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Top 10 risks Nigerian businesses will face in 2020/2021 – Report 

Covid-19 impact on Nigerian businesses can be classified into 3 major channels and they are the supply channel, the demand channel and the financial channel.

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Nigerian businesses are facing enormous challenges due to macroeconomic issues. While sustaining its recovery from the 2016 recession, the Nigerian economy grew by 2.3% in 2019. This growth appears quite inadequate when compared to the annual population growth of between 2.6% and 3%.

Against the background of a challenging economic and business environment, Nigerian businesses have some key risks that they face in the course of their operations. The outbreak of the coronavirus pandemic has exacerbated some of the risks that these businesses face.

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Prior to the coronavirus outbreak, the highest concerns for Nigerian businesses across different sectors were the regulatory, foreign exchange volatility and fiscal & monetary policy.

The Covid-19 came with the risk of financial loss arising from the emergence of the disease and its impact on businesses. This risk is fueled largely by the health crisis, the lockdown measures (local and international) that have been put in place to address the pandemic and the apprehension of investors. Consequently, the Covid-19 impact on Nigerian businesses can be classified into 3 major channels and they are the supply channel, the demand channel and the financial channel.

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Professional service firm, KPMG, presented a report on Top Business Risks that Nigerian Business executives will face in 2020/2021, after conducting a quantitative survey. These risks are –

Here’s why your business needs a solid value proposition (PART 1), Top 10 business risks that Nigerian companies will face in 2020/2021 - Report 

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  • Regulatory Risk; This reflects the significant anxieties executives have continued to have over regulatory uncertainties as a result of increased regulatory scrutiny and sanctions within the country. This also includes uncertainty about the actions to be taken by regulators to cushion the impact of the coronavirus pandemic on the country. This ranges from tax laws to the minimum wage amendment act, and Police Trust Fund Act among others.
  • Fiscal & Monetary Risk; The fiscal policy risk has been elevated by the Covid-19 impact and a sharp drop in oil prices below the initial budget benchmark. This has led to a downward review of the FG 2020 budget benchmark and the expenditure pattern. This will lead to a reduction in economic activities and consumer spending. The risks and opportunities around monetary policies are also critical given the role CBN has to play in our fiscal tight environment. The channel through which the monetary policy directly impacts corporates is credit, specifically lending rates. 

(READ MORE: Local investors push Nigerian Stocks to post best monthly gains in over 2 years)

  • Foreign Exchange Volatility Risk; This carried extreme impact especially among multinational corporates for reasons like importation and capital repatriation.
    More than 40 SMEs in Lagos shut down due to economic crisis, Top 10 business risks that Nigerian companies will face in 2020/2021 - Report 

The oil price movement in 2020 is expected to remain weak due to low oil demand triggered by Covid-19 and supply glut.

In 2019, Nigeria’s foreign reserves depleted by $4.42 billion ending the year at $38 billion.  Presently, the reserve is down to around $35 billion and continuous free fall of the foreign reserve increases the risk of devaluation.

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Against the background of the collapse of investor confidence in the wake of the Covid-19 crisis, global financial conditions, the principal determinant of capital flows to emerging and frontier markets have tightened.’

  • Cyber-security Risk; The business ecosystem is rapidly evolving across different sectors and economies. Advancement in digital technology has continued to enable business innovations and agility across the world. Cybersecurity directly affects the resilience of organisations, economy, and individual safety.

‘The volume, sophistication and the ever-involving nature of cyber-attacks in recent times, demands every organization to adopt innovative approaches to the management of cybersecurity risks’

  • Political Risk; In 2020, with the country now outside the electoral cycle, we do not expect the manifestation of this form of political risk which is defined by the prospects for the disruption of business on account of political instability, unlike last year.

(READ MORE:   5 practical things small businesses can do during this pandemic lockdown)

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Another way that political risk impacts the business community are through policies that emanate from the political process. The risk arises when the political harmony leads to policies that are unfavourable for businesses because, in that event, the absence of a mitigating opposing political force to contest and debate such policies or to prevent their enactment and implementation is elevated’.

SMEs, business, COVID-19: Here’s how to manage remote teams for your startup, Top 10 business risks that Nigerian companies will face in 2020/2021 - Report 

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  • Technology Infrastructure Risk; This risk examines the inadequate information technology infrastructure and ERP system to effectively and efficiently support the current and future needs of businesses.

‘This risk can be considered the highest in the financial sector despite huge investments by banks into upgrading and acquiring new digital technology tools like cloud computing, artificial intelligence, and diverse software. Technology, media, and telecommunication industry consider this risk as number 2 risk.’

  • Customer Attrition RiskThis risk examines the loss of key customers and patronage resulting from perceived or actual inability to meet customers’ expectations. Customers expect organizations to keep up with their demands and will often compare their experiences across sectors using the best experience as the baseline for all others.

Additionally, the shape of the economic landscape over the last few years has made customers more sensitive to the quality of experience they receive and their perception of value for money. There are higher attrition risk and decline in brand loyalty in some sectors’.

(READ MORE: COVID-19 Palliatives: Leadway Assurance gives back to motor insurance clients )

  • Talent Shortage/Attrition Risk; This risk examines the level and quality of skills, knowledge, and experience required to achieve business objectives and/or sustain growth.

Top 10 business risks that Nigerian companies will face in 2020/2021 - Report 

 ‘Changing skills in demand, increased talent mobility, shifting employee expectations and the integration of human and intelligent automation are reinventing the workplace’.  The 2 key factors that contribute to widening talent gap are quality of education and talent migration/brain drain of highly skilled Nigerians to countries like the US, Canada, UK, Australia.

  • Business Continuity RiskOrganizations are faced with several threats of potentially disruptive and unexpected adverse developments in their operating environment, including pandemic, wars, terrorist attacks. This risk can impact on the profitability and cash flow for an organization due to an immediate decline of revenue and ultimately the going concern of a business if not adequately managed.
  • Governance Risk; This risk examines the ineffective frameworks, processes, or practices by which the organization is controlled and directed.

In today’s corporate world, a sound corporate governance system has become a strong determinant of companies’ economic fortune, operational sustainability, and longevity. It also sets the tone for the relationship between the board of directors, management, employees, and other stakeholders including the regulators. It also provides a framework for transparency, fairness, and accountability leading to profit maximization, promoting investors’ confidence, and ultimately creating jobs.

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Companies

Deap Capital Management & Trust Plc reacts to ‘rumoured’ AMCON takeover

AMCON had dragged the company before a Court in a bid to recover the debt.

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Deap Capital Management & Trust Plc

Deap Capital Management & Trust Plc has reacted to media reports about the supposed takeover of its assets by the Asset Management Company of Nigeria, AMCON.

In a statement that was signed by the Company Secretary, Yetunde Fashesin-Sousa, Deap Capital admitted that it is indebted to AMCON to the tune of N1.6 billion. It was also confirmed that AMCON owns a 20% equity stake in the fund management firm.

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Note that the indebtedness arose after AMCON took over ownership of certain banks. Apparently, these are banks that Deap Capital originally owed. However, following the transfer of the unnamed banks’ assets to AMCON, the debts were also transferred alongside.

Meanwhile, AMCON had dragged the company before the Federal High Court in Lagos in a bid to recover the debt. A ruling on the case, which was delivered on January 28 by the Hon Justice John Terhemba Tsoho, was in AMCON’s favour.

Following the ruling, AMCON began the process of recovering the debt from Deap Capital Management & Trust Plc. The company said it has been cooperating in this regard by working towards repaying the debt.

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The company also clarified that the assets that were taken over by AMCON belonged to its former directors whose names were not mentioned. Nairametrics could not verify if these directors are among those who were recently reinstated by the Securities and Exchange Commission, SEC. But we do know that AMCON had obtained a court order to attach the ‘former directors’ assets’ in its attempt to recover the N1.6 billion debt.

In the meantime, Deap Capital Management & Trust Plc said it is committed to resolving its operational challenges, including the recovery of its operational license and profitability issues.  The company’s latest earnings report (for its Q1 period ended December 31st, 2019) showed a total income of N1 billion. There was also a N6.3 million loss for the period under review.

Deap Capital’s stock opened today’s trading session on the Nigerian Stock Exchange with a share price of N0.30. Year to date, the stock has declined by some -18%.

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Companies

Lafarge Africa Plc. announces its board meeting and closed period for Q2 2020 

The notification which was duly signed by General Counsel & Company Secretary.

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Lafarge Africa

Lafarge Africa Plc. notified the Nigerian Stock Exchange and the investing public that he closed period will commence on Wednesday, 8th July 2020 until the unaudited financial statement for the second quarter ended 30th June 2020, is released to the Nigerian Stock Exchange. 

In a disclosure on the Nigerian Stock Exchange, it wrote: “We hereby notify the Nigerian Stock Exchange and the investing public that a meeting of the Board of Directors of Lafarge Africa Plc has been scheduled to hold on Thursday, 23rd July 2020 to consider the second quarter financial results of the Company for the quarter ended 30th June 2020.”  

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The notification which was duly signed by General Counsel & Company Secretary, Mrs. Adewunmi Alode explained further stating that “Accordingly, no Director, employee, persons discharging managerial responsibility and Advisers of the Company and their connected persons may directly or indirectly deal in the shares of the Company in any manner during the closed period.” 

Over the past few months, it made a few board changes with the retirement of two of its Non-Executive Directors, as well as the appointment of three new DirectorsIt had also spun off its South African subsidiary, Lafarge South Africa Holdings (LSAH), last year. 

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READ MORE: NSE’s statement in reaction to the Visionscape Municipality Bond Default

Lafarge Africa’s Q1 2020 revenue was up 9.8% year-on-year to N63.7 billion, driven by higher Cement Sales (a figure up 11% year-on-year to N62.3 billion) which offset the weakness in Aggregate and Concrete (down 21% y/y to N1.4bn). Its EBITDA grew by 2.4% year-on-year to N19.3 billion as well. As at Tuesday the 7th of July, the share price of the company was N10.00 

 

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Companies

AXA Mansard Insurance Plc gives notice of Annual General Meeting 

The AGM will be live-streamed to enable shareholders and stakeholders participate.

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AXA Mansard Insurance Plc

Insurance firm, AXA Mansard Insurance Plc., has given notice of its board of its Annual General Meeting (AGM) scheduled for Wednesday, July 29, 2020, at 10:00 a.m.  

The announcement which was disclosed by Nigerian Stock Exchange (NSE) in a corporate disclosure on July 7th, 2020 and signed by Company Secretary, Omowunmi Mabel Adewusi read, “Notice is hereby given that the twenty-eighth annual general meeting of AXA Mansard Insurance Plc. will hold at the Oriental Hotel, no. 3, Lekki Road, Victoria Island, Lagos on Wednesday, July 29, 2020, at 10:00 a.m.” 

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READ ALSO: AXA Mansard divests from its pension and real estate ventures

As noted, the purpose of the AGM is to transact the following business: 

  1. To receive the Audited Financial Statements for the year ended December 31, 2019, and the Reports of the Directors, Auditors and Statutory Audit Committee thereon 
  2. To authorise Directors to fix the remuneration of the Auditors 
  3. To elect Directors and 
  4. To elect members of the Statutory Audit Committee.  

In order to ensure that all relevant stakeholders can be a part of the AGM, the company will also be streaming the AGM live. It noted that “This will enable shareholders and other stakeholders who will not be attending physically to follow the proceedings.” 

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The link for the live streaming of the Meeting will be made available on the Company’s website at www.axamansard.com. 

READ MORE: Sterling Bank’s earnings to remain pressured but valuations still attractive

Recall that a few months ago, in March, the company’s Board of Directors announced the appointment of John Dickson as the company’s new Non-Executive Director. A month earlier, it also disclosed its plan to sell its pension management subsidiary (AXA Mansard Pensions Ltd) and some undisclosed real estate investments. 

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Its unaudited financials for the period Q1 2020 reveal a growth across revenue and profit lines. Gross written premium grew by 21% from N17.4 billion earned in Q1 2019 to N21 billion in Q1 2020. Profit for the year for the group grew by a commendable 120% from N890 million in Q1 2019 to N1.9 billion in Q1 2020. 

As at Tuesday, the 7th of July when markets closed, the share price of the company was N1.59. The company’s EPS stood at 0.33 while its price to book ratio stood at 0.6082. 

 

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