Post-covid19 Outlook for Entrepreneurs/businesses:

Gentlemen and ladies,

Sharing some strategic insights into the post-covid19 pandemic comes with a fine blend of optimism and reality. This already came with a lot of harm that grossly revealed some of our “long-lingering” systemic failures as members of the human race. Again, it brings the world to a whole new level of consciousness that no one is untouchable afterall.

Meanwhile, it makes quality socio-economic sense to take informed personal precautions during and after this pandemic as well as look forward to what happens when this fades off:

Nigeria still leads the world in having 95million extremely poor people living in it and the least you can do as an entrepreneur is to avoid adding to that number as it is evident that many businesses have started struggling and that may continue as long as the pandemic persist. A combination of luck and the choice of playbook might make all the difference between a successful business and a failed one hence the under-listed propositions:

Note: This writeup attempts to identify some opportunities that exist or that will open up in the marketplace during and after covid19:

1.     Debt Management: By now, many loans would have stopped performing for the very obvious reason and the ability to help borrowers interface with lenders and vice/versa to secure debt restructuring, consolidation, renegotiation, recovery etc would definitely come with some rewards. It is mainly a knowledge driven venture and not capital intensive. Your easiest customers might be your friends, families, Commercial Banks, Microfinance Banks, Leasing Companies, consumer lending/finance institutions etc. To do: Prepare a good proposal, dress decently and walk in to discuss your capabilities.

2.     Equity Investment: There have been so much noise around buying stocks at this time using the “Warren Buffet strategy”. My honest opinion is, do not buy a stock whose trend and drivers you don't understand and by the way, you don't want to buy a stock that is still far on its way down because you don’t know just how low it would get before a possible rebound. Thread with serious caution here.

3.     Fixed Income: Capital and money market instrument with sound professionalism should be appropriate for investors with relatively low risk appetite. So, if you do not like adventures and surprises just stick to your fixed income investments and hold your peace.

4.     Mergers & Acquisitions(M&A): M&A is a specialized professional service offered mostly by investment banks(IBs) or main advisory service firms which focuses on merging two or more organizations for different reasons some of which are to gain further competitive advantage, for skill-set, for strategic integrations, access new markets/territories etc More of this may be seen after covid19 so, if you have some financial skills or legal knowledge you can position yourself to act as a matchmaking consultant and liaise with experienced investment bankers for professional handling while make some earnings as finder.

5.     Real Estate: Like the popular saying “cash is king”. The property market may experience a serious increase in “buyer power” so much so that buyers will continue to determine prevailing prices in the market. Investors with good liquidity can take advantage of this period to make some strategic property acquisitions.

6.     Healthcare(HMO: Health Maintenance Organizations)/Pharmaceuticals: There may never be a better time to be in this sector as HMO packages become easier to sell, drugs become easier to sell as people generally seek to maintain good health and hygiene. However, non-medical practitioners may directly or indirectly key into the space through investments into strategic players like pharmaceutical companies, medical technology equipment etc

7.     Foreign Exchange Business: Continuous fluctuation of the Naira and the somewhat consistent indications of a further Naira devaluation may force capital erosion to slide more as seen in the past months where total value of capital importation into Nigeria stood at $3.8Billion Q4 2019 which represents a decline of 32.42% when compared to the 3rd Quarter of 2019 and with the current global pandemic, the Q1 2020 figures may not be better as investors’ preferences for more stable economies and currencies would be understandable. So, this business space stands a good chance due to steady surge in funds repatriation especially for those who are efficient in remittance operations(fx inflows/outflow transactions).

8.     Insurance businesses: This business for the next couple of months may be favourable to insurance brokers and the insured at the expense of the Insurance Companies also referred to as the underwriters. We should expect to a sharp increase in claims across all insurance products and services. A huge opportunity exist as Insurance firms may require “independent loss adjusters” to help them stay in business by genuinely and legally cutting down the volume of claims exposure.

9.     Digital Services: It is apparent that technology is not just a driver of global business advancement but also now a bridge that seeks to keep things working with little or no human interference. Difficult to imagine what the absence of internet/mobile banking, social media, ecommerce, mobile phones or internet  would be like during this pandemic. At least 75% of the world's business models can be powered by these technologies with the end goal of reducing human interference in service delivery. Examples are e-healthcare, digital media, online education/trainings, virtual reality, augmented reality, online meetings etc Apart from these technologies helping us scale our businesses, they also are great cost efficiency tools.

10.  Language Translation:  With the implementation of the African Continental Free Trade Agreement(AfCFTA) comes great movement of factors of production around Africa and this clearly has its implications especially as countries within the continent had varying colonial masters and as such, different official languages ranging from English, Portuguese, French, Spanish, Swahili etc are spoken and ability to translate some of these languages may be handsomely rewarded.

Public/Government roles in the economic recovery and stabilization process cannot be over-emphasized especially in Nigeria where the Government remains the biggest spender and recipient of revenues through trades and taxes as well as control of most sectors via policies and regulations. Among other things, Government must play some pivotal parts with decisions such as:

·     Government's economic and fiscal action that would boost recovery:

a.  An Executive order for immediate suspension of all Local Government levies on “micro traders” in all our markets especially those who live on sales of snacks, water, beverages, non-alcoholic drinks etc they must never have be subjected to paying any levies because they are actually the poorest of the poor as we know it.

b. VAT may be reversed to the initial 5% as this directly impacts household’s disposable income.

c.     The capital market would require some levels of tax concessions such as a further extension of the Exemption of bond investments from the 10% Withholding tax(WHT) by the Bonds and Short Term GovernmentSecurities Order of 2011 ending in the year 2021

d.     The current “tax avoidance treaties” be extended to include more countries with good investment potentials into Nigeria.

e.     All debates/deliberations on “capital gain tax” need to be suspended as introduction of this may slow/cut foreign investments into the country.

f.      Reduce general cost of governance as well as implement cost efficiency strategies in the production of crude oil as price continues fall towards production cost of $22pb.

g.    Consider the possibilities of hedging foreign oil revenue via derivative contracts just like Mexico a fellow oil producer does. As foreign reserve falls from USD37Billion to southward USD33Billion, FG must now leverage the expertise of local Investment/commercial Banks viz a viz their foreign counterparts to action this.

·      FG Financial intervention strategies:

a.     Targeted and industry specific Intervention Funds: The N50Billion intervention fund by the Federal Government is clearly a step in the right direction however, this requires a major improvement for a national estimated average of over 3million entrepreneurs N50Billion comes to only about N16,000 per business.

b.     The CBN must direct the Banks towards a fresh cut in transactions fees and charges as well as further adjustment of the Loan-to-Deposit ratio.

c.     Social cash transfers to the active poor(micro-traders): To make this most effective, Federal Government may work directly with 774 Local Governments to identify existing records of all “micro tax/levies payers” in the markets and districts within their communities to disburse cash accordingly.

d.     Returning Government Agencies and Parastatals to proper Not-for-profit structure: In 2017 the Joint Admission Matriculation Board(JAMB) generated N12Billion in revenue and remitted a total of N7.8Billion to the Federal Government. This means JAMB generated 285.7% of what it actually needs administer the examination and as much as the Leadership of JAMB deserves the credit for such level of efficiency, management and for some reduction in the fees however, it would be most appropriate for FG to further significantly cut down JAMB registration fees for students as JAMB was not setup to make profit for the Government and same must apply to WAEC, NECO etc

e.     State of Emergency on budgetary allocation to “Recurrent Expenditures and increase in budgetary allocation to Healthcare, Education, agriculture and Transportation.

·      360 review and qualitative integration of all security bodies and agencies: A 2017 research by Chris Kwaja, PhD of the Centre for Peace and Security Studies, Modibbo Adama University of Technology, Yola and Ufiem Maurice Ogbonnaya, PhD of the Directorate of Research, National Institute for Policy and Strategic Studies (NIPSS), Kuru summarily suggest that Nigeria’s security architecture is shrouded in grossly unnecessary secrecy, politicization, over-subordination to the Executive arm of Government and boycotting of the legislative roles in the scrutinization of security mandate holders.

Abayomi Michael

MD/CEO

Asset & Equity Group