Kimberly-Clark exit

Job losses, price hike, diaper scarcity looms for Nigerian families

What Happened
Kimberly-Clark, the American multinational personal care corporation known for brands like Huggies diapers and Kotex sanitary pads, has announced plans to shut down its manufacturing operations in Nigeria. This comes just three years after the company invested $100 million in building a new factory in Ikorodu.

The Big Picture

The decision to exit Nigeria is a significant blow to the country’s manufacturing sector and highlights the ongoing challenges faced by foreign businesses operating there. An inside source at Kimberly-Clark cited several factors contributing to its decision, including:

  • High energy costs: The high cost of electricity in Nigeria is a major hurdle for manufacturers, significantly impacting production costs.
  • Expensive raw materials: The difficulty and expense of sourcing raw materials locally further strains margins for manufacturers.
  • Reduced customer demand: The weakened Nigerian economy has led to a decline in consumer spending, impacting demand for Kimberly-Clark’s products.

The reason for Kimberly-Clark’s closure of operations in Nigeria is not far from similar foreign manufacturers who have exited or reduced their activities in the country-Weak purchasing power of the people, currency depreciation and high production cost.

The Numbers

According to Statista, the Nigerian baby diaper industry is estimated at $920 million with a compound annual growth rate of about 11% between 2024 and 2028. Kimberly Clark’s  Huggies are among the industry leaders in the industry alongside Pampers produced by P&G and Molfix. However, these companies compete with 15 other brands in the market.

Before the decision to close, Kimberly Clark’s company production time was reduced from 7 days a week to 4 days in a week. Also, the company spends around N100 million on power generation monthly and over  N500 million in operations.

Last year, Procter and Gamble (P&G), another U.S. based company, after investing about $300 million in a production factory in Ibadan, exited Nigeria.

Similarly, PZ Cussons who reported a loss of N94.78 billion in Q3 of the fiscal year 2023/34 is evaluating strategic options for its African business of which Nigeria is its largest market on the continent.

The closure of the Kimberly-Clark factory will result in the loss of jobs and closure of businesses that are sole suppliers of the product.  It also represents a significant setback for Nigeria’s efforts to attract foreign direct investment (FDI) in the manufacturing sector.

What Next

The exit of Kimberly-Clark is likely to have a ripple effect on the Nigerian economy. With reduced domestic production, diaper prices are expected to rise, putting additional strain on household budgets. The closure also raises concerns about the future of other foreign manufacturers operating in Nigeria, as they grapple with the same challenging economic conditions.

This development underscores the urgent need for the Nigerian government to address the issues plaguing the manufacturing sector. Creating a more conducive business environment through reliable power supply, affordable raw materials, and improved infrastructure is crucial to attracting and retaining foreign investment.

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