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MAY 23, 2016

From left: Chairperson, NASCON Allied Industries Limited, Yemisi Ayeni (Mrs); Outgoing Chairman, NASCON Allied Industries Limited, Aliko Dangote; Managing Director, NASCON Allied Industries Limited, and Paul Farrer at the 2015 Annual General Meeting of NASCON Allied Industries Limited, held in Lagos. Photo: Kehinde Gbadamosi

How NSE’s N1trn market capitalisation bid flopped By PETER EGWUATU

resh facts have emerged why the Nigerian Stock Exchange, NSE rescinded its N1 trillion market capitalisation target by 2016. Lack of liquidity , low capacity building, unfavourable economic policies have been adduced as major constraints militating against the growth of the market in the past fours years. Vanguard’s investigation reveals that after four years that the guidelines for securities lending, short selling were introduced by the NSE to boost market activities and

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in turn increase market capitalisation, capital market operators are yet to execute transactions from these products, a situation they attributed to lack of liquidity, capacity building, unfavourable economic policies, among others. Securities lending is one of the products initiative introduced by the Nigerian Stock Exchange that was expected to boost the amount of money that is quickly available for investment spending and in turn boost market capitalisation to the level of N1 trillion mark by 2016. Securities lending is the market practice of temporarily transferring securities, for a fee, from their holder

(the lender) to another party (the borrower), with the borrower agreeing to return the securities to the lender either on demand or at the end of the agreed loan time. This practice usually requires the borrower to back the transaction with cash or other valuables equal to or greater than that of the lent securities, in order to protect the lender against counterpart credit risk. Securities lending plays an important role in capital markets by providing liquidity, which in turn reduces the cost of trading and promotes price discovery. It will be recalled that the Securities and Exchange Commission, SEC appointed Stanbic IBTC, UBA, Capital

Bancorp and First Bank as securitieslending agents in 2012 and since then no transaction has been executed. For short selling, it is the practice of selling securities that the seller does not currently own, and subsequently repurchasing them (“covering”). If a broker has sold securities short, it must borrow those securities in order to fulfil its settlement obligation in the securities settlement system. The short-seller hopes to profit from a decline in the price of the assets between their sale and their repurchase, as, in that scenario, the seller will pay less to buy the assets than it received when selling them. On the other hand, the short-seller will incur a loss if the price of the assets rises, as it will have to buy them at a higher price than it sold them. There is no theoretical limit to the loss that a short seller can incur. Short selling is a legitimate trading strategy on the floor of the Nigerian Stock Exchange, provided that, prior to initiating a trade on a security, that security has been borrowed and is in the account of the seller. Naked short selling – the practice of selling shares a broker does not own without borrowing them or making arrangements to borrow them – is banned for all participants in the NSE. In an exclusive chat with Vanguard, Managing Director, Highcap Securities Limited, Mr. David Adonri said: ”Lack of liquidity and knowledge base are the major constraints militating against the implementation of these products in our market. There is no liquidity in the market and the awareness of these products has not spread. In advanced economies, these products help to move the market as investors are highly educated. So, government has a big role to play in terms of educating the investing public. Once there is demand for the products, I believe the operators in the market will execute transactions. "Also, liquidity is another key factor; local investors like to keep securities for long. How would such people lend to people that requires the shares. So, we need a lot of education so that the local investors will know that it is better to sell securities than to keep them for long term purposes." Speaking as well, Executive Director, Valueline Securities & Investment Limited, Mr. Erem. O Erem said: “The Continues on page 18

18 — Vanguard, MONDAY, MAY 23, 2016

Cover

How to start a business with little or no funding

WORLD AIS DAY - From left: Capt. Dere Ore, Aviation Expert; Mr. Matthew Pwajok, Representative of MD, NAMA; Capt. William Inyang, Chief Pilot, Medview Airline receiving the Award of Excellence For Medview Airline's Contribution to AIS and President, Aeronautical Information Services Association of Nigeria (AISAN), Mr. Sarafa Babatunde Shittu during the 2016 World AIS day on Management of Aeronautical Information; A Prerequisite To Safe Air Navigation at NCAA Annex, Ikeja Lagos. Photo Lamidi Bamidele.

How NSE's N1 trn market capitalisation bid flopped Continued from page 17 Nigerian capital market is suffering from lack of liquidity and inconsistent government policies that have been affecting the growth of the market. If there is no liquidity, how do you think there will be securities lending, market making, short selling among others. So, the market requires enough liquidity for these kinds of advanced products to take place in the country. Another major problem is education, as lack of knowledge of these products by local investors has made it difficult for market to grow. Even when some of the operators are knowledgeable about the products, the investors are lagging behind. It is the investors that will initiate demand for the products, while operators will execute them. So there is need for government to intervene in this regard by educating Nigerians about these products.” The Chairman, Association of Stockbroking Houses of Nigeria, ASHON, Mr. Emeka Madubuike said: “Lack of enlightenment about securities lending and short selling is a major constraint to the development of these products. It is the investors that will demand for the products before the market will key in. Another problem is liquidity. If there is no liquidity these products will not fly. Asset Management Corporation AMCON has many shares. If they can offload them, there will be shares in the market for investors to trade. Also, the operating environment has been unfavourable to quoted entities and other capital market operators. The monetary policy is not helping matters and this C M Y K

affecting our market. The foreign investors are ready to come to our market but government’s policies are scaring them away. For securities lending to be active in Nigeria, government must do a lot in terms of educating the masses. There should be massive enlightenment from government and complemented by the private sector.” The General Manager, Operations, Central Securities Clearing System (CSCS) Limited, Mr. Joseph Mekiliuwa, in a chat with Vanguard said: “I think the problem we are having in Nigeria on these products is lack of awareness. They are sophisticated products and that is why African Securities Exchange Association, ASEA th organised its 5 seminar themed: 'Building African Financial Markets ( BAFM) Capacity Building' in Nigeria, being the first time that such seminar is hosted outside South Africa. South Africa is the only market in Africa where

The market requires enough liquidity for these kinds of advanced products to take place in the country

securities lending is in operation. In Nigeria, the NSE has come out with the guidelines and it is now left for operators to key in. I believe after this seminar and with more enlightenment we would begin to see some of these products take off.” The Head, Investor Services (West Africa) Stanbic IBTC, Mr Segun Sanni in his remark said “There are benefits in securities lending. To the lenders, there is additional income from investment portfolios and also market liquidity by increasing the number of potential sellers and buyers in the market. To the borrowers, the market making without having to carry inventory; failed trade protection (covered short selling ); additional income; market liquidity by increasing the number of potential sellers and buyers in the market and hedging against volatility. He stressed that the market will be better for it as liquidity will be enhanced by increasing the number of potential sellers and buyers; there will be price discovery, which will lead to efficient pricing and market depth. Also the market will be more competitive. Sani said that securities lending is very important to market development, noting “Sometime in the early 1990s the G-30 recommended securities lending in order to reduce the high rates of trading “fails” that were discouraging cross border investors and rendering domestic capital markets illiquid and prone to paralysis.” According to him, “G-30 urges regulators to take down regulatory and taxation barriers Continues on page 19

o you tried everything and entails a lot of sacrifice in your asked everyone, but personal life and tightening the nobody offered you a loan? Well, belt. Once you have set a do not despair; others have deadline to launch your started businesses in similar business, you have to learn to circumstances. Starting a live on less and put money aside business without outside to help you fund the business. funding is known as 2. Back yourself bootstrapping. In bootstrapping, An entrepreneur who is not the entrepreneur uses his or her willing to invest his own money personal savings, overdraft, or into his business does not bond on their home. Most well- believe in himself. Once you can known successful business invest your own resources into entrepreneurs like Bill Gates the business, you can expect (Microsoft), Michael Dell (Dell support from close relatives and computers), and Richard friends who believe in you and Branson adopted a combination know the amount of money you of personal bootstrapping plans have pumped into the business, to start- off their businesses. To which is a clear indication of obtain maximum result, you your commitment to make the need to use a combination of business succeed. bootstrapping options to 3. DIY (Do – It- Yourself) leverage every opportunity An entrepreneur at the startinstead of focusing on one up must endeavour to be jack option. There’s is no uniform of- all –trades. Although you “Start- up” fee for building a may have your own specialty it business, so different businesses does not matter when you add will have different needs. It’s some other works to your important to first estimate how business, after all, the more you much you need before you start do, the less you need to pay finding alternative methods to someone else. This can help you fund your business. There are save some money and get the two main parts of starting a business off the ground. The business with less: Lowering entrepreneur and the your costs or Increase your management team at the startavailable capital from outside up stage must train themselves source. These have three to do most of the work instead of options, but I will discuss one. outsourcing. Reduce your needs: your first 4. Work in Parallel option is to change your At the start-up stage of your business model to demand fewer business, you can sell your time needs. For example, if you were to raise some money while you planning on starting a company are building your business from of personal trainer, you could the income generated from the reduce your “employee” consulting work. expenses by being the sole 5. Keep the End in Mind “employee” at the start. Unless Although consulting can you need office space, you can generate some money for a startwork from home. up business, there is a possibility You can do your home- work of over dependence and to find cheaper sources of forgetting the big picture of suppliers or even cut out the developing your own brand. entire product lines that are too This means the entrepreneur expensive to produce at the can become greedy and caught outset. up in a circle of generating The following money outside of tactics will help the business, with you start your f e w e r business with opportunities, than minimal capital: selling from within To obtain maximum result, the business. SIX TACTICS the latter you need to use a Although FOR STARTING will take time and A BUSINESS combination of needs a long-term WITH NO/ bootstrapping mentality, the M I N I M A L options to rewards could be CAPITAL greater. leverage every 1.Break the opportunity Focus on cashG o l d e n flow. Cash is the instead of Handcuffs king, queen, and The reality is that focusing on one prince of every starting a business option business.

Vanguard, MONDAY, MAY 23, 2016 — 19

inister of Information, Lai Mohammed last week said that Nigeria is broke. He spoke to State House correspondents at the end of the Federal Executive Council (FEC) meeting in Abuja. He said the Federal Government took a painful decision by increasing the pump price of petrol from N86.50 to N145 per litre. According to him, the current problem is not about subsidy removal but a result of dwindling income of the government. He said: “The current problem is not really about subsidy removal. It is that Nigeria is broke. Pure Nigeria is indeed on financial demand and simple! is therefore “It is like somebody who has life support machine if you substantial. The CBN is not been earning N100,000 a like. This government should the principal source of foreign month and he is faced with a have told the nation the whole exchange. Autonomous situation where his employer truth. Nigeria is broke, please sources provided $4.08 billion says henceforth, you will be understand and bear with the in January, compared with earning N10,000 a month. He government. The average CBN’s $1.30bn, and would would need to make some very Nigerian would have listened. have included remittances of Nigerians can see for about $1.80bn as well as oil painful decisions and some very painful adjustments. That themselves how the slide in exports generated by the is the situation with Nigeria the oil price has brutally private sector. exposed Nigeria’s Achilles today. Comments last week by Vice“A few months ago, we were heels. Foreign exchange President Yemi Osinbajo, and earning as much as $100 for inflows at the CBN in January the announcement by the every barrel of crude. In the amounted to just $1.30 billion, NNPC of a new authorised months of February and which represented a year-on- price band for sales of petrol/ March, we were short of…so, year decline of 46.7 per cent. gasoline, have fuelled we no longer have the Skeptics of this administration speculation that a devaluation resources, the foreign could point out that the oil of the naira exchange rate exchange to bring in refined price has recovered above the may be coming. fuel products. And our $38 budget bench mark to Most Nigerians do not economy is shrinking. We about $48/b but Nigerians realise the nation has been appreciate the fact that the must understand that sabotage living in The Matrix. This decision is going to affect and disruption in the Niger- subsidy removal is perhaps Delta have picked up to a level the red pill that may wake everybody. “We appreciate what we are not seen since the period Nigerians up to reality. going through, but Nigerians preceding the Yar ’Adua Nigeria is poor. It is broke. should also know that the amnesty. Oil industry sources Nigeria has been raped, government has the have said that Nigeria's output pillaged, looted and left for responsibility at times to take is at the moment as low as 1.40 dead. very difficult decisions. So, it mbpd. Whichever data is used, All these years, the nation’s is not always about it has become obvious why economy has been sustained access to foreign exchange on the junk food of corruption popularity.” Lai Mohammed was only has become problematic and and Nigeria had kwashiorkor stating the obvious. This why the CBN is selling no but because it looked chubby, fundamental truth was not told more than $200m per week at Nigerians thought the nation to Nigerians from the very the official rate. was healthy. Nigerians were While foreign exchange busy throwing money around. beginning. This is what Lai Mohammed and his supply has crashed with the Those who had political principals should have told oil price since mid-2014, godfathers and had access Nigerians before the hike in demand has not eased. The were renting two bedrooms in the pump price of petrol. gap between supply and Abuja for N700 million.

Welcome to the reality: Nigeria is broke Houses were springing up around the country from the proceeds of corruption. It was unbelievable that make-up artistes were charging N500, 000 and pre-wedding photo shoots were going for N700, 000. Aso ebi for wedding, naming or burial ceremonies were sold for N90, 000. These Nigerians were busy buying Rolex watches and Ferraris. Range Rover Sport was everywhere you turn to in Lagos, Abuja and Port Harcourt. To these sudden wealthy people, the items were like Keke Napep. Little did they know that it is all fake life. The perception of a wealthy nation was all a mirage. Nigerians have all been living off the spoils of corruption. That’s why the country seems so hard and difficult now that nobody has access to free money anymore. There is at the moment no money circulating because there is none to steal and rent flats and shops for girlfriends. There is no more money for civil servants to steal to pay bogus tithes of N500, 000 to unsuspecting churches and take an equally bogus title from traditional rulers. There is no money for Nigerian lawmakers to spray in dollars at their daughters’ weddings; for Lagos big boys to spend N2 million every Friday night at

nightclubs. It’s time for Nigerians to face reality. The party is over. Buhari must deregulate completely the oil sector whether labour likes it or not. CBN must not back down on its foreign exchange policy. It must not reverse itself on the 41 items denied access to foreign exchange. It is time for Nigerians to learn the hard way. It is time to see the real Nigeria and Nigerians. Now that money budgeted will go into our roads and bridges and hospitals, there will be economic progress. Such budgetary allocations will now benefit those who do not have a rich corrupt uncle with connections in oil and gas. Those who cannot travel to Dubai to celebrate birthdays will do so here in Nigeria. Those who do not know what Coldstone ice cream tastes like will benefit from government programmes. Now is the time for those who have stolen Nigeria’s money to invest in real estate and reap the benefit of corruption. Hopefully, the real estate markets will crash. The thieves with 15 houses in Abuja will be forced to sell them fast for cash. It would, however, be better if EFCC seized and auctioned them. All those in the service industry will have to reevaluate their pricing. You cannot charge 500,000 to paint faces anymore; free money is gone for ever. Nigerians welcome to the real world.

Cover Continued from page 18 that inhibit securities lending. This was so well embraced that throughout the 1990’s, countries like Japan, Australia, UK, Switzerland , Italy, France etc acted to remove the barriers. From the beginning in the 1990’s in Europe, the total repo and securities lending transactions settled on the Euroclear settlement platform amounted to 95 trillion Euro for the year 2000. It is our hope that African countries, like Nigeria will key into these products.” In this development, he said “Securities lending is crucial to the growth and liquidity of our markets, just as lending is essential to a functional banking system.” Meanwhile, the NSE in its securities lending guidelines stated that the Nigerian capital market has a reputation for the C M Y K

How NSE's N1 trn market capitalisation bid flopped professionalism of the firms that participate in it and their employees. All participants in the securities lending market have a common interest in maintaining this reputation. They also have a common interest in ensuring that the securities lending market operates in a sound and orderly manner. To achieve these aims it is essential that firms and their staff adopt prudent practices, act at all times with integrity, and observe the highest standards of market conduct. It further stated: “Participants should possess requisite skills and act with due care and diligence. Staff should be properly trained in the practices of the securities lending market

and be familiar with these guidelines. Participants must accept responsibility for actions of their staff. Market professionals should pay particular attention to ensuring fair treatment for and between clients who are not market professionals where conflict of interest cannot be avoided. Participants in the securities lending market should at all times treat the names of parties to transactions as confidential to the parties involved." The guideline sated: “In order for the benefits of the securities lending market to accrue generally to market participants, it is essential that securities lending activity does not distort the market either in

borrowing/lending or in the securities themselves. To this end, participants in the securities lending market must not in any circumstances enter into any transactions or holding arrangements designed to limit the availability of a specific security or with the intention of creating a false or distorted market in the underlying securities." For Preliminary Issues, the guideline states, “Where relevant, participants should ensure that they have appropriate prior authority from the beneficial owners of the securities, or from a party suitably authorized by the beneficial owners, for the security to be lent. All participants should ensure

that there are no legal obstacles to their undertaking securities borrowing and lending transactions and that, where necessary they have all relevant permissions from the regulatory authorities. They should become familiar with the rules, procedures and conventions of the market in which they will operate in order to fully comprehend the business and its associated risk. Participants should ensure that they have established and fully understood their tax position in relation to securities lending transactions. Such transactions should be carried out in accordance with the relevant market and tax regulations.”

20 — Vanguard, MONDAY, MAY 23, 2016

Business & Economy

Economic downturn: Experts task advertisers on budget cut By PRINCEWILL EKWUJURU

dvertisers in the country have been advised not to cut down their advertising budget during periods of difficult economic climate. Lampe Omoyele, a brand research and consumerism expert, gave the advice at the maiden edition of Advertisers’ Association of Nigeria, ADVAN Marketers Conference in Lagos. Lampe who is also the Managing Director of The Nielsen West Africa, a brands and marketing research company, urged that brands should not succumb to the pressure of cutting down their marketing budgets despite internal and external economic crunches because they will ultimately make more gains after the dust had settled. Presenting a paper on ‘Consumer Confidence Trends and Engagement’, Lampe observed that since the third quarter of 2015, consumer confidence in the economy has dipped significantly, and dropped further in the first quarter of 2016 due to nagging issues like devaluation, foreign exchange crisis, high inflation, budget delay and many others. He also stated that his company’s research showed there was a general decline in job prospects and a reduced willingness to spend by most consumers. He explains that most households now use scale of preference on their expenditures and are consistently cutting down on what they spend. Lampe also noted that, as expected, the sector that has had been the worst hit was the Fast Moving Consumer Goods, FMCGs, which is usually a major indicator for consumer confidence in any country. Most of the companies in the FMCG, he said, have reported losses. On the other hand, Alcoholic beverage brands, Telco brands and nonalcoholic beverage brands have all recorded some growth despite the drop in consumer confidence. C M Y K

PRESS CONFERENCE - From left: GMD/CEO, Access Bank Plc, Herbert Wigwe; Chairman, Institute of Human Virology, Nigeria (IHVN), Professor Emeritus Umaru Shehu; CEO, Dangote Foundation, Zouera Youssoufou; Chief Executive Officer, IHVN, Dr Patrick Dakum and Executive Director, Personal Banking, Access Bank Plc, Victor Etuokwu, at a press conference on the proposed N5bn fund raising for the International Research Center of Excellence by IHVN in Lagos

Current economic woes negatively affecting MFBs — Operators By MICHAEL EBOH

perators of microfinance banks in Nigeria have lamented the current economic situation in the country, stating that if the Federal Government fails to take urgent steps in strengthening the economy, many businesses would fail and microfinance banks would be negatively affected. Speaking at the second edition of the Nigerian Microfinance Platform in Abuja, Chairman, Board of Directors, NPF Microfinance Bank Plc, Mr. Joel Udah, stated that the worrisome state of economic growth and high level of poverty is one of the challenges hindering financial inclusion which is a major platform of microfinance banks. He added that the current economic challenges had brought about a low propensity to save among low income earners and the active poor, who constitute majority of the country’s population.

Also speaking, Mrs. Nwanna Joel-Ezeugo, Chief Risk Control and Compliance Officer, Accion Microfinance Bank, said due to the tough operating economic conditions and foreign exchange policy of the government, businesses are finding it very difficult to cope. She blamed the development on the inconsistent policies of the Federal Government which, she said, is stifling businesses.

She said, “Microfinance banks actually deal with people at the bottom of the pyramid and I must tell you that the economic situation is not funny. Initially, I thought it was ACCION that was only affected, but from the meeting we had yesterday, where all the managing directors of the Nigerian Microfinance Platform attended, it was the same complain.

FG plans agro-dealers network to ensure availability of farm inputs

he Federal Government says it is working towards developing agrodealers network across the country to ensure that fertilisers and other inputs are available and accessible to farmers all year-round. Chief Audu Ogbeh, the Minister of Agriculture and Rural Development, stated this in

Abuja at the 2nd Annual West African Fertiliser Stakeholders’ Forum. “It is one of the current government’s aspirations to empower these agro-dealers to function independently in making fertilisers and other agroinputs accessible to farmers always. “We want to develop agro-

NAHCO invests N1.4bn on infrastructure By FAVOUR NNABUGWU

“The real people in the market are actually finding it very difficult to cope because they are so many inconsistent government policies that are not enabling them to actually run their businesses the way they used to. Of course, if they are having issues, automatically, it would affect their ability to operate effectively with microfinance banks. “The foreign exchange policy is a major issue. The reason being that in the middle of last year, the CBN came up with a list of activities that can be accessed through the official exchange rate. And we know Nigeria has so far been an import dependent economy. When that policy came up, a lot of people were taken away from their jobs and businesses. “And of course, even the increase in the exchange rate, those that can access official rate, the funds are not available at the CBN, because of the drop in the price of oil and declining reserves. At the end of the day, you find out that either way, the economy is not favourable to the people in the market.” She called on the Federal Government to churn out concrete economic blueprint that would help point out the direction of the country ’s economy, stating that “If everyone knows the direction we are heading, we will begin to strategise on how to get there. But where there is no clear cut policy, these inconsistencies will kill more people and throw a lot

he Nigerian Aviation Handling Company (NAHCO) has invested N1.4 billion to upgrade infrastructure and equipment after privatisation ten years ago, its Managing Director, Mr. Nobert Bielderman has said. Bielderman who led a delegation on a visit to the Acting Director-General of the Bureau of Public Enterprises (BPE), Dr. Vincent Onome Akpotaire in Abuja, said that NAHCO was poised to sustain its position as a leading success story of the privatisation and reform programme of the Federal Government. “NAHCO has since its privatisation in 2006, invested N1.4 billion to upgrade its

infrastructure.” The NAHCO boss said that having grown NAHCO’s revenue base from N3.5 billion to N8.5 billion in the last six years, the enterprise was determined to sustain the tempo, despite the current economic downturn. He added that the investments made in the acquisition of new equipment, human capacity development and good corporate governance would enhance optimal service delivery and shore up the company’s revenue base. According to him, the company which was privatised through a public offer in 2006 and promptly listed on the Nigerian Stock Exchange (NSE) has recorded favourable profit margin for shareholders above the 50 kobo share price before privatisation.

dealers network in the rural communities where majority of our farmers reside to access these inputs without much stress.” The minister said that the country hosted the African Fertiliser Summit in June 2006 and proposed a number of actions for boosting fertiliser production and usage in Nigeria and the rest of the subregion. He listed the actions to include: development of a favourable policy framework for full private sector investment in the fertiliser industry, quality control and monitoring mechanism to regulate the sector. “The summit also proposed to protect the interests of investors and farmers, specific programmes to improve mechanisms for the administration of targeted subsidy to farmers. “I am delighted that this Forum has provided us another opportunity to reflect on the progress we have made over the years with respect to the implementation of the abovementioned actions.

Vanguard, MONDAY, MAY 23, 2016 — 21

Interview

Why we’re investing in commercial production of sorghum, cassava

BY FRANKLIN ALLI

Nicolaas Vervelde is t h e Managing Director/CEO, Nigerian Breweries Plc. He spoke with VANGUARD about the company’s 70 years of operation in Nigeria, the challenges of investing in the brewery sector, among other salient issues. At 70 what percentage of your raw materials are being sourced locally and even exported to other countries? We maintained our contribution to the development of the agriculture value chain in Nigeria as parts of our focus on sustainable sourcing of raw materials. For instance, in 2015, 47.4 per cent of our raw materials were sourced locally. Hopefully by 2018 we should be able to achieve a benchmark of 60 per cent and Heineken, our parent company has a commitment that by 2020 we should be able to attain 99 per cent local sourcing of raw materials. Every year, we improve on our local content inputs so we are making progress with our partners –International Fertilizer Development Centre, IFDC, and Psaltry International, a local processing company on value extraction from cassava. We are also making progress in the development of new hybrid Sorghum varieties with the potential of increasing yield for sorghum farmers as well as improving the quality of sorghum malt which is a raw material input in our operations. I want to know specifically, which areas of the challenging operating environment that is affecting you? And what would you want government to do with a view to helping corporate entities like Nigerian Breweries remain competitive? I am not sure I am in a position to give advice to the government on what to do to mitigate the tough operating business environment. Nevertheless, we have to consider the effect of the global economy which is playing out, especially the decline in oil prices, which was due to global recession, worries about China and oil supply countries like OPEC reducing prices with increased outputs. All these have effects and we also know that Nigeria is to a very large extent, dependent on oil revenues and this is affecting C M Y K

– MD, NB Plc

•Nicolaas Vervelde

the salaries of civil servants in both the states and local level. Of course, if there is improved revenue, it will also help in relieving the forex situation. It is now very clear that other brands of beer like Golden Guinea is coming into the market in the third quarter of the year, I want to know how ready you are to take the heat that will break in the aftermath of their entry into market. We agree there is going to be increased competition and over the last few years we have been working on a competing portfolio and on a far more diverse group of

In Nigeria with a population of over 170 million, per capita consumption of beer is 11 litres whereas in Brazil with 200 million populations per capita consumption of beer is 70 litres; Russia 64 litres, Mexico 60 litres and South Africa it is 60 litres per person; Burundi 40 litres.

consumers and their needs. Today we have portfolios with 20 brands all have segments. And having been operating in the market for 70 years, we have very strong position in the market to weather competitions and instead of down trading we will grow big in our offerings with the supports of Heineken, an international brand. 70 years is no mean feat, do you have plans to start growing some of the raw materials locally? Second, what are the main challenges of breweries in Nigeria compared to the global market? First of all, I can say that Nigeria Breweries has always been committed to Backward Integration. Our first backward integration started in the 80s during the Structural Adjustment Programmes, SAP. At that time forex were not available for much of what we buy, and then NB with the support of technology from Heineken started developing beers brewed with corn. In 2006, due to investments made by NB, we have been able to invest in two varieties of Sorghums and now harvesting four tonnes per hectare from one tonnes per hectare. Today we have created jobs for over 250,000 farmers through our investments in sorghums and cassava farming. Our target is to make it commercial and we have signed a Memorandum of Understanding with the ministry of Agriculture to upscale it for two to three years and then make it commercially available.

We have been working on this for five years because the point is; backward integration only makes sense if it is commercially sustainable. If it becomes a subsidized system, the more the funds are there and the subsidy is accessed, the business is gone. Backward Integration is a long term commitments before you see the results. It demands long years of hard work. What is the level of the consumption of beer in Nigeria compared to other countries, and what is NB doing to better the percentage of beer drinking in Nigeria? Although, 23 percent of Nigeria's population is middle class, yet per capita consumption of beer is low compared to markets across the globe. In Nigeria with a population of over 170 million, per capita consumption of beer is 11 litres whereas in Brazil with 200 million population per capita consumption of beer is 70 litres; Russia 64 litres, Mexico 60 litres and South Africa it is 60 litres per person; Burundi 40 litres, Cameroun 40L and Sub-Saharan Africa 17liters. The last time Nigeria had high per capita consumption of beer was 1984, and it was 17 litres per person. First of all, there are many ways companies like Nigerian Breweries can increase per capita consumption of beer. One of it is road to markets, by making sure that the brands is always there, not only in the urban areas but in the rural areas which is not a small part given the huge landmark of Nigeria. The other one is try to address all the consumer needs including pricing. Over the last few years, we see that par capita consumption started going down because if you look at the statistics, the average income of workers decreased mainly due to inflation and devaluation of the Naira How was the brewed products market in 2015? The overall performance of the brewed products market

Backward integration only makes sense if it is commercially sustainable. If it becomes a subsidized system the more the funds are there and the subsidy is accessed, the business is gone. mirrored the general performance of the economy. Indications are that the sector in Nigeria has been undergoing slow growth for four consecutive years. The sector grew by 1 per cent last year compared to 9-10 per cent recorded in the years before 2010. The slight growths recorded by operators in the sector were in the areas of products innovation and expansions of beer plants driven by acquisition. Among the players in the industry, Nigerian Breweries alone has 20 products category, 11 beer plants and two malt plants in Aba and Kaduna. 70 years in Nigeria - what have been your impacts on the economy and the people? Government, host communities and shareholders feel our positive socio-economic impacts. For instance, in 2015, despite tough operating environment, the company paid N16 billion as tax to the Federal Government for the financial year 2015 and N38 billion to shareholders. Employmentwise, the company has 4,000 Nigerians on its payrolls across the country while 280,000 people have been indirectly employed by our transporters, distributors and other ancillary businesses. We also spent over N130 million on corporate social responsibility projects across the country in 2015.

22 — Vanguard, MONDAY, MAY 23, 2016

Banking & Finance MPC: Experts predict further hike in Monetary Policy Rate CBN disburses N55.4bn to 24 firms to boost power supply

he Central Bank of Nigeria (CBN) on Friday disbursed N55.4 billion to 26 power firms to address funding impediments to power supply in the country. The power firms include three distribution companies, 14 generation companies, six gas companies and one services provider. The funds represent the fourth batch disbursed under the N213 billion Nigerian Electricity Market Stabilization Facility (CBNNEMSF). Speaking at the presentation of payment documents to the 26 power firms in Lagos, CBN Governor, Mr. Godwin Emefiele, said, “The Central Bank of Nigeria (CBN) initiated a N213billion Nigerian Electricity Market Stabilization Facility (CBNNEMSF) as a follow up to commitments reached with other stakeholders to address debts owed by generating companies to gas suppliers. The first disbursement was effected on February 12, 2015 to industry participants. “This 4th batch disbursement marks a major milestone in the effort of the Bank in collaboration with the Federal Government to achieve a Contract Based Electricity Market. “It will feature Signing of Power Purchase Agreement (PPA) Activation Agreement by Nigeria Bulk Electricity Trader (NBET) to signal activation of Industry contracts for Power Generation under a Contract Based Market; and the disbursement of a further N55.456billion out of the N213billion to 24 industry participants, namely 3-Discos; 14 Gencos- NIPP inclusive; 1Service Provider; and 6Gascos ) to further address the challenges of the sector. “This includes N8.67 billion to thee Discos, N35.83 billion to 14 Gencos, N10.49 billion to six Gascos and N459.68 million “New entrants into the scheme are two (2) Distribution companies (Benin and Jos) and eight (8) generating companies that include two (2) IPPs (Agip/Okpai and Shell) and six (6) NIPP plants (Alaoji, Geregu, Ihovbor, Olorunsogo2, Omotosho2 and Sapele2).” C M Y K

*Call for adjustment to forex policy Stroies by Babajide Komolafe

conomic experts have predicted that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will further raise the Monetary Policy Rate (MPR), in order to address rising inflation in the country. Some of them however opined that the Committee should adjust the foreign exchange policy to allow for efficiency in the foreign exchange market. The 11 member MPC commenced its bi-monthly meeting on Friday in Lagos with presentations of departmental reports by CBN staff. Committee members will today discuss highlights of the CBN staff reports as well as latest inflation and Gross Domestic Product data released by the Nigeria Bureau of Statistics (NBS) last week. The meeting will conclude tomorrow with policy recommendation by each committee member and announcement of policy measures adopted. At the end of its meeting in March, the MPC decided to tighten money supply by raising the MPR to 12 percent from 11 percent. It also raised the Cash Reserve Requirement (CRR) of banks to 22.5 percent from 20 percent and narrowed the upper and lower bands around the MPR to +200 and

*CBN Governor - Godwin Emefiele -700 basis points to +200 and -500 basis points. The MPC is expected to further tighten money supply especially in view of the jump in inflation to 13.6 in April from March, as well as the commencement of the implementation of the 2016 budget, which is expected to inject massive liquidity into the economy. “The more appropriate policy expected in my view from MPC, will be a slight upward adjustment of current MPR as a tightening response to the current inflationary trend’, said Mr. Victor Ogiemwonyin, Managing Director/Chief Executive, Partnership Investment Plc. He added that, “The 2016 budget just signed into law is a large reflationary budget

which will also put further pressure on inflation. The large spending budget is needed at this time to get economic activity up, but also has the potential to further stoke inflation. A

Market conditions are arguably too liquid for a sizeable devaluation to be considered just yet

Heritage Bank to launch financial inclusion comic book

eritage Bank is set to launch a comic book to drive financial inclusion among children. The launching of the book is one of the highlights of the bank’s Children Banking Month 2016, which is a financial literacy campaign to commemorate the May 27th Children’s Day celebration. In a personal letter conveying details of the Children Banking Month 2016 of young customers of the Bank, Managing Director/Chief Executive, Heritage Bank, Mr. Ifie Sekibo said, “May 27 has been set aside nationally as Children’s Day and to honour you, our leader of tomorrow, for the second year running, we at Heritage Bank have declared the entire month of May as Children Banking Month. “We are dedicating this month to you, our young customer, because of the important

position you hold in the destiny of our great nation, Nigeria. “Our theme for this year’s celebration is “Taking the Early Lead” and aligned with this is our financial literacy campaign geared towards equipping you with the requisite knowledge to make you a remarkable leader in future. This is also in keeping with the bank’s vision of creating, preserving and transferring wealth across generations. “I personally want to congratulate you on behalf of the management and staff of Heritage Bank ahead of the Children’s Day celebrations on the May 27 and to urge you to stay in school and stay focused on your academics. I also want to let you know that you can be anything you want to be in future if you listen to mummy and daddy and also to your teachers in school. As

the buds of today and the stars of tomorrow, we are counting on you to make the difference in our great nation. “Throughout the month of May my colleagues in the bank will go round a great number of schools throughout the country imparting knowledge on elementary finance and at the same time, we will also invite some of you on an excursion of the bank to let you see firsthand, the workings of a modern day financial institution. I have also made sure that you will be entertained if you walk into any of our Experience Centers. “On the 24rd of May, we will launch the first ever comic book for children and youth. This financial literacy resource kit will feature creative visuals and highly intelligent and funny comic characters to drive financial education in a fun way.”

tightening stands will be understandable.” On her part, Razia Khan of Standard Chartered Bank, London, predicted that MPC will raise the MPR to 13 percent. In an email response to Vanguard, Khan, who is the Managing Director, Chief Economist, Africa, and Global Research for Standard Chartered Bank, said, “We have been monitoring inflation risks for some time. With April composite Price Index (CPI) confirmed at 13.7 percent, we now expect the CBN to tighten its policy rate by 100 basis points to 13 percent at the May meeting, rather than in September, as previously forecast. Inflation is largely cost-push in nature, and the economy is weak. A hike of 100 bps will not result in a positive real MPR, but the 200 bps upper corridor around the MPR is likely to result in a SLF (Standing Lending Facility) rate of 15 percent. This should be sufficient for the MPC.” Though Khan ruled out the possibility of any adjustment to the exchange rate, Ogiemwonyin and Afrinvest Plc called for removal of foreign exchange restrictions. According to Khan “We do not expect any big foreign exchange liberalisation moves just yet. Although the release of a new fuel pricing template with its exchange rate assumption of N285 per dollar has raised market anticipation of an imminent change in policy, there has been little official indication of any change in thinking. Market conditions are arguably too liquid for a sizeable devaluation to be considered just yet.” Making a case for the removal of foreign exchange restrictions, Ogiemwonyin said, “I also expect removal of controls from the Foreign Exchange market. As this will be the only way to make this market efficient. Efficient markets work for all of us. There will be no need to announce any devaluation of the naira, only that the CBN is getting out of Transactionary Naira. i.e they will no longer sell dollars to banks just as they have done with BDC. Banks will be free to source Dollars at their supplier’s rate and sell at the rate customers are ready to buy. The CBN will henceforth intervene like other central banks when rates get out of control. They will offer very large amounts to ease supply and cool the market when necessary.”

Vanguard, MONDAY, MAY 23, 2016 — 23

Corporate Finance

Stanbic IBTC, Zenith, others set to finance state govt projects By PETER EGWUATU

ome of the banks have indicated their interest to finance viable state governments’ projects that are expected to impact on the lives of the people. The strategic intermediation role played by financial institutions in society will be further tested in the coming months as some states finetunes its developmental agenda to ensure prosperity for residents of their states. Stanbic IBTC Plc, Zenith Bank Plc , Heritage Bank, GT Bank Plc and First Bank Plc co-sponsored the two day Kaduna State Investment Economic Investment Summit tagged KadInvest. The government reforms in agriculture have also attracted financial commitments from the financial industry. Today, banks have invested billions of naira across the agricultural value chain. As well, banks continue to tap into the small and medium scale enterprises sector to create value. The Chief Executive, Stanbic IBTC Holding, David-Borha said that Stanbic IBTC has “begun partnership with Kaduna State in the area of small and medium scale enterprises." So often, financial institutions, which are mindful of toxic loans, are hampered by governments from playing this critical role. The required fiscal discipline, commitment and transparency to ensure realization of development plans are sometimes missing, making financial commitments difficult. In reference to that, Acting Managing Director, Bank of Industry, Mr. Waheed Olagunju, said: “If the blueprint is religiously followed through successfully in terms of implementation, they state government would have substantially de-risk the business environment in Kaduna. And by so doing they will ease the ability of entrepreneurs in Kaduna to meet the Bank of Industry’s risk acceptance criteria, thereby facilitating access to its loans.” Meanwhile, public financial institutions such as the Bank of Industry, the World Bank, the African Export and Import Bank, the International Monetary Fund and the International Finance Corporation made very strong contributions at the two-day summit. The Kaduna state government talked about “productivity and C M Y K

•Mr. Oscar Onyema , Chief Executive Officer, NSE

competitiveness”. Financial institutions will be the critical springboard for the competitiveness of the entire state, no doubt. At the recent inaugural annual Kaduna State Economic and Investment Summit, the

(KADIPA), with help from the Nigerian Investment Promotion Council and the Nigerian Economic Summit Group and co-sponsored by Stanbic IBTC, el-Rufai unveiled a five-year developmental plan for the

We are also a mining institution. Across Africa, we have provided financing in mining, and we believe we can do the same in Kaduna State state governor, Mallam Nasir el-Rufai, made a strong case for investment in the state by the private sector. At the summit, organised by the Kaduna State Investment Promotion Agency

state. Some of the critical sectors to be addressed in the fiveyear developmental plan are transportation, power, agriculture, education,

mining, housing, health, security and the judiciary, among others. Financial institutions, both public and private, have a critical role to play in the actualization of the plan. “The government will continue to finance part of its capital programme with internal and external loans obtained on concessional terms” the governor said in acknowledgement of the role of financial institutions. Perhaps to further underscore this role, they were involved at every stage of the summit. The aggregate capital expenditure projection for the state’s five-year plan is about N108 billion for 2016, N87 billion for 2017, N100 billion for 2018; N111 billion for 2019 and N126 billion for 2020. In all, the state government needs roughly N1.5 trillion in the next five years. Private sector players are expected to provide around half the fund, about N800 billion. The financial institutions will provide the needed credit to both the government and the private sector players like Olam, which announced plans to invest $150 million (about N30 billion) in animal feed, poultry, hatchery factory in Kaduna, and Dangote, which indicated interest to invest N10 billion in tomato paste processing plant in the state, among other expected investors.

FCMB’s Training Academy gets CIBN accreditation The capacity building and training programmes offered by First City Monument Bank (FCMB) Limited’s Training Academy have received due recognition and positive affirmation from Chartered Institute of Bankers of Nigeria, CIBN. The Academy has been certified and granted full accreditation status due to its compliance with best practices and other requirements set by the Institute. The certification came at the end of a recent evaluation exercise carried out by the CIBN which is the sole accreditation agency under the Competency Framework for the country’s Banking and Finance industry put in place by the Central Bank of Nigeria, CBN . During the evaluation exercise, the CIBN team carried out various reviews and processes regarding the services provided by the Academy. These covered operating procedure, programmes and curriculum, quality of internal and external pool of faculty, programme delivery and evaluation process and facilities in place, among others. With the accreditation, employees of FCMB will be granted automatic exemptions in certain subjects and levels of professional certification, such as Diploma Level, Intermediate Professional Level and Chartered Banker Level in the Institute’s Banking Professional Examinations leading to the Award of Associate of the Chartered

Institute of Bankers. Speaking at the certificate presentation ceremony in Lagos, the President/Chairman of Council of the CIBN, Otunba (Mrs.) Debola Osibogun said, “I am indeed elated that First City Monument Bank (FCMB)’s Learning Academy has also joined the league of institutions certified to provide training services in the industry. I thank the Chief Executive Officer (CEO) of FCMB, Mr. Ladi Balogun for deeming it fit to tap into the scheme for the benefit of staff ”. The Group Managing Director/Chief Executive, Mr. Ladi Balogun, said ‘’This is another landmark achievement. It is a clear demonstration that the various strategic approaches we have adopted to boost our workforce’s learning and development through our Training Academy are yielding the desired results and our stakeholders appreciate them”. Balogun, who was represented by the Bank’s Divisional Head, Human Resources and Change Management, Felicia Obozuwa, added that, ‘’capacity building and innovation are key priorities of the Bank. We will continue to upscale our focus on these critical areas across all cadres of employees to further reinforce our core values of professionalism, sustainability, customer focus and excellence. ”

Champion Breweries predicts sustained growth after rebound

mboldened by its movement from a position of deficit to surplus, Champion Breweries Plc has promised shareholders of its determination to sustain the current growth with a view to achieving payment of dividend very soon. Chairman, Dr. Elijah Akpan who stated this in Lagos during the company’s 40th Annual General Meeting said Champion Breweries recorded substantial improvement in its trading results in the year under review compared to previous years. According to him, revenue increased to N3.5 billion from N3.3 billion in 2014 while operating profit was N207 million as against N26 million recorded in 2014. Besides, profit before tax was N210 million away from N1.1 billion loss recorded in 2014. “The company’s successful conclusion of debt refinancing, increase in production and sales volume of Champion Lager Beer as well as re-introduction of Champ Malta has resulted in positive turnaround of the business performances during the year ” he said. He assured the shareholders of better days ahead, saying they will soon start enjoying the dividend of their investments. “Considering our present financial position from deficit to surplus, our company has the right mindset and structures to achieve payment of dividend to you our dear esteemed shareholders in no distant time” he said. Akpan who predicted stronger competition with ongoing global mergers between brewing giants in the world, noted that the situation would lead to more innovations and inflow of new brands in the market. He also expressed optimism in Nigeria’s outlook in 2016 which according to him is brightened by the large and varied opportunities in different sectors of the economy. “We shall explore the available possibilities the Nigerian business environment is offering to increase our market share within our business region” he emphasised.

24 — Vanguard, MONDAY, MAY 23, 2016

Corporate Finance

NSE sustains winning streak, as in or s’ invvest estor ors’ wealth rise N2 14bn N21 BY NKIRUKA NNOROM

ctivities on the Nigerian Stock Exchange, NSE, continued upbeat at the close of transactions last week as sustained optimism reigned in the market throughout trading session, resulting in N214 billion appreciation in investors wealth. Specifically, at the end of trading last week, the market capitalisation, rose to N9.313 trillion in comparison to the opening figure of N9.099 trillion, representing 2.4 per cent increase. Similarly, the All Share Index, ASI, appreciated by 2.5 per cent, closing at 27,116.45 basis points from 26,441.03 points. The positive sentiment observed within the equity market filtered through the key sectors as the Oil and Gas sector posted a 0.9 per cent daily return to lead sector gains, on the back of gains in Oando Plc’s shares which rose by 1.5 per cent. The financial services was also up 0.5 per cent driven by price appreciation on the shares of Zenith Bank Plc (+1.8%) despite losses in Guaranty Trust Bank (-3.7%). In a same vein, price appreciation in Lafarge WAPCO (+1.8%) and DANGCEM (+0.05%) drove a 0.2 per cent positive return in the Industrial Goods Index, just as the Consumer Goods sector added 0.2 per cent on the back of gains in Nigerian Breweries, which rose by 0.4 per cent. Investment analysts at United capital had predicted that another positive week would be recorded barring any proposed disruptions to trading activities by the actions of the National Labour Congress, NLC. “Barring proposed disruptions to trading activities by the actions of the National Labour Union, we anticipate another positive week for equities this week, as optimism from investors’ positive expectations on domestic economic reforms continues to drive demand. Foreign money managers are also likely to watch closely, as news around possible review of the foreign Exchange, FX, policy framework gathers momentum,” they said.

Nkiruka Nnorom writes that the Debt Management Office is making concerted efforts to ensure that N1.88 trillion to be borrowed by the Federal Government to fund budget deficit is utilised for the intended projects. The Federal Government recently revealed plans to borrow N1.884 trillion from both local and international debt markets to fund the 2016 budget deficit which is put at N2.24 trillion. According to the government, N900 billion will be borrowed externally, while the remaining N984 billion will be borrowed from domestic debt market to provide infrastructure needed to boost productivity and create jobs. The borrowed funds, according to the FG, would be deployed to fund only capital projects. In demonstration of the government’s commitment to capital projects development, President Muhammadu Buhari assured at the signing of 2016 budget of immediate release of N350 billion capital projects development funds into the economy. Buhari revealed that N200 billion has been mapped for development of road network, saying that it is just a figment of other capital projects which cut across health, railway, energy, sports , hospitality, education, security and aviation among others. The Vice president, Professor Yemi Osibanjo, as well as Zainab Ahmed, Minister of State for Budget and National Planning, had

•Mr. Abraham Nwankwo, DG, DMO

•Kemi Adeosun, Finance Minister

DMO: Driving efficient utilisation of borrowed funds earlier stressed the federal government’s commitment to ensure that 2016 budget is fully implemented while funds meant for capital projects are affectively directed to the projects. Osinbajo disclosed in a paper entitled: ‘The economy – Where we are today ’, delivered at a presidential retreat organised by the Office of the Secretary to the GoverAnment of the Federation for ministersdesignate, that the government was working towards pegging capital expenditure in the 2016 budget at N2 trillion, about 30 per cent of the budget sum. This, he said, was against the N1.31 trillion allocated to

capital expenditure in 2015 budget. He further said that while the percentage of capital expenditure to recurrent expenditure in the 2015 budget was 19.4, the government tinkered with 40 per cent for 2016 budget. Osinbajo said: “The budget process will be zero based, a method of budgeting by which all expenses must be justified for each new budget year. DMO’s efforts To ensure efficient utilisation of the borrowed funds, the Debt Management Office, DMO, recently organised a one-day workshop tagged “Public Debt and the Challenge for Financing Nigeria’s

NASCON Allied commits N7.3bn to new product-lines expansion … as Dangote retires as Chairman

NASCON Allied Industries Plc said it has spent over N7.3 billion in the last three years to expand its product lines to include tomato paste, vegetable oil and seasoning in a bid to transform to a full Fast Moving Consumer Goods, FMCG, company and improve earnings. This is even as Alhaji Aliko Dangote has retired as the Board chairman having served in the capacity for 10 years since Dangote Group acquired the old National Salt Company, NASCON in 2007. Mrs. Yemisi Ayeni, a Chartered Accountant with experience in audit, finance, asset/investment management, and corporate planning takes over in his stead as the new Board chairperson. Addressing shareholders at the company ’s Annual General Meeting, AGM, in Lagos, Alhaji Dangote said despite the challenges

associated with fall in crude oil price, volatility in the Naira and ban of 41 items from foreign exchange, forex, market which affected manufacturing activities and consumer spending, the company was able to deliver sales and revenue growth in its core business with moderate contribution from the new product lines. He noted that the company’s objective in 2015 was to grow the seasoning, refined oil and tomato paste businesses to ensure that they complement and strengthen the existing refined salt business in order to contribute to revenue and profit growth. Accordingly, NASCON Allied has strengthened and restructured every aspect of its existing operations in the last three years, while the marketing and promotional activities were also strengthened to fuel sales, Dangote said, adding that the

salt business registered excellent growth, while the Dan-Q Seasoning increased its market share significantly through focused and consistent marketing efforts. Consequently, he said for year ended December 31, 2015, the company recorded total turnover of N16.2 billion, a 43 per cent increase over N11.25 billion posted in full year ended December 2014. Profit after tax increased by 11 per cent to N2.1 billion from N1.9 billion in the previous year. “The overall financial stability continued to remain strong with N2.5 billion of cash and its equivalent as reserves. We achieved this by becoming more customer focused, managing our costs and improving our efficiencies,” he said. Following the impressive performance, the Board of Directors recommended N1.46 billion dividend, translating to N0.55 per share, which was approved by shareholders present at the meeting.

Economic Recovery ”. The workshop provided the Agency the opportunity to give further impetus to steps being taken by the Federal Government, FG, to finance 2016 budget deficit. It also served as an avenue for the Agency to give an update on it is doing to ensure that the funds are efficiently utilised. Mr. Abraham Nwankwo, Director General, DMO, reechoed that the federal government is focused on ensuring that the funds to be borrowed for 2016 budget financing would be committed to financing capital projects. He assured that the DMO is committed to raising capital to fund the 2016 budget deficit. Such funds, he said, are to be raised from appropriate sources and through suitable mix during the 2016 fiscal year to make sure that capital projects are adequately funded. “The DMO is committed to making sure that we raise money to fund the 2016 budget deficit from appropriate sources and through appropriate mix during the fiscal year to make sure that capital projects are funded,” he said. Nkwnkwo said that Nigeria is rightly positioned to borrow more hence the country’s debt to GDP ratio is 13 per cent. “The debt to GDP ratio is 13 per cent, compared to the 56 per cent of peer group. So in that essence, our debt is still very sustainable” the DMO DG said. He urged Nigerians to boost contribution to nation building by ensuring sustenance of payment of taxes and other duties to beef up the country’s tax revenue which he said had remained relatively low. Nigeria comparative tax revenue to GDP ratio of less than 7.0 per cent, against a ratio of 18 per cent by its peer group, reinforces the need to widen the tax net for the government to generate to generate more tax revenue.

Vanguard, MONDAY, MAY 23, 2016 — 25

C M Y K

26 — Vanguard, MONDAY, MAY 23, 2016

Homes & Housing Finance

Architects charge FG on housing finance

rchitects Registration Council of Nigeria (ARCON) has called on the federal government to adequately fund the Ministry of Power, Works and Housing to implement its mandate on the proposed affordable housing programmes. ARCON said in order to achieve this; architects and other relevant professionals in the building industry should be used in designing the proposed affordable housing schemes. This was contained in a communiqué issued at the end of the 2016 Architect Colloquium’ signed by its Registrar, Arc. Umar Saulawa Murnai. It called for an enabling environment for the development of local manufacturing capacity as well as development of local building materials in Nigeria through policy formulations. The council said the need to use professionals in the industry became imperative as building collapse in Nigeria has become a huge security risk, calling on building owners, statutory bodies, building contractors and the public to actively supervise the construction of their building projects.

UK mortgage lending falls after stamp duty changes

ortgage lending in the UK fell by nearly one-third between March and April, in the wake of a surge in home-buying ahead of stamp duty changes on April 1. Gross mortgage lending was £18.5 billion in April, 29 per cent lower than March’s total. Nonetheless it was the strongest April since 2008, and 16 per cent higher than the total for April 2015. The government’s stamp duty reforms imposed a three percentage point surcharge on the duty on second homes and buy-to-let properties, prompting buyers to complete ahead of the April deadline. Mohammad Jamei, CML economist, said he expected buy-to-let to “take a back seat” over the next few months as any growth in lending would be driven more by first-time buyers, movers and remortgage customers.

FG set to unveil Nigerian housing model —FASHOLA By YINKA KOLAWOLE

he Federal Government is set to unveil a Nigerian housing model that will be suitable and acceptable to all Nigerians. Minister of Power, Works and Housing, Mr Babatunde Fashola, who disclosed this at a forum in Abuja, said government is already working on the design in furtherance of the its housing policy. “A lot of work is going on and very soon you will see the result of that work. Let me be very clear; we are in a result business but I have learnt that it is results that are sustainable that become enduring. “We’ve built all sorts of houses but when you look at it, has a housing implementation programme responded to you? Has it responded to many people? So, it is because there was no sustainability in them. So they change as the government changes. Now that’s what we are working on to build; first to design a Nigerian house – a design that all of us can say, yes, if I get a house here, I will live here. “These are the things that are going on in the ministry now; a few designs have evolved, we are working; we are going to meet again because this process is being driven by the civil servants and by private sector volunteers, who are

contributing to help. But because the process is going to be owned and driven over a long time by the civil servants, I want as much of their input in it because I will not be there tomorrow. But those who helped to build it, as long as they remain in the system, they will hand it over,” he stated. Commenting on the campaign promise by the All Progressives Congress to build 250,000 houses annually, Fashola said his focus was on long-term solution rather than on the number of houses the present administration would build. “Right now, I am not focusing on the number of houses that this administration will build; rather, I’m focusing on a

long-term solution that whether this administration is there tomorrow or not, it will be difficult to say you want to change it because it works. In a matter of weeks,

A few designs have evolved, we are working...In a matter of weeks, we will finish and unveil the design

we will finish and unveil the design. We already have a budget then we can start something to validate our concept; then we will expand next year. “But what that policy will also bring is predictability to the small and medium factories in Nigeria who make door handles, paints, nails, fittings, windows, roofing sheet. Because they know now that this market is ready, they can position themselves. It is not a rush; we will just show you a house then we cannot do it next year. We are planning and that is the hardest part,” the minister stated. He further said that once construction began, workers such as artisans, food vendors, builders, tank drivers, suppliers, among others, would be engaged to boost the economy.

A low-cost housing development

FG partners NMRC on homeownership for public workers

ederal Government Staff Housing Loans Board (FGSHLB) has partnered with the Nigeria Mortgage Refinance Company (NMRC) to enable civil servants have access to affordable homes. Speaking during a recent meeting between the two organisations, Executive Secretary, FGSHLB, Dr. (Mrs.) Hannatu Adamu Fika, said the partnership is meant to ease the difficulty in accessing mortgages by staff of MDAs to build their own homes. In a statement signed by Akinwale Adegbola, FGSHLB’s public relations officer; Fika noted that the partnership would greatly assist public servants that are eagerly waiting to access housing loan either to build or purchase houses directly from developers. She explained that the loan disbursed through the board is risk free since it has a robust repayment

mechanism as most of the public servants are on IPPIS platform and repayment of housing loan is a first charge on loan beneficiaries’ salary. Also speaking, Managing Director, NMRC, Professor

Charles Inyangete, assured that with the large portfolio of mortgage from the FGSHLB, NMRC would secure a refinance on single digit interest rate which will make the facility convenient

for public servants. He reaffirmed NMRC’s commitment to refinance all conforming loans brought to it through appropriate channels.

Infinity Trust Mortgage records N7.6bn total assets BY FAVOUR NNABUGWU

nfinity Trust Mortgage Bank Plc has declared a total asset of N7.6 billion at the end of its operations for the financial year ended December 31, 2015. Chairman of the bank, Dr Adeyinka Bibilari, speaking at the bank’s 10th annual general meeting in Abuja, noted that the figure shows a growth of 5.55 percent over the N7.2 billion that the bank recorded for its operations in 2014. The bank also posted a profit before taxation (PBT) of N262.4 million while total operating expenses increased by 10.5 per cent from N393 million in 2014 to N434 million in 2015. He described the bank’s performance as a feat in view of the harsh economic and operating environment during the period. Bibilaro remarked the bank has declared profit consistently for the past 10 years, which he noted was unprecedented in the mortgage banking industry. “Our strategies

in terms of the aggressive mobilisation of customer deposits paid off even with the harsh environment, with deposit growing from N1.1billion in 2014 to N1.4billion in 2015, an increase of 27 per cent. Our commitment and passionate attachment to increasing house ownership led to our loan and advances also growing from N1.2 billion in 2014 to N1.7 billion in 2015, an increase of 41 per cent, while shareholders funds also grew from N5.5billion in the preceding year to N5.6billion in 2015,” the chairmen said. Also speaking, managing director/chief executive officer, Olabajo Obaleye said the bank was paying three kobo dividend per share to shareholders in line with the company’s objective of maximising and increasing wealth to its stakeholders, adding that this will make the ninth consecutive time the bank is declaring dividend. “With a Capital Adequacy Ratio of 124 per cent and liquidity of 191 per cent, the bank is well poised to meet all its maturing obligations.

Vanguard, MONDAY, MAY 23, 2016 — 27

Insurance STORIES BY ROSEMARY ONUOHA

he African Insurance Organisation, AIO, has decried the low level of insurance penetration in Africa, saying that the continent can boast of only about 1.4 per cent of total world premium. President of AIO, Mrs. Lamia Ben Mahmoud who made the assertion at the 43rd Conference and Annual General Assembly of the AIO in Marrakech, Morocco on Monday noted that there is clear predominance of developed countries on the insurance market. Mahmoud said, ‘This weakness is even more apparent regarding our African countries with a modest share not exceeding 1.4 percent of total premiums written in the world and a low penetration in the economy with a premium/GDP ratio not exceeding 1.0 percent in some countries, below the average rate of 2.7 percent recorded in 2014 for the entire continent.’ She said that there is need to develop between insurers and reinsurers a solid partnership that can help to improve access to insurance services and building a strong and complementary African insurance industry. According to her, that is a challenge and a goal despite the economic difficulties experienced by our region. ‘Insurance penetration is still a hard nut to crack, the share of insurance premiums as a percentage of GDP, has remained exceptionally low. In some countries it only amounts to less than 1.0 percent, well below the global emerging market average of 2.7 percent in 2014, while Africa’s share of the global insurance market is 1.1 percent for non-life and 1.8 percent for life but this is a demonstration of the enormous growth potential

BEDC, USAID sign MoU to boost electricity access

CEREMONY - From left : Former Commissioner for Insurance, Mr. Fola Daniel; Former Chairman of Niger Insurance Plc, Mr Bala Zakariyau; Mr. Steve Kyerematen, Director General, Activa Finances; Chairman of Niger Insurance, Mr. Yusuf Abubakar and Managing Director of Custodian & Allied Insurance, Mr. Wole Oshin at the opening ceremony of Africa Insurance Organisation in Morocco.

Africa accounts for 1.4% of world premium —AIO within the industry African insurance industry, an indicator that the insurance market is still widely untapped. ‘In order to insure Africa’s future, we must devise strategies aimed at facing the continent’s numerous challenges today. Within the past decade, the continent has been hit by some major challenges which have to a large extent disfavored economic growth and affected the insurance sector tremendously. Here, I am referring to the recent drop in fuel prices, in fact, the price per barrel in January 2016 stood at approximately a quarter of its market value two years ago, and at the lowest point since 2003. On the list of challenges could be added cyber criminality, political instability, insecurity with some new waves of terrorist attacks, climate change, food

security challenges for the continent’s population tomorrow etc. ‘We still suffer from a shortage of skilled and experienced insurance professionals, as a result, large and complex risks are not retained within Africa, but are ceded to foreign insurance markets because specialist risk management capabilities and high quality security are not sufficiently available leading to a consequent premium flight which threatens the viability of the domestic insurance industry. ‘Moreover, there is still wide spread ignorance on the benefits of insurance. Added to this list is an acute insufficiency of product differentiation. Every company should continue to act to promote expertise. We emphasise in this area on the need to strengthen the diversification of training in scientific and technical issues

Leadway records 125% growth in PAT

eadway Assurance Company Limited has posted a 125 percent growth in profit after tax of N6.3bn for the 2015 financial year from N2.8 billion in 2014. The results which was presented at its 44th Annual General Meeting held last week revealed a 37 percent growth in assets to N137.3 billion in the year under review from N 100.5billion in 2014. The company reaffirmed its commitment to its clients by paying claims in excess of N14.3billion, a 13 percent increase from the N 12.7 billion record of 2015, making it the highest claims’ paying insurance company in the industry. The company wrote a 20 percent increase in Gross Premium from N 39 billion in the prior year to N 46.6 billion this year though with fairly C M Y K

modest underwriting results. Speaking during the presentation of the results, the Acting Chairman, Mr. Jeremy Rowse, stated that “ with various guidelines aimed at reinforcing standards and encouraging confidence in the Nigerian insurance industry, the company remains poised to take advantage of emerging growth opportunities to compete effectively within its immediate market and the larger global markets.” He further stated that “as the Nigerian polity itself becomes restructured to tackle the myriads of socio-political, economic and infrastructural challenges facing it, the opportunity for increase in insurance penetration and contribution to GDP should increase. On our part we will maximize our resources to remain competitive within the

by leveraging new tools and instruments imposed by the development of technology to ensure greater communication of their knowledge and know-how. ‘The challenges are many and daunting; especially in a context where the one size solution is outdated as customers now expect personalized insurance solutions. It is true that some of the solutions to these problems require a multidimensional approach with the input of other key actors required. Through Microinsurance, extending insurance cover to the unserved segment of the population will increase insurance penetration in Africa, but the sector has to see an over hauling in its regulation. ‘We must play a frontline role in the quest for solutions to these challenges. We have a number of factors that militate to our favour notably Africa’s favourable demographics and wealth of natural resources (including 60 percent of the world’s uncultivated arable land), there is an enormous growth potential. The operating environment is becoming more favourable – increased stability and improvements in transparency and the rule of law are all contributing to a growth in regional insurance practices. This is shown in the high rate of market liberalisation that has been seen across Africa, as insurance companies have successfully lobbied governments to allow private entry into the previously state monopolised sectors in many countries.

enin Electricity Distribution Plc (BEDC) and the United States Agency for International Development (USAID) will today sign a Memorandum of Understanding (MOU) aimed at boosting access to electricity and improved services to customers in its franchise. The event will enable USAID through the Power Africa Project to officially commence its support for the development of Nigeria’s power sector through credit enhancement, grants, technical assistance and investment promotion efforts. President Barrack Obama of United States had launched the Power Africa Initiative to bring together technical and legal experts, the privates sector and governments from around the world to work in partnership to increase the number of people with access to power in Africa including Nigeria. BEDC management is expected to sign the MOU with USAID agents, Tetratech Inc. one of the contractual vehicles funded by the agency under the Power Africa Transactions and Reforms Program, (PATRP); a five year USAID technical assistance project implemented by Tetra Tech designed to bring more electricity to sub-Saharan Africa by utilizing a transaction-centered approach. Tetra Tech, as directed by USAID is offering to provide commercialization assistance to BEDC for over a period of about two years focusing on management support to address losses, strengthen management controls and help with the required performance turnaround in its operations. It has engaged a team of professionals already on ground to man some strategic business units in BEDC for the implementation of the technical assistance. Tetra Tech’s assistance to BEDC will help demonstrate and implement loss reduction strategies, as well as other improvements to allow for improved ways of managing the business to be rolled out through BEDC network and to provide a demonstrative effect for other utilities in the country.

28 — Vanguard, MONDAY, MAY 23, 2016

E-Commerce significant customer base. By expanding into other petroleum products, we truly become your personal filling station.

Fahrenheit Hospitality adopts MoBiashara for Hotels

ahrenheit Hospitality Limited, FHL the parent company of Maison Fahrenheit Hotel and Fahrenheit Loft has adopted SlimTrader’s MoBiashara for Hotels as it repositions for more efficient services to provide wider range of accessibility options to its clients. The MoBiashara for Hotels platform, which was launched by SlimTrader recently, provides hotels with an easy to use Property Management System (PMS) and Channel Manager as well as a composite ‘Personal Computer – Point of Sale Terminal’ (PCPOS). With the Channel Manager feature, FHL hotels rooms will now be available for purchase on international and local online travel agencies. The platform supports both online and offline payments as well as automatic synchronisation and reconciliation between FHL hotels’ credit and debit card machines with computer records. In a statement, Managing Director of Maison Fahrenheit Hotel Mr. Anthony Shishler, said the adoption of MoBiashara for Hotels will enable FHL to move to a new era of hotel inventory management, one he believes will see an improvement in room sales and efficient hotel processes automation. He noted that the partnership came about as part of the Fahrenheit Hospitality Limited’s efforts to subscribe to the BuyNaijaAndGrowTheNaira movement which encourages Nigerians to invest locally. He said: “Before the coming of this solution; hotels in Nigeria were completely unplugged. Now, this plugs us in and more people would be able to view our rooms and book them online. No other platform allows us to plug into all these different OTA’s and to also receive payments. "It simplifies processes immensely for FHL and for our customers who can now book and pay for our rooms anywhere in the world, and in any currency. Our hotel staff will not be bogged down with currency conversions, forex limitations or the hassle of consolidating offline with online records.” Also speaking, SlimTrader’s General Manager, Commercial, Mr. Magaji Buba said: “We are confident that our MoBiashara for Hotels platform is a must have management system for businesses in the hospitality sector."

How we'll sell fuel in Lagos using mobile app — FueledUp boss S

ubomi Odo-Owusi is the 24 year old founder of FueledUp, a mobile application that enables people to fuel their cars on the go eliminating the inconvenience of queuing at filling stations. In this interview with Jonah Nwokpoku, he explains how a product like petrol could be distributed in Lagos' complex city setting using mobile technology. Exceprts What is fueledUp? FueledUp is your Personal Filling station, a mobile application that enables an on-demand fuelling service making sure you never stop for fuel again. Our aim is to create convenience for the everyday use of petroleum products How exactly do you propose to sell a product like petrol using mobile app? FueledUp is a mobile application that allows its users to request for fuel for delivery at your chosen location. We would be using IT as a tool to enable us reach to all and provide accessibility too. The application remains a web tool for the request of service and nothing more. Products would be delivered to your desired location and payment via your desired e-payment channels. At least 75 per cent of Lagosians use smart phones and at least 30 per cent are tech savvy. What kind of logistics have you built to make this a success? We have strong partnership agreements, which we can

not disclose now, with the very best in the downstream oil and gas sector. This is to ensure reliability of products at the best market price as well as the authenticity of products sold. Also, we have the required man power and trucks available to carry out operations to meet consumers’ demand upon launch. We are approaching this with modern practices especially on delivery routines to ensure safety, security and reduce delays as a result of the heavy traffic flow in Lagos. Do you think this your approach is going to solve Nigeria’s distribution issues around petroleum products? Our technology approach would not only help solve distribution issues but also reduce traffic flow. Overall it will lead to increase in productivity within the State as we aim to bring to

Lagosians a system that takes off one less worry especially in this time. FueledUp would bring the filling station experience to all, making it ‘ your Personal Filling Station’. This will result to effective time management as endless waits at filling stations would be drastically reduced or completely eliminated thus reducing traffic congestions on our roads. Our solution is also designed to bring products to areas that find access to products very hard and are being exploited by merchants in their vicinities. It enables a free market system recently adopted by the NNPC and truly embraces the notion making it possible for all to not only afford products but also have access to it with no exploitation. If you do not catch up with technology, you would be left behind, the use of IT is critical to bringing all into a more globally accessible online community. Do you plan to only sell PMS or do you also plan to sell other petroleum products like diesel and kerosene? We certainly would move into other petroleum products once we have built a

Safety is a critical concern in petroleum products distribution, how have you planned for this? We take our Health Safety and Environment(HSE) very seriously, and due to that we will be running campaigns educating the public on the practice of the FueldUp delivery process, as well as safety routines we should practice in our daily lives. Also, in conjunction with Lagos State Fire Service and international experts in HSE practice within downstream oil and gas sector, we will be carrying out trainings and also carrying out monitoring checks on our operational manuals and practice. This is to ensure that our employees operate with the best practices within the industry Take us through the process of buying petrol from FueledUp? Well it is not just petrol, so I would take you through the process of getting FueledUp. *Download the app(once it appears in Various App stores) *Create your account *Click the Get FueledUp button. The App picks up your location via GPS, you can seek to change that if you want by selecting an area with the use of the pin. *Fill out the request formSelect how many liters, select delivery time, and add any other information you desire *Press request Once this is done, our customer service team would be notified who will immediately notify our truckers who will affect delivery.

Supermart unveils local recipe database, marks anniversary By JONAH NWOKPOKU

igeria’s online grocery delivery service, Supermart.ng has said it will soon unveil the country’s largest recipe database. The company, in a statement said the database will come in different categories covering different range of local dishes, baby recipes, deserts, etc. It stated, “These recipes have been put together by Supermart chefs in collaboration with other top chefs in the country. Readers can also have their own personal recipes uploaded to the platform. Attached to every recipe will be an ‘Add to

cart’ option which enables readers to purchase ingredients used in preparing a particular recipe.” On the anniversary celebration, Suppermart said it has lined up series of events from May to July, one of which will be the Supermart Speaker Series which features leading business leaders and entrepreneurs who will discuss their business experience with the audience. Earlier this month, one of such speakers was Mrs. Omobola Johnson, who spoke about her time as the minister of ICT and her passion for growing the ICT industry in Nigeria and Africa.

Vanguard, MONDAY, MAY 23, 2016 — 29 “The liberalization policy will lead to the creation of 600,000 jobs…” ai Mohammed, Information Minister, NATION, May 17, 2016, p 6. In the report by Yusuf Alli, Yomi Odunuga and Vincent Ikuomola, all senior editorial staff of the paper, the Minister also pointed out that “Government is not about popularity. There are times in life you have to take a very hard decision and this decision is for the long term and benefit of everybody.” Fortunately or unfortunately, the three journalists were with the paper in January 1, 2012 when Jonathan’s government increased the price of fuel from N97 per litre to N141 – an increase of 45.3 per cent. Each of them should be able to

recollect what he wrote in response to that announcement. Lai Mohammed, then the National Publicity Secretary for the Action Congress of Nigeria, ACN, also should go and find out what he said in 2012. However, many Nigerians would recollect that President Jonathan used almost the same words to justify the increase – it was in the national interest and it was designed for our collective long-term benefit. But, the explanation was dismissed by the political opposition – meaning those now asking Nigerians to accept the new increase as inevitable. That new increase, from N86.50 to N145 per litre, is not only higher in real terms (N145 versus N141), it is also higher in percentage terms (67.5 percent versus 45.3 percent). Whereas the proposed increase of 2012 was followed by mass protests, fuelled largely by the political opposition then, the same individuals who organised the Occupation of Kudirat Abiola park in Ikeja and made condemnatory speeches against Jonathan are asking Nigerians to embrace the new price and wait for better days. Certainly, no Pastor will

Consequences of N145 per litre fuel lead an army of occupation to Ikeja. Ambode, unlike Fashola in 2012, will not allow the people the “freedom” to occupy the site this time around. And, if they attempt to do so, and they are warded off by soldiers, the same people who argued for their right to free association will look the other way if soldiers brutalise them – because they were Jonathan’s soldiers in 2012; they are Buhari’s soldiers now. All leading members of the PDP supported Jonathan in 2012; all leading APC members are now supporting Buhari now. As Lai Mohammed had told us, popularity had nothing to do with it. Power is the most important thing. Nigerians handed power to a new set of rulers in 2015; they should be ready to accept the consequences. One of this is N145 per litre fuel the repercussions of that decision. Many of the implications of the policy decisions are grave in the short term; that explains why Lai Mohammed premises his announcement on the longterm benefits. He has a lot of

reasons to do so. As a comedian once observed, “economists talk about the long-term because they know that in the long term we are all dead anyway.” By not putting a date on when the benefits of liberalisation and N145 per litre fuel will flow, the Federal Government of Nigeria has given us a “politicians promise” – which “like pie-crusts are made to be broken”. (Jonathan Swift, 1667-1745). If the benefits expected will require more than seven years to be delivered, obviously Buhari will not be around to claim credit or blame for them. Long term has become a face-saving device for governments which are not sure of the outcome of their policy initiatives. “Wise skepticism is the first attribute of a good critic.” James R. Lowell, 1819-1891. (VANGUARD BOOK OF QUOTATIONS, VBQ p 222). Because Nigerians with long memory have heard similar promises about the future from previous governments, “Housing for all by 2000 by IBB; Millennium Development Goals by 2015 by OBJ, and

14,300MW of power by 2013 by GEJ, any economic analyst and public commentator must be skeptical about the new claims and promises. Bluntly stated” “We have heard such stories before and they have led us nowhere. Lai Mohammed’s claim that the government he serves is different is also not new. Every government before now had claimed to be different and more people oriented. Each had produced more billionaires among those in the corridors of power while the people remained impoverished. The 600,000 jobs promised are like so many birds in the bush. Compared to six in hand they are nothing and may never materialise. So, since nothing concrete had been promised by the Minister, on behalf of the Federal Government in the long term, perhaps the best place to start examining the consequences of the new policy is from the immediate consequences and the short term. The announcement of the new fuel price was made on Wednesday May 11, 2016 in

the early evening news. And, some of the consequences were felt from early morning the next day. As promised by the Minister of State for Power, Dr Kachikwu, the fuel queues vanished. Price has always been a mechanism for crowd control. Announce a concert by a popular singer and peg the ticket at N1000 and you might need the Nigeria Army to control the crowd. Raise the ticket to N15,000 and hardly anybody will show up. All the filling stations from Lagos to Ibadan having fuel, and who hitherto had caused massive hold-ups were almost completely deserted. Those willing to pay the new price spent less than five minutes to get served instead of three or four hours. Meanwhile, the driver of a bus from one of the largest fleet owners got down at the Sagamu filling station and announced that his bus was the first to leave Ojota that day – unlike the past week when it would have been the sixth. Furthermore, the second bus might be the last for the day instead of twelve to fifteen. Passengers became scarce commodities immediately.

AVIATION Arik Air ther o benef it fr om N4trn Afre ximbank loan Air,, o other therss tto benefit from Afreximbank By LAWANI MIKAIRU & DANIEL ETEGHE

rik Air is one of the airlines been considered to benefit from a $20 billion (about N4 trillion) syndicated loans to be provided by the African ExportImport Bank (Afreximbank). This was disclosed at the Annual Air Finance in Africa summit held in Johannesburg, South Africa, The Senior Manager, Syndicated and Special Finance Department, Afreximbank, Samuel Mugoya, made the disclosure while presenting a paper at the 25th Annual Air Finance in Africa summit held recently in Johannesburg, South Africa. He said the loan is meant to assist the beneficiary carriers to revitalise their operations and get out of the financial woods. Although, Mugoya did not disclose the actual amount the bank would give as a bailout to Arik, a source said it could be as much as $200 million. Mugoya who spoke on “Challenges in Syndicating Aviation Finance Deals for Africa,” said that over 90 per cent of the airline’s earnings come in naira, whereas its C M Y K

African airlines enjoyed strong passenger demand in March By DANIEL ETEGHE

WORKSHOP - From left: Percival Uwuche, Airport Manager; Fola Akinboro, Marketing Lead and George Mawadri, General Manager, all of Etihad Airways at the Etihad Airways Trade Workshop held in Lagos. expenses are in United States dollars. Mugoya equally said that Africa needed to do more on aviation infrastructure, adding that his interaction with airlines in Nigeria showed that the quality of the runways were bad, posing serious danger to aircraft. “We are working to finance Arik Air ’s operations by preparing loans for the airline. Aviation in Africa is still lagging behind. For instance,

Arik generates 90 per cent of its revenue in naira, but makes expenses in dollars like buying of aircraft spare parts and maintenance of its fleet. That is a real problem not only for Arik, but other airlines. “On aviation infrastructure, Africa needs to improve in order to compete with big airlines. From my interactions with airline operators in Nigeria, they complain of the quality of runway of most of the airports,” he said.

Contributing, the former secretary general of African Airlines Association (AFRAA) and the convener of the summit, Nick Fadugba, said to syndicate such financial deals, airlines need to come together and cooperate. “How are you going to finance airplane acquisition when virtually all countries in Africa are junk rated? This is not a good record. We need leadership in Africa. We lack strategy and implementation for all the grand schemes,” he said.

he International Air Transport Association (IATA) has announced global passenger traffic results for March saying African airlines continued to enjoy strong demand, with traffic up 11.2 per cent compared to March 2015. The director general and chief executive officer of IATA, Mr. Tony Tyler said in Geneva, Switzerland that the turnaround in the fortunes of African carriers after several difficult years coincide with expansion of long-haul networks by the region’s carriers. He said capacity rose 9.7 per cent per cent, and load factor strengthened to 66.6 per cent, up 0.9 percentage points. And global passenger demand (measured in revenue passenger kilometers, or RPKs) rose 5.3 per cent, compared to the same month last year. Capacity grew slightly faster at 5.9 per cent which pushed the average load factor down by half a percentage point to 79.6 per cent.

30 — Vanguard, MONDAY, MAY 23, 2016

Economy

Senate may block States from World Bank facility STORIES BY

EMEKA ANAETO, ECONOMY EDITOR

midst the massive declines in cash-flow of the various tiers of government due to dwindling oil revenue, there were indications that the Senate may block state governments from accessing the USD4.25 billion earmarked by the World Bank for states’ development. A source close to the Senate Committee on Foreign and Domestic Debts, hinted to Vanguard that the states would still need to seek the Senate approval to access the funds, adding that the Senate will weigh the merits in the light of the existing loan exposures of the states. He added that the states were already highly geared, meaning that they have overborrowed and are now in a repayment difficulties. As at end last year total states’ domestic debts was about N1.66 trillion with another substantial share of Nigeria’s total external debt of USD10.7 billion. These are in addition to federal government and Central Bank of Nigeria’s backed N560 billion restructured loans for the states last year, which were rolled over again this year due to the states’ inability to meet up with repayment plans. Several states are said to have mortgaged their monthly allocation from the Federation Account Allocation Committee, FAAC, resources to irrevocable standing payment orders that clears between 50 per cent and 90 per cent of the allocations into their contractors’ bank accounts, leaving the affected states with too little a resources that cannot pay basic salaries. Hence, over 17 states are now owing salary arrears with some up to 10 months as at end April 2016. In a session with the Nigerian Governors’ Forum, NGF, the Country Director of

C M Y K

World Bank, Rachid Benmessaoud, had educated the governors on how they could access the funds. The chairman of the forum, Governor Abdulaziz Yari of Zamfara State, told journalists that the forum decided to invite the World Bank to brief them “on the money lying down in the World Bank which largely belongs to state governments but had not been accessed”. Mr. Yari said because of the cumbersome procedure in accessing the funds, most of the governors did not even know they had such funds

there. He said: “Because of the cumbersome procedure in accessing these funds, most of the governors did not even know they had such funds there. It was the initiative of the Governor of Kaduna State that they should come and make this presentation so that they can educate the governors to know that these monies are there especially in the kind of situation we are so that the states can move forward in terms of infrastructure development and other matters in our respective states. “

•Bukola Saraki, Senate President

CBN’s MPC urged to complement FG’s new oil sector policy A

head today’s crucial meeting of the Monetary Policy Committee, MPC, of the Central Bank of Nigeria, CBN, the apex bank’s body has been asked to adopt a monetary policy complementary to the recent liberalisation of the petroleum downstream sector to forestall negative impact of a weaker exchange rate in the parallel market. Although fiscal impulse from recently signed appropriation bill is anticipated to stimulate performance in second half of 2016, the recent move by Nigerian National Petroleum Corporation, NNPC, to deregulate the downstream petrol market, according to financial market analysts, comes with serious monetary policy implications. Oil marketers are now allowed to freely import fuel and to approach autonomous sources rather than the CBN for their foreign exchange needs. This has been broadly speculated to prompt the apex bank to bite the bullet and allow the Naira find its true value in the official market. Expectedly, the Nigerian Stock Exchange, especially the oil & gas sector, has experienced a resurgence, rallying 4.9 per cent

in the last six days following the announcement by NNPC. However, according to analysts at Afrinvest West Africa, a Lagos based investment house, failure on the part of the MPC to fix the currency market crisis will widen the spread between interbank and parallel foreign exchange markets while creating more opportunities for arbitrage. According to Afrinvest, “it will also increase the pump price of

Given that inflation in Nigeria, most especially the recent episode, has been studied to be majorly cost-push, we believe if the Committee leaves MPR unchanged, allowing the market to find its true yield, but concentrating on its mop-up strategy of controlling liquidity, the result may be more absorptive for the economy

petrol in the PPPRA price modulation template and further pressure the general price levels, ultimately defeating the objective of price stability”. Consequently, Afrinvest advised that MPC should adopt a more flexible exchange rate policy that will close the spread between the official/interbank market rate and the N285.00/ US$1.00 rate assumed by PPPRA in its pricing template. This, according to them, is to reduce the pressure on the parallel market rate which has already been endorsed by the pronouncement of NNPC. They also advised the MPC to remove the restrictions earlier imposed on 41 items that were excluded from accessing foreign exchange at the official/interbank market and allow the fiscal authorities to impose an appropriate trade policy in line with the agenda of the government. This, according to them, will instil confidence in the system and ensure the influx foreign portfolio investments, FPIs, and foreign direct investments, FDIs, that will help increase foreign exchange supply. Afrinvest had noted that MPC, in the last meeting, guided that it will maintain a positive real

interest rate for which MPR was hiked to 12.0 per cent when February inflation touched 11.4 per cent. ”Inflation rate has accelerated to 12.8% and 13.7% in March and April 2016 with higher projections for coming months (14.6%); hence, for consistency, it would be proactive, if the Committee front loads inflation expectation into MPR in anticipation of higher prices. Thus, we assume that MPC could set the monetary policy interest rate, MPR, at 15.0% to ensure positive real return in the interim”. Also Afrinvest stated, ”given that inflation in Nigeria, most especially the recent episode, has been studied to be majorly costpush, we believe if the Committee leaves MPR unchanged, allowing the market to find its true yield, but concentrating on its mop-up strategy of controlling liquidity, the result may be more absorptive for the economy. ”Therefore, the dilemma for the Committee would then be to either increase MPR to 14.0% or 15.0% in addressing negative real return problems and risk higher cost of credits to both government and businesses or allow the market set interest rate and risk inconsistency in policy”.

Vanguard, MONDAY, MAY 23, 2016 — 31

Advertising & Media

Ad agencies must re-invent to fit into world order — OMOJAFOR Stories by PRINCEWILL EKWUJURU

he Group Chairman of STB-McCann, Sir Steve Omojafor has said that advertising agencies must reinvent to fit into the new world order in order tio excell. He made the assertion in a lecture titled, "Nigerian Advertising: ‘Yesterday, Today & Tomorrow”, delivered at the inaugural lecture to mark the th 60 anniversary of Rufai Ladipo, a former president of the Association of Advertising Agencies of Nigeria, AAAN. The lecture series, which will hold annually will explore issues in marketing communications to the enlightenment of the industry, government and other related sectors in the economy, was supported by BrandIQ, a marketing communications magazine. Omojafor, who was the Lead Speaker traced the history of advertising from the conventional period through the era of integrated communications to the current digital era, explained that with the country ’s exposure to sophisticated digital technology, Youtube, Facebook,

Twitter, Snapchat and many other platforms have become the new advertising “media”. In this view, he advised agencies that want to excel, to re-invent themselves and possibly change their business models to fit into the “New Generation World of today,” while sticking to the timecherished rules of the game. He however praised the new partnership between Insight Communications and Publicis Groupe as one of the things that can lead to a glorious future for advertising in Nigeria. Also speaking, Steve Babaeko, CEO/Chief Creativity Officer, X3M Ideas, revealed that artificial intelligence will be the next level of development in the world of advertising. “In a world where a robot has already been named Chief Creativity Officer of a leading global agency, "Nigerian agencies must change their module of operation if they want to keep pace with the rest of the world” Babaeko stated. Buttressing this point, Dr. Ken Onyeali Ikpe, Managing Director/CEO, All Seasons Media pointed out that practitioners should master the fact that disruption by technology will continue in advertising and indeed all

other genres of marketing communications. Speaking on the relevance of regulation in moulding a great future for advertising, Alhaji Garba Bello Kankarofi, Registrar/CEO of APCON, explained that this awareness had come years ago when the disagreement between Newspaper proprietors and Ad practitioners revealed that self regulation was clearly inadequate. He advised all students and new entrants into the profession to deepen

their knowledge in advertising regulations if they want to excel in the profession Another discussant, Chizor Malize, Managing Partner Brandzone Consulting LLC harped on the importance of creating differentiation as a tool to ensure success for future players in the industry. She stated that digital communication is evolving and Nigerian agencies that can develop indigenous models will definitely stand out and excel.

African PR leaders converge in Nigeria for APRA conference

frican Public Relations leaders will converge in Nigeria th for the 28 edition of the African Public Relations Association, APRA conference in association with the Association Union Commission, AUC, slated for Calabar International Convention Centre, CICC, Cross River from May 24 through 27, 2016. The Conference themed, ‘Leapfrogging Africa: The Role of Communication’, will be chaired by former President of Nigeria, Olusegun Obasanjo. The occasion is expected to bring together some if the best minds in Public Relations and Communication, numbering about 500 from across the African continent and beyond. Speaking about the conference, the Secretary General of the Association, Mr. Yomi Badejo Okusanya, said that the theme is deliberate because the key challenges of Africa lie in communication. In view of this, organisers of the conference have lined up speakers like Alhaji Aliko Dangote, President and Chief Executive Officer, Dangote Group; Erastus J.O. Mwencha, Deputy Chairperson, ACU; Lai Mohammed, Hon. Minster of Information, Nigeria; Dr. Ben Ayade, Governor of Cross River State; Peter Mutie, President, APRA; Bart-de-Vries, President, IPRA; Robyn De Villiers, CEO, Burson Marsteller Africa and Maxim Behar, President of ICCO and others.

Okhma wins right to market Calabar festival

a result of its performance in marketing the 2015 carnival, Okhma, a destination marketing agency has again won the right to the 2016 Calabar carnival rights. The chairman of the Cross River state Carnival Commission, Mr. Gabe Onah, Special Adviser to the governor on Festival and Events, acting on behalf of His Excellency, the executive governor of Cross River state, Professor Ben Ayade, announced a retainership agreement with the agency. The theme for the 2016 Carnival is “Climate Change”, seeks to draw attention to the challenges of global warming and its effect on the environment as well as preservation of future livelihoods. With the carnival, participants and revellers attack the problem with creativity as their major tool. It is also noteworthy that with Cross River being a major tourism destination in Africa, preservation of its wild life and natural fauna becomes a task for accomplishment, which Governor Ayade is now spearheading.

Micro-Finance

Umuchinemere MFB disburses N248mn in Q1 2016 Stories by Providence Obuh

muchinemere Procredit Micro Finance Bank (UPMFB) said it has disbursed N247.72 million micro credit fund to 796 active poor people in Enugu State in the first quarter of 2016. The bank also said that the amount disbursed in the period under review was below its planned budget for disbursement, while attributing it to high cost of living that affected virtually all business activities in the country. In a statement issued by the bank, Head of Credit/Business Development, Mr. Ikechukwu Ngene, expressed hope that the situation would improve in the second quarter of the year, when the national budget would have gone into implementation and economic activities revived. He predicted that there would be economic improvement in the country by the end of the year, assuring that the bank was focused and determined to achieve its projected target of fund disbursement to create jobs and alleviate poverty by the end of 2016 .

He advised beneficiaries of the bank’s facilities to use the facilities wisely and ensure prompt payment, so as to continue to receive fund from the bank.

A breakdown of the disbursement shows that about 306 females received a total of N169, 039, 459 and N78,680, 500 was disbursed to a total of 490 male

beneficiaries. However, Special Adviser on Micro, Small and Medium Scale Enterprises to Enugu State Government, Mr. Anayo Agu, commended the bank’s poverty alleviation scheme

since 2009 when it took up the management of the government’s special transport scheme, Coal City Cabs and Coal City Shuttle, aimed at creating jobs and empowering hundreds of unemployed youths in the State, just as he advised that they keep up the good work.

New accountants tasked on anti-corruption T

he Institute of C h a r t e r e d Accountants of Nigeria (ICAN) has enjoined newly inducted members to join the Federal Government in its fight against corruption in public and private sectors.. President, ICAN, Otunba Femi Deru, gave the charge at the 57th Induction Ceremony of New Member into the ICAN in Lagos, saying, “Indeed, as Chartered Accountants, we must deliberately join the critical mass to support and sustain the on-going anticorruption crusade by the government. We must all stand up to be counted in this battle for the renaissance of our social values and those of you being brought into the fold of this noble profession, must join with your peers to take up this battle.” Deru said that there was concern of inconsistencies and failure to comply with

accounting and other regulatory requirements within the accountancy profession as it is also across a wide spectrum of professions, however, he stated, “it is imperative that I enjoin you to continue to live above board. It is no longer news that the absence of transparency and accountability has intensified the prevalence of corruption and sharp practices in low and high places in the nation. “As a result, this has accounted for the slow pace of development of this richly endowed nation. Indeed, financial improprieties by persons in position of trust have been a recipe for underdevelopment, increased suffering of the citizens, unemployment, hunger and anger of the poor and insecurity for all. “As Chartered Accountants, we must hold firmly to our main strengths, that is, the

virtues of integrity and credibility on which our survival depends. This is a compelling mandate we must continue to discharge because being the conscience of the nation, Accounting Professionals must strive to create oasis of sanity in their spheres of influence such that a virtuous society will emerge.” he said. Also, Former Minister of Finance Dr. Anthony Ani, said that the the country has nothing to gain from devaluation since Nigeria do not export anything significant except crude oil. He said that the further devaluation of the naira will worsen the economic situation and send the cost of all imported goods to the skies. Ani said these in his paper titled: “Of Exchange Rate Mechanism, Exchange Rate and Devaluation.” stating, “I submit that neither

devaluation nor flexibility of the exchange rate is the answer to our problems.” He lamented that the debt cancellation exercise of 2003 destroyed the exchange rate mechanism as one of its conditions was for the CBN to abdicate its responsibilities as the central player in the Autonomous Foreign Exchange Market (AFEM) where a wholesale/retail Dutch auction system was introduced. “Our exchange rate mechanism was destroyed when we were cajoled into debt cancellation programme. We must restore this mechanism and adopt a realistic exchange rate. We must make the naira to be internally convertible again; we must realize that the naira had in the past been overdevalued with no corresponding production or productivity to follow,” he said.

32 — Vanguard, MONDAY, MAY 23, 2016

(0805 220 1997)

“Of exchange rate mechanism, exchange rate and devaluation” BY ANTHONY ANI

ndustry, Commerce, as well as employment opportunities, unexpectedly, flourished for the greater part of Abacha’s four year reign, despite Nigeria’s pariah status and the stupendous treasury rape by the dictator. The question, therefore, is how Abacha’s Economic team sustained the erstwhile elusive enabling environment, despite the dysfunctional economy that was inherited. Fortunately, Chief Anthony Ani, an insider in that team, answered this question, in his keynote address, at ICAN’s injuction ceremony on May, 112016. A summary and excerpts from that paper are as follows; please read on: “We are an import dependent nation, therefore the Naira price of dollars, required to pay for imports, will inevitably significantly impact on multiple sectors of our economy; furthermore, despite the collapse of Naira exchange rate from $2=N1 to N199=$ since 1985, the IMF, America and several international Banks have goaded Nigeria to further devalue our currency. Recently, even the immediate past President of ICAN also added his voice to the call for Naira devaluation. I hold the view that our Naira is even undervalued and President Buhari should continue to resist the pressure to devalue. Devaluation will further worsen our economic situation, especially when we do not export anything significant except crude oil. “Invariably, Exchange rate is a key policy variable, and a good exchange rate mechanism, therefore augurs well for price stability and international trade”.

The Naira was effectively devalued when “Nigeria adopted IMF’s Structural Adjustment Programme in 1986, when the Second – Tier Foreign Exchange Market (SFEM) was introduced, but banks and their directors and managers made bonanza profits until things came to a head by November, 1994. The banks were selling dollars bought at N22 SFEM price to end users, and manufacturers at N128=$1; meanwhile, Inflation was galloping at 88% and lending rate was oppressive at over 30%. There was serious price instability as salaries and wages were not aligned to inflation or the parallel market exchange rate. There was discontent in the country and the security of the nation was threatened”. Consequently, in November 1994, the acting Finance Minister (Chief Anthony Ani), CBN Governor (Paul Oguwuma) and the Chairman of National Economic Intelligence Committee (NEIC) Prof Sam Aluko were ordered to find a solution by the National Security Council. “We, therefore, looked at the macro-economic variables and found that there was overliquidity of Naira in the banking system, as a result of excess profits from forex arbitrage. “ We decided to eliminate this liquidity and reduce instability and inflation. We also resolved to crash the parallel market by all means, but this was problematic, because, with barely $1bn reserves and less than two weeks imports cover, we did not have the capacity to crash the parallel market, especially when Nigerian importers no longer enjoyed international credit terms, as overseas exporters demanded upfront payments”. “Ultimately, we (Ani/

Ogwuma/Aluko) agreed that for the parallel market to crash, the CBN must fund the needs of the real sector, while banks sourced their own forex to fund the other sectors; we also shut all other forex windows and reluctantly concluded that, an exchange rate of N8082=$1 will be sustainable, but production and productivity must however remain our abiding watch words”. Indeed, as soon as our recommendations were effected, the parallel market crashed from N128 to $82/$1; furthermore, we also discovered that proceeds of non-oil exports and remittances from Nigerians in the diaspora was surprisingly

We are an import dependent nation, therefore the Naira price of dollars, required to pay for imports, will inevitably significantly impact on multiple sectors of our economy nil. On enquiry, we gathered that Asian businessmen, who controlled Nigeria’s non oil exports, persistently falsely condemned whole shipments to be substandard and ultimately declared valueless, whereas these, exporters actually sold and retained the proceeds abroad. Similarly, the meters at flow stations of

debts during the debt cancellation exercise”.

our oil terminals malfunctioned for years, with the result that crude oil was shipped for which no payments were made. Consequently, we sealed all these loopholes and opened up significant capital inflows; we were also determined to reduce our heavy dependence on food and petroleum imports particularly”. Suffice to say that with the removal of the existing tax on overseas remittances and the introduction of other supportive laws, foreign inflows into Nigeria increased, and by 1997 external reserve had risen to $7 billion to make the Naira exchange rate more stable and virtually convertible. Another important development was that CBN now made a profit of N58 per dollar, on forex sales to the real sector, consequently CBN was awash with Naira which we applied to balance our budgets and also build infrastructures such as the Gwarimpa Housing Estate, the biggest housing estate in Africa, whereas before the introduction of AFEM, these bloated profits were selfishly cornered by banks and bankers. “In February 1995, I had visited the Paris Club Office in France where I proposed payment of $7bn as full debt settlement spread over 5 years with nil interest, and our creditors were very excited with the proposal. By 1996 during the process of analysis and verification of the entire Paris Club debt, we discovered 18 “failed projects” valued at $1bn which were never executed, but for which the related proceeds from external loans were in all cases drawn down. The Government insisted that rather than pay we should go to court; sadly, we ended up paying these

Regrettably, we paid about $12 billion for what should not be more than $7 billion. The whole Paris Club thing was a debt trap to enforce a structural adjustment programme and they used Nigerian economists, trained in North American Universities for this enforcement. The debt cancellation exercise of 2003 destroyed our exchange rate mechanism as CBN abdicated its responsibilities as the central player in the Autonomous Foreign Exchange Market (AFEM), and Bureau de Change (BDC) were inexplicably licensed and also funded by CBN. Eventually, there were 3000 BDCs owned by bankers, legislators, politicians, all funded at the rate of $60,000 per week by CBN. With this development, few families or clans took control of the forex market and made a kill with super profits and the rest is history; ultimately, the Naira also became gradually inevitably over devalued. Today, the same Banks with the robust support from IMF are even suggesting that the Naira should further be devalued. Profits made by banks in respect of their foreign exchange transactions remain humongous and Nigeria is the only country in the world frivolously re-exporting its remittances. It is relevant to note that the Naira is not convertible but remittances which are meant to stabilize our exchange rate are now reexported. This is the cause of the scarcity of dollars in the market and the cause of the worsening depreciation of the Naira in the parallel market”. SAVE THE NAIRA, SAVE NIGERIANS!

Business & Economy FBN Merchant harps on sound corporate governance

anaging Director/Chief Executive of FBN Merchant Bank Limited, Mr Kayode Akinkugbe, has called on banks to embrace sound corporate governance as a way of life in order to strengthen the sector. In a keynote speech delivered at the monthly meeting of the Committee of Chief Compliance Officers of Banks in Nigeria (CCCOBIN), Akinkugbe said, “Sound corporate governance goes beyond compliance and checklists; it must become a way of life. We have a duty to ensure C M Y K

that it permeates the length and breadth of our banks”. Speaking on, ‘The Place for Sound Corporate Governance in Today’s Banking Institutions’, he noted that the principles of corporate governance must form the basic framework for ensuring that stakeholders are able to enjoy long term benefits and value from banks. They also serve as strong pillars that ensure overall market confidence in institutions. According to him, the institution of corporate governance, backed by legislative, economic and

financial reforms intended to promote transparency, accountability and the rule of law in the economic life of the country, are critical in assuring the banking public retains trust and confidence in such essential of bodies. Mr. Akinkugbe stated; “this not only ensures compliance with legal and ethical standards, but helps in building the strength of financial institutions within an economy.” He further emphasised that in recent years, corporate governance has attracted considerable interest.

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