from the Report
Persisting Inflation: Inflation remains a major concern, with the IMF predicting a decline to 23% in 2024, still significantly above the Central Bank of Nigeria's target. This high inflation erodes consumer purchasing power and raises input costs for businesses, impacting profitability and investment decisions.
External Headwinds: Global economic slowdown, rising interest rates, and geopolitical tensions pose additional challenges for Nigeria. These factors could affect foreign direct investment, export earnings, and access to credit, further complicating the economic landscape.
Fiscal Pressure: According to data from the Debt Management Office (DMO), Nigeria’s total public debt is $114.35 Billion as of December 2023. This has made her face fiscal sustainability concerns due to high debt servicing costs, potentially limiting government spending on infrastructure and other growth-stimulating initiatives.
Implications for Businesses
It is crystal clear that businesses will be impacted. Therefore, they must develop ways to stay aloof. Here are some ways they can achieve this.
Strategic Planning: Businesses need to develop robust strategic plans that factor in the projected economic slowdown and persistent inflation. This includes re-evaluating cost structures, diversifying revenue streams, and exploring alternative financing options.
Cost Optimisation: Managing costs effectively will be critical to maintaining profitability in a high-inflation environment. Businesses should explore cost-saving measures, such as negotiating better deals with suppliers, streamlining operations, and investing in technology to improve efficiency.
Market Diversification: Dependence on a single market or product can be risky in uncertain times. Businesses should consider diversifying their offerings and exploring new markets to mitigate risks and spread their customer base.
Risk Management: Strengthening risk management practices is essential to navigate the volatile economic environment. This includes anticipating potential challenges, developing contingency plans, and implementing robust risk mitigation strategies.
Focus on Corporate Governance: Effective corporate governance plays a crucial role in building investor confidence and attracting capital. Businesses should prioritize ethical practices, transparency, and accountability to ensure sustainable growth in challenging times.
Director Development: Equipping directors with the necessary skills and knowledge to navigate complex economic situations is crucial. This includes providing training on risk management, financial analysis, and strategic decision-making.
The Role of
Good Corporate Governance in Weathering the Storm
Independent Board Composition: Having a board with diverse perspectives and independent directors not beholden to specific interests can ensure objective decision-making and mitigate risks.
Compliance with Regulations: Strict adherence to regulatory requirements and ethical codes fosters trust and reduces the risk of legal or reputational issues.
Effective Risk Management: Implementing robust risk management frameworks helps businesses identify, assess, and mitigate potential threats, safeguarding their financial stability and long-term viability.
Stakeholder Engagement: Open and transparent communication with stakeholders, including investors, employees, and communities, builds trust and fosters collaboration, leading to more sustainable growth.
Chartered Institute of Directors (CIoD), Nigeria
Research & Advocacy Department,
28, Cameron Road, Ikoyi, Lagos.