Global consumer goods manufacturer, Procter & Gamble (P&G), has announced its decision to discontinue manufacturing operations in Nigeria and pivot for an import-only approach.
The multinational anticipates incurring charges totaling $2.5 billion over the next two years due to a strategic overhaul of its operations in certain markets and a devaluation of its Gillette business.
Renowned for its iconic brands such as Pampers, Gillette, Ariel, Always, and Oral-B, P&G is expected to face after-tax charges ranging from $1 billion to $1.5 billion as it restructures its operations in Nigeria and Argentina. These two markets have presented challenges for the company, prompting this significant shift in its business approach.
According to Business Day, this development is set to lead to the potential loss of over 5,000 jobs in Nigeria.
Muda Yusuf, the Chief Operating Officer of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the impact of heightened industry competition and reduced consumer purchasing power as key factors contributing to P&G’s decision. The recent devaluation of the naira has further compounded challenges, exposing the harsh realities of the Nigerian market.
P&G confirmed its plans to transition its Nigerian operations to an import-only model due to unfavorable macroeconomic conditions. Andre Schulten, P&G’s Chief Financial Officer, emphasized the difficulties of generating U.S. dollar value in markets like Nigeria and Argentina, affecting the company’s overall operations.
Despite previous significant investments, including a $300 million ultra-modern plant in Ogun State in 2017, P&G faced operational restructuring and eventual closure in 2018. While this departure may not drastically impact P&G’s $85 billion portfolio, insiders express sadness over missed opportunities for substantial investments in the country.
This exit contributes to a growing trend of multinational companies leaving Nigeria, driven by challenges such as rising interest rates, inflationary pressure, and foreign exchange volatility. The Manufacturers Association of Nigeria (MAN) attributes increased job losses in the manufacturing sector to an unfriendly business environment resulting from policy changes and currency challenges.
Eke Urum, founder of RiseVest, views this exit as a consequence of acknowledging exchange rate realities. Despite the tough outlook for the next two years, local manufacturing is gaining momentum. While P&G’s Nigerian business accounts for $50 million out of its $85 billion portfolio, Urum believes this shift is significant for local businesses.
The departure of Procter & Gamble adds to a list of multinational companies exiting Nigeria, including Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries, and Stone Industries.