Feature/OPED
Outsourcing and Subcontracting: Insights and Opportunities for SMEs in a Pandemic
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: dr***********@***il.com, for any questions, reactions, and comments.
Feature/OPED
What Does Nigeria’s $51bn Reserves Milestone Mean if Most New Foreign Money Can Leave Quickly?
Nigeria’s foreign reserves have climbed to about $51 billion, a decade-plus high, according to the Central Bank of Nigeria (CBN). EBC Financial Group (EBC) notes that this reflects stronger investor confidence, but the second half may show whether it holds, as the build rests on three cyclical drivers: oil earnings, short-term foreign money and a narrowing official-to-street naira gap.
Reserves rose from about $32 billion in April 2024, during a dollar shortage, to about $51 billion now, near the CBN’s target. Much came from two cyclical sources, strong oil earnings and money chasing high-yielding naira assets, so EBC expects the pace to slow or reverse. Fitch Ratings, a major international credit rating agency, expects a marginal decline to about $47 billion by the end of 2026, citing higher spending and external pressures.
David Precious, Senior Market Analyst at EBC Financial Group, said, “Nigeria’s reserve build is real but may not be durable yet, because nearly all of the new money is the kind that can leave quickly. Of the $10.37 billion that came in over the first quarter, the overwhelming majority was short-term portfolio funds rather than long-term investment, so a shift in oil prices, global interest rates or confidence in the naira might pull a large part of it straight back out.”
Most New Money Can Still Leave Quickly
The composition of the foreign inflows explains the caution over how long the build can last. The country attracted $10.37 billion in foreign investment in the first quarter of 2026, up 83.83 per cent year-on-year, according to the National Bureau of Statistics (NBS). Of that, $9.86 billion or 95.09 per cent, was portfolio money, largely short-term naira debt such as Treasury bills that investors can sell at the next auction, while foreign direct investment, the long-term kind that builds factories and jobs, was $135.08 million, or 1.30 per cent. Put simply, of each dollar coming in, about 95 cents can leave quickly, and barely one cent stays.
That money supports reserves while it stays. Dollars brought in to buy naira assets add to market supply, letting the CBN hold more reserves and steady the naira. It leaves when conditions change. Nigeria earns most of its export dollars from oil and gas, so lower oil prices mean fewer dollars, and as a member of the Organisation of the Petroleum Exporting Countries (OPEC), it cannot simply produce more, output capped by quota and reduced by theft and ageing fields. Higher global interest rates draw money toward safer returns abroad, and a weakening naira prompts investors to sell early. When oil fell in 2016 and 2020, foreign investors withdrew and could not convert naira to dollars as supply dried up, leaving the CBN to clear more than $7 billion in trapped obligations into 2024.
The Oil Boost is No Longer Certain
Oil looked like a dependable source of the dollars behind the reserves only months ago. Earlier in 2026, concern over disruption around the Strait of Hormuz lifted crude prices, and stronger receipts flowed in, with crude oil export earnings of $8.11 billion in the first quarter in the CBN’s balance-of-payments data. That support is now easing. The tension has subsided, and Brent traded near $72 on June 29, down about 24 per cent over the month, back to pre-conflict levels. With the price boost gone and output constrained, reserves are more exposed, leaning on non-oil earnings and investor patience rather than oil.
The Naira Still Trades at Two Prices
The naira has traded at two prices, an official rate and a higher parallel-market rate, and closing that gap into one trusted price is what many investors might watch most. Before committing funds, they may want assurance they can convert naira to dollars at a fair rate when they exit, and a wide gap revives the fear of being trapped that lingers from earlier shortages. The gap has narrowed to roughly N20 to N30, with the CBN’s official rate near N1,380 per dollar on June 26 against parallel-market quotes around N1,400. The International Monetary Fund (IMF) 2026 Article IV review urged Nigeria to depend less on this fast-moving portfolio money and to keep phasing out its multiple exchange-rate practices. The CBN’s Foreign Exchange Manual, in force from 1 June, is intended to make the market clearer, though such rules build confidence only once investors can freely trade dollars at the posted rate.
What could Make the Build Durable
A few signs that may show the build turning durable include a smaller gap between the official and street naira rates, more long-term foreign investment, and steadier oil earnings. A gap that stays small, now roughly N20 to N30, may mean investors trust the official rate and no longer need the street market. A clear rise in foreign direct investment, only $135 million last quarter against $9.86 billion of short-term money, might mean lasting capital is replacing funds that can leave at the next auction. Oil earnings that hold up, rather than sliding from the low $70s, should help keep reserves steady, since oil and gas bring in most of Nigeria’s export dollars.
“Reserves built on money chasing high yields can fall as fast as they rose, as they did after the last two oil shocks, when investors left, and the CBN spent years clearing a foreign-exchange backlog,” Precious added. “What holds through a downturn is slower money, direct investment, steady oil and non-oil export earnings and one credible naira rate, and that is the shift Nigeria has yet to make.”
By Olajumoke Bello
Across Nigeria, small and medium enterprises remain the backbone of economic activity. They drive trade, create jobs, and sustain millions of livelihoods. Yet, despite their importance, many SMEs continue to operate below their full potential due to persistent structural challenges.
Access to finance remains one of the most cited constraints. However, the issue today goes beyond the availability of capital. Many businesses struggle with financial readiness, weak documentation, and limited understanding of what lenders require. This often leads to missed opportunities, even when funding options exist.
At the same time, SMEs face gaps in market access and visibility. Business owners operate in highly localised environments, with limited exposure to broader networks that can unlock partnerships, new markets, and growth opportunities. This isolation can constrain scalability and reduce long-term competitiveness.
Equally important is the capability gap. Many entrepreneurs grow through resilience and experience but lack structured knowledge on critical areas such as financial management, export readiness, and digital adoption. Without this, even well-capitalised businesses can struggle to sustain growth.
These challenges point to a clear need for a more practical and integrated approach to SME support. It is no longer sufficient to offer standalone solutions. SMEs require ecosystems that combine knowledge, access, and direct engagement in ways that reflect how they actually operate.
A key shift is the move from centralised interventions to localised engagement. SMEs are deeply influenced by their immediate environments, whether markets, industrial clusters, or trade corridors. Solutions must therefore be brought closer to where these businesses function, allowing for more relevant support and stronger relationships.
Another important shift is from awareness to action. Business owners do not only need information; they need insights that they can apply immediately. This includes understanding how to structure their finances, how to access trade opportunities, and how to connect with the right partners to scale their operations.
There is also a growing need for continuity. Many SME-focused initiatives deliver strong initial impact but lack follow-through. For support to be effective, it must extend beyond one-off engagements into sustained relationships, with clear pathways for onboarding, advisory, and growth.
For financial institutions, this presents both responsibility and an opportunity. Supporting SMEs now requires moving beyond transactional banking to deeper partnership models. It requires understanding businesses at a granular level and co-creating solutions that evolve with their needs.
At Stanbic IBTC, this perspective continues to shape our approach to SME development. Our focus is on delivering practical support that translates into real business outcomes, helping enterprises grow, compete, and contribute more meaningfully to the economy.
As part of this commitment, we are extending our SME engagement to the regions through the Nigeria Business Summit Regional Tour. The tour will take structured, on-ground activations into key commercial hubs, where SMEs can access funding guidance, trade insights, advisory support, and direct engagement with financial experts.
The regional tour will take place across five strategic locations, bringing these solutions closer to business owners in Aba, Onitsha, Ibadan and Kano.
This approach reflects an important principle. When support moves closer to businesses and when solutions are delivered in ways that are practical and continuous, SMEs are better positioned to grow sustainably. In turn, this strengthens not only individual enterprises but the broader economy.
Olajumoke Bello is the Head of Enterprise Banking at Stanbic IBTC Bank
By Winston Osuchukwu
The average Nigerian borrower is widely considered high-risk – a claim repeated in credit committees, priced into retail loans, and largely treated as settled fact. Every credit market accepts that an individual loan may not be repaid; this is ordinary, priced risk. The high-risk claim, however, is applied to whole segments – the informal trader, the gig economy earner whose income is steady but split across several accounts, the remote worker paid by an overseas client into a fintech FX wallet. What the assessment establishes is not whether they are likely to repay, but how they fit into an arbitrary segment. Having spent years building decisioning systems for this market, my thesis is a specific one: “high-risk” does not mean “no credit” – it simply requires that the lender embrace alternative datasets to price the risk appropriately.
This is not a criticism of the institutions that built their frameworks around collateral and documentation; those were rational responses to the tools available at the time. When data is scarce, prudence means defaulting to the status quo. The limitation is not that this approach is wrong, but that it leaves a blind spot – excluding fundamentally sound borrowers whose economic lives simply are not captured on the bank’s ledger. A market trader who has moved consistent, growing volumes of cash through mobile money for three years is not, in any meaningful sense, unknowable. Their financial behaviour is observable and patterned; it simply occurs outside the traditional banking system, rendering it invisible to conventional underwriting.
This is the gap technology is now positioned to close – not by replacing institutional judgment, but by augmenting it. When AI-driven analysis is applied rigorously to the financial behaviour these borrowers generate, a far more complete picture of their repayment ability emerges – and a meaningful share presents a risk profile that compares favourably with segments the traditional system has long considered safe. The “high-risk” label, applied broadly to an entire category of borrower, was never a risk pricing tool so much as the limit of what the available tools could see.
For banks, this is the opportunity to extend capital with confidence beyond the borrowers who fit their stringent criteria. Nigerian banks are highly liquid; the constraint on credit growth has rarely been capital, but the ability to assess and price the borrowers who sit outside the traditional file. Close that gap, and the whole ecosystem strengthens: banks grow their loan books into segments they have long wanted to serve, and the real economy gets the capital it needs to expand.
This is precisely what we focus on at Mathesis Analytics: building AI-powered credit decisioning that gives lenders a fuller, more defensible picture of the individuals long excluded as high-risk when they were simply misjudged. The Nigerian credit gap has never been a non-lendable population problem, but one of incomplete visibility. By unifying varied data sources and partnering with the institutions that hold the capital and scale to move the market, we translate out-of-ecosystem behaviour into reliable, bank-grade risk scores. Closing this gap is one of the clearest, highest-leverage opportunities in Nigerian financial services today.
Winston Osuchukwu is the founder & CEO of Mathesis Analytics
