GSK, one of the world’s leading pharmaceutical and healthcare companies, has announced plans to cease its direct business operations in Nigeria. The company, which employs 1,800 people in its plants in Dungarvan, Cork, Sligo, and Dublin, has been active in Africa’s largest economy for over 50 years. While GSK has not provided a specific reason for this decision, it is believed that the difficulties associated with foreign currency payment issues have played a significant role. Many Irish companies trading in Nigeria have faced challenges in handling these issues and have opted to use third-party Nigerian companies for distribution.
Aeolus International, an Irish company that has been trading in jet engines in Nigeria for the past two decades, has also experienced difficulties in accessing foreign currency to pay for services. The CEO of Aeolus, Fergal Whelan, has highlighted the foreign currency crisis in Nigeria and its impact on the Irish aviation sector. The company, which has extensive lease arrangements in the region, has faced complications in repatriating earnings paid in the Nigerian currency, naira. To overcome these challenges, Aeolus has resorted to buying euros or dollars from the parallel (aboki) market, a common practice among foreign-owned companies.
In April, the International Air Transport Association director general, Willie Walsh, expressed concerns that airlines may cease operations due to $802 million of trapped funds in Nigeria. Walsh criticized the policy of the Central Bank of Nigeria (CBN), which severely restricts access to currency exchange for foreign companies in an effort to preserve its exchange reserves and stabilize the national currency, the naira. In June, Nigeria’s central bank allowed the naira to float freely on the official market, following the suspension of the central bank governor responsible for the country’s multiple exchange rates scenario in recent years.
The multiple exchange rates system has caused foreign currency shortages in Nigeria for decades. Under the suspended CBN chief, Godwin Emefiele, the situation worsened, making it challenging for investors to repatriate funds from Africa’s largest economy. The devaluation of the naira implemented in June aimed to improve the current account and long-term investment climate but resulted in a historical 36% drop in the currency’s value against the US dollar and the euro.
Foreign currency difficulties have created barriers to trade not only in Nigeria but across Africa as a whole. Currently, Ireland’s two-way trade with the continent accounts for less than 1% of its total trade, despite the presence of 13 Irish embassies across the 50 African states, which have a combined population of 1.2 billion people. Irish companies have made their own arrangements to navigate the volatile African currency landscape and continue trading. For example, Oruna, a dairy products company, has established packaging facilities in Nigeria for its dried milk products, while Dawn Meats has developed extensive prepared meats facilities in South Africa and the surrounding southern states.
Guinness, a beloved brand in Africa since the 1960s, also faced exchange rate volatility when Diageo, its parent company, stopped exporting stout from Dublin and established a brewery in Lagos. However, Guinness Nigeria has successfully weathered these challenges and is now considered an iconic African company. It operates a full brewing, packaging, marketing, and selling operation, producing popular brands such as Guinness Foreign Extra Stout, Malta Guinness, Harp Lager, and Guinness Africa Special.
While the recent decision to allow market forces to determine the exchange rate is expected to eventually align the parallel (aboki) and official rates, the economic outlook for Nigeria in August, as projected by PwC Nigeria, predicts a sharp depreciation of the naira and an increase in the cost of importation.