market

The Nigerian Economy and COVID-19

Let’s make a simple Analogy.

Adam earns N100,000 monthly which makes it N1.2Million Annually. After all deductions his total annual income comes to N1million, then he took a loan of N1.5million for 24months @ 23% interest to be paying N76,875 monthly out of N100,000. Don’t forget this N1.5Million loan he took is to use to pay rent to his landlord N500,000 for last year’s rent, buy new TV N200,000, repair his car N200,000,  pay his child school fees N200,000 for the first term, then, from it he paid some of his debt of N200,000. He then used the remaining N200,000 for family upkeep and other small important projects.  Remember all these expense are for the first year, his loan is for 24months.

Adam’s projection while taking the loan was that his salary will be increased or he will be promoted before end of the year, so that he can reduce the impact on his salary. Based on this, he bench-marked his next increase and upgrade income to N150,000 if all things work as planned. So he has planned that his family will manage and can cope with the remaining N23,125, this will cover transport, other monthly expenses like electricity, health etc.

He has no savings, but has other opportunities to increase his income. However he prefers tasking and borrowing from his siblings and other friends to meet up urgent needs. Though he has been working for three years now, he has refused to upgrade his skills. He always thought that he has the best job and that he would always grow on his job.

Suddenly come March of the same year, the economy went down; organisations gave people option to either cut their salary or be sacked. Adam was devastated with the news, now he earns N77,000 and not certain he will be able to meet other obligations in the near future, but he is so confident that things will change.

If this talks about you, this is exactly the state of Nigeria Today, so brace up and have a contingency plan.

Before COVID-19 spread into Africa,  the Buhari led government have already made all arrangements to borrow over $23Billion Dollars (N9Trillion at current exchange rate) waiting  approval from the senate in early March 2020( though suspended for now). This borrowing would be sourced from creditors expected from the Islamic Development Bank, the African Development Bank, the World Bank and creditors in China, Japan and Germany. Remember with these borrowing comes interest servicing which could take over 76% of our revenue yearly by 2024 according to IMF warning. Just last week S&P Global changed our rating from stable to negative (which is towards the junk territory) this means Nigeria’s credit worthiness has gone down in lay man language, you might say that’s their business, but this means countries and institution will see if you have the capacity to repay any loan before they give you money, ask countries like Venezuela and the rest.
read more nairametrics.com

Now Nigeria has not been able to get any form of Loans, the only likely place to borrow money immediately will be China, and you know China? They are gaming to have control of the world economy and 5G and Africa is a good place to have control while the rest of the world is fighting COVID-19. Nigeria bases its budget on income from crude oil, in last 3-months the bench mark has been changed from $57 to $30 and now price is hovering around $20/barrel what will the bench mark be again?

Nigeria is currently desperate, and will do anything to cushion the incoming impact on the economy.

A lot of businesses are going to be impacted negatively by the time we come out of this COVID-19 epidemic, but God watches over his people.

Things likely to happen are mass retrenchment of workers as government and businesses will not be able to pay salaries, already government (both state and federal have arrears to pay which they also plan to use part of the loan for) so don’t pray to be at home beyond 30days in Nigeria, government does not have money for stimulus package like the US and Europe, the money the government want to borrow will not come anytime soon, a total lockdown means, loss of job and close down of businesses.

This is a time we need a very strong and firm leader with insights and undying love for this country. It’s not time to be supporting party or ethnic affiliation.  It’s time Nigerians must work together as one against the political class who is not thinking of Nigeria development and sufficiency. We need to develop other sectors aggressively and forget oil completely if the country must survive the next 10 years because Nigeria is broke as a country.

The government cannot sustain any form of lock-down for more than 4 weeks without a negative backlash on the economy with heavy reliance revenue from Oil and an import based economy.

Foreign direct investment has almost come to a halt, foreign remittances to Nigeria has dropped drastically. Currency has been devalued even though the Central Bank of Nigeria(CBN) said it’s repricing.

So Nigerians please brace for the impact.

Finally I want to use this opportunity to encourage as many as believe that God watches over his people. This write up is to help us not to be ignorant of the times, if I write all I have in mind, this will turn into a book; perhaps I will do a video to clarify some things I have written here. However we must more at this time look up to God for direction and pray for wisdom for our leaders. Everyone of us needs direction from God on what and how to go about this season. Don’t stop praying for the world against COVID-19, in all, be strong and don’t give in to fear.

To your Success

Entrepreneurship

What To Do Before You Quit Your Job for Entrepreneurship

I get calls from people who are gainfully employed asking me what to do before they quit their jobs. Many of them are feeling tired on their current jobs and want to quit for entrepreneurship as soon as possible. Sometimes I here words like; ‘I can’t wait to join you’, ‘I am so tired of this job’, ‘this job sucks’ etc. Yes it’s true you might be tired, but I am sure you are not tired of earning a monthly income. Entrepreneurship is not what you rush into, especially if you have a stable job and a consistent source of income.

The fact that you are working today means that you are gathering certain experiences and skills for the challenges life could bring. Also everyone must not be an entrepreneur but everyone can be an Intrapreneur and still be wealthy.

Entrepreneurship comes with a lot of challenges and struggles especially if you are based in Africa. The enabling business environment is not so conducive so you have to figure out how to make things happen in your business. Most people just think all entrepreneurs simply hit billions in less than six months. My friend it’s not like that in Africa especially Nigeria. You will work it out harder than your peers in some other parts of the world.

I always advise people not to jump into entrepreneurship if they don’t have the following checked out. you might also read this before you continue A-practical-guide-to-start-that-small-business/

  1. Ensure you have researched and planned out what market you want to serve: Market Identification is the most important part of starting. You must know the market, their price taste, challenges of the market and how to overcome them. You also need to know where to access the market. Don’t assume there is a market waiting for you. The market in Africa is dynamic and the demography is volatile. Your markets guarantee the service to offer the market and how to design the product or services. It also determines if the market gives room for growth. At least do a little market survey, ask questions and have a feel of what to expect when you step out. The first time I jumped out to sell I was rejected by all the people I met. It was discouraging but I never gave up and those people later became my first customers. Even the most attractive products or services get rejected at first. This market will also help you decide how you want to run the business and where, if it’s going to be a brick and mortar business with a physical location. This is with that fact that you already know the sectore you are diving into.
  2. Build Your Product: with the knowledge you have about the market: Having identified your market,, you can now design a product to fit these identified market. Test this product yourself, understand the product then give to your immediate circle to test. If possible get some of those customers to help do that, these you can do at your free periods or off days at work or you take leave to test them and move around. It’s always better to try things yourself or recruit someone that can assist in the first phase on a contract basis for this purpose. Ensure you don’t incur unnecessary cost while testing; it can be draining to the pocket. Implement feedbacks, changes and update the product for final release.
  • Start small, give to people to pilot it for a period say like 30days. Remember that all these are happening while you still work, but you will commit extra time outside work to do these things. Don’t just rush out immediately, let few people use and give you feedback on their experience.  This would show you how customers are willing to pay for the service or product. What I tell people is if you are able to make at least five sales or close deals in a month, then the light is green to quit even if there is no profit.

But before you quit, the following should be your final check list especially if you live in Africa or Nigeria.

These points I will outline below sounds funny, but they are real and can be devastating if not looked into, especially when the business doesn’t go as planned.

But before you quit, the following should be your final check list especially if you live in Africa or Nigeria. These points I will outline below sounds funny, but they are real and can be devastating if not looked into, especially when the business doesn’t go as planned.

  • Have your Paid for your House rent? If you live in a rented apartment at least 1year rent is sufficient, as rent is a reality, if you don’t at least have an alternative, you won’t have head ache with accommodation when you are supposed to be thinking on how to grow your business.
  • Have you paid for your children’s school fees or tuition if you have a family? This one is tough and always comes every three months starting in January.  You can plan for 1 year also to ensure you focus on your business.
  • Have you planned for feeding? For single people this can be managed but for family people children don’t know anything like I don’t have money, at least plan a minimum monthly food expense for your home.
  • Prepare your mind that in the next one year at least there is no luxury or extreme comfort for you and family, everyone must be prepared and you must prepare your family if you have one on the impact of your decision. I mean your immediate family if you are married, please don’t tell extended family they will discourage you. You must be mentally ready to take up this adventure.
  • Then quit if you have 1-4 taken care of , you are surely ready to quit your job in Nigeria or Africa, there is nothing like having a good job and earning well and suddenly you turn to a beggar because you wanted entrepreneurship.
  • This is a bonus point: if you must partner, ensure they are people with like minds, same believes and ready to put in the same quota of sacrifice you are about to make, it’s better not to partner than partner with someone that will add to your headache, especially if they still keep a day’s job and you are going in full time. They almost likely will not understand the challenge you face daily except they are coming as Investors into the business.

Having said all these, this is just a guide and not a guarantee that the business will succeed. There are other factors that affect business growth which is not part of the conversation here, but this gives you a good landing base on your first exit from paid employment. Entrepreneurship can be tough, demanding and ultimately rewarding, go in with wisdom and succeed.

You can also read this I found it interesting 10 Things You Must Do Before Quitting Your Job

To your success

Lawrence Obi