P&G Exit: What it Means for Nigeria’s Economy and Consumers

The recent announcement of Procter & Gamble’s (P&G) exit from Nigeria has sent ripples through Nigeria’s economy raising questions about the challenges faced by multinational corporations in the Nigerian market. P&G, a prominent multinational consumer goods company, plans to transition its Nigerian operations into an import-only model, effectively ending its on-ground presence in the country. This decision comes as a response to what P&G describes as unfavorable macroeconomic conditions.

This move is part of a growing trend, as other multinational giants have also been reevaluating their positions in Nigeria. Unilever, a household name, made substantial changes earlier this year by discontinuing the production of certain product categories.GlaxoSmithKline Consumer Nigeria Plc (GSK), a major drug producer in Nigeria, halted its operations, attributing the decision to the termination of exclusive marketing and distribution agreements by its UK parent company. Meanwhile, Sanofi, a French pharmaceutical multinational, quietly disclosed its exit strategy by appointing a third-party distributor for its medicines portfolio.

These multinational exits and adjustments underscore the complex economic landscape in Nigeria, marked by currency devaluation, foreign exchange shortages, and rising inflation. This article will delve into the implications of P&G’s exit and the broader effects of multinational departures on Nigeria’s economy and consumers, shedding light on the challenges multinational corporations face in the country.

A Loss of Over 5,000 Jobs and Declining Foreign Investments

Muda Yusuf, chief operating officer of the Centre for the Promotion of Private Enterprise (CPPE), said that the exit of P&G is primarily attributed to intensified competition within the industry and a declining consumer purchasing power. Data from the Manufacturers Association of Nigeria (MAN) shows a sharp increase in job losses in the manufacturing sector. The number of jobs created has declined, highlighting the unfriendly business environment in Nigeria.

There is a possibility that if the current situation persists, Small and Medium Scale Enterprises (SMEs) in Nigeria may cease to exist. Importing goods into Nigeria has become cheaper, leading to severe economic implications for the country.

How P&G Plans to Transition to an Import-Only Model

The devaluation of the naira has created significant hurdles for businesses operating in Nigeria. P&G, which has been in the country for over 30 years announced plans to transition to an import-only model due to unfavorable macroeconomic conditions. According to Andre Schulten, P&G’s CFO, it is increasingly challenging to operate and create U.S. dollar value in markets like Nigeria.

P&G, known for brands such as Always, Ariel soap, and Oral B toothpaste, had invested millions of dollars in Nigeria’s manufacturing sector, including a $300 million ultra-modern plant in Agbara, Ogun State, which created over 5,000 jobs directly and indirectly. However, the plant was shut down just one year later, citing operational restructuring as the primary reason.

The exit could lead to higher operating cost

The Tinubu administration’s economic reforms, including the removal of petrol subsidy and naira devaluation, have pushed inflation to its highest level in 18 years. Rising inflation has weakened consumers’ purchasing power, further straining businesses already grappling with higher operating costs.

There is news that P&G had once sought to co-invest $2 billion with raw material suppliers in Nigeria’s gas master plan, aiming to create well-paying jobs and export raw materials to P&G plants in Africa and the Middle East, but this plan never materialized.

P&G’s exit is not an isolated incident. Several manufacturers, especially in the fast-moving consumer goods industry, have either left Nigeria or halted production due to the challenging operating environment. Rising interest rates, surging inflation, and foreign exchange volatility are impacting businesses’ profitability in Africa’s most populous nation.