For the past few years, until recently, conversations regarding the Nigerian Tech Developers exiting to other developing countries had been rife. People were concerned by the rate at which Nigerians relocated to countries like Malaysia and Indonesia.
In more recent years, the trend appears to be changing. The developer move has been towards eastern European countries, with Ukraine topping the list and countries like Cyprus, Estonia amongst others. However, currently, the developer move has been towards much more developed European countries with Germany and Netherlands taking the lion’s share.
The relocation drive is however not limited to developers and designers alone. Nigerian doctors, I believe, initiated this trend. It was reported that over five thousand Nigerian trained doctors are currently working with the British National Health Service. This implies that Nigerian medical practitioners constitute 3.9% of the foreign staff working with the British Health Service. According to the NMA President, Dr. Mike Ogirima, the situation was blamed on poor remuneration for medical doctors, poor working environment and inadequate medical equipment and infrastructure.
The crux of this article is to examine if we should actually be concerned about this trend and how a startup can operate irrespective of the desire of developers to migrate to greener pastures.
Cheap Education, Poor Education, Great Students
I have always argued that good quality education cannot be cheap, and it cannot be free. The best-rated universities in the world are usually the most expensive. However, the Nigerian situation appears to be peculiar. We have some not so great schools (at least a few of Nigerian universities appear in the top 1000 universities globally), but we have one of the best-motivated crop of students.
The current age has improved learning outside of the university system. I was speaking to a developer, and he confirmed to me that he did not learn how to code within the university system because his lecturers are stuck with BASIC and COBOL programming languages.
Bringing this to the current scenario, Nigerian students are really motivated. Some will put their grades on the line to just learn C#. Once these guys graduate, since the school contributed little or nothing to the body of knowledge they gained, they look to earn the most from this knowledge.
Why are our Developers Leaving?
Taking a cue from the president of the Nigerian Medical Association, few things might have contributed to the situation. They include:
Poor Remuneration – Unfortunately, in a capitalist community, money flow is expected to be directly proportional to value creation. Additionally, the higher the demand the higher the price of the item. Putting these 2 together, most businesses in 2018 will require the services of developers to ensure long-term sustainability. Everyone is looking for the “tech angle” to their business, hence, the value of being a developer. These developers are however in very short supply, hence the high cost of hiring them.
These developers are so much in high demand that Nigerian businesses are facing stiff competition from foreign businesses for them. These foreign tech businesses have higher bargaining powers since they offer relocation opportunities and compensation in foreign currency (this is redundant though since your cost is in foreign currency as well except for those working remotely).
Sadly, due to the stage of the Tech ecosystem in Nigeria, remuneration will continue to be an issue, because most startups cannot afford to pay what developers actually want to earn. If they manage to, then people in marketing and sales will complain. You might just shut the business down anyway.
Poor Working Environment – Due to capital constraints, a lot of startups still will be unable to create the most conducive work environments for their staff. Some will have to cool their offices with fans because they cannot afford air conditioners. Surely the work environment questions transcend the pay.
We have, however, noticed that most startups deliberately try to create good working environments, similar to what is obtainable at google, Uber, Salesforce and Co. This is only possible when the startup raises its funds or just got back from Y Combinator, 500 Startups and more recently, Techstars and Google Launchpad.
What then would a Startup do?
Based on the premises above, it is clear that most startups cannot afford to pay what most developers want to earn. Hence, these developers work for the most established, or the best-funded startups. These well-funded startups then lose many of the developers to foreign companies, especially booking.com. So the question is how do you attract and retain the best developers even in the competitive environment.
Side Hustle to Empire – Rather than trying to raise money at the early phase of your business, I will recommend that you fund the business out of the proceeds of your current salary. By this, I mean that you should start your business as a side hustle first, before jumping into the deep end. With this method, you can pay a crop of good quality developers to build your Minimum Viable Product.
Once that has been built, you leverage your network to conduct a Proof of Concept (POC) and iterate based on feedbacks from the POC. Once the concept has been proven, you initiate a soft launch to understand adoption and if the model can scale. Once this is done, you can then focus on your new startup to accelerate growth.
This model will allow you fund the initial development phase of your product. All you might need following this is a junior developer to maintain the system rather than building additional features.
Technical Co-Founder – Another way is to find a technical co-founder who has the skill and the ability to build the product you are trying to launch. With this technical co-founder, you will not need to be out of pocket too soon as your co-founder will build the product with assistance from his own network of UI/UX designers, front-end guys, etc. You, however, need to know that for you to get a co-founder, salary will not be the motivation; he needs to have skin in the game. So, some equity split is usually the catch.
Employee Stock Option Pool – Another way to ensure that you can get your technology business up to scratch and retain your top developer talents is to have a path to ownership for your employees through the employee stock option plan. These employees know that they might be earning below fair market price right now, but at exit, they have a share of the exit value.
Outreach and Remote Internships – A creative way is to hire 2 senior developers, but build your products leveraging remote internships. These interns will build your product for you, be the evangelists of your company, and learn to become great quality developers from thereon. From this internship opportunity, you identify the best talents and recruit those to work for your business.
In this day and age, you have to be creative to start, remain and grow a business.
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Strong performance from Stanbic IBTC, despite weak retail banking position
Will Stanbic IBTC be able to generate profit from its personal banking division by full year?
Stanbic IBTC made a profit after tax of N45.2billion, growing its profit by 24.7% when compared with this period last year.
The feat is remarkable; given that a majority of financial institutions responded as expected to the economic downturn triggered by inflationary pressures, oil price instability, and lack of notable business activities, necessitated by the corona-virus pandemic that has characterised the 2020 business calendar year.
These other organizations reflected positions worse off than their escapades in 2019. In cases where improvements in bottom-line were seen, it was only marginal.
Stanbic IBTC was not exempted from these economic trials, their immensely diversified business portfolio boosted their numbers on multiple fronts. Robust presence in Asset Management paid off, as commissions and fees represented a massive 62% of general fees and commission income. It’s Corporate and Investment division continues to produce astoundingly, contributing the highest and growing profit after tax of 49.2%.
This focused and efficiently monitored diversification, is turning Stanbic IBTC into world-beaters, reflecting in the expansion of its gross earnings by 7.8%, from N117.4billion in HY’2019 to N126.6billion so far this year.
This position could have appeared even better; had STANBIC been able to demonstrate in its personal and business banking segment, the same excellence, noticeable in its other business segments (Wealth, Corporate and Investment).
It’s Personal banking (generally regarded as Retail banking), encompasses the provision of banking and financial services to individual customers and SME’s (Small and Medium scale enterprises), mortgage lending, leases, card products, transactional and lending activities such as telephone banking, ATM’s, etc. The segment suffered this year, closing with a loss of N3.2billion, despite being responsible for over 58.4% of general staff costs. This poor position was sponsored by a reduction in income levels, especially non-interest income from fees and commission.
Unsurprisingly, given CBN’s policy at the start of the year to implement a much-reduced transfer fee rate, an increase in Non-performing loans is another causal factor for its loss this half-year. STANBIC cannot afford to bask in the euphoria of the massive successes of its Wealth and Corporate segment, at the expense of Retail banking.
Retail banking is fundamental to any bank looking to be a force, or preserve its going-concern status in this critically competitive economic environment. It has been the subject of immense research in the last decade, with many banks devising strategies to acquire a large chunk of the market share in this business segment. The banking landscape is evolving amidst growing competition, such that a bank that generally does well in its retail banking segment, is perceived as strong by the public. This has an underrated capacity to effortlessly attract more customers. Banks need to revisit the drawing board and re-embrace their sacred purpose of serving the basic and pure needs of their individual customers.
Michael Lafferty, Chairman of the Lafferty Group, whilst describing Retail banking said, “Retail banking is the foundation on which global banks are built,” It is a vast retail and consumer banking market, pointing out that the world’s biggest banks built their financial empire from the mass market.
Stanbic IBTC must be conscious in its quest to provide universal banking and find a balance in product and service offerings across its business segment.
A summary of the performance parameters in its financial statement, shows growth in gross earnings, from N117.4billion to N126.6billion, and improvement in earnings per share from 342kobo to 419kobo.
Attention now shifts to the impact of the bank’s new super app, supposedly a one-stop-shop for its diverse offerings, including banking, investing, pensions, trading, and insurance, and how it affects the bottom line in subsequent quarters.
Explore the Nairametrics Research Website for Economic and Financial Data
Lastly, will Stanbic IBTC be able to generate profit from its personal banking division by full year? We await their H2’2020 results.
Is Zenith Bank thriving on the strength of sound financial indices?
Zenith Bank posts N103.8bn profit in half-year financial result.
Sound financial indices have made Zenith Bank one of the largest banks in the Nigerian banking Industry. It was recognized as the Most Valuable Banking Brand in Nigeria 2019, in the Global Banker magazine Top 500 Banking brands; and Best Commercial Bank in Nigeria 2019, by the World Finance.
Zenith Bank has successfully bolstered this narrative even further with the release of its Half Year 2020 Financial Report, where it closed with a profit of N103.8 billion.
Growing profit position in these perilous times, speaks remarkably of the suppleness and elasticity of any establishment. A lull in economic activity caused by inflationary pressures, precariousness of the market, and the coronavirus pandemic has forced most Deposit Money Banks (DMBs) to cave in, and reveal achievements worse off than their 2019 results y/y – but not Zenith Bank Plc. The institution has showcased beyond reasonable doubt, that the apparent limitations are incapable of distorting its active growth pattern.
Zenith Bank closed H1 2020, 16.8% better off than it did in 2019 y/y, in terms of profit after tax. Although this massive leap, hugely resulting from tax paid as profit before tax, noted just a 2.2% growth. Further analysis of its HY’2020 results, demonstrates more efficiency, a focused cost of fund optimization, and an aggressiveness in generating income across its business heads and segments. This strategy had begun since 2018, and was shared by the bank when it disclosed planned implementation of an improved core banking system, hoping it would ultimately enhance efficiency while reducing costs.
Zenith Bank has thrived on the strength of its sound business model, corporate governance, conservative risk management, and strategic corporate social investment. The bank has been very forceful in the market, improving massively across all of its income generating segments, despite the plausible and obvious hindrances. This is a testament to its superiority, and sponsors its claim for supremacy.
The bank made N22billion from foreign exchange revaluation gains and despite evidence to the contrary, it endeavored in operating expenditure (OPEX). OPEX may have grown by 7.7%, but disclosures and note to the accounts shows that in virtually every expense head, costs dropped. The 7.7% was triggered majorly by Information Technology related costs, fuel and maintenance, and an increase in the compulsory banking cost fund, set up for the Asset Management Company of Nigeria (AMCON) by the CBN.
Now, like every hero susceptible to their hubris, Zenith has its own problems, which questions its position at the top. Yes, the bank may have an amazing and constantly improving interest expense to interest income ratio, but it does not possess the finest result in this regard as of yet. HY 2019 interest expense took as much as 33.6% of its income, while HY 2020 dropped to 27.4%. This is good, but still considerably high, if we carry out a peer-to-peer analysis with Guarantee Trust Bank Plc (masters of low-interest expenses), whose ratio stands at 16% for HY 2020.
However, Zenith has sustained the momentum of positioning itself as the crème de la crème in the Nigerian Banking Industry for quite some time. The bank’s pattern of growth and performance, strongly indicates its capabilities to manage its interest expense in subsequent quarters. It will be interesting to see how this pans out by year end.
In summary, despite economic difficulties this year, with most bank’s bottom-line at a worse position than the corresponding period last year, Zenith posted improved profit yet again. Could this be enough to portray supremacy?
UBA Plc H1’2020 results, a true reflection of its rightsizing decision?
UBA’s H1 2020 result is yet another demonstration of the resilience of its business model.
The upward review in benefits of some employees and directors this year, coupled with the rising operational costs, constitutes the hot topics from the 2020 semi-annual results released by UBA Plc.
Widely regarded as the banking sector’s largest employer of labour in Nigeria, the bank in December 2019, embarked on a ‘rightsizing’ exercise, which partly resulted in new hires, as well as promotions, improved remunerations, and benefits for existing employees.
The Group Head, Media and External Relations, UBA Plc, Nasir Ramon commenting on this said, “over 5000 staff of UBA Plc, started the new year with a lot of cheer, as the bank promoted to new grades, coupled with salary upgrades. Beneficiaries of this exercise will receive up to 170% increase in their salaries and benefits, whilst a good number have been moved to higher grade levels.”
Directors saw their emoluments amplify by 177.7% (Fees and Sitting allowances) as demonstrated in the financial statements of the bank. Rising to N50million in June 2020, from N18million in 2019 y/y.
Now, Deposit Money Banks (DMB’s) might be adjudged to be honorable in all of their objectives, but the truth is they are neither self-sacrificing nor are they expected to be. DMB’s are established for profit, and would incessantly prioritize business good sense over social empathy, for the sake of their owners. The import of this is, UBA Plc expects its colossal investments in employees and directors to overwhelmingly reflect in its bottom-line.
Half-year 2020 results is clearly not in sync with this philosophy, as it reflects a weakened position compared to the corresponding period last year, despite the investments in human capital. Profit before tax dropped by 18.7%, from N70.3billion recorded in HY’2019 to N57.1billion in the current period. Profit after tax waned as well by 21.7% to N44.4billion from N56.7billion in HY’2019.
Interestingly enough, the top-line fared pretty well. Interest income and fee income showed improvements, albeit marginally by 0.3% and 6.7% respectively. This makes it illogical to attribute the entirety of the decline in profit to the recent austerity measures put in place by the CBN, reducing funds transfer fees and card maintenance charges.
The Coronavirus pandemic played a big role too, by widely stunting the economy in the second quarter of 2020, and negatively impacting profit. But even these do not provide substantial and sufficient convictions as to why the Tier-one bank did not hit the profit-bar it set for itself, from its truly emphatic 2019 financial year. Does this mean that UBA Plc got the decision wrong at the start of the year?
Six months seem too short a period to immediately class management’s decision to jack up the benefits and emoluments of its internal customers as a failed one. Although, no one anticipated the travails of COVID-19 and its resulting consequences, investments in human capital is widely proven to yield tremendous growth in the long haul. Besides the fact that it has given UBA Plc a solid reputation in the market place, it also makes the company very attractive to the very best of industry talents. Furthermore, employee engagements of this nature, foster brand loyalty which ultimately trickles down to how passionately these personnel undertake their tasks and deliverables. The true bearing of this investment is expected to reflect in due course, in subsequent quarters.
Commenting on the result, UBA’s Group Managing Director/Chief Executive Officer, Mr Kennedy Uzoka said, “Our H1 2020 results is yet another demonstration of the resilience of our business model in an extremely uncertain and tough operating environment. We recorded commendable growth in our underlying business in terms of customer acquisition, transaction volumes, and balance sheet whilst inflation, depressed yield environment and exchange rate volatility impacted our net earnings as anticipated.”
In today’s increasingly aggressive marketplace, where consistently generating revenue, is paramount to preserving the longevity and going-concern status of any establishments, costs must also be accorded as much attention and significance. Tightening and managing costs with the aim to improve and generate profit is genius strategy especially in today’s banking industry. The banking industry is under threat from ruthless competitions. Multifarious streams that had hitherto been available for generating income for DMB’s are being severely hindered by the ‘austere’ policies (from the perspective of commercial banks) from the apex bank, making effective cost management a survival mechanism.
Explore the Nairametrics Research Website for Economic and Financial Data
Employee benefits rose by 20% from N37.2billion in HY’2019 to N44.6billion in HY’2020, while Directors’ emoluments (Fees and Sitting Allowance) as earlier stated, surged by 177% from N18million in 2019 to N50million in 2020 y/y. The total operating expenses increased 22.6% in 2020. UBA Plc, unavoidably expended N22.4billion on Banking Sector Resolution cost trust fund, in compliance with the CBN’s requirement to contribute to the cause of the Asset Management Company of Nigeria (AMCON). Security and other payments for core services experienced increase as well compared to the preceding year.
Avoidable expenses like Penalties and Premises Maintenance Charge, should be extensively reviewed and extinguished wherever possible, to improve bottom line. UBA plc has forked out N565million in penalties so far in 2020, representing 6177.7% increase from just N9million in 2019 y/y. This is a prime example of the operational brick walls, UBA Plc must properly address to improve its fortunes in subsequent quarters.