As international corporations based in the United States and Europe leave Nigeria, Asian and local businesses are filling the hole.
Last week, London-based Diageo Plc sold its controlling investment in Guinness Nigeria Plc to Singapore’s Tolaram Group Inc. The Fouani Group, a local company, operates a diaper and sanitary pad production in a property where Cincinnati-based Procter & Gamble Co. closed a $300 million operation producing the same goods, according to Businessday.
Lagos-based Fidson Healthcare Plc is expanding its manufacturing portfolio after the UK’s GSK Plc shut down its Nigerian distribution unit. Hayat Kimya AS, a Turkish diaper company, has also set up in Nigeria, according to Bloomberg.
Nigeria is the most populous nation in Africa, with over 200 million people.
However, persistent unemployment, widespread poverty and insecurity, a depreciating currency, skyrocketing inflation, and decades of economic mismanagement have turned it into a graveyard for global consumer products corporations.
While the exits demonstrate how undesirable the Nigerian consumer market has become, they also illustrate the effectiveness of techniques employed by companies like Hayat AS and Tolaram, both of which have transformed their brands into household names.
Localized costs For companies like Tolaram, who are used to operating in demanding countries like Indonesia, the solution has been to localize as many costs as possible. This has helped it establish Indomie instant noodles as one of Nigeria’s most popular brands, leading to collaborative ventures with US cereal and snack producer Kellanova and Danish dairy major Arla Foods.
The executive director at Tolaram, Girish Sharma said “Brands can’t continue to operate the way they’re used to. You need to adapt to the market accordingly.
“There is hardly anything in Indomie that we import. We have our flour milling, we have our palm oil refining, we have our packaging.”
According to Sharma, Tolaram operates 24 “fully backwardly integrated” plants in Nigeria.”
This means the corporation generates the raw materials it requires and is even establishing its oil palm plantations.
GSK, in contrast, imports its products.
A financial analyst and managing director of MBO Capital Management Ltd, Jide Ogundare said That doesn’t mean local businesses aren’t struggling.
Ogundare noted “In theory, we think we can better manage the difficulties of doing business in Nigeria.
“In actual fact, we face the same challenges as the foreigners except that we can’t leave and go elsewhere.”
Despite the decreasing margins and limited spending power, the weaker naira is boosting Nigerian manufacturing competitiveness.
We’re exporting to some West African countries like Mali and 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.
Microsoft Corporation said in May that it would close the engineering division of its Africa Development Center in Nigeria, two years after it began. Meanwhile, oil majors Shell Plc, Exxon Mobil Corp., and Eni SpA have all sold their onshore assets to local companies, undermining trust in the industry that accounts for the majority of Nigeria’s exports and leaving decades of environmental destruction.
In contrast, Tinubu’s spokesman stated that Tolaram’s $70 million purchase of the Guinness stock represented a show of confidence in the Nigerian economy.
“The multi-pronged reforms and interventions being implemented on the economic and financial fronts would deliver sustained growth and enduring profitability,” special adviser to the president on information and strategy, Bayo Onanuga said in a post on X.
Meanwhile, South Africa’s Multichoice Group, Nigeria’s largest satellite television provider, saw subscriber numbers dip 18% in the year to March, claiming that Nigerian customers “had to prioritize basic necessities over entertainment.”
MTN Group Ltd, Nigeria’s largest mobile phone network, had its revenue fall 53% in the first quarter of the year.
However, even under difficult circumstances, there remains an opportunity, according to Tolaram’s Sharma, who emphasized the company’s conviction in Nigeria’s potential.
