Swiss construction giant Holcim is selling its 84 percent stake in Lafarge Africa to China's Huaxin Cement for $1 billion, marking its exit from Nigeria as part of a portfolio rebalancing towards high-growth regions.
SBM is also a security analysis and strategic consulting firm whose aim is to provide analysis of the socio-political and economic situation in West Africa by whatever means are practical.
Accordingly, “the dynamics of the Nigerian economy have changed significantly in recent years, forcing investors to rethink their assumptions about the purchasing power and preferences of Nigerians.”
The deal, however expected to close in 2025, reflects Huaxin's growing African acquisitions as Nigeria faces a sharp $12.8 billion decline in foreign ownership between 2022 and 2023 due to naira devaluation and Corporate exits will fall to $73.4 billion, as noted in the report World Investment Report 2024.
Nigeria's domestic and foreign direct investment also declined, with foreign direct investment (FDI) inflows reaching historically low levels, further weighing on the country's economic prospects.
The naira, which has fallen by more than 70% since the foreign exchange reform in 2023 coupled with the withdrawal of multinational companies, explains why the stock of foreign direct investment fell by 14.9% last year.
This decline is more pronounced compared to 2021, when the stock of foreign direct investment fell only slightly by 1.49%. South Africa, which remains the largest FDI recipient in Africa, also saw its FDI stock decline from US$172.2 billion in 2022 to US$124.0 billion in 2023.
Foreign direct investment, a key category of cross-border investment, is critical to promoting economic growth, technological advancement and job creation. However, in recent months there has been a steady increase in exit plans or a reduction in commitment by multinational companies, particularly in the manufacturing sector.
In the second half of 2023, at least five multinational companies – Procter & Gamble, GlaxoSmithKline Consumer Nigeria, Equinor, Sanofi and Bolt Food – announced plans to exit Nigeria in 2024.
The trend continued in 2024, with companies such as Kimberley-Clark, Heineken (exiting Champion Breweries), Diageo (exiting Guinness Nigeria), Eni (exiting Nigerian Agip Oil Company), Mobil (exiting Mobil Producing Nigeria ) and Pick n Pay also moved out of the country.
The exit of these multinationals weakens Nigeria's productive capacity and makes achieving a trillion dollar economy by 2030 a difficult task.
As the fourth largest economy in Africa, Nigeria cannot achieve this milestone without a strong and thriving manufacturing sector. Challenges such as persistent foreign exchange shortages, high energy costs, port congestion, multiple taxation, insecurity and poor infrastructure continue to slow the sector's growth.
According to the National Bureau of Statistics, the real growth rate of manufacturing was just 0.92% in the third quarter of 2024, the lowest since the third quarter of 2022, when the sector contracted.
The Manufacturers Association of Nigeria also reported a 37% decline in new jobs created in the first half of 2024. Two recessions in the last eight years have hampered Nigeria's ability to grow beyond $500 billion.
The last time Nigeria surpassed this figure was in 2014, when its GDP was $574.2 billion, according to the World Bank. As of last year, the economy had fallen to $362.8 billion, compared to $477.4 billion in 2022.
Multinational companies have historically contributed greatly to Nigeria's GDP and income. Before the exit of major multinational companies this year, many manufacturers, particularly in the fast-moving consumer goods industry, had either left the country or stopped producing certain products due to the difficult operating environment.
President Bola Tinubu claimed earlier this year that his reforms had attracted $30 billion in foreign direct investment into the economy within a year. But in the second quarter of 2024, the national data agency reported that foreign direct investment fell to $29.8 million, the lowest since the agency began collecting data in 2013.
“This decline highlights the growing trend of joint ventures between Chinese companies and African nations. Companies such as Huaxin Cement, which has acquired cement companies in Tanzania, Zambia, South Africa and Mozambique since 2020, and West China Cement, another key player, have expanded into countries such as the Democratic Republic of Congo and Mozambique,” says SBM.
It continued: “Huaxin’s majority stake in Lafarge Africa, if completed next year, could further enhance Lafarge’s market capitalization and financial performance in the first nine months of 2024.”
Lafarge reported profit growth of 53%, reaching N60.1 billion compared to N39.3 billion in the same period last year, while Dangote Cement recorded a slight increase in profit of 0.58% to N279.1 billion.
However, BUA Cement’s profit fell by 36% to N48.9 billion. Despite Lafarge's impressive profit growth, its profit is lower than Dangote's. The Nigerian cement market, dominated by three major players – Dangote Cement, BUA Cement and Lafarge – is facing increasing competition, particularly from Chinese takeover.
It is argued that this acquisition, if successful, could position Huaxin as a top contender in the market. As the world's largest cement producer, China's entry into the Nigerian market could intensify competition as companies vie for customers through lower prices and higher quality offerings.
The cement sub-sector is one of the three largest contributors to the Nigerian manufacturing sector. While many foreign direct investments have withdrawn from Europe and North America, others are stepping in from Asia.
Nigeria's building materials and cement industries remain robust, but growing competition in these sectors is causing margins and growth opportunities to shrink, prompting investors such as Holcim to rethink their market position.
We now range from Ashaka in Gombe State to Ewekoro and Sagamu in Ogun State down to Mfamosing in Cross River State.
Lafarge prides itself on empowering people in its host communities and creating progress with and for them.
“We thrive alongside our communities through our ongoing projects and activities that impact the community. At Lafarge Africa, we believe in “Creating Progress for People and the Planet” to continuously deliver environmental, economic and social impact in our operating communities while advancing Nigerian society.
“Our goal is to create a positive footprint for diverse stakeholders, create opportunities for partnerships and build accountability for the well-being of all.” Through our various interventions, we are reinventing how the world is built for today, tomorrow and for the future “said the company.
It goes on to say that the four pillars of sustainability are: “Ensuring progress for people and planet We have taken a horizontal approach to sustainability and align our interventions and practices with four key pillars.”
Climate and energy
“As a member of Holcim, we are committed to building a net zero future that benefits people and the planet. As a pioneer in green building, Holcim was the first global building materials company to sign the United Nations Global Compact's Business Ambition for 1.5°C initiative, with its 2030 targets validated by the Science Based Target Initiative (SBTi).
“One year later, Holcim is among the first companies in the world to set net zero targets for 2050 validated by SBTi. With these goals, Lafarge Africa has established its country targets, spanning all operations and the value chain, to set milestones for achieving its net zero targets by 2050.
Circular economy
“Lafarge Africa is ready to create a business model that replaces the linear concept with the circular economy. Through a stop-extraction, zero-waste, optimization, reuse and recycling approach, Lafarge Africa enables recycling and is a leader in the circular economy as a key enabler of sustainability.
“We are driving the circular economy through manufacturing and production, from our facilities and products to sustaining our ecosystems, creating the need to fully optimize resources that deliver business, societal and planetary benefits.” In this way, we are creating a model , which effectively manages the world's finite resources.
Nature
“Lafarge Africa’s nature strategy focuses on two main areas: water and biodiversity. We protect and restore the natural resources we rely on. Through our operations, Lafarge strives to replenish the fresh water we consume by using rainwater in our operations, thereby preventing the use of fresh water, particularly in water-scarce locations.
“Our focus on biodiversity is to create a lasting positive impact on the planet. Through various transformative interventions such as quarry rehabilitation programs and the Maiganga Wetlands Project, we are building a nature-friendly future and restoring our ecosystem to its natural habitat.
People
“Our people and communities remain at the heart of our interventions. We respect our stakeholders with a focus on human rights in our operating communities and along our business value chain.
“We work together to empower our people and communities to build a functional future. We do everything we can to implement social interventions that increase the trust of our stakeholders while maintaining our license to operate.
“Our social impact programs focus on four key pillars – education, empowerment, health and safety, housing and infrastructure – and have reached approximately one million beneficiaries over the last five years.
“The United Nations Sustainable Development Goals set out a holistic framework for tackling the world's most pressing sustainability challenges and creating a future that works for all.
“Lafarge Africa is less than a decade away from achieving the Sustainable Development Goals and is committed to making a positive contribution to achieving these goals by working with all relevant stakeholders, led by the Government.”
“Through effective monitoring and evaluation and transparent disclosures, we accelerate impact and contribute to goals,” the company said.