Businesses that value the rule of law, consistency in policy, macroeconomic stability, and level playing fields will continue to leave Nigeria, according to Mr. Atedo Peterside, the founder of the Stanbic IBTC Bank and an economist. He claims that only investors who know how to “partner” with politicians will remain in the country.
Following Procter & Gamble’s (P&G) announcement that it would be discontinuing its manufacturing operations in Nigeria, Peterside provided sobering and insightful analysis of the causes contributing to the pattern of certain multinational manufacturing concerns closing their doors and departing the nation.
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Another way to interpret this @ProcterGamble withdrawal story is that several investors who value the rule of law, policy coherence, macroeconomic stability, level playing fields, etc., are fleeing Nigeria, according to Peterside’s post on his X (Twitter) handle.
“Investors who know how to ‘partner’ with politicians and/or game the system through waivers, exemptions, etc. are only partially replacing them.”Following the announcements of similar choices by French pharmaceutical company Sanofi-Avantis Nigeria Limited and GlaxoSmithKline Consumer Nigeria Plc (GSK), P&G is the third multinational to declare its departure from Nigeria.
The Nigeria Employers’ Consultative Association (NECA) Director General, Mr. Adewale-Smatt Ayorinde, also responded to P&G’s decision to leave the country by urging the federal government to take proactive measures to prevent businesses and organisations from leaving the nation. He stated that “these regrettable departures will persistently undermine the federal government’s efforts to attract Foreign Direct Investment, rendering its initiatives ineffective.”
“NECA emphasised the urgent need for decisive measures to halt the ongoing trend of companies divesting from the country,” Ayorinde said.
“We demand immediate and decisive action to stop the lawful organisations in Nigeria from leaving and from divesting.”
Strong local and international brands that were once well-known have either closed their doors or completely or partially divested in the past few years.He stated that the “difficult business environment in Nigeria, characterised by strict legislative and regulatory actions, inadequate infrastructure, and inconsistent policies, all contribute to the challenges faced by enterprises.”
He noted that the current state of affairs, in which “legislators, under the guise of oversight functions, consistently create impediments for organised businesses, hindering their operations,” and “regulatory bodies tasked with fostering business growth persist in prioritising revenue generation at the expense of their core mandate,” would irritate companies and encourage their departure from Nigeria.
“Before actively seeking Foreign Direct Investment, Oyerinde humbly begged President Bola Tinubu, the Minister for Finance, and the Coordinating Minister of the Economy to prioritise the survival of local businesses.”He did, however, thank the federal government for helping manufacturers and Small and Medium-Sized Enterprises (SMEs) by providing N125 billion as part of the Presidential Palliative Programme (PPP).Dr. Chinyere Almona, the Director General of the Lagos Chamber of Commerce and Industry (LCCI), expressed concern about the multinational companies’ growing exit strategies and decreasing engagement in the Nigerian market.
“Many businesses in Nigeria have suffered as a result of persistent foreign exchange scarcity, inadequate power supply, port congestion, multiple taxation, insecurity, and poor infrastructure,” Almona stated.The chamber suggests that the government take action to stabilise and guarantee foreign exchange availability for companies, especially those who operate in situations where dollars are used as currency.
“To address scarcity issues, the LCCI also implores the government to create a more flexible and transparent foreign exchange policy.”In addition, the chamber calls on the government to interact with international firms and the business community in order to comprehend their issues and obtain opinions on proposed policies. Together, these parties may then work to create solutions that would stop companies from leaving Nigeria.”The country’s currency stability should be the CBN’s top priority, and the appropriate policy mix should be adopted to ensure price stability.”
At the Morgan Stanley Global Consumer & Retail Conference, P&G’s Chief Financial Officer, Mr. Andre Schulten, recently declared, “We have announced that we will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground in Nigeria and reverting to an import-only model.”
“The other reality that arises in some of these markets is that it gets harder and harder to operate and create U.S. dollar value,” Schulten continued. Therefore, the macroeconomic situation makes it difficult for us to operate in nations like Nigeria and Argentina.In light of this, we are launching a reorganisation plan that will modify the operational model and the portfolio in order to preserve the discipline in the portfolio that has led us to this position.
P&G clearly stated the circumstances that could lead to the company pulling its operations out of any nation in its 2023 annual report, which was prepared in accordance with Section 13 or 15(d) of the US Securities and Exchange Act of 1934 and covered the fiscal year that concluded on June 30, 2023.It said that in cases where its operations, workers, or business have been negatively impacted by “geopolitical conflicts, political volatility, trade controls, labour market disruptions or other crises or vulnerabilities in individual countries or regions (including) deterioration in the creditworthiness of local governments, particularly in emerging markets,” there would be a “need to de-consolidate or even exit certain businesses in particular countries.”
Reduced demand for our products as a result of one or more major local, regional, or worldwide economic or social disturbances could have a detrimental effect on our business. A slowdown, recession, or inflationary pressures in the overall economy; lower market growth rates; more stringent credit markets for our vendors, suppliers, or consumers; a notable change in governmental regulations; and notable societal unrest are some examples of these disruptions that have occurred or may occur in the future.
“The outcome of elections, referendums, sanctions, or other political processes, as well as pressures in some of the markets where our products are produced, sold, or distributed, may give rise to uncertainty about potential changes to the laws, taxes, tariffs, import and export controls, and the general flow of capital, people, goods, and services across national borders.
“The company’s results of operations and cash flows could be adversely affected by the potential implications of such uncertainty, which include, among others, exchange rate fluctuations, new or increased tariffs, trade barriers, and market contraction.”
It went on to say that it is a worldwide business, operating in over 70 countries and selling its goods in about 180 nations and territories.
“Variations in foreign exchange rates have the potential to further erode our competitiveness in those markets, raise our supply costs (measured in US dollars), and have a negative impact on our earnings, cash flows, and sales from non-US markets in terms of US dollars.
“Moreover, changes to tariffs and current trade policies and agreements, as well as discriminatory or conflicting fiscal or trade policies in other countries, could adversely affect our results.”
