Proctor & Gamble is latest multinational to stop Nigerian manufacturing

According to media reports emanating from Nigeria, as well as from the Morgan Stanley Global Consumer & Retail Conference held in New York City last week, P&G’s sole factory in the country is to be closed or sold.

The factory is located in Ibadan in Oyo State. It is the third-largest city by population in Nigeria after Lagos and Kano. 

P&G did at one stage have a second factory in Ibadan, but this was closed some years ago. Another factory, located in Ogun State, was sold in 2018.

Several multinational consumer companies have closed, or are closing, manufacturing operations in the country. For example, GlaxoSmithKline (GSK) announced plans in August to exit Nigeria after 51 years of operations.

The Nigerian economy is struggling under the weight of several challenges – including a foreign exchange shortage, poor exchange rate, supply chain problems and cash-strapped consumers.

Greater competition and less purchasing power

“The impact of the market on the company’s overall net worth is due to two key factors – intensified competition within the industry and a declining consumer purchasing power,” Muda Yusuf, Chief Operating Officer of the Centre for the Promotion of Private Enterprise (CPPE), told Nigeria’s BusinessDay newspaper. 

He added that the recent devaluation of the naira poses significant challenges for any business with substantial foreign exchange exposure, highlighting the current reality of the Nigerian market. “Businesses with foreign exchange exposure are struggling,” he said.

Speaking at the Morgan Stanley conference, P&G’s CFO, Andre Schulten, explained that it was difficult to create US dollar value in countries such as Nigeria and Argentia at present. 

Trendtype, the London-based emerging markets consultancy, has a slightly different view in its analysis of the P&G announcement.

“The switch in business model … reveals a disconnect in approaches to fx-challenged markets like Nigeria between multinationals,” it says.

“The Yara brand now produced in P&G’s old Agbara factory is reportedly selling strongly, especially in northern Nigeria. Other businesses (Henkel, Arla, Kellogg’s, Suntory) have engaged local partners in long-term relationships, either as contract manufacturers, JV partners or licensees.

“An import-only model will see P&G lose market share and potentially long-term traction with consumers.”