‘Multinationals exit costs Nigeria N94tn in five years’

The exodus of multinationals from the Nigerian economy has cost the country a N94tn loss of output in five years, according to an economist and former Director of Research and Advocacy at the Lagos Chamber of Commerce and Industry in Nigeria, Dr Vincent Nwani.

Multiple multinationals have left Nigeria by either scaling down operations, transferring ownership or selling their stakes, the most recent being the sale of beverage company Diageo’s 58.02 per cent shareholding in Guinness Nigeria to Tolaram Group on June 11, 2024.

Nwani told The According 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.

Nwani, who claimed to have always kept his eye on the economic data from Nigeria for most of the 20 years, noted he only mentioned the most notable companies, but other multinationals were included in the analysis, which helped him arrive at the final figure.

According to the analyst, for the first year, over 10 companies shut down operations in 2020, most notably: Standard Biscuits Nigeria Ltd, NASCO Fiber Product Ltd, Union Trading Company Nigeria PLC and Deli Foods Nigeria Ltd

In 2021, he stated that more than 20 companies 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 over 15 known brands left 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 listed major companies had left Nigeria, including Microsoft Nigeria, Total Energies Nigeria (affected by its divestment), PZ Cussons Nigeria PLC, Kimberly-Clerk Nigeria and Diageo PLC.

Nwani told The According that the major contributor to Nigeria’s N94tn loss in output was Microsoft Corporation, which announced it was closing its Africa Development Centre in Lagos on May 8, 2024.

“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 has denied it was shutting down its operations in Nigeria, the closing up of the tech company’s centre for which it invested $100m was followed by an announcement of a proposed $100bn investment in a Kenyan data centre.

The economist stated the top reasons for the exodus of multinationals were the foreign exchange crisis, worsening security conditions in the country and the power supply crisis, which has led to exorbitant energy costs.

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.”

The economist said the President Tinubu-led government needed to address the top three reasons it gave for the multinationals’ exit from Nigeria to bring about some economic relief.

A Babcock University Professor of Economics, Olusegun Ajibola, told The According 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 former president of the Chartered Institute of Bankers mentioned that foreign investors would remain attracted to the Nigerian economy even in the eye of many multinationals exiting, as was the case of Tolaram Group, a multinational that bought over the shareholding of another multinational, Diageo.