THERE is palpable tension and apprehension among Nigerians over plans by Sanofi-Aventis Nigeria Ltd, major manufacturers of polio vaccines in Nigeria, to exit the country by the first quarter of 2024.
The French pharmaceutical company, in a letter to its customers, recently, stated that it would be adopting a third-party distribution model for its products in Nigeria, a development that would see the commercialisation of the company’s drugs in the country.
Sanofi, in the letter, had described the move as driven by its commitment to continually improve access to its medicines, and better serve its Nigerian patients, and the nation’s healthcare system.
“While details of our new business model will be made in our media announcement, be assured that this transformation is rooted in our commitment to providing more value to patients.
“We understand that you may have questions or concerns, and we are committed to addressing them as much as we can,” the company stated.
But many experts are seeing this as another big negative for the country’s economy. The planned exit, they argue, has again raised the issue of the suitability of the nation’s business environment for investments and businesses.
For instance, with the latest development, many believe that the multinational pharma company is only toeing the path of others, such as GlaxoSmithKlime (GSK), that left the shores of the country for a more conducive environment.
GSK Consumer Nigeria Plc had announced its decision to ‘cease commercialisation of its prescription medicines and vaccines in Nigeria’ after 51 years of operating in Nigeria. But experts believe GSK’s decision, just like others, is not unconnected with hostile government policies, hovering around forex scarcity, multiplicity of taxation, inflation and high cost of doing business.
Interestingly, the development continues to elongate the divestments list of companies seeking to ply their trades elsewhere. Tower Aluminium; Evans Medicals; Technoflex Company Limited; Moak Enterprises; Mayor Biscuits Company; and a host of others are already finding comfort in other business spaces in the last few years.
Therefore, Sanofi’s planned exit, for many, is only following a trend of companies looking for better and more conducive space outside the shores of the country to ply their trades. But, according to experts, this may not be the last, unfortunately! The tombstones of businesses and investments may continue to expand, the experts have warned.
But such fears may not be unfounded! A recently-released Purchasing Managers Index (PMI) report revealed a continued drop in business activity in Nigeria.
The latest of such reports released by Stanbic IBTC last Friday revealed a drop of the headline index from 49.1 in the previous month to 48.0 in November 2023, making it the fourth time business activity in the country would drop this year.
But why is the nation’s business space increasingly becoming toxic to businesses, including those that have been around for sometime, and are therefore expected to have learnt the rope?
Besides other factors, many have attributed the dwindling fortunes in the nation’s business space to some ‘unforced errors’ on the part of the government, regarding its policies.
A financial expert and public affairs analyst, Mr Adebiyi Adesuyi, argued that despite the tall ambition of the present administration to grow the nation’s economy from $493 billion to $1 trillion, by 2030, the environment still remains a big disincentive to businesses.
Adesuyi, who is also the Chief Executive Officer of Wealthgate Advisors, a consulting firm with strong focus on economic development and financial planning, stressed the need for government, both at the national and the sub-national levels, to do more, if they are really desirous of attracting investments to their spaces since the ease of doing business indices are clearly not in the country’s favour.
Using the PESTLE (Political, Economic, Social, Technology, Legal, Environment) analysis to determine the country’s suitability for business, Adesuyi believed Nigeria will continue to experience a haemorrhage of investments as it is presently doing, unless drastic actions are taken.
“For instance, let’s put the PESTLE analysis, usually used by businesses before taking their investment decision, in an environment.
“For instance, if you want to use this analysis here, the two areas Nigeria can be said to be above board are in technology and environment. We are found wanting in the other four areas. The country cannot be said to be performing badly in the area of technology, since the internet has penetrated almost every local government area of the country. And, talking about the environment, the climate, we can say to a large extent, is clean, but our failures in the other four are enough to scare even the steel-hearted investor.
“Our political environment is toxic, our economic environment is in tatters, the social environment is not encouraging since there is no cohesion between the nation’s ethnic groups, and our legal environment is cumbersome since justice is often delayed,” he argued.
Adesuyi noted that all these are disincentives to entrepreneurship and there is no way businesses can flourish under such.
Interestingly, the PMI report has identified strong inflationary pressures and the fall in the number of new orders and output since customers are increasingly becoming reluctant to or unable to pay higher charges.
The PMI, which measures the performance of the private sector, and derived from a survey of 400 companies from agriculture, manufacturing, service, construction and retail sectors, noted a modest deterioration in business conditions, and one that was most marked since the cash crisis in the opening quarter of the year.
The Manufacturers Association of Nigeria (MAN) has also not hidden its disenchantment at the nation’s business environment, while insisting on the need to work on them to stem the gale of business divestments presently bedeviling the economy.
For instance, the association had attributed the increasing de-industrialisation being witnessed in the country to some government policies which have, not in any way, engendered business growth in this part of the world.
While speaking at this year’s edition of the Adeola Odutola Memorial Lecture, president of the association, Chief Francis Meshioye, frowned on the issue of multiple taxation, confronting members annually.
In a passionate appeal to the Federal Government, Otunba Meshioye called for the intervention of the Federal Government, stating that the average manufacturer operating in the country contends with not less than 30 different taxes, fees, and levies annually.
According to him, some of the resultant effects of such unfortunate development are the rising cost of doing business and rapid divestment in the nation’s manufacturing sector, as seen recently.
He added that the combination of the issues have continued to depress demand, worsen job losses and increase poverty and low revenue generation from the sector.
But what can be done?
The MAN president believes for the nation’s dream of being an industrialised nation to come into fruition, constraints and other issues, affecting the ease of doing business in the country, must be resolved.
One of such inhibitions, he stated, is the energy inadequacy and inefficiency, which manufacturing and all industrial and commercial businesses in the country have continued to grapple with.
While calling for sustained efforts at bringing about significant improvement in the quantum, quality and consistent supply of electricity, the MAN boss also called for a new industrial policy for the country that would engender growth and development in the sector.
Expressing its concerns on the state of the nation’s economy, particularly the volatile foreign exchange situation, high inflation and general uncertainty, the Lagos Chamber of Commerce and Industry (LCCI) noted that the implications of high interest rate and unstable exchange rate are already taking their toll on households and businesses.
The chamber noted it wants the government to pay particular attention to investing more in transport infrastructure in order to mitigate the high cost of fuel and resolve the many logistic challenges that have continued to impact the movement of goods across the country.
“Looking beyond oil, the government must build investors’ confidence and enhance our forex earnings through non-oil exports. We need to invest more in export infrastructure through automation and implementation of critical port reforms to reduce the bottlenecks in our export logistics and processes,” the chamber stated.
While also toeing a similar path, Adesuyi, on his part, wants the government to make the economic environment suitable.
“Inflation has to be brought down, and there must be stability in the value of the naira. The current instability in forex cannot allow businesses to plan. They can not make projections. They will always suffer losses because of that. They should be able to predict the exchange rate of the naira,” he stated.
The Wealthgate Advisors’ boss also sees the inability of companies to repatriate their earnings out of the country as also a negative, which must be addressed. A lot of airlines, he stated, are currently affected by this development.
“Some of them have even shut down their business here; since they had already rendered services, but are finding it difficult to take the proceeds of such services rendered, out of the country. That’s why airlines, such as Emirate, left Nigeria. Those that are still here have not been able to get their dollars. They sold their tickets in naira, and they will have to repatriate in dollars,” he added.
He noted that the policy of the Central Bank of Nigeria (CBN), under its former governor, Godwin Emefiele, was a big disincentive to those airlines; since it never allowed them to have access to those dollars.
Adesuyi also stressed the need to increase the supply of dollars in Nigeria by increasing the quantity and value of items that the country exports.
“It is only when we export more than we import that we have sufficient dollars, that naira can appreciate. What we export must be higher than what we import, that is when we have sustainable flow of foreign exchange, that’s how we can help the naira to regain its strength,” he added.
The financial guru also counseled on the need to explore tourism as a huge source of revenue earning. He, however, noted that the environment must be made suitable to make people desire to come and spend their foreign currencies in Nigeria.
“We should also encourage foreign direct investment so that more dollars will come to the real sector of Nigeria, and as more dollars are invested, there will be inflows of dollars. We should not lose sight of foreign portfolio investments too. When we encourage people to come and invest their dollars, it reduces the pressure that we are presently having on dollars.
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