The Exodus of Foreign Companies in Nigeria: A Cause for Concern

The recent announcements of multinational companies either closing down or scaling back operations in Nigeria are indeed cause for concern. The most recent blow came from U.S. consumer goods giant Procter & Gamble (P&G), who revealed that they will be shutting down their manufacturing operations in the country, making Nigeria solely reliant on imported goods.

This follows the announcement made by Shoprite Mall about the closure of its Kano State branch by January 14, 2024. Additionally, Jumia Food has also stated that it will cease its operations in Nigeria by December 31, 2023, followed by a similar decision by Bolt Food.

What’s more, Equinor Nigeria Energy Company (ENEC), a Norwegian energy corporation with significant stakes in Nigeria’s oil mining, also decided to divest from its Nigerian operations after a three-decade presence in the country’s energy market.

These exits have been a long time coming, as demonstrated by GlaxoSmithKline Consumer Nigeria Plc pulling out of its manufacturing operations in August 2023. Unilever Nigeria also made a similar announcement earlier in the year, revealing their plans to discontinue the production of popular brands like Omo, Sunlight and Lux.

The list of companies that have exited Nigeria over the years is extensive, including big names like The Game, Shoprite, HSBC, UBS, Etisalat, Procter & Gamble, Truworths, ExxonMobil, Tiger Brands, Woolworths, Iberia Airline, and InterContinental Hotel Group. Even iconic company brands like John Holt, Leventis, and Kingsway have followed suit.

This trend is further compounded by reports indicating that over 50 Nigerian manufacturing companies have closed down in the last five years in various parts of the country, signalling broader challenges in the local business environment.

One of the hardest-hit sectors has been Nigeria’s textile industry, which saw 38 major textile companies shut down between 1999 and 2009, reflecting a broader trend of economic dislocation.

It is evident that Nigeria, as Africa’s largest economy with a population exceeding 200 million, is facing a mass exodus of multinational companies, which is indeed cause for concern.

These companies attribute their decisions to a challenging operating environment, citing issues such as foreign exchange unavailability, high cost of raw materials, insecurity, and the overall high cost of doing business.

The challenges faced by both local and multinational manufacturers have historically included power crisis, constant devaluation of the Naira, and forex availability, which have only been exacerbated with the recent economic reforms.

Since President Bola Ahmed Tinubu took office in May 2023, his administration’s decisions to withdraw fuel subsidy and devalue the Naira have evidently had an impact on these multinational companies, which heavily rely on forex availability and the purchasing power of Nigerians. This has only worsened their plight.

Despite the President’s continued efforts to promote Nigeria’s economic potential to prospective investors, the exodus or divestment of multinational companies sends contradictory signals and raises questions about the country’s ability to sustain future growth.

It is imperative that the Federal Government takes urgent action to address the factors leading to the departure of foreign firms and create a conducive environment for their operations. Nigeria has historically been a thriving hub for foreign and local investments, and it is crucial that this status is preserved.

Furthermore, there needs to be a concerted effort to review existing economic policies and their impact on businesses, as any policy that leads to the closure or exit of enterprises is detrimental to the economy and impedes foreign investments.

In addition to policy review, it is essential that both the Federal and State Governments focus on providing infrastructure and improving power supply to reduce the cost of doing business in Nigeria. A business-friendly environment is crucial to attracting and retaining industries and firms.

Moreover, emphasis should be placed on the local manufacturing industry, as they are a solid foundation that would withstand challenges and contribute to the country’s growth. It is vital for the government to prioritize the sector’s consolidation and address the issues that hinder its operations.

In conclusion, the exodus of multinational companies in Nigeria is a cause for concern and requires urgent attention from the government to rectify the situation. Maintaining a conducive business environment and providing the necessary support to local and foreign businesses is critical for the country’s economic growth and sustainability.