Success Ajilore
Introduction
Business as a by-product of entrepreneurship has caused a transformative shift in the lives of those who are bold to front it, and by extension, the domicile economies where these businesses gain thresholds. Nigeria, home to Africa’s largest economy, boasts of an impressive range of investments from both the public and private sectors, with a diversification chart catering to sectors like oil and gas, e-commerce, manufacturing, banking and finance, technology, agriculture, education, and a whole lot more. Despite being an economy rife with investments and diversification, it struggles with strongholds for sustainability. Businesses build up today, stay for a few more years, only to collapse after a short period, indicating a clear case of short-term objectives.
Unbeknownst to business owners, short-term investments are quick triggers for economic volatility, which remains unhealthy for developing economies like Nigeria. The urge for quick returns, especially in a system with loose regulations, allows these short-term businesses to thrive and vanish, returning employees to being unemployed and jeopardizing communities reliant on the service of these businesses. This article is therefore set to address how business analysts who are specialists in the analysis of business with the use of data-driven decisions can nip Nigeria’s short-term business syndrome. The article would further unfurl strategies to establish long-term sustainable business strategies that would serve as tools for business analysts to advise companies and organizations, especially SMEs, to keep standing in business as a core of fulfilling professional requirements of the business analysis industry.
The Problem of Short-Term Thinking in Nigerian Businesses
The issue of short-termism is a global concern business but more pronounced in developing economies like Nigeria. There’s a handful of businesses that plunge into the market to compete with peers just to satisfy temporary benefits. These benefits dance along the lines of immediate profit earnings, market dominance, and brand recognition. While these benefits are quite interesting, they come at the expense of long-term plans. McKinsey’s study revealed that companies that aren’t entirely bent on short-term benefits are likely to gain more market dominance in the long run and attain revenue growth of 47% or more. This study buttressed the importance of businesses on a long-term stance, and even if the market becomes too turbulent, there’s a higher possibility of still being relevant.
Short-termism in business is triggered by several factors, which vary from location to location. However, in Nigeria, it’s exacerbated by the factors below:
Economic instability: Nigeria’s economy is always in the stables of instability, where the country’s major export, crude oil, has its price fluctuating, further ushering in other spikes like inflation, currency depreciation, and increased rates of unemployment. These underlying issues cause economic instability, which often compel business owners to shoot their shots at short-term businesses in a bid to survive amidst hardship.
Investor pressure: Most Nigerian businesses are sponsored by external investors who often set unfavourable profit timelines. This situation results in extreme pressure, which pushes business owners to meet investors’ demands; hence, short-term plans are made to avoid the withdrawal of investors.
Regulatory barriers: The regulatory framework guiding businesses in Nigeria is somewhat hectic and offers little or no incentives for long-term planning. This discourages long-term business plans as business owners get tired overtime of balancing profits with regulatory compliance. An example in this regard is the existence of policies that discourage the utilization of renewable energy, which kills the urge for sustainability.
The International Finance Corporation (IFC), in one of their reports, cited that short-term thinking in business might not result in any benefit, hence making it detrimental, noting that if it’s constantly prioritized, growth and operational efficiency would be nowhere to be found. Business analysts are, therefore, charged to expound the dangers of short-termism to scare off the idea in the minds of business owners and advocate for long-term sustainable business practices.
The Role of Business Analysts in Strategic Planning
Strategic planning follows a series of intentional activities and undertakings that steer businesses towards sustainable long-term standing. Through strategic planning, business analysts can execute their role in solving the short-term thinking problem. They are expected to provide invaluable insights that would guide businesses to opt for long-term goals by using data to analyze market trends and customer behaviour and assessing risk factors. These cues can help companies maintain relevance and stay competitive over a long time, not just for present-day fulfillment but also for futuristic relevance. Business analysts should dig deep into business operations, ensuring that operational processes are fashioned in productive patterns, producing results that could be repeated for a long while.
Business analysts can employ methodologies such as financial modeling with core elements like historical financial data, assumptions, and projections for business owners to see reasons why they need to keep progressing. Coupled with methodologies like scenario analysis and risk management, business analysts can give room for better understanding of long-term business and its impact. These methodologies might not work immediately; hence, tactical approaches like patience and steadfastness must come into play.
Moreover, business analysts with their professional prowess are at the better end to inform business owners about their financial potential if business is sustained, and this is in line with the findings of Harvard Business Review, which suggest that companies with strong environmental, social, and governance (ESG) practices witness high revenue growth by 4.8%, against their counterparts with no practice.
Under the purview of business analysts, the following sustainable strategies can be adopted for Nigerian long-term business standing:
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Workforce Development:
The investment of human capital is a strategy that is often swept under the carpet, forgetting its effective returns. Once businesses undertake long-term hiring and employee investment by funding advanced courses and professional training, it can undoubtedly foster the growth of a business. This way, there would be a structure composed of an advanced and loyal workforce who would work passionately to see the growth of the business. In support of this claim, the 2020 report made by Deloitte clarified that companies with high employee investment yield a 92% growth and innovation rate.
Adopting Renewable Energy:
Nigerian businesses, especially large corporations, fully rely on fossil fuels and gas for business operations, and this results in financial downtime. To avert this, businesses can turn to adopting renewable energy such as solar or wind, which are capable of reducing cost and promoting global earth sustainability goals. This approach is augmented by the support of the Nigerian government Economic Sustainability Plan (ESP), where it points businesses to leverage the incentives of renewable energy for long-term gain. To prove the efficacy of this, PwC in their report showed that businesses investing in renewable energy are liable for an 8% reduction of operational cost, leading to long-term practice. Also, practiced by Dangote Cement, the adoption of renewable energy reduced cost and promoted earth-friendly standards, which resulted in an increase in company revenue by 14% over three years, despite economic challenges.
Integrating Circular Economy Practices:
Circular economy practices involving the reusing and recycling of resources is another strategy that business analysts can suggest to businesses for achieving long-term results. Activities like this point to benefits such as optimizing resources and minimizing waste, particularly applicable in the manufacturing sector where waste can be reduced up to 30%. This promotes the culture of saving for business efficiency, indicating the need for long-term sustainability.
Financial Forecasting and Risk Management:
As business analysts, part of executing standard professional duty includes finance forecasting, and this can be done with a proper market evaluation in order to allow businesses to make informed decisions. This market analysis captures risks, challenges, and opportunities with short-term plans. It offers more suitable practices for the long term as it’s in Nigeria’s tech sector, where forecasting models have led to a 25% increase in profit and operational efficiency as compared to their counterparts without forecasting models.
Challenges Faced by Business Analysts in Promoting Sustainability
Long-term business thinking, with no doubt, can be easily fuelled by business analysts, but in the midst of their undertakings often come some challenges. They include:
- Resistance to Change: Nigerian business owners remain rigid with small-minded decisions, such that they are hostile to any idea or effort trying to make them think otherwise or reconsider prioritizing long-term investments. This is often the result of constant hardship in the economy with no glimmer of hope.
- Lack of Data: Many Nigerian businesses, particularly small and medium enterprises (SMEs), are financially struggling to raise funds for long-term strategies like financial forecasting. And with lack of data and insights, the urge to build further is hindered.
- Regulatory Barriers: Nigeria’s laws and policies are only favourable to big enterprises whose profit margins cover for numerous compliance measures, unlike other struggling enterprises on the other side of the divide without adequate resources to advance and to comply with the strategies of business analysts.
However, there are opportunities Nigerian businesses can seize for growth, especially as global markets consider ESG factors to attract foreign investment and collaboration that eventually enables long-term market standing. Also, sectors like agriculture can adopt circular economy practices to reduce waste and increase productivity, while the technology sector can leverage renewable energy to trim down operational costs and fatten profit.
Conclusion
The prevalence of short-term thinking businesses in Nigeria devastates and stifles economic growth. However, business analysts and their exceptional expertise can help revert this trend by promoting sustainable strategies aimed at curbing short-termism and converting these businesses to run on a long-term scale. Business analysts should continually strive to promote sustainable strategies for the benefits of the overall economic health of the country to boast in strength, resilience, and vitality, ensuring that businesses are fit to withstand future challenges and opportunities if they surface.
Success Ajilore is a highly seasoned accounting professional and business analyst with over eleven years of experience, specialising in enhancing operational efficiency, policy improvement, governance, and process optimization of various companies in Nigeria.
