P&G to End Operations in Nigeria, Argentina’s Markets In Restructuring Move

...As Exit Ends 5000 Jobs

Nigerian consumers will soon see fewer Procter & Gamble (P&G) products on shelves, as the  company announced a limited market portfolio restructuring that includes pulling out of the Nigerian and Argentinian markets.

The exit of the American multinational consumer goods in Nigeria, could result in a loss of over 5,000 jobs and a major decline in foreign investments into Africa’s most populous nation.

This comes after GlaxoSmithKline Consumer Nigeria, another multinational announced plans in August to exit the country after 51 years of operations.

The decision, attributed to challenging macroeconomic and fiscal conditions in both countries, is expected to incur restructuring charges of $1.0 to $1.5 billion after taxes, primarily due to non-cash charges and foreign currency translation losses.

While the exact timeline for the complete withdrawal is yet to be determined, P&G anticipates incurring these charges throughout the fiscal years of 2024 and 2025, with the first charges appearing in the financial quarter ending December 31, 2023.

This news comes as a blow to Nigerian consumers who have long relied on P&G brands like Ariel detergent, Pampers diapers, and Gillette razors. The company’s exit from the market is likely to ’ead to job losses and increased competition among remaining players.

The restructuring also includeincludees an impairment charge, bringing the total anticipated charges to approximately $2.0 billion to $2.5 billion after taxes. These charges will be reported as non-core charges, meaning they are not expected to impact the company’s core business performance.

P&G’s decision to exit Nigeria and Argentina highlights the challenges faced by multinational companies operating in emerging markets. Economic instability and volatile currencies can make it difficult for these companies to maintain profitability.

As the global economic landscape continues to evolve, it is likely that we will see more companies making similar strategic decisions in the years to come.

The makers of Always, Ariel soap, and Oral B toothpaste has invested millions of dollars in the manufacturing sector. The biggest of such investment was the completion of the ultra-modern $300 million plant at Agbara, Ogun State in 2017.

During the 2017 plant launch, it provided over 5,000 jobs directly and indirectly through its offices, suppliers and distributors and created over 200 SME jobs.

However, one year later, it shut down the plant, citing restructuring of operations as its main reason. The plant was arguably the largest single investment by a non-oil firm in Nigeria and was expected to boost job creation and help improve the socio-economic state of its host community.

Schulten of P&G noted 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.

This development saddened a source familiar with the company. The source said another tragic example of opportunities has been missed.

“Approximately 14 years ago, the company had actively sought engagement with NNPC on Nigeria’s gas master plan during Jonathan and Deziani’s tenure as petroleum minister.”

The source added that P&G aimed to co-invest $2 billion with their raw material suppliers, gas converters. “The goal was to produce essential materials for their manufacturing plants, leading to the creation of numerous well-paying jobs. The plan envisioned exporting these raw materials to P&G plants in Africa and selected parts of the Middle East, however, it never saw daylight.”

According to Eke Urum, founder of RiseVest, the exit is an effect of embracing exchange rate reality.

“It’s going to be a rough two years but local manufacturing is cooking. It’s too small for P&G (their Nigerian business is $50 million out of $85 billion). But for local guys this is meaningful,” he said on X.

Some of the companies that have exited the country are Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries and Stone Industries.

In March, Unilever, which started operations in the 1920s, announced that it was stopping the production of its legendary OMO, Sunlight and Lux home and skincare brands in a bid to cut costs to concentrate on higher growth opportunities.

Data from the Manufacturers Association of Nigeria (MAN) showed that the number of jobs lost in the manufacturing sector rose to the highest in three years for the first half of 2023.

In MAN’s latest half-yearly review report, the number increased by 108.7 percent to 3,567 in the first half of 2023 from 1,709 in the same period of 2022.

The number of jobs created in the sector declined by 32.8 percent to 6,428 from 9,559 in H1 2022.

“The decline in the number of jobs created in the sector during the period further highlighted the unfriendly business environment resulting from the hasty policies and residual effect of the currency redesign policy that led to naira crunch,” MAN said.

December 07, 2023