Factory Shut Down
OpenLife Nigeria reports that there are palpable fears over the alarming rate at which manufacturing companies are closing down in Nigeria.
The fears are so heightened in a manner that insinuations jokingly abound on the possibility of Nigeria retaining a space on global map as a result of how people are being killed mercilessly and companies folding up.
Below are different reports indicating that the All Progressives Congress, APC led federal government has taken the country backward since it took over the democratic governance of Nigeria
Over 50 companies shut down over forex, power crises – Investigation
More than 50 Nigerian manufacturing companies have shut down in the last five years, according to investigations by The PUNCH.
Some of the manufacturing companies that have exited the industry in the last five years include: Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries, and Stone Industries.
Others are: Solo Industries, Quick Born Industries, Supercor Industries, Arabi Industries, and Rola Industries.
The PUNCH also found out that Peak Aluminium, Phonenix and Wise Machine Industries are no more functional, according to our investigations.
In an earlier report funded by the International Centre for Investigative Reporting, our correspondent had found a list of recently shut-down industries to include: Louis Carter Limited, Sky Aluminium, Grief, Errand Products, Technoflex, Gorgeous Metal, Mother’s Pride, including the Industrial and Foam Equipment, Deli Foods, Universal RubberErrand Products, Technoflex and Universal Rubber.
He berated the current administration for poor management of the foreign exchange market, stressing that “ I have not seen this kind of economic management in my life.
“Things were better before the administration came on board, which was why I started this business on 2014. But it is very difficult to understand what is going on now.”
Players in the manufacturing sector told The Punch that the number of shutdowns could be more than 50, considering the impact the foreign exchange crunch has had on manufacturers.
According to MAN, the average interest rate charged on manufacturers in 2020 was 22 per cent and over 20 per cent in 2021.
Capacity utilisation, which examines the rate at which manufacturers make use of their installed capacity, has not reached 60 per cent in over 10 years. It was 49.5 per cent in 2020, according to MAN. Capacity utilisation in South Africa was 82 per cent in 2021.
In a recent CEO Confidence Index conducted by the Manufacturers Association of Nigeria, more than 50 heads of corporate organisations suggested ways of preventing factory shutdowns and galvanising the manufacturing sector.
They said, “Government must incentivise investment in the development of raw materials locally through the backward integration and resource-based industrialisation initiatives.”
They urged the government to ensure effective allocation of available forex to productive sectors, particularly the manufacturing sector while sustaining the eligible customer initiative to ensure that more electricity was supplied to the manufacturing sector.
They further said, “It is important to strengthen the Bank of Industry and Bank of Agriculture to adequately provide liberal finance for the manufacturing sector.
“It is also important to monitor the implementation of Executive Order 003 to ensure compliance by MDAs so as to boost activities in the manufacturing sector.”
Four multinational companies have left Nigeria in 2023
2023 has been one of the toughest years for Nigerian businesses this decade. It took only two months after the petrol subsidy removal in May for a reported 4 million small businesses to shut down because of a harsh economy. In October, the Nigerian Association of Small-Scale Industrialists said that Micro, Small and Medium Enterprises were shutting down daily.
But small businesses are not alone. Several big names have scaled back their operations this year, citing harsh economic conditions. According to the Manufacturers Association of Nigeria, the value of unwanted products held by Nigerian producers jumped 22% to 470 billion naira ($1 billion) by the end of 2022.
That’s the highest in the last five years except for 2020. Problems like lingering foreign exchange scarcity, poor power supply, port congestion, multiple taxation, insecurity, poor infrastructure, etc., have forced these companies to stop operating in Nigeria. Here are the most notable ones so far.
Unilever
This year, Unilever was the first household name to shed its Nigerian production. In March, the company announced changes in its business model to exit the home care and skin cleansing categories. That meant famous brands like OMO, Sunlight and Lux would no longer be on retail shelves. According to Unilever, it ceased production of homecare category products in June and ended sales in September. However, it extended the production and sale for the skin cleansing category to December 2023.
Why? Running the business has been rough. According to the company’s unaudited interim financial statements for the first nine months of 2023, it lost N1.09 billion in the third quarter of 2023. Borrowing costs widened to N1.03 billion in Q3 2023 from N328.89 million in Q3 2022, thanks to the CBN’s new forex policy. Also, because of the naira’s devaluation, Unilever lost N6.297 billion in valuation and posted restructuring costs of N3.27 billion.
GSK
In August, GlaxoSmithKline Consumer Nigeria Plc, the country’s second-biggest drug producer, told the public it was halting operations.
This decision was because the company’s UK parent terminated exclusive marketing and distribution agreements. According to a statement published on the Nigeria Exchange, GSK Plc, which owns a majority stake in the Nigerian unit, said it will appoint third-party distributors to sell its prescription medicines and vaccines in the country.
GSK’s consumer-health arm, Haleon Plc, also informed GSK Nigeria of its “intent to terminate its distribution agreement in the coming months” and appoint a third-party distributor. GSK also said it planned “an accelerated cash distribution and return of capital” to minority shareholders.
The company gave no reason for its decision. However, GSK Nigeria had previously said it was struggling to maintain supplies of its pharmaceutical and vaccine products in Nigeria due to a shortage of dollars to import ingredients.
Sanofi
On November 8th, Sanofi, a French pharmaceutical multinational, subtly announced its exit from Nigerian operations. The company said it has appointed a third-party distributor to handle its commercial portfolio of medicines from February 2024.
Just like GSK, Sanofi didn’t state any reason for its decision. Folake Odediran, Sanofi general manager (general medicines) and country lead, only said: “This strategic move is driven by our commitment to continually improve access to our medicines and to better serve our patients and the Nigerian health system.” However, the company’s numbers indicate that it’s been struggling to keep its margins in Nigeria.
In 2019, May & Baker Nigeria announced a contract manufacturing agreement to produce four brands from Sanofi. This deal was an effort to boost local production. It enabled May & Baker to use Sanofi’s facilities to manufacture flagyl tablets, suspensions, anti-infective medicines and anti-malaria drugs. By then, May & Baker’s revenue slowed by 9.57% to N5.9 billion in the first nine months of 2019. Gross profits also fell by 9.36% due to a sharp decline in sales.
Bolt Food
Right after Sanofi’s announcement, Bolt Food followed suit. “At this time, we have made the difficult decision to discontinue our food delivery operations in Nigeria due to business reasons,” the company said in a statement. On December 7th, Bolt Food will exit the Nigerian market. According to the company, it’s out of a need to “streamline its resources and maximise overall efficiency.”
Bolt, famously known for its ride-sharing platform, offers food delivery services in 16 countries and 33 cities globally. It launched Bolt Food in Nigeria in October 2021. But the market hasn’t exactly been kind to logistics startups in the last two years. Delivery businesses in the country are facing stringent macroeconomic challenges which have affected their operations. Rising fuel prices have led startups like Bolt to raise delivery fees by 20-50%. Rising inflation has also shrunk consumers’ spending power this year.
One Of Africa’s Largest Syringe Factories Shuts Down 6 Years After Opening In Nigeria
Jubilee Syringe Manufacturing (JSM), once celebrated as Africa’s syringe manufacturing company, has declared temporary redundancy in its operation in Nigeria.
The firm which opened an operation in Nigeria’s South-south region of Awa in the Onna Local Government Area of Akwa Ibom State, said the decision was made following “unforeseen circumstances affecting our business operations”.
According to BusinessDay, the company reputed to be the largest syringe manufacturing venture in Africa was inaugurated in 2017 by then-Vice President, Yemi Osinbajo.
A memo addressed to all the workers of the company, which had stopped production a long time ago, officially announced that its operations came to an end on December 31, 2022.
It said it had “to implement temporary measures to ensure the long-term sustainability of the company.”
Titled “Temporary Redundancy – Service Not Needed Till Further Notice,’’ the memo was signed by the company’s Managing Director, Akin Oyediran.
It read: “We trust this message finds you in good health. With a heavy heart, we write to you today to communicate a challenging decision that Jubilee Syringe Manufacturing Company Limited has had to make due to unforeseen circumstances affecting our business operations.
“After careful consideration and a thorough evaluation of our current business situation, we regret to inform you that we must implement temporary measures to ensure the long-term sustainability of the company.
“Unfortunately, this includes placing all positions including yours on temporary redundancy effective January 1, 2024.
“We want to emphasise that this decision is not a reflection of your individual performance or dedication to the company. The challenging business environment we find ourselves in has compelled us to take these difficult steps.
“Please return all company belongings in your custody.
“Thank you for your understanding and cooperation during these challenging times.”
Media reports quoted Oyediran to have said in an April 2023 interview that the company had secured a credit facility of $1 million, adding that it was due to the enabling environment the state government had been able to provide for the growth of the manufacturing sector.
“Not only have we come into this environment, we are also growing, we are doing other products. The company would in addition to syringes, manufacture gloves, masks, and infusion sets.
“Our investors are investing one million dollars in the company because of the level playing field and the advantages provided by the state government,’’ he had said.
Some multi-national companies shut down their operations in Nigeria last year, citing economic uncertainties.
Among them are Procter & Gamble (P&G), the world’s largest personnel care and household products company, makers of brands like Pampers, Gillette among others; top global pharmaceutical giants, GlaxoSmithKline (GSK), French pharmaceutical company Sanofi-Aventis, and top Energy firm, Norwegian behemoth Equinor.
Business Insider Africa recently reported that the American company stressed challenges in conducting business as a dollar-denominated organization and attributed its strategic decision to the macroeconomic conditions in Nigeria.
The presidential candidate of the Labour Party in the February 25, 2023, general election Mr Peter Obi among other Nigerians have decried the exit of multi-national companies in Nigeria.
Obi recently said, “A few months ago, I lamented the exit of one of the top global Pharmaceutical giants, GlaxoSmithKline (GSK) from Nigeria. GSK remains a top global pharmaceutical manufacturer and has had 51 years of operations in Nigeria.
“The reason for their exit was that there was no longer a perceived growth in Nigeria anchored on productivity. Today, Procter & Gamble (P&G), the world’s largest personnel care and household products company, makers of iconic brands like Pampers, Gillette, etc, is again leaving Nigeria, for the same reason GSK left.
“Following this also are French pharmaceutical company Sanofi-Aventis, and top Energy firm, Norwegian behemoth Equinor which has sold off its Nigerian business development associates Fifteen years ago, P&G, as they are commonly called, viewed Nigeria as a strategic country of importance and invested millions of dollars in an ultra-modern chain supply structure in Agbara which, sadly, is now up for sale.”
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