BusinessDay 01 Jul 2020

New electricity tariff postponement means more trouble for economy

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elaying the implementation of the new electricity tariff plan which guarantees that customers pay their fair share will worsen the government’s

fiscal situation and continue the culture of wasteful consumption subsidies which takes away scarce resources from critical projects. This is not an option for an economy only a short crawl

FRONT PAGE comment away from recession.

Last week, the board of the World Bank approved Nigeria’s

long-standing request for about a billion dollars, releasing the first tranche of $750 million credit to support the power sector recovery, after the Nigerian government committed

to reviewing tariff and ending subsidies which have gulped over N1.72 trillion with the last five years.

Reneging on the terms of this Continues on page 31

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GenCos threaten force majeure if new electricity tariff is delayed E N

Nigeria working towards meeting World Bank’s FX unification requirement – finance minister … to embrace integrated financing framework for SGDs

ISAAC ANYAOGU

lectricity generation companies (GenCos) say they will declare a force majeure and down tools if the Federal Government goes ahead to delay the commencement of the new service-reflective tariff plan billed to start July 1 (today).

Joy Ogaji, executive secretary, Association of Power Generation Companies (APGC), in a phone interview threatened that the operators who are owed considerable sums of money would drag the Federal Government to an arbitration court in the UK over the matter.

According to the GenCos, “The DisCos have been arguing that they are not able to take more power because the tariff is not cost-reflective. How come now that a cost-reflective tariff Continues on page 31

Cynthia Egboboh, Abuja, ENDURANCE OKAFOR & OLUFIKAYO OWOEYE, Lagos

FX rate unification on their mind: L-R: Zainab Ahmed, minister of finance, budget and national planning; Godwin Emefiele, governor, Central Bank of Nigeria, and Ibrahim Gambari, Chief of Staff to the President in a side chat, at the virtual flag-off of construction phase of the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline Project at the State House, yesterday.

igeria’s Finance Minister Zainab Ahmed said on Tuesday that the country was working towards meeting the single exchange rate window requirement for accessing an agreed $1.5 billion loan support from the World Bank.

Ahmed made the announcement during a webinar organised by the Federal Ministry of Finance, Budget and National Planning, OSSAP-SDGs and UNDP Nigeria with the title ‘Integrated National Financing Framework for Sustainable Development’.

“The minister of finance and the Nigeria central bank are working closely together to meet that requirement,” Ahmed said.

BusinessDay gathers that NiContinues on page 31

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Nigeria Economic Sustainability Plan: Agriculture!

Franklin Ngwu

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n the recently released Nigeria Economic Sustainability Plan, Agriculture was most interestingly named as the first key project that will be used to stimulate and sustain our economy. According to the report, it will be through “A Massive Agricultural Programme, that is expected to bring between 20,000 and 100,000 hectares of new farmland under cultivation in every state of the Federation. The aim is to create millions of jobs opportunities, directly and indirectly, over a 12-month period. A significant number of Nigerians will be incentivised to engage in farming and agro-processing, as that is a field in which Nigeria has a comparative advantage”.

While there is no doubt that agriculture is an area of our comparative advantage, what is in doubt is the seriousness of federal, state and local governments to patriotically pursue the immense direct and indirect growth opportunities we have in our agricultural sector. Sustaining the doubt is the way the flaunted importance of Agriculture normally dies down once our precarious economic situation improves. The most recent evidence is the limited agricultural achievement since the 2016 recession.

As it is very clear that we are in a very serious socio-economic situation, it is expected that we should pursue the touted Agricultural revolution with the seriousness it deserves. In the Economic Sustainability Plan, more details and focus are required. For instance, it will be important to properly identify and map out what will be cultivated in the planned 20, 000 to 100,000 hectares of land per state. In 2018, Indonesia made about about $23 billion from just two economic trees- coconut and palm trees.

To address the short-medium term revenue impacts, the focus for this agricultural season should be on crops with three – six months gestation period. Crops like maize, yam, cassava, sweet potatoes, beans, and others fall into this category. In a recent study on the business opportunities of some of these crops, it was noted that the gaps between demand and supply are huge. For instance, while the gap in the demand and supply of Garri in a year is over N430 billion, for Maize flour processing, it is about N240 billion.

While the Netherlands makes about N285 billion from potatoes every year, the 2020 total budget of Plateau state is about N172 billion. In the same vein, Germany and Spain exported pork meat worth about $4.4 billion and $4 billion respectively in 2018.

Another way through which Agriculture can be used to diversify the economy is a strategy to supply food products consumed by Nigerians in the Diaspora. It will also provide short to long term foreign revenue in addition to jobs and other positive spillover benefits. The main reason why the foods that are in very high demand are not sourced from Nigeria is the lack of internationally accepted packaging

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This venture will improve the Naira’s value, generate foreign revenue and bring about financial inclusion. Not to mention employment generation and economic empowerment especially for the women and the poor. It will provide the required stimulus for the muchtalked agricultural revolution

centres in Nigeria. This is a challenge which the government can quickly address and which I had earlier asked the banks to provide possibly as part of their Corporate Social Responsibility. With about 15 million Nigerians in the Diaspora, it is a business with a potential annual revenue of over $81 billion (about N31 trillion).

A brief illustration will be helpful. A food expenditure of about $15 by each of the 15 million Nigerians in the Diaspora translates to about $225 million every day and about $81 billion every year. As only a very small quantity of the foods consumed by Nigerians in the Diaspora are sourced from Nigeria, the above is sadly the amount of money that Nigerians in the Diaspora send to other countries especially in South America and Asia every year. To further illustrate, the UK imports plantains and bananas from Argentina, Ecuador and Uruguay. However, the flight time between these countries and the UK is about 14 hours compared to six hours from Nigeria. As the limited food products supplied from Nigeria are inadequate to meet demand, they are very expensive.

So, this is a big opportunity for Nigeria to generate revenue. The benefits are endless! Nigerians will always prefer foods imported from the homeland so there will be little or no competition especially if these are sold at slightly lower prices compared to the products from Asia/South America. As a major problem is the absence of packaging centres that meet international standards, the government can immediately invest in this vital area by establishing packaging centres in major cities in Nigeria. To ensure prompt take-off and success, distribution centres in major European and American cities will be

Our relationship with Governor Rotimi Akeredolu

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aul Joseph Goebbels, a German Nazi politician, was the Reich Minister of Propaganda of Nazi Germany from 1933 to 1945. According to his Wikipedia page, he was one of Adolf Hitler’s closest and most devoted associates, and was known for his skills in public speaking and his deeply virulent anti-Semitism, which was evident in his publicly voiced views. He advocated harsher discrimination, including the extermination of the Jews in the Holocaust.

In one of his many affirmations against the governed and the Jews, Goebbels advocated consistent peddling of lies against the opposition and perceived enemies. He opined that whenever occasion demands that lies be unleashed, such should be done mercilessly.

Recently, our family, the Olatunde Runsewe Dynasty of Ibadan Land, was targeted for the Joseph Goebbels’s kind of attacks by the opponents of our in-law, Oluwarotimi Akeredolu, SAN, the Governor of Ondo State, over some legitimate business transactions which our corporate entity, the Dutum Group of Companies, has with the government of Ondo State.

As a family and company, we understand that this is the era of electioneering and sloganeering when lies, slander, slur and virulent misinformation are mercilessly spread across the blogosphere by political actors without respect for truth, decency and civility hence, we would have ignored the latest fallacies and misleading notions sponsored against our esteemed family by those against the re-election bid of Governor Akeredolu.

However, as posited by Goebbels, a lie repeatedly told may be considered truth, if not conscientiously and thoroughly thrashed.

Therefore, for the sake of the unsuspecting

members of the public who may have been hoodwinked by the recent falsehood against our revered family, we consider it sacrosanct and imperative to release this rebuttal to set the record straight: Our son, Olakunle Runsewe is married to Yejide, daughter of Governor Akeredolu, SAN, and the marriage preceded the emergence of the Governor.

The Dutum Group of Companies was established in 1989 by our patriarch, Olatunde Runsewe, with a vision to be one of the best five indigenous construction companies in Nigeria.

As a family that values good name above gold and riches, we confirm that our corporate brand, the Dutum Company Limited, has executed, and still executing some contracts for the government of Ondo State. We state clearly, too, without going into details, that Dutum Group of Companies had been executing contracts for Ondo State Government long before Akeredolu became Governor in February 2017.

On the Ile Oluji Township Road Contract, we will like to state very clearly that the contract was awarded for the sum of N800 million, and not N6.8billion erroneously being brandished on the internet by some unscrupulous persons.

Therefore, there is no N25 billion contract being executed by the Dutum Construction anywhere in Ondo State. The Ile Oluji road construction is 91 percent completed with N630 million paid to our firm thus far. We also want to make it known that out of about 30 road constructions ongoing in Ondo State, only the Ile Oluji township road was awarded to Dutum Company Limited and we stand to be corrected.

On the allegation that Streford Limited, owned by one of us, Olakunle was awarded the contract to renovate the Governor’s Office and

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Government House in Alagbaka, Akure, the state capital, we want to say without any form of contradiction that the claim was blatant mendacity. Streford was never awarded any contract for renovation of government houses nor was the firm involved in any installation of elevators in Alagbaka.

On the allegation that the sum of N10 million is being paid to Olakunle monthly for the renovation of the newly acquired elevator in the Governor’s Office at Alagbaka, we state explicitly that the said elevator, according to our findings, is a brand new one and no renovation and maintenance would be needed on it for now ,thus, the monthly payment of N10million to Olakunle is a lie from the pit of hell. Olakunle is not involved in any installation of lift nor has he been involved in any maintenance of lift in Alagbaka.

On the Direct Labour Contract from the Ministry of Land and Housing allegedly awarded to Olakunle, our simple reaction to it is that it is an unfounded lie. You may recall that the vendor of these untruthful stories once told the public that the Runsewe Family is the Auditor of COVID-19 response fund of the Ondo State Government via SIAO Partners, which was found to be another falsehood.

Governor Akeredolu is currently constructing roads in all the 18 local government areas of Ondo State. Intelligence reports have it that the wicked propaganda being consistently unleashed against our family is due to the fact that the state government did not mobilize government contractors to share money to some political actors who are used to being given kick-backs in the past hence their disdain towards the Akeredolu clan and his in-law, the Runsewes.

As a family with impeccable integrity, we do

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needed to ensure efficient distribution to all other cities with significant Nigerian/Afro-Caribbean populations.

This venture will improve the Naira’s value, generate foreign revenue and bring about financial inclusion.

Not to mention employment generation and economic empowerment especially for the women and the poor. It will provide the required stimulus for the much-talked agricultural revolution. Not only will it lead to better revenue for Ozor Umahi of Abakaliki, it will also increase his lifespan due to the psychological satisfaction that his yams are sold and consumed in London and America (Obodo oyibo!).

It will help Ohttom of Vandekiya village of Benue State to train her kids through the export of mangoes that are in abundance and wasting in her village.

Alhaji Abdulahi from Fagge in Kano State will live in peace with Joshua in Jos as they are both involved in the export of carrots and groundnuts to Canada. Gbadamosi will prefer to live in Ogbomosho than in Lagos due to his Amala processing plant which provides him with good income. With the above and the foreign revenue that will be generated, the agricultural revolution will be in auto pilot, requiring little or no push from the governments for youths to get involved. As our 2020 budget is about N10.8 trillion, imagine the yearly impact of N31 trillion on the economy especially the poor and less privileged Nigerians!

Dr. Ngwu, is an Economist/Associate Professor of Strategy, Risk Management & Corporate Governance, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- fngwu@ lbs.edu.ng

Temitope Runsewe not compromise quality in all our dealings. Our corporate brand, Dutum Group of Companies, is known for quality and excellent service delivery which has made us to be trailblazing for more than three decades in the construction industry. We have executed jobs for the federal and many state governments and too numerous to mention private organisations in Nigeria.

Anyone who wishes to know more about our history and our feats can visit our website, www. dutumgroup.com Once again, we urge the general public to ignore all the lies being peddled by political urchins and meddlesome interlopers paid to destroy our hard-earned integrity for pecuniary gains. Our Patriarch, Olatunde Runsewe, is renowned worldwide for honesty and sincerity of purpose, virtues he impacted in all his children.

We say with all sense of responsibility that our patriarch will never indulge in any acts capable of tarnishing his image.

Lastly, as a family, we have bad news for the masquerading marauders: The Runsewes are solidly behind the re-election bid of Governor Oluwarotimi Akeredolu. The achievements of the Akeredolu administration in the areas of road infrastructures, business development, jobs creation, industrialisation and Information Technology must be consolidated upon in the interest of the Younger generation who desire a new direction in line with the tenets of 21st century.

Temitope Runsewe is the Managing Director of Dutum Group of Companies and the Scion of the Olatunde Runsewe Dynasty.

Tope.runsewe@dutumgroup.com

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Recovery 103: Translating public financial packages to liquidity Small Business handbook

Emeka Osuji

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here has been robust discussion of the fact that we can fast-track post-COCID 19 recovery by putting money in the hands of SMEs and households. While it would help the former to resume their production and services activities and restore some level of the vaporised cash flows, it would also assist in stemming the challenge of vanishing consumer spending. We are also mostly in agreement with the fact that the government and its key financing institutions, especially public or development banks, should spearhead this recovery financing. This agreement is evidenced by the steps taken by governments across the world to provide financing packages to assist the most impacted economic agents. It is however, equally important to ensure that such financial provisions do indeed get to the target segments of the society and not remain in the vaults of public banks. We have seen cases where funds “earmarked” for SMEs were never “eye marked” by them, apologies to some Nigeria complaining about public finances in the country.

In some domains, the role of public banks, and special financing institutions, have been strengthened by law to enable them take serious steps to put money

into the system. Many cases, legislatures have made laws to permit special funding activities targeting the SME sector and households. In the United States, the CARES Act provides approximately $2 trillion to help individuals and businesses that may be impacted by the pandemic. It made provision for a number of initiatives, which aim to provide urgently needed financial assistance to small businesses and their employees, and for non-profit organisations as well. Some of the channels provided to direct funds to the target beneficiaries include the fact that small businesses in America can access the lending programmes of the Small Business Administration (SBA), and enjoy debt relief programs. Temporary tax breaks and deadline extensions for both individuals and businesses, and improved unemployment benefits to individuals impacted by the COVID-10 are also included.

While these funding support opportunities may sound quite good, especially to the potential beneficiaries, we do not expect the Nigerian authorities to just copy what they do in America or elsewhere and transplant to our system. We need to think about our own peculiarities and design appropriate responses, keeping the objective of getting cash out of the vaults to the people. It is not right to pass tax-payers’ money to individuals without regard to equity and a sense of natural justice, more so when such monies are going to individuals who are ordinarily engaged in private business. This is the realistic part of the story. Transfer payments need to be properly thought out and managed, not only with regard to equity, since recipients give no real value, but also for accountability because it could be a source of major scandals, especially in environments of endemic corruption, like most developing countries.

This challenge of carefully managing

transfer payments was clearly reflected recently in Nigeria, when cash palliatives were allegedly hauled by certain public officials to places of interest to them, and physically handed out to alleged relatives and friends, to the exclusion of many others, raising quite some commotion.

Some of the measures announced by the Nigerian Central Bank, which has been playing an extensive development role in recent times, include the N50 billion credit facility for both SMEs and households. Not only is the amount too small, relative to certain costs considered even unnecessary in the present circumstances, its operational modalities do not reflect much insight that ought to have been gained from earlier financial packages made available by the government but remained largely undisbursed. Perhaps, we may achieve more, and reduce the tendency to poor implementation, if we get more specific particularly with regard to procedures for disbursement.

What SMEs need most right now is to continue to run their businesses and pay the staff, and that calls for cash injection. The criteria for accessing the facilities meant for them may profit from strict resort to the official definition of SMEs in Nigeria, which takes into account the number of employees and capitalisation. These are verifiable facts that will obviate misdirection of financial assistance to reflate the economy and avoid distress. Specific payroll loans with clear repayment terms may be better than grants handed out at the whim of privileged officials. This will be better if the government adds its guarantees to private bank loans, while also using public banks to push the ball. The Bank of Industry and the big five microfinance banks have some experience in dealing with the economically active poor and households. They may be more effective

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What SMEs need most right now is to continue to run their businesses and pay the staff, and that calls for cash injection. The criteria for accessing the facilities meant for them may profit from strict resort to the official definition of SMEs in Nigeria, which takes into account the number of employees and capitalisation

Dr Osuji is head of the department of Economics at Pan Atlantic University Lagos. eosuji@ pau.edu.ng @Emekaosujii

Who knows the end?

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he “end” of a matter doesn’t always reflect the motivation behind it’s beginning. And neither can one use how a thing begins, to accurately project how far it will eventually go. There are times when a modest ambition can result in greatness and can even lead to a change in the course of history. In the same vein, some of the biggest investments, some of the most elaborately set up projects with the loudest introductions to the world have disappeared as quickly as they appeared.

Call me cynical but had they exited with a loud bang, that would have at least lent them a “glorious” moment in history that would compel us to remember them but as if determined to be forgotten forever, numerous melts into oblivion with nothing more than a whimper. “Do not despise these small beginnings” is an admonition anyone would do well to take to heart. Let me give you a couple of illustrations.

English Independent Schools, better known quite ironically as Public Schools, are generally accepted to be the most prestigious secondary schools in the world and they parade several unique attributes to support this position. The majority of them are several centuries years old with some as old as five hundred years and beyond. Of course, this doesn’t automatically confer upon them a label of excellence but it would be difficult for anyone to totally discount the advantage of centuries of teaching experience and the continuous pursuit of excellence over that period. Neither should one minimise the possible edge they could enjoy from long held character building values and traditions.

A little research would reveal that most of these schools were established with a clear and well thought out vision and ethos, which time has both allowed and assisted to mature into a pervading culture; often unique to each school. Competition amongst these schools for academic supremacy, sporting glory and numerous other extracurricular activities over the centuries, would expectedly lead to the highest of standards. As the good book

says, “iron sharpeneth iron”. The pedigree these schools have become globally known for, has led some to establish franchises in different Asian countries; Thailand, China and Singapore to name a few. Such schools as Harrow, Shrewsbury and Sherborne have taken full advantage of their perceived exportable values.

But now, to the crux of the matter. It may interest you to know that most of these schools were actually established to cater for the poor, but you should try telling that to parents who currently pay between forty and forty-five thousand pounds a year in school fees per child! There couldn’t have been anything further from the mind of the founders of these schools, than to establish a school that would ultimately cater for the English as well as the international elite. I say this because in many cases, the land and original building used to start the school, was donated in the will of a privileged individual as his dying wish; with strict instructions for it to be used as a school to educate children of the poor and clergy in that village or town.

Over the years, the product of these schools has held sway at the very top of British society, though the push back against such obvious and unapologetic elitism, which they’ve been seen to represent, has led to a gradual whittling down of their influence in more recent times.

The last few decades have seen the United Kingdom gravitate, almost inevitably, towards a more egalitarian society. Having said this though, the vast majority of British Prime Ministers attended ‘Public’ schools, with one particular school producing twenty of them. Perhaps more significant is the composition of the current Prime Minister, Boris Johnson’s cabinet, with two thirds of his Ministers being products of the ‘Public’ school system. I have my doubts that the founders of this system, who sought to provide for the disadvantaged, would have foreseen just how elitist or dominant they would eventually become.

The Michelin Guide, now available in over 20 countries, has proven to be a faithful and indispensable companion to diners seeking fine

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cuisine, since it started listing and categorising restaurants in the 1920s. But the founders of this publication had no such ambition in mind. The famous Michelin brothers, Edouard and André, found themselves in a conundrum. They dreamt of the great fortune their innovative tyres could make for them but there was one small snag. There just weren’t enough car owners to sell them to.

In fact, the whole of France could boast of only about three thousand cars at the time. They needed a more vibrant market if they were going to make any money at all, so they turned their attention to employing a gimmick. In order to improve the popularity of automobiles, they decided to publish a magazine which featured useful information for motorists, such as maps and instructions on how to change the tyre of a vehicle, which literally seemed like rocket science to just about everybody at that time. In an attempt to enhance the appeal of the magazine, it widened its scope by including a guide on good hotels and restaurants. The magazine was introduced purely as a gimmick to get more people to buy cars, resulting in an increase in the demand for tyres.

The magazine was never the focus, which explains why it was given out free for years. Apparently, the first print was for over thirty thousand copies. An expensive gimmick you may say but it worked. Michelin tyres have become a global brand with very few rivals but unpredictably, the Michelin Guide which recommends the best restaurants, adjudged so by the Michelin Stars awarded them by the Michelin Guide in-house gourmet experts, has established its position as the leading authority in fine cuisine. Chefs across the globe make it their lifetime ambition to earn the coveted Stars and proudly let out a breath of relief when they eventually get it. There’s no greater recognition for a chef and the restaurant that employs him. But this was far from the plans of Edouard and Andre Michelin.

Incidentally, Ikoyi, a Nigerian restaurant became the first African restaurant in London to be awarded a Michelin Guide Star as recently as 2018.

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in certain public funding programmes.

While development banks and indeed, the usual funding channels for SMEs and the economically active poor, should play leading roles, operators in the SME space must take steps to complement such financing. There is still a lot they could do for themselves to promote the muchneeded rapid transition to digitalism. The first thing is to embrace the new normal – anything that can be transited to the digital space must not wait a moment longer.

Anything that can go online should do so now. This is especially so for service firms providing such services as foods. Providers of in-person services must not allow the expected lethargy to drown them. It is time to migrate to online services. Doctors should begin to see their patients online, while cakes and birthday gifts should be sent and not brought in person. Drones are doing it in China and some other places.

Investment is needed here and that is the kind of loan we are talking about. Indeed, a packaging industry to take care of should be kicking off right now because of this transition to the digital space.

Second, this is the era of the virtual market place. Everyone that has anything to sell now has a stall in the virtual market place to rent and populate with goods. Look out. Your hop is waiting to be occupied. Get on a platform; make your own marketing materials and hit the road. Advertising is the way to go and there are limitless opportunities to show off your product or service. E-commerce has come to make everyone rich. Get going, while the government adds the tonic to your business by translating its financial packages to real cash in the economy.

Character Matters with Daps

Dapo Akande The lesson I take away from this is that only God truly knows tomorrow but this should not deter us from getting up and taking that bold step forward. Our plans may impress some, while others may even mock us behind our backs.

Such plans may appear gargantuan and impossible to many or they could even seem small and insignificant to others. History, as well the Nigerian business terrain is replete with many organisations that people didn’t think were worth a second look in their first few years of existence but which later became too big, too impactful and too successful for anybody to ignore.

I can bet that many of the Michelin brothers’ compatriots would have dismissed their Guide as a sad joke by people desperately grasping at straws but where are these mockers now?

Tenacity and the ability to think outside the box brought the brothers success and a name still relevant over a hundred years later. For the fourteen years till Amazon eventually broke even, Jeff Bezos found himself the butt of jokes too, for foolishly relinquishing a job which fetched him an annual income of more than half a million dollars at the youthful age of thirty-two. He “pursued” a ridiculous dream. But who’s laughing now?

Changing the nation...one mind at a time.

Akande is a Surrey University graduate with a Masters in Professional Ethics. An alumnus of the institute for National Transformation and author of two books; The Last Flight and Shifting Anchors. Contact: dapsakande25@ gmail.com

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Raiding the pot: How the pandemic has deepened the pensions crisis The pressure on schemes has intensified with rates set to stay low and workers drawing down their funds Josephine Cumbo, Robin Wigglesworth and Billy Nauman

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he arrival of coronavirus in Australia in March left Marie Piggo struggling to put food on the table.

The 32-year-old hairdresser from Sydney quickly saw two-thirds of her income disappear as customers stayed at home. Worse still, her husband lost his job.

So when the Australian government announced in March it would allow young people like herself to raid their retirement pots to ease financial pressures caused by the coronavirus lockdown, she jumped at the chance.

“We didn’t take too long to decide to take [the maximum] A$10,000 [$6,900] from my superannuation pot,” she says.

“We used this to buy a car which we really needed, as my husband fell ill, and I needed to get to work.”

Ms Piggo says she has no regrets about withdrawing what amounted to one-third of her total retirement savings. “It was not ideal but right now our debts, and getting back into work, are a priority,” she says. “I will have to make up the savings later.”

While the measure may have helped ease a cash crunch for Ms Piggo, and millions of others around the world, such short-term emergency measures will deepen the retirement savings crisis that is brewing around the world.

Even before Covid-19, the challenges facing the global pensions industry were already immense, with longer life expectancy meaning that individuals need to save much more in order to have a comfortable retirement.

A decade of historically low interest rates since the financial crisis has put even more pressure on pension systems.

This is particularly true for corporate and public sector “defined benefit” pension plans — which promise a certain payment to members.

The coronavirus crisis has compounded many of these seemingly intractable problems. For many of those people with individual pension accounts, the challenge of building up savings has become even harder. Australia is not alone in allowing people to spend part of their retirement pots to make ends meet during the crisis — the US is among the other countries that have permitted or made it easier to make withdrawals.

At the same time, the investment outlook has become more complicated for all types of private and workplace pension plans. Central banks have indicated that savers could face another prolonged period of ultra-low interest rates as they try to foster an economic recovery, while a string of blue-chip companies have been forced to cut their dividends as a result of the crisis.

“This exacerbates the trends that have been in play for a while,” says Mark Wiseman, a prominent industry executive who once led the Canadian Pension Plan Investment Board. “The value of their assets have been hit and their liabilities have gone up with lower rates. It’s a massive double whammy.”

Some of the immediate pain has been alleviated by the huge stock market rally since April triggered by the extraordinarily aggressive intervention by central banks — which JPMorgan Asset Management estimates totals about $17tn globally. But many analysts say that this will serve to fast-forward stock market returns, dimming the future

outlook, and many remain sceptical that the strength of the rally can endure. The longer-term picture for pensions has been murky for some time.

In 2017, the World Economic Forum warned the retirement savings gap — or shortfall between what people currently save and what they need for an adequate standard of living when they retire — would balloon from $70tn to $400tn in 2050, in just eight countries.

That gap has only got larger as a result of the pandemic.

“Even before Covid-19 hit, people were not saving enough for retirement in most countries,” says Han Yik, head of the World Economic Forum’s institutional investors group. “So they [early access measures] could be a big hit to the ability of people to save adequately for a pension.”

Savings challenge for personal retirement accounts Most pension funds and retirement accounts suffered an immediate and brutal hit this year, when the coronavirus outbreak and harsh lockdowns sent financial markets sliding into one of the biggest and swiftest bear runs in history.

But the impact of the Covid-19 crisis will be most painful for those about to retire, especially those soon-to-be pensioners who have put money away in a private or workplace pension scheme where the employee has an individual account that invests in the stock market.

In the US and UK, average fund values for defined contribution pension plans, which require contributions from employees as well as employers, were down nearly 20 per cent and 15 per cent respectively in the first quarter due to market slump, in theory wiping tens of thousands from the value of retirement accounts. Although, in many cases, much of the losses may have been re-

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The value of their assets have been hit and their liabilities have gone up with lower rates. It’s a massive double whammy

covered during the recent rally.

“For those planning for retirement now and looking for a retirement income immediately, they present unenviable challenges,” says Richard Eagling, head of pensions at Moneyfacts, a UK-based financial information provider.

Temporary measures taken by governments around the world to soften the economic blow of lockdowns are also threatening to deepen long-term savings challenges for people with retirement accounts.

In Australia’s “superannuation” system, where all the funds are managed on a defined contribution basis, trustees were inundated with requests to take advantage of the emergency relaxation of rules, which allowed the early release from pensions plans of up to A$20,000 over two tax years for those aged 55 and over. Between April 20 and June 14, Australian pension funds paid out A$15.9bn ($10.9bn) to 2.1m members under the emergency Covid-19 withdrawal scheme, according to the country’s financial regulator.

While this outflow will not present an immediate liquidity threat to Australia’s superannuation pension system, which has around A$2.7tn in assets, concerns are being voiced about who will pay the most for the emergency measure.

“Superannuation was never intended to be a national relief fund,” says Kirstin Hunter, who runs Future Super, one of the leading pension funds.

“Allowing people to access their retirement savings early seems like an easy solution to the Covid crisis, but it places pressure on people doing it by forcing them to choose between their present and their future.”

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Re-imagining the business school model

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his pandemic has uncovered the soft underbelly of our unwillingness to think beyond the present and anticipate future eventualities.

There have been various experiences and pronouncements regarding the education of our youth in the past couple of weeks. At the local secondary level, my son’s school completed the syllabus for the current term through online classes at home. Far afield, the Harvard University is offering 67 online courses for free to help academics through lockdown and quarantine; while Coursera is partnered with 192 institutions from 43 countries and offering more than 3,200 online courses in 13 languages.

In sharp contrast, the Kano State Government has ordered all schools to stop online classes immediately, while the Academic Staff Union of Universities (ASUU) through an interview of their President, Biodun Ogunyemi with the Punch Newspaper has declared that E-Learning cannot work in Nigeria.

In his TED talk on the three ways to plan for the very long term, Ari Wallach canvasses: Transgenerational Thinking (thinking beyond just your own lifetime), Thinking of possible futures and not just one future, in case of eventualities. And having a 30-year horizon in our thinking process, not just the next couple of years.

I wrote this article four years ago, when I was invited as the Keynote Speaker at the GBSN/ EFMD joint Conference at Accra, Ghana in November 2016.

It seems that the chickens have come home to roost.

The EFMD is a leading international network of business schools and companies (820 members from 82 countries) at the forefront or raising

the standards of management education and development globally. EFMD runs the EQUIS and EPAS accreditation systems as well as the EFMD Deans Across Frontiers development programme (EDAF) and is one of the key reference points for management education worldwide.

The GBSN is a non-profit organisation dedicated to strengthening management, entrepreneurial and leadership talent for the developing world through better access to quality, locally relevant education. GBSN harnesses the power of a network of nearly 70 leading business schools that share a dedication to their mission to build management education capacity for the developing world.

Even though I spoke about Business Schools.

The insights stretch across the whole educational system. The Chinese use the same expression for Challenge and Opportunity because they are the two sides of the same coin. We should not waste the crises of this painful pandemic, but rather exploit the opportunity to plan for Sustainability in our education system across all levels.

Time there was when an MBA from an Ivy League College will guarantee you a very lucrative high-profile job. This seems no longer to be the case.

I must tell you this story about a Kenyan lady who was settled in the UK. She had borrowed heavily to do an MBA at a business school hoping that this will secure her future. Three years after graduation, she was facing eviction from her Council accommodation for back rents and no job in sight, albeit with a huge student loan overhang. You cannot but empathise with her in her confusion, when through streaming tears, she told the court bailiffs how disappointed she was that she did everything right and felt rather

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short-changed by the system.

In my view, the real questions become: Are we setting the right expectation for Business School aspirants? Have schools missed the train of the Digital Revolution? Why are they refusing to innovate in today’s age of Digital Platforms?

After over a decade of being an Entrepreneurin-Residence at Columbia Business School in New York, and serving on the World Economic Forum’s Global Agenda Council on Innovation and Intrapreneurship, these are my insights about the need to re-imagine the Business School model to produce graduates who can thrive now and into the future: We need to start teaching people to learn “how to learn” rather than just to learn to master something, in this fast-disruptive world.

The inverted classroom should be the new norm – the creative contribution of the class with a facilitator is much more effective than the messianic delivering of long lectures by a “professor”.

To what extent are business schools allowing influence from markets – is there a concept of Entrepreneur-in-Residence or Professor of Practice attached to the school, linking industry experience and market expectation with learning concepts in business schools?

Are we empowering students to create their own entrepreneurial or intrapreneurial spaces after graduation - today’s knowledge workers prefer to sell their time and talents to many organisations and be paid on an outcome basis than get stuck in a “9 to 5” job with one company – For example, Upwork provides a platform for matching requirements with skills in the shared economy.

How can we encourage business schools to explore structures that teach how to leverage the

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Austin Okere

need for inclusiveness, by bringing products and services to non-consumers through low-cost efficiencies and wider availability than fierce competition in a shrinking pie of current consumers?

How can education reach more people more affordably? Massive Open Online Courses or MOOCs are gradually taking the toll off traditional schools leveraging the ubiquity of broadband and connected devices – how well have we embraced the concept of MOOCs - concerns around quality of programs and teachers, while relevant, should not stop this viable way of reaching more people. They should be seen as a complement to traditional business schools than competition, especially in emerging markets, where 80 percent of the world resides, and are more likely to be excluded in formal settings.

Note: The rest of this article continues in the online edition of Business Day @https://businessday.ng Okere is the Founder of CWG Plc, the largest security in the technology sector of the Nigerian Stock Exchange, and Entrepreneur-in-Residence at CBS, New York. Austin also serves on the Advisory Board of the Global Business School Network, and on the World Economic Forum Global Agenda Council on Innovation and Intrapreneurship. Austin now runs the Ausso Leadership Academy focused on Business and Entrepreneurial Mentorship.

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Editorial Frank Aigbogun

COVID-19 in Nigeria: Four months after

editor Patrick Atuanya

The known and unknown

Publisher/Editor-in-chief

DEPUTY EDITORS John Osadolor, Abuja Tayo Fagbule NEWS EDITOR Chuks Oluigbo MANAGING DIRECTOR Dr. Ogho Okiti EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure ADVERT MANAGER Ijeoma Ude MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai COPY SALES MANAGER Florence Kadiri DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

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our months after the COVID-19 virus arrived on the shores of Nigeria and disrupted the activities of economic agents, a lot has been revealed about the nature, mode of transmission, symptoms, side effects and prevention of the deadly virus while still preparing for a future filled with uncertainties.

Being a price for ignorance, developed and developing economies of the world have had to deal with fierce blows from the COVID-19 pandemic which has claimed over 483,000 lives worldwide amid other devastating consequences.

According to a report from Reuters, “to be sure, the world is far from safe from a virus that continues to rage. It is expected to reach two grim milestones in the next several days: 10 million confirmed global infections and 500,000 deaths.”

In the Nigerian case – same applies to other countries – better understanding of virus transmission, disease’s side effects, how to help patients struggling to breathe, information on which drugs work

for which kinds of patients, age group more susceptible to the virus, preventive measures, tools needed for testing etc. are some COVID-19 related knowledge which are being employed to fight the virus.

Also revealed is that beyond introducing fresh challenges for the Nigerian economy, the COVID-19 pandemic also accelerated impending crises which were inherent in most sectors of the economy, particularly the health sector.

Unlike Nigeria’s swift and impressive response to curb the spread of Ebola in 2014 which attracted commendations from citizens and international bodies, the COVID-19 virus has proven more challenging altogether, dashing any iota of confidence the Ebola success story may have created in Nigerians.

On a daily basis, the spike in COVID-19 numbers in Nigeria remains worrisome. As at June 28, 2020, confirmed cases stood at 24,567 with 490 new cases. Fatality toll increased to 565 with 7 additional deaths. With active cases accounting for 61 percent against 36 percent in discharged cases and samples tested (130,164) accounting for just 0.06 percent of

the entire population estimated at 200 million, a scary unknown is best imagined.

Given what is known while still battling the deadly virus and its effects, we are compelled to ask how prepared Nigeria is for the second wave of COVID-19 outbreak?

The Nigerian authorities have thought it wise to ease lockdown given its negative impact on the economic health of the country. While taking this crucial decision, enforcement of safety precautions seem to be neglected.

But it remains worrisome that, overtime, Nigerians have become insensitive to the reality of the virus, instead treating numbers as a league table. Some have resorted to disbelieving the existence of the virus while some perceive the FG using the pandemic as a means to siphon funds.

Doctors around the world, from New Orleans to London to Dubai, some 30 told Reuters they feel more prepared should cases surge again in the fall. According to Gopi Patel, a doctor based in New York, “we are well-positioned for a second wave, we know so much more.”

Regrettably, this cannot be said of

Nigerian doctors who still, genuinely though, lament over the abysmal state of Nigeria’s health sector, unpaid salaries, unfair treatment, non-availability of laboratory testing for COVID-19 among others in some states.

The readiness of Nigeria to face the unknown will largely be dependent on what her focus is. It seems to us that the Nigerian federal government seems to prioritise the recovery of the Nigerian economy over the recovery and rejuvenation of its healthcare system, which is unfortunate.

The outlook of the health implication of COVID-19 virus on Nigerians is bleak. Some experts foresee infections mounting in July and death rate jumping while hospitals remain overwhelmed.

We therefore suggest that testing capacity must be improved, more isolation centres created. Also there must be political will to invest in the Nigeria healthcare system. Ultimately, the fight against COVID-19 is a community and public effort.

We must improve and stimulate awareness while working to enforce preventive measures in people.

HEAD, HUMAN RESOURCES Adeola Obisesan

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insight Africa faces worst economic shock since 1970s, says IMF chief

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Kristalina Georgieva

$44bn for Africa, either through debt write-offs, grants or concessionary funding, she said.

Ken Ofori-Atta, Ghana’s finance minister, is one of many African officials to complain that while richer countries have taken massive and unorthodox measures to stave off economic collapse, African countries are expected by creditors to stick by the rules. “ You really feel like shouting: ‘I can’t breathe,’” he said. Without naming the US, Ms Georgieva called on countries to reconsider their opposition to a new issuance of $1tn in Special Drawing Rights that would provide a liquidity boost to countries facing a sudden depletion of foreign reserves.

Steven Mnuchin, US treasury secretary, has voiced Washington’s opposition to an SDR issuance,

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However, African Union envoys appointed to press the continent’s case say this will not be enough because African countries are eligible for only 6.8 per cent of these funds

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frica will need more financial help to avoid “long-lasting, terrible consequences” from the coronavirus pandemic, Kristalina Georgieva, managing director of the IMF, said as the fund predicted a regionwide contraction of 3.2 per cent this year, far worse than it had forecast just 10 weeks ago.

“This is the heaviest hit on Africa at least since the 1970s,” Ms Georgieva said in an interview. Without tens of billions of dollars in additional support, she warned, “there can be very significant scarring that will have long-lasting, terrible consequences”.

Africa had been a “continent on the move”, she said, referring to several of the region’s economies — such as Ghana, Ethiopia, Ivory Coast, Rwanda and Senegal — that had been among the world’s fastest-growing in recent years.

“This momentum is now dramatically interrupted.”

Given the rising population in sub-Saharan Africa, the region would be hit harder still in per capita terms, she said, with an expected 5.4 per cent fall in incomes that could push millions back into extreme poverty.

Oil-dependent and tourism-dependent economies in sub-Saharan Africa would shrink by 4.9 per cent and 9.7 per cent respectively, she said.

“When we look at the devastation this crisis is causing everywhere, we have to recognise that it is particularly hard on Africa,” Ms Georgieva said.

Many African governments have been credited with acting swiftly to stem the spread of the virus, which has so far infected a relatively low 400,000 people and killed 6,500 people.

But the economic impact has been severe because of falling commodity prices, suppressed remittance flows and a collapse in tourism and investment.

The IMF also remains concerned that the virus could “spread aggressively”.

Ms Georgieva said the IMF was already in the process of increasing annual average disbursements to Africa 16-fold to $16bn. “We have no intention to stop there,” she said.

This year alone, the international community still had to find an additional

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akin to “printing” money, on the grounds that some funds would go to the likes of China and Iran and not enough to poor countries with low IMF quotas.

“We have not been able to gather sufficient support for a new SDR issuance at this point,” Ms Georgieva conceded.

“I would not say this is off the table, but we need 85 per cent voting and we don’t have it at this moment,” she said, adding that those countries with strong economic fundamentals had been able to issue bonds to bridge the liquidity gap.

“For weak economies, for poor countries, it continues to be a very pressing issue.” In the meantime, she said, the IMF was negotiating to reallocate some of the roughly $260bn of existing unused SDRs from rich countries to poor ones, a proposal she described as “progressing”.

However, African Union envoys appointed to press the continent’s case say this will not be enough because African countries are eligible for only 6.8 per cent of these funds. Ms Georgieva also called on private sector lenders to African countries, such as banks and pension funds, to join in a debt moratorium.

“We are asking everybody to look in the mirror,” she said, adding that rating agencies should not penalise countries that agreed debt standstills with creditors.

“We are not talking about a debt reduction and it is voluntary,” she said, referring to a possible private sector debt standstill. “We are in this together. If there is anyone that hasn’t quite gotten it, please wake up.” https://www.facebook.com/businessdayng

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AGRIBUSINESS

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In association with

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How COVID-19 rattles Nigeria’s poultry farmers The Nigerian poultry industry has been negatively impacted by COVID-19 as farmers lose millions of naira to the pandemic, writes JOSEPHINE OKOJIE

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t the centre of Mowe town in ObafemiOwode Local Government Area in Ogun State was once a flourishing poultry farm belonging to Taofik Abdulsalam, a 56-year- old farmer and father of five.

Abdulsalam started his poultry business over 10 years ago after losing his accounting job in a construction firm.

The farm, which has a capacity of 3,000 layers in a battery cage and an additional 1,000 broiler birds for chicken, has become a shadow of itself since the Federal Government imposed the initial COVID-19 lockdown in Lagos, Ogun, and Abuja to curb the spread of the virus.

During the lockdown, he was stuck with about 2,800 crates of eggs he could not sell owing to the restrictions which obstructed the country’s already fragmented food supply chain.

A l s o, t h e s i t u a t i o n reduced the demand for eggs and chickens from restaurants, eatery, hotels and confectioners who were Abdulsalam’s most loyal customers.

Eggs have a short shelflife. As a result, Abdulsalam was forced to destroy about 500 crates of eggs that got spoilt during the period, selling the remainder far below his production cost.

“It has really been difficult for my family since the lockdown,” he says. “The business from which I have earned my income in the past 10 years is almost collapsing,” he says.

“I cannot even feed my family anymore because of the huge losses I incurred during the lockdown. We are now trying to restart the business again,” Abdulsaleem says, in a voice devoid of hope.

He suffered an estimated revenue loss of about N5million owing to the short shelf life of the eggs and disruption in the food supply

in food crisis next year on the obstruction of the country’s fragmented farming supply chain that has led to spike in input prices.

They say that the country is approaching the peak period of the rainy season – June through November— when flooding usually submerges and destroys crops.

“There will be a 10 or 12 percent reduction in farm produce this year, and if the coronavirus continues to spread to rural communities the reduction might get to 25percent,” Ayodeji Balogun, countr y manager, AFEX Commo dities E xchang e Limited, says.

“We need to declare a state of emergency on the cultivation of wet farming and ensure that there is free movement of trucks conveying food on the roads and ports,” Balogun says.

He calls on the government to adopt disruptive and innovative s olutions to address the impact of the pandemic on the agricultural sector.

The World Food Programme (WFP) has warned that the coronavirus pandemic w ill push an additional 130 million people to the brink of starvation.

An empty battery cage of Abdulsalam’s farm in Mowe, Ogun State

chain.

He was forced to reduce his staff strength from eight to three as he could no longer afford to pay their services.

He says that despite suffering this huge loss, he has not got any form of support from the government to revive his business.

Many poultry farmers like Abdulsalam across the country have suffered severe losses due to the COVID-19 pandemic control measures imposed by the government.

The situation has impacted their livelihoods negatively with many closing down their businesses. It has also led to a surge in post-harvest losses currently estimated at $9 billion. “ There has been an increase in post-harvest losses since the COVID-19 outbreak, as farmers were unable to transport their fresh produce to the markets because of the lockdown,” says Akin Sawyerr, executive secretary, Agricultural Fresh Produce Growers Association of Nigeria (AFGEAN).

Though the economy has been battered by the virus and low oil price, the government has failed to provide sufficient social safety net to protect businesses.

“Many farmers did not receive any form of palliative

The 500 crates of eggs being destroyed in the farm

from the government despite that their businesses have been heavily impacted by the COVID-19 pandemic,” AfricanFarmer Mogaji, headagribusiness, Lagos Chamber of Commerce and Industry (LCCI), says.

“The government needs to come to the assistance of farmers to survive through this pandemic, most especially the poultry farmers” Mogaji adds.

Looming food crisis Farmers have continued to count losses owing to the pandemic and they fear it could trigger a looming food crisis in Africa’s most

Day old layers chicks www.businessday.ng

populous nation by 2021 - as production declines.

“I had to sell all my broiler birds at half their prices during the lockdown because I could not continue to feed them after four months,” says Dayo Gawati, chief executive, Fdot Farms.

“Now, my poultry cage is empty and I can’t afford to buy enough day-old chicks because of the revenue loss I suffered earlier from the pandemic,” Gawati says.

He explains that he could only afford to buy 400 day-old chicks which are less than a third of what he had preCOVID-19.

Farmers hinge their belief

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High input cost, FX volatility complicate matters The high cost of key inputs such as seeds, vaccines, and feeds across the country is frustrating farmers who are currently struggling to survive the difficult moment.

The prices of farm inputs are surging owing to foreign exchange (FX) volatility as most of the vaccines and drugs used in the country’s livestock industry are imported. Naira exchanged at N360 to a dollar at the parallel market before COVID-19 outbreak, but this has skyrocketed to N450 to a dollar as a result of dollar scarcity attributed to low oil prices and oil glut.

Nigeria depends on crude oil for over 70 percent of its FX needs and revenue, according to the National Bureau of Statistics (NBS).

BusinessDay survey at some markets in Lagos shows that a 25kg bag of layers marsh now sells for N3,600 as against N3,200 sold prior to the COVID-19 outbreak, while broiler finisher marsh now sells for N4,200 as against N3,750 pre-COVID-19.

Even prices of day-old chicks have also surged by 10 percent amid the virus.

“Our production cost @Businessdayng

has increased since the virus outbreak owing to FX volatility. Dollar is used in importing more than 70 percent of our inputs like vaccines, hormones and other additives like lysine and methionine among others,” R o t i m i O l oy e, nat i o n a l president, Catfish and Allied Fish Farmers Association of Nigeria (CAFFAN), explains.

He says farmers are finding it difficult at the moment and, if the situation persists without adequate support from the government, they can be forced to abandon their farms, leading to threats of food insecurity.

“It will potentially lead to loss of employment while people who have shown interest in investing in the farming may lose interest,” he warns.

No alternatives for farmers Experts say if Nigeria had fully utilised the opportunities in value addition, the impact of the pandemic on the sector would have been limited.

Fresh eggs can be p ro c e s s e d i nt o p ow d e r and fresh fruits can also be processed and preserved for future uses, but this is not happening on a wide scale.

The country is the largest producer of eggs in Africa with 10.3 billion eggs produced annually, data from the Poultry Association of Nigeria (PAN) show.

However, the nation is yet to fully take advantage of this situation by processing eggs into powdery forms.

The country is a major p ro d u c e r o f f r u i t s a n d vegetables but a large number of these go down the drain as wastages owing to limited processing factories and facilities.

“The country has been losing a lot of money due to our inability to process eggs into powder. It has really been a tough situation for poultry farmers,” says Kabiru Ibrahim, former president of the Poultry Association of Nigeria, in a telephone conversation with BusinessDay. “ We n e e d t o s t a r t processing eggs into powder and also fruits into concentrate to help address the issue of wastage in the country and also increase the shelf life of our highly perishable produce,” Ibrahim adds.

Raw eggs are said to last about four weeks, while powdered eggs can last up to a year.

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INSIGHT Towards inclusive human development in

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Introduction he notion of inclusive human development cannot be overemphasized in developing and emerging markets in general given the prevailing inequalities that continue to persist in lower to middle income countries globally. Specifically, there are four main factors in scholarly and policymaking circles that motivate this paper on the poverty tragedy in sub-Saharan Africa (SSA), notably: (1) the growing exclusive development in the sub-region; (2) evolving literature on the relevance of the middle class in sustainable development outcomes; (3) paradigms shifts in the conception of governance in light of contemporary dominant models of economic development; and (4) gaps in the literature.

To be sure, these factors, which articulate the fact that “Output may be growing, and yet the mass of the people maybe becoming poorer” (Lewis,1955), are expanded in chronological order. First, in the post-2015 development era, one of the most challenging policy syndromes to Africa’s development is exclusive development. Accordingly, the reduction of inequality is central to most sustainable development goals (SDGs). This concern about poverty is even more relevant to SSA because approximately half of the countries in the subregion did not achieve the Millennium Development Goal (MDG) extreme poverty target. It is important to emphasize that the number of people living in extreme poverty consistently increased across the sub-region despite more than two decades of economic growth resurgence. The poverty tragedy is therefore traceable to exclusive development because the response of poverty to economic growth is a decreasing function of inequality.

The importance of promoting shared prosperity in the post-2015development agenda in SSA is supported by the conclusions of Bicaba et al.(2017) who articulate that if poverty is to be reduced to a threshold of below 3% by the year 2030, governments of countries in the sub-region will have to pay particular attention to inclusive development.

Secondly, the relevance of middle income status and the middle class in economic development has been articulated in a number of scholarly fronts, notably: Historical views establishing that the middle class is crucial for the economic development of technically advanced countries in Europe and North America (Adelm anandMorris,1967;Landes,1998).

Contemporary scholarly perspectives have documented the importance of the middle class in, inter alia: alleviating poverty (Easterly, 2001); ameliorating social evolutions (Sridharan, 2004); consolidating institutions (Birdsall, 2007a), entrepreneurship and innovation activities (Banerjee and Dufflo, 2008); institutional

reforms (Loayza et al., 2011); promoting democracy (Kodila-Tedika et al., 2016); and boosting inclusive development(Birdsall,2010).

Thirdly, consistent with Asongu and Le Roux (2019), the middle class is crucial in the understanding of the two dominant contemporary models of development, namely, the Washington Consensus and the Beijing Model. The latter is defined as “state capitalism, deemphasized democracy and priority in economic rights” whereas the former is defined as “private capitalism, liberal democracy and priority in political rights” (Asongu, 2016a).

The literature is in accordance with the position that a sustained middle class is crucial for political governance to be sustainably demanded by the population. Hence, for political governance (i.e. a priority of the Washington Consensus) to be sustainably achieved, economic governance (i.e. priority of the Beijing Model) should take precedence in policymaking. China has produced a burgeoning middle class within a historically short period of time (Asongu and Ssozi, 2016). In summary, the narrative supports the view that political governance should be a longerterm goal for African countries compared to economic governance which should be a short-term goal to build the middle class necessary for a sustainable demand for political governance. This study extends the underlying strand of literature within the framework of inclusive human development by attempting to answer the following research question: RQ1: How do low-income and middle-income countries complement political and economic governance in influencing inclusive human development in SSA? In order not to bore readers with information that may not necessarily be easy to digest, I will make a concerted effort to organize the rest of the paper as follows. Section 2 briefly discusses the data and methodology while the empirical results are covered in Section 3 capturing only the key takeaways. Section 4 concludes with implications.

2. Data and methodology 2.1Data

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The paper examined a panel of 49 countries in SSA for the period 2000-2012 with data from 5 sources, notably, the: (1) World Governance Indicators of the World Bank for governance indicators; (2) World Development Indicators of the World Bank for income levels and control variables; (3) Financial Development and Structure Database of the World Bank for some control variables; (4) United Nations Development Programme for the inclusive development variable; and (5) principal component analysis(PCA)for composite governance indicators.

The temporal and geographical scopes of the study are constrained by data availability. Considering recent African development literature and the motivation of this study, the inequality-adjusted human development index (IHDI) is used as the outcome variable. The six governance indicators from Kaufmann et. al. (2010) are bundled with PCA for composite indicators, notably: • political governance (proxied by political stability and “voice and accountability”), which is the election and replacement of political leaders.

• economic governance (measured with government effectiveness and regulation quality) understood as the formulation and implementation of policies that deliver public commodities; and • Institutional governance (proxied with corruption-control and the rule of law), which is defined as the formulation and implementation of policies that deliver public commodities.

To ensure there is no ambiguity and in line with other scholarly works, the income level classification is consistent with the World Bank income groups. These are: high income, $12,276 or more; upper-middle income, $3,976- $12,275; lower-middle income, $1,006-$3,975; and low income, $1,005 or less. Four control variables are adopted to account for variable omission bias, namely, gross domestic product (GDP)per capita growth, private domestic credit, remittances, and foreign direct investment (FDI) inflows.

2.2. Methodology 2.2.1 Principal component analysis: PCA is a technique that is used in empirical literature to reduce highly

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correlated variables into a set of smaller uncorrelated PCs. The procedure for adopting the main PCs is the Kaiser (1974) criterion, which suggests that PCs with an eigen value greater than one and reflecting about 70% of the total variation should be selected.

In summary, political governance has an eigen value of 1.671 and reflects a total variability of 83.50%.

Hence, 85.50% of information contained in “voice and accountability” and political stability is captured by the composite political governance indicator. In the same vein, economic governance reflects 93.90% of common information in government effectiveness and regulation quality and has an eigenvalue of 1.878. The institutional governance composite indicator is informational and not used in the empirical analysis in light of the focus of the study on economic governance and political governance.

The PC-derived composite indicators can provide robust estimates.

3. Empirical Results Table 2 presents the empirical results. While Panel A shows how low-income levels modulate governance to influence inclusive development, Panel B discloses findings on how middle-income levels modulate governance to affect the same outcome variable. The left hand-side and right hand-side of both panels focus on respectively, political governance and economic governance.

In order to assess the overall impact of the relevance of income levels in moderating governance for inclusive development, net effects are computed from the unconditional effect of governance and the conditional impact resulting from the interaction between income levels and the corresponding governance dynamic.

For instance, in the first column of Table 2, the net effect of lowincome levels in modulating political governance for inclusive human development is 0.021 ([-0.031× 0.632] + [0.041]). In the computation, the mean value of low-income countries is 0.632, the unconditional effect of political governance is 0.041 while the conditional impact from the interaction between low income and political governance is -0.031. In the same vein, in the last column of Panel A in Table 2, the net impact of low in-

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The relevance of middle income in modulating political governance to positively affect inclusive human development is apparent exclusively in the median, while the importance of middle income in moderating economic governance to positively influence inclusive human development is apparent in the 10th and 75th quantiles

‘

Joseph Nnanna

come in modulating economic governance for inclusive development is 0.022 ([-0.063× 0.632] + [0.062]). In the computation, the mean value of low-income countries is 0.632, the unconditional effect of economic governance is 0.062 while the conditional impact from the interaction between low income and economic governance is -0.063.

It is important to note that the findings of OLS and QR are distinct in terms of significance and magnitude of significance because the OLS findings vary throughout the conditional distribution of inclusive human development. This heterogeneity confirms the relevance of assessing the investigated linkages throughout the conditional distributions of inclusive human development.

The following findings can be established.

First, low income modulates governance (economic and political) to positively affect inclusive human development exclusively in countries with above-median levels of inclusive human development. It follows that countries with averagely higher levels of inclusive human development are more likely to benefit from the relevance of income levels in influencing governance for inclusive development.

Second, in Panel B, the importance of middle income in modulating political

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sub-Saharan Africa governance to positively affect inclusive human is apparent exclusively in the median while the relevance of middle income in moderating economic governance to positively influence inclusive human development apparent in the 10th and 75th quantiles.

Third, from the OLS results, regardless of panels, income levels modulate economic governance to affect inclusive human development at a higher magnitude, compared to political governance. This finding is logical in the light of the definition of economic governance which is conceptually more associated with inclusive development compared to political governance. Accordingly, economic governance is the formulation and implementation of policies that deliver public commodities, which include education and health amenities captured by inequality-adjusted human development.

Fourth, the significant control variables have the expected signs. Accordingly, except for remittances, the other variables involved in the conditioning information set positively affect inclusive human development.

4. Concluding remarks and future research directions The literature is consistent on the view that close to half of the countries in sub-Saharan Africa (SSA) did not achieve the Millennium Development Goal (MDG) extreme poverty target.

Moreover, the number of people living in extreme poverty have been increasing in the sub-region since the mid-1990s. This paper complements existing literature on dominant development paradigms (i.e. the Washington Consensus versus the Beijing Model) by assessing the role of income levels (low and middle) in modulating governance (political and economic) to influence inclusive human development.

The empirical evidence is based on interactive quantile regressions and forty-nine countries in SSA for the period 2000-2002.

The following main findings are established. First, low income modulates governance (economic and political) to positively affect inclusive human development exclusively in countries with above-median levels of inclusive human development. It follows that countries with averagely higher levels of inclusive human development are more likely to benefit from the relevance of income levels in influencing governance for inclusive development.

Second, the relevance of middle income in modulating political governance to positively affect inclusive human development is apparent exclusively in the median, while the importance of middle income in moderating economic governance to positively influence inclusive human development is apparent in the 10th and 75th quantiles. Third, from the OLS results, regardless of panels, income levels modulate economic governance to affect inclusive human development at a higher magnitude, compared to political governance.

Policy implications are discussed considering the post-2015 agenda www.businessday.ng

of sustainable development goals and contemporary development paradigms.

The benefit of low-income levels in modulating governance (political and economic) to positively affect inclusive human development is a positive function of inclusive human development. It confirms the hypothesis that the response of poverty to development is a decreasing function of inequality in the perspective that countries with comparatively higher levels of inclusive development will benefit more from the ability of low income countries to leverage on governance to affect inclusive human

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development in the post-2015 development agenda. This conclusion is in line with Bicaba et al. (2017) on the importance of reducing inequality for shared economic development if SSA is to eradicate extreme poverty by 2030.

Furthermore, irrespective of income levels, income modulates economic governance to affect inclusive human development at a higher magnitude than political governance is evidence of the fact that focusing on economic governance will engender more inclusive development benefits compared to political governance.

Hence, prioritizing economic gov@Businessdayng

ernance will be more beneficial for inclusive development compared to the corresponding benefits from prioritizing political governance. It is important to note that the motivation of this write up, political governance is a priority for the Washington Consensus while economic governance is a priority for the Beijing Model. Future studies can use relevant estimation approaches to assess country-specific cases to provide more targeted policy implications.

Prof. Joseph Nnanna, Chief Economist, Development Bank of Nigeria

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TRANSPORTATION Motoring

RailBusiness

ModernTravel

Roads

Nissan prioritises Nigeria in four-year AMI business plan Lagos-Badagry rail project over-flooded

...With budget sedans, SUV among key focus MIKE OCHONMA Transport Editor

MIKE OCHONMA

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issan Africa, Middle East and India (AMI) this week Monday unveiled a comprehensive four-year strategy for the region under the company’s Global Transformation Plan with Nigeria, Egypt, India and South Africa as focus strategic markets.

The AMI business plan aligns with the global direction of rationalization, prioritization and focus to bring core models and technologies to a region that accounts for around 10 percent of the world automotive market.

The automaker aims to build on the brand’s existing strengths in the region including continued growth in key markets and strong brand presence, maximising synergies with Alliance partners and leveraging an expansive and competitive manufacturing presence in South Africa, Egypt, India and Nigeria where the Stallion group is the local assembler of Nissan models.

During a virtual media conference with select top automotive journalists drawn from Africa, Middle East and India including BusinessDay Nigeria, Nissan chief operating officer, Ashwani Gupta, said: “Africa, Middle East and India is an important region where we will target investment in existing strengths, including SUV, and bring eight new products to the market’’.

By driving efficiencies through the Alliance and focusing on core competencies, we will further increase the region’s profitability, especially in key markets including the Gulf, South Africa and Egypt.”

Chairman of the Africa, Middle East and India region, Guillaume Cartier, commented: “The AMI region has enormous potential with some of the most dynamic and diverse automotive markets in the world.”

M “Nissan has already established a strong foundation for sustained growth with high brand equity, a deeply embedded heritage of Nissan DNA and culture and a long history of dedicated and experienced business partners in retail and manufacturing.” Cartier said.

“Through the mid-term, we will remain focused on driving value for the business by meeting the needs of our customers across the region.”

AMI will follow the global transformation strategy, announced last month by chief executive officer, Makoto Uchida, which aims to achieve sustainable growth, financial stability and profitability by the end of fiscal-year 2023.

In line with Nissan’s global plan, the AMI strategy is developed around two strategic areas of ‘rationalization’ and ‘prioritization and focus.

Rationalization involves sustained actions to improve regional cost and efficiency through the optimisation of the regional product portfolio by 20 percent, further increase the cost competitiveness of local plants, seek and enhance export opportunities from AMI plants as well as leveraging on additional opportunities to reduce fixed cost

In the areas of prioritization and focus, Nissan will take actions to build on key strengths in products, markets and technology These will be achieved through the introduction of eight new models. Through the market, it hopes to focus on core models and segments to channel investment to most profitable products. Regional priority on sports utility vehicles (SUVs) and affordable sedan models (B-sedan segment).

In terms of market presence, Nissan says it will continue building on existing strengths in key markets including GCC, Saudi Arabia and Egypt, fully realize the opportunity of Africa and Turkey as high potential markets and will launch local models including Navara in South Africa and B-SUV in India.

Technology-wise, there will be phased regional deployment of Nissan Intelligent Mobility including e-POWER, EV and Connected technologies as well as increased digitalization and enhancement of the customer experience.

AMI will leverage the new Alliance global cooperation model in which all partners (Groupe Renault,

Nissan Motor Co., Ltd. and Mitsubishi Motors Corporation) will deepen synergies to support the competitiveness and profitability of member companies.

In AMI, the Alliance ‘leaderfollower’ approach will enhance efficiency and competitiveness in products and technologies including common platforms and advanced technology, while there will be additional benefits through shared procured services including IS/IT and distribution.

The global ‘reference region’ scheme will also apply, with Alliance partners focusing on core regions to act as a reference for the other members. In AMI, Nissan will be the reference in the Middle East, South Africa and Egypt; Renault in Turkey and North Africa (excluding Egypt); with joint status in India.

Cartier added: “Today, AMI is a region with opportunity for significant growth. Over the next four years we will transform opportunity to reality by bringing the right products, services and technologies to deliver lasting positive change for the business, our partners and customers’’.

Passengers may pay more as FG lifts ban on interstate road travels MIKE OCHONMA

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assengers travelling by road should brace up to pay higher fares as transport fares following the lifting of the ban on interstate travels by President Muhammadu Buhari last Monday in the federal government’s response to check the rising number of coronavirus infections in the country.

Speaking with BusinessDay hours after the pronouncement by the federal government, Val Uduebor, public relations officer of Public Transport Owners of Nigeria Association (PTONA) and managing director Famous Motors said the piece of good news is a welcome development that will enable its members return to business while observing all Covid-19 related healthy and safety guidelines a set out by the federal government.

Recall that about two weeks ago, PTONA members called on the federal government to open the road for interstate travels to save

its members from the huge loss it has incurred following the ban on interstate travels.

An analysis of the statistics of permanent losses due to the ban on commercial transportation made available to BusinessDay by Isaac Uhunmwagho, president of PTONA a result of the government ban on www.businessday.ng

interstate travels shows that for the first four, eight and 12 weeks, there was estimated loss of N50 billion, N120 billion and N200 billion respectively loss to the national gross domestic product as a result of the ban.

To cushion the effects of the Covid-19 affliction upon their return to the roads, PTONA wrote to plead for financial assistance and palliatives to the Economic Sustainability Committee headed by vice president Yemi Osibanjo.

PTONA asked the government should face the challenge of ensuring that Nigerians comply with the guidelines and protocols which will be introduced for long-distance

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travels, as well as encourage strict adherence to every guidelines as contained in the Covid-19 rules and regulations.

Asked if there will be an increment in transport charges by the operators, Val Uduebor said, his association can only increase charges when the carrying capacity is reduced to 60 percent in observance of social distancing principles without any palliative extended to them by the federal government.

The PTONA image maker explained that operations in the first few days and weeks by PTONA may be on a skeletal scale in readiness to full operations while a number of operational protocols and safety guidelines that will be put in place will be followed religiously.

He disclosed that part of the reasons for the planned skeletal return to business is to enable its member company’s time to service the vehicles in its fleet that has been parked for many months which have undergone wear and tear. @Businessdayng

assive flooding due to the persistent rainfall in the past days has overtaken the new multi-million naira rail tracks laid along the Lagos-Badagry expressway integrated multiple intermodal transport project constructed during the administration of Raji Babatunde Fashola as the governor of Lagos state.

The decaying condition of the rail tracks now abandoned now serves public toilets and waste bin deposit centres. It is also a comfortable hideout for criminals with little state government attention.

It is not only the rail tracks with some of the segments completed and others half-completed since the exit of former governor Babatunde Fahola about six years ago and now minister of works that is affected; heavy flooding is also a recurring decimal at the ever-busy Mile 2 interchange with daily heavy vehicular density.

Driving through the interchange either coming from Badagry or from the Iganmu end has remained a motorists nightmare as a result of flooding on the surface of the purportedly completed Iganmu to Mile 2 stretch of the Lagos-Badagry ECOWAS super highway.

The decayed condition of the road raises concerns on the quality of materials and level of supervision, if any, by the state government during the project execution.

During his pre-election campaigns and subsequent assumption of office on May 29, 2019, Babajide Sanwo-Olu, the current governor of Lagos state expressed his desire to put smiles on the faces of Lagosians plying the route. This he followed by ordering the Chinese Civil Engineering & Construction Corporation (CCECC) back to site.

But as at the time of filing this report, daily commuting experience of BusinessDay reporter along the corridor suggests that commuters daily struggles on that corridor to get to their destinations as a result of bad portions of the road as the Chinese contractors has once again gone to sleep.

Worst case scenarios on this corridor where there are doubts if any of the officials of government travels on, is the stretch between the Military Cantonment through the Lagos State University Ojo (littered with waste-bin around the surroundings) and extending to Okokomaiko which among other infrastructure houses the official quarters of the Department of State Services (DSS).

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POLITICS & POLICY Nnamani, Bello head Edo, Ondo APC reconciliation committees ...APC debunks zoning arrangement ahead of national convention James Kwen, Abuja

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he Caretaker/ Extra-Ordinary National Convention Planning Committee of the All Progressives Congress (APC) has appointed the former Senate President, Ken Nnamani and the Governor of Niger State, Abubakar Bello as chairmen of the party’s reconciliation committees for Edo and Ondo States, respectively.

Deputy National Publicity Secretary of APC, Yekini Nabena in statement on Tuesday said it was in line with the process of true reconciliation among leaders and members of the party at all levels as announced by the National Chairman of the Caretaker/Extra-Ordinary National Convention Planning Committee, Governor Mai-Mala Buni of

Yobe State.

According to the statement, the Edo State Reconciliation Committee has

Babatunde Fashola, Fetus Keyamo,Tahir Mamman, Margaret Okadigbo and Sanusi Musa as members

while Abdul-Rahman Sumaila is the Secretary.

The Ondo State Reconciliation Committee has

L-R: Rotimi Adetula, member Bukola Adetula Campaign Organisation; Bukola Adetula, governorship aspirant APC Ondo State, and Lanre Adetula, aspirant’s wife during at a press briefing during the submission of the aspirant’s nomination and expression of interest forms at the APC National Secretariat, in Abuja.

Picture by TUNDE ADENIYI.

Adamu Aliero, Bamidele Opeyemi, Gambon Magaji, Jasper Azuwatalum, Binta Muazu and Iquo Inyang as members with Shina Pellar as Secretary.

Meanwhile, APC has debunked a rumour about a purported zoning arrangement for the planned National Convention of the party which has gone viral on the social media.

The party’s Spokesperson, Nabena advised party members, supporters, stakeholders and the general public to disregard the purported zoning arrangement as it is fake news.

“The inaugural meeting of the Caretaker/Extra-Ordinary National Convention Planning Committee (CEONCPC) which held at the APC National Secretariat on Monday did not discuss or issue the fake zoning arrangement for the

planned National Convention.

“If and when a zoning arrangement is made for the planned National Convention, it will be officially communicated and publicised.

“The meeting unanimously adopted a six-point working document aimed at repositioning the party.

“Members also renewed their commitment to work as a family in the interest of the party and appealed to all leaders and members to give full cooperation to the Committee in the discharge of its duties/mandate.

“The meeting also approved the composition of the following Committees: Edo State Governorship National Campaign Council.

Consultation/Reconciliation Committees for Edo and Ondo States ahead of the forthcoming governorship elections,” he stated.

PDP disowns ex-Southwest publicity Drama as Lagos lawmaker, Moshood Oshun, walks out on speaker The two decisions were told Oshun that if everyone wale (Ibeji Lekki Constitusecretary over call for Ondo Deputy Iniobong Iwok chose his or her seat, there ency II) were also suspended supported through voicevotes by members present here was a mild dra- would be disorganization in indefinitely.

Governor’s resignation Announcing the suspen- during the plenary. Notice ma at the Lagos State the chamber.

KORETIMI AKINTUNDE, Akure

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h e P e o p l e ’s Democratic Party (PDP) in O ndo State has disowned the former South West Publicity Secretary of the party, Ayo Fadaka for calling on the state Deputy Governor, Agboola Ajayi to resign honorably.

According to a statement made available to journalists in Akure by the Director of Media and Publicity of the party, Zadok Akintoye, however, advised the general public to disregard the statement.

Fadaka, on Tuesday, asked the Deputy Governor, Ajayi to follow the path of honour by resigni ng h i s p o si t i o n w hil e featur ing on Channels TV programme, Sunrise Daily.

But, PDP noted that Fadaka’s comment does not reflect the position of the party on the matter.

The statement read:

“Our attention has been d r aw n t o a s t a t e m e n t made by Mr. Ayo Fadaka in his capacity as a former South West Publicity Secretary of the PDP via an interview granted to Channels Television on Sunrise Daily, wherein he opined that the Deputy Governor and member of the PDP, HE. Hon. Agboola Ajayi should resign his position on moral grounds.

“The Ondo state PDP wishes to dissociate itself from this statement and inform the general public that the position expressed by Mr. Ayo Fadaka does not represent the opinion of the PDP in O ndo State. H.E. Bar r.

Agboola Ajayi remains the Deputy Governor of the state and is not under any compulsion (either moral or legal) to resign his position.

“The party therefore, advised the general public to disregard this statement as it does not reflect the position of the party on this matter.” www.businessday.ng

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House of Assembly on Tuesday during plenary, when a member of the House, Moshood Oshun (Mainland 2) walked out of the hallowed chamber during the seating.

The Speaker, Mudashiru Obasa had directed Oshun to take his allocated seat instead of the one he was sitting on.

The lawmaker, however, said that he had earlier complained that the seat allocated to him was not convenient.

The Speaker thereafter,

Obasa therefore, stated that Oshun should comply with the rule of the House or he should take his leave, and at this point, Oshun walked out of the chamber.

It will be recalled that the House had in March, 2020 removed two of its principal officers- the Chief Whip, Rotimi Abiru and the Deputy Majority Leader, Olumuyiwa Jimoh.

Two other members of the House, Moshood Oshun (Lagos Mainland Constituency II) and Kazeem Raheem Ade-

sion of the members, Obasa, had stated that the House was the hope of the people and the heartbeat of democracy and should be well guided.

“I hereby invoke Section 68 and Section 70 4 (a, b) 2 and 3 of the House Rules in respect of gross misconduct, insubordination and action that can destablise this House.

“I hereby move that Moshood Oshun and Raheem Adewale be placed on suspension indefinitely,” Obasa had said.

and change in the leadership were contained in a letter read on the floor of the House by the Clerk, Azeez Sanni.

Sanni stated that the 26 members that signed the letter urged the House to change the leadership of the House, including Rotimi Abiru as the Chief Whip and Olumuyiwa Jimoh as Deputy Chief Whip.”

However, the suspension of the four lawmakers was later lifted after the intervention of the leaders of the party in the state.

Taraba LG polls peaceful, transparent - Ishaku Nathaniel Gbaoron, Jalingo

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araba State Governor, Darius Dickson Ishaku on Tuesday said that the local government election​in the state was conducted​ in a peaceful and transparent manner.

Ishaku, who stated this in Takum while casting his vote, said that the voter turnout was impressive.

“Before coming to my polling unit, I​ had gone to observe other polling units and I can tell you that the

process was​ peaceful and transparent ; I have also heard from my deputy who voted at Gassol LGA and he said everything was going on peacefully and other places have also reported peaceful conduct of the exercise; so, I can tell you it is all peaceful,” he said.

The governor, who debunked insinuation that council executives were imposed on the people against their choice by the government,​m aintained that he would not allow imposition under his watch.

“I am the father of democ-

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racy; and​I can never allow the imposition of candidates against the will of the people, that’s​w hy right at the primaries we decided to go by consensus so as to avoid crisis and the people decided who should represent them,” he said.

Commenting on the boycott of the council election by the All Progressives Congress (APC),​Ishaku said that the participation in the council election was optional and the party has its rights not to participate.

The governor, who has been away from his home @Businessdayng

town Takum since his reelection as governor of the state in 2019, expressed concern over the communal crisis that have ravaged the region in the recent times.

He said the government and all the security agencies have been working round the clock to bring lasting solution to the crisis.

“I have often told my people to give me peace and I will give them development because when there is no peace there won’t be any meaningful development,” he said.

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news Nigeria’s digital tax plan could unlock new revenue, but hurdles lie ahead FRANK ELEANYA

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igeria has an opportunity to unlock a new revenue stream that could mitigate the shocks to its economy as a result of the COVID-19 pandemic by leveraging digital taxes efficiently.

But its path to enforcement is littered with diplomatic pebbles the country must cross.

The digital tax regime is contained in Nigeria’s Finance Bill which was signed into law by President Muhammad Buhari in January 2020.

According to the bill, digital businesses will be taxed if they have a “significant economic presence in Nigeria”. The provision relating to the taxation of economic value derived in Nigeria by nonresident companies (NRCs) is made in Section 13 of the Company Income Tax Act (CITA).

An NRC is said to have derived taxable economic value in Nigeria only if such company has a fixed base of business in Nigeria as long as it has a dependent agent who habitually executes contracts on its behalf in the country; it maintains a stock of goods or merchandise in Nigeria which supplies are made; it executes a single contract for surveys, deliveries, installations or construction in Nigeria; and it is deemed to have carried out an artificial or fictitious transaction with related parties in Nigeria.

Digital taxes – which include policies that specifically target businesses that provide products or services through digital means using a special tax rate or tax base – are a growing trend in the world.

There are over 31 countries that have implemented digital taxation in some form.

For Nigeria, the digital tax represents part of its efforts to drive non-oil tax revenue.

Growth in mobile and internet penetration has seen the

proliferation of digital services in the country. Today, a significant number of transactions in Nigeria (sale and purchase of goods and services) are consummated using mobile devices and online payment platforms.

According to a 2018 report

by Picodi, a Polish eCommerce platform, the average order made by Nigerians using mobile devices to shop on eCommerce platforms was N14,100, about N3,500 less than when using desktops (N17,600) and N5,000 less than when using tablets (N19,100). iOS users spend more than Android users – N16,600 vs N13,400 on average.

The growth in digital commerce has seen increased investments from big technology companies like Google, Facebook, Twitter, Amazon, Microsoft, to mention a few.

All these companies including digital advertisers and platforms designed to allow users to connect with one another and trade in goods and services are within the scope of the proposed taxation in Nigeria.

According to the Finance Act, NRC’s profits will be subject to company income tax where “it transmits, emits, or receives signals, sounds, messages, images or data of any kind by cable, radio, electromagnetic systems or any other electronic or wireless apparatus to Nigeria in respect of any activity, including electronic commerce; application store; high-frequency trading; electronic data storage; online adverts; participative network platform; online payments and so on, to the extent that the company has a significant economic presence (SEP) in Nigeria and profit can be attributable to such activity”. The companies must also be deriving an income of N25 million or its equivalent in other currencies from Nigeria in a year.

Shell’s $22bn loss waves warning flag to Nigeria’s indigenous oil companies DIPO OLADEHINDE

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h e f u t u re o f most Nigeria’s indigenous oil companies may be under major threat as Shell, one of the world’s largest oil companies, has warned that it would write off up to $22 billion from the value of its assets after the spring’s oil price crash, a concession that in an age of abundant oil and gas some of its holdings won’t be profitable anytime soon.

In a trading update on Tuesday, the Anglo-Dutch firm said that impairment charges of up to $22 billion were expected in the second quarter, a development that shows what to expect from firms like Aiteo E & P Ltd, Seplat Petroleum Development Company and at least 50 small to mid-sized Nige-

rian producers pumping between 1,000 and 100,000 barrels each day.

Shell’s decision follows that of its rival British Petroleum (BP), which told investors last week that its oil assets are not worth as much as they used to be and that it would write down the value of its assets by at least $17.5 billion.

The timing of IOCs’ impairment raises concern about existential threat for most indigenous Nigerian oil and gas producers.

Revaluation of assets as a result of the economic impact of coronavirus dragged Seplat Petroleum Development Company plc, Nigeria’s largest listed oil & gas firm by market value, into a loss of $106.6 million in its unaudited first quarter 2020 result.

Seplat’s Q1 2020 loss was mostly driven by a $145.5 million impairment loss charged on its oil and gas assets.

The current situation of Seplat is similar to other Nigeria’s indigenous oil companies

which do not possess the same capacity and leverage as their foreign counterparts in accessing global finance. It is even worse now when virtually every country in the world is concentrating on saving its people and economy.

Majority of them have costs of production in the $30$40 per barrel range, largely as a result of the high costs of operation and security-related expenses in the onshore shallow-water fields of the Niger Delta, where militant attacks on oil and other energy infrastructure are rampant.

For Nigeria’s domestic oil companies, an oil price within the range of $30-$40 may bring another round of funding crisis that might bring fears of 2016.

In 2016, the indigenous firms that bought the assets could no longer generate revenue at the levels expected when they agreed to loan terms, putting themselves and banks at risk.

It’s 2020 and the current oil

price rout may mean a similar scenario is well on the cards for indigenous producers in Africa’s top oil producer.

For Shell, its reduction in the value of its assets will make its debts look that much bigger, and market-watchers are considering whether these changes are coming fast enough.

“The real question going forward is whether Shell’s fairly downbeat expectations are downbeat enough,” Nicholas Hyett, equity analyst at stockbroker Hargreaves Lansdown, tweeted on Tuesday.

“Oil prices have spent a large part of the last five years under $60 a barrel and while the collapse of several large US shale names might reduce global supply, the outlook for demand is hardly robust,” Hyett said.

Analysts at Royal Bank of Canada (RBC), a Canadian multinational financial services company and the largest

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L-R: Ahmed Lawan, Senate president; President Muhammadu Buhari, and Femi Gbajabiamila, speaker, House of Representatives, during a meeting on the suspension of proposed hike in electricity tariffs at the Presidential Villa in Abuja, yesterday.

7 new numbers that bring you up to speed on COVID-19 in Lagos LOLADE AKINMURELE

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agos, Nigeria’s sprawling commercial capital, is the epicentre of the COVID-19 pandemic in the country, accounting for nearly 40 percent of the total reported cases nationwide. BusinessDay analysed data collected since the index case in Lagos to date to glean some insights on how the spread of the virus is evolving. Here are seven numbers that best capture our findings.

27.1% Lagos has a test positivity rate of 27 percent, a troubling evidence of the prevalence of the virus in the state. Test positivity rate is calculated

by dividing the number of reported positive cases by the total number of tests carried out.

A test positivity rate of 27 percent means one in every four people tested had the virus.

The state’s test positivity rate is higher than the national average of 18.9 percent but lower than the global average of 31.4 percent.

Lagos reported 9,497 cases as at the end of last week (June 26) while it had carried out a total of 35,027 tests.

130% Confirmed cases of the virus have grown at an average of 130 percent each week www.businessday.ng

since the lockdown was eased compared to an average of 82 percent between when the first case was reported in March and the week before the lockdown was eased.

Confirmed cases of the virus jumped 1,173 percent to 9,497 as at the end of last week from 746 cases reported the week before the lockdown was eased.

2,381 As many as 2,381 persons that tested positive to the virus have not been picked up for isolation and they could be actively spreading the virus across the state. These people have not been picked up for two reasons, according to Akin Abayomi, the state’s

commissioner for health.

First is some have declined to be picked up while others provided the wrong contact information making it difficult for them to be located.

128 Some 128 patients who tested positive for the virus in Lagos have died. That gives a fatality rate of 1.3 percent, which is much lower than the global rate of 8 percent and Nigeria’s 2.3 percent.

1,515 Eti-Osa Local Government Area in Lagos leads the chart for the highest number of confirmed cases of the virus in the state with 1,515 persons affected. Alimosho, Kosofe and Ikeja follow with 663,

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659 and 620 reported cases, respectively.

1,629 Lagos has now tested 1,629 persons per million of the population of the state. Although testing capacity is rising, it remains relatively low.

In Ghana, which is about the size of Lagos, for instance, the government has tested 9,286 per 1 million people. That means 9 of every 100 persons in Ghana have been tested compared to less than 2 of every 100 in Lagos. Despite the low level of testing in Lagos, it still beats the national average of 610 per 1 million.

4 Only four public laboratories with a combined @Businessdayng

capacity of 2,000 are testing COVID-19 samples in Lagos.

These are Lagos University Teaching Hospital (LUTH), Lagos State Biobank (LSB), Nigerian Institute of Medical Research (NIMR), and Central Public Health Laboratory (CPHL).

The small number of testing centres, which has often been fingered as a main cause of the low testing rate in the state, has prompted the government to tap private laboratories to ramp up testing.

As Lagos attempts to open up various aspects of its economy, it is imperative that COVID-19 tests are widely available to members of the public.

Wednesday 01 July 2020

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news Nigeria working towards meeting World...

Continued from page 1

geria’s senior government

officials were involved in consultations on Monday to come up with a plan to access the much-needed fund from the Washington-based lender.

“We are agreeing on the process and the timeline for the particularrequirement,”shesaid.

The desperation is coming after it became clear that the Washington-based bank will not disburse any portion of the fund unless Nigeria’s multiple exchange rates were unified and the foreign exchange market freed from the shackles of the central bank.

The consultations involved the finance ministry, the apex bank and the chief of staff to the president, Ibrahim Gambari, who is using his enormous diplomatic experience to try to stabilize the government whose various units are working at cross purpose.

Ahmed desperately wants to see the urgent disbursement of the World Bank fund because it is a key element of her fiscal war chest to shore up federal government finances in the face the massive collapse in revenues caused by the oil price crash and the coronavirus pandemic that is rampaging across the globe.

Curiously, the CBN also stands to benefit from an early disbursementoftheWorldBank loan as it could help bolster Nigeria’s foreign reserves which have come under severe pressurebyadollardemandbacklog estimated by some to be in excess of $5 billion. If the demand backlogisallowedtogothrough, that will bring Nigeria’s external reserves below psychological threshold of $30 billion.

Meanwhile, she also noted that the Nigerian government has introduced the integrated financing framework to fund the financial gap in meeting the Sustainable Development Goals (SDGs) by 2030.

Stakeholders at a webinar on Tuesday stressed on the need for rapid mobilisation of local resources through the public, development partners, and private funds.

Edward Kallon, United Nations’ country representative, notes that the agenda of

achieving the SDGs by 2030 is broad, complex and spread beyond the capacity of the government, hence the need to mobilise both public and private funds to ensure actualisation of the goals by 2030.

He says mobilising capital for SDGs in Nigeria has been constrained by inequality, weak financial system, uncertainty of policy, impact of conflict, climate change, as well as the Covid-19 pandemic.

He stresses on the need for development of financing modalities through increased domestic revenues, deepening efforts to attract both domestic and international investment through FDI. He says, “The INFF process will help in understanding the financial gaps that exist in meeting these gaols, the role of the government to achieve the objectives and ways to mobilise available resources to achieve the goals.

“The estimated funding gap is $350 billion, while the private sector gap is $100 billion over the next 10 years, while the global financing gap is $2.5 trillion and private sector at $300 trillion.

“The finance required is available and can be mobilised if only if proper policies are put in place to attract them.”

Adejoke Adefulire, senior special assistant to the President on SDGs, notes that INFF is aimed and designed to ensure effective implementation of Nigeria financial framework to achieve the SDGs by 2030, and achieving these goals requires mobilising the public and private resources, this is a call for integrated approach to finance the SDGs. “We have been working with national and international bodies to get framework that will guarantee effective implementation, and we have domesticated the Nigeria integrated sustainable development goals,” she states.

Representative of European Union in Nigeria, Kurt Corenelis, in his remark states that it is almost impossible for Nigeria to achieve the SDGs without a mobilised financing structure asthecountryisstillbattlingwith insufficient domestic resources.

Shell’s $22bn loss waves warning flag to...

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bank in Canada by market capitalisation, said the lower near-term price deck for oil and gas is not a huge surprise given Shell’s initial comments post Covid-19 and current spot prices. However, the bigger surprise is the lower refining margin assumptions over time.

“We do not expect this to materially alter Shell’s investment plans, the company has already sold multiple refineries in recent years, but we would expect this trend to continue,” analysts at RBC said.

Countries across the globe

have ordered people to stay indoors and not travel as a result of the coronavirus pandemic, which has caused a slump in demand for oil.

As a result, the cost of oil fell to less than $20 a barrel at the peak of the crisis, less than a third of the $66 it cost at the start of the year.

For a brief period, buyers were actually paid to take delivery of crude oil amid a shortage of storage.

The price of Brent crude oil has recovered in recent weeks, and is currently trading at $41.04 per barrel. www.businessday.ng

L-R: Eki Adezufeh, permanent secretary, Media Independent Practitioners Association of Nigeria (MIPAN); Olufemi Adelusi, newly elected president, MIPAN, and Henry Ononiwu, new publicity secretary, MIPAN, at the 2020 Annual General Meeting (AGM) of the association in Lagos, yesterday.

GenCos threaten force majeure if new...

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has been approved, and it will become effective tomorrow [Wednesday], the same DisCos ran to the National Assembly and started lobbying for it to be

postponed?”

Representatives of the DisCos rushed to Abuja in private jets, Monday, and lobbied the the leadership of the National Assembly to postpone the new tariff, saying the DisCos were not ready for its implementation and that the timing of the increase, during a pandemic, would adversely affect their customers who are bleeding under the weight of estimated bills.

The service-reflective tariff negotiated with operators guarantees that customers, grouped in different service bands, will pay a new set of tariff based on the number of hours they get power daily.

The new tariff plan also empowers customers to demand compensation, which the regulator, the Nigerian Elec-

tricity Regulatory Commission (NERC), will enforce if DisCos fail to provide power for the number of hours agreed daily.

Ogaji said that GenCos were in dire financial straits over poor remittances by DisCos. The situation is worsened because GenCos are compelled to bill for only power requested by the DisCos rather than how much power they can generate (capacity).

She said current generation capacity stands at 8,145MW but the DisCos continue to demand between only 3,000MW and 3,500MW of power daily, thereby constraining over 4,000MW, the so-called stranded power, which is unpaid for.

According to Ogaji, total debt owed to the GenCos and acknowledged by the Nigerian Bulk Electricity Trading Company (NBET) is over N500 billion but in their books it has risen to over N1 trillion, where stranded power which the DisCos fail to take is accounted for.

Due to the inability of the

New electricity tariff postponement mean...

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deal will imperil future efforts to secure financing from multilateral institutions.

Nigeria already suffers a reputational crisis; it does not help the country’s image if it once again pushes further its obligation due to pressure from interest groups.

We condemn strongly the current lobbying efforts of the legislators by electricity distribution companies (DisCos) to postpone the implementation of the service-reflective tariff plan. After years of campaigning for tariff increase, it is reprehensible to seek its delay now because for once, this is a tariff plan that pegs their revenue to how much service they deliver.

It is disingenuous that the DisCos are leading the campaign that consumers’ purchasing power has been affected by COVID-19, considering that within the same period

they have inflicted outrageous bills on customers whose consumption is estimated.

If the Federal Government allows itself to be pressured, it will continue a pattern of spending that ruins the economy. The 11 DisCos agree they owe a combined sum of N622.4 billion and interest accrued on this debt has risen to N308.2 billion, bringing their cumulative debt to N930.6 billion. This pattern of shortfall will continue with the delay of the servicereflective tariff plan.

Today, the electricity sector is on life-support with government support providing a lifeline. This has come mostly from the Central Bank and has reached over N1 trillion. The World Bank’s fresh cash injection is meant to provide financing to help the government repay the CBN for loans to the power sector so that it can support other sectors. But Nigeria must

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market to generate enough revenue to cover the cost of producing power, NBET began paying GenCos only for energy DisCos are willing to take, though the power purchase agreement signed by DisCos obligates them to pay for both energy and capacity, Ogaji said.

“We have waited for nearly seven years for this market to work. Which investor can sit down and be watching 4,000MW of his invested resources stranded every month and nobody is paying for it?” said the GenCos’ representative. “We have gas obligations and gas debts on our books and we have acquisition loans on our books, we have creditors on backs and now we have auditors asking how they should sequence our debts or classify as bad loans.”

The service-reflective tariff divides customers into five bands. Band A is for customers who get 20 hours of power and above daily, Band B has customers who get power for 16 hours daily, C-band has customers who enjoy power for 12 hours and above a day.

Those that enjoy power for eight hours and above are in D-band, and E-band has customers who only get four hours and above but below eight hours of power supply daily.

Under the plan, there will be no increase for customers in Band E and those called lifeline customers irrespective of how much power they get every day.

With the declining oil prices and the consequent fall in revenue, the Nigerian government says it can no longer afford subsidies on electricity which the World Bank has said goes largely to the rich consumers who get power for the most hours daily and government now seeks to have customers who have enjoyed more stable power pay their fair share.

Within the past five years, the Federal Government has spent over N1.75 trillion on electricity subsidies. Abolishing these subsidies was a condition upon which the World Bank provided $750 million financing to repay loans to the Central Bank towards the power sector.

begin a tariff regime that will guarantee cost recovery and abolish subsidies to enjoy this.

The critical decision before the Federal Government is to weigh the cost of postponing this tariff increase against DisCos’ argument that they need more time to be ready. In reality, these DisCos have been getting ready for the past six years. They failed in their obligation to meter customers, they abused the estimated billing programme and short-changed other market participants by keeping more revenue than they should.

They have gone to court to stop a forensic audit of their finances.

Those who take a cudgel at efforts at transparency usually have a lot to hide.

Yet, the regulator is not totally free of blame. It has issued threats where sanctions should suffice, it has bent over backwards to accommodate every whim of the DisCos who often whine like over-pampered children. The regulator too has been too amenable to

political interference.

Some customers have not been faithful, bypassing meters, and stealing power. Many have deliberately refused to pay for power, insisting it should be a social service even when it is not possible. Some have destroyed electrical connections, stolen cables and devices, and some resisted efforts to install transmission lines that should ensure power reaches others.

We admit there is enough blame to go around but with this tariff plan, Nigeria has a real chance to institute equity in the pricing of electricity and enthrone transparency in the process. The new plan provides clarity in the system of billing and what parameters are used to measure output.

It empowers consumers to demand better service and ensures that those who use the most power also pay the most cost and these are critical elements for a vibrant electricity market.

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Wednesday 01 July 2020

BUSINESS DAY

cityfile Downpour wreaks havoc in Ondo community KORETIMI AKINTUNDE, Akure

A Timothy Olawale (l) director-general, and Taiwo Adeniyi, president, Nigeria Employers’ Consultative Association (NECA) during the association’s quarterly media briefing in Lagos, last week.

Lagos moves to streamline public procurement processes … begins training of heads of MDAs JOSHUA BASSEY

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he Lagos government is taking steps toward the streamlining of its public procurement processes with the aim of curbing wastages and enhancing service delivery to the public.

At the flag off of a three-day workshop for chief executive officers of ministries, departments and agencies (MDAs) on Monday, the special adviser to the state governor on Parastatals Monitoring Office (PMO), Afolabi Ayantayo, said this has become necessary to enable the MDAs maximally deliver their statutory mandates.

According to Ayantayo, since the domestication of the Procurement Act in Lagos State in 2011 and the subsequent establishment of Public Procurement Agency (PPA) in 2012, many of the accounting officers in the parastatals were yet to have a clear understanding of the procurement processes as

stipulated by the procurement law. The objective of the workshop, therefore, is to create a better understanding of the procurement processes and clear the grey areas in the procurement law.

Themed “compliance with the procurement law and procedure as a catalyst to drive the T.H.E.M.E.S. developmental agenda of the current administration,” the training has been designed to keep the officers abreast with developments as they relate to public procurement.

Public procurement refers to the purchase by governments and state-owned enterprises of goods, services and works. Public procurement accounts for a substantial portion of the taxpayers’ money, governments are expected to carry it out efficiently and with high standards of conduct in order to ensure high quality of service delivery and safeguard the public interest.

Ayantayo argued that without effective procurement,

hospitals would wait for drugs, teachers for textbooks, and cities for roads.

“Whenever a news item surfaces about drug shortages in hospitals, schools without textbooks or failing road networks, the reader may be looking at a procurement problem. Without efficient procurement, money gets wasted on a very large scale.”

“Many developing countries channel significant proportions of their budgets through the procurement system – even marginal savings can add up very fast. Again, public procurement is a part of the government that citizens see every day as lack of transparency and corruption in procurement directly affects citizens, especially when their expectations are not met due to inefficient and corrupt procurement systems,” the SA explained.

Permanent secretary in the PMO, Kafayat Ajenifuja, speaking also at the event, noted that companies and

agencies owned or controlled wholly or partly by the government and were critical to the socio- economic development of a nation, hence the need to position them to effectively deliver service to the people.

“This workshop has been organised to re-engineer parastatals and agencies in the state for a better, effective and efficient service delivery bearing in mind the T.H.E.M.E.S developmental agenda of the administration of Governor BabajideSanwoOlu,” said Ajenifuja.

She explained that the training materials were assembled with the objective of stirring a better understanding of the procurement law and procurement processes.

The PS also hinted that the PMO would be undertaking project inspection and monitoring of all agencies as a further step to ensure efficient service delivery.

The workshop was organised by the PMO in conjunction with the Lagos State Public Procurement Agency (PPA).

ICPC tracks constituency projects in Kwara SIKIRAT SHEHU, Ilorin

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peratives of Independent Corrupt PracticesandRelated Offences Commission (ICPC) have commenced the tracking of 250 constituency projects in Kwara State.

The commission is in the second phase of its constituency and executive projects tracking exercise in 16 states of the federation.

The team, which had earlier visited the Kwara State secretariat of the Nigeria Union of Journalists (NUJ), Ilorin to seek the support of the media

in carrying out the exercise, explained that they are tracking projects executed between 2015 and 2019 at the total contracts sum of valued at N4.1 billion spread across the three senatorial districts of the state.

Some of the projects inspected during the team’s first outing on Friday included solar street lights along Edun, Isale Aluko, Pakata – Adeta road, Oloje – Alfayaya road, Popo-Giwa and Oloje Estate, all sited within Kwara Central Senatorial District.

Also visited in the same district were constituency public primary school projects in www.businessday.ng

Oko-Erin, Ijoro, Adewole and Anifowose, among others.

Spokesperson of the commission, Rasheedat Okoduwa, “the exercise, which started from June, 23rd involved 16 states- Cross River, Taraba, Ekiti, Ogun, Gombe, Nasarawa, Kebbi, Kwara, Jigawa, Abia, Delta, Ebonyi, Niger, Rivers, Oyo, and Kaduna and focuses on key sectors, including health, education, water resources, agriculture, and power.

The objective of the tracking exercise is to investigate fraudulent procurement practices in the award of contracts and execution of projects;

make recoveries on projects or contracts confirmed to have been inflated or in which contractors under-performed or did not perform at all; and track contracting companies for all statutory compliance”.

The commission said it had in 2019 launched the pilot phase of the exercise in which it tracked projects performance from 2015 to 2019 in 12 states. “Successes of the exercise included the recoveries of tractors, ambulances, dialysis machines and other hospital equipment from sponsors of the projects across the pilot states”.

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downpour has sacked some residents of Idanre, a hilly town in Ondo and damaged properties worth millions of naira, including electricity poles and other infrastructure, among others.

It was gathered that the heavy rain, which started Saturday evening and continued for hours, caused huge losses to the residents.

BusinessDay correspondent, who visited the hilly town on Sunday to ascertain the level of damage caused by the rainstorm, observed that the damage was more noticeable in Alade Idanre where many roofs were blown off and electricity poles taken away from their original places.

Between Odode and Alade Idanre, electricity cables around Gbekemu valley were seen dangling on the roads as many of the poles made with steel had either fallen or bent.

Streets such as Idimilokun, Oke-Ibukun and Police Station road had roofs littering and blocking them, thus keeping the carpen-

ters busy to remove the damaged planks.

The General Hospital, Idanre was not left out as it had its car park blown off while the house of a retired Justice of Supreme Court had its gate pulled down and many of the tree crops planted in his garden uprooted by the windstorm.

One of the victims, Janet Jonuash, who has a computer centre at the former post office building, lamented her loss of over three million naira equipment and damaged stationeries after the roof of her shop was blown off.

Another victim, Adewale Afolabi at Palace road, Atosin Idanre while recounting his losses, said a sum of two hundred thousand naira would be needed to repair the blown off roof .

Jonuash and Afolabi appealed to Governor Oluwarotimi Akeredolu to come to their aid.

Also, Oluwatosin Akintan, whose house was affected by the rainstorm, said it was a terrible experience for the residents of the area. According to Akintan, though no life was lost, properties worth millions of naira were destroyed by the rainstorm.

Mobile court seals hotel in Maitama

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he Federal Capital Territory Administration (FCTA) Mobile Court has ordered the seal up of Missouri hotel, located in Maitama district of Abuja, for allegedly operating a nightclub within Covid -19 curfew hours.

The court presided over by magistrate Idayat Akanni, ordered that the hotel be sealed on Monday for one week for contravening Covid-19 regulations.

The court also tried and sentenced 11 defaulters to engage in a three-day community service with the payment of fine of N5,000 each.

The defaulters found guilty were staff of the hotel apprehended by the Covid-19 enforcement team for opening business within the curfew hours, from 10 p.m. to 6 a.m. within the FCT. Other five other persons were those found in the premises convicted for partaking in the social gathering, which accord@Businessdayng

ing to the court constituted night club activities.

Addressing newsmen, the prosecutor, Udeme Umanah, who is also the chief state counsel to the FCT, explained that the 11 defaulters were arraigned before the mobile court, found guilty and sentenced accordingly.

Umanah also explained that the defaulters opened up the hotel and engaged in night club activities in the area.

Chairman of the FCT ministerial task force on Covid -19, Ikharo Attah, who led his team to enforce the seal up order, said the arrests and trial of the defaulters followed the receipt of complaints from the residents of the area.

Attah said that the security personnel visited the hotel and discovered that activities there were in contravention of Covid-19 guidelines. According to him, the hotel has been sealed until the court decides otherwise.

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Wednesday 01 July 2020

BUSINESS DAY

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news

Free trade zones offer economic opportunities despite COVID-19 pandemic -NEPZA HARRISON EDEH, Abuja

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igeria Export Processing Zones Authority (NEPZA) says free trade zones in the country have offered numerous economic opportunities for investors in trade and manufacturing sector.

Acting managing director, NEPZA, Bitrus Dawuk, says the pandemic presented both challenges and opportunities for free trade zones across the world, noting that the opportunities are mostly in the area of international trade and production as most manufacturers around the world are looking to diversify the supply chains to meet the present demands.

Dawuk states this in a presentation at a webinar online conference organised by a Dubai-based free zone training and management consulting company, CTP International FZLEE, for selected industry experts across the world.

In a statement signed by Martins Odeh, head, corporate communications, NEPZA, and made available to newsmen in Abuja on Monday, Dawuk assures that free zones in the country would leverage the COVID-19 opportunities.

In the presentation titled ‘Seeking New Frontier for Repositioning NEPZA for Maximum Investor Attraction and Retention in the Post Covid-19 Era,’ Dawuk notes that NEPZA is prepared to cash in on the prevailing business environment by developing robust actionable plans to reposition the country’s free zone for maximum investor attraction and retention in post Covid-19 and Brexit era.

“NEPZA has identified two major opportunities presented by covid-19: the first is inward production, involving a change in sectoral focus in favour of agro-allied and healthcare, while the second is in the global and regional value and supply chain, involving manufacturing and supply of capital goods to other African countries,’’ Dawuk states.

The NEPZA boss commended President Muhammadu Buhari for his commitment toward ensuring effective and efficient management of the country’s free zone scheme for speedy national economic recovery and growth.

He expresses delight over the president’s special interest to ensure the scheme surmounted all prevailing challenges so as to leverage the opportunities provided by it to accelerate attraction of Foreign Direct Investment (FDI) into the country.

He however says he was not surprised by Buhari’s support for NEPZA and the entire operations of free zone in the country, adding that the Federal Government’s former subtle reservation toward the sector changed when the president made a state visit to China to have an on-the-spot assessment of Chinese free zone model.

The Authority has enjoyed some considerable increase of budgetary allocation since the president discovered the need to support the sector to perform optimally, he notes, stressing that the president’s exposure to the Chinese free zone scheme had positively robbed off positively on NEPZA and the country free zone.

SMEs struggle as ease of lockdown fails to improve margins Gbemi Faminu

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icro, small and medium enterprises (MSMEs) are having a hard time selling their products despite the gradual ease of lockdown that started many weeks ago.

They say most of their customers are cash-strapped and cannot spend as much as they did pre-COVID-19 era.

Temiloluwa Smyth, CEO of Lagos-based fashion outfit, Smyth Couture, says despite business resumption, people were yet to start making outfits as they used to pre-COVID-19, and attributes the situation to some of his clients being laid off from work, which made it difficult for them to afford new outfits.

Oyedeji Dolapo, CEO of Ibadan, Oyo State-based D’Oye Edibles, maker of popcorns and drinks, notes that since resumption of business, she had cut her production by 50 percent as her business was yet to pick up.

“I am hopeful that, overtime, business will pick up,” she says.

COVID-19 has hit over 10 million people worldwide, killing half a million. In Nigeria, more than 25,000 have been infected, with over 550 dying. The virus has changed all activities globally and locally, affecting lives and sources of livelihood.

Countries, including Nigeria, have stepped up measures to curb the spread of the virus, but such steps have hit businesses hard.

MSMEs are among the worst hit as some of them contemplate shutdowns or new businesses. They

account for 90 percent of all businesses in the country and contribute 50 percent to the GDP. BusinessDay gathers from interactions with MSMEs across the country that resumption of business activities has not been rosy, as some MSMEs say they have had a 20-60 percent drop in their margins.

“My revenue has dropped by 60 percent since the lockdowns started,” Onyeka Iwoma, CEO of Igraduel Limited, a trader in Kaduna, states.

“I hope that the ease of interstate lockdowns will make a difference because my business depends so much on inter-state movements,” he says.

Johnson Obasi, CEO, Johnsfrank Global Resources Nigeria Limited, an Aba-based footwear manufacturer, who now produces personal protective equipment (PPE), says since the beginning of the pandemic, business activities in the commercial hub of Aba had taken a different turn.

He notes that his booming shoe business is struggling as people are more concerned about protecting themselves from the virus.

“Even as a PPE production business is not moving as fast as it should due to various reasons, which include the scarcity of raw materials, a cut in supply chain and restricted market access,” he explains.

Aba flourishes on the importation of fabrics. However, since the pandemic there has been a supply glut and this has caused artificial scarcity of raw materials, leading to a hike in the price of the inputs.

“This is further aggravated by the import restriction and high cost of dollars,” Obasi further says. www.businessday.ng

L-R: Shileola Ibironke, managing director, Heritage Cinemas; Patrick Lee, chairman, Cinema Exhibition Association of Nigeria; Lanre Mojola, director-general, Lagos State Safety Commission, and Moses Babatope, co-founder, Filmhouse Cinema, during a courtesy visit to the commission to express the association’s readiness to open business in Lagos, yesterday.

Electricity tariff increase: Buhari, NASS leadership meet, agree to halt increase Tony Ailemen, Abuja

… NASS says increment ‘untimely’

resident Muhammadu Buhari and Vice President Yemi Osinbajo on Tuesday met the leadership of the National Assembly on the suspension of planned increase of electricity tariff.

Senate president, Ahmed Lawan, who spoke with State House correspondents after meeting with Vice President Yemi Osinbajo, described the announcement on the increase of electricity tariff in Nigeria as “untimely.”

“We had this discussion with Mr Vice President and we are sure that the announcement in the increase of electricity tariff in Nigeria is untimely.”

The joint leadership of the National Assembly had on Monday met with the electricity distribution companies (DISCOs) and Nigerian Electricity Regulatory Commission (NERC) where they agreed to halt the planned tariff increase, which is expected to take off on Wednesday, July 1.

According to Lawan, “We believe that this is not the right time to increase the tariff in the electricity sector. Nigerians have a lot of challenges today because of the COVID-19 pandemic and the situation requires that we do everything possible to make life easy for our citizens.”

He however noted that the government was doing a lot in this respect, but, “We believe that the Discos should meet with consumers, find better cost effective tariff.

“But before then, there must be some steps to ensure that the consumers are properly metered, otherwise, you will still go back to guessing what consumers are consuming. That is to say that let the billing be scientifically based; it has to be based on what you actually consumed.”

He insisted that there was the need to do more work to ensure that the billing system work properly before any increase.

“There must be some mea-

P

Ministry of Labour responsible for unregulated practices in diving profession - divers AMAKA ANAGOR-EWUZIE

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igerian Divers have blamed the underdeveloped state of the profession on unregulated practices and foreign dominance to the failure of the Ministry of Labour and Employment to establish a Diving Advisory Board in line with the nation’s 2018 Diving at Work Regulations.

Julius Ugwala, the chief diving inspector (elect), who stated this at the weekend in an interview with Maritime TV, frowned at the dominance of foreigners in the nation’s diving profession, leading to outsourcing the much-needed jobs to expatriates in place of Nigerians.

To harness the potentials in the sector, he said the nation would have to set up an Advisory Board as stipulated by existing regulations to oversee the activities of diving including safety, education, remuneration and local content development.

“The government isn’t aware of the viability of the diving sector

and how much it could contribute in terms of revenue for government and job opportunities for the youth. I think the practitioners in the country should take up the onus of convincing the government about the need to regulate the profession,” he said.

According to Ugwala, “Setting up Advisory board would see the diving profession becomes duly regulated in Nigeria. It would also encourage more people to pick a career in diving and experts would no longer have to travel out of the country to be trained.”

He disclosed that the diving sector had capacity to put an end to youth restiveness across Nigeria by catering for over 10 percent of the nation’s unemployment margin.

“The board would ensure proper regulation leading to the establishment of quality schools in the country to train professionals. This nation is facing a serious unemployment gap but this diving sector could reduce the margin of unemployment drastically by more than 10 percent,” he said.

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sures, steps, line of actions that must be exhausted including the metering. This is a welcome idea to the Vice President as well,” he said.

The Senate president also insisted that the share purchase agreement signed by the government and the Discos at the point of the privatisation must be adhered to.

“These are businesses and they must do everything possible to provide services. It is when they provide efficient and effective services to consumers that they can make money.

“But as a government, we too must make sure that we discharge our obligations as provided for in the share purchase agreement signed. Once we are able to achieve that, we will have a better situation in the power sector in Nigeria.

“It is doable, it has happened elsewhere. So, we cannot continue to give Discos and Gencos the resources that we can ordinar-

ily deploy to build hospitals. But whatever it’s necessary for us to do as part of our agreement with them we must do those.”

Speaking on the “International Day of Parliamentarianism,” Lawan said the lawmakers had been doing their best but, “it is for the public to judge what we do. I wouldn’t say we should rate ourselves but I want to assure you that in the prevailing circumstances, the National Assembly has been doing its best.

“We try to attend to all those issues we believe are contemporaneous, those resources that government need to address COVID-19 situation.

“Recently, we passed the budget 2020 and of course that included the stimulus package to support the COVID-19 situation.

So, we have been doing our best and we are always available to undertake those parliamentary interventions that will be required as at when due,” he said.

Access Bank launches *901*911# self-service USSD to curb fraud SEGUN ADAMS

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urthering its commitment to safeguard the investments and savings of customers, Access Bank plc, has introduced *901*911#. The USSD code allows customers deactivate their USSD profile once their mobile devices get lost or stolen.

This self-service enables users to deactivate their accounts using any alternative phone number, giving accountholders full autonomy to safeguard their funds before official reports are directed to the bank.

Speaking about the development, the executive director, retail banking, Access Bank, Victor Etuokwu, said, “Access Bank is always seeking innovative ways to safeguard the resources of our customers. We have listened to customer complaints and have now introduced the *901*911# USSD code, a solution that allows customers act swiftly. To deactivate a USSD profile, simply dial @Businessdayng

*901*911# from any phone, input the registered phone number for the account you want to blacklist and your USSD profile will be deactivated and blacklisted automatically.

“It has also come to our attention that there has been an increase in the number of fraudsters disguising themselves as bank representatives. Hence, we will like to once again urge all customers to be wary of this tact and to ignore any message demanding personal or bank details. Access Bank will never ask for your BVN, full card PAN, PIN, mobile app activation code, OTP or password as it is readily available to the Bank via its database.”

Through the years, the bank has remained committed to educating its customers, informing and protecting them from fraudsters. The bank has created dedicated pages on its official website that constantly update customers on the schemes fraudsters employ to defraud them.

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Wednesday 01 July 2020

news

Fidelity Bank lauds NNPC, Oilserv, pledges to Pension industry to reap 15% of N7.6trn support $2.8bn AKK gas project NT-bills, OMO maturities – FSDH Research Gbemi Faminu

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idelity Bank plc Tuesday commended the Nigerian National Petroleum Corporation (NNPC) and Oilserv, contractor to the $2.8bn Ajaokuta Kaduna - Kano (AKK) gas pipeline project, flagged off Tuesday with a ground-breaking ceremony at Ajaokuta, Kogi State.

Designed in line with the key objectives of the Federal Government of Nigeria’s Gas Masterplan, the AKK project was borne out of the need to not only boost domestic gas utilisation, but reduce the infrastructure deficit plaguing the oil and gas industry.

Speaking during the ceremony, President Muhammadu Buhari said the landmark project was being developed at a critical time in Nigeria’s history, particularly now when it had become imperative to improve the country’s infrastructure asset.

The AKK Gas Pipeline Project, he said, will provide gas for generation of power, facilitate the development of new industries and revive moribund industries along transit towns in Kogi State, Abuja (FCT), Niger State, Kaduna State and Kano State.

“When operational, the cascading effect and impact of the project will be immeasurable. It has significant job creation potential both direct and indirect, while fostering the development and utilization of local skills and manpower, technology transfer and promotion of local manufacturing,” the president said.

Mele Kyari, managing director of NNPC, commended the Nigerian President for the push and support to jumpstart the project, he said, was critical to national development.

Kyari explained that the project, when completed, would create an enabling environment for development, adding that NNPC had the capacity to deliver and create opportunities for the growth of other industries in Nigeria.

Also speaking at the ceremony, Fidelity Bank CEO, Nnamdi Okonkwo, stated that that the bank was delighted to be associated with the laudable initiative to improve gas supply, enhance power generation and boost the productive capacity of the Nigerian Industrial sector. Okonkwo who was represented by the executive director, North, Hassan Imam pledged Fidelity Bank’s

commitment to Oilserv.

“As partner/banker to Oilserv, we are happy to meet all the financial obligations and other funding needs, required to successfully execute this project” he added. Leveraging on its know-how and capacity, Fidelity Bank Energy Desk provides support to businesses in the oil and gas value chain.

“The bank’s support for local content development, according to Fidelity Bank’s executive director, Corporate Bank, Obaro Odeghe “underscores our support for the key infrastructure initiatives of the Federal Government, and our customer, Oilserv Limited; a market leader in the oil servicing space”.

Chairman/CEO, Oilserv Limited, meka Okwuosa, assured Nigerians that the project would be delivered within the contractual terms, adding that the company had the capacity to handle such a monumental project.

“We are ready for it and what we are doing today is the official flag off which is ground breaking.

We are already working and laying the lines,” he stated. According to him, the company had already employed over 600 employees, stating that this will be increased to 1000 or 15000 in due course.

…to be awash with liquidity in Q3, Q4 HOPE MOSES-ASHIKE

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igeria’spensionindustry would be awash with robust liquidity in the third quarter (Q3) and fourth quarter (Q4) of 2020, following its 15 percent share of the maturing N7.6 trillion ($20.1bn) worth of T-Bills and Open Market Operation (OMO) instruments, over the next six months.

What this means, according to analysts at FSDH Research, is that Pension Fund Administrators (PFAs) and Nigerian institutional investors have had to combat to sustain pressure on generating above inflation returns, on their clients’ Retirement Savings Account (RSA), in the face of growing liquidity and reducing investment opportunities.

The analysis of data from the National Pension Commission (PENCOM) estimates PFAs share of this sum at about 15 percent, which implies an absolute value of N1.1 trillion, of which about N867.1 billion of the sum are OMO instruments.

“When the organic growth of pension contributions and possible half-year dividend payments from major banks are factored in, PFAs would be awash with robust liquidity in Q3 and Q4,” analysts at FSDH Research state in a report.

However, recent regulations have limited the investment vehicles available for Nigerian PFAs. As at April 2020, data available from PENCOM showed that Nigerian PFAs hold 66.25% of their assets in FGN securities with FGN bonds getting 54.55% and Treasury Bills (including OMO) getting 10.67%.

This huge exposure has left pension managers in a tight space, given the CBN has banned non-banking local corporates from accessing the OMO market of which holds over 8% (about N1.0tn) of their total assets. This implies these funds must be rotated to different asset classes.

Most PFAs are already significantly exposed to FGN securities, particularly bonds. Thus, similar less risky instruments for consideration are corporate debt and money market instruments. Nigerian PFAs currently have a 1.44%

and 6.53% exposure to commercial papers and corporate bonds, respectively, which leaves some room to increase exposure.

However, while several corporates have taken advantage of the low interest rate environment, the amounts raised by these corporates have been inadequate to absorb the robust liquidity with PFAs. “We believe with less risky fixed income instruments in short supply and interest rates continuing to dip on robust liquidity, PFAs would need to take on more risk to generate superior inflation-adjusted return on their client’s RSAs. According to PENCOM, PFAs exposure to the domestic equities market stood at 4.62% (or N488.5bn in absolute terms) at the end of April 2020. This is only 3.8% of total NSE equity market capitalization. With valuations still at multi-year lows, we believe value remains to be mined from the equity market. Thus, increasing exposure to domestic equities remains a viable endeavour,” the analysts said.

Buhari flags off AKK gas pipeline, promises new gas revolution ...project to boost power generation by 3,600MW Tony Ailemen & Harrison Edeh

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resident Muhammadu Buhari on Tuesday affirmed Nigeria’s commitment to a new gas revolution while ensuring timely delivery with the flag-off of the Abuja-Kaduna-Kano (AKK) gas pipeline project within budgetary allocation and specifications.

The AKK gas pipeline is expected to enable the injection of 2.2bscf/d of gas into the domestic market and facilitate additional power generation capacity of 3,600MW. Speaking at the virtual flag-off ceremony of the project at the Ajaokuta, Kogi State, and Rigachikun, Kaduna State camp sites simultaneously, President Buhari said the project was very dear to the people of Nigeria and must succeed.

The president, therefore, directed the NNPC and partners to remain focused, noting that the AKK project was part of the delivery of the present administration’s Next Level Agenda for sustainable development, enhancement of economic prosperity and increase of the country’s infrastructure assets.

Governors Yahaya Bello of Kogi State and Nasir el-Rufai of Kaduna physically flagged off the commencement of works at Ajaokuta and Rigachikun sites, while the President watched remotely via video-conference from the Council Chamber in Abuja.

Buhari said: “We promised the nation that we will expand the critical gas infrastructure in the country to promote the use of gas in the domestic market. These include the Escravos to Lagos Pipeline System - 2 (ELPS-2), Obiafu to Obrikom (OB3) pipeline and AKK. “These projects are fundamental to our desire to industrialise and energise the entrepreneurial spirit that is ever present in our population.’’ Enumerating the benefits of the project, billed to be completed in two years, the president said it would provide gas for generation of

power and for gas-based industries, which would facilitate the development of new industries.

The president also used the opportunity to challenge the organised private sector to lead the charge in maximising the nation’s gas resources as well as create a petrochemical hub that would resurrect the manufacturing industry and put the nation on the path to increased self-sufficiency.

It will also ensure the revival of moribund industries along transit towns in Kogi State, Abuja (FCT), Niger State, Kaduna State and Kano State, he said, adding that the cascading effect and impact of the AKK, when operational, would be immeasurable.

His words: ‘‘It has significant job creation potential both direct and indirect, while fostering the development and utilization of local skills and manpower, technology transfer and promotion of local manufacturing.’’

The president announced that Nigeria had learnt invaluable lessons from the global COVID-19 pandemic and some oil rich countries that had used their crude as a pathway to economic and industrial diversification.

On COVID-19, the president said the pandemic had further underscored the drive of his administration for export substitution initiatives and projects that promote local manufacturing.

On diversification, he said: ‘‘Gulf countries that have similar levels of gas reserves as Nigeria have a strategy centred around gas-industrialisation as their foundation towards export diversification. This has to be our guiding principle as we seek to attract investment and create opportunities for our people. ‘‘As the world evolves, we owe our people the responsibility to prepare them for what the future holds. We, therefore, must be bold and fearless and can no longer be incremental in our approach. www.businessday.ng

L-R: Hassan Imam, executive director, north, Fidelity Bank plc, with Emeka Okwuosa, chairman/CEO, Oilserv Limited, at the ground breaking ceremony for the $2.8bn AKK Gas Project at Ajaokuta, Kogi State, yesterday.

EY to explore disruptive, converging forces driving health sector

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Y Nigeria has concluded arrangementstobringtogether healthcare professionals and providers of healthcare services across board to brainstorm on the current forces driving the changinghealthsectorlandscape.

Themed “Disruption, convergenceandthehealthcaresectorof tomorrow,” the healthcare webinar session will hold July 2, 2020 Speaking about the webinar, Damilola Aloba, partner, Transaction Advisory Services, EY, says the virtual webinar session is primarily designed to explore the disruptive and converging forces driving the healthcare landscape, impact on ecosystem players and how providers can remain resilient amidst disruption.

He notes that the interactive and engaging session will focus on key areas, including but not limited to; how changes are impacting the healthcare ecosystem players; healthcare financing in West Africa and how healthcare providerscanremainresilientand relevant in the face of disruption.

Explaining the reason for the session, Olufemi Alabi, partner/leader, Transaction Advisory Services, EY West Africa, says the health ecosystem globally is changing radically with breakthrough technologies, and integrateddesign-basedsolutions are driving fundamental change in the delivery of health, wellness and care.

Therefore,theneedtore-think and evolve new business models within the sector is further amplified by the current COVID-19 outbreak, which poses further threats to the relatively weak healthcare system in Nigeria.

Henotesfurtherthatthepanel session will attract seasoned panellists, including the Lagos State Commissioner for Health, Akin Abayomi,whowilldeliverthekeynote address at the session. Other industry stalwarts are Richardson Ajayi, executive chairman, Bridge Clinic, who is also chairman Synlab and chairman, LASUTH Board; Tunde Lalude, CMD ReddintonHospitals,ObinniaAbajue, CEO, Hygeia Limited.

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MIPAN pledges to achieve more success leveraging tech, as group holds AGM SEYI JOHN SALAU

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he new executive of the Media Independent Practitioners Association of Nigeria (MIPAN) has promised to take the group to an enviable height leveraging technology.

Making the promise in his acceptance speech shortly after he was elected as the new executive president of the association, Olufemi Adelusi, expressed appreciation to his immediate predecessor and his team, saying he would build on the successes they had recorded.

Listing his vision couched under the acronym ‘THINC’, Adelusi said his tenure would focus on “technology, data and innovation; human capital development; industry-thought leadership; inclusiveness and collaboration, and commercial stability of the media ecosystem.”

According to the new presi@Businessdayng

dent, who also is the CEO Brandeye Media Limited, “We would develop our associates in media, digital and the marketing communications industry through our academy.

“We would like to be judged on the progress we make in these areas.”

Earlier in his address, Ken Onyeali Ikpe, immediate past executive president of MIPAN, noted that the Nigerian business and economic environment had been characterised by several challenges including high level of insecurity, serious reduction in government revenue, high level unemployment, low purchasing power by consumers, and the coronavirus pandemic that has already claimed so many lives.

Highlighting the implication for members of the association, he said: “All our businesses are under serious threat with attendant loss of clients and consequently loss of income.”

Wednesday 01 July 2020

BUSINESS DAY

news Nigeria faces grain scarcity on account of worsening insecurity in North West Adeola Ajakaiye, Kano

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here is mounting banditry activities in recent times in the farming communities situated in major grain production belt of north-west area of Nigeria, suggesting a high probability of grain scarcity in the country next year.

The intensity of the banditry in the grain production states of Sokoto, Kebbi, Zamfara, Kaduna, and Niger, which sources believe is connected to the reemergence of the Ansaru Jihadist Group, in the states, seems to be defiling military solutions.

The states in the Northwest Agricultural Belt of Nigeria are dominantly the areas responsible for the cultivation of the bulk of the Maize, Rice, Millet, Sorghum and Wheat grown in the country.

Ibrahim Umar Abubakar, immediate past national president, Agricultural Society of Nigeria (ASN), who confirmed the threat the rising insecurity in the grain production states posed to the country, says there should be military need to scale

up security in the area to avert the threat of grain scarcity in the country.

The prevailing banditry in the states is view by many experts as one of the major factors hampering the implementation of the Federal Government`s policy of Strategic Grain Reserves designed to build up over 150,000 metric tons of grains annually.

The overall goal of Nigeria’s National Food and Nutrition Policy is to improve the nutritional status of Nigerians, with particular emphasis on vulnerable groups, children, women, and the elderly.

However, Ibrahim, while on an appearance on a national television on Saturday, observes that the escalation in arm attacks on farming communities in Sokoto and Zamfara states, of recent, has led to killings and massive dislocation of the farmers in the localities, which is a major hindrance to the attainment of the national goal.

Facts gather by BusinessDay indicate that there have been killing of 13 persons in farming communities of Maru Local

Government Area of Zamfara State, last weekend, by the terrorists who are attempting to take control of the communities.

According to information gathered, the farmers were killed by the terrorists who invaded the communities on motorcycles while members of the communities were organising the burial of some of the residents that were killed last Tuesday.

Other farming communities where the killings also occurred in the local government area are: Manya, Inwallar Gobirawa, Difgawa, Kyaranki, Manyar Daudu, Zaman Gira, Tungar Roro, Tsibiri, Matukkuda Dandogo and Bullake.

As at the time of filing this report, these farming communities, according sources, are empty, as most of the residents are believed to have fled out of fear.

It would be recalled that apart from the 13 persons killed two weeks ago, about 77 other were also killed in grain production communities in three local government areas of Sokoto, including Rebah.

FIRS stamp duty collection hits N66bn in 6 months Cynthia Egboboh, Abuja

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he Federal Inland Revenue Service (FIRS) has announced a total of N66 billion as Stamp Duty charges generated for the period of January to June 2020.

Muhammad Nami, executive chairman, FIRS, disclosed this in Abuja on Tuesday, stating that the significant leap arose from the dynamism introduced by the Finance Act 2019.

Speaking at the inauguration of the inter-ministerial committee on audit and recovery of back years stamp duties, Nami noted that stamp duty was essentially a

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duty chargeable on both physical and electronic instruments.

He said, “As the world becomes more global, COVID-19 has further limited physical interaction, electronic payment acknowledgement of stamp duties at a time like this is a must.

“The introduction of the FIRS stamp duties adhesive stamp will plug the revenue sink-hole, enable proper accountability and transparency, simplify tax administration of stamp duties and reduce disputes.”

He further stressed that with the Finance Act 2019, FIRS remained the sole competent tax authority to assess, collect

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and account for stamp duty in Nigeria.

Speaker of the House of Representatives, Femi Gbajabiamiala, in his remark said the global COVID-19 pandemic and its cascading economic effects had made it necessary for of government to be proactive in bringing about rapid economic recovery.

“The House of repentance has always encouraged and supported laudable initiatives of FIRS towards repositioning tax administration in Nigeria and maximising revenue collection for the Nigeria government.

“Therefore, urge all the other revenue generating agencies to rise up to this challenge. For, I dare to say that the only way to prevail in difficult times is to evolve resourceful and dynamic policies and engage in global best practices.

“Let me therefore seize this opportunity to reassure the Executive Chairman that the House of representatives is committed to continue supporting F IRS especially in legislative interventions in order to ensure that the Service continue to succeed in its mandate,” he said.

Boss Mustapha, Secretary to the Government of the Federation, said it had become more important to consistently emphasise the need for the tightening of all areas of leakages, wastages, and revenue losses as the projected revenue realisable from all sources available to the government as per our 2020 budget estimates, was far lower than the projected expenses leading to a budget deficit of over N5 trillion.

“The Members of the Committee may recall that since the inception of this administration, the government has pledged to Nigerians that it shall leave no stone unturned in its commitment to reposition the economy of this country for sustainable development and meaningful progress. https://www.facebook.com/businessdayng

@Businessdayng

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Wednesday 01 July 2020

BUSINESS DAY

MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

How NLNG sustains investment in seafarers’ development …Wants 100% Nigerians onboard NLNG vessels by 2022 amaka Anagor-Ewuzie Owing to the role seafarers play in the global supply chain, the International Maritime Organisation (IMO), world’s maritime regulatory organ of the United Nations, set aside June 25 of every year to celebrate the contributions of seafarers to the development of global economy.

For instance, the outbreak of Coronavirus (Covid-19) pandemic has further gone to justify the place of seafarers in the global economy.

Seafarers, no doubt, are the engine that propels the vehicle of international trade. They make sure that essential goods are moved from countries of production to the countries where they are needed.

This was why the IMO came up with a campaign themed, ‘Seafarers are Key Workers,’ to mark this year’s Day. To IMO, seafarers are on the frontline of the Covid-19 pandemic, playing an essential role in maintaining the flow of vital goods, such as food, medicines and medical supplies. However, the crisis has led to difficult working conditions for seafarers, including uncertainties and difficulties about port access, re-supply, crew changeovers and repatriation.

This year’s Day of the Seafarer campaign calls on maritime nations to recognise seafarers as key workers – and to provide them with the support, assistance and travel options open to all key workers during the pandemic.

This campaign encourages every shipping stakeholder to treat seafarers with the respect and dignity they deserve so that they can continue to provide their vital services to keep world trade moving.

According to the International Chamber of Shipping (ICS), the global population of seafarers serving on merchant ships is estimated at 1,647,500 seafarers, of which 774,000 are officers and 873,500 are ratings.

Sadly, countries like China, the Philippines, Indonesia, the Russian Federation and Ukraine are estimated to be the five largest suppliers of all seafarers (officers and ratings). The Philippines is the biggest supplier of ratings, followed

by China, Indonesia, the Russian Federation and Ukraine while China is the biggest supplier of officers, followed by the Philippines, India, Indonesia and the Russian Federation.

ICS estimated that the global demand for seafarers stands at 1,545,000, with the industry requiring approximately 790,500 officers and 754,500 ratings. This indicates that the demand for officers has increased by around 24.1 percent, while the demand for ratings has increased by around 1.0 percent.

The current supply-demand situation highlights a shortage of approximately 16,500 officers and a surplus of around 119,000 ratings.

While the global supply of officers is forecast to increase steadily, this trend is expected to be outpaced by increasing demand.

In Nigeria, for instance, responsible maritime players such as Nigeria LNG that have interest of seafarers at heart, have been investing heavily on the development of quality seamen to compete in the global shipping industry.

The NLNG said it’s on course to achieving its target of ensuring that its workforce, including seafarers onboard its vessels, are 100 percent Nigerians in line with the provisions of the Nigerian Content Act of 2010.

Currently, NLNG Ship Management Limited (NSML), a subsidiary of the NLNG, has achieved 83 percent of its Nigerianisation target, according to NLNG. Local Content Act is a regulatory act known as the Nigerian Oil and Gas Industry Content Development Act, which was introduced in 2010. The policy was designed to build the capacity of indigenous firms and to provide more opportunities for indigenous participation in business and value addition.

Eyono Fatayi-Williams, genwww.businessday.ng

eral manager, External Relations and Sustainable Development of NLNG, who spoke to newsmen in Lagos recently, said that as at December 2019, the company has in its employment list, about 661 competent and professional seafarers as employees.

The number, according to her, spreads across 297 officers, 329 ratings and 35 share-based personnel.

Nigeria LNG has two subsidiaries that play actively in the nation’s shipping business and they are Bonny Gas Transport Limited (BGT) and NSML. NLNG has a total of 23 vessels in its fleet, 13 of which are owned by BGT. Presently, NSML’s Fleet Management department manages 11 LNG ships including seven steam and four Dual Fuel Diesel Electric ships owned by BGT. It ensures the vessels are operated in line with flag state, class and the global maritime industry requirements.

NSML ensures that these vessels are sea- and cargo-worthy at all times, thereby ensuring that NLNG achieves its aims of delivering cargoes safely and reliably to its customers globally.

“NSML is the biggest employer of Nigerian seafarers on board its 13 NLNG-owned carrier ships. We have trained hundreds of seagoing officers, some to the level of captains and chief engineers,” Fatayi-Williams disclosed.

Continuing, she stated: “NSML, which initially was set up as a manning outfit in 2010, metamorphosed into an international maritime service company that is providing world-class services in vessel management, crew management,

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administration, terminal management and maritime training including projects and consultancy.”

Giving further insight, she stated that NLNG and its shareholders agreed on a Nigerianisation scheme in 1997, but the agreement was revisited and updated in 2004.

“The objective of the scheme, which was to Nigeranise the company’s workforce, was achieved in 2012. It started by recruiting Higher National Diploma graduates and training them as technicians and operators. This was a deliberate policy to enable the relatively young minds imbibe the skills, work culture, discipline and professionalism that the business requires,” he stated.

NLNG, she said, also instituted a staff training and development drive for different cadres of technical staff to help them acquire the requisite skills and competence needed for management, supervisory and to hold operational positions in the company. “The company continues to recruit young engineers and other technical staff, as part of this initiative,” she also added.

On the economic impact of NLNG’s operations on Nigerian economy, Fatayi-Williams pointed out that NLNG provides more than 2,000 jobs each construction year.

“Overall, the major sub-contractors employed about 18,000 Nigerians in technical jobs in the Base Project.

“Through each Nigerian Content plan for its contracts, NLNG has promoted the development and employment of Nigerian manpower. For instance, 600 Nigerians were trained in Nigeria and at the @Businessdayng

contractors’ (Hyundai and Samsung) shipyards in Korea as part of the Nigerian Content deliverables tied to the construction of six new LNG vessels by BGT, a wholly owned subsidiary of NLNG,” she stated.

At the end, those 600 Nigerians, with enhanced skills in welding, hull assembly, pipe fitting, electrical, mechanical, painting and ship design joined the nation’s workforce, providing a support base for technology transfer and industrialisation.

Determined to also ensure that Nigerian seafarers play role in Nigerian and global shipping communities, Nigeria LNG invested in the building of Maritime Centre of Excellence (MCOE), a one-stop maritime consulting and training outfit set up to provide marine and shipping technical services, maritime training, maritime project management and maritime consultancy for NSML, NLNG, and for the wider maritime industry.

Situated on Bonny Island in River State, the centre has national and international accreditations including the NIMASA accreditation as a Maritime Training Institute (MTI) and accreditation to conduct STCW courses.

Others include Marshall Islands Flag Administration accreditation to conduct STCW and seafarers’ training courses; DNV-GL accredited Maritime Simulator Centre and Maritime Training Centre and the ISO 9001:2015 by DNV-GL. In addition, NLNG has, over the years, supported the Maritime Academy of Nigeria (MAN), Oron, to train manpower for the industry.

First, NLNG engaged Warsash Maritime Academy, Southampton to review the Nigerian academy’s STCW 95 courses. With this, Warsash Maritime Academy facilitated the accreditation process of Maritime Academy of Nigeria, Oron, to enable them issue MCAapproved certificates.

The cost for these projects which includes purchase, installation and test-running equipment for the Academy was fully borne by Nigeria LNG limited.

Furthermore, NLNG also spent over US$100,000 on equipment, besides sponsorship of four lecturers and a Life Craft Technician to the United Kingdom for training.

In 2010, NLNG made a donation worth N40 million to the academy to facilitate training of officers in Proficiency in Survival Craft and Rescue Boat (PSCRB).

Wednesday 01 July 2020

BUSINESS DAY

37

FINANCIAL INCLUSION

& INNOVATION

Reaching for the Cloud: Embracing Digital Channels in Cooperative Societies within Africa Obong Idiong

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he Covid-19 pandemic has fueled the migration of group interactions to online channels. Virtual meeting platforms such as Zoom, Skype, Microsoft Teams and Google Meets have become an essential element of modern culture, enabling family members, professional colleagues and other people groups to interact safely amid the outbreak of the highly contagious disease.

Additionally, there is a growing appetite for virtual channels for investments, commerce and recreation.

According to the African Union Commissioner, Amani Abou-Zeid, the “Covid-19 crisis has become the biggest catalyst for digital transformation and has moved digitization from a niche market into mass adoption”.

As a voluntary association of individuals with common economic and social interests, cooperative societies in Africa should embrace the trend and take deliberate steps to migrate their operations to digital channels.

Cloud and related technology provide an opportunity for cooperative societies to not only improve the user experience of members and ease administration but to deliver additional services efficiently.

The adoption of digital technology holds the key for cooperatives in Africa to fulfil their potential as agents of economic growth. In Kenya, for example, the Ministry of Industry, Trade and Cooperatives estimates that cooperatives account for over 30 percent of GDP, compared to a much smaller fraction of Nigeria’s GDP. Technology

has played an important role in organizing the activities of cooperatives in nations where they are making a significant economic impact.

Cloud computing is a technology that is very relevant to cooperatives today.

It refers to the delivery of computing service such as servers, storage, databases, networking, software and analytics over the internet and can be used to deliver faster and more flexible services to a variety of users.

Service providers create cloud computing systems to serve common business or research needs.

These solutions are generally designed to support large customer or user numbers and are therefore an ideal solution for cooperative societies that seek to operate more efficiently. Adopters typically pay only for the cloud services they use and can lower their operating costs, enhance security, run infrastructure more efficiently and scale operations. One way to achieve this cost efficiency is by partnering with digital

solutions companies.

By adopting cloud technology, cooperatives can revolutionize their operations in several ways. The collection and organization of members’ data on a cloud platform allow cooperatives to create financial accounts efficiently.

This endears the cooperative to financial service companies, making them more willing to offer loans and other services to cooperatives. Sadly, many cooperatives in Africa struggle to provide financial accounts and data on the contribution of members. As a result, they are unable to take advantage of financing opportunities such as the loans currently being offered by the vari-

ous Government’s in these countries through various intervention schemes.

Technology is also changing how members relate with each other. Participation at meetings, voting and notifications can now be done virtually, saving time, resources, increasing participation and making engagement more convenient for members.

Also, the adoption of digital technology opens up a new approach to customer service and customer experience.

Members are now able to access information about their contributions and receive personalized services on the go.

The use of digital methods to organize the operations of

cooperative societies also enables a range of prescriptive and predictive analysis that are otherwise not possible without data. The managers of the cooperative can analyze the membership and peculiar needs and circumstances of members on a platform made possible by cloud computing technology.

For example, through data mining, cooperative societies can more accurately ascertain the products and services that could interest their members. Also, through the processing of data and the creation of appropriate algorithms, the cooperative is more likely to improve member satisfaction by anticipating their needs and product preferences. Data processing can also be a valuable tool in risk management concerning designing rules around the provision of loans/credit to members. The power of data can only be truly unleashed today when organizations adopt digital methods in the provision of their services and the management of their operations.

The application of digital technology to drive innovation in the activities of cooperatives is a growing trend across the world. Credit unions in the United States are offering services via online and mobile channels to young adults. Millions of credit union members in Asia are being connected to digital financial tools.

Digital technology is not only supporting the efficient distribution of loans to credit union members but enabling peer-to-peer rental of farming and other equipment in many countries.

Given a large number of cooperative societies in Africa, there is significant scope for these groups to enhance their impact on society, better serve their members, and navigate the current public health concerns.

Another reason why cooperatives should embrace digital technology is the threat of the potential disruption of their businesses by outsiders. The success of Uber shows how the business of “taxi service cooperatives” across the world can be disrupted. Cooperatives in Africa need to wake up to the threat of technology to their business and embrace it before advancements in technology render them irrelevant in the future.

While access to digital tools and affordable broadband connectivity remains a challenge, the World Economic Forum calls for “localizing digital content and services” through; new models of investment in digital infrastructure; digital skills development; digitization of public services and creation of technology offerings tailored towards SMEs, all of which create further opportunities.

Covid-19 has created uncertainties across economies around the globe. However, this dire outlook creates new opportunities, to do things differently and harness new growth opportunities.

Obong Idiong is the CEO of Africa Prudential Plc, an NSE listed digital solutions company with a particular focus on Nigeria’s capital market.

Nigeria needs to accelerate Fintech industry growth to boost financial inclusion- MTN Nigeria Endurance Okafor

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or Nigeria to onboard its 40million unbanked population and meet the Central Bank’s 95 percent financial including target by 2024, Africa’s most populous nation needs to accelerate the Fintech industry growth, the General Manager, Mobile Financial Services, MTN Nigeria, Usoro Usoro, said.

This was made known during a recent virtual ses-

sion by The Economist Intelligence Unit based on a report entitled: “State of Play: Fintech in Nigeria”, sponsored by MTN Nigeria and Mastercard.

Hosted by Camelia Oros, Managing Director, CT Productions, Usoro said during the webinar that Fintech and financial inclusion is an important area for MTN Nigeria.

“We always see ourselves as a company that drives economic growth and develop-

ment everywhere we operate.

Working with The Economist team and similar stakeholders to produce reports, such as this stimulate debate and conversation around the challenges in the sector and how we can work together as an industry to drive our desired objectives,” he said.

Meanwhile, the National Financial Inclusion Strategy (NFIS) set up in 2012 by the Central Bank of Nigeria (CBN) was revised in 2019, and in the new strategy, the

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apex bank increased its inclusion target to 95 percent by 2024.

Although, the 2018 data

by EFInA put Nigeria’s exclusion rate at 36.8 percent, meaning the central bank would have to bridge the current 16.8 percent gap in order to achieve its 80 percent inclusion target of 2020.

Responding to the new target by the CBN, Usoro said: “It is barely five years from now and we need a collaborative approach by

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stakeholders in the industry to ensure that all players can leverage their various assets to meet that target.”

According to him, Nigeria relatively has more sophisticated products than many other countries on the continent.

“The challenge is in accessibility and how these products will not only improve convenience for the already banked but further drive inclusion while addressing how we can bring @Businessdayng

this last batch of 40 million customers that are traditionally excluded into the fold,” he said.

The general manager, however, expressed optimism towards a broader financial inclusion breakthrough in Nigeria.

“I think we are in the right direction, and studies, such as this, serve the purpose of stimulating conversation that will provide solutions to the challenges we face as an industry,” Usoro said.

38

Wednesday 01 July 2020

BUSINESS DAY

FT

FINANCIAL TIMES

World Business Newspaper

Africa faces worst economic shock since 1970s, says IMF chief

Georgieva calls for international solidarity to help region that was ‘on the move’ before coronavirus struck DAVID PILLING

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frica will need more financial help to avoid “long-lasting, terrible consequences” from the coronavirus pandemic, Kristalina Georgieva, managing director of the IMF, said as the fund predicted a region-wide contraction of 3.2 per cent this year, far worse than it had forecast just 10 weeks ago.

“This is the heaviest hit on Africa at least since the 1970s,” Ms Georgieva said in an interview. Without tens of billions of dollars in additional support, she warned, “there can be very significant scarring that will have long-lasting, terrible consequences”.

Africa had been a “continent on the move”, she said, referring to several of the region’s economies — such as Ghana, Ethiopia, Ivory Coast, Rwanda and Senegal — that had been among the world’s fastest-growing in recent years. “This momentum is now dramatically interrupted.”

Given the rising population in sub-Saharan Africa, the region would be hit harder still in per capita terms, she said, with an expected 5.4 per cent fall in incomes that could push millions back into extreme poverty.

Oil-dependent and tourismdependent economies in subSaharan Africa would shrink by 4.9 per cent and 9.7 per cent respectively, she said.

“When we look at the devasta-

IMF managing director Kristalina Georgieva: ‘When we look at the devastation this crisis is causing everywhere, we have to recognise that it is particularly hard on Africa’ © Nicholas Kamm/AFP/Getty

tion this crisis is causing everywhere, we have to recognise that it is particularly hard on Africa,” Ms Georgieva said.

Many African governments have been credited with acting swiftly to stem the spread of the virus, which has so far infected a relatively low 400,000 people and killed 6,500 people.

But the economic impact has been severe because of falling commodity prices, suppressed remittance flows and a collapse in tourism and investment. The IMF also remains concerned that the virus could “spread aggressively”.

Ms Georgieva said the IMF was already in the process of increas-

ing annual average disbursements to Africa 16-fold to $16bn. “We have no intention to stop there,” she said.

This year alone, the international community still had to find an additional $44bn for Africa, either through debt write-offs, grants or concessionary funding, she said.

We are in this together. If there is anyone that hasn’t quite gotten it, please wake up Kristalina Georgieva, IMF managing director Ken Ofori-Atta, Ghana’s finance minister, is one of many African officials to complain that while richer countries have taken mas-

sive and unorthodox measures to stave off economic collapse, African countries are expected by creditors to stick by the rules. “You really feel like shouting: ‘I can’t breathe,’” he said.

Without naming the US, Ms Georgieva called on countries to reconsider their opposition to a new issuance of $1tn in Special Drawing Rights that would provide a liquidity boost to countries facing a sudden depletion of foreign reserves. Steven Mnuchin, US treasury secretary, has voiced Washington’s opposition to an SDR issuance, akin to “printing” money, on the grounds that some funds would go to the likes of

China and Iran and not enough to poor countries with low IMF quotas.

“We have not been able to gather sufficient support for a new SDR issuance at this point,” Ms Georgieva conceded.

“I would not say this is off the table, but we need 85 per cent voting and we don’t have it at this moment,” she said, adding that those countries with strong economic fundamentals had been able to issue bonds to bridge the liquidity gap. “For weak economies, for poor countries, it continues to be a very pressing issue.”

In the meantime, she said, the IMF was negotiating to reallocate some of the roughly $260bn of existing unused SDRs from rich countries to poor ones, a proposal she described as “progressing”.

However, African Union envoys appointed to press the continent’s case say this will not be enough because African countries are eligible for only 6.8 per cent of these funds.

Ms Georgieva also called on private sector lenders to African countries, such as banks and pension funds, to join in a debt moratorium. “We are asking everybody to look in the mirror,” she said, adding that rating agencies should not penalise countries that agreed debt standstills with creditors.

“We are not talking about a debt reduction and it is voluntary,” she said, referring to a possible private sector debt standstill. “We are in this together. If there is anyone that hasn’t quite gotten it, please wake up.”

Coronavirus threatens to wipe out gender equality gains, UN agency warns International Labour Organization says women are at greater risk of losing their jobs DELPHINE STRAUSS

C

oronavirus and its economic consequences threaten to wipe out progress on gender equality at work as women are at greater risk of losing their job, more likely to be exposed to infection and take on more of the burden of unpaid care, the International Labour Organization has warned.

On Tuesday the UN agency increased its estimate of global working hours lost to the pandemic, largely due to the worsening health situation and economic conditions in the Americas.

It said global working hours were 14 per cent lower in the second quarter of 2020 than in the last quarter of 2019 — equivalent to a loss of 400m full-time jobs.

Workers in developing countries with high levels of informal em-

Ethiopian domestic workers who have been dismissed by their employers outside their country’s embassy in Hazmiyeh, east of Beirut, Lebanon © AFP via Getty Images

ployment were being hit much harder than in previous crises, the ILO said.

It warned that women face a disproportionate impact: the decline in female employment in April and May was steeper than it was for men in countries where www.businessday.ng

data were available.

“We fear that the progress, modest as it has been, in gender equality . . . runs the risk of being reversed,” said Guy Ryder, the ILO’s director-general.

This is partly because a large proportion of women work in

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sectors badly affected by lockdowns: hospitality, retail, entertainment and labour-intensive areas of manufacturing such as textiles. Again, this is especially pronounced in the Americas; almost 60 per cent of women in Central America work in hard-hit sectors, and more than 45 per cent in South America.

Women also make up the vast majority of the 55m domestic workers around the world who are at risk of losing their livelihood as a result of lockdowns and a lack of social security coverage.

The ILO also cited survey evidence showing that women were bearing the brunt of increased childcare responsibilities. In Europe, more than 10 per cent said they were unable to spend as much time as they should on work, all or most of the time.

Mr Ryder said it was “striking and disappointing” that care re@Businessdayng

sponsibilities had not been more evenly shared, even when both parents were off work.

If remote working becomes more prevalent after the immediate crisis has passed, policymakers will need to ensure that it did not exacerbate the already uneven division of unpaid care, with women becoming more likely to work from home while men returned to offices, Mr Ryder added.

The ILO set out three scenarios for a recovery in labour markets in the second half of the year. In its optimistic scenario, working hours in the fourth quarter would be only 1.2 per cent lower than a year earlier, with equivalent full-time job losses limited to around 34m.

In its bleakest scenario, involving fresh lockdowns to deal with a second wave of infection, working hours would remain around 12 per cent lower year on year, equivalent to a loss of 340m full-time jobs.

Wednesday 01 July 2020

BUSINESS DAY

39

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Wirecard’s real business relied on small number of customers FT exclusive: An internal spreadsheet shows how only 100 clients generated majority of revenues in 2017 DAN MCCRUM

W

irecard relied on a small number of customers for the majority of its genuine sales, according to an internal company spreadsheet that shows for the first time the real business behind the fintech group’s facade.

The German payments company filed for insolvency last week after acknowledging that €1.9bn of cash probably did “not exist” and the business that accounted for about half of its reported revenues had been misrepresented.

A snapshot of Wirecard’s clients in 2017, reviewed by the Financial Times, gives an indication of the real size and shape of the company, with only 100 customers accounting for more than half of its sales.

The document provides fresh evidence that Wirecard comprehensively misled the market about its scale. It also shows that it processed payments for a variety of controversial businesses that have drawn regulatory scrutiny in a number of jurisdictions.

In 2017 Wirecard claimed publicly to serve 33,000 large and medium-sized merchants, and 170,000 small businesses, a global reach that helped make the company an investment sensation.

The internal file seen by the FT, entitled “Customer list — Jan-Jun 2017 (global)”, suggests

Wirecard’s customer base was in fact much smaller, and far more lopsided.

Prepared by staff at the request of then chief executive Markus Braun, an enormous spreadsheet was shared by email between 10 employees in October 2017, showing 107,000 clients, with the transaction volume and resulting Wirecard sales generated by each. As a payment processor, Wirecard generates revenue by taking a cut of merchants’ transactions.

The file reviewed by the FT shows figures equivalent to about half the sales and transaction volume the company reported for the first six months of 2017.

That seems likely to represent

the genuine business. Statements from Wirecard last week, a special audit by KPMG and previous reporting by the FT indicate that the other half of the reported business might never have existed in reality.

Wirecard did not respond to a request for comment.

A lawyer for Wirecard’s former chief Mr Braun, who was arrested last week on suspicion of false accounting and released on bail, said “the assumptions and imputations” in the FT’s questions about the spreadsheet were “incomprehensible” to his client and “obviously based on information taken wholly out of context”.

Mr Braun was providing “absolute and unlimited co-operation to the public prosecutor in Munich

to clarify the criminal liability”, he said.

In 2017 Mr Braun was boasting of Wirecard’s cutting-edge technology, including “a data layer that also now takes new and state of the art instruments in the area of machine learning and artificial intelligence into account”.

To generate information on its own customers, however, Wirecard staff needed to use an unsophisticated Excel spreadsheet that reflected the same paperwork weaknesses described in a special audit by KPMG. Thousands of client names appear to be duplicates.

The FT has also excluded six Indonesian financial institutions that were said to contribute €200,000 of sales on an improbable €190bn

of transactions, possibly the result of the wrong currency being used.

The remaining data show €292m of sales from processing €18bn of transactions, compared with the €616m of revenues from processing €37.9bn of payments that Wirecard claimed at the time.

An outsized amount comes from a small group of important customers, including the UK-based online bank Monzo, Hungarian low-cost airline Wizz Air, and Marathon Alderney, the parent of online gaming site Marathon Bet. The top 200 contributed €193m in sales, two-thirds of the total, according to the file.

Wizz Air and Monzo no longer use Wirecard. Marathon did not respond to a request for comment.

Other examples of Wirecard customers include the Cypriot online brokers Rodeler and Hoch Capital, which were recently banned from operating in the UK by the Financial Conduct Authority. They did not respond to requests for comment.

The 21st largest customer in the first half of 2017 appears to have been a Polish entity used by Qnet, a multi-level marketing group that has its headquarters in Hong Kong, which has faced complaints in India over whether it engaged in pyramid scheme behaviour.

“Wirecard has been very good to us in the sense of the rates that it gives us,” said Zaheer Merchant, Qnet’s director of corporate affairs. Pointing to a 2017 judgment in India, he said: “The supreme court order that we received was that Qnet is not a scam company.”

Rise in Covid-19 bond issuance fans fears over ‘social washing’ Some issuers have been too vague on how proceeds will be used, say analysts CAMILLA HODGSON AND BILLY NAUMAN

A

nalysts in the sustainable investment sector say the market needs to be on alert for “social washing”, where issuers claim that proceeds will go towards worthy causes but the money ends up elsewhere.

Since the coronavirus pandemic upended global markets, companies and governments have issued tens of billions of dollars worth of special bonds, including about €60bn in March and April alone, according to Axa Investment Managers.

Many were classed as social bonds — part of a distinct market based on environmental, social and governance principles — while others have been billed as conventional bonds intended to fund spending programmes or strengthen balance sheets during the crisis.

The flurry of issuance has given social bonds an edge over more established green bonds within the growing ESG sector.

Green bond issuance dropped in the first half of 2020 while

$50bn of social bonds were sold — more than double the whole of 2019, according to data from S&P Global.

But the social segment of the market is at an early stage of its development, say analysts, and is light on rules about how to structure the products and measure results.

New York-based S&P Global warned this month about social washing, drawing a parallel to allegations of “green washing” that have dogged many issuers of notionally green bonds in recent years. “[Social] benefits are often more qualitative than quantitative,” said Lori Shapiro, a sustainable finance analyst at the rating agency.

“With the green bond market, it’s essentially taken 12 years to get to the point where everyone has pretty good clarity about what’s green, what’s good and what’s bad,” said Yo Takatsuki, head of ESG research and active ownership at Axa IM. “In social, we haven’t had that level of debate.”

One industry standard for social bonds is a set of principles drawn up by the Zurich-based International Capital Market Aswww.businessday.ng

sociation, which requires issuers to identify specific projects with social benefits and then track and report how the money is used.

But compliance with the guidelines is optional and the details are self-selected, notes Tim Conduit, a partner in the international capital markets group at law firm Allen & Overy. As long as an issuer uses the money as it said it would, the only remedy for an investor who considers that the company’s reporting is poor, or who disapproves of specific projects the money is being invested in, is to sell the bond.

“If an issuer has given itself wriggle room then you have to assume that it’s going to use it,” Mr Conduit said.

Drugmaker Pfizer, which issued $1.25bn in 10-year bonds in March, said it aimed to use the money to fund certain “eligible projects” — sustainability initiatives chosen by the company. But the investor prospectus said that, before allocation, the funds might temporarily be used for “shortterm investments” or “to repay other borrowings.”

“There can be no assurance that such net proceeds will be

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totally or partially disbursed for such eligible projects,” it added.

Pfizer declined to comment for this article.

The goals of Covid-19 bonds — social or conventional — tend to vary, with some issuers earmarking funds for immediate relief and the purchase of medical equipment, while others are aimed at supporting longer-term recoveries.

Issuers have included supranational bodies such as the European Investment Bank, governments such as Indonesia and companies including Spanish bank BBVA and Bank of America. While some issuers said they would ringfence the funds and outlined strict criteria for how the money could be used, others allowed themselves more flexibility.

Mr Takatsuki said Axa IM had considered 25 Covid-19 bonds for potential investment, and rejected 10 of them. A common problem with the bonds — a mixture of corporate, sovereign and development agency debt — was vagueness, said Mr Takatsuki. “We didn’t feel like there was sufficient information or assurance,” he said.

Several of the bonds, he added, @Businessdayng

allowed proceeds to be used for general purposes once the crisis was over. One bond allowed some of the money to be used for nonpandemic purposes.

In February, Chinese regulators said they would fast-track the approval process for “virus control” bonds if just 10 per cent of the money raised were spent to help combat the pandemic. One glass manufacturer that took advantage of the scheme described it as a “windfall” of cheap capital.

When it comes to social bonds, analysts are hopeful that standards should improve as issuance increases, as is happening with green bonds. Until then, they say, investors may have to take it on trust that the money will be put to socially useful ends.

“It’s not very easy for our analysts to track the proceeds until a company reports [how they have been spent],” said Lan Wu, euro credit fund manager at Legal & General Investment Management.

Even then, it can be difficult to verify independently what the issuer has said, she added: “There’s not enough transparency or data.”

insight

BUSINESS DAY Wednesday 01 July 2020 www.businessday.ng

Explaining the new electricity tariff Introduction 1. The estimated cost of electricity in Nigeria is ~N53/kWh. Lack of timely tariff reviews has meant we only charge N31/kWh to consumers leading to a shortfall of N22/kWh which is a subsidy. In total this subsidy cost the Federal Government of Nigeria N560 billion ($1.5 billion) in 2019 (7% of the 2019 budget).

2. If the status quo is maintained, the tariff shortfall subsidy in 2020 will be another N610 billion ($1.7 billion), although energy produced will be virtually the same as output from 10 years ago.

3. During the inauguration of the senate committee on power’s investigative hearing on 15th June 2020, the Senate President lamented that the N1.7 trillion that has been used to cover tariff shortfall over the last five years has prevented the average Nigerian from having access to improved services in other critical sectors, e.g. healthcare, education.

4. Analysis corroborated by the World Bank have shown that 60% of the subsidy was used to cover electricity consumption for the richest 10% of the population.

While billions of dollars are going to subsidise the rich, latest estimates indicate that 90 million of the poorest Nigerians have no access to power. It should be noted that some off-grid systems in the country charge well over the N31/kWh on-grid (examples include Toronkawa minigrid in Sokoto and Rokoto minigrid in Niger amongst others.

5. There was a planned increase in tariff of 50% for all consumers scheduled for April 1st,2020. As mandated

by Electric Power Sector Reform Act (EPSRA), NERC conducted public consultations. During these consultations, customers expressed willingness to pay cost reflective tariff if they received acceptable quality of service. Based on this feedback, NERC and FGN agreed to delay the tariff review by 3 months in order to give all stakeholders the time required to design and implement a servicebased tariff system (this coincided with the onset of COVID-19). This deferral cost the FGN an additional N90 billion in subsidy.

6. A service-based tariff system provides more equity and drives improvement in service for all citizens.

This tariff structure ensures that customers receiving high quality of service should pay agreed rates with the DISCOs, while those receiving poor service would not experience any tariff increase. The DISCOs themselves designed the implementation for their customers and have requested a “no objection” from NERC. This tariff is contingent on DISCOs holding consultations and reaching agreements with their customers on penalties for poor service.

7. In the current submissions by the DISCOs, 80% of the increase in tariff will be borne by the richest 20% of the population.

There is no change in tariff for the poor. Customers that receive

The financial status of Nigeria’s electricity market SUMMARY FGN RESPONSIBILITY TO NESI LICENCEE Abuja DISCO Benin DISCO Eko DISCO Enugu DISCO Ibadan DISCO Ikeja DISCO Jos DISCO Kaduna DISCO Kano DISCO Port Harcourt DISCO Yola DISCO TOTAL

LICENCEE Kainji Hydro GENCO Jebba Hydro GENCO Shiroro Hydro GENCO Egbin Thermal GENCO Transcorp Thermal GENCO Sapele Power Thermal GENCO Geregu Thermal GENCO Afam IV Power Thermal GENCO Omotosho Thermal GENCO Olorunshogo Thermal GENCO Ibom Thermal GENCO Rivers FIPL Thermal GENCO Trans Amadi FIPL Thermal GENCO Azura Thermal GENCO Omoku FIPL Thermal GENCO Alaoji NIPP GENCO Geregu NIPP GENCO Odukpani (Calabar) GENCO Olorunsogo NIPP GENCO Omotosho NIPP GENCO Sapele NIPP GENCO Ihovbor NIPP GENCO Gbarain NIPP GENCO Afam VI SPDC GENCO Okpai GENCO TOTAL

FGN NET POSITION (PRINCIPAL ONLY) 110,116,911,624.13 50,451,893,246.75 38,764,110,597.63 73,564,611,443.30 58,114,839,176.66 58,572,883,566.47 30,645,584,785.46 68,706,814,457.44 52,212,980,153.71 67,763,437,749.17 13,493,465,206.30

FGN NET POSITION (INTEREST ONLY) 63,468,992,575.39 21,847,906,967.81 13,326,953,208.00 39,633,500,514.31 27,260,797,439.04 39,115,079,096.72 5,300,676,355.99 38,355,091,079.06 23,963,068,495.70 32,654,730,043.09 3,336,094,628.12

FGN NET POSITION (PRINCIPAL + INTEREST) 173,585,904,199.52 72,299,800,214.56 52,091,063,805.64 113,198,111,957.61 85,375,636,615.70 97,687,962,663.19 35,946,261,141.46 107,061,905,536.50 76,176,048,649.42 100,418,167,792.26 16,829,559,834.42

(7,095,686,011.00) (1,718,567,234.54) (7,835,320,204.00) (2,563,980,543.00) (2,636,862,976.25) (1,676,157,804.04) (7,238,155,525.00) (8,720,082,835.07) (1,356,781,073.68) (2,558,339,315.66) (2,490,002,078.82)

622,407,532,007.02

308,262,890,403.24

930,670,422,410.26

(45,889,935,601.06)

MDA Debts

FGN NET POSITION FGN NET POSITION FGN NET POSITION Gas Supply and (PRINCIPAL ONLY) (INTEREST ONLY) (PRINCIPAL + INTEREST) Transport (21,425,169,529.19) (9,411,817,301.94) -30,836,986,831.13 0.00 (25,530,112,406.49) (11,608,573,422.83) -37,138,685,829.32 0.00 (23,059,890,817.11) (10,205,038,829.77) -33,264,929,646.88 0.00 (59,705,915,339.32) (4,053,006,073.94) -63,758,921,413.26 37,488,119,130.78 (35,898,035,049.43) (16,188,305,692.57) -52,086,340,742.00 46,485,958,247.27 (5,991,547,214.76) (3,659,640,116.05) -9,651,187,330.81 10,167,823,066.94 (16,900,519,165.28) (6,928,984,088.32) -23,829,503,253.60 0.00 (316,965,985.37) (250,142,899.23) -567,108,884.60 0.00 (48,391,753,772.79) (10,238,905,264.80) -58,630,659,037.59 14,601,767,057.40 (48,141,992,597.59) (10,400,830,664.70) -58,542,823,262.29 13,157,559,010.31 (5,984,150,856.10) 0.00 -5,984,150,856.10 2,202,226,484.46 (3,939,883,033.35) 0.00 -3,939,883,033.35 0.00 (1,515,847,005.15) 0.00 -1,515,847,005.15 1,674,186,327.82 0.00 0.00 0.00 0.00 (5,491,670,310.40) 0.00 -5,491,670,310.40 6,935,588,513.76 (11,161,295,950.70) 0.00 -11,161,295,950.70 2,352,896,994.32 (12,682,409,607.81) 0.00 -12,682,409,607.81 13,257,912,099.65 (4,415,522,683.12) 0.00 -4,415,522,683.12 7,661,903,971.21 (7,587,959,440.84) 0.00 -7,587,959,440.84 8,398,112,903.48 (15,931,118,774.03) 0.00 -15,931,118,774.03 15,480,495,470.71 (15,228,733,945.64) 0.00 -15,228,733,945.64 14,077,546,610.21 (13,173,865,621.91) 0.00 -13,173,865,621.91 12,356,169,522.77 (3,499,812,489.80) 0.00 -3,499,812,489.80 0.00 (25,699,652,976.24) (4,227,757,857.90) -29,927,410,834.14 0.00 (50,418,272,721.78) (12,329,778,885.30) -62,748,051,607.08 0.00 (462,092,097,294.20)

less than 50kW of energy a month will not experience any increase and will continue to pay N4/kWh. Customers receiving less than 4 hours of energy per day will not experience any tariff increase.

8. The Federal Government set aside N380 billion to provide subsidies in 2020 as part of the Financing Plan for the Power Sector Reform Plan (PSRP) approved by the President. These funds are meant to continue the subsidy for the poor, while ensuring a transition to cost reflective tariffs for others (in a phased process).

9. The Federal Government of Nigeria has a significant gap in funding the subsidy given its fiscal position.

Even before the arrival of COVID-19 and the spectacular fall in crude oil prices, the 2020 appropriation approved by the National Assembly only provided N80 billion (20% of the total) for tariff subsidy.

10. Based on the approved Financing Plan, 40% of the funds required for the 2020 tariff subsidy will come from the recently approved World Bank $750 million facility.

The World Bank facility is contingent upon removing the existing retrogressive subsidy regime that benefits the rich at the expense of the poor.

Section B – Role of the DISCOs: 11. In the past the Federal Government of Nigeria did not have any measures in place to enforce remittance of collections from the DISCOs. In some estimates, this caused an inappropriate over retention of over N900 billion over the past 5 years by the DISCOs. This is money the DISCOs owe the Federal Government. This debt to the FGN

(99,502,781,097.35)

calls into question their solvency.

Continued subsidies reinforce support for a privatized power sector at the expense of the poor.

12. The remittance control measures introduced by NERC ensures that the DISCOs remit a regulated amount. The reluctance of some of the DISCOs to transition to service reflective tariffs is borne out of a fear of an increase in remittance requirements.

Section C – The Serious Impacts of Inaction for the Country: 14. Stopping the proposed tariff review will have grave consequences for the Nigeria. The key impacts are listed below: i. Increased financing pres-

‘‘

Based on the approved Financing Plan, 40% of the funds required for the 2020 tariff subsidy will come from the recently approved World Bank $750 million facility

(561,594,878,391.55)

112,156,364,966.12

sure on the FGN: Postponing the tariff review till January will increase power sector subsidy for 2020 by N261 billion – there is no viable budgetary or lending path for securing these additional funds. ii. Loss of World Bank $750 million facility: One of the Conditions Precedent (CP) for the World Bank approval of the $750 million facility to the Nigerian Government is a tariff review on July 1st as contained in the financing plan which was approved by His Excellency, the President. Failure to enact the tariff review will mean that Nigeria will miss a critical milestone thereby resulting in non-disbursement of the funds. Without the World Bank funds, the FGN will need to find an additional N137 billion to meet the subsidy for 2020 – total new funding required will be N398 billion. iii. Loss of additional $3 billion in World Bank and African Development Bank (AFDB) funding for the country: It has been made clear from the World Bank and AFDB that there is an expectation as documented in our policy intent document to the IMF to remove retrogressive subsidies and focus on implementing policies for the poor and vulnerable. The World Bank Federal Budget Support Facility of $1.5 billion to support the 2020 budget is dependent upon a sensible macro economic framework.

Keeping retrogressive subsidies will disqualify us from obtaining these funds that are desperately needed. In addition, low interest infrastructure funding for DISCOs of $1.5 billion from the World Bank and AFDB that will be activated by

December will be lost.

These funds are critically needed to improve infrastructure alongside the planned Siemens interventions. iv. Collapse of the generation sub-sector: As a result of non-cost reflective tariffs, the generation subsector currently relies heavily on the subsidy for the payment of its invoices. Between October 2019 and April 2020, the FGN through the Payment Assurance Facility (PAF); a loan from the Central Bank of Nigeria is responsible for paying over 70% of the GENCO invoices.

The CBN Governor has stated that the disbursement of the World Bank funds is a CP for the disbursement of future PAF payments. Loss of the World Bank facility will result in non-release of PAF which will ultimately lead to the collapse of the generation subsector – resulting in the risk of a nationwide black out. v. Reverse progresses made on non-FGN interference with tariff setting: One of the key features of the reform has been the transfer of tariff setting and consumer engagement responsibility to the DISCOs as envisaged under EPSRA. Any action by the FGN to cancel/delay the July tariff review puts the government firmly at the centre of tariff setting thereby reducing investor confidence in the sector as well as further reinforcing public opinion that electricity is a public service as against a commercial commodity.

Section D – Options and Actions Needed: 15. In a country where over 50% of the population (majorly the very poorest) is not connected to electricity, government fiscal support in the power sector needs to focus on the off-grid space. With this in mind, His Excellency, the President, approved the 5 million Solar Home Systems (SHS) initiative under the Economic Sustainability Plan in response to COVID-19. This initiative will provide low interest loan to manufacturers for the mass deployment of SHS to help over 25 million of the poorest Nigerians. This is where the focus of the Executive and Legislature should be.

16. A combined narrative about the holistic approach to the Power Sector (on-grid and off-grid) and protections for the poor should be espoused by the joint arms of government.

17. DISCOs have continuously clamoured for cost reflective tariffs.

Now that the Government is poised to allow them charge cost reflective tariffs to customers receiving high quality of service the DISCOs are backtracking solely because some of them are unwilling to increase their payment obligations for power produced by the Generating Companies.

18. Continued subsidy is rewarding poor performance by the DISCOs and preventing the electricity market from evolving, as envisaged in the Act, therefore DISCOs should be allowed to proceed with their customers engagements with NERC focusing on consumer protections.

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