As we look for nascent signs of an economic recovery, we sought the views of Chief Financial Officers (CFOs) on the outlook for their businesses in 2017
The KPMG Chief Financial Officers (CFO) Forum is a platform for discussing issues of common interest to CFOs and creating an avenue for CFOs to interact as a group with relevant government regulators and policy makers.
The Annual CFO Outlook Survey is one of our levers for achieving this objective.
The Nigerian economy has been adversely affected by external shocks, in particular, a fall in the global price of crude oil, compounded by the over-reliance on crude sales as the main source of foreign exchange earnings in a highly import-dependent economy.
As we look for nascent signs of an economic recovery, we sought the views of CFOs on the outlook for their businesses in 2017, their current strategies for cost and risk management and what they believe the priorities of government should be for the creation of an enabling environment.
In terms of outlook, respondents were generally less optimistic about the prospects for growth in 2017 when compared to 2016. The top three ‘stay awake’ issues for our respondents are foreign currency availability and exchange rate volatility, operational challenges exacerbated by weak infrastructure and inconsistent government policies. These are indeed tough times and the corporate results released thus far are reflective of the difficulties being experienced. It is interesting to note however that the same respondents expressed significantly more optimism when asked about growth prospects over a two to three year horizon. This medium term optimism may be indicative of expectations of an imminent upturn in the economy possibly based on the cumulative impact of turnaround measures being put in place by the Federal Government. Policy consistency and a strong focus on implementation by Government will go a long way in providing the certainty needed to improve and sustain business confidence.
In dealing with the present challenges, CFOs have had to adopt various strategies to ensure their businesses survive these times. Most of these strategies are focused on improving service delivery, strengthening customer acquisition and loyalty and redesigning operations to improve efficiency and reduce costs. Our respondents reported that risk management is a key priority for them with the top three risks being currency risk, liquidity risk and credit risk. For sustainable results, it is important that company’s risk management strategies are based on a well thought through financial risk management framework rather than a ‘seat of the pants’ approach. CFOs must use risk management to improve results, optimally allocate resources, protect organisational assets and achieve growth. The ability to seize business opportunities is often heavily dependent on the ability of the CFO and other members of the C-suite to identify, assess and manage risks.
Nigeria is currently ranked 169 among 190 economies in the `Ease of doing business’ index published by the World Bank. Raising Nigeria’s ranking on the index is a stated priority of Government. The ease of doing business parameters that our respondents believe require priority action from Government are; getting electricity, getting credit, starting a business and trading across borders. Our respondents were also clear that in dealing with the current challenges, the most important priorities for Government should be infrastructure development and foreign exchange policy review.
Our gratitude goes to all the CFOs who took out time out of their very busy schedules to complete the survey. Your contributions to this year’s survey have been instructive and quite revealing. There is no doubt that the skills and experiences required of CFOs today is very different from those that were required five years ago and these skill requirements will continue to evolve.
We hope you find our 2017 CFO Outlook Survey Report insightful and replete with insights that can be adapted in various forms for the benefit of your organisations.
Where there are specific themes and messages you want to explore further, I urge you to get in touch with any of the contacts listed on the last page of this Report. For us at KPMG, we remain committed to providing a platform for articulating critical issues of concern to CFOs and actively participating in the dialogue between CFOs and Government.
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