Nigeria: Wooing investors abroad, losing them at home

After close to one century-and-half of operations in Nigeria, the multinational giant, PZ Cussons Nigeria, has announced its plan to quit Nigeria and a few other African countries. Ironically, this is happening at a time that the Nigerian President, Bola Ahmed Tinubu’s every trip outside the country is deliberately used to woo foreign investors. The latest of such trips being the one to the Netherlands, from where, as usual, the President and his ministers, have been telling Nigerians about billions of dollars of investments that would soon flow from the outing.

Unsurprisingly, one of the foreign firms already being bandied about by Mr President’s team as having sealed a deal with Nigeria to invest $600 million in the country, A. P. Moller Maersk, has promptly denied. While Tinubu and his team were still on the trip, Robert Maersk, chairman of the Danish shipping giant (Maersk) refuted signing any $600 million investment deal with the Nigerian government despite a Sunday (April 28) press statement by Mr President’s aide saying otherwise.

Although President Tinubu met with Mr Maersk at a special session of the World Economic Forum (WEF) in Riyadh, Saudi Arabia, and asked the shipping mogul to come invest in Nigerian “seaport reconstruction,” no deal was actually sealed in this regard. In fact, the Maersk Group has denied such a deal, saying “we are unable to comment on any investment talks,” in response to enquiries by UK-based Lloyd’s List newspaper. This denial however marks the latest in a trend of the Tinubu administration’s penchant for pushing around false claims about securing (investment) agreements with foreign bodies. There have been similar claims during a visit to India and other places.

While this latest gambit was playing out, PZ Cussons (on April 24) said it had begun a strategic review of its African businesses to exit Africa, mainly due to economic challenges in Nigeria. The company said its sales in Nigeria plunged by almost 50 percent due to the Naira devaluation and inflation. Jonathan Myers, the company’s chief executive in Nigeria, stressed the importance of looking towards the future while respecting PZ Cussons’ past, adding that the review’s outcome could include changes in ownership.

Myers said: “The macro-economic challenges and complexities associated with operating in Nigeria are significant, and there is much more to do to unlock the full potential of the business,” adding: “as such, we have undertaken a strategic review of our brands and geographies and have embarked on plans to transform our portfolio, refocusing on where the business can be most competitive.” The CEO said that in addition to the challenges of the exposure in Nigeria, the group “is complex for its size, with financial and human resources spread too thin to generate returns.”

With this, the exit of PZ Cussons from Nigeria after 140 years of operations becomes a fait accompli; thus, joining in the exodus of blue chips and multinational companies (MNCs) from the country in recent times. Unfortunately, each exiting company points to the adverse impact of recent reforms or economic policies of the government of the day in Nigeria. Specifically, when, a few months ago, GlaxoSmithKline (GSK), Sanofi, Procter & Gamble (P&G) and others were announcing their exit from Nigeria, each one of them blamed the worsening business climate in the country.

In point of fact, the 2023 annual reports and first quarter 2024 accounts of most of the major companies in Nigeria show huge losses. These humongous losses are euphemistically tagged “revaluation losses” or “forex losses”— meaning that they were incurred owing to the impact of the floatation of Nigeria’s national currency, the Naira, in June 2023. Floating the Naira has led to an unprecedented devaluation of the currency: from about N460/US$1 in May 2023 to well over N1500/US$1 in March 2024 — and now hovering around N1300/US$1.

Examples of major companies in Nigeria, with their reported forex losses (based on their 2023 financial year results) include: MTN Nigeria (N740.43 billion); Nestle Nigeria (N195 billion); Cadbury Nigeria (N195 billion); Dangote Sugar (N172 billion); Dangote Cement (N164 billion); Nigerian Breweries (N153 billion); BUA Foods (N81.87 billion); Intercontinental Breweries (N70.38 billion); BUA Cement (N67 billion) and Lafarge Cement (N21 billion), among others.

Also, despite recent hikes in prices of its products, Guinness Nigeria reported a loss of N62 billion for the nine-month period ended March 31, 2024 — compared to a profit of N5.9 billion in the same period last year. The company has also shut down its head office production plant at Ikeja, Lagos, and now runs mainly the plant in Benin City, Edo State. Similarly, Nigerian Breweries has shut two of its plants in the country to better manage its “FX losses” in the coming years.

In the oil and gas sector, almost all international oil companies (IOCs) are divesting in one form or the other from Nigeria. Many of the IOCs are in the circuitous process of divesting their assets from (mainly) onshore operations — and leaving only offshore (or deep offshore) activity. These IOCs include Shell Nigeria, Total Energies, Mobil Producing (Nigeria), and Equinor (that has exited completely), among others. Although these quitting oil and gas giants claim they are mainly responding to the dictates of ongoing energy transition worldwide, the reality is that Nigeria is losing out in terms of no fresh investments.

The cumulative effects of all these are in forms of fast spreading and deepening poverty levels in Nigeria; and the country’s loss of its place in the comity of oil producing nations. For instance, for three consecutive months (January to March, 2024), Nigeria’s crude oil production/export has been dropping compared to previous months. This, according to the Organisation of Petroleum Exporting Countries (OPEC), has not only pushed Nigeria behind Algeria (among African oil producers), but also seen the country’s oil output hovering around 1.3 million barrels per day (mbpd). This is as against the projected 1.78 mbpd in the 2024 national budget and the about two million barrels per day OPEC quota for Nigeria.

All these have translated to continued shrinking (rather than growth) of the Nigerian economy in the past ten years — a situation the International Monetary Fund (IMF) has vividly shown in a recent publication. Specifically, the IMF said that Nigeria now ranks the fourth largest economy in Africa; this is as against being the largest economy on the continent since 2013. In its latest ‘World Economic Outlook,’ the IMF estimated Nigeria’s gross domestic product (GDP) at $252 billion based on current prices, lagging behind Algeria at $267 billion, Egypt at $348 billion, and South Africa at $373 billion. Nigeria’s GDP stood at about $510 billion in 2013.

Apparently, the current worrisome state of the Nigerian economy has been pushing the Tinubu administration into a frenzy in the ‘trial and error’ policy making mode. However, the policy somersaults rather than encouraging or attracting local/foreign investors, unleash the opposite effect. The backdrop of deepening and spreading insecurity in the country is also a clear counterpoise to whatever investment attraction Nigeria possessed. This largely accounts for why, rather than more investors coming into Nigeria, existing businesses keep leaving in droves. And many are dying quietly — especially most small and medium scale enterprises (SMEs). The net effect remains a shrinking economy. 

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