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5 Ways to Innovate Your Business and Stay Ahead of the Competition

Dear Business Owner,

What readily comes to mind when people think about business innovation is product innovation. Contrary to this popular belief, business innovation goes way beyond just product innovation.

 

In this edition of the Wema Bank SME Newsletter, we will bring to you the different innovation that you can implement as a business owner to differentiate your company from its competitors and help it gain competitive advantage.

 

1. Product Innovation: Product innovation is the most obvious form of business innovation. It involves the development of a product or service that significantly improves existing products or services in the market. This improvement can be in the functionality's form, design, or look and feel.

 

For a while, it seemed like we had reached peak innovation in smartphone technology, as new smartphone models released by popular brands like Apple and Samsung did not differ significantly in functionality or design from their predecessors. That was until the Chinese company, Royole, in 2018, launched the first commercially available smartphone with a foldable screen, the Royole Flexpai.

 

The foldable smartphone technology is now considered a game-changer and the next big thing in the smartphone industry and other companies like Samsung and Huawei have since rolled out their own versions of the foldable smartphone.

 

2. Process Innovation: While product innovation deals with a tangible or intangible item, process innovation is systemic. It focuses on making meaningful improvements to internal operations, activities, tools, and techniques like production method, delivery method, equipment, and software to reduce cost or turnaround time and boost revenue. You can achieve process innovation through technology and digitalization, and its major aim is to improve efficiency and effectiveness in production and service delivery.

 

At the onset of the COVID-19 Pandemic, many Nigerians could no longer visit the branches of banks to perform transactions because of restrictions on movement. Those who did so had to queue up for several hours before being attended to.

 

To address this challenge and make banking more convenient for their customers, many Nigerian banks upgraded their banking apps and made it possible for their customers to perform almost all banking transactions with the use of a web or mobile app. Today, individuals and businesses can even open bank accounts and apply for loans online, without having to visit a branch or interface with any banker.

 

3. Marketing Innovation: Marketing innovation seeks to capture the imagination of a company's target customers, arouse their interest, and hold their attention well and long enough to motivate them to check out and buy its product or service.

 

In 1984, Nike – which was then a struggling, small US footwear manufacturing company – signed a deal with promising basketball rookie, Michael Jordan, to market its customized brand of athletic shoes, the Air Jordan. Back then, the NBA permitted players to only wear white shoes. However, Jordan went against this rule and whenever he was in the court, his red, black and white shoes stood out and were easily noticeable amidst the sea of uniform shoes that every other player was wearing.

 

As Jordan's fame and success increased, so did the popularity and sale of Nike's shoes. While Nike expected to only make $3 million in sales in the first four years of the deal, it ended up making $126 million in the first year alone. It has proven to be one of the shrewdest and most lucrative marketing partnerships in history. Jordan has since become a billionaire and the richest former athlete in the world and Nike has since become the largest footwear company in the world.

 

4. Technological Innovation: Technological innovation is the application of technology to boost the performance and efficiency of business processes, products, or services. It can involve the application of technology to erstwhile manual processes or the replacement of outdated equipment and software with significantly improved versions.

 

It is important to note that it is not every business innovation that involves technology. We can achieve some innovations without technology. Likewise, it is not all technological improvements that can be classified as innovation. Technological innovation can also overlap with other forms of innovation, such as product and process innovation. Hence, an innovation can be both a product innovation and a technological innovation.

 

Though not entirely new, virtual assistants and chatbots have recently gained widespread acceptance in the business world. Many organizations now deploy them to provide first-level responses to customer complaints and frequently asked questions, digitalizing large parts of the customer support process and reducing the need for human interface (and dedicated personnel) to high-level issues.

 

5. Business Model Innovation: In simple terms, a business model is a company's strategy for carrying out its business, creating and delivering value to its customers and making money. It involves everything from market segmentation to product development and from revenue model to partnerships.

 

For instance, Netflix enables users to stream thousands of movies and TV shows with an app for a monthly subscription fee. Similarly, Coca Cola sells soft drink concentrates and syrups to bottling companies around the world, who then add water and fizz and sell the bottled drinks to final consumers through a chain of distributors, wholesalers, and retailers.

 

Business model innovation is the most radical, challenging, and unpredictable form of innovation, because it involves changing or making noteworthy modifications to an existing business model. For Netflix, this may entail building cinemas where subscribers can physically go to watch movies instead of streaming them via an app. For Coca Cola, it may entail bottling its soft drink concentrates and syrups by itself, which will entail buying over all of its bottling company partners or building its own bottling factories from scratch.

 

You should only go the route of business model innovation if your existing business model is failing or if a different business model offers a much better prospect than your current business model.

 

Key Takeaways

 

Having gone through some of the major forms of innovation that you can implement in your business, it is important to point out that innovation should be a continuous activity and not a one-off event. One-off innovation can give you a temporary edge over your competitors, but it is only through continuous innovation that you can sustain that competitive advantage.

 

With so much information out there, getting intel on a competitor's innovation, is – sometimes – only a few clicks of a button or phone calls away, making it relatively easy for your competitors to figure out and replicate your innovation. Shifting demands of consumers can as well render an innovation obsolete.

 

You also shouldn't rely on one form of innovation. It is important that you continuously explore opportunities for innovation across all aspects of your business, from product development to operations and from marketing to service delivery. That way you will always be one step ahead of the competition and before your competitors can decipher your innovation, you have already moved on to the next one.

 

Chinedu Nnawetanma

RETAIL AND SME

9 Key Steps to Building a Successful Business

A business needs more than just finance to succeed. Businesses operate in a very complex, competitive, and dynamic environment, with many internal and external factors coming into play. Therefore, it is important that a business owner or operator gets the business management process right at every step of the way.

Entrepreneurial capacity, which is the ability of a business owner to identify and effectively leverage business opportunities, is one of the most overlooked elements of the business success mix. The business owner or operator is like the architect of the business – he envisions the business from the conceptual or seed stage; designs its short-term, medium-term, and long-term strategic plans; and mobilizes the resources required to translate these visions and strategic plans into a thriving venture.

Unfortunately, many business owners and operators lack the capacity required to optimize the potentials of their businesses, with or without funding. In this edition of Wema Bank's SME Newsletter, I will outline some of the steps and measures that every business owner or operator needs to take and put in place to ensure that their business survives the high mortality rate that has plagued startups and micro, small and medium-scale businesses around the world.

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1. Know Your Motivation: It is essential that you clearly identify and understand why you are in business in the first place. People start up a business for different reasons. These range from the need to earn an income to the need for professional independence and autonomy, and from solving an identified economic need to making a social impact. It is important that you identify and understand what drives you as an entrepreneur, because this will be your guiding principle going forward.

2. Do Something that Resonates with You: You need not venture into entrepreneurship just because other people are doing that. You need not start a fintech company because it is "the in thing," when your real passion lies in fashion. Passion is the fabric that holds all the other elements of entrepreneurship and business management together.

3. Develop an Entrepreneurial Mindset: Entrepreneurship is one of the most complex and unforgiving career paths that an individual can take. The stakes are very high, just as the rewards and returns can be very attractive. In the economic concept of the factors of production, the entrepreneur is defined as the risk-taker who combines all the other factors like land, labour, and capital for profit. The first step towards developing an entrepreneurial mindset is to embrace risk. Nothing ventured, nothing gained. Other important attributes of a high-achieving entrepreneurial mindset are setting SMART goals, being focused, staying committed, and having moderate optimism.

4. Find Your Niche: A niche is a subset of a larger market with similar characteristics, needs and preferences. Among organizations, for instance, a niche market can be the banking industry, the oil and gas industry or tertiary institutions. Likewise, among individuals, a niche market can be high-net-worth individuals (HNIs), athletes or nursing mothers. Businesses that start off by serving a niche market have a greater chance of succeeding than businesses that start off by serving a large, heterogeneous market. This is because businesses that serve a niche market can over time develop specialization in their offerings and own that space. This is not to say that serving a heterogenous market from the outset is an entirely bad idea, it is just that your lean resources as a startup or an SME will be stretched very thin. With time and enough traction, businesses that start off by serving a niche market can expand into other markets through diversification.

5. Do Not Create a Solution for a Problem that Does Not Exist: To have a greater probability of being commercially successful, you need to create a solution for a problem that exists now, rather than one that may arise in the future. A business essentially exists to meet the needs of people and/or other businesses who will pay to have that solution. Simply put, if nobody needs or wants your "solution," no one will pay you for it.

6. Clearly Understand the Market and the Problem: Finding a niche market to target is one thing, understanding the needs of that market is a different thing altogether. Conducting a comprehensive market analysis will reveal the key demographic, psychographic, and economic characteristics of the market and help you understand why the problem you are trying to address exists and how best you can address it.

1. Know Your Motivation: It is essential that you clearly identify and understand why you are in business in the first place. People start up a business for different reasons. These range from the need to earn an income to the need for professional independence and autonomy, and from solving an identified economic need to making a social impact. It is important that you identify and understand what drives you as an entrepreneur, because this will be your guiding principle going forward.

2. Do Something that Resonates with You: You need not venture into entrepreneurship just because other people are doing that. You need not start a fintech company because it is "the in thing," when your real passion lies in fashion. Passion is the fabric that holds all the other elements of entrepreneurship and business management together.

3. Develop an Entrepreneurial Mindset: Entrepreneurship is one of the most complex and unforgiving career paths that an individual can take. The stakes are very high, just as the rewards and returns can be very attractive. In the economic concept of the factors of production, the entrepreneur is defined as the risk-taker who combines all the other factors like land, labour, and capital for profit. The first step towards developing an entrepreneurial mindset is to embrace risk. Nothing ventured, nothing gained. Other important attributes of a high-achieving entrepreneurial mindset are setting SMART goals, being focused, staying committed, and having moderate optimism.

4. Find Your Niche: A niche is a subset of a larger market with similar characteristics, needs and preferences. Among organizations, for instance, a niche market can be the banking industry, the oil and gas industry or tertiary institutions. Likewise, among individuals, a niche market can be high-net-worth individuals (HNIs), athletes or nursing mothers. Businesses that start off by serving a niche market have a greater chance of succeeding than businesses that start off by serving a large, heterogeneous market. This is because businesses that serve a niche market can over time develop specialization in their offerings and own that space. This is not to say that serving a heterogenous market from the outset is an entirely bad idea, it is just that your lean resources as a startup or an SME will be stretched very thin. With time and enough traction, businesses that start off by serving a niche market can expand into other markets through diversification.

5. Do Not Create a Solution for a Problem that Does Not Exist: To have a greater probability of being commercially successful, you need to create a solution for a problem that exists now, rather than one that may arise in the future. A business essentially exists to meet the needs of people and/or other businesses who will pay to have that solution. Simply put, if nobody needs or wants your "solution," no one will pay you for it.

6. Clearly Understand the Market and the Problem: Finding a niche market to target is one thing, understanding the needs of that market is a different thing altogether. Conducting a comprehensive market analysis will reveal the key demographic, psychographic, and economic characteristics of the market and help you understand why the problem you are trying to address exists and how best you can address it.

7. Know Your Competitors: Except you are addressing a novel problem, chances are that there are already other businesses offering the solution that you intend to offer. These are your competitors. Who are they? What are they doing? What are they not doing? What can you do differently? What is their market share? These are some of the questions that will guide you in positioning your business to stand out from your competitors.

8. Innovate: What readily comes to mind when business innovation is mentioned is product innovation. Contrary to popular belief, innovation comes in different ways. It can come in the form of product innovation, service innovation, business model innovation, process innovation, technological innovation, marketing innovation and social innovation. Adopting any of these types of innovation will differentiate your business from the competition, leave a positive mark on your customers, and boost customer satisfaction. It is also important that you continually innovate as a one-off innovation cannot give you a lasting competitive advantage.

Author- Chinedu Nnawetanma

WEMA Bank Plc Reports Gross Earnings of N59.59bn

The bank recorded Gross earnings of ₦59.59bn, a y/y increase of 50% (H1 2021: ₦39.82bn). Interest Income up 55% y/y to ₦49.75bn (H1 2021: ₦32.19bn). Non-Interest Income up 29% y/y to ₦9.85bn (H1 2021: ₦7.64bn).
Profit before tax (PBT) was ₦6.13bn a y/y increase of 43% over the ₦4.30bn reported in H1 2021. Profit after tax (PAT) also increased y/y by 42% to ₦5.30bn (₦3.72bn in H1 2021). The bank grew its deposit year to date by 13% as of H1 2022 to ₦1,097.07bn from ₦968.17bn reported in FY 2021. Loans and advances rose by 7% to ₦447.23bn from ₦418.86bn in H1 2022.

Download the full press release below.

Wema Bank H1 PRESS RELEASE 

 

Why are Many Small-Scale Businesses Failing in the 21st Century?

The Micro, Small and Medium Enterprises (MSME) ecosystem is often referred to as the engine room of the Nigerian economy as it employs over 80% of the workforce and contributes about 49% to the Gross Domestic Product (GDP). As of December 2020, the number of MSMEs operating within the country stood at 39.6 million compared to 41.5 million in 2017, representing a 4.5% decline. 

According to Investopedia, approximately 20% of small businesses fail in their first year, 50% fail within five years, and 33% make it to 10 years. These failures and eventual collapse are caused by both internal and external factors among which are poor management skills, lack of finance, poor preparation and poor knowledge of the sector and its value chain. The collapse of these businesses can be attributed to a few factors: 

 

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1) Lack of proper business planning: It is essential that a business owner has a good understanding of the business they own. This allows such individuals to be able to effectively communicate with investors and the public. A business plan provides a written-down plan of action, a road map that speaks to both a business's internal and external audience. 

Investopedia outlines the most important components of a business plan as

 An Executive Summary: This is a brief introduction to the business and its internal stakeholders. It also outlines the mission statement of the business.

 

Market analysis: This shows an in-depth understanding of the industry the business operates in, highlighting market leaders and other competitors. Market analysis also portrays the need(s) the business will be addressing.  

Sales Plan: This addresses how the business plans to attract and win market share. This will also require an understanding of the business' competitive advantages and plans around modes and channels of advertisement. 

Service and Product Offerings: This outlines the offerings of the business, their pricing, and their benefits to the customers 

Financial Planning: This will include plans and projections for the business, and

new businesses will have to show all targets and estimates for future years. 

Budget: This shows the cost attributed to each aspect of the business, including staffing, stock purchases, Operational expenses, and miscellaneous expenses. 

2) Funding: In Nigerian society, many people believe the best way to fund an idea is by making use of your savings or by raising funds from friends and family. While this path may not be easy, it is no doubt a good one as little to no interest rate is charged. Another alternative is opting for loans from banks and other financial institutions.  

New entrepreneurs might apply for more money than they need from a bank which then makes it harder to repay within the allotted timeframe.  

Lewis, L.V. and Churchill, N.C. (1983) mentioned five stages a business ought to pass through. 

These stages include the existence stage, survival stage, success stage, take-off stage and resource-maturity stage. Business owners must identify the stage in which their business is before applying for a loan. Many business owners at the existence stage take big loans from banks and other financial institutions and end up not being able to repay. It is therefore appropriate for an entrepreneur to know when to apply for loans, the types of funding available and have a funds management framework to guide how much is needed. 

4) Inability to Adapt to Changes: Businesses operate in a world where consumer behaviour, needs and tastes are constantly changing. Consumers’ behaviour pre-Covid19 has drastically changed and is still changing as they settle into the new world order. There is a need for SMEs to ensure that they stay abreast of new market trends and consumer behaviours and adjust their product offerings and marketing strategy to best align with new market behaviour and requirement. 

5) Lack of Sales: One of the major reasons why SMEs fail is their inability to generate constant revenue through sales of their goods and services. Nothing hurts a business faster than not being able to reach its projected sales goals to enable it to stay afloat. One of the ways that this can occur is when the business has customer concentration risk issues (a situation where too 

much reliance is on a particular customer or few customers). Business owners will have to diversify their customer base by ensuring their marketing strategy is well developed to reach a vast number of their available market size. 

6) Poor/Inadequate Management: This is by far the easiest thing to get wrong and the most important part of owning a business: the ability to manage both the human and material resources at a business owner’s disposal. Failure to acquire the required business acumen on the part of business owners and/or management is a pitfall entrepreneurs should avoid and mitigate.  

 While the owner may have the skills necessary to create and sell a viable product or service, they often lack the attributes of a strong manager and don't have the time to successfully oversee other employees. Smart business owners outsource the activities they do not perform well or have little time to successfully carry through. In areas where the funds available are not sufficient for outsourcing, entrepreneurs are advised to register and attend management training programmes to help improve and develop the required skill. 

Conclusion

In conclusion, business owners should be able to embrace evolution in the business world. A business owner who is not able to understand the continuous improvement and growth in the business world is at the losing end and their business will in no time go into extinction. It is therefore advisable for a business owner to identify and predict the present and future of the business world in order to understand the level of consistency, skill, knowledge, and growth that is needed to sustain the business.

Author- Gbolahan Owoeye

Wema Bank Voted ‘Best Overall Investor Relations’ Brand at NIVA Awards 2022

 
Lagos, Nigeria. Monday, May 16, 2022: Nigeria’s leading innovative financial institution, Wema Bank Plc has again been recognized for its commitment to the highest standards of disclosure, transparency, and fairness in disseminating information to investors and other stakeholders.

The Bank was on Saturday May 14 awarded the ‘Best Overall Investor Relations’ brand at the 8th edition of the prestigious BusinessDay Nigeria Investor Value Awards (NIVA) for its adherence to corporate governance ethics in driving its impressive performance on the Nigerian Exchange – NGX.

Speaking on the award, Head, Marketing Communications and Investor Relations, Wema Bank, Funmilayo Falola, commended the organisers of the award for the recognition, stating that it was an affirmation of Wema Bank’s transparency and commitment to corporate governance and best practices.

“We are grateful to the organisers for recognizing the impact of what we are doing, particularly entrenching firm corporate governance ethics in our corporate culture. This has strengthened healthy relationship across the bank’s stakeholder spectrum whilst instilling trust.

 

“At Wema Bank, we believe in transparency, and timeliness in sharing relevant data with our stakeholders, including our earnings reports. We don’t sugar-coat things but are always upfront about the state of our business, even at the worst of times. This is why Wema Bank remains one of the most credible banks in the country,” she said.

According to the organisers, Wema Bank was selected for the award by the Awards Review Committee and BusinessDay’s Research & Intelligence Unit for its commitment to the highest standards of disclosure, transparency and fairness in disseminating information to stakeholders. The Bank was also chosen for its impressive performance in the Nigerian Exchange despite a challenging macro-economic environment in the past year under review during which its profits grew by 93.72% from N4.58 billion in 2020 to N8.87 billion in 2021, recording a profit margin of 9.71% in the same period.

The NIVA Awards is a survey conducted by BusinessDay’s Research & Intelligence Unit (BRIU), and the Awards Review Committee to evaluate more than one hundred and fifty companies listed on the Nigerian Exchange Group (NGX) in a thorough evaluation process.

businessday niva awards

The Award recognises leaders of public and private companies who have created sustainable alpha-generating value for their shareholders through their strategic priorities, operating efficiencies, organisational values, and market engagement activities.

In the 2021 financial year, the Bank was named ‘Most Innovative Digital Bank’ in Nigeria at the 2021 Digital Banker Africa Awards; ‘Most Outstanding Digital Bank Brand of the Year Award’ at the 2021 Brandcom Awards and KPMG ranked the bank among Customer Experience Leaders. The bank also ranked among LinkedIn’s Top 25 Workplaces in Nigeria some months ago.

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Wema Bank Sustains Momentum By 119% Rise in PBT

 

Following a record-breaking attempt to sign up one million customers in one day on May 2, ALAT By Wema is now the number one ranked finance app in Nigeria. 

As part of its fifth-anniversary celebrations, the digital banking platform powered by Wema Bank, held widespread offline and online activations to onboard new customers, while rewarding existing customers. The impact of the customer acquisition drive saw ALAT move up three places to become number one among the top finance apps in Nigeria on iOS Appstore and Google Play. ALAT also closed the day (May 2) as the number one on the Free App Chart, and number 45 Finance App on the World Top App Chart. 

While much of ALAT By Wema’s new ranking links to marketing activities on May 2, the functionality of the platform is a key reason Nigerians have adopted it. Since its launch in 2017, the bank has helped Nigerians has supported lifestyles with refreshing digital banking offers. It has helped Nigerians build a healthy saving culture through flexible automated saving features. In line with this, the platform recently rolled out a Spend and Save feature to help Nigerians save more money while making transactions.  

 

ALAT also offers collateral free loans, scheduled bill payments, a free debit card and virtual Naira card. Customers can also make bulk payments, open a domiciliary account without visiting the bank and make investments with high-yield interests. The platform also a corporate banking app, ALAT for Business, which supports Nigerian businesses in making bulk payments and carrying out other business transactions. 

“We have always been number one,” Segun Adeniyi, the Chief Digital Officer of Wema Bank states. “When you look at our track record, we are Africa’s first fully digital bank, we kick started branchless banking in Nigeria, which included the delivery of free debit cards, and have been pioneer enablers of the fintech industry in Nigeria.” 

 

Mr Adeniyi explained that the bank intends to build on this ‘tradition of firsts’ and continue to empower lives through innovation while providing seamless digital banking services to Nigerians both home and abroad. 

 

Click here to open an ALAT account and to enjoy digital banking services 

 

Wema Bank Sustains Momentum By 119% Rise in PBT

 
 

Wema Bank Plc continued its growth momentum in the first quarter of 2022, building on the superlative result it recorded in the 2021 financial year. The bank posted N9.6 billion profit before tax in the full year ended December 31, 2021 as against N5.9 billion in 2020.

The bank which announced the release of its unaudited three-month result ended March 31, 2022 , recorded gross earnings of N29.14 billion, representing a year-on-year increase of 62 percent as against N17.96 billion recorded in the first quarter of 2021.

Other highlights of the bank’s 2022 first quarter result include a qualitative rise in interest income to N23.53 billion y/y, an increase of 58 percent compared to the N14.92 achieved in Q1 of 2021.

Similarly, profit before tax during the review period soared to N3.3 billion as against N1.5 billion made in Q1 of 2021, reflecting a growth of 119 percent. Profit after tax also increased year on year to N2.86 billion in Q1 2022 from N1.30 billion in Q1 of 2021.

The bank also grew its deposit base year to date by 6 percent to N1.022 trillion from N968 billion in FY 2021. Also on the positive side is loans and advances which rose from N418 billion in FY, 2021 to N433 billion in Q1, 2022.

Commenting on the result, the Managing Director/Chief Executive officer of the bank, Mr. Ademola Adebise attributed the impressive performance to the relentless spirit and hard work of the employees.

“Our human capital resource remains the single most important factor in our upward trajectory and improved figures in recent times. They have been cracking difficult business puzzles and providing business solutions that solve business problems amazingly and incredibly”, Adebise said.

Also commenting on the result, the bank’s Chief Finance Officer, Mr. Tunde Mabawonku, explained the bank’s, progressive business development drive and the deployment of cutting-edge technology to deliver superior banking services to their customers.

“We have deployed digital banking assets to optimize customer satisfaction as well as to reduce cost and inefficiency. ALAT has been strengthened and has been well received by the business community as well as the youth segment of the market.

We hope to build on these successes and deliver greater value and services to our esteemed customers and deliver better returns to our shareholders”, Mabawonku said

WEMA Bank Plc Reports Gross Earnings of N29.14billion for 3 Months

FINANCIAL RESULTS FOR THE PERIOD ENDED 31ST MARCH 2022 WEMA Bank Plc.

Reports a Gross Earnings of N29.14billion for the 3 months ended 31st March, 2022. LAGOS, NIGERIA – 5th May 2022

Wema Bank PLC (Bloomberg: Wema NL) (“Wema’ or “the Bank”), announces its unaudited results for the 3 months ended 31st March 2022 . 62% N17.96billion 58% N23.53billion 84% N5.61billion N3.05billion N3.3billion 119% N2.87 Billion

 

Click here to download full press release. 

Managing Rising Energy Costs as a Growing Business in Nigeria through Renewable Energy

 

Dear Business Owner, 

According to the latest Consumer Price Index report of the National Bureau of Statistics (NBS), Nigeria’s inflation rate for March 2022 stood at 15.92%. This represents the 

highest rate recorded in the country since October 2021, when it was at 15.99%. One of the major factors responsible for this spike is rising energy prices in the country and around the world, which can be seen as a direct impact of the ongoing war between Russia and Ukraine. 

The conflict between the world’s second largest exporter of oil, Russia, and its Eastern European neighbour, Ukraine, has created fears in international markets of an impending shortage in the supply of oil due to the economic sanctions and embargoes imposed on Russian exports by NATO member states. As with every other commodity that obeys the law of demand and supply, this market sentiment has increased the demand for oil (and, consequently, its price) as companies around the world position themselves to hedge against any future shortages. 

 

Even before Russia’s invasion of Ukraine, energy prices had been on the increase in the country with the price of petrol surging beyond N170/litre (from N165/litre) in many parts of the country as consumers grappled with fuel scarcity caused by the recall of the adulterated petrol of about 170m litres that was in circulation at the beginning of the year.

The price of diesel has also shot up significantly since the beginning of the year, moving from an average of N288/litre in January 2022 to over N700/litre by the end of March 2022. Many businesses that depend almost entirely on diesel-powered generators have been forced to adjust their operating hours to reduce their operating cost.

 

The National Electricity Regulatory Commission (NERC) also recently revealed that electricity tariffs charged by electricity distribution companies (DisCos) in Nigeria would go up in the coming months following the removal of power sector subsidies by the Federal Government.

These rising energy costs, coupled with inadequate power supply from the national grid,

have made it necessary for business owners in Nigeria to explore cheaper off-grid sources of energy. Renewable energy sources like solar, wind, biomas, hydro, geothermal, tide and wave readily come to mind when the discussion around alternative energy arises. However, of the lot, only solar energy is widely available in the Nigerian market for both residential and commercial use. This is due to the relative advancement in indigenous expertise in solar photovoltaic technology, especially as it relates to the assembly, installation and repair of solar panels. 

SMEs and other businesses looking for more affordable long-term alternatives to fossil fuel energy sources can look towards solar energy. Though the initial outlay on procuring a solar energy system (solar panels, batteries and inverters) may be huge, it doesn't come with the regular purchase of fuel as its source of energy comes freely from nature.

 

Solar energy systems are also substantially more durable than petrol-powered and diesel powered generators. A solar battery can last between 5 – 15 years, while the lifespan of a typical solar panel is 25 years, with both requiring minimal and infrequent servicing. To eliminate the impact of the initial outlay on solar solutions, businesses can take advantage of the various flexible payment plans made available by solar energy companies. Many solar energy service providers in Nigeria have come up with lease-to own plans that enable customers who cannot afford to pay outrightly to pay by installments over a tenor of 1 – 6 years, while others have rolled out usage-based payment models that only charge customers for the units of energy they consume. Low-cost financing options from commercial banks like Wema Bank PLC are also available for businesses and households that want to transition to solar. All in all, the market for solar energy – and other forms of renewable energy – in Nigeria is huge, as many communities in the rural parts of the country still lie beyond the reach of the national grid, while those that have access to it complain of its inadequacy. 

According to the Association of Nigerian Electricity Distributors, Nigeria currently has an electricity supply gap of about 180,000 MW and some of this gap can be filled by renewable energy. The government has thus far played a critical role in encouraging the growth and development of the renewable energy industry in Nigeria by offering various forms of incentives to foreign and domestic investors. It can complement this by offering incentives that will increase the demand for renewable energy by the general public, especially businesses, such as offering tax credits to businesses that transition from polluting and hazardous fossil-fuel-generators to renewable energy sources. Besides its positive impact on the environment and on the bottom line of these businesses in terms of cost savings, the adoption of renewable energy will curb the demand for, and importation of, petroleum products and go a long way in stabilizing the foreign exchange rate. According to the Central Bank of Nigeria (CBN), about 40% of the country’s scarce FX is spent on the importation of petroleum products like gasoline (petrol) and diesel annually.

The adoption of renewable energy has a far-reaching positive impact on both businesses and the society, and it is a strategy that the government and Nigerian businesses should elevate to the front burner. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

This newsletter was prepared by the Wema Bank SME Advisory Services Team. To get free advisory support for your business and also find out more about the bank’s low-cost financing offerings for SMEs, kindly send an email to smehelpdesk@wemabank.com.