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Columnists

When companies die…

When a company goes under, lost jobs and loss of purchasing power leaves the economy of the community in tatters.

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There is a lot of literature on why companies die, but hardly is the post mortem conducted after their death on the implications of their demise. When companies die, what happens afterwards? The immediate effect that is easily seen and felt, is the loss of jobs. The economy of the affected community suffers. That cannot be hidden. The humming of the turbine engine comes to a stop. The party is over and folks go home reluctantly.

What else happens when a company dies? I think a lot happens. First, let us look at what a company does.

In general, a company exists to offer products and services. To do that, the company would rely on other companies and people to provide raw materials as input for its products and services. Nestle would want maize from farmers. Olam would need the rice farmers to do well in order to supply it with rice. Tech companies would need Amazon AWS and Microsoft Azure for their cloud services. In addition, companies need other companies to provide services for their existence. Think of maintenance services, janitorial services, technology services, etc., Finally, companies need customers for their products and services. In essence, every company has a supply chain built around it.

When a company goes under, the web of the supply chain will have no host to “feed” on. It is not a zero-sum game but an actual loss to many people in the value chain and the ecosystem, and the economic impact is unmistakable. Lost jobs and loss of purchasing power leaves the economy of the community in tatters. If this is sustained, people move out of that community.

But there is something that is not glaring — the loss of a skilled workforce. When companies die, the skill sets that support that sector of the economy either dies entirely or moves to another place where there are opportunities. As you now know, talent is always attracted to opportunities. This is apparent today as many countries are using the opportunities they have, to attract top talents from around the world. Canada, Australia and the UAE are all singing from that hymn book as of today.

The other thing that goes when a company dies is innovation. You cannot innovate on the dead. Innovation is a living thing. It is alive. It grows, mutates and co-exists with existing processes and technologies.

The final part of the trifecta that dies is the dreams of the young; the future generation. It is hard to dream to be an astronaut as a Nigerian living in Nigeria. It is not because it is forbidden but because there is no reality to attach that dream to. Back to the issue of the auto industry, it is hard to have auto engineers and designers when there are no vehicle manufacturing companies (thank God Innoson is unbuckling this trend). University students have nowhere to intern. The companies are dead and they cannot support the skill set of the young.

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Culled from an article by George Omin on Medium

SSKOHN

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform.To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

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Columnists

CIFI: Despite CBN funds, can the creative industry thrive in this environment?

The Nigerian technology ecosystem is at its nascent stage, and beyond money, there is the need to ensure an enabling environment for operators.

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Despite a frail 2020 for the Nigerian economy, there was a bit of silver lining. The Nigerian Information, Communication, and Technology (ICT) sector emerged as the leading segment of the economy aiding the country’s exit from recession by a whisker in Q4 2020.

The development, in effect, justifies to some extent, the earlier decision of the Central Bank of Nigeria (CBN) to create the Creative Industry Financing Initiative (CIFI) to support businesses in the following areas:

  • Fashion
  • Information Technology
  • Movie Production and Distribution
  • Music

The CBN began to contemplate the idea of the CIFI following the influx of private investment into the technology space in 2019. For instance, according to the African Tech Start-ups Funding report for 2019, Nigeria got foreign exchange inflows totalling US$137.9m in the period.

This continued into 2020, considering that despite the pandemic, the sector still attracted an additional US$122m in seed funding. Furthermore, the sector contributed 13.12% of the total real Gross Domestic Product (GDP) of Nigeria which came to N19.53tn as of Q4 2020.

Evaluating the progress made so far with the CIFI, as of Q3 2020, the CBN had reportedly disbursed c. N3.12bn in intervention to 320 beneficiaries. While there are concerns around the tenor of the loan for Software Engineers and accessibility of funds to other technological entrepreneurs, we laud the CIFI and encourage relevant agencies to do more.

The Nigerian technology ecosystem is at its nascent stage, and beyond money, there is the need to ensure an enabling environment for operators. For instance, the recent BVN concerns that rocked the financial technology space and the regulatory uncertainty which is a key risk for telecommunication operators among other concerns, are issues that should be decisively dealt with.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange

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Book of States 2020: Vast resources, low industrial development

State governments have been heavily reliant on FAAC distribution to meet recurrent expenditure, thus making no room for capital spending. 

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Oil Price Crash: Governors to meet on budgetary and economic issues, Insecurity: Governors to meet on Wednesday over rising insecurity

The Nigerian Investment Promotion Commission (NIPC) in a recent report titled “Book of States 2020” highlighted the investment prospects of the 36 states of the federation including the Federal Capital Territory (FCT) to steer attention to the subnational investment opportunities in Nigeria. We note that the report is an outcome of a partnership between the commission and the Nigeria Governors’ Forum (NGF) to showcase the key investment opportunities for each state.

The report focused on the key areas of physical capital (airports, railway stations and seaports), resources (natural and minerals) and demography (population and labour force) of each state including their Internally Generated Revenues (IGRs), budget spending and household consumption.

While we acknowledge the decrepit infrastructure as a major hindrance to the growth of businesses and economic prosperity of many states, we note the little emphasis placed by the states on financing capital projects to attract private sector investments. Over the years, state governments have been heavily reliant on FAAC distribution to meet recurrent expenditure, thus making no room for capital spending.

The truth is that as long as state governments do not make desperate efforts to develop their internal revenue-generating capacity, the states in the country would continue to operate an inefficient rent collection system where they rely solely on FAAC allocation to meet basic needs such as paying workers’ salaries.

In our view, we believe the efforts to revive the ailing status of many states depend on the effectiveness and soundness of policies made to propel investments. Currently, Nigeria has enormous potentials to improve tourism given its ample amount of resources to attract both local and international tourists. Many countries in the continent such as South Africa, Kenya and Morocco have made great fortunes from tourism.

Over 50% of the states have recorded no foreign direct investments over time due to little or no requisite infrastructure needed to attract capital inflows amid untapped resources in these affected regions. Also, we believe the Federal Government needs to relax its control on some of the state-owned resources to enable the states better exploit these resources.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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