Economy
The Growth and Growth of Family-Owned Businesses: the Two Key Pillars of Success
By Kyra Motley and Chelsea Turner
Africa has seen an exponential growth of family-owned businesses (FOBs) in recent years, aligned with a fast-growing ultra-high-net-worth population – a trend that is set to continue on an upward trajectory.
This is particularly true of Nigeria. Nigeria has the largest population in Africa and is a landscape where family businesses are prominent and contribute significantly to the country’s economy. Here, FOBs contribute over $200 billion to the Nigerian economy and one out of two Nigerian businesses is a family business.
FOBs are typically resilient, exemplified by their resistance to recent inflationary pressures experienced in the Nigerian economy. Having experienced a number of challenges as they become established, family businesses are now ripe for growth, pending the stabilisation of the economic climate in the region.
Nigeria is one of the recently coined “Big 5” wealth markets in Africa, which together hold over 90% of the continent’s billionaires, and Africa’s population of high-net-worth individuals is predicted to rise by 42% in the next decade.
Therefore, at a countrywide level, the importance of these businesses to the economy cannot be underestimated, nor their wider contributions to the success of surrounding communities at a local level.
Good governance: a critical pillar for sustainable success
Given family businesses are a staple to the economy, it is therefore cause for concern that only 58% have a form of governance structure, and only 6% have dispute resolution procedures in place. Furthermore, in 2021, only 25% had succession plans and 9% had a family constitution, figures which are unlikely to have shifted notably in this time.
Family businesses must equip themselves with a governance framework to enable the business to progress further. A family constitution can ensure a clear goal for the family business and protect continuity for the business that spans beyond some of the family members themselves. This pre-emptive planning can provide beneficial opportunities for family members to settle into their roles before the practical elements of their positions are required. Another useful tool is shareholder agreements, which can ensure clarity on how the success of the business is maintained, providing peace of mind for families who may be concerned about the challenges to come and changes to follow.
Implementing a forward-thinking governance framework will benefit younger generations, who may themselves progress and lead the business forward. These generations may require specific skills or qualifications to enable them to lead with confidence.
These considerations are inherently important given it is an unfortunate fact that many of these family businesses, which are so important to Africa’s economy, do not manage to survive beyond the third generation.
Securing success through effective succession
The importance of effective succession planning should not be underestimated in combatting the challenges family businesses will undoubtedly encounter, and ensuring there is continued prosperity and success for these businesses and the region as a whole.
The challenges faced by family businesses are not inherently distinct from the challenges non-family businesses face. Family businesses do not hold a unique immunity to the challenges of economic instability, inflation, corruption, and terrorism that exist. These features are also not distinct to Nigeria and are faced by many other businesses globally.
However, in conjunction with these adverse influences, family businesses have a multitude of other considerations. Family businesses, just like every other family, will have disputes between family members. However, these disputes are susceptible to being strained, and complications can arise from contrasting management perspectives, concerns for the business, and dealing with business demands.
Furthermore, families are not fixed, instead altering substantially with time, growing with new generations, and coping with the loss of older generations. Legacy is an important aspect to consider, to withstand the changes and fluctuations of modern times, but most importantly so businesses can thrive through these changes.
The prospect of succession planning can be an aspect that family businesses avoid, yet this can cause significant instability – planning ahead can eradicate some of these fears and threats. Focusing too heavily on the present, without a lens for future generations, can result in these hard efforts being unrealised in the future.
In the unfortunate event someone in the family business becomes unable to continue running the business, there should be a plan in place that clearly sets out the steps that should be taken – these may involve drafting Wills for family members, or potentially establishing a trust structure to ensure shareholdings are passed efficiently.
These considerations are often postponed, yet incapacity and death can, unfortunately, strike suddenly and preparing for moments such as these hold the key to the business’s success and survival.
Ultimately, family businesses have a critical role to play in the Nigerian economy and with the right approaches and frameworks in place, they have the potential to propel their established success forward for generations to come.
Kyra Motley is a Partner at Boodle Hatfield, and Chelsea Turner is a Trainee Solicitor at Boodle Hatfield
Chelsea Turner
By Aduragbemi Omiyale
Stanbic IBTC Nominees Limited has been commended for its critical role in the Nigerian capital market, especially for safely keeping non-pension assets.
For the past 30 years, the company has provided custody services in Nigeria, and to celebrate this milestone, it was honoured with a closing gong ceremony at the Nigerian Exchange (NGX) Limited.
The milestone reflects the institution’s longstanding contribution to investor confidence and the continued development of the nation’s capital market.
Welcoming the organisation to Customs Street, the chief executive of NGX, Mr Jude Chiemeka, commended its three decades of custody services, recognising the firm’s role in strengthening investor confidence and enhancing market safety.
He highlighted NGX’s continued investment in technology, which he said has enabled over 2.6 million active retail investors to trade on the platform.
“Technology continues to be at the heart of our strategy,” Mr Chiemeka said, noting that a vibrant and secure marketplace remains essential to investor participation.
In his remarks, the chief executive of Stanbic IBTC Bank, Mr Wole Adeniyi, thanked NGX for its continued partnership, saying, “We are thrilled to be here today, commemorating not just our journey, but also the remarkable progress made by the NGX.”
He noted that the collaboration between the two institutions has continued to drive innovation, product development and thought leadership across the industry.
“We are dedicated to raising standards within the industry as part of Standard Bank Group. Our focus remains driving the growth and development of Nigeria’s capital market. Indeed, Nigeria is our home, and we drive her growth,” he added.
The chief executive of Stanbic IBTC Nominees, Mr Babatunde Majiyagbe, reflected on the evolution of the business from the era of physical share certificates stored in fireproof vaults to today’s fully dematerialised market, where securities are held electronically.
“We started with holding custody of physical certificates, investing in vaults with fire and dust protection, so those certificates could be presented when needed,” Mr Majiyagbe recalled, noting that while the market has evolved significantly, the commitment to service excellence has remained unchanged.
“What has endeared a lot of investors to the market is that they are dealing with a reputable organisation like ours. We are high on good governance, and high on technology, making the process of investment in Nigeria easier,” he said.
Mr Majiyagbe added that Stanbic IBTC Nominees’ role goes beyond just attracting foreign portfolio investment (FPI) and capital.
“For us, it’s not just about FPI; but also about the value we have delivered over 30 years. Stanbic IBTC Nominees continue to be the eyes and ears of foreign and domestic investors in our market,” he stated.
Mr Majiyagbe added that the firm has also supported the development of market rules and safeguards, noting: “We have, over the years, advocated for growth, change, transformation and stability in our capability to provide services to domestic and foreign portfolio investors continuously.”
The deputy chief executive of Stanbic IBTC Bank and Chairman of Stanbic IBTC Nominees, Mrs Bunmi Dayo-Olagunju, said the next phase of growth will build on the institution’s legacy of trust.
“For 30 years, we’ve delivered growth, security, and client confidence. That’s why investors have stayed with us and why new business keeps coming.
“Our target for this new phase of growth is simple: build on that trust and ride the acceleration in Nigeria’s economic activity.
“With custody, settlement, capital raise, and advisory integrated on one platform, we’re not just a custodian. We’re an infrastructure. We look forward to building on that trust for generations to come, serving both local and international clients. Hopefully, we’ll have another 100 years of maintaining that trust with local and international markets,” Mrs Dayo-Olagunju said.
By Dipo Olowookere
The positive market breadth index recorded by the Nigerian Exchange (NGX) Limited could not save it from further claws of the bears on Friday.
The major performance indicators, the All-Share Index (ASI) and the market capitalisation, depreciated by 0.03 per cent and 0.01 per cent, respectively.
The ASI was down by 78.58 points to 245,283.68 points from the previous day’s 245,362.26 points, and the market capitalisation receded by N14 billion to N158.326 trillion from Thursday’s N158.340 trillion.
Business Post reports that market participants traded 943.0 million equities valued at N46.7 billion in 55,480 deals compared with the 2.1 billion equities worth N230.8 billion transacted in 48,231 deals a day earlier.
This implied that the trading volume shrank by 55.10 per cent, the trading value reduced by 79.77 per cent, and the number of deals surged by 15.03 per cent.
An analysis of the sectoral performance showed that the consumer goods space crashed by 0.60 per cent and the energy index went down by 0.09 per cent.
However, the banking sector improved by 1.90 per cent, the insurance counter expanded by 0.75 per cent, and the industrial goods segment soared by 0.10 per cent.
There were 33 appreciating stocks and 29 depreciating stocks during the last trading session of the week and month of July, indicating bullish investor sentiment despite the poor outcome.
CAP lost 9.97 per cent to trade at N128.25, Veritas Kapital depreciated by 9.49 per cent to N1.43, Vitafoam Nigeria slipped by 7.70 per cent to N179.80, The Initiates dipped by 6.67 per cent to N28.00, and NAHCO crashed by 6.63 per cent to N155.00.
Conversely, Eterna gained 10.00 per cent to sell for N33.00, Consolidated Hallmark also grew by 10.00 per cent to N8.36, McNichols expanded by 9.52 per cent to N5.75, Honeywell Flour increased by 8.96 per cent to N18.25, and First Holdco chalked up 8.00 per cent to quote at N129.55.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its bullish run on Friday, July 31, by 0.99 per cent.
This raised the NASD Security Index (NSI) by 43.54 points to 4,431.71 points from 4,388.17 points, and lifted the market capitalisation by N26.13 billion to N2.659 trillion from N2.633 trillion.
The growth came amid a significant decline in the activity level, as the volume of securities decreased by 73.0 per cent to 690,990 units from 2.6 million units, the value of securities slid by 15.0 per cent to N75.0 million from the preceding session’s N88.3 million, and the number of deals contracted by 31.6 per cent to 26 deals from the 38 deals recorded a day earlier.
The most active stock by value on a year-to-date basis remained Great Nigeria Insurance (GNI) Plc, with a turnover of 3.4 billion units valued at N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and Central Securities Clearing System (CSCS) Plc with 76.6 million units exchanged for N5.5 billion.
The most active stock by volume on a year-to-date basis was also GNI Plc, with the sale of 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units traded for N415.7 million.
Investor sentiment was bullish yesterday after a positive market breadth index triggered by five price gainers and two price losers, led by 11 Plc, which gave up N14.99 to close at N225.01 per share versus the previous day’s N240.00 per share, and MRS Oil Plc, which shed N14.55 to settle at N132.00 per unit versus N146.55 per unit.
However, Nipco Plc gained N41.50 to sell at N456.50 per share compared with the preceding session’s N415.00 per share, FrieslandCampina Wamco Nigeria Plc appreciated by N12.93 to N147.93 per unit from N135.00 per unit, Nitrox Industrial Gases Plc improved by N1.00 to N20.00 per share from N19.00 per share, CSCS Plc soared by 54 Kobo to N102.00 per unit from N101.46 per unit, and Industrial and General Insurance (IGI) Plc jumped by 1 Kobo to 50 Kobo per share from 49 Kobo per share.
