2023 Exit List: P&G shuts manufacturing as forex crisis takes toll on production

• Joins GSK, Unilever, Evans Medical, Sanofi

A global leader in consumer goods, Procter & Gamble Nigeria is the latest casualty of Nigeria’s harsh operating environment, as the company, yesterday, announced that it was transitioning local operations to an import-only model, effectively dissolving its on-ground presence in the country.

This decision, it said, stems from the increasingly challenging business environment, particularly dollar-denominated operations, lower spending power and the general high cost of doing business.

The move means that thousands of jobs and millions of dollars in investment of the company have been lost.

In 2018, the firm, which employed about 5000 workers, sacked hundreds of staff in tranches. It shut its largest plant in Nigeria at Agbara Industrial Estate, Ogun State, just about a year after it was commissioned.

The latest revelation comes five years after the company denied exiting Nigeria when it laid off hundreds of workers and scaled down operations in the country. The company had denied it was troubled, claiming it was restructuring and had no plans to exit.

P&G, which operates in some 180 countries of the world, produces a range of products for the Nigerian market, including sanitary pads, diapers, detergents, toothpastes and shaving sticks.

It also firmly denied it was leaving the country then, saying it was not struggling with competition. The $300 million plant, which was turned into a warehouse for imported products and has since been sold, was the single biggest non-oil investment of the United States in Nigeria.

P&G’s Chief Financial Officer, Andre Schulten, during a presentation at the Morgan Stanley Global Consumer and Retail Conference, noted that operating in Nigeria has become increasingly difficult.

As a result, he said, the company was implementing a restructuring program to optimise its operating model and portfolio, focusing on markets with greater potential.

“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, 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 the operating model and adjust the portfolio to ensure that we maintain the portfolio discipline that has brought us to this point. We will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground,” he said.

He said the decision would help them focus on markets that have the highest potential. Revealing that Nigeria is a $50 million net sales business, compared to its overall portfolio worth $85 billion, he said they do not anticipate any material impact on their balance sheet from a sales or profitability standpoint.

This is coming just months after big multinationals including, GSK, Unilever, Sanofi, Guinness Nigeria and Evans Medical notified stakeholders of pulling back or stopping operations in Nigeria listing FX issues and harsh operating environment. Since GSK and Evans pulled out, the cost of their drugs has skyrocketed well beyond the reach of Nigerians.

Earlier this year, the umbrella body for local manufacturers, the Manufacturers Association of Nigeria (MAN), revealed that over a hundred companies have ceased operations in the country, listing lingering foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, worsening purchasing power, high operating costs, harsh business environment and poor infrastructure, among other issues as reasons for the rapid depletion.

MAN President, Otunba Francis Meshioye, warned that if these issues are not addressed soon, more companies would follow suit, worsening the unemployment situation in the country. Despite promises from President Tinubu to improve the ease of doing business and revamp the sector, this has not reflected on manufacturers as many players are pivoting or completely shutting down operations, sticking to import or handing over distributions to a third party.