Nigeria has seen a surge in company closures and relocations, driven by economic difficulties, currency fluctuations, and escalating operational expenses in recent years.

Nigeria’s 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 them cite harsh economic conditions, unpredictable currency fluctuations, and soaring operational costs as key factors driving their decisions, a development that has been described as worrisome by the Organised Private Sector.

An earlier report by the Nigerian Investment Promotion Commission stated 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 Aluminium 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.

He said, “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.”

Nwani told The PUNCH he arrived at his data by considering the valuation of multinationals and by calculating their value addition by five to 10 times.

The economist explained that he checked the contribution of all multinationals leaving the Nigerian economy by analysing how many Nigerians such multinationals employed, the salary they paid their workers, and their turnover.

In a similar vein, a Babcock University Professor of Economics, Olusegun Ajibola, told The PUNCH that the exit of multinationals happened chiefly because the investment attracted by the foreign companies in their original currencies eventually dropped in value due to the increase of the exchange rate against the Naira.

Ajibola drew an analogy of a multinational whose investment inflow of about $1m gets converted to the existing naira rate and after a financial year, converts profit to original currency for repatriation purposes only to discover it was not worth the same as before because the naira exchange rate plummeted.

The don said it was most likely for a multinational in such a situation as his analogy to not spend further resources to do business in a country with an exchange rate challenge as Nigeria had and would rather sell off its stakes to other businesses.

Ajibola noted, “While some multinationals are leaving Nigeria, other companies are coming in.”

“Nigeria presents a very beautiful outlook for international investors. We have always had a robust market, irrespective of some of our local challenges in infrastructure, security, and others.”

The departure of multinational companies from a country can lead to a decline in Foreign Direct Investments, which is vital for economic growth, especially in emerging economies like Nigeria which heavily rely on crude oil exports.

OPS worry

The Organised Private Sector has expressed worry over the trend. Addressing challenges of business exits from Nigeria, the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, Dele Oye, said the association was deeply concerned about the continuous trend of companies, including notable entities like Pick n Pay, exiting Nigeria.

He said, “This situation is largely attributed to ineffective monetary policies from the Central Bank of Nigeria, which has resulted in substantial foreign exchange losses for businesses.

“Compounding this issue are the opaque practices within the oil and gas sector under the Nigerian National Petroleum Company Limited, leading to inflation in gas and petrol prices after the removal of subsidies.”

To reverse this trend and create a more favourable business environment, Oye proposed that the Central Bank of Nigeria must implement transparent and stable policies that would encourage investment and stabilise the naira.

He added, “Under no circumstances should the naira exceed 1,000 to $1. Furthermore, the CBN needs to positively discourage individuals and businesses from holding their monies in foreign currency in domiciliary accounts, a program of continuous appreciation of the naira.

“Collaborating with existing bureau de changes is crucial, as CBN current attempts to restructure or displace these entities have not stemmed the naira’s depreciation; in fact, they have contributed to it.”

The NACCIMA boss advised that NNPC must establish a clearer and more predictable framework for the oil and gas sector to restore investor confidence.

He posited, “It is imperative to resolve the ongoing ambiguities in its relationship with Dangote Refinery, enabling the refinery to sell fuel at lower prices and allowing Nigeria to genuinely benefit from its strategic location and capacity. We need a date for the resumption of the Port-Harcourt refinery.