GSK said in June that widespread foreign exchange shortages in Nigeria were negatively impacting its operations. Soon after, the British multinational pharmaceutical and biotechnology company decided to exit the Nigerian market, which bodes ill for Africa’s largest economy.
The decision, announced on 8 August, is “bad for us and our reputation” given the role the company plays in technology transfer, Tosin Jolayemi, chairman of Nigeria’s pharmaceutical manufacturers association, tells The Africa Report.
Drug manufacturers are struggling with the forex crisis, which has been worsened by the decision to unify the naira’s exchange rates, Jolayem says. He fears that the decision by the British firm may encourage more companies to leave. “The problem is that there may be a bandwagon effect. If GSK, the biggest pharmaceutical company, is pulling out of your country, what happens to the lesser ones?”
Multinationals have scaled back operations in Nigeria as currency uncertainties make planning a shot in the dark. In March, Unilever Nigeria announced it would exit its home and personal care businesses, saying it wanted to reduce exposure to currency devaluation. South African retailers Shoprite and Mr. Price have also left the country.
“The business environment has not been very easy for manufacturers,” says Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. He urged the Nigerian government to create an enabling environment for both local and international companies to prevent more exits.
“The international trade process, the international payment system and the foreign exchange environment need to improve significantly if we want to retain those foreign investors in our manufacturing sector and even other sectors,” says Yusuf, a former director-general of the Lagos Chamber of Commerce and Industry. The government also needs to ensure infrastructure development, he added.
GSK, which employs over 290 people in Nigeria, is well-known for its products, such as Augmentin, Neosporin and Panadol. Its statement says that there is “no alternative but to cease operations” given plans by GSK to switch to a third-party direct distribution model for its pharmaceutical products in the country.
The parent GSK company, which is based in the United Kingdom, owns 46% of GSK Nigeria. The company advised local shareholders to seek professional advice and exercise caution in dealing in the company’s shares. The firm is preparing a scheme of arrangement to be filed to the Securities and Exchange Commission, which may lead to a return of capital.
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