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Multinationals may exit Nigeria in 2024 due to high operating costs and forex scarcity

Consumer goods multinationals in Nigeria are considering exiting Africa’s largest economy in 2024 due to unfavourable operating conditions, according to a new report.

Key reasons cited for the potential exit include rising production costs stemming from commodity price hikes, naira devaluation, higher import duties, and energy prices.

Per the “Strategic Resilience: Sailing Through Business Disruptions” report published by Cardinal Stone, a financial services firm, fast-moving consumer goods (FMCG) companies have borne the brunt of recent economic shocks in Nigeria.

Despite global commodity prices easing, the significant weakening of the naira from N422 per dollar in June 2022 to over N950 in December 2022 has neutralised any potential savings for FMCG companies. Most raw materials and machinery are imported, leading to inflated naira costs.

The Central Bank of Nigeria (CBN) moved to a flexible exchange rate regime in June 2022 to curb rising forex parallel market rates. But this has also accelerated imported inflation and input costs.

2022 also saw record-high diesel prices surpassing 1,000 naira per litre after Russia’s invasion of Ukraine disrupted global energy markets. Higher logistics costs have further squeezed profit margins.

Cardinal Stone expects such cost pressures to continue in 2023. Collaborations between FMCG giants like Nestle, Unilever, and P&G could improve economies of scale. But some firms may choose to exit manufacturing and focus only on imports.

Recent years have seen companies such as Pernod Ricard, GSK Consumer Healthcare, PZ Cussons, and Unilever streamline their Nigerian operations amid rising costs and supply chain bottlenecks.

The report urges businesses to adapt through strategic cost optimisation and diversification to build resilience. But the next year could see more multinationals follow suit if conditions do not improve.

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