The Reason
Procter & Gamble’s decision to exit the Nigerian market and shift to an import-only model has raised significant concerns about the country’s business environment. P&G, which had operated in Nigeria since 1992, cited the challenging macroeconomic conditions, including currency fluctuations and inflation, as reasons for their departure. Their operations in Nigeria, while accounting for about $50 million in net sales, represented a very small part of their $85 billion global portfolio. The situation in Nigeria, especially the difficulty in managing costs tied to the naira’s depreciation and foreign exchange issues, mirrored challenges faced by other multinational companies, like GlaxoSmithKline and Unilever, which also scaled down operations in the country.
P&G’s decision, alongside these other companies, points to systemic issues affecting Nigeria’s fast-moving consumer goods (FMCG) sector. For instance, competition from companies based in developing economies like Turkey and India, such as Hayat Kimya (makers of Molfix diapers), has intensified. These companies managed to capture market share with cost-effective alternatives. In comparison, P&G has struggled due to its dollar-denominated costs and the high inflation, making it unprofitable to continue local production.
The broader economic conditions that forced P&G to exit include persistent inflation, worsened by the Nigerian government’s decision to remove fuel subsidies and float the naira. These policies, while aimed at stabilizing the economy, led to increased costs for businesses operating in the country. Industry-wide losses across Nigerian firms are also notable. For instance, Dangote Sugar Refinery and Nigerian Breweries both reported significant losses in recent quarters, largely driven by foreign exchange revaluation and a decline in consumer purchasing power. When comparing P&G’s performance in Nigeria to other African nations, the scenario is different. In Argentina, a country with similar inflationary pressures, P&G managed to build a more substantial $400 million business. However, in Nigeria, the difficulties proved more acute, contributing to their decision to downsize. The exit of these multinational companies highlights the need for the Nigerian government to create a more business-friendly environment, especially with a focus on local producers to fill the gaps left by departing global giants.
Former Foreign Companies
Over the last decade, several major international brands have exited Nigeria, largely due to macroeconomic challenges, foreign exchange constraints, inflation, and declining consumer purchasing power. Below is a list of prominent companies that have either scaled down operations or left the country entirely:
1.Procter & Gamble (P&G)
Exit: 2019 (scaled down operations to import-only model)
Products: Ariel detergent, Pampers diapers, Always sanitary pads, Oral-B toothpaste.
Reason: High operating costs, currency instability, and competition from lower-cost rivals like Hayat Kimya (Molfix).
2.GlaxoSmithKline (GSK)
Exit: 2023
Products: Panadol, Sensodyne, Horlicks, Augmentin.
Reason: Unfavorable business environment and the high cost of production driven by forex challenges. GSK shifted to a third-party distribution model instead of local production.
3.Shoprite
Exit: 2020 (sold Nigerian operations)
Products: Retail supermarket selling groceries, clothing, electronics, and more.
Reason: Tough business environment, economic downturn, and currency depreciation.
4.Mr. Price
Exit: 2020
Products: Clothing, household goods.
Reason: Economic challenges and declining profitability in the Nigerian market.
5.Etisalat
Exit: 2017 (rebranded as 9mobile)
Products: Telecommunications services (voice, data, mobile).
Reason: Financial troubles and debt crisis, with creditors taking over the company, leading to its exit.
6.Truworths
Exit: 2016
Products: Fashion retail (clothing, accessories).
Reason: Currency depreciation, high inflation, and forex restrictions affecting profitability.
7.Tiger Brands
Exit: 2015 (sold its majority stake in Dangote Flour Mills)
Products: Flour, pasta, bread (through its stake in Dangote Flour Mills).
Reason: Consistent financial losses and challenging economic conditions.
8.Volkswagen (VW)
Exit: 2020 (suspended assembly operations)
Products: Automobiles (Volkswagen cars and commercial vehicles).
Reason: Economic downturn and forex issues, making vehicle assembly unfeasible.
9.Intercontinental Hotels Group (IHG)
Exit: 2018
Products: Luxury hotel management.
Reason: The group withdrew its franchise from Nigerian partners due to business challenges and an inability to meet international standards under current economic conditions.
10.ExxonMobil
Exit: 2022 (sold off assets)
Products: Oil exploration and production (upstream oil and gas operations).
Reason: Shift to focusing on core areas and selling off its assets to focus on different priorities amid operational challenges in Nigeria.
Several multinational companies have exited Nigeria over the past decade due to a combination of challenges. One significant issue is the foreign exchange (forex) controls, which make it difficult for companies to repatriate profits, leading to financial strain. The devaluation of the naira has also driven up the cost of imports and operations, affecting profitability. Additionally, high inflation has eroded the purchasing power of Nigerian consumers, making it harder for companies to sell products at prices that cover costs. Lastly, inconsistent economic policies, such as fluctuating interest rates and unclear regulations, have further created an unfavorable business environment. These factors combined have pushed several companies to either scale down operations or fully exit the Nigerian market.
These exits signal a broader challenge for multinational companies operating in Nigeria, as local economic conditions continue to impact their ability to maintain profitability. However, some companies, like Unilever and Nestlé, remain in the market but have adopted cautious strategies, adjusting their product offerings and pricing models to navigate these difficulties.
