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news you can trust I ** MONDAY 03 AUGUST 2020 I vol. 19, no 619

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ive straight years of negative Per Capita GDP growth is unprecedented in Nigeria, at least, since the turn of democracy in 1999.

But that is what has happened between 2015 and 2019.

For many Nigerians, connecting the dots between five years of an economy not expanding as fast as population is not so straightforward, not with an illiteracy rate of 62 percent, one of the highest globally.

What is unmistakeable, however, is the pain those five years of negative Per Capita GDP has wrecked on households and businesses, whether they understand what is happening or not.

Take the case of Jide Ibrahim Continues on page 26

What is coming next?

3M 0.00 1.21

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The human face of an economy growing slower than population growth LOLADE AKINMURELE

fgn bonds

Treasury bills

Market

Nigerian Diasporas in US top list of high earning immigrants STEPHEN ONYEKWELU

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few Nigerian Diasporas maybe sending out wrong signals of criminal tendencies but credible data show that Nigerians top the list of high earning immigrants in the United States of America.

Nigerians are some of the most educated immigrants in the US, according to the Washington-based Migration Policy Institute. Fiftynine percent of Nigerians - aged 25 years or older - in the US hold at least a bachelor’s degree.

That nearly doubles the proportion of Americans born in the

Continues on page 30

Inside

Nigeria’s plan to acquire $18.12m scanners heightens hope for automation of cargo clearance P. 2

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news Consumer goods firms disappoint market with quarterly results … as COVID-19 damps productivity BALA AUGIE

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he number of consumer goods firms failing to turn a profit has jumped to a level last seen after 2016 recession, as downturn caused by the coronavirus (COVID-19) pandemic hits businesses across Nigeria.

As restriction on social events, social clubs and bars slows demand for products, the hardest hit from the pangs of the current crisis are operators in the brewery industry.

Analysts have unanimously agree that food manufacturers and fast moving consumer goods (FMCG) companies have been walking on thin ice before the advent of COVID-19 that ravaged economies across the globe.

They say there could be sustained weakness if economic recoveries are not strong enough, and that a gradual reopening of business shuttered could add impetus to earnings.

“With the harsh operating environment, it is normal to get these kinds of results,” Gbolahan Ologunduro, equity research analyst at CSL Stockbrokers Limited, says.

“Over 20 percent of the firms saw declines in sales due to restrictive measures

that slowed consumption income,” Ologunduro notes.

The ongoing earnings releases as gleaned from the NSE website show all of the companies that have released half-year results fell off the cliff, and are unable to turn each naira invested in sales by their owners into higher profit.

Unilever Nigeria plc recorded a loss of N519.11 million as at June 2020, from 2019’s profit of N3.51 billion.

That is its first loss in five year, as it posted an operating loss of N1.84 billion, thanks to a 40.22 percent reduction in revenue.

International Breweries posted a loss of N9.35 billion in June 2020 from 2019 loss of N6.84 billion the previous year. Also, it posted an operating loss of N11.12 billion as it continues to struggle with huge debt and deteriorating cash flows brought on by spiralling trade payables.

Nigerian Breweries’ operating profit dipped by 38.85 percent to N24.46 billion in June 2020 from N15.04 billion the previous year; the brewer’s net income was down 60.25 percent while sales reduced by 10.80 percent.

Cadbury Nigeria’s operat-

Continues on page 30

Roger Brown resumes as Seplat’s new CEO Iheanyi Nwachukwu

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oger Brown, the new CEO of Seplat Petroleum Development Company plc, resumed on August 1, 2020.

Brown is expected to lead Seplat into the next phase of the company’s growth aspirations following the retirement of the founding CEO, Austin Avuru, on July 31, 2020, after 10 years.

Brown joined SEPLAT in 2013 as the CFO and played a key role in the successful dual listing of the company in 2014 on both the London and Nigerian stock exchanges.

Similarly, since joining SEPLAT, he has played significant roles in various asset acquisitions by the company as well as implementing the company’s financial business model.

Brown played critical roles in the company’s successful landmark deals, Initial Public Offering (IPO) and financial structure of debt and acquisitions, as well as increased returns to shareholders.

He is very familiar with the local and global business environments and institutions.

As the new CEO, he is expected to work towards reinforcing the company’s leading position in the energy sector.

Brown brings to the CEO role, an extensive knowledge

of the company in his over six years as the CFO and a member of the Board. He has strong financial, commercial and Mergers and Acquisition (M&A) experience as well as proven people skills, which will be an asset as the company embarks on the next phase of growth.

One area of priority for SEPLAT is to ensure that liquidity and cash flow of the company remains strong and that the company’s balance sheet maintains its resilience and robustness.

Prior to joining SEPLAT, Brown was an advisor to the company since 2010 while he was the managing director and head of EMEA Oil and Gas at Standard Bank Group.

During his time at the bank, he was instrumental in providing advice and deploying capital across the African continent

Continues on page 30 www.businessday.ng

L-R: Austin Avuru, outgoing CEO, Seplat; ABC Orjiako, chairman, Seplat; Basil Omiyi, board member, SEPLAT, and Roger Brown, incoming CEO, Seplat, during the Seplat Energy Summit 2020 with the theme “Business Sustainability and Strategic Leadership in Africa.”

Nigeria’s plan to acquire $18.12m scanners heightens hope for automation of cargo clearance AMAKA ANAGOR-EWUZIE

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igeria’s plan to invest $18.12 million into acquisition of three new scanning machines for cargo inspection has reassured shippers that Nigerian seaports are on the move to becoming a modern port with an automated cargo clearing processes.

With scanning machines, analysts say, the Nigerian Customs Ser vice (NCS) would be able to reduce the rate of manual inspection and human contact at ports in facilitating cargo clearing.

Presently, Nigerian ports are heavily congested because containers are not being cleared as soon as they should due to lack of functional scanners.

“Scanning is one of the best modern methods of cargo inspection because it eliminates the need to go for physical examination and reveal 100 percent, the content in the container. If a ship berths, before any container is stacked at the terminal, it would be scanned and the content saved in the system for duty valuation,” Tony Anakebe, managing director of Gold Link Investment Limited, a Lagos-based clearing and forwarding company, says.

Anakebe, who commends the move, says such efforts would go a long way to ameliorate the plights of cargo owners at the port.

According to Anakebe, the delay caused by manual inspection has compelled

importers to pay demurrage and storage charges to shipping companies and terminal operators as additional cost of doing business. This they impose on Nigerians by raising the market prices of commodities.

“With the acquisition of new scanners, delays would be reduced and automation would be embraced. This also means that Nigeria can generate more money from Customs revenue through blocking leakages, and creating businesses for firms that import goods,” he notes.

Anakebe, who blames poor maintenance culture for lack of functional scanners at ports, states that the several spoilt fixed scanners at the ports and border stations can be refurbished, but they are

presently wasting away without repairs. He however urges the government to ensure the machines are professionally managed to avoid Nigerian factors – the lack of maintenance culture.

BusinessDay can recall that the Federal Executive Council (FEC) at its ninth virtual meeting approved $18.12 million and N3.255 billion contracts, which was awarded to Messrs Airwave Limited, for the supply and installation of three mobile cargo scanners.

Zainab Ahmed, minister of finance, budget and national planning, said the cargo scanners would be placed in Onne Port, Port Harcourt Port and Tin-Can Port.

“The scanners will fasten

Continues on page 30

Nigeria risks losing from $50bn IOCs’ spend on lack of reforms ISAAC ANYAOGU

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nternational Oil Companies (IOCs) projected spend of about $50 billion on capital projects in Africa on new oil discoveries has presented them with abundant options, hence only countries with competitive systems will attract investments, experts say.

Analysts at WoodMackenzie, an oil sector intelligence firm, say capital spend on the continent has fallen to around $14 billion in 2020 due to COVID-19 and the resultant decline in oil prices. As prices slowly recover, capital spending could reach $50 billion in the next five years.

Osagie Okunbor, managing director, Shell Petroleum Development Company (SPDC) and country chair, Shell Nigeria, in a webinar organised by the Nigerian Brit-

ish Chamber of Commerce (NBCC) last Thursday, said a key priority for the country was to focus on strategies to manage threats to its national revenues.

Okunbor said in the face of declining revenues, Nigeria should manage its costs efficiently and enhance cash preservation initiatives, including import substitution and increasing local refining capacity to conserve foreign exchange. The oil industry too must reduce waste, digitise as part of cash preservation, and cost containment initiatives.

He called for deeper collaboration between the country and the sector to co-create a way out of current crises, enforce certainty of contacts and framework to support investment as well as carbon neural projects taking centre stage in deciding projects.

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“Revenues in the medium and short term will still come from oil and gas, our cost of production today, which averages the mid-20s to $30. We need to bring that down to remain competitive,” he said.

Mele Kyari, group managing director, Nigerian National Petroleum Corporation (NNPC), is drumming this message home to operators.

Local producers, according to him, are more guilty of inefficiency reporting higher production costs than IOCs. Oil and gas sales used to account for about 70 percent of Nigeria’s revenue and 90 percent of dollar earnings, but these figures have changed due to fallen oil prices. Oil and gas sales accounted for 40 percent of Nigeria’s revenue in 2019.

It is projected that in 2020, revenue will fall below 30 percent of projected earnings. @Businessdayng

Going forward, we think we are going to see lower prices for much longer and less than $50 per barrel in 2024, said Austin Avuru, outgoing CEO of Seplat Petroleum Development Company.

“The days for oil and gas rental revenue being almost the sole source of funding the budget is gone, there needs to be a mental and practical shift,” he said.

The oil executive said Nigeria’s economic planners need to take a closer look at integration within the West African sub-region.

“We need to turn the oil and gas from rent-supporting industry to become an enabler for economic growth in West Africa. It should contribute much higher economic activity, which will in turn widen our tax base to support our budget,” Avuru said.

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news

LCCI sees 2% contribution to postal

African Diplomatic Corps calls for Adesina’s fund squeezing logistics industry re-election ahead of August election …says NIPOST can’t be regulator and operator Endurance Okafor

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ollowing the verdict that exonerated Akinwumi A d e s i n a , p re s i dent of African Development Bank (AfDB) of any wrongdoing, African Diplomat Corps (ADC) has endorsed his re-election ahead of the August 27 elections.

On behalf of the ADC, an international development organisation b a s e d i n Wa s h i n g t o n , Serge Mombouli, ambassador extraordinary and plenipotentiary of the Republic of Congo Dean of the African Diplomatic Corps in the United State of America said in a letter addressed to the US, the largest non-regional shareholder of AfDB that ADC is in support of Adesina’s re-election of Adesina.

“Adesina is the sole candidate and has received the full endorsement of the Africa Union,

said in a letter addressed to United State government, dated July 29 2020,” the letter read.

While commending Adesina for his visionary leadership and outstanding development results attained by the bank under his tenure, Mombouli urged the US, and all other shareholders to “continue to at strongly support the president of the bank and the AfDB group, going forward, especially at this period of global Covid-19 pandemic.”

The special committee set up by governors of AfDB recently cleared Adesina of any wrongdoing in the allegations that were levelled against him.

The committee chaired by former Irish President Mar y Robinson sent in its findings on July 28 saying “It has considered the president’s submissions on their face and finds them consistent with his innocence and to be persuasive.”a

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Odinaka Anudu

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agos Chamber of Commerce and Industry (LCCI) says asking courier and logistics firms to contribute two percent of their annual revenue to the Postal Fund will cripple the industry, especially small and medium players in the space.

The chamber is reacting to the provisions in Courier Regulations which mandate logistics and courier firms to contribute two percent of revenue to postal development, and postal services in rural and underserved areas.

The LCCI in a statement on Sunday said that the provision would put too much burden on courier and logistics businesses and make them unsustainable.

“These businesses are already grappling with multitude of taxes and levies in the course of their daily operations. We request that this provision be expunged immediately in the interest of investments and investors in the courier and logistics sector of the Nigeria economy,” said Muda Yusuf, LCC directorgeneral, in the statement.

NIPOST had earlier ordered international courier services to pay N20 million for

new licenses and N8 million annually while those offering national services were expected to pay N10m for license and N4 million yearly for renewal.

But Isa Pantami, minister of communications and digital economy, had reversed than on public outcry.

The LCCI explained that two percent contribution to Postal Fund would undermine the confidence of investors in the courier and logistics business and should be immediately be repealed.

It further noted that it was a negation of the efforts of the Federal Government to attract investment, create jobs and grow the economy.

The chamber also criticised a provision in the regulations which stipulates that “All courier items/articles such as right issues, shares certificates, statement of accounts, cheques, letters or offer documents, etc weighing below 0.5kg brought to a courier/logistics service operator shall be recorded and referred to the nearest post office of the Nigerian Postal Service for processing and delivery. Failure to do so will attract payment to Nigerian Postal Service of a penalty of 90 percent of the amount charged on the item by the erring operator.”

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Zenith Bank to reward customers in ‘Beta Life’ promo

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enith Bank Plc has commenced its “Zenith Beta Life” promo to reward customers of the Bank with gifts every week starting from July 31, 2020 to July 30, 2021.

According to the bank, during this period, 50 customers will be selected via raffle draw each week and rewarded with gifts worth N30,000.

“The promo is open to existing and new Zenith Bank customers with the following raffle qualifying criteria: maintain a minimum deposit of N5,000 for the period, request and collect a Zenith Bank Car; and download and register on the Zenith Mobile App,” the bank said.

Zenith Bank Plc is recognised as one of the most customer-focused financial institutions in the country and was voted the most customer-focused bank in Nigeria for the retail and SME segments in the 2018 KPMG annual Banking Industry Customer Satisfaction Survey (BICSS).

The bank was also voted as the best commercial bank in Nigeria 2019 by the World Finance and the Best Digital Bank in Nigeria 2019 by Agusto and Co, in addition to being recognised as bank of the year and best in retail banking at the 2019 BusinessDay Banks and Other Financial Institutions (BOFI) awards.

Life Lager lights up Niger Bridge

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ollowing the launch of a new bottle and the ‘Nduka’ campaign, Life Lager Beer has continued to spread the message of hope and resilience to consumers, this time with decorative lighting on the Niger Bridge.

The ground-breaking lighting project which was unveiled on Saturday, August 1, is a new initiative from Life Lager Beer, which climaxed the brand’s relaunch activities.

As the coronavirus spreads across the country, Life Lager Beer launched the ‘Nduka’ campaign as a means of encouraging its consumers to keep hope alive even as they stay safe at home.

The campaign theme which translates to “Life is Greater” saw

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Life Lager engage in a number of communication activities to pass its message of choosing life in these uncertain times creatively.

With its new lighting initiative, Life Lager is now spreading the importance of resilience, and self-preservation as the words “Enjoy Life Responsibly” appear boldly on its new lighting construction along with other brand signages.

The unveiling of the lights display which was done at an evening event had in attendance the governor of Anambra State, Willie Obiano, who referred to the initiative as a progressive one and encouraged everyone to take the right precautions to stay safe.

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Shell writes down OPL 245 licence amid bribery trial Olusola Bello

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oyal Dutch Shell said its secondquarter write downs include the OPL 245 licence for an offshore oilfield in Nigeria which it holds alongside Eni and which is at the centre of an ongoing corruption trial in Italy.

Italian prosecutors have asked for oil majors Eni and Shell to be fined and some of their present and former executives, including Eni CEO Claudio Descalzi, to be jailed in a long-running trial over alleged corruption in Nigeria. All the defendants have denied any wrongdoing.

According to Reuters, Shell said a post-tax impairment charge of $4.658 billion was “mainly related to unconventional assets in North America, assets offshore in Brazil and Europe, a project in Nigeria (OPL245), and an asset in the U.S. Gulf of Mexico.”

Eni had on July 21, 2020, considered that the public prosecutor’s requests for conviction of the company, its former and current CEOs and the managers involved in the Opl245 proceeding were completely groundless.

It stated that during its

indictment, in the absence of any evidence or tangible reference to the contents of the trial investigation, the public prosecutor had told a story based on suggestions and deductions as already developed during the investigation.

It stated that this narrative ignores both the witnesses and the files presented within the two years long and more than 40 hearings proceeding, which have decisively denied the prosecutorial hypothesis.

“Defence lawyers are going to show to the Court that both Eni and its management’s conducts were correct in the Opl245 transaction,” the company said.

Eni and Shell paid a reasonable price for the license directly to the Nigerian gov-

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ernment, as contractually agreed and through transparent and linear means.

Furthermore, Eni neither knew nor should have been aware of the possible destination of the money subsequently paid by the Nigerian government to Malabu.

Moreover, the payment was made after an inquiry carried on by the UK’s Serious Organised Crime Agency (SOCA), the company stated.

“So there can therefore be no bribes from Eni in Nigeria, no existence of an Eni scandal. Eni recalls the decision of the Department of Justice and the US SEC, which decided to close its own investigations without taking any action against the company.”

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Government failure: Nigerians must keep their leaders’ feet to the fire global Perspectives

OLU FASAN

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igerians are complicit in the utter mediocrity of their government. This seemingly stems from the failure to understand the difference between “representative” and “direct” democracy. In a direct democracy, citizens themselves decide how they are governed, including the policies and rules they want. But in a representative democracy, they elect others to govern, i.e. make rules and policies, on their behalf. Thus, representative democracy puts a huge responsibility on citizens to hold their government accountable.

The best analogy is an agency relationship where the principal must ensure that the agent acts in its best interests.

Without accountability, without a system of control by the principal, there is a risk of agency slack, where an errant agent veers away from its remit and pursues its own interests to the detriment of those of the principal.

Similarly, if left to their own devices, without pressure from the citizens, elected politicians and public officials are likely to work solely or mainly to serve their own interests rather than the interests of the people. Self-interest is a powerful force in politics.

It is useful, at this point, before we discuss the Nigerian situation, to explore from theory the role of institutions, of which governments are composed, and how they work.

At the heart of the analysis of why nations fail or succeed is the nature of institutions. In their book “Why nations fail”, Daron Acemoglu and James Robinson stress that the nature of a country’s political, economic and social institutions determines its success or failure. This is because different institutions create different incentives and produce differ-

ent results.

But what do we mean by institutions?

Or, put differently, what constitutes institutions? Douglas North, the Nobel Prize economist, made a distinction between “formal” and “informal” institutions.

According to him, formal institutions are tangible rules and organisational structures; informal institutions are norms of behaviour.

This is an important distinction because while formal institutions, i.e. rules, set the terms of governance and the parameters of acceptable behaviours, it is informal institutions, i.e. values and norms of behaviour, that determine how people apply the rules and, therefore, whether they work or not.

Which is why Professor Paul Collier, the renowned economist at Oxford University, argues that, to succeed and move from poverty to prosperity, a country must not only create the right set of rules, it must also build “teams of people with a clear mandate and the right values and motivation to make the rules work.” Of course, it’s easier to create formal rules than to engender the right values and norms of behaviour in people.

Now, coming back to Nigeria, everyone knows that this country has countless laws in the statute books and countless formal institutions. For instance, there are several criminal codes and laws against corruption, bribery and abuse of office; there are several anti-corruption and law enforcement agencies; and there are countless ministries, departments and agencies (MDAs). In fact, as I wrote recently, Nigeria is administratively overgoverned. So, why is corruption so rife?

Why is the government utterly ineffective? Why is good governance so elusive?

Well, the answer is that the formal rules and institutions are not matched by the informal constraints of the right values and norms of behaviour. Two countries can have the same rules and yet have different outcomes. This is because the people operating the rules in both countries behave differently, based on different informal rules – norms of behaviour, ideas, values, internally enforced code of conduct like honesty and integrity.

The truth is that those governing Nigeria have the wrong values and norms and are not constrained by the formal rules of conduct.

In her book “Fighting Corruption Is

Dangerous”, Dr Ngozi Okonjo-Iweala, two-time finance minister, lists the following as the factors undermining governance in Nigeria: “inappropriate policies, inefficient and non-transparent institutions, corruption, capture by leaders and rent-seeking elite.” This makes Nigeria what Acemoglu and Robinson call an “extractive” state, a state where a small group of elite dominates and exploits the people. But is this because of the absence of formal rules or because of the absence of the right values and norms of behaviour? Well, the answer is more the latter than the former.

One obvious solution is to enforce the formal rules strictly. But who will enforce the rules? Is it not the same people with the wrong values and norms of behaviour? Enforcement matters, but formal enforcement alone can’t do the job.

This is where the citizens come in.

When the French philosopher Joseph de Maistre said that “every nation gets the government it deserves”, what he meant was that, in a representative democracy, citizens have a duty not only to elect the right people to govern them but also to hold them accountable. Democracy is not about casting your ballot and then doing nothing until the next election cycle. Rather, it is about keeping the elected politicians’ feet to the fire so that they can do the right thing and act in the best interests of the people.

But such “pressure from below”, i.e. from the citizens, will only come when a country has an enlightened citizenry.

Which is why Professor Collier listed “a critical mass of well-informed citizens” as one of the key drivers of good governance. According to him, “without a critical mass of pressure from citizens, rules and institutions become paper tigers, the rules get ignored, the institutions get overpowered”.

Sadly, Nigeria doesn’t have a critical mass of well-informed and active citizens to hold elected politicians to account and act as a bulwark against bad or mediocre government. Why? Well, there are many reasons, but partisanship and self-interest are key ones. In their book “The Hidden Agenda of the Political Mind”, Jason Weeden and Robert Kurzban argue that when people take a political stance, they are probably acting out of self-interest.

That’s true in Nigeria. No matter how appallingly a government performs,

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Sadly, Nigeria doesn’t have a critical mass of well-informed and active citizens to hold elected politicians to account and act as a bulwark against bad or mediocre government.

Why? Well, there are many reasons, but partisanship and selfinterest are key ones

there are legions of people, driven by selfinterest and partisanship, who are willing to defend it to the hilt.

Take President Buhari’s supporters and spin doctors. They were bitterly against President Jonathan, who they believed woefully underperformed. But the same people have turned a blind eye to President Buhari’s appalling underperformance. Rather, they present him as Nigeria’s saviour. Why are they doing so? Well, it’s because it serves their selfinterest or partisan leanings.

The same self-interested and partisan Buharists find my criticisms of the president’s policies and leadership so objectionable they are calling me Buhari’s “enemy.” In a recent interview in Vanguard to mark my 60th birthday, the political editor, Clifford Ndujihe, asked: “From your columns, your critics consider you as President Buhari’s enemy. What is your take on this?”

But why would anyone call me President Buhari’s enemy? Of course, I speak truth to power in my columns. But the challenges that this country faces are too great for any columnist to equivocate, grovel or be sycophantic towards any politician.

The Economist magazine once wrote: “The questioning of institutions and received wisdom is a democratic virtue, and a sceptical lack of deference towards leaders is the first step to reform”. That’s the approach I have taken in my columns: questioning institutions and received wisdom in Nigeria and sticking my head above the parapet to say, with directness, to the president that his policies and decisions are undermining economic prosperity and endangering unity and political stability.

Yet, I am not President Buhari’s enemy; what I am is his probing and principled critic!

Truth is, unless Nigerians learn to hold their government to account, unless there is a critical mass of enlightened citizens that can act as a bulwark against mediocre government, Nigeria will continue to be poorly served by its leaders. It’s a choice Nigerians must make!

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

In the driving seat but not in full control

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ootball supporters in England in a state of exasperation with the selection and game plan of their team’s manager like to chant “you don’t know what you are doing”. While wishing them well, we could say the same at times of our elected leaders across the world.

In East Asia governments were prepared in terms of the medical equipment in their hospitals because they had tackled the severe acute respiratory syndrome (SARS). As second or localised spikes in the Covid-19 virus are now being recorded across the world, however, we can see that governments have to take political decisions that may or may not be guided by their leading scientists.

The economic cost of lockdowns has been brutal. In Q2 the US economy contracted by -9.5 percent q/q and the German economy, the largest and strongest in the Eurozone, by -10.1 percent. Worse is to come: the lockdown in Germany was shorter and less draconian than most in Europe, and a substantial postCovid fiscal stimulus has been prepared.

The IMF brought forward the update to its World Economic Outlook to late June to reflect its more negative call. In April it had a global contraction of -3.0 percent for this year and a rebound of 5.8 percent in 2021 but has

revised its forecasts to -4.9 percent and 5.4 percent respectively. Few economies were spared as the Fund made sizeable changes on the downside for the US, the Eurozone, India, Brazil, Nigeria, South Africa and more.

The lockdown was the easy part for governments. Most people followed the simple message, and the positive impact on infection rates and deaths was clear. In some advanced economies with established safety nets it was maintained for three months but everywhere it has been lifted for fear of the size of the hit to the economy.

We say it was the easy part because governments must now experiment with the easing and selective reimposing of controls. Another set of full national lockdowns would kill off the forecast rebound in 2021 so they must balance the needs of the economy with the advice of their scientists. Their experiences with tracing, self-isolation and travel restrictions have shown them the fickle nature of humanity.

Without any qualifications in behavioural science and armed only with anecdotal evidence, we detect two very different popular responses. Some people, and not just the elderly, still feel in lockdown mode despite the lifting of controls. They are reluctant to leave their homes and wary of public transport and www.businessday.ng

gatherings. They may well not have kept important appointments with their doctors for the same reason. They are not going to kickstart their local economy in a spending binge.

The second group has embraced the easing of restrictions with a vengeance. Most of them respected the lockdown yet now feel cavalier about the remaining official guidance. They have all become their own medical experts.

When pressed on their behaviour, they will say a) that the danger has passed, b) that they will not get the virus or c) that they had to get out and about to preserve their sanity or a combination of the three.

We do not buy into the apologists’ argument that they have been confused by the guidance because this demeans their common sense.

This group might undermine the policy of their government, for example, by ignoring a request to take part in a tracing programme.

It is also the group that gives a boost to household consumption.

This analysis is based upon our experiences in England yet has far broader application. As we all wait for the development of a vaccine that is widely available, our governments and public agencies can lessen the hardship for the poorest in society, who suffer the most from every natural disaster, pandemic and

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Gregory Kronsten financial crash. Education plays a part, and we give the example of the text messages sent by the Nigeria Centre for Disease Control on matters of hygiene. Where resources permit, governments can provide food for the most vulnerable and teaching for their children (even when schools are closed). A large network of community health groups across Ethiopia, expanded under the direction of the late Meles Zenawi, has helped to contain the virus in the absence of a lockdown.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Kronsten is the head, macroeconomic & fixed income research at FBNQuest

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For Chief J.K Randle – it’s thanksgiving time again (2) Bashorun J.K Randle

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hey were visionaries and they articulated their mission statements with vigour.

“The rich, and the highlyplaced in business, public life, and government, are running a dreadful risk in their callous neglect of the poor and down-trodden.” – Chief Obafemi Awolowo Premier of the Western Region “It is our determination that everyone should have absolute liberty to practice his belief according to the dictates of his conscience.

The cardinal principle upon which our University is founded is to impart knowledge and learning to men and women of all races without any distinction on the grounds of race, religious, or political beliefs’”– Sir Ahmadu Bello, Sarduana of Sokoto and Premier of the Northern Region.

Suddenly, we lost the plot. The struggle to dominate others and grab the largest slice of the pie (if not all) has become all-consuming to the detriment of nation building. Even the “Federal Character” principle which was meant to create fairness and equity has become an instrument for torment, torture, frustration and oppression. It had even become subversive if we are to rely on the verdict delivered by the late Pius Okigbo the Chief Economic Adviser to the Eastern Nigeria Government (1958–1962) “It means that even the village idiot can be appointed to head critical positions/agencies in the Executive branch or the political arena to the detriment of merit or incompetence.”

Yet it was not so long ago that we devoted our brains, zeal and brawn to nation building. Along with the National

Youth Service Corps whereby graduates would serve for a year in various parts of the nation other than their own state of origin, schools were to be encouraged (at both primary and secondary levels) to ensure that students learnt a language other than their own.

The goal was to ensure that a Yoruba would speak either Ibo and/or Hausa while Ibo, Hausa, Ijaw etc. would also master any of the other languages.

Hopefully, over time we would be able to communicate with each other and thereby engender mutual cooperation and understanding.

Additionally, we were set to create wealth all over our nation by galvanising production instead of consumption and taking cognizance of those aspects, skills and resources where each state has a comparative advantage. Now, the nation is on edge and all we are sharing are poverty, misery and debts.

As for accountability, we threw it out of the window when the military embarked on the massive purge (which backfired) of the public service – in 1975 with the sacking of officers by radio announcement “with immediate effect”.

Forty-five years after, many of those who believe they were denied fair hearing have not recovered. Now, you can even be sacked by Zoom!

There is a cartoon circulating on social media showing a little boy whose father had asked what he wants to do when he grows up. The boy without any hesitation replied: “I want to be a criminal”. The dad demanded – “in government or private sector?”. The boy coolly replied: “Government, of course.”

This prompted the father to enquire: “Why?” The dead pan response delivered by the little boy was: “Because they never go to jail.”

These are the structural misalignments which have created huge distortions and impediments to our progress as a nation.

How can we justify a situation in which our nation’s cash-cow (the Niger-Delta) has become the victim of massive oil pollution on a scale that is unequalled anywhere else in the world?

Recently, CNN showed dwellers close to the oil fields defecating into the same river from which they drink!

Also, there is a video going around on social media showing students in a school in Lagos while it was raining.

Rain was pouring on the students from a gaping hole in the roof while those seated at their desk had water gushing from the ground right up to their knees!

Yet in this same country, the Management Team of Niger-Delta Development Commission allegedly blew a whopping N81.5 billion within a period of five months with nothing to show for it.

It is now self-evident that we owe an apology to late Arthur Prest who was a great friend of my father. When the agitation for independence was in full sway in the 1950s, Chief Priest’s mother asked him an innocent question.

“All this talk about Independence and sending the white people away, instead of replacing them with black people, why don’t you try the half-caste first?”

Perhaps I should add the friendly fire between Chief Arthur Prest and Dr. Nnamdi Azikiwe in the 1950’s. The great Chief H.O. Davies Q.C. had in his weekly column in the “Daily Service” newspaper “Political Reminiscences” taken “My Friend Zik” (Azikiwe) to task over his credentials and commitment to racial equality. This was at a time when what is now General Hospital, Marina/Broad Street, Lagos was known as “African Hospital” while the nearby Creek Hospital (now known as Military Hospital) on Awolowo Road, Lagos was “European Hospital” and was exclusively for expatriates – even to the exclusion of Lebanese and Greeks.

Anyway, Prest who was half Ijaw and half-Scottish took sides with Davies. In his own newspaper, “The Pilot”, Azikiwe replied to the allegations against him

by Davies “seriatum”. He then veered off to launch a below-the belt attack on Arthur Prest.

“As for Chief Prest, since he is neither black nor white, he is not in a position to adjudicate on the matter.”

It says a great deal for the character

‘

How can we justify a situation in which our nation’s cashcow (the Niger-Delta) has become the victim of massive oil pollution on a scale that is unequalled anywhere else in the world?

Recently, CNN showed dwellers close to the oil fields defecating into the same river from which they drink!

of Chief Arthur Prest that he did not take offence at all.

Another leading politician from the North, Alhaji Dan Baba was asked a very direct question by his father: “This agitation for Independence is not a bad idea but for how long do you want Independence?”

However, it was late Chief Michael A. Agbamuche, SAN former Minister of Justice and Attorney-General of the Federation who used to regale his friends with his anecdote regarding the exasperation of his aged mother who on the eve of Nigeria’s Independence (1st October 1960) offered him her counsel in a last-minute effort to avert what she believed to be an imminent disaster.

“My son, instead of sending the Europeans away, why do you not give Nwobiko (an albino) a try? At least, he is more white than black.”

What a monumental tragedy and a ghastly contrast to the foundation laid by our own parents and grandparents who truly believed that the “Nigeria Project” would deliver endless possibilities – “Life More Abundant” (to quote Chief Obafemi Awolowo).

As for Zik, an Ibo and a Christian, some of his most ardent and unrepentant followers were Yoruba Muslims such as Alhaji Adelabu Adegoke and Chief Kehinde Sofola, SAN. A by-election was held for the Lagos seat in the Legislative Council of Nigeria in December 1945 to replace Jibril Martin of the Nigerian Youth Movement (NYM). It was won by Abubakar Olorun-Nimbe of the Nigerian National Democratic Party (NNDP).

They were determined to flatten the curve between fear/ignorance/poverty and security/education/prosperity.

Our ancestors gave each other the benefit of the doubt. Also, they spoke in parables because they did not want to be misunderstood.

J.K. Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN) and former Chairman of KPMG Nigeria and Africa Region. He is currently the Chairman, J.K. Randle Professional Services.

Email: jkrandleintuk@gmail.com

The Nigerian youth and dignity in labour

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abour is as old as time and man on earth, so is the principle that to eat or to survive, we have to labour; nothing falls on your lap without effort. Dignity in labour implies that all jobs are to be respected equally and accorded equal respect without any discrimination based on the type of work it is, as well as promoting honour and integrity of man’s effort in producing a service or product.

For this principle to be effective, everyone must adhere to it; employers, employees, bystanders, family, friends, government and stakeholders in society at large. The government must play its role in giving dignity to all sectors through proper legislation and enforcement of worker’s welfare and pay.

In reality, this is far from practiced; dignified labor is mostly associated with white-collar jobs.

In Nigeria, certain jobs are viewed as less dignifying and as such, people run away from them so as not to be perceived as unserious or lesser beings.

This then leads people to both identify and create avenues or explore other paths, which in most cases are illegal channels and immoral.

With an increasing youth population and few jobs available, youths have been gradually moving towards making wrong career choices, and plagued with negative influences on social media with the growth of internet scamming businesses, known as Yahoo! Yahoo! especially

in Nigeria. There is the urgent need to make concerted effort in dignifying the informal sector and directing these youths to take up careers that were ab-initio considered un-dignifying.

An estimated 58 percent of Nigerians engage in the informal sector according to the Nigeria Bureau of Statistics . Like anything else, it has its good and bad sides; on the one hand, the informal sector allows its participants flexibility than the formal sector does not provide. Especially for women, it gives them the freedom to work and at the same time build their families and marriage, especially for those that are self-employed. At the same time, the services and work they do are not accorded dignity by society and sometimes looked down upon, which should not be the case.

People who fall under the informal sector are oftentimes not legislated for or never taken into more than surface-level consideration when legislation is involved. The enactment of the Employment Compensation Act (2010) saw a blatant overlooking of those who participate in the informal sector. For the most part, people who engage in the formal sector have their employment welfare legislated and taken care of, this in turn, gives it the dignity others do not get.

An act that addresses employment welfare took no steps to address the welfare of those in the informal sector; the wordings of this act would logically be unable to cover the informal www.businessday.ng

sector. Considering the situation in Nigeria, people go the informal route to avoid poverty and most times “live from hand to mouth, knowing this, no special considerations were put in place to tackle this special situation and this contributes to the negative narrative of the informal sector. Even on the matter of national minimum wage, partakers in the informal sector seem not to benefit from it.

The youths are an essential part of any economy or country, it is important that jobs be available for them to foster this idea of dignity in labour or they will attach dignity to other destructive forms of labour. With a high crime rate in Nigeria and perpetuated mostly by people within employable age, which are youths, Nigeria needs to resolve its crime problem by getting its youth population to be gainfully employed both in the formal and the informal sector.

Think of a domino effect concerning dignity ascribed to labour and crime. When the youths see how undignified certain jobs are, they are bound to make more destructive life choices in a bid to move away from those undignified jobs.

Seeing this problem and its magnitude, WODDI has dedicated herself to developing and implementing programs dedicated to providing relevant skill acquisition classes, so that our beneficiaries can convert these learned skills into money-making endeavors and in turn free

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NKECHI ROCHAS OKOROACHA themselves of poverty and contributing positively to the society.

This change in the world, although a difficult transition, will surely do some good to the society, especially amongst the youths, as non-dignifying work will become attractive and dignifying. Such jobs as photography, makeup artistry, graphic design, content creation and much more, will become distinguished and more people will seek opportunities in these areas rather than crime and other negative vices.

The informal sector contributes about 65 percent to the GDP of the Nigerian economy and creates millions of jobs and as such should be ascribed the much dignity as the formal sector if dignity in labor is to mean anything, especially amongst the youths This is what we strive to do at WODDI as we continually seek to provide opportunities for the youth population through our designated programs and interventions.

Dr. Nkechi Okorocha is the founder/CEO of WODDI

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Survival instinct of real estate during recession WILLIAM & PARTNERS

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he pending COVID-19 pandemic has incessantly represented an unprecedented disruption to the global economy and world trade at large as such consumption and production have declined across the globe with real estate included.

The implication of this decline in global trade forces countries into recession. The Pandemic currently undermines countries’ effort to foster trade and investment amongst themselves. Projections show jeopardy in the economic growth and development forcing countries into various degrees of recession which will lead to redundancy in workplaces causing unemployment, developments that utilise 80-90 percent import-elements of construction would be disrupted as well as logistics for global supply chain interruptions.

The first major sign of the global recession was the 2020 stock market crash on 20 February 2020 and the International Monetary Fund (IMF) reported on 14th April 2020 that nations had already entered or were entering deep recession and that there had already been a significant slowdown of growth in emerging economies. Global markets into early March became extremely volatile with large swings occurring in the global markets. According to the IMF, the global economy will contract by 3 percent this year as countries around the world shrink at the fastest pace in decades, predicting that India and China are the only two major economies that will maintain a positive growth rate according to the latest UN report.

The Nigerian economy currently faces the effects of the global economic crises which results in breakdown and decline in economic vigor. It has continued to witness renewed and sustained recession, characterised by poor economic planning, highinterest rate, galloping inflation,

unemployment, stock market crash and declining businesses. The general business cycle of recessions also affects real estate as home prices tends to fall when the demand shrinks, but the extent to which that happens can vary by the local market. In areas of high demand, property owners may not see their home values go down at all. As the pandemic continues to take its toll on the Nigerian economy, the country has witnessed a massive crash in the prices of stocks and shares in the stock exchange market. However, the real estate sector has enjoyed some mixed blessing in this economic situation.

Further to the worsened fluctuation in the value of the Naira against the Dollar/Pounds, re-appraisals of values and pricing of high end residential and commercial asset classes is inevitable. Immediate pricing in the local currency has made some of these assets more competitive and desirable.

Recent experience in the market showed slightly higher activities in the high-end strata of the market with developers pushing hard to find new developments for the market and off-takers seeking deals within that segment. My personal experience shows how two well-known developer friends of mine (names I cannot disclose) called requesting for land and advisory for Ikoyi residential development urgently. The mid-income market isn’t left out of these opportunities, the stay-at-home global phenomenon has pushed demand especially for investment drives.

Real estate as an essential product/ service Consequently, real estate is regarded as a pertinent commodity both in and out of recession. While lockdowns may affect many types of businesses, especially those that provide in-person services which include retail stores, restaurants and hotels, entertainment venues and museums, medical offices and beauty salons however shelter remains a fundamental right and human need. In a case of a global pandemic which individuals need to remain isolated to stay safe, invariably pushing for real estate as an essential status.

To curb unemployment which is

one factor that leads to recession, it is important to note that every home sale could generate a job in a country.

Housing is currently 14.6 percent of Gross Domestic Product (GDP) and a major engine of the economy. Real estate activities that are considered essential include; residential and agricultural real estate services, staff of government offices that perform specific sensitive services, notary and recording services in support of mortgage and real estate services and transactions.

The essential services are primarily responsible for sale and leasing of residential properties to provide individuals and families with ready access to available housing. They are also responsible for handling property/facility management and maintenance as someone needs to ensure basic amenities such as power, water, security; janitorial and other services are running smoothly. These activities create the real estate ecosystem integral in government economic policies to exit recession. These roles are often offered by estate surveyors, engineers, technicians and other professionals in the built environment and the hospitality sector.

Workers performing housing construction-related activities to ensure additional units can be made to combat the nation’s existing housing supply shortage, including those supporting government functions related to building and development processes such as inspections, permitting and plan review services that can be modified to protect public health. If the construction industry and its supply chain are disrupted there will be a crash in the housing sector.

Nigeria has one of the largest stocks of human resources for health (HRH) in Africa; hence, there will be a need for development services, the health sector will need more developments to house patients and health workers.

The hospitality sector which amounts to 1.9 percent of the country’s GDP is a breeding ground for international business seekers and will need to house tourists as Nigeria remains an attractive market to major hotel brands with strong infrastructures.

‘

For the real estate to thrive, private sector, government and other stake-holders have to collaboratively and formulate policies and action plans that will meet todays and tomorrows’ needs, which in turn lead to fair deals for the masses who want to own their own houses to reduce payment of outrageous rents

It is obvious that real estate is very essential to every sector of the economy and with the government taking necessary steps for fueling the economy, real estate is likely to bounce back and continue with its good run.

The ease of doing business initiative by the government will have a positive impact on the market and things will improve. Growth in the real estate sector in Nigeria will have an impact on the economy significantly, from jobs it creates to revenue generation. The real estate’s multipliers effect in terms of job creation is significant. Real estate activities also stimulate the economy indirectly through the value-added impacts of the purchase of goods and services that stem from real estaterelated businesses and transactions.

Investors in the real estate sector often smile to the bank as they get returns on their investments.

I believe, “the future belongs to those who see it first, who get there first and who claim it first”. The opportunities hidden in the unprecedented health crisis for home ownership calls for innovations from access to finance, construction methodology, supply chain management, local material sourcing and marketing. Recognising what lies ahead and meeting the gap today calls for a “UREKA” moment.

In conclusion, for the real estate to thrive, private sector, government and other stake-holders have to collaboratively and formulate policies and action plans that will meet todays and tomorrows’ needs, which in turn lead to fair deals for the masses who want to own their own houses to reduce payment of outrageous rents. Lack of access to funds, poor mortgage systems are some of the challenges hindering the growth of real estate in the country.

However, real estate as the most transformative sector of any economy is capable of attracting more investments with flexible policies and optimum investment from the government. The sector has been growing with an influx of capital driven by young savvy investors who foresee the importance of investing in the sector as they see that when it comes to investing in real estate Nigeria is the best place.

Protecting trade in Nigeria: How DFIs are responding to COVID-19

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ith the COVID-19 pandemic continuing to devastate economies around the world, Africa is set to experience its first recession since the 1990s, threatening to undo two decades of growth and development.

In Nigeria, these challenges are magnified by the country’s overwhelming dependence on oil. The drop in projected crude revenue from N5.5 trillion to N1.1 trillion this year will create a difficult fiscal position, forcing the government to make tough choices as it determines how to allocate dwindling resources in a time of increasing need. With an economy significantly impacted by government spending, these effects are directly felt by households and businesses across all sectors of the real economy, ranging from bricks-and-mortar merchants and SMEs to major manufacturers.

The country’s trade sector is particularly affected by the re-emergence of foreign exchange shortage that has been amplified by the global oil price crash, lower remittances and reversed investment flows. Businesses have struggled to secure much-needed dollars to conduct international transactions and have been unable to open new lines of credit. This has important ramifications across the economy: food manufacturers

with limited access to dollars may struggle to import wheat or other raw materials sourced from overseas, crucial for providing essential food and nutrition to millions. Companies with foreign loans may struggle to source dollars to pay maturing instalments while some foreign portfolio investors have struggled to repatriate dividends and proceeds from sale of assets.

The government has been swift to introduce measures to shore up the economy and protect the private sector - including the N3.6 trillion stimulus package. However, Nigeria will continue to face persistent foreign exchange challenges that stifle trade as long as the country relies on oil for the majority of its export earnings. The currency shortage means that Nigerian businesses may be unable to make dollar payments for trade finance transactions when they fall due, resulting in technical defaults. This makes it challenging to secure new lines of credit, thereby further slowing their growth and exacerbating trading conditions under a pandemic.

As a development finance institution (DFI) with a long history of providing trade finance facilities in Nigeria, CDC Group is committed to increasing its work with partner banks to address these forex liquidity issues.

While international commercial financiers www.businessday.ng

tend to reduce their risk appetite in times of crisis, DFIs have a developmental mandate to invest counter-cyclically to protect the private sector and, importantly, jobs. As international banks reduce their trade finance limits in Nigeria or become reluctant to renew maturing lines of credit, DFIs are stepping in to ensure that trade continues as smoothly as possible. Investing at the most challenging times is part and parcel of DFIs’ mission to support growth and jobs that help people prosper and leave poverty behind.

Protecting the private sector and facilitating trade today will lead to a faster national economic recovery in the medium and long term.

That is why we are increasing existing trade finance facilities and deepening our pre-existing partnerships with three leading international banks, to provide approximately $300 million to support trade across Africa, with a particular focus on Nigeria.

Under these facilities, CDC’s partner banks directly take on risk from banks in Nigeria – and across the continent – to enable local importers to conduct more regional and international transactions. This will help alleviate the pressure on businesses such as manufacturers or pharmaceutical companies that have struggled to import inputs for their operations. Some are already fac-

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BENSON ADENUGA ing major cash flow challenges and may have to cease or downscale operations in the near future if they are unable to secure imports, potentially leading to job losses and a further slowdown in economic activity. For many of these businesses, trade finance can be a lifeline that allows them to weather the crisis, retain staff and pay salaries, as well as the taxes needed to fund essential public services such as healthcare or education.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Adenuga, Head of Nigeria Office and Coverage Director, CDC Group. CDC is the UK’s development finance institution and impact investor with a mandate to support the sustainable, long-term growth of businesses in Africa and South Asia. In Nigeria, CDC’s portfolio of 98 companies employs over 50,000 people.

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Monday 03 August 2020

EDITORIAL Publisher/Editor-in-chief

Frank Aigbogun

Fixing agriculture critical to economic rebound

editor Patrick Atuanya

Vibrant agribusiness protects lives and livelihoods

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

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hocks from the COVID-19 pandemic have hit Nigeria in a time when its absorbers are best defined as weak. It has worsened the precarious state of the economy, costing Nigerians their jobs, weakening economic growth and increasing the number of poor masses.

To help save lives, prevent increase in poverty rate and protect livelihood of the poor and vulnerable, the federal government must reprioritise public spending, focus more on expenditures aimed at stimulating and developing the economy. One way will be to lessen the COVID-19 induced pressures on the Nigeria agricultural sector.

It has gotten to a point where all hands must be on deck to rebuild a more vibrant and sustainable economy. The federal government’s “I am self sufficient and well able” thinking and policies will not work, hence, the private sector must be carried along.

In every economic crisis, households bear the brunt eventually through increased cost of living, job losses, health complications etc. Households account

for more than 70 percent of GDP. Hence, it only makes sense that policy options that can help mitigate the effects of the crisis on this group must be focused on. This will help lay the foundations for a strong economic recovery, generating more jobs and improving employment.

The Nigeria agricultural sector has remained a major contributor to the economy compared to other sectors. In 2019, the sector contributed 22.12 percent to Nigeria’s nominal GDP coupled with the fact that the sector employs about 70 percent of Nigeria’s working population. The sector is also the largest economic activity in the rural area where almost 50 percent of the population lives.

However, the outbreak of the COVID-19 pandemic has caused the sector to contract. It has brought to the fore many of the existing structural challenges in the sector.

Farmers and dealers of agricultural goods struggled through the lockdown, as security agents routinely declined to grant ease of passage.

With farmers unable to access their farms, some that should have harvested during the months coinciding with the lockdown were unable to, while those that should have been

preparing their land for the planting season were equally restricted.

According to the International Food Policy Research Institute (IFPRI), the agriculture sector contracted by minus 14 percent in April/ May 2020. Export crops such as sugarcane, beverage crops, export crops declined 47 percent, 45 percent and 58 percent respectively due to falling export demand and input supply disruptions. These crops account for less than 1 percent of agriculture GDP. Also, decline in investment spending and construction activities reduced demand for timber and wood products. This led to a minus 25 percent plunge in the forestry subsector which accounts for 1.1 percent agriculture. Root crops which are the largest food group and agriculture subsector in Nigeria accounting for 43.3 percent of the sector’s GDP contracted by 5 percent. In terms of value of activities, this is huge. Other subsectors moved in a similar direction.

Moreover, the shut down of Indorama, a leading fertiliser producer, was termed the major challenge for farmers in this difficult time. Fertilisers are needed to supplement required elements found naturally in

the soil for improved output. Farmers now have to find a way of multiplying their farm harvest else food shortage awaits Nigeria in 2021.

Projections by some agricultural commodity producers shows that productivity this year could reduce by an average of up to 47.5 percent.

Nigerians face a harsher reality of food shortage, job losses; if reforms and policies are not initiated. Food shortage means higher prices amid excess demand. With higher prices adding to inflationary pressures, Nigerians are worse off with no corresponding increase in income due to high job losses.

With such reforms targeted at increasing the productivity of farmers as well as the storing and processing capacity of agricultural produce, Nigeria would be able to mitigate the negative effects of the pandemic, while generating more jobs.

Without bold reforms, strong fiscal and monetary policy actions, the World Bank warns that the macroeconomic implications of COVID-19 in 2020 and 2021 will be severe – including the loss of life, and the possibility of five million more Nigerians being pushed into poverty – even if Nigeria manages to contain the spread of the virus.

HEAD, HUMAN RESOURCES Adeola Obisesan

EDITORIAL ADVISORY BOARD Imo Itsueli Mohammed Hayatudeen Afolabi Oladele Vincent Maduka Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Mezuo Nwuneli Charles Anudu Tunji Adegbesan Eyo Ekpo Wiebe Boer Paul Arinze Boye Olusanya Ayo Gbeleyi Haruna Jalo-Waziri Clement Isong

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In Association With

US-China relations

Would a Biden administration be softer than Trump on China?

Relations with Beijing will loom large in America’s presidential campaign

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N DECEMBER 2018 China hawks in the Trump administration pushed a series of punitive measures in what some referred to internally, according to a new book by Bob Davis and Lingling Wei, as “Fuck China Week”. That was as nothing compared with what happened in the month of July 2020.

In recent weeks America has imposed sanctions on senior Chinese officials, including a member of the Politburo, for their part in atrocities against Uighurs in Xinjiang; added 11 Chinese companies to the Commerce Department’s blacklist, for complicity in those atrocities; declared China’s sweeping claims in the South China Sea illegal; revoked Hong Kong’s special status for diplomacy and trade; announced criminal charges against four Chinese nationals who officials say were spies for the People’s Liberation Army; and ordered the closure of China’s consulate in Houston, supposedly a hub for espionage and influence operations, the first such move since the normalisation of relations in 1979 (China retaliated by closing America’s consulate in Chengdu).

The first hint of trouble in Houston came when videos surfaced online of Chinese diplomats hurriedly burning documents in their courtyard— an apt metaphor for more than 40 years of diplomatic engagement going up in smoke.

All this has happened under a president, Donald Trump, who displays a personal affinity for his Chinese counterpart, Xi Jinping, and (according to his former national security adviser, John Bolton) told Mr Xi that building camps for Uighurs was “the right thing to do”. He has shown little appetite for fights with China except over trade and, to deflect blame for his response to covid-19, the pandemic. But with time running out in his first term—and perhaps his presidency—hawkish officials around him are trying to fix in concrete a more confrontational posture than America has adopted since before Richard Nixon went to China almost half a century ago.

On July 23rd, at the Nixon Presidential Library in California, Mike

Pompeo, the secretary of state, concluded a series of four speeches in as many weeks by top officials portraying China’s regime as the greatest threat to liberty and democracy globally. The national security adviser, Robert O’Brien, the FBI director, Christopher Wray, the attorney-general, William Barr, and Mr Pompeo argued that China sought to export its ideology and “control thought” beyond its borders. They castigated corporate chiefs and Hollywood studios for bowing to Beijing, warned of extensive Chinese espionage operations in America and contended that Mr Xi is on a decades-long quest for “global hegemony”. Mr Pompeo said that America and its allies must push China to change, or risk ceding the 21st century to Mr Xi’s authoritarian vision. “The old paradigm of blind engagement with China simply won’t get it done,” he said. “If we bend the knee now, our children’s children may be at the mercy of the Chinese Communist Party.”

Unnamed in these speeches— but an unavoidable backdrop to them—are Joe Biden and the presidential campaign. Mr Trump’s campaign wants to portray the presumptive Democratic nominee as soft on China, suggesting Mr Biden while vice-president underestimated the threat. A senior administration official says that part of the calculus driving recent actions is to set China-US relations on a trajectory that would be difficult to reverse no matter who wins in November. Some officials believe they have come close to achieving this, with the help of a

broadly hawkish bipartisan consensus in Congress, which has passed tough legislation in response to the treatment of Uighurs and Hong Kong. The Communist Party’s own actions—turning Xinjiang into a gulag and stripping Hong Kong of the rule of law—have almost certainly ensured that America cannot return fully to its former relationship with China.

Still, some hawks outside the administration, including a few who say they will vote for Mr Biden, worry that he would be less confrontational with Mr Xi as he searches for co-operation on issues like climate change and nuclear-arms control. Many of his foreign-policy advisers are, inevitably, veterans of the Obama administration. Hawks deride it as having accommodated China’s rise too readily for the sake of, say, the Paris Agreement. Would a Biden administration be softer, too?

No more Mr Soft Guy Mr Biden’s advisers push back in a few ways. First, they argue that he would restore moral authority by calling out China for humanrights abuses. Second, they say he intends to work with allies to press China to change its behaviour. Third, he would invest at home to make America a stronger competitor in areas like 5G. Mr Trump, they contend, has weakened America’s standing relative to China on all three fronts: giving a green light to human-rights abuses; undermining allies while cosying up to dictators; and letting America’s institutions and infrastructure rot. “We’re weaker and

China’s stronger because of President Trump,” says Tony Blinken, an adviser to Mr Biden.

Mr Trump’s officials lay stress on their actions, not the president’s words. Before July’s salvos officials had moved to cut off the supply of American technology to Huawei, part of a campaign against the telecoms giant that has won some support among allies: Britain has now said it will bar Huawei from its networks (Australia did so before America). The FBI has taken a more aggressive approach to investigating Chinese espionage—in his speech on China, Mr Wray said he was opening a new case every ten hours.

The State Department recently decided to cancel the visas of as many as 3,000 graduate students connected to military institutions in China, the latest uptick in scrutiny of Chinese nationals coming to America for study or research. And the Department of Defence has become more assertive in conducting freedom-of-navigation operations in the South China Sea and the Taiwan Strait.

Most provocative, perhaps, have been shows of support for Tsai Ingwen, the president of Taiwan, which China claims as its own. This has raised the question of how far they might go in testing one of the most delicate aspects of Sino-American relations. A senior official says that after decades of risk-averse diplomacy, the administration is determined to impose costs for China’s behaviour.

Mr Biden’s advisers are on weak ground when they claim the Obama administration was tough on China.

A more persuasive argument is that, though he has surrounded himself with China hawks, Mr Trump is no hawk himself, and could undercut his administration’s policies at a stroke. He admitted, in an interview in June, that he delayed imposing sanctions on Chinese officials over Xinjiang because he did not want to jeopardise a trade deal. And the policy he is keenest on, tariffs, has been a failure, netting a flimsy agreement from China to buy more farm goods (which Mr Bolton says the president asked Mr Xi to do to help him win re-election).

AThe Balkan betrayal new hotspots

Curbing the covid-19 comeback in Europe Young people are flouting the rules

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HE WAVES of an epidemic tend to rise like a tsunami— slowly, almost surreptitiously, before a precipitous surge. In parts of Europe there are now fears that covid-19 cases may again be nearing a menacing inflection point. In Spain, daily new cases in the week to July 28th have risen sharply to nearly ten times the low they had descended to in June, when the lockdown was lifted. Less dramatic but worrying increases in cases are starting to bubble up in other European countries.

For the moment, the spikes in Europe are largely confined to a few hotspot countries, regions within them or even towns. Infection rates are particularly high in the Balkans

and in Spain, which has notched up about 27 cases per 100,000 people in the past week. The corresponding case rate in Germany, France and Italy is in the single digits. In both low- and high-rate countries, the bulk of new cases is often concentrated in particular locations. Roughly two-thirds of Spain’s cases in the past week are from just two regions, Catalonia and Aragon, which are home to a fifth of Spaniards. About 20% of Italy’s cases in the same period are in the Emilia-Romagna region, which has just 7% of the population.

The rise in cases across Europe is not surprising, says Hans Kluge of the World Health Organisation. As lockdowns were lifted and people resumed travel and mingling, both imported cases and the local spread of the virus have pushed tallies up.

What is different now is that testing and tracing systems are catching local spikes early, and authorities are battling them with localised Continues on page 19

Monday 03 August 2020

BUSINESS DAY

19

In Association With

Palaeomicrobiology

Researchers revive bacteria from the era of the dinosaurs The bugs that time forgot

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AR FROM the life-sustaining light of the sun, the deep sea floor appears barren and desolate. Its appearance, however, belies a thriving bacterial ecosystem that may contain as much as 45% of the world’s biomass of microbes. This ecosystem is fuelled by what is known as marine snow—a steady shower of small, nutrient-rich particles that fall like manna from the ocean layers near the surface, where photosynthesis takes place.

Not all of the snow is digestible, though. And the indigestible parts build up, layer upon layer, burying as they do so the bugs in the layer below. To look at how well these bacteria survive entombment a group of researchers led by Morono Yuki of the Japan Agency for Marine-Earth Science and Technology and Steven D’Hondt of the University of Rhode Island studied samples collected in 2010 by the Integrated Ocean Drilling Programme, a decade-long international expedition of which they were part. Their results, just published in Nature Communications, are extraordinary. They seem to have brought back to life

bacteria that have been dormant for over 100m years.

For many microbes, burial is an immediate death sentence.

Some, however, are able to enter a state of dormancy—slowing their metabolisms down almost, but not quite, to zero. They can remain in this state for considerable periods.

But precisely how long has been a subject of debate.

The samples Dr Morono and Dr D’Hondt chose for examination came from a place in the Pacific Ocean where the sea bed is nearly 6,000 metres below the surface.

That made drilling a challenge. But the expedition was able to recover

sediment cores stretching all the way down to the underlying rock— a thickness of 100 metres in some cases. The oldest material in these cores dated back 101.5m years, to the middle of the Cretaceous period, the heyday, on land, of the dinosaurs.

Examination of the sediments showed that even the oldest still contained a few bacteria. The question was, were these organisms dead or alive? To find out, the researchers incubated the samples, slowly feeding them compounds rich in carbon and nitrogen in order to coax any still-living microbes out of their

dormancy.

The results shocked Dr Morono, “At first I was sceptical, but we found that up to 99.1% of the microbes in sediment deposited 101.5m years ago were still alive.”

And there was quite a variety of them, too. The team found representatives of phyla called Actinobacteria, Bacteroidetes, Firmicutes and Proteobacteria, all of which are familiar to microbiologists. In one sample (admittedly from a mere 13.5m years ago) they also discovered representatives of the archaea, a group of organisms that resemble bacteria under a microscope, but have a biochemistry so different that they are regarded as a separate domain of life.

Cretaceous Park To find such living fossils from as far back as the Cretaceous is extraordinary. It is not possible to be sure, given the length of time involved, that they have undergone no growth and cell division whatsoever. But if they have, it will have been minimal given the lack of nutrients in the ooze they were found in. Nor is it likely that they migrated there from layers above.

The ooze in question was sealed off by a bacteria-proof layer of chertlike material called porcellanite.

One country, two passports

Many Hong Kongers are considering emigration Political and economic uncertainties may drive a new exodus

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N SEPTEMBER 2018 Matthew Torne, a British filmmaker, released the third in his trilogy of documentaries about Hong Kong.

“Last Exit To Kai Tak” is a bittersweet chronicle of five Hong Kongers who, after the disappointment of the prodemocracy “umbrella” protests of 2014, grapple with what is left for them in the city, as its liberties are chipped away by an increasingly bellicose Chinese government. The burning question, as one character puts it, is this: “revolution or emigration?”

For many people, that question has now been answered. At 11pm on June 30th, one hour before the 23rd anniversary of Hong Kong’s return to Chinese rule, the Communist Party imposed a national-security law designed to squash Hong Kong into submission. The city’s reputation as a haven of free speech within China disappeared overnight, along with the “one country, two systems” framework set up in 1997. In 2014 Communist Party leaders waited for the protesters to lose steam. But by 2020 they had run out of patience.

Several people were arrested for violating the new law on July 1st, but most have been dissuaded from taking to the streets. Then, on July 29th, four students aged 16 to 21 were detained for“incitingsecession”onsocialmedia.

They included Tony Chung, former leader of Studentlocalism, a protest

group that had called for Hong Kong’s independencefromChina.OnJuly30th Hong Kong’s government said it had disqualified 12 pro-democracy figures fromstandinginelectionfortheLegislativeCouncil(Legco),HongKong’s(until now) semi-democratic parliament. As the euphoria of the protests has dissipated and the new reality has sunk in, the focus for many Hong Kongers has shifted—just as it did a generation before, as the handover loomed—to emigration.

It is not just the crackdown that is pushing people to leave. Hong Kong was already one of the world’s most expensive places to live. It ranked above New York, Tokyo and London in the latest cost of living survey carried

out by the Economist Intelligence Unit, a sister company of The Economist.

Then came the covid-19 pandemic.

The economy shrank by 9% year-onyear in the second quarter of 2020. On July 29th Carrie Lam, the territory’s chief executive, warned the city was “on the verge of a large-scale community outbreak”. On July 31st Mrs Lam, announced what she called the “difficult decision” to delay the Legco elections, citing the territory’s spike in coronavirus cases. She gave Hong Kong a generous year to get to grips with it, promising an election on September 5th, 2021. A poll by the Chinese University of Hong Kong conducted in May, after China announced its intention to impose the law, found that half

of 15- to 24-year-olds were considering leaving.

“In Hong Kong people learn to survive, not live,” says Thea, a 23-year-old who plans to emigrate.

“Even for a middle-class person like me, having my own flat is like an impossible mission.”

Would-be émigrés have many destinations to choose from. Canada is home to more Hong Kong-born people than any other OECD country.

More than 275,000 of them emigrated there between 1989 and 1997. A residence permit can be secured by an investment of just C$150,000 ($112,000), a sum easily covered by the sale of a pad in Hong Kong, where the average house price is $1.2m, according to CBRE, a property firm. Australia is offering five-year visa extensions to Hong Kongers already in the country, “with a pathway to permanent residency”. An investment visa is pricier, at around A$1.5m ($1.1m).

Other avenues are also now available. Taiwan has opened an office to help Hong Kongers resettle. Between January and May, there were 3,352 Hong Kong applicants for permanent residence in Taiwan, double the figure in the same period for 2019. Cultural similarity and affordability make Taiwan a popular choice, says Roy Lam, an immigration consultant. A recent poll found that Taiwan was the most popular destination for 50% of Hong Kongers considering emigration.

Curbing the covid-19 comeback...

Continued from page 18

measures. On July 27th Antwerp, Belgium’s most populous province, announced a night curfew for nonessential movement and made masks mandatory in public spaces; people were told to stay at home as much as possible. Covid clusters have emerged across Germany, in care homes, workplaces and private parties, forcing officials to impose localised lockdowns. In mid-July the Catalan authorities reimposed a strict lockdown in Lleida, a city of 140,000. Nightclubs in Barcelona and other hotspots in Spain were recently shut or ordered to close early.

Varying covid-19 rates across Europe have prompted countries to make some tough choices. In a normal year, some 18m Britons seek fun in the sun in Spain, along with lots of other northern Europeans. But as cases in Spain notched up, Britain and Norway swiftly brought back quarantine for people coming from Spain. Vacationers to Greece from some Balkan countries must now show proof of a negative covid-19 test to enter the country. That has dealt a blow to whatever remained of the foreign tourist season in much of southern Europe. But there has been a collective sigh of relief among health officials watching with trepidation clubs and beaches crowded with drunk foreigners.

That, however, still leaves the matter of intensifying local transmission. A pattern that cuts across Europe is that new cases have been mostly among people in their 20s and 30s; clusters linked to large parties have become a recurring theme across the continent. German politicians have warned that citizens are growing complacent about the dangers; surveys confirm suspicions that fewer people are avoiding crowded public spaces or private gatherings. Dr Kluge says that the priority in Europe now is to ensure that young people comply more with such precautions. If that fails, he says, it won’t be long before infections spread to older, vulnerable people.

20

Monday 03 August 2020

BUSINESS DAY

MARKETS INTELLIGENCE Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Nigeria’s Stock Market adds 4,000 points since hitting multiyear lows in April

SHORT TAKES N312m After a disappointing 2018, Fidson healthcare seems to have regained its mojo as it records an after-tax profit of N312 million in full-year 2019 for the period ended 31 December. Revenue dipped 13.5 percent to N14.06bn from N16.22bn in the same period in 2018. Efficient cost management saw its cost of sales decline 17.35percent to N8.19bn from N9.91bn

BALA AUGIE and Ifeanyi John

S

ince falling to multiyear lows in April, the Nigerian Stock Market All Share Index has now jumped around 4,000 points in the last three months.

The NSE ASI which fell to as low as 20,669 points on April 4 as several states in the country embarked on partial and full lockdown to curtail the rapid growth of coronavirus in the country. However, 3 months since the country was forced to lockdown its most prosperous states, the stock market appears to have rebounded as ASI closed at 24,693 points on Friday, marking a 4,000-point march upwards.

Analysts say the stock market recovery is due largely to reduced uncertainty in the economy as the country appears to have reopened for business. Other positive contributors to the market turnaround are the currency devaluation and increased availability of foreign exchange supply in the country which improved investor sentiment.

The stock market index is now up about 19.4 percent since its lows in April but the NSE ASI

5

is still down roughly 8 percent year to date. The stock market which initially started strongly has since entered a down spiral since February as the coronavirus outbreak and collapse in crude oil price between February and April weighed heavily on stock prices.

Investors are now breathing

a sigh of relief as oil prices have significantly recovered from their low levels seen in April when crude oil price fell to $19 from its year beginning price of $66. Oil price has since recovered to $43 in July as a record oil production cut helped salvage oil prices from falling to multi decade lows.

Investors now appear more confident in the local companies and with H1 release season currently showing mixed results in the corporate market, analysts say they think stocks are more likely to go up than down as results of many companies are positively surprising investors who feared the worst.

Unilever see share price and gross profit drop by 60 percent in 3 years BALA AUGIE and Ifeanyi John

U

nilever Nigeria has s e e n t h e i r s ha re p r i c e d e cline by around 63 percent as investors repriced the company downwards after it recorded a 60 percent decline in gross profit from N15.32 billion in 2018 Q2 to 6.15 billion in 2020 Q2.

Investors unimpressed by the consistent decline in gross profitability of the firm sold down on its shares, causing the company share price to drop from N36 as at end of Q2 2018 to N13 as at end of Q2 2020.

Meanwhile, the drop in gross

P.E

profit can be attributed to the 43.20 percent drop in revenue Unilever recorded between Q2 2018 and Q2 2020. The company saw its revenue decline by 45 percent moving from N42.65 billion in Q2 2019 to N14 billion in Q2 2020, while in the three year period recorded a drop from N48.12 billion in Q2 2018 to N27.33 billion in Q2 2020.

The company also posted lower cost of sales of N32.80 billion in Q2 2018 and N31.31 billion in Q2 2019 compared to the N21.81 billion it posted in Q2 2020.

Analysts however, do not see an immediate change in fortunes for Unilever, as the impact of the COVID-19 pandemic still lingers. Weaker consumer spending coupled with higher inflation and

dollar scarcity is impacting negatively on sales performance and disrupting supply chains within the manufacturing industry.

Investors can only hope that the economic rebound expected next year brings about the much needed turnaround in the company’s financial performance.

The fast moving consumer goods firms (FMCGs) are walking on rotten ice as evidenced in a disappointing second results that sent a predawn chill down the spine of investors.

Hitherto the outbreak of the virus from China that took the world by surprise, companies had been reeling from inflationary pressures, decrepit infrastructure, and poor government regulations..

The stock market declined for the fifth-straight trading session on Friday to end its worst week after CBN’s CRR policy weighed on banking stocks and set off 2020’s longest bear-run.

Nigerian equities fell for all five trading sessions last week to close 2.65 percent lower weekon-week, and end January on a very different tempo than it began the month.

Bank stocks shed 5.17 percent to push Year-to-date return to 7.46 percent, down from around 10 percent at the beginning of the week, while analysts say the bearish sentiment will likely extend to trading this week.

“Next week, we expect bearish pressures on the equities market to remain, as investors continue to selldown on banking counters,” said analysts at Lagos-based Chapel Hill Denham in a note to clients.

N23bn

For instance, International Breweries has been recording recurring losses since last year, and huge debts and weak sales is a recipe for bankruptcy..

Of course, closure of bars and social events have compounded the brewer’s woes, and that’s on top of stiff competition it’s grappling with.

Analysts and investors have warned that a slow economic recovery could see the disappointing results spill into subsequent quarters.

Cadbury Nigeria, Nigeria Breweries, and Honeywell Nigeria fell of the cliff as net income slumped, raising concerns about their ability to make money from core business operations.

Interswitch Limited has listed its N23bn callable senior unsecured bond with a tenor of seven years at a fixed rate of 15percent, embedding a call option that can only be exercised from the second year, are payable in full at maturity A callable bond is a bond that the issuer may redeem before it reaches the stated maturity date. In essence, a callable bond allows the issuing company to pay off their debt early.

According to the company, this is part of its N30bn debt issuance programme through a special purpose vehicle, Interswitch Africa One Plc.

BusinessDay MARKETS INTELLIGENCE Team Lead: BALA AUGIE, IFEANYI JOHN; Graphics: FIFEN FAMOUS

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team balaaugie@yahoo.co.uk; augiebala@gmail. www.businessday.ng

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@Businessdayng

Monday 03 August 2020

BUSINESS DAY

COMPANIES&MARKETS

21

CONSUMER GOODS

FMCGs slash capital expenditure to preserve Amazon records highest profit in cash as pandemic erode half year revenue 26years as pandemic boost sales …consumer index remains the second worst performing OLUFIKAYO OWOEYE & SEGUN ADAMS

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igerian fast-moving consumer goods (FMCG) firms delayed expansion plans in the first half of the year to manage their cash just as early half year results of five FMCGs show a sharp decline as COVID-19 pandemic hurt sales of several products.

Checks by BusinessDay show that three consumer goods firms cut heavy investment by 68percent to N6.98 billion in the six months to end of June while their cash and near-cash assets rose more than four times to N141 billion in the period.

Data from Unilever, Cadbury and International Breweries show combined capex at a 3-year low. Excluding International Breweries, which has a different accounting year, data going back to 2015 show that capital spending is at its lowest in at least six years. In the

first half of the year net cash of the firms rose to an inflow of N11.13 billion compared to a net outflow of nearly N10 billion last year.

The firms made more money from asset disposal than last year but the figure rose significantly largely as a result of receipts International Breweries recorded in the period.

Revenue also came under intense pressure on the back of lockdown in key revenue generating and industrial states (Lagos, Abuja, and Ogun States) as well as the ban on inter-state movement further worsening the woes of consumer goods companies that are already struggling amid intense competition and cash strapped consumers.

Analysis of Unilever’s half year result shows that the consumer goods giant printed a 40.1percent year-on-year decline in revenue in the second quarter and a 35.9percent decline in the first six months of the year. The makers of Omo detergent and Close Up tooth-

paste recorded a post-tax loss of N1.63billion- the company’s third loss in the last four quarters.

Nigeria’s largest beer maker by market size, Nigerian Breweries recorded a 21.5percent decline in revenue in the three months April-June at N68.15billion from N86.91 billion recorded during the same period in 2019. Revenue for the first six months tanked 10.8percent at N151.8billion from N170.19billion. Half year profit stood at a meagre N5.58 as at June 2020 as against N13.31 recorded in same period in 2019.

Nestle, the biggest consumer goods player by market capitalization, sustained its robust performance as it benefits from panic buying by consumers and front loading of products by retailers during the restriction of movement announced by the government. Figures from its recently released half year result show that six months revenue was flat for the period ended 30th March stood at N141billion

same as period in 2019.

The NSE Consumer Goods Index, the gauge used in measuring performance of listed consumer goods firms on the Nigerian Stock Exchange remains the second worst performing index on the exchange with year to date down by 32.11percent.

The fall out of the Coronavirus pandemic on consumer demand with a weaker exchange rate, low FX liquidity and rising inflation affected both the sales and operating costs of FMCGs in Nigeria.

There was significant early growth in the first two months of the year largely driven by higher prices rather than higher consumer demand. This was on the back of Value Added Tax (VAT) increment also some of the companies struggling with competition from smuggled goods, benefited from the positive impact of the closure of land borders that helped push more volumes within the domestic market in the first two months of the year.

L-R: Bola Olowu, chairman, director, public private partnership and diaspora, federal ministry of health; Abike DabiriErewa, chairman , Nigerians in Diaspora Commission, Chikwe Ihekweazu, directorgeneral, Nigeria Centre for Disease Control (NCDC), and Ali Onoja, representing , president of the Nigerian Association of Pharmacists and Pharmaceutical Scientists in the Americas (NAPPSA), during NAPPSA’s donation of COVID-19 diagnostic and other medical equipment to NCDC in Abuja.

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he Lagos Area Committee (LAC) of the Nigerian Council of Registered Insurance Brokers (NCRIB) held its first ever virtual Mid-Year Workshop between Wednesday 22nd and Thursday 23rd July, 2020 which focused on advocacy, fintech and mental health.

The two-day virtual conference held via the Microsoft Teams Live Conference had Peter Braid, Chief Executive Officer of the Insurance Brokers of Canada (IBAC) as the guest speaker of the occasion.

Braid who spoke on the topic, “Advocacy as a Major Tool for Business Success: the IBAC Story,” enjoined insurance brokers

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orld’s largest online retailer, Amazon printed the biggest profit in its 26-year history on the back of a boom in online sales and its lucrative business supporting third-party merchants that ballooned during the coronavirus pandemic.

Amazon benefitted from government-imposed lockdowns which forced rival brick-and-mortar retailers to shut stores to curtail the growing spread of the pandemic.

Amazon hired 175,000 people in recent months and saw demand for its services soar.

The company said revenue jumped 40percent from a year earlier to $88.9 billion.

The online store sales jumped 48percent to $45.9 billion in the second quarter.

Meanwhile, merchants paid Amazon more to fulfill and sponsor their products in order to reach the company’s loyal customers. That resulted in a 52percent and 41percent jump in seller services revenue and other revenue such as from ads, respectively.

Amazon’s cloud services also saw higher demand as

companies switched to virtual offices in the pandemic. Revenue from Amazon Web Services (AWS), which sells data storage and computing power in the cloud, rose nearly 29% to $10.81 billion.

According to Brian Olsavsky, Amazon’s chief financial officer, the outsized profit surprised the company because at the time it issued its forecast last quarter, shoppers were buying lower-margin products.

“Everyone was looking for masks; everyone was looking for gloves; everyone was buying groceries online. That mix is not super profitable,” he said. “What we saw in Q2 was not only did the mix start to shift back to a more normal mix” but that “we also were able to ship a lot more than we had originally thought.”

O nline grocer y sales tripled year over year, and worldwide streaming video hours doubled, Olsavsky said on a call with analysts.

Delivery and video services bundled with the company’s loyalty club Prime are a key reason why customers subscribe to that program and do more of their shopping on Amazon.

Wragby wins Microsoft Partner of the Year 2020

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NCRIB-LAC focuses on advocacy, fintech and mental health at mid-year Workshop IFEOMA OKEKE

OLUFIKAYO OWOEYE

to engage key decision makers across levels of government as well as key stakeholders like the fintech in order to boost the growth and penetration of insurance in Nigeria. He shared the success story of the IBAC in the same vein and explained how that can be replicated in Nigeria.

His presentation was followed by that of the Deputy President of the NCRIB, Barrister Rotimi Edu who drew the parallel between IBAC’s pillars with the Nigerian market in a presentation titled, “Federal Government Advocacy.”

Among other things, he noted: “the Canadian experience in advocacy and its effect on the brokers growth in the Canadian insurance market becomes very

important so that we can draw from the experiences of both nations and make comparative inference on topic and the practice in both countries.”

The second day of the workshop featured two broad presentations with the first focused on fintech, title “Fintech for Insurance penetration as a Financial Service.”

Presentations on this were made by foremost Mobile Money providers in Nigeria, Systemspecs, EFinA; an organization that has been helping Banks to increase customer base in the rural areas, driving penetration to assist Banks reach out to the unbanked.

Wragby Business Solutions & Technologies who equally

www.businessday.ng

made a presentation through Oluyomi Alarape, an Executive Director of the firm who introduced the iBroka and shed more light on the All-in-One Solutions that can be accessed from a single platform based on Brokers’ subscription level.

The Application according to Alarape is to assist Insurance Brokers deliver efficient and quality service at optimal cost.

The second focused on a health talk, “Effect of COVID-19 on Mental Health of Families and Business Owner,” delivered

by Maymunah Kadiri, popularly known as ‘The Celebrity Shrink’ a multiple award winning Mental Health Physician & Medical Director of Pinnacle Medical Services.

https://www.facebook.com/businessdayng

ragby Business Solutions & Technologies Limited has been named Nigeria 2020 Microsoft Partner of the Year. The award which holds yearly recognizes companies who have shown a commitment to customers success, providing innovative and unique solutions that solve problems for customers. This win for Wragby is coming on the back of a series of wins in the last four years, including 2019 Nigeria Partner of the Year, and Global Finalist for the 2019 Application Innovation Partner of the Year.

Being recognized yet again as Nigeria’s 2020 Partner of the Year demonstrates their expertise as a technology solution provider.

The finalists and winners for the awards were selected from more than 3,300 nominations collected from more than 100 different countries worldwide based on their commitment to customers, their solution’s impact on the market and exemplary use of Microsoft technologies.

“It is an honor to recognize the winners and finalists @Businessdayng

of the Microsoft 2020 Partner of the Year Awards,” said Gavriella Schuster, corporate vice president, One Commercial Partner, Microsoft. “These partners go above and beyond, delivering timely solutions that solve the complex challenges that businesses around the world face — from communicating and collaborating virtually to helping customers realize their full potential with Azure cloud services, and beyond. I am proud to honor and congratulate each winner and finalist.”

Based in Lagos Nigeria, Wragby Business Solutions & Technologies has a wholly indigenous team of women and men across the age spectrum who are, according to them, “obsessed with customer success.” The company provides solutions for customers in various industries by leveraging its expertise in Cloud Platform & Application Infrastructure, Data & Artificial Intelligence, Software Engineering & Application Development, Enterprise Workplace Security and Productivity, Business Solutions, and Advisory Services.

22

Monday 03 August 2020

BUSINESS DAY

INSIGHT

What you need to know about Forensic Audit Adeleke Emmanuel Divergent public expectation of conventional audit ore often than not, the public usually expect that auditors of financial statements should know everything that has transpired including evidence of any fraud committed, imminent insolvency and corporate failures of the auditee.

In the expectation of the society, the auditor’s expertise is linked with fraud detection and fraud deterrence. Thus, auditor’s credibility has often been questioned and the auditor widely criticized where these expectations are not met notwithstanding that they are outside the scope of the conventional auditors’ duties and standard of practice. It appears that majority of the interest groups have little or no knowledge of the duties and limitations of conventional audit, as well the objectives and requirements.

The general expectations of the society from an auditor are commonly covered under a different field of accounting and auditing called Forensic Accounting, or Auditing/ Investigation.

M

Distinguishing conventional audit from forensic audit There is no doubt that both conventional and forensic audits are examinations conducted retrospectively. However, the objective, focus and outcome are not the same. The objective of conventional audit is to form an independent opinion on the overall financial statements taken as a whole. The conventional auditor’s opinion is to add credibility to the financial information reported by the auditee in the eyes of its users or interest groups.

Auditors are guided by standards of practice that require them to maintain professional scepticism while performing their audit work of inquiring, making observations, examinations and re-performance of accounting transactions of the sample selected to obtain evidence that will give reasonable assurance of the audit assertions.

The conventional auditor only seeks to ensure that the financial statements are free from material misstatements caused by either error or by fraud; and where they exist, cause management to correct the material misstatements before they are issued for users; otherwise he qualifies his opinion to put users on notice or at alert. However, the real work/ science of detection,

deterring and investigating fraud, financial scandals, improprieties and providing remedial actions including litigation support to deter reoccurrence in in the future is covered under forensic audit or investigation.

Definition of forensic audit There are many definitions of forensic auditing, accounting or investigation. The word forensic in its elementary use itself simply means the “use of scientific methods to solve crimes”. The use of forensic is not limited to accounting or auditing alone. There are many areas of forensic specializations. In the field of medicine, much of forensic investigation is about trying to determine how and when a corpse died which we popularly refer to as autopsy. On the other hand, forensic in engineering try to find out what went wrong with a structure or machine.

Therefore, a very simple definition of forensic audit can be taken as “a methodical application of accounting, auditing and investigative skills to analyse and evaluate financial and non-financial data to obtain evidences that are suitable to answer the questions who, what, when, where, how and why of any improprieties that are suspected or known to have been committed”.

Dire need for forensic auditing There is no doubt that nobody wants to be duped or cheated. Even the thief does not want the booty of his illicit acts stolen. He equally wants to retain what he has stolen from others and will want to prevent it from being re-stolen from him. This www.businessday.ng

would suggest that everyone may need forensic auditing. In recent years, public outcry and anger over occurrences of massive fraud and corrupt practices in governments and corporations have led to the establishment of special crime detection and deterrence institutions; new legislations, new corporate codes of conducts, new auditing and reporting standards, new accounting standards, regulatory oversights and stiffer penalties for conspiracy, commission or concealment of fraud and corrupt practices.

However, while some prosecutions have been successful, a lot of prosecutions involving mindboggling amounts/values have failed because of lack of evidence on the part of the prosecutors to ensure conviction of the culprit(s). It is a known

principle that criminal conviction can only be founded on Proof Beyond Reasonable Doubt. Also, the Blackstone’s ratio states that “it is better that ten guilty persons escape than that one innocent person suffers”. This presupposes that a high level of substantial evidence is required o convict a suspect of a crime.

It is apparent that prosecutors most times rush to court with little or no evidence to procure convictions and the suspect ends up walking home tall even when there are apparent gaps between resources expended and value obtained. This is where forensic auditing becomes relevant to find the missing link, identify what had depleted the value addition and reconcile the gaps with verifiable evidence that can provide support for litigation and other remedial actions.

Forensic audit follows a multi-staged process similar to normal audit process but its aim, objective, focus and extent of work done by forensic auditors are not the same with traditional or conventional auditors

The Process of forensic audit Forensic audit follows a multistaged process similar to normal audit process but its aim, objective, focus and extent of work done by forensic auditors are not the same with traditional or conventional auditors. The process of a forensic audit can be represented diagrammatically as follows: The outcome of forensic auditing should either documentarily or in testimonial form detail amongst others: who committed the crime?

What is the very nature of the crime committed? What evidence is available and what will deter reoccurrence? When was the crime committed? Where was the crime committed and where was the proceeds kept? How was the crime committed and how much resource/value is involved? Why

‘

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was it possible for the culprit to commit the crime?

Deciding for forensic audit today!

The outcome of a forensic audit is neither to reach nor to express a general opinion about fair representation of financial statements of the auditee as is the case with a conventional audit process. In forensic auditing, the auditor assesses and measures financial losses and other forms of damages that the auditee has suffered. The scope of work is neither based on sampling technique nor materiality concepts.

The forensic auditors seek for all relevant evidences and examine them in details. The forensic report is based on factual information which could either be documentary or testimonial and can be used in litigation proceedings in criminal actions against the culprit. Recommendations from forensic audit could include changes to internal processes, policies, personnel and preventive or deterrence actions against future reoccurrence of identified improprieties. With the spate of financial scandals, corporate failures, changes in value systems and misplaced economic priorities all over the world, and in Nigeria in particular, there is no economic unit that does not need to undergo forensic audit today. You will be surprised of what the outcome of your forensic audit will reveal if your organisation (NGO, company or Parastatal) decide to undergo a forensic audit today.

Adeleke Emmanuel, FCA Partner/Forensic Audit Ijewere & Co.

Monday 03 August 2020

BUSINESS DAY

23

FEATURE As 600 firms chase Nigeria’s 57 marginal oil fields:

Niger Delta-based oil expert hints on challenges facing bidders and cost overview •Says 2020 bid round would pile up search cost up to $130,000 Ignatius Chukwu

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bout 600 bidders have emerged for the 57 marginal oil fields put up

by Nigeria but a Niger Delta-based oil management expert, Leesi Gborogbosi, has placed caution at their disposal and explained the cost profile of a bid. The last time Nigeria carried out such bid was about 20 years ago, according to insiders.

The CEO of Gabriel Domale Consulting, a management consulting firm, warned bidders to endeavour to understand the concept of the marginal field from the perspective of government; the petroleum (amendment) decree number 23 of 1996; marginal field operations (fiscal regime) regulations of 2005; and the guidelines for the award and operation of marginal fields in Nigeria before deciding to invest.

The consultant who worked in one of the foremost oil multinationals in Nigeria for many years and was responsible for all aspects of the IOC’s strategy, business development, leadership, governance, competitiveness, teams, and operations across all network of client offices gave the definition and explanation of marginal fields. He said they have some investments implications which he said a marginal field investor should factor into the investment decision.

On want he called ‘assured marginal economics’, Gborogbosi warned that because the economics of the oil mining license (OML) is considered marginal, the investor needs to re-evaluate the historical risks and costs of the proposed marginal field. “The key question is - what has changed over the years and what will be the costs of mitigations?”

He said for over 10 years, the existing infrastructure may likely have decayed and requires an urgent upgrade. This was the sad experience of the buyers of Nigeria’s power sector. The Ogoni-born expert warned further; “Additionally, because the marginal field existed in the host community for over 10 years, there may be a heightened expectation on the part of the host community for immediate corporate social responsibility initiatives.”

He warned bidders to understand the rationale behind the decision of the portfolio owners to stay away by understanding the underlying drivers for the portfolio rationalisation which he said the investor should consider as an investment variable and be risked in the decision model.

On this, he warned against the oil

Leesi Gborogbosi, oil management expert, warns over 600 marginal field bidders on risky areas and provides cost outline for bidding.

field being returned to the government. “The expectation is that marginal field will be efficiently operated to deliver competitive returns to the investor and contribute towards the national oil and gas aspiration. Full risk management will ensure that the marginal field does not hibernate beyond 10 years to avoid being reclassified as marginal field and re-awarded.”

In explaining what the government classifies as marginal field, Gborogbosi defined them as : “Marginal field definition is further highlighted by the Department of Petroleum Resources in the 2020 marginal field bid guidelines.

A marginal field is any field that has reserves booked and reported annually to the Department of Petroleum Resources (DPR) and has remained un-produced for a period of over 10 years.”

Costs: The expert gave cost ideas, advising investors who would be successful at the pre-qualification stage to treat the costs up to the point of winning the bid as search costs. “In the 2020 marginal field bid round, the total search cost is N47m (approx.

US$130,235) excluding signature bonus.

This cost include costs for registration, application and bidding per field: N5,500,000 (approx. US$15,235) as registration fee - N500,000; application fee - N2,000,000 and bid processing fee - N3,000,000) and [B] – costs for data prying, data leasing, Competent Person’s Report and www.businessday.ng

Filed Specific Report : US$115,000 (approx. N41,515,000) as data prying - US$15,000; data leasing - US$25,000; Competent Person’s Report - US$50,000 and Filed Specific Report – US$25,000.

“Signature bonuses will be paid as per the applicant’s winning bid.

The signature bonus should be estimated to be included in the investment proposal. The US Dollars to Naira equivalent is derived using the Central Bank of Nigeria (CBN) current exchange rate of the US Dollars to Naira of N361/$1.”

Investment approach: Leesi who has a long and successful record of helping diverse functions to develop collaborative relationships with key stakeholders in order to execute strategy effectively reminded bidders that successful pre-qualified companies were expected to prepare and submit field-specific technical and commercial bids based on the field data as provided by the leaseholder and/or DPR. “The documentation of the technical and commercial bids should include detailed proposed work programme, development plan and commercial proposals.”

He warned that experts consultants should be on hand to advise marginal field investors to treat all bid search costs, field ownership costs (signature bonus), and field lifecycle costs as an investment package. “This commercial perspective will enable the investor’s advisory team to develop a robust investment proposal.

“Investing in the oil and gas in-

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dustry, especially the marginal fields, is usually complex, challenging and rewarding though there are a lot of blind spots. It is always advisable that the services of ex-managers with decades of actual working experience in the oil and gas industry should be sought. This is to avoid mistakes made by earlier marginal field investors.

“A well prepared and reviewed investment proposal will form a strong basis for deciding the threshold to be used for the commercial bid. Intuitively, the threshold for the commercial bid should be positively influenced by the positive net present value (NPV) and value investment ratio (VIR) arising from the investment proposal.”

Best templates On the best templates to be used, Gborogbosi advised winners to consider what he called front-end planning right from the onset; plus the right financials and dataset that could sustain the operation of the marginal field lifecycle. “I will recommend that the investment plan for the marginal field should contain 10 key sections namely: executive summary that should provide summary information on the content of the investment proposal. “This section is key as it enables decisionmakers to have an overview of the investment decision points.”

This section additionally, highlight the source and forms of funding, the full scope of cashflow, and summary economics. There is the description of the proposal that provide concise details of the investment scope and objectives, he said.

“Also, discuss the key technical and commercial variables impacting the investment. Some of the key variables will include existing agreements if any, government policies, expenditure and production profiles.

“The marginal field investor should have clear statements on the winning strategy and models for vertical integration and diversification, collaboration and synergy, aggressive work programme implementation, community relationship, regulatory compliance, cost control and optimization.

“The growth profile of the marginal field is expected to demonstrate the field’s contributions to national reserves and production growth, Nigerian content impact, domestic energy security, increased government revenue, and corporate social responsibility.”

He mentioned what he called value proposition and strategic and financial drivers of the final bid which would require the economics of the investment showing the base case and sensitivities, in@Businessdayng

dustry benchmarked discounted rate, net present value (NPV), value investment ratio (VIR), and the payback period. “Also, discuss the economics, cashflow plot and all externalities that are included in the computation of the economics.

“Specifically, the value propositions for marginal field investment should clearly state how the investor will promote indigenous participation, generate employment, increase oil and gas reserves, increase production, encourage capital inflow, build technical capacity and promote the use of shared facilities.

In risks and opportunities and alternatives, Gborogbosi advised bides to evaluate and mitigate the standard industry risks such as technical, economic, commercial, organisational, political, health, security and environmental risks.

The estimated costs of implementing risk mitigations should be considered.

He gave advice on the corporate structure and governance as what would drive the strategy and execution of this investment. “Also, highlight how the overall investment (the marginal field) is going to be managed, performance monitored and reported. For instance, if this investment falls within a foreseen unitisation with an existing joint venture, how will that be managed?

He mentioned budget provision as a key section that should include the total expenditure phasing and cost classification based on the industry’s standard cost classification. Nigeria is striving to bring down its cost of operation to $10 from about $18. This would definitely require new cost outlines for marginal fields.

He said the financing section should look at funding strategy options and the contribution of each option to the financing of the investment. “Also, indicate the financial impact for investment’s full scope on the existing company as applicable.”

Taxation was brought up. He said: “Payment of tax and royalty is a major revenue stream to government. A comprehensive list of the tax rates used should be stated. Applying the wrong tax regime will hurt the investment.”

The parameters section should provide for a quick summary of the key aspects of the investment proposal for which organisational approval is sought; while there should be three parties who are indicated as being responsible for the investment decision on behalf of the investor.

“They are the initiator (responsible for the preparation of the proposal), reviewer and approver.

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Monday 03 August 2020

BUSINESS DAY

real sector watch

Dangote, Flour Mills, De-United, others produce N12trn goods in 12 months

…represents 37% jump in 4 yrs Odinaka Anudu

T

he value of goods produced by Dangote Group, Flour Mills of Nigeria, De-United Foods, Honeywell and other members of the Manufacturers Association of Nigeria (MAN) hit N11.99 trillion in 2019, from N9.98 trillion reported in the previous year, data from the Manufacturers Association of Nigeria (MAN) show.

This represents a 20.1 percent growth in output in 12 months.

However, when compared with the 2016 output of N8.78 trillion, the number represents a 37 percent increase.

MAN attributes the rise in output in 2019 to high volume of activities in some sub-sectors on account of border closure and the relative tranquility in the forex market.

Output from food, beverages and tobacco totalled N4.99 trillion in 2019 as against N3.33 trillion of 2018, indicating N1.66 trillion increase over the period. Companies in the food, beverage and tobacco which achieved the feat in 2019 included: Flour Mills of Nigeria, De-United Foods, Nigerian Breweries, Honeywell, Guinness, and Cadbury, among others.

In the domestic and industrial plastic industry, the value of production was N348.64 billion in 2019, a little lower than N348.73 billion recorded in 2018.

Companies which achieved the feat were Asia Plastic Industries, Lotus Plastics, Bally Plastics, Eva Footwear, Great Wall Footwear and West Africa Rubber Products, among others.

Source: MAN, BusinessDay

Also, the value of production in chemical & pharmaceutical group stood at N533.1 billion in 2019 as against N710.42 billion recorded in 2018, thus representing N176.9 billion decrease over the period.

Some of the companies in this sub-sector that achieved the performance were: Indorama Eleme Petrochemical, SKG Pharma, Fidson Healthcare, May& Baker, among others.

However, goods worth N402.42 billion were not sold at the end of 2019, according to MAN. In 2018, goods valued at N375.42 billion remained unsold.

The closure of Nigeria-Benin Border in August 2019 favoured some manufacturers as it raised patronage of their products. Many

firms in the palm/ vegetable oil industry such as PZ Wilmar, Okomu, Presco and De-United confirmed that it ramped up sales and raised their profits.

Similarly, farmers were fa-

voured by the policy.

“Lots of rice farmers are increasing their production areas because there is a huge market for paddy since the border closure,” said Aminu Goronyo, national

president, Rice Farmers Association of Nigeria, in a telephone response to questions.

However, it was a challenge for many manufacturers who needed to import inputs or export finished goods.

Okhai Ehimigbai, export manager at Aarti Steel, which exports steel products and zinc ash, said in January 2020 that his company had stopped export to the Economic Community of West African countries (ECOWAS) due to the closure of the border.

“We can’t export because we can’t get all the containers on time,” he said.

Trade among West African countries is about 12 percent, which is relatively low when compared with other regions. On continental basis, trade among African countries is 16 percent, which is poor when compared with Europe’s 59 percent, Asia’s 51 percent, North America’s 37 percent, and Latin America’s 20 percent, data show.

However, with COVID-19, many country has limited access to import and export business, piling more pressure on Nigerian manufacturers who stopped export in 2019 due to the closure of Nigeria-Benin border.

Similarly, the foreign exchange was stable in 2019, with some manufacturers rushing to the FX market and cutting their local input sourcing, according to MAN. However, with COVID-19 cutting oil prices in the global market, Nigeria’s earnings from oil has declined by over 40 percent since COVI9-19 lockdown in March, creating an FX crunch worse than 2016.

GSK achieves sustainable performance despite tough manufacturing environment … declares profit of N917Million Odinaka Anudu

E

dmund Onuzo, chairman, board of directors, GlaxoSmithKline Consumer Nigeria plc, said the company achieved sustainable performance on its entire healthcare portfolio in 2019 despite challenges faced by manufacturers in the country last year.

Speaking at the 49thAnnual General Meeting (AGM) held in Lagos recently, Onuzo said the healthcare company delivered a good performance in 2019 with growth in sales, earnings and strong cash generation.

“GSK delivered a good performance in 2019 with growth in sales, earnings and strong cash generation. We also made excellent progress in our three long-term priorities: Innovation, performance and trust, strengthening our consumer healthcare portfolio, improving operational execution and reshaping the company,” he said.

GSK Nigeria declared a profit after tax (PAT) of N917 million, with shareholders receiving 55 kobo per share as dividend—a total of N657.7m for the year ended December 2019.

The company’s annual turnover increased from N18.41 billion www.businessday.ng

in 2018 to N20.76 billion in 2019, representing a 13 percent growth while PAT rose from N617.62 million to N917.10 million, a 48.4 percent increase.

Onuzo further said that the task before the company in the new financial year was to drive its strategic objectives that would not only keep the business afloat but make its portfolio more efficient and profitable.

He explained that achieving these objectives might be challenging, most especially with the current realities of COVID-19, which had resulted in major shifts in the stock market and a global economic slowdown.

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Onuzo further said that the company was currently at the forefront of global research aimed at discovering a vaccine or drug for the treatment of the coronavirus.

“At GSK, we remain hopeful that very soon, we will all return to our normal ways of living. To this end, we are more committed than ever before to our mandate of driving innovations that would enable people to do more, feel better and live longer,” he added.

Kunle Oyelana, managing director,GlaxoSmithKline Consumer Nigeria, expressed confidence in the economic outlook for 2020, expressing appreciation for the immense support from all @Businessdayng

stakeholders.

“We are pleased with the result for 2019, despite it being a very challenging year. We were able to deliver significant top-line and profit growth. These results are a testament of the incredible effort put in by the team and all our partners - internal and external.

Although 2020 has began with a subdued economic outlook driven majorly by current pandemic, we remain confident of achieving our strategic objectives for the new year,” he said.

GSK Consumer Nigeria is one of the world’s leading researchbased pharmaceutical and healthcare companies.

Monday 03 August 2020

BUSINESS DAY

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25

26

Monday 03 August 2020

BUSINESS DAY

EXPERT PROGNOSIS OF NIGERIA’s ECONOMY

How Nigeria’s Per capita GDP growth compares with peers over last decade FAVOUR OLAREWAJU

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hile Mexico, Indonesia and Turkey saw per capita GDP growth contract for the first time in a decade in 2019, Nigeria’s contraction started in 2015 and has remained negative since then.

The secret to the success of Nigeria’s MINT peers (Mexico, Indonesia and Turkey) is that they have positioned their economies to attract foreign capital, according to World Bank and IMF economists.

The term “MINT” was popularised by former Goldman Sachs economist, Jim O’Neil, in reference to Mexico, Indonesia, Nigeria and Turkey, which at the time had favourable demographics and benign economic prospects.

The four countries also had comparable levels of FDI but the story has since changed.

In 1995, Nigeria’s FDI stock (a measure of the total level of direct investment at a given point in time) was $USD 16.25 billion, ranking it third, behind Mexico’s $41.1 billion

and Indonesia’s $20 billion. Turkey had the least FDI stock of $14 billion, according to UNCTAD data.

By 2017, all four countries looked so different.

Although Mexico and Indonesia

still led the way in terms of FDI stock, Nigeria has fallen off third place by no small margin and is now firmly rooted at the bottom.

Between 1995 and 2017, Mexico’s FDI stock jumped 1,089 percent to

$489 billion, while Indonesia and Turkey’s FDI stock surged 1,104 percent and 1,110 percent to $248.5 billion and $180.7 billion respectively.

Nigeria is almost unrecognisable from when it was second only to

Mexico in 1970s or third in 1995.

The country’s FDI stock only grew 500 percent, which is less than half the average of its peers, to $97.7 billion in 2017.

That is despite boasting the largest population after Indonesia of the four countries.

As a percentage of GDP, Mexico’s FDI stock in 2017 was 49.5 percent compared to 12 percent in 1995, while Indonesia’s FDI stock was 24.4 percent compared to 8.4 percent.

Turkey’s FDI stock as a percentage of GDP was 22.8 percent in 2017 compared to 6.4 percent in 1995.

Nigeria saw a much smaller jump in FDI stock as a percentage of GDP, implying less progress compared to the others, as it went from 12.3 percent of GDP in 1995 to 24 percent in 2017.

In terms of recent FDI inflows, Indonesia ranks top with FDI inflows of $28.2 billion in 2019. That excludes inflows to the banking and oil sectors Mexico follows with $26 billion. In third place is Turkey, which attracted $8.4 billion in FDI. Nigeria attracted less than $1 billion.

The human face of an economy growing slower than population ... what is coming next?

Continued from front page

(not real name) for example. Ibrahim’s highest qualification is a Bachelor’s degree in Human Kinetics from the Lagos State University (LASU).

He worked at Woolworth, a South African clothing retailer, which closed its three stores in Nigeria in 2013.

It is been seven years and he is yet to pin down another job. His lack of job has forced some changes. He has had to move away from his twobedroom apartment somewhere in Ikorodu to living with a friend in a one-bed apartment almost the size of a telephone booth within the same area.

When asked how he felt when he was laid off, he heaped the blame on Woolworth, saying the company unfairly asked people to leave after milking Nigeria dry.

“These foreign companies just use you and dump you,” Ibrahim said.

Little did he know that his lay off was no fault of Woolworth, but of the high cost of operating a business in Nigeria, which sucked the life out of the South African retailer and sent it scrambling back from where it came.

Hear what Woolworth’s CEO, Ian Moir, said about the exit at the time: “When an investment no longer generates viable returns, difficult decisions have to be made to contain costs.”

High rental costs and duties and complex supply chain processes made trading in Nigeria highly challenging, according to Moir.

Woolworth’s 18-month foray into Nigeria is peculiar for a company that has been operating in South Africa for decades – since 1931 in fact – and has operations in various African countries and elsewhere.

The remaining 59 stores in 11 African countries were not affected by the Nigeria decision.

Since that time, Woolworth has expanded to 64 stores and is in 13 African countries.

Woolworth’s experience is not unique; several companies have had to close shop in Nigeria due to the country’s difficult business environment.

Though strides have been made to improve the business environment, the country sits at a lowly 131 of 180 countries surveyed by the World Bank.

Challenges from tax multiplicity to inefficient transportation networks and lack of adequate power have been unbearable to businesses.

Over regulation and corruption in government are also chief culprits in pushing businesses, foreign or local, off the cliff.

This shows Ibrahim’s anger should be channelled towards the Nigerian government, which has failed to create an enabling environment for businesses to succeed.

On the evidence of the declining flows of FDI into the country since 2014 and tales of woes by local businesses, the government has not been able to significantly improve the www.businessday.ng

business environment.

Since 2008, when Nigeria attracted a record $8 billion FDI following a wave of privatisation, the country got $3 billion on average between 2009 and 2015, and $1 billion a year since then, according to the NBS, effectively trailing smaller peers like Ghana.

Considering the size of Nigeria’s population, a billion dollars works out to $5 per head.

Foreign companies are not the only businesses to have walked out on Nigeria, even local companies have struggled.

The Manufacturers Association of Nigeria (MAN) said about 272 firms were forced out of business in 2016 alone, 50 of which were manufacturing companies, amid stifling govern-

‘

Little did he know that his lay off was no fault of Woolworth, but of the high cost of operating a business in Nigeria, which sucked the life out of the South African retailer and sent it scrambling back from where it came

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ment regulation. The manufacturers say that led to 180,000 job losses in the period.

Perhaps, Ibrahim and the over 20 million Nigerians without jobs, should hold the government more accountable for the damage done to their lives by bad policies. The lack of jobs has helped poverty thrive.

Nigeria, home to 87 million poor people, became the world’s poverty capital in 2019, overtaking India, according to a Brooklings Institution report.

Another set of statistics by the World Data Lab estimates that 90 million Nigerians live under $1.90 a day, while the United Nations Development Programme reported that 98 million Nigerians were in multi-dimensional poverty.

Yet the pain of a floundering economy growing slower than population also shows it is no respecter of persons. The rich have perhaps suffered just as much.

Take Aliko Dangote, Nigeria’s richest man, who doubles as the continent’s wealthiest person. Dangote is no longer worth half as much as he was in 2014.

Despite remaining the richest African for almost a decade, his fortune is down a staggering 72 percent to $7 billion from $25 billion in 2014, according to Forbes data.

What is Per Capita GDP and why is it important?

At its most basic interpretation, @Businessdayng

Per Capita GDP shows how much economic production value can be attributed to each individual citizen.

It breaks down a country’s economic output per person and is calculated by dividing the GDP of a country by its population.

Per Capita GDP growth is said to be positive when economic growth is higher than population growth and negative when the population is growing faster than the economy.

The per capita metric is a popular measure of the standard of living, prosperity, and overall well-being in a country. A high Per capita GDP indicates a high standard of living while a low one indicates that a country is struggling to supply its inhabitants with everything they need.

Luxembourg, a small European country surrounded by Belgium, France and Germany, has the highest GDP per capita globally with $113,196 as at 2019, according to IMF data.

Switzerland ($83,716) and Norway ($77,975) make up the top three countries with the highest GDP per capita.

On the flip side, war-torn South Sudan ($275), Burundi ($309) and Eritrea ($342) make up countries with the lowest Per Capita GDP in the world. Nigeria ranks 138 with $2,222, behind Ghana with $2,223.

Five years of negative Per capita GDP Nigeria’s relatively low Per Capita GDP, which paints a dim picture of

Monday 03 August 2020

BUSINESS DAY

27

EXPERT PROGNOSIS OF NIGERIA’s ECONOMY the living standards in the country, has been worsened by five straight years of contraction.

The last time Nigeria had a positive Per Capita GDP was in 2014, as the economy has struggled since a lengthy collapse in global oil prices that began in mid-2014. When not contracting, the economy has grown at a tepid 2 percent rate compared to average population growth rate of 2.6 percent.

The economy grew 2.5 percent in 2015 before contracting by 1.6 percent in 2016. As oil prices recovered, the economy turned the corner on its first recession in a quarter of a century by growing 0.8 percent in 2017 and a 1.9 percent growth in 2018. In 2019, the economy grew 2.27 percent, capping five years of an economy that didn’t grow fast enough to create new opportunities for a rapidly growing population.

Make it another five years Prior to the COVID-19 pandemic, the IMF predicted that income per head will continue falling for another three years until at least 2023.

However, with the pandemic, that forecast is grimmer. The trend of negative Per Capita GDP growth could last another five years, according to Jesmin Rahman, the International Monetary Fund’s (IMF) mission chief to Nigeria. That is worse than the initial projection.

“We are going to see the contraction in real Per Capita GDP pick up in the next five years,” Rahman says.

Rahman says it could take Nigeria at least three years before the economy grows at the modest 2 percent rate at which it expanded in 2019 prior to the COVID-19 pandemic.

Another five years of Per Capita

GDP contraction is a painful squeeze for a country with gross domestic product per capita of just $2,222, meaning Nigerians will get even poorer than they are now for another five years as their incomes continue to shrink and the economy bleeds jobs.

It means more Nigerians will fall into a poverty pit. The IMF already projects that Nigeria would be home to 20 percent of the world’s poor people by 2030.

Another painful stretch of negative per capita GDP growth also means fewer people will be able to afford quality education for themselves and their children.

For instance, premium primary education alone in Lagos, Nigeria’s commercial capital, could cost anything between N700,000 ($1,944) to N1 million per annum ($2,777). That works out to an average of $2,360 (N849,600), higher than Nigeria’s per

capita GDP of $2222.

Fewer people will also be able to afford quality healthcare in a country where the average life expectancy is just 53 years. Only four countries in the world have lower life expectancy rates and they are Sierra-Leone, Chad, Lesotho and Central Africa republic.

South Africa’s life expectancy is 63 years, at par with Ghana’s but lower than the World average of 70 years, according to United Nations World Population data.

Countries like Hong Kong, Japan, Singapore and have an average life expectancy of 83 years.

The job-seeker in Nigeria will also have fewer jobs to compete for with an even larger population of job seekers. Ibrahim may struggle to find a job for another five years.

Data from Jobberman, which recruits mainly white-collar employees and does not track those looking for non-skilled, blue-collar work, sees unemployment in the nation of more than 200 million soaring to 34 percent by the end of the year from 23 percent in 2019.

Other estimates suggest that the unemployment rate could hit 50 percent by 2021. The country’s unemployment rate quickened to a more than six-year high of 23 percent in 2019, the last time the NBS measured the rate.

Rising unemployment and higher inflation has meant the country’s misery index has deteriorated to be almost at par with failed countries from Syria to Lebanon.

As it stands, over 22 million employable Nigerians are out of work and another 15 million are underemployed. There’s little hope that the country can generate sufficient

jobs for its people who are forecast to reach 400 million by 2050.

The last time the Nigerian Bureau of Statistics (NBS) published data on job creation it showed the economy added 187,226 new jobs in the third quarter of 2016 after adding 475,180 a year earlier.

As Nigerians get poorer over the course of the next five years, it may also mean more companies, especially small businesses, are at risk of failing as falling consumer purchasing power leads to a reduction in sales and revenues.

Though there is paucity of data on the failure rate among Nigerian start-ups, the one available estimate given by a Nigerian bank Stanbic IBTC claimed that over 80 percent of Nigerian start-ups fail within their first five years.

That will get worse if the economy continues to underperform population growth for another five years. www.businessday.ng

What experts say is the way out of deepening poverty Jesmin Rahman ahman is the International Monetary Fund (IMF)’s mission chief to Nigeria. She recommended a raft of fiscal policies that lift can per capita GDP growth in Nigeria during a recent webinar hosted by the American Business Council.

Here’s what she had to say: Nigeria has always been to me a fascinating country with huge potential; there’s nothing it doesn’t have.

Nigeria has a huge population, and natural resources, yet this is a country that when you compare to its peers on social indicators and living standards, it is not where it should be.

Per capita income used to be $7,000 in mid-1980s since then it has gyrated in sync with oil prices. There are quite a few challenges Nigeria needs to tackle if this course is to be altered. At the current population growth rate of 2.6%, Nigeria’s population is projected at 400 million by 2050. The labor force is growing very rapidly much of which is getting absorbed in either the informal sector or not employed at all. Informal sector wages are very low. Basic literacy among the young population is also very low. Six of out ten out of school children are Nigerians so these are very sobering statistics.

When you look at poverty rate, it is around 40% and given the population projection, by 2030, the World Bank estimates that a fifth of the world’s poorest will be housed in Nigeria. When you add regional dimension, the situation is even scarier because you will the concentration of all of these low statistics in one part of the country.

To turn Nigeria’s population into human capital so the economy grows, Nigeria needs strong job growth and investment in social indicators; education, health and some of the very basic services.

My colleagues in the IMF did a basic estimate of how much it would cost the country to reach the SDGs and they came up with 18% of GDP which would come largely from government even though donor community would help. This reemphasises the importance of growth because without stronger growth to raise revenues, and without those revenues, it would be hard to provide for these very basic and much needed things.

The second challenge is to reduce the dependence on oil. In some ways the Nigerian economy has achieved diversification. Oil only counts for 10% of GDP and 1% of employment so you can say that’s a kind of diversification but the non-oil economy depends heavily on the oil prices through direct and indirect linkages and oil also accounts for 50% fiscal revenues and over 80% of exports. Oil is also important for FX inflows even though remittances help. Because of this, in order to have any form of meaningful diversification, Nigeria needs to move on these fronts as well: diversify fiscal revenues and exports in addition to diversifying GDP base.

Nigeria’s DNA is oil and unless diversification is seen on both fiscal and external fronts, this perception is unlikely to change and this perception needs to change if we are to avoid the big cycles.

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Charles Robertson obertson, the global chief economist at Renaissance Capital, during a Financial Times summit as far back as 2018, said the country needs to grow by between 4-5 percent for per capita GDP to stop contracting.

“As Nigeria has grown at 2 per cent per capita since 1992, our medium-term base should be at least 4-6 per cent GDP growth,” Robertson said.

But Nigeria cannot match the 4-6 per cent per capita GDP growth of industrialising countries because adult literacy at 60 per cent is too low and electricity consumption is under half the minimum required level for sustained industrialisation, according to Robertson.

“To push headline GDP growth to 6.5-8.5 per cent would require an adult literacy campaign, a trebling of electricity consumption and a doubling of investment to GDP,” Robertson said.

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John Ashbourne shbourne, a senior emerging markets economist at economic consulting Capital Economics also shared the following views during the FT summit.

“The government needs to unlock private sector investment by improving the business environment and encouraging participation in the non-oil sector.

The country also desperately needs better infrastructure and reforms to the state-dominated oil sector.”

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Razia Khan azia Khan, chief Africa economist at Standard Chartered bank also had these to say: “Nigeria has all the necessary building blocks to achieve much faster growth. With its low base, youthful population and scale, a growth rate exceeds the rate of population growth should be easily achievable.

It needs to develop more institutions that are more resilient than tends to be the case in typical resource economies, for example a tax base independent of oil and a banking sector that can meet the borrowing needs of the private sector. Nigeria has failed to make a transition away from being an oil economy.”

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Olusegun Omisakin misakin is the Chief Economist and Director of Research & Development at the Nigerian Economic Summit Group (NESG). His views are as follows: “The effects of COVID-19 pandemic on global health and socio-economic conditions will remain for the foreseeable future.

For Nigeria, economic policies have to remain broadly expansionary to hasten recovery. Implementation of the Medium-Term National Development Plans (MTNDP) and Nigerian Economic Stimulus Plan (NESP) will quicken the recovery in 2021.

More focus should also be on improving the business environment through reforms.”

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Monday 03 August 2020

BUSINESS DAY

Start-Up Digest

In association with

Benedicta Enodiana: Building successful fashion business Josephine Okojie

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enedicta Enodiana, founder, Dreamy Fabrics &More, is among the few female entrepreneurs that are building successful fashion brands in Lagos – the country’s commercial centre.

Enodiana, who is also a human resource consultant, was inspired to establish Dreamy Fabrics &More in 2018 out of her love for colours and African prints.

Since starting, the business has continued to grow steadily as its customer base keeps expanding.

“When we started, our sales were through one-onone marketing and sometimes it took a few weeks to even sell an item,” she says.

“But today, we have our products listed in popular stores in Lagos and we now get orders from weekly refer-

rals,” the young entrepreneur also says.

The sociologist-turnedentrepreneur says that her business sources all its raw material locally, by working with the best vendors to get quality products.

“Everything we use for production is sourced and carefully handcrafted locally,” she says.

She notes that the business has continually remained in operation owing to its excellent customer satisfaction and delivery of quality products.

“The fashion space is an open market and very competitive. We will continue to do all we can carefully to deliver quality products and ensure our customer satisfaction always,” she explains.

The business currently has four employees. “We have a small team of four employees. A team lead, two support staff, and a sales and business development

Benedicta Enodiana

representative.”

Enodiana further says the business aims to continually grow its customer base in the short run, while its long-run plan is to make the brand a household name.

In evaluating the country’s fashion industry, the young entrepreneur says the sector is fast growing and very promising.

“Over the past decade a lot of young women have

Abiodun-Adeyemi: Offering virtual, hybrid event solutions Odinaka Anudu

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he current pandemic is turning out to be a blessing in disguise for many. Social distancing has forced practically everyone to go virtual.

However, there are a few who had positioned themselves in that space prior to this time, becoming highly sought-after mentors today.

One of them is Adeife Abiodun-Adeyemi. She is a digital eventpreneur and founder of Ifectiv Touch, which is in its 9th year. Her event planning and management business was officially birthed on July 23, 2011. She is reputed for offering virtual, hybrid event solutions to clients.

“My journey into event planning started in 2008. I had to assist my late dad, Dr. ‘Wole Olugboji with planning and managing the gubernatorial campaign dinner for his friend, the current Governor for Ekiti state, Dr. Kayode Fayemi. The event was a huge success and a few of the guests began to ask about the event managers,” she explains.

“They actually thought I had been into events for quite some time but that was actually my very first time. Prior to this time, I had only ushered once at a corporate event at the University of Ibadan in 2005. Without thinking about what was coming my way, I took advantage of the opportunity and told them I was the event manager and before

I knew it, I had two potential customers from that event.”

She further narrates that at the initial stage of the business she operated under the name DEE Protocol Crew for three years before adopting Ifectiv Touch. From the outset, the entrepreneur spared nothing at making personal development her watchword up till her wedding day on July 23, 2011, where she unveiled the name Ifectiv Touch as the brand name and still continues to develop herself continuously till now.

She says that her wedding was the very first wedding planned and managed by herself from scratch.

Today, Ifectiv Touch offers full event planning and management, professional event ushering, VIP hospitality, virtual/hybrid event management. “The brand offers

Adeife Abiodun-Adeyemi www.businessday.ng

these services for corporate and selected social events.

We also have an academy and several event communities,” she adds.

The digital eventpreneur says her brand’s contribution to the Nigerian economy is in no small measure.

“We have contributed our own quota to Nigeria’s economy by creating job opportunities for young individuals between ages 21 and 35 as event ushers, coordinators, virtual assistants, decorators, fashion entrepreneurs, to mention a few, “ she says.

“Moreso, we have trained over 1,000 people through free trainings, premium webinars, workshops, online courses and coaching programmes,” she discloses.

Sharing what influenced her success in life and in business, she says the God factor

cannot be compromised. Leveraging strategic relationships and personal development with great support systems have been her mainstay.

She says other things working for her today in the event industry are passion for professionalism and her ability to leverage the virtual/ digital space.

“After getting married in 2011, I had to relocate from Ibadan to Abuja to join my husband, but at that time, I didn’t understand how to run my business online. So I struggled with visibility. I was able to overcome this gradually after my husband got transferred back to Ibadan and I started to learn how to run my business online so that location will no longer define my visibility.

“Another challenge I faced was getting the right people on my team. I never got the opportunity to be mentored by anyone when I started in 2008, so I had to figure out how to train my team all by myself. I did a lot of research on the hospitality industry and the standards required to set up a professional and successful event business.

I overcame this by creating my signature online course in professional event ushering which had evolved from training via BBM, then whatsapp, email, to proper and scalable online course hosted on our own online school.”

She says it has made it easy to guide her ushering recruits on standards and how to start a profitable event career right from the ushering level.

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been doing well in the industry and even represented Nigeria globally with local brands,” she notes.

Speaking on some of the major challenges limiting her business, she says lack of standardisation of products remains a big hurdle for Dreamy Fabrics &More.

She states that the Nigerian market is filled with lots of substandard fabrics because the government has failed to ensure standards.

According to her, the business spends more time and resources in ensuring that they get the quality fabrics for its customers.

“There are a lot of substandard items out there and if one is not careful, one will mess up a brand. We spend a lot of time selecting quality raw materials so that our finished products will be just perfect for our customers,” she says.

She urges the government at all levels to stan-

dardise the industry in order to promote local brands globally.

She also urges the government to revive the country’s textile industry by investing and promoting the use of local fabrics in the country.

She calls on the country to adopt the Turkey model in growing its fashion industry.

“The government should adequately invest in the industry to grow the economy.

We can use our ‘ankara’ prints to do anything and everything fashionable, just like the Indians,” she says.

“What stops primary and secondary schools from adopting ‘ankara’ school uniforms and bags? We must begin to think and love our things rather than look outside?” she says.

On her advice to other entrepreneurs, she says, “Stay true to yourself and your brand and ensure quality over quantity.”

How Dunnice became successful brand in event industry Odinaka Anudu

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unnice is one of the successful brands in Nigeria’s event industry. But its success did not come overnight. It took years of hard work, patience and courage to get to where it is today.

However, its founder Ibidunni Layade believes that the company is yet to get to where it should be.

According to her, Dunnice Catering’s journey started as far back 2005 when it began event decoration.

But how did Layade conceive the idea?

“My first job came from a desire to decorate my church for Christmas shortly after I got married. I observed there were no signs of any church decorations coming up. Being new to the church, I told my husband, who informed the pastor and secured his approval for me to do something about it - at no cost. I didn’t have the skill then, but my hubby connected me with the vendor who decorated our wedding reception venue for a time of tutorship and training.

Thereafter, I got a few of the church youths and the decorations were up,” she explains.

She says that that the probono decoration work paved the way for other commercial jobs that she got paid for.

The chartered accountantturned-entrepreneur recalls that her educational background gave her a soft landing in business, having studied @Businessdayng

accounting and graduating with an upper credit, making her one of the best students in class. “Never think you can go far without education,” she says. “Whether formal, informal or on-the-job-training, endeavour to learn. I paid to attend seminars, courses, trainings, masterclasses from bridal accessories to bead making, to flower arrangements, to tablesettings and hanging balloons.

I still do. Learning, for me, is continuous” she says.

The Dunnice boss notes that she believes in research and development, prompted by listening to clients’ feedback and following trends from the streets of social media. She says she spends a considerable amount on data just to keep informed and ensure that she’s always abreast of what is fashionable and current.

According to Layade, she spares nothing to make her next event experience memorably different from the last.

“I remember an event decoration job we did some time ago where we went the extra mile to provide live parrots and rabbits as part of our props, because the job was a jungle themed party,” she says.

The catering arm of Dunnice has also created various product categories ranging from Corporate Cafeteria Management Services, Soups’n’Stews-in-Bowls, Appreciation Trays, Take away Packs, Celebration Boxes, Intimate Catering Dining, Homemade Foods-in-Bowls, and Owambe Dishes, the entrepreneur says.

Monday 03 August 2020

BUSINESS DAY

Government Enterprise & Empowerment Program

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GEEP: Timely intervention for Nigeria’s bottom of the pyramid odinaka Anudu

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t is indisputable that the Government Enterprise & Empowerment Program (GEEP) came at the appropriate time. Numbers do not lie and they accentuate why an intervention programme like GEEP is most critical at this moment.

A recent report done by the National Bureau of Statistics (NBS) said that 82 million Nigerians live on less than $1 per day, representing 40 percent of the population. Other reports put the number of Nigerians living in want at 87 to 100 million. The majority of Nigerians in this class are petty traders whose capital is below N10,000.

These Nigerians live from hand to mouth and require little intervention to escape from poverty.

A 2019 report by the National Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency (SMEDAN) shows that over 95 percent of Nigerians doing business in the country are in the category of micro, small and medium enterprises.

In fact, the report says that out of 41.5 million MSMEs in the country, micro businesses make up 99.88 percent.

According to the report, which covered 2013 to 2017, the number of micro businesses in the country within the period was 41.469 million while that of small enterprises was 71,288 (0.2 percent). On the other hand, medium-scale businesses made up only 1,793 (0.004 percent).

With these glaring statistics, the government cannot fold its arm and watch—which is why it introduced GEEP to cater for these Nigerians at the bottom of the pyramid.

Jumai Bello

Taiwo selling her food stuffs

“Little interventions like that might seem small, but the impact on an ‘akara’ balls seller, ‘moi-moi’ seller and other petty traders can be unimaginable,” Ike Ibeabuchi, CEO, MD Services Limited, a chemical manufacturing outfit, said.

The Government Enterprise & Empowerment Program (GEEP) was set up to start the economic revival from the bottom of the pyramid by providing access to credit for Nigerians who contribute to the economy but have been neglected over the years. Tradermoni, Marketmoni and Farmermoni are part of the GEEP project. They have all together provided loans ranging from N10,000 to N300,000 to petty traders, artisans, small businesses and farmers. This has seen over two million Nigerians significantly receive boosts to their businesses.

GEEP has been implemented in

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36 states of the federation and the FCT with a spread of over 2,600 market clusters.

The COVID-19 has made GEEP a critical scheme as more Nigerians fall into the bottom of the pyramid due to impact of the virus.

Johnson Obasi, CEO of Ababased Johnsfrank Global Resources Nigeria Limited, said he had become poorer since the pandemic struck.

However, the Bank of Industry (BOI) , which manages the scheme, has assured that the programme will help assuage the plight of many Nigerians, while also supporting their micro businesses.

On the other hand, beneficiaries have continued to speak about GEEP, commending the government for remembering them at this point.

Jumai Bello, a merchant of

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perfumes, air fresheners, scents and ointments in Bauchi has a testimony.

“I learnt about the GEEP Marketmoni scheme through my association, the Development Exchange Centre (DEC) in Bauchi State. In my business, I have people who help me sell. I keep detailed records of every product. I applied for the Marketmoni loan and I got a loan of N50,000.

I have used the loan to purchase more raw materials for my scents in bulk rather than buying in bits like I used to. There is not much else to say but to thank the Federal Government for this programme. I hope to see more of this kind of people-oriented programs.”

Obinna Ogara, a beneficiary in Owerri, Imo State, said he was glad to receive N10,000 from the scheme, urging the Federal Gov-

@Businessdayng

ernment to keep up the scheme.

Mrs Amidu of Marna Market in Sokoto, also a beneficiary, said the scheme had made an impact on her.

“I sell local household utensils such as mortar, pestle, and calabash. The day I heard about Tradermoni, we just came into the market and we saw people registering fellow traders. We were curious so we had to go and ask the people registering what Tradermoni was about. The people registering told us it was a scheme by the Federal Government to empower traders and they asked us if we would like to register. We said ‘yes’ and we got registered. I was so sure that I was going to get the money and when I finally got the money, I told all my friends. I was so shocked because no government has ever come to our aid like this.”

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BUSINESS DAY

news Nigeria’s plan to acquire $18.12m scanners...

Continued from page 2

cargo examination and reduce the need for the Customs to open containers to do physical inspection as they are doing, which is causing us, Nigeria, a lot of time as well as loss of revenue,” she said.

Vicky Haastrup, chairman, Seaport Terminal Operators Association of Nigeria (STOAN), who decries the high rate of manual examination of cargoes, says deployment of automated scanners would drive and enhance cargo clearing process.

Haastrup, who spoke in Lagos during a virtual conference held recently, said manual examination of cargoes was not efficient and does not promote social distancing.

“We have a situation where people must visit the port physically to do Customs documentation and cargo examination before they can take delivery of their consignments. This is not safe at this time of Covid-19, and it is also inefficient,” she said.

According to Haastrup, terminal operators had in the past years suggested to Customs to allow them invest in scanners but up till today, nobody has done anything on that.

“It is a shame that Nigerian ports do not have quality and functional scanners

that is why Customs relies on physical examination of containers, which drives human traffic into the port. We need to provide these scanners and other automation platforms in order to make cargo clearance quicker. Nigerian ports must operate the one-stop-shop if we must compete with other ports in the West and Central Africa,” she said.

Recall that in line with the port reform agenda of 2006, the Federal Government entered into contract with Scanning Service Providers (SSPs) that includes Cotecna, SGS and Global Scan, responsible for approving Form M, issuing Risk Assessment Report (RAR) and scanning goods imported into Nigeria.

The contract, which was based on build, operate, own and transfer (BOOT) regime, allowed the Destination Inspection (DI) agents to acquire six multi-billion dollar mobile and fixed scanners for electronic examination of imports at the ports and border stations.

Seven year after the DI agents handed over the equipment to Nigeria Customs to manage, cargoes now dwell as long as three weeks to one month at the port due to delay in clearing goods, and the importers pay demurrage and storage charges for the delay.

Consumer goods firms disappoint market...

Continued from page 2

ing profit was down 17.88 percent to N714.45 million in the period under review while revenue was down by 18.27 percent to N19.45 billion, as net income dipped by 19.83 percent to N536.66 million.

Nascon Allied’s net income increased by a mere 2.77 percent to N1.48 billion as at June 2020, the slowest growth in five years.

Analysts at Coronation Asset Management in a recent report said the return on equities (RoEs) of most listed food manufacturers and FMCGs have been falling in the past 10 years.

That means companies have been unable to deliver higher returns to shareholders in the form of bumper dividend and share appreciation.

The report listed PZ Cussons, Guinness Nigeria, International Breweries, Flour Mills, and Honeywell as firms that seldom record return in excess of the Fair Value Equity Return over the period 2010-19.

However, Nestle Nigeria, Nascon Allied and Dangote Sugar have successfully delivered returns higher than the benchmark.

“Many years ago (roughly 10 years ago) the most-traded

and sought-after stocks on the Nigerian Stock Exchange were brewers, food manufacturers and fast-moving consumer goods (FMCG) companies,” note analysts at Coronation Asset.

Dangote Sugar, however, beats analysts’ expectation in the second quarter even amid a tough and unpredictable macroeconomic environment.

Analysts say the imposition of border closure by the government to curb smuggling of products out of the country is boon to the producer of the sweetener, as consumers are forced to patronise local products.

The trade war between the United States and China led to a fall in commodity prices for raw sugar and wheat, which supported a reduction in raw material cost.

For instance, Dangote Sugar’s revenue increased by 28.48 percent to N103.23 billion as at June 2020 from N80.36 billion the previous year; but net income and operating profit increased by a mere 5.56 percent and 0.57 percent, respectively.

Honeywell Nigeria’s operating profit increased by 10.23 percent to N1.70 billion in June 2020, thanks to a 38.98 percent uptick in sales. www.businessday.ng

Douye Diri (l), governor, Bayelsa State, and Abraham Ingobere, speaker, Bayelsa State House of Assembly, during the signing of the Revised 2020 Appropriation Bill into law at Government House, Yenagoa.

Nigerian Diasporas in US top list of high...

Continued from page 1

US at 33 percent. It is also more than the proportion for immigrants from South Korea - 56 percent; China - 51 percent; Britain - 50 percent, and Germany - 38 percent.

Nigerian immigrants tend to work high skilled jobs, 54 percent of them are in largely white-collar positions of management, business, science and the arts, compared to 39 percent of people born in the US. This means they have significant spending power.

According to a report by the New American Economy Research Fund, in 2018, Nigerian immigrants made more than $14 billion and paid more than $4 billion in taxes. The Nigerian diaspora sent back almost $24 billion remittances in 2018 to a Nigerian economy that is more dynamic than many people, including Donald Trump, president of US realise. Services account for

more than 50 percent of gross domestic product (GDP), technology is 10 percent, according to the Centre for Global Development.

Over the years, it has been widely established that the officially recorded remittances into the country are much lower than the actual remittances that take place through unofficial channels. This means a larger chunk of Nigeria’s remittances flow through the unofficial channels.

PricewaterhouseCoopers (PwC), a multinational professional services network, estimates that migrant remittances to Nigeria could grow to $25.5 billion, $29.8 billion and $34.8 billion in 2019, 2021 and 2023, respectively. Over 15 years, PwC expects total remittance flows to Nigeria to grow by almost double in size from $18.37 billion in 2009 to $34.89 billion in 2023.

This is why many have criticised President Trump’s

Roger Brown resumes as Seplat’s...

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in the oil and gas, power and infrastructure, and the renewable energy sectors.

SEPLAT’s new CEO is a qualified chartered accountant from the Institute of Chartered Accountants of Scotland. The product of Belfast Royal Academy also holds MSc in Finance from University of Ulster; BSc (Hons) in Finance from University of Dundee. Brown set up the London office for the company prior to listing on the Nigerian and London stock exchanges (Main Board).

During his time at the company, he steered the business through extremely challenging times during low oil prices and an 18-month period when the business was not producing oil due to a shutdown of its main oil pipeline.

He also put in place a total of $1.75 billion of financing, which included an inaugural $350 million Eurobond as well as bringing in a number of top tier banks into the syndicate.

SEPLAT in line with its forward looking plans positions itself for a next phase growth ambition which would see the expansion of its footprint in terms of energy business activities, pursue offshore assets as well as opportunity driven entry into different geographies.

SEPLAT corporate transition, which sees Brown takes over as CEO would require a different kind of organisational structure, people skills set and mentality to competitively position well in the expanded space.

In view of this development, SEPLAT will no doubt be reviewing its current organisational and systems structure.

Already, the Board of Directors of SEPLAT appointed Emeka Onwuka as chief financial officer (CFO) and executive director of the company. He joined the Seplat Board on August 1, 2020. The next stage Brown leads as CEO requires a wide global business/transaction view requiring deep financial and capital markets knowledge and experience.

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inclusion of Nigeria on his list of travel ban earlier this year based on national security concerns. In a February 20, 2020, video, Fareed Zakaria, CNN’s journalist, argued based on data from the Pew Research Centre that including Nigeria, Myanmar, Tanzania and Eritrea based on gaps in their security protocols that expose the US to terror threats was senseless.

“No one born in Nigeria, Myanmar, Tanzania, Eritrea, has been responsible for a single terror-related death on American soil from 1975 – 2017,” Zakaria said. “If the administration was worried about security from these countries, it would ban all visas but it is only targeting permanent visas, leaving temporary visas from those countries untouched, which suggests that something else is going on.”

Last year when Trump unveiled the new immigration plan, the White House told the Washington Post that Trump wanted high skilled English

speaking educated immigrants that assimilate easily and give back to the country. This is reasonable but if Trump cared to know, Nigerian immigrants who make up the largest number of sub-Saharan immigrants in the US, qualify more.

Back in Nigeria, there is a growing middle class increasingly educated and aspirational. Nigeria is America’s Africa’s second-largest trading partner. John Kemble, former US ambassador to Nigeria, said Nigeria’s undoing was policy inconsistencies.

Politics in Nigeria presents a dark logic.

Trump is not acting based on data, some have argued.

He once told the New York Times in 2017, that Africans in general and Nigerians in particular, once they have seen the US, would refuse to return to their huts in Africa. He wants more immigrants from Norway, fewer from Haiti and African nations. Mexicans Trump sees as criminals, and Muslims look like terrorists.

PIGB, Electoral Act amendment bills, others suffer delay as lawmakers embark on annual recess James Kwen, Abuja

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etroleum Industry G ov e r na n c e Bi l l (PIGB), Electoral Act, several constitutional amendment bills, reports and many other legislative activities are to suffer delay for almost two months.

This is as both chambers of the National Assembly - Senate and House of Representatives - have embarked on a long annual recess, beginning from Thursday, July 23 to Tuesday, September 15, 2020.

Many critical bills such as the PIGB and Electoral Act amendment, which most Nigerians have been yearning for, did not received attention as assured particularly by the House of Representatives due to the distortion of the legislative calendar by the advent of COVID-19 pandemic.

At the onset of COVID-19, @Businessdayng

the National Assembly shut down plenary and most legislative activities for over one month (March 24 - April 28), and even after resumption, plenary held once, or at most twice a week, and the National Assembly also went for two weeks end of legislative year recess.

Upon resumption from the two weeks break, the House of Representatives said it would accord priority to the PIGB and Electoral Act Amendment Bills in its second legislative year.

House spokesperson, Benjamin Kalu, while assuring that the laws would be on the front burner in the second legislative session, said: “PIB and the Electoral Act, these are the things that are going to be on the front burner so be patient with us. We are still working round to see how these laws would be done while respecting the COVID-19 protocols.

Monday 03 August 2020

BUSINESS DAY

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BUSINESS DAY

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news

T-Bill rates rise first time in 8 weeks as investors place N265bn in successful bids Endurance Okafor

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ixed-income investors seeking high-yielding securities in the light of the prevailing developments in the markets were not disappointed, as attempts to buy the Federal Government short-term debt instruments at attractive rates were accepted.

The 364-day bill saw an increase by 5 basis points from 3.3 percent to 3.40 percent at the Nigerian Treasury Bills (T-Bills) auction conducted Wednesday, July 29, by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria, as investors bid at rates as high as 12 percent.

Although marginal, the increase in the 364-day bill for July 27, 2020, is the first since the last higher stop rate was recorded some two months ago.

According to market analysts, fixed income investors are being cautious not to invest at a lower rate despite the limited investment options.

“Though the increase is marginal,” Ayodeji Ebo, MD, Afrinvest Securities Limited said “investors are being mind-

ful of interest rate and as a result, “they didn’t submit at a significantly lower rate compared to the last auction.”

While investors were able to place N265.95 billion (the exact amount the CBN offered to raise from the auction) in successful bids, N200.75 billion were unsuccessful, a pointer that there is still high liquidity in the market amid lack of high yielding investment instruments.

A breakdown of the auction result seen by BusinessDay shows that stop rates on the shorter 92-day and 282-day bills dipped to 1.2 percent, and 1.5 percent, respectively. This is compared to the 1.3 percent and 1.8 percent reported in the previous auction. Meanwhile, investors were requesting for as much as 3 to 9 percent for the short term papers.

While investors jostled for the N265.95 billion the CBN sought to raise at the auction with N468.27 billion, a breakdown of the result reveals that the CBN sold N49.84 billion worth of bills for the 91-day paper. The short term instrument was subscribed by N94.39 billion, N44.55 billion more than

what the apex bank offered.

N54.59 billion worth of bills were allotted on the 182-day paper. Investors were, however, willing to offer N156.79 billion, almost three times what the CBN raised, considering they oversubscribed by N102.2 billion.

Bills valued at N161.52 billion were sold on the 364-day paper but investors were willing to subscribe to the bill with N215.52 billion, N54 billion higher than the CBN’s offer.

According to market analysts, Nigeria’s low yield environment which is further worsened by the country’s high inflation rate is a key driver of the high liquidity rate in the financial system of Africa’s largest economy.

While interest rates in Nigeria have always been high due to the monetary system in vogue since 2009 which sought to use FGN bonds/Tbills and OMO bills as a means of attracting US dollars into the country to stabilise the naira, the recent OMO policy by the central bank which prevents domestic investors from participating in the auction is the key driver of the recent lowinterest rates.

Quantum Travels begins private charter evacuation flights to London, Lagos IFEOMA OKEKE

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uantum Travels, one of Nigeria’s leading travel management companies has launched private charter evacuation flights from London to Lagos and Lagos to London.

The charter flight which costs $3,500 will be operated once a week. With the current exchange rate of N386

to a dollar, passengers will be paying N1.35million for this charter evacuation flight.

However, BusinessDay checks show that airlines are charging $2,000 for evacuation flights. With the current exchange rate of N386 to a dollar, passengers have had to pay N772,000 for a one-way evacuation flight.

A source at Quantum Travels told BusinessDay

that the reason for the relatively high cost is because it is a business class flight with a maximum of 30 persons on board.

The source disclosed that the flight which is strictly for citizens and resident permit holders will be operated once in a week.

Passengers are required to get Covid-19 negative tests to get on the flight.

United Way, 3M Nigeria rally support for communities impacted by COVID-19 Odinaka Anudu

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cience-based technology company 3M Nigeria has partnered a non-profit organisation United Way Worldwide (UW) to support relief projects to help communities hard hit by Covid-19 across Europe, Middle East and Africa (EMEA).

United Way Greater Nigeria, the local UW organisation, is working with 3M Nigeria to implement a $160,009 Covid-19 relief programme to support 10,000 beneficiaries in communities in the five administrative zones in Lagos State that have been identified as high-risk areas.

This includes support in the form of food distribution and packaging in collaboration with local partners, including the government, NGOs and religious organisations.

Nigeria is one of twelve countries across EMEA receiving a share of a 3M Nigeria grant totalling $1.875 million, which is being directed to projects

supporting nutrition, mental and physical health, education and Covid-19 awareness, according to the most pressing local needs and country status on the pandemic.

“It’s important that 3M holds true to its core values during this pandemic by supporting our communities and improving lives” said Robert Nichols, managing director of 3M Middle East Africa.

“The projects with United Way form part of a $20 million commitment made by 3M at a corporate level to support Covid-19 relief projects globally, and we’re grateful that some of this funding is helping vulnerable communities in Nigeria to receive support during these exceptional times.”

United Way Worldwide has been helping communities in need for more than 130 years, but the scale of the Covid-19 crisis and its far-reaching impact on people’s health, social mobility, income and job security – factors that are essential to wellbeing www.businessday.ng

have posed new challenges.

“We’re pleased to see how 3M is stepping up in helping the people in the Nigerian communities who support the most vulnerable that have been impacted by the pandemic,” Janet Butler, vice president, United Way African Region.

“Together, we can make a real difference to people’s quality of life as we navigate through the coronavirus pandemic.”

Lanre Towry-Coker, chairman, board of trustees, United Way Greater Nigeria, said although lockdown had been eased in major parts of the country, the United Way Greater Nigeria understood that there was an ongoing need for basic essentials in vulnerable households.

“The team is working tirelessly to reach these households in these trying times. The financial support of organisations such as 3M helps us to achieve our goals to alleviate the burden brought about by the novel coronavirus,” TowryCoker said. https://www.facebook.com/businessdayng

@Businessdayng

Monday 03 August 2020

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news Dangote Cement presents 82 trucks, Over 1 million subscribers leave 9Mobile Survey shows Nigerians still distrust motorised 3-wheelers to distributors in half-year 2020 government, but trust CEOs

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angote Cement Plc has also presented 82 brand new trucks to its distributors to further assist them ease their product distribution logistics.

The trucks are also to help the distributors, who are responsible for the availability of the cement products nationwide, to service their customers efficiently and more profitably and in turn take their businesses to the next level.

This is coming on the heels of similar presentation of motorised three-wheelers to some distributors and retailers across the nation.

The truck presentation, which was held at the Enugu assembly plant of the SHACMAN truck, was preceded by special training session held for the drivers of the trucks, with the supervisors and managers of the distributors’ companies in attendance.

The training organised by Dangote Cement Plc in collaboration with Transit Support Services Limited (TSSL), the producers of SHACMAN trucks in Nigeria, was part of a purchase agreement designed to ensure the drivers get acquainted with the new trucks to minimise breakdowns and road accidents.

According to the organisers, the training which focused more on the drivers touched on the special skills needed to drive such trucks, road signs, and comportment of the drivers, as well as the general driving rules, will help them to be more

aware of their trucks and help to reduce carnages on Nigerian roads.

The training also emphasised proper handling and maintenance of the vehicles so as to enjoy their ruggedness and durability as they were purposely built for Nigerian roads.

Funmi Sanni, Dangote Cement marketing director explained that the trucks were presented under Truck Empowerment Scheme (TES) designed to help the distributors in the area of logistic operations for prompt product collection and delivery to other retailers.

She stated that under the scheme, the distributors would pay for the trucks on a 50-month installment basis. By so doing, the distributors can easily have access to the truck on very simple and easy terms, an opportunity they could not have otherwise been availed of by the commercial banks.

Sanni pointed out that the presentation of the trucks was meant to enhance the operations of the distributors who have proven loyal to the Dangote Cement products over the years and guarantee more profitability at the end of the day.

According to her, Dangote Cement has a culture of catering for all its stakeholders along the value chain, noting that even the retailers were not left out of the scheme as there are arrangements for them to procure threewheeler motorised vehicle to help them in their own delivery operations too.

www.businessday.ng

FRANK ELEANYA

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ne of Nigeria’s telecommunication companies, 9Mobile has gone through the first half of 2020 without growth in data subscription as the month of June showed the telco lost about one million subscribers in the first six months of the year. The company’s voice subscribers are also not holding up as it lost over one million within the period.

The telco recorded 7,094,421 data subscribers in June from 7,255,348 in May representing a drop of 160,927 subscriptions in the period. While this is not the most it has lost in 2020, as the telco lost more in previous months, it is, however, an indication that subscribers are yet to be impressed with the services of the company.

Between January and June saw the exit of 945,840 subscribers.

The continued exodus from 9Mobile is now in its fourth year. The last time the company saw data subscribers flock to its platform was in April 2016 when it recorded over 17 million subscriptions. Today, about 10 million subscribers have left the telco to its competitors. Nigeria’s data subscribers climbed to 143 million in June from 140 million May. Also, 9Mobile did not improve its share of voice

subscribers in June. The company’s subscribers dropped from 12,225678 in May to 12,111,674 in June, a decline of 114,004 subscribers. From January to June, 9Mobile saw the exit of 104,5869 voice subscribers.

The further drop also means 9Mobile’s market share at 6.18 percent has been in the single-digit territory since 2019. This trend is likely to continue as the Covid-10 pandemic continues to impact the operating costs of operators in the telecommunications sector. BusinessDay had reported that MTN Nigeria recorded a 16 percent decline in profit in the second quarter of 2020 due to a jump in operating cost by 35.6 percent to N80 billion from N59 billion a year ago.

Unlike MTN, 9Mobile does not make its financial report public. But that may soon be a thing of the past as the regulator Nigerian Communications Commission (NCC) has mandated that the major telecommunication companies operating in Nigeria have to submit their yearly financial reports, starting from July 15, 2020.

The new policy is based on the Accounting Separation Framework (ASF) for the industr y which provides telcos with a comprehensive set of policies and guidelines for generating detailed regulatory financial statements.

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CHUKA UROKO

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he 2020 Edelman Trust Barometer has revealed that, of the four mainstream institutions of government, business, media and non-governmental organisations, government remains the least trusted with Nigerians having no confidence in the ability of current leaders to address the country’s challenges successfully.

Conversely, Nigerians’ trust in chief executive officers of businesses as positive change agents rose while trust in non-governmental organisations (NGOs) and the media also increased, according to the supplementary data for Nigeria. It showed that while trust across the four mainstream institutions in the country increased compared to 2019, business still led with 91 percent, followed by NGOs with 87 percent. The media was the third with 84 percent while government had only 55 percent.

These revelations, amongst others, were contained in the 20th Edelman Trust Barometer Survey report unveiled virtually by Edelman and its exclusive Nigerian affiliate, Chain Reactions Nigeria in Lagos recently.

The presentation saw the CEO of Edelman Africa, Jordan Rittenberry present the @Businessdayng

global 2020 Edelman Trust Barometer and the Impact of Covid-19 on trust reports.

Adekunle Dixon Odukoya, a consultant at Chain Reactions, presented the supplementary data for Nigeria.

Commenting on the 2020 Edelman Trust Barometer report, managing director/ chief strategist, Chain Reactions Nigeria, Israel Opayemi, noted that since 2017 when the report was first unveiled in Nigeria, major corporate players have always looked forward to its release because they draw significant insight from it to grow the asset of their reputation.

An all-female panel drawn from government, media, business and civil society also discussed the survey report and its implications for their respective constituencies and Nigeria at large, in line with the theme, “Competence and Ethics.”

They were the special adviser to President Muhammadu Buhari on social protection, Maryam Uwais; director, public affairs, Lafarge Plc, Folashade Ambrose-Medebem; director of news, TVC, Stella Din Jacob, and the convener, Enough is Enough, Yemi Adamolekun.

Former assistant director of programmes, Lagos operations of the Federal Radio Corporation of Nigeria (FRCN), Funke TreasureDurodola, moderated.

Managing

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Monday 03 August 2020

BUSINESS DAY

Monday 03 August 2020

BUSINESS DAY

GOVERNMENT

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the Executive Governor of the Nigeria’s eastern State of Taraba

Zainab Ahmed

BUSINESS

Minister of Finance, Budget and National Planning

Interview with Public Sector Leaders

Effective Economic Sustainability Plan implementation is antidote to recession – Finance Minister Zainab Ahmed

As Nigeria battles the twin shocks of falling oil prices and the challenging health crisis due to the coronavirus global pandemic, its economy has been forecast by the IMF to contract by as much as 5 percent in 2020. This has spurred policy makers into a desperate search for sustainable ways to manage the situation. In this exclusive interview with BusinessDay’s Editor Patrick Atuanya, and General Manager, Business Development, North, Bashir Ibrahim Hassan, Nigeria’s minister of finance, budget and national planning, Zainab Ahmed, who is generally believed to have been exhibiting rare brilliance, patriotism and humility in discharging her duties, speaks on President’s Muhammadu Buhari’s plan to salvage the economy of any further impending crisis.

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s the chief manager of the Nigerian economy, planner and custodian of the nation’s treasury, what is this administration doing differently from the previous administration in terms of planning for sustainable economic development for the overall benefits of the Nigerian economy?

Since his first tenure, President Muhammadu Buhari has committed to Nigerians that he would be concentrating on the fight against corruption. When he was campaigning for the second term, he made the same promises. So, I will say you cannot divorce his first from the second term as it is a continuation of the commitment of the president.

During the first term, we developed the Economic Recovery and Growth Plan (ERGP), which we have implemented till date. The ERGP is supposed to expire this 2020, the same time the Vision 2020 is expected to expire as well. So we are developing a new national plan that will be a successor to ERGP. It will still be borrowing from the principles of the ERGP. The ERGP was anchored on the philosophy of partnership with the private sector.

It also had key implementation priorities, including agriculture and job creation, that remain relevant today, tomorrow and next 20 years.

The plan also commits to enhancing the efficiency of the power and the petroleum sectors. These are still very relevant today.

We also committed that we will develop and enhance the manufacturing sector with a special focus on the small and mediumterm enterprises. That is still relevant today as it was at that time.

There were several major cross-cutting issues which the ERGP committed to; for example, using technology to enhance governments processes and drive the development of the economy. These are still very relevant today.

Also, enhancing and developing human capacity. We have very low capacity indices in terms of health and education. That was a commitment in the ERGP and it is still a commitment today. So, this new plan is going to be drawing from those main principles and philosophies that were detailed in the ERGP. What will be different is that we will be detailing the implementation of these new plans and we have already started.

Two weeks ago, we got the approval of the federal executive council for the Economic Sustainability Plan (ESP). This is a plan that is for 12 months, designed to help improve the economy and also help our capacity in reaching the health challenges that we are facing today as a result of the Covid-19. It would also help in steadying the economy so we don’t have a deep crash because of the crash in crude oil prices.

It was approved at the end of June but took effect in July and it is expected to run through to next year.

The ESP was developed through an effort that was first of all set up by a steering committee chaired by the Vice president and a couple of ministers as members. Later on, we added more ministers because we need to look into their sectors.

The plan has been fully cost with a full detailed implementation plan. And that is the plan that the Medium-term expenditure framework will take as well.

That is different from the ERGP. The ERGP didn’t have a detailed implementation plan; it didn’t have a costing associated with it.

When you cost a plan, then you will be able to implement accordingly. Like the ESP, it

cost N2.3 trillion. We were able to identify N500 billion which the president approved out of the government special account; then we now have N1.2 trillion that will be funded through the Central Bank intervention funds that are going out to the private sectors at a very low rate. Also, there is the component that would be funded by other sources, including multilateral sources and possibly the private sector, to the tune of N440 billion.

That is the difference. When you do a plan and you cost it, you have a better chance of fully achieving its implementation. But the principle and the philosophy are the same.

We have a lot of Nigerians that are living in difficult and challenging situations. We have more people who have lost jobs due to the Covid-19 pandemic. So, the ESP is trying to create jobs by going into very large public works, construction of rural roads that would allow us to move goods from farms to markets.

The building of roads creates a lot of jobs and it has a very long value chain effect.

Our commitment is to build a lot of rural roads to link farmers to market and bring into cultivation between 20,000 to 100,000 hectares of new farmlands. Our target is to get more people back to their farmlands as soon as possible.

Even as we have achieved self-sufficiency in rice, we also have the target of achieving self-sufficiency in wheat production, because it is still one of our largest imports.

We want to cut down on spending foreign exchange to import it. This will enable us concentrate on a few value chains across the whole of the value chain.

We have also designed the ERGP to create mass housing. The target of the ERGP is to create 300,000 houses at low cost, and 80 to 90% of the material used in their construction will be local.

These houses will be in the states. The states will be providing the lands and some primary infrastructure. We will be providing the funds through the Central Bank interventions programme to small size developers, young groups of 3-4-5 architects and engineers.

So in a large housing program, you will have for example 1000 houses and each of these contractors will be given like 50 houses each to build. On that same site, we will have carpenters, block makers, welders and consultants that will be supervising them so that only those items that we can’t get locally will be imported in. With that, there will be a large value chain effect. It is not a white-collar job, but real physical work, that will push people to use their hands.

How do you assure Nigerians that the ESP will be different in terms of implementation than other plans in past years?

This plan is fully a national one. We have the federal government represented, as well as the states and the local governments. We also have different segments of the private sector represented.

The plan development process also has a steering committee which comprises very high level persons, some ministers and representatives of the private sector, including the Manufacturers Association of Nigeria (MAN).

Then we have a central working group, which is the second level, and then we have about 54 technical working groups representing various sectors like housing, women, roads, health, education and so on.

The chairs of this working committee will be members of the central working group. www.businessday.ng

The mode of development itself is an improvement from what has been done in the past because we want to make sure that there is value. In each of those committees, we have legislators as members, either themselves as chairs of committees or those they nominate from the legislators to represent.

Also, from each zone, we have six people nominated from the states hence, it is typically a national plan.

When you have a national plan that people can call their own, it has a higher chance of being successfully implemented. This is because you are not deciding as a federal government from Abuja that when I go to Zaria local government, I will build them a hospital. No, that is not needed because their priority might be a school and not a hospital.

Detailing how the plans will be implemented and cost is also important to the success of this plan. We are doing a long-term plan, which will go for about 30-40 years. We are waiting for the president to inaugurate the steering committee because they will be the ones to make that call.

But the detailed plan that I am talking about will be a 5-year one. So we have a long visioning document which will be a long term plan, but it will be detailed in 5 years and, of course, there will be an annual review for implementation.

When the vision 2020 was done, one of the things that were recommended was that it should be backed by law, but that never happened. When you back it by law, there is a chance that when a new government comes in, they won’t just change the main focus. But there is also a risk. If you say something that should run for about 40 years be backed by law, then take a clue from what happened this year with the Covid19. All those things that had been planned now needed to be changed. So if you put it into law, you will

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have that restriction, which is one of the things we are considering.

We might consider just passing into law the visionary documents and say we want to, for example, in terms of infrastructure, bridge our infrastructure gap from say 70 per cent to like say 50 per cent in the 25 years.

Or you want to move your revenue from 18 per cent revenue to GDP to 30 per cent revenue to GDP in the next 30 years. But in terms of the detailed implementation, if we cast it into law, it will hamstring your flexibility during implementation. So the steering committee that is made up of very high-level Nigerians will have to make that consideration, but our suggestions will be if we want it to be backed by law, it should be the visionary, not the detailed implementation. And, of course, we will see what happens since there will be lawmakers in the committee.

What are you seeing in the economy that is making the government optimistic? Also, do you think the government is doing enough with all these stimulus packages and commitment to the economy?

We got approval for a stimulus package of N2.3 trillion. For an economy that is as large as ours, if we can do a fiscal package that is around 10 percent of GDP, it will be better. But we are doing the best within the limitations that we have and that is why implementation is very important.

The National Bureau of Statistics (NBS) has already done an initial assessment that the economy could go into recession to as much as 4.2 per cent by 2020 but if we are fully able to deploy this N2.3 trillion, we might end up in -0.59 per cent. That is a bit fair. It means that, by the end of Q1 2020, we should have been out of the recession and back to steady growth. So the implementation of the ESP is very important.

Fortunately, the Nigerian economy has proven to be quite resilient. People tend to forget that even though we are called an oil-dependent economy, @Businessdayng

the oil sector only constitutes about 9 percent of our economy, meaning around 91 per cent of our GDP is the non-oil sector.

As the oil crashed, it has had some impact on the non-oil sector, but it was made worse by the impact of the Covid-19 due to the lockdown, which affected trade and services, some of the biggest drivers of our GDP. We are not under any illusions.

That is why we came out to say we are going into recession, so that everyone is aware and takes precautionary measures.

The Q1 report was a good one, but when you compare it with Q1 2019, it was still deep. We expect Q2 to be much lower than Q1. If we don’t go into a negative trajectory by Q2, then that’s a plus because that was the worst time or if we go into negative growth shallowly, that would still be fine; and Q3 and Q4 will also be fine.

Even in our Federal Account Allocation Committee (FAAC), we kept being surprised because we were expecting a huge dip. The last FAAC we did recently, we saw a revenue of around N690 billion.

What was responsible for the boost in FAAC? What happened was that, when oil and nonoil revenue dabbled, there were still many other stimulators that were acting as a stabilizer for the economy. The Federal Inland Revenue Service (FIRS) is also active in pushing, even though this is a time where you can’t push so much in terms of collection of taxes.

Sincerely, we have hope that we might even escape this recession, or, even if we slide into a recession, it will be a shallow one that will be easy for us to come out of. That is the target of the ESP. One area we always hear a lot of worries about is the debt that has accumulated, increasing the debt service commitments that the government has to repay. How do we hope to manage ourselves out of these problems?

I want to challenge BusinessDay to take a criti-

cal look at all our projects. People just sit in their offices but do not know where these projects are.

I must say that we have major infrastructure projects situated across the country. Last week, we did a Sukuk signing on each of the four major roads across the six geopolitical zones. There are also ongoing projects that are now 100 per cent funded. These are works that are moving across the country.

Go to Apapa and see the roads Dangote is doing. There is also the 2nd Niger bridge.

There is the Abuja-Kaduna-Kano road that is also going.

Four major airports have been fully rehabilitated, including those of Abuja, Lagos, Kano and Port Harcourt. Some rail lines are also functional, and all these projects were not available before.

There is Abuja, Kaduna, Ibadan, Lagos.

There is the Ibadan to Kano which is also just picking up. There is the Itakpe-Warri rail line which is now able to move cargo from Itapke to Warri. A lot of major work is going on. I think the issue is that many people just look at their environment alone and feel nothing is happening.

But there are lots of projects that we have taken on that would drive growth, and that is what is different from what you have now compared to before. We need to make these developments now not tomorrow because it is these developments that will enhance businesses for them to pay more taxes to the government.

It is not that it is fun sitting down and just borrowing, it is carefully planned and we designed our budget in such a way for capital projects to be funded because the revenues are short. And there are capital projects across every zone as several major projects are going on.

What is the situation of the $22 billion foreign loans tied to various projects across geo-political zones?

It was the borrowing plan for 2016-2018, which is to the tune of $22.7 billion. It was finally approved by the national assembly.

There are a lot of major projects. About $18 billion of that is major infrastructure projects that are going to be implemented.

Also, when you look at our borrowing costs, we are borrowing at a cost that is around 1-2 per cent. We have 20-25 years to repay these loans. I tell you, you can’t get any better than that.

What we did was to make sure that we are using the funds for projects that will have meaningful returns in the future. We are concerned about the level of borrowing because we are struggling with revenue so debt repayment is a task for us. We are paying and we have never failed in any debt service despite the difficulty.

What we are paying now is not a debt taken in the past 4-5 years but those taken 30 years ago. So we have added to it because the government is a continuous process. The thing is that we are so confident that we can show what we are doing with the money, that these are physical projects that are adding value to the economy and people can see.

Are we in the position to raise the $22 billion any time soon?

The borrowing plan is part of the requirement that before FGN borrows, it must get approval from the Legislature. The money is not something you are borrowing in one day. So to the lender, they want to ensure that you have full approval of the government. That approval will enable us to review and continue negotiation of the process. Also, we are not under any www.businessday.ng

obligation to take everything. We take the ones that we will commit to carefully knowing that we are adding to the debt because, for anyone you take, you are adding you are also increasing your future debt repayment.

Do you have a communication blueprint inserted in the planning so that you have the buying of the Nigerian citizens?

We have a communication working group. We selected communication experts in that working group. Of course, their work starts from when you are developing the plans but the most important aspect is even when the plans have been done. As you are developing the plans, you need to also continue to communicate the process. So we have a communication workgroup and their responsibility is to develop a communication work plan during the development and after the developmental processes.

What are your major achievements as a minister of finance, budget and national planning? What legacies will you be leaving behind?

One of the first things I developed when I came on board was a strategic revenue growth initiative (SRGI). It’s a program that harnessed all the key priority interventions that needed to be implemented that will increase and expand our revenue base. We are implementing that and we are seeing some progression. Yes, the covid19 situation has set us back, but we are still moving forward.

The SRGI is a very important initiative that I have done. During our work, we developed for the first time in the last 20 years, a finance bill aimed at closing the loopholes that we have in about seven different fiscal bills that we have in the country.

One of the most important things for me is that we were able to reduce taxes for SMEs among several other things. There are about 87 provisions in that finance bill but, left for me, that is the most important one. The essence for me is that it allows these SMEs to retain money in their business so that they can grow their businesses and employ more people. We did that not knowing that the pandemic would erupt. What we did with the finance bill -- in reducing taxes for SMEs then -- is what countries are now doing in the wake of the pandemic.

Another thing for me was amending the budget cycle back to the January to December fiscal year. Again, for more than 13 years, our budget cycle has been distorted. Even

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though the government budget is small when you look at it to the economy at 10 percent of GDP, it has a multiplier effect for all of the economy – for both small and big businesses.

So I consider bringing it to what the constitution provided January to December as a major achievement, and we are working to ensure that it doesn’t change, and we will deliver on that.

Please tell us about the Treasury Single Account (TSA), because it has been a long time since we heard of it.

The TSA is doing very well. It helps us to see all of the government transactions -- both revenue and expenditures. I must say it has been very useful in managing government liquidity and also managing the transparency of their operations.

On the back of the TSA, we have a transparency portal that is hosted on the website of the accountant general of the federation that will disclose payments that are made across different ministries and agencies from N5 million and above. You can access it as a public. You choose an agency that you want to see. You select any expenditure line item. That is also one of the unique things we have done.

It has also enhanced the transparency commitment of the president because transparency is a necessary part of accountability. So when people know that the whole country can see what they are transacting on and people can ask questions and answers must be provided, it sends a signal to them to sit up as whatever development they are making can be seen.

There is a proposed N15 trillion infrastructure company to leverage pension funds. What role will the finance ministry play in getting the pension funds to build all the infrastructure that we need in Nigeria?

It is still a work in progress. The CBN has announced it. Before then, we did skeletal work under NERC and we submitted it to the president on the need to commit some part of pension funds to invest in infrastructure.

We plan to make sure that we design debt instruments that are long-term because that is what pension fund administrators need, schemes that are safe with government guarantee behind them, so this money will now be available for government infrastructure and limit the need for us to borrow outside as we can use funds internally to develop our infrastructure.

@Businessdayng

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Monday 03 August 2020

BUSINESS DAY

news

Lagos closes Eti-Osa isolation facility, others Joshua Bassey

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L-R: 1st row: Doja Ekeruche, advisory board member, Eko Innovation Centre; Media professionals, and Olatunbosun Alake, special adviser to the Lagos State governor on innovation and technology. 2nd row; L-R: Olalere Odusote, commissioner for energy and mineral resources, Lagos State; Goddy Jedy-Agba, minister of state for power, and Babajide Olusola Sanwo-Olu, governor, Lagos State, at the launch of Lagos Smart Meter Hackathon in Lagos.

How COVID-19 battered lives, morale of private school teachers in Nigeria Ibrahim Adeyemi

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s if being a teacher is a curse, Tope Olaleye says she regrets being a teacher in a private school. The twenty-something-year-old has been left to ponder the future ever since schools were shut down by the Federal Government in March to contain the spread of the deadly coronavirus.

“How do they want us to cope?” she asks angrily. “The last time we received our salary was in March, we have not received anything since then, not even a call to know about our welfare during these hard times.”

As she feels abandoned by the management of a private nursery and primary school at Idimu area of Lagos where she teaches, Olaleye says she’s been made to believe that Covid-19 has come to show private school teachers that they have no job yet.

She vows not to go back to teaching when schools are reopened.

“I am already looking for another job. I don’t want to die of hunger. once I get any other job, I am not going back to teaching,”

she says.

She says the proprietor who employed her neglected her and other teachers at the school since the shutdown.

“You can imagine. They’re even renovating the school and they are not paying us. What do they want us to eat? We are suffering and nobody cares!” she laments.

No one prepared for this In March 2020, the Federal Ministry of Education ordered the immediate closure of all educational institutions nationwide in a precautionary move aimed at curtailing the spread of coronavirus disease in the country.

Nigeria has seen the number of Covid-19 cases grow rapidly.

As of July 27, over 40,000 cases of infection had been recorded with over 800 deaths across the country.

At the same time, the emergence of the pandemic has exposed the imbalances, fragility and outright neglect, if not rot, in the structure and functioning of some sectors including education.

For example, many private school teachers have lamented the non-payment of salaries by their employers since the lockdown began. This has led to some of the

teachers making a direct appeal to the Federal Government for support so as to save them from starvation.

According to their spokesperson, Abdul-Ganiyu Raji, it would be callous of the government to wait for owners and teachers of private schools to start dying of starvation before it comes to their aid.

Meanwhile, the president of the National Association of Proprietors of Private Schools, Nigeria (NAPPS), Yomi Otubela, has disclosed that a total of 1,000,143 teaching and non-teaching staff in about 84,614 private schools are directly affected.

The teachers and non-teaching staff are now jobless as a result of the shutdown, Otubela says.

This has also led to both Federal and State Governments losing over N72 billion in tax earnings due to non-payment of salaries to teachers in the private schools since March.

One proprietor’s unofficial disengagement One school proprietor, Tope Balogun, owner of Paragon Children School at Iganmu area of Lagos, confirmed that he laid off

his teachers unofficially because he could not pay them.

His school has over 100 pupils and 15 teachers. Balogun says he was able to pay his teachers in March, but April became a struggle because pupils had stopped attending and parents would not pay fees.

“I had to call a meeting and I told the teachers that the school can’t keep on paying them. Already we have invested in the facility we are using. And I had to disengage them unofficially,” he says.

“I told them to go and find other things they can do to sustain themselves. So, when the school finally re-opens, they can all come back.”

Balogun also says the government did the right thing by shutting down schools because of the ravaging pandemic. The issue, however, is that the government ought to have given considerations about relief support for those working in the educational sector.

This report was facilitated by the Wole Soyinka Centre for Investigative Journalism (WSCIJ) under its COVID-19 Reality Check project.

Evacuation flight: House of Rep chides embassy in UAE

We’ll repatriate trafficked indigenes stranded in Lebanon- Oyo govt

....accuses officials of sabotage

REMI FEYISIPO, Ibadan

IFEOMA OKEKE

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hairman, House of Representatives committee on aviation, Nnolim Nnaji has berated the Nigerian Embassy in United Arab Emirates for sabotaging the economic interests of Nigeria and Nigerian people.

Nnaji stated this while reacting to the marketing of Emirates Airlines’ charter flights by the embassy which urged stranded Nigerians in United Arab Emirates to buy the tickets describing the development as unfortunate.

He recalled that the House of Representatives had in June after adopting a motion on the continued use of foreign airlines to evacuate stranded Nigerians abroad mandated the committee on aviation to liaise with the Presidential Taskforce, (PTF) on Covid-19, the ministries of aviation and foreign affairs and their relevant agencies to ensure that only the indigenous airlines

should carry out subsequent evacuation of stranded Nigerians abroad.

Nnaji, who represents Nkanu East/West Federal Constituency of Enugu State, said it was regrettable that Emirates has continued to evacuate stranded Nigerians from UAE with the active connivance of the officials of the Nigerian Embassy in Abu Dhabi to the detriment of an earlier agreement that only Nigerian airlines should henceforth be engaged for such evaluations.

He condemned the continued use of foreign airlines for the evacuation flights, saying that it was robbing the indigenous airlines the little opportunity of earning revenue at this period of severe financial meltdown.

“All over the world, embassies and diplomats strive to promote and protect the economic interests of their nations but it is unfortunate that this has not been the case with our embassy in UAE” Nnaji said. www.businessday.ng

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overnor Seyi Makinde has said that Oyo State would ensure safe repatriation of all its indigenes found to have been trafficked to Lebanon.

Makinde said that the state would not stand by and watch its indigenes suffer dehumanisation under any guise.

While receiving a brief on the plight of Oyo State indigenes trafficked to Lebanon from his senior special assistant on diaspora matters, Bolanle SarumiAliyu, the governor pledged that “we will pay for the repatriation of all Oyo State indigenes confirmed to have been trafficked to Lebanon,” adding “please put all necessary plans in place to bring them back.”

Speaking further, the governor said: “I understand that some well-meaning individuals and groups have made some donations to some of the victims, let them use such dona-

tions as pocket money.”

Makinde in a statement by his chief press secretary assured that his administration would pay for the victims’ flights and fees required to conduct Covid-19 test on each of them.

The governor had earlier been informed that a number of Oyo State indigenes had been discovered to be illegal migrants who were trafficked Lebanon.

Sarumi-Aliyu said that while 40 of such victims have been screened and ready for the journey back home, more victims were still being discovered.

She added that her office had been working closely with Lebanese authorities to identify Oyo State indigenes stranded in Lebanon, adding that the 40 victims already screened would be returning home this month.

“We are expecting them back on a special flight on August 12. The government of Seyi Makinde has shown a renewed commitment to the welfare of our people in the diaspora and we are pleased with that.

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agos State government has shut down the EtiOsa isolation centre as the rate of Covid-19 infection in the state reduces.

The state governor, Babajide Sanwo-Olu made the announcement during the 17th update on the management of coronavirus in the state.

The governor said the Agidingbi isolation centre would also be closed and patients relocated to a large capacity centre – Indo centre in Anthony area, which would be soon be inaugurated.

“Over the last four, five months, we have built an excess capacity centre, but that is only the way to go, you cannot over-prepare.

“We have got to a stage where we need to balance the economics of this and which

of these facilities do we need to keep running.

“Some of them now are having less than 20 per cent of occupancy. This is why we reached a conclusion to shut Eti-Osa facility and another one in Lekk,” 7said the governor at the weekend.

He added that the Infectious Diseases Hospital in Yaba “is now also gradually being reverted back to its former status as a hospital to cater to all forms of infectious diseases.”

As of Friday July 31, Lagos State had a total of 15,150 confirmed cases of Covid-19, with 10,835 persons recovered and discharged.

The state, however, lost 194 persons to the virus, leaving1813 active cases in community and 96 under management across various isolation centres in the state.

Union threatens Bristow over alleged discriminatory policies IFEOMA OKEKE

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ational Association of Aircraft Pilots and Engineers, (NAAPE) has threatened to shut down operations of Bristow helicopters from midnight of Monday 3, 2020.

To this end all pilots and engineers in the employ of the helicopter company have been directed to embark on an indefinite strike over what they called discriminatory policies and consistent victimisation of Nigerian nationals.

“NAAPE has been actively engaged with the management of Bristow for some time now in a bid to carry out the renewal exercise of the conditions

of service for national pilots and engineers.

“NAAPE had previously instructed members in the employment of Bristow to embark on a three-day warning strike at the expiration of which an olive branch was extended to the Bristow management in the form of a seven-day notice period during which the union had held out hopes of an amicable resolution to the items under contention. Unfortunately, Bristow management was unable to proffer any solution even after the union graciously extended seven days’ notice period at the behest of Bristow management,” Umoh Ofonime, deputy general secretary of NAAPE said.

CIPM urges HR practitioners to brace up for ‘new normal’ SEYI JOHN SALAU

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s businesses and organisations continue to adjust to the Covid-19 disruption and the changing world of work, the Chartered Institute of Personnel Management of Nigeria (CIPM), has urged human resource (HR) practitioners to brace up for the ‘new normal’ in the work and business environment.

This advised was given

by Wale Adediran, president/chairman of council, CIPM at the 39th induction ceremony held virtually. A total of 672 HR practitioners were inducted with 163 through the HR practitioners’ route while 509 @Businessdayng

were inducted through professional examinations’ route.

According to Adediran, HR professionals must have a good grasp of change management principles and must effectively prepare for and address the potential impacts of change.

“HR professionals and business leaders all over the world are faced with daily unprecedented contexts and situations requiring new learning and approaches because we just do not know it all, and we are not always able to grasp in the short space of a moment, everything that this increasingly VUCA world brings,” said Adediran.

Monday 03 August 2020

FT

BUSINESS DAY

39

FINANCIAL TIMES

World Business Newspaper

ByteDance races to salvage TikTok deal after Trump vows ban

Chinese-owner of video app tries to convince White House to accept sale of US business to Microsoft Arash Massoudi in London, Hannah Murphy in San Francisco, and James Politi and Aime Williams in Washington

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yteDance, the Chinese owner of TikTok, is racing to save the videosharing app’s US operations by making a last-ditch plea to the Trump administration to allow it to sell the unit to Microsoft.

ByteDance has told the White House it is willing to divest its US operation in full through a sale, according to people with direct knowledge of the matter, after US president Donald Trump vowed to ban the app in the US. A US national security review has deemed TikTok a risk to Americans’ personal data, and Mr Trump said a sale to any party — including Microsoft — would not be an acceptable solution. “We are not an M&A [mergers and acquisitions] country,” the president said.

The comments left some involved in the talks between Microsoft and ByteDance fearing that any hope of a deal had collapsed.

However, others — including ByteDance executives — believe that Mr Trump’s intervention was a negotiating ploy intended to compel the Chinese group to sell the US business in full and at a lower price than it had been holding out for from Microsoft.

“As far as TikTok is concerned we’re banning them from the United States,” Mr Trump told reporters on Air Force One late on Friday,

A US national security review deemed TikTok a risk to Americans’ personal data © REUTERS

adding that he could use executive powers to formalise the decision.

US Treasury secretary Steven Mnuchin did not go as far in an interview on Sunday. The US government’s Committee on Foreign Investment in the US, or Cfius, which is led by the Treasury department, has been undertaking a review of TikTok’s status in recent weeks on national security grounds.

“The entire committee agrees that TikTok cannot stay in the current format because it risks sending back information on 100m Americans [to China],” Mr Mnuchin told ABC’s This Week.

“The president can either force a

sale or the president can block the app . . . and I’m not going to comment on my specific discussions with the president, but everybody agrees it can’t exist as it does.”

There is no guarantee that Microsoft and ByteDance will reach a deal, even if allowed. The two sides have been secretly discussing a transaction over the past few weeks, according to multiple people involved.

Microsoft president Brad Smith visited officials in Washington last month to see if a takeover of the business by the US company would address the government’s concerns over TikTok, some of these people said.

Microsoft would be buying

Tikok’s US operations — including 1,500 staff, intellectual property and technology — but the app’s 100m American users would still be able to access content from non-US users through a sharing agreement with ByteDance, according to a person familiar with the plan.

Microsoft has a limited presence in social media and believes a deal would allow it to enter a category dominated by rivals such as Facebook, one person added.

In private, TikTok executives and investors have speculated that Facebook, which is preparing to unveil a rival product in America as soon as this week, has been lobbying the US

government behind closed doors to ban the app.

The exact price under discussion is not clear, but is believed to be in the range of between $15bn and $30bn, one person said. Another person said that there had been no agreement on price or terms yet and characterised the discussions as “preliminary”.

It also remained unclear how TikTok would separate its US operations from its European and Asian arms. The offer to divest the US operations in full was first reported

by Reuters.

The review by Cfius followed growing concerns over the company’s Chinese roots and datagathering practices.

As well as considering an outright ban, and a spin-off to a US buyer, the Trump administration has also weighed whether to place TikTok on the so-called entity list run by the Department of Commerce, to restrict its ability to do business in the US. In an apparent bid to assuage the concerns of its US users, Vanessa Pappas, general manager for TikTok US, posted a video on TikTok on Saturday in which she said: “We’re not going anywhere . . . We’re here for the long run.”

The company also put out a statement on Friday saying: “TikTok US user data is stored in the US, with strict controls on employee access.

TikTok’s biggest investors come from the US. We are committed to protecting our users’ privacy and safety as we continue working to bring joy to families and meaningful careers to those who create on our platform.”

Airlines attempt to reboot transatlantic routes Covid spikes in Europe and the US come after expansion of flight capacity Claire Bushey in Chicago

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irlines have restored flying capacity between the US and Europe at a rapid rate, setting up a test of passenger demand amid spikes in coronavirus infections on both sides of the Atlantic that threaten to lead to new restrictions on travel.

While the number of available seats remains a fraction of pre-pandemic levels and is likely to stay that way for years, transatlantic capacity bottomed out in May, according to data from aviation consultancy Cirium.

Airlines added back capacity every month since the nadir, with published schedules for August showing nearly four times the number available in May. The 1.9bn “available seat miles” between the US and Europe in May was far less than 18.6bn a year earlier, but month-on-month increases have been large from this low base. The metric measures an airline’s carrying capacity and is calculated by multiplying the num-

After the initial low point in capacity, airlines increased transatlantic seats by 40 per cent in June and 67 per cent in July © AP

ber of plane seats by the distance travelled.

Airlines increased capacity by 40 per cent in June and 67 per cent in July, and published schedules for August show another 60 per cent increase.

But experts said the August capacity was likely to drop, as airlines cancel flights closer to departure, even before accounting for conwww.businessday.ng

cerns over an uptick in Covid-19 cases in Europe this week.

Airlines were publishing “optimistic schedules”, said Rob Morris, global head of consultancy at Ascend by Cirium. “There is a probably 5 to 10 per cent over-report in the schedule because they can cancel [a flight more easily] than add one in.”

Since they do not know what demand will be, he added, “they’re

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making it up as they go along”.

The rate of new Covid cases in the US recently eclipsed the daily peak in March in the early days of the pandemic, as the disease spread in sunbelt states. In Europe, the British government was criticised by tour operators and passengers for reimposing quarantine on travellers from Spain at the weekend after a rise in case numbers there.

During normal times there are approximately 2,500 weekly flights between the US and Europe in winter and 4,000 in summer, said Mark Duell, vice-president of FlightAware, a flight data website. For the week starting July 13, there were 1,497.

Projected capacity for August remains 78 per cent lower than a year earlier. That drop is why four airline chief executives wrote to government officials on both sides of the Atlantic last week to ask for a coordinated testing regime that might speed recovery for this high-profile segment of the aviation market.

I can’t see us getting back to the same level of capacity that we tra@Businessdayng

ditionally see in a summer season before summer 2023 John Grant, OAG Transatlantic routes bring in less total revenue for US carriers than domestic ones, but they are some of the most profitable routes.

“It’s not quite a licence to print money, but you have strong corporate demand, you have strong leisure demand, you have diaspora going back and forth all the time,” said John Grant, executive vicepresident at aviation consultancy OAG. “It had been, until very recently, a very nice market. Then it all fell apart.”

Executives and analysts are forecasting a multiyear slump for aviation, with international travel trailing a recovery in domestic flying.

“I can’t see us getting back to the same level of capacity that we traditionally see in a summer season before summer 2023, or even perhaps summer 2024,” Mr Grant said.

The International Air Transport Association, an industry body, said this week it did not expect a recovery in global traffic until 2024.

Company IN FOCUS

BUSINESS DAY Monday 03, August 2020 www.businessday.ng

Unilever Nigeria: Is first half-year loss in over 5 years bad omen for FMCGs? Segun Adams & Bunmi Bailey

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The analysts, however, noted the company-specific issues like unsustainable high marketing and admin expenses, as well as its management plans to sustain investment behind their brands in order to boost volumes.

Consumer analysts like Ayorinde Akinloye at Lagos-based CSL Stockbrokers are looking beyond the pandemic lockdowns to the age-long issue of product elasticity in the sector.

“Home and Personal care products are highly competitive now with several alternative brands,” Akinloye said. “For example, Unilever themselves alluded to this when they stated that the consumer market is developing a 4th tier.”

The declining spending power of households following the recession in 2016 led to a shift in consumer demand patterns

”

nilever Nigeria posted its first halfyear loss since at least 2013, according to available NSE records, suggesting that Fast Moving and Consumer Goods companies (FMCGs) in Nigeria may be up for a significantly challenging year, no thanks to the coronavirus pandemic.

Unilever Nigeria in the six months of the year to June 30 made a loss of N519 million, an anomaly for the household brand that made over three billion profit in the same period last year.

Food Product and Home & Personal Care (HPC) segments in the period came under pressure, especially the latter, as Nigerian consumers held back spending and adjusted their consumption patterns in the light of the coronavirus impact on their income.

“The second-quarter numbers give us an idea of how bad the lockdown was and how it affected some of the players in the industry,” said Abiodun Keripe, Head of Research, Afrinvest Limited. “I am not surprised, these second-quarter numbers are worse off. I expected this.”

On March 31, 2020, the president announced a total lockdown of economic activities in Lagos, Abuja and Ogun states in order to combat the COVID-19 pandemic.

The lockdown was gradually eased starting from May 4.

During that period (April and May), 38 percent of workers stopped working due to disruptions across sectors of the economy, the National Bureau of Statistics (NBS) estimated.

T h e p o o re s t h o u s e h o l d s formed the highest of workers that stopped working (45 percent) but the rate was also high for the wealthiest households (39 percent). The middle-class saw a rate of 42 percent, the second-highest.

The impact of the COVID-19 pandemic had a negative effect on Nigeria households’ total income, as a high rate of households reported income loss since mid-March. 79 percent of households reported that their total income decreased.

The performance of Unilever “continues to reflect the challenging operating conditions as pressured consumer wallet continues to impact sales, while weaker exchange rate, poor FX liquidity and rising inflation continue to impact input and fixed costs,” said analysts at Cordros Securities.

The secondquarter numbers give us an idea of how bad the lockdown was and how it affected some of the players in the industry

in favour of value brands. As a result, some listed FMCG brands faced new fierce competitions from smaller players that appealed to the needs of Nigerian customers for products that were more affordable given lower income levels.

This trend also affected other segments of the consumer goods market like the beer industry and forced some older players to change their competitive strategies and also create new products or repackage existing ones (sachetization).

Add new worries like rising inflation and recent currency devaluations, which erode consumer purchasing power further and raise the cost of production for manufacturers, the odds seem to be stacked up against FMCGs as adjusting prices might lead to further loss of market

share to cheaper brands.

Last year the portion of production cost in sales revenue for seven Nigerian listed FMCGs, which is simply the direct cost margin, rose 300 basis points to 72 percent in the first six months compared to 69 percent in the corresponding period of 2018.

This implies players paid more on actual cost-related expenses relative to their revenue.

Also, the under whelming second quarter performance of Unilever wiped its q1 2020, thereby affecting its half year performance. It recorded a 35.9 percent decline in revenue to N27.3billion from N42.7billion in H1.

The lockdown of economic a c t i v i t i e s i n Ni g e r i a h a d a negative impact on Unilever Nigeria Plc, a Fast-Moving and Consumer goods company revenue in the three months period ended June 2020.

According to its 2020 half-year financial report, the company reported a revenue decline on a year-on-year basis of 39.1 percent to N14 billion in the second quarter (q2) of 2020 from N23.4 billion in the same period of 2019. But on a quarter-onquarter basis, revenue increased by 5.1 percent to N14.0billion in q2 2020 from N13.3bn in q1 2020.

Company Financials Highlight Revenue fell 35.9 percent year-on-year to N27.3bn in the first half of the year. Between April and June, Unilever sales rose 5 percent on a quarterly basis but slumped around 40 percent compared to the same period last year.

The company suffered more decline (-43 percent) in Home/ Personal Care (HPC) segment than in its food business (-29 percent).

Unilever Nigeria Plc manufactures and markets consumer products primarily in the home, personal care and foods categories. The Company sells products such as Omo washing powder, Key soap, Royco bouillon, Lipton tea, Pears baby care goods, Vaseline petroleum jelly, Lux soap, and Close Up toothpaste.

The faster decline in revenue meant Unilever made N26 from every N100 sales as gross profit, almost N3 less from last year.

In the period, Unilever managed its operating expenses better but was unable to turn the tide as it suffered impairment loss on its trade receivables.

Other income rose to N48.5 million from N28.9 million in the first halves of 2020 and 2019 respectively.

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