Since 2000 till date, insecurity, terrorism, and kidnapping cases have increased exponentially, creating an unfavorable business environment and the government’s efforts to diversify the economy has led to a shift away from traditional industries, causing most businesses to exit. As we can see, this menace has been a recurring nightmare in the corridors of Nigeria since the post-independence era. How shall we escape?
There is a growing concern about the significant exodus of foreign companies, leaving behind a trail of uncertainty and economic instability.
Nigeria has always been a fertile ground for businesses to thrive and a robust market for international investors, which culminated the long-standing global image and reputation as the ‘Giant of Africa’. Sadly, the giant that represented the dignity of Nigeria’s business landscape is gradually falling on the ground of its founding fathers, as notable multinational companies are seen quitting the country on yearly basis, leading to far-reaching implications for Nigeria’s economy, workers, and future investments. The reasons behind this mass exit are not farfetched; however, there are practical solutions to reverse this worrisome trend before the next set of companies exit the country.
Let’s take a short drive through the historical lanes of how we found ourselves in this quagmire as a nation. We should recall that it all began in the 1960s with the menace of political instability when Nigeria experienced a series of military coups, civil wars, and political unrest, scaring off investors and businesses. From the 1960s to 1990s, the country faced severe economic downturn, currency devaluation, and hyperinflation, making it challenging for businesses to operate. To cap it all, there was an epidemic of corruption, bureaucratic red tape, and unfavorable regulatory environments that drove businesses away till the 2000s.
Since 2000 till date, insecurity, terrorism, and kidnapping cases have increased exponentially, creating an unfavorable business environment and the government’s efforts to diversify the economy has led to a shift away from traditional industries, causing most businesses to exit. As we can see, this menace has been a recurring nightmare in the corridors of Nigeria since the post-independence era. How shall we escape?
Truth be told, there have been ripple effects of this national unrest on businesses with proven statistical records. Between 2005 and 2015, Nigeria lost over $100 billion in investments due to political and economic instability according to the UN Conference on Trade and Development (UNCTAD), while in 2019, foreign direct investment (FDI) in Nigeria dropped by 43% compared to the previous year as reported by the National Bureau of Statistics. A 2020 survey by the Nigerian-American Chamber of Commerce also found that 50% of businesses considered leaving Nigeria due to unfavorable operating conditions which validate the reasons for the shut-down of Standard Biscuits Ltd, NASCO Fiber Products Ltd, Union Trading Company (UTC) Nigeria PLC, Tower Aluminum Nigeria PLC, Stone Industries Ltd, Framan Industries Ltd and Mufex Nigeria Ltd, including Equinox Nigeria Ltd, GlaxoSmithKline Nigeria Plc, and Bolt Food & Jumia Food Nigeria, amongst other well-known names between 2020-2023.
As at Q1 of 2024 till date, we have recorded the exit of five major companies including PZ Cussons PLC and Kimberly-Clerk, Microsoft, and Guinness Nigeria, a subsidiary of global brewery brand Diageo, which announced plans to exit the Nigerian market and sell its controlling stake to Singaporean conglomerate Tolaram Group. According to reports, Guinness Nigeria suffered a staggering loss of N61.9 billion between July 2023 and March 2024, a significant decline from the N5.9 billion profit recorded in the same period last year. The loss is attributed to the country’s economic woes, which have been exacerbated by the recent floatation of the naira, foreign exchange crises, increased energy cost due to power crises, as well as the deadly state of insecurity of lives and properties in the country. Based on the research conducted by Dr Vincent Nwani, the cumulative lost output due to these multinational exits is estimated at N94 trillion in five years.
What is the way forward before the next company leaves Nigeria?
Considering the increasing rate of insecurity in the country without a realistic measures in place to stem the tides of this national menace, coupled with the fluctuating foreign exchange and unchecked rate of taxation, there is a projection that more multinational companies are in the pipeline of exiting Nigeria before the end of June and July, because the cost of running businesses is largely becoming unbearable and unprofitable, especially as a result of foreign currency devaluation orchestrated by the increase in exchange rate against the naira; hence, the reason multinationals are selling off stakes to other business in a bid to cushion the effect of the nation’s economic woes. However, there are few companies still coming into Nigeria to test the waters, but would these companies withstand the test of time within the nation’s business landscape if the current narrative persists?
As a matter of fact, this trend of businesses quitting Nigeria can be reversed if only the government and private sector can work together to improve the business environment, addressing regulatory issues and improving infrastructure. The government must also address the economic challenges facing the country, including high inflation rates and inadequate foreign exchange, while enhancing security in the country, including addressing terrorism and kidnapping. It is very pertinent for investment to be encouraged, including providing incentives for businesses to operate in Nigeria, while focusing on reducing its reliance on oil exports and promoting other sectors such as agriculture, manufacturing, and services as well as investment in human capital, providing education and training programs that will equip Nigerians with the skills needed to compete in the global economy. Most importantly, the government needs to address corruption, ensuring that the business environment is transparent and fair with the much-needed democratic purity.
To me, we should not wait until the next set of companies exit Nigeria before expediting these actions, because the economic implications of these exits, especially the mass retrenchment of the nation’s young workforce without an alternative means of survival, is undoubtedly another time-bomb waiting to explode. We should rather not wait to experience the destructive outcome of this looming explosion in the country.
Matthew Adebisi is a solution-based writer from Lagos, Nigeria: [email protected]