BUSINESS SURVIVAL IN 2016
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In this column in the last two weeks, I have looked at the Economy and concluded that 2016 will be a tough year. I will not deserve any awards for saying so because many other commentators and analysts have come to similar conclusions. But if an award must be given, then President Muhammadu Buhari( PMB) is the undisputed winner. First, since he assumed office , he has been consistent in telling Nigerians that our economy was in bad shape and that difficulties lay ahead. This call has intensified by the day rather than abate. In his recent media chat he again harped on the subject of the difficult economy that lies ahead.
The only award that has no obvious winner is that which will go to whoever tells us exactly what must be done to heal the economy and restore it to sanity as quickly as possible. All kinds of ideas are floating in the air and some tentative and experimental measures are being taken, but so far nothing has changed. Or rather nothing has changed for the better. When I started to hear of figures of money stolen and kept abroad by some past political leaders and officials of government and the present government's determination to bring back all the money, I thought perhaps we could make up the oil revenue shortfalls. My hope was buoyed up some months ago, when Comrade governor Adams Oshiomhole announced that a former minister had six billion dollars in his or her account and that it was the Americans that gave him the figures. At that time, I had suggested to a friend that we could hire America's special force, the guys that took out Osama Bin Laden to help us retrieve this large sum in one person's account. Even if we had to pay them one billion dollars to carry out this certainly less dangerous task, it would be worth the while. But it does not look like we are in any real hurry to repatriate these funds. And listening to PMB and watching his mien, we would never try anything extra judicial like trying to cargo Umaru Dikko as we did in 1984. So any hope for quick fixes are forlorn. And yet our businesses have to survive in 2016, especially those who operate in the SME sector. Hence this attempt to proffer a few suggestions
RETHINK YOUR BUSINESS
At the close of 2015, many businesses were gasping for breath. And if we must prevent sudden death, the first thing to do in the new year is to rethink the business. What is this business about in the first place? The assumptions on which the business was planned or started, are they still relevant? With the current happenings in the Economy, are those assumptions still justified?What Business results am I expecting this year? Can my current structure- ownership, management and funding deliver the results? Can I deal with the new regulatory regime? Must I really remain in this business? Is this sector growing or declining and why? These questions are relevant, because experience has shown that at times, people act as if they were sentenced to a particular business. Many fail to confront and interrogate the unfolding realities in their line of businesses and feel obliged to keep " suffering and smiling". No way! In the recent past for example, with the subsidy bazaar, many people went into the oil and gas business. But with recent development in both the international and domestic oil markets, the new regulatory frame work from PPRC/DPR/ NNPC and the development in the Forex market, Many players in this business need to rethink their business models and options and take bold steps to align to new trends, if practicable or take a jump to safety when the shore is still visible.
SOFT PEDAL ON IMPORT.....PUSH ON LOCAL INPUT
Any business that depends on the importation of anything will face challenges this year, that is if they are not already in distress. In the closing months of 2015, it was difficult to access foreign exchange for import and I am not talking about the 41 products that had been on the restriction list. It is becoming difficult to open letters of credit and harrowing to get those letters confirmed. Businessmen are now queuing up in banks and bank treasurers are now in hot demand, if you understand what I mean. Soon, if things do not change, then consumers of imported products may also be on the queues. Manufacturers are having challenges sourcing imported raw materials and other industrial inputs and stocks are depleting fast.
So it may be helpful to take a close look at the source of your inputs. Can you develop a locally available source? Is it possible to deliberately reduce the import component of your value chain? Can you think of completely running with local inputs only? May be not. But my instinct is that the the businesses with minimum import component will fare better this year
BORROW MAINLY LOCAL
I believe one of the greatest risks any businessman will take this year is to borrow in foreign currency. The Naira is on the downward slope in the parallel market, which actually is the real market today. Since nobody is getting sufficient dollars at the official market, many businessmen are compelled to go to the parallel market to keep their businesses going or to meet maturing obligations. That adds pressure to the price of the dollar. Though the CBN has resisted to date all the pressures to further devalue the Naira officially, the recent visit of the IMF President Madame Largade may have have finally broken the resolve and I predict that an official devaluation will happen soon and that will naturally escalate the depreciation at the parallel market. With the price of crude oil still on the decline, there seems to be no reprieve in sight for the Naira. Therefore any borrowing or commitment made in foreign currency must be speedily extinguished to minimize the present risk of devaluations. Luckily there seems to be plenty of Naira in our banks, perhaps due to the the combined effects of the foreign exchange controls, the inactivation of the domiciliary accounts and the scarcity of foreign exchange in the banks. And this seems to have crashed the interest rates in banks. Thus those who need to borrow should look to the Naira.
STAY CLOSE TO THE PUBLIC SECTOR
The Federal Government plans to spend 6.08 Trillion Naira in 2016. That is huge. We have never spent this kind of money in our Economy in one year before. Against the expectation that with declining National income, expenditure will also decline, the Federal government wants to stimulate the economy to arrest the frightening decline of the GDP that occurred in 2015. So I can see opportunities here for Businessmen to take positions.Are you in construction, services or product supply, there is an opportunity to do business with the Public sector in 2016. You will therefore need to take a close look at the Budget Proposals that PMB has sent to the National Assembly and see where you can play. Dust up your papers and ensure they are current. There seems to be opportunity for many including those who will supply the food to feed the school Children, the books to support the educational renaissance and the medicines to support healthcare. Luckily, it may not be business as usual as the ANTICORRUPTION war may help keep the procurement process better sanctified. Just may be, because in our Country, the more things seem to change the more they remain the same.
STAY ON THE RIGHT SIDE OF THE LAW
Ordinarily, it makes sense to always stay on the right side of the law but in Nigeria, many people find ways to stay either above or below the law. But as can be seen, Nigeria is working hard to hold everyone accountable. It looks to me that we are entering the era where it may become increasingly costly to disobey the rules. One area every businessman must watch out for this year is in the area of taxes and VAT. The government has acute revenue shortfalls from oil and is desperate to find resources to fund the ambitious budget of 6.08 Trillion Naira. It will naturally look towards the Private sector to meet the shortfall and it has become evident that they will adopt aggressive methods. Businesses will be shut down this year because of defaults in paying appropriate taxes or timely remittance of VAT. So take measures to avoid disruption and embarrassment. Secondly, all businesses owners must seek wisdom to enable them comply with regulatory requirements. And should we be dissatisfied with any overbearing regulator, then we may seek legal protection or redress early. The experiences of MTN, Stanbic IBTC, Guinness and others in 2015 give credence to my advice.
Finally should you desire further discussion on this subject you may reach me on my email :firstname.lastname@example.org you may also prepare to attend the forthcoming Business Seminar being arranged by the Sam Ohuabunwa Foundation for Economic Empowerment (SOFEE) on this subject. This will be a testy year for Nigerian Businesses and it will be helpful to seek all the wisdom and understanding to overcome,God helping us.
Mazi Sam Ohuabunwa OFR