The business landscape in Nigeria encountered substantial adversity throughout 2023, emerging as one of the most challenging periods for both local and multinational enterprises. A confluence of factors, notably the uncertainties associated with an election year and an artificial cash scarcity, set the tone for a tumultuous year, creating an atmosphere of caution among investors. This caution, driven by apprehension about the policy directions of the incoming administration, significantly restrained long-term investment decisions.
The challenges escalated with a poorly executed currency note redesign, intensifying an artificial cash scarcity and constraining consumer spending in the initial quarter of the year. As the economy began to rebound in the second quarter, it faced the twin reforms of fuel subsidy removal and the unification of the foreign exchange market. This, in turn, triggered a surge in inflation and a substantial devaluation of the Nigerian naira, causing the nation to lose over 50% of its value. These macroeconomic disruptions, coupled with persistent challenges from previous years, prompted a significant exodus of businesses from the Nigerian market in 2023.
Several high-profile exits marked the year, underscoring the gravity of the economic challenges faced by businesses in the country. Among them, Lazerpay, a web3 and crypto payment company, ceased operations in April due to a failure to secure adequate funding. GlaxoSmithKline Consumer Nigeria, a multinational pharmaceutical company, announced in August its shift to a third-party distribution model, citing challenges in accessing foreign exchange. 54Gene, a biotechnology company, shut down in September after a tumultuous year marked by leadership changes and legal issues.
Mayor Biscuits Company Limited, known as MABISCO, announced in October the closure of its multimillion-dollar plant, opting to sell the company and refocus on other business areas. Sanofi-Aventis Nigeria Ltd, another multinational pharmaceutical company, followed suit in November, ceasing operations in Nigeria and transitioning to a third-party distribution model. Equinor Nigeria Energy Company divested its stake in oil and gas leases in November, ending its over three decades of presence in Nigeria. Bolt Food and Procter & Gamble also announced their exits in November and December, respectively.
Jumia Foods, a food-ordering platform, decided to discontinue its operations in Nigeria by the end of December, aligning with a broader trend of companies exiting the challenging African market. These exits, coupled with the recent closure of manufacturing operations by Procter & Gamble, Shoprite Mall’s announcement of branch closure in Kano, and Bolt Food’s decision to end operations, paint a grim picture of the business landscape in Nigeria.
The pervasive exit of multinational companies has become routine, prompting concerns about the country’s attractiveness to foreign investors. The government’s economic reforms, including fuel subsidy withdrawal and naira devaluation, have been cited as exacerbating the challenges faced by businesses, particularly those dependent on forex availability and consumer purchasing power. The impact of these reforms has led to a wave of divestments and closures across various sectors, posing a threat to the nation’s economic stability.
As a response, Daily Trust calls for a halt to further exits, emphasising the need to preserve Nigeria’s historical status as a haven for both local and foreign investments. The government is urged to conduct a thorough review of economic policies affecting businesses and create an enabling environment to ensure the sustained operation of enterprises. Addressing issues such as forex availability, high cost of raw materials, insecurity, and the overall cost of doing business is deemed crucial to retaining existing industries and attracting future investments.
In addition, there is a call for a prioritized focus on infrastructure development and improvements in power supply to reduce business costs. The government is urged to diligently implement ease of doing business initiatives to foster a friendly business environment. The consolidation of the local manufacturing industry is recommended as a loyal base that can weather economic challenges for the benefit of Nigeria.
Daily Trust asserts that proactive measures are essential to reverse the narrative of Nigeria as a destination for the closure of thriving companies. The government’s commitment to fostering a conducive business environment will play a pivotal role in retaining and attracting investments, ensuring the nation’s sustained economic growth.
