By Ebere Inyama

(Lagos) Five multinational corporations shut down operations in Nigeria in the first half of 2024, bringing the total number of multinational corporations that have exited Nigeria in the past four years to 75, ThruthNigeria has learnt.

According to economist and former Director of Research and Advocacy for the Lagos Chamber of Commerce and Industry, Dr. Vincent Nwani, the vacuum left by these multinational corporations cost Nigeria an estimated loss of production of N94 trillion ($59 billion) over five years. Procter and Gamble, Equinor, Diageo PLC, Sanofi PLC and Kimberly-Clerk withdrew from Nigeria in the first quarter of 2024, while more than 55 multinational corporations, including GlaxoSmithKline Nigeria Plc, Universal Rubber Company Ltd and NASCO Fiber Products Ltd, closed down operations in Nigeria between 2020 and 2023.

The exodus of multinational corporations has led to a 35.2 per cent decline in foreign direct investment (FDI) inflows into Nigeria in the first quarter of 2024, according to a statement by the president of the Nigerian Economic Society (NES), Professor Adeola Adenikinju.

In an interview with TruthNigeria, economist and former governor of the Central Bank of Nigeria, Sunday Akuns, stated that the challenges facing the Nigerian economy can be overcome through restructuring (changing the presidential system of government to a regional system where the regions, namely the North, West, East and South, control their natural resources and remit a certain percentage to the federal government).

“The Nigerian federation is teetering and not functioning. What has the United States done to stabilize it? The United States itself is a federation of 50 states. Since it has stabilized, that should be a reason to replicate the same in other entities that are teetering.

“The insecurity in Nigeria, whether you call it banditry, herdsmen killings, IPOB or Boko Haram, it is a simple statement about the need to restructure Nigeria. Ethnic nationalities are seeking self-determination and it is chaotic and violent.

“If the United States takes a strategic position on this issue, as it did in Berlin in 1884, it will put an end to uncertainty and increase world peace and prosperity,” he said.

US government expresses concern over decline in foreign direct investment in Nigeria

In its 2024 Investment Climate Statement, the U.S. Department of State said weak regulatory frameworks, corruption, insecurity and inadequate electricity supply were factors that threatened the growth of foreign direct investment (FDI) in Nigeria.

According to a statement by the American institution, Nigeria’s underdeveloped energy sector forces companies to use diesel-powered generators, which further contributes to price increases.

In the same vein, international business research firm, Economist Intelligence Unit (EIU), found in its 2024 Nigeria Country Report that multinational corporations are increasingly choosing to exit Nigeria or reduce their presence in the country due to corruption, cronyism, widespread insecurity and huge infrastructure gaps.

Government policies pushing foreign investors out of Nigeria

Nigeria recorded the highest inflow of foreign direct investment on the continent in 1997, but since 2023 the country has not only seen a decline in foreign investment but also an outflow of foreign investors.

After President Bola Ahmed Tinubu removed fuel subsidies in 2023, Nigeria’s economy was hit by inflation and rising transportation and power costs. These economic changes, combined with strict regulations on foreign investment and frequent changes in the value of the naira, caused Nestle, Guinness and other companies to collectively lose ₦900 billion ($565 million) in 2023.

The international company, which has created brands such as Huggies and Kotex, announced plans to exit Nigeria in an official press release published in May 2024, partly due to “economic developments in the country” that have led to a monthly loss of ₦500 million ($314,000) in operating costs despite operating at a lower capacity.

Nestlé Nigeria PLC has reported a loss of ₦104 billion ($65 million) before tax for 2023, with the company noting that “despite a strong operating performance, net profit is weighed down by the significant devaluation of the naira.”

Similarly, the Corporate Affairs Commission (CAC) raised the minimum paid-up share capital in 2023 for companies with foreign participation from ₦10 million ($6,000) to ₦100 million ($63,000) with a six-month compliance period, which was then withdrawn less than a week later.

All these cases demonstrate the business risks that government policies expose investors to.

Perhaps the most significant reason for multinationals to pull out of Nigeria was given by Babcock University economics professor Olusegun Ajibola. According to him, the exit of multinationals occurred mainly because the investments attracted by foreign companies in their original currencies eventually lost value due to the appreciation of the exchange rate against the naira.

Ajibola explained that a multinational corporation with an investment inflow of about $1 million converts it into the prevailing naira rate and after the financial year, converts the profit into the original currency for repatriation, only to discover that the value is no longer the same as before because the naira exchange rate has plummeted.

He said it was highly unlikely that a multinational in a similar situation would continue to spend funds to do business in a country with exchange rate problems like Nigeria.

Experts propose solutions to Nigeria’s decline in foreign direct investment

In a statement at the three-day Nigeria Manufacturers Summit in Abuja in July 2024, Aliko Dangote, Africa’s richest man who has made billions through his association with various Nigerian presidents, said one way to discourage foreign investors from leaving Nigeria en masse is for the federal government to initiate a well-thought-out industrial policy that provides support and protection to investors. This is the Dangote path: crony capitalism.

He said that as government policies become more supportive and protective, investors will be more willing to partner with the government. This, he said, will help address other challenges such as infrastructure deficit, market volatility, inflation and exchange rate volatility.

Dangote further stressed the importance of stable and affordable electricity, adding that “ignoring all these facts leads to insecurity, banditry, kidnapping and extreme poverty in the country.”

But an alternative path to stimulating economic growth is to attract a broad range of investors operating in Nigeria, says financial consultant Bayo Adams, a doctoral candidate at Hult International Business School and principal consultant at Periscope Consulting Ltd.

In a study of 52 companies listed on the Nigerian Stock Exchange (NSE) in August 2024, Adams recommended that the organized private sector and regulators in the Nigerian economy take proactive steps to increase the diversity of their investor base. Adams recommends that investors such as owner-managers can be key to enabling Nigerian companies to benefit from positive changes in law enforcement and the availability of government-funded loans for small businesses.

He believes that companies need to provide more freedom in shareholding and management to different investors, as such diversity helps them cope effectively with economic uncertainty.

Ebere Inyama is a reporter covering conflicts in Imo State for TruthNigeria

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