It is no longer news that Nigeria has been under recession for the past one year. The first sign that the economy was going into recession manifested at the end of Q1 (March) 2016, when the country’s Gross Domestic Product (GDP) recorded a negative growth of -0.26%. This trend continued in Q2 and Q3 with GDP growth rates of -2.1% and -2.24% respectively. GDP is the aggregate monetary value of all finished goods and services produced within a country’s borders in a specific time period.
A recession is defined as a period of economic downturn. Technically, if a country records a negative GDP growth in two or more consecutive quarters, then such economy is classified as being under recession. The economy can also get into depression if this trend of negative GDP growth is sustained. Depression is a more severe economic downturn where the period of recession becomes long term (i.e remains beyond a normal business cycle). In a nut shell, should Nigeria record yet another negative growth in GDP when the reports for Q4 2016 are released in a couple weeks’ time, then we can say that the Nigerian economy has gone into depression.
The current economic realities are worrisome. GDP has dropped 2.24% as at the end of September 2016. In the same manner, industrial production declined by 12.21%, unemployment rate stood at about 13.3% at the end of June 2016, inflation as at end of December 2016 stood at 18.55% (Jan. 2016 was 9.6%), while naira exchange rate at the parallel and the interbank markets in December 2016 averaged N480/$ and N328/$ respectively.
The consequences of all these include massive job losses, reduction in disposable income, high cost of living, reduction in corporate profits, increased burden on families to fund education, medical expenses and other needs of their members. Naira remains under intense pressure as scarcity of foreign exchange persists.
I do not believe that Nigeria will slide into depression at the end of the day. My optimism is built on two points. Firstly, depression is not a regular occurrence. The world has seen about 33 recessions since 1854, but only one depression has happened since then. The US witnessed what was then known as “the Great Depression” between August 1929 and June 1938 with moderation between April 1933 and May 1937. So, countries do not easily experience this economic dilemma. Secondly, and most importantly, Nigerians are very resilient people. We have a never-say-die attitude to survival. We are a creative and innovative people. We can turn around this economy in a matter of months if we all decide to get out of the woods. Furthermore, government’s expenditure plans (despite some flaws) seem to speak to most of the issues responsible for the strain in our economic milieu.
The major reason for our economic woes is that the non-oil sector of the economy remains weak. Therefore, despite the improvements in the price of crude oil in the international oil markets, as well as the increase in production output following the relaxation in militancy attacks in the Niger-Delta region, government revenue remains under strain. I believe that government’s strategy to diversify its revenue base focusing on taxes and import duties is counterproductive. Let’s discuss this in the next edition of this magazine.
What options do we have?
Nigerian population size and distribution is a unique opportunity waiting to be tapped. Most Nigerians do not see the green pastures within, hence we have left these opportunities to discerning entrepreneurs from other countries like India, South Africa, China, Korea and parts of Europe. Most retail chains in Nigeria are owned by South African businesses and Indians, most of whose goods were imported until the recent ban of certain 41 items from the official foreign exchange market. The forex scarcity is a blessing in disguise. Nigerians have been forced to test the beauty of home made goods and food items such as rice. Today, Nigerian rice, grown in the dry lands of Nassarawa, and the wetlands of Eboyi have thrown the so-called foreign rice from Thailand and Indonesia out of the windows of Nigerian markets. I believe strongly, that by the time, as a nation, we are able to delete rice and other food items from our import list, the nation’s economy will begin to experience a rebound.
Nigeria has one of the best geographies in the world. From Sokoto to Calabar, Maiduguri to Mbaise, there is no crop or animal that we cannot grow or rear in these lands. Some of the best bananas can be found in Mbaise (quoting the current MD of UAC, Mr.ChidiOkoro, while delivering a paper at the 2016 end of the year get together of Mbaise Professionals Congress in Lagos recently). Cows, goats and sheep can be reared in virtually all parts of Nigeria. We can be self-sufficient in food if we all can embrace one aspect of farming or the other. Time for white collar jobs has passed. We need to face the reality.
Growing up in the Eastern part of Nigeria, I saw that almost every family had a small stable for rearing goats and other types of livestock. All that needed to be done every day was that one went into a nearby bush, fetched palm fronts and other forms of grass to make fodder for the livestock. At that time, we had a strong rural economy where families could sell some of such livestock to meet their financial needs (including payment of school fees) from time to time. Unfortunately today, you can hardly see such ventures in most villages. We need to return to this economic model. Import dependence has become a paradigm within the Nigerian society. The East depends so much on the North for meat and dreary products, yam, tomatoes and pepper. Everything we need today must be bought from the market. We need to imbibe a self-sufficient mindset. This is the only option we have.
Agriculture remains the most vital sector capable of generating inclusive economic growth, savings for investment purposes and foster national development. The opportunities in the agricultural sector are many. For instance, over 65% of fruit juice consumed in Nigeria are made from orange and pineapple. This market is supported by a growing youth population. Oil palm adds about N221 billion annually to GDP and employs about 4 million people. Yet, only about 11% of Nigeria’s arable land is cultivated. In many rural communities, family lands have been split into very tiny and useless portions. Such small portions are neither big enough for farming nor building. Such lands can be pulled together by the community and converted to large palm plantations proceed from which can be shared according to defined proportions. The demand for agricultural products outstrips its supply. This is a yawning opportunity.
Poultry, piggery and fishery businesses seem to command the most attention of our young farmers. This is a positive sign and as such, commendable. We, however, advise that before engaging in such ventures on a large scale, proper consultation with experts should be undertaken. Such businesses must comply with public health and safety standards, or they will be penalized by government. Experience that is the best teacher is that of others. Proper financial and operational planning remain critical success factors in every entrepreneurial endeavor.
I wish all our readers a happy and prosperous new year.
By Oguh Mark, FCA
NB: Mark Oguh, a Fellow of Institute of Chartered Accountants of Nigeria and a Financial Management Expert wrote in from St. Anthony’s Parish, Gbaja, Surulere, Lagos. Contact firstname.lastname@example.org
In my contribution to the last edition of this magazine, I had noted that 2016 will bea difficult year for Nigeria in particular and the rest of the world at large,as the economic headwinds which characterized 2015 still extend to the New Year. It is no longer news that Nigeria recorded a negative Gross Domestic Product (GDP) growth rate of -0.36% in the first quarter of 2016. Should this be the case by the end of the second quarter, then the Nigerian economywill officially be in recession.
A recession is defined as a period of economic downturn. Technically, if a country records negative GDP growth rates in two or more consecutive quarters, then such economy is classified as being under recession.
Managing your business through a period of economic meltdown will be severely daunting. Ordinarily, small businesses face myriads of obstacles even in normal times ranging from financial and sales challenges, to human resources and management of suppliers. These impediments become even greater during periods of recession.
Often times, recession is characterized by extraordinary market-place pressures, decreased staff morale arising from inevitable pay cuts, downsizing and other rationalization measures, weak market demand, inflation and hike in the cost of basic amenities, and exorbitant taxation as the government struggles to generate enough revenue to stimulate the economy.A research by HBR suggests that only 9% of companies come out of recession stronger than ever.
Of these few, small businesses are better positioned to navigate the turbulent waters of recession. They are small and nimble, courageous and innovative in approach. They are more flexible and better placed to take advantage of obstacles, and see opportunities even in hard times. They are less bureaucratic andhave more elastic operating systems.
Here are six steps that will help you steer your business through the tide of economic meltdown:
- Check your Cash-flow and Income Statement Regularly
There is no better time when “cash is king” than during recession. Entrepreneurs must maintain a clear trade-off between increasing sales and maintaining a healthy cash flow. To succeed in these hard times, you must establish a strong credit policy which seeks to contract credit expansion. This step is important because with the attendant high risk of job losses being one of the major consequences of a recession, retailers and small businesses are likely to suffer credit losses where some of their customers lose their jobs.
Akin to this fact is the need to minimize concentration of credit exposures on certain customers and segments of customers. This, in effect, means that businesses must have a good understanding of their customer segments and must properly dimension the possible impact of a recession on such segments. The most effective strategy to contain this risk is to diversify credit sales across major segments and customers. There should be a defined credit limit per customer segment.
- Manage your Costs Effectively
Experts agree that one of the quickest wins under a recession is to cut costs. However, cost structures differ across industries and businesses. You must examine your cost profile to know what percentage is fixed, semi variable or variable. Fixed costs are those cost items which do not change with change in volume or number of outputs, sales or units. They are said to be fixed over a relevant range. These are called committed costs. They include rent, depreciation, license fees etc. Notwithstanding, all costs are variable in the long run.
Variable costs are those cost elements which change as a result of changes in business parameters such as sales volume, number of customers etc. In order to contain variable costs, managers must be able to identify the key drivers of such costs. To manage such costs, you must control the drivers. For instance, to manage your fuel expenses, you must reduce the distance your car travels daily.
Effective cost management requires that you focus on the major cost lines that are variable within the relevant range of activities. Focusing on the most significant variable cost lines can provide levers for profit improvement and enhancement of your financial performance. Stop every activity that is not a value driver for your business in a period of recession.To do this, and do it well, you must clearly define what “value” means to you. Value analysis, is therefore central to havingan effective cost containment strategy.
Shedding workforce may seem like the lowest hanging fruit, but the truth is that this measure should really be the last option open to you. Staff cut can be counterproductive both in the immediate and at the turn of events. It has the potential of weakening the confidence and commitment of the surviving employees. When the economy rebounds, you will be faced with staff shortages, and high replacement cost in terms of recruitment expenses and learning curves. Therefore, managing staff cost should be a strategic agenda of your business. Businesses must design recruitment policies that adequately protect it against indiscriminate hiring leading to excess workforce. Full time employees may be complemented with a squad of contract staff whose employment terms are renewable yearly.
- Provide Excellent Customer Service
Attracting and retaining customers under a period of downturn requires customer service qualities that not only meetexpectations but wows the customers. The nimbleness of small businesses coupled with the inbuilt flexibilities in their operating systems enables them to provide tailor-made services to their customers all year round. SMEs are able to maintain close contact with their clients and can also effectively track their lifestyle.
Keeping a close contactwith your customers is a prerequisite tool to having an excellent customer service. You can do this by sending constant messages to keep yourself in theminds of customers and making them feel you care about them. This is much easier for small firms than for big conglomerates. Your operating margins may shrink, but you need to hold on to your customers at all cost.
- Incentivize your Employees for Customer Acquisition
As recession bites harder, it is possible for small companies to acquire more customers who may be looking for smaller and cheaper providers of their product/service needs. Remember that what some blue-chip companies may be selling is their brand, and not utility. So higher prices may not necessarily translate to higher quality or better utility. In periods of recession, many customers seek utility rather than prestige and packaging.
Customer acquisition will be further enhanced if you provide incentives in form of bonuses and commissions for employees who win new clients. Acquisition and retention of new customers is the key to surviving the recession.
- Be innovative
Creativity, intellect, vision and experience are levers of success for small businesses under economic meltdown. Emotional intelligence, technical skills, competence and a mastery of the digital world will count as a major point of departure in the business climate of today. Where these features manifest, they enhance the ability of the company to employ the steps discussed above to win in the market. Winning is the only option for you.
- Keep the presence of God
Finally, and most importantly, you must keep the presence of God all the time. God’s promise to bless the works of our hands is not absolute. The scripture tells us in Psalm 1 that those who work in the way of the Lord shall be like trees planted by the rivers of water that bear fruit in and out of season, and whose leaves will never wither. We have a duty to do things in the way that God teaches. Our father in heaven is a just God and He expects us to do our business with fairness and justice. We must neither cheat our customers nor maltreat those who work for us. When we play by the principles of God, then the words of Psalm 1 will be our portion.
NB: Mark Oguh, a Fellow of Institute of Chartered Accountants of Nigeria and a Financial Management Expert wrote in from St. Anthony’s Parish, Gbaja, Surulere, Lagos. Contact email@example.com
Rt. Rev. Msgr. (Dr.) John Kanebi Asuquo Aniagwu is Vicar General, Catholic Archdiocese of Lagos, Episcopal Vicar Ikeja Region and Parish Priest of St Leo’s Catholic Church Ikeja. In this chat with Nigerian Catholic Reporter, he talks on the problem of unemployment, the power sector, job creation and poor funding of education in Nigeria. He also counseled Christians on how to vote in credible leaders into offices and how to cope in a distressed economy.
What would be your recommendation to Christians in the face of the present economic crunch in the country?
Christians should keep on praying to God that He would turn our situation around and that the economy would improve. We should also pray that the managers of our economy will do the right things with our resources by channeling resources where they would benefit the masses more. Specifically more attention should be paid to job creation to ensuring that people are gainfully employed.
Another area that requires the urgent attention of the managers of our economy is the power sector. Electricity is a key factor to development. If we have steady power supply, a lot of people can be self-employed. They can create their own businesses, production will increase, and industries will grow and employ more people.
It is quite unfortunate that a lot of parents are out of jobs today. Many of them cry to us here every day for all manner of assistance especially in the areas of provision of school fees for their children and wards, payment of house rent; sometimes for things as basic as feeding, which is heart wrenching. We cannot do much as a Church. We do not have the type of resources that are available to government to be able to help these people. We do the little we can, but I must confess that we can only do very little.
One would wish that governments at all levels would channel our resources towards meeting the needs of the people in the two areas that I have mentioned – power and employment.
What is your advice to the youths?
Youths cannot do anything when there are no opportunities for them. There are very limited opportunities for them to get employment, or to gain admission to higher institutions. We can only plead with them not to react in negative ways by going into crime.
In a situation like this when opportunities for young people are severely limited, the temptation for them to go into crime is very strong. It is very easy for some unscrupulous people to recruit them into fraudulent practices or into more criminal practices like armed robbery, kidnapping and even cultism.
For the ladies they could be swayed into prostitution. Our youths should do all they can to resist the temptation. They should stick to the straight and narrow path until it should please God to improve the conditions of living for everyone. They should not use their skills in the faces of the challenges they are facing to deviate into criminal activities. They should continue to resist all temptations and look up to the Lord.
But like I said, it behooves on those who are in charge of the economy of our nation to create an environment where the youths can be gainfully employed. An idle mind is the devil’s workshop. If our young people are not gainfully employed it can be very difficult to get them to stay on the straight and narrow path.
The truth of the matter is that the opportunities for young people to be gainfully employed are very limited. Some go as far as obtaining Master’s and Doctorate degrees and yet there are no employment opportunities for them. This is unlike in our days when there were employment opportunities for us even before we finished school.
What is your advice for those who run our educational institutions?
Good education is necessary for the development of people and nations. Government owes the duty of providing basic education to the people. UNESCO has even provided that for any nation to develop, it must as a matter of routine commit at least 26% of its annual budget to education. Nigeria is not meeting this commitment and therefore education is suffering.
If leaders and rulers can devote more resources to education then there will be better education in the country especially for the poor ones who cannot afford private education. People who can afford private education either in Nigeria or abroad have no problem but it is the masses who cannot afford private education that are having problems. As a result, they attend schools that are poorly equipped and poorly staffed. The result is that when they come out they are not educated. They are actually illiterates.
It is for those in authority to commit adequate fund to education. The nation can afford good public schools that are properly equipped and employ the right staff.
How should Christians react in the face of this kind of challenges?
Christians should pray that God will intervene in our affairs by giving us the right kind of leadership, as we pray in the Catholic Church – “leaders who care for us and who would lead us in the path of peace, prosperity and progress.” Nigeria has never been blessed with such leaders. As Christians we should go on praying that God would give us such leaders in the immediate future, not in the distant future. As Christians, our greatest weapon is prayer.
During elections, Christians should go out and vote massively to see whether they can elect credible leaders. The sad thing here is that in Nigeria so far, our votes have never been allowed to count. If they are going to give us free and fair election we should go out and vote according to our conscience – for leaders that can really help solve our nation’s problems, forgetting ethnicity, language and even religion.
If we have a broad minded person contesting for Presidency that we believe will not be a religious bigot, I wouldn’t mind voting for him even if he is not a Christian. But if it is someone that I see may want to favour Islam over Christianity, I will not vote for him.
The year 2015 has been predicted to be a difficult year. The reasons for this negative prediction are not far-fetched. International oil price has dropped below $50/barrel. Oil is the main driver of Nigeria’s Gross Domestic Product (GDP). GDP measures the size of the economy.
The revenue base of the Nation is highly skewed towards oil revenue. Little wonder then that the current southward trend in international oil prices impact negatively on the economy. A downturn in the economy definitely affects general consumption and purchasing power. This will impact aggregate demand.
Therefore, businesses will normally witness slowdown in sales and profitability in a period of recession like this.
When the going gets tough, it is said that the tough also gets going. The key to attracting and retaining quality customers in and out of recession remains great customer service. Passion for excellent customer service should be at the Centre of your business strategy this year.
To be effective, the business strategy must be communicated to every member of staff, internalized and shared by all and sundry from the man at the gate to the Managing Director.
The first step towards guaranteeing great customer service that exceeds customers’ expectation is team spirit. If all departments and staff do not work with each other as one team pursuing the same goal, it will be difficult to achieve harmony in how customers are treated. Production/operations departments and Sales and marketing department must share same attitude and behavior towards the customers.
While businesses must strive to offer the best products and services than the market/competition, ability to deliver such promises must be ascertained. It is better to under promise and over deliver, than to over promise and under delivered. Consistency in quality service implies that businesses always keep their words.
Effective customer services demands investment in people and machines. There should be no cutting corners if you truly want to consistently deliver quality to your clients. Just like individuals should improve their talents if they want to succeed, businesses must sharpen themselves by the use of technology to improve on service delivery.
An upgrade of your production infrastructure may be necessary to meet the current taste of your clients. Training staff to use the new technology to improve service efficiency is imperative. In addition, staff must be trained on good customer service and engagement. In today’s world, the use of social media as the fastest means of customer engagement cannot be over-emphasized.
How you communicate through social media should concern you as a business owner. The company can easily suffer reputational damage if unwholesome messages are released through such platforms using the company’s identity. Facebook is one platform that you must be careful about.
As a businessman, you must appreciate the true value of a customer, which Andrew Reid says goes beyond their wallets. Customers are willing to provide attention, data and opinion that will go a long way to drive quality customer service if the business will understand the true value of the customer.
How do you deal with customer Com¬plaints? Do you just consider such customers as troublesome ones? Do you investigate their complaints and quickly get back to them? Truth is; it is only customers that love you that will complain about poor services. Others will simply take a walk. Research has shown that one dis-satisfied customer will certain cost you eight others.
Customer preferences and tastes are dynamic. This must be closely monitored and responded to. The market and the entire business environment change with time. You must offer the type of product and service that is consistent with today’s demand. Otherwise, your offering will be out of tune with today’s realities.
Richard Branson (founder of Virgin group) says “if you wish to win in business, make sure the customer wins also”. You must ask the question about what customers’ needs your product/service are meeting? How do these products/services serve the customers’ needs? Branson says if you get into business only to make money, you won’t. But if you try to make a difference, you will find success.
Business success reflects in sales volume and profitability – sustainable ones at that. What the foregoing means is that you must not set profit target as an end in themselves. The mantra should be to “seek first to offer consistent and reliable customer service, and every other thing shall be added on to you”.
You have got to build sustainable relationships if you are to attract the greater share of customers’ value. There are two surest ways of doing this: Be personal and customize your services according to key customers’ needs and preferences.
Some businesses treat customers as mere nominal phenomena. They forget that customers are not just data as delivered by CRM vendors, but humans with both social and psychological features. Time is gone when we think that one-size-fits-all service models still work. There is need for personalized services. Bespoke services are the in-thing if you want to make a difference in the market place.
Most people make the mistake of focusing only on financial gains in every encounter with customers. Experts advise that in pitching for any sales contract or customer acquisition exercise, focus more on what the client stands to gain by buying your product or service, rather than beclouding your mind with the inordinate quest for profit.
In the bid to secure sales and profitability, most sales people fail to even under¬stand what the client’s pain-point is. This is a sure way to deliver the wrong solution. But if you pay attention to the major reason why the client is looking for a new service provider or product, you will gain insight into how best to serve the new client.
Just as no idea is a virgin, every new customer you have has been someone else’s customer before you. A satisfied customer will not only guarantee repeat buys, but will also give you referrals to friends and associates, thereby maximizing the life-time-value of such a customer.
This year, can you measure the sales and profits from existing customers? Remember we said in our last edition of this column that whatever goal that you set must be measured. Setting goals on customer satisfaction is crucial this year 2015, and the best way to measure this should be sales from existing customers, which includes repeat buys. You also need to track the value of referrals from existing customers.
NB: Mark Oguh, a Fellow of Institute of Chartered Accountants of Nigeria and a Financial Management Expert wrote in from St. Anthony’s Parish, Gbaja, Surulere, Lagos. Contact mark.oguh@ gmail.com
Image credit: Bazar
Fidelity Small Business Account has emerged Nigerian Catholic Reporter Product of the Year 2014.
The product was selected after a vigorous process involving Micro, Small and Medium Scale business owners in the Catholic Dioceses of Lagos, Abuja, Port Harcourt, Warri, Benin, Enugu, Owerri, Ibadan, Abeokuta, Katsina, Aba, Umuahia, Okigwe, Nsukka, Orlu, and Ahiara.
Fidelity Small Business Account gives businesses the hard start to success. It is Fidelity Bank Plc’s answer to the needs of growing businesses with peculiar solution for the Micro, Small and Medium Scale Enterprises. Fidelity Small Business Account offers attractive benefits such as zero COT, zero monthly charge for small beginners and free advice from professionals.
The Board of Economic News Associates Limited in collaboration with Nigerian Catholic Reporter (NCR) had embarked on this selection exercise to identify banks and other financial institution’s products that were outstanding in helping small businesses to succeed in year 2014.
The selected product is the one that has been adjudged to have pushed the boundaries of innovation, start-up and growth assistance in the micro, small and medium scale business units.
This is the reason Economic News Associates and Nigerian Catholic Reporter are giving this recognition to Fidelity Small Business Account and this reflects the strength of this product in this increasingly challenging operating environment.
• To give Micro Small and Medium enterprises (MSMEs) a flexible, low to zero cost opportunity to bank with us especially as they are very discerning and cost sensitive.
• To build a new generation of loyal small business customers
• To give MSMEs a flexible, low cost opportunity to run their business transactions through a bank so as to aid record keeping with the ultimate aim of making them more eligible and ready for loans and investment by interested parties.
• To create an additional avenue for financial inclusion as the product is amongst others, also aimed at bringing MSMEs who are currently outside the formal banking system into the formal banking system.
Key Features & Benefits of the FSBA
• Zero COT
• No fixed monthly charge for all categories
• Access to loans
• Unlimited number of withdrawals
• Access to website building and management services support (for eligible MSMEs)
• Access to company registration/incorporation support
• Minimum initial deposit of N10,000 and minimum daily balance of N10,000 for the Individual-Micro and Starter-Micro categories
• Access to free, periodic business management capacity building seminars (for eligible MSMEs)
• Access to knowledge materials on enterprise development
In the last edition of this magazine, we dedicated this column to explaining how best to institute financial discipline in the family and the need to work towards achieving and maintaining healthy financial state for the family.
In this month’s edition, we want to focus on the challenges in business and career – the geese that lay the golden eggs. Business is defined as an organization involved in the trading of goods, services or both to customers in exchange for other goods, services or money. There are different categories of businesses such as sole proprietorships, partnerships and corporations.
A sole proprietor is called a sole trader in common parlance. A sole trade is a one-man business. There is no legal distinction between the owner and the business. As a sole proprietor, you do not share profits and losses with anybody.
You are responsible for all the obligations arising from the operations of the business. You alone bear the risks and earn the rewards from that enterprise alone. Partnerships are associations of two or more entrepreneurs who decide to pool resources together with the sole purpose of sharing risks and rewards.
Partnerships are governed by partnership agreements which may be written or unwritten. Where there are no written agreements, such partnerships are governed by Partnership Act, 1890.
In some cases, profit sharing is the motivation for the arrangements. Profit sharing may be based on capital contribution ratio, business introduced by each partner, or any other specific understanding between the partners. There are general partnerships, limited partnerships and limited liability partnerships (LLP).
A general partnership is the most common form of association of two or more persons, created by agreements, proof of existence or estoppel, and the members are personally liable for any legal obligations or debts that the partnership may incur.
Limited partnership is similar to general partnership in that it is a partnership where in addition to general partners, there is one or more limited partners. While a limited partner may be liable to the obligations and debts incurred by the partnership, a limited partner in most cases has no management control function. He has no powers to commit the partnership and does not in any way act as its agent.
The general partners in a limited partnership are jointly and severally liable to the obligations and debts incurred by the firm, have management control functions and are agents of the partnership. In some texts, limited partners are referred to as “sleeping partners”.
Limited Liability Partnerships (LLP) are partnerships in which some or all the partners have limited liabilities. In such partnerships, the concept of “several and joint” liability does not exist. Limited liability partners are not responsible for the misconduct of other partners. This is a striking difference between LLPs and general partnerships.
Partnership associations are found largely among professional services firms such as Accountants, Lawyers, Estate Surveyors, Architects, and Medical Doctors, among others. It is not uncommon to find partnerships in other economic ventures like agric business, merchandizing and manufacturing concerns.
Sole proprietorships and partnerships are essential vehicles for economic development and social empowerment in a large economy like Nigeria. They serve as media for the trickling down of the benefits of economic growth and development. This advantage can only be realized in a balanced economy where there is an unquenchable commitment of the political leadership to achieve equitable income distribution.
Limited Liability companies or corporations are more complex set of business structures that dot the economic landscape. In simple language, limited liability means that the financial obligation of the members of that company is limited to a fixed amount. This amount may be the amount of investment made or allotted to each member whether paid for or not. It may be limited to the amount each stakeholder may have guaranteed in the event of difficulties.
Limited liability companies are considered as legal persons in their own right. This means that they separate entities from their owners. They have a right to sue and be sued. They have rights to acquire assets and incur liabilities. Consequently, they have legal powers to protect their rights to their assets and a duty to obey the laws of the land.
Apart from the provisions of the Companies Act, companies are also governed internally by the Article and memorandum of association. This document describes the business and the powers the business has to engage in specific economic activities. It details the powers of its directors to commit the company as well as the distribution of the ownership stake among its owners.
Most businesses (irrespective of their structures) are registered by the Corporate Affairs Commission (CAC) and issued registration certificates and number. A limited liability company is required to file annual returns yearly, maintain a registered office which may or may not be the same with its operational office, and appoint and retain a company secretary.
Official communications and legal documents emanating from the company are expected to emanate from the registered office, and any legal notice to the company will be addressed to the registered office. Filing of annual returns requires that the business accounts of the reporting entity will be audited by a firm of Chartered Accountants. The annual return is the only evidence that the business is still in operation.
Nigeria is full of entrepreneurial spirit. This is to say that many Nigerians have enterprise DNA. This may or may not be a response to the absence of paid job opportunities in the country due to our history of poor and corrupt leadership.
The poverty level in Nigeria is alarming. At the same time, this poverty level is not reflected on market prices of goods and services. The very few rich people brandish their wealth so loudly that the market reacts to the detriment of the largely poor…Get A Copy Of Our Magazine To Continue Reading.