By Chinwendu Obienyi
Diageo, the beverage company for Guinness Nigeria, has exited Nigeria, joining a growing list of multinational organisations that have recently left the country.
A filing sent to the Nigerian Exchange Limited (NGX) on Tuesday by Guinness Nigeria, stated that Tolaram has agreed to acquire Diageo’s 58.2 per cent shareholding in Guinness Nigeria Plc and is also expected to enter into a long-term license and royalty agreement for the continued production of the Guinness brand and its locally manufactured Diageo ready-to-drink and mainstream spirits brands. The transaction is expected to be completed during Fiscal 2025, subject to obtaining the requisite regulatory approvals in Nigeria.
On completion of this transaction, Guinness Nigeria will remain listed on the floor of the NGX and subject to regulatory approvals, Tolaram would launch a mandatory takeover offer in compliance with local law requirements. This development underscores the increasingly challenging business environment in Nigeria, characterized by economic instability, regulatory hurdles, and security concerns.
Diageo’s departure follows similar moves by other significant players in various industries, indicating broader issues that are making Nigeria less attractive to international businesses. Industry giants like Procter and Gamble, Glaxosmithkline, Kimberly-Clark, Pernod Ricard and Unilever, have already stated their exits, blaming it on “unfavourable conditions”. For example, Kimberly-Clark, maker of Huggies diapers and kotex feminine care products stated that it will be closing its facility due to declining production and difficult economic conditions whilst Proctor and Gamble explained that its decision to exit was also due to challenging business environment as well as the difficultly in creating US dollar value.
According to economic experts, the exit of such companies can have substantial implications for the local economy, including job losses, reduced foreign investment, and a potential decline in consumer confidence. In a report titled; Strategic Resilience: Sailing Through Business Disruptions by Cardinal Stone, analysts noted that the Fast Moving Consumer Goods (FMCG) industry is acutely vulnerable to fluctuations in the commodity prices, exchange rates and cost associated with import duties and freight.
A critical factor exacerbating the situation is the significant depreciation of the Naira. From $422/$1 in June 2023, the naira has plummeted to N951.94/$.
Although, the naira is standing currently at N1,483.62/$1, the firm noted the Central Bank of Nigeria (CBN)’s strategy aimed at narrowing the gap between the official market rate and parallel market rate as well as addressing FX supply concerns, seems to have had unintended consequences.
Meanwhile, President Bola Tinubu has commended Tolaram Group, for acquiring Diageo’s 58.02 per cent shareholding in Guinness Nigeria Plc. In a statement by his Special Adviser on Information and Strategy, Bayo Onanuga, the president said commended the firm for ‘believing in Nigeria and having absolute faith in her economy.’ He said that by acquiring Diageo’s shares in Guinness, Tolaram has shown that it has a long-term view of doing business in Nigeria.
“President Tinubu welcomes Tolaram to the beverage sector of Nigeria’s business landscape and hopes the group’s business will continue to flourish. President Tinubu gives assurances to investors and Nigeria’s businesses, promising that his government will continue to make the operating environment more conducive and transparent. He said that the multi-pronged reforms and interventions being implemented on the economic and financial fronts would deliver sustained growth and enduring profitability for investors,” Onanuga said.
