The dollar is powerful; GSK and P&G left Nigeria because of its absence, and this is why.

At the last count, five multinationals have closed shop and left Nigeria this year alone.

They include Unilever, GSK, P&G, Sanofi, and Equinor.

Unilever Nigeria exited its home care and skin cleansing categories in Nigeria.

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Equinox, a Norwegian oil and gas company, sold its oil and gas assets, including its stake in the Agbami oil field, to Chappal Energies, a Nigerian-owned oil and gas firm.

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Equinox left because the company felt the Agbami oil field no longer served their interests at this time.

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The last three, GSK, Procter & Gamble, and Sanofi, are leaving for one reason:

Dollar

Why dollar?

As a foreign-owned business in Nigeria, whether MTN, DSTV, or Sanofi, the dollar is at the heart of what they do.

It is at the heart of their business.

These guys need dollars for the following reasons:

To import critical raw materials needed for production from abroad
To import new machines for production and spare parts to replace ageing machines

And then the biggest elephant in the room

To repatriate profits to the owners and shareholders of the business domiciled in their home country

Let me use a Nigerian brewery as a case study.

Nigerian breweries are in the business of brewing beer and malt.

For them to produce Star or Amstel malt, they need to import raw materials like sorghum from foreign suppliers abroad.

The company needs dollars to pay the suppliers in exchange for the raw materials.

Since COVID arrived on our shores in 2020, most foreign-owned companies have struggled to assess foreign exchange to pay their foreign suppliers and can’t afford to go to the black market to get these scarce dollars.

In my opinion, most of these foreign-owned companies need $100 million every month to pay suppliers and import spare parts and new machines abroad. No BDC anywhere in Nigeria can meet this pent-up demand except CBN through the banks.

Before 2015, it was easy for these companies to access the dollars needed to fund raw materials, new machinery, and spare parts, but since dollar flight happened, some of these companies with long-term ambition to stay in Nigeria have become ingenious in paying their foreign suppliers that supply raw materials, spare parts, and new machines.

They have their parent company( owners of the business) abroad who have excess dollars, so the parent company pays these suppliers and then transfers the debt to their Nigerian operations to pay at a later time when things stabilise.

A Nigerian brewery chose to stay in Nigeria and stay in business because of this creative model.

Guinness Nigeria did the same.

Nestle adopted this creative process to ease the dollar shortage their Nigerian operation is facing.

But apparently, GSK Sanofi and P&G have had enough, as the owners (the parent company) don’t understand why they should continue to subsidise their Nigerian operations by paying their foreign suppliers, so it makes more business sense for them to leave than stay, hoping that things will improve.

But the biggest factor that made GSK of this world say, You know what?

Fuck Nigeria

Enough is enough—the inability to repatriate their profits abroad.

Let me use a Nigerian brewery as an example again.

The parent company of the Nigerian brewery is Neitherland.

Nestle is in Switzerland.

MTN is in South Africa.

So at the end of a good, profitable financial year, after paying the Nigerian investors who are in minority for companies that are quoted on the stock exchange their dividends, the next people to pay dividends are the owners in the Netherlands, L’Arche Green N.V., an investment vehicle of the Heineken family and the Hoyer family, the two families that own Nigerian breweries, and other shareholders of Heineken in the Netherlands.

In Nigeria, there is free entry and free exit movement of foreign investment funds. After payment of relevant taxes, investors abroad can proceed to repatriate their investment along with the proceeds only if the investment was brought under a Certificate of Capital Importation (CCI).

And to do this, Nigerian breweries need to swap the company’s naira profit for dollars, which will be provided by the CBN.

Then the swapped money from the Nigerian brewery will be sent to the Heineken account in the Netherlands, and it will be sent in dollars provided by CBN.

Before 2015, it was easy to do this—to return naira profit home in dollars—but since 2020, it has been so hard and very difficult to do so because Nigeria does not have dollars to do so.

It is this difficult to repatriate dollar profits home, which is why Emirates Airlines left out of anger.

Emirates airline money is trapped here in naira, and they can’t repatriate their profit in dollars to the government of the UAE, the owners of Emirate Airlines, so they left last August.

Ethiopia Airlines is facing the same issue, but the reason they are still operating is because the Nigerian government came up with a creative solution to solve their problem.

Aliko Dangote has a cement plant in Ethiopia, and he is finding it difficult to repatriate his own profit from the Ethiopian plant to Lagos, where his business is domiciled.

Because, just like Nigeria, Ethiopia has the same dollar shortage, they are not providing dollars for foreign businesses in the country that want to repatriate dollars to their home countries.

So the two central banks of Nigeria and Ethiopia came together to arrive at this;

The Central Bank of Nigeria should pay Dangote what he was meant to repatriate from Ethiopia in dollars.
Then the Central Bank of Ethiopia should pay Ethiopian airlines what they are meant to take from Nigeria.

The balance will be sorted out at a later date when the two companies are due to repatriate again.

So the two parties went home, happy and satisfied, to continue their business both in Ethiopia and Nigeria.

But GSK, P&G, and Sanofi did not have this leverage with Nigeria to come up with creative agreements that saved Ethopia Airlines and Dangote, so it was in their best interest to exit since Nigeria is a poor country with poor people and brings insignificant returns to their global revenue.

Nigeria has been struggling with a dollar shortage since 2020, and these foreign companies, who are the worst hit, made the decision with their feet to leave instead of staying back to continue business in the name of

E go better

E go better that kept MTN and other foreign companies that are yet to leave.

The way forward for Nigeria

1) The CBN needs to clear the dollar backlog of these foreign-owned companies operating in Nigeria.

These multinationals provide high-quality jobs that pay good salaries to our people, and they have contributed significantly to the local communities in Nigeria.

And after paying the backlog, assure these foreign investors that Nigeria operates a free entry and free exit movement of foreign investment funds model, with an assurance that this embarrassment won’t happen again.

2) NNPC needs to come clean with what they are doing with the dollars they earn from the sale of crude oil.

Before now, NNPC used to account for 60% of our foreign exchange reserves and needs, but this changed in 2017 when NNPC claimed they spent dollars importing fuel for subsidies.

NNPC has not remitted dollars since that time.

We don’t have a fuel subsidy in place anymore, so NNPC needs to explain what they are doing with the dollars from crude oil sales.

Where is it going?

3) We need the hot money back.

Hot money refers to foreign portfolio investors (FPI)

It also signifies currency that quickly and regularly moves between financial markets, which ensures investors lock in the highest available short-term interest rates. Hot money continuously shifts from countries with low interest rates to those with higher rates.

FPI guys bring their dollars into Nigeria to buy short-term securities like stocks from the Nigerian Stick Exchange, Treasury bills, bonds, and other short-term securities and then exit their naira investments when they are profitable and then sell the profits back to dollars to repatriate the profit home.

Before now, they provided 40% of our foreign exchange needs, but these guys are not coming again because the investors who invested in the 2018 and 2019 cycles are trapped because they have yet to get their money out since 2020. It is part of the backlogs that Nigeria is owing foreign investors, so the investors whose money is not trapped are waiting on the sidelines, waiting for CBN to clear the backlog of the investors that have been trapped since 2020.

4) Clear the backlogs.

CBN needs to be transparent by making it clear how much backlog we are owing, who they are owing, and then the plans and timetable to pay them.

This will calm the foreign investors, who are agitated that there is a plan.

5) Finally, we need help.

We need dollars.

We don’t have dollars, which is why the dollar is currently trading from 1,200 naira to $1.

But this is not sustainable, as it unleashes poverty and unprecedented hardship that we have experienced in our country since 1960.

Since the $10 billion inflows we are expecting are taking too much time,

We need to approach the IMF with a cap and a plate to beg.

We are broke, so we need to be desperate and shameless at this point.

There is no need to carry a shoulder again at this time.

A $10 billion temporary bailout from the IMF will calm things down, stabilise the economy, and reduce the hardship in the land.