Another foreign firm set to dump Nigeria over high production cost

Barely a year after a U.S based company in the personal care business Procter and Gamble (P&G) closed production in Nigeria, another foreign firm operating in the country has revealed its intention to shut down its Lagos production facility.

Diaper and sanitary pad manufacturer, Kimberley Clark  is citing economic challenges despite investing about $100 in the facility based in Ikorodu area of Lagos.

Kimberly-Clark began operations in Nigeria in 2012 but stopped due to unfavourable economic conditions after five years in 2019 to later restart in 2021.

According to reliable sources within the company, the plant has been producing below capacity from late 2023 into 2024 due to the harsh economic environment within the country.

KC is a listed multinational on the New York Stock Exchange with the majority of its shares held by institutional investors like Blackrock Inc., Vanguard Group, Morgan Stanley etc.

According to the source who claimed anonymity, the company since late 2022 have battled with high energy costs, raw materials and reduced demand from customers due to the prevailing economic situation.

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This has resulted in downsizing and reduced production time from every day of the week to just Mondays to Thursdays.

The company currently spends around N100 million on power generation monthly aside from maintenance costs and its monthly fixed spend on operations has risen over N500 million.

He said, “Our first two years were fantastic in terms of sales growth and market shares within the diaper industry. Fast forward into late 2022 and 2023 was really bad years for the company due to the economic situation.”

“Running costs are extremely high. Our fixed spend on a monthly basis is above N500 million and we spent about N100 million on just gas consumption for powering the gas engine aside maintenance. The company has two assets and for last year, these assets didn’t run for like 90 days in 365 days.”

“Earlier this year, the coy had to downsize to 2 shifts from 4 shifts. We run 24hrs and 7days and 365 days before but currently we don’t run on Friday, Saturday and Sunday anymore because of the economic situation. There is already an embargo on external recruitment. The company is looking for ways to reduce costs since it is not making a profit.”

Furthermore, the source noted that the high production cost stems from the increased raw material cost since it is import-based.

The planned closure of operations of Kimberly-Clark from Nigeria and the reasons provided are similar to those of other manufacturers who have exited the country in the past few years.

High production cost, currency depreciation affecting the import of raw materials, and weak purchasing power of the populace.

Last year, another U.S based company in the personal care business Procter and Gamble (P&G) closed production in Nigeria in a similar fashion having invested about $300 million (the single largest non-oil investment by a U.S company in Nigeria) in a production facility in Ibadan.

Similarly, PZ Cussons stated last month that it is evaluating strategic options for its Africa business for which Nigeria is the biggest and thinking of ways to maximise shareholder value. The company has also restarted asset disposal in Nigeria after a halt due to forex liquidity issues.