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 Adedapo Adesanya
The Nigerian Exchange (NGX) Limited is seeking review of the controversial Capital Gains Tax increase, fearing it will chase away foreign investors from the country’s capital market.
Nigeria’s new tax regime, which takes effect from January 1, 2026, represents one of the most significant changes to Nigeria’s tax system in recent years.
Under the new rules, the flat 10 per cent Capital Gains Tax rate has been replaced by progressive income tax rates ranging from zero to 30 per cent, depending on an investor’s overall income or profit level while large corporate investors will see the top rate reduced to 25 per cent as part of a wider corporate tax reform.
The chief executive of NGX, Mr Jude Chiemeka, said in a Bloomberg interview in Kigali, Rwanda that there should be a “removal of the capital gains tax completely, or perhaps deferring it for five years.”
According to him, Nigeria, having a higher Capital Gains Tax, will make investors redirect asset allocation to frontier markets and “countries that have less tax.”
“From a capital flow perspective, we should be concerned because all these international portfolio managers that invest across frontier markets will certainly go to where the cost of investing is not so burdensome,” the CEO said, as per Bloomberg. “That is really the angle one will look at it from.”
Meanwhile, the policy has been defended by the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, who noted that the new tax will make investing in the capital market more attractive by reducing risks, promoting fairness, and simplifying compliance.
He noted that the framework allows investors to deduct legitimate costs such as brokerage fees, regulatory charges, realised capital losses, margin interest, and foreign exchange losses directly tied to investments, thereby ensuring that they are not taxed when operating at a loss.
Mr Oyedele also said the reforms introduced a more inclusive approach to taxation by exempting several categories of investors and transactions.
By Adedapo Adesanya
Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.
Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.
This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.
Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.
Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.
At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.
InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Dipo Olowookere
The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.
This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.
UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.
On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.
Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.
Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.
A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.
This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.
For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.
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