Exit of foreign companies from Nigeria.

By Sun News Publishing
Monday, July 6, 2009

Editorial Index

A number of multinational companies have relocated their businesses from Nigeria to other African countries, citing concerns like infrastructural decay, poor tariff structure, corruption, growing insecurity, among others.

According to the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), blue chip companies like Paterson Zochonis (PZ) and Unilever have already moved or are in the process of moving their operations out of Nigeria to neighbouring Ghana, even as several others are on their way out. Earlier, two giant tyre manufacturers, Dunlop and Michelin, had closed shop in the country, due to unfavourable business conditions.

For a number of years, the Manufacturing Association of Nigeria (MAN) had raised strident alarms on the stifling and oppressive atmosphere in which business is done in Nigeria, but successive governments typically turned deaf ears.

Now, the loss of Nigeria has turned to gains for countries like Ghana, Sierra-Leone, and The Gambia, which have offered safe haven for the retreating companies. Ironically, while multinational manufacturing operations are moving out to smaller countries with more reliable infrastructure, Nigeria with our huge consumer population still remains the target for the finished goods. The tragic difference is that we will become a net importer of these consumer goods hitherto manufactured here.

It is sad and depressing that Nigeria is fast assuming the unenviable reputation of being a cemetery for big businesses, particularly those in the real sector. Three recent international reports bring this out quite vividly. In its latest ranking, the Global Competitiveness Index, places Nigeria 148 out of 196 countries in terms of conducive environment for business.

Another report, Doing Business in Africa, ranks Nigeria as the eighth worst country for investment in the continent, while Ease of Doing Business Report, rates Nigeria as the second most difficult country to do business, globally. All these are unedifying, distressing and lamentable.
A cocktail of factors coalesce into what is now an unwholesome business environment. Perhaps the most critical is the power supply situation.

The latest statistics on power shows that Nigeria now has about 1,800 megawatts. For a country that needs a minimum well over 30,000 megawatts at any given time, this is parlous and quite desperate. The alternative for business outfits is to run on generators almost round the clock, and at the end of the year, they come up with negative profit.

We are not unmindful of efforts to fix the power situation, and the promise of the Yar’Adua administration to generate 6,000 megawatts by December this year, and 10,000 megawatts by December 2010. Efforts are good, but results are better. For eight years, the Olusegun Obasanjo expended billion of dollars on the power sector. Yet what Nigerians got was more darkness, leading to the current asphyxiating business climate. The situation must be reversed if we will ever regain the confidence of investors, both local and foreign.

Infrastructure is another scourge of business in Nigeria. And the greatest affliction comes in the forms of roads. Inter-city and intra-city roads are in such sorry states as to make investors rue their venture into these climes. Yet it gets worse by the day, particularly now that the rains are here. And the government through the Federal Ministry of Works appears helpless.

What of insecurity? A land where armed robbers, kidnappers, militants, and the like, have free rein, would not inspire the confidence of multinationals. And when they add to this the cumbersome process of getting things done here, in which you have to virtually bribe your way through the officialdom, then relocating to more halcyon lands is a better option.

Again, multiple taxation is a disincentive. Federal, state, and local tax authorities are ever at the heels of businesses, so much so that they do not know what their tax liabilities are at any given time. A bill on streamlining our tax policy has been gathering dust at the National Assembly. Exhuming and giving it accelerated treatment will send a signal to investors that we are now a serious nation.

An unrestrained exit of multinationals from Nigeria has grave socio-economic implications. Since we are the largest market in the sub-region, products which they manufacture from other countries will now be sent back here, and we will purchase same at higher cost. Foreign investment flows out, we again deplete our foreign reserves to import essential goods. Our economy will also lack international confidence, and we will forever be deemed a non-competitive nation. Our dependence on foreign countries will be deepened, and what is national sovereignty without economic sovereignty?

There is nothing on the ground to demonstrate beyond sterile precepts that the governments at various levels appreciate the gravity of this situation and are embattled enough to stem the dangerous drift to economic penury with attendant social and political risk. Rather, we are left with the uncomfortable sense of an Emperor Nero fiddling while the nation burns.
What of the concomitant revenue losses to government, job losses and the attendant social cost? When companies relocate, their Nigerian staffers are thrown into the already saturated labor market. Inevitably, many will turn to crime and other anti-social acts.

The antidote to all these is good governance. Unless we have quality leadership, committed to development in all its ramifications, quality of life and investment will inexorably go downhill.
Only government can fix power, fix infrastructure, engender the right political, social and economic environment for businesses to thrive. Nigeria hemorrhages now. All the symptoms of a failed economy are evident. Only good governance can reverse the trend. It is time to wake up.