Immediately after resuming office as Nigeria’s President, Bola Tinubu’s administration made two moves that shook the economy. The first was subsidy removal and the second was to float the exchange rates.

Both moves were meant to save Nigeria from bankruptcy and usher in a new era of reforms. But they have had unintended consequences. For the consumer, inflation has worsened every month since then. In October, it climbed for the tenth straight month to an 18-year high of 27.33%. And for producers, many businesses have either shut down or moved their operations outside the country this year.

Multinational companies, such as Procter & Gamble, GSK and Unilever, have decided to scale down or pull out of Nigeria altogether, citing currency problems and low consumer demand as primary reasons. They have shifted to import-only models or outsourced their distribution to local partners, leaving behind their factories and employees. These companies operated in Nigeria for decades and were leaders in Nigeria’s fast-moving consumer goods (FMCG) market.

Procter & Gamble (P&G) is the latest big company to exit Nigeria. It said it would stop producing its care and hygiene products, such as Pampers, Ariel, Oral B, etc.

According to P&G’s Chief Financial Officer, Andre Schuten, Nigeria’s macroeconomic conditions have become too tough to handle. Nigeria is “very difficult for us as a U.S. dollar-denominated company to create value” in, Schuten said at Morgan Stanley’s Global Consumer and Retail Conference, an investor event in New York. The naira to dollar exchange rate has doubled at the official markets since Nigeria chose a “floated” system.

In September, another British group, PZ Cussons, said “foreign exchange challenges” were causing it to delist from the Nigerian stock market.

Schuten challenged a narrative that a country of 200 million people is a market in which foreign investors must be active. “Nigeria is a $50 million net sales business,” he said, “a really small” market in the context of the company’s global net sales of $85 billion. The case is similar to the other multinationals leaving Nigeria: the country accounts for less than 3% of their revenue. Notably, P&G is also cutting back in Argentina, a similarly inflationary economy. But over there, it has built a $400 million business for 46 million people, much more efficient than in Nigeria.

However, most of these business challenges did not start this year. In most cases, they only reached their limit. For instance, P&G began doing business in Nigeria in 1992, centring production in two plants in towns close to Lagos. In 2017, it opened a multimillion-dollar baby care products manufacturing plant but shut it down a year later because sourcing inputs was difficult. Also, some of Nigeria’s largest companies, including Dangote and MTN, reported that cash scarcity and other macroeconomic conditions hit their earnings in Q1.

There’s also an argument that stiff competition is one reason these companies are leaving. Entrants from developing economies like India and Turkey have become more active in the Nigerian market over the last decade. For instance, Pampers, the popular P&G brand, reportedly ceded its leading market share a few years ago to a competing diaper brand by Turkish company, Hayat Kimya, which launched in Nigeria in 2015 and has a $100 million plant. The latter won by selling cheaper alternatives to Pampers. But this argument circles to Nigeria’s foreign exchange problems. Companies like P&G are dollar-denominated businesses. So, it’s more difficult for them to find profitable models in countries with fluctuating exchange rates. It’s not usually the same case with Turkish and Indian businesses.

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