Finance: Here is why P&G is shutting down its $300 million Agbara production factory


Here is why P&G is shutting down its $300 million Agbara production factory

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.

  • One year after launch, Procter & Gamble (P&G) may be shutting its $300 million production plant situated in Agbara Industrial Estate, Southwest, Nigeria.

  • 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 a lot of challenges ranging government policy, multiple foreign exchange rates and high interest rate.

Procter & Gamble (P&G) may be shutting its production plant situated in Agbara Industrial Estate, Southwest, Nigeria, exactly one year after launching the $300 million factory, Premium Times reports.

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.

The company is yet to make official statement on the shutting down of its Agbara plant.

Why P&G is shutting down the Agbara plant

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.

Another source said the factor responsible for the shutdown was the unhealthy competition being faced by the company.

ALSO READ: Here is why Unilever Nigeria is selling its Blue Band brand

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.

120 P&G Staff to be affected

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.

P&G manufacturing lines

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.

P&G Nigeria Brands

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.

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