FX Scarcity, Naira’s Deteriorating Value, Others Fueling Exodus of Multinationals from Nigeria, Says CIoD

­ Dike Onwuamaeze 

The Chartered Institute of Directors (CIoD) Nigeria has identified lack of an easily accessible foreign exchange market, deteriorating value of Naira, insecurity and poor power supply to businesses as the core reasons multinational manufacturing companies are trooping out of Nigeria.

The Director General/CEO of the CIoD, Mr. Bamidele Alimi, expressed these views in a statement titled, “Position Paper on the Exodus of Multinationals from Nigeria,” in which he urged government to actively engage in public relations campaigns to rebuild confidence among foreign investors while addressing the underlying issues that made the country’s business environment challenging in order to stem the exodus and attract new foreign investments.

Alimi said: “Obtaining foreign exchange is a significant hurdle for multinational companies. The volatility in the exchange rate creates untold hardship for businesses. The lack of an easily accessible liquid forex market, where companies can easily buy and sell foreign currency at market rates, significantly hinders their operations.

“This makes it hard for them to repatriate profits in Dollars or Euros, impacting their global bottom line.”

He added: “The depreciation of the Naira against major currencies like the US Dollar further compounds the foreign exchange woes.

“This erosion of value means that multinational companies earn less in Dollar terms for their sales, making their operations (in Nigeria) less profitable.”

He further stated that erratic and unreliable power supply is another chronic problem as “frequent outages disrupt production, increase reliance on expensive generators, and raise operational costs for multinational firms.

“This lack of stable electricity makes it difficult to maintain efficient production lines and plan for the future. Manufacturers like Kimberly-Clark, which rely heavily on consistent power for production, might have found this energy situation untenable, leading to their exit.”

The director general also stated that infrastructural impediments and bureaucratic bottlenecks were also factors driving out multinational businesses from Nigeria.

He averred that no nation would thrive better than its level of infrastructure and pointed out that, “poor road networks, congested ports, and inefficient logistics create bottlenecks that delay deliveries, increase costs, and disrupt supply chains.”

According to him “complex bureaucratic procedures and regulatory hurdles add to the operational burden for the multinationals.

“Companies that rely on efficient logistics for distribution might have found insufficient infrastructure and bureaucratic processes too cumbersome, impacting their ability to reach customers effectively.”

He further stated that security concerns were also casting a shadow over business stability in the country.

Alimi said: “Rising crime rates and an insurgency and banditry in the northern part, create an unstable environment for businesses.

“This can deter investment, disrupt operations, and increase insurance costs for multinationals.”

He, therefore, urged the government to address these underlying issues that have made the country’s business environment challenging in order to stem the tide of exit of multinational firms and attract new foreign investments.

According to him, improving foreign exchange policies would be a key intervention in addressing the exit of businesses from Nigeria.

In furtherance of this, “the CBN should adopt more flexible foreign exchange policies to ensure businesses can access foreign currency more easily. This could involve creating a more transparent and market-driven exchange rate system,” he said.

Furthermore, “streamlining regulations and ensuring consistency in policy implementation will reduce the uncertainty faced by businesses.   

“The government should engage with the private sector to create a more business-friendly regulatory framework, simplifying processes and reducing bureaucratic red tape,” he added.

The CIoD added that “investing in infrastructure is essential. Public-Private Partnerships (PPPs) can be leveraged to develop critical infrastructure, such as roads, ports, electricity, and internet connectivity.

“Ensuring reliable power supply and improving logistics networks can significantly reduce operational costs for businesses.”

He also recommended the promotion of local partnerships between multinationals and local businesses to enhance local capacity and ensure more sustainable investments.  

“The exodus of multinationals from Nigeria is a worrying trend with significant economic repercussions. By addressing these underlying issues and cautiously implementing measures to stem and reverse the trend, Nigeria can create a more attractive business environment.

“This, in turn, will lead to increased investment, job creation, and economic growth, ensuring the ‘Giant of Africa’ can retain its position as a leading destination for foreign investment in Africa,” he said.