Indian steelmaker Aarti is exiting the Nigerian manufacturing sector, adding to the growing list of companies departing the country due to economic woes, BusinessDay confirms. The Ota, Ogun State-based steel manufacturer has been put up for sale, attracting bids between $50 million and $100 million from major players.
The exit is attributed to a high rate of indebtedness, a challenging economy, fluctuating currency, surging inflation, and high energy costs, according to sources speaking to BusinessDay on condition of anonymity.
“We are aware that Aarti Steel Nigeria has been put up for sale, but we are yet to make our bid,” said a source from one of the bidding companies. African Industries and Bharti are reportedly bidding to buy the Indian-owned steel manufacturer, with the process expected to conclude in a few months.
Aarti is asking potential investors to submit their profiles, aiming to hand over to a credible buyer. This marks the sixth company to exit Nigeria in the first half of 2024, following departures by Microsoft Nigeria, Total Energies Nigeria, PZ Cussons Nigeria PLC, Kimberly-Clark Nigeria, and Diageo PLC.
Aarti’s exit further dents Nigeria’s perception as an investment destination, challenging the country’s $1 trillion gross domestic product (GDP) target.
“The continuous exit of multinationals is a serious cause for concern,” said Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. “It has a negative implication for employment and the country’s perception as an investment destination.”
In 2017, Aarti invested $20 million to $30 million to establish a 120,000-capacity cold-rolled mill in Ota, Ogun State, serving Nigeria’s downstream players in home appliances, roofing sheets, and metal furniture sectors. However, this investment seems less significant now.
A director at Aarti Steel Nigeria, G C Tripathi stated he is unaware of the company being put up for sale, noting that key decisions come from the Indian headquarters. He added that the business is seeking more finance and bank commitments to increase production.
However, senior management confirmed in March 2024 that the company was seeking investors due to high indebtedness and missed supplier delivery timelines. “We are seeking a lifeline,” an official told BusinessDay.
The basic metal, iron, and steel subsector growth slowed to 0.57% in Q1 2024 from 1.1% in Q4 2023. On a year-on-year basis, it grew by 0.11% from 0.46% to 0.57%. Manufacturers attribute the exit of multinationals to Nigeria’s worsening business environment and insecurity, which are crimping profits and erasing shareholder value.
Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir said rising energy costs, foreign exchange volatility, accelerating inflation, and worsening insecurity are hurting manufacturers and hampering growth. He noted that the steel industry is particularly vulnerable, with operators struggling to survive.
“The escalating costs of power, low consumer spending, low access to competitive credit, and high rate of unplanned inventory and naira depreciation are hurting the country’s steel industry,” Ajayi-Kadir said.
Former chairman of MAN Steel Group and CEO of Qualitec Industries, Oluyinka Kufile added that poor policies and lack of government seriousness are detrimental to steel companies in Nigeria, with only a few players participating in industry meetings.
