The 30th Nigerian Economic Summit (#NES30) was held in Abuja on October 14, 2024. At that summit, the Vice President of the World Bank, Indermit Gill, said that Nigeria’s current reforms must be sustained for the next 10-15 years to transform its economy and grow in Sub-Saharan Africa.
The World Bank’s policies, including removing subsidies for premium motor spirits and unifying exchange rates, led Nigeria to grapple with its worst cost-of-living crisis in nearly 30 years.
While acknowledging that the Tinubu administration’s reforms have brought hardship to Nigerians, especially the vulnerable poor, the World Bank assured that they were the only way out for the economy.
However, despite the World Bank praising Tinubu’s policies, Equinor, a Norwegian company that produces oil, gas, and renewable energy worldwide, exited Nigeria two months later. This is not the first time multinational companies have exited the supposed giant of Africa.
Companies that have had their last in Nigeria
GlaxoSmithKline (GSK), a British multinational pharmaceutical and biotechnology company, on
August 3, 2023, concluded plans to shut down its 51 years of operations in Nigeria. The company’s first office was opened in Lagos on July 1, 1972. After many years, it decided to permanently withdraw from the country, ending the commercialisation of its prescription medicines and vaccines through its Nigerian subsidiary, GlaxoSmithKline Consumer Nigeria Plc.
The company stated that a third-party distributor-led supply model would be adopted.
In January 2024, the Nigerian Exchange Limited (NGX) delisted the shares of GlaxoSmithKline Consumer Nigeria (GSK) Plc from its Daily Official List, and a payment of N17.42 was approved for every share held by its shareholders as part of the Scheme of Arrangement for the company’s dissolution.
Procter & Gamble (P&G), producer of a range of products for the Nigerian market, including Always sanitary pads, Pampers, Ariel detergent, Oral-B toothpaste, and Gillette shaving sticks, announced on December 4, 2023, that it would discontinue manufacturing in Nigeria. The American multinational consumer goods company disclosed plans to transition to an import-only activity.
On May 31, 2024, Kimberly-Clark, the manufacturer of Huggies baby diapers and other products (such as sanitary pads, Kotex, and various other hygiene and personal care products), announced its exit from Nigeria after almost 13 years of operation, starting in 2012. In 2022, the company invested in a $100 million state-of-the-art diaper manufacturing facility in Ikorodu, Lagos. It was their first manufacturing facility in Nigeria.
This facility was expected to create over 1,000 direct jobs and 5,000 indirect jobs, with the potential to scale over the next three to five years of operation. However, in 2024, the reverse was the case. Following the announcement of its exit from Nigeria, there was a major layoff of employees, signifying the company’s decision not to manufacture or market Huggies and Kotex products in the country.
Not less than 15 companies have had to exit Nigeria since 2015.
The economy is frustrating businesses
When GSK planned to exit Nigeria, the company, in its 2023 H1 report, lamented that the business environment continued to be very challenging, with foreign exchange (FX) availability affecting its ability to settle foreign currency-denominated trade payables with product suppliers.
At its 2022 52nd annual general meeting (AGM), Edmund Onuzo, chairperson of the board of directors, explained that several factors— including foreign exchange availability for businesses, insecurity, unemployment, high costs of doing business, and uncertainty around fuel subsidy removal— must be duly considered in the quest for economic growth and development in Nigeria.
P&G struggled with the Nigerian economy before its eventual exit. In 2018, Premium Times reported P&G’s planned shutdown of its $300 million Nigerian production plant, just one year after its launch. Two years later, the company laid off workers and significantly downsized its operations in the country.
The purchasing power of Nigerians dropped in June 2023, and the inflation rate for May 2023 rose to 22.41 per cent — an 18-month high — following the federal government’s removal of the petrol subsidy in May 2023, which caused the price of PMS to increase by about 250 per cent. This, in turn, affected transportation costs and further weakened the purchasing power of Nigerians.
In the Cowry Research report, “Half Year 2024 Nigerian Economic and Financial Market Review and Outlook for H2 2024,” the purchasing power of Nigerians has declined severely by 56% over the past two years, attributed to high inflation rates, currency devaluation, and disruptions in global supply chains.
The report highlighted that this decline was foreseen as early as the fourth quarter (Q4) of 2019 when the Central Bank of Nigeria’s (CBN) Customer Expectation Survey (CES) warned that rising inflation and high costs would negatively impact citizens’ purchasing power. However, past government policy decisions failed to address these warning signals, exacerbating the situation.
In November 2024, the Manufacturers Association of Nigeria, MAN, disclosed in its H1’24 Economic Review that the declining purchasing power of consumers has led to a 357.57 per cent rise in the inventory of unsold finished products of manufacturers in Nigeria to N1.24 trillion in the second half of 2024 (H1’24) compared to N271 billion recorded in the same period last year (H1’23).
Other bodies, including the Nigeria Employers’ Consultative Association, NECA, warned that if what led to these economic challenges is not addressed, it could herald another wave of business closures, higher unemployment rates and greater social dysfunction.
Nigerians bear the brunt
The exit of multinational companies from Nigeria has led to significant job losses, with approximately 20,000 people losing their livelihoods, explained Dotun Adekunle, a financial analyst.
According to him, the surge in unemployment caused by these companies’ layoffs has deepened poverty levels, strained social services, and disrupted supply chains, leaving local businesses struggling to survive. He added that the resulting economic contraction further threatens growth and stability.
“The broader implications of these exits include a decline in foreign direct investment (FDI) and damage to Nigeria’s reputation as an investment destination. As multinationals leave, they take with them vital resources like capital, technology, and infrastructure development, stifling growth,” he emphasised.
“Without addressing issues like foreign exchange scarcity, high energy costs, and unstable policies, Nigeria risks further economic decline.”
Adekunle, who described the Nigerian economy as sluggish growth, said the economic downturn is largely attributed to lower-than-expected oil production, ongoing insecurity, and a scarcity of foreign exchange necessary for importing essential inputs for manufacturing and production.
“Inflation in Nigeria has reached alarming levels, with rates hovering around 34.6% as of late 2024, significantly eroding consumer purchasing power and increasing operational costs for businesses,” he explained.
Adekunle emphasised that despite the Central Bank of Nigeria implementing contractionary monetary policies, raising interest rates from 15.5% to 27.25%, these measures have not effectively curbed inflation.
“Currency devaluation has made imports more expensive, challenging companies reliant on foreign goods and raw materials. The volatility of the naira further deters investment as businesses face uncertainty regarding future costs.
“Meanwhile, rising operational costs due to inadequate infrastructure and energy issues, compounded by the removal of fuel subsidies, have made it difficult for companies to maintain profitability,” he said.