Economic Crisis Forces Major Multinational Companies Out of Nigeria

Mobel
By Mobel 5 Min Read

Economic Crisis Forces Major Multinational Companies Out of Nigeria why 16 multinational companies, including Diageo and Procter & Gamble, have exited Nigeria in the past three years

As Nigeria grapples with an economic crisis fueled by the removal of petrol subsidies and the unification of FX windows, a significant number of multinational companies have exited the country. In the past three years, 16 major firms, including Diageo, Kimberly-Clark, Procter & Gamble (P&G), and GlaxoSmithKline (GSK), have left Nigeria, citing various challenges.

Diageo’s Departure

The latest in the series of exits, Diageo announced on June 11 that it would sell its 58.02% stake in Guinness Nigeria to Tolaram. This move follows similar decisions by other global brands like Unilever and Sanofi-Aventi, all of which have either completely exited or significantly reduced their operations in Nigeria due to the country’s worsening economic conditions.

Reasons Behind the Exits

The primary reasons these companies have given for their departure include high energy costs, currency depreciation, and widespread insecurity. The Federal Government has acknowledged these challenges. In an interview on Channels Television’s Sunday Politics program, Finance Minister Wale Edun highlighted the lack of a liquid foreign exchange market as a critical factor impeding the operations of these multinationals.

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Impact on the Economy and Job Market

The exit of these companies has dire consequences for Nigeria’s economy. According to Adewale Oyerinde, Director-General of the Nigeria Employers’ Consultative Association (NECA), over 15 multinationals with a combined staff strength of over 20,000 have divested or partially closed operations in the last three years. This trend has led to massive job losses, exacerbating the country’s unemployment crisis and contributing to insecurity.

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Oyerinde stressed the broader implications of these exits, noting that numerous secondary businesses that supply goods and services to these major corporations are also at risk. The ripple effect could destabilize the entire business ecosystem, impacting households and government revenue.

Government Response and Future Outlook

President Bola Tinubu has set an ambitious target to grow Nigeria’s economy to $1 trillion by 2026. However, the continuous departure of multinational firms poses a significant threat to this goal. Data from the National Bureau of Statistics (NBS) showed that while the services sector recorded growth, the manufacturing sector’s real GDP growth was significantly lower in the first quarter of 2024 compared to the previous year.

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Industry leaders, including Otunba Francis Meshioye of the Manufacturers Association of Nigeria (MAN) and Dr. Chinyere Almona of the Lagos Chamber of Commerce and Industry (LCCI), have called for urgent government intervention. They emphasize the need for improved security, stable electricity supply, fiscal sustainability, and consistent policies to support the manufacturing sector and attract Foreign Direct Investment (FDI).

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Recommendations for Stabilizing the Economy

The LCCI recommends that the government implement measures to stabilize and ensure the availability of foreign exchange for businesses. Creating a more flexible and transparent foreign exchange policy is crucial to addressing scarcity issues. Additionally, engaging multinational corporations and the business community to understand their challenges and gather input on policy decisions is vital for developing collaborative solutions.

Femi Egbesola, National President of the Association of Small Business Owners of Nigeria (ASBON), highlighted the significant contribution of multinationals to Nigeria’s GDP and earnings. He emphasized the need for a conducive environment for both foreign and local investors to thrive.

Looking Ahead

Since taking office, President Tinubu and Finance Minister Wale Edun have been vocal about efforts to revamp the economy, encourage FDI, and boost local industries. Edun mentioned recent executive orders and tax reform proposals aimed at simplifying business operations in Nigeria. Whether these measures will stem the exodus of multinational companies remains to be seen, but they represent a crucial step towards stabilizing the economy and fostering a more attractive investment climate.

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