Recent departures of multinational corporations (MNCs) in Nigeria have caused worries among local businesses and analysts. The absence of these companies has affected small and medium enterprises, which depended on them for Outsourcing and contract work. This has disrupted the local content, integration, and supply chain management that the MNCs previously supported. Over the last ten years, the country has witnessed several outflows of multinational companies. This trend has brought attention to the challenges within the country’s business climate, including the difficulty in repatriating profits and dividends from dollar-denominated assets.
Such issues have threatened the inflow of Foreign Direct Investment (FDI) and raised alarms among industry stakeholders about the potential for job losses, factory shutdowns, and the decline of well-known brands in the face of economic instability. Companies that have left include Procter & Gamble (P&G), GlaxoSmithKline (GSK), and Kimberly-Clark, the manufacturer of Huggies. Their departure has resulted in job losses and reduced the technological and economic benefits they brought to the country. Their leaving can be linked to various issues such as political instability, foreign exchange shortages, high inflation, subsidy cuts, market unpredictability, dollar fluctuations, and Naira devaluation.
Govt needs to act promptly to avoid negative consequences for SMEs.
These challenges have made it difficult for businesses to thrive, raising concerns about the region’s capability to draw and maintain foreign direct investment. According to Dr. Femi Egbesola, the National President of the Association of Small Business Owners of Nigeria (ASBON), the government must intervene promptly to avoid negative consequences for SMEs caused by multinational corporations’ withdrawal. He stressed the importance of SMEs in delivering essential services and subcontracting for more prominent companies. Egbesola pointed out that SMEs are crucial in connecting multinational corporations by providing outsourcing and subcontracting services, promoting collaboration and shared advantages.
Due to the foreign exchange crisis and volatile exchange rates, foreign Investors are being discouraged from engaging in the investment sector, as stated by Johnson Chukwu, the Managing Director of Cowry Asset Management Company. The challenges of repatriating dividends and securing foreign exchange for imports have decreased the appeal of dollar-based investments, resulting in the departure of MNCs. Alimi Bamidele, the CEO of the Chartered Institute of Directors (CIoD), expressed similar worries. He mentioned that the decline in the value of the Naira compared to currencies such as the US Dollar makes it harder for multinational corporations to recover their profits and dividends, affecting their ability to compete globally.
Experts stress economic diversification and better regulations.
Bamidele emphasised enhancing the business environment by suggesting various measures to tackle the existing challenges. He proposed Economic Diversification to lessen the country’s reliance on oil, advocating for investments in agriculture, manufacturing, technology, and services to promote economic stability. He highlighted the significance of supporting small and medium enterprises and encouraging Innovation as essential components of this diversification strategy. Also, the CEO of the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, emphasised how decreasing people’s purchasing power has led to a shift in local companies towards offering cheaper products while multinational companies face challenges in maintaining their market presence with high-end brands.
He also pointed out that currency instability often discourages foreign investors from operating in unpredictable environments, posing difficulties for their business operations. On his part, Frank Onyebu, the ex-chairman of the Manufacturers Association of Nigeria (MAN), recognised the major consequences of multinational departures on the national Economy and emphasised the importance of implementing thorough tactics to reduce these repercussions. Dr. Alimi Bamidele from the CIoD stressed the need to align regulations and maintain uniformity in policy execution to minimise business uncertainties. He proposed active collaboration between the government and private industry to establish a regulatory environment conducive to business growth, emphasising the importance of simplifying procedures and eliminating unnecessary limitations.
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However, enhancing the safety and Security of both internal and national operations is crucial in creating a conducive business atmosphere. This necessitates a comprehensive strategy that involves increased resources and Education for security personnel, active community involvement, and advancements in surveillance Technology and intelligence gathering. Community members have encouraged the Presidential Fiscal Policy Reform and Tax Committee to explore ways to make business operations more affordable through incentives like tax deductions, grants for important resources, and assistance incorporating new technologies. Establishing designated economic zones that offer companies advantageous terms could draw international corporations and improve the overall business environment.