Consumer goods giant Procter & Gamble (P&G) has announced plans to dissolve its on-ground operations in Nigeria and transition the country into an import market.
The decision, outlined by P&G’s Chief Financial Officer, Andre Schulten, during a presentation at the Morgan Stanley Global Consumer & Retail Conference, is attributed to challenges in the volatile exchange market and other business-unfriendly issues.
Schulten highlighted the difficulties of conducting business in Nigeria as a dollar-denominated organization, citing the macroeconomic realities in the country as a driving factor behind the strategic decision.
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“It is difficult for us to operate because of the macroeconomic environment. So with that in mind, we are announcing a restructuring program with the intent to adjust the operating model and the portfolio.
The restructuring program will predominantly focus on Nigeria and Argentina. For Nigeria, P&G plans to transform it into an import-only market, effectively ending its physical presence in the country and reverting to an import-only model.
“We’ve announced that we will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground in Nigeria and reverting to an import-only model,” he said.
Schulten explained that this decision aligns with the company’s strategy to concentrate on markets with the highest potential.
Responding to inquiries about the impact of the restructuring on the overall group’s portfolio, Schulten clarified that Nigeria constitutes a $50 million net sales business. With an overall portfolio worth $85 billion, P&G does not anticipate a significant material impact on the group’s balance sheet in terms of sales or profitability.
P&G’s decision follows in the footsteps of GlaxoSmithKline’s exit from Nigeria earlier in the year, also attributed to the country’s forex crisis. The departure of multinational companies like P&G and GSK raises concerns about the impact on local markets, particularly in the pricing and availability of certain products.
The forex challenges in Nigeria have led to a collective net foreign exchange loss estimated at N452.2 billion for nine Lagos-listed fast-moving consumer goods companies during the first half of the year. The losers include Flour Mills of Nigeria, Dangote Sugar, International Breweries, GlaxoSmithKline (GSK), Cadbury Nigeria, and FrieslandCampina. Others are Nigerian Breweries, Guinness and Nestle.
Analysts foresee a potential trend of more companies considering exits or restructuring in response to the ongoing forex crisis, posing challenges to the country’s investment climate.
The official exchange rate of the naira stands at N806.73/$1, while in the parallel market, it is at N1165/$1 as of Wednesday. The government’s efforts to address the forex crisis have so far yielded limited results, prompting concerns among investors and businesses alike.
The situation underscores the urgent need for comprehensive measures to stabilize the forex market and restore investors’ confidence in the Nigerian business environment.
The exodus of companies and de-industrialization of Nigeria continue with P&G joining the party: "Consumer goods giant Procter & Gamble (P&G) has announced plans to dissolve its on-ground operations in Nigeria and transition the country into an import market. The decision,… pic.twitter.com/rVjvBAkUow
— Ndubuisi Ekekwe (@ndekekwe) December 6, 2023