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MARCH 7, 2016

LAUNCH - From left: Steve Judo, General Manager, Special Duties, Channels Television; Bola Onadele Koko, MD/ CEO, FMDQ OTC Securities Exchange; John Momoh, Chairman/CEO, Channels Media Group, and Emmanuel Ukeje, Director, Financial Markets Department, CBN, at the live launch of FMDQ Price Ticker Tape on Channels Television in Lagos. PHOTO: AKEEM SALAU

INFRASTRUCTURE:

Why FG, other investors can't access N5.3 trn pension fund By ROSEMARY ONUOHA

aving been in operation for over eleven years, investors are still unable to access the accumulated pension fund which is in excess of N5.3 trillion due to inability to meet criteria in the investment guidelines. Investigation by Financial Vanguard revealed that Pension Fund Administrators, (PFAs) in charge of channeling the fund into qualified investment vehicles are yet to see any C M Y K

credible investment vehicle from Nigerians. Even government bodies, especially state governments that are clamouring for the fund to be invested in infrastructure have not been able to come up with an infrastructure bond as the guideline stipulates. Minister of Works, Power and Housing, Mr. Babatunde Fashola recently approached pension operators to see if part of the fund could be channeled into infrastructure but was told that even the Federal Government

must meet the criteria in the guidelines. Aside from the government, other interested investors have consistently failed to meet the requirements as stipulated in the investment guidelines. As such, the fund has continued to be invested in zero risk investment vehicles, despite the fact that the infrastructure deficit of the country needs long-term funds for investment in the sector. Although the guidelines clearly state the investment criteria, Financial

Vanguard's findings showed that the National Pension Commission, (PenCom) ensures that interested investors abide strictly by the law. PenCom ensures that in the case of infrastructural investment, there must be a competitive bidding process for any contract, the bidders must be qualified to carry out the contract, there must be a time limit for completion of the contract, there must be a monitoring team to monitor the progress or otherwise of the contract, there must be experts to ascertain that the quality of products the investors purport to buy are up to standard. Due to these oversight functions of PenCom, Nigerians have not been able to access the fund as most investors that have come forward to use part of the fund for investment are merely looking for quick profits, while PenCom on its part stands guard to ensure that pensioners’ money are not wasted on unrealistic projects. Director-General of PenCom, Mrs. Chinelo Anohu-Amazu said, “I have always been a proponent of investment in infrastructure for a simple reason that this is one investment if handled properly would benefit both the contributors and retirees alike. The Federal Government bonds are safe but it is not something you can see and feel like infrastructure. “When we were doing this reform in 2001/02, we were in Mexico and had gone to other South American countries where they have implemented the contributory system. We were going down a road and what we saw on the signboard on the road was ‘contributory pension fund.’ This is the kind of thing we want to see in Nigeria. Ten years down the line there is no such signboard in Nigeria and the funds are growing. Who will use the roads? “The reason for the criteria in the guideline is to make sure that the funds are safeguarded, shrouded from the vagaries of human discrepancies and all. Countries like Singapore and Canada have utilized their pension funds effectively for their citizens. It is not something that is outlandish; the key thing is: How did that utilisation happen? “Why are Nigerians not meeting the guidelines? What is preventing those who are looking to build things for the community from meeting the Continues on page 18

18 — Vanguard, MONDAY, MARCH 7, 2016

Cover

The Nigerian Palm oil Industry: What went wrong and the way forward (2)

CELEBRATION - From left, Head, Corporate Communications Division, Ayoni Trimnell; Head, Transaction and E-Banking, Rob Giles; CEO, Diamond Bank,Uzoma Dozie; Head, MSME Proposition, Njideka Esomeju and Head, Corporate Planning, Lanre Showunmi during the celebration of one millionth diamond mobile application user at Diamond Bank's head office, Lagos.

Infrastructure: Why FG, other investors can't access N5.3trn pension fund Continued from page 17 guidelines? What is preventing you from having access to the pension fund?” Anohu-Amazu queried. “If the PFAs per chance invest in something they ought not to have invested in, it would read on its raider that instant and they have two options, either to rescind the transaction or we will take our license back, very simple. Now if we haven’t seen a lot of investment in infrastructure it is because a lot of people have not met the guidelines,” she said. Guideline on investment of pension fund in infrastructure PenCom set the minimum value of individual projects that pension fund assets could be invested in at N5 billion. According to PenCom, as much as 15 per cent of the total value of pension fund assets under management could be invested in infrastructure through infrastructure bonds and another 5 per cent of the total value of pension fund assets could be invested in infrastructure through infrastructure funds, making 20 per cent of the total value of accumulated pension asset. Also, both outlets must meet the conditions for the investment of pension fund in infrastructure before PFAs could channel pension fund assets into such investments. The pension regulator cited section 5.2.3 of the draft “Regulation on Investment of Pension Fund Assets” saying it provided that pension assets could be invested in infrastructural projects through eligible Bonds, Sukuk subject to two major conditions. “The infrastructure project shall be not less than N5 billion C M Y K

in value and awarded to a concessionaire with good track record through an open and transparent bidding process in accordance with the due process requirements set out in the Infrastructure Concession and Regulatory Commission Act (ICRC Act) and any regulation made pursuant thereto and certified by the Infrastructure Concession and Regulatory Commission (ICRC) and approved by the Federal Executive Council (FEC),” PenCom said. Other conditions for the investment of pension assets on infrastructure include that the project's business plans and financial projections indicate that they are viable as well as economically and financially rewarding for investment by pension funds. The Bonds or Sukuks issued to finance the infrastructure project shall have robust credit enhancements including guarantees by the Federal Government or eligible bank/ development finance institution or MDFOs and a maturity date that precedes the expiration of the concession. It should also have a feasible

Now if we haven’t seen a lot of investment in infrastructure it is because a lot of people have not met the guidelines

and enforceable redemption procedure in the event of project suspension, cancellation or, in the case of regulated sectors, when changes in regulatory or policy decisions make the project to differ significantly from its original financial projections. Where infrastructure projects are financed through infrastructure funds, the value of the infrastructure fund shall not be less than N5 billion and the infrastructure fund must have a well defined and publicised investment objectives and strategy as well as disclosures of pricing of underlying assets, including any other necessary information. All annual financial statements of the fund shall be audited by reputable firms of chartered accountants and the infrastructure fund shall have satisfactory pre-defined liquidity/exit routes such as IPO, sale to other PE Funds, Trade sale, sale to a strategic investor etc. The funds shall be managed by experienced fund managers, versed in infrastructure financing and registered with the Securities and Exchange Commission, (SEC) as fund managers. Some other conditions for the investment of pension assets in infrastructure include that a minimum of 60 per cent of the infrastructure fund shall be invested in projects within Nigeria and where an infrastructure fund does not have development finance institutions or MDFOs as coinvestors, but the fund manager has a minimum investment manager rating of BBB issued by a rating company registered or recognised by SEC and the Continues on page 19

alm oil owes its significance in the Nigerian scheme of things to several reasons. Besides conventional uses in food-processing, every part of the tree has economic value that can be employed in a variety of lowcost activities like roofing and wickerwork. Moreover, palm oil is a source of raw material for a whole range of industries; for instance, those involved in the manufacture of detergents, pomades, confectionary fat and margarine. By virtue of this alone it offers massive scope for employment generation and income distribution, to say nothing of other diversified products like palm kernel oil. The industry has therefore been widely regarded as a high-growth business by the private sector. In countries like Malaysia and Indonesia, which together account for 90% of current global exports, palm oil has proved to be a cornerstone of industrial growth. For Nigeria, this dynamic crop represents an economic asset of incredible potential. It also represents huge opportunities for rapid SME development as a means to economic diversification, poverty alleviation and employment generation. The palm oil industry is unquestionably vital in Abuja’s plans for accelerated growth and the establishment of a sustainable and closely interdependent economy. Reinvigorating the industry can very well spark off the enterprise revolution that the country need to turn its fortunes around. Government intervention in this sector must hence be guided by a number of critical considerations: ? ? ? ? ?

? ?

Maximising productivity in existing plantations so that scattered smallholdings can be converted into viable agricultural ecosystems. Minimising cost of production by developing highyield varieties and improving efficiency in basic processing and refining activities. Creating effective backward and forward linkages for palm oil production and processing activities with focus on the larger domestic economy. Directing investment at marginal farmers and cooperatives that rely on wild groves or practice mixed farming on small plantations. Facilitating research and development, promoting public-private joint ventures and encouraging foreign investment with tax breaks and financial incentives. Revamping distribution and marketing networks to export-orientated standards; entering bilateral counter-trade agreements to avoid high tariffs and import restrictions. Ensuring compliance with international regulations on safety and quality of palm oil and processed products through wider use of technology. Implementing policies to address negative social development issues; for instance, promoting backward migration from urban areas to plantations.

A total of #746 billion worth of Agricultural products was imported into the country in the third quarter of 2015, despite currency restriction imposed on manufacturers of some agricultural items. This is to encourage local products like palm oil. Palm oil producers desire to increase their production. This could only be done by growing high yielding variety as mentioned above, improving efficiency in milling, crushing and refining and balancing the rising cost of land labour. The Nigerian Institute for oil Palm Research (NIFOR) is now producing hybrid seedlings capable of matching Malaysian output of 4 tonnes per hecters. What is necessary now is to improve capacity to use the most modern processing techniques and also improve the infrastructure. All these will combine to boost production.

Vanguard, MONDAY, MARCH 7, 2016 — 19

n the early 1970’s through to the 1990’s, the Nigerian industrial horizon was dotted with textile manufacturing industries. In the Kaduna-Kano axis, one recalls with nostalgia several large textile companies employing thousands of Nigerians. It used to be an intriguing experience to be close to a textile mill. At the close of business, several employees will be trooping out of the premises of a textile company. It was like a market that has sold out all its wares. These textile mills were using local materials that further employed millions of farmers. At the same time, Nigeria was exporting an estimated 25 to 30 per cent of production, making the industry an important earner of foreign exchange for Nigeria. At that time, instead of being a consumer of foreign exchange, the textile sector earned the country some foreign currencies that added to the build up of the nation’s external reserves. Looking back on those golden years, the Central Bank of Nigeria (CBN)'s Annual Report for 1995 showed that out of 13 sub-sectors in the Manufacturing sector, the Textile sector (Cotton, Textile and Synthetic Fabrics) accounted for a significant proportion of the overall growth of manufacturing production. The sector was saving a lot of foreign exchange for the country as between 60 to 70 per cent of the raw materials used in the industry were sourced locally. As the sector is labour-intensive, it provided an estimated employment of around 1,500,000 direct jobs for Nigerian markets. Domestic Garment union states that markets are facing a major more than one million people, Nigerians. During this period, the threat from smugglers whose jobs were indirectly textile industry was at its importing cheaper textile related to the textile industry peak with 124 companies in fabrics from other countries like cotton farmers, traders, existence. But there are only and selling them at a price, suppliers etc have lost their 30 textile companies in which is lower than the market source of revenue as a result of garments of these shutdowns. existence in Nigeria today. price It is unfortunate that there manufactured locally. This is a shocking reduction Where do these smugglers are only about 30 operational of 70 per cent. Despite the fact that global textile trade is get their foreign exchange textile mills which are running booming, these industries are from? Of course, the parallel at an average of 40 per cent of gradually diminishing in market which many Nigerians installed capacity in Nigeria Nigeria. The reason behind are now using as the reference today. The influx of cheaper this is the influx of smuggled exchange rate. This anti-social fabrics from China and India foreign textile products into behaviour has led to the has been highlighted as one the reasons for Nigerian markets. Huge closure of 90 textile mills and of quantities of both new and a layoff of about 1,500,000 underperformance in this second-hand garments from workers during the last decade. industry. Based on trade data Asian countries flood the Data quoted by a Nigerian from the National Bureau of

Nigerians used scarce forex to kill textile industry

Statistics, Nigeria spent about N24.7 billion on textile imports between July and September last year. This represented a 17 per cent decline in naira terms from the N29.8 billion recorded in the corresponding period of the previous year. Nigeria had placed a ban on textile importation in 2010 in order to encourage domestic production. However, this led to increased smuggling. Textiles also feature in the CBN’s circular of June 2015 specifying 41 import items for which foreign exchange from official sources is not available. Smuggled imported textiles account for over 85 per cent of

fabrics sold locally. It is Nigerians that are buying these imported goods, killing the local industry, sending several Nigerians out of jobs while increasing the job opportunities in Asia, Europe and America by patronising their products. It is the same Nigerians that are using the country ’s scarce foreign exchange to import these goods. Yet, they bend backwards to accuse government and CBN of not making enough foreign exchange available to private sector operators. The annual global output of textile firms is estimated at $400billion. China’s production accounts for half of this figure. According to the CBN’s 2014 Statistical Bulletin, the value of cotton production in Nigeria contracted by -1.1 per cent year on year in 2014 and accounted for 5.1 per cent of crop production GDP in the same quarter. The Bank of Industry blames state governments’ failure to implement the National Cotton, Textile and Garment policy in their respective states for the collapse of textile companies across the country. It is the shame of a nation that government officials from Turkey are currently visiting Nigeria and Turkey happens to be an important cotton producer and has a welldeveloped domestic textiles industry. Maybe this government wants to learn from Turkey, how to grow cotton and develop the textile industry that was once booming in the country. Now that Nigeria is cash-strapped, anything in the name of diversification goes. What a shame, what a pity, what a nation to weep for.

Cover Continued from page 18 fund manager shall retain a minimum investment of 3 per cent of the infrastructure fund. Where the infrastructure fund has development finance institutions or multilateral development finance organisations as co-investors, the fund manager shall retain a minimum of 1 per cent of the infrastructure fund and the fund shall have an advisory board with independent representatives of institutional investors being in majority. And prior to investment and during the tenor of investment C M Y K

Infrastructure: Why FG, other investors can't access N5.3trn pension fund in any infrastructure fund, PFAs are to ensure that the advisory board has responsibility over audit functions regarding the evaluation of projects prior to investment; transactions with parties related to the infrastructure fund manager and strategies concerning divestiture of investments in which the private equity fund has interests. Way forward In order to ensure maximum

utilisation of the pension fund, PenCom is of the opinion that even before investors go ahead to float a bond, they should study the investment guidelines thoroughly. Anohu-Amazu said, “If you are desirous of the pension fund going into your investment, study the guidelines. So that at the time you are creating that bond you are ready. Former Director General of Lagos State Pension

Commission (LASPEC), Mr. Rotimi Hussain said that it is ideal that the pension industry left the fund strictly in the hands of pension fund administrators and custodians because they are the professionals. He said that pension funds have been so seriously ringfenced that in over eleven years of practice there has never been a single case of fraud being reported. Hussain said, “But it could get to a worrisome level where you

keep accumulating funds and you leave that kind of fund in low yield investment for years in a developing economy. PenCom have laid down the investment guidelines, however, if you study the investment guidelines closely, they are stringent because the conditions are so strict. “It is important to note that safety of the pension fund takes very high premium over and above returns. Nobody says you shouldn’t make returns but not at the risk of losing money. So the industry is not going to throw money after risky investments,” Hussain stated.

20 — Vanguard, MONDAY, MARCH 7, 2016

Business & Economy

Labour calls for presidential task-force against smuggling By VICTOR AHIUMA-YOUNG

RGANISED Labour in the nation’s Textile and Garment industry has called for an all inclusive presidential taskforce not only against smuggling, but also to confiscate goods smuggled into the country. In a statement, Issa Aremu, General Secretary of the National Union of Textile and Garment and Tailoring Workers of Nigeria, NUTGTWN and Chairman, IndustriALL Global Union, Sub Sahara Africa, said: “We are excited by President Buhari’s commitment to revive the textile industry. All the administration needs is to immediately implement the Robust Recommendations of the 2015 Cotton, Textile and Garment, CTG, policy.” He added that as recommended in 2015, that “all military and Para-military agencies and Government schools are to purchase only Nigerian made textile and garments for their uniforms once the requisite standards are met. In addition, he said that the private sector (schools in particular) should be encouraged to source their materials locally. Aremu said between 30 percent and 35 percent of textile and garment manufacturing costs are energy related expenses, noting that without addressing the industry’s energy needs, the Nigeria CTG sector simply cannot develop.

FORUM - From left: Pharm Nkiru Omenyi, MD, Daruchi Products Ltd; Mr Nnamdi Okafor, May and Baker; Mrs Edith Nwachukwu, MD, Audion Pharmacy Store, Lagos and Pharm Ngozi Ezeani, Chief Pharmacist, Havana Specialist Hospital during the May and Baker 2016 Customers forum held in Lagos.

40 solid minerals awaiting development, says ABU V-C BY NAOMI UZOR

ice Chancellor, Ahmadu Bello University, Prof. Ibrahim Garba, has said that there are about 40 different kinds of solid minerals and precious metals buried in Nigerian soil waiting to be exploited. The commercial value of Nigeria’s solid minerals has been estimated to run into hundreds of trillions of dollars, with 70 per cent of these buried in the bowels of Northern Nigeria. The Professor stated this in his paper presentation titled; Mineral Resources and Mining in Nigeria: Investment Opportunities and Challenges’ at a seminar during the 37th Kaduna

FIIRO tasks entrepreneurs on contract production By FRANKLIN ALLI

ederal Institute of Industrial Research, Oshodi (FIIRO) has enjoined entrepreneurs who have been trained by the Institute to embrace contract production scheme it has put in place in order to realize their dreams of becoming entrepreneurs. Dr. Gloria Elemo, Director General FIIRO, made this appeal in Lagos, during the Techno-Entrepreneurship Development Training for Ubulu-Uku Youths, Delta State. She also urged them not to mind any challenge or barrier they would face while becoming business owners C M Y K

and employers of labour. According to the DG, acquiring the skill is just one of many steps to becoming the entrepreneur of your dream, taking a step further to starting the business is another big step. “I can assure you that you will find tones of reasons why you cannot start now, though some of these reasons cannot be ignored totally especially start off fund. “I want you to know that once there is a will, there will always be a way,” she said. She also informed them that there exist collaboration between the institute and the Bank of Industry (BoI) in funding their projects, be it small, medium or large.

International Trade Fair. He said If Nigerians were taking data seriously; we would have built a database, where we have authentic information, noting that the failure of Nigeria, since independence in 1960, to put in place a structure that will make the benefits of the exploitation of solid minerals available to all Nigerians has been the bane of the nation. At the moment, he stressed,

mining of minerals in Nigeria accounts for only 0.3 per cent of its GDP, due to the influence of oil resources. The domestic mining industry is underdeveloped; leading to Nigeria having to import commodities it could produce domestically, such as salt or iron sheets and billets. According to him, solid mineral deposits are scattered all over Nigeria, with more deposits in certain areas than

others. Over 40 million tonnes of talc deposits have been identified in Niger, Osun, Kogi, Ogun and Kaduna states. There are huge deposits of coal ranging from bituminous to lignite in the Anambra Basin of SouthEastern Nigeria. He noted that the low activity in the solid mineral sector is not yielding the desired financial benefit as there are no records of payment of taxes and royalty to the government. Nigeria is losing lots of resources from untapped mineral deposit as well as from the little that is being mined mostly by illegal miners who smuggle the products out of the country. “Despite the fact that Gold and Barites were being mined across the nation, there is no record to show that these minerals are among the mined or exported minerals. Further finding shows that barites are mined in Benue and Nasarawa states, despite high activities of miners there are no record of royalty payments. “From the available records of the Ministry of Mines and Steel Development, there was no evidence of royalty payment on these exported minerals. The Nigeria Minerals and Mining Act 2007 requires that any exporter of solid minerals must request for permit to export minerals. But in defiance to the Act, there was no available evidence of request for permit or approval to export minerals by the companies,” he stated.

Climate change, major challenge to agriculture development — DON By NKIRUKA NNOROM

limate change has been described as the greatest challenge of all times for humanity, with potentially huge, negative consequences for agriculture. This assertion was made by Professor Francis Adesina of the Department of Geography, Obafemi Awolowo University, Ile-Ife, Osun State, while delivering a lecture on the topic, ‘Some Thoughts on Climate Change, Agriculture,’ at the British American Tobacco Nigeria Foundation (BATNF) Implementing Partners workshop. Professor Adesina noted that the impact of climate change is felt most on “exposed systems, “which he said include rain-fed agriculture. He traced the genesis of global warming to 1880, noting that successive years since the 19th Century have been hotter, with 2015 being the hottest year. He regretted that Nigeria and other developing countries are most susceptible to the harsh effects of climate change due to poor water storage system, which he said has grave implication for agriculture.

“Considering the very high consumption of rice in Nigeria, nowadays, if you must control climate change, one of the crops you need to control is rice because of its high water demand,” he said, while emphasizing the need for farmers to be climate smart. He noted further that climate change signs are evident and cited the example of the absence of an August break in 2015. Earlier in his address, a BATNF Technical Committee member, Prof Chidi Ibe, reiterated the need for farmers to develop the capability to adapt to climate change. One of the achievements of climate change adaptation, he noted, is the development of a drought resistant rice variety. Other contributors to the climate change discourse also called for greater agricultural water management programme and the development of a water harvesting culture. The Implementing Partners were also advised to regularly access information from the Nigerian Metrological Agency (NIMET) and interface with farmers in disseminating information on climate change. A case was also made for the proper inspection of beneficiary farmers by the Implementing Partners in some of the BATNF crop enterprise implementation projects to ensure greater compliance.

Vanguard, MONDAY, MARCH 7, 2016 — 21

Re: Devaluation: IMF versus Buhari — Henry Boyo’s ranting By BAKARE ADEMOLA

he respected economist, Mr. Henry Boyo has never ceased to amuse me with his numerous commentaries in both electronic and print media. He has taken so much pleasure and relish in every opportunity given to him by the media to unleash his

acerbic commentaries on the Nigeria’s apex bank – the CBN. As if it was orchestrated media appearance, the above titled caption at the back of The Punch and Vanguard newspapers edition of Monday, February 29, 2016 and on the popular Sunrise Daily broadcast programme of the Channels Television of same day, the renowned economist and

characteristic of him since I have been reading his opposing views of virtually every of the CBN monetary policies dated back to Chief Joseph Sanusi’s days as the Governor of the Bank to the present leadership sounded as a rehash of his usual playing of the broken record of excess liquidity in the system as the intractable problem of the

fate of the naira and the economy. Though I had once taken the respected old war horse on sometime last year on one of his unpatriotic and selfish comment on the management of the economy, particularly when the apex bank suspended 41 items from it FOREX shop. However, I would have ignored him knowing

him for who he is, but the uncontrollable visible the anger on his face when Maupe Ogun, one of the anchors of the programme asked him what he would have done better with his acerbic criticisms of CBN’s monetary policies, if he was in the saddle as the governor of the bank. Mr. Boyo responded almost jumping out of his seat thus, “it is a common sense thing”, and you the media have been sold lies over time and have become culprits in the mismanagement of economy ”. Watching him in my view proffers no reasonable solution but his ritual ranting inability of every CBN governor to arrest the menace of excess liquidity in the economy which he claimed was a deliberate scam being perpetrated by the Bank. Also in his back page write up column of the above named newspapers, he was quoted - “Indeed, if the IMF team sincerely expects sustainable inclusive growth for Nigeria, there is no way they would have failed to examine the persistent cause of the systemic surplus naira, which forces the CBN to regularly commit to reckless. Some would say fraudulent, financial mismanagement to fight inflation when it compulsively sets to restrain borrowing and consumer demand by marginally reducing the persistent irrepressible liquidity challenge, with unreasonably high interest rate paid on funds which CBN borrows and simply stores as sterile and idle deposits”. In my view, there seems to be a disconnect between policies and expected economic gains which is not the fault of the managers at the apex bank, but the efforts of the fifth columnist in the economy, the speculator who engages in round tripping in order to short change the financial system. Even when the IMF team visited, led by its Managing Director, Ms. Christine Largade, they acknowledged the

efforts of the CBN and the federal government for what they have done in the economy, and observed that if the Nigeria can fix some noticeable structural defects in the system, Nigeria would be one of the best economies the st 21 century is waiting for. But rather than Mr. Boyo joining hands to applaud the CBN as done by the Bretton Wood institution ventilated his frustration on the IMF for closing its eyes on what he called ‘CBN distortional monopoly of dollar supply and serial naira devaluation …’ While I agree with him and many other commentators that devaluation will not help Nigeria at this moment, the clamour for diversification of the economy to make Nigeria competitive internationally is what we all should join hands with the CBN and the federal government to bring to fruition what we have mouthed for decades, rather than rubbishing every effort of the economic managers. This is not to say that Mr. Boyo’s commentaries are valueless or unpatriotic, but he would have employed a better and more dignified ways to get his views across to those in authority instead of trading them at the market place for reasons best known to him. It diminishes his stature and the values he stands for. If he has been threading a more dignified path, those in authority, past and present, would not have ignored him. He would have been invited into government to contribute and practice what he preaches, but surprisingly no one has found him useful. If he ever wanted the position of the governor of the apex bank, there are more honourable and dignified ways to achieve this purpose than running down or impugning the integrity of those God has placed in those positions of authority. The Holy Scripture admonished that ‘promotion comes from above’, not by intelligence nor might and those he has promoted must be supported not to be pulled down.

Send your reactions to: news@vanguardngr.com C M Y K

22 — Vanguard, MONDAY, MARCH 7, 2016

Banking & Finance

Industrialist writes Buhari, proposes N15trn collateral bank

oncerned about the country ’s gnawing economic challenges, the Group Managing Director of CFL Group of Companies, Mr. Lai Omotola at the weekend proposed the establishment of Collateral Bank, which he said, could help over 10 million businesses access capital. Omotola, an infrastructure development financier, argued that the establishment of the bank became imperative “to unlock access to capital by businesses and entrepreneurs in Nigeria.” He advocated the establishment of the collateral bank in a letter he addressed to President Muhammadu Buhari and the Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele on February 29. In a two-page document he personally signed, the chief executive lamented diverse difficulties the lack of collateral securities had created for businesses, entrepreneurs and high-net individuals in the country, which he said, had contributed “to our prevailing economic crisis.” Omotola cited the case of various intervention funds that the CBN “has provided for different sectors of the economy.” He also cited the case of thousands of individuals, who have beautiful business plans, but could not access capital to execute their business plan. He thus said the need to provide collateral securities to access either the funds or business capital “has remained a huge challenge. This is not only for the intervention fund, but also the bank loan and other capital.” The chief executive therefore noted that the market for the collateral bank “is estimated at N15 trillion. If fully harnessed, it can be a panacea for unlocking capital for the economic growth of Nigeria.” He further explained the market worth of the collateral bank, noting that the country ’s total exposure of banks, governments and organised private sectors to capital “is N12 trillion. Currently, we do not have up to 10 percent people and businesses that should have access to capital.” C M Y K

Access Bank: Fitch upgrade for strong risk management BY BABAJIDE KOMOLAFE

t a time when the Nigerian banking industry is showing signs of weakness in risk management practices as reflected in resurgence of huge non performing loans, Fitch Ratings have commended Access Bank for its ‘strong risk management’, and thus upgraded the bank’s rating to long-term National Ratings to “A” from “A-” with a stable outlook. The rating upgrade according to Fitch is a reflection of the improvement in the creditworthiness of Access Bank over time relative to peers and to the best credits in Nigeria. Announcing the rating upgrade, the company stated, “Fitch Ratings, a global leader in credit ratings and research, has affirmed the Long-term IDRs of Access Bank Plc (Access) and upgraded the National Ratings. The National Rating of the Bank has been upgraded to ‘A(nga)’/ ‘F1(nga)’ from ‘A-(nga)’/ ‘F2(nga)’ to reflect the improvement in creditworthiness over time relative to peers and to the best credits in Nigeria. “In Fitch’s opinion, banks will continue to face multiple threats in the course of 2016, particularly from tight foreign currency liquidity, worsening asset quality and pressure on regulatory capital ratios. However, Access’ Viability Rating (VR) is affirmed as these risks are to a large extent already captured in the ratings. “Access Bank’s major strengths, which underpin its long and short-term ratings, include its size and franchise, its strong risk management and the group’s solid capitalization. The bank’s improved rating further reinforces its resolve to deliver leading innovative and differentiated products and services to its customers in its quest to become the world’s most respected African bank by 2017.” The upgrade corroborates feedbacks from Renaissance Capital’s visits to Nigerian Banks under its Client group trip to Nigeria, which stated “Overall, Access Bank came across as being the most on top of risk management”.

ASSEMBLY- From left: Mr. Olalekan Akodu, Permanent Secretary, Ministry of Commerce, Industry and Cooperatives; Prince Rotimi Ogunleye, Honourable Commissioner for Commerce, Industry & Cooperatives: Hon. Oladele Adekanye, Chairman, House Committee on Commerce, Industry & Cooperatives and Chief (Mrs.) Nike Akande, President, Lagos Chamber of Commerce and Industry at the 5th Lagos Corporate Assembly held recently in Alausa, Ikeja.

Navigating economic headwinds

While the rating is an endorsement of the strong risk management, corporate governance and procedures of Access Bank, it is also significant, given the concerns over the Nigerian economy fuelled by dwindling revenue from oil, decline in external reserves and apprehension over the value of the nation’s currency, all occasioned by the 70 percent decline in price of crude oil. Given the ubiquity of government spending in the Nigerian economy, the fall in oil revenue has triggered doubts over governments ability to fund its budget and hence possibility of further slowdown in economic activities. The Fitch upgrade however indicates that Access Bank is able to effectively manage all the anticipated risk associated with these economic headwinds, and still remain profitable.

Improved Earnings, Asset Quality and Efficiency

This is reflected in the bank’s operating results for the third quarter ending 30th September 2015. The results showed that Access Bank, despite economic pressures, was able to increase its earnings, grow its balance sheet size, and improved its Asset quality as well as its operational efficiency. According to the bank, gross earnings increased year-onyear by 42 percent to N258 billion from N182 billion recorded nine months ended September 2014. Profit before tax and profit after tax rose by

43 percent and 34 percent to N60 billion and N48 billion respectively from N42 billion and N35 billion in 2014. Total Assets grew to N2.4 trillion, up by 14 percent compared to N2.1 trillion as at end of 2014. Reflecting improved asset quality, Credit quality improved in the third quarter of 2015 as the percentage of non-performing loans to total gross loans was recorded at 1.7 percent, a 50 basis points (bps) decrease from 2.2 percent as at December 2014; while Coverage Ratio (with regulatory risk reserve) increased to 196 percent in Q1 2015 from 154 percent as at December 2014. Impairment charges increased to ¦ 11.6 billion from ¦ 7.0 billion in 9M 2014, with a corresponding rise in cost of risk at 0.8 percent from the same period in 2014 (9M 2014: 0.4 percent) largely incurred by collective impairment recognized on medium to large sized exposures following the reassessment of loans, on the back of prevalent macro-economic conditions. In terms of operational efficiency, the bank recorded Net Interest Margin (NIM) of 5.9 percent in nine months ended September 2015, up from 5.6 percent in Q2 2015, reflective of improved yield on assets on a quarter-onquarter basis. Cost of Funds increased by 90bps y/y to 5.4 from 4.5 percent in 9M 2014 but improved by 40bps on a q/q basis (Q2 2015: 5.8 percent ); reflective of the continued high interest rate environment. Cost to Income Ratio (CIR) was recorded at 59.6 percent, down 160bps from 61.2 percent in 9M 2015, supported by strong revenue growth during the period. In addition to showing the

resilience of Assess Bank, the results, also show the emergence of the bank as the 3rd largest bank in all indices, and its steady accent to becoming largest bank in the country. Commenting on the results, Group Managing Director/ Chief Executive, Access Bank PLC, Mr. Herbert Wigwe, said, “The Bank continues to maintain strong growth in earnings reflecting our commitment to deliver on our objectives for 2015. The Group posted a PBT of ¦ 60bn (Sep’14: ¦ 42bn), in spite of the significant policy headwinds in the first nine months of the year. “We continue to invest in technology, enhance our processes and improve service delivery whilst reducing cost as we deploy simple and efficient digital solutions to meet the needs of our customers. The recent upgrade of our core banking applications will act as catalyst for the sustainable growth of our retail base and deepen our share in key focus market segments”. Since its transformation in 2002, Access bank has grown into, with a network of 364 branches and service outlets located in major centres across Nigeria, Sub Saharan Africa and the United Kingdom. Ranked amongst Africa’s top 20 banks by total assets and capital in 2015, Access Bank is a financial powerhouse which has consistently defied industry and economic challenges to create value for stakeholders and benefits for customers. The bank under its current leadership is poised to continue with its rich history of accomplishments.

Vanguard, MONDAY, MARCH 7, 2016 — 23

Corporate Finance BY PETER EGWUATU

itafoam Nigeria Plc has commenced measures of reducing operating cost to boost profitability and enhance shareholders’ value. The company has noted that it has almost concluded arrangements to commence production of oil filters and allied motor spare parts through its newly established subsidiary. Addressing shareholders at the company’s Annual General Meeting (AGM) in Lagos, the Chairman, Dr. Dele Makanjuola explained that the on-going inclement operating environment had forced the company’s Board and Management to embark on cost saving initiative in order to sustain the company’s competitive edge. Makanjuola who reviewed the current challenges facing manufacturing firms in Nigeria stated that Vitafoam was able to remain profitable due to the prudent approach towards management of human and material resources: “The foam business is operating in a very competitive environment. There are over 300 manufacturers. It is stressful to operate in the foam industry. As professionals, we have tried to keep administrative and financial cost under control. This prudent approach enabled us to generate profits and declared dividend. of 25

Stanbic IBTC highlights opportunities in new banking solutions By NKIRUKA NNOROM

AGM: From left: Company Secretary, Vitafoam Nigeria Plc, Mr. Olalekan Sanni; Chairman, Dr. Bamidele Makanjuola; and Group Managing Director, Mr. Taiwo Adeniyi, at the Annual General Meeting, AGM of Vitafoam in Lagos.

Vitafoam embarks on cost reduction measures to boost profitability kobo per share in an environment where many companies are closing business. We were able to achieve this feat despite the high cost of operation because of our careful management practice. “ As we try to control our cost, we have decided to limit our exposure to our

subsidiaries to a maximum of 40 percent. This is expected to relieve us of financial burden of 100 per cent ownership. We can always raise 60 percent equity through private placement. “ We have almost concluded plan to commence production of oil filter in our new subsidiary . As for Vono

Niger Delta E&P pledges enhanced dividend payment to investors By NKIRUKA NNOROM &

iger Delta Exploration

Production (NDE&P) Plc listed on NASD OTC Plc, an over-the-counter securities exchange, has assured its shareholders of enhanced dividend payment in the coming years, even as it has revealed plans to raise $400 million from the domestic capital market. Speaking at NASD OTC Market analysts forum and conference call in Lagos, the Managing Director/CEO, Dr. Layi Fatona, said the company has consistently paid dividend in the last eight years, in addition to enjoying 10 years of uninterrupted oil and gas production in the country. He said: “For our shareholders, there has been substantial value add. We have successfully and consistently paid dividend in the last eight years and for those of our shareholders who actually know us, I think C M Y K

waiting for our dividend is an annual ritual at our Annual General Meetings (AGMs). “So when you put all these characteristics of the company; producing oil, producing gas, processing oil and processing gas, I think we truly qualify to be described as a fully integrated Nigerian independent oil and gas company.” On the fresh capital raise, he stated that the company has commenced raising $100 million, while raising of the remaining $300 million would start on conclusion of the first phase in the next couple of weeks. According to him, the fund raising exercise would enable the company to reposition by increasing its refining capacity from 1,000 barrels per day to 5,000 barrels per day. It would also enable it to acquire new assets and capitalize on its gas producing ability. “As Oil Company, our appetite for money is voracious, and three years ago, we ended up in N600 million

transactions, buying 45 per cent divested interest of Shell, Total and Agip from one of the oil and gas producing assets, west of the Niger Delta. So, few years ago, we decided that for us to continue this kind of investment, we need very significant wallet, and we decided that with the authorization of our shareholders, we will raise some $400 million dollars,” Fatona explained. Laying the company’s 2015 results before the analysts, Mr. Deji West, Group Chief Operating Officer, NDE&P Plc, explained that the company had a tough year in 2015, but noted that measures are being put in place to cushion the losses in current financial year. Speaking at the event, Mr. Bola Ajomale, Managing Director, NASD OTC Plc, said the markets analyst forum is in line with the Exchange’s tradition of promoting a transparent market. He noted that NDE&P has been trading on its platform for the two years.

Products, we shall keep the brand. We have gone to the Corporate Affairs Commission (CAC) to ensure that the brand is not taken away” Makanjuola said. Corroborating him, the Group Managing Director, MrTaiwo Adeniyi said that the decision to float a new subsidiary, Vitaparts Nigeria Limited was to provide products for motor spare parts which is in high demand. We shall enjoy pioneer status in the country as there is no manufacturer of these parts yet in the country. Adeniyi who assured the shareholders of higher value lamented the effects of forex scarcity and imported raw materials on the production of foams in Nigeria .He however expressed optimism that Vitafoam would continue to operate optimally as measures have been put in place to strengthen the company’s operations with cost saving approach. Many shareholders commended the company’s board and management for the good performance in spite of the tough business environment while some advised for more cost control measures. In giving assurance of continuous improved performance, the Makanjuola declare that: “Despite this uncertain disturbing outlook, our company will remain resolute in the implementation of nascent strategies that will enable the harvesting of lowhanging opportunities in the economy to improve growth prospects across several markets.”

tanbic IBTC Bank, a member of Stanbic IBTC Holdings Plc, has launched a nationwide campaign that offers bespoke financial solutions to help individuals and businesses achieve their aspirations. Tagged Switch, the campaign aims at encouraging individuals and businesses to harness vast opportunities embedded in Stanbic IBTC Bank’s bouquet of products such as its salary or business accounts. Speaking at the launch in Lagos, Executive Director, Personal and Business Banking, Stanbic IBTC Bank, Mr. Babatunde Macaulay, said the need to enrich the banking experience of Nigerians necessitated the launch. According to him, the financial needs of today’s bank customer are very dynamic and as a result, there is a constant demand for financial solutions that address specific needs in real time. The expertise and experience of the Stanbic IBTC Group across the spectrum of financial services ensure that the bank is able to provide solutions that meet and exceed such needs, Macaulay said. “The Switch campaign is aimed at ensuring that Nigerians enjoy the best financial services experience. At Stanbic IBTC, we fully understand the need by banking customers for quality and timely financial solutions at minimal cost, and we constantly strive to provide innovative banking solutions tailored to those needs,” Macaulay said. The bank highlighted some of the benefits an individual stands to gain by switching a salary account to Stanbic IBTC Bank to include: access to 55 days interest free credit card, the best in the market now; access to up to 100% of salary advance; best rates on international spend on debit cards; access to personal loans; a dedicated relationship manager that will ensure the customer ’s needs are attended to promptly; and access to internet and mobile banking.

24 — Vanguard, MONDAY, MARCH 7, 2016

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Vanguard, MONDAY, MARCH 7, 2016 — 25

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26 — Vanguard, MONDAY, MARCH 7, 2016

Homes & Housing Finance Stories by YINKA KOLAWOLE, with agency report

Another US mortgage crisis looming

he U.S. could be headed for a new mortgage crisis by this summer, Richard X. Bove, Vice President of Equity Research at Rafferty Capital Markets, said in a report. Bove highlighted how much control the government now has over the nation’s mortgage markets and explained how this could be a recipe for disaster. He pointed out that the U.S. government now insures one-fourth of all new residential mortgage loans and purchases one-sixth of all residential mortgage loans issued. Further, governmentsponsored enterprises Fannie May, Freddie Mac and Ginnie Mae own or ensure three-fifths of all current outstanding mortgages in the country, and the problem is getting worse and worse every quarter, he said.

APBN seeks improvement in housing

resident, Association of Professional Bodies of Nigeria (APBN) Mr. Foluso Fasoto has called on the federal government to improve the housing development in the country to ensure access to habitable and affordable housing by Nigerians. Fasoto stated this in Abuja during the Board meeting of the professional bodies comprising presidents of 28 professional bodies and State chapters of Chairmen of APBN. He debunked claims that the drop in price of oil in the international market would affect housing development. He maintained that members of APBN in the built sector was collaborating with representatives of the federal government to improve housing delivery in line with global standard adding that the public would soon appreciate their efforts towards sustainable housing delivery.

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he foreign exchange crisis currently rocking the Nigerian economy has rendered most ongoing construction projects in the country unviable, according to the Federation of Construction Industry (FOCI), the employer organisation for building and civil engineering contractors, sub-contractors, as well as plant and equipment suppliers in Nigeria. FOCI disclosed in a statement jointly signed by its president and Director General, Mr. Solomon Ogunbusola and Mrs. Olubunmi Adekoje, respectively, that the state of the construction industry requires urgent intervention, and therefore called on the federal government set up a bail-out fund to rescue the industry. “Most projects were awarded when the exchange rate was $1 to N165.00. However, the current exchange rate of $1 to about N400 has rendered the projects non-viable and totally unprofitable. The depreciation of the naira against the dollar has led to

A private bungalow under construction

Forex crisis renders construction projects unviable —FOCI serious difficulties in procurement of machinery, spare parts and payment of experts for specialised assignments. Construction companies have been forced to leave construction sites due to lack of funds. This leads to challenges in payment of

workers’ salaries and parking of capital intensive construction equipment. The parked construction equipment are depreciating faster due to non-usage and are at a risk of being rendered obsolete. “To compound the

Property eviction: The rights of a landlord

t is generally believed that landlords are belligerent, troublesome people who lord their properties over tenants and try to make life uncomfortable for them but this is not always true. Just as tenants have been at the mercy of landlords, landlords have also been treated with contempt and maligned by tenants. Frustrated with tenants who refuse to pay rent, damage their properties and cause conflicts amongst other tenants, landlords are often faced with the option of ejecting such a tenant. There are however rules by law that must be followed and a landlord needs to know these rules so as not to be in err of the law. By law, it is wrong for a landlord to forcibly eject a tenant no matter how much rent he or she owes or how cantankerous such a tenant is. The recovery of property by law in most states in Nigeria and anywhere in the world really unfortunately for landlords is in the favour of the tenant. This is done by the different law-making bodies of the states to curb the excesses of landlords and ensure that tenants are not entirely at their mercy to be treated anyhow. A landlord who

therefore wishes to eject his tenant for whatever reason must use the method prescribed by law. The law states that a landlord must give his tenant reasonable time to vacate the property by serving him a quit notice and this is dependent on the tenancy period. For a yearly tenant, the law provides that he must be given a six months quit notice, a quarterly tenant - a quarter’s notice, monthly tenant - a month’s notice and a weekly tenant - a week’s notice. The quit notice must be written and served on the tenant. These provisions are however subject to the tenancy agreement between the tenant and the landlord. In a case where it is expressly stated in the tenancy agreement that no

A landlord must give his tenant reasonable time to vacate the property by serving him a quit notice and this is dependent on the tenancy period

notice will be given to the tenant, the landlord can go ahead and eject such a person without notice as long as the tenant duly executed the tenancy agreement. In the case where a quit notice has been served and the tenant still refuses to vacate the property after the notice has elapsed, the law still does not permit the landlord to take matters into his hand and forcibly evict the tenant. Rather, the law expects another seven days notice of owner’s intention to recover property to be served. This notice is usually from the landlord’s Lawyer or Agent’s Legal Unit, informing the tenant his intention of proceeding to court to recover the property on behalf of the landlord. It is important to note that this seven days notice of owner’s intention to recover property can only be served on a tenant after the expiration of a valid “Notice to Quit”. If served before a notice to quit or during the life span of a notice to quit, it is invalid and discredited. Also, this seven days notice is counted seven days from the date the notice is served. If it is less, the court will most likely reject its validity. *Culled from Nigeria Real Estate Hub

challenges, workers in the industry are agitating for upward review of the conditions of service. This is despite the fact that about 75 percent of the workers have been laid off while the remaining 25 percent are being maintained on high interest loans rate from the commercial banks”, the group stated. To effectively tackle the challenges, FOCI therefore appealed to government “for an urgent bail-out and quick intervention so that workers who have not received salaries for some months can be paid and members can return to sites to resume their operations before the fast approaching rainy season.” According to FOCI, many players within the industry have been forced to close their firms, compounded by over N600 billion Federal and state governments’ indebtedness to its members. The contractors asserted budgetary allocation alone is not adequate to meet the industry’s financial needs, hence their call for direct intervention to solve the debt problem. “FOCI expected that by now things would have improved; however, it is disheartening to note that the debt profile has continued to rise since all tiers of government have been unable to pay their debts. FOCI fears that if the Government has to rely on only budgetary allocation without direct intervention into the debt owed the construction industry, the construction industry in Nigeria could be moving towards a total collapse,” the group added.

Vanguard, MONDAY, MARCH 7, 2016 — 27

Insurance

Insurance operators lament impact of forex crisis By ROSEMARY ONUOHA

s the economy of the country continues to witness challenges due to the fluctuations in foreign exchange rate, insurance practitioners have said that the situation is having adverse effects on insurance business. Managing Director of Universal Insurance Plc, Mr. Ben Ujoatuonu said that insurance is an international business as such the marine aspect of insurance business is being affected because importation is at its lowest ebb. Ujoatuonu said, “Because of the problem of exchange rate, every insurance company is feeling the brunt in the hype in exchange rate and it has affected the marine aspect of our business. Of course every other person within the society is feeling the heat of the economic situation and because insurance business is not insulated, the insurance business will feel the heat as well.” Also President of the Nigerian Council of Registered Insurance Brokers, Mr. Kayode Okunoren said that it is most disheartening that the value of the naira has continued to take a downward plunge against the dollar, pound sterling and other currencies, to the detriment of the nation’s economy. Okunoren said, “The resultant effect of this is negative on the nation’s economic revival efforts. Aside from the possibility of stagnating industrial development and favourable trade, the situation is already causing increasing inflationary rate that is affecting the common man in the street. The mono economy has left the country helpless, considering also the continuous downward slide in the price of crude oil in the international market, upstaging the budgetary

anticipations of government. Definitely, the insurance industry is not insulated from these grievous indices of economic recession. It is a tough time we must all admit. “As a critical stakeholder in the nation’s economy, it is our take that the present situation serves as a good avenue for government to begin to pay more emphasis to diversification of the nation’s economic

nsurance Brokers under the aegis of the Nigerian Council of Registered Insurance Brokers (NCRIB) have joined scores of other Nigerians in sharing the grief of the Nigerian Film Industry over the demise of no fewer than four of its brightest actors and actress within the last one month. The actors included Mike Odiachi, Sikiru Adesina, popularly known as Arakangudu, Festus Aguebor as well as a Kano based actress of Kannywood (Kano sub sector), Aisha Dankano. President of NCRIB, Mr. C M Y K

definitely a period that calls for sacrifice on the part of all Nigerians, including the leadership, if the present crusade would achieve long lasting positive results. I whole heartedly align myself with the timeless wisdom that “to be successful as an individual or a nation, you must decide exactly what you want to accomplish, and then resolve to pay the price,” Okunoren said.

VISIT — From left: Chief Pilot, Arik Air, Captain Adetokunbo Adekunbi; Deputy Managing Director, Arik Air Captain Ado Sanusi and Governor of Kaduna State, Nasir El-Rufai during Kaduna Governor's visit to Arik Headquarters in Lagos.

Stanbic IBTC insurance brokers begins operations

tanbic IBTC Insurance Brokers is set to provide bespoke risk management and insurance services in Nigeria. The company announced that it has commenced full operations sequel to the granting of a licence by the National Insurance Commission (NAICOM) in January 2016, paving the way for the firm to offer the full spectrum of insurance brokerage services, a development that will help in deepening insurance penetration in Africa’s largest

Brokers sympathise with movie industry

mainstay from oil, as we have had till now. There must be a re-tuning of the minds of Nigerians from rabid consumption of foreign goods and services at the expense of those produced locally. Also, the penchant for luxuries has to be curtailed so as to preserve the nation’s available meager foreign monetary reserve for the essentials, rather than fritter them on irrelevances. It is

Kayode Okunoren, said the Council described the death of four prominent actors within a month as a colossal loss to the nation. The Council lamented that the actors who had liven up the entertainment space had departed at a time when their values was most desired in the country. While praying for the repose of the souls of the departed, the NCRIB lamented the poor acceptance of insurance by the actors, a situation that usually leave the families in precarious financial state after the painful of their loved ones and bread winners.

economy. According to the broker, global best practice, including facilitatory prompt payment of claims, will underline the operations of Stanbic IBTC Insurance Brokers as the insurance brokerage firm enters the Nigerian market. Part of the Stanbic IBTC Group, which has a clear focus on corporate and investment banking, personal and business banking and wealth management, the new business broadens the scope of financial services offered by the group while widening its holding company structure. Chief Executive of Stanbic IBTC Insurance Brokers, Mr. Anselem Igbo, said the business was established to fill perceived gaps in the industry, part of which includes helping clients effectively manage their risks and claims processes, thereby ensuring peace of mind through risk transfer, efficient insurance claims payment and exceptional quality of service. On claims management, Igbo stated, “We believe that the test of any insurance arrangement is in prosecuting claims to a satisfactory conclusion for our clients. Our role as brokers also ensures that insurers, as a

matter of obligation, pay claims equitably and promptly. Prompt payment of claims is a key factor in any insurance contract. We continuously develop key relationships and requisite logistical processes to ensure that your claims are promptly settled.” Whilst benefiting from a strong, dynamic and vast group structure, Igbo said the company will be differentiated from the competition as it will be driven by a team of reputable and financially strong underwriters; fully customized solutions, and innovative insurance products at no additional cost to the client. “Stanbic IBTC Insurance Brokers’ professional services are at no additional cost. We will negotiate your insurance premiums and get the best quotes available,” Igbo said. “Our services apply to both individuals and corporate entities. Our services are also offered to both existing customers and non-customers of the group. As insurance professionals with a vast knowledge of the workings of the insurance market, we are able to arrange the most suitable policies for our individual and corporate clients.

Workplace unveils initiative to benefit businesses

orkplace Plus Limited, operators of the Regus franchise in West Africa, has unveiled a cluster initiative that will offer Small and Medium Enterprises (SME’s) the benefit of maximizing profit in Nigeria’s current harsh economic environment. The initiative, which is the first of its kind, brings companies under one operating environment with the necessary infrastructures that will enhance business development. Speaking about the initiative, Executive Chairman of the company, Ayo Akinmade explained that the firm which was registered in Nigeria in 2003, engages in the business of providing infrastructure to support companies to carry out their businesses seamlessly in Lagos, Abuja, Port Harcourt and Accra Ghana. According to him, we provide representative offices for corporate bodies, organisations and individuals, with fully furnished and equipped short stay office accommodations. We also provide conferencing services to corporate bodies and organisations. Our clients, including many multinational companies, are some of the most respected names in the world. Akinmade noted that one of the challenges of business operations in Nigeria is inadequate provision of infrastructure which include, electricity, information technology and a conducive working environment to facilitate business contacts, development and capacity to promote efficiency. He said the company is the largest provider of virtual office space in Nigeria, providing over 150 customers with office and related facilities from grade- A buildings. Giving further insight into the initiative, the Executive Chairman stated that Regus Virtual Office provides best possible first impression to clients as well as offering a great corporate image at a fraction of the cost of running an individual office. Describing the initiative as cost saving for entrepreneurs, he said, “Our business is to make sure that you focus 100% on your core business. Our friendly and professional team will answer your dedicated number in your company name, take and pass on your messages in the way you choose ad give your business the due representation”.

28 — Vanguard, MONDAY, MARCH 7, 2016

People in Business

Food expo showcases opportunities in Nigeria's growing food market By Nkiruka Nnorom

ver 150 international companies in food and beverage sector from around the globe will have the opportunity of experiencing first-hand, opportunities in Nigeria’s growing food market at the forthcoming Food Nigeria exhibition. The companies will represent more than 20 country pavilions welcoming an expected 6,000 attendees. The event being organised by Informa Life Sciences Exhibitions is supported by the Association of Food Vendors in Nigeria (AFVN), the National Agency for Food and Drug Administration and Control (NAFDAC), is scheduled to kick-off 18-20 May, 2016 in Lagos. The event will provide a platform for international and regional food and beverage companies to network and cultivate business ties in the country. “Food Nigeria is a businessto-business platform promoting supply chain partnership along with imports and exports. Participants who will come from Nigeria and West Africa, will benefit from meeting industry leaders from regional and international organisations, showcasing an extensive range of the latest products and services,” says Jamie Hill, Director, Informa Life Sciences Group, Africa. McKinsey Global Institute reported in July 2015, Nigeria’s consumption could rise to $1.4 trillion every year by 2030, at an average annual increase of eight per cent. This rise in consumption will likely be driven by higher income levels, significantly expanding the middle-income bracket. This increased affluence is expected to result in 7.1 per cent annual growth in sales of food and non-food consumer goods. “It is important to recognise the opportunities currently present in the Nigerian market. By organising Food Nigeria, we aim to provide an opportunity to support the growing market and host international and regional food brands to build business ties. C M Y K

Challenges bring out the best in humans — UMOEFIK BY EBELE ORAKPO & VERA SAMUEL ANYAGAFU

r Mbetobong Umoefik is the Managing Director/Chief Executive Officer of Port Harcourtbased Pride Garments Company (PGC), an outfit that specialises in industrial work-clothes & Personal protective Equipment (PPE), skills training, bulk production and consultancy. In this chat with Financial Vanguard, the University of Port Harcourt Management student, speaks on why he got into his line of business, the challenges and says influx of foreign products does not really pose a challenge to him. Excerpts: Upon completing his secondary school education at the School of Arts & Science, Uyo, Akwa Ibom State, Umoefik attended training courses in textile and fashion design in Europe and Asia. Going into business: According to Umoefik, he got into the business because of interest, an interest born out of his desire to make his own clothes by himself and avoid problems with tailors. "I developed interest in the business, first of all, to be able to make my own dress by myself since it was always difficult to get a tailor to make your dress when you want it. There was a brother who was doing the business at home and when I completed my secondary education, I used the opportunity to learn." Fast learner: "Within a week, I was able to sew a pair of trousers and a bed sheet for myself. Although the brother did not like me using his machine for the fear of damage since I was not proficient, but when he realised how fast I was to understand the skills without guidance, he decided to guide me through the skills and show me how to use the sewing machine. "The more I learnt, the more the passion increased and making dresses for people became my desire despite the fact that I didn’t want to learn the skills for profit-making. I was actually waiting for university admission that did not come for so many years, and at this point, I saw opportunities in the business and that was how I settled for

I developed interest in the business, first of all, to be able to make my own dress since it was always difficult to get a tailor to make your dress when you want it this line of business," he said. Start-up capital: "This type of business doesn’t really need start-up capital. When it was time to start my own business, I hired a secondhand sewing machine from a neighbour and my mother also got one for me. My parents paid the rent for the house we were living and gave me one room to live in but it was this room that I used for the business. In 2012, this business won the prestigious Presidential Award of Youth Enterprise with Innovation in Nigeria (YouWiN). Challenges: Every business has its challenges and these challenges vary from one level of the business to another. Even now, there are still challenges but where there is a will, there is a way. Most of the challenges deal with skills upgrade, expansion and product improvement but the other challenges such as power, raw materials, influx of foreign products into the country, etc., does not really pose a challenge to me since they are beyond my powers so I do my business as though such challenges do not exist." Staff strength: "The staff capacity for the business is 50 persons but you cannot operate on this capacity for a long time except you have production orders that can sustain such payroll. So the actual staff strength depends on the size of responsibility at a given time. "When we have many orders, we increase and when the orders are less, we downsize the labour force.

*Mbetobong Umoefik.....Asking an SME to deposit N20m for such order and a guarantee of monthly purchases of between N10-15m is really difficult *Staff of Pride Garments company at work

Lack of forex: The lack of foreign exchange is really affecting this business because about 90 per cent of inputs, except labour, is sourced abroad. This is so because the fabrics and accessories for the product line that caught my interest the most (the industrial workclothes), are imported. We have approached some textile mills in Nigeria to get them to produce that quality of fabric suitable for the production of work-wear but they gave us conditions we cannot meet. "Asking a Small and Medium Enterprise to deposit N 20m for such order and a guarantee of monthly purchases of between N10-15m is really difficult. They equally said that they would need to import some chemicals that will be used to achieve that quality. One is then bound to ask: 'what was the agreement with these investors when they were granted licence to operate in Nigeria? Some of them are Indians, some Chinese and

*Some of the products on display these countries have this very quality of fabrics and they export same to Nigeria." Local content: "Local content is 100 per cent workforce, other inputs such as equipment/machines are imported except for raw materials which is determined by client’s specifications that is, where the requested order suggest Nigerian print textile, then the fabric which is 80 per cent of any garment product can complement the local labour thereby increasing Nigerian content to about 90-95 per cent. Most accessories are often imported."

Vanguard, MONDAY, MARCH 7, 2016 — 29 “The moving finger writes; and having writ, moves on. Nor all your piety nor wit shall lure it back to cancel half a line; nor all your tear wash out a word of it.” Omar Khayyam, 1123AD. (VANGUARD BOOK p 57).

ost of our Fellow Countrymen (“How many fools make up Fellow Countrymen”, asked Thomas Carlyle, 1795-1881, in despair) are emotional and unrealistic. Less than one tenth of one per cent understands the basic principles of economics. Most of the leaders, drawn from the same pool of people, are not different. Even those among the leaders who understand the principles of economics lack the moral courage to tell the truth when issues pertaining to economics become contentious. They choose to play to gallery by telling the “masses” what they prefer to be told instead of telling the truth which might be unpopular. Electricity tariff increase is another example of how the masses and spineless leaders can induce governments to take decisions whose consequences later prove disastrous e.g tariff reversal. About three years after the Structural Adjustment Programme, SAP, which had helped the “Tiger” nations in Asia to achieve economic recovery, President Ibrahim Badamasi Babangida, IBB, was scratching his head in Nigeria and wondering “why the laws of economics, which work elsewhere, don’t work in Nigeria.” The answer given was direct to the point. “The principles of economics address themselves to reasonable people. Nigerians are nothing but reasonable – including most of the leaders.” What we are reading in the papers these days prove the point conclusively. In a nation where seventy per cent of the people live on $2 [N600 at N300/ US$1] per day, a “leader ” distributed 23 exotic cars costing N310 million to people who already had more than a dozen cars each! Furthermore, some Nigerians still defend the giver and the takers of that demonstration of economic

“No”” to protest against tariff increase lunacy. While that was going on, the former Minister of Finance was preaching economic inclusiveness – while the government she served was excluding 170 million Nigerians from the dividends of democracy. The flight of economic reason from Nigeria cannot be more total. It is once more being exhibited in the national debate regarding electricity tariff increase. Some of those opposed have made several suggestions which will be examined separately and the consequences of each will be pointed out to those who think their suggestions will solve the problem. But, before looking at the objections to tariff increase, we need to remind ourselves of certain facts which suggest that we might be blaming the victims – DISCOs – for the sins of commission and omission of governments from the time the Electricity Corporation of Nigeria, ECN, was established; until the Power Holding Company of Nigeria, PHCN, was liquidated. Fact 1. The Distribution Companies, DISCOs, don’t generate electricity. That is the responsibility of another unit still under government control. DISCOs cannot supply power in excess of what the Federal Government makes available to them. Thus, when power supply is withheld (it happened here two minutes ago this Saturday February 27,

2016) Nigerians, presumed to be sane, let loose curses and maledictions on DISCOs and their staff. On one occasion, a DISCO van passing by was pelted with stones. Most Nigerians, including people who should be knowledgeable and responsible, fall into the blame trap and unleash expletives. Why? It is obviously irrational; and partly insane. As the lawyers have always reminded us, “You can’t give what you don’t have”. So why are My Fellow Nigerians asking DISCOS to supply more power and more regularly than they receive? FACT 2. Power generation in Nigeria had remained stubbornly below 5,000MW for more than sixteen years despite the US$13-16 billion, Obasanjo’s government allegedly spent on it. Meanwhile, the nation had been fed on several diets of lies by PDP Presidents and their Ministers of Power. Obasanjo/ Lyel Imoke promised 10,000MW by 2007. That was the excuse for the raid of US$13-16 billion. They added less than 1000MW by the time they left office. Nobody stones them. Jonathan/Professors Nnaji and Nebo promised 14,000MW by end of 2013. They left office with capacity less than 4500MW. Nobody directs curses and maledictions their way any time there is power failure. Yet, at the time privatization

was being seriously embarked upon, the prospective DISCOs were deceived to believe that power supply would have reached at least 10,000MW by 2015. Had that promise been redeemed, the noisy city dwellers, constituting the nuisance to DISCOs, should be enjoying at least twelve to fifteen hours of power supply by now. Instead of directing their anger at those who were sharing our money rather than applying it to provide power, they vent their spleen on the first victims of the swindle perpetrated by the Jonathan administration. DISCOs were promised power supply; governments have failed to deliver. We should blame governments; not the DISCOs. FACT 3. The Minister for Power, Fashola, was absolutely correct. You cannot divorce the price paid from the value received and by looking at the alternatives. DISCO power supply is still far cheaper than any other means of generating power – even with the new tariff. On the average, it is a mere 20 per cent of the closest alternative – petrol or diesel generators. A meticulous compilation of expenditure on electricity by different means has established that DISCOs are almost operating as a charity compared with gensets. So, why curse the benefactor for increasing the price when the new tariff is still akin to robbing the DISCOs?

How many Nigerians, if given a DISCO free today will lower the tariff? Hypocrites!! FACT 4. Scarcity always drives up prices/costs. Nigerians should count themselves fortunate that the power sector had not been totally privatized; a regulatory agency still regulates the tariff. Had the free market been allowed to operate in the power sector, most of us would not have been receiving power supply at all. Corporate entities, the wealthy and the rich would have bought the entire supply if it was made available to the highest bidder. The Chief Executive Officer of a multi-national disclosed that his company would save up to three billion a year using DISCO exclusively if the tariff is three times what it is now. Most critics are actually cynical individuals. And as Oscar Wilde, 1854-1900, had observed, “A cynic is a person who knows the price of everything, but the value of nothing.” Most of them lack a sense of the economic value of mass produced power supply. Incidentally, how many of them, who have tenants, have retained the rent at the same level since 2010? Yet, their “services” to tenants have not improved (actually deteriorated as the buildings aged). Yet, they increase rent. Ask them why? And get ready to listen to the malarkey offered as explanation. The new tariff must stay; painful as it is, it is still in our interest. To be continued…

Micro Finance 'Nigeria has no business importing print products' Stories by PROVIDENCE OBUH

hairman of Board of Academy Press Plc, Chief Simeon Oguntimehin, has affirmed that the country does not need to import printing products as a nation because local printers can do it. He made the observation th during the company’s 50 Anniversary Dinner in Lagos. “We do not need as a nation, to import any of our print products such as books, magazines, annual report, calendars, diaries, fliers, bank forms, flow lines, tickets, vouchers and all other sensitive materials including elections papers, revenue agencies forms, bank forms and other security agency document needs,” he said. He noted that Academy Press is now positioned to lead the industry to fully cater for the entire needs of the country. ‘’We have remained strong over the last 50 years as a result C M Y K

of continued re-investment in modern printing equipment and we just launched new sets of printing equipment worth N1.5 billion. Academy Press is Nigeria’s one-stop shop for world class printing.” “In fact, we do not end any

five years without investing in major modern equipment. This is to ensure that wet catch up with the latest skills and technology and to always be at par with the rest of the world.” Also speaking, Managing Director of the company, Mr.

Gbenga Ladipo, added: “We have been financing the growth and retooling from our own

Simba woos entrepreneurs over service centres

CONFERENCE - From left: Banjo Adegbohungbe; General Manager Access Bank, Charles W J Weller; Managing Director Financial Institutions Barclays, Paul Greetham; Managing Director Global Trade Review (GTR) and Tampiri Irimagha Akemu; Managing Director Sesema PR at the West Africa Trade & Export Finance Conference 2016 by GTR recently.

internally generated funds. For six years we were getting equipment one after the other and demand was ahead of us until the Bank of Industry’s intervention and that led to a leap within that year.”

imba Group says it welcome business owners and aspiring entrepreneurs who want to open authorized service centres for its products across the country. The company distributes and services power backup products such as inverters, batteries, online UPS and integrated power management systems including luminous, genus, epsilon and exicom. In a statement, Chief Vinay Grover, Managing Director of Simba, said that they have eleven service centers in key cities in Nigeria with plans to further open 20 service centers within the next few months. “We have always believed that

a good quality product means very little unless it is supported by a high level of service before, during and after the sales process. It is with this in mind that we recently launched our one-of-a-kind 24/7 nationwide contact center and exclusive customer-service online portal,” he said. Chief Grover explained, “As more and more customers turn to our award winning customer care offering, it becomes important that we bring these services closer to them. It is with this in mind that we committed to extending our service through the creation of new Authorized Centers, which I’m happy to announce are fully operational now.”

30 — Vanguard, MONDAY, MARCH 7, 2016

Economy

New CBN study discredits inflation targeting model for economic devt Stories By EMEKA ANAETO, Economy Editor

new report by the monetary policy department of the Central Bank of Nigeria, CBN, has indicated that a full-fledged inflation targeting framework may not be very relevant in the prevailing economic dispensation, popularly called the new normal, as it may not address the exchange rate and foreign reserves variability, economic growth as well as employment objectives of the Nigerian economy. Inflation targeting encompasses a monetary policy framework in which the central bank sets an explicit target for future inflation, usually low inflation rate, and work towards achieving this goal. Consequently, the inflation rate serves as the nominal anchor on which the central bank relies to maintain price stability. Since the first adoption of inflation targeting by New Zealand in 1990, several countries from developed and emerging market economies as well as developing countries including Nigeria have adopted the framework. The policy framework, according to the CBN, proved to be quite successful in the previous two decades. However, the recent global financial and economic crisis has put a severe dent to this monetary policy framework. During the crisis, most central banks fell into the liquidity trap as the target interest rates were cut to the zero bound to stimulate the economy. ‘ But when there was no incentive for a further lowering of the nominal interest rate, unconventional monetary policy was adopted evidenced by several rounds of

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quantitative easing followed. Yet, unemployment remained very high indicating that the steps taken were not sufficient to reverse the recessionary trend. In spite of the persisting unemployment and low growth, inflation rates in most advanced economies such as the United State of America, remained very low. It was obvious that the achievement of the low inflation target, with low interest rate and low volatility, did not guarantee favourable growth and improved employment. At this point, economists began to question the wisdom in the inflation targeting framework. It was this abnormal environment, termed by some analysts as the new normal, and under which unconventional monetary policy appeared more successful in addressing the

imbalances in the economy. According to the CBN report, “in the new normal, central banks have the additional mandate of maintaining financial system stability and economic growth in addition to the price stability objective of monetary policy. “In the particular case of developing economies with substantial output gap, we query the continued relevance of the conventional focus of

During the crisis, most central banks fell into the liquidity trap as the target interest rates were cut to the zero bound to stimulate the economy

monetary policy. In the CBN report titled ‘relevance of inflation targeting for developing countries in the new normal: a case of Nigeria’, published last week as CBN working paper series, the apex bank’s monetary economists said however, that the alternative scenario of nominal gross domestic product, GDP, targeting framework seems more plausible, as it generates higher economic growth, increment in foreign reserves, more stable exchange rate as well as lower inflation rate. According to them “this position is consistent with the new Keynesian theory, which posits that an economy with huge output gap could boost economic growth and employment through a low interest rate policy. “Furthermore, the theory argues that with financial frictions in place, strict inflation targeting may be sub-optimal

under conditions of financial market imperfection as is common in most developing economies”. The conclusions of the research team was derived from a study and reviews of the conceptual as well as theoretical and empirical literature on the subject, and employed various estimation techniques. The outcome of the study, the team stated, “demonstrates that in post crisis Nigeria, under the new normal paradigm, strict inflation targeting would not be a suitable framework to address the key macroeconomic issues confronting the economy, such as inclusive economic growth, price instability and exchange rate stability. The estimation technique adopted in the study demonstrates that nominal GDP targeting could be more suitable than inflation targeting in pursuit of the broader set of objectives highlighted under the new normal paradigm. Inflation targeting, according to the report, however, still remains a relevant policy approach but is considered weak in its ability to deal with financial and economic crisis if deployed solely.

February inflation rate may hit 2-yr high

... FSDH Forecasts 9.85%

he approaching double-digit inflationary economy is around the corner with analysts expecting the February figures at a border line. In its current analysis of the economic situation economists at FSDH Merchant Bank said they expect the February 2016 inflation rate to trend up to 9.85 per cent year-on-year, y-o-y, up significantly from 9.62 per cent recorded in January 2016. According to them the increase in the inflation rate would be as a result of the volatility in the foreign exchange market during the month. National Bureau of Statistics, NBS, is expected to release the inflation rate for the month of February 2016 by next week. Food Price Index, FPI, which the Food and Agriculture Organization, FAO, released last week shows that food prices increased marginally in February from

January level. FPI increased by 0.14 per cent from the revised figure in January. Price of vegetable oil surged in February while meat prices recorded a small recovery. The increases in these two categories were more than enough to offset the decline in cereal, sugar and dairy prices. FAO Vegetable Oil Price Index was up significantly by 8.04 per cent from January, the highest value since June 2015. The upswing was primarily driven by reports of falling inventories in Southeast Asia coupled with poor production prospects in the coming months. FAO Meat Price Index was up 0.67 per cent as prices for the different categories of meat went in different directions. The FAO Cereal Price Index was marginally down by 0.55 per cent, due to ample global supplies and increased competition for export markets. Wheat

prices were mostly affected while on the other hand, rice prices firmed slightly. The FAO Dairy Price Index fell by 2.13 per cent, due to lackluster import demand, especially by China, and increase in supply for export. FAO Sugar Price Index recorded the highest loss. The Index was down 6.16 per cent due to better than expected crop conditions from Brazil. FSDH stated “our analysis indicates that the value of the Naira remained stable at the inter-bank market while it depreciated at the parallel market by 9.85 per cent to close at USD/N340.00 from USD/N306.50 at the end of January. “The depreciation at the parallel market led to an increase in the prices of imported consumer goods in Nigeria between the two months under review. “The prices of most of the food items that FSDH Research monitored in February 2016 increased.

Vanguard, MONDAY, MARCH 7, 2016 — 31

Advertising & Media

AAAN creates campaign against terrorism, corruption unify us.” “It is a behaviour change campaign such as the one we are working on requires deep insight and expertise. You’ve got to build it with deep, resonant insights; sometimes

STORIES BY PRINCEWILL EKWUJURU

ssociation of Advertising Agencies of Nigeria, AAAN, says it’s taking the fight against corruption, terrorism and other vices to the billboards as their contribution towards government’s effort at tackling the menace. The AAAN president who spoke to Vanguard said the Association had reached an agreement to compliment government’s efforts through a campaign that will unify and motivate Nigerians to support the war against corruption and terrorism. According to him, the campaign is meant to support the war against corruption , terrorism, mobilise, inspire, and motivate Nigerians to join in the war. He further stated “there is currently a lot of apathy amongst Nigerians about the violence going on and that has continued to go on especially in the North Eastern part of the country. That is what our campaign on Anti-Terrorism is all about.” The AAAN president who

you might need to pre-test the creative work. So government has got to be deliberate in designing these campaigns otherwise they will not be effective.

Nigeria to usher in creativity in Cannes’ Style

MEETING - From Left: Dr Rotimi Oladele,President NIPR;Dr Grace Achum,Special Assistant to NIPR President on Media and Ethel Agbeyegbe,Acting Chairman,Lagos State Chapter of NIPR.At the breakfast meeting of NIRP Team and Brand Journalist Association of Nigeria held in Lagos. PHOTO: AKEEM SALAU. stated that the campaign was first conceived before government thought about the war against corruption, is meant to be an integrated campaign that will support the whole war against terrorism using very effective media to deliver the message and solicit support of Nigerians for the government. His words, “it is really a campaign to support the war

against terrorism. We have also developed two other campaigns. So there is this one against terrorism; there is one against corruption and there is another one for unity. As you know, one of the big issues in our country is Unity or the lack of it. This country is so divided; divided along tribal lines, political lines, religious lines etc. We believe therefore that we need to have a campaign to

Cannes Lions International Festival of Creativity launches its communications campaign for 2016 tagged, “Thank You C r e a t i v i t y ” (www.thankyoucreativity.com), the official Festival representative in Nigeria, CHINI Productions has also rolled out plans for the pre Cannes local events in Nigeria. Activities lined up in Nigeria include the Roger Hatchuel Academy, the Young Lions Competitions, the Miami Ad School Scholarship Competitions, Lions Edit and Lions Night & Awards. These activities are scheduled to take place from April 5 to April 9, 2016. Entries for Roger Hatchuel Academy, Young Lions C ompetition and Miami Ad School Scholarship competitions

are already open at www.canneslions-ng.com. The Roger Hatchuel Academy is the oldest academy in Cannes Lions and is named after the first Festival chairman. It is a high profile intensive training for students in the university who intend to work in advertising on graduation. In Nigeria, CHINI Productions has partnered with APCON for about 9 years to promote this programme. In 2016 again, this programme will see talented students gather from campuses around Nigeria to learn from leading professionals in Lagos and visit organisations in the industry during their 3day intensive residential programme. Companies that have already decided to host the students include Noah’s Ark Communications and STB McCann.

e-Commerce

MTN, Goldman Sachs, Rocket Internet commit N48bn to grow AIG STORIES BY JONAH NWOKPOKU

frica Internet Group, AIG has received additional investments totalling $245 million, about N48 billion, from South African telecoms group, MTN, American investment banking firm, Goldman Sachs and Rocket Internet. Recall that MTN had bought 33 per cent in AIG in 2014 to

join other AIG shareholders including Rocket Internet. AIG, founded in Nigeria in 2012 as an e-commerce conglomerate has leveraged deepening internet penetration in emerging markets including growing middle class to meet increasing demands for online products. Over the past three years, the group has launched and operated e-commerce companies in 26 countries

across Africa. These companies include: Online retailer, Jumia.com, food delivery app HelloFood, hotel booking platform Jovago, online real estate marketplace Lamudi, online marketplace, Kaymu.com, taxi hailing app,EasyTaxi and online vehicle marketplace, Carmudi.com. Recall that barely a month ago; AIG raised £75 million by selling 8 per cent stake of the company to French insurance giant, AXA.

Speaking on the investments, Founders and Co-CEOs of Jumia and AIG, Sacha Poignonnec and Jeremy Hodara said the funds will significantly strengthen the balance sheet of AIG enabling the company to leverage the significant growth of Jumia and other AIG subsidiaries and to capitalize on the significant opportunities in Africa. “This investment is recognition of the success that Jumia has already achieved and provides us with a strategic flexibility to further support our

efforts to offer the best shopping experience to our customers,” said Sacha Poignonnec and Jeremy Hodar in a joint statement made available to Vanguard, adding, “We are delighted to welcomeAXAandGoldmanSachs as new investors and are also grateful for the continued confidence from our existing shareholders. To us, it is arecognition of the quality of our operations across the African continent and an affirmation of the significant growth potential of Jumia.” ThestatementfurthersaidJumia, intends to use the funds to support itscontinuedgrowth,andtoexecute on attractive development opportunities in Africa along with AIG’s other e-commerce platforms.

Carmudi, Concept Nova partner to combat vehicle vandalism

C VISIT — From left: Mr. Oscar Onyema, Chief Executive Officer (CEO) Nigerian Stock Exchange; Alhaji Muneer Bankole, Managing Director/CEO, MED-VIEW Airline and Rasheed Yussuff, MD/CEO, Trust Yields Securities Ltd during the courtesy visit of Med-View Airline to Nigerian stock Exchange, Lagos, preparatory to listing. C M Y K

armudi, Nigeria’s online vehicle marketplace, and Concept Nova, a fast growing information technology and software development company have partnered to provide a premium anti-glass break solution called C-Protect for car buyers and owners in Nigeria. C-protect is an invisible film which can be applied to car windows, windscreens and glass vents protecting the glass from breaking in the event of accidental break, vandalism or robbery.

Speaking on the research and partnership, Managing Director Amy Muoneke said ‘Carmudi Nigeria is not just focused on providing a fraud free platform for car buyers and sellers but we also make it a point of duty to partner with organization that provide services and products that would benefit car buyers. Security has always been an important issue and we are proud offer Nigerians who buy cars from the Carmudi Nigeria website C-protect at a discounted price."

32 — Vanguard, MONDAY, MARCH 7, 2016

(0805 220 1997)

Will agonising fuel queues ever end?

t is, inexplicable, that despite Nigeria’s ranking as a major oil producer, our economy is still literally in shambles with a tattered currency and a crushing unemployment rate above 25%; we still unfortunately presently expend almost 50% of our total export revenue on fuel imported from some of those refineries which buy our crude oil. Regrettably, despite the regular recurrence of fuel scarcity, with its severe public discomfort, and ravaging economic dislocation, there is still no assurance that this tortuous cycle will ever end. However, if the inefficient, and wasteful sporadic operation of existing government refineries is anything to go by, any serious proposal for government to build and operate more refineries may just be a death wish. Although, it has been suggested that public/private sector partnership refineries will guarantee efficiency and best practice management, serious investors may, however, never emerge, if fuel price remains regulated; furthermore, if government’s plans to collaborate with private investors have still not advanced beyond an M.O.U, then it will be unrealistic to expect steady fuel supply, for at least another two years. It has, also, been suggested that several small modular refineries can be established very quickly nationwide; evidently this strategy may only be feasible if pipelines are already laid from oil wells in the South/South to designated refinery sites, in widespread locations, before modular refineries become

practical propositions. Furthermore, the concept of modular refineries may not also attract private sector interest, if fuel price still remains regulated. Nigerians may readily recall that the approval given in 2012 to a Nigerian/American consortium to construct, 6 modular refineries within 30 months, has regrettably also failed to materialise; more than 20 other licensees have also remained inactive. The preceding narrative suggests that the possibility of more refineries to augment fuel supply and possibly also earn additional export revenue may not materialise for a while yet, at least not until fuel pricing is deregulated. Nonetheless, our hope for fuel sufficiency may still be spurred by the steady progress of the multibillion dollar Dangote’s Lekki refinery. Dangote’s refinery, will produce about 500,000 barrels per day to cover over 50 % of our daily domestic requirement of over 40m litres. Anyhow, Dangote’s refinery may not come on stream until 2018, so fuel supply will still largely remain import based and will therefore continue to severely deplete our foreign exchange reserves. Incidentally, the eventual commissioning of Dangote’s refinery in 2018 will certainly improve fuel supply but it may not significantly reduce the heavy depletion of our foreign exchange reserves from fuel imports. Furthermore, the location of this gigantic project in an Export Processing Zone, connotes product prices will be denominated in dollars.

Indeed, the Project’s Sponsor has never hidden the fact that, in addition to personal equity, foreign loans, which would be serviced and repaid in foreign currency were also secured to fund the projects; thus, Dangote’s Refinery will not sell its fuel in Naira and then proceed to buy dollars from CBN to service its external loans; indeed with such trade terms and, the continuous slide in Naira exchange rate, this multibillion dollar investment would invariably become a nightmare for the owners. So, fuel supply may still predominantly come from NNPC imports, and fuel scarcity will unfortunately also remain abiding with NNPC’s monopoly; this, would be bad news for the market because private sector marketers will be happy to avoid the heavy financial burden which results when subsidy refunds and exchange differentials are not promptly settled to repay their high interest bank loans with the usual oppressive penalty clauses. Indeed, Fuel merchants are probably, presently, more comfortable with simply paying Naira to lift supplies directly from NNPC to service their own petrol outlets and earn a modest profit margin without much sweat, as this strategy invariably drastically reduces both the tenor and the high interest paid on loans that marketers incur to import fuel. Nonetheless, although NNPC’s monopoly will reduce the level of petrol marketers’ loans well below the present estimated 40% of total bank credit, sadly however, commercial banks

will probably still choose to reinvest the resultant surplus funds, in governments’ bills and bonds, to reap easy money rather than support the famished real sector with low cost funds. Conversely, however, NNPC operations will inadvertently become challenged, as over 50% of its forex earnings will also have to be dedicated to pay for fuel imports. It is not yet clear how this system is currently playing out, particularly with the mandatory requirement for the Corporation to domicile its funds in CBN in compliance with the T.S.A system. Obviously, the sales income from petrol and kerosene supplies comes into NNPC coffers in Naira, so how will the Corporation account for unavoidable exchange rate differentials, when it has to pay for its fuel supplies in dollars? The question is clearly, at what rates the NNPC will repurchase dollars with its naira sales income from CBN to pay for its fuel imports; conversely, NNPC may actually require an approved dollar denominated budget annually, for its fuel imports so as to avoid recourse to the dangers inherent in procuring dollars from CBN for this purpose. It would seem from the preceding narrative, that there is no easy quick fix solution to the challenge of fuel supply without price deregulation. Nevertheless, deregulation will invariably also fail if the Naira exchange remains weak. Thus, government’s apparent inability to deregulate is actually because of the

apprehension that such policy position will not be sustainable if Naira’s unending slide is not arrested. For example, if the Naira is allowed to depreciate below N300=$1 because of dollar demand pressure, the pump price of fuel which is presently below the N87/litre regulated price, will immediately spike above N140/litre to make abolition of fuel subsidy very unpopular; invariably, further depreciation will expectedly further increase fuel price beyond N140/litre. Conversely, if the Naira appreciates to N100=$, for example, fuel price will fall below N50/litre, i.e. well below the regulated price, and support sustainable deregulation of the downstream market; furthermore, with deregulation, the market will embrace competitive pricing and services amongst marketers, so that, ultimately NNPC may withdraw and focus on more specialised subsectors of the oil industry. Evidently, with the eternal presence of systemic surplus Naira in the money market, not even increasing dollar revenue will save the Naira exchange rate from further depreciation; however, a more competent management of naira liquidity by CBN will gradually redress the market imbalance in favour of Naira and steadily induce a stronger naira exchange rate that would support and sustain deregulation of fuel pricing. Instructively, Naira liquidity will be minimised if Naira allocations are not substituted for dollar denominated revenue.

Business & Economy

Skye Bank, KIA Motors offer new car acquisition window

n strict adherence to the current national automotive policy of the Federal Government to promote the culture of driving new cars by Nigerians, some strategic alliances have begun to emerge between the major stakeholders in the transportation sector and the financial services industry. These alliances are designed to ensure ease of acquisition of new cars by the members of the public as well as ensuring flexibility in paying for the cars over a period of time. The major stakeholders that are involved in this new drive to relegate used cars to the background and facilitate the C M Y K

easy acquisition of new cars are the car manufacturers/ marketers and banks that are providing the funding requirement to the prospective car owners and members of the public. The idea behind this new trend is to discourage the habit of buying used cars by Nigerians and embrace a more pleasant driving experience. Skye Bank Plc. and Kia Motors recently signed a strategic auto finance agreement to enable customers of Skye Bank acquire brand new Kia vehicles without difficulty. The arrangement covers Kia models such as Picanto, Rio, Cerrato, Optima

and Sportage. The partnership is borne out of the zest of both Kia Motors Nigeria and Skye Bank Plc to promote a customer-driven corporate culture by providing the best quality service and exceptional buying experience with all values centered on the customers. The joint partnership brings to the fore an auto finance scheme that is geared towards satisfying customers’ needs with manageable monthly repayments and is best suited for individuals, organizations, corporate bodies and institutions who are availed convenient and flexible finance options.

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