Diageo Sells Guinness Nigeria Stakes; Join Exiting Multinationals

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UK-Based Diageo to Sell 58% Guinness Nigeria Stake to Tolaram Group for $70 Million

Diageo Plc, the British multinational beverage alcohol company, is selling its 58% stake in Guinness Nigeria Plc to Singapore-based Tolaram Group. This move aligns with other multinational corporations’ recent decisions to reduce their exposure or exit Nigeria, the most populous nation in Africa, currently grappling with a severe cost-of-living crisis.

Tolaram Group, which operates in consumer goods and is an investor in Nigeria’s new Lekki Deep Sea Port, will purchase the holding for 81.6 naira ($0.05) per share, totaling approximately $70 million. This strategic exit by Diageo is in response to the increasingly challenging business environment in Nigeria, marked by a scarcity of dollars necessary for international businesses to repatriate earnings. Additionally, an almost 70% depreciation of the naira since June and decades-high inflation have severely impacted profits and consumer demand.

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Recent months have seen similar moves by other major companies. Unilever Plc, Procter & Gamble Co., GSK Plc, and Sanofi have all announced reductions in their exposure or complete exits from the West African nation.

Despite selling its stake, Diageo will continue to have a presence in Nigeria. The company has entered into long-term license and royalty agreements with Tolaram for the ongoing production of the Guinness brand, along with locally manufactured ready-to-drink and mainstream spirits brands. According to a statement from Guinness Nigeria, the transaction is expected to be finalized in fiscal 2025, pending the necessary regulatory approvals in Nigeria. Diageo will retain ownership of the Guinness brand, which will be licensed to Guinness Nigeria for the long term, and will continue to operate in the country through its international premium spirits business.

Operating in Africa’s fourth-largest economy has become increasingly difficult for multinational companies. The devaluation of the naira, alongside soaring inflation rates, has created a tough economic climate. The scarcity of foreign currency has particularly strained international businesses, making it challenging to repatriate earnings and sustain operations.

These economic pressures are driving multinationals to reassess their investments in Nigeria. The exodus of businesses highlights the need for structural economic reforms to stabilize the currency and control inflation, which are crucial for maintaining foreign investment and economic growth.

Source: Bloomberg

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