What is driving manufacturers to leave Nigeria with their jobs?
The American company Procter & Gamble is the latest on the list of international organisations that are making tweaks in their Nigeria operations.
Nigeria, under a new handler, wants to improve its macroeconomic realities to ensure that its citizens enjoy a good quality of life. To do that, the country needs active manufacturers to turn on their machines always and speed up their output to the degree of productivity that the new president, Bola Tinubu expects things to be.
Well, it seems that vision is facing challenges because of a wave of foreign companies seen to be leaving. They are exiting through divestment and the FX difficulty has played multiple roles in actualising that. It is to the detriment of Nigerian households anytime there is a departure of an investment in their country as such exits limit job availability.
The American company Procter & Gamble is the latest on the list of international organisations that are making tweaks in their operating structure in Nigeria. It anticipates to incur a $1.5 billion after-tax payment in an ongoing effort to restructure its process.
With such a huge cost, P&G had now decided to divest its home care wing in the country and also in Argentina. Both nations are dealing with severe macroeconomic challenges which makes FX scarce and highly-priced against the local currencies.
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On Tuesday, 5 December in Lagos, P&G’s Chief Financial Officer, Andre Schulten, while making a presentation at the Morgan Stanley Global Consumer and Retail Conference walked the audience through the way things are shaping up.
“The other reality that arises in some of these markets is that it gets increasingly difficult to operate and create U.S. dollar value. So when you think about places like Nigeria, it is difficult for us to operate because of the macroeconomic environment.
“So with that in mind, we are announcing a restructuring program with the intent to adjust the operating model and adjust the portfolio to ensure that we maintain the portfolio discipline that has brought us to this point. We will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground.”
Among the local stakeholders, there is a feeling of a bad situation getting worse if nothing is done soon.
Speaking to the media on Wednesday, Godwin Akpovie who, is the Managing Director and Chief Executive Officer (CEO) of Delta Special Economic Zone, tied the exits to “multiple taxation”. His input summarises that international investors do not necessarily want to leave Nigeria, it is the low returns exchanged for their multiple investments that are causing this.
“When you bring in your money and in just a short while it depreciates due to the value of our currency, it means your money is not secured. Insecurity is not just about guns and weapons but how secure the funds of investors that come into the country are. No businessman wants to put his money where he is unsure of the returns on investment. So, those in charge of our monetary policy should urgently look towards this direction and proffer solutions,” says Akpovie.
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Other companies that have announced the termination of full operation or some production segments include the British pharma GlaxoSmithKline Plc (GSK). In August, the drug maker revealed an intention “to appoint a third-party distributor in Nigeria for the supply of its consumer healthcare products”, therefore the abrupt end after half a century of running the business.
Ayodelé is a Lagos-based journalist and the Content and Editorial Coordinator at Meiza. All around the megacity, I am steering diverse lifestyle magazine audiences with ingenious hacks and insights that spur fast, informed decisions in their busy lives.
