After investing $100 million over the years in Nigeria, Kimberly-Clark, known for producing Huggies Diapers and various sanitary pads, is set to reveal the shutdown of its production plant in Ikorodu. According to a report from the company’s insider, it was revealed that Kimberly-Clark has faced difficulties and has been working under capacity since late 2023 due to the country’s tough economic circumstances. The company is closing its doors for the second time in the country. After a re-evaluation in 2019, it decided to cease operations, only to reopen in 2022 by introducing a $100 million facility in Ikorodu, Lagos State.
The anonymous source noted significant challenges regarding high running costs, such as energy, maintenance expenses, and raw materials. Adding to these limitations is the decreased demand for their products caused by the ongoing economic problems. Due to these factors, downsizing has occurred, and production schedules have been reduced to Mondays and Tuesdays only. He revealed that the company experienced tremendous success in sales growth and market share in the diaper industry during their first two years in the country.
Business environment needs to be improved for the country’s growth.
However, by the end of 2022, the economic downturn harmed the company’s performance in 2023. The company’s expenses are exorbitant, with a monthly fixed cost exceeding ₦500 million. In addition to maintenance, they allocate about ₦100 million to fuel for the gas engine. Despite having two assets, they were operational for less than 90 days out of 365 days in the previous year. At the beginning of the year, the company was forced to reduce its workforce from 4 shifts to 2. Previously operating around the clock every day of the year, it no longer runs on weekends due to financial challenges. With a pause on hiring new employees, the company is actively seeking cost-cutting measures as it struggles to profit.
To mitigate the effects of these closures and assist companies facing economic challenges like Kimberly-Clark, the federal government must prioritise establishing a more favourable environment for business. They can increase the financial strength of businesses by tackling the root causes of high operating expenses, such as unstable energy supplies and costly maintenance. The financial burden on enterprises would be significantly reduced by initiatives targeted at enhancing the energy Infrastructure and lowering reliance on pricey fuel alternatives. It would encourage more foreign Investment and assist in stabilising current operations.
Enhancing financial stability for people can boost enterprise growth.
In addition, the government should also implement economic measures that increase consumer spending power and demand. Policies like Tax breaks for low-income households, discounts on necessities, and efforts to raise employment rates may increase disposable income and the local market for goods like Huggies diapers. Improving the Financial Stability of its people may establish a more conducive atmosphere for enterprises to flourish and grow. Likewise, the administration can consider providing grants, tax advantages, and simpler Finance access as incentives for Manufacturing firms.
These incentives enable them to keep a consistent staff and reinvest in their operations by easing financial pressure on businesses. Furthermore, the government should support more efficient raw material import procedures since this would lower production costs and improve the competitiveness of locally produced items. They should consider developing infrastructure nationwide to improve the business climate further. Businesses can dramatically cut Logistics and transportation expenses by improving port facilities, rail systems, and road networks. In addition to ensuring that products reach markets more quickly while lowering operating costs, efficient infrastructure also increases overall Productivity and competitiveness.
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Moreover, promoting a skilled workforce through targeted Education and training programs is essential for the long-term viability of the manufacturing sector; active and open communication between the business community and the government is critical. Creating frequent forums where companies can express their issues and offer workable solutions can result in more efficient and knowledgeable policymaking. In addition to helping identify critical areas that require improvement, this cooperative approach will increase investor trust and confidence, ensuring that companies in the country feel valued and supported in their activities.