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Nigerian businesses are facing enormous challenges due to macroeconomic issues. While sustaining its recovery from the 2016 recession, the Nigerian economy grew by 2.3% in 2019. This growth appears quite inadequate when compared to the annual population growth of between 2.6% and 3%.

Against the background of a challenging economic and business environment, Nigerian businesses have some key risks that they face in the course of their operations. The outbreak of the coronavirus pandemic has exacerbated some of the risks that these businesses face.


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Prior to the coronavirus outbreak, the highest concerns for Nigerian businesses across different sectors were the regulatory, foreign exchange volatility and fiscal & monetary policy.

The Covid-19 came with the risk of financial loss arising from the emergence of the disease and its impact on businesses. This risk is fueled largely by the health crisis, the lockdown measures (local and international) that have been put in place to address the pandemic and the apprehension of investors. Consequently, the Covid-19 impact on Nigerian businesses can be classified into 3 major channels and they are the supply channel, the demand channel and the financial channel.

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Professional service firm, KPMG, presented a report on Top Business Risks that Nigerian Business executives will face in 2020/2021, after conducting a quantitative survey. These risks are –

Here’s why your business needs a solid value proposition (PART 1), Top 10 business risks that Nigerian companies will face in 2020/2021 - Report 

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  • Regulatory Risk; This reflects the significant anxieties executives have continued to have over regulatory uncertainties as a result of increased regulatory scrutiny and sanctions within the country. This also includes uncertainty about the actions to be taken by regulators to cushion the impact of the coronavirus pandemic on the country. This ranges from tax laws to the minimum wage amendment act, and Police Trust Fund Act among others.
  • Fiscal & Monetary Risk; The fiscal policy risk has been elevated by the Covid-19 impact and a sharp drop in oil prices below the initial budget benchmark. This has led to a downward review of the FG 2020 budget benchmark and the expenditure pattern. This will lead to a reduction in economic activities and consumer spending. The risks and opportunities around monetary policies are also critical given the role CBN has to play in our fiscal tight environment. The channel through which the monetary policy directly impacts corporates is credit, specifically lending rates. 

(READ MORE: Local investors push Nigerian Stocks to post best monthly gains in over 2 years)

  • Foreign Exchange Volatility Risk; This carried extreme impact especially among multinational corporates for reasons like importation and capital repatriation.
    More than 40 SMEs in Lagos shut down due to economic crisis, Top 10 business risks that Nigerian companies will face in 2020/2021 - Report 

The oil price movement in 2020 is expected to remain weak due to low oil demand triggered by Covid-19 and supply glut.


In 2019, Nigeria’s foreign reserves depleted by $4.42 billion ending the year at $38 billion.  Presently, the reserve is down to around $35 billion and continuous free fall of the foreign reserve increases the risk of devaluation.

Against the background of the collapse of investor confidence in the wake of the Covid-19 crisis, global financial conditions, the principal determinant of capital flows to emerging and frontier markets have tightened.’

  • Cyber-security Risk; The business ecosystem is rapidly evolving across different sectors and economies. Advancement in digital technology has continued to enable business innovations and agility across the world. Cybersecurity directly affects the resilience of organisations, economy, and individual safety.

‘The volume, sophistication and the ever-involving nature of cyber-attacks in recent times, demands every organization to adopt innovative approaches to the management of cybersecurity risks’

  • Political Risk; In 2020, with the country now outside the electoral cycle, we do not expect the manifestation of this form of political risk which is defined by the prospects for the disruption of business on account of political instability, unlike last year.

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Another way that political risk impacts the business community are through policies that emanate from the political process. The risk arises when the political harmony leads to policies that are unfavourable for businesses because, in that event, the absence of a mitigating opposing political force to contest and debate such policies or to prevent their enactment and implementation is elevated’.

SMEs, business, COVID-19: Here’s how to manage remote teams for your startup, Top 10 business risks that Nigerian companies will face in 2020/2021 - Report 

  • Technology Infrastructure Risk; This risk examines the inadequate information technology infrastructure and ERP system to effectively and efficiently support the current and future needs of businesses.

‘This risk can be considered the highest in the financial sector despite huge investments by banks into upgrading and acquiring new digital technology tools like cloud computing, artificial intelligence, and diverse software. Technology, media, and telecommunication industry consider this risk as number 2 risk.’

  • Customer Attrition RiskThis risk examines the loss of key customers and patronage resulting from perceived or actual inability to meet customers’ expectations. Customers expect organizations to keep up with their demands and will often compare their experiences across sectors using the best experience as the baseline for all others.

Additionally, the shape of the economic landscape over the last few years has made customers more sensitive to the quality of experience they receive and their perception of value for money. There are higher attrition risk and decline in brand loyalty in some sectors’.

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  • Talent Shortage/Attrition Risk; This risk examines the level and quality of skills, knowledge, and experience required to achieve business objectives and/or sustain growth.

Top 10 business risks that Nigerian companies will face in 2020/2021 - Report 

 ‘Changing skills in demand, increased talent mobility, shifting employee expectations and the integration of human and intelligent automation are reinventing the workplace’.  The 2 key factors that contribute to widening talent gap are quality of education and talent migration/brain drain of highly skilled Nigerians to countries like the US, Canada, UK, Australia.

  • Business Continuity RiskOrganizations are faced with several threats of potentially disruptive and unexpected adverse developments in their operating environment, including pandemic, wars, terrorist attacks. This risk can impact on the profitability and cash flow for an organization due to an immediate decline of revenue and ultimately the going concern of a business if not adequately managed.
  • Governance Risk; This risk examines the ineffective frameworks, processes, or practices by which the organization is controlled and directed.

In today’s corporate world, a sound corporate governance system has become a strong determinant of companies’ economic fortune, operational sustainability, and longevity. It also sets the tone for the relationship between the board of directors, management, employees, and other stakeholders including the regulators. It also provides a framework for transparency, fairness, and accountability leading to profit maximization, promoting investors’ confidence, and ultimately creating jobs.

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