NIGERIA— British pharmaceutical giant, GlaxoSmithKline (GSK) through its subsidiary, GSK Nigeria, has announced it is in the process of winding down direct operations in Nigeria and instead seeking a third-party entity to distribute its products in the country.
GSK, in 2018 announced a radical shift from direct operations in Africa and instead adopt a distributor-led model in 29 Sub-Saharan Markets, led by its subsidiary Haleon.
Although, it continued to run local operations in Kenya and Nigeria while retaining representative offices in Cote d’Ivoire and Ghana.
GSK in a statement on the 3rd of August noted that worsening economic pressure had led it to put the brakes on activity in Africa’s largest economy after more than half a century of being present there.
The drugmaker said that it had informed GSK Nigeria, its local affiliate, that it will stop distributing its prescription medicines and vaccines itself and move to use third-party Nigerian companies.
Haleon, GSK’s consumer health division which was spun out last year and which manufactures products such as Panadol painkillers and Sensodyne toothpaste, also announced it would shift to a third-party distribution model.
GSK had previously signaled that in common with other international peers operating in the country, it was under pressure to secure much-needed foreign currency.
In March, Unilever’s Nigerian subsidiary said it would stop manufacturing homecare and skin-cleansing products as it sought to make its business “competitive and profitable.”
GSK said in June that widespread foreign exchange shortages in Nigeria were negatively impacting its operations.
“The challenge in accessing currency is affecting our ability to maintain a consistent supply of medicines and vaccines in the market,” a GSK said at the time.
GSK Nigeria was announcing its half-year performance as that fell by almost 50 percent to US$9.9 million compared to the same period last year.
The announcement by GSK Nigeria led shares in the Nigerian Stock Exchange to close under US$0.01.
GSK Nigeria also noted that it was facing increased competition from local companies and imports from India and China
“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,” GSK Nigeria said in a statement.
GSK said it was working with advisers to determine the next steps and is aiming to submit a plan to Nigeria’s Securities and Exchange Commission.
The group said shareholders other than its UK parent company would “receive an accelerated cash distribution and return of capital if the plan is approved by the regulator.”
The company also, unfortunately, noted that more than 160 employees will be affected by the change in approach in Nigeria.
Nigeria’s dollar crunch and Naira crush
Inflation in Africa’s largest economy, which has been in double digits since 2016, reached 22.79% in June and is set to rise further after new President Bola Tinubu scrapped a popular but costly subsidy on petrol and devalued the currency.
Comprehensively, foreign currency is important to help multinationals repatriate revenue earned in the country and to facilitate the purchase of raw materials such as Active Pharmaceutical Ingredients (API) and excipients from abroad.
Additionally, dollar inflows into Nigeria have fallen to record lows, hampering large global groups such as airlines who have had to cut back flights to and from the country or suspended operations.
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