Over time, young Nigerian business owners and Chief Executive Officers (CEOs) have been pushing the boundaries. They have displayed their courage in building and sustaining phenomenal businesses that are driving the nation’s economy.
These young entrepreneurs, more than anyone, are known for going the extra mile in providing solutions for societal needs and job creation for the Nigerian populace at large. These CEOs are not just making their families proud, they also make the nation proud as they consistently break boundaries in the country’s struggling business environment.
In no particular order, meet the Nigerian under 40 CEOs who have been executing their great visions, and whose excellence in 2019 cannot be questioned.
Dr Olamide Orekunrin
It is no longer news that the Nigerian healthcare system is at the moment in pitiful condition. The healthcare overview is far from stellar, as people who can afford better, ignore local hospitals and healthcare services for the ones abroad.
There have been instances where the lack of emergency healthcare services cost lives, one of whom was Dr Olamide Orekunrin’s sister. This heart-breaking loss spurred her on to improving medical care in the country, especially in the area of devising the fastest ways of getting patients to the best healthcare facilities for their ailments.
With this in mind, Orekunrin founded Flying Doctors, a company adjudged as West Africa’s first and only full air ambulance service. So far, the company has airlifted hundreds of patients, using a fleet of planes and helicopters to rapidly move injured workers and critically ill people from remote areas to hospitals. Ranging from patients with road traffic trauma, to bomb blast injuries, and gunshot wounds, Orekunrin and her team are helping to save lives by moving these patients quickly and safely while providing a high level of medical care en route.
Flying Doctors is not just functioning locally, a call to the company confirms that patients are also flown abroad for quality medical care.
At this stage, it is safe to say that the 33-year old is not just a problem solver but also a lifesaver. She was once quoted to have said that her goal is to continue improving access to medical treatment while focusing on the pre-hospital and in-hospital management of injuries across the continent. She said that whilst much attention and funding is directed toward infectious diseases, Africa is also facing a big problem when it comes to treating physical injuries. Orekunrin’s dream is to see the brand establish its presence in other African countries.
Blogging is a business which someone who is an information enthusiast can suddenly find him or herself in. Linda Ikeji’s transformation from a ‘gossip blogger’ to a ‘media mogul’, has since sent shock waves through the public space and trained media professionals at large.
The 38-year old started blogging at a time when the internet was less relevant. After completing her first degree from the University of Lagos (UNILAG), Ikeji found herself blogging, a ‘hobby’ which she did with consistency and passion till it became a multi-million naira generating business.
Having started active blogging in 2007, Ikeji was pushed into the spotlight as she took risks which a lot of people would not dare take. She became more popular for creating controversies and her fearlessness. Ikeji became the nightmare of celebrities and socialites. Millions of people around the world, not just Nigerians jump on her blog to read fresh gist and gossips, while she smiles to her bank to cash out money gotten from heavy traffic, paid banners and sponsored posts.
Going by Ikeji’s known assets and properties, it may not be erroneous to say that she’s worth a billion. In 2015, she bought a house in Banana Island for over N500 million, a property which would have increased value by now.
Years after establishing her media company, Ikeji has proved her competence in the struggling and highly competitive industry as her relevance in the media world is an admirable one among her peers.
The advent of the internet has, no doubt, revolutionised how movie lovers consume content. In recent times, there has been an increase in the number of Video-on-Demand (VoD) platforms in the country. The relatively affordable cost of data has further contributed to the increasing number of these platforms in Nigeria.
With nearly $4 billion in revenue and almost 2,000 productions every year, Nollywood is the second largest movie industry by volume. In the past, Nollywood movies were mostly sold on the streets and to idling motorists caught in traffic as pirated copies. However, things seem to have changed in the last few years.
Presently, movie lovers can have multiple VoD apps installed on their devices. All one has to worry about is the cost of data, as well as a monthly subscription charge. These platforms serve Nigerians with local and foreign video content.
Meet Jason Njoku, CEO of IROKOtv, one of the early video-on-demand platforms for Nigerian movies. The IROKOtv brand has grown to become one of the largest platforms for Nollywood movies and TV series. Iroko TV platform currently has customers spread across the continent, with customers from Africa representing 67% of the platform’s total subscriber base (Nigeria accounts for 41.9%, French-speaking African countries account for 18.3% and other English-speaking Africa countries accounts for 6.6%).
On the off-chance that you are wondering how IROKOtv was birthed, the idea to start IROKOtv came after Njoku’s mother sent him to buy some Nollywood movies in London and after several attempts, he could not find any movie to either buy or stream online. He saw a huge gap and opportunity – a global desire for content, but no easy means of accessing it. This later prompted Jason to move back to Lagos and start research on the industry. He started acquiring hundreds of online licenses for Nollywood movies, to upload onto YouTube.
According to him, “What informed my decision to move into the digitisation of Nollywood was the fact that there was a global desire for content. Everything was super informal and based on geography. Bringing the content online erased those borders in an instant.”
Just like the aforementioned, Makanjuola’s successful professional attainments cannot be swept under the carpet. He is a co-founder of Caverton Helicopters, an integral part of Caverton Group which generates a lot of revenue and profit.
While the success of the business has received praise in the Nigerian business environment, not a lot of people are in the know that the company is the brainchild of Makanjuola. Following his return to Nigeria upon the completion of his studies in the United Kingdom, he identified a major gap in Nigeria’s oil and gas sector and set about solving it.
While the 38-year old was still a student in the United Kingdom (UK), he learnt how to fly helicopters, and took rotary wing flight training and other aviation industry courses. This experience availed him of an understanding of the aviation industry, even as he came to the realisation that he could disrupt the oil and gas sector in Nigeria using the new skill he had acquired. Note that at this time, the oil and gas industry had no active helicopter services provider.
Today, Caverton Helicopters has successfully leveraged the status of its parent company to become one of the biggest players in the sector. The company currently has the largest fleet of ultramodern helicopters operating in Nigeria and Sub Saharan Africa.
Lately, Nigerian fintech companies are gaining momentum. Thus, Piggybank.ng, since its establishment, has grown rapidly compared to the way financial institutions like commercial banks grow. Piggybank.ng is a fintech company that works directly with financial institutions to enable individuals to save little amounts of money periodically (daily, weekly or monthly) and restricts withdrawals until set dates.
The company was founded by Somto Ifezue, Joshua Chibueze and Odunayo Eweniyi in April 2016.
25-year-old Eweniyi is a first-class graduate of Computer Engineering from Covenant University. Upon graduation, after a series of fruitless interviews, she joined Sharphire Global Limited, where she co-founded PushCV. Soon after, she also co-founded Piggybank which was born out of a need to help the people who had gotten jobs on PushCV save their salaries.
In view of her career attainments so far, it is unarguable that Eweniyi’s career objective is to be at the forefront of the digital revolution in Nigeria and Africa at large — particularly in the financial, education and labour sectors. Eweniyi’s commitment and focus have helped Piggybank save close to N1 billion in 2017, a whopping increase from the N21 million in savings it began with, in the same year. The number of users on the platform also grew by 3000% in 2017, with minimal marketing. Piggy Bank also launched its apps on the Google Play and Apple app stores.
Last year was a blast for Piggybank, as the fintech company secured Seed Funding of $1.1 million from High Net Worth Individuals led by Olumide Soyombo, Founder of LeadPath Nigeria, and with participation from International and Pan-African investors, Village Capital and Ventures Platform.
Why Insurance firms are selling off their PFAs
It has not been uncommon over the years to have insurance companies with pension subsidiaries.
The idea of mitigating risks and curtailing losses at the bare minimum begins from the insurance industry and only crosses into the pension space with the need for retirement planning. For this reason, it has not been uncommon over the years to have insurance companies with pension subsidiaries. However, controlling the wealth of people is no easy feat – and crossover companies are beginning to think it might not be worth it competing with the big guns; that is, the pension fund administrators (PFAs) that already cater to the majority of Nigerians.
A few months ago, AXA Mansard Insurance Plc announced that its shareholders have approved the company’s plan to sell its pension management subsidiary, AXA Mansard Pensions Ltd, as well as a few undisclosed real estate investments. It did not provide any reason for the divestment. More recently, AIICO Insurance Plc also let go of majority ownership in its pension arm, AIICO Pension Managers Ltd. FCMB Pensions Ltd announced its plans to acquire 70% stakes in the pension company, while also acquiring an additional 26% stake held by other shareholders, ultimately bringing the proposed acquisition to a 96% stake in AIICO Pension. The reason for the sell-off by AIICO does not also appear to be attributed to poor performance as the group’s profit in 2019 had soared by 88% driven by growth across all lines of business within the group.
So why are they selling them off?
Pension Fund Administration is, no doubt, a competitive landscape. Asides the wealth of the over N10 trillion industry, there is also the overarching advantage that pension contributors do not change PFAs regularly. Therefore, making it hard to compete against the big names and industry leaders that have been in the game for decades – the kinds of Stanbic IBTC, ARM, Premium Pension, Sigma, and FCMB. Of course, the fact that PFAs also make their money through fees means the bigger the size, the more money you make. With pressure to capitalize mounting, insurance firms will most likely spin off as they just don’t have the right focus, skills, and talents to compete.
The recent occurrence of PENCOM giving contributors the opportunity to switch from one PFA to another might have seemed like the perfect opportunity for the smaller pension companies to increase their market shares by offering better returns. More so, with the introduction of more aggrieved portfolios in the multi-fund structure comprising of RSA funds 1, 2, & 3, PFAs can invest in riskier securities and enhance their returns. However, the reality of things is that the smaller PFAs don’t have what it takes to effectively market to that effect. With the gains being made from the sector not particularly extraordinary, it is easier for them to employ their available resources into expanding their core business. There is also the fact that their focus now rests on meeting the new capital requirements laced by NAICOM. Like Monopoly, the next smart move is to sell underperforming assets just to keep their head above water.
Olasiji Omotayo, Head of Risk in a leading pension fund administrator, explained that “Most insurance businesses selling their pension subsidiaries may be doing so to raise funds. Recapitalization is a major challenge now for the insurance sector and the Nigerian Capital Market may not welcome any public offer at the moment. Consequently, selling their pension business may be their lifeline at the moment. Also, some may be selling for strategic reasons as it’s a business of scale. You have a lot of fixed costs due to regulatory requirements and you need a good size to be profitable. If you can’t scale up, you can also sell if you get a good offer.”
What the future holds
With the smaller PFAs spinning off, the Pension industry is about to witness the birth of an oligopoly like the Tier 1 players in the Banking sector. Interestingly, the same will also happen with Insurance. The only real issue is that we will now have limited choices. In truth, we don’t necessarily need many of them as long all firms remain competitive. But there is the risk that the companies just get comfortable with their population growth-induced expansion while simply focusing on low-yielding investments. The existence of the pandemic as well as the really low rates in the fixed-income market is, however, expected to propel companies to seek out creative ways to at least keep up with the constantly rising rate of inflation.
Nigerian Banks expected to write off 12% of its loans in 2020
The Nigerian banking system has been through two major asset quality crisis.
The Nigerian Banking Sector has witnessed a number of asset management challenges owing largely to macroeconomic shocks and, sometimes, its operational inefficiencies in how loans are disbursed. Rising default rates over time have led to periodic spikes in the non-performing loans (NPLs) of these institutions and it is in an attempt to curtail these challenges that changes have been made in the acceptable Loan to Deposit (LDR) ratios, amongst others, by the apex regulatory body, CBN.
Projections by EFG Hermes in a recent research report reveal that as a result of the current economic challenges as well as what it calls “CBN’s erratic and unorthodox policies over the past five years,” banks are expected to write off around 12.3% of their loan books in constant currency terms between 2020 and 2022, the highest of all the previous NPL crisis faced by financial institutions within the nation.
Note that Access Bank, FBN Holdings, Guaranty Trust Bank, Stanbic IBTC, United Bank for Africa and Zenith Bank were used to form the universe of Nigerian banks by EFG Hermes.
Over the past twelve years, the Nigerian banking system has been through two major asset quality crisis. The first is the 2009 to 2012 margin loan crisis and the other is the 2014 to 2018 oil price crash crisis.
The 2008-2012 margin loan crisis was born out of the lending institutions giving out cheap and readily-available credit for investments, focusing on probable compensation incentives over prudent credit underwriting strategies and stern risk management systems. The result had been a spike in NPL ratio from 6.3% in 2008 to 27.6% in 2009. The same crash in NPL ratio was witnessed in 2014 as well as a result of the oil price crash of the period which had crashed the Naira and sent investors packing. The oil price crash had resulted in the NPL ratio spiking from 2.3% in 2014 to 14.0% in 2016.
Using its universe of banks, the NPL ratio spiked from an average of 6.1% in 2008 to 10.8% in 2009 and from 2.6% in 2014 to 9.1% in 2016. During both cycles, EFG Hermes estimated that the banks wrote-off between 10-12% of their loan book in constant currency terms.
The current situation
Given the potential macro-economic shock with real GDP expected to contract by 4%, the Naira-Dollar exchange rate expected to devalue to a range of 420-450, oil export revenue expected to drop by as much as 50% in 2020 and the weak balance sheet positions of the regulator and AMCON, the risk of another significant NPL cycle is high. In order to effectively assess the impact of these on financial institutions, EFG Hermes modelled three different asset-quality scenarios for the banks all of which have their different implications for banks’ capital adequacy, growth rates and profitability. These cases are the base case, lower case, and upper case.
Base Case: The company’s base case scenario, which they assigned a 55% probability, the average NPL ratio and cost of risk was projected to increase from an average of 6.4% and 1.0% in 2019 to 7.6% and 5.3% in 2020 and 6.4% and 4.7% in 20201, before declining to 4.9% and 1.0% in 2024, respectively. Based on its assumptions, they expect banks to write-off around 12.3% of their loan books in constant currency terms between 2020 and 2022, a rate that is marginally higher than the average of 11.3% written-off during the previous two NPL cycles. Under this scenario, estimated ROE is expected to plunge from an average of 21.8% in 2019 to 7.9% in 2020 and 7.7% in 2021 before recovering to 18.1% in 2024.
Lower or Pessimistic Case: In its pessimistic scenario which has a 40% chance of occurrence, the company projects that the average NPL ratio will rise from 6.4% in 2019 to 11.8% in 2020 and 10.0% in 2021 before moderating to 4.9% by 2024. It also estimates that the average cost of risk for its banks will peak at 10% in 2020 and 2021, fall to 5.0% in 2022, before moderating from 2023 onwards. Under this scenario, banks are expected to write off around as much as 26.6% of their loan books in constant currency terms over the next three years. Average ROE of the banks here is expected to drop to -8.8% in 2020, -21.4% in 2021 and -2.9% in 2022, before increasing to 19.7% in 2024.
Upper or optimistic case: In a situation where the pandemic ebbs away and macro-economic activity rebounds quickly, the optimistic or upper case will hold. This, however, has just a 5% chance of occurrence. In this scenario, the company assumes that the average NPL ratio of the banks would increase from 6.4% in 2019 to 6.8% in 2020 and moderate to 4.8% by 2024. Average cost of risk will also spike to 4.2% in 2020 before easing to 2.4% in 2021 and average 0.9% thereafter through the rest of our forecast period. Finally, average ROE will drop to 11.6% in 2020 before recovering to 14.4% in 2021 and 19.0% in 2024.
With the highest probabilities ascribed to both the base case and the pessimistic scenario, the company has gone ahead to downgrade the rating of the entire sector to ‘Neutral’ with a probability-weighted average ROE (market cap-weighted) of 13.7% 2020 and 2024. The implication of the reduced earnings and the new losses from written-off loans could impact the short to medium term growth or value of banking stocks. However, in the long term, the sector will revert to the norm as they always do.
Even with a 939% jump in H1 Profit, Neimeth still needs to build consistency
Neimeth has been one of the better performers in the stock market in the last one year.
Neimeth’s profit after tax for H1 2020 might have jumped by 939% from H1 2019, but there’s still so much the company needs to do to remain in the game.
For the first time in years, Pharmaceutical companies across the globe are in the spotlight for a good reason. As the COVID-19 pandemic rages on, the world waits patiently for this industry to produce a vaccine that can once again lead us back to the lives we all missed. Nigeria is also not an exception, it seems. One of Nigeria’s oldest pharmaceutical companies, Neimeth, has been one of the better performers in the stock market in the last one year. However, there is still so much the company needs to do to earn profits consistently.
Neimeth’s recently released H1 2020 results show a jump of 19.4% in revenue from ₦976 million earned in H1 2019 to ₦1.165 billion in H1 2020. While this is impressive, its comparative Q2 results (Jan-March ‘ 20) show a drop in revenue of 25.4% from ₦748.8 million earned in Q2 2019, to the ₦568.7 million revenue in Q2 2020. In similar vein, while its profit-after-tax soared by 939% from ₦5.447 million in H1 2019 to ₦56.596 million in H1 2020, its quarter-by-quarter results show a drop of 118%. While there is a truth that some months are better performers than others, Neimeth’s extreme profit jump in the half-year results juxtaposed with the more-than-100% drop in the first quarter of this year, reveal wide-gap volatility in its earning potential. Its revenue breakdown attributes the quarter-by-quarter drop in revenue to a comparative drop in its ‘Animal Health’ product line by a whopping 897.42%. The ‘Pharmaceuticals’ line also only experienced a marginal jump of 2.57%.
Full report here.
Current & Post-Covid-19 Opportunities
A 2017 PWC report had revealed that by 2020 the pharmaceutical market is expected to “more than double to $1.3 trillion. Mckinsey had also predicted that come 2026, Nigeria’s pharma market could reach $4 billion. The positive outlook of the industry is even more so, following the disclosure by the CBN to support critical sectors of the economy with ₦1.1 trillion intervention fund.
The CBN governor, Godwin Emefiele, had stated that about ₦1trillion of the fund would be used to support the local manufacturing sector while also boosting import substitution while the balance of ₦100 billion would be used to support the health authorities towards ensuring that laboratories, researchers and innovators are provided with the resources required to patent and produce vaccines and test kits in Nigeria.
While manufacturing a vaccine for the Covid-19 pandemic might be nothing short of wishful, the pandemic presents a global challenge that businesses in the healthcare industry could leverage. Through strategic R&D, it could uncover a range of solutions, particularly those that involve the infusion of locally-sourced raw materials.
In order for the company to attain sustainable growth, it needs to come up with structures and systems that are dependable, while also tightening loose ends. One of such loose ends is its exposure to credit risk. It’s Q2 2020 reports reveal value for lost trade receivables of N693.6 million carried forward from 2019. To this end, it notes that while its operations expose it to a number of financial risks, it has put in place a risk management programme to protect the company against the potential adverse effects of these financial risks.
At the company’s last annual general meeting (AGM), the managing director, Matthew Azoji, had also spoken on the company’s efforts to gain a larger market share through its initiation of bold and gradual expansion strategies.
The total revenue growth and profitability of the half-year period undoubtedly signals a potential in the company. However, we might have to wait for the company’s strategies to crystalize and attain a level of consistency for an extended period before reassessing the long-term lucrativeness of its stock or otherwise. That said, it certainly should be on your watchlist.