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SMEs in Survival Mode as Recession Bites Harder



  • SMEs in Survival Mode as Recession Bites Harder

There is no relief yet for the Small and Medium-scale Enterprises in the country as they continue to struggle to maintain profitability or remain in business, with the cost of operations rising rapidly.

Business owners are worried about the continued free fall of the naira, which dipped to as low as 516 to the United States dollar on the parallel market last week.

Foreign exchange scarcity and increasing cost of importing raw materials, with other challenges of infrastructure deficiency, have continued to increase the cost of doing business in the country.

Many small businesses are now seeking different survival strategies to enable them to remain in business.

The Chief Executive Officer of a firm dealing in printing materials, Mr. Dare Bakare, said the challenges facing the economy started with the exchange rate volatility, which affected a lot of things such as the cost of clearing goods at the ports.

Bakare, who observed that a lot of businesses had been affected by the economic recession, noted that tariffs rose beyond reasonable levels and even additional levies not part of the clearing were introduced at the ports.

With the prices of goods and services rising in the country, he said the harsh business environment was forcing entrepreneurs to draw out their plans with the expectation of improvement in the economy.

According to him, the Treasury Single Account introduced by the Federal Government made Deposit Money Banks to lose a lot of money because most of the government funds were moved to the Central Bank of Nigeria from the DMBs.

He said the development affected the liquidity of the banks and their ability to meet the needs of the SMEs seeking loans from them.

“We try to ensure that we operate on a moderate level so that our prices are not too high or too low so that we can keep the business going because we believe it will not continue this way; things will improve,” he said.

Aside from the fall in oil prices, he said the resurgence in militant attacks in the Niger Delta affected the government’s revenue from oil sales.

Bakare also said that war against corruption as well as good leadership at a time of recession would help the country to get out of the economic quagmire quickly.

“They should negotiate with the Niger Delta militants to stop the bombings. The government should also recover looted funds from those who stole and the money should be returned to the economy, and all those thieves should be arrested,” he said.

The Managing Director, Topgy Group, Mr. Tokunbo Oshinyemi, said the harsh business environment and difficulty in getting raw materials due to forex scarcity made the company to resort to alternative funding.

He said, “We do not put the whole pressure on our clients in our pricing; we still maintain our pricing based on that, our clients are able to still find us very attractive, unlike many competitors that have increased their prices. With that, we are able to maintain our clients.”

According to him, the recession has made it important for firms to manage their fixed assets.

“A lot of organisations now have to manage their fixed assets because they don’t have money to buy new ones,” Oshinyemi said.

According to him, the ability to maintain prices in order to retain customers has been a top priority for the organisation.

He said, “Not increasing our prices has reduced the profit margin significantly, but what is affecting us is affecting our customers.

“It is better to retain our customers when things are difficult than to lose them because you want to increase pricing. We want to maintain our clients despite the fact that our environment does not warrant it,” he said.

An insurance broker, Mr. Dele Kareem, said for most countries that had experienced recession, it was always an opportunity for small-scale firms to grow.

He explained that this could be achieved by taking advantage of opportunities around them.

“For instance, with agro industry, you can do backward integration and then use the opportunity to expand your business and look for export business as well,” he said.

According to him, the cost of producing energy for business is very high because businesses need drums of diesel for their generators as power supply from the national grid remain poor.

Kareem said, “That eats into your capital. Some businesses have been able to cut off some bills. Some have cut off the bills from power firms completely and now rely on generator alone.”

He also observed that insurance business had not been rosy but dull due largely to government policy.

“A lot of companies are closing down, construction industries are not operating; manufacturers are closing down, traders don’t have dollars to import, which affects maritime and aviation business,” he said

The Chief Executive Officer, Institute of Credit Administration, Prof. Chris Onalo, said the capability of indigenous investors would be greatly hampered by the nation’s weak currency.

He stressed the need for the government to ban the importation of goods being produced in Nigeria to boost local production, adding that it was relevant to diversify the economy.

The Chief Executive Officer, Riskguard Nigeria Limited, Mr. Yemi Soladoye, said it would not be possible to fully appreciate the benefits of the economic recession unless the root causes were first identified.

He said Nigeria entered into recession in 2016 due to the absence of national saving/mandatory Sovereign Wealth Account, reduction in oil price, reduction in oil output, increased spending on insurgency, monumental corruption and bloated cost of governance.

Soladoye said one of the natural consequences of recession was famine.

He said, “The Venezuela experience where people looted supermarkets and chain stores and migrated to neighbouring countries in droves would have been our portion. Meanwhile, which neighbouring countries can contain us in a situation where the population of just the poor people in Nigeria (112 million) is equal to the population of seven other West African countries combined?”

He said the current recession had brought some benefits to Nigeria such as attention to the non-oil sectors like agriculture, the SME, mining; reduction in dollar-based consumption – foreign education, medical tourism and luxury items; focus on local industries and self-employment; fighting corruption and wastage; removal of impunity with which public money was stolen; and reduction in the importance attached to oil revenue.

Soladoye said to achieve sustainable economic turnaround, “there is a need to restructure the ministries, department and agencies at federal and state levels to suit the country’s targeted economic focus.”

He also said, “Let all the development agencies, the Bank of Industry, Bank of Agriculture, Central Bank of Nigeria, Nigerian Export-Import Bank, and Nigeria Investment Promotion Commission focus on agriculture and develop a 10-year agric master plan and allocate robust budget for agriculture on yearly basis for the whole period.

According to him, Nigeria is a land of resources and opportunities, and anybody who can use their brain and is ready for legitimate work will not be in recession.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Company News

Uber to Halt Services in Parts of Belgium




Uber will stop its ride-hailing service in most parts of Belgium tomorrow after a court ruling on Wednesday which extends an order given in 2015, banning its p2p (Peer to Peer) UberPop service to also cover professional drivers who provide its ride-hailing service.

Uber told TechCrunch that it is currently closely examining the details of the ruling, in order to arrive at a decision on whether or not to appeal the decision with the country’s Supreme Court.

This also follows a temporary decision to discontinue Uber’s service in Brussels, a decision which was referred to as “exceptional and unprecedented” by the tech giant. The company said that it was merely taking a step to complain about the lack of reform rules which forbid drivers from using smartphones.

After the ruling by the Brussels appeal court, private hire vehicle drivers have been obstructing a major tunnel in the capital of Belgium.

In a statement made concerning Friday’s impending shutdown, the chief of Uber in the country, Laurent Slitsagain criticized the government for not providing a reform which it has been soliciting for, stating that the decision was made depending on regulations which are now outdated as they were written before smartphones.

The company stated that the government has promised a reform but has failed to deliver said reforms for the last seven years.

According to Bloomberg, the shutdown will not be applicable to a small number of drivers who are licensed in the Flemish region of Belgium, and are therefore still permitted to use the application. Uber confirmed that the Appeal Court ruling only applies to drivers with Brussels licenses.

In another statement, Slits stated that the tech giant is hugely concerned about the 2,000 possessors of LVC licenses (rental car with driver licenses) who according to the country chief will lose their ability to generate earnings.

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Company News

Honeywell Flour Mills Refutes Ecobank Winding Up Proceeding Claims, Assures Investors of Total Transparency



Honeywell Flour Mill Factory - Investors King

Following media reports that Honeywell Flour Mills Plc (HFMP) is a subject of an ongoing winding up proceedings instituted by Ecobank Nigeria Limited in a suit no: FHC/L/CP/1571/2015, Honeywell Flour Mill Plc has now refuted the publication, insisting there is no winding-up petition against the embattled company.

The company disclosed in a statement signed by Yewande Giwa, Company Secretary and obtained by Investors King.

It said “It is pertinent to set the record straight that there is no Winding-up Petition currently pending or live against HFMP in any Court in Nigeria. There is also no pending Court Order restraining trading in the shares of HFMP or inhibiting HFMP or its owners from dealing in its assets. HFMP assures its investors, regulators and stakeholders that in all of its engagements with FMN, it received independent legal advice and asserts that the transaction is not in breach of any subsisting Order of Court. The issue as to whether HFMP is indebted to Ecobank is still before the Courts and the final decision remains the exclusive preserve of the Courts. It is also important to state that the Court of Appeal judgement being referred to in the reports did not declare HFMP to be indebted to Ecobank.”

This was in response to a publication titled “Ecobank Warns against Acquisition of Honeywell Flour Mills, Alleges Company Facing Winding Up Proceedings” that claimed Ecobank Nigeria Limited had issued a 7-day ultimatum to Flour Mills to desist from completing the acquisition of 71.69 percent stake in Honeywell Flour Mills Plc on the ground that the company was hugely indebted to Ecobank.

However, Honeywell claimed “The assertions lack merit, were written in bad faith and are a deliberate attempt to undermine a transaction that will result in substantial benefit to the Nigerian economy and entrench the collaboration of two publicly quoted companies. As a responsible corporate citizen, we have entered the transaction with FMN having taken all legal issues into consideration.

“All stakeholders are hereby assured that management of Honeywell Flour Mills Plc will continue to act in the best interests of all concerned and work diligently to preserve value for all its shareholders.

“We expect that from the proposed combination, stakeholders will benefit from the more than 85-year combined track record of FMN and HFMP and their shared goal of making affordable and nutritious food available to Nigeria’s population. The country and its food security agenda will benefit from both companies’ focus on developing Nigeria’s industrial capability, its agricultural value chain and specifically backward integration of the food industry.”

This whole drama started immediately Honeywell Flour Mills and Flour Mills of Nigeria, in a joint statement, announced FMN has agreed to acquire a 71.69 percent stake valued at N80 billion in Honeywell Flour Mills Plc. A deal that will automatically make Honeywell Flour Mills Plc Flour Mills of Nigeria’s asset.

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Merger and Acquisition

Flour Mills of Nigeria Acquires First Bank of Nigeria Limited’s 5.06 Percent Stake in Honeywell Flour Mills



Honeywell Flour Mill Factory - Investors King

Flour Mills of Nigeria Plc, Nigeria’s leading flour mill company, has acquired First Bank of Nigeria Limited’s 5.06 percent stake in Honeywell Flour Mills Plc.

The company disclosed in a statement signed by Umolu, Joseph A.O., Company Secretary/Director, Legal Services.

The acquisition was in addition to the 71.6 percent stake of Honeywell Flour Mills Plc (HFMP) FMN acquired on the same day. Therefore, Flour Mills of Nigeria Plc will now hold 76.75 percent equity interest in HFMP.

According to the company, the move will help build a resilient flour mills company that will ensure job continuity, deepen productivity and support national growth.

Commenting on the transaction, Omoboyede Olusanya, Group Managing Director of FMN, said “The proposed transaction is part of our global growth strategy, which is aligned with our vision to not only be an industry leader, but also a national champion for Nigeria in the Food and Agro-allied industries.”

“Given FMN’s parallel negotiations for both stakes culminating in the agreements being signed on the same date, the basis for arriving at key commercial terms including final equity price per share, will be the same. The price payable to FirstBank will be the same with Honeywell Group Limited.”F

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