World watches as Nigeria’s foreign currency woes scare multinationals

A report published last week by financial news agency Bloomberg – and widely reported around the world – notes that at least four global conglomerates have recently announced they are exiting the country. They are Procter & Gamble (commonly known as P&G), GSK, Bayer and Sanofi. 

Other multinationals that have stayed are struggling along with the economy. Among them are Unilever and Nestlé. 

“At the heart of the exodus is a scarcity of the dollars international businesses need to repatriate earnings,” the Bloomberg report states. 

“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.” 

There may be more closures 

Bloomberg quotes Segun Ajayi-Kadir, Director-General of The Manufacturers Association of Nigeria advocacy group, as saying: “If the current situation doesn’t improve, certainly we’ll have more closures. 

“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.” 

According to Bloomberg, Cadbury Nigeria has had to convert loans from its UK parent into equity because it couldn’t find the foreign currency to repay them. PZ Cussons, a UK-based maker of soap and other personal care products that counts Nigeria as its biggest market, this month slashed its profit expectations for the group. 

Tielman Nieuwoudt, an emerging markets expert and occasional contributor to Strategic Marketing for Africa, the magazine of the African Marketing Confederation, says the scarcity of foreign currency within the Nigerian economy has made it challenging for companies to import raw materials and repatriate profits, severely affecting their operations and financial viability. 

“Airlines like United Airlines and Iberia have temporarily suspended flights to Nigeria due to difficulties in repatriating earnings, a consequence of the foreign exchange scarcity,” he notes in a social media post. 

“The automotive industry has also been hit, with car manufacturers halting assembly due to difficulties in sourcing foreign currency for parts imports.”