FDI Retention in Nigeria: The Tolaram—Guinness Example

As the Nigerian Government deploys several strategies to attract substantial Foreign Direct Investment (FDI) into the country, the business deal recently struck between Tolaram Group (Nigeria) and Guinness Nigeria serves as a pointer to a new approach to achieving the much-desired investment retention objective. In a novel ownership transfer initiative, rather than quitting Nigeria, after over six decades of existence, Guinness Nigeria had its majority shares bought-out by a global investor and key operator in Nigeria—the Tolaram Group.

Specifically, under the terms of an agreement signed on Tuesday, June 11, 2024, Tolaram will acquire Diageo’s 58.02 % shareholding in Guinness Nigeria, and enter into long-term license and royalty agreements for the continued production of Guinness brand and its locally manufactured Diageo ready-to-drink and mainstream brands. The transaction price is N81.60 per share, amounting to N70 billion. Diageo is a British multinational parent company of Guinness Nigeria Plc. Although this deal is expected to be completed during fiscal 2025, subject to obtaining the requisite regulatory approvals in Nigeria, it has opened a new vista of hope on creative mode of FDI inflow and retention.

The uniqueness and novelty of this transaction lies in the fact that Diageo (a British multinational alcoholic beverage company) owners of Guinness Nigeria, rather than shutting down its operations in Nigeria (like many other multinational companies, MNCs) opted to ‘sell’ its brands to another global company—Tolaram Group. This way, huge investment outflow (that is, complete exit of Guinness) from Nigeria is averted. On the contrary, Tolaram Group’s ‘new’ investment serves as a clear demonstration of confidence in the Nigerian business environment; an example to existing and potential investors.

With a five-decade presence in Africa, Tolaram is one of the largest consumer packaged goods companies on the continent and has forged joint venture partnerships with several leading consumer MNCs. Interestingly, at the completion of the Tolaram-Guinness deal, Guinness Nigeria Plc would remain listed on the Nigerian Stock Exchange and, subject to regulatory approvals, Tolaram would launch a mandatory takeover offer in compliance with local law requirements.

Furthermore, the deal papers show that after the consummation of the transaction, in partnership with Guinness Nigeria and Tolaram, Diageo would continue to drive the brand and marketing strategy for Guinness in Nigeria, to ensure Diageo’s capabilities in brand building and innovation continue to drive long-term growth for Guinness in the country. Haresh Aswani, Managing Director, Tolaram Africa, says “we are thrilled to welcome Guinness Nigeria, a company with such a rich legacy and strong consumer loyalty, into our ecosystem. This strategic move will expand our significant footprint in the Nigerian market and presents an opportunity to leverage our combined strengths to foster innovation and deliver immense value to our customers and shareholders across the nation.”

As a going concern, Guinness Nigeria Plc released its unaudited financial results for the nine-month period ended 31 March 2024, showing both resilience and adaptability in navigating an uncertain economic landscape. The foremost total beverage alcoholic company delivered a 28% year-on-year revenue growth, reaching N220.3 billion compared to N172.47 billion in the same period last year. In line with this revenue growth, the company’s operating profit surged by 27%, reaching N22.21 billion.

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A household name in Nigeria, Guinness Nigeria Plc, according to records, is home of “first Guinness brewery outside the British Isles.” The first bottle of Guinness Foreign Extra Stout in Nigeria was brewed in November 1963; and two years later, in 1965, Guinness Nigeria was listed on the Nigerian Stock Exchange. Steady growth in markets for Guinness Stout and Harp Lager during the next 30 years prompted the building of other major breweries in Nigeria—two in Benin City and two in Ogba, Lagos. The market capitalization of Guinness Nigeria Plc as at end-December 2023 was N110.7 billion based on its share price of N50.5 per share.

Tolaram Group is a holding company headquartered in Singapore, with diversified business interest in consumer goods, fintech, infrastructure and industries. It has a presence across Asia, Africa, Europe and South America. According to Wikipedia, in 1988, Tolaram Group began exporting to Nigeria Instant Noodles manufactured by Indofoods and Maggi produced by Nestle. Its success in penetrating the Nigerian market led to the Group’s diversification into several sectors including logistics, haulage, manufacturing, energy supply, among others.

Today, in Nigeria, the Group is a key player/investor in virtually all sectors of the economy. It has just developed Nigeria’s first privately owned free trade zone (FTZ) with an integrated deep-sea port in Lekki area of Lagos. This facility is Nigeria’s single largest private infrastructure investment, and is expected to have an aggregate impact of approximately US$361 billion on the Nigerian economy over the 45-year concession period.

No doubt, Tolaram Group’s latest acquisition of majority shareholding in Guinness Nigeria validates its understanding and confidence in the Nigerian business landscape. It has through the deal saved the country huge loss of investment that would have taken place if Guinness Nigeria had opted to quit the Nigerian market as few other MNCs had done in the recent past. The latest deal certainly ensures continuity and leverages Tolaram’s established local expertise to navigate the complex economic landscape.

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Meanwhile, the Tolaram—Guinness deal has also received a Presidential commendation from Nigeria’s President Bola Ahmed Tinubu, who described it as “a vote of confidence on the Nigerian economy.” Tinubu says: “In choosing to expand its investment footprints in Nigeria, Tolaram has demonstrated strong faith and confidence in Nigeria’s economy.” He welcomed Tolaram to the beverage sector of Nigeria’s business landscape and expressed hope that the Group’s business would continue to flourish.

Transactions similar to the Tolaram—Guinness deal have also been taking place in the oil and gas sector of the Nigerian economy in recent times. Specifically, for the purposes of the much-hyped ‘energy transition’ fad and sundry issues, many International Oil companies (IOCs) had opted to pull out of Nigeria. But in pursuit of this objective, many of them had to sell-off their assets in the country on the basis of “as is, where is” to some other global players or indigenous operators. Late last year, for instance, a Norwegian oil firm, Equinor Nigeria Energy Company (ENEC), sold its Nigerian business to Chappal Energies—a Nigeria-owned firm.

In September 2023, Oando Plc sealed a deal to acquire a 100% stake in Eni’s subsidiary—Nigerian Agip Company Limited (NAOC Ltd). Earlier on, in 2021, Seplat Energy Plc entered an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil for US$1.3 billion. Much earlier, in 2016, Chevron Nigeria Limited formally handed over the producing assets in Oil Mining Lease (OML) 53 and 55 to Seplat Petroleum Development Company Plc.

Most recently, on January 16, 2024, Shell announced an agreement to sell its Nigerian onshore subsidiary—The Shell Petroleum Development Company of Nigeria Limited (SPDC)—to Renaissance, a consortium of five companies comprising four exploration and production companies based in Nigeria and an international energy group. The deal is put at US$2.4 billion.

In all these transactions, none resulted in any noticeable capital flight from Nigeria; that is, there were no tangible outflow of assets/or capital out of the country. And so, there were no outright loss of investment with the change in ownership consequent upon the consummation of the transactions. Hopefully, more of these deals are yet in the pipeline.

• The author, Okeke, a practicing Economist, Business Strategist, Sustainability expert and ex-Chief Economist of Zenith Bank Plc, lives in Lekki, Lagos. He can be reached via: [email protected] (08033075697 SMS only)