Tuesday 19 March 2019
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BUSINESS DAY
7
NEWS
Wemy comeback underscores opportunity in N280bn diapers market ... As CBN, BoI provide financing ... P&G struggles, Kimberly Clark exits Nigeria BALA AUGIE
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he return of Wemy Industries Limited to the Nigerian diapers market, after three and a half years of near shutdown, underlines the opportunity in a market BusinessDay estimates at N280 billion per annum. “We are back to the diapers market,” Paul Odunaiya, managing director, Wemy Industries, told BusinessDay in an interview on Friday. “We are bringing in adult diaper machines. We are going to be pioneer adult diaper manufacturer in Nigeria and we will service the Nigerian market and that of the whole West Africa by exporting what we produce here to the ECOWAS region,” he said. Wemy got funding from the Bank of Industry (BOI), and another intervention from the Central Bank of Nigeria (CBN), to enable the resuscitation of its factory, Odunaiya said. Wemy Industries, founded in 1978, is a manufacturer of adult, feminine and baby diapers, sold under Dr Brown’s and Nightingale brand names. The company was hard hit by the recession of 2016, as it was heavily exposed to foreign exchange risks, being an importer of raw materials and finished products. But opportunities exist in the industry as 7 million children are born each year, according to the United Nations International Children’s Emergency Fund (UNICEF). Data from the National Population Commission in 2015 said there were 32 million under-five children in Nigeria. If we assume an estimated diaper penetration rate of about 10 percent or 3.2 million children, using an average of four diapers a day at a cost of N60 per diaper, it gives an annual market roughly estimated at N280 billion. This excludes the adult segment and export market. There are more babies born
in Nigeria in a year than in all of Western Europe, a signal of the opportunity in the sector. “Globally, over half of the world’s births are estimated to take place in just eight countries, including Nigeria,” Pernille Ironside, UNICEF’s Nigeria acting representative, said on December 31, 2018, adding that 25,685 children would be born on January 1, 2019. The diaper industry was once dominated by Procter&Gamble’s Pampers, manufactured in its Ibadan and Agbara plants. P&G shut down its $300 million Agbara plant in July 2018 and insiders told BusinessDay that the company is now importing diapers. Until July 2018, it had been the biggest US non-oil investment in Nigeria. Sources close to the company told BusinessDay that the company faced multiple taxation and harsh treatment in the hands of Nigeria Customs Service, which regularly acts as a revenue earner rather than a business facilitator. P&G also faced multiplicity of taxes in Agbara where government agencies, who could not even build good roads, demanded huge taxes and levies. “They did not meet their projections due to increased competition and overhead costs,” a source close to the company said. “You now have the Customs and other agencies. The company was also exposed to FX risks,” the source added. Industry sources say today’s industry leader is the Agbara, Ogun State-based Hayat Kimya, which makes Molifix, preferred by a number of mothers. The Lagos-based Kimberly Clark is also a key player, producing Huggies, which is also a major brand. But insiders told BusinessDay that the company is leaving Nigeria. “Yes, the company said it would leave Nigeria and return in 18 to 24 months,” a source, who was once a staff member of the company, told BusinessDay.
•Continues online at www.businessday.ng
R-L: Emanuel Nnorom, chairman, Transcorp Hotels plc; Owen Omogiafo, managing director/CEO, and Okaima Ohizua, executive director, during the 5th Annual General Meeting of the company, held at Transcorp Hilton Hotels, Abuja.
CBN reviews MFBs’ capital requirements, approves compliance by instalment ... Categorises unit MFB into tier-1, 2 HOPE MOSES-ASHIKE
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he Central Bank of Nigeria (CBN) on Monday reviewed the minimum capital requirements for microfinance banks, allowing for instalment payment and categorisation of Unit Microfinance Bank into tier-1 and tier-2. Consequently, tier-1 MFBs are to pay N200 million as minimum capital requirement, while tier-2 MFBs are expected to pay N50 million. In a circular signed by Kevin Amugo, its director, financial policy and regulation department, the CBN explained that tier-1 Unit Microfinance Banks will operate in the urban and high-density banked areas of the society, while tier-2 Unit Microfinance Banks will operate only in the rural, unbanked or underbanked areas. To aid the process of recapitalisation, the CBN directed that all tier-1 unit microfinance banks should meet a N100 million capital threshold by April 2020 and N200 million by April 2021, and tier-2 unit microfinance banks should meet a N35 million capital threshold by April 2020 and N50 million by April 2021.
Similarly, state microfinance banks are to increase their capital to N500 million by April 2020 and N1 billion by April 2021, while a national microfinance bank should hold a capital of 3.5 billion by April 2020 and N 5billion by April 2021. This move is in response to the agitation of operators over the earlier increase in capital requirements by the CBN. “The new circular addresses two out of four requests we made on minimum capital, which is creating rural MFBs with N50m capital and extending the time,” said Rogers Nwoke, president, National Association of Microfinance Banks (NAMB), in reaction to the CBN’s new directive. “We appreciate the CBN for listening to us, but as we said before, what is needed is a holistic review of the microfinance policy framework and operational guidelines. Review of capital does not address the issues and challenges of microfinance in Nigeria,” Nwoke said. Godwin Ehigiamusoe, managing director/CEO, LAPO Microfinance Bank Limited, said the review was a reflection of the CBN’s responsiveness to concerns of actors in the sub-sector. He com-
mended the NAMB leadership for engaging with the regulator in this regard. The CBN bank had in October 2018 increased the minimum capital requirement of unit microfinance banks from N20 million to N200 million, state MFBs from N100 million to N1 billion, and national MFB from N2 billion to N5 billion. Microfinance operators had protested the increases and had written to the CBN for extension of date and review. The National Association of Microfinance Banks had earlier disclosed its plans to float a National MFB licence with N10 billion capital base ahead of the full implementation of the capital requirement. The CBN and the Bankers Committee plan to establish a National MFB across the country using the facility of NIPOST, which is set for launch at the end of the month. In the National MFB establishment plan, the CBN and the Bankers Committee will utilise the sum of N5 billion as equity from N60 billion Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS) Fund, while NIPOST will contribute its offices in the 774 local government areas.
Trade volume across FX windows declines in March as market stabilises ... as I&E recorded $1.61bn less ENDURANCE OKAFOR
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olume of trade reported on the three foreign exchange windows in Nigeria fell by an average of 33.64 percent for the week ended March 8, 2019. According to the figures by FMDQ OTC, the total value of trades recorded in the Investors’ & Exporters’ (I&E) for the review week closed at $2.67 billion, representing a decrease of 37.62 percent ($1.61 billion) compared to the $4.28 billion reported in the week ending March 1, 2019. Trading activities on the Spot FX market between the Dealing Member Banks (DMBs) and their clients
stood at $2,760.93 million (average daily turnover of $552.19 million), representing a decrease of 31.91 percent when compared to the $4,054.78 million (average daily turnover of $810.96 million) recorded the week ended March 1, 2019. The review of trading activities in the Spot FX market amongst banks, as analysed from FMDQ figures, was not different as it was down by 31.41 percent. A total turnover of $395.20 million (average daily turnover of $79.04 million) was recorded, against $576.14 million (average daily turnover of $115.23 million) reported the week ended March 1, 2019. Responding on the FX market
performance, an exchange analyst said it must have been market going back to its normal level. “The values reported before were as a result of the after- election effect but the market is stabilising now and the reality is what we see in the trading activities,” said a Lagos-based commodity exchange analyst who does not want to be identified. The first analyst opinion was supported by a source at the Security and Exchange Commission, who said, “Nothing significant happened, it is just market returning back to its normal level.” “More money came into the market the week before and the report for
the week ended March 15 will help to better tell if there is major outflow,” said the analyst who spoke to BusinessDay on the condition of anonymity. Gbolahan Ologunro, research analyst at CSL Stockbrokers, told BusinessDay that immediately after the election there was a surge on the inflow into the country. “And there was a rally in the fixed-income market but yields are at the level where investors are comfortable and are not increasing their investment due to higher yields from other markets,” Ologunro said. A further analysis of the FMDQ data revealed that the year-to-date (YTD) value of trades on I&E window stood at $15.63 billion as at March 8, 2019. The I&E window was created in
April 2017 by the Central Bank of Nigeria (CBN) to boost liquidity in the FX market and ensure timely execution and settlement for eligible transactions as stipulated by the apex bank. The report by FMDQ also revealed that the CBN in its periodic supply of United States (US) dollars in the FX market, aimed at stabilising the naira, intervened in the market with $100.00 million to the Secondary Market Intervention Sales (SMIS) Wholesale window on March 12, 2019. The apex bank also sold $55.00 million each to both the Small and Medium-scale Enterprises (SMEs) and the Retail.
•Continues online at www.businessday.ng