•Say 100,000 jobs lost, unemployment rate may hit 40% by year end •Better days ahead, Edun, Cardoso assure
By Merit Ibe
Economic experts are worried that Nigeria may be dealing with a deeper economic crisis than it is willing to admit as some multinationals which recently exited the country dragged along with them investments worth over N500 trillion.
Also lost are jobs estimated at 20,000 for direct engagements and over 100,000 indirect jobs.
The analysts say the horror is not over as the country is still struggling to come out of the pit of despair because the operating environment is still toxic.
In the last few years, foreign companies, especially manufacturers and energy firms, have left Nigeria with many citing the current foreign exchange volatilities hampering dollar repatriation, devaluation of the naira resulting in lower earnings for foreign companies in dollar terms and a general suffocating operating environment as principal reasons.
Last year, US manufacturing giant, Procter and Gamble announced its exit barely seven years after establishing a $300 million manufacturing plant in Nigeria. GSK and Sanofi also hit the exit button. Unilever has cut some of the products it was manufacturing in the country. In 2022, Foreign Direct Investment (FDI) turned negative as about $187 million worth of investments left Nigeria.
But the Minister of Finance, Mr Wale Edun and the Central Bank of Nigeria (CBN) Governor, Dr Yemi Cardoso, have said there was no need to despair as a cocktail of policies and action plans were already being administered on the economy and that the results were encouraging.
The duo said the lingering FX shortages and issues around repatriation of funds have been substantially addressed; just as infrastructure deficit gaps were being closed. They said more foreign exchange inflow valves were being oiled to ensure sufficient funds are available to run the economy and grow external reserves. Edun said Nigeria has already qualified for a $2.25 billion World Bank facility with 1 per cent interest, 40-year tenure and 10 years moratorium for repayment.
On his part, Cardoso said the country was working with leading International Money Transfer Operators (IMTOs), “where we collectively committed to doubling remittance flows through formal channels into Nigeria in the immediate short to medium term. This target is both ambitious and achievable, and we’re wasting no time in setting up a collaborative task force, reporting to myself, to drive progress and address any bottlenecks that hinder flows through formal channels”.
However, commenting on the worrisome development, Daniel Dickson-Okezie, Chairman, SMEs Group of the Lagos Chamber of commerce and industry (LCCI) said: “The departure of multinationals has caused Nigeria over N500 trillion in terms of investments. And in terms of direct jobs, over 20,000 direct jobs have been lost and close to 100,000 indirect jobs have been lost. “There are other consequences of the departure of these companies like increases in the unemployment rate which may move from about 33 per cent to close to 40 per cent before the end of this year. And that will increase the problem of insecurity and a lot of people might move into crime.
“Also, after the removal of fuel subsidy, about 10 per cent of SMEs closed down from reports and obviously since then till now about 10 to 15 per cent of SMEs have closed shop.
“Eventually, this will affect the government’s revenue in terms of taxes as well as other multiplied problems. And other companies that depend on multinationals and local companies will have to go out of business which will increase the problems of the economy”.
On his part, Frank Onyebu, former Chairman, Manufacturers Association of Nigeria (MAN), said there was no need pretending that the exit of multinationals has not jolted the Nigerian economy because the impact has been enormous.
“When we talk about costs, we are referring to losses in investments, losses in dividends to shareholders, losses in government revenue, losses in employment, losses to GDP, etc. “We are talking about losses running into trillions of Naira. In terms of losses in employment we are talking about a figure above one hundred thousand direct and indirect jobs.
“These figures are staggering and need urgent government’s intervention to stem the tide. The government needs to address the concerns of manufacturers. The issue of dilapidated infrastructure has been there for decades and nothing appears to be done about it. Power supply situation is deteriorating rapidly rather than improving.
“Multiple taxation is still a major hindrance to investment. Insecurity is also a problem. There’s also the issue of Forex. In summary, the government needs to do something to make the operating environment friendlier”, he advised.
Also speaking on the impact of the exit without commensurate investments from within, the Director General, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf explained that the exit of multinationals from the Nigerian economy remains a cause for concern because of the implications that the exit has in terms of employment, especially those directly employed by the companies, implications for their suppliers, their service providers, their logistics providers and so on.
“It also has implications for Nigeria as an investment destination. So, it’s not particularly a good story to tell that investors are leaving the country. But one interesting dimension to this is that for some of them, especially those in the consumer product segment as they are leaving, some other new investors are taking their place. Some of them are indigenous, some of them are foreign investors. Because one thing about the consumer space is that it is a highly competitive sector. We have a lot of providers in that space and some of the providers leaving are also leaving because of the pressure of competition. “The environment has become very challenging. I’m talking about the macroeconomic environment. It requires a lot of creativity, innovation and a lot of business strategies to be able to cope with the shocks of the microeconomic conditions.
“Some of the companies are not flexible enough to adapt, while some can adapt easily. So, of course, that is part of the problem. Then for some of the sectors, external factors are a very big issue.
“Talking about the import dependent companies. With what has happened with our exchange rates, the depreciation of our currency in particular, companies that have high currency exposure are some of the biggest casualties of what happened in the forex market. So, the shock on many of them was profound which resulted in the exit in addition to the issues of the competition pressure that has become elevated in the last two years. So, these are the issues. It’s not a good thing that they are leaving, we had wished they did not leave because of the implications for jobs, and the multiplier effects of their exit.
“But the good news is that the economy is gradually recovering and we are beginning to see some improvements in our macro economic environment. Our exchange rate is getting better, we hope it will further stabilize. So, as we make progress with the reforms, things will begin to take shape with the gaps refilled”, he said.