Procter & Gamble, a prominent player in the global consumer goods industry, has revealed its intention to shift its Nigerian operations to an import-only model, essentially discontinuing its physical presence on the ground in the country. The reason behind this resolution originates from the difficult state of affairs in the Nigerian business landscape, mainly due to operating in a currency tied to the dollar and unfavourable overall economic circumstances. The country will suffer significant job losses and a substantial economic setback as a result of the company’s relocation. With a presence spanning more than thirty years in Nigeria, the company has injected millions of dollars into the Manufacturing industry.
In 2104, a groundbreaking moment unfolded with the finalization of an ultramodern plant worth $300 million at Agbara, situated in Ogun State. This tremendous Investment marked the United States of America’s most significant non-oil venture in the country. Launched by the firm in 2014, the plant not only generated a whopping 5,000 job opportunities, but also indirectly supported numerous individuals through its network of offices, suppliers, and distributors. Additionally, this remarkable undertaking propelled the establishment of more than 200 jobs for small and medium-sized enterprises, further fueling Economic Growth and prosperity.
GSK had also previously announced its exit from Nigeria.
This is coming after GSK, the pharmaceutical company, made a recent announcement that it will no longer be conducting its business in Nigeria. Instead, a third-party entity has been chosen to handle the distribution operations. The implementation of this decision has taken several months to finalize. During his presentation at the Morgan Stanley Global Consumer & Retail Conference, Andre Schulten, the Chief Financial Officer of Procter & Gamble, highlighted the growing challenges of operating in specific markets like Nigeria and Argentina, owing to their macroeconomic conditions.
Consequently, the company is initiating a restructuring program aimed at optimizing its operating model and portfolio, with a strategic focus on markets that offer greater potential. According to Schulten, the emergence of another reality in certain markets lies in the growing complexity associated with generating and establishing value in US dollars. As a result, countries such as Nigeria and Argentina present challenging operational conditions due to their macroeconomic milieu. “So with that in mind, we are announcing a restructuring program with the intent to adjust the operating model and adjust the portfolio to ensure that we maintain the portfolio discipline that has brought us to this point,” he said, adding that the restructuring program will largely focus on Nigeria and Argentina.
Plan to make Nigeria an import market is now in the works.
Schulten declared the company’s decision to transform Nigeria into an exclusive import market, thereby dismantling their presence in the country and returning to a solely import-oriented model. He pointed out that the company’s decision would allow them to direct their attention towards markets that hold the greatest opportunities. During the discussion regarding the potential impact of the company’s forthcoming reorganization in Nigeria and Argentina on its overall group’s portfolio, the Chief Financial Officer elucidated that Nigeria constitutes a business generating $50 million in net sales.
The company is confident that the sales and profitability aspect will not have a significant effect on the group’s balance sheet, considering its extensive portfolio valued at $85 billion. Numerous businesses in Nigeria are grappling with a myriad of challenges that significantly impede their operations and overall growth. One pressing issue is the scarcity of foreign exchange, which has created hurdles for businesses in conducting international transactions and securing necessary imports. The unreliability of the Power Supply poses another obstacle, forcing businesses to contend with frequent disruptions that affect Productivity and operational efficiency.
Challenges affecting company operations in Nigeria.
Also, congested ports amplify logistical difficulties, leading to delays in the shipment of goods and increased operational costs. The burden of Taxation further exacerbates the situation, placing a heavy financial strain on businesses that are already navigating a complex economic landscape. Moreover, the prevailing Insecurity in various regions of the country poses risks to both personnel and assets, adding an extra layer of complexity for businesses to navigate. Still, inadequate Infrastructure compounds these challenges, hindering businesses from reaching their full potential. Insufficient transportation networks, substandard telecommunications, and inadequate facilities all contribute to a less-than-ideal business environment.
