As more and more multinationals continue to exit Nigeria on account of the economic crisis, Huggies diaper and sanitary pad manufacturer Kimberly-Clark is considering shutting down its Ikorodu production facility in Lagos Nigeria, nearly three years after a $100 million investment and a factory inauguration.
The economic downturn in Nigeria, leading to high energy costs, rising raw material prices, and weak consumer demand, is the reason for the sudden decision by Kimberly-Clark, resulting in the closure decision.
Reports revealed that production has been below capacity since late 2023 due to these economic difficulties. This comes after a previous closure in 2019, followed by a restart in 2021. The company initially enjoyed strong sales growth upon reopening, but the economic situation has greatly impacted its operations.
The high cost of running the factory is a major issue. Reports also note that the company spends over N500 million monthly on fixed operational costs, with an additional N100 million just for powering the gas generators. This, coupled with reduced production schedules — down to four days a week — has highly affected profitability.
The reliance on imported raw materials further heightens the problem. With the rising cost of these imports, combined with the weakening Naira, Kimberly-Clark is unable to keep up. The company initially set aside funds for operations, expecting Nigerian revenue to sustain them within five years. However, the current economic reality offers a difficult environment.
Last year, another major player in the personal care industry, Procter & Gamble (P&G), closed its Nigerian production facility after investing a huge sum (around $300 million). PZ Cussons is also evaluating strategic options for its Nigerian business, pointing at a need to maximize shareholder value.
The potential closure of Kimberly-Clark’s factory deals a huge blow to the Nigerian government’s efforts to attract foreign direct investment. It also reiterates the challenges faced by manufacturers in the real economy.
With two of the top three diaper and personal care producers potentially exiting in the last year, issues are rising about the impact on consumers.
If Kimberly-Clark follows P&G’s lead and transitions to an import-based model, it could further inflate the cost of huggies and sanitary products for Nigerian households. This would occur at a time when the Naira’s depreciation is already placing a strain on purchasing power and when the government is pushing for increased local production.
