Ukpono Anietie, PH
Multinational companies have long been a significant part of Nigeria’s economy, driving growth and development across a range of sectors.
However, in recent years, a growing number of these companies have been shutting down their businesses in Nigeria, citing a variety of reasons ranging from a challenging business environment to economic instability.
The trend is having significant impacts on Nigeria’s economy and business environment, leaving many to question what the future holds for the country’s relationship with multinational companies.
In this article, we will list some of the multinational companies that have left the country and torchlight the reasons behind the departure.
Pfizer
Pfizer, the US-based pharmaceutical company, started doing business in Nigeria in 1957.
The company was one of the first multinational pharmaceutical firms to enter the Nigerian market, and it quickly proved itself as a top player in the country’s healthcare sector.
The plant was located in the southern city of Lagos, produced a range of pharmaceuticals, including antibiotics, analgesics, and cardiovascular drugs.
Pfizer’s entry into Nigeria was part of a broader strategy to expand its global operations and tap into emerging markets in Africa and other parts of the world.
The company saw Nigeria as a key market due to the country’s large population and growing healthcare needs.
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The success of the company was however cut short by certain factors they had no control of.
In 2016, Pfizer closed its manufacturing plant in Nigeria, citing what it called a “challenging operating environment.”
Nigeria’s regulatory environment has been criticized for being complex and difficult to navigate, with frequent changes to laws and regulations that can make it difficult for companies to operate.
Infrastructure challenges, such as inadequate power supply and poor transportation networks, can also make it difficult for companies to operate efficiently in Nigeria.
Security concerns, including the threat of terrorism and kidnapping, can also make it challenging for companies to operate safely in the country.
In addition to these factors, Pfizer may have also faced economic challenges in Nigeria, such as a shortage of foreign exchange and difficulties in repatriating profits due to capital controls.
Despite Pfizer’s exit from manufacturing in Nigeria, it has not affected commercial operations in the country, as the company still maintains a presence in Nigeria and continues to sell its products there.
Michelin
French tyre manufacturer, Michelin operated in Nigeria for several decades.
The company established its first tyre manufacturing plant in the country in 1977, in the heart of Port Harcourt’s industrial area, Trans Amadi.
Michelin expanded its operations in Nigeria, investing in new technologies and production facilities to meet the growing demand for tyres in the country and across the West African sub-region.
The company operated two tyre manufacturing plants in Nigeria, located in Port Harcourt and the city of Lagos, with a total production capacity of over four million tyres per year.
In 2007, the Michelin Group shut down its tyre production plant in Port Harcourt, Nigeria.
The closure of the plant was a blow to Nigeria’s economy, as it resulted in the loss of over 1,000 jobs.
The closure of Michelin’s tyre production plant in Nigeria was due to some reasons.
One of the primary reasons for Michelin’s departure from Nigeria was the country’s economic instability.
The issues of a high inflation rate, currency devaluation, and a lack of foreign investment made it difficult for Michelin to operate its business in Nigeria successfully.
Sadly, Nigeria is still facing the same problems today.
Another factor that contributed to Michelin’s exit from Nigeria was the competition from imported tyres.
The then government of Nigeria favoured tyre manufacturing firm outside of the country. Michelin faced stiff competition from the firms because they were able to sell cheaper because of their lower costs of production.
The influx of cheaper tyres made it difficult for Michelin to maintain its market share.
The power supply was another factor. Michelin had to rely on expensive diesel generators to power its operations.
This led to increased production costs, which made it difficult for them to compete with its competitors.
Michelin consequently relocated to Ghana years back but tyre dealers in Nigeria still patronize them.
Truworths
Truworths is a South African-based fashion retailer that operated in Nigeria for a few years before leaving the country in 2016.
During its time in Nigeria, the brand opened several stores in major cities across the country, including Lagos and Abuja.
The brand offered a range of clothing and accessories for men, women, and children.
The company’s products were targeted at the middle to the upper-class segment of the Nigerian market, with a focus on quality and style.
The company stated that the decision was made after a thorough review of its operations in the country, which found that it was not financially viable to continue operating in Nigeria.
Truworths’ managements in Nigeria were short-lived and marked by significant challenges, including an unfavourable economic environment, high operating costs, and difficulties in accessing foreign exchange to import goods.
These challenges, combined with the increasingly competitive nature of the retail sector in Nigeria.
The Nigerian fashion industry is highly competitive, with many local brands and international retailers competing for market share.
Truworths struggled to differentiate itself in this crowded market, which impacted its ability to attract customers and generate sales. This made it difficult for Truworths to maintain profitability in the country.
The company also stated that it would be focusing on its core markets in South Africa and the rest of Africa, where it has a more established presence.
Tiger Brands
Tiger Brands is a South African packaged goods company that carried out business in Nigeria for a few years before exiting the market in 2015.
The sole aim of entering the Nigerian market was to tap into the many opportunities the country offered and to establish its presence.
Tiger Brands’ entrance into Nigeria can be traced back to 2012 when it acquired a 63.35% stake in Dangote Flour Mills, one of Nigeria’s largest flour millers, for $190 million.
The acquisition was seen as a strategic move by Tiger Brands to gain footing in the Nigerian market and expand its operations in West Africa.
However, Tiger Brands faced several challenges during its time in Nigeria, which ultimately led to its exit from the market.
Despite its acquisition of a majority stake in Dangote Flour Mills, Tiger Brands struggled to achieve profitability in Nigeria.
The company’s financial performance was adversely affected by factors such as high production costs, low consumer spending, and a weak exchange rate.
Another reason for the exit was strategic repositioning. Following a strategic review of its operations,
Tiger Brands decided to reposition itself as a focused packaged goods company, with a renewed focus on its core operations in South Africa.
This strategy shift led to the company’s decision to exit the Nigerian market and divest its stake in Dangote Flour Mills.
This led to the sale of all their stakes in Dangote Flour Mills to Olam International for $200 million and ceased all operations in Nigeria.
Shoprite
Shoprite is a major South African retail chain that had been in business in Nigeria for over a decade.
The company was known for its large supermarkets, which offered a wide range of products, including groceries, clothing, and household items.
On August 3, 2020, Shoprite announced that it would shut down its operations in Nigeria, citing economic challenges as the main reason for its decision.
The move came as a surprise to many, as Nigeria was one of the largest and fastest-growing consumer markets in Africa.
One of the key factors that led to the brand’s exit was Nigeria’s foreign exchange restrictions. The Nigerian government imposed strict controls on foreign exchange transactions in an effort to shore up its currency and prevent capital flight.
This made it difficult for Shoprite to repatriate its profits and led to a shortage of foreign exchange in the country, making it difficult for them to import goods and pay its suppliers.
Another factor that played a role in Shoprite’s decision was the competition from local retailers. In recent years, a number of Nigerian-owned retail chains had emerged, offering similar products and services to those offered by Shoprite.
The local retail stores were able to meet the teeming needs of Nigerians through the goods and services they offered.
Shoprite’s exit from Nigeria was a slow and gradual process, with the company looking for a buyer for its operations in the country.
The company had already closed some of its stores in Nigeria and was expected to gradually wind down its operations over the coming months and years.
Ketron Investment Limited, a Nigerian company owned by a group of investors led by Persianas Investment Limited on June 1, 2021, completed the acquisition of the South African retail outlet, Shoprite.
Today, Ketron Investment Limited is running the business without changing the brand’s existing name “Shoprite”.
While there are a lot of reasons why companies may choose to shut down their operations in Nigeria, it is clear that the country’s government and business leaders must work together to address these challenges and create a more stable, attractive business environment that can compete in the global market.
