Multinationals’ exit will worsen Nigeria’s economic crisis – APC chieftain

A chieftain of the All Progressives Congress from Osun State, Olatunbosun Oyintiloye, speaks to BOLA BAMIGBOLA about steps the Federal Government can take to halt the rate at which foreign companies are leaving the country, among other issues

You recently expressed worry over multinationals that are leaving the country. Can you explain why this development should concern the Nigerian government?

Yes, I did raise the concern. It should be a serious concern to all and sundry in this country. This development started a long time ago unchecked by previous administrations. Unfortunately, these warning signs were not heeded until they resulted in the eventual shutdown and relocation of major manufacturing companies.

The trend inherited from the previous administration has continued with the recent exit of major multinational companies in fast-moving consumer goods like GlaxoSmithKline Nigeria, Procter & Gamble, Unilever and Sanofi-Aventis Nigeria Limited, Kimberly-Clark.

These companies have decided to exit Nigeria by ending their operations here. The situation is worrisome and alarming and calls for serious attention from the present administration. To salvage the situation and end this ugly trend, there must be a well-planned strategy in place by the government.

Have you looked at some factors making these companies exit the country?

Of course, some of the challenges are the fluctuating foreign exchange rates, coupled with the scarcity of foreign currency, an environment not conducive for business. These conditions make it difficult for companies to plan long-term, manage costs, and maintain profitability.

Secondly, the infrastructural deficits, particularly in power and logistics, have significantly increased the cost of doing business in Nigeria. The unreliable power supply necessitated additional costs for businesses to generate their electricity, while the issue of poor transportation network led to inefficiencies and delays.

Also, multiple taxation, bureaucratic hurdles, and policy inconsistencies have created an environment that is often seen as unfriendly to business operations. Streamlining regulatory processes and ensuring policy consistency can go a long way in improving the business climate.

All these you mentioned could be said to be issues inherited by this administration. Are they not?

As I have said earlier, it is a trend that was noticed long before now but was not checked. Some manufacturing companies had left before the present administration, while some are leaving, and others are willing to leave. So, all these challenges have been there for long, lingering and encouraging the exit of these multinational companies from Nigeria.

The reasons cited by these companies for their departure include the power crisis, foreign exchange instability, and an overall harsh business climate. All this points to longstanding issues that have plagued the Nigerian economy for years.

The exit of these multinational companies indicates that Nigeria needs to urgently reform its economic policies and infrastructure to create a more attractive environment for local and international investors. Addressing the power crisis, stabilising the foreign exchange market, improving infrastructure, and creating a more business-friendly regulatory environment are a few things that could be done immediately.

The trend should be a source of concern for the government because if not quickly addressed, it will reduce Nigeria’s GDP growth and worsen the rate of unemployment. After all, these companies have been major contributors to the economy and job creation over the years.

You have mentioned some, but can you explain further some of the likely negative impacts of this trend on the economy?

There is no doubt that if these foreign companies continue to exit Nigeria, it will have adverse effects on our economy. The exit of multinationals will worsen the economic challenges facing Nigerians. The trend will lead to a higher unemployment rate because Nigerians working in these companies may be retrenched after a change in ownership, decline in foreign investments, increased inflationary pressures, instability in foreign exchange, and reduction in government revenue will also set in.

Take, for instance, Procter & Gamble alone accounted for approximately 5,000 jobs. The exit of GlaxoSmithKline, with a market capital of N22bn and over 400 highly technical workers will further exacerbate the already terrible unemployment rate. Also, with the exit of Unilever with a net worth of N50bn and 755 employees, the concern keeps growing.

Within the value chain, numerous enterprises serve as suppliers to these major corporations, and the sustainability of these companies is significantly threatened when the primary source of their business is facing a threat. The chances for survival of these secondary businesses are at stake, and their employees are also at risk of losing their jobs. There is an urgent need for us to pay more attention to the crisis within the value chain system than the situation is currently receiving.

But are there no positive sides to these foreign companies exiting Nigeria?

I don’t think there are positive sides, given the fact that for any country to grow its GDP, both foreign investors and local industries must operate in an environment that is conducive and allows businesses to thrive.

This can be guaranteed by providing a favourable legal framework, good policy formation, reduced infrastructural deficits, power sector reforms, reduced multiple taxations, stabilised foreign exchange market, etc. These companies are major contributors to Nigeria’s economy. It is dangerous the way they are exiting.

Don’t you feel by exiting, local industries producing similar products will have the opportunity to grow?

Don’t forget that these local industries are also operating in the same unfriendly business environment as those owned by foreigners. The local industries are also facing a similar situation. They are finding it difficult to break even, not to speak of making a profit which is their ultimate goal.

So, if these foreign companies continue to leave the country and the local industries are still operating in the same harsh environment, there are small chances of them recording growth. All over the world, both local and foreign companies operate together in the same environment, and they contribute significantly to the GDP of the country.

In a situation where foreign companies are leaving due to a harsh business environment; how do you expect the local industries to survive? The recent ripple effects of the hike in electricity tariff have resulted in the closure of over 300 companies and 380,000 job losses over the past two months according to the Manufacturers Association of Nigeria. For me, until the aforementioned challenges are addressed by the government, there is no how local industries can survive, even with the exit of these multinational companies.

If you say local industries are also feeling the heat over the current unfriendly business environment, what should be done to at least sustain them?

The government should urgently address various challenges making the business environment not conducive for both the local and foreign businesses. The government should come up with a good legal framework, and policy that supports business growth such as tax incentives, improve infrastructure, enhance good transportation system, improve security system, energy and power, reduce bottlenecks in business registration, and eliminate multiple taxes for the local industries.

The government should also create a more flexible and transparent foreign exchange policy to address scarcity issues, reduce the inflationary trend which has reduced consumers’ demand and purchasing power, create tax breaks, and review economic and fiscal policies. The government should consider giving more incentives to some of the multinationals that are remaining.

Regarding the foreign companies that have chosen to remain here, what other things will you suggest that the government should do to retain them?

For the remaining foreign companies, the government should address all the challenges that made others exit the country. The government should urgently put in place measures to stabilise foreign exchange for businesses, particularly those operating in dollar-denominated environments, and also create a flexible exchange policy to address scarcity issues.

In addition, the government, as a matter of urgency should engage the remaining foreign companies to understand their challenges more and develop a way of finding solutions. The government should also look at how to give incentives to some of the multinationals that are still operating in the country.

The feedback from meetings with the remaining foreign companies will assist the government in policy decisions. It will ensure collaboration that will develop solutions and forestall the exodus of businesses from Nigeria.

With the benefit of hindsight, having served as a state lawmaker before now, is the present administration capable of implementing all these measures you listed?

Yes, of course, once a good legal framework is set in motion, which I believe the National Assembly is working on, and with the executive arm of government working towards putting back the economy on the right path through the development of Renewed Hope eight-point Agenda, there will be a reprieve soonest.

Also, with the setting up of the Presidential Council on Industrial Revitalization and the Presidential Council on Fiscal Reform and Tax Policy Review in 2023 by the President, I believe the situation will be addressed before long.

These measures you mentioned could be regarded as the immediate solutions to address the situation. What should be the long-term initiatives as it remains quite risky for foreign companies to manage strategic sectors of the economy, while local ones may be encouraged to take a plunge?

The short and long-term initiatives towards revitalising Nigeria’s economy through foreign investors and local industries are embedded in the solution mentioned earlier. If all these are put in place among other things, it will provide an enabling environment for businesses to thrive.

More of those companies that have left Nigeria did so during the administration of your party, the All Progressives Congress. Does that not suggest a lack of capacity by the Federal Government to handle the situation?

Not really, the multinational companies have been exiting the country since the return of democracy in 1999. It is just that the rate has been alarming in recent times. Some of the major and unavoidable reforms of the present administration contributed to it, but measures are being rolled out to cushion the impact.

Will you suggest the involvement of experts who are not possibly related to your party in handling issues around the nation’s economy?

Yes, I agree with you that experts who can positively contribute to the development of our economy can be brought in without considering their party affiliation. After all, Nigeria is our collective project and whosoever is genuinely ready to bring his or her expertise to bear can be involved in moving the nation forward. We do not have any other country except Nigeria, and we must all be genuinely concerned and be ready to contribute to its stability.