Corporate exodus continues: An oil major, a FMCG giant

Even with the seemingly intensified efforts of the President Bola Ahmed Tinubu administration to attract foreign investors into Nigeria, not a few existing foreign-owned companies are opting to leave the country. This ‘corporate exodus’ is largely due to Nigeria’s investment climate which has been deteriorating rather than improving, owing to a potpourri of economic reforms. The latest to join what is gradually becoming a bandwagon in leaving the country is Equinor Nigeria Energy Company (ENEC) — a subsidiary of the Norwegian state-owned energy company — Equinor. Also leaving Nigeria is a consumer goods giant — Procter & Gamble (P & G).

In pursuit of the exit scheme, the parent company of Equinor has entered into an agreement to sell its Nigerian assets (ENEC), including its stake in the Chevron-operated Agbami offshore oil field, to the Nigerian company — Chappal Energies. According to the agreement, Chappal Energies will acquire Equinor Nigeria Energy Company (ENEC), which holds a 53.85 percent ownership in oil and gas lease OML 128, including the unitized 20.21 percent stake in the Agbami oil field. This transaction, whose closing is subject to regulatory and contractual approvals, is in line with Equinor’s strategy to optimise its international oil and gas portfolio and focus on core areas.

The transaction marks the end of Equinor’s three-decade presence in Nigeria. Equinor has been a significant player in the development of Nigeria’s oil and gas sector, particularly in the Agbami field, which has produced over one billion barrels of oil since its inception in 2008.

Nina Koch, Equinor’s senior vice president for Africa (operations) says: “Nigeria has been an important part of Equinor’s international portfolio over the past 30 years,” adding that “this transaction realises value and is in line with Equinor’s strategy to optimise its international oil and gas portfolio and focus on core areas.” On the other hand Chappal Energies, the acquiring company, is a Nigerian-owned energy firm positioning for further developing the acquired assets and contributing to the Nigerian economy. Chappal’s managing director/chief executive, Ufuoma Immanuel says: “We are excited to take over the baton from Equinor after three decades of enduring legacy.”

On its part, P & G on Wednesday (December 6, 2023) said it plans to dissolve on-ground operations in Nigeria and its country into an import market. Chief financial officer of the P & G group, Andre Schulten stated this during his presentation at Morgan Stanley Global Consumer and Retail Conference. The company explained that “it is difficult to do business in Nigeria as a dollar-denominated organisation and the macroeconomic reality in Nigeria” is responsible for its latest strategic decision.

Shulten stated: “The other reality that arises in some of these markets is that it gets increasingly difficult to operate and create U.S. dollar value. So, when you think about places like Nigeria and Argentina, it is difficult for us to operate because of the macroeconomic environment.” In this regard, Shulten said, “We have therefore decided we will turn our business in Nigeria into an import-only market, effectively dissolving our footprint on the ground in Nigeria.”

It therefore goes without saying that hitherto well-established business concerns are leaving Nigeria in droves under the guise of changing their models. In practically all sectors of the economy, blue chips are exiting Nigeria. In the pharmaceutical/health sector, GlaxoSmithKline (GSK) left Nigeria a few months ago — after over five decades of successful operations in the country. Similarly, another pharmaceutical key player of French-origin (Sanofi-Aventis Nigeria Limited) left Nigeria soon after GSK.

In the aviation industry, the story has not been any different. It is on record that United Airlines discontinued its daily trip from Lagos to Houston-Texas a few years ago, while Iberia suspended its flights to Nigeria from Madrid at the same time due to foreign exchange policy and the attendant difficulty in repatriating profits/earnings. The forex situation is yet to improve significantly — leading to several appeals and warning letters to Nigeria by IATA. Today, out of the estimated $1.2 billion airlines’ money trapped in many countries, Nigeria accounts for the biggest chunk, according to IATA records. On the ‘corporate exodus’ bandwagon from Nigeria has also been other key players in diverse sectors. They include Truworths, Etisalat, Tiger Brands, HSBC, Woolworths, Shoprite, InterContinental Hotel Group. These companies and many others have sold their holdings and left Nigeria for good. Just before he left office, President Muhammadu Buhari had approved the 100 percent acquisition of the entire share capital of Mobil Oil Producing Nigeria Unlimited by (Nigerian) Seplat Energy Offshore Limited. Buhari authorised the acquisition in his capacity as Minister of Petroleum (at that time). The deal has since been sealed.

Other International Oil Companies (IOCs) that have left Nigeria either completely or in part include Royal Dutch Shell, ExxonMobil, Total, Eni, Chevron, Texaco. Specifically, Shell has been in talks with ND Western to divest its assets in Nigeria, according to a Bloomberg report. Shell holds a 30 percent stake in the joint venture (JV) with Eni, Total Energies and the government-backed Nigerian National Petroleum Company (NNPC). In June 2022, Shell said that it was postponing the sale of its shares in the JV as it awaited the resolution of a legal dispute before the Nigerian Supreme Court. A lower court had instructed Shell not to sell any assets until the issue with a community in the crude-rich Niger Delta over alleged environmental pollution was fully addressed.

Minister of State for Petroleum Resources (till early this year), Timipre Sylva said the oil firms were leaving Nigeria due to the volatile environment which impacts negatively on their operations. Sylva stated that Nigeria’s situation had become dangerous because of the myriad of challenges affecting the oil sector. According to him, “Nigeria’s biggest problem is the insecurity of the pipelines, coupled with a lot of pollution due to oil theft and pipeline vandalism which has put Nigeria in a tough situation.”

During the 2022 Nigerian International Energy Summit (NIES2022) in Abuja, with the theme “Strategies for Confronting the Energy Transition”, not a few experts expressed worries about the uncertain future of crude oil exploration and production in Nigeria. One of the experts, a former minister of petroleum resources, Dr Ibe Kachikwu said “divestment of assets by some IOCs is beyond the global push for energy transition”. Kachikwu noted that the IOCs, including Shell and Exxon Mobil, have divested some of their Nigeria assets in the past few years, citing the need to diversify their portfolios, but promptly added that “there is need for the companies to be engaged in further discussions regarding the move.”

The managing director/CEO of Nigeria National Petroleum Company (NNPC) Limited, Mele Kyari, also at the NIES2022, said bluntly that the “International Oil Companies are divesting. They are leaving our country. That is the best way to put it”. He added however that “they are not leaving because opportunities are not here but because companies are shifting their portfolios where they can add value and not just that, but where they can also add to the journey towards carbon net-zero commitment.”

Put differently, these ‘Oil Majors’ are leaving Nigeria in droves because compared to other business environments, the country is no longer conducive enough for them, and for the ‘new businesses’ they might diversify into (including clean/renewable energy transactions). This development, to say the least, is portentous for Nigeria which, in the short-to-mid-term, will still depend heavily on earnings from crude oil production and export for the running of its economy. Unfortunately, this exodus of the IOCs is sector-wide, covering upstream, midstream and downstream operators.

Thus, the ombudsman of the extractive industry, the Nigerian Extractive Industries Transparency Initiative (NEITI), says the recurrent issues of oil theft and vandalism were some of the reasons responsible for the gradual divestment by IOCs and big firms in the downstream sector. Executive Secretary of NEITI, Ogbonnaya Orji said “this is a huge problem that is currently impacting very negatively and seriously, especially on our downstream and midstream operations,”  stressing that many IOCs and big firms are gradually divesting in the downstream sector because the problems of oil theft, vandalism, and deliberate sabotage have been quite difficult to manage.

Now that the recent economic policies of the President Tinubu administration have heightened dollar crunch in Nigeria, many multinationals are looking to other climes to relocate. The P & G chief, Shulten, said this much, when he stated the dollar-denominated nature of his company’s business rules out Nigeria as a viable business location. Today, the backlog of outstanding dividends and earnings of many companies in Nigeria that could not be repatriated due to acute shortage of dollars are yet huge. And so, many of them that cannot even see any light at the end of the tunnel are taking their early exit; and they are quite many!