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Business News of Friday, 1 May 2020

Source: www.mynigeria.com

Why IROKO placed 28% of its Nigerian staff on unpaid leave

iROKOtv iROKOtv

After Access Bank announced its decision to lay off the bulk of its casual staff and introduce pay cuts for Senior management, iROKOtv plied a similar route.

Just recently, the entertainment streaming platform decided to place 28% of its Nigerian staff on unpaid leave.

Citing a range of issues from currency devaluation to the COVID19 pandemic and oil fortunes shrinking, Jason Njoku knew he had a difficult decision to make, as reported in his blog, Just Me. Jason Njoku.

Trouble began when the lockdowns were announced. His team was fully prepared but some people had to leave first and they were the contract staff.

Jason words: "When they announced the Lagos State lockdowns, IROKO wasn’t surprised. In fact, we had expected them and were fully prepared. The entire company had already gone into working from home mode.

"At the onset of that, we had the unfortunate yet immediate need to end the contracts of ~100 contract workers in our offline & outbound marketing teams. If we were going into Work from Home mode, it made little sense for a team organised essentially to be offline and out and about in the community, to continue. That would be the antithesis of our employee safety-first positioning."

Initially, it was good. Until insecurity reared its ugly head in places like Ogun and Lagos, reducing the need for premium entertainment.

"Our subscriber numbers started surging. We hit our highest daily addition within the first few days of the lockdown. It was interesting, as I thought people would start panic buying and conserving, they didn’t, that would come later.

"It seemed that consumer sentiment was pretty high, folks seemed to view the lockdown as some kind of additional holiday. Until the widespread and widely reported incidents of insecurity became a major issue, and then Buhari extended the lockdowns. Just like that, consumer sentiment/confidence seemed to collapse," the investor said.

Njoku who published the data of the subscription for all to see said Nigerian's subscription basis was good but not good enough to support the business. Nigerian numbers were dwindling and International numbers were surging.



The next decision was to grant 28% of his workers an indefinite leave- what the film magnate called a "furlough." The essence of a leave of absence is to allow the workers come back when things are better but still enjoy other benefits off the company in the process.

"Why did we ‘furlough’ rather than lay-off? Once you are laid off, that’s essentially the end, whereas I wanted to safeguard the business I also wanted to hedge my doom and gloom bet that things may not be as bad as I thought they were. So we retained the option of scaling up again pretty quickly etc. during the furlough period. Whilst employees would be unpaid, they were still eligible to use IROKO’s health insurance, which I think in these times, may be the difference between life or death," Jason explained.

Giving further details on the reasons for furloughing 28% of his staff, Jason said the devaluation of the naira was the major reason.



"The biggest challenge alongside the softening, okay collapse of, consumer confidence was the Naira devaluation. This hurt us last time around. Example; our AWS bills are $45k/month. Just like that. Things just got real for us. Devaluation = N360 –> N450. In April that went from N16.2m/mth to N20.25m/mth. Scaled the rest of 2020 = N32m per year newly budgeted expense (assuming N450). Our N3,000 annual subscription just went from $8.33 to $6.67. You see the problem?" the investor lamented.

Last Saturday, IROKO staff got "the mail."

"We will communicate over the next 24hrs those who will be affected. This decision was not taken lightly as we waited for the last 6 weeks monitoring the situation to see how we could improve and how we can mitigate it without any additional job losses. There appears to be no way. These are truly unprecedented times. What comes next is anybody’s guess.

"Those of us left need to get our collective heads down working as hard as we can to entertain African in this time. Whereas entertainment isn’t essential, it is important. Our entire purpose and existence is supposed to bring our members happiness and escape from day to day realities. The work we do has a dramatic impact on happiness. There is no better time to spread hope & happiness. Those of us fortunate to continue need to remember this as we go forward," the Nigerian entrepreneur argued in his defence.

iROKOtv and Access Bank are not the only ones facing difficulties, Hotels.ng is also affected though CEO, Mark Essien has not made a public statement yet, however he noted that the hospitality sector was greatly affected.