Nigeria’s outsourcing firms are carrying risk they don’t control: CEO
ACCRA, GHANA — Across corporate Nigeria, many personnel outsourcing contracts now contain sweeping indemnity clauses requiring service providers to absorb nearly every operational loss — fraud, negligence, customer claims, regulatory exposure, and reputational damage — regardless of whether those losses arose from provider failures or gaps in the client’s own operations.
Dr. Olufemi Ogunlowo, who wrote the article published in Business Day, is the CEO of Strategic Outsourcing Limited, calls the contradiction unsustainable.
Indemnity clauses treat outsourcers as operational risk absorbers
Clients typically control contract terms, impose liability structures, and run reverse-bidding processes to drive costs as low as possible — then require the resulting provider to deliver quality service, manage employment obligations, and absorb heavy liability exposure on narrow margins.
Personnel outsourcing firms recruit, screen, deploy, administer payroll, and maintain employment compliance — but they do not control the workflows, approval structures, transaction limits, or oversight processes that determine whether a deployed worker’s actions result in a business loss.
“The same provider pressured to quote the lowest possible fee is frequently expected to carry the broadest possible risk,” said Dr. Olufemi Ogunlowo, CEO of Strategic Outsourcing Limited.
Responsibility must follow control, not bargaining power
A fraudulent banking transaction rarely succeeds through a single actor — it passes through approval layers, supervisors, control officers, system validations, and reconciliation processes, all designed and supervised by the client organization, not the outsourcing firm.
ILO Convention 181, Article 12, establishes the relevant framework: responsibilities between employment agencies and user enterprises should be “determined and allocated” in accordance with national law and practice — a standard of allocation, not blanket risk transfer.
Better-structured contracts already exist, limiting indemnity to direct losses from proven fraud, dishonesty, negligence, or misconduct attributable to deployed personnel, while explicitly excluding losses from systemic operational failures or contributory client negligence.
When outsourcing firms carry undefined liability while competing on the lowest price, the outcome is predictable: margins shrink, insurance becomes unavailable, quality suffers, and responsible operators are structurally disadvantaged against providers willing to accept any terms.
“Strong industries are not built by squeezing providers until they become fragile. They are built through fair pricing, clear responsibilities, shared governance, and balanced contracts,” Ogunlowo said.
Nigeria’s personnel outsourcing sector supports critical functions across banking, telecommunications, manufacturing, fintech, logistics, and retail — making the sustainability of its commercial foundation a market-wide concern.
For global buyers sourcing from Nigerian providers and for Nigerian operators competing to serve them, the indemnity question is whether the sector can retain the quality operators enterprise contracts require. A market that structurally disadvantages responsible providers produces the fragility those clauses are supposed to prevent.
