BusinessDay 23 Sep 2019

FMDQ depository goes live …to provide seamless, innovative services …empowers investors, issuers with choice of depositories IHEANYI NWACHUKWU

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n yet another significant milestone for the Nigerian capital market, FMDQ Securities Exchange plc (FMDQ Exchange or the Exchange), having positioned itself as an innovative

and pacesetting financial market infrastructure group, announced the operationalisation of its wholly-owned central securities depository (CSD), FMDQ Depository Limited (FMDQ Depository or the Depository), on August 5, 2019.

The incorporation of this im-

news you can trust I **MONDAY 23 SEPTEMBER 2019 I vol. 19, no 399

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portant market infrastructure, in December 2018, and its registration by Nigeria’s Securities and Exchange Commission, (SEC or the Commission) in June 2019, follows the operationalisation of FMDQ Clear Limited (FMDQ Clear), Nigeria’s first central clearing house,

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in January 2018, completing the value chain of pertinent market infrastructure for the pre-trade, trade and post-trade spectrums provided by FMDQ – from listing to trading, clearing, settle-

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With world’s smallest budget, FG’s privatisation efforts need urgency LOLADE AKINMURELE

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igeria has one of the smallest spending governments in the world, yet it has handed private capital the backseat since 2014.

That has created a needless liquidity shortage, with government spending unable to make significant impact on an underperforming economy that has contracted three years straight in per capita terms and is haemorrhaging jobs.

At 4.7 percent of Gross Domestic Product (GDP) in 2017, Nigeria was outspent nearly three-fold by sub-Saharan Africa peers who spent an average of 13.2 percent of

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Foreign Reserve - $42.46bn Cross Rates - GBP-$:1.25 YUANY-N 50.83 Commodities Cocoa

Gold

US$2,473.00

$1,523.50 $64.70

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Inside Nigeria drug makers lose out as country emerges hotspot for counterfeits P. 2 Army launches new operation against ISWAP in Northeast P. A3 L-R: Bala Mohammed (3rd l), governor, Bauchi State; Ifie Sekibo (4th l), MD/CEO, Heritage Bank plc; Abubakar Saidu, accountant general of the state; Samaila Burga, commissioner for agriculture; Nura Manu Soro, commissioner for finance; George Oko-Oboh, regional executive, Abuja and North, Heritage Bank, and Turaki Manga, commissioner for special duties, during a business call to the Bauchi State governor on developmental project partnership with the bank.

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news Millions of unmetered Nigerians risk non-access to power ...as NERC mulls no meter, no supply policy HARRISON EDEH, Abuja

M L-R: Adeniyi Adebayo, minister of industry, trade, and investment; Hadiza Bala Usman, managing director, Nigerian Ports Authority (NPA); Babatunde Ruwase, president, Lagos Chamber of Commerce and Industry (LCCI); Toki Mabogunje, vice president, and Cosmas Maduka, president/chairman, Coscharis Group, at the LCCI 2019 presidential policy dialogue on the economy in Pic by Olawale Amoo Lagos, at the weekend.

Nigeria drug makers lose out as country emerges hotspot for counterfeits At the peak of the recession in 2016, drug makers saw their sales drop by 20 percent to $722 million from the $904 million made in 2015. And despite a rebound in the economy in 2017, sales fell further by 11.9 percent to $636 million but rose to $666 million in 2018.

Though the sales grew slightly by 4.7 percent to $666 million in 2018, Fitch projects it to grow by almost the same amount in 2019 to $698 million. However, this growth is expected to be short-lived as the sector is expected to decline by 0.6 percent a year between 2019 and 2023.

The reason for this decline is that Africa’s largest economy has emerged a hotspot for the manufacture and sale of fake drugs. Hence, despite efforts by the World Health Organisation (WHO) to sup-

…N200bn lost yearly to fake drugs MICHAEL ANI

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slowdown in the e conomy and a massive influx of counterfeit drugs are among the major reasons drug makers in Nigeria have a hard time reaping the benefits of operating in a populous market.

Since 2015, sales in the Nigerian pharmaceutical industry have declined by 35.7 percent with no signs of improvement, according to data tracked by global rating agency, Fitch.

Cheap and easily available, counterfeit drugs smuggled through the country’s porous borders find their way into a vast distribution network.

These drugs affect the health of both the economy and the

individuals that patronise them.

“Nigeria is estimated to lose about N200 billion annually to counterfeit medicine (excluding substandard drugs),” according to a 2019 PwC report on how abuse of patents and copyrights affects the economy.

Tens of thousands of deaths in the country are attributed to fake medicines.

Because genuine drugs are out of reach for many cashstrapped Nigerians, they often resort to fake ones.

As a result, sales in the Nigeria pharmaceutical industry have declined by over 35.7 percent since 2015 and expected to fall even more, noted Fitch Solutions in its report ‘Nigeria Pharmaceuticals and Healthcare’.

port local drug manufactures in improving competitiveness with foreign generic drug makers, the effect is still not felt as drug makers are challenged with imitated drugs that are fake.

According to the Pharmaceutical Security Institute, countries in Asia have been identified to produce the largest share of counterfeits globally with about 50 percent finding their way to Nigeria.

Ayorinde Akinloye, consumer goods analyst at Lagos-Based CSL Stockbrokers, reckoned that in reality, pharmaceutical consumptions in the country are not declining especially given the fact that the health sector is one of the basic sectors.

However, what has happened is that many Nigerians

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Analysts back MPC’s call for privatisation of public assets

…Privatisation proceeds hit highest level in 2017 to N372.36bn …CBN data show no receipt in 2018 HOPE MOSES-ASHIKE, BUNMI BAILEY & SEGUN ADAMS

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nalysts in the financial services sector have unanimously backed the call by the Monetary Policy Committee (MPC) to the Federal Government to urgently build fiscal buffers through the sale of idle public assets to raise more revenue.

The MPC chaired by Godwin Emefiele, governor, Central Bank of Nigeria (CBN), on Friday called on the government to, as a matter of urgency, adopt a BIG BANG approach towards building fiscal buffers by purposefully freeing up redundant public

assets through an efficient, effective and transparent privatisation process.

The committee noted the government’s current drive to increase Value Added Tax (VAT) was too little to close the gap in government finances.

The Federal Government had proposed an increase in VAT from 5 percent to 7.5 percent, targeting huge revenues, which would reduce the fiscal deficit burden.

E m e f i e l e, w h i l e a n nouncing the retention of the benchmark interest rate at 13.5 percent, said the privatisation of assets would raise significant revenue for

government and resuscitate the redundant assets to generate employment and contribute effectively to national economic growth.

“It is a good decision. And I think the starting point for me should be those assets that are lying idle,” Gbolahan Ologunro, an equity research analyst at Lagos-based CSL Stockbrokers, said.

“The government should withdraw certain ownership from key assets and allow private sector to dictate the dynamics or take control of ownership and they should perform more of supervisory roles and formulation of policies in the oil and power

sectors,” he said.

Ologunro said this would lead to increase in revenue which will translate to increase in capital expenditure as against recurrent expenditure.

“Most of the fiscal deficit which has been mostly financed by borrowing can now be financed from the sale of the government assets. So what you will now see is that government will no longer rely or rely less on external borrowing as often,” he said.

Privatisation proceeds in Nigeria hit highest level

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businessday market monitor NSE Biggest Gainer NESTLE N1210.10 0.83%pc

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illions of unmetered Nigerians are at risk of having no access to power supply as the Nigerian Electricity Regulatory Commission (NERC) says it is preparing grounds for the enforcement of “no meter, no power supply” policy. The policy is expected to come into effect once the regulator comes up with the policy of capping estimated billing cost for power consumers.

Sharffudeen Mahmoud, general manager, market competition and rates, NERC, confirmed this exclusively to BusinessDay, saying the regulator would embark on the policy once the regulatory framework for capping meter billing for estimated billing comes on stream.

“Currently, we don’t have a regulatory policy on estimated billing, but wider consultation is currently ongoing with submissions being made by the DisCos through their Performance Improvement Plan,” Mahmoud said.

He noted that once NERC finalises terms and comes up with the estimated billing capping policy, supply would be cut off from any Nigerian who is connected to the grid and is

not metered.

Electricity consumers have been raising concerns over non-metering, and the DisCos themselves have often said the situation has compounded the liquidity concerns in the power sector value chain.

There have also been concerns of overbilling through estimated billing by electricity consumers, with the concerns currently being looked into it with a policy to address the issue currently underway.

It is to resolve the issues around metering that NERC came up with a third-party Meter Asset Provider (MAP), which is expected to continuously close the metering gap of about 4.6 million unmetered Nigerians.

“We are still consulting on the regulation for capping estimated meter billing,” Mahmoud said.

He said NERC would embark on an extraordinary tariff review, which would see the exchange rate variables, inflationary rates and even electricity consumers who would want to move their tariff class addressed and reflected in the upcoming tariff review, expected to gradually make the sector more investor-friendly.

•Continues online at www.businessday.ng

YES! Nigeria’s VAT policy does affect its poor OLUWASEGUN OLAKOYENIKAN

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L AIM: Nigeria’s VAT policy does not affect the poor but only those who can afford luxury items.

FALSE: Poor Nigerians consume other goods and services not exempt from VAT. Besides the goods and services exempted from tax in the First Schedule of the Value Added Tax Act Cap VI, LFN 2004 (as amended), some taxable items are consumed by the poor, implying this category of people is affected by any VAT policy review.

FULL TEXT Several reactions have ensued in the aftermath of the recently introduced and proposed tax policies of the Nigerian government. This is particularly true with respect to the applicability of one of the policies on Nigerians.

Nigerians have been receiving tonnes of notices on tax reviews by the government over the last three months. It all started with a planned 5 percent Value Added Tax (VAT) on online transactions effective January 2020. This was followed by a newly-signed Nigeria Police Trust Fund compel@Businessdayng

ling companies operating businesses in the country to pay 0.005 percent of after-tax profits to the trust fund.

All this, however, pales in significance compared with what took place last week Friday. On September 13, media publications re-

FACT CHECK ported the proposed hike of Nigeria’s VAT charges from 5 percent to 7.2 percent. This was corrected to 7.5 percent

by Zainab Ahmed, minister of finance, budget and national planning.

The proposed increase was said to have followed the recommendation of the presidential technical advisory committee. The intent was to provide additional revenue to the states to meet the obligations of the new minimum wage.

However, the disclosure was greeted with mixed reactions from Nigerians on social media, particularly Twitter.

While some argued that VAT negatively affects the poor in Nigeria, some others believed otherwise with little or no evidence to support the claims.

It was against the back-

•Continues online at www.businessday.ng

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Apapa: Property value seen rising on improved roads infrastructure, vanishing gridlock CHUKA UROKO

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roperty value in Apapa, Nigeria’s premier port city, will pick up again on the back of ongoing reconstruction of major and arterial roads infrastructure as well as disappearing gridlocks following the activities of the presidential task team (PTT) on Apapa gridlock, according to analysts and close watchers of the city’s property market.

Ayo Vaughan, chairman, Apapa GRA Residents Association, told BusinessDay on phone that hope was in the air for Apapa and its residents and that if the work done by the task team was sustained, the value of property in the city would go up.

He was optimistic that when the electronic call-up system expected before the end of this year was installed, it would help to keep the trucks off the roads and bridges permanently.

“Once the people who left, especially those who have business here, see that this situation is sustained, they will come back,” said Vaughan, who is a member of the task team.

Following from the siege on Apapa environment, the occupation of its roads and bridges and the accompanying gridlock, the premier port city whose economy is estimated at N20 billion a day became a nogo area, forcing out residents and businesses who left behind empty properties whose value has depreciated significantly.

At the moment, over 40 percent of residential buildings in Apapa are empty. Loss in rental income to landlords is estimated at N250 million per annum while vacancy rate in the entire port city is well above 50 percent.

Vice President Yemi Osinbajo, chairman of the PTT, who was at the port city a couple of months ago on projects inspection, had assured that the Federal Government would prioritise infrastructure provision in the search for solution to Apapa problem.

“It will take both mediumand long-term solutions to ultimately deliver to the users an efficient port environment for the economy and businesses to thrive,” Osinbajo said.

These, he said, would involve infrastructure development.

While the task team has succeeded appreciably in pushing away the rampaging trucks on Apapa roads and bridges, creating easy access to the port city, some dilapidated roads have either been rehabilitated or are receiving attention. These include Wharf Road, Apapa-Oshodi Expressway, Creek and Liverpool Roads.

Sanity is gradually but steadily returning to the city and expectation is that with this, both residential and investment interest will return, leading to increased demand for property.

Uche Chiejina, an estate manager, told BusinessDay in a telephone interview that “it

has been so far, so good”.

Chudi Ubosi, an estate surveyor and valuer, said that before Apapa, which used to be in the same league with Ikeja GRA, became what it is today, land there sold for between N200,000 and N250,000 per square metre as in Ikeja.

“Apapa no longer commands such price; it is hard to get a buyer who will pay N100,000 per square metre of land in Apapa today,” Ubosi noted.

He said it might take a long while, up to 10 years, for Apapa to rebuild confidence in potential investors and to patch up its degraded environment and decaying infrastructure.

Chiejina, however, sees huge opportunities ahead of the ongoing cleaning-up, especially for retail and leisure investors.

“I foresee a situation where Apapa will become largely a commercial destination.

Though I don’t rule out what is possible with human beings, I don’t see many people coming here to take up new residences except for staff of government agencies. Besides these people, the only residents one will be seeing here are those living in the GRA,” Chiejina said.

He added that besides its closeness to the Island, Apapa remains home to Nigeria’s two busiest seaports, meaning that ports and other marine activities will continue to flourish in the port city and as both the environment and infrastructure improve, people may decide to take residence in the port city.

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Budget, xenophobic attacks, others top agenda as Senate resumes Tuesday SOLOMON AYADO, Abuja

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he 2020 national budget, Xenophobic Attacks, among other issues are expected to top discussions as the Nigerian Senate resume on Tuesday, after their eight- week annual recess.

The Senate had embarked on recess on July 30, after screening and confirming all the 43 ministerial nominees sent in by President Muhammadu Buhari. The recess, according to Senate President Ahmad Lawan was to enable the lawmakers assess their constituencies, intimate the people of progress on constituency projects and evolve proactive measures that can impact rapid development to the electorates.

However, while the recess lasted, several national issues that required urgent legislative attention came to the fore which the lawmakers are expected to tackle and proffer measures to how best they can be resolved.

Among the many issues, the Senate is expected to discuss Xenophobic attacks on Nigerians in South Africa.

Scores of Nigerians were

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attacked in South Africa, property worth millions of naira destroyed in the attacks.

Nigeria’s minister of foreign affairs, Geoffrey Onyeama, said even though the attacks are unacceptable, the federal government would not severe diplomatic ties with South Africa on this basis – though citizens expect an urgent solution, possibly through decisive legislation.

The senate committee on foreign affairs, chaired by Senator Bashir Ajibola had met with the minister of foreign affairs and the Director-General of the National Diaspora Commission, Abike Dabiri Erewa, to initiate ways to evacutate the victims.

Up until now, the federal government is yet to announce any decisive policy on the attacks. As Senate resumes, it is believed that discussions would be based on how the federal government can liaise with South African Government to end the acrimony.

The 2020 budget which is already being prepared is also expected to receive an accelerated attention when finally submitted by President Buhari for appropriation.

Senate President Lawan

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had assured on delivering a January-December budget cycle and is expected to lead the legislature to pressurize an early submission of the budget to the NASS for on-time passage.

Lawan is of the view that if the change to January-December budget circle is effected, it would eradicate the unnecessary delays the National Budget always experiences in the defence processes by Ministries, Departments and Agencies, MDAs, as part of the budget screening process by the National Assembly.

Also on the table for discussions would be the Federal Government’s plan to increase the Value Added Tax, VAT, from 5 to 7.2 per cent.

The Senate Committee on Finance has already invited the Minister of Finance, Zainab Ahmed, and the Chairman of the Federal Inland Revenue Service, Babatunde Fowler, over the issue.

The Senate had raised concerns that the proposed VAT increase could negatively impact the living standards of Nigerians and further weaken demand and the economy, in terms of reducing disposable incomes of citizens.

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United Nation’s stress test for Nigeria – land, water conflicts ‘ (Thirdin a series of 8 articles)

BASHORUN J.K RANDLE

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ore explosive and distressing for the US secretary general was the front page of “Vanguard” newspaper of June 19, 2019: “Nigeria has greater causes of violence than Boko Haram.”

The United Nation says that, “land degradation and competition over access to land and water have triggered more bloody conflicts in Nigeria than Boko Haram.

This came on a day two children and a teenager were killed after suspected herdsmen attacked Unguwan Rimi village in Kauru local government area (LGA) of Kaduna State, as UNICEF also condemned the use of children as human bombs in any combat or non-combat roles in the conflict in the North East.

Four persons were also killed when herders attacked Kpagoro village in Riyom LGA of Plateau State. Speaking to the News Agency of Nigeria (NAN), on the side-line of 2019 World Day to Combat Desertification in Ankara, Turkey, Ibrahim Thiaw, executive secretary of UN Convention to Combat Desertification(UNCCD), , said, “More lives have been claimed in conflicts over access to land and water than Boko Haram. Every day, you have more conflicts between people that are competing for access to land and water.

The root cause of the competition is access to natural resources.”

World Day to Combat Desertification is celebrated every year globally on June 17 to promote good land stewardship for the benefit of present and future generations. This year’s edition was jointly hosted at Ankara by the government of Turkey and UNCCD, with ministers from 10 countries in attendance.

Thiaw said that the growing population with growing demand on resources, coupled with climate change and reduction of available land resources, were root causes of most of the bloody conflicts.

“So, the tipping point was reached a long time ago; and most of the time, this is also combined with bad governance at national levels,” Thiaw said.

He said land restoration could not be left in the hands of governments alone, and called for a review of the land tenure system in order to mobilise private business investment into the programme.

“This means there should be some concession for the business sector to participate in land restoration. ‘It means that if a business restores a land, it gets concession on the land for 50 years or more so that the land remains restored rather than leave it barren.’ Otherwise, why would I invest in land restoration if I had no right on that land? If the land continues to belong to someone else, I won’t invest in it,” said the UNCCD boss.

Thiaw said economists had projected that every dollar invested in land restoration would generate $5, adding that restoring land also meant reducing risks of irregular and forced migration.

He said, “Restoring land will reduce forced migration and keep people on the ground to generate their own incomes and live their own lives.’’

The UN official said forced migration was the worst that could happen to countries where people were departing from.

“Most times, countries of destina-

tion see it as a problem, but countries they are departing from have a bigger problem because people involved in forced migration are educated and a big loss to their national economies,” he said.

He also said although planting of trees was important and symbolic in land restoration, it was not the only solution to the problem. According to him, “you can plant billions of trees, but unless you have good sensitisation, the trees will not grow or they clear off again. Land restoration is about security, and reducing clashes between farmers and herdsmen over access to land and water, which may trigger the Third World War.’’ He called on people to care more about land because land is important and interconnected with biodiversity.

Thiaw also called for the use of technology to produce solar, wind and small hydropower so as to create decentralised energy system in villages.

Some 196 countries and the European Union are parties to the Convention, of which 169 are affected by desertification, land degradation or drought.

In 2015, the international community agreed to achieve a balance in the rate at which land is degraded and restored by taking concrete actions to avoid, reduce and reverse land degradation, generally referred to as achieving land degradation neutrality, LDN, and mitigate the effects of drought.

In the last four years, 122 countries have committed to taking voluntary, measurable actions to arrest land degradation by 2030. Also, 44 of the 70 countries that have suffered drought in the past have set up national plans to manage it more effectively in the future.

Speaking on the killing of two children and a teenager, many of the residents were also said to have sustained injuries and were currently receiving treatment in unnamed hospitals. A resident said the armed men started shooting immediately they entered

the growing population with growing demand on resources, coupled with climate change and reduction of available land resources, were root causes of most of the bloody conflicts

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

What’s next at LSETF?

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he clear and present challenge of unemployment in Nigeria is already well known, and in many ways, Lagos is the ground zero for this challenge. The response to it led to the establishment of the Lagos State Employment Trust Fund (LSETF) in 2016, with a broad mandate to address unemployment and support entrepreneurship in the state.

Our impact in the first three years has been significant. We have over 10,000 beneficiaries of our loan programme who have accessed nearly N7 billion. As a result, they have created nearly 100,000 direct jobs.

On the employability side, over 5,000 young people have been provided with tangible skills they can leverage to provide themselves a better life and break the shackles of poverty, with over 2,000 of them placed in jobs. Also, 47,000 new taxpayers have been added to the register.

We have just been scratching the surface, but these initiatives have played a role in reducing unemployment rate in Lagos to 14.6 percent, one of the lowest in the country, despite being the most populous state.

At the outset, there was a need to establish credibility with potential partners by distinguishing ourselves from other government lenders and initiatives. For

the village, adding that the children were killed on the spot.

Confirming the incident, Yakubu Sabo, spokesman of the Kaduna police command, identified the victims as Monday Yahaya (8 years), Samson David (17 years) and Ashimile Danladi (9 years). Sabo, who disclosed that efforts were being made by the police to apprehend the culprits, said, “Information reaching us stated that on Monday, June 17, at about 14:25hrs, DPO Kauru received a distress call that armed men entered Unguwan Rimi village, Chawai District of Kauru LGA, and started shooting sporadically.

Teams of policemen quickly moved to the area, evacuated the dead bodies to the hospital and ensured that the situation was brought under control.

Preliminary investigations later revealed that the attack might not be unconnected with the attack of a Fulani camp in the area early morning of the same date. However, efforts are on to apprehend the perpetrators and the command has intensified patrols and other proactive measures to forestall further breach of peace in the area.

In a similar development, UNICEF representative in Nigeria, Peter Hawkins, yesterday condemned the use of children as human bombs in combat or non-combat roles in the conflict in the North East of Nigeria.

Hawkins in a statement issued in Abuja said, “According to several reports, three children, two girls and a boy (ages unknown), were used to detonate explosives that killed 30 people and injured 40 others at a community football viewing centre in Konduga, Borno State.

TEJU ABISOYE example, loans gotten from the trust fund are not “money for the boys”, with strict guidelines for application as well as repayment. Efforts at recovering loans – from issuing demand notices, filing an action at the Small Claims Court and prosecuting unrepentant defaulters – are ongoing and will expand in the coming months.

Having demonstrated our capacity to fulfil our mandate, the next stage of the LSETF’s evolution is the sustainability of the Fund’s work. In order to bring in more private sector capital and deepen access to funding, our loan programmes will now attract 10 percent, as against the initial 5 percent interest rate. The recent announcement of the LSETF W-Initiative in partnership with Access Bank is a fruit of this revised interest rate, and we are working toward more partnerships with commercial banks and development finance institutions.

In terms of job generation, our partnership with the United States African Development Foundation (USADF) and German International Development Agency (GIZ), will enable us impact many more lives across the state by providing the skills so many young Lagosians need. We recently requested for proposals to evaluate potenwww.businessday.ng

tial partners for an expanded employability programme and got an overwhelming response.

On Agriculture, we recognise the job creation potential and are designing a programme that will be the best fit for the Lagos economy and available infrastructure.

We are also passionate about sharing what we have learned so far with other state governments in Nigeria. In a few months, the LSETF will organise an Employment Summit that will bring together our key learnings, we hope to enable other governments to act to stem-the-tide of unemployment in their states. We realise that the fight against unemployment is one that requires all hands on deck. The more, the merrier.

In all this, the support of the Lagos state government has been indispensable.

On behalf of the fund, I must express gratitude to all arms of the state government for allowing us to carry out our duties without fear or favour. Without this institutional support, our efforts would not be as effective.

Personally, it is an honour for me to have the opportunity to lead this team.

What the LSETF is trying to do is unprecedented. Other government initiatives have attempted to address one of these is-

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sues. However, the times we live in and the challenges we confront require ambition and audacity, courage and creativity. This is what my colleagues and I, signed up for.

I recently came across a 1962 speech by John F. Kennedy, where he made a commitment to put a man on the moon by the end of the 1960s. I drew inspiration from the following lines.

We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organise and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win, and the others, too.

The challenge of unemployment in Lagos and across Nigeria is one we must accept, one we must refuse to postpone. It is one we must win.

Teju Abisoye is the acting Executive Secretary of the LSETF.

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The beginning of the end

PATRICK ATUANYA

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lmost a week ago, an attack on Saudi Arabian oil facilities knocked off 5 percent of global production and some 5.7 million barrels per day of Saudi production in one fell swoop.

It was the single biggest sudden disruption on record, which triggered the biggest one-day jump in Brent crude prices on record.

The Saudi disruption surpasses the loss of Kuwaiti and Iraqi petroleum output in August 1990, when Saddam Hussein invaded his neighbour to the South.

It also exceeds the loss of Iranian oil production in 1979 during the Islamic Revolution, according to the International Energy Agency.

Oil prices jumped more than 20 percent initially after the coordinated drone and possible cruise missile attacks, blamed on Iran and/ or Houthi rebels who are engaged

in a bitter war with Saudi Arabia in Yemen.

Crude has since retreated from its highs of $71 per barrel reached in the aftermath of the attacks and Brent was trading at $64.83 per barrel on Friday.

At first glance the return of geopolitical tensions and premium on oil prices might seem positive for producers like Nigeria, but look again and it is clear that things are not quite as rosy as they seem.

While the Sept. 14 attack on two of Saudi Arabia’s biggest crude oil production plants sent shock waves through energy markets, it was not nearly the Armageddon that people had feared, because Saudi Arabia holds almost all of the world’s spare capacity -- seen as insurance against unexpected supply disruptions.

The reaction of oil has been telling in that the initial price spike has moderated amid ample supplies from the U.S shale producers, Russia and the rest of OPEC. But it is not just the availability of immediate supply cushions and release of oil from strategic reserves that is leading to benign reaction from oil markets.

It could be a watershed moment that historians looking back in 20 years from now could pinpoint as the beginning of the end of the oil age.

The attacks in Saudi Arabia has alarmed nations from Japan to France.

In a sense it is an attack on the global economy (and has been condemned by most countries

including President Muhammadu Buhari), which for all intents and purposes still runs on oil.

Big oil price spikes often precede global recessions.

Economist James Hamilton has shown that each oil shock since the end of WW II was followed by a U.S. downturn.

Net importers of oil in Europe and Asia, as well as China and India, will see fuel costs rise, which could slow their economies and indirectly hurt the global economy.

What this means is that most nations will not fold arms and wait for their energy supplies to be determined by the minefield that is the Middle East with its numerous wars.

This could then be a wakeup call for the world to switch to non-oil sources of energy such as renewables (solar, wind, etc.) as quickly as possible.

Germany, China, Japan and a host of other countries are intensifying research into Hydrogen as a source of clean energy.

Hydrogen releases only water when burned and therefore is considered cleaner than coal, oil or gas, which emit greenhouse gases.

Japan’s automakers have put hydrogen fuel cells in their cars, while consumers there are buying home energy units using hydrogen.

China and the U.K also are investigating the technology, with Shell Plc seeing it as reliable and easy to transport.

Battery powered cars are another means of achieving this goal. Electric vehicles are forecast to outnum-

‘

It could be a watershed moment that historians looking back in 20 years from now could pinpoint as the beginning of the end of the oil age

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

Unconventional monetary policy?

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was at the annual conference of the Nigeria Economic Society recently and the governor of the Central Bank came to be inducted into the college of fellows.

Afterwards he gave a speech which focused on what he described as unconventional monetary policy. The challenges in Nigeria require out of the box thinking he said, and we in the press should stop criticising his polices but understand and support them.

Fair enough, but how unconventional are these policies?

The idea of unconventional monetary policy in the global context is not new.

Monetary policy typically deals with the interactions between interest rates and money supply on one hand, and unemployment and economic activity on the other, with the broad goal being to maintain the best conditions for sustainable economic growth. Those conditions broadly described as price stability.

So, when inflation is getting high authorities go to tightening cycles by raising interest rates and when inflation is low then the opportunity exists to ease policy, or lower rates to support economic activity in a sustainable way.

However, once in a while some countries fall into peculiar situations. Situations where inflation or interest rates are too low or close to zero. This creates problems for conventional monetary policy and so

authorities move into “unconventional” monetary policy. For instance, when interest rates are already at zero and there is no further room to cut then monetary expansion by other means such as quantitative easing become an option. Or when inflation is too low and unconventional methods of monetary expansion to raise the price level and expected inflation are needed such as in Japan for the last decade or two.

The important point is that “unconventional” monetary policy in those contexts is driven by such challenges when key monetary policy variables get close to zero and traditional tools stop being effective.

In most cases unconventional monetary policy is seen as temporary with the goal being to get back to fundamentals that are more in tune to conventional policy.

Which brings us to Nigeria and our definition of “unconventional” policy. It goes without saying that none of our key monetary policy variables are close to zero.

But in order to stimulate economic activity, we have banned certain sectors from access to foreign exchange. We have done this with the hope that it will stimulate local production of goods in the restricted sectors. We have termed this “unconventional” monetary policy but is it?

Many other countries have tried this preferential foreign exchange access and other protectionist policies especially in www.businessday.ng

ber gas-powered cars in the U.S. in about 20 years, with battery costs coming down.

The posterchild of that is Tesla and its Super star CEO Elon Musk, but other vehicle manufacturers from Europe to Japan are investing heaving in alternatives to fossil fuel as an energy source.

Amid all these, Nigerian government officials are still behaving as if the day of reckoning will not come regarding the end of the oil age.

We spend trillions of naira each year subsidizing petrol, are loathe to sensible reforms to attract private capital - that even oil rich Saudi Arabia is undertaking – believe the Federal Government can borrow/ print and spend its way out of its economic crises, and continue to behave like the proverbial ostrich, with no sense of urgency around the major issues confronting the nation.

It is said that “the stone age did not end as a result of a shortage of stones” therefore the oil age will probably not end from the production of the last barrel of oil.

The attacks in Saudi-Arabia should then present another incentive for Nigerian policy makers to learn the right lessons and think for the next generation.

There will be little or no Gulf war type oil windfalls to be had this time from the Geopolitical mess that is the Middle East.

ECONOMIST the 1980s. Most countries have given up on those kinds of policies. The reason they seem “unconventional” to us is because they are bad policies that most have abandoned.

Of course, we know that the real story behind the CBN’s quest for demand management is the balance of payments problems.

Anytime the current account turns red the central bank starts to attack demand for foreign exchange. In essence trying to close a negative current account balance by shrinking demand for foreign exchange. That is, it’s unconventional policy. But again, we know that kind of thinking is not new. There is nothing unconventional about it.

Many other countries tried it and abandoned it. The best way to deal with persistent balance of payments problems is a currency movement and not trying to maintain a fixed peg. Officially, we do not maintain a fixed exchange rate but in practice the currency is managed around a fixed rate.

Another unconventional policy which has been abandoned by most countries. Even those who have managed exchange rates tend to manage it around the real effective exchange rate.

Then we have the final unconventional policy of central bank direct intervention in certain sectors by providing loans at low interest rates. The jury is still out on this one.

Many countries have gone down this route

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NONSO OBIKILI although mostly through the development banking model of using some state institution to guarantee risk in targeted sectors.

The “unconventional” part is that the CBN is lending directly. I would be curious to see the CBNs non-performing loans ratio with regards to its lending, but that data is unfortunately not available.

By now, I am sure you get my point.

The idea of unconventional monetary policy as practiced around the world during specific periods of zero interest rates or very low inflation is different to the “unconventional” monetary policy we claim to be practicing here. If it seems unconventional it is because no one implements monetary policy in that way anymore. The world has moved on and we should too. No need to label policy as unconventional when it is really just bad policy. Perhaps we need to go back to conventional policy for now.

Nonso Obikili is chief economist at Business Day.

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16

BUSINESS DAY

Monday 23 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

Replicate NLNG to finance key infrastructure projects

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n the face of dwindling income from crude oil and falling tax revenues which are causing the federal government to miss its targets Nigeria has to explore creative models to fund huge infrastructure required to revamp a broken economy.

There is yawning poverty and rising unemployment rate put at over 23 percent. The federal government is spending about 70 percent of its earnings servicing loans and states are neck deep in debt. A new model is critically required to fund roads, rails and runways.

One of such proven models is the Nigeria Liquefied Natural Gas (NLNG). Since 1999, the NLNG has fully paid the $5.45 billion taken from its shareholders to build its six existing LNG trains. The company has also paid as much as $36 billion to its shareholders as dividends over the years, in addition to paying joint venture (JV) gas suppliers $28 billion for feed gas supplies.

Much of its success is de-

rived from its unique structure.

The government, represented

by NNPC, owns 49 percent of NLNG while Shell owns 25.6 percent, Total Gaz Electricite Holdings owns 15 percent and Eni owns 10.4 percent.

The ownership structure makes it an independent incorporated joint venture, guaranteeing an independent board of directors, effective decision making as well as funding for its projects. NLNG is run based on international best standards with all the parties carefully scrutinising every decision to ensure benefits are maximised.

NLNG’s unique ownership and operating model has also made it difficult for the National Assembly to amend the Act that established it; because of its incorporation charter, with companies and their countries being represented, the NLNG Act has been elevated almost to the status of a treaty and all parties are required to amend it.

NLNG could not kick off after it was first proposed in 1968 because of the huge capital investment required which Nigeria

did not have. Investors wanted assurances and guarantees that they would recoup their investments. In 1990 Nigeria granted the investors a ten year pioneer status as well as generous concessions that prohibited further taxation and levies. The charter came with strong terms involving joint agreement before any amendment.

Therefore to finance big infrastructure projects like road networks, rail lines and airports we encourage partnerships and funding, ownership and management structures like the NLNG. We encourage initiatives like those of the Lagos and Ogun state in constructing new roads.

However, for these projects to be viable, they require tolling infrastructure to help investors recoup their money. The private public partnership model has been successful in constructing big ticket infrastructure projects. To attract needed financing, companies can be offered incentives including tax breaks and other kinds of support.

Nigeria has progressively

is no longer the destination for foreign direct investments (FDI) as it used to. An enabling environment goes beyond just rhetoric. According to data from the National Bureau of Statistics (NBS) $222.8 million was imported as FDI in the second quarter of 2019, the lowest since the same period in 2016.

Not only does that compare poorly with FDI flows to African peers from South Africa to Egypt, it translates to an FDI per head of $1.14 compared to the Africa average of nearly $100 per head, according to World Bank data. In 2018, while South Africa and Egypt attracted FDI worth $5.3bn and $6.8bn respectively, Nigeria raised $2bn, according to UNCTAD. We encourage the federal government to replicate this model to attract much-needed financing. It should create entities that are run differently from the public sector. The government could own significant shares but could leaver management to the private sector who have proven to be better at managing businesses.

HEAD, HUMAN RESOURCES Adeola Obisesan

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Monday 23 September 2019

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Nigeria’s $9bn judgement debt: Triumph of rule of law over rule of men GLOBAL PERSPECTIVES

OLU FASAN

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igeria has been in the eye of a global legal storm since the decision, on August 16, by a British judge, Mr Justice Christopher Butcher, to uphold an arbitration award of $9.6bn in favour of Process & Industrial Development (P&ID) Ltd, an Irish company, based in the British Virgin Islands.

Unsurprisingly, the London commercial court ruling was extensively reported by the international media. This, after all, is about Nigeria, a nation reputed globally for endemic corruption and blatant disregard for the rule of law; thus, such a landmark ruling against the country was bound to make headline news around the world. But the stupendous amount involved was also difficult to ignore. As the Financial Times noted, the $9.6bn liability is the equivalent of about a fifth of Nigeria’s foreign reserves, adding that “the decision represents perhaps the largest financial liability in Nigeria’s history”!

But last week, there was an interesting twist to the case when, in what seemed like a tit-for-tat action, the Federal High Court sitting in Abuja authorised the federal government to seize assets belonging to P&ID Virgin Islands and its Nigerian affiliate, P&ID Nigeria Ltd, having found them guilty on two charges of tax evasion and money laundering brought by the Economic and Financial Crimes Commission (EFCC). According to one newspaper, “The companies had through their representatives pleaded guilty to all the charges”.

Yet, one must wonder why the tax evasion and money laundering charges were not advanced in the London arbitration and court cases or instituted

separately in the UK and the US, where a parallel P&ID action is still ongoing.

Given that Nigeria is not a signatory to any treaty on the recognition and enforcement of foreign judgements, such as the Hague Convention or the New York Convention, the ruling of the federal high court would only have effect in Nigeria. By contrast, the London court judgement, if upheld in any appeal, would potentially affect all of Nigeria’s non-diplomatic assets in all British entities, the European Union, the US and several other countries.

But leaving aside the legal niceties about the recognition and enforcement of foreign judgements, the London ruling is deeply embarrassing and damaging to this country. Which raises the obvious question: how did Nigeria get into such a terrible legal mess? Well, the problem stemmed from two familiar sources: corruption and abuse of power on the one hand, and utter disregard for legality and the rule of law on the other.

Everything about the P&ID case smells of attempts by certain powerful individuals to commit Nigeria to a shoddy international commercial contract, in part for personal gains, and, subsequently, a reckless decision, borne out of shameful incompetence and deliberate disregard for the principle of the sanctity of contract, to renege on and frustrate the performance of the contract.

Let’s take the corruption first. It is an open secret – isn’t it? – that government-awarded contracts in Nigeria are intended, in large part, to serve personal interests. In her book titled “Fighting Corruption Is Dangerous”, Ngozi Okonjo-Iweala, Nigeria’s two-time finance minister, devoted a section to this phenomenon. She described a common practice in which politicians and officials award contracts with a view to defaulting on them for personal gains.

This arrangement involves connivance between contractors, government officials and the courts, she said, describing “an unholy alliance where amounts owned by government, interest and penalties were inflated and all parties shared in the proceeds after payment.”

Of course, at the heart of the P&ID case was a contract which the politicians

and government officials involved had no intention of performing, but which went terribly wrong against the game plan! According to the narrative, in 2010, the government awarded a contract to P&ID to build a gas processing plant, while Nigeria, on its part, committed to laying all the pipelines and supplying gas to the plant. P&ID’s payment for the contract was to come from the export of gas products from the plant over 20 years. But, although the company said it spent $40m in preparatory work, it didn’t break ground on the project, arguing that the government frustrated the contract by reneging on its commitment to lay the pipes. In 2012, P&ID went to arbitration to seek damages for breach of contract.

This was clearly contract entered into with wrong motives, without due diligence. The two Irish businessmen, Brendan Cahill and Michael Quinn, who were awarded the contract to build the gas plant, made their names, according to the Irish Times, in the entertainment industry. Their company, P&ID, didn’t previously exist; it was set up specifically to undertake the project. Yet, this was still a valid contract, and, thus, had to be performed. The failure by any of the parties to perform it, or any attempt by one party to frustrate the other party’s ability to perform it, which was what P&ID alleged, would be a breach of contract.

But Nigeria deliberately ignored the huge legal risks, riding roughshod on the rule of law. On May 3, 2015, about 26 days before President Muhammadu Buhari was sworn in, P&ID reached a settlement with President Goodluck Jonathan’s administration for the sum of $850m.

But President Buhari refused to pay the settlement, ignoring the fact that, with respect to international legal obligations, government is treated as a continuum!

Even when the Buhari government eventually became involved in the case, it’s handling of the arbitration was embarrassingly shambolic and incompetent. For instance, Nigeria did not challenge the arbitration tribunal’s initial decision in favour of P&ID in July 2015, nor did it appeal the final arbitral award made in January 2017, in which the tribunal ordered Nigeria to pay P&ID $9bn for the breach of contract.

‘

Of course, at the heart of the P&ID case was a contract which the politicians and government officials involved had no intention of performing, but which went terribly wrong against the game plan

Instead, Nigeria spent time arguing that England was not the proper place for the case. Yet, any lawyer with a basic knowledge of conflict of laws knows that, as one of the parties, in this case P&ID, had a strong connection with the UK, unless there are explicit choice of law and choice forum provisions in the contract, England was an appropriate forum. There was a court decision in 2016 that the UK was the right jurisdiction for the arbitral case. However, even though Nigeria could appeal the decision within 28 days, it missed the deadline by several months. Inevitably, a judge dismissed its appeal. Yet, Nigeria till refused to pay up!

In November last year, the former British Secretary of State for International Development, Priti Patel, alluded to the case in a damning article, titled “If Nigeria wants to take part in global markets, it must shape up and honour its obligations.” The former minister blamed President Buhari for cancelling a compensation settlement between P&ID and the Jonathan government, adding that, since taking office, Buhari “has done his level best to pretend Nigeria’s obligations to P&ID do not exist”, by “refusing to respect the various tribunal decisions.” Nigeria, she said, must honour its obligations to companies like P&ID, adding: “Until the, investors inevitably will be very wary of investing in the country”.

Of course, Nigeria still refused to pay the arbitral award. But, now, the English commercial court has converted the award into a judgement debt. Unless Nigeria successfully appeals the case, its commercial assets around the world are at risk of being confiscated.

Nigeria’s reputation with investors is already damaged by this case, but the financial consequences could be equally devastating. Yet, some would say it serves Nigeria right, hailing the case as a triumph of the rule of law over the rule of men and impunity!

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

Nigerian code of corporate governance 2018 – Principle 19: whistle blowing

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histle-blowing is generally defined as the disclosure by members of an organisation (former or current) of illegal, immoral or illegitimate practices under the control of their employers, to persons or organisations that may be able to effect action.

Within the corporate context, whistleblowing is the disclosure of information by an employee or any stakeholder who alleges willful misconduct carried out by an individual or group of individuals within the organisation. The CBN guidelines on whistle-blowing for banks and other financial institutions in Nigeria describes whistle-blowing as, “the reporting of alleged unethical conduct of employees, management, directors and other stakeholders of an institution by an employee or other person to appropriate authorities”.

Principle 19 of the Nigerian Code of Corporate Governance, 2018, requires the board to establish a whistle-blowing framework which encourages stakeholders to bring unethical conduct and violation of laws and regulations to the attention of an internal and/or external authority so that action can be taken to verify the allegation, apply appropriate sanctions or take remedial action to correct any harm done.

The Buhari administration introduced a national whistleblowing policy under which according to Zainab Ahmed, the minister of finance, has led to the recovery of N605 bil-

lion as at May 2019. At the corporate level, the 2018 Association of Certified Fraud Examiners (ACFE) Report to the Nations on Occupational Fraud and Abuse, reported that tips are by far, the most common initial detection method with 46 percent of cases being detected by a tip. The report also states that globally, fraud losses were 50 percent lower in organisations with whistleblowing hotlines than those without.

The NCCG code recommends that boards should ensure that a reliable and accessible whistle-blowing mechanism exists which guarantees the anonymity of the whistle-blower. All disclosures resulting from whistleblowing are required to be treated in a confidential manner with the identity of the whistle-blower kept confidential. The board should ensure the effectiveness of the whistleblowing mechanism and continually affirm publicly, its support for and commitment to the Company’s whistle-blower protection mechanism.

The content of a whistle-blowing policy or “speak up policy” may include additional sector-specific legal requirements and peculiar industry practices. An effective whistleblowing policy should set out the objectives of the policy and emphasise that the company’s interest in the disclosure of unethical conduct is beyond regulatory compliance. It should clearly state the company’s intention is to encourage and enable stakeholders raise www.businessday.ng

serious concerns within the company, rather than ignoring a problem or “blowing the whistle” outside especially to the press. The policy must clearly define its scope and those to whom it applies – which typically would be staff, shareholders, customers/clients and other stakeholders.

It is also a useful practice to describe the kind of information the company desires to be disclosed. Whilst disclosures often relate to financial information such as fraud, embezzlement and misappropriation, the NCCG code emphasises that a whistleblower can disclose any information related to a violation or suspected violation of any law or internal policy connected with the business of the company, its employees or stakeholders.

The policy should encourage disclosure of concerns that could have a significant impact on the company – such that it is differentiated from routine feedback and grievance channels available to employees. The whistleblowing policy could be linked to the company’s code of conduct and cover serious code violation. The code of conduct should provide examples of possible breaches of the code of conduct and guide employees on how they should evaluate whether an act (or inaction) constitutes code violation.

A whistleblowing policy should provide details of internal and/or external persons to whom disclosure may be made. The NCCG Code recommends that the team responsible for managing disclosures obtained through

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BISI ADEYEMI the whistle-blowing mechanism should provide the Audit Committee with a summary of reported cases, cases investigated, the process of investigation and the results of the investigations.

The team may comprise internal persons such as line managers, the Managing Director/Chief Executive Officer, Head of Human Resources, Internal Audit, Company Secretary or Legal Counsel, designated Ethics Officer, board Audit Committee or Chairman of Statutory Audit Committee. Line management is generally perceived as less independent. Although line managers can be included as potential recipients of disclosures, the policy should include persons who are likely to be more independent of management. The policy should also require all complaints to be documented.

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 23 September 2019

BUSINESS DAY

In Association With

Hitting the ceiling

Why the Fed was forced to intervene in short-term money markets The repo rate spiked in an alarming echo of the financial crisis

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HE FEDERAL RESERVE had plenty to fret about as it prepared to discuss policy interest rates on September 17th and 18th. Trade tensions and wilting global growth have seen businesses cut back investment in the second quarter of the year. In manufacturing, production and capacity utilisation have been falling since the end of 2018. Though the Fed has described jobs growth as “solid”, some analysts worry that the labour market is wobbling. As expected, these concerns prompted the central bank to lower rates for the second time this year, by 0.25 percentage points, to a target of 1.75-2%. But the meeting was overshadowed by turmoil in money markets.

On September 17th, for the first time in a decade, the Fed injected cash into the short-term money market. The intervention was needed after the federal funds rate, at which banks can borrow from each other, climbed above the Fed’s target. It rose as the “repo” rate—the price at which high-quality securities such as American government bonds can be temporarily swapped for cash—hit an intra-day peak of over 10%. On September 17th the Fed offered $75bn-worth of overnight funding, of which banks took up $53bn. The following two days it again offered $75bn-worth. Banks gobbled it up.

That sent shivers down spines. A spiking repo rate was an early warning sign before the financial crisis. In 2007, as market participants began to doubt the quality of collateral backed by mortgage lending, repo rates jumped as lenders hoarded cash.

The latest jump was unlikely to have been caused by such doubts.

Most collateral is now high-quality American Treasury bonds or bills.

Even so, there are reasons to worry.

America’s banks and companies seem to be short of cash. And during the turmoil the repo rate stopped tracking the federal funds rate. This link is the main way monetary policy influences the economy. A gap opening between the two deprives the Fed of its most important policy tool.

Fortunately, the Fed’s interventions seemed to work. The repo rate returned to its usual level, close to the federal funds rate, which in turn is within the range targeted by the Fed. Even so, the turmoil raised questions

A Balkan Second timebetrayal unlucky

Israel’s prime minister will desperately struggle to stay in office Binyamin Netanyahu is down but not out

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about how it plans to handle future cash shortages. The mere prospect of them marks an important shift for America’s financial system. Before the financial crisis the Fed controlled the federal funds rate using a “corridor”, with a ceiling and a floor. Banks with too little cash could borrow at the ceiling rate. But there was no compensation for extra cash held at the Fed (the floor interest rate was zero). To keep interest rates precisely on target the Fed used “open market operations”, swapping Treasuries and cash to control liquidity in the banking system.

Six years of quantitative easing changed all that. To push down long-term interest rates, the Fed bought vast quantities of long-dated Treasury bonds. Its balance-sheet ballooned to $4.5trn. The holders—mainly banks—ended up with mountains of cash. To keep market interest rates at or above the policy rate, the Fed was authorised by Congress to raise the floor from zero, compensating banks for their cash that it held. The ceiling became redundant, as did open market operations. Only the floor mattered.

But banks’ cash piles have dwindled of late. Since late 2017 the Fed has been reducing its balance-sheet by not reinvesting all the proceeds when its assets mature. The balancesheet shrank from $4.5trn in 2017 to $3.8trn in June this year. Moreover, a

wider budget deficit means the Treasury has had to issue more bills and bonds. So far this year it has issued an average of $63.9bn-worth per month, net of repayments. During the same period in 2017 the monthly figure was just $19.6bn. As banks buy Treasuries, their cash piles fall. The surplus reserves banks hold in their deposit accounts at the Fed fell from $2.2trn in 2017 to $1.4trn now.

No one knows how much surplus cash banks need to feel comfortable.

That depends partly on regulations, which have increased the amount of cash banks must hold as a buffer, but also on business sentiment.

Banks’ near-death experience in 2008-09 has left them with a strong desire to hold plenty of extra cash.

Economists have attempted to estimate the level at which banks would start to squirm, most coming up with estimates of $1.2trn-1.5trn.

Usually banks have at least this much on hand. But they may not have had on September 16th, for quite benign reasons. That was the deadline for quarterly corporatetax payments, meaning companies asked banks for more cash than usual. The Treasury had issued $77bn-worth of bills the previous week. The buyers, mostly banks, also had to pay on September 16th.

The Fed expected these events, said Jerome Powell, its chairman, but

not such an extreme reaction. As banks’ cash piles shrank, they grew reluctant to lend to companies and other counterparties. The repo rate spiked. Some banks stepped in, lending to companies at elevated rates.

But then those banks tried to borrow from other banks in the federal funds market, pushing up the rate. This prompted the Fed to intervene.

Cash would have become scarce sooner or later, says Bill English of Yale University. In a growing economy—especially one with a rising government deficit—the demand for bank cash increases over time.

The Fed now faces a choice. It could return to conducting frequent open market operations to pin down interest rates, as before the crisis.

Or it could keep the current system and avert future cash shortages by expanding its balance-sheet enough to keep the banking system permanently saturated with liquidity, even as demand for cash grows. On September 18th Mr Powell suggested that the Fed would opt for the latter, saying it wanted reserves to be ample enough to avoid operations of the sort carried out in recent days. He also announced technical tweaks that will mean banks are compensated a little less handsomely for cash deposited at the Fed, which might encourage them to lend a little more in the repo market instead.

INYAMIN NETANYAHU spent the last two hours of voting in Israel’s general election on September 17th speaking through a camera to an online audience, begging people to come out and vote for Likud, his ruling party, before it was too late. “All the battles I fought as a soldier in an elite unit, all the battles I fought against a president of the United States [Barack Obama], all my other battles in Congress and at the United Nations—I did it for you. And now I’m asking you for something small. Go the polling station. It’s only a five-minute walk.”

As he wheedled and begged his voice grew hoarser. He took phonecalls from fans. Occasionally he stood up to gesture at a map of the Middle East on the wall, pointing to the menace of Iran. At one point, he mockingly showed puppets of his rivals. It was a bravura and sometimes

bizarre performance of an embattled prime minister, frantic for every last vote. For the first time in over a decade he was staring at defeat. As the results came in, they confirmed that he had failed. Likud and the clutch of right-wing and religious parties backing him would lack a majority in the new Knesset.

On May 30th, seven weeks after the previous election, Mr Netanyahu took the unprecedented step of dissolving the Knesset to call for a second election, since he was just one seat short of a majority in the 120-strong parliament. Now he is short by six.

He had thrown everything at his foes. He had accused them of treasonous behaviour. He smeared Israel’s Arab citizens with allegations of voterfraud (Facebook briefly suspended a chatbot on his page after a message accused Arabs of wanting “to destroy us all”). He promised his right-wing Continues on page 20

Monday 23 September 2019

BUSINESS DAY

19

In Association With

A warming world

Israel’s prime minister will desperately...

The climate issue

Continued from page 19

Climate change touches everything this newspaper reports on. It must be tackled urgently and clear-headedly

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ROM ONE year to the next, you cannot feel the difference. As the decades stack up, though, the story becomes clear. The stripes on our cover represent the world’s average temperature in every year since the mid-19th century. Dark blue years are cooler and red ones warmer than the average in 19712000. The cumulative change jumps out. The world is about 1ºC hotter than when this newspaper was young.

To represent this span of human history as a set of simple stripes may seem reductive. These are years which saw world wars, technological innovation, trade on an unprecedented scale and a staggering creation of wealth. But those complex histories and the simplifying stripes share a common cause. The changing climate of the planet and the remarkable growth in human numbers and riches both stem from the combustion of billions of tonnes of fossil fuel to produce industrial power, electricity, transport, heating and, more recently, computation.

All around us That the changing climate touches everything and everyone should be obvious—as it should be that the poor and marginalised have most to lose when the weather turns against them. What is less obvious, but just as important, is that, because the processes that force climate change are built into the foundations of the world economy and of geopolitics, measures to check climate change have to be similarly wide-ranging and all-encompassing. To decarbonise an economy is not a simple subtraction; it requires a nearcomplete overhaul.

To some—including many of the millions of young idealists who, as The Economist went to press, were preparing for a global climate strike, and many of those who will throng the streets of New York during next week’s UN General Assembly—this overhaul requires nothing less than the gelding or uprooting of capitalism. After all, the system grew up through the use of fossil fuels in ever-greater quantities. And the market economy has so far done very little to help. Almost half the atmosphere’s extra, human-made carbon dioxide was put there after the turn of the 1990s, when scientists sounded the alarm and governments said they would act.

In fact, to conclude that climate change should mean shackling capitalism would be wrong-headed and damaging. There is an immense value in the vigour, innovation and adaptability that free markets bring to the economies that took shape over that striped century. Market economies are the wells that produce the response climate change requires. Competitive markets properly incentivised, and politicians serving a genuine popular thirst for action, can do more than any other system to limit the warming that can be forestalled and cope with that which cannot.

This special issue of The Econo-

mist is not all about the carbon-climate crisis. But articles on the crisis and what can be done about it are to be found across all this week’s sections. In this, our reporting mirrors the world. Whether it is in ensuring a future for the Panama Canal or weaning petrol-head presidents off their refinery habit, climate is never the whole story. Other things matter to Manhattan stockholders and Malawian smallholders. But climate change is an increasingly dangerous context for all their worlds.

To understand that context, it is important to understand all the things that climate change is not. It is not the end of the world. Humankind is not poised teetering on the edge of extinction. The planet itself is not in peril. Earth is a tough old thing and will survive. And though much may be lost, most of the wondrous life that makes Earth unique, as far as astronomers can yet tell, will persist.

Climate change is, though, a dire threat to countless people— one that is planetary in scope if not in its absolute stakes. It will displace tens of millions, at the very least; it will disrupt farms on which billions rely; it will dry up wells and water mains; it will flood lowlying places—and, as time goes by, higher-standing ones, too. True, it will also provide some opportunities, at least in the near term. But the longer humanity takes to curb emissions, the greater the dangers and sparser the benefits—and the larger the risk of some truly catastrophic surprises.

The scale of the implications underlines another thing that climate change is not. It is not just an environmental problem alongside all the others—and absolutely not one that can be solved by hair-shirt self-abnegation. Change by the people who are most alarmed will not be enough. What is also needed is change in the lives of those who do not yet much care. Climate is a matter for the whole of government. It cannot be shunted off to the minister for the environment whom

nobody can name.

And that leads to a third thing that climate change is not. It is not a problem that can be put off for a few decades. It is here and now. It is already making extreme events like Hurricane Dorian more likely. Its losses are already there and often mourned—on drab landscapes where the glaciers have died and on reefs bleached of their coral colours.

Delay means that mankind will suffer more harm and face a vastly more costly scramble to make up for lost time.

Hanging together What to do is already well understood. And one vital task is capitalism’s speciality: making people better off. Adaptation, including sea defences, desalination plants, drought-resistant crops, will cost a lot of money. That is a particular problem for poor countries, which risk a vicious cycle where the impacts of climate change continuously rob them of the hope for development. International agreements stress the need to support the poorest countries in their efforts to adapt to climate change and to grow wealthy enough to need less help. Here the rich world is shirking its duties.

Yet, even if it were to fulfil them, by no means all the effects of climate change can be adapted away. The further change goes, the less adaptation will be able to offset it. That leads to the other need for capital: the reduction of emissions. With plausible technological improvements and lots of investment, it is possible to produce electricity grids that need no carbon-dioxideemitting power stations. Road transport can be electrified, though long-haul shipping and air travel are harder. Industrial processes can be retooled; those that must emit greenhouse gases can capture them.

It is foolish to think all this can be done in ten years or so, as demanded by many activists and some American presidential hopefuls. But today’s efforts, which are too lax to keep the world from two or even

three degrees of warming, can be vastly improved. Forcing firms to reveal their climate vulnerabilities will help increasingly worried investors allocate capital appropriately. A robust price on carbon could stimulate new forms of emission-cutting innovations that planners cannot yet imagine. Powerful as that tool is, though, the decarbonisation it brings will need to be accelerated through well-targeted regulations.

Electorates should vote for both.

The problem with such policies is that the climate responds to the overall level of carbon dioxide in the atmosphere, not to a single country’s contribution to it. If one government drastically reduces its own emissions but others do not, the gallant reducer will in general see no reduced harm. This is not always entirely true: Germany’s over-generous renewable-energy subsidies spurred a worldwide boom in solar-panel production that made them cheaper for everyone, thus reducing emissions abroad; Britain’s thriving offshore wind farms may achieve something similar. But it is true enough in most cases to be a huge obstacle.

The obvious fix will be unpalatable to many. The UN’s climate talks treat 193 countries as equals, providing a forum in which all are heard. But three-quarters of emissions come from just 12 economies.

In some of those, including the United States, it is possible to imagine younger voters in liberal democracies demanding a political realignment on climate issues—and a new interest in getting others to join in.

For a club composed of a dozen great and middling-but-mucky powers to thrash out a “minilateral” deal would leave billions excluded from questions that could shape their destiny; the participants would need new systems of trade preference and other threats and bribes to keep each other in line. But they might break the impasse, pushing enough of the world onto a steeper mitigation trajectory to benefit all— and be widely emulated.

base that he would annex chunks of the occupied West Bank. And he tried to enlist other world leaders, including Donald Trump and Vladimir Putin, to endorse him. But this time it wasn’t enough. The man dubbed “the magician” for defying the odds to pull off improbable election victories had run out of tricks.

About 54% of Israel’s voters picked parties opposed to Mr Netanyahu. Some are right-wingers who back many of Mr Netanyahu’s policies yet refused to vote for Likud or its allies. This was a personal rebuff.

Ironically, a key constituency that helped bring him down was the Arab one, which he had tried to deter from voting with a law, which failed to pass, that would have let party officials film voters in polling-stations.

The turnout of Arab voters rose by around ten percentage points. Their Joint List won three extra seats.

Mr Netanyahu has not yet had to concede. He will remain in office as a caretaker prime minister until a new government is sworn in. That can take months. Benny Gantz, a former general who leads the centrist Blue and White party, which is now narrowly the largest in the Knesset, lacks a majority too. Mr Netanyahu’s assorted opponents do not share enough common ground to form their own coalition government. Many Israelis refuse to consider the Arab parties as legitimate coalition partners, though a growing number of Arab voters want to play a bigger role.

So Israeli politics looks deadlocked all over again. But there is a precedent for solving the conundrum. In 1984 neither Likud nor its main rival, the Labour party, could form a ruling coalition. Instead they agreed to a national-unity government with a “rotation” between Labour’s leader, Shimon Peres, and Likud’s Yitzhak Shamir, with each agreeing to serve two years of the prime minister’s term.

This just might work again. Likud and Blue and White are nearly even in their tally of seats. Together they command a majority, which could be strengthened by a couple of other parties joining such a coalition. Mr Gantz is experienced in military matters, having commanded Israel’s army, but is a political novice. He could benefit from working with Mr Netanyahu.

20

Monday 23 September 2019

BUSINESS DAY

In Association With

Bagehot

David Cameron’s alternative memoirs This week the former prime minister published his memoirs. We print an extract from the book he might have written had he won the Brexit referendum

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FRIEND ONCE asked Margaret Thatcher what she would do differently if she had her time again. After a pause for thought, she replied: “I think I did pretty well the first time.” I don’t feel quite the same way. I was wrong to withdraw Conservative MEPs from the European Parliament’s centre-right alliance. I was wrong to surround myself with so many chums from school and university. On reflection the “Big Society” contained too much hot air. But I do pride myself on one thing: I left behind a country that was far more at ease with itself than the one I inherited.

The reason for this was the defining act of my career, the Brexit referendum of 2016. After the result was announced, the pundit class assured me with one voice that I didn’t deserve any credit for doing the blindingly obvious. “Mr Cameron was confronted with an open goal,” the Times editorialised.

“All he did was kick the ball.” These were often the same people who, before the vote, had informed me that I risked unleashing monsters.

I can only say that the referendum didn’t feel like an open goal at the time. The campaign tore the country apart and strained some of my closest friendships. And the result was worryingly close. I sometimes torment myself, in my more mas-

ochistic moments, by imagining what might have happened had it gone the other way!

The fever of Euroscepticism eventually broke and Britain entered its current age of Euro-contentment. Nigel Farage moved to America for a gig with Fox News and a slot on the speaking circuit.

I’m told that he has built quite a place in southern Florida—a mockTudor mansion complete with red telephone boxes and a working

pub serving real ale, pie and mash.

With his guiding hand removed, the UK Independence Party was captured by people who were so nauseating and ill-disciplined that membership collapsed. The Daily Mail was the only big-selling newspaper to continue to champion the lost cause and, after a particularly foam-flecked leader about “the traitor in Downing Street”, Viscount Rothermere stepped in to replace Paul Dacre with Geordie Greig,

a sensible man as well as a good friend.

What went unreported at the time was that the death of Euroscepticism also took a lot of work on my part. A good chunk of the Tory party had campaigned for the losing side. Millions of good people had voted to leave, not because they were fed up with Europe but because they were fed up with Britain. I tackled the Tory problem by forgiving the most talented Leavers,

such as Boris Johnson and Michael Gove, while simultaneously marginalising the irreconcilables.

New MPs only have to look at the desiccated hulks of Iain Duncan Smith and Jacob Rees-Mogg lounging in the parliamentary tea-room to know their fate if they step out of line. I dealt with the problem of the left-behind by announcing the end of austerity at the 2017 party conference and encouraging Boris, as business secretary, to make revitalising the north and the Midlands his priority—or, as he put it, a matter of “do or die”.

I also threw myself into the European issue in a way that I’d never done before. I learned two things from the frustrating renegotiations leading up to the referendum. First, you can’t be a part-time member of the club—you have to put in time sitting on the committees. Second, you can’t underestimate the inflexibility of transnational bureaucrats.

I kept up the pressure, ably assisted

by Sir Ivan Rogers, agitating for the completion of the single market in services and issuing blood-curdling warnings about what would happen if they didn’t rethink freedom of movement. My position was enormously strengthened by Britain’s close relations with America, and my personal rapport with President Clinton (thank goodness she beat that charlatan calling himself “Mr Brexit”).

Bob’s your adviser

Donald Trump replaces John Bolton with a hostage negotiator Robert O’Brien has similar views to his predecessor but a less combative style

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WO MONTHS before the 2016 election Robert O’Brien, a lawyer from Los Angeles, opined on Russian interference to a radio talk-show host. “It’s clear that Vladimir Putin just doesn’t like [Hillary Clinton], and is going to do what he can to help Donald Trump.”

After the election Mr O’Brien— who had advised Ted Cruz, Scott Walker and Mitt Romney in their presidential runs— changed his tune, praising Mr Trump before he even took office for getting NATO allies to boost their defence spending.

Last year Mr Trump named Mr O’Brien an envoy for hostage affairs. Mr O’Brien, according to Mr Trump, called the president “the greatest hostage negotiator...in the history of the United States.” Flattery works. On September 18th Mr O’Brien became Mr Trump’s fourth national security adviser, succeeding John Bolton, who was fired a week earlier.

Unlike Mr Bolton, Mr O’Brien is relatively unknown in foreign-policy circles. Jim Talent, a former Republican senator who worked with him on Mr Romney’s campaign, says Mr O’Brien “absorbs enormous amounts of information quickly” and will be an “honest broker at ensuring options for the president”—the “opposite model” to Mr Bolton.

Mr O’Brien worked under Mr Bolton at the UN, then spent four years at the State Depart-

ment, spanning the administrations of George W. Bush and Barack Obama, working on the justice system in Afghanistan.

Mr Trump considered him for secretary of the navy, a job he would probably have held had Mr Romney won.

In “While America Slept: Restoring American Leadership to a World in Crisis”, published in 2016, Mr O’Brien comes off as a garden-variety hawk. He criticises the Obama administration’s pusillanimity, condemns

the 2015 Iranian nuclear agreement as “the worst diplomatic deal since Munich” and warns that Mr Obama “is decimating America’s unparalleled armed forces”. He urges America to support Egypt’s despot, General Abdel Fattah al-Sisi, and wants to wants to “serve notice upon North Korea that it is within reach of American naval air power”. It is time, he says, to return to a policy of “peace through strength”.

Such views resemble Mr Bolton’s, though Mr O’Brien, unlike his predecessor, has a reputation for congeniality.

That may help restore comity and morale at the National Security Council. But legal work and diplomatic dabbling may not have given him sufficient expertise to guide a mercurial president’s foreign policy.

A former senior official who worked with Mr O’Brien describes him as a “very smart, very nice and very capable lawyer from Los Angeles with

a long-standing interest in national security matters.” But “there’s nothing in his biography that suggests he has the experience or bandwidth to take on this job.”

Monday 23 September 2019

BUSINESS DAY

COMPANIES & MARKETS

21

COMPANY NEWS ANALYSIS INSIGHT

CONSUMER GOODS

Is Nigerian Breweries ready to regain its lost mojo? …stock records biggest trading volume in 7 months OLUFIKAYO OWOEYE

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igeria’s biggest brewer by market share, Nigerian Breweries (NB) Plc has revealed plans to halt its current woeful performance as the battle market share in the beer market heats up.

The management of the company while speaking at the annual financial market forum to discuss its H1 2019 company results, market strategy, and outlook for the year said it is ready to restrategize its product offering and improve on its income.

The makers of Star Lager Beer said it will grow volume on some of its major brands by introducing a smaller can packing by introducing a new 35cl can and new 45cl bottles.

Diageo’s Guinness dur-

ing its investors call noted that it recorded an increase in volume growth from its Can segment. This could be as a result of consumers shifting to smaller and convenient storage packs.

The brewer also announced plans to increase prices to reflect growing cost pressures from excise duties and Value Added Tax (VAT) Four years ago, 71 percent of the Nigerian beer industry was dominated

by Nigerian Breweries while International breweries managed five percent. However, by 2018, the market leader had lost 15 percent of its market share while AB InBev’s International Brewery increased its footing by 16 percent.

In its H1 2019 result, NB reported a net drop in profit of 28percent for the first six months of 2019

ending on 30th June. Profits fell to N13.3bn from N18.4bn in the previous year. The drop accelerated in the second quarter with the company recording a 36percent decline in

earnings to N5.3bn from N8.2bn.

The decline in profit was blamed on a host of factors including the impact on sales of the second wave of a new excise tax

which came into effect on 4th June 2018.

Revenue declined marginally by 1.43percent to N170.1bn from N172.7bn in the same period in 2018.

The Nigerian brewery

L-R: Tiamiyu Olayinka, chairman, Association of Chief Audit Execitive of Banks in Nigeria (ACAEBIN); Adesola Adeduntan, CEO, First Bank of Nigeria Limited/vice chairman, ACAEBIN, and Uduak Nelson, chief audit executive, First Bank of Nigeria Limited, at the 43rd quarterly general meeting of ACAEBIN in Lagos. Pic by Pius Okeosisi

industry has seen intensified competition in more recent times amid tepid growth on the heels of the country’s sluggish economic recovery and inability to pass the cost to consumers who themselves suffer weak purchasing power.

The stock of Nigerian Breweries was the toast of investors on the floor of the Nigerian Stock Exchange (NSE) on Friday.

Investors traded 28.13million units of Nigerian Breweries shares valued at N1.47billion, the biggest volume of trade recorded by the brewer since February 25, 2019 when it traded 42.71million.

The unusual volume of trade had little impact on the performance of NB at the local bourse in Friday’s session. NB shares rose 1.06percent to N52.55 per share, the stock’s highest value in almost two months.

BANKING

CBN’s cashless policy a boon for lenders BALA AUGIE

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nalysts see the new CBN cashless policy adding impetus to banks’ income from fees and commission income, a boon in disguise for lenders operating in a low yield environment.

As part of its cashless policy initiatives, the Central Bank of Nigeria (CBN) announced that banks will now be allowed to take charges on customer deposits in excess of N500 thousand (individuals) and N3 million (corporates), respectively.

The charge applies to the excess cash.

The new policy means a lot of customers may migrate to alternative channels, which is likely to increase deployment of Point of Sales (POS) and Automated Machines (ATM) terminals as well as encourage debt card issuances.

T h a t m e a n s B a n k s,

whose gross earnings have been growing at a slow pace due to a sharp drop in short term government securities, could see increased adoption in their USSD code.

“Banks like Zenith and Access that have premium customers with cash above N500,000 will benefit the most,” said Yinka Ademuwagun.

“On the other hand, the ones that do more of retailing banking may not benefit because their customers may not have cash at that limit,” said Ademuwagun.

Between June 2016-19, the largest lenders in Africa’s largest economy raked in N948.12 billion in fees and commission income, according to data gathered by BusinessDay. A breakdown of the figures shows fees and commission income increased by 17.81 percent to N280.89 billion in June 2018 from N238.41 billion as at June 2018.

“In the positive side, these may be a boost to bank’s earnings for the rest of the year. Fintechs such as Interswitch also stand a lot to benefit from an increased usage of alternative channels,” said analysts at CSL Research Limited.

A copious investment made by banks on latest technology and digital expansion have yielded fruits as online there has been an increase in sundry electronic transactions.

For instance, the volume of Access Bank’s debit/ credit holders surged by 100 percent to 330 million, while in value terms it upsurge by 136 percent to N2.89 trillion in June 2019 from N1.22 trillion the previous year.

Access Bank’s USSD spiked by 160 percent to N422 billion in the period under review to N163 mbillion. It generated N997 billion and 236 million in fees from ATM and POS in the period under review.

The lender plans to develop variants of products that suit the needs of its customers, while expanding its digital capability and providing service and credit.

FirstBank Holding said revenue from Electronic Banking income is now 34 percent of Non-Interest Revenue, while USSD transactions processed stood at N1.20 trillion.

The bank has launched competitive and future ready digital initiatives/ platforms, while improving revenue synergies across the Group.

Fidelity Bank saw number of debit card holders increase by 6 percent to 2.09 million in June 2019, as mobile and internet banking holders hit 2.15 million in the period under review.

Fidelity Bank said 82.0 percernt of its customers transactions are now done on electronic banking channels, Digital Banking now

accounts for 29.0 percent of Fee Income Analysts say the timing of the announcements could stoke negative sentiments as Nigeria is cash driven society, and they added that coupled with the VAT on line transactions, consumer wallets will continue to be pressured.

Analysts at Cardinal Stone are of the opinion that BDCs, petrol stations, traders and small businesses who handle a lot of cash are likely to be negatively im-

pacted by the new charges.

“It is also unclear how the general populace will react to this measure, given that Nigeria remains a hugely cash-driven society,” said analysts at Cardinal Stone.

“We, however, note that the CBN had previously backtracked on attempts at nationwide implementation of similar initiatives in the past, and we do not rule out the possibility of similar occurrence come March 2020,” summed the analyst.

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

22

Monday 23 September 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

BANKING

Fitch assigns Access Bank’s subordinated bond final ‘A(nga)’ rating OLUWASEGUN OLAKOYENIKAN

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itch Ratings, a global credit rating agency, has assigned Access Bank Plc’s tier two subordinated bond worth N30 billion a final national long-term rating of ‘A(nga)’.

The assignment of the final rating, which is in line with the expected rating assigned on June 6, 2019, followed the receipt of final documents conforming to information already received, Fitch said in a statement.

“The bonds are rated one notch below Access’s ‘A+(nga)’ National Long-Term Rating,” Fitch said. “This reflects higher loss-severity relative to senior unsecuredinstruments,whichis due to their subordinated status.”

“No additional notching

has been ascribed for nonperformance risk, as Fitch regards this to be minimal relative to that captured in Access’s National Long-Term Rating.”

Nigeria’s largest lender by total assets issued the sevenyear local currency bonds on July 23, 2019 with a 15.5 percent fixed rate and a maturity date of July 23, 2026. The bonds, according to Fitch, rank pari passu with the claims of all other subordinated debt.

This implies there are no contractual going-concern features such as coupon deferral or omission and writedown or conversion ahead of non-viability.

However, it said the bonds’ ratings are sensitive to changes in Access’ National LongTerm Rating, which reflects the

bank’s creditworthiness relative to other issuers in Nigeria.

Nigeria’s first credit rating agency, Agusto & Co assigned the debt instrument “A+”. As at the close of business Friday on the FMDQ Security Exchange, yield on the bond stood at 15.28 percent, while risk premium was at one percent.

Meanwhile, the Nigerian Stock Exchange (NSE), in a statement on Friday, announced the listing of the bond to its daily official list.

“Dealing Members are hereby notified that Access Bank Plc’s N30,000,000,000, 7-Year 15.5% Fixed Rate Subordinated Unsecured Bonds Due 2026, were listed on the Daily Official List of The Nigerian Stock Exchange on Tuesday, 17 September 2019,” the local bourse said.

L-R: Adiatu Adeyemi Olatunde, chairman, VCare Diagnostic Limited; Sanjay mathur, managing director, and Abiola Adejumobi, quality assurance manager, during a press conference to unveil the VCare Diagnostic Centre in Lagos, at the weekend. Pic by Olawale Amoo

CONSUMER GOODS

Nestlé Nigeria signs MOU with Wecylers to tackle plastic waste pollution GBEMI FAMINU

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estlé Nigeria, a key player in the fastmoving consumer goods industry in partnership with Wecylers has taken a move to combat plastic waste pollution in Nigeria.

Speaking at the Memorandum of Understanding (MOU) signing ceremony between the two companies, Mauricio Alarcon chief executive officer of Nestlé Nigeria said the company has always advocated for a clean and healthy environment as well as a healthy lifestyle.

“One of our ambitions at Nestlé is to strive for zero environmental impact in our operations as we strive towards a waste-free future. A key part of achieving this goal is to make 100 percent of our packaging reusable or recyclable by 2025.”

“Tackling plastic pollu-

tion is an urgent priority which requires multisector collaboration, so this MOU with Wecyclers is another step towards achieving our shared objectives of a wastefree future and building thriving communities. Our longer-term ambition is to stop plastic leakage into the environment in order to avoid further accumulation of plastics in nature while also achieving plastic neutrality.” Alarcon added.

He stated that the signing of the memorandum is to accelerate the process of recovering and recycling post-consumption plastic packaging waste in Lagos State by extending plastics waste recovery systems to more communities.

Kemisola Ajasa, regional regulatory manager Nestlé CWAR said the partnership reiterates the company’s commitment to a waste-free future

which it hopes to achieve by 2025 by using recyclable items, influencing consumer beliefs and action in promoting a healthy environment through sensitization and creating public awareness while leveraging on the Food and Beverage Recycling Alliance (FBRA) as a founding member.

Wale Adebiyi, MD Wecyclers said the focus was to achieve a clean and healthy environment while also providing employment opportunities for people.

“This partnership is an avenue to extend the plastics collection and recycling process by setting up more collection sites in Lagos” “In addition to tackling the plastic menace, the project will also help to create 40 direct jobs for collection point operators and sorters while empowering an additional 15,000 Wecyclers subscribers.”

INSURANCE

Guinea Insurance posts N190m annual loss on rising expenses OLUWASEGUN OLAKOYENIKAN

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ftertwoprofitableyears, Guinea Insurance plc returned to its pre-2016 financial woes in fullyear 2018, no thanks to the firm’s increased expenses which weakened revenue gains.

Guinea Insurance recorded a loss of N190 million in 2018 from a profit of N251 million recorded a year earlier, the company’s weakest performance since 2014 when it posted a loss of N81 billion.

Gross written premium of the insurance company rose some 28 percent to N1.24 billion in 2018, but only N1.2 billion was left as income after

N40 million was deducted as unearned premium.

The company spent N22 million more on reinsurance expenses in the review to N295.7 million. In spite of this, its net premium income leaped some 21 percent to N904 million as against N747 million recorded in the previous year.

Increased commission received on treaty insurance and facultative reinsurance saw Guinea Insurance’s fees and commission income for the year to jump to N72.7 million from N687 million.

However, the increases were offset by a 169 percent surge in claims expenses to N170.4 million from N63.8

million, and another 14.5 percent growth in underwriting expenses to N282.6 million.

The resultant effect of all these was a 5 percent increase to N524.5 million in the company’s underwriting profit for the year. While the company benefitted from the relatively high yield environment in the Nigerian T-Bills market in review period, declines in other investment activities cast a shadow on its investment income.

Rental income from land and building rose to N5.7 million from N5.6 million, while only 510,000 was recorded as gain on sale of property as against N10 million garnered in 2017.

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L-R: Theo Nwamad, MD, Interim Consulting South Africa, and Pascal Odibo, group country director, Jeff & Obrien Knowledge, sign an MOU on business combination strategy on Knowledge development in Africa in Randburg JHB, SA.

L-R: Omar Shekarau, executive director, small and medium enterprises, Bank of Industry (BoI); Mohammed Goni Alkali, MD, North East Development Commission (NEDC); Olukayode Pitan, MD, BoI, and Musa Umar Yashe, executive director, humanitarian affairs, NEDC, at an advocacy visit of NEDC management to BOI in Abuja. Pic by Tunde Adeniyi

L-R: Muhhammed Rudman, president, Nigeria Internet Registration Association; Yusuf Kazuure, MD/ CEO, Galaxy Backbone Limited; Habiba Lawal, permanent secretary, Ecological Fund, and Dasuki Arabi, DG, Bureau of Public Service Reforms (BPSR), at a launch of 2019 evaluation and ranking of Websites of the Ministries, Departments and Agencies in Abuja. Pic by Tunde Adeniyi

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Monday 23 September 2019

BUSINESS DAY

COMPANIES&MARKETS

23

Business Event

REAL ESTATE

Agusto assigns ‘Bbb’ rating, negative outlook to Mixta Real Estate BALA AUGIE

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igeria’s first credit rating agency, Agusto & Co has assigned a “Bbb-” rating to Mixta Real Estate Plc. According to Augusto, the rating assigned to Mixta Real Estate Plc is hinged on the Company’s adequate working capital, moderate

leverage, strong brand presence in the Nigerian real estate market and a stable and experienced management team.

However, the rating is tempered by MRE’s subpar profitability, weak cash flow and the adverse macroeconomic environment which has negatively impacted demand for real estate generally.

Mixta Nigeria is a mem-

ber of the Mixta Africa S. A. – a large property development company operating in seven African countries and Europe. MRE is one of the leading real estate development companies in Nigeria and has a track record and diverse real estate portfolio, with operations spanning the residential, commercial, retail and leisure subsegments of the Nigerian real estate industry.

L-R: Adesoji Adesugba, vice president/provost, Abuja Chamber of Commerce and Industry’s Business Entrepreneurial Skills and Technology (BEST) Centre, with Malaysian investors from the Datasonic Group, at their business visit on the Chamber in Abuja. Pic by Tunde Adeniyi

SEPLAT deepens healthcare in Imo Communities with Eye Can See, Safe Motherhood initiatives ...offers free consultation, treatment and Safe Motherhood kits to indigenes

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eplat Petroleum Development Company Plc (SEPLAT), operator of the NNPC/SEPLAT Joint Venture, has brought succor to community members of its areas of operation and to other indigenes of Imo State, as it holds the 2019 edition of its Eye Can See and Safe Motherhood programmes, the company’s signature Corporate Social Responsibility (CSR) health programmes.

Speaking at the opening ceremony which took place on September 19th at the Medical Health Centre at Izombe, Imo State, the wife of the Imo state governor, Lady Ebere Ihedioha who flagged the medical outreach open said: “If all the corporate organisations were to tow this route of SEPLAT petroleum today, the burden of underdevelopment and social restlessness particularly in the oil producing areas in the state would be greatly reduced. This programme therefore places SEPLAT Petroleum at the top of the Corporate Social Responsibility in the state, and by

extension have won the hearts of our people.”

In the company’s response, Dr. Chioma Nwachuku, General Manager, External Affairs & Communications, representing Mr. Austin Avuru, the Chief Executive Officer of Seplat, said: “People are at the center of everything we do. The NNPC/SEPLAT joint venture takes delight whenever we have opportunity to deploy these two key programmes specially designed for the wellbeing of our community members and for other indigenes of the state who wish to access the benefits of these health programmes.”

Through the Eye Can See and Safe Motherhood initiatives, Seplat has provided premium health care in line with its commitment to ensuring the wellbeing of people living in its host communities.

The company began in 2017 to run these programmes annually in these communities.

The Eye Can See initiative has brought community dwellers face to face with specialist op-

tometrists. Within the two year period, a total of 7,343 patients have benefitted from the initiative, 2,200 reading glasses have been given to patients while over 233 successful eye surgeries have been conducted.

On the other hand, through the Safe Motherhood initiative, Seplat has supported pregnant women and nursing mothers with Safe Motherhood kits comprising a maternity bag, treated mosquito nets, vitamin supplements and other medical items which foster safe delivery, and cater to babies.

As part of the programme, pregnant women are also enlightened about safe and planned motherhood as well as child care. So far, 3,586 expectant mothers have received Safe Motherhood kits in Seplat’s Eastern Asset area in the last two editions of the initiative.

This year’s Opening ceremony was attended by government dignitaries, traditional rulers, community leaders, government officials and Management/Staff of Seplat and NNPC.

Coca-Cola HBC retains top spot in Dow Jones sustainability ranking ISRAEL ODUBOLA

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oca-Cola Hellenic Bottling Company (HBC), one of the largest bottlers for the Coca-Cola Company, is leading the way in sustainability for the global beverage industry, after achieving the highest sustainability ranking in Europe and in the world for the fourth consecutive year.

The bottler’s robust sustainability performance, particularly in the areas of labour practices, strategy for emerging markets, health and nutrition and across the environmental dimension, earned it a top spot with 90 index points, 38 points higher than the industry average.

“Our performance was so strong that Coca-Cola HBC is now not only sustainability leader in the beverage industry, but

has also taken the lead across Dow Jones’s food, beverage and tobacco group,” said Dimitris Lois, group’s chief executive.

Commenting on the bottler’s performance in its latest sustainability index rankings, Dow Jones said that Coca-Cola HBC has showed commitment to sustainable development to create long-term value for business and society. “With admirable targets to reduce water and energy consumption while scaling up package recycling, the company has an ambitious sustainability strategy, and with such large business, every steps matters,” Dow Jones said.

Introduced in 1999, the Dow Jones Sustainability Index is the most widely recognized benchmark for corporate sustainability. Companies are judged against strict economic, environmental and social criteria, with a strong www.businessday.ng

focus on long-term shareholder value. The rigorous, rule-based methodology reveals the sustainability leaders in world business, with 2, 500 companies assessed across 59 industries in 26 countries.

Meanwhile, Coca-Cola HBC has agreed to buy Italian mineral water maker and sparkling beverage company Lurisia in a deal worth $97 million.

The acquisition made together with the group Coca-Cola will allow the London-listed group add premium Italians brands to a portfolio which already includes iced teas and plantbased drinks.

Coca-Cola HBC is the world’s third-largest CocaCola anchor bottler in terms of volume with sales of over 2 billion units. Its shares are listed on the London Stock Exchange with a secondary listing on Athens Stock Exchange.

L-R: Gabriel Idahosa, vice president/chairman, Trade Promotion Board, Lagos Chamber of Commerce & Industry; Oyeyinka Banjo, president, The Real Economy Sector Initiative (TRESI), and Segun Akintemi, CEO, Page International Financial Services Limited, at the TRESI SME Conference in Lagos.

Ebere Ihedioha (2nd l), wife of the governor of Imo State; Ogbuefi Vivian Ironna (2nd r), wife of deputy governor, Imo State; flanked by Chioma Nwachuku (r), general manager, external affairs and communications, Seplat Petroleum Development Company Plc, and Ayodele Olatunde (l), general manager, eastern assets, SEPLAT, at the opening ceremony of SEPLAT’s 2019 Eye Can See and Safe Motherhood CSR Programmes in Izombe, Imo State

L-R: Adesoji Adesugba, provost Abuja Chamber of Commerce and Industry (ACCI); Emeka Offor, founder/chairman, Emeka Offor Foundation; Rauf Aregbesola, minister of Interior, and Adetokunbo Kayode, president, ACCI, at the visit of business delegation of Datatonic Group Berhad- Malaysia to the minister in Abuja. Picture by Tunde Adeniyi.

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Monday 23 September 2019

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REAL SECTOR WATCH Manufacturers develop backward integration projects to source inputs locally ODINAKA ANUDU

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ultinationals and conglomerates are developing backward integration projects to raise their local raw materials sourcing.

Manufacturers told Real Sector Watch that they have been consistently doing this to lower costs, key into government vision and forestall constant pressure on the foreign exchange market.

Local raw materials sourcing averaged 60.29 percent in 2018, from 63.21 percent in 2017, according to data prepared by the Manufacturers Association of Nigeria (MAN), which has over 2,000 members.

Backward integration occurs when a company buys its suppliers or internally produces segments of its supply chain.

Dangote Group has pumped several billions into several backward integration programmes in sugar, flour, cement and others.

In 2017, Dangote Sugar signed a $450 million deal with Niger State.

The $450million deal was to see the company producing raw sugarcane on 16,000 hectares of land at Lavun Local Government through an out-grower scheme.

Dangote Sugar Grou and Nasarawa State government also, in 2017, entered into a $700m sugar agreement for the purpose of setting up a backward integration project and state-of-the-art refining facilities.

Aliko Dangote, president of

Dangote Group, had said the integrated sugar complex, to be located in Tunga, Awe Local Government Area of Nasarawa state, comprised 60,000ha sugar plantation and two sugar factories with capacity to produce 430,000 tonnes per day of refined white sugar, representing about 30 percent of the country’s consumption.

It also has projects through its Savannah Sugar plc in Numan, Adamawa State, North-East Nigeria.

Nigeria President Muhammadu Buhari commissioned FMN’s N50 billion Sunti Golden Sugar Estates in March 2018, featuring 17, 000 hectares of irrigable farmland and a sugar mill processing 4,500 metric tons (MT) of sugarcane per day.

At full capacity, the estate can produce 1 million tons of Sugar-

cane which roughly translates into 100,000 MT of sugar yearly.

According to John G. Coumantaros, chairman of Flour Mills of Nigeria (FMN), the Sunti Golden Sugar Estates achieved its first development target of reaching 2,836 hectares of land under cane in July 2018. He said the company completed the construction of three drain pump stations with the heightening and strengthening of dyke along 10 kilometres on the NorthEastern side of the recurrent challenges of flood.

BUA has nursery plantations in Lafiagi, Kwara State. Others with backward integration projects in sugar are McNichols, and Confluence Sugar.

PZ Wilmar, which is a subsidiary

of PZ Cussons, has acquired over 50,000 hectares of oil palm plantation in Cross River State. The firm acquired the defunct Calaro Oil Palm Estate, formerly owned by Cross River government, as well as the 12,805-hectare Kwa Falls oil palm plantation, formerly owned by Obasanjo Farms. It also bought the 5,450-hectare Ibiae Oil Palm Estate and another 8,000 hectares estate in Biase.

For the purpose of backward integration in palm oil, Flour Mills subsidiary Agri Palm Limited has plantations at Ugbogui and Iguiye near Benin City in Edo State, and has expanded to 4,000 hectares (ha) of established palm in the first phase of local palm oil production needed to support the upstream needs of the group’s oil

refining operations in Ibadan.

Lafarge Africa, Nigeria’s second largest cement maker, has continued to explore limestone and gypsum locally.

FrieslandCampina WAMCO, producer of Peak Milk and Crown Milk, currently has five locations in Oyo State where it houses and supports local herdsmen who provide milk from local cows. In 2015, the dairy maker engaged and trained over 920 women and 726 men Fulani milk producers and potential small-holder dairy farmers in Oyo State. The dairy maker is also expanding to other states.

Olam has made backward i nt e g rat i o n i nve s t m e nt s i n wheat and noodles and has also achieved forward integration through its acquisition of the entire equity stake in Titanium Holding Company, the parent company of OK Foods, according to a 2016 KPMG report.

Okomu Oil, palm oil maker, is planting 5,000 hectares of oil palm in Edo State.

In 2018, the company disclosed that it was planting 11,400 hectares at a new Extension 2 Plantation in Ovia North East Local Government Area in Edo State.

This was after acquiring two additional machines that produce 30 metric tons per hour mills, valued at $50 million.

Manufacturers say this is an indication that they have confidence in the Nigerian economy.

A string of policies have hurt investors in Africa’s biggest market, with the restriction of 43 items since 2015 topping the chart. But this has not limited them.

Border closure to enable Nigeria unlock AfCTA benefits — Industry minister DAVID IBIDAPO

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t the 2019 presidential dialogue on the economy organised by the Lagos Chamber of Commerce and Industry (LCCI), Adeniyi Adebayo, minister of trade, investment and industry, who represented the president and vice president, said border closure was initiated to achieve security and position Nigeria to reap full benefit of the recently signed African Continental Free Trade Area (AfCTA) agreement.

“The border closure is a security issue and the action has been taken to enable security agencies of government to secure our nation. What the government is trying to achieve is that at the point when the borders are eventually opened, Nigeria will not be a dumping ground upon AfCTA’s imple-

mentation,” Adebayo said.

In his view, the closure of the border is a way the Nigerian government is preparing for AfCTA agreements to make manufacturers competitive.

The border closure has seen about a 33 percent increase in the price of rice and increased smuggling, amongst other conwww.businessday.ng

sequences. It was a major issue of concern raised at the dialogue.

According to Babatunde Paul Ruwase, president of the Lagos Chamber of Commerce and Industry, closure of the land borders has enormous implications for cross border economic activities around the country.

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“The indications are now that the closure is indefinite.

While we share the concern of government on issues of security and smuggling, we believe that the indefinite closure of land borders is not the solution to the problem,” he said.

With short-term outlook of key economic indicators not looking bright, with Nigeria being largely dependent on oil sector which is volatile, analysts cannot but stress the importance of market-moving reforms in the economy.

Other issues raised during the dialogue were huge infrastructure deficit in the country, policies that stiffle big organisations in the auto industry, the need to diversify and reduce importation of commodities Nigeria can produce, unsigned CAMA bill by the president, among others.

While the federal govern@Businessdayng

ment has churned out policies to spur growth in the economy, experts suggest that these policies may be dead on arrival if the government doesn’t interact with private sector players to understand the challenge and how best to solve it.

“The message is that regular engagement with relevant stakeholders in the various sectors will bring a lot of value.

The regulatory environment needs to align with this vision as well. This policy dialogue is our contribution to this process,” Ruwase added.

While analysts have commended the efforts of President Buhari on instituting the Economic Advisory Council (EAC) headed by Doyin Salami, a renowned economist, stakeholders across sector plead that the government should listen and implement recommendations from the EAC.

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REAL SECTOR WATCH Why NASS must reject $1bn voted for Ajaokuta Steel ODINAKA ANUDU

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he 9th Senate and the House of Representatives must reject the $1 billion earlier voted for the retrogressive Ajaokuta Steel Complex, which is yet to give Nigeria any value since 1971 when it was established.

In December 2018, the 8th Senate passed a bill seeking to allocate $1 billion from the federalgovernment’sshareofExcess Crude revenue for the completion of Ajaokuta Steel Company.

The Senate resolution followed the adoption of the ‘Ajaokuta Steel Company Completion Fund Bill 2018’, which was a bill presented by now Senate president, Ahmed Lawan.

Many senators were happy about the bill, as they felt it would rejuvenate the behemoth. However, a critical analysis shows that allotting $1 billion to Ajaokuta si a waste of resources.

It is on record that Ajaokuta was established in 1971 to develop Nigeria’s steel sector and stimulate the exploration of God-given natural resources, especially iron ore.

Luckily for the country, large iron ore deposits were found in Itakpe, Ajabanoko and Oshokoshoko all in Kogi State.

The Ajaokuta Steel Complex

L-R: Jean-Luc Nzoubou, deputy/chief executive officer; Gaëtan Debuchy, managing director/ chief executive officer and Obinna Ukachukwu, deputy/chief executive officer, all of AdvansLa Fayette MFB during the announcement of their new appointments recently.

and Delta Steel Company were subsequently incorporated in 1979 as limited liability companies.

Between 1980 and 1983, the then federal government stated that it had achieved 84 percent completion of Ajaokuta steel plant, having completed the light mill section and the wire rod mill.

It was also widely reported that erection work on equipment reached 98 percent completion around 1994.

Ever since then, Nigerians have been made to believe that Ajaokuta is 98 percent completed.

But here lies the biggest

puzzle: Why is a company that is 98 percent completed still failing to produce a sheet of steel over 35 years after its establishment?

Despite being unproductive, government after government has continued to pump billions into the complex. Government records show that successive administrations have pumped $8bn so far into the complex since 1979. The current government of Muhammadu Buhari has joined the party of spenders on a government facility that needs to be in private hands.

In a move that shocked

economists and finance experts, the federal government budgeted N3.9 billion in 2016 and N4.27 billion in 2017 for the resuscitation of the moribund Ajaokuta Steel Company, despite an earlier business case in the last administration showing that the complex could only work if properly privatised or concessioned. There was also a humongous budget on it in 2018.

“So why would anyone continue to pump money into an enterprise that is unproductive,” Ike Ibeabuchi, a manufacturer, said. “The government says new inves-

tors are interested in taking over the complex, so why would Nigeria spend that huge fund on it?” he asked.

Eleven private investors expressed interests in the concessioning of Ajaokuta Steel Company, Abubakar Bawa Bwari, former minister of mines and steel development, said in the nation’s capital on January 15, 2019.

Bwari said it would be concessioned to a firm with the financial muzzle, technical know-how and genuinely committed to the nation’s steel sector development.

Ime Ekrikpo, director of ferrous metals at the Federal Ministry of Mines and Steel Development, said at a recent event held by the Manufacturers Association of Nigeria (MAN) in Lagos that the federal government had accepted the option of concessioning Ajaokuta Steel, whereby it would maintain some level of ownership while being funded and operated by a private player.

He, however, added the procurement processes to engage a transaction adviser is on hold following its delisting from the enterprises to be privatised by the National Assembly.

BusinessDay had criticised the immediate past Senate for insisting on set-

ting aside $1 billion for the steel plant. This is because it makes more economic sense to sell or concession the plant which has gulped over $8 billion without producing a sheet of steel “I hope Lawan will not promote this anymore, especially now that he is the Senate president with more influence,” a private sector player said.

“It makes no sense to waste our resources on that complex,” the private sector player added.

Ajaokuta Complex has the capacity to produce one million metric tonnes of steel, one million metric tonnes of coal , manganese and limestone, among others, but it is yet to produce a sheet. It has a managing director and staff members who are paid from tax payers’ funds.

“Currently, I am not sure those technologies at Ajaokuta are competitive in steel making. The world has moved on. What is required now is for the private sector to get more and more involved in the downstream and the upstream segments in the steel business,” Raj Gupta, chairman, African Industries Group, a consortium of 12 companies, including six steel plants, told BusinessDay recently.

Manufacturing investments fall as economy drags ….Investors tread cautiously GBEMI FAMINU & SEGUN ADAMS

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ollowing the slow economic recovery from recession, Nigeria’s Foreign Direct Investment (FDI) picked up in 2018, but this is short-lived as attention continues to shift to more attractive debt market.

Investors have been scrambling for Nigeria bonds as equities market continue to see massive sell-offs. Treasury bills have also been attractive, with yield hovering between 10 and 18 percent in the last four years.

Foreign Direct Investment, also referred to as patient 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, which can be liquidated easily, FDI has a longer duration in an economy, hence it is real investment.

Data show that the economy is replete with industrial companies and micro, small and medium enterprises by almost 95 percent. But

the industrial companies, which represent real investments, have been down since 2014/15.

In 2013, a total of N2 trillion investments were made by manufacturers, according to the Manufacturers Association of Nigeria (MAN). This number dropped to N523 billion in 2018, due to a string of poor policies and low confidence.

The manufacturing sector plunged into a negative territory in the four quarter of 2017, recording -2.85 percent growth. The economy grew sluggishly at 1.94 percent in the second quarter of 2019, from 2.1 percent in the first quarter, according to the National Bureau of Statistics.

The Manufacturers CEOs Confidence Index (MCCI) survey carried out among CEOs in the manufacturing sector for the first quarter of 2019, conducted by MAN, showed that issues around foreign exchange, bank lending rate, government capital implementation, multiple taxes, overregulation of regulatory agencies, sources of raw materials were some of the challenges dragging the growth of the sector, constraining its performance on the global market scale. www.businessday.ng

These challenges, which have remained constant over the years, have sent many industrial companies out of the country and likewise scared prospective foreign investments away, pushing them to other African countries.

In 2016 alone, 54 manufacturing concerns shut down owing to foreign exchange challenges, as they could not access dollars to import inputs, according to Frank Jacobs, then president of MAN. The resultant effect of this is that the country still runs a 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.Data from the National Bureau of Statistics (NBS) show that in 2014, FDI into Nigeria stood at $2.28 billion but five years later, inflows slowed to $1.19 billion and it fell by 8 percent in half-year of 2019 , declining at the rate of 15 percent.

In contrast, portfolio investment dropped only 4 percent in the same period while money market inflows surged 52.57 percent.

The trend shows the urgent

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need to address issues that have held the country back for the last couple of years, according to Yinka Ademuwagun, an analyst at Lagosbased 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,” Ademuwagun said.

Nigeria’s economy has grown by an average of 1 percent since 2014 caused by the sluggish pace of recovery from the 2016 recession.

BusinessDay findings reveal that Grief, an American Manufacturer, silently left Nigeria because the company could not get annealed cold-rolled steel. Lack of access to its key raw material was an after match of CBN’s 41-item blacklist in 2016.

Procter & Gamble, a global brand, is part of the exodus while Lagos-based Kimberly Clark, which produces Huggies, is said to be exiting Nigeria.

The business climate is not as friendly as investors would like.

Nigeria dropped a notch lower to rank 146 out of 190 countries on the ease of doing business index.

While regulators send conflicting signals, Nigeria’s infrastructure @Businessdayng

gap would require $100 billion investment annually for six years, according to the director-general of the Bureau of Public Enterprises.

Dilapidated road infrastructure has increased woes of manufacturers and a survey conducted by the Manufacturers Association of Nigeria (MAN) says expenses involved in alternative energy sources totalled up to N93.1 billion in 2018.

Manufacturers say the cost of energy accounts for a significant part of their production cost. The country with a population of 200 million generates about 5,000 megawatts (MW), which is about 0.000025MW per capita while it distributes 2,500 to 3,000MW. Despite obvious challenges, Nigeria has failed to fix its problems and instead has remained largely focused on foreign portfolio investment, which though necessary, cannot fund development.

“If these issues are not checked by relevant government agencies, it could result in the collapse of more factories and businesses as some firms have already shut down their operations and relocated to neighbouring countries.” Seleem Adegunwa, chairman, MAN, Ogun State said.

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Consolidation set to swallow fringe players, as capital basket dries up Modestus Anaesoronye

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major policy directive that may thinker the current structure of the Nigerian insurance industry is the ongoing recapitalization of the

industry This current development, which from all indication will look difficult for many insurance companies due to paucity of funds in the economy, may end up swallowing fringe players.

According to analysts, raising money from the capital market this time is a huge task, an could be more tasking for those that still have a long way to go or have not been paying dividend to its shareholders.

Interaction with some insurance players in the industry weekend at the Business Journal 2nd Annual Lecture held in Lagos with the theme ‘Digital Nigeria: The Path to Sustainable Economic

Growth’, show that business combination may be the only way out.

According to them, since the regulator is not likely to shift ground on either the amount or time frame, the only alternative is to look for bed fellows and do business combination, Kunle Ogedemgbe, finance analysts said.

The Nigerian insurance regulator, NAICOM had in a circular issued on Monday May 20, 2019 announced increase in the

paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance companies from N10 billion, to N20 billion.

According to the Commission, the minimum paid-up share capital requirement shall take effect from the commencement date of this circular (May 20, 2019) for new applications, while existing

insurance and reinsurance companies shall be required to fully comply not later than 30th June 2020.

NAICOM also on July 23rd, 2019ina circular titled: “Re: Minimum Paid Up Share Capital Policy for Insurance and Reinsurance Companies,” signed by Pius Agboola, director, Policy & Regulation Directorate, NAICOM stated that the recapitalisation plan should include among others, capital status of the companies as at the last audited financial statements; board resolution on how to comply with the directives, and detailed action plan on how the funds for the recapitalisation are to be sourced with timeline and deliverables.

The circular also directed that companies intending to seek funds from the capital market were required to submit their plan of action on a file-and-use basis, just as, “companies that intend to merge or acquire another should submit their proposal after which they must comply with Section 30 and 31 of the Insurance Act 2003.”

Old Mutual rewards customers in ‘Double Awoof’ loyalty programme …reiterates commitment to Nigeria insurance market the premium.

Similarly, a car owner whose vehicle is valued at N3,000,000 ( Three Mil-

Modestus Anaesoronye

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n furtherance of its resolve to deepen market penetration and reward its numerous loyal customers, Old Mutual General insurance Company, a subsidiary of Old Mutual Limited - a premium African financial services group - has launched ‘Double Awoof’ campaign on its Comprehensive Motor Insurance Policy. The ‘Double Awoof’ loyalty programme, which commenced August 27, 2019, will last till November 8, 2019.

The loyalty programme, which rewards policyholders by slashing the cost of procuring comprehensive motor insurance cover to 2.5 percent on vehicles; then doubles the reward with an instant gift of a TOTAL Service Station’s fuel voucher of up to N30,000.

For vehicle owner whose car is valued at N2,000,000 (Two Million Naira), the instant fuel voucher is N5,000 (Five Thousand Naira) to keep them moving during the “Ember Months”. This is an addition to the 25 percent discount of

Alero Ladipo

lion Naira) and above gets an instant Ten Thousand Naira (N10,000) fuel voucher while car owners with cars worth Twenty Million Naira and above get an instant fuel voucher worth Thirty Thousand Naira (N30,000) when they buy the insurance product during the loyalty campaign period which lasts till November 8, 2019.

Commenting on the exciting offer Alero Ladipo, the executive head, Marketing, Old Mutual, said the brand’s move to reward its growing customer base was borne out of its firm commitment to the Nigerian insurance market.

“We understand the importance of comprehensive car insurance to Nigerians especially during the last quarter of the year, when there is a spike in travel activities, heightened insecurity and other associated risks. While we believe it is critical for everyone to buy an insurance policy for their cars, we also consider it thoughtful to give back to policyholders who buy our Comprehensive Motor Insurance policy. So, it is really about buying a great product at a discount and getting rewarded at the same time,”

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she said.

“When a customer gets an instant reward for purchasing a reliable product, you brighten the day for that customer.

We are keen to get our customers moving no matter the circumstance they find themselves. Today, we are fueling and filling the tanks of our customers, tomorrow we could be gifting an unimaginable reward”, she added.

Speaking further, Alero Ladipo said; “It is critical to note that our drive to reward is a unique way of staking our commitment to the Nigerian market, whilst striving for market leadership” The Double Awoof loyalty programme is open to all car owners valued at Two Million Naira and above. Each customer who takes the Comprehensive Motor Insurance policy from now till November 8, 2019, gets an instant fuel voucher worth up to N30,000 (Thirty Thousand Naira).

Old Mutual, since its entry into the Nigerian market, has leveraged its heritage and expertise, launching a wide range of insurance solutions tailored to meet the unique needs of Nigeria’s insurable population and corporate clients.

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Monday 23 September 2019

BUSINESS DAY

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Insurers identify empowerment for farmers as critical for growth in agri-business Modestus Anaesoronye

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n venturing into weather index based insurance for agric business, the need to empower famers for efficiency and growth has been identified.

Participants at a recent agricultural insurance workshop organized

by Royal Exchange General Insurance Company (REGIC) in collaboration with InsuResilience Investment Fund (IIF), established by the German Development Bank and managed by Swiss based Impact Investment Manager, BlueOrchard Finance Investment Limited (“BlueOrchard”), noted the need to train the farmers, equip them with some technology, as well as funding to enable them maximize their potential.

Specifically, they observed that, since weather index based agriculture needs data, and based on forecast, enabling the farmers to understand importance of information and ac-

L-R: Bernd Leifeld, chairman Prism of Reason; Barbara Lochbihler, keynote speaker ; Chimamanda Ngozi Adichie, Award recipient; Ijoma Mangold, keynote speaker laudator ; Barbara Ettinger-Brinckmann, board member Prism of Reason, and Thomas Bockelmann, artistic director of the State Theatre Kassel, where Chimamanda Becomes 1st Nigerian to Receive Kassel Citizen’s “Prism of Reason” Award in Germany.

curate data was a necessity.

So, this speaks to the importance of practical education and enlightenment so that insurers will not have much problems dealing with the issues that will arise.

They believe also that some level of technology,

camera enabled phones, weather equipments and recording equipments to support the farmers will enhance quality of data and response.

According to them, partnering with micro finance banks or other funding institutions was necessary to

boost capacity of the farmers to enable them realise their potential and create more wealth.

Index insurance is a relatively new but innovative approach to insurance provision that pays out benefits on the basis of a predetermined index

(e.g. rainfall level) for loss of assets and investments, primarily working capital, resulting from weather and catastrophic events.

Weather index insurance underwrites a weather risk, typically highly correlated with agricultural production losses, as a proxy for eco-

nomic loss and is gaining popularity in lower income countries.

This instrument, although subject to basis risk and high start-up costs, should reduce costs over traditional agricultural insurance. Multilateral institutions have suggested that weather index insurance could enhance the ability of stakeholders in lower income countries to adapt to climate change.

While weather index insurance could have several benefits in this context (e.g. providing a safety net to vulnerable households and price signals regarding the weather risk), climate change impacts increase the price of insurance due to increasing weather risk.

Uncertainty about the extent of regional impacts compounds pricing difficulties. Policy recommendations for insurance market development include funding risk assessments, startup costs and the extreme layer of risk. General premium subsidies are cautioned against as they may actually slow household adaptation.

Saham Unitrust offers travel insurance online Modestus Anaesoronye

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aham Unitrust Insurance Nigeria Limited has made its Travel Insurance solution available online to enable customers to conveniently get their travel insurance policies from any

part of the world.

The company says this is part of its efforts to be innovative and continue to make insurance more accessible to the public.

It added that the company has continued to improve its services as part of its bid to remain competitive in the ever-dynamic business world and meet the needs of

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the insuring public.

While explaining the benefits of its cover, the company said the travel insurance cover serves the travellers better, reduces operational costs and improves professional efficiencies.

Unlike the current system where every transaction is typed on individual

workstations and stored in multiplicity of places, the new solution is designed to run on an enterprise database platform that would allow all transactions to be generated at the click of a button.

The insurance company is in partnership arrangement with Swan International Assistance to

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provide travel insurance for intending travellers for all Schengen countries and worldwide coverage, against emergency medical assistance, repatriation and evacuation, urgent medical expenses; Repatriation of mortal remains; Emergency dental coverage; Trip cancelation; Sea and mountain search & Rrescue; Loss

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of baggage and loss of passport.

Saham Unitrust is a Limited Liability Company which was licensed in 1986 to carry out all forms of General insurance transactions including Oil & Gas. Intending travelers are encouraged to log on to company’s website and follow the procedures.

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FEATURE Does Nigeria really need a national carrier?

IFEOMA OKEKE

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to set up a national carrier, especially in a country that is currently facing economic downturn and battling with basic needs such as basic health care, housing, electricity, and good roads, amongst others.

Ojuri hints that if funds are channelled to the above projects, rather than a national carrier at this time, it will be beneficial for not just the economy but the common man at large.

Giant strides of the local operators that are worth recognising Gone are the days when Nigerian carriers are being tagged ‘not capable to reciprocate traffic’ or ‘not capable of representing Nigeria outside the shores of the country.’ A pronounced example is Air Peace, Nigeria’s largest carrier has solidified its operations both in Nigeria and outside the shores of the country.

Air Peace which operates the West coast regions has also been able to sustain Sharjah operations (UAE route) almost three months after it commenced, shaking-up competition in the route with its relatively cheaper tickets.

Air Peace is currently playing the supposed role of the national carrier in the evacuation of several stranded Nigerians in South Africa as a result of the xenophobic attacks. The airline will spend over N300 million to carry out the evacuation.

Air Peace, no doubt is the highest employing carrier in Nigeria, creating over 5,000 direct and indirect employments; again playing the role of a national carrier.

Med-View Airlines Plc., with support of First Bank Plc. and foreign partners acquired B777 aircraft for its Hajj operations and revival of the truncated London and Dubai operations.

Dana Air has given its strategic route expansion plan a push with the arrival in Lagos of one of its newly acquired Boeing 737 aircraft.

Following the takeover of Arik www.businessday.ng

Air by the Asset Management Corporation of Nigeria (AMCON) in February 2017 and injection of N1 billion, the airline showed signs of stability but not recovery. Besides paying salaries and meeting basic obligations, about nine out of 30 aircraft owned by Arik returned to operation, sustaining both local and regional operations.

Air Peace is, however, the most stable of the airlines and it is not by accident that the airlines account for about 40 per cent of 2018 total passengers on the local front.

Indeed, the airlines led the way with an unprecedented investment in aircraft in its bid to make a strong case for Nigerian flag carriers on regional and international skies, even as no city is left behind on the home front.

To this effect, the airline recently placed a firm order for 10 brand new Embraer 195-E2 aircraft.

The order comprises purchase rights for another 20 E195-E2 jets.

Also, 124-seater jet in dual class and 146-seater jet in single class configurations respectively. With all purchase rights exercised, the contract is valued at N640.5 billion ($2.12 billion) based on current list prices.

The carrier also set a regional record in September 2018 when it ordered 10 brand new aircraft from Boeing, increasing its fleet size then to about 37 aircraft. With the new order, Air Peace’s fleet size has increased to 67 aircraft.

Air Peace had earlier set a domestic record as the first Nigerian

airline to acquire and register the Boeing 777 aircraft in the country.

Three of the four wide-body aircraft it acquired for its long-haul operations to Dubai, Sharjah, Johannesburg, London, Houston, Guangzhou, and Mumbai have so far been delivered.

Industry stakeholders though, marveled at the unparalleled investment in capacity, they are optimistic that the 14 million passenger record may as well double in a year when at least half of Air Peace new orders join the current operating fleet.

It is therefore instructive to query the existence of a national carrier where there are capable airlines already not only representing the country but also creating job opportunities.

Past failed efforts to set up a national carrier History has shown that this is not the first time government is floating a private sector-led airline as various attempts by past governments to set up national carriers failed over power play, government intervention, lack of management and unhealthy competition, amongst others.

Proposed national carriers and the ones that have gone into extinction include Nigerian Airways, Air Nigeria, NewCo, Nigerian Global, Nigerian Eagle, Virgin Nigeria, Air Nigeria, Nigerian Eagle and Nigeria one.

Richard Branson, the chairman of Virgin Atlantic said: “We have virgin’s ill-fated footsteps by

“

We fought a daily battle against government agents who wanted to daily make fortune from us, politicians who saw the government 49 perecent as a meal to seek for all kinds of favour, watchdogs (regulatory body) that didn’t know what to do and persistently asking for bribes at any point

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s the federal government intensifies plans to set up a national carrier, several concerns have been raised by experts and stakeholders in the sector. Some of these concerns are as follows: Does Nigeria really need a national carrier? Since the project may be fully or partly managed and regulated by the government, will there be a level playing field for domestic carriers to cohabit and thrive?

In the event that a national carrier comes on stream, will policies in place be applicable to both domestic carriers and the ‘government-managed carrier’?

Will it be transparent and operated using the right models? Why did the former national carriers and attempts to set up some in the past fail? Has Nigeria really learned from its mistakes?

These are myriads of questions that have been left unanswered as the road to ‘Nigeria Air’ remains littered with skeletons of failed past efforts.

These concerns are sprouting at a time when the Transaction Advisers for the establishment of a national carrier, Air Nigeria, have concluded their research and are set to submit the outcome of their research to the Federal Government.

Hadi Sirika, the Minister of Aviation, who spoke in Abuja during a meeting with executive officers of the National Air Traffic Controllers Association, assured them that plans for the country to have its own national carrier remains on the front burner.

What is a national carrier?

A national carrier is a transportation company, such as an airline or shipping company, which, being locally registered in a given sovereign state, enjoys preferential rights or privileges accorded by the government for international operations. Historically, the term was used to refer to airlines owned by the government of their home country and associated with the national identity of that country.

Does Nigeria need a national carrier?

The existence of national carrier in any country is often necessitated by the need to reciprocate air traffic in a situation where there are no capable local carriers, the need to represent the country in other climes and a need to create employment opportunities.

Tayo Ojuri, the chief executive officer of Aglow Limited, an aviation support services company said in a situation where all these factors are met by operating local carriers, it may be questionable

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setting up a new airline in Africa in conjunction with the Nigerian government. The details of the doomed attempts to crack the Nigerian market in the 2000s is better imagined. We put together a very good airline-the first airline in West Africa that was ever IOSA/ IATA operational safety audit accredited but unfortunately it got tied down to the politics of the country. We led the airlines for 11 years.

“We fought a daily battle against government agents who wanted to daily make fortune from us, politicians who saw the government 49 perecent as a meal to seek for all kinds of favour, watchdogs (regulatory body) that didn’t know what to do and persistently asking for bribes at any point.”

Branson disclosed that N3billion was realised for the federal government of Nigeria during the joint venture and the government didn’t bring anything to the table except dubious debts by the previous carrier, Nigeria Airways He regretted that the joint venture should have been the biggest African carrier by now if the partnership was allowed to grow, but the politicians killed it.

Parameters to put in place to ensure private-owned airlines survive Rather than setting up a national carrier, aviation operators are calling on the government create enabling environment for domestic airlines to survive.

Nogie Meggison, chairman Airline Operators of Nigeria (AON) said some of the major issues that need to be addressed to grow the industry include: removal of Value Added Tax as domestic airlines were the only mode of transport still paying it; and review of the five per cent Ticket Sales Charge to a flat rate in line with the global best practices as well as harmonisation of over 35 multiple charges which add huge burdens on airlines, among others.

Nogie said, “A clear economic policy for the survival of domestic airlines is very critical at this time which has resulted over the years in the death of over 25 airlines in 30 years. Investors are in the business of aviation for the profit and can’t make a profit without safety or have a safe airline without profit.

“These are some of the main reasons for the short life span of Nigerian airlines averaging about eight years. With the growth in demand for domestic air travel, Nigeria can become the hub for Africa and easily make aviation the fourth contributor to the economy and a major contributor to the Gross Domestic Product as well as create 200,000 new jobs for our ailing youths through its direct and indirect link.”

Monday 23 September 2019

BUSINESS DAY

MARKETS INTELLIGENCE

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Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

GTBank is worth more to investors than other lenders BALA AUGIE

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ran Stark is a 38 year old football enthusiast who likes to wager on teams, and a lot times he wins because he is a good at permutations.

One morning, he went to the sporty Bet office where someone told him he would get N50,000 extra if Manchester United won last weekend’s game or N30,000 if Manchester City triumphed.

He looked at the man seating directing opposite him and smiled drily. I will rather bet on Manchester City because there is no way the Etihad giants will not win,” said Stark.

Just as Bran Stark has put his money on the current English Premier League champions amid low returns, so are investors willing to take a lower return on investment (ROI) from Guaranty Trust Bank (GTBank) than to take a higher returns from the rest of the banks.

This GTBank has been consistently turning each Naira invested in revenue into higher profit since 2015, while it delivers higher returns to shareholders in form of bumper dividend and share price appreciation.

For instance, it has an equity risk premium of 7.75 percent, the lowest in among the five largest lenders, which means it is a less risky investment.It also means that GTBank is worth more to investors

than its peers assuming a give level of earnings.

Access Bank has an equity risk premium of 37.75 percent; Zenith Bank, 17.75 percent; United Bank for Africa (UBA), 23.75 percent, and First Bank Holding Plc, 14.01 percent.

Equity risk premium refers to the excess return that investing in the stock market provides over a risk-free rate. This excess return compensates investors for taking on the relatively higher risk of equity investing.

The risk-free rate of return is the theoretical rate of return of an investment with zero risk; for example government securities such as the 1 year, 2 year, 5, and 10 year treasury yields, are less risky compared to equities, which are susceptible to stock market gyrations.

Across the globe, during a stock market rout, investors pack their money to safe haven assets, but the global economy is grappling with

negative interest rates.

Negative interest is a situation where government is being paid for borrowing; a situation that leaves investors with the option of investing in Gold.

GTBank has an average return on equity (ROAE) and earnings per share of (EPS) of 33.60 percent and 6.60 percent, which means it is efficient in the deployment of shareholders’ resources in generating higher profit.

The lender’s earnings compares with Access’s ROAE of 23.90; UBA, 21.70; Zenith, 21.70, and FBHN, 11.60 percent.

While GTBank’s total asset of N3.59 trillion is the third largest in the industry, its total market capitalization of N853.30 billion is the largest among peer rivals.

Stocks of Nigerian banks have seen their stocks beaten down since the start of the year as foreign investors dumped shares due to a flagging economy and lack of policy

direction by the federal government.

The Nigerian Stock Exchange All Share Index (NSE/ASI) has shed -11.87 percent to close at 27698.69 points, while the Banking Industry Index has a negative year to date of -13.26 percent.

GDP of Africa’s largest economy expanded by 1.94 percent in the second quarter, according to the National Bureau of Statistics (NBS); that compares with 2.10 expansion in the first quarter.

While the cheapness of banks stock presupposes an entry point for investors, analysts say the macroeconomic headwinds will deter investors from taking advantage of such opportunities.

“When the economy is not growing, foreign investors will move asset to risk free market no matter how cheap banks stocks are,” said Kayode Tinuoye Fund Manager at United Capital Limited. The weak sentiment will continue to depress their share price”

Tier-1 Banks see NPL decline by N233bn in H1 2019

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s big money lenders improve credit-risk measures, the banking industry has seen a corresponding uptrend in asset quality as signalled by the decline in the value of non-performing loans among the top tier banks by N233.45 billion in the first half of the year.

Non-performing loans stood at N953.77 billion at the end of the 2018 financial calendar, however, six months later, the top 5 banks by assets in the country had reduced this figure to N720.32 billion. This means a significant portion of remaining N233.45 billion worth of loans were

SHORT TAKES 2.9% The Organization for Economic Cooperation and Development said in its latest global outlook that the global economy risked entering a new, lasting low-growth phase if governments continue to dither over how to respond. The international agency said that the global economy will see its weakest growth since 2008-09 financial crises this year, slowing from 3.6% last year to 2.9% this year before a predicted 3% in 2020.

11.02% Nigeria’s measure of composite changes in the prices of consumer goods and services purchased by households slowed by 11.02 percent on a yearon-year basis in August 2019 from 11.08 percent in July, according to data released by the National Bureau of Statistics (NBS).

The August headline inflation, which is the lowest since January 2016, was driven by sustained moderation in the sub-indices that track price changes of food items and all other items.

1.94%

… average NPL ratio dips from 10.93% to 7.72% Ifeanyi John

P.E

restored to active while unrecoverable sums were written off.

According to a report by EUA Intelligence, average Tier-1 Banking NPL ratio dipped from 10.93 percent at the end of 2018 to 7.72 percent as the end of the first half of 2019. First Bank was the only big lender that was far off CBN’s NPL guideline of 5 percent. First Bank reduced its nonperforming loans by 42.04 percent from N436 billion to N252 billion but coming from an NPL ratio of 25.90 percent this reduction was just enough to bring NPL ratio to 14.50 percent in the first half of the year.

Tochukwu Okafor, Lecturer in Banking and Finance department at Covenant University explained that “Money lenders have seen the

rhetoric from Central Bank which has been to improve lending to the retail sector. If NPLs are reduced, the banks can disburse more cash to retail customers without affecting profitability. This strategic credit risk assessment has seen all big banks improve collection measures which has trickled down into a lower NPL ratio.”

Zenith Bank was the closest Tier-1 money lender to CBN’s 5 percent NPL ratio guideline as the lender who boast as much as 5.7 trillion in assets had their NPL ratio about 30 basis points above the 5.00 percent NPL ratio it posted at the end of 2018.

“The reduced NPLs will inadvertently mean that more loans

can be disbursed to meet up with the September 30 deadline for the 60 percent Loan-to-Deposit Ratio (LDR) requirement. This sets a positive outlook for the financial service sector as FUGAZ will most likely post a faster growth in bottom line and improve dividend payments to shareholders.” Okafor added.

United Bank of Africa was 62 basis points above the 5 percent benchmark coming in second to Zenith Bank by improving its asset quality from 6.45 percent NPL ratio recorded at the end of 2018. Access Bank and Guaranty Trust Bank recorded an H1 2019 NPL ratio of 6.40 percent and 6.80 percent improving from 10.00 percent and 7.30 percent in 2018 respectively

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 Q119. 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.

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 23 September 2019

BUSINESS DAY

MARKETS INTELLIGENCE

Naira misdirection on Crude oil rally confuses economistsI Ifeanyi John

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hile several analysts expected that a sudden rally in crude oil prices will translate to a breather for Nigeria’s currency in the wake of higher crude oil prices, the complete opposite occurred in the market during the past week.

“Typically, the correlation between crude oil prices and USD to Naira is negative, such that as crude oil gets higher, you will expect that Naira will become stronger and cost less to buy in the market. But what we saw last week was something different. Crude oil prices were rising but Naira was getting weaker. It was quite puzzling,” said Jeremiah Ejemeyovwi, a Lagos based Economist.

The crude oil market saw one of its most eventful weeks since the oil price crash of 2015. Crude oil prices saw one of its biggest one day spike on record after drone attacks on state

oil company Saudi Aramco’s Abqaiq crude processing plant and a plant in the Khurais field was expected to reduce Saudi Arabia’s oil production capacity by around 5.7m barrels per

day for at least a week. The affected processing plant produces around 5% of the global oil supply.

The Brent crude oil price rose about 15 per cent immediately, peaking at $69, at the end of Monday before declining to around $64 on Friday which was still about 7% higher than it closed at just 7 days earlier.

In a surprise twist of events, as crude oil prices rose, Naira got weaker and as crude oil prices began declining later on in the week, the trend reversed, and Naira began to appreciate in value once again.

Nigeria which is one of the largest oil exporting nation is expected to be one of the biggest beneficiaries of the rise in crude oil prices as public finances were already poorly positioned due to crude oil prices trading at $60 per barrel which is the oil price

benchmark of the country’s budget.

Nigeria anticipated daily crude oil production of 2.3mbpd but has struggled to reach this volume all year long as the country has heavily depended on crude oil prices trading well above the benchmark price to ensure that the budget deficits do not grow any bigger. Crude oil earnings contribute more than 70% of Nigerian government revenue and up to 93% of the country’s export earnings, making the sector the most critical in the Nigerian economy.

“If higher crude oil prices can’t make Naira stronger, it’s not hard to imagine that investors are not just avoiding Naira completely as their devaluation fear factor is rising due to the numerous economic reports pointing at Naira as being overvalued,” said Obinna Uzoma, Chief Economist at EUA Intelligence.

The war for the world’s eyeballs will end in tears YouTube and ByteDance may be the only winners as other streaming services go head to head Tom Braithwaite, ft

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ech and media giants are going to war, pouring billions into competing streaming services. Apple and Disney are both about to enter the market, taking on established players such as Netflix and Amazon.

Next year will see even more new entrants. In the clamour and confusion, viewers may rue the day their traditional television and cable packages were “unbundled”.

The spending is immense. Apple has committed more than $6bn for original content, including movies and series such as The Morning Show, starring Jennifer Aniston, Reese Witherspoon and Steve Carell.

In this expensive pivot to video,

the iPhone maker is racing to catch up with Netflix, which already spends $15bn a year on content, including the $500m it just dropped on Seinfeld, a 30-year-old sitcom.

Some investors are already concerned. Netflix has been playing this game for 12 years and secured an impressive slice of the world’s population — but still fails to generate positive free cash flow.

Now the market leader is losing some of its best content, as new rivals such as Disney hoard it for their own services. Meanwhile, Apple can afford to outspend anyone and undercut them on price; the Apple TV Plus service is only $4.99 a month.

Everyone has the potential to lose lots of money.

The most obvious investor backlash in the sector is at AT&T, where

Elliott Management has taken a stake in the venerable telecoms group and told it to stop wasting money on deals in a vain effort to rejuvenate itself.

Included in AT&T’s $80bn takeover of TimeWarner last year was HBO, which is, inevitably, launching its own new streaming service next year.

But even the sceptics might not be worrying enough. The danger is not only that the competing efforts cancel each other out. It is that younger audiences have zero interest in the stars from the 1990s, whom executives are so keen to sign up.

Many younger viewers barely care about premium content at all.

Instead they are fixated on short clips of home-made material consumed on the likes of YouTube, Snapchat and TikTok.

Airbnb plans to go public in 2020 Accommodation-booking platform says it made more than $1bn in revenue in second quarter Ortenca Aliaj in New York, Alice Hancock in London and Patrick McGee in San Francisco, FT

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irbnb, the accommodationbooking platform, said on Thursday that it plans to go public next year, making the announcement a day after it reported more than $1bn in second-quarter revenue.

The 11-year-old company stands to be among the biggest listings in 2020, having been valued at $31bn in its most recent funding round.

But a series of rocky debuts for other so-called unicorns has raised questions about the durability of investor demand for new offerings.

Airbnb said on Wednesday that it made “substantially more” than $1bn in revenue in the second quarter of 2019 and that Airbnb hosts — people who rent out rooms or apartments on the platform — have made more than $80bn from renting their homes since it was created.

At a conference in May 2018, Airbnb’s chief executive Brian Chesky said that the company would “be ready” for an IPO in 2019 but added that it was not definite. “We have investors who are really patient, and I want to make sure it’s a benefit [to them] when we do.”

On Thursday, it put out a short public statement saying: “Airbnb Inc announced today that it expects to become a publicly traded company during 2020.”

A company spokesperson said that it had “nothing more to add” on the timing next year or whether it had already filed confidential documents to the US Securities and Exchange Commission in preparation for a listing. The company has also not confirmed whether it will go public via a direct listing — in which no new shares would be offered but existing investors could sell — or the more traditional initial public offering.

Airbnb will join a host of Silicon Valley peers making their stock market debuts after having been able to grow much larger using only private www.businessday.ng

capital than used to be the case.

However, highly anticipated listings from Uber and Lyft have performed poorly due to mounting concerns over their profitability and regulatory setbacks, and office space group WeWork has postponed its IPO after negative investor reaction.

There is risk in Airbnb waiting until 2020, if the long economic expansion begins to slow.

Despite high-profile flops, the US IPOX Index — a measure of recent IPO and spin-off performance — has been “soaring over the US benchmark indices”, said Jefferies analyst Sean Darby. But he views the current climate as “eerily similar” to the late 1990s when the Federal Reserve was easing rates just as tech stocks boomed. A tech sector crash followed.

Airbnb is “trying to be more systematic with their IPO and have an approach on corporate governance that is more thoughtful after seeing what happened with WeWork”, said Michael Underhill, chief investment officer for Capital Innovations. “

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Big Stocks Outperforming Nigeria’s Bearish Equity Market SEGUN ADAMS

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ith Nigeria’s stock market still largely in negative regions a little more than three months to the end of 2019, investors’ confidence in the market has not improved but some big stocks have surprised to the upside, returning value more than 10 percent year-long.

Stocks like Dangote Flour, MTN Nigeria, Union Bank of Nigeria, Cadbury, Access Bank and Lafarge Wapco, among others, have defied investors’ bearish sway and beaten Nigeria’s main equity gauge which saw an uptick on Friday but has lost 11.87 percent since January.

Leading the outliers, Dangote Flour has surged 223.36 percent to N22.15 per share since it opened around N6 per share in January.

MTN Nigeria which listed by introduction in May at N90 per share is currently trading around N140 a unit-this means investors who have held the mobile phone network share since its debut have seen 41.41 percent gain.

Union Bank has returned 25 percent capital gain to its investors so far in the year. The mid-tier bank @Businessdayng

opened at N5.6 per share on January 2 but is currently trading at N7 per share.

Cement Maker, Lafarge Wapco Plc, is one of the best preforming stocks on Lagos bourse. The industrial goods company’s share trades at N15.10 per share currently, up 21.29 percent from the start of the year.

Sterling Bank, a mid-tier lender, has returned 14.74 percent to investors that have held its share till date.

At the close of trading Friday the bank share was at N2.18 per share.

Also with the advancers, listed consumer goods player, Cadbury has outperformed the All Share Index with 9.5 percent gains since January. The stock opened at N10 in January.

Access Bank, a tier-one lender, has seen its shares rally 8.09 percent as at the close of trading on Friday. The bank stock currently trades at N7.35 per share.

Analysts say a lot of fundamentally sound stocks are at levels very attractive and promising for value investors.

The equity market however has not bottomed-out, they say.

The market currently swings as bargain hunters position in value stocks and profit takers sell their holdings.

Monday 23 September 2019

BUSINESS DAY

START-UP DIGEST

In association with

Chizoba Alu leads reforms in medical packaging to save lives ODINAKA ANUDU

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he general impression is that reforms are started by government or institutions. But history is replete with ordinary people who started reforms, by way of revolutions, to create positive changes in their societies.

Chizoba Alu, a University of Port Harcourt graduate of Science Laboratory Technology with specialisation in Physiology and Pharmacology, has joined the coveted league of revolutionaries as she is set on changing medical packaging in Nigeria’s beleaguered healthcare sector.

Alu is the CEO of Steripro Nigeria Limited, which she started in 2017. The firm was set up to change the way medical packaging is done in the health sector and ensure proper sterilisation of sensitive materials used in hospitals.

“Prior to that time, I had been in the paid employment where I tried to create a change in the health sector,” she says.

“The more I went in, the more I saw things that were not done right,” she confesses.

She says her focus is to change the way medical packaging is done in the health sector and promote excellence in theatres and central sterile services departments (CSSDs). She has a new set of packaging materials that are hygienic and meet international standards.

Something prompted the Anambra State-born entrepreneur to take medical pack-

Chizoba Alu

aging very seriously.

“In my journey in the health sector, I discovered that CSSDs are non- existent in many hospitals. In teaching hospitals, they have them, but CSSDs are non-existent in most of the general hospitals.

It is the operating theatres that do most of the sterilisation instruments they use,” she explains.

“Having moved around, I discovered that the materials they are using to package the surgical instruments are not of right standards. You find that most of the general hospitals, teaching hospitals, federal medical centres and leading private hospitals use brown envelopes, which are just wrapping sheets with no microbial barriers. In other words, they cannot prevent

microbes from entering the instruments. I also discovered that some teaching hospitals and federal medical centres use the papers to wrap sensitive things. I also discovered, again, that some use calicos and re-use them many times.

Sometimes, the sight of these calicos is horrible and these are things they use to package instruments that will be used on human beings,” she laments.

She had to take the bull by the horns to change this phenomenon.

“This is why I asked, ‘What can I do differently?’ ‘How do I come in?’ This was how I started doing research. Some medical personnel said they were using envelopes because those were what they knew,” she says.

But use of envelopes is a recipe for disaster as it can transmit infections from one person to another, she says.

She says if a HIV-virus patient goes through surgery and the instruments are not sterilised, there is a possibility that the next patient that is going on surgery will get that virus.

She, however, says that when the right packaging materials are used, the instruments will be sterilised properly, which, in turn, prevent microbes from feeding on the products.

“We started going on awareness training, moved round general hospitals, medical centres and went to the ORs to train the nurses on the availability of these products and why they needed to use the m,” she says, when asked how she started.

Her campaign is yielding fruits as a number of hospitals and healthcare centres now realise the danger of the traditional use of envelopes and other unhygienic materials during surgeries and treatment.

“The reception has been very good,” she says.

“It is not as if some of them do not know what is right. Some make excuses for themselves; some make excuses for patients and for the hospitals. Right now, I am not only trying to sell the products. I want to make sure that you and I can actually be on that operating table and feel secure,” she says.

So far, about 40 hospitals have accepted her message.

“When I started, I went to

elite private hospitals. But at some point, I had to change a strategy to reach others,” the 40-year-old entrepreneur says.

Being from the SouthEast part of Nigeria, she has been able to get 15 hospitals to accept her message and products.

“A teaching hospital in the South-East has phased out brown paper completely.

They said they did not know a product like ours existed.

They also use our surgical parts,” she discloses.

Alu says that the hospitals complained initially that her products were expensive, but later realised that they were relatively cheaper.

“I asked them to go back and do the cost analysis on what they were using and the consequences, side by side with what I was offering them.

It was at that point that some of them went home and did the cost analysis and told us to bring the products.”

“They were having womb break down and a lot of infections, but the patients would not know. I keep telling them to educate the patients so that they make the right choice,” she says.

“I said to them, ‘Sell safety to the patients because this life does not have any duplicate. If I know I am going to get a value from what I am paying for, obviously I will pay for it. Remove that brown paper which you buy at N50, because you end up giving them HIV virus for life. The cost of life is not N50. We are trying to create a change in perception,” she says.

Sanwoolu urges youths to leverage skills acquisition opportunities ...as LSETF, UNDP hold graduation ceremony for 1,300 trainees GBEMI FAMINU

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abajide Sanwoolu, governor of Lagos State, has urged young Nigerians to take advantage of available opportunities presented by the Lagos State Employability Trust Fund (LSETF) through its Employability Support Project and acquire vocational skills of their choice at no cost in order to equip themselves.

Speaking at the graduation ceremony of 1,300 youths trained by LSETF in Lagos in partnership with the United Nations Development Programme (UNDP), Sanwoolu, who was represented by the commissioner for education Folashade Adefisayo, said over 60 percent of Nigeria’s population is made up of young people under the age of 35 and for the future of the country , they have to be wellequipped to lead.

He commended the LSETF and the UNDP for successfully completing the project, adding that the future of the country is promising.

He said the two organisations would comfortably provide Lagos workforce with young and skilled manpower for the next 30 years, which will improve productivity.

“By training over 4,500 youths in different vocational skills while placing 1,707 in sustainable jobs, there is no doubt that this project puts us in a position to achieve laid-down agenda in building a greater Lagos, and these are necessary steps in achiev-

ing sustainable development aims of full employability for youths—both women and men— by 2040,” Sanwoolu said.

“We must be honest to admit that the reality today is that we do not have enough young people with employable skills that would make them globally competitive to take advantage of employment opportunities. Even blue-collar employment opportunities are quickly snapped up by the

Yetty Ogunnubi, publicist, The Business of Photography; Freya Doessel, brand manager- Fayrouz, Nigerian Breweries Plc; Lara Rawa, founder, Lagos Cocktail Week; Tiyan Alonge, brand ambassador, Diageo Reserve Brands and Funke Babs Kufeji, editor in chief, Thisday Style during Lagos Cocktail Week stakeholders press conference in Lagos recently. www.businessday.ng

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more skilled personnel from our neighbouring countries.

We have to fix it and to fix this challenge,” he said.

“And to fix this challenge, there is a need to adequately equip our youth with worldclass vocational skills to actualise their potential,” he added.

Ifueko Omoigui Okauru, chairman, LSETF, represented

by Dele Martins, member of the board of trustees, said it is necessary to equip the youth for the future, adding that with right mentoring and capacity building, Nigerian youths can add value to themselves, their families and the nation at large.

She pointed out that one of the key objectives of the programme is to ensure that many youths are equipped with capacity building and skills in order to alleviate the shortage of skilled workforce in the state, adding that the project is part of the government’s agenda of ‘Building a Greater Lagos’.

“In the last 2 years, we have contributed significantly

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in reducing the unemployment rate in Lagos to 14.6 percent, one of the lowest in the country, despite youths migrating to Lagos regularly seeking greener pastures with opportunities to participate in Nigeria’s commercial hub,” Okauru said.

“Since inception we have trained and certified 4,503 young people with 1,707 of them placed in jobs. In addition, we have over 350 employers of labour who have registered to source and access and employee manpower from our pool of beneficiaries,” she disclosed.

Mohamed Yahya, resident representative of UNDP in Abuja, represented by Muyiwa Odele, UNDP team leader, Environment and Sustainable Development, said the project was designed for a 2-year period, with the aim of addressing unemployment challenges faced by youths in Lagos State and is targeted at the unemployed aged between 18 and 45 years, with special consideration for women. @Businessdayng

Entrepreneurs want lawyers to leverage technology in service delivery DAVID IBIDAPO

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t a summit themed, ‘Legal & Tech Network Summit 2019’ held at the Commerce House of the Lagos Chamber of Commerce and Industry (LCCI), stakeholders in the legal and tech spaces discussed how lawyers could leverage technology for effective services to clients.

Tech players urged lawyers to embrace technology without any fear of it taking over their jobs in the nearest future.

Analysts stressed the need to stay abreast with innovations in the tech space to boost efficiency and ensure better service delivery to clients.

The legal space is one that has begun experiencing technological disruptions around the world where law firms now utilise the services of artificial intelligence (AIs) for faster and more reliable services to their customers.

This, hence, raises concerns on what the future holds for Nigerian lawyers.

Coupled with this are the issues Nigerian businesses face in dealing with regulators prior and during the launching of their businesses and products.

“Technology moves faster than regulations, and there lies the issue that most young people face with regulators,” Odun Eweniyi, vice president and co-founder of Piggyvest, an online savings platform, said while speaking on ‘Growth and Evolution of Technology: Lessons for Techpreneurs and the Role of Lawyers’.

Amongst many fast-evolving technologically driven operations are the Fintech companies. Every month, at least a Fintech company is birthed in Nigeria. Then the question lies, how fast the CBN can keep up with this pace as it relates to investment, banking, credit creation and the like.

“Nigeria currently lacks the regulatory signboard to financial technology services.

The best you can do right now is a microfinance license none of which covers the breadth that the Fintech companies do,” Eweniyi clarified further.

According to Eweniyi, lawyers can only come to the rescue of young and evolving companies which are technologically driven and facing regulatory challenges, when they also embrace and stay well-informed on technological innovations.

Also pointed out that there is need to move from logically formed regulations to data driven segmented regulations. Lawyers could leverage on available data bases of regulations and cases to make well informed decisions and forecast future possibilities with accuracy, analysts add.

34

Monday 23 September 2019

BUSINESS DAY

START-UP DIGEST

‘Businesses fail due to improper, non-professional accounting support’ JOVITA MADOJEMU is the managing director and CEO of Pundit Bookkeeping Services, a virtual company that provides accounting services to MSMEs. In this interview with JOSEPHINE OKOJIE, she talks about her organisation and lack of financial literacy within the Nigerian MSME ecosystem.

W

hat is your motivation for starting Pundit Bookkeeping Services Limited?

The motivation behind starting Pundit Bookkeeping Services was to immortalise MSMEs by giving them access to a reliable partner that would see to the accurate accounting of all their financial transactions and provide them professionally prepared financial reports. That way, we guide the entrepreneurs on various decisions with a view to sustainable business growth. This motivation gave birth to our mission, which is, ‘To be the entrepreneur’s best friend and partner in all things financed’.

Furthermore, we wanted the entrepreneur to get past the concept of just having an inexperienced person in-house, doing money errands, which is what most of them call an accountant. What we are providing is a shared service where clients have access to professionally prepared accounts overseen by experienced, qualified accountants. This way, they pay as low as half the cost of keeping a certified accountant in-house on a full time basis.

What is your assessment of the Nigerian business environment?

I see the Nigerian business environment as flux-filled. There are huge infrastructural deficits that increase the burden of the business owner.

A simple case to point is the continuous gridlock in the ports which have made logistics costs increase astronomically for exporters and importers.

Then, of course, there are tax policies which could be friendlier.

For instance, the current increase in Value Added Tax (VAT) from 5 to 7.5 percent is ill-timed. This is in an environment where entrepreneurs have to generate their own power and pay for private supply of water to keep the workplace functional and comfortable for employees. It is almost like you are being punished for trying to create value in the economy.

In addition, the Internet Service Providers (ISPs) need to be called to order. In this age of the digital, most entrepreneurial activities are powered by the internet, but we are yet to

The absence of trained teams is a problem for Nigerian entrepreneurs.

In many cases, the business owner is more concerned about the fact that, in the shortest possible time, the employee may leave to a bigger company, rather than urgently investing in that employee’s capacity development so that the burden of coordinating the business can be shared.

Another serious problem which we must not overlook is that the quality of education is fast declining and the fact is that not all graduates are trainable. There are fundamental issues with basic quantitative aptitude and verbal communication that make it terribly frustrating to work with such graduates. We have seen a number of businesses with such graduates in their employ, and it is one horror story after another. The ministry of education has its work cut out for them. If we are not churning out a literate workforce from our educational institutions, then we are gradually bringing meaningful enterprise up-scaling to a halt.

Jovita Madojemu Jovita Madojemu

get the optimal value for money from these ISPs. Some of us have to use two or three of them, so that when one is down, you switch to the other. This is a needless incremental cost that can be avoided if service quality of the ISPs is properly regulated. The insecurity challenges are a real threat and create a lot of doubts as to whether or not the going concern status of an enterprise will be truncated.

if the business is better off with one lender’s proposition as against the other. The only reason any of these is possible is because we have been tracking the business transactions with sufficient regularity; in this case, monthly. So, we can tell if there are sufficient margins to accommodate interest expense, for instance, and if the business can meet repayment schedules.

A critical point for entrepreneurs is finance. How does your firm provide support entrepreneurs to enable them easily access finance?

In tracking the financial transactions of our clients on a monthly basis, we are exposed to their spending patterns, their revenue gaps or the lack thereof, and this helps us anticipate their future needs. The core reports we prepare monthly include the statement of profit or loss, financial position and cash flow. These form the baseline in assessing the need for funding and the timing of such funding.

To arrive at the best financing decision, we run several simulations to predict the outcome of the utilisation of the funding. This enables us to see

What are the peculiarities that hinder the growth of Nigerian MSMEs? There is a prevalent dearth of financial literacy in the Nigerian MSME ecosystem as compared to other parts of the world. There is hardly any mom-and-pop store in Northern America or Europe that is not supported by a professional bookkeeper.

This brings financial literacy in very close proximity to the business owners. There is a strong awareness and embrace of this sort of support. It is planned for; it is seen as an integral cost of running the business and revenues are planned to accommodate this cost as well as other costs like the shop rent, staff salaries and so on. This is something the Nigerian MSME needs to adopt fastidiously.

There are a lot of incubators and accelerator hubs with similar accounting services like Pundit.

So what makes your initiative different?

Simply put, we are differentiated by the fact that we combine management consulting with accounting.

We present an end-to-end solution from the point of transaction initiation to the reporting, and ultimately to course-correcting decisions that drive business profitability.

For every transaction that occurs in the business, we are asking the question, ‘Is this hurting or helping the business?’ We relay this answer to the business owner for immediate alteration of spending and income generation behaviour, where necessary.

We also pride ourselves in our continuous organisational learning process. It is an integral part of who we are, and we find that not many people rendering this service pay attention to this aspect. In most cases, knowledge resides with just one person, while the other members of the firm are basically just running errands.

From your profile, you have worked with a lot of MSMEs. Why do most start-ups fail after five years of being birthed?

Improper accounting and lack of professional accounting support are usually the major reasons. In some cases, the entrepreneur just refused to cooperate with the accounting process, ignored the warning signals and faced the consequence of that inaction.

Closely related to this is the fact that some business owners decide to spend business funds as if it is their personal money. There have been several cases of MSMEs taking business loans from the banks and diverting these funds for personal perks like status cars and other related luxuries.

Other reasons include burnout resulting from disenchantment with low sales, lack of trained teams to drive customer acquisition and retention, as well as plain indiscipline on the part of the business owner in following through with the design and implementation of strategic business goals.

With the current challenges facing the economy, what is the outlook of entrepreneurs in the economy?

The challenges in the economy make it very clear that with unemployment rates skyrocketing and our population exploding at a geometric progression, more and more people are going to be starting their own businesses to create employment for themselves and a few others that they can absorb. This ultimately means that in whatever entrepreneurial endeavour you find yourself, competition is going to become stiffer. What this means is that entrepreneurs will have to make more insightful decisions on the basis of credible numbers. Every cost is going to matter and corresponding revenue streams need to be guarded.

In the face of such a situation, it also becomes critical for entrepreneurs to differentiate themselves with product and service quality.

There will be need for concrete organisational learning and transfer of knowledge within the enterprises run by these entrepreneurs.

NixxHash Communications empowers entrepreneurs on business development JOSEPHINE OKOJIE

N

ixxHash Communications, a fast growing media organization, has trained over 30 entrepreneurs on business development skills.

The training session, which was tagged ‘Enterprise Jolly: The CEOs Hangout’ was aimed to train small and medium business owners in Ikorodu area of Lagos State on digital marketing, branding, as well as accounting and taxation skills to enable

them scale their businesses.

Adenike Fagbemi, brand strategist, NixxHash Communications, said that that business owners need to be equipped with the 21st century skills to enable them grow their businesses sustainably.

“Technology, time and space keep throwing things at us and if we cannot keep up, we get kicked out. This training is solely to brainstorm and reflect on the things we are getting right and those we need to put into consideration if truly we want to remain www.businessday.ng

in business,” Fagbemi said.

“Business owners need to learn, unlearn and relearn to grow their businesses,” she advised.

Also speaking at the training programme, Steve Adesemoye, who is also a public relations and brand development expert, harped on the need for business owners to understand their target clients, identify their needs and purchasing power, then create a solution to meet the needs and deploy the resources to meet them.

Adesemoye added that it

https://www.facebook.com/businessdayng

is very important for business owners to constantly monitor their brands, incomes and consumers in order to quickly identify changes in their needs due to regular technological disruptions.

Kazeem Adegoke, CEO of Pentacept, urged businesses to keep account record and ensure regular payment of taxes to relevant authorities.

“If you wait for the revenue agencies to come to you to ask for taxes which is your obligation to the government, you may end @Businessdayng

up being overbilled. To avoid that, ensure you always keep a good financial record so you can pay what is accountable to government at the appropriate time,” he advised.

Kehinde Olofintuyi, a digital marketing firm and a Google certified trainer, tasked the business owners to leverage opportunities in social media to take their goods and services to a larger audience.

“You have to identify your audience and put out contents that will address them and reach them directly,” Olofintuyi said.

Monday 23 September 2019

BUSINESS DAY

35

Live @ The Exchanges Market Statistics as at Friday 20 September 2019

Top Gainers/Losers as at Friday 20 September 2019 LOSERS

GAINERS Company

Company

Closing

Change

N11.65

N10.95

-0.7

N19

N18.7

-0.3

WAPCO

N15.35

N15.1

-0.25

VOLUME (Numbers)

0.5

GUARANTY

N29.25

N29

-0.25

VALUE (N billion)

0.3

ETERNA

N3

N2.75

-0.25

Closing

Change

NESTLE

N1200.1

N1210.1

10

CADBURY

STANBIC

N39.95

N42.85

2.9

ZENITHBANK

N52

N52.55

0.55

DANGSUGAR

N10.55

N11.05

FLOURMILL

N13.7

N14

NB

ASI (Points)

Opening

Opening

DEALS (Numbers)

MARKET CAP (N Trn)

27,698.69 3,484.00 177,567,116.00 5.924

Global market indicators FTSE 100 Index 7,337.11GBP -19.31-0.26%

Deutsche Boerse AG German Stock Index DAX 12,468.01EUR +10.31+0.08%

S&P 500 Index 3,008.62USD +1.83+0.06%

Nikkei 225 22,079.09JPY +34.64+0.16%

Generic 1st ‘DM’ Future 27,125.00USD +47.00+0.17%

Shanghai Stock Exchange Composite Index 3,006.45CNY +7.17+0.24%

13.483

Honeywell to sustain revenue growth through innovation, capacity expansion

L L-R: Femi Williams, immediate past group managing director, Chams Plc, Engineer, Gavin Young, new group managing director, and Oscar Onyema, The Nigerian Stock Exchange’s chief executive officer, during courtesy visit of Chams’ Management to the NSE.

Equities shed N40bn in one week Stories by Iheanyi Nwachukwu

T

he cumulative value of listed equities on the Nigerian Stock Exchange (NSE) depleted by about N40billion in the trading week ended Friday September 20.

All sectoral indexes closed in the green zone.

The positives seen across the sectoral index is an indication of waning sell pressure that hitherto pervaded the Nigerian Bourse.

Stock market which had opened the trading week in review with All Share Index (ASI) of 27,779 points and capitalisation of N13.523trillion closed the week at 27,698.69 points and N13.483trillion respectively.

Week-on-week (WoW), the NSE ASI decreased by 0.29percent while its year-to-date (YtD) return stood at -11.87percent.

Month-to-Date (MtD) the

stock market is down by 0.63percent.

For medium to long term players, analysts maintain that equities prices are still at attractive points in some fundamentally sound stocks trading at significant discounts to their intrinsic value.

NSE 30 Index which tracks the top 30 companies in terms of market capitalisation and liquidity stood at 1,131.21 points representing week-on-week increase by 2.62percent and month-to-date increase by 4percent.

NSE Banking Index at 344.35 points shows weekly increase of 1.84percent and 7.21percent increase in this month. NSE Consumer Goods Index advanced by 2.21percent in the review trading week and 1.41percent this month to 533.52points.

NSE Industrial Goods Index has at 1,093.55points rose by 0.04percent in one week while MtD it increased by 0.22percent; NSE Insurwww.businessday.ng

ance Index closed the review week at 110.56points representing an increase of 4.85percent and 3.47percent MtD. NSE Oil & Gas Index at 213.67points as at the week ended Friday September 20 indicates 0.48percent increase and 7.69percent rise this month; while NSE Pension Index at 989.72 points on Friday rose by 2.57percent WtD and 6.92percent MtD. In the review week, Access Bank Plc’s N30billion 7-Year 15.5percent Fixed Rate Subordinated Unsecured Bonds Due 2026 were listed on the Daily Official List of the Nigerian Stock Exchange on Tuesday September 17, 2019.

Also, Dealing Members were notified that the following Federal Government Savings Bonds -11.150percent FGS Sept 2021; and 12.150percent FGS Sept 2022 were listed on the Daily Official List of the Nigerian Stock Exchange on Wednesday September 18, 2019.

eading foods manufacturer, Honeywell Flour Mills Plc (HFMP) has said it will continue to sustain growth in revenues through innovation and capacity expansion. The Company also assured stakeholders that the future of the business would be shaped by innovation; introduction of new and unique food products whilst maintaining its commitment to increasing local content.

These aspirations were contained in the 2019 Annual Reports and Accounts of the Company and further information is expected at the Company’s 10th Annual General Meeting (AGM) which is scheduled for Thursday September 26 in Lagos.

In his annual report based message to shareholders, Chairman of the Board of Directors, Oba Otudeko said HFMP remains focused on growth and is committed to entrenching itself in the markets where it currently

operates while capturing new markets. “My conviction that ours is a company of the future is borne out of the knowledge that we are making significant investments in organic growth and expansion which is cardinal to meeting the needs of our growing customer base and securing future earnings”, Otudeko said.

Speaking on some of the measures the company has employed to promote efficiency and growth, Otudeko said: “We have increased our capability and measurement of external market trends, and we regularly collate customer and consumer insights to better develop category and brand strategies. Our strategy focuses on investing in markets and segments which we identify as attractive because we are confident that we can secure profitable growth and build further competitive advantage.”

Also speaking ahead of the

AGM, Managing Director of the company, Lanre Jaiyeola, assured shareholders that the Company would strengthen revenue by expanding its portfolio and marketing new products tailored to consumers’ taste, nutritional needs, and pockets. “Following deep research work on Nigeria’s consumer behavior and needs, we are in a position to produce safe, healthy and affordable food products for all Nigerians”, Jaiyeola said.

For the financial year ended March 2019, revenue increased by 4 percent to N74.4 billion, total assets increased by 10 percent to N137.5 billion, while the company had a gross profit margin of 15 percent. Operating profit reduced by 58.7 percent to N3.9 billion, reflecting the major impact the traffic situation in Apapa and environs had on the evacuation of finished goods to customer locations.

Chams says committed to sanctity of post listing requirements

P

oised to uphold the sanctity of Post Listing Requirements, the management of Chams Plc at the weekend assured the Nigerian Stock Exchange of regular provision of its corporate information for enhanced investment decision.

Besides, Chams, a leading identity management company had intimated the Exchange of its preparedness to focus on innovations in the identity space to ensure sustainable shareholder value.

Gavin Young, the newly appointed Group Managing Director of Chams Plc who spoke during Chams’ courtesy visit to the Nigerian Stock Exchange’s Chief Executive Officer, Oscar Onyema, ex-

plained that the company would place premium on investment in innovative solutions and software across the Commercial, Consumer and Government sectors of the economy to sustain its competitive edge.

Young, assured The Exchange that Chams would always take the issue of compliance with all the Post Listing Requirements seriously, saying he was looking forward to a strong relationship with The Exchange and would be happy to make input on the best ways of achieving a strong relationship. Speaking on the strategic move to upscale the company’s operations, he stated that “Our focus is to perfect and package these solutions

so that we can realise value from our investments. As Chams is one of the foremost identity companies in Nigeria, we are also focusing on innovation in the identity space, and particularly verification, as there are now over 40million National Identity Numbers (NIN) and BVN records to which we can link to provide such verification solutions.

“Of course, we are also very involved in the National Identity (NID) enrolment space, via our own network, and through agent and business partnerships and have a close working relationship with the National Identity Commission (NIMC) and Nigerian Inter Bank Settlement System (NIBSS).

Wapic Insurance seeks NSE approval, listing of N5.9bn Rights Issue

D

ealing members of the Nigerian Stock Exchange (NSE) were on Friday September 20 notified that Wapic Insurance Plc through its stockbroker, Coronation Securities Limited, submitted an application to the Exchange for the approval and listing of a Rights Issue of 15,613,194,623 ordinary shares of 50kobo each at

https://www.facebook.com/businessdayng

38kobo per share.

The Rights Issue will be on the basis of 7 new ordinary shares for every 6 ordinary shares held. The qualification date for the Rights Issue was Thursday September 19, 2019.

The Right Issue is coming at a premium price when compared with 37kobo which it closed on September 19. Though, Wapic Insurance Plc share price had @Businessdayng

reached a 52-week high of 47kobo and a 52-week low of 33kobo.

Shareholders of Wapic Insurance Plc had ahead of National Insurance Commission’s (NAICOM) June 30, 2020 deadline for firms to comply with its new capital regime, given the company approval to increase its capital base to N15 billion from the current N8.5 billion level.

36

Monday 23 September 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Why consolidating brands can be a strategic mistake GRAHAM KENNY

F

or two decades, a well-known professional service firm in Australia had offered management consulting and training services under two distinct brands. When it came time to update the company’s websites, management was advised to rebrand and wrap both into one. Thinking it would be simpler and more convenient than running two brands and websites, they did.

It was a disaster. Clients felt that after more than two decades, the training organization had ceased to exist and

that a single monolithic organization had taken over the fleet-footed innovative training company. Business fell away dramatically. Manage-

ment had to quickly backtrack and re-establish the original brands on separate, but new, websites.

This mistake is re-

peated time and time again. A friend of mine, a partner in a brokerage firm that specialized in buying and selling accounting practices, al-

ways told her clients to pause before changing the name of a practice they had bought. Killing off the acquired brand, she argued, would drive away customers and hurt revenues.

All too often her advice was ignored, and as she predicted, clients would almost immediately flee the rebranded firm, fearing that their needs would be lost in the larger company.

Why do so many management teams make this mistake? The answer, I think, lies in a common psychological phenomenon called projection. Confronted by a bewildering portfolio of brands, managers

can experience a crisis of identity, a reaction that is likely to be particularly strong in firms growing quickly through acquisitions. They then project this confusion onto the customer. What they forget is that the customer doesn’t have to confront the whole portfolio.

The lesson for managers? Don’t confuse your sense of the company’s identity with your customers’ sense of your brands’ identities. You’ll only spread your own confusion.

(Graham Kenny is managing director of Strategic Factors and president of Reinvent Australia.)

The strategy behind TikTok’s rise REBECCA FANNIN

I

n just two years, TikTok has emerged to rival companies like Netflix, YouTube, Snapchat and Facebook, with more than 1 billion downloads in 150 markets worldwide and 75 languages. On the app, homemade videos showcase everything from comedy to lip-syncs to dog-grooming tips that users create and share on their phones. The scrappy, goofy, fast-moving content has hooked young audiences around the world.

Chinese entrepreneurs such as ByteDance founder Zhang Yiming are showing they can succeed in an openly competitive market internationally rather than only in China. His strategy of

dual versions of Tik Tok — one for China’s internet-censored market and another for the rest of the world — could be a new model for other digitalcontent companies aiming for such global reach, including China-based

digital startups with new ambitions to venture beyond the home market. Their story may also hold lessons for American companies that have watched similar ventures into China meet serious constraints.

In August 2012 Zhang launched his first mobile app, “Toutiao,” or “Today’s Headlines,” an AI-powered daily curated feed of news content personalized to users. In 2016, Zhang introduced a video-sharing app,

Douyin, for the Chinese market. He rolled out an overseas equivalent, dubbed TikTok, in 2017.

That same year, ByteDance paid an estimated $900 million to acquire Musical.ly, a social-video app based in Shanghai with more than 200 million users worldwide and a large following in the U.S. The deal combined TikTok’s AI‑fed streams and monetization track record with Musical.ly’s product innovation and grasp of users’ needs and tastes in the West.

After ByteDance folded the four-year-old Musical.ly into TikTok, and rebranded it as a single application under the TikTok name in August 2018, the combined app gained some 30 million new users within three months. The app makes money through ads and

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

Make this summer your best one ever With any of our FirstBank cards, you can enjoy a flexible summer in over 200 countries worldwide Visit any FirstBank branch for the issuance of your Summer Cards

from the sale of virtual goods such as emoji and stickers to fans.

TikTok uses the app’s algorithms to decide which videos to show users, dictates their feed entirely and learns their preferences the more they use it. This is different from the approach of Facebook, Netflix, Spotify and YouTube, which use AI to recommend posts rather than send feeds directly to users.

Facebook faces a serious global rival from China in TikTok. It added 188 million downloads in the first quarter of 2019, surpassing Facebook at 176 million, but trailing WhatsApp at 224 million and Messenger at 209 million.

(Rebecca Fannin writes about China’s entrepreneurial boom.)

Monday 23 September 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

37

In association with

Companies led by inventors produce better innovations EMDAD ISLAM AND JASON ZEIN

W

hat makes a company innovative? In the words of Steve Jobs: “It’s not about money. It’s about the people you have, how you’re led and how much you get it.”

We wanted to explore a different aspect of CEOs’ backgrounds — whether they’ve innovated themselves — and see whether it leads to greater company innovation. In a recent study, published in the Journal of Financial Economics, we focused on inventor CEOs. First, we tracked the inventing history of 935 CEOs at publicly listed U.S. high-technology companies, using information from the U.S. Patent and Trademark Office starting in 1975.

Then we compared the patented technologies (in terms of volume and impact) of firms with inventor CEOs and firms not led

by inventors over a 17-year period starting in 1992. We made sure the firms we were comparing had similar levels of investment in research and development, were at a similar stage in their life cycle and were in the same industry sector.

We found that inventor-

led companies not only were awarded more patents, but these patents were commercially more valuable and scientifically more influential.

We looked deeper into the CEOs’ actual experience. We found that the effect an inventor CEO had on her firm (in

terms of patents) was noticeably stronger when she was previously a high-impact inventor.

We also examined the specific types of technologies that inventor CEOs had worked on in the past, to understand whether this had anything to do with how strong their effect was.

We found that when the CEO’s previous inventions were more closely aligned with the type of technology her firm produced, then this led to even greater innovation success for a firm.

Inventing experience can provide a CEO with deeper insights into her firm’s technology and how to manage the business around it. Firsthand exposure to the process of innovation may also make inventor CEOs better able to create a culture that fosters creativity and innovation.

Apart from enhancing innovation, inventing experience may also make an inventor CEO a more authentic and convincing spokesperson for her firm’s products, helping the firm’s innovation make a greater impact in the industry.

(Emdad Islam is an assistant professor at Monash University. Jason Zein is an associate professor at UNSW Business School.)

What C-Level executives really think about CMOs CMOs should seek ways to use their understanding of customers to help C-suite colleagues reach their goals. Finally, CMOs should leverage the support of their biggest advocate, the CEO, by asking for an endorsement of their collaborative efforts.

DIANA O’BRIEN, JENNIFER VEENSTRA AND TIM MURPHY

C

hief marketing officers are under enormous pressure.

They’re expected to deliver ever-improving results for marketing activities, manage the explosion of customer channels and own customer strategy — while still running legacy tactical initiatives like ad campaigns. It’s no wonder their average tenure is the shortest of all C-suite roles.

To understand how CMOs assess their abilities, and to see how their colleagues think they measure up, we surveyed 575 Fortune 500 C-suite executives (principally CEOs, CFOs, CIOs and CTOs) and conducted 19 in-depth interviews. Here’s what we found: CMOS SUFFER FROM A CRISIS OF CONFIDENCE. Only 5% of CMOs are highly confident in their ability to affect strategic decision-making and the

overall direction of the business and to garner support for their initiatives among their peers.

That’s the lowest self-ranking of anyone in the C-suite. But there’s good news: CMOS’ LACK OF CONFIDENCE IS LARGELY UNWARRANTED. Most C-suite executives rate CMOs’ performance more highly than CMOs themselves do. In nearly all cases,

most C-suite players respect — and lean on — the CMO’s expertise and feel that CMOs deliver effectively on many fronts.

CSOS AND COOS STILL NEED SOME CONVINCING. CSOs are particularly doubtful of CMOs’ ability to demonstrate a financial impact and to persuade others to support their initiatives. COOs are looking to CMOs to step up their game

across the board, especially in demonstrating a financial impact.

CMOS SHOULD LEAD WITH THEIR STRENGTHS. If there’s one area the C-suite is telling us CMOs need to focus on, it’s collaboration. Only 17% of C-suite executives in our study reported having collaborated with CMOs over the previous 12 months. More broadly,

Brought to you courtesy of First Bank Nigeria

(Diana O’Brien is the global chief marketing officer for Deloitte. Jennifer Veenstra is a managing director with Deloitte Consulting LLP and leads Deloitte’s CMO program. Tim Murphy is a researcher and analytical scientist at Deloitte Services LP.)

38

Monday 23 September 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

The world is going cashless: Are you ready?

MONEY MATTERS

Nimi Akinkugbe Whether you like it or not, our world is becoming cash free. How prepared are you for change? he Central Bank of Nigeria’s (CBN) cashless policy commenced on January 1, 2012 in a phased approach that featured Lagos as the pilot state because of its “financial sophistication, the presence of an enabling infrastructure, volume of cash transactions and exposure of residents to alternative payment channels.” The cashless policy aims at reducing the volume of cash in circulation by transforming our heavy reliance on cash to a digital electronic cashless country.

In a circular, dated September 17, 2019, the CBN’s Director of Payments System Management Department, Sam Okojere, instructed deposit money banks to implement the policy starting from September 18, 2019. “Charges on deposits shall apply in Lagos, Ogun, Kano, Abia, Anambra, Rivers states and the FCT, in addition to already existing charges on withdrawals, effective September 18, 2019.”

The CBN’s cashless policy will be extended nationwide from March 2020. According to the policy, “a 3% processing fee will be charged for withdrawals of amounts above N500,000 for individual accounts, while 2% will be charged for deposits. For corporate accounts, a processing fee of 5% will be charged for withdrawals, and 3% for deposits of amounts above N3 million.”

All over the world, the trend has been for governments and financial institutions to pursue policies to reduce the volume of cash in the system. In some developed countries, one can do almost entirely without the use of hard cash and electronic means of payments far outstrip cash transactions in much of the industrialized world today; indeed one is regarded with some consternation, even suspicion, should you wish to make a purchase with large amounts of cash.

As we inch closer towards cashless Nigeria where digital or electronic money will eventually take precedence over physical money, how prepared are you? How would you feel if you were told that you would no longer be able to use paper money and would have to rely on electronic technology for all your transactions? We all like the speed and convenience of e-commerce, but we also love the look and feel of our hard cash in our wallets; it is tangible and feels real and it gives one a sense of really possessing something.

Technology has changed so much in our lives, the greatest impact be-

T

ing the actual way that transactions take place. The world of banking and finance has been one of the greatest beneficiaries of technological innovations and advancements in global payment systems.

There are many benefits from doing away with “old fashioned cash.” It is a means of curbing corruption, money laundering and other cash related financial crimes, global terrorism and cross-border crimes. It also helps to address the enormous security challenges and the exorbitant cost of cash management logistics to the financial services and banking industry. Businesses will embrace it as a means of receiving instant payments, cutting their expenses and institutionalizing operational efficiency, thereby increasing their revenues. The rest of us should embrace electronic, internet and mobile banking for the speed, convenience, security, and the extraordinary degree of efficiency that they provide.

The internet has revolutionized banking and personal financial management in many ways. Nowadays, we are all so busy in our work lives, that there simply just isn’t the time to visit the bank. If you have not yet embraced your bank’s internet banking service, there are some compelling reasons to do so. With internet connectivity, you have unlimited access to your bank accounts and can carry out most of your routine banking transactions at your convenience; you can check your account balances, pay bills, make transfers, and manage your various accounts with a few simple clicks from your computer, your laptop, your tablet, or your cell phone.

Do you use your bank’s electronic banking services, which automate processes relating to your financial transactions for convenience and efficiency? The most com-

mon forms of electronic payments are telephone banking, internet banking and plastic cards; credit cards, debit cards and automatic teller machine (ATM) cards instead of currency.

Debit and credit cards, have transformed our financial lives; one can effect a host of transactions without ever having to visit a bank. Whether it is from a Point of Service (POS) portal at your nearest grocery shop, an increasing number of merchants, including shops, restaurants, clubs, hotels etc will accept your card.

Mastercard, Visa, and Verve are at the forefront of card technology in Nigeria and have changed the way we pay for transactions. Apart from enabling you to access local currency in Nigeria, you can access foreign exchange from your Naira account while abroad, with limits.

Denominated in Naira, they can be used at ATMs or point of sale (POS) terminals globally where the Visa or Mastercard signs are displayed to either pay for goods and services or access foreign exchange. Linked to your current or savings account, all transactions reflect instantly.

With the future looking cashless, as electronic payments replace cash, one must also consider some of the enormous challenges ahead.

We must all concern ourselves with cyber security issues. Technology all over the world is vulnerable to glitches, outages and mistakes.

This is even more so in an environment where the infrastructure has not kept apace with the transformational growth of technology.

We must all thus be conscious of an increased risk of crimes such as identity theft, fraudulent transactions and data breaches, due to the higher volume of cashless transactions leaving us all more vulnerable and exposed.

Are your smartphones, com-

‘

It is important to begin to become familiar with the alternative electronic payment channels available to you and decide which will best suit your personal financial habits and circumstances

puter and other devices password protected? If your password or PIN [Personal Identification Number] is compromised, this could lead to devastating losses should unscrupulous people gain access to your financial information.

Do not share your passwords or PINs with anyone. If you might forget them and need to write them down, then store them securely.

Change your passwords and PINS periodically and use different codes for different accounts. Be creative about your choice of passwords and PIN numbers; family birthdays and names are very easy to decipher so avoid using those.

In addition, secure your computer with a firewall and security software packages that have antivirus and anti-spam features. If you are technologically challenged, an IT specialist or a techy friend can help you download and install this.

Choose someone you can trust!

Ignore phone calls or email requests for personal information.

Your bank and other legitimate companies will never request for sensitive information such as passwords and PINs by email; these are usually fraudsters attempting to defraud you. Contact your bank directly and report such incidents.

There is no guarantee that your financial information will be completely secure even if you put all these basic measures in place.

However, you certainly stand a better chance of limiting access to sensitive information and protecting your personal finances from fraudsters.

It is important to begin to become familiar with the alternative electronic payment channels available to you and decide which will best suit your personal financial habits and circumstances. Be deliberate about embracing technology, and reduce your dependence on cash. Don’t get left behind.

Follow Nimi Akinkugbe on: Twitter and Instagram: @ MMWithNimi, Facebook: ‘Money Matters With Nimi’ Send an email to info@ moneymatterswithnimi.com Or visit her Website www. moneymatterswithimi.com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.

For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi.com Twitter: @MMWITHNIMI Instagram: @MMWITHNIMI Facebook: MoneyMatterswithNimi www.businessday.ng

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BUSINESS DAY

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40

Monday 23 September 2019

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: September 20 - September 27, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

1.94

Q2 2019 — lower by 0.16% compared to 2.10% 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)

11.02

Decreased to 11.02% in August 2019 from 11.08% in July 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)

42.91 64.92 1.87

September 18, 2019 figure — a decrease of 2.17% from September start September 19, 2019 figure— an increase of 6.43% from the previous wk August 2019 figure — a decrease of 4.8% from July 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday 20/09/19

Friday

Change(%)

27,698.69 13.48

27,779.00 13.52

(0.29) (0.29)

Volume (bn)

0.18

0.17

7.40

Value (N’bn)

5.92

2.62

126.04

MONEY MARKET NIBOR Friday Rate (%) 20/09/19

Indicators

20/09/19

1-week Change

YTD Change

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

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Gold ($/t oz.)

Silver ($/t oz.)

Copper ($/lb.)

64.92 2.55

(%) 6.43 (1.16)

(%) 0.71 (16.56)

2465.00 99.20 60.71 12.05 489.75

5.75 4.20) (2.65) 0.42 0.26

27.32 (23.81) (21.66) (21.40) 12.98

1503.96 17.89 261.85

(0.20) (1.60) (1.86)

14.15 4.07 (20.12)

13/09/19

NSE ASI Market Cap(N’tr)

Tenor

Global Economy In the US, the Federal Reserve cut the target range for the federal funds rate to 1.75-2% during its September meeting, the second rate cut since 2008, as inflation remains subdued amid heightened concerns about the economic outlook and ongoing trade tensions with China.

GDP forecasts were raised to 2.2% in 2019 (vs 2.1% previously estimated) and 1.9% in 2021 (vs 1.8%), while that for 2020 was unchanged at 2.0%. Inflation expectations were seen at 1.5% in 2019, 1.9% in 2020 and 2.0% in 2021, matching June's projections. Seven of the policy makers agreed to the decision while 3 were of a different opinion. Elsewhere, The People's Bank of China (PBOC) in its most recent meeting set its oneyear loan prime rate (LPR) at 4.2%, down from 4.25% the prior month. The reduction came after the central bank lowered banks' reserve requirements by 50 basis points to support the economy and after the Federal Reserve slashed US interest rates for the second straight month this year. The five-year LPR was unchanged at 4.85%. In a separate development, Japan inflation rate dipped to 0.3% in August from 0.5% in the prior month. Annual core consumer inflation, which excludes fresh food, was at 0.5% in August, down from 0.6% in the previous month according to the Statistics Bureau of Japan. It was the lowest inflation rate in six months, raising the chances of further stimulus after the Bank of Japan decided to leave policy unchanged in its September meeting but left the window wide open for easing.

Friday Rate (%)

Change (Basis Point)

13/09/19

OBB

6.4300

22.4300

(1600)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

7.5700 14.2000 13.2969

24.7100 22.3333 13.1220

(1714) (813) 17

Tenor

20/09/19

13/09/19

90 Days

13.4426

13.6345

(19)

1 Mnth 3 Mnths

12.28 12.24

11.93 11.92

34 32

6 Mnths 9 Mnths 12 Mnths

13.12 14.53 15.30

12.65 14.33 15.18

47 20 13

FOREIGN EXCHANGE MARKET Market

Friday

Friday

1 Month

(N/$)

(N/$)

Rate (N/$)

20/09/19

13/09/19

20/08/19

Official (N) Inter-Bank (N)

306.90 362.39

306.85 362.04

306.95 363.68

BDC (N) Parallel (N)

0.00 360.00

0.00 360.00

0.00 360.00

Friday

Indicators

Friday

AVERAGE YIELDS (%)

Friday (%)

Change (Basis Point)

20/09/19

13/09/19

3-Year 5-Year

0.00 14.46

0.00 14.38

0 8

7-Year 10-Year 20-Year

14.34 14.21 14.35

14.34 14.34 14.45

0 (13) (10)

30-Year

14.45

14.63

(18)

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)

Friday

(%)

Friday

Change

(%)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

BOND MARKET Tenor

Friday

(%)

Change

(%)

(Basis Point)

20/09/19

13/09/19

Index

2,969.50

2,958.51

0.37

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

9.01 5.73

8.98 5.70

0.37 0.47

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

20.89 -34.90

20.44 -35.32

0.45 0.42

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

91 Day 182 Day

3,000.00 8,385.20

364 Day

168,361.35

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

Rate(%) 11.1

Date

11.75

19-Sep-2019 19-Sep-2019

13.3

19-Sep-2019

Domestic Economy The Central Bank of Nigeria concluded the rescheduled fifth Monetary Policy Committee meeting of 2019 last week. The committee members voted to retain the Monetary Policy Rate (MPR) at 13.5%, Asymmetric corridor around the MPR at +200/-500 basis points, Cash Reserves Ratio (CRR) at 22.5%, and Liquidity Ratio (LR) at 30%. The Committee was also of the opinion that retaining the current position of policy would encourage credit delivery to the real sector, especially in the light of the subsisting implementation of the Loan-to-Deposit Ratio policy. In a separate development, the Consumer Price Index (CPI) which measures inflation rose by 11.02% year-on-year in the month of August 2019, which is 0.06% points lower than the 11.08% recorded in July 2019. The food index increased by 13.17% (year-on-year) in August, lower than 13.39% recorded in July, thus indicating reducing pressure in the prices of food items. The core sub-index, which excludes prices of farm produce decreased to 8.68% from 8.8% recorded the prior month. During the month, the highest increases were seen in the prices of Oils and fats, Meat, Bread and cereals, Potatoes, yam and other tubers and Fish. Others are Cleaning, Repair and hire of clothing, Repair of household appliances, Hospital services, Glassware, tableware and household utensils, Passenger transport by air and repair and hire of footwear. In a separate development, the Central Bank in a recent circular called “Re: Implementation of the Cashless Policy” informed all deposit money banks that it has approved charges on deposits, and it will apply to FCT, Lagos, Ogun, Kano, Abia, Anambra and Rivers states. This is in addition to already existing charges on withdrawals.

According to the circular, the charges, which take effect from September 18, will attract 3% processing fees for withdrawals and 2% processing fees for lodgments of amounts above N500, 000 for individual accounts. For corporate accounts, the apex bank in the circular said that DMBs would charge 5% processing fees for withdrawals and 3% processing fee for lodgments of amounts above N3, 000, 000. The nationwide implementation of the cashless policy will begin by March 2020.

Stock Market The nation's bourse closed marginally in negative territory last week compared to the preceding week. This was on the back of profit-taking particularly in the banking and consumer goods sectors. Accordingly, the All Share Index (ASI)

decreased by 0.29% to 27,698.69 points from 27,779 points the preceding week. Market capitalization also dipped by N40 billion to N13.48 trillion from N13.52 trillion the prior week. The lacklustre performance of the market could be attributed to investors waiting to see the outcome of the rescheduled Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting. This week, we anticipate bargain hunters will take advantage of low stock prices, thereby boosting gauges of market performance.

Money Market Rates at the money market dwindled last week as system liquidity improved following coupon payment which hit the system. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates climbed to 6.43% and 7.57% from 22.43% and 24.71% respectively the previous week. Call rates also decreased to 14.20% from 22.33% the prior week. This week, rates are expected to remain around current levels depending on government decision to carry out Open Market Operations (OMO) auctions Foreign Exchange Market Last week, the naira depreciated against the greenback across most market segments. At the NAFEX window the local currency witnessed a depreciation of 35 kobo to close at N362.39/$.

Similarly, at the official market, naira depreciated to N306.90/$, a 5 kobo depreciation from the prior week. The parallel market remained unchanged at N360/$. The relative stability of the local currency continues to be supported by the intervention of the apex Bank across various market segments. This week, we foresee the local currency trading at prevailing levels due to the apex bank's sustained supply of liquidity.

Bond Market The Bond market witnessed bullish sentiments for the week ended September 20th,2019. This was largely due to a renewed interest in FGN bonds by both foreign and local investors.

Consequently, we observed demand for various maturities particularly the 2036, 2037 and 2049 bonds. Yields on the ten-, twenty- and thirty-year debt papers closed lower at 14.21%, 14.35% and 14.45% from 14.34%, 14.45% and 14.63% respectively the previous week. The Access Bank Bond index increased by 10.98 points to finish at 2,969.50 points from 2,958.51points the previous week. This week, we anticipate bullish sentiments will be sustained as market participants position for higher yields Commodities The price of oil jumped last week supported by supply risks brought about by last weekend's drone attacks on Saudi oil infrastructure and a cut in U.S. interest rates. The attacks knocked down more than half of Saudi Arabia's crude production and severely limited the country's spare capacity, a cushion for oil markets in any unplanned outage Bonny light, Nigeria's benchmark oil crude edged up $3.92, or 6.43%, to $64.92 a barrel. In contrast, precious metals prices slipped following the announcement of a second consecutive 0.25% cut to short term interest rates by the Federal Reserve. Gold dropped to $1,503.96 an ounce, down 0.20% from the previous week's price, while the silver settled lower at $17.89 per ounce, compared to the preceding week's close of $18.18 per ounce. This week, oil prices may retreat following a Reuters report that Saudi Arabia's oil output may return to normal more quickly than earlier reports had suggested. For precious metals, the dovish bias by central banks in advanced economies will continue to support prices.

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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Nov’19

Exchange Rate (Interbank) (N/$)

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Monday 23 September 2019

BUSINESS DAY

41

news Why we are developing commodities trading ecosystem - SEC Iheanyi Nwachukwu

I

n its avowed determination to further deepen the capital market and have a vibrant commodities exchange, the Securities and Exchange Commission is set to hold a roundtable on the commodities Trading Eco-system.

According to the Acting Director-General of the SEC, Mary Uduk, the Roundtable which is scheduled to hold on October 3, 2019, in Lagos with the theme: ‘Building a strong Commodities Trading Ecosystem for Inclusive Economic Development’ is expected to convene industry experts, policymakers and thought leaders to have discussions to further develop the commodities market in Nigeria.

Uduk said the objective of the roundtable is to obtain the buy-in of policymakers and agencies of government and to get perspectives of stakeholders towards encouraging investments and get more participation in the commodities market.

According to Uduk, “The Capital Market Master Plan did an analysis of where we are and where we want to be

as the leading capital market in Africa, and one of the areas is the Commodities market which is very important, but one of the least developed.

The Nigerian economy is mainly agrarian- driven; all states of the federation have exportable quantities of commodities and we have some of the highest grades in the world.

“Government wants to diversify to agriculture and so we need to be able to export some of these commodities. If the farmers do very well, the earnings of the country will be boosted,” She said.

She disclosed that these commodities can be exported, while on the other hand industries can be set up that would employ a large number of our teeming population.

“If we can develop this very well, our country will be better for it. What we need now are better pricing, transparency and better quality and these are what we set to achieve with the farmers and that is why the Commodities Exchange is important.

“The crude form they are trading now does not provide the farmers the benefit of price discovery, transparency among others. The only way to achieve these is to have www.businessday.ng

an exchange, hence the need arose to set up the Technical Committee to look holistically at all the issues, the nation needs to harness the full potentials in the Commodity market.

According to her, the aim of SEC is to have an efficient commodities exchange because right now that sector of the capital market is dormant and that is why the Commission is leading other capital market stakeholders on capacity building and public enlightenment campaigns.

“We have already commenced capacity building for stakeholders and the public on commodities exchange to bridge the current knowledge gap to ensure we reap the benefits of trading in commodities, all these are part of the implementation of the report of its Technical Committee on Commodities Trading Ecosystem” she said.

Some of the topics to be discussed at the roundtable include, enabling environment for functional commodities trading system, developing a thriving commodities market: success stories from Africa and Emerging economies and Private sector involvement: Key to a strong commodities trading system.

I will succeed Buhari as president, says Tunde Bakare JOSHUA BASSEY

F

ounder and senior pastor of Latter Rain Assembly, a Lagos-based pentecostal church, Tunde Bakare, has declared he would be Nigeria’s next president.

Bakare, in a video which has gone viral on social medial, declared that he would succeed President Muhammadu Buhari as 16th president of Nigeria, saying this is why he was born.

“Take it to the mountain top if you have never heard it before. I am saying it to you this morning, in the scheme of things, as far as politics of

Nigeria is concerned, President Buhari is number 15 and yours sincerely is number 16. I never said that to you before, I want to let you know it this morning; nothing can change it, in the name of Jesus. He (Buhari) is number 15; I am number 16,” Bakare said, placing his right hand on his chest.

“To this end was I born and for this purpose came I into the world. I have prepared for this for 30 years. When he (Buhari) chose to run in 2019, he is still number 15, when he steps out, I step in.

“His assignment is that of Moses, to take Nigeria to River Jordan, but he can’t cross it. It will take a Joshua to go to the

other side and begin to distribute the resources to the people of this nation,” Bakare told his congregation in the video.

Bakare, who is seen in some quarters as a controversial preacher cum politician, had many times criticised previous and present governments in the country.

In 2012, Bakare was among those who mobilised forces for daily protests that lasted more than two weeks at the Gani Fawehinmi Park, Ojota, Lagos, against the removal of subsidy on petroleum products and consequential price increase announced by the administration of former President Goodluck Jonathan.

You’ve no agenda, address EU, AU reports on 2019 polls, PDP tasks Buhari SOLOMON AYADO, Abuja

T

he People’s Democratic Party (PDP) has lamented that President Muhammadu Buhari has no definite agenda to the United Nations General Assembly (UNGA) to attract tangible benefits to the nation.

The party argued that for the President to attend such an important meeting of world leaders and policymakers without a clear-cut national proposal is an indi-

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cation that his administration lacked the commitment to foster rapid national development.

The PDP gave the task through the National Publicity Secretary, Kola Ologbondiyan, in a statement issued in Abuja on Sunday.

“Nevertheless, since Mr. President is appearing before the UNGA, the PDP tasks him to use the opportunity to address world leaders on the reports by the European Union (EU), African Union (AU) and other international @Businessdayng

bodies, detailing heavy manipulations and outright rigging of the 2019 general elections to favour him and his party.

“Our party also urges Mr. President to address the world on reported issues of violations of human rights, disregard to the rule of law and constitutional order, disobedience to court orders, arbitrary arrest and detention of citizens, extrajudicial killings, impunity and swelling corruption under his watch,” it said.

42

Monday 23 September 2019

BUSINESS DAY

cityfile A Police Officer controlling traffic at the scene of an accident on Plateau Specialist Hospital Road in Jos on Friday.

NAN

Lagos seeks banks’ collaboration on service delivery JOSHUA BASSEY

L

agos State government has sought the collaboration of banks and financial institutions to deliver services that will impact the people and businesses in the state.

Special adviser to the state governor on works and infrastructure, Aramide Adeyoye, made the appeal when he received separate delegations from Access and Zenith Banks, in her

office, at Alausa, Ikeja.

Adeyoye also charged the banks to work out modalities that would ensure that contractors who obtained Advance Payment Guarantee (APG) from banks were allowed sufficient access to the funds in good time to enable them deliver on projects within the duration of their contracts.

She bemoaned a situation where contractors who had been mobilised would wait endlessly to access the funds from the bank

thus slowing the progress of work.

While commending the banks for their corporate social responsibility (CSR) projects in different parts of Lagos, she pleaded with them, however, to do more in the areas of provision and powering of traffic signal lights, street lights, junction improvement, laybys and other road furniture to reduce traffic gridlock in the state.

The special adviser also urged the banks to leverage

technology and come up with ways of improving the ease of doing business in the state as well as revenue collection modes without belabouring people who have businesses to transact with the government.

The banks represented by Tolu Adegoke, zonal head of Access Bank and Stella Egwuatuonmu of Zenith Bank, pledged to work in harmony with the government and mutually promote service delivery in the interest of all.

How I killed 7 women in Port Harcourt, Lagos, Owerri- Serial killer confesses

A

suspected serial killer, Gracious DavidWest, 39, arrested by the police has admitted killing at least seven women in hotels in Lagos, Owerri and Port Harcourt.

The suspect was arrested following CCTV footage which showed him leaving an unnamed hotel in Port Harcourt, after he allegedly killed the lady he slept with the previous night.

David-West confessed to killing the seven women to newsmen on Friday after his arrest by the police in Rivers State.

“So far, I’ve killed five girls in Port Harcourt; one in Owerri (Imo) and another in Lagos. I started the killing in Lagos.

“I took N52,000 from the bank account of the first girl I killed in Lagos. Thereafter, I went to Port Harcourt, then to Owerri and later returned

to Port Harcourt.

“After I kill a girl, I collect her phone, and sell the phone at Waterlines and MTN office (areas in Port Harcourt).

“I met the last girl (latest victim) at a club in Port Harcourt,” David-West told reporters.

David-West, who hails from Buguma in Asari Toru local government area of Rivers State, further gave horrific details on how he murdered his victims in cold-blood.

The suspect, who did not betray any emotion, said he usually picked his victims from clubs and drinking spots.

“I take a girl into the hotel, we eat, make love and sleep. Later, I wake up in the middle of the night and put a kitchen knife on her neck, ordering her not to shout.

“I threaten her that if she shouts that I will kill her. I promise her that if she cowww.businessday.ng

operates that I will not kill her, so, the girl, out of fear will not shout.

“After the girl relaxes, then, I will tear the bed’s pillow case and tie her hands and legs, so that she will not struggle. Thereafter, I strangle her,” he confessed.

David-West confessed that his victims usually plead for their lives by offering him money as well as details of their bank accounts. He said after obtaining the victim’s Automated Teller Machine (ATM) card and pin and other belongings, he would kill them.

“So, I collect their ATM pins, and after dawn, I go to ATM to withdraw money from the account. I usually use the money to get other girls.

“I don’t know what is making me to kill people. Immediately the urge

comes, I kill, and after killing, I regret and feel sober.

But later, I will still go and kill again,” he said.

Commissioner of Police in Rivers, Mustapha Dandaura, said that David-West was arrested by cops on routine stop and search along the Ogoni stretch of the East/West Road.

According to him, the suspect was arrested inside a commercial bus travelling to Uyo from Port Harcourt.

“The suspect is definitely not alone in these killings.

So far, three suspects are in our custody and are being investigated in connection with these killings,” the police chief said.

Fi v e d e at h s i n Po r t Harcourt sparked outrage in Nigeria, with protests erupting across the city by women activists fearing a rise in killings targeting suspected sex workers.

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Lagos begins road rehabilitation after rains- Official JOSHUA BASSEY

T

he Lagos state government says it w ill be commencing massive road construction and rehabilitation soon after the ongoing rainy season.

Several major roads and inner city streets in Nigeria’s commercial city are in terrible state of disrepair.

Since the rains began, craters and potholes on the roads have sunk deeper and expanded wider, with consequential traffic jams and untold hardships on motorists and residents. In some cases, intercity journeys that should ordinary take less than one hour, now take upward of three to four hours.

Listed to benefit from the expected resumption of road rehabilitation are the Lagos-Badagr y Expressway, Agege Pen-Cinema Fly-over, Agric/Ishawo road, Ojokoro phase I & II and, Command/Ejigbo NNPC road.

“These roads and others will receive urgent attention after the rains,” said Aramide Adeyoye, special adviser to Governor Babajide Sanwo-Olu on works and infrastructure.

Adeyoye gave the assurance when “Made in Lagos Women Group” led

by Bosede Joseph, visited her in Ikeja.

According to her, the government was not unaware of the deplorable state of some roads in the state, adding that not much of construction work

could be done during the rainy season to avoid the waste of resources.

She pleaded, however, with the people to be patient and continue to support the government in its drive to deploy “scientific approach to improve on road infrastructure in the state.”

The special adviser, who commended the women group for identifying with the new administration in the state, charged them to help members acquire skills and identify talents amongst the youth who might need assistance in actualising their dreams.

She also implored the group to come up with initiatives that would make them to be more relevant and contribute meaningfully to good governance.

“I charge you to develop your potentials and skills, come up with good initiatives that can position us as a serious minded people who are ready to contribute to good governance and influence policies that can better our society “ Adeyoye advised.

Speaking further she said “we should be more conscious of how we can contribute to good governance, four years is just too short a period of time, the present government has challenged us by giving us 33 percent representation, so we must be ready to convince the public that women can do it through various advocacy programmes that are development driven.’

Accident claims 5 on Lagos-Ibadan road

F

ive persons at the weekend lost their lives while 10 others sustained injuries in an accident involving a white Mazda bus at Onigaari, on Lagos-Ibadan expressway.

Clement Oladele, the sector commander, Federal Road Safety Corps (FRSC), confirmed the incident to newsmen in Abeokuta.

Oladele said that the accident which occurred around 8:49 a.m was caused by speed and loss of control.

According to the sector commander, the crash involved 18 passengers comprising 17 male adults and one female adult.

He noted that 10 males sustained injuries from the crash while five of the passengers comprising of four males and one female died.

“The lone crash involved a commercial bus that traveled @Businessdayng

all the way from Sokoto state but stopped briefly in Ibadan to pick other passengers.

“The white coloured Mazda bus with registration number WWD 302 CB, was heading to Lagos before it lost control at Onigaari due to speed and collided with the road median and upturn,” he said.

Oladele further explained that the injured victims were taken to Olabisi Onabanjo University Teaching Hospital (OOUTH), Sagamu, while the dead bodies were deposited at the mortuary of the same hospital.

He reminded motorists of the need to drive cautiously, saying the Lagos-Ibadan road was still undergoing rehabilitation.

Oladele said that the recommended speed at construction areas was 50 kilometers per hour.

Monday 23 September 2019

BUSINESS DAY

43

news

Nigeria to reduce overproduction of oil by 50% ...Inland depots to be revived for ease of products distribution GBEMI FAMINU

N

igeria has expressed a willingness to reduce the volume of overproduced oil by 50 percent, as the country tries to renew its ‘rogue’ image among the Organisation of Petroleum Exporting Countries (OPEC) member states, having failed to abide by the oil production quota allotted it since December 2018.

Whereas Nigeria currently has a 1.685 million bpd quota, in August, for instance, the country produced 1.84m bpd.

Similar overproduction in varying volumes has been recorded over the course of the year, with 1.95 million bpd in July. The other country with Nigeria’s reputation of flouting the quotas is Iraq, which has also been significantly overproducing crude, and together making it more difficult to achieve the supply-

price goals of the group.

Nigeria now expects to generate more revenue from higher oil prices, if production is reduced in accordance with the widely accepted quotas by other OPEC member states. This was part of disclosures made at the weekend during a press briefing by the ministry of petroleum resources, following the conclusion of a ministerial retreat held with directors, chief executives and agency heads of the ministry.

Timipre Sylva, minister of state, Petroleum Resources, said the move to reduce overproduction of oil would be done by 50 percent, saying this would improve revenue generation for the government.

“There will be an increase in the federation revenue through cost control and increased efficiencies and an increase in oil and gas reserves,” Sylva said.

The minister’s position

was buttressed by Mele Kolo Kyari, group managing director of the Nigerian National Petroleum Corporation (NNPC), who said: “The current situation in OPEC is about market balancing”.

According to Kyari, to achieve market stability, every OPEC member has to play a contributory role which will be beneficial to all members and this can happen through production cuts. This he described as necessary in order to avoid high production volumes and low value in returns.

Sylva also spoke about the ministry’s plans in relation to the ‘next level agenda’ of the Muhammadu Buhari administration, saying that in order to curtail smuggling and recurrent product theft in the industry, preventive measures would be put in place including enhanced security measures.

Also, contrary to earlier media reports that the Fed-

$9.6bn P&ID fine: Nigerian delegation departs to UK ahead Sept. 26 case ONYINYE NWACHUKWU, Abuja

eral Government was planning to reduce its equity in petroleum Joint Ventures, Sylva clarified that: “There will be no divestment of federal government interests in our joint ventures,” explaining there had been no such discussions.

Kyari, NNPC’s GMD, also disclosed that the Ilorin Depot was commissioned on Saturday after five years of redundancy with 10 million litres of gasoline in place.

With this, he explained that pressure and attention would be shifted from the previous depots like Ibadan and Apapa thereby reducing the traffic challenges occasioned by it.

“We have a comprehensive rehabilitation process to make sure that all inland depots come to life through rehabilitation of the pipelines and depots. We are working on all of them and we are scheduling to deliver on all of them,” he said.

T

he Nigerian delegation has left to the United Kingdom to discuss with the legal team on strategies in dealing with the recent development regarding the $9.6bn P&ID contract judgment, the attorney general of the federation and minister of justice, Abubakar Malami, announced on Sunday.

“All cards are on table but it all depends on the beneficial that has potency for setting aside the award having regards to the applicable law in the circumstances,” Malami said in a statement.

He was shedding light as to whether the Nigerian delegation leaving for UK was to file a new case based on the new realities that the contract was a fraud or would build on the previous judgment.

Nigeria is contesting the judgment slammed on it by a UK court in favour of P&ID over a gas deal violation. The case is listed for 26 September in the UK. Malami announced last week of government plans to head to court based on an established fraud following outcomes of investigations.

The chief law officer also

disclosed an ongoing extensive investigation on everyone that played a role in the failed contract. This is to enable government establish whether there was a criminal conspiracy.

But in the mailed statement on Sunday through his media aide, Jubrilu Gwandu, Malami said no possibility is ruled out including “possibility of filling new case and or using existing proceedings to seek relief of setting aside the award (of the contract)”.

Just last week, a Federal High Court in Abuja ordered the forfeiture of assets belonging to Process and Industrial Development Limited (Incorporated in Virgin Island) and its Nigerian affiliate, P&ID Nigeria Ltd, to the Federal Government.

The court equally issued an order winding up the activities of the two companies in Nigeria after finding them guilty of economic sabotage, tax evasion and money laundering in respect of the suspicious contract.

Authorities say revelations so far from investigations have strengthened Nigeria’s position in the case which is aggressively being pursued.

P&ID has, however, described the ruling as fraudulent and entirely illegitimate.

Taraba Killings, kidnapping worryNUJ Nathaniel Gbaoron, Jalingo

T Collaboration to drive the growth of the Nigerian off grid energy sector: L-R Dozie Okpalaobieri, Nigeria Power Sector Lead, African Development Bank; Adesola Alli, Head of Renewables, Sterling Bank; Balaji M. K., Off Grid Lead, USAID Power Africa Nigeria; Anita Oburu, Head of the Energizing Education Initiative, Rural Electrification Agency; Wiebe Boer, CEO, All On during the quarterly Nigeria off grid energy donor and investor coordination meeting held in Abuja.

New cashless policy to push Nigeria through GIABA Anti-money laundering/CFT test Onyinye Nwachukwu, Abuja

G

overnor of the Central Bank of Nigeria, Godwin Emefiele, said on Friday that the new drive in implementing the cashless policy which now requires bank customers to pay some charges on both deposits and withdrawals would help Nigeria wriggle out of the Anti-money laundering and Counter-Financing of Terrorism (CFT) test coming soon.

The assessment would be conducted by the InterGovernmental Action Group against Money Laundering in West Africa(GIABA) - a specialised institution of the Economic Community of West African States responsible for facilitating the adoption and implementation of Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) in West Africa.

Consisting of 17 member

states, and headquartered in Dakar, Senegal, GIABA is also the FATFStyle Regional Body (FSRB) in West Africa and works with states in the region to ensure compliance with international AML/CFT standards.

Addressing the press on the outcomes of the two-day Monetary Policy Committee meeting in Abuja, Emefiele said the new plan to aggressively implement the cashless policy comes at a strategic timing because the mutual evaluation of Nigeria

by GIABA on countries and money laundering and CFT regime would begin on Monday (today).

“Passing the mutual evaluation positions, and for Nigeria to be appraised as a safe and credible destination for financial transaction across the world is crucial,” Emefiele stated.

According to him, “GIABA will be in Nigeria on 23rd September to evaluate the rate at

which Nigeria has embraced anti-money laundering and CFT regime. It is important that we display and show to them that Nigeria is indeed in conformity with their practices as in their anti-money laundering and CFT laws.

“What this means also is that if we do not do what we are doing today, we will soon get to a point where if they pass us negative, even your cards that you carry abroad, you may not be able to use them,” he declared.

“So it is in our own best interest that we should be seen to be working in line with best global practices so that we can have a comfortable and convenient life in future.”

The CBN announced last Tuesday it would begin an aggressive implementation of its cashless policy, which signalled the imposition of charges on deposits in addition to already existing charges on withdrawals.

www.businessday.ng

he Nigeria Union of Journalists (NUJ), Taraba State council has said it was worried over the near collapse of activities in Southern Taraba caused by the Jukun/Tiv crisis which has claimed many lives and property worth millions destroyed The union also said it was worried over the high rate of kidnapping in the state.

The Taraba state council Chairman of the union, Jovita Shafe, disclosed this at the weekend in Jalingo during the state Congress meeting of the union.

Shafe, who said journalists were the “watch dog of the society” stressed that the union would not fold it’s arms and watch the people of the state kill each other, also wondered why human beings cannot accommodate each other.

He further stressed that if the people could work together as brothers and sisters, Taraba State would remain stagnant in terms of development.

The union called on the government at all levels to redouble their efforts to end the perennial crisis between the two tribes as well as put to an end to kidnapping in the state

NEXIM Bank advocates increased capitalization of development finance institutions Hope Moses-Ashike

T

he Nigeria ImportsExports Bank (NEXIM) has identified increased capitalisation of development finance institutions as a way of addressing the funding challenges of the non-oil sector of the economy.

Abubakar Bello, managing director of the bank, said this at the weekend at the annual Finance Correspondents Association of Nigeria (FICAN) in Lagos.

Funding, which includes volume/availability of export credits; high cost of funds; absence of medium/long-term funds since the export sector is perceived as high risk by the Deposit Money Banks (DMBs), and absence of innovative trade finance instruments, have contributed to the low level of growth of non-oil exports sector

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and its sub-optimal contribution to annual export revenues.

Other challenges include operation issues, policy constraints, quality standards, and logistics issues among others.

Nigeria’s non-oil export sector is currently characterised by a systemic decline in the contribution of total exports to GDP, dropping from 31.44 percent in 2012 to 18.44 percent and 10.63 percent in 2014 and 2015, respectively, before rising to 13.17 percent in 2017. The figures from 2014 to 2017 have been below the global average of exports to GDP of about 30 percent, according to World Bank data.

As part of efforts to address the key challenges of the non-oil export sector, Bello said NEXIM over the years had played significant role through its funding/risk-bearing intervention and other trade facilitation initiatives.

According to him, given the @Businessdayng

current production structure and resource endowment, Nigeria has the capacity to boost its non-oil economy and enhance its export revenues towards promoting sustainable, inclusive growth and development. This, he said, will however require concerted efforts by both the government and the private sector.

“I am of the view that some of these challenges should be seen as investment opportunities, which should be embraced by the private sector and promoted by the government through sustained policy instruments and incentives,” Bello said.

He recommended the development of Human Capital through increased funding to support education, particularly science and technology education as well as the promotion of research and development to enhance innovation and boost global competitiveness.

44

Monday 23 September 2019

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 20 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. 261,257.41 7.35 -1.34 274 9,763,359 UNITED BANK FOR AFRICA PLC 208,616.47 6.10 -2.40 224 15,216,431 ZENITH BANK PLC 587,114.43 18.70 -1.58 314 14,549,676 812 39,529,466 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 202,808.40 5.65 3.67 288 15,962,498 288 15,962,498 1,100 55,491,964 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,849,631.83 140.00 -0.36 31 3,175,128 31 3,175,128 31 3,175,128 BUILDING MATERIALS DANGOTE CEMENT PLC 2,641,278.65 155.00 -0.19 62 148,212 LAFARGE AFRICA PLC. 243,227.71 15.10 -1.63 59 637,109 121 785,321 121 785,321 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 270,684.50 460.00 - 4 3,108 4 3,108 4 3,108 1,256 59,455,521 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 - 7 56,080 7 56,080 7 56,080 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 7 56,080 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 52,417.35 54.95 - 25 81,935 PRESCO PLC 44,800.00 44.80 - 15 115,724 40 197,659 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,520.00 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,500.00 0.50 - 15 624,092 15 624,092 55 821,751 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 688.30 0.26 - 4 9,490 237.38 0.61 - 0 0 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 -0.95 57 9,151,019 U A C N PLC. 22,762.24 7.90 1.94 240 6,958,447 301 16,118,956 301 16,118,956 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 24,486.00 18.55 - 5 9,254 ROADS NIG PLC. 165.00 6.60 - 0 0 5 9,254 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 3,689.72 1.42 - 62 2,436,619 62 2,436,619 67 2,445,873 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 9,003.92 1.15 0.88 7 238,725 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 81,044.16 37.00 - 46 37,543 INTERNATIONAL BREWERIES PLC. 103,150.34 12.00 - 15 10,750 NIGERIAN BREW. PLC. 420,237.20 52.55 1.06 82 28,135,241 150 28,422,259 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 110,750.00 22.15 -1.12 96 2,532,231 DANGOTE SUGAR REFINERY PLC 132,600.00 11.05 4.74 109 1,488,373 FLOUR MILLS NIG. PLC. 57,405.31 14.00 2.19 46 762,596 HONEYWELL FLOUR MILL PLC 8,009.50 1.01 -1.94 22 476,961 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 5 5,199 NASCON ALLIED INDUSTRIES PLC 35,502.47 13.40 - 13 54,796 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 291 5,320,156 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 20,566.31 10.95 -6.01 18 104,038 NESTLE NIGERIA PLC. 959,193.33 1,210.10 0.83 62 2,099,777 80 2,203,815 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 5,366.12 4.29 - 15 392,714 15 392,714 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 27,991.86 7.05 - 48 331,805 UNILEVER NIGERIA PLC. 166,605.16 29.00 - 33 231,303 81 563,108 617 36,902,052 BANKING ECOBANK TRANSNATIONAL INCORPORATED 163,311.01 8.90 -1.11 59 2,645,271 FIDELITY BANK PLC 51,285.39 1.77 -1.12 51 2,105,324 GUARANTY TRUST BANK PLC. 853,504.20 29.00 -0.85 162 17,660,177 JAIZ BANK PLC 12,669.63 0.43 2.38 19 1,018,662 STERLING BANK PLC. 62,763.11 2.18 -0.91 49 3,886,971 UNION BANK NIG.PLC. 203,845.27 7.00 - 21 52,130 UNITY BANK PLC 7,948.75 0.68 7.94 9 309,503 WEMA BANK PLC. 23,144.68 0.60 -3.33 14 781,240 384 28,459,278 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 4,504.63 0.65 - 3 57,623 AXAMANSARD INSURANCE PLC 18,900.00 1.80 - 7 204,298 CONSOLIDATED HALLMARK INSURANCE PLC 2,682.90 0.33 - 1 870 CONTINENTAL REINSURANCE PLC 16,285.21 1.57 - 10 1,035,450 CORNERSTONE INSURANCE PLC 5,744.51 0.39 - 5 207,300 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. 2,050.56 0.28 -6.67 4 474,612 LAW UNION AND ROCK INS. PLC. 1,589.64 0.37 - 1 7,142 LINKAGE ASSURANCE PLC 4,480.00 0.56 - 0 0 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 5 570,000 NEM INSURANCE PLC 11,353.08 2.15 - 13 235,899 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 - 2 500,000 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 - 1 40,000 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,683.96 0.35 -5.41 69 9,279,930 122 12,614,124

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MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 2,858.30 1.25 - 2 2,990 2 2,990 MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 4,158.00 0.99 - 1 1,400 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 1 1,400 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 8,200.00 4.10 - 24 227,560 CUSTODIAN INVESTMENT PLC 35,291.19 6.00 - 7 13,475 DEAP CAPITAL MANAGEMENT & TRUST PLC 660.00 0.44 - 0 0 FCMB GROUP PLC. 33,466.58 1.69 0.60 48 825,348 ROYAL EXCHANGE PLC. 1,080.53 0.21 - 7 6,100 STANBIC IBTC HOLDINGS PLC 448,787.42 42.85 7.26 40 3,305,854 UNITED CAPITAL PLC 13,440.00 2.24 0.90 71 3,018,961 197 7,397,298 706 48,475,090 HEALTHCARE PROVIDERS EKOCORP PLC. 1,680.29 3.37 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 852.75 0.24 - 0 0 0 0 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 - 0 0 GLAXO SMITHKLINE CONSUMER NIG. PLC. 8,670.10 7.25 - 17 120,240 MAY & BAKER NIGERIA PLC. 3,450.47 2.00 - 6 144,655 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 835.63 0.44 - 3 25,146 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 0 0 26 290,041 26 290,041 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 745.92 0.21 - 1 500 1 500 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. 486.00 4.50 - 1 40,000 TRIPPLE GEE AND COMPANY PLC. 282.12 0.57 - 2 2,183 3 42,183 PROCESSING SYSTEMS CHAMS PLC 1,127.05 0.24 - 27 4,513,528 E-TRANZACT INTERNATIONAL PLC 9,996.00 2.38 - 1 30,500 28 4,544,028 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,065,435.95 283.50 - 9 9,086 9 9,086 41 4,595,797 BUILDING MATERIALS BERGER PAINTS PLC 2,173.68 7.50 - 6 8,880 CAP PLC 16,275.00 23.25 - 18 64,652 CEMENT CO. OF NORTH.NIG. PLC 218,182.12 16.60 - 15 121,255 MEYER PLC. 313.43 0.59 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,769.32 2.23 -9.72 1 100,000 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 40 294,787 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 2,747.66 1.56 9.86 35 786,832 35 786,832 PACKAGING/CONTAINERS BETA GLASS PLC. 29,873.33 59.75 - 0 0 GREIF NIGERIA PLC 388.02 9.10 - 0 0 0 0 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 75 1,081,619

CHEMICALS B.O.C. GASES PLC. 2,547.42 6.12 - 4 4,600 4 4,600 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 - 2 154,000 2 154,000 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 83.60 0.38 - 0 0 0 0 6 158,600

ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,315.17 0.21 5.00 21 1,671,084 21 1,671,084 INTEGRATED OIL AND GAS SERVICES OANDO PLC 49,725.65 4.00 4.17 57 1,153,830 57 1,153,830 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 56,974.05 158.00 - 31 24,120 CONOIL PLC 11,658.40 16.80 - 16 31,443 ETERNA PLC. 3,586.40 2.75 -8.33 16 150,004 FORTE OIL PLC. 20,839.70 16.00 - 52 135,030 MRS OIL NIGERIA PLC. 5,729.98 18.80 - 3 2,555 TOTAL NIGERIA PLC. 33,952.18 100.00 - 32 32,595 150 375,747 228 3,200,661 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. 317.62 0.27 - 2 50,000 2 50,000 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,387.46 4.05 - 5 6,890 TRANS-NATIONWIDE EXPRESS PLC. 328.19 0.70 - 3 409,268 8 416,158 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 2,452.98 1.18 - 4 47,500 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 0 0 TRANSCORP HOTELS PLC 41,042.18 5.40 - 6 238,237 10 285,737 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,800.00 0.40 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 211.68 0.35 - 1 800 LEARN AFRICA PLC 1,072.32 1.39 - 13 203,832 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 1 82,270 UNIVERSITY PRESS PLC. 496.12 1.15 9.52 9 210,136 24 497,038

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@Businessdayng

Monday 23 September 2019

BUSINESS DAY

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45

46

Monday 23 September 2019

BUSINESS DAY

news FMDQ depository....

Continued from page 1

ment and data, amongst other services.

An effective and fully-developed securities depository system is essential for maintaining and enhancing market efficiency, which is one of the core characteristics of a mature capital market, and the depository and attendant custodial service is one of the key ingredients of developed global markets.

Therefore, as a strategically-positioned CSD, FMDQ Depository will complement the clearing function discharged by FMDQ Clear by providing the requisite framework for collateral caching, asset servicing and settlement services in the Nigerian financial markets, offering market participants an unrivalled opportunity to experience enhanced straight-through-processing.

Specifically, FMDQ Depository is positioned to significantly reduce principal risks in the nation’s financial markets by linking securities and cash in a way that enhances delivery versus payment, thus facilitating seamless settlement finality.

Ahead of operationalising its business franchise, FMDQ Depository commenced leveraging on strategic partnerships and alliances formed by the FMDQ entities, whilst engaging its critical stakeholders, including regulators and market participants, across the value chain, on its operational readiness to implement value-added product and service offerings.

These engagements with stakeholders have culminated in the progressive support of the Central Bank of Nigeria (CBN), which has taken the lead in upgrading relevant guidelines – starting with the 2009 Guidelines on the Issuance and Treatment of Bankers’ Acceptances and Commercial Papers, which was revised 10 years after on September 11, 2019 – to ensure that market stakeholders have a choice of Nigerian

depositories, thereby further enhancing market efficiency in the markets.

It is envisaged that the SEC, following its registration of the depository, is also taking steps to upgrade its regulations to reflect the existence of another depository in the capital market landscape.

These changes will facilitate the interoperability between the two depositories in the country, thereby optimising freedom of choice and integrity of depository services, making the financial markets globally competitive and operationally excellent.

From its provision of data integrity and governance, innovative technology in operational processes and straight-through-processing via the FMDQ proprietary system, FMDQ Q-ex, FMDQ Depository has provisioned requisite structures to deliver a client-focused depository of choice, with excellent operational capabilities tailored to provide value-adding services to its stakeholders in the Nigerian financial market.

“With an overarching objective of making the Nigerian financial market globally competitive, operationally excellent, liquid and diverse, FMDQ, in collaboration with its members, regulators and other stakeholders, will continue to work hard to place Nigeria on the global financial market map despite the numerous challenges,” said Bola Onadele. Koko, managing director/chief executive officer, FMDQ Exchange.

The three SEC-registered FMDQ entities – FMDQ Exchange, FMDQ Clear and FMDQ Depository – make up Africa’s first verticallyintegrated financial market infrastructure group, providing a one-stop platform for the seamless listing, trading, clearing, settlement and recording of financial market transactions across the debt capital, equity capital, foreign exchange and derivatives markets.

Analysts back MPC’s call...

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in 2017, with figures climbing as much as 6,187.76 percent to N372.36 billion from N5.92 billion previously made in 2016, data from the CBN show.

The figure in 2017 accounts for 78.43 percent of all the total proceeds received by the Federal Government since 2009.

The government has made N474.76 billion in 10 years from privatisation proceeds, according to BusinessDay calculation of figures from the latest CBN statistical bulletin.

There were no proceeds from privatisation in Nigeria between 2013 and 2014, while the provisional figures for 2018, according to the apex bank, showed no receipt in the year.

Johnson Chukwu, managing director, Cowry Asset Management Limited, told BusinessDay by phone that inasmuch as he supports the idea of privatisation, the truth is that the sale of the idle assets is not the enduring solution to government revenue shortfalls. www.businessday.ng

L-R: Femi Williams, immediate past group managing director, Chams plc; Gavin Young, new group managing director, and Oscar Onyema, chief executive officer, Nigerian Stock Exchange (NSE), during a courtesy visit of Chams’ management to NSE in Lagos.

With world’s smallest budget, FG ...

Continued from page 1

GDP, according to data from the World Bank, which also suggests that Nigeria spends less than peers because it earns much less.

In 2018, the Nigerian government spent even less than in 2017 at 4 percent of GDP, the lowest since 2005.

In comparison, the South African government spent 21 percent of GDP, five times more than Nigeria, while MINT peers Mexico, Indonesia and Turkey spent 11.6 percent, 9 percent and 14.4 percent of GDP, respectively.Emerging markets with about the same population size as Nigeria also spent substantially more.

Pakistan and Brazil with populations of 216 million and 211 million spent 12.4 percent and 19.7 percent of GDP in 2018, respectively.

No country with available data on the World Bank’s website spent less than Nigeria in 2018. For a government that spends so little despite needing so much, there should be opportunities for private investment to fill the gap created by weak public spending.

For instance, the Africa Development Bank estimates that Nigeria needs $100 billion annually in infrastructure spend for the next 30 years to address a gaping deficit.

T h e g ov e r n m e n t h a s s p e nt n o t h i n g o n c a p i tal projects this year so far, according to a budget implementation report published by the budget office.

D espite the liquidity shortfall, opportunities to deploy private capital are scarce, with the government

unwilling to tap equity capital, choosing instead to hold on to redundant assets and borrow at a steep cost.

Nigeria’s attitude towards private capital is perfectly summed up by data that show the country has only managed to raise N5 billion (USD$16 million) in the last three years through 2018, according to data by the budget office.

“Even Saudi Arabia which spends more than 10 times the amount Nigeria spends annually is wrapping up plans to sell some stake in its oil company Saudi Aramco to raise equity,” a senior banking source who did not want to be named said.

“It’s unbelievable that t h e g ov e r n m e n t t h i n k s drip-feeding the economy is sustainable while private capital remains largely unlocked,” the source said.

There are also doubts that even if the government was willing to sell some of its assets, private investors would not balk at a deal with a government that has shown a penchant for consistently reneging on contracts.

It is the little importance attached to contracts that is costing the country’s power sector which has failed to take off despite 2013’s privatisation where the government sold $3 billion worth of power distribution and generating assets.

The power privatisation hasn’t managed to keep the lights on in Nigeria where incessant blackouts are taking a huge toll on households and businesses.

The bulk of the blame for that failure has been laid at the feet of the government which failed to abide by a promise made to investors at the time of purchase to

Nigeria drug makers lose...

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have moved from the formal market to either the informal or illegal market.

“There has been a surge in the purchase and consumption of home-made herbal products which are not cap-

tured in the data for pharma sales,” he told BusinessDay. Africa’s largest economy for almost four years has seen output growth below population levels, an affirmation of falling per capita income and increasing poverty.

Data obtained from the

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consistently review electricity tariffs to ensure they were market-reflective.

Unable to recoup the market price for power supply due to the government’s hesitance to review tariffs upward in line with current realities, investors in the sector have been dissuaded by colossal operational losses from making more investments.

That has left Nigeria wallowing with an average power generation of less than 4,000 megawatts, 10 percent of South Africa’s 40,000mw.

Another example where the government, whether at federal or state level, didn’t uphold promises made to private investors is in the case of Visionscape.

The waste management company had signed a deal with the Lagos State government to rid its street corners of festering waste but was kicked out less than three years into the agreement following the exit of then governor Akinwunmi Ambode, with its assets taken over by the government-backed LAWMA. “While it is likely that Visionscape was compensated, it doesn’t take away that the work done in setting up for full-fledged operations in Nigeria was a big waste of time and they must be disappointed,” an investor familiar with the matter said.

“These cases would make any investor think twice about investing in Nigeria but the government hasn’t even demonstrated the urge to make things right and attract some private money,” the investor said.

For the last time Nigeria successfully privatised an asset, one would have to go back 13 years to the $225 million sale of Port Harcourt-based olefins and

polyolefins maker, Eleme Petrochemical to Indorama Group, in 2006.

President Muhammadu Buhari, whom critics describe as a socialist with disdain for private capital, has been more interested in ramping up government interventions that scratch the surface at best. Latest data suggest the government is even too broke to spend the full amount of the pittance earmarked for such interventions.

In 2018, about N400 billion was spent on social interventions, lower than the N500 billion in the budget.

“It is clear that the only sustainable path to addressing our liquidity shortage and boosting the economy is by privatisation, and the NLNG model already provides a winning blueprint for how this can work,” said Ayodeji Ebo, managing director of investment bank, Afrinvest Securities.

These are hardly new counsels, but they have so often fallen on deaf ears. In cases where they have not, the government has hesitated on the back of pressure from Nigerians who threaten protests if the country’s assets were sold to private investors.

There is a misconception that privatisation is like selling off properties that will benefit only the rich and impoverish a generation of Nigerians to come.

“The expectation of many Nigerians is that their government should subsidise ever ything from food to power and petrol because it is rich,” Adedeji Faseun, a student of development economics at the University of Birmingham, said.

“They are so wrong to think the country is rich when in fact it is broke,” Faseun said.

International Monetary Fund (IMF) show that GDP per capita growth in Nigeria has been negative since 2015, declining at an average of -0.63 percent annually. Analysts say a fall in the standard of living makes the proliferation of fake drugs possible.

There is, however, a fair twist to this story as data

tracked by the Organisation for Economic Co-operation and Development, an intergovernmental economic organisation with 36 member countries, show that 58.5 percent of counterfeit and pirated products traded worldwide were sold to consumers who actually knew they were buying fake products.

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Wednesday 04 September 2019

BUSINESS DAY

news Mixed reactions greet return of ‘Nigeria Air’ project …Minister says it’s priority, but govt must get it right this time Stella Enenche, Abuja

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he proposed national carrier, Nigeria Air, has continued to dominate public discourse, with experts expressing divergent views on its viability or otherwise.

Though the last Federal Executive Council (FEC) had suspended the national carrier project, following complexities in the process that would have led to the final takeoff of the airline, but Minister of Aviation, Hadi Sirika, said recently that it remained a top priority for government.

“Nigeria is a traveling public. We have seen how this quarter alone, the aviation sector has grown by about 12.1 percent, and is the secondfastest growing industry in the country as of today” Sirika said recently on the project.

“We need a carrier that is equal to the Nigerian economy, because if we do not have any alternative, the other carriers have a field day,” he further argued.

According to him, “The carrier is on course, the outline, business case has been bought by the consultant and it is being looked at and implementation will begin soon.

“We will advertise and in-

vite people to come and partner in a PPP arrangement so that we can float the airline and I believe we will get it right this time around.

On the controversies that surrounded the announcement and eventual suspension, the minister said it was expected but that the ability to deal with those controversies is what matters.

He said at the time stakeholders were invited to discuss the well-thought out road map, and had adopted the road map, but because of elections and other exigencies, it was suspended so that this could be gotten right.

“The question is not how very quickly we get it but how very well.”

The federal government has not hidden its determination to pull through with the ambitious plan, and had allocated a whopping N47bn ($155m) take-off grant in the 2019 budget to it.

The “Nigerian Air” is being planned as a Public-Private Partnership (PPP) project, to be managed by a private operator without interference from the government. Government’s stake in the new national carrier will be no more than a 5% holding, authorities have proposed. The

remaining 95% will be owned by strategic investors and the general public.

A cross section of experts, who spoke with our correspondent, expressed different opinions about the economic value of the national carrier.

Some who do not see an immediate need for it, particularly recalled how the defunct Nigerian Airways collapsed 15 years ago, and a 2004 joint venture with billionaire Richard Branson, named Virgin Nigeria, shut down shortly after he pulled out five years later because of mismanagement.

In an interview with BusinessDay, Dung Pam, an aviation expert, said the new National Carrier amounts to an aberration for the federal government to conceive the idea, when number of private airlines were seen to be performing below expectations.

Rather than bringing this on board, the regulatory authorities should find a way of strengthening the private airlines’ capacities to function optimally, Pam suggests.

“This is an investment that has been made by more or less struggling Nigerian entrepreneurs. None of the airlines can we vouch for now, that is making profit at the moment.

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Monday 23 September 2019

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news Nigeria’s company income tax amongst highest in the world, says Oyedele Hope Moses-Ashike

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igeria has one of the highest company income tax rates globally, which is a disincentive for business growth, Tax Leader, PwC Nigeria, Taiwo Oyedele, has said.

He spoke on Saturday at the Finance Correspondents Association of Nigeria, FICAN annual workshop themed “Unlocking Opportunities in Nigeria’s Non-Oil Sector”.

According to Oyedele, Nigeria is in the top 10 in the world, for the highest income tax rate.

“We pay Company Income Tax, CIT 30%, education tax, 2%, whatever is left, we pay a withholding tax of 10%. If you add it together, it is more than 40% already.

If you now make a mistake of having a group and you say it’s a holding company, another 30%. Who does that?” he said.

Speaking further, he said: “When you start a business

today, there is something called commencement rule.

It is supposed to punish you during commencement, so that you pay tax twice. It does not make sense”.

To address this challenge, the tax expert advised that operators in the private sector should focus on demanding for the removal of some of these disincentives that affect business operations.

“What I keep saying to government is that I can insist that I have a pot that

is this small and I say I must get 60% of this pot by all means. Or I allow this pot to be big enough and then get 10% of it. The government must remove tax disincentives. One thing I am asking the business community is to stop asking the government for incentives because they will think they are doing you a favour. Ask them to remove the disincentives that are not allowing us to do business,” he said.

He also called on the authorities to change their

thinking about taxation as the current approach has only made compliance difficult.

“Our thinking around taxation is completely upside down as a country.

Nigeria does not seem to understand that you need to be prosperous so that you can pay taxes. So, tax does not just fall from heaven.”

“As a government, I should help you make money so that you can pay me tax. It’s just common sense.

Nigeria has a tax system that

Wema Bank opens bootcamp to support fintechs TEMITAYO AYETOTO

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ema Bank, Nigeria’s leading innovative bank, hosts a bootcamp focused on engaging fintech startups to develop solutions that will optimise service delivery in banking and finance.

The Hackaholics Bootcamp is a 10-week intensive programme designed to engage outstanding startups who participated at the Wema Bank hackathon to develop their ideas and make them into market-ready products or services. They will also be trained on global practices for lean startups which include user research and pivoting, customer journey mapping, among other solution-design thinking.

The bootcamp which kicked off on September 16, 2019 at the Wema Bank Codeville in Lagos will feature robust ideation and training sessions on product design and development facilitated by experts.

Trainers at the bootca mp – C hu b a Eze kw e sili, head of research and strategy and co-founder, Akanka; Iyin Aboyeji, cofounder, Flutterwave, Andela and founder, Street Capital; Joseph Agunbiade, co-founder BudgIT, founder, Univelcity, Getmobile Technologies Limited, and SmartED, and other experts – will take participating teams through extensive market research and predictive trend analysis to ensure they develop solutions that are relevant in an ever-changing market.

Participating teams will be equipped with different business model toolkits to develop a scalable marketready solution, a go-to-market strategy, branding and communications. They will also be equipped with skills on how to pitch to and win over investors.

“The path to growth in today’s world is through collaboration and competition within and outside your organisation,” Samuel Omotayo, Wema Bank’s head of innovation, said. www.businessday.ng

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does not allow businesses to thrive, whether you are small or big,” he added.

He noted that “the reason Nigeria cannot make money from tax, and is not a curse, is that it continues to beat up the people at the bottom of the ladder. But they cannot give you what they don’t have. In societies where they think things logically, they focus on the top 1% who are the rich and big companies and they will get the desired tax result,” he said.

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news Army launches new operation against ISWAP in Northeast Stella Enenche, Abuja

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he Nigerian Army theatre Command of Operation Lafiya Dole said it has launched “Operation Positive Identification” against the Islamic State West Africa Province (ISWAP) and Boko Haram terrorists in the Northeastern part of the country.

The operation has become necessary following credible information that some of the

fleeing criminals were hibernating in some towns and villages of Borno and Yobe States in particular, and North East in general, according to the army.

Consequently, the Nigerian army has advised the public to always carry valid means of identification when moving or passing through Adamawa, Borno and Yobe states.

In a statement by the Deputy Director Army Public Relations (OPLD), Colonel Isa

Ado, on Sunday, he said: “Our troops have been instructed to strictly check valid means of identification such as National Identification Card, Voters Registration Card, Drivers’ License and International Passports, or other valid official identification, before allowing such person passage.

“We therefore once again enjoin all to fully cooperate with troops and security agencies in carrying out this exercise.

The Theatre Command

also stated that anyone who was not positively identified would attract further scrutiny and comprehensive investigation to determine his or her activities with the insurgents or otherwise.

“The general public is please requested to bear with this measure as it is in their best interest and our national security, as well as efforts to end the madness called insurgency as perpetrated by the erstwhile Boko Haram/ISWAP fighters,” he concluded.

Nigeria to earn fresh $6.35bn in taxes, royalties via NNPC deal OLUSOLA BELLO & HARRISON EDEH, Abuja

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he reform push being embarked upon by the Management of the Nigerian National Petroleum Corporation (NNPC) to increase crude oil production and grow the nation’s revenu e profile is already yielding results, with the closure of $875.75m alternative financing deal for the Nigerian Petroleum Development Company (NPDC).

This deal, the corporation has said, is being operated by OML 65 through the Funding and Technical Services Agreement with CMES-OMS Petroleum Development Company (CPDC).

Ndu Ughamadu, the corporation’s spokesperson, said on Sunday in a statement that NNPC Chief Financial Officer, Umar Ajiya, disclosed that the project, which scope cuts across exploration, development, production and provision of facilities with incremental first oil targeted for Q4 2020, was estimated to have potential reserves of 800 million barrels of oil equivalent (mmboe) with an ultimate recoverable reserve of 244 mmboe and cumulative production of 44mmboe from the Abura Main and Abura SE fields.

Aj i y a e x p l a i n e d t hat over the project’s life, it was

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expected to generate over $6.35bn in taxes and royalties to the Federation to support Government’s medium to long-term economic development agenda.

Speaking at the closing meeting with the financing partners in Dubai, United Arab Emirates, Ajiya described the contractor financing model as an innovative approach by NPDC to funding its operations in response to the challenging economic environment, saying the approach would fast-track the development of NPDCs under-developed assets.

He informed that the project was expected to ramp

up production at OML 65 from 900barrels per day to 60, 000 barrels per day with average production over field life at 40,000 barrels per day.

Throwing more light on the financing strategy, the CFO explained that the package entailed a comprehensive financing solution that addresses the complex issues involved in growing NPDC’s production, minimizes its cost of capital, and maximizes its value preservation, adding that it also strikes a balance between risk and reward which gives investors a rate of return that is commensurate with funding a brownfield project which has significant exploration risk.

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Sujimoto celebrates fifth anniversary to the virtues of womanhood Segun Adams

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ujimoto Construction Company is set to celebrate its fifth anniversary, which according to the company’s CEO, Sijibomi Ogundele, is the celebration of womanhood and the appreciation of the outstanding works mothers.

According to Ogundele, it has been five years of resilience, perseverance, and growth that is also a resonance of the story of the woman behind what it takes to build a successful business – a mother like no other.

Ogundele notes, “I have always considered myself fortunate to have won an ovarian lottery by being born to a mother like mine. My mother, my number one mentor! A woman who at the age of just Nine was sent to Cameroon as a salesgirl but defied all odds and today, she is one of the biggest distributors for the Nestle Nigeria Plc. “For the past five years, every Sunday, I will visit my Mum, savor her delicious meal and gist about everything. In the course of our conversations, my Mum never ceases to drop one or two pieces of advice that can only be learned in an MBA classroom. She would say: “Suji, don’t employ 10 staffs if you can pay for only 4”. (HR Manage-

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ment) Don’t promise people 9 when you can only afford 5”.

(Corporate Integrity)” “My mother laid the foundation to the hardworking man I have become today. Her story serves as a simple reminder that gender is no hindrance to reaching greater heights”.

The celebration of fifth anniversarynniversary, according to Ogundele, is a reenactment of history from legendary Queen Amina; the 16th century warrior queen who became the leader in a Muslim male-dominated society, becoming one of the greatest Queens in Africa, to the Umu Ada and Oha Eshi societies, who fought for the rights of the women beyond the shores of the Igbo tribe, and the great Queen Moremi; who the Yoruba tribe will find difficult to forget for her incredible and courageous contributions to posterity; and more recently, Folorunsho Alakija; the richest black woman ever in history.

He also extols the virtues of younger women such as Linda Ikeji; the media mogul who turned a hobby into a money-spinning empire and many other women worldwide, constantly defying stereotypes and overcoming numerous obstacles to establish themselves in society.

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FINANCIAL TIMES

World Business Newspaper KIRAN STACEY IN WASHINGTON

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onald Trump is under growing pressure to reveal further details about his contacts with Volodymyr Zelensky, as Democrats accuse the US president of putting pressure on his Ukrainian counterpart to damage a political rival.

Mr Trump faces accusations that he improperly sought to persuade Mr Zelensky, the recently elected Ukrainian president, to open an investigation into the Ukrainian business dealings of Joe Biden’s son.

Mr Biden, former US vice-president, is currently the frontrunner in the race to challenge Mr Trump in next year’s election.

The complaint centres on a phone call on July 25 between Mr Trump and Mr Zelensky, during which Mr Trump is reported to have urged the Ukrainian president to work with his personal lawyer Rudy Giuliani to investigate Hunter Biden.

The US president on Sunday denied he had offered Mr Zelensky anything in return for investigating Mr Biden’s son, Hunter. “There was no quid pro quo,” he told reporters at the White House. “It was a warm and friendly conversation.”

Speaking ahead of a trip to Houston for a joint rally with Narendra Modi, India’s prime minister, Mr Trump said the call was instead focused on corruption, and “the fact that we don’t want our people, like vice-president Biden and his son, [adding] to the corruption already in the Ukraine”.

Mr Trump has also been accused of trying to use military aid as lever-

Trump denies offering incentive to Ukraine to look into Biden’s son

Senior Democrats suggest they could launch impeachment proceedings

© AP

age, with critics claiming he was slow to hand over $250m, which was approved by Congress in August, but only released by the White House last week.

Steven Mnuchin, the Treasury secretary, said on Sunday: “I can tell you that there was no connection [between the aid being delayed and

Mr Zelensky’s reported refusal to work with Mr Giuliani].”

As calls grow for the Pentagon to release details of a complaint by a whistleblower that the US president had made a “troubling” promise to Mr Zelensky, Democrats said the accusations might be the most serious

Mr Trump has faced.

Adam Schiff, the Democratic chair of the House intelligence committee, said on Sunday: “This seems different in kind [than previous accusations against the president].

We may have crossed the Rubicon.”

Elizabeth Warren, one of the

leading Democratic candidates for next year’s presidential election, told a campaign event on Saturday: “It is time to call out this illegal behaviour and start impeachment proceedings right now.”

Ms Warren this weekend overtook Mr Biden in the polls for Iowa, the first state to vote on the Democratic candidates. Mr Biden himself has said only that impeachment “could” happen.

The decision on whether to begin impeachment proceedings against the president rests solely with Nancy Pelosi, the speaker of the House. She has so far remained opposed to such a move, believing instead that the law should be changed so a sitting president can be tried in court.

The controversy is likely to intensify this week as Mr Trump meets Mr Zelensky during the UN General Assembly in New York.

Democrats have long been divided over whether to impeach the president over various accusations of wrongdoing, with party leaders warning that such a move could backfire if Republicans in the Senate vote to clear Mr Trump’s name.

The publication of the Mueller report earlier this year appeared to have swung the argument for those who have urged caution.

WeWork debacle spells end of private Brazil tries to refresh its image after Amazon fires company ‘glory days’, says Capital Group head Campaign to tout green credentials could be undercut by Bolsonaro’s clashes with Europe Tim Armour says WeWork’s aborted IPO signals the end of frothy valuations

ROBIN WIGGLESWORTH

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eWork’s aborted listing may herald the end of a “glory period” for amplyfunded private companies with lofty valuations as investors dissect their prospects more rigorously, according to the head of Capital Group, one of the world’s biggest asset managers.

There has been a spate of initial public offerings from high-profile, disruptive technology companies this year, but many have seen their private valuations come tumbling after listing on the stock market.

WeWork last week delayed its own IPO amid concerns over its big losses, corporate governance and eccentric chief executive and founder, Adam Neumann. The real estate company had been valued at $47bn in its last private investment round from backer SoftBank, but its investment bank advisers were forced to ratchet down their price estimates before finally deciding to shelve the listing last week.

Tim Armour, the chairman and

chief executive of Capital Group — the investment group with $1.8tn of assets in its American Funds range — said that WeWork’s aborted IPO was emblematic of an era of frothy private market valuations that could now be winding down.

“We have been through one of the glory periods for companies to remain private and get funding and do things without making money for a long period of time.

I question whether that will continue,” he said at the FT’s Future of Asset Management conference last week.

“Money was easy and they got funded, I hope it turns out to be a great business, but the reality is that the public markets scrutinise more at times,” he added.

Several high-profile Silicon Valley unicorns including Uber, Lyft and Spotify have seen their shares dip since going public in recent years. The stock of Slack, the messaging company, jumped 48 per cent when it started trading in June, but has slid 34 per cent since then, while Dropbox has trodden water. www.businessday.ng

BRYAN HARRIS IN WASHINGTON, ANDRES SCHIPANI IN BRASÍLIA, AND DAVID KEOHANE IN PARIS

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fter a month of controversy over its handling of fires that have ravaged the Amazon rainforest, Brazil’s rightwing government is trying to give its international image a reboot ahead of next week’s UN General Assembly.

The campaign, “Brazil by Brazil”, by the Calia Y2 Propaganda e Marketing agency, launched on Friday as the UN General Assembly got under way in New York. It has nationalist echoes and targets US and European audiences with messages on television and in newspapers, touting Brazil’s environmental regulations and the role of its agribusiness in feeding a large slice of the global population.

Brazil has had some of the world’s most stringent environmental regulations in place for decades, and many large farmers are engaged in sustainable practices to reduce environmental degradation. However, much of the controversy over the Amazon has been triggered by the pugnacious

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style of Brazil’s far-right leader, Jair Bolsonaro, who has developed an acrimonious relationship with some European leaders that has been exacerbated by an outcry over the Amazonian fires and rising deforestation.

Mr Bolsonaro, who will open the UN General Assembly next week, told Brazil’s Record TV that his speech in New York will “reaffirm the issue of our sovereignty”.

Otávio Rêgo Barros, his spokesman said his boss will deliver a “heartfelt speech” in which he will reject the notion “that Brazil does not take care of the Amazon, does not take care of the environment.”

But Brazil’s crucial agricultural sector has grown increasingly fearful about further boycotts of Brazilian produce by Western producers concerned about destruction of the world’s largest tropical rainforest. Earlier this month, H&M, the world’s secondbiggest fashion retailer, stopped purchasing leather from the Latin American nation, citing environmental concerns. The decision follows similar moves from shoe brands Vans and Timberland as well as outdoor clothing group The North Face.

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“We are losing the information war to movements that are interested in harming us,” said Soraya Thronicke, a senator with the conservative PSL party of Mr Bolsonaro.

After initially appearing to blame the fires on non-profit groups, Mr Bolsonaro accused European nations of infringing Brazil’s sovereignty by questioning his guardianship of the Amazon.

“The president’s rhetoric doesn’t help at all. It indeed hampers, but European leaders are using Brazil for their own political gains back home,” said a senior official in the Bolsonaro administration.

The Brazilian president’s highestprofile clash over the topic has been with his French counterpart, Emmanuel Macron. At the G7 meeting last month, Mr Macron offered a $20m aid package from G7 nations to extinguish the fires and then reforest and protect the rainforest.

Mr Bolsonaro slammed the offer as treating Brazil as a “colony.”

Things then got personal after Mr Bolsonaro echoed insults aimed at Mr Macron’s wife on Facebook.

“This is not the behaviour of a president,” Mr Macron charged back.

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NATIONAL NEWS

Democrats in a fever over universal healthcare pledges ‘Medicare for All’ proposal risks alienating moderates ahead of 2020 election LAUREN FEDOR IN WASHINGTON

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hile Democrats want the 2020 election to be a vote on Donald Trump’s presidency, so far the party’s presidential hopefuls have spent most of their time arguing over an issue that risks alienating voters.

The candidates’ televised debates have been dominated by sharp disagreements over whether “Medicare for All” — a phrase coined by Vermont senator Bernie Sanders — is the best way to reform the expensive and inefficient US healthcare system.

US census figures published last week showed that the number of uninsured Americans rose for the first time in almost a decade in 2018, to 27.5m. But while most Democrats agree that all Americans should have access to healthcare, the debate over how to achieve that has confused voters. It has also given the Republicans a fresh opportunity to argue that the Democratic party is moving dangerously to the left.

“The Democrats want to make [2020] a referendum on Trump,” said Kyle Kondik, managing editor of the non-partisan Sabato’s Crystal Ball at the University of Virginia’s Center for Politics.

“These proposals give Republicans a chance to make this election more about a choice.”

Mr Sanders, 78, a self-described Democratic socialist, has spent much of his career campaigning for the US to adopt a universal, government-sponsored healthcare system, similar to Canada’s. His current plan is driven in part by polling that shows the overwhelming popularity of Medicare, a US federal government programme that provides health insurance to pensioners and some younger people with disabilities.

But his promise to expand Medicare over four years, effectivelyeliminating private health insurance, would cost more than $3tn a year, doubling annual federal spending and resulting in tax increases for many Americans.

Mr Sanders argues that families’ healthcare costs would go down, as he would end out-ofpocket expenses — including “co-payments” for doctor visits and “deductibles” that need to be paid before insurance kicks in — and cap prescription costs at $200 a year.

Elizabeth Warren, the senator from Massachusetts, has largely endorsed Mr Sanders’ plan. But other candidates, most notably former vice-president Joe Biden, have attacked the proposals, saying they are too expensive and would eliminate choice for voters — around half of Americans

have private health insurance through their employers.

Mr Biden has instead called for an expansion of the Affordable Care Act, the sweeping 2010 legislation that expanded government assistance for people on low incomes and forbade insurers from denying care to people with pre-existing medical conditions. After Mr Trump was elected, the Republicans sought to repeal the ACA, but the efforts were stymied in the Senate, when then-Republican senator John McCain voted against the measure.

A graphic with no description Mr Biden has proposed introducing a government-run “public option” healthcare plan to compete with private insurers — a proposal that Barack Obama abandoned as politically too difficult.

Other candidates have offered proposals that fall somewhere between Mr Sanders’ and Mr Biden’s plans, but which play on the Medicare for All moniker. Kamala Harris, the senator from California, would expand Medicare but maintain a role for private insurers under her “Medicare for All” plan. Pete Buttigieg, the mayor of South Bend, Indiana, would build on the ACA with “Medicare for All Who Want It”. Beto O’Rourke, the former congressman from Texas, would maintain a role for both the public and private sectors with “Medicare for America”.

Most US voters are confused.

The latest poll from the independent Kaiser Family Foundation found that 55 per cent of Democrats and independents who lean Democratic would prefer a presidential candidate who would build on the ACA, compared to around 40 per cent who want it replaced it with Medicare for All. But the survey also found that less than half of Democrats think there are differences between Medicare for All, and a government-run public option.

Liz Hamel, director of public opinion and survey research at the Kaiser Family Foundation, said that at a time of rising medical and prescription drug costs, Democratic voters “really do care about healthcare,” but most “don’t really care how you get there”.

“Your average voter just wants to see those costs and those prices come down,” she added.

“They want relief.”

Ms Hamel said support for Medicare for All was “very malleable” depending on the messages voters receive. People are more likely to back the concept if they are told it will provide universal healthcare coverage for all Americans. But support wanes if they learn that private health insurance would be eliminated. www.businessday.ng

© Bloomberg

Elliott prepares for downturn with new funding round

Paul Singer’s activist fund is building up a war chest as it expects market disruption ORTENCA ALIAJ AND LINDSAY FORTADO IN NEW YORK

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lliott Management, one of the most zealous shareholder activists on Wall Street, is going back to investors for more money just two years after the hedge fund raised $5bn in one day as it prepares for a market downturn.

The $38.3bn activist fund led by Paul Singer has been building up a sizeable war chest to spend on new opportunities, including a $2bn co-investment fund that closed in August to take companies private.

Elliott could raise a further $5bn in the new funding round, according to an investor familiar with the terms. The hedge fund is using a drawdown structure that will feed into the main fund, an arrangement that is often used by private equity firms but has become more popular among activists.

In a drawdown structure, investors who agree to commit cash to the fund do not have to front up capital immediately. Instead their investment is called over time as opportunities are identified and no fees are charged until the money is put to work.

Elliott used the same structure when it raised money two years ago to position itself for market disruption. In a 2017 letter to investors, Mr Singer said the firm wanted to raise funds before investor liquidity dried up.

An investor who allocated more than $100m to Elliott in the 2017 fundraising called drawdown structures “problematic” and “restrictive”. Allocators had to make sure they could meet their commitments when they were called or face paying a hefty fee, he said.

However, many investors were willing to give up liquidity to get early access to well-known managers, he conceded.

The new capital raising is further indication that Mr Singer is anticipating a market meltdown.

The billionaire investor, who has been vocal about complacency in global financial markets, recently predicted that the economy was headed for a significant downturn with risk at an all-time high.

“The global financial system is very much toward the risky end of the spectrum in terms of debt,” Mr Singer said during a panel at the Aspen Ideas Festival in July.

“Global debt is at an all-time high, derivatives are at an all-time high and it took all of this monetary ease to get to where we are today”.

Mr Singer has proven he can play the long game after battling Argentina for more than a decade over its defaulted debt. Elliott struck a deal with reformist president Mauricio Macri in 2016 and collected some $2.4bn from the country, putting an end to a 15-year long legal fight.

France doubts it will hit target to rebuild Notre-Dame in 5 years Culture minister is latest to question target set by Macron after cathedral blaze VICTOR MALLET AND HANNAH COPELAND IN PARIS

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rench authorities have questioned President Emmanuel Macron’s ambitious plan to rebuild Notre-Dame in Paris within five years following the fire in April that destroyed the roof and severely damaged the structure of the medieval cathedral.

The latest to cast doubt on the target was Franck Riester, French culture minister, who said in an interview published at the weekend that there had been complications at the site during emergency repairs and that the hope now was to have the cathedral open to the public within five years while restoration continued.

“The most important thing is the quality of the restoration and of the project,” he told the newspaper

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Le Parisien. “It must be done in a reasonable time.”

Mr Riester added: “We’re not focused on a timetable. Our aim is five years, but there’s no countdown.

The president never asks me when the work will begin. I’m not being put under pressure and there is no obsession.”

Despite experts predicting it could take decades to complete the work, Mr Macron made a televised address to the nation the day after the fire in which he declared: “We will rebuild the cathedral of Notre-Dame and make it even more beautiful than before and I want this to be completed within five years . . . We can do it, and we will mobilise to do it.”

Philippe Villeneuve, the architect in charge of the restoration, has been more cautious. He said: “In @Businessdayng

five years, we can rebuild the vaults and the roof, and reopen the church to both worshippers and public. But not much more.”

Urgent work is expected to continue into next year to stabilise the walls with wooden supports, remove the twisted and partially melted scaffolding that was in place for an earlier restoration programme at the time of the fire, and erect a temporary roof to protect the building. Only then will decisions be made about how to restore NotreDame for posterity.

Not everyone regards the fivetarget as impossible, however.

André Finot, the cathedral’s communications director who once attended services as an altar-boy and was at the building on the night of the fire, said: “It can be done in five years. That’s my point of view.

Monday 23 September 2019

BUSINESS DAY

57

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Europe’s private banks hit by worst year since crisis Earnings in 2018 tumble 8% due to higher costs and weak investor inflows CHRIS FLOOD

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rofits for European private banks dropped by the most since the global financial crisis last year as muted investor inflows, weakness in financial markets and rising costs combined to reduce earnings.

Selling banking services and investment products to the growing number of millionaires has long provided the banking industry’s most lucrative profit stream.

However, profits across western Europe’s €6tn private banking sector fell 8 per cent to €13.5bn in 2018 from the record €15.4bn registered the previous year, according to a survey by McKinsey, the consultancy.

Private banks in western Europe underperformed their US and Asian peers where preliminary data suggest profits increased about 5 per cent last year.

Sid Azad, a partner at McKinsey, said the fall in profits in Europe, the second annual decline in the past three years, emphasised the need for a “fundamental transformation” of processes and systems.

“Private banks will need to reconfigure their business model to operate in a market with weaker asset growth and decreasing profit margins,” he said.

Just under a third of the 113 banks surveyed by McKinsey registered net client withdrawals, compared with a quarter in 2017.

Switzerland and Monaco, two important markets, have seen no growth in client inflows overall during the five years to 2018.

A failure to control rising costs has proved an intractable problem for private banks in Europe. Cost inflation in the front office — in-

vestment management, sales and marketing expenses — has been rising by about 4 per cent annually over the past five years. Back-office costs have also swollen in spite of investments in technology and efforts to automate processes.

Mr Azad said cost control problems could become “substantially worse” unless banks took quick action.

McKinsey suggested that small and midsized players could cut costs by working together to create a platform for back-office functions, such as know-your-client due diligence.

Mergers and acquisitions among smaller banks could also create more effective competitors to larger rivals.

Private banking in western Europe is highly fragmented and small and midsized players face the biggest challenges as larger rivals have proved more successful in attracting business.

Mr Azad said developments in the quality of services offered to private banking clients had lagged behind improvements made by other industries. Greater use of advanced analytics could help relationship managers to deliver higher quality “bespoke experiences” to clients.

Private banks should also either find partners in private equity and other alternative investments or build these capabilities internally given rising client demand for these strategies.

Exploring alternative partnerships and adapting to issues, such as environmental, governance and social considerations, could help private banks become “better entrenched” in their clients’ lives, said Mr Azad.

Jeremy Corbyn dismisses talk he is stepping down Labour party leadership accused of ‘lack of professionalism’ as head of policy quits JIM PICKARD, CHIEF POLITICAL CORRESPONDENT

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eremy Corbyn has dismissed rumours he could soon step down as Labour leader as “wishful thinking” after the party’s head of policy resigned, delivering a withering private broadside against the “lack of professionalism” in the leadership of Britain’s main opposition party.

Sunday newspapers reported that the 70-year-old veteran leftwinger was “ready to pack it in” because of the huge pressure of leading a major political party. Senior figures in the shadow cabinet are understood to be lining up for a potential leadership race in the coming months.

But Mr Corbyn, speaking at the start of Labour’s annual conference in Brighton, said he had carried out 40 public engagements in August alone all over the UK and insisted he wanted to win an election to end austerity. Asked if he intended to be prime minister

for an entire five-year term, he told the BBC’s Andrew Marr Show: “Of course. Why wouldn’t I?” One senior ally of Mr Corbyn told the Financial Times that he had considered quitting earlier in the year but was now re-energised by the prospect of an imminent election.

Mr Corbyn’s comments came after Andrew Fisher, the head of policy, announced on Saturday evening that he was leaving. He has long been considered one of the most loyal and discreet aides to Mr Corbyn, and his departure comes as a bombshell at a time when Labour is already flailing in the opinion polls.

Mr Fisher, a former policy officer at the PCS union, pulled together the Labour manifesto in the 2017 election which was widely credited with gaining the party seats. His decision to leave will raise speculation about morale at the heart of the Labour leadership amid growing questions about the future of Mr Corbyn. www.businessday.ng

Adam Neumann, co-founder and CEO of WeWork, attends the opening bell ceremony at Nasdaq, Tuesday, January 16, 2018, in New York. © AP

SoftBank moves to oust Neumann as WeWork chief executive Board meeting to demote founder of property group could be called as early as next week ERIC PLATT AND ANDREW EDGECLIFFEJOHNSON IN NEW YORK

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oftBank has lost faith in Adam Neumann’s ability to lead WeWork and is expected to call for a board meeting to demote him as early as this week, after the lossmaking property group shelved its initial public offering and the chief executive’s volatile behaviour and drug use came to light.

Mr Neumann’s outsized influence over the company has become one of the biggest hurdles in the path of a multibillion-dollar IPO, according to investors and people briefed on the matter.

SoftBank’s vice-chairman Ron Fischer sits on the WeWork board, as does Mark Schwartz, a former board member at the Japanese telecoms-to-technology group. It was unclear, however, whether a majority of the board members believed Mr Neumann should step down as chief execu-

tive.

The board could decide against changing the CEO role in the end, these people cautioned, and either rally around Mr Neumann or hire a new executive chairman to oversee the company’s management.

WeWork declined to comment.

Any attempt to oust Mr Neumann could backfire. Mr Neumann’s shares carry 10 times the voting rights of other investors and he has the ability to replace a number of the members on the board. Three of the seven board members were appointed by WeWork investors, including the SoftBank Vision Fund, Benchmark Capital and Hony Capital.

Opposition from SoftBank, in particular, could complicate Mr Neumann’s position and would represent a striking rift in a relationship the CEO has credited with having driven the company’s ambitions. Masayoshi Son’s Japanese group has been the largest single investor

in WeWork to date, pumping nearly $11bn into the group, and remains a potential future source of private capital amid public market scepticism.

Any change to Mr Neumann’s role would mark another volteface on WeWork’s corporate governance. When the company first published documentation for its planned initial public offering, it said Mr Neumann’s shares would carry 20 times the votes of ordinary shares, his wife would have a say in picking his successor should he die, and WeWork’s board would include no women.

Investor hostility forced the company to reverse each of those plans, cutting Mr Neumann’s voting rights to 10 times, removing his wife from succession decisions and adding Frances Frei, a former Uber director, to the board.

The Wall Street Journal reported earlier on Sunday that some WeWork board members were pushing Mr Neumann to step down.

New York Fed rejects Wall St criticism of response to repo turmoil Willingness and preparedness in responding to situation called into question JOE RENNISON AND BRENDAN GREELEY IN NEW YORK

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arket confidence in the Federal Reserve Bank of New York and its leader, John Williams, remains on shaky ground, after its initial response to the breakdown of a vital short-term lending market last week compounded simmering tensions.

The cost of borrowing cash overnight in exchange for US Treasuries in the repo market — crucial for banks and investors seeking to cover short-term funding needs — quadrupled to

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a high of 10 per cent on Tuesday, prompting the New York Fed to inject cash into the financial system to calm the turmoil.

Mr Williams and Lorie Logan, senior vice-president in the markets group, told the Financial Times that the decision to step in on Tuesday was planned and had the desired effect, with repo rates falling back down to more normal levels by the end of the week.

The main criticism from several bankers, traders and analysts, though, is that the New York Fed should have stepped in to support the market sooner, as repo rates rose on Monday. This was especially so given some stress @Businessdayng

was expected, due to corporate tax payments and Treasury settlements draining cash from the market, even if the extent of the turmoil was not.

“I think they were slow in reacting,” said Seth Carpenter, chief US economist at UBS. “They knew this could be an issue and they should have had everything lined up ready to go on Monday.”

The people added that the New York Fed had gone some way to restoring confidence by the end of the week, following further daily cash injections. This was capped by a sweeping announcement on Friday to lend billions of dollars over the end of the quart.

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Monday 23 September 2019

BUSINESS DAY

FT

ANALYSIS

America to send weapons and troops to Saudi Arabia Donald Trump orders ‘defensive’ deployment to boost air defences following Riyadh request DEMETRI SEVASTOPULO IN WASHINGTON, NAJMEH BOZORGMEHR IN TEHRAN AND MICHAEL PEEL IN BRUSSELS

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he Pentagon is preparing to send weapons and hundreds of troops to Saudi Arabia to help the nation boost its military defences following the alleged Iranian attack last weekend that knocked out half of the kingdom’s crude oil production.

General Joe Dunford, chairman of the joint chiefs, and Mark Esper, defence secretary, said Donald Trump ordered the deployments after requests from Saudi Arabia and the United Arab Emirates.

Mr Esper said they would be “defensive in nature, and primarily focused on air and missile defence”. One official said the troops would only be sent to Saudi Arabia.

Earlier on Friday Mr Trump put new sanctions on Iran’s central bank in response to the attacks in Saudi Arabia, which have deepened the crisis that has escalated between Washington and Tehran in the 16 months since Mr Trump withdrew from the 2015 nuclear deal.

Mr Trump also hinted that he was wary of taking military action against Iran, while warning Tehran not to become complacent and underestimate the US. “The thing that does show strength would be showing a little bit of restraint,” Mr Trump said,

before adding: “Iran knows that if they misbehave, they are on borrowed time.”

Speaking alongside Australian prime minister Scott Morrison, the US president rejected criticisms that he was being weak: “Going into Iran would be a very easy decision . . . most people thought I would go in within two seconds . . . I’m showing great restraint.”

Nancy Pelosi, the Democratic speaker of the House, on Saturday condemned the White House move, noting that Congress had passed a bipartisan resolution over the summer to block arms sales to the Saudis and the UAE. “Once again, President Trump is turning a blind eye to Saudi Arabia’s continued violence against innocent Yemenis, as well as its horrific murder of journalist Jamal Khashoggi and its gross abuses of human rights, which represent a moral and humanitarian crisis.

The United States cannot enable more brutality and bloodshed.”

Mr Esper said the attack on the oil facilities had not originated from Yemen — as Iranian-backed Houthi rebels in that country claimed — and that the weapons included drones and cruise missiles.

“The weapons used in the attack were Iranian produced, and were not launched from Yemen,” the defence secretary said. “All indications are that Iran was responsible for the attack.”

Google claims to have reached quantum supremacy Researchers say their quantum computer has calculated an impossible problem for ordinary machines MADHUMITA MURGIA AND RICHARD WATERS

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oogle claims to have built the first quantum computer that can carry out calculations beyond the ability of today’s most powerful supercomputers, a landmark moment that has been hotly anticipated by researchers.

A paper by Google’s researchers seen by the FT, that was briefly posted earlier this week on a Nasa website before being removed, claimed that their processor was able to perform a calculation in three minutes and 20 seconds that would take today’s most advanced classical computer, known as Summit, approximately 10,000 years.

The researchers said this meant the “quantum supremacy”, when quantum computers carry out calculations that had previously been impossible, had been achieved.

“This dramatic speed-up relative to all known classical algorithms provides an experimental realisation of quantum supremacy on a computational task and heralds the advent of a much-anticipated computing paradigm,” the authors wrote.

“To our knowledge, this experiment marks the first computation that can only be performed on a quantum processor.”

The system can only perform

a single, highly technical calculation, according to the researchers, and the use of quantum machines to solve practical problems is still years away.

But the Google researchers called it “a milestone towards fullscale quantum computing”. They also predicted that the power of quantum machines would expand at a “double exponential rate”, compared to the exponential rate of Moore’s Law, which has driven advances in silicon chips in the first era of computing.

While prototypes of so-called quantum computers do exist, developed by companies ranging from IBM to start-ups such as Rigetti Computing, they can only perform the same tasks classical computers can, albeit quicker.

Quantum computers, if they can be built at scale, will harness properties that extend beyond the limits of classical physics to offer exponential gains in computing power.

A November 2018 report by the Boston Consulting Group said they could “change the game in such fields as cryptography and chemistry (and thus material science, agriculture and pharmaceuticals) not to mention artificial intelligence and machine learning . . . logistics, manufacturing, finance and energy”. www.businessday.ng

Fed chair Jerome Powell had euphemistically remarked that there were ‘disparate perspectives’ on the committee © AP

Is the Federal Reserve making a mistake on inflation?

Upside and downside both have risks and the FOMC is split on the way forward GAVYN DAVIES

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here was broad support, or at least acquiescence, on the Federal Open Market Committee for last week’s decision to cut policy rates by 0.25 per cent. Nevertheless, policymakers are clearly divided on the general direction of rates from now on. In his press conference, Jay Powell, Federal Reserve chairman, euphemistically remarked that there were “disparate perspectives” on the committee.

There seems to be a small plurality for further “insurance cuts”, probably including the leadership, but there is also mounting discontent about the extent and duration of the easing cycle that is now under way.

The split in the FOMC between hawks and doves is no doubt driven by many factors, but one of the main underlying differences concerns the amount of inflation risk that participants are willing to take in the late stage of the economic cycle.

The more hawkish camp believes that, with unemployment well below the natural rate, there will be further — if gradual — rises in wage inflation. These, they believe, will inevitably feed eventually into higher price inflation — a development that may already be under way, given successive upside surprises in monthly consumer price index reports during the summer.

Underpinning these conclusions is a belief that the Phillips curve, which relates wage

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inflation to unemployment and expected price inflation, is still alive and kicking. Harvard University’s Gregory Mankiw recently reminded the Fed that this curve has always represented “the single most important macroeconomic relationship”.

Everyone accepts that the impact of low unemployment rates on wage inflation has been substantially damped in the past two or three decades, but there is very strong resistance among the FOMC hawks, and the Fed’s mainstream economic staff, to any suggestion that it has disappeared altogether.

Furthermore, the hawkish group believes that the dampening or flattening of the Phillips curve would prove very problematic for monetary policy if inflation was allowed to rise too far above target.

This is because the “sacrifice ratio”, in the form of the extra unemployment that would be needed to get inflation back down, is greater when the curve is flatter.

Hence, any inflation mistake on the upside would be more painful to correct. This makes the hawks reluctant to do more than a couple of rate cuts, seen as a midcourse correction, at the present stage of the cycle.

Why do the doves disagree with these arguments? They would deny that the recent CPI reports represent a significant change in inflation pressure. Mr Powell, an obvious dove by nature, ignored these data points entirely last week. He emphasised, quite rightly, that inflation expectations in the bond market are at the lower end of their historic range, a wor@Businessdayng

rying development.

He also repeated his belief that, in a world where interest rates are constrained by the zero lower bound, the central bank should stand ready to act aggressively if it thinks the economy is worsening.

When asked if the Fed might shift rates into negative territory in an economic downturn, following the pattern in other countries, Mr Powell poured cold water on that idea. That means the FOMC would be able to cut rates by only 187 basis points in a recession (ie from 1.875 per cent to zero). This would be much less than half the easing that has been needed in previous US economic downturns.

Viewed in a global context, the lack of monetary ammunition becomes even more stark. Policy rates in Europe and Japan are already very close to their effective lower bounds for rates.

I calculate that the global average for policy rates in the advanced economies as a group, weighted by nominal gross domestic product, could be cut by only about 110bp in a recession before the central banks reach their different lower limits. This shows how close the rest of the global economy is to the limits of monetary policy, which places enormous responsibility on the Fed. While there are inflation risks in both directions, the consequences of allowing deflationary forces to take control are particularly severe. The doves, led by Mr Powell, may not be in a clear majority on the FOMC, but they will probably get their way when the crunch comes.

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Monday 23 September 2019

BUSINESS DAY

FT

FINANCIAL TIMES

World Business Newspaper KIRAN STACEY IN WASHINGTON

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onald Trump is under growing pressure to reveal further details about his contacts with Volodymyr Zelensky, as Democrats accuse the US president of putting pressure on his Ukrainian counterpart to damage a political rival.

Mr Trump faces accusations that he improperly sought to persuade Mr Zelensky, the recently elected Ukrainian president, to open an investigation into the Ukrainian business dealings of Joe Biden’s son.

Mr Biden, former US vice-president, is currently the frontrunner in the race to challenge Mr Trump in next year’s election.

The complaint centres on a phone call on July 25 between Mr Trump and Mr Zelensky, during which Mr Trump is reported to have urged the Ukrainian president to work with his personal lawyer Rudy Giuliani to investigate Hunter Biden.

The US president on Sunday denied he had offered Mr Zelensky anything in return for investigating Mr Biden’s son, Hunter. “There was no quid pro quo,” he told reporters at the White House. “It was a warm and friendly conversation.”

Speaking ahead of a trip to Houston for a joint rally with Narendra Modi, India’s prime minister, Mr Trump said the call was instead focused on corruption, and “the fact that we don’t want our people, like vice-president Biden and his son, [adding] to the corruption already in the Ukraine”.

Mr Trump has also been accused of trying to use military aid as lever-

Trump denies offering incentive to Ukraine to look into Biden’s son

Senior Democrats suggest they could launch impeachment proceedings

© AP

age, with critics claiming he was slow to hand over $250m, which was approved by Congress in August, but only released by the White House last week.

Steven Mnuchin, the Treasury secretary, said on Sunday: “I can tell you that there was no connection [between the aid being delayed and

Mr Zelensky’s reported refusal to work with Mr Giuliani].”

As calls grow for the Pentagon to release details of a complaint by a whistleblower that the US president had made a “troubling” promise to Mr Zelensky, Democrats said the accusations might be the most serious

Mr Trump has faced.

Adam Schiff, the Democratic chair of the House intelligence committee, said on Sunday: “This seems different in kind [than previous accusations against the president].

We may have crossed the Rubicon.”

Elizabeth Warren, one of the

leading Democratic candidates for next year’s presidential election, told a campaign event on Saturday: “It is time to call out this illegal behaviour and start impeachment proceedings right now.”

Ms Warren this weekend overtook Mr Biden in the polls for Iowa, the first state to vote on the Democratic candidates. Mr Biden himself has said only that impeachment “could” happen.

The decision on whether to begin impeachment proceedings against the president rests solely with Nancy Pelosi, the speaker of the House. She has so far remained opposed to such a move, believing instead that the law should be changed so a sitting president can be tried in court.

The controversy is likely to intensify this week as Mr Trump meets Mr Zelensky during the UN General Assembly in New York.

Democrats have long been divided over whether to impeach the president over various accusations of wrongdoing, with party leaders warning that such a move could backfire if Republicans in the Senate vote to clear Mr Trump’s name.

The publication of the Mueller report earlier this year appeared to have swung the argument for those who have urged caution.

WeWork debacle spells end of private Brazil tries to refresh its image after Amazon fires company ‘glory days’, says Capital Group head Campaign to tout green credentials could be undercut by Bolsonaro’s clashes with Europe Tim Armour says WeWork’s aborted IPO signals the end of frothy valuations

ROBIN WIGGLESWORTH

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eWork’s aborted listing may herald the end of a “glory period” for amplyfunded private companies with lofty valuations as investors dissect their prospects more rigorously, according to the head of Capital Group, one of the world’s biggest asset managers.

There has been a spate of initial public offerings from high-profile, disruptive technology companies this year, but many have seen their private valuations come tumbling after listing on the stock market.

WeWork last week delayed its own IPO amid concerns over its big losses, corporate governance and eccentric chief executive and founder, Adam Neumann. The real estate company had been valued at $47bn in its last private investment round from backer SoftBank, but its investment bank advisers were forced to ratchet down their price estimates before finally deciding to shelve the listing last week.

Tim Armour, the chairman and

chief executive of Capital Group — the investment group with $1.8tn of assets in its American Funds range — said that WeWork’s aborted IPO was emblematic of an era of frothy private market valuations that could now be winding down.

“We have been through one of the glory periods for companies to remain private and get funding and do things without making money for a long period of time.

I question whether that will continue,” he said at the FT’s Future of Asset Management conference last week.

“Money was easy and they got funded, I hope it turns out to be a great business, but the reality is that the public markets scrutinise more at times,” he added.

Several high-profile Silicon Valley unicorns including Uber, Lyft and Spotify have seen their shares dip since going public in recent years. The stock of Slack, the messaging company, jumped 48 per cent when it started trading in June, but has slid 34 per cent since then, while Dropbox has trodden water. www.businessday.ng

BRYAN HARRIS IN WASHINGTON, ANDRES SCHIPANI IN BRASÍLIA, AND DAVID KEOHANE IN PARIS

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fter a month of controversy over its handling of fires that have ravaged the Amazon rainforest, Brazil’s rightwing government is trying to give its international image a reboot ahead of next week’s UN General Assembly.

The campaign, “Brazil by Brazil”, by the Calia Y2 Propaganda e Marketing agency, launched on Friday as the UN General Assembly got under way in New York. It has nationalist echoes and targets US and European audiences with messages on television and in newspapers, touting Brazil’s environmental regulations and the role of its agribusiness in feeding a large slice of the global population.

Brazil has had some of the world’s most stringent environmental regulations in place for decades, and many large farmers are engaged in sustainable practices to reduce environmental degradation. However, much of the controversy over the Amazon has been triggered by the pugnacious

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style of Brazil’s far-right leader, Jair Bolsonaro, who has developed an acrimonious relationship with some European leaders that has been exacerbated by an outcry over the Amazonian fires and rising deforestation.

Mr Bolsonaro, who will open the UN General Assembly next week, told Brazil’s Record TV that his speech in New York will “reaffirm the issue of our sovereignty”.

Otávio Rêgo Barros, his spokesman said his boss will deliver a “heartfelt speech” in which he will reject the notion “that Brazil does not take care of the Amazon, does not take care of the environment.”

But Brazil’s crucial agricultural sector has grown increasingly fearful about further boycotts of Brazilian produce by Western producers concerned about destruction of the world’s largest tropical rainforest. Earlier this month, H&M, the world’s secondbiggest fashion retailer, stopped purchasing leather from the Latin American nation, citing environmental concerns. The decision follows similar moves from shoe brands Vans and Timberland as well as outdoor clothing group The North Face.

@Businessdayng

“We are losing the information war to movements that are interested in harming us,” said Soraya Thronicke, a senator with the conservative PSL party of Mr Bolsonaro.

After initially appearing to blame the fires on non-profit groups, Mr Bolsonaro accused European nations of infringing Brazil’s sovereignty by questioning his guardianship of the Amazon.

“The president’s rhetoric doesn’t help at all. It indeed hampers, but European leaders are using Brazil for their own political gains back home,” said a senior official in the Bolsonaro administration.

The Brazilian president’s highestprofile clash over the topic has been with his French counterpart, Emmanuel Macron. At the G7 meeting last month, Mr Macron offered a $20m aid package from G7 nations to extinguish the fires and then reforest and protect the rainforest.

Mr Bolsonaro slammed the offer as treating Brazil as a “colony.”

Things then got personal after Mr Bolsonaro echoed insults aimed at Mr Macron’s wife on Facebook.

“This is not the behaviour of a president,” Mr Macron charged back.

Company IN FOCUS

BUSINESS DAY Monday 23 September 2019 www.businessday.ng

Stanbic IBTC Holdings: Three decades of consistent value delivery ISRAEL ODUBOLA & OLUFIKAYO OWOEYE

S

Overview tanbic IBTC Holdings Plc, subsidiary of South Africa’s Standard Bank Group, has undergone several transformations in the last three decades and has evolved into a full-fledged financial services provider with nine subsidiaries across banking, pension, stockbroking, and financial advisory and two other indirect subsidiaries.

The history of the holding financial institution dates back to Investment Banking & Trust Company Limited which was established in February 1989 with Nigerian business mogul Peterside Atedo as pioneer chief executive.

Following the introduction of universal banking and a regulatory requirement for financial institutions to have a N25 billion minimum capital base, IBTC merged with Chartered Bank PLC and Regent Bank PLC in 2005 to become IBTC Chartered Bank PLC, which effectively transformed it into a universal bank.

Two years later in 2007, IBTC Chartered Bank PLC merged with the Nigerian subsidiary of Standard Bank Group Limited, to become Stanbic IBTC Bank PLC. The reforms in the Nigerian financial system, which led to the review of the Universal Banking Policy of the Central Bank of Nigeria and the introduction of a holding company model, led to the adoption of a HoldCo structure by Stanbic IBTC in 2012 to retain its noncore banking businesses.

Stanbic IBTC Holding is currently Nigeria’s third most-capitalized lender on the Nigerian Stock Exchange with a market value of some N418 billion behind Guaranty Trust Bank (N860bn) and Zenith Bank (N596bn). The bank has been consistent in delivering returns in the form of dividends to shareholders, capital appreciation and bonuses.

The company has reiterated commitment to ensuring sustainable value delivery to shareholders. According to a press statement by group’s chief executive Yinka Sanni, “We remain committed to operating at the highest level of corporate governance standards while delivering long-term loan growth to clients and stakeholders.”

Management Team After laying a solid foundation for good corporate governance, Peterside Atedo in 2017, resigned as board chairman.

The mantle of leadership fell on Basil Omiyi, a former Managing Director and subsequently

Source: Company’s Analyst Presentation Report

Country Chairman of Shell Petroleum Development Company of Nigeria Limited.

Yinka Sanni is the Chief Executive of Stanbic IBTC Holdings haven previously served as the Chief Executive at Stanbic IBTC Bank and IBTC Pension Managers Limited (IBTC Pensions). Yinka has a B.Agric.

(Hons.), Agricultural Economics from the University of Nigeria, Nsukka, an MBA from the Obafemi Awolowo University (Great Ife) and has gone through the Harvard Business School’s Advanced Management Programme.

Other executive directors include Adekunle Adedeji currently the Chief Financial Officer of the Stanbic IBTC Group., has over 23 year’s post-graduation experience, with over 20 years in the banking sector.

Before his appointment, he has served as Chief Financial Officer of Stanbic Ghana from May 2013 to March 2018.

Fabian Ajogwu, a Senior Advocate of Nigeria, and Professor of Corporate Governance at the Lagos Business School is a non-executive director while Salamatu Suleiman sits on the board as an independent nonexecutive director In May 2018, its parent company Stanbic Africa Holdings Limited, acquired an additional 1.14billion ordinary shares in Stanbic IBTC Holdings PLC in an off-market transaction, bringing the total percentage shareholding of Stanbic Africa Holdings Limited in Stanbic IBTC to 64.44percent from 53.09percent.

Resilience amid headwinds The group delivered N36.2

billion post-tax profit in the first half of 2019, which is 12 percent less than N43.1 billion posted in the preceding comparable period. The decline in bottomline is partly caused by a mild decline in net interest income and slim growth of non-interest income.

The group’s one percent increase in interest income from N59. 9 billion to N60.8 billion couldn’t save net interest income from shedding two percent as interest expense jumped 9 percent to N21.5 billion midyear 2019 from N19.8 billion.

Net interest income dropped

”

The company remains committed to operating at the highest level of corporate governance standards while delivering long-term loan growth to clients and stakeholders

to N39.3 billion in the review period from N40.2 billion a year before as major drivers asset yields tanked to 12.8 percent from 15.2 percent, and cost of funds rose to 5.2 percent from 4 percent. The bank attributed its increased cost of funds to higher funding to finance asset books, saying it will continue to take deliberate actions to substitute expensive term deposits with cheaper deposit liabilities.

As a result net interest margin, a metric that tracks how well a company is making investment decisions by comparing income, expenses, and debt, fell to 4.9 percent half-year 2019 from 5.9 percent last year on liquidity squeeze and reduced financial investment portfolio as a result of excess cash reserve assets.

The groups’ non-interest income grew a mere 2 percent to N54.9 billion in the review period from N53.8 billion last year, driven by a 10 percent increase in trading income and 10 percent growth in other revenue, which offset the impact of a 2 percent decline in net fees and commission.

Gross loan portfolio of the group increased some 5 percent to N479.7 billion in the first half of 2019. A look at the numbers showed that the local currency component of the loan jumped from 53 percent to 61 percent while the foreign part reduced to 39 percent from 47 percent.

Meanwhile, customer deposits declined 14 percent to print N693.5 billion in the review period from N807.7 billion fullyear 2018 due to release of expensive term and call products.

However, the loan-to-deposit ratio for half-year 2019 stood at

51.75 percent, which is 9 percent lower than the 60 percent threshold of Nigeria’s Central Bank.

The lender recorded improved asset quality in the period as bad loans halved to N18.8 billion mid-year 2019 from N37.7 billion last year, even as NPL ratio trended lower to 3.9 percent within CBN’s five percent threshold.

A look at its NPL numbers showed that the company is exposed majorly to transportation and agriculture sectors of the economy.

Stanbic IBTC amid tough regulator The apex bank as part of its regulatory functions imposed a heavy fine totaling N5.87bn on four banks and also directed the teleco-giant, MTN, to refund $8.1bn relating to the remittance of foreign exchange based on certain “irregular” capital importation certificates issued to MTN Nigeria Communications Limited. Out of this amount imposed on four banks, Stanbic IBTC directed to refund N1.886bn.

Also recently, after several years of legal battle, the Supreme Court delivered a judgment between the bank and Longterm Global Capital and Patrick Akinkuotu and ordered the bank to pay the sum of N2.5bn Bullish on full-year outlook For Nigeria’s economic and political environment, the company expects moderate economic growth, stability in crude production and relative peace in the Niger Delta region, Brent to hover around $60 per barrel, headline inflation for the year to print at 11 percent and accretion in external reserves.

Stanbic IBTC Holding company says it would focus on cost-efficiency, improved risk asset quality, loan growth, growing low-cost deposits, improving customer experience and digitalization, but risks to performance centers on low-cost deposit growth, regulatory intervention, and competitive asset pricing.

For the banking industry, management envisages interest rates to hover around 12 to 14 percent, naira stability, pressured net interest margins, relatively tight liquidity regime, heightened regulation to drive loan growth, better digital efficiency and relative improvement in asset quality.

It expects NPL ratio to remain below 5 percent in 2019, net interest margin to hover between 4 -5 percent; cost-to-income to fall between 50 – 55 percent; return on equity to print between 25 -30 percent and loan growth of at most 15 percent.

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