Procter & Gamble Announces Plan to End On-Ground Operations in Nigeria, Shift to Import-Only Model
Consumer goods giant Procter & Gamble (P&G) has revealed its intention to dissolve on-ground operations in Nigeria and transition the country into an import-only market. This strategic decision was outlined by Andre Schulten, the Chief Financial Officer of P&G, during his presentation at the Morgan Stanley Global Consumer & Retail Conference. The company cited challenges associated with the macroeconomic environment in Nigeria and the difficulty of operating as a dollar-denominated organization.
Key Points:
- Reasons for Strategic Decision:
- P&G highlighted the difficulty of doing business in Nigeria as a dollar-denominated organization, citing challenges related to the macroeconomic environment. The company expressed concerns about operating in markets like Nigeria and Argentina due to these challenges.
- Restructuring Program:
- In response to the identified challenges, P&G announced a restructuring program focusing on Nigeria and Argentina. The intent is to adjust the operating model and portfolio to ensure portfolio discipline. As part of this restructuring, Nigeria is set to become an import-only market, leading to the dissolution of P&G’s on-ground footprint in the country.
- Focus on High-Potential Markets:
- P&G explained that the decision to shift to an import-only model in Nigeria is aligned with its strategy to focus on markets that offer the highest potential. The restructuring aims to streamline operations and maintain portfolio discipline.
- Limited Impact on Group’s Portfolio:
- In response to questions about the impact of the restructuring on P&G’s overall group portfolio, the CFO stated that Nigeria represents a $50 million net sales business. Considering the company’s overall portfolio worth $85 billion, P&G does not anticipate any material impact on the group’s balance sheet in terms of sales or profitability.
- Macroeconomic Conditions in Nigeria:
- P&G’s decision is reflective of the challenging macroeconomic conditions in Nigeria, affecting foreign USD-denominated companies. Other companies, such as GSK, have also announced changes in operations due to difficulties in repatriating U.S. dollars from Nigeria. The Central Bank acknowledged a forex backlog of approximately $7 billion.
- Reforms for Foreign Investment:
- While President Tinubu has instituted reforms aimed at attracting foreign investment into Nigeria, the short-term impact has been challenging for foreign companies. The difficulties in repatriating U.S. dollars have been a significant concern for businesses operating in Nigeria.
Conclusion: Procter & Gamble’s decision to shift to an import-only model in Nigeria reflects the complex economic challenges faced by foreign companies in the country. The move is part of a broader restructuring program aimed at adapting to the macroeconomic environment and maintaining portfolio discipline. P&G’s experience adds to a trend of foreign companies reassessing their operations in Nigeria due to difficulties related to foreign exchange and macroeconomic conditions.
