As 2024 approaches, it is anticipated that advertising expenditure in Nigeria will decline significantly due to the substantial departure of major multinational corporations that have long invested heavily in marketing and promotional efforts within the country. Throughout the current year, there has been a notable surge in corporate exits, particularly within the Fast-Moving Consumer Goods (FMCG) sector. This trend is primarily attributed to the escalating economic challenges that have negatively impacted the profitability of these organizations.
Prominent brands, renowned for their annual marketing expenditures that run into billions of naira within the Nigerian Integrated Marketing Communications (IMC) industry, have either relocated entirely or streamlined their operations in the nation. The key contributing factors to this exodus include foreign exchange scarcity, insufficient power supply, port congestion, burdensome taxation, security concerns, challenges in repatriating profits, adverse effects of government policy changes on business operations, and a deficient infrastructure.
These multifaceted challenges collectively serve as the primary drivers behind the diminishing advertising spend in Nigeria, signaling a notable shift in the landscape as the year 2024 looms.
A noteworthy departure involves the FMCG giant Unilever, which garnered attention this year by discontinuing its production in Nigeria. The company underwent a strategic shift, exiting the home care and skin cleansing categories. Household names like OMO, Sunlight, and Lux disappeared from retail shelves as Unilever ceased the production of home care products in June, followed by the cessation of sales in September. However, the company continued the production and sale of skin cleansing items until December 2023.
Unilever encountered financial challenges, reporting a loss of N1.09 billion in Q3 of 2023, and faced increased borrowing costs attributed to the Central Bank of Nigeria’s new forex policy and the devaluation of the naira. The company explicitly stated its intention to seek better economic opportunities in other markets that are both sustainable and profitable.
According to Unilever Nigeria Plc’s Unaudited Interim Financial Statements for the Nine Months Ended 30 September 2023, the company allocated N4,975,879,000 to brands and marketing activities in 2023, marking an increase from N4,588,940,000, its adspend in 2022. This expenditure reflects Unilever’s commitment to brand promotion and marketing despite the broader challenges leading to its strategic repositioning in the Nigerian market.
GlaxoSmithKline Consumer Nigeria Plc., a pharmaceutical company with over 51 years of operations in Nigeria, renowned for its products such as Augmentin, Neosporin, Panadol, Sensodyne, Advair, Ventolin, and Theraflu unfortunately, suspended its operations in August in a significant decision prompted by the termination of exclusive marketing and distribution agreements by its UK parent company. In response to this development, GSK Nigeria announced plans to appoint third-party distributors to handle its prescription medicines and vaccines. The primary reason cited for this suspension was the challenges in maintaining supplies due to a shortage of dollars for importing essential ingredients.
In its Unaudited Condensed Consolidated and Separate Financial Statements for the 6-Month Period Ended 30 June 2023, the company directed financial resources strategically, allocating N517,710,000 specifically for advertising and promotion related to consumer healthcare products. Additionally, a substantial amount of N814,307,000 was earmarked for promotional activities in the Pharmaceuticals segment. These figures offer valuable insights into the financial priorities of the company during this period, underscoring its unwavering commitment to both consumer healthcare and pharmaceutical segments. Despite operational challenges and the shift in distribution strategies, the substantial investment in advertising and promotion highlights the company’s dedication to promoting and sustaining its presence in these crucial market segments.
Similarly, Procter & Gamble (P&G) a prominent consumer goods manufacturer known for brands like Ariel, Safeguard, Oral-B, Pampers, and Gillette, communicated its intention to discontinue local operations in Nigeria, marking a transition to an import-focused market strategy.
The company attributed its decision to the challenges posed by the country’s macroeconomic conditions and its dependence on the dollar. The shift to import-only operations is seen as a response to navigate these difficulties effectively. Notably, P&G’s global ad spend in 2023, as reported by Statista, a research company, is $8 billion. It is likely that a significant portion of this advertising expenditure was directed toward the Nigerian market.
The exodus of major companies from Nigeria extends beyond Procter & Gamble, GlaxoSmithKline Consumer Nigeria, and Unilever. Notably, Bolt Food and Equinor, a Norwegian energy corporation, have also decided to exit the Nigerian market. In addition, Sanofi, a significant distributor of essential vaccines such as Influenza, meningitis, and rabies vaccines, made a discreet announcement in November about its departure from Nigerian operations. The company has chosen to appoint a third-party distributor to manage its medicine portfolio in the country starting from February 2024. While Sanofi did not explicitly state the reasons for its exit, it hinted at challenges related to sustaining profit margins in Nigeria.
These collective exits from various sectors underscore the complex economic and operational challenges faced by multinational companies in the Nigerian business landscape.
