A recent report by financial solutions firm Cardinal Stone highlights the precarious situation faced by Fast-Moving Consumer Goods (FMCG) companies in Nigeria. Titled ‘Strategic Resilience: Sailing Through Business Disruptions,’ the report emphasizes the impact of high operating costs on these firms, making them susceptible to a mass exodus from the market. The FMCG sector, being highly exposed to fluctuations in commodity prices, exchange rates, import duties, clearing duties, and freight costs, is grappling with the challenges imposed by Nigeria’s harsh economic conditions.
Within a span of 10 months, six major multinational corporations, including Unilever, GlaxoSmithKline Consumer Nigeria Plc, Sanofi, Bolt Food, Procter & Gamble, and Jumia Foods, have exited the Nigerian market, signaling a trend that could adversely affect foreign investment and hinder Nigeria’s goal of achieving a $1 trillion economy by 2030. Cardinal Stone’s report predicts that companies in 2024 will continue rethinking their operational strategies for cost efficiency. It suggests potential collaboration between FMCGs to enhance economies of scale, diversify product portfolios, achieve revenue and cost synergies, explore technological innovations, and bolster the financial strength of the resulting entities.
MAN concerned over exits of multinational firms.
The United Nations Conferences on Trade and Development has added to the concerns, revealing that, for the first time in 33 years, foreign direct investment inflows into Nigeria turned negative in 2023, amounting to -$187 million. The report also highlights the possibility that the Nigerian FMCG sector may not benefit from the moderation in global commodity prices due to the depreciation of the naira, which dropped significantly from ₦422.00/$ in June 2023 to ₦951.94/$ in December 2023, following the Central Bank of Nigeria’s unification process.
Meanwhile, in December 2023, the Manufacturers Association of Nigeria (MAN) expressed alarm over the continuous exit of foreign multinationals, predicting over 6,000 job losses. MAN’s President, Francis Meshioye, attributed this trend to the ‘harsh business environment,’ cautioning that the exodus might persist without the government’s engagement with manufacturers who are hesitant to invest in uncertain business climates. This sentiment was echoed by Adewale-Smatt Oyerinde, the Director-General of Nigeria Employers’ Consultative Association (NECA), who confirmed that over the past three years, about 20,000 Nigerians have entered the job market as 15 business organizations either divested from Nigeria or partially closed their operations.
At least five companies have left Nigeria in 10 months.
Within the last 10 months, at least five major multinationals have shut down their operations in Nigeria. Unilever, in March, confirmed its exit from Nigeria, ending its home care and skin cleansing categories. GlaxoSmithKline Consumer Nigeria Plc, the country’s second-largest drug producer, followed suit in July by halting manufacturing operations. French pharmaceutical multinational Sanofi also announced its departure from Nigeria. Shortly after Sanofi’s announcement, Bolt Food closed its food delivery operations in Nigeria, citing business reasons.
Most recently, consumer goods giant Procter & Gamble declared the dissolution of its on-ground operations in the country. Despite some companies framing their exits as strategic business decisions, an analysis of their financial records by The Punch indicates shrinking profits, with some reporting significant losses in recent memory. These developments underscore the challenges faced by the FMCG sector in Nigeria and the urgent need for innovative solutions to ensure the sector’s sustained growth and resilience.
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Companies are exiting Nigeria primarily due to the country’s challenging business environment, characterized by high operating costs and economic uncertainties. The Fast-Moving Consumer Goods (FMCG) sector, in particular, faces exposure to fluctuating commodity prices, exchange rates, import duties, and freight costs. The mass exodus of major multinational firms, such as Unilever, GlaxoSmithKline Consumer Nigeria Plc, and Procter & Gamble, reflects the struggle to maintain profitability. The depreciation of the naira, negative foreign direct investment inflows, and an overall lack of assurance in returns on investments further contribute to the departure trend, emphasizing the need for government intervention and strategic reforms.