Kimberly-Clark, a leading manufacturer of diapers and sanitary pads, is set to announce the imminent shutdown of its production facility in Ikorodu, Lagos, Nigeria.

This decision comes just two years after the company invested $100 million to restart operations in the country. Sources within the company, quoted by Nairametrics, attributed the shutdown to severe economic conditions that have impacted production and profitability.

Kimberly-Clark first began operations in Nigeria in 2012, producing popular hygiene products such as Huggies diapers and Kotex sanitary pads. However, in 2019, the company ceased operations due to unfavorable economic conditions.

In 2022, Kimberly-Clark inaugurated a new $100 million production facility in Ikorodu, marking a significant investment aimed at reviving its presence in the Nigerian market. Despite initial success, the company has struggled with several challenges since late 2022.

According to the sources, the Ikorodu plant has been operating below capacity from late 2023 into 2024 due to the harsh economic environment in Nigeria. The company has faced escalating energy costs, high raw material expenses, and reduced customer demand, leading to a substantial financial burden.

High Operational Costs

A source revealed that the company currently spends approximately N100 million monthly on power generation alone, aside from maintenance costs. Overall, the monthly fixed operational costs have risen to over N500 million.

“Running cost is extremely on the high side. Our fixed spend on a monthly basis is above N500 million, and we spend about N100 million on just gas consumption for powering the gas engine aside from maintenance. The company has two assets, and for last year, these assets didn’t run for like 90 days in 365 days,” the source explained.

Downsizing and Reduced Production

In response to these economic pressures, Kimberly-Clark has downsized its operations, reducing production from seven days a week to just Mondays to Thursdays. The company also cut its shifts from four to two earlier this year.

“We run 24 hours and seven days a week before, but currently, we don’t run on Friday, Saturday, and Sunday anymore because of the economic situation. There is already an embargo on external recruitment. The company is looking for ways to reduce costs since it is not making a profit,” the source added.

A significant factor contributing to the high production costs is the increased expense of raw materials, most of which are imported. Currency depreciation has further exacerbated these costs, making it difficult for the company to maintain profitability.

At the onset of operations, Kimberly-Clark had set aside funds for five years, expecting that revenue from the Nigerian market would sustain operations. However, the current economic conditions have derailed these expectations.

Kimberly-Clark’s planned closure is part of a broader trend of multinational companies exiting Nigeria due to similar challenges. Last year, Procter & Gamble (P&G) closed its production facility in Ibadan, after investing $300 million, citing high production costs and economic difficulties. Similarly, PZ Cussons recently announced that it is evaluating strategic options for its African business, with Nigeria being its largest market.

Potential Impact on the Diaper Industry

The baby diaper industry in Nigeria, estimated at $920 million with a CAGR of about 11% between 2024 and 2028, is highly competitive, with approximately 15 brands vying for market share. Leaders in the industry include Pampers (produced by P&G), Molfix, and Kimberly-Clark’s Huggies. The exit of two major players—P&G and now potentially Kimberly-Clark—within a year underscores the challenging business environment in Nigeria.

The planned closure of Kimberly-Clark’s Ikorodu facility is a significant setback for Nigeria’s efforts to attract foreign direct investment (FDI). It highlights the broader challenges faced by manufacturers in the country, including high production costs, currency depreciation, and weak consumer purchasing power.

If Kimberly-Clark follows P&G’s lead and transitions to an import-based business model, it could exacerbate the cost of diapers and sanitary products for Nigerian consumers. This shift would increase the country’s reliance on imports at a time when there is a strong drive to boost local production. Such a move could lead to higher prices for essential hygiene products, placing additional financial strain on households.

In a move towards promoting clean energy and affordable transportation, the Presidential Compress Natural Gas Initiative (PCNGI), in collaboration with Rolling Energy, has announced the commencement of a nationwide Mass Transit Conversion Program.

The initiative aims to convert mass transit vehicles to cleaner energy sources, significantly reducing emissions and promoting environmental sustainability.

The announcement was made at the launch of the conversion and refueling site in Ilorin on Wednesday. The PCNGI, a flagship program of President Bola Tinubu’s administration, is dedicated to promoting clean energy solutions across Nigeria. Through strategic partnerships and innovative projects, PCNGI aims to reduce the environmental impact and support the transition to sustainable energy for the transport sector.

The initial phase of the conversion program will be rolled out in Lagos, Kwara, the Federal Capital Territory (FCT), and Rivers States. This phase will be executed in partnership with major transport unions, including the National Union of Road Transport Workers (NURTW), the Road Transport Employers’ Association of Nigeria (RTEAN), and the Nigerian Association of Road Transport Owners (NARTO).

To ensure the success of the program, the rollout will commence in eight of over 120 designated conversion workshop sites. Key union partners will have the opportunity to observe, evaluate the conversion process, and provide valuable feedback as the initiative plans to scale up operations across 15 states over the next 45 days. The rollout will be backed by a 50 percent discount on equipment and kit costs, as well as support for qualified union members for installation costs.

Government Commitment to Clean Energy

The PCNGI and Rolling Energy are committed to driving Nigeria towards a more sustainable future. Establishing the Ilorin site and the nationwide conversion program are pivotal steps in reducing the carbon footprint and enhancing the efficiency of mass transit systems. Interested public members are encouraged to visit Femadec, FixIt45, and Portland in Lagos, NITT, Nipco in Abuja, Total Support and Femadec in Abuja, and Rolling Energy in Ilorin for conversion.

This development comes after the Presidency announced plans to launch 2,700 CNG-powered buses and tricycles before May 29, marking President Tinubu’s first year in office. The federal government aims to deliver 100 conversion workshops and 60 refueling sites spread across 18 states before the end of 2024.

The Back Story: Addressing Fuel Subsidy Removal

The PCNGI initiative is part of the government’s broader efforts to cushion the effects of the recent removal of fuel subsidies. The removal of fuel subsidies in May 2023 has led to a significant increase in fuel prices, impacting transportation costs and the cost of living. The government aims to provide a more affordable and environmentally friendly option for mass transit by promoting the CNG as an alternative fuel.

The removal of fuel subsidies has been a contentious issue in Nigeria, with widespread protests and public outcry. The government argues that subsidies are unsustainable and that the funds can be better utilized for development in other sectors. However, the immediate impact on fuel prices has placed a burden on the populace, particularly in the transportation sector.

The PCNGI initiative aims to mitigate these effects by providing a cleaner and more cost-effective alternative. The transition to CNG is expected to reduce transportation costs and provide long-term economic benefits by decreasing the country’s reliance on imported petroleum products.

However, the success of the PCNGI initiative will depend on effective implementation and collaboration between the government, transport unions, and private sector partners. By providing financial incentives and technical support, the program seeks to ensure a smooth transition and encourage widespread adoption of CNG.

The establishment of conversion workshops and refueling sites across the country is a critical component of this strategy. If successful, the program could serve as a model for other countries in the region, demonstrating the potential of clean energy solutions to address economic and environmental challenges.

In a significant development in Nigeria’s oil and gas industry, the Nigerian National Petroleum Company (NNPC) Limited has announced the signing of a settlement agreement that paves the way for ExxonMobil’s divestment of its stake in Mobil Producing Nigeria Unlimited (MPNU) to Seplat Energy Plc.

This agreement, involving MPNU, Mobil Development Nigeria Inc., and Mobil Exploration Nigeria Inc., marks a crucial step towards resolving a long-standing divestment issue.

“Settlement agreement between NNPC Ltd. and Mobil Producing Nigeria Unlimited, Mobil Development Nigeria Inc., and Mobil Exploration Nigeria Inc. signed regarding the proposed divestment of a 100% interest in Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited,” NNPC stated.

This development follows a directive from President Bola Tinubu, issued on May 28, to the Ministry of State for Petroleum Resources (Oil) and NNPC, urging them to address the divestment issue that has stalled the Seplat and ExxonMobil deal for over two years.

Tinubu assured ExxonMobil’s delegation that the federal government was committed to resolving the divestment issues between NNPC and Seplat Energy.

Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, emphasized the urgency of the matter, stating, “Mr. President has given a clear directive to the NNPC GCEO and I to resolve the issue of divestment, and we are doing whatever we can to achieve that.”

Lokpobiri also highlighted the economic repercussions of the stalled deal, revealing that Nigeria lost $34 billion over the past two and a half years due to a significant decline in production from the assets being divested by ExxonMobil to Seplat Energy. Production from these assets plummeted from 600,000 barrels per day (bpd) to the current 120,000 bpd, resulting in a shortfall of 480,000 bpd. At a conservative $80 per barrel, this decline amounted to a $34 billion loss.

The Backstory: Regulatory Challenge

In 2022, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) rejected President Muhammadu Buhari’s consent for Seplat’s acquisition of ExxonMobil’s shallow water assets. The rejection by the upstream regulator came just hours after presidential spokesperson Femi Adesina announced that President Buhari had approved the transaction.

The NUPRC, in a statement shared with the media, revealed that the deal required regulatory approval rather than presidential approval, notifying ExxonMobil that the deal had been declined.

“The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) affirms that status quo remains in respect of ExxonMobil/Seplat Energy share acquisition. Responding to media enquiries on latest development about the transaction, the Chief Executive of the NUPRC Engr. Gbenga Komolafe clarified that the Commission in line with the provisions of the Petroleum Industry Act 2021 is the sole regulator in dealing with such matters in the Nigerian upstream sector,” said NUPRC chief executive Gbenga Komolafe.

“As it were, the issue at stake is purely a regulatory matter and the Commission had earlier communicated the decline of Ministerial assent to ExxonMobil in this regard. As such the Commission further affirms that the status quo remains,” he added.

This contradictory development, which pitted the federal government against its regulatory agency, stirred a backlash from the Nigerian public, highlighting a perceived lack of synergy between the presidency and federal agencies.

Adesina’s statement indicated that Buhari had approved the transfer in his capacity as Minister of Petroleum Resources, emphasizing the transaction’s extensive benefits to Nigeria’s energy sector and economy.

The Legal Tussles

The sale of Mobil Producing Nigeria Unlimited became controversial after ExxonMobil entered a Sale and Purchase Agreement with Seplat Energy. The agreement aimed to enable Seplat Energy to scale up production by 95,000 barrels of oil a day from assets in a joint venture with NNPC.

However, the transaction was halted following a court ruling obtained by NNPC, which argued that it should be given priority consideration in the sale of ExxonMobil’s oil blocks.

The July 6 2022 decision of the High Court of the Federal Capital Territory to block the sale included a share sale and purchase deal struck with Seplat in February.

NNPC sought a court declaration of conflict over the “interpretation of preemption rights under their Joint Operating Agreement (“JOA”) and order NNPC and MPNU to arbitration as required by the JOA.” In response, Seplat Energy argued that it was not a party to the lawsuit and insisted the share purchase agreement remained valid.

However, with the recent signing of the settlement agreement, Nigeria stands to significantly boost its crude oil production. This development could add at least 700,000 barrels per day (bpd) to the current daily production volume, potentially reaching about two million bpd before the end of the year. This increase in production would not only help recover some of the economic losses incurred over the past few years but also strengthen Nigeria’s position in the global oil market.