What is sorely needed now is a conducive business environment

For at least two major reasons, GlaxoSmithKline’s (GSK) decision to cease operations in Nigeria is a great blow to the country’s manufacturing sector. A great blow because it is coming at a time a new government that seems desirous of confronting the challenges faced by manufacturers as well as address other serious economic impediments, is just settling down to business. Second, the company is a major operator in the crucial health sector.

According to GSK Nigeria, it is working on modalities for the planned exit with advisers after which it would submit its proposal to pay off Nigerian investors to Nigeria’s Securities and Exchange Commission. Once this is approved, the Nigerian investors would be paid off, leaving only no its parent GSK.

GSK’s British parent company GSK (GSK.L), has been in Nigeria since 1971. No doubt its figures have not been particularly impressive in the last few years. It has had to cope with increased competition from local companies as well as imports from India and China, whose drugs are relatively cheaper, in some cases due to the underhand dealings between the manufacturers of those drugs and their unpatriotic Nigerian importers. Of course we know the other challenges faced by manufacturing concerns in the country, including but not limited to irregular power supply, multiple taxation, etc. Poor power supply means that companies have to resort to power generators with the attendant high price of diesel. All of these naturally push up the cost of production, a development that the company, like other manufacturing concerns, has endured over the years .

Apparently it has got to a stage that the company can no longer absorb the shock. So, its exit could therefore not have been due to subsidy removal or the reforms in the forex regime initiated by the Tinubu administration.

This is clear from the frightening financials that the company has made public. The figures indeed give a cause for concern. Its half year sales for 2023 dropped by about 50 per cent compared to the corresponding period last year. That means from about N14.8bn to about N7.75bn ($9.82m). Similarly, the company’s shares which was worth about N42.24 in 2014 is now worth a paltry N8.10.

“For the above reasons, and having, together with GSK UK, evaluated various other options, the Board of GlaxoSmithKline Consumer Nigeria Plc has concluded that there is no alternative but to cease operations,” GSK Nigeria said in a statement.

As a matter of fact, the company’s British parent company (GSK L) had since 2018 hinted of plans to cut back operations in Africa and adopt, instead, a distributor-led model.

That the parent company is ready and willing to pay off Nigerian shareholders who form majority (with about 53.6 per cent shareholding) shows how dire the situation is.

The country is yet to recover from the negative impacts of the exit of companies like Dunlop Nigeria Ltd, Michelin, etc that left the country long ago; the present government must do everything humanly possible to halt such exits. We may say GSK has only a few people in its payroll, the fact of the matter is that the country cannot afford job losses any longer. At any rate, there are countless of others who live on ancillary services provided to the company as well as others that the company also services indirectly. All of these jobs would be wiped out when it leaves.

We therefore, urge the Tinubu administration to expedite action on its economic reform programmes to engender confidence in, not only investors who are already in the country, but also prospective ones. There is more to do to ensure steady public power supply so as to reduce the cost of operations of industrial concerns. The government must also more vigorously address the issue of insecurity. No reasonable investor would invest in an insecure environment no matter how tempting other indices are. There is also the need to streamline taxes to reduce the incidence of multiple taxation. Other challenges at the ports must also be dealt with if more manufacturers are not to leave the country, thus truncating its dream of an industrial revolution.

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