• Friday, July 19, 2024
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BusinessDay

What is next for Nigerian businesses?

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At this time, there is no easier topic to discuss in Nigeria than the forthcoming presidential polls. Everyone in Nigeria- citizens, foreigners and investors alike are concerned about the outcome, and which of the candidates could be trusted to resolve Nigeria’s age long problems.

Elites as well as lay people critique and analyze the ‘cause and effect’ of Nigeria’s problems, and with every publicity tool at their disposal, voice out their opinions about the forthcoming elections and the suitability or otherwise of the presidential candidates.

But a pertinent question to ask is, “what is next for business organizations in Nigeria after the polls?”

If business organizations bear in mind that the presidential and gubernatorial elections would hold on single days respectively, and afterwards, they would be faced with the realities of the nation’s current economic indices, they might want to focus more attention on developing sustainable business plans for the New Year and the post-election period.

Essential questions to ask would be – what are the current economic indicators? How are they likely to affect businesses? What are the leadership styles and agenda of the presidential candidates and how can this knowledge benefit businesses in arranging their business structures and processes in order to benefit from any policy changes by the new government?

It is common knowledge that the global price of crude oil has fallen significantly- although it has gained some dollars from last month’s $44.53 per barrel to $51.16 as at today, with a one year forecast of $58. According to analysts, this is still below the price that could guarantee economic and financial comfort for the government. With the depleting foreign exchange reserves, the Naira continues to suffer devaluation while average prices of foods and commodities continue to increase gradually.

According to data from the national bureau of statistics, poverty rate is currently at 71% while unemployment rate is at 24%. If the Federal government decides to embark on a similar program as the then ‘Structural Adjustment Program (SAP), public sector funding may reduce and the bulk of economic activities would likely be driven by the private sector.

Many companies in the oil and gas sector are beginning to gradually restructure their cost base albeit the length of time it takes for old oil and gas suppliers’ contracts to terminate. New oil and gas investments are currently on hold and many employees are being laid off. It cannot be asserted, with confidence, that the oil and gas sector players are having a good time now. There is so much suspense as these players are unsure of the long term implications of the crude market indices and how the government would go about finding new markets for Nigeria’s crude.

This feeling of suspense should not be peculiar to oil and gas businesses alone. Every Nigerian business is advised at this time to develop cost effective structures and in-house strategies that would guarantee its continuity in spite of any negative economic or business indicators.

When making such strategies and business projections, it is important to consider the leadership focus/ agenda of the two presidential aspirants so as to ensure a win-win situation for the business whatever the outcome of the elections.

The 100 day plan of the APC’s presidential candidate anticipates a government whose focus would be on the following:

Conservatism and transparency in government spending

Curbing insurgency and insecurity

Revitalization and preservation of the Niger Delta resources

Ensuring diversity and inclusion for increased harmony in institutions

Revitalization of the health sector and review of laws guiding this sector

Massive investment in the agricultural sector and revamp of key development banks to fund agricultural operations

Creation of jobs

Management of oil revenue and growing of the foreign exchange reserves

Facilitating the growth of SMEs

Finalizing the PIB and boosting local content participation in the downstream sector

Resolving discrepancies in labor relations

Revitalizing the power sector

Investing in information technology and youth development

If this government comes into power, small businesses, agricultural businesses, development banks, downstream sector of the oil and gas industry and its indigenous players, power sector businesses, information technology ventures and players in the health sector would need to put the necessary structures in place to take full advantage of the promised government focus. Suppliers of raw materials and services to these industries should also be able to benefit directly from any growth in these sectors or favorable policy changes affecting them.

The PDP is yet to publish any formal agenda for the future, however, the pointers from their campaign statements focus on curbing insurgence, boosting the agricultural sector, job creation, improvement in infrastructure- educational facilities, health, power, transportation etc. The same outlook and preparation is expected of businesses operating in these sectors. In addition, they should begin to take necessary steps at projecting their businesses for recognition by the government.

Beyond the elections, the current economic indices are not looking so good and as earlier mentioned, this calls for urgent actions from the private businesses to create cost effective business structures while still achieving efficiency. Human capital resources should be strategically planned and properly managed to ensure the continued growth and success of these businesses. Businesses should strive to create niche products and invest in niche projects that would distinguish them from contemporaries, attract more customer loyalty and stand the test of time.

Essentially, the back office structures should be tidied up to ensure properly balanced businesses ready to succeed in any given economic circumstance. The information technology infrastructures should be foolproof to prevent fraud and ensure smooth running of the companies’ operations. Policies should be updated and internal control measures put in place to safeguard the companies’ assets.

The accounting systems should be compliant with the relatively new International Financial Reporting Standards (IFRS). If there are businesses in Nigeria that are yet to implement the IFRS, and properly too, it is one indication of inefficiency in the internal processes. Cash flow projections and project yields should be analyzed before any huge capital expenditure is made while existing property, plant and equipment should be properly handled and maintained to prolong their useful lives. Operating expenses should be well structured and managed to achieve full tax and business efficiency.

It is now absolutely important for businesses to plan their operations around achieving tax efficiency because from the present economic indications, government may resort to aggressive taxation for increased revenue generation. Either of the two presidential aspirants, whoever wins, would require funds to execute his leadership agenda. Also, election expenses would need to be recovered and the government would require sustainable sources of revenue to recuperate before even embarking on either the planned/promised projects or the 2015 budget execution.

Taxation may be a sore point in the next regime. Hence, our advice is for businesses to carry out comprehensive tax health check of their business operations. This activity would ensure that tax leakages are identified and resolved, remedial tax payment discussions held with the relevant tax authorities and payments made before any additional tax liabilities are levied by the tax officials through aggressive tax audits that may characterize this year. This exercise would also help in putting structures in place such as tax policies and procedures that would guide the proper preparation and filing of tax returns from henceforth.

Tax reviews also have a way of flowing into the transfer pricing, accounting, information technology and human resource structures of companies. The cost structures are also revisited during tax reviews and non-tax effective expenses identified. Any loopholes from this total review of your business would be identified and remedial actions advised/ implemented once and for all to reduce stress and ensure that the companies’ management can focus their strength and mental energy on what matters more – growing the business.

Vivian Chigozie-Nmonwu