In this feature, Jumoke Olasunkanmi highlights implications of the exit of several multinational corporations on the socio-economic wellbeing of Nigerians and President Tinubu’s bid to attract investors to the country.
Nigeria, once proud to be the largest economy in Africa, is now witnessing an exodus of multinational corporations. Over seven major players, including industry giants Unilever, GlaxoSmithKline (GSK), and Procter & Gamble (P&G), have either left or announced their imminent departure by the end of the year.
The driving force behind this corporate migration lies in the myriad challenges faced by these companies, ranging from a persistent power crisis to the constant devaluation of the Naira, coupled with forex availability issues and other stringent government policies.
P&G’s Chief Financial Officer, Andre Schulten, explained that the company was leaving the Nigerian market due to the difficulty of doing business in the country.
“The other reality that arises in some of these markets is that it gets increasingly difficult to operate and create U.S. dollar value. So when you think about places like Nigeria and Argentina, it is difficult for us to operate because of the macroeconomic environment,” he said.
Similarly, pharmaceutical giants, Sanofi-Aventis and GSK’s exit is not unrelated to the unavailability of forex in the country. During its annual general meeting in 2022, GSK’s Chairman of the Board of Directors, Edmund Onuzo, noted that factors such as the scarcity of foreign exchange and the high cost of doing business were affecting the company’s operation.
“While we expect sustained economic growth in 2023, we cannot overlook some factors which must be duly considered in this quest for economic growth and development in Nigeria. The factors include foreign exchange availability for businesses, insecurity, unemployment, and the high cost of doing business, coupled with the uncertainty around fuel subsidy removal…we must mention that it continues to be very challenging with foreign exchange non-availability affecting our ability to settle foreign currency-denominated trade payables with product suppliers,” Onuzo said.
Mass Unemployment
The exodus of multinationals will undoubtedly lead to mass job losses, as many of these companies are among the biggest employers in the country. According to reports from Punch newspaper, more than 6,000 Nigerians will be left jobless, with an estimated 5,000 jobs lost from P&G’s exit alone—a disconcerting figure in a country where over a third of the population live in poverty.
Earlier this year, KPMG in its ‘Global Economy Outlook Report, H1 2023’ predicted that Nigeria’s unemployment rate, which was 37.7 percent in 2022, will rise to 40.6 in 2023.
“Unemployment is expected to continue to be a major challenge in 2023 due to the limited investment by the private sector, low industrialization, and slower-than-required economic growth and consequently the inability of the economy to absorb the 4-5 million new entrants into the Nigerian job market every year. Although the National Bureau of Statistics recorded an increase in the national unemployment rate from 23.1 percent in 2018 to 33.3 percent in 2020, we estimate that this rate has increased to 37.7 percent in 2022 and will rise further to 40.6 percent in 2023,” part of the report read.
Scarcity and Hike in Price of Products
Companies like P&G, GSK and Unilever produce many commonly used household products and pharmaceuticals, from toothpaste and detergents to pain relievers and inhalers. Their exit will mean that these products will be imported into the country, resulting in an increase in their normal price and potential scarcity.
With headline inflation rising for the 11th consecutive month in November, according to NBS, an additional increase in the price of everyday products is an added strain for people whose purchasing power has been drastically reduced with the 28.20 percent inflation rate.
Less Revenue for Government
Tax generated from the companies folding up will, of course, cease. Less revenue may affect economic growth and development in the country and push the government into even more debt. Nigeria’s debt as of March 2023 was over $108 billion, according to the Debt Management Office (DMO). The country is more likely to borrow more in the coming year as more companies exit.
Dearth of Foreign Investment
Tinubu’s renewed hope agenda has continually called for and promised foreign investment to grow the economy. However, his policies have ironically driven multinationals away from the country, a move that is sure to deter other intending investors. Already, foreign investment flow into the economy reduced by 33 percent, dropping to $1.03 billion in the second quarter (Q2) of 2023 from $1.54 billion recorded in Q2 of 2022. This decline will again be evident in the country’s economic growth and development.
As the 2023 financial year closes and ushers in a new one in 2024, it is expected that the Tinubu-led administration will address issues arising from policies that have adversely affected the investment climate in the country. Failure to do this will lead to more exit of investors, investors apathy and further descent of more citizens below the poverty line.
