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Outsourcing and Subcontracting: Insights and Opportunities for SMEs in a Pandemic

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Timi Olubiyi Outsourcing and Subcontracting

By Timi Olubiyi, PhD

Numerous factors can make businesses decide to outsource or even engage a sub-contractor in their day-to-day activities.

Results of many surveys indicate that some of the key reasons for this are the competence of the third party, cost reduction purposes, reaction to government policies, and unpredictable business climate, among others.

However, the current reality of the harsh environment, the novel Coronavirus (COVID-19) pandemic, high economic pressures and the craving for business survival lay at the heart of the need for outsourcing or subcontracting as a strategy to stem the tides of these challenges.

Outsourcing is primarily a cost-efficient solution and cost-cutting measure where regular business tasks are completed by individuals or businesses outside of the firm.

Subcontracting, on the other hand, (subcontractors, co-contractors, or partners) is when a company hires another individual or company to complete a specific specialized task that sometimes typically cannot be done internally.

While the practice of outsourcing and subcontracting are not new, the popularity especially in a developing and emerging economy like Nigeria is largely due to costs of labour, operations and production.

Around the country, there are lots of critics of outsourcing/subcontracting due to associated risks and the attendant negative impacts.

Distinctively the practices can easily be noticed around the country, chiefly with the increasing use of contract staff, in many sectors of the economy. It has spread across industries, from manufacturing to services industries, and other occupations, including construction, banking, oil and gas, telecommunications among others.

However, under the employment regulation, a contract staff is perceived as an unemployed person; who is supposed to take a temporary job while looking for a permanent role.

Conversely, in Nigeria, some contract staff usually remain as far as 10-12 years or more on the role. This negates the campaign against unemployment and poverty reduction initiatives by the government.

It can be said that the attraction to subcontracting or outsourcing practices in business operations is mainly because companies do not necessarily have to make provisions for workers benefits such as compensation, pension, health, wardrobe, holiday, or even sick leave.

Nevertheless, whether the consequences for subcontracting or outsourcing are good or bad, lots of surveys conducted in the recent decade have shown that the practice improves business profitability and drastically reduces the cost of doing business.

However, much is still desirable in the area of regulations, engagement contracts, protection, and formality by government and policymakers.

Agreeably, the whole idea of the practice is to reduce business costs by entrusting part or all not too sensitive roles to an outsourcing or subcontracting company or individual.

Besides, business owners, operators, and entrepreneurs often use outsourcing and subcontracting interchangeably; however, in reality, the two practices are quite different and distinct.

Empirically, outsourcing and subcontracting differ greatly from the descriptions. On the contrary, from the business perspective, and in my view, subcontracting and outsourcing have similar objectives which are that both strategies are adopted in a business to save time and cost, despite being two different terms.

Both reduce the cost of service and production which in turn affect sale prices, operation expenses, labour cost, and more importantly it improves competitiveness when multiple businesses have the same goods or services.

This led me to conclude that the difference between outsourcing and subcontracting is very indirect. But the primary difference lies in the amount of control a company has over the work process and the length of time of engagement in my opinion.

Significantly, subcontracting does not involve permanently allocating out entire jobs or departments within a firm and the job is usually agreed upon on a contract basis.

On the other hand, outsourcing is governed by a contract stipulating the services expected and the payment terms that may be fixed-priced for the duration of the contract or based on some sort of pay-per-use/service arrangement.

Common business operations that can be outsourced or subcontracted are training, recruiting, facility management, security, information technology operations, research, software, and network services, and so on.

With the pandemic and the new normal, it is evident that to stay competitive business organisations particularly Small and Medium-sized Enterprises (SMEs) need to review their business process and consider outsourcing or subcontracting were necessary to maintain a competitive edge and customer satisfaction.

Currently, businesses need to focus more attention on their core functions and on increasing their productivity. In fact, high-cost business activities can be outsourced to specialists and professionals to keep operating expenses, payroll, and overhead low.

More so, with these practices, freeing up time to focus on value-added and the main services of the business can easily be achieved.

For instance, to meet up accounting functions in any small business, companies do not necessarily need to employ the services of a sit-in chartered accountant to achieve the stipulated duties of an experienced accountant, outsourcing can be leveraged upon to achieve the task for a quarterly or annual retainership fee. This usually covers the bookkeeping, and management, and maintenance of records or software if need be.

In conclusion, to grow your practice or business, it is essential to consider subcontracting or outsourcing as a strategy at this time because of the aforementioned and harsh current realities.

Functions such as compliance tasks, that is tax matters (withholding, company income tax, VAT, and PAYE), technology and software requirements, preparation of accounts to meet regulatory framework, and stipulated guidelines can be conveniently outsourced.

Accounting is one of the most common areas where small businesses choose to outsource for effectiveness, compliance, and to main an adequate business structure, this you can also key into.

Handing the accounting task off to experts has shown to decrease costs and increase compliance. Likewise, the non-sensitive functions like social media marketing, software, facility management particularly cleaning can be outsourced to reduce operating expenses going forward. Good luck!

How may you obtain advice or further information on the article?

Dr Timi Olubiyi is an Entrepreneurship and Small Business Management expert with a PhD in Business Administration. He is a prolific investment coach, business engineer, Chartered Member of the Chartered Institute for Securities and Investment (CISI), and a financial literacy specialist. He can be reached on the Twitter handle @drtimiolubiyi and via email: drtimiolubiyi@gmail.com, for any questions, reactions, and comments.

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The Price of Fake Life at This Time!

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Timi Olubiyi Price of Fake Life

By Timi Olubiyi, PhD

In Lagos, Nigeria, like other African cities, Johannesburg, Cairo, and Nairobi, among others, the pressure to appear rich has reached disturbing heights. Amid a backdrop of rapid urbanization and economic uncertainty, social media platforms have only intensified this pressure, making it feel as though success is synonymous with material wealth.

From sleek cars on the streets of Lekki, Victoria Island, or Ikejaand flashy social media posts make it hard to ignore the overwhelming desire to flaunt wealth in Lagos Nigeria.

In recent time, the extravagant parties and designer clothes, the pursuit of outwardly projecting affluence has become an obsession, leaving many trapped in a cycle of debt and despair. The unfortunate paradox here is that it’s difficult for a broke person to keep up the appearance of affluence for long, while a rich person, paradoxically, can play broke every day of the week without breaking a sweat.

But the problem runs much deeper than just appearances; it has become a silent epidemic that has wreaked havoc on the mental and physical well-being of countless individuals. This pressure to appear wealthy, fueled by the desire for social validation, has now crossed dangerous thresholds, often leading to extreme consequences.

With Nigeria facing one of its highest inflation rates in decades, the economic landscape has made it increasingly difficult for many people to simply make ends meet. A devalued Naira, skyrocketing prices of goods, and unpredictable economic policies are forcing individuals to make impossible choices. For the young, the hungry, and the vulnerable, social media platforms such as Instagram and Twitter have become breeding grounds for comparison, feeding into the illusion that wealth is easily attainable.

What most people fail to see, however, is that the “rich” lifestyle they covet is often unattainable for anyone not already possessing considerable resources. The consequence? A generation of individuals who feel forced to live beyond their means, often going into debt or risking their lives to maintain a false image of success.

Even worse, the financial pressure to appear rich can often spiral into even darker consequences. In recent years, Lagos, Ilorin and many parts of Nigeria have seen a surge in ritual killings, kidnapping, and other terrible crimes often linked to the dangerous desire to accumulate wealth, or at least the appearance of it.

These violent crimes are often perpetrated by those who, due to lack of opportunities, have found themselves cornered by an economic system that rewards only those with visible wealth, no matter the means.

This disturbing trend feeds directly into the cycle of social media glorification, where a brazen display of wealth often gathers admiration, and in some cases, even envy. This desire to appear rich without any meaningful livelihood has led to a breeding ground for criminality and social vices.

Young people, especially, are finding themselves caught in this dangerous web, where they feel the need to flaunt wealth they do not have in order to gain respect and social media validation. The pressure is unbearable, and the consequences can be life-altering. As inflation continues to rise, the temptation to adopt a fake life becomes even more pronounced, with people willing to do anything whether fraudulent or violent to escape the crushing grip of financial instability.

Those who truly understand the value of money often prefer simplicity, investing in long-term growth rather than short-term gratification. It’s a lesson that the majority in Lagos and other Nigerian cities need to learn: living within your means, focusing on long-term financial growth, and avoiding the temptation to project affluence for approval will lead to more sustainable happiness.

Financial stability does not come from showing off; it comes from sound financial decisions, investments, and the ability to live within one’s means. Instead of chasing a lifestyle that is unattainable for most, focus on building something that lasts. Seek opportunities to learn about personal finance, invest in skills, and explore sustainable business ideas.

Consider putting money into assets that appreciate over time, such as real estate, stocks, or even a side hustle that offers long-term returns. Building a meaningful life also means finding value beyond material possessions. Pursue personal growth, invest in relationships, prioritize health, and learn to appreciate the things that truly bring happiness family, knowledge, experiences, and personal fulfillment.

In conclusion, while Lagos and other Nigerian cities continue to be hotbeds for the illusion of wealth, it is crucial that we shift the narrative. Let’s break the cycle, resist the pressures to conform, and begin making thoughtful, sustainable choices that can lead to true success, one built on a life of purpose. Only then can we break free from the chains of societal expectation and find lasting happiness, without risking everything in the pursuit of a fake life. The key to navigating this period is by adopting a meaningful private life and investing in things that matter, not in what the world sees. Good Luck!

How may you obtain advice or further information on the article? 

Dr Timi Olubiyi is an Entrepreneurship and Business Management expert with a PhD in Business Administration from Babcock University, Nigeria. He is a prolific investment coach, columnist, author, adviser, seasoned scholar, Chartered Member of the Chartered Institute for Securities & Investment (CISI), a member of the Institute of Directors, and a Securities and Exchange Commission (SEC)-registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: drtimiolubiyi@gmail.com, for any questions, reactions, and comments.

The opinions expressed in this article are those of the author, Dr. Timi Olubiyi and do not necessarily reflect the opinions of others.

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A Call for Global Action as Ethiopia Hosts Climate Summit

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ethiopia

By Atiklit Atnafu Naramo

Ethiopia, a nation with over 3,000 years of civilisation and home to more than 80 ethnic groups, is set to host the second Africa Climate Summit (ACS2) from September 8 to 10,2025, in its capital, Addis Ababa.

The country, often referred to as the Land of Origin owing to its status as the cradle of human ancestry, and as the second most populous and geostrategic nation in Africa, plays a significant role on the continent.

Addis Ababa is emerging as an important diplomatic hub, frequently hosting various international conferences and summits. This trend is enhancing the city’s reputation as a centre for global dialogue and collaboration.

In recent years, the growing concern over climate trends and their potential impacts on both the environment and the socio-economic fabric of societies has positioned climate change as a critical topic of global discourse. Before delving into the causes, evidence, potential impacts, and adaptations related to climate change, it is essential to first understand what climate change entails.

Climate change is a pervasive global threat that has been unfolding over an extended period, with its manifestations posing significant risks to the stability of societies, as well as to natural and managed ecosystems. The rise in ambient temperatures and the alteration of related environmental processes are directly linked to increasing concentrations of anthropogenic greenhouse gases (GHGs) in the atmosphere.

While climate change can result from natural internal processes or external forces, its persistent anthropogenic influences have become increasingly evident. In the 21st century, issues such as migration, terrorism, and the proliferation of weapons of mass destruction have emerged as critical challenges that transcend national borders. Among these, climate change stands out as one of the most formidable challenges humanity faces in its relationship with nature. The complexity of climate issues necessitates a collective global response, emphasizing the urgent need for international collaboration and action to address this pressing crisis.

As a nation committed to addressing the pressing of climate change, Ethiopia has aligned its efforts with the Paris Agreement’s goals of limiting the global average temperature increase to well below 2 °C above pre-industrial levels, and striving to limit the increase to 1.5 °C. The Ethiopian government recognizes the devastating impacts of climate change on its people, environment, and economy, and is committed to taking immediate global action to enhance climate resilience and reduce greenhouse gas (GHG) emissions.

Ethiopia’s long-term low emissions development strategy (LT-LEDS) aims for net-zero emissions by 2050, setting an ambitious example for others to follow. This strategy complements Ethiopia’s Climate Resilience and Green Economy strategy, which was outlined in the Ten-Year Development Plan: A Pathway to Prosperity (2021-2030). This plan aims for an annual economic growth rate of 10.2% while prioritizing the establishment of a climate-resilient green economy. It includes specific targets to enhance Ethiopia’s capacity for reducing greenhouse gas emissions from 92.7 MtCO2e to 162.3 MtCO2e by 2030.

Despite these ambitious goals, current projections indicate that emissions may rise to between 197-220 MtCO2e by 2030, representing a 62-81% increase compared to 2010 levels. In response to this challenge, Ethiopia has taken significant steps under leadership of PM Abiy Ahimed (PhD) such as green legacy initiatives planting billion of trees every year, a large-scale reforestation program targeting 700 million trees in 2025.  banning the import of all internal combustion engine vehicles in 2024, becoming the first country to do so. Additionally, policies have been introduced to incentivize electric vehicle (EV) adoption, including tax exemptions and reduced import tariffs for locally assembled EVs.

The forthcoming ACS2 will be co-convened by the Ethiopian government and the African Union Commission under the theme “Accelerating Global Climate Solutions: Financing for Africa’s Resilient and Green Development.” The summit will showcase Africa-led climate solutions and focus on unlocking climate finance, positioning the continent as a key player in the global climate response.

The urgency of the climate crisis cannot be overstated; 2024 is projected to be the hottest year on record, with 2025 likely to surpass it. African nations, despite contributing less than 4% of global greenhouse gas emissions, are disproportionately affected by climate change, often spending over 5% of their GDP on climate-related responses. This diverts critical resources from essential development sectors such as health and education.

The ACS2 aims to bring together 45+ African heads of state, policy makers, scholars and different stake holders, to spotlight Africa’s leadership and innovation in combating the climate crisis. It seeks to establish a united African voice ahead of COP30, emphasizing principles of multilateralism, equity, and respect for international rights frameworks. The summit will champion partnerships that promote nature-centred investments, innovative solutions, and sustainable practices.

Ethiopia calls upon the international community to support Africa in creating green energy solutions and building climate-resilient economies. The ACS2 will serve as a platform for mobilizing political and financial action to address the climate crisis, advocating for reforms in the global financial system that reflect Africa’s realities and priorities, particularly in renewable energy access and climate adaptation.

In conclusion, the ACS2 represents a pivotal opportunity for African nations to assert their leadership in global climate governance, fostering a future that prioritizes sustainability, resilience, and equitable development.

 ACS2 will also deepen South–South cooperation and foster a new era of global partnerships rooted in equity, innovation, and African-led solutions. The long-term impact will be a strengthened continental position that not only influences COP30 but alsoinstitutionalizes Africa’s leadership in global climate governance, through collective efforts and international support, Africa can catalyse transformative change in the global response to climate change.

Climate change has no borders our solution should not either.

Atiklit Atnafu Naramo is the Second Secretary at the Ethiopia Embassy in New Delhi

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Nigeria’s Vanishing Savings: $10bn Subsidy Removed, Yet Reserves Stuck at $41bn

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FX Reserves

By Blaise Udunze 

When the Nigerian government scrapped the decades-old fuel subsidy in 2023, it promised relief for the nation’s bleeding finances. Nearly $10 billion was to be freed up annually, and by scrapping it, President Bola Tinubu’s administration projected that the fiscal space created could be channeled into education, infrastructure, social investment, and healthcare.

The International Monetary Fund (IMF) and the World Bank praised the move as a sign of long-awaited economic discipline. But the move, championed as a patriotic sacrifice, came with painful consequences: fuel prices quintupled, increasing by about 514 percent from N175 in May 2023 to N900 as of today; inflation is now at 21.88 percent, and the cost of living hit historic highs, inflicting more pain on the already impoverished Nigerians.

But one year later, one critical figure exposes a troubling paradox: Nigeria’s Federal Reserve remains stuck at around $41.046 billion, almost the same level as before subsidy removal. For many Nigerians, the obvious question is, where did the money go?

The Numbers Don’t Add Up

Officially, subsidy removal was meant to ease fiscal pressure and rebuild foreign reserves. Yet, the reserves have barely moved, even as citizens endure economic hardship.

Independent economists argue that the supposed “savings” are being quietly swallowed by corruption, inefficiency, and shadowy financial obligations.

“The government keeps announcing that billions are saved, but the reserves don’t reflect it, and the people don’t feel it,” says Abuja-based analyst Dr. Nnamdi Okeke. “It raises the suspicion that subsidy savings have simply disappeared into the same black hole of mismanagement.”

Debt and Dollar Drain

One explanation offered by officials is debt servicing, which consumes a staggering portion of national revenue. But critics argue that this alone cannot account for the stagnant reserves. Instead, they point to:

–       Opaque fuel import contracts that continue despite subsidy removal, with Nigeria still importing refined petroleum.

–       Unaccounted forex interventions by the Central Bank of Nigeria, where billions vanish into stabilizing the naira with little transparency.

But recently, the CBN governor, Yemi Cardoso who spoke at the spring meetings of the IMF and the World Bank, disclosed that the naira is performing independently, as the apex bank’s key monetary policies salvaged the naira from devaluation and not because the foreign reserves were used to defend it.

–       Leakages and corruption within ministries and agencies that fail to publish clear records of subsidy savings and allocations.

–       Shoddy revenue-sharing formulas that become “loot-sharing formulas.” Part of the tragedy is that while the revenue generated is expected to be channeled to federal reserves, it is often diverted into corrupt networks; the elite share billions; the people face poor roads, underfunded hospitals, failing schools, and mass unemployment.

The government has increasingly turned to borrowing as its lifeline for development.

From highways and railways to schools, hospitals, and social investment schemes, government loans -both domestic and foreign as the engine behind many of the country’s most ambitious projects. With the rising debt profile, the question again is, where did the subsidy removal fund go?

“There’s no transparency,” says an insider at the Ministry of Finance, speaking anonymously. “The books are not open. Nigerians are told savings exist, but there’s no breakdown, no audit, and no accountability. Meanwhile, reserves are flatlined.”

Citizens Pay, Elites Gain

The removal of subsidies has hit citizens hardest. Transport fares have doubled, food prices are suffocating households, and SMEs are shutting down. Yet, elite profiteers in oil importation, government contracts, and currency speculation continue to thrive.

“It feels like the sacrifice of millions is subsidizing corruption, not the economy,” laments Port Harcourt-based teacher Chika Nwankwo. “We tightened our belts, but the politicians keep widening theirs.”

Lessons from other Crude Oil-Producing Nations

Other nations that are yet to fully remove subsidies, like Saudi Arabia and Indonesia, but have significant reforms underway, have steadily grown their foreign reserves to the tune of $410 billion and $153 billion, respectively. These countries paired the reform with clear reinvestment into social welfare and infrastructure, making the benefits visible to offset the economic impact on vulnerable populations and ensure broader public support. Indonesia, for instance, expanded social assistance programs and shifted towards direct household subsidies, while Saudi Arabia focused on providing alternative energy sources and other measures to support its citizens.

In Nigeria, however, the absence of transparency and targeted relief has turned reform into a source of anger and suspicion.

The Auditor General’s office has not published a comprehensive account of how subsidy savings were used. Civil society groups are now demanding independent investigations, fearing that the billions have been misappropriated.

FAAC Allocations: Higher Revenue, Same Mismanagement

To be fair, one area where subsidy removal is visible is in the Federation Account Allocation Committee (FAAC) disbursements. Since 2023, allocations to federal, state, and local governments have significantly increased, with record revenues shared across the three tiers of government.

But this “windfall” has not translated into reserve growth or tangible improvements in citizens’ lives. Instead, fiscal leakages, wasteful spending, and reckless recurrent expenditures have absorbed much of the extra revenue.

Analysts warn that without discipline, the increased FAAC allocations only fuel the same old cycle: more money in government hands, but little to show in infrastructure, education, healthcare, or poverty reduction.

A Hollow Reform?

For many experts, the stagnant reserves signal a deeper rot: Nigeria’s economy is not suffering from a lack of revenue but from a failure of governance.

Savings exist on paper, but corruption, mismanagement, and opaque financial practices erase them before they reach the people.

“The problem isn’t subsidy removal; it’s what happens after,” says Dr. Okeke. “We removed the subsidy, but we didn’t remove the thieves.”

Conclusion

The government asked Nigerians to endure pain for long-term gain. But with $10 billion supposedly saved, reserves still stuck at $41 billion, and FAAC allocations hitting record highs, the gain is nowhere in sight.

Until transparency replaces opacity and accountability trumps corruption, subsidy removal risks becoming just another chapter in Nigeria’s long history of economic betrayal. Higher revenues without prudent management only deepen reckless expenditure, and Nigerians continue to pay the price.

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