In the latter half of 2023, the Nigerian business landscape has witnessed the departure of at least five major multinationals, raising concerns about the impact on foreign investment and the nation’s ambitious target of achieving a $1 trillion economy by 2030.
Investment data from the National Bureau of Statistics (NBS) reveals a 33 percent decline in the second quarter of 2023, with inflows dropping to $1.03 billion from $1.54 billion recorded in the same period in 2022. The United Nations Conferences on Trade and Development reported negative foreign direct investment inflows (-$187 million) into Nigeria for the first time in at least 33 years.
The exit of these companies coincides with the lowest foreign investment inflows in 27 months, painting a worrisome picture for Africa’s largest economy.
Ayorinde Akinloye, a Lagos-based investor relations analyst, emphasized the importance of a robust manufacturing sector for economic growth, citing challenges faced by multinationals like Procter & Gamble (P&G), which invested $300 million in a new factory only to close within a year due to unfavorable currency conditions.
With two recessions in the past seven years hindering Nigeria’s ability to surpass $500 billion in GDP, the recent exits could further jeopardize economic growth. The impact is expected to be felt through job losses, reduced overall spending, and a decline in the operating surplus of contributing firms, according to analysts.
Several high-profile exits have been announced, including GlaxoSmithKline Consumer Nigeria, PZ Cussons Nigeria, Guinness Nigeria, Sanofi, and Equinor. Notably, Procter & Gamble has also declared its transition to an import-only model for its Nigerian operations.
Chinyere Almona, director-general of Lagos Chamber of Commerce and Industry, highlighted challenges such as foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, and inadequate infrastructure contributing to the trend of multinational exits.
Segun Ajayi-Kadir, director-general of the Manufacturers Association of Nigeria (MAN), expressed concerns on Channels TV, suggesting that more exits in the manufacturing sector might occur unless the government implements defined measures to address existing challenges.
Despite recent reforms initiated by President Bola Tinubu, including the removal of petrol subsidies and foreign exchange reforms, rising inflation and a depreciating naira have created an uncertain business environment. The high cost of sourcing foreign exchange has contributed to an 18-year high inflation rate of 27.33 percent in October, making many products unaffordable.
Gbolahan Ologunro, portfolio manager at FBNQuest, noted that the departure of multinationals would weaken the nation’s productivity capacity, making the ambitious one trillion-dollar goal a challenging task.
The exit trend follows the departure of several manufacturers in the fast-moving consumer goods industry in the past year, further raising concerns about the nation’s economic stability.
As the real growth rate of the manufacturing sector faces challenges, and with multinationals contributing significantly to Nigeria’s GDP, the ongoing trend of investor exits poses a significant threat to the nation’s economic aspirations.
