The recent exit of Procter & Gamble (P&G), a global consumer goods powerhouse, from Nigeria marks a critical juncture for both citizens and the nation’s economy. As part of a larger trend, major players in the fast-moving consumer goods industry are either scaling back or abandoning operations in Nigeria, driven by factors such as surging interest rates, inflationary pressures, and foreign exchange volatility.
P&G, renowned for producing popular brands like Pampers, Ariel, Always sanitary pads, Gillette, Oral B, Vicks, and Safeguard, declared its shift to an import-only model for Africa’s largest economy. This decision, though seemingly small in the context of its global portfolio, carries weighty implications for Nigeria.
Leke Olushuyi, a chartered accountant and business writer, expressed on X, “P&G’s products are no longer being manufactured in Nigeria. This means that the prices of these products will likely increase too.” Despite contributing only 0.06 percent of its global net sales, P&G’s departure raises concerns about the economic landscape.
Five Ways P&G’s Exit Will Impact Nigerians:
- Loss of Jobs:
With P&G’s exit resulting in the loss of over 5,000 jobs, Nigeria, with a population exceeding 200 million, faces a potential spike in its unemployment rate. The latest data from the Manufacturers Association of Nigeria (MAN) reveals a significant increase in job losses in the manufacturing sector, rising by 108.7 percent in the first half of 2023 compared to the same period in 2022. - Decline in Foreign Investments:
P&G, with a market size of $50 million, was a substantial investor in Nigeria. Its withdrawal signals a lack of confidence in the country’s business environment, potentially deterring other foreign investors. This could lead to long-term negative consequences for Nigeria’s economic growth. - Further Increase in Inflationary Pressures:
As P&G’s products are integral to many households, their exit may lead to shortages and increased prices, exacerbating inflationary pressures. The removal of the petrol subsidy and naira devaluation have already elevated inflation to its highest level in 18 years, impacting businesses and causing a contraction in business activities. - Instability in Foreign Exchange:
The foreign exchange reform in June, allowing the naira to trade more freely, has led to significant depreciation. This has adversely affected businesses with foreign exchange exposures, as evident in the substantial foreign exchange losses reported by six FMCG companies in the first nine months of 2023. - Reduction in Government Revenue:
The departure of P&G raises concerns about the stability of corporate tax revenue in Nigeria. The country’s projected non-oil tax revenue of N3.52 trillion may be under threat as consumer goods firms struggle to generate profits amidst growing inflation, declining consumer purchasing power, and naira devaluation.
As Nigeria grapples with the ramifications of P&G’s exit, it underscores the urgent need for strategic economic interventions to attract and retain foreign investors, stabilize the job market, and address the broader challenges impacting the nation’s business environment.
