Major Job Losses In Nigeria As 16 International Companies Pull Out Of Country

As Nigeria grapples with an economic crisis precipitated by the government’s dual policies of removing the petrol subsidy and unifying the foreign exchange windows, the country has witnessed the exit of several multinational companies.

Osun Defender reports that one of the latest to join this exodus is Diageo, a UK-based company.

Diageo recently announced its decision to sell its 58.02% stake in Guinness Nigeria to Tolaram on Tuesday, June 11.

Diageo’s departure aligns with the actions of approximately 15 other multinational corporations that have either completely exited or reduced their operations in Nigeria over the past three years.

This trend highlights the severe economic challenges facing the country. Among these companies are Kimberly-Clark, known for its Huggies and Kotex brands, US-based Procter & Gamble (P&G), GlaxoSmithKline (GSK), Unilever, and Sanofi-Aventi Nigeria.

Unilever Nigeria, in particular, announced in November 2023 its exit from the home care and skin cleansing markets.

The company cited the need to find a more sustainable and profitable business model as the reason for its decision.

This announcement underscores the difficult business environment in Nigeria, which is pushing even long-established companies to reconsider their presence in the country.

Procter & Gamble, another major player, also decided to exit Nigeria in the same year.

The departure of such a significant multinational underscores the gravity of the economic situation.

These companies, which have been integral to various sectors of the Nigerian economy, are leaving due to a range of adverse conditions that have made continued operations untenable.

The reasons cited by these companies for their exits are numerous and interconnected. High energy costs have been a persistent issue, making it expensive to run manufacturing and other operations. Additionally, the depreciation of the Nigerian currency has eroded profit margins and increased the cost of imported raw materials, further straining businesses.

Insecurity has also played a significant role in these decisions. The safety concerns for staff and the risk to assets have made Nigeria a less attractive destination for multinational companies.

The inability to ensure a secure operating environment has added to the complexities faced by businesses in the country.

READ: CBN Reveals Nigeria’s Economy Records Over $1.5bn Inflow In Days

The Federal Government has acknowledged these challenges. In an interview on Channels Television’s Sunday Politics program, the Minister of Finance, Wale Edun, noted that the lack of a liquid foreign exchange market was a major reason for the exit of some multinationals.

The difficulty in accessing foreign exchange has been a significant impediment, affecting the ability of these companies to repatriate profits and manage international transactions.

Adding to the discussion, Adewale Oyerinde, the Director-General of the Nigeria Employers’ Consultative Association (NECA), revealed that at least 15 multinationals have either divested or partially closed their operations in Nigeria over the past three years.

Oyerinde, in his assessment, stated: “Over 15 organisations, with a combined value-chain staff strength of over 20,000 employees, have either divested or partially closed operations,” lamenting that this has “dire consequences not only for organised businesses but also for labour, government revenue and the households; massive job losses across sectors, which would continue to create insecurity challenges.

“When NECA examined the exit of prominent companies like GSK, Sanofi, Procter & Gamble, Nampak, and others, who had been doing business in Nigeria for decades and were huge employers of labour, it was worried about the ripple effect on the broader business ecosystem.

“Within the value chain, numerous enterprises serve as suppliers to these major corporations, and their sustainability is significantly compromised when the primary businesses they cater to face extinction.

“The survival prospects of these secondary businesses are at stake, and their employees are also at risk, as the departure of the main clients could lead to their demise. The crisis within the value chain deserves more attention than it currently receives”.

Other sectoral group leaders and analysts maintain that the continuous exit of multinational firms would dampen Nigeria’s $1trn GDP target of President Bola Tinubu’s administration.

Recall that the President had, at the 29th Nigeria Economic Summit in Abuja, told business leaders and Nigerians that Nigeria’s economy can grow to $1 trillion by 2026.

Analysts believe the persistent exit of multinational companies from the country is set to impact negatively on this target.

Data from the National Bureau of Statistics (NBS) revealed that the performance of the GDP in the first quarter of 2024 was driven mainly by the services sector, which recorded a growth of 4.32 per cent and contributed 58.04 percent to the aggregate GDP, whereas the nominal GDP growth of the manufacturing sector in the first quarter of 2024 was recorded at 8.21 percent (year-on-year), 9.64 percent points lower than the figure recorded in the corresponding period of 2023.

Real GDP growth in the manufacturing sector in the first quarter of 2024, on its part, was 1.49 per cent (year-on-year), lower than the same quarter of 2023.

Reacting to this, President of the Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye said, “MAN expects the government to frontally address insecurity, improve electricity supply, promote fiscal sustainability and ensure policy consistency.

“Among other priorities, the fiscal authority must also lend supportive measures by adequately incentivising the manufacturing sector and other productive sectors.

“This is very important to boost non-oil export earnings in addition to the increase in oil export proceeds occasioned by increased oil production, rising global oil prices and the coming on stream of the Dangote Refinery”.

Director-General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, also speaking on the issue, said: “Over the last few months, there has been a consistent increase in exit plans or a reduction in involvement in the Nigerian market by the multinationals, and this trend is worrisome.

“We have seen the likes of Unilever Nigeria, GlaxoSmithKline, and recently now Guinness Nigeria Plc.

“In Nigeria, lingering foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, and poor infrastructure, among others, have taken a toll on many businesses in the country.”

The chamber recommended that the government should implement measures to stabilise and ensure the availability of foreign exchange for businesses, particularly those operating in dollar-denominated environments, also imploring the government to create a more flexible and transparent foreign exchange policy to address scarcity issues.

“Further, the Chamber urges the government to engage multinational corporations and the business community to understand their challenges and gather input and feedback on policy decisions to collaboratively develop solutions that will forestall the exodus of businesses from Nigeria. The CBN should prioritise the stability of the country’s currency and adopt the right policy mix to ensure price stability,” Almona said.

National President of the Association of Small Business Owners of Nigeria, ASBON, Femi Egbesola, maintained that multinationals are among the companies that contribute largely to the country’s GDP and earnings.

“We cannot be talking of growing our economy when the real investors are leaving. Assuming they are leaving and the indigenous ones are increasing, it would have been a different thing. But that is not the case. You make income as a nation when you have investments and investors,” he said.

However, since the coming of the Tinubu administration, Tinubu and Edun, among others, have been speaking on efforts being put in place towards revamping the economy, encouraging Foreign Direct Investment (FDI) and also making local industries vibrant and competitive.

Whether the assurances of Edun, who, on the Channels Television’s Sunday Politics programme, said, “recent executive orders signed by President Bola Tinubu have improved the investment climate … and also disclosed that tax reform proposals aimed at simplifying doing business for local and foreign manufacturers are being considered as part of an Economic Stabilisation Package,” would stem the flow of multinationals exiting the country, only time will tell.

Source: Vanguard