Why GSK Is Exiting The Nigerian Market

0

GSK, a British multinational pharmaceutical and biotechnology company has announced plans to cease direct business operations in Nigeria. This indicates a significant decision with potential implications for stakeholders, the stock market, and the Nigerian economy.

This decision which was announced last week marks the end of a business presence that spans over half a century.

The global 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.

Reasons for the exit were revealed in its H1 report which includes a “challenging environment with foreign exchange availability” which strongly indicates the impact of Nigeria’s macroeconomic headwinds, as reflected in the decline in revenue. In the first half of 2023, the company witnessed a decline of nearly 50% in revenue, amounting to N7.75 billion.

The company’s financial notes shed light on the revenue downturn. The report elucidates that the revenue contraction was a consequence of a demanding scenario characterized by the scarcity of foreign exchange.

As a result, the company encountered considerable challenges in maintaining a consistent flow of products to the market, ultimately impacting its top-line performance.

GSK’s exit carries worrying implications, particularly when juxtaposed with the actions of other companies.

GlaxoSmithKline (GSK) began adopting a local distributor model across its African markets in 2018, but its departure from the Nigerian market now is indeed of concern.

The departure is poised to exacerbate the unemployment situation. Reports suggest that the pharmaceutical company has communicated that around 160 employees will bear the brunt of this shift in business strategy in Nigeria.

Beyond its implications for unemployment, this exit will reverberate through the stock market.   UK-based GSK owns 46.4% of GSK Nigeria with the rest held by local investors.

Furthermore, this departure is likely to impact the investment landscape, resulting in a reduction in the investment portfolio. Minority shareholders, who hold a stake in GSK Nigeria, will take their capital.

Leave A Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.