2023 proved to be a trying time for businesses across Nigeria, marked by a string of challenges that led to a significant number of companies exiting the country.
These departures were driven by a range of factors, starting with uncertainties linked to the dynamics of an election year.
Amid general elections, investors typically approach with caution due to uncertainty about incoming administrations’ policies, leading to a reluctance to make long-term investment decisions. This caution was further compounded by artificial cash scarcity at the year’s start and a botched currency note redesign, hampering consumer spending in the initial quarter.
Despite an economic rebound in the second quarter, subsequent reforms—such as fuel subsidy removal and foreign exchange market unification—sparked inflation and a drastic devaluation of the naira by over 50%. These macroeconomic challenges, coupled with ongoing woes, led to a notable exodus of businesses from Nigeria in 2023.
Remote Work Editorial team observed that the following companies could not weather the Nigeria’s economic storm.
Jumia Foods: Across various African countries, Jumia Food ceased operations in the food delivery sector, shifting focus to physical goods due to difficulties in achieving profitability.
54Gene: September marked the end of the company’s four-year journey, despite raising $45 million in funding rounds, following internal struggles and leadership changes.
MABISCO Biscuit: The company announced its shutdown in October, deciding to sell its multimillion-dollar plant in Ogun State after seven years of operation.
Equinor: Exiting after over three decades, Equinor sold its stake in oil and gas leases, citing a strategy to focus on its international portfolio.
Lazarpay: The web and crypto payment company co-founded by Emmanuel Njoku closed operations in April after failing to secure funds to sustain its business, despite operating for only two years.
Procter & Gamble (P&G): In December, P&G dissolved its ground operations in Nigeria, opting for an import-only model due to Nigeria’s macroeconomic challenges and forex difficulties.
GlaxoSmithKline Consumer Nigeria: In August, GSK UK Group announced the cessation of commercialization of medicines and vaccines in Nigeria, shifting to a third-party distribution model due to challenges accessing foreign exchange.
Sanofi-Aventis Nigeria Ltd: Similar to GSK, Sanofi announced in November its exit from Nigeria’s market, adopting a third-party distribution model for its pharmaceutical products.
Bolt Food: November saw Bolt Food ending operations in Nigeria, citing resource optimization as the reason for the strategic decision.
The reasons for the exodus of companies from this developing economy is not far fetched. One of the foremost challenges is the persistent issue of inflation, driven by a combination of factors including supply chain disruptions, currency fluctuations, and fiscal policies, which have also strained the purchasing power of citizens.
Energy Sector Struggles: Nigeria, traditionally reliant on its oil reserves, grapples with the need for diversification in its energy sector. Despite being an oil-rich nation, fluctuations in global oil prices and the call for cleaner energy sources have emphasized the urgency for diversification and investment in renewable energy.
Security Concerns: Ongoing security challenges, particularly in the northern regions, have not only posed humanitarian crises but also affected agricultural productivity—a critical sector for Nigeria’s economy. Inconsistent agricultural output due to security issues has contributed to food insecurity and economic instability in affected areas.
However, companies under the leadership or significant shareholding of Nigerian tycoons Herbert Wigwe, Aliko Dangote, Femi Otedola, and Jim Ovia amassed a staggering capital gain of N3.1 trillion in 2023. These firms, including Geregu, Zenith Bank, Access Holdings, Dangote Cement, NASCON, and FBN Holdings, registered substantial advancements on the Nigerian Stock Exchange (NGX) despite grappling with a myriad of challenges like a forex crisis, naira devaluation, and inflationary pressures.
The NGX exhibited remarkable strength as the All-Share Index closed the year at an impressive 74,773.77 points, marking a remarkable year-to-date growth of 45.90%. This robust market performance paralleled the commendable corporate feats achieved by companies affiliated with Nigeria’s affluent investors, translating into significant gains for their publicly traded ventures.
Access Holdings, spearheaded by Dr. Herbert Wigwe, saw a remarkable surge in market capitalization, soaring by N517 billion and concluding the year at N822.8 billion. The group’s share price catapulted from N8.50 in December 2022 to N23.15 by December 2023, underlining its impressive financial performance.
Aliko Dangote, Africa’s wealthiest individual, witnessed a colossal N1.1 trillion increase in market capitalization for his diversified conglomerate, the Dangote Group. Dangote Cement, a key entity under this conglomerate, experienced a notable market cap surge of N1.03 billion and reported robust financial growth in the 9M 2023 financial report.
Femi Otedola, chairman of Geregu Power Plc and a significant stakeholder in FBN Holdings, reaped substantial rewards, with Geregu Power experiencing a N625 billion gain and FBN Holdings achieving a commendable 116.1% annual gain on the NGX in 2023.
Jim Ovia, the Chairman of Zenith Bank Plc, oversaw a substantial N436.4 billion increase in market capitalization. Zenith Bank emerged as a profit leader, reporting impressive financials for the nine months ending September 2023, surpassing its 2022 earnings in just nine months.
These achievements amidst economic challenges underscore the resilience and dynamism of Nigerian businesses led by these prominent investors, showcasing their ability to thrive and generate significant gains in a volatile economic landscape.
The Nigerian government has however outlined various measures to address economic challenges and capitalize on available opportunities. Fiscal reforms, including efforts to curb inflation and promote economic diversification, are being actively pursued. Additionally, there are ongoing infrastructure projects and incentives to attract investments in key sectors.
Despite the challenges, Nigeria’s economic outlook for 2024 is cautiously optimistic. While the nation faces hurdles that require comprehensive solutions, the presence of opportunities, particularly in technology, youth demographics, and infrastructure, provides a ray of hope for sustained growth.
The successful navigation of these challenges and the effective utilization of available opportunities will be pivotal in determining Nigeria’s economic trajectory in 2024 and beyond.