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NSE/Bloomberg: Nigerian Companies Embrace Innovation to Navigate Recession

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Top chief executives across sectors who were part of a panel at a recent Nigeria Stock Exchange (NSE)-Bloomberg CEO Roundtable in Nigeria agree that the recession provided an opportunity to innovate and take advantage of opportunities hitherto unseen.

Nigeria, is widely believed to have come out the worst of its recession. While it lasted, businesses suffered erosion in bottom lines, forcing them to tweak models to stay in business and to thrive.

Effects of Recession On Companies
Speaking at the CEO Roundtable Demola Sogunle, CEO of Stanbic IBTC Bank, said that 2015 was a tough year for Nigerian banks, as it “affected the quality of our loan book (personal and corporate). People were just not able to pay. The loans became impaired. The situation was the same in 2016 and was exacerbated by forex illiquidity.”

Graham Hefer, managing director at Okomu Palm Oil Company, commented that in agriculture, there were significant revenue drops, leading to aggressive lowering of cost.  In his company, there “were issues with having to import and the lack of forex”.

In the infrastructure sector, “in the last couple of years there hasn’t been any new large scale infrastructure project due to the fact that the recession has constricted ability to pay,” said Andrew Alli, CEO of Africa Finance Corporation (AFC).

Telecom companies’ “capacity to pay is coming to a grinding halt,” added Funke Opeke, CEO of Main One. This is because they are no longer able to approach the market because of forex shortage and there is lack of local substitutes. This has led to rationalisation of services, cost and consolidation. She also noted that “There is loss of skills as experts depart the local market,” adding that the ability to deliver virtual businesses is impaired as interested parties are focusing on competing markets like Kenya and South Africa because of the macroeconomic environment.

Facing Up to The Challenge
On how businesses stood up to the challenge presented by the recession, Sogunle said that when considering companies with which to do backward integration, his bank looked at firms who were able to source raw materials locally and whose reliance on foreign currency was moderated, or those who were in a position to export (and thus could earn FX to bring in their imports). 

Sogunle added that in a further bid to reduce costs, his bank went more digital and had to scale down on branches leading to rationalisation. It also made changes in terms of channels and internal operations, leading to faster delivery of service to customers. “We scaled down on sectors. In agriculture for instance, we identified key subsectors to work with.”

Hefer said the recession helped his company aggressively lower costs while guarding forex that it obtained. To bolster their forex sourcing, they devised a system of selling palm oil locally and selling rubber to the international markets.  “On productivity, we’ve looked at vertical integration within our company and we are looking for better yielding crops so that we don’t look for more land.” He also stressed the need for value creation if agriculture will deliver the promised benefits.

Mark Bohlund, Bloomberg Intelligence economist commented that “agriculture is going to be the biggest contributor to the economy in the next two years. The country doesn’t have to reinvent the wheel, but simply look at what the Rwandans and the Zambians are doing. It is one of the sectors that can benefit from weak naira and improved cost competitiveness. This is also because it is not as dependent in energy as other sectors like manufacturing.”  He also noted that while agriculture is a central part of the government plan, implementation of that plan remains to be seen.

Alli pointed out that there hasn’t been many large scale infrastructure projects that have taken off because people’s ability to pay (including the government’s ability to pay) has gone down.

“Shortages of dollars have caused a rethink around innovative products that will allow financing in naira,” says Alli, but cheap funding in naira given the macro environment is difficult and these things take time. So in the meantime, the industry is resorting to the use of technology to manage cost.

According to Opeke, “there’s the need to create structures that make it easy for private capital to come in” to the telecom industry and to allow investors repatriate their funds. On the demand side, she says since consumers have less buying power, which has to be addressed in the same way the government has to aggressively implement policy.

Fortunately, the government appears poised to key into the needs of business, assured finance minister Kemi Adeosun, who added that “a strong focus on infrastructure and improved ease of doing business is a very clear recipe for growth, profit and progress.”

Nigeria CommunicationsWeek believes that technology makes life more exciting and helps improve the lives of people around Nigeria and indeed the world.

So since 2007, we have devoted our energy to independent reportage of technology and how they affect lives.

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E-Financial

Vodacom Director Urges Accountants to Leverage Sage/ACCA Partnership

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By peter oluka

Mr Oluseyi Olanrewaju, the finance director at Vodacom Business Africa (Nigeria) Limited, has re-emphasised the need for accounting professionals to embrace digital culture.

He made the remark while delivering keynote address at Sage-ACCA Continuing Professional Development (CPA), event held in Lagos Tuesday, which was the launch of partnership between the two entities to provide platform for accountants to embrace digital transformations.

Olanrewaju emphasized that rapid growth and development in information technology has brought about digital revolution in economic, social and cultural fields, and bequeaths today’s accountant with the responsibility to improve on the skills to remain relevant.

With the recognition of the accounting discipline as an information system, he said, the accountants can’t undermine the influence that the changes in processes of carrying out transactions with the usage of IT in business operations.

In a bid to keep up with changing conditions and the enabling inclusion of information era the need to embrace the digital culture in accountancy can’t be overlooked especially in medium to large scale business.

“Technology should not be viewed as a threat rather tools to boost accounting profession. Digitization is the future; as accountants we can’t run from it. Yes, manual processes are ridden with high risks on accounting and costly. Thus, changes is the environment necessitates changes in applicable accounting tools and skills required to carry out accounting roles”, Olanrewaju said.

Determinants of business that qualify as medium to large include: IT staff & skills including several specialists, multiple locations, large capex in relation to other businesses in operation in the same industry and business with main considerations for technology purchases being advanced features and security.

Using the acronym: VUCA- Volatile, Uncertain, Complex and Ambiguous situations, he reminded the participants that, roles of accountants have changed overtime, demanding for real-time ‘results’. “The environment demands you react quickly to ongoing changes that are unpredictable; it requires you to take action. Therefore, there is little you can achieve today in the ‘VUCA’ world without digitization”.

The keynote speaker also applauded Sage X3 offering, such as robust accounting processes; consistency; time saving; delivers visible metrics; helps to improve operational efficiency and assists users to be in line with government regulations and international accounting rules.

Participants at the interactive session with other C-level ACCA members also learnt how Sage X3 offers the bedrock of the adjustments required in today’s accounting field.

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E-Financial

CBN 14% Interest Rate: Investors Still Expecting Cut

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Lukman Otunuga, a research analyst at FXTM.

By peter oluka

Nigeria’s central bank has yet again left benchmark interest rates unchanged at 14% in November amid a ‘fragile’ economic recovery.

But, Lukman Otunuta research analyst ForexTimes, in his comment, believes investors are still keen on interest rate cut.

The apex bank also left the cash reserve ratio (CRR) at 22.5 percent.

CBN governor, Godwin Emefiele made this known on Tuesday while announcing the decision of the committee in Abuja.

Emefiele said only one of the nine members of the committee voted against the decision.

“Inflation in particular requires very close monitoring to gain clarity on the medium-term optimum path of monetary policy,” Emefiele told a news conference.

The monetary Policy Committee had begun its last meeting for the year on Monday.

According to the committee, the interest rate was held to prevent exchange rate pressure.

Commenting on the decision by the apex bank, Otunuga said, “With GDP growth in the third quarter rising by 1.40%, it seems that the central bank is hesitant to take action anytime soon.

“I believe that Nigeria’s improving economic landscape, and signs of inflationary pressures easing, are likely to support investor expectations of a rate cut.

“With inflation in Nigeria at 15.91%, there is a suspicion that the CBN may be waiting for a more sustained decline before moving ahead with rate cuts to support economic growth.

“As the year slowly comes to an end, investors will continue to observe Nigeria’s hard economic data and inflation figures for hints as to when the CBN might act in 2018”.

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E-Financial

Bitcoin Smashes Through $8,000 for the First time

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Bitcoin hit a new record high on Monday after smashing through the $8,000 level for the first time over the weekend, marking an almost 50 percent climb in just eight days.

The new high came after leading U.S. payments company Square Inc said late last week that it had started allowing select customers to buy and sell bitcoins on its Cash app.

Bitcoin traded as high as $8,197.81 on the Luxembourg-based Bitstamp exchange, up over 2 percent on the day and around 48 percent up since dipping to $5,555 on Nov. 12.

An eye-watering eightfold increase in the value of the volatile cryptocurrency since the start of the year has led to muliple warnings that the market is in a bubble, and institutional investors are broadly staying away.

Retail investors, however, as well as some hedge funds and family offices, are piling into the market. The “market cap” of all cryptocurrencies hit an all-time high of over $242 billion on Monday, according to trade website Coinmarketcap.

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