Economic Turmoil Deepens as Manufacturers Exit Nigeria

Nigeria’s once bustling industrial hubs now stand eerily silent, leaving countless workers jobless and communities in disarray. The promise of progress feels like a distant memory, replaced by a pervasive sense of uncertainty and despair, a development which can be turned around for the better only if President Bola Tinubu’s administration is determined to do so with the urgency it deserves, writes Festus Akanbi 

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t was a paradox of sorts that while President Bola Tinubu’s administration was celebrating 25 years of unbroken democratic governance in Nigeria with fanfare last Tuesday, the manufacturing sector and many Nigerians were grappling with the harsh realities of a struggling economy.

It was not a coincidence that Nigerians woke up on Democracy Day to grapple with two unpleasant news items from the nation’s manufacturing sector. One was that of the decision of brewery giant, Guinness to exit the Nigerian market and sell off its controlling shares to Singaporean conglomerate Tolaram Group. Nigerians were still weighing the implications of the divestment when another news report, this time, on the alarm by the Manufacturers Association of Nigeria (MAN) over the ripple effects of the recent hike in electricity tariff which the manufacturers’ body said has resulted in the closure of over 300 companies and 380,000 job losses over the past two months.

Industry analysts said although the root of the current economic crisis predated the current administration, they, however, pointed out that the current level of the economic conundrum was exacerbated by some of the economic policies announced at the inauguration of the current administration in 2023. These policies included the removal of the controversial fuel subsidy, foreign exchange reforms, and the electricity tariff increase, among others.

Today, the tempestuous instability of the foreign exchange market weaves a tapestry of uncertainty, leaving businesses adrift in a sea of fluctuating fortunes. The relentless ascent of energy costs scorches the ambitions of enterprises, as they struggle to fuel their operations amidst an inferno of expenses. Inflation, that insidious spectre, gnaws at the foundations of commerce, eroding the value of hard-earned capital with its relentless appetite.

 Meanwhile, the pervasive spectre of insecurity casts a long shadow over the land, stifling growth and breeding an atmosphere of fear and apprehension. Together, these formidable forces compound to forge a harsh and unforgiving business climate, where survival becomes an arduous odyssey against formidable odds.

Guinness’ Exit

Before it announced its divestment plan, the brewery brand had recorded a staggering N61.9 billion loss after tax between July 2023 and March 2024, just a few months after Tinubu floated the naira to unify the currency’s value at the official and parallel foreign exchange markets.

But the move backfired and caused many multinational companies to suffer huge financial setbacks including Guinness Nigeria whose N61.7 billion loss after tax in Q3 was a 1,000 per cent decrease from the N5.9 billion profit generated in the same period last year.

Analysts said the loss exacerbated by the naira’s continued downward trend may have informed Diageo, Guinness’ parent company, to sell its 58.02 per cent majority stake to the Singaporean group.

“Under the terms of an agreement signed on June 11, 2024, Tolaram will acquire Diageo’s 58.02% shareholding in Guinness Nigeria royalty agreements for the continued production of the Guinness brand and its locally manufactured Diageo ready-to-drink and mainstream spirits brands,” the company said in a statement.

The Guinness brand has operated in Nigeria since 1950, but with Tolaram’s controlling stake acquisition expected to conclude by 2025, the global brewery brand will have spent 75 years in Nigeria.

In the statement, Guinness said the firm would leave Nigeria next year and hand over to a third-party venture.

“The transaction is expected to be completed during fiscal 2025, subject to obtaining the requisite regulatory approvals in Nigeria,” said the statement signed by Abidemi Ademola, Guinness’s legal director.

Diageo, however, stated that the sale of its Nigerian brand would not in any way affect its ownership of the Guinness global brand.

Companies Closure

Speaking on the closure of over 300 companies and 380,000 job losses over the past two months, Senator Ahmed Abdulkadir who spoke on behalf of MAN in Abuja, during the investigative hearing organised by the Joint Committees on Power, Commerce, National Planning & Economic Development and Delegated Legislations, observed that in fact, electricity-related expenses of a manufacturing concern constitute about 40% of the production overhead.

He therefore stressed the urgent need for the present administration to address the rising case of insecurity, as more workers may be disengaged due to the high cost of doing business occasioned by the astronomical hike in electricity tariff.

Nigeria, with its population of 200mn, was once considered an attractive growth market for global brands seeking to expand internationally, but currently, the country is experiencing its worst cost of living crisis in a generation with inflation at a three-decade high of 33.7 per cent.

According to a recent report by Nairametrics, the list of companies that exited Nigeria included Lazarpay, a web and crypto payment company co-founded by 21-year-old Emmanuel Njoku, which announced it was shutting down operations after failing to raise funds to keep the company afloat. The company operated for only two years before calling it quits. 

The list included GlaxoSmithKline Consumer Nigeria, which in August 2023, announced its intention to cease commercialisation of its prescription medicines and vaccines in Nigeria. It decided to transition to a third-party direct distribution mode. The company had earlier complained that challenges in accessing forex were disrupting its operations in Nigeria. It joined the list of companies that adopted a third-party distribution model for its pharmaceutical products.  

Also on the list was 54Gene, which was shut down in September 2023 bringing an end to its four-year existence in which it raised a whopping $45 million in three funding rounds. 

According to Nairametrics, another company that exited Nigeria was MABISCO Biscuit- In October, Mayor Biscuits Company Limited popularly called MABISCO announced it is shutting down its multimillion-dollar plant in Agbara Industrial Estate, Ogun State. 

Sanofi-Aventis Nigeria Ltd, an arm of Sanofi Aventis followed the example of GSK and P&G by announcing its ceasing operations in Nigeria and pivoting into a third-party distribution business model in a letter sent to its partners. 

Another such company was Equinor, which announced the sale of its 85% stake in oil and gas lease OML 128, and a 20.21% stake in the Agbami field, operated by Chevron to Nigerian-owned Chappal Energies. 

Bolt Foods joined the train of companies exiting the Nigerian marketplace in November when it announced its end of operations in Nigeria. The company cited the need to optimise resource utilisation and streamline overall efficiency as responsible for its latest strategic decision.

Also on the list was Procter & Gamble (P&G), which announced the dissolution of ground operations in Nigeria and reverting to an import-only business model for its Nigerian market. 

 PenCom Approves N14.2bn to Job Losers

Meanwhile, as more Nigerians are being thrown into the labour market as a result of several factors, including companies’ closure, the National Pension Commission (PenCom) said it has approved the disbursement of N14.2 billion to 8,651 Nigerians who experienced temporary job loss in the first quarter of 2024.

The total sum disbursed reflects the considerable financial support provided to these individuals under the age of 50 years, averaging around N1.64 million per person.

This move is part of the measures to alleviate the financial challenges faced by individuals due to unemployment, providing much-needed relief amid ongoing economic difficulties.

According to the First-Quarter 2024 Report of PenCom, a total of 8,702 Retirement Savings Account (RSA) holders requested to access 25% of their RSA balances due to temporary loss of employment.

The PenCom report read: “A total of 8,702 RSA holders requested to access 25% of their RSA balances due to temporary loss of employment. Out of that, 8,651 RSA holders’ requests were approved, while 51 were rejected because their ages were above 50 years.”

Analysts said that addressing the prevailing difficult operating environment should be the priority of the Tinubu administration in its second term, explaining that no democratic dividend is greater than a favourable environment where businesses and enterprises thrive.