Experts have identified top 10 business risks associated with the country in 2018. Firing the first salvo is Allianz Global Corporate & Specialty, a global insurance company and risk consultant, which recently published the 2018 global risk outlook enumerated top 10 business risks for Nigeria according to their ranking.
According to the body, theft, fraud and corruption rank as number one risk. “Corruption in Nigeria is endemic and deeply rooted in our society but what is surprising is that even with the anticorruption drive of the present administration this risk jumped three places from being fourth ranked in 2017 to being number one in 2018.”
Market developments: This encompasses issues such as volatility, intensified competition / new entrants, M&A, market stagnation, market fluctuation. This is the second highest risk faced by businesses in Nigeria in 2018. Its ranking in 2017 was also number two.
Besides, the group identified changes in legislation and regulation including change in government, economic sanctions, protectionism, Brexit, Eurozone disintegration etc, as the number three since according to it, the country has a culture of lack of continuation in policies and legislation.
The body said macroeconomic developments such as austerity programmes, commodity price increase, deflation, inflation etc, which in 2017 ranked number 1, but now in third place, seems to suggest that there is a measure of macroeconomic stability in 2018 compared with 2017.
Cyber incidents like cyber crime, IT failure, data breaches and hacking, which risk is reflective of the reality of the digital age, in Nigeria, has more to do with IT failure than cyber attacks because of the state of IT infrastructure which is not as advanced as that of Europe or the U.S. Political risks and violence involving war, terrorism, civil commotion, exacerbated by the activities of Boko Haram, the killings by Fulani herdsmen, the threats by Niger Delta militants, unrests among Igbo youths are all pointers to how widespread political risks and violence is in Nigeria. Fire and explosion, ranked number seven, while power and energy blackouts followed suit.
Business interruption including supply chain disruption, ranked at number nine and has to do with issues such as suppliers not delivering on time which affects the time to market of businesses.
New technologies such as impact of increasing interconnectivity, nanotechnology, artificial intelligence, 3D printing and drones: This risk was also ranked number 10 in 2017.
Curiously, as Nigeria exits the recession of 2017, investor sentiment across the West African sub-region is likely to experience uplift in 2018. Still, political uncertainty ahead of Nigeria’s 2019 presidential elections and ongoing security concerns are among the key risks for businesses operating in the region, says specialist global risk consultancy Control Risks in their annual political and security risk forecast ‘RiskMap.’.
On control risks, Senior Partner for West Africa Tom Griffin noted that, “2017 has been a tough and turbulent year for businesses in the region, however with Nigeria exiting recession, and foreign exchange shortages easing, we see a strong improvement in investor sentiment emerging. Another major engine of growth will be Cote d’Ivoire, where economic expansion is projected at around 7% next year. There will be only a handful of elections in the region in 2018, meaning continuity will largely prevail with policy decisions having the biggest impact on the business environment.”
“In Nigeria however, although presidential elections are next slated for 2019, campaigning has already started. The uncertainty that generates, as well as the need for cash that an election brings, mean that political instability and regulators whose actions will be difficult to predict remain among our top risks for businesses in the year ahead.”
Specifically, Control Risks identified terrorism and militancy as the greatest risk to bear in 2018 across the sub-region. “Business assets and personnel in West Africa will remain vulnerable to attacks by transnational or domestic militant groups. In particular, al-Qaeda and its affiliates will continue to pose a threat to operators in the Sahel, while the oil and gas industry in Nigeria’s Niger Delta will remain exposed to attacks by domestic militant groups. Failure to resolve the underlying political and socio-economic grievances at the root of these movements will see the threat persist in 2018.”
Besides, “Countries in the region, notably commodity-dependent economies, face growing fiscal pressures, operators are likely to see regulatory bodies increasingly act as revenue-generating bodies, strengthening local content provisions, introducing stricter fiscal terms, reviewing contracts or erratically imposing fines in companies in the hope of boosting state finances. This will periodically give rise to commercial disputes, legal challenges, and the need for businesses to engage with government stakeholders”, the expert projected.
The major risks and challenges businesses that are likely to confront West Africa are the ongoing practical impediments to day-to-day operations. “Shortages of or difficulties in sourcing fuel, foreign currency, equipment and skilled labour; the infrastructure deficits that persist in the vast majority of the region, such as in electricity and transport, will continue to mean higher costs, higher demands on management resources a tougher capital-raising environment, and greater uncertainty for businesses than in other regions.”
Many countries in Africa, including Nigeria, face the prospect of what could become a sovereign debt crisis, a decade after they followed Ghana’s lead in entering the international bond market. The problem is driven by high levels of external debt, persistent uncertainty over the recovery of commodity prices to fund repayments, and borrowing to fund recurrent expenditure. Countries dependent on oil revenues are particularly vulnerable to ballooning debt in 2018.
The post 2018: Experts identify major business risks in Nigeria appeared first on The Nation Nigeria.