T he list of the multinational manufacturing companies that have closed shop and exited to other countries in recent years, or about to do so keeps increasing by the day. These include Procter & Gamble, Surest Foam Limited, Mufex, Framan Industries and Moak Industries. Others are Deli Foods, Stone Industries, MZM Continental and Nipol Industries.
This frightening economic situation fuels the questions of the causes for their exit, and what could be done to stem the tide of relocating to other countries, sometimes some neighbouring West African states?
The answers are not far-fetched. In spite of the country boasting of being the largest economy on the African continent; with abundant natural resources and human capital, in addition to over 200 million people, the high operational costs as well as inadequate or decrepit infrastructure are responsible for their exit.
Specifically, other factors fingered as undermining productivity include the high cost of diesel, premium motor spirit, gas, the ever-escalating inflation rate, currently put at over 26%, lack of foreign exchange (forex), lack of stable electricity and the spiralling interest rates. At the end of the day, when the cost of production is placed vis-a-vis the income there is little or nothing to boast about. That is in terms of profitability, so why waste scarce resources in the bid to keep the business running?
It would also be recalled that the President of the Manufacturers Association of Nigeria (MAN), Francis Meshioye, not long ago raised the alarm that more multinationals would exit Nigeria if electricity hike was implemented.
He said that it was as a result of the electricity crisis, in addition to the unpredictability of the country’s forex before it was recently unified. He added that over N144 billion was spent on alternative sources of energy by manufacturers in 2022 alone.
In his words, he stated that: “Manufacturers provide almost every infrastructure by themselves. Outside the major roads, you find out that manufacturers provide water, power, security, etc. So, when you look at it, you find out that the cost of doing business is so huge, that a businessman will ask, ‘Is this the only place I can do my business? Can’t I move my capital elsewhere?’”
With the current situation of a new government in place, as led by President Bola Tinubu, expectations were high that the economy would be stimulated by pro-productivity policies but the empirical evidence on ground proves otherwise. For an import-dependent country that has none of the four refineries working, the sudden removal of fuel subsidy has exacerbated the economic crisis.
Even while some experts on the economy trace the decision to be based mainly on internal company experiences and vagaries and market-wide or sectoral global trends in labour or technology, the potential of recovery is still far in sight.
Also significant is the fintech sector in the country. For a global spectrum that has the digital economy experiencing expansion in the country, the decline of one sector of the economy could be taken over by the growth of another.
The current administration should therefore, walk the talk on attracting Foreign Direct Investment (FDI) by providing the enabling environment for businesses, including the local ones to thrive.
Going by the position of the Permanent Secretary, Federal Ministry of Industry, Trade and Investment, Dr Evelyn Ngige, who stated that the launch of Nigeria’s first trade and investment policies would boost the local economy and facilitate increased foreign and domestic trade, implementation will act as the catalyst to make the needed change. This statement was made at the opening of a stakeholders’ workshop on the maiden Nigeria Investment Policy (NINP) and Trade Policy (NTP) in Abuja.
Such implementation should be hinged on the approval by the Federal Executive Council (FEC) of the first Nigeria Investment Policy (2023-2027) and the review of the Trade Policy of Nigeria (2023-2027).
Ngige pointed out that the development of the previous investment policy, in addition to the review of the country’s trade policy, was a positive output of the sustained efforts of the ministry.
In its essence, the NINP is anchored on three pillars such as investment promotion, investment facilitation and sustainable development. But these efforts will yield the desired fruits if there is economic diversification, improvement on investment and operating business environment.
Another factor is taxation. For instance, in July this year, the Special Adviser (SA) to the President on Revenue, Zacch Adedeji, said the government would streamline its taxes from 52 to 10 in order to promote efficiency and accountability. He stated this during the virtual TOPAZ 88 second lecture series, which had the title: “Revenue Challenges and Opportunities in Nigeria Today”.
To be realistic, it would be difficult to achieve these objectives with the current federal centre that keeps making policies for the ever-dependent states. A holistic devolution of powers away from Abuja to the federating units, which should have the freedom to control their resources and increase internal revenue generation, would be the more sustainable economic solution.
These steps should be taken to reduce mass job losses, increase tension in the country due to increasing poverty rate and attract more Foreign Direct Investment (FDI), as promised.