Magazine article African Business

That Sinking Feeling

Magazine article African Business

That Sinking Feeling

Article excerpt

Nigeria's business environment has always been a slippery terrain. But while foreign companies have been able to muddle through for a long time, many have finally decided to divest their stakes in the economy. Jato Thompson reports.

The Government is baffled by the recent spate of divestments despite a strong drive to attract investors, with international campaigns and the recent abrogation of the Exchange Control Act and the Nigerian Enterprises Promotion Act.

Figures from government agencies in charge of the financial market - the Securities and Exchange Commission (SEC) and its private sector counterpart, the Nigerian Stock Exchange - reveal that about N10bn worth of capital has been lost through divestment over the last two years. The exit of 14 European firms from the pharmaceuticals industry between 1993 and 1994 alone cost the country N3.5bn. Companies which left included Sterling Health Overseas, May & Baker, Wellcome, and Glaxo.

Unilever's divestment from UAC Nigeria Plc and Vono Products Plc is estimated to have cost the economy over N2bn worth of capital, and the recently concluded sale of Texaco Overseas Holdings in Texaco Nigeria Plc took over N100m out of the country.

Neither has the banking sector been spared the rod of capital flight. SEC sources say divestment has swallowed up over N2bn from this sector. Over N260m went with the departure of Standard Chartered from First Bank Nigeria Plc, and N207m with the withdrawal of BIAO from Afribank. The latest divestments to hit the sector have come from American Express and Barclays Bank.

Bankers and government officials admit that these decisions to pull out of the country despite recent efforts to shore up investor confidence, show a clear lack of confidence in the Nigerian economy as presently managed by the military Government.

With even the Chief Executive of the SEC, Mr George Akamiokhor, calling on the Government and the private sector to take urgent measures to prevent further capital flight, the tide could not be stemmed. …

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