2024-03-07 10:56:47
In Nigeria, the economic crisis is causing foreign companies to flee. The exodus of multinationals began in 2023. Their departure aggravates the difficulties of the continent’s second largest economy.
The departure of the American Procter and Gamble announced in December 2023 has sounded the alarm. The American company which arrived five years ago Nigeria has invested heavily in a market estimated at $50 million. But the economic chaos has worsened since the coming to power of Tinubu ball last May and this generalized descent into hell ended up wearing out the patience of multinationals. It is not the first multinational to flee Africa’s largest market. In the pharmaceutical sector, it is a massacre, the British GSK, the German Bayer and the French Sanofi have also left Nigeria. Several large oil companies have also withdrawn, including the Norwegian Equinor and the Italian Eni.
Demand weighed down by inflation
Most of these companies have suffered for many years from Nigeria’s well-known sores, such as corruption, recurring problems with logistics and electricity supply, but with the economic crisis which has exploded in recent months – we are talking about the worst crisis for a generation—this promising market has suddenly contracted. With inflation at 30% and a minimum wage unchanged since 2019, households are focusing their purchases on essentials, transport and food. The end of fuel subsidies decided by President Tinubu the day after his election was hailed as a courageous decision, but due to lack of support, it caused all prices to skyrocket and considerably impoverished the population.
Also read: The drift of the Nigerian economy
Painful exchange liberalization for foreign companies
Another decision with serious consequences from President Tinubu: the liberalization of the foreign exchange market. Since June, the Central Bank has let the naira slide. A necessary sanitation treatment, but for which households and businesses pay a high price. Last May, 10,000 naira was worth 22 dollars, it is only six dollars and 40 cents today. The collapse of the naira coupled with the shortage of dollars is putting the accounts of foreign companies in the red. Nestlé, the Swiss agri-food multinational present in Nigeria since independence, suffered losses of $70 million in 2023. The South African telecoms giant MTN is also suffering colossal exchange rate losses.
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Foreign direct investment in free fall
This general malaise is chilling foreign investors. According to the Nigerian Bureau of Statistics, foreign direct investment increased from $1 billion and $150 million in the third quarter of 2022 to $654 million a year later. A decline of 45% at a time when this foreign capital is more essential than ever to create growth and employment. Attracting investors is one of President Tinubu’s priorities. He also remains confident, announcing a few days ago that he had collected commitments worth $30 billion. Promises made in particular by Gulf countries which are slow to materialize.
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