By Samuel Timothy
The Organized Private Sector (OPS) has raised concerns over the majority of ill conditions such as severe economic conditions, volatile exchange rates, and rising operating expenses causing businesses to migrate from the country. In recent years, economic challenges, exchange rate volatility, and rising operating costs have caused a sharp increase in business closures and relocations from Nigeria.
A concerning trend that has plagued Nigeria’s economic environment in recent years is the forced closure or relocation of operations by both local and multinational corporations.
According to a previous report by the Nigerian Investment Promotion Commission, more than 50 local businesses and multinational organizations closed or moved their operations outside of Nigeria between 2015 and 2022.
The South African supermarket chain Pick n Pay is the most recent company to declare its intention to leave Nigeria.
It just announced that it would do so by selling its 51% share in a joint venture. Sean Summers, the company’s CEO, said that this choice is in line with the company’s larger restructuring strategy outside of its domestic market.
Pick n Pay first established its first store in Nigeria in 2021 after partnering with A.G. Leventis (Nigeria) in 2016. Since then, it has operated two locations.
Nigeria had a concerning trend of businesses leaving the market between 2020 and the middle of 2024 as a result of persistent economic instability, operational difficulties, and other poor business conditions.
More than ten businesses, including well-known brands like Standard Biscuits Nigeria Ltd., NASCO Fiber Product Ltd., Union Trading Company Nigeria PLC, and Deli Foods Nigeria Ltd., closed or reduced their operations in 2020. Due to growing economic instability, these closures marked the start of a wider migration.
In 2021, the trend intensified, with over 20 businesses departing Nigeria. These were Surest Foam Ltd., Tower Aluminium Nigeria PLC, Framan Industries Ltd., Stone Industries Ltd., and Mufex Nigeria Company Ltd.
The increasing worries about profitability and the viability of operations in an uncertain economic climate were highlighted by this wave of departures.By 2022, more than 15 well-known brands had stopped doing business in the nation, indicating that nothing was changing. The departure of businesses such as Mother’s Pride Ventures Ltd, Errand Products Nigeria Ltd, Universal Rubber Company Ltd, and Gorgeous Metal Makers Ltd further highlighted the difficulties that Nigerian local and international businesses face.
Over ten significant corporations left Nigeria in 2023 as a result of challenging business environment and worries about profitability. Unilever Nigeria PLC, Procter & Gamble Nigeria, GlaxoSmithKline Consumer Nigeria Ltd, ShopRite Nigeria, Sanofi-Aventis Nigeria Ltd, Equinox Nigeria, and food delivery behemoths Bolt Food & Jumia Food Nigeria were among the most prominent exits that year.
The trend continued in the first ten months of 2024, with at least five major corporations leaving Nigeria, underscoring the country’s still difficult business environment.
Businesses in Nigeria are facing increasing challenges, as seen by the withdrawal of companies like Microsoft Nigeria, Total Energies Nigeria (affected by divestment strategies), PZ Cussons Nigeria PLC, Kimberly-Clark Nigeria, and Diageo PLC.
Vincent Nwani, an economist and former Director of Research and Advocacy at the Lagos Chamber of Commerce and Industry, claims that the main causes of multinational corporations’ departure from Nigeria were the lack of foreign exchange, the depreciation of the naira, inadequate infrastructure, problems with the power supply, and excessive energy expenses.
Moreover, insecurity, rising interest rates, and erratic government policies are some additional difficulties.
According to him, Nigeria has lost N94 trillion in productivity over the past five years as a result of international corporations leaving the country.
At least ten more well-known brands (of international corporations) will disappear if things keep going this way and nothing is done to curb instability, unlawful taxes, corruption, and foreign exchange uncertainty that prevents businesses from hedging risk.
By the end of May, we already had five.The economist clarified that by examining the number of Nigerians these multinational corporations employed, the wages they paid their employees, and their turnover, he was able to determine the contribution of all international corporations departing the Nigerian economy.
Similarly, Olusegun Ajibola, a professor of economics at Babcock University, stated that the main reason multinational corporations left was because the foreign companies’ original currency investments eventually lost value as a result of the exchange rate rising against the Naira.
Ajibola used the example of a multinational corporation whose $1 million investment inflow is converted to the current naira rate. After a fiscal year, the company converts its profit back to the original currency for repatriation purposes, only to find that it is no longer worth the same due to the sharp decline in the naira exchange rate.
According to the don, a global company would probably prefer to sell off its interests to other companies rather than invest more money in conducting business in a nation that was experiencing exchange rate difficulties, like Nigeria.
According to Ajibola, “other companies are coming in Nigeria, while some multinationals are leaving.”For foreign investors, Nigeria offers a stunning prospect. Despite certain local issues with infrastructure, security, and other areas, our market has always been strong.
The departure of multinational companies from a country can lead to a decline in Foreign Direct Investments, which is vital for economic growth, especially in emerging economies like Nigeria which heavily rely on crude oil exports.
Concern regarding the tendency has been voiced by the organized private sector. The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture’s National President, Dele Oye, addressed the issue of business exits from Nigeria and expressed the association’s deep concern over the ongoing trend of companies, including well-known companies like Pick n Pay, leaving the country.
