Amid Nigeria’s ongoing economic crisis, exacerbated by the government’s policies on petrol subsidy removal and the unification of foreign exchange (FX) windows, several multinational companies have exited the country.
The latest to announce its departure is United Kingdom-based Diageo, which on June 11 declared it would sell its 58.02% stake in Guinness Nigeria to Tolaram.
This exit follows that of other major companies like Kimberly-Clark, Procter & Gamble (P&G), GlaxoSmithKline (GSK), Unilever, and Sanofi-Aventis Nigeria.
These exits are attributed to several factors, including high energy costs, currency depreciation, and insecurity.
Unilever Nigeria, for instance, announced its exit from the home care and skin cleansing markets in November 2023 to pursue a more sustainable business model.
Similarly, P&G, GSK, and other companies cited similar operational challenges, including high costs and difficulties in accessing foreign exchange, as reasons for their departure.
The Federal Government has acknowledged these challenges. In an interview on Channels Television’s Sunday Politics program, Minister of Finance Wale Edun highlighted the lack of a liquid foreign exchange market as a significant reason for the exit of multinational companies.
Edun noted that these companies faced major impediments in their operations due to difficulties in accessing foreign exchange.
Director-General of the Nigeria Employers’ Consultative Association (NECA), Adewale Oyerinde, revealed that at least 15 multinationals have either divested or partially closed operations in Nigeria over the past three years.
These companies, with a combined value-chain staff strength of over 20,000 employees, have faced dire consequences, including job losses and reduced government revenue.
Oyerinde emphasized that the ripple effects of these exits impact numerous enterprises within the value chain, compromising their sustainability and endangering their employees’ livelihoods.
Other sectoral leaders and analysts have voiced concerns that the continued exit of multinational firms will hinder Nigeria’s goal of achieving a $1 trillion GDP by 2026, as envisioned by President Bola Tinubu.
Analysts argue that the departure of these companies negatively impacts economic growth and stability.
Data from the National Bureau of Statistics (NBS) indicated that the GDP performance in the first quarter of 2024 was primarily driven by the services sector, which grew by 4.32% and contributed 58.04% to the aggregate GDP.
In contrast, the manufacturing sector recorded a nominal GDP growth of 8.21% (year-on-year), 9.64 percentage points lower than the corresponding period in 2023. Real GDP growth in the manufacturing sector was 1.49% (year-on-year), also lower than the same quarter in 2023.
Reacting to these developments, the President of the Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye, while speaking to Vanguard, urged the government to address issues such as insecurity, electricity supply, fiscal sustainability, and policy consistency.
Meshioye highlighted the need for supportive measures to incentivize the manufacturing sector and boost non-oil export earnings.
The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, also expressed concern over the increasing number of multinational companies exiting Nigeria.
Almona cited foreign exchange scarcity, poor power supply, port congestion, multiple taxation, and insecurity as major challenges facing businesses in the country.
The LCCI recommended measures to stabilize and ensure the availability of foreign exchange, as well as creating a more flexible and transparent foreign exchange policy.
National President of the Association of Small Business Owners of Nigeria (ASBON), Femi Egbesola, emphasized that multinationals significantly contribute to Nigeria’s GDP and earnings.
Egbesola noted that the departure of these companies, without a corresponding increase in indigenous businesses, undermines the country’s economic growth prospects.
Since taking office, President Tinubu and Finance Minister Wale Edun have emphasized efforts to revamp the economy, encourage Foreign Direct Investment (FDI), and enhance the competitiveness of local industries.
Edun mentioned recent executive orders aimed at improving the investment climate and tax reform proposals to simplify business operations for local and foreign manufacturers as part of an Economic Stabilisation Package.
However, whether these measures will successfully stem the flow of multinational companies exiting the country remains to be seen.
