Nigeria’s large and growing population is impossible for business to ignore and a recent exodus from the West African state won’t last, South African billionaire Christo Wiese said in an interview on Bloomberg TV.
“How do you ignore an economy like this?” said the former chairman of Shoprite Holdings Ltd., the continent’s largest grocer which left Nigeria in 2021.
“Sooner or later the big players will enter again,” the billionaire declared.
In December Procter & Gamble Co. also ditched Nigeria, with at least three other global conglomerates in recent months announcing they are exiting Africa’s most populous nation, and second-biggest economy.
Many African countries, like Nigeria, developed as single-commodity economies which has meant that when the price of that product falls, the currency and consumer spending take a hit, making it difficult for foreign investors to get a return.
“Most foreign investors, including South African investors, I think have adopted an attitude when it comes to Nigeria that it’s too early,” Wiese said. “We’ve got to wait for things to settle, for the economy to develop more and then for governments that adopt the correct policies.”
The entry of several global firms into Nigeria was heralded with fanfare.
For example as Nigeria’s vice president cut the ribbon on Procter & Gamble Co.’s diaper production line in 2017, the $300 million facility near Lagos was hailed as a symbol of the country’s economic ambitions. In December, P&G said it was leaving the West African state.
The US consumer goods giant is not alone. In recent months at least three other global conglomerates have announced they are exiting Africa’s most populous nation, and second biggest economy. Among them GSK Plc, Bayer AG and Sanofi SA. Last year Unilever Plc cut some of the products it was manufacturing in the country. Nestle SA has posted losses from its operations.
At the heart of the exodus is a scarcity of the dollars international businesses need to repatriate earnings. The central bank has devalued the naira twice in the past eight months and is still struggling to clear a backlog of demand for greenbacks companies require to pay debts and import raw materials. A near complete absence of a reliable electricity supply and congestion at Nigeria’s ports are compounding the malaise.
“It’s news because it’s P&G. It’s news because it’s GSK. It’s news because they have been in the country for a long time — but there are others that have died quietly,” Segun Ajayi-Kadir, director general of The Manufacturers Association of Nigeria advocacy group said on local television after the P&G announcement. “If the current situation doesn’t improve, certainly we’ll have more closures.”
Some of the world’s largest oil reserves, ample fertile land and a rapidly growing population should have created a lucrative market for consumer goods producers following the restoration of democracy in 1999. Instead policy missteps, corruption and an over-reliance on oil fueled dysfunction in the economy. The middle class didn’t expand as much as expected.
The implications for Nigeria are hard to ignore. Its oil-dependent, $394 billion economy is already hobbled by high levels of imports. The corporate exits — $187 million in investment left the country in 2022 compared with an inflow of almost $9 billion in 2011 — will only exacerbate pressure on the naira, which has depreciated 86% over the last eight years, and deal a further blow to long-standing diversification efforts.
