Nigeria’s tentative turnaround: Multinationals test the waters again

Nigeria’s reputation as Africa’s economic powerhouse has faced significant strain in recent years. Foreign direct investment (FDI) plummeted by 36 percent in 2023, reaching just $698 million—the lowest in over a decade, according to the UNCTAD World Investment Report 2024.

High-profile exits, from energy giant Shell divesting its onshore operations to Procter & Gamble halting manufacturing and Microsoft closing its African Development Centre in Lagos, have underscored deepening investor unease. The reasons? A toxic mix of policy instability (including abrupt tax hikes and import restrictions), a volatile naira (which lost 70 percent of its value in 2023 after forex reforms), and rising security costs—factors that pushed Nigeria to the lower rung of the ease of doing business ladder since 2020.
Yet beneath the exodus, tentative green shoots are emerging. While GlaxoSmithKline and Sanofi joined the retreat in 2023, others like Microsoft (signing a $1M digital transformation deal with the government in early 2024) and Dangote Group’s $20B refinery—now operational—signal cautious optimism.

“While reforms like the naira float show promise, sustainable recovery hinges on stabilising these interconnected crises. Without meaningful progress, Nigeria risks losing its status as Africa’s investment hub.”

The naira’s stabilisation and Q4 2024 GDP growth of 3.84 percent (the highest since 2022) hint at fragile macroeconomic progress. But with inflation still at 23.7 percent (April 2025) and debt servicing still mounting, the question remains: Is this a genuine turnaround or merely the calm before another storm? In Nigeria’s complex economy, the answer is rarely straightforward.

Wave of high-profile exits

Between 2022 and 2025, Nigeria witnessed an unprecedented exodus of multinational corporations across critical sectors, from energy to tech and consumer goods. According to data tracking 12 major exits since 2022, the departures reflect deepening operational hurdles, from currency volatility to thinning margins.

March, 2025

● Shell: After decades of onshore operations, Shell finalised its exit from Nigeria’s troubled oilfields, pivoting to offshore assets. The move followed years of community unrest and regulatory headaches, severing ties with one of the country’s oldest oil investors.

2024

● Microsoft: The tech giant shuttered its Lagos-based Africa Development Centre in May 2024, attributing the decision to global restructuring. Industry insiders, however, pointed to local challenges like soaring operational costs and FX scarcity.

● Diageo: The beverage leader sold its stake in Guinness Nigeria in June 2024, joining a wave of consumer goods retreats.

2023

● GSK and Sanofi: Both pharmaceutical giants halted manufacturing, citing logistical gridlocks and unviable margins.

● Procter & Gamble: P&G exited local production in December 2023, switching to imports amid FX instability. Competitor Hayat Kimya’s Molfix nappies now dominate the market.

● Unilever: Scaled down homecare production in March 2023, blaming Nigeria’s “hostile” business climate.

2021–2022

● Shoprite: The South African retailer exited in 2021, unable to navigate profit repatriation bottlenecks and security risks.

The exits reflect a trifecta of challenges pervading Nigeria’s investment climate, which is thereby eroding investor confidence: chronic forex volatility (36% FDI drop in 2023), policy unpredictability (ranked 131st in 2020 ease of doing business), and widespread insecurity (4,000+ conflict deaths in 2023). Businesses grapple with dollar shortages, abrupt regulation shifts, and regional threats—from insurgencies in the northeast to banditry in the northwest and oil theft in the south. While reforms like the naira float show promise, sustainable recovery hinges on stabilising these interconnected crises. Without meaningful progress, Nigeria risks losing its status as Africa’s investment hub.

The exits underscore a stark reality: Nigeria’s appeal as an investment hub is eroding. Yet, as local firms like Molfix fill gaps, the long-term impact remains contested between resilience and systemic fragility.

Multinationals testing Nigeria’s reformed waters

President Tinubu’s reforms have sparked selective multinational returns, with Microsoft ($1M digital investment) and PZ’s reopening manufacturing line leading the charge. In his 2024 Independence Day anniversary speech, he noted that within the first 16 months of his administration, the government has succeeded in attracting $30bn worth of FDI.

Tech, energy, and agribusiness firms are cautiously reinvesting, drawn by forex reforms and localisation incentives like PZ Cussons’ manufacturing push. While Emirates resumed flights and BUA expanded refining, most returning players represent strategic adaptations rather than full reversals of previous exits. The $1.5B Q1 2024 FDI uptick remains dwarfed by pre-2022 levels, underscoring Nigeria’s unfinished recovery. Key deals like Seplat’s ExxonMobil acquisition signal confidence, but absent major manufacturers like GSK, this revival remains measured.

Naira stability brings a flicker of optimism

Despite these headwinds, some investors are beginning to take a second look at Nigeria. A key reason? The recent stabilisation of the naira, which for years had been a major obstacle to business confidence.

In May 2025, the naira appreciated by ₦16.03 against the dollar, closing the month at ₦1,586.15/$. This marked a shift from a volatile 2024, where the currency had been among the worst-performing globally.

Central Bank reforms have played a major role in reducing exchange rate volatility and narrowing the gap between the official and parallel markets. Analysts now see Nigeria’s FX environment as more predictable, one of the top priorities for foreign capital providers.

Surge in capital inflows

These changes are already producing results. The Central Bank of Nigeria (CBN) reported that capital inflows rose from just $330 million in January 2024 to over $2 billion in January 2025, a 524 percent increase year over year. Nigeria was also the leading destination for private capital in West Africa between 2020 and 2024, securing over $3 billion in investment deals.

Significant developments include:

● A $600 million lithium processing plant near Kaduna-Niger is scheduled for commissioning this quarter.

● A $200 million lithium refinery on the outskirts of Abuja, opening later in 2025.

● New investments in refining, boosting national capacity to 1.3 million barrels per day, and transforming Nigeria into a regional oil hub.

Local currency investments on the rise

Another trend is the pivot to naira-based investments. Venture capitalists and fund managers are increasingly backing startups and businesses in local currency, avoiding the pitfalls of dollar-denominated deals in a volatile FX environment.

“Naira-based funds make more sense now,” said Gbenga Hassan of Argentil Capital. “Returns are more predictable, and you’re not battling devaluation on the back end.”

Final thoughts

Yes, the foreign investor exodus is real, and it reflects years of structural issues. But Nigeria is not without hope. With a more stable currency, a narrowing FX gap, and early signs of capital returning, the country may be at a turning point.

The road to recovery is long. But if reforms hold and political will persists, Nigeria can still reclaim its place as a preferred investment destination on the continent.