•Economists urge FG to accelerate backward integration, support domestic production
Barely four months after the GlaxoSmithKline Consumer Nigeria Plc (GSK), took the decision to exit the Nigerian market, the Procter & Gamble (P&G), another multinational firm, has taken a decision to shut down its production lines and commence the exportation of its products into Nigeria.
This was announced recently by the Chief Financial Officer of P&G, Mr. Andre Schulten, at the Morgan Stanley Global Consumer & Retail Conference when he stated specifically that, “we have announced that we will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground in Nigeria and reverting to an import-only model.”
Schulten, attributed the P&G’s decision exit Nigeria to the prevailing foreign exchange rate situation in the country, saying that Nigeria and Argentina were difficult to do business in because of macroeconomic environment.
He stated that, “the other reality that arises in some of these markets is that it gets increasingly difficult to operate and create U.S dollar value. So when you think about places like Nigeria and Argentina, it is difficult for us to operate because of the macroeconomic environment.
“So with that in mind, we are announcing a restructuring program with the intent to adjust operating model and adjust the portfolio to ensure that we maintain the portfolio discipline that has brought us to this point.
“The restructuring program will largely focus on Nigeria and Argentina. We’ve announced that we will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground in Nigeria and reverting to an import-only model.”
He explained that Nigeria was a $50 million net sales business which would not make any significant marginal impact on the P&Gs overall portfolio worth $85 billion.
Reacting to the move by P&G to exit the country, the Founder of the Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, told THISDAY that it was a reflection of the challenges that businesses with high foreign exchange exposures were facing in the country.
Yusuf, further explained that the challenge was not limited to foreign companies as indigenous Nigerian companies, both big and small companies that are not well known, were also facing challenge because of the foreign exchange rate situation.
He said: “Competitiveness and sustainability issues now for businesses that have high foreign exchange exposure. The only way out of this situation is for us to accelerate the process of backward integration as much as we can. Secondly, is to accelerate the rate of import substitution.
“We know that there is effort by the CBN to stablise the market. Some progress has been made but it depends on how fast we are able to fix the fundamentals, especially around the supply of foreign exchange.
“So, these are reflections of the macroeconomic challenges that we are facing at the moment.”
Speaking in the vein, the Chief Executive Officer of Nigeria Economic Summit Group (NESG), Mr. Laoye Jaiyeola, told THISDAY yesterday that the current development was inevitable because of the careless ways Nigeria had managed its financial and monetary affairs in the recent past.
Jaiyeola, however, said the exit of foreign manufacturing firms from Nigeria could be an opportunity for Nigerians to produce and consume made in Nigeria products.
He said: “We are all paying for it. It is bad but in every setback there is an opportunity to look inward. We all know that it will get to this level when we were printing money and being reckless about the way we were conducting our financial and monetary position.
“And now it seems that the chicken has come home to roost and we are all suffering for it now. However, this is an opportunity for us to start looking for made in Nigeria.
“If they (P&G) think that we will import from them and we now develop our own local substitute and did not import from them what will happen? And if we produce locally, we will create jobs. The time is ripe for us to know that for everyone (foreign firm) that goes we should look for local substitute.
“Government’s own is to ensure that it is making the environment for doing business good enough for us.”
