Nigeria’s ongoing economic strife, accentuated by persistent foreign exchange crises, is compelling major manufacturing firms to overhaul their business strategies, a move experts warn could jeopardize product quality and pose health risks.
Market giants, including GlaxoSmithKline Consumer Nigeria Plc (GSK) and Guinness Nigeria Plc, have initiated drastic measures in response to the turmoil. GSK has ceased operations, while Guinness Nigeria will discontinue importing several Diageo premium spirits as of April 2024. Similarly, Unilever has significantly scaled back production on numerous products, signaling a potential domino effect among industry leaders.
These shifts come amid soaring inflation and unemployment rates that have battered consumer spending and forced households to opt for cheaper alternatives, compromising their health and well-being. Statistics from the National Bureau of Statistics (NBS) underscore the crisis, with four million Nigerians slipping into poverty in the first half of 2023 and a staggering 133 million, or 63%, suffering multidimensional poverty.
According to a report by The Guardian, the Naira’s depreciation has dealt a blow to companies across sectors, triggering massive operational losses and prompting some businesses to abandon long-standing market segments. This retreat has exacerbated unemployment, already worsened by the COVID-19 pandemic, and sparked a surge in illicit activities around government job recruitment.
Despite a slight decline in the unemployment rate in early 2023, long-term projections suggest an unsettling trend, contributing to a volatile social climate ripe for unrest. Manufacturers’ pivot to new business strategies is discouraging investment and could diminish their tax contributions despite a 115% increase in taxes paid by manufacturers in 2023, according to NBS data.
The Manufacturers Association of Nigeria (MAN) disclosed a significant decrease in job creation within the sector in late 2022, attributing this to a hostile business environment characterized by exorbitant borrowing costs, rampant inflation, and reduced sales.
Medical professionals express concern over the dwindling supply of essential drugs, caused by supply chain disruptions and the Naira’s devaluation. This scarcity and subsequent price hike have grave implications for public health, potentially leading to an uptick in patient fatalities if not urgently addressed.
GSK’s departure, announced by its UK parent group, highlights the challenging landscape companies navigate, considering foreign exchange availability, security issues, unemployment, and the high operational costs in Nigeria. Following suit, Unilever Nigeria has also revealed plans to exit its home care and skin cleansing markets, a decision echoed by Guinness’s recent announcements.
These upheavals have confirmed that all sectors are vulnerable to the nation’s overwhelming economic challenges. Companies like Guinness Nigeria and Nigeria Breweries Plc reported significant losses due to exchange rate fluctuations in 2023, with others, including Nestle Nigeria Plc and Cadbury Nigeria Plc, also suffering substantial financial setbacks.
Dr. Muda Yusuf, CEO of the Centre for The Promotion of Private Enterprise, emphasized that businesses heavily reliant on foreign exchange are currently in jeopardy. He warned of potential health risks associated with downgraded production standards, especially in pharmaceuticals, urging regulatory agencies to combat health hazards related to counterfeit drugs preemptively.
With no immediate solution to the foreign exchange crisis, more companies may adopt Guinness and Unilever’s strategies or even exit the market entirely, Yusuf noted. Patrick Ajudua, President of the New Dimension Shareholders Association of Nigeria, called for urgent intervention to enhance the business climate and prevent further market exits, urging regulators to foster a more robust market environment.
