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Exodus: Asian, Turkish and local firms step in as Western multinationals exit Nigeria

Western multinationals, including American and European companies, are pulling out of Nigeria, creating an opening that Asian and domestic businesses are rushing to fill. This shift comes amid significant economic challenges in Nigeria, including a declining currency and high inflation.

The exodus follows major developments:

  • Diageo Plc (London) sold its controlling stake in Guinness Nigeria Plc to Singapore’s Tolaram Group Inc.
  • Local firm The Fouani Group is now operating a diaper factory where Procter & Gamble Co. (Cincinnati) once produced similar goods.
  • Fidson Healthcare Plc (Lagos) is expanding its manufacturing range after the UK’s GSK Plc closed its $300 million Nigerian distribution arm.
  • Turkish diaper maker Hayat Kimya AS has also established a presence in Nigeria.

Nigeria’s Challenges Stiffling Multinationals

Despite a large population of over 200 million, economic mismanagement and a plummeting naira have made Nigeria a difficult market for multinationals.

The naira’s value has significantly decreased against the dollar, making it hard for importers like Kimberly-Clark Corp., Sanofi SA, and Bayer AG to make profits, according to a report by Bloomberg.

“The naira has swung wildly in recent months and is 56 per cent down against the dollar over the past year, the most of any African currency,” the report states. Additionally, repatriating funds has been challenging in recent years.

Opportunities Emerge as Multinationals Leave

The departing companies leave gaps that domestic firms and foreign firms focused on local sourcing can fill. This strategy avoids the currency risks that have pushed out some Western businesses.

Companies like Tolaram, with experience in challenging markets like Indonesia, have thrived by using localised production.

“Brands can’t continue to operate the way they’re used to. You need to adapt to the market accordingly,” said Girish Sharma, an executive director at Tolaram.

Also read: Tolaram Group to Acquire Majority Shares in Guinness Nigeria as Diageo Exits

“There is hardly anything in Indomie that we import. We have our own flour milling, we have our own palm oil refining, we have our own packaging,” Sharma stressed, adding that Tolaram operates 24 “fully backwardly integrated” plants in Nigeria, and is even setting up its own oil palm plantations.

Local Firms Face Challenges Too

While domestic firms may have an advantage, they still face the same economic difficulties. Jide Ogundare, managing director of MBO Capital Management Ltd (Lagos), which took over supermarkets run by Shoprite Holdings Ltd. when the South African company quit Nigeria in 2021, acknowledges these challenges.

“In theory, we think we can better manage the difficulties of doing business in Nigeria,” Ogundare was quoted as saying. “In actual fact, we face the same challenges as the foreigners, except that we can’t leave and go elsewhere.”

A Silver Lining?

The weaker naira is making Nigerian manufacturing more competitive. Fidson Healthcare is already exporting to neighbouring countries and plans further expansion, according to Bloomberg.

“We’re exporting to some West African countries like Mali and to East Africa and our target is to export to another five to 10 countries by the end of next year,” said Imokha Ayebae, Fidson’s executive director.

Oil and Tech

The departure of companies like Kimberly-Clark, Sanofi, and Bayer is a setback for President Bola Tinubu’s economic revitalisation efforts. Oil majors Shell Plc, Exxon Mobil Corp., and Eni SpA have all sold their onshore operations to local companies, denting confidence in the industry that accounts for most of Nigeria’s exports and leaving behind decades of environmental devastation.

The Government’s Perspective

The government sees promise in Tolaram’s investment, with President Tinubu’s spokesman Bayo Onanuga saying, “The multi-pronged reforms and interventions being implemented on the economic and financial fronts would deliver sustained growth and enduring profitability.”

Also read: Exodus: Huggies diapers maker joins other multinationals to leave Nigeria after $100 million failed investment

However, existing foreign firms are facing reduced consumer spending. South Africa’s Multichoice Group, the biggest satellite television provider in Nigeria, saw subscriber numbers fall 18 per cent in the year to March, saying that Nigerian customers “had to prioritise basic necessities over entertainment.”

Revenue at Johannesburg-based MTN Group Ltd. (which runs Nigeria’s biggest mobile phone network) fell 53 per cent in the first quarter of the year when measured in its home currency.

Long-Term Potential

Despite the current difficulties, Tolaram remains optimistic about Nigeria’s potential. The company highlights the large Nigerian population and their essential needs as reasons for continued investment.

“If everything was good, I don’t think Guinness would think of partnering with Tolaram. Now when they saw there’s adversity, they chose to partner with us,” said Sharma, emphasising the company’s belief in Nigeria’s potential.”

“Nigeria has 200 million people. They have to eat, they have to drink. We don’t see why Nigeria should not be the country where we’ll continue to stay and continue to invest,” Sharma added.

Samuel Bolaji

Samuel Bolaji holds a Master of Letters in Publishing Studies from the University of Stirling, Scotland, United Kingdom, and a Bachelor of Arts in English from the University of Lagos, Nigeria. He is an experienced researcher, multimedia journalist, writer, and Editor. He is currently the Editor of Arbiterz.

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