In a significant development that has sent shockwaves throughout Nigeria’s business landscape, British pharmaceutical giant GlaxoSmithKline (GSK) announced on August 3, 2023, its decision to cease operations in the country. The multinational corporation, which has been a prominent player in the Nigerian market for 51 years, cited numerous challenges, including the exploration of a third-party distribution model and the difficulties faced in accessing foreign exchange (FOREX) required for remittances to the parent company in the UK.
GSK, which began its operations in Lagos, Nigeria on July 1, 1972, is well-known for its flagship products such as Panadol, Augmentin, Lucozade, Macleans, and Sensodyne. Over the years, some of these products have attained generic status in the market. The company’s exit, coinciding with the publication of its half-year 2023 financial results, has sparked a range of reactions from shareholders, consumers, and economic experts. Notably, experts have expressed concerns that GSK’s departure could set a precedent for other multinational companies considering similar moves in Nigeria.
Just two months after GSK’s exit, on October 16, 2023, other multinational firms revealed their plans to scale down production, citing analogous reasons. Guinness Nigeria Plc, for instance, announced that it would discontinue the import and distribution of international premium spirit products, including Johnnie Walker, Singleton, and Bailey’s, effective 2024, under its 2016 Sale and Distribution Agreement with Diageo Plc. Similarly, Unilever has significantly reduced the production of items like Lux, Lifebuoy, and Sunlight. In a concerning development, PZ, a major player in the Nigerian market, is reportedly on the verge of delisting from the Stock Exchange.
The primary driver behind this widespread shift in operational strategies for these large corporations is the ongoing economic crisis plaguing Nigeria. The crisis has exacerbated over time, with the most pressing issues being a severe shortage of foreign exchange, soaring inflation rates, and skyrocketing unemployment, leading to a significant erosion of citizens’ purchasing power. According to data from the National Bureau of Statistics (NBS), around four million Nigerians fell below the poverty line in the first half of 2023. The 2022 Multidimensional Poverty Index survey reveals that 133 million people, or 63% of the population, are dimensionally poor.
Within the manufacturing sector, the dire economic conditions have resulted in more job losses, further contributing to the high unemployment rate. Experts have sounded the alarm, warning that this situation could potentially trigger widespread social unrest and increase insecurity in the nation. Recent NBS data indicates a decline in the unemployment rate, which stood at 4.10% in Q1 of 2023, down from 5.30% in Q4 of 2022. However, projections suggest that the rate is likely to hover around 5.40% in 2024 and 4.50% in 2025 in the long term.
Amid these disconcerting developments, there is a growing chorus of calls for the government to urgently implement measures to mitigate the adverse effects on the business environment and the economy as a whole. A primary focus of these measures should be addressing the foreign exchange crisis, which lies at the heart of the current economic challenges in Nigeria.