Peter Obi, the presidential candidate of the Labour Party in the last general elections, has raised concerns about the increasing number of multinational companies leaving Nigeria.

Citing various reports, Obi attributes this trend to an unfriendly business environment that is symptomatic of a larger governance problem.

Obi highlighted the severe economic impact of this exodus, stating, “I am compelled to address the alarming exodus of multinational companies from Nigeria, which has cost our nation a staggering N95 trillion in the past five years.”

According to a report by The New Telegraph, cited by him, over ten multinational giants, including GlaxoSmithKline, Equinor, Sanofi-Aventis, Bolt Food, Procter & Gamble, Jumia Food, PZ Cussons, Kimberly-Clark, and Diageo, have exited Nigeria in the past year alone.

Obi quoted several news outlets documenting the reasons behind this mass departure. According to him, The Punch reported, “Multinational firms exit Nigeria over harsh business climate.” He also mentioned The Guardian noting, “Insecurity, high energy costs force companies to leave Nigeria,” while The Nation pointed out, “Poor business environment, inconsistent policies drive companies out of Nigeria.”

These companies consistently cite issues such as insecurity, high energy costs, and inconsistent policies as the primary reasons for their departure. Obi emphasized that these problems are not isolated incidents but reflect deeper governance issues.

“These issues are not coincidental but symptomatic of a larger governance problem,” he stated.

Voices of Economists and Business Leaders

Economists and business leaders across Nigeria have echoed Obi’s concerns. Dr. Muda Yusuf, the CEO of the Centre for the Promotion of Private Enterprise, stated that without significant reforms, the trend of multinational exits is likely to continue, further harming the economy.

The Irony of Government Efforts to Increase FDI

The irony of this situation is highlighted by President Bola Tinubu’s efforts to attract foreign investment. Despite his administration’s global efforts to bring in new investors, the exodus of established multinationals sends a contradictory message about Nigeria’s business environment.

President Tinubu has been actively engaging with international business communities, traveling extensively to pitch Nigeria as an attractive investment destination. During his recent visits to the United States and the Middle East, Tinubu assured potential investors of his administration’s commitment to economic reforms and a stable business climate.

However, the departure of major companies like Procter & Gamble and Diageo presents a stark contrast to these assurances.

Call to Action for Leadership

Obi called on the nation’s leadership to urgently address these challenges. “The responsibility lies with our leadership, those we put in charge to urgently address these challenges,” he said.

He stressed the need to create a business-friendly environment that fosters investment, innovation, and growth.

To create a friendly business environment, Obi suggested reforms targeting critical areas such as infrastructure, with a focus on the power sector to reduce operational costs and attract foreign investment. He also mentioned simplifying regulatory processes as another key initiative aimed at easing business establishment and operation, including updating regulations and enhancing transparency.

His proposed reforms include improving Nigeria’s ranking in the Ease of Doing Business index. This involves reforms in business registration, property rights enforcement, and contract handling. Obi stresses the importance of investing in education and vocational training to cultivate a skilled workforce capable of meeting industry demands.

He also emphasized lowering energy costs to enhance business efficiency, while promoting good governance practices to foster sustainable economic development through transparency and accountability in government operations.

Impact on the Economy

The exodus of multinational companies has far-reaching implications for the Nigerian economy. Firstly, it leads to significant job losses. For instance, when GlaxoSmithKline exited, it impacted hundreds of direct and indirect jobs, adding to the already high unemployment rate. Secondly, the departure of these companies results in a loss of foreign direct investment (FDI), which is crucial for economic growth and development. According to the National Bureau of Statistics, FDI into Nigeria dropped by 19.4 percent to US$377.4 million in 2023 from US$468.1 million in 2022  reflecting the deteriorating business environment.

Moreover, the exit of these firms undermines Nigeria’s industrial base and limits access to quality goods and services. The pharmaceutical sector, for example, has suffered from the exit of companies like Sanofi-Aventis, which provided critical medicines and healthcare solutions.

Obi urged Nigerians to unite in transforming the country into a business-friendly nation that attracts investment and ensures prosperity for all citizens.

“Let us unite to transform Nigeria into a nation conducive to business, attractive to investment, safe and prosperous for all citizens,” he said. He envisioned a Nigeria that becomes a beacon of hope and progress in Africa and the world.

Obi’s call to action has been echoed by many prominent Nigerians, underscoring the urgent need for systemic reforms to address the underlying issues driving multinational companies away from Nigeria. He believes that by tackling these challenges head-on, Nigeria can create a more stable and attractive environment for both local and international businesses.

Shoprite Wuse Abuja gives up as the economic paralysis in Nigeria accelerates: “Retail Supermarkets Nigeria Limited (RSNL), the operators of Shoprite Mall, has announced its decision to cease operations at its Wuse, Abuja branch. The closure, set for June 30, 2024, is attributed to the challenging business climate in Nigeria and the financial performance of the store.”

 Just like Mr Price, Woolworths, and other South Africa brands which packed and left Nigeria, Shoprite 1.0 followed. But of course, some Nigerians kept the brand in the nation. Unfortunately, what brought the firm to Nigeria [expanding middle class] has since punted or even degraded, and ShopRite’s business is under severe stress.

Running a majorly-grocery chain in Nigeria is challenging, considering that every corner of the major cities has an open market. Those open markets are asymmetric competitors as they do not pay VAT, corporate taxes, etc, and most times source produce from the same places companies like Shoprite also get their products. When the purse is heavy, you can enter Shoprite to enjoy shopping in the air-conditioned ecosystem, but under lite purses, open markets become  the main option.

This struggle is not on Shoprite; it is a lesson for any person running a business in Nigeria. Simply, you must innovate on your pricing: “This is the age of sachetization in Nigeria irrespective of whatever you are selling”.

Shoprite has a problem because the best customer segment has shrunk:  “the most significant opportunity for African B2C startups lies with consumers who earn between $4 — $8 per day … This is largely because that income band holds the highest concentration of discretionary spending power on the continent, as the graph below shows.”  That band is under attack.

In 2021, I modeled that 30 million was in that band: “Yes, we have about 30 million people with decent income supporting more than 200 million, using tax numbers and informal sector upper estimates.”  That number today is less than 18 million. So, if you are running a business in Nigeria, you must adjust your pricing strategy and price smartly.

“We regret to inform you that as of June 30, 2024, Retail Supermarkets Nigeria Limited will be closing its Wuse Store located in Novare Wuse Central Mall, Abuja. This decision has been made after a thorough evaluation of the store’s financial situation and the current business climate. We believe this is the best course of action for our organization’s long-term growth.”  

“Effective June 30, 2024, our company will no longer operate in Wuse, Abuja, and we will no longer require your services for the Novare Wuse Central Mall Store. Please note that all existing service contracts will also terminate for the store.” 

“If your services are specifically tied to the Novare Wuse Central Mall Store and if there is an outstanding balance between our companies, we will carefully review our accounting records over the next 60 days (about 2 months). We will then promptly contact you to confirm the amount owed and discuss a suitable payment schedule.”  

Shoprite to Close Wuse, Abuja Branch, Citing Challenging Business Climate