Checking The Continued Exit Of Companies From Nigeria

ISAAC ASABOR examines the perilous trend and effects of corporations leaving Nigeria for obvious reasons. This is exacerbated by the lack of government initiatives to stem the tide.

A look at the history of Nigeria’s manufacturing industry reveals that many companies are departing the country, owing to the difficulty of doing business. It will be remembered that the Manufacturers Association of Nigeria (MAN) declared in 2009 that 820 manufacturing companies had closed down since 2000, surprisingly under democratic rule, displacing thousands of people, even though the federal government admitted at the time that a solution would take time.

In retrospect, while addressing top government functionaries, policymakers, and industrialists from across the country at the 37th annual general meeting of MAN in Lagos, Alhaji Bashir Borodo disclosed that between 2000 and 2008, approximately 820 manufacturing companies closed down or temporarily suspended production, and urged the Federal Government to take pragmatic steps to save the sector from total collapse.

Borodo attributed the growing closure pattern of companies in Nigeria’s industrial landscape at the time to a difficult operating environment, unstable electricity, high interest and exchange rates, smuggling, high cost of AGO and LPFO to power their generators or boilers, as well as multiple taxations and levies imposed on the manufacturers by the various levels of government, among other factors.

“The lesson of the last few years has shown that if local manufacturers are to survive in a globalised world, the provision of energy cannot be compromised,” he says, “especially in our peculiar situation where the upgrading of energy production had suffered nearly 30 years of neglect.” All things considered, the level of expenditure required to reverse the degradation caused by long-term neglect would be substantial.

He noted that, aside from energy issues, additional obstacles encountered by manufacturers were worsened in 24 months by unfavourable loan terms to the sector, and that firms continued to groan as a result of excessive borrowing rates and a lack of long-term credit.

Similarly, he stated that in the last six months, at the time he spoke on the issue, macroeconomic indices were disrupted when the exchange rate of the Naira fell abruptly by nearly 20% after a relatively long period of stability and that the combined effect of high-interest rates and currency devaluation was responsible for increased inflation.

Responding to questions about the relocation of industries to neighbouring countries such as Ghana, Borodo stated that it was a very concerning development that should be stopped given Nigeria’s unrivalled leadership role as the hub of industrial production in West Africa.  He remarked that no national industrialist would want to overlook Nigeria’s market with its strengths and potential, and he added that the development was the result of a breakdown in infrastructure.

In his closing remarks, he emphasised that the theme of the event was a wake-up call for Nigeria to remove infrastructure roadblocks and provide incentives for manufacturing companies to thrive, and he added that the reality was that, despite the relocations that had already occurred and those that might occur in the future, the obvious and primary market target of the industries remained Nigeria.

He asked the Presidency to make pragmatic decisions and demonstrate the political will to implement the 7-point Agenda and Vision 20: 2020, as these will serve as true platforms for harnessing the best of Nigeria and transforming it in the shortest feasible period.

At this point, it is pertinent to recall that the then-Minister of Commerce and Industry, Chief Achike Udenwa, acknowledged that power was the major issue confronting manufacturers in the country, despite the fact that the Federal Government was determined to meet the 6000 MW targets by the end of that year.

He added that the government aimed to achieve the same feat by rigorously implementing all projects under the National Integrated Power Projects (NIPP), adding that the effort would bring some measure of relief to Nigerians and manufacturers, as well as advancement. “Be assured that the government is behind you,” he continued. We feel your anguish. My ministry will cease to exist if there are no manufacturing industries. The solution may not be immediate, but the administration is working on it.”

In a similar vein, the leadership of the Nigerian Association of Chambers of Commerce, Mines, and Agriculture (NACCIMA) stated in 2012 that more than half of the country’s remaining enterprises were “ailing.”

The shocking revelation was given in Asaba by Herbert Ajayi, then President of NACCIMA, in a report he presented at a zonal workshop on economic diversification organised by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC).

He stated that between 2009 and 2011, at least 800 companies closed shop in Nigeria due to the harsh operating business environment, and emphasised that the companies that survived the onslaught of the unfriendly business environment were facing serious challenges, with more than half of them classified as “ailing.”

Unfortunately, despite the robust lobbying displayed over the years by leaderships of the NMA, NACCIMA, Manufacturers, and other advocacy groups and individuals, Nigeria’s ease of doing business rating remains poor.

According to Statista, a global data and business intelligence website with a large collection of statistics, reports, and insights, “As of 2020, Nigeria’s ease of doing business ranks 131st globally, with a general score of 56.9. Starting a business, dealing with construction permits, and obtaining credits received the best grades. Nigeria, on the other hand, performed poorly in other areas, such as property registration, cross-border trade, and insolvency resolution.”

Without sounding exaggerated, the situation has become so worrying that many companies are leaving Nigeria that it has become extremely worrying, especially since the trend is increasing the country’s long-standing unemployment problem. For example, GlaxoSmithKline Consumer Nigeria recently announced its exit from the country after 51 years of operations.

Dele Oye, National President of NACCIMA, lamented the company’s recent exit from Nigeria, specifically in August 2023, at an event, saying: “GlaxoSmithKline’s exit from Nigeria has dealt a major blow to the country’s manufacturing sector, which is already experiencing significant collapse amongst its local businesses.”

While the current administration has commendably put Nigeria on a long-term road of economic improvement, he remarked that some of President Bola Tinubu’s immediate beneficial economic initiatives have had a negative impact on certain sectors of the country.

“In particular, the sudden rise in the price of petrol and abolition of the official naira rate has caused a significant backlash, eroding the already earned income and trading capital of several multinational companies that had established their previous earnings based on the official naira rate at the time,” he went on to say.

Other companies that have left the country include Michelin, Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries, Stone Industries, and Procter & Gamble.

Unilever, which began operations in the 1920s, said in March 2023 that it would cease production of its iconic OMO, Sunlight, and Lux home and skincare brands in order to decrease costs and focus on higher growth prospects.

Given the preceding facts, it is necessary to admit that this essay was motivated by a recent news report claiming that Nigerians will no longer be able to place food orders on the Bolt Food app as the firm plans to discontinue its food delivery service in the country on December 7, 2023. The corporation announced its decision as part of an effort to streamline its resources and increase overall efficiency.

Bolt, which currently provides meal delivery services in 16 countries and 33 cities worldwide, was started in Nigeria in October 2021 in response to the growing demand for food delivery services amid the COVID-19 pandemic. Bolt Food claims to have worked with over 10,000 restaurants, delivered over 1 million meals and onboarded 23,000 agents and 12,000 merchants since its launch in the country.

Many manufacturing professionals and observers have asked President Bola Ahmed Tinubu and his team to revitalise the manufacturing sector in light of a disturbing data fact originating from the NMA leadership that manufacturers were slashing jobs and production to respond to economic constraints.

The preceding advice could not have come at a better time, as MAN recently announced that 2,818 jobs would be cut in the first half of 2022. “Based on MAN’s survey since 2013, cumulative new manufacturing employment was estimated at 1,686,725 at the end of 2022,” according to the report. However, manufacturing employment fell to 6,741 in the second half of 2022, down from 8,508 in the first half of 2021 and 9,559 in the first half of 2022.”

• Source: Saturday INDEPENDENT