NIGERIA — GlaxoSmithKline (GSK) Nigeria has announced its decision to withdraw from the Nigerian market due to mounting challenges and a shifting business landscape, following a strategic move that parallels its departure from Kenya last year.
This decision follows a comprehensive evaluation of options to adapt to the evolving market dynamics. GSK Nigeria, a subsidiary of the British pharmaceutical giant, has been an integral part of Nigeria’s healthcare landscape since 1971.
However, in recent years, it has grappled with growing competition from local enterprises and the influx of pharmaceutical imports from India and China.
The company’s financial reports reveal a stark decline in sales, with half-year revenues plummeting to 7.75 billion naira (approximately US$9.82 million) from 14.8 billion naira (US$18.7 million) during the same period in the previous year.
This sharp decline can be attributed to a combination of factors, including increased competition, challenges in accessing foreign currency, and a shifting market landscape.
GSK’s parent company, headquartered in the United Kingdom, announced its intention to streamline operations across Africa back in 2018.
Instead of marketing medicines directly in multiple sub-Saharan African markets, the company opted to adopt a distributor-led model.
This decision was prompted by a desire to enhance efficiency and adapt to the unique challenges of the African healthcare landscape.
In June, GSK highlighted the widespread foreign exchange shortages in Nigeria, which severely hampered its operations.
A spokesperson at the time noted, “The challenge in accessing currency is affecting our ability to maintain a consistent supply of medicines and vaccines in the market.”
Now, GSK has concluded that, after exploring various alternatives, discontinuing operations in Nigeria is the only viable option.
GSK is actively working with financial advisers to chart the course ahead. If the plan is approved by Nigeria’s Securities and Exchange Commission, shareholders, except the UK parent company, will receive an accelerated cash distribution and return of capital.
The Haleon Group has also informed GSK Nigeria of its intentions to terminate a distribution agreement and appoint a third-party distributor in Nigeria.
This decision is influenced by Nigeria’s current challenges, including a rising cost of living, increased business expenses, and a shrinking consumer base.
In a statement, GSK Nigeria’s board expressed their rationale, saying, “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 repercussions of this decision are not limited to the pharmaceutical industry; they extend to the broader economic landscape of Nigeria.
Shares in GSK Nigeria, where British drugmaker GSK holds a 46.4% stake while Nigerian shareholders own the remaining 53.6%, have declined significantly, closing at 8.10 naira (US$0.01), down from a peak of 42.24 naira (US$ 0.054) in 2014.
The economic challenges in Nigeria are exacerbated by inflation, which has remained in double digits since 2016, reaching 22.79% in June.
This strategic pivot is expected to impact around 160 employees in Nigeria, further underlining the significance of GSK’s decision in the country’s healthcare and economic landscape.
President Bola Tinubu’s recent policy changes, including the removal of a popular but costly petrol subsidy and currency devaluation, are expected to further drive inflation upward.
These reforms aim to stimulate economic growth and attract foreign investment to address chronic dollar shortages, making it difficult for companies to import essential raw materials.
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