The former Director of Research and Advocacy at the Lagos Chamber of Commerce and Industry in Nigeria, Dr Vincent Nwani has stated the exit of many multinationals from the Nigerian economy has cost the country N94 trillion in lost output over the last five years.
Multiple international corporations have exited Nigeria by reducing operations, transferring ownership, or selling holdings, the most recent being the sale of beverage major Diageo’s 58.02 percent stake in Guinness Nigeria to Tolaram Group on June 11, 2024, according to The Punch.
This was disclosed by Nwani stating that he arrived at his data by considering multinationals’ valuations and multiplying their value contribution by five to ten.
Nwani added that he examined the contribution of all multinationals departing the Nigerian economy by looking at how many Nigerians they hired, how much they paid their employees and their turnover.
He noted that he has been taking note of Nigerian economic data for almost 20 years, and stated that while he only named the most notable firms, additional multinationals were included in the study, which helped him arrive at the final figure.
According to the analyst, for the first year, around ten companies will cease operations in 2020, most notably Standard Biscuits Nigeria Ltd, NASCO Fiber Product Ltd, and Union Trading Company Nigeria PLC.
In 2021, he added that over 20 companies have exited, including Tower Aluminium Nigeria PLC, Framan Industries Ltd, Stone Industries Ltd, Mufex Nigeria Company Ltd, and Surest Foam Ltd.
He stated that in 2022, around 15 well-known brands would leave Nigeria, including Universal Rubber Company Ltd, Mother’s Pride Ventures Ltd, Errand Products Nigeria Ltd, and Gorgeous Metal Makers Ltd.
More than 10 major companies left in 2023, notably Unilever Nigeria PLC, Procter & Gamble Nigeria, GlaxoSmithKline Consumer Nigeria Ltd, ShopRite Nigeria, Sanofi-Aventis Nigeria Ltd, Equinox Nigeria, and Bolt Food & Jumia Food Nigeria.
In the first six months of this year, five publicly traded firms departed Nigeria: Microsoft Nigeria, Total Energies Nigeria (due to its divestiture), PZ Cussons Nigeria PLC, Kimberly-Clerk Nigeria, and Diageo PLC.
Nwani underlined that Microsoft Corporation, which announced the closure of its Africa Development Centre in Lagos on May 8, 2024, was the primary cause of Nigeria’s N94 trillion output loss.
“Between 2020 and 2022, our calculation showed a cumulative lost output and potential investment of N24tn. From 2023 to H1 2024, larger multinationals exits, such as Microsoft’s departure, accounted for over 50 per cent of the figure,” he said.
While Microsoft denied shutting down its activities in Nigeria, the closure of the tech company’s center, in which it invested $100 million, was followed by an announcement of a $100 billion investment in a Kenyan data centre.
According to the economist, the top reasons for multinationals leaving the country were the foreign exchange crisis, deteriorating security conditions, and the power supply problem, which has resulted in expensive energy bills.
Nwani said, “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.”
Meanwhile, a Babcock University Professor of Economics, Olusegun Ajibola noted that multinationals exited mostly because the investment received by international corporations in their original currencies lost value as the exchange rate against the Naira increased.
The don stated that a multinational in his scenario would most likely not expend more resources to do business in a country with an exchange rate difficulty, such as Nigeria, and would instead sell off its holdings to other enterprises.
“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.”
