P&G is battling with challenges posed by government policies on the importation of raw materials for its production as well as foreign exchange rates.
A P&G staff told Business Insider Sub-Saharan Africa that the factory has remained redundant for a while and only serve as warehouse with low production capacity.
P&G among other manufacturers of Fast Moving Consumer Goods (FMCG) in Nigeria have been facing enormous challenges ranging government policy, multiple foreign exchange rates and high interest rate but the company said the decision is purely business.
Procter & Gamble (P&G) is shutting its $300 million production plant situated in Agbara Industrial Estate, Southwest, Nigeria.
P&G, one of the leading FMCG (fast-moving consumer goods) manufacturers, commissioned the production line in June 2017 with Nigeria's Vice President Yemi Osinbajo and Governor Ibikunle Amosun of Ogun State in attendance.
An insider familiar with the development disclosed to Premium Times that “the company is battling with the challenge posed by government policies that regulate the importation of raw materials for its production.”
Another source said the cost of importing raw materials was becoming unbearable for the company, which has refused to involve in shady deals in order to cheat the system and ease importation.
“It is so expensive to import these raw materials which are not produced in Nigeria. Other companies take the shortcut by manoeuvring the system, but we cannot,” a top official of the firm told the online newspaper.
"The factor responsible for the shutdown was the unhealthy competition being faced by the company," a source also revealed.
“Our competitors invested much less in their factory, can manoeuvre their way in the system, and thus produce and sell for much less. We cannot do that. Our investment in Agbara is arguably the largest single investment by a non-oil firm in Nigeria. But we just have to shut it. The loss is much,” the source said.
But in a statement made available to Business Insider Sub-Saharan Africa on Thursday, July 5, 2018, the company confirmed that it is shutting down its Agbara manufacturing line to deliver effective business operations by strengthening the Ibadan plant.
P&G said the closure of the Agbara plant is purely a business decision for a sustainable and innovative business operation in Nigeria.
“P&G is restructuring its Nigeria manufacturing operations to deliver a more effective business operation for now and sustainably for the future. This will entail an exit from production in its Agbara plant.
“We will strengthen our manufacturing operations in the Ibadan plant, scale up our contract manufacturing operations as well as continue to invest in our local talents,” Christine Ine, a consultant to P&G Nigeria told Business Insider.
The report about the shut down is expected to affect closed to 120 employees who are gradually being laid off in preparation for the eventual closedown. An anonymous source said “about 30 staff will be left who may either be outsourced or deployed” to the Ibadan plant.
The company headquarters is situated in Lagos, Nigeria with two manufacturing plants in the Southwest, Agbara, Ogun state and Oluyole, Ibadan, Oyo state capital.
When Business Insider Sub-Saharan Africa contacted a P&G staff who preferred anonymity in Ibadan on Wednesday, July 4, 2018, he said he is not familiar with the Agbara line but it is expected because the Agbara factory has been running below expectation for a while.
“The Agbara line has only been producing Safeguards – a bar soap - for a while now, and the factory has since been turned to a warehouse or some sort, so it may be shutting down.”
“The Ibadan factory has been running optimally and I don't think there are internal issues here," he told Business Insider.
The brands include Pampers, Ariel, Fairy dishwashing liquid, Always, Oral B, Gillette, Safeguard bar soap. The company also manufactures and distributes brands of detergent, fragrances, alkaline battery and tooth brush.
P&G started operations in Nigeria in 1992 with the acquisition of manufacturing plant in Ibadan with local production of Vicks and Always began. The company started the production of Pampers in 1994 and since then continued to expand its investment in Nigeria.
Manufacturers of Fast Moving Consumer Goods (FMCG) in Nigeria have been facing a lot of challenges ranging from multiple foreign exchange rates to high interest rate even as consumers turned to healthier alternatives and less expensive goods in a competitive market.
In May 2018, Nigeria’s biggest player in the Fast Moving Consumer Goods (FMCG), Unilever, also announced the sale of its spreads business, Blue Brand, tagging it as the worst-performing unit.
His Majesty Nnaemeka Achebe, Obi of Onitsha and Unilever chairman, while addressing shareholders at the 93rd Annual General Meeting, AGM, held in Lagos on Thursday, May 10, 2018, said the Spreads sector is slowing down as consumers are turning away from margarine to other alternatives.
He stated that the decision to divest from the spread business is largely due to the desire by the company to boost shareholders’ return.