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.
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 –
- 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.
- Foreign Exchange Volatility Risk; This carried extreme impact especially among multinational corporates for reasons like importation and capital repatriation.
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.
‘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.
‘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’.
- 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 Risk; This 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’.
- 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.
‘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 Risk; Organizations 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.
NB Plc to raise additional N20 billion from its N100 billion Commercial Paper
Nigerian Breweries has announced the continuation of its N100 billion Commercial Paper (CP) Issuance Programme.
Nigerian Breweries has announced the continuation of its N100 billion Commercial Paper (CP) Issuance Programme in a bid to raise up to N20 billion to support its short term funding needs. The company has launched Series 9 and 10 of the programme for this purpose.
This information was disclosed in a notification signed by the Company’s Secretary, Uaboi G. Agbebaku, and sent to the Nigerian Stock Exchange.
The notification reads;
“[Nigerian Breweries Plc] is pleased to inform the Nigerian Stock Exchange and the investing public of the continuation of its “CP” (Commercial Paper) programme with the launch of Series 9 and 10 of the programme.
“Series 9 of the Commercial Paper programme would be for a tenor of 180 days, while Series 10 would be for 270 days. However, the launch of the CP opens today 23rd October 2020.”
What you should know
According to data obtained from Financial Market Dealers Quote (FMDQ), Nigerian Breweries has raised up to N90.12 billion since the start of the year.
- N52.76 billion was raised from Series 6 between February 12 to November 6, 2020.
- N13.03 billion was raised from Series 7 from April 15 to October 14, 2020.
- N24.33 billion was raised from Series 8 from April 15 to January 8, 2021.
- The recent issuance of the Series 9 and 10 CP will bring the total funds raised to N110.12 billion.
Why it matters
- The CP will help the company navigate through the recent impact of COVID-19 and other trade disruptions.
- The programme will strengthen the balance sheet of the company, and enable the brewer to execute its plans while delivering value to customers and creating wealth for shareholders,
- In like manner, the CP programme is expected to provide opportunities for non-equity investors to invest in the company and support its cost management initiatives.
MTN shareholders have made approximately N1 trillion since April 2020
Shareholders of MTN Nigeria gained close to a trillion naira in less than 7 months.
MTN Nigeria shareholders have gained N986.58 billion since the first trading session in April 2020.
This was uncovered by calculating the difference in the telecommunication giant’s market capitalization of ₦1.832 trillion at the open of trade, for the first trading session in the month of April 2020, and the market capitalization of ₦2.646 trillion at the close of trade in the first trading session in the month of October.
This gives a whopping N814 billion increase in market capitalization, and this with the dividend the company has paid to shareholders on two occasions between this time period, brings the total gains both realized and unrealized to approximately N1 trillion.
Hence, the N814 billion increase in market capitalization translates to the joint gains MTN investors have made from the increase in the shares of the company, as the share price of the company has increased by 44.44% or ₦40.00 between April 1, 2020, and October 2, 2020, with the share price of increasing from ₦90.00 to ₦130.00.
However, the gains MTN NG investors have made from their investments in the telecommunication company, is not limited to the gains driven by the increase in the price of the shares.
Recall that the company declared payment of dividends to its shareholders on two occasions, as investors/shareholders of the company, whose names appear in the Register of Members, as of the close of business on April 17, 2020 and August 14, 2020 were paid a cumulative dividend per share of ₦8.47, for all the outstanding shares of 20,354,513,050 held by the shareholders, and this translates to a total dividend payout of N171 billion by the company to its shareholders.
It is noteworthy that the realized and unrealized gains MTN investors have made from holding the shares over this period stands at N986.58 billion.
LASACO Assurance Plc Chairman, Aderinola Disu resigns from the Board of Directors
Aderinola Disu resigned her position as a Director on the Board of LASACO Assurance.
Lasaco Assurance Plc has announced the resignation of its former Chairman, Mrs. Aderinola Disu, as a Director on the Board. The resignation took effect from the 8th of September, 2020.
The following information is contained in a press release made available to the public, signed by the company Secretary, Gertrude Olutekunbi, and verified by Nairametrics.
The notification also revealed that, the aforementioned firm has received a provisional approval from the National Insurance Commission (NAICOM) to appoint two other directors.
The two newly appointed directors are; Dr (Mrs.) Maria Olateju Phillips, and Prince Jamiu Adio Saka, both appointed to a Non-Executive Director role.
Profile of the two newly appointed Directors
Chief (Mrs.) Teju Phillips, is a successful Chartered Accountant, who holds an ACCA from England and Wales. She is multilingual and has extensive experience in Management/Consultancy services, that spans across many years in both the public and private sectors. She has served as a Director in Keystone Bank; Director, Lagos State Lottery Board; Honorable Commissioner for Special Duties & Inter-Governmental Relations in Lagos State; Managing Director of Alma Beach Estate Ltd (a subsidiary of Rims Merchant Bank Ltd); Managing Director, Maridot Ventures Ltd. among others.
Prince Jamiu Adio Saka, is an accomplished Insurance professional, having practiced in Canada and Nigeria. He brings to the board over 30 years of experience as a Broker.
Lasaco Assurance Plc, is a listed Nigerian firm that provides life and general insurance services, which includes motor, bond, contractors-all-risk, fire, burglary, aviation, marine, general accident, life, pension schemes, engineering, and oil and gas. The company has a market capitalization of about N2.05 billion and it share price currently trades at N0.28 kobo.