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GSK has announced plans to stop doing business directly in Nigeria amid worsening economic pressure, putting the brakes on activity in Africa’s largest economy after more than half a century of being present there.
The drugmaker said on Thursday that it had informed GSK Nigeria, its local affiliate, that it will stop distributing its prescription medicines and vaccines itself and move to using third party Nigerian companies. Haleon, GSK’s consumer health division which was spun out last year and which manufactures products such as Panadol painkillers and Sensodyne toothpaste, also announced it would shift to a third-party distribution model.
GSK did not specify a reason for the move but the group had previously signalled that, in common with other international peers operating in the country, it was under pressure to secure much-needed foreign currency. Foreign currency is important to help multinationals repatriate revenue earned in the country and, for those who, unlike GSK, also manufacture locally, to purchase raw materials from abroad.
Dollar inflows into Nigeria have fallen to record lows, hampering large global groups such as airlines who have cut back flights to and from the country or temporarily suspended operations.
In March, Unilever’s Nigerian subsidiary said it would stop manufacturing homecare and skin-cleansing products as it sought to make its business “competitive and profitable.”
GSK said in June that widespread foreign exchange shortages in Nigeria were negatively impacting its operations.
“The challenge in accessing currency is affecting our ability to maintain consistent supply of medicines and vaccines in the market,” a spokesperson said at the time. The company has now said that after evaluating other options, it “concluded that there is no alternative but to cease operations.”
UK-based GSK owns 46.4 per cent of GSK Nigeria with the rest held by local investors. Shares in the Nigerian-listed entity closed at N8.10 ($0.01).
The company’s half-year revenue fell by almost 50 per cent to N7.75 bn ($9.9mn) compared to the same period last year.
GSK said it was working with advisers to determine the next steps and is aiming to submit a plan to Nigeria’s Securities and Exchange Commission. The group said shareholders other than its UK parent company would “receive an accelerated cash distribution and return of capital if the plan is approved by the regulator.”
GSK began adopting a local distributor model across its African markets in 2018. The company told the FT about 160 employees will be affected by the change in approach in Nigeria.