• Say exit clear sign economy is distressed
• Urge govt to arrest trend
By Cosmas Omegoh
Few days from now, the year 2023 will roll to an end, and finally folding irretrievably into history – just like the other years before it.
For many, 2023 is going down as a year like no other – one some people will prefer to call it the year of the locust because of the enormity of challenges that came with it.
Now ask the manufacturers, for instance, many of them will tell you how they are reeling in pains and anguish, how disgusted they are feeling. The latter half of 2023, has been characteristically excruciating. They will tell you that in their strive, no year has been like 2023. No year has brought as much misery and challenge especially as some companies are closing shop, with their owners literarily throwing up their arms in resignation as they rued their misfortune. The year has seen some big companies with overseas links packing up and leaving. Not that they want to leave. They are doing so sorrowfully at time the odds are swelling up against them and they can no longer cope. They are complaining bitterly how the Nigerian space has been hurting what they do. Their businesses could no longer grow as they did in the time past. So, they are leaving for other climes where they believe their investments are better served.
From what is learnt, other companies that are still managing are struggling to survive with enormous difficulties.
Our correspondent learnt that many company operators are merely trudging on with fear. Each day, they fear that they could go under. When they look into the future, the fate of their investment is not encouraging.
And now, to remain afloat, the companies are shedding skilled and unskilled hands, constantly flushing them into the labour market. Yet, they also fear that sometime soon, Nigeria might have to depend on its less endowed neighbours for everything manufactured since the future of the manufacturing industry is becoming bleak by the day.
How downward trend began
In the early 1980s, manufacturing activities in Nigeria was clearly booming. The country was doing very well at that time. Much of the products it needed were manufactured locally – vehicles, household products, foot wears, clothing and more were locally made.
All across the country, industrial clusters sprang up and flourished.
In those days, Lagos remained the hub of manufacturing activities. There were several thriving outfits in the Apapa axis. In particular, there were very many companies doing well in the Ilasamaja scheme, Apapa, Oba Akran Way in Ikeja and more. Those that could not find a space in the aforementioned locations moved to Ota, in Ogun State.
In Ibadan, the Oluyole Industrial layout was teeming with manufacturing firms. Kano’s Bompai and Sharada Phases 1 and 2 were busy. In the East, the Enugu-Port Harcourt corridor was very active. Life went on well. Many adults can now recall that glorious past with nostalgia.
How the big fall began
But as the years went on, no one saw the big fall coming. Even now, not many can say for sure how and when the big fall began. Just like a thief in the night, many of the manufacturing and even trading outfits went down.
Companies like Berec Batteries, Michelin, Dunlop, Volkwagen and many others disappeared – all gone with their iconic products which sustained the joy and happiness of those days.
Sadly, when you stroll along Ijora Cause Way or Creek Road in Apapa, or Oba Akran Way in Ikeja which housed many of those companies in those days, their once enviable places are now either fallow and forlorn, or had been converted to worship centres. What is left is just figment of their ones glorious moment. The same thing could be said of many other corridors that used to be manufacturing centres across the country.
Now, truth be told. Many of the companies that are now struggling to remain in business are doing so with enormous difficulties. They are bleeding as a result of high operating costs, complaining that the ease of doing business in the country has considerably ebbed with time.
The companies are bitter because they don’t have the least supply and affordable power. So, they are compelled to plow a substantial part of their profits into purchasing power- generating systems and buying diesel at very high cost to fuel their operations.
Even lately the companies are bitter that the naira has been literarily devalued, and now exchanging at ridiculous rates with every currency in the world. Worse still, the exchange rates regime remains uncertain, and posing a cloud of uncertainty difficult to manage. Even the most astute of the companies’ managers can hardly plan and keep pace with the dizzying pace of the naira fall. The future is unsure. Such regime is not good for any serious business, they insist. To some of them, the option left is to exit.
Worse still, the inflationary trend is killing. Last October, the National Bureau of Statistics (NBS), announced that inflation had hit 27.33 per cent – the highest ever recorded since August 2005. The trend has maintained its upward climb ever since with industry icons lamenting that the regime is not good for business.
And now companies are leaving
It was gathered that between January 2023, and now, about seven multinationals had either left or signaled their intention to leave Nigeria by the year ending.
On August 3, for instance, GlaxoSmithKline (GSK), a prominent UK-based pharmaceutical firm, which had been operating in the country since July 1, 1972, under the name Beecham Limited announced its decision to leave. GlaxoSmithKline Consumer Nigeria Plc was incorporated in Nigeria on June 23, 1971.
Lately, Procter & Gamble (P&G), a consumer goods outfit and household name, also announced its decision to quit. It was a decision that had rattled the Nigerian manufacturing community and other private individuals.
P&G Chief Financial Officer, Andre Schulten was quoted as saying that “the other reality that arises … is that it gets increasingly difficult to operate and create U.S dollar value. So, when you think about places like Nigeria … it is difficult for us to operate because of the macro-economic environment.
“So, with that in mind, we are announcing a restructuring programme with the intent to adjust the operating model and adjust the portfolio to ensure that we maintain the portfolio discipline that has brought us to this point.”
In addition, some local firms which are finding life difficult are either closing shop or scaling down their operations and shedding their manpower in other to remain alive.
Our correspondent gathered that with the harsh economic climate in the country, more and more firms were likely to announce their decision to quit.
All this is happening at the time the Nigerian government is going round the world soliciting direct investment in the country.
Critics are raising their voices, insisting that the government ought to first fix the challenges at home and make the land favourable for business. Only then, they say, can those managing to preserve breathe and new ones find the space come in.
MAN fears situation might worsen
Earlier in the year, Manufacturers Association of Nigeria (MAN) expressed fears that the situation in the country might get worse if nothing was done to halt the trend.
MAN President, Francis Meshioye, said that a humongous sum said to be in the region of N144 billion which companies spent on powering their generators alone in 2022 was unacceptable.
That, he said, was unacceptable as it cut too deeply into the operating cost of the affected companies.
He told a national daily that “if you spent N144 billion on alternative energy sources in one year, you can only imagine the impact which that will have on your cost of operations. The manufacturing business in Nigeria is affected by so many factors, energy is a major one.
“Manufacturers provide almost every infrastructure by themselves. Outside the major roads, you find out that manufacturers provide water, power, security, etc. So, when you look at it, you find out that the cost of doing business is so huge, that a businessman will ask, is this the only place I can do my business? Can I move my capital elsewhere?”
He lamented that electricity cost was going up too highly where it was even supplied, at all, and warned that further increases in tariff might trigger an exodus of companies.
Speaking on the proposed exit of P&G from Nigeria, Segun Ajayi-Kadir, MAN’s director general, expressed worry at an encounter with an online platform.
He said: “Obviously, we received it with sadness, but it is not totally unexpected, and more may happen because there is no doubt that we operate in an environment that is challenged.
“Manufacturing in any economy is a strategic choice; the government has to make up its mind whether it wants its country to be an industrialised one. Once that decision is taken, you have to do all that is needed to remove the binding constraints that limit the performance of that sector. Nigeria has not done so and that is why you can see there are closures.”
P&G exit bad omen – Peter Obi
Meanwhile, the presidential candidate of the Labour Party, (LP) in the 2023 election, Peter Obi, described the exit of big firms from the country as bad omen.
Obi made the comment in his verified X (Twitter) handle.
He said: “A few months ago, I lamented about the exit of the international Pharmaceutical giant, GlaxoSmithKline (GSK) from Nigeria. GSK remains a top global pharmaceutical manufacturer and has had 51 years of operations in Nigeria, the reason for their exit being that there was no longer any perceived growth in Nigeria anchored on productivity.
“Today, Procter & Gamble (P&G), the world’s largest personnel care and household products company, makers of iconic brands like Pampers, Gillette etc, is again leaving Nigeria, for the same reason GSK left.
“Following this also are FMCG and top Energy firm, Norwegian behemoth Equinor which has sold off its Nigerian business. Developments associated
“Fifteen years ago, P&G, as they are commonly called, viewed Nigeria as a strategic country of importance and invested millions of dollars in an ultra-modern chain supply structure in Agbara, which, sadly, is now up for sale.
“The presence of these iconic companies in any economy is not only that they signify trust and confidence, as well as believe in medium to long-term socio-economic prospects of such countries, but they massively create jobs, invest in Research and Development, as well as pieces of training which smaller players in the industry learn from and adapt.
“The exit of these top global companies basically shows that our medium to long-term prospects strategy is in the negative, our investment profile is not attractive and our business environment is deteriorating continually. The declining purchasing power of Nigerians is nose-diving every day.
“In the face of the absence of the rule of law, and a conducive business environment, it will be difficult to retain such iconic companies and talk more about attracting new ones.
“Governments at all levels in Nigeria must, therefore, take immediate steps to ensure that institutions of governance are put in place and actively engaging to show that the situation is reversed.”
Right things not being done
Also, Iorbee Ihagh, a lecturer in the Department of Business Administration, Federal University of Agriculture, Makurdi, has warned that Nigeria runs the risk of having more firms go under if the right things are not done urgently.
“I concur with everyone who has said that the exit of some multi-nationals from the country is a potential danger to our fragile economy.
“The problem with Nigeria right now is that of leadership. We lack the right leadership, which can change the course of things. Now, see where we are with the policies on ground.
“At the moment, we don’t have fuel. Even where you find it, the price is unaffordable. I see some distinguished professors trekking to school. So, you can imagine what the companies leaving are seeing.”
He stated that since the right policies were not mounted, there was no way good results could be achieved.
“When the politics and policies on ground do not favour the multinational companies, definitely they would leave for safer climes where the conditions are favourable.
“The government needs to be told that the current policies on ground are not favourable to investment. Security, for instance, is not there for anybody. And so, there is no how anybody will come here to invest in a volatile environment. People want to invest where there is rest of mind.
“Based on what we are seeing now, Nigeria could be said to be pregnant. Anything can happen. And so, to prevent the untoward from happening it is left for the leadership to do the right things fast. Once the right things are not being done, there is no way the good results will be achieved.
“The firms that left were here to make profit. If that was not being achieved, why will they stay back?”
Ihagh also spoke on the spate of corruption and the punishing exchange rate regime.
He said: “I don’t see the country making progress without a change of attitude to corruption. A situation where people go free no matter what they do – all because they belong to a particular party in power is not helping matters.
“Worse still, look at the value of the naira right now. Even the West African CFA has regrettably overtaken our own naira. How would any company survive with this trend?”