money trends

TRENDS, CHALLENGES AND OPPORTUNITIES FOR SMEs IN 2023

The beginning of every year presents businesses with an opportunity to take stock, restrategize, set ambitious new targets and map out plans to achieve those targets.

 

As with every other year, the year 2023 has been welcome with great hope and expectations. Following what was a challenging year 2022 for various businesses and economies around the world, many are hopeful that 2023 would be the year that they would recover lost ground and rediscover their growth trajectories.

 

Being an election year, 2023 presents unique challenges and opportunities for businesses operating within Nigeria. To help businesses in the country, especially SMEs, to adequately plan for the new year and identify and harness the opportunities that it presents, Wema Bank PLC has sampled the opinions of leading experts across different industries and specializations to get their views and outlook for 2023. Those interviewed are Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PwC; Oluwatosin Olaseinde, founder, Money Africa, and co-founder, Ladda; Gospel Obele, founder, Streetnomics; and Ladi Asuni, a technology consultant.

 

GOSPEL OBELE – MACROECONOMIC OUTLOOK FOR 2023

 

Q1 : What is the overall outlook for the Nigerian economy in 2023 and what effects are the upcoming presidential and state elections in Nigeria likely going to have on the economy?

Gospel Obele: The outlook for the Nigerian economy is largely mixed. There are so many uncertainties this year. Elections are going to take the bulk of Q1, transitions are going to take the bulk of Q2 and understanding and having a clear direction around the policy direction of the new president will take the bulk of Q3 and maybe Q4. These plus all the other global narratives such as the looming recession and the cost-of-living crisis have made it a very uncertain year. On the flip side, it is also a year that requires us to position and take advantage of new opportunities that are emerging. I wouldn’t say that it is downtime year, I would say that it is a year mixed with uncertainties and the rise of opportunities hinged around change in leadership.

Q2: Inflation was a major talking point in 2022, with the Government rolling out several policies in the past year to curb inflation. Do you expect these policies to finally kick in and help to reduce the inflation rate in the country in 2023?

Gospel Obele: Policies usually have an effect on the economy either immediately or over time. The conversation around whether the government and the Central Bank of Nigeria’s recent policies will have an impact on inflation is still a developing story. We also must take into context other international factors like the Russia-Ukraine War, the climate change narrative, the post-COVID-19 narrative and how all these things have impacted on food and energy prices. To a large extent, these are the major pressure points through which the cost-of-living crisis hits heavily globally and on the Nigerian economy. At best, the policies that have been introduced by the government have been largely reactionary and monetary, but the construct of this inflation is not monetary. So, we are expecting and watching to see if the policies will have an impact on inflation. But I don’t see them having that significant impact on inflation in the mid to long term.

Q3: The naira plunged to record lows against major global currencies, especially the US dollar, in 2022. Should we expect a rebound of the naira or should we expect it to plunge further in 2023?

Gospel Obele: I envisage a further worsening of the exchange rate, because there are a lot of factors that are strongly informing and reinforcing the exchange rate of the naira to the dollar. The major factor is that we are not a primary productive economy. Many may argue that the naira exchange rate has more to do with international events than local events, but I think that it is a mix of both. The strength of the currency and its ability to withstand internal and external pressures is a function of how strong the economy is and how competitive the goods and services produced by the country are in regional and global markets. On these counts we have technically not done so well. Structurally, we are not productive. Being a consumption-driven and reactionary economy, the naira will still be at the mercy of international currencies, especially the US dollar. Let us also take into cognizance that the fact that the Federal Reserve Bank of the United States is doing everything it can to strengthen the position of the dollar in comparison to other currencies.

Q4: What industries do you predict will witness the highest growth in 2023 and how can SMEs in these industries tap into the opportunities?

Gospel Obele: To a large extent, I think that technology will rise on new fronts and more industries will see newer expressions of technology. The cost of doing business is fueling the need for Nigerian SMEs to rethink how they model their business and how they execute propositions. As a result, a lot of businesses will go techier and more digital. Another major industry that I see picking up this year is food and agriculture. Despite threats like flooding and the Russia-Ukraine War, this will be a high-growth industry. However, SMEs in food and agriculture need to play differently to go against the headwinds of inflationary pressure. Thirdly, I think real estate will pick up during the year. Many Nigerians in diaspora will be seeking to bring investments home and lock down these investments in appreciating assets. Another industry is logistics and mobility, primarily spurred by the new infrastructure that is being introduced in Lagos, Abuja and the like, and SMEs should leverage these to scale. There are a couple of other sectors as well, such as media and communication (because of the strong push of digital and social media) and, to a lesser extent, manufacturing.

OLUWATOSIN OLASEINDE ON  INVESTMENT OUTLOOK FOR 2023

Q1: 2022 was a difficult year for stock markets around the world, with tech stocks being the most affected. Are tech stocks still good investment options? Do you foresee a resurgence in global tech stock prices in 2023 after the crash of 2022?

Oluwatosin Olaseinde: Anyone investing in stocks needs to have a long-term view of at least a decade and have a balanced portfolio beyond tech stocks. If the above conditions are met, then one can always invest in tech stocks with good fundamentals. It’s a bit hard to forecast how global stocks will perform this year. One of two scenarios could play out: a mildly positive performance year or a year as rough as 2022.

Q2: What investment instruments are likely going to yield the highest returns in 2023? In other words, where should people invest for the best returns in 2023?

Oluwatosin Olaseinde: It is near impossible to forecast what investments will give great returns this year, with economic growth expected to slow down. Last year, cash was the best performing asset globally. Anyone investing should have a balanced portfolio split across low-, medium-, and high-risk investments. I would tilt more towards low-risk investments such as cash and savings and medium-risk investments like money market funds for the first quarter of the year.

Q3: Are there little-known investment options and instruments that Nigerians can invest in to realize good returns and guard against soaring inflation in 2023?

Oluwatosin Olaseinde: If you’re taking inflation from a domestic perspective, there’s barely anything that would beat inflation of over 20%. The prudent option for those with a long-term term view would be to pursue low-risk dollar options. In the mid to long term, inflation should fall back to the 12% to 15% mark. The closest options in this case would be either money market mutual funds or high-yield savings. One can begin investing in those with as little as N5000. For those with an investment horizon of a year or less, the above also applies. Stick to Naira options such as money market funds and high-yield savings.

 

 

 

 

LADI ASUNI – TECHNOLOGY OUTLOOK FOR 2023

Q1: 2022 was a difficult year for many tech businesses in Nigeria and around the world. Do you see tech companies and investors’ confidence in tech companies rebounding in 2023?

Ladi Asuni: According to “Africa: The Big Deal” report which tracks tech investments across the continent, Nigeria recorded a USD1.2bn investment in 2022 compared to the record $1.7bn the prior year (2021). While there seems to be a decline (30%) in the deal value from prior year, looking at the actual number of deals which was about 286 shows a 15% growth in transactions from the prior year with two Fintechs recording mega deals over $100m – i.e., Flutterwave ($250m Series D) and Interswitch ($110m). Despite the decrease in investments for Nigeria, the overall performance of the continent for the year 2022 suggests a moderately sustained growth of about 5% from 2021 which may be sustained into 2023. There is no doubt that there is still some interest in the African market.  However, there is need for cautious optimism and a more moderate growth outlook than we have seen in the years prior to 2022 as the struggling global economy continues to take its toll on Startup funding across the globe. Nigeria remains a preferred destination for startup funding amongst other destinations like Kenya, Egypt, and South Africa who each accounted for total investment value exceeding $500m.

Q2: What tech trends and innovations do you see emerging or gaining ground in 2023?

Ladi Asuni: Developments in Artificial Intelligence is arguably the biggest technology trend of 2022 which is expected to carry through to 2023 in terms of application and full-scale commercial deployment. With ChatGPT 3 – by OpenAI – setting a new record when more than 1 million users enrolled within the first 5 days of it being made available to the public. Similarly, we are seeing AI adoption in the image generation space with the likes of Dalle-2, Stable Diffusion and MidJourney being adopted and used at scale. The use cases for AI adoption are enormous and we can expect to see more AI- driven automation integrated into day-to-day technologies, interactions, and general utilisation for solving problems in different industries. Some interesting use cases in financial services include, financial advisory, customer services, sales support etc. The massive and rapid adoption of these AI tools will definitely be a game changer. Other technology trends we can expect may include greater adoption of smart phones and devices leveraging Internet of Things (IoT) to get increasingly integrated into regular consumer electronics (TVs, Refrigerators), vehicles and other day-to-day lifestyle technologies. 5G adoption is also expected to scale. The confluence of all these emerging technologies will birth new technology adaptations as innovators apply them to solving problems at scale.

TAIWO OYEDELE – TAX OUTLOOK FOR 2023

Q1: Many SMEs in Nigeria have been complaining of multiple forms of taxation at the federal, state, and local levels of the government. Do you foresee a continuation of the government’s aggressive approach to taxation as it strives to meet its revenue target in 2023, especially with an expected change in administration?

Taiwo Oyedele: Nigeria’s multiple taxation issue is an age-long problem. Unfortunately, every successive administration in the past decades talks about it but does nothing or even ends up adding more to the problem by enacting additional earmark taxes. While the foundation of the problem can be traced to the fiscal federalism structure as contained in the Constitution, the practical manifestation is attributable to the poor fiscal leadership and revenue mismanagement by the country’s leaders. Evidence has shown that introducing more taxes does not necessarily result in higher tax revenue collection but rather it creates excessive burden on taxpayers, dampens tax morale and fuels tax corruption. My expectation is that Nigeria will begin to make a turnaround in 2023 with the new government such that various multiple taxes are repealed and the government concentrates on a few, broad-based, easy-to-administer taxes with commensurate fiscal exchange provided for taxpayers. Also, the next government needs to harmonize revenue collection agencies and restrict the revenue administration function to one agency per level of government.

Q2: What can the government do differently in 2023 and beyond to meet its tax target without jeopardizing the growth of SMEs in the country?

Taiwo Oyedele: Government must introduce business- and growth-friendly policies that reduce over-regulation, excessive bureaucracy, and manual tax administration. If SMEs are allowed to grow, they will create more employment and contribute to economic growth which in turn leads to a wider tax net and broader tax base. Also, technology should be deployed to simplify tax compliance and link all economic activities to a central identity system to track and punish tax evaders.

 

 

Author 

Chinedu Nnawetanma.

plan your finances in 2023

MAKING THE RIGHT FINANCIAL PLANS IN 2023: TIPS FOR BUSINESS OWNERS

Finance is the most important aspect of business management. Every business, whether it is a large corporate or a non-profit, depends on money to function. Businesses need money to procure raw materials and other inputs, engage in production, hire and pay employees, market their products and services, and pay taxes to the government.

 

Despite its immense importance and centrality to business success, many entrepreneurs are still struggling to get a hang of financial management. To help you to set your business apart in 2023 and position it on a trajectory of long-term success, we have identified 6 key financial management best practices that will help you to achieve better business outcomes in 2023 and beyond.

 

  1. Separate your business and personal finances: The first step towards cultivating financial discipline as an entrepreneur is to separate your business and personal finances. And the first step towards achieving this is to open a dedicated bank account for your business. Doing this will enable you to channel all the transactions that are coming from your business through this account. You will also be able to get a snapshot of your business’ financial performance by viewing its bank transaction history.

 

  1. Record Your Transactions and Maintain Updated Financial Records: Bookkeeping is the most basic aspect (and one of the most important parts) of accounting. It is the process of recording the sales and purchases arising from your business. It is the foundation upon which other accounting processes are built because it supplies the data that will be used for further financial analysis. Do not just make purchases and receive payments without recording them.

 

  1. Periodically Analyze Your Financial Performance: You should regularly monitor your business’ financial performance. It is not enough to record your finances and maintain good bookkeeping practices if you are not going to use them for anything. Your transactions are merely raw data that need to be further processed for better decision-making.

 

  1. Get an Accounting or Financial Management Software: If your business witnesses high sales volumes, this would be the right time to get an accounting or financial management software to help you to manage your finances better. Fortunately, there are several reputable free software available on the internet that can help you do the job.

 

  1. Pay Yourself a Salary: As a business owner, you need to treat your business as a separate entity and not just an extension of yourself. This means that your company’s money is not essentially your own money. Strictly speaking, as a separate entity, any money that you put in the business should be considered a loan from you to the business and any money that you take out of it should be considered a loan from the business to you. Indiscriminately drawing from your company’s coffers to meet your personal needs will strangulate its growth. As an entrepreneur, you should put yourself in the payroll and pay yourself a salary that your business’ financial performance can accommodate.

 

  1. Get the Right Type of Financing: Not all types of financing are suitable for every business. Businesses, depending on the industries that they operate in, their stages of development and other factors, require different types of funding. For instance, a bank loan may not be suitable for a startup, while venture capital may not be the best financing option for an importation business. Identify the type of funding that is suitable for your business before you approach financiers because this will increase your chances of fundraising success.

 

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Author

Chinedu Nnawetanma
RETAIL AND SME
christmas shopping

How to Boost Your Sales During the Christmas Season

 

The Holiday season, built around Christmas, has officially begun. For many businesses around the world, it is the peak sales season of the year.

 

In the United States, for instance, the total Holiday retail sales hit $889 billion in 2021, according to the National Retail Federation of the United States, growing by 13.5% over the previous year. Similarly, in Western Europe, consumers are expected to spend about $366 billion in Christmas shopping this year.

 

In Nigeria, the Yuletide is also the season when many businesses in the retail industry witness the highest demand and sales. Nigerians spend as much as 16% of their annual income on Christmas shopping every year, according to a report by World Remit.

 

While the current economic downturn in the country has reduced the consumers' spending power and is threatening to dampen Christmas sales, business owners can still position their businesses for healthy revenues by taking the steps outlined in this newsletter.

 

 

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  1. Invest in digital marketing: The importance of digital marketing in today's business world cannot be overemphasized. Globally, there are around 5 billion internet users. In Nigeria, about 80 million people (or almost 1 in 2 Nigerians) have access to the internet. With the digital media, it has now become easier and more cost effective to gain visibility and reach your target audience. Despite this, it is surprising that many businesses in the country are yet to tap into the potentials of digital marketing. By bucking this trend and investing in targeted digital marketing, you can give more exposure to your business and generate a lot of leads that you can convert to paying customers.

 

  1. Offer discounts: The current economic downturn in the country is biting hard on the Nigerian consumers. Amidst rising inflation, spiraling cost of living and dwindling income levels, every kobo saved matters a lot to the average consumer. Therefore, something as simple as a marginal reduction in the prices of your goods and services in comparison to those of your competitors can encourage customers to gravitate towards your business.

 

  1. Leverage past and existing customers: It is easier to retain an existing customer than to acquire a new one. This is because you do not need intensive marketing to convince existing customers to buy from you as they have actually bought from you in the past and, if your product or service met or exceeded their expectations, they are likely to buy from you again when the need arises. This is in addition to their ability to help you to acquire new customers at no cost through word-of-mouth marketing and the referral of their friends, family members, colleagues, and associates to your business. This Christmas season is a good time for you to reach out to your past and existing customers. Send them goodwill messages, cross-sell, upsell and resell to them. However, leveraging past and existing customers is without prejudice to the importance of acquiring new ones as you would ultimately need new customers to expand your sales in the long run.

 

  1. Ask for referrals: Turn your satisfied customers into your indirect marketers. Ask them to refer people within their networks to your business if they are satisfied with your product or service.

 

  1. Join and leverage professional and business networks: Professional and business networks are associations of like minds. People join them for various reasons, ranging from access to information to belonginess. But the most powerful purpose that they serve is the business purpose. People in the professional and business associations that you belong to are not only your potential customers, but they can also put you in contact with other people that they know who may need your products and services. However, before you dive straight into sales and marketing, it is important that you first build meaningful and mutually beneficial connections with them and provide value. That way, your sales pitch will look more genuine when it eventually comes, and they will not perceive you as yet another self-centered salesperson.

 

 

Author- Chinedu Nnawetanma

VR glasses

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

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

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. 

How To Grow Your Business With The Power Of Branding

Branding is a unique art that is essential for all companies, especially in a crowded competitive marketplace. Creating a brand enables a company to set itself apart from every other competitor by creating a perception of its goods or services beforehand. 

The branding journal defines branding as the process of giving meaning to a specific organization, company, product, or service by creating and shaping a brand in consumers' minds.The objective is to attract and retain loyal customers and other stakeholders by delivering a product that is always aligned with what the brand promises. 

Branding is a very powerful tool that can make the most mundane things outstanding. Water, for instance, is one of the most consumed items in the world. It is also one of the most accessible things in the world. However, through branding, we have seen water bottlers differentiate themselves and charge a premium price for a readily available resource. 

Despite its uncanny ability to make the existence of a company stick in the heart of the audience, there have been questions regarding the importance of branding to SMEs. People often ask, "Is having a good brand important for an SME business?"  

  The answer is yes! Branding matters regardless of the size of the business.  Why does branding matter to SMEs?  As earlier stated, a strong brand allows a company to be differentiated from its competitors in the market. Here are more reasons for you to invest in branding: Strong brands enhance business performance primarily through their influence on current and prospective customers, employees, and investors· Branding has been a part of the marketing strategies that have affected an amazing push and growth on the performance of businesses around the world· 

It provides an opportunity for businesses to build trust by delivering on the promises of their brand. With branding, SMEs can attract top-quality talents by demonstrating what their company offers which a larger corporation might not offer. Note however that branding is one thing, maintaining a strong brand that will keep your company glued to the heart of your customers is another.  

Building your brand when a business is set up, it builds a reputation, whether good or bad. It is at this point that the initiation of branding should come in, to control what the reputation will look like. Hence, it is recommended for businesses, especially SMEs to start branding the moment a business is being set up.   

  

 

 

 

 

 

 

 

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Here are some key considerations for building the right brand for your business: 

Embarking in the branding process is impossible without a branding strategy. This should form part of your overall business strategy.

The purpose and mission of the business must be clear. When this is well defined, the core values to be communicated to the entire world will be well structured and stated. It is necessary to choose a suitable voice that is understood by the audience to register the brand in their minds, thus making yours the preferred brand for your target market.   When a company is set to build its brand, some inevitable questions must be asked to carry on. Questions like; who am I? How do I want my customers to feel? How am I different? How do I come across? What do I want to achieve?  

Who am I?  

This is the kind of impression and picture created in the heart of the customers about the  company.

What do I want to achieve?  

The question of what to achieve can be derived from your vision, mission, purpose, and values. 


These three things must therefore be well defined.

How do I come across?  The techniques to be adopted while communicating your values need to be defined as well. As a business owner, you must be able to pinpoint words and terminologies to be used to describe your industry, products, and services to your customers.

How am I different?  Here, any entrepreneur or business owner should know what uniquely stands the business out. This is where a conclusion on how the customer sees the business distinctively is made. It's essential to identify and develop the key differentiators. These differentiators become a robust set of unique features and benefits that will form the basis for establishing and maintaining the business’ competitive advantage.  

How do I want my customers to feel?  This is also a vital aspect of branding; knowing the feeling your company will evoke while customers interact with you. Right now your brand is making the people important to its success feel one thing or another. The question is, are those feelings helpful or a hindrance? Actions need to be taken to make sure that these feelings are positive.  

What makes a strong brand?  In deploying your brand strategy, below are some of the factors with which to measure its strength: An ability to condense the peak performances of your company, thereby making them tangible over a long period.

Clear brand core values, an unambiguous positioning, and a long-term brand strategy, a  consistent voice creates a memory in the heart of your audience. This voice can be professional, informal, sophisticated, simple, conservative, a bit sketchy, etc., and must be consistent on blogs, sites, social media platforms, emails and even ads.

 

 
 

Conclusion

Branding is a critical success tool for all businesses. If well deployed, it can be the difference between a struggling business and a successful business. Business owners must therefore dedicate resources to building and maintaining a strong brand.

Beyond just building the brand, Business owners must believe in their brand and what it represents regardless of what competition is doing. The company culture must also reflect the brand as staff are the company’s biggest brand ambassadors.  

Do these, and your company just might take over the market!  

  

 

  
  
 

Author- Gbolahan Owoeye

The 2022 Budget: What You Need To Know

Dear Business Owner,

Welcome to the year 2022. We believe that you will have a fruitful and rewarding run this year.

The new year often presents us with an opportunity to review and re-evaluate. We hope you have taken the time to reflect upon your business in the past year and to make viable plans for this year. Your plans should include the goals you will attain as a business, your strategy for attaining those goals, and of course your budget.

Speaking of budget, President Muhammadu Buhari signed the 2022 Appropriation bill on the 31st of December 2021. The budget tagged “Budget of Economic Growth and Sustainability” is designed to achieve the following:

  • Diversification of the economy with robust growth of MSMEs
  • Investment in critical infrastructure
  • Strengthening security and ensuring good governance
  • Enabling a vibrant educated and healthy populace
  • Reducing poverty and minimizing regional, economic, and social disparities

In this month’s Newsletter, we will analyze the 2022 national budget, highlighting the portions we consider most vital to you and your business

Why You Should Care About the National Budget

The budget impacts the economy, and the state of the economy impacts your business. Every serious entrepreneur looking to draw up budgets for his business (which we highly recommend) and put in place pragmatic plans for business growth must not do so in isolation of the national budget.

Below are a few of the ways that the national budget might affect your business

  1. How money is spent and invested by the ministry of finance impacts fiscal deficit

  2. The extent of the deficit and how the deficit is being financed impacts money supply and interest rates in the economy

  3. High-interest rates imply a higher cost of capital, lower profits, and lower stock prices

  4. Higher taxes reduce disposable income

  5. Reduced disposable income, in turn, reduces the ability to pay for goods and services

  6. A decrease in demand for goods may translate to a decrease in your profit margin as a business

Now that we have convinced you to care, let’s dive right into analyzing the budget

 

 

 

The deficit of N6.39tn is expected to be financed by new borrowings, privatization proceeds and drawdown on loans secured for specific projects.

Key Assumptions

  • Benchmark Oil price – US$62 per barrel
  • Oil production volume – 1.88 million barrels per day
  • Inflation rate – 13%
  • Average exchange rate – N410.15 / US$1
  • GDP growth rate – 4.2%

Below are some of the ways the government plans to raise money for funding the budget

  • Enhancing tax and excise revenues. 
  • Reviewing the effectiveness of policies for tax waivers and concessions
  • Increasing customs revenue through technology 
  • Preserving the revenue derived from the oil and gas sector.

 

Implications for the Business Owner

  • The budget has a deficit of N6.39trn to be funded largely via borrowing. To put things in perspective, this deficit is 35% higher than the total amount budgeted for in 2015. Increasing government debt has consequences on the economy that could trickle down to your business, such as an increase in taxation, interest rates etc.

 

  • There is no provision in the budget for fuel subsidy from the 2nd half of the year. You should be prepared to pay higher amounts for PMS once this subsidy is removed. This will impact your cost of doing business directly through increased power and transportation costs, and indirectly through the expected inflationary impact of the subsidy removal. We recommend that you make adjustments to this. However, it is not a certainty that the subsidy will be removed by the government.

 

  • The government has imposed a 6% tax on the turnover of Offshore companies providing digital services to individuals in Nigeria. This includes services such as electronic data storage, high-frequency trading, online advertising etc. In addition, the companies are obliged to charge, collect, and remit VAT. This will cause a marginal hike in your cost of consuming digital products/services. For example, your social media advertising cost will be affected by this.

 

  • The government has also imposed an N10 per litre excise duty on all non-alcoholic, carbonated, and sweetened beverages in the country. Whether you are trading in these beverages or consuming them, you should expect a marginal increase in their prices

 

 On the bright side, monies have been set aside in the budget for conducting the national population and housing census. The last time Nigeria had a national census was 15 years ago. Data from the census will better position the government to strategize and make decisions that affect national development

 Also, there has been an expansion in the country’s revenue base. This year, 65% of projected income will come from non-oil sources. This will better stabilize the economy, cushioning it from shocks that may arise due to movements in international oil prices.

2021 FINANCE ACT: SOME NOTABLE CHANGES

Recall that we shared major highlights of the 2020 finance act with you last year. On the 31st of December 2021, the 2021 finance bill was signed into law. Below are some of the changes introduced by the new act:

  • Increase in Education tax payable by Nigerian companies from 2% to 2.5%
  • 10% Capital gains tax chargeable on disposal of shares worth N100m or above in any 12 consecutive months, except the proceeds of such disposal is re-invested in the shares of a Nigerian company.
  • FIRS has been mandated to enforce the payment of the Nigerian Police Trust Fund levy. Rate is 0.005% of the net profit of companies operating in Nigeria
  • Companies engaged in educational activities are now expected to pay Corporate Income Tax, including those whose activities are of public character

Companies operating in select sectors with a turnover of N100m and above are subject to a science and engineering levy of 0.25% of their profit before tax. The sectors include banking, mobile telecommunication, ICT, aviation, maritime, and oil and gas.

Ndianabasi Udondian
RETAIL AND SME

The Impending New Covid-19 Variant: How SMEs Should Prepare To Safeguard Their Business

Small and Medium-Sized- Enterprises (SMEs) play a key role in national economies around the world both in developed and developing countries: generating employment and contributing to GDP growth. Small businesses act as important tools to achieve environmental sustainability and more inclusive growth.

Over the last few decades, globalization, rapid technological advances and dizzying products development have propelled small- and medium-scale enterprises (SMEs) toward sustainable innovation to gain competitive advantage. The growth of this space is now threatened by the devastating impact of the covid-19 pandemic.

Since the beginning of the COVID-19 pandemic, the SARS-CoV-2 coronavirus that causes COVID-19 has mutated (changed), resulting in new variants of the virus (Delta variant and omicron variant are examples of notable variants). The impact of the Covid-19 pandemic affected every industry as it disrupted supply chains and forced the shutdown of various businesses. The period of closure and movement prevention policies adopted by governments in many countries have greatly affected SMEs, paralysing their operations, weakening their financial positions, and exposing them to financial risk

Unfortunately, after months of steady decline, COVID-19 cases and hospitalizations are creeping back up which is of great concern globally.  As the world is adjusting gradually to the new normal, it is very necessary for SMEs to take advantage of leveraging on sustainable innovation and strategies in growing their business beyond.

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Various strategies have been identified as potential drive which SMEs can use to improve their competitiveness in global markets amidst developing covid-19 variant:

  1. Networking and Flexible production strategies: SME’s can exploit the networking space to identify new markets and promote their products through various online sales platform. These online channels offers enormous opportunities such as e-commerce sales and lower operating cost.
  2. Continuous Entrepreneurial Skills Development: entrepreneurial capabilities are also important in increasing the development and survival rates of start-ups. There is need to keep growing new skills and ideas in maintaining sustainable business growth.
  3. Improve on product branding: SMEs should make branding an integral part of their business plan rather than an afterthought. Branding helps in creating demand for products and services, resulting in faster sales. Even for B2B business, branding creates recognition, reputation and trust resulting in better conversions.
  4. Adapting to current market trends: market trend keeps changing and unpredictable because of these newly discovered variant cases. SMEs need to be monitoring trends in their product/service markets continuously to ensure customers satisfaction requirements are met and changes in customer preferences are caught early.
  5. Preplanning and learning from experience: Preplanning has always been considered a strategic management process that helps to fight against uncertainties. Outbreak of Covid-19 created a wake-up call regarding external uncertainty and degradation in the social and economic development. SMEs should identify substitutes for product ingredients ahead of disruptions or be able to pivot to new products in case of problems with some products.

Behind every crisis is an opportunity, as the saying goes but opportunity favours only those who are prepared. The 2008 global financial meltdown hit so hard and created disruption that will remain fresh in the minds of many people for years to come. To those who were prepared, the economic recession was the best of times and to those who weren’t prepared; it was the worst of times. The global economic recession came like a tsunami and swept away lots of businesses; both big and small.

The business environment is continually changing all over the world, SMEs are central to the collective goal of increasing productivity turnover and ensuring that the benefits from increased globalisation are sustained. SMEs entrepreneurial opportunities represent an important vector for economic and social participation.

Greater flexibility and capacity to plan can give SMEs a competitive advantage in global markets relative to the current new normal economy challenges, as they are able to respond rapidly to changing market conditions.

Conclusion

The Covid-19 pandemic is the new normal and it seems it will be with us for a while. The introduction of new virus variants will keep changing the dynamics of doing business worldwide. While the prospects for many SMEs may look discouraging, the pandemic still presents opportunities for businesses that are proactive. A good example are the companies that pivoted from making gels or other FMCG products to manufacturing hand sanitizers. It is advisable now for SMEs to assess the damages their companies may face and strategically create protection measures that will assist in mitigating the impact of the pandemic while maximizing the opportunities that will most certainly present themselves once the pandemic is contained.

Author- Gbolahan Owoeye