- Total market capitalisation of delisted companies stands at N284.59bn
- Shareholders no longer able to make gains from investment in delisted entities
- NECA warns of consequences of massive job losses across sectors
- Experts say burdens of quoted companies becoming too big
- More companies bid Nigeria farewell
More than 15 multinational corporations have pulled out of Nigeria in the last two years, with most of the organisations citing unfavourable business environments caused by the unavailability of foreign exchange.
According to findings by The Point, the majority of these companies are pharmaceutical, household and food companies.
Investigations revealed that as the dust settles, the departures of these companies have led to far-reaching implications for Nigeria’s economy, workers, and future investments.
Data analysis revealed that the total market capitalization of the delisting companies stood at about N284.59 billion while the contribution of the total share was 34.29 billion units as of September 7, 2023.
Part of the consequences of the exits is that shareholders of the delisting companies will no longer be able to make gains from their investment in those entities again.
In some cases, they might be shortchanged as the board of directors of the exiting companies will only pay them paltry sums for the value of the shares they own in the company.
The Minister of Finance, Wale Edun, also stated last week that the lack of a liquid foreign exchange market was the major reason why some multinational companies exited Nigeria.
Edun stated that the government has addressed this issue by establishing a willing buyer, willing seller foreign exchange market.
However, experts have lamented that the economy will be on the receiving end as there will be job losses and gross domestic product which means economic growth will dwindle as British multinational GSK, which is a major player in Nigeria’s pharmaceutical industry has moved out of the country and will no longer contribute to the nation’s economic productivity.
The founder of the Independent Shareholders Association of Nigeria, Sunny Nwosu, blamed the exit of the multinationals from the stock market on the Federal Government, citing unfavourable policies.
He argued that the policy of the government on repatriation of profit for multinational companies operating in the country is not favourable to them and urged the government to revisit the policy.
“The essence of multinationals coming into the country to do business with their capital is to make a profit and also to be able to take their profit after tax to their own country where the initial capital came from. But for our government to make it almost impossible for them to repatriate their profit will make them leave,” he said.
“The essence of multinationals coming into the country to do business with their capital is to make a profit and also to be able to take their profit after tax to their own country where the initial capital came from. But for our government to make it almost impossible for them to repatriate their profit will make them leave”
He argued that delisting the shares of these multinationals from the Nigerian Exchange Limited would impact negatively on both its capitalization and the volume of shares listed.
“Both the capitalization and volume of shares listed on any Exchange are very important to how it is rated,” he added.
Besides reducing the volume of business transactions that investors will be able to do on the Exchange after their shares are delisted and reducing the level of gains investors can make from the market, Nwosu noted that the exit of these multinationals would result in increasing the level of unemployment in the country.
“For instance, the employees of GSK will become jobless and that will increase the unemployment rate in the country,” he said.
Besides raising the level of the unemployment index, Nwosu believed that the nation’s healthcare sector would be affected by the exit of GSK as the products of the company would no longer be available.
“And you know that to continue to use their products henceforth, it must be imported into the country and you will need the very scarce foreign exchange to make that possible. So, this is part of the dilemma that will be created by the exit of these multinationals,” he lamented.
Nwosu called on the Federal Government for immediate intervention to be able to stop the multinationals from exiting the troubled economy.
“I think the government should immediately intervene, call them to a meeting and sort out whatever grievances they have to stop them from leaving this economy because it will affect all of us,” he added.
The Director General of Nigeria Employers’ Consultative Association, the umbrella body for employers, Adewale Oyerinde, disclosed that at least 15 multinationals have either divested or partially closed operations in the country in the last three years.
Oyerinde warned that the consequences of the massive job losses across sectors would continue to create insecurity challenges and increase the occurrence of child labour, among others.
“It is worrisome to note that in the last three years, over 15 organisations with a combined value-chain staff strength of over 20,000 employees have either divested or partially closed operations.
“This has dire consequences not only for organised businesses but also for labour, government revenue and the households,” he noted.
Oyerinde cautioned, “The consequences of these massive job losses across sectors will continue to create insecurity challenges, increase the occurrence of child labour (as children will be forced to become breadwinners), adversely affect the disposable income of families, erode the purchasing power of individuals and drastically reduce economy’s output.”
A Professor of Finance and Capital Market, Nasarawa State University, Uchenna Uwaleke, said, the NGX has witnessed several voluntary delisting in the last couple of years resulting in the number of listed companies declining from nearly 170 to below 150 at present.
He disclosed that this trend has adverse implications for market capitalization and by extension the depth of the market.
“Each time a multinational company is delisted, it reduces the size of the Nigerian stock market and the level of confidence investors and issuers have in it.
“It sends a wrong signal to other public companies that may be considering listing and therefore could discourage them from doing so.
“It’s equally not good news to minority shareholders of the company especially when they are not well compensated in the scheme of arrangement. Take the case of PZ for example, the current share price is about N20 and the minority shareholders are being offered N21 which does not amount to adequate compensation.
“For the economy in general, the exit of multinational companies from Nigeria has negative implications for jobs and GDP growth,” Uwaleke added.
The CEO of Sofunix Investment and Communications, Sola Oni, suggested that the burdens of being a quoted company are becoming too big at the moment.
He added that besides the regulations, the financial obligations are enormous.
“At the moment, it is becoming more of a burden to be a quoted company. Government should encourage quoted companies with incentives such as tax holidays at the point of seeking quotation and patronage of products and services of quoted companies to encourage more companies to list on a securities exchange,” Oni said.
He recommended that the government should begin to be more creative by expanding the obligations under ESG to private companies that have some threshold of revenue to create a level playing field for these companies and their quoted counterparts.
He explained that quoted companies are at liberty to apply for delisting from a securities market.
“Much as there are many benefits of quotation, they also come with obligations. For instance, a quoted company is believed to operate at high ethical standards, including adherence to corporate governance and implementation of ESG (Economic, Social and Governance) in their reporting. These companies cannot evade tax and they contribute significantly to government tax revenue in Nigeria. A quoted company is believed to be operating at global best practices,” he reiterated.
Stock market exits
Ardova (formerly Forte Oil), Union Bank, Capital Hotels and Courteville have left the stock exchange, just like GlaxoSmithKline Consumer, PZ, among others which last year shut down its manufacturing operations in Nigeria and switched to a distribution model.
PZ Cussons
In a corporate notice filed on the Nigerian Exchange Limited in September 2023, which was signed by its Acting Company Secretary, Olubukola Olonade-Agaga, the company said that the mother company, PZ Cussons (Holdings) Limited, has offered to acquire shares held by other shareholders of PZ Cussons Nigeria Plc at an offer price of N21 per share. The shares of the company closed trading at N19.15 per unit on Tuesday on the NGX.
Although the transaction is subject to regulatory approval and that of shareholders, it will be implemented under a Scheme of Arrangement in line with section 715 of the Companies and Allied Matters Act, No.3 of 2020 (as amended) and other applicable rules and regulations.
PZ stated that the move is to bolster its operations in Nigeria.
“In their offer, the PZ Cussons Group explained that they believe the transaction is necessary to enable them to significantly simplify and strengthen operations in Nigeria creating the foundations for the Nigerian business to deliver against its strategy, building a more agile and innovative business, and noted that PZ Cussons has been present in Nigeria since 1899 and expects Nigeria to remain an important market for the Group for many years to come,” part of the statement read.
This move comes weeks after another British multinational, GlaxoSmithKline Consumer Nigeria Plc, announced the end of its operations in the country, a development which has sparked concerns from minority shareholders as well as economists, who called for the government to engage with the multinationals.
GSK
In August 2023, GlaxoSmithKline announced plans to discontinue operations in Nigeria, ending its 51-year existence in the country after the company’s first office was opened in Lagos on July 1, 1972.
The British multinational pharmaceutical and biotechnology company is best known for household brands like Panadol and Sensodyne.
In a corporate filing, the pharmaceutical giant said it would now adopt a distributor-led model to supply the country with its products.
GSK Nigeria said it was working with its advisers to determine the next steps and intends to submit a scheme of arrangement to the Securities and Exchange Commission for the possible return of capital to its local shareholders.
“In our published Q2 results we disclosed that the GSK UK Group has informed GlaxoSmithKline Consumer Nigeria Plc of its strategic intent to cease commercialization of its prescription medicines and vaccines in Nigeria through the GSK local operating companies and transition to a third-party direct distribution model for its pharmaceutical products,” the firm said.
“The Haleon Group has also separately informed the board of its intent to terminate its distribution agreement in the coming months and to appoint a third-party distributor in Nigeria for the supply of its consumer healthcare products.
“For the above reasons, and having, together with GSK UK, evaluated various other options, the board of GlaxoSmithKline Consumer Nigeria Plc has concluded that there is no alternative but to cease operations.”
GSK Nigeria’s sales in the first half (H1) of 2023 dropped to N7.75 billion from N14.8 billion in the same period a year ago.
In its 2023 H1 report, the company lamented that the business environment continued to be very challenging with foreign exchange (FX) availability affecting its ability to settle foreign currency-denominated trade payables with product suppliers.
Last year, at the 52nd annual general meeting of GSK Nigeria, Edmund Onuzo, chairman of the board of directors, spoke of the impact of FX scarcity on their operations.
He said the company’s ability to secure essential foreign currency for importing products had been severely compromised.
“While we expect sustained economic growth in 2023, we cannot overlook some factors which must be duly considered in this quest for economic growth and development in Nigeria. The factors include foreign exchange availability for businesses, insecurity, unemployment, and high cost of doing business, coupled with the uncertainty around fuel subsidy removal,” Onuzo had said.
More companies bid Nigeria farewell
Companies leaving the country are not limited to those on the stock exchange.
Some like Equinor, Swiss-owned oil prospecting company and Procter and Gamble, an American household goods company among others have bid the country farewell.
Equinor
On November 29, 2023, Equinor announced its departure from Nigeria after over 30 years of operations, revealing that it had sold its business interests, including its stake in the Agbami oil field, to Chappal Energies, a Nigerian-owned company.
The Norwegian oil firm will divest its subsidiary, Equinor Nigeria Energy Company (ENEC), which holds a majority stake in oil mining lease (OML) 128, including a significant interest in the Agbami field, operated by Chevron.
While the company didn’t disclose its reasons for leaving, it stated that the transaction’s completion is contingent on meeting certain conditions, including regulatory and contractual approvals from both parties.
Sanofi
Sanofi-Aventis Nigeria Limited, a French pharmaceutical company, announced on November 7, 2023, that it would adopt a third-party distribution model for its products in Nigeria, effective February 2024.
The company, a significant supplier of vaccines, cited Nigeria’s economic challenges, particularly the foreign exchange crisis, as the reason for this decision.
However, Sanofi aims to increase efficiency and sustainably reach patients and the medical community through this new model, which involves partnering with a single strong distributor with extensive geographic coverage.
On February 2, 2024, CFAO Healthcare, a subsidiary of the French conglomerate CFAO Group, announced its expansion with Sanofi, strengthening its strategic partnership.
Procter & Gamble
On December 5, 2023, Procter & Gamble (P&G) announced its decision to cease operations in Nigeria after three decades, transitioning to an import-only model.
According to financial analysts, this decision was driven by Nigeria’s challenging business environment, largely due to dollar-denominated operations and unfavourable macroeconomic conditions.
The P&G’s chief financial officer, Andre Schulten, mentioned that operating in certain markets like Nigeria and Argentina had become increasingly challenging due to these macroeconomic factors.
A few days after the announcement, Segun Ajayi-Kadir, the Director General of the Manufacturers Association of Nigeria, expressed concerns about P&G’s departure, warning that other manufacturers might also consider exiting the country.
Bolt Food and Jumia Food
“We are very focused on resolving all investment-related issues. There is no bottleneck that is too difficult for us to remove in our determined march toward making Nigeria the African haven for large-scale investment in all key sectors”
In December 2023, Bolt Food decided to exit Nigeria after operating for two years in the country. The company cited the need to streamline resources and enhance overall efficiency as the reason for its departure.
Bolt Food was launched in October 2021 by the ride-hailing company to compete with rivals like Jumia Food and Gokada, making food access easier in Lagos.
Similarly, Jumia Food also exited the Nigerian market in December 2023. Initially launched as Hellofood in 2012, it rebranded in 2019 under the Jumia Group.
Jumia Food was one of the pioneers of online food delivery in Nigeria and had the widest geographic coverage before its departure.
Jumia also discontinued its services in other countries, including Kenya, Morocco, Ivory Coast, Tunisia, Uganda, and Algeria. Jumia’s CEO, Francis Dufay, stated that the company would now focus on its core physical goods business and payment platform.
Microsoft
On May 8, 2024, Microsoft announced its decision to close its African Development Centre in Ikoyi, Lagos.
Although the company did not provide a specific reason for this closure, it emphasized its continued commitment to operations in Nigeria and its focus on investing in strategic growth areas.
Microsoft launched the innovation centre in 2019 to develop technology solutions from Africa to tackle both regional and global challenges.
Impressed by the initiative’s success, the company established $100 million African Development Centres in Nigeria and Kenya in 2022. Despite the closure of the Nigerian centre, the Kenyan centre will remain operational.
On June 14, 2023, the Central Bank of Nigeria instructed Deposit Money Banks to eliminate the rate cap on the naira at the Investor’s and Exporters’ (I&E) Window of the foreign exchange market, enabling the national currency to float freely against the dollar and other global currencies.
IOCs leaving too
Total Energies, Shell & other International Oil Companies are divesting their assets away from Nigeria with billions of investments going to other African countries with better business environments. For instance, Total Energies is increasing its stakes in Angola and the Congo.
