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Surviving the looming recession in the Nigerian tech space

Although there have been a few gainers, most companies have lost major earnings due to COVID-19.

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recession, Surviving the looming recession in the Nigerian tech space

On the last day of March, Nigeria joined the rest of the world in trying to control the spread of the Coronavirus pandemic, by declaring lockdowns in three of the county’s most prone states/cities. The lockdown orders later extended to several states, albeit in varying degrees. Kano State is the most recent addition. Although there are differing opinions about the effectiveness of the lockdown, one thing everybody agrees on is the toll that it has taken on the country’s economy.

No sector has been spared the economic fallouts of the lockdown. Although there have been a few gainers, most companies have lost major earnings. This is why the Federal Government eventually directed the commencement of a phased easing of the lockdown, despite medical warnings against doing that.

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In the meantime, employees are already feeling the effect. This is because many companies’ responses to the crisis have varied from pay cuts to outright layoffs. Companies within the tech-space have not been spared, as many of them have had to make hard decisions to ensure their survival during this difficult time.

Downsizing…

On March 25, Renmoney laid off 391 sales agents, claiming that new technology was being introduced to change the company’s mode of operation. These changes include the introduction of an app, which the company said would make field sales agents redundant.

Interestingly, this layoff came just before the commencement of the lockdown, giving room for speculations that the company simply did not want to incur additional salary costs for field agents who would be sitting at home, unable to work during the lockdown. It should be noted that all the laid-off employees received full benefits and compensations.

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(READ MORE: The CBN data that can reveal whether we are already in a recession)

One thing is clear, and that is the fact that Renmoney will no longer operate with its former business model, having eliminated the direct sales channel. Although this is a great way to cut down operational costs, the technological change will have to be driven aggressively so that it can produce same results as the direct sales team.

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Techadvance founder, Desmond Olotu, took to his twitter handle on April 8 to explain his company’s decision to downsize. According to Olotu, for the first time, he was left with no option but to take decisions based on ‘what the data says’, rather than following his instincts.

(READ MORE: Nigeria’s Inflation rate jumps to 12.26% in March as recession looms)

In a lengthy Twitter thread, Olotu, who also serves as the company’s Chief Innovation Officer, made it clear that it was not an easy decision “letting go of them in the middle of a crisis because the data said it was that or a dead company.”

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“The hardest decision I have ever had to make in my life isn’t shutting down a non-performing company like I have done a few times; but rather letting go of high performing & dedicated staff because that’s what the data told me to do,” he said in one of the tweets.

Olotu then added that it was the first time in his 15-year entrepreneural journey that he was feeling like the rug was being pulled out from underneath his feet. He explained that he had always believed in his ability to navigate his company through any economic waters, including during the 2008/09 global recession when he won the Bill Gates grant for global health, and secured funding for his biotech company.

The option of restructuring

SystemSpecs (owner of Remita) has, however, opted for restructuring. Mid-April, the company hinted at the  restructuring plan.

(READ MORE: Nigeria is in a weak financial position to absorb recession shocks —Bismark Rewane)

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Although details of the restructuring have not been announced, the company recently launched Paylink, a payment solution that allows users to receive funds into their bank accounts without revealing their bank details. At a time when people have become wary of providing sensitive details on the internet due to Phishing, this solution could not be more timely.

5 Signs Nigeria is heading for a Recession, Surviving the looming recession in the Nigerian tech space

Paylink also doubles as a virtual mall, allowing users to easily set up their online stores and accept payment by simply creating a link where customers can make instant payment. Plans are underway to launch the Paylink mobile app, and make it available on app stores.

According to Patrick Ikpelue, the restructuring will see the company relocate its corporate headquarters and roll out several other products. No mention has been made of downsizing or rightsizing. If anything, a new line of business for the company should expectedly create new jobs.

E-commerce platforms like Jumia and Konga have recently driven their marketing campaigns to higher levels with free deliveries, discounts, and free coupons. All of these just to keep the sales coming in.

(READ MORE: See 5 signs indicating that Nigeria is heading for a recession)

On Friday, May 1, Konga will launch its first online and social media auction, allowing customers to bid their desired prizes on items they wish to shop. This might be the right move to protect sales from dropping as consumers move towards buying only their essential needs.

Although there have been speculations that Paga may be toeing the same path soon, with a 50% salary cut, it does not seem likely. The fintech recently qualified to join the 4th cohort of the Ping A Insurance Company of China Cloud Accelerator Programme.

Paga also did a giveaway for randomly selected users, crediting their Paga wallets with N5000 to assist them in stocking up during the lockdown period.

Paga basically operates an agent-customer system where the agents earn commissions on transactions carried out by customers in their wallets.

(READ MORE: Gold hits 8-year high, strengthened by global recession sentiments)

According to Jay Alabraba, Co-founder and Director of Business Development, the pandemic has reduced agent-customer contact thus reducing transactions. He, however, noted that there is an increase in the use of the wallets to receive foreign transfers.

Meanwhile, GTBank had in March 2020 announced plans to restructure as well, and venture into the fintech space.

Between the rock and a hard place

For any employer, the decision to lay off staff, especially high-performing ones, is never an easy one. As Olotu noted, “I suffer the same anxiety about my future & the future of my company like most founders do. Now more especially I’m anxious about the folks who work with me who have staked the success of their careers on the vision of our company. A vision that I am responsible for crafting.

Also, they often have to battle with the reality that staff who survived the cut may leave due to lowered morale resulting from paycuts or layoffs. However, it is a decision that most will be constrained to make in the coming months as the economic effects of the pandemic is predicted to last into 2021.

Patricia

Ruth Okwumbu has a MSc. and BSc. in Mass Communication from the University of Nigeria, Nsukka, and Delta state university respectively. Prior to her role as analyst at Nairametrics, she had a progressive six year writing career. As a Business Analyst with Narametrics, she focuses on profiles of top business executives, founders, startups and the drama surrounding their successes and challenges. You may contact her via [email protected]

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Companies

Seplat gives notice of board meeting, to consider Q2 financial result

The notification is in conformity with the rules of the Nigerian bourse on the obligations of the issuer.

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Seplat Plc, Seplat gives notice of board meeting, to consider Q2 financial result

The indigenous oil and gas firm, Seplat Petroleum Development Company Plc has given notice of its board of director meeting which has been scheduled for Tuesday, July 28, 2020 through a teleconference in Lagos between 10 am and 3 pm.

This was disclosed in a notification that was sent to the Nigerian Stock Exchange (NSE) on July 3, 2020 and signed by the oil firm’s Company Secretary, Edith Onwuchekwa.

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The notification is in conformity with the rules of the Nigerian bourse on the obligations of the issuer, in this case, Seplat, to notify the Exchange at least 14 days ahead of the due date and time when the board of directors hopes to meet to discuss its financial results.

The notification from Seplat states, ‘’In line with the rules of the NSE on the obligation of the Issuer to notify the Exchange at least 14 days in advance, in respect of the date and time when the board of directors will meet to discuss its Q2 2020 Financial Results, we wish to state the meeting details as follows,’’

‘’Date: Tuesday 28th July 2020, Venue: Via Teleconference, Lagos, Time: 10.00am – 3.00pm’

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(READ MORE: Fidelity Bank announces closed period ahead of H2 financial statements release)

Seplat, in its statement, also said they were going to notify the Exchange of the details of the Board’s decision on the 2020 second-quarter financial results immediately after the meeting as required by the rules.

Nairametrics had earlier reported that following the global oil crisis triggered by the coronavirus pandemic, the oil and gas firm, in its released financial statement, announced that revenue declined from $159.5 million in Q1 2019 to $130.5 million in Q1 2020. That represented an 18.2% drop.

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The gross profit dropped from $81.4 million in Q1 2019 to $33.1 million in Q1 2020. This shows a drop of 59.3%. The profit before deferred tax showed a loss of $105.8 million in Q1 2020 as against the profit before deferred tax of $35.8 million that was achieved in Q1 2019. This represented a huge drop of 395.5%.

The company’s CEO, Austin Avuru, said that as part of its strategy, Seplat was shifting focus to its gas business which is less exposed to the oil price drop which is currently ravaging the upstream sector.

The current share price of Seplat on the Nigerian Stock Exchange is N386 per share as at July 3, 2020.

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Energy

Just in: NNPC announces top management appointments as top official resigns

The NNPC has effected a major shake-up to enable the corporation to live up to its expectations.

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The state-owned oil giant, the Nigerian National Petroleum Corporation (NNPC) has effected some major reorganization in the firm. They have announced some new appointments and redeployments as part of the ongoing efforts to strengthen and reposition NNPC for greater efficiency, transparency and profitability in line with the next level agenda of President Muhammadu Buhari’s administration.

This was disclosed in a press release by NNPC on Sunday, July 5, 2020, and signed by the corporation’s Group General Manager Public Affairs Division Dr Kennie Obateru.

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In the statement released by the oil giant, Mr Adokiye Tombomieye, the Group General Manager, Crude Oil Marketing Division (COMD), is now the new Chief Operating Officer (COO), Upstream while Mr Mohammed Abdulkabir Ahmed, the Managing Director of the Nigerian Gas Marketing Company (NGMC), has been appointed the new Chief Operating Officer, Corporate Services, following the retirement of Engr. Farouk Garba Sa’id, last week.

Dr Kennie Obateru stated that reorganization includes the redeployment of Engr. Adeyemi Adetunji, the Chief Operating Officer, Upstream, to the Ventures & Business Development Directorate as COO, following the voluntary resignation of Mr Roland Onoriode Ewubare, from the position last week.

The top-level staff movement also affected Sir. Billy Okoye who has been redeployed from the NNPC Downstream Company, NNPC Retail Limited, as Managing Director, to replace Mr Tombomieye as the Group General Manager, Crude Oil Marketing Division; while Mrs Elizabeth Aliyuda, the General Manager, Sales and Marketing NNPC Retail Limited, takes over from Sir Okoye as Managing Director.

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Similarly, Mr Usman Farouk, Executive Director Asset Management and Technical Services at the Nigerian Gas Marketing Company (NGMC) takes over from Mr Ahmed as Managing Director

The statement from NNPC also explained that President Buhari has accepted the resignation of Mr Roland Ewubare, who was the immediate past Chief Operating Officer, Ventures and New Business Directorate of the National Oil Company while the retirement of the immediate past Chief Operating Officer, Corporate Services, Engr. Farouk Garba Said had also received the approval of President who thanked the two former COOs for their meritorious service to the corporation.

The Group Managing Director of NNPC, Mele Kyari, said the new appointments would enable the corporation to live up to the expectation of her shareholders, Nigerians, and give impetus to the ongoing restructuring within the Corporation, which, he said, was in line with the corporate vision of Transparency, Accountability & Performance Excellence (TAPE).

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Financial Services

Zenith Bank and GTBank are considering paying interim dividends despite COVID-19

Analysts earlier predicted that banks may hold off on dividend payments as a way of cutting down on costs in view of COVID-19.

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Zenith Bank’s board of directors is set to meet on July 23rd, 2020 to consider the tier-1 bank’s audited financial statements for half-year 2020. The directors will also consider “the proposal for recommendation of interim dividend for shareholders,” said a notice that was sent by the company to the Nigerian Stock Exchange.

In a similar development, Guaranty Trust Bank Plc said in a statement to the NSE that “issues relating to half-year dividend may also be discussed” when its board of directors meet later this month.

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Zenith Bank and GTBank, which are two of the most profitable banks in Nigeria, have always paid interim dividends to their shareholders. However, analysts earlier predicted that many banks may hold off on dividend payments as a way of cutting down on costs, in view of COVID-19 and its attendant economic implications. It is, therefore, fascinating to see that Zenith Bank and GTBank are considering interim dividends nonetheless.

Elsewhere, banks around the world have either been warned not to pay dividends at all or to be careful with dividend payouts. In April, The Economic Times reported that the Reserve Bank of India advised Indian banks to suspend dividend payments in order to conserve their capital amid the pandemic. In a similar development, regulators in Europe also banned European banks from paying any dividend in 2020. In Australia, banks were advised to slash their dividend payouts. Meanwhile, over in North America, the US Federal Reserve announced in late June that it will temporarily restrict dividend payouts by some of the country’s biggest banks, the New York Times reported.

As Nairametrics had repeatedly reported, the COVID-19 pandemic is expected to adversely impact different sectors of the Nigerian economy, including the financial institutions. An earlier report by Nairametrics quoted Augusto & Co to have predicted how the pandemic would weaken Nigerian banks’ assets. An April report by PwC also highlighted some of the ways COVID-19 could impact Nigerian banks.

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In the meantime, the Banking Industry Risk Indicator (BIRI) in Nigeria stands at a score of 12.14 out of 100, according to a recent analysis by Fitch Solutions, as Nairametrics reported.


Do note that Zenith Bank Plc has declared a closed period for the trading in its stock starting from July 6th, 2020. The closed period will last until 24 hours after the company’s half-year 2020 financial report is released to the public. In the meantime, all persons with inside knowledge of Zenith Bank’s affairs shall be prohibited from buying and selling the company’s stock during the closed period. 

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