To Multinationals in Nigeria: Indigenize or Leave

Chukwunweike Araka
6 min readDec 28, 2023

Poverty is a horrible reality many in Nigeria have to face on a daily and it hasn’t been any kinder in recent times given the astronomic rise in inflation to 28.20 per cent as of November 2023 — a 14 per cent rise in Nigeria’s yearly inflation rate since 1996. Prices of everything including food and medicines are at an all-time high in Nigeria. The country is battered by internal and external factors at play in worsening the crises. The new Bola Tinubu government has effected several economic and fiscal measures aimed at restructuring the economy, which albeit necessary, has caused pain and suffering to many, especially the poor and vulnerable.

The removal of the long controversial fuel subsidies, an act that was okayed by the IMF, saw the prices of fuel in Nigeria more than triple overnight to about 620 naira, 0.8 dollars per litre. Naturally, this meant an increment in the prices of goods as transportation costs also tripled. The operating costs of industries also skyrocketed as the cost of electricity went through the roof. The fuel subsidies which have been decried by the IMF for years as unsustainable guzzled about 10 billion dollars last year alone. For a cash-strapped country whose debt servicing exhausted as much as 97.4 per cent of revenue in 2022, 10 billion dollars is a lot of money.

Another internal shake-up that worsened the situation for average Nigerians was the switch by the Nigerian government to a floating exchange rate. What used to be obtainable in Nigeria is that the government through the Central Bank would peg the value of the naira against the dollar at a fixed rate which is guaranteed by the government through its reserve of dollars. Nevertheless, the new regime in Nigeria has abandoned this system because of the tremendous need for dollars and other foreign currencies used to prop up the value of the naira. Under Tinubu’s government, the value of the naira is to be determined by the market forces of demand and supply. And, as it was revealed by the market, the true value of the naira against the dollar was far lower than the formerly inflated value. On average, about 900 naira are exchanged for one dollar. This devaluation instantly had the effect of increased prices in Nigeria because of the country’s overreliance on imports for most things.

Even before the foreign exchange fiasco began in Nigeria, America’s domestic fiscal policies already tightened its grip on Nigeria’s economy and that of other developing countries dependent on loans, usually priced in dollars, from foreign investors to spur its development. The American Federal Reserve in response to inflation increased interest rates in 2022 and maintained them high for most of 2023. This stoked fear of balance of payment issues in developing countries like Nigeria which suddenly had to pay more interest to its foreign lenders in dollars. This caused a shortage of dollars in Nigeria so much so that the government was unable to repatriate the income of certain foreign airlines operating in Nigeria.

Photo by Sunday Abegunde on Unsplash

In some sense, this justifies the restructuring of Nigeria’s foreign exchange system by the Tinubu government as Nigeria’s foreign exchange reserve was drying up fast. Nevertheless, the rightfulness or otherwise of the decision did not change the business implications it carried. Manufacturers who were mostly reliant on the importation of inputs such as raw materials and intermediate goods immediately found the business environment in Nigeria unsuitable because of the free fall of the naira against the much stronger dollar. Most notably, multinationals like GlaxoSmithKline have left Nigeria while Unilever packed up the home care and skin cleaning division of its business.

But, even with the crises, all hope is not lost in Nigeria. People innovate in the face of adversity, and nowhere is that truer than in Nigeria. While developed countries would need laws to ban single-use plastics, in Nigeria however, re-using plastics comes naturally as it is not only environmentally sustainable but most especially economically sensible. Necessity is after all the mother of invention, and there’s a lot of necessity faced by average Nigerians and Nigerian businesses.

Nevertheless, there’s a condition — if you want to solve Nigerian problems, you have to think Nigerian. For instance, businesses like Nestle which have deep roots in Nigeria were able to weather the foreign exchange crises better than GSK. What Nestle did differently from GSK was that Nestle developed local supply chains in Nigeria, a business strategy that weaned its business off dollars. Nestle worked with local farmers who produced grains like maize and millet to deliver good quality inputs which Nestle used in its products like golden morn. Doing this saved Nestle scarce and expensive dollars which it would have otherwise used to import grains used in its production process.

Time has passed in Nigeria when indigenizing one’s business was merely corporate social responsibility; the very survival of businesses depends on maintaining local connections in a globalized world. In as much as we live in an increasingly globalized world, there are prevailing local circumstances that just cannot be ignored. The hardship and the hostile business climate in Nigeria have a silver lining in that it is slowly and silently kick-starting an industrial revolution. Nigeria’s import regime has become outdated by the recent devaluation of the naira which makes it more difficult to import and more attractive to produce locally and export.

More and more, local brands like Nutzy peanut butter are taking the place of foreign brands like Skippy on the shelves of Nigerian supermarkets. Smart multinationals like McVitie’s, Kellogg’s and Colgate Palmolive have noticed the direction of the tides and have acted accordingly. They collaborate with local companies in Nigeria to produce their products in Lagos, Nigeria using Nigerians and for Nigerians. To consumers like yours truly this has had the advantage of cheaper products from familiar brands whose imported equivalents have become unaffordable given the foreign exchange debacle.

This pattern is not only noticeable in the goods sector, but even in the services sector. Any business that does not pay attention to its local needs is at risk of losing its place in Nigeria’s roughly 210 million people-large domestic market, Africa’s largest. Earlier in the year, most Nigerians were unable to subscribe to Apple Music because of the flimsy reason that Apple’s payment processor is incompatible with Nigerian banks. This pushed a lot of users, including many of my friends to Spotify which unlike Apple Music maintains an office in Lagos, Nigeria. Because of its local presence, Spotify was able to capitalize on the misfortunes of Apple Music to gain market share in Nigeria’s music streaming industry. Maybe if Apple Music had a presence in Nigeria it would have averted this blunder by working with the many Fintech startups and banks in Nigeria.

Even in Nigeria’s oil industry, the country’s long-time golden goose that brings in about 80 per cent of the country’s export earnings, an indigenization of some sort is ongoing. Since the country’s oil boom in the 1970s, Nigeria’s oil industry has been dominated by big international oil companies like Shell, ExxonMobil, TotalEnergies and Chevron with the only notable local player being the state-owned Nigerian National Petroleum Corporation, NNPC. However, this has been changing in recent years as the major international oil industry players have either divested from Nigeria or are in talks to do so because of the insecurity in Nigeria’s Niger Delta amongst other reasons. The local oil companies filling the shoes of these international behemoths include Oando which agreed to acquire Eni’s Nigerian subsidiary, Nigerian Agip Oil Company and Seplat Energy whose acquisition of ExxonMobil’s assets has been stalled by regulators.

There’s a silent revolution ongoing not just in Nigeria but on the African continent whose countries are faced with similar challenges and likewise with similar opportunities as Nigeria. In recent times, with greater emphasis on regionalism as opposed to globalization by the global leader, the United States, it would do Africa, the continent with the lowest intra-regional trade in the world a lot of good to take initiatives like the African Continental Free Trade Area, the AfCFTA seriously. If the AfCFTA is ever fully implemented, the exit of a multinational pharmaceutical company like GSK from Nigeria would not be so much of a tragedy as it could easily migrate to another country on the continent like South Africa from which it would produce and export to Nigeria.

Remember that no country can exist in isolation. Nigeria cannot produce everything it needs and would have to trade with other countries that are better at producing certain goods and services than it. This is already at play in Nigeria’s immediate neighbourhood, West Africa where Nestle produces Nescafe coffee in Cote d’Ivoire and exports it to markets like Nigeria courtesy of the Economic Community of West African States, ECOWAS. Similarly, Unilever produces Lipton in Tema, Ghana and ships it across the West African region.



Chukwunweike Araka

As a writer I believe I'm actively part of humanity's collective memory and conscience. And as such, I owe the duty of telling the truth at all times.