By the third quarter of every year, businesses usually start looking forward to what the next year holds for them in terms of generating revenue and being profitable. This period is used because it must have been clear to the owners and employees that the strategy crafted for the outgoing year has delivered what it was expected to bring or not. Thus, both the owners and employees are expected to put on their strategic thinking caps and come up with new strategies and tactics that will be used during the new year.
Like other markets in the world, Nigeria is a country that requires multiple strategies, not just a mono-strategy, due to unpredictable socioeconomic and political indicators. Businesses are affected both positively and negatively during the current fiscal year. In our experience, businesses are also forced to change their pricing strategies due to the irregular inflation rate.
With a few days to go until the year 2022, analysts have reported how micro and macroeconomic indices would equally force businesses and buyers to change their strategies and tactics during the year. Projected demand for goods and services and corporate performance in terms of revenue and profitability might not be realised because significant changes would occur in the political environment.
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Political activities in 2022 would be substantial because politicians and political parties would intensify their efforts towards winning various positions in 2023. Therefore, political changes would more likely surprise market expectations. Businesses that have products and services that connect with politics directly are likely to gain more than others. Beyond political interference, we also expect positive performance from a number of businesses in the utilities, transport, services, public administration, mining, manufacturing, construction, and agriculture sectors of the economy.
For the year 2021, it is clear that the federal government performed well in some areas of the economy and failed in others. Both the failure and the success could be attributed to the strategies and tactics employed. This is also applicable to the state governments. From the National Bureau of Statistics and the Debt Management Office, it is obvious that some states did well, while a large number of them failed to utilize available resources in their domains for huge revenue generation.
A local business newspaper reported that: “The National Bureau of Statistics (NBS) says the 36 states and the federal capital territory (FCT) recorded N849. 12 billion in internally generated revenue (IGR) in the first half of 2021. The figure represented a 39 percent increase year-on-year after the coronavirus pandemic impacted revenue generation. Amongst the Internally Generated Revenue categories, PAYE contributed the highest which amounted to N488.1 billion.
This was followed by revenue from MDAs which amounted to N173.56 billion. The least category was Road Tax with a contribution of N16.75 billion in the first half of 2021. Internally Generated Revenue by Zones in the first half of 2021 shows that the South-West zone recorded the highest revenue which amounted to N385.41 billion, followed by the South-South zone with N156.17 billion, while the North-East zone recorded the least internally generated revenue with N42.92 billion.”
Finding the Right Strategy
In line with these premises and outcomes of our analysis, local and foreign businesses need state strategy, not national strategy. A strategy that considers national characteristics alone would not win state markets. Likewise, a state strategy that failed to consider the individuality of towns and cities in each state would help businesses. For instance, it has been projected that “Nigeria will be dealing with cost-push inflation in 2022.”
This type of inflation is driven by an increase in wages and raw materials (such as petroleum), which pushes up the cost of production. There is evidence that the federal and state governments would increase salaries in 2022, but it is obvious that many citizens would face some challenges because of the government’s readiness to remove fuel subsidy This implies that businesses should devise a strategy to help them win over consumers and clients who will be hit harder. This is necessary because a good strategy should not only be relevant to a company’s situation. It must also be a fit for the internal and external factors.