GlaxoSmithKline (GSK), last Thursday announced plans to discontinue operations in Nigeria, ending its 51-year existence in the country after the company’s first office was opened in Lagos on July 1, 1972.
The British multinational pharmaceutical and biotechnology company is best known for household brands like Panadol and Sensodyne.
In a corporate filing, the pharmaceutical giant said it would now adopt a distributor-led model to supply the country with its products.
GSK Nigeria said it was working with its advisers to determine the next steps and intends to submit a scheme of arrangement to the Securities and Exchange Commission (SEC) for the possible return of capital to its local shareholders.
“In our published Q2 results we disclosed that the GSK UK Group has informed GlaxoSmithKline Consumer Nigeria PLC of its strategic intent to cease commercialisation of its prescription medicines and vaccines in Nigeria through the GSK local operating companies and transition to a third-party direct distribution model for its pharmaceutical products,” the firm said.
“The Haleon Group has also separately informed the board of its intent to terminate its distribution agreement in the coming months and to appoint a third-party distributor in Nigeria for the supply of its consumer healthcare products.
“For the above reasons, and having, together with GSK UK, evaluated various other options, the board of GlaxoSmithKline Consumer Nigeria Plc has concluded that there is no alternative but to cease operations.”
The company further advised shareholders to seek professional advice and continue to exercise caution when dealing its shares until a further announcement is made.
While GSK did not speak on reasons for the move, speculations abound regarding the factors that led to this drastic action.
TheCable will attempt a response based on interviews and the facts we have about the company’s challenges.
FOREIGN EXCHANGE CRUNCH
GSK Nigeria’s sales in the first half (H1) of 2023 dropped to N7.75 billion from N14.8 billion in the same period a year ago.
In its 2023 H1 report, the company lamented that the business environment continued to be very challenging with foreign exchange (FX) availability affecting its ability to settle foreign currency-denominated trade payables with product suppliers.
“As a result, it remained difficult to maintain consistent supply to the market,” GSK Nigeria added.
An index analysis of the company’s financial results within the six-month period showed that the firm made more money (N5.25 billion) from the sale of its consumer healthcare brands than its pharmaceutical brands (N2.49 billion).
Between January and June 2022, the company generated a revenue of N10.59 billion from the sale of its pharmaceutical brands while it made N4.21 billion from its consumer healthcare brands.
Last year, at the 52nd annual general meeting (AGM) of GSK Nigeria, Edmund Onuzo, chairman of the board of directors, spoke of the impact of FX scarcity on their operations.
He said the company’s ability to secure essential foreign currency for importing products had been severely compromised.
“While we expect sustained economic growth in 2023, we cannot overlook some factors which must be duly considered in this quest for economic growth and development in Nigeria. The factors include foreign exchange availability for businesses, insecurity, unemployment, and high cost of doing business, coupled with the uncertainty around fuel subsidy removal,” Onuzo had said.
“The challenges ahead are quite significant, as some of you may have read reports from a few media houses regarding the supply constraints on GSK drugs in the market, we must mention that it continues to be very challenging with foreign exchange non-availability affecting our ability to settle foreign currency-denominated trade payables with product suppliers.”
Recently, drug manufacturers appealed to the government to address the issue of FX scarcity as it could lead to drug shortages in the county.
INCREASED COMPETITION FROM LOCAL FIRMS AND GLOBAL IMPORTS
In addition to FX, TheCable understands that GSK faced increased competition from local companies and imports from India and China.
According to Ade Popoola, the managing director of Reals Pharmaceuticals, GSK exited the country due to the increasing crowding out of its products by competition from mostly India.
“It’s like being in the middle of an expressway. When you have too much traffic, the rate at which you will progress will be difficult no matter how good your car is,” Popoola explained.
“The look-alike from India crowded them out. You find out that if you have been selling 250,000 units per year, when cheaper alternatives come in, it will first of all reduce to 200,000, and subsequently to 150,000, and 100,000.
“Later you will find yourself struggling to sell 50,000 because the hospital buying from you prefers alternatives because the other companies too may be quality. Once they crowd you out, you find it difficult to maintain your volume, and when you can’t maintain your volume, you cannot pay your cost.
“The Indian will sell at 20 percent of your price. It has happened to me, so I know what I am saying.”
GSK’S STRATEGIC SHIFT IN AFRICA
In 2018, GSK made headlines when Emma Walmsley, its chief executive officer (CEO), unveiled plans to scale back operations in Africa as part of the company’s strategic realignment.
Walmsley said the company would no longer market medicines to healthcare professionals in 29 sub-Saharan African markets and instead adopt a distributor-led model.
She said GSK would continue to run local operations in Kenya and Nigeria while retaining representative offices in Cote d’Ivoire and Ghana.
However, in 2022, GSK announced that it would adopt a third-party distribution model for its drugs and vaccines in Kenya from next year (2023).
While the cessation of operations in Nigeria may come as a shock to many, it aligns with the firm’s overall goals for the African region.
SHAREHOLDERS REACT TO GSK NIGERIA’S EXIT
Speaking on the development, Bisi Bakare, the national coordinator of Pragmatic Shareholders Association, said the scarcity of forex has made things difficult for GSK in the country, thus prompting the move to stop operations.
She also expressed her unhappiness at the impact the exit would have on unemployment in the country.
“We are not happy about it. We feel very bad. But when you look at the challenges the company is also going through, we know we can’t force them to stay. Shortage of forex is really affecting their business even though the problem is not peculiar to them,” Bakare said.
“Our children and elderly people working with them will also have to leave their jobs. Jobs are scarce now. Their decision to leave Nigeria will add to unemployment in the country.”
On his part, Godwin Anono, president of Standard Shareholders Association, said the lack of a conducive environment for doing business prompted GSK’s departure from Nigeria.
”A foreign company cannot be prevented from leaving if they have made up their mind. Nigeria will remain Nigeria. For shareholders, if the value of a share is N3, then with our interest, they pay us N5, we will collect it and move on,” Anono said.
BREAKING: BUA cement slashes price to N3,500, plans further cut for 2024
BUA Cement PLC, on Sunday, announced the reduction of the price of its cement product to N3,500 per bag starting from Monday, October 2, 2023.
It said the price reduction was in line with its commitment to spur development in the “building materials and infrastructural sectors”.
The company announced the price reduction in a statement posted on its X (formerly Twitter) page.
This development is coming weeks after the company’s chairman, Abdul Samad Rabiu, after meeting with President Bola Tinubu, promised to review the price of the product.
The statement read in part, “We refer to our previous pronouncements regarding our intent to reduce cement prices upon the completion of our new lines at the end of the year, in order to spur development in the building materials and infrastructure sectors.
“As per the commitment made to reduce prices and following a periodic review of our operations for efficiency, the management of BUA Cement Plc wishes to announce and inform our esteemed customers, stakeholders, and the public that effective October 2, 2023, we have decided to bring the price reduction forward. As a result, BUA Cement would now be sold at an ex-factory* price of 3,500 Naira per bag so that Nigerians can begin to enjoy the benefits of the price reduction before the completion of our plants.
“Upon completion of the ongoing construction of our new plants, which would increase our production volumes to 17million metric tonnes per annum, BUA Cement PLC intends to review these prices further in line with our earlier pronouncements by the first quarter of 2024.”
FAAC shares N1.1trillion to FG, states, LGs for August
The Federation Account Allocation Committee (FAAC), has shared N1.1 trillion among the Federal Government, states and Local Government Councils for August.
This is more than the N966 billion shared in July.
According to the FAAC communique, the N1.1 trillion total distributable revenue comprised statutory revenue of N357.398 billion, Value Added Tax (VAT) revenue of N 321.941 billion and Electronic Money Transfer Levy (EMTL) revenue of N14.102 billion.
It also comprised Exchange Difference revenue of N229.568 billion and Augmentation of N177.092 billion.
The communiqué said total revenue of N1.48 trillion billion was available in the month of August 2023.
“Total deductions for cost of collection was N58.755 billion, total transfers and refunds was N254.046 billion and savings was N71 billion.
“Gross statutory revenue of N 891.934 billion was received for the month of August 2023. This was lower than the N1.1 trillion received in the month of July by N258.49 billion.
“The gross revenue available from VAT was N345.727 billion. This was higher than the N298.78 billion available in the month of July by N46.938 billion,’’ it said.
It said that from the N1.1 trillion total distributable revenue, the Federal Government received N431.245 billion, the state governments received N361.188 billion and the LGCs received N266.538 billion.
“A total sum of N26.473 billion, (13 per cent of mineral revenue) and N14.657 billion (13 per cent of savings from NNPCL), were shared to the relevant states as derivation revenue.
“From the N357.398 billion distributable statutory revenue, the Federal Government received N173.102 billion, the state governments received N87.800 billion and the LGs received N67.690 billion.
“The Federal Government received N48.291 billion, the state governments received N160.971 billion and the LGs received N112.679 billion from the N321.941 billion distributable VAT revenue,” it said.
The communiqué said the N14.102 billion EMTL was shared among the three tiers of government.
“The Federal Government received N2.115 billion, the state governments received N7.051 billion and the LGCs received N4.936 billion.
“The Federal Government received N114.445 billion from the N229.568 billion Exchange Difference revenue.
“The state governments received N58.048 billion, and the LGCs received N44.752 billion.
“The sum of N12.027 billion (13 per cent of mineral revenue) and N0.296 billion (13 per cent of savings from NNPCL) went to the relevant states as derivation revenue,’’ it said.
It said that from the N177.092 billion augmentation, the Federal Government received N93.292 billion, the state governments received N47.319 billion and the LGCs received N36.481 billion.
“In the month of August, VAT, Import and Excise Duties and EMTL increased considerably while Petroleum Profit Tax (PPT), Companies Income Tax (CIT), Oil and Gas Royalties recorded significant decreases.
“The balance in the Excess Crude Account (ECA) was 473.75 million dollars.
Tinubu rings Nasdaq stock market closing bell, tells investors ‘the greatest economy is Nigeria’
President Bola Tinubu rang the closing bell at the Nasdaq Stock Market in New York on Wednesday as he called on the United States business community to invest in Nigeria’s “bubbling market”.
Tinubu, who is attending the ongoing 78th session of the United Nations General Assembly, was accompanied to the bell ceremony by the President of the U.S.-Africa Business Center (USAfBC) at the U.S. Chamber of Commerce, Scott Eisner.
The closing bell ceremony, held at the seven-storey tower of the Nasdaq headquarters in New York, signifies the end of a trading session.
“I am happy to bring Nigeria to your doorsteps and honoured that we’re here today with a bubbling maket that will evolve the West African subregion,” Tinubu said.
“The greatest economy is Nigeria. There is an immense opportunity in Nigeria that you can invest your money without fear.”
The Nigerian leader cited the removal of “a lot of the bottlenecks”, including the fuel subsidy which he described as corrupt, adding that his administration had retooled the exchange rate to a “reliable, dependable one-figure floating of the exchange naira”.
“You are free to take in your money and bring out your money,” he continued. ” I count on you to invest in Nigeria.”
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