"Nigeria’s currency crisis is fueling a corporate exodus"

" \r\n\r\n Nigeria's currency crisis is fueling a corporate exodus \r\n\r\nAs Nigeria\u2019s vice\u00a0president cut the ribbon on Procter & Gamble Co.\u2019s diaper production line in 2017, the $300 million facility near Lagos was hailed as a symbol of the country\u2019s economic ambitions. In December, P&G said it was leaving the West African state.\r\n\r\nThe US consumer goods giant is not alone. In recent months at least three other global conglomerates\u00a0have announced they are exiting\u00a0Africa\u2019s most populous nation, and second biggest economy. Among them GSK Plc, Bayer AG and Sanofi SA. Last year Unilever Plc cut some of the products it was manufacturing in the country. Nestle SA has\u00a0posted losses\u00a0from its operations.\r\n\r\nAt the heart of the exodus is a scarcity of the dollars international businesses need to repatriate earnings. The central bank has devalued the naira twice in the past eight months and is still struggling to clear a backlog of demand for greenbacks companies require to pay debts and import raw materials. A near complete absence of a reliable electricity supply and congestion at Nigeria\u2019s ports are\u00a0compounding the malaise.\r\n\r\n\u201cIt\u2019s news because it\u2019s P&G. It\u2019s news because it\u2019s GSK. It\u2019s news because they have been in the country for a long time \u2014 but there are others that have died quietly,\u201d Segun Ajayi-Kadir, director general of The Manufacturers Association of Nigeria advocacy\u00a0group said on local television said after the P&G announcement.\u00a0\u201cIf the current situation doesn\u2019t improve, certainly we\u2019ll have more closures.\u201d\r\n\r\nSome of the world\u2019s largest oil reserves, ample fertile land and a rapidly growing population should have created a lucrative market for consumer goods producers following the restoration of democracy in 1999. Instead policy missteps, corruption and an over-reliance on oil fueled dysfunction in the economy. The middle class didn\u2019t expand as much as expected.\r\n\r\nThe implications for Nigeria are bleak. Its oil-dependent, $394 billion economy is already hobbled by high levels of\u00a0imports. The corporate exits \u2014\u00a0\u00a0$187 million in investment left the country in 2022 compared with an inflow of almost $9 billion in 2011 \u2014 will only exacerbate pressure on the naira, which has depreciated 86% over the last eight years, and deal a further blow to long-standing diversification efforts.\r\n\r\nPresident Bola Tinubu\u00a0has already introduced unpopular polices deemed necessary to revive the economy since taking office in May. He must now convince business that he can staunch the leak\u00a0of big name multinationals from the country.\r\n\r\nTaxes and duties are being simplified and a committee has been set up within the office of the vice-president to cut red tape, and there\u2019s a plan to improve infrastructure, according to Temitope Ajayi, a spokesman for the president. Tinubu has also vowed to end jihadist violence and criminality that has made shipping\u00a0goods in much of the north virtually impossible for many major companies.\r\n\r\n\u201cThey can make a marked difference,\u201d said Pieter Scribante, a South Africa-based senior political economist at Oxford Economics, of the government. \u201cBut it will take time \u2014\u00a0not a couple of years.\u201d\r\n\r\nMany companies can\u2019t wait.\u00a0On Feb. 7, PZ Cussons Plc, a UK-based maker of soap and other personal care products that counts Nigeria as its biggest market slashed its profit expectations for the whole group.\u00a0Cadbury Nigeria Plc has had to convert loans from its UK parent into equity because it couldn\u2019t find the foreign currency to repay them.\r\n\r\nNestle and Unilever\u00a0\u00a0are still operating on the sprawling industrial estate where the P&G production line was shuttered. But outside the walled complex, 65-year-old Raphael Babalola said\u00a0he isn\u2019t as busy loading boxes onto his truck for distribution as he once was. Some days he even drives off empty. \u201cCompanies just aren\u2019t producing like they used to,\u201d he said.\r\n\r\nAdigun Daniel, 63, another driver, said\u00a0he\u2019s idle most of the time when only a few years ago he would transport goods to the east and north of Nigeria, a country almost three times the size of Germany, at least twice week.\u00a0Other drivers have given up altogether and sold their trucks, he added.\r\n\r\nNigeria suffered two recessions in eight years after a drop in prices of crude drained foreign-exchange coffers and Covid struck.\u00a0Of the 230 million strong population, 130 are now multidimensionally poor, and with inflation at a 27-year high, fewer and fewer Nigerians can afford anything but the basics.\r\n\r\n\u201cTwenty years ago, 15 years ago it wasn\u2019t a mirage, it was a real business opportunity,\u201d said Adedayo Ademuwagun, a Lagos-based analyst at political risk firm Songhai Advisory of Nigeria. \u201cBut given the complications it\u2019s starting to look a lot less attractive.\u201d\r\n\r\nOther companies that have tried and failed to crack the Nigerian market include South Africa\u2019s Shoprite Ltd., Africa\u2019s biggest grocer, which left in 2021 \u2014\u00a016 years after opening its first store in a country it then envisaged as the linchpin of its planned expansion across Africa, which has largely been a disaster.\u00a0Clothing and food retailer Woolworths Holdings Ltd., fashion chain Truworths International Ltd.\u00a0and cereal and food producer Tiger Brands Ltd. have also packed up.\r\n\r\nFor manufacturers there\u2019s an added difficulty: competition from lower cost rivals like Turkish diaper-maker Hayat Kimya AS, and a unit of Singapore\u2019s Tolaram Group Inc. that makes Indomie Noodles, a national dish of sorts in Nigeria. While these companies are also struggling, they are too invested to leave, said Girish Sharma, chief executive officer of the Colgate Tolaram joint venture in Nigeria.\u00a0\u201cThings are tough right now,\u201d he said, adding but\u00a0\u201cexiting is not an option.\u201d\r\n\r\nP&G declined to comment on the closure of its plant. When the news was announced in December, its Chief Financial Officer, Andre Schulten, said; \u201cIt\u2019s very difficult for us as a US dollar-denominated company to create value,\u201d and \u201cit\u2019s also difficult to operate, because of the macroeconomic environment.\u201d\r\n\r\nThe government says Nigerian firms\u00a0can step in and fill the gap left by the corporate exits. But they are bleeding too, with many of them among the 767 companies that shut\u00a0down in the first quarter of last year alone.\u00a0The disused P&G factory did however present\u00a0an opportunity for Fouani, a local manufacturer, which now makes sanitary pads and diapers\u00a0in the same complex.\r\n\r\nNigerian firms should be the priority, Ajayi-Kadir said of the Nigerian manufacturers group, adding that he\u2019d like to see less taxes and more lines of credit. \u201cFDI is excellent, but it should come secondary to empowering the local manufacturers,\u201d he said. \u201cThat is when you have certainty that come rain, come shine, they will be with you.\u201d\r\n\r\nWhile Tinubu has taken measures that economists and investors in Nigeria\u2019s capital markets say are long overdue those steps are causing misery for ordinary people and sapping the popularity of his government.\r\n\r\nSome, like Tolaram\u2019s Sharma, have faith in Tinubu even if the benefits of what he is doing\u00a0are yet to be seen. \u201cHe\u2019s got a tough job,\u2019\u2019 Sharma said. \u201cHe will do things to fix the economy. As we speak lots of things are happening.\u2019\u2019\r\n\r\n \r\n \r\n \r\n "

"Nigeria’s currency crisis is fueling a corporate exodus"

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