Influx of Chinese, Asian businesses threatens U.S, Europe hegemony

…as more Western-based MNCs wind up operations in Nigeria

The continued influx of companies of Chinese, Asian and Middle East origin into Nigeria is accelerating the exodus of Western European and American Multinational Companies (MNCs), Business Hallmark investigation has revealed.

According to BH findings, while Chinese, Asian and Middle East owned businesses are daily setting up shops in the country for business, American and Western European-owned businesses have been shutting down, citing harsh business environment.

For instance, not less than six American and European based MNCs, including household names in Fast Moving Consumer Goods (FMCG) like Procter & Gamble, Equinor, Sanofi-Aventis, Unilever, Bolt Food and GlaxoSmithKline exited Nigeria between February and December 2023.

In March 2023, Unilever became the first multinational to announce plans to shut down some of its operations in Nigeria. According to the company, the changes in its business meant it had to exit its home care and skin cleansing categories from Nigeria, with iconic brands like Omo, Sunlight and Lux, which are popular in many Nigerian homes, becoming the casualties.

On January 19, 2023, about 10 months after it announced plans to exit the market, Unilever Nigeria Plc announced the stoppage of production and sale of its home care and skin cleansing products, saying they would no longer be on retail shelves.

Likewise, in July 2023, the second-biggest drug producer, GlaxoSmithKline Plc, announced it was halting manufacturing operations in the country without giving reason for the exit. In November 2023, a French pharmaceutical multinational, Sanofi, followed suit by announcing the shutting down of its Nigerian operations.

While Sanofi’s financial report indicated that operating in Nigeria had been difficult, its Country Manager, Folake Odediran, however, described the decision as a strategic move driven by the firm’s commitment to continually improve access to medicines. She further disclosed that Sanofi had appointed a third-party distributor to handle its commercial portfolio of medicines from February 2024.

Consumer goods giant, Procter & Gamble, further shocked the nation on Wednesday, December 6, 2023, when it announced its decision to dissolve its on-ground operations in the country.

P&G’s Chief Financial Officer, Andre Schulten, while making the announcement at the Morgan Stanley Global Consumer and Retail Conference in far away New York in the United States, lamented that it was difficult to do business in Nigeria as a dollar-denominated organisation.

According to him, the macroeconomic reality in Nigeria is responsible for its latest strategic decision.

“The other reality that arises in some of these markets is that it gets increasingly difficult to operate and create U.S dollar value. So, when you think about places like Nigeria and Argentina, it is difficult for us to operate because of the macroeconomic environment.

“So with that in mind, we are announcing a restructuring programme with the intent to adjust the operating model and adjust the portfolio to ensure that we maintain the portfolio discipline that has brought us to this point.

“The restructuring programme will largely focus on Nigeria and Argentina. We’ve announced that we will turn Nigeria into an import-only market, effectively dissolving our footprint on the ground in Nigeria and reverting to an import-only model”, Schulten had explained.

While all the companies blamed lingering issues, such as poor power supply, multiple taxation, insecurity, foreign exchange scarcity, port congestion, deficient infrastructure and rising high cost of production for their decision to exit the country, BH findings revealed that there were more to the reasons given.

Our correspondent reliably gathered that while the reasons given by these multinational companies are contributory factors, their already bad situation was aggravated by the influx of Chinese, Asians and Middle East companies, which daily churn out cheaper goods as alternatives to the much more expensive goods produced by the Europe and America headquartered MNCs.

According to a consumer expert, the exodus of MNCs with headquarters in Europe and America would have been negligible had it been there were no alternative products to challenge their dominance in the Nigerian market.

“Yes, the harsh economic climate, to a very large extent, is a contributory factor to the continued winding up of MNCs with origins from Europe and America doing business in Nigeria, however, you cannot remove their stubborn insistence of sticking to old and outdated business models that worked in the 70s, 80s and 90s.

“They (MNCs) are currently being side blinded by the new sharks in the business world from China, Middle East and the rest of Asia, who are not ready to play by old rules”, said Jumoke Akosile, an economist based in Lagos.

One of the undoing of the MNCs, it was learnt, is their usually over-bloated and top heavy workforce.

Unlike Chinese, Asians and Middle East related companies operating in Nigeria with relatively smaller but very efficient workforce, MNCs are usually saddled with a massive workforce, whose wages and living allowances gulp millions of dollars annually.

According to Jumoke Akosile, who is the Senior Partner at Brednard & Co., a South African marketing firm with presence in Lagos, the MNCs are being pushed out of the African market because they have refused to adapt.

“I will like you to go to the head offices of the Bottling Company (NBC) and Seven-Up Bottling Company in Lagos to fully understand what I am trying to explain.

“At NBC, the workforce is massive and top heavy. Based on the firm’s own data, it has approximately 4,800 workers in its employment. As if that is not enough, the top management are almost Europeans or Americans.

“Its current Managing Director/Chief Executive Officer, Matthieu Seguin, is a French citizen transfered to Nigeria by its parent company, Coca Cola HBC with headquarters in Atlanta, Georgia in the U.S.

“It will interest you to know that Matthieu Seguin and other top guns at NBC earn the same salary as their colleagues in Europe and America, which is in U.S dollars. NBC is also one of the best paying firms in Nigeria”, Akolsile explained.

She, however, said the situation is different at Seven-Up Bottling Company Nigeria, founded by a Lebanese businessman, Mohammed El-Khalil in 1926.

“Lebanese businessmen are known for their shrewdness. They hardly throw money away except when they want to be philanthropic.

“You can see it in the way Faysal El-Khalil, who took over from his late father, Mohammed, is managing Seven-Up.

“One, the salary structure at Seven-Up is modest, with the highest salary band ranging from N33.6 million to N57.6million (excluding bonuses), unlike at Coca-Cola, where it is between $137,000 to $235,007 per annum.

“The highest-paying position at Coca Cola HBC is held by the Group CEO based in Atlanta with a salary of $373,007 per year. Salaries of Coca Cola country CEOs are close to this figure because it is usually from this pool of CEOs that the group CEO is chosen.

“You can now see why Coca Cola products cannot compete with Seven-Up produces in any price war”, the marketing expert declared.

BH findings also revealed that MNCs cannot favourably compete with the new companies from Asia and the Middle East due to their large offices and factories that require humongous resources to maintain.

Compared with companies set up by Asian and Middle East businessmen and conglomerates, which operate from relatively smaller sites, European and American-owned MNCs are normally built on sprawling expanse of lands running into hundreds of hectares.

It was also observed that the offices built by the MNCs are massive edifices with modern and state of the art facilities that can compare with their peers around the world.

“If you see any British, American, French, Italian, German or Dutch company in Nigeria, you will immediately notice the difference in size and grandeur.

“Examples are the Nestle plant at Agbara in Ogun State, Procter & Gamble plant in Ibadan and the British American Tobacco Company in Ibadan, as well as the Nigerian Breweries Plc. plant in Aba in Abia State, among several others scattered across the country.

“Unfortunately, it takes huge resources to maintain these edifices, which before now were passed to the final consumers.

“On the other hand, Asian and Middle East businessmen rarely enter into this same trap. They only build smaller but efficient places, where they can churn out their products and work from.

“In most instances, the Asians build living quarters in their plants, where even their top management often reside. Unlike top U.S, European MNCs, which have the unsustainable habit of lodging their top echelons in 5-star hotels for months before they are able to secure living apartments in upscale locations like Lekki, Ikoyi, Victoria Island, Banana Island and Ikeja GRA, Lagos.

“Also, while American and European companies usually send their workers abroad for training, thereby incurring huge training, traveling and living costs, which they then pass on to the consumers, Chinese, Middle East and other Asian owned businesses prefer bringing experts into Nigeria to impact into their workers the necessary skills.

“They only send their workers, who needed to be trained abroad, when the needed skills can’t be acquired locally.

“So tell me, how can they favourably compete with Chinese and other investors with this kind of operational setups?

“Trouble often start with their (MNCs) prices of goods, which are always on the high side. For instance, compare the prices of Omo and Ariel detergents by Unilever and P&G to either Good Mama, Viva, My My or Waw detergents produced mostly by Chinese and Lebanese owned companies operating in the country, and you will see the huge difference in prices.

Unfortunately for the MNCs, the middle class, which used to patronise their products has been wiped out. There are now three types of classes in Nigeria today; the rich, the just hanging on and the abject poor, to which majority of Nigerians belong.

“So, it is not a surprise to me that some of these MNCs are closing shops. Tell me, if a company cannot sell its products, and the trend continues for a long period, is the next thing not to wind up business?”, asked a brand analyst, Dr. Bright Nweje.

Apart from these factors, new businesses, particularly Chinese firms, are edging out their American and European counterpart in the battle for the Nigerian market due largely to the support they are getting from their home governments.

According to available data, Chinese businesses operating in Nigeria and other African countries usually get huge support from the Chinese government in form of loans and subsidies to be able to trump competing American and Western European companies.

With these almost interest free loans from government-owned Chinese financial institutions like the China Export-Import Bank and the China Development Bank (CDB), MNCc from Europe and America, experts argue, do not stand a chance, unless they change tactics or also get help from their home governments.

Speaking on the development, a lecturer of Economic at the Olabisi Onabanjo University (OOU), Abiodun Tella, while agreeing that the business environment in the country is not friendly, advised MNCs to change their business models.

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“While MNCs are complaining about how difficult and frustrating it is to do business in Nigeria, some foreigners, especially the Lebanese, Indians, Chinese and even the South Africans are rushing into Nigeria to do business and they’ve been extremely successful at it.

“Many of our most successful companies are owned and operated by them. Even the few successful Nigerian owned companies are managed by foreigners, especially Indians. Globacom and Dangote Group are examples of successful companies managed by Indians.

“The question we should be asking is: what is their secret? They arrive the country in bathroom slippers, barely able to speak English, and then they turn to dollar millionaires in a few years

“Is there something they are doing that MNCs and Nigerian businesses are not doing? Why are businesses run by Indians, Chinese, Koreans and Lebanese now doing better than those run by European and American businesses?.

“This is a question that the MNCs still operating in Nigeria must ask themselves if they want to avoid the fate of the others before them”, Tella advised.

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