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Nigeria Faces Economic Strain as 16 Multinationals Exit, Resulting in Massive Job Losses

Multinational Exodus: Economic Fallout as 16 Companies Exit Nigeria Amidst Crisis

As Nigeria grapples with an economic crisis exacerbated by the removal of petrol subsidies and the unification of foreign exchange (FX) windows, 16 multinational companies have left the country over the past three years. The latest to announce its departure is the UK-based Diageo, which revealed on June 11 that it would sell its 58.02% stake in Guinness Nigeria to Tolaram.

Diageo’s exit follows similar moves by other major companies, including Kimberly-Clark, Procter & Gamble (P&G), GlaxoSmithKline (GSK), Unilever, and Sanofi-Aventis Nigeria. These companies have cited high energy costs, currency depreciation, and insecurity as key reasons for their departure or reduced operations.

Unilever Nigeria exited the home care and skin cleansing markets in November 2023, aiming to find a more sustainable and profitable business model. Procter & Gamble also announced its exit in the same year.

Minister of Finance Wale Edun, in a recent interview, acknowledged the challenges, attributing the exits mainly to the lack of a liquid foreign exchange market. He explained that the inability of these multinationals to access foreign exchange was a significant impediment to their operations.

Adewale Oyerinde, Director-General of the Nigeria Employers’ Consultative Association (NECA), revealed that at least 15 multinationals, employing over 20,000 people in total, have either divested or partially closed operations in Nigeria in the last three years. He emphasized the severe consequences for organized businesses, government revenue, and households, highlighting the resultant massive job losses across various sectors, which exacerbate insecurity issues.

Oyerinde expressed concern over the ripple effects on the broader business ecosystem, noting that numerous smaller enterprises dependent on these major corporations face sustainability challenges as their primary clients exit. This crisis within the value chain, he argued, requires urgent attention.

Sectoral leaders and analysts warn that the continuous departure of multinational firms could hinder Nigeria’s goal of achieving a $1 trillion GDP by 2026, a target set by President Bola Tinubu. At the 29th Nigeria Economic Summit in Abuja, President Tinubu had expressed optimism about the country’s economic growth potential.

Data from the National Bureau of Statistics (NBS) indicated that the services sector drove GDP growth in the first quarter of 2024, recording a 4.32% increase and contributing 58.04% to the aggregate GDP. In contrast, the manufacturing sector’s nominal GDP growth was 8.21% year-on-year, significantly lower than the previous year’s figure, with real GDP growth in the sector at 1.49% year-on-year.

Otunba Francis Meshioye, President of the Manufacturers Association of Nigeria (MAN), urged the government to address insecurity, improve electricity supply, promote fiscal sustainability, and ensure policy consistency. He emphasized the need for fiscal authorities to support the manufacturing and other productive sectors to boost non-oil export earnings.

Dr. Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry (LCCI), also expressed concern over the increasing trend of multinational exits. She highlighted issues such as foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, and poor infrastructure as major challenges. The LCCI recommended stabilizing and ensuring the availability of foreign exchange for businesses, particularly those operating in dollar-denominated environments, and creating a more flexible and transparent foreign exchange policy.

Femi Egbesola, National President of the Association of Small Business Owners of Nigeria (ASBON), stressed the importance of multinational companies in contributing to the country’s GDP and earnings. He argued that the departure of real investors undermines economic growth, especially when there is no corresponding increase in indigenous investments.

Despite these challenges, the Tinubu administration has been vocal about efforts to revamp the economy, encourage Foreign Direct Investment (FDI), and make local industries competitive. Edun highlighted recent executive orders signed by President Tinubu to improve the investment climate and disclosed tax reform proposals aimed at simplifying business operations for local and foreign manufacturers.

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