\n
As US and Europe-based multinationals exit Nigeria, Asian and local companies are stepping in to fill the void.<\/p>\n
Last week, London-based Diageo Plc sold its controlling stake in Guinness Nigeria Plc to Singapore\u2019s Tolaram Group Inc. The Fouani Group, a local firm, operates a diaper and sanitary pad plant in a complex where Cincinnati-based Procter & Gamble Co. shuttered a $300 million facility making the same products.<\/p>\n
Lagos-based Fidson Healthcare Plc is expanding its manufacturing range after the UK\u2019s GSK Plc closed its Nigerian distribution arm. Turkish diaper-maker Hayat Kimya AS has also established itself in Nigeria.<\/p>\n
Nigeria, with a population of more than 200 million, is Africa\u2019s most populous nation, in theory presenting a huge market for consumer goods. But rampant unemployment, widespread poverty and insecurity, a plummeting currency, sky-high inflation and decades of economic mismanagement have turned it into a graveyard for multinational consumer goods companies.<\/p>\n
The naira has swung wildly in recent months and is 56% down against the dollar over the past year, the most of any African currency. That\u2019s made it difficult for companies that import goods and service foreign debts to make a profit as they struggle to pass the necessary price increases to consumers. And while the central bank has now cleared a $7 billion backlog that companies were seeking to repatriate the difficulty in doing so in recent years made many businesses unsustainable.<\/p>\n
The gaps in the market left by the departing multinationals present an opportunity for domestic companies and foreign firms that focus on sourcing raw materials in Nigeria and manufacturing locally, thereby avoiding the currency risk that has hounded some foreign companies out.<\/p>\n
And while the departures show just how unattractive the Nigerian consumer market has become they also highlight the success of strategies of companies such as Hayat and Tolaram, which have each turned their brands into household names.<\/p>\n
Localized Costs<\/strong><\/p>\nFor companies such as Tolaram, used to operating in challenging environments such as Indonesia, the answer has been to localize as many costs as possible. That\u2019s helped it turn Indomie instant noodles into one of Nigeria\u2019s most popular brands, and led it into joint ventures with US cereal and snack maker Kellanova and Danish dairy giant, Arla Foods.<\/p>\n
\u201cBrands can\u2019t continue to operate the way they\u2019re used to. You need to adapt to the market accordingly,\u201d said Girish Sharma, an executive director at Tolaram. \u201cThere is hardly anything in Indomie that we import. We have our own flour milling, we have our own palm oil refining, we have our own packaging.\u201d<\/p>\n
Tolaram operates 24 \u201cfully backwardly integrated\u201d plants in Nigeria, meaning the company produces the raw materials they need, and is even setting up its own oil palm plantations, Sharma said in an earlier interview. GSK, by contrast, imported its products.<\/p>\n
That doesn\u2019t mean that local firms aren\u2019t struggling.<\/p>\n
\u201cIn theory, we think we can better manage the difficulties of doing business in Nigeria,\u201d said Jide Ogundare, managing director of MBO Capital Management Ltd, which took over supermarkets run by Shoprite Holdings Ltd. when the South African company quit Nigeria in 2021. \u201cIn actual fact, we face the same challenges as the foreigners except that we can\u2019t leave and go elsewhere.\u201d<\/p>\n
Still, despite the narrowing margins and reduced spending power, the weaker naira is making Nigerian manufacturing competitive.<\/p>\n
\u201cWe\u2019re exporting to some West African countries like Mali and to East Africa and our target is to export to another five to 10 countries by the end of next year,\u201d said Imokha Ayebae, Fidson\u2019s executive director.<\/p>\n
Oil, Technology<\/strong><\/p>\nThe exodus of firms including Kimberly-Clark Corp., Sanofi SA and Bayer AG are hindering Nigerian President Bola Tinubu\u2019s bid to breathe life into the struggling economy.<\/p>\n
Microsoft Corp. in May said it would shut the engineering section of its Africa Development Center in Nigeria two years after it opened. Meanwhile, oil majors Shell Plc, Exxon Mobil Corp. and Eni SpA have all sold their onshore operations to local companies, denting confidence in the industry that accounts for most of Nigeria\u2019s exports and leaving behind decades of environmental devastation.<\/p>\n
By contrast, Tinubu\u2019s spokesman said Tolaram\u2019s $70 million purchase of the Guinness stake was a vote of confidence in the Nigerian economy.<\/p>\n
\u201cThe multi pronged reforms and interventions being implemented on the economic and financial fronts would deliver sustained growth and enduring profitability,\u201d Bayo Onanuga, special adviser to the president on information and strategy, said in a post on X.<\/p>\n
For now the companies still invested aren\u2019t seeing that uptick. South Africa\u2019s Multichoice Group, the biggest satellite television provider in Nigeria, saw subscriber numbers fall 18% in the year to March saying that Nigerian customers \u201chad to prioritize basic necessities over entertainment.\u201d Revenue at Johannesburg-based MTN Group Ltd., which runs Nigeria\u2019s biggest mobile phone network, fell 53% in the first quarter of the year when measured in its home currency.<\/p>\n
But in challenging environments there is also opportunity, said Tolaram\u2019s Sharma, who emphasized the company\u2019s belief in Nigeria\u2019s potential.<\/p>\n
\u201cIf everything was good I don\u2019t think Guinness would think of partnering with Tolaram. Now when they saw there\u2019s adversity they chose to partner with us,\u201d he said. \u201cNigeria has 200 million people. They have to eat, they have to drink. We don\u2019t see why Nigeria should not be the country where we\u2019ll continue to stay and continue to invest.\u201d<\/p>\n
Source:\u00a0<\/strong>bloomberg.com<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"
As US and Europe-based multinationals exit Nigeria, Asian and local companies are stepping in to fill the void. Last week, London-based Diageo Plc sold its controlling stake in Guinness Nigeria Plc to Singapore\u2019s Tolaram Group Inc. The Fouani Group, a local firm, operates a diaper and sanitary pad plant in a complex where Cincinnati-based Procter […]<\/p>\n","protected":false},"author":1,"featured_media":116483,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-190508","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business"],"yoast_head":"\n
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