Nigerian businesses have faced significant challenges due to the impactful reforms introduced by Bola Tinubu’s government, resulting in the highest surge in losses since he assumed office. The removal of the petrol subsidy and the liberalization of the foreign exchange regime, implemented in the second quarter of 2023, have notably reduced profitability, increased job losses, decreased tax revenue, and endangered the survival of many businesses, leading to more exits of of multinational corporations. Femi Egbesola, the national president of the Association of Small Business Owners of Nigeria (ASBON), described Tinubu’s first year as “the toughest year for us in business in our history of doing business in the country,” citing an “avalanche of challenges.”
He noted that over two million businesses have died during this past year adding that many businesses have decided to relocate from Nigeria to other countries, including big businesses.
This year marked the highest debt profile, with numerous bad loans across financial institutions that are unlikely to recover due to the closure of these businesses,” stated Egbesola.
The latest financial reports of 13 listed consumer goods companies indicate significant losses. Seven companies, including International Breweries Plc, Cadbury Nigeria Plc, Nigerian Breweries Plc, Nestlé Nigeria Plc, Dangote Sugar Refinery Plc, Champion Breweries Plc, and Guinness Nigeria Plc, collectively reported a loss of N388.6 billion.
Of the remaining six companies, three, including BUA Cement, Lafarge Africa Plc, and Nascon Allied Industries Plc, reported a decline in earnings by 37.6 percent, 65.2 percent, and 24.9 percent, respectively. The other three companies, BUA Foods Plc, Unilever Nigeria Plc, and Dangote Cement Plc, recorded a combined profit of N171.9 billion, an increase from N152.6 billion
However, the reforms have led to increased inflationary pressures, reaching the highest levels in at least 28 years, and have weakened consumers’ purchasing power. This comes at a time when businesses are already struggling with higher operating costs.
Egbesola further emphasized that the government should have addressed all indicators to ensure businesses had a smooth transition before implementing the reforms. Since the liberalization of the foreign exchange regime, the naira has depreciated by 65 percent against the US dollar in the official market within a year, following two devaluations by the Central Bank of Nigeria (CBN) in its move towards a market-determined exchange rate. Data from the FMDQ Securities Exchange Limited showed that the naira’s value dropped to N1,339 per dollar as of May 27, 2024, from N463 quoted in May 2023.
The government should also reduce its expenditure across all levels,” stated the economics professor.
The devaluation of the naira has further squeezed the profit margins of companies already grappling with double-digit inflation rates and the weakened purchasing power of consumers.
These factors, among others, have led to the departure of several multinationals from the country. Within a year, major corporations such as Procter & Gamble, GlaxoSmithKline Consumer Nigeria Plc, and Sanofi have exited, with many others scaling back their operations due to the weakened naira.
While the reforms have boosted the revenues of large manufacturing firms, they have also contributed to numerous closures due to the challenging business environment. The exodus of multinationals is primarily driven by difficulties in repatriating funds back to their home countries due to the scarcity of dollars in Nigeria’s economy.
The naira’s decline over the past year, coupled with rising prices, is also eroding the profits of conglomerates.
