Procter & Gamble (P&G), a multinational consumer goods company, has decided to end its operations in Nigeria after more than three decades, citing unfavorable macroeconomic conditions. The move could result in a loss of over 5,000 jobs and a major decline in foreign investments into Africa’s most populous nation.
P&G, which produces popular brands such as Always, Ariel, and Oral B, said it plans to transit the Nigerian market to an import-only model, effectively dissolving its on-ground presence in the country. The company’s chief financial officer, Andre Schulten, said that Nigeria is a $50 million net sales business compared to its overall portfolio worth $85 billion and that it is difficult to operate and create U.S. dollar value in the country due to the volatile foreign exchange market and the high inflation rate.
The announcement comes as a shock to many Nigerians, especially those who work for the company or its suppliers and distributors. P&G had invested millions of dollars in the manufacturing sector, including the completion of a $300 million plant at Agbara, Ogun State in 2017. The plant, which was expected to boost job creation and improve the socio-economic state of its host community, was shut down a year later, as part of the company’s restructuring plan.
P&G is not the only multinational company that has exited or downsized its operations in Nigeria in recent years. GlaxoSmithKline Consumer Nigeria, another consumer goods giant, announced plans in August to exit the country after 51 years of operations. Unilever, which started operations in the 1920s, stopped the production of its legendary OMO, Sunlight, and Lux home and skincare brands in March, in a bid to cut costs and focus on higher growth opportunities.
According to the Manufacturers Association of Nigeria (MAN), the number of jobs lost in the manufacturing sector rose to the highest in three years for the first half of 2023, while the number of jobs created declined by 32.8 percent. The association attributed the decline to the unfriendly business environment resulting from the hasty policies and the residual effect of the currency redesign policy that led to the naira crunch.
The Tinubu administration’s reforms, such as the removal of petrol subsidy and naira devaluation, implemented in the second quarter of the year, pushed the inflation rate to the highest level in 18 years. The removal of the petrol subsidy tripled the petrol price to N617 from N184, causing public transportation providers to raise fares. The naira has plunged to record lows across markets since the central bank allowed it to weaken by as much as 40 percent against the dollar in June.
The rising inflationary pressures have weakened the purchasing power of consumers, even as businesses grapple with higher operating costs. The latest monthly Purchasing Managers’ Index by Stanbic IBTC Bank showed the headline index dropped to the lowest in eight months of 48.0 in November 2023, marking the second straight month of contraction.
Some analysts and experts have expressed concern over the impact of the exit of P&G and other multinationals on the Nigerian economy, especially on the small and medium-scale enterprises (SMEs) that depend on them. They have also warned that the exit could deter other potential investors from entering the country or expanding their existing operations.
However, some have also seen the exit as an opportunity for local manufacturers to fill the gap and meet the demand for consumer goods in the country. They have urged the government to stabilize the foreign exchange market and provide incentives and support for local production and backward integration.
The Nigerian government has said that it is committed to improving the business environment and attracting more foreign direct investment into the country. It has also launched several initiatives and programs to support the growth and development of SMEs, which are considered the backbone of the economy.
Source: BusinessDay
