Nigeria, Africa’s largest economy, is facing a wave of exits by multinational companies that are struggling to cope with the country’s macroeconomic environment. The federal government says it is in talks with these companies to find solutions to their challenges and persuade them to stay.
Some of the multinationals that have cut back their operations or left the country entirely in the last 10 months include Procter & Gamble, GSK, Unilever, and PZ Cussons. These companies cite factors such as foreign exchange scarcity, currency devaluation, inflation, and regulatory uncertainties as reasons for their decisions.
The latest to announce its exit is Procter & Gamble, an Ohio-based consumer goods giant, which said it will dissolve all on-ground operations and stop producing its care and hygiene products in the country. Andre Schuten, P&G’s chief financial officer, said Nigeria was “very difficult” for the company to create value in, as a US dollar-denominated company.
“Nigeria is very difficult for us as a US dollar-denominated company to create value”, Schuten reportedly said at Morgan Stanley’s Global Consumer and Retail Conference, an investor event in New York.
“The other reality that arises in some of these markets is that it gets increasingly difficult to operate and create US dollar value. So, when you think about places like Nigeria and Argentina, it is difficult for us to operate because of the macroeconomic environment,” he said. “We’ve announced that we will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground in Nigeria and reverting to an import-only model.”
The exit of P&G and other multinationals has raised concerns about the impact on Nigeria’s economy, which is still recovering from a recession induced by the COVID-19 pandemic and a slump in oil prices. According to the World Bank, Nigeria’s gross domestic product (GDP) is expected to grow by 1.8 percent in 2021, but the per capita income will remain below its 2010 level until 2023.
The World Bank also warned that Nigeria faces “enormous challenges” in lifting millions of people out of poverty and creating jobs for its young and fast-growing population. The bank urged the government to implement structural reforms to improve the business environment, enhance competitiveness, and attract investments.
Doris Uzoka-Anite, minister of industry, trade, and investment, said the government was aware of these challenges and working to address them. She said the government was in dialogue with the multinationals that have left or are planning to leave the country, to understand their pain points and offer them incentives to stay.
“For those companies that are exiting, we’ve been reaching out to them. For example, P&G is recent; we’ve reached out to them a couple of times and proposed some exit strategies, to smoothen their exit or reverse exit strategy and have them retained,” she said.
“That discussion is still ongoing and we intend to do that with multiple other agencies. And going forward in the new year, we will be engaging more of the international business communities that are present in Nigeria to ascertain their pain points and see how we can accommodate them as a government.”
She added: “We know the difficult challenging environment for businesses in Nigeria and working with the Presidential Enabling Business Environment Council, trying to also see how we can facilitate more ease of doing businesses for these companies.
“It’s not just the foreign ones that are exiting, even the local ones, some of them are closing down. But we just have to continue to dialogue with them, bringing them up to speak to what governments are doing.”
The minister also said the government was implementing various policies and programs to support the growth of the private sector, such as the Economic Recovery and Growth Plan, the National Industrial Revolution Plan, the Nigeria Industrial Policy and Competitiveness Advisory Council, and the African Continental Free Trade Area Agreement.
She expressed optimism that these initiatives would help Nigeria overcome its economic challenges and create more opportunities for businesses and citizens. She said the government was committed to making Nigeria a more attractive destination for investments and a hub for industrialization in Africa.
“We believe that Nigeria has a lot to offer to the world and we are determined to showcase our potential and our capabilities. We are confident that with the support of our partners and stakeholders, we will achieve our vision of a prosperous and inclusive Nigeria,” she said.
Source: Business Day
