Published on 27 Dec 2023

Procter & Gamble halts manufacturing in Nigeria amid economic headwinds

Multinationals are reassessing their presence in Nigeria

Photo credit: Campaign Asia

American consumer goods company Procter & Gamble will close its manufacturing operations in Nigeria, shifting its focus solely to imports. The company, which generates revenue of about US$50m in Nigeria through the sale of brands such as Pampers diapers, Ariel detergent, and Oral-B toothpaste, cited currency issues and a challenging macroeconomic environment as reasons for its decision.

Over the past year, the Nigerian naira has experienced a significant depreciation, reaching a record low of NGN 1,160 to the US dollar on 1 December. This decline can be attributed to various economic factors, including relaxed foreign currency controls, diminishing foreign investments, and a decrease in crude oil exports, a key revenue stream for Nigeria. The weakening naira has reduced the converted dollar earnings for foreign companies. “When you think about places like Nigeria... it is very difficult for us as a US dollar-denominated company to create value,” said Andre Schulten, chief financial officer of P&G, during an investor call. 

P&G's scaling back is part of a broader trend of multinational corporations either withdrawing from or reorganising their operations in Nigeria. In August, the British pharmaceutical giant GlaxoSmithKline (GSK) also announced its departure from the Nigerian market. This move followed the company's earlier statements that Nigeria's economic challenges and a foreign currency crisis were adversely impacting its operations.

However, it has been suggested that the difficulties encountered by foreign multinationals in Nigeria arise not solely from the country's macroeconomic difficulties but also from suboptimal strategic decisions and competitive forces. For example, GSK contended with increased competition from local companies and imports from India and China. In the first half of 2023, its sales fell to NGN 7.75bn (US$ 9.7m), a significant reduction from NGN 14.8bn (about US$ 18.7m) in the same period the previous year.

Earlier in 2023, consumer goods company Unilever also announced the withdrawal of its OMO, Sunlight, and Lux home and skin care brands from Nigeria. At the time, Uchenna Uzo, a consumer trend expert, and faculty director at the Lagos Business School noted that Unilever relied too heavily on imports for some products. Additionally, it has been highlighted that key lessons from Unilever’s experience include the importance of having a robust scenario plan which entails preparing for the most adverse economic outcomes, and investing in domestic production and partnerships with local stakeholders to reduce import dependence.

To mitigate foreign exchange risks, Guinness Nigeria, a longstanding local manufacturer of various alcoholic beverage brands, announced in September that it will discontinue distributing imported international premium spirits, including Johnnie Walker, Singleton, and Baileys. Instead, Diageo, the UK-based parent company of Guinness Nigeria, plans to launch a brand new, wholly owned business dedicated to importing and distributing its international premium spirits portfolio in West and Central Africa. Guinness Nigeria said this strategic shift will reduce its foreign exchange needs and mitigate the negative effects of ongoing hard currency shortages and rate fluctuations on the company's financial performance. Following this move, Guinness Nigeria will concentrate on its core domestic manufacturing operations.  



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