Only Investors Who Know How To ‘Game the System’ Stay in Nigeria, Says Atedo Peterside

An Economist and Founder of the Stanbic IBTC Bank, Mr. Atedo Peterside, has stated that businesses that value rule of law, policy consistency, macroeconomic stability and level playing field would continue to depart from Nigeria, saying only investors who know how to “partner” with politicians would stay.

Peterside’s sober and penetrating insights to the factors behind the trend where some multinational manufacturing concerns are shutting down operations and leaving the country followed the announcement by Procter &Gamble (P&G) to stop its manufacturing activities in Nigeria.  

Peterside wrote on his X (Twitter) handle: “Another way to look at this @ProcterGamble exit story is that multiple investors who cherish the rule of law, policy consistency, macroeconomic stability, a level playing field etc. are running away from Nigeria.

“They are being ‘replaced’ only partially by investors who know how to ‘partner’ with politicians and/or game the system through waivers, exemptions etc.”

P&G is the third multinational to announce its exit from Nigeria after GlaxoSmithKline Consumer Nigeria Plc (GSK) and Sanofi-Avantis Nigeria Limited, had announced similar decisions.

Reacting to P&G’s decision to quit Nigeria, the Director General of Nigeria Employers’ Consultative Association (NECA), Mr. Adewale-Smatt Ayorinde, urged the federal government to take proactive action to stop businesses organisations from moving out the country because, “these regrettable departures will persistently undermine the federal government’s efforts to attract Foreign Direct Investment, rendering its initiatives ineffective.”

NECA, according to Ayorinde, “strongly emphasised the immediate need for decisive measures to halt the ongoing trend of companies divesting from the country.

“We urge a quick and definitive action to arrest the continuous exit and divestment of legitimate organisations in Nigeria. In the last few years, hitherto strong brands, both multinationals and strong local brands have either closed shop or divested fully or partially.”

He noted that Nigeria’s “challenging business landscape, marked by stringent regulatory and legislative activities, insufficient infrastructure, and policy inconsistencies collectively exacerbates the difficulties faced by businesses.”

He observed that the situation whereby, “regulatory bodies tasked with fostering business growth persist in prioritising revenue generation at the expense of their core mandate while legislators, in the guise of oversight functions, consistently create impediments for organised businesses, hindering their operations” would frustrate businesses and foster their exit from Nigeria.

Oyerinde, “earnestly implored President Bola Tinubu, as well as the Minister for Finance and the coordinating Minister of the Economy, to prioritise the survival of local businesses as the primary step before actively seeking Foreign Direct Investment.”

He, however, commended the federal government for supporting the Small and Medium Enterprises (SMEs), and manufacturers through the disbursement of N125 billion as part of Presidential Palliative Programme (PPP).

The Director General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, described the increase in exit plans, or a reduction in involvement in the Nigerian market, by the multinationals as worrisome.

Almona said: “In Nigeria, lingering foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, and poor infrastructure, among others, have taken a toll on many businesses in the country.

“The chamber recommends that the government should implement measures to stabilise and ensure the availability of foreign exchange for businesses, particularly those operating in dollar-denominated environments.

“The LCCI also implores the government to create a more flexible and transparent foreign exchange policy to address scarcity issues.

“Furthermore, the chamber urges the government to engage multinational corporations and the business community to understand their challenges and gather input and feedback on policy decisions to collaboratively develop solutions that will forestall the exodus of businesses from Nigeria.

“The CBN should prioritise the stability of the country’s currency and adopt the right policy mix to ensure price stability.”

Recently, the Chief Financial Officer of P&G, Mr. Andre Schulten, stated at the Morgan Stanley Global Consumer & Retail Conference that “we have 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.”

Schulten added that “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 P&G, in its 2023 annual report for the fiscal year that ended on June 30, 2023, which was prepared in pursuant to Section13 or 15(d) of the United States Securities and Exchange Act of 1934, categorically identified conditions that might cause it to remove its operation from any country.

It stated that there would be “need to de-consolidate or even exit certain businesses in particular countries” where its business, operations or employees have been and could continue to be adversely affected by “geopolitical conflicts, political volatility, trade controls, labor market disruptions or other crises or vulnerabilities in individual countries or regions (including) deterioration in the creditworthiness of local governments, particularly in emerging markets.  

“Our business could be negatively impacted by reduced demand for our products related to one or more significant local, regional or global economic or social disruptions. These disruptions have included and may in the future include: a slow-down, recession or inflationary pressures in the general economy; reduced market growth rates; tighter credit markets for our suppliers, vendors or customers; a significant shift in government policies; significant social unrest.

“Results of elections, referendums, sanctions or other political processes and pressures in certain markets in which our products are manufactured, sold or distributed could create uncertainty regarding how existing governmental policies, laws and regulations may change, including with respect to sanctions, taxes, tariffs, import and export controls and the general movement of goods, materials, services, capital, data and people between countries.

“The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, new or increased tariffs, trade barriers and market contraction, could adversely affect the company’s results of operations and cash flows.”

It stated further that it is “a global company, with operations in approximately 70 countries and products sold in approximately 180 countries and territories around the world.

“Fluctuations in exchange rates for foreign currencies have and could continue to reduce the U.S. dollar value of sales, earnings and cash flows we receive from non-U.S. markets, increase our supply costs (as measured in U.S. dollars) in those markets, negatively impact our competitiveness in those markets or otherwise adversely.

“Moreover, discriminatory or conflicting fiscal or trade policies in different countries, including changes to tariffs and existing trade policies and agreements, could adversely affect our results.”

Dike Onwuamaeze

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