Why multinationals are leaving Nigeria – NECA president

President of the Nigeria Employers Consultative Association, Wale Oyerinde, speaks to TEMITOPE ADETUNJI on the issue of multinationals divesting and partially closing down their operations in the country

Can you provide an overview of NECA’s stance on the recent trend of multinational divestments from Nigeria?

Our stance remains the same. It has been consistent that the pattern of multinationals leaving the community is sending a wrong signal not only to foreign direct investors, but also creating short waves among local investors. Multinational entities play a significant role in national development, providing employment, generating revenue for the government through company taxes, and ensuring that employees also contribute taxes to the government. They also support the community through various corporate social responsibility activities. This trend represents a substantial loss in both investment and human capital development, which is a major concern for us.

What are the main factors contributing to the departure of multinationals from Nigeria?

Beyond the general context of business decisions, while a business has the right to change its mode of operation or decide on the environment in which it wants to operate, the reality is that the challenging regulatory environment for doing business has been a factor that everyone has been complaining about. Even, local businesses are aware of the current issues and also complain about the high regulatory environment, which is not very friendly, including the legislative environment.

There are many persistent issues, such as challenges carried over from past administrations, government policy inconsistency, and insincerity inherited from previous administrations. All these factors fuel the exit of multinationals from Nigeria. It is unfortunate that this administration inherited many challenges from the past, leading to issues like unemployment and disruptions in business operations.

What are the major challenges that the divestment of multinationals will pose or is posing to the Nigerian economy?

Those challenges are multifaceted; let’s say 5,000 direct employees and 5,000 young adult Nigerians lose their jobs. You can imagine the economic impact on those people. What has happened to those people or will happen is that the ability to pay school fees would have been compromised, the ability to pay house rent would have been compromised, and the ability to feed themselves would have been compromised. Now, when that happens, it will also invariably affect the landlord because the landlord will not be able to collect his rent as of when due, and the school proprietor will not be able to collect the school fees as of when due. The women in the market selling rice and tomatoes and the supermarket owners will not be able to make enough revenue to survive. It also affects the people down the line who are patronising the traders, so it spirals down the negative consequences.

For that same multinational to know that there are some other companies that are supplying that same company food, as that multinational company is shutting down, there is a high review that many other companies, small and medium-scale enterprises that are supplying that multinational will also be affected. So, it is a huge challenge that we are hoping that the recent government reforms will attend to quickly. For those who have left, they will probably find their way back, and for those who are still around, they will continue to survive.

What impact can this create on Nigeria’s employment index?

It is going to drag it into the negative because the International Labour Organisation report that came out a few days ago also states that unemployment and inequality will increase in 2024 due to many global issues. Now, if that is the projection, imagine low-income companies that are already struggling with the issue of unemployment. You can envision the kind of challenge that we are going to face subsequently. We have many young Nigerians out of jobs, becoming willing tools in the hands of mischievous persons to manipulate and use for whatever negative social action they want to perpetrate. Therefore, the government must take drastic action to limit this.

Do you think the Federal Government has shown genuine concern over the departure of some major multinationals?

Well, we are not seeing the urgency; the government is not addressing this as urgently as possible. We have asked, and some people in the government have stated that these companies are also leaving Kenya; they are leaving Rwanda and moving to Europe. The issue is this: it should be laughable to compare Rwanda and Kenya to Nigeria. Nigeria has probably the highest youth population in Africa, and the world, excluding India and China. It would be a laughable and unfortunate comment if that was said. We have one of the largest populations, and if they are leaving Kenya or Rwanda, then they should create an environment where they should be coming here. Justifying that they are leaving other places too is a lazy excuse.

How can the government foster a more favourable business environment to encourage multinationals to invest and stay in Nigeria?

We have made three recommendations, not only for businesses to come back but actually to address this issue of unemployment. First is making the business environment more conducive; let’s address the regulatory environment and the legislative environment. Let the government assess the impact of every regulator by how many businesses they are promoting, not within the context of how many businesses they can slant funds on. Their role is to promote enterprise development; it is when businesses are growing and thriving that they can generate revenue, pay their taxes, meet their obligations to their employees, and meet their obligations to their communities.

The second part is the issue of social security schemes. Now, in such development when people are out of jobs, there are means they can collect funds at the end of the month, depending on the time they spend unemployed or to get other jobs. The idea is that economic activity should continue; whatever interest they get, they are not going to keep the cash. They are going to buy foodstuffs and consumables that will keep the manufacturing businesses going. As those businesses are growing, they will continue to upgrade, continue to employ, and fit into national development. Unfortunately, our social investment has run into controversy, and we hope that the government will do the needful, conduct the necessary investigation, and repackage this scheme to meet the yearning and expectations of Nigerians.

The third thing that we have recommended is for the government to take a step beyond the critical look at the issue of technical and vocational skills. Not everyone can go to universities, and then come out and everyone is looking for a job. They should work on technical and vocational skills projects so that people can learn skills that will enable them to become entrepreneurs. We currently run the model technical and vocational skills with the Industrial Training Funds through the ITF-NECA Technical Skills Development Project, which has trained thousands of young Nigerian youths. Most of them, 95 per cent of them, have become successful entrepreneurs because they have these critical skills. Those are the three recommendations and those are the things the government can do to start addressing the issue of unemployment.

As a body, is NECA doing anything to encourage foreign investors to remain in the country, or is that the sole responsibility of the government at all levels?

We have done a lot at the local and international levels. Everywhere we go, whether, with our partners at the African level, where we have a forum called Business Africa, bringing together employers across the continent, or at the International Organisation of Employers, where global employers convene, we promote and share information about investments in Nigeria. We are actively engaged in various forums, but it can be self-destructive when marketing and communicating positive aspects, only for Nigerians and organisations to encounter less favourable conditions on the ground. These are critical issues for us.

What we will continue to do is share business continuity plans and schemes with these organisations so that they can better comprehend the local environment. It’s noteworthy that we are collaborating with certain government agencies and regulators. While some have turned themselves into undertakers, we are working with others who actively promote enterprise, which is crucial.

Can you elaborate on NECA’s engagement with governmental bodies and policymakers to address the issues affecting multinationals’ investments?

We don’t only deal with multinational investors; we also address issues with local investors. Some of our constructive engagements include discussions with the Customs and various government agencies such as the Ministry of Industry and the Ministry of Labour. Engagement is ongoing at every level so this enables us to actively influence the business environment to foster enterprise and national growth.

Apart from its impact on unemployment, are there security implications?

Indeed, there are noteworthy security concerns associated with prolonged unemployment. The long-term challenge arises when individuals find themselves without employment. As the saying goes, ‘An idle mind is the devil’s workshop’, and this adage holds true. When people are jobless, they lack productive engagement, making them susceptible to unnecessary influences. This susceptibility to external influences can, in turn, have significant repercussions for our overall security situation and national security. This extends beyond merely local security concerns. It becomes imperative for our nation’s self-enlightened interest to proactively address these issues as they manifest. By doing so, we not only mitigate the impact on unemployment but also bolster our resilience against potential security threats arising from idle minds seeking direction and purpose.

How does NECA foresee the future of the Nigerian economy with foreign investments?

A lot of things have happened; not all rosy, but certain policy reforms that the government has come up with, including reforms with Customs, monetary schemes, and many in business areas in the economy. These reforms might not yield immediate fruits in the short time of one or two quarters, but we believe strongly and are hopeful that by the third quarter of 2024, we will start seeing gradual improvements in the economy. If the government continues on this path with the reforms, things will change for the better.

Do you think Nigerian employers have done enough to support their employees amid rising inflation?

For employers, it’s a tough situation on two fronts. Firstly, there’s the challenge of dealing with high interest rates, especially for businesses that have taken loans from banks. These borrowed funds come with interest, and in a short time, these interest rates have shot up significantly. The big question is, how will these businesses manage to survive in the face of this? Now, consider a business that initially expected the dollar to be worth N700 or N800 at the beginning of the year, but now has to buy dollars at a rate exceeding N1,000. This puts them in a tough spot because, with the increased cost of obtaining dollars, they can’t raise the prices of their products. The pricing stays the same, adding more pressure to these businesses.

It essentially creates a double or triple challenge for the average business. However, despite these significant challenges, employers are showing resilience and taking proactive steps to tackle these issues head-on. A notable instance is the President’s broadcast in August of last year, where he commended the private sector for taking decisive actions to meet the needs of their employees. It’s crucial to recognise that employers are operating within the constraints imposed by these economic factors. Given the limitations faced by employers, it’s appropriate to give them credit for the commendable efforts they’ve made to navigate these challenging economic conditions and support their workforce.

How important is technology and artificial intelligence to the Nigerian business environment?

The future basically is Artificial Intelligence and ICT. Any business or employee that is not alive or taking a critical look at the impact of artificial intelligence and technology will be surprised in the next two years. Within businesses or employees, they may find themselves out of business or out of work. That is the future. While the investment in technology and artificial intelligence might make the Nigerian space a bit slow, we are not an island. So, we cannot run away from the reality of artificial intelligence and technology as a whole.

 Do you think AI can replace human labour in the future?

The context of artificial intelligence is overestimated; the reality is that fundamentally, there will be a change. The skills needed will undergo transformation where some tasks will be eliminated while others become essential. It’s akin to someone accustomed to a typewriter; now, with computers, those accustomed to typewriters may lose their jobs, but new opportunities arise for those familiar with computers. Everyone needs to stay attuned to evolving needs, acquire new skills, and remain relevant within the context of their work.

Does NECA collaborate with educational institutions to ensure a skilled workforce that meets the evolving needs of corporate organisations and employers?

Those conversations are ongoing; we are in discussions with the Nigerian Universities Commission. Recently, we engaged with the University of Lagos through the vice-chancellor. We are about to initiate a conversation with the University of Ibadan and many other universities. The upfront collaboration opportunities are open.

In what ways is NECA leveraging international partnerships and collaborations to address the issues highlighted in a recent report?

Well, the report just came out a few days ago, and through our collaboration with the International Organisation of Employers, the machinery is set in place to examine those issues and promptly address their content.