BusinessDay 16 Sep 2019

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news you can trust I **MONDAY 16 SEPTEMBER 2019 I vol. 19, no 394

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Here’s how Nigeria could solve its fiscal crisis, if it wants to act FG bailouts now 3 times power N privatisation proceeds N6bn a day spent on interest in 2019

finance minister urged to roll out debt restructuring plan

LOLADE AKINMURELE

i g e r i a’s Fe d e r a l Government could be blowing 100 percent of its revenue to repay creditors in another five years, but economists have figured a way out.

As a percentage of revenue, the government has spent close to 60 percent on average in the past three years to service debt,

…intervention reaches N1.623trn with application for N600bn as CBN kicks

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ISAAC ANYAOGU

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Inside Drone attacks on Saudi Arabia heighten geopolitical P. 2 risks facing oil

L-R: Babatunde Ruwase, president, Lagos Chamber of Commerce and Industry (LCCI); Tony Elumelu, founder/chairman, Heirs Holdings; Aderemi Adebowale, representing governor of Lagos State, and Peter Maurer, president, International Committee of the Red Cross, during the LCCI-ICRC Humanitarian Partnerships and Social Investment Forum in Lagos.

he Federal Government has s o far approved N1.623 trillion on various intervention funding since it privatised the power sector in 2013. This amount is over three times what the Federal Government earned selling the assets,

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news L-R: Chris Ogbeche, director, Lagos Business School Sustainability Centre; Victoria Uwadoka, corporate communications and public affairs manager, Nestle Nigeria plc; Baker Magunda, managing director/CEO, Guinness Nigeria plc, and Bala Yusuf Yunusa, senior technical adviser, office of the senior special assistance to president on SDG, at the CEO Roundtable on Sustainability organised by LBS in partnership with Guinness and Nestle in Lagos.

Struggling packaging industry mirrors Nigeria’s cash-trapped consumers OLUFIKAYO OWOEYE & OLUWASEGUN OLAKOYENIKAN

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hese are not the best of times for players in the consumer goods packaging industry as companies continue to record a significant decline in their sales.

The decline in sales has seen inventory build up on the back of pedestrian economic growth worsened by tapped out consumers, thereby posing a threat to thousands of workers in Nigeria’s consumer goods and packaging industry.

Early in the year, Africa’s biggest packaging company, Nampak, producer of highquality folding carton products for the tobacco, food and consumer goods segments, which has operations in Nigeria, announced that it has entered into a definitive agreement with AR Packaging

…thousands of jobs at risk Group AB, a Swedish cigarette pack maker, for the disposal of its wholly-owned subsidiary Nampak Cartons Nigeria.

André de Ruyter, Nampak CEO, said the disposal of the cartons business in Nigeria is in line with Nampak’s ongoing strategy to sharpen its focus on strategic substrates.

“We continue to rationalise the portfolio to improve returns on capital and reinforce our strategic intent, proceeds from this disposal will further strengthen the company’s financial position,” he said.

Nampak Cartons Nigeria was established in 2004 and has continued to serve a broad market of primarily multinational customers in the tobacco and food segments from its production facility in Ibadan, Oyo State, and currently employs approximately 200 personnel.

Checks by BusinessDay on highly capitalised consumer

goods companies listed on the Nigerian Stock Exchange (NSE) revealed alarming weak sales in the sector.

For instance, revenue of Nigerian Breweries plc, Nigeria’s largest brewer by market share, in the first six months of 2019 dropped 1.43 percent to N170.19 billion from N172.26 billion achieved in the same period a year earlier.

Interestingly, Diageoowned Guinness in its fullyear 2019 recorded a decline in the bottle and can packaged drinks but saw some growth in plastic bottles drinks. The revenue of company fell 8 percent to N131.49 billion in the financial year from the previous year.

Similarly, Dangote Sugar Refinery witnessed a 4.42 percent decline in sales to N80.36 billion in the first half of 2019.

Unilever Plc sales dropped 1.70 percent to N23.42 billion in the review period, while

Dangote Flour Mills’ revenue was down some 13.57 percent to N48.74 billion.

The manufacturing sector was the largest contributor to the Nigerian economy in the second quarter of this after Agriculture, Trade and Information & Communication, according to data obtained from the National Bureau of Statistics (NBS).

The sector contributed 9.1 percent to the country’s economy in the period, largely supported by the food, beverage and tobacco segment which accounted for 46.3 percent share.

Unsurprisingly, a slowdown of growth in food, beverage, and tobacco between April and June this year by 1.22 percent as against +2.93 recorded in the first three months of 2019 fuelled the manufacturing sector’s first contraction in almost two years.

•Continues online at www.businessday.ng

Drone attacks on Saudi Arabia heighten geopolitical risks facing oil ISAAC ANYAOGU

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series of coordinated drone attacks on Saudi Arabian oil facilities, among the world’s largest and most important energy production centres, has not only disrupted the kingdom’s capacity by half but raises new geopolitical risks for crude oil, one missed by global risk analysts.

Eurasia Group, a respected political risk research and consulting firm founded in 1998

by Ian Bremmer, published a comprehensive list of risks facing the world in 2019 but missed attacks on the world’s most stable oil producer.

“The Saudi Crown Prince has made many enemies in recent years but he’s not going anywhere, and neither he nor the kingdom he will lead faces serious risks in 2019,” writes Ian Bremmer in his risk analysis for Saudi Arabia.

On Iran, the risk firm which

has offices in New York City, Washington, DC, London, Tokyo, São Paulo, San Francisco and Brasilia, said the country’s need to endure US sanctions by protecting relations with Europe will “limit the aggressiveness of its foreign policy, as it keeps its head down and tries to run out the clock on the Trump administration”.

But Iran is not backing down. Mike Pompeo, US Secretary of State, has blamed the drone attacks on Iran.

“Tehran is behind nearly 100 attacks on Saudi Arabia while Rouhani and Zarif pretend to engage in diplomacy.

Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply. There is no evidence the attacks came from Yemen,” Pompeo said on Twitter.

Analysts at JP Morgan Chase in their risk forecasts said US sanctions on Iran could trigger oil supply shock www.businessday.ng

that Saudi cannot offset in the short term, pushing Brent towards $100 per barrel. Yemeni rebels were not factored to cause a major upset.

This drone strike will not only heighten tensions in the Persian Gulf adding to the geopolitical risks from the confrontation between the United States and Iran over a disagreement with a nuclear pact it had with world powers, it could unsettle oil markets.

Abdulaziz bin Salman bin Abdulaziz, Saudi Arabia’s minister of energy, has said the attacks knocked out 5.7 million barrels of oil per day (bpd) and has led to the cessation of the production of associated gas estimated at (2) billion cubic feet per day, used to produce 700,000 barrels of natural gas liquids.

“Part of the decline will be compensated for its customers through stocks,” the Saudi oil minister explained in a press release.

Saudi Arabia is one of the biggest oil producers in the world and is often seen as swing producer helping to rebalance oil markets. It holds millions of barrels in tanks inside the kingdom as well as in the Netherlands, Japan, and Egypt. But these reserves could run out in a matter of weeks.

Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University, said in a statement that if the disruption in Saudi Arabia is prolonged, “sanctioned Iran supplies are another source of potential additional oil, but [US President Donald] Trump has already shown he is willing to pursue a maximum pressure campaign even when oil prices spike. If anything, the risk of tit-for-tat regional escalation that pushes oil prices even higher has gone up significantly.”

•Continues online at www.businessday.ng

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FG to challenge P&ID $9.6bn judgment on basis of fraud ONYINYE NWACHUKWU, Abuja

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he Federal Government will head to court to challenge the $9.6bn slammed on Nigeria by a UK court in favour of a British engineering firm, Process & Industrial Development Limited (P&ID), over a gas deal violation, once it is able to establish some element of fraud in that deal.

The Federal Government had announced that it would appeal the judgment, but is now exploring options, including asking the court to set aside the deal, because outcomes of investigations so far already point to some pre-determined plans to defraud the country before the contract was even made.

Already, there is an extensive investigation on everyone that played a role in the failed contract to establish where there was a criminal conspiracy, Abubakar Malami, minister for justice and attorney-general of the federation, told a press meeting on Sunday.

President Buhari had directed Malami to mandate the Economic and Financial Crimes Commission (EFCC), National Intelligence Agency (NIA) and the Inspector General of Police (IGP) to conduct a thorough investigation into the company, the circumstances surrounding the agreement and the subsequent event, which includes commencing a full-scale crim-

inal investigation.

“There is indeed investigation being intensively and extensively carried out by agencies of government and it is wholehearted, borderless, and there are no limitations as to who and who can be invited for questioning or not,” Malami stated while addressing the press.

He was not specific on personalities being investigated but stated “categorically that those that were involved in the process of drafting the agreement, signing and executing, conduct of arbitration before the arbitral panel, in the conduct of trial before the Federal High Court relating to a subsequent case that was filed and all other personalities of interest, local and international, are indeed being investigated to get to the bottom of what indeed transpired for the purpose of establishing the existence or otherwise of fraud and fraudulent conspiracies between or among the parties”.

He said it was clear from all indications that the so-called contract was a well-organised scam consciously, deliberately and intentionally orchestrated by some dubious and wellplaced Nigerian government officials at the time with some shrewd foreign collaborators to defraud Nigeria and inflict heavy economic and financial loss on Nigeria and its people.

•Continues online at www.businessday.ng

Nigerian banks record mixed exposure to oil and gas sector after recession DIPO OLADEHINDE

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igeria’s largest banks, otherwise known as tier-1 lenders, recorded mixed exposure to the oil and gas sector despite a sustained increase in crude oil price seen in the first half of this year after initial market instability, as well as a recession that was caused by a collapse in oil prices in 2014.

BusinessDay analysed oil exposure of the five largest Nigerian banks – FBN Holdings, Zenith Bank, Guaranty Trust Bank, United Bank for Africa, and Access Bank – using the average exchange rate of $358.79 in first half (H1) 2019 and $344.94 in H1 2018.

Guaranty Trust Bank (GTB), Access Bank and United Bank of Africa (UBA) increased their exposure to the oil and gas sector by 6 percent, 71 percent and 50 percent, respectively, while First Bank and Zenith Bank reduced their exposure by 26 percent and 23 percent, respectively.

In first quarter 2019, GTB loans to oil and gas sector increased by 6 percent to $1.39 billion (N499 billion), from $1.30 billion (N449 billion) in H1 2018, while Access Bank increased its loans to oil and @Businessdayng

gas sector by 71 percent to $2.4 billion (N865 billion), from $1.4 billion (N482 billion) in H1 2018.

Also, UBA increased its loan to the oil and gas sector by 50 percent to $1.4 billion (N359 billion), from $930 million (N321 billion).

Further calculations showed First Bank loans to oil and gas sector reduced

MARKETS by 26 percent to $1.5 billion (N554 billion), from $2.04 billion (N702 billion) in the half year 2018 period, while Zenith Bank reduced its loans to the oil and gas sector by 23 percent to $1.013 billion in first half of 2019, from $1.32 billion in the corresponding period last year.

“The reason for the mixed reactions is because some of the banks have dominant customers in either the upstream, downstream or midstream sector of the oil and gas sector. However, each bank will respond based on their risk acceptance criteria,” said Johnson Chukwu, managing director and CEO, Cowry Assets Management Ltd. “Some of the tier one banks will increase their loan books

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United Nation’s stress test for Nigeria – future fears ‘ (Second in a series of 8 articles)

BASHORUN J.K RANDLE

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ven more explosive and distressing for the US Secretary-General was the front page of Vanguard newspaper of June 19, 2019: “our fears for future polls in Nigeria.”

“Two institutions, International Republican Institute, IRI, and National Democratic Institute, NDI, yesterday, called for urgent national conversation to harmonise recommendations of various committees on electoral reforms.

This is even as Ketil Karlsen, Head of European union election observer team, said the body contributed over 100 million euro to support electoral reforms in Nigeria. But the All Progressives Congress (APC), in a swift reaction, said the reports of the international observers should be ignored, saying, “We are no kids, we can take care of ourselves.’’

However, the Peoples Democratic Party (PDP) on its part, said the report

by NDI and IRI warning of possible apathy in future elections showed that the 2019 presidential poll was rigged in favour of Muhammadu Buhari.

According to the two US groups, the essence is to implement them to avoid facing citizens opting out of future elections.

They warned that if urgent steps

were not taken, more negative things could occur in Nigerian democracy.

The IRI and NDI, which issued the warning, during a presentation of the report of the 2019 general election in Nigeria, said the elections fell below the expectations of many people when compared to 2011 and 2015 elections.

The report was presented by, Christopher Fomunyoh, NDI’s senior associate for Africa and regional director for central and west Africa, and Elizabeth Lewis, the acting regional director for Africa division at the IRI, at Transcorp Hilton, Abuja.

Fomunyoh, who specially asked for implementation of recommendations around the 2019 general elections, expressed fears that citizens might lose confidence and become very disaffected with future electoral process.

According to him, “I will just echo the response of my colleague, Lewis. I will on top of that also add that both of our organisations feel very fortunate to have been accepted by Nigerians and adopted by Nigerians as viable partners in helping to strengthen democracy in this country.

Both of our organisations are strengthened by the promise of Nigeria because we see the vitality of this country in human capital and material resources. We know what Nigeria can contribute to Nigerian people, to Africa and to the world.

Let’s not forget that projections of world population do show that by 2050, Nigeria may move from being the 7th to the 3rd most populous country in the world. Nigeria has a lot to offer. But at the same time, we are confounded by the fact that the country doesn’t seem to be punching at the level of its weight when it comes to issues of electoral practices and good governance.

A lot has been accomplished since the transition in 1999 but there is still a lot to be done – that their

votes count, that elections and that democracy matters. And once the national conscience is awakened, we can all go home and celebrate that the country has grown to a point of no return The IRI/NDI in their report also blamed the political class, lack of internal democracies in political parties as well as security operatives for some of the challenges experienced during the 2019 general elections.

Noting that INEC made arrangements for a credible poll, the groups said the political class deployed high-handed tactics, including vote buying, unguarded political statements and violence, to undermine the process.

They commended INEC for introducing simultaneous voting, posting of results at polling units, improved voter-verification technologies, a more robust review and disciplinary process for INEC staff, and enhancement of ballot secrecy as well as measures to reduce vote buying.

While making a case for pursuit of a comprehensive, inclusive and expeditious electoral reform process, the report said, “This process should draw upon recommendations from Nigerian-led reform initiatives such as the Uwais commission in 2008 and the Nnamani committee in 2017.

These reforms should also address the challenges and lessons learned from the 2019 electoral cycle and should include the creation of appropriate institutions to oversee political parties and prosecute electoral offences, responsibilities that impede INEC’s focus on election administration.

These reforms should be pursued immediately and completed early enough to allow changes to be fully implemented before the 2023 general elections.”

Part of recommendations is to establish time limits for the adjudication of pre-election petitions to

And I think once the national conscience is awakened to the fact that a lot needs to be done to give spur citizens confidence that their votes count, that elections matter, and that democracy matters, then we will be at that juncture we could all go home and celebrate that the country has grown to a point of no return

Randle is Chairman/Chief Executive JK Randle Professional Services Chartered Accountants

Setting the record straight on public sector minimum wage in Nigeria

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n 1974, when Nigeria was “on top of the world” during the first oil boom era, nominal minimum wage was N60 per month. This amount is equivalent to about N90,000 in today’s value, when adjusted for inflation using the Consumer Price Index (CPI) with 2017 as the base year. The index measures the rise in the cost of living.

For instance, what N60 can buy in 1974, N90,000($228) will be needed to buy the same item(s) in 2017.

This implies that, since 1974, the real wage has been falling. However, it rose twice – during the military juntas led by generals Sani Abacha and Abdulsalami Abubakar between 1993 and 1998, and under the civilian government of Umaru Musa Yar’Adua between 2007 and 2009.

Comparing 1974 with today, the real wage has declined about 80 percent.

Workers, in terms of pay, were better off in the past than they are currently. Also, against 1981, purchasing power is three times weaker.

Unions and workers are now asking for a pay rise. Consideration is being given for an increase from N18,000 to N30,000. Should they consider putting forward a modest request that will raise their welfare level back to what it was in 1981, they should

ask for N54,000.

Perhaps, the government and some of its supporters will argue that there is no money to defray the potential wage bill, however, over the years, the size of government, in terms of its workforce, has increased. It has employed additional state and locally-salaried staff to run the affairs of newly created states and local government areas in the country. More agencies were established and therefore more bureaucrats employed to formulate and implement government policies through these agencies.

OK, I get it! But… As of 1981, our national assembly had 95 senators and 449 House of representative members. Little difference if compared with current numbers. More senators and fewer house members, at least balances out.

Their take-home pay, I think, has risen by more than 300 percent. They have never gone on strike, meaning the government never defaulted in salaries due to them.

Haba Naija! Please pity thy workers and pump up their pay!

Dear federal government, if you decide to increase thy workers’ pay (bearing in mind this is a highly contentious issue), please pay the state and local government www.businessday.ng

staff directly from Abuja. Do this because of one reason – the salaries are often deliberately delayed not because there is no money but because...

Deduct the wage bill of each state from its monthly subvention. I believe this will stop states from owing workers and will also help in purging the payment system – but not 100 percent - of ghost workers.

There is available technology that could help in achieving this.

How can it be done?

Firstly, using biometrics, the federal government collect, into a federally-centralised database, finger-prints and other essential details of all (federal, state and local) government staff.

Secondly, obtain an ATM-like device, maybe through a MoU with one of the technologically advanced countries. The device would have an in-built fingerprint feature linking to the central database holding the staff information, every public servant in the country.

Also, when salaries are due, the staff would use his/her fingerprints to withdraw the pay, transferring part of the amount to his/her existing bank account using the machine.

If the states object by saying, “wait a

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ensure that judgments are rendered before election day and early enough not to interfere with INEC’s election preparations.

Reduce the length of time allowed for post-election disputes so the majority of petitions can be adjudicated fully before those rightly elected assume office. This might require re-examining the electoral calendar.

Meanwhile, the presidency, insisted that Buhari won the presidential election on February 23, 2019 with a clear margin.

The presidency also defended the suspension of Walter Onnoghen, former Chief Justice of Nigeria (CJN),

by Buhari over the controversy surrounding his asset declaration form before the last general elections.

Garba Shehu expressed reservations over IRI and NDI’s election report saying, “it was indisputable that Buhari defeated his main opponent, Atiku of PDP, with a margin of 14 percent.”

According to him, the most important thing in an election is that it reflects the will of the people, which in the circumstances was acknowledged to have been a success by ECOWAS observer mission and YIAGA Africa whose parallel vote tabulation verified INEC’s presidential election result as announced.

The presidential aide said, “We have developed a tradition of improvements in our electoral process through enforcement of our electoral law, which resulted in the prosecution and conviction of electoral officers that were found wanting by compromising our electoral process.

We, however, agree notwithstanding, that there are improvements that must be made in the process for the future. The sheer size, terrain and remoteness of certain regions do pose serious logistical challenges.”

ZUHUMNAN DAPEL minute, we are supposed to be autonomous. Do not dictate to us how to spend our money or how to run the financial affairs of our states.” Fine! FG, please remind them that they are not financially independent. They visit thee every month for pocket money.

I have discussed in several fora that section 162(1) of our constitution on fiscal federalism be amended to make room for this, otherwise, it may not last beyond the regime of the government that first implemented it.

But this idea faces a full-sized hurdle. In 2002, the Nigerian supreme court ruled in favour of the 36 states against the federal government’s decision to pay state workers directly.

This can only be resolved and push forward by a determined political will at all levels of government. Otherwise, political gridlock being faced by biometrics salary system since 2006 at the federal level, called the Integrated Personnel and Payroll Information System (IPPIS), will be meted on any proposal intended to improve efficiency and transparency in the payment system.

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States must embrace reforms to attract capital

PATRICK ATUANYA

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ast week the ever busy National Bureau of Statistics (NBS), released data which showed the total value of capital imported into Nigeria stood at $5.82 billion in the second quarter (Q2) of 2019.

This represents a 31.41 percent decrease compared to Q1 2019 and a 5.56 percent increase compared to Q2, 2018.

The largest amount of capital importation by type was received through Portfolio investment, which accounted for 73.76 percent or $4.29 billion of total capital importation, followed by Other Investment, which accounted for 22.41 percent or $1.3 billion and Foreign Direct Investment (FDI), which accounted for 3.83 percent or $222.89 million.

Capital importation to the banking sector dominated in Q2 2019 reaching $1.89 billion of the total capital imported, while the United Kingdom emerged as the top source of capital investment in Nigeria in Q2 2019 at $3.13 billion, accounting for 53.85 percent of the total capital inflow.

Stanbic IBTC Bank Plc emerged as the top Bank through which capi-

tal flowed into Nigeria in Q2 2019 at $1.76 billion, followed by Citibank Nigeria at $1.01 billion and Rand Merchant Bank at $611.7 million.

Clearly these multinational banks with strong connections to home markets and group balance sheet as source of capital are doing much better than local banks in this regard but that is a story for another day.

The major issue that strikes anyone reading through the report is the lack of geographic diversification in terms of final destination of capital imported into the country.

This is important because it is not something that can be willed into existence by Government via pronouncements, as capital only heads to countries, states or regions where it will be well received, bureaucracy is low and risks are commiserate with returns.

According to the NBS data, by Destination of Investment, Lagos state (no surprises there) emerged as the top destination for capital investment in Nigeria in Q2, 2019 at $4.13 billion.

This accounted for 71.09 percent of the total capital inflow for the period.

Lagos is the commercial capital of Nigeria, so it is expected to get a huge chunk of the capital imported into the country. However it was hoped that more of the capital inflows would go inwards to other states of the Federation to fund investments that help create jobs.

So which other states got a piece of the $5.2 billion that flowed into

the country in the second quarter of 2019?

The list is small and tells a bigger picture of lack of reforms and understanding by Governors on the need to make their states business friendly.

Only 10 states (including the Federal Capital) appeared on the list, a majority of whom recorded token amounts as capital imports.

Lagos, as earlier mentioned received $4.137 billion, followed

by Abuja FCT ($1.672 billion), Ogun State ($4.8 million), Kaduna ($1.97 million), Oyo ($1.78 million), Edo ($1.04 million), Anambra ($110,000), Kano ($100,000), Nasarawa ($100,000) and Rivers ($30,000).

Lagos and Abuja accounted for 99.82 percent of total capital inflows which is a worrying sign for Nigeria’s attempts to develop its other regions.

Low capital inflow to Kano in the North West, Anambra in the South East, Rivers in the Niger Delta and Ogun/Oyo in the West is particularly disappointing as these states are the major commercial hubs that underpin the regions.

The North Eastern region, ravaged by conflict also did not register a single state where foreign capital was willing to deploy in.

Can Nigeria survive and have a stable, sustainable future with only 2 (Abuja, Lagos) out of hundreds of its cities, creating jobs and attracting investment? Surely it cannot.

While individual states will need to do most of the heavy lifting, the

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Lagos and Abuja accounted for 99.82 percent of total capital inflows which is a worrying sign for Nigeria’s attempts to develop its other regions.

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

What do I think of the proposed VAT increase?

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ate last week the minister of finance announced that the government was going to increase the VAT rate from the current five percent to 7.2 percent. To be clear, the rate does not kick in immediately but there will be a consultative process culminating in the amendment of the VAT act.

Earlier in June the minister said there was a “strategic revenue growth initiative” which was designed to increase government revenues to 80 percent of the revenue target. I guess this is the first, or second, salvo in what looks like a series of initiatives to bolster government revenue. As we know, the government is almost bankrupt.

Almost.

So, what do I think of this VAT increase? The stark reality is that the VAT rate in Nigeria is very low compared to almost anyone else. In South Africa VAT is 15 percent. In China it is 17 percent.

In Ghana it is 12.5 percent. I could go on. Of course, there are those who argue that Nigeria does not actually have a VAT tax and that in practice it is a sales tax, and sales taxes are typically lower.

Whichever way you slice it, the fact remains that our VAT (sales tax) rate is low and from that perspective there is room to increase it.

However, it is not that simple. It rarely is. For starters VAT is one of those taxes we economists like to call regressive; that is, the burden on the poor is higher than the burden on the rich.

Not that the poor pay more per person but that the fraction of income that gets captured in VAT taxes is higher for the poor. To be fair, many goods especially agricultural produce, are VAT exempt. But things like bread and gala and Fanta are not VAT exempt.

For instance, rich people spend an infinitesimal amount of their income on food. But for the poor that fraction is a very large. Some segments of the population spend up to 70 percent of all their incomes on food. Most of that spending will face an increased VAT rate.

Then there is the problem with the economy. The economy has been doing like this and like that recently and looks to be slowing. It is not clear that increasing the VAT rate on its own will be bad for the economy. The impact depends on what the extra income from VAT receipts is spent on. If it is spent on productivity-enhancing infrastructure or on education and health then you can make the case that it will be good for the economy overall.

But we know that is not how our www.businessday.ng

Federal Government probably has some role to play here also. Insecurity is a major deterrent to investments as can be seen in the North East, and the FG needs to do more to tackle it.

A rising tide of kidnappings in the Kaduna, Kano axis is surely unhelpful, never mind some of the excellent reforms that the Kaduna State governor has recently enacted, which has attracted firms like Olam.

The FG also has to get out of the way of the States that wish to attract Private capital to fund infrastructure and other projects.

The Government should expedite its privatisation and concession efforts as some Federal assets located in various States could be a magnet for capital infusion to the benefit of the domestic State economy.

For instance beyond shutting the Enugu Airport for probably inadequate repairs the FG should quickly privatise or concession the airport (and other dilapidated ones), so private investors can pump capital in and position it as a major hub in the South East.

The time for rhetoric is long gone, campaigns to be elected as Governor and President are over and most court battles won or lost. It is now time for elected Governors and the President to be innovative and provide solutions to the country’s numerous problems!

ECONOMIST government spends money. The extra income will probably be spent on salaries. If that is the case then the VAT increase will be bad for the economy.

Should we really be trying to further slowdown a slowing economy? In most democracies, announcements for tax increases come hand in hand with announcements on spending plans. In our case the announcement was that we are cutting capital expenditure and raising money to pay the new wages for government officials.

I guess a bankrupt government is worse than a slowing economy.

In general, I think the VAT increase is not bad. The VAT rate is low so you cannot argue against increasing it. But it is just one tax reform that misses the wider point of a fiscal structure that is in need of wholesale reform.

The fiscal structure was designed at a time when the government was flush with cash and the question was how to share it. That is no longer the case and the fiscal structure will need to change to one of tax revenue in exchange for public services. A fiscal structure that ensures the rich pay their fair share. A fiscal structure that aligns the well-being of local, state and national economies, and citizens with

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NONSO OBIKILI

the taxes collected by governments in those spaces.

That is the real issue with regards to the government’s fiscal position and we see evidence of this in the compliance numbers. If most people are not compliant then the rate doesn’t matter. Only the ever-shrinking compliant firms will continue to be squeezed.

If you have malaria you can take paracetamol. No one will say you should not. But do not be deceived into thinking it will cure your malaria.

Nonso Obikili is chief economist at Business Day.

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BUSINESS DAY

Monday 16 September 2019

EDITORIAL PUBLISHER/CEO

Frank Aigbogun EDITOR Patrick Atuanya DEPUTY EDITOR John Osadolor, Abuja NEWS EDITOR Chuks Oluigbo EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai COPY SALES MANAGER Florence Kadiri DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

Wake up FG and smell the gas!

T

he total value of Nigeria’s proven gas reserves is over $460 billion, more than the country’s GDP as of today. Yet, in a world where gas is emerging as the commodity of the future, Nigeria lags due to its inability to articulate a visionforenergysecurityaroundgas.

It’s saddening that in most cases, the inability to review obsolete regulations and update outmoded lawshaskepttheoilandgassectoron its knees as clueless administrators are unable to create the policy environment to turn this huge resource into prosperity for the country.

Late last year, our proven gas reserves grew to 202 trillion cubic feet (Tcf) from187 Tcf, plus about 600 Tcf of unproven gas reserves, according to Nigeria National Petroleum Corporation (NNPC). Despite having the largest gas reserves in Africa, only about 25 percent of those reserves are being produced or are under development, according to Shell.

Nigeria’s gas sector suffers from poor fiscal terms, lack of marketreflective prices and inadequate infrastructure. Since the production sharing contracts (PSC) started over 20 years ago, Nigeria doesn’t have fiscal terms for gas. Hence, oil companies flare the gas in search

of oil.

While the recently governmentapproved gas commercialisation initiative has recorded progress, its speed of execution does not reflect the hurry required.

The power sector has proven to be the biggest obstacle to deepening gas investments. The federal government enforces price controls on gas provided to legacy plants as a means to keep electricity tariffs low.

At least 75 percent of Nigeria’s power is sourced from gas and cheap prices keep the plants running but leave its operators cash-strapped since tariffs do not guarantee commercial return.

When electricity generation companies threaten to rebel, they are reined under the guise of national security and intimidated by the Department of State Security (DSS).

Gas pipelines are inadequate to power available plants and they are often vandalised by oil thieves.

Power plants are sited away from gas resources on account of a warped theory of political correctness that ignores market realities. Since 2001, Nigeria has spent billions in building NIPPs with little attention paid to ensuring that required gas quantities would be there when needed.

To get the country out of this funk, we counsel the federal government to enact policies that will remove

constraints to gas supply.

Let’s break it down this way. Establish a separate regulator for the gas sector as respected analysts have counseled. Yes, there is the Department of Petroleum Resources (DPR), we know, but they are better suited at regulating the upstream petroleum sector.

A regulator in the mode of the Nigerian Electricity Regulatory Commission (NERC) will evidence a seriousness to cut through the noise to reach the heart of the issue. (This is by no means a validation of NERC’s competence, as it leaves much to be desired.)

The gas regulator will establish a complementary and flawlessly interconnected framework for electricity and natural gas giving NERC purview of the energy, not just electricity but the industry. This is important because we cannot have a cost-reflective electricity tariff where natural gas is priced based on political sentiments.

This new gas regulator should be responsible to a collection of stakeholders including international oil companies (IOCs), indigenous suppliers, non-NGC pipeline owners such as there are, IPPs, other major non-IPP gas buyers (fertilizer, cement, heavy industry) and the Ministry of Power to create progressive

policy that will spur gas availability and supply.

All over the country are gas projects such as the Nigerian Liquefied Natural Gas (NLNG) Trains 7 and 8, Brass LNG, and Olokola LNG, awaiting final investment decisions for years. There is also a $12 billion Trans-Saharan Gas Pipeline Project (TSGP), expected to help Nigeria achieve zero gas flaring by 2020, but yet to materialise 17 years after it was conceived.

IOCs including Shell Petroleum Development Company of Nigeria Limited (SPDC) have made the final investment decision (FID) on the Assa North Gas Development Project in Imo State, expected to produce 300 million standard cubic feet of gas per day and ExxonMobil and Qua Iboe Power Plant Limited (QIPP) have initiated plans to invest a combined $1.6 billion in the development of gas and power projects in Akwa Ibom State. Eni has just announced a new discovery.

Yet, a national obsession with oil has blinded the government to the reality of gas. As the world moves to phase out dirty fuels, gas will remain relevant and countries that will be commercially successful are those with strong legal, regulatory and fiscal environments to harness gas investments.

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Buhari’s strange query to Fowler, the chief tax collector GLOBAL PERSPECTIVES

OLU FASAN

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ax collectors are, historically, hate figures. They are damned if they do; damned if they don’t. Remember the story in the bible when Jesus went to the house of Matthew, the tax collector?

He was accused of dining with sinners.

Tax collectors are loathed by taxpayers. Yet, in the days of the Herods and Caesars, if they did not collect enough taxes, the tax collectors could have their heads cut off and brought to the king on a charger.

Well, President Muhammadu Buhari has not asked for the head of Tunde Fowler, chairman of the Federal Inland Revenue Service (FIRS), on a charger.

However, recently, he harangued him for failing to collect enough taxes. In a letter dated 8 August, Buhari’s mercurial chief of staff, Abba Kyari, asked Fowler to explain why there were “significant variances between the budgeted tax collection and the actual collection for the period 2015 to 2018” and why “the actual collections for the period 2015 to 2017 were significantly worse that what was collected between 2012 and 2014”.

The presidency later clarified that the FIRS boss was “not under investigation”.

According to a statement by President Buhari’s senior media assistant, Garba Shehu, the chief of staff’s letter to Fowler was “a routine administrative inquiry”.

Yet, even if Fowler was not under investigation, the query amounted to a criticism of his performance. It was akin to querying an employee for poor performance!

In his reply, Fowler blamed the variances on the fall in the price of crude oil and the poor state of the economy, which went into recession in 2016.

Fowler made a distinction between oilbased and non-oil revenue collections and said that the latter actually grew by 21 percent between 2016 and 2018, while the collapse in world oil prices depressed the former and the overall tax intakes.

But knowing, that Nigeria’s economy has been comatose since 2015, why would President Buhari blame the head of the revenue service for “significant variances” between budgeted and actual tax collections?

A budget is a projection of income and expenditure and if it’s not based on hardnosed and realistic estimates of expected revenues, it would come a cropper. That’s simple logic!

When a country depends solely on oil export for over 70 percent of its revenues, it’s not rocket science – or is it? – that when world oil price drops from about $100 per barrel to under $50, revenue intakes would fall drastically. Equally, as I tweeted, when I read the presidency’s query letter, “only an economically illiterate government would not know that when an economy is in recession or beset by very low growth and when unemployment is so high that most people are not gainfully employed, tax revenue would fall.”

Truth is, the extent of revenue generation from Companies Income Tax and Value Added Tax is dependent on the rates of economic growth and the levels of corporate and personal incomes, while the extent of revenue from Pay-AsYou-Earn tax is a function of the levels of employment and pay. If an economy is not growing and companies are not making enough profits and most people are not employed or earning good pay, tax collection will suffer.

But, historically, the state has been agitated by tax revenues. Indeed, one of the requirements of statehood is that, after creating an army, a state must establish a tax system. In 16th century

England, the king always faced a fiscal crisis and required additional revenue to survive because the incomes from his estates and the traditional feudal dues were not enough, due to the cost of warfare. As a result, he entered into a bargain – a social contract – with the people, promising to protect them in return for tax revenue. But, to ensure the money was coming in, the king created a tax system, with tax collectors to monitor, meter and collect the revenue.

However, as Paul Collier, a professor in Oxford University said in a seminar, the need for tax revenues also gave the leader an interest in growing the economy, because only a growing and prosperous economy could help generate more tax revenues.

Thus, to become a strong and effective state, after creating an army and a tax system, the next thing leaders and kings did was to stimulate economic growth.

Today, that means facilitating productive private sector activities, encouraging greater flows of trade and attracting local and foreign investors so that companies and individuals can enjoy the economic prosperity and commercial successes needed to pay more taxes.

But President Buhari ignores all this, blaming the tax collector instead of his management of the economy. Surely, Buhari, like the medieval kings, wants large tax revenues, but, unlike them, he doesn’t have the incentive to grow the economy; he doesn’t recognise the nexus between tax intakes and economic growth. Indeed, even if the president has an interest in growing the economy, he doesn’t have the right policies and institutions to do so or the willingness to create them.

Think of it. Here is a president whose cabinet includes not a single credible economist and who puts people who have no knowledge of applied economics, or the grasp of economic fundamentals, in charge of key economic ministries, particularly finance and trade. What’s more, here is a president who is adamantly pursuing protectionist import-substitution policies instead

‘

A budget is a projection of income and expenditure and if it’s not based on hardnosed and realistic estimates of expected revenues, it would come a cropper. That’s simple logic!

of creating a robust market economy system that would engender the private sector development and investor confidence needed to grow the economy.

So, let’s face it, President Buhari was wrong to blame Fowler for any low revenue collection, and Fowler was right to point out that “tax revenue collection is a function of economic activities”!

Of course, it’s true that, with a tax-toGDP ratio of just 8 percent, the worst in Africa, Nigeria has acute and chronic problems with revenue mobilisation.

According to a recent analysis, 67 million of Nigeria’s labour force of 77 million are not registered taxpayers. Less than 6 percent of registered taxpayers are active in the corporate income tax category, and Nigeria raises less than 1 percent of GDP in VAT revenue, according to the IMF. And, according to Fowler, quoted in a newspaper, “over 6,772 billionaires don’t pay tax”!

Yet, all that said, and despite the presidency’s query, Fowler, whose impressive record as head of Lagos State Revenue Service earned him the federal job, has achieved a lot over the past four years. , Elias Mbam, chairman revenue mobilisation, allocation and fiscal commission said recently, FIRS contributed 59.7 percent of the revenues to the federation account in the three months.

Adefisayo Awogbade, registrar and chief executive of the Chartered Institute of Taxation of Nigeria also said “The FIRS has done credibly well and needs to be commended by government and all wellmeaning Nigerians”.

So, then, based on expert opinion, Fowler and FIRS are doing their job reasonably well, while it is the federal government that is not doing its own at all by failing to grow the economy. Which is why Buhari’s query to Fowler is utterly wrong and misguided!

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

The Nigerian code of corporate governance, 2018 Principle 18 - Internal audit function

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n recent years, cases of corporate failure have highlighted the need to look beyond the assurance provided by external audit and the oversight role of the statutory audit committee with respect to the board’s responsibility for risk management, control, and the entire governance framework. Attention has been focused on strengthening internal governance infrastructure that will provide the basis for external audit. Consequently, the role of the internal audit function has become quite critical in providing the required support to the board in the discharge its governance responsibilities.

Principle 18 of the Nigerian Code of Corporate Governance, 2018 (NCCG) provides that, “An effective internal audit function provides assurance to the board on the effectiveness of the governance, risk management and internal control systems.”

The Institute of Internal Auditors defines internal audit as an independent, objective assurance and consulting activity, designed to add value and improve an organisation’s operations. Internal audit supports the actualisation of corporate objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of the governance process. It provides independent assurance on the management of risk and the effectiveness of the controls designed to mitigate identified risks. The contemporary internal audit can be described as the “eyes

and ears” of the board of directors.

The NCCG requires the board to oversee and approve the establishment of an internal audit framework that provides assurance on the effectiveness of the governance, risk management and internal control systems. To achieve this, the function should be a strategic business unit of the company and not a mere support function as it’s typically the case.

The unit should be headed by a competent, experienced and sufficiently senior management staff who will report directly to the audit committee, “with a line of communication” to the MD/CEO. There is a debate as to which is more effective – insourcing or outsourcing the internal audit function. The suspended FRC code (which the NCCG replaces) clearly stated that the function should not be outsourced. If the role is to function as a strategic business unit, it is expected that significant knowledge of the company’s operations will engender effectiveness. Concerns of independence and undue influence where the role is insourced can be addressed by hiring right, significant seniority for the chief internal auditor as well as periodic rotation of the internal audit team.

Where the board decides not to establish the internal audit function, internally or outsourced, the code requires that sufficient reasons should be disclosed in the company’s annual report with an explanation as to how the board has obtained adequate assurance www.businessday.ng

on the effectiveness of the internal processes and systems such as risk management and internal control.

For the internal audit unit to effectively contribute to good corporate governance, the board should set the right tone at the top and ensure support for the internal audit at all levels of the organisation. The effectiveness of internal audit depends largely on the level of independence and the quality of resources allocated to the audit function. It is therefore in the board’s interest to protect the independence of the internal audit and to allocate adequate resources – including staffing, access to appropriate technology tools and training.

The code advocates for a proactive internal audit function that adopts a risk-based audit process as opposed to a compliance approach which is limited to the evaluation of adherence to procedures. The board, through the audit committee, should refine the scope of work of internal audit and ensure that the purpose, authority and responsibility of the internal audit function are clearly defined in an internal audit charter approved by the board.

The code requires that the internal audit function is independently assessed at least once every three years by qualified professionals. The evaluation of the Head of internal audit function shall be performed by the audit committee, and he/she may only be removed by the board on the recommendation of the

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BISI ADEYEMI committee.

A healthy relationship with the audit committee is critical in ensuring a clear understanding of the specific needs of the audit committee. The audit committee also discharges its responsibilities better with the support of an independent internal audit function.

The Head of internal audit is required to report at least once every quarter to the audit committee, on the adequacy and effectiveness of management, governance, risk and control environment, deficiencies observed and management mitigation plans. The reports should include recommendations for enhancement or improvement. The Head of the unit should liaise with other internal and external providers of assurance on regular basis in order to ensure proper coverage and to minimise duplication of efforts.

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline. com/ Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions tobadeyemi@dcsl.com.ng

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Monday 16 September 2019

BUSINESS DAY

REAL SECTOR WATCH Why we sold Lafarge South Africa, by Mobolaji Balogun Mobolaji Balogun is the chairman of Lafarge Africa plc. In this interview, he speaks on some of the progress recorded by the cement maker in recent times. He also discloses why the South Africa Holdings was sold, assuring shareholders of better times ahead.

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esolutions passed at the recent annual general meeting I think these resolutions were extremely important. This has really been a momentous year for us as a business, in terms of some of the progress we have made on some of the key strategic issues that we have had to deal with.

reduction in our debt.

Strategy for growth sustenance We started this year with more than N260 billion of debt, but by the time we get to the end of September, the debt in this company, netted, will be much less than N55 billion. I think that is a major transformation for this business. You will see the impact flow through into the company’s cash flow, into the company’s profitability, and that can only be a good thing for our shareholders. It will also provide us the platform now to focus on the market that we know, which is the Nigerian market, and to invest significantly in this market to maintain our market share.

Influence of ongoing restructuring on Lafarge Africa We have reduced our debt further by about N89 billion following the success of our rights issue at the beginning of the year. You will see the impact in the 2019 half-year result.

We have also approved, more importantly, a decision to sell Lafarge South Africa Holdings.

Reasons for offloading Lafarge South Africa Holdings Lafarge South Africa was part of our business which was not performing well at all, and for a number of reasons, we have worked hard to turn it around.

Unfortunately, we have not been able to do that successfully. The decision to sell it is for the good

of the Nigerian business and minority shareholders.

Influence of Lafarge South Africa’s sale on Lafarge Africa going forward We sold Lafarge SA Holdings for

approximately N114 billion but when you also deconsolidate the debt related to Lafarge South Africa, you are talking about another N45 billion of debt. The total impact on our company is somewhere around N159 billion

Low product order in August shows manufacturers battling shrinking wallets GBEMI FAMINU

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he Purchasing Manager’s Index (PMI) for the month of August released by the Central Bank of Nigeria (CBN) revealed that despite recording consecutive expansion, demand for product has declined.

The PMI usually computed based on five major metrics, including production level, level of new orders, suppliers delivery time, employment level and raw materials inventory . For the month of August, the PMI report noted that “supplier delivery time and raw materials inventories grew at a faster rate while production level, new orders and employment level grew at a slower rate in August 2019.”

Analysts are of the opinion that the decline in consumer purchase is tied to mixed economic conditions that have hurt consumer spending.

A report released recently

by CSL research states that the demand for manufactured products has declined due to economic conditions constraining consumer purchasing power.

Poverty rate has worsened in Africa’s most populous nation, with 98 million living

from hand to mouth. Unemployment rate is 23 percent, meaning that almost 46 million people—above Ugandan population—are jobless.

This buttresses manufacturers’ claims of debt incurred from unsold stocks. Furthermore, despite the increasing cost of production, manufacturing companies are unable to increase prices of goods as this will further discourage consumers.

Nigerian breweries, a giant brewer, recorded a decline of 41.2 percent in its profit for the year 2018, having had N33 billion in 2017 and N19 billion in 2018. The company’s net revenue also reflected a decline of 5.8 percent, recording N324.4 billion in 2018 from N344.5 billion realised in 2017.

Jordi Borrut Bel, MD/CEO of the firm, stated that the business environment in Nigeria was quite challenging in 2018, adding that economic upheavals, which increased inflationary pressures and also constrained consumer’s purchasing power, affected beer consumption in 2018, which consequentially affected the volume of sale the company recorded in 2018.

The Nigerian breweries is not the only company bearing the brunt of low consumer www.businessday.ng

purchase.

Adesola Sotande-Peters, vice president of finance at Unilever Nigeria, also disclosed during a breakfast meeting that the Fast Moving Consumer Goods (FMGCs) company is battling low consumer purchasing power as the sector is highly dependent on foreign exchange to source for raw materials which increases its cost of production.

Consumer’s sensitivity to product prices means firms cannot increase prices at will, with consumers willing to switch products.

McNichols, a producer of consumer goods, was hit by the economic headwinds as its revenue dropped by 17 percent to N355 million, from N430 million in the 2018 financial (full) year. The company’s profit before tax was N20.9 million in 2018 but it dropped to N15.4 million in 2019.

Okomu Oil Palm had its turnover fall by 22 percent to N4.34 billion in 2019, from N5.59 billion in 2018. The company’s gross profit also dropped to N3.49 billion, from the N4.45 billion in 2018, representing a 21.6 percent decline.

Its total comprehensive income dropped significantly by 38 percent from N2.46 billion in 2018 to N1.52 billion in 2019.

Assurances for shareholders We would release the half-year result and you will see that the direction of travel is now clear.

That half-year result does not include the South African transaction that has just been approved.

Impact of restructuring on remaining months in 2019 I think what you will see when

you put the last two quarters of the year together is that the work of transformation that we have done is extremely advanced.

There is still a lot of work to be done on our cost structure but I can assure you that we are making good progress in that respect.

Pricing and competition strategies Pricing is never the right way to compete. I think what is important for all of us in the market is to recognise that Nigeria will become one of the largest markets for cement countries across the world. This country will need to build a tremendous amount of infrastructure and housing over the next decade of twenty to thirty years. If you have to do that, all of the operators have to invest. If you have to invest and get returns on investment, then it is important that we compete on products, we compete on brand, we compete on market, we compete on route to market, we compete on service but we are not competing on price.

Nigeria must improve trade, production to grow GDP – LCCI ODINAKA ANUDU

T

he Lagos Chamber of Commerce and Industry (LCCI) says Nigeria must promote trade and boost production in order to bolster growth in the gross domestic product (GDP).

Babatunde Ruwase, president of the LCCI, said at the opening ceremony of LCCI Member’s Day Exhibition, Networking and Sales Event held in Lagos that poor performance of Nigeria’s trade sector in the second quarter of 2019 shows that there is more to be done to promote commerce and trade.

He said the situation reinforces the need for credible platforms to facilitate trade, industry and commerce through easy access to the market.

“We can improve the performance of the trade sector if our entrepreneurs can conveniently have access to markets despite the structural economic challenges con-

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fronting our nation,” he said.

“The fact that some local products have issues with standards and certifications does not necessarily connote that they are fake or substandard,” he noted.

He stated that technological advancement and quality product development are mutually reinforcing, adding that businesses will make more investments in technology to improve products if they have better access to market.

Nigeria Ruwase cited recent statistics released by the National Bureau of Statistics (NBS) which shows that Nigeria’s real GDP grew by 1.94 per cent (year on year) in the second quarter of 2019.

“Compared to the second quarter of 2018, which recorded a growth of 1.50 per cent, the growth observed in quarter 2, 2019, indicates an increase of 0.44 percent points. Unfortunately, the growth @Businessdayng

of the trade sector contracted by -0.25 per cent in quarter 2 2019 from 0.85 per cent in quarter 1 2019 and 1.02 per cent in quarter 4 2018. Also, the contribution of the sector (second after agriculture) in quarter 2 was down to 16.45 per cent in Quarter 2 2018,” he said.

Several firms such as Cross Resources Limited, DeWALT and Stanley brands hand tools, Spectra Industries Limited, Yemkem, CFAO Motors, Larabee Ventures, Renmoney Microfinance Bank, among others, exhibited at the event.

The LCCI event started seven years ago to provide a platform for the generality of members to showcase their innovations and exhibit their products to the world. Ruwase said the event has now grown in leaps and bounds to become a formidable platform for the promotion of innovation, networking, sharing of business ideas and a breeding ground for future enterprise leaders.

Monday 16 September 2019

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Monday 16 September 2019

BUSINESS DAY

REAL SECTOR WATCH The many faces of China’s industrial strategy in Nigeria ODINAKA ANUDU

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huks Anim owns a smallscale shoe manufacturing company in Lagos.

His factory produces boots, sandals and slippers, supplying them to schools and traders in south-western Nigeria.

He has been a shoemaker for 12 years and has made a name for himself. He employs 13 workers, four of which are apprentices. But barely three months into 2019, he has lost three of his main customers. Two Chinese businessmen were in Nigeria around December of 2018 and were able to convince Anim’s customers to look outwards.

The businessmen now exports shoes from China directly to Anim’s customers at cheaper rates.

“I used to sell a pair of shoes to them for N2, 000 ($5.5),” Anim said. “But I learnt that the Chinese businessmen sell theirs for N1, 200 ($3.3).”

Anim is already thinking of sacking seven of his workers and cutting down production as a hedge against this shock.

“If we should produce our quality of shoes and sell at that Chinese rate, we would all die,” he said.

He explained that no shoemaker would stay afloat after losing three of their major customers.

Like Anim, a number of entrepreneurs are seething at the sight of Chinese businessmen in Nigeria because of their experiences at different points in time.

In Aba, one of Nigeria’s main industrial cities, shoemakers complained in 2017 that cheap Chinese exports were “killing their business”.

This is not limited to shoes, but is extended to other areas of manufacturing.

In 2015, the only surviving brake pads and lining maker, Star Auto Industries, collapsed and blamed its woes on cheap Chinese imports.

“It is difficult to compete with China, with substandard, cheap

L-R; Dr. Jean-Marc Ricca, managing director, BASF West Africa; Abdullahi Idris, national ozone officer, Federal Ministry of Environment; Oluyomi Banjo, energy and environmental expert, UNIDO, and John Akhabue, national president of National Association of Refrigeration Practitioners (NARAP) at the recently concluded 2-day training workshop on safer production and business development for practitioners in the refrigeration, air conditioning and foam sector held in Abuja organised by BASF West Africa in partnership with UNIDO and the Ministry of Environment.

brake pads,” Chidi Ukachukwu, CEO of the firm, told BusinessDay after the collapse of his company.

“I am not happy that import duty on brake pads fell from 25 percent to 10 percent. This has been the situation since 2004 and government has done nothing about it,” he said, adding that duties had always been designed to favour Chinese and Asian products.

Many entrepreneurs in Nigeria, especially manufacturers, blame their struggles on Chinese businesspeople. Their grouse is that Chinese entrepreneurs import cheap products, thereby beating local producers that have put much labour and resources into the production process.

Nigerian manufacturers provide their own energy and import some of their raw materials from abroad.

The question now arises, is China de-industrialising Nigeria?

Samuel Ojimbe, managing director of a manufacturing servicing company, answered in the affirmative.

“You see, they are only interested in the market which Nigeria offers,”

he said.

“They are not interested in setting up factories locally,” he said.

“The moment you ask them whether they want to set up local factories, they evade the question,” he added.

Ojimbe’s position, however, may not stand the test of time because there are many Chinese manufacturing companies in Nigeria. Examples of such are Western Metal Products Company Limited (Wempco), Inner Galaxy Steel Company, Hongxing, and Lifemate, among many others.

The Lekki Free Zone is virtually owned by Chinese manufacturers who enjoy several incentives for producing for export.

John Kolawale, an Ogun Statebased businessman, believes that China uses substandard products to “kill local firms in Nigeria”.

“They send inferior products to us at cheaper rates, making it difficult for our local companies to compete favourably with them,” he said.

However, Ede Dafinone, chairman of the Manufacturers Association of Nigeria Export Group

(MANEG), said if anyone should blame Chinese for importing substandard products or killing local companies, Nigerians too should not be spared.

“The truth is that it is a mix of Nigerians and Chinese that are importing fake and substandard products from China. Nigerians go there and make their request and Chinese manufacturers give them what they want,” he said.

Nigeria offers a demographic advantage for China, with almost 200 million people seeking to satisfy their utilities and needs. More than half of this population are young people, below the age of 30, who live mainly in urban areas, statistics shows.

China was Nigeria’s biggest import partner in the fourth quarter of 2018, with a share of N900.4 billion, representing 25.1 per cent of the total imports, according to Nigeria’s statistics agency, the National Bureau of Statistics (NBS).

China exports virtually everything from leather to electric bulbs to Nigeria. Incidentally, the NBS data show that China is not on the list of

top ten export destination countries for Nigeria.

Such data explain why Nigerians feel that China is only interested in dumping its products to Nigeria, while restricting Nigeria’s export.

“Apart from flooding the Nigerian market with products that are not durable, some of their products can kill,” Haruna Maiya, a civil servant in a north-western Nigerian state, said.

Haruna may have made allusions to electrical products from China, especially cables, which have many times been reported to have caused fire outbreaks.

“Nigerian cables are strong, good and durable, but Chinese cables are often substandard,” Frank Jacobs, former president of the Manufacturers Association of Nigeria (MAN), said in a 2016 interview.

But several analysts say Chinese businesspeople are not de-industrialising Nigeria as they are only seeking new markets.

“They are only businesspeople looking for markets for their products,” a Chinese businessman told BusinessDay. “There is even a Go-Out policy in China which even encourages Chinese firms to invest in places like Africa,” he said.

“So, it is a Western propaganda against China,” he added.

Charles Uzua, an investment analyst, based in Nigeria’s capital Abuja, said China could not have been de-industrialising the country when its firms were investing in all key industrial sectors.

“Is it railway, energy or manufacturing? They are all there,” he said.

“Yes, there are few unscrupulous elements from China, but it is wrong to just label them all as bad elements.”

Muda Yusuf, director-general of Lagos Chamber of Commerce and Industry (LCCI), said it was a question of regulation.

“It is a question of strengthening our own institutions to make sure they do what they are supposed to so,” Yusuf said.

Manufacturing output rises 3.8% to N5.22trn Blessing Bala

I

n the second half of 2018, output by members of the Manufacturers Association of Nigeria (MAN) stood at N5.22 trillion as against N5.03 trillion recorded in the corresponding half of 2017.

This indicates N0.19 trillion or 3.8 percent increase over the period, according to MAN. Similarly, it increased by N0.46 trillion or 9.7 percent when compared with N4.76 trillion recorded in the preceding half.

Output in the sector totalled N9.98 trillion in 2018 as against N9.7 trillion recorded in the

2017, representing N0.28 trillion or 2.9 percent increase over the period. The increased manufacturing production in the period was ascribed to increase in activity volume and the relative tranquility in the foreign exchange market.

“MAN considers H2’18 as another life time opportunity to consolidate on the achievements recorded during the first term in office (of President Buhari), accomplish the various laudable projects, initiate policy measures that would enhance competitiveness and deliberately set the manufacturing sector on the path of sustainable growth,” MAN said in a recent economic review of the second half of 2018 www.businessday.ng

manufacturing performance.

“Association acknowledges that the performance of the economy in the year 2018 presented better economic scenario than what obtained in 2017. The manufacturing sector also witnessed improved performance in 2018 in terms of capacity utilisation, production and investment than in 2017. However, for the economy and the manufacturing sector to experience significant improvement in the years ahead, it is important that the various challenges limiting manufacturing performance and growth are adequately addressed,” MAN notes.

Sectorial Group analysis shows that production increased

https://www.facebook.com/businessdayng

in almost all the groups in this period.

Food, beverages and tobacco group increased production in the H2’18 to N1.7 trillion as against N1.64 trillion recorded in the corresponding half of 2017.

Production in pulp, paper & paper products, printing, publishing & packaging (6Ps) group stood at N75.84 billion in second half of 2018, representing N10.39 billion (15.9 percent) increase from N65.45 billion recorded in the corresponding half of 2017 and N12.45 billion or 19.66 per cent when compared with N63.38 billion of the preceding half.

Also, output in chemical & pharmaceutical group stood at @Businessdayng

N373.81 billion in the second half of 2018, representing 4.6 per cent and 11.05 per cent increase from N357.63 billion and N336.61 billion recorded in the corresponding half of 2017 and the preceding half respectively.

Production in domestic & industrial plastics increased by N16.31 billion when compared with N166.21 billion recorded in the preceding half.

Basic metal, iron & steel group improved production to N316.44 billion in second half of 2018, representing N109.32 billion and N129.99 billion increase from N207.12 billion and N187.44 billion recorded in the corresponding half of 2017 and the preceding half respectively.

Monday 16 September 2019

BUSINESS DAY

19

In Association With

Grave threats

Even in death, Robert Mugabe worries his successor Emmerson Mnangagwa, Zimbabwe’s president, is bracing for trouble

R

OBERT MUGABE had be en out of power for nearly two years when he died on September 6th (see Obituary). He had been far away and sick since April, so you might think his death would not rattle his successor as president of Zimbabwe, Emmerson Mnangagwa. But bones have a way of making themselves felt.

In the past few months Zimbabwe has fallen into a pit of despond that is as deep as it was during a horrendous period in 2008 when inflation reached world-record levels and shelves in the shops went bare. Rumours of rancour and plots in Zanu-PF, the ruling party, especially among the generals, are flying thick and fast.

Even the arrangements for the dead despot’s funeral have been causing confusion, consternation and bad blood.

As The Economist went to press, Mr Mugabe’s body, after arriving from Singapore, where he died, was due to lie in state for two days in a football stadium near the centre of Harare, the capital, before being moved to the bigger National Sports Stadium. This happens to be across the road from Heroes’ Acre, a hill on the edge of the city where the leading lights of the anti-colonial liberation struggle, including Mr Mugabe’s first wife, Sally, are buried. A place has long been reserved next to her.

The funeral service is expected to take place in the bigger stadium on Saturday. Mr Mnangagwa, the dead man’s bloodstained, long-serving enforcer, who ousted him in a coup in 2017, is expected to preside. The government says Mr Mugabe is to be buried in Heroes’ Acre the next day. But his family, led by his widely reviled and notoriously acquisitive second wife, Grace, wanted him buried in his

A betrayal TheBalkan Democratic primary

Can Kamala Harris recover from her slump?

The Democratic contender from California is running out of chances

K

home village, Kutama, an hour’s drive to the west. Wherever it takes place, the prospect of huge crowds, swelled by rising anger and desperation among the poor, leaves Zimbabwe’s rulers nervous.

That is not surprising. Electricity is available for barely six hours a day. Clean water runs once a week. A civil servant’s monthly salary barely buys two days of groceries for a family of four.

Drivers queue for hours for scarce supplies of petrol, the price of which has more than quintupled this year. Annual inflation is reckoned to be about 500%. The value of Zimbabwe’s newly introduced currency, which is meant to take the place of the American dollars that have been used for a decade, has slumped.

Western governments and bodies such as the IMF will not lend unless Zimbabwe clears its arrears with the World Bank and the African Development Bank. The finance minister, Mthuli Ncube, has cut subsidies and sought to reduce the state payroll but seems increasingly

erratic. Harsher austerity risks a popular explosion. Moreover, he is hobbled by party bigwigs and generals who fiddle the foreignexchange rates and continue to plunder the treasury.

Outsiders also insist that, if Mr Mnangagwa (pictured on the right) is to get foreign help, he should be less repressive, first by repealing two laws that have long enabled the government to lock opponents up and muzzle independent voices. He is moving towards doing so, but has yet to complete the task.

Human-rights campaigners say his proposed security bill looks a lot like the repressive old act, and that abuses have surged even in the past month. They report more than a score of new charges of treason, abductions and cases of torture of opposition campaigners, mainly belonging to the Movement for Democratic Change (MDC). Civil-society groups say they are being threatened as viciously as ever.

Mr Mnangagwa has long been adept at suppressing dissent, though street violence could

erupt again as the economy melts down. The MDC insists that, before it might agree to cooperate in a “transitional mechanism” to implement reforms, he should first admit that last year’s parliamentary and presidential elections were rigged, something he is unlikely to do.

In any case, the biggest threat to his survival comes from within his own party, especially from the generals who helped him seize power in the first place. His first vice-president, Constantino Chiwenga, the armed-forces chief behind the coup, is said to be gravely ill. Other army types are reported to be plotting for the succession. Some prominent holdovers from the Mugabe era may, it is speculated, at last be charged with corruption. Mr Mugabe’s widow and her family, whose bid for power sparked the coup, may finally be dispatched into political oblivion. And the lethal internecine struggles within the ruling party that marked the despot’s 37 years in power will persist beyond his grave, wherever it may be.

AMALA HARRIS was expected to be a strong presidential candidate. She has a strong résumé as a prosecutor, district-attorney, state attorney-general and senator. She is telegenic, a good public speaker and even better interrogator, as displayed in her punchy questioning of President Donald Trump’s judicial nominees. As the daughter of an Indian mother and Jamaican father and the first African-American to become a state attorney-general, her biography could endear her to minority and progressive voters, too.

In June, during the first Democratic debate, those virtues elided as Ms Harris excoriated Joe Biden, the frontrunner, for his opposition in the 1970s to school bussing, a policy Ms Harris had benefited from as a child. In the following days, her fundraising and polling numbers surged.

A little over two months later her campaign seems to have squandered

that opportunity. Ms Harris is well behind in what increasingly looks like a three-way race between Mr Biden, Elizabeth Warren and Bernie Sanders.

In the second debate in July, when Ms Harris was repeatedly put on the defensive over her record on criminal justice and her health-care positions, her performance was less impressive.

Since then, her polling numbers have languished: The Economist’s poll aggregator has her at 7% (Mr Biden is at 27%; Ms Warren at 19% and Mr Sanders at 15%). This week, Politico got hold of a memo accidentally left by members of her campaign team in a restaurant in New Hampshire which referred to her campaign’s “summer slump.”

The problem is less her debate performance than the muddled campaign she has run. Over the summer, she looked as if she could not decide whether she would win more votes as a progressive or moderate. That Continues on page 20

20

Monday 16 September 2019

BUSINESS DAY

In Association With

European economic integration

Can Kamala Harris recover from her...

A singular opportunity

Continued from page 19

Europe’s best hope of economic revival lies in reanimating its neglected single market

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VERY FI VE years the appointment of a new team at the European Commission is a chance to steer the European Union (EU) in a fresh direction. On September 10th Ursula von der Leyen, the incoming boss, set out her priorities: managing the transition from fossil fuels, extra dollops of American big-tech bashing and “upgrading our unique social market economy”.

The first two at least have the benefit of being clear. On the economy, however, Europe needs a lot more than blather.

In the past decade the trend of economic integration that defined post-war Europe has gone backwards. The “single market”, once breathtaking in its ambition to eliminate all internal EU barriers for goods, services, capital and people, has failed to keep up with the economies it was trying to shape. If Europe wants to create prosperity and world-beating firms, it needs not just to reinvigorate the single market, but also to rediscover that original vision in neglected areas of trade such as services.

The single market still matters—look at the mess Britain finds itself in as it tries to extricate itself from the EU. But a policy originally devised to break down trade barriers in the era of coal and steel has not adapted fast enough to the era of bits and likes (see Briefing).

In the past decade Europe’s banks have retrenched to their home markets and its firms have shifted their energies to expanding outside the EU. As a result, Europe still looks like a series of mid-sized economies patched together, not a single rival to China and America.

That is one reason why, even as central bankers administer a drip-feed of monetary adrenalin, Europe’s economy is losing ground to global rivals. It risks becoming a business backwater.

A decade ago ten of the world’s 40 largest listed firms by market value were based in the EU; now only two are—in 32nd and 36th place. Desperately few of the world’s leading startups are European.

Policymakers who ache at the absence of a European tech success on the scale of Google or Amazon pay lip service to the importance of the single market. And yet France and Germany argue that the real answer is dirigiste indus-

trial policy. They have called for mergers of European firms to create industrial “champions” shielded from antitrust rules and Chinese competition.

They should be aiming to complete the single market instead. A functional single market helps firms achieve economies of scale. It is cheaper to make a product that has to meet one set of EU regulations than to try to follow 28 different national rulebooks. Stiffer competition from firms across the continent means that shoppers get better and cheaper stuff.

Imagine if the dozens of mobile operators in Europe were free to pitch their data plans to those beyond their national borders.

Instead, consumers have to make do with higher-charging local oligopolies.

Innovation spreads faster in a unified market, pepping up productivity. A properly integrated energy grid would boost the most efficient (and greenest) power producers. Banks with loans out across the continent avoid trouble if their home market falls into recession. Capital markets on a continental scale can help them distribute risks beyond the banking sector.

Safer banks and deeper markets mean cheaper capital and fewer bail-outs.

For all those reasons, reinvigorating the single market ought to be at the centre of the debate on how to boost Europe’s economy. It is not. Since her appointment two months ago Mrs von der Leyen has mentioned the single market only in passing (see article).

The commissioner in charge of the brief, Sylvie Goulard of

France, is well regarded, but will have to split her time between internal-market duties, regulating artificial intelligence, and a new defence-industry and space brief.

That might be understandable if the single market were beyond saving. In fact it can be revitalised in three ways. The first is to ensure that its statutes are fully implemented. Too often, national governments flout the edicts of the single market so as to protect a politically connected industry. On average, each European country regulates the workings of nearly 200 professions, making it needlessly tricky for Europeans to move to where the jobs are. No wonder bits of the continent still have double-digit unemployment. The new Brussels team should step up enforcement against governments that fail to apply the rules.

The second way is to focus on the euro. The single currency is in some ways an extension of the single market, even if fewer countries belong to it. It would be more stable if a central fund insured bank deposits. A more substantial euro-zone budget, focused on unemployment insurance, say, could help integrate euro-zone economies.

As an added benefit, this would also deepen cross-border links, notably by helping banks become truly European. Here, Mrs von der Leyen has a harder task.

Her native Germany will seek to keep progress glacial.

Most ambitious would be a fresh push to remove what structural barriers remain to cross-border European trade.

Collecting value-added tax in

a neighbouring country would not be so daunting for small businesses if the levy was structured in the same way across Europe, for example. Banks would pitch their wares more broadly if bankruptcy laws were harmonised, and a proper capital-markets union created.

Standard contracts for business services (on professional liability, say) would make it easier for German accountants to tout for business in Italy, or for Spanish architects to pitch their offerings beyond the Pyrenees.

A grand bargain of policies serving up tax reform, services liberalisation and a more robust euro would run into plenty of national red lines. But each country would also have lots to gain. Europe needs to shield itself from the fallout a global trade war might bring. It needs a vision after the departure of Britain, the single market’s most reliable champion in Brussels—but also, often, a brake on ambitious projects. Meanwhile, Britons tempted to say good riddance to the single market’s frustrations should reflect on how much losing a seat at the table could cost them.

Jacques Delors, a former head of the European Commission who championed closer integration, rightly pointed out that “nobody can fall in love with the single market”. There is nothing flashy about reworking bankruptcy rules or tax regimes.

But Europe’s greatest economic project is half-finished business, yielding just half the benefits it could. Europe has few such obvious levers to pull to boost its economy. Time to tug on this one.

has led to some policy vacillations, most damagingly over health care.

Initially she backed the “Medicare for all” plan proposed by Mr Sanders and endorsed by Ms Warren, which would put all Americans onto government plans. But she reneged on that and produced a plan that preserved private insurance for some. That didn’t have its intended effect, of appealing to moderates and progressives alike.

It left her looking opportunistic and uncommitted.

Now, Ms Harris’s campaign appears to be making a final push to break through. On September 12th she will join ten candidates—from a field that is still 20-strong—for the third Democratic debate in Houston, Texas. Earlier in the week, she unveiled her plan for criminal justice reform. Broad in scope and ambitious, it focuses on reducing mass incarceration, restricting the use of deadly force by police and legalising marijuana federally—a move aimed at reducing incarceration for nonviolent drug offences. It would also end the use of private prisons and find better ways to rehabilitate violent criminals.

The timing of the plan’s release is designed to sharpen Ms Harris’s message at a crucial moment. It should also give her an opportunity to tackle criticisms that during her previous career she did too little to challenge a criminal justice system that often discriminates against black and poor Americans. Her plan contains progressive proposals that contradict some of her earlier positions. For example as attorney-general of California Ms Harris did not push for independent investigations of fatal police shootings. Her plan would encourage states to do so. In an interview with the New York Times she defended her record, saying that political attitudes to criminal justice reform had changed a lot in recent years.

Ms Harris’s fresh focus on criminal-justice reform is also designed to appeal to African-American voters, who so far seem to prefer Mr Biden to her. His reputation as a loyal deputy to the first black president, Barack Obama, helps with that. Yet if black voters’ enthusiasm for Mr Biden fades, Ms Harris would stand a reasonable hope of gaining it.

Monday 16 September 2019

BUSINESS DAY

21

In Association With

Spoiler alert

Hong Kong’s bourse seeks to snap up the London Stock Exchange HKEX wants to break up the LSE’s deal with data-provider Refinitiv

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ECENT MONTHS have been eventful for bosses in Hong Kong, including Charles Li, the head of the island’s stock exchange. Last month, just days after a huge deal in his industry was announced—an agreement by the London Stock Exchange Group (LSE) to buy Refinitiv, a data provider, for $27bn—the Chinese People’s Liberation Army released a video of troops performing anti-riot drills, a scenario that Mr Li had warned Beijing against. The protests continue, but Hong Kong Exchanges and Clearing (HKEX) is keeping calm and carrying on. On September 11th it made an audacious bid to scupper the Refinitiv-LSE deal and buy the British exchange for £31.6bn ($39bn) itself.

In normal times pundits might have hailed the proposal as visionary. Hong Kong is the world’s fourth-largest financial centre.

Combined with London, it could rival New York. It is well positioned to benefit from the strength of Asian emerging markets. In its proposal HKEX dangled the prospect of Britain capturing growth as China’s currency, the yuan, internationalises—for example, with more Chinese firms listing in London.

And under Mr Li HKEX has proved an adept buyer of foreign

assets. Its acquisition of the London Metal Exchange in 2012 for $2.2bn has gone well. As other exchanges have done, HKEX has diversified beyond listings into trading services, derivatives and data. Its mix of fast-growing businesses adds up to far more than an opportunistic play on China.

But most of the LSE’s shareholders look likely to back the bourse’s prompt rebuff of HKEX. The board will examine the bid in detail, but called it “unsolicited, preliminary and highly conditional”. It reiterated its commitment to the Refinitiv transaction, which is

due to be approved by shareholders before the end of the year.

The chief obstacle to the East-West tie-up is political risk.

Cross-border exchange deals often founder on national sensitivities, as happened with the LSE’s own attempt in 2017 to merge with Deutsche Börse. HKEX’s proposal would mean a Chinese firm owning the main equity markets of Britain and Italy (the LSE bought Borsa Italiana in 2007) and key clearing infrastructure for European debt markets. British politicians and regulators, desperate to juice up the economy post-Brexit,

might prove relaxed. American and continental European ones probably will not.

Mr Li is no patsy for China.

Last summer he tussled with Beijing when the Shenzhen and Shanghai exchanges blocked mainland investors from buying shares in Hong Kong-listed firms with dual-class structures. Nevertheless, six members of HKEX’s 13-strong board are appointed by Hong Kong’s government, notes an investment banker close to the LSE. HKEX could try to increase its independence by asking the territory’s financial secretary to refrain

from exercising his right to choose its board members, but changing the rule itself is not on the agenda.

For their part, LSE shareholders are unlikely to see HKEX’s offered price, at a relatively low premium of 23%, as sufficient temptation to abandon the Refinitiv deal for one that has a serious risk of being blocked.

Backers of the agreement with Refinitiv, the owner of Eikon data terminals, are therefore confident.

They note the market’s welcome for the LSE’s further expansion into data and analytics. The exchange’s shares had risen 20% from the date of that offer to just before HKEX’s bid.

The Refinitiv deal also faces regulatory hurdles, however. Like HKEX, the LSE swims in politically treacherous waters. China’s desire to exert control will have been one of the motives for the Hong Kong exchange’s London gambit. As for the LSE, the EU’s fears that post-Brexit London will be a freewheeling offshore centre could prompt its regulators to seek to limit the British exchange’s growth. The Refinitiv deal faces a gruelling competition review in Brussels over concentration of financial-data ownership. Mr Li’s bid to escape trouble at home may not succeed.

But the Refinitiv deal is not home and dry either.

Hate thy neighbour

Xenophobic violence flares in South Africa As anti-foreigner attacks spread, the authorities respond with denial

W

AVING FIGHTING sticks, improvised spears and shields, they advanced like an army through the streets of central Johannesburg, chanting and singing in Zulu: “Foreigners must go back to where they came from.” As they went they looted and burned shops, attacked a mosque and killed two people.

The murders on September 8th came after more than a week of attacks—mostly by South Africans against migrants from other African countries—that had already led to ten deaths.

This is not the first time South Africa has experienced such horrors. Dozens of people were killed in anti-foreigner riots in 2008 and 2015. But the most recent outbreak of violence shines a particularly harsh light on the rabble-rousing of South African politicians, some of whom have blamed migrants for supposedly taking jobs from locals and committing crimes.

Two years ago the deputy minister of police complained in a press conference that South Africans had

allowed foreigners to take over the centres of cities such as Johannesburg. “We fought for this land...we cannot surrender it to the foreign nationals,” he said. Aaron Motsoaledi, then the health minister but now in charge of home affairs, last year blamed overcrowded hospitals and the spread of infectious diseases on sick foreigners.

Anti-foreigner sentiment is not confined to politicians from the ruling African National Congress.

Herman Mashaba, who was elected mayor of Johannesburg for the

opposition Democratic Alliance, regularly scapegoats foreigners for crime in the city.

The killings are straining diplomatic, trade and cultural relations between South Africa and others on the continent. Nigeria has started flights to evacuate hundreds of its citizens affected by the violence. Some Nigerian lawmakers have called for South African firms operating in their country to be nationalised. Rioters have attacked South Africanowned companies in Nigeria and

prompted the closure of South Africa’s diplomatic outposts. Protests have also been staged outside South African embassies in Zambia and the Democratic Republic of Congo.

Some locals whisper that clandestine forces are whipping up the violence in South Africa for political ends. Perhaps, but it is not unusual for riots to break out spontaneously. Youth unemployment is a staggering 40%, so there are plenty of frustrated young men with time on their hands.

Economic growth is slow, and the gap between rich and poor is vast. Trust in the police and government has been weakened by years of corruption scandals. The provision of basic services such as water and electricity is woeful.

Many South Africans would like someone to blame, and many politicians are keen for them to blame someone else.

Mangosuthu Buthelezi, a veteran Zulu leader, was one of the few politicians to try to quell the anti-foreigner rage on September 8th. Speaking to a crowd, he asked

them to remember how other African countries had supported the fight against apartheid. “Is this how we repay them?” he asked.

But his appeals were drowned out by the angry mob as it turned is back on him and set about its grim business.

22

Monday 16 September 2019

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

MARKETS

This analysis shows Nigerian companies struggling DAVID IBIDAPO & SEGUN ADAMS

T

he sluggish growth of Nigeria’s economy ha s t h row n a large part of its population into a poverty trap while companies seem to be growing. A closer look at the profit of listed firms, however, suggests a different fate for Nigerian companies with growth limited.

On account of a rise in Consumer Price Index (CPI) – the weighted average of prices of a basket of consumer goods and services – which has grown at a faster pace since the recession in 2016, earnings of companies have been severely constrained in real terms.

This shows why investors insist on reforms to turn bullish on Nigerian stocks.

Among companies listed on the NSE30 index, a measure which tracks firms accounting for about 80 percent in the total market value of on the exchange, no firm is close to the reality of its nominal growth in earnings since 2015 when profit is adjusted for the effect

of inflation, BusinessDay analysis show.

From 2015 to 2018, the general prices of goods and services rose by 52 percent from a CPI of 180 in 2015 to 274.6 in 2018, which forms the deflator in adjusting for the profit of listed companies during the same period.

BusinessDay analysis shows a more pronounced effect on the profit of Lenders on the NSE 30 index.

In the review period, Access bank – biggest lender by asset and customer base – which would have been proud of a 44 percent growth in Profit After Tax, when adjusted for inflation

has plunged by 5 percent during the period.

Similarly, UBA despite growing its net income 32 percent in nominal terms has shed 14 percent in real terms in 5 years to 2018. The same goes for Union bank with nominal growth of 29 percent in net income but in real terms has declined

by 15 percent.

Among peers in the banking industry, Sterling bank has declined the most, plummeting 40 percent in real terms against negative 8 percent in nominal terms.

Zenith Bank, Guaranty Trust Bank, First Bank of Nigeria Holdings, Fidelity Bank, and Ecobank International Incorporated are among lenders with positive real growth.

However, many lenders despite recording positive growth in net income in real terms, their nominal growth is just a dream would have wished were the reality.

This was a trend common with all companies listed on the index, however, consumer goods firms with the exemption of Nestle, NASCON, Dangote Sugar and Unilever, stood as the worst hit on the index with real growth plunging 102 percent on the average.

The Nigerian economy faces currently a wide array of challenges ranging from slow economic growth, upward inflation pressure, threat on debt sustainability, high debt levels, shrink-

ing consumer wallets etc to mention but a few.

Latest Gross Domestic Product (GDP) figures show that Africa’s biggest economy has slowed for the third-straight quarter dragged by the non-oil sector. Manufacturing sector declined for the first time in more than five quarters.

Nigeria’s stock market is down some 12 percent yearto-date but analysts say it is hard to tell when the bearish market would bottom out.

Reforms to stimulate the real sector are a must, they say, if the interest of foreign investors, who have the big money, is to be reignited.

This has cast a gloom over Lagos bourse as a bearish run which began last year might linger into the coming year.

While there are hopes for market-friendly policies following the constitution of President Muhammadu Buhari’s cabinet, the big question in the words of Warren Buffett, chairman of Berkshire Hathaway, remains to be answered; “what is in the future for investors?”

BONDS

CBN records more OMO sales than N300bn offered to investors HOPE MOSES-ASHIKE

T

he Central Bank of Nigeria (CBN) recorded the most sales in its N300 billion Open Market Operation (OMO) offered to investors on Thursday.

Consequently, the OMO sales of various tenor bills increased by 14.89 percent to the sum of N344.38 billion from initial offer of N300. The N30 billion and N200 billion offered for the short (91-day) and longer term (364-day) respectively were oversubscribed and sold while the median term instrument was undersubscribed.

Ayodeji Ebo, managing director, Afrinvest Securities Limited explained that the OMO auction rates have continued to attract investors attention due to its attractiveness relative to the the secondary market.

He said the long term bill was prorated by 69.9 percent due to the high sub-

scription level. Due to huge maturities for the rest of the year, we expect the CBN to accelerate its frequency of OMO Auction to keep System liquidity in check.

Total subscription for the 364-day OMO instrument stood at N385.47 billion while the CBN sold the sum of N250 billion at a stop rate of 13.5 percent.

Investors earlier bid at a range between 13.5 and 14 percent for the offer which matures on September 10, 2020.

The CBN offered N70 billion for 182-day tenor but sold only N8.97 billion at 11.79 percent stop rate. The bill was undersubscribed at N20.97 billion at investors preferred bid range of between 11.78 and 13 percent.

The maturity date is fixed at March 12, 2020.

For the 91-day OMO bill, which matures on December 12, 2019, the CBN sold a total of N85.41 billion out of the N30 billion initial offer, at a stop rate of 11.59 percent. Investors subscription

rose to N85.41 billion at a bid range of between 11.50 and 11.59 percent.

The Nigerian financial market was last week awash with liquidity from maturing Treasury Bills and Open Market Operation (OMO), with attractive yields.

A breakdown of the system liquidity shows that the Central Bank of Nigeria (CBN) will on Wednesday rollover N158.7 billion worth of maturing T-Bills at the Primary Market Auction. This consists of N15.00 billion for 91 day tenor, N14.002 billion for 182 day tenor and N129.65 billion for 364 day tenor. And also inflows from maturing OMO bills worth N300. billion is expected to hit the system thereby bolstering system liquidity.

The yield for short-term bills offered by some investment firms as at Monday last week ranged between 10.31 and 10.47 percent per annum. For medium-term instru-

ments, the yield ranged between 12.01 and 12.32 percent, while the yield for longer-term bills stood at between 13.47 and 13.71 percent per annum.

Yield refers to income realized on an investment over a particular period of time, while stop rate refers to stop rate refers to the maximum interest rate preferred/issued by the CBN out of all the bids submitted within a bid window.

The previous week saw further increase in demand in the Treasury Bills secondary market as system liquidity remained elevated at about N862.2 billion positive as at Thursday, amidst the OMO auction that was conducted by the Apex bank on the same day.

Although, system liquidity opened the week negative N68.0 billion spurring sell offs, liquidity from matured OMO bills bolstered demand across the yield curve during the remaining trading sessions of the week.

Consequently, yields

remained pressured as average yield across tenors dipped further by 51bps Week-on-Week to settle at 13.3 percent on Friday from 13.8 percent the previous week. Major buying interests were witnessed at the short and medium end of the curve, particularly, 24Oct-19 (-126bps), 10-Oct19 (-126bps) and 12-Dec-19 (-111bps) maturities.

Last week Thursday, the CBN mopped-up a total of N322.6 billion out of the initial N400 billion offered to investors via OMO auc-

tion.

Investors scrambled for the longer tenure instrument as the 364 day tenor OMO bill was oversubscribed by 63.25 percent.

The initial offer for this tenor was N250 billion while the total subscription stood at N408.12 billion.

The CBN sold a total of N321.48 billion (364 day) at a stop rate of 13.50 percent. The investors bided at a range bid of between 13.49 and 14.50 percent for the offer which matures on September 3, 2020.

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: Samuel Iduh

Monday 16 September 2019

COMPANIES&MARKETS

BUSINESS DAY

23

Business Event

HEALTHCARE

Echolab partners IDH in $25m diagnostic services expansion TEMITAYO AYETOTO

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oved by the seeming undersupply of diagnostics services in Nigeria, Echolab Radiology and Laboratory Services has partnered with the largest operator of diagnostic chain in the Middle East and North Africa, Integrated Diagnostic Holdings (IDH). The collaboration is expected to bring to bear global best standards on the investigation of wide range of illnesses and conditions affecting Nigerians.

Echolab is an offshoot of EcoScan, which has been in diagnostics service of Nigeria for over 20 years.

Benson Ayodele, the chief executive said the relaunching the company was to announce the introduction of foreign participation and expansion of its service offerings in both radiology and pathology laboratory services. Ayodele said $25 million in investments was pumped into the expansion.

“We changed the trade name just to reflect the fact that we are doing a lot more in laboratory medicine compared to where we were before,” Ayodele told Businessday at the launch. “It is to bridge the gap in diagnostic service that we have noticed long ago in the health care industry in Nigeria.”

To realise this dream, Echolab has invested in an arsenal of cutting edge technology. It will be beaming light on health complications with tools including Atellica CH930 Analyser, a flexible, scalable and automation-ready immunoassay used in clinical chemistry analysis to deliver simple and customisable detections. The device capable of 1800 tests per hour gives room for conducting routine tests and advanced categories such as Therapeutic drug monitoring, drugs of abuse and specific proteins.

Sysmex XN-350 Analyzer, another device, conducts standard routine blood checks and differential blood cell counting. It supports the detection of infections and provides for diagnosis and therapy monitoring of infections by reliably counting immature cells.

Other devices are LOGIG F8, a high-end GE Ultrasound system; VIVID IQ, a cardiovascular ultrasound system, and Prodigy Pro, a body composition analyser for bone mineral density (BMD) and lean and fat tissue mass.

With these technologies, Echolab hopes to leverage IDH specialty in pathology, molecular diagnostics, genetics testing and radiology to help patients.

It sees its quality proposition to the diagnostic market

further enhanced by its other partnership with the international Finance Corporation, an arm of the World Bank which ensures compliance with global best practice standards and ethics.

Akin Abayomi, the Lagos State commissioner for health said the state has particularly exerted efforts on partnership with diagnostics centres, to enhance its capacity to manage the demands of its surging population.

“The Lagos state government is in support of this initiative. I urge them to sustain the standard of what is expected in radiology and laboratory services. They should uphold quality control,” Okunowo Olanrewaju, acting head of department, chemical pathology, Lagos State University (LASU) said while holding brief for the commissioner.

Echolab currently services Embassies, government parastatals and non-governmental organisations including United Nations, Central Bank of Nigeria, NNPC. It also offers esoteric tests which are not routinely performed in clinical laboratories through a subsidiary of IDH, Al Mokhtabar laboratory.

Nigeria’s diagnostics service commanded a N50 billion market as of 2015 and is projected to grow six folds to N300 billion by 2025, available reports say.

L-R: Hassan Bello, executive secretary/CEO, Nigeria Shipper Council; Chike Ogeah, vice chairman, Skyway Aviation and Handling Company Plc; Joseph Abugu, representing head of department, commercial law and industrial law, University of Lagos; Adekunle Oyinloye, GMD, Sifax Group, and Afolasade Afolabi, chairman, Sifax Off Dock, at the 4th edition of Taiwo Afolabi annual maritime conference in Lagos.

Pic by Olawale Amoo

L-R: Olufemi Balogun, head, market services, The Nigerian Stock Exchange (NSE); David Ogunsola, head, information technology, C&I Leasing Plc; Bridget Edesiri Nkemnole, senior lecturer, mathematics, University of Lagos; Tosin Beredugo, head, technology, NSE; Oscar Onyema, chief executive officer, NSE; Ifeyinwa Kojo, country lead-sales, Hewlett Packard Enterprise, at the NSE Market Data Workshop 2019 in Lagos.

CONSUMER GOODS

Colgate partners Tolaram to bring innovative oral care solutions to Nigeria DAVID IBEMERE

C

olgate Palmolive company makers of “Colgate” and Tolaram Group have entered into a strategic Joint venture to bring innovative oral, personal and home care products to consumers across Nigeria.

In a statement to BusinessDay, the management of Tolaram Group, said the partnership will help strengthen Colgate presence in Nigeria and equally continue to cement Tolaram Group’s position as one of the leading and most diversified consumer brand builders in the Nigeria.

John Hazlin, president Africa Eurasia for the ColgatePalmolive Company said “Colgate is proud to partner with Tolaram to increase its investment in Nigeria.

We see many bright opportunities ahead for this new venture and for consumers in this vibrant and growing

market”.

Also, from the other end, Deepak Singhal, CEO Consumer Division for Tolaram Group Inc. stated that the partnership with Colgate will mark Tolaram’s fourth Joint venture in Nigeria with global leaders and is a testament to the company’s commitment to continue delivering quality products to the Nigerian consumers.

“We are excited as we increase our investment on the oral care, home care and personal care categories with Colgate, a partner with which we can effectively combine market knowledge and product expertise” he said.

“Tolaram group has a track record of building brands from different categories right from the scratch into becoming market leaders and most beloved household names in Nigeria, such as; Indomie Instant Noodles, Power Oil, Minimie Noodles, Minimie ChinChin, Power

Pasta, Hypo Bleach, Munch It, Lucky Fibres, Lush Hair and Goodlife Magik fruit drink - the newest brand addition, recently launched into the Nigerian beverage market.”

Operationally, the joint venture will leverage Tolaram’s significant local manufacturing presence, marketing expertise and distribution strength with Colgate’s product formulations and R & D capabilities.

“The joint Venture business has been set up as a partnership of equals and will initially focus on aggressive marketing and promotion of the oral/dental care products - Colgate toothpaste and tooth brush as well as other Colgate Palmolive brands in the category of personal and home care- Palmolive soaps, cosmetic lines while the construction of a multimillion dollar facility for the production will be set up in due course.

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L-R: Charles Nnochiri, head of brand development and activation, personal care, PZ Cussons; Yemisi Odusanya, celebrity judge, Cussons Baby Moments 6; Joyce Coker, human resource director, PZ Cussons; Deyemi Okanlawon, celebrity judge, Cussons Baby Moments 6; at the official Cussons Baby Moments 6 press parley, at PZ Cussons headquarters, Ilupeju, Lagos. Pic by Pius Okeosisi

L-R: Alex Olorunnusi, relationship officer, First City Monument Bank (FCMB); Lynda Chuma-Osuebi, manager, Apapa Randle branch of the bank; Oliver Opara, regional head, Lagos; Ali Ahmad, general manager, NY Supermarket Limited and winner of star prize in the fourth draw of ‘’FCMB SME Race to China Promo Season 2’’; Wale Alabi, accountant of the supermarket, and George Ogbonnaya, group head, SME/business banking, FCMB, during the prize presentation ceremony to the winner by the Bank in Lagos.

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Access Bank Rateswatch Market Analysis and Outlook: September 6 - September 13, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

1.94

Q2 2019 — lower by 0.38% compared to 2.01% in Q1 2019

Broad Money Supply (N’ trillion)

35.68

Increased by 1.88% in July’ 2019 from N35.02 trillion in Jun’ 2019

Credit to Private Sector (N’ trillion) Currency in Circulation (N’ trillion)

24.27 2.00

Decreased by 1.93% in July’ 2019 from N24.75 trillion in Jun’ 2019 Decreased by 0.55% in July’ 2019 from N2.01 trillion in Jun’ 2019

Inflation rate (%) (y-o-y)

11.08

Decreased to 11.08% in July 2019 from 11.22% in June 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)

43.14 62.98 1.786

Global Economy

In the UK, inflation rate increased to 2.1% yearon-year in July 2019 from 2.0% in the previous month according to the Office of the National Statistics. This was spurred by the price increases seen in recreation & culture and restaurants & hotels. This is above the Bank of England 2% target. The annual core inflation rate, which excludes prices of energy, food, alcohol and tobacco, advanced to 1.9% in July, the highest in six months. In a separate development, the Indian economy expanded by 5% year-on-year in the second quarter of 2019, slowing from a 5.8% advancement in the prior period. It was the weakest growth rate since the first quarter of 2013, amid a slowdown in manufacturing and construction sectors according to data from the Ministry of Statistics. Elsewhere in Japan, unemployment rate fell to 2.2% in July 2019, the lowest rate in 27 years. According to the Statistics body in Japan, the jobs-to-applications ratio declined to 1.59, the lowest since March 2018 and also below consensus of 1.61. The number of unemployed fell 70,000 from a month earlier to 1.54 million in July, while employment grew by 150,000 to 67.16 million. Unemployment rate during this period last year was reported at 2.5%.

September 5, 2019 figure — a decrease of 0.49% from September start September 5, 2019 figure— an increase of 2.89% from the previous wk July 2019 figure — a decrease of 1.21% from June 2019 figure

Domestic Economy

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

Friday

6/09/19

30/08/19

NSE ASI Market Cap(N’tr)

27,146.57 13.21

27,525.81 13.39

Volume (bn)

0.31

0.12

Value (N’bn)

6.44

1.82

MONEY MARKET NIBOR Tenor

Friday Rate (%)

Friday Rate (%)

Change(%)

Indicators

6/09/19

1-week Change

YTD Change

(%) Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) 149.44 Agriculture Cocoa ($/MT) 254.41 Coffee ($/lb.)

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Change Gold ($/t oz.)

Silver ($/t oz.)

(Basis Point) Copper ($/lb.)

(1.38) (1.38)

(%)

62.98 2.41

2.89 6.17

(2.30) (21.14)

2,235.00 95.65 59.00 10.94 463.75

1.64 0.05 0.08 (2.23) (0.59)

15.44 (26.54) (23.87) (28.64) 6.98

1,506.63 18.15 262.75

(1.23) (1.20) 2.06

14.35 5.58 (19.84)

6/09/19

30/08/19

OBB

3.2100

9.2900

(608)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

3.8600 4.3500 13.7818

10.5000 9.2500 13.9985

(664) (490) (22)

Tenor

90 Days

13.9813

12.9832

100

1 Mnth 3 Mnths

12.77 13.28

13.03 11.42

(26) 185

Friday

1 Month

(N/$)

Rate (N/$)

6 Mnths 9 Mnths 12 Mnths

14.06 15.06 15.32

13.95 14.74 14.98

11 32 34

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

6/09/19

30/08/19

6/08/19

Official (N) Inter-Bank (N)

306.90 362.08

307.00 362.93

306.90 362.21

BDC (N) Parallel (N)

0.00 360.00

0.00 360.00

0.00 360.00

Friday 6/09/19

30/08/19

Indicators

Friday

AVERAGE YIELDS (%)

Friday (%)

Change (Basis Point)

6/09/19

30/08/19

3-Year 5-Year

0.00 14.46

0.00 14.37

0 9

7-Year 10-Year 20-Year

13.85 14.25 14.40

13.85 14.16 14.23

0 8 18

30-Year

14.56

14.56

0

Disclaimer 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.

(Basis Point)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Friday

(%)

Friday

Change

(%)

BOND MARKET Tenor

Friday

(%)

Change

(%)

(Basis Point)

6/09/19

30/08/19

Index

2,958.12

2,989.74

(1.06)

Mkt Cap Gross (N'tr) Mkt Cap Net (N'tr)

8.98 5.71

9.05 5.73

(0.80) (0.31)

YTD return (%) YTD return (%)(US $)

20.42 -35.36

21.71 -34.13

(1.29) (1.23)

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

Rate(%)

91 Day 182 Day

24,372.79 38,751.85

11.1 11.58

28-Aug-2019 28-Aug-2019

364 Day

145,475.02

12.89

28-Aug-2019

Sources: CBN, Financial Market Dealers Association of Nigeria, NSE and Access Bank Economic Intelligence Group computation.

Date

The Nigerian economy advanced at a slower pace in Q2 2019 by 1.94% year-on-year (y-o-y) when compared to Q1 2019 (2.10%), according to the Nigeria Bureau of Statistics (NBS). This indicated a decline of 0.16% over the previous quarter. The oil sector posted a real growth rate of 5.15% (year-on-year) in Q2 2019, representing 9.10% points increase relative to the growth rate recorded in the corresponding quarter of 2018. It also indicated an increase of 6.61% points when compared to Q1 2019(revised). The non-oil sector grew by 1.64% in real terms during the reference quarter. This was 0.40% lower than recorded in the same quarter of 2018, and -0.83% lower than the first quarter of 2019. During the quarter, the sector was driven mainly by information and communication, mining and quarrying, agriculture, transportation and storage, as well as other services. In a separate development, data from the Nigeria Bureau of Statistics (NBS) revealed that total value of capital importation into Nigeria stood at $5.8 billion in the Q2 2019. This represents a decrease of 31.41% compared to Q1 2019 and 5.56% increase compared to the Q2 2018. The largest amount of capital importation by type was received through Portfolio investment, which accounted for 73.76% ($4.3bn) of total capital importation, followed by Other Investment, which accounted for 22.41% ($1.3bn) and Foreign Direct Investment (FDI), which accounted for 3.83% ($222.89m) in Q2 2019. Capital importation by banking dominated in Q2 2019 reaching $1.89bn of the total capital importation in Q2 2019. The United Kingdom emerged as the top source of capital investment in Nigeria in Q2 2019 with $3.13bn.

This accounted for 53.85% of the total capital inflow in Q2 2019. Lagos state emerged as the top destination of capital investment in Nigeria in Q2 2019 with $4.13bn and accounted for 71.09% of the total capital inflow in Q2 2019.

Stock Market

The Nigeria Stock Exchange suffered another week of loss on the back of selling pressure and seeming profit-taking. Foreign investors confidence was also shaken by the call to nationalize South African companies due to the xenophobia attacks happening in South Africa.

Accordingly, the All Share Index (ASI) declined 1.38% to 27,146.57 points from 27,525.81 points the preceding week. Market capitalization also fell by N180 billion to N13.21 trillion from N13.39 trillion the prior week. This week, we envisage that the market will remain

bearish amidst profit-taking and investors reshuffling their portfolios in anticipation of interim earnings reports of dividend-paying companies.

Money Market

The direction of money market rates trended downwards last week due to sustained liquidity seen in the market and net Open Market Operation (OMO) of about N414 billion. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates declined to 3.21% and 3.86% from 9.29% and 10.50% respectively the previous week. Call rates also dipped to 4.35% from 9.25% the prior week. Longer-tenured interbank rates, such as the 30-day Nigerian Interbank Offered rate (NIBOR) declined to 13.78% from 14% the previous week. This week, rates are expected to remain in single digits barring further OMO auctions by the central bank.

Foreign Exchange Market

The local unit saw an appreciation against the dollar across most major market segments for the week ended September 6th, 2019. The official window saw a slight appreciation as it ended N306.90/$, a 10 kobo gain from the prior week. Likewise, at the NAFEX window, the local unit saw a slight appreciation of 85 kobo to close at N362.08/$, while the parallel market remained unchanged at N360/$. The appreciation recorded in the NAFEX 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

The bond market was bearish this week driven by sell off as investors' appetite for bond remained low. Yields on the five-, tenand twenty- year debt papers closed higher at 14.46%, 14.25% and 14.40% from 14.37%, 14.16% and 14.23% respectively the previous week. The Access Bank Bond index decreased by 31.62 points or 1.01% to finish at 2,958.12 points from 2,989.74 points the previous week. This week, we expect a slightly more active market in the coming week given the incoming maturities.

Commodities

Oil prices rose marginally supported by betterthan-expected Chinese economic data and news that the People's Bank of China (PBoC) would soon introduce more bank reserve requirement (RRR) cuts to help stave off the ongoing economic headwinds. Nigeria's crude oil benchmark, Bonny light, edged up by 2.89% to $62.98 per barrel compared to $61.21 the prior week. Precious metals went in the opposite direction as they declined from preceding week high as risk sentiment improved after stronger-than-expected US economic data and hopes of a thaw in the USChina trade war. Gold dipped by 1.23%, settling at $1,506.63 per ounce, while silver settled at $18.15 per ounce, 1.2% lower than the prior week. This week, US-China trade talks may soon take a turn for the better after the Chinese Commerce Minister said that China will strive to achieve real progress with the US during high level meetings in October, thereby leading to a boost in oil prices. Precious metal prices are expected to decline as hopes of a resolution in the US-China trade war supports riskier assets.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Sept’19

Oct’19

363

362

363

Inflation Rate (%)

11.2

11.2

11.5

Crude Oil Price (US$/Barrel)

67

68

68

For enquiries, contact: Rotimi Peters (Team Lead, Economic Intelligence) (01) 2712123 rotimi.peters@accessbankplc.com

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Exchange Rate (Interbank) (N/$)

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Informal sector workers want to be involved in designing micro insurance, pension products Modestus Anaesoronye

I

nformal sector players including Traders and Artisans have asked operators in insurance and pension industry to work closely with them in designing their products so that providers can actually understand what their needs are.

They said that working with insurers and micro pension operators will enable providers come up with the kind of products that meet the need of consumers and encourage patronage.

“We want to key into the products of insurers and pensions, but we would be more at peace if the products consider helping our businesses in the area of funding and training so that we can be empowered in knowledge as well as capital to support our businesses, says Eric Ndubueze, one of the informal sector participant at the NAIPCO National Conference held in Lagos.

Ndubueze said a lot of the small business operators; particularly traders have interest in planning their retirement but do not know how to go about it.

“We will be better off if we can be educated by practitioners in the industries as we know truly that, this is the way to go to overcome old age poverty, he said.

Executives of the Federation of Informal Workers Organisation of Nigeria (FIWON) who were also present at the Seminar said coming up with any product policy that affects informal sector operators without carrying along the key beneficiaries would amount to waste of resources and time.

He said that, they need to work closely with regulators and operators in the pension industry, as well as micro insurance products to enable them understand their peculiarities.

According to them, micro

pension would not achieve its expected target without considering the flexibility of the informal sector environment.

They therefore called on the regulator to sit down with them for effective designing of the products and its eventual implementation.

For the National Pension Commission (PenCom), success of the Contributory Pension Scheme (CPS) which commenced 15-years ago have gone beyond value of pension assets, but more on the number of Nigerians protected under the scheme.

This singular vision is what is driving the Commission’s quest for increased penetration of the scheme across the states and local governments as well as its micro pension

scheme which targets to open up the informal sector market.

For the National Insurance Commission (NAICOM) as well, micro insurance was key in its agenda to deepen insurance penetration in Nigeria from 0.3 percent currently to something comparable to its position in Africa.

NAICOM had early last year given June 30, 2018 deadline to non-life insurance companies to unbundle microinsurance products for standalone license. At the moment, two stand alone applications have been approved, while quite a number are in the process of getting regulatory approval.

Low-income households, micro, small and medium enterprises are particularly vulnerable to risks, be they related to health, agriculture, property or death. These risks often carry heavy financial implications as individuals, businesses and households attempt to deal with them. Since very few of these groups have access to efficient and effective formal risk management and social protection mechanisms, recuperating losses and recovering from shock is at best difficult, and more often impossible.

NIA moves to help Nigerian employees plan for retirement Modestus Anaesoronye

C

ommitted to helping the populace plan effectively for retirement, the umbrella body of insurance companies, the Nigerian Insurers Association (NIA) is planning a workshop for workers in both the public and private institutions.

The workshop according to NIA will enlighten them on how to prepare for their future using available financial planning tools.

The two-day workshop, scheduled to hold in Lagos from September 17 to September 18 has as its theme,

“Preparing for tomorrow today,” and notable speakers had been lined up to address different issues on financial plans.

Yetunde Ilori, directorgeneral, NIA said insurance is a means of financial planning and a veritable means for workers to plan for their future.

She observed that many Nigerians did not have plans or prepare for their future after decades of work and this had its attendant consequences.

Ilori said it was cogent for workers to have a change of mind and do the right thing because if they were ready or not, their retirement would

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Yetunde Ilori

come later in life.

A statement from the NIA said the speakers at the workshop would discuss topics such as the importance and necessity of building economic back-ups.

According to the as-

sociation, transiting into retirement with only the prospect of pension income is hardly prudent and not recommended by pension retirement planning experts.

This session, it added, would explore the possible sources of retirement income and their limitations and present other options for a financially secure retirement.

The topic, “Achieving the retirement dream,” which would help workers to create actions and adopt a long-term view that are prerequisite for a dignified and comfortable retirement would be discussed.

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ON THE MONEY 5 Steps to a back-to-school season without stress

S

eptember is a very unique month for parents. It is the moment the reality of actualizing the dreams for the children comes bearing fangs as a new academic calendar begins.

That overwhelming stress that comes with the reality of meeting the financial demand for providing quality education.

The issue of parents’ default on school fees is a global conversation. In fact, Lebogang Montjane, the Executive Director of the Independent Schools Association of South Africa (ISASA) was compelled to write to parents on this issue through an opinion piece in South Africa’s Sunday Tribune Newspaper.

In the article, he argued that: “defaulting parents pose a very real sustainability risk for the independently-funded school, yet are quick to argue for the ‘rights of the child’ and blame the school, ironically, and not themselves, for ‘denying the child an education”. Maybe Mr. Montjane has a point, but parents just want to go out of their way to give their children the best education possible.

That said, we have identified five smarter financial-management approaches for parents to proactively embrace on this issue.

1. Choose a school you can afford- Scouting for schools is never an easy task. The society has made us believe that the most expensive schools are the best schools hence the need to go overboard every school year.

Before making any savings plan for the school year, ensure that you are not biting more than you can chew. Find a good school that fits your earning and enroll your child there.

2. Have a budget- After you must have chosen the best school for your child, it’s most important that you set a working budget for all your expenses afterward. Prioritize based on the needed expenses for survival, and every other thing should follow suit. In other words, your arrangement should be in the order of your critical needs and not the good-to-haves. This way, you are making it a lot

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more comfortable for you to spend money on your child’s education and other important personal and family needs.

3. Avoid impulse buying- The most practical way of controlling impulse buying is budgeting. You must have set out the cost for miscellaneous in your budget, Now stick to it.

You might think some school supplies are extremely cheap and they would not even move an inch from your wallet but remember that if it’s not in your budget, don’t buy it. Learn to keep and reuse little supplies from previous years like pencils, backpacks, lunch bags and so on, as long as they are in good condition.

4. Build an emergency fund- It’s important that whilst saving, we should also bear in mind the need to save for an emergency. Your child could catch a fever just a few weeks before school resumes or even in the middle of the term, keep funds aside for it so you don’t end up spending the money you have set aside for school.

5. Buy education insurance- Buying education insurance is perhaps the best way to build funds for your child’s future education project. Education Insurance products also come with the added advantage of providing protection for the life of the policyholder. In other words, should any of life’s extreme incidences occur – such as death or critical injuries the insurer would ensure your child’s education continues. It is important that your child’s future is secured.

For more financial education like this, you can call Old Mutual on 01 271 9393 to arrange a free financial education session for your team, or on a one-on-one basis. Our financial advisers can help you with the right kind of financial and insurance advice. For more information, visit your nearest Old Mutual branch or go to www.oldmutual.com.ng or follow our social media pages @ oldmutualng on Facebook and Instagram and @oldmutual_ng on Twitter. We look forward to helping you with your money matters.

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Nigeria’s agricultural insurance sector offers attractive growth prospect – REGIC MD Benjamin Agili, managing director/CEO, Royal Exchange General Insurance Company Limited (REGIC) in this interview with one of its Investment Partners, BlueOchard shares his thought on inroad into agric insurance and what REGIC plans to do in that space. Modestus Anaesoronye reports.

R

What is REGIC’s story? oyal Exchange General Insurance Company Limited (REGIC) is a subsidiary of Royal Exchange Plc, which was established in 1918 and is Nigeria’s first insurance company.

Our mission is to attain leadership in the financial sector and provide the highest quality services in accordance with ethical practices and norms to our clients while ensuring adequate returns to our stakeholders. Our clients and our country face a range of challenges from a growing population to the threats of climate change. As a company we want to thrive with the country and our clients by supporting them. We aim to help secure the livelihoods and property of our clients and create a positive impact on their lives and communities.

Why does REGIC focus on agricultural insurance and what is your main target group?

For us, agriculture coverage ticks all the right boxes and can help the company unlock doors to new clientele and market reach in a way that other commercial lines of coverage cannot. We are specifically focusing on the small holder segment, which currently faces risks from climate change consequences to which our insurance packages offer solutions.

Agriculture is one of the largest economic sectors in Nigeria. It accounts for over 20 percent of GDP and 60 percent of total employment. Now, 80 percent of agricultural production is handled by small holder or subsistence farmers that engage largely in rain-fed farming.

This sector of the agrarian population is particularly vulnerable to the effects of climate change. Climate change poses a significant threat to the livelihood of farmers, their household, and the overall agricultural sector. The overarching implication is that the food security and productivity of Nigeria’s growing population and Africa’s most populous nation are under threat.

Currently, about 30 million smallholder farmers operate in rural areas.

With limited or no access to agricultural insurance services they have no means to protect themselves against the economic impact of crop shortfalls or harvest losses triggered by climate risks such as droughts, floods and heat waves. With the largest population in Africa and one of the lowest insurance penetration levels within the continent, Nigeria’s agricultural insurance sector offers attractive growth prospects along with the prospect of adding real impact value across underserved communities.

Lastly, with our increased activities in the agriculture sector, we contribute to supporting recent policy initiatives to

Benjamin Agili

transform Nigeria’s economy and diversify it away from the oil sector.

REGIC recently received regulatory approval for distribution of weather index insurance products, specifically targeting small scale farmers. How does weather index insurance work?

‘

Our goal is to insure over one million small-holder farmers by the year 2025, fostering insurance inclusion and financial empowerment to support this vulnerable segment of the population

Weather Index Insurance (WII) is a non-indemnity based product, which does not include physical inspection of farms as traditional insurance cover demands. In that sense, it is a much more efficient product to underwrite and distribute, and the claims process as well is far more streamlined than with a more conventional agricultural insurance product. Our WII product provides protection to farmers against production losses or crop shortfall occurring at the crop germination, flowering and maturity phases.

For the crop germination and maturity phases, claim payouts are based on values obtained from pre-determined weather (rainfall/temperature/natural disaster) triggers and parameters as laid out in our insurance policy. Claim payouts are also made to the farmer at any of the crop growth stages once the set-out weather triggers are breached due to adverse climate changes in the farming location.

We additionally offer other variants of weather index products to further enhance our service proposition to our small holder farmers. These include Area-Yield Index Insurance (AYII), Normalized Difference Vegetation Index Insurance (NDVI) and Hybrid Index Insurance which combines features of different products.

What is the benefit of your products for smallholder farmers in Nigeria?

As noted, we provide economic protection, now largely unavailable, for the

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adverse effects of climate change and weather conditions. Having the right coverage could mean the difference between financial ruin and the ability to continue planting in the next, hopefully better, season.

Our agricultural insurance also plays a role in de-risking agribusinesses, making them more attractive for formal financial service players and investors such as micro and commercial banks, social impact investment firms or private equity firms.

What is your biggest USP that differentiates REGIC from competitors?

Our primary differentiating factor is our workforce. We invest in our people and have committed significant resources towards training our staff to deliver best-in-type products and exceptional customer-experience to our clientele.

We also understand that the best people should have the best tools, so we have invested heavily in ag-tech digital resources to connect virtually with our agricultural small-holder farmers and to provide business intelligence and agribusiness risk portfolio management capabilities to our business partners – all with the purpose of growing a robust agribusiness finance and insurance inclusive ecosystem.

How are BlueOrchard and the InsuResilience Investment Fund helping your growth?

Our goal is to insure over one million small-holder farmers by the year 2025, fostering insurance inclusion and financial empowerment to support this vulnerable segment of the population.

BlueOrchard’s and the InsuResilience Investment Fund’s (IIF) global network of relationships with development institutions, technical experts and key players in the insurance and agricultural sectors will be of great support in achieving this goal. Furthermore, BlueOrchard and IIF will bring value through the Fund’s technical assistance and premium support facility which we believe will help us in meeting our financial inclusion targets by enabling us to develop new products and create alternative channels of distribution to reach our current clients and reach people who have traditionally been excluded from the insurance market.

What are your next milestones in terms of growth? And what is your vision for the company for the next years in terms of size and impact?

Nigeria has a 200 million strong, young population that needs to be insured and needs to better understand the role of the insurance marketplace in the economy. Of that huge population of young Nigerians, 60 percent are active in the agricultural space. Our long term growth strategy is to service this client segment and to grow our company by empowering their success.

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INTERVIEW Implementation key to achieving policy objectives -Abiodun Sanusi Nigeria is at a crucial point and regulators in different sectors have recently come up with policies aimed at revitalizing the economy. In this interview, BusinessDay journalist, Bala Augie, speaks with Abiodun Sanusi, Head of Investment Banking division, Coronation Merchant Bank, on the possible impact of these policies, exploring growth options for Africa’s biggest economy Nigeria’s second-quarter GDP data published by the National Bureau of Statistic surprised to the downside, what is your take on the country’s performance in the period? s we are all aware the elections took place in the first quarter while the president was sworn on May 29.

In an election year, economic activities are usually slow because politicians busy themselves with campaigns to get elected into offices.

So, it is not surprising GDP numbers was below failed to impress.

Generally, the economy has not grown the way a lot of people expected, especially since we exited the recession in 2016.

The population growth is about 3 percent per annum and at the minimum, we need to grow at that rate so that we record growth at a per capita income basis.

Although we are growing, we are not growing as fast as our population growth and that is what we have witnessed in the last two years. What that means is government policies are not impacting on the economy, but we have seen a lot of progress being made.

Now that this government has settled down, ministers have been assigned portfolios, and the budget about to be approved by the Senate, we should see some growth in the economy by 2020.

However, this can only happen if the government implements structural reforms that will help propel economic growth.

Agriculture, services and manufacturing were the major drags to activity in the non-oil economy, how can policymakers invigorate these industries?

If you take a cursory examination of the Gross Domestic Product (GDP) figures, you will find that the Agriculture sector contributed 21.10 percent to the economy, oil and gas, 22.70 percent; and Information and Communication, 63.20 percent.

I think that some private sector friendly policies have to be undertaken, especially in the area of infrastructure. The Federal Government should invest more in the power sector because it is the catalyst for industrialization.

The power sector hasn’t lived up to expectation after its privatization in 2014 that gave birth to the distribution and generating companies.

Power generation has to improve so that manufacturers can produce more at a cost.

The issue of cost-reflective tariffs should be resolved to help attract foreign investors. Once there is a remarkable improvement in electricity supply, then there will be acceleration

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Abiodun Sanusi

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a stance.

If l am falling short of loans to deposit ratio (as we can see with most Tier 1 banks), then I have two options.

First, l will increase my loans by converting fixed income securities and treasury bills. What that means is that you start investing in higheryielding risk assets. Consequently, we could see a higher cost of risks and rising Non-performing Loans (NPLs) on the back of the new measure amid a tighter framework from the banks.

The other strategy is to shade deposit. Some of the banks have started shading deposit by reducing the deposit rates that they give to institutional investors like pension funds and corporates.

Because banks want to start lending, they have started restructuring some corporate loans rather than writing them off. And this is good for the economy.

As we all know, during the recession, manufacturers groaned under high-interest rates that hindered

A lot of our team members were in the middle of the banking sector consolidation.

That means we are going to bring the experience and knowledge we learned during the banking consolidation to bear to ensure that the insurance industry consolidation is a success www.businessday.ng

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economic growth.

The protracted insecurities across the country have to be addressed, especially the herders- farmers clash.

These bedlams are undermining food production and have remained a drag on the economy.

We need to see the kind of revolution that took place in the telecommunications industry has to happen in the power sector.

The Central Bank of Nigeria (CBN) has mandated that Deposit Money Banks (DMB) to maintain a minimum Loan to Deposit Ratio (LDR) of 60 percent, do you see the new rules spur lending to the economy?

The high-interest rate regime has prevented banks from lending to the real sector. Lenders prefer to pack their money in risk-free investment instead of extending credit to the real sector.

The impact of the new rule is already being felt as banks now want to give out loans, but they have to take

them from paying back money borrowed from financial institutions.

And that affected their profitability.

Do you think foreign investors will react to the recapitalization amid a bearish market?

I see a situation where insurance companies will have to raise capital through rights issue or private placement. They may also consider mergers and acquisitions (M&A).

Our take is that M&A will dominant more than capital raising and we see insurance players reduce to 25 from 59.

If M&A dominates the space, then we will see more Initial Public Offering (IPO) and follow up options in the capital markets as we saw during the banking sector consolidation.

Insurance consolidation is going to have a positive impact on the capital market. Once stronger players with solid working capital and capital base emerge from the exercise, then the industry will be attractive to investors.

How is Coronation Merchant Bank strategizing so that to take advantage of the opportunities that will come out of the recapitalization?

Coronation Merchant Bank (CMB) is a full-fledged investment bank. We offer both capital raising, private placement, and M&A service.

The insurance recapitalisation gives us immense opportunities to invigorate an industry that has been operating below the curve over the years. That is one of the major themes of the insurance sector report titled “from lagoon to the ocean” The recapitalisation exercise as an opportunity for us to advise a lot of insurers on issues relating to business combinations, either through mergers, acquisitions, private placements, or a reverse takeover.

We have started working with some companies with regards to the aforementioned strategies. So that by the time consolidation starts, we will be well-positioned to be preferred investment bank to offer advisory service that will raise the desired equity capital that will enable them to meet their investment needs and scale up operations.

A lot of our team members were in the middle of the banking sector consolidation. That means we are going to bring the experience and knowledge we learned during the banking consolidation to bear to ensure that the insurance industry consolidation is a success.

What is your take on government ban on forex for the importation of food?

For me, there are many ways to achieve a policy objective but what matters most is the implementation of those policies. For example, import substitution through investment underpinned backward integration strategy in the cement industry. @Businessdayng

The government worked with key industry players and offered a lot of palliatives, and a lot of investment support: tax waivers were given to increase investment in that sector.

The policy yielded fruit as Nigeria is now a net exporter of cement.

The federal government ban on forex for food importation has to be supported with investment as well; 0therwise it could lead to short term scarcity and that may worsen the situation.

I think providing investment palliative for the food and Agriculture industry as we did for cement will unlock the potentials in the economy and make Nigeria self-sufficient in food.

Your bank grew earnings amid a low yield environment and difficult business landscape; can you share with us some of the strategies that helped underpin earnings?

We were able to deepen our coverage, and we have been able to bring attract more clientele. The growth in earnings has been largely driven by volumes, as we signed in more alpha corporates.

We have started extending our coverage in many to the Agricultural, manufacturing, and industrial space.

We have banked a lot of customers in these sectors. We have also increased our fee-based income in terms of increasing our scope in supporting clients in the Information and Technology space.

Can you share with your risk management strategy?

Over the last four year, we still have zero Non-Performing Loans (NPLs). The reason is that as a merchant bank it became crystal clears to us that we do not have the latitude to create NPLs like the big tier 1 banks.

Also, it is a function of our net interest margin; our net interest margin is not as high as the big banks’. We are only allowed by regulations to deal with HNI and corporates.

For us to continuously be seen and be relevant to our counterparties, risk management is at the top of our list. So, l will say that risk management focuses on moderate in the sense that we spend moderate time in accessing our risk before extending our loans.

There is a lot of in-depth analysis that is done to ensure all the risk is fully mitigated.

Because of our good asset quality, Augustus and Co assigned us A+ credit ratings. And that is very critical for our survival and existence.

We are a specialized investment bank; we cannot be a bank to everybody. We are bank to a few selected people. Those selected clients and those few selected counterparties consider risk rating. We provide specialized service and that is why we have been able to merge core investment banking to corporate coverage.

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INTERVIEW ‘Multiplication of regulators whether federal or state government agencies significantly increase costs’ In this interview with BusinessDay, CLEMENT ISONG, CEO of the Major Oil Marketers trade group, MOMAN offers insight into the group’s position on petrol subsidy and how the sector is coping with the crushing effects of the policy

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he Downstream Oil Industry appears to be against fuel subsidies even though the government and a large part of the population appear to favour its continuance. Why is the Oil Industry against it?

I believe there are two issues here.

The first is the fact that there is a subsidy at all in this sector of the economy which Nigerians have differing opinions on. As Nigerians some of us support the argument that the subsidy could be used to fund investments in human development such as agriculture, education, healthcare and infrastructural development.

Investments that will generate more employment opportunities and selfsufficiency; that will multiply our GDP exponentially.

If we believe those things are important enough, if we believe that as a generation, we are obliged to prepare the economy and our people for the challenges they are facing and will face, then we must find the funds and willpower to prepare them for it.

There will always be those that prefer to consume what they have today, then there are those that say invest to make things better. The job of politicians is to lead the arguments one way or the other and deliver what the people want.

As stakeholders in this society, many of us believe we should invest in Human Development now!

The second and more direct issue for the Downstream Oil Industry is the impact this subsidy regime or perhaps I should say, “the methodology of implementation” of this subsidy regime has had and continues to have on our industry.

I learnt a term a few weeks ago and at once it struck me as identifying the real challenge that the Downstream Industry have with subsidies; the phrase is “the Cobra effect”.

“The term cobra effect originated in an anecdote, set at the time of British rule of colonial India. The British government was concerned about the number of venomous cobra snakes in Delhi. The government therefore offered a bounty for every dead cobra.

Initially this was a successful strategy as large numbers of snakes were killed for the reward. Eventually, however, enterprising people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped, causing the cobra breeders to set the

CLEMENT ISONG

now-worthless snakes free. As a result, the wild cobra population further increased. The apparent solution for the problem made the situation even worse” I copied this directly from Wikipedia.

Need I say more?

The methodology of implementation of the subsidy encourages rent seeking and has deprived my industry of an efficient way of recovering its costs as the price template managed

by PPPRA has not been subject to review to capture yearly inflation since 2016 and yet costs continue to go up.

There is a monopoly in importation of PMS by NNPC and any economist or behavioral scientist will tell you the obvious risks and dangers in having a monopoly or even a market dominant player. Therefore, anti-trust and anticompetition regulations and agencies exist to prevent a monopoly situation and governments break them up wherever they are found. The private sector in Nigeria has been deprived of participating in this part of the supply chain, not directly by regulation, but by the unintended consequence of a policy implementation decision.

To add to that, the delay in payment of already incurred subsidies led to many practitioners going under, loss of jobs and seizures by AMCON: the Cobra effect and/or unintended consequences. Many players have resorted to “self-help” or sharp practices to either exploit the current system or just to stay afloat; the Cobra effect/

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unintended consequences.

Finally, the absence of adequate margins, caused by the low and unmoving pump price has curbed investments in innovation, facilities infrastructure upgrades and meeting international HSEQ evolution and standards; again, the Cobra Effect/ unintended consequences.

So, the problem may not necessarily be with the fact that there is a subsidy but with its mode of implementation?

If we decide as a nation that we will continue the subsidy, despite the opportunity costs, then so be it. We must then go further to interrogate how and where to situate the subsidy and set up mechanisms to track and monitor the cost to the country as well as mitigate the negative impact. There are many implementation models we could follow to benefit from experiences of other countries who still have price caps but have made the process more transparent and accountable to the country. What we must not expect is a business owner to bear the costs of the subsidy because you are killing his business and putting his employees out of work. I just had a call this morning from a gantry foreman in a private independent depot complaining that AMCON is taking over his facility and asking for help as he is looking for work. This is very real. We must not turn a blind eye to fires and explosions from product carrying pipelines and trucks where scores of our kinsmen

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are killed nor can we avoid insisting that underground water and soil must be protected against pollution.

We must do the investments necessary to optimize our supply chain whether we are referring to bigger storage tanks or deeper port draughts or well-maintained pipelines. Finally, we must invest in the technology to track volumes and eliminate losses and theft. Many economists will tell you that competition, meaning price competition is the best way to seek efficiencies and improve customer service. We are in dire need of these efficiencies as our operational costs in the country are too high. We also desperately need to streamline regulatory oversight. Duplication or in some cases, multiplication of regulators whether federal or state government agencies significantly increase costs of operations especially when the objective for many of the state agencies is increasing Internally Generated Revenue. Passing regulation with differing standards and mitigation measures also cause confusion and increases costs in the industry. For these reasons, we are strongly supporting the passing of the Petroleum Industry Governance Bill so that we can have some clarity on who supervises this industry and we can work towards better professionalism.

Are you hopeful for the future then?

Yes of course! We are Nigerians. Ever optimistic! Ever so resourceful! Ever resilient! I am very hopeful that we will get it right this time. Once government negotiates with Nigerians and can arrive at acceptable mitigating palliatives to ease the pain of any fuel price adjustments, we can begin to focus on building the industry to support the economy and the social infrastructure of our country. The objectives in the National Petroleum Policy passed by this government are clear and we all adhere to them, principally, that Nigeria should become the Refining and Trading Hub in Africa of refined petroleum products, beneficiating our crude.

This will be a sound basis for building and benefiting from AfCFTA and developing the human potential of millions of Nigerians. What remains is for us to come together and with these objectives in mind, structure our pricing and distribution policies in such a way as to achieve our goals, while mitigating the cobra effects and unintended consequences.

@Businessdayng

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Bright Jaja: Bridging Nigeria’s skills gaps JOSEPHINE OKOJIE

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any entrep re n e u r s are driven by a passion to solve societal problems. For Bright Jaja, chief operating officer and founder of iCreate Africa, his driving force is to reduce Nigeria’s high youth unemployment rate.

Through his annual skills competition, Bright established a platform that identifies creative youths and empowers them with the relevant entrepreneurial skills, mentorship and finance to kick-start their businesses.

Bright began iCreate Africa in 2017 with a big vision of re-engineering the employment ecosystem on the continent.

“In Nigeria, unemployment is currently over 23 percent and every year the institutions graduate about 260,000 students without the necessary skills in demand to gain employment,” the young entrepreneur says.

“I conducted a research and I discovered there was a huge skills gap in the country, while about 30 million jobs are actually available in technical skill trades,” he explains.

“We are determined to solve this problem at iCreate Africa and what we are doing first is to change societal perception affecting technical skill professions,” he notes.

He business is promoting skills and driving investments in technical and vocational trainings through

public – private partnerships.

The young entrepreneur says that he never needed money to start but relevant skills, integrity, passion and faith in God. “Money is a commodity that you exchange for value.

Adding value to yourself through any means makes

you worthy, and you can exchange that for money,” he says.

The business currently has five full-time employees, four part-time staff members and over one thousand volunteers across the country.

He says his business has grown since starting and has empowered lots of youths to start their businesses.

In evaluating the current unemployment situation in the country, Bright says that the situation is extremely critical and requires a state of emergency.

He adds that governments at all levels should embrace new ideas in creating jobs for youths, while involving them in the conversation.

“The government should embrace new ideas and involve young people in the conversation because they understand where it hurts and how to address the issue,” he says.

Bright, however, admits that the problem in the country is not unemployment but lack of skills required by the labour market.

According to him, ICreate Africa is empowering young people with necessary skills required to solve the problem while preparing the next generation for the 21st century skills.

He says that iCreate Africa plans to create five million jobs within in the next four years.

He notes that his business trains youths on artificial intelligence, block chain technology, drone, nanotechnology and digital farming, among others, to equip them with the skills for the future work place.

“We achieve this through our various projects in partnership with international partners focused on capacity-building and human capital development,” he says.

“Africa is projected to provide 60 percent of global workforce by 2030 and Nigeria will be ready to take advantage of that opportunity,” he adds.

On the company’s longrun plans, he says the business wants to scale across Africa and ensure participation of key stakeholders and youths across the continent in its annual iCreate Skills Competition.

He identifies lack of government support for the initiative as the major challenge confronting his business.

“Presently, Nigeria is not part of the World Skills member countries, the biggest organisation that promotes skills excellence in the world— with 85 mem-

ber countries including China, Japan, Russia, USA and most European countries,” he says.

“Nigeria joining the World Skills will unlock more opportunities to partner with companies that will assist in upgrading our TVET institutions and create an opportunity for young artisans to join the global skills community,” he explains.

He urges the federal, state and local governments to embrace new strategies and drive more educational investments in the country.

He also calls for the adoption of the Chinese education model that focuses on skills development to revive the educational system and support organisations working towards solving the problems.

Bright was recently listed as one of the Forbes Africa 120 game changers in 2019.

He was also recognised by Reformers Africa recently.

In his advice to other entrepreneurs, he says, “Be the best at whatever you decide to do. It is okay to fail and fall, but do not give up.

“Always show up for your dreams because it is never about you but the problems you are solving and the lives you are changing. Stay positive always and put God first,” he adds.

How ICRC, Elumelu empowers Nigerians in conflict-prone zones Seddy Makeover hosts awards for beauty, cosmetics entrepreneurs ODINAKA ANUDU

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he International Committee of the Red Cross (ICRC) and the Tony Elumelu Foundation (TEF) have an arrangement to create economic opportunities for Nigerians living in crisis areas, especially the North East and Niger Delta regions.

In 2018, they signed a memorandum of understanding to holistically address, through innovative interventions, the economic plight of communities affected by armed conflict or violence.

Speaking in Lagos at the Lagos Chamber of Commerce and Industry (LCCI)organised forum entitled ‘Human Partnerships and Social Investment in Africa’, Tony Elumelu, founder of TEF, said he has always believed that giving in Africa should be in the perspective of making people self-reliant.

Elumelu said they started with $1 million, which would cover 200 beneficiaries.

“We need to make sure that income per capita is high,” he said. “And we want to make sure we get more people involved,” he added.

According to the ICRC, 22,000 Nigerians are missing since Boko Haram crisis began in 2009— the highest number of missing persons registered with the organisation in any country. Sixty percent of the missing people are children, according to Peter Maurer, ICRC president.

Maurer said displaced people always want to do something even at IDP camps, adding that it is the society’s duty to help them survive.

“They need income-generating activities,” he said.

“That’s why we have partnership with Tony Elumelu Foundation,” he added, stressing the need to make capital available for them and securitise their investments.

The Boko Haram insurgency has ravaged Nigeria since 2009. A total of 2.2 million were in IDP camps as of December 2018, according to the Internal Displacement www.businessday.ng

Monitoring Centre (IDMC).

Businesses from farms to factories have been hard bit, with many relocating from the North East.

“It is a self-enlightened interest of the private sector to get involved,” Babatunde Paul Ruwase, president of the LCCI, said.

“As businesses, we need an environment that is socially and economically stable. We also need the market. All these will not happen in the midst of humanitarian crisis,”Ruwase said.

He said commitment to fixing humanitarian problems and the prosperity of businesses are mutually supportive, adding that businesses should work towards a framework for sustainable partnership between the private sector and the humanitarian sector.

Aderemi Adebowale, special adviser to Lagos State governor on civic engagement, said government cannot handle human crisis alone, pointing out more can be achieved through joint action.

JOSEPHINE OKOJIE

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e d d y Ma k e ov e r, a leading Lagos-based make-up and hair stylist company, is set to host the 2019 Africa Beauty Summit &Awards to recognise and celebrate entrepreneurs doing amazing things in the continent’s beauty industry.

The award aims to promote beauty businesses on the continent by creating a link with African entrepreneurs and foreign investors.

Temitope Sedi, an entrepreneur, business owner and a passionate business leader, is the brain behind the Seddy Makeover Summit & Awards.

According to her, the award will create for Nigeria and African beauty industry a working system in 10 years, increasing revenue and creating a platform to enable local brands reach global market.

She noted that the award categories will be thrown

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open to the public to nominate key players who will be nominees for the awards.

The categories are entertainment, fashion, film and sport.

Sedi stated that all the nominees will be present at the gala night taking place at Oriental Hotel on the 22nd September, 2019 with investors and industry actors as well.

The winners will be selected through an open voting website called africabeautysummitandaward. com After the awards, beauty and fashion entrepreneurs will gather again in July 2020 @Businessdayng

at Kigali, Rwanda, to chart a path forward for the growth of the African beauty and cosmetics industry.

The summit will converge investors, stakeholders and key players in the beauty industry from over Africa to celebrate and explore innovative ways to improve the industry.

The cosmetics industry in sub-Saharan Africa is expected to grow over the next two years. It was estimated at €10 billion in 2017 and expected to double when the continent’s total population, the fastest growing in the world, surpasses 1.

2 billion.

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Chidiebere Akpojotor: Changing Nigeria’s fashion narrative ODINAKA ANUDU

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hidiebere Akpojotor is a graduate of Business Administration from the University of Lagos. She is the chief executive officer of Chiky Fashions, a Lagos-based fashion and designs outfit.

Since 2013 when she started, she has been able to raise a huge number of entrepreneurs. She taught them the nittygritty of succeeding in fashion business in the 21st century.

Before 2013, Akpojotor’s passion for fashion only existed in her head. But she decided to turn the idea into business after being tired of job search.

After a roadside training, she attended several professional trainings to scale her skills.

“I started my business in 2013, and after a while, I found out that I was doing so many things,” she says.

“I needed to hire more hands, but they were too expensive. So, I thought I needed more understanding of this business. I was able to narrow down the business in

Chidiebere Akpojotor

2018 and carve a niche for myself,” she recalls.

She started training others who needed to learn fashion. Since then, she has been able to tutor would-be entrepreneurs on fashion for three, six and eight months.

The entrepreneur says she now concentrates on training to raise more entrepreneurs.

“But aside from training, we also make clothes

for people who run boutique houses; we make designs for people and our designs look like what they regularly go to Senegalese to buy. These are special designs and they are not just what you get from anywhere,” she boasts.

Akpojotor is lucky as her husband is a graphic artist who creates special patterns for her clients— patterns that are exclu-

Eventi to host Lagos Cocktail Week for entrepreneurs, bar attendants JOSEPHINE OKOJIE

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venti, a cocktail design and consulting firm, is set to host another edition of its annual Lagos Cocktail Week for entrepreneurs, bar attendants and cocktail enthusiasts.

The Lagos Cocktail Week is a festival that celebrates the unique cocktail culture in Nigeria by bringing players in the sector together to interact and discuss on possible ways to address issues limiting the industry.

The annual event with the theme ‘Changing the African Cocktail Narrative Through Collaboration and Creativity’ is aimed at ensuring the recognition of cocktail business as an integral aspect of the Nigerian food and beverage industry and also to bridge some of the gaps in the subsector.

“We noticed there is a

huge gap in the cocktail industry, so the best way to fill this gap is through the Lagos Cocktail Week for bar attendants, entrepreneurs and interested personalities all over Nigeria to be trained by industry professionals,” Lara Rawa, CEO, Eventi Cocktail, said at a press briefing.

“This year, we are making our conference more educative with several seminars and workshops with practical sessions for participants,” Rawa said.

She stated that Lagos was chosen as the location for the event because it is the commercial hub of the country and has so many bars where cocktail is being served to customers. She noted that with time it will be hosted in other states of the country.

“There is going to be a cocktail village, seminar and workshop. The workshop will commence in the morning and the cocktail village www.businessday.ng

will be open to consumers from 4pm on both days and there will lots of interaction and networking,” she further said.

According to her, the twoday event will have training sessions for start-ups that wants to venture into the cocktail business.

These start-ups will be trained on business management, human resource and skills in providing quality services to clients, she said.

The event is schedule to take place on 16th and 17th October, 2019 at the Federal Place Hotel, Victoria Island.

This year’s event will be sponsored by Fayrouz, Johnnie Walker, Sky vodka and Smirnoff among others.

In addition, there will be a competition for bar attendance where they will be required to showcase their skills. The most creative style will emerge as the Face of Cocktail 2019.

sively owned by her.

“So, I make such beautiful kaftans and all that.

Those are the jobs and contracts that we like collecting right now,” she says.

Her space is small, but she is planning to expand to accommodate more young people who are asking to learn fashion.

“Right now, finance is my major problem,” she admits.

“I have seen places that I can use but they are very expensive,” she says.

She hopes to get a grant thatwillenablehertoexpand and train hundreds of students coming out of school.

The entrepreneur is good at making beddings like duvet and can design bed sheets with local ‘Ankara’.

She believes that N5 million can enable her to expand her portfolio.

She is proud that her former students are doing exploits in the fashion and designs industry.

“Most of them are even richer than I am and they are really putting a lot of things out there and they do them in great styles,” she notes, adding that some of them also run fashion shows abroad.

The Enugu State-born

fashion designer says that the business has been good since she started.

“I started with just a machine and right now, I have seven machines (manual), two industrial machines, interlocking machines and three mannequins and show glasses,” she discloses.

Like most entrepreneurs, power is her biggest challenge.

“Power has been my greatest challenge. I run my generator almost every day,” she says.

Like most young entrepreneurs, Akpojotor looks at international designs and replicates them here.

“I look at West African countries because I know we have colours in Africa.

You cannot compare our Ankara fabrics, the ‘Adires’ of this world with any other fabrics anywhere,” she notes.

“The last Lagos trade fare gave me an opportunity to have costumers from other countries, because when they walked in wanting to buy other stuffs, they saw the designs I made with jeans and Ankara and they loved them. We called the designs ‘Jankara’ and we had the sizes for children. A woman among them said, “Madam, I

have white men here. Can you make the designs for them, and how many days can I get them?’ I asked her to give me three days and within three days, they were ready. One of them wore it and refused to remove it,” she testifies.

She says there is so much money in the fashion industry, which is yet to be scratched.

She says though there are lots of people in the industry, they are still not enough.

“I am among the people producing fashion designers. We are still not enough because many times, my hands are full.”

For her, the charges in the industry are moderate—not low or high.

Her advice to younger people is to make use of their time judiciously.

“Make use of the time you have right now and get skills, especially in fashion designs, because if there’s anything that is important in life aside feeding and shelter, it is clothing.

“People say they do not have money, but they are well-dressed every day. So, I will advise them to come into the fashion world and learn how to make clothes and enjoy the proceeds,” she says.

Feed Tonight Foundation begins entrepreneurship programme with N1m seed fund

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he need to continually impact on the society positively and in demonstration of its commitment as a brand and business to live a life of purpose, Culture Communications Limited, a wholly Nigerian marketing communications firm, has launched Feed Tonight Foundation with a view to ensuring that no one within its areas of influence goes to bed without having something to eat.

The foundation recently created Feed Tonight Foundation’s Entrepreneurship program (FTF Entrepreneurship Programme) that will give out N1,000,000 to any start-up or idea that requires seed fund to succeed. Speaking at the launch of this initiative, Yomi Benson, managing director and CEO of the firm,

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said the contest is open to males and females within Nigeria, irrespective of educational background or ethnicity. Participation and opportunity to win would be easy but the applicants must demonstrate willingness and passion to succeed.

The FTF Entrepreneurship Program will be an annual four-week event that will see one individual emerge as the winner of the prize money (N1 million), as interested individuals are to submit their business proposals or ideas through dedicated online platforms within a period of two weeks. The proposals would be screened and top ten ideas shortlisted for final pitching session, while a day will be dedicated for the pitching session after which a winner will emerge same day. The panellists @Businessdayng

for the final pitching session will be made up of distinguished Nigerians across various sectors of the economy who have distinguished themselves in management of business. It will be added value if you already have a business running. For you to be part of this just go to www.feedtonight.org to register and submit your proposals. Come October 2019 the winner would be announced, and fund transferred easily into the winners account.

In the last eight months, the foundation has fed over 5,000 people, with the goal of giving hope and putting smiles on the faces of the hungry, believing that no one within its areas of influence would go to bed without having something to eat.

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Monday 16 September 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Why companies are forming cybersecurity alliances DANIEL DOBRYGOWSKI

W

hen it comes to cybersecurity and cyberattacks, most governments have spent much more time increasing their offensive capabilities than protecting companies and individuals. But the advent of cyber-physical systems and the internet of things, along with the increasing sophistication of bad actors, has made cyberattacks issues of human safety.

And companies have largely been left to fend for themselves.

That’s why, over the last few years, tech-

focused companies have begun entering into cybersecurity alliances with one another.

Some of these groups (operational alliances) are mainly practical, sharing intelligence or

technical data. Others (normative alliances) are explicitly aimed at changing the ways companies deal with cybersecurity vulnerabilities and renegotiating the social contract between

states and their citizens.

The operational alliances are built around small groups of companies. Their exchanges of information about cyberattacks and threats try to raise the collective

level of cybersecurity, shape overall security practices and speed the adoption of security technologies. The normative alliances make explicit calls for digital peace, government support for companies under attack, and cooperation to limit the use of private systems and networks against citizens.

Yet while virtually every company supports peace, it may not make sense for every company to join one of these alliances. And of course, not every company is so systemically important that it needs to take a position on the geopolitics of cybersecurity. Ultimately, it comes down to risk tolerance and ca-

pacity.

Nations continue to be the ultimate protectors of their citizens.

But civil society and companies are also important as the drivers of human rights and economic prosperity.

What’s needed now is cooperation on a larger scale, broader sets of allies working together to build trust and share responsibility, to protect the increasing numbers of citizens who rely on digital networks to survive and thrive.

(Daniel Dobrygowski is the head of governance and policy for the World Economic Forum’s Center for Cybersecurity.)

A study of 597 logos shows which kind is most effective JONATHAN LUFFARELLI AND MUDRA MUKESH

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ogo design choices might seem inconsequential to some. But a well-designed logo can offer substantial benefits to brands. A logo’s design characteristics can considerably affect consumer behavior and brand performance.

A descriptive logo includes textual or visual design elements that clearly communicate the type of product or service a brand is marketing. For instance, the logo of Burger King and that of the New York Islanders (a sports franchise) are descriptive.

Conversely, the logos of McDonald’s and the Minnesota Wild (another sports franchise) are nondescriptive.

The question of whether to use a descriptive or a nondescriptive logo often arises during

design meetings. As our research demonstrates, descriptive logos more favorably affect consumers’ brand perceptions and are more likely to improve brand performance.

We compared the

effects of having a descriptive logo for brands that are familiar and unfamiliar to consumers. We observed that although having a descriptive logo had a positive effect on brand equity for both familiar

and unfamiliar brands, the magnitude of this positive effect was much smaller for the familiar brands.

If you are considering creating or modifying a logo, our findings suggest you might want to include at least one textual and/or visual design element that is indicative of the type of product or service your company offers.

If, however, you work for a brand that markets a product or service that can easily bring to mind negative concepts, a nondescriptive logo is probably better. We also suspect that nondescriptive logos are better for companies that operate in several

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

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unrelated business segments.

Of course, we are not contending that a descriptive logo guarantees the successful launch of a brand, or that the logo is the most important brand element to consider. We are arguing that underestimating the importance of logo design and the power of descriptive design elements can sometimes be a costly mistake.

(Jonathan Luffarelli is an assistant professor of marketing at Montpellier Business School.

Mudra Mukesh is an assistant professor of marketing at Westminster Business School.)

Monday 16 September 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

37

In association with

We need more startups that don’t prioritize growth above all else MARA ZEPEDA AND JENNIFER BRANDEL

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orporate America’s “growth at all costs” has worked for too few for too long. Recently, leading CEOs at the Business Roundtable came to a similar conclusion, issuing a statement on rejecting maximizing shareholder returns as the sole corporate objective.

If those CEOs are serious about fixing shareholder capitalism, they need to take an honest look at who gets funding, how local communities are affected and what voices are missing from the conversation.

To that end, we offer three suggestions: — STARTUPS AND NEW SECTOR BUSINESSES NEED ALTERNATIVES TO VENTURE CAPITAL: Not everyone has a fair shot at entrepreneurship.

Distributing ownership and governance to more stake-

holders is the most direct way to make change.

— LEARN FROM LIVING ‘ZEBRAS’: Businesses that prioritize people, purpose and profit already exist in spades.

We believe they represent a majority of businesses being created every day, especially

by founders like us — women and minority entrepreneurs — who have been historically excluded from opportunities for ownership.

A diverse founder community has come together in the Zebras Unite movement.

Zebra companies prioritize

mutualism, shared prosperity and social good over Silicon Valley’s “winner take all” mentality.

— CREATE MORE PUBLIC/PRIVATE COLLABORATIONS: The next step is to build a bridge between Wall Street and Main Street. Each

of us has started two such experiments in our own backyards. In Chicago, Civic Exchange is a newly launched coworking space and learning community centered on how news, information and technology can increase democracy and freedom. And in Oregon, Business for a Better Portland has advocated for critical investments in clean energy jobs for communities of color affordable housing and equitable access to capital for all entrepreneurs.

Through our work founding multiple companies and support organizations, we know that the path to more inclusive corporate growth exists. We have found some creative and collaborative solutions to ensure more people and more communities get a seat at our tables.

(Mara Zepeda and Jennifer Brandel are co-founders of Zebras Unite.)

When women are on boards, male CEOs are less overconfident representation matters more in certain industries, because some industries have more overconfident CEOs. Second, our findings suggest female board representation can be especially beneficial in helping firms weather crises. Our research supports the view that having women on boards improves strategic decisionmaking and benefits firms.

JIE CHEN, WOON SAU LEUNG, WEI SONG AND MARC GOERGEN

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number of governments are pushing for greater female representation in the boardroom. And several studies suggest why: Having women on the board results in better acquisition and investment decisions and in less aggressive risk-taking, yielding benefits for shareholders. What’s less clear is why these effects happen.

Our research suggests one potential reason: Having female board members helps temper the overconfidence of male CEOs. To test this, we gathered data on 1,629 firms in the U.S. We examined whether CEOs were less likely to exhibit overconfidence when there were women on their board, and how this effect influenced corporate decisions and performance.

To assess overconfidence, we looked at CEOs’ optionexercise behavior. Unlike corporate decisions that reflect top management’s collective beliefs, the personal choice of

holding or exercising vested options is likely to reveal a CEO’s individual beliefs and confidence about the company.

We then analyzed whether female board representation affected this behavior. We found a significant relationship between female board representation and the overconfidence measure for male CEOs. In our data, we found that the most overconfident CEOs were in industries like pharmaceuticals, computer soft-

ware, coal and construction.

And we did find that having at least one female director on the board was associated with less aggressive investment policies, better acquisition decisions and ultimately improved firm performance in these industries.

To further examine how female board members affect firm performance, we looked at differences in accounting and stock performance for over 500 firms during the financial crisis of 2007 to 2009.

We expected CEO overconfi-

dence resulted in poor performance during the crisis, as it might have led CEOs to pursue aggressive strategies that made their firms more vulnerable. But because female directors might be more likely to temper these CEOs’ behavior, we expected to see better performance during the crisis for firms with female directors.

Our results were consistent with this prediction.

Our study has two important implications. First, it suggests that female board

Brought to you courtesy of First Bank Nigeria

(Jie Chen is an associate professor in finance at the University of Leeds. Woon Sau Leung is an associate professor in finance at the University of Edinburgh. Wei Song is an associate professor in finance at the University of Southampton. Marc Goergen is a professor in finance at IE University.)

38

Monday 16 September 2019

BUSINESS DAY

cityfile Oyo promises to empower youth with waste recycling skills AKINREMI FEYISIPO

O Heaps of refuse at Okokomaiko Area in Lagos.

Agency flags off campaign on waste sorting, recycling in Lagos JOSHUA BASSEY

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anaging Director of the Lagos Waste Ma n a g e ment Authority (LAWMA), Muyiwa Gbadegesin, has flagged off campaign for waste recycling, urging the residents to imbibe the culture of waste sorting at source by dropping all recyclable items in one bag and other waste items in another.

This comes on the heels of the recently launched Blue Box programme of the state government.

Gbadegesin at a road show organised by LAWMA along the LagosBadagry Expressway, to create awareness among residents and to distribute waste bags to them, last

week, said it was not going to be business as usual in the state.

He said the sensitisation programme was to draw the attention of the residents to the need for sanitation and cleaner surroundings.

“We have come to sensitise the community on how to maintain a clean environment because a clean environment is the beginning of good health for all Lagosians. If you don’t have a clean environment, you cannot enjoy good health”, said Gbadegesin Speaking further, he said: “You were keeping one waste bag before, but now you will be keeping two bags; one bag for your recyclable materials like plastic bottles, cans and water sachets while the other bag is for general waste. That is why we are

distributing the bags to you, for the “Blue Box” programme which the governor just launched.”

He also urged the residents to cease the idea of using refuse to reclaim land, describing it as an unwholesome practice that is harmful to the environment.

The LAWMA boss also stated that the agency, as a follow-up to the recent executive order on sanitation

by Governor Babajide Sanwo-Olu, has commenced massive clean-up exercises along Orile-Lagos-Badagry Expressway, to ensure that the stretch was rid of black spots and all forms of environmental nuisance.

He urged residents in the area to support government’s efforts by embracing right environmental practices, to protect them from dangers of environmental

pollution, adding that the authority had commenced distribution of trash bags, in line with the blue box program, to enable residents sort their wastes properly for recycling.

Funsho Adeolu, a known Nigerian actor and LAWMA ambassador, said he joined the campaign to promote environmental sustainability in the state, urging Lagosians to support LAWMA’s efforts at restoring the environment through proper waste management practices like waste sorting for recycling.

Also at the sensitisation exercise was Ohekwuru Tony, a child environmental advocate with Children for Cleaner Lagos, who educated residents on how to dispose of their wastes properly, as well as the importance of waste segregation for recycling.

Ebonyi: Police charged 75-year man, others with breach of public peace NKECHINYERE OGINYI, Abakaliki

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he police in Ebonyi have arraigned a 75-year-old man, Nweze Fidelis and 14 other suspects.

The suspects were arraigned before an Abakaliki Magistrate Court on a threecount charge of conspiracy, assault and breach of peace in the state and its environs.

The suspects, mostly aged men were members of Abakpa market traders association. The market has been locked up for over two weeks following a fracas that broke out between the traders and government tax agents.

That the accused persons were arrested by the police on August 28, at the Abakpa market, for allegedly disobeying the Ebonyi State

government’s order to pay their taxes or faced eviction from the market.

The police prosecutor, Eze Mathias, told the court that the accused persons committed the offense at Abakpa Main market, Abakaliki, in Abakaliki local government area of Ebonyi State, on August 28, 2019.

The police said that the offences were punishable under sections 516A (a) of the Criminal Code, Cap 33, Vol. 1, Laws of Ebonyi State; 15 of Ebonyi State Miscellaneous Offences Law No. 010; 249 (d) of the Criminal Code, Cap 33, Vol. 1 Laws of Ebonyi State, 2019; and, 333 of the Criminal Code Cap 33, Vol. 1, Laws of Ebonyi State of Nigeria, 2019.

The charge read, “That you Nweze Fidelis ‘m’, Nwite Titus ‘m’, Eze Nwanta ‘m’, Agwww.businessday.ng

wagom Ignatius ‘m’, Akannu Sabastine ‘m’, Emeka Uba ‘m’, Simon Ominiyi ‘m’, Dandy Eselu ‘m’, Pius Omewa ‘m’, David Nwoke ‘m’ Alex Oragudozi ‘m’, Christopher Ejim ‘m’, Christopher Nnadiekwe ‘m’, Patrick Eze and others at large, on August, 28 2019, at Abakaliki Main market Abakaliki in the jurisdiction of this court did conspired among yourselves to commit misdemeanor to wit : conduct likely to cause breach of the peace and thereby committed an offence punishable under section 516A (a) of the Criminal Code, Cap 33, Vol. 1, Laws of Ebonyi State of Nigeria, 2019.

The prosecutor further accused the suspects and others at large, of on the same date, conducting themselves in a manner

likely to cause breach of peace by refusing to vacate the shops at Abakpa Main market, which the government has revoked the right of occupancy. This, the police said constituted violated and contravened section 15 of Ebonyi State Miscellaneous Offences Law No. 010 and thereby committed an offence punishable under section 249 (d) of the Criminal Code, Cap 33, Vol. 1, Laws of Ebonyi State of Nigeria, 2019.

“That you Patrick Eze ‘m’ and others at large, on the same date, place and in the aforesaid magisterial district did assault one Mark Onu by pushing him and thereby committed an offence punishable under section 355 of the the Criminal Code Cap 33, Vol. 1, Laws of Ebonyi State of Nigeria.”

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yo State is to create opportunities for economic empowerment of youths to enable them escape poverty.

The state commissioner for environment and natural resources, Kehinde Ayoola stated this during a tour of some waste recycling factories in Ibadan, the state capital at the weekend.

Ayoola who was in company of the consultant to the state on waste management, Ololade Oresanwo, said the waste recycling would also redirect the minds of the youths from cyber crimes and idleness.

Among the recycling plants visited were those on Ring road, Orita Aperin waste-to-wealth project site and the Aba Eku central dump site. It was to enable the state government ascertain the capacity of the plants and possibility of further support for the private investors in waste recycling.

“As we can all see, the wealth of the nation is no more oil dependent but in areas that we have not been paying attention to

before. Young Nigerians are making good money from waste recycling while others cringe at the sight of waste, yet we complain of poverty.

“We have to be realistic in what we want and how we go about achieving them. The administration under Governor Seyi Makinde has looked and found various ways to make youths have enabling environment to thrive in whatever business or enterprise they engage in to reduce poverty and unemployment.

“The capacity to employ is not as buoyant as it used to be by the federal and state governments due to low income from oil, which is the mainstay of Nigeria’s wealth, so we all have to look inward and waste recycling has offered a good opportunity to make money and even employ other youths.

“We shall give support to youths in Oyo State to establish their own business or be an entrepreneur by continuing to provide the enabling environment.”

The plants visited produce polythene and other products from recycled water sachet and other waste products.

Oyo distributes 10,000 waste bags in Mokola REMI FEYISIPO, Ibadan

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ot less than 1 0 , 0 0 0 re f u s e bags have b e e n d i str i buted free in Mokola a rea o f Iba da n f o llowi ng th e f lag - o f f o f sp e cia l e nvi ro n m e nta l e xe rci s e i n th e state.

The exercise was w i tn e ss e d by m e mb e rs of the state of assembly a n d va r i ou s m i n i str i e s a n d ag e n ci e s.

Residents of Sabo a n d o th e r a rea s o f Mo kola in Ibadan were seeing clearing their gutters while dancing to music provided by a tea m le d by th e o f f i cia ls o f th e m i n i str y o f environment and water re s ou rce s.

Permanent secretar y i n th e m i n i str y, Ba s h i r Olanrewaju who repre s e n t e d t h e c o m m i s sioner, Kehinde Ayoola said during the special sanitation exercise that the government wa s co llab o rati ng w i th We st Af r i ca E N RG, th e official refuse contrac@Businessdayng

to r i n O yo State to d i str i bu te th e wa ste bag s to re si d e nts o f Mo ko la a n d i ts e nvi ro n s.

He added that the initiative would be take n to o th e r co m mu n i ti e s i n Iba da n a n d th e re st o f th e state i n th e m o nth s a h ea d .

Ba s h i r sa i d that th e essence of exercise was to for the residents to key into the vision of the government to e n s u re z e ro t o l e ra n c e to filth and indiscr imi nate dumping of refuse i n th e state.

“Our mission is to encourage residents on p ro p e r ways o f d i sp o sing their wastes so as not to constitute env i ro n m e n t a l n u i s a n c e to th e roa d s a n d o th e r o p e n spa ce s. Wi th th e bag s d i str i bu te d to th e people, the nuisance of w a s t e w i l l b e re d u c e d i n th i s co m mu n i t y a n d we believe the people w i ll ma ke th i s e xe rci s e endure without anyb o dy co m i ng rou n d to nu dg e th e m to a cti o n ,” sa i d O la n re waju .

Monday 16 September 2019

BUSINESS DAY

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Monday 16 September 2019

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 13 September 2019 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 257,702.89 7.25 2.84 220 6,546,704 UNITED BANK FOR AFRICA PLC 215,456.35 6.30 3.28 193 12,370,747 ZENITH BANK PLC 598,103.21 19.05 1.87 312 22,523,986 725 41,441,437 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 193,834.58 5.40 4.85 324 8,800,428 324 8,800,428 1,049 50,241,865 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,829,277.31 139.00 0.36 70 1,941,382 70 1,941,382 70 1,941,382 BUILDING MATERIALS DANGOTE CEMENT PLC 2,648,094.85 155.40 0.26 92 1,078,441 LAFARGE AFRICA PLC. 236,784.59 14.70 -1.01 49 755,041 141 1,833,482 141 1,833,482 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 270,684.50 460.00 2.22 17 113,772 17 113,772 17 113,772 1,277 54,130,501 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 13,074.52 4.90 - 2 10,000 2 10,000 2 10,000 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 2 10,000 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 46,169.24 48.40 9.63 25 238,937 PRESCO PLC 44,800.00 44.80 - 19 112,485 44 351,422 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,520.00 4.26 - 1 10 1 10 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,170.00 0.39 8.33 25 3,302,500 25 3,302,500 70 3,653,932 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 688.30 0.26 - 1 128 237.38 0.61 - 3 60,185 JOHN HOLT PLC. S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 42,680.39 1.05 2.94 78 6,355,990 U A C N PLC. 19,016.56 6.60 6.45 96 2,171,720 178 8,588,023 178 8,588,023 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 24,486.00 18.55 - 17 59,621 ROADS NIG PLC. 165.00 6.60 - 0 0 17 59,621 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 3,897.59 1.50 9.49 72 3,039,236 72 3,039,236 89 3,098,857 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 10,178.35 1.30 -5.80 5 346,365 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 81,044.16 37.00 - 57 406,757 INTERNATIONAL BREWERIES PLC. 103,150.34 12.00 - 12 62,264 NIGERIAN BREW. PLC. 408,241.85 51.05 0.59 40 260,816 114 1,076,202 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 110,250.00 22.05 0.23 74 979,601 DANGOTE SUGAR REFINERY PLC 115,200.00 9.60 3.23 98 1,093,876 FLOUR MILLS NIG. PLC. 55,355.12 13.50 2.27 58 1,825,207 HONEYWELL FLOUR MILL PLC 7,533.69 0.95 -2.06 16 892,268 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 2 500 NASCON ALLIED INDUSTRIES PLC 33,647.87 12.70 - 10 83,576 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 258 4,875,028 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 20,190.67 10.75 8.59 18 141,290 NESTLE NIGERIA PLC. 951,187.50 1,200.00 - 80 39,070 98 180,360 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 1 200 VITAFOAM NIG PLC. 5,366.12 4.29 - 6 124,745 7 124,945 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 23,425.81 5.90 -0.85 34 893,176 UNILEVER NIGERIA PLC. 168,328.66 29.30 - 6 1,827 40 895,003 517 7,151,538 BANKING ECOBANK TRANSNATIONAL INCORPORATED 146,796.41 8.00 9.59 32 492,765 FIDELITY BANK PLC 49,257.15 1.70 1.80 82 4,804,344 GUARANTY TRUST BANK PLC. 810,828.99 27.55 0.18 216 42,472,958 JAIZ BANK PLC 11,196.41 0.38 - 21 608,400 STERLING BANK PLC. 67,657.48 2.35 - 9 181,000 UNION BANK NIG.PLC. 203,845.27 7.00 - 19 438,842 UNITY BANK PLC 8,182.54 0.70 4.48 6 257,195 WEMA BANK PLC. 22,758.93 0.59 -1.69 44 1,834,506 429 51,090,010 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 4,712.54 0.68 1.49 31 2,034,714 AXAMANSARD INSURANCE PLC 17,955.00 1.71 -2.29 11 455,783 CONSOLIDATED HALLMARK INSURANCE PLC 2,439.00 0.30 - 5 952,700 CONTINENTAL REINSURANCE PLC 15,559.12 1.50 - 12 228,044 CORNERSTONE INSURANCE PLC 4,418.85 0.30 - 4 244,478 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 0 0 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 2,197.03 0.30 7.14 10 4,029,672 LAW UNION AND ROCK INS. PLC. 1,675.57 0.39 - 0 0 LINKAGE ASSURANCE PLC 4,000.00 0.50 - 0 0 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 16 13,369,368 NEM INSURANCE PLC 9,399.30 1.78 - 10 55,100 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 2,637.45 0.49 - 0 0 REGENCY ASSURANCE PLC 1,333.75 0.20 - 0 0 SOVEREIGN TRUST INSURANCE PLC 1,668.16 0.20 - 2 250,000 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 2,800.00 0.20 - 1 1,000 SUNU ASSURANCES NIGERIA PLC. UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 0 0 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,951.61 0.37 -5.13 18 1,258,847 120 22,879,706

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MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 2,789.70 1.22 9.91 10 137,664 10 137,664 MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 4,158.00 0.99 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,796.93 1.39 - 0 0 RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 0 0 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 8,000.00 4.00 - 32 704,784 CUSTODIAN INVESTMENT PLC 37,055.74 6.30 - 3 315,033 DEAP CAPITAL MANAGEMENT & TRUST PLC 660.00 0.44 - 1 10 FCMB GROUP PLC. 33,664.61 1.70 1.19 40 2,259,786 ROYAL EXCHANGE PLC. 1,029.07 0.20 - 27 7,874 STANBIC IBTC HOLDINGS PLC 366,570.82 35.00 -2.10 41 1,113,386 UNITED CAPITAL PLC 12,420.00 2.07 - 59 1,946,924 203 6,347,797 762 80,455,177 HEALTHCARE PROVIDERS EKOCORP PLC. 1,680.29 3.37 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 852.75 0.24 -4.00 3 600,000 3 600,000 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 494.58 0.50 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 9,388.62 4.50 - 1 500 GLAXO SMITHKLINE CONSUMER NIG. PLC. 8,670.10 7.25 1.40 18 284,308 MAY & BAKER NIGERIA PLC. 3,605.74 2.09 - 7 165,981 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 854.62 0.45 - 9 1,135,610 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 0 0 35 1,586,399 38 2,186,399 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 781.44 0.22 - 3 432,000 3 432,000 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 534.60 4.95 - 0 0 TRIPPLE GEE AND COMPANY PLC. 282.12 0.57 - 1 1,000 1 1,000 PROCESSING SYSTEMS CHAMS PLC 1,220.98 0.26 - 6 719,950 E-TRANZACT INTERNATIONAL PLC 9,996.00 2.38 - 2 220 8 720,170 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,315,353.03 350.00 8.19 12 108,042 12 108,042 24 1,261,212 BUILDING MATERIALS BERGER PAINTS PLC 2,173.68 7.50 - 15 30,190 CAP PLC 17,325.00 24.75 - 8 24,871 CEMENT CO. OF NORTH.NIG. PLC 222,125.17 16.90 0.30 57 1,756,413 MEYER PLC. 313.43 0.59 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,959.74 2.47 - 0 0 PREMIER PAINTS PLC. 1,156.20 9.40 - 2 200 82 1,811,674 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 2,465.85 1.40 - 8 175,395 8 175,395 PACKAGING/CONTAINERS BETA GLASS PLC. 29,873.33 59.75 - 2 1,200 GREIF NIGERIA PLC 388.02 9.10 - 0 0 2 1,200 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 92 1,988,269 CHEMICALS B.O.C. GASES PLC. 2,547.42 6.12 - 2 1,010 2 1,010 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 0 0 0 0 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 83.60 0.38 - 2 4,454 2 4,454 4 5,464 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,252.54 0.20 - 8 147,800 8 147,800 INTEGRATED OIL AND GAS SERVICES OANDO PLC 47,239.37 3.80 -2.81 34 1,044,330 34 1,044,330 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 56,974.05 158.00 - 4 376 CONOIL PLC 11,658.40 16.80 - 21 96,162 ETERNA PLC. 3,716.81 2.85 5.56 12 169,234 FORTE OIL PLC. 21,556.06 16.55 7.82 67 638,243 MRS OIL NIGERIA PLC. 5,729.98 18.80 - 1 3,100 TOTAL NIGERIA PLC. 33,952.18 100.00 - 23 17,744 128 924,859 170 2,116,989

ADVERTISING AFROMEDIA PLC 1,820.01 0.41 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 17,551.17 1.80 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 341.14 0.29 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,387.46 4.05 - 1 1,000 TRANS-NATIONWIDE EXPRESS PLC. 328.19 0.70 - 1 1,300 2 2,300 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,723.78 3.05 - 0 0 IKEJA HOTEL PLC 2,432.19 1.17 - 3 80,000 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 0 0 TRANSCORP HOTELS PLC 41,042.18 5.40 - 3 2,263 6 82,263 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,800.00 0.40 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 211.68 0.35 - 0 0 LEARN AFRICA PLC 1,072.32 1.39 - 6 36,210 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 452.98 1.05 - 5 46,517 11 82,727 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 596.77 0.36 - 2 28,776

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How earnings of oil marketers go up in flames BALA AUGIE

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arnings of the largest major oil marketers have gone up in flames, as a once lucrative industry is gradually becoming unprofitable.

While these companies declare huge profit, accelerating input costs and huge debt obligation makes it difficult for them to deliver higher returns to shareholders in form of share appreciation and bumper dividend.

Analysis by of the financial statement of 5 largest players in the industry (Total Oil Nigeria Plc, 11 Nigeria Plc, Forte Oil Nigeria Plc, Conoil Plc, and Eternal Oil Nigeria Plc) shows combined net income fell by 16.19 percent to N10.89 billion in June 2019 from N13.0 billion as at June 2018.

A myriad of challenges have continued to undermine earnings of

downstream oil and gas firms, as margins are increasingly deteriorating.

The rally in crude oil price in the fourth quarter of 2016 and subsequent devaluation of the Naira resulted in higher landing costs have taken food away from the table of companies, while failure of government to refine petroleum product to meet local demand is undermining industry growth.

Also, the delay in subsidy payments by federal government worsened the financial capacity of companies to import as banks refused to extent further credit because of high defaults.

Average industry operating profit margin, a measure of operating efficiency, reduced to 3.33 percent in June 2019, from 4.28 percent in June 2018.

The strongest margins (6.97 percent) were recorded in 2016, thanks to the introduction of a special exchange rate by government and rebound in

a time high of 200.10 percent in June 2019; the simple translation is that debt is 2 times equity.

The disagreement between the Federal Government and depot operators over pricing template causes fledging fuel crisis as petroleum markers hoard Premium Motor Spirit (PMS). Analysts are of the view that removal of petrol subsidy will help government liberate itself from the current fiscal struggles and give it the way to free up more funds that can be channelled to more productive sectors of the economy.

According to the latest data from the NNPC, Federal Government spent N650.20 billion in subsidising PMS, a figure that is 79.20 percent of N820.0 billion government earmarked for capital spending in the in the 2018 budget as presented.

The landing costs for litre of petrol according to marketers hovered between N170/litre and N200/litre in the second quarter of 2019.

Dangote Cement is a more attractive takeover candidate than peer rivals

D

angote Cement is an eye-catching takeover candidate compared to peer rivals, which means the largest producer of the building material in Africa’s largest economy is better managed and with a solid growth prospect.

The largest producer of the build-

ing material has an enterprise value to earnings before interest taxation, depreciation, and amortization (EBITDA) of 6.80 times, this compares to Lafarge Africa’s and Cement Company of Northern Nigeria (CCNN)’s EV/EBITDA ratios of 11.0 times, and 20.0 times, respectively.

The enterprise multiple ratio is considered a more accurate barometer of the firm’s value than the price-to-earnings (P/E) ratio since

SHORT TAKES $5.82 billion The total value of capital importation into Nigeria stood at $5,820.21m in the second quarter of 2019.

This represents a decrease of 31.41% compared to Q1 2019 and 5.56% increase compared to the second quarter of 2018. The largest amount of capital importation by type was received through Portfolio investment, which accounted for 73.76% ($4,292.89m) of total capital importation, followed by Other Investment, which accounted for 22.41% ($1,304.43m) of total capital imported and Foreign Direct Investment (FDI), which accounted for 3.83% ($222.89m) of total capital imported in Q2 2019

crude oil price.

Total Nigeria is the hardest hit from the pangs of a tough business environment as analysts expect it to record its first loss in more than decade, which could undermine dividend payment of a company that has been consistently rewarding shareholders from distributable profit.

Total Nigeria profit fell to 97.70 percent to N129.13 million in June 2019 from N5.67 billion as June 2018, the steepest slump in 5 years, according to data compiled by BusinessDay. The downstream oil and gas firm has a negative cash flow from operating activities of N9.85 billion as at June 2019, which means it lacks the financial strength to pay future dividend, fund expansion plans, and settle debts. However, capital injections by owners could bolster a weak liquidity position.

Total Nigeria may not be able to generate cash to satisfy its debt obligation as debt to equity ratio has hit

BALA AUGIE

P.E

it discounts various countries taxing policies and takes into account debt and cash on hand.

The enterprise value, which comprise of the market capitalization, debt and, working capital of the company, gives an investor an insight into the value of a company before an acquisition.

EBIDTA is a measure of efficient, and it a more realistic gauge of printability because takes into consider-

ation exceptional items and out of pocket expenses.

In a nut shell, a lower EV value is more attractive while a ratio below 10 is favoured by investors, implying that Dangote Cement is a stock worth holding.

The cement sector are not spared from the carnage of a flagging economy, the industry was laggard as seen Continues on Page 42

1.94% Nigeria’s economy grew more slowly in the second quarter of 2019 than it did in the first quarter. The Gross Domestic Product growth rate fell to 1.94 per cent in Q2-19 from 2.10 per cent in Q1-19.

Aggregate GDP stood at N34.94 trillion in nominal terms in Q2-19, an increase of 13.83 per cent over the performance in the second quarter of 2018 and 9.8 per cent over the preceding quarter.

7.2% The Federal Executive Council has raised Value-Added Tax rate to 7.2 percent from the current 5 percent albeit subject to the approval of the National Assembly. Nigeria has been retaining the current rate since 1994, and is one of the lowest globally. The aim of the VAT rate hike is to assist state governments have more funds to pay new the minimum wage.

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 Continues on page 37 Email the BMI team patrick.atuanya@businessdayonline.com www.businessday.ng

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Monday 16 September 2019

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11 years after financial meltdown, NSE market returns still lacklustre Ifeanyi John

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n this day, 11 years ago, Lehman Brothers’ action to file for bankruptcy set off a chain of events that led to a financial crisis across the globe. In Nigeria, the aggregate value of all the companies on the stock market halved in response to the crisis and returns have remained static ever since.

BusinessDay analysis of the All Share Index in that time period show that in the 10 years after the financial crisis, Nigerian stock returns have remained flat. In February 2008, the Nigerian stock market was at its peak point of 65,652.38 index points. 11 months after that, the market had

shed 52.09 percent to close the year at 31,450.78 index points.

10 years later, the Nigerian stock market would close the 2018 calendar year with an index point of

31,430.5 index points shedding 6 basis points since December 2008.

Average annual returns of the Nigerian equities market in the 10 years after the crisis is -0.86 percent

Nigeria’s top lenders show less profitability than Sub-Saharan African peers Israel Odubola

S

hares of Nigeria’s big banks are cheaper compared to peers in South Africa and Kenya, albeit investors are willing to pay more than the equity per share of some of these foreign banks on the back of better profitability prospects.

Data tracked by BusinessDay from Bloomberg and Market Investing Database showed that Nigeria top lenders’ rank lower in valuation and profitability indicators, implying that shares of foreign lenders are more expensive than their Nigerian counterparts as investors are pricing in higher return on them.

Nigeria’s three most-capital-

ized lenders – Guaranty Trust Bank ($2.1bn), Zenith Bank ($1.5bn) and Access Bank ($657.4m) are trading 1.3x, 0.7x and 0.4x price-to-book value respectively, indicating that these stocks are under-priced, but remain fundamentally sound with significant potentials for value appreciation.

This compares with South Africa’s top three lenders –First Rand ($23.1bn), Standard Bank ($20.2bn) and Capitec Bank ($9.1bn) trading 2.5x, 1.8x and 6.4x for each local currency unit of their net assets.

Similar trend applies for Kenya’s top lenders – Equity Bank ($1.4bn) and Kenya Commercial Bank ($1.2bn) and Standard Chartered Bank Kenya ($652.3m) trading 1.4x, 1.0x and 1.5x for each local

currency unit per net assets.

“From enterprise value perspective, other banks especially South African lenders have huge capital base in excess of billion dollars,” said Taiwo Ologbon-Ori, chief research analyst at Lagos-based Cash Craft Capital. “So these banks cannot have similar valuation with Nigerian banks, and it is expected that shares of these foreign banks will be more expensive and more attractive to investors globally.” he said.

Going by their capacity to generate earnings from shareholder funds, GTB, Zenith and Access currently boast of 16 percent, 14 percent and 11 percent return on equity.

But it’s lower compared to their Kenyan counterparts – KCB (24%), Equity bank (22%) and Standard Chartered Bank (18%) and South Africa’s First Rand (24%), Standard Bank (16%) and Capitec (22%).

Nigerian lenders are confronted with a number of headwinds from sluggish economic growth to uncertainty in the polity environment, which investors fear could drag profitability.

The licensing of telecom companies to start operating in the mobile money space is another blow that could challenge the relevance of banks. Nigerian lenders are less efficient in utilising assets to generate profit as return on assets of the country’s top-three lenders averaged at 1.9 percent compared with Kenya’s 3.3 percent and South Africa’s 3.9 percent.

representing a flat growth trajectory since 2008.

Chief economist at EUA Intelligence, Obinna Uzoma stated that “the market has failed to recover from the financial crisis despite the companies faring better. The vast majority of Nigerians still have a mistrust of the equities market due to the perceived high-risk nature of investments and returns on the broad market has failed to bolster this perception, underperforming inflation which is a basic benchmark for investment returns.”

“Typically, the buy and hold strategy is said to be the better than active management of funds. In the Nigerian climate however, save for companies like Nestle, Okomu Oil and Presco who reigned in the 10year challenge of returns, investors would have fared better actively

changing positions rather than buying into index funds” Uzoma added The All share index has not fared any better this year losing over N1.3 trillion in market value from the beginning of the year. Based on a client’s note from EUA Intelligence, up to 100 stocks are in negative return territory since January, while 24 posted positive returns and 40 have remained static.

The year to date market breadth shows that there is an inherent fear in the heart of investors when it comes to investing in Nigerian companies. These companies are in a better position than they were in 10 years ago with admirable growth trends over time but the companies still sell for roughly the same amount they did a decade ago, a sign that many of these stocks are significantly undervalued.

Bonds flow up 17% as Equity slumps 61% in 5 years aking different trajectories in the last half-decade, bonds is nearing a convergence with equity in terms of attracting hot money as flows into the debt market hit 5-year high, BusinessDay analysis on Capital Importation data from the National Bureau of Statistics (NBS) show.

Flows into bond rose 19 percent to $881 million in the first half of 2019 while investment into equity slumped by 34 percent to $1.15 billion. Over the last five years, bond has seen foreign fund rise by 16.71 percent while equity has declined 61.38 percent.

On a quarterly basis, flows into bonds slowed the most in the second quarter of 2019 paring 44 percent to $316 million compared to equity where capital imported reduced 24 percent to $497 million.

Flows into both assets were strong in the first quarter with equity skyrocketing 201 percent while bonds ballooned 193 percent in the three months to March 30.

Analysts say the trend reflects a change in sentiment in both market in the second quarter of the year; bonds yields fell as the

CBN’s balance sheet policy turned accommodative in the quarter on the back of a surge in carry trade activities post-elections, moderating inflation and a favourable oil market.

On the other hands pre-election rally in the equity market was replaced by gyrations which pressured stock prices downwards as foreign funds took a risk-off stance.

Lack of clarity on policy direction amid unimpressive companies earnings were part reasons for decline in the period.

Overall, capital importation into the country in the first-half periods reached $14.31 billion in 2019, the highest in the last five years at least. In perspective, total capital imported in full-year 2018 was $10.51 billion.

The highest type of capital flow was in portfolio investment ($11.44 billion) with money market instruments accounting for 82 percent ($9.4 billion).

Banking with some 33 percent was the sector the highest inflow while financing made up for 28 percent.

Among lenders, Stanbic IBTC Plc accounted for about 30 percent of inflows while Citibank Nigeria limited accounted for some 17 percent to come in second place.

driver of volumes.

Nigeria requires $100bn over the medium term to plug huge infrastructure deficit, according to ICRC. The Central Bank of Nigeria (CBN)’s lending drive especially for consumer, retail and mortgage financing is positive for cement

manufacturers.

Also, rapid implementation of capital expenditure component of 2019 budgets and exports could be supportive, major reconstruction of Northern Nigeria, post the peak of insurgency and Second Niger Bridge will impetus to construction activities.

SEGUN ADAMS

T

Dangote Cement is a more attractive takeover...

Continued from Page 41 in the last GDP report released by the National Bureau of Statistics (NBS).

Nigeria’s economy has been growing sluggishly since it existed a recession in 2016.

Gross domestic product in Africa’s largest oil producer expanded by 1.94

percent in the second quarter of year, this compares with a 2.10 percent expansion in the first quarter.

The manufacturing sector contracted by 0.13 percent from the 0.81 percent expansion in the first quarter (Q1) 2019.

Experts say Federal Government www.businessday.ng

has to implement structural reforms that will propel the economy and accelerate construction activities, they suggested more fiscal stimulus.

However, prognosticators see a bright future for the industry, as the country’s huge infrastructure deficits and rising population could be major

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Monday 16 September 2019

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news

Patient capital slumps 15% in 5 years as Nigeria focuses on portfolio inflow Gbemi Faminu & Segun Adams

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igeria’s Foreign Direct Investment (FDI) rebounded in 2018, but the country still runs the risk of worsening growth in its fragile economy. The country is trading long-term capital for hot money and investors are leaving the economy amid a never-ending spell of regulatory gaps and infrastructure.

FDI into Nigeria in 2014 stood at $2.28 billion but five years later, inflows had slowed to $1.19 billion growing at a negative rate of 15 percent as multinationals moved out of the economy in droves, taking with them long-term capital.

FDI in half-year 2019 fell by 8 percent, according to the National Bureau of Statistics (NBS).

In contrast, portfolio investment dropped only 4 percent in the five-year period while money market inflows surged 52.57 percent.

All calculations (except for FDI in H1) are based on Compounded Annual Growth Rate (CAGR) over 5 years to 2018 so that effects of shocks are adjusted for.

Foreign Direct Investment, also referred to as pa-

tient money, involves foreigners committing resources to establish manufacturing businesses, and buying buildings and machines without expectations of a quick profit.

Unlike Foreign Portfolio investment based on assets like stocks and bonds, and can be liquidated easily, FDI has a longer duration in an economy hence is real investment.

The t re n d show s t h e urgent ne e d to address issues that have held the country back for the last couple of years, according t o Yi n k a Ad e mu wag u n , an analyst at Lagos-based United Capital.

“When you look at how sectors across the board have fared, you would realise that the government has not been intentional about growth.”

Nigeria’s economy has grown by CAGR of 1 percent since 2014 caused by the sluggish pace of recovery from the 2016 recession.

BusinessDay findings reveal that Grief, an American Manufacturer, quietly left Nigeria because the company could not get annealed coldrolled steel. Lack of access to its key raw material was an after match of CBN’s 41-item blacklist in 2016.

Shippers Council donates hospital equipment to Imo community GODFREY OFURUM, Aba

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he Nigerian Shippers Council (NSC), the country’s ports economic regulator has donated hospital equipment to Isinweke Health Centre in Ihitte-Uboma Local Government Area of Imo State.

The gesture, which is part of the Council’s corporate social responsibility, is geared towards deepening healthcare services in rural areas of the country.

Hassan Bello, executive secretary/chief executive officer of the council, in a speech at the presentation of the items held at the medical centre, Isinweke, explained that the NSC placed importance on the issue of its corporate social responsibility programme. The council’s CSR is always targeted at the grassroots with a view to touching lives at the base of the society, he explained.

Bello, who was represented at the event by Winner Anayo, zonal director, NSC, SouthEast, explained that the council contributes optimally to the economic development of the nation, while protecting the rights and interests of all stakeholders in the transport sector, in line with world’s best practices.

He explained that the gathering was necessitated by the Council’s passion to support and empower Nigerians in need in different ways, as part of its corporate social responsibility activities.

“Accordingly, at the end of our last corporate social responsibility needs assessment exercise, the Isinweke Health Cen-

tre, Ihitte-Uboma, was found qualified to attract the attention of NSC’s CSR intervention and was graciously chosen, as one of the centres to benefit from this exercise,” he explained.

Items presented to the health centre were two singlemotor hospital beds, two micro air alternating pressure overlay mattress, eight HD 1172 Philips iron, seven medium-sized towels, eight medium-sized bedspreads, and one Samsung 206-litre, one-door freezer.

Others included two washing machines, one Honda (5.5kva) generator, one Honda (2.5kva) generator, seven rechargeable lanterns, five mosquito nets, and seven blankets.

Bello, while presenting the items to the community, urged health providers at the medical centre to ensure that they used the equipment to touch the lives of those who really need them.

“Our joy at NSC would have no bounds, when we find out that these items are judiciously engaged in touching the lives of the ordinary Nigerian citizens”.

Felix Okeke, vice chairman, Interim management committee, Ihitte-Uboma Local Government Area, Imo State, who stood in for the chairman, expressed joy that the LGA, was the first in the State to benefit from the scheme and thanked the NSC for the gesture.

He stressed that the items would improve healthcare delivery in the medical centre and assured that the equipment would be fully utilised to ensure that the poor, who are the target in which the medical centre was established benefits from them.

Ahmad Shakur, acting director, Department of Petroleum Resources (DPR), being presented with a plaque by Babajide SanwoOlu, Lagos State governor, during a courtesy visit by the team from DPR to the Governor at Lagos House, Marina.

Big banks spent N362m more on H1’19 audits to meet regulatory standards …PWC, KPMG are auditors of tier-one lenders Endurance Okafor

I

n the quest to meet regulatory standards of the Central Bank of Nigeria (CBN) and other international requirements, Nigerian tier-one banks spent N362.98 million more to audit their half year 2019 financial reports.

According to the banks’ financial reports as analysed

by BusinessDay, the Deposit Money Banks (DMB) audited their half-year financials at a joint cost of N1.61 billion in H1 2019. On year-on-year comparison, the figure is 29.19 percent higher than the N1.24 billion spent in the corresponding period of 2018.

Under the Banks and Other Financial Institutions Act (BOFIAS 1991) as amended to date, money depository institutions in Nigeria in addition to the provisions of CAMA 1990 are required by BOFIAS to submit audited financial statements to the CBN for approval before publication in a national daily newspaper within four months

after the year end.

A dive into the financials of the country’s biggest banks revealed that Access Bank spent more in auditing its half-year financials. The lender audited its H1’19 financial report with N561.47 million from the N257.16 million spent in the corresponding period of last year.

This was followed by Guaranty Trust Bank (GTB) and Zenith Bank as they paid their auditors N390 million and N379 million, respectively.

Compared to the previous year, the lenders paid 2.9 percent and 12 percent more than the N379 million and N336 million reported as auditors’ remuneration in H1 2018.

In the same period under review, United Bank for Africa (UBA) reported N4 million rise in auditor’s fees as the lender paid N275 million in H1 2019 compared to N271 million in the previous year.

The breakdown of the figures from FBN Holdings was however not ascertained at the time of this report.

In 2017, the Central Bank instructed that the auditors’ reports accompanying audited financial statements of all banks should be in compliance with International Standard on Auditing (ISA) 701- communicating Key Audit Matters in the Independent Auditor’s reports of the Financial Reporting Council of Nigeria (FRCN).

The FRCN requires independent auditors of listed and unlisted entities to comply with the requirements of ISA 701 for audit of financial statements for periods ending on or after December 15, 2016 and June 30, 2017, respectively.

Consequently, the CBN said it had obtained the concurrence of the FRCN for external auditors of all banks (both listed and unlisted to comply with the requirements of the new standard for audits of financial statements).

Checks by BusinessDay revealed that the appointment of auditors for banks is approved by the apex bank.

A further probe into the H1 2019 financials of Nigeria’s five

biggest banks revealed that the PricewaterhouseCoopers (PWC) audited four banks in the review period leaving only one bank to KPMG Professional Services.

According to the reports, PWC was the external auditor to Access Bank, FBN Holdings, UBA and GTB and it attracted a total of N1.23 billion from three of the lenders.

“We concluded our audit in accordance with International Standards on Auditing (ISAs). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion,” PWC said.

On the other hand, KPMG audited the financials of Zenith Bank with an auditor’s remuneration of N379 million.

In its remark, KPMG stated that “the accompanying consolidated and separate interim financial statement (of Zenith Bank) gave a true and fair view of the consolidated and separate financial position of the Bank and its subsidiaries as at 30 June 2019”.

FG’s proposed VAT increase to worsen lean consumer wallet ...new VAT to generate N479.7 billion in revenues - Afrinvest Michael Ani

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he proposed increase in the consumption tax, placed on the value added to goods and services, will force companies to increase the prices of goods and services which would further worsen the living conditions of consumers, whose real income have been stifled over recent years.

In order to shore up revenue to meet budgetary expenses and cater for the new N30, 000 minimum wages, the federal government through the Minister of finance, Zainab Ahmed, last week, approved a 44 percent increase in Value Added Taxes from 5 percent to 7.2 percent, a move that has attracted various criticisms from

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all round stakeholders.

“In our view, the plan by the Federal Government to finance the increment in the wage burden through tax increment would force companies to raise prices significantly, ultimately placing the incidence of the tax increment on the consumers,” analysts at Lagos-based Stockbroking firm, CSL said in a note.

Manufacturers of goods and services in Nigeria have struggled to stay afloat in a harsh operating environment coupled with declining consumer’s income that has been eroded by double digit inflation.

Data from the National Bureau of Statistics on Gross Domestic Product (GDP) by Income and Expenditure approach at 2010 purchaser’s values show that consumption expenditure of households has

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been declining at varying rates since it rose by 1.5 per cent in 2015. This has added more woes to the revenues of Consumer Goods Companies, as they jostle for lean consumer’s cash. The consumers, on their part, are looking for the highest quality products at the lowest possible prices.

Dwindling federal government revenue ,owing to lower crude oil prices is forcing Africa’s largest economy to search for measures that would help in shoring up non-oil revenue.

Babatunde Fowler, executive chairman, Federal Inland Revenue (FIRS), hinted earlier that come next year, the tax agency would impose taxes on all online purchases. The proposed VAT hike is part of a broader drive to increase tax revenue.

“We expect the increase @Businessdayng

in VAT to generate additional N479.7bn in revenues, based on the N1.1tn collected in 2018,” analysts at Lagos-based Afrinvest, a securities and investment firm said.

Zainab while announcing the new increase said the hike was important because the Federal Government only retains 15 per cent of the VAT while 85 per cent is actually for the states and local governments. “The states need additional revenue to be able to meet the obligations of the minimum wage,” she said.

Afrivest said in a note that based on the sharing formula, the FG would receive additional N72.0bn (15.0 percent), states would get N239.8bn (50.0 percent), while local governments would get N167.9bn (35.0 percent) upon the implementation of the planned increase.

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news

NTCB seen as enabler, as operators seek more reforms in Nigerian ports AMAKA ANAGOR-EWUZIE

O

perators in the nation’s seaport have identified the passage of the National Transport Commission Bill (NTCB) into law as the enabler that would bring the necessary reforms and innovations that would spur sustainable growth in Nigerian ports.

Vicky Haastrup, chairman of Seaport Terminal Operators Association of Nigeria (STOAN), who made this submission at the fourth edition of the Taiwo Afolabi Annual Maritime (TAAM) Conference held in Lagos at the weekend with the theme, ‘Innovation and Practical Reforms Towards Sustainable Growth in the Maritime Sector’, said that NTCB would serve as a boost that would put everyone in check.

“The port cannot be reformed if we do not have an enabling law in place. We need the National Transport Commission Bill to be passed to bring reforms and necessary innovations that the nation’s maritime industry needs at this critical time,” she said.

According to her, the government should see to it that NTCB was passed into law because it would moderate the way business is done at the

ports as well as the responsibilities of all players including government agencies, service providers and port users.

Taiwo Afolabi, vice chairman of SIFAX Group, said the Federal Government and it relevant agencies needs to fortify the nation’s coastal waters and maritime boundaries against maritime crimes.

According to him, piracy attacks on ships and various terminals had led many shipping lines to introduce war risk surcharges on consignments coming to Nigeria.

Afolabi, who was the chief host, said that the federal government policy of linking some of the ports to the national rail network meant that cargoes could be evacuated by rail to the hinterland from Apapa port. “Government initiative of moving cargos from the ports to the Inland Dry Ports and container freight stations is a development that must be seen to the end,” he said.

In his own keynote address, Hassan Bello, executive secretary of the Nigerian Shippers’ Council (NCS), said that infrastructural reform is very important to making transport system very efficient.

According to him, government must take the responsibility of providing infrastructure such as good roads, link-

age of rail to the ports.

“We have to regulate the carriage of goods by land which means there must be liability insurance, responsibility of the owners of the transport and carriage. In the freight forwarding practice, we have called for consolidation, professionalism, for reforms in the trucking system, and the haulage system,” he said.

According to him, there is a need for Nigeria to have registered fleets that would pass all the tests, so that carriage of goods from the ports to the hinterland will be secured and fast because timely delivery of cargo is essential to the economy.

“What we have now in our ports are rickety trucks that break down all the way because there is no legislation to guide carriage of goods by land. Truckers must have a rest period, after six or eight hours of driving to reduce the rate of accidents caused by fatigue in our ports,” he said.

Bello pointed out that the Council did not want to see articulated vehicles being parked indiscriminately on the highway, adding that it is for this reason that the Council was promoting the Truck Transit Park project, which would be a whole village with many facilities.

Nigeria’s FinTech sector attracts $204m investments in 8yrs BUNMI BAILEY

T

he financial services and information technology (FinTech) sector in Nigeria has experienced a meteoric rise in the eight years to 2018, leading to an inflow of at least $204m into it, according to a recent report on the local sector.

This came on the back of more companies leveraging technology to change the way the nation’s financial industry operates.

According to a market insight report by Asoko Insight, Africa’s comprehensive corporate information platform that provides market mapping solutions to investment firms, banks, corporates and governments, a total of $204.3 million worth of FinTech investments was secured in disclosed deals between 2010 and 2018 by 16 companies. Eight of these firms tapped investors on multiple occasions to fund growth, according the report.

The report attributed this to the growth of the local FinTech industry which has been supported by the increased use of smartphones, which has changed consumer behaviour, making convenience and accessibility a priority.

“Over the recent years, Nigeria witnessed increased deal activity with 11 deals worth $113.99 million in 2018 compared to one valued at $700,000 in 2010. The wide acceptance of FinTech and the solutions it provides continues to make the sector attractive

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to investors,” the report stated.

Investments in FinTech recorded $700,000 in 2010, $10.5 million in 2011, $9 million in 2012, $2 million in 2013, $7.2 million in 2014, $45 million in 2015, $2.3 million in 2016, $13.7 million in 2017, $113.9 million in 2018 and in the first quarter of 2019, $ 6.5 million was recorded.

From 2014-2018, Cellulant, Africa’s top FinTech company in the payments and transfers category, had the highest amount of $53million raised, Cowrywise , a FinTech company that democratises access to premium financial services by making these services available to the mass market had lowest of $170,000 in just 2018 alone.

Nigeria has the largest mobile market in Africa with over 172 million mobile subscribers in 2018, accounting to a penetration rate of 87 percent of its population and represented a 6.4 percent growth increase, compared to 162 million subscribers in 2017, according to a report released by Jumia, Africa’s online retailer.

Also from Jumia, at end of 2018, there were over 36 million smartphone users, representing a penetration of 18.37 percent year-on-year. The availability of lower-price point phones still remains the major driver of smartphone penetration.

Internet connectivity and the availability of affordable smartphones continue to drive an increasing uptake of social media networks. The number of active social media users rose from 17 million in 2017 to 24 million at the end of 2018. @Businessdayng

This represents a 12 percent penetration of the country’s population.

“I think mainly, more light is being shined on Africa, especially in Nigeria because of our population. FinTech is growing fast because of the population.

For example, the number of transactions that happen in Nigeria will be higher than the ones in Kenya or other neighbouring countries. So our high population is a major contributing factor. It is not really about the ease of doing business in Nigeria,” Sydney Aigbogun, chief executive officer of Cashbox, a Nigerian-based digital savings firm, said to BusinessDay on phone.

“When you have a large population to play around with, it gives you more money and investors want their returns quick. And also there are more mobile phone users and more people have access to cheap data because if they don’t have this, FinTech will become useless and the telecommunication sector has become better too,” Aigbogun further said.

A survey by Alliance for Affordable Internet (A4AI), a global coalition of private sector, public sector, and notfor-profit organizations which analysed 60 Low and Middle income countries (LMIC) in the world stated that at the end of 2017, only four African countries (Tunisia, Nigeria, Mauritius, and Egypt) had continuous improvements in affordable mobile broadband plans (i.e, 1GB plans available for less than 2 percent of average monthly income)

Country Most Recent Year Most Recent Value

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Angola 2017 16.5

BUSINESS DAY

news

Botswana 2017 1.8

Cameroon 2017 5.5 Congo, Rep. 2016 2.6 Cote d'Ivoire 2017 9.7 Egypt, Arab Rep. 2015 33.3 Equatorial Guinea 2017 2.3 Ethiopia 2017 4.6

FG bailouts now 3 times power privatisation...

Gabon 2016 13.4

Continued from page 1

BusinessDay calculations show.

Due to the absence of measurable impact of these bailouts, the Central Bank of Nigeria (CBN) is hesitant about disbursing the new N600bn bailout funds approved by the Federal Government to plug gaps in the power market.

Two sources present at the Power Sector Meeting with stakeholders and the regulator, which held in Lagos on September 9, said the CBN representative berated the power sector players over their inability to show tangible progress for the bailouts already collected.

Using the prevailing exchange rate of $1/N157, Nigeria earned N471 billion or about $3 billion from selling the power sector assets including 11 electricity distribution utilities and five power plants in 2013.

However, the government has so far spent N1.623 trillion on intervention funding or three times the naira value of the assets sold.

Analysts say this pattern of bailouts poses system risk to the economy because it excludes other critical sectors where funds can be more efficiently deployed to achieve measurable impact.

“Giving out these bailouts without evaluating the impact they are having is like pouring water into a bottomless pit,” said Chinwendu Enechi, senior manager, oil, gas and power at Anderson Tax. Enechi said unless Nigeria wakes up to the real issue which is fixing the electricity market by having a costreflective tariff in place, these bailouts funds would halt efforts to diversify the economy and reduce funding for critical sectors including agriculture.

While the bulk of these intervention funding has been termed loans, there are no clear signs towards repayment by these cash-strapped power companies with current market shortfalls and huge debts.

An analysis of the 2017 financial statements of 10 Nigerian power distribution companies (DisCos) shows combined accumulated losses or retained earnings of N713.63 billion, from N288.85 billion as at December 2016.

In accounting, a firm with negative retained earnings has recorded more losses than it has made profit since its existence.

Nigeria’s power sector privatisation is modelled after India’s electricity reform in early 2000s. The distribution companies were also burdened by debt and poor governance structures. Therefore, the country’s power sector kept over 300 million in darkness, according to a 2014 World

Monday 16 September 2019

Burkina Faso 2017 4.5

Bank study, and power sector debt reached Rs 3.5 trillion (US$77 billion) – 5 percent of India’s GDP – in 2011.

The study found that the continued flow of funds from lenders to “insolvent distribution companies” reduced their willingness to make urgently-needed performance improvements.

“Unless utilities are permitted to function as commercial entities, service delivery will not get the attention necessary and the financial sustainability of utility operations will remain an after-thought, leading to periodic bailouts,” Sheoli Pargal, economic adviser in the World Bank Group’s South Asia Infrastructure Department and one of the report’s authors, said at the time.

Following the recommendations of the study, the government embarked on reforms and began demanding measurable progress with each intervention funding. The target was to progressively invest in the network to cut down commercial, collections and technical losses.

The state regulatory bodies were given autonomy and were held accountable for their performance. Over the course of seven years, the utilities cut down losses as intervention funding gradually declined.

Unlike India, Nigeria’s intervention funding has often fallen short of achieving its purpose because “they are based on needs not on design”, said an official of one of the DisCos who asked not be mentioned.

The Federal Government does not enforce obligations to repay or follow through on commitments made before these funds were disbursed and they are usually poorly structured, the official said.

Bailouts to the power sector in the past five years are two times more than Nigeria’s 2019 education and health budget. The power sector got its first intervention fund of N213 billion as Power Sector Market Stabilisation Fund at concessionary interest rate below market rate to DisCos and GenCos in November 2014.

Three years later, the Federal Government approved the first tranche of N701 billion assurance guarantee for the gas suppliers to enable generation companies stay afloat due to declining revenues from DisCos. In 2018, the Federal Government said it has taken advantage of the new Meter Asset Provider (MAP) regulations to give a grant of N37 billion to a private sector operator to supply meters to interested DisCos. Ghana 2015 27.1

Guinea-Bissau 2017 3.7 Kenya 2017 13.2

Malawi 2018 18.9 Mali 2017 4.4

Mauritius 2017 7.5 Morocco 2017 9.7 Nigeria

Rwanda 2017 3.9

South Africa 2017 11.4 Sudan 2016 5.1

Tanzania 2018 10.3 Togo 2017 8.0

Uganda 2017 16.7

Sub-Saharan Africa 2017 8.0

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

Continued from page 1

Here’s how Nigeria could solve its fiscal...

according to official data.

Debt has been the preferred option to bridging a shortfall in public revenues despite opportunities to raise equity through privatisation. In four years, the government’s debt stock has increased by N10 trillion to N24 trillion as at March 2019.

Since peaking at an eightyear high of 69 percent in 2017, the government actually spent less on repaying creditors in 2018, with 55 percent of each naira earned going to debt service. That’s after N2.15 trillion went to debt service in the course of the year, while the government raked in revenues of N3.9 trillion.

The decline in the debt service cost may have come from a change of tack by the government in 2018 to swap expensive local debt for cheaper foreign debt.

That decline, however, hasn’t masked the government’s ugly balance sheet and the long-term concerns it elicits, particularly regarding the cost of public debt.

Since 2014, debt service costs have jumped 165 percent to N2.2 trillion in 2018. Going by that trend, debt service could more than double to over N4 trillion in another five years.

That’s more than the amount spent on infrastructure in the last two years combined and is about the total size of the 2014 budget.

In 2019 alone, the government has spent N1.1 trillion in debt service costs, 18 percent higher than the budget estimate and 55 percent of the N2 trillion government revenue for the half-year period.

This implies that the government spent N183 billion every month and N6 billion daily in the first half of the year to service debt.

At 55 percent of revenue, Nigeria spends the highest percentage of its earnings on debt service among 24 African countries surveyed by BusinessDay. South Africa spent 11.4 percent of its revenue servicing its debt in 2017, according to the latest data provided by the World Bank, while Egypt and Kenya spent 33 percent in 2015 and 13.2 percent in 2017, respectively.

While the percentage may have increased since then, Nigeria still outspent Kenya at the time as some 69 percent of revenues went to debt service in 2017. For some economists, the debt trend is unsustainable

African Countries Interest Payments (% of Revenue)

Morocco

Egypt/Arab Republic

9.7

33.3

(2017)

(2015)

Guinea B.

3.7

Mali

4.4

(2017)

5.1

to their clients in the upstream sector which has remained strong with crude oil trading around $60, while those with clients in the downstream will reduce their exposure to the sector,” he said.

Chukwu noted that the macroeconomic environment, activities in the oil and gas sector and oil price are factors that will determine the positioning of the banks going forward.

“The banks increasing their loans in the oil and gas sector will most likely be in-

(2017)

(2016)

E. Guinea

2.3

(2017)

Uganda

8.0

Burkina Faso

4.5

(2017)

(2017)

Cote D’Ivorie

9.7 (2017)

Nigeria

Congo

55

Kenya

2.6

(2018)

13.2

(2017)

(2016)

Ghana

Tanzania

27.1

10.3

Angola

16.5

(2015)

(2018)

Rwanda

3.9

(2017)

Cameroun

(2017)

Malawi

5.5

18.9

(2017)

(2018)

Togo

8.0 (2017)

Mauritus

7.5

Gabon

13.4

(2017)

Bostwana

(2016)

1.8 (2017)

South Africa

11.4

IN 2017

Sub-Sahara Africa spent

8.0 %

(2017)

Top five African countries with highest Interest payments (% of revenue)

55 33.3

27.1 18.9

16.5

of revenue on debt service

Nigeria

Source: World Bank

and creates a big mess for the future as it inhibits the cash that can be channelled into badly-needed physical and social infrastructure as well as human capital development.

“Going by the rule of 72, if interest rates on short-term paper are averaging 14 percent per annum, it means the sum of total debt owed plus interest will double in five years even if we don’t take additional debt between then and now,” an economist, who’s unauthorised to speak publicly, said.

“It’s clearly unsustainable and I feel any government coming in by 2023 is being set up to fail,” the economist, who keenly follows political events in Nigeria, said.

Despite admitting that it is facing “significant mid-term fiscal challenges” owing to weak revenue mobilisation and rising costs, the government’s math is quite different from a doubling in debt service costs within five years.

Zainab Ahmed, minister of finance, expects the government will spend N2.9 trillion to service its debt by 2022, up from N2.2 trillion in 2018.

From the numbers, Ahmed’s overambitious revenue projections are expected to keep debt service-to-revenue ratio at around 34 percent.

Some economists are holding that estimate with a pinch of salt and for good reason.

Nigerian banks record mixed...

Continued from page 2

Uganda

4.6

Sudan

(2017)

creasing in the upstream sector because of the fairly stable outlook for oil price and relative stability in the Niger Delta which put upstream in a favourable condition while the reverse is the case for the downstream sector,” Gbolahan Ologunro, a research analyst at Lagos-based CSL stockbrokers, said.

“Also, in the course of trying to restructure banks’ loans, some of the bank debtors might require banks to make some injections which they might use to stabilise their business which the debtors can use to generate

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Egypt

Ghana

Malawi

Angola

Infographic: David Ibemere

The government has failed consistently to accurately forecast most of its line items other than recurrent expenditure for more than three years.

From exaggerated revenues to underestimated borrowing costs, the government is fast developing a penchant for missing set targets in its budget.

Rather than the 34 percent debt service-to-revenue ratio estimated for 2022, economists say the actual figure could be closer to 100 percent on the back of lower-than-planned revenues.

On average, the Federal Government has only been able to meet 52 percent of its revenue target in the last three years through 2018.

Assuming the trend of raising only 52 percent of its revenue projections continues into 2022, then the government may raise only N4.16 trillion, at which point debt service could equal total revenues.

That could spell disaster for Nigeria, which would be left with zero cash to fund capital projects and pay its bills from worker salaries to overhead costs.

A possible way out of this impending debt implosion, which is now also dawning on the government, is to roll out a debt restructuring programme, according to Wale Okunrinboye, head of investment research at pension fund manager, Sigma Pensions Ltd. “The government needs to

cash flow to service the increasing debt burden or solve their working capital issues,” he said.

With the recent happenings in the oil sector, Ologunro said banks ought to be more cautious in creating risk assets.

“For banks with legacy issues, loan growth will remain muted in the short-tomedium term,” he said.

Adetola Adelu, financial analyst at Fides Capital Partners, said the oil and gas sector is generally a favourable sector which in most cases makes loan applications from the sector less rigorous because they often get favour@Businessdayng

embark on a sovereign-type rights issues to manage its debt,” Okunrinboye said by phone. “We need to sell down some government assets to raise equity and settle some of our debt so that we free up cash for better purposes,” he said.

The government has often talked up the need to raise equity through asset sales but not much action has followed that.

In 2017, the government announced that it planned to raise some N710 billion from the restructuring of some of its Joint Venture stakes with International Oil Companies.

Two years later, not a dime has been raised, neither has the paltry N10 billion which has been budgeted for as privatisation proceeds since 2016.

The government’s revenue mobilisation efforts have yielded little results, yet private capital has hardly been tapped.

Ayo Teriba, a leading economist and CEO of advisory firm, Economic Associates, said there’s no reason the government should be facing a fiscal crisis with the assets at its disposal.

The global liquidity glut provides a good time for the country to raise some equity, according to Teriba.

“We have $60bn in dollardenominated equity sitting idle in JV assets that can be securitised and investors will jump at it, automatically cancelling the need to rack up so much debt at such high cost,” Teriba said.

“We had this option before the oil price collapse in 2016 and long before the naira meltdown, yet we managed to ignore it,” he said.

Andrew S. Nevin, chief economist at PwC, is also convinced Nigeria should be looking to raise equity at this time.

“Nigeria has some N180 trillion in dead capital trapped in real estate and unlocking it would be a game changer for government revenue and the economy,” Nevin said.

“We need to act with some more urgency to boost economic growth given that Nigerians are growing poorer at an alarming rate as population growth continues to outpace GDP growth,” he said.

But critics say the current government’s ideology largely does not see the merits of private capital. “Time is running out on Nigeria and we are getting to that point where it’s embrace private capital or perish,” a senior banking source said on condition of anonymity.

able ratings.

Adelu said although most of the players in the oil industry often have a high liquidity ratio, their long-term solvency ratio, interest coverage and value of productive asset matter as well.

Loan exposure by sectors GTB loans to oil and gas upstream increased to 25 percent from 21.3 percent in H1 2018. Loans to oil and gas midstream increased to 15 percent in H1 2019 from 13.4 percent in H1 2018, while loans to oil and gas downstream increased to 4 percent from 3.8 percent in H1 2018.

•Continues online at www.businessday.ng

Monday 16 September 2019

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abujacitybusiness Comprehensive coverage of Nation’s capital

Commuters lament daily extortion by ticketing agents

L-R: Babajide Arowosafe, executive director technical, Nigeria IncentiveBased Risk Sharing System for Agricultural Lending (NIRSAL); Hassan Usman, MD/ CEO Jaiz Bank Plc; Aliyu Abdulhameed, MD/CEO NIRSAL and Mahe Abubakar, deputy managing director Jaiz Bank Plc during a meeting of the two institutions on the ways forward on Agric-business financing held in Abuja.

Stella Enenche, Abuja

C

Picture by TUNDE ADENIYI.

Tijjani-Aliyu sues for partnership between FCTA, FERMA on road maintenance James Kwen, Abuja

...Commends Korea’s educational devt in FCT

he Minister of State, Federal Capital Territory (FCT), Ramatu Tijjani-Aliyu has called for a closer collaboration between the Federal Capital Territory Administration (FCTA) and Federal Road Maintenance Agency (FERMA) in road maintenance across the Territory.

Tijjani-Aliyu who made the call when the management staff of FERMA led by its Managing Director and Chief Executive Officer, Nuruddeen Rafindadi, paid her a congratulatory visit

also noted that FERMA has diligently and competently carried out its functions across the length and breath of the nation.

She promised that the FCT Administration will continue to strengthen the relationship between both organisations, just as she called on residents of the territory not to vandalize FERMA facilities in the territory.

In his remarks, the Managing Director of FERMA, Rafindadi congratulated the Minister over her appoint-

T

ment by President Muhammadu Buhari, stressing that the FCT Administration is very important to FERMA as a host city to many government agencies.

Rafindadi also noted that the FCTA is presiding over a state and at the same time carrying out administrative tasks for the presidency and urged the Administration to treat other agencies as special.

Meanwhile, the FCT Minister of State has commended the Republic of Korea in promoting quality education

in the FCT and expressed the appreciation of the people of the Territory to the Government of the Republic of Korea for its contribution to the educational development of the nation’s capital.

Tijjani-Aliyu who gave the commendation when the Korea Ambassador to Nigeria, In-Tea Lee paid the FCT Administration a courtesy visit, tasked the Government of the Republic of Korea to replicate the quality of the model school established in Abuja in other states of the federation.

FG to establish second runway in Abuja Airport Stella Enenche, Abuja

T

he Federal Government has concluded plans to establish a second runway at the Nnamdi Azikiwe International Airport, Abuja.

This came as transaction advisers for the establishment of a national carrier, Nigeria Air have concluded their baseline studies and are set to submit their findings to

the federal government.

Minister of Aviation, Hadi Sirika made the disclosure in his office in Abuja, at a meeting with officials of the National Air Traffic Controllers Association.

While noting that the move to establish a national carrier was still being pursued, Sirika expressed delight that Nigerians were inclined to the project.

“The second runway proj-

ect is in the budget and it will be procured by God’s grace.

The national carrier is in the pipeline and in the next one hour I will be meeting with the transaction advisers.

They are in town and they have concluded their baseline studies and we are moving to the next stage. So that is also on course”, Sirika said.

The Minister also disclosed that efforts were being intensified at upgrading

communication systems at control towers across airports in Nigeria and called on airline operators to help improve their communications systems with a view to enabling them function effectively.

At an earlier meeting with Airline Operators of Nigeria, the Minister hinted that the aviation was the second fastest growing sector in Nigeria.

FCDA threatens to terminate infrastructure contracts at Galuwyi- Shere Resettlement Housing James Kwen, Abuja

T

he Federal Capital Development Authority Authority has directed contractors handling infrastructural projects at the Galuwyi- Shere Resettlement Housing Scheme in Bwari Area Council to complete work according to specifications or have their contracts terminated.

Jibrin Umar, FCDA Executive Secretary who gave this directive during inspection of facilities at the Housing

Scheme in Bwari expressed displeasure over the poor handling of infrastructural projects such as access roads, electricity and water in the resettlement estate.

Umar also disclosed that the Authority will soon begin the eviction of illegal occupants of the facility who have not moved out even with the expiration of deadline earlier issued as FCDA will soon commence the resettlement.

He announced that out of the nine communities earmarked for the scheme, the

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Jabi Yakubu Community will be the first to be resettled in no distance time as directed by the Minister of the Federal Capital Territory, Muhammad Bello.

“The Communities, initially were seven and now nine but right now we are talking of the first one to move, Jabi Yakubu. You have seen the number of houses that are there, close to 100, precisely 94 including Chief’s own, 95”, Umar said.

While conducting the Executive Secretary round the site, FCDA Director of Public

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Buildings, Anthony Odigie explained that the project started in 2005 with the intention to build 2, 266 houses and by 2009 only 1400 were completed while others were at various stages of completion.

Odigie however said, due to problems such as the non payment of contractors, litigations among others led to the dilapidation and vandalization of the completed houses until 2017 when FCDA began rehabilitation to make them habitable ahead of the resettlement.

ommuters besieging the Abuja - Kaduna train station daily have lamented the daily extortion they suffer in the hands of ticketing staff.

Following the rising cases of kidnapping, armed banditry, armed robbery and other security challenges on the Abuja- Kaduna highway, passengers have resorted to using train services as a way of staying safe from the criminal elements along the ever-busy corridor.

Since July 2016, when president Muhammadu Buhari commissioned the $ 1.457 billion project, the passenger population has continued to increase, thereby putting the management of Nigerian Railway cooperation(NRC) under immense pressure on how to manage the huge traffic situation.

It will be recalled that sometime in 2017, the minister of transportation, Rotimi Amaechi had sacked three

staff of the NRC over ticket racketeering.

However, a visit by BusinessDay to the train station revealed that the sack of some members of staff over the misconduct, may not have deterred ticketing staff from engaging in some alleged fraudulent activities.

Passengers, who spoke with our correspondent at the Kubwa station said, they have resorted to “sorting” ticketing staff so as to secure seats on the train which, they claim, have become highly competitive.

According to them, they reconciled themselves to the ongoing exploitation at the station, in order not to jeopardise their safety along the Abuja - Kaduna highway.

A commuter, who spoke on the condition of anonymity said: “Fact is, my family and side businesses are all in Kaduna but I am a civil servant and I work here in Abuja.

I can’t afford to be struggling for tickets every weekend because I have to travel down every other week”.

Benue College ranked best in Nigeria by NISSMUN Benjamin Agesan

P

rincess Adeja International College, Gboko has been ranked the Best College in Nigeria BCN for a record 5th time in the 2018 edition of Nigeria International Secondary Schools Model United Nations (NISSMUN) Conference held in Abuja.

Princess Adeja International College is the most celebrated college in Nigeria today having won the award of the BCN for a record 5th time in 2018, after previously setting the enviable and unbeatable record of winning the prestigious award in 2013, 2014, 2015 and 2016 thereby placing Benue State on the

global map.

Like the previous years’ graduation, the event featured unveiling of three first class graduates who were decorated with the prestigious Adeja Green Jacket and the sum of fifty thousand naira (N50,000.00) each for doing the college proud.

The School Principal, Sam Davis in a remark said for doing the state and nation proud, government ought to know that the college is there and do the needful while commending parents who trust them with their children.

Princess Adeja International College only recently, made Benue Proud by winning the 2nd edition of the Africa Young Orators National competition 2019.

Non-repayment of loan remains our major challenge-BOA Cynthia Egboboh, Abuja

T

he Bank of Agriculture (BOA) on has lamented that customer’s non repayment of loan has remain a challenge that hampers its lending effort to farmers.

Kabir Adamu, BOA Managing Director who disclosed this while receiving the delegates of the National Institute for Policy and Strategic Studies (NIPSS) on a study tour to the Bank in Abuja said there is need to develop a legal framework that will compel defaulters to be sanctioned.

Adamu said the bank was established with the mandate to support small

@Businessdayng

holder farmers and medium scale enterprises but most of them often do not payback the loans.

He noted that the inclusion of commercial banks in the anchor borrowers scheme has made it difficult for farmers to access the fund, stressing that all agricultural related fund should be deposited in the Bank of Agriculture.

Asipita Umar, Managing consultant, NIPSS in his remarks said the tour was aimed at equipping the delegates and policy makers on agriculture financing in Nigeria as the institution is saddled with the responsibility to research and develop key inputs for government policies.

Monday 16 September 2019

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Monday 16 September 2019

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25% import duty weakens MAP implementation …with millions of meters stuck at port HARRISON EDEH, Abuja

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he 25% import duty slammed on meters imported into Nigeria has cast doubts on the possibility of closing the metering gap of 4.6 million electricity consumers in the country.

Some Meter Access Providers (MAP) are worried that their imported meters are stuck at the port on the back of the 25% duty hike by the Custom, and some of them raised the concern at a recent engagement with the Nigerian Electricity Regulatory Commission (NERC).

Chuks Nwani, an Energy Lawyer who consults for some MAPs, told BusinessDay that they had agreed to make an official documentation with the regulator on the issue to address their concern.

“As we speak now, there are several imported meters from the Meter Asset Providers that are stuck at the Port due to the 25% hike. This has made the closure of the metering gap weak, while also threatening the closing of the metering access,” Nwani, told BusinessDay. The Federal government, through the NERC , had worked out a model through the MAP, to enable unmetered Nigerians get metered as part of measures to address the liquidity concern already threatening the electricity

sector. The MAP regulation commenced on the 1st of May 2019.

Adetokunbo Kayode, the President of Abuja Chamber of Commerce and Industry, expressed worry while speaking to BusinessDay, that Nigeria won’t make appreciable progress in closing the metering gap, adding that “Metering concerns cold have been addressed if there were more local companies producing meters in the country.”

Kayode told BusinessDay further that: “Through the Nigerian-Russian Business Council, we have been exploring options of ensuring we attract huge investments into Nigeria, taking advantage of the forums like this.

We are already talking to investors in meter manufacturing to come into Nigeria to enable more metering manufacturing.”

BusinessDay findings revealed that only Mojec and Mammas are the key metering companies assembling meters in the country. Most other companies who are merely importing the equipment are squeezed by the 25% duty.

NERC, according to the MAP Regulations, is expected to sanction licencees, who did not meet up with the task of metering their franchise areas.

Industry analysts had noted that the MAPS cannot

meet up with the metering obligations of providing smart meters to homes, considering all these concerns, even as they called on the to find alternative options in metering electricity consumers.

“In the United States, for instance, there is still the option of post-paid metering ,where the regulators go after households that don’t have meters and collect their pay per monthly or bi-weekly depending on the arrangements,” Emeka Okpukpara, lead partner at NEXIER Power, told BusinessDay. He noted further that the regulator could explore the option of post-paid if providing meter access was not enjoying the expected success.

“The Regulator in their Performance improvement Plan signed with the Discos could explore options of ensuring that the Discos insert a software that enables them know the power that enters each household to enable them monitor consumed power for appropriate billing and payments,” Okpukpara noted further.

Oyebode Fadipe, the spokesperson for Abuja Electricity Distribution Company, told BusinessDay that the MAPs in their Franchise areas covering Niger, Kogi, Nassarawa, and FCT had been attending to customers to close metering gap.

Dradrock canvasses all-inclusive innovation in real estate development

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relatively young property development firm, Dradrock Real Estate Limited, has canvassed all-inclusive innovation in real estate development, saying that deploying cutting edge innovation and technology to accelerate quality service delivery through seamless customer experience is the way to achieve real estate sector growth.

Oladipo Idowu-Agida, the firm’s CEO, stated this in an interview on the sideline of African Real Estate Conference and Awards (AFRECA’19) that took place in Lagos recently.

In his presentation titled

‘Future of the Nigerian Real Estate Sector: Harnessing New Innovations, Idowu –Agida noted that the huge housing gap that needed to be filled to forestall an impending housing crisis in the country.

According to him, statistics point to the fact that, by year 2025, Nigeria will need about 20million new homes compared to what it needed in 2012.

As a solution, he advocated innovations that will include deploying the right people, effective cost management, specialist skills and entrepreneurship, government partnership and global network.

He disclosed that Dradrock was established in 2017 to tackle the housing deficit in the country, pointing out that, though the core of its services is in real estate developments, the company also delivers unique master-planned lifestyle affordable options, through its various products such as Annapolis courts, Annapolis Gardens, Annapolis Residence, and Pacific Manor, amongst others, stating that in a short while, the company has been able to provide accessible real estate solutions in Nigeria with the highest possible standards and yet it is still spurred to do more.

EDC confab seeks data power to drive growth of SMEs KELECHI EWUZIE

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midst economic challenges that small and medium enterprises face in Nigeria, discussions that center on building capacity and pointing the way for SME in Nigeria will take centre stage at the forth-coming 13th edition of Enterprise Development Centre conference in Lagos.

The conference will focus on governance which is key as well as how entrepreneurs can utilise data to drive growth, and deploy technol-

ogy to change the narrative of business.

Peter Bamkole, director, Enterprise Development Centre (EDC) which is the not-for-profit arm of the Pan Atlantic University says the SME conference will provide opportunities for networking among participants.

Bamkole while announcing the conference scheduled for 18th of September 2019 with the theme “Growing a Business in Challenging Times: Exploring New Trends in Entrepreneurship”, says empowering small business

owners to grow will help reduce the burden on government and facilitate the creation of job opportunities for the unemployed.

Charles Anyanwu, Head, SME, at Lagos State Employment Trust Fund (LSETF), said the state is committed to capacity development, adding that platforms such as the SME conference will help pull many youth off the street.

LSETF one of the partners for the year’s conference lauded EDC for its work towards stimulating a national movement for entrepreneurship.

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More struggles for real estate investors as xenophobia threatens opportunities in AfCFTA CHUKA UROKO

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he xenophobic attacks in South Africa directed chiefly at nationals of other African countries are seriously threatening opportunities which the African Continental Free Trade Agreement (AfCFTA) is expected to offer real estate investors on the continent, experts have said.

At the continental level, African real estate markets are underperforming with the investors struggling with falling demands and rising vacancy rates in both residential and commercial real estate buildings. The signing of AfCFTA in June 2019 was seen by these investors as light ray in the tunnel.

Apart from facilitating job creation and greater competitiveness of African micro, small and medium-sized enterprises (MSMEs), experts explain that, as a trade agreement in force between African countries, there are also opportunities for real estate investors in AfCFTA. But these foreseen or expected opportunities are now under threat because, according to MKO Balogun, CEO, Global PFI, a Lagosbased real estate firm, “any disturbance or unrest leads to uncertainty while uncertainty,

in turn, breeds negative effect on economy.”

Though Balogun says the value of African foreign ownership of real estate asset in South Africa may not be all that significant, Edem Usong, a real estate manager and property market analyst, differs, taking a holistic view of Africa as a whole and South Africa as the second largest economy on the continent.

Africa is generally considered underweight relative to other continents in terms of the value of its real estate assets. Despite its large and growing population estimated

at 15 percent of the world total, the gross asset value of Africa’s real estate is estimated at €113 billion, representing just 1 percent of the world’s total value.

Andrew Baum, a Cambridge University professor and thought leader on global real estate investments, who gave this insight at a roundtable discussion in Lagos, explained that the continent’s underweight in real estate asset value was based on global performance of real estate investment trusts (REITs).

This explains, in part, why AfCFTA as a crucial ingredient in lifting people out of

poverty and invigorating the continent’s growth trajectory, was welcome especially by real estate investors. “Africa is now one of the biggest economic blocs in the world, meaning that the continent has become borderless such that businesses can now move from one country to another,” noted Mustapha Njie, CEO, Taf Africa Global.

“Free movement of businesses from one country to another means there will be increased demand for both residential and commercial real estate, including office, retail and industrial space

in which investments could be made,” Njie added in an interview with BusinessDay. However, Usong notes that “what xenophobia is doing in South Africa is a direct opposite of the expected gains of AfCFTA because the attacks on Nigerians and their investments in South Africa and the reprisal attacks on South African interests in Nigeria are all counter to the spirit of AfCFTA”.

“Nigerian, Zimbabwean and Kenyan nationals are the main targets of the xenophobic attacks and these countries, particularly Nigeria, are major real estate investment

Bolaji Akinyemi asks Nigeria to Sue South Africa over Xenophobic Attacks

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olaji Akinyemi, Nigeria’s former minister of external affairs, says the country has enough grounds on which to sue the South African government and some of its officials over xenophobic attacks on Nigerian immigrants to that country.

In an emailed statement on Sunday, Akinyemi called on Nigeria “to sue South Africa before the International Court of Justice for failure in its duty of care and protection of Nigerian citizens resident there” Additionally, he asked Nigeria to “file complaints against specific South African officials at the International Criminal Court for aiding and abetting the xenophobic attacks.”

The former minister said his counsel to Nigeria was based on some facts, including statements credited to some South African government officials.

Akinyemi, a former Director-General of the Nigerian Institute of International Affairs, listed some of these facts to include a statement by the South African Minister of International Relations, that Nigerians were drug dealers, and another credited to the Deputy Police Minister, Bongani Mkongi, that they fought for their land and that that land would not be surrendered to immigrants. www.businessday.ng

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destinations and commercial hubs on the continents,” Usong said, pointing out further that these attacks impact negatively on the economy of the continent and also on individual countries.

He recalled how South African investors took the Nigerian retail and office space markets by storm, spreading their investment interests in both core and secondary retail markets.

He cited Resilient Africa, a real estate investment company from South Africa, that was already operating outside the traditional big cities of Abuja, Lagos and Port Harcourt.

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news FG’s proposed VAT increase to worsen lean consumer wallet ...new VAT to generate N479.7 billion in revenues - Afrinvest Michael Ani

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he proposed increase in the consumption tax, placed on the value added to goods and services, will force companies to increase the prices of goods and services which would further worsen the living conditions of consumers, whose real income have been stifled over recent years.

In order to shore up revenue to meet budgetary expenses and cater for the new N30, 000 minimum wages, the federal government through the Minister of finance, Zainab Ahmed, last week, approved a 44 percent increase in Value Added Taxes from 5 percent to 7.2 percent, a move that has attracted various criticisms from all round stakeholders.

“In our view, the plan by the Federal Government to finance the increment in the wage burden through tax increment would force companies to raise prices significantly, ultimately placing the incidence of the tax increment

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on the consumers,” analysts at Lagos-based Stockbroking firm, CSL said in a note.

Manufacturers of goods and services in Nigeria have struggled to stay afloat in a harsh operating environment coupled with declining consumer’s income that has been eroded by double digit inflation.

Data from the National Bureau of Statistics on Gross Domestic Product (GDP) by Income and Expenditure approach at 2010 purchaser’s values show that consumption expenditure of households has been declining at varying rates since it rose by 1.5 per cent in 2015. This has added more woes to the revenues of Consumer Goods Companies, as they jostle for lean consumer’s cash. The consumers, on their part, are looking for the highest quality products at the lowest possible prices.

Dwindling federal government revenue ,owing to lower crude oil prices is forcing Africa’s largest economy to search for measures that would help in shoring up non-oil revenue.

Babatunde Fowler, executive

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chairman, Federal Inland Revenue (FIRS), hinted earlier that come next year, the tax agency would impose taxes on all online purchases. The proposed VAT hike is part of a broader drive to increase tax revenue.

“We expect the increase in VAT to generate additional N479.7bn in revenues, based on the N1.1tn collected in 2018,” analysts at Lagos-based Afrinvest, a securities and investment firm said.

Zainab while announcing the new increase said the hike was important because the Federal Government only retains 15 per cent of the VAT while 85 per cent is actually for the states and local governments. “The states need additional revenue to be able to meet the obligations of the minimum wage,” she said.

Afrivest said in a note that based on the sharing formula, the FG would receive additional N72.0bn (15.0 percent), states would get N239.8bn (50.0 percent), while local governments would get N167.9bn (35.0 percent) upon the implementation of the planned increase.

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BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

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How to cancel death sentence on your business ... as 90% of family businesses face extinction The Solid Wealth Messenger

Grace Agada

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uccessful family businesses have within them both the ability to live and the ability to die.

According to global research, almost 90% of family businesses will not make it to the third generation. In Nigeria, it is even hard to find a successful and thriving three generation family business. This means that your seemingly successful and thriving business today may be dead

by September 16th, 2109 which is exactly three generations from now. The reason for this massive murder of family businesses is the lack of a timely, well-planned and well-documented succession plan. According to the survey by PricewaterhouseCoopers 2014, only 16 percent of family businesses have a documented succession plan. Having no succession plan in place is a plan in itself and this plan is inevitably death. If your Business has no succession plan, it means it is already dying. It is up to you to decide whether you want this death to continue or whether you want to stop this death from happening to your business.

If you were Methuselah, the oldest person on record in human history who died at age of 969, you would live longer than three generations that saving your business from the three generation death sentence will not be a problem.

But unlike Methuselah, you and the whole of humanity as we know it today has a significantly shorter life span. Research shows that the average life expectancy for men is 68 years and 4 months and for women is 72 years and 8 months.

This means that your time here will soon be over. When it eventually does, how would your business survive the unfortunate fate described by the famous Chinese

proverb, “shirtsleeves to shirtsleeves in three generations”.

Would your wealth be spared like that of Rockefeller or would your wealth be murdered like that of the Vanderbilt?

Preserving wealth and family businesses across multiple generations require a certain type of skills that are vastly different from the skills required for building and sustaining businesses within one generation. While the creation of your business involved your individual determination, the wisdom and lessons gleaned from the grind and sacrifice of building a business from scratch, subsequent generation will have to be helped to develop collaborative skills as well as the skills required for creating additional wealth from existing wealth.

Without these skills the longevity of your business is already determined. Not planning for succession is choosing to buy a future of tragedy.

So what can wealth creators do to reverse the hands of death and position their businesses for long-term success?

The answer is simple and it is two faceted.

Firstly, business leaders must treat succession as a top priority. Sometimes the delay in succession planning results from the lack of confidence in the competence and sometimes credibility of the next generation. In some cases these competencies are truly absent and can be acquired if the right kind of help is sought. Other times it is that business leaders are reluctant to accept the new ideas and challenge the younger generation brings into a business and may want to keep operating the business the same way. However, business leaders must understand that not all businesses are designed to be multi-generational businesses and some businesses may even become obsolete during the lifetime of the founder.

Even when businesses remain relevant throughout the first generation, it is very unlikely that it will remain the same in

Objectives • Solid Wealth Creation • Solid Wealth Preservation www.businessday.ng

shape and form in the second or third generation. The younger generation must, therefore, be given the room to create new ideas and adapt the businesses to meet the demands of the future. It is this openness of the business leader and the emotional detachment from the initial business idea that make succession smooth and family businesses resilient over the long-term.

Secondly, business leaders must manage their need for control with their need to become multigenerational heroes. The longer a business leader remains at the helm of affairs in the family business, the more successful he will likely become in his lifetime career, but the sooner he will also be forgotten. To create a multigenerational legacy, business leaders must develop a series of transfer signals that should initiate the beginning of the succession process.

To begin succession, business leaders must clearly articulate the criteria for a competent successor that will take over from them. They must understand how they judge competence and how they come to trust. Successors, on the other hand, must know exactly how they can earn the trust of the business leader, be seen as competent and fulfill their career goals. Business leaders and successors must be guided to gradually shift base through a series of role adjustment until the succession and handover process is complete. The business leader must move from sole operators or monarchs having preeminent powers over their business to overseer-delegator, from where he finally must transition to consultant who is disengaged from

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the organization.

At the same time, the successors must progress from having no role to being a helper (monarch), to a manager, (under the monitoring of the overseer-delegator) and finally, leader/chief decision-maker (when the owner is disengaged and the successor is weaned from the founder’s direct “micro-managing”). Thus, in a carefully planned succession process, both the leader and successor advance through these stages simultaneously to maintain a healthy relationship and promote trust throughout the process.

If family business leaders must break the three-generation barrier and grow their Businesses across multiple generations, they must tackle and not dodge the issue of succession. It is the responsibility of the current generation to successfully pass on the baton to the next generation while they are still alive as the longevity of their family businesses and wealth depends on it.

If you need help preparing the next generation for their role or breaking your business from the three-generation death sentence, we can help you. To get help Text “Business Succession”, to 08101860042 for a special report on how we can work together.

Succession is the one critical factor that will determine the lifespan of your business.

‘

If family business leaders must break the threegeneration barrier and grow their Businesses across multiple generations, they must tackle and not dodge the issue of succession

Grace Agada is a Senior Wealth Advisor and Author with extensive experience in wealth creation, wealth preservation and wealth transfer.

Email: info@createsolidwealth.com Tel: 08101860042

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Monday 16 September 2019

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BUSINESS DAY

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FINANCIAL TIMES

World Business Newspaper

BEN HALL, ROMAN OLEARCHYK AND MAX SEDDON IN KIEV

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kraine is looking to exchange hundreds more prisoners with Russia as it seeks to pave the way for revived peace talks with Moscow to end the conflict in the eastern Donbas region, according to Ukrainian officials.

Andriy Yermak, Ukraine’s chief negotiator, told the Financial Times that Kiev wanted to swap all Russian detainees held in Ukraine in connection with the fighting for the more than 100 Ukrainians in jails across the border, as well as a further 227 held captive by Moscow-backed separatists.

“First we will find each Ukrainian person held in Russia and the territories not controlled by Ukraine, then we will [exchange them] according to the principle of all for all,” Mr Yermak said.

Moscow and Kiev earlier this month exchanged scores of prisoners in a goodwill gesture that Kiev hopes will lead to the first face-to-face peace talks between new president Volodymyr Zelensky and his Russian counterpart Vladimir Putin together with the leaders of France and Germany later this month.

The release of celebrated Ukrainian film-maker Oleg Sentsov and 24 Ukrainian sailors captured by the Russian navy near the Kerch Strait last year was a cause for celebration in Kiev.

“We couldn’t let these people

Ukraine eyes further prisoner swap with Russia Exchange seen as paving the way for revived peace talks with Moscow

Ukraine’s new president Volodymyr Zelensky is making efforts to to build goodwill with the Kremlin © PRESS SERVICE OF P. POROSHENKO

down. They had been unfairly convicted, we obviously had to return them home and had no right to drag out the process,” said Ivan Bakanov, a businessman who ran Mr Zelensky’s TV production company and who is now head of the Ukrainian

Uganda’s oil ambitions delayed as deals stall Oil majors will be pulling back from project preparations TOM WILSON IN NAIROBI

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ork on a multibillion-dollar Ugandan pipeline project has stalled in the wake of continued disagreements between the government and its three foreign partners, threatening the east African country’s hopes of becoming the world’s next oil producer.

France’s Total, UK-listed Tullow Oil and the China National Offshore Oil Corporation jointly control three oil blocks in Lake Albert, a giant stretch of water on Uganda’s border with the Democratic Republic of Congo.

Ugandan officials have long hoped that investment in Lake Albert — home to Africa’s fourthlargest oil reserves — would accelerate economic growth in the region from 2020.

But 13 years after the first discoveries were made, Total said it was stopping technical work on the oilfield and pipeline project following the collapse of a deal to buy additional equity from Tullow and the failure of talks with the Ugandan government to agree legal terms for the

investment.

Oil executives said the decision to stop work had been discussed with the government but Uganda’s oil minister, Irene Muloni, said she had not been informed and denied the project had reached an impasse.

“They have not given any formal communication [of an intention to cease work],” Ms Muloni told the Financial Times.

“The discussions on the various issues are ongoing and we hope to reach an agreement very soon.”

The pause in activities after years of negotiations is the latest setback for a complex project whose upstream development costs are estimated at $10bn and which requires the construction of a 1,443km electrically heated pipeline — the longest in the world — to get the oil from landlocked Uganda to the Indian Ocean. Tullow confirmed the commercial viability of the oil blocks in 2009 but a final investment decision has been delayed multiple times.

Total told the Financial Times that the partners could make no further progress until they had “a clear and stable legal framework and clarity on the project shareholders”. www.businessday.ng

security service, the SBU. The move is part of an effort by the new Ukrainian government under Mr Zelensky to build goodwill with the Kremlin and the Russian-speaking population in the Russian-backed separatist-

held parts of Donetsk and Lugansk provinces.

Kiev has unilaterally pulled back its forces from the town of Stanytsia Luhanska and is poised to do so in two other places before disengaging from the entire 400km

frontline. It has cleared minefields and dismantled fortifications, and is preparing to make it easier for locals behind the lines to draw their pensions.

But foreign minister Vadym Prystaiko cautioned that disputes over whom to consider a prisoner were a likely sticking point in future talks. “The principle of all for all is ideal . . . but we are not expecting it to happen,” he said. Ukraine also believes that as many as 500 of its citizens listed as missing in action are being detained by the Russianbacked militants, he said.

Mr Zelensky, who has made peace his priority, is determined to try a new approach to break the deadlock that prevailed for three years under his predecessor Petro Poroshenko. “We are very different people,” said Mr Yermak. “We are open, we are transparent, everything is on the table.”

The outlines of a peace deal to end the fighting in eastern Ukraine were agreed in Minsk, the capital of Belarus, in 2015 but the agreement has not taken hold largely because Russia failed to follow through on its undertakings to end the fighting and pull back its forces.

Saudi Arabia faces weeks without full oil production after attack

Kingdom in talks to assess whether it should ask fellow Opec countries to help calm markets after attack FT REPORTERS

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audi Arabia faces weeks without full crude and gas production capacity after Saturday’s attack on the world’s most important oil facility.

While some officials in the kingdom have sought to reassure oil markets that production will come back quickly, people briefed on the matter say it could take far longer restore output to its maximum level.

“It will take weeks to ramp up and bring the complex to maximum capacity,” said one person close to the energy ministry.

While the full extent of the damage is still being investigated, the person said there was enough concern that the kingdom was in talks with several Opec countries. One option could be to call an emergency meeting of the oil producers’ cartel.

The kingdom, which is the de facto leader of Opec, is in the initial stages of assessing whether it will need to ask other member countries to temporarily raise production to calm markets until Saudi Arabia’s output can fully recover.

The discussions are at an early

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stage and may not materialise into action, the person said. But given that Saudi Arabia has previously led the group in reducing output to support prices, the talks illustrate the depth of concerns in the kingdom.

The US has blamed Iran for the attacks on Abqaiq, a vital crude processing centre south-west of Saudi Aramco’s headquarters in Dhahran, and the Khurais oilfield, that forced the world’s top crude exporter to suspend more than half its oil production.

The attacks have heightened concerns about the vulnerability of Saudi Arabia’s oil infrastructure as the stand-off between the US and Iran have ramped up tension across the Middle East.

Riyadh is the Trump administration’s closest Arab ally and has been a staunch backer of the US strategy of imposing “maximum pressure” on Iran in an effort to force it to renegotiate its 2015 nuclear agreement with world powers and curb its support for militant groups across the Arab world.

Iran-aligned Houthi rebels, who are fighting a Saudi-led coalition in Yemen’s four-year civil war, have @Businessdayng

claimed responsibility for what they said was an attack by 10 drones on the two oil facilities.

Mike Pompeo, US secretary of state, accused Iran of launching “an unprecedented attack on the world’s energy supply,” adding that there was “no evidence the attacks came from Yemen” Iran on Sunday dismissed the US’s allegations, with the foreign ministry saying Washington’s claims were part of its policy of “maximum lies”.

Mohammad Javad Zarif, Iran’s foreign minister, said having failed at “max pressure” Mr Pompeo was “urning to “max deceit”.

“US & its clients are stuck in Yemen because of illusion that weapon superiority will lead to military victory,” Mr Zarif said on Twitter.

“Blaming Iran won’t end disaster.”

Pictures and video posted on social media showed large fires at Khurais, which lies more than 500km from the Yemen border.

Amin Nassir, Saudi Aramco chief executive, said that the company had extinguished the fire, which had caused no injuries, and was working on restoring production.

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news

Naira strengthens to 358/$ on low demand, Yuan trades …weak economy, closed borders Hope Moses-Ashike

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igeria has recorded a 0.6 percent appreciation in nairadollar exchange rate to N358/$ currently from N360 sold since June 2018 at the parallel and Bureau De Change (BDC) segment of the foreign exchange market.

This was due to the lower demand for dollars and increased use of the Chinese Renminbi (Yuan) by importers.

“The Central Bank of Nigeria (CBN) is now selling Yuan to importers and that is removing the demand for dollars,” said Azubuike Igbokwe, a BDC operator in Anambra State.

The apex bank had in April 2018 signed a $2.5 billion currency swap agreement with the People’s Bank of China to facilitate trade between the two countries and enhance foreign reserve management.

Consequently, CNY237.6m (US$34.9m) was injected into the market by the CBN in the first quarter (Q1) of 2019, a report by FBNQuest indicated.

To access this segment of the window, the importer’s letter of credit must be denominated in Renminbi.

Other reasons, Igbokwe noted, included increased dollar liquidity as the CBN has continued to intervene by selling dollars in the forex market.

The CBN on September 11, 2019 injected a total of $210 million into the inter-bank

market.

A breakdown of the intervention showed that the wholesale segment of the market was offered the sum of $100 million, while the Small and Medium Enterprises (SMEs) segment received the sum of $55 million. The sum of $55 million was allocated to customers requiring foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others.

Isaac Okorafor, director, corporate communications department of CBN, assured of the apex bank’s commitment towards ensuring stability in foreign exchange market.

On September 6, the CBN intervened with the sum of $321.11 million and CNY33.3 million into the Retail Secondary Market Intervention Sales (SMIS) segment.

Other analysts believe the CBN’s restriction of certain items from accessing foreign exchange has contributed to low demand for dollars.

A Lagos-based importer told BusinessDay by phone that he had held on to importation, while waiting and watching the government regarding its policies.

The importer who preferred to be anonymous said some of the importers who are still importing chose to source the dollar from the parallel market instead of the official window which requires filling Form Q documents.

L-R: Bankole George, South-East regional director, Dangote Cement plc; Funmi Sanni, marketing director, Dangote Cement plc; Onyeka Okpara, star prize winner; Olukayode Akin-Bamidele, head, route to market, Dangote Cement plc; Dorothy Ufot, independent non-executive director, Dangote Cement plc, and Ayirioritse Oke, deputy regional director, South-East, Dangote Cement plc, at the star prize presentation in the ongoing Dangote Cement ‘Bag of Goodies’ national consumer promo in Owerri, Imo State.

500 persons receive cars, tricycles, other items from Dangote cement TEMITAYO AYETOTO

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o fewer than 23 persons have so far received brand new saloon cars from Nigeria’s leading cement manufacturer, Dangote Cement plc, in the ongoing ‘Bag of Goodies’ national consumer scratch and win promotion in appreciation of their loyalty to the cement brand.

Aliko Dangote, chairman of the company, said in Uyo, Akwa Ibom State, that 20 more cars are still up for grabs even as the foremost cement producer disclosed that some 500 customers have gone home with either tricycles, motorcycles, refrigera-

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tors or plasma television sets in the last two months.

Dorothy Ufot, Senior Advocate of Nigeria and member of the company’s Board of Directors, who represented Aliko Dangote at a presentation of prizes to winners in Uyo at the weekend, stated that the promo had turned around the lives of many Nigerians through the economic empowerment prizes they won.

Dangote insisted that his companies would continue to spread prosperity and create jobs for the teeming population, saying the private sector has a lot to do to augment government efforts at alleviating poverty and

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improving the lives of the people.

In Uyo, a block maker, Aniekut Umoh, collected keys to a brand new car, while winners of refrigerator, Nsikak Michael Ottong, Aniekan Sunday and Efefiong Umoren, collected their prizes. Also in Owerri, Onyeka Okpara received keys to a new car, Uchechi Obasi a new motorbike, while Nworie Charles and Okorie Promise emerged as winners of refrigerators.

Ufot said the promo is an indication that Dangote Cement is keeping faith with its customers who are keeping the company in business. She lauded consumers in Akwa Ibom State for choosing Dan-

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gote Cement, saying there are still many cars to be won.

In Ilorin, the company earlier presented 13 refrigerators, 11 plasma TV sets, a tricycle and motorcycle to winners in the promotion in the region.

“We are giving out 43 cars nationwide and other prizes.

We are here today to say thank you for your contribution to the growth of our company, Dangote Cement plc. We value our customers that is why we have brought this promo to Uyo. We value everybody in our value chain system (distributors, wholesalers and retailers) and this our own way of giving back to our consumers,” Ufot said.

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Monday 16 September 2019

BUSINESS DAY

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Monday 16 September 2019

BUSINESS DAY

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

A15

Company IN FOCUS

BUSINESS DAY Monday 16 September 2019 www.businessday.ng

Access Bank: Reaping early fruits of synergy Israel Odubola & Segun Adams

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Corporate History ccess Bank is a tier-one lender and Nigeria’s biggest bank by asset and customer base.

The lender has in the last three decades evolved from obscurity to becoming a leader in the Nigerian banking industry and across the continent.

The lender was issued a banking license on December 19, 1988, was incorporated as a privately owned commercial bank about two months after. In May of 1989, Access Bank commenced operations at its Burma Road, Apapa Head Office.

Access Bank became a Public Limited Liability Company and listed on the Nigerian Stock Exchange (NSE) in 1998 while it obtained a Universal Banking License from the Central Bank of Nigeria in 2001.

In 2002, a core of new management led by Aigboje AigImoukhuede and Herbert Onyewumbu Wigwe took over affairs at the then-small commercial bank and through decisive leadership grew the bank to greater heights.

Notably, Access Bank acquired Marina Bank and Capital Bank (formerly commercial bank Crédit Lyonnais Nigeria) by a merger in 2005, bought stakes in other lenders across Africa in 2008 and Intercontinental Bank in 2012.

Herbert Onyewumbu Wigwe is the bank’s Managing Director/ CEO and Oluseyi Kumapayi is Chief Financial Officer.

Hopes that defined Road to the Merger The fusion of leading wholesale banking business and a leading retail banking franchise in Nigeria created much excitement in the first half of 2019; Access Bank, a tier-one lender, and Diamond Bank a tiertwo bank jointly announced plans to consolidate and create new value for shareholders, customers and other stakeholders.

“Following the signing of the Memorandum of Agreement and announcement of headline terms, which valued Diamond Bank at approximately NGN72.5 billion (~$200m),” the banks said in a note dated 19 December 2018. The document explained that Diamond Bank shareholders would receive NGN3.13 per share in cash and shares, 2 Access shares for every 7 of Diamond’s shares held.

The deal promised to rattle dynamics in the banking industry with the new entity leapfrogging sector leaders to take charge on some fronts; the media, stock analysts, brokers, investment bankers and even the average Nigerian customer with interest in either bank paid keen attention to developments.

Estimations showed Access– Diamond Bank merger would lead to N150.3 billion in synergies with expectations of creating Africa’s largest bank by customers, spanning three continents, 12 countries and 29 million clients.

Key Pro-forma metrics based

on 9 months 2018 data showed Access Bank with N4.56 trillion asset and Diamond Bank with N1.56 trillion. Net Customer loans for Access Bank was N1.98 trillion while Diamond Bank had N730 billion. The tier-one lender had a customer deposit book of N2.48 trillion while the mid-tier bank had N1.1trillion.

Also, Gross earnings of Access Bank was N375 billion and Diamond Bank was N143 billion, Net Income was N63 billion and N2 billion respectively.

Diamond Bank had a customer base of 19 million with 10 million online customers and Access Bank had 10 million customers with 3 million online customers. Also, Access Bank had 400 branches and 1,881 ATMs while Diamond Bank had 277 branches and 1,218 ATMs. In a conference call held in January, BusinessDay gathered that the merger would have its synergies span from 2019 through 2021.

Cost synergies were estimated at N88.1 billion comprising of consolidation of procurement and management facility with an estimate of N40.1 billion, representing 46 percent share; cost of funds reduction through lower deposit pricing and improved mix projected at N21 billion; IT integration and consolidation, N12.6 billion; branch consolidation, N13.5 billion; while the synergy value of integration of support functions was projected at N500 million.

In addition, the deal promised

revenue collaborations projected at N62.2 billion, of which N40.9 billion, accounting for more than 65 percent, was expected to come from enhanced product offering and cross-selling; expanded digital channels was put at N8.4 billion; improved corporate and commercial share, N6.7 billion; while treasury sales and digital market expansion was expected to take N6.2 billion.

On Non-performing loans (NPLs) concerns, both banks highlighted that Diamond Bank’s Q3’18 numbers were adjusted to reflect additional impairment of N150 billion, placing its current NPL ratio at 40.4 percent.

For the combined entity, this translated to a pre-merger NPL ratio of 14.1 percent based on 9M’18 numbers.

The hurdles to cross were important; a court-ordered meeting of shareholders, approval from the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), and then a court sanction. The deal was completed on 1 April 2019.

How Merger has impacted earnings numbers One of the clearest signs that Nigeria’s biggest lender by assets has started reaping the benefits of a merger with Diamond Bank is the significant growth in bottom-line, the highest recorded in the industry.

Post-tax profit surged 59 percent to N63 billion in the first half of 2019, from N39.6 billion a year earlier.

Amid the current low-interest environment which saw some lend-

ers record declines in their interest income, Access Bank grew nearly by half to N272.9 billion half-year 2019 from N186.7 billion in the previous comparable period. The bank attributed the surge in interest income to the increased volume of investment securities in the period.

The bank paid N117.8 billion as interest expense, about 16 percent more than N101.4 billion posted a year before, on account of growth in deposit volume and increasing trade-related transactions, making net interest income almost doubled to N155 billion in the review period to N85 billion.

Access Bank had earlier expected net interest margin (NIM) to print at 6 percent. NIM, which measures the profit a bank makes on its investing activities as a ratio of total investing assets, kicked in at 7.6 percent, buoyed by an increase in yields and reduction in the cost of funds.

The lender’s asset quality improved in the period after a sharp deterioration in March as results of the assets acquired. Non-performing loan ratio trended downwards from 10 percent to 6.4 percent, which the bank attributed to prudent provisioning, risk management practices, a combination of write-offs, recoveries, reclassification and restructuring. A closer look at the NPL ratio numbers showed that the bank has more exposure to oil & gas and agriculture sectors.

“We have had to pursue this loan book with vigour and there have been significant recoveries. There have been restructuring which have shown improvements. And there have also been significant writebacks of some of the loans that have been fully provided,” said Herbert Wigwe, the bank’s chief executive officer at a recent conference call with investors and analysts.

Capital adequacy ratio (CAR) printed at 21 percent in June 2019, from 16.9 percent a year before, reflecting an improvement in tier-1 capital. Taking into consideration IFRS 9 transitional adjustment on capital CAR improved by 4.9 percent points to 24.9 percent, while liquidity ratio in the period stood at 49.7 percent.

The bank received N4.18 trillion in customer deposits as of June 30, 2019, which is 7 percent more than N3.92 trillion three months earlier.

According to Wigwe, the growth in customer deposits was driven by a surge in current and savings account, reflecting enhanced retail value proposition on account of strong and innovative digital platform.

Access Bank improved on operational efficiency as cost-to-income ratio declined 399 basis points year-on-year to 61 percent from 65 percent last year on account of continued adoption of cost-reduction strategies and stronger earnings.

Strides in retail banking Access Bank continues to make strides in the retail business. In its presentation notes to investors and analysts, the lender stated that its focus to bank with the unbanked through agency banking and collaboration with telecom companies has helped reach 1.3 million customers and facilitated transactions valued at N99 billion within three months.

The bank noted that it invested in digital and analytics. Through these, the bank disbursed an average of N200 million to 4, 600 customers daily at the click of a few buttons, leading to diversification and derisking of the loan portfolio.

Here’s what the group’s chief executive said about its retail strategy.

“During the reporting period, we made some strategic decisions to push our retail strategy in line with the next phase of our transformation. We invested in analytics to be able to discern our customers’ increasingly complicated needs, and therefore structure products and services towards meeting or achieving optimal satisfaction.”

As a result of various initiatives deployed to grow the retail business, the contribution of the segment to total income grew more than double at 42 percent compared with 18 percent a year ago.

Outlook for 2019 second half The bank forecasts improvement in asset quality. It expected NPL ratio to further trend downwards to its traditional 2.5 percent this year and next year. To achieve this, the bank will maintain an aggressive recovery drive and continue to pay attention to the loan book.

The bank says it will ensure costto-income ratio further fall below 60 percent as it would optimise operational efficiency through enhancing productivity across branches and also by aggressively executing strategic cost-saving initiatives.

On ways to increase transactional banking income, the bank says it will migrate customers to alternative channels and create strong awareness of flagship retail products. The bank unveils intention to intensify low-cost deposit drive to reduce funding costs, to boost liquidity, margins and retail business.

The bank also expects to ramp up the delivery of its merger synergies.

“As at half-year, we have generated cost synergies worth N32 billion.

We believe that as we move into the second half of the year we should be able to build on that number to ensure that we continue to remain profitable in spite of the fact we had a merger.” Wigwe assured.

Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Advert Hotline: 08033225506. Subscriptions 01-2950687, 07045792677. Newsroom: 08169609331 Editor: Patrick Atuanya. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.