By Chinwendu Obienyi
The recent plans by some multinational companies to exit the country have been projected to cut off an estimated 5000 jobs from the economy.
The latest job loss projection comes as companies like PZ Cussons, Glaxosmithkline and most recently, Procter and Gamble (P&G) among others recently gave reasons why they decided to pull out from Nigeria over its worsening operating environment.
Their decision is an indication that over 5000 Nigerians, (both skilled and unskilled labour) may have to lose their jobs across the various sectors of the economy where these companies have been operating over the years.
The companies, citing challenges of harsh operating environment, FX illiquidity and volatility, soaring inflation and interest rates hike, said to have weakened the purchasing power of consumers, leaving them to grapple with higher operating costs.
For instance, the Chief Financial Officer, P&G, Andre Schulten, noted that the company plans to transit the Nigerian operations to an import-only model, effectively dissolving its on-ground presence in the country based on unfavourable macroeconomic conditions.
Also speaking, Equinor’s Senior Vice-President for Africa Operations, Nina Koch, stated that Nigeria has been an important part of the company’s portfolios over the past 30 years.
According to Koch, the decision to exit realises value and is in line with Equinor to optimise its international oil and gas portfolio and focus on core areas.
Owing to lingering FX scarcity bedeviling Nigeria, Guinness Nigeria had also announced that effective April 2024, it will no longer import or distribute certain Diageo International premium spirits products, including Johnnie Walker, Singleton, and Baileys and others imported brands under its 2016 Sale & Distribution Agreement with Diageo Plc.
According to a notice tagged; Notification of Change in Distribution Model for Imported Diageo International Premium Spirit (IPS) filed with the Nigerian Exchange Limited (NGX), this move is in line its long-term growth strategy and it is also in alignment with the company’s decision to establish a new, wholly owned spirits-focused business to manage the importation and distribution of its international premium spirits portfolio in West and Central Africa, with Nigeria as one of the hubs.
In like manner, Sanoti-Aventis Nigeria Limited, a French pharmaceutical company pulled out assets estimated at over $800 million from Nigeria.
There are fears that this development is far from being over with a likelihood that more companies may hit the exit door if the uncertainties in the economy persists.
Speaking during a Business Morning programme on Channels Television recently, the Director General, Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, expressed concerns over the exit of multinationals and added that more manufacturers may likely exit the country.
He said, “We received it (P&G exit) 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 limits the performance of that sector, Nigeria has not done so and that is why you can see there are closures”, He said.
But in separate interviews with Daily Sun, several economic experts said that Nigeria is fast becoming a finance first economy instead of sticking to the old mantra of manufacturing which is slowly disappearing.
They also urged the FG to reverse the floating of the Naira as the exits may lead to job losses and rising costs of products.
Associate, Research and Portfolio Management, Zedcrest wealth, Samson Owolabi, stressed that the exits are a cause for concern amongst investors and believes this is sending negative sentiments and cautious trading in the market.
These countries have been in this country for a very long time. GSK has been here for 51 years, hence there are concerns as to the investment landscape. If these companies are blaming the harsh operating environment, then they will think their money won’t be safe.
He explained that due to the increase in price of products from these companies, consumers are switching to their substitutes.
“When you look at the current economy especially cost of living amongst people, they tend to switch products or look at their substitutes which is the major factor here for these manufacturing companies. The impact will be severe but again we could look at it that there is so much to do in terms of ramping up local production, this is an opportunity for the government to support the SMEs”, Owolabi said.
For his part, Ndubuisi Ekekwe, an economic analyst, described the situation as shocking and disappointing. According to him, Nigeria is in an economic miry clay.
He said, “When SAP sapped Nigeria and rewired the economy to be finance-first, instead of manufacturing-first, from that day, the Naira started losing its value to dollar because our balance of payment and balance of trade began to deteriorate”.