Businessday 02 jul 2018 by BusinessDay

businessday market monitor Commodities

NSE

Brent Oil

Biggest Gainer

$79.39

NESTLE N1,575.00

Cocoa

Bitcoin Biggest Loser

4.92pc

FO N32.85

-3.52pc

38,278.55

US $2,512.00

₦2,103,077.72

FMDQ Close

Everdon Bureau De Change Buy

-3.65pc

news you can trust I **MONDAY 02 JULY 2018 I vol. 15, no 87 I N300

Sell

$-N 359.00 361.00 £-N 476.00 484.00 €-N 413.00 421.00

Foreign Exchange Market

Spot $/N

I&E FX Window 361.32 CBN Official Rate 305.75

fgn bonds

Treasury Bills 3M -0.08 12.79

5 Years

10 Years

20 Years

-0.00 13.07

0.00% 13.66%

0.19% 14.02%

0.00% 13.96%

Old PSC law means billion dollar losses for Nigeria C

INSIGHT

Buhari’s infrastructure spend fails to lift construction stocks BALA AUGIE & Olalekan Ipele

accounts for almost 50% of production

DIPO OLADEHINDE

rude oil fields governed by Production Sharing Contracts (PSC) now make up a sizable chunk of Nigeria’s oil output leading to less government take in the form of royalties and taxes as a result of obsolete laws that have not Continues on page 46

Donald Duke, a former governor of Cross River State, recently declared his intention to contest the 2019 presidential election. A couple of days ago, BusinessDay Editors engaged him in an exclusive interview in which he spoke on a wide range of issues, including his experiences in government; his economic direction as governor for eight years and his motivation to aspire to lead Nigeria as president. Read this no-hold-barred interview in BusinessDay tomorrow. Book your copy.

Endurance Okafor, Abdullateef Eniola-Giwa, Oghogho Edosomwan, & Sobechukwu Eze

Continues on page 4

Inside Raven Energy partners with ENOC Group to begin jet fuel operations in Nigeria P. 18

Continues on page 46

The Donald Duke Interview

Stocks, Eurobonds slide in H1 2018 on EM selloff igeria’s sovereign Eurobonds and stocks have sold off in the half year (H1) period that ended on Friday June 29, amid market correction, political

onstruction stocks are not feeling the impact of the federal government’s acclaimed expenditure on the infrastructure. Julius Berger and

Nyesom Wike, governor of Rivers State, flanked by Frank Aigbogun, publisher/CEO, BusinessDay (r), and Anthony Osae-Brown, editor (l), as well as members of his Executive Council during a courtesy call paid by BusinessDay to the governor’s office in Port Harcourt to inform him of his nomination as “Governor of the Year” in the forthcoming BusinessDay Good Governance and Competitiveness awards.

World Cup Result Spain Croatia

3 - Russia 4 4 - Denmark 3

Branding of bond index by FMDQ OTC Securities and S&P Dow Jones takes off Endurance Okafor

n a move that could significantly draw foreign investor attention to the country’s debt capital markets and boost foreign investment inflows, FMDQ OTC Securities Exchange

(“FMDQ”), and S&P Dow Jones Indices (“S&P DJI”), will today begin a joint branding of Nigeria’s sovereign bond index. FMDQ Securities, the country’s largest securities exchange with annual turnover of US$650 billion and the world’s leading provider of

financial market indices, S&P DJI had in 2017 announced the signing of a cooperation agreement to create and launch co-branded fixed income indices. Today, the successful transition of the S&P/FMDQ Nigeria Sover-

eign Bond Index marks the activa-

tion of the inaugural co-branded index under the agreement. A range of other S&P/FMDQ Fixed Income indices will be developed under the agreement according to a statement issued by FMDQ securities. The S&P/FMDQ

Continues on page 46

2 BUSINESS DAY NEWS

C002D5556

Monday 02 July 2018

Companies to decide when MARKETS Suspicious trades seen ahead CCNN ahead their CEOs leave – FRC

...Guidelines for Churches, NGOs out soon Ignatius Chukwu

oards of corporations are now to decide how long their chief executive officers (CEO) would stay on the job, instead of the compulsory retirement date earlier fixed by the regulatory authorities, so declared the Financial Reporting Council (FRC) in Port Harcourt, Friday afternoon. The new guidelines were unveiled by the team led by the executive secretary of FRC/chief executive officer, Daniel Asapokhai, when the council began nationwide draft presentation consultations that began in Owerri, Imo State and moved to Port Harcourt, onward to other zones in Nigeria. The CEO said the previous guidelines unveiled in 2016 had caused nationwide uproar, forcing the federal government to suspend the codes and appointed a new board to work out what would be acceptable to Nigerians. The new codes are being sampled around Nigeria. The executive secretary said the new policy is a set of principles, not rules that would guide boards of corporations. The other major difference is that the new code to be approved would start immediately but it would take up to 2020 for companies to report how far they had implemented the principles. There is no punitive measures for non-compliance but Asapokhai said the market would punish companies that failed to operate by the new codes because such companies would not be regarded as standard firms and would hardly pass due diligence tests. They would therefore miss many incentives such as loans and investment opportunities. The nationwide draft presentation followed the successful release of ‘Exposure Draft’ of Nigerian Code of Corporate Governance, NCCG 2018’. The four-week public

hearing on the new Code, in all six geopolitical zones of Nigeria, including the Federal Capital Territory, kicked off in Owerri on Wednesday, June 28, 2018. Speaking at the event in Port Harcourt, Asapokhai stated: “The public hearings will take place in seven key locations in all the geopolitical zones and Abuja. It is our belief that this Code will promote ease of doing business, attract local and foreign investments and enhance the integrity of the Nigerian capital market, by entrenching a culture of disclosure, transparency and accountability. In addition, this Code will raise public awareness of good corporate governance practices.” Asapokhai revealed that the Nigerian Code of Corporate Governance has adopted the ‘Apply and Explain’ principle, which requires companies to apply the requirements of the Code and to explain how they did so. In his words: “The decision to adopt the ‘Apply and Explain’ approach was made after careful considerations of several factors including the Nigerian legal system, Nigerian culture and history, government policies, state of the Nigerian economy, global economic and political climate, and levels of capital inflow of investment coming into the country.” According to the FRC CEO, the Nigerian Code of Corporate Governance 2018 shall apply to all public companies; whether listed or not, all private companies that are holding companies of public companies and other regulated entities, concessioned and privatised companies, and regulated private companies. The Code was developed based on a comprehensive review of the suspended 2016 Code of Corporate Governance by a 15-man technical committee, and extensive consultative and collaborative engagement with a wide range of stakeholders and other regulators.

External reserves record 55.8% accretion in one year … CBN intervenes in retail forex segment with $318.73m HOPE MOSES-ASHIKE

igeria’s external reserves recorded a higher accretion of 55.8 percent within a period of one year and could finance 16.2 months of imports, the Central Bank of Nigeria (CBN) said on Friday. The stock of external reserves as of end March 2018 stood at $46,730.54 million, indicating an accretion of 18.7 percent when compared with the preceding quarter. The reserves could finance approximately 16.2 months of imports, compared with 15.6 and 11.7 months of imports cover for the preceding quarter and corresponding period of 2017, respectively. These were however, above the West African Monetary Zone (WAMZ) and global benchmarks of 6 and 3 months, respectively. Customers in the retail segment of the Nigerian inter-bank foreign exchange market received a $318.73m boost from the Central Bank of Nigeria (CBN) on Friday, June 29, 2018. Information obtained from the CBN on Friday indicates that the

deals in the retail window represent requests from the various sectors in the Secondary Market Intervention Sales (SMIS), thereby providing a boost to the respective sectors. Isaac Okorafor, acting director, corporate communications at the CBN, while confirming the forex sales, explained that $318.73 million sold was for companies in the raw materials, agricultural, airline and petroleum industries. It will be recalled that last Tuesday, June 26, 2018, the CBN had intervened to the tune of $210 million to cater for requests in the wholesale segment of the forex market. Speaking further, Okorafor said the CBN remained very committed to ensuring that all the sectors continue to enjoy access to the foreign exchange required for their business concerns. Meanwhile, the naira, on Friday, June 29, 2018, exchanged at an average of N360/$1 in the Bureau de Change segment (BDCs) across major trading points in Lagos, Abuja, Port-Harcourt and Kano.

merger announcement suggesting deal leak Abdullateef Eniola-Giwa

here was an unusual spike in volume traded of the CCNN stock on Monday 25th June 2018, three days before the corporate announcement of a proposed merger with Kalambiana Cement Company Limited. This suggests that investors might have pre-empted the announcement of the deal or insiders may have had information leaked. BusinessDay looked into the market reaction of the announcement and realized a 2 percent increase in the share price and a 76 percent increase in the volume traded since the announcement. However, volumes of the equity traded in the past weeks increased from 812,000 on Tuesday

to 3,300,000 at the end of trading on Friday 22nd June 2018. On Monday June 24th, the total volumes traded, sky rocketed to 32,000,000 which represented an 881 percent increase from the last trading day and from Tuesday till the end of trading on Friday, volumes of CCNN stocks traded average of over 200,000. BUA International Limited has its subsidiary, Damnaz Cement Company as a majority shareholder in CCNN. Kalambiana Cement Company Limited, another wholly owned subsidiary of BUA, merger will consolidate CCNN and its aim to create synergies and strengthen the competitive poition of the enlarged company amongst cement manufacturers in the company. CCNN has had the best performance on the Nigerian All

Share index with its year to date percentage performance over 100 percent. The low competition where the company supplies cement is a major driver of utilisation rates for the company. The cement maker is efficient in deploying shareholders’ resources in generating higher profit as net profit margins hit 16.25 percent in 2017, a 0.60 point increase from 10.23 percent recorded five years ago. CCNN shares would be issued and allotted to all shareholders of Kalambaina Cement in exchange for their shares in Kalambaina Cement at an agreed ratio based on the CCNN’s 30-day volume weighted average closing price to June 22, 2018 of N25.99 per share. Continues on wwwbusinessday online.com

L-R: Uzoma Dozie, CEO, Diamond Bank plc; Jumoke Dada, Buliding Entreprenurs Today (BET) Season 7 winner, and Peter Bamkole, director, Enterprise Development Centre (EDC) of the Pan-Atlantic University, at the BET 7 dinner and awards ceremony in Lagos.

Nigeria’s current account balance rises to $4.5bn on increased export earnings HOPE MOSES-ASHIKE

igeria’s current account witnessed a positive outcome in the first quarter of 2018, recording a higher surplus of $4.5 billion as against a surplus of $3.6 billion in the previous quarter and $3.4 billion in the corresponding period of 2017. The development was largely attributable to the increased export earnings and the net surplus in current transfers, according to the Central Bank of Nigeria (CBN). The Apex bank on Friday, released its first quarter brief on balance of payments statistics, which revealed that provisional Balance of Payments (BOP) estimates for Q1 2018 showed a significant improvement in the country’s position as the overall balance of payments indicated a surplus of US$7.3 billion compared with a surplus of US$6.2 billion in the preceding quarter. It also indicated a better position when compared to a surplus of $2.9 billion recorded in the correspond-

ing period of 2017. The surplus in the Goods Account increased to $5.7 billion in Q1 2018 from a surplus of $5.5 billion in the preceding quarter and $2.3 billion recorded in the corresponding period of 2017. Export earnings rose by 10.2 per cent to $14.4 billion in Q1 2018 when compared with Q4 2017. It also indicated an increase of about 44.4 per cent when com-pared to Q1 2017. Earnings from crude oil and gas, which accounted for 93.3 per cent of total export earnings during the review period, increased by 10.1 per cent to $13.4 billion in Q1 2018 when compared with the preceding quarter. The report indicated that earnings from non-oil and electricity ex-ports also increased by 12.3 per cent to US$967.08 million in Q1 2018 when compared with the preceding quarter. Available data showed that payments for import of goods (fob) to the economy in the review period

grew by 13.9 per cent to $8.6 billion above the level recorded in the preceding period. This was largely as a result of 99.5 per cent increase in the imports of petroleum products. On services, income and current transfers, net out-payments for services during the review period decreased by 5.1 per cent to a deficit of $4,445.49 million when compared with the level recorded in Q4 2017. However, when compared with the level in the corresponding period of 2017 it indicated a significantly increase of about 201.2 per cent. Income account (net) worsened to a debit of $3.3 billion in the review period from $2.9 billion recorded in the preceding period. This is significantly different from $2.3 billion recorded in the corresponding period of 2017. Current transfers (net) increased by 9.9 and 31.3 per cents to a surplus of $6.4 billion in Q1 2018 when com-pared with the levels in the preceding quarter of 2017 and corresponding period of 2017, respectively.

Monday 02 July 2018

C002D5556

BUSINESS DAY

Monday 02 July 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 02 July 2018

BUSINESS DAY

C002D5556

Monday 02 July 2018

8 BUSINESS DAY NEWS

C002D5556

Monday 02 July 2018

Debt crisis looms in states as borrowing outweigh revenue CYNTHIA EGBOBOH, Abuja

here is a looming debt crisis in states as available figures indicate that their borrowings have far exceeded total revenues. According to data from the National Bureau of statistics (NBS), the total debt of the states stood at over N7 trillion, as at the end of 2017, while total revenue for the period amounted to N2.67 trillion - N1.74 trillion from the federation account and N936 billion as total internally generated revenue. The states with higher debt to revenue are Osun, Ekiti, Plateau, Cross River, Zamfara, Kogi, Imo, Oyo, Nasarawa, Bauchi, Adamawa, Taraba, Benue, Delta, Akwa Ibom, Gombe, Abia, Edo, Bayelsa, Kebbi, Kaduna, Ogun, Enugu, Borno and Ondo, as contained in the NBS data. With the total internally generated revenue of the states at N936, 471,407,367.06 compared to the total debt stock (N3.25trn), analysts raise concerns that most of the states cannot function without monthly the Federal Government allocation. According to data from the Debt Management Office (DMO), the states debt, however, account for 21.77 percent of the country’s total debt stock. Godwin Emmanuel Oyedokun, business analyst, fears that there may soon be crisis in the states as the government is obviously incurring debt than their revenue, stressing that most of these borrowings are often not necessary. According to Oyedokun, “The states are not doing well as regarding their internally generated revenue, which means the states may continue to be poor as they are expected to keep servicing the debt. The borrowing most times are not necessary only that some governors are borrowing to do projects to show that they are working, and raising debt for the subsequent government after them.” The states’ 2017 total debt stock was N58 billion higher than their total revenues in the same year. The total debt stock comprised of external debts and domestic debts, while the total revenue included revenues from net Federation Account Allocation Committee (FAAC) allocations, and internally generated revenue (IGR). “These debt acquired is not in the favour of the states or the people, it is political,” Oyedokun stresses. BusinessDay further analysis of the NBS revenue/debt data shows that in 2017, while Osun recorded total revenue of N22.167 million, its debt stood at N138.336 million. Ekiti State’s total revenue stood at N30.601 million, but with a N117.573 million debt. Plateau State’s total revenue was reported at N40.408 million, but total debt settled at N122.379 million. Cross River recorded total revenue of N41.556 million and N125.81 million debt; Zamfara revenue stood at N34.476 million and N69.958 million debt, while Kogi’s revenue for the period stood at N50.891 million and N102.392 million debt. For Oyo

State, N66.921 million revenue was recorded as against N129.306 million debt; Imo had N44.967 million revenue as against N80.848 million debt; Nasarawa at N41.371 million revenue as against N71.422 million debt. Others include Bauchi at N43.884 million revenue as against N69.703 million debt; Adamawa at NN43.637 million against N60.749 million debt; Benue at N52.200 million revenue against N74.972 million debt; Taraba at N39.686 million against N60.877 million debt; Delta at N163.091 million revenue as against 228.386 million debt; Akwa Ibom at N159.571

million revenue against N189.327 million debt. Gombe at N36.505 million against N41.978 million debt; Abia at N53.793 million and N60.749 million debt; Edo at N62.187 million revenue and N68.746 million; Bayelsa at N117.782 million revenue and N129.517 million debt; Kebbi at N44.470 million revenue and N48.777 million debt; Kaduna at N77.337 million revenue and N84.063 million debt; Ogun at N101.021 million revenue and N106.637 million debt; Borno at N51.519 million revenue and N54.064 million debt and Ondo at N56.825 million revenue and

N58.601 million debt. However, the states with positive debt to revenue ratio include Anambra, which had N58.703 million revenue and N2.698 million debt; Sokoto at N50.262 million revenue and N26.069 million debt; Yobe at N43.091 million revenue and N26.497 million debt; Kastina at N52.369 million revenue and N31.184 million debt; Jigawa at N51.914 million revenue and N33.303 million debt. Kwara’s revenue was recorded at N52.745 million revenue and N40.315 debt; Niger at N48.991 and N40.088 million debt; Kano at N107.558 mil-

lion revenue and N92.323 million debt14.16 percent, Lagos at N432.662 revenue and N364.758 debt; Rivers at N209.117 million revenue and N191.222 million debt, and Ebonyi at N40.593 million and N34.676 million debt, respectively. Analysis shows that the entire revenue generated internally by the 36 states in the country in 2017 was 12.69 percent of their total debt stock. Analysts suggest that states will require over eight years to settle the debts if N916 billion yearly is to be used as their IGR. Auwal Ibrahim Musa, executive director, Civil Society

Legislative Advocacy Centre, told BusinessDay exclusively that the indebtedness was due to lack of effective planning, corrupt leadership and bad governance in states. “The leadership of these states lack developmental plan for effective management of the state’s affairs and have no economic activities hence are not able to cater for expenditure with their revenue. “The head of these states are not planning; they are only out to siphon public funds, so there will definitely be issues concerning the well-being of the citizens,” he said.

Monday 02 July 2018

C002D5556

BUSINESS DAY

Monday 02 July 2018

C002D5556

BUSINESS DAY

C002D5556

COMMENT

Monday 02 July 2018

comment is free

Send 800word comments to comment@businessdayonline.com

Address delivered at the official commissioning of the house bequeathed by Alhaja Munirat Muhammed to the Lagos central mosque

BASHORUN J.K RANDLE Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

ather than being thanked by the Elders of Lagos Central Mosque for the modest role I played in handing over this property (14A Bashorun Street, Ikoyi, Lagos) to the mosque in accordance with the will of my late aunt, Alhaja Munirat Muhammed, I should be the one to thank our Moslem brethren for giving me the opportunity to once again celebrate the life, steadfastness, humility, faithfulness and generosity of spirit of the Testator. For several years, the matter dragged on through the courts until the Supreme Court delivered judgment in favour of the event we are witnessing today. Let us be clear that the handing over ceremony is only a symbolic testimonial to the deep love and mutual respect which Lagos Christians and Moslems have shared and cherished for several centuries. Just as Christians donated generously to the building of mosques, in similar fashion Moslems contributed to the building of churches and cathedrals – (in cash and kind, mostly land). This was the natural consequence of the extensive friendship and intermarriage whereby demography provides ample evidence that most families in Lagos are almost equally split between Christians and Moslems. My own family is no exception. Indeed, Alhaja Munirat was born a Christian and was baptised as Esther. When she, of her own volition, converted to Islam, nobody in our family batted an eyelid. Neither was there any issue raised when she chose to marry a Moslem, Alhaji Bakre, who promptly whisked her off to Sapele where they resided for several years in peace and harmony. This was well before oil was discovered in that part of our country. Certainly, Niger-Delta militants did not exist then. The whole nation was at peace. It did not matter whether you were Christian or Moslem, you could choose to live anywhere in Nigeria – and even in the Cameroon, which

USMAN MUSA AHMED Usman is a Public commentator lives at No. 87 Tukuntawa Quarters, Kano.

ravel document, popularly referred to as passport is a symbol and pride of a nation that every citizen would wish to hold with dignity. Most developed nations consider any one holding their passports as a treasure and it is for this reason that the procedure to obtain passport in such countries is meticulous and thorough. This may not be the case with Nigeria. Nationals of other countries were arrested with the Nige-

was then part of Nigeria. Perhaps, I should add that the first school I attended was a Koranic school at Agoro Lane, off Ricca Street, Lagos. It was located within Oseni Compound and my teacher (Alfa) died only a few years ago at well over the age of ninety. Late Justice Muri Okunola was also at the school. Thereafter, we both proceeded to Lagos Government School which had Christians and Moslems in equal number as students and teachers. The headmaster, Mr. Usman was a Moslem, and he happily conducted both Christian and Moslem prayers at the morning assembly. My father, Chief J.K. Randle was very fond of Aunty Esther (Sisi Sapele) and she in turn adopted him as her favourite uncle, mentor and role model. When my father died on 17th December 1956 at the age of only 47 years, our entire family was devastated. Aunty Esther (Alhaja Munirat) was a pillar of strength and consolation. As I was only twelve years old at the time, it was a time of utter bewilderment and profound shock. She travelled all the way from Sapele and endeavoured to persuade me that in all matters, we should accept the supreme verdict of the Almighty with faith, steadfastness and equanimity. Besides that, she committed herself to following the footsteps of my father in philanthropy; and commitment to fostering harmonious relationship between Christians and Moslems. She kept her word. When she realised that death was imminent, she confided her intention to donate her house to the Lagos Central Mosque in me but wanted me to have the first option. I politely declined the gift and urged her to follow her instinct – the house would be handed over to the mosque. She took a keen interest in the actualisation of the bequests which my father made to Moslem schools especially Ahmadiyya College, Agege and Ansar-Ud-Deen College Isolo for education and sports facilities. Sadly, as we speak, we are totally in the dark regarding what has become of those gifts running to almost N100,000,000 (one hundred million naira) which were to be disbursed by the Public Trustee/Ministry of Justice of Lagos to the beneficiaries. In order to avoid a repetition

We have a duty to persuade the government (local; state; and federal) to acknowledge and even publicise the harmonious relationship between different faiths and ethnic groups in Lagos of bequests disappearing, I am here to personally deliver this house as a gift from Alhaji Munirat to Lagos Central Mosque! As for those who have expressed their anguish and concern over the demolition of J.K. Randle monuments and property by the government, I remain eternally grateful. I assure you that my family remains steadfast and passionate about Lagos. The ideals of our ancestors will not be sacrificed at the altar of waywardness, mendacity, malice or timidity. We are entitled to ask why government should dispossess any of the family of their legacy property and sacred heritage. For the avoidance of doubt, anybody who is a true Lagosian cannot ever be arrogant. Neither would he or she ever soil the family name and reputation. Lagosians have every right to be proud of their pedigree which strictly forbids them to beg or be lazy. Regardless of the circumstances they find ourselves, Lagosians are ever ready to submit to the will of the Almighty – to love our neighbours unreservedly, whether or not they are Christians or Moslems. As evidence, I have brought with me a long list of Lagos Christians who are married to Moslems and vice versa. I also have a supplementary list of those whose parenthood is shared between father (Christian) and mother (Moslem) – and vice versa. On my special list are those who were born Christian but converted to Islam (and became fervent Moslems). Similarly, it turns out that some of our well known Christian pastors (even Archbishops) were previously

moslems. Truly, no genuine Lagosian needs to be preached to about the sanctity of tolerance, integrity, honesty and trustworthiness which are already embedded in our DNA. Sadly, our children and grandchildren are now asking awkward questions – particularly, if indeed our ancestors accomplished so much and bequeathed so much to Lagos (our State) and Nigeria, (our beloved nation), how come their contributions are neither acknowledged nor celebrated? It is instructive that when our State celebrated 50 years, J.K. Randle was not the only name that was conspicuously missing! My grandfather (Dr. J.K. Randle); my father (Chief J.K. Randle) and my Aunty Esther were very much concerned about the plight of the “mekunu” (the poor and underprivileged) and that was the anchorsheet of their philanthropy and generous bequests to Lagos and the nation. Now, our nation is confronted with the ugly spectacle of rampaging bandits and terrorists who jubilantly and drunkenly boast that rape, kidnapping and armed robbery are the poor man’s nuclear weapon against oppression and injustice. That is a monumental tragedy for our state and our nation. It is profoundly disturbing. We must give glory to the Almighty that this handing over ceremony is holding on the conclusion of the Holy Month of Ramadan and the celebration of Eid-el-Fitr festival. It behoves us to cherish and celebrate the ruggedness and resilience of the bond between Christians and Moslems in this part of our nation. Most of you are aware of the twin brothers who went to different schools – one was at Methodist Boys’ High School, Lagos (and was a Christian) while the other twin attended Ahmadiyya College, Agege (and was a devout moslem). The late Alhaji L.B. Agusto was Chief Imam of Lagos but that did not preclude him from being the lawyer to the Catholic Diocese of Lagos under late Archbishop Leo Taylor. It was Alhaji Jubril Martins, another Moslem who had attended St. Gregory’s College that succeeded Alhaji Agusto as the lawyer to the Catholic church. When Alhaji Jubril Martins died in Mecca in 1958 he was deeply mourned by both Christians and Moslems. It was to no avail that the Christians pleaded that his

corpse should be brought back to Lagos for burial. The Saudi authorities would not yield. The Lagos Moslems readily came to terms that it was the will of Allah. Back in 1954 when the “Marian Congress” was hosted in Lagos by the Catholics to celebrate 100 years of the miracle of Lady of Fatima, Cardinal John McIntyre, the Archbishop of Los Angeles, U.S.A. who presided at the ceremony was amazed when Moslem children insisted on full participation along with their Christian brethren. Adults and children were decked out in Ankara uniform regardless of whether they were Christians or Moslems. For those who insist on concrete evidence, I suggest you visit 123 Bamgbose Street; 125 Bamgbose Street ; and 127 Bamgbose Street, all in Lagos. They belong to Akerele; McGregor and Da Silva families respectively. All of them are staunch Catholics. Directly across the street is the Salvador Mosque. There is no record of friction between the catholic and the Moslem community. On the contrary, there is hardly any of the children of those catholic families that was not given a Moslem “Suna” in joyful celebration by the adherents of Islam from across the street. Occasionally, it was the Chief Imam who intervened in order to ensure amicable settlement of disputes within each of the Christian families or one Christian family against another. It was and remains a relationship cemented by love, trust and mutual respect. We have a duty to persuade the government (local; state; and federal) to acknowledge and even publicise the harmonious relationship between different faiths and ethnic groups in Lagos. The same goes for the Lagos/Yoruba community which has been living peacefully in Kano for over two hundred and fifty years. Additionally, we have at Ita Agarawu (close to Isale Eko) Hausa/ Fulani families who insist that on account of having lived in Lagos for over a hundred years, they are truly Lagosians. These should provide salutary lessons for our nation.

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline.com/ Send reactions to: comment@businessdayonline.com

Time to review the Nigerian Passport rian passports despite effort by the Nigerian Immigration service to periodically improve on the security embedded in the booklet. Nigerian passport as a travel document was first introduced in the year 1948 after the Second World War and was then called the British West African Passport. Shortly after the attainment of independence in 1960 Nigeria changed the colour of the passport to a light green and the ministry of Foreign Affairs became the issuing authority. In 1988, the authority to issue all travel documents in Nigeria was transferred to the Nigerian Immigration Service and in 1998 ten years after the issuance was

transferred to the Nigerian Immigration Service, a significant change occurred with the introduction of Machine Readable Passport (MRP). The Machine Readable Passport is a computer based passport, it is significant because it presents a major shift from the hand written manual method which was characterized by fakery and imitation. Certain deficiencies associated with MRP Passports compelled the Nigerian Immigration Service to again introduce e – passport on the 27th of July 2007. The e – passport as it is commonly called is officially known as the ‘’ECOWAS Harmonized Electronic Smart Passport’’. With all the innovations and transformation of the booklet, it is

still not free from being abused. This therefore necessitate for the Nigerian Immigration Service to as a matter of urgency introduce a new passport booklet with improved security measures to further check mate the activities of fraudsters. Another area of concern is the activities of touts in many passport centres in the country. An organised system must be put in place to ease the process of obtaining passport thereby eliminating the activities of Touts. Nigerian Immigration Service could also borrow a leaf from some developed countries like UK, US and France, to establish what is called Passport Express Centres. These are centres where

a prospective passport applicant can walk in and get his passport processed within a few hours at a fee. This will help to decongest our passport issuing centres. Similarly in line with the global best practice, passport fees are applied uniformly as against the case in Nigeria where the children, old and middle aged Nigerians pay different fees. Passport is passport whether for old or young Nigerian. Abolishing this policy we believe will shore up the revenue base of the Nigerian Immigration Service for an efficient and better Service delivery.

Send reactions to: comment@businessdayonline.com

Monday 02 July 2018

C002D5556

COMMENT

BUSINESS DAY

comment is free

Send 800word comments to comment@businessdayonline.com

How Nigeria is driving the World Poverty Clock

ANTHONY OSAE-BROWN Osae-Brown is the editor of BusinessDay @osaeB

nly last week, the World Poverty Clock released a report that painted a grim picture of the increasing poverty trend in the country. The report notes that Nigeria has already overtaken India as the country with the highest number of extremely poor people, despite the fact that India has a population of 1.324 billion people while Nigeria has a population of just about 200 million people. According to the report, the number of Nigerians living in extreme poverty crossed the 87 million mark in 2018, surpassing India’s number of extremely poor at 73 million. This means that almost one of out every two persons living in the country is now extremely poor. The World Bank had in 2015 fixed the threshold of the extremely poor as those living on less than US$1.90 a day. This means that anyone with an income below this amount is extremely poor. At US$1.90 per day, this comes to US$693.5 a year, which is an equivalent of N249,660 a year

based on an exchange rate of N360 to the US$1.00 (the average rate in the Investors and Exporters (I&E) window used for commercial transactions involving currency exchange). On a monthly basis, this comes to an income of N20,805. This simply means anyone on a salary of N20,805 per month, which is slightly above the minimum wage is extremely poor. Another way of saying it is that anyone on a minimum wage in the country is extremely poor. It is clear how many Nigerians are on a minimum wage or how many people earn below this amount on a monthly basis. It is difficult to say. But many civil servants in the public service in states across the federation do not even earn the minimum wage. In the wider informal sector, this is a bit more difficult to determine. But we could use withdrawals from ATMs, which is widely used across the country as a proxy to show people’s earning power. This is a good proxy since those who use ATMs are both in the formal and informal sector of the economy and Nigeria is still a highly cash based society. Data from the NIBSS website showed that as at March 2018, the total number of active bank customers stood at 65 million and together they operated 108.3 million bank accounts of which only 70 million bank accounts were active. The number of accounts with unique BVNs was 45.1 million, which is about half of Nigeria’s labour force population of about 85.1 million. Most bank customers use ATMs because it is more

Rise in extreme poverty is real and it is not something that the government should play politics with. The evidence and figures of rising extreme poverty is all around us convenient especially for small withdrawals. These withdrawals usually indicate the earning power of individuals since people with higher income tend to make higher single withdrawals than those with lower incomes. So average cash withdrawals from an ATM is a good indicator of the average earning and spending power of the majority of a country’s earning population. The NIBSS data shows that in the three months ending March 2018, total value of transactions on ATMs across the country stood at N1.57 trillion. The total transaction volume in the same period stood at 212.37 million, which brings average value per transaction in the period to N7,393. This low single withdrawal is a sign of the low earning power of Nigerians. It is therefore not surprising that most banks have pegged maximum withdrawal from ATMs at N10,000 per transaction. Some unconfirmed figures put 90 percent of withdrawals as falling below this amount. In the same period, using another indicator of purchasing power, POS transactions, average value per pur-

chase stood at N8,863. This is about US$25, just about the one third global average of US$80 per transaction on Mastercard and Visacard, two of the popular cards used in Nigeria. But, then many Nigerians still transact in cash, so withdrawals from ATMs is still a better indicator of people’s earning power. But there are other indicators that also show that ‘extreme poverty’ in the country is real. The latest unemployment figures released by the National Bureau of Statistics (NBS) put the unemployment rate at 18.8 percent as at the third quarter of 2017. The NBS report shows that unemployment rate increased consistently from 14.2 percent in the third quarter of 2016. In absolute numbers, the total number of unemployed people was 15.9 million as at the third quarter of 2017. Within the same period, another 18 million people were classified as underemployed. Combined, both unemployed and underemployed were 40 percent of the country’s labour force which the NBS put at 85.1 million. This means that almost 1 out of 2 people in the labour force, willing and able to work is either unemployed or under employed. The unemployed do not earn income while the underemployed usually earn very low incomes that are far below their productivity levels or qualifications. High levels of unemployment and underemployment also have wider implications. It leads to higher dependency on the few people working. So with 85.1 million people in the labour force and only 51.2 million actively employed, the remaining, unemployed, underemployed, and

those yet to enter the labour force have to depend on them for survival. This puts significant pressure on the incomes of the few that are privileged to be in the labour force but even more significantly, it disrupts their capacity to build savings and investment into the future as they are forced to support a higher number of people than they should normally be supporting. And because their support is also limited, both the supporters and the supported are prone to extreme poverty or are extremely poor as a result. To get out of this dependency trap that tends to fuel extreme poverty, Nigeria needs to grow the economy at a fast pace in a way that create jobs and absorbs the existing unemployed and underutilised labour force and also absorbs new entrants into the labour force. Sadly, the country’s growth has stagnated in the last three years, driving more people into extreme poverty. The economy contracted in 2016, grew marginally by 0.83 percent in 2017 and also already there are signs that growth is going to be marginal again in 2018. In the first quarter of 2018, the economy only grew by 1.95 percent, well below expectations. The country’s low economic growth has not stopped its population growth rate which is estimated at 2.5 percent. This means people are being born into ‘extreme poverty’ in the country.

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline.com/ Send reactions to: comment@businessdayonline.com

Indonesia-Africa: Trade and investments make everyone better-off

BAGUS WICAKSENA BAGUS WICAKSENA is trade researcher and head of Indonesian Trade Promotion Centre (ITPC) in Lagos, under the Ministry of Trade, Republic of Indonesia.

ndonesia, like many developing countries, such as Nigeria, is struggling to increase export as well as investment to boost its economic development, trade and investment in Africa offers such opportunity. This is all the more so because the ratio of Indonesia’s export to Gross Domestic Product (GDP) was still around 19 percent – 24 percent in the last three years, far behind Malaysia and Thailand, which respectively accounted for 65 percent and 68 percent, and Vietnam was nearly 94 percent in the same period, data from the World Bank show. The low export ratio will lead Indonesia to a potential loss in terms of balance of trade and deprive it of taking advantage of global economic growth that is

projected to grow by 3.9 percent in 2018. Regardless of the internal factors that support export development, Indonesian export ratio would probably remain stagnant because of its high dependency on the so-called traditional markets. Indonesia’s Ministry of Foreign Affairs in 2017 stated that Asia has been the major destination for global exports and 67.90 percent of Indonesia’s export value has Asian destinations, followed by America and Europe, while Africa is on the fourth rank which accounts for less than 3 percent. The slowdown in Asian economic growth, is mainly driven by East Asian countries, the United States “restrictive” trade policy, as well as the unfavourable issues raised in European countries regarding some Indonesian products have been considered as some the driving factors contributing to declining Indonesian export ratio. That background shall be a good lesson for Indonesia to “manage” its export portfolio, referring to a prominent business quote “do not put your eggs in one basket”. Seeing Africa as new potential trading partner Africa is a new potential for Indonesia to trade with. While the figures show that Indonesia’s export to Africa is still less than 3

percent of its total export, this is set to change, thanks to Mr President Joko Widodo, who has finally seen that Africa will be one of Indonesia’s important business partners. Indonesia and Africa share a lot in common, in terms of natural resources, agricultural, industrial, and services trade. In the last 5 (five) years, North Africa has been Indonesia’s major trading partner, followed by West, East, South, and Central Africa. Most of the exported goods are crude palm oil (CPO) and its derivatives, textile, pulp and paper, jewel, rubber, vehicles, and even hospitality services like spa and wellness. As one of Indonesia’s concrete action, the first Indonesia-Africa Forum was initiated on 10 – 11 April 2018 in Bali. In the opening, a sincere remark was stated that “Indonesia Loves Africa”. As to economic interpretation, it seems simply true. First, Indonesia-Africa’s trade has increased from US$ 7.5 billion in 2016 to US$ 8 billion in 2017. The figure will be greater in 2018. Second, there are also around 25 Indonesian companies and their affiliations that have invested, in terms of establishing companies or joint venture or trading, across the continents. Third, it has been true that Indonesian products have been in African wonderful daily activities. Most of the products are CPO derivatives, textile and textile

product, pulp and paper, soap and cleanser, margarine, jewel, rubber and rubber product, vehicle and its part, and machinery. Moreover, in order to optimise the potentials, the Government of Indonesia (GoI) has strengthened the role of Indonesia Exim Bank that plays key role to promote export. Exim bank provides special scheme for trade financing, insurance, and advisory services for exporters. More importantly, the bank has “National Interest Account” that carries out special assignments from the Government to Support the National Export Programme; all expenses are fully provided by the Government. Just recently, the bank has signed business commitment with several African Banks such as the African Export Bank, Standard Chartered, Commerz bank, and Chief of Cabinet of Nigeria with accounted amounts of US$ 350 million. The Government of Indonesia has also put about US$ 90 million to the bank for special assignment programmes as mentioned before. These commitments can be utilised for business parties in both Indonesia and African Countries. Strategy to create sustainable business The hardest part of doing something is how to start. This also may

happen to Indonesia with African countries in terms of creating sustainable businesses. However, it is possible to attain. Just as Indonesia has done with its traditional partners, trade can be the initial step to build trust among parties. By doing trade, both parties can learn the dynamics and see how the market goes. Then in the long run, both parties need to focus on investment that is offering multiplier effect to the economic development. The co-called concept of “trade and investment” has been implemented by some big Indonesian companies like Indomie and Wings Food. They have started with trade for years ago before invested. Last but not least, the government’s role needs to be taken into account. Dialogues and agreements may take the lead to enable an efficient and open trade as well as investment policy. It has been common to see that open trade and investment will make positive surplus to the economy. Therefore, trade and investment shall not be separable, supported by strong initiative of the government. This comprehensive strategy would lead both parties to sustainable business relationships that will eventually be favourable for economic development.

Send reactions to: comment@businessdayonline.com

BUSINESS DAY

C002D5556

Editorial PUBLISHER/CEO

Frank Aigbogun EDITOR-IN-CHIEF Prof. Onwuchekwa Jemie EDITOR Anthony Osae-Brown DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya EXECUTIVE DIRECTOR, SALES AND MARKETING Kola Garuba EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure ADVERT MANAGER Adeola Ajewole MANAGER, SYSTEMS & CONTROL Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu HEAD, HUMAN RESOURCES Adeola Obisesan

Monday 02 July 2018

Conflict management to end the outrageous killings in the Plateau and Middle Belt

ollowing the despicable violence and bestiality visited on the people and communities in three local governments of Plateau State June 2 through June 4, 2018, President Muhammadu Buhari visited to commiserate with the people. He then stated that the Federal Government was considering rejigging the Security forces while simultaneously praising his government for alleged successes in security management. The contrast between the apparent failure of the security forces in stopping the carnage in Plateau state and other states in the Middle Belt and North East and the official claim of security successes are the ultimate paradox. More importantly, the situation calls for more decisive action than declarations of intent. There is fire on the mountain,and the Federal Government is still contemplating a tea party at the base of the hill. Over the weekend of June 2-4, shooters went on the rampage killing over 100 people and burning villages and communities in three local governments in Plateau State. Pictures from the area paint a gory and extremely sore sight,with the clear message of failure of

security. It is one too many and speaks to the imperative of better conflict management including an overhaul of the security set up in the contentious regions of Nigeria and for the country in general. Enough of the dithering and pussyfooting. Stop this carnage. Vice President Prof Yemi Osinbajo commendably visited the area immediately. Bureaucrats created the wrong optics for many citizens as they rolled out the regular protocol of red carpets in the midst of grief. At the ceremony itself, a representative of the Miyetti Allah Cattle Rearers Association of Nigeria spoke first followed by one for the victims of this carnage and that of the Local Government. President Muhammadu Buhari then visited. He spent time alternately playing the victim on the matter of the frequent herdsmen/farmers’ clashes and praising his regime for alleged success in security management. PMB said citizens should not blame him for the increased frequency of the crisis since he assumed office and naturally for its poor management. Reports say he called for prayers to stem the situation. It is easy to overlook the insensitivity in President Buhari personalising the issue and rejecting blame for a failure that

stared him in the face. Praising the security forces however at the site where the failure of security was still evident in corpses awaiting burial goes beyond the pale. It does not send a right message of care, concern or acceptance of responsibility. Senate President Dr Olusola Saraki and Speaker of the House of Representatives Alhaji Yakubu Dogara also visited to sympathise with the victims. They both spoke of the need for better handling of the security challenges. After-the-fact pilgrimages to sites of this devastation beg the issue. They do not assuage the wounds nor heal the land. The situation is combustibleand the conflagration could spread. As research firm SB Morgen noted in January 2018, “Attacks by herdsmen, reprisals against Fulani communities, and counter-reprisals against indigenous communities have become an unfortunately regular phenomenon over the last two years with the Nigerian Government generally seen as taking an ineffective stance in dealing with the resultant security breakdown. “The proliferation and spread of these incidents, coupled with a lackadaisical attitude, and in many cases, inaction of the government security agencies has led to perpetrators of these crimes going unpunished, and

many communities believing that they are left with little choice than to resort to self-help”. Ethnic conflicts are not new in Nigeria, Africa or even the world. Conflicts arise out of contention in the search for basic human needs. The needs in these regions include economic well being, security, equality and recognition. Others include identity, dignity and participation. Understandably, the conflicts in the Middle Belt and North East have revolved around the land as the primary resource as well as questions of identity, ownership and control of this resource. Weak economic and environmental conditions since 2015 have exacerbated the issues. It is unfortunate that the public has framed the matter of rearing cattle as exclusively Fulani. Other groups involved in pastoralism in Nigeria include the Kanembu, Kwoya, Manga, Fulbe (Fulani) and the Shuwa Arabs. The challenge calls for skilful conflict management. The first call is for appropriate political will and sincerity of purpose. Is the Federal Government genuinely interested in ending this conflict? It should show an even hand.

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline.com/

EDITORIAL ADVISORY BOARD Dick Kramer - Chairman Imo Itsueli Mohammed Hayatudeen Albert Alos Funke Osibodu Afolabi Oladele Dayo Lawuyi Vincent Maduka Maneesh Garg Keith Richards Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Sim Shagaya Mezuo Nwuneli Emeka Emuwa Charles Anudu Tunji Adegbesan Eyo Ekpo

ENQUIRIES NEWS ROOM 08022238495 Lagos 08034009034 08033160837 Abuja

}

ADVERTISING 01-2799110 08116759801 08082496194 SUBSCRIPTIONS 01-2799101 07032496069 07054563299 www.businessdayonline.com The Brook, 6 Point Road, GRA, Apapa, Lagos, Nigeria. 01-2799100 LEGAL ADVISERS The Law Union

MISSION STATEMENT To be a diversified provider of superior business, financial and management intelligence across platforms accessible to our customers anywhere in the world.

OUR CORE VALUES

BusinessDay avidly thrives on the mainstay of our core values of being The Fourth Estate, Credible, Independent, Entrepreneurial and Purpose-Driven. • The Fourth Estate: We take pride in being guarantors of liberal economic thought • Credible: We believe in the principle of being objective, fair and fact-based • Independent: Our quest for liberal economic thought means that we are independent of private and public interests. • Entrepreneurial: We constantly search for new opportunities, maintaining the highest ethical standards in all we do • Purpose-Driven: We are committed to assembling a team of highly talented and motivated people that share our vision, while treating them with respect and fairness. www.businessdayonline.com

Monday 02 July 2018

C002D5556

BUSINESS DAY

Monday 02 July 2018

C002D5556

In Association With

When good men do nothing

Growing pains

America’s immigration system is broken

Tough times for Embrapa, a jewel of Brazilian innovation

This the result of decades of dodging hard decisions

ESS than ten miles separate two rooms in McAllen, a modest, low-slung city on the Mexican border. The first is Ursula, an immense warehouse which squats behind a high brick wall, almost invisible from the street. It is the largest immigration-processing facility in America, and holds children taken from their parents under a policy that President Donald Trump’s administration initiated in April and then ordered stopped last week. Inside the facility, children lie on mats beneath bright lights that never go out, wrapped in Mylar blankets, caged behind chain-link fences. Nine miles north, clad in a modest stucco, is the second building—the Catholic Charities Humanitarian Respite Centre, where migrants who have been released from detention can rest, shower, change clothes and have a hot meal before their onward journey further into the United States. Most have travelled for weeks from Central America, though some journeys are more arduous than others. Brenda Riojas, a cheery and tireless spokeswoman for the Diocese of Brownsville, which runs the centre, says that a woman arrived recently with a ten-day-old baby: she had given

Its technology helped make the country an agricultural superpower. Now it must reinvent itself

N HOUR’S drive from Brasília, Brazil’s capital, humped zebu cattle take refuge from the heat of the cerrado (tropical savannah) under neat rows of eucalyptus trees. The grove and the cattle belong to the cerrados branch of the Brazilian Agricultural Research Corporation (Embrapa) in Planaltina. Their purpose is to help researchers test how best to alternate crops and livestock in order to turn degraded pastures into productive fields. Besides providing shade (and, eventually, timber), the trees put nutrients into the soil and

birth in the Mexican mountains during her northward trek. On one recent Wednesday afternoon, young men huddled around a television watching the World Cup, while parents tended to their children and filled out forms. A smattering of Texans arrived with boxes of clothes to donate. If you are a liberal, you probably

view what is happening in the first building as unbearably cruel and what is happening in the second as decent and just. If you support the president, you probably view what is happening in the first building as regrettable but necessary and what is happening in the second as naive and perhaps dangerous: after all, if you treat them kindly then more will come. More than any other single issue, attitudes towards immigration define Mr Trump’s base. Some immigration restrictionists use clinical language, arguing that reducing levels of immigration would be better for American workers and immigrants already in America. Not Mr Trump. To him, Mexico is sending “rapists” and members of MS-13, a hyper-violent gang, across the border. (Stephanie Leutert, who directs the Mexico Security Initiative at the University of Texas, points out that his own government’s data show that MS-13, members made up 0.075% of the total number of migrants crossing the southern border in the 2017 fiscal year.) The president discusses immigration in the vocabulary of a pest-controller. Everything suggests that he intends to make the “infestation” of immigrants a central issue in the mid-terms, despite the revulsion at his policy of sundering families to deter future migrants. The traverse in reverse America’s immigration system

offers something to displease everyone. People such as Jeff Sessions and Stephen Miller—the attorneygeneral and his funereal former aide, now a policy adviser to Mr Trump—think it far too permissive. Employers find it rigid and unresponsive to their needs. The asylum process is, in the words of a case-manager in Houston, “set up so people fail.” This is what happens when decades of congressional kludges are piled on top of each other. The Supreme Court did not deem regulating immigration to be a federal responsibility until 1875. That year, awash in concerns over the prevalence of Chinese workers, especially in California, Congress passed the Page Act, which banned virtually all Asian women from entering America. The Chinese Exclusion Act, which barred Chinese immigrants, followed seven years later. In 1882 Congress passed the Immigration Act, which put the treasury secretary in charge of immigration control, levied a tax on every non-citizen who arrived at American ports and barred all foreign convicts—“except those convicted of political offences”. Naturalisation and citizenship were tightly restricted, often racially; but immigration, by and large, was not. Of the immigrants who arrived in the great wave between 1890 and 1930, more than one-quarter were never naturalised.

offset the effects of methane, a greenhouse gas belched by the ruminants. In 2005 such “integrated systems” covered less than 2m hectares (5m acres). Today they occupy 15m hectares, 5% of Brazil’s farmland. Maurício Lopes, Embrapa’s chief since 2012, believes such know-how will be as valuable as the technology Embrapa invented in the 1970s and 1980s, which helped make Brazil an agricultural superpower. Founded in 1973, Embrapa made the cerrado’s acidic soils hospitable to maize, soyabean and cattle, and created types of crops and livestock that could thrive in such climes. Once an importer of staples, Brazil now exports $96bnworth of produce a year. Embrapa reckons that in 2017 it returned 36bn reais ($9bn) to the economy through higher productivity and lower costs, more than ten times its budget. Yet it faces unprecedented criticism. Farmers say that its research is irrelevant to them. An Embrapa employees group says it is too fragmented, and worries that the cashstrapped federal government will cut its budget. Environmentalists grouse Continues on page 15

Monday 02 July 2018

C002D5556

BUSINESS DAY

In Association With

Power Failure

John Flannery gets down to business restructuring General

Continued from page 14

Booted from the Dow this week, GE is becoming humbler but fitter

HIS should have been one of the very darkest weeks in the history of General Electric (GE). The firm founded by Thomas Edison has been a member of the Dow Jones Industrial Average, a stockmarket index composed of leading American companies, for over a century. Alas, mismanagement and a failure to move with the times have turned the erstwhile icon of innovation into a disorganised, debtladen mess. GE’s shares have plunged to below a quarter of their peak value in 2000. On June 26th GE was ejected from the Dow index and replaced by Walgreens Boots Alliance, a big health-care firm. Yet on that same day a ray of sunshine also fell on GE. John Flannery, an insider known for his number-crunching skills who has been the troubled firm’s boss since last August, announced details of a muchawaited restructuring plan. Over the next couple of years GE will spin off its healthcare division and unwind its new-

ish stake in Baker Hughes, a petroleum-services firm. He had previously confirmed the sale of its train locomotive division. Taken together, these three units generate roughly $40bn a year, about a third of the firm’s annual revenues. GE’s share price rose on the news. The obvious reason for cheer was Mr Flannery’s renewed promise to slim down the unwieldy conglomerate, including a vow to slash its net debt and pension obligations by $25bn. He also promised to cut an extra $500m in costs, on top of previously announced cuts, by 2020. Beyond this willingness to wield the axe, Mr Flannery’s plan for fixing GE has three attractive elements: call them “spinners”, spin-offs and “spinning down”. First, the plan lets management focus on the core businesses of power generation, aviation and renewables (what people at the firm call “things that spin”). This rump produces about $70bn a year in revenues. GE’s power division, which generates about half of those revenues, is in

particularly deep trouble. A combination of mismanagement, ill-judged investments and weak global demand has left it in crisis. The division is shedding some 12,000 workers, nearly a fifth of its global workforce. Delivering on GE’s promise to continue “rightsizing the business” to match lower demand will require hard work. Second, the restructuring is being done in a thoughtful way that should produce shareholder value. Rather than, say, sell the profitable health-care unit to a strategic buyer in return for a rapid infusion of cash, Mr Flannery will spin it off as a standalone firm. He will give 80% of its shares to GE shareholders (who will thus capture any future financial gains), and sell the remaining fifth. Research by Emilie Feldman of the Wharton School shows that such spin-offs create value in two ways. Freed from overbearing parents, the new entities become more efficient at allocating capital. Intriguingly, her research shows that the

Tough times for Embrapa, a jewel..

divesting firms also improve their financial performance after a spin-off. The third reason for cheer is Mr Flannery’s desire to reform GE’s management culture. This week he launched a new “GE Operating System” which promises less centralised decision-making and red tape, and a spinning down of resources from headquarters to business units. GE’s bloated board of directors has been replaced with a smaller, more relevant one that includes Ed Garden, a co-founder of Trian, an activist investor. Steven Winoker of UBS, an investment bank, calls this the most important of all the reforms, praising the new directors as “sharp, useful people”. The road ahead remains rocky. The firm may be forced to cut its dividend again, reckons Mr Winoker, which will produce howls of protest from investors. Still, if his bold plan succeeds, Mr Flannery will in time have moulded a humbler but fitter GE that may yet endure another century.

that its research enables farmers to push into the Amazon rainforest. Mr Lopes thinks these criticisms are unfair. Agricultural production has continued to rise over the past decade even as deforestation declined, he says (though the deforestation rate has gone up again in two of the past three years). Farmers may buy fewer sacks of seeds emblazoned with Embrapa’s logo, but its know-how is part of almost everything they do, Mr Lopes insists. Yet the critics have a point. Nearly 90% of Embrapa’s economic contribution comes from work it did in its first 25 years. Seven areas of research, including rice and beans, provided no return last year. That is partly because Embrapa faces more competition. Laws enacted in the 1990s, including one that improved protection of intellectual property, brought foreign agri-businesses such as Bayer and Syngenta. They have more money than Embrapa to spend on such new areas as biotechnology. Embrapa should focus on areas they avoid, such as integration experiments like the one in Planaltina, says Blairo Maggi, the agriculture minister. Mr Lopes says he wants Embrapa to work in areas the big companies neglect. Embrapa has to be “more diversified, not less” to support production of foodstuffs, from açaí, a tropical fruit, to tenderloin and fish. But the problem is not just that Embrapa is still paying attention to the wrong things. Salaries consume 70% of the budget; spending on lab equipment, field trials and the like accounts for just 2%. Its labs do almost no work on gene-mapping. This year Mr Lopes merged 17 administrative units into six and closed four of Embrapa’s 46 regional branches. A plan for a bigger overhaul, leaked to the press, calls for a more centralised institution. Critics say it does not deal with Embrapa’s main shortcomings. Mr Lopes is rumoured to be on his way out. His successor will need to pull Embrapa into the 21st century, perhaps with the help of a few head of zebu.

BUSINESS DAY

C002D5556

Monday 02 July 2018 In Association With

Don’t rig the election

Can foreign observers keep Zimbabwe’s election clean? Hopes are high that the poll next month will be fairer than those in the past

IMBABWEANS shuddered when a bomb went off on June 23rd in Bulawayo, the country’s second city, a few yards from President Emmerson Mnangagwa as he left the podium at the end of an election rally. Would the explosion, which killed two security men, herald a wave of violence against the opposition, as it might well have done if the vengeful Robert Mugabe had still been president? In the event, Mr Mnangagwa (pictured), who displaced Mr Mugabe in a coup last November, called for calm rather than retribution. He implied that friends of Mr Mugabe’s ambitious wife, Grace, who had wanted the top job, were the likeliest culprits. The main opposition leader, Nelson Chamisa, called for calm, too. With parliamentary and presidential elections set for July 30th, Zimbabweans of all parties are praying for a peaceful poll. But will it be fair? That is harder to tell. Elections since 2002 have been both violent and rigged. Among the worst was in 2008, when the Zimbabwe Electoral Commission (ZEC) took more

than five weeks to declare a result; more than 270 activists, almost all belonging to the opposition Movement for Democratic Change (MDC), were killed. The last national polls, in 2013, were relatively peaceful but generally regarded as rigged. Mr Mugabe’s ruling Zanu-PF comfortably beat the MDC, which had been discredited by a hapless spell in a coalition government. The result was also attributed to a gross manipulation of the voters’ roll in favour of rural voters, who are Zanu-PF’s strongest backers.

This time an updated register of 5.7m voters has raised hopes of a fairer poll. But other worries persist. One is the role of the army, which brought Mr Mnangagwa, a former security minister, to power. The generals have yet to declare publicly that they would serve under a government run by a party other than Zanu-PF. In the past, army chiefs have declared undying allegiance to Mr Mugabe at election time. Still more disturbing are unconfirmed reports that soldiers, discarding their uniforms, have

been deployed in the countryside, where more than half the voters reside, quietly threatening them if they vote “the wrong way”. Many of the 2m-plus rural people who have been receiving food handouts from international donors fear such necessities could be withheld. Many also think their influential chiefs and village headmen, who have been in thrall to Zanu-PF, will be able to tell how they voted. The main wing of the MDC, led by Mr Chamisa, a sharp-elbowed 40-year-old lawyer, may once again win the urban vote, but he must break Zanu-PF’s stranglehold on the countryside if he is to have a chance of winning. The head of the ZEC, Priscilla Chigumba, a judge, has so far said the right things, but the MDC has already charged her with favouring Zanu-PF. A leading opposition lawyer calls her “the military’s pick”. She has acknowledged that 14% of her staff are past or present members of the army or ex-guerrillas, but has refused to say which posts they hold. Nor has the ZEC met another opposition demand that it spell out where the

ballot papers will be printed, stored or distributed. Foreign observers will play a vital role in trying to ensure a clean election. Missions under the aegis of the African Union and the Southern African Development Community are likely to whitewash the election, provided it is non-violent, as they have always done before. The key watchers are a European Union team and a joint mission from America run by the National Democratic Institute (NDI) and the International Republican Institute (IRI). Crucially they will stay for at least a month after the election, when hanky-panky over the count is most likely to occur. The NDI and IRI have acknowledged “several notable improvements in the political environment and electoral preparations as compared to prior elections,” but they also lamented that “a number of significant opportunities to break with the past have been missed.” Tension is rising. Mr Mnangagwa, now 75, was Mr Mugabe’s longserving chief enforcer, including during the outrageous poll in 2008. Does he seek redemption? That is the question.

Worrying signs in Senegal

Senegal’s democracy is being tested by its president Macky Sall appears keen to lock up his opponents on corruption charges

O THE casual observer, all seems well in Senegal. Visitors to Dakar, the capital, fly into a new world-class airport. The economy grew by 6.8% last year and the discovery of natural gas heralds an even brighter economic future. To boot, the national team has performed well at the football World Cup. Bu t t h e p o l i t i ca l g ra f f i t i scrawled across Dakar’s walls tell a different story. The messages demand freedom for the political opponents of President Macky Sall, several of whom have been imprisoned. With a presidential election just eight months away, fears are growing that democracy in Senegal, long an example for west Africa, is being subverted. The political system has been tested before. Unlike most west African countries, Senegal has never had a military coup, but in 2012 the previous president, Abdoulaye Wade, did run for a third term, which the constitution proscribes. Mr Sall, riding a wave of popular anger, defeated him. Now Mr Sall’s government stands accused of selectively enforcing corruption laws to sideline his opponents. In March Khalifa Sall (no relation), the mayor of Dakar, was sentenced to five years in prison for embezzling $3.4m. Another opposition leader,

outside Dakar’s main university. Many Senegalese are also unhappy that little of the country’s new wealth is trickling down to them. GDP per person was just $2,566 (measured at purchasingpower parity) in 2016, according to the World Bank. The unemployment rate is over 15%. That makes the government nervous—and may increase its propensity to silence critics.

Barthélémy Dias, was found guilty of contempt of court when he protested against the verdict. He will spend six months in prison. Another potential challenger, Karim Wade, the former president’s son, was arrested in 2013 and found guilty of corruption two years later. After Mr Sall pardoned him in 2016, Mr Wade immediately flew to Qatar. Some observers think his exile was part of a deal with the government. But he is now considering coming back to

stand in the election. Potential candidates face other obstacles. A law introduced in April requires them to obtain signatures from 1% of the registered voters in each of Senegal’s 14 districts. Hundreds of people protested against the measure, saying it was unfair to poorer candidates. But the government says it is needed to ensure that only serious contenders appear on the ballot. Parliamentary elections held last year were chaotic,

in part because they featured 47 electoral lists. The protests over the election law and more recent demonstrations by students, angry about unpaid grants, have been met with violence by the government. In May a student was shot dead in the northern city of Saint-Louis, leading to yet more unrest. Images of police brutality have been widely shared on social media. One disturbing video shows a police van crashing through protesters

Monday 02 July 2018

BUSINESS

COMPANIES & MARKETS

DAY

Raven Energy partners with ENOC Group to begin jet fuel operations in Nigeria

Pg. 18

C o m pa n y n e w s a n a ly s i s a n d i n s i g h t

Why Dangote Cement is raising N150bn commercial paper Emeka Ucheaga

ith N129 billion in current liability set to mature over the next 12 months in Dangote Cement, management may have chosen to raise up to N150 billion via commercial papers to refinance its debts rather than fall back on profitability. Dangote Cement earned a record N204 billion in 2017 and paid out an astonishing N178.9 billion in dividends, reserving very little funds to clear off maturing debt. In the first 3 months of the year more than N16 billion worth of debt matured with another N113 coming due over the remaining 9 months of the year. In the 2017 financial statement, the company directors informed investors that “the current working capital is sufficient for the operations and the Group generates sufficient cash flows to fund its operations. Borrowings are mainly to fund the expansion projects

in various African countries”. Yet barely two days after the annual shareholders meeting, the company decided to borrow N50 billion in the market this month to fund short term working capital requirements and for general corporate purposes. In 2017, the company had a negative working capital of around N110 billion which was about half the size of the negative working capital of N222.6 billion in 2016. From the figures above, it is clear that the business generates enough profit to take care of shortfalls in working capital but is instead choosing to take advantage of the tax benefits to financing a business with debt. Brian Egan, chief financial officer in Dangote Cement announced earlier in March that the company plans to raise a ₦300 billion localcurrency bond as well as $500 million via the issuance of a Eurobond. The combination of these debts should push company liabilities above N1 trillion. Although some of the fresh debts will be used to pay off some of the older debts.

Currently, there is no commercial paper on the books of Dangote Cement and the company may be

…offer opens Monday 6th August 2018

nderwriting firm, Mutual Benefits Assurance Plc has secured the approval of regulatory authorities to raise N2billion through right issue in pursuance of its five years strategic plan. The underwriting firm will be offering to its existing shareholders 4,000,000,000 ordinary shares of 50 kobo each at 50kobo per share on the basis of one new ordinary shares for every one held. Shareholders of the company had approved the Board of Directors’ proposal to raise additional equity at an Annual General Meeting (AGM) held in Ibadan on June 27, 2018. Acceptance List for the Rights Issue opens on Monday, 6, August 2018 and will close Friday 14, September 2018. The Rights being offered are tradable on the floor of The Nigerian Stock Exchange for the duration of the Issue. The insurance company,

a general business and life insurer, has an authorised share capital of N10billion with a paid up capital of N4 billion. The company provides insurance coverage across several sectors including aviation, oil and gas, marine cargo and hull business and other non-life insurance underwriting, including motor, fire and special perils, goods-intransit, engineering insurance, retail and micro insurance, amongst others. Speaking at the completion board meeting held today, the chairman of the company Akin Ogunbiyi said that the proceeds of the offer will be used to fund the Company’s recapitalization and growth plan, provision of additional working capital and financing the expansion of IT facilities to support the Company’s enlarged operations. On plans for 2018, he said “We will consolidate on the modest achievements recorded in 2017 by commencing our IT transformation blueprint in 2018.” This he said will help to eliminate slack time in its pro-

to their parent company or Dangote oil and gas. Also as money market rates have been trending

lower this year, this commercial paper move may just be a way to refinance old debt at cheaper rates.

Segun Oloketuyi, MD/CEO, Wema Bank Plc (l), receiving a gift from Folasade Ogunsola, deputy vice-chanvellor, development services, University of Lagos at the Faculty of Science, University of Lagos 2018 Annual lecture themed ‘Impact of Science and Technology : The way forward for Nigeria’ held at the Main Auditorium of the institution

Mutual benefits to shop for N2bn through rights issue Modestus Anaesoronye

looking to diversify its financing sources as more than half of the current debt in the company is owed either

cessing and ultimately enable them to focus more on customer delights and satisfaction. He further said “Our strategic aspiration is to become the number one insurance company in Nigeria in terms of growth and profitability.” “Despite the tough business environment we have been able to bounce back to profitability and delight our shareholders. Dividend of N0.02kobo per share will be paid to our esteemed shareholders who have stood by us over the years” He assured that going forward dividend payment will be sustained, while urging shareholders to take up the right issue. The Company’s financial performance for the year ended 31, December 2017, shows that top line growth was combined with prudent management of expenses, which resulted in a 224.9 percent growth in profit before tax to N1.34 billion in 2017 from a loss position of N1.1billion in 2016. Group’s total assets grew by 12.1 percent from N51.5billion in 2016 to N57.7billion in 2017.

FirstBank Agric Expo seeks sustainable economic diversification in Nigeria

s part of its commitment to support agric businesses across the value chain and play its enabling role in the nation’s drive for economic diversification through agriculture, First Bank of Nigeria Limited has held the second edition of its annual agric expo with the theme “Innovating for a Sustainable Green Economy” The FirstBank Agric Expo, launched in 2017, was designed as a lead to national discourse on the economic benefits of sustainable agriculture valuechain as an alternative source of economic development and foreign exchange through export. The event which was over-subscribed by100 percent had in attendance key policy influencers, agriculture service providers, primary producers, exporters and top players in the agric value chain. The 2018 Agric expo was geared to drive conversations and collaborations that promote sustainable businesses for Agropreneurs whilst creating avenues for growth and increased per capita income in the larger economy. Audu Ogbeh, minister of

Agriculture and Rural development, was the special guest of honour at the expo, while Doyin Salami, a senior fellow/associate professor and full-time member of the Faculty at the Lagos Business School delivered the keynote address on the theme of the day, while Okechukwu Enelamah, the minister of Industry, Trade and Investment delivered the goodwill message at the event. Adesola Adeduntan, MD/ CEO, First Bank of Nigeria Limited and Subsidiaries, stated that FirstBank has over the years, committed to nation building, whilst promoting agric-business

and the development of the economy in Nigeria. ” This second consecutive edition of the FirstBank Agric Expo is indicative of our commitment to increasingly collaborate with public and private sector partners to fully restore the prime role of the agricultural sector as the mainstay of our national economy. Over 124 years ago, our Bank commenced operations with a major strategic focus on financing agriculture development as well as enabling farmers and agrobusinesses. I am pleased to note that agricultural financing across all value chains remains a core part of our business today.”

BUSINESS DAY

C002D5556

Monday 02 July 2018

COMPANIES & MARKETS

Raven Energy partners with ENOC Group to begin jet fuel operations in Nigeria

aven Energy Limited (Raven) the Nigerian subsidiary of Raven Resources Group, a global player in the Oil, Gas, and Power industry have signed an exclusive Technical Services & Marketing Agreement (TSMA)

with Emirates National Oil Company Limited (ENOC); a leading integrated global oil and gas player operating across the energy sector value chain. Raven Resources Group, is a multi-national oil and gas investment company with interests ranging from

marketing and distribution of petroleum products, oilfield equipment manufacturing, commodities trading, and deployment of power generation infrastructure. ENOC Group (Emirates National Oil Company) owns and operates assets in the fields of exploration

and production, refining, supply and operations, terminals, fuel retail, aviation fuel and petroleum products for commercial and industrial use. The Group’s general business operations includes automotive services, non-fuel F&B retail and

L-R: Adeniyi Makanjuola, chairman/CEO, Raven Resources Group and Burhan Al Hashemi, managing director, ENOC Marketing at the recent signing of an exclusive Technical Services & Marketing Agreement

JOSHUA BASSEY

…target financial inclusion, consumer value

aving secured the approval of regulatory authorities, Old Mu t u a l a n d Ecobank have flagged of a bancassurance partnership deal that enables them provide holistic financial products and services to their existing and prospective customers in Nigeria. The collaboration under the bancassurance referral model which has started running since June 4th 2018 provides Old Mutual extensive outlets of Ecobank to offer life and general insurance products to Nigerians. The first phase covers 62 branches of the bank in Lagos, Port Harcourt, Abuja and Ibadan. We expect this to be extended to 200 branches across

Nigeria by 2019, says Keith Alford, managing director, Old Mutual Nigeria during a press conference in Lagos. “This is another proud moment for us because we have been in partnership with Ecobank on other fronts of our business over the years. This Bancassurance partnership further strengthens the capacity of both financial institutions to offer multiple access points to our various products and services to customers across Nigeria and indeed Africa. Alford said through this partnership, Old Mutual will leverage on Ecobank’s existing customer base and wide distribution network to promote financial inclusion and insurance penetration whilst pushing our brand offerings to customers of Ecobank. He therefore called on Nigerians and the corporate entities to explore and take

advantage of this great channel we are offering to attain financial wellbeing and independence. The Old Mutual-Ecobank Bancassurance Partnership already exists across eight African countries with Nigeria projected to be the most robust in reach and spread. Ayo Osolake, head, Personal Banking, Ecobank Nigeria said this alliance aligns with Ecobank quest to deliver superior and robust financial product offerings to our customers. “We are happy that Old Mutual is taking advantage of our spread across Nigeria to offer our banking customers, individuals and businesses in Nigeria full access to their life and general insurance products and services. We already have this Bancassurance arrangement with Old Mutual in eight African countries.” “Under this partnership,

The new alliance between ENOC and Raven stands to serve the highly competitive market across the oil and gas value chain in Nigeria. Adeniyi Makanjuola, chairman and CEO for Raven, said “This is a major development for Raven and provides a strategic partnership with a global industry leader that will not only strengthen the infrastructure locally available but will also provide additional cost savings and enhanced productivity by reducing turnaround times’” Saif Humaid Al Falasi, group CEO, ENOC, said: “Expanding our operations in Nigeria underlines our strategic international growth plans as we continuously look for opportunities to grow our business with our partners. Today, we supply in excess of 2.8 Million US Gallon of jet fuel per day to a diversified portfolio of clients in the UAE and internationally. We’ve successfully forged many collaborations and our partnership with Raven Aviation is one that we take pride in. We hope to continue exploring future opportunities to elevate the aviation fuel infrastructure, while expanding capabilities

Inlaks confirms Dare as Executive Director

Old Mutual, Ecobank flag off bancassurance partnership deal Modestus Anaesoronye

fabrication services. Servicing thousands of customers in over 60 markets, the Group employs a workforce of over 11,000 employees. The Group’s local aviation operations provides more than 55 per cent of Dubai International Airport’s jet fuel requirements, through its two pipelines linking its storage terminals in Jebel Ali to the airport. The Group has also announced plans to extend a 16-kilometre jet fuel pipeline to Al Maktoum International Airport in Dubai South, to meet the expected increase in airport traffic through the UAE to more than 25 million visitors by 2020. ENOC currently provides jet fuel to 150 airports across 24 countries around the globe. The group also provides technical service assistance along with aircraft liability insurance to further enhance customer value proposition. Over the last five years, ENOC has established a strong presence in the aviation sector internationally with over 70 per cent growth in its network, providing jet fuel to over 80 customers across airports in the Middle East, Africa, South East Asia and Europe.

Old Mutual would have full physical presence in terms of personnel and products offering in over a hundred Ecobank branches in major cities by December 2018 and 250 branches by 2019, Osolake. She said this strategic partnership is one of the ways Ecobank aims to create a onestop hub for robust financial services offerings.”We believe that with our excellent banking services and Old Mutual’s insurance expertise we will be able to deliver exceptional customer service.” Old Mutual General Insurance and Old Mutual Life Assurance are part of the Old Mutual Limited Group which provides life assurance, wealth and investments, personal finance and general insurance services to more than 12 million customers in 17 countries across Africa, Asia and Latin America.

he Management and board of Inlaks have confirmed the elevation of Babatope Dare to the position of an executive director (ED) in the organisation. Inlaks is a leading system integrator in Sub-Saharan Africa. The company collaborates with leading OEMs in the technology industry to provide world-class information technology solutions that exceed the needs of customers. Before his elevation, Dare was the acting executive director of the infrastructure business unit, where he was responsible for the development and implementation of the digital transformation strategy of the infrastructure and e-banking business division while also serving as the director for sales and strategy. The newly promoted ED started his career in the Nigerian financial industry where he successfully designed, implemented and managed complex IT projects while leading cross-functional large teams of both technical and operations in the Information Technology division of different banks. He later joined NCR; the American global leader in the vast self-service

industries as sales & marketing manager where he was responsible for all direct and indirect sales of NCR’s solution portfolios in Nigeria between 2010 and 2012. Tope, a graduate of Electronics and Electrical Engineering from Obafemi Awolowo University, also has holds a Master’s Degree in Business Administration from the Business School, Netherlands. He has attended management courses from the prestigious Wharton Business School, University of Pennsylvania and a FinTech certificate at Said Business School, University of Oxford. Femi Adeoti, MD/CEO, Africa operations of Inlaks said, described Dare as a seasoned professional who has displayed competence and leadership since joining the firm. “His unique skills set based on his experience and competencies has added a lot of value to our business in recent years. Dare has also been responsible for leading key strategic programs that deepen efficiencies and drive growth,” said Adeoti. Over the years, Inlaks has built a reputation as a leading ICT and infrastructure solutions provider, helping customers effectively seize new market and service opportunities.

Monday 02 July 2018

Business Event

L-R: Eric Wang, head of marketing, Transsion Holdings Nigeria; Chidi Okonkwo, general manager, Transsion Holdings Nigeria; Teju Ajani, country manager, Android Partnerships, Google Nigeria; Jay Liu, country manager, Infinix Mobility Nigeria, and Tayo Odunowo, marketing commuincations manager, Infinix Mobility Nigeria, during the launch of Infinix Note 5 in Lagos. Pic by Olawale Amoo

L-R: Zhou Pingjian, ambassador, Peopleâ&#x20AC;&#x2122;s Republic of China; Adebayo Shittu, minister of communications; Tank Li, managing director, Huawei Technologies Company Nigeria Limited, and Lanre Osibona, representing vice president, during the digital economic forum in Abuja.

L-R: Nkechi Onyenso, secretary to the council, Institute of Chartered Secretaries and Administrators of Nigeria, (ICSAN); Francis Meshioye, honorary treasurer; Bode Ayeku, vice president, and Samuel Kolawole, president/ chairman of council, during the 2017 annual general meeting of ICSAN in Lagos.

L-R: Femi Niyi, executive director, project & Strategy; Afam Edozie, non-executive director; Yeye Nwidaa, company secretary, Jackson Ettii &Edu; Osuolale Salami, chairman; Adebola Akindele, group managing director; Adewale Sonaike, deputy managing director; and Oye Ogundele, executive director, African Expansion, at the 13th Annual General Meeting of Courteville Business Solutions (CBS) Plc in Lagos

C002D5556

BUSINESS DAY

C002D5556

Monday 02 July 2018

C002D5556

BUSINESS DAY

Mondy 02 July 2018

CityFile

Kogi: 60 traffickers arrested as NDLEA seizes illicit drugs

ixty suspected traffickers have been arrested in connection with 974.5kg of illicit of drugs in Kogi State. Idris Bello, Kogi State commander of the National Drug Law Enforcement Agency (NDLEA) said the suspects were arrested between April and June this year. The arrested traffickers include 56 males and 4 females. “The command also seized 976.2 kilogrammes of various illicit drugs, with Indian hemp accounting for about 974.5 kg, within the period” he said. Four of the arrested suspects, according to Bello, have been convicted and sentenced to various jail terms. He added that 28 of the suspects were undergoing counseling while 28 others had been counseled and released.

Flooding: Edo donates relief materials to victims IDRIS UMAR MOMOH, Benin

do State Governor, Godwin Obaseki, has reassured that adequate provision has been made to provide succour to ameliorate the effects of natural disasters on victims. Obaseki, who was represented by his special adviser on special duties, Yakubu Gowon, in Benin during the presentation of relief materials to persons affected by flooding in eight local councils in the state. The distribution of relief materials was monitored by the State Emergency Management Agency (SEMA), which carried out on-the-spot assessment of victims. The affected local councils include: Igueben, Orhionmwon, Uhunmwode, Ovia North East, Esan Central, Etsako Central, Etsako West and Owan East. The donated materials include: 100 bundles of zinc; 140 bags of cements; 14 bags of 3 inches zinc nails; 14 bags of 4 inches zinc nails; and 140 ceiling board; cash gifts, among other materials.

Driver bolts with employer’s N5.4m valuables

38-year-old driver, who allegedly stole from his employer cash and valuables worth N5.4 million, has been arraigned before an Ikeja Magistrates’ Court. The accused is standing trial on a twocount charge of conspiracy and stealing. Police prosecutor Benson Emuerhi told the court on Friday that the accused committed the offences with others still at large on June 21 at Maryland, Ikeja. Emuerhi said the accused, who worked as a driver for the complainant, Ngozi Braide, allegedly stole gold jewellery and cash valued at N5.4 million. He alleged that the accused was given the keys to the complainant’s house to grant access to the people who were coming to clean the house. “Braide gave Phillip the keys to her apartment so he could let the housekeepers have access to her apartment but when she got home, she noticed some of her properties were missing. “The items stolen include a 22 karat gold bangle, 22 karat chain, a set of diamond rings all valued at N3.6 million and 3,000 dollars (N1.8 million).

L-R: Social Welfare Officer, State Emergency Management Agency (SEMA), Igienelumhe Isaiah; chairman, Uhunmwode Local Government Area, Napoleon Agbama; representative of Governor Godwin Obaseki and Special Adviser on Special Duties, Yakubu Gowon; and chairman, Orhionmwon local government area, Sylvester Okoro, during the presentation of relief materials to flood victims, in Benin City.

NEPC, AGOA to partner C’ River garment factory MIKE ABANG, Calabar

he Nigerian Export Promotion Council (NEPC), in collaboration with African Growth and Opportunity Act (AGOA) is partnering the Cross River State garment factory to promote export products, as well as build capacity to enhance professionalism in services rendered. The executive director/CEO of NEPC, Segun Awolowo disclosed this in Calabar during a one-day capacity building workshop organised for staff of the Cross River State garment factory. The workshop exposed participants to the importance of good packaging to meet international standards for exports and building export capacity for the maximisation of AGOA. Awolowo, who was represented by the regional co-coordinator, NEPC, South West, BabatundeFaleke reaffirmed commitment of the Federal Government to support the Cross River State government’s vision in promoting the state garment factory and other developments within the state to the world. Bolanle Emmanuel, from AGOA who

was one of the resource persons, spoke on the theme “understanding AGOA’s procedures and documentation”. She said the workshop was also aimed at sensitising participants and the general public to take advantage of the benefit available in AGOA. She noted that AGOA was a United States trade that significantly enhances market and access to about 39 subSaharan African countries. Speaking further, on how AGOA is beneficiary to Nigeria, Bolanle noted that it seeks to forge stronger commercial ties between Nigeria as well as other qualified African countries and the United States, while it helps to integrate Nigeria into the global economy. The trade promotion advisor, NEPC Calabar smart office, Emmanuel Etim said AGOA was the trade policy initiative of the United States which records dutyfree treatment to virtually all products exported by beneficiary sub-Sharan African countries to the United States’ market. According to him, the AGOA bill was enacted in 2000 by the former U. S President Bill Clinton administration and was extended in 2015 up till 2025 by other successive administrations.

“The purpose of AGOA include: to promote increased trade and investment between the U. S and Sub-Sharan African Countries, to promote economic development and reform in sub-Sharan Africa and to promote increased access to opportunities for U. S investment and business in Arica. Etim maintained that “the U.S market was very large with enormous trade opportunities which exporters can take great advantage of through AGOA, these include: duty-free access for eligible products into the largest single market in the world, competitive advantage over non-AGOA countries that must pay normal tariff rate to enter U.S, AGOA provide opportunities for companies to build relationship with their U.S counterparts and trade opportunities for exporting companies”. The workshop which was declared opened by the Cross River State commissioner for commerce and industry Akam Egba, represented by his permanent secretary, Akpeh Ogon attracted participants from staff of the garment factory including political appointees supervising the factory.

N1.7bn alleged theft: Court rules on FirstNation MD’s objection Sept. 21

n Ikeja Special 0ffences Court has fixed September 21, 2018 to rule on an application filed by Kayode Odukoya, managing director of First Nation Airways, seeking to quash a N1.7 billion theft charge proffered against him. The Economic and Financial Crimes Commission (EFCC) is prosecuting Odukoya alongside First Nation Airways and Bellview Airline on a fourcount charge bordering on forgery, use of false document, perjury and stealing. The defendant’s counsel, Olawale Akoni through a preliminary objection during a proceeding last Friday, prayed the court to strike out the charge for lack of jurisdiction. The application was dated April 30 and supported by an 11-paragraph affidavit. The defendants said in the objection that the charge, dated December

11, 2017, contravened sections 249, 252 and 77 of the Administration of Criminal Justice Law (ACJL), No. 10, 2011. The defendants said: “Section 249 of the ACJL stipulates that prosecutorial authority before the High Court of Lagos State shall be exercised only in the name of `The State of Lagos’. “ The infor mation/charg e No. ID/239C/2012 filed against the applicants does not comply with Section 249 of the ACJL as stated above.” Opposing the application, EFCC counsel, Zainab Ettu, argued that the anti-graft agency did not require a fiat from the attorney-general of Lagos State to prosecute the case. She urged the court to dismiss the application on the grounds that it lacked merit and constituted abuse of court processes. The EFCC claimed that Odukoya and the other defendants committed the

offences on March 21, 2013. According to the commission, the defendants forged the Memorandum of Loss of Lagos State Certificate of Occupancy registered as No. 33 on Page 33, Volume 1011 at the Lagos State Land Registry, Alausa, Ikeja. It said that the defendants intended that the document would be acted on as genuine. According to the commission, the forged document is in respect of a property located at No. 29, Oduduwa Street, Ikeja GRA. It said that Odukoya used the false document and also gave false information on oath concerning the loss of the certificate of occupancy at the Lagos State land registry. The anti-graft agency further alleged that Odukoya stole and converted N1.7 billion belonging to Skye Bank for his own use, on October 7, 2016.

Monday 02 July 2018

C002D5556

BUSINESS DAY

Monday 02 July 2018

C002D5556

Monday 02 July 2018

BUSINESS DAY

INSIGHT

The fragility of Nigeria’s economic recovery Tochukwu Nwachukwu

W Introduction

hen Nigeria came out of the worst recession to hit it in 2 decades in the second quarter of 2017, it was easy to link this to the Economic Recovery and Growth Plan (ERGP), especially since the Plan was inaugurated by President Buhari at the beginning of the 2nd quarter in 2017. The ERGP, which is a medium term plan for 2017 – 2020, is being implemented with the intention of laying the foundation for economic diversification as well as inclusive and sustainable growth. So far, Nigeria has been unable to attain inclusive growth, evidenced by the fact that it recently surpassed India as the country with the world’s poorest people. This result isn’t due to its high population alone, but rather to the fact that Nigeria’s economy doesn’t grow as fast as its population. It is also due to the widening income inequality, which has resulted in rising, rather than declining extreme poverty levels in the country. With a population of about 195 million people, the country now has about 87 million people living below the poverty line, meaning that almost one in every two Nigerians is poor. According to the World Poverty Clock, 6 Nigerians fall below the

poverty line every minute. However, India with a population of about 1.3 billion people, has about 73 million people below the poverty line. A rich country with very poor masses depicts a fragile economy. There is thus an urgent need for more growth drivers to make Nigeria’s growth more inclusive and resilient. Evidence of Nigeria’s Continued Dependence on Oil The call for diversification dates back several years, as past and present administrations have acknowledged the country’s overdependence on oil to provide revenue, export earnings and foreign reserves since the 1960s. The recession that hit Nigeria in 2016, though painful, was an opportunity for the country to look inwards and try to restructure its economy. However, it may be erroneous to attribute the recent slight improvements and growth in GDP solely to the ERGP’s implementation. This is because the main drivers of Nigeria’s recovery have been a boost in global oil prices and increased stability of oil production in the Niger Delta region. The Nigerian Investment Promotion Council (NIPC)’s Report on Investment Announcements in 2017 shows that 38% of investments went to the oil and gas sector. This is more than the total investments that

went to the Manufacturing sector(18%), Transportation sector (6%), and Agriculture sector (5%). Also, according to the Center for the Study of Economies of Africa (CSEA), even though GDP

growth rate increased from 0.72% to 1.4% in the 3rd quarter of 2017, oil GDP growth rate increased from 3.52% to 25.89% while that of non-oil fell from 0.45% to -0.76%. Therefore, not only is the economy still very dependent on oil, the situation seems to be getting worse. Nigeria’s growth is still being driven by high oil prices and high aggregate consumption, thus, reinforcing the country’s vulnerability to the same factors that caused it to go into recession in the first place. At the end of its recent economic review of Nigeria in its 2018 Article IV Consultation, the IMF rightfully described Nigeria’s recovery as a fragile one. It highlighted high interest rates and the possibility of lower global oil prices as the main downside risks. The IMF affirmed that although reforms under the ERGP have helped improve the business environment (as evidenced by Nigeria’s movement from 169th to 145th position on the World Bank’s 2018 Ease of Doing Business Ranking), its attempts to achieve any meaningful diversification of its productive and export base have failed as the non-oil and non-agricultural sectors are yet to pick up. The ERGP and its Implications for Sustainable Growth of the Nigerian Economy The goals and deliverables of the ERGP are laudable given that they highlight the Nigerian government’s plan to focus on other growth-generating and foreign exchangeearning sectors like manufacturing and agriculture, and also on sectors that improve the business environment like energy and transportation (infrastructure). In addition, the plan to focus on investing in the Nigerian people is commendable because, as Bill Gates said during his visit to Nigeria earlier this year, the most important choice Nigeria can make is to maximize her greatest resource (the Nigerian people) as investment in health, education, and opportunities – the human capital – lays the foundation for sustained prosperity. However, even though the ERGP identifies investment in the Nigerian people as one of its broad objectives, human capital development, specifically education and health, is not listed among the Plan’s execution priorities. The graph below shows that attention to these sectors has not improved; as execution priorities have been in favour of physical over

human capital. Graph showing budgetary allocations to Health, Education, Infrastructure and Security from 2015-2018. Nigeria’s health system was ranked 136th of 137 countries according to the Global Competitiveness index for 2017-2018, and only the University of Ibadan made it to the top 1000 in the global university ranking of 2018. These are just a few of the consequences of not prioritizing education and health in Nigeria. Until the country begins to focus on human capital development, growth will remain limited, and it will be difficult to sustain for the long term whatever growth it may achieve. Current Policies: Strengths, Shortcomings & Recommendations It is imperative that Nigeria corrects the existing structural distortions in order to address the vulnerabilities in the economy. There is need for a thorough reappraisal of the contents of the country’s development policies, as well as a renewed commitment to their implementation, in order to realize the potentials of the non-oil sector and attain sustainable growth of the economy. Some areas to focus on include: • Addressing the unemployment problem. Nigeria’s human resource endowments provides it with huge potentials to become a major player in the global economy. However, the nation’s high unemployment figure reduces its capacity to build both its oil and non-oil GDP. It is therefore critical

that the government provides an enabling environment for businesses who are the major employers of labour and who have the potential to contribute to non-oil GDP growth. In addressing this problem, it is critical that the government develops a long-term and sustainable plan, one that provides a lasting solution. For example, if the current N-power programme is properly deepened and implemented, it can serve as a tool to not only alleviate the unemployment problem, but also aid diversification and human capital development. However, so far it has done little to solve the unemployment problem in Nigeria. This is evident in the fact that the unemployment rate has almost doubled from 9.9 percent in 2015, to 18.1 percent in 2017. A solution that involves providing youth with adequate training which would equip them with the skills that employers seek and which allows them to fit into the workplace should be pursued if we are to achieve the target unemployment rate of 11.23% by 2020. In addition, a more lasting solution to the problem would involve increasing the share of education in the total budget, rather than decreasing it as has been the case in recent years. • Proposed partnership for job creation

between the federal government, private sector and state governments should focus on policies that will support growth and diversification of the economy. Emphasis should be placed on public procurement which considers local content and labour intensive production processes. • Nigeria’s exchange rate can be stabilized and improved by addressing the country’s dependency on imports. There is thus need for the implementation of more initiatives and projects that are geared towards domestic production, especially in Agriculture and Manufacturing. This will ensure that the country produces enough to satisfy domestic demand, with the excess exported to boost foreign exchange earnings. The New Basket of Incentives Scheme (NBIS) should therefore be fully and speedily implemented by building industrial estates and other necessary incentives that would not only encourage prospective investors but also build competitiveness in the non-oil sector. • The ERGP plans to develop the agriculture value chain with the aim of achieving self-sufficiency in tomato paste by 2017, rice by 2018, and wheat by 2020. The goal is for Nigeria to become a net exporter of key agricultural products like rice, cashew nuts, groundnuts, cassava and vegetable oil. The government hopes to achieve this through the Anchor Borrowers Programme (ABP), the Green Alternative Agriculture Promotion Policy and the Presidential Initiative on Fertilizer. It also hopes to increase access to finance by sustaining already existing programmes including the Commercial Agricultural Credit Scheme (CACS) and the Nigeria Incentive-based Risk-sharing System for Agricultural Lending (NIRSAL). • However, for Agriculture to significantly contribute to Nigeria’s GDP on a sustainable basis, it has to be able to create lots of jobs for Nigerians. The ABP specifically was developed to create linkages between anchor companies involved in the processing of key agricultural products and small holder farmers. The goal is to increase agricultural output, generate millions of jobs, reduce poverty among smallholder farmers, reduce the importation of agricultural products, conserve the nation’s foreign reserves, and contribute towards the sustainable growth of the economy. The ABP should be extended to other key

agricultural commodities so that Nigeria can become both self-sufficient and a net exporter of products like tomato paste, vegetable oil, cashew nuts, groundnuts, cassava, poultry, fish and livestock. • More effort should be focused on increasing government revenue rather than further increasing the already high national debt profile. Debt service payments have increased by over 370 percent in the last 5 years from N591 billion in 2013 to 2.2 trillion in 2018. The implication is that about a quarter of the 9.12 trillion 2018 budget will be spent on interest payments on debts. The current drive to increase independent revenue through the VAIDS is a laudable one, because with the country’s current tax to GDP ratio of just 6 per cent, there is a lot of room for improvement in that area. However, doubts remain about its efficacy, with the FIRS only able to meet 10 percent of its target amount of $1billion as the 1 year window ends on 30 June 2018. • To enhance the competitiveness and growth of the non-oil sector, there is need for increased collaboration among all stakeholders through a national system of innovation. This will include government, private sector operators, universities and research institutes, in order to create linkages between the oil sector and other key sectors of the economy. It will involve increasing investment in science and technology in these key sectors, and will help stimulate innovation, transfer some of the benefits of the oil sector to other key sectors (thereby diversifying the economy), and help build a knowledge-based economy. As efforts are already being made in many of the above listed areas through the ERGP, the key determinant of whether these can be realized is in the implementation of the identified policies and projects. There is need to institutionalize the budget calendar, and align it to the January-December calendar. Any calendar other than this denotes late passage of the Budget, with implications for achieving the objectives of the ERGP. Conclusion Although the strengthening of the Nigerian economy requires the participation of all stakeholders including the private sector, the role of the federal government in diversifying the economy by raising the contribution of the nonoil sector cannot be overemphasized. Sustained effort must be made to substantially improve power supply, provide motorable roads, build railways and industrial estates, and provide other key infrastructure and positive externalities that would incentivize and properly equip prospective investors to invest in the non-oil sectors of the economy. In addition, attention must also be given to the human development sector, as this is the only means by which any growth achieved can be sustainable. In addition to developing well-structured and beneficial programs and policies, the government needs to aggressively drive the focused implementation of the ERGP, and provide for a robust monitoring and evaluation of the implemented projects. This will ensure long-term sustainability of growth, and better position Nigeria for a stronger and more resilient economy. Tochukwu Nwachukwu, Ph.D, is Chief Executive Officer, Preston Consults

BUSINESS DAY

C002D5556

Monday 02 July 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 02 July 2018

C002D5556

BUSINESS DAY

REAL SECTOR WATCH BUSINESS DAY

C002D5556

Monday 02 July 2018

Dangote, Aarti, African Industries, Honeywell pump N4.63trn into economy in 5 years ...year-on-year investment drops by 17.2% ODINAKA ANUDU

igerian manufacturers pumped N4.3 trillion into the Nigerian economy between 2013 and 2017, according to the latest data from the Manufacturers Association of Nigeria (MAN). The investments were in the form of new plants, machineries, equipment, land, vehicles, buildings and furniture. Firms that have consistently invested into the country’s economy include: Dangote Group, African Industries Group, Flour Mills of Nigeria, Honeywell, Aarti Steel, BUA Group and FrieslandCampina WAMCO, among many others. The data also show that manufacturers invested N508.98 billion in the whole of 2017 as against N614.55 billion recorded in 2016, signifying N105.57 billion or 17.2 percent year-on-year drop. Nigeria’s manufacturers expanded investments in 2017 despite slow recovery of the economy. Aarti Steel Nigeria Limited, a Nigerian steelmaker, completed a cold-rolled mill in Ota, Ogun State, with a capacity to produce 120,000 tonnes of products per annum last year. “We are confident in Nigeria and we just set up a cold-rolled plant in March. It is now fully stabilised and is producing already. It is a big investment and it will also be good for the Nigerian economy,” Aniket Singal, Aarti Group’s vice chairman, told Real Sector Watch in Lagos. The steel maker spent roughly N11 billion to complete the mill, expected to serve the downstream steel makers in Nigeria using

L-R: Sylvanus Nsofor, Nigerian ambassador to United States and Olamilekan Adelana, managing director, Zenith Carex Intl. Limited at a business-tobusiness matchmaking meeting organised by Nigerian-American Chamber of Commerce at Embassy of the Federal Republic of Nigeria, Washington DC, USA on June 21.

cold-rolled steel products for the production of home appliances, roofing sheets, metal furniture and filling cabinets, tables and chairs, among others. Unilever Nigeria, a Fast-Moving Consumer Goods (FMCGs) firm, in 2017, opened its Blue Band factory at Agbara Industrial Estate, Ogun State, which is the latest addition to investments the company has made in Nigeria. Dangote Group consistently raised its stakes in the economy through aggressive expansion in sugar plantations, rice production, cement, flour and pasta making, among others, in 2017. Dangote Group has been pumping close to $2 billion into sugar plantations since 2014 to tap into opportunities in the industry currently enjoyed by Brazil, which

is responsible for most of sugar imports into Nigeria. Aliko Dangote, president of Dangote Group, signed a $700 million pact with Nasarawa State government for the purpose of setting up sugar projects. Flour Mills, which is one of the most diversified Nigerian conglomerates, has also been pumping billions in sugar, oil palm, flour and feeds, among others. Flour Mills has been investing over $300 million in its sugar projects in Sunti, Niger State, since 2014. Beta Glass, subsidiary of Frigoglass Industries Limited, set up three furnaces exceeding 600 tons of produced glass containers per day in 2016. Through its United Cement Company of Nigeria (UniCem), Lafarge has been pumping $565

million into the economy to add 2.5 million metric tonnes (mt) capacity cement plant in Mfamosing, Calabar, Cross River State. Honeywell Flour Mills Plc spent N64 billion on an integrated processing facility in Ogun State. PZ Wilmar has invested over N65 billion in developing oil palm plantations and palm oil mills in Cross River State. The company is investing in over 26,000 hectares of land in the state. Similarly, Presco Plc, one of the leading palm oil producers in Nigeria, has so far invested N75 billion into oil palm plantations and palm oil mills. On December 1 last year, Kellogg’s and Tolaram Nigeria Limited commissioned a N6 billion naira factory, with a capacity to produce 10,000 metric tonnes of cereals per year. In June 2017, dairy maker FrieslandCampina WAMCO commissioned a milk collection plant in Saki, Oyo State, with a capacity to hold 12,000 litres of raw milk daily and 4.32 million litres annually. Also in June, Procter & Gamble, largest American non-oil investor in Nigeria, commissioned a new production line for its Always brand in Agbara, Ogun State, south-west Nigeria. On August 30 last year, vice president Yemi Osinbajo commissioned a 60,000 metric tonnes per annum Edo State Fertilizer Plant, Auchi. On the same day, BUA commissioned its second cement plant located at Obu, Okpella, Edo State. BUA has invested $2 billion dollars in the Nigerian cement industry with capacities in excess of over 8 million tons per annum within nine years of existence.

“Our investments in the two cement lines in Edo State represent the largest non-oil and gas related investment in the whole of the South-Southern region of Nigeria. Our technology has the latest filtration with capacity of less than 10 milligram per normal cubic meter. We use natural gas, which is a very clean energy for both our kiln as well as the power plant in addition to having a very green environment,” said Abdulsamad Rabiu, chairman of BUA Group, at the commissioning. In late November, FoodPro Limited commissioned its cashew processing factory in Ilorin, Kwara State. Manufacturers were hard hit by dollar crunch in 2016, resulting from a combination of global oil price slump and militancy in the Delta that cut production targets. The Manufacturers Association of Nigeria (MAN) claimed in 2016 that it lost 54 of its members whose firms went under owing to dollar crunch. Multiples of small-scale businesses were shut down, while firms such as Truworths and Clover left Nigeria. However, more liquidity in the foreign exchange market and the introduction of investors and SME windows eased dollar access for manufacturers as confirmed by Frank Jacobs, president of MAN The Nigerian economy exited recession in the second quarter of 2017 after suffering contraction for five consecutive quarters. The gross domestic product (GDP) grew 0.6 percent growth in Q2 and 1.40 per cent in the third quarter of 2017 in real terms, signalling a gradual rebound for an economy earlier characterised by severe dollar crunch.

BASF, PSN launch ‘Young Female Pharmacist of the Year’ award

A S F, w o r l d ’s l a r g e s t chemical company, has launched the 2018 ‘Young Female Pharmacist of the Year’ awards programme in partnership with the Pharmaceutical Society of Nigeria (PSN). The programme is for BASF West Africa. This pioneering awards programme is a competitive process, open only to female pharmacists between the ages of 25 and 35 who are registered in Nigeria. Applicants can be drawn from manufacturing, academia and/or public research institutes and they may be nominated, or elect to apply themselves. Speaking at the inauguration of the awards programme with the committee saddled with the responsibility of validating and assessing the entries, Jean – Marc Ricca, managing director of BASF

West Africa, said, “This awards programme will serve as an incentive for innovation and scientific excellence in Nigeria, as we honour women who have shown exceptional commitment and have made extraordinary achievements in their scientific fields. In the same vein, we hope to contribute our own quota to the achievement of Sustainability Development Goals 4 and 5, which relate to quality education and gender equality respectively.” Sharmila Govind, head of human resources for Market Area Africa, applauded this initiative as one that speaks closely to the rewards and recognition scheme of BASF. According to her, “I am very excited about this because the topic of women in leadership is one close to my heart. With this kind of initiative, I hope we see more women step in to the limelight and grow in their careers.”

L-R: Sharmila Govind, BASF’s head of human resources for Africa; Mbang N. Femi-Oyewo, chairman of PSN’s selection committee; Ahmed I Yakasai, president, Pharmaceutical Society of Nigeria; Jean-Marc Ricca, managing director, BASF West Africa; Sithembiso Dlalisa, sales account manager, BASF West Africa and Sola Balogun, corporate communications & governmental relations manager for BASF West Africa at the inauguration of Young Female Pharmacist of the Year’ award in Lagos recently

Also present at the meeting was Ahmed Yakasai, president of the Pharmaceutical Society of Nigeria. Yakasai expressed delight at this intervention from BASF and encouraged all the members of the societal body to make the most of this opportunity. He also implored BASF West Africa to make this an annual awards programme to ensure more opportunities and exposure for young female pharmacists. He requested the selection committee, led by Mbang Femi-Oyewo, former deputy vice chancellor of Olabisi Onabanjo University and fellow of the Pharmaceutical Society of Nigeria (FPSN), to discharge its duties judiciously and present candidates the society will be proud of. The finalists will be announced and awards will be presented at the Pharmaceutical Society of Nigeria’s Annual Conference in October 2018.

Monday 02 July 2018

C002D5556

BUSINESS DAY

REAL SECTOR WATCH

Manufacturers say African Continental Free Trade Area shrouded in secrecy ODINAKA ANUDU

he Manufacturers Association of Nigeria (MAN) says the African Continental Free Trade Area (AfCFTA) is shrouded in secrecy and that Nigeria will be worse for it if the country signs the agreement in its current form. Speaking at a press conference in Lagos, Frank Jacobs, president of MAN, commended the National Office on Trade Negotiation (NOTN) for the just concluded nationwide consultations and sensitisation programme on AfCFTA, but added that NOTN version of the outcomes of the stakeholders’ engagements and sensitisation as reported in the media does not adequately reflect the overall proceedings and factual expressions at those meetings. Jacobs stated that some of fears originally expressed by MAN have not been doused or addressed. “We are worried that this could be misleading and, more importantly, may not put Nigeria in good stead and could inexorably put the nation in a disadvantaged position if or when the implementation of the AfCFTA commences. “We are now even more worried that, in spite of the widespread concerns that necessitated Mr. President’s reservation of his signature at the Summit in Kigali, the subsequent activities

of the NOTN was not tailored towards addressing those concerns. Rather than squarely addressing those critical issues, all efforts were geared towards extolling the laudable objectives of the AfCFTA, its potential benefits and what Nigeria is expected to benefit from its implementation.” MAN says this is rather simplistic and cannot be the way to go. The AfCFTA is a pact among African countries targeted at breaking

barriers to free trade among continent’s countries. According to Jacobs, the agreement to the adoption of the 90:10 percent Market Access ratios to be achieved in five years lacks empirical basis and evidence of due consultation and accommodation of concerned and affected stakeholders and operators. He stressed that Nigeria agreed to such a short period for the implementation of the Market Access without nego-

tiating the Rules of Origin. “Right from the period preceding the Kigali Summit and up until now, the content of the Nigerian offer has remained unknown to manufacturers who are the number one stakeholders to be positively and or negatively impacted by the proposition. It is noteworthy to say here that MAN had requested for this vital information severally, including when the chief negotiator led his team to the

MAN House as part of the consultation/sensitisation programme,” he said. MAN helmsman advised the government to, as a matter of urgency, commission and conduct an Offensive Export Market Discovery Study. Jacobs said this would reveal the specific manufactured products which might be in high demand in each African country; products demands that may be satisfied by Nigeria’s manufac-

tured products (now and near future); tariff and nontariff related market access constraints which currently limit Nigerians from exploring opportunities available in the continental export market, and extent of AfCFTA tariff liberalisation needed to realise the opportunity. He further advised the need to conduct a Defensive National Economic and Industrial Priority Study to reveal the specific products that may be negatively impacted or threatened by import liberalisation in Nigeria in the context of AfCFTA; consequences of continental import penetration on Nigerian firms; impact on government and the economy; recommendations on adjustment support required to address the consequences of AfCFTA shocks (should Nigeria sign) on the industries and workers that would be laid off. He also stressed the need to study the impact of AfCFTA on Nigeria’s manufacturing sector. “Additionally, we are also worried that the director general of NOTN ‘chief negotiator’ doubles as chairman of AU-AfCFTA Negotiation Committee and may need to balance allegiance to both Nigeria and the AUAfCFTA Negotiation Committee. As such, we implore the federal government to consider appointing a national chief negotiator that will be saddled with the responsibility of negotiating specifically for Nigeria.”

High energy cost responsible for uncompetitiveness of Nigerian products-MAN ENDURANCE OKAFOR

he Manufacturers Association of Nigeria (MAN) says high cost of energy supply is the major cause of poor competitiveness of made-in-Nigeria products. According to MAN, while total expenditure on power in many emerging economies is nine percent, local manufacturers in Nigeria spend 30 to 40 percent on energy. “It is no more news that manufacturers in Nigeria currently self-generate as much as 13,000MW through alternative sources of energy in order to stay afloat. In fact, members of MAN expended

over N129billion on alternative energy generation in 2016 and the cost of alternative electricity generation alone constitutes about 40 percent of production cost. With such high costs, made-in-Nigeria products will hardly be competitive,” Frank Jacobs, president of MAN, said at a special interactive forum on Eligible Customer Regulation of the Nigeria Electricity Regulatory Commission (NERC) held on June 28, 2018. Ibrahim Usman, vice president, North West zone, MAN, said made-in-Nigeria products cannot be competitive internationally, owing to high cost of generating power, stating that this is a

key issue. Eligible Customer Regulation was initiated to address high cost of electricity, according to Babatunde Fashola, minister of power, works and housing. The declaration of Eligible Customer Regulations means successor electricity Generation Companies (Gencos) and Independent Power Producers (IPPs) would be able to by-pass the Bulk Trader (the Nigerian Bulk Electricity Trading Plc (NBET)) and sell electricity directly to eligible customers. In other words, electricity customers who fall within any of the four ‘eligibility’ categories would now be

permitted to buy power directly from Generation Licensees and Trading Licensees (also known as Suppliers). “The dialogue session is important to us as manufacturers. Do not forget this is a brand new initiative by the government, so we need to inform our members so they will take advantage opportunities given because there is 2000MW to be taken,” Usman said. A participant at the special interactive forum said while the regulation allows the eligible customers to contract directly with the Gencos, a possible issue that may arise is the ability of the eligible customers to

commit to long-term PPAs (which is often required by Suppliers) and provide the requisite payment security to the Suppliers. While applauding the government on the initiative, Usman, who is also the chairman of MAN Power Development Company (MPDC), said manufacturing is the biggest employer of labour after government, stating that Nigerian authorities must make electricity available at a cheaper rate to cut product costs. On the pricing of the formula of the Eligible Customers Regulations, Usman pointed out that the Nigerian Electricity Regulatory Commission (NERC) has a

template for pricing. On how far the initiative has been welcomed by members of MAN, Usman said he believes there have been few licenses issued and some of the members are already enjoying them. “In the regulation, there is a part of it that says if there is outstanding debt by any manufacturer, such will not enjoy Eligible Customer status. That is a problem for us because we are still in court with the Discos in respect of tariffs and what we want government to do is to come in and create a way to come in the middle between us and the Disco and help MAN intervene with regard to the debt,” he further stated.

BUSINESS DAY

Monday 02 July 2018

This is M NEY A daily guide to your Personal Finance

• Savings • Travel • Debt & Borrowing • Utilities • Managing your Tax

Planning a family holiday?

he holidays are almost here and maybe you are one of those fortunate enough to be able to get away from the stresses and strains of work and routine home life. Many Nigerians in the diaspora will be heading home to spend time with loved ones, whilst others will be heading for other destinations. In all the excitement and anticipation, it is so easy to overspend. Here are a few ways to manage your holiday finances and still have lots of fun. When you book early, there is time to shop around for the best deals on fares, accommodation and tour packages. If you have waited until the last minute to make arrangements for your holiday, you will have little flexibility and will have to accept whatever is available. Last minute bookings can cost you twice, even three times as much as if you had booked months in advance. This can get really expensive when you are making a booking for a large family or group. Do you have any air miles? Air miles are useful in offsetting your ticket or accommodation costs, if you book well in advance of your trip. However, the best value from your air miles is usually during off-peak seasons when demand is low. It will be a challenge to find air mile

tickets for travel now. During peak periods the best use of air miles is to secure upgrades. Focus on your budget You don’t have to travel to an expensive or exotic location just because “everyone else” is doing so. Look critically at your finances. Have you saved towards your holiday? How much can you afford to spend? Set an overall spending limit involving your family and try to stick to this. You will need to budget for the various aspects of holiday spending including accommodation, transport fares, food, shopping, entertainment, gifts, excursions and so on. Avoid borrowing to finance your holiday unless there is the absolute certainty of an impending inflow of funds. Cards, cash, transfers? Have you sorted out your spending money? Cash withdrawals can be made using your Visa or Mastercard; they are accepted at over a million Automated Teller Machines (ATMs) globally where the sign is displayed to either pay for goods and services or access cash. Linked to your Current or Savings account, all transactions reflect instantly. If you are travelling with your Naira card be sure to read the terms and conditions; there is usually a daily cash withdrawal limit. If you plan to use your cards whilst you are away to save you carrying too much cash, notify your bank or credit card company; as an added security precaution, many card providers look out for what appears to be “suspicious” activity. If they see your card being heavily used particularly in what is an unusual environment for you, your account may be suspended until they have heard from you to confirm

figure. Use this long vacation to try to begin to do something about this. A vacation is really about spending quality time with loved ones and having time to rest; it need not be that expensive; you can rediscover your own environment by visiting places close to home, revisit hobbies, pastimes, and sports, or simply just staying at home. Make it a point of visiting one of the stunning tourist destinations here in Nigeria. With a little careful planning, you can find a balance between having an enjoyable family vacation and still keeping your finances in check in time for the new school year. that it is indeed you using the card. As far as possible use your debit card for withdrawals at ATMs during bank opening hours. Hold some cash just in case your card is lost, stolen or not working. You are entitled to Personal and Business Travel allowance. Visit your bank for information on the current policy and any limits. You can also make payments and transfers out of your account from online banking solutions if you have this in place. Licensed bureaus de change are available at major airports but they tend not to be as competitive as those in town. Look out for the commission charge and the exchange rate offered. Be cautious when you patronize moneychangers, as there is the very real risk of being shortchanged or sold counterfeit money. Travel insurance is important While vacations usually go without incident, have you given any thought to what would happen if something were to go wrong? What if someone in your family sud-

denly falls ill, your luggage gets lost, or you have to cancel your trip? Travel insurance usually includes coverage for medical bills, lost baggage and cancellations. Read the fine print to ensure that you have the best coverage at affordable rates and make sure your medical insurance card is on you at all times. Roaming can be very expensive Roaming charges can result in a shocking telephone bill when you return home. Contact your service provider and be sure of the implications and costs as you will be paying both for making and receiving calls. Pay your bills in advance so that you don’t get cut off whilst you are travelling. It makes sense to buy a local SIM card when you arrive at your destination; make sure that your friends, family, colleagues and important contacts have the number so that you don’t miss out on important calls. Most SIM cards don’t charge to receive calls and making calls will be much cheaper than using your usual number.

Fathers and holidays Far too many family holidays consist of just mum and children. For many fathers in their families, they feel outside of the “emotional core” of the family; some feel left out of the depth of the natural bond and closeness, warmth and love that mothers have with the children. Father’s Day was recently celebrated and it focuses on celebrating fatherhood, paternal bonds, and the influence of fathers in society. It also reminds fathers to consider the critical role they play in the family, to take stock and to carefully consider their responsibilities. Fathers should be proactive about getting more involved in quality family time. The time a father spends with children is the foundation of deep and enduring relationships that impact their own relationships in future. There is so much wrong in our society and over the years the focus has been largely on the girl child; this has implications for the development of the boy child who often craves that important father

Happy holidays!

Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

Monday 02 July 2018

C002D5556

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: June 29 - July 06, 2018

KEY MACROECONOMIC INDICATORS Indicators

Current Figures

Comments

GDP Growth (%)

1.95

Q1 2018 — lower by 0.11% compared to 2.11% in Q4 2017

Broad Money Supply (M2) (N’ trillion) Credit to Private Sector (N’ trillion)

25.17 22.21

Increased by 2.64% in May 2018 from N24.52 trillion in Apr’ 2018 Decreased by 0.21% in May 2018 from N22.25 trillion in Apr’ 2018

Currency in Circulation (N’ trillion) Inflation rate (%) (y-o-y) Monetary Policy Rate (%)

1.93 11.61 14

Decreased by 1.36% in May 2018 from N1.96 trillion in Apr’ 2018 Declined to 11.61% in May’ 2018 from 12.48% in Apr’ 2018 Raised to 14% in July ’2016 from 12%

Interest Rate (Asymmetrical Corridor) External Reserves (US$ million) Oil Price (US$/Barrel)

14 (+2/-5) 47.63 76.72

Lending rate changed to 16% & Deposit rate 9% June 13, 2018 figure — an increase of 0.02% from June start June 29, 2018 figure— an increase of 1.19% in 1 week

Oil Production mbpd (OPEC)

1.71

May 2018 figure — a decrease of 3% from Apr’2018 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday 29/06/18

NSE ASI

38,278.55

Market Cap(N’tr) Volume (bn) Value (N’bn)

Friday

Change(%)

37,862.53

1.10

13.72 0.17

1.10 180.65

5.82

1.43

307.00

NIBOR Friday Rate

Change

(%)

(Basis Point)

29/06/18

22/06/18

OBB O/N

13.1700 14.0800

2.8300 3.5800

1034 1050

CALL 30 Days

14.7000 14.4552

3.2917 13.3995

1141 106

90 Days

15.0040

13.5019

150

FOREIGN EXCHANGE MARKET Market

Friday

1 Month

(N/$)

Rate (N/$)

29/06/18

22/06/18

29/05/18

Official (N) Inter-Bank (N)

305.80 344.94

305.85 343.87

305.95 340.68

BDC (N) Parallel (N)

360.00 362.00

359.81 362.00

361.00 363.00

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture Cocoa ($/MT) Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Gold ($/t oz.) Silver ($/t oz.) Copper ($/lb.)

1-week Change

YTD Change

Tenor

Friday

Change

(%)

(Basis Point)

29/06/18

22/06/18

3-Year 5-Year

0.00 13.05

0.00 13.33

0 (28)

7-Year 10-Year 20-Year

13.43 13.60 14.06

13.04 13.48 13.81

40 12 25

18.91 (3.80)

2458.00 115.65 83.75 12.17 487.00

(1.09) (1.45) (1.42) (2.56) (2.84)

26.96 (11.18) 8.06 (20.61) 12.34

1250.71 16.05 297.55

(1.53) (2.19) (2.17)

(5.07) (6.63) (9.23)

Friday

Change

(%)

(Basis Point)

22/06/18

12.66 12.87

12.43 12.18

23 68

6 Mnths 9 Mnths 12 Mnths

13.03 13.21 13.19

12.86 13.11 12.93

17 10 26

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Index

Friday

Change

(%)

(Basis Point)

29/06/18

22/06/18

2,670.60

2,677.34

(0.25)

9.10 5.88 8.99

0.02 (0.65) (0.27)

(46.26)

(0.25)

Rate (%)

Date

Mkt Cap Gross (N'tr) Mkt Cap Net (N'tr) YTD return (%)

9.10 5.84 8.72

YTD return (%)(US $)

(46.51)

TREASURY BILLS (MATURITIES)

Disclaimer

Sources: CBN, Financial Market Dealers Association of Nigeria, NSE and Access Bank Economic Intelligence Group computation.

1.19 (0.34)

29/06/18

Tenor This report is based on information obtained from various sources believed to be reliable and no representation is made that it is accurate or complete. Reasonable care has been taken in preparing this document. Access Bank Plc shall not take responsibility or liability for errors or fact or for any opinion expressed herein .This document is for information purposes and private circulation only and may not be reproduced, distributed or published by any recipient for any purpose without prior express consent of Access Bank Plc.

76.72 2.94

1 Mnth 3 Mnths

AVERAGE YIELDS Friday

(%)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

BOND MARKET Tenor

29/06/18

(%)

13.87 0.47

Friday Rate

Indicators

22/06/18

MONEY MARKET Tenor

Global Economy In the U.S., Gross Domestic Product (GDP) was revised lower to 2% in Q1 2018- 0.2% below the previous estimate. According to the Bureau of Economic Analysis (BEA), it is the lowest growth rate recorded in a year as business inventories and personal consumption were revised down. Elsewhere, in the U.K., the economy grew by 0.2% in Q1 2018, revised from its initial estimate of 0.1% and lower than the 0.4% recorded in the prior period. Major contributors to the GDP according to the Office of National Statistics (ONS) include household spending, net trade, services, production and general government. Exports jumped by 2.4% (3.2% in Q4’17) and imports rose at a slower 0.6% (1.7% in Q4’17). The trade deficit thus narrowed to 3.174 billion pounds from 5.711 billion pounds in Q1’17. In a separate development, Eurozone inflation rate rose to 2% year-on-year in June 2018 from 1.9% seen in the previous month. It is the highest rate of inflation recorded since February 2017 according to Eurostat. The rise was due to higher prices of energy and food. Core inflation rose to 1% year-on-year in June from 1.1% in May.

91 Day 182 Day 364 Day

Amount (N' million) 6,217.066 50,000.00 124,640.724

10.4662 14-June-2018 11.0801 13-June-2018 12.9897 13-June-2018

Local Economy The Federation Accounts Allocation Committee (FAAC) disbursed the sum of N701.02 billion among Federal, States and Local Governments in May 2018 from the revenue generated in April 2018. The amount was 9.86% or N62.93 billion higher than the figure disbursed in April (N638.09 billion). The amount distributed was from the statutory account, excess bank charges recovered, and value added tax (VAT) comprising of N612.64billion, N418.88million and N87.97billion respectively. A breakdown of the sum disbursed among the three tiers, revealed that the Federal Government received N289.04billion, states received N181.96billion and the local governments received N137.33billion. The oil producing states received N49.76billion as 13% derivation fund. Revenue generating agencies such as Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR) received N4.61billion, N8.67billion and N4.06billion respectively as cost of revenue collections. In another development, Nigeria’s total debt rose to N22.71 trillion as at March 2018 from N12.6 trillion in December 2016. Latest data from the Debt Management Office (DMO) revealed that Nigeria’s debt stock grew by almost a trillion naira during the first quarter of 2018. Stock Market The bullish performance at the local bourse last week was driven by buying interests. Activity level strengthened as the volume and value traded advanced by 180.65% and 307% respectively from the previous week. The All Share Index (ASI) climbed by 1.1% or 416.02 points to 38,278.55 from 37,862.53 points the previous week. Likewise, market capitalization rose by 1.1% to N13.87 trillion from N13.72 trillion the preceding week. The performance was influenced by gains in the stocks of companies in the consumer goods, industrial goods and the oil & gas sectors. This week, we expect the positive performance to be sustained as investors seek bargain hunting opportunities in the market. Money Market Money market rates accelerated across all tenors as tight liquidity persisted in the week

ended June 29, 2018. CBN mopped up system liquidity via the Open Market Operation (OMO) auction of about N208bn. Consequently, Open Buy Back (OBB) and the Over Night (O/N) rates rose to 13.17% and 14.08% from 2.83% and 3.58% respectively the previous week. Longer tenured interbank rates did likewise with the 30-day and 90-day Nigerian Interbank Offer Rates (NIBOR) settling at 14.46% and 15% from 13.40% and 13.50% respectively. This week, rates may further trend upwards due to the expected OMO auction. Foreign Exchange Market Exchange rates at the foreign currency market recorded mixed performances during the past week. The interbank window depreciated to N344.94/$ from N343.87/$ representing a drop of N1.07kobo. Conversely, the parallel market rate remained stable for the third consecutive week at N362/$ even as the official rate appreciated also for the third consecutive week by 5 kobo to settle at N305.80/$ from N305.85/$ the previous week. The efforts of the apex bank in maintaining FX liquidity as well as its commitment to intervene in the market as at when necessary were the major reasons for the stability and appreciation witnessed. This week, we envisage rate stability across market segments due to consistent FX supply by the Central Bank of Nigeria (CBN). Bond Market Average bond yields advanced in the week ended June 29, 2018 as local and international counterparties engaged in sell-offs despite the bond auction that took place during the week. Yields on the seven-, ten- and twentyyear debt papers finished at 13.43%, 13.60% and 14.06% from 13.04%, 13.48% and 13.81% respectively the previous week. The Access Bank Bond index plummeted by 6.74 points or 0.25% to close at 2,670.60 points from 2,677.34 points the previous week. This week bond yields may further trend upwards if the selling pressure persists. Commodities Oil prices climbed last week, driven by supply concerns due to U.S. sanctions that could cause a large drop in crude exports from Iran. Bonny light, Nigeria’s benchmark crude, settled higher at $76.72 per barrel, up 90 cents, or 1.2%, from the previous week. Meanwhile, the prices of precious metals dipped to its lowest level in more than six months particularly that of gold as mounting pressure from trade disputes and the expectation of higher U.S. interest rates continued to weigh on the commodities. Gold lost 1.5% or $19.44 to settle at $1,250.71 per ounce. Silver also dropped by 36 cents, or 2.2%, to settle at $16.05 an ounce. This week, oil prices may remain supported by the tightness being witnessed in the oil market. Precious metals prices may likely remain pressured due to expectations of additional rate hikes by the US Fed as well as the strengthening dollar.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Jun’18

Exchange Rate (Official) (N/$)

Jul’18

Aug’18

Inflation Rate (%)

344.80

345

346.02

11.00

10.50

Crude Oil Price (US$/Barrel)

10.20

75.2

75.9

For enquiries, contact: Rotimi Peters (Team Lead, Economic Intelligence) (01) 2712123 rotimi.peters@accessbankplc.com

BUSINESS DAY

C002D5556

BUSINESSINTELLIGENCE

Monday 02 July 2018

In association with

Directors – Duty of care and remedies for breach BISI ADEYEMI

“

irectors have sometimes been called trustees, or commercial trustees. Sometimes they have been called managing partners; it does not much matter what you call them as long as you understand what their true position is, which is really that they are commercial men [and women] managing a trading concern for the benefit of themselves and all the other shareholders; they are bound to use fair and reasonable diligence in the management of their company’s affairs and to act honestly” Jessel MR in Re Forest of Dean Coal Mining Company In relation to company

property, a Director’s position is similar to that of a trustee in that a Director controls the company’s assets and exercises his power for the company’s benefit, and not his own. Company property includes not only money and physical assets, but also intangible assets and confidential information such as trade secrets and details of business opportunities. As trustees, Directors must account for all such property over which they exercise control, refund any money improperly paid away, and exercise their powers in the interest of the company and not in their own sectional interests. A Director is also an agent for the company. The company, not being a natural person can only act through other persons. He acts on its

behalf and owes the core of his duties to the company as a whole, and not just to its shareholders or other stakeholders. More importantly, a Director stands in a fiduciary relationship towards the company and must observe utmost good faith towards the company in any transaction with or for the company. A Director must at all times act in what he believes to be the best interest of the company as a whole so as to preserve its assets, further its business, and promote the purposes for which it was formed. He must do this in such manner as “a faithful, diligent, careful and ordinarily skillful director” would act in the circumstance. This duty of care is owed towards shareholders, creditors, and employees.

Corporate Governance Masterclass Theme: “The Role of the Board in Business Sustainability” Directors, Owner Managers, Company Secretaries , Compliance & Regulatory Oﬃcers Date: July 26th2018

Location: Abuja, Nigeria

Enrolment & Registration: N100,000 (discounts available for early and multiple registration) Modules: • Achieving Board Eﬀectiveness – Key Focus Areas • Safeguarding the Independence of Independent Directors • Cybersecurity – Imperatives for the Board • Fundamentals of Risk Management For enquiries and registration: • Nike Taiwo: ntaiwo@dcsl.com.ng or 08090381864 |Mobile:08037699347, 08052800715 • Yinka Akinyemi: yakinyemi@dcsl.com.ng or 08090381864 |Mobile: 07030916893

Fiduciary duties include the exercise of power for proper purpose, not to make secret profit, not to fetter his discretion, to act in accordance with the company’s Memorandum and Articles of Association and the avoidance of conflict of interest. Questions have been asked as to the practicality of requiring a Director who is representing a significant shareholder on the Board not to fetter his discretion. Such a Director would typically vote as directed by his principal. However, the rationale of this legal requirement is to ensure that decision making in the Boardroom is based on objective reasoning and not influenced by narrow considerations. The ability to “not fetter his discretion” is the hallmark of a Director able to exercise independent judgment. A Director should not allow personal interests to conflict with his duties and responsibilities as a Director. A conflict of interest occurs when an individual is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other and it typically manifests when an individual’s private interest interferes in any way or appears to interfere with the interest of an entity to which he owes a duty. It is inevitable that Directors will occasionally face situations of potential conflict of interest whether directly or indirectly. Directors should promptly disclose any real or potential conflict of interest that they may have regarding any matters that may come before the Board or its Committees. The disclosure by a Director of a real, potential or perceived conflict of interest or a decision by the Board as to whether a conflict of interest exists should be clearly recorded in the minutes of the meeting at which the notice of interest was made. A Director should abstain from discussions and voting on any matter in which he has or may have a conflict of interest. Some Boards expect such a Director to leave the Boardroom when the matter is being discussed. The exposure draft of the Nigerian Code of Corporate Governance recently released by the Financial Reporting Council “recommends” that

such a Director should not be present when any matter on which he has an interest is being decided. The consequences of breach of a Director’s duties include, imprisonment, fines, removal from office by shareholders and disqualification from holding the office of a director in a publicly quoted company. A Director will be personally liable where he receives money by way of a loan for specific purpose on behalf of the company and with intent to defraud, fails to apply the money for the purpose for which it was received. Directors will also be personally liable where individually or collectively, they have acted beyond the authority conferred upon them by the company’s Articles of Association; acted in breach of the Companies and Allied Matters Act or other legislation; acquiesce in the company carrying on business recklessly; sign or authorize the publication of false or misleading financial statements. Directors can also be sued for losses suffered by the company as a consequence of breach of their fiduciary duties. Directors and Officers Liability Insurance (D&O) is increasingly catching on in Nigeria. D & O is provided to attract competent professionals to take up Board appointments without fear of personal financial loss. However, insuring against losses suffered by Directors as a direct consequence of negligence in performing their oversight functions or wrongful acts and misrepresentation in financial statements is not in consonance with the key corporate governance principle of accountability.

Bisi Adeyemi is the Managing Director of DCSL Corporate Services Limited. Kindly forward comments and reactions to badeyemi@dcsl.com.ng

Monday 02 July 2018

Stocks

Currencies

C002D5556

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

BUSINESS DAY

Watchlist

ECONOMY

Drug makers record

P.E

SHORT TAKES $210mn

improvement in key ratios BALA AUGIE

harmaceutical (Pharma) firms have embarked on transformational investment in the past three four years with a view to meeting international best standards and add value to shareholders’ wealth. Experts are of the view that with the completion of such investment in new plants, drug makers stand a chance of being launched into global reckoning and attract foreign investors. The analysis of the financial statement and stock performance of four of the top players in the industry (Fidson Healthcare Nigeria Plc, May and Baker Nigeria Plc, GSK Pharmaceuticals Nigeria Plc, and Neimeth Pharmaceuticals Plc ) reveals these firms have weathered the storm as evidenced by improvement in key ratios. Once a pharmaceutical company manages to bring a product to market, a key element is how profitable the company is able to manufacture and sell this product, which brings us to the measurement of key profitability and efficiency ratios. Fidson, May and Baker, GSK, recorded net profit margin of 5.60 percent, 5.91 percent, and 6.10 percent, respectively as at March 2018, beating an industry average of 5.27 percent, based on market and intelligence calculations. The cumulative average net margin of the four firms improved to 5.27 percent in March 2018 from (6.77) percent the previous year. This means drug makers

Nigeria’s central bank said on Wednesday 20th June that it had injected $210 million into the interbank foreign exchange market, extending efforts to boost liquidity and alleviate dollar shortages. The bank said in a statement it had released $100 million earmarked for the wholesale market, $55 million for small businesses and individuals, and $55 million for certain dollar expenses such as school fees and medical bills.

IV funds

are able to turn each naira of sales into higher profit as they spent less on input cost in producing each unit of product as evidenced in improved cost of sales ratio. Because pharma firms must expend massive amounts of capital to bring in their product, it is important to take a cursory look at their return on equity (ROE). Fidson’s ROE increased to 2.61 percent in March 2018 from 0.021 percent the previous year. May and Baker’s ROE increased to 4.10 percent in the period under review from 0.80 percent as at March 2017.

GSK’s ROE improved to 1.50 percent in March 2018 as from (0.00) as the firm returned to profit in the period under review. Neimeth’s ROE improved to 3.50 percent in March 2018 from (0.24 percent) as the firm returned to profit. This means firms have utilized the resources to equity shareholders in generating higher profit. Drug makers in Africa’s largest economy have been able to reduce debts in their capital structure, a sign of good financial heath despite money spent to fund aggressive expansion. Debt to equity, a mea-

A breakdown of the new fee structure showed it was divided into IV t fund segments. Fund one is an optional fund, which means interested contributors, must write to take part in it. Fund two and three are the default fund for contributors aged 49 & below, and aged 50 & above respectively. The fund four is for retirees, as stated by PENCOM

2018-2020 sure of gearing, for all four firms has reduced. May and Baker’s debt to equity ratio fell to 68.12 percent in March 2018 from 126.35 percent the previous year. Fidson’s debt to equity ratio reduced to 35.01 percent in the period under review from 39.25 percent the previous year. GSK’s debt to equity ratio dipped to 47.15 percent in the period under review from 68.52 percent the previous year. Neimeth’s debt to equity ratio declined to 90.12 percent in March 2018 from 98.15 percent the previous year. Investors have confidence that the expansion plans of some of these firms

will translate to earnings growth as they continue to buy into stocks. Fidson’s shares have gained 115.83 percent since last year, outperforming the NSE ASI Index of 19.57 percent, while it trades at price to earnings ratio of 8.45 times. G S K ’s s ha re s hav e gained 22.82 percent since last year, outperforming the NSE ASI Index of 19.57 percent, while it trades at price to earnings ratio of 29.28 times. May and Baker’s, and Neimeth’s shares have dipped 33.05 percent and 33.12 percent, underperforming the NSE ASI Index of 19.57 percent.

The fee structure for Nigeria pension industry was revised by the National Pension Commission (PENCOM), and it is valid for the period between 2018-2020, as compiled from the commission’s statement,released last week Thursday, 21 June 2018. The revised fee structure which will be effective from 1st of July, 2018 cover charges by the commission, Pension Fund Administrators (PFAs), Pension Fund Custodian (PFCs) and the commission itself

BusinessDay MARKETS INTELLIGENCE (Team lead: BALA AUGIE - Analyst: DIPO OLADEHINDE, ENDURANCE OKAFOR, BUNMI BAILEY Graphics: DAVID OGAR )

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Email the BMI team patrick.atuanya@businessdayonline.com

BUSINESS DAY

C002D5556

Monday 02 July 2018

Markets Intelligence ECONOMY

Consumer goods firms’ debt falls on FX Stability capital structure has reduced, paving the way for them to borrow and fund future expansion plans. The industry debt to equity ratio stood at 81.36 percent in 2015, and then it reduced slightly to 81.15 percent in 2016 before dropping further to 64.97 percent in 2017. The industry average total liability to total assets ratio, another measure of gearing or capitalization ratio, fell to 61.73 percent in December 2017 from 66.12 percent the previous year. Unilever’s total debt (both long and short term borrowing) reduced by 97.78 percent to N454.52 million in December 2017 from N20.50 billion the previous year. Nestle’s total debt dipped by 59.47 percent to N20.47 billion in December 2017 from N50.51 billion as at December 2016. Nigerian Breweries’ total debt decreased by 52.94 percent to N8 billion in the period under review from N17 billion the previous year.

BALA AUGIE

onsumer goods firms are clearing the backlog of foreign currency debt owed to suppliers or creditors as total trade payable has fallen, thanks to a new foreign exchange regime that eased the flow of foreign currency. Also, their debts to equity ratio- a measure of gearing- have improved, signalling a gradual improvement in financial conditions. Companies operating in the sector were the hardest hit when a sharp drop in oil price of mid 2014 resulted in a severe dollar shortage that hindered them from meeting obligations as at when due. The introduction of a flexible exchange rate policy in June 2017 combined with a rebound in crude oil price and output was a boon to firms as foreign currency was available for them to meet obligations, import raw materials and equipment to meet production. The trade and other payable of 13 largest consumer goods firm quoted on the floor of the bourse dipped by 5.04 percent to N495.85 billion in December 2017 from N522.22 billion as at December 2016. Cadbury’s trade and other receivable were down 29.58 percent to N8.86 billion in December 2017 from N12.58 billion the previous year.

Nestle’s trade and other payables fell by 24.10 percent to N49.05 billion in the period under review as against N64.47 billion as at December 2016. Flour Mills’ trade and other payables dipped by 29.15 percent to N66.42 billion in December 2017 from N94.56 billion the previous year. Nigerian Breweries’ trade and other payables were down 14.81 percent to N75.65 billion in the period under review from N88.81 billion the previous year. 90 percent of these firms recorded marked improvement in short term obligation as they continue to intensify strategies with a view to bolstering liquidity position. “At the height of the foreign exchange scarcity, a lot of them couldn’t access dollars so they had trade creditors in their books,” said Johnson Chukwu, managing director and CEO of Cowry Assets Management. “Now that FX has improved, a lot of them were able to settle suppliers,” said Chukwu. The decision of firms to raise capital to retire debt has yielded fruit as the level of debt in their

External reserves records 55.8% accretion in one year HOPE MOSES-ASHIKE

igeria’s external reserves recorded a higher accretion of 55.8 percent within a period of one year and could finance 16.2 months of imports, the Central Bank of Nigeria (CBN) stated on Friday. The stock of external reserves as at end March 2018 stood at US$46,730.54 million, indicating an accretion of 18.7 per cent when compared with the preceding quarter. The reserves could finance ap-

proximately 16.2 months of imports, compared with 15.6 and 11.7 months of imports cover for the preceding quarter and corresponding period of 2017, respectively. These were however, above the West African Monetary Zone (WAMZ) and global benchmarks of 6 and 3 months, respectively. Customers in the retail segment of the Nigerian inter-bank foreign exchange market received a $318.73m boost from the Central Bank of Nigeria (CBN) on Friday, June 29, 2018. Information obtained from the CBN

on Friday indicates that the deals in the retail window represent requests from the various sectors in the Secondary Market Intervention Sales (SMIS), thereby providing a boost to the respective sectors. Isaac Okorafor, acting director, corporate communications at the CBN, while confirming the forex sales, explained that $318.73 million sold was for companies in the raw materials, agricultural, airline and petroleum industries. It will be recalled that last Tuesday, June 26, 2018, the CBN had intervened

to the tune of $210 million to cater for requests in the wholesale segment of the forex market. Speaking further, Okorafor said the CBN remained very committed to ensuring that all the sectors continue to enjoy access to the foreign exchange required for their business concerns. Meanwhile, the naira, on Friday, June 29, 2018, exchanged at an average of N360/$1 in the Bureau de Change segment (BDCs) across major trading points in Lagos, Abuja, Port-Harcourt and Kano.

BUSINESS DAY

Monday 02 July 2018

Start-Up Digest

In association with

Young entrepreneurs making millions from food business ODINAKA ANUDU

ood is man’s basic need. People must eat no matter how bad the economy is. People must eat even if one dollar exchanges for N1 million. Nigerians must eat even when six of them enter the extreme poverty club every minute. Even when 100-trillion-dollar Zimbabwean note was worth just 40 U.S. cents (in 2015), people still ate. Food is becoming a big business in the Nigerian and the global markets. In the manufacturing sector in Nigeria, food and beverages make up 45 percent of the entire sector. People want to eat healthy foods, and entrepreneurs are increasingly finding ways of satiating this need, but are also making millions doing so. Toyin Onigbanjo One of those in this market is Toyin Onigbangbo. Toyin is the founder and head cook of August Secrets, which produces baby foods such as Veggie Beans, Nutty Meal, Fish Powder and Crayfish Powder. Toyin is a journalist, but she exports packaged baby foods to Ghana; New York and Atlanta in the United States, and other countries, making her money in hard currency. Toyin started this business officially in July 2016 and it has been a rewarding experience. The first raw materials she bought cost her N20, 000. She then spent between N200, 000 and N500, 000 on purchasing the next set of raw materials and setting up the factory. Fewer than two years down the line, this revenue of this firm (in the last 12 months) is about $100,000. “We are selling in about 24 Nigerian cities and states of the country now. We sell in Ghana; we sell in Atlanta, and we sell in New York. We sell outside Nigeria. It is amazing that we now take our foods to places where we bring our foods from,” she said. Oluwatoyin has 24 direct and indirect staff members and 24 distributors across the country. “We decided to fill in the gap when we realised that about 90 percent of what the Nigerian children ate were imported and were foreign goods. We are producing Nigerian foods, nutritious foods that are attractive and also nourish the Nigerian children across Africa,” she stated. Fo r h e r, t h e re a re m o re grounds to cover. According to her, a lot of produce from farmers is wasting away and need

Toyin Onigbanjo

off-takers and people who will market them. “The link between the farmers and the market is very weak. There are still a lot of issues in logistics. We also have a lot of market gap, and there is a gap in warehousing.” Adetola Abolarinwa Adetola Abolarinwa is the founder of The Originals, a cocktail business operating in Lagos and its environs. Adetola has seven years’ experience in Nigeria’s cocktail business. Adetola was inspired to establish The Originals in 2010 out of her desire to be independent. The Industrial Relations graduate started her business with less than N5, 000, which was spent on the purchase of basic items needed for the business. Today, she is, in the language of Nigerians, ‘not doing badly’. Kasope Ladipo-Ajai, Founder, OmoAlata In 2012, Kasope Ladipo-Ajai, a Computer Science graduate of Babcock University, set up OmoAlata, a Nigerian food service brand focused on the production and sale of hygienically processed and packaged local Nigerian soups, spices and peppers. “I told my first job interviewers that I would probably be working for myself in five years. I got the job and resigned four years later to become an entrepreneur,” she told an online platform Woman. ng. Today, the entrepreneur is making millions from providing food for the people. Onyekachi Ekezie Onyekachi attended primary school in Port Harcourt and

Kasope Ladipo-Ajai

secondary school at Igbinedion Education Centre Secondary School, Benin City, Edo State. But the entrepreneur left midway for the United Kingdom, where he completed secondary education, later obtaining a degree in Computer Science from the Bowie State University, USA. Kachi, as he is fondly called, is back as the CEO of Kaptain Foods Limited and Ready Stews, producing and packaging Nigerian-made stew and fully cooked foods. He found a business opportunity while in the USA and decided to tap into it. “It dawned on me I could package an authentic, easy to prepare stew in an appealing way. We thought Nigerians at home and abroad, especially students, would appreciate the convenience,” he told the United States Agency for International Development (USAID), in an interview in November, 2017.

Living a fast paced lifestyle often results in workers skipping their breakfasts. Knowing that breakfast is the most important meal of the day and can make workers productive, I decided to fill the gap by providing them the right meal for breakfast

Abioye Tunde-Anjous and Ladi Oshinaike Abioye Tunde-Anjous and Ladi Oshinaike, co-founded SirChefs Food and Beverage to provide healthy food for Nigerians. SirChefs Food and Beverage is a celebration of Nigeria’s food industry, with its essence created from unique local and traditional ingredients. Through its Breakfast King brand, Abioye and Ladi provides Nigeria’s pap (popularly called ‘Ogi’ or ‘akamu’) and Akara (bean cake) in packaged cups, enabling employees and people with busy schedules to take breakfast regularly. “The idea of our business came when we were both working in a health insurance firm. As a pharmacist, one of my roles in my former organisation was to talk to employees about their health and each time I asked if they had taken breakfast, I would get a ‘no’ response from most of them,” Abioye said. “Living a fast paced lifestyle often results in workers skipping their breakfasts. Knowing that breakfast is the most important meal of the day and can make workers productive, I decided to fill the gap by providing them the right meal for breakfast,” Abioye stated. After doing some research on what the ideal breakfast could be, Abioye shared his idea with Ladi, his friend and colleague then, who bought into it and, in 2017, they established SirChef Food and Beverage. Abioye and Ladi started this business with the money they raised from their personal savings while they were working and also sourced additional capital from family and friends.

The co-founders told StartUp-Digest that their business has grown tremendously since starting, owing to global standards adopted in production and excellent customer service as well as repeated patronage and high referrals rates from previous customers. “Despite that we started the business at the height of Nigeria’s recession, which was not probably the best time to start, we have been able to survive and grow new number of clients,” the pharmacists-turned-entrepreneur said. “We have never spent anything on advertisement. Our previous customers have been the ones doing it for us. We regularly get referrals for them,” Abioye further said. SirChef Food and Beverage currently has 26 full-time and part time employees. It has not all being rosy for the two entrepreneurs as logistics weaknesses have continued to impact negatively on their business. The young entrepreneurs are planning to expand their operations to other major cities across the country.

Start-Up Digest Team ODINAKA ANUDU Editor

odinaka.anudu@businessdayonline.com 08067478413

Reporters Josephine Okojie Angel James Joel Samson Graphics

BUSINESS DAY

C002D5556

Monday 02 July 2018

Start-Up Digest

How Halima makes money from baking JOSEPHINE OKOJIE

alima Adeniji is the chief executive officer of ‘Cakes on Point’. The firm offers outdoor and indoor baking services in Lagos and its environs. The success of her mother, who is also a baker, inspired Halima to set up this business in 2015. Halima learnt baking when she was 13. Apart from her mother being a baker, Halima was inspired to establish this business owing to her passion for baking, which prompted her to pick up a job at a cake company immediately after her tertiary education. She was able to raise her initial start-up capital from personal savings she made while working in a cake company. Halima says she got her inspiration from the mother. “She knows how to bake and also sells baking items. When I was young, each time I went to her shop, all I wanted to do was to look at cake catalogues and imagine how each cake would be,” she explains. “I started my business really small. I worked for a cake company before I decided to start my own business. Every month, after I collected my salary, I saved half of it to buy one or more baking equipment. Gradually, I was able to start my owing baking business,” she says.

Halima Adeniji

The Computer Science graduate tells Start-Up Digest that her business has grown since starting and has continued to remain in existence owing to the excellent services she renders to her clients

who in turn recommend others for her. “I ensure that I satisfy my customers so that they can always come back and also refer me to others,” the baker says.

The young entrepreneur believes that she sources her raw materials from local markets across the country. This, according to her, is the way to go in Nigeria where manufacturers

source the majority of their raw materials from abroad. When asked about the challenges confronting her business, Halima tells Start-up Digest that lack of finance is the greatest challenge her business faces. According to her, lack of funding forced her to set up this business early enough, as she was unable to secure enough funds for business registration as well as financing the business proper. She urges the federal government to provide adequate grants and loan opportunities to youths with entrepreneurship minds, stating that a lot of young people with wonderful business ideas are yet to go commercial owing to inadequate funds to finance their businesses. Apart from finance, Halima says that high cost of food items and inadequate power supply are key challenges confronting her business. She states that adequate power supply is the backbone of any economy, calling the government to ensure adequate supply of power for start-ups and businesses to survive. She further says that it will be impossible for start-ups and MSMEs to realise their potential in the absence of power. What advice does she have for other entrepreneurs? Halima says, “There are going to be hard times, but never give up, dream big, aim high ,pray very hard, work hard and success is yours.”

CBN, BoI, LSETF say many SMEs unqualified to access cheap funds

iCreate unveils partners for upcoming skills fest

…SMEs need to prepare a year or more to access loans

ODINAKA ANUDU

ENDURANCE OKAFOR

he Central Bank of Nigeria (CBN), the Bank of Industry (BoI) and the Lagos State Employment Trust Fund (LSETF) say there are many funds available for the micro, small and medium enterprises (MSMEs), but many business owners are not qualified to access them. They say lack of proper documentation, absence of financial history, and inability to structure businesses, among others, are responsible for poor access to funds at financial institutions. Mike Oye, head of SME Funds at BoI, said many Nigerians set up businesses without thinking that they would ever take loans, which is why many of them do not take documentation seriously. “Take for instance, someone makes shoes and comes asking for a loan. He says he sponsored himself through school from producing shoes. I believe him because when I ask him questions like, where do you source your leather? How do you sell? He is answering me off the top of his head, so I know really that he has been in the

business for like five or six years, but unfortunately, my computer is completely emotionless, as he does not have sales record, bank account, and receipts,” Oye said at an event organised by the Arts and Civics Table Organisation (TACT), a non-governmental organisation, themed, ‘SME Sustainability & Growth Conference 2018’. Adebisi Adedeji, head of development finance office at the CBN, said there is some kind of disconnect between the lenders and the SMEs. Adedeji said there are several ways of looking at the challenges. “It is an orientation and a training problem, orientation problem because I have had instances where I spoke to Nigerian graduates who had been home for five, six years waiting to get a white collar job and doing nothing. Nigerians are not trained to create their own jobs. Most people’s mind-set is to get out of school and get a job. That is the first primary challenge.” He stressed the need for an average young Nigerian to have a change of attitude tailored towards starting up businesses. Charles Anyanwu, head, SMEs at LSETF, cited lack of entrepre-

neurial training on the part of most graduates, stating that some accounting graduates cannot even draft business plans. Anyanwu explained that CBN has encouraged institutions to factor in entrepreneurship in their curriculum and a few of them have done so, especially private universities. “You are running a business for ten years, no documentation, no paper trail, no bank account for the business. All transactions are in person. It does not enter your bank account and you want to access a facility. So, these are the things that we really need to engage people about,” Anyanwu said at a panel conversation. On the way to go for SMEs in Africa’s largest economy to be eligible for loan funds, the stakeholders in the conference raised different ideas which included formalising their businesses to enable them gain recognition by government. According to the survey from the conference, only 4.2percent of 37.07 million MSMEs in Nigeria have been able to access loans or overdrafts from financial institutions while new entrants or startups find it practically impossible to access finance from banks.

Create Africa has partnered new organisations for its first ever iCreate Skill Fest. Some of the organisations supporting the project are: the Federal Ministry of Industry Trade and Investment; Embassy of the Federal Republic of Nigeria, Berlin-Germany; Abuja Chamber of Commerce and Industry; Nigeria Employers’ Consultative Association (NECA), and the Delegation of German Industries and Commerce in Nigeria. These are lending their networks, platforms and expertise within the industry

space to help make iCreate Africa Skill Fest a success, according to Teresa Aligbe, public relations director. Aligbe says the partners share iCreate’s commitment and passion to positively reshape the narrative around vocational skills acquisition, empower Nigerian youths with relevant skills for the job market as well as entrepreneurship, and help solve the biting problem of unemployment in the country. She adds that international NGOs, Oxfam and Siemens are also their lending support and decades of technical expertise. “The Start Up and SME scene is duly represented by StartUp Incubator, Impact Hub Lagos and StartUp, Creative and SME focused communications firm, Phenom Communications. A special thanks to our media partners, The Guardian and The Beat 99.9Fm, whose partnership with iCreate Africa, just like all our other partners, is borne out of a shared understanding of the many solutions the vocational skills sector can unlock for the country.”

Monday 02 July 2018

C002D5556

BUSINESS DAY

FEATURE

PFI: Intervention in fertiliser supply,fillip to farmers, employment In late 2016, the government established Presidential Fertilizer Initiative, PFI to make fertiliser not only available but cheap for Nigerian farmers. Daniel Obi assesses this initiative and its impact.

Fertiliser supply rumbles over fertiliser scarcity and its attendant agricultural consequences were predominant in media channels prior to this period. It was either the product price was out of the reach of common farmers; selling between N9,000 and N15,000 per 50kg, or the product was diverted for other nefarious purposes or that farmers suffered from lack of subsidised input support. Prior to 2017, excessive emphases were laid on importation of the product which according to reports cost Nigeria humongous amounts of money in foreign exchange annually. This also means that Nigeria was boosting other countries’ economies and sustaining their jobs level to the detriment of Nigeria’s economy. The trend of importing fertiliser at high price to meet the needs of farmers with objective to augment agricultural production was embarked upon in spite of 32 fertiliser blending plants in the country. Thomas Etuh, Chairman of Fertilizer Producers and Suppliers Association of Nigeria (FEPSAN) said that out of this 32 plants, only five were functioning at only 10 capacities, a development caused by importation. Today, the ugly narrative appears to be changing, triggered by the launching of the Presidential Fertilizer Initiative (PFI) by the Federal Government early last year. The initiative was informed by Nigeria’s desire to reduce the cost of fertiliser and equally make the product available.The initiative which kicked off in February 2017 was also designed to achieve local production of one million metric tonnes of blended Nitrogen, Phosphorous and Potassium (NPK) Fertilizer for the 2017 wet season farming and an additional 500,000 metric tonnes for dry season farming. A committee, comprising key stakeholders, was set up to craft a model with the intention of making fertilizer available at cheaper prices a reality. The committee included Governor of Jigawa State; Chief of Staff to the President; Group Managing Director of NNPC, the Governor of Central bank of Nigeria, the President of Fertilizer Producers and Suppliers Association of Nigeria, the Managing Director of the Nigerian Sovereign Investment Authority, the Minister of Finance; and the Minister of

Agriculture. Starting on this journey, the committee realised that 63 percent of fertiliser raw materials is available in Nigeria. These raw materials include; Urea which is Nitrogen, produced in Port Harcourt; Limestone, which forms the Calcium input in fertilizers that is produced by the West Africa Fertilizer Company in Okpela in Edo State. The other raw materials are imported and they are 21 percent Phosphate from Morocco, 16percent Potassium from Belarus. Potash is available in Nigeria but not in commercial quantity. With availability of phosphate in Morocco, President Mohammadu Buhari initiated a deal with King Mohammed VI of Morocco on how Nigeria could get phosphate on a government-togovernment basis. This yielded a good deal for Nigeria in pricing. The committee also negotiated the potash deal with Belarus. Chairman of FEPSAN calculated that by sourcing 63 percent of raw materials found in the country for inputs, the programme has been able to save the country, $200 m in foreign exchange and N60 billion in subsidy instead of relying on full importation. During the visit, it was said that both leaders signed some agreements which included a partnership between FEPSAN and OCP, a state-owned Moroccan company and a world leader in phosphate and its derivatives. The partnership entails OCP supplying phosphate at discounted price to Nigeria, to help support

the domestic blending of NPK Fertiliser starting in 2017. With this the stage was set. “The objective of this initiative is to ‘disrupt’ the importation of blended fertiliser status-quo”. This is how the committee was able to reduce the price to N5,000 per bag from over N10,000 previously. To blend the ingredients into fertiliser, government signed in some blending plants in Nigeria which produce, bag and then sell the finished NPK blends of fertilizer to Agro-dealers and state governments at the cost of N5,000 per bag. They in turn sell to farmers at N5,500. The PFI initiative has also revived some blending plants which were producing at ridiculously low capacity before now. Under this arrangement, the Nigerian Sovereign Investment Authority NSIA was invited to buy these raw materials, Urea and limestone from Nigeria, Phosphate from Morocco and Potash from others and the supply them to the blending plants to blend and sell. After identifying the suitable blending plants,NSIA shipped the fertiliser components to them on credit, to blend and sell to the consumers and return the money to NSIA. According to a source, “in one singular action, the fraud has been eliminated from the system because there is no subsidy. In the past, the subsidy was a conduit where someone will sweep all the money and pretended to have imported fertilizer but this time, it has changed, importation

bottlenecks are eliminated. This time it is cash and carry”. Fortunes of farmers improved Looking back to where Nigeria is coming from on fertiliser, Ogbonnaya Chukwu, General Manager, Ebonyi Sate Fertilizer and Chemical Company Limited and Senior Special Assistant to Ebonyi State Governor on Investment, described PFI as a success story to Nigeria especially to both farmers and blending plants. He simply said in a report that the PFI intervention has been a very wonderful thing as far as fertilizer production is concerned. It is also further made easy to blending plants as federal government provides all the raw materials they need. Chukwu also admitted that availability of fertilizer has boosted food production in Ebonyi State. Further assessing the initiative, Jacob Gimba Manu of Bejaftan Group in a report believed that the PFI has reduced poverty within some areas. “Poverty eradication is not just about giving you wealth; it’s for you to be able to at least have three square meals. And today, if you go to my own local government, Bokos LGA, farmers are smiling”. According to him, the availability of the product from right sources has put checks on the adulteration of the product. Employment generation and contribution to GDP The initiative has not only assisted to revive some of the moribund fertiliser plants in the country; it has generated em-

ployment to Nigerians. Before now, the blended fertilisers were imported 100 % in the face of the presence of blending plants in the country. The challenge was how and where to get the raw materials in scale and size because many of the plants were small businesses. The government intervention therefore removed this challenge which enabled the blending plants to become alive again. “The intervention by PFI has helped us to up our game in terms of employment. PFI helped to revive our plant. The company was almost moribund but this programme restored us to productivity and we are even looking at exploiting the opportunity further for growth. Nigerian farmers have also benefited hugely because the PFI has made fertilizer available and affordable for them”, Chukwu further said. It is estimated that the initiative has created over 150,000 direct jobs and over 200,000 indirect jobs. Possible exportation of fertiliser Stakeholders in the fertiliser value chain believe that there is possibility of exportation of the product from hitherto 100% importation of the product. This is in view of the plans to sign in more blending plants from the present 11 to 20 or more before the end of 2018 Today, Ebonyi Sate Fertilizer Company is expanding to meet needs and perhaps export. If other blending plants, in addition to those yet to come on stream achieve this success, Nigeria will move from importation of fertiliser to exportation with consequent result in foreign exchange earnings. Mohammed Rabiu Kwa, Executive Secretary of FEPSAN is confident that any excess fertilizer produced in Nigeria has no problem at the moment as the aim is to make Nigeria become a hub for fertilizer in West Africa. The PFI initiative is laudable with expected positive impact on agriculture, employment and GDP. It was largely successful because of the determination of the government and its PPP arrangement. It is an initiative that can be replicated in other sectors such as solid mineral mining, gas exploration, infrastructure development and abandoned government properties to boost employment and services to Nigerians.

BUSINESS DAY Harvard Business Review

Monday 02 July 2018

C002D5556

MondayMorning

In association with

Why is crying at work such a big deal? JENEVA PATTERSON

t’s a familiar narrative for women who cry at work: Escape to bathroom. Grab toilet paper. Wipe eyes. Blow nose. Most of the women I spoke with about this article explain that to cry in front of colleagues, especially male peers or bosses, ranks as one of the most humiliating professional experiences. But times and corporate culture are both changing. Could crying have a less negative stigma if leaders embraced it as natural? Sylvia Ann Hewlett, an expert on gender and

workplace issues, writes that “Crying … is just one of a menu of communication blunders that, in a mere instant, can suck the executive presence right out of you.” It can take years, or even a job transfer,

for us criers to earn back our executive presence once it vanishes. On the other hand, instead of losing their executive presence, men generally benefit from crying at work. An organization’s cul-

ture is most often established, normalized, and reinforced by its leaders. Leaders are most effective when they show vulnerability and acknowledge their mistakes. If leaders are in charge of creating a culture of inclusivity, their work includes getting more women into higher-level positions. And since crying is a natural part of women’s biology, a new attitude about crying must be part of that same effort. So if you cry at work, do one of the following: Own your tears. If you’re not embarrassed about crying, others won’t be embarrassed

either. Take a breath. Say something like, “As you can see I have strong emotions about this topic because of how much I value our work.” Laugh. There’s nothing that makes you and everyone else feel more comfortable than laughing together. If you begin sobbing, excuse yourself, and leave the room. But when you come back or the next time you’re with that group bring it up again and talk about it transparently. And if you are a leader and someone on your team cries, try these strategies: Openly acknowledge

that crying is a natural, autonomic process. You can say,”Obviously many of us feel strongly about this. It makes me feel like crying too!” Share an example with your colleagues of when you cried at work. You’ll model that being vulnerable is OK, which increases levels of trust and safety and gives implicit permission to someone else who might need to cry in the future.

(Jeneva Patterson is a senior faculty member at the Center for Creative Leadership in Brussels, Belgium)

How do we combat ageism? By valuing wisdom as much as youth CHIP CONLEY

lthough the Age Discrimination Employment Act of 1967 prohibits discrimination in the U.S. against people 40 and older, a recent survey by AARP showed that two thirds of workers between the ages of 45 and 74 said they have seen or experienced ageism. So, while class action lawsuits and tough journalistic scrutiny are steps in the right direction, efforts to merely enforce the law are not sufficient. Let’s remember that equal rights for women, blacks, disabled people, gays and lesbians and others weren’t achieved solely through changes in laws, but instead by a change in

attitudes that usually predated legislation. And yet our culture, in this particular arena, is lagging behind. The brisk march of progress from the industrial age to the tech era has created a strong bias toward digital natives who understand gadgets and gigabytes better than those of us who didn’t grow up using computers. We’re living longer, but power is becoming younger. While the median age of employees in the United States is 42, that number is more than a decade younger among our tech titans. The problem is that many of these young leaders are being thrust into positions of power long before they are ready.

built to endure. In early 2013 I returned to the workforce in my mid-fifties as a senior executive with tech startup Airbnb. What I lacked in digital intelligence, I made up for in accumulated emotional intelligence. And the mutual mentoring I offered and received turned me into what I call a “Modern Elder” — someone who marries wisdom and experience with curiosity, a beginner’s mind and a willingness to learn from those younger. It’s time we embraced age like any other type of diversity. Wisdom precedes us and will succeed us. But there is a generation of older workers with wisdom and experience,

specialized knowledge and unparalleled ability to teach, coach and council

who could pair with these ambitious millennials to (Chip Conley is a bestsellcreate businesses that are ing author.)

We have you covered through CBN’s special intervention for speciﬁed retail invisible transactions.

Are you travelling abroad for vacation

Visit any of our designated branches nationwide for your following invisible trade transactions: School Fees Pilgrimage & Other Travel Allowances (PTA and BTA) Medical Allowances

or studying abroad?

We are here to serve you. *Terms and conditions apply

www.ﬁrstbanknigeria.com

FirstBankofNigeria

@FirstBankngr

Firstbankngr

FirstBankofNigeriaLtd

@ﬁrstbanknigeria

+FirstBankNigeria

Monday 02 July 2018

Harvard Business Review

BUSINESS DAY

C002D5556

MondayMorning

In association with

How to identify and tell your most powerful stories NANCY DUARTE

hen I ask executives w h a t their favorite speech is, Steve Jobs’s Stanford commencement address is always at the top of the list. Great stories expose our flaws and our struggles. This is what makes them inspiring, and not sharing them is such a missed opportunity to connect with your audience. When my firm helps executives craft talks that will persuade and forge bonds with listeners, we often have to help them recall or dig up latent stories that come from a deep place of personal conviction. Here are some of the techniques we rely on again and again: — TRIGGER STORIES

THROUGH MEMORY RECALL. Sit down with a notepad and think through the people, places and things that have shaped your life. People: Write your name in the center of the paper, and start drawing out types of relationships: family, friends, co-workers

and so on. Each time you draw a connective line, think through the relational dynamics and emotions. Places: Get as specific as you can in recalling places that matter to you. Use spatial recollection. Retracing your movements will dislodge memories that will re-

veal to you long forgotten events and interactions. Things: Take note of objects or items that have symbolic meaning in your life. Sketch them and recall what makes them emotionally charged. When you’re done with the above exercises,

look at the story kernels you’ve come up with and write one-line summaries of them. — CREATE A STORY CATALOG. Once you’ve curated a host of stories that you can use in various types of situations, take your list and create a personal story cata-

log that you can turn to. Many people pull from the most poignant part of their story catalog when they’re staring down mortality, like Jobs was. Instead of waiting until your hand is forced, take stock of the important stories in your life right now, and catalog them. — CHOOSE STORIES WITH YOUR AUDIENCE IN MIND. Consider who’s in your audience and what they care about. Carefully consider their values, goals, and interests, and then decide which of your stories fits them best. Telling a personal story from a place of conviction is the most powerful communication device you have. That’s what the greatest and most beloved communicators do.

(Nancy Duarte is the author of the “HBR Guide to Persuasive Presentations.”)

How liberals and conservatives shop differently NAILYA ORDABAYEVA

he charged political atmosphere is increasingly influencing the marketplace, and retailers are having to figure out where they stand. In this era, it seems, everything is political, including shopping. But our research suggests American consumers’ brand preferences are shaped not only by where companies stand on politically polarizing issues, but also by consumers’ own political affiliations and subtle brand associations. We find that conservative and liberal ideologies lead consumers to systematically choose different strategies to distinguish themselves in the marketplace. In our research, conservatives tended to differentiate themselves through products that show that they are “better” than

others — for example, by choosing products from high-status luxury brands. In contrast, liberals tended to differentiate themselves through products that show that they are “unique” — for example, by choosing products with unconventional designs or colors. These patterns emerged regardless of whether political ideology

was captured by a simple dichotomous scale. Similar results emerged even when we temporarily made a conservative or a liberal identity salient to participants, by asking them to recall a time when they were interacting with someone who was more liberal, or someone who was more conservative than them. The results were also

consistent across income brackets. For example, in one study participants from different annual income brackets were asked to rate their interest in wearing a red outfit to a professional networking event. Regardless of their income bracket, conservatives were more interested in wearing the red outfit when they thought that red signaled superior-

ity (rather than “uniqueness”), and liberals were more interested in wearing the red outfit when they thought that red signaled uniqueness (rather than “superiority”). We hypothesized that these differences in product preferences might emerge because of different beliefs about social hierarchies. Conservatives tend to endorse social

Brought to you courtesy of First Bank Nigeria

hierarchies as reflecting legitimate differences in people’s skills and work ethic. Liberals tend to oppose hierarchical social structures, believing that everyone works hard and that some people attain high positions in society because of luck or connections. This means that if conservatives’ and liberals’ perceptions of hierarchical structures can be reconciled, at least temporarily, the differences in their product preferences may also be bridged. Ultimately, this work introduces a new, political lens for understanding key differences in consumers’ purchase decisions.

(Nailya Ordabayeva is Assistant Professor of Marketing at the Carroll School of Management, Boston College.)

BUSINESS DAY

Monday 02 July 2018

Live @ the Stock exchange Prices for Securities Traded as of Thursday 29 June 2018 Company

Market cap(nm)

PRICES FOR MAIN BOARD SECURITIES (Equities)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Monday 02 July 2018

C002D5556

43 NEWS

BUSINESS DAY

Poor landing aids, low purchasing Rising killings: Ekweremadu to power squeeze domestic airlines sponsor bill on State Police IFEOMA OKEKE

omestic airlines operating in Nigeria are currently operating below capacity as a result of low purchasing power of Nigerians and poor landing aids across Nigeria’s airports. Experts say this situation is costing airlines billions of naira in unearned revenues. BusinessDay’s checks show that currently less than 10 percent of the population travel by air as a result of low purchasing power of the populace. This has continually made it difficult for airlines to carry aircraft with full load of passengers, thereby making it difficult to realise their operating cost. A report obtained by BusinessDay has revealed that only 11,221,617 passengers passed through the nation’s 32 airports in 2017, representing 26.3 percent drop when compared with the preceding year. In addition to this, an average functional aircraft can operate for 15 to 18 hours daily, but Nigerian airlines fly an average of only five hours.

“Most of the airports in Nigeria close by 6pm to 7pm, whereas airlines should be able to operate their aircraft for at least 18 hours a day. This is one of the problems making their operations not very profitable because if they can fly from 5am in the morning till 3pm the next morning and use the few remaining hours to do maintenance, then airline operations will be very profitable,” Dung Rwang Pam, Nigeria’s Aviation Safety Initiative (NASI) coordinator, told BusinessDay. Pam explained that some of the landing aids were absent at most of the country’s airports, include landing lights, the taxi way light to show airlines where the centre line and the edge of the runway is; and the apron, where airlines can taxi their aircraft. According to Pam, lack of these instruments reduces the utilisation of the aircraft, adding that whether airlines use their aircraft or not, every 18 months, they have to pay for compulsory C check maintenance for their aircraft. “All the about seven domestic operational airlines make less than 300 flights to less than 10 airports daily; whereas, if each

can make just three return flights or six flights daily to 20 of the 26 airports, that would be about 600 daily flights for a whole day. “There are about 26 airports, 18 of them are federal, about 8 of them are owned by states and private operators, but less than 10 of these airports are regularly operated. The airports with operational night landing aids are most likely the five international airports in Nigeria,” John Ojikutu, chief executive of Centurion Securities, said. BuinessDay’s checks show that Nigeria loses N13.6 billion annually to poor navigational aids as a result of the failure of the Federal Airports Authority (FAAN) and Nigerian Airspace Management Agency (NAMA) to provide adequate aids required for night landing. Experts have said that with the economic activities around Akure, Asaba, Calabar, Ilorin, Jalingo, Kano, Makurdi, Minna, Owerri, and Uyo, Nigeria may be losing N37.5 million daily and N13.6 billion annually because there are no landing aids around these airports to enable them operate night flights.

OWEDE AGBAJILEKE, Abuja

s the Senate resumes from Sallah break on Tuesday, deputy Senate president,IkeEkweremadu,has indicated that he will sponsor a bill to decentralise the nation’s policing system. This, he pointed out, was in response to the rising insecurity and killings in Nigeria. Ekweremadu gave the indication during an interactive session with Fulbright Scholars, Exchange Scholars, and Graduate Students at the International Centre for Information and Nelson Mandela Institute of Research in his maiden lecture as a professor and senior mentoring scholar, E-Governance and Strategic Government Studies, Nelson Mandela School of Public Policy and Social Sciences, Southern University, Baton Rouge,Louisiana,UnitedStates. A statement on Sunday by Uche Anichukwu, special adviser (media) to Ekweremadu, explained that the lawmaker described the current system in Nigeria as “dysfunctional and unsuitable for a federal system.” Reacting to numerous con-

cerns and questions posed to him on the rising killings and insecurity across the country, the senator said the killings had continued mainly because the federating states were not constitutionally allowed to recruit, train, and equip enough manpower for the security of lives and property of citizens in their states. His words: “Unlike here in the United States where the component states, counties, big institutions set up police service to address their local needs, the Nigerian constitution vests the security of a very vast, multifarious, and highly populated country in hands of the Federal Government. “The internal security of Nigeria depends on one man or woman, who sits in Abuja as the Inspector-General of Police. The governor of a state, though designated as the chief security officer of the state by the constitution, cannot direct the Police Commissioner of his State on security matters. “The commissioner will have to clear with the Assistant Inspector-General of Police, who will clear with a Deputy

Inspector-General of Police, who will also clear with the Inspector-General of Police, who may in turn need to clear with the President, who is the Commander-in Chief of the Armed Forces. By the time the clearance comes, if it ever does, it would have been late. “Nigeria is the only federal system I know, which operates a unitary or centralised policing. Ironically, it was not the case in the beginning. The founding fathers agreed on a federal constitution, which allowed the component units to set up local police organisations. But it was overturned by the military and successive civilian regimes have continued to play the ostrich.” On the way forward, he said: “As far as I am concerned, whateverwearedoingnowiscertainly not working and we cannot continue to do the same thing and expect a different result. “The real tragedy of the Plateau massacre is that we risk more attacks and loss of lives unless we decentralise our policing and allow every state at least to take their fates in their own hands.

NAMA deploys stand-alone VHF radios at Lagos SUB-FIR IFEOMA OKEKE

n keeping with its earlier pledge to address Remote Control Air to Ground (RCAG) communication challenges in the nation’s upper airspace, the Nigerian Airspace Management Agency (NAMA) has successfully deployed two Jotron highpowered very high frequency (VHF) long-range communication radios, each installed in Lagos West and Lagos East Area Control Centres (ACCs). The installation of equipment, which began a few weeks ago, culminated in the successful Site Acceptance Test (SAT) carried out by NAMA engineers in conjunction with their counterparts from Jotron AS, Norway. Speaking during the Site Acceptance Test, Fola Akinkuotu, NAMA managing director, said, “In accordance with International Civil Aviation Organisation (ICAO) regulations, it is incumbent on Air Navigation Service Providers (ANSPs) like NAMA to facilitate safe airways, safe separations and also provide critical fall-back plans for airspace users and that is the essence of this project.” He described the standalone radios as a robust solution for emergency/backup coverage in unexpected circumstances like when there were technical failures or

during routine maintenance of the main RCAG system. He said: “test transmission has been conducted on the system by air traffic control officers with aircraft flying at different flight levels just as contacts have been established for a distance of up to 220 nautical miles at different flying levels of the upper airspace and this conforms with the VHF propagation predictions submitted for scrutiny during the design phase of the project.” E x p l a i n i n g f u r t h e r, Akinkuotu said the highpowered VHF radios are designed to provide cover for Lagos en-route East using 127.3MHZ and Lagos enroute West using 120.9MHZ. Similarly, he said the radios will provide VHF backup for Kano en-route-East (124.1MHZ) and Kano enroute West (128.5MHZ). The stand-alone facility according to the NAMA boss is fully self- sufficient, independent of existing VSAT, local voice switch (VCCS) and is inclusive of its own integrated power supplies to cover an eight-hour emergency communication window should a total power outage occur. “Basically, the standalone VHF radio ensures 24/7 Air Traffic Control (ATC) availability in the event of either a VSAT link failure or some other significant VHF communication loss,” he said.

L-R: Anthony Osae-Brown, editor, BusinessDay; Adeola Ajewole, advert manager; Frank Aigbogun, publisher/CEO; Laurent Dumeau, founder, Trace International, and Oghenevwoke Ighure, executive director, digital services, BusinessDay, during a courtesy visit by Laurent to BusinessDay head office (The Brook) in Lagos, at the weekend. Pic by Olawale Amoo

Nigeria’s current account balance rise to $4.5bn on increased export earnings HOPE MOSES-ASHIKE

igeria’s current account witnessed a positive outcome in the first quarter of 2018, recording a higher surplus of $4.5 billion as against a surplus of $3.6 billion in the previous quarter and $3.4 billion in the corresponding period of 2017. The development was largely attributable to the increased export earnings and the net surplus in current transfers, according to the CBN. The apex bank on Friday, released its first quarter brief on balance of payments statistics, which revealed that provisional Balance of Payments (BOP) estimates for Q1 2018 showed a significant improvement in the country’s position as the overall

balance of payments indicated a surplus of $7.3 billion compared with a surplus of $6.2 billion in the preceding quarter. It also indicated a better position when compared to a surplus of $2.9 billion recorded in the corresponding period of 2017. The surplus in the Goods Account increased to $5.7 billion in Q1 2018 from a surplus of $5.5 billion in the preceding quarter, and $2.3 billion recorded in the corresponding period of 2017. Export earnings rose by 10.2 percent to $14.4 billion in Q1 2018 when compared with Q4 2017. It also indicated an increase of about 44.4 percent when compared to Q1 2017. Earnings from crude oil and gas, which accounted for 93.3 percent of total export earnings

during the review period, increased by 10.1 per cent to $13.4 billion in Q1 2018, when compared with the preceding quarter. The report indicated that earnings from non-oil and electricity ex-ports also increased by 12.3 percent to $967.08 million in Q1 2018 when compared with the preceding quarter. Available data showed that payments for import of goods (fob) to the economy in the review period grew by 13.9 percent to $8.6 billion, above the level recorded in the preceding period. This was largely as a result of 99.5 percent increase in the imports of petroleum products. On services, income and current transfers, net out-payments for services during the review period decreased by 5.1 percent

to a deficit of $4,445.49 million when compared with the level recorded in Q4 2017. However, when compared with the level in the corresponding period of 2017 it indicated a significantly increase of about 201.2 per cent. Income account (net) worsened to a debit of $3.3 billion in the review period from $2.9 billion recorded in the preceding period. This is significantly different from $2.3 billion recorded in the corresponding period of 2017. Current transfers (net) increased by 9.9 and 31.3 percents to a surplus of $6.4 billion in Q1 2018 when com-pared with the levels in the preceding quarter of 2017 and corresponding period of 2017, respectively.

44 BUSINESS DAY NEWS Again, CBN fears interest rate cut will heighten monetary, fiscal challenges ONYINYE NWACHUKWU, Abuja

entral Bank of Nigeria (CBN) has ruled out an interest rate cut in near term, with fears that loosening its monetary policy stance could at this time exacerbate fiscal challenges in the economy and worsens inflationary pressure, which it is trying to contain. Moses Tule, CBN director of monetary policy, told journalists last week in Abuja that cutting the Monetary Policy Rate, which the apex bank had retained at 14 percent and kept for the 10 straight time as well as other benchmark lending, would trigger adverse consequences, including the demand for increased wages. “When you reduce MPR, of course, the way the fundamentals are today, you are going to have the impact of that in other ways; which means the demand is going to be higher on the government to increase wages because inflation will erode the living wage. There will be demand on the government, and every other person in the private sector will demand for wage increase” he said. The CBN announced last month that it was waiting to see

how far the huge anticipated spending from a combination of the over N9 trillion 2018 budget, expanded monthly disbursements by the FAAC, election spending, among others, could have on price stability before deciding on how to move rates. “That’s the choice. We have to choose between having to improve infrastructure and interest rate will come down overtime and the whole economy will benefit or reduce interest rate now and then worsen inflation,” Tule argued, while fielding questions from journalists on the sidelines of the maiden colloquium organised by Uche Uwaleke, a professor of capital market. Reacting to concerns that there is no convergence between monetary and fiscal policies, Tule explained that this was not true, and that the fiscal and monetary authorities have rather come up with measures that helped the country restore economic growth. Citing the nation’s reserves now at about $48 billion, Tule said it was CBN’s tactical foreign exchange measures that led to the steady accretion being celebrated and had provided buffers in the past few weeks to temper the pressure caused by the normalisation

of interest rate in the United States of America. Tule equally commended fiscal measures put in place by the government, particularly the decision to look towards offshore borrowing in order not to crowd out the private sector. But speaking earlier at the colloquium, and in a panel discussion on “Fiscal and Monetary Policies for Deepening the Capital Market in Nigeria,” Tule had pointed out that one of the derivatives of the structural policies is that “the market determines what the interest rate is. “When we (CBN) reduce the MPR of course the way the economic fundamentals are today we are going to have the impact of that on higher prices.” Tule cautioned that the capital market should not expect investment inflows, arguing, “that the people do not invest where they live from hand to mouth. You can only save to invest when you have leftover.” “There are lots of funds offshore, those funds are eager to come into the nation,” he rather advised. “On our own part the central bank has tried to stabilise the exchange rate and you can see that it has stirred up

C002D5556

Monday 02 July 2018

NIRSAL, AfDB to tackle Africa’s $35bn food import using technology ONYINYE NWACHUKWU, Abuja

elying on new technology, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), African Development Bank (AfDB) and the International Institute of Tropical Agriculture (IITA) have commenced a partnership that would see a significant cut in the $35 billion annual food import by the continent. The collaboration was borne out of concerns that Africa cannot continue to import food considering massive arable land and other resources. NIRSAL convened agriculture stakeholders to a meeting Thursday last week to create a plan for agricultural transformation in Africa, through the adoption of regional and home-grown technologies that are enhanced by strategic partnerships of agriculture multistakeholders and experts. Coming together to deliberate on lasting solutions for the transformation of agriculture in Africa were managing director/ CEO, NIRSAL, Aliyu Abdulhameed, director, Agriculture and Agro-Industry, AfDB, Martin Fregene, deputy director-general, Partnerships for Delivery, IITA, Kenton Dashiell, officials of the Federal Ministry of Agriculture and Rural Development (FMARD), Technologies for

African Agricultural Transformation (TAAT) and industry experts from various countries in Africa. Speaking at the meeting held at the NIRSAL’s head office in Abuja, Abdulhameed said, “The background to this is that the AfDB has developed a technology to see how Africa agriculture can leapfrog in order to meet the requirements of the 21st Century-rapid population growth and the fact that Africa imports $35 billion of food commodities from around the world and we know we have sufficient resources to feed Africa, Nigeria in particular, we have land resource, water resource, we have the market opportunities.” But despite these resources, the technology required increasing yields from subsistent level to commercially viable and surplus of communities and the market to substitute for imports remains a problem. “We have found in the AfDB TAAT (Technology for Africa Agricultural Transformation) system a one-stop shop what can give us the capability and the technology required to be applied on the ground to support primary production of virtually all the commodities required in Nigeria and leapfrog the technology overnight,” Abdulhameed said. “We believe in NIRSAL, being a risk management company, it is import for us to sup-

port any technology that can increase yield. Any increase in yield for farmers’ means generation of revenue. Generation of revenue means the capacity for us to enable them to access finances because finances can only come when you can demonstrate the generation of sufficient revenue. “Yield is tied to science, technology and innovation and that is what the TAAT programme of the AfDB is all about.” AfDB’s Feed Africa initiative targets massive food production on the continent, through improved technology by ensuring increase yield per hectare, as well as, attracting the youth to agriculture. The meeting was an outcome of the recently concluded fourth Cassava Conference and Meeting of TAAT Compact Leaders in the Republic of Benin. The AfDD has pledged to invest $120 million over the next three years to boost productivity and transform nine commodities in Africa, which include cassava, rice, maize, sorghum/millet, wheat, livestock, aquaculture, high iron beans and orange-fleshed sweet potatoes. The transformation of these nine commodities will be achieved through TAAT, a key platform for driving the Feed Africa strategy of the AfDB.

Shell finalises 624mw electricity for national grid ONYINYE NWACHUKWU, Abuja

L-R: Abiodun Fawunmi, non-executive director, board of CWG; Adewale Adeyipo, vice president - sales/marketing, CWG; James Agada, group CEO/MD, CWG; Phillip Obioha, chairman, board of directors CWG; Anne Agbo, CWG company secretary - DCSL; Austin Okere, non-executive director, board of CWG; Olusegun Oso, non-executive director, board of CWG, and Wale Agbeyangi, non-executive director, board of CWG, at the annual general meeting of CWG plc in Lagos.

Dangote Cement’s African expansion drive strategic - Makoju

roup managing director of Dangote Cement plc, Joseph Makoju, says the investments of the cement company and its expansion drive across African countries are strategic to contribute to Africa economy and make its products the most preferred by consumers. He stated this at the weekend during a partnership visit and plant facility tour by top officials of the Standard Organisation of Nigeria (SON) to the Ibese Cement Plant of the company in Ogun State. According to Makoju, Dangote Cement is way

ahead of competition in quality, volume production size and production automation saying these are parts of the results of continuous investments by the management. Makoju, who was represented by the Dangote Cement national sales and distribution director, Adeyemi Fajobi, stated that besides the investments in expansion to ramp up volume, such investments had added value to the economies of the African countries where the company had presence. To date, Fajobi disclosed that Dangote Cement oper-

ates in 14 countries in Africa with efforts on to expand to other three within the next few months to make its presence felt in 17 countries. The ultimate aim, he stated is to help other African countries to attain self-sufficiency. “In the last ten years, Dangote cement has embarked on aggressive expansion drive which has seen it having an annual production of cement to the tune of over 29 million in its three production plants in Ibese, Obajana and Gboko thus effectively eliminating importation of cement.

In his remark, directorgeneral of SON, Osita Anthony Akpoloma, represented by Joseph Ugbaja, group head, Building and Civil, said the partnership with the Dangote Cement was for the good of the industry and that so far Dangote Cement had been a leading light in the cement sector of the built industry. He explained that SON relationship with Dangote dated back to the inception of Dangote Cement manufacturing in Nigeria, and that the SON had always visited the company’s plant on routine quarterly inspections.

arring any regulator’s restrictions, Afam VI power plant is ready to deliver its net dependable capacity of 624mw into the Nigerian national grid, coming at a time power generation has suffered a deep plunge following reported outage of some thermal power stations. Osagie Okunbor, managing director, Shell Petroleum Development Company of Nigeria Limited (SPDC) and country chair, Shell Companies in Nigeria, said in Abuja that the SPDC Joint Venture-owned combined cycle power plant was ably maintained to consistently deliver its net dependable capacity of 624mw from an installed capacity of 650mw with its three gas turbines and one steam turbine. “In 2017 alone, Afam VI supplied approximately 14 percent of Nigerian’s grid-connected electricity, and the plant has delivered over 25.97 Trillion Watt-Hour of electricity into the Nigerian grid in the last 10 years,” Okunbor said, noting, “What is most exciting is that the plant has achieved this milestone while also touching the lives of community people and helping youths to acquire key engineering skills.” According to Okunbor, the operations at Afam VI have generated subcontract opportunities and employment for over 150 people from the 16 host communities. It also provided hands-on and offshore training for 30 youths in electrical, mechanical and instrumentation engineering on combined cycle power plant operations and maintenance. All the trainees are employable in the Nigerian power industry. The power plant also won the

Best Company in Climate Action Award in the 2016 edition of Sustainability, Enterprise, Responsibility Awards for Corporate Social Responsibility (SERAs–CSR), an annual event to celebrate organisations that invest resources to improve the socio-economic living conditions of people in Nigeria and Africa. Located in Afam village in Oyigbo Local Government Area of Rivers State, Afam VI uses combined cycle gas turbine technology that burns 40 percent less gas than plants using older open cycle technologies. This also contributes significantly to the reduction of greenhouse gas emissions. In November 2017, the Nigeria Electricity Regulatory Commission renewed SPDC JV’s Afam VI power generation licence for another 10 years, and in December 2017, the company signed an interim multi-year agreement with General Electric to improve the power plant’s availability, reliability and output for up to 200,000 Nigerian homes, while decreasing its operational costs. The agreement covered planned maintenance for the four turbines and upgrade of the gas turbines to help increase the plant capacity by up to 30mw while increasing its efficiency and significantly saving fuel and reducing CO2 emissions. As a Clean Development Mechanism (CDM) project under the United Nations Executive Board for Climate Change, Afam VI Power Plant targets to eliminate over 500,000 tons of CO2 emissions per year, while also maintaining excellent safety standards. The plant receives gas from SPDC JV’s gas plant at neighbouring Okoloma village.

Monday 02 July 2018

C002D5556

BUSINESS DAY

NEWS

NIMASA fears China may overrun Africa’s ports, trades IGNATIUS CHUKWU

D L-R: Gertrude Quashigah, deputy national coordinator, Ghana School Feeding Programme; Oluseyi Ojurongbe, manager, Sahara Foundation; Zuriel Oduwole, film maker and Girl Education Advocate, and Tosin Etomi, country manager, Sahara Group (Ghana), at the unveiling of Zuriel Oduwole as Sahara Girl Education ambassador in Accra, Ghana.

FG to set up special company to implement Mambilla hydro project ... to sign financing agreement by September ONYINYE NWACHUKWU & HARRISON EDEH, Abuja

igeria’s Federal Government is planning to set up a special company to effectively complete the Mambilla hydro project, 36 years after the power project, which holds up to 3,050 megawatts promise to the grid, was conceived. In an exclusive interview with BusinessDay, finance minister, Kemi Adeosun, confirmed government’s plan to adopt a project risk model, and that the whole idea was to ensure a record time completion, sustainability and also guarantee that, that long-term project was not truncated by successive administrations. The Mambilla hydro project would be partly funded by a China Exim Bank loan, and the financing agreement is expected to be signed this September, according to her. The NSIA is also to spend part of its $650 million fresh capital under the Presidential Infrastructure Fund on the project. ”There will be a Mambilla

hydro company for the project. Nigeria Sovereign Investment Authority (NSIA) is just bringing in the counterpart funding. This is a China Exim loan; so then we also need to operationalise it because if you are debt-funding a project, you need to check your revenues, the strategy. “So, that company will have all the important structures because if you leave it in the hands of the ministry, they will just deliver a project and go home,” Adeosun explained. Conceived in 1982, the Ma m b i l l a Hy d ro - Pow e r Plant Project has suffered serial neglect by successive governments and had featured in almost every presidential campaign promises since the return of democracy in 1999. But the power project came alive following the Federal Executive Council (FEC) approval for the construction of the 3,050mw of Mambilla Hyro-Power Protect at Gembu in Taraba State in August 2017. The proposed project, it is said, could be one of Africa’s and Nigeria’s biggest

hydro dams, and was to connect to three dams across the brownish River Donga, snaking through the fabulous Mambilla mountains in Taraba State. The Federal Government and China Export Import (EXIM) Bank would jointly finance the project, as the finance minister confirmed and would see Nigerian government commit 15 percent, while the EXIM Bank would provide 85 percent of the cost. She said following FEC’s approval, key ministers linked with the project, including herself and the minister of power, works and housing, Babatunde Fashola, travelled for financial discussions with the officials of China Exim Bank. They also sought to understand the best implementation approach that would ensure that the project does not fail. Speaking to BusinessDay on the outcome of that meeting and the financing model being considered, Adeosun explained, “We don’t have enough capacity because it is a big project so we went there to negotiate the terms of that loan.

“The China Exim were offering us blended, not fully concessional loan. They funded a project in Ethiopia, so we would learn how they do their own to avoid pitfalls,” the minister said. “The reason why the China Exim Bank was offering us blended conditions for that loan is that we also want to learn from other bigger and similar projects like we have seen in Ethiopia. Bigger projects comes with bigger risks,” she explained. “We don’t want a situation where we will get involved and there would be nothing to show for it.” Projected to cost $5.792 billion (N1.140trn), the Mambilla hydro is a multi-year project and is expected to shore up current grid capacity of 7,000mw, while boosting Nigeria’s quest for economic diversification through industrialisation. Speaking further on the funding agreement, she said, “It is about seven years project, hopefully, we are aiming at September to be able to sign the final agreement.

Branding bond index by FMDQ OTC Securities, S&P Dow Jones takes off

n a move that could significantly draw foreign investor attention to the country’s debt capital markets and boost foreign investment inflows, FMDQ OTC Securities Exchange and S&P Dow Jones Indices will today begin a joint branding of Nigeria’s sovereign bond index. FMDQ Securities, the country’s largest securities exchange with annual turnover of $650 billion and the world’s leading provider of financial market indices, S&P DJI had in 2017 announced the signing of a cooperation agreement to create and launch co-branded fixed income indices. Today, the successful transition of the S&P/FMDQ Nigeria Sovereign Bond Index marks the activation of the inaugural co-branded index under the agreement. A range of other S&P/ FMDQ Fixed Income indices will be developed under the agreement according to a

statement issued by FMDQ securities. The S&P/FMDQ Nigeria Sovereign Bond Index, formerly branded as S&P Nigeria Sovereign Bond Index, tracks the performance of local currency denominated sovereign debt publicly issued by the government of Nigeria in its domestic market. “We are pleased to collaborate with FMDQ to create benchmarks for Nigeria’s domestic fixed income markets. This is S&P Dow Jones Indices’ first ever agreement with an Africa-based securities exchange to offer fixed income indices. “The successful transition of the S&P/FMDQ Nigeria Sovereign Bond Index marks the beginning of our joint efforts to establish a more transparent environment for market participants to gain insights into the Nigerian capital markets,” Alex Matturri, CEO of S&P Dow Jones Indices, said.

Bola Onadele. Koko, managing director/CEO, FMDQ OTC Securities Exchange, said the new initiative was part of the “GOLD” (Global Competitiveness, Operational Excellence, Liquid & Diverse) agenda of the FMDQ for the Nigerian financial markets. He assured that the exchange is committed to developing and increasing the market accessibility for all stakeholders including the investors. “We are delighted to collaborate with S&P Dow Jones Indices to further deepen the markets through these index-based solutions and measures. As we see more domestic and global demand, for diverse and innovative investment products, the S&P/FMDQ index family will critically serve to raise the global exposure of the Nigeria fixed income assets and represent an opportunity to increase trading flows to the Nigerian finan-

cial markets.” S&P Dow Jones Indices is the largest global resource for essential index-based concepts, data and research, and home to financial market indicators, such as the S&P 500® and the Dow Jones Industrial Average®. Most asset managers globally invest their funds by tracing these indices. S&P DJI claims that more assets are invested in products based on its indices than products based on indices from any other provider in the world. “Since Charles Dow invented the first index in 1884, S&P DJI has been innovating and developing indices across the spectrum of asset classes helping to define the way investors measure and trade the markets.” FMDQ OTC Securities Exchange is Nigeria’s foremost debt capital, foreign exchange and derivatives over-thecounter (OTC) securities exchange.

irector-general, Nigerian Maritime Administration and Safety Agency (NIMASA), Dakuku Peterside, says the Maritime Silk Road initiative promoted by China to develop international shipping connectivity across South East Asia, Africa, Oceania, and Indian Ocean, may overrun Africa’s ports and trades, except African nations do their own bids. The NIMASA boss however admitted that the initiative would create a new opening for Africa to advance its economic partnership for the benefit of the continent. Speaking further, Peterside listed potential threats such as likelihood of ports being taken over by the Chinese to the detriment of Africans, noting that the Maritime Silk Road initiative would create opening for African markets to be flooded with Chinese goods. He also said that as a result of the China driven initiative, Chinese policy might also affect port calls and hub decisions, warning that the oil tanker and gas markets could be affected by the construction of new pipelines that would connect Africa to China, which would engender Chinese political dominance in Africa if not carefully managed. The NIMASA DG further advocated for the support of the China-led Maritime Silk Road initiative but charged Africa to do the needful to ensure her economic interests were fully protected. On the positive side, Pe-

terside, who was speaking as chairman of the 29th annual session of club of ports of the Crans Montana forum currently ongoing in Brussels, Belgium, said, “The Maritime Silk Roads scheme comes with a lot of benefits for the continent.” He however charged African countries to be strategic in decision-making in order to reap the rewards and avert some perceived risk inherent in the initiative. He said: “Whereas China is pursuing new transportation linkages throughout the Eurasia region and Africa to boost trade and enhance her economic status; Africa must key in to develop her port infrastructure, maritime assets financing and create jobs for her people.” Other speakers at the Club of Ports annual meeting were Jose Gonclaves of Cape Verde, Mohamed Ibrahim of Mali , Abass AlNaqi of Organisation of Arab Petroleum exporting countries, Sergey Sidorsky of Eurasian Economic Commission, Mircea Ciopraga of TRCECA, Deniz Beten of NATO, Jean Osso of Congo, Pierre Ndiaye of Gabon, Farshad Shahbaz of Iran , Erwin Cootjans of Netherlands, Salou Oumarou of Belgium, Paul Altena of Belgium. The Maritime Silk Road refers to the maritime section of historic Silk Road that connects China to Southeast Asia, Indonesian archipelago, Indian subcontinent, Arabian Peninsula, Somalia and all the way to Egypt and finally Europe, that flourished between 2nd-century BCE and 15th-century CE.

Oando to lead discussion on investing in the Future of Nigeria at Nigeria Oil & Gas confab

ollowing a successful outing at the recently concluded OPEC Seminar, Oando is set to lead conversations at West Africa’s largest oil and gas gathering, the Nigeria Oil and Gas Conference (NOG) in Abuja from July 2 – 5, themed: ‘Driving the Nigeria Oil & Gas Industry Toward Sustainable Development & Growth.’ Group chief executive of the company, Adewale Tinubu, will be speaking on the topic ‘Investing in the Future of Nigeria for Sustained Economic Development and Growth.’ He will, alongside industry colleagues, Bello Rabiu of NNPC; Chike Onyejekwe, GMD, Aiteo and Tony Attah, MD/CEO, Nigeria LNG deliberate on the topic and proffer solutions to ensure oil and gas continues to be a relevant and viable resource for moving the nation forward. Specifically they will look at sectors such as gas which is still not being fully exploited; Nigeria has significant gas reserves, estimated at 192 trillion cubic feet, the largest gas reserves in the continent and ninth in the

world. Despite this abundant reserve base, its utilisation in the domestic sector is grossly inadequate and the country is yet to fully benefit from her natural gas endowment. Also in discussion on the panel will be how upstream activities can be increased and the role indigenous players will have to play in collaboration with the Government in realising this. The event is set to host dignitaries including the Vice President Yemi Osibanjo, who will officially open the conference and the Secretary General, OPEC, Mohammad Sanusi Barkindo, who will give a keynote address at the event. Also in attendance will be Dr. Emmanuel Kachikwu, Minister of State for Petroleum Resources; according to Kachikwu: “The Nigerian Oil and Gas Conference & Exhibition is an important event in the Nigeria oil and gas industry calendar. As such, I am delighted to participate in discussing the current state of our industry and discuss the roadmap for moving the industry forward.”

46 BUSINESS DAY NEWS

C002D5556

Monday 02 July 2018

Stocks, Eurobonds slide in H1 2018 on EM... Continued from page 1

uncertainties and investor concerns over a strengthening dollar and rising U.S. Treasury rates. The status of Africa’s largest economy as the 3rd best performing market in the world in 2017 has done little to spare it, as traders’ appetite for higher yields wanes and they rush to cut exposure to the riskiest markets.

L-R: Wale Akinyemi, CEO, Power Talks Limited, Kenya; Bolaji Akinyemi, former minister of foreign affairs; Beatrice Kolade, wife of Christopher Kolade; Christopher Kolade, host; Austine Avuru, CEO, Seplet Petroleum Development Company Plc, and Soji Apampa, CEO, CBI/Integrity, during the 6th annual Christopher Kolade lecture on Business Integrity- The Role of Business Integrity in National Transformation in Lagos. Pic by Pius Okeosisi

Old PSC law means billion dollar losses... Continued from page 1

changed in more than 25 years. Data from Nigeria’s national oil company NNPC from January 2015 to December 2017 showed that PSCs had the highest share of the 2.126 billion barrels of crude oil and condensate produced between January 2015 and December 2017 or an average of 1.94 million barrels per day.

“A lot of production activities have moved towards deep offshore which was very attractive for PSCs since 2003; the idea was that as oil prices go up the contracts will be reviewed however successive Nigerian Federal governments have failed to do so,” Adeola Adenikinju, gas policy analyst for the World Bank and professor of Economics at University of Ibadan said. The PSC is a form of joint agreement for exploration, development and production of oil resources, that makes extractive companies bear the cost of production, unlike the joint venture agreement where government is indebted with cash calls. According to stakeholders, the PSC had attracted International Oil Company’s (IOC) due to its favourable fiscal and legal regimes, which offer a higher profit share for the more marginal and high-risk projects offshore. “The fiscal regime that underscores the administration of offshore activities were so generously drawn up for the PSC’s when oil prices were very low which is now currently out-dated allowing majority of the companies benefits from current higher oil prices than Nigeria itself,” Adenikinju told BusinessDay. NNPC financials showed PSCs had the highest production with 44.87 percent over the three year period while Joint Ventures (JVs) came second with 31.35 percent, Alternative Financing (AFs) had the third highest production with

Continues on wwwbusinessday online.com

Buhari’s infrastructure spend has fail... Continued from page 1

14.14 percent, Marginal Fields (Independents) came in fourth highest with 4.52 percent production, while the Nigerian Petroleum Development Company (NPDC), the upstream company owned 100 percent by NNPC, had the lowest production contributing just 4.11 percent to total production. Ibe Kachikwu, Nigeria’s minister of state for petroleum, recently bemoaned the loss of “close to $21 billion” extra revenue for the country due to the non-review of the Act. “From 1993 to now, we have lost a total of $21 billion just because government did not act. We did not exercise it,” the Reuters news agency quoted Kachikwu as saying. The lack of passage of the Petroleum Industry Bill (PIB), for many years has added to the problem. Adenikinju added, “The PIB would have been an opportunity to bring the system to international standard and make it more competitive which will benefit the government more.” Nigeria has been on a perpetual voyage with PIB which is one of its most important bills ever to be contemplated in its history in a journey that began sixteen years ago with a lot of anticipation and

Branding bond index by FMDQ OTC Securities... Continued from page 1 Nigeria Sovereign Bond Index, formerly branded as S&P Nigeria Sovereign Bond Index, tracks the performance of local currency denominated sovereign debt publicly issued by the government of Nigeria in its domestic market. “We are pleased to collaborate with FMDQ to create benchmarks for Nigeria’s domestic fixed income markets. This is S&P Dow Jones In-

The only U.S. exchange traded fund solely tracking Nigerian equities, the Global X MSCI Nigeria ETF, has shed 25 percent of its market capitalization this quarter. The fund has not seen any inflows since January 24 and outflows since then have totalled $25million, according to Bloomberg data. “So, in the first six months of the year, market went up in just two months – January and June. That of course revealed that the market reacted to the level of uncertainty around the world, the Nigerian Policy uncertainties, budget was just passed, the response of the government to monetary authority and fiscal authorities, international market, uncertainty surrounding the trade war between the US and China, sort of local factors and global issues,” Ayo Akinwunmi, Head of Research at FSDH Mer-

chant Bank said. There has been a Technical correction to the Nigerian equities market that has seen the Nigerian Stock Exchange All Share Index shed 15 percent since its peak earlier in January. “Going forward, the outlook is not so favourable in the Nigeria equities market due to the announcement of two additional increases of interest rates this year in the last Federal Open Market Committee meeting (US Fed) and the political risk in the country as the general elections build up,” Abdulrauf Bello, investment research analyst at WSTC Securities Ltd explained. BusinessDay half year sectoral analysis of the Nigerian equities market showed the Oil and Gas, and the Consumer goods sector struggling as they both fell by 2.2 percent and 4.9 percent respectively. Forte Oil, Total, Honeywell and Flour Mills were amongst the biggest losers in the first 6 months of the year in the respective sectors. Nigerian Eurobond yields are rising more sharply than the emerging-market average. Rates on dollar notes issued by African governments have climbed to 7.6 percent, around 200 basis points above where they were in

dices’ first ever agreement with an Africa-based securities exchange to offer fixed income indices. The successful transition of the S&P/FMDQ Nigeria Sovereign Bond Index marks the beginning of our joint efforts to establish a more transparent environment for market participants to gain insights into the Nigerian capital markets.” Alex Matturri, CEO of S&P Dow Jones Indices said.

Bola Onadele. Koko, Managing Director/CEO, FMDQ OTC Securi-

Continues on wwwbusinessday online.com

Roads Nigeria Plc, both listed in the Infrastructure Heavy Construction sector of the Nigerian Stock Exchange have their stocks currently trading below their 52-week highs. Julius Berger stocks close Friday at N27.50 kobo per share, below its 52-week high of N39.45 per share, though higher than its 52-week low of N23.50 per share. Roads closed at N6.60 per share. The NSE official list does not give the company’s high and low price in the last 52 weeks. Since the beginning of the year, Julius Berger’s has returned a negative 1.84% almost mirroring the performance of the stock market itself. Julius Berger is almost synonymous with road construction in the country and big ticket construction projects. So it is naturally expected that if the government is spending big on infrastructure, Julius Berger stocks should be the toast of investors. But that is obviously not happening and that is blamed on the fact that the Buhari government has been big on talk on infrastructure spending but small on actual expenditure. Buhari’s government budgeted N1.58 trillion and N2.17 trillion for capital expenditure in 2016 and 2017, but actual money released was N1.20 trillion and N1.54 trillion. Actual spend on infrastructure was

ties Exchange, the new initiative is part of the “GOLD” (Global Competitiveness, Operational Excellence, Liquid & Diverse) agenda of the FMDQ for the Nigerian financial markets. He assured that the exchange is committed to developing and increasing the market accessibility for all stakeholders including the investors. “We are delighted to collaborate with S&P Dow Jones Indices to further deepen the markets through these index-based solutions and measures. As we see

more domestic and global demand, for diverse and innovative investment products, the S&P/ FMDQ index family will critically serve to raise the global exposure of the Nigeria fixed income assets and represent an opportunity to increase trading flows to the Nigerian financial markets.” S&P Dow Jones Indices is the largest global resource for essential index-based concepts, data and research, and home to financial market indicators, such as the S&P 500® and the Dow Jones Industrial Average®.

promises. The bill is still stuttering through legislation after passing through four presidents, five presidential terms and five legislative tenures yet there is little or no results to show. Ademola Henry team leader at the Facility for Oil Sector Transformation (FOSTER) said the increase in PSC production is because onshore activities of joint ventures are more prone to militant’s attacks compared to offshore fields where most PSC operates. The Nigeria Extractive Industries Transparency Initiative (NEITI), the agency mandated by law to promote transparency and accountability in the management of Nigeria’s oil and gas revenue, early last month declared that the old agreement used in computation of revenues to be shared between the government and oil companies is outdated, calling for urgent review. NEITI said the loopholes in the Deep Offshore and Inland Basin Production Sharing Agreement (PSC) between Nigeria and oil companies meant the nation’s total share of oil revenues between 2015 and 2017 was $35.893 billion against the oil majors who earned about $68.591 billion.

even lower going by data from third party sources. Trends show that while the government has always been able to cash back 100 percent of recurrent expenditure, the cash backing and actual spending on infrastructure has always fallen short in 2016 and 2017. There is little optimism that the government planned capital expenditure of N2.18 trillion in the 2018 budget will be met. A shortfall could further exacerbate the already anaemic position of construction firms that are already grappling with huge debt, cash flow problems that hindered them from purchasing more equipment to bolster earnings, and above all, monies owed to them by customers (especially Federal Government). “It has been very difficult for these firms because they have a lot of money they have not received from government,” said Olalekan Olabode, Head of Research at Vetiva Capital Management. “Of course capex spend will drive construction activities provided they get paid for job done,” said Olabode. That seems not to be the case looking at the books. Government and sundry debtors owe Julius Berger Nigeria Plc N49.83 billion in account receivables as at December 2017. Continues on wwwbusinessday online.com

Most asset managers globally invest their funds by tracing these indices. S&P DJI claims that more assets are invested in products based on its indices than products based on indices from any other provider in the world. “Since Charles Dow invented the first index in 1884, S&P DJI has been innovating and developing indices across the spectrum of asset classes helping to define the way investors measure and trade the markets.” Continues on wwwbusinessday online.com

Politics & Policy Monday 02 July 2018

C002D5556

BUSINESS DAY

‘Buhari’s anti-corruption fight is a sham’ Tope Fasua is the national chairman of the Abundant Nigeria Renewal Party (ANRP) and presidential aspirant. In this interview with ‘YOMI AYELESO, talks about the anti-corruption fight of the Federal Government, the 2019 general election, among other issues. Excerpts: How is ANRP preparing for the 2019 general election? e are the most prepared political party now because we got our approval on the 10th of January 2018. On the 17th of February we were able to organise a national convention of which all our national working committee were elected at the eagles square in Abuja with about 4,000 members in attendance. We put all that in place and some months later, we started going to states for congress and as i speak with you now, we have done 33 state congresses. After that we are moving on to the local government congress and then the ward congress. We are the only party out of the 21 that were recently approved that managed to do national convention. Even among the old 48 parties, many of them have not been able to do their national convention. Some of them are still using caretaker committees to run the parties. We are concentrating on Ekiti election now because we have a strong candidate and then Osun State later in the year and after that the 2019 general election. We are contesting for positions in the election not only the presidency because actually we want to win the presidency and we can’t do that in isolation. We need to get some spaces in the National Assembly as well.

should not look at the Boko Haram alone; we can also look at kidnapping, cultism and armed robbery. These are security indices. People no longer use the road to travel anymore; if security is okay, how many Buhari aides are using Nigerian roads? Anywhere they want to go, they fly aircraft, knowing that the country is not safe. The fight on corruption is a sham and a shame; they have not done anything on it. I can tell you and I have written about it recently. On the federal budget, all the items on the budget are owned by the people either civil servants or the politicians. They owned part of the budget. They have nothing to address. They have not shown the young ones the dignity of labour. Whether in the public or private sector, corruption thrives. So, this government can’t talk of anti-corruption. They have failed big time.

Is your party considering going into alliance with other political parties? It won’t be a bad idea if it happens but as a party we are not relying on that. If alliances come, why not? The presidency is an important level in government and I understand why everybody is interested in who becomes the president. If we are having a merger, it is going to be extremely difficult because as a party we have our values and ways of thinking which we will not ready to part with. We are one of the parties in this country that has stated ideology. If you go into any merger or coalition, you have to be very careful not to lose your soul. Going to alliance, a lot of things should be considered, like what they are bringing to the table. Many of them don’t have membership, they don’t have structures. In doing the 33 state congresses, that is the structure we are building. If in the event, we have to go into coalition, it is going to be a collective decision of the party because i don’t take decisions alone. How does this party get its fund? We started from the beginning that we needed to crowd fund this party. The party was established by group of people who felt that there is hope in the country. We started from crowd fund and we are the only party that has given effect to crowd funding in this country. We have our annual dues of just N5,000 and other contributions. We have managed the little we have. We got discount for eagles square for our national convention and at the end of the day, we ended up spend-

Fasua

ing N7 million for the convention. We did not even pay anybody for coming to the convention. What is people’s perception towards the party? It has been fantastic. We don’t have to talk so much before people accept us and that is one thing about the party. Nigerians are waiting for us. Right now, we have about 18,000 members who have registered, and we have many others aspiring to register for our party. What is your assessment of President Buhari and the APC-led Federal Government in the last three and half years in the area of economy, security and the anti-corruption war? The government has been a disaster. They have not done well at all. On the economy, they first plunged the economy into recession and now they are taking accolades for taking us out of recession. If you look at it now, the country’s population is growing at higher rate and you cannot cause something and come claiming accolades. They have not done well at all. Policy lethargy and wrong policies have been ways they have messed up the economy. Look at the naira to dollar now. We can see how organisations are laying off staff and those

that don’t do that, they do not pay them. They cannot tell me they have worked on the economy. Security-wise, yes the attacks from Boko Haram has reduced but they are still attacking. Many people are still being burnt to death in North East. I remembered the President once said the fight with Boko Haram was going to be a walk over. Where are we on that today? Apart from that, we

Any right-thinking human being should be disturbed with these senseless killings in the country. Who are these people killing Nigerians? We know for a very long time that herders move around the country without actually carrying gun

Do you think the government is doing enough to curtail the ravaging Fulani herdsmen killing people across the country? Any right-thinking human being should be disturbed with these senseless killings in the country. Who are these people killing Nigerians? We know for a very long time that herders move around the country without actually carrying gun. This time around, we see clashes in Benue, Zamfara and recently Plateau State. They kill people indiscriminately. The president once said they are from other countries. The president has failed in this regard. We have to know who they are before we can address it. What we need is a government that will work on its intelligence gathering. Many of these things border on intelligence. The President has refused to change his security chiefs after three years and more. That tells you what we have now is not up to the task. What is the implication of the Not-tooyoung-to-run bill recently signed into law by the President? It means they are going to crowd the scene now. It would further populate the political space. Youth have now been qualified by age but not with financial consideration. What these old men did was to qualify more of their children to join politics. Most of them have children between 25 and 40. These are the people that will benefit from this new law. Do you think you have the national presence to contest the presidency in 2019? I am not the only person under this party. We are going to forward our ideas, competence and other things. In terms of national presence; I don’t know what that means. Most people believe if you have not been around since 1970, you can’t do anything in the country. Many of these people we see today are sponsored by Nigeria from the primary to the university level. Nigerians are suffering and they needed to be rescued. We will take charge of the country in the best interest of the citizens.

A1 BUSINESS DAY NEWS Tanker fire: Lagos restricts tankers to designated route ... gives 30 days for trucks to certify road worthy JOSHUA BASSEY

gainst the background of last Thursday’s tanker accident on Otedola Bridge, inward Ojodu Berger on Lagos-Ibadan Expressway, the Lagos State government has restricted movement of fuel tankers to designated route going forward. It is also now mandatory for all articulated trucks entering Lagos to obtain roadworthiness certificate from the state ministry of transportation at any of the existing test centres in the state within 30 days. The tanker explosion, it would be recalled,claimed over10livesandburnt54vehicles. At a joint press briefing at Alausa on Sunday, after meeting withrelevantstakeholdersincluding Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), Association of Maritime Truck Owners (AMATO), Petroleum Tanker Drivers (PTD), NationalAssociationofTransport Operators (NATO), Container Truck Owners Association of Nigeria, the state commissioner for transportation, Ladi Lawanson, said the decision became necessary following preliminary investigations into the incident thatrevealedacombinationofvehicular defect and human errors. Lawanson said: “As an im-

mediate response to the latest incident, the Lagos State government hereby announces the following measures: Fuel tankers are hereby directed to ply the designated trailer route, that is, Apapa-Oworonshoki Expressway via Ogudu to Lagos-Ibadan Expressway. “All tankers and containers coming into Lagos State from henceforth are directed to obtain the ministry of transportation certificate of road worthiness at any of or centres within the next 30 days, while new centres along the Lagos-Ibadan Expressway will be established to quickly to cope with the expected demand for this service.” He listed the 10 centres currently available to process the applications to include Berger, Ojodu; Odogunyan, Ikorodu; Agric/Ishawo Road, Ikorodu; Worksyard, PWD, Shogunle; NCI, Gbagada; VIS Yard, OkoAfo, Badagry; VIS Yard, AyoboIpaja; Test Centre, Badagry; VIS Yard, Epe; and VIS Yard, OkoOba Abattoir. Lawanson, who addressed the briefing alongside heads of government agencies and the stakeholders, said preliminary investigation revealed that the affected tanker that exploded was registered in Nasarawa Local Government of Kano State

with registration number NSR 888 YC, and had changed ownership 13 times since purchase. “It (the tanker) was manufactured in 1999 by Mack Trucks Inc at its assembly plant in Winnsboro, United States. This truck was designed as a 14,959kg (approximately 15 ton) drilling rig with low bed, but it was converted in Nigeria from a drilling rig to fuel tank carrier to carry 30 tons. “From this preliminary investigation, the truck should not have been loaded to the weight of 30 tonnes, which is twice its pulling capacity,” the commissioner said, adding that further investigation into the current ownership of the tanker and other related details were progressing. On suggestion of restriction of operation of tankers to certain hours, the commissioner said having critically examined the issue, especially considering the fact that imported petroleum products were pumped from import jetties at Atlas Cove through pipelines to Ejigbo Depots in Lagos, Mosimi (Ogun), Ibadan (Oyo), Ilorin (Kwara) and Ore (Ondo), and due to pipeline vandalism, any restriction of such would undermine supplies and threaten the wellbeing of the Nigerian economy since there was high demand for petroleum products across the country.

C002D5556

Monday 02 Jujy 2018

BUSINESS DAY

C002D5556

Monday 02 July 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 02 Jujy 2018

NEWS

Effective intermodal transport vital to seamless FG to earn $5.60bn in taxes, royalties on cargo movement, port efficiency - Peterside Shlumberger oil finance deals AMAKA ANAGOR-EWUZIE

irector-general, Nigerian Maritime Administration and Safety Agency (NIMASA), Dakuku Peterside, has identified the need for the port system to be effectively connected to the railway, inland waterways and road transportation modes to achieve effective movement of cargo at the ports. According to Peterside, effective intermodal connectivity results to port efficiency, facilitates seamless transportation of goods and creates immeasurable positive effect on the economy. Peterside, who said this while speaking at the Crans Montana Forum Club of Ports in Brussels, Belgium, said the quality of the rail and road transport connection to a port, impacts on the cargo throughput of the port.

Bakery Initiatives Group embarks on training of bakers

n a bid to uplift bakery businesses in Nigeria and make it profitable ventures, Bakery Initiatives Group (BIG) of the Netherlands has begun a training and re-training of bakers to acquaint them with the requisite knowledge to run bakeries profitably as well as expose them to international best practices and emerging trends in the industry. The training programme, which will run in phases, began with a train-the-trainers programme with the objective of not only increasing the theoretical and practical knowledge of participants in the bakery and confectionary industry, but also equip them to be able to transfer such knowledge to others, thereby creating a large pool of knowledgeable people in this field in Nigeria. According to Ephraim Mbanaso, the country representative/CEO of Bakery Initiatives Nigeria, the training is in line with the company’s philosophy that identifies well-trained and grounded people as one of the essential pillars for the success of any bakery business. “It is our hope that after passing through this training, you all will become change agents in ensuring that the bakery businesses you get involved in become successful,” Mbanaso told the participants at the brief opening ceremony before the commencement of the first phase of the training. The training programme, which is taking place at Araba’s Homemade, 16 Thurbon Street, Yaba, started on Monday, June 25, 2018, and will cover such areas as technology and practice of baking of bread, cakes and pastries with special emphasis on recipes, effects of basic ingredients, cost calculations among others.

“The efficiency of a port is measured by the quantity of import and export cargoes handled in a day. A port with bad roads and rail facilities will have low cargo throughput. While ships start and end their journey in a port, the cargoes in most cases originate and end up far from the ports. “This implies that without the connection of other modes of transport to the port, the system becomes crippled and the sea transport becomes inefficient,” Peterside said. He stated that some port managers, particularly in developing countries, were yet to understand the importance of an effective intermodal connectivity to efficiency at the ports. He further said that the turnaround time of vessels in most African ports was too high due to inefficiency and lack of necessary port infrastructure, which leads to longer dwell time for vessels and cargoes in

the ports. This, according to him, results to high cost for importers in form of demurrage, which eventually passed over to the final consumers. “While transport cost adds between 2 to 5 percent to the final cost of imported cargoes in developed countries, it adds as much as 15 to 50 percent in developing countries,” he said. He however disclosed that Nigeria under the current leadership of President Muhammadu Buhari had through the Federal Ministry of Transportation invested heavily in linking all major seaports and airports to the cities through rail and good access roads to further boost the economy. “Our quest to enhance the quality of the rail and road transport connection to all ports in Nigeria is to ensure seamless transportation of goods and services through the ports,” he said.

HARRISON EDEH, Abuja

ederal Government will earn in the region of $5.60 billionintaxesandroyalties as a result of concluded plans on jointventureagreementbetween theNigerianNationalPetroleum Corporation (NNPC)/FIRST E&P JV and Shlumberger for the Anyali and Madu fields. The sealed agreement is coming a year after signing the tripartite term sheet for the financing and technical services arrangement between NNPC/ FIRSTE&PJVandSchlumberger for the Anyalu and Madu fields under Oil Mining Licence, OML 83andOML85,offshoreNigeria, while a final nod was given to the package over the weekend in London with the execution of the final contractual agreement. Under the agreement, global oil services firm, Schlumberger, will provide $724.14 million out of the required project cost of $1.082 billion while the balance of $358.79 million is to be funded with cash flows generated by the project. The Anyala and Madu fields are projected to have 193 million barrels of crude oil and 0.637 trillion cubic feet of proven gas reserveswithproductionplateau

of50,000barrelsofoilperdayand 120millionstandardcubicfeetof gas per day. Speaking at the signing ceremony, attended by chief executivesoftheotherpartiestothe deal, group managing director of NNPC, Maikanti Baru, said in arrivingattheinnovativealternative fundingpackage,thecorporation was guided by the need to instil transparent and accountable processes. He said the NNPC also followed strict compliance with all extant laws, regulations and established governance protocols as well as overriding national interest and drive to achieve competitive market pricing for such a greenfield project. Baru explained in a statement issued on Sunday that the NNPC/FIRST E&P JV project financing formula came as a creative approach to funding JV operations in response to the realities of the prevailing operating environment. According to Baru, “Apart from aligning wholly with government’saspirationofincreased crude oil and gas production, reserves growth and monetizationofthenation’senormousgas resources,themodelisintandem with one of the corporation’s 12

Business Focus Areas (BUFAs); ramping up crude oil and gas reserves and production which also supports Government’s 7 Big Wins aspirations.” He said the Schlumberger financing package covers preFinal Investment Decision (FID) funding, 100 per cent of capital expenditure for three years and pre-production operating expenses. He added that the package would enable the country to generate$5.60billionintaxesand royalties and $1.32 billion in net cash flows after Schlumberger’s cost recovery & compensation inlinewiththetermsoftheagreement. The OMLs 83 and 85 are in shallow waters 40km offshore in the Niger Delta. NNPC holds 60 per cent interest in the licences while,FIRSTE&P,theoperatorof theJV,holdstheremaining40per cent interest. Apart from providing funding for the development ofthefields,Schlumbergerwould alsoprovideotheroilfieldservices to the JV on a limited exclusive basis. A joint project team would drive technology transfer whilst leveragingontheglobaltechnical expertise of Schlumberger and the extensive local knowledge of the JV partners.

Monday 02 July 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 02 July 2018

C002D5556

BUSINESS DAY

FINANCIAL TIMES Alphabet joins $300m funding round for electric scooter start-up

Debate on UK productivity puzzle masks growing Page A9 consensus

Page A8

World Business Newspaper

Mexicans go to the polls as Amlo scents victory Leftist is frontrunner for president but a quarter of voters say they are undecided JUDE WEBBER

exicans began voting in elections that, although marred by violence and fraud, look set to deliver an unequivocal victory to the leftist nationalist Andrés Manuel López Obrador— at least if polls prove correct. Mr López Obrador flashed a victory sign as he arrived to vote on Sunday at a polling station in Mexico City, where he used to be mayor. The anti-establishment candidate has been the frontrunner from the start, galvanising voters furious with graft scandals and terrified by the country’s record murder rate. With 18,299 federal, state and local posts being decided, including the presidency, these are the biggest elections in Mexican history. Over 100 candidates and politicians have been murdered during the campaign, one while taking a selfie with another victim. Voters themselves have described being offered bribes of as much as $250 according to Acción Ciudadana Contra la Pobreza, a nongovernment organisation collecting reports of vote-buying. Less than a week before the vote, armed men ambushed electoral officials and stole more than 11,000 ballot papers in broad daylight in the municipality where Mr López Obrador, known by his initials, Amlo, was born. Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of Nearly 90m Mexicans — a quarter of whom are in their 20s — are eligible to vote and look set to punish the corruption and escalating violence by ejecting the ruling Institutional Revolutionary party (PRI) in the latest electorate worldwide to bet on an outsider. At a Mexico City polling station on Sunday, Rosa Pachecho, 65, a TV producer, said she was voting for Mr López Obrador. “I don’t think there’s a party who really represents us,” she said. “I feel like he’s the least

corrupt.” Juan Carlos Luna, 54, a software consultant, said he voted for one of Mr López Obrador’s rivals. “In past elections, I knew who I wanted to vote for but this time no,” he said, adding that voted tactically in legislative elections “because I don’t want (Mr López Obrador’s party) Morena to win everything”. Although anything other than a López Obrador victory would be a major surprise, polls show that more than a quarter of voters are undecided, potentially narrowing the race at its climax. Exit polls are due at 8pm local time, with the first official indications before midnight. After the election, Mexico will enter a five-month transition until the new president is sworn in, on December 1. Mainstream presidential candidates, including José Antonio Meade of the PRI and Ricardo Anaya of a right-left coalition, apparently failed to make inroads against the leftist. Mr López Obrador has racked up a 25 point lead in polls with promises to sweep out the graft that blighted outgoing president Enrique Peña Nieto’s government. He has also promised to boost pensions, give bursaries and apprenticeships to young people and kick-start the economy with the state in the driving seat. Mr López Obrador’s detractors fear that he will steer Mexico sharply left and plunge Latin America’s second-biggest economy into populist chaos, sparking economic crisis on US president Donald Trump’s doorstep that could further strain migrant and bilateral business flows. Mexico and the US are already embroiled in a trade war triggered by Mr Trump’s imposition of steel and aluminium tariffs and are struggling to renegotiate the North American Free Trade Agreement. If the silver haired 64-year-old wins in what are only Mexico’s fourth elections since the advent of democracy in 2000, when the PRI’s 71-year-old rule came to an end, it will be the first time in Mexican history that a party that is neither the PRI nor Mr Anaya’s conservative National Action party (PAN) has won.

Renminbi’s worst month ever sparks US-China currency war fears Economists say any attempt to ‘weaponise’ China’s currency carries big risks GABRIEL WILDAU & JAMES KYNGE

hina’s currency suffered its largest ever monthly fall against the US dollar in June, sparking concern that Beijing is prepared to use currency devaluation as a weapon in an escalating trade war with the US. From 2005 to mid-2014, China systematically intervened in its currency markets to weaken the value of the renminbi, sparking accusations that Beijing was seeking an unfair competitive advantage for its exporters. US president Donald Trump revived those accusations during his 2016 campaign, despite

the fact that China had already switched to a policy of supporting the renminbi to prevent capital flight. But the renminbi weakened by 3.3 per cent against the dollar in June, the worst single-month decline since China established its foreign exchange market in 1994. Analysts say that so far the move looks more like market forces than an act of currency war. Still, they warn that continued weakness could further inflame trade tensions. “In the context of rising trade and economic frictions between the two countries, exchange-rate movements take on Continues on page A8

Andrés Manuel López Obrador arrives to vote on Sunday, after polls suggested he could win the Mexican presidency by a 25 percentage point margin © AP

Wyoming’s pioneering crypto cowboys beef up the supply chain

Ranch owners are using blockchain to prove the quality of their cattle as the state passes laws to attract cryptocurrency start-ups

BEN MCLANNAHAN

n a ranch in northern Wyoming, not far from the Belle Fourche river, a few hundred calves are making history. They are being tagged and castrated and branded with irons, as is normal, a couple of months after birth. But what is new is that their IDs are now logged on a blockchain: part of a push by America’s least populated and most minerals-dependent state to position itself at the front of the “crypto” revolution. According to ranch owner, Ogden Driskill, blockchain technology can help to capture and preserve value along every step of the supply chain. He says that if he can prove to the ultimate buyer that these are openrange cattle, reared on sunshine and grass in cowboy country — rather than a cramped pen — he can get a premium of up to $700 per head, or almost 30 per cent. “We always had a superior product but it would always get blended in, like if you sold Volkswagens with Cadillacs and Mercedes,” says the beef rancher, 59, who

was elected as a Republican member of the Wyoming Senate seven years ago. “This gives us a chance for our quality to stand on its own.” Other US states have big ideas for blockchain, the digital ledger technology that underpins bitcoin and other cryptocurrencies, and which has been tipped to transform sectors such as shipping, logistics and finance. But only Wyoming has passed legislation to create a framework for blockchain and crypto businesses, giving it a head-start on would-be rivals such as Arizona, Michigan or North Dakota. About 200 new companies have sprung up in Wyoming over the past few months, according to state records, with names like Bison Crypto Power and Something Something Blockchain. Matt Mead, the state’s Republican governor, says technology could become a vital “fourth leg” of Wyoming’s economy, behind energy, tourism and agriculture, helping to revive one of the handful of US states that still has not regained its pre-financial crisis level of output. Others dream of creating some kind of hipster

enclave within the deep-red state, just like Austin has lured Apple, Alphabet and Amazon, among others, to the middle of Texas. But there is some nervousness about the headlong plunge into crypto. Marian Orr, the mayor of the state capital Cheyenne, says she worries about an invasion of bitcoin miners, sucking the electricity grid dry of cheap power and then heading off without paying their bills. Others fret about rampant fraud in the market for the sale of so-called utility tokens, which act like prepaid software licences, allowing the owner to use some kind of a blockchain-embedded product or service in the state. “It can be hard to tell the ‘black hats’ from the ‘white hats,’” says Sarah Reese, manager of economic and community initiatives in Laramie, a university town 50 minutes west of Cheyenne, alluding to the old western films where the bad guys dress in black. “We don’t want to sell our communities down the river. The problem is, there are all kinds of shades of grey.” Unlike a lump of coal or a barrel of oil, a blockchain can be hard to visualise.

Warren Buffett is big winner after US bank stress tests

Berkshire Hathaway will net $1.7bn in dividend payments approved by the Fed last week

ALISTAIR GRAY

arren Buffett’s Berks h i re Ha t h aw ay i s poised to net about $1.7bn in dividends after Wells Fargo and other banks in which he is a shareholder sailed through the Federal Reserve’s annual stress tests. Calculations by the Financial Times, based on figures from Jefferies and Bernstein, show the renowned investor is set to be among the largest individual winners from the Fed’s decision to approve banks’ highest capital distributions since the financial crisis. Berkshire is one of the biggest single investors in the financial sector globally. It is the number one shareholder in lenders including Wells, Bank of America and American Express, and has sizeable stakes in several others. While some companies strug-

gled with the stress test, which was tougher than in prior years — Deutsche Bank failed outright — Berkshire’s biggest banking investment, Wells Fargo, was an unexpectedly strong performer. Wells was given the all-clear to make almost $33bn in dividend payments and share buybacks over the next four quarters, overtaking JPMorgan Chase at the top of the capital distribution league table. Mr Buffett has continued to back Wells through a scandal over its creation of millions of sham accounts. He said this year that while the bank had failed to address its compliance problems quickly enough, chief executive Tim Sloan had been “working like crazy to clean things up”. The Fed placed restrictions on Wells’ expansion earlier this year, citing “widespread customer abuses”, but last week

it permitted the bank to make aggregate distributions equating to 40 per cent more than its forecast annual earnings. That would be the second highest payout ratio among 22 of the country’s largest listed lenders, according to RBC Capital Markets. The bank was a “notable standout” in the stress test this year and passed “with flying colours”, said John McDonald, analyst at Bernstein. With a 9.9 per cent stake, Berkshire is in line for about $800m of dividends from Wells in the year ahead. Bank of America is also due to boost payouts. The Fed signed off on its plan to raise its annual dividend by a quarter. Berkshire became its largest shareholder last summer after it exercised warrants to buy 700m shares — putting it in line for about $400m of dividend payments in the year ahead.

BUSINESS DAY

C002D5556

NATIONAL NEWS

Nelson Peltz hedge fund dragged down by blue-chip bets Trian Partners suffers losses on General Electric and Procter & Gamble this year LINDSAY FORTADO

rian Partners, the hedge fund run by veteran activist investor Nelson Peltz, has been dragged into the red this year by share price declines at two of America’s largest companies. Trian ended the

first half down almost 2 per cent, according to a person familiar with the result, with its stakes in General Electric and Procter & Gamble both down by a double-digit percentage. Mr Peltz is telling investors to keep the faith, however, since Trian has board seats at both companies through which it is

trying to push for improvements. A jump in GE’s shares last week, in the wake of its announcement of a partial break-up plan, did little to reduce the sting of losses. Trian took a $2.5bn stake in the company in late 2015, when shares were trading at about $25, and said at the time that it envisioned they

could be worth as much as $45 by the end of 2017. GE ended last year below $18, and by the close of trading on Friday, they were down a further 22 per cent to $13.61. Trian sold off about one-sixth of its position in late 2015 and early 2016 at about $30, but the share price collapse since then means GE now

counts as one of Mr Peltz’s most disastrous investments. His stake is now worth just under $1bn. Meanwhile, Procter & Gamble, the fund’s largest holding, is down 15 per cent this year in the face of margin and market share pressures across the consumer goods industry. Another company in Trian’s seven-stock portfolio, the industrial group Pentair, is also down sharply this year — by 11 per cent at the end of June.

The reinvention of Société Générale’s investment bank

Renminbi’s worst month ever sparks US-China currency war ... Continued from page A7 greater symbolic significance than in normal times,” said Eswar Prasad, economics professor at Cornell University and former head of the International Monetary Fund’s China division. “The renminbi’s depreciation relative to the dollar could serve as a Rorschach test. It could either be seen as a sign of a more marketdetermined exchange rate or as an attempt by Beijing to send a message to Washington about another tool in its trade war arsenal.” The renminbi had been an island of strength earlier this year, even as the dollar strengthened against the euro and many emerging market currencies. The recent declines are partly a catch-up effect, analysts say. In late 2015, China’s central bank announced it would begin targeting renminbi stability against a broad basket of global currencies, shifting away from a narrow peg to the dollar. That policy implies the renminbi should weaken alongside other currencies in periods of broad dollar strength. “For now, it’s relatively easy to explain the renminbi’s move in the context of China’s efforts to manage its currency against a basket,” said Brad Setser, former deputy assistant US treasury secretary for international economics and senior fellow at the Council on Foreign Relations. “But if it starts to look like a conscious effort to depreciate significantly to offset the impact of tariffs, there’s a much greater chance it will attract attention.” The renminbi’s 1.9 per cent fall last week was its second-biggest weekly decline, trailing only midAugust 2015, when the People’s Bank of China shocked global markets by announcing a sudden policy change that unleased a 2.8 per cent depreciation in a single week. But market reaction to recent renminbi weakness has been more subdued, even though — as in 2015 — renminbi declines have coincided with a sell-off in the mainland stock market. The Shanghai Composite Index fell 8 per cent in June amid signs of an economic slowdown in China. Bo Zhuang, chief China economist at TS Lombard, a research group, said that Beijing was probably allowing a tactical depreciation to send a signal to Washington but that a deep devaluation would be counterproductive for China. “Many market participants speculate . . . that China may have weaponised the renminbi, opting for a devaluation to offset the impact of US tariffs. We disagree, though policymakers are now considering devaluation as an option,” said Mr Bo. The PBoC burnt through roughly $1tn in foreign exchange reserves in 2015-16 in order to fight market expectations of depreciation. Reviving those expectations now would carry big risks, Mr Bo cautioned.

Monday 02 July 2018

Séverin Cabannes does not think equity derivatives is what differentiates the division any more DAVID KEOHANE & LAURA NOONAN

Alphabet joins $300m funding round for electric scooter start-up Deal with Lime along with other investments highlights complexity of growth strategy TIM BRADSHAW & RICHARD WATERS

lphabet is joining a $300m funding round for electric s c o o t e r s t a r t- u p Lime, adding to an increasingly complex web of deals in transport and “smart city” ventures by the internet company and Larry Page, its co-founder. The holding company of Google and Waymo is investing directly in the scooter start-up in addition to its own venture-capital arm, GV, according to people familiar with the financing. Formerly known as Google Ventures, GV acts like a traditional Silicon Valley venture capital fund and is leading Lime’s round. By injecting a similar amount to that put in by GV, Alphabet is adding to a small number of deals it has backed directly at the holding company level — even though it already has a number of other internal funding vehicles to handle outside investments. Other Alphabet investments include SpinLaunch, which is developing a space catapult, and United Masters, which is using data analytics to reinvent the music label. The round values Lime at about $800m, or $1.1bn after including the funds raised, according to people with knowledge of the terms. Spokespeople for Lime, Alphabet and GV all declined to comment. Axios had reported GV’s investment in Lime earlier this month but Alphabet’s additional involvement has not previously been disclosed. The two-pronged

investment highlights the growing complexity in the way Alphabet is putting some of its excess cash to work in search of future growth. It has another investment vehicle for later stage investments, called CapitalG, and Google itself makes direct investments in other companies. G oogle set up its own artificial intelligence fund, Gradient Ventures, last year, backing the kind of earlystage start-ups that might otherwise have been expected to get money from GV. The bewildering array of apparently overlapping investment vehicles was another example of Alphabet’s failure to disclose enough to shareholders, said Youssef Squali, an internet analyst at SunTrust Robinson Humphrey. “We need to understand the logic of having four sources of investment,” he said. Mr Squali added that Alphabet shareholders were showing growing interest in the company’s so-called other bets — the name it gives to long-range investments in new businesses beyond Google — and they were likely to support the apparent proliferation of new investment conduits. “You definitely want Alphabet to be aggressive in making big bets in the future, it’s the only way to sustain above-average growth in the long term,” he said. Together, CapitalG, GV and Gradient invested in more than 100 deals in 2017, according to Crunchbase, making the group the most active corporate investor last year. Others in Silicon Valley who have invested alongside Alphabet say

the holding company typically gets involved directly in deals that are considered strategic to the group’s business. That could point to deeper ties with Lime in future and give it a powerful ally in the intensely competitive scooter-sharing business. Lime’s main rival Bird announced last week it had raised $300m from venture investors including Sequoia and Accel. How e ve r, t h e d e a l w i t h Lime could also present conflicts with existing investments elsewhere within the Alphabet group. GV was an early investor in Uber, while Alphabet als o has a stake in rival Lyft through Capital G. Both Uber and Lyft have signalle d their interest in entering the scooter market, which threatens to take away ride-sharing customers for shorter trips around town. Lime is already competing with Uber and Lyft, as well as several other companies, for a permit to operate a scooter service in San Francisco. Then there is Waymo, Alphabet’s autonomous dr iving company, and Sidewalk Labs, its “smart cities” unit that already has various projects focused on tackling urban transit. The growing range of investments reflects a longstanding interest on the part of Mr Page in backing more effective forms of transport and finding ways to make cities operate more efficiently. At times that has spilled over into personal investments beyond Alphabet, such as Mr Page’s flying car start-up, Kitty Hawk.

t has been 20 years since Société Générale gave up the quaint trappings of historic Paris for the gleaming practicality of its towers in La Défense, Paris’s modern business district. Now, Séverin Cabannes, SocGen’s new investment bank chief, is on a mission to convince shareholders of the merits of another pragmatic break with the past — reinventing his division around a broader base than the market-leading equities derivatives franchise that critics say is fading fast. The investment bank has been under fierce scrutiny following the March departure of Mr Cabannes’ predecessor Didier Valet and a “watershed” first quarter where SocGen’s equities revenues rose just 6 per cent while rival BNP Paribas’ were up 38 per cent, according to Goldman Sachs data. Rival bankers and former SocGen staff say its woes started much earlier, beginning with the departure almost 10 years ago of the star traders who created the bank’s market-leading equity derivatives business, including JeanPierre Mustier, now chief executive of Italian lender UniCredit. “They lost some real leaders in the field who were instrumental in getting SocGen where they got to,” said one equities professional who used to work at SocGen and now works for a rival bank. “It’s a real real shame for the amazing franchise that they had.” SocGen is now Emea’s [Europe, Middle East and Africa] third biggest equities operator by revenue, having lost its number one ranking in 2013, according to data from industry monitor Coalition. Its shares have fallen 23 per cent since March 1; shares in the benchmark Stoxx EU 50 banks have fallen almost 17 per cent over the same period, while shares in France’s CAC 40 have risen almost 1.5 per cent. In an interview with the Financial Times at the bank’s headquarters, Mr Cabannes said he does not think equity derivatives is what differentiates SocGen any more, but that the bank must explain itself better. “I think we have still to do more pedagogic work,” said the 60-year-old Frenchman, who has been at SocGen since 2007. “In the first quarter we made a dedicated deep dive on our global market activities for our investors and analysts. It was very well received and I think we have to continue in that direction.”

Monday 02 July 2018

C002D5556

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

China backs $15bn tech fund to compete with Japan’s SoftBank Fund to look at global deals even amid concern over inflated tech valuations ARASH MASSOUDI & DON WEINLAND

hina Merchants Group has teamed up with a London-based firm to launch a new Rmb100bn ($15bn) technology investment fund with aim of becoming China’s answer to the near-$100bn Vision Fund created by Japan’s SoftBank. The state-owned conglomerate, along with other unnamed Chinese groups, has pledged to invest up to Rmb40bn of the fund, in what would be a huge pool of capital primarily designed to target investments in Chinese technology companies. The “China New Era Technology Fund” will also look at deals globally, a move that may draw scrutiny from Western governments, which have becoming increasingly concerned and outspoken about Chinese dealmaking in their technology sectors. CMG is set to announce the plans with the UK’s Centricus, the investment firm that helped structure SoftBank’s record-setting technology fund, and SPF Group, a small Beijing-based fund manager that counts Joshua Fink, the son of BlackRock founder Larry Fink, as one of its partners. Centricus and SPF Group will be responsible for raising the remaining the Rmb60bn from governments, universities and other technology companies. Centricus is led by former Deutsche Bank executive Nizar Al-Bassam and former

Goldman Sachs partner Dalinc Ariburnu, who have close links to Gulf sovereign wealth funds and helped SoftBank secure $60bn in commitments from the state funds of Saudi Arabia and Abu Dhabi. The new fund comes as global investors are racing to assemble ever larger pools of money to compete with SoftBank’s massive fund, which has upended the traditional venture capital-backed approach to technology investing by deploying huge amounts into start-ups. Mr Ariburnu said: “The technology revolution is taking place much faster than expected and this is creating a big race for investments in this space. We are at a stage where the size of available funds and the ability to access big markets will be the game changer.” Last week, the FT reported that Sequoia Capital had raised the first $6bn of what will be an $8bn global fund as the Silicon Valley venture capital firm seeks more firepower to compete with SoftBank. CMG has become increasingly focused on tech investments in the past years and it recently gained approval from Beijing for a group subsidiary, China Merchants Fund, to set up one of six funds to participate in tech IPOs as cornerstone investors. The group’s financial arm is active in the Chinese tech sector, recently securing a role as one of the seven cornerstone investors for Xiaomi’s IPO in Hong Kong.

Elliott Advisors criticises ThyssenKrupp-Tata deal terms

Activist investor and Cevian Capital express concerns over non-cash

OLAF STORBECK

lliott Advisors, the US activist investor, has criticised the terms of the merger of the steel operations of ThyssenKrupp and Indian rival Tata, accusing the German industrial conglomerate of giving away assets too cheaply. The non-cash merger to pool the European steel assets of ThyssenKrupp and Tata into a new company based in the Netherlands struck late on Friday does not need shareholder approval, having been agreed by ThyssenKrupp’s supervisory board. Two members of that board voted against the deal, with a third abstaining, according to a person with knowledge of the matter. ThyssenKrupp declined to comment. The deal creates an enlarged group with €17bn in sales, 48,000 employees and 34 sites. The German group will transfer pension obligations worth €4bn into the joint venture, while Tata will put in €2.5bn in debt. Both partners will hold a 50 per cent equity stake, but ThyssenKrupp would get 55 per cent of the proceeds

of a future initial public offering. Calculations by Elliott, which owns a stake below the 3 per cent disclosure threshold, seen by the Financial Times estimate ThyssenKrupp’s fair stake in the new company at about 80 per cent, based on the higher profitability of its European steel operations. Elliott estimates that ThyssenKrupp’s higher share in the proceeds of a future IPO are worth €150 to €200m. The funds declined to comment. Cevian Capital, the Swedish activist investor which holds an 18 per cent in ThyssenKrupp, also has concerns about the valuation of the deal, according to people with knowledge of the situation. The fund manager, which did not comment on the valuation, on Sunday welcomed the joint venture as “a step towards reducing the overly complex conglomerate structure”. But Lars Forberg, founding partner of Cevian Capital, said in a statement that there was “now an urgent need and opportunity to address the significant and persistent underperformance of the industrial businesses” of ThyssenKrupp.

Debate on UK productivity puzzle masks growing consensus Your weekly briefing on the UK economy GAVIN JACKSON

o fewer than three Bank of England policymakers publicly discussed the UK’s poor productivity performance last week, but, while all focused on different aspects of the problem, their interventions showed that a consensus is emerging about its source. Ian McCafferty, an outgoing member of the Monetary Policy Committee, kicked things off on Tuesday by labelling Brexit as the new greatest threat to productivity growth in the UK. After 2010, slowing global trade and the repair of the financial services industry had held back productivity growth, he said, but now, as these factors wane, Brexit will take over. Uncertainty will lead to lower investment and a change in trading arrangements will cause a reallocation of resources that should lower productivity growth, at least in the short term. Jonathan Haskel, Mr McCafferty’s replacement on the MPC, was next and more optimistic. He told a Treasury select committee hearing, also on Tuesday, that data are failing to measure growth in the intangible economy and productivity may recover as business investment in new

technology “comes on stream.” Then, on Thursday, Andy Haldane, chief economist of the BoE, blamed a “long tail” of underperforming companies — that need help to improve skills and use of technology across supply chains — for Britain’s relatively poor level of productivity compared with other western European nations. While it may look like the old joke about how you can lay every economist end to end and still not reach a conclusion, these three statements mask a growing consensus among policymakers that low investment and a fall-off in growth among previously fast-growing companies is responsible for the slowdown after the 2008 crisis. As my colleague Chris Giles has written, the productivity puzzle has been solved. Mr Haldane cited research by BoE staff showing that “previously high-performing companies have seen their productivity laid low”, just as Mr McCafferty identified exporters and financial services not growing as fast as they used to. Mr McCafferty and Mr Haskel also both highlighted the role of low investment, mentioning BoE research showing about half of the slowdown in growth is explained by lacklustre business investment. This week’s calendar Monday 9.30: Manufacturing purchasing managers’

index (June) May’s manufacturing PMI pointed to a bounce back. The index rose to 54.4 up from 53.9 in April, indicating a slight acceleration in activity. However, much of the increase came through inventory building, that is building up stocks of unsold goods rather than meeting new demands. Since that survey was released, official manufacturing output data for April pointed to the sharpest slowdown in more than half a decade. Britain’s manufacturing sector enjoyed a good 2017 but indications show that global growth no longer provides as much of a tailwind to industry as it previously did. Last week’s BoE agents’ report said that demand for UK-produced goods destined for China had fallen. Tuesday 9.30: Construction PMI (June) Official estimates of growth were revised up last week as the Office for National Statistics introduced a new method of calculating construction output. However, while the pace of contraction in construction was lowered from a fall of 2.7 per cent, the sector still struggled through the bad weather and shrunk by 0.8 per cent. In May the construction PMI came in at 52.5, indicating growth and a modest bounce back in the second quarter of the year as building work resumed.

Strong dollar leaves emerging markets on edge for rest of 2018

Slowing growth in China and the concerns over tit-for-tat protectionism add to fears FT REPORTERS

reasuries and their relationship with global yields Tightening monetary policy and surging economic growth was supposed to finally call time on an era of ultra low bond yields. It has not yet turned out that way. The 10-year US Treasury yield has stalled at the psychologically crucial 3 per cent level. Other major markets followed it higher earlier this year, but they have subsequently plateaued. Hence, the difference between Treasuries and other bond yields has reached historically wide levels. Meanwhile, weaker prices and higher yields in the eurozone periphery last month were triggered more by local political tensions, led by Italy, than sustained evidence of economic sprightliness. This leaves fixed income investors mulling the prospect of either a global stagnation or a sustained and historically rare divergence between the US and other markets in the second half of this year.

Tim Haywood, fixed income investment director at Gam Investments, said there was still plenty of reasons to expect yields to shift higher in the coming months. “The premise that yields would rise has definitely been proven,” he said. Although investors’ risk appetite is “relatively light”, “the underlying economic data are pretty impressive”, therefore “it is appropriate to be somewhat bearish on bonds”, he argued. Fundamental shift for developed world stocks Nine years into a bull market, US equities are showing signs of strain. The S&P 500 is up 1.7 per cent this year while European national indices are almost all negative since the start of 2018. “If you look out across the world, price-to-earnings multiples are high relative to where they have been in the past,” said Bill Kennedy, portfolio manager for Fidelity International Discovery Fund. “You have high valuations combined with incremental monetary tightening so my base case is that there is probably some downside”. With unpredictable factors such as

Trump’s trade policy unlikely to go away investors will be forced to refocus on fundamental drivers of stock valuations, most importantly earnings. In the US large technology companies, which are among the fastest growing in the S&P 500, have outperformed, with the Nasdaq up 8.6 per cent year to date. If these groups continue their growth trajectory then their shares should be able to shrug off frightening headlines from elsewhere. “When making investment decisions, you cannot rely heavily on a re-rating of P/Es,” said Mr Kennedy. “What will drive performance over the next six months is owning companies that are delivering on earnings.”A challenging second half for 2018 awaits investors with a number of flashing warnings over a slowing macroeconomic story outside of the US and heightened political and trade tensions. Emerging markets and the threat of contagion A stronger dollar and rising short-term US interest rates have shaken faith across emerging markets with investors dumping stock and bond funds.

A10

BUSINESS DAY

C002D5556

Monday 02 July 2018

ANALYSIS US and China must find ways to control their elites Success rests on heading off popular unrest, rather than winning trade fights

ension between the US and China is driving much of what is happening in the markets today. The analysis has focused on tariffs, currency manipulation, strategic technologies and which country has the most to win or lose in a trade war. But there is a more important question to be asked when thinking about the future success and stability of each nation: which country will be better able to control its moneyed elites? In his 1982 work The Rise and Decline of Nations, the economist Mancur Olson argues that civilisations tend to decline when the moneyed interests take over politics. That has clearly happened in both countries, where the levels of wealth inequality are not dissimilar; the top 1 per cent in China own about 30 per cent of the economy; in the US, the figure is 42 per cent. For better or worse, China is tackling this head on via

liberal entitlement that is anathema to large numbers of Democratic voters. Witness last week’s congressional primary in New York City. A veteran representative — number four in the House leadership — was defeated by a 28-year-old who favours guaranteed jobs and universal healthcare. America’s elite business class has, for decades now, sought to distract from rising oligopoly with hypocrisy. US companies complain vociferously about unfair Chinese trade practices and intellectual property theft. But faced with challenges in the Chinese market they usually caved in to maintain their access rather than seeking public help from the US administration to mount official challenges. (Corning backed down on a lawsuit over theft of trade secrets, and Qualcomm paid a $975m antitrust fine to China in two public examples.) “The thought of accessing 1.3bn consumers is simply too tempting,” says Michael Wessel, a trade expert

President Xi Jinping’s clampdown on the country’s princelings. Thoughtful people can disagree about whether a party that jails hundreds of thousands of people and executes some in the name of a corruption purge can maintain any sense of moral superiority or legitimacy. But Communist party elites would argue that this is all in service of the higher goal of economic development. People who have had recent conversations with Chinese leaders have told me they believe the anti-corruption probes led by Wang Qishan are essential to breaking up vested interests that want to maintain a status quo based on cheap labour and cheap capital. Chinese leaders also believe that America’s inability to curb its own elites will be the country’s downfall. They have a point. Last week, several important Supreme Court decisions were made that favoured the few above the many. They included the American Express ruling, which weakened antitrust enforcement; the upholding of Donald Trump’s travel ban on immigrants mainly from Muslim nations; and the Janus decision that strips funding from much of the US union movement. This all stems from the fact that moderate Republicans, including many in the business community, supported Mr Trump despite misgivings because they knew he would appoint a friendly Supreme Court justice. But Mr Trump was in some ways a reaction to the Democratic party’s decision over the past few decades to ally with elite interests — Wall Street under Bill Clinton, and Silicon Valley under Barack Obama. Many of the party’s top donors and power brokers in the party blend a “greed is good” 1980s ethos with a sense of

and former Democratic staffer, who sits on the Committee on Foreign Investment in the United States, which regulates overseas investment. “They are trading America’s long-term economic future for the prospects of returns that simply aren’t as robust as promised.” It amazes me that any western multinational thought they could win this bet. China has made it clear it intends to give more, not less, support and preferential access to its own companies both at home and in areas where China has significant geographical influence. Yet neoliberal hope springs eternal. Markets have breathed a sigh of relief in the past few days because they believe pro-free trade advisers like Treasury Secretary Steven Mnuchin have dissuaded Mr Trump from imposing tougher bans on Chinese investment. The respite is temporary. It remains unclear whether China’s anti-corruption campaign will restore faith in the Communist party, or ultimately undermine it. But the US is not doing any better at curbing elite power. It is arguably doing worse, as reflected in the fact that lobbying dollars into Washington have more than doubled in the past 20 years. The left has a choice to make between capital gains and moral certainty. The right must decide whether it still has a soul. The centre will not hold — and there will be big economic and political impact as it crumbles. The US may well be heading towards a choice between fascism driven by rural whites or socialism driven by urban millennials. Investors know neither will be good for business. A key bond market indicator, the yield curve, is flattening and may invert. If that happens, a recession is likely.

RANA FOROOHAR

Alarm bell over ‘valley of death’ for mid-sized asset managers Outlook for companies with no competitive edge is bleak, warns Bain CHRIS FLOOD

severe squeeze on profits over the next five years will drive many mid-sized asset managers out of business and force those that survive to restructure operations, according to Bain. The consultancy forecast that profits earned by 150 of the largest traditional fund houses globally would tumble 12 per cent from €92bn in 2017 to €81bn by 2022 as stricter regulations, rising costs and the end of ultra-low interest rates drive up competition. It also expected that the top 10 managers would win a larger share of industry profits, making it hard for smaller players to survive. “A collapse of smaller or mid-sized plain-vanilla firms with no competitive advantage is a highly likely scenario,” said Matthias Memminger, a Bain partner. The squeeze on fund managers’ profit margins is expected to be even more intense. Profits measured as a share

of assets are forecast to decline by an average of 7 per cent a year until 2022. This would leave profit margins at just 8.3 basis points, below the trough of 2008. Mr Memminger said an “escape from this valley of death” was possible by two routes. Managers could “go big” through mergers and acquisitions to build scale in either active or passive strategies. “M&A is a promising option to increase assets in a fragmented market, either through addon deals or via a merger of equals,” said Mr Memminger, pointing to the deals that created Janus Henderson and Standard Life Aberdeen. The second route would require managers to carve out niches that could deliver high alpha [market-beating returns] and command higher fees. Nordea of Sweden, Zurich-based RobecoSAM and Candriam, the Franco-Belgian manager, have pursued this path. Multi-asset strategies, socially responsible investments and alternatives including hedge funds, infrastructure and real estate still stand out as attractive

opportunities for Bain. “All of these strategies can command higher fees if executed well but they require distinct capabilities. Managers need a clear-eyed view of where they should play and how they will win,” said Mr Memminger. Gavin Weir, a London partner in White & Case, the US law firm, said asset and wealth management was the most fragmented financial sector globally and that consolidation was accelerating. Macquarie, the Australian financial services provider, last week expanded its presence in Europe with the acquisition of ValueInvest, a €3.7bn Luxembourgbased global equities manager. “Megamergers also remain a strong possibility,” said Mr Weir, adding that new regulations, competition from fintechs and the expectations of cost-conscious retail investors would drive more managers to pursue deals to achieve economies of scale. “The global financial crisis is behind asset managers but the new challenges are no less daunting,” said Mr Weir.

Washington and its allies need to contain Beijing US should not acquiesce to Chinese dominance of the South China Sea

ittle by little, China has taken de facto control over much of the South China Sea. It has constructed artificial islands then stationed military equipment on them. It has used civilian fishing boats to assert informal sovereignty, then sent coastguard ships or its navy to protect them. Through salami-slicing tactics — incremental steps not big enough individually to provoke a response from its rival, the US — it has changed the facts in the water. Now, Beijing has rebuffed Washington’s efforts to engage on the issue. President Xi Jinping told US defence secretary Jim Mattis in Beijing last week that China would not yield “one inch” of the crucial waterway through which $5tn of trade passes annually. That was only a restatement of Mr Xi’s longheld position. But it is one Beijing was wary of stating publicly even a decade ago. Now, Chinese officials more overtly assert that great powers should control the waters around them. The South China Sea — to

parts of which several neighbouring countries stake marine claims — is joining a list of global flashpoints that includes Ukraine, Syria and the Korean peninsula. It is another arena in which the waning of US power and of the Pax Americana, which has largely kept the peace and helped fuel Asia’s rise to prosperity, have been laid bare. China has ignored the 2016 ruling of a tribunal in The Hague that its territorial claims to a large part of the sea were invalid. In this, it was helped by the capitulation of the Philippines — which took the case to The Hague in 2013 — as President Rodrigo Duterte turned away from the US to court trade and investment instead from China. Yet the case has highlighted Beijing’s willingness to flout international law. The US now faces a choice: to accept creeping Chinese hegemony in its backyard, or try to contain Beijing. There is little it can do to reverse recent developments in the South China Sea. Military confrontation is not an option. But it should not roll

over and accept Chinese dominance. Doing so would offer a tacit invitation to Beijing to pursue other, potentially more dangerous, territorial claims elsewhere. It might prompt US allies concerned about China’s rise, such as Japan and South Korea, to conclude that Washington will no longer defend their interests, and take matters into their own hands — adding fuel to a dangerous Asia-Pacific arms race. US President Donald Trump has unfortunately shown an unnerving readiness to snub longtime partners, such as G7 members, while pursuing eye-catching deals with adversaries such as North Korea’s Kim Jong Un. The president has, however, done much more than his predecessors both to engage with Beijing and — however misguided the means — exert economic pressure on China over its trade practices. He should be encouraged to echo from the White House the kind of message on the South China Sea that Gen Mattis took to Beijing last week.

Monday 02 July 2018

C002D5556

BUSINESS DAY

A11

A12

BUSINESS DAY

NEWS Arrest any fuel tanker seen after 6pm, NUPENG tells FG RAZAQ AYINLA, Abeokuta

igerian Union of Petroleum and Natural Gas Workers (NUPENG) has advised Federal Government to start arresting any fuel tanker driver caught on highways or any Nigerian roads after 6pm, saying the Union had earlier made law to that effect but a large number of its members fail to abide by it. NUPENG said the arrest and prosecution of erring tanker drivers and confiscation of such tankers would reduce incessant fuel tanker fire disaster on the highway as witnessed last week Thursday evening in Lagos State. Speaking in Abeokuta on Sunday on the sidelines of handing over ceremony of the Independent Marketers branch of NUPENG, both zonal chairman and national auditor of Independent Marketers branch of NUPENG, Olayemi Abayomi and Thompson Ogbodo, respectively, said government should assist the Union to implement the law that outlawed haulage of fuel at night. While speaking with newsmen after the meeting, Abayomi said the recent fire disaster at the Otedola link bridge in Lagos was unfortunate, but could be avoided if fuel tanker driver had abided by the rules

and regulations of the Union, saying the government needed to have a close watch on the fuel tanker drivers as some of them drive while not in their right state of mind. He said, “It is an unfortunate event that happened on Thursday night. What really happened was that, the tanker drivers had been given instruction from their Union that there shouldn’t be any movement after 6pm, but the tanker drivers failed to adhere to the instruction. “Had it been after loading the truck the tanker parked, that accident might not have occurred, but it is a disaster, which can be caused by a human error. “All tanker drivers should not travel at night, each time they load late they should wait till next day before they continue their journey. As a tanker driver it is dangerous to drive at night though there might be less traffic, I see no reason why the tanker drivers should work at night for their safety and the safety of the entire citizens.” It also berated President Muhammad Buhari-led Federal Government, saying that the Union had not felt the impact of the government, explaining further that if President Buhari had done the needful, the pump price of the Premium Motor Spirit (petrol), which stood at N145 per litre would have been reduced.

C002D5556

Motorists to be prosecuted on Lagos-Ibadan Expressway for speeding above 50km per hour - FRSC RAZAQ AYINLA, Abeokuta

peratives of the Federal Roads Safety Corps (FRSC) have requested motorists that ply Lagos-Ibadan Expresswaytobewatchfuloftraffic barriers, construction equipment and materials deployed to the road since Julius Berger plc has resumed construction works on the road. The national traffic and safety agencyalsoaskedmotoriststoprepare for extra travel time around the said areas, pointing out the possibility of narrowing down the carriage ways and occasional diversion of traffic for which it warned the motorists not to speed above 50km per hour, within the construction zone. Recall that Federal Government through the Federal Executive Council had last April approved N64.108 billion for additional works on the road that coversrehabilitation,construction and erection of pedestrian bridges and toll plazas. Speaking in Abeokuta on Sunday through a press statement signed by Florence Okpe, FRSC public education officer, Clement Oladele, Ogun State sector commander of FRSC, said the maximum speed limit allowed by law at the construction areas was 50km per hour. He clarified that position of traffic law is applicable to LagosIbadan expressway as well as all

other places where roads construction are ongoing, adding that any motorists that flout traffic rule would be prosecuted accordingly. He said, “This is to inform the motoring public that sequel to the traffic alert issued by FRSC Ogun State Command on Tuesday 08 May 2018, to the effect of resumption of construction works by Julius Berger Plc (JBN), the construction company rehabilitating the Sagamu interchange section of the Lagos - Ibadan Expressway. “It is important to issue this advisory that the exercise has led to mobilisation of construction materials and erection of traffic barriers, which could narrow the carriageways and even cause occasional diversion of traffic from the long bridge to Warewa, Ibafo, NASFAT, Mowe and RCCG towards Sagamu Interchange. “Accordingly,motoristsareadvised to note this and replan their tripswithallowanceforextratravel time around these construction areas.Motoristsarealsoreminded that maximum speed limit allowed by law at construction zone is 50km/hour. “Violators are liable to prosecution. We, therefore advise motorists traveling along the Lagos - Ibadan expressway to drive cautiously and obey traffic rules at construction sites. They should also obey the FRSC and sister traffic and emergency agencies directing traffic around the construction areas.”

Monday 02 July 2018

CBN gives banks 3 days to resolve USSD disputes HOPE MOSES-ASHIKE

entral Bank of Nigeria (CBN) on Saturday directed all commercial banks to resolve disputes arising from use of Unstructured Supplementary Service Data (USSD) channel within three days. Such resolution, according to Dipo Fatokun, director, banking and payments system department, will help build more confidence in the payment system and bring more people into the financial services net. Speaking on the theme: Half-Year Review of Developments in the E-Payment Industry and Customer Protection, Fatokun said: “USSD transactions above N20,000 require two-factor authentication (2FA). “No USSD financial service should be activated for customer unless the deactivation mechanism is put in place with effect from October 2018. In addition, the CBN is c u r re n t l y w o r k i n g t o properly structure and

formalise the sandbox arrangement in Nigeria by collaborating with some infrastructure providers like the Nigeria Interbank Settlement System (NIBSS) to interact with FinTechs.” Fatokun, who was represented by assistant director, Banking and Payments System Department, Taiwo Oladimeji, said maximum USSD transaction limit remained N100,000 per customer per day, adding that any amount above that required customer to execute indemnity at the bank. He said the financial system was undergoing transformation through technology, adding that it was not only peculiar to the financial services sector, but all sectors of human endeavours. “We are seeing new operators with technology savvy, more efficient models, and collaborations among new entrants as well as established participants in payments systems in ways that exhibit regulatory challenges.

Monday 02 July 2018

C002D5556

BUSINESS DAY

A13

A14

BUSINESS DAY

C002D5556

Monday 02 July 2018

C002D5556

BUSINESS DAY

A15

A16

BUSINESS DAY

C002D5556

Monday 02 July 2018

BUSINESS DAY

C002D5556

NEWS YOU CAN TRUST I MONDAY 02 JULY 2018

fivethings

Opinion

for your new week

Industrialising Nigeria? Ask the Brits: It’s about ideas, people and systems GLOBAL PERSPECTIVES

OLU FASAN Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

ontinuing the theme of my discussion on Nigeria’s trade policy last week, I want to turn to its industrial policy. Trade and industry are, of course, closely interrelated. A nation cannot truly participate in international trade, and be rich, unless it can sell valuable products, not just raw materials, to the rest of the world; and it can’t do that unless it has the industrial capacity to produce high-quality goods and services. So, industrialisation is a legitimate goal for any nation to pursue. But how best to achieve it? Central to that question is another: What is the proper role of government? The statist school holds that government should centrally plan, direct and influence industrial outcomes, with state officials picking “winners” among industries. On the other hand, the libertarian, laissez-faire school sees virtually no role for government, but puts absolute trust in market forces. However, a third school, the classical liberal approach, rejects both extremes. Markets can fail and need framing rules, and, thus, there is a proper role for the state. Of course, that role is not about central planning by some arrogant yet ill-informed state actors, but rather it’s about government working in partnership with business and other stakeholders to remove all barriers to economic and industrial growth. So, what are the enablers of industrial development, and how prepared is Nigeria to provide them? To answer these questions, I will use the UK’s recent Industrial Strategy White Paper to benchmark global best practices, and then compare Nigeria’s approach to industrial development. Why Britain, you might ask. Well, for centuries, Britain has been the global economy’s intellectual powerhouse and driver of change, from the first industrial revolution to the “golden era” of free trade. In the 1980s, after a decade of national economic stagnation and high inflation (“stagflation”), caused by statist economic policies, it was Britain’s bold, promarket reforms that set an example for others, including (eventually) the then Soviet Union, to follow. So, when Britain produces an Industrial Strategy, any country interested in economic devel-

opment should learn from its approach. For me, what’s most striking about the UK’s Industrial Strategy White Paper, published in November last year, is the clarity about Britain’s overarching approach to industrial policy: it is underpinned by a resolute commitment to trade openness. As the White Paper puts it, “Britain’s prosperity is founded on being an open, liberal free-trading economy”, and “Britain’s future has to be one of free trade”. It goes on to say that “The role of the government is not to pick favourites and subsidise or protect them; rather it is to ensure that British business environment is shaped by competition and contestability in which the best businesses of all sizes can thrive”, adding that, “the best way to improve productivity is to increase exposure to competition”. In this era of growing protectionist sentiments, it’s really refreshing that a government is talking like this. When you hear some otherwise well-informed technocrats in Nigeria, as I pointed out last week, you would think that no country embraces economic liberalism anymore. Well, Britain has always done and still does. But does it mean that the UK does not support its industries or that it doesn’t have a strategic view about the direction its industrial development should take? Far from it, its strategy is not libertarian or laissez-fair,

areas where the UK believes it can lead the “global technological revolution”. These are: 1) artificial intelligence (AI) and big data; 2) clean growth; 3) the future of mobility, i.e. the development of electric cars; and 4) meeting the needs of an ageing society. None of these “Grand Challenges” involves the government protecting any sector, but they will be achieved through intense focus on the five cross-cutting, horizontal enablers, and through bottom-up Sector Deals, in which sectors come together under clear leadership to negotiate a Sector Deal with the government to address their specific sectoral needs and boost productivity through the five enablers. Reading the UK’s Industrial Strategy White Paper, I couldn’t help but wonder why, given its acute development crisis, Nigeria lacks the urgency to embark on serious structural reforms. Britain, let’s remember, is the world 6th largest economy, 5th out of 127 in the 2017 Global Innovation Index, 8th out of 137 in the 2017/18 Global Competitiveness Index, and 7th out of 190 in the 2018 Ease of Doing Business Index. If Britain, with its world-class achievements, is still deeply fixated on advancing its innovative capacity, people, infrastructure, business environment and regions, why is Nigeria not in a hurry to develop, why is it so sclerotic and lethargic about progress?

How can a nation industrialise without innovation? Yet Nigeria is 119th out of 127 in the 2017 Global Innovation Index. How can a country industrialise without being competitive? Yet Nigeria is 125th out of 137 in the 2017/18 Global Competitiveness Index. What about infrastructure, which I call, broadly, systems? No nation has ever industrialised without energy and advanced transport networks rather it is based on classical economic liberalism that believes that government has a role in promoting competition and driving higher productivity, and in providing incentives for industry-led technological breakthroughs. So, first, the White Paper lists five foundations of industrial success that the government wants actively to support. It calls them ideas, people, infrastructure, business environment and places. The last is about devolving economic powers to regions to ensure that every part of the country experiences economic dynamism and productivity growth. In addition to the five pillars of productivity, the White Paper then lists four “Grand Challenges”, that is, four

Nigeria published its industrial strategy, called Nigerian Industrial Revolution Plan (NIRP), in 2014, under the Jonathan administration. The Buhari administration adopted it, which is commendable for policy consistency. But despite the plan being called “revolution”, there is nothing revolutionary about it; not in terms of its substance nor in terms of the speed of delivery. Take delivery first. The plan was supposed to be delivered “over the next 5 years”. That was 4 years ago. In 2018, where is Nigeria with the implementation of the NIRP? Beyond processes, committees, meetings, announcements, planning etc, where is the real progress on the

ground? Hardly any! Now, what about the substance of the NIRP? Its overall approach is to pick “winners” among industries. While the UK identifies themes, such as Artificial Intelligence, big data and clean energy that it wants to advance through key enablers, Nigeria lists 4 industry groups and 20 sectors that it wants to protect through local content requirements, high tariffs, import bans etc. Even though the NIRP states that manufacturing in Nigeria “has failed to undergo critical structural transformation”, the government thinks the best way to tackle that problem is to cocoon the sectors within protectionist walls instead of exposing them to the oxygen of competition. By the way, how can a country promote or protect 20 sectors? Even the United Nations Economic Commission for Africa said: “Selecting the various sectors to be promoted appears to be based on rule of thumb and not on rigorous studies”, adding: “The number of subsectors appears on the high side to qualify for a selective trade and industrial policy”. To be fair, the NIRP also lists 7 cross-cutting or horizontal enablers, namely, infrastructure, skills, innovation, investment climate, standards, local patronage and financing. But while the UK makes these enablers the focus of its industrial strategy, Nigeria sees them only as secondary to its overarching protectionist approach. Yet, the enablers are what Nigeria must focus on if it truly wants to industrialise. How can a nation industrialise without innovation? Yet Nigeria is 119th out of 127 in the 2017 Global Innovation Index. How can a country industrialise without being competitive? Yet Nigeria is 125th out of 137 in the 2017/18 Global Competitiveness Index. What about infrastructure, which I call, broadly, systems? No nation has ever industrialised without energy and advanced transport networks. What about the business climate? Last week, a reader, Mrs Makinde, emailed me. She described the Nigerian business environment as “a complete mess”. There is a “hostile attitude to foreignowned businesses”, she said. Expatriate employees are hardly welcomed, “yet standards have fallen so badly graduate engineers don’t know how to interpret metres”. This is sad, of course. No nation can industrialise without the right skills base and a flexible labour market. Indeed, every serious nation now competes for the best brains around the world. Truth is, Nigeria can industrialise if it does the right thing. It must become one of the best places to start and grow a business. That requires focusing on ideas, people, infrastructure and business environment. Above all, it must be a competitive, open economy. That works. If in doubt, ask the Brits!

Fascinating business facts

200,000

olkswagen has launched a car assembly facility in fast growing Rwanda where it hope to build 5,000 cars annually beginning with Polo and Passat models. Car ownership in the nation of 12 million people is low with only 200,000 private cars registered since 1997. Monique Nsanzabaganwa, the vice governor of Rwanda’s central bank, welcomed the move as an example of much needed investment in the nation, which has been implementing business-friendly reforms in recent years. For Volkswagen, Europe’s biggest maker seeking an African push, this will be its first factory in Rwanda.

11m

audi Arabia plans to pump up to 11m bbl/day in July, the highest in its history, up from about 10.8m bbl/day in June, an industry source familiar with Saudi oil production plans told Reuters on Tuesday. OPEC agreed with Russia and other oil-producing allies on Saturday to raise output from July by about 1m bbl/day, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers.

$10bn

hen it comes to attracting foreign direct investment, Egypt is leading the way as it expects to rake in over $10 billion annually this year and next year in actual foreign investment in its oil and gas industry. Unlike Nigeria, Egypt is dismantling barriers to investment while also adopting a flexible gas-pricing formula to encourage investment and boost supply and allowing it to move from a fixed price of $2.65 per thousand cubic feet to a price range of $3 to $5.88.

13%

il has recorded its longest run of quarterly gain in eight years as fears over global supply disruptions overshadow OPEC’s decision to ease its historic output curbs. Futures in New York were on course for a 13 percent increase in the April to June period, rising for a fourth consecutive quarter. Prices have rallied over 12 percent in the last two weeks as a tougher U.S. stance on Iran threatens to cut exports from OPEC’s third-largest supplier. Concern is rising that lower output from the Persian Gulf state will strain the producer group’s spare capacity at a time when the market is already grappling with shrinking American inventories, a Canadian oil-sands outage, as well as turmoil in Libya.

t has a large population, modern infrastructure network and now with a new set of political and economic reform, even its greatest critics say Ethiopia is ready to for a take off. Kenya’s biggest bank which set up a representative office in Addis Ababa, the Ethiopian capital, in 2015 is positioning itself for when Africa’s fastest-growing economy finally relaxes its policy toward external investment in key industries, Chief Executive Officer Joshua Oigara said. It might not have to wait much longer. “Ethiopia is a very exciting market today and the level of financial inclusion is relatively low,” Oigara, 43, said in an interview in the capital of neighboring Kenya, Nairobi. “I see a country that is ready for a major take-off in terms of infrastructure, economy etc.” Ethiopia has 18 commercial banks serving 102.4 million people.

Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Ghana Office: Business Day Ghana Ltd; ABC Junction, near Guinness Ghana Limited, Achimota – Accra, Ghana. Tel: +233243226596: email: mail@businessdayonline.com Advert Hotline: 08116759801, 08082496194. Subscriptions 01-2950687, 07045792677. Newsroom: 08022238495 Editor: Anthony Osae-Brown. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.