The Organised Private Sector in Nigeria has expressed their displeasure that the Nigerian business environment has been marred by a worrying trend in recent years, as both multinationals and local enterprises have been forced to either shut down or relocate their operations.
Most of the businesses cite harsh economic conditions, unpredictable currency fluctuations, and soaring operational costs as key factors driving their decisions.
The report by Punch newspaper on Thursday said that an earlier report by the Nigerian Investment Promotion Commission showed that between 2015 and 2022 over 50 multinational corporations and local enterprises shut down or relocated their operations out of Nigeria.
The latest company to announce its departure from Nigeria is South African grocery retailer Pick n Pay, which confirmed recently that it would exit the market by selling its 51 per cent stake in a joint venture.
Its Chief Executive Officer, Sean Summers, stated that this decision aligns with the company’s broader restructuring plan outside its home market.
Pick n Pay, which initially entered Nigeria through a 2016 partnership with A.G. Leventis (Nigeria), opened its first store in 2021 and went on to operate two locations.
From 2020 to mid-2024, Nigeria saw a troubling trend of companies exiting the market due to ongoing economic instability, operational challenges, and other unfavorable business conditions.
In 2020, over 10 companies shut down or scaled back their operations, including notable names like Standard Biscuits Nigeria Ltd, NASCO Fiber Product Ltd, Union Trading Company Nigeria PLC, and Deli Foods Nigeria Ltd. These closures signaled the beginning of a larger exodus driven by increasing economic uncertainty.
The trend escalated in 2021, with more than 20 companies leaving Nigeria. Among them were Tower Aluminum Nigeria PLC, Framan Industries Ltd, Stone Industries Ltd, Mufex Nigeria Company Ltd, and Surest Foam Ltd. This wave of departures underscored the growing concerns about profitability and the sustainability of operations in a volatile economic environment.
By 2022, the situation showed no signs of improvement, with over 15 prominent brands ceasing operations in the country. Companies like Universal Rubber Company Ltd, Mother’s Pride Ventures Ltd, Errand Products Nigeria Ltd, and Gorgeous Metal Makers Ltd were among those that exited, further signaling the challenges facing both local and multinational firms in Nigeria.
The exodus continued into 2023, with more than 10 major companies pulling out of Nigeria due to profitability concerns and difficult business conditions. Some of the most notable departures that year included Unilever Nigeria PLC, Procter & Gamble Nigeria, GlaxoSmithKline Consumer Nigeria Ltd, ShopRite Nigeria, Sanofi-Aventis Nigeria Ltd, Equinox Nigeria, and food delivery giants Bolt Food & Jumia Food Nigeria.
In the first 10 months of 2024, the pattern persisted as at least five significant companies exited Nigeria, highlighting the continuing tough business climate.
Companies such as Microsoft Nigeria, Total Energies Nigeria (impacted by divestment strategies), PZ Cussons Nigeria PLC, Kimberly-Clark Nigeria, and Diageo PLC pulled out, further illustrating the deepening struggles businesses face in Nigeria.
According to an economist and former Director of Research and Advocacy at the Lagos Chamber of Commerce and Industry, Vincent Nwani, the top reasons for the exit of multinationals from Nigeria were the foreign exchange scarcity, naira decline, poor infrastructure, power supply issues, and exorbitant energy costs.
In addition to this, some other challenges include unstable government policies, insecurity, and increasing interest rates.
“The exodus of multinationals from the Nigerian economy has cost the country a N94tn loss of output in five years.
“If things continue this way and I don’t see anything being done to cause insecurity to stop, illegal taxation, corruption, and uncertainty of foreign exchange rendering companies unable to hedge risk, then I see at least 10 more notable names (of multinationals) that will go. We already have five by the end of May,” the newspaper quoted Nwani as saying.
GIK/APA