Nigeria, with its vast resources and potential for economic growth, has historically been an attractive destination for multinational corporations (MNCs). However, in recent years, there has been a noticeable trend of MNCs divesting or scaling back their operations in the country. Within the last 15 months, at least five MNCs, including household names in Fast Moving Consumer Goods (FMCG) like GlaxoSmithKline Nigeria, Procter & Gamble, Unilever and Sanofi-Aventis Nigeria Limited, have decided to exit Nigeria by ending manufacturing operations in the country. More recently, Kimberly-Clark, the manufacturer of the famous diaper brand ‘Huggies’ and various sanitary pads, is planning to announce the closure of its production facility in Ikorodu. The harsh business environment is the primary reason these MNCs cited for exiting the country’s borders. According to an anonymous insider, Kimberly-Clark identified that the company had faced numerous hurdles, including soaring energy expenses, scarcity of raw materials, and dwindling customer demand amidst the current economic climate.
Certain factors are responsible for this departure, such as policy Instability. Nigeria has struggled with policy inconsistencies and abrupt changes, particularly in sectors such as oil and gas, deterring long-term investment. Also, at the root of MNCs’ departure is the increasing fragility of the Nigerian state. In 2011, when Nigeria ranked 14th in the Fragile States Index, a publication by Air War College alluded to the possibility of Nigeria becoming a failed state by 2030. Even though the Nigerian government firmly rebuffed such an apocalypse, within the past five years, Nigeria has remained among the 15 most fragile states in the world except for 2022, when it ranked the 16th most fragile state. This uncertainty and fragility is a negative for investors.
Currency volatility through fluctuations in the value of the Nigerian Naira against significant currencies has posed challenges for MNCs operating in the country, affecting profitability and investment decisions. Also, the CBN has been accused of favouritism in selling foreign exchange. The inability of the NNPC to remit foreign exchange earned from the sale of crude oil and the lack of transparency by the CBN in trading foreign exchange implies that some businesses, including MNCs, cannot access foreign exchange needed for their business operations.
Infrastructure deficit has also been a significant factor in the departure of multinational companies. Inadequate infrastructure, including unreliable power supply and poor transportation networks, has increased business operational costs and hindered productivity. One of the most significant barriers to in Nigeria is unpredictable electricity supply. Frequent power outages and poor energy infrastructure raise operational expenses for enterprises while reducing productivity and competitiveness. Because of the lack of a dependable power supply, many foreign investors have been forced to rely on costly alternative energy sources, affecting their bottom line and overall investment feasibility. Transportation infrastructure is another critical area where Nigeria’s shortcomings have hindered companies. Poor road networks, overcrowded ports, and limited access to quality transportation services have all hampered the efficient flow of goods and services. Investors frequently encounter difficulties in distributing their products, resulting in delays and inefficiencies.
Inadequate communication systems in Nigeria have also been an impediment to companies. Limited access to dependable internet connectivity and telecommunications services impedes corporate operations, communication with international partners, and market entry. This absence of digital infrastructure harms global organizations and stifles the expansion of small and medium-sized businesses wanting to expand their operations.
Security concerns are also a significant factor in the departure of MNCs. Nigeria manifests all features of fragility, and the state has lost its monopoly over the legitimate use of force as various non-state armed groups in parts of the country have continued to cause mayhem in parts of the country. Persistent security threats from groups such as Boko Haram in the North and militants in the Niger Delta region have undermined business confidence and posed risks to personnel and assets. The weak capacity of the state to provide security for lives and properties has seen the rise of outlawed groups taking the law into their hands in an attempt to protect their communities from other non-state armed groups. In the Northwest, for instance, groups such as Yan Sakai, Yan Bindiga emerged to fill the security vacuum in their communities. In the South East, the Eastern Security Network (ESN) emerged, and it was also ostensibly to protect the South East from violent incursion. The general state of insecurity in the country has severe implications for the business environment and the economy. Also, Incidents of kidnapping for ransom, mainly targeting expatriates and high-profile individuals, have raised security concerns and contributed to the decision of some MNCs to exit or reduce their presence.
The departure of MNCs can have some implications. On employment, the departure of MNCs can result in job losses and reduced opportunities for skilled workers, exacerbating unemployment and underemployment rates in the country. The exit will further worsen Nigeria’s unemployment situation, given that there were direct and indirect job losses resulting from the exit. This will, in turn, heighten the risks of criminality, youth restiveness and other forms of uprising in the country. The departure of MNCs may also erode investor confidence in Nigeria’s economy, leading to reduced foreign direct investment (FDI) inflows and slower economic growth. Also, the withdrawal of MNCs could create imbalances in specific sectors, potentially affecting supply chains, market competition, and overall industry dynamics.
The exodus of multinational companies from Nigeria is a complex phenomenon driven by economic, security, and regulatory factors. Hence, there is a need to reform institutions that are critical for creating an enabling environment for businesses to thrive in all sectors. Also, the exit of the MNCs should serve as an opportunity for the Nigerian state to deepen support for indigenous industries, firms and start-ups in various sectors. The government also needs to improve security infrastructure, and promote transparency and good governance. Only through such reforms can Nigeria regain investors’ confidence and create a conducive environment for sustainable economic growth and development.
