Turning multinational flight into domestic opportunity, By Dipo Baruwa

Nigeria stands at a critical juncture. Without urgent reforms across industrial policy, governance, infrastructure, and skills development, the exodus of multinationals will continue, undermining growth, jobs, and competitiveness. By addressing these gaps decisively, Nigeria can rebuild investor confidence, strengthen domestic capacity, and create a new era of sustainable industrial development.

Nigeria’s economic growth presents a paradox. Recent indicators appear promising: foreign direct investment rose by 32 per cent between 2019 and 2024; trade with key partners produced a $2.6 billion surplus with the United States in 2024; and GDP growth stood at 2.9 per cent in 2024. Yet, beneath these headline figures lies a sobering reality; multinational corporations (MNCs) are exiting Nigeria at an alarming rate. Economists estimate that these divestments have cost the country approximately ₦94 trillion in lost output over the last five years, with over 767 manufacturing firms shutting down in 2023 alone, and another 335 in distress, according to the Manufacturing Association of Nigeria (MAN).

This wave of divestments has eroded industrial capacity, reduced jobs, weakened tax revenues, and increased import dependence. From oil and gas exits by Shell and TotalEnergies, to closures in pharmaceuticals (GSK, Pfizer), consumer goods (Unilever, Kimberly-Clark, Nestlé), technology (Microsoft), and e-commerce (Jumia Food), the impact cuts across sectors.

To fully grasp today’s challenges, it is instructive to trace Nigeria’s industrial history, from the golden era of the 1960s and 1970s, through the policy missteps of the 1980s and 1990s, to the current divestment wave threatening economic stability.

The Golden Age of Nigerian Industry

In the early post-independence decades, Nigeria’s industrial landscape was dominated by European and American MNCs, including Unilever, Nestlé, Procter & Gamble, Shell, and Texaco. These companies were engines of growth, providing jobs, transferring technology, and fostering local supply chains. Cities such as Lagos, Ibadan, Enugu, Aba, Port Harcourt, Kano, and Kaduna emerged as industrial hubs, and Nigeria steadily gained the reputation of an emerging African economy and contributor to global value chains. Industrial output rose, consumer markets expanded, and macroeconomic stability seemed within reach.

The Downward Turn: Policy Missteps and Structural Challenges

While the consequences of economic mismanagement became evident from the late 1980s, the roots extend further back. The Indigenisation Decrees of the early 1970s, aimed at transferring ownership of foreign enterprises to Nigerians, were poorly implemented, driving away capital and technical expertise without creating effective local replacements.

This was followed by the abrupt suspension of National Development Plans and a series of policy reversals in the 1980s. The most disruptive was the Structural Adjustment Programme (SAP), which introduced sharp naira devaluation and liberalisation without adequate structural support for local industry. Import substitution was announced but never matched by adequate infrastructure, logistics, or banking/credit systems, leaving factories stranded.

These macro-level challenges were compounded by micro-factors that directly affected MNC operations:

Key Micro-Factors Affecting Multinationals

• Exchange Rate Volatility: Inconsistent foreign exchange policies complicated profit repatriation and the importation of raw materials. Procter & Gamble cited FX scarcity in its decision to shut down local manufacturing, while GSK struggled to repatriate profits.
• Inflation and Currency Depreciation: Inflation soared above 57 per cent in 1993 and remained in double digits for much of the last two decades, eroding consumer purchasing power. Kimberly-Clark’s diaper production became unprofitable, as local demand shrank.
• Regulatory Uncertainty: Frequent policy reversals and political interference in business policy undermined long-term planning. Microsoft scaled down operations due to unclear tax obligations and inconsistent digital regulations.
• Infrastructure Deficits: Chronic underinvestment left roads unmotorable, ports inefficient, and power generation consistently below 4,000 MW, far short of the estimated daily peak demand of 20 gigawatts. Reforms like the National Electric Power Policy of 2001 and NEPA unbundling failed to deliver sustainable improvements. Nestlé repeatedly cited high energy costs and unreliable power as barriers to competitiveness.
• Security Risks: Oil bunkering, pipeline vandalism, and rising kidnapping incidents increased operational risks. Shell and TotalEnergies accelerated divestment from onshore assets due to insecurity in the Niger Delta.
• Neglect of Agriculture: Breweries and food processors like Guinness Nigeria struggled with sourcing local raw materials. Poor farm-to-industry linkages increased reliance on imports, compounding supply chain vulnerabilities.
• Inconsistent Educational Policy: Emphasis on university degrees over technical vocations reduced the pipeline of skilled technicians and engineers, raising training costs for MNCs and increasing reliance on expatriate labour.

While domestic capital is becoming more visible across the investment landscape, as seen in the activities of Dangote Group, BUA, and Glomobile, its depth remains insufficient to drive sustainable industrial growth. Many of these domestic investments still rely on foreign partners, and the ongoing exodus of MNCs threatens their ability to attract strategic investors and technology transfer.

Reversing the Trend

Each micro-factor identified above has had tangible consequences; collectively, they have weakened the business case for MNCs to remain invested in Nigeria. While domestic capital is becoming more visible across the investment landscape, as seen in the activities of Dangote Group, BUA, and Glomobile, its depth remains insufficient to drive sustainable industrial growth. Many of these domestic investments still rely on foreign partners, and the ongoing exodus of MNCs threatens their ability to attract strategic investors and technology transfer.

As global capital becomes increasingly fluid, MNCs will continue to invest where the environment is most predictable, stable, and profitable. For Nigeria to reverse the divestment trend and create a new frontier for industrial growth, building domestic capacity and improving the investment climate is imperative. This requires concerted efforts across multiple fronts:

1. Shallow Financial and Insurance Sector: Nigeria’s banking and insurance industries remain insufficiently deep to fully support long-term industrial investment. Limited access to affordable credit, high borrowing costs, weak risk mitigation instruments, and underdeveloped capital markets constrain both domestic entrepreneurs and foreign investors. While landmark projects such as the Dangote Refinery have successfully mobilised capital through syndicated loans, development bank support, local bond issuances, and strategic partnerships, such arrangements are not universally accessible and they underscore the structural limitations of Nigeria’s financial ecosystem. Strengthening financial intermediation, expanding long-term financing options, and developing robust insurance products can reduce reliance on foreign capital and absorb some of the risks that drive MNCs away.
2. Over-politicisation of Economic Management: Economic decision-making in Nigeria is often subordinated to political priorities, leading to policy reversals, regulatory inconsistencies, and uncertainty for businesses. Insulating key economic policies from political interference, ensuring continuity across administrations, and embedding stakeholder consultation in policy formulation are essential to rebuilding investor confidence.
3. Excessive Reliance on Federal Government: Nigeria’s current industrial strategy often places disproportionate reliance on the Federal Government to manage national competitiveness. This centralisation limits the ability of subnational governments, private enterprises, and development agencies to innovate or respond to local conditions. Encouraging subnational competitiveness, decentralising incentives, and enabling state-level industrial strategies can create a more dynamic, resilient, and diversified investment ecosystem.
4. Limited Technical and Managerial Capacity: Beyond formal education, there is a shortage of skilled technicians, engineers, and management professionals capable of sustaining complex industrial operations. Expanding vocational training, investing in polytechnic and technical institutions, and fostering industry-academia partnerships will help bridge this skills gap.
5. Weak Infrastructure and Logistics Networks: Persistent deficits in reliable power, transportation, port efficiency, and digital infrastructure significantly raise production and transaction costs. Prioritising infrastructure development with clear timelines, public-private partnerships, and sector-specific incentives can lower barriers to industrial expansion. It is high time to return to a structured, rolling National Development Plan.
6. Fragmented Agricultural and Industrial Value Chains: Many industries remain dependent on imported raw materials due to poorly integrated domestic agricultural supply chains. Strengthening farm-to-factory linkages, supporting agribusiness clusters, and promoting local sourcing, can reduce import dependence, stabilise input costs, and increase the competitiveness of Nigerian manufacturing.
7. Regulatory and Policy Predictability: Frequent policy reversals discourage long-term capital commitments. Establishing a transparent, predictable, and consultative regulatory framework, including clear rules for taxation, import/export, foreign exchange, and digital operations, will create an enabling environment for both domestic and foreign investors.
8. Security and Risk Mitigation: Rising security risks in key industrial zones undermine investor confidence. Strengthening security infrastructure, improving surveillance, and creating rapid response mechanisms for industrial areas can reduce operational risks and insurance costs, making investments more viable.

Conclusion

By addressing these interconnected challenges, Nigeria can not only stem the outflow of MNCs but also foster a domestic investment ecosystem capable of sustaining industrial growth, attracting strategic partners, and creating jobs. This requires coordinated policy reforms, institutional strengthening, and long-term strategic planning across the public and private sectors.

Nigeria stands at a critical juncture. Without urgent reforms across industrial policy, governance, infrastructure, and skills development, the exodus of multinationals will continue, undermining growth, jobs, and competitiveness. By addressing these gaps decisively, Nigeria can rebuild investor confidence, strengthen domestic capacity, and create a new era of sustainable industrial development.

Dipo Baruwa is a business climate development analyst.