Economy

 Nigeria’s $1trn GDP target fades as Multinationals’ exit

Multinational companies play a significant role in the economic growth and development of nations. However, the recent trend of multinational companies exiting Nigeria could have a detrimental impact on the country’s ambitious $1 trillion GDP target. Nigeria, Africa’s largest economy, has been attracting multinational firms with its vast consumer market and natural resources. However, factors such as high operating costs, infrastructural challenges, and a complex business environment have led to several companies considering an exit strategy.

At least five international corporations have stated that they intend to leave Nigeria in the second half of 2023. This development could have an impact on the nation’s goal of having a $1 trillion economy by 2030 by lowering foreign investment inflows. The largest economy in Africa is experiencing its lowest level of foreign investment inflows in 27 months as a result of these companies’ departure. 

The National Bureau of Statistics (NBS) reports that investments fell by 33 percent to $1.03 billion in the second quarter of 2023 from $1.54 billion in the same period the previous year. The United Nations Conferences on Trade and Development also revealed that foreign direct investment inflows into the country turned negative (-$187 million) last year for the first time in at least 33 years.

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After 51 years of business, the healthcare company GlaxoSmithKline Consumer Nigeria announced in August that it was leaving the nation. Consumer goods company PZ Cussons Nigeria announced the following month that it was going to delist from the Nigerian Stock Exchange. The alcoholic beverage manufacturer Guinness Nigeria announced in October that it would cease importing and distributing some Diageo international premium spirits as of April 2024.

In November, three companies revealed that it was shutting down their food delivery service in the country from December 7, 2023. Sanofi, a French pharmaceutical company, said that it has begun to plot its exit from Nigeria and that it had appointed a third-party distributor to solely handle its commercial portfolio of medicines from February 2024.

Equinor, a Norwegian energy company announced the sale of its Nigerian business, including its share in the Agbami oil field, to Nigerian-owned Chappal Energies. The transaction marks the end of Equinor’s three-decade presence in Nigeria.

Reasons for exit

One of the major reasons behind multinational companies leaving Nigeria is the high operating costs. The country’s infrastructure is in dire need of improvement, with frequent power outages and inadequate transportation networks. These challenges result in increased operational expenses for foreign firms. Additionally, the complex regulatory environment and bureaucratic red tape hinder business operations, making it difficult for multinationals to thrive. The high costs and operational difficulties push foreign companies to exit Nigeria in search of more favorable investment environments.

Ripple effect

The exit of multinational companies  poses a significant threat to Nigeria’s GDP target. These firms contribute significantly to job creation, skill development, and export promotion. With their exit, employment opportunities will decrease, the skills gap will widen, and the country’s export potential will be hampered. Moreover, the departure of foreign companies may discourage future investment, deterring other multinationals from considering Nigeria as a potential market. This can create a ripple effect, negatively impacting various sectors of the economy and ultimately slowing down the nation’s economic growth.

Covenant Umoru

Covenant is a multi- media Journalist with over 4 years experience. More »

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