Multinational Manufacturers’ Exit To Dampen Nigeria’s GDP Growth

The increasing number of companies ending manufacturing operations in Nigeria will dampen the growth of the country’s Gross Domestic Product(GDP), LEADERSHIP learnt.

Multinationals are the most dependable and valued businesses in the market. They are enter­prises with a long track record of financial stability that are deemed low-risk by investors in many economies. However, with recent exit of aome.of them from the store of the country, this is becoming a source of concerns for stakeholders.

Procter & Gamble (P&G) has planned to transition its Nigerian operations to an import-only model, effectively dissolving its on-ground presence in the country.

The company cited challenges in conducting business as a dollar-denominated organisation and attributed its strategic decision to the macroeconomic conditions in Nigeria. The company has a portfolio valued at $85 billion with Nigeria contributing $50 million in net sales.

Some of the companies that have exited the country are: Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries, Stone Industries and GlaxoSmithKline Consumer Nigeria.

In March, Unilever, which started operations in the 1920s, announced that it was stopping the production of its legendary OMO, Sunlight and Lux home and skin care brands in a bid to cut costs so as to concentrate on higher growth opportunities.

Over the past seven years, several manufacturers, especially, in the fast-moving consumer goods industry, have either left the country or stopped production of some of their products as a result of the difficult operating environment.

Problems such as; rising interest rates, surging inflationary pressure, and foreign exchange volatility are impacting input costs, operating expenses and the general profitability of businesses in Africa’s biggest economy.

As a result of this, millions are losing their jobs and the country poverty index is worsening. The multinationals that are leaving the country have not only created jobs but have created immeasurable training that contributed immensely to the human capital development over the years.

Earlier, the governor of Central Bank of Nigeria (CBN), Mr Yemi Cardoso, had earlier said, the economic policy proposals of President Bola Tinubu’s administration can achieve a GDP of N1 trillion in eight years.

Speaking on this, the director-general of Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona said: “over the last few months, there has been a consistent increase in exit plans or a reduction in involvement in the Nigerian market by the multinationals, and this trend is worrisome. We have seen the likes of Unilever Nigeria, GlaxoSmithKline, and Guinness Nigeria Plc.”

She added that, “in Nigeria, lingering foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, and poor infrastructure, among others, have taken a toll on many businesses in the country.”

The chamber recommended that the government should implement measures to stabilize and ensure the availability of foreign exchange for businesses, particularly those operating in dollar-denominated environments.

The LCCI also implored the government to create a more flexible and transparent foreign exchange policy to address scarcity issues.

“Further, the Chamber urges the government to engage multinational corporations and the business community to understand their challenges and gather input and feedback on policy decisions to collaboratively develop solutions that will forestall the exodus of businesses from Nigeria. The CBN should prioritize the stability of the country’s currency and adopt the right policy mix to ensure price stability,” Almona said.

The national president of Nigerian Association of Chambers of Commerce Industry Mines and Agriculture (NACCIMA), Dele Oye, said, while the current administration has commendably set Nigeria on a long-term path to economic progression, it has been noted that some of the immediate positive economic policies of President Bola Tinubu have had an adverse effect on certain sectors of the country.

“In particular, the sudden rise in the price of petrol and abolition of the official naira rate has caused a significant backlash, eroding the already earned income and trading capital of several multinational companies that had established their previous earnings based on the official naira rate at the time,” he added.

NACCIMA recommended the government to focus on creating a conducive environment for businesses to thrive and provide access to single-digit short and long-term financing to reduce the cost of doing business.

“The government should prioritise investments in infrastructure and power supply, provide tax incentives to encourage businesses to invest in Nigeria, and improve the ease of doing business by reducing bureaucratic bottlenecks.

“Furthermore, we urge the government to work collaboratively with the private sector to develop policies that will stimulate economic growth and create job opportunities in the country,” Oye said.

Also, national president of the Association of Small Business Owners of Nigeria, Femi Egbesola said multinationals are among the companies that contribute largely to the country’s GDP and earnings.

“We cannot be talking of growing our economy when the real investors are leaving. Assuming they are leaving and the indigenous ones are increasing, it would have been a different thing. But that is not the case. You make income as a nation when you have investments and investors,” he said.