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Economic Crisis: Massive Job Losses as 16 Multinationals Exit Nigeria in 3 Years |
Nigeria is grappling with an economic crisis triggered by the government's policies on petrol subsidy removal and the unification of FX windows. In this challenging environment, UK-based Diageo has joined approximately 15 other multinational companies that have exited the country over the past three years.
Diageo recently announced its departure on Tuesday, June 11, stating it will sell its 58.02% stake in Guinness Nigeria to Tolaram.
Diageo follows in the footsteps of other major companies like Kimberly-Clark, makers of Huggies and Kotex; US-based Procter & Gamble (P&G); GlaxoSmithKline (GSK); Unilever; and Sanofi-Aventis Nigeria, all of which have either fully exited or significantly reduced their operations in Nigeria, which is experiencing its worst cost-of-living crisis in decades.
Unilever Nigeria announced its exit from the home care and skin cleansing markets in November 2023, citing the need for a more sustainable and profitable business model. Procter & Gamble also announced its departure from the country the same year. Common reasons for these exits include high energy costs, currency depreciation, and insecurity.
The Federal Government has acknowledged these challenges. In an interview on Channels Television’s Sunday Politics program, Finance Minister Wale Edun stated that the lack of a liquid foreign exchange market was a major reason for the departure of some multinational companies, as they struggled to access the foreign exchange needed for their operations.
Adewale Oyerinde, Director-General of the Nigeria Employers’ Consultative Association (NECA), revealed that at least 15 multinationals have either divested or partially closed operations in Nigeria over the last three years. He noted that these exits have had severe consequences for organized businesses, labor, government revenue, and households, leading to massive job losses and increased insecurity.
Oyerinde expressed concern over the ripple effects on the broader business ecosystem, particularly for secondary businesses that serve as suppliers to these major corporations. The sustainability of these secondary businesses is at risk, and their employees face job insecurity as a result of the primary businesses' departure.
Sectoral leaders and analysts warn that the continuous exit of multinational firms could hinder Nigeria’s goal of achieving a $1 trillion GDP by 2026, as stated by President Bola Tinubu at the 29th Nigeria Economic Summit in Abuja.
Data from the National Bureau of Statistics (NBS) showed that the GDP growth in the first quarter of 2024 was driven mainly by the services sector, which grew by 4.32% and contributed 58.04% to the aggregate GDP. In contrast, the manufacturing sector's nominal GDP growth was 8.21% year-on-year, significantly lower than the previous year, with real GDP growth at just 1.49%.
Reacting to these developments, Otunba Francis Meshioye, President of the Manufacturers Association of Nigeria (MAN), called on the government to address issues such as insecurity, electricity supply, fiscal sustainability, and policy consistency. He emphasized the need for supportive measures to incentivize the manufacturing sector and boost non-oil export earnings.
Dr. Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry (LCCI), highlighted the increasing trend of multinational exits and its adverse impact on the Nigerian market. She urged the government to stabilize and ensure the availability of foreign exchange, improve power supply, and address other infrastructural challenges.
The National President of the Association of Small Business Owners of Nigeria (ASBON), Femi Egbesola, stressed the importance of retaining multinational investors for the country's GDP and earnings. He noted that the departure of these investors, without a corresponding increase in indigenous businesses, would negatively impact the economy.
Since the inauguration of the Tinubu administration, efforts have been made to revamp the economy, encourage Foreign Direct Investment (FDI), and make local industries more competitive. Finance Minister Wale Edun mentioned on Channels Television’s Sunday Politics program that recent executive orders signed by President Bola Tinubu have improved the investment climate. He also disclosed that tax reform proposals aimed at simplifying business operations for local and foreign manufacturers are being considered as part of an Economic Stabilization Package.
Whether these measures will stem the flow of multinationals exiting the country remains to be seen.
