P&G To End Manufacturing Operations In Nigeria

P&G To End Manufacturing Operations In Nigeria

Procter & Gamble (P&G), a leading US consumer goods company, has announced its decision to cease manufacturing operations in Nigeria and shift to import-only activities, as disclosed on Tuesday.

The multinational anticipates incurring charges of $2.5 billion over the next two years due to the restructuring of its operations in certain markets and the devaluation of its Gillette business.

Known for producing renowned brands such as Pampers, Gillette, Ariel, Always, and Oral-B, P&G may face charges ranging from $1 billion to $1.5 billion after-tax as part of its restructuring efforts in Nigeria and Argentina. These two markets have presented challenges for the company.

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“So when you think about places like Nigeria, when you think about places like Argentina, it’s very difficult for us as a U.S. dollar-denominated company to create value,” Andre Schulten, the chief financial officer, said at Morgan Stanley Global Consumer & Retail Conference in New York.

“It’s also difficult to operate because of the macroeconomic environment,” he added.

The decision by Procter & Gamble (P&G) to cease manufacturing operations in Nigeria is part of a growing trend of multinational companies facing challenges and exiting the Nigerian market. This trend, particularly evident among manufacturers and energy firms, is often attributed to the current foreign exchange constraints and the devaluation of the naira, resulting in diminished earnings for foreign companies when converted to dollars.

Earlier in the year, Unilever announced the discontinuation of production for its homecare and skin-cleansing products in Nigeria, citing margin dilution as a primary reason and emphasizing the need to enhance the profitability of its Nigerian operations. In August, GlaxoSmithKline, a British pharmaceutical giant, also revealed its decision to halt manufacturing operations in Nigeria, opting for a third-party distribution model instead.

P&G, with a 30-year presence in Africa’s largest economy, previously operated two manufacturing plants in Ibadan, Oyo State, and Agbara, Ogun State. The company has been gradually scaling back its operations through measures such as job cuts and the partial operation of its factories in recent years.

“Only the P&G plant in Ibadan is currently being run by the company, and it only produces Ariel detergent. All the other P&IG products in Nigeria are either being imported or produced by another company licensed by P&IG,” a company source told PREMIUM TIMES in 2021.

Nigeria contributes $50 million in net sales to P&G’s global business according to its CFO.

“We think that we’re at the point in both markets, Argentina and Nigeria, where a change in the approach will yield a better result overall,” Mr Schulten said.

“So it’s not because it’s opportune. It’s because we truly believe this is the better way to go to market in those geographies.”

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