BusinessDay 01 Jul 2019

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news you can trust I **monDAY 01 july 2019 I vol. 15, no 343 I N300

g

Buy

Market

Sell

$-N 358.00 361.50 £-N 458.00 464.50 €-N 404.00 411.00

($/N)

he performance of Nigeria’s beleaguered electricity Distribution Companies (DisCos) is getting worse, with negative consequences for the sector, and posing systemic risk to the economy as a whole.

An analysis of the 2017 financial statements of 10 DisCos shows that the combined accumulated losses or retained earnings hit -N713.63 billion in the period under review, from -N288.85 billion as at December 2016.

Retained earnings are a firm’s total profits over time less dividends issued to stockholders. A retained earnings deficit, also called an accumulated deficit, happens when cumulative losses are greater

Continues on page 50

3M

360.74 306.90

0.04 11.65

NGUS sep 18 2019 361.03

Debt owed to NBET/TCN hits N1.1trn Poses systemic risk to economy 2017 Financial Statement Summary

ABUJA (2018)

N235 N221 N172 Billion Billion Billion

CUMULATIVE LOSSES

NET WORKING CAPITAL (DEFICIT)

BENIN

N88 N48 N7 Billion Billion Billion IBADAN

N127 N97 N54 Billion Billion Billion

KADUNA

N116 N95 N78 Billion Billion Billion

EKO

ENUGU

N65 N65 N14 Billion Billion Billion

N124 N73 N51 Billion Billion Billion JOS

IKEJA

N109 N157 N251 Billion Billion Billion

5Y

-0.05

0.00

12.36

14.03

NGUS dec 24 2019 361.48

10 Y -0.13

20 Y 0.03

14.32

14.48

NGUS jul 29 2020 362.53

@

g

Banks lure retail customers with cheap dollar sales

ELECTRICITY DISTRIBUTION COMPANIES (DISCOs) PAYABLES TO NBET/TCN

6M

g

www.

Nigeria’s broken electricity market worsens as DisCos lose N713bn since privatisation T

BALA AUGIE, ISAAC ANYAOGU & DIPO OLADEHINDE

Spot ($/N)

I&E FX Window CBN Official Rate Currency Futures

fgn bonds

Treasury bills

N63 N43 N17 Billion Billion Billion

KANO

PORT HARCOURT

N82 N84 N37 Billion Billion Billion

N111 N72 N97 Billion Billion Billion

Infographics: David Ibemere

OLUFIKAYO OWOEYE

E

MARKETS

mmanuel Obinna was surprised when his bank sent an email offering forex at a lower competitive rate.

“The bank even sent me a text informing me that I can walk Continues on page 50

Inside Airtel Africa shares fall after raising $750m P. 2

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news Airtel Africa shares fall after raising $750m ENDURANCE OKAFOR

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harti Airtel Ltd’s Africa unit plunged in London trading on Friday after raising about $750 million in an initial public offering (IPO), making it among the worst debuts on European exchanges this year.

Airtel Africa Ltd dropped as much as 16 percent to 67 pence per share, matching the first-day decline for OssDsign AB last month.

AirtelAfricasaidithadpriced the offering at 80 per share.

Airtel Africa may be suffering from broader investor unease about telecom carriers in emerging markets, said Ally McKinnon, a fund manager at Scottish Investment Trust plc who didn’t participate in the IPO. Phone companies were popular during the investment boom in so-called BRIC stocks – from Brazil, Russia, India and China – but they can be at risk

of state intervention, McKinnon said, citing Johannesburgbased MTN Group Ltd’s battle against multibillion-dollar claims by Nigerian authorities over taxes and fines.

“Onceyou’vegotthenetwork built, you’re vulnerable because you’ve got assets in the country, you’reabigcompanythatmakes money, or makes cash flow at least,” McKinnon said.

Alastair Jones, an analyst at New Street Research, had flagged concerns about Airtel Africa in the run-up to the IPO tied to the company’s network investment and its exposure to Nigeria – given MTN’s troubles there – as well as Airtel’s slightly weaker market position relative to rivals.

“Clearly it’s a more difficult market at the moment for African telcos,” said Jones, who doesn’t have a rating on Airtel, on Friday. “The regulatory risk around the region is elevated given what has happened with MTN over the last few years.”

Porous borders, low farm productivity mock Nigeria’s ban on agriculture imports CALEB OJEWALE

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orousborders,poorfarm yields, and difficulty in conducting business are just a few of the numerous factors that combine to make mockery of Nigeria’s ban on agricultural imports.

Nigeria, it appears, is glossing over its inadequacies and inefficiency in producing good quality agricultural goods at competitive prices by banning agricultural imports in a move the government sees as a protection of the local economy.

The government says it is resolved to “deal with smuggling and dumping of goods in Nigeria”. Godwin Emefiele, governor of the Central Bank (CBN), reportedly said Nigeria was very good at making brilliant economic policies “but we have identified smugglers and dumpers as those who sabotage these policies”.

However, despite various restrictions and ‘bans’, these ‘banned’ commodities continue to sell in Nigeria, even when prices are increased owing to the difficulties. This reflects the huge demand yet absolute lack of local capacity to meet up.

According to the World Trade Organisation (WTO), if a company exports a product at a price lower than the price it usually charges on its own home market, it is said to be “dumping” the product. But the WTO Agreement does not regulate the actions of companies engaged in “dumping”. Its focus is on how governments can or cannot react to dumping – it disciplines anti-dumping actions, and it is often called the “Anti-dumping Agreement”.

To say imported agricul-

tural goods are being dumped in Nigeria is likely far from the truth, as it is yet to be established that any of the imports is sold below prices of their home countries. The main challenge, however, is that production in Nigeria is not competitive. The problem, it appears, is here at home and not with those countries that lowered barriers to productivity, a factor policymakers in Nigeria are either oblivious of or deliberately ignore.

“Many of the countries where these things are coming from have built an infrastructure that makes it a lot cheaper (to produce). The cost of doing business in those countries is far lower,” said Emmanuel Ijewere, vice president, Nigeria Agribusiness Group (NABG), in a phone interview. “They have electricity, good roads and so on, so they already have an advantage over us.”

Nigeria has a deficit across every type of food produce. In fact, the Agriculture Promotion Policy released in 2016 showed a 20.14 million metric-tonne deficit across 13 major crops and 60 million poultry bird deficit. Three years later, with the rapidly growing population, this deficit would have increased substantially.

Bridging the deficit in local demand and supply has got some boost in recent times, with the increasing interest in agriculture, necessitated partly by the need for people to secure new forms of economic empowerment. However, the challenges of producing in the right quantities and competitive prices remain the same.

•Continues online at www.businessday.ng www.businessday.ng

Umaru Ibrahim (r), MD/CEO, Nigeria Deposit Insurance Corporation (NDIC), leads a delegation of the corporation’s executive management on a courtesy visit on Senate President Ahmed Ibrahim Lawan (l).

Insurers embrace new capital requirements, engage NAICOM for palliatives …set to improve dividend pay-out, media spending MODESTUS ANAESORONYE

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he earlier apprehension and shock that greeted the announcement of a newminimumpaidup share capital requirement for insurance and reinsurance companies in Nigeria by the National Insurance Commission (NAICOM) has faded.

Currently, operators are

looking at the positives and what the impact will be on the growth and development of the industry when the exercise is concluded, particularly as the wind of recapitalisation is sweeping across markets and the financial services industry in Africa.

Realising the need for greater capacity having witnessed capital erosion over time as a result of foreign exchange

weakening, industry players say they are poised to comply.

Eddie Efekoha, chairman, Insurance Industry Consultative Council (IICC), said on Friday that the wind of recapitalisation was sweeping across markets, including Ghana, Morocco, Kenya and even the banking industry in Nigeria.

He pointed out that all of this has been as a result of weakened capital over foreign

exchange crisis and inability of operating companies to pay good dividend to shareholders, saying NAICOM should be commended for being proactive in kick-starting the exercise in Nigeria’s insurance industry.

“If the exchange rate has weakened, that means we do not have the same power as we had in 2007 when we

Continues on page 50

Opacity in judicial appointments responsible for loss of confidence in judges, says Justice Reform Project DIPO OLADEHINDE

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group known as the Justice Reform Project says the current opaque system of judicial appointments in the country defeats legitimate public interest in the quality of judges.

The group, comprising mostly Senior Advocates of Nigeria (SAN), said the “unceremonious removal” of Walter Onnoghen, former chief justice of Nigeria (CJN), was a signal of lack of self-regulating mechanisms which has affected the confidence of Nigerian judges.

In a letter addressed to President Muhammadu Buhari, which it said “follows the public announcement that Mr. President has accepted notice of retirement from the former Chief Justice, Justice Walter Onnoghen, and your Excellency intends shortly to nominate an additional five justices to the nation’s Supreme Court”, the Justice Reform Project said Onnoghen’s trial was the clearest signal in recent times of a raging crisis in the administration of justice in Nigeria, and the collapse of confidence in the individuals who occupy

highest judicial offices.

“There can be little contest that the absence of effective self-regulating mechanisms for the legal profession has played a major role in the loss of confidence in the nation’s judiciary,” Justice Reform Project said in the letter copied to Vice President Yemi Osinbajo, the Attorney General of the Federation, among others.

“Nigeria has long been a peculiar jurisdiction when it comes to the appointment of Judges and Justices to superior courts of record,” it said.

The Justice Reform Project, in the letter signed by 34 members including Yemi Candide-Johnson, SAN, convener, Yemi Adamolekun, Adeniyi Adegbonmire, SAN, Olatunde Adejuyigbe, SAN, Olufunke Adekoya, SAN, Seni M. Adio, SAN, among others, noted that certainly, not every lawyer with 15 years of practice experience and with an otherwise clean record is fit for the Supreme Court even if he/she is ‘qualified’.

It is an office that demands to be occupied by persons of the highest character and intellectual capability, it said.

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The Justice Reform Project lamented the prevalence of lobbying and favouritism in judicial appointments at the cost of merit.

“These and other changes appear not to have had much effect and the extant practice is that Federal/States’ Judicial Service Commissions gather nominees from a range of covert sponsors. The criteria and processes by which these nominees are selected are hidden from public scrutiny. Judicial appointment is processed in a certainlevelofsecrecythateasily lends itself to manifest abuse,” the Justice Reform Project said.

The group urged the President to instruct the current Attorney- General to issue an opinion as to the quality and character of candidatesforhighjudicialoffice andtheprincipleuponwhichthe President will act in making such appointment.

It advised that the memo be delivered to the National Judicial Commission (NJC) as well as all heads of courts to signpost the Presidency’s commitment to the rule of law and to challenge them to meet his criteria.

The Justice Reform Project recommended that President

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Buhari confirm absent measures to secure legitimacy and public acceptance of judicial appointments as the President will not act on any recommendation from NJC. “The possibility that Mr. President remains bound to a widely discredited selection processwithoutanyaccounting for its past failures or a progressive plan for its redemption is worrisome at this most critical junctureofunprecedentedcrisis of confidence in the nation’s judicial machinery,” it said.

“A successful judiciary is one whose members are appointed following a rigorous process and adherence to criteria that assess both the candidate’s legal qualifications as well as integrity,” it added.

In order to guarantee that the most capable justices are selected,theJusticeReformProject said successful judges must meet certain criteria that include independence and impartiality, reputable conduct and spotless record of integrity, outstanding knowledge of the law, excellent oralandwrittencommunication skillsandanalyticalcompetency, andcommitmenttothejudiciary as a public institution.

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NEWS CBN injects $242.04m, CNY32.3m into forex market Hope Moses-Ashike

I

n continuation of its intervention in the inter-bank foreign exchange market, the Central Bank of Nigeria (CBN) on Friday injected the sum of $242.04 million into the retail Secondary Market Intervention Sales (SMIS) and CNY32.3 million into the spot and short-tenored forwards segment of the inter-bank foreign market.

Isaac Okorafor, the CBN’s director of corporate communications, said the intervention was for requests in the agricultural and raw materials sectors, adding that the Chinese Yuan, on the other hand, was for Renminbi-denominated Letters of Credit.

Okorafor further expressed satisfaction over the stability of the foreign exchange which, according to him, was largely due to sustained intervention by the bank.

He assured that the apex bank management would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange.

Okorafor reiterated that with improved inflow of foreign exchange, the exchange rate had remained stable around N360/$1 for the past 27 months.

The CBN had on Tuesday, June 25, 2019, offered authorised dealers in the wholesale segment of the market the sum of $100 million, while the Small and Medium Enterprises (SMEs) and the invisibles segments each received the sum of $55 million.

Why we are setting up Ruga settlements - Presidency Tony Ailemen, Abuja

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residency on Sunday explained reasons behind the proposed establishment of Ruga settlements across the country, a decision that has attracted widespread condemnations.

A statement by Garba Shehu, senior special assistant to the President on Media and Publicity, said the decision was to check farmers’ herders clashed.

He said the plan was also to stop roaming of cattle herders with the attendant clashes with farmers.

“Ruga Settlement” that seeks to settle migrant pastoral families

simply means rural settlement in which animal farmers, not just cattle herders, will be settled in an organised place with provision of necessary and adequate basic amenities such as schools, hospitals, road networks, vet clinics, markets and manufacturing entities that will process and add value to meats and animal products.

Beneficiaries will include all persons in animal husbandry, not only Fulani herders.

According to the statement, “The Federal Government is planning this in order to curb open grazing of animals that continue to pose security threats to farmers and herders.

“The overall benefit to the nation includes a drastic reduction in conflicts between herders and farmers, a boost in animal protection complete with a value chain that will increase the quality and hygiene of livestock in terms of beef and milk production, increased quality of feeding and access to animal care and private sector participation in commercial pasture production by way of investments.

“Other gains are job creation, access to credit facilities, security for pastoral families and curtailment of cattle rustling.”

However, the Presidency denied plans to seize lands or create colonies for Fulanis.

“Stripped of the politics and howling that has attended the recent comments, there is no government plan to seize state land, colonise territory or impose Ruga on any part of the federation. Government has made it clear time and again that the programme is voluntary.

“So far, 12 states have applied to the Federal Ministry of Agriculture, making lands available for the take-off of the scheme in their states. This number is sufficient for the pilot scheme,” he said.

“Unfortunately, some state governments that have not signified interest in the scheme and, therefore, are not on the invita-

Courteville MD commits to inspiring 21st century entrepreneurs KELECHI EWUZIE

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roup managing director, Courteville Business Solutions plc, Adebola Akindele, says he is committed to knowledge sharing for aspiring entrepreneurs through his ‘Go Beyond Series’ mentorship programme in Lagos.

The series is focused on Akindele, fondly called Uncle B, sharing real-life experiences and the struggles of being an entrepreneur, and it is a mentorship platform opened to entrepreneurs or aspiring entrepreneurs and students to benefit from.

The event, which is the third in the series with the theme: ‘Leveraging Social Capital for Business Growth, is scheduled for July 4, 2019, in Yaba, Lagos.

According to a statement made available to BusinessDay, in line with Akindele efforts to stay true to one of his favourite philosophies of “the more you give the more rewards you get from God,” he started a quarterly mentoring session at the quarter of 2018.

Akindele acumen for business operations put him in the position of leading the company and working as its spokesperson.

He speaks regularly at events on e-commerce, entrepreneurship, leadership, technology and business strategy in Nigeria and internationally. www.businessday.ng

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tion list have been misleading people that the Federal Government is embarking on a scheme to take away their lands.

“Mostly, these are state leaders that have no explanation to offer their people for continued non-payment of workers’ salaries.

“It is true that government at the centre has gazetted lands in all states of the federation but because the idea is not to force this programme on anyone, the government has limited the takeoff to the dozen states with valid requests,” he said.

The Presidency, while appealing to states to key into the project, said it would ensure peaceful coexistence among the people.

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A hearty toast to prince Francis Oluwole Awogboro “VQB”

Bashorun J.K Randle

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ather than prolong undue anxiety, let me disclose that the “QB” sobriquet on the business card of Prince Olu Awogboro stands for “Very Quiet Billionaire”!!

Having cleared that first hurdle (or preliminary), justice demands that we commence the toast by acknowledging the celebrant’s good fortune and the abundant blessings of the Almighty as embodied in his soulmate and devoted wife Tokunbo (nee Oni). She is undoubtedly his secret weapon for ensuring that he has not only survived the perennial turbulence and devastating intrigues of business life in Nigeria and beyond, he has emerged triumphant in robustly good health, glowing with radiant happiness and serene contentment. Through the storms of life and the vicissitudes of striving for excellence, he has emerged as a worthy Prince. It is no secret that Tokunbo is a formidable prayer-warrior and her profound spiritualism has fortified her beloved husband who has endeared himself to us all by being a consistent advertisement for trustworthiness, generosity of spirit and superlative hospitality whether in Ilesha (from where he hails); Lagos; London; Paris; Cape Town or other exotic locations.

We have already been treated to moving testimonies and incontestable averments by Arc.(Chief ) & Dr. (Mrs.) Tony Soetan; Mrs. Toun Adebiyi (Tokunbo’s sister) and late Chief Yomi McGregor how in their moments of need, it was the celebrant who went far beyond the call of duty or the obliga-

tions of friendship to settle the hefty medical bills (while being tormented by life threatening ordeals) which they had incurred in foreign territories (London and beyond) without expecting acknowledgement, gratitude or deification in return.

I must debunk the widely held opinion or unfounded rumour that the Prince’s generosity is exceptionally skewed in favour of his immediate family, his in-laws he has neither time or patience for out-laws and old boys of St. Gregory’s College, Obalende (his Alma Mater). God help you if like me you are an old boy of King’s College, Lagos!!

Perhaps I should confess that the celebrant and I have been friends for almost six decades. I have it on good authority that when he landed in London in 1961, while others declared their immigration status as “student”, without batting an eyelid he insisted on being welcomed to London as a “Landlord” and promptly declared the address of the property at 15 Windsor Road, Willesden Green which his father, a wealthy cocoa merchant, had consigned to his care.

Anyway, when he introduced himself to me at a party in Golders Green, London as a Prince, I was somewhat wary and even alarmed. I instantly recalled the strictures and warning of Psalm 146: “Put not your trust in princes, nor in the son of man in whom there is no help.”

He has since proved to be an uncommon exception to that prejudicial assertion.

Indeed, trust and trustworthiness have been the watchwords that have guided his path to his phenomenal success as an astute and accomplished businessman (insurance guru and property tycoon); and his dealings with his fellow human beings in various spheres of endeavour within Nigeria and beyond its shores, particularly Lloyds of London, the citadel of insurance; re-insurance loss adjusters (they never adjust their profits) and the apostles of all risks covered!!

For his exemplary conduct and unflinching commitment, he has been rewarded with being appointed a Trustee

of St. Gregory’s College Old Boys Association; Trustee of Lagos Motor boat Club; Knight of the Catholic Church and numerous other accolades. The list is as long as it is intimidating. Regardless, he has remained refreshingly unassuming, genuinely humble, raucously good humoured and uncommonly spiritual especially in discharging his obligations to the Catholic Church and daily supplication to the Almighty for his beneficence not only for himself but for all his friends, especially old boys of St. Gregory’s College!!

He has turned out to be a Prince and a Knight in shining armour in a country where pedigree has become irrelevant while the trust deficit has ravaged our collective psyche thereby guaranteeing that we are doomed to grope in the dark further compounded by plus darkness of the soul.

As a family man, he has been truly exceptional. His home is an oasis of peace, serenity and tranquillity. He is the best of friends with all his children and grandchildren and cares deeply for all of them. Every Sunday morning without fail he gathers all his grandchildren (minus their troublesome parents!) for a hearty breakfast at the Wheatbaker Hotel, in Ikoyi or the Chocolat Royal, Victoria Island. His day commences with a bicycle run around Park View/Banana Island, Ikoyi at the crack of dawn, accompanied by his darling wife Tokunbo. Nothing would stop him from turning up for early morning mass at the Church of the Assumption, Falomo, Ikoyi or the Catholic church in Regent’s Park, London.

The Prince is not a keen supporter of Manchester United; Manchester City; Arsenal; Chelsea; or Barcelona football teams. Neither is he an avid follower of Cricket, Athletics or Horse Racing. His favourite sport is to sit at the Trustee’s table in the far corner of the Lagos Motor Boat Club, Awolowo Rd. Ikoyi on Friday nights. Surrounded by fellow old boys of St. Gregory’s College, they lay an ambush to snare any unwary old boy of King’s College who dares to venture into their lair!! One of them is a medical doctor who is always

‘

As a family man, he has been truly exceptional.

His home is an oasis of peace, serenity and tranquillity

in attendance just in case their quarry prefers to give up the ghost rather than surrender to their unrelenting allegation that old boys of King’s College are to be held responsible for the terrible woes that have befallen Nigeria. No amount of forceful denial will prevent them from repeating the same allegations all over again the following week.

Strictly, no ladies are allowed within earshot of the vigorous arguments back and forth – fuelled with vast quantities of champagne, wine and vintage whiskey or mature brandy. For some inexplicable reason “to so”, barbecued chicken, “suya”, and yam chips are delivered by stewards who eagerly savour the jousting perhaps in expectation that it would eventually metamorphose into duelling – with swords drawn.

Anyway, while St. Gregory’s College versus King’s College is the main attraction, the Barewa College boys insist on flouting their moral superiority on account of having produced Nigeria’s first Prime Minister, late Sir Abubakar Tafawa Balewa; late Sarduana of Sokoto and Premier of Northern Nigeria, Sir Ahmadu Bello, late former President Umaru Yar’Adua, former Head of State General Yakubu Gowon who by all accounts did not enrich themselves by plundering the public treasury. All this in addition to their long list of former Chiefs of Army Staff, Chief Justices, Military Governors etc.

As for the Igbobi College boys, their own mantra is to advertise their domination of the Nigerian Academy of Engineering. Not to be left out are the Old boys of Baptist Academy; Methodist Boys High School and CMS Grammar School who never tire of debunking the allegation that the Christian missions schools forced Christianity on their moslem students.

Note: the rest of this article continues in the online edition of Business Day @ https://businessday.ng Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

Letter from Malabo

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e attended the annual meetings of the African Development Bank (AfDB) in Malabo (Equatorial Guinea) in mid-June, and want to share our take on three of the talking points.

These are the African Continental Free Trade Area (AfCFTA), the indebtedness of the continent and China in Africa.

Our sense is that some policymakers view the AfCFTA as a solution to their economic problems without much input on their part. There is, however, usually a correlation of sorts between the amount of work put into a project and the benefit derived from it. We chatted in a taxi with a Congolese government official, as one does, and found our analysis confirmed by his myopia. The trade area would merely have to adopt the EU model, he argued, and all would be well.

If regional integration is rushed, not properly planned and/or pursued with a non-economic agenda, tensions emerge and some participants seek to leave the party. The origins of the EU were laid in the 1950s, we recall.

The AfDB’s director for regional development and a panelist in a session on open doors endorsed the project, as one would expect: the bank has provided a grant of US$5m towards the trade area’s secretariat. That said, she sought to rein in any exuberance. She noted that intra-EU trade had grown strongly because of the development of supply chains over many years. She then made a telling practical observation, which some could term subjective. Africans in her experience

needed to welcome each other as they welcomed foreigners if the mobility of talent was to become a driver of the AfCFTA. We learnt from the presentation by the AfDB treasurer, Hassatou N’sele, that the continent’s ratio for general government debt/GDP has deteriorated from 34 per cent in 2008 to 59 per cent in 2018. She was citing a broad measure of indebtedness, for which Nigeria’s burden would be about 30 percent including state governments, AMCON, the NNPC and sundries according to our estimates.

This is a steep increase over a decade, and encourages the view that the fruits of the borrowing are seldom visible beyond recurrent spending such as salaries. Whichever figures we cite for the gap in investment spending, it is obvious that Africa is falling short. The UN Economic Commission for Africa estimates that the continent requires spending on healthcare of US$66bn per year. For the sake of perspective, the AfDB approves funding of +/- US$10bn per year in total. At the same time, venture capital and private equity together raised US$17bn for projects in Africa between 2009 and 2017, of which just 3 per cent was allocated to healthcare.

Calls for a second round of debt relief would not be popular with the Paris and London clubs.

The US Treasury has already said as such. The ratio for Africa as a whole tells many very different stories, however. Mozambique has been a disaster and Zambia is not far behind. A few governments have made very large mistakes, www.businessday.ng

whether as a result of fraud or poor planning.

Yet all governments have development agendas for their economies, which require substantial borrowing because their revenue generation is generally inadequate to cover the associated costs. They need to boost tax collection, remove exemptions, tackle fraud, draw more on technology and pursue high-profile non-payers. These efforts will not be rewarded in a hurry. Governments should borrow in the interim, and several have tapped a receptive sovereign Eurobond market that is still scrambling for new issues with a decent yield and is not overly bothered with World Bank-style conditionality.

Our final talking point is the position of China in Africa. A panel contribution from the country’s deputy governor at the AfDB was highly instructive and more frank that we had expected. Governments should always be looking to improve their business climate, she said, and China’s gaps were accounting, regulation and flexible financing products. Its development policy was “maturing”, which was a subtle acknowledgement of past mistakes, and China had only been operating in this field for about ten years.

Chinese procurement should be more open, and it had not always been a good idea to import Chinese labour for large infrastructure projects.

We think she may have had the rebuilding of the Benguela railway in mind and recall the photographs at the time of tented towns to house the imported workers. The deputy governor was indulging in the dark art of public relations in

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Gregory Kronsten the face of increasingly negative news flow but we should still recognize the demonstration of openness. She was keen to point to the trend for Chinese project co-financing with multilateral development banks such as the AfDB. As for the event itself, we did not have the technology to count the delegates but had the distinct impression that numbers were down on the meetings the previous year in Busan (South Korea). This was certainly the case with fellow bank economists, think tanks, NGOs, regional bodies and portfolio investors. Our hunch would explain why discussion panels were dominated

by AfDB employees and representatives of shareholder governments, both groups being mandatory attendees of the annual meetings. Such discussions tend to be livelier when the panels are more diverse and include the private sector. The annual meetings were the poorer for its absence.

Gregory Kronsten is the Head, Macroeconomic & Fixed Income Research FBNQuest

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The long game Patrick Atuanya

N

igeria’s had the 29th largest economy in the world at the end of 2018, according to data from the latest IMFs World Economic Outlook (April 2019). A couple of things struck me as I went through the data (see chart).

For one, Nigeria is the only African country in the top 30, with South Africa coming in at a distant 35th.

Secondly is the fact that the West African country that gained independence from colonial rule as recently as 1960, has built a larger economy than Ireland ($381.5bn), Denmark ($349bn), Finland ($276bn), Czech Republic ($246bn), Greece ($219bn), New Zealand($210bn), and a host of other long established nations.

So is this a glass half full or glass half empty scenario?

It is impressive that Nigeria has managed to build a semi-modern economy that has made it to the top 30 in the world even with all the problems the nation confronts. However there are no illusions that a lot of work still needs to be done to double the size of the economy and improve the lives of millions of its citizens.

It’s probably a miracle that the country hasn’t gone the way of the Democratic Republic of Congo (DRC), one of the richest countries in the world in terms of natural resources which has a GDP of just $48 billion.

On the other hand Nigeria could have with a little more hard work and discipline been closer to Indonesia (with a $1.1 trillion economy), especially considering both countries had similar structure of economies at independence.

The optimism that greeted Nigerian independence in 1960 soon vanished as the country fumbled into a needless Civil War that killed millions on both sides and disrupted the growth of the young nation, and made a mess of things

generally, until 1998/1999 with the death of Military Dictator Sani Abacha, which some say was an act of God. Whatever the case the economy took off in earnest in 1999 and expanded an average of 8 percent a year, for 16 straight years until 2015. In that period the economy expanded twelvefold, from $35bn in 1999 to $445bn today.

Major reforms were enacted in that timeframe (which would have been near impossible under an Abacha Presidency/rule) which aided the expansion.

These include achieving macro-economic stability through paying off the huge debt burden and the restoration of sovereign ratings, signing of the Pension Reforms Act which removed trillions of naira in Pension liabilities from the Federal Government’s balance sheet, banking consolidation that led to bigger banks with balance sheets that enabled them to increasingly finance large private sector credit needs, privatisation of close to 200 Federal Government enterprises overseen by a wellregarded Bureau of Public Enterprises (BPE),

and reform of the Telecoms sector which kicked off a revolution in voice and data that continues today.

The list is by no means exhaustive. A lot of reforms that anchored the growth seen in those 16 year period were difficult to undertake but often took a principal/President that was willing to back his Ministers or Department and Agency head as the case may be.

The emergence of a private sector – an offshoot of the reforms - led to the large corporations of today such as Dangote Industries, the Banking sector, MTN Nigeria, the 21 Pension Fund Administrators (PFAs), and privatised firms like Indorama.

Before 2002, Nigeria pulled down the Tele density of Africa with its poor telecommunications network, today it is the largest Telecoms market on the continent, by far. The richest African is a Nigerian (with wealth not made in oil), and Airtel will list its African operations in Lagos, not Johannesburg, something unthinkable before 1999.

So Nigerians should have some pride in what

has been achieved, however as our weeklong series on ‘lifting 100 million Nigerians out of poverty’ shows there is a lot of work still to be done.

A lot is still holding the engine of the Nigerian economy from going at full power and these need to be addressed.

Take transportation links between regions.

They are woeful and expensive. Roads need to be expanded and railway lines built to move goods and services across the s regions in the country.

The military era land use charge, needs to be reformed as it traps millions of dead capital in homes which have no titles. For most people even in the developed world, home ownership is the base for wealth creation.

Infrastructure needs for the entire country needs to be audited, costed and a credible plan for attracting investments from the private sector to the roads, bridges, seaports, broadband fibre optics, and airports that will power growth for the next 30 years, needs to be on the table.

The country’s vast oil and gas wealth should be unlocked and production targets doubled (to say 4million barrels a day), so the country can get the best benefits of oil before the music stops and renewables become a cheaper means of energy.

Oil Production Sharing Contracts (PSC) need to be re-negotiated for the benefit of young Nigerians, the Sovereign Wealth Fund (SWF), needs improved funding, again led by politicians with an eye to 2060, not 2023, in essence playing the long game.

Young Nigerians must be prepared for the jobs of the future, frank discussions should be held about current regional disparity and a credible plan to tackle it put on the table.

Finally leadership at all levels must up their game. Young Nigerians need to be galvanised with a vision for a better tomorrow. They need to be given hope, beyond the extremes of reality T.V and suicide!

All of us have work to do. How did the little bit of reforms that propelled the Nigerian economy to become the 29th largest in the world happen? We need to find out and replicate on a national level, one state at a time, one Local Government (L.G) at a time.

Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

Source: IMF World Economic Outlook (April 2019)

Multifaceted benefits of industry relevant doctoral (PhD) training: Lessons from developed countries

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n the nearest future, depending on crude oil as major source of revenue will become irrelevant as the world is steadily drifting away from the use of fossil fuel. For example, electric cars are becoming popular and developed countries have started preparing towards this development. Use of solar energy to power cars and other equipment is also increasing. It is therefore important to look beyond crude oil. For example, the downturn in mining has made country like Australia to shift to knowledge -based economy.

Knowledge-based economy is becoming significant in global economy and depends on the use of innovation to drive socio-economic productivities that require highly skilled workforce. To meet this demand, most developed countries are switching from traditional (university-based) doctoral (PhD) training to industry PhD. The training and educational experience of doctoral (PhD) students equip them as applied researchers and innovators that can meet the needs of various industries.

Benefits of industry-focused PhD to the students • Wider career prospect: Industry PhD will be of benefits to the students that are not employed by any higher institutions of learning or research institutes before the commencement of PhD. Academic jobs are becoming scarcer and more competitive. There is need for career diversity.

Industry -based PhD graduates could work as research and development scientists, product development scientist, technical writer, research

or project managers and application specialists to mention few. In the academia, PhD holders can only work as lecturers or research fellows.

• Funding support (towards research, tuition fees and stipend): Based on the models of developed countries, industry provides research funding and contribute towards tuition fees and stipend of the PhD student to enable him or her focus on the main goal.

• Industry based work experience through mentorship: Students engaged in industry PhD can gain industry-based work experience involving practical application of theoretical knowledge.

• Industry engagement: The student will be able to communication complex research to industrial stakeholders in a simplified way.

• Lastly, the students will be able to gain broad industry relevant skills such as translational research skill that can transform knowledge to new or improved products and or services.

• Higher wages: Studies have shown that industry-focused PhD holders earn higher and secure job easily than traditional PhD holders.

Benefits of industry-focused PhD to the industry • Industry focussed research outputs: The most important benefit of industry-based PhD is the development of industry focused outputs (new or improved products and services). Right from the onset, the research project is industry focused to solve real life industry problem. When compared to the traditional PhD that the major output is www.businessday.ng

usually a thesis that ends in bookshelves or library archive and a couple of scientific papers that only contribute knowledge relevant to academic or research communities. In most cases, the papers are not translated to real solutions to prevailing problems.

• Building innovation capacity of future innovators: The engaged industry is capable of developing innovators that can help improve the products and or services of the industry.

• Development of industry owned patents (intellectual property – IP): Since the research project is industry focused, the patent(s) generated during this period becomes the intellectual property (IP) of the industry. This IP could be translated to product(s), service(s) that can generate direct income or royalty to the industry.

Benefits of industry-focused PhD to the academia • Collaboration between industry and academia: The academia has long existed in isolation without connection to the community and industry. Industry-focused PhD will enable collaboration between the industry (town) and the academia (gown). This collaboration could result into shared IP, research fund and provision of equipment for research. For example, some research laboratories are ill-equipped when compared to that of the industry. This collaboration will enable PhD students to carry out research in the industry while utilizing the facilities in such industry. This will on the long run speed up the

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Olumide Odeyemi completion of the research.

• Funding support (research fund): The universities running industry-focused PhD could benefit from research funding. For example, the running cost of the research could be completely off set by the industry or shared with the university based on the initial agreement with the industry.

Benefits of industry-focused PhD to the nation • Improvement of national economy: Industryfocused PhD helps to drive innovation that in turn improve economic growth and prosperity of the nation. The benefits of this model of doctoral training of highly skill workforce have been harnessed by advanced countries mentioned above.

• Human capacity development and employment: The overall benefits of industry-focused to the students, industry and academia are translated to national capacity development and increase in employment rate.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Dr. Odeyemi is Principal consultant, Higis Consulting, a research advisory and consulting service firm. oluodeyemi@gmail.com

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EDITORIAL Publisher/CEO

Frank Aigbogun editor Patrick Atuanya DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Chuks Oluigbo EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua ASSIST. SUBSCRIPTIONS MANAGER Florence Kadiri GM, BUSINESS DEVELOPMENT (North)

Generating jobs one square metre at a time

C

onstruction as an economic activity is a growth enabler given the quantum of jobs it can generate at a time and the multiplier effect of those jobs on individuals, households and the economy.

Whether it is the construction of roads, rails and bridges, or real estate activities involving the building of residential houses, commercial facilities such as offices, retail outlets and hotels, a good number of jobs are generated, engaging skilled and unskilled labour.

While one kilometre of road construction can employ over 30 skilled and unskilled workers, it is even more in real estate. It is estimated that every one square metre of real estate activity generates three jobs.

In other words, a 1,000 square metres guarantees about 3,000 jobs.

More direct jobs are created through construction, meaning that the country has

to catalyse more activities in that sector for more jobs to be created, more people empowered economically and poverty level and prevalence reduced significantly.

Analysts reckon that while the multiplier effects of investment in some other sectors of the economy like oil and gas happen in arithmetic progression, the effect of a similar amount of investment in housing and construction is in geometric progression, thus creating jobs in multiples of tens and hundreds.

Infrastructure, chiefly good roads network and rails for mass transportation, is critical. Therefore, for a country like Nigeria that needs to lift millions of its citizens out of poverty through increased economic activities that stimulate employment, construction, especially real estate, should be given adequate consideration. The challenges impeding growth in the sector have to be addressed for this to happen.

Unarguably, the construction industry in Nigeria has great growth potential which is reflected in a 10-year forecast from Global Construction Perspectives and Oxford Economics, which notes that growth in the industry will be faster than other sectors of the economy.

The forecast notes further that while China may overtake the US as the world’s biggest construction market, the fastest growth is projected to occur in Nigeria. It considers the country as the ‘hotspot’ for construction activities up to 2020.

Apart from infrastructure, investors in real estate, for instance, need incentives such as tax holiday for those of them that opt for low cost housing; reduction in land charges, reduction in import duties, and review of the Land Use Act with a view to expunging Governor’s Consent which is a big obstacle to ease of property registration in the country.

Leveraging opportunities in this sector serves dual purposes

of providing shelter and creating jobs which lead to wealth generation. The rebasing of the country’s GDP a few years ago revealed that this sector is about 40 percent larger than what it was thought to be and, from the rebasing too, the sector was discovered to be the fastest growing and the sixth largest in the economy.

Nigeria has an estimated 200 million square metres of real estate (residential, commercial and industrial) but most it is either under-developed or in a poor state. Investment in housing, for instance, can keep up with number of people moving into the cities.

For a country like Nigeria looking to lift over 100 million of its citizens out of extreme poverty opportunities in the construction industry can’t be ignored.

No effort should be spared by government to create the enabling environment for private sector operators to invest in infrastructure, generate more jobs and grow the economy.

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu HEAD, HUMAN RESOURCES Adeola Obisesan

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Buhari was right: His first-term ministers were just ‘noisemakers’ global Perspectives

OLU FASAN

R

emember what President Muhammadu Buhari once said about ministers? In an interview with the French TV station France 24 in 2015, he was asked whether he thought that having no ministers, particularly a finance minister, for several months was hurting the economy. He responded with an emphatic “No”! Ministers, he said, “just make a lot of noise; they are there to make a lot of noise”! The civil servants, who he described as “technocrats”, could run the country successfully, with him as president, without the “noisemakers”. For Buhari, therefore, having no ministers, no cabinet, for months was doing no harm to the economy!

But no serious government treats a cabinet with such insouciance. Elsewhere, ministers are not seen as noisemakers.

They provide political leadership and policy direction; they articulate visions and set strategic objectives, and work with the civil servants to drive and ensure their delivery. Of course, as part of their leadership role, ministers are also public advocates for government policies, securing wider public support for them. But they are more than the public faces of government ministries; they take the general policy directions determined by the cabinet and translate them into specific, measurable, action-based, result-oriented and time-based (SMART) objectives.

Indeed, so pivotal are ministers to the success of any government that some presidents and prime ministers fill their cabinets with some of the best and brightest in their countries. A former British prime minister once formed a cabinet he described as “governments of all the talents”, GOATS. Of course, at the heart of any talent-based government is technocracy. Truth is, good

policymaking and technocracy go together; indeed, some believe that a precondition for good policy is that technocrats are in charge of making it.

Thus, a government that wants to succeed must recognise the role of technocracy, not just at the bureaucratic level, which is the only sense President Buhari sees technocrats, but also at the ministerial level. Of course, the constraints of intraparty politics require that some people are appointed ministers for purely political reasons; however, good governance dictates that the preponderance of any cabinet should be “non-political” technocrats, or what the economists Jose Dominquez and Richard Feinberg called “technopols”, that is, technocrats assuming positions of political responsibility, namely as ministers.

They – technocrats or technopols– should be in charge of critical economic-related ministries.

But by describing ministers as people who are there “to make a lot of noise, President Buhari ignored all the above.

Most of his misters were appointed for political rather than technocratic reasons.

Take, for instance, the minister of finance.

When a large economy like Nigeria’s is in deep crisis, it needs as finance minister a strong, authoritative and experienced technocrat, with sufficient international clout, who can inspire the confidence of international financial markets in times of crisis. But Kemi Adeosun, who Buhari gave that job, was appointed purely for political reasons; she was not the right person for that job, nor was her successor!

The Oxford Dictionary defines technocracy as the “organisation and management of a country’s industrial resources by technical experts for the common good”. And in the book, The Political economy of policy reforms, the economist John Williamson wrote that a successful technopol “needs to be able to judge what institutions and policies are needed in specific circumstances in order to further desired objectives”. If you take the dictionary meaning of technocracy and Williamson’s description of the qualities of a successful technopol, it is clear, given the worsening situation in this country across many areas over the past four years, that President Buhari’s first-term administration lacked technocracy and that the few technopols in the government did not pull their weight.

Truth is, over the past four years, there was more ministerial “noisemaking” than actual delivery.

There is no space to consider all the ministers in Buhari’s first term, but any assessment must start with the former governor of Lagos State Babatunde Fashola, who was the minister of power, works and housing in Buhari’s first term administration.

President Buhari himself once described Fashola as “Super Minister”, who headed a super ministry. Of course, he was given that role because of his achievement as governor of Lagos State, which earned him local and international kudos.

But as super minister, Fashola was more a “noisemaker” than an achiever! He barely addressed the country’s housing deficit, estimated at over 17m, and did very little to improve the power supply, with Nigeria still producing less than 4,000 MW of electricity as against the estimated demand of 12,000. But he was good at insulting Nigerians, arrogantly saying, for instance, that “If you don’t have power, it’s not the government’s problem”. Rotimi Amaechi, Buhari’s first-term transport minister, is in the same category of ministers who make “a lot of noises”. He would claim that, in four years, he made significant achievements in developing transport infrastructure, but, in truth, across the country transport bottlenecks, on land, sea etc, are making everyday life difficult and running businesses unbearable. Nigeria is a country where the government talk about achievements, but people and businesses do not see or experience them.

Of course, when it comes to the macroeconomic environment, the finance minister and the central bank governor are the technopols who, as Williamson put it, must “be able to judge what institutions and policies are needed in specific circumstances in order to further economic objectives”. Well, I said earlier the Kemi Adeosun and her successor as finance minister, Zainab Ahmed, were not up to the job; and, of course, a few weeks ago, I ranked the CBN governor, Godwin Emefiele, a failure in the management of the economy. Inflation is high, interest rates are too high, the exchange rates are not competitive, unemployment, poverty and inequality are unbearably. Basically, Nigeria lacks the optimal macroeconomic environment to generate economic growth

‘

Truth is, virtually all of President Buhari’s first-term ministers failed to demonstrate sufficient technocracy in their roles. Buhari said ministers are there “to make a lot of noise”, and so most of them turned out to be

and prosperity. And that’s because, let’s face it, there is no technocracy, properly defined, in the management of Nigeria’s economy.

From macro, you move to micro. I once wrote that then minister of industry, trade and investment, Dr Okechukwu Enelamah, was one of the most important ministers in Buhari’s government because of the critical roles of industry, trade and investment in getting Nigeria out of the woods economically. I happen to believe that he was, broadly speaking, a successful minister, who understood technocracy. The tenacity and intelligence with which he pursued the ease of doing business agenda was impressive; his political or ministerial leadership over the negotiations of the agreement establishing the African Continental Free Trade Area (AfCFTA) would be remembered along with the technical leadership of Ambassador Chiedu Osakwe, Nigeria’s Chief Trade Negotiator and the DirectorGeneral of the Nigerian Office for Trade Negotiations (NOTN). President Buhari received the AfCFTA impact and readiness assessment report last week, a credit to the Dr Enelamah and Ambassador Osakwe, and one must now hope that Nigeria signs the agreement.

So, Enelamah demonstrated significant technocracy in government. But Nigeria has a very unproductive and uncompetitive industrial sector and a very protectionist trade regime. Given what we know about the benefits of liberal economic policies it’s a failure of technocracy to preside over such a regime. Dr Enelamah would probably fit the description f the economist John Toye of “the economist-turned-politician who retains the vision and rhetoric of normative economics but doesn’t practise his or her economic policy-making skills”.

Truth is, virtually all of President Buhari’s first-term ministers failed to demonstrate sufficient technocracy in their roles. Buhari said ministers are there “to make a lot of noise”, and so most of them turned out to be. But what kind of ministers does he want for his second term: noisemakers or technopols? Well, we have to wait and see!

Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

Which states are losing from fuel subsidies?

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couple of days ago I read a speech which was given by His Royal Highness, Sanusi Lamido Sanusi, Emir of Kano. It was about the government’s energy subsidies, particularly for fuel and electricity. His arguments need no introduction as we have heard them countless times before. Every naira spent on fuel subsidies is a naira not spent on education. Every naira spent on electricity subsidies is a naira not spent on healthcare.

And you know what we should be spending money on. Needless to say, I agree with him. But something struck me as missing from the whole debate about subsidies. We know that in general the rich and middle class benefit the most but are there spatial differences in the benefits as well?

Think of this from a fuel subsidy perspective in the context of where fuel is actually consumed. Some states with a lot of economic activity and higher fuel consumption per person should be benefiting more than states with lower fuel consumption per person. If the average person in state X uses 50 litres of fuel a week, they are benefiting more from the subsidy than in state Y where the average person used only 20 litres of fuel per week.

On the other hand, the costs of the fuel subsidy are not borne based on the amount of fuel consumed but based on the revenue

allocation formula. Recall the subsidies, or under-recovery, are currently paid by the NNPC before it hits the federation account. So, all the tiers of government are indirectly paying for it. If N1tn is spent on fuel subsidies by the NNPC for instance then the states and LGAs are missing out on roughly N473.2bn that they would have shared if there were no subsidies. Shared according to the formula of course.

In general, some states, where there is relatively higher fuel consumption, are benefiting from fuel subsidies perhaps even more than they are losing from lost income.

On the other hand, some states who have relatively lower fuel consumption are losing from lost income due to fuel subsidies even after taking the amount of fuel consumed into account. So, who is gaining and who is losing?

We don’t have data on actual consumption per state but there is data on the number of trucks sent to each state by the NNPC which is a good proxy. Of course, this data is not perfect. In Q1 of 2019 Zamfara state got almost as many litres of fuel as the FCT and we know most of that probably made its way across the border. But still. On the lost revenue distribution side, the revenue allocation formula is public information so its easy to determine what each state would have got if nothing was spent on fuel www.businessday.ng

subsidies and the money just paid into the federation account instead.

Which states actually gain and lose from fuel subsidies? Turns out that Lagos, FCT, Ogun, and Kano gain the most from fuel subsidies. That is, if you subtract the amount lost from money not remitted to the federation account from the amount gained by consumers in that state not paying as much for fuel as they would have, only those four states gain. The rest of the states actually lose money from fuel subsidies. Based on Q1 NNPC truck distribution numbers, for every one million naira spent on fuel subsidies, Lagos state gains just over N127,000. The FCT gains about N46,000.

Kano gains almost 557,000 while Ogun gains about N32,000. The majority of the rest of the states lose with the worst being Bauchi state which loses about N29,000, closely followed by Jigawa, Katsina, Sokoto, and Yobe. If you assume that the NNPC spent one trillion naira subsidizing fuel in 2018 then a state like Bauchi lost N14bn in subsidy payments for fuel that its residents did not consume. Essentially Bauchi spent N14bn subsidizing fuel for people in Lagos, Kano, Ogun, and the FCT. You can also see the obvious unfortunate pattern there. The states who lose the most are all poor northern states with higher levels of poverty, and lower human capital

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NONSO OBIKILI development indices. The states where investments in education and health are needed the most. Yet they indirectly are subsidizing fuel for much richer and more economically active residents in Lagos and the FCT. An absurd state of affairs no matter how you think about it.

The part that continues to leave me puzzled is why these states don’t argue for the removal of subsidies. If subsidies were scrapped, Bauchi state, for example, would be able to pay all its resident enough to cover their loss from increased fuel prices and still have a lot to spare. This would be true for all the states that lose. So why do all the states that bear the brunt of subsidies without the benefits not fight for its removal?

Dr. Nonso Obikili is Chief Economist at Business Day.

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How to contain Iran

A Balkan Half a plan betrayal

As America and Iran inch closer to war, new talks are needed Negotiation, not confrontation, is the way to stop the mullahs from getting the bomb

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OR NEARLY four years Iran’s path to a nuclear weapon was blocked. The deal it signed with America and other powers in 2015 limited its nuclear programme to civilian uses, such as power-generation, and subjected them to the toughest inspection regime in history. The experts agreed that Iran was complying and that its nuclear activities were contained. But then President Donald Trump ditched the nuclear deal and Iran resumed stockpiling low-enriched uranium.

It is now poised to breach the 300kg cap set by the agreement. Iran may hesitate before crossing that line, but it is also threatening to increase the enrichment level of its uranium, bringing it closer to the stuff that goes into a bomb.

Fortunately, Iran is not about to become a nuclear-weapons power.

Its breakout time is over a year. But it is once again using its nuclear programme to heap pressure on America. That adds an explosive new element to an already-volatile mix.

America accuses Iran of attacking six ships in the Strait of Hormuz since May. On June 20th Iran shot down an American spy drone. America insisted the aircraft was above international waters, not Iran’s, and sent warplanes to strike back. Ten minutes before they were due to hit targets inside Iran Mr Trump called them off and contented himself with a cyber-attack instead.

Neither Mr Trump, nor America’s allies, nor Iran wants a big new war in the Middle East. Yet Mr Trump’s strategy of applying “maximum pressure” on Iran is making the prospect more likely—because each side, issuing ever-wilder threats, could end up misreading the other’s red lines.

The president’s room for manoeuvre is shrinking. As Iran turns more belligerent, calls for action will grow, not least from his own party (see article).

Before things escalate out of control, both sides need to begin talking. That is not as unlikely as it sounds.

Mr Trump’s Iran strategy is based on the premise that Barack Obama gave too much away too easily when he negotiated the deal in 2015. Last year the president set out to get better terms by reneging on the agreement and reimposing the sanctions that have crippled Iran’s economy. This,

An underwhelming start to the “ultimate” Israeli-Palestinian deal Neither side shows up to discuss Jared Kushner’s plan

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T COULD HAVE been Davos, or any other conference on the annual circuit for the world’s wealthy. Jared Kushner, the son-in-law and adviser to America’s president, took the stage in Manama to offer his vision for solving the Israeli-Palestinian conflict.

The combatants, he lectured, were “trapped in an inefficient framework of the past”. The IMF director suggested looking at best practices from Mozambique. During a surreal segment on property rights, which lie at the very heart of the conflict, the moderator mused about using blockchain for

his advisers argue, will force a weakened Iran to accept a new deal that lasts longer than the old one, most of which expires by 2030. They also want curbs on Iran’s missile programme and an end to its violent meddling in the region. Mike Pompeo, the secretary of state, sees recent Iranian aggression as a sign that the strategy is working.

Hard-hitting sanctions brought Iran to the negotiating table in 2015, but they are unlikely to lead to the transformation Mr Trump wants.

One reason is that he has discredited Hassan Rouhani, Iran’s president and a champion of the nuclear deal.

Hardliners are now calling the shots.

Another is that America is acting alone. In 2015, in a rare moment of international unity, it had the support of its European allies as well as Russia and China.

Maximum pressure comes with extra risks, to boot. The mullahs and their Islamic Revolutionary Guard Corps want to prove their mettle by showing that Mr Trump’s actions have costs—for everyone. On top of the attacks on ships and drones, Iranian proxies have hit pipelines in Saudi Arabia and are suspected of having struck Iraqi bases hosting American troops. If sanctions are not lifted, Iranian officials may resort to closing the Strait of Hormuz, through which one-fifth of the world’s oil passes.

Hawks like John Bolton, Mr Trump’s national security adviser, retort that if Iran wants war, that is what it will get—especially if it shows signs of dashing for a nuclear bomb, which could trigger disastrous proliferation in the Middle East. But this is the riskiest calculation of all.

Having pulled out of a working deal, America may not win the backing of European allies for strikes. China and Russia would vehemently oppose any action at all.

Perhaps sanctions or war will cause the regime to crumble. But that is hardly a strategy: Cuba has resisted sanctions for decades. More probably, a defeated Iran would heed the lesson of nuclear-armed North Korea and redouble its efforts to get a bomb.

Attacking Iran’s nuclear facilities would not destroy its know-how, as even Mr Bolton admits. If, as is likely, Iran barred international inspectors, its programme would move underground, literally and figuratively, making it very hard to stop.

The alternative to today’s course is talks between America and Iran.

Just now that looks far-fetched.

Iran’s foreign ministry says American sanctions imposed on Ayatollah Ali Khamenei, the supreme leader, and other top officials this week mark “the permanent closure of the path of diplomacy”. Mr Rouhani has suggested that the White House is “mentally handicapped”—after

which Mr Trump threatened “obliteration”.

But optimists will remember similar clashes between America’s president and Kim Jong Un, North Korea’s despot, before they met in Singapore and “fell in love”, as Mr Trump put it. When he is not threatening to annihilate the mullahs, Mr Trump is offering to talk without preconditions and to “make Iran great again”.

He does not want the prospect of war in the Middle East looming over his re-election campaign. Likewise, in Iran the economy is shrinking, prices are rising and people are becoming fed up. Pressure is growing on Mr Khamenei to justify his intransigence.

Love could yet bloom.

America might coax Iran back to the table with a gesture of good faith, such as reinstating waivers that let some countries buy Iranian oil. Iran, in turn, could promise to comply with the nuclear deal again. Behind the scenes, its leaders have expressed a willingness to sign something like the old agreement with additions—such as extending parts of the deal beyond 2030. Negotiations would never be easy; the Iranians are infuriating to deal with. But that would let the president claim victory, as he did with the United States-Mexico-Canada Agreement, which his administration signed last year and which looks a lot like its predecessor, the North American Free Trade Agreement.

Palestinian land deeds.

Before he took office in 2017 Donald Trump vowed to broker the “ultimate deal” between Israelis and Palestinians. To oversee the effort he chose Mr Kushner, a property developer with no experience in diplomacy or the Middle East. The result has been roughly as expected. There is still no plan for resolving the underlying conflict and its many thorny issues: borders, refugees, the status of Jerusalem, or the very notion of Palestinian statehood. Its release has been repeatedly delayed. Diplomats hint that it may remain on the shelf until Mr Trump’s second term, if he wins one.

Instead Mr Kushner organised this two-day confab in Bahrain. Dubbed the “Peace to Prosperity” workshop, the centrepiece was a 96-page plan that pledged $50bn-worth of investment in Palestine and neighbouring countries after a peace deal. The document is impressive in scope. It suggests projects to boost agriculture and tourism, fix Palestine’s infrastructure and improve governance. All of this would be funded by a mix of grants, concessional loans and private money.

Missing amid all this detail was anything about the Israeli occupation, in its various forms, of the West Bank and Gaza, or about the schism between the Palestinian leaders in the two territories. The plan presupposes that the Holy Land’s noxious politics have Continues on page 21

Monday 01 July 2019

BUSINESS DAY

21

In Association With

Open Future

Open FutureGlobalisation is dead and we need to invent a new world order A book excerpt and interview with Michael O’Sullivan, author of “The Levelling”

H

AS THE world witnessed “peak democracy”? Is the future one in which open societies with free markets vie for influence in global affairs with authoritarian countries under state capitalism?

The very questions evoke a nostalgia for a seemingly simpler past.

For Michael O’Sullivan, formerly an investment banker and economist at Princeton University, it is more useful to consider the future.

Mr O’Sullivan’s book, “The Levelling: What’s Next After Globalisation” offers a roadmap. He sees a multipolar world forming but international institutions unprepared for this. He voices worries about a world of low growth and high debt—and calls for a “world treaty on risk” so central banks only resort to measures like quantitative easing under agreed conditions.

But his most intriguing framing of the issues is his comparison of today’s world and 17th century England’s Putney Debates, when the practicalities of a rights-based democracy were first enunciated by a faction called “ The Levellers” (which inspired the book’s title).

The world, he believes, will cleave into “Leveller” countries that hew to rights and freedoms, and “Leviathan” ones that are content with state-managed growth and fewer liberties.

As part of The Economist’s Open Future initiative, we probed Mr O’Sullivan ideas in a short interview. Below that is an excerpt from his book, on the end of globalisation.

The Economist: Describe what comes after globalisation—what does the world you foresee look like?

Mr O’Sullivan: Globalisation is already behind us. We should say goodbye to it and set our minds on the emerging multipolar world.

This will be dominated by at least three large regions: America, the European Union and a Chinacentric Asia. They will increasingly take very different approaches to economic policy, liberty, warfare, technology and society. Mid-sized countries like Russia, Britain, Australia and Japan will struggle to find their place in the world, while new coalitions will emerge, such as a “Hanseatic League 2.0” of small, advanced states like those of Scandinavia and the Baltics.

Institutions of the 20th century— the World Bank, the International Monetary Fund and the World Trade Organisation—will appear increasingly defunct.

The Economist: What killed globalisation?

Michael O’Sullivan: At least two things have put paid to globalisation. First, global economic

growth has slowed, and as a result, the growth has become more “financialised”: debt has increased and there has been more “monetary activism”—that is, central banks pumping money into the economy by buying assets, such as bonds and in some cases even equities—to sustain the international expansion. Second, the side effects, or rather the perceived side-effects, of globalisation are more apparent: wealth inequality, the dominance of multinationals and the dispersion of global supply chains, which have all become hot political issues.

The Economist: Was the death of globalisation inevitable or could (and should) it have been prevented?

Mr O’Sullivan: One problematic factor here is that there is no central body or authority to shape globalisation, beyond perhaps the World Economic Forum or maybe the Organisation for Economic Co-operation and Development. In many ways, the end of globalisation is marked by the poor and inconclusive response to the global financial crisis. In general, the response has been to cut the cost of capital and not to tackle the root causes of the crisis. As such, the world economy will limp on, burdened by debt and in hock to easy money from central banks.

The Economist: The book’s title comes from the “Levellers” during Britain’s Putney Debates in the mid 1600s. Who were they and what can their story teach us today?

Mr O’Sullivan: The Levellers are a hidden gem from British history. They were a mid 17th century group in England, who participated in debates about democracy that took place in a part of London called Putney.

Their achievement was crafting “An Agreement of the People,”

which were a series of manifestos that marked the first popular conceptions of what a constitutional democracy might look like.

The Levellers are interesting for two reasons. First, in the context of the time, their approach was constructive and practical.

The “Agreement” spells out what people want from those who govern them in a clear and tangible way. For example, they proposed term limits on political office and that laws regarding indebtedness are applied equally to the rich and poor.

Second, they are interesting for the way the movement was countermanded and then snuffed out by the military leader Oliver Cromwell and the Grandees (the elites of their day). Like so many idealistic political start-ups, the Levellers failed. This should encourage the growing number of new political parties, like Change UK and new candidates to be worldy-wise in how they approach the process of political reform and change.

The Economist: You foresee new international institutions to replace archaic 20th-century ones that are suited for a different time. How would they work?

And can countries with such different values (ie, democratic, market-based “Levellers” and state-managed societies and economies, the “Leviathans”) really cooperate?

Mr O’Sullivan: A lot is made of the Cold War rivalry between communist Russia and America, and now some want to see a clash of civilizations between America and China. The “Levelling” characterises a future where there are at least two approaches to public life.

The most distinctive approach to nations doing things in their own way will be for what the

Levellers might call the “rights of freeborn men,” or the idea of the open society. The code of the Levellers presents a very clear political formula that Europeans and Americans will recognise for its values, though decreasingly in its practice.

The challenge to this code will come from the rising acceptance of less democratic ways of ordering society, in both developed and developing countries. A related clash will be the desire of a growing proportion of electorates to have a more open society as economies also open up.

As the world evolves along the lines of Leveller-type and Leviathan-type societies, it is possible that in some countries, such as Russia, a Leviathan-like approach—that is, order in exchange for reduced democracy and rights—will be the accepted way of life. In other countries, most interestingly China, as its economy loses momentum and evolves, there may be a growing tension between groups holding the Leviathan view (supported inevitably by Grandees) and opposing Leveller-like groups (who favor equality of opportunity and a multiparty system). The role and views of women, especially in China, and of minority groups like the gay community will be pivotal.

The emergence of a new world order, based on large regions and coloured by Leveller and Leviathan modes of governance, echoes several periods in history. The challenge in the next few years will be for Leviathan-oriented nations like China to maintain economic stability so that rising unemployment, for instance, does not break the “Leviathan contract”. Equally, the challenge in Leveller countries will be to maintain open, fraternal societies in the face of political and potentially economic volatility.

An underwhelming start to the “ultimate”...

Continued from page 20

simply vanished. Mr Kushner would spend $5bn to connect the West Bank and Gaza, for example. Israel has promised to do this for years but never has, because the link is not simply a matter of building a monorail: it raises complex political and security questions. The $2bn plan to give Palestine 5G wireless infrastructure would thrill entrepreneurs, but there was no mention of how to overcome objections from the Israeli army, which let the West Bank have 3G only last year, a decade after the rest of the world.

None of the speakers in Bahrain commented on this dissonance, perhaps because few were familiar with the conflict, or even its geography.

To estimate the cost of installing 5G in Palestine, the president of AT&T compared it with Mexico, which he said was five to ten times as big (it is in fact 316 times larger).

As it stands, the plan is thoroughly unrealistic. That is the point, Mr Kushner’s supporters argue. It is meant to offer the Palestinians a peace dividend, an incentive to accept his (perhaps) forthcoming political vision. They certainly need the help.

Unemployment in the West Bank is 17%. In Gaza it is more than 50%. Adjusted for inflation, GDP per person is almost unchanged from 20 years ago.

But to the Palestinians this smells like a bribe from a hostile president.

Mr Trump cut all American aid to them. He overturned decades of precedent to recognise Jerusalem as Israel’s capital. And aides hint that the political plan will give the Palestinians far less than the sovereign state along the pre-1967 borders that they demand.

So they decided to boycott the workshop. Their president, Mahmoud Abbas, refused to send anyone from his government. “The deal of shame will go to hell,” he said in May. The private sector also declined invitations.

Arab states were thus reluctant to share a stage with Israeli officials— who were not invited in the end, though some Israeli businessmen did come. Reporters from six Israeli outlets sent fawning dispatches. The country’s largest newspaper, Israel Hayom, which backs both Mr Trump and the Israeli prime minister, Binyamin Netanyahu, dubbed Bahrain the “island of hope”, an odd appellation for a kingdom that crushed a popular uprising in 2011.

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Monday 01 July 2019

BUSINESS DAY

In Association With

Debt sum

China is thinking twice about lending to Africa Too many past projects have been costly flops

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OR TEN days in May Uhuru Kenyatta, Kenya’s president, vanished from view. Kenyans feigned concern on Twitter, using the hashtag #FindPresidentUhuru.

A missing-person poster appealed for information on the whereabouts of a five-foot-eight African male last seen in Beijing. A government spokeswoman sought to reassure the public: Mr Kenyatta had been in his office “meditating”. But others speculate that the president was in a funk after his trip to China failed to yield a new loan for the next phase of Kenya’s ambitious $10bn railway.

Mr Kenyatta could be forgiven for feeling piqued. Beijing’s largesse to Africa has sometimes seemed limitless (see chart). In September China promised another $60bn in aid and loans to the continent. Xi Jinping, its president, promised the money would come with “no political strings attached”. John Magufuli, Tanzania’s strongman president, was delighted. The West, he griped, made its money dependent on “strange conditions”, such as insisting that Tanzania should not lock up gay men. “China is a true friend,” he enthused. Its assistance comes “free of charge”.

Being chummy with China has served Tanzania well. It has received more than $2bn in loans since 2010, reckons the China-Africa Research Initiative at Johns Hopkins University. In 2013 China agreed to finance and build a $10bn port in Bagamoyo, once a big slave- and ivory-trading entrepôt but now a sleepy fishing village.

Kenya has done even better. It was an early African member of the Belt and Road Initiative, China’s global infrastructure project. It scooped up at least $9.8bn between 2006 and 2017, making it Africa’s third-largest recipient of Chinese loans.

Mr Kenyatta must have reckoned that his railway project, on which he has staked much political capital, was due another cut of Mr Xi’s cash.

Not only has it been one of China’s highest-profile projects in Africa, but Beijing has already doled out $4.7bn to finance its first two sections. An almost 500km stretch between the port of Mombasa and the capital, Nairobi, is up and running. The second is nearly completed. Kenya had assumed that China would fork out the $3.5bn needed for the penultimate section, to Kisumu on Lake Victoria. If China’s ultimate vision was a railway network connecting resource-rich inland states to Indian

Ocean ports, why stop funding the project halfway through?

Some Africans suspect that China deliberately lends countries more than they can repay in order to seize strategic assets when they default. They point to the Chinesefinanced port at Hambantota in Sri Lanka. After the project flopped commercially, a Chinese stateowned firm took control. Hambantota would be a handy place to park Chinese naval vessels seeking to patrol the Indian Ocean. “The situation that Sri Lanka got itself into may not turn out to be unusual,” says Mutula Kilonzo, a prominent Kenyan senator. “It is going to happen to African countries, too. The conditions of many loans are...a debt trap.”

Deborah Brautigam at Johns Hopkins argues that Hambantota is an exception. She looked at more than 3,000 projects overseas financed by China, and found that it was the only example of such an asset being seized to cover a debt.

Nonetheless, African leaders are spooked. Dialogue with the Chinese is becoming edgier. On June 7th Mr Magufuli indefinitely suspended construction at Bagamoyo, balking at demands from the project’s

Chinese partner for a 99-year lease and a ban on port development elsewhere in Tanzania. Moving smoothly from cheerleader to critic, he accused the firm of setting “tough conditions that can only be accepted by mad people”. Last year Sierra Leone scrapped a Chinese-funded project to build a new international airport for fear that it would involve too much debt.

The perception of a plot to turn the Indian Ocean into a Chinese lake endangers the political capital China has amassed in Africa. Since Mr Kenyatta came to power in 2013, public debt has nearly tripled. Last year the IMF raised the country’s risk of debt distress from low to moderate. If Kenya defaults, China risks being blamed.

China’s hesitation also reflects the uneven performance of past projects. A railway between Djibouti and Addis Ababa, completed in 2017, cost China’s state-owned insurer Sinosure $1bn in losses, its chief economist said last year. Corruption and mismanagement drive up costs. Sometimes plans smack of unreasonable optimism. Bagamoyo’s port was expected to handle more containers than Rotterdam, Europe’s biggest freight terminal.

Coups and contradictions

Killings and claims of an attempted putsch rock Ethiopia The unrest shines a spotlight on opposition to Abiy Ahmed, the prime minister

O

N JUNE 23rd 2018 Abiy Ahmed, Ethiopia’s newly inaugurated prime minister, took to the podium wearing a bright green T-shirt. Smiling and waving, he offered hope of democratic change to tens of thousands of supporters at a rally in the capital, Addis Ababa.

A year later, almost to the day, he again addressed the nation, this time in army uniform, to declare, stony-faced, that his government had thwarted a coup. It was a sharp reminder of the fragility of his democratic revolution.

Abiy said the putsch had originated in the northern region of Amhara, Ethiopia’s second-most populous, and was the work of General Asamnew Tsige, Amhara’s head of security.

The prime minister’s office claimed that General Asamnew’s men attacked government offices in the regional capital, Bahir Dar, on June 22nd, killing the Amhara region’s president, Ambachew Mekonnen, and other officials.

In a separate attack in Addis Ababa, the army’s chief of staff, Seare Mekonnen, was killed in his home by a bodyguard. (Also murdered was a retired general who had been visiting.) The government said the attacks in Addis Ababa and Bahir Dar were

linked. Since then, it has shut down the internet and released few details of the plot. But from what little information has emerged, the incidents look more like an unplanned outbreak of violence than a calculated attempt to seize power.

General Asamnew was a former political prisoner sentenced in 2009 for his alleged role in another failed coup. Abiy released him last year and gave him a powerful job as part of a campaign to embrace former opposition leaders. But General Asamnew provoked alarm with his strident talk of defending Amhara territory against other Ethiopians.

Ethnicity has been a central feature of Ethiopian politics since 1995, when the current constitution came into force. It carved up the country into nine ethnically based semi-

autonomous regions. The Ethiopian People’s Revolutionary Democratic Front, which has run the country with a heavy hand for almost three decades, kept a lid on tensions between ethnic groups for most of that time. But they are on the rise as Abiy has liberalised politics. Last year intercommunal fighting forced almost 3m people from their homes.

The Tigrayans, who are around a tenth of Ethiopia’s population, have largely run things since the toppling of a Marxist dictatorship, the Derg, in 1991. The Oromo, Abiy’s group, who are a third of the population, resented Tigrayan domination, which in part accounts for Abiy’s rise. The Amhara, who are about a quarter of the population, ruled the roost under Ethiopia’s last emperor, Haile Selassie, who was deposed in 1974.

As the Amhara region’s security chief, General Asamnew strengthened its paramilitary forces, creating a special police unit that answered directly to him. Both the federal government and Ambachew were troubled by this. People familiar with the events on June 22nd say that Ambachew had called a meeting with his advisers to discuss ways of stopping General Asamnew from expanding his forces and possibly firing him. (Among those killed was Migbaru Kebede, the attorney-general of Amhara.)

General Asamnew is said to have sent men from his special police force to the meeting who shot and killed Ambachew. The general may have been outside the building at the time.

It is not clear whether the murder was premeditated, or the general lost control. He fled immediately, which suggests this may not have been an organised putsch. The army killed him two days later.

There are many unanswered questions, including whether and how events in Bahir Dar were connected to the killing of the army chief.

If the incidents were indeed linked, as the government claims, that would point to a wider conspiracy and suggest that Abiy faces a threat from elements of the national army.

The ramifications for a country

that seemed on the path to reform are gloomy. Scores of journalists, politicians and activists linked to Amhara nationalists have already been arrested. Repression may, in turn, stoke further resentment in Amhara, a region in which many young people are beginning to feel discriminated against by Abiy and his Oromo faction. The euphoria that greeted Abiy’s rise to power just over a year ago seems a distant memory.

Monday 01 July 2019

BUSINESS DAY

COMPANIES & MARKETS

23

AFEX targets investors, brokers, farmers in EdEX commodities market learning Pg. 25

COMPANY NEWS ANALYSIS INSIGHT

INSURANCE

Airtel’s LSE debut signals likely behaviour from Nigerian investors DAVID IBIDAPO

R

eaction of investors to the stocks of Airtel upon listing on the L on d on sto ck exchange market (LSE) is believed to signal a likely behaviour of Nigeria’s high net worth individuals (HNI) and institutional investors towards firm’s listing on the Nigeria stock exchange market (NSE).

As at the close of trading on Friday, stock price of Airtel Africa slumped steeply by 16 percent on its first day of trading, hence joining the list of worst debuting stocks in Europe.

Airtel stocks which were valued at 80 pence dipped to 67 pence as at the close of trading on Friday on the LSE. “The sad decline of the first day of trading reflects lack of interest in the stock.

This can be attributed to a number of factors ranging from their historical performance in which they have recorded losses,” Gbolahan Ologunro, Research Analyst

at CSL; stockbrokers told BusinessDay. “Also they have high financial leverage which is higher than its peers when we look at their debt to equity ratio,” Ologunro added.

While Airtel may have highly leveraged balance sheet compared to peers, analyst believe that a more attractive valuation multiple could have bred a better response from investors to-

wards shares of the telecommunication firm.

Against the expectation of a similar excitement towards the shares of MTN Nigeria on that of Airtel, analysts believe that the negative reaction from foreign investors on the LSE is an eye opener for Nigerian investors who are largely driven by sentiment on the possibility of Airtel’s share being pricey.

Concerns have been

raised over the possibility that investors perceive a threat to future earnings of the company on the back of an issue which isn’t sufficient enough to improve the finance cost of the firm, hence hinder anticipated returns.

Airtel Africa, a unit of India’s Bharti Airtel Ltd, last week set a price range of N363-N454 per share for its IPO on the NSE where it aims to issue 501 million to

716 million new shares and selling about 500 million shares on the London stock exchange (LSE) market with 10 percent over allotment option.

The proposed listing of Airtel is said to imply a TTM EV/EBITDA multiple of 6.3x – 6.8x, implying that for every N1 EBITDA made investors are willing to pay between N6.3 to N6.8 own the shares.

Airtel had claimed it planned to raise $750 million, despite highly leveraged with a debt-equity ratio of 2.0x and an outstanding debt obligation of about $3 billion.

This means that its debt obligation when shares are fully subscribed to will drop to about $2.25 billion while debt to equity to about 1.7x.

“This is still very high and doesn’t make a difference, now leverage stocks in the market generally trade at a discount to peers because of the leverage risk and impact on ROE,” Ayorinde Akinloye, equity research analyst at

CSL Stockbrokers explained.

Meanwhile the big question remains whether or not Airtel is under-priced or pricey.

Amongst peers like Safaricom with Return on Equity (ROE) OF 46.6 percent and EV/EBITDA of 8.6x, Vodacom (20.8%, 7.8x), Airtel with an ROE of 18.5 percent suggests to be traded at a price lesser than that of Safaricom and Vodacom.

Also, compared to MTN Nigeria with a ROE of 65.4 percent higher than ROE of MTN group at 6.8 percent, this suggests MTN N should be priced at a premium to Airtel but currently trades at 6.2x EV/EBITDA which is discount to that of Airtel stated earlier.

“For foreign investors who are holding or bidded for Airtel shares on the LSE, they may want to cash out in the Nigeria upon listing hence reduce the extent of their lost since it’s a dual listing,” Ologunro stated.

Red Star Express introduces GSA services in expansion push ISRAEL ODUBOLA

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agos-based logistics and cargo generating company, Red Star Express Plc, has ventured into cargo General Sales Agent Services (GSA) as part of its business expansion strategies.

The service, which was introduced recently, would help connect passenger baggage and packages from one airport location to another at a faster rate.

The company’s Managing Director, Olusola Obabori, noted that the introduction of the new service would enable the logistics firm expand operations to other neighbouring countries like Niger Republic, Benin Republic and Burkina Faso, adding that plans are underway to expand operations in WestAfrica.

“We are a company focused on growth, and part of our growth platform for the current financial year is to work to a large extent with airlines on cargo consolidation both locally and internationally” said Obabori.

He stated that the company had plans to invest in core aviation practices in the

future, but wanted to partner operating airlines at the moment to consolidate on its cargo services.

The company’s foreign business is majorly done on the FedEx platform, and has Red Star Freight that is into major cargo movement from Nigeria to other nations across the globe.

Mudiaga Okumagba, Red Star’s Chief Operating Officer, Red Star Freight, explained that the company was fully a domestic organization and managed

by Nigerians, adding that it was a licensee of American-based FedEx, which enabled it to ship goods and cargo through the FedEx network, and got GSA license two years ago.

“We have partnered Aero Contractors, and we hope to work with other domestic airlines in a couple of months. Also for the international routes, we hope that before the year ends, we will have something to do with Lufthansa Airline” said Okumagba.

Recall in November 2018, the company extended presence to Burkina Faso through Red Star Burkina Faso Office, to carry out pickup and delivery of time-sensitive and timedefinite shipments within the West African nation.

The logistic and cargo generating firm was appointed Licensee of FedEx and TNT in Burkina Faso, and was given the power to handle all FedEx and TNT inbound and outbound packages in Burkina Faso including, but not limited to pickups, deliveries and customs clearance of courier services and bulky freight packages.

Review of the company’s unaudited earnings report for nine months ended December 31 2018, showed that revenue surged 27 percent to N2.68 billion from N2.1 billion reported in the previous corresponding period. Proceeds from cargo accounted for 57 percent of total turnover.

Red Star reported increased turnover in each business segment except logistics which contracted 13 percent. Receipts from cargo business jumped 43 percent, logistics upped 27 percent, and freight segment grew 5 percent.

The company’s net income skyrocketed 73 percent from N71.2 million to N123.6 million in the first nine months of its financial calendar, buoyed by strong revenue growth, elevated other income and reduced operating expenditure.

Red Star Express Plc works in air express service, provide transportation, warehousing and other supply chain management services.

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: David Ogar

24

Monday 01 July 2019

BUSINESS DAY

COMPANIES&MARKETS THE COMPANIES AND ALLIED MATTERS ACT (REPEAL AND REENACTMENT) BILL 2019 – WHAT YOU NEED TO KNOW

HAT YOU NEED TO KNOW PART 12 – THE STATUS OF THE BILL where the term of imprisonment is prescribed in the CAMA Bill.

For example, where a person fraudulently holds himself out as a director, the penalty would be two years imprisonment or a fine as determined by the court.

By Udo Udoma & Belo-Osagie BACKGROUND The Companies and Allied Matters Act (Chapter C20) Laws of the Federation of Nigeria 2004 (CAMA) was enacted in Nigeria as a decree of the military government in 1990, and in the past 28 years, there have been no significant amendments to the CAMA. This is, however, all set to change if the Companies and Allied Matters (Repeal and Re-enactment) Bill 2019 (CAMA Bill), which was passed by the Nigerian Senate on 15th May 2018 and by the House of Representatives on 17th January 2019, is passed into law. This is the final part of a 12-part series on the CAMA Bill that has been provided by Udo Udoma & Belo-Osagie to share insights and digestible excerpts on the effect of key changes proposed by the CAMA Bill.

OTHER CHANGES PROPOSED IN THE CAMA BILL A more inclusive CAC board Under the CAMA Bill, the board of the Corporate Affairs Commission (CAC) will include a representative of the Institute of Chartered Secretaries and Administrators of Nigeria. The Nigerian Association of Small and Medium Enterprises will also be represented on the Board, thereby ensuring that the interests of micro, small and medium scale enterprises are taken into consideration.

The Association of National Accountants of Nigeria (ANAN), in collaboration with the Institute of Chartered Accountants of Nigeria (ICAN), will also have a representative on the Board, thereby expanding the pool of financial experts represented on the Board.

Decriminalising offences Under the CAMA, there are more than 100 criminal offences, all of which attract a nominal monetary penalty (some still as low as N5.00) or a term of imprisonment upon conviction. A different approach has been adopted in the CAMA Bill; only grave matters shall remain criminal offences. These include falsification of statutory books, providing false information for the purpose of incorporating trustees and when a person not duly appointed as a director acts or holds himself out as a director. Most offences (such as failure to file resolutions or the failure of a director to disclose his age to the company) will be regarded as administrative offences under the CAMA Bill and the CAC will be empowered to penalise such offences by imposing appropriate fines. Another novel development to be introduced by the CAMA Bill is that the quantum of fines would be prescribed by the CAC in regulations to be issued by the CAC, instead of having the quantum of fines specified in the legislation. This is a welcome initiative because it gives the CAC and the Minister for Trade, the flexibility change the quantum of various fines to reflect economic realities as required from time to time.

In relation to criminal offences, the courts are generally given the discretion to determine the quantum of fines and the duration of sentences except in certain specific circumstances www.businessday.ng

These changes are laudable as they will make it easier to penalise breaches of the law, set penalties at a level where they act as a deterrent, and consequently, encourage compliance with the provisions of the CAMA Bill.

THE STATUS OF THE CAMA BILL Despite its progressive provisions, the CAMA Bill has not yet been signed into law by the President of the Federal Republic of Nigeria. This delay has significant implications for Nigerian and foreign investors who are excited about the prospect of the passage of the CAMA Bill. The CAMA Bill draws on inspiration from selected jurisdictions, while at the same time proffering solutions in the context of our domestic market. It aims to reposition Nigeria and the way we do business so that Nigerian business are well positioned to compete with other leading African jurisdictions, and globally, in this fast-paced and everchanging century.

The World Bank 2019 Doing Business Ranking Index ranks Nigeria 145th out of 190 countries – this ranking increased from 169th after the announcement that the CAMA Bill had been passed by the Senate. If the CAMA Bill is not passed as soon as possible, our current rankings might be difficult to sustain, given that we shall continue to carry on business in a legal and regulatory landscape relating to company law matters which would have remained largely unchanged for three decades.

PARTING WORDS As we have outlined in the preceding 11 parts of this series, the CAMA Bill seeks to introduce several innovations into Nigerian company law. These include single member and single director companies, changes to the process of registering companies limited by guarantee, company administration, company voluntary arrangements, netting, greater disclosure of beneficial interests in companies, and the introduction of new entities such as limited partnerships and limited liability partnerships. These are all critical to the development of the Nigerian economy and, ultimately, the ease of doing business in Nigeria as they are designed to give Nigerian businesses and organisations the tools they need to operate and compete efficiently in modern times – the goal being to position Nigeria as a hub for entry into African markets. The CAMA Bill also seeks to address the various shortcomings of the CAMA and, if passed, has the potential to leapfrog our companies’ law over three decades of stagnation. It is, therefore, imperative that the CAMA Bill should be passed into law without further delay.

Udo Udoma & Belo-Osagie actively participated in the drafting of the CAMA Bill. Corporate Partner, Ozofu 'Latunde Ogiemudia was the chairperson of the Technical Advisory Committee set up by the office of the Senate President to advise on the CAMA Bill and the bill to amend the Investments and Securities Act 2007. Managing Associate, Christine Sijuwade was a member of that committee and led the drafting sub-committee on the CAMA Bill.

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Monday 01 July 2019

BUSINESS DAY

COMPANIES&MARKETS

25

AFEX targets investors, brokers, farmers in EdEX FoodCo delights consumers, unveils Sunfresh Ice Cream Range into Nigerian market commodities market learning initiative TEMITAYO AYETOTO

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FEX Commodities Exchange Limited has said it will target institutional and retail investors, brokers and smallholder farmers as key groups of participants in its latest initiative to deepen public knowledge of commodities trading markets tagged ‘EdEX’.

The new learning platform, according to Nigeria’s first private sector commodities exchange firm is informed by the need to simply the understanding of the various wealth creation opportunities along the commodities value chain. These opportunities are considered to have been harnessed by only few investors due to limited understanding of the structure and operations of the market.

AFEX believes that with inclusion and innovation at the heart of current commodity markets, investors can find several routes to participate in the market, provided that they are sufficiently edu-

cated and informed about the opportunities present in trading and investing in commodities.

The EdEX platform has been designed to accommodate online trainings, digitally distributed learning materials as well as physical workshops, which will enable AFEX to reach various audience groups and satisfy their unique education needs.

“EdEX is a market education platform designed to help portfolio managers, fund managers, analysts, traders, brokers and risk managers gain an understanding of the commodities markets in Nigeria, and develop products and services around the commodities exchange ecosystem,” Ayodeji Balogun, AFEX’s country manager said in a statement made available to BusinessDay. Content available on the platform for investors and brokers span across membership procedure, market access, trading strategies and community engagement.

For smallholder farmers,

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a train the trainer model aimed at effective and efficient knowledge dissemination to smallholder farmers on various farm processes and beneficial practices will be adopted.

EdEX aligns with the Security and Exchange Commission’s focus on investor protection and education and is a strategic investment

by AFEX, which will grow into an open source library for exchanges in Africa.

“AFEX’s education platform will make the structure and functions of Nigeria’s commodity market accessible knowledge; handing the knowledge needed to navigate today’s commodities markets to anyone desirous of an entry point to trading commodities,” the statement said.

“It will ensure that market participants are educated on the operations of the exchange, products and services available and other essential information that can lead to an increase in income for everyone involved.”

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oodCo Nigeria Limited, a diversified consumer goods company with interests in retail, quick service restaurants, entertainment and manufacturing, has launched Sunfresh range of ice creams. This is as the company seeks to meet consumer yearnings for affordable, high quality ice cream in the market.

Speaking at the launch, Solomon Heusu, Marketing Manager, FoodCo Nigeria Limited, said: “We are excited to unveil the latest offering from the FoodCo family of products, Sunfresh Ice Cream. Sunfresh was developed in response to customer feedback and market research which showed a gap in the availability of affordable, yet, high quality ice creams. Our response was to develop Sunfresh which is made from the finest quality products. With Sunfresh Ice Cream range, our customers are guaranteed of rich,

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creamy ice cream, served at the right temperature and at the right texture.”

He further added that in addition to expanding the menu options in FoodCo’s Quick Service Restaurants, the introduction of Sunfresh Ice Cream will enhance the general experience for customers at our outlets.

“At FoodCo, we are passionate about ensuring that every person that visits any of our outlets - whether the retail stores, our gaming centers or our quick service restaurants - enjoys a premium experience across the value chain. Our prices are also affordable. This is a common thread that runs through all our eight outlets and we have been consistent in delivering on this brand promise. We are proud to state that the introduction of Sunfresh Ice Cream is a continuation of that tradition,” he added.

Sunfresh Ice Cream comes in a variety of deli-

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cious flavours. The originals flavours include: blueberry, banana, vanilla, French vanilla, strawberry, chocolate and red velvet while the specialty and Mix-ins flavours include German chocolate cake, There’s Chocolate on my snickers, S’more Some More, Coffee Lovers Crunch, Cookies and Creamery, My Mojo Pie, Very Berry Candid, Birthday Remix and my strawberry browning.

The Ice Cream brand is currently available in FoodCo outlet, Ring Road, Ibadan, Oyo State. A roll-out to other brand outlets is planned in the upcoming weeks. Sunfresh Ice Cream is the latest product from FoodCo Manufacturing, an arm of FoodCo Nigeria Limited. FoodCo Manufacturing is recognised for producing high quality products made to best hygiene standards. It also produces Sunfresh Bread, which is the most popular bread brand in Ibadan.

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Monday 01 July 2019

BUSINESS DAY

Monday 01 July 2019

BUSINESS DAY

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TITI ODUNFA

CEOINTERVIEW

Founder/CEO of Sankore Investments

Interview with Private Sector Leaders

‘We want to aggregate the biggest pool of private capital Nigeria has ever seen, to solve our country’s problems’ Titi Odunfa is the founder/CEO of Sankore Investments, a boutique wealth management firm that provides advisory, brokerage, fund management and other investment services to high net worth individuals and corporations. In this interview with BusinessDay’s Editor, PATRICK ATUANYA and Senior Associate, LEHLE BALDE, Odunfa describes her journey from Goldman Sachs to starting a hedge fund and now providing investment strategy and guidance to clients. Excerpts…

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hank you for having us today, can you tell us about your firm and why you decided to set up a firm that caters to high net worth individuals?

Sankore Investment is a full-service wealth management platform and I started it because I have been interested in investing since I was at least thirteen. I remember being curious about what investing was about, and I started investing personally when I went to the United States for college and was able to open my first brokerage account and started trading.

It was a very interesting time, it was actually during the internet bubble around the late 1990s and it was a very interesting time to learn about investing although I lost what little money I had. That actually even got me more curious about understanding the fundamentals of investing.

I initially worked in Consulting but moved to Goldman Sachs strategy after my business school program. It was at Goldman Sachs I really feel I developed the understanding of the beauty of investment and the underpinning of what drives return and that was an amazing experience for me.

After a few years with Goldman Sachs, I just realised I needed to run my own investment firm and manage money directly for people. It was also an exciting time in Nigeria, this was around 2007 and 2008 and there was a lot going on in the country especially around the stock market. At Goldman that time I was already covering a wide range of asset classes and was very interested in emerging markets.

So I thought of starting a hedge fund. I saw that Africa was doing fantastic with so much global interest and investing in the continent and decided to come back to Nigeria, where I am from and start a hedge fund.

Looking back I believe it was a really bold step I took at that time because I was around 28 to 29 years old and it was not that I had a lot of investing experience at that point but I really just felt like I would be able to do it.

When I came back I realised I needed to get some Nigerian work experience and it was pretty much the beginning of the downturn as the timing was not percent. At that time, however, I worked for Zenith Capital for a bit and was able to eventually start Sankore in 2010. I was truly oblivious of how difficult it was going to be, I was so driven to actualize my vision and I went straight for it and was still determined to start the hedge fund.

However, it was very difficult to raise money and I realised that there was actually quite a big pool of capital that really wasn’t properly managed and it was mostly individual funds and so that for me became an interesting place because I actually stumbled on it by accident, as I said, I was running a company that was set up to run hedge fund and I remember having a client who invested possibly 67 percent of their net worth in our hedge fund.

I didn’t know at that time it was that large an amount because globally the people investing hedge funds are supposed to be sophisticated clients and very high net worth

that our clients in Nigeria are usually the first creators of wealth and generally if you are the first creator of wealth you are more than likely to be an entrepreneur.

Entrepreneurs definitely at this point are majorly worried about economic growth. We are creeping on 2 percent growth rate which is not great for businesses. The major worries have been around economic activities and government policies because Nigeria is very dependent on that as well. Then you see a big focus on that from our clients who are mostly entrepreneurs and can be directly affected by all of those variables.

And of course one of the big policy areas they focus on is the exchange rate, which makes sense if you are trying to build wealth.

For a lot of High Net worth Individuals (HNIs), their spending is global; they spend in pounds, dollars and are earning naira which makes it very important to be aware of the foreign exchange policy.

For us what we try to do to help them navigate is just proper planning and provision of information and data and we usually hold monthly investment planning and strategy calls where we give our clients a sense of direction of the macro-economy and policies with regards to how it impacts their wealth and should affect their investment decisions.

We also build investment strategy models that are optimised for their global spending.

We recommend them to have a huge chunk of their investment in dollar-denominated instruments, and so on.

We are also encouraging them to look at high yielding instruments in alternatives like real estate and agriculture. It cannot all be T-bills and bonds because otherwise, you are not compensating for potential depreciation risk.

Those are some of the strategies we advise our clients on.

individuals who know what a hedge fund is and the risks involved.

But it made me realise that the level of sophistication even HNI clients in Nigeria are slightly different- I wouldn’t say it is worse-but way they understand investment is completely different because Nigeria has its own uniqueness.

So I just showed me that there was an opportunity to set up a firm to provide investment strategy and guidance to clients whilst helping them invest at the same time.

How has the transition from a developed market in the United States to a less developed one here in Nigeria been, especially in 2009 where Nigeria’s financial services sector was not as developed as it is today?

It was initially a difficult one, and that was why I decided to work in Nigeria first; I did that to be absolutely sure. Even now in my company, it is very rare for me to hire people with only foreign experience because one needs to know how Nigeria works.

One of the big things is when you work in investments in Nigeria you have to know everything end-to-end – especially operational backbone of everything.

In the developed market you do not know all of that and that was actually the big thing for me; coming here, having to understand what a Registrar does, a Custodian does, and so on. Trading abroad is a very different and seamless experience but working in Nigeria requires one knowing much more about the entire cycle of investments and you have to be like the “jack of all trade”. For me that was the transition; having to understand all of the bits and not just focusing on what the market was doing.

For instance, you could invest in a security that makes a lot of sense and just you not having your operational system set up could cause you to lose money. That is one of the reasons we are also passionate about technology here.

We have done a lot in the technology space and even now we are working on a networking platform that is targeted towards people who want to get the same wealth management advice and processes but want it simplified.

We actually just launched a platform called Wealth.ng and our goal here is to give people more of a simple experience with regards to investing.

Like you said, it’s been quite a transition, one in which we are trying to get the operational backend clean in other to give our client an experience that is simple.

What has working in Nigeria and trying to learn the Nigerian factor taught you about the domestic financial ecosystem?

Like I said earlier, working here in investment is actually different from doing so outside the country.

Again our work with clients actually varies; even though we are a wealth management firm, we focus on a range of things. We do www.businessday.ng

fund management, we do Trust, we also have a Registrar so our clients fall into different categories, but at the end of the day, our key priority is the Wealth Management need of different individuals but we engage with our clients on many different levels.

Take for example for the former Diamond Bank we actually provided their privileged banking unit with white label investment products. As you know, Universal Banking means that most banks no longer have their own investment subsidiaries and it means that they still have a need to provide some of these services and we have been able to step in to provide white labelled services to them at the backend.

One of the things we have definitely learned is that a lot of Nigerian Financial institutions have very broad offerings but sometimes they may be missing depth in

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particular areas and they are aware of this and it is why they are willing to work with firms that can provide them with further depth.

So we actually found in Nigeria that very few banks have a proper private bank based on global standards and it is something a lot of banks are aware of, but they make so much money from the rest of their business and private banking being much more of a long term kind of business is actually something they haven’t focused on.

themselves-part of the Nigerian factor.

However, collaboration can actually allow one to provide many more services to clients and keep them happier. These are part of what we try to preach to financial institutions: collaboration and partnerships to provide more to individual customers.

These have been some of the things we have experienced working with Nigerian financial services institutions.

As you know there are three banks with a group structure and they of course focus on it and do an amazing job at it, but a lot of the other banks that do not focus on this primarily are the ones that we look to help provide a white labelled approach which by the way is in line with global practice.

Globally a lot of wealth management companies and private banks use third-party products. It is only in Nigeria everyone wants to do everything

From your interaction with clients, what are their greatest concerns in today’s Nigeria and how are you helping them ease some of the worries?

As you know, Nigeria doesn’t have a lot of intergenerational wealth. Our wealth tends not to pass beyond one or two generations whereas, in countries like the United States, about 80 percent of private wealth is inherited. What that means is

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You talked about the economy and it brings me to financial inclusion, you represent the wealthiest 1 percent of Nigerians. What do you think the 1 percent of Nigerians should do to bridge that gap?

I am glad you asked that question because it is an area of passion for us. One of the things I tell people is that investing is the key to unlocking wealth both for individuals and nations.

For us, we have a big mission not to make the rich wealthier, but to drive and grow Nigeria’s wealth through the deploying of investment assets.

We do believe that Nigerians, unfortunately, focus too much on what the government should do rather than what we can do ourselves with our investment money. Because of that we strongly believe that HNIs have a very strong responsibility to the country through investment.

We are so much dependent on FDI and we shouldn’t be. Why should, for example, the stock market drop by 20 percent because foreign portfolio www.businessday.ng

investors take their money out? Why dont we have enough people here investing in the stock market?

Of course, there are many reasons for that but part of it is just because of the lack of proper guidance and investment portfolio allocation and so we really do think that there is a strong responsibility on the part of HNIs to solve Nigeria’s problem.

Many of the HNI’s may be interested in legacy building and philanthropy but then most of them want to build wealth for themselves first, so our objective is how to marry both ends and get Nigeria’s HNI to invest in sectors that are beneficial for the economy and their portfolios simultaneously. We often find that some of the best investment ideas do both.

One of the issues we have seen over the last several years of working with HNI’s in Nigeria is that the average Nigerian HNI’s portfolio is underperforming inflation.

If that is the case they are not even feeling that confident in their own wealth building, they are not going to be thinking about building the nation. And the big reason is that too much of the portfolio of most HNIs sit in low yielding real estate assets.

There are a lot of high yielding real estate assets that can be beneficial towards economic growth but unfortunately, the majority of HNIs put their money in 3-bedroom flats in luxury areas and the likes and that is actually not beneficial because rental yields are low at 3-5 percent.

So if you have 50 to 80 percent of your portfolio in real estate and it is low yield real estate, then your total portfolio return even if the rest is in high yielding fixed income, is not going to exceed 6-8 percent, and that means you are not building true wealth for yourself.

There are actually subsectors of real estate, like commercial real estates that are lowincome kind of real estate and yield as high as 20-25 percent. We are looking at substituting housing opportunities for our clients that can yield as high as 18-200 percent. Guess what!

That is the type of investment that HNIs really should be putting their money into.

If an HNI invests in student housing, that means the majority of students that live in terrible conditions now can afford to stay in better hostels and value would have been created for both parties.

For us, we spend a lot of time trying to think of how to find the sweet spot between where HNIs make more money than they current have-which would incentivise them to keep investing- and there is a benefit to the country.

So for us, that is why we spend a lot of time looking at real estate, agriculture, and venture capital and so on. We consider a lot of alternative investment opportunity to show our client because we really do think there is a strong need to aggregate capital in order to solve our nation’s problems.

What are the ranges of assets you offer your clients, and how do you manage risk and liquidity?

It comes back to the core of my discipline which is Investment Strategy to ensure clients

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have an optimised portfolio. It is just one of the most important things in investing.

You have to understand the client’s risk and return profile in order to suggest them an ideal portfolio allocation and still one of the first things we encourage clients to do is make sure they have a very good portfolio allocation to fixed income and we call that “sleep well money” which allows you to then take risk in other asset classes.

Like I said the majority of Nigerian HNIs have most of their asset and net worth in illiquid real estate.

I have had clients tell me “I am worth two billion but if you ask me to produce ten million now, I cannot.” This is something we hear from a lot of our clients.

Many HNIs in Nigeria have liquidity issues as they hold too much of real estate-the wrong real estate. We love real estate and even have a subsidiary that looks into real estate opportunities but we want clients to look at holding more of the higher yielding real estate and commercial real estates than residential.

Again one of the things we do is make sure clients have a healthy allocation to fixed income. Again the discipline of investment strategy involves you running what we call “optimizers”.

Optimizers involve the historical data of risk and return of different asset classes to help figure out what size each asset class should be in your portfolio. Portfolio allocation is a discipline and should not be based on words of friends and family, it should instead be based on professional advice.

This year, for example, we really like agriculture but it involves some risk which we are working with different organisations to ensure we create products that are as risk mitigated as possible.

So we are partnering with the likes of AFEX which is a commodity Exchange, we are partnering with NIRSAL which helps spread the risk from lending to agriculture.

Again it is down to size. If I think this asset class is going to return 25-30 percent to you, risk and return are again very tightly coupled.

If you are getting 14 percent in T-bills, a product with a return of 25 percent would be slightly riskier but if you size it appropriately, that risk over the long term should be minimized.

How competitive are your fees, can we get an overview of your performance compared to peers and Asset under Management (AuM)?

We manage about N25 billion currently for clients. We have much more in Assets under Custody. Our AuM is split almost evenly split between naira and dollars.

With regards to our peers, we actually do not currently run any mutual funds. That is a strategic decision because the majority of HNIs do not like Mutual Funds.

We found that most of our clients are entrepreneurs and entrepreneurs are generally very confident on their ability to build wealth

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Monday 01 July 2019

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CEOINTERVIEW Interview with Private Sector Leaders

‘We want to aggregate the biggest pool of private capital Nigeria...

Continued from page 27 and as such do not like structure that obfuscates what you are doingthey like to know what they are investing in. We invest for clients on a case-by-case basis in the specific products that we recommend. So we definitely have more of a portfolio approach.

Very few firms publish their portfolio numbers so it is hard to compare, but I do feel because we do use very rigorous methods, I would be willing to bet we are very close to the top.

With regards to fees, we try our best to be very competitive. Again we see the calibre of firms that clients move money from to us and we try our best to make sure we are benchmarked to those- and it is really all of the top guys, so our fees are generally in line with the industry.

We also try to be a bit more competitive by leveraging our lean structure which is optimised by technology. So we think that because of the use of technology we can definitely afford to keep things as lean as possible.

How much do I need to have to be a client of Sankore?

Sankore’s big mission is to aggregate the biggest pool of private capital Nigeria has ever seen in order for us to solve our country’s problems ourselves.

In order to do that, first, we have to be open for everyone. So what we are to trying to do is create multiple offering that meets different people at their points of need. So we have Sankore, the core platform which is targeted at the HNIs. The platform is a bespoke kind of service, and the average person has a minimum of N100 million to be a client.

Then we also have a mass affluent program which is Wealth.ng to offer the services we give to a small group of people to the broader group. The minimum to get started there is N10,000.

What we have been doing is to build a platform where people would be able to access to T-bills, Stocks and some of the Agric assets we have been talking about. Eventually we are also going to list some of the real estate offerings that we have as well. We want anyone to be able to come on and invest because at the end of the day we have to get people to have an investment mentality-that is the only way you build wealth.

Again the wealth of Nigeria is the aggregate of the wealth of its citizens; we actually think it’s a gain to get Nigerians interested not just in savings but also in investment because that is what really grows your pie.

Look at the fact that agriculture requires billions in financing in order for us to feed ourselves.

That is actually a simple problem

to solve theoretically with investments; why, for example, can all of us not decide to fund our farmers? The default rate of farmers is actually way less than the default rate of consumers and people are investing in consumer finance businesses, so why not Agric?

Then again some of the platforms are gaining popularity now; the likes of Farmcrowdy. It is a great movement which I greatly encourage- us financing and investing in the real sector. For us that is our angle on fintech, we really think we should be solving Nigeria’s problem and we have to go to the most basic industries that are able to hire the most people. It is the only way to build the wealth of Nigeria.

If we know that the government is trying to support rice farming, they are doing a bit of what they can with regards to trying to mitigate the risk of loss and are doing their best.

We have to try our best in providing financing to those sectors.

The key thing is with any investment there is certain risk of loss but you cannot make any return if you don’t take risks and that is one issue we have as Nigerians- it is

not our fault but we are very short term oriented. So even on our wealth and education platform, we see people asking how much they can make in 30 days, a week and so on.

One of the things we are trying to do is promote financials literacy about investment being a long-term thing. We talk about the fact that you really should not be investing in stocks if you are looking to make money by tomorrow.

We always tell people that their minimum horizon for stocks should be three years. It should, in fact, be five, but in Nigeria, we advise people to start with three before you go into stocks.

What advice do you have for young women looking to get into finance and build an amazing career there?

I am actually speaking to a small group of women tomorrow about wealth for women particularly.

The reason that is important is the income gap; the fact that women make a little bit less than men.

What we do not talk about is infact the wealth gap which is much worse.

The impact of this wealth gap

is very negative on women and their children. Women with lower wealth are more likely to be in abusive relationships.

Property rights in Nigeria don’t really cater to women; there are instances where women who lose their husbands cannot inherit the properties. There are just so many reasons why women have to take control of their wealth and it is an area I am passionate about and would be exploring some more over the next few years.

I think it is important for us as women to be very clear that we are different from men. That is a very controversial thing to say because for a long time women have tried to do the exact same thing as men and be treated the exact same way.

The only problem is we have different realities and we can never ignore biology; I have a three-yearold daughter I have to take three to four months off work.

The key is in understanding the wealth gap is causes because the majority of women want to have a family and kids and they will never put their work above their childrenwhich they never should.

So if that is the case, women should think about that even in

their career choices.

A lot of women, unfortunately, focus on careers that do not build wealth. The key thing is that it is better or women to pick careers in areas of high expertise, more than flexible jobs because the position of high expertise is much more difficult to dispose of.

So in my company for example, if you are a software developer you need to take three to four months of leave, I would still be waiting for you to come back because I don’t want to retrain a software developer. But if it is another role for which talent can be easily replaced, it would be a different narrative then.

Women globally do better than men at school. Expertise acquisition is not the problem of women, why are we then clustering into positions of low expertise? If you look across the world, most of the positions of low expertise are dominated by women.

Women have to stop that and start looking at those roles that they erroneously believe they are not good enough for.

Remember I said we should all be aware of what makes women different from men; did you know women are better investors than men, but most women do not know that.

In fact, many of the top funds in Nigeria are run by women, but guess what we only know their men bosses. We are living in patriarchy and women are not even aware of our own strengths. We are too fixated on our weaknesses but we have to focus on our own strengths.

Wealth.ng was built by a team of software developers with 50 percent women. I would actually say it is one of the most advanced investment platform in the country and it makes me glad to see women doing great.

We need women to gravitate towards high expertise careers that penalise less when we take time off.

The second thing is we have to invest. You cannot build wealth if you do not invest. Women need to be aware that we are naturally good investors and if that is the case we shouldn’t be worried about getting it. We are naturally good but invest less and it is actually the fact that women are risk-averse that makes us better investors.

The way money works, if you lose 50 percent of your portfolio, it takes 100 percent to come back. So being risk averse actually works really well for investors and investment is one of the high expertise professions that allow women to take time off without severe penalties. So these are the areas that women should really be dominating.

Women should pick careers that are not dispensable and should stop being afraid of things they consider to be male-dominated; they are only so because we allow it to be.

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Monday 01 July 2019

BUSINESS DAY

insurance today

In association with

E-mail: insurancetoday@businessdayonline.com

Brokerage fraternity plays caution against ON THE MONEY placing risks with ailing underwriters 5 Tips to manage your …lays watch over recapitalization salary wisely

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Stories by Modestus Anaesoronye

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he brokerage fraternity of the insurance industry, the Nigerian Council of Registered Insurance Brokers (NICRIB) has warned its members to avoid placing risks with challenged underwriting firms that cannot be able to pay claims when they arise.

According to the NCRIB, this is important to protect the image and integrity of the brokerage industry for the future of the business.

Shola Tinubu, president/ chairman, Governing Board of the NCRIB gave the warning during the June edition of the Members Evening of the Council hosted by NSIA Insurance in Lagos.

Tinubu who however waned on a personal note said “I would like to enjoin my professional colleagues to be wary of where you place your business for the protection of image of brokers and

L-R: Rotimi Edu, vice president, Nigerian Council of Registered Insurance Brokers (NCRIB); Ebelechukwu Nwachukwu, managing director, NSIA Insurance; Shola Tinubu, president; Maxim Hammel, client executive Africa, NSIA; and Bola Onigbogi, deputy president, NCRIB at the June Edition of NCRIB Members’ Evening held in Lagos

that of the Council.”

According to him, news making rounds have it that some Brokers still indulge in placing businesses with companies that are challenged and that may have difficulty in paying claims when losses occur. “This should be watched!”

He noted that it’s no longer news that the National Insurance Commission (NAICOM) has jerked up the minimum paid-up capital of Insurance Companies in Nigeria.

“The new capital base required that that Companies that want to remain in Life Business should raise their minimum paid up capital base from N2 billion to a minimum of N8 billion; General Insurance Companies from N3 billion to N10 billion, Composite Insurance Companies from N5 billion to N18 billion, while Re-Insurance Companies will require a Paid Up capital base of N20 billion from N10 billion.”

According to him, as Insurance Brokers, we cannot shy away from the fact that this directive will adversely affect the entire industry.

“As a proactive Council, we are critically examining the implications and possible solution to the effect the implementation would have on our members.

“As critical stakeholders we would be watching as the implementation of the directives unfolds before us, Tinubu said.

Sovereign Trust Insurance opens rights issue to boost capital

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he Management of Sovereign Trust Insurance Plc has announced the opening of the company’s Rights Issue for existing Shareholders.

The Rights Issue which commenced on Monday, June 24, 2019 will run through July 31, 2019.

The company is offering 4,170,411,648 (Four Billion, one hundred and seventy million, four hundred and eleven thousand, six hundred and forty-eight) ordinary shares of 0.50k each at 0.50k per share on the basis

Olaotan Soyinka, managing director/CEO of Sovereign Trust Insurance Plc

of one (1) new ordinary share for every two (2) ordinary shares of 0.50k each held

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as at the close of register on Tuesday, January 15, 2019.

In the same vein, the Management has enjoined all Shareholders of the company to take advantage of this unique opportunity by maximally taking up their rights in the Rights Issue with a view to increasing their stake in the company and as well grow their wealth in the very near future as the company is poised to moving on to the next phase of its growth stage.

Olaotan Soyinka, managing director/CEO of Sovereign Trust Insurance Plc, said the

Management of the company has set a growth agenda which is aimed at positioning the underwriting firm as one of the top five in the insurance industry in Nigeria. The Managing Director’s appeal to Shareholders of the company was unequivocal. “In achieving this aspiration, we have identified that a very robust capital base is critical to the success of the set agenda; hence the need to call on our Shareholders to fully exercise their rights by subscribing fully to the Rights Issue and ultimately grow their investments in the company”.

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ccording to the Governor of the Central Bank of Nigeria, Godwin Emefiele, the average Nigerian spends 73 per cent of his/her total income on food and beverages. Despite this huge spending on feeding, other present-day needs like data subscription, airtime, transportation costs and other utility bills scrape off what is left, leaving almost nothing to be saved.

In many cases, the entire earning is exhausted halfway into the new month and consequently exerting a financial burden on the salary earner prematurely.

However, with these five tips on how to manage your salary wisely, you can take control of your finances and start laying the foundation to a sound financial future: 1. Figure out how much you need: Before you can save money, you’ll have to pay for basic needs, such as monthly rent, utility bills, insurance, car maintenance, upkeep, transportation costs etc. It is therefore important that you develop a detailed list of all your expenses that are divided into annually, quarterly, and monthly categories. Make sure to include everything that you spend cash on, whether it’s a necessity or a desire. Don’t underestimate the small ticket items.

2. Plan your trips to the grocery store: Planning is a commonly underestimated habit; it’s too simple and doesn’t have as much weight as other

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more sophisticated ways of managing money. Nonetheless, practising the habit of planning your trips can save you a lot of money in the long run. Have a schedule, whether it’s weekly or biweekly. When making that trip to the supermarket, also make sure you have a detailed list of the items you want to critically restock.

3. Be an active investor: Investing your extra cash in stocks and currencies is another way to boost your salary. Online forex trading offers opportunities to make short-term gains from the ups and downs of currency pair prices.

4. Pay off debts: Debts are a financial burden and it’s a common issue everyone grapples with in personal finance. If you borrowed money to invest or start a business, make sure to pay the debt off as soon as you start generating revenue. Use an investment loan repayments calculator to see how much you should expect to pay in interest over a set period. If you can repay the loan earlier than the agreed-upon terms, make sure to exercise that option.

5. Set financial milestones: Nobody wants to pay rent forever. Set financial milestones including first home buying or investing in higher education.

Consistently learning and adding to your skillset can boost your earning potential. Financial milestones help validate that you are on the right track and that you are increasing your net worth over time.

Monday 01 July 2019

BUSINESS DAY

insurance today

33

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E-mail: insurancetoday@businessdayonline.com

Insurers board directors’ pay hits N3.5 bn in 2018 BALA AUGIE

P

ay for directors of insurance companies rose by 67.70 percent to record N3.50 billion in 2018, even as stock price of firms continue to be stuck at less than N0.50.

Directors’ emoluments are a contentious issue in the corporate world because shareholders want to be sure the pay is commensurate with the performance of stewards of the company.

Directors of Leadway Assurance Limited were paid N1.36 billion in salaries, emoluments, and bonuses in 2018, that represents a 453 percent surge from N247.35 million take home pay for 2017.

A breakdown of the figures shows Leadway paid its top executives N984.70 million in post emolument benefit in 2018, which is why the total figure surged.

Veritas Kapital Assurance Plc paid its Chief Executive Officers (CEO) N347.81 million in 2018; this represents a 53.33 percent increase from last year’s figure even as the company recorded a loss to end 2018 financial year.

Veritas revenue growth isn’t enough to cover operating expenses, as total operat-

ing expense of N2.91 billion outstripped net premium income of N2.08 billion, resulting in an expense ratio of 140.10 percent, and a combined ratio of 175.12 percent in the period under review.

A combined ratio above 100 percent means the insurer earns less in premiums than it pays out in claims and operating expenses.

The directors of Mutual Benefit Assurance Plc took home N401.15 million in salaries, emoluments, and bonuses in 2018; this represents a 11.86 percent increase from N358.57 million they received in 2017.

Wapic Insurance Plc’s top executives’ increased by 36.55 percent to N223.28 million in the period under review from N163.51 million the pr3evious year.

The directors of AXA Mansard Insurance Plc were paid N100.13 million in 2018 as against N86.645 million they pocketed the previous year.

However, Custodian Investment Plc directors pay was flat at N460 million as the insurer share price continues to allure investors because of its consistent dividend payouts.

Analysts are of the view that executive of top insurance companies do not deserve the pay they are getting because they have not be able to deliver a higher returns to shareholders.

For instance, share price of most of them is below N0.50 since the cap on stock was removed by the Nigerian Stock Exchange (NSE), and the reason for the poor stock performance is the inabil-

ity of firms to take more risk and pay bumper dividend to shareholders.

Paul Uzum, Equity Trader at Royal Guaranty and Trust Limited, said investors easily lose confidence in a company that do not reward them, and that people will start doubting the authenticity of the annual report.

“Imagine when a company is not paying dividend and the directors are receiving jumbo salaries and bonuses, buying expensive cars, and paying expensive for flight tickets,” said Uzum,”If these firms pay steady dividend, they will attract a new clientele. That’s why most insurers are badly priced,” Ozim however said Custodian and Allied Investment has distinguished itself as it has been reward-

ing its owners in the last five years, which is why its share price has moved from between N1 and N2 as at 2014, to between N5 and N6 today as at toady.

Insurers are not liquid enough to take on more risk and invest in investment securities that will help magnify revenue and underpin profit.

In saner climes such as the United States, the United Kingdom, and Asia, companies are in a solid liquidity position that they buy banks and skyscrapers that fetches them rental income.

Earlier the year, China announced that insurance companies are allowed to invest in perpetual bonds and Tier 2 capital bonds issued by certain banks as government seeks to bolster banking industry capital.

During the financial crisis of 2008, Life insurers in the United States, weakened by losses on their immense investment portfolios, were manoeuvring to get a slice of government bailout funds by buying up tiny banks.

But the insurance industry is bedevilled with a myriad of challenges such as cultural beliefs, lack of awareness about the benefit of taking up a cover, lack of trust, and slug-

gish economic growth.

In a country where over 50 percent of its people live on less than $1.90 a day, taking up a cover is luxury of the average man on the street.

Nigeria, with a population of 180 million people, has a penetration rate of 0.3 percent.

That compares with South Africa (14.7 percent), Kenya (2.8 percent), Angola (0.8%) and Egypt (0.6%). Similarly, the sector’s insurance density (a measure of industry gross premium per capita) is still one of the lowest when compared to peers – South Africa ($762.5), Egypt ($22.8), Kenya ($40.5) Angola ($30.5) and Nigeria ($6.2).

But the Nigeria Insurance Commission (NAICOM), the body that regulates insurers, have jerked up capital bases of firms, as it recognises that there are too many weak firms that cannot compare with their peers in Sub Saharan Africa.

The revised paid-up capital requires life Insurance business operators to raise its capital from N2 billion to N8 billion; General business from N3 billion to N10 billion, while that of Composite business has been jerked up from N5 billion to N18 billion.

Insurance industry premium hits N400bn in 2018 ...as NIA engages NAICOM on palliatives to drive recapitalisation Modestus Anaesoronye

T

he nation’s insurance industry has recorded a written premium income of N400 billion in the 2018 financial year, a growth of 10 percent from N363 billion generated in the 2017 financial year.

Tope Smart, chairman of the Nigerian Insurers Association (NIA) who made the disclosure in Lagos during its Annual General Meeting said the industry like other sectors of the economy during the review year grappled with challenges of power outage and over taxation, which impacted heavily on business.

“Growing Herdsmen/ Farmers clashes across the country, insurgency and armed banditry in the North, rising cases of kidnapping, armed robbery and other violent crimes as well the internecine communal clashes in some states all combined to negatively affect the bottom

L-R:Olusola Ladipo-Ajayi, past chairman; Eddie Efekoha, immediate past chairman; Yetunde Ilori, director general; and Tope Smart, chairman, all of the Nigerian Insurers Association(NIA) during its Annual General meeting in Lagos

line of many insurance companies,” On the new minimum capital requirement for insurwww.businessday.ng

ance companies, he said the leadership of the NIA was engaging the National insurance Commission (NAICOM) to

properly understand the components of the new capital as well as available palliatives to ensure a smooth exercise.

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“we have started engaging the National Insurance Commission (NAICOM) with a view to defining the components of the new capital level as well as the incentives and palliatives that members will enjoy to ensure that as many companied as possible scale through, Smart.

Smart however urged the association members to contact the secretariat if they face challenges and also for updates, “on our part we will continue to update you as we make progress in our engagements with the commission.” “The association is working closely with NAICOM to promote the business of insurance and increase its contribution to national GDP,” he said.

On the NIA towers, the chairman who had promised to work with other council members for its actualization stated that substantial progress in bringing the dream to fruition has been made, as the contractor and subcontractors have fully mobilized @Businessdayng

to site and work is progressing according to the work plan presented by the main contractor.

Smart also commended the Chief Executive Officers of member companies for their support towards the vision through payment of the NIA house levy, urging them not to relent as the association strives to deliver the project in July 2020.

Yetunde Ilori, director general of the NIA in her report reiterated the association’s successful implementation of the USSD code *565*11# which according to her would enable policyholders and law enforcement agencies upscale their monitoring and enforcement of compliance on motor insurance. The introduction of the code is a major achievement for the association as it eliminates challenges posed by poor internet connectivity in rural areas, which had been a major issue in the development of hand-held devices for enforcement of NIID, Ilori noted.

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Monday 01 July 2019

BUSINESS DAY

Start-Up Digest

In association with

A peep into Adepeju Jaiyeola’s entrepreneurship journey ODINAKA ANUDU

I

t takes courage to move from law to health. The difference between the two is clear: One is law and the other is health. This may appear like a repetition, but only lawyers and health practitioners know the real difference between the two.

Adepeju Jaiyeola studied Law at Obafemi Awolowo University. But she has decided to tread on the health sector to make a difference.

In 2011, she had an unforgettable experience that later became an inspiration. She lost a close friend at child birth. Her friend had a good job, financial power and exposure, yet died at child birth. This made Jaiyeola wonder what women in rural communities without money, education and good jobs could be going through.

“When you see numbers, those are just numbers,” she told Start-Up Digest at the Hague, the Netherlands, at the Global Entrepreneurship Summit held in early June.

“It is when you knew one person who died at child birth that you would know that no one was immune to dying at child birth. My friend was educated, working class, had information and the financial power to seek good healthcare, but she still died at child birth. It made me wonder what could be happening at rural communities where people would not have access to all these sterile facilities,” she said.

She thereafter went to rural communities and saw things herself. The difference, however, is that she decided to do something about that.

In 2014, she founded Mothers Delivery Kit to reduce maternal mortality in rural communities. Maternal mortality in Nigeria was 814/10,000 live births in 2014 so she needed to do something to reduce this phenomenon.

“We connect women in rural areas to life-saving supplies they need at child birth.

We work with women in these communities because we believe the location of a woman at child birth or her economic status in life should not be a factor in determining whether she lives or dies at child birth. The kit is an assembly of all the things which a woman needs at child birth. It is aimed at fighting the issue of accessibility and affordability of sterile

Adepeju Jaiyeola

equipment during child birth,” she explained.

She has different manufacturing partners in Nigeria who supply her with the content of the delivery kits. In some cases, she and her team design particular sterile equipment and then ask manufacturers to produce in large quantity.

The kits are, however, not completely free.

They are sold in different rural communities at the cost of $5.

“Women within the communities also sell the kits to traditional birth attendants, birthing homes, primary healthcare centres and other areas. From the sales of these kits, these women are also able to get incomes, support their families, start new businesses or pursue new dreams or even send their own children to school,” she said.

She does not just give out kits. She tries to establish contact or relationship with the ultimate consumer of the goods. And one way in which she does that is by training birth attendants.

“We have different trainings categories to different birth attendants. Our focus is on two lowest cadres of healthcare: Community extension workers and traditional birth attendants.

“We try to identify who holds the power to what is used during the child birth. The answer is the traditional birth attendant. So, we train birth attendants to improve birth outcomes for mothers and babies,” she disclosed.

“We use influential people, and we go through associations that ensure we get the maximum level of support we need,” she added.

Since 2014 when the mother of two boys started till date, she has sold over 500,000 kits across 346 communities in Nigeria.

“We have returning customers and those who order in large quantity or demand customisation of packs,” she explained.

So far, the growth has been rapid. In 2014, she started in two communities and had only 30 kits. This has moved to 346 communities now and over 500,000 kits. “Right now, we

are looking into new product developments,” she said.

She has been developing herself since then. Through the Mandela Washington Fellowship, she has studied Business and Entrepreneurship at University of Texas, Houston.

Thereafter, she interned at the Maternal and Child Health section of the United Nations Foundation.

She has also been privileged to receive the support of the United States African Development Foundation in kicking off Mother’s Delivery Kits.

“Our services are not in all the states. Because our services are usually accompanied with training, you will see us in some local governments in Katsina, Zamfara, Bauchi, Adamawa and many states. You will find us in Epe, Ibeju-Lekki, and Ikorodu in Lagos,” she said.

He said her kits were unbelievably cheaper than what anyone could get in the open market.

Apart from the United States African Development Foundation, her other investor is Unilever London. She said they were investors that would go beyond giving anyone just funds.

“They also connect you with platforms that can offer technical support and assistance; mentoring so that you continue in the work you do and improve the communities you sell to,” she explained.

She is also planning for expansion to all the states in the country.

She said Nigeria’s health sector was improving and getting better.

“We can do far better in terms of policies to ensure that development and quality trickle down,” the entrepreneur said.

Like other entrepreneurs, she certainly has challenges.

“The supply chain line is a nightmare. This is because we do not have infrastructural support. Imagine goods leaving for Lagos and you can’t even say authoritatively that they will arrive in Kaduna in three days’. Anything can happen to stop it, including a tanker bursting into flames and burning down all your goods.

Supply chain lines are the death of production lines in Nigeria. By the time they arrive in Kaduna, they are already more expensive.

That is why you find that drugs that are N30 in Lagos cost much more in Kaduna or Bauchi.”

Why retailers must refocus attention on consumer experience, by RAN JOSEPH MAURICE OGU

I

n an emerging and rapidly transforming retail market such as Nigeria, studies show that the market is yet unpredictable.

According to a research done by the Retail Association of Nigeria (RAN) and presented at its 6th edition of The Retail Leaders Conference (TRLC 2019), since 2015 when it undertook a 5-year plan to 2020, the retail market in Nigeria has been characterised by uncertainties and unpredictabilities.

Joseph Ebata, president, RAN/Bervidson Group, said the conclusion was as a result of new innovations, technology, consumer behaviourial experiences currently changing and improving today’s world, such that any market that could not grow with the trend of modernity would not remain business.

According to him, gone were the days when market could be predicted based on existing technology and innovations, which were not seen to change soon.

But in today’s world where robots and artificial intelligence (AI) are fast taking over the running of supermarkets, warehouses, even delivery of parcels on the streets, there is a need for every retailer to be innovative and move with the trend of event.

“The future involves a series of interplay of competitive forces and shifts,” Ebata said,

adding that in a growing market like Nigeria, “unpredictability is constant.”

According to RAN, unlike before, today’s business required rethinking, reshaping of mind and strategy in order to satisfy customer’s experience.

In the past, businesses tried to satisfy customers with quality goods and services, but today’s narrative has changed with studies showing that customers do not only want quality goods and services but dwell more on the experience they have while visiting an outlet.

“Nobody can drive to the future on cruise control,” Ebata said.

The group argued that increased competition usually translated into more power and choice for consumers, implying added pressure on the already thin average profit margins for retail businesses.

For this reason, Ebata said customer’s experience was fast becoming the new retail currency in the emerging retail market, and not merely the cash in the wallet.

During the period under study, the group said some retail outlets that were not innovative in their customer experience care and could not leverage on the existing technology either lost a lot of customers outrightly or had their outlet

L-R: Olusola Obabori, group managing director &executive director, Red Star Express Plc and Joseph Ebata president and CEO, Bervidson Retail Group during the Retail Leaders Conference held recently in Lagos.

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shrunken and eventually closed down.

“Retail businesses that failed to stand up to customers’ scrutiny felt the effects in lost sales revenue and profits. Others simply became history as customers voted with their wallets,” Ebata said.

For retailers to survive the new waves in technology and customer experiential behaviour, the group advised players to refocus attention on the new consumers that are so dynamic in behaviour and preferences, very powerful, more demanding and less forgiving.

Business owners should equally build agile, transparent and demand responsive supply chains systems. In addition, retailers should also embrace and use apposite technologies to optimise operation for greater effectiveness, which would help in building capabilities to put data at the heart of their organisations and creating the agility to respond to market change.

According to RAN, having a system that will enrich customer’s experience and make them come back again is very important. This should be the driving force for retailers to rethink how and where to serve the smart consumers and provide them with the right experiences they seek, thus providing consumers with compelling reasons for continued patronage.

“Leaders must be willing to take bold strategic and tactical steps to guarantee success and survival into the future”, Ebata advised.

@Businessdayng

Monday 01 July 2019

BUSINESS DAY

35

Start-Up Digest Meet Chuks Ogbekile, entrepreneur driving facility management industry Josephine Okojie

C

huks Ogbekile is the founder of Colorvine Integrated Services Limited, a start-up facility management firm that operates in Lagos.

Chuks was inspired to establish Colorvine in 2012 owing to his love for entrepreneurship right from his childhood days.

“Right from my secondary education days, I discovered that every little move I make towards business always succeeded. This inspired me to resign my job with MTN Nigeria to establish Colorvine Integrated after working for some years,” he says.

Apart from owing a start-up business, Chuks is also actively involved in entrepreneurship coaching, youth development, and sales and brand development.

The economist-turned-entrepreneur says his strength and motivation come from unique insights into the entrepreneurial opportunities in the Nigerian business ecosystem.

He tells Start-Up-Digest that he started his business small and that it has grown quite well still starting.

He advises youths with excellent business ideas not to allow inad-

Chuks Ogbekile

equate capital to deter them from pursuing their goals, noting that ideas drive capital.

“I had the required skill and network. Industry knowledge and social capital were the main forms of capital I had,” he says.

“In my first job, after the interviews, I was given a 75 percent payment upfront and that was how I raised my first working capital,”

he adds.

Chuks says his business expansion strategy has moved beyond the planning stage. He states that the business is making arrangements to have more trucks for its relocation management unit.

He adds that the business is leveraging social media to grow its client base and also doing things innovatively to ensure customer

satisfaction.

On challenges of the business, he identifies huge truck maintenance cost and high rate of insecurity as major issues.

“We have had to reject some relocation jobs to some parts of the country for security reasons,” he explains.

Similarly, he says that the huge road infrastructure gaps, inadequate finance and policy flip-flop are other major challenges confronting his business.

He urges the government to bridge the country’s huge infrastructural gaps and provide more funding for start-ups to scale up their businesses.

He also calls on government at all levels to address the huge security challenge in the country as it has continued to deter growth and development.

“Security of lives and property should be of utmost concern to the government of Nigeria today,” he advises.

In evaluating the facility industry in Nigeria, the economists- turnedentrepreneur says that the outsourced form of it is relatively new in the country.

However, he says that awareness is growing by the day as many businesses now see how it can ensure

optimal performance.

“Business owners should entrust the facility management practitioners with cleaning, gardening, handling functions like plumbing, electrical challenges, fumigation, space allotment &management, sewage disposal, and generator maintenance, among others, for efficient management,” he advises.

“We as facility management practitioners are better trained to proactively handle these to give them peace of mind. Colorvine Facilities handles the aspects of buildings, estates, malls, and other space facilities such sports and car parks,”he says.

On his motivation for becoming an entrepreneurial coach, he says he believes that it is a God-given potential to everyman and his insights into the enormous opportunities that abound in the country’s ecosystem as well as success stories of successful entrepreneurs.

On advice to other entrepreneurs, Chuks says, “Engage in continuous self-development and do not lose focus particularly in building a customer-centric team.

Be innovative, continue to acquire skills, develop your brand continuously and ensure customer loyalty always.”

her business, she has worked on improving herself and building her clientele. She has been able to record progressive growth in her business, making reasonable profits in the process. She attributes this to the kind of friendly relationship established with the clients.

“Currently at Olúbùnmi, we are at a competitive stage where we have to keep being creative and relevant in our artwork without running another man’s race,” she says.

She has a five-man team of professional employees who assist her in various jobs. In addition to this, she has successfully registered her business with the Corporate Affairs Commission (CAC).

Despite the excitement she has for her business, she encounters major challenges which include: getting some necessary but very expensive instruments, influx of smart phones trying to replace cameras, and unstable electricity. The entrepreneur wants the government to implement policies that will aid start-ups, especially access to cheap funds. She also requests organisations to support upcoming entrepreneurs to acquire more training through workshops and seminars that will help

them to improve. She stresses the need for the government to create an enabling business environment by way of easy access to cheap credit, removal of multiple taxes and regulators, among others.

The budding entrepreneur has plans to create a niche in photography that will be unique to her brand. She also plans to get a studio that will serve as a training institute for prospective photographers, partner with event managers in order to have consistent clientele and also incorporate video coverage, which she can employ someone for.

Apart from being certified as a project manager, the entrepreneur attends trainings and works with top-notch photographers, which gives her the necessary experience and knowledge.

She is inspired by major players in the industry as well as events happening in her surroundings.

Her life’s values are hard work, dedication and prayer, which have worked for her over the years, even before she became a photographer.

Advising other entrepreneurs, she says, “It is not easy but with hard work and determination, it will be worth it.”

Anuoluwapo: Making waves in photography space Gbemi Faminu

K

ushimo Oluwabunmi Anuoluwapo is one of Nigeria’s hardworking and upcoming photographers, rapidly working her way to popularity. She is the head photographer and creative director at Olúbùnmi Photography.

Life has dealt her blows at different points but she refuses to be daunted. She studied Mass Communication at Moshood Abiola Polytechnic, Abeokuta, where she bagged Ordinary National Diploma (OND) and Higher National Diploma (HND) certificates.

Having been passionate about capturing special moments and creating memories, she combined passion with education to establish the business which involves helping people to document their best moments into beautiful memories. She says that following her passion is one of the best decisions she has made personally. She is happy to be a photographer and thrives in a business dominated by men.

She started her business in 2014 as a student with N15, 000.

Then, she used a small camera,

though her father later gave her a brand new one. However, while serving as a National Youth Corps Service (NYSC) member, she purchased a professional camera, funded with her savings and contributions from friends and family members. From then on, she built her business and purchased other

necessary equipment, including lighting set, mobile studio, and flash diffuser, among others.

“Starting a business in Nigeria is not easy, but because I was passionate about it and was encouraged by my family and friends, I did not give up,” she says.

Since Anuoluwapo started

Kushimo Oluwabunmi Anuoluwapo www.businessday.ng

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36

Monday 01 July 2019

BUSINESS DAY

Live @ The Exchanges

L-R: Andrew S. Nevin, Advisory Partner and Chief Economist at PwC West Africa; Gbite Oduneye, CEO, AOA Investment Group; Sheye Aina, chair, British Nigeria Law Forum (BNLF); Olumide Lala, Africa Programme Manager at the Climate Bonds Initiative; and Olasupo Shasore (SAN), Senior Partner, Africa Law Practice during the BNLF Seminar on Trends Redefining the Financial Industry held recently in Lagos.

Nigeria stock investors lost N480bn in June Stories by Iheanyi Nwachukwu

T

he month of June has gone but the negative remark it left on the Nigerian stock market will always be remembered.

The lost value of stocks on the Nigerian Stock Exchange (NSE) in the month of June 2019 is approximately N480billion.

Investors at the Nigeria Bourse who had their equities portfolio cumulatively valued at N13.685trillion as at the first trading day in the review month (June 3) saw it eroded to N13.205trillion as at June 28, the last trading day in the review month.

As a result, the NSE All Share Index (ASI) declined by 3.55percent, from month-open level of 31,069.37 points to 29,966.97points as at Friday June 28.

This recorded decline in the review month no doubt implies that it did not favour some long-term investors at the Nigerian Stock Exchange (NSE) who decided not to sell their stocks.

Aside the month’s performance, the stock market has lost 4.66percent of its year-open value, data at the Exchange showed.

Stock price indicators show many equities listed on the NSE are in red com-

pared with their prices at the beginning of the year.

Despite that prices of stocks across the board remain deflated in June and presented attractive entry points for bargain hunters, the market activity still slowed down as investors’ sentiment on Custom Street remained evidently bearish. Some of the stocks that far underperformed the NSE ASI year-to-date (YtD) are PZ Cussons (-41.3percent), Berger Paints (-18.6percent), Chemical and Allied Plc (-21.1percent), Cement Company of Northern Nigeria (-32percent), Champion Breweries (-15.1percent), CHI Plc (-31.6percent), Conoil Plc (-6.9percent), Cutix Plc (-14.6percent), and Dangote Sugar Refinery Plc (-25.6percent).

Other top laggards this year include Eterna Plc (-16percent), ETI Plc (-21.4percent), FBN Holdings Plc (-17.6percent), FCMB Plc (-13.8percent), Fidelity Bank Plc (-16.3percent), Flour Mills Nigeria Plc (-39.4percent), Forte Oil Plc (-6.6percent), and GlaxoSmithKline Consumer Nigeria Plc (-29.7percent).

In the review month, some analysts expected investors with medium to long term investment horizon to cherry pick value stocks based on their attractive prices across the board.

The list of top losers at the NSE this year include GTBank Plc (-4.5percent), Guinness Nigeria Plc (-33.8percent), Honeywell Flourmills Plc (-21.1percent), Ikeja Hotel Plc (-6.5percent), International Breweries Plc (-40percent), Jaiz Bank Plc (-6percent), Law Union (-13.3percent), Mobil Oil Nigeria Plc (-8.4percent), MRS Plc (-18.9percent), NAHCo Plc (-12.6percent), NASCON Plc (-16.7percent), Nigerian Breweries Plc (-26.3percent), Neimeth Pharmaceuticals Plc (-33.3percent), NEM Insurance Plc (-15.9percent), Nestle Nigeria Plc (-6.4percent), Niger Insurance (-16.7percent), NPF Microfinance Bank (-36.4percent), and Oando Plc (-20percent).

Also in the big losers league year-to-date (ytd) are stocks like: Okomu Oil Palm (-16.0percent), Presco Plc (-18.8percent), Resort Savings (-60percent), Seplat (-17.2percent), Stanbic IBTC Holdings (-16.1percent), Total (-26.1percent), Transcorp Plc (-14.4percent), UACN (-31.8percent), UAC Property Development Company (-21.5percent), UBA Plc (-19.5percent), United Capital Plc (-16.7percent), Unilever (-10.8percent), Unity Bank (-39.3percent), University Press (-15.1percent), Vitafoam (-12.7percent), and Zenith Bank Plc (-14.1percent).

Airtel: Meristem asks investors to bid between N363 – N375.53 range

A

head of Airtel Africa admission for trading on the Nigerian Stock Exchange (NSE) on July 4 research analysts at Lagos-based Meristem Securities Limited in their June investment recommendation advised that investors bid between the N363 –N375.53 price range.

The analysts said they used a blend of various valuation

methods and arrived at a fair value of N375.53 (83 pence) for the offer. The Book Building for the planned Initial Public Offering (IPO) which opened on June 18 closed last Friday June 28. Through the Book Building process, the underwriters attempted to determine the price at which the IPO will be offered.

“The company possesses decent growth prospects

across its operating markets, particularly in Nigeria which is the single largest contributor to company revenue, at 35.9percent, and is key to the company’s strategy of driving revenue growth. However various operational risks existing in some of its markets may pose significant risks to the health of the overall business”, Meristem Securities said.

Monday 01 July June 2019

BUSINESS DAY

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37

38

Monday 01 July 2019

BUSINESS DAY

real sector watch

How cement makers turned Nigeria’s big challenge into opportunity

billionaires. Between the first quarter of 2015 and that of 2019, cement makers listed on the Nigerian Stock Exchange (Dangote, Lafarge, and CCNN) grew revenue from N180 billion to N236 billion. The number certainly exceeds N200 billion if BUA is factored in.

In Q1 of 2019, they grew revenue by four percent.

In fact, Dangote is already exporting the product while BUA is exploring markets in Nigeria, Burkina Faso and other parts of West Africa.

The huge opportunity found by cement makers is down to the country’s huge infrastructure gap.

The gap is so huge that Nigeria has to spend $100 billion for the next six years to close the hiatus, according to

Bureau of Public Enterprises (BPE). A federal government data show the country must spend three to five percent of its gross domestic product (GDP) to bridge the gap.

The Financial Derivatives Company, an economic and financial research firm, puts its own estimate at $15bn annually for 15 years.

Roads are bad but increased spending to close the gap by federal and state governments is providing opportunities for manufacturers who supply cement and concretes.

Nigeria has a population of 200 million people but housing deficit is between 17 and 20 million units. Houses are springing up in cities and must be built with cement and other materials. Bridges are also critical. Federal and state governments are embarking on several bridges now and again, and cement makers are always in the mix.

More opportunities are even knocking. The Centre for Affordable Housing Finance in Africa says that currently, Nigeria has a low homeownership rate as its housing production is roughly 100,000 units, yearly which are below one million units needed annually to bridge the gap by 2033.

The transport sector is a determinant for a country’s economic development. According to an infrastructure report for 2017, budgetary allocations for the transport sector was N19.5 billion in 2015, N424.27 and N365.1 billion in 2016 and 2017 respectively.

Obser ving the company’s performance, the Shareholders commended its board and management for a creditable performance, noting that the 2018 result reflected a solid business and the strength of its operations.

At the AGM, the company also declared major milestones in its Dairy Development Programme, which included construction of additional milk collection points to support milk collection; investment in milk trucks and farm machinery; and the establishment of four dairy cooperatives.

A statement on the company’s first quarter perfor-

mance and outlook for 2019, signed by Ore Famurewa, corporate affairs director, quoted Ben Langat, managing director, as saying: “FrieslandCampina WAMCO delivered a strong result in Q1 2019 with 10 percent topline sales growth vs Q1 2018. As a company, we remain positive and confident about the future. We are assured that our brands which are leading in the market will continue to grow. We will sustain the current initiatives that have proven to be effective and develop innovation that consolidates our market leadership to meet the every day needs of our customers and consumers.”

ODINAKA ANUDU & GBEMI FAMINU

O

nce upon a time, Nigeria imported cement in millions of metric tons (MT). Lafarge was the only major cement maker in Nigeria and could not even satisfy one-thirds of the market. China, India, Brazil and several countries found Nigeria a big export market.

Annual cement production between 1999 and 2002 was around 1.7 million MT, but demand was almost 8 million MT. In 2002, Olusegun Obasanjo, then president of Nigeria, challenged the likes of Aliko Dangote, today’s Africa’s richest man, to move into the cement production business. Obasanjo came up with a policy that revolutionised the cement industry. The policy was simple: Unless you set up a local cement plant, you would not be allowed to import. Nigeria’s population was rapidly growing and it was becoming clear that cement demand would be rising. With a rising population, infrastructure gap was widening.

Between 2006 and 2007, Dangote set up local plants while Lafarge expanded.

The likes of Unicem and Cement Company of Northern Nigeria (CCNN) came on board later to chase market share. In December 2018, CCNN merged with BUA’s Kalambaina plant in Sokoto, North-West Nigeria.

SOURCE: Company Financials, BusinessDay

From mere 7.5 or 8 million metric tons, demand has shot up four times since 2002.

Local production of cement is over 40 million MT today, with Dangote pushing out 70 percent of the entire capacity.

Dangote has moved to Edo (Okpella) and Ogun (Itori), with the two plants having a capacity of nine million MT. Dangote has since then established many cement plants across Africa.

“Sales of cement from our Nigerian plants increased by 11.4 per cent to 14.2 million MT in 2018,” Aliko Dangote, president of Dangote Group, said on June 18, 2019, at an annual general meeting in Lagos.

The entry of BUA changed the face of the industry, with expansion happening so fast.

Fewer than six months after commissioning its 1.5million MT Kalambaina Cement Plant in Sokoto State, BUA completed its newest Obu plant in Edo State, with a capacity of three million MT annually.

This brings the total capacity of BUA Obu cement operations to six million tonnes and moves the entire group’s installed capacity to eight million MT. The cement plant started three years ago when BUA engaged Sinoma at the height of foreign exchange crisis and began production in March last year.

The plant runs on coal, heavy oils or a mixture of both, and the use of coal is expected to save over 70 percent of energy costs compared with 15 million litres

of fuel oil per month or 40 tonnes or even 20 trucks of fuel that could have been used per day.

“We have built a 32 megawatts multi-fuel captive power plant and a coal mill. To put this in perspective, this new plant will be generating more power than is currently generated by the entire Sokoto State,” Abdul Samad Rabiu, chairman and CEO of BUA Group, said in Sokoto in 2018.

Lafarge has been conservative in cement investment over the years in Nigeria, but it remains a strong player in concrete. It recently divested its South African operations with a sale to another affiliate of LafargeHolcim Group.

Cement revenue and profits have helped to turn entrepreneurs into mega

How FrieslandCampina WAMCO fared in 2018 ODINAKA ANUDU

F

rieslandCampina WAMCO Nigeria PLC , makers of Peak and Three Crowns, has recorded a turnover of N149.2 billion, which was a six percent increase over 2017 with N140.1 billion. Profit before income tax increased by three percent, from N15.9 billion reported in the previous year to N16.3 billion.

T h e re s u l t w a s a n nounced at the company’s 46th annual general meeting held in Lagos last week.

Shareholders approved a total dividend payout of N9.27 per N0.50. Although

businesses generally experienced low consumer spend during the year under re-

view, FrieslandCampina WAMCO showed significant commercial and financial

improvement compared to 2017, recording impressive volumes through its brands.

L-R: Roel van Neerbos, president, FrieslandCampina Consumer Dairy; Jacobs Ajekigbe, chairman, board of directors, FrieslandCampina WAMCO; Oyinkan Ade-Ajayi, non-executive director, and Ben Langat, managing director, FrieslandCampina WAMCO Nigeria PLC. at the 46th annual general meeting of the company held in Lagos June 20, 2019 www.businessday.ng

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Monday 01 July 2019

BUSINESS DAY

39

real sector watch

Backlog of EEG claims valued at N350bn, not N1.2trn — NEPC ODINAKA ANUDU & HARRISON EDEH

T

he Nigerian Export Promotion Council (NEPC) has said that the total value of the Export Expansion Grant (EEG) backlog claims between 2007 and 2016 is N350.417 billion and not N1.2 trillion as earlier reported.

Abdullahi Sidi-Aliyu, director in charge of policy and strategy, NEPC, had been quoted as saying that the value was around N1.2 trillion, but he has come out to state that the figure was far less than reported.

Earlier at the annual general meeting of the Manufacturers Association of Nigeria Export Promotion Group (MANEG) in Lagos in 2018, however, he had told journalists that the value of backlog EEG claims was over N1 trillion.

In a fact sheet sent to BusinessDay, he said the backlog claims approved by the National Assembly were worth N195.089 billion. But a document seen by BusinessDay earlier put the number at N193.042 billion.

L-R: Janet Adetu, CEO, JSK Etiquette Consortium; Otunba Oluwatoyin Akomolafe, national president, Nigerian-American Chamber of Commerce (NACC) and Akaoma Onyeonoru, corporate social responsibility executive, MultiChoice at the NACC 58th Annual General Meeting and New Members’ Induction held on 28th June, 2019, in Lagos.

The fact sheet also shows that the number of beneficiary companies was 270, though document seen by BusinessDay said 269.

As reported earlier, SidiAliyu said the number of expected beneficiaries was 38 while claims waiting approval at the National Assembly were valued at N129.88 billion.

He further said for 2017, total claims approved for payment were worth N23.849 billion, with 61 companies as

beneficiaries. However, the value was yet to be paid with Export Credit Certificate.

He added that N4.086 billion out of N13.2 billion budgeted for 2018 EEG settlement was released by the Federal Ministry of Industry, Trade and Investment. The EEG Implementation Committee has approved promissory notes of the sum in favour of the 61 companies, having secured the approval of the Minister of Industry, Trade and Invest-

ment for the disbursement to beneficiaries.

The EEG was originally

established in 1986 to help Nigerian exporters to become competitive at the global market. It is a practice in many developing and developed countries such as China, India and Australia to provide concessions or cash rebates/ grants to companies penetrating new markets or consolidating already established markets to enable them rival competitors.

Companies that exported different kinds of products or commodities between 2006 and 2016 were owed billions of naira in claims as the federal government did not meet the obligation of settling them as promised.

Some of 38 companies that are yet to be paid, including PZ Cussons, British American Tobacco, Okomu Oil, Lee Group (which has seven subsidiar-

Why we embarked on trade mission in 2018—Nigerian-American Chamber ODINAKA ANUDU

T

he NigerianAmerican Chamber of Commerce (NACC) says it embarked on trade missions in 2018 to expose Nigerian businesspeople to opportunities in the U.S. Speaking at the chamber’s 58th annual general meeting held in Lagos weekend, Otunba Oluwatoyin Akomolafe, national president, NACC, said the chamber had its 2018 trade mission in Washington DC themed ‘Partnership for Prosperity’ in June, with a total number of 26 registered delegates participating.

“The mission featured B2B interaction with the Nigerian Diaspora on business opportunities, meetings with US African Development Foundation and Centre for International Private Enterprises.

The delegates also participated in the Africa Trade and Investment Global Summit (ATIGS),” he said.

He said the chamber also embarked upon an inward trade mission to the Chamberin in May, with five compa-

nies from the State of Illinois, US, participating.

“Over 30 member companies participated in the specially packaged B2B meetings and the feedback was enormous,” he said.

He said there was a second edition of African Food And Products Exhibition featuring over 100 exhibitors and more than 2,000 visitors.

He explained that the chamber engaged in topical issues using the monthly breakfast meetings as platforms.

“For the year 2018, the chamber had a total number of eight breakfast meetings cutting across the logistics, telecoms, oil & gas, real estate, economy and SMEs with guest speakers from Lagos Business School, Nigerian Shippers Council, MainOne Cable, Nigeria Export Processing Zone Authority, Nigerian Content Development and Monitoring Board, Nextzon Business Services and General Electric,” he said.

“Most remarkable of these meetings was the official launching of the Property, Construction and Infrastructure Business Group of the chamber and also in Novemwww.businessday.ng

ber 2018 a breakfast meeting focusing on the Social Impact of the American Businesses in Nigeria in partnership with the American Business Council.”

He explained that as part of the chamber’s campaign for continuous capacity building, various training programmes were held for both members and non-members.

“The 2018 witnessed a total number of 10 trainings, which are an improvement from 2017. These trainings covered various businesses, leadership and marketing skills. We shall continue to improve on our training offerings through partnership with topnotch training facilitators in meeting the skills gaps in the marketplace,” he stated.

He said African Growth and Opportunity Act (AGOA) committee worked assiduously to ensure the AGOA National Utilization Strategy for Nigeria was finalised and presented to the Federal Government for approval.

For financials, the chamber realised a total income of N69.7 million, from N40.3m in 2017, generating a surplus of N13.2m as against N3.6m in 2017. https://www.facebook.com/businessdayng

@Businessdayng

ies), Sapele Integrated, Nestlé Nigeria, De-United Foods, Beta Glass, Unilever, and Dangote Agrosacks, among many others, alleged in an earlier report that some senators wanted them to offer ‘lunch’ before approval.

But Francis Alimikhena, chairman of the Senate Committee on Promissory Notes, debunked the allegation.

“Don’t mind them; they are telling lies,” he responded.

“The promissory notes that we have already passed? We didn’t see them and we passed over 290, and it is just remaining 38 companies. The 38 just appeared before us last week.

They did not even come with their papers. They are just telling lies. What they are telling you is a lie. They have not even appeared before the House of Representatives even,” he said.

40

Monday 01 July 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

When we’re reminded of death at work ZHENYU YUAN, LISA E. BARANIK AND ROBERT R. SINCLAIR

M

any occ u p a t i o n s involve exposure to mortality. Critical-care nurses and emergency medical technicians must take care of dying patients. Firefighters and police find themselves in danger when trying to save lives.

There may be two divergent ways people process mortality cues. Those prone to “death anxiety” tend to experience aversive emotions such as fear and panic, whereas those who engage in “death reflection” focus on the ways they can find mean-

ing in their lives and enter into a more positive mindset.

Our research has focused on understanding the consequences of these different responses at work. Dealing with death takes a toll on employee well-being and creates challenges for both businesses and society at

large. Employees facing mortality cues should not be left to suffer the negative consequences associated with death anxiety.

Through another path — death reflection — they can be happier, more focused, more engaged and more productive.

Organizations and managers can play an

important role: Acknowledge that dealing with death is stressful, and implement supportive human resources practices and policies. Newcomers and young people may be the most vulnerable to death anxiety because of their inexperience. Therefore, organizational onboarding should include

death-related educational modules that teach participants how to cope with the stress. In the recruitment process, realistic job previews should include honest descriptions of death-related experiences on the job.

Systemic interventions, such as death-related training, should also be put into place to help people reduce death anxiety and promote death reflection.

Employees themselves should be actively involved in the design and implementation of these interventions, so that they can confront their own feelings about death and find meaningful ways to develop a growth mindset around it.

Managers can serve

as effective role models, using their own behavior to shape the ways their subordinates process mortality cues. When they avoid talking about death, employees follow suit and shy away from the topic. If they instead reflect on death and ways to find meaning, employees will be inspired to do the same and get more engaged in the pursuit of their calling.

(Zhenyu Yuan is an assistant professor at the University of Illinois at Chicago. Lisa E. Baranik is an assistant professor at the University at Albany, SUNY. Robert R. Sinclair is a professor at Clemson University.)

Investors reward companies that highlight digital initiatives SURAJ SRINIVASAN AND WILBUR CHEN

D

igital technologies have the potential to transform a wide range of businesses, especially in traditionally nontechnological sectors.

Motivated by the breadth of these digital transformations, we’ve done research exploring how frequently they are occurring, what benefits they are creating and what impact they are having on financial performance. We’ve tried to answer three specific questions: First, how extensive is the adoption of digital technologies by nontech firms?

We find that firms that are larger and younger, and that hold more cash and spend less on capital expenditures, are also more likely to

go digital. Companies with weaker performance are going digital sooner, perhaps as a possible response to competitive pressures.

Second, what are the benefits of going digital?

For one, investors seem to love it. Valuations of firms that go digital are 7% to 21% higher than those of peers.

Moreover, firms that go digital also receive higher valuations on their earnings.

Their price-earnings ratio is 3% to 9% higher, and they receive 30% to 90% higher returns per dollar of incremental earnings than firms that don’t disclose digital activities.

Third, how are compa-

nies faring as they adopt digital technologies? Surprisingly, we find little evidence of immediate improvement in financial performance. We find positive performance benefits only in terms of asset turnover (a measure of efficiency of use of assets), which increases by 3% to 9% over three years

relative to peers, following the disclosure of digital activities.

However, we find no change in overall financial performance (measured by return on assets) and significant declines in operating margins and sales growth (lower by 14% to 42% and 10% to 30% respectively) when digital activities are disclosed. These limited benefits could be due to several factors.

One, the gains from digital activity take a long time to bear fruit and firms have to bear the costs in the interim. Many successful tech firms that undertook large digital investments, like Amazon.com, waited many years to become profitable.

Two, competitive forces may quickly erode the benefits of going digital. For instance, customers may ben-

(C) (2017) Harvard Business Review. Distributed by New York Times Syndicate

Partnership our core value

through 125 years

As your trusted advisor and business partner, we stay true to our promise to always deliver the ultimate ‘gold standard’ of value and excellence.

Let’s journey to the next 125 years together.

efit from better products but companies cannot sustain higher prices because of competition. Three, firms may not have the right management team to go digital.

It’s imperative to pay attention to having senior managers with the right tech acumen.

Investors are rewarding the early movers even if immediate financial-performance benefits remain elusive. The risky nature of the digital investments highlights the need for companies to keep capital markets better informed, and provide assurance that they have the right managers to execute the digital transformation.

(Suraj Srinivasan is a professor at Harvard Business School, where Wilbur Chen is a doctoral student.)

Monday 01 July 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

41

In association with

Platforms and blockchain will transform logistics SANGEET PAUL CHOUDARY, MARSHALL W. VAN ALSTYNE AND GEOFFREY G. PARKER

W

ith increasing digitization, platformbased business models will connect new players, wash away inefficient old ones and harness the cloud. At least three factors are driving the industry move to platforms: New infrastructure and technology, richer and more visible logistics data and relentless pressure to reduce costs.

Consider how global shipping giant Maersk and IBM have partnered to launch TradeLens, a blockchain-based platform for managing global shipments involving multiple stakeholders. Events across the shipping life cycle — credit checks, contract signing, arrival at port and payment — can be recorded publicly. On TradeLens, event data and document information are written on the blockchain, which creates a single source of truth that all can see.

Enterprise cloud technologies are also increasing coordi-

nation across the supply chain.

As more companies move their digital processes and workflows to the cloud, they can share data with one another more easily through application programming interfaces, or APIs, software that allows two applications to talk to each other. Using APIs, supply-chain events can be aggregated on central

platforms that receive data from participating firms’ distributed systems in real-time. Supply chain efficiency can be continually optimized.

As more fleets, ports, warehouses, and containers become instrumented, the value of these platforms increases via network effects. Value grows in multiple ways. First, greater

availability and coordination of fleets, warehouses and containers leads to faster end-to-end shipment and better route optimization. Second, as different types of fleets and warehouses come on board, the scope of use cases that logistics platforms can handle also increases. As an expanding set of warehouses with different specifications

join a platform, the platform becomes more valuable to more parties.

As the platform mediates more shipments, it learns which shipping life-cycle events and which actors create more delivery volatility and then uses this learning to hedge and buffer future operations. Finally, creating a platform-based market for idle assets such as transportation and storage capacity allows them to be time-sliced and rented at increasingly finegrained and coordinated intervals.

Finally, decentralized lastmile delivery services are a growing industry that will interface with central logistics platforms and can be expected to do so even more as they become autonomous.

(Sangeet Paul Choudary is an entrepreneur-in-residence at INSEAD. Marshall W. Van Alstyne is a professor at Boston University School of Business.

Geoffrey G. Parker is a professor at Dartmouth College.)

Actually, consumers do buy sustainable products Corporate leadership should no longer give brand managers a pass when they claim that there is no demand for sustainable products. And investors should support companies in making the investments needed for the pivot.

TENSIE WHELAN AND RANDI KRONTHAL-SACCO

F

or years, brand managers have groused that while consumers say they intend to buy sustainable products, in a store they don’t actually purchase them.

NYU Stern’s Center for Sustainable Business just completed extensive research into U.S. consumers’ actual purchasing of consumer packaged goods, or CPG, using data contributed by IRI, and found that 50% of CPG growth from 2013 to 2018 came from sustainabilitymarketed products. Products with a sustainability claim on the packaging accounted for 16.6% of the market in 2018, up from 14.3% in 2013, and delivered nearly $114 billion in sales, up 29% from 2013.

Products marketed as sustainable grew 5.6 times faster than those that were not.

(Tensie Whelan is a professor at NYU Stern School of Business and founding director of the NYU Stern Center for Sustainable Business, where Randi Kronthal-Sacco is a senior scholar.)

What do these findings mean for corporate managers and investors?

Consumers are voting with their dollars — against unsustainable brands. The legacy companies that will thrive are those that accept this shift and are willing to pivot, such as PepsiCo and

Unilever. CPGs that are not making the pivot will lose — Kraft Heinz, whose investors have encouraged a cost-cutting approach that is backfiring, is a case in point. Given the evidence that consumer tastes are changing, an attitude of “Why mess with a recipe that has worked well

over the last 40 years?” is the wrong one to take.

Some of the necessary transformation can be accomplished by reinventing legacy products, as Unilever has shown with its “sustainable living” brands, now delivering 70% of its turnover growth.

Brought to you courtesy of First Bank Nigeria

42

Monday 01 July 2019

BUSINESS DAY

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Monday 01 July 2019

BUSINESS DAY

Government Enterprise & Empowerment Program

43

Brought to you by

Africa’s most impactful financial inclusion programme: Why GEEP works

G

EEP is beyond a social good.

It is a matter of economic security. It is a more direct effort of the federal government to break the multi-decade jinx of economic growth without shared prosperity.

According to studies, MSMEs (predominantly informal microenterprises) contribute 76 percent of Nigeria’s GDP and 60 percent of labour. Yet 85 percent of these enterprises cite ‘access to finance’ in their top three challenges, as only 0.4 percent of banking loans in 2017 were lent to this microenterprise segment. GEEP’s beneficiaries are of this segment often-neglected by traditional banks unwilling or unable to handle scale and informality. They are the Nigerians for whom ₦10,000 to ₦300,000 represent a complete turnaround in their businesses and livelihoods. And with the power of biometrics, a BVN as digital collateral, mobile data capture, mobile wallets, and a 4000-strong agent network, GEEP has been able to properly target, document, profile, and deliver credit to 2 million people in this demographic.

GEEP’s achievement – and continued mission – remains to provide access to finance, and sustainable financial inclusion, and to do this at scale. The programme is making good on this agenda. Recently, it was awarded the most impactful financial inclusion programme in Africa at the African Bankers’ Award. It also gained recognition at the 63rd UN Commission on the Status of Women, where the executive director of the Micro Enterprise Division of the Bank of Industry, Toyin Adeniji delivered a presentation which showed how GEEP is being deployed

using technology and how beneficial it has been for empowering women.

Since its inception in 2016 GEEP hasserved and strengthened 4,084 cooperatives with GEEP loans nationwide, enabled the creation of over 1.4 million new mobile wallets, and 350,000 new bank accounts, provided job for over 5000people who are now GEEP agents nationwide, and, thus, expanded agency banking. Over 55.41 percent of beneficiaries are women, and the programme has footprint across all 774 local governments across the 36 states and the FCT. GEEP has proven to be a sustainable model for driving financial inclusion and ensuring easy access to affordable capital in Africa; here are a few reasons why GEEP works: Last Mile Focus driven by largest agent network in Africa The majority of GEEP beneficiaries have not used financial services before; see going to the bank as very expensive inconvenience, and have a natural aversion to technology. Bearing this in mind, GEEPuses market cooperatives and field agents as an acquiring structure. Every single day, over 5,000 agents go to the markets across the 774 LGAs across Nigeria to register petty traders at their point of trade. This has enabled GEEP register over 7 million MSMEs in Nigeria; over 2 million of whom have benefitted from the GEEP loans. It has also allowed the program gain scale; visiting over 1600 markets since inception.

Extensive KYC and data validation via mobile forms GEEP agents are equipped with proprietary application that enables full

www.businessday.ng

chief operating officer, GEEP, Uzoma Nwagba, showing the programme’s live activity to the vice president, YemiOsinbajo, at the GEEP Command Centre Abuja.

registration and capture of applicant data e.g. biodata, information on the market, nature of trade, GPS coordinate of the trade point, association member and all other data that enables credit assessment. Data on every captured beneficiary is delivered to Bank of Industry real time to enable verification, appraisals and credit assessment.While captured beneficiary data go through several points of verification within the system and against connected third party data sources, the beneficiaries only involvement is a call from one of GEEP’s 120 GEEP call center representatives to confirm their profile details.

Mobile Wallet, Bank Account Disbursements and automatic loan booking There is no need for further documentation; every verified applicant who doesn’t have a bank account immediately has a mobile wallet created for them.

Disbursements are made into the bank accounts or mobile wallets. This allows

every loan disbursed to be booked automatically on a core banking system that is plugged to all commercial banks in the country. Consequently, every loan given out on the programme can be traced to a beneficiary involved in a known trade, at a known location, within a known market association, cooperative or farming cluster.GEEP works with mobile wallet operators and all banks to ensure seamless disbursements.

Ubiquitous repayment options and automatic qualification after repayment GEEP makes it easy for beneficiaries to repay the loans by breaking it down into weekly repayments (for marketmoni and Tradermoni loans) or allowing farmermoni beneficiaries pay during the season of har vest.

Beneficiaries can walk into any bank in the country and make repayments the same way they make utility bill payments.

GEEP also developed re-

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payment scratch-cards for beneficiaries much farther away from banks. Beneficiaries purchase the cards in their local markets and load them as they would a Telco recharge card. This immediately credits their loan account. Also,when beneficiaries take a loan and pay back, they automatically qualify for the next higher amount. Each new loan requires simply dialling a USSD code. Disbursements happen in minutes into their mobile wallets or bank accounts Partnerships GEEP has leveraged partnerships to scale. The Bankers’ Committee, a body that represents all commercial banks in Nigeria donated phones to the program. These phones have been given to qualified beneficiaries who didn’t have phones and thus would have been unable to participate in the program.

Airtel also donated free sim cards to go with the phones.

Good partnerships with other ecosystem players:

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all commercial banks in the country, over 1600 market leaderships, over 4000 market cooperatives and farming clusters, and several technology companies have enabled the smooth implementation of the program.

St r o n g g ov e r n a n c e framework, operational control, and ops embedded monitoring and evaluation With a fully functional operations control center and a team of analysts and behavioural scientists, GEEP embeds consistent monitoring and evaluation into its operations to ensure full program efficiency, and proactive issue resolution. It also has a robust governance framework that involves the Micro Enterprises Division of the Bank of Industry, the Ministry of Industry, Trade and Investment, the judiciary, the Central Bank, and the presidency through the office of the Vice President, and the National Social Investments Office. Consequently, GEEP’s operations follow a well-structured reporting framework to enhance transparency and national character.

By choosing to invest in Nigerians at the bottom of the pyramid, the federal government, through GEEP is charting a new course for Nigeria: one where every Nigerian regardless of educational qualification, political class or economic status is empowered to pursue their entrepreneurial aspirations.

This shouldn’t be done in Nigeria alone; more African countries need to do ‘GEEP’.

Structured, well managed affordable credit is not just the only way to onboard these members of the society, it is also the only way to spur productivity at the grassroots and to truly enable Africa achieve its economic potential.

44

Monday 01 July 2019

BUSINESS DAY

Access Bank Rateswatch

Market Analysis and Outlook: June 28 - July 5, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.01

Q1 2019 — lower by 0.38% compared to 2.39% in Q4 2018

Broad Money Supply (N’ trillion)

34.89

Decreased by 0.77% in May' 2019 from N35.17 trillion in Apr' 2019

Credit to Private Sector (N’ trillion) Currency in Circulation (N’ trillion)

24.86 2.11

Decreased by 0.13% in May' 2019 from N24.89 trillion in Apr' 2019 Decreased by 2.22% in May’ 2019 from N2.16 trillion in Apr’ 2019

Inflation rate (%) (y-o-y)

11.4

Increased to 11.40% in May 2019 from 11.37% in April 2019

Monetary Policy Rate (%) Interest Rate (Asymmetrical Corridor)

13.5 Adjusted to 13.5% in March 2019 from 14% 13.5 (+2/-5) Lending rate changed to 15.5% & Deposit rate 8.5%

External Reserves (US$ million) Oil Price (US$/Barrel) Oil Production mbpd (OPEC)

45.07 66.69 1.73

June 27, 2019 figure — a decrease of 0.15% from June start June 28, 2019 figure— an increase of 2.4% from the previous wk May 2019 figure — a increase of 5.49% from April 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr)

Friday

Friday

28/06/19

21/06/19

29,966.87 13.21

0.39 0.39 30.75

0.25

0.19

Value (N’bn)

5.40

4.16

MONEY MARKET NIBOR Friday Rate (%) 28/06/19 OBB

Friday Rate (%) 21/06/19

4.00

8.71

O/N CALL 30 Days

4.64 5.13 11.62

9.21 5.00 12.09

90 Days

12.65

12.72

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

28/06/19

Friday (N/$)

21/06/19

Official (N) Inter-Bank (N)

306.90 360.88

306.95 360.69

BDC (N) Parallel (N)

0.00 361.00

0.00 362.00

Friday

Friday

BOND MARKET AVERAGE YIELDS Tenor

(%) 28/06/19

(%) 21/06/19

3-Year 5-Year

0.00 14.02

0.00 14.43

7-Year 10-Year 20-Year

13.97 14.14 14.38

14.67 14.45 14.67

30-Year

14.57

14.67

Disclaimer

Indicators

28/06/19

1-week Change (%)

29,851.29 13.15

Volume (bn)

Tenor

Change(%)

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture Cocoa ($/MT) Coffee ($/lb.)

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Gold ($/t oz.)

Silver ($/t oz.)

Copper ($/lb.)

66.69 2.30

2.40 4.55

2425.00 109.65 66.19 12.80 545.00

(3.06) 8.30 0.06 1.27 2.40

Global Economy In the US, the Federal Open Market Committee (FOMC) left their policy interest rate unchanged in a range of 2.25% to 2.5%. The much anticipated post-meeting statement dropped a reference to being “patient” on borrowing costs, and indicated that “uncertainties” about the outlook for the US economy “have increased”.

The statement furthermore said that, due to these uncertainties and lower-than-previouslyexpected inflation pressures, the Committee will closely watch incoming economic information and will “act as appropriate to sustain the expansion”. FOMC members were divided in their voting, with one member being in favour of a 25 basis point cut. In a separate development, Eurozone economic sentiment deteriorated to the lowest level in nearly three years in June, survey data from the European Commission showed. The economic sentiment index dropped to 103.3 in June from 105.2 in May. This was the lowest since August 2016, when the reading was 103.2. The weakness in overall sentiment was driven by lower confidence in industry and services and among consumers, while confidence improved in retail trade and, particularly, in construction.

Elsewhere, in Japan, manufacturing activity contracted again in June as new orders fell at the fastest pace in three years, a preliminary survey showed. The IHS Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 49.5 in June from a final 49.8 in the previous month. The index was at its lowest since March, and below the 50 threshold that separates contraction from YTD Change expansion for the second straight month. The index for new orders, domestic and foreign, fell (%) to a preliminary 47.3 from a final 48.7 in May to the lowest level since June 2016. New export 3.46 (24.74) orders fell at the sharpest pace in five months.

25.26 (15.78) (14.59) (16.50) 25.72

Domestic Economy The Central Bank of Nigeria's (CBN) Governor, recently unveiled the 5-year policy direction for the apex bank. While highlighting some successes recorded in the past five years (20142019), the apex bank helmsman stated that 1413.87 1.12 7.31 Change 15.24 (0.72) (11.34) although the results recorded in the last five (Basis Point) 271.25 0.31 (17.25) years of his administration were re-assuring, Nigeria's economy still remains fragile. The CBN (471.0) NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS five-point agenda include; domestic macroeconomic and financial stability, fostering (457) Tenor Friday Friday Change the development of a robust financial payment 12.5 (%) (%) (Basis Point) system infrastructure that will increase access (47) 28/06/19 21/06/19 to finance to all Nigerians, thereby raising the 1 Mnth 10.93 11.02 (9) financial inclusion rate in the country, growing (7.6) 3 Mnths 0.00 0 external reserves and supporting efforts at diversifying the economy through intervention 6 Mnths 11.61 10.84 77 programmes in the agricultural and 1 Month 9 Mnths 12.52 12.52 0 manufacturing sectors. The governor also 12.99 13.32 (34) Rate (N/$) 12 Mnths announced that the apex bank is set to 28/05/19 recapitalize the Nigerian commercial banks. The 306.90 ACCESS BANK NIGERIAN GOV’T BOND INDEX aim is to re-position the Nigerian banks among 360.39 the top 500 banks in the world, while also reducing the risks and the possible impact of any 0.00 Indicators Friday Friday Change economic crises on the financial sector. In a 361.00 separate development, the Manufacturing (%) (%) (Basis Point) Purchasing Managers' Index (PMI) stood at 57.4 index points in June 2019. This indicates an 28/06/19 21/06/19 expansion in the manufacturing sector for the 2949.34 2933.04 0.56 Change Index twenty-sixth consecutive month. The index (Basis Point) grew at a slightly slower pace when compared to Mkt Cap Gross (N'tr) 8.73 8.65 0.99 Mkt Cap Net (N'tr) 5.53 5.46 1.30 the previous month (57.8 points). This was 0.0 shown in the latest PMI report by the Central YTD return (%) 20.07 19.40 0.67 (40.8) Bank of Nigeria. A PMI above 50 points indicates YTD return (%)(US $) -35.72 -36.41 0.69 that the manufacturing sector is generally (69.9) expanding, while a reading below 50 points (31.2) TREASURY BILLS (MATURITIES) indicates a contraction. Twelve of the sub(29.1) Amount Rate(%) Date Tenor sectors surveyed recorded growth during the (N' million) month, while the non-metallic mineral products (10) 91 Day 3,000.00 9.6 19-June-2019 and primary metal subsectors recorded decline 182 Day 4,000.00 11.89 19-June-2019 in the period under review.

29.84

This report is based on information obtained from various sources believed to be reliable and no representation is made that it is accurate or complete. Reasonable care has been taken in preparing this document. Access Bank Plc shall not take responsibility or liability for errors or fact or for any opinion expressed herein .This document is for information purposes and private circulation only and may not be reproduced, distributed or published by any recipient for any purpose without prior express consent of Access Bank Plc.

364 Day

10,614.11

12.02

19-June-2019

Stock Market The Nigeria stock exchange experienced a bullish turn at the end of trading week due to renewed buy-interest in medium and large capitalised stocks. The index increased by 0.39%

Sources: CBN, Financial Market Dealers Association of Nigeria, NSE and Access Bank Economic Intelligence Group computation.

to settle at 29,966.87 index points from 29,851.86 index points the previous week.

Similarly, market capitalization gained 0.39% to close at N13.20 trillion from N13.15 trillion last week. This week, we expect mixed performance as fund managers embark on portfolio repositioning and balancing for month end and Q2 earnings reporting season.

Money Market Rates at the money market saw a decline as liquidity was boosted by Open Market Operations (OMO) maturity of about N34 billion. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates settled at 4.0% and 4.64% from 8.71% and 9.21% respectively the previous week.

Similarly, the 30-day and 90-day NIBOR closed lower at 11.62% and 12.65% from 12.09% and 12.72% respectively in the preceding week.

This week, we expect rates to expand due to expected retail auction and foreign exchange auction.

Foreign Exchange Market The local unit saw an appreciation against the dollar across most major market segments for the week ended June 28th 2019. The official window saw a slight appreciation as it ended N306.90/$, a 5 kobo gain from the prior week.

Likewise at the parallel market, naira appreciated to N361/$ from N362/$ the previous week. At the NAFEX window, the local unit saw a slight depreciation of 19 kobo to close at N360.88/$.

The appreciation recorded in the parallel and official market segments may be attributed to the apex bank's regular interventions. This week, we envisage the stability in the market would continue due to consistent FX liquidity injections by the CBN. Bond Market Average bond yields dipped across all th segments in the week ended June 28 , 2019 due to unmet demand from the previous day's bond auction as well as the expected bond maturity of N351 billion this week. Yields on the seven-, ten- and twenty-year debt instruments settled lower at 13.97%, 14.14% and 14.38% from 14.67%, 14.45% and 14.67% respectively. The Access Bank Bond index climbed by 0.56 points to close at 2,949.34 points from 2,933.04 points the previous week. This new week, the market is expected to remain positive owing to the renewed interest in the Bonds market.

Commodities Oil prices ended modestly higher last week as global markets awaited the outcome of the Group of 20 leaders' summit. Bonny Light, Nigerian benchmark crude settled at $66.69 per barrel last week, 2.4% higher than the previous week. Precious metal prices went in varying direction as the price of gold edged up while the price of silver dipped. Uncertainty over the outcome of highly anticipated trade talks between China and the United States boosted the appeal of gold as a safe-haven asset.

Consequently, gold price closed at $1,413.87 per ounce, up 3.4% from the previous week's close.

In contrast, silver declined to $15.24 per ounce compared to $15.35 per ounce the prior week due to low demand. This week, oil prices will likely be determined by the outcome of the OPEC and Russia meeting scheduled to hold this week to discuss an extension of the oil –production pact.

For precious metals, prices are expected to remain supported, getting a boost from dovish tones from major global central banks.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Jul’19

Aug’19

Exchange Rate (Interbank) (N/$)

361

362

362

Inflation Rate (%)

11.44

11.5

11.5

Crude Oil Price (US$/Barrel)

65

67

67

For enquiries, contact: Rotimi Peters (Team Lead, Economic Intelligence) (01) 2712123 rotimi.peters@accessbankplc.com

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Sept’19

Monday 01 July 2019

BUSINESS DAY

MARKETS INTELLIGENCE

45

Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Analysts upbeat on palm oil producers’ future earnings BALA AUGIE

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nalysts are betting that an uptick in domestic crude palm oil (CPO) price on the back of reduction in global supply glut and magnified demand for rubber will add impetus to Nigerian palm oil producers’ earnings.

The largest firms in the industry (Okomu Oil Nigeria Plc and Presco Nigeria Plc) saw a record drop in earnings since 2017 financial year as raw material price at the international markets continues to dwindle.

“While the global CPO supply glut picture remains largely intact at the time of writing, we note that CPO prices have recovered, rising by 8 percent quarter on quarter ( q/q) in the first quarter of 2019,” said analysts at Cordros Securities Limited.

“The resurgence in CPO prices was, in part, driven by the reducing size of the global supply glut,” said analysts at Cordros Securities,” said analyst at Cordros Securities.

In the latest report, Cordros analysts said the global rubber prices have also picked up significantly, benefiting from the proposed cartel-like “rubber export restriction” by Thailand, Indonesia, and Malaysia.

“The impact of the foregoing, in our view, bodes well for sector players’ margin,” said the analysts,” the analysts summed.

Okomu Oil’s sales reduced by 42.50 percent to N4.22 billion in March 2019, from N7.34 billion the previous year - the drop at the top line (revenue) is the first since 2015.

The company’s net income fell by 71.18 percent to N1.0 billion in the period under review as against N3.47 billion as at March 2018 - the first slump in at the bottom line (profit) in 5 years.

Presco Nigeria’s sales reduced by 16.54 percent to N5.50 billion in the period under review as against N6.59 billion the previous year.

Revenue has been ebbing since 2017, with its net income declining by 17.37 percent to N2.14 billion in March 2019 from N2.59 billion the previous year.

In 2015, the Central Bank of Nigeria (CBN) had shut out crude palm oil with 41 items from the foreign exchange window in order to protect the country’s external reserves and curb inflation in the face of the precipitous drop crude oil price of mid-2014.

The policy was a boon for these

firms because competitors, who couldn’t access foreign exchange to import the commodity, were forced to patronize them.

Palm oil producers have seen net profit margin deteriorate since the central bank introduced a new foreign exchange regime that paved the way for competitors to import the commodities.

Presco’s net profit margin has been ebbing since 2016 while Okomu’s margins reduced by margin dipped to 52.12 percent in March 2019 as against 24.15 percent as at March 2018.

However, there is light at the end of the tunnel for palm oil producers as Nigeria plans to increase its palm oil production 700 percent over the next eight years.

The new policy will boost local production to about five million tons from 600,000 tons a year by investing as much as N180 billion ($500 million) beginning this year, the trade and investment ministry said in a report.

“Our policy objectives over an eight-year period (between 2019 and 2027) will see that we locally produce 100 percent of local crude palm oil demand by 2027, increase revenue from importation via duties and deliver 225,000 full-time jobs and at least 450,000 seasonal jobs,” it said.

Presco Plc, the country’s largest producer of palm oil, is driving an expansion plan that expects a 500 ton capacity refinery to begin operating in first quarter of 2020, with an additional increase of its milling capacity from 60 tons an hour to 90 tons an hour by next January, Felix Nwabuko, its chief executive officer said in a conference call with investors on Thursday.

By 2022, the company expects to push capacity to 210 tons an hour, with an additional 60 tons per hour in milling facilities, he said.

The West African nation’s palm oil impor ts rose from 302,000 tons in 2017 to 600, 000 tons by end of 2018, costing the country as much as $500 million, despite placing the commodity on a forex-exclusion list, central bank figures indicate.

While Nigeria wants to grow Continues on page 46

P.E

SHORT TAKES N9.03 trillion The pension fund asset under management as at the first quarter of 2019 stood at N9.03 trillion as against N8.63 trillion in the fourth quarter of 2018. Federal Government Bonds has the highest weight of 49.37% of total pension fund assets followed closely by treasury bills with 21.44% weight and local money market securities with 9.68% weight.

11.40% The headline inflation accelerated by 11.40 % in May 2019, indicating a 0.03 percentage point increase over 11.37% recorded in April. Food inflation accelerated for the second consecutive months by 13.79% in May, while core inflation slows to 9%.

2.5% Total trade grew by 2.50% in Q1 2019 compared to Q4, 2018, and 7.52% relative to the corresponding quarter in 2018.

The value of total imports rose 3.39% in Q1 2019 compared to Q4 2018, and by 25.84% over the corresponding quarter of 2018. Imported Agricultural products were 7.98% higher in value than in Q4 2018, and 28.1% higher than in Q1 2018.

BusinessDay MARKETS INTELLIGENCE (Team lead: BALA AUGIE - Analyst: Dipo Oladehinde, ENDURANCE OKAFOR, BUNMI BAILEY Graphics: FIFEN FAMOUS)

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Email the BMI team patrick.atuanya@businessdayonline.com www.businessday.ng

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46

Monday 01 July 2019

BUSINESS DAY

MARKETS INTELLIGENCE Oil prices set to hit year high on renewed Iran sanctions rhetoric … Nigerian market may fail to reap rewards.

I

A

An oil expert who spoke to BusinessDay on the condition of anonymity said that “a spike in oil prices in the coming weeks is imminent and the Nigerian government might benefit more from higher crude oil prices as production costs has been reduced to $23/ barrel. Since the earnings from oil exports represents the largest percent of foreign exchange to the country, it would be beneficial for the economy as the currency fears would further slide.”

On the back of this latest sanction rhetoric, analysts around the world have forecasted the possible removal of the waivers on the previous sanctions on Iran and maybe even a tougher sanction on Iran. This will be followed by a retaliation from Iran in the form of disruptions on the Strait of Hormuz to affect the oil supply and send oil prices to levels that will negatively affect the United

States of America.

“If Nigeria can optimize production levels while price improves further, they can tap into these gains but knowing the Nigerian government, there may even be a reduction in production if the prices go up which will dwindle our revenues.” the analyst concluded.

Because the Strait is so vital to the world’s economy, Iran has boosted its naval capabilities and tasked the Revolutionary Guard Corps — a famously anti-West, anti-US parallel military organization answering only to supreme guide Ali Khamenei — to protect it.

By the end of the day we would see oil prices either go up on a ‘Trump tweet’ or recede on a gentler response. If the former happens, all eyes would be on Iran in the coming weeks as investors would position for a retaliation which could push crude oil prices north.

Carmignac Gestion pays €30m to settle French tax investigation One of France’s best-known asset managers was investigated over a Luxembourg-based subsidiary Harriet Agnew, FT

C

armignac Gestion, one of France’s highest-profile asset managers, has agreed to pay a €30m fine to authorities to settle an investigation into allegations of tax evasion.

The investigation by France’s Financial Public Prosecution Office centred on how some of Carmignac’s executives were paid through a Luxembourg-based subsidiary between 2010 and 2014. The authorities challenged Carmignac’s decision to pay these employees dividends, rather than salaries, in a country with a more favourable tax regime than France.

Carmignac, an independent fund

manager that was set up three decades ago by Edouard Carmignac and Eric Helderlé, said in a statement on Friday that the settlement ends a case opened by the Public Prosecution Office in 2017.

“At no time were the interests of clients and partners questioned,” Carmignac said in the statement.

The settlement comes at a difficult time for Carmignac, which has been bleeding assets following a prolonged period of underperformance. In the past nine months, its assets under management have dropped from €50bn in the third quarter to €39bn, according to its website.

Mr Carmignac, who is credited as one of the first French fund managers to invest on a global scale and sell funds across Europe, in September

stepped back from the front line of fund management. A few months later he handed over the management of Carmignac Patrimoine, the group’s largest fund which invests in bonds, equities and currencies, to co-managers Rose Ouahba and David Older.

The Public Prosecution Office did not immediately respond to a request for comment.

Patrimoine made its name during the financial crisis of 2008 when its performance was flat while its benchmark index lost 12 percentage points.

However since then it has underperformed its index over one, three, five and 10 years, according to documents published on Carmignac’s website, much to the disappointment of the investors who poured in money after the financial crisis.

Gold on top as US stocks eye best June since 1955 Peter Wells, FT

N

othing like the prospect of an interest-rate cut to prop up the market, and growing bets the Federal Reserve might soon loosen monetary policy has lined the S&P 500 up for its biggest June advance since the 1950s.

In afternoon trade on the final

…as investors see promising outlook in debt markets Ifeanyi John

Ifeanyi John

third of the world’s oil supply passes through the strait of Hormuz, an important waterway located south of Iran and north of Oman. It is the most important waterway for global energy supply and the only way through from the Persian Gulf to the Arabia Sea and the Indian Ocean. With Donald Trump set to toughen his stance on the Iran sanctions, analysts forecast oil prices could return to levels last seen in April levels when a barrel of Brent crude sold for $74.

Last week, the Iranian government shot down a US drone in the Strait of Hormuz and there was a dispute on whether the Drone was in Tehran’s air space or international waters. A back and forth ensued after Tehran claimed that the US ‘spy’ drone was downed by its Revolutionary Guards and the US Secretary of State, Mike Pompeo said that ‘significant’ sanctions on Iran would be announced in retaliation to the incident.

Brent crude price is up 23.92 percent since the beginning of the year after hitting a year high of $74.51 in April. At the close of the Nigerian market on Friday, the price of futures on a barrel of oil was $66.67 improving by two-tenths of a percent since the start of trading.

FBNQ Commercial Paper top yield chart on FMDQ

trading session for June, the S&P 500 was up 6.7 per cent month-to-date.

That is set to be the biggest monthly advance since January, when the market was roaring back from its late2018 sell-off, and also the biggest June increase since 1955.

Rising expectations the Fed could soon cut interest rates to guard against the adverse economic effects of the US’s trade war with its allies were augmented by signals the Eu-

ropean Central Bank, too, might also be forced to begin easing monetary policy again. That all helped propel the S&P 500 and Dow Jones Industrial Average to record highs this month, although they were slightly short of those peaks at month end.

The Dow, up 7.2 per cent for June, was eyeing an advance on par with January, but an extra little burst would put it on track for its biggest monthly rise since October 2015.

nvestors searching for risk premiums in excess of 3 percent have up to N3.22 billion in outstanding value of FBN Quest Merchant Bank commercial papers to tap into as the date to maturity nears an end.

Commercial papers are unsecured short-term promissory notes with maturity mostly not exceeding 270 days. They are issued by large corporations to meet short-term obligations. In terms of dollar volume, commercial paper occupies the second position in the money market after Treasury bills.

Analysis of the Daily FMDQ quotation list shows that of all the 11 commercial papers quoted on FMDQ as at the close of business on Friday, FBN Quest Merchant Bank CP IX had the potential to yield the highest return for investors looking for significant risk premiums. As the maturity date draws to an end, the investors who care about the mathematics of returns can buy and receive rewards in 19 days to get an annualized return of 15.13 percent.

Obinna Uzoma, a Lagos based economist told BusinessDay that “the commercial paper environment seems to keep blossoming as

FMDQ keeps listing CPs on their platform. The fact that we have CPs worth N25 billion in outstanding value with maturities ending in at the end of July means that investors are a little bit weary but there are good deals to be done on the FMDQ OTC exchange.”

FBN Quest Merchant Bank who has the most commercial papers quoted on FMDQ had varying yields on its maturing debt securities but as maturity date nears, the yield on its CP IX ranks the highest on the yield table. This was followed by FBNQ CP VIII which ranked second with a risk premium of 2.90.

“These instruments only have a high yield because the date to maturity is under 2 months. With little appetite shown for these CPs the yields need to compensate for the short duration at which investors will have to lock up capital. The debt market has seen more activity in recent times and the outlook is that more large corporates by-pass banks still and issue promissory notes which are cheaper” Uzuoma added.

In May, Sterling Bank and FBN Quest Merchant Bank listed 180-day CPs at 12.51 and 12.46 percent respectively. Today, these commercial papers have valuation yields of 13.06 and 13.01 percent respectively representing a risk premium of 1.05 and 1.01 percent.

Analysts upbeat on palm ...

Continued from page 45

quickly in palm oil, it’s still likely to be a small part of a market dominated by Indonesia and Malaysia.

The country currently ranks as the

world’s fifth-biggest producer in palm oil, accounting for less than 2 percent of global production, according to data from the U.S. Department of Agriculture.

Monday 01 July June 2019

BUSINESS DAY

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47

48

Monday 01 July 2019

BUSINESS DAY

NEWS Terrestrial fibre infrastructure investment key to Africa’s digital economy growth - experts SEGUN ADAMS

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xperts at the ‘Africa Panel Session’ of the 2019 International Telecoms Week (ITW), held recently in Atlanta, USA, stressed the importance of broadband infrastructure investment in facilitating the growth of Africa’s digital economy.

Speaking on the theme “Enabling Africa’s Digital Economy,” Patrick Christian, principal analyst at TeleGeography, evaluated the African digital economy, noting that the study of global trends showed that Africa was maintaining its position as the fastest growing region in terms of internet usage, though data volumes remain lower than other parts of the world.

Christian underscored the importance of the role content providers such as Google, Microsoft and Facebook play in driving internet traffic and the expectation that their traffic on the continent would increase with the growth of Africa’s digital economy. It is expected that having more content beginning to reside and be exchanged within Africa, will

add tremendous benefits to the ecosystem.

A panel that included highlevel representation from MainOne, Google, Avanti plc, Angola Cables, CSquared Africa and WIOCC engaged in compelling discourse that highlighted these and other key factors for development in Africa’s digital economy.

The dialogue centred on the notion that the development of the terrestrial network is key to growing the digital economies of all African countries. A point further emphasised by MainOne’s CEO, Funke Opeke, who stated that the organisation was currently working in Lagos State to enable digital transformation through the deployment of 2500km of fibre across the state, adding to the almost 1000km of fibre currently deployed.

Opeke stated, “Our immediate focus is to ensure we have fibre to the towers, fibre to schools, health care facilities, and other government agencies, fibre to the enterprise/business districts, and with a density to reach within 1km of the majority of citizens in Lagos. We envisage having network density whereby over 60% of the population is

Hot air balloon pilot, paraglider take centre Axa Mansard, Laspark partner to Green Lagos climate change.”

XA Mansard, a member stage on CNN African Voices The Lagos government in of AXA, global leader in

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NN African Voices, sponsored by national telecommunications operator, Globacom, will this weekend continue its tradition of bringing to viewers Africans who have excelled in different spheres of life by highlighting the story of two pilots and a paraglider.

The 30-minute magazine programme will, from Friday celebrate a hot air balloon pilot from Kenya; David Eris Nguruga, a commercial pilot from Pimville, Soweto in South Africa, Tumi Carter Katisi, and a paraglider from Mauritius, Hans Joachim.

David Nguruga is one of the top balloon pilots with ‘Class C’ flying license. There are less than 100 people worldwide with this highest qualification. His childhood dream of flying airplanes has careered into a 12-year romance with hot air balloons. Speaking on his career, Nguruga said, “I had developed a liking for flying airplanes when I was a kid. I remember, we were having lunch and this fighter jet came out.

I stepped on my food just to see this plane. I was like, ‘whoa’. I said I want to be in one. So, I think I developed that from my childhood but never thought that I could do it.”

Katisi’s love for flying was ignited in her tenth grade when she got an assignment to shadow a professional in the workplace. She had earlier planned to become a medical doctor and chose to carry out the assignment in a hospital but none of the hospitals she contacted responded. She then decided to reach out to her aunt, a staff of South African Airways.

After her first experience, Katisi explained that she used every opportunity to visit the airport and gradually she became familiar with pilots who shared their secrets with her and allowed her to share in their simulator time. She eventually got her commercial licence having received communal help to pay her huge fees.

An elated Katisi has promised to use her experience to train other aspiring pilots from young South Africans females.

The third guest, Joachim is a specialist in recreational and competitive adventure sport of flying lightweight, free-flying, footlaunched glider aircraft with no rigid primary structure. He has ruled the Mauritius skies over the years sitting in a harness suspended below a fabric wing.

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insurance and asset management, has announced its partnership with the Lagos State government as they prepare to conduct the 2019 Tree Planting Exercise.

The Lagos State Parks and Gardens Agency (LASPARK) has announced that the 2019 Tree Planting exercise would hold on Sunday, July 14, 2019, with the theme: “Clean and green is our perfect dream.” The event will hold across all the 20 local government areas (LGAs) and 37 the Local Council Development Areas (LCDAs) in Lagos.

Speaking about the event at a meeting organised by LASPARK at its office in Ikeja, Kola Oni, chief strategy and marketing officer at AXA Mansard Insurance plc, said, “Insurance companies are in a privileged position to enhance knowledge on climate risks in order to better understand and tackle climate change.

“AXA Mansard is also aware of the role it can play in promoting environmental protection awareness amongst its stakeholders, contributing to improving the understanding of global and local environmental risks, and committing to addressing

2012 committed to an internationally recognized tree-planting programme to plant 10 million trees by 2020. This commitment is based on the fact that tree planting remains one of the most effective ways of absorbing greenhouse gases such as carbon dioxide and methane that are harmful to the environment from the atmosphere. The Initiative is therefore aimed at improving environmental sustainability in Nigeria.

Oni concluded that “As both a responsible insurer and as an environmentally responsible corporation, AXA Mansard has a responsibility to leverage its expertise and take action to reduce climate risks; supporting this initiative will enable us perform this responsibility successfully.”

In her remarks, the general manager of LASPARK, Bilikiss Adebiyi-Abiola noted that there was a universally progressive idea to integrate private bodies to government policies and programmes in order to achieve a broadband and enduring legacy, adding that tree was a significant accessory of mental and physical comfort.

EY appoints four new partners

E

rnst & Young Nigeria (EY) has announced the appointment of four new Partners. This move is part of efforts to continually provide quality and exceptional services to its clients across board.

The new admitted Partners are Adedapo Adewole, Damilola Aloba, James Adeagbo and Benson Uwheru. The appointment takes effect from July 1, 2019.

Dapo has been admitted as a Partner in Advisory services.

Prior to his admission, he was an Associate Director in the Advisory practice of the firm. In his new capacity, he leads the Technology and Digital practice across West Africa.

Dapo has over 18 years’ experience in technology consulting, specialises in Digital Strategy and Transformation solutions.

Prior to joining EY, he was an Executive at Accenture, responsible for leading Technology across Financial Services Dapo holds a BSc degree in Accounting from the University of Lagos. He also has other certifications in Microsoft Dynamics CRM, Project Management, ITIL and Business Continuity Management.

Damilola has been admitted as a Partner in Transaction Advisory Services. Prior to his admission, he was an Associate Director in the Transaction Advisory Services of the firm.

In his new role, Damilola leads the Consumer Markets in Transaction Advisory practice of the firm across West Africa, focusing on supporting EY’s priority clients, private equity clients and middle-market companies towards achieving their strategic growth objectives. He brings on board over 18 years’ experience in investment banking, corporate finance, mergers and acquisi-

tions, infrastructure and project finance.

He is a graduate of Economics from the Obafemi Awolowo University, Ile-Ife, a Fellow of the Institute of Chartered Accountants of Nigeria and an MBA graduate from the Warwick Business School, UK. He is passionate about supporting the growth strategy and capital agenda of organisations.

James is admitted Partner in the Tax arm of the business.

Prior to his admission, he was an Associate Director in Tax Services of the firm.

In his new capacity, he focuses on the Consumer sector, supporting global and local priority clients in the firm’s Global Compliance and Reporting unit.

James currently serves as the Tax Account Leader on several priority accounts.

James, who joined EY Nigeria in 2006, is a graduate of Accounting, and a Fellow of the Institute of Chartered Accountant of Nigeria.

He is also an Associate member of the Chartered Institute of Taxation of Nigeria. James serves on the Tax Faculty Management Board of ICAN. Benson has been admitted as a Partner in Advisory Services.

He was an Associate Director in the Advisory practice of the firm, prior to his admission. In his role, he leads the Risk Management practice across West Africa.

Benson brings over a decade and half of professional experience in strategy crafting and execution, risk management, financial management andproject management, gained globally and locally. Over the course of his career, he has been involved in growing the Risk Advisory business across banking, capital markets, and insurance and pension clients. www.businessday.ng

L-R: Farouk Aminu, head, investment management, National Pension Commission; Dayo Obisan, managing director, Greenwich Asset Management Limited/president, Fund Managers Association of Nigeria; Jumoke Olaniyan, vice president, market architecture, FMDQ Securities Exchange plc; Wale Okunrinboye, head, investment research, Sigma Pensions Limited/member, PenOP Technical Committee, and Zack Bezuidenhoudt, head, South/Sub-Saharan Africa, S&P Dow Jones Indices, at the S&PDJI/FMDQ Fixed Income Indices Sensitisation Workshop at Exchange Place, Lagos.

Nigeria phases out old yellow card July 1, replaces it with e-version Ifeoma Okeke

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he Federal Government has announced plan to phase out all old versions of Yellow card, as a new e-Yellow card has been put in place to take effect from July 1, 2019.

Making the announcement in Abuja, Abdulaziz Mashi Abdullahi, the permanent secretary, Federal Ministry of Health, said the new card had enhanced security features that could be verified anywhere in the world by scanning the bar code or checking the card number on the Yellow Card portal.

According to a statement made available to newsmen

in Abuja by Boade Akinola, director, media and public relations in the ministry, the introduction of the new e-Yellow Card, otherwise known as International Certificate of Vaccination or Prophylaxis (ICVP), is to address the issue of fake Yellow cards that have hitherto constituted a source of national embarrassment.

Abdullahi stressed that with effect from July 1, the e-Yellow card would be the only valid documented proof of vaccination against yellow fever.

Highlighting the importance of the yellow fever vaccine for which the yellow card is documented, he said Yellow fever, a viral haemorrhagic fever, caused by

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a virus transmitted by the Aedes Aegypti mosquito, is a potentially fatal illness but vaccine-preventable.

The permanent secretary noted that some countries, including Nigeria, were endemic for yellow fever and as such, travellers to affected (endemic) countries were at risk of exposure to infection by the yellow fever virus; hence, the mandatory vaccination against the disease.

To this end, the permanent secretary said according to the World Health Organisation’s (WHO) recommendation, all international travellers, nine months of age and above, who were visiting Nigeria, must be vaccinated @Businessdayng

against yellow fever.

Also, additional measures have been adopted at points of entry for the prevention and control of yellow fever, which involves the mandatory requirement of evidence of vaccination against Yellow fever on arrival in Nigeria, Abdullahi said.

He however noted that some countries also require evidence of vaccination against yellow fever as a condition for entry, and stressed that from July 1, travellers arriving Nigeria without proof of Yellow Fever vaccination would be vaccinated with the yellow fever vaccine at points of entry and issued the card, after payment.

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NEWS Incorporating value addition to Nigeria’s raw materials export Gbemi Faminu

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espite the prospects of having abundant raw materials, Nigeria loses billions naira annually shying away from fully utilising the raw materials in its possession.

While focusing on the proceeds got from exporting raw materials, billions of dollars are overlooked from bypassing value addition to these products.

A report released by Nigerian Export-Import Bank (NEXIM), using cocoa as a case study, shows that Africa accounts for over 70 percent of the global cocoa production with Nigeria as one of its key producers. The global value of raw cocoa export is $10 billion while the total value of all finished goods from cocoa annually is $200 billion with chocolates alone having $100 billion. This shows that Africa accounts for 73 percent of global production but enjoys less than 5 percent of the wealth in the value chain.

Ogbonnaya Onu, former minister of science and technology, posits that the Nigerian leather industry could be worth about $900 million in export in the coming years, provided that further action is taken and value addition is intertwined with the export process.

According to Bello Yakasi, a Kano-based leather dealer, Nigeria’s leather export value is between $600 million and $800 million annually, and with value addition, much more could be realised from leather products, as it is possible to get $150 billion leather footwear alone.

Mansur Ahmed, president, Manufacturers Association of

Nigeria (MAN) also said, “Value addition is the key to success in manufacturing,” transforming raw materials into finished goods for the market would grow the economy.

“For instance, you produce cocoa, turn it into cocoa butter and you export it. What you get from that cocoa butter, they convert into chocolates and for the same quantity of cocoa butter, the manufacturers of chocolate will make more profit a thousand times more than you do,” Ahmed said.

Experts are of the opinion that including value additions to exports in the country will contribute to the country’s economic development and GDP, it will generate more income and also provide jobs, thereby reducing the high unemployment rate.

Incorporating value addition to the country’s exports will require some basic utilities, especially infrastructure.

In view of this, the president of MAN said infrastructure was one of the main components of a successful manufacturing sector, therefore, major investments should be made in infrastructure.

There is need to be updated with global trends, especially in the technological and digital aspects, he said.

Tayo Omidiji, head, Strategic Planning at Nigerian Export-Import Bank, advised that there was a need to improve competitiveness by bridging the infrastructure gap, increase funding for research and development to aid innovation and development of intellectual property, and also improve the economic environment to attract investors.

How education, health, infrastructure suffer on back of fuel subsidy - NECA JOSHUA BASSEY

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ith over N9 trillion reportedly spent on subsidy over the last decade, Nigeria, sadly, places premium on funding of corruption-ridden fuel subsidy regime over education and health, which received only N2.1 trillion and N3.9 trillion, respectively, Nigeria Employers’ Consultative Association (NECA) has said.

Against this background, NECA has again alerted to the negative economic implication of the continuation of the fuel subsidy regime, insisting it is not only ill advised and unsustainable, but also a misplacement of priority by the Nigerian government.

Timothy Olawale, directorgeneral of NECA, spoke in Lagos, in the wake of the recent warning by Lamido Sanusi, a former governor of the Central Bank of Nigeria (CBN) and Emir of Kano, that the country was at the verge of insolvency due to the trillions naira being spent to fund the subsidy regime.

NECA averred that the fuel subsidy regime constituted a major leakage in national revenue mobilisation.

Recall that Sanusi recently stated that in 2011, the country made $16 billion from petroleum sales and spent $8.2 billion to subsidise imported petroleum products.

“Unfortunately, despite past sound counsel, government has refused to demonstrate the political will needed to deregulate the downstream sector of the oil and gas.

“The non-deregulation of the petroleum sector has fuelled the continued dependence on offshore sources for petroleum products, supply perennial shortage of petroleum products and unimaginable corruptions in the management of the subsidy dispensation. These remain a major concern for organised businesses,” Olawale said.

The NECA DG said there was an urgent need for the government to fully deregulate the downstream oil sector, and free the economy from dire implications of the fuel subsidy regime.

“Over the last decade, the country has spent over N9 trillion on fuel subsidy, about N15.5 trillion on capital expenditure, N2.1 trillion on health and about N3.9 trillion on education.

“This is a misplacement of priority and shows that critical developmental items such as education, health and infrastructure have suffered due to the expenditure on fuel subsidy,” Olawale said, adding that subsidy had succeeded in creating phony and emergency billionaire at the expense of millions of pauperised Nigerians. www.businessday.ng

L-R: Gbenga Oyebode, managing partner, Aluko and Oyebode; Seni Adio, chairman, Nigerian Bar Association-Section on Business Law (NBA-SBL); Abimbola Ogunbanjo, president, Nigerian Stock Exchange (NSE); Toyin Sanni, group chief executive officer, Emerging Africa Capital Group, and Adeoye Adefulu, chairman, 13th NBA-SBL conference planning committee, at the 13th annual business law conference, with the theme “Growth, Investment and Employment: Beyond Rhetoric” in Lagos. Pic by Olawale Amoo

Nigeria approves first-ever community engagement standards Gbemi Faminu

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ederal Government has approved Nigeria’s firstof-its-kind community relationshipmanagement tool,theCommunityEngagement Standards (CES), developed by CSR-in-Action, which serves as the acceptable framework for engagement between extractive companies and oil-producing communities in the Niger Delta and other oil-producing communities across the country.

In Nigeria, the oil and gas industrycontributesmorethan80% of GDP. And according to Goldman Sachs, 73% of project delays the world over are due to ‘above ground’ or non-technical risks, including community resistance.

The CES was developed following empirical research findings of poor or inadequate and

ineffective communication and engagement with communities as the major factor responsible for the lack of mutually beneficial relationship between companies and communities, which in turn have contributed to insecurity and retrogressive development in the sector.

Research feedback stemmed from a comparative analysis of international best practices, which looked at ways in which companies in two mature (Canada and Russia) and two emerging (Ghana and Peru) markets have managed conflicts within indigenous oil and gas communities - rigorous visits to the communities of the nine oilproducing states, discussions with government staff at local, state and federal levels within the legislative and executive arms, and a workshop for businesses;

by CSR-in-Action consultants.

Lagos to crack down on illegal health facilities JOSHUA BASSEY

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agos State government is renewing the crackdown on illegal health facilities in the state to safeguard the health of the citizenry.

Abiola Idowu, executive secretary of Health Facility Monitoring and Accreditation Agency (HEFAMAA), said on Sunday, at the end of a three-day capacity building training for staff of the agency, being deployed for the crack down exercise.

According to Idowu, the agency is leaving no stone unturned in thebidtosanitisingthehealthsectorandsavethelivesofthecitizens.

The clampdown will be extended to the illegal hawking of drugs in streets and open markets. It will ensure that only duly registered and qualified health care providers are in the business.

“As a regulatory agency, we will also ensure that health facilities operating in the state are well equipped to provide quality and efficient services in line with the minimum set standards,” Idowu

said.

She added that the capacity building was part of the agency’s initiatives geared towards making it a world-class regulatory agency to pursue excellent, quality and efficient healthcare services was provided in Lagos.

Captured in the training were medical doctors, nurses, drivers as well as clerical officers, administrative officers and scientific officers, expected to pursue the corevaluesofintegrity,professionalism, accountability, excellence and team spirit of the agency as all staff according to her, irrespective of the cadre is capable of making a positive impact in achieving the core values of the agency.

“HEFAMAA will continue to train and re-train its staff in line with its core mandate, we would strive at all times to broaden their horizons, increase their knowledge and enlighten them on the current trends of quality service delivery as well as re-orientate them on the need to imbibe and exude professionalism in their relationshipwithclientsandother stakeholders,” Idowu said.

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During a two-day CES Presentation Workshop to government ministries and agencies to adopttheCESinAbuja,Folashade Yemi Esan, permanent secretary, Ministry of Petroleum Resources (MPR), described the CES as a “decisive tool towards the restoration of peace and stability in the Niger Delta”. She was ably represented by Dorcas Arekhamhe, deputydirector,OilServices,MPR. Participants at this session included director – level representatives from Office of the Vice President, MPR, Federal Ministry of Environment, Ministry of Niger Delta Affairs, Nigerian National Petroleum Corporation, Department of Petroleum Resources, Nigerian Content Development and Monitoring Board and Nigerian Extractive Industries Transparency Initiative who were very elatedatthenoveltyofthetooland who reiterated that it was neces-

sary to embed such commitment and sincerity of purpose across all government functions.

Following this meeting, the Standards and its indicators was adopted and the ministry expresseditscommitmenttocodifying the process. While underscoring the relevance and benefits of theCES,BekemeMasade-Olowola,ChiefExecutive,CSR-in-Action, expressedherhappinessinseeing her company being in the forefront of delivering solutions for an industrythathasbeenresponsible forbothnationalgrowthandchallenges. She stated that ‘’the first of its kind Community Engagement Standards is an operational tool that outlines a set of procedures and guidelines for enhanced community management which can be used from the inception in exploratory activities, in negotiationanddecision-makinginorder toprotecttheinterestofallparties.”

Tell your story better, Fashola urges youths JOHN SALAU

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mmediate past minister of power, works and housing, Babatunde Fashola, has urged Nigerian youth to change the narrative by telling and projecting their own story better.

“Your generation must tell your story better. You are doing a lot more than you care to speak about,” Fashola said at the BRF Gapfest3 tagged, ‘generational gap: youth inclusion and the leadership question in Nigeria’ held in honour of the former to mark his 56th birthday in Lagos.

According to Fashola, the youths are doing a lot to move the country forward, while most of the younger generations have moved ahead of the nation in creating opportunities for themselves.

Fashola opined that censorship was not necessarily negative; rather it helped to form the values of a society on what was acceptable and what was not.

“A society that cannot decide what is acceptable or what is good, and leaves everything to @Businessdayng

individual behaviour: individual behaviour has never worked.

We must never take good governance for granted; those who take good governance for granted, do so at their own peril,” he said, as he charged the youth to manage their time with the use of tablets and other technology devices better.

On the generational debate, Fashola was of the opinion that every family is interested in their young ones, stating that everybody has a role to play in good parenting. “Young people are taking more responsibilities than they care to admit they have taken,” he said, charging young Nigerians to delegate less of their parenting role.

Babajide Sanwo-Olu, the Lagos State governor, commended Fashola’s dedication to youth development.

He stated that the theme of the BRF Gabfest will help Nigerian youth develop an insight into moulding the Nigerian society into what it ought to be and the inclusive role they are to play in it in terms of leadership.

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Monday 01 July 2019

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news Nigeria’s broken electricity market...

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than cumulative profits.

The DisCos are in a dire position as surging operating expenses, huge finance costs and absence of new investments to help expand metering and halt electricity theft have short-circuited profitability.

Data from the financial statements of the 10 DisCos show that in 2017 alone, they recorded a combined loss of N446.85 billion which is 63.88 percent higher than N301.18 billion loss recorded the previous year, an indication that the power sector woes may be worse than many thought.

BusinessDay analysis further revealed that total combined operating cost of N655.16 billion in the period (2017) outstripped cumulative sales of N563.10 billion, compounding the woes of firms grappling with spiralling interest on borrowing.

Interest expense for the 10 firms surged by 129.51 percent to N155.64 billion in December 2017, from N67.81 billion the previous year.

Analysts say the power sit-

uation of the country is gradually becoming irredeemable as DisCos, struggling with huge debts, rising costs, and recurring loses, are on the brink of collapse.

But there is enough blame to go around.

“Everybody in the power sector is to blame for this problem,” Ayodele Oni, energy partner at Bloomfield Law Practice, told BusinessDay. The 2013 power privatisation and the electricity market that resulted from it were organised to have the DisCos collect and pay the Nigerian Bulk Electricity Trading (NBET) plc, which will then pay every other operator in the value chain – generation companies (GenCos), gas companies (GasCos) and the Transmission Company of Nigeria (TCN).

It was assumed that the DisCos would collect a costreflective tariff, hence a MultiYear Tariff Order (MYTO) was developed which will see a biannual review of tariffs.

However, three days before the 2015 presidential elections, the then Sam Amadiled NERC cut electricity tar-

iffs by 30 percent, a decision that tarnished the regulator’s credibility, power sector reforms outlook, market, and investors’ confidence, Eyo Ekpo, former commissioner of market competition and rules (MCR) at NERC, said recently on Twitter.

“He (Sam Amadi) completely bypassed the Market Competition and Rates Division, which I headed and which alone had responsibility for staffing, proposing and implementing rate-making decisions on behalf of NERC,” Ekpo said.

After the decision to reduce tariff, the worst happened. The electricity Distribution Companies (DisCos) declared force majeure while NERC suffered a massive loss of credibility with all its stakeholders who resolved never to accept the commitment of NERC in good faith, a development which ruptured the industry.

Even when all the tariff assumptions changed, NERC did not review the tariff.

“The challenge was the assumptions (inflation, FX rate etc) that fed into tariff changed but the regulator did not change the tariff,” Chuks

Nwani, an energy lawyer, said.

Inflation jumped from single digit, gas prices rose and foreign exchange went through the roof but tariff did not move, which set in liquidity challenges in the system.

NERC also failed to enforce market rules, allowing DisCos withhold more than they should remit, violate their obligations to metered customers and ignore investments thresholds according to their performance agreements.

Debts to power plants rose and gas companies balked.

This has led to calls to review the 2013 privatisation exercise. Today the Discos are being sustained by the government with cash that is four times that which it got as proceeds from the privatization of the nation’s power assets in 2013.

The reality is that the power situation is worsening with the poor financial position of DisCos and the rapid evolution in technology means the assets of the Discos are becoming obsolete day by day.

The total amount owed to NBET and TCN amounts to N1.1 trillion in the period under review, which represents an 82.15 percent increase

from the N698.22 billion incurred in 2016, and two times the cumulative revenue.

Drilling down to individual DisCos, the picture is even worse.

Abuja DisCo recorded total liabilities of N206.15 billion in the period under review, which exceeds total assets of N120.02 billion, resulting in a negative shareholders’ fund of N86.09 billion. It recorded accumulated losses of N105.50 billion in the period under review, a sum that is more than the total asset figure.

Ikeja Electric plc’s total liabilities of N213.64 billion as at December 2017 exceed the total asset of N176.14 billion, resulting in a negative shareholders’ fund of N37.50 billion. Also accumulated losses of N251.91 billion ellipse total asset.

Eko Electricity Distribution Company plc’s total liability of N103.42 billion in the period under review outstrips total assets of N88.89 billion, resulting in a negative shareholders’ fund of N14.52 billion. Accumulated losses stood at N24.9 billion.

Also, Benin Electricity plc had accumulated losses of N7 billion; Enugu Electric plc’s

Banks lure retail customers with cheap...

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into any of their branches nationwide to procure forex

for the purpose of school fees, medical bills, personal and business travel allowances,” Obinna, a 45-year-old parent, told BusinessDay. BusinessDay saw such mails sent by lenders including Access Bank, Stanbic IBTC, Standard Chartered, among others, urging clients to access cheap FX with ease.

Following the Central Bank of Nigeria’s direct funding for commercial banks in the country to meet the needs of Nigerians for personal, business travel, medical needs, and school fees, lenders, in a bid to woo customers and generate higher revenues, have upped their game in providing forex to clients at a lower price.

The policy action by the apex bank is targeted at easing the difficulties encountered by Nigerians in obtaining funds for foreign exchange transactions.

Since the announcement of the policy, the apex bank has maintained a regular supply of dollars

at both the interbank and parallel FX markets. Also, heavy sales have been directed to the retail end of the market, specifically for invisibles such as personal travel allowances and business travel allowances (PTA and BTA).

Gabriel Ilori, a banker, said banks are sending emails and texts to customers as part of their effort to boost their profitability and also position them to get more FX allocation from the apex bank.

“Ever imagined the profits recorded by banks at year end? A lot of work goes into it,” Ilori said.

“The commission, when translated in naira terms, is really profitable,” he added.

Omotola Abimbola, fixed income analyst at Chapel Hill Denham, attributed the development to the robust excess liquidity in the system due to CBN’s intervention.

He believes that over a short time, the level of liquidity would be sustained by the CBN buoyed by supportive oil prices as well as foreign portfolio inflows into the fx market.

Insurers embrace new capital...

Continued from page 2

had the last recapitalisation, meaning we need more capital,” Efekoha said.

NAICOM had on May 20, 2019announcednewminimum paid-up share capital for the insurance industry, requiring companies that want to remain inlifebusinesstoraisetheirminimum paid-up capital base from N2 billion to N8 billion; general insurance companies from N3 billion to N10 billion; composite

insurance companies from N5 billiontoN18billion,andreinsurancecompaniesfromN10billion to N20 billion. The insurers were given June 30, 2020 as deadline for the exercise.

Efekoha further said operators would not go against the regulator because the consequences would be grievous.

Rather, he said, the operators would work with the regulator to see what palliatives they could get to have the exercise www.businessday.ng

accumulated losses stood at N50 billion; Ibadan Electric plc N54 billion; Jos Electric plc N17 billion, Kaduna Electric plc N78 billion, Kano Electric N37 billion, and Port Harcourt Electric plc N97 billion.

DisCos whose financial statements were reviewed are Eko Electricity Distribution plc (Eko Disco), Yola Electricity Distribution Company (Yola DisCo), Kaduna Electricity Distribution plc (Kaduna DisCo), Ikeja Electricity plc (Ikeja DisCo), Abuja Electricity Distribution plc (Abuja DisCo), Ibadan Electricity Distribution plc (Ibadan DisCo), Enugu Electricity Distribution plc (Enugu DisCo), Jos Electricity Distribution plc (Jos DisCo), Kano Electricity Distribution plc (Kano DisCo), Port Harcourt Electricity Distribution plc (Port Harcourt DisCo), and Benin Electricity plc (Benin DisCo).

Only the 2017 financial statement of Yola DisCo was not available for review as the company said the board was yet to approve it.

Watch out for what experts say is required to resolve this monumental crisis.

L-R: Mukhtar Adam, group CFO, Zenith Bank plc; Ebenezer Onyeagwu, group managing director/ CEO, Zenith Bank plc; Sola David-Borha, chief executive, Standard Bank Africa Regions; Sim Tshabalala, group chief executive, Standard Bank Group, and Bola Onadele. Koko, chief executive officer, FMDQ OTC Securities Exchange, at the Standard Bank Group Africa Investors’ Conference in London.

Abimbola said for the CBN to ensure that the parallel market does not skyrocket, the apex bank will continue to supply the small retail demand for FX such as (PTA & BTA) which is not as big as the wholesale auction.

“If they are not supplied, they will go to the parallel market and speculation would start, hence to avoid speculative pressures, they supply the market with liquidity,” he said.

Nnamdi Olisaeloka, fixed income analyst at Zedcrest Capital, said the supply was

part of CBN’s secondary market intervention with special foreign exchange intervention and it conducts this intervention twice a month on Fridays.

Banks are required to submit their retail customers’ invoice. The CBN sells to them at $357 and they make a gain of $1 on this transaction.

Olisaeloka said the apex bank would continue to make this intervention but it would be segmented as only selected people would be able to access this in-

tervention. He added that questions relating to what purpose must be answered before customers have access to the intervention.

Godwin Emefiele, CBN governor, while outlining his policy thrust for his second five-year term recently, said the apex bank would continue to operate a managed float exchange rate regime in order to reduce the impact which continuous volatility in the exchange rate could have on the economy.

According to the CBN’s guideline, the maximum

volume of BTA approved for sale per customer is $5,000 quarterly, while a PTA customer gets $4,000.

“Banks are hereby directed to process and meet the demand for Personal Travel Allowances and Business Travel Allowances customers within 24 hours of such applications.

They are to equally process and meet the demands for school fees (including allowances) and medical bills within 48 hours of such applications,” the CBN circular said.

completed successfully.

“I see a stronger industry, I see a more disciplined market, I see an industry that will better reward shareholders, and I also see stronger competition without rate cutting,” he said.

Tope Smart, chairman, Nigerian Insurers Association (NIA), said the leadership of the NIA was engaging NAICOM in that regard. He said the association was working closely with NAICOM to promote the business of insurance and increase its contribution to national GDP.

“We have started engaging the National Insurance Commission with a view to defining the components of the new capital level as well as the incentives and palliatives that members will enjoy to ensure that as many companies as possible scale through,” Smart said.

He urged the association members to contact the secretariat if they face challenges and also for updates.

“On our part, we will continue to update you as we make progress in our engagements with the commission,” he said.

Owolabi Salami, executive director, Allianz Nigeria, said the regulatorwasclearthistimeinits communication about the new minimum capital requirement.

According to him, additional capital is needed to grow insurance business in Nigeria. Insurers need to spend money to create awareness, communicate the value and benefits of insurance, and it is only when they have done this judiciously and consistently for a long time that they can begin to expect people to understand what insurers do

and patronise them, he said.

Salami, who looked at advertising spend in other businesses including telecommunication and banking, noted that insurers had not spent enough to get consumers’ attention and that was part of what additional capital will do.

He also noted that the exercise, when completed, would strengthen capacities of companies, bring the right chief executives that will bring value for their investors, and bring real competition and discipline into the business.

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FEATURE

How private sector-led economy could prosper Nigeria – Experts …as 13th NBA-SBL business law conference ends in Lagos MICHAEL ANI & OLUWASEGUN OLAKOYENIKAN

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or Nigeria to be a prosperous nation, the collaboration between the private and public sectors has to be strengthened, economic experts said at the 13th annual business law conference of the Nigerian Bar Association Section on Business Law (NBA-SBL) held in Lagos June 26-28, 2019.

This partnership would entail the government creating an enabling environment for privatesector players to drive investments across various sectors of the economy. An increase in private investments would create jobs and improve the standard of living of the populace.

The three-day conference, themed ‘Growth, Investment and Employment: Beyond Rhetoric’, focused on engaging stakeholders and government to go beyond the usual documentation of ambiguous policies to the implementation of critical policies that would drive investment, create jobs, spur growth and lift the well over 44.5 percent of the Nigerian populace out of extreme poverty.

It boasted an array of economic experts, domestic and global chief executive officers, lawyers, key players in various sectors of the economy, as well as representatives and regulators from the public sector, who spoke at the various sessions marshalling out the best ways to drive growth, investment and employment in the Nigerian economy.

These included Kingsley Moghalu, a former deputy governor of the Central Bank of Nigeria (CBN) and president, Institute for Governance and Economic Transformation; Toyin Sanni, CEO, Emerging Africa Capital; Frank Aigbogun, publisher/CEO, BusinessDay Media; Andrew Nevin, chief economist at PwC; Ijeoma Agboti, CEO, FBNQuest Funds, among others. Femi Gbajabiamila, speaker, House of Representatives, and Babajide Sanwo-Olu, governor of Lagos State, were at the opening ceremony held earlier on Wednesday.

“With a growing youth population, the importance of growth, investment and employment cannot be overemphasised. In the recent past, the country has suffered from underwhelming Gross Domestic Product (GDP) growth. Indeed, it has been argued that even whilst experiencing accelerated GDP growth, the structure of growth was not inclusive and therefore had little impact on vast proportions of the populace. We have also witnessed a sharp decline in foreign direct investment and the youth unemployment rate is now at an alarming 36.5 percent,” Adeoye Adefulu, chairman, 13th NBA-SBL Conference Planning Committee, said in his welcome speech at the opening ceremony of the conference.

“After 20 years of democracy, we think it is a good time for the Nigerian government at all levels to take stock and plan for the future of the Nigerian economy,” he added.

He urged the government to “persist in creating an enabling business environment through effective institutions and implementation of policies that would improve the ease of doing business, drive investment opportunities and make Nigeria an investor-friendly nation. The private sector must partner with government and embrace the forward-looking reforms of the government while proffering constructive suggestions on how to improve the economic wellbeing and circumstances of the people,” he said.

For too long the Nigerian economy has tilted towards policies that are hurting the growth of private investment as well as Small and Medium Scale Enterprises (SMEs). This has made people poorer and further widened the inequality gap.

L-R: Bode Rhodes-Vivour, Justice of the Supreme Court; Seni Adio, SAN, chairman, Nigerian Bar AssociationSection on Business Law (NBA-SBL); Femi Gbajabiamila, speaker, House of Representatives, and Babajide Sanwo-Olu, governor, Lagos State, at the conference opening ceremony.

Instead of creating an enabling environment for the private sector to thrive, the government has continued to compete with the private players, wasting enormous resources on projects that benefit few at the expense of many, Moghalu said at one of the panel sessions.

“By spending heavily on subsidising the prices of fuel and on recurrent expenditure, the government is spending money wrongly in areas that are suffocating the economy,” Moghalu said.

“If Nigeria wants to be a prosperous nation, it must focus attention on building the skills of its citizens through driving private investment in education,” he argued.

Funke Adeyemi, regional head, International Air Transport Association (IATA), noted that “without the right kind of regulatory environment, it will be difficult for the private sector to thrive and sustain business”.

Adeyemi, who spoke at a panel session, maintained that laws are made to protect society from the basic instinct of man, but when these laws become a burden on businesses, they stunt the growth of the economy.

“Hence, regulators need to be able to strike this balance,” Adeyemi said.

Since 2015, foreign investment into Africa’s most populous nation has headed south, staying at its lowest value of $2.1 billion in 13 years, according to data from United Nations Conferences on Trade and Development (UNCTAD).

The country was ranked low in the World Bank ease of doing business in 2018, staying at the 146th spot out of 190 countries of the world.

“The ranking goes to show the structural challenges that Nigeria is going through regarding poor infrastructure, difficulty of doing business around property rights and contract enforcement. Governments have the enormous task of fostering an environment where entrepreneurs and small and medium enterprises can thrive,” the Washingtonbased lender said when it released the report.

With the decline in investment, the country’s unemployment rate grew to as high as 23 percent in Q3 2018, from 7.4 percent in 2015, as firms battled with huge operating cost in running their day-today activities.

“The Nigerian government is enveloped with ideas that are skewed towards a socialist economy that is hindering investment and exacerbating the already high unemployment rate, yet it claims it is practicing a capitalist economic system,” Moghalu said.

Following its socialist leaning, the Nigerian government in 2018 spent as much as N730.9 bilwww.businessday.ng

lion subsidising the price of petrol, even though it complained of inadequate funds to scale up its ailing health and educational sectors required for achieving Human Capital Development.

Budgetary allocations to both the educational and health sectors in the last five years averaged 8 percent and 5 percent, according to data compiled by BusinessDay. This is below the global recommendation of 21 percent and 15 percent for the educational and health sectors, respectively.

However, this has not stopped the oil-dependent nation from paying annually for the unsustainable subsidy.

In 2018, Nigerians abroad sent some $25 billion as diaspora remittances. This value exceeds by $7 billion the total money generated as gross revenue from oil which represents 84 percent of the country’s foreign earnings.

“Nigeria is in crisis and the government needs to recognise this,” Moghalu said. “This stems from the huge accumulated debt, the subsidy payment and the ballooning recurrent expenditure in the budget that is making the country poorer.”

He explained that the country is being held down by the lack of knowledge of what is happening in its economy and the political will to structure the economy along with the priorities to create jobs, even as its unemployment rate continues to rise to new highs every quarter.

He pointed out that the country is creating more burden despite its dwindling revenue by “doing too much” with its petrol subsidy, heavy public sector evident in the recently passed federal budgets, and spending money on the wrong things.

To address these challenges, Moghalu said the country must create a structural environment that would enable the economy to grow beyond its population growth rate, to create jobs and move its estimated 100 million extremely poor people above the poverty line.

At the end of May 2018, Nigeria had overtaken India to hold the record of being the poverty capital of the world with 87 million of its people living below $1.9 per day compared with the latter’s 73 million.

The economy is also cash-strapped with the Federal Government revenue falling short of its annual projection, forcing the country to borrow more.

As at December 2018, the country had a total debt profile of N24.39 trillion, a 116.9 percent increase from the N11.24 trillion it borrowed five years ago, according to data obtained from the Debt Management Office (DMO).

Oliver Andrews, chief investment officer, Afri-

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can Finance Corporation, who was represented by the head of financial advisory in the firm, Fola Fagbule, while sharing his thoughts on how Nigeria can attract more investment opportunities, particularly at this time when government revenue is shrinking, said the nation needs to take a strategically different approach to pricing.

According to him, despite the developments in the global market which have greatly affected the prices of crude oil, consumers in Nigeria have continued to pay almost the same amount for petrol in the last two years when a new petrol pump price was announced.

Furthermore, the AFC boss explained that while the economies of the 36 states and Federal Capital Territory, Abuja make up the Nigerian economy, some of these states are not financially stable as they highly depend on the monthly disbursement from the Federation Accounts and Allocation Committee (FAAC) to meet most of their financial obligations.

Addressing the challenge, he said, would require strong investment inflows into the states which would only happen if there is available infrastructure to safeguard investment while the states run transparent governments.

He recommended the need for government to stop financing capital projects such as roads, railways, bridges, among others which could have been left for the private sector to handle.

Andrew Nevin of PwC spoke on the need for Nigeria to leverage its untapped dead capital amounting to over $100 million to shore up its dragging economy.

Dead capital are assets that cannot be easily transferred, where the title is uncertain, so cannot be converted to their most valuable social and economic use, and cannot be used as collateral, so prevent investment in other businesses.

The renowned economist noted that Nigeria requires investment worth about 28 percent of its GDP in a year to grow 6 percent. Even though the government recently disclosed its plans to grow at double-digit by 2024, Nevin maintained that only a total investment of about N35 trillion to N40 trillion a year could bring the nation close to such reality.

Speaking earlier at the opening ceremony on Wednesday, Seni Adio, chairman, NBA-SBL, said going beyond rhetoric, as the theme of the conference suggests, means that the Council of the SBL was looking forward to “actioning many of the incisive prescriptions that we are confident will evolve from the conference”.

Adio added that the SBL “has become a goto resource for the executive and the legislative arms of government with respect to law reform concerning business and commercial law and, in particular, towards easing doing business in Nigeria and enhancing the competitiveness of the Nigerian economy”.

Paul Usoro, president, NBA, said the theme of the 2019 conference was pertinent and timely coming in the wake of a new government.

He said as a nation blessed with natural resources and human capacity, Nigeria has enormous opportunities for economic growth, investment and employment. However, the government must do its bit for things to take their proper shape.

House of Reps Speaker Femi Gbajabiamila, who was guest speaker at the opening dinner, promised the lower chamber of the 9th Assembly would focus on reviewing all existing laws and contracts hurting the growth of the business environment. He noted that by promoting a clear sanctity of contracts, the country would have the needed investment required to fund its infrastructural gap in health care, education, security that would improve the country’s ease of doing business index.

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NEWS

Afreximbank launches pan-African payment, settlement platform in Niamey SEGUN ADAMS

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he African Export-Import Bank (Afreximbank) will launch its new Pan-African Payment and Settlement (PAPS) platform at the African Union (AU) Extraordinary Summit on July 7, 2019 in Niamey, Niger Republic.

The summit will be dedicated to the launch of the operational phase of the AfCFTA as well as its operational instruments. The AU Summit’s delegations to be hosted in the newly built Radisson Blu Hotel of Niamey are expected to launch the following operational instruments of the treaty: Rules of Origin Portal; Tariff Concession Portals; Portal on Monitoring and Elimination of Non-Tariff Barriers; Digital Payments and Clearing System and African Trade Observatory Dashboard.

Afreximbank’s president, Benedict Oramah, explained that PAPS, which will be available on mobile devices, would facilitate the clearing and settlement of intra-African trade transactions in African currencies and significantly reduce the dependence on US dollars and other hard currencies in the settlement of regional trade.

According to Oramah, the bank has partnered the West African Monetary Institute (Wami) to launch a pilot in six

West African countries by the end of the year. The West African Monetary Zone is the continent’s only economic community that does not already have a settlement platform – hence Afreximbank’s decision to pilot the new solution in the region.

Previously referred to as the Intra-Africa Trade Platform, it is one of a number of new initiatives that the bank is currently implementing as part of its strategy to facilitate greater volumes of intra-African trade as well as formalise the continent’s informal trade, which is estimated by the bank to be close to $40 billion.

“Africa’s challenge when it comes to payments and settlements,” Oramah explained, “comes down to the fact that it has multiple local currencies, meaning that cross-border payments typically involve a third currency, such as the US dollar or Euro. This leads to a high cost of intra-African payments, which can take weeks to process.

“Governments want to build their reserves so they tend to prefer exports to markets that issue hard currency. For this reason, a significant amount of cross-border trade occurs informally. The issue is compounded by the fact that most traders currently do not have a system that enables them to settle in a secure way,” Oramah said.

Diezani bribe: INEC deputy director bags six SEL Capital launches Customer Experience Centre years, another bags seven years Innocent Odoh, Abuja

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he Economic and Financial Crimes Commission (EFCC) Kano zonal office weekend secured the conviction of a Deputy Director of the Independent National Electoral Commission (INEC), Auwal Jibrin, and one Garba Ismaila, before Justice Yusuf Birnin-Kudu of the Jigawa State High Court sitting in Gumel, on a six-count charge bordering on unlawful enrichment and gratification.

This was disclosed in a statement issued on Sunday by the acting head of media and publicity of the EFCC, Tony Orilade, stressing that the journey to prison for culprits started after the Commission received intelligence report that they benefited from the $115,010,000 largesse of a former minister of petroleum, Diezani Alison-Madueke, in the build-up to the 2015 presidential election.

Investigations showed that they benefitted N45,000,000 out of the N250,000,000 disbursed in Jigawa State to influence the outcome of the election.

Upon arraignment, they pleaded “not guilty” to the charges thereby setting the stage for full trial.

During the course of trial, the prosecution presented five witnesses and tendered 20 exhibits to prove the case against them.

One of the charges read: “That you, Auwal Jibrin, while being a public Servant (Deputy Director with Independent National Electoral Commission, Dutse) sometime in 2015, at Dutse within the Judicial Division of this Honourable court dishonestly received the sum of ₦45,000,000 (Forty Five Million Naira) from Garba Ismail, which you were not authorised to receive and you thereby committed an offence punishable under section 122 of the Penal Code.”

Delivering judgment, Justice Birnin-Kudu held: “The prosecution proved beyond reasonable doubt, all the elements and facts of the case as contained in the charge and the testimonies of prosecution witnesses and exhibits tendered.”

The court added that the defence team failed to counter the evidence presented by the prosecution through its witnesses. Thus, the court found the first defendant guilty as charged on count two, while the second defendant was found guilty on counts one and three.

ISRAEL ODUBOLA

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EL Capital Limited has launched Customer Experience Centre (CEC) to improve and deliver exceptional experience for its clients.

In a statement, Segun Opaleye, managing director/CEO, SEL Capital, says the launch provides a great opportunity for the financial services firm to effectively attend to all of its customers’ enquiries, requests as well as address their complaints.

“We are pleased to announce the launch of our Customer Experience Centre (CEC) at Still Earth Capital Finance. The CEC has been set up to promptly receive and attend to all your enquiries, requests and complaints,” the statement states.

“Equipped with the latest technology, product knowledge and effective customer handling skills, our customer service officers are available to deliver a unique experience each time you contact us for enquiries, requests and complaints about our products and services,” it says.

According to Opaleye, the company will continue to provide exceptional service experience to clients and financial partners, while enhancing the growth and success of their

ECOWAS leaders pick Niger’s President as new chair Innocent Odoh, Abuja

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resident Muhammadu Buhari has handed over the chair of the Authority of Heads of State and Government of the Economic Community of West African States (ECOWAS) to the President of the Republic of Niger, Muhammadu Issoufou.

The Nigerien President was announced as the new chair of the Authority during of the closing ceremony of the 55th Session of the Authority of Heads of State and Government in Abuja on Saturday. The West African leaders had elected Issoufou after their closed-door deliberations, where they also discussed issues ranging from insecurity and economic challenges facing the region.

In his remarks, the new chair of the Authority commended President Buhari for his enormous contribution to the integration efforts of the sub-region and promised to consolidate on the efforts.

Meanwhile, the West African leaders have adopted Eco as the name of the proposed single currency for the community to be issued in January 2020, even as they lauded the Ministerial Committee on the single currency for the considerable progress recorded in the implementation of the revised roadmap.

Reading the communiqué at the end of deliberations, Permanent Secretary in Nigeria’s Ministry of Foreign Affairs, Mustapha Suleiman, said the Authority had instructed the ECOWAS Commission to “collaborate with the West African Monetary Agency for the implementation and also instructed the com-

... adopts ‘Eco’ as single currency mission to work with the West African Monetary Institute and central banks to accelerate the implementation of the revised roadmap with regards to the symbol of the single currency.”

The Authority also directed the Commission and the central banks to accelerate operation of the Special Fund for financing of programmes in the revised roadmap for the single currency programme.

It further directed the Commission to ensure implementation of the recommendations of the meeting of the Ministerial

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Committee held in Abidjan on June 17 and June 18 as well as proposal for the implementation of the communication strategy for single currency programme.

The new chair of the Authority also urged member states to strive towards meeting the six convergence criteria for the single currency before the deadline, stressing that those who met the criteria could commence the take off of the single currency. He also tasked them to improve the macroeconomic convergence of the community.

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businesses.

SEL Capital offers financial advisory services, wealth management, investment advisory services and funding solutions to individuals, Small and Medium-scale Enterprises (SMEs), corporate institutions, government and High Net-worth Individuals (HNIs).

The company is committed to becoming a gateway and catalyst for mobilising capital for growth and development across Africa.

Clients can make enquiries on the company’s services including but not limited to consumer finance, Small and Medium-scale Enterprises (SMEs) funding and structured finance, he states. They can also enquire about the company’s project finance, financial advisory and wealth management services.

The company provides investment advisory to HNIs, he says, adding that the HNIs have their buyers’ value which SEL Capital has to go for, by providing them the needed solution.

SMEs can also get advice on how to establish Letters of Credit (LCs) and be guided on issues around corporate governance, he says, saying that understanding the customers’ business is one of the easiest ways to meet their needs.

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Monday 01 July 2019

BUSINESS DAY

news SEC urges investors in defunct Skye Bank to claim dividends Iheanyi Nwachukwu

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ecurities and Exchange Commission (SEC) has again reiterated its earlier directive to shareholders of defunct Skye Bank to claim their dividend payment.

This, SEC said, is part of its investor protection programme and also to ensure that shareholders get the benefits of investing in the capital market.

Mary Uduk, acting DG of SEC, said in an interview in Abuja that the Commission recently released a circular to shareholders of defunct

Skye Bank to claim all outstanding dividends.

She said, “We have informed shareholders of the defunct Skye Bank that unclaimed dividends declared by the bank are being held in trust on their behalf. This will further help reduce the volume of unclaimed dividends in the market and boost investor confidence. Investors that have unclaimed dividends are therefore advised to contact Cardinalstone Registrars to process their dividend payments.”

Uduk said the Commission had also directed Cardinalstone Registrars and STL Trustees to ensure all

genuine claims of beneficiary shareholders were addressed forthwith.

The acting DG said since the company was no longer in operation, these unclaimed dividends had to be made available to the rightful owners that were the shareholders, as that would go a long way in boosting investor confidence in the market.

“They invested in a company and since the company has gone under, there is no reason why they should not have access to their unclaimed dividends. That is why we are calling on them to take advantage of this opportunity and claim their dividends,” she said.

Nkemadu becomes NCC’s director of public affairs Jumoke Akiyode-Lawanson

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enry Chukwudumeme Nkemadu has been named as the new director for public affairs at the Nigerian Communications Commission (NCC).

His appointment, according to Umar Garba Danbatta, executive vice chairman (EVC), NCC, is in line with the commission’s policy of putting round pegs in round holes for optimum delivery of responsibilities, especially now that the stakes are getting higher for the commission’s regulatory oversight.

“Henry Nkemadu has had a rewarding opportunity of traversing the entire telecom regulatory ecosystem, which experience he will find

handy as the new spokesman of the commission,” Danbatta said.

A well groomed professional, Nkemadu, a consummate communicator, joined the NCC as principal manager in business development in September 2003 with responsibilities as strategist for the department, evaluating, regulating and managing all departmental requirements.

He handled proposals on capacity building initiatives in liaison with international agencies for capacity building. He became a full director few weeks ago.

He holds multiple degrees/certificates in several disciplines from three universities both in Nigeria and the United States of America. He has transversed several departments within the NCC and garnered wide

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and varied experience in the workings of the commission.

He was deputy director/head, special intervention projects of the project department where he superintended the initiation, planning, execution, monitoring/control and close out of intervention projects carried out by the commission.

These projects provide the necessary tools such as ICT hardware, software, power systems, contents, specialised computer programmes, connectivity as well as enabling infrastructure and buildings in a shared manner to bridge the digital information knowledge gaps enabling familiarity and confidence in the utilization of ICTs in teaching, research, innovation and learning schools and tertiary institutions.

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OML 25 crisis: Kula leaders allege $5m bribe, wash hands off Monday deal Ignatius Chukwu

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ula community leaders, owners of the contentious Oil Mining License 25 in Akuku-Toru Local Council Area of Rivers State, have alleged that an official of the Rivers State government has received $5 million bribe from an oil giant to facilitate an agreement that may lead to reopening of Kula oil field. The leaders have also washed their hands off the equally controversial peace agreement advertised for Monday, July 1, 2019.

The deal, tabled for signing in Government House, Port Harcourt, is expected to lead to the resumption of oil operations at the Kula oil field which was shut down almost two years now, leading to loss of over N700 billions to Nigeria.

The oilfield is owned by Belema, Offoin-Ama and Ngeje communities and their leaders have kicked against the deal, saying they were not in the negotiations that may have led to the memorandum of understanding (MoU) to be signed with Shell Petroleum Development Company (SPDC). Shell’s license has however been renewed for another 20 years and the Rivers State government says there is no need for any other oil company to eye it and that the host communities must reach an agreement with Shell to allow operations resume.

The Kula people however want

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Shell to hands off the field to Belemaoil owned by their son, Jackrish Tein Jnr. This was so until the Federal Government renewed it for Shell.

Belema community of OpuKula (Old Shipping) has a king or Amanyanabo, Bourdillon Ekine, the Oko 28, but Hope Opusingi is claiming to be the rightful Amanyanabo. The Rivers State government and SPDC seem to agree with him and are negotiating with his own chiefs and supporters. This in itself seems to ignite more flares.

The Kula community leaders said in a press briefing on Saturday, June 29, 2019, that it was not true that Kula and SPDC had reached any deal midwifed by the Rivers State government or anybody.

The leaders including the king and Amanyanabo of Opu-Kula (old Shipping), Bourdillon Allen Ekine, Oko 28, a chief-elect, Mpakaboari Welsch, and nine other chiefs bribe was at work.

The leaders said: “It is disheartening and highly preposterous that the Rivers State Government could (make such a claim) to please its new ally, Shell. It is most unfortunate that a state government that is supposed to concern itself with good governance would be this desperate to champion an illegal course to forcefully re-open an oil platform that was peacefully shutdown based on the legitimate grievances of the Host Communities.

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“It is now very obvious that the Rivers State Government supports injustice, marginalization, enslavement and impoverishment of the Host Communities by the oil multinational company contrary to a recent declaration by His Excellency that Shell is responsible for the crisis in most oil producing communities in the state. The Governor had also stated that Shell with its divide and rule tactics is the major culprit of non-implementation of GMOU with Host Communities.

Accusing the state governor of making a U-turn on Shell, the leaders said: “It is important we remind the Governor his exact words when he received officials of the Netherlands High Commission to Nigeria at the Government House during a courtesy call on Friday 10th May, 2019, ‘’Unfortunately Shell Dutch Company, they are part of the major culprit, what it does is to divide communities, to make sure that communities don’t work together, for them to have their way but it boomerangs at the end of the day.

Shell does not want to obey or implement the Memorandum of Understanding they have with communities, Shell has that history of not implementing Memorandum of Understanding, even when they want to, they will go and find project that does not worth anything, it’s unfortunate, so we seek your cooperation that Shell does what it is supposed to do”.

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This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Get a foot in the door MONEY MATTERS

Nimi Akinkugbe

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hat are your teens or adult children doing during the long holidays?

Of course after a gruelling academic year, it is important to enjoy some precious family time at home or on vacation and for them to get some rest and to unwind so they are refuelled before the new academic year, but do they need to be on holiday for some three months? Take advantage of the long holiday; make it more than a vacation; it can add huge value to their future.

Grades matter From a very young age, students are expected to get the best grades possible. This puts so much pressure on our young people.

Grades do matter, but remember that they are not everything; having good grades doesn’t necessarily translate into a good job, make you a great employee. There is so much more to life than grades.

Of course, as Nigerian parents we desire and can be blinded by those A grades, but work experience, an array of extracurricular activities and interests have become as important as exam or coursework grades in the search for top candidates. A well-chosen internship opportunity often gives students an edge.

Hands-on practical experience It is on the job that you can truly hone some professional skills and gain hands-on, real-world experience outside the classroom.

Theory is important but it comes alive when you are given an opportunity to put that knowledge into practice. This prepares you to go back to school equipped with greater understanding and fresh perspectives on the subject matter reinforcing classroom concepts.

Interning provides an opportunity for you to work in a team, one of the most essential ingredients for success. This throws up many aspects of character, leadership, collaboration, technical skills, managing deadlines, responsibility etc. It is from this that a sound work ethic can be built.

“An audition in disguise” An internship can lead to a fulltime job at your host company. If you’ve left a great impression that you are hardworking, committed, intelligent and capable, you are certainly in a more competitive position to be considered than even those with far superior grades

since your bosses are already familiar with your work ethic.

Internships give you a foot in the door; this is an ideal way for both employer and intern to test the waters for a period before committing fully. If you’ve impressed them, you’ll probably make the final list even ahead of candidates more accomplished and with stronger credentials than you.

Test the waters So many young people embark on a path only to find after considerable time and expense, that they wish to change direction. Ideally it would be nice to know as early as possible where your strengths are and where you will find fulfillment. An internship usually lasts for about 3 – 6 months. This is a great opportunity to test out a job or career path with enough time to learn whether or not it is a good fit without a long-term commitment.

You might also try out various sectors during each vacation; different careers demand varying skill sets. This way, you get a wide range of experience under your belt and can begin to narrow down your choices as you identify your strengths as well as areas in which you feel challenged.

Apart from the formal roles, there are numerous other opportunities to consider; from volunteering and community service, helping at a holiday camp, waiting tables in a restaurant, sales clerk at a local store.

Have you thought of setting up a business?

What are your talents and skills that make you stand out? Have you ever considered the possibility of monetizing them? The long vacation is a great time to explore the possibility of collaborating with others to set up your own business. This impresses employers no end.

The family business If you have some hope of your children eventually joining the

family business, the holidays are a good time to have them spend some time learning from you from the bottom of the ladder.

Over years, they will become familiar with the ethos and vision of the family business. The mistake many families make is to impose their adult children as Executive Directors with little to no interest or knowledge about the family firm. Far too many family businesses do not survive much beyond the life of the founder.

Relevant work experience If you already have an idea of the path that you wish to pursue, select a firm in that field which will help equip you to prepare for future interviews and direction by gaining invaluable industry knowledge. Employers tend to choose candidates that have some experience that is relevant to the position they are actually hiring for; this puts you up on the learning curve and helps you settle into a new role with ease.

But keep an open mind; it is useful to expand your horizon; you may just find an area that you might never have considered, that suits you perfectly. Also with the level of unemployment out there, you may well need to just grab a job if you are offered one.

Valuable connections Professional connections are among the most valuable networks that you can have in your life. Even if you are not retained for a full-time position, the networks that you build from even a short stint can be invaluable whether for providing mentoring and support as you grow, or for career advice, references or recommendations for your next job.

Find a mentor, but remember that a senior colleague is more likely to take interest in an interested, committed, hardworking intern and not someone that is always late, unresponsive, doesn’t meet deadlines, and adds little or no value.

Should money be a factor?

‘ It is impossible to accept a role for any length of time, without pay.

However, it is a pity to have to turn down an excellent but unpaid internship opportunity, as this significantly limits available opportunities

As far as possible, try not to let money be the overarching deciding factor when you are thinking of interning. Gaining useful experience should be your goal for the value it will bring to your resume and your personal life. Of course for most, it is impossible to accept a role for any length of time, without pay. However, it is a pity to have to turn down an excellent but unpaid internship opportunity, as this significantly limits available opportunities.

Financial responsibility One of the greatest benefits of interning is earning and learning to manage your own money.

Money that you have earned from your own sweat tends to have more meaning than allowances and gifts from parents. Hard work builds discipline and frugality; when you work hard to earn, you are more selective in your spending choices.

Time is a fundamental ingredient of successful investing as funds set aside have time to appreciate in value. This presents a wonderful opportunity to set aside at least part of your income and begin the journey to financial independence. Mutual funds are ideal for small savers with entry as low as N5,000; the key is to be consistent and to think long term.

And a word for parents…encourage your children to earn.

Leaving home to go out to work every day is an important step to financial responsibility. It is not the amount of money your child earns, but the lessons learned that counts. The sense of independence and accomplishment provides a child with a solid foundation for their development and when they leave home, you will have that knowledge that they are capable, independent and can take care of themselves and their loved ones.

Follow Nimi Akinkugbe on: Twitter and Instagram: @ MMWithNimi, Facebook: ‘Money Matters With Nimi’ Send an email to info@ moneymatterswithnimi.com Or visit her Website www. moneymatterswithimi.com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.

For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi.com Twitter: @MMWITHNIMI Instagram: @MMWITHNIMI Facebook: MoneyMatterswithNimi

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cityfile Fake insurance agents charged with N39.5m fraud

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This is the irritating outlook of the decrepit narrow gauge rail track in Ijora, Lagos littered with wastes and water logged.

Its scenario reflects lack of government seriousness and commitment to the citizenry as well as the failure of the public Pic by Pius Okeosisi towards proper refuse disposal.

wo suspected fake insurance agents, Daniel Udeze and S m i t h O b u m e, who allegedly swindled a lady of N39.5 million, have been charged before an Igbosere Magistrate Court in Lagos.

The defendants, who are both 24 years’ old, are standing trial on a fourcount charge bordering on fraud and impersonation.

The prosecutor, Friday Mameh, told the court that the defendants conspired with others still at large and committed the alleged offences sometime in April, at Coker Road, Ilupeju area of Lagos.

Mameh said that the duo presented themselves as agents of one Axa Mansard Insurance Plc and another company, Doheney Recruitment services, and defrauded the complainant, Chioma Obi of N39.5 million.

He said that the defendants defrauded the

complainant through a GTB bank account No. 0154207679 with the name Zyfeso Enterprises.

“The defendants hacked into the two companies’ sites, pretended that they can employ the complainant, used the companies’ names to swindle the unsuspecting complainant,” Mameh said.

The alleged offences contravene sections 287, 314, 380 and 411 of the Criminal Law of Lagos State, 2015.

The defendants, however, pleaded not guilty to the charge.

The magistrate, A. M. Davies, granted them bail in the sum of N4 million each, with two sureties each in like sum.

She ordered that the sureties must show evidence of tax payment to the Lagos State government, and adjourned the case until July 9 for mention. NAN

10% of Libya returnees have medical challenges – Edo official Zamfara: 54,000 households to

IDRIS UMAR MOMOH & CHURCHILL OKORO, Benin

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hairman, Edo S t a t e t a s kforce on antihuman trafficking, Yinka Omorogbe, says 10 percent of Nigerian returnees from Libya, received in Edo, have serious medical challenges Omorogbe, who did not give details of the medical challenges, however, added that the affected persons were given adequate treatment.

The taskforce chairman, who is also the state commissioner for justice and attorney-general, made the disclosure during a stakeholders’ conference organised by Market Development Programme in the Niger Delta (MADE), a DFID programme, in collaboration with Edo State Investment Portfolio (ESIP).

She also disclosed that the committee is currently facing financial and training equipment challenges, among others.

She, however, called on well-meaning individuals

and international bodies to collaborate with the state government to effectively care of the victims of human trafficking.

The commissioner, who said 4,779 victims of illegal migration and human trafficking, out of which 1,321 are females and 57 pregnant have so far been received in the state from 56 batches, restated the state government’s commitment to the training and resettling of the victims.

She said as part of the state government’s efforts to stem the illegal migration, government has em-

barked on the training of returnees on their chosen trades while starter-packs have been provided so as to dissuade them from embarking on the journey.

She, however, identified quest to greener pastures, economic pressure, family and pear pressure, as some of the reasons why the youths embarked on illegal migration.

Rufus Idris, MADE Investment Portfolio manager, said they were supporting the Edo State government to train the returning and help increase their means of livelihood.

TCN confirms reviewing of ‘earthing’ system to address concerns of recurring grid collapse … confirms working on restoring grid collapse HARRISON EDEH, Abuja anagement of the Transmission Company of Nigeria (TCN) says it is currently working on a review of the entire protection and earthing system nationwide to address concerns of recurring national grid collapse.

The company also confirmed working on stabilisation of the National Grid that experienced a system collapse on Sunday at

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9.10am due to high voltage following massive drop of load by the electricity distribution companies.

Ndidi Mbah, general manager, public affairs in TCN, confirmed the development, stating the high voltage also caused a fire incident in the 75MXreactor in the Benin Substation, Sapele Road in Benin City, Edo State.

She explained that the massive load drop led to high voltage in the system, which shattered the lightwww.businessday.ng

ning arrester in close proximity to the 75MX Reactor in Benin Substation.

According to TCN, the restoration of the Grid commenced immediately and as at 1.30pm, bulk power supply to most parts of the nation had been restored.

Ndidi in the statement noted that it has commenced the movement of another reactor to Benin City to replace the burnt reactor and ensure voltage stability in the City as well as prevent a re-

occurrence.

“This is done in addition to the overall upgrading of the system through the TREP programme being financed by multilateral donors.

“The installation of 3no reactors on the IkotEkpene- Ugwuaji –Jos line has reached an advance stage. It is expected that once these three reactors are installed and commissioned, the grid would be further stabilised,” she stated further.

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benefit from FG’s empowerment

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total of 54, 197 registered households are expected to benefit from the Federal Government’s cash transfer programme in Zamfara, an official has said.

National coordinator of the programme, Temitope Sinkaiye disclosed in Gusau on Friday at a oneday enrolment training for local government facilitators of the programme in the state.

He said that six local government areas of Anka, Bungudu, Birnin-Magaji, Kaura-Namoda, Tsafe and Talata-Mafara had been selected for the programme.

According to him, the programme is one of the components of social investment programme initiated by the government to reduce poverty level among the locals.

“This programme focuses on cash transfer assistance and capacity building to the beneficiaries especially at the community level.

“This is one of the efforts of the Federal Government to reduce poverty level which has become very prevalent affecting people at the rural areas especially the female headed households who do not have any @Businessdayng

source of income.

“The cash assistance is usually followed by capacity building to ensure that the beneficiaries utilise the funds given to them in line with the aims and objectives of this programme”, he said.

According to him, the assistance is inform of cash which is N5,000 to each beneficiaries.

“However, we are giving them in two months, making N10,000 so that the money will be enough for them to utilise or to start saving. The programme we are having today is enrolment training for cash transfer facilitators from the local government areas.

“Our local government facilitators are the key actors of this programme.We will build their capacity to make sure that they are able to implement the programme and reorient the minds of our beneficiaries at community level.

“We have a total 137 cash transfer facilitators across the six benefiting local government areas in the state”, he said.

The director of planning in the state ministry of women and children affairs, Balkisu Ismail thanked the Federal Government for the gesture.

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BUSINESSINTELLIGENCE

In association with

The Nigerian Code of Corporate Governance 2018 PRINCIPLE 9- Access to Independent Advice BISI ADEYEMI.

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he ninth Principle of the Nigerian Code of Corporate Governance, 2018 provides that “Directors are sometimes required to make decisions of a technical and complex nature that may require independent external expertise.”

Given the increasingly complex nature of the transactions that Directors are required to consider and approve, it is imperative that the Board has access to robust expert advice to ensure it has complete understanding of transactions and the implications for the enterprise to enable them take optimal decisions.

Such transactions include financing and investment, business restructuring – mergers and acquisition, business combinations, etc. The Code recommends that the Board should ensure that Directors, especially Non-Executive Directors (NEDs) - who may not have all the competencies and skillsets in their midst to grapple with the technicalities of complex transactions - have access to independent professional advice where they consider it necessary to enable them effectively discharge their fiduciary responsibilities. Such independent professional advice shall be obtained as set out in the Company’s governance policies and at the Company’s expense. The intention of the Code is clearly to ensure that directors discharge their responsibility to the optimum, notwithstanding their limitation as far as certain transactions are concerned.

Traditionally, Boards would typically consider engaging independent advisers in situations specifically required by law - obvious conflict at Board level or a related party transaction with a Director. The global trend is to encourage the Board to seek independent advice in relation to a broader range of issues, most notably significant or “transformational” transactions by the Company. Whilst the Code does not set a standard for what may be deemed a “technical and complex decision”, the definition appears to be subject to the circumstance of each company’s operations as well as the skillset available on the Board. Alex Bennet in his book, “The DecisionMaking Process for Complex Situations in a Complex Environment” describes a complex decision as a choice to be made

on a matter having peculiar information with numerous alternatives which all have the potential to trigger an impactful change therefore requiring an increased attention around coordination or specialized expertise before the choice is executed”.

Travers Smith LLP in their paper on “Independent Expert Advice for Non-Executive Directors” provide some useful guidance to NEDs when faced with complex transactions. Directors should be mindful that if the transaction is subsequently unsuccessful, there are potential liability and reputational issues for the entire Board and not just the executive directors. It is therefore important to ensure that all appropriate steps are taken to minimize this risk of failure. Where the Company is considering a transaction, which involves some Directors or a Management Buy Out, separate legal and financial advice should always be taken by the other directors – especially the Independent Directors. If the Company is considering entering into a large, complicated or potentially hostile transaction, NEDs should carefully consider whether they should retain independent advisers to assist them in their consideration of of the transaction. This will be particularly relevant where the information is voluminous, the deal complex or the timetable aggressive. NEDs should make sure that they are provided with all relevant material information which has been produced in relation to the transaction and not a “watered down” summary which simply argues the benefits. NEDs need to be able to fully understand the potential downsides of a transaction (as well as the upsides). Equally, board packs should be concise enough to be readable and demand-led. NEDs (and their independent advisers) should be given direct access to the company’s legal and financial advisers to enable them to discuss the transaction (and not necessarily in the presence of the executive directors).

It is also imperative that NEDs should make sure that a proper assessment of the risks has been undertaken and properly factored into the terms of the particular transaction. Where due diligence has been limited, NEDs should understand the material omissions and the risks associated with such omissions. If redflags have been identified during the due diligence process, NEDs should establish whether they have been addressed properly.

The Board will in the normal course of business be required to evaluate proposals, projections and underlying assumptions presented by Management which may require an independent perspective in order to reinforce

a potential opportunity, or highlight the landmines in what had been presented by Management as a not-to-be-passed opportunity.

The Code recommends that the Board should ensure that all external consultations are made in compliance with the Company’s governance policies and at the Company’s expense. This re-emphasizes the need for the Board to define appropriate governance policies that align with the Company’s unique business operations and structure. Generally, individual directors do not have authority to commit the Company to a contract, including one to provide professional advice to the director on matters relating to their role. Thus, the Company should have a Policy statement regarding seeking independent professional advice which must essentially require the prior approval of the Board, include details of the nature and reasons for seeking the independent professional advice, the nature of fees amongst other details.

It is essential that a Letter

of Engagement detailing the Board’s expectations and scope of such engagement is executed.

It is good practice that the fee for such engagement is not success based as this could affect the independence of the expert. A fixed fee arrangement is preferable.

To be effective, the Board should ensure that such independent advisers are given direct access to all information and Company resources that will enable them offer the appropriate advice. The often significant costs associated with seeking independent expert advice is a major disincentive to going this route. The Board should consider the cost-benefit trade-off when considering seeking external advice.

As Board members act in a collective capacity, trust and confidence are critical to consensusbuilding in the decision-making process. As such, the exercise of individual right to seek expert professional advice must be sparingly used.

In the event of an allegation of breach of their fiduciary responsibilities of due care and

diligence, evidence that Directors sought and relied on independent advises could be marshalled in their defense. This is not to say that Directors can abdicate their statutory responsibility under the cloak of acting on expert advice.

In the case of ASIC Vs Healey (2011) FCA 717, the US Federal Court held that Directors cannot substitute reliance on the advice of Management or external professionals for their own attention and examination of an important matter that falls specifically within the scope of the Board’s responsibilities. Directors are expected to apply an enquiring and unbiased mind to the information before them.

Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng.

For more articles, kindly download the DCSL Knowledge Hub via this link - https://www.dcsl.com. ng/index/pages/page/dkhub

Monday 01 July 2019

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EDWARD WHITE, DEMETRI SEVASTOPULO AND SONG JUNG-A

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onald Trump has become the first sitting US president to visit North Korea after crossing from the demilitarised zone that divides the Korean Peninsula, in a historic move during his third encounter with North Korean dictator Kim Jong Un. Mr Trump stepped over the border and posed for photographs with Mr Kim on Sunday before the pair crossed back to the South Korean side of the DMZ minutes later.

“I didn’t expect to meet you at this place,” Mr Kim said after Mr Trump stepped over the border into North Korea. “We should shake off history and move forward to the future”.

“Big moment,” said Mr Trump, who added that it was an “honour” to cross the border.

The two leaders then had their first meeting since February, when they held a summit in Hanoi that collapsed after they failed to agree on the path to denuclearisation, which Mr Kim had pledged to complete during their landmark first meeting in Singapore.

After an almost hour-long discussion on Sunday, the US president signalled the resumption of nuclear talks. He said teams from both sides would start working over the next two to three weeks. “We are not looking for speed, we are looking to get it right,” he said.

The meeting was orchestrated at short notice after Mr Trump on Saturday tweeted an invitation to the North Korean dictator to meet him in the DMZ during a visit to South Korea. But US officials had done

Donald Trump enters N Korea and meets Kim Jong Un First US sitting president to set foot in country signals restart of nuclear

some preparatory work in case of a possible meeting.

The leaders had also exchanged letters in recent weeks, adding momentum to a process that had ground to a halt. The Hanoi summit collapsed after Mr Trump refused to ease sanctions until Mr Kim abandoned his entire nuclear programme. But on Sunday, he suggested the possibility of taking the more incremental approach desired

by Mr Kim. “The sanctions remain, but at some point during the negotiations things can happen,” Mr Trump said after his meeting with Mr Kim. Mr Trump met Mr Kim even though Pyongyang recently tested several short-range ballistic missiles — the first such move since 2017. He had played down the tests — contradicting his own officials — in an effort to maintain his relationship with Mr Kim. Sue Terry, a former CIA North Korea expert, said one positive result was the fact that Mr Trump said Mr Kim had agreed to designate a team to negotiate with Steve Biegun, the US’s North Korea envoy. “Thus far the Trump-Kim bromance acted as an impediment to making progress, because Kim wanted to only deal

Deutsche Bank plans 15,000-20,000 job cuts Reduction represents about a fifth of the German bank’s total workforce OLAF STORBECK AND DAVID CROW

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eutsche Bank has drawn up plans to cut between 15,000 and 20,000 jobs as part of chief executive Christian Sewing’s push to shrink dramatically the lender’s investment banking division.

The potential job cuts were included in proposals presented to members of Deutsche’s supervisory board and regulators earlier this week, according to one person briefed on the discussions.

The headcount reductions would be equivalent to roughly half of all investment banking jobs at Deutsche, although it is unclear whether the cuts will also affect the bank’s other divisions. It represents about a fifth of Deutsche’s total workforce of about 91,000. Last year, the lender cut 7,000 jobs.

“There has been significant progress over the last week, but the full package is not yet ready,” said a second person briefed on the plans Deutsche declined to comment on the scale of any potential job cuts, adding: “[The bank] is working on measures to accelerate its transformation so as to improve its sustainable profitability.

We will update all stakeholders if and when required.”

The job cuts under consid-

eration are one of the clearest indications so far that Mr Sewing is serious about scaling back Deutsche’s struggling investment bank following years of poor performance. The potential cuts were first reported by The Wall Street Journal.

Earlier this month, the Financial Times reported that Deutsche was preparing a dramatic overhaul of its trading operations, which would involve closing or drastically shrinking its equity and rates trading operations outside of continental Europe.

Deutsche is also working on the creation of a “bad bank” that could house or sell up to €50bn of assets after adjusting for risk.

Under the plans, which could be unveiled alongside the bank’s half-year results next month, the bank would retain stronger units such as its bond trading business and its currency-trading operation.

In addition to shrinking the investment bank, Mr Sewing and executives are set to unveil a renewed focus on transaction banking and private wealth management as the lender tries to find new sources of revenue.

Deutsche’s Wall Street operation is expected to bear the brunt of job cuts, prompting officials at the Federal Reserve to ask executives to explain the potential impact of the “bad bank” plan. www.businessday.ng

Donald Trump, left, became the first sitting US president to visit North Korea when he crossed the border to greet Kim Jong Un © AFP

with Trump,” she said.

Jung Pak, a former CIA analyst and Kim expert, said the meeting could prove worthwhile if Mr Kim really empowered his negotiators, but said she was sceptical.

“What would be the incentive for him if he can get the president of the United States to cross over into North Korea without having done

very much?” Ms Pak said.

Wendy Sherman, a former North Korea negotiator in the Clinton administration, said Mr Kim had won the “authoritarian beauty contest” — a reference to meetings Mr Trump had at the G20 with Russian president Vladimir Putin, Crown Prince Mohammed Bin Salman of Saudi Arabia, Turkish president Re-

cep Tayyip Erdogan, and Xi Jinping of China.

One key question was whether Mr Trump had altered his position that Mr Kim must abandon his entire nuclear programme to get sanctions relief, Ms Sherman said: “If Putin, MBS, Xi, Erdogan are precedent, Trump gave but didn’t really get anything.”

Trump’s Huawei shift angers US security hawks Hardline senator warns president of ‘catastrophic mistake’ on telecoms group DEMETRI SEVASTOPULO AND TOM MITCHELL

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onald Trump has angered US security hawks by softening his stance on Chinese telecoms company Huawei — a concession even Beijing had not expected to win as part of a trade truce with President Xi Jinping at the G20.

As part of the trade compromise brokered on Saturday in Osaka, the US president agreed not to impose new tariffs on Chinese goods and China agreed to buy US agricultural produce. In a less expected twist, Mr Trump also agreed to reverse a decision that had in effect imposed a ban on American groups to sell software and equipment to Huawei.

Mr Trump first said he told Mr Xi he would only consider addressing Huawei issues at the “very end” of the trade talks. But on Sunday he revealed he reversed his position on the sale of gear to Huawei “at the request of our high tech companies and President Xi”.

“Trump gave the Chinese a clear sense that he is transactional on China rather than ideological — which they take as good news,” said Dennis Wilder, former head of China analysis at the CIA. “National security hawks are unhappy and will try to block his Huawei move in Congress.”

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Senator Marco Rubio, who supports a hard line on China, said Congress would have to respond: “If President Trump has agreed to reverse recent sanctions against #Huawei he has made a catastrophic mistake,” he tweeted.

When Mr Trump earlier this year suggested he would consider including Huawei in any trade deal, it sparked criticism from those arguing the company posed a security threat.

They feared the president would overlook their concerns to meet his campaign pledge about reducing the US trade deficit with China.

From China’s perspective, the meeting went better than expected, in line with Mr Xi’s other encounters with Mr Trump, whose appetite for fighting wanes when in the same room as his Chinese counterpart.

Before the gathering of world leaders, Beijing was confident that he would not impose new tariffs on Chinese exports and that he would agree to a resumption of trade talks in return for token purchases of US agricultural goods.

But Chinese officials and analysts did not expect any narrowing of the trade differences or a softening on Huawei and merely sought to halt the downward spiral in relations, people familiar with China’s preparations said. A resumption of trade talks is “probably the best outcome we can expect,” Shi Yinhong of @Businessdayng

Renmin University had said before the G20.

So Mr Trump’s offer to ease the pressure on Huawei and his comment that the nations could become “strategic partners” came as a surprise. Illustrating the general disbelief in China, Huawei tweeted “U-turn?” on Saturday.

Asked by the Financial Times if he planned to remove Huawei from the “entity list” — which dictates which US companies get licences to export to Chinese companies on the list — Mr Trump said it was under discussion. One official said the administration was also looking at other ways to enact the change.

Larry Kudlow, a senior White House economic adviser, said on Sunday the change in tack was not a “general amnesty” for Huawei.

“All that’s going to happen is the Commerce Department will grant some temporary additional licences where there’s a general availability,” he told Fox News. “For example, some of the chipmakers in the United States are selling products that are frankly widely available from other countries.”

However, Bonnie Glaser, a China expert at the Center for Strategic and International Studies, pointed out that Mr Trump had also shifted his stance on ZTE, another Chinese telecoms group, in 2017 after a request from Mr Xi.

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NATIONAL NEWS

Sudan militia chief hires Canadian lobbying group for $6m US filings show boom in such contracts between N American outfits and African governments TOM WILSON

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feared militia commander in Sudan has hired a Canadian lobbying group he hopes will secure a public meeting with US president Donald Trump, support from Libya’s military leader and free wheat from Russia in return for an upfront fee of $6m.

The consultancy agreement, signed in May by Montreal-based Dickens & Madson and Lieutenant General Mohamed Hamdan Dagalo of Sudan’s ruling military council, was published on June 17 by the US Department of Justice under the Foreign Agents Registration Act. It is the latest in a series of eye-catching lobbying contracts between North American companies and authoritarian African governments.

For decades, lobbying outfits have served the interests of US businesses and foreign governments willing to pay for introductions and influence.

Those companies are expanding their services, promising not only access in Washington but also mediation and dealmaking with third-party governments all over the world.

Matthew Page, a former Department of State official, said lobbying contracts between Washington groups and African states were proliferating because there was a belief that the Trump White House was more susceptible to external influence than previous administrations.

“This is a reflection of the changed political realities in Washington where the dynamics within the Trump administration are fundamentally different in terms of influence peddling,” Mr Page, who is now an associate fellow at Chatham House, a UK think-tank, said. “African governments have always had these types of lobbying firms helping them out but in the Trump era these firms can be more effective.”

Foreign governments, individuals and companies spent almost $1bn on US lobbyists in 2017, according to figures compiled by the Washingtonbased website OpenSecrets.org, a non-profit organisation which tracks money in US politics.

Services rendered have included securing press coverage for Cameroon’s 82-year-old autocrat Paul Biya, defending officials in the Democratic Republic of Congo from targeted sanctions or blocking the investigation of war crimes in South Sudan.

In Sudan, Dickens & Madson said they would attempt to influence US policy in favour of the transitional military council and help secure funding and equipment for the Sudanese army.

Lt Gen Hamdan and his fellow military officers seized power in April, toppling Omar al-Bashir, a long-term US enemy, following months of government protests. After promising to hand power to civilian rulers, the generals have demurred and in June turned their guns on the people, killing more than 100 civilians in a night-time raid on a pro-democracy sit-in.

The lobbying contract was signed on May 7, before the raid. But even then, Dickens & Madson faced an uphill battle to build US confidence in Lt-Gen Hamdan. Better known as

Hemeti, the soldier who is second-incommand in the transitional military council and Sudan’s de facto leader, rose to national prominence as the head of a feared paramilitary group known as the Rapid Support Forces.

Members of the RSF have been accused of widespread human rights abuses in Darfur, western Sudan.

The lobbying group’s contract extends further than Washington.

It will also push the interests of the Sudanese transitional military council in Russia, Saudi Arabia, the UN, the African Union and “any other mutually agreed upon country or countries,” according to the filings.

In Russia, the company aims to arrange “private meetings . . . with senior Russian and other political figures” and to secure aid shipments of wheat, diesel and animal feed.

In Libya, the goal is to win funding for the transitional council from military leader General Khalifa Haftar — another Dickens & Madson client — in return for Sudanese military support for the Libyan National Army.

Other objectives include meetings with Middle Eastern heads of state, US investment in Sudan’s oil industry and even the negotiation of an economic union between Sudan and neighbouring South Sudan, which seceded in 2011.

When contacted by the Financial Times, a spokesperson for Dickens & Madson said the company’s president who signed the agreement, former Israeli intelligence officer Ari Ben-Menashe, was travelling and could not be immediately reached for comment.

The Foreign Agents Registration Act, which requires companies that lobby the US government on behalf of foreign entities to disclose their relationships and publishes those statements online, provides an insight into a booming industry.

In South Sudan, former US diplomats are working with the government to block the establishment of a court to investigate war crimes, according to filings.

In the Democratic Republic of Congo, then president Joseph Kabila hired in 2016 Tel-Aviv based MER Security and Communication Systems Ltd to improve its relations with the Trump White House. MER was paid $9.5m by the Congolese government between December 2016 and January 2019, of which at least $4m was passed to US companies, filings show.

A spokesperson for MER was not immediately available for comment.

The agreements are legal and lobby companies say their work provides professional services to legitimate leaders, but the industry has drawn criticism from non-governmental organisations.

“Pocketing millions of dollars from, and representing the selfish interests of, ruthless dictators has become a lucrative business,” said Jeffrey Smith, the founding director of Vanguard Africa, a Washington based non-profit organisation that says it supports ethical leadership in Africa. “It’s an upside-down world in which priorities are misplaced, the people suffer, and abusive leaders inevitably grow stronger and more emboldened.” www.businessday.ng

Agustín Carstens has been dismissive of the first wave of cryptocurrencies, such as bitcoin © AFP

Central bank plans to create digital currencies receive backing Market may evolve ‘sooner than we think’ says Agustín Carstens CLAIRE JONES

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lobal central banks may have to issue their own digital currencies sooner than expected, the general manager of the Bank for International Settlements has said, after Facebook recently unveiled plans to create its own stablecoin.

Agustín Carstens, who heads the BIS, known as the central bankers’ bank, told the Financial Times that the organisation supported the efforts of the world’s central banks in creating digital versions of state currencies.

“Many central banks are working on it; we are working on it, supporting them,” Mr Carstens told the Financial Times.

“And it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”

A number of central banks, including Sweden’s Riksbank, are working on their own versions of digital currencies, which would work by offering the public direct access to central bank money.

At present, only private sector lenders can borrow directly from monetary authorities.

Central bankers, including Mr Carstens, have been dismissive of the first wave of cryptocurrencies, viewing the likes of bitcoin and ethereum as speculative instru-

ments that cannot be described as money due to the volatility of their value against the most widely used state currencies, such as the US dollar and the euro.

However Facebook’s plans to create Libra — a stablecoin with its value pegged to a basket of as yet unspecified currencies backed by as yet unspecified assets — have attracted attention from officials, including at the Basel-based BIS. The BIS said in an extract on digital currencies, taken from its annual report, that coins backed by tech giants could “rapidly establish a dominant position” in global finance and pose a potential threat to competition, stability and social welfare.

“The issue is how will the currency be used? Will there be discovery of information, or data that can be used in credit provision and how will data privacy be protected?” Mr Carstens said. “A very simple way to regulate this is to start with anti-money laundering rules. That is a very immediate and very obvious concern.”

However, Mr Carstens acknowledged that developments in the rest of the currency market would influence the extent to which central banks pursued their stablecoin projects.

“There needs to be evidence for demand for central bank digital currencies and it is not clear that

the demand is there yet,” he said.

“Perhaps people can do what they want by using electronic wallets provided by banks or fintech companies. It depends on the development of payment systems.”

The BIS used its annual report, published on Sunday, to call on governments to take some of the weight off central banks in supporting the economy by unveiling more fiscal policies and structural reforms.

“The effectiveness of very aggressive monetary policy dwindles through time. It will always have some impact, it is effective to combat downturns — but it is not a pillar for higher sustainable growth,” Mr Carstens said. He added that keeping monetary policy ultraloose for longer created greater financial risks.

A number of central banks that are BIS members — including the US Federal Reserve and the European Central Bank — are considering launching a fresh round of additional monetary easing to boost flagging confidence in the global economy.

The Fed looks set to cut interest rates and ECB president Mario Draghi has hinted that his governing council could cut rates or restart the expansion of its €2.6tn quantitative easing programme of bond buying in response to investors’ fears that growth is set to slow sharply.

G20 deeply divided on trade and climate change Japanese prime minister Shinzo Abe, host of this year’s G20 summit in Osaka ROBIN HARDING, ALEX BARKER AND DEMETRI SEVASTOPULO

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he G20 has staged a show of unity by signing up to a unanimous communique but only by papering over deep divisions on trade and climate change.

Trade has been the main focus of this year’s G20, with Mr Xi on Saturday accusing rich countries of engaging in protectionism that was “destroying the global trade order”.

After two days of discussions in Osaka, Japan, leaders of the world’s biggest economies warned that trade and geopolitical tension had intensified and risks to the global economy

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“remain tilted to the downside”.

Their success in crafting a communique shows that the G20 is getting better at managing the disruptive challenge from US president Donald Trump, but at the price of weak agreements that do little to bind national leaders.

Although the mood was lifted

by US-China trade detente, news that the EU and Mercosur struck a landmark trade agreement, and agreement between Russia 0and Saudi Arabia to extend their oil production agreement, officials involved in the G20 talks said that trade, environment and the digital economy were the toughest issues with the debate on climate @Businessdayng

change going all the way to the deadline.

Shinzo Abe, chairing the G20 as prime minister of Japan, said that trade-related tension was a risk to the global economy. “There are concerns that the postwar free trade system may be wobbling,” he said. “Rather than playing up the differences between the G20, we strove to find common ground.”

On trade, the G20 did that by adopting a bland set of positive principles that were hard for anybody to disagree with: freedom, fairness, non-discrimination, open markets and a level playing field.

Monday 01 July 2019

BUSINESS DAY

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FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

US energy independence could prove to be an illusion Shale boom took energy security off political agenda, but that may not last

ED CROOKS

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nergy independence is a complex concept that is often reduced to a very simple calculation.

Daily oil production 20m barrels, daily oil consumption 19.9m barrels, result: independence.

On that measure, the US appears to have achieved the goal of energy independence pursued by presidents since Richard Nixon.

Its net imports of petroleum and related liquids are on course to average about 620,000 barrels a day this year, just 3 per cent of total consumption, according to the government’s Energy Information Administration (EIA). Next year, the balance is expected to show a small surplus.

Yet that simple accounting for a nation’s energy security obscures some important details, and what seems like independence may be nothing of the kind. In the past decade, energy security has plunged down the political agenda in the US as a result of the shale revolution. In the next decade, it could re-emerge.

One reason is that the simplistic calculation of independence ignores the large inflows and outflows that offset each other to give those small net balances. In the four months to April, the US imported an average of 7m b/d of crude, and exported 2.8m b/d of crude and 3.8m b/d of oil products and related liquids.

President Donald Trump has brushed that complexity aside.

“We work with other countries, and we work with their energy,” he said in a speech at the opening of the Cameron LNG (liquefied natural gas) export plant in May. “But any time we want, we can stop.”

It is not that easy. The US simultaneously imports and exports oil because its refining industry is generally configured to process heavier crudes, not the lighter grades produced in the shale oilfields nearby. It makes economic sense to bring heavier crude all the way from Saudi Arabia, for example, and to build costly export terminals for US production, rather than try to run it through domestic refineries that are not designed to take it.

A move to stop those inward and outward flows, as Mr Trump has suggested, would create colossal difficulties and send the price of fuel soaring. Turning the US into an oil autarky is something that could be contemplated only in the direst crisis.

That means the US will for the foreseeable future remain exposed to what happens in world oil markets, and cannot simply turn a blind eye if there is an es-

calation of disruption to tanker traffic passing through the Strait of Hormuz.

With net oil imports of roughly zero, the US has less macroeconomic exposure to a surge in crude prices. But there would still be a significant distributional effect on incomes. Workers and investors in the oil industry would benefit at the expense of consumers, particularly those who buy a lot of fuel.

Uncertainties about the outlook for oil supplies and prices have also been raised recently by a fresh round of concern about the financial health of the US shale industry. Pioneer Natural Resources, one of the most successful of the shale oil producers, in May announced that it had cut about a quarter of its workforce, and its chief executive told the Wall Street Journal recently that the company had abandoned its goal of increasing production to 1m b/d by 2024.

US shale production has consistently defied every negative assessment. US onshore oil production outside Alaska rose by 1.6m b/d last year and is set to add another 1.2m b/d this year, according to the EIA. But the industry’s persistent failure to generate free cash flow has left investors disillusioned.

Another source of uncertainty is the possibility that a Democrat will retake the White House in next year’s election. All the contenders for the party’s nomination have talked about the need to address the threat of climate change, and some have talked about restricting US fossil fuel production.

Joe Biden, the frontrunner, has sounded less ambitious on climate than many of his rivals, but his platform includes a commitment to “banning new oil and gas permitting on public lands and waters”.

A future Democratic president’s freedom to act will be constrained to some degree by what he or she can get through Congress but, as Barack Obama showed, there are many measures that a president can take by executive action and regulation.

In the 2000s, there were often alliances in US energy policy between those worried about climate change and those worried about national security, which achieved legislative success in creating support for renewables and efficiency standards.

The shale boom eroded the base for those alliances. Some combination of an international crisis, disappointing performance from the shale industry and a White House less sympathetic to fossil fuels could bring them back. www.businessday.ng

Workers on a shale oil rig in Menstone, Texas. The industry’s failure to generate free cash flow has left investors disillusioned © Bloomberg

EU-based traders caught in Swiss ‘equivalence’ spat Breakdown in talks leaves investors in cross-border limbo MEHREEN KHAN AND PHILIP STAFFORD

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U-based banks and fund managers face the threat of imprisonment in Switzerland from Monday if they flout a ban on trading hundreds of Swiss stocks following the breakdown of talks between Brussels and Bern.

Swiss regulators have imposed a ban on trading Swiss equities on exchanges in the EU after the European Commission let the “equivalence” status granted to Switzerland and its stock exchange expire, amid failed negotiations over a trading agreement with the EU. The equivalence permit lets Swiss and EU investors freely trade across each others’ borders. From Monday, Swiss shares can only be traded on the Zurich exchange, via a recognised broker.

European investors will face punishments ranging from financial penalties to imprisonment of up to three years if they trade stocks, such as consumer company Nestlé or pharmaceutical group Novartis, away from Switzerland’s exchange.

As a result of the impasse, Swiss traders will also lose their access to EU-based stock exchanges from Monday.

The regulatory moves mark a new low for EU-Swiss relations, which have been strained for months over talks to formalise more than 120 bilateral treaties into a single framework deal that would require Switzerland to adopt some EU laws automatically.

Brussels has hardened its stance in light of negotiations with the UK where equivalence is likely to be the status granted to the City of London after Brexit.

To put pressure on Swiss authorities to accept the treaty, Brussels has kept the country’s traders on a tight leash, granting short-term equivalence permits since December 2017. The latest six-month extension expires on Sunday and will not be renewed unless there is a breakthrough in treaty talks, the Commission said.

“At this stage we have no indication about any intention of our Swiss partners to make further progress and hence there is no justification to extend the current equivalence decision beyond 30 June”, said a Commission spokesperson.

The “equivalence” permit let Swiss and EU investors freely trade across each others’ borders. From Monday, Swiss shares can only be traded on the Zurich exchange, via a recognised broker.

How will US jobs growth figures affect the Fed? Market questions is the FT’s guide to the week ahead

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ow will US jobs growth figures affect the Fed? June’s jobs data due for release on Friday will offer a fresh view on the health of the US economy at a pivotal moment for markets.

The Bureau of Labor Statistics is expected to show that the US created 160,000 jobs in June. This would mark a leap from the disappointing 75,000 added in May, which was the lowest jobs growth figure since February and second lowest since September 2017, and added to concerns that US economic growth may be slowing.

A good bounce in employment growth would indicate that the US economy remains in good shape despite a decade-long expansion and unemployment at a halfcentury low, and damp pressure on the Federal Reserve to lower interest rates later in July.

The Fed Funds futures market has priced in a certainty that the Fed will trim rates by at least a quarter of a percentage point, and a decent chance of the central bank lowering rates by a largerthan-usual half point. Jay Powell,

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Fed chairman, has hinted at the potential for a rate cut in recent weeks, saying twice in two separate June appearances that “an ounce of prevention is worth a pound of cure” — a nod to the idea an “insurance cut” now would help avert poorer economic activity later. Another weak jobs reading could make that a certainty, while a strong data point could force markets to reassess the likelihood.

“The fact the Fed is going to be data dependent has boosted markets this year,” said Lori Heinel, deputy chief investment officer for State Street Global Advisors.

“We think this economic recovery has room to run and that stocks have another leg in them.” Richard Henderson After hitting a six-year high, can gold’s rally continue?

Gold is set for its best monthly return since 2016 on the back of a weaker US dollar and the expectation of lower interest rates globally.

Last week the price broke through $1,400 a troy ounce, hitting its highest level in six years at $1,439. But it has since fallen back @Businessdayng

to trade at $1,415.

Investors are suddenly taking notice — a turnround from the last few years when gold failed to break above $1,365. Holdings in gold-backed exchange traded funds have risen for 11 straight days, according to data compiled

by Bloomberg.

Joe Foster, portfolio manager for the VanEck International Investors Gold Fund, says gold’s move higher signals the beginning of a bull market that could last for several years.

“We have talked frequently about the fundamental and technical importance of the $1,365-per-ounce level for gold, which has roughly been the top of its trading range for the past six years,” Mr Foster says. “If gold holds above the $1,400-per-ounce trading level over the course of this week, we believe there is a very good chance that this marks the beginning of a new gold bull market.”

On Friday analysts at UBS also signalled their confidence, raising their short-term price forecast for gold to $1,430 from $1,380.

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Monday 01 July 2019

BUSINESS DAY

FT

ANALYSIS

Ivanka Trump’s G20 performance puzzles world leaders US president’s daughter and son-in-law seek foreign affairs roles — with mixed success EDWARD LUCE

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he abiding image from this year’s G20 summit will not be Donald Trump sharing another chuckle with Vladimir Putin. It is the clip of his daughter, Ivanka, inserting herself into an awkward circle of world leaders.

The video, released by the French government, shows varying expressions of tortured politeness as Ms Trump intrudes on a discussion between France’s Emmanuel Macron, Britain’s Theresa May, Canada’s Justin Trudeau and Christine Lagarde, head of the IMF. Ms Lagarde, in particular, was unable to conceal her irritation.

What they were discussing is secondary. Mr Macron made a point about social justice. Mrs May replied that people notice when

mostly by the Gulf states. She is also in charge of US workforce training. Her father said she was uniquely qualified to lead the US skills drive because she had created “millions of jobs”.

In reality, Ms Trump’s accessory companies, which she no longer directly runs, created hundreds of jobs, almost all of them in China.

Both Ms Trump and Mr Kushner were denied high-level security clearance by the White House personnel office. Mr Trump overruled the bureaucrats. It is thought that their extensive overseas business ties offered ample conflicts of interest. If you google “Ivanka Trump clearance”, the first item that comes up is cut price sales of Ivanka product lines.

The larger question is whether

Middle East’s power struggle moves to the Horn of Africa

Gulf states are investing heavily in the region, but the crackdown in Sudan has put their interventionist policies under scrutiny TOM WILSON AND ANDREW ENGLAND

A

Ivanka Trump with world leaders at the G20 summit in Osaka on Saturday © AAP/dpa

the economy is brought into it.

Ms Trump then interrupted with a non sequitur about how the defence industry is male-dominated.

The real point is that America’s self-named “First Daughter” is rarely out of the frame at global summits. Other Trump officials are almost invisible compared with Ms Trump, and her husband, Jared Kushner, the only two White House players who are thought to be immune from Mr Trump’s trademark phrase: “You’re fired.”

By contrast, leaders of patrimonial countries, such as Saudi Arabia, are very comfortable with Ms Trump’s role. Mohammed Bin Salman, Saudi Arabia’s crown prince, conducts much of his US communication over WhatsApp with Mr Kushner. The first sonin-law is also a favoured conduit for other leaders. Rex Tillerson, the former US secretary of state, recently disclosed that he had found out his Mexican counterpart was in Washington when he stumbled across him dining with Mr Kushner.

Both Mr Kushner and Ms Trump have a large array of portfolios and unparalleled Oval Office access on any topic. Mr Kushner is in charge of the stillborn Arab-Israeli peace plan, which he launched in Bahrain last week with no Palestinians present. Ms Trump launched a women’s entrepreneurship fund, which is run out of the World Bank and funded

Ms Trump harbours political ambitions of her own. At the G20 summit in Hamburg two years ago, Ms Trump sparked outrage when she briefly stood in for her father at a round table of world leaders.

Ms Trump’s prominence has only grown since then. At the end of this latest summit, Ms Trump provided a video briefing of Mr Trump’s meetings with Japan’s Shinzo Abe and India’s Narendra Modi.

Mr Trump has also been encouraging talk of dynastic succession. Last week he tweeted an image of Trump re-election banners starting from 2024 and escalating quadrennially into eternity. The meme ended with “Trump4Eva”. Whether Mr Trump was trolling his critics, or is genuinely nurturing a dynasty, is an open question.

Earlier this year, Mr Trump said he had considered appointing his daughter as US ambassador to the UN. He had also thought about making her head of the World Bank. He said he pulled back because he would have been accused of “nepotism”.

Because neither job would have come close to offering the power Ms Trump and her husband already have, Mr Trump’s comments must be taken with a pinch of salt. Mr Trump often treats politics as an extension of his business.

The latter has always been tightly held within the family. His White House seems to be little different. www.businessday.ng

fter troops launched a deadly night-time raid on Sudan’s pro-democracy protesters, blame immediately focused on the Rapid Support Forces. The notorious paramilitary unit, made up of remnants of a militia that wreaked havoc in war-torn Darfur in the 2000s, had led the June 3 assault, victims said. Demonstrators were beaten, shot and raped. The bodies of dozens of the 100 people killed — according to local estimates — were tossed into the Nile.

The crackdown suggested the country’s military leaders, who have ruled since the protests triggered a coup against Omar al-Bashir in April, were sending a deadly message that they would not bow to popular pressure and accept a transition to civilian rule. But it was not just the RSF and the generals who faced scrutiny: as the body count mounted, attention intensified on their regional backers — Saudi Arabia and the United Arab Emirates.

Many Sudanese activists even asked whether the powerful Gulf states gave the green light for the raid.

Two days after the attack, the US state department issued an unusually curt readout of a call between a senior US official and Prince Khaled bin Salman, the Saudi deputy defence minister and brother of Crown Prince Mohammed bin Salman, the kingdom’s de facto leader. David Hale, undersecretary of state for political affairs, described the crackdown as “brutal” and told Prince Khaled of the “importance of a transition from the Transitional Military Council to a civilian-led government”.

Saudi Arabia and the UAE strongly deny prior knowledge of the raid, diplomats say. And both insist they are promoting stability in the region and have a long history of economic and political ties to Sudan, a country that bridges the African and Arab worlds and has a

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long coastline along the Red Sea. Nevertheless, the crackdown raised scrutiny over the countries’ role in Sudan, while fuelling wider debate about the interventionist polices being pursued by assertive Gulf states at a time when they are spending hundreds of millions of dollars buying concessions to manage ports and other infrastructure in the Horn of Africa.

“All our problems are about Saudi Arabia, the UAE and Egypt,” says Salman Osama, a 27-yearold surgeon who has been on the frontline of the Sudan protests and treated wounded people during the RSF raid. “They were supporting the [Bashir] regime that was oppressing us and they are supporting this regime too.”

Just 10 days before the attack, Lieutenant General Mohamed Hamdan Dagalo, who heads the RSF and is considered Sudan’s most powerful military leader, was hosted

by Prince Mohammed in Jeddah.

The same week, Lt Gen Abdel Fattah al-Burhan, the head of Sudan’s military council, visited Sheikh Mohammed bin Zayed, the crown prince of Abu Dhabi and the UAE’s de facto leader.

The kingdom and the UAE — its closest regional ally — have pledged $3bn to Sudan’s Transitional Military Council since Mr Bashir was ousted, the two joining Egypt as the generals’ most important backers. For many protesters the Khartoum crackdown reinforced their fears that the foreign powers were bent on keeping their regime allies in power at the expense of democracy.

In its wake, Saudi Arabia and the UAE both called for “constructive dialogue” among Sudanese parties. But it is the generals they appear to be banking on to protect their interests, including Sudan’s deployment of troops in Yemen as part of a Saudi-led coalition fighting Iran-aligned Houthi rebels.

“The Saudis and Emiratis know Burhan and Hemeti [Lt Gen Hamdan] well due to their command of Sudanese forces in the Yemen war,” @Businessdayng

the International Crisis Group said in a report. “They trust the generals to shepherd the country through a managed transition from one military-led regime to another, avoiding the interlude that occurred in Egypt [in 2011] — elections with uncertain outcomes followed by brief Muslim Brotherhood rule — by sidelining those favouring more wholesale reform among civilian protesters.”

Lt Gen Salah Abdel Khalig, one of the seven military officers running Sudan, denies there is anything nefarious in the Gulf states’ support. “They stand with us politically because they want to get rid of this Islamic system that was ruling Sudan,” he says, referring to the Islamists that consolidated power with Mr Bashir in the 1990s.

Those demanding democracy have largely been young and secular. But Adel al-Jubeir, the Saudi minister of state for foreign affairs, hinted last month at Riyadh’s concerns about the potential influence of Islamists. “The Muslim Brotherhood has been opportunistic, they hijacked the changes in Egypt in 2011,” he said. “I believe they may be trying to do the same in Sudan.”

Since the 2011 Arab spring, Riyadh and Abu Dhabi have pursued assertive foreign policies in a bid to mould the region in their image. The uprisings sent shockwaves through the Middle East as autocrats, including Egypt’s Hosni Mubarak and Libya’s Muammer Gaddafi, were ousted and conflicts erupted in Syria and Yemen.

Riyadh and Abu Dhabi took them as a signal that they should become more interventionist to counter the rise of political Islam, which they regard as an existential threat, and Iran’s influence. In Egypt, the UAE allegedly funded media hostile to Mohammed Morsi, the brotherhood leader who became the country’s post-revolution president. After the military ousted him in a 2013 coup, the UAE and Saudi Arabia poured money into Egypt to support the new regime.

Morsi died in prison in June.

BD Money

Monday 01 July 2019

BUSINESS DAY

EqUITIES Basic terminologies to help you understand stock investing Investing in the stock market is not rocket science. Even though there are professionals to help along the way, it pays however, for one to understand the following basic basic concepts associated with stock investing.

Page 72

Interview Tradefi aims to win retail admirers with educative investment platform What informed the establishment of this investment platform? The fixed income market in Nigeria is dominated by banks and institutional investors such as insurance companies and pension funds.

Page 73

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@Businessdayng

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Equities

Basic terminologies to help you understand stock investing Israel Odubola & Segun Adams

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nvesting in the stock market is not rocket science. Even though there are professionals to help along the way, it pays however, for one to understand the following basic concepts associated with stock investing.

Here are some of the technical words you might come across: Stocks: This refers to an investor’s overall ownership in a company. In order words, it is the accumulation of one’s shares in a company. Often times, “Shares” and “Stocks” are used interchangeably; however both terms mean different things.

While a share refers to the smallest unit into which a company’s capital can be divided, a stock is a collection of fully paid up shares.

Liquidity: The ease of buying and selling a security, asset or instrument is what is meant by liquidity. In investing, the closer an asset is to cash, the more liquid it is said to be.

Liquidity is a very important consideration before buying into any stock because investors holding illiquid instrument may be forced to sell at a discount to incentivize buyers.

Bulls: Bulls, Bullish, Bull-run are some of the more likely words you would come across as an investor in equities.

A Bull refers to an investor who believes a share’s price would rise and as such is willing to bet on an upward trend on such stock. Similarly a bull market occurs when prices of equities rise or are expected to rise.

The word “Bull” is usually associated with optimism and willingness to bet on improving market conditions.

Bears: The concept of bear in a stock market originates from the way in which a bear attacks its prey – swiping its paw downwards.

The term ‘bear market’ is used when prices of stocks are falling or expected to decline.

All Share Index (ASI): The ASI is an indicator that measures the average price movement of all stocks listed on an exchange. It is used to evaluate the general trend of a stock market, and is computed in weighted points.

Year-to-date (YTD): This refers to the percentage return of a stock from the first trading day of the day to a particular trading day.

It could be positive or negative depending on general sentiment toward the stock.

Dividend: This is the sum of money companies paid to shareholders out of its profit or reserves as a compensation or reward for risk.

Dividends are recommended by a company’s board of directors, subject to the approval of shareholders Right Issue: This is a group of rights a com-

pany offers its current shareholders to purchase new shares at a rate below the current market price. It implies that the company is giving shareholders a chance to increase their exposure to the stock at a discount price. Companies typically decide to offer right issues when they are cash-strapped and require additional funds either to settle debt or invest in new equipment.

Bonus shares: These are free additional shares given to existing shareholders. A company may decide to distribute further shares as an alternative to increasing dividend that will be paid to shareholders. Bonus shares are issued out of a company’s reserves. When bonus shares are issued, the number of shares a shareholder holds increase. Shareholders pay nothing for these shares.

Blue-chip stocks: This term is used for shares of large and well-recognized companies with track record of sound financial performance. These stocks are known to have capabilities to weather tough market conditions and deliver high returns in good market conditions. Blue-chip stocks are often market leaders in their respective sector.

Bid and Ask: The two terms describe the best potential price that buyers and sellers in the market place are willing to transact at. The bid price is the highest price an investor is willing to pay for the stock. On the other hand, ask price is the lowest price that an investor is willing sell. The difference between the bid and ask price gives the bid-ask spread.

Volatility: This refers to the amount of uncertainty or risk related to the sizes of changes in a stock’s value. A stock with higher volatility means that its value can potentially be spread out over a large range of values. This implies that the stock price can change dramatically over a short time period in either direction. A lower volatile means a stock’s value is steadier and does not fluctuate dramatically.

Basis points (bps): Bips are a unit of measure use to describe the percentage change in the value of a financial instrument. One basis point is equivalent to 0.01 percent. That is, 1 percent is 100 basis points.

Rally: A rally is a period of sustained increases in prices of stocks or upward swings in the market. Short-term rallies occur due to several reasons. Short-term rallies are caused by news or events such as a new CEO appointment that affect demand-supply equilibrium.

Rallies can also be long-term, which result from changes in macroeconomic conditions such as implementation of favourable fiscal policies, etc.

Dividend yield: This is a financial metric that shows how much a company pays out in dividends each year in relation to its share price. It is expressed in percentage and calculated by dividing annual dividend by the stock price. For instance, if a company’s declared a dividend per share of N2 and the stock is trading at N4, the dividend yield is 2%.

Profit-taking: This describes a situation in which investors sell shares after prices have risen to make profit. Profit taking often causes stock price to fall.

Institutional/Retail Investors: Institutional investors are organizations that pool money from individuals and group of individuals to buy securities. Examples of institutional investors are investment banks, insurance companies, pension fund administrators, etc. On the other hand, retail investors are individuals who purchases securities for their own personal account rather than for an organization.

Arbitrage: This is simply the simultaneous purchase of a security in one market and sales in another, to take advantage of difference in price.

Beta: This is a measure of a stock’s volatility; that is how its share price moves in relation the general market price movement. A beta value

greater than one shows the stock’s price swings more than the market, while a value less than one connotes the converse.

Beta is a useful gauge of riskiness for investors in the equity market.

For example if a Stock’s beta value is 1.5, the stock is 50 percent more volatile than the market. If the market gains 10 percent, the stock should therefore gain 15 percent.

On the other hand, if the market dips by 10 percent, the value of the stock is expected to also fall by 15 percent.

Broker: A broker is an individual or firm which buys and sells securities on behalf of the transacting parties. The broker acts an intermediary to execute deals between owners and buyers of a security in exchange for a commission.

Initial Public Offering: An IPO is the process of selling shares of a private company wishing to turn public and raise capital on the stock exchange. The IPO is used only where there is a first time issuance of shares to the general investing public-although institutional investors typically participate in more in an IPO. 52-week high/low: The 52-week high and 52-week low refers to the highest and lowest price at which a stock has traded over the course of the previous year.

An investor might see a stock trading close to its 52-week high as a signal to sell the stock.

This is because they tend to believe the stock price would fall and therefore see opportunity in exiting when the price is still high, so they buy back when price falls.

By the same token, a 52-week low is often seen as a guide pointing to a good entry point into a stock.

Bargain hunting: A Bargain hunter is someone looking for stocks that are cheaper than usual and therefore would offer opportunity to exploit capital gains.

Value investors look for stocks with good fundamentals which are undervalued would guarantee gain when the stock becomes rightly priced.

Penny Stock: A stock less than N1 per share is a penny stock. This kind of stocks is also commonly referred to as micro-cap stocks, and small-cap stocks.

Penny stocks are usually highly speculative and prone to be illiquid and as such may sometimes be risky investments.

Fundamental Analysis: This is a method of evaluating a stock’s true worth by factoring economic and financial factors that are important to the company’s performance.

In Fundamental analysis, Macroeconomic, Industry analysis and trends, corporate caption and news relating to companies are crucial to estimating what price the stocks would trade at in the near term.

About BD Money: This finance supplement is targeted at investors and other readers keen to make their money work harder.

Team Members: Lolade Akinmurele (Lead); Hope Moses Ashike; Segun Adams; Oluwasegun Olakoyenikan; Temitayo Ayetoto; Israel Odubola; Olufikayo Owoeye; David Ibidapo; Graphics: Fifen - Famous www.businessday.ng

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Monday 01 July 2019

BUSINESS DAY

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The Week in View Kemi Akande, Meristem Research

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he bearish sentiment in the equities market turned for the better this week (24th-28th, June), as the market gained 0.39 percent, easing the YtD return to -4.66 percent.

However, persistent selloffs in the month of June settled the month-to-date return at -3.55 percent. During the week, Airtel Africa carried out an Initial Public Offering (IPO) on the London Stock Exchange in the United Kingdom (U.K) under the ticker “AAF� and the company is scheduled to carry out a secondary listing on the Nigerian Stock Exchange (NSE) in the coming week.

The company listed at a price of 80 pence (NGN363) and the admission on the exchange is supposed to take effect on July 3rd, 2019. Although the offer was oversubscribed with strong interests from institutional investors, its share price has slumped by 16 percent. In the fixed income market, investor sentiment was bullish, reflected by respective yield declines of 0.31 percent and 0.18 percent in the secondary markets for bonds and treasury bills.

On Wednesday June 26th, the Federal

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Government of Nigeria through the Debt Management Office (DMO) carried out a primary market bond auction, where it raised NGN96.84bn.

The offer was well oversubscribed with bid-to-cover ratios of 1.35x, 1.66x and 1.92x across the three instruments on offer.

@Businessdayng

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Monday 01 July 2019

BUSINESS DAY

Interview

Tradefi targets retail admirers with educative investment platform Retail investors are missing out on attractive investment opportunities in a safe, liquid and rewarding fixed-income market.

In this interview, Business Day speaks with Tosin Osunkoya, CEO Comercio Partners Asset Management on TradeFi, an innovative mobile investment platform that not only allows investors to access the fixed-income market with convenience, but also educates them on investing.

What informed the establishment of this investment platform? he fixed income market in Nigeria is dominated by banks and institutional investors such as insurance companies and pension funds. However, retail investors, who are at the bottom of the pyramid, are shielded from the benefits of the fixed income market. This is because the local financial market especially the fixed income market is capital driven, hence, institutional and big investors crowd out the retail investing community from the benefits of the fixed income market. So, in a bid to bridge the gap, we developed TradeFi. Our aim is to help people have a better understanding of the fixed income space, whilst exposing them to the benefits such that they can profit from it. By encouraging more people to understand the fixed income market, we are also deepening the capital market which is positive for the economy.

How is TradeFi different from other platforms?

Most platforms are execution platforms, but TradeFi goes beyond execution. I like to think of it as an experience platform. The first value proposition of this platform is safety. It is safe because assets are kept with a reputable custodian, and you receive your statement directly from the custodian.

The second thing is liquidity, because people sometimes need to have access to their money at any time, TradeFi allows you to conveniently terminate your investment with no penalties to fulfill your obligations.

The third point is competitive returns. It is amazing that despite Sovereign issued fixed income instruments such as the FGN Bonds and Treasury bills being safer than bank deposits, they also give higher returns than most banks offer.

The fourth is convenience. Being able to invest at the tip of your fingers, with your phone or computer at your convenience as opposed to the traditional and cumbersome way of investing in Nigerian fixed income is most certainly a game changer.

Above all, FMDQ, which is our self-regulatory organization (SRO) endorsed TradeFi. They are comfortable and satisfied with our

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From left to right: Mr. Nnamdi Nwizu: Co-Managing Partner and Head of Trading at Comercio Partners Mr. Ibrahim Dikko: Chairman, Comercio Partners Mr. Tosin Osunkoya: Managing Director, Comercio Partners Asset Management Mr. Stephen Osho: Co-Managing Partner and Head of Advisory at Comercio Partners

operations and corporate governance structure.

How secure are investors’ funds with TradeFi? We partnered with a custodian to safeguard the cash and securities of the investors on the platform.

When you sign in and fund your wallet on this platform, the money goes straight to your designated account with our custodian. You receive a statement of holdings directly from the custodian.

When the coupon, which is the annual interest rate paid on a bond, is paid by the Federal government, it goes straight to bondholders TradeFi account with the custodian. Neither money nor securities comes to us. We believe it is important we have this level of transparency to make people feel comfortable and have high confidence in this platform.

So, our partnership with the custodian and the way we designed the system brings credibility to the platform. This means investors’ funds are always safe because they are warehoused with a trusted custodian. www.businessday.ng

The fact that investors are exposing their funds to risk free investments is another layer of comfort for them as well.

How to get started with TradeFi First you must download the application on your mobile (available on Appstore and Playstore for iOS and Android phones respectively).

You can also go through the web browser www. tradefi.ng to access TradeFi. Thereafter, you sign up and your account will be activated on the same business day. Once your account is activated, you will receive a notification to that effect.

To fund the account, the user will go to their wallet. Then you make a transfer or pay by card to TradeFi’s designated account with the custodian.

After funding your account, same value will reflect in your TradeFi account immediately after notification by the bank, and then you can start investing.

In the investment room, you have all the secured asset classes, basically treasury bills and Federal Government Bonds with different tenors.

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@Businessdayng

You can choose your preferred securit in the investment room and click ‘ibuy’. If t money in your wallet is not sufficient, the s tem alerts you immediately. But if you have s ficient money, it takes you to another wind that shows you how much you have invest and the valuation of the portfolio.

What is the current size of your custom base and what is the value of transactio carried out so far on the platform?

The volume of the transactions is highly flective of the potential of the retail market. D ploying TradeFi will raise turnover in the ret fixed income market to over a billion naira.

From inception, we have settled over N1 b lion worth of investments on the platform a we currently have over 1,000 users.

What is the minimum amount an invest can start with?

The minimum amount for now is N100,0 We have had feedback from people saying th would want it to be brought down to as low N10,000. This is currently being evaluated.

Right now, we have over a thousand us and we are working towards substantially creasing that figure over the next five years.

How do you ensure the low rate of fina cially literacy doesn’t get in the way?

One medium we are using to reach peop is education. To demystify what many peop find confusing about investing in fixed incom we think we are justified to begin by providi information to the public, starting with ba knowledge of investment and dynamics of Fe eral Government Securities.

The average Nigerian doesn’t know they a better positioned to invest in government curities than keep their money in a savings a count or fixed deposit.

Why put your money in a savings accou where you earn an average of 4.2 percent p annum, you can conveniently invest same government securities that will give yields b tween 12 to 14 percent?

The reason a lot of people save in banks the safety of investment, but there is a high degree of safety in Government Securities.

The interesting thing is you don’t even ha to hold them for long as there are 30-day, 9 day and 180-day plans. Government securit provide better returns than a savings account fixed deposits.

Monday 01 July 2019

BUSINESS DAY

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Monday 01 July 2019

BUSINESS DAY

Investing Questions prospective investors should ask before launching into agribusiness

Temitayo Ayetoto

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ore than before, Nigerians appear to have found more reasons to bet their money on agriculture, with a good number increasingly entrusting their idle funds in the hands of anchors of a farming scheme or the other.

Opportunity windows are widening and statistics such as the value of Nigeria’s agricultural export rising in the first quarter of 2019 by 17.5 percent higher than the same period in 2018 reinforces investors’ optimism. The exports were largely driven by Sesamum seeds worth N39.6 billion, well-fermented cocoa beans N20.1 billion, superior quality raw Cocoa Beans N9.8 billion and frozen shrimps and prawn N4.3 billion.

As promising as the agricultural sector appears, leading experts in the field think intending investors should be able to answer certain key questions before launching out fully into farming. Experts who spoke to BusinessDay have these to say.

Babafemi Oke, All Farmers Association of Nigeria (AFAN), Lagos Chapter Chairman I think you should think of the farm location against post-harvest losses.

Where you are going to have your farm should be taken care of such that it would be more accessible to the road network. If not, you will definitely start recording post-harvest losses.

Availability of labour should be taken into consideration. Labour is a critical area of farming that has to be guaranteed in order to protect productivity.

Then the marketing has to be strategic, which is knowing where you are going to sell your products.

In terms of the method, it depends on what you are planting. Definitely, you have to be conscious enough to get a hybrid seed that will assure better yields. If it’s animals, consider the drugs for them.

You should not just plant anything, that at the end of the day, it won’t yield well.

These are very important when going into agriculture.

Dangote Sanni, President, Nigeria Agri-Business Group (NABG) It depends on the crops to be cultivated and the size of the activities. The fundamental issues are suitable land, accessible water (irrigation or rain), seeds quality, fertiliser and herbicides.

Other inputs are finance, market value, mechanization and sustainability. I believe these issues are the most important things to take care of in the evaluation of the farming business.

Ade Adefeko, vice president Olam Nigeria They (investors) need to understand the terrain, the soil type, the enabling policy framework that guides agriculture in the states they want to venture into and the legislation on ground. There also has to be an understanding of the crop dynamics and the need to determine which part of the value chain to play.

Whether it is in production, processing or finished products, there are specifics to consider.

Tunji Falade, chairman, Lagos Chamber of Commerce and Industry (LCCI) Integrated Agriculture Project (LIAP) www.businessday.ng

What market am I producing for?

What crop or what produce? What are the specifications of the market? Then it depends on whether it’s an out grower’s scheme or you want to do it yourself.

You have to consider the land to be cultivated. Has it been tested? Is it suitable for the crops to be planted? What about whether, irrigation and mechanization? What about the inputs? Are you getting seedlings, fertilizers and chemicals from the right and authentic sources? These are the concerns that an investor must address before investing.

Olabode Adetoyi, chief executive officer (CEO), Hi-Nutrients International Limited and Harvard University trained entrepreneur The investor should study the area he or she wants to play, be it livestock or crops. What is the margin and market for the product and opportunity for growth are what investors should look out for.

OpenFarm Network The business perspective to agriculture One of the challenges African farmers are suffering from is their inability to take farming from a lifestyle inherited from their ancestors to running a busi-

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ness venture. This explains why a banker who leaves the banking hall for agriculture could prosper within a few years unlike those that have been farming for decades.

It starts with a difference of perspective. He comes with a single aim of making a business out of farming.

No more. No less. Having this perspective shapes the decisions the farmer makes. It becomes more economical rather than sentimental in nature.

This makes them ask questions like: “Is this purchase an asset or liability?

How can I reduce the cost? How can I increase profit? Who can buy at this price? These perspectives also shape how the business is managed. Records are kept to track cost in order to know the minimum market price acceptable. This lack of farm record is the reason so many farms run at a loss without the farm owners even realising it. It also determines how human resources are organised to manage and get things done on the farm.

Value Added Agriculture Value-added agriculture is any activity done to improve the value of agriculture produce beyond its raw state. These activities range from the way crops are processed and packaged. Lack of valueadded services such as this is why other players in the food production chain earn far more than growers. Billion dollars agribusinesses have been built on providing value-added services to farmers.

A poultry farmer who goes beyond just producing his eggs with well-branded promotional materials and offers home delivery as a service can sell at 20 percent higher than market competitors.

Adding value to farm produce increases their appeal to buyers, which then increases their willingness to pay higher prices. Successful farmers see themselves beyond growers. They see themselves as players in the food production sector, knowing that the more responsibilities they can take to add value to their produce, the bigger the financial reward that accrues.

@Businessdayng

Monday 01 July 2019

BUSINESS DAY

77

Data

Federal government eurobond Yields on Eurobonds fell further week on week by c.222ps from an average of 6.56 percent when the market closed last week to 6.42 percent as buying interest on Nigeria’s Sovereign Eurobonds intensified.

Egypt’s local-currency bonds have handed investors a 22% return this year, five times the emerging-market average. And the Egyptian pound’s 7.3% gain against the dollar is the most globally after Russia’s ruble, according to Bloomberg analysts.

Corporate eurobond Yields on corporate Eurobonds rose c.605bps across all tickers week-on-week with average yield rising from 7.08 percent last week to 7.51 percent. www.businessday.ng

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Monday 01 July 2019

BUSINESS DAY

Personal Finance Answering risk appetite questions before investing OLUFIKAYO OWOEYE

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ife is all about taking risks, so also saving and investing involves several risks. For smart investors, the magic is to find a middle ground between these different risks.

The risk that an institution will fail in its obligations (default risk), risk that the money will not keep up with rising prices (inflation risk), the risk that comes with share prices going up and down (volatility risk), the risk that you could have earned better returns elsewhere (interest-rate risk) However, what is a good balance differs from one investor to another. The personal attitude to risk, investment goals, time frame and need for returns, personal circumstances – how much you can afford to lose (your capacity for loss) are some questions every investor must answer before making an investment decision.

All these questions make up what is called individual ‘risk appetite’. Over the years, a good way to mitigate risk is to

spread your money across a range of different investment types.

Ask yourself what would happen if I lose some or all of the money I am putting into this investment. This will depend largely on your circumstances and how much of your money you are investing.

Saving and investing choices will depend on goals and timescales. The bigger your goal in relation to the assets or income you wish to invest, the greater the

Week Ahead Week Ahead(Monday, 1st July – Friday, 5th July, 2019) Week Ahead (Monday, 8th April – Friday, 12th April, 2019) Commodity Cocoa: Cocoa prices decreased by 0.20% to $2, 495/MT despite supply cut by Ghana and Ivory Coast. Going forward, prices are expected to rise in the near term due to sale suspension by Ghana and Ivory Coast.

Sugar: Sugar prices fell 0.39% to 12.78/pound despite expectation of a global deficit. Going forward, lower global supplies will likely weigh on prices.

Fixed Income 185-day Open Market Operation (OMO) bill sold for N70 billion at 14.49% stop rate will mature on Thursday, July 4.

91-day treasury bills that were issued on April 3, 2019 offered for N10 billion at 10.29% stop rate will mature Wednesday, July 3.

Data Release The National Bureau of Statistics will on Monday, July 1, release Nigerian Demographic Statistics 2018 report.

Currency The naira depreciated 0.04% to N360.74/$ on the Investors and Exporters window at Friday’s trading. Friday’s turnover stood at US$320.98 million. Going forward, we expect naira to remain stable across all windows given Nigerian Apex Bank’s regular Event The meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies will hold on July 1 -2 in Vienna, to decide on production levels, which influence global oil prices. www.businessday.ng

rate of return required to beat inflation and hit your goal. Taking no volatility risk at all might make your goals impossible to achieve, taking too much might lose you your investment.

If I have a short-term goal my appetite for volatility risk would usually be low and cash products will be the best place to invest. You don’t want to be worrying about the state of the financial markets when you need your money to be readily accessible.

Short-term goals (under five years) such as a car or a house deposit are best saved for in cash. However, cash savings run the risk of not keeping up with rising prices (inflation risk) With longer-term goals, it’s more advisable to put cash into investments that have a better chance of giving inflation-beating returns, such as shares, but which carry the risk of prices going down.

Longer time frame gives the investment more time to recover if it falls in value. So if you have a long-term goal it makes sense to be prepared to take on volatility risk for the opportunity of higher returns. However, as a long-term goal moves closer the risk balance should change.

Risk attitude is subjective and is likely to be influenced by current events or recent experiences. When stock markets rally, we tend to feel comfortable with market risk, when they are falling we do not. On the other hand, we might regret it if we’ve been very cautious and our long term investments don’t produce the returns we need.

You can keep risks in line with your risk appetite by spreading cash across a range of different investments.

Chart of the week

With the first half of the year gone, investors’ value on the Nigeria equity market has suffered the worst performance against corresponding periods in the last five years. This is despite impressive performance churned out during the first quarter of the year and positive outlook for companies’ earnings in the second quarter.

Still maintaining its bearish trend, the Nigeria all share index (ASI) which measures the aggregate performance of listed shares is down on Year-to-date (YTD) by -4.66 percent.

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Monday 01 July 2019

BUSINESS DAY

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Company IN FOCUS

BUSINESS DAY Monday 01 July 2019 www.businessday.ng

NDEP: The making of an independent integrated energy firm OLUSOLA BELLO & FRANK UZUEGBUNAM

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aking a success of any oil and gas star t-up requires technical competence, tenacity and sound judgement.

Technical competence matters a lot. Getting a foothold in the industry could mean squeezing out millions of barrels of crude oil from a tired marginal field. Tenacity is equally as important especially in the unfriendly Nigerian business environment where there are more reasons to give up than to continue. While it takes technical competence and tenacity to build, sound judgement is the staying power and survival of the business.

When the promoters of Niger Delta Exploration and Production (NDEP) set out to actualise their dreams, despite their strong technical competence, the business would have been a failure but for providence and the determination to survive which propelled the company to its much celebrated achievement.

The company started out with the name Midas Exploration and Production as it identified with its financial partner, Midas Merchant Bank. From the onset, the company wanted to go into marginal oil field development.

Today, the marginal field has metamorphosed into an integrated energy firm including a refinery.

Back then when they got the oil field, they could not get presidential approval during the regime of late General Sani Abacha administration. It was a period of death to come because the promoters were not able to do anything, yet they had shareholders who believed in what they were doing and had put money down.

To raise money, the promoters of the company had to engage virtually in “street hawking” of the shares of the company, according to Layi Fatona, pioneer managing director of the company.

Then came Goddy Ibru, an entrepreneur of great intellect who had a group of about twelve other investors behind him. With his intervention, the company went into action to develop the field and today it is history.

Ogbele refinery

“Ogbele (a marginal filed), given to the company by chevron had a reserve of just about 5 million barrels then but has grown to almost 50 million barrels by 2019 and still counting,” Fatona said at the May 2019 technical meeting organised by the Nigerian Association of Petroleum Explorationists (NAPE).

After suffering so many disappointments especially while trying to raise money to develop the field coupled with the death of Aret Adams in 2002, the company eventually recorded a breakthrough in 2005 when it struck the first oil.

Beyond the breakthrough of striking first oil in 2005, NDEP also experienced a rig collapse the same year which remains a chilly memory to the company.

The misfortune of the rig collapse was a potentially ruinous situation as it occurred before the first cash flow.

Beyond first oil at Ogbele, with good reserve, wells 3, 4 and 5 were drilled and more reserves were added. The company subsequently moved to wells 7, 8 and 9. It got new reserves and indulged in its own 3D. When Niger Delta Exploration and Production Plc started planning for Ogbele oil field, the oil price was $12 per barrel.

“Then we ran our numbers up to $20 saying if oil price got $22 or $23 dollars per barrel, at that level we would be able to pay our debt of $6 million. This was the strength and the character that allowed the company to be bold enough to take a $6 million loans. By the time the company

was able to get to first production oil price was at $54”, said Fatona.

Ogbele field also has a significant amount of gas. In the beginning, NDEP was battling with all sorts of problems, including gas flaring, which had become a challenge. It then decided it was going to invest in gas and negotiated the first gas purchase agreement with Shell and commenced gas pipeline of 20 kilometres and delivered its first gas in 2012 to buyers.

The gas challenge turned into an opportunity for the company as it was enabled to diversify its revenue base while still dealing with so many security issues. The gas curves, he said, turned the company around.

After first oil at Ogbele, NDEP grew reserves from 5 million by drilling additional nine wells thereby adding more to it reserve. Just a few weeks ago, the company completed well 11 in Ogbele.

As at the beginning of May 2019, the company produced about 15 million barrels of oil from Ogbele. This is 300 times the reserve in place when Chevron gave the block to Niger Delta Petroleum Resources. It has produced 81.5 billion standard cubic feet of gas, which it supplies to Nigeria Liquefied Natural Gas Limited (NLNG).

One interesting thing about the field is that it had no gas reserve when Chevron handed it over to the company, but today it is carrying gas of half Tcf “I believe every marginal field has the potentials and prospects like Ogbele. You can imagine if

every marginal field turns out to be like this, then what the prospect for Nigerian petroleum industry would be? This can only be if we can get everything right, such as a safe environment where people can work, funding is in place, develop our own human capital and make sure we can do all the right things. I can see the story of the Nigerian petroleum industry good to go,” Fatona said.

Today, the company is contributing highly to the domestic gas supply through the EscravosLagos Gas pipeline as its gas comes to Lagos and the West African Gas Pipeline.

NDEP has also given birth to another company with other partners known as ND Western.

It came when the divestment programme of the International Oil Companies (IOCs) offered an opportunity for a new horizon for it to grow further. NDEP took advantage of the asset sale. It formed a partnership with Petrolin, First E&P and Waltersmith, which created the ND Western, through which they successfully acquired 45 percent interest of OML 34 owned by Shell, Total and Agip.

Fatona said that the company “has metamorphosed into Nigeria’s first fully integrated energy company. There was Niger Delta Exploration & Production Company, there is ND WESTERN. We have fully commercialized our gas resources in a company called ND Gas and we are beginning to think of a way to step out.”

The company has also taken a shot at drilling first shallow

offshore well. For the first time as a company, it can claim it has booked reserves that are sitting in the offshore domain.

Its modular refinery, located in Ogbele, has successfully refined 1,000 barrels per day of Automotive gas Oil (AGO) or diesel and it is now scaling up its production capacity to 11,000 barrels to accommodate several other petroleum products.

“Our thrust is to address the persistent shortage, steady growth in local demand of petroleum and the company’s own refinery growth strategy, we took the strategic decision to expand the Obele Refinery tenfold, with additional 10,000barrels per day of processing capacity and increased product mix”, Fatona said.

Aside from Jet-A fuel, the company will also be producing other petroleum product such as marine diesel, High Pour fuel oil (HPFO), Naphta which would eventually become petrol and Liquefied Petroleum Gas (LPG).

“The most remarkable thing is that it is going from one product to be producing marine diesel, jet A fuel, HPFO, Naphta which would eventually become petrol and LPG in another one or two months,” Fatona said, adding that about 16 trucks of Automotive Gas Oil (AGO) are now being loaded as against two several months back from the refinery.

He added that there is no doubt that Ogbele was gradually transforming into an energy hub.

It was not all that rosy. One of its staff who was NDEP Production Adviser that runs its operations, was kidnapped in the front of his home on October 16th in 2017. Till date, he has never been found. Also, in NDEP’s location, gun men kidnapped a Scottish, Canadian and Nigerian oil worker.

From 1992 when NDEP was incorporated, to 2005, when it had its first oil, then to early May 2019, it has produced about 15.8 million barrels of oil from Ogbele. This is 300 times the reserves in place when the bloc was given to Niger Delta by Chevron. NDEP has produced 81.5 billion standard cubic feet of gas, sent to Bonny LNG. Through the effort of the company, it has sold to the Nigerian market about 133 million litres of diesel and saved the country from importing diesel.

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