- 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.
Eat’N’Go Expands To East Africa, Projects 180 Stores By Year End
In a bid to further extend its tentacles beyond the West African market, Eat’N’Go limited, one of the leading Quick Service Restaurant (QSR) operators in Nigeria and master franchisee for world-class food brands – Domino’s Pizza, Cold Stone Creamery, and Pinkberry Gourmet Frozen Yoghurt, announced its expansion into the East African market.
This development comes after the successful acquisition of the franchisee which operated Cold Stone Creamery and Domino’s Pizza in Kenya. This acquisition will see Eat’N’Go limited become the largest Domino’s pizza and Cold Stone Creamery Master Franchisee in Africa with operations in Nigeria and Kenya.
Since its entrance to Nigeria in 2012, the QSR company has grown exponentially and has continuously nurtured the drive to extend its footprint across the African market. This acquisition provides them their first foreign market expansion, making them a Pan African company with a total number of 147 outlets across Africa and a projection to reach 180 stores by end of 2021.
Group Chief Executive Officer and Managing Director Eat’N’Go Limited, Patrick McMichael said that expanding into East Africa represents a very exciting time in the growth of the organization and also a strategic investment for the firm and its stakeholders. “Over the years, we have fostered the mission to not just bring the best QSR brands to Africa, but to directly impact on Africa’s economy and we are glad we are finally on the way to making this happen. Studying the growth of the Kenyan market in the last couple of years, we are convinced that now is the time to extend our footprint into the country.”
“We are very thrilled about this expansion as this move avails us more opportunity to provide Jobs to more Africans, especially in times like this. We remain thankful to all our customers, partners, and stakeholders who have supported us this far and we are more than ready to strengthen our dedication in satisfying the needs of our customers” Patrick added.
Eat’N’Go has over the years maintained its position as the leading food franchisee in Nigeria. As it expands its presence to other parts of Africa, the organization also places a strong focus on the quality of its products and services of all its three brands. The expansion to this new region is in line with the company’s plan to reach 180 stores across Africa by the end of 2021.
The milestone achievement and development will better position the company in its contribution to Nigeria and Africa’s economy. Currently home to over 3000 staff members across Africa, the company is committed to continuously provide job and business opportunities across the continent.
Eat’N’Go launched in 2012 in Nigeria with the vision to become the premier food operator in Africa. Today, the company has over 147 stores in Nigeria and Kenya and it continues to deliver on this promise by successfully rolling out the globally recognised brands Cold Stone Creamery and Domino’s Pizza across Africa. The company continues to expand its presence in key markets by fusing company goals with new strategic development goals and is projected to reach 180 stores across Africa by end of 2021.
Shoprite Exit: LCCI Explains Challenges Hurting Business Operations in Nigeria
Following the recent announcement of Shoprite, a leading South Africa retail giant, that it is leaving the Nigerian market due to harsh business environment and tough business policies, Dr Muda Yusuf, the Director-General, Lagos Chamber of Commerce and Industry (LCCI) has explained some of the challenges responsible for such decision despite Nigeria’s huge population size.
Yusuf said while such decision is negative for the Nigerian economy, several factors like harsh business environment could have forced the company to make such decision. He said it also could be due to intense competitive pressure.
He said, “Shoprite is an international brand with presence in 14 African countries and about 3,000 stores. The comparative analysis of returns on investment in these countries may have informed the decision to exit the Nigeria market.
“The opportunities for retail business in Nigeria is immense. But the competition in the sector is also very intense.
“There are departmental stores in practically every neighbourhood in our urban centres around the country. There is also a strong informal sector presence in the retail sector. It is a very competitive space.”
According to the Director-General, there are also important investment climate issues that constitute downside risks to big stores like Shoprite.
He said, “These include the trade policy environment, which imposes strict restrictions on imports; the regulatory environment, which is characterised by a multitude of regulators making endless demands.
“There is also the foreign exchange policy, which has made imports and remittances difficult for foreign investors. There are challenges of infrastructure which put pressures on costs and erodes profit margins.”
The LCCI boss added, “But we need to stress that Shoprite is only divesting and selling its shares; Shoprite as a brand will remain. I am sure there are many investors who will be quite delighted to take over the shares.
“It should be noted that there are other South African firms in Nigeria doing good business. We have MTN, Multichoice, Stanbic IBTC, and Standard Chartered Bank, among others. Some of them are making more money in Nigeria than in South Africa.”
He added that some sectors are more vulnerable to the challenges of the business environment than others.
Afrinvest Appoints Mrs. Onaghinon As COO
Afrinvest West Africa Limited, has appointed the former head of public private partnership agency of the Edo State, Mrs Onoise Onaghinon as its chief operating officer.
Onaghinon joined Afrinvest in 2003 as an analyst in the firm’s investment banking division, rising through the ranks to become an associate, then vice president and eventually executive director & head of investment banking.
She is a seasoned veteran in the Nigerian capital markets and investment landscape with over 18 years of experience in capital raising, mergers and acquisitions, and restructurings across many industries.
In 2017, Onaghinon took a sabbatical from the Firm to head the Public Private Partnership Agency of the Edo State Government. Having acquitted herself creditably in the public sector, she has rejoined the Firm to resume as the new COO.
Speaking on the appointment, group managing director of Afrinvest, Ike Chioke, said: “over the years, Onaghinon has demonstrated great leadership, professional excellence and outstanding client commitment in driving the firm’s business units, particularly our investment banking division. We are delighted to have her back and we look forward to leveraging her cross-disciplinary experience across the Afrinvest group”.
In her new role, Onaghinon will oversee human resources, legal & compliance, internal control and general services while leading the firm’s initiatives to improve efficiency across its subsidiaries.
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