The Exodus

…at this point, the last to leave should close the door.

Source: Business Day

For a seed to grow, it needs to be in the right environment. It requires the right amount of water, sunlight, weeding, if necessary, manure, and ultimately it has to be in the right soil. All these need to be in place for fruits to be borne or flowers displayed. This analogy extends to businesses as well. They need a conducive environment to thrive, be profitable and grow. Any form of extreme condition would hamper their abilities to thrive, produce profits or grow.

Over the past 12 months, we have seen several multinational companies either scale down their involvement in the Nigerian market or out rightly pack up their stuff and leave. The cost of continuing operations in the economy outweighed its benefits. The economic climate can be likened to a seed’s harsh growing conditions: intense heat, flooding waters and inhospitable soil. In Nigeria’s case, this translates to insecurity, foreign exchange scarcity, power shortages, poor infrastructure, and consistent high inflation, all of which have created an unsuitable environment for businesses.

Recently, Diageo sold 58% of its stake in Guinness Nigeria to a Singaporean company- Tolaram (makers of Indomie in Nigeria) why? Diageo plans to scale down its presence in the Nigerian economy. While this was not a total exit like P&G, GSK, Equinor or Kimberley-Clark, it still reflects the challenging state of the economy. Many of these companies produce essential goods used by the average Nigerian. Their exit will likely result in a reliance on imports, which given the weakened value of the naira against the dollar or pound, will make these products less affordable for consumers.

In an interview with President Tinubu, he mentioned that these companies can leave if they desire to and the economy does not need them. While this can sound like a confident thing to say about the economy, it would only be a valid statement if we had domestic substitutes for these companies, which we do not. The manufacturing sector of the economy would likely face the brunt of these exits and scale-downs.

So What?

There are so many impacts to the economy with these activities. If a company shuts down, it means that the people employed are laid off. In an economy where the possibility of finding jobs is thin, this would throw more people into the unemployment basket. Their financial capabilities drop and affect their standard of living. It also throws the economy back to square one. The manufacturing sector is slowly ebbing away. The reputation of the economy also drops as Nigeria starts to hold the position of the country where many left. To the average person who could afford essentials like Macleans toothpaste or tablets produced by GSK, they are forced to let go of such purchases or scrapple up 100% more of the initial amount to afford the current prices.

This could also be an opportunity for the government to do all it can to create that conducive environment that businesses need to survive in Nigeria. Policies need to be set in place and implemented quickly (like the national anthem) to see changes that would either drawback these companies or make the ones within the economy thrive and become long-lasting.

Also;

Over the past 12 months as well, the number of Nigerians that have migrated out of the country stands at outrageous values. So, it’s not just the multinational companies, but people leaving for postgraduate studies or employment offers. This creates a huge brain drain problem. All these are huge warning signs(or red flags) that the government needs to address quickly and promptly. Questions like why are these units of the economy leaving and at such a rate should be discussed and answered with strategic plans that should be implemented promptly