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Consumer goods giant Procter & Gamble has stated it plans to dissolve on-ground operations in Nigeria and turn its country into an import market.
The Chief Financial Officer of the group Andre Schulten stated this during his presentation at the Morgan Stanley Global Consumer & Retail Conference.
The company explained that it is difficult to do business in Nigeria as a dollar-denominated organisation and the macroeconomic reality in Nigeria is responsible for its latest strategic decision.
What the company said
- Mr Schulten stated, “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 and Argentina, 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 operating model and adjust the portfolio to ensure that we maintain the portfolio discipline that has brought us to this point. The restructuring program will largely focus on Nigeria and Argentina. We’ve announced that we will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground in Nigeria and reverting to an import-only model”
It further explained that the decision will help the company focus on markets that have the highest potential.
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Reacting to questions bothering on the effect of the company’s planned restructuring in Nigeria and Argentina on its overall group’s portfolio, the CFO explained that Nigeria is a $50 million net sales business.
Compared to its overall portfolio worth $85 billion, the company does not anticipate any material impact on the group’s balance sheet from a sales or profitability standpoint.
Backstory
The current macroeconomic conditions in Nigeria have negatively affected foreign USD-denominated companies in Nigeria. In August, drug maker GSK announced it’s ceasing operations in Nigeria and appointing a third party to take over distributions.
These companies have often cited difficulty in sending back U.S. dollars outside Nigeria. The Central Bank has acknowledged it has a forex backlog to the tune of around $7 billion
President Tinubu has instituted reforms aimed at attracting foreign investment into Nigeria, but it seems in the short term it has only brought more hardship.
Forget all the reforms, if basic things (electricity, good roads, security, development of local manpower and content and the likes) cannot work, all the reforms will be nothing but a mirage. Which is what they are and the present and his men know it.
Another legacy business shutting down, signaling job losses, investment losing value, capacity becoming redundant and real estate demarketing. Which way Nigeria?
You forgot to add “signalling to potential investors to whom they are marketing, that Nigeria is not where to go.
The FG should put a human face to its present policies and reforms. What becomes of the many Nigerians working in this organisation with this kind of decision? Its riple effects will, no doubt, be devastating considering the hardship Nigerians are currently experiencing.
Funny that the president and his vice have been shuttling from one corner of the world to another seeking foreign direct investments whiereas some quality foreign investors who have been in the country for decades are exiting the country at an alarming rate. I don’t think this administration is ready to seriously solve the major problems encumbering manufacturers yet, perhaps they think they can bamboozle prospective investors with mere sweet but unrealistic promises or perhaps the administration is out of touch with the actual harsh business conditions on the ground. I completely agree with Mr Peter Obi when he suggested that there’s no need wasting public funds on fruitless investor hunting trips, and that the administration should rather put their house in order first, by aggressively fighting and removing those obstacles to ease of doing business and the investors would return in their numbers even without any invitations. There are lots of quality foreign investors seeking for where to put their money but that doesn’t mean they’re so desperate as to gamble with their funds in an uncertain and hazardous economy.
It the most simple minded thing to do to land blame of this on PBAT and his policies. That’s naive and ignorant. The fact is that the inability of Nigeria to enable companies remit their profit to their home countries started way befote and worsened under Buhari. With the hugh theft of oil and the resultant paucity of forex , Nigeria became more and more dollar starved and many companies were unable to source forex to remit their profit.
There is the need to reset, and if that means more international companies reverting to import only model and thus relieve pressure on Nigeria to service their forex needs , then so be it.
The fact is that these companies cannot afford to lose the Nigerian market and are finding other ways of retaining the market minus the headache of their profit being trapped in Nigeria.
PBAT is on the right track and only uninformed minds would imagine that decades of challenges would be resolved in a matter of months.
Congratulations.
@Otunba, the import-only model puts MORE (not less) pressure on sourcing forex. Hopefully, our Olabisi Ajala president doesn’t share your sentiment that long-established foreign investors voting with the feet and wallet by joining the “japa” stampede is not bad and thus “so be it”! SMH
Very very interesting!!
So what it means is that PBAT has taken us streigth into container economic model, for he was insulting PO.
This BAT of a man na copy and paste presidentoo. Worst still he copies the wrong things he criticised.
As they source for investors, existing are leaving. Yet, the govt is spending tremendously on their accommodation, cars offices etc. U go begging but behave like you are wealtht. It will be well.