BusinessDay 03 Dec 2018 by BusinessDay

NEWS YOU CAN TRUST I **MONDAY 03 DECEMBER 2018 I VOL. 15, NO 194 I N300

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I am not Jubril – Buhari

.. alleges some people wanted him dead TONY AILEMEN, Abuja

resident Muhammmadu Buhari on Sunday, in faraway Poland, denied rumours that he is a clone, emphasizing that is the real Buhari. The rumour of his cloning had become a subject of controversy with many Nigerians chiding the Presidency, including the President himself for remaining silent over the issue as the social Media fed fat on the rumours that was dead and that the person living in Aso Rock is an impostor called Jubril, who is originally from Sudan. But Buhari dispelled the rumour at the town hall meeting in Krakow on Sunday evening,

LOLADE AKINMURELE

MARKETS

ot in any of Africa’s largest economies will you find cheaper company stocks yet investors want nothing to do with Nigeria at the moment and it could get worse as oil prices endure their longest losing streak since 2016. Investors currently pay as low as 9.4 naira for each naira of profit made by companies listed on the Nigerian Stock Exchange (NSE), the lowest since 2008. That’s despite the fact that the companies’ return on equity climbed to 15 percent as the end of September 2018, the highest since 2014, according to Bloomberg data. Investors pay much higher to hold stocks in peer markets. In

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Inside L-R: Olayinka Otudola, DG/CEO, Association of Enterprise Risk Management Professionals (AERMP); Deji Olanrewaju, dean of law, Babcock University/treasurer, CIBN; S Taiwo Ige, president, AERMP; Uche Olowu, president, CIBN, and Bola Oyebamiji, commissioner for finance, Osun State, representing the Osun State governor, at the 2018 conference and induction of new members of AERMP, with the theme ‘Regulatory and Compliance Risk Management in Nigeria’ in Lagos. Pic by Pius Okeosisi

From Cake walk to contest: In bid for re-election, Buhari promises SE, SW presidency P. 2 in 2023

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How corruption, cross-border smuggling, encourage elevated PMS consumption, huge NNPC ‘underrecovery’ DIPO OLADEHINDE & ENDURANCE OKAFOR

ecent analysis of reports from Nigeria Bureau Statistics (NBS) and Nigerian National Petroleum Corporation (NNP C ) have revealed how high volumes of petroleum products have continued to be smuggled from Nigeria to neighbouring countries, questioning L-R: Chris Baywood Ibe, founder/chairman, Baywood Foundation, his wife Pat; Emmanuel Ijewere, chairman of the occasion, and Odein Ajumogobia, former minister of foreign affairs, during a public presentation of a book titled: Beyond Rhetoric, Youth Empowerment and Political voice in Nigeria, held in Lagos, at the weekend. Pic by Olawale Amoo

From Cake walk to contest: In bid for re-election, Buhari promises SE, SW presidency in 2023

…SE becomes battle ground following huge turnout for voter registration CHRIS AKOR

igeria’s 2010 electoral law expressly prohibits a candidate or his agents from engaging in campaigns along religious, tribal or sectional lines. Equally, all presidential candidates in next year’s general elections recently signed a peace pact in Abuja pledging to refrain from campaigns along ethnic lines both by themselves and by all agents acting on their behalf. But president Buhari and his agents appear to have adopted a strategy of pitting the two largest ethnic groups in the South against one another in a quest for re-election in 2019. The election has seemingly gone from cakewalk to a contest with the emergence of Atiku Abubakar, as the flagbearer for the opposition People’s Democratic Party (PDP). Although the president doesn’t say much, he relies on his aides and agents to do

most of the talking and campaigning for him, like in 2015. As far back as April 2018, the Secretary to the Government of the Federation, SGF, Boss Mustapha, while receiving the Ebonyi state chapter of the All Progressives Congress (APC) at his office, pointedly told them the Southeast will have a better chance of producing a president in 2023 if they give their support to the second term ambition of President Buhari. “Preach it to the other south-east states that the shortest way to Igbo presidency is to support Buhari in 2019,” Mustapha told the delegation. “The dynamics of politics can change and people that you perceive today are not with you, will be with you tomorrow”, Mustapha said warning that “the region must support the party this time around in its own interest.” A fortnight ago, Mustapha, this time, speaking on behalf of his boss after the president met with South East gover-

ANALYSIS

East the presidential ticket on behalf of the president, another powerful minister in his cabinet, Babatunde Raji Fashola – who holds the triple portfolio of minister of power, works and housing, is busy campaigning in his native SouthWest region also encouraging the people of the region to vote for Buhari in 2019 to guarantee a return of power to the region in 2023. Speaking recently in his native Yoruba, Fashola asked the audience whether they knew that “power is rotating to the South-West after the completion of Buhari’s tenure” if the vote for him in 2019? Using a local proverb, he drove the point home: “Your child cannot surrender her waist for edifying beads and you will use the bead to decorate another child’s waist”. A vote for Buhari means a return of power to the SouthWest in 2023.”

nors at the presidential Vila in Abuja minced no words when he reminded them that the region’s investment in the re-election of President Buhari in next year’s election will determine their fate in 2023. “You remember there was a programme in the SouthEast where the President asked me to represent him and I threw the kite by telling the south-eastern states that their quickest and easiest means to the presidency is to support President Muhammadu Buhari’s second term. Meaning that they can short circuit the period in terms of only having him there for another four years and whatever they do in 2019 will determine what will happen thereafter, because politics is a game of numbers and it is like a cooperative society,” Mustapha stated matters of fact. But while Mustapha is •Continues online at busy promising the South www.businessdayonline.com

Education, Power, Mining sectors INEC grapples with preleast attractive for bank lending election litigations

... as bank credit to private sector rises 2% in Q3 2018 ... gets 396 court actions, 302 CTC, 52 petitions ENDURANCE OKAFOR

igeria’s power and energy, mining and quarrying and education sectors seem to be the least attractive to the country’s commercial banks as they got the smallest portion of loans in the 3rd quarter of 2018, a report by the National Bureau of Statistics (NBS) has shown. The figures released by NBS over the weekend, show that power and energy re-

ceived credit of N422.7 billion, while mining and quarrying and education sectors got credits of N6.2 billion and N6.5 billion, respectively, in the quarter under review. Rafiq Raji, the chief economist at Macroafricaintel Investment said that “these sectors are not good credit for banks at the moment,” noting that there is regulatory uncertainty with the mining sector. For power, he said the lingering challenges facing the

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JAMES KWEN, Abuja

h e In d e p e n d e nt National Electoral Commission, INEC is grappling with preelection litigations ahead of the 2019 general elections sequel to acrimonious primaries conducted by political parties. This is as INEC has been joined to 396 pending actions in various courts across the country, arising from the conduct of primaries and nomination of candidates by political parties.

The Commission has also received request for Certified True Copy (CTC) of documents of monitoring reports of party primaries and copies of particulars of candidates, and 52 petitions as well as protests from aggrieved party aspirants. Mahmood Yakubu, INEC Chairman revealed this over the weekend in Abuja while declaring open the capacity building workshop for INEC Press Corps organized by the Electoral body

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economy or State GDP, which had 3,181 trucks transporting 128.79 million litres to the state. Borno state from the n o r t h - e a s t o f Ni g e r i a (which borders Cameroon) recorded 877 trucks, transporting 41.4 million litres of petrol in the same period. According to NBS, Zamfara state which shares border with Niger republic had 2,078 trucks that

INSIGHT

Nigeria’s 54 million litres daily petrol consumption figure. From 35 million litres of Premium Motor Spirits (PMS), popularly known as petrol consumed daily prior to the increase in the pump price to N145, average daily consumption skyrocketed to over 54 million litres in September 2018, figures released by the National Bureau of Statistics (NBS) showed. BusinessDay analysis of the latest financial records of NNPC showed from August 2017 to August 2018, the government paid a total of N542 billion for Under Recovery while in the month of August alone the government paid N60.6 Billion. State comparison carried out by BusinessDay showed that States that have international borders like Ogun, Zamfara and Borno often have elevated consumption patterns for PMS. According to the NBS data, in Q3 2018, Ogun state (bordering Benin republic) had 4,177 trucks transporting 155.66 million volumes of PMS to the state. This compares to Rivers State with a much larger

conveyed 93.8 million litres to the state, compared to a much industrialized Anambra state which had 1,719 trucks delivering 76.3 million litres of petrol to it. Anambra state, one of the most urbanized states in Nigeria boast of an annual population growth rate of 2.21 percent and has over 60 percent of its people living in urban areas. It’s also home to ‘Onitsha Main Market’; the largest market in Africa based on geographical size and volume of goods. “Those numbers in states in the Northwest and Northwest region are actually smuggling which is striving easily in that part of the world,” Luqman Agboola, head of energy research at Sofidam capital Limited said. Agboola noted that for as long as there is subsidy the problem will continue to persist as monies that should generate revenue into Nigeria goes into private pockets. Jubril Kareem energy researcher at EcoBank group said the higher level of subsidy being borne by the NNPC is an indication of the unsustainable pegging of PMS Price.

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Indigenous companies are the problem with Nigerian content scheme, not IOCs – Wabote IGNATIUS CHUKWU

t has been revealed that it is Nigerian firms, not the foreign ones, that have posed threats to effective implementation of the Nigerian Content Law, enacted April 2010 to force substantial control of the oil industry to Nigerian input (human and material). The head of the regulatory agency set out to ensure the objectives of the law dropped this bombshell. This shocker was disclosed in Port Harcourt

Growing LPG business will create jobs, economic stability - DPR FRANCIS SADHERE, Warri

epartment of Petroleum Resources (DPR) at the weekend said growing Liquefied Petroleum Gas (LPG) business in Nigeria would result in job creation, economic stability and growth. Asuquo Antai, operations controller, DPR, Warri zonal office, made this statement at the ‘2018 DPR/LPG Marketers Stakeholders Forum’ in Warri, Delta. He urged DPR to sanitise the LPG business to entrench professionalism and ensure that those who do not have passion for the business do not invest in it. He called for improved awareness on the use of LPG to boost its consumption in line with the Federal Government aspirations. Antai, who was represented by Ogbe Nicholas at the event, said a lot of people do not use the cooking fuel (LPG) because of the fear of the high risk associated with its usage. According to Antai, it is easier and safer to harbour gas than electricity, which virtually about 80 percent of Nigerians are comfortable with. The theme of the forum is: ‘Stakeholders Relationship Building and Management: Promoting a Safe and Sustainable Utilisation of LPG.’ The controller said the theme was chosen in line with the Federal Government aspiration to grow LPG investment and gas domestication in the country. “As a domestic cooking fuel, LPG presents valuable opportunity to combating climate change, reduced deforestation and improved community health, economy and livelihood. “LPG has a relatively low emission when compared to other cooking means like kerosene, firewood and others,” he said.

weekend by Simbi Wabote, executive secretary, Nigerian Content Development and Management Board (NCDMB), at the commissioning of the headquarters of Global Processes and Pipeline Services Limited (GPPSL). The company is indicated as one of the global leaders in process, pipeline, pre-commissioning, commissioning, maintenance, and project management services anywhere in Africa and beyond. The company is also into facility flushing, integrity testing, pipeline

de-watering, and drying, and deep water pipe repairs. This is as Wabote, a one-time head of Local Content Division in Shell, commended GPPSL and few other oil service corporations that have remained faithful to the Niger Delta by staying put in places like Port Harcourt and investing more, including building their corporate headquarters. He said the board had taken note. Wabote revealed that whereas the Nigerian government was expecting laid back attitude and

probable sabotage of the Nigerian Content policy from the International Oil Corporations (IOCs), it was rather the Local Oil Corporations (LOCs) that have posed some threat. For instance, he said, when some IOCs were about to divest, some Nigerians were deliberately tipped to buy out the offers. The ES however observed bitterly that most of those CEOs have been hiding from the regulatory authority with their gains. His words; “Some of them now operate off the radar.” He however assured

that an order has just been signed by his office to go after such defaulters. He said auditors have been sent after many of the LOCs and that one got the hint and rushed to pay at least N1.5 billion into the board’s account as part of debt owed since 2010. He announced that Project 100 has been approved by the FG to identify 100 well-doing LOCs and boost them with finance and contracts so as to grow capacity incountry. He did not give details, other than that forms were being sent

out to some companies. Speaking, the CEO of Global Processes, Obi Uzu, said he started the company eight years ago in the swamps of Marine Base with two workers (himself and his driver), but that he put in a governance structure to attract investors, now the edifice has emerged. “Now, we are the definition of success and growth, all due to type of workforce and professionalism,” saying GPPSL is one of the largest of its type in Nigeria.

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“XKPMG” (the global brand)

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

ohn Dara (former Presidential aspirant of the Social Democratic Party [SDP]) “Zimboda is blessed (cursed) with visionless and mediocre leaders” Dr. Obadiah Mailafia (Presidential candidate of African Democratic Congress) “One of the greatest dangers to the survival of contemporary democracies, in my humble opinion, is the rampant use of money to buy citizens’ votes in a manner that undermines the free-flow of ideas and open debate which gives meaning to the spirit of democracy.” Homeless and Hopeless (front page Vanguard newspaper) “We pay N100 Daily to sleep under Oshodi bridge” “One of the 62 miscreants arrested during a raid at Oshodi and its environs by the Lagos State Task Force, Gani Yusuf (aged 35) disclosed that they paid N100 every day to their ring leader for a space to sleep under the Oshodi Bridge.” John Campbell (former United States of America Ambassador to Zimboda and author of the book: “Zimboda: What Everyone Needs To Know”) “In Zamfara, the statistically average woman has 8.1 births; in Rivers State, 3.8. Zimboda is a flawed democracy bedevilled by multiple insurgencies: Boko Haram. There is conflict in the Middle Belt over land and water use, often in ethnic and religious context, and with criminal elements i.e. cattle rustling. Zimbodians widely criticize their government for mismanagement ; corruption is

structural. The bottom line is most Zimbodians must fend for themselves.” “The Punch” newspaper “Obasanjo calls for constitution amendment to allow youths to participate in politics” Imo State Police Command, Commissioner of Police, Dasuki Galadanchi: “Two suspects (Friday Echereobia aged 28 and Ozioma Nwosu aged 30) have been arrested by operatives of the Police Mobile Force 18 Squadron during a routine stop at the police checkpoint by the United Bank For Africa junction in Orlu. They were on a motorcycle and in possession of a suspicious looking object which turned out to be an Improvised Explosive Device [IED] or homemade bomb. They were allegedly on their way from Ebonyi State to bomb a community in Orlu town.” “ThisDay” newspaper “Don’t use other people’s children as thugs while your own children are in safe havens. Obasanjo cautions politicians” Dr. Sarah Rapucci (United Nations University) “Civil Service Reform: The Civil Service is the backbone of the State and can either support or undermine a country’s entire system of governance.” “Daily Sun” newspaper “2019: Igbo Leaders Endorse Atiku-Obi Ticket” Nyesom Wike, Governor of Rivers State “We are planning for next fifty years of Rivers State” Chief Newton Jibunoh (Desert Warrior and environmentalist) “With each tree we cut down and refuse to replenish, we further alter the migration route of birds as they will be nowhere for them to perch” Antonio Guterres (SecretaryGeneral of the United Nations) “It took from the Big Bang until the year 1820 for the number of people on Earth to reach one billion. Today that number is approaching eight billion and half of

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Don’t use other people’s children as thugs while your own children are in safe havens

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the growth in the global population will be in Africa. We must come to our senses. Without international cooperation, and if we retreat behind our national borders, we will sacrifice our collective values, and we will perpetuate the tragedy of migrants being exploited by the worst traffickers.” Jo h n C a r d i n a l O n a iy e ka n (Catholic Archbishop of Abuja) “Poverty is not an excuse for human trafficking.” “Nigerian Tribune” newspaper “Ibrahim Umar’s sale of Son for N15 million” “While the country is still grappling with the horrendous story of Samuel Akpobome, an 18-yeard-old who allegedly killed his mother and had carnal knowledge of her corpse in Ologbo, Edo State, another befuddling news hit the airwaves last week. Ibrahim Umar, a native of Filaya village in Shagom Local Government Area of Gombe State, sold off his 19-year-old son, Adamu Buba, for N15 million. His alibi? He wanted to surmount some financial challenges. According to the police prosecutor, Buba’s mother died some years ago. The suspect himself claimed that he was lured into the deal by a friend, Umar Musa, who told him that selling off one of his children to solve the myriads of financial challenges confronting him was a good idea. Buba was then allegedly sold through Adamu Bitrus, a resident of Kwanar Huguma in Takai Local Government Area of Kano State. Following the sealing of the

terms and conditions of the deal, Umar allegedly took two of his 16 children from Gombe to Kwanar Huguma in Kano State where, he claimed, he was told that Buba would be engaged in farming and get paid every day. He then provided a justification for taking two children instead of one to Kano: “The plan was that the boy would feel comfortable if he is with his brother up till the time the prospective buyers would come and take him away at night.” He added that he regretted his decision, but reiterated that he was misled by a friend. Umar and his two accomplices, Musa and Bitrus, have been remanded in prison by a Kano State Magistrates’ Court. According to the court, the offence contravenes sections 95 and 97 of the Penal Code. It is indeed disturbing that from North to South, the Nigerian society appears to be unravelling very quickly. Ordinarily, it would be inconceivable that a father would take the decision to trade off his own son for money. Whatever happened to the filial love, the engine by which every family, nuclear or extended, runs? How can money be assigned a higher value than human life? Almost on a daily basis, horrendous acts are committed by young and old people which suggest that the family as a social unit either has collapsed completely or is on the verge of doing so. The African family, bound by love, is subject to the lores and mores of the community with inbuilt mechanisms for curbing deviance and aberrant behaviours, and it is surprising that rather than proffer creative and legitimate solutions to the problems confronting their friend and kinsman, Musa and Bitrus actually aided and abetted Umar in the ruinous path he chose in order to solve his financial difficulties. Pray, if Umar’s own father had sold him off to solve financial problems, where would he be by now? Or did Umar never for once consider that his own parents must have experienced financial

challenges at some point? Besides, what kind of financial problem will selling one’s children solve? In his utter lack of common sense, Umar even failed to consider the possibility that Buba’s buyers would not have minded taking away his brother as a bonus to their illicit bargain. Worse still, there is as yet no evidence that he realises the deep agony into which he has plunged the young men by his utterly despicable action. From all indications, they accompanied him to Kano without the slightest knowledge that one of them was to be sold off. What kind of society does the country aspire to be when children can no longer trust their parents? If a man can sell off his own son, what can he not do to another person’s? On current evidence, the story is hardly an isolated incident. There is a high probability that some other persons would have suffered the same fate that would have been Buba’s lot had Umar and his accomplices not been arrested by the police. In this regard, we urge the police commands in Gombe and Kano states to conduct a thorough investigation and unravel the brains behind the trade in human persons in the states. Who are those involved in the illicit trade and what is their modus operandi? Are the victims retained by their buyers or resold within the country or outside it? Are they used for money ritual? Do the operators of the illegal business have networks within the security agencies and other organs of the society? We encourage the police to provide answers to these posers. We believe that treating the current case in isolation is not the best course of action to take. To be sure, Umar and his friends must face the full wrath of the law. This society can only progress when people reap the full benefits of their actions in accordance with the laws of the land.”

chain to converge? That’s what Uber, Netflix, Instagram, and Google are doing. Be a platform. In the long run, you’d make more profit through dependency. Sadly, strategic decisions are now dependent on P&L Statements, ROI with higher IRR and NPVs (returns on investments with higher internal rate of returns and net present values) and shorter payback period, as against how truly the user’s lives can be made easier, more exciting and better with their products, till a new company comes from the bottom and provides more for more price. Differentiation and niche focusing is more powerful than price wars in beating competition. Zooming into both, take

for example, approximately two million women get pregnant in Nigeria every year. Imagine if you’re a fashion company that concentrates only on that niche and then you begin to build a brand as the main clothing line for pregnant women. That’s differentiation and niche focusing at play. That’s a huge niche there. Even with only 1% market penetration and an average annual spend of N20,000 per customer, that’s about N400m turnover and with a high margin of safety and profit margin of 20 to 30%, that SME is in for annual EAITA of over N20m. That’s with ease and comfort from home.

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Stay off price wars

EIZU UWAOMA Uwaoma is a start-up, corporate restructuring and strategy consultant. He writes via contacteizu@gmail.com

rrespective of what you do, there are only three ways to win competition in business. They include: 1. Pricing, 2. Niche focus, 3. Differentiation Low pricing strategy is not the only way to win competition,

concentrate on building a brand so you can try niche focused strategy or differentiation strategy by standing your proposition as a brand out enough to justify good reasons why your clients should buy from you, even it’s not as cheap as the rest. It’s the Apple model. In today’s market place, efficiency is key. For that reason, many people are trying to win by being cheaper (from production to selling price); that’s too cheap to build sustainable and progressive wealth. In every long run curve of a price war between producers, the only real winner is the consumer. Today’s world is redefining what efficiency and functionality is. Don’t sell functional benefits, don’t describe

your product as cheap, rather justify what it cost. I mean sell experience, quality, depth and brand! Cost cutting is important. Efficiency is powerful, but most times blinding of effectiveness. In my years of studying innovation, I have come to the summary that what kills effectiveness and the growth of companies is that they move strategic business decision making to the accounting department, always trying to cut cost as against increasing revenue. Collaboration is a better form of competition. You mustn’t always buy from the source, to make more profit, you mustn’t always short change the supply chain by cutting off the middle man so you can save cost, how about being a platform, for all the supply chains and value

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With Nigerian banks, old lending habits die hard

Anthony Osae-Brown For feedback, send Whatsapp message to 08152060502

igerian banks are yet to catch the bug that agriculture should be the new oil, going by their lending patterns as shown in the latest data from the National Bureau of Statistics (NBS). Despite the government’s push to have Nigerians return to the farm so that ‘we can plant, what we eat” as President Buhari often says, bank lending to the sector have not changed much in the last three years. As a proportion of their total lending books, bank credit to the agricultural sector has moved from just 3.49 percent in the second quarter of 2015 to only 3.80 percent in the third quarter of 2018. In absolute numbers, total bank lending to the agricultural sector was N485 billion in the second quarter of 2015. By third quarter 2018, it had moved to N592 billion, a difference of N107 billion or an increase of 22 percent. So over a period of three years, banking sector credit to supporting the agriculture has not really changed significantly, as 96 percent of banking lending is still not going

to agriculture which actually makes up 22 percent of the economy. The darling of banking credit remains the oil and gas sector, which is not surprising considering it rakes in up to 70 percent of the country’s revenues despite contributing just about eight percent of the economic output. The NBS data shows that total credit to the oil and gas sector, as at the third quarter of 2018, stood at N3.6 trillion, which accounts for 23 percent of total banking credit to the economy for the period. Bank lending to the oil and gas sector, as a percentage of total credit to the economy has increased consistently since the second quarter of 2015 from 16.12 percent to its current level of 23.02 percent. Banks have been basically following the money, lending to the sector of the Nigerian economy that is laying the ‘proverbial’ golden egg. But the manufacturing sector is another sector banks are putting money into at a disproportionate level when compared to the sector’s contribution to Nigeria’s economy. Banking sector’s outstanding credit to the manufacturing sector as a proportion of total credit to the economy was 13.79 percent in the third quarter of 2018, almost twice the manufacturing sectors contribution to the economy of about five percent. Bank credit to the sector has declined slightly since the second quarter of 2015, when total credit to the sector as a percentage of total lending stood at 14.06 percent. This

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... it is understandable why banks are failing to pump credit into the power sector, which should normally attract huge credit considering the country’s acute power supply shortages. The sector is not bankable because the government still controls the setting of power tariffs

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slight drop in lending to the manufacturing sector could be explained by the struggles that the sector faced in the last three years. In 2016, when the economy plunged into a recession, the manufacturing sector was one of the hardest hit. The sector got hit by several policies from the Central Bank of Nigeria (CBN) including an initial

decision to ban some prohibiting certain items from accessing dollars from the official window to a decision to ration dollars to the sector and then the eventual devaluation of the naira. These are all factors that made the sector largely unbankable in the period. The NBS data shows that lending to the sector declined to a low of 13.16 percent in the third quarter of 2016 before beginning to recover. However, despite the challenges faced by the sector, the fact that the sector still attracts the second highest proportion of bank lending is an indication of the potential the sector holds, if perennial challenges like poor and inconsistent power supply are resolved. Interestingly, while banks are willing to support the manufacturing sector, they are shying away from the power sector, which could provide the engine to power the manufacturing sector. Banks total credit to the power sector as a percentage of total credit to the economy was just 2.09 percent in the third quarter of 2018. This is down from the 2.12 percent of total banking credit in the second quarter of 2015. It is worse than lending to the agricultural sector and it is the third least attractive sector for bank lending. Once more, it is understandable why banks are failing to pump credit into the power sector, which should normally attract huge credit considering the country’s acute power supply shortages. The sector is not bankable because the government

still controls the setting of power tariffs. Players have argued, in vain, in the last three years, that the current tariff structure in the sector is no way reflective of the cost of generating electricity. The government, for obvious political reasons, have not heeded to pleas to allow a market reflective tariff regime to come into place. Without a market reflective tariff regime, the sector will remain unattractive to bank lending despite the huge potential of the sector. But then, the NBS figures also show that bank lending has remained largely stagnant. In fact, the last three years for the banking industry could be described as the era of lost bank lending. In absolute numbers, bank lending to the Nigerian economy has declined consistently from a three year high of N16.19 trillion in the third quarter of 2016 to N15.6 trillion as at third quarter 2018. Within the same period, non-performing loans as a percentage of total credit has risen from 12.82 percent to 14.16 percent, an indication of the deteriorating economic environment which the banks are currently operating in. There is a need to incentivize bank lending to the critical sectors of the economy to restore growth. Without bank credit to expand growth in these critical sectors, economic growth will continue to struggle.

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The nexus between public holidays and national productivity (1)

EMEKA OKOLO Dr. Okolo is a Chartered Stockbroker and Management Consultant based in Lagos.

very nation has special days set aside to commemorate one event or the other. The events usually range from historical, social to religious. Predominantly across nations, historical or religious events are usually celebrated with a lot of passion amongst the citizens of such nations. It may be a day a nation gained its independence or freedom. It may even be to commemorate the birthday of an important personage in the life of a nation. For religious events, the days for them, especially for the major faiths, are the same across the globe, though some nations tend to allot more days than others for the same celebrations. Whatever be the raison d’etre for the celebrations, such days are almost always declared work free in such countries. The implication of a work

free day obviously is that major economic activities are not performed that day; financial institutions, some department stores, some major markets, even some seaports in some countries, et cetera, take holidays. Needless emphasizing it, billions are usually lost in whatever currency a country conducts its economic affairs, depending largely on the size of the economy in question, for any single working day that a public holiday is observed. As a result of this very important reason, many nations are very painstaking in marking out public holidays. In Nigeria, officially and nationally recognized public holidays have been oscillating on the average between 13 – 15 days in a year, when no meaningful economic activities are performed. When these are added to some observed in some states, for example June 12 in Lagos and south west states (before now) and some spurious ones often declared by some state governors in their states for purely political reasons, the picture becomes clearer. Not to talk of the ad hoc ones now common place with elections and sanitation days! In recognition of the colossal loss Nigeria bears any time there is a public holiday, the administration of former Presi-

dent Olusegun Obasanjo at a time came up with a policy ‘outlawing’ the shifting of a public holiday that fell on a week end to a working day. However, no sooner was the policy pronounced than it was jettisoned with the merry go round unleashed with more vengeance and impunity! For avoidance of any doubt, the recognized national holi-

days in Nigeria are: New Year Day: Januar y 1, Mouloud or Mawlid (Mohammed’s Birthday): January 3, Good Friday, Easter Monday, Workers’ Day: May 1, Children’s Day: May 27, National Democracy Day: May 29 (now cancelled in favour of June 12), Eid-el-Fitri, Eid-elKabir, National Independence Day: October 1, Eid-el- Maulud,

Table 1 Country Average No of public holidays in a year 1. Argentina 16 2. Austria 15 3. Cyprus 20 4. Greece 15 5. Japan 15 6. Malta 14 7. Nigeria 14 8. Portugal 14 9. Slovakia 16 10. Slovenia 14 Source: From some corporate organizations’ published diaries. On the other side of the divide are the following: Table 2 Country Average No of public holidays in a year 1. Australia 10 2. Canada 11 3. Germany 11 4. Israel 10 Country Average No of public holidays in a year 5. Mexico 10 6. Netherlands 10 7. New Zealand 11 8. Romania 11 9. Switzerland 11 10. U.S.A 10 Source: ibid.

Christmas Day: December 25, Boxing Day: December 26 Ordinarily, one may be tempted to dismiss the interrogation that Nigeria has too many wasteful public holidays, considering that those listed above, apart from the national ones, are mainly of religious in nature (after all, Nigeria is a multi-religious country) or internationally recognized ones; Nigeria being a member of international community, especially the United Nations. However, as the aphorism goes, the devil is in the details! Nigeria is not the only country in the league of often classified “too many public holiday nations”. The top ten in the globe (Nigeria inclusive) are: At a glance, the above tables (1 & 2) merely indicate the countries (ten apiece) with the highest average number of declared public holidays in a year and those with the lowest average number, respectively. However, a meaningful nexus between public holidays and a country’s national productivity can be explored through its Gross Domestic Product (GDP) and the per capita income arising therefrom. Those should be the rationes decidendi of this discourse. For the purpose of this analysis, 2016 should be used as the reference year.

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The world-class lessons of China’s Shanghai Free-Trade Zone

Dan Steinbock Dr Steinbock is the founder of DifferenceGroup. He has served as Research Director of International Business at India China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see www. differencegroup.net

h e S h a n g h a i F re e Trade Zone (FTZ) was launched in September 2013, some five years ago. It was the first FTZ in mainland China and has progressively been expanding its territorial coverage. Yet, territorial coverage is only a part of its strategic significance. What the FTZ experiments herald is a new stage in China’s economic reforms and opening-up policies. FTZ impact on market liberalization When the Shanghai FTZ was created half a decade ago, the idea was to develop Shanghai into an international financial center and trading hub by 2020, by loosening

the government’s grip on foreign investment, the currency market and the banking. Initially, Shanghai FTZ covered only 30 square kilometers, including a logistics park, port and airport. In 2015, the FTZs were expanded to include Lujiazui Financial and Trade Zone, Shanghai Jinqiao Economic and Technological Development Zone and Zhangjiang Hi-Tech Park. The objective is to gradually expand the FTZ to 1,200 kilometers of Pudong. According to research, the FTZ has already had an impact on the internationalization of the Chinese yuan. In the past, Chinese offshore yuan was traded on foreign currency markets, whereas onshore yuan trading was controlled by the China’s central bank. Shanghai FTZ reduced the gap of the price spread between offshore yuan (CNH) and onshore yuan (CNY). Meanwhile, the yield gap between offshore and onshore yuan of 3-month maturity had decreased as well. And while the internationalization of the Chinese yuan is far from complete, the Chinese currency was included as a major reserve currency in the IMF’s international basket (SDR) in October 2016. In the advanced West, free trade agreements were used in the postwar era to accelerate market liberalization. In China and emerging economies, FTZs have been deployed to foster a favourable environment to attract foreign investment and

‘ In the advanced West, free trade agreements were used in the post-war era to accelerate market liberalization. In China and emerging economies, FTZs have been deployed to foster a favourable environment to attract foreign investment and promote economic growth

’

promote economic growth. From new FTZs to the Great Bay Area In 2014, China announced three new FTZs in Guangdong, Tianjin

and Fujian. As Shanghai FTZ expanded in Pudong, new FTZs were “cloned” in other major Chinese cities. A dozen Chinese municipalities and provinces, including Shaanxi, Henan, Zhejiang, Tianjin, Guangdong and Sichuan, are building free trade ports and seek to shorten negative lists to attract foreign capital. In early 2016, I forecasted that Guangdong was moving from industrialization to a post-industrial society, while emerging as a global hub of innovation. In China, innovation - as measured by R&D per GDP - had then climbed to 2.1% (which, despite the huge population, was higher than that of France, the UK or Australia). In Guangdong, the comparable figure was 2.5% but in Shenzhen around 4% - not far from the world leaders, South Korea (4.4%) and Israel (4.2%). Today, the Greater Bay Area combines the nine cities of the Pearl River Delta with the special administrative regions of Hong Kong and Macao. While it comprises just 1% of China’s land mass, it has a population of 70 million and produces 37% of Chinese exports and 12% of its GDP. It is the Guangdong FTZ that is fueling new gains in productivity and innovation. How FTZs differ from imposed bilateral tariffs In effect, pure “free-market” doc-

trines would have failed Guangdong’s growth and innovation. If all nine cities had only focused on their own narrow interests, while Hong Kong and Macao had remained insular, positive spill-over effects would have been impossible. Rather, it is economic cooperation and integration within and across these cities and regions that has made the difference. In the U.S. tariff wars, the White House’s trade hawks seek to impose bilateral trade agreements top-down on other countries. The idea is to rule and divide over major sovereign nations that trade with America. It is a 21st century version of a colonial ‘open door’ policy. The idea of the Shanghai FTZ is almost diametrically the opposite. Here the effort is to open the Chinese economy progressively to multilateral world trade. The ultimate objective is to open Chinese economy bottom-up to trade with other nations. It is China’s response to rising nationalism and protectionism in the advanced West. It is also a development blueprint to other emerging and developing economies. • The original commentary was published by China.org, China’s official government portal, on November 30, 2018. Send reactions to:

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Towards the standardization of human resource management practice in Nigeria

Jude Adigwe Adigwe is a certified Human Resource Management (HRM) professional and an Industrial-Organizational Psychologist. He is the Human Resources and Administration Manager at Sharemind Lagos. adigwejudeobi@gmail.com

his topic is timely as the Chartered Institute of Personnel Management (CIPM) Nigeria marks its golden jubilee. The human resource management (HRM) profession in Nigeria is an evolving one—though not perfect, it is promising. Regardless of the promise the profession holds, there is still a lot of room for improvement. I will offer a few ideas on how HRM practice in Nigeria can be standardized. First, I think CIPM is doing a great job by preparing aspiring HRM professionals with instructional training prior to being certified. Beyond instructional training, there should be insightful practical sessions embedded in the professional training. Practical sessions make concepts and theories

come alive as well as deepen the insights of students. Workforce planning, recruitment and selection, performance management, training and development et cetera remain abstract until they have been experienced. Practical experience could be gained (before proper employment) through internships, audio-visual sessions et cetera that depict best practices in these different domains. Second, there is need for more robust laws on employment and related matters. This is very crucial because it guarantees fair play in practice. It guarantees protection of rights of all involved in the employment dynamics. While the laws we have are better than not having any, there is need for lots of improvement. As the world of work evolves so should the laws (that regulate engagement of actors etc.) be reviewed and amended to capture present realities. Third, the need for regular research on HRM issues cannot be overemphasized. Research offers opportunities to have deep insights into issues. With such insights, ideas on how to improve standards of practice are birthed. Rule of thumb, though convenient, can never be a substitute for theory which is an integral part of research.

HRM professionals must bear in mind that work experience, no matter how vast, is not theory. Fourth, I think CIPM needs to have regular engagements with employers through their associations. This is very important because some of the challenges faced by professionals in practice stem from the unwillingness of employers to uphold best practice despite recommendations offered. The power distance that exists between HRM professionals (who can only advise) and employers (who have reward power as well as the prerogative to make final decisions) is a yawning one. Employers should be made to see the financial and non-financial benefits of accepting some of these recommendations. This might seem a herculean task but it is worth trying. Fifth, the need for licensing or better put, licensed practice cannot be overemphasized. If standards will have to be maintained then it is important to ensure that only licensed individuals are allowed to practice. That said, I know this is almost impossible because Nigeria is every so often bedeviled with challenges of implementation. Regardless of this challenge, CIPM should endeavour to liaise with other regulatory bodies to

see how this can be achieved. If this challenge can be addressed, licensed practice would also imply recognition for professionals who uphold the standards of the profession and sanctions for defaulters. Sixth, there is need for indigenous texts on HRM practice. Business across the globe is heavily influenced by context. This, among other things, would explain the nuances of business operations of same company across branches domiciled in different geographical locations. Since HRM as a profession is geared towards advancing business objectives (through humans), it is only fitting to craft texts that capture the dynamics of doing business in Nigeria and how HRM practice can be seamlessly and strategically aligned without compromising the ideals of the profession. While acknowledging reality we can still strive for ideals. Seventh, the curriculum of higher institutions of learning would need to be periodically updated to capture the emerging issues in the profession. This is paramount because it will deepen the insights of students as well as equip them well to get off to a good start when employed. Also, HRM scholars in higher institutions of learning, should engage

in consulting activities in order to stay abreast with burning issues in organizations, industries and the labour market as it pertains to HRM practice. Students cannot be properly equipped for the world of work if those who teach them do not have any professional engagement outside classrooms. Consulting activities should partly inform decisions on areas to conduct research as well as shape content of and approach(es) to lectures while findings from research should partly inform solutions proffered to organizational problems. This is how practice and research reinforce each other to deepen insights which consequently informs the need and ways to improve standards. From the ideas offered above, it is crystal clear that standardizing the practice of HRM in Nigeria should be done holistically. A holistic approach acknowledges complexities which is a better way to approximate closer to underlying issues. Acknowledging these complexities and addressing them will help us move towards standardizing the HRM practice in Nigeria insofar as we stay committed to the cause come rain or shine. Send reactions to:

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Monday 03 December 2018

Publisher/CEO

Frank Aigbogun editor Anthony Osae-Brown DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)

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Editorial

NPA’s gross incompetence

v er y n e w day, Apapa sinks deeper into the traffic quagmire that is now threatening to engulf the whole of Lagos, Nigeria’s commercial capital. Daily, tankers and trailers are line up from the precincts of the port to Western Avenue, Surulere and many other parts of Lagos leaving the city, its residents and road users in perpetual traffic bind. It does not have to be this bad except that by failing to do simple things, the Nigeria Ports Authority is ensuring that the worst is yet to come for the businesses and motorists in the city. A reform-minded NPA would have ensured the resuscitation and maximum use of other ports like Onne, Port Harcourt, Warri and Calabar. Whatever the rationale for this situation was, a vast country like Nigeria with more than six ports

cannot rely on only one. A reform-minded NPA would have ensured that shipping companies and others have holding bays to take in used containers and institute a stiff regime of sanctions against those who violate that policy. A reform minded NPA would be pressing the federal government to resuscitate the rail lines to move heavy cargo from the ports into the hinterland to reduce the pressure on Apapa roads. But the NPA has done none of those. Rather, the concern of the leadership is in erecting a seven billion naira (N7 billion) head office in Abuja while access to the ports are becoming impossible and the entire city including other roads serving the entire population of Lagos have been taken over by trucks and containers waiting to gain access to the ports. From the beginning, Businessday rightly predicted the rebuilding of Wharf road will offer no respite. Sadly, even

after the complete reconstruction of the more than one kilometre Wharf road, there has been absolutely no change in the traffic situation. Rather, the expensive road has now turned into the most expensive parking lot in the world after being taken over by trucks heading to the port. The access roads to Apapa and Tin Can ports, although originally projected to give access to 1,500 trucks, now caters for about 5,000 trucks that seek access to the ports every day, according to reports by the Lagos Chamber of Commerce and Industry (LCCI). The Chamber estimates that Nigeria loses N600 billion in customs revenue, $10 billion (N3.6trn) in non-oil export sector and N2.5 trillion in corporate earnings across various sectors on annual basis due to the poor state of Nigerian ports. Of course, this is besides several reports listing Nigerian ports as some of the most inefficient and expensive ports in

the world. There are credible examples around we can learn from. The Indian ports, for instance, managed to record more than 25 percent in throughput simply by implementing a simple process improvement manual designed by Mckinsey and co. One wonders why the NPA cannot seek help from logistics experts and consultants that abound in Nigeria. The management of NPA must and should take full blame for the chaos in Lagos. Reconstructing dilapidated roads is not and cannot be the solution to the intractable traffic in Apapa. The traffic problem in Apapa is the result of the failure of NPA and the shipping companies to introduce simple logistic solutions into the job of receiving and dispatching trucks at the ports and until they begin to do the right thing, the city of Lagos will be ensnarled by the crippling traffic emanating from Apapa.

Bashir Ibrahim Hassan

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

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A battle within a battle

Credit comesexplains later The Economist

The struggle to get Ebola vaccine to rebel-held areas of Congo Jabs can stop the epidemic. But men with machetes can stop the vaccinators

HEN A YOUNG woman living near Beni came down with a fever, a nurse told her to go to the clinic for a test. But by the time the Ebola virus was detected in her blood, she was in a car bumping her way towards Kalungata, an area controlled by the Mai-Mai, a plundering, raping militia. She probably fled because of a widespread belief that people go to clinics to die. Beni is the epicentre of the Democratic Republic of Congo’s latest Ebola outbreak. A week later a cluster of Ebola cases cropped up in a village close to where the woman was hiding. It took three days of talks with a Mai-Mai chief before vaccination teams were allowed in. This was too late. The vaccine does not work on those who already have symptoms, which can appear within 48 hours of infection. The disease, which causes copious bleeding, spread to 45 people in the area, killing 23. The overall toll from this out-

Monday 03 December 2018

What, and who, are France’s “gilets jaunes”? Yellow-jacketed protesters have blocked roundabouts and motorway toll booths nationwide

break stands at 241, making it Congo’s third-deadliest and the world’s fourth-largest. Congo, with its long experience of battling the virus—it had one of the world’s first recorded outbreaks in 1976—is seen as a model for the way in which it isolates and treats people to break transmission. But this outbreak, its tenth, is proving

harder to contain. The problem is that Ebola is spreading to areas rife with machete-wielding rebels. Fighting has driven more than 1m people from their homes in the provinces affected by the outbreak (see map). The violence is escalating. On November 15th an extremist group called the Allied Democratic Forces (ADF) killed eight UNpeacekeepers. A day later the ADF fired at hotels housing humanitarian workers. “I was in the restaurant when we heard bangs,” says Guido Cornale, senior co-ordinator of the Ebola response for UNICEF. “We put the lights off and got under the tables.” Bullets flew through windows, but did not injure any of the health workers. Geography complicates matters, says Oly Ilunga, the minister of health. The outbreak is near the frontier with Uganda and refugees regularly slip across. It is also the first time in Congo that Ebola has reached a city as big or as bustling as Butembo, a trading stop on one of Congo’s few highways. And it has spread through remote villages that are hard to get to at the best of times—and are now reachable only in armoured cars escorted by UN blue helmets. The new vaccine may yet turn

the tide. Without it, thousands of people would have already died, says Dr Ilunga. When health workers reach remote villages they tend to vaccinate everyone in them. This is a change from the World Health Organisation’s (WHO) standard “ring vaccination” strategy of jabbing only those most likely to come into contact with an Ebola patient. Unfortunately some people refuse, says Michel Yao of the WHO in Beni. Other weapons are being developed. This week the WHObegan the first multi-drug trial of potential cures for Ebola. No one knows whether they will work, but four treatments show promise. Peter Salama of the WHOreckons it will take at least six months to end this outbreak. But Robert Redfield, the director of America’s Centres for Disease Control and Prevention, warns that Ebola may become endemic, or entrenched, in the region. In addition, if new treatments succeed in saving lives, they could also increase the (remote) possibility of survivors becoming carriers of the virus who then pass it on through sex. Either way, it may become necessary to vaccinate whole populations and not just the people most obviously at risk. If the men with machetes allow it.

MAGES OF burning barricades, riot police and tear gas on the Champs-Elysées in Paris have brought France’s gilets jaunes (“yellow vests”) to the world’s attention. The name refers to the high-visibility jackets that these protesters have adopted as a symbol of their complaint. French law requires all motorists to carry these jackets in the car. The movement began earlier this month as a protest against the rising price of fuel, but has taken on a wider role, and the gilets jaunes are

now seen as symbols of the growing popular discontent with President Emmanuel Macron. The yellow-vest protest began when rising world oil prices, combined with an increase this year of 7.6 cents per litre in taxes on diesel, pushed prices at the pump up to record highs. Commuters in France’s big cities are well served by good metro systems and bus routes; but elsewhere, many people drive long distances to get to work. The government says that the higher tax rate, together with an increase of another 6.5 cents a litre planned for early next year, is designed over time to align diesel and petrol prices as part of an effort to reduce diesel consumption and thereby curb pollution. “I’d prefer to tax fuel than work,” Mr Macron explained. “Those who complain about higher fuel prices also demand action Continues on page 15

Monday 03 December 2018

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BUSINESS DAY

In Association With

Superpowers and technology

Chip wars: China, America and silicon supremacy America cannot afford to ignore China’s semiconductor ambitions. It cannot simply tame them, either

HE TRADE disputes President Donald Trump relishes have an old-fashioned feel. Tariffs are the principal weapons. Old-economy markets, from cars to steel, are the main battlefields. Farmers and factories preoccupy the president. And his personal chemistry with other powerful men can make or break deals. Hence the focus on the meeting between Mr Trump and Xi Jinping at this week’s G20 summit, which takes place in Buenos Aires after The Economist has gone to press. Yet the trade conflict that matters most between America and China is a 21st-century fight over technology. It covers everything from artificial intelligence (AI) to network equipment. The fundamental battleground is in semiconductors. The chip industry is where America’s industrial leadership and China’s superpower ambitions clash most directly. And whatever Messrs Trump and Xi say at the G20, this conflict will outlast them both. That is because computer chips are the foundations of the digital economy and national security. Cars have become computers on wheels. Banks are computers that move money. Armies fight with silicon as well as steel (see article). Firms from America and its allies, such as South Korea and Taiwan, dominate the most advanced areas of the industry. China, by contrast, remains reliant on the outside world for supplies of high-end chips. It spends more on semiconductor imports than it does on oil. The list of the top 15 semiconductor firms by sales does not contain a single Chinese name. Well before Mr Trump arrived on the scene, China made plain its intention to catch up. In 2014 the government in Beijing announced a 1trn yuan ($150bn) investment fund to improve its domestic industry. Semiconductors feature prominently in “Made in China 2025”, a national development plan issued in 2015. China’s ambitions to create a cutting-edge industry worried Mr Trump’s predecessor. Barack Obama blocked Intel from selling some of its whizziest chips to China in 2015, and stymied the acquisition of a German chipmaker by a Chinese firm in 2016. A White House report before he left office recommended taking action against Chinese subsidies

and forced technology transfer. Other countries are alarmed, too. Taiwan and South Korea have policies to stop purchases of domestic chip firms by Chinese ones and to dam flows of intellectual property. Although the chip battle may have pre-dated Mr Trump, his presidency has intensified it. He has made a national champion of Qualcomm, blocking a bid for it from a Singaporean firm for fear of Chinese competition. Earlier this year an export ban on selling American chips and software to ZTE, a Chinese telecoms firm in breach of sanctions, brought it to the brink of bankruptcy within days. Startled by the looming harm, and (he says) swayed by appeals from Mr Xi, Mr Trump swiftly backtracked. Two things have changed. First, America has realised that its edge in technology gives it power over China. It has imposed export controls that affect on Fujian Jinhua, another Chinese firm accused of stealing secrets, and the White House is mulling broader bans on emerging technologies. Second, China’s incentives to become self-reliant in semiconductors have rocketed. After ZTE, Mr Xi talked up core technologies. Its tech giants are on board: Alibaba, Baidu and Huawei are ploughing money into making chips. And China has showed that it can hinder American firms. Earlier this year Qualcomm abandoned a bid for NXP, a Dutch firm, after footdragging by Chinese regulators. Neither country’s interests are about to change. America has

legitimate concerns about the national-security implications of being dependent on Chinese chips and vulnerable to Chinese hacking. China’s pretensions to being a superpower will look hollow as long as America can throttle its firms at will. China is destined to try to catch up; America is determined to stay ahead. The hard question is over the lengths to which America should go. Protectionists in the White House would doubtless like to move the semiconductor supply chain to America. Good luck with that. The industry is a hymn to globalisation. One American firm has 16,000 suppliers, over half of them abroad. China is a huge market for many firms. Qualcomm makes two-thirds of its sales there. Trying to cleave the industry into two would hurt producers and consumers in America. And it would be a bluntly antagonistic act, which would make no distinction between unfair and genuine competition. In the long run it may be futile, too. Today America has the edge over China in designing and making high-end chips. It can undoubtedly slow its rival. But China’s progress will be hard to stop. Just as Silicon Valley’s rise rested on the support of the American government, so China blends state and corporate resources in pursuit of its goals. It has incentive programmes to attract engineering talent from elsewhere, notably Taiwan. Firms like Huawei have a proven ability to innovate; blocking the flow of Intel chips in 2015 only spurred

China on to develop its domestic supercomputing industry. Moreover, China’s bid to become a global semiconductor powerhouse is propitiously timed. For decades the chip industry has been driven forward by Moore’s law, under which the capabilities of a chip of a given size double every two years. But Moore’s law is reaching its physical limits. As everyone jumps to new technologies, from quantum computing to specialised AI chips, China has a rare chance to catch up. The right approach for America, therefore, has three strands. The first is to work with its allies in Europe and Asia to keep pushing back against unfair Chinese practices (such as forced tech transfer and intellectual-property theft) at the World Trade Organisation, and to screen out inward Chinese investments when security justifies it. The second is to foster domestic innovation. More government funding is already going into chip research; greater openness to talent is needed. And the third is to prepare for a world in which Chinese chips are more powerful and pervasive. That means, among other things, developing proper testing procedures to ensure the security of Chinese-made products; and tightening up on data-handling standards so that information is not being sprayed about so carelessly. Measures such as these will not make the headlines at the G20. But they will do more to shape the world in the years ahead.

What, and who, are France’s “gilets... Continued from page 14

against air pollution because their children get sick.” Those who live far from the bike-share schemes and Uber networks of France’s big cities, however, do not buy the government’s green argument. They think that this tax is a punishment for families struggling to make ends meet, and proof of the president’s disdain towards ordinary working people. Some 280,000 yellow vests took part in a first day of protest on November 17th, blocking roundabouts and motorway toll booths nationwide. Less than half that number took to the streets on November 24th, when a protest in Paris took a particularly violent turn after troublemakers infiltrated the event. The gilets jaunes movement, which emerged through social media and embraces lots of dramatic revolutionary imagery, has tapped into anger at the perception that Mr Macron governs for the better-off, Parisbased elite. How long the protest movement can last depends partly on whether it can survive an attempted mutation into a more organised movement. The gilets jaunes are currently structureless and leaderless, which is both their strength but also a potential weakness. Internal rivalries and conflicting objectives could yet split the movement, as could a loss of public support if the movement radicalises. Unlike union-led demonstrations, the amorphous nature of the gilets jaunes protests also makes it more difficult for the government to negotiate with them. Mr Macron’s challenge will be to defend the principles of his eco-tax, as well as his image as a determined leader who will not cave in to protests on the streets as so many of his predecessors have done, while overcoming the perception that he is deaf to the concerns of ordinary folk.

BUSINESS DAY

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Monday 03 December 2018 In Association With

The great inaction

Why is climate change so hard to tackle? A problem of unprecedented scope and intractability, to which current responses are unequal

T IS MORE than a quarter of a century since the leaders of the world, gathered in Rio de Janeiro in 1992, committed their countries to avoiding “dangerous anthropogenic interference in the climate system” by signing the UN convention on climate change. The case for living up to their words has only become stronger. The level of carbon dioxide in the atmosphere grows unremittingly. Average global temperatures have risen, too, to about 1°C above those of the pre-industrial era. The science that links the two is incontestable. Recent extremeweather events, from floods in Hanoi to fires in California, were made more likely by the change that the climate has already undergone. Things will only get worse—perhaps catastrophically so. In a sense the world is already equipped for the task at hand. Wind and solar power have, after huge subsidies, joined nuclear reactors and dams as affordable ways of generating gigawatts of electricity without burning fossil fuels. As our Technology Quarterly this week shows, parts of the energy system not easily electrified—some forms of transport, industrial processes like making steel and cement, heating offices and homes—could also be decarbonised with coming technologies. And policymakers have tools

to bring about change, including carbon taxes, regulation, subsidies and, if they choose, command and control. Yet when the parties to the convention on climate change meet again in Katowice, Poland, on December 2nd, it will be against a backdrop not just of rising temperatures but also of rising despair. The problem is obvious; the stakes are huge; solutions are within reach. So why is the response inadequate? One reason is special interests. A formidable lobby exists to warn of the dangers of climate change. But when it counts—as, say, in Washington state’s recent ballot initiative on a carbon tax—its antagonists in the fossil-fuel industry smack a chequebook more forcefully on the other side of the scales. On the right that has bred a culture which flatly rejects the evidence. But the chief reason is that the world has no history of dealing with such a difficult problem, nor the institutions to do so. The harm done by climate change is not visited on the people, or the generations, that have the best chance of acting against it. Those who suffer most harm are and will be predominantly poor and in poor countries. The people called on to pay the costs of reducing that harm are and will be mostly much better off. The gilets jaunes angry

at increases in French fuel taxes (see article) and the family which in 20 years will be forced from land in Mexico by drought know nothing of each other. But the protester does know that such taxes are not being raised in America or Russia. The better off are more able to adapt to climate change than the poor, and thus have less cause to avoid change. And making the poor wealthy enough to adapt involves economic growth that

is still mostly powered by fossil fuels. Although no one should be asked to forgo that growth, it has consequences. What might produce a moment of clarity to break this impasse? One possibility is the sheer impact of climate change. Geophysical features of Earth are already being redrawn. The dry edges of the tropics are heading polewards at about 50km a decade. The line of aridity defining the American

West has moved roughly 230km east since 1980. The sea ice in the Arctic is a shadow of its former self. Nobody can know whether the world will one day wake up and cut emissions to zero. Even if it does, the main problem— the stock of greenhouse gases already emitted—will remain. A crash programme to suck carbon dioxide out of the air would take vast resources and years to make a difference.

a tilt in favour of buyers. He has seen less evidence of bidding wars; fewer examples of buyers waiving contingencies, such as forgoing the option to pull out if something about the sale goes wrong; fewer multiple offers, and fewer homes that sell for very much more than their asking price. While the priciest points of the market have been chilly for a while, now the bottom end is catching a cold, too. The next likely explanation is that demand is being constrained by an affordability crunch. House prices are rising nationally just as, according to Freddie Mac (a government-backed mortgage insurer), the effective rate on home loans has risen by 0.8 percentage points since 2017. As Jerome Powell, chairman of the Federal Reserve, pointed out, on average housing is still more affordable than it was before the financial crisis, and mortgages are still historically cheap. But in this case the change matters, and more expensive houses coupled with more expensive mortgages can still weigh on demand. The buyers most vulnerable to this dynamic are young. Homeownership rates for those under 35 collapsed following the recession, and although they have recovered a bit since 2016 they are still well below their historical average, and

around seven percentage points below their pre-crisis peak. The young are the most likely to buy cheaper, entry-level homes. To buy an average starter home with a 10% down-payment, the National Association of Realtors estimates that a first-time buyer would need to fork out $1,099 per month in the third quarter of this year, $120 more than a year ago.

Safe as houses

The housing market is having a wobble Don’t be alarmed

OME BUILDERS and buyers are feeling hesitant. Residential fixed investment has dragged back GDP growth in each of the past three quarters; in October sales of existing homes were 5.1% below their level a year before and new ones down by 12%. Since March price rises have slowed. As housing has historically been seen as a canary in the coal mine for the American economy, this wooziness is worrying. But it is not yet cause for panic. The wobble invites two questions. Why is it happening? And does it matter? Answering them gains importance as chatter about a possible economic slowdown gets louder. The corpse of the last yellow finch is still fresh. In August of 2007 Edward Leamer of the University of California, Los Angeles highlighted the predictive power of residential investment and home-building when forecasting downturns, in a paper called “Housing is the Business Cycle.” Eight of the ten previous recessions had been preceded by serious problems in housing, he pointed out, before forecasting that “this time troubles in housing will stay in housing”. They did not. When identifying the causes

of what is happening it is better to consider a brew of factors than any single ingredient. Robert Dietz, chief economist at the National Association of Home Builders, refers to five “L”s that have been pushing up builders’ costs and so constraining the pace of new home-building: labour, lots, lending, laws and lumber. Construction workers are scarce, and are therefore seeing faster wage increases than the general workforce. These burdens might not matter so much if the sector were managing to squeeze more from its inputs. But it is struggling to do so. As a result, the incentive to build many new homes has been reduced. With the possible exception of

a 20% tariff on Canadian lumber, which led to a spike in prices this summer, these pressures are not new. For several years they have been used to explain why building has been so slow in the face of strong demand and rising prices (aside from the hangover from overbuilding in the mid-2000s). Mr Dietz says that for cheaper, entry-level homes, the fixed costs of building are most crippling, which helps to explain why their supply has been particularly squeezed. Homebodies Over the summer something else seemed to change. Aaron Terrazas, an economist at Zillow, a price-listings website, has noticed

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Monday 03 December 2018

COMPANIES & MARKETS

DAY

Airlines reduce fleet size as fares set to rise

Pg. 18

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

GLOBAL

Microsoft beats Apple to world’s most valuable company LOLADE AKINMURELE

icrosoft pulled ahead of longstanding rival, Apple, as the w o r l d’s m o s t va l u ab l e company for the second time in the space of one week, Friday Nov. 30. The Seattle-based technology group ended the day w ith a market value of $850 billion, c o m p a r e d t o A p p l e ’s $844 billion. Microsoft was briefly the world’s most valuable company again after losing its spot to the iPhone maker some 20 years ago on Tuesday, Nov.27. Both firms have end u re d m i x e d f o r t u n e s this year. Microsoft’s rising market value caps a five-year rally for the technology group that has seen its stock price increase nearly three-fold. Most of that rise has come under chief executive Satya Nadella, who has overseen stabilisation in Microsoft’s traditional Windows and Office software businesses, as well as surging growth in cloud computing.

Apple, on the other hand, has struggled on the back of a wider tech sell-off and came under renewed pressure from investors when President Donald Trump suggested in a Wall Street Journal inter view on Monday that iPhones might be cau g ht u p i n t h e n e xt wave of tariffs on goods imported to the US from China. The president’s comment adds to a darkening outlook for iPhone sales. Since becoming the first pub l ic c ompany to b e valued at more than $1 trillion earlier this year, Apple has lost some $200 billion in market capitalisation. Lower than expected fourth-quarter results at the start of November as well as issuing guidance t hat f e l l s h o r t o f Wa l l S t re e t ’s e x p e c t a t i o n s, have taken a negative toll on the company. Apple, which has been the world’s most valuable company for about seven years, having overtaken ExxonMobil in 2011, also said it would no longer provide unit sales figures for the iPhone or its other devices, fuelling fears that demand for its

most profitable product has peaked. Meanwhile, Microsoft

has remained insulated from the wider sell-off among tech companies

in recent weeks, bolstered by a resurgence in the PC market as well as its

s t re n g t h i n t h e c l o u d , where it sits in second place behind Amazon.

Microsoft’s gain is Apple’s loss

Source: Bloomberg

BANKING

FCMB’s profit doubles in Q3 on FX revaluation gains DIPO OLADEHINDE

irst City Monumental Bank Group Plc has released its financial results for the nine-month period ended September 2018, wherein the lender reported a 116 percent increase in Profit Before Tax (PBT) from N6.8 billion in 2017 to N14.7 billion in 2018 while Profit After Tax (PAT) increased by 109 percent from N5.4 billion in 2017 to N11.3 billion in nine months 2018. Investment bank, Cardinal Stone, said FCMB’s result was significantly bloated by the N9.0 billion FX revaluation gain booked in third Quarter

2018. “While we expect this to go on to support the bank’s full year 2018 result, we are cautious in our excitement given that we do not foresee similar lofty numbers beyond Full year 2018,” Cardinal Stone said in a note to clients Nov.31. The tier-two lender also recorded an 11.8 percent increase year on year in gross earnings to N132.8 billion from N118.8 billion in 2017. Income tax expenses increased by 94.8 percent in nine months 2018 to N1.3 billion from N697 million in nine months 2017 while depreciation and amortization expenses increased to N4.1 billion in nine months 2018

from N3.9billion in nine months 2017. Cardinal Stone observed concerns about the 15.8 percent Year on Year rise in impairment losses, a contrast to an average decline of 39.7 percent Year on Year observed across the investment bank’s coverage banks. Net impairment loss on financial assets increased in nine months 2018 to N14.6 billion from N12.6 billion recorded in nine months 2018 while operating expenses increased to N56.8 billion in nine months 2018 from N49.3 billion recorded in nine months 2017. The lender’s net interest income increased to N53.2 billion from

N49.9 billion in the period under review, while interest expenses reduced to N42.1 billion from N46.3 billion in nine months 2017. Also, noninterest income soared to N16.5 billion in q3 2018 recording a quarter on quarter increase of 94.5 percent which is the highest amount recorded in the last five quarters. The portion of a company’s profit allocated to each share of common stock, Earnings Per Share (EPS) which serves as an indicator of a company’s profitability increased by 103 percent from N0.28 in nine month 2017 to N0.57 in nine month 2018. Also, FCMB’s Non-

controlling interest (NCI) which measured the net asset value of entities and do not account for potential voting rights reduced from 11.78 percent in nine month 2017 to 8.36 percent in nine months 2018. NCI is an ownership position whereby a shareholder owns less than 50 percent of outstanding shares and has no control over decisions. FCMB Group Plc was incorporated in Nigeria as a financial holding company on November 20, 2012, under the Companies and Allied Matters Act, in response to the CBN’s Regulation on the Scope of Banking Activities and Ancillary

Edited by LOLADE AKINMURELE (loladeakinmurele@gmail.com) Graphics: CHINEDUM ONYEMA

Matters (Regulation 3). The principal activity of FCMB Group Plc is to carry on business as a financial holding company, investing in and holding controlling shares in, as well as managing equity investments in Central Bank of Nigeria approved financial entities. The Company has six direct subsidiaries; First City Monument Bank Limited (100%), FCMB Capital Markets Limited (100%), CSL Stockbrokers Limited (100%), CSL Trustees Limited (100%), FCMB Microfinance Bank Limited (100%) and Legacy Pension Managers Limited (91.64%). FCMB Group Plc is a company domiciled in Nigeria.

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COMPANIES & MARKETS AVIATION

Airlines reduce fleet size as fares set to rise IFEOMA OKEKE

he recent reduction in the number of operational aircraft among domestic airlines operating in Nigeria may create a passenger glut which could lead to an increase in air fares, BusinessDay’s findings show. The seven domestic airlines to have put a knife to their fleet size either due to maintenance checks abroad or reduced frequencies include Air Peace, Dana Air, Medview, Arik, and Aero Contractors. Aero, which had 10 aircraft in its fleet has cut the number to two while Arik Air, which had over 28 aircraft on its fleet, currently has about eight aircraft. Medview airlines which had about four aircraft, currently has about two while Dana Air which had five aircraft currently has three aircraft. Also, AirPeace, the largest domestic airline in Nigeria re-

cently reviewed its flight schedule downward on account of five of its aircraft it pulled out of service and sent abroad for C-checks. Chris Iwarah, Air Peace Corporate Communications Manager, said the carrier was concerned about reports of shortage of scheduled flights across the country and was ready to do everything within its capacity to ease the pain of air travellers. The airline confirmed that the nation had been facing air travel difficulties since it reviewed its flight schedule downward on account of five of its aircraft it pulled out of service and sent abroad for C-check. “However, beginning from Sunday, most of our aircraft that went for C-check will start to return to join our operations. We are soon going to schedule more flights and deploy more aircraft across our domestic routes,” Iwarah said. BusinessDay’s checks show that there is already a gradual

L-R: Anthony Ekun, creative director, SO&U; Biodun Adefila, executive director, brand management, SO&U; Udeme Ufot, group managing director, SO&U; Nkem Okocha, founder, Mamamoni Initiative; Mojisola Saka, COO, Soulcomms, and Kemi Evbota, senior group head, human interest and admin, SO&U, at the 2018 SO&U Group retreat in Lagos.

spike in the prices of tickets for frequently visited destinations for Christmas such as Abuja, Owerri, Asaba, Port Harcourt and Uyo.

A one-way ticket from Lagos to Abuja, Port Harcourt, Enugu and Owerri on these major airlines which previously cost between N23,000 is already

costing N30,000 to N33,000 as at 30th of November for bookings between December 12th to January 12th. This indicates a 30 to 43.5percent increase.

However, experts observed that for airlines to effectively accommodate this surge in passenger traffic, they will need adequate aircraft.

REAL ESTATE

POWER

Consumers gain as landlords strategise to remain competitive in retail market

Geometric signs gas supply agreement with SPDC, Agip, Total, NNPC JV partners for Aba IPP

CHUKA UROKO

s landlords strategise to remain competitive in a very challenging retail business environment in Nigeria, resulting from increasingly declining purchasing power, consumers are better for it as they benefit from those strategies. In the core retail markets of Lagos and Abuja, where activities and trends remained unchanged in the third quarter of 2018 (Q3 2018),landlords are incorporating family-friendly offerings, cinemas and arcades to capture the changing consumer preferences. Additionally, some landlords are bringing in a number of international brands on their own balance sheets, thereby offering consumers not only the luxury of choice, but also quality products. This underscores the reasoning by Broll Property Services in its ‘Q3 2018 Retail Market Viewpoint’ that “flexibility is required to make retail work”. As against landlord’s demand for dollar-denominated rents and advanced payment in the past, they are now ready to collect naira equivalents and also accept quarterly payments in order to retain tenants and increase occupancy. Similarly,asagainstNovareLekki Mall’s 22,000 square metre lettable space, landlords are now reducing theirprojectsizetoassmallas10,000 square metres and, according to NnennaAlintah,aresearcheratBroll, spacerequirementsbyretailersinQ3 2018 focused on 100 square metres or lower. To further buttress this, average asking rents for 50 square metres – 200 square metres range between $30 per square metre per month – $70 per square metre per month. “Transactions ultimately are

conducted on a case-by-case basis and achievable rents could fall well below this average”, Alintah said. Retailers are also re-examining their strategy in the market. Relocations from formal malls to surrounding high-street locations have become evident. Some retailers are locating close to malls in order to benefit from passer-by traffic whilst incurring reduced occupancy costs. “Retailers that had initially adopted a strategy to locate exclusively in stand-alone buildings are now branching out into malls. This could be attributed to internal strategies to curb competition and to benefit from parking as well as other amenities provided within malls”, Alintah noted. The story in the secondary market like Onitsha, Kaduna, Warri, Owerri, etc is different given that the formal retail landscape in these locations remains challenging. Landlords are still under pressure to drive up occupancies at malls. Alintah pointed out that in addition to the existing concessions to drive take-up, landlords were considering even more flexible lease terms such as annual and hybrid Naira/Dollar leases, adding however, that this was yet to become an established practice in the market and was more on a case-by-case basis. Average asking rents for malls in secondary locations are lower in the quarter under review in dollar terms. Average asking rents ranged fromUS$15 per square metre per month – US$25 per square metre per month for spaces between 50 square metres – 200 square metres down fromUS$20 per square metre per month – US$30 per square metre per month in the previous quarter.

…as commercial city of Aba edges closer to 24-hour power supply FRANK UZUEGBUNAM

he city of Aba, the commercial hub of the South East, is inching closer to 24-hour uninterrupted power supply with the signing in Abuja of Gas Supply and Aggregation Agreement (GSAA) between Geometric Power Limited and the joint venture partners of Shell Petroleum Development Company (SPDC), AGIP, Total and Nigerian National Petroleum Corporation (NNPC) for the 141MW Aba Integrated Power Plant. This landmark agreement is the first executed agreement for the power sector in Nigeria by the IOCs and the NNPC joint venture. Prior to this, two other gas supply agreement signed so far by the NNPC joint venture companies were for liquefied natural gas (LNG) and fertilizer projects. “We understand that this is the third commercial GSAA being signed by the JV partners. One was for LNG, and the other was for fertilizer. This is the first one for power in Nigeria. We had signed a Gas Supply Agreement for the Aba IPP in 2009, but because of the delays caused the “erroneous” sale of the Aba Ring-fence, the agreement lapsed and had to be renegotiated anew; especially with the establishment of the Gas Aggregation Company of Nigeria (GACN) which now issues Gas Purchase Order to gas off-takers in Nigeria. Although it has taken six years to negotiate this present agreement, we

are delighted that all the parties have successfully concluded”, said Professor Bath Nnaji, Chairman, Geometric Power and former Minister of Power. “This GSAA is possible because of the structure of the project where the JV partners can see that the project is bankable and will be able pay for the gas they will supply at commercial price reliably. We are confident that is structure will serve as a model for other gas to power projects in Nigeria since the various stakeholders can see how they will be able to recoup their investment in their projects. Furthermore, this structure will incentivise the gas suppliers to invest in gas production for the domestic market”, Nnaji added. The agreement which was signed at the boardroom of the Honourable Minister of State for Petroleum Resources also had the presence of the oil and gas sector regulators, National Petroleum Investment Management Services (NAPIMS) and the Gas Aggregator Company of Nigeria (GACN) who midwifed the updated agreement between the parties over a 6-year period, thus, successfully transiting from the 2008 executed Gas Supply Agreement (GSA) for the Aba IPP into the current gas policy regime. The former minister of power said that “this project is a model of how the entire power value chain can be incentivised. The 141MW power plant (to be scaled to 188MW) is embedded in a ring-fenced electricity district of Aba com-

prising of 9 out of 17 Local Government Areas of Abia State and within over 4000 sq kilometres. The project has its own gas pipeline of 27 kilometers. Its electric distribution ring fence includes 7 substations of 2x15MVA each; hundreds of kilometres of overhead lines at 33Kv and 11KV networks along with other low voltage lines. This first class electric distribution infrastructure is intended to deliver guaranteed reliable supply of electricity to industries, commercial ventures and residential homes in the Aba metropolis”. It will be recalled that on May 11, 2004, the Federal Government, the now defunct National Electric Power Authority (NEPA) and Geometric Power Limited (GPL) entered into and executed a Memorandum of Understanding (MOU) under which GPL was granted the exclusive right to construct a 3 x 35 MW open cycle gas turbine power plant and designated sub-stations in Aba, Abia State, which would generate electric power for distribution by Aba Power Limited (APL) to residential and commercial customers and to industrial clusters in a ring-fenced island in Aba. The government, NEPA and Aba Power Limited (APL) executed a lease agreement on April 28, 2005 for the distribution of power to the ringrenced residential and commercial consumers in Aba. By the terms of the agreement, NEPA assigned its right to distribute electric power in the ring-fenced area of Owerri-nta,

Osisisoma, Ogbor Hill, Factory road and Port Harcourt road in Aba and also leased its distribution facilities within the contract area. A supplementary agreement was made on August 31, 2006 between the Federal Government represented by the minister of power and steel, Transmission Company of Nigeria (TCN) and Enugu Distribution Company (EDC) and Geometric Power Limited. EDC and TCN were substituted for NEPA as parties to the lease agreement of 2005 and assumed their respective obligations. Unfortunately, during the privatization exercise by the Bureau for Public Enterprises (BPE), in what was described as “administrative error”, the Bureau did not take into consideration the pre-existing agreements on Aba ring-fence and thus, did not excise it from Enugu DISCO. The $500 million Geometric/Aba Power Plant has capacity to produce and distribute about 141 megawatts (MW) of electricity in its first phase, with new distribution lines, four new sub-stations and three rehabilitated sub-stations. Each plant is to produce 47 MW of power, supported by a 60 MVA per transformer. The power plant is to be powered by gas from Shell company flow station at Owaza in Ukwa West Local Government Area of Abia State. The company has also laid a pipeline spanning 27 kilometers from the flow station to the power plant at Osisioma.

Monday 03 December 2018

COMPANIES & MARKETS Business Event

L-R: Nike Bajomo, executive director, business development directorate, Stanbic IBTC Pension Managers Limited; Demola Sogunle, chief executive, Stanbic IBTC Bank PLC; Shuaib Audu, executive director, Investments, Stanbic IBTC Asset Management Limited; Bridget Oyefeso-Odusami, acting head, marketing and communications, Stanbic IBTC; Binta Max-Gbinije, head, public sector group, Stanbic IBTC Bank PLC, and Charles Omoera, acting CE, Stanbic IBTC Trustees Limited, at the 2018 Pearl Awards where Stanbic IBTC won the Sectoral Leadership Award and Highest Dividend Growth Award in Lagos.

Maria Rotilu, general manager, Branch Nigeria, (l) receiving the award for Excellence in Artificial Intelligence from Mr. Leland Rice, chair of the advisory board, Africa Fintech Summit (r). The award was presented at the recently held Africa Fintech Summit in Lagos, in recognition of Branch’s use of world class AI technology in giving access to quick loans in minutes to underserved Nigerians through the Branch Mobile App.

L-R: Amunume Eshimiakhe, senior finance and administrative officer, Nigerian Business Coalition Against AIDS (NiBUCAA); Gbenga Alabi, executive secretary, and Ogbonne Mecha, programmes officer, after a press briefing held to announce activities to commemorate NiBUCAA 2018 World AIDS Day in Lagos.

L-R: Tolu Adedeji, marketing director, International Breweries Plc; Nkem Owoh, nollywood actor/director and Hero brand ambassador; Okpala Chidubem, winner of the ongoing Hero National Consumer Promo tagged ‘HEROnaires Mega promo’; Godwin Oche, national sales director, and Obumneke Okoli, marketing manager, Hero Larger, both of International Breweries, at the presentation of prizes to winners in Onitsha, Anambra State.

BUSINESS DAY

Monday 03 December 2018

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28 BUSINESS DAY

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Wednesday 03 October 2018

Interview

‘We want to create an Africa-wide market Over 62 percent of Nigerians will use mobile applications to access financial services within the next five years. At the occasion of Africa Fintech Festival, SEGUN AINA, president of FinTech Association of Nigeria highlights FinTechNGR’s achievements and points to the road ahead. He spoke with BusinessDay’s LOLADE AKINMURELE and STEPHEN ONYEKWELU. Excerpts:

ou are fondly called the fintech envoy, a sign of your commitment to the growth of this space in Nigeria. How did you make the transition from traditional banking to becoming president of FinTech Association of Nigeria, given that fintech is often perceived as millennials’ turf? Yes, I had many years of banking career and when I moved to Ecobank in 1989, my role then was head of operations and technology, then I moved from assistant manager to general manager, to executive director, the number two position in the bank. Ecobank was one of the younger banks at the time. There were many young people and the bank was leveraging on technology to drive its vision and mission. So, Ecobank was the go to place for young people who wanted to be creative and use technology to drive banking. We started the concept of every cashier having a computer in front of them. We were the first bank to use T24 banking application in the whole of Africa. It is now used by most of the banks in Nigeria. It is a core banking application. It was called Globus, when it was created. This generated in me a lot of interest in technology. When I moved from Ecobank to Fountain Trust Bank, which was then a merchant bank, I decided to convert it to a universal bank, which is what you call deposit money banking today. And of course we had to leverage on technology. One of the things I told my team at the time was that the only way we could distinguish ourselves was to come up with creative services and solutions. After a lot of effort we came up with a product, result checker, which is not really a banking product but something that revolutionalised the education sector. Today, when you sit for the Joint Matriculation and Examination Board or West Africa Examination Council’s examination, you do not need to go and queue to access your result. Or go to their offices or read your results off the entrance gate of their various offices. In 2001, the global mobile system (GSM) came to Nigeria and we thought people should be able to check results on their phones. I went to JAMB, WAEC, and the National Examination Council (NECO) and told them I can help them with broadcasting examination results to candidates without having to post them on physical notice boards or gates. They agreed and it was a winwin. There was no problem getting the buy-in of parents and other stakeholders. It was one of the first products leveraging on cell phone technologies in this country. This product became so successful that it was accounting for 40 percent of the bank’s revenue by the second year. At this point, I thought it was something we needed to move out of the bank. I went to the board and said let us set up a company. We set up what was then called Fin Technologies now called Vatebra Limited. The company still exists. It was 80 percent owned by the bank and 20 percent by other shareholders. Today, Vatebra is a multi-billion naira company, which took off as a unit of Fountain Trust Bank then. Of course, today, Fountain Trust Bank has been integrated into Heritage Bank Limited. When I completed my tenure in

Fountain Trust Bank as the managing director in 2004, I had seen there was going to be a meeting point between finance and technology, between banking and technology. So, I coined the word, fintech and registered the company in 2003. This is because I thought fintech was something that will rule the world in the future. Then, fintech was not a big deal but today it has gathered the critical mass. When I coined the term and set up the company, I realised that there was another company in Germany that had fintech in its name. We were probably the only companies that had fintech in our business names. Okay, there was also another company in Kenya, which still exists. So, I saw what is happening now 10, 15 years ago. And we are very happy that it is happening. Talking about age and fintech, yes, many people think millennials should be driving fintech because they constitute a big chunk of our population. People under 35 years of age comprise about 70 percent of the population, definitely the form the majority. You find that they own more mobile phones that are connected to the internet, so they are the majority. But that does not say much. Omar Sultan AlOlama, the minister for artificial intelligence, United Arab Emirates and 28 years old, once said age is not about the numbers of years, it is about your mind. If a 100-year-old person thinks like a 20-year-old, he is a young person. If a 20-year-old thinks like a 70-year-old, she is an old person. It is not really the number of your years. I also believe that with my experiences and network, one can do a lot to create an enabling environment for the young people that are coming up. It not about me, it is not about my generation but it is more about these young ones you are talking about. We have been helpful to the young ones. For instance, there was a time some young people complained they did not have access to the Securities and Exchange Commission, I used my contacts, took them there and they got listening ears. I have done this for many other regulators. Young people that need access to funds, we link them up to resources that they may ordinarily not have access to. Those who have developed products, we link them up to markets. We provide mentorship and corporate governance structures for their organisations and some of them are doing extremely well. This is the role I play. The role I play is one of providing leadership for these young people in the industry to enable them thrive. That is what I am doing. From what you have said, you saw opportunities inherent in the application of technology to finance as far back as 2003. Where do you see the future of fintech and its applications in Nigeria? Nigeria’s fintech today is a thriving ecosystem and industry. If you look at the evolution that has taken place, particularly in the payment environment, you see Nigerian companies that five, six years ago did not exist or were unknown. Some examples will include, Paga, Flutterwave, Paystack and a number of others that are now doing extremely well. There are applications of financial technology in agriculture, insurance and education too. We also have applications of this technology in the capital markets.

Segun Aina

Some of these products are useful for Nigeria but we are also creating products that are globally relevant. This tells you that Nigeria, young people and young minded people are creating the much needed export proceeds for Nigeria, through the use of Nigerian technologies in some of the other countries. Here lie the prospects for fintech adoption in Nigeria. If you look at the investment flow, in the last two or three years, you will see that it has been really amazing. The foreign direct investment has been really good; the only unfortunate thing is that these have been coming mostly from foreign based organisations. I have not seen a lot of local funds coming into the industry. Why is this so? I think it has to do with the mindset of an average Nigerian investor. Investment in start-ups is very risky. Traditionally, when you invest in ten, if you are lucky, may be two of them will do very well. Secondly, those investments, the returns do not come quickly, but when they come, the come in very big. Look at an example such as Facebook, if you had invested in Facebook ten years ago, you can imagine the worth of your investment today. I believe that generally, most Nigerian investors want immediate returns. The risk appetite may not be as good as that of those coming from other countries. What can regulators do to derisk the sector? Well, it is a business environment and less government intervenes in

the sector the better, so that we do not stifle creativity and innovation in. Government needs to have enabling regulations that are inclusive. Inclusive means consulting with all the stakeholders in the industry, the developers, innovators and others. The regulators need to understand the mindset of actors in the industry, such as the product development process and application. This will help the regulators and stakeholders to identify the risks and address them together. With this methodology, at the end of the day it becomes a win-win for the economy, inventors and the regulators, rather than simply saying this is what you must do. This will not encourage innovation and creativity. The regulators need to work with developers in a controlled environment to analyse the risks, challenges and benefits a product offers. Sandboxes are useful for this process. We now have an international regulator, the Global Financial Innovation Network which is an association of 12 regulators led by the banking regulator in the United Kingdom, the Financial Conduct Authority. This is because technology is borderless. You can sit here in Lagos and be doing stuff in the United States of America or Canada. So, if you are regulating me in Lagos and what I am producing is being used in the U.K. this means you need a cross-border regulator. Cybersecurity is the number one risk factor for fintech and it is borderless. Still on regulation, the Central Bank of Nigeria recently raised

the minimum requirement for fintech companies to N5 billion, do you think this stifles the sector? Well that statement is misunderstood. The Central Bank of Nigeria has been providing regulation for various players within the financial services sector. What they have done with the recent update is to register or provide regulation for what they call payment service banks. These banks that are run more like digital institutions that will be operating a lot more in the rural and semi-urban areas as part effort to ensure more people are financially included and more people have access to financial services. And the capital requirement is not N5 billion, because they are tiered, depending on how you want to play. Just like the conventional money deposit banks, there are three different categories, the highest category is N25 billion and somebody may now say you need N25 billion to set up a bank. No. If you want to set up a regional bank, the capital requirement is different from one that has national or international coverage. Yes, N5 billion is the upper limit for payment service banks but there are other categories that require less amount of money. What you may then say is, even if it is N1 million, is that something that encourages growth and development in the industry. It is not only fintechs, there are many institutions that can get that licence. For instance, subsidiaries of telecommunication companies, (telcos) can get the licence too. MTN Nigeria is interested in this space but of course it will not operate as MTN but will need a special purpose vehicle to be able to buy into that. Supermarket chains can decide to have a licence because if you have stores all over the country then you already have the outlet to be able to

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Interview

t for developers and operators’ provide such financial services. There is no specific regulation for fintech companies to-date in Nigeria. What regulators are doing is providing regulation for different aspects and players in the financial services sector. But again the definition of fintech can be confusing. I always look at it from two differently definitional approaches. Fintech is just financial technology and has always been in existence. This is why you have incumbent companies that have been in existence for more than 100 years. The application of financial technologies has mostly been in the financial services sector. It is only in the last few years that fintech took a life of its own. This makes some define fintechs as just start-up companies. This is a narrow definition of fintech. Companies like Interswitch and Visa qualify as fintechs because they use financial technology to drive their operations. Your next conference is tagged Africa Fintech Festival, how much of Africa are we going to see during this conference and why have you called it a festival? Let me give you some historical background. Fintech Associates Limited conceived the idea of a national fintech conference in 2017. This was even before the fintech association of Nigeria was birthed. One thing we realised was that we needed to coordinate the fintech activities in Nigeria. Everyone was just working in silos. So our company decided to bring together some institutions to form the fintech association of Nigeria. We had the first conference in April 2017; it lasted for a day and was adjudged extremely successful by participants both from Nigeria and other countries. Most of the post conference feedback suggested we make it a two-day event or even three days. So, when we were organising the second conference in January of this year, we had formed the fintech association of Nigeria, which is one of the outcomes of the first event. So, we had the second conference in January, a two-day event that came out very well. That is where the idea of having an African fintech stakeholder network came up. I was challenged to make this happen by reaching out to other African countries, so that the continent has one strong voice. This helped the various countries share ideas, compare notes. This is one of the outcomes of the second conference. This has led us to create the African Fintech Festival. We do not want these activities to just be a talk shop; we want to build some fun into it and some side events. Again, it will not be held in one location. Subsequently, it will held in different African countries. This first one was planned to hold in either Ethiopia or Ghana but it was decided that we host it in Lagos, Nigeria. It will be two days of conferences and three days of other events. For instance, on Monday December 03, a day before the conference, we are going to have a fair for start-ups from Africa. We are bringing in institutions from across the world to interact with these start-ups. Based on the impact of the African Fintech Festival we are having, the UK government decided to setup the UK-Africa investment group. This will work towards supporting UK initiatives for Africa and I was invited to be a member of the group. They have also decided to make the first meeting of that group as part of the Africa Fintech Festival event. This will hold on Monday December 03. Fifteen or 16 African countries have already confirmed participation and more will do so before the event. The Canadian government is also very interested. They are coming to share experience about how fintech has helped the Canadian economy. The French government is also interested and many other countries. So, we are situating fintech in Africa within the global network. This is one of the reasons for Africa Fintech network. The United Nation’s Economic Commission for Africa based in the Ethiopia is happy this is happening and will participate in the festival. This is a great show of support and

endorsement. The African Development Bank is also very much involved; the president of AfDB will deliver a keynote at the event. This conglomeration of both local and international support convinces us that we are on the right course. You remember that there is the Africa Free Trade Zone (AFTZ) that was setup early this year by the African Union, which will actualise the free movement of people, goods and services within Africa. We see this as a very important thing that can support the growth of technology. I said earlier that we want to create an Africa-wide market so that when a developer develops a product in Nigeria, she should not be thinking about Nigeria alone as her market. She should be thinking about Africa, one billion people as her market. This is because the challenges and issues in Nigeria are the same in Morocco in Ethiopia. So, if somebody in a small country like Togo is developing something he is not looking at his market of four to five million people, he is looking at a one billion market. The next level of course is to scale up. We will approach the African Union with the suggestion that someone who has registered a fintech company in Nigeria and wants to operate in Ghana or Uganda should not be required to setup and re-register the business in those countries and have different laws guiding the company’s operations in those countries. We should have one Africa registration like we have in Europe today. This is unlike the current practice of having companies register different entities in different countries. It is an advocacy we intend to drive to remove some of these hindrances. Blockchain, cryptocurrencies what is the position of regulators? We will have a session during our conference on blockchain and cryptocurrencies. The regulators will be there to talk about it. Blockchain is being used now in Nigeria. The Nigerian Customs Service has used the technology to increase their revenue. The comptroller general is coming to talk about the experience of the Nigerian Customs Service on blockchain adoption. I know of companies using blockchain to drive supply chain management and will be coming to speak at the conference about this. There are companies using blockchain to drive agricultural production, they are also coming to speak at the conference. What regulators are worried about is just one aspect of blockchain application – cryptocurrencies and bitcoin in particular. Blockchain technology or distributed ledger technology is the platform on which some of these things run. But cryptocurrency has been the most popular usage. However, now we have other user cases that will be made known. Blockchain is used for land registry. Some of the blockchains features that endear it to many include permanence and transparency. This is your second festival this year; you had one in January, why do you have two in one year? Yes this is second conference this year but this one was designed to take place in Addis Ababa, Ethiopia. In fact the African Union had provided us with venue for the conference but the plans changed and we decided to host it in Lagos. The fintech communities in those countries have not been brought

together and we did not want to deal with individual companies. This is why the first thing we should do is to support some of those countries to create their own national fintech associations that will bring everybody together. Egypt, Ghana, Uganda already has one and Ethiopia is putting one together. So, the next African fintech festival may still be in Nigeria because we do not want to lose traction. Nigeria’s national fintech conference will still hold in Nigeria. But African fintech festival will rotate among member states and driven by the African fintech network, which will be inaugurated during at this conference. In the context of cyber-attacks and cyber-security concerns, what should we worry about for fintech in Nigeria? Life itself is risk. When we wake up in the morning we have no idea what might happen to us during the day but we will not because of this and say we will not go out. It is the same thing with innovation and technology. The people that were sent to Mars did not know whether they were going to return, it was a risk that paid off. We need to focus on the positive. Yes, because of instantaneity and immediacy that come with technology adoption, the likely hood of fraud is higher because transactions are faster. Therein lays the risk. This is why institutions continue to improve on cyber-attacks exposure. We must admit that the risk exists and take steps to forestall and mitigate them. Organisation need to address current risks and anticipate future ones. Only organisations with this mindset will be on top of their game. Fraudsters are creative people and organisation must anticipate their thought processes. Some organisation employ ethical hackers to help them test how secured their cyberspace is. It is a running battle. The risk is real but some organisations are finding ways to deal with it. What are the most exciting new developments in the fintech space? It is very difficult to keep track of developments in that space, it is only when these things are announced or you have access to privileged information that you can really know. That makes it both fascinating and interesting. The most popular applications we have had so far have been the payment systems because that is

the easier thing to do. Today there are many other interesting applications. There are many user cases to refer to. I spoke at an Oracle event recently and was amazed the level of innovation they are spearheading. For artificial intelligence, two years ago, if you talked of AI in Nigeria it sounded like Greek but today some AI applications are with us. Banks use AI today called chatbot to be able to interact with you. You have heard about Leo and Ada. This is machine learning in action. Mention two things we need to do to revolutionalise this sector. The private sector should drive activities in this space. But the nature of our economy in Nigeria is such that government still plays a lot of influence on what businesses do. So, government should be prepared and ready to support this sector in an open and transparent manner. Secondly, still talking about government, private sector collaboration is needed. Besides, government needs to digitise its operations. For instance, the Canadian government appointed for the first time, a minister for digital government from the private sector, who has been in the technology world. Nigeria has a very youthful population that is digitally savvy. There is a UK Prime Minister ambassador for fintech who is also co-chair of the UK-Africa Investment Group. Nigeria has been criticised as importing and maintaining technologies and not developing them, how is this playing out in fintech? Are there specific initiatives that promote local developers? There are many things universities can do for the economy. Let me note that some of the global technologies we have today were incubated when their developers were still undergraduates. Some of them started it in the university environment as academic projects or just some pastime. Many initiatives are going on in Nigerian universities. Our company has what is called a university based incubation and acceleration programme. We have signed on with universities such as the University of Ibadan, FUTA, Akure, and some others where we have a cohort of students who have ideas; we pick them and attach them to innovation laboratories and hubs, within the country and different parts of the world. We have investors as partners too so that when these developer need funds we

connect to investors. Sometimes a developer needs seed funds from family and friends and this is something we can do, probably within the range of N2 million. Now, when a prototype is ready to go market and gone through a lot of discussion and incubation mechanism, they might then need $1 million or $500, 000 we then go to major investors. We are particularly associating ourselves with DMZ of Ryerson University, Toronto, Canada. This is the number one university based incubation programme in world. Early this year, about 850 universities were assessed in terms of the programmes that they have from university based incubation. We have had two sessions with Ryerson University and they are ready to work with us. They are willing help get work permit, so that the Nigerian students can come and live in Canada and pursue their dreams. There are other programmes such as the Silicon Valley. Some students have passed through and have been adopted by some of these universities. What are the chances of fintech companies looking to initial public offers (IPOs) as way of raising funds? As we get more interest into fintech, adopt technology and use it to drive activities in both the public and private sector, we will likely have more fintech companies listing on the stock exchange. This is because the companies with become larger and need funds for expansion. A pointer to that is what we did with the Nigerian stock exchange last year. The NSE wants to create a growing model market for new companies, in order to help them with funding. They came up with a draft policy and sent to us to evaluate as an association. We brought in about 22 start-ups, took them to NSE, the stock exchange presented what it had in mind for them. After the interaction the NSE realised there were so many things it had not considered in the draft policy document. This is a clear case of regulators listening. In the past a regulator simply came up rules and players had to obey. The Securities and Exchange Commission has set up a fintech division based on our interaction with them. We have suggested that they have a road map for fintech adoption in the capital market. They approved our recommendation as an association. A committee has been created to develop a roadmap for fintech adoption in the capital markets. A lot is going on at the CBN too; they have created a payment division, just last month. The division will focus on the initiatives that coming up in the fintech space. So there is a lot. What are some of the challenges FinTechNGR has faced? The association was formed in June 2017. So you want to first evaluate to see what you have done and what you have not done. We recently had a strategy session with Pwc advisory. This was meant to help us look at where we are coming from, where we are today and where we are going to. We came out with a roadmap for the next three years. What will fintech in Nigeria be in the next three years? Our achievements so far can be divided into three objective areas: connect (people), advocate (legitimacy and acceptance) and accelerate (how to grow the ecosystem). We have done well but we can do a lot better.

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Monday 03 December 2018

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Monday 03 December 2018

real sector watch C002D5556

Monday 03 December 2018

BUSINESS DAY

Enhancing standards to reduce rejection of Nigerian products in global market ODINAKA ANUDU

igerian exporters often suffer losses resulting from rejections at the borders of destination countries. The European Food Safety Authority rejected beans from Nigeria in 2015 because it contained between 0.03mg per kg and 4.6mg/kg of dichlorvos pesticide, when the acceptable maximum residue limit was 0.01mg/kg. The ban has been extended to 2019, which shows that Nigerian food processors and exporters are yet to change. A Nigerian businessman recently exported cans of 35cl malt drink numbering into hundreds of thousands to Kenya. The products were on display in the East African country until they caught the attention of the Kenya Bureau of Standards (KEBS), which subjected them to measurement tests. The products were subsequently found to be 32cl, rather than 35cl. The KEBS withdrew them from the Ke-

Asamah Kadiri, president, Etsako Club ‘81 receiving a pack of Bournvita from Bala Yesufu, director, corporate and government affairs, Cadbury West Africa, flanked by Fola Akande (2nd left), Cadbury’s company secretary/chief counsel, during a presentation ceremony at the Company’s head office in Agidingbi, Lagos State, recently.

nyan market, banning the malt drink—including its supplier—from the country for good. “Technical regulations, standards and procedures for determining conformity have increasingly become important drivers of market access for non-oil export,” Olu Alaba, a trade policy expert, said at the Policy Development Facility (PDF) II on non-oil export symposium held in Lagos. Alaba said conformity to standards is key to mar-

ket access, adding that collaboration between the public sector and reputable private institutions is inevitable as the easiest route to overcoming international market access constraints. “C o l l a b o ra t i o n , n o t competition, is key to ensuring credibility of Nigerian products in the international market MSMEs can lean on credibility of voluntary certification institutions to exploit expanded market entry op-

portunities,” he added. Vincent Isegbe, coordinating director, Nigeria Agricultural Quarantine Service (NAQS), identified absence of phytosanitary certificate and lack of additional declaration as two among many reasons why Nigerian goods are rejected. “Even if you have everything in place, the exporter will like you to give him additional information, such as date of harvest and others. Again, if the com-

modity has a quarantine pest in it, your products will be rejected. There was a case where pest was found in one container and 50 or more containers were put on hold,” Isegbe said. He explained that it is important to get a produ c t ’s b o t a n i c a l n a m e, rather than its local name, when doing an export business. “If you carry vegetables and it is yellowish or look weak, the destination countr y may reject the vegetables. Some countries are non-conforming and Nigeria is one of them. If a container is coming from Nigeria, even if they find out that the contents are clean, they will still express some doubt,” he disclosed, urging exporters to begin to restore the confidence of destination countries to Nigerian products. Simidele Onabanjo of the National Agency for Food and Drug Administration and Control (NAFDAC) argued that exporters evade the agency’s processes without knowing that there are no fees attached to scrutiny of most export products by the body. “A lot of chemicals are

used during production, processing, transportation, which is why if you do not go through the right process, your products may be rejected,” she added. Simeon Umukoro of the National Quality Infrastructure (NQI), United Nations Industrial Development Organisation, said trust will begin to exist when Nigeria can certify all products. Umukoro urged exporters to identify private regulatory bodies that can help them navigate through the hurdles and meet regulatory requirements, adding that through the efforts of the NQI, Nigeria now has a metrology institute in Enugu, South-East Nigeria, which can service the whole of West Africa. John Isemede, a trade consultant and former director-general of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), urged regulatory agencies to be sincere with exporters. “Do we have export policies and programmes? All the government agencies, including the Customs, are interested in exports. We have to change,” he said.

ment and ensuring that manufacturers comply with environmental regulatory standards for the benefit of everyone. Segun Ajayi Kadir, director general of MAN, also speaking at the event, said that the forum was aimed at fostering a more cordial relationship between members of MAN and the regulatory agencies in order to have a better understanding of the policies and functions of these agencies and to explore areas of collaboration and partnership to further improve the business environment for manufacturing companies in Nigeria. Kadir, represented by Ambrose Oruche, director of corporate affairs, further stated that businesses cannot thrive in an un-

conducive environment and therefore the regulator y agencies should help proffer solutions to challenges being faced by the members of the association in order to ensure sustainable development and improve the ease of doing business in Nigeria. Okerayi Adekunle, a member of the association present at the forum, said that the interactive forum was quite encouraging and helpful as he was able to directly express his grievances on duplicated cost and repeated charges especially by the officials of the NEDSRA regulatory agency, but armed with the information obtained from the DG himself, he was ready to challenge any questionable action and charges of the officials.

MAN carpets regulators over duplicated charges Faminu Gbemi

embers of the Petroleum Products sub-group of the Manufacturers Association of Nigeria (MAN) have voiced displeasure regarding over-regulation of their activities in the sector, stressing that paying duplicated fees for the same services to different regulatory agencies is burdensome. Ad e s o j i Fa gb e m i , chairman of the Petroleum Products Group of MAN, said at an intera c t i ve f o r u m w i t h t h e National Environmental Standards Regulatory and Enforcement Agency (NESREA) and National Oil Spill Detection and Response Agency (NOS-

DRA), held in Lagos last Thursday, that members of the association have complained bitterly about being over-regulated by different agencies. He said paying duplicated fees for the same purpose is burdensome and affects margins of manufacturers negatively. “The petroleum sector is being regulated mainly by the Department of Petroleum Resource (DPR), but along the line, some other regulatory agencies come in and administer the same function that tends to overtake or limit the functions of the DPR w ith each of them requesting for consultants approved by them.” He continued that this has put the group members under pressure and has also made the

bu s i n e s s e nv i ro n m e nt unfriendly for them, all of which are contrary to government’s plan on ease of doing business in the country. “We have this pool of consultants who are providing these services. We want a situation whereby their activities are streamlined within a body. So, for any consultant registered with any of the agencies either DPR, NOSDRA or NESRE A , their repor ts when tendered will be accepted by any of the organisations.” He further stated that each agency should clearly define and synchronise their responsibilities while ensuring that operators are not troubled with the same regulatory requirements from different agencies.

Speaking at the forum was Peter Idabor, director-general of NOSDRA, repres ented by Daniel Okoromu, said that they are charged with the responsibility of responding and investigating oil spills and waste spills while conducting necessary inspections when due. Lawrence Chidi Anukam, director-general of NESREA, who replied to the grievances of the association members, clarified that the environmental audit dues are to be paid once ever y three years and that the members are allowed to search for consultants themselves provided that the consultants are approved by the agency. He further stated that the agenc y focuses on protection the environ-

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Monday 03 December 2018

An auto industry in tatters Nigeria’s auto industry is in a fix as a policy meant to protect the sub-sector is hurting both local vehicle assemblers and Nigerian middle-class, who now cannot afford new cars, writes ODINAKA ANUDU

amuel Ogundele jumps from one commercial bus to another in the sprawling city of Lagos. Two weeks ago, his three year-old car had broken down along Awolowo Way while heading home from his Ikeja office. He is the managing director of Skyworld Industries, a company in food packaging industry, but he cannot afford a new car. He had bought a used car, known as ‘Tokunbo’, three years ago for N900, 000, but this was already an 11-year-old vehicle. All together, the car was about 14 years old when it broke down. His medium-scale company cannot afford to buy him a new car, which now costs around N15 million. Ogundele now uses Uber taxis for official assignments or when there is an urgent appointment to meet. “I earn around N300, 000. So, I will need to work for four to five years to get a new car. That is if I hold onto all my salaries for the years without spending anything. You and I know it is impossible,” he tells me. He is certainly not the only one in this. Chief executive officers of top deposit money banks in Nigeria earn around N15 million to N20 million annually, so may not be able to get new vehicles, except if they refuse to spend anything from their salaries. Not so before Back in 2012, Nigerians could afford to buy new cars at N4 million each. Six years after, prices of new cars have

Coscharis Ford Assembly Plant in Lagos

shot up to N15 million per vehicle. Experts point fingers at the National Automotive Industry Development Plan (NAIDP), which appears to be pricing out the middleclass who makes up a large percentage of buyers. In 2013, the then government of Goodluck Jonathan introduced the NAIDP with a view to ensuring the survival and growth of the Nigerian automotive industry using local, human and material resources. It was a well thought-out policy aimed at enhancing the industry’s contribution to the

A locally assembled vehicle by Innoson Motors

GDP, especially in the areas of transportation of people and goods. It was approved in October 2013, with a focus on bringing back vehicle assembly operations and developing local content. Then the duty & the levy The policy makes provision for commercial vehicles to attract 35 percent duty without levy. Cars are to attract 35 percent levy charged on the fully built units (FBU), in addition to the 35 percent import duty. Completely knocked down parts (CKD), semi knocked down parts I (SKDI) and semi knocked

down parts II(SKDII) for use by local assembly plants attract zero percent, 5 percent, and 10 percent respectively. Assembly plants importing FBU for cars pay 35 percent duty without levy, whereas commercial vehicles attract 20 percent duty without levy, in numbers equal to twice their imported CKD/SKD kits. More incentives To increase local assembly of vehicles, all machinery and equipment for tyre production are duty and Value Added Tax (VAT) free. Also, all machinery and equipment imported for the purpose of vehicle assembly attract zero percent import duty and are VAT free. Furthermore, pioneer status were granted to all tyre plants. There was also harmonised 20 percent duty on car, lorry and bus tyres. Yielding fruits The policy initially yielded fruits. This is because local manufacturers in any country often envisage growth any time certain restrictions are placed on importation. Fourteen existing assembly plants and body builders, which were on the verge of closure, had a new lease of life and obtained or renewed technical partnership agree-

ments with global original equipment manufacturers (OEMs) after the policy was approved. Some of them were VON, PAN, Innoson, Anammco and LeylandBusan. These companies kick-started assembly in 2014. Sixteen other companies signed commitments with technical partners to set up assembly operations in 2014, said Aminu Jalal, the then director-general of the National Automotive Design and Development Council (NADDC). Companies such as Nissan, VW, Hyundai, Kia, Honda, Shacman, Sino, FAW, Ashok-Leyland and FAW started assembling buses in Nigeria. Also, new companies, including Century Auto (Toyota), TATA, Coscharis, Auto (FORD, Joylong, Dongfeng), Globe Motors (Higer), Leventis(FOTON-Diamler), Kewalram Chanrai(GM, Mitsubishi) and Tilad were ssued certificates to assemble vehicles. Where are the cheap cars? The ultimate aim of the immediate past government was not only to develop a local auto industry but also to provide cars at cheaper rates. Five years down the line, Nigerians do not see cars

anywhere. Even they see these cars, they are expensive. A sample list of 1.6-litre engine cars used by banks and other corporate buyers have had their prices double between 2014 and 2017. In 2014, a brand new Kia Cerato 1.6 litre automatic transmission saloon car cost N3.96 million, but this went for N9.54 million in 2017, according to BusinessDay findings. A Picanto one-litre engine capacity car went for N2.25 million three years ago, but was sold for N4.95 million in 2017. Similarly, Toyota Corolla 1.6 litre GLI automatic transmission fabric was sold for N4.45 million in 2014, but it surged to N18.9 million last year. During the same period, a Mescedes-Benz C200 luxury Sedan, which was sold at a dealership price tag of N10.5 million, cost N25 million in 2017, while a G63AMG model sold for N50 million currently wears a price tag of N78 million today. No components industry anywhere The components industry, which was supposed to support the local vehicle assemblers, is still not in existence. Muda Yusuf, director-general of Lagos Chamber of Commerce and Industry (LCCI), wondered in an interview how an auto industry could be developed without a functional components section. Currently, all the components makers have gone out of business in Nigeria. In 2015, the only surviving brake pads and lining maker, Star Auto Industries, collapsed, as it was unable to compete with cheap Chinese products and could not pay back a loan from the Bank of Industry. “It is difficult to compete with Asia, with substandard, cheap brake pads. I am not happy that import duty on brake pads fell from 25 percent to 10 percent. This is the situation since 2004 and government has done nothing about it,” Chidi Ukachukwu , CEO of Star Auto Industries, told BusinessDay before closure. Michelin and Dunlop, local tyre producers, went under 10 to 11 years ago.

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real sector watch Dunlop is now DN Tryes and imports tyres from all parts of the world into Nigeria. “Now ask yourself, how many made-in-Nigeria vehicles have you seen, compared with the demand?” Muda Yusuf, director-general of Lagos Chamber of Commerce and Industry (LCCI), asks. High production cost Local car makers are facing what they describe as ‘ extremely high cost of production’ caused by lack of regular public power, multiple taxation and poor access to finance. Frank Udemba Jacobs, immediate past president of the Manufacturers Association of Nigeria (MAN), says 40 percent of manufacturers’ expenditure goes to alternative energy sources. Power sector expenditure in the manufacturing sector has been on the rise since 2014/15. Manufacturers spent N51.35 billion on alternative energy sources in the second quarter (H2) of 2017; N66.03 billion in the first half (H1) of 2017; N62.96 billion in H1 of 2016, and N69.99 billion in H2 of 2016, according to MAN. Average daily electricity supply in H1 of 2017 declined to five hours, from seven hours supplied in the corresponding period of 2016 and eight hours in the H2 of 2016. There was, however, a nine-hour average power supply in the second half of 2017. “It is no more news that manufacturers in Nigeria currently self-generate as much as 13,000MW through alternative sources of energy in order to stay afloat. In fact, members of MAN expended

over N129billion on alternative energy generation in 2016 and the cost of alternative electricity generation alone constitutes about 40 percent of production cost. With such high costs, made-in-Nigeria products will hardly be competitive,” Jacobs says. In fact, manufacturers have given up on power distribution companies (DisCos), prompting them to form a corporation known as MAN Power Development Company to cater to their energy needs. The industry also suffers lack of access to finance. Results of survey conducted by MAN shows that the average interest rate banks charged manufacturers in H2 of 2017 was 23.05 percent as against 22.65 percent in H1 of 2017 and 21.4 percent in H1 of 2016. Also, manufacturers in various states pay 54 types of taxes and levies as against 38 in 2013-14. “These taxes need to be amalgamated into one or a few, since the whole tax cycle is a multiple chain of taxes on the same income stream,” Vivian Chigozie-Nmonwu, tax expert and lead partner of Vi-M Professional Solution, says in an interview. Then importation of rickety vehicles Due to the 35 percent levy and 35 percent duty on imported vehicles, amounting to a total of 70 percent, Nigerians have resorted to the importation of what is known as ‘accidented vehicles’. Importers of damaged or accidented vehicles officially enjoy a rebate of 30 percent. What this has done is to encourage the importation of rickety vehicles, which make

An accidented vehicle being pushed by security agents

A porous Nigerian border

up 70 percent of imported cars today, analysts say. The age of most imported used cars in Nigeria is 15 years, whereas that of Algeria, Angola, Chad, Mauritius and Seychelles is three, according to a research done by PwC, presented by Andrew Nevin, partner and chief economist at PwC Nigeria, in Lagos. “Imported used car segment (Tokunbo) dominates the industry, accounting for 74 percent of all vehicle imports, making Nigeria the largest in the world. Ten percent of imported cars are less than three years old, while 63 percent are over 11 years,” Nevin says. Smuggling is also on the rise. “People now divert vehicles to Cotonou. What it means is that government is encouraging smuggling, thereby losing revenue,” Yusuf says.

No market for local manufacturers Market for new cars in the country is just 6,999 as against 555,716 in South Africa; 181,001 in Egypt ; 168,913 in Morocco, and 94,408 in Algeria. “There is no market for even the investors,” Thomas Pelletier Thomas Pelletier, managing director, CFAO Nigeria, states. “The fact is that cars are too expensive and people cannot afford to buy. So, how will local assemblers sell? We have seen a market drop of 75 percent in the last three years. Increase in duties has increased smuggling,” Pelletier discloses. A policy in tatters The auto policy encourages importation of damaged cars, which now litter Nigerian roads, say observers. The

cars are competing with locally assembled cars, making it difficult for the assemblers to sell. Local vehicle assemblers themselves do not have cheap or affordable vehicle five years after the policy, which now places all the players in a serious dilemma, analysts say. The National Bureau of Statistics says Nigerians imported 105,189 units of vehicles in 2016 through the ports and raised the number to 181,404 (72.46 percent increase) in 2017. The capacity of 54 licensed asemblers is 400,000, the same as Morocco with only two assembly plants. “Imported used car segment dominates the industry, accounting for 74 percent of all vehicle imports, making Nigeria the largest in the world. Ten percent of imported cars are less than three years old, while 63 percent are over 11 years,” Nevin, earlier cited, says. Banks in Nigeria are also buying used vehicles. “Even with Automotive Policy, we have not slowed down on the number of cars we import. In some areas, they will be described as scraps and allowed. In some areas, they will be allowed into the borders of neighbouring countries. For those that come through the ports, you have to ask yourself a question: If we want to develop a market for 54 companies that have got licenses with 410,000 capacity plants and we import a huge number of used vehicles, how are they going to support vehicles being assembled, since the one assembled locally will be more expensive? Naira is weak, interest rates are high and the banks have

taken collateral and they want their money. I need to recoup my investments as quickly as possible. The cars are already expensive ab nitio and I am now competing with cars that are one-thirds to one-fifths less the price?” Bambo Adebowale, chairman, Auto and Allied Sector group of LCCI, asks. He wonders why Nigeria is promoting the manufacture and assembly of combustion engine vehicles when the original owners of these vehicles have announced plans to phase them out. Which way Nigeria auto industry? Adebowale suggests that there is a need to review the policy. He maintains that car dealers and auto assemblers must come together to review the policy in order to have a win-win situation. On his part, Pelletier suggests that Nigeria needs an auto financing scheme for both the buyers and the assemblers. He stresses the need to incentivise local assemblers to enable them come up with cheap vehicles. “Without structural reforms, poor infrastructure will impede Nigeria’s ability to leapfrog and adopt emerging global trends. Consequently, Nigeria risks being a dumping ground,” PwC recent report says. For Ajibola Ajiboye, chairman of car dealers in Nigeria, the economics must be right. “The real issue is affordability. We control 80 percent of the market today because used vehicles are cheaper. So, let there be measures to cut down prices,” Ajiboye says.

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real sector watch Our flexible packaging solutions bring value to Nigeria—Dow In this interview with ODINAKA ANUDU, Lanre Dairo, public & government affairs manager (West Africa), Dow Chemical Company, speaks on the company’s footprint on the West African region. Tell us about your operations in West Africa. ow has a longstanding history in West Africa. Our corporate presence in the region started in the 1990’s, though political and business reality mandated operating solely through distributors for a period until 2012 when Dow officially re-entered West Africa with corporate offices in Ghana, followed by Nigeria in 2015. Dow serves West Africa from these two countries, with Dow Ghana, a sales licensed entity, currently the hub for operations and business development for Francophone West Africa. The plan is to have an office in Ivory Coast that will be the hub for Francophone, while Nigeria remains our regional head office for West Africa. Dow West Africa is positioning to support rapid growth in the region by ramping up local footprint, creating greater access to global expertise and providing growing product capacity through our Sadara joint venture – the largest chemical complex ever built in the world in a single phase, with 26 integrated worldscale manufacturing plants, over 3 million metric tons of capacity per year and a total investment of about $20 billion. Dow uses its strengths as a technology and innovation leader – committed to sustainability - to build and advance existing partnerships and forge new mutually beneficial relationships in the region. Dow businesses in the region are agro sciences, coating materials, polyurethanes, plastics, oil & gas, performance systems and industrial solutions, with shared selling for other businesses such as water, microbial control, construction chemicals and consumer products. The future growth potential of the market should have most (if not all) Dow businesses fully represented in the region.

In specific terms, how much contribution has Dow made to the Nigerian

and the West African manufacturing sectors within the last five years? Dow combines the power of science and technology in helping manufacturers grow and be more sustainable. Our innovations are found in a wide variety of industrial settings. We have helped in the manufacturing of goods and services with additive solutions that minimiSe friction and heat in mechanical processes; manage the oil and water interface; deliver active ingredients for maximum effectiveness; facilitate dissolvability, and enable product authentication. Beyond our products and services, it is our view that by partnering with other private sector and multilateral institutions or governments, we can fulfil a significant role through involvement in the development of manufacturing-focused public policy. Dow has been successful in completing and implementing advanced manufacturing plans for some of the world’s largest markets. These include Argentina and Australia as well as one for Brazil (on-going). With momentum currently shifting towards sub-Saharan Africa, many governments on the continent have prioritised manufacturing and industrialisation as a means to kick-start their economies and increase the number of jobs and boost skills. With governments recognising the importance of manufacturing and looking to the private sector for increased collaboration, Dow is in a unique position to support them in the achievement of their development goals by transferring our own expertise, experience and solutions to our government partners and their projects. How much has Dow invested in West Africa since 2013 when it entered the regional market? We currently cover 23 countries in West Africa from Nigeria and Ghana and we are considering opening a third office in Ivory Coast with plans to build local warehouses, and establish semi processing plants.

that will lead their respective industries through productive innovation to meet the needs of customers and help solve global challenges. DowDuPont brings together the complementary portfolios of Dow and DuPont, two innovative, science-based companies that hold leadership positions in the agriculture, materials science and specialty products industries. Working together, we intend to create three strong, independent companies that will be more competitive than either company could be on its own and well equipped for science-driven, profitable, long-term growth.

Lanre Dairo

Dow West Africa is positioned to support rapid growth in the region by ramping up local footprint, creating greater access to global expertise and providing additional product capacity from our Sadara joint venture – the largest chemical complex ever built in the world in a single phase, with 26 integrated worldscale manufacturing plants, over 3 million metric tons of capacity per year, and a total investment of about $20 billion. Tell us about the number of jobs you have created so far. Our operations in West Africa support the local manufacturing sector and have a key role in job creation and long-term prosperity. It employs millions of people, drives research and development, drives innovation, creates new products, while pushing the frontiers of science and technology. No other sector has the power to create more jobs. For every job created in the manufacturing sector, three to five jobs are created across the economy. We need to develop and implement a national strategy focused on creating an environment that will

enable this manufacturing renaissance to take hold. How are you dealing with the competition in subSaharan Africa, especially Nigeria? At Dow, we are constantly evolving and innovating to meet our customers’ needs and stay ahead of the competition. At the core of this is our expertise. Behind every innovation at Dow is a team of world-class researchers able to move transformative ideas into real-world solutions. Our technical specialists, market knowledge, resources, and relationships deliver innovative solutions to the markets we serve. Dow’s commercial and technical expertise is strategically located across 16 countries in the Middle East, Africa and Turkey (MEA&T) region, allowing us to be close to our customers and ready to support their investment plans. Specifically, we have five technical experts located across the region, with three in Africa. Additionally our recent global merger— ‘merger of equals’— creating DowDupont, brings together the complementary portfolios of Dow and DuPont to create three strong competitors

Dow has been in the forefront of championing flexible packaging in West Africa. What is the level of acceptability of flexible or plastic packaging in the region? Firstly, we should always remember that a package protects the product and serves as a vessel to take the product from the factory floor to the point of purchase. Better performing packages will positively affect the bottom line, because waste reduction leads to lower costs and better profitability. Good barrier properties lead to longer shelf life, so fewer products are wasted, and better seal integrity may lead to longer shelf life, much to the brand owner and consumer’s satisfaction. Dow’s solutions are created with the entire product life cycle in mind, and our experts can help customers make the right decisions to optimise cost savings. We understand that volatile prices and rising costs of raw materials increase production costs and reduce margins for manufacturers, who are increasingly searching for cheaper substitutes. This is where our flexible packaging solutions bring value. Their light weight ensures lower transportation overheads (as the vehicles use less fuel) and reduces overall supply chain costs. Do you have confidence in the West African market, considering peculiar issues

such as poor infrastructure, multiplicity of taxes, challenging politics and policies, among others? Absolutely. Challenges notwithstanding, the potential is undeniable. West Africa is crucial to our company’s future growth and business success. It is the last frontier. There are few places in the world with such high potential growth rates, strong commitment for investment and untapped opportunities. While the region faces economic headwinds today – as a result in lower commodity prices, currency issues, droughts, political uncertainty, and security issues – West Africa remains a vital part of Africa, a growing continent in the world, just behind Asia. This is because some of the fundamentals are strong. Investment in infrastructure remains high. It is the second largest destination for Foreign Direct Investment (FDI) inflows in the world, behind the Asia Pacific region. Banks are healthy: the 200 largest banks have combined assets worth $1.5 trillion - about 75 percent of the continent’s GDP. So not only is the continent abundant in natural resources, it also sits on significant untapped financial resources. The Investment Focus on Africa has become long term – also for Dow. Dow has what Africa needs: Science and technologies for infrastructure, construction materials, mining, oil and gas, water, clean energy, packaging and consumer goods. I don’t have to remind you that we are not alone in seeing the opportunities. Many Fortune 500 companies are already very strong in West Africa or have their eye on the region as well. What are your future plans for West Africa, particularly the Nigerian market? Dow is positioning to support rapid growth in Nigeria and the larger region by ramping up local footprint, creating greater access to global expertise and providing additional product capacity starting from our Sadara JV.

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In association with

Meet Sherifat Adeleye, the construction entrepreneur ODINAKA ANUDU

herifat Olabisi Adeleye is a civil engineer by training and profession. She owns a civil engineering, construction and facility management company called Shlaad Engineering Company & Handyman Services. The firm maintains offices and homes from start to finish. It is also in the business of interior decoration, with a special focus on marketing of throw pillows, duvets and others related products. Sherifat started this business in 2010 on a part-time basis, but went into it fully in 2016. It is not completely wrong to say that Sherifat is proverbially treading where angels fear to tread; she is playing in a profession purely dominated by men. But she remains undaunted. “The number one thing is that once you are in this kind of business, you do not have to see yourself as a woman any longer,” she tells StartUp Digest. “You have to see yourself as a man and you need not be emotional about it. You leave the ‘woman’ aspect of you at home and let people see the boldness.” She has master’s degree in Civil Engineering, working in construction and facility management firms for 15 years. The entrepreneur started ‘anyhow’. For her, what mattered was to set up the company first. This was, perhaps, why she started in her home. “With trainings and determination, I had to learn and re-learn. You burn your fingers in this kind of situation. At the end of the day, you may put your own money, but you will smile when success beckons,” she says. ”I started from my house. That’s how I ran the business for seven years before moving into an office. I had to put a face to my company; I had to put a physical structure. Get-

Sherifat Adeleye

ting your client is the biggest thing, not really an office,” she explains. She notes that the journey has been overwhelming and profitable, but riddled with challenges. Sherifat cannot really say that the number of her clients has shot up. But she believes she is getting there. “Once you are able to give your clients the best, there is always continuity. Regarding being overwhelming, you have to prove that you can do it, being a woman. You have to be on top of your game; you have to be detailed and you must do the extra work for people to come back. Integrity is something you have to build,” she states. The construction industry in Nigeria has been on low ebb since 2015 and, especially 2016, when recession hit the country. But the sector is beginning to see growth. Recent data by the National Bureau of Statistics (NBS) show that the sector grew by 7.66 percent in the

second quarter of 2018 from -1.54 percent in the first quarter and 4.14 percent in the last quarter of 2017. The entrepreneur says though it has been very challenging operating in the construction sector, she has been able to wade through hurdles because of good planning. “I saw that if you are able to plan your business, it will keep growing,” he says. Even though there is much emphasis on business plan, Sherifat believes that some of things she has heard in this area are more theoretical than practical or realistic. “Business plan is a big word. I did not start with a business plan because I wanted to do something side by side my job. But it is more theoretical. Physical implementation is more important. But it is always good to have it. It is always a guide or check on your long- and short-term achievements,” she explains. For her, trust is something no

entrepreneur should joke with. Furthermore, the entrepreneur knows her clients and market. Her clients are high-end people and the middle-class. It is not all ‘uhuru’ for her as she faces challenges like other entrepreneurs. “Our biggest challenge is not even with our clients. Our biggest challenge is with our artisans. They do not want to work and they always look for shortcuts. The tilers in Nigeria do not want to work. “We have been tempted to get tilers from West African countries. Most of them are from Cotonou. Tilers in Nigeria are not ready to work. Some of our youths are not ready to work,” she laments. She believes it is high time parents began to educate their children on the importance of hard work. “We should talk to our wards, that whatever they do, they must do it well. You have to be an expert before you go on your own. Most of the artisans in Nigeria will like to leave as soon as they start. They need practical experience before being on their own,” she admonishes. As part of her expansion plans, Sherifat is planning to collaborate with the bigger names to reach out to more clients. The entrepreneur has borrowed money from a microfinance bank before, but it was not a good experience as the interest rate was 10 percent monthly. “We got stuck in a particular project and the bank was to lend us N1.5 million. But the process and the paper work were just too tedious.” She believes that there is a need to make borrowing easier for entrepreneurs in the country. “This is a challenge because when you get a job and make a profit of N700, 000, all the profit may go to the bank. You may notice that you have just worked for that bank. I think the Bank of Industry (BoI) is doing a good job now, but we need more organisations that can do this.

We also need to set up cooperatives that can do this,” she recommends. She believes Nigeria, more than ever, needs an entrepreneur bank. Nigeria has a housing deficit of 17 to 18 million. A number of citizens do not live in homes, while many live in slums and thatched houses. “This is where the government has to come in. There should be low-cost housing like in the days of Lateef Jakande (former Lagos governor) when people had access to housing and paid little at the end of each month. Individuals cannot do this because they are driven by profits,” she says. She believes that recession has done more good for the Nigerian entrepreneurship ecosystem than evil. “Post-recession, entrepreneurship has really done well,” she says. “Recession taught us a big lesson. In a way, we can say ‘thank you’ to recession because it opened our eyes to the fact that we could open our own business.” For her, entrepreneurship should be a course on its own in higher institutions of learning. This is because not all students would like to be doctors and lawyers or do white-collar jobs, she says. “They should train them so that when they are coming out of school, they do not have to apply for jobs,” she advises. What advice does the entrepreneur have for younger ones? She responds that parents should train their children to learn that going to universities does not mean they must do white-collar jobs. “We need to encourage them to get some skills. We need to empower them. It is good for the economy,” she adds. She has some pieces of advice for her younger self. “If I had known that this would be the path I would take, I would have started earlier. I would have gone for trainings. I didn’t have to wait for this time to do what I would have done 20 years ago,” she concludes.

ASBON wants start-ups to engage in apprenticeship …to hold SME national business awards 2018 Josephine Okojie

he Association of Small Bu si n e ss O w ners of Nigeria (ASBON) has urged business owners in Nigeria to engage in apprenticeship and training before establishing new enterprises. The body says this will help them to scale up. Femi Egbesola, national president, ASBON, made the assertion during a press briefing in Lagos recently. “Lack of skills and apprenticeship is responsible for the high failure rate of businesses within five years of operation. Apprenticeship is a fantastic model of knowledge

and learning to building businesses for scale,” Egbesola said. “Start-ups need to engage in apprenticeship to grow their businesses. They must understand that enduring businesses are not products of chance. They are characterised by clear vision and growth strategies actualised through trainings.” He also identified the country’s difficult operating business environment and government policy inconsistencies as some of the factors responsible for the high failure rates among start-ups. “The economic environment is not friendly enough and the policy is not right” Egbesola stated that despite this, start-ups that undergo any form of apprenticeship program

can position themselves with the skills and experience learnt to build their business sustainably. He also urged entrepreneurs to take advantage of the various capacity-building programmes organised for operators of small business to further deepen their entrepreneurial skills. He stated that the confident level of entrepreneurship in the country has been on the rise because people have begun to realise that it is the only way to drive growth and development. Egbesola also spoke on the association’s upcoming award for small and medium enterprise in Nigeria tagged ‘Nigeria SME National Business Awards.’ “We seek to reward excellence amongst the most committed and

dedicated businesses operating in Nigeria. “We want to celebrate entrepreneurs and game changers of business in the country for their continuing commitment to excellence, developing best practices and innovative strategies.” According to the association, several nominees were brought forward, evaluated, screened and eventually, 18 of the nominees were approved as award winners of different categories. The various awards cut across sectors relevant to the growth of SMEs, Egbesola said. Godwin Emefiele, governor of the Central Bank of Nigeria, is expected to give the keynote address at the event. The award ceremony is sched-

uled to hold 19th of December, 2018 at the Business Club, Ikeja Conference Centre.

Start-Up Digest Team Odinaka Anudu Editor

odinaka.anudu@businessdayonline.com 08067478413

Reporters Josephine Okojie Bummi Bailey Joel Samson Graphics

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Start-Up Digest

How Omolola makes money from helping Nigerians find right ICT accessories Josephine Okojie Over the last decade, Nigeria has experienced an ICT boom. It may be argued that the industry needs more women change makers, particularly when it comes to finding solutions to key challenges. Omolola Onabanjo, chief executive officer of LollyP Accessories, a start-up business that sells ICT gadgets in Lagos, has positioned herself to tap from the opportunity of ICT boom in the country. Omolola’s love for mobile phones inspired her to establish LollyP Accessories in 2011 while still an undergraduate. She started by buying blackberry phones from various stores in Ikeja and selling them in school, making a margin from each sale. The graduate of Olabisi Onabanjo University, AgoIwoye, Ogun State, says that patronage from friends and course mates was very high at the outset, making her see a good business opportunity. “I was buying and selling

phones to my friends back then in school and making a little margin. The demand from friends and course mate was on the rise, so I decided to establish LollyP Accessories to meet up with the demand,” she says. “I was getting patronage on a daily basis from referrals from my course mates and friends, but I could not meet up because it was capital intensive to store phones. So, I decided to focus on the accessories instead. “Once a new phone is launched, I try to find out its weakness and then begin to stock their parts. For example, for blackberry, I realise that the battery shelf life is low so I had a lot of blackberry batteries in stock,” Omolola says. “I also realise that there was high demand for power bank because of the poor power supply in the country. So, I had a lot of power bank in stock and there was a high demand of it from students,” the young entrepreneur states. Omolola tells Start-Updigest that she started her business with no capital. “To be candid, I started my

Omolola Onabanjo

business with zero capital. The strategy I used then was to help some of my friends and my course mates who wanted to buy or sell new or used smartphones, laptops and some other gadgets at a commission,” she explains. “From every commission made, I saved a little and, in 2011, I had enough to estab-

LCCI Mentoring Programme has set us on right path—Mentees ODINAKA ANUDU

he 2018 mentees who graduated from the Lagos Chamber of Commerce and Industry (LCCI) Mentoring Programme have recounted their experiences, saying that the programme has not only set them on the right business path but also enabled them to understand the economics of business management. The LCCI, through its Business Education Services & Training (BEST) unit, brings entrepreneurs together each year, putting them through the rigours of business success for eight weeks or more. Bukola Baruwa, CEO of Yembar Ventures, who was the head of the 2018 class, said the programme met her expectations. “When we came here in April, we all came with different mind-sets. We weren’t sure why we came in, but we all had expectations. For me, my plan was to come in,

sit down and just listen. But today, I can tell you I have achieved a lot. We started a cooperative society, which is undergoing registration process. We attended various trainings through our network. We have also had good mentoring. I have learnt that it is important to create the market, manage the market and sustain the market,” Baruwa said. Another mentee, Tubosun Adelatun, said the programme afforded the mentees the opportunity to have access to people they would not have met, saying that it broke barriers. Other mentees, who run different businesses, told Start-Up Digest that they were able to network even as each person monitored the success of another. During the programme, experienced mentors were attached to mentees. One of the mentors, Victoria Onafowokan-Obadina, advised mentees to buy right in order to sell right, saying that profits are often found in buying. She encouraged men-

tees to maintain a good relationship with their mentors even beyond the programme. Hebert Ajayi, former president of LCCI and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), told the mentees that they must know enough to be able to stabilise and make profits. Ajayi urged them to hold onto the virtue of integrity while ensuring they do not open businesses they will not be available to run. On his part, Michael Olawale-Cole, chairman of BEST unit of the chamber, said the LCCI would continue to wax stronger in its corporate social responsibility, especially in the development of youths and small businesses through its mentoring programme, which started in 2013. “For us at the Lagos Chamber of Commerce and Industry, focusing on developmental initiatives of the youth is a means of investing in their future, thereby guaranteeing better tomorrow for our country,” Olawale-Cole said.

lish my business,” she adds. The young entrepreneur says her business has been able to scale up since starting and has done delivery in 30 states across the country. She notes that social media has helped her to grow his business since starting. “Thank God for the social media and e-commerce

platforms such as Jumia and Konga, amongst others. My business has amplified since the invention of these platforms. They have really enhanced the growth of my business and helped me survive even without a physical outlet yet,” Omolola says. “I run my business 100 percent online and through online referral I get offline orders and at the moment we have been able to deliver to 30 states so far in the country,” she says. Omolola says she sources most of the accessories from manufacturers directly and also from international online stores. She plans to expand her business by having a store and representatives to sell the gadgets in each higher institution of learning across the country. “One of my plans is to have an offline outlet very soon, which is going to major in varieties of accessories to gadgets. Also, I plan to have campus representatives across various universities that sell my products. I have already done that with my alumni but I am currently working towards

other university as well,” she says. It has not all been rosy for Omolola as the business has suffered trust issues. The entrepreneur says it has been very challenging convincing clients that she offers excellent services owing to high rate of fake social media accounts set up to dupe people. She notes that the business is gradually addressing the issue by telling clients to pay on delivery. She also identifies lack of finance as another major challenge facing the business and logistics. She states that logistic time has taken longer hours owing to the poor state of road infrastructure across the country, while calling on the government to improve on Nigeria’s road infrastructure and create access to finance for startups. On her advice to others, Omolola says, “Never stop building meaningful relationship with customers and other people in your industry. Choosing to instead view competitors as potential partners and collaborators can positively impact your business in a big way.”

NGO trains SMEs on how to grow their businesses IFEOMA OKEKE

Lagos based nongovernmental organisation (NGO), Friends For Islamic Development (FID), at the weekend organised a training programme, focusing on how to grow businesses for Muslims who are in small and medium scale enterprises (SMEs). Titled ‘FID HUB 2018’, the event which was put together in Lagos by Aisha Bello Tukur, founder of FID Networks, attracted discussants among whom were Abubakar Suleiman, managing director/CEO, Sterling Bank; Bolatito Ajibode, general manager, Stanbic IBTC Bank; Saidat Otiti, CEO of Baytuzzeenah; Raliat Oyetunde, business consultant, Muslim businessmen and women, amongst others. According to Tukur, the target of the one-day training programme with the

theme: ‘SMEs In Islam’ is to create a platform for the participants, to grow their businesses and also express their ideas alongside established business owners and CEOs. Speaking at the event, Abubakar Suleiman, managing director/chief executive officer of Sterling Bank Plc, advised participants to always choose a business that they know well and the ones that would have sustainability, just as he admonished that such businesses must be satisfying a particular need. Citing himself as an example, Suleiman said that, if he were not in banking business, he would have been in packaging business where he would specialise in processing and packaging of food products. “If I were not in banking, I would have gone into packaging of food products of any kind from their natural form where the price is low to a premium value

where it is sold at a multiple cost “Do what you need to do for capital to come and look for you. That is the only model of business that works,” he said. Suleiman also noted that if Muslims translate the character of Ummah into business, there is no way their businesses will not grow. He, therefore, urged them to go back to the history of Muslim commerce, stressing that if they carry that to their everyday dealings in business, they would have advantage in business. Advising the numerous participants further, on the dynamics of businesses, Suleiman said that “every successful business person is quitting and starting again. If you stay with the business idea you started with, and the world moves on, the business will die. If it is also the type that is not meant for you, don’t hesitate to shut it down”.

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Start-Up Digest

Why franchising is critical for Nigerian SMEs ODINAKA ANUDU & IFELAYO EHINMOSAN

nvestopedia defines a franchise as a type of license that a party (franchisee) acquires to allow them to have access to a business’ (the franchiser) proprietary knowledge, processes and trademarks in order to let the party sell a product or provide a service under the business’s name. Investopedia says that franchises are a very popular method of starting businesses, especially for those who wish to operate in a highly competitive industry like the fast-food industry. It goes further to say that one of the biggest advantages of purchasing a franchise is that you have access to an established company’s brand name; meaning that you do not need to spend further resources to get your name and product out to customers. Across the world, franchising is one popular way of achieving business growth and strong return on investment. Small and medium businesses are leveraging this for growth. The Franchising Association of South Africa (FASA)’s latest survey, published in November 2017, showed that the performance of franchises was on an upward trend, with 845 franchisors and over 40,000 franchisees generating sales of R587 billion – contributing 13.3 percent to the country’s GDP. The British Franchise Association in partnership with NatWest Research found in 2015 that franchise industry annual turnover was £15.1 billion, while the number of franchisor brands operating in the

UK was 901. Similarly, number of franchisee outlets grew to 44,200, just as the number of people employed in franchising was 621,000. Also, percentage of units profitable was 97. Nigeria is still miles apart from understanding the economics of franchising, though the last four years have seen businesses adapt to the trend. “We want to be able to come together to create value and see immense opportunity we can tap through franchising,” Chiagozie Nwizu, managing consultant, Franchise Business Development Services, said at the firm’s matchmak-

ing forum in Lagos. “For the past years, franchising has made some progress. We now have a number of businesses that have done franchising. Some have had their fingers burnt, but what we found was that these businesses needed support. A lot of businesses have done well and will learn from the mistakes of others. We are beginning to see local businesses such as Spa and House of Tara in this,” Nwizu said, adding that through a research funded by the DFID, some Nigerians have been able to learn how franchising works in four countries. Murad Alnasur, founder, Res-

tonalysis FZE, United Arab Emirates, said Nigeria needs to protect franchising by passing some laws that protect identity. He said franchises are succeeding across the world because businesses are aligning themselves to the demands of the millennials. Sam Ohuabunwa, founder of African Franchise Institute, said franchising would go down in the Nigerian history as a key driver and motivator of the gross domestic product (GDP) and development. “In every clime and nation, some ideas come up and you will sometimes begin to ask where you have been. I have been involved in

initiating and setting up 33 businesses. Less than one-fourths is still alive. I got my fingers burnt in many cases. If I had known about franchising, perhaps, all these businesses would have been alive,” Ohuabunwa, who is also the founder of Ohuabunwa Foundation for Economic Empowerment, said. He said many young people often confront him with the question of the business they should start, but he often racks his brains to find one enterprise that he could endorse. He added, however, that with franchising and Franchise Association coming up in Nigeria, he has no more reason to worry. On his part, Peter Bamkole, director of Enterprise Development Centre of Pan-African University, said six years ago, he pioneered the EDC to strengthen small businesses and grow them into medium to large enterprises. Bamkole said he has observed that a few things are missing, as growing rapidly requires a different skill set. “The human capital is a big issue. Franchising, therefore, offers the best opportunity today. You can no longer be successful alone; you have to be successful together with your competitors and partners,” he noted. Furthermore, Prakash Pantham, commercial director of the programme, pointed out that franchising can reduce high unemployment rate in Nigeria to the barest minimum. Pantham said the European market is shrinking; the Asian market is stabilising, while the African market is full of opportunities, adding that franchising can only succeed when there are monitoring, execution and implementation.

Capacity-building institutions for Nigerian start-ups Josephine Okojie

xperts believe that for any entrepreneur to be successful, he or she must build capacity. In line with this thinking, Start-Up has listed a few institutions where start-up owners can enhance their capacities. Enterprise Development Centre (EDC) The Enterprise Development Centre (EDC) provides capacity building programmes and a variety of wrap-round services such as advisory services, mentoring, experts-in-residence, network meetings, implementation of organisational plans and access to market and information, which are key challenges facing entrepreneurs in Nigeria. Lagos State Employment Trust Fund Apart from its N25 billion to fund

SMEs, the Lagos State Employment Trust Fund (LSETF) is also building the capacities of operators of small and medium businesses in Lagos state. LSETF builds the operational, managerial, and financial capacities of businesses by deepening their understanding of the industry at which they operate from the ground levels. Also, LSETF has partnered with some private sector organisations such as the United Nations to train entrepreneurs at different layers of skills. Tony Elumelu Foundation Apart from providing seed capital for small businesses, the Tony Elumelu Foundation is also deepening entrepreneurial capacities entrepreneurs need to scale up their businesses. Since its establishment in 2010, it has trained and empowered entrepreneurs, promoting an integrated entrepreneurial ecosystem that drives the African entrepreneurship.

Leap Africa Leap Africa, a non-profit organisation has, over the years, focused on equipping entrepreneurs with the skills to lead ethically while implementing initiatives that transform their communities and organisations as well as contributing to national development. Through its yearly annual flagship event- the CEO’s, Leap Africa builds the capacity of over 1,000 SMEs for growth and effective leadership. FATE Foundation FATE Foundation, a non-profit making organisation, deepens entrepreneurs’ capacity through its various boot- camps programmes for small business operators. Since inception, FATE has graduated over 5,000 entrepreneurs from its aspiring, emerging and special entrepreneurs’ development programmes and trained over 28,000 Nigerians in its short entrepreneurship certifi-

cate courses. The foundation has also enabled over 60,700 Nigerian youths on the path to entrepreneurship. About 65 percent of its alumni are actively running their businesses and most are beneficiaries of alumni support services. MBC Africa MBC Africa is a collaborative platfor m providing comprehensive business solutions, addressing four key needs of SMEs: access to affordable Business Development Service (BDS), innovation and technology, market development and financing. Growth Mosaic Growth Mosaic is a social-purpose business preparing small and growing businesses to access and manage growth investment. It reduces execution risks and improve the viability of clients as investible opportunities. Gaining management experience in a field or business will be directly applicable for entre-

preneurs to manage their own businesses. Wennovation Hub Wennovation Hub is the pioneer innovation accelerator in Nigeria, with offices in Lagos, Ibadan, Abuja and recently Kaduna, focused on inspiring, empowering and building capacity of African entrepreneurs to solve economic problems by leveraging technology resources and networking. LCCI Best Unit The Lagos Chamber of Commerce and Industry (LCCI) has the Business Education Services and Training (BEST) unit that trains and mentors entrepreneurs all-round. The LCCI mentor ing programme started in 2013, with a view to raising a generation of well-trained, dynamic and young entrepreneurs well equipped to confront ever-changing challenges in business. The programme is for six months and it is an intensive training with testimonies.

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CITYFile Group seeks speedy trial of killers of DELSU student

A Tradermoni Agent Abu Jeremiah attending to a beneficiary at Karu Market in Abuja.

LAHA amending law to raise contract mobilisation to 40% JOSHUA BASSEY

f the moves by the Lagos State House of Assembly sail through, project contractors stand a chance to better deliver on public infrastructure, as mobilisation fee will increase from the statutory 20 percent to 40 percent. Lawmakers in the state are of the view that the 20 per cent advance payment for public procurement is out of tune with the current reality, as it can no longer guarantee quicker delivery of projects in a state with a huge infrastructure deficit. Speaker of the house, Mudashiru Obasa, gave the hint at a public hearing on a bill seeking to amend the Lagos State Public Procurement Agency Law, organised by the lawmakers. According to Obasa, who was represented by his deputy, Wasiu Eshilokun-Sanni, the review aims at making the law more functional, and to ensure that peopleoriented projects are delivered speedily and in good quality. He said that procurement was all about

accountability, probity as well as reduction of corruption. “There are projects that require speedy completion. The delivery of government projects within reasonable time is key to the house. Our people desire services as early as possible. There are projects the government wants to finish in time, 20 percent (advance payment) cannot work again and the law has to be dynamic. “We will ensure increase in the mobilisation fee for projects. The job cannot be completed in time with 20 per cent mobilisation. “We cannot forget that our people want to do the jobs but their capacity is limited. Government money should be accounted for and should also be used for what it is meant for. We want procurement in Lagos to be seamless and work for the people,” he said. Speaking on the bill, house majority leader, Sanai Agunbiade, observed that the existing law has 82 sections, and the house has identified areas that required amendment to meet with the present reality. According to him, the house has identi-

fied 10 laws of the state to be reviewed to give Lagosians cleaner and more functional laws for the benefit of the people. The proposed amendment, he said would affect sections 18, 19, 31, 32, 33 and 63 of the principal law which deleted 20 per cent of advanced payment, replaced by 40 per cent considering the present reality. Akinyemi Ashade, the state commissioner for finance, described the proposed amendment as progressive and proactive. Ashade said that the public procurement, apart from ensuring accountability and probity, is also about value for money and speedy delivery of projects. One of the stakeholders, John Ekundayo, a project engineer, who hailed the lawmakers, said that even with 40 per cent proposed advance payment, there were still some hiccups affecting project delivery due to the nature of payment. Ekundayo said: “40 per cent is good but there are some key projects that require even more. Some projects are key and need more to ensure quick delivery. I suggest 70 per cent.”

A’Ibom: Police raise alarm over increased cultism in primary schools

he police in Akwa Ibom have decried the increase in cultism in primary and secondary schools in Eket local government area of the state. Isong Essien, the divisional commander officer 2, Eket divisional police headquarters, who raised the alarm during an Anti-Cultism Summit in Eket, on Friday, described the situation as worrisome. “Cultism has gone down to secondary schools and even primary schools,” he said, noting that it has become imperative to sensitise the people on dangers of cultism in the state.

Essien defined cultism as a `religion which practice is very dangerous and different from the generally accepted religion’. “Whatever you do that stand you at the extreme is not good, whatever you do that make people to see you as dangerous is bad. There is no gain in cultism; the aftermath of cultism is death. If care is not taken, your future and your life will be terminated.” He said that policemen had sleepless night to stop the fight against two rival groups in Eket between 2017 and 2018 which resulted in deaths of some suspected cultists in the area.

“There were clashes during the period and the people were killed. After our investigation, it was found that one of the victims had employment in one of the multinational oil companies in Eket,” Essien disclosed. The police officer, who advised students to shun cultism to have a brighter future, thanked the Eket Students Association for the initiative in touring schools to inform students of negative effects of cultism in the area. Ifiokobong Akanimo, the president, Eket Students Association said the association had taken anti cultism campaign to secondary schools in Eket and its environs.

non-governmental organisation, Impact Future Nigeria (IFN) has called for speedy trial of alleged killers of Elozino Ogege, a 300 level Mass Communication undergraduate of Delta State University (DELSU). The group protested at the federal ministry of women affairs and the headquarters of the Nigeria Police Force, demanding the prosecution of the alleged killers. The late Ogege was reportedly declared missing and later found dead along a road in Abraka community with her tongue and breasts severed from her body. The gruesome incident has generated series of condemnations and calls for justice by her relatives, groups and individuals of goodwill across the country. May Ubeku, the convener of IFN, said although the suspected killers had been arrested, it was imperative for the Ogege’s family to get justice. “The suspects who confessed to have killed Ogege for ritual purposes have been arrested but we are saying that justice must be done speedily no matter who is concerned. “We appreciate the Delta State police command for the prompt arrest of the suspected killers. However, this kind of killing is becoming too much in our society, and we don’t want the killers to go unpunished. They must face justice to serve as a deterrent to other criminal elements. The group, which submitted a protest letter to the Nigeria Police, called on other relevant agencies to unraveled the perpetrators of the act and brings them to book. It also listed out some of their concerns which necessitated the protest, including putting adequate measures in place to rid the society, especially campuses of menace of ritual killers. “We want a virile task force to be set up in our tertiary institutions where activities of students can be monitored under strict surveillance. Also, students in our tertiary institutions should be grilled under close monitoring on how they acquire the wealth and cars they flaunt about on campuses,” Ubeku said.

Benue attacks: Bishop warns against shifting blame, demands apology

atholic Bishop of Makurdi Diocese, Wilfred Anagbe has urged the public to desist from changing the narrative regarding the identities of the April deadly attacks in Benue. The cleric, who also demanded public apology from those changing the narratives, spoke at St Ignatius Quasi Parish, Ukpo-Ayar, Mbalom in Gwer local government area of Benue, during the atonement and purification of the parish. The St Ignatius Quasi Parish was the church where two priests, Joseph Gor and Felix Tyolaha as well as 17 parishioners were killed on April 22, 2018. Anangbe said there was the need to tender an apology to the church over insinuations seeking to shift blame. He stressed that even if the church did not need the apology, he needed it as the Bishop of the Catholic Diocese of Makurdi, whose priests and congregation were gruesomely murdered. Anagbe said what baffled him most was that a good number of the people trying to change the narratives were from Benue. He said that the living witnesses had testified at several fora about the identity of their attackers, having heard them spoke in a particular language during the attacks. Meanwhile, Governor Samuel Ortom of Benue has promised to construct a block of classroom at St Wilfred’s Nursery and Primary School, Ukpo-Ayar, Mbalom, in honour of the priests and parishioners. Ortom also pledged to make the road to the area more accessible by constructing the culverts and bridges on it, stressing that if the resources permitted him, he would also tar it. NAN

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CBN’s licensing regime could slow Fintech growth

that there is customer interest and revenue potential. While analysts at Afrinvest Securities Limited agree that Fintech companies should be “highly” regulated to protect investors’ interest due to the rate at which the companies are springing up, they warn however that such excessive capital requirements may prevent

the growth of the companies. “I feel that raising the capital base may be too early as Nigeria needs to create an environment that shows that we want to grow the Fintech space. It will become very difficult to access capital to set up a new Fintech company due to the initial capital required,”Ayodeji Ebo, MD, Afrinvest Securities Limited told BusinessDay in an interview. Similarly, Dolapo Ashiru, a stockbroker, says that most fintech companies, being start-ups will need capital to undertake research to produce innovations. “The proposed policy will stifle innovation or creativity as the new capital requirement threshold will be difficult to meet by the fintech startups,” he noted. “Many of them will migrate to tech companies in order to avoid such high capital requirements,” Ashiru explained. Ibrahim Tajudeem, Head of Research, Chapel Hill Denham, says there should be different capital requirements levels for different kinds of businesses. “And for those small players that cannot afford to meet up with the requirements, they should consolidate or merge with others to become more qualified and stronger,” he told BusinessDay by phone.

tomers Agents offer passbooks to customers for record-keeping and use these records to provide loans to them. A good number of agents report that the act of filling up the passbooks themselves provides opportunities to interact with the customers, making them feel “special”. Agents value the customers’ body language and demeanour as additional information that is critical in the intuition-based assessment of customers for microloans – of course, in addition to the transactional patterns. Digitising Esusu and Ajoo Using Roving Employees Some agents employ roving staff to provide Esusu services and facilitate Ajoo services through the agent banking channel. From the Helix field interactions, agents report that considerable financial information is shared in the Ajoo meetings, and this could be helpful in product evolution to make solutions more meaningful to the daily lives of customers.

The takeaway for providers: Develop field-based applications to digitise the Esusu or Ajoo processes, thereby improving the agent business-case and enhancing agent loyalty, and through their actions increase the transaction volumes and deposits mobilised. Digital tools, such as tablets and smartphones that offer other intuitive interfaces could be used during these sessions to improve the interactions and ensure prompt data collection. Where is the Prize? Providers must create value for agents and customers if they are to benefit from increased transactions and deposits. Providers would be able to increase usage through digitising local use-cases and by enhancing the user experience. This is the key takeaway from M-PESA’s ‘Send money home campaign – it mirrors existing local financial practices. In this way, providers can maximise value per customers and ultimately be able to appropriate value, which is pivotal for DFS business sustainability.

BUNMI BAILEY

he recent licensing regime announced by the Central Bank of Nigeria (CBN) aimed at regulating the country’s growing number of financial technology (Fintech) companies may pose a threat to investment innovations in the sector, a report by Ecobank has said. The report says that the proposed regulation could reduce the volume of investment flowing into the local Fintech sector. The proposed licenses are in three categories: Basic, Standard and Super. The basic license, which is for a period of two years, requires a minimum Shareholder’s Fund (SHF) of N50N100 million, license fee of N100,000 and renewal license of N50,000. A Standard license for three years requires a SHF of N3 billion, license fee of one million naira and renewal fee of N500,000, while Super license, also for three years, requires a SHF of N5 billion, a license fee of N2 million and renewal fee of N1 million The policy, if implemented will properly position the central bank to adequately address the emerging issues of Fintech with respect to cyber

risks, risk management framework, capital adequacy, better focused regulation and oversight operations, the regulator explained. “The minimum shareholder capital requirements are high for Fintech start-ups, which typically have low capital and shoe-string budgets,” Ecobank said in the report. It warned that if enforced, “these

requirements could raise the barrier for entry, inhibiting Fintechs’ ability to scale, and stifle innovation.” The report further emphasised that the high capital requirements could also choke off investments, as few investors would put their money into a Fintech before it is able to demonstrate that its product or innovation works in the market, or

DFS Customer Development Opportunities in Nigeria Jacqueline Jumah & Irene Wagaki, Kenya

n Nigeria, Deposit Money Banks focus on raising deposits from the public to fund the corporate sector but typically do not offer a full range of products and services to the mass market. Agent banking can promote greater access to convenient and accessible transactional services throughout the country. The agent channel can be used by providers to significantly increase customer captivation and revenue per customer. At present, the primary focus of the financial institutions that have adopted agent banking is on the customer discovery phase – primarily through offering the channel for Cash-In and Cash-Out. There are few value-added services that customers use. To drive revenue per customer, Deposit Money Banks must combat the perception that they are only used for the storage of funds. This would encourage their customers to use the products and services that ride

on the agent channel. Providers must ensure that services can meet the actual needs of customers, provide an optimal user experience, and use agents as a Below-the-Line marketing channel to demonstrate the range of services available. This is essential if the aggressive Above-the-Line (in most cases) and Through-the-Line (SMS blasts) marketing communications that Deposit Money Banks typically use are to be effective. Beyond deposits, many mass market customers’ needs are served by Microfinance Banks that provide a better user experience. But agent banking combined with customercentric product development and appropriate partnerships with fintech companies could extend the range of personalised retail services that Deposit Money Banks offer. This would allow them to compete with the Microfinance Banks. How Might Institutions Harness Opportunities in Customer Development in Nigeria? One of the research focus pillars

in the recently published Agent Network Accelerator Research: Nigeria Country Report 2017 by the Helix Institute of Digital Finance has been customer development. The report outlines the need for providers to use research to generate compelling value propositions beyond cash deposits and cash withdrawals. We have identified use-cases within the payments space, including social transfers, such as from donors or government, person-to-business, for instance, payment of school fees, and person-to-person funds transfer. Designing use-cases around pain-points would drive customer adoption and thereby revenue per customer. The survey finds that providers have been doing little to promote uptake and usage. Rather, innovative agents have themselves developed mechanisms to promote uptake and usage. Typically, these mechanisms are built around digitising locally accepted cash-management practices: Providing Micro-loans to Cus-

Monday 03 December 2018

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46 BUSINESS DAY NEWS Nigerian stocks cheapest in Africa as... Continued from page 1

South Africa, the average price

to earnings ratio is 15.2 times, while listed companies in Egypt are valued at an average of 12.5 times of earnings. For publicly listed companies in Ghana, investors pay 22.4 times of earnings, while in Kenya they pay 11.2 times of earnings. Investors had paid up to 12.42 times of earnings to hold Nigerian stocks at the start of 2018, after paying a peak of 14.5 times in 2017 and 17.40 times in 2016- which coincides with the period the economy was in reces-

sion and company profits tumbled. The decline in appetite for Nigerian stocks, which succumbed to a year to date loss of 19.27 percent Friday, is driven by an exit of foreign portfolio investors who are worried about the exchange rate leading up to the 2019 elections next February. In dollar terms, the market is down about 16 percent. Local investors are also showing less appetite for equities amid an uptick in bond yields that have proved a profitable distraction from stocks. WaleOkunrinboye,headofresearch at pension fund manager, Sigma Pen-

sions, told BusinessDay that local fund managers are on the side-lines partly as a result of attractive bond yields. The effective yields on government bonds touched a two-year high of 17 percent, Friday. Most companies are trading at their lowest levels in 52 weeks, including the most capitalised company, Dangote Cement, which fell to as low as N185 per share Friday from a peak of N278 in February and is down 18.7 percent year to date, according to data compiled by BusinessDay. Even the company’s planned IPO on the London Stock Exchange has done little to lift investor sentiments. The country’s biggest lender by

L-R: Musa Rabiu, group chief human resources officer, Dangote Cement plc; Ndidi Nnoli-Edozien, group chief sustainability and governance, Dangote Industries Limited; Yomi Badejo Okusanya, former president of NIPR, presenting the best in hunger, Food and Security award to Dangote Rice, Dangote Industries Limited, senior adviser, Stakeholder Relations, Fatima Wali-Abdurrahman, Eunice Sampson, general manager/head, Sustainability, Dangote Cement plc, at the 12th edition of SERAS Awards in Lagos, at the weekend.

I am not Jubril – ... Continued from page 1

while responding to a question

from a Nigerian who wanted to know if he was the real Buhari or the much talked about Jubril from Sudan. The meeting provided Buhari an opportunity to interact with Nigerians living in Poland, which was the President’s first official engagements, ahead of the Conference of the Parties (COP24) of the UN Framework Convention on Climate Change (UNFCCC), taking place from December 2-4, 2018. The President who was reacting to the rumours of his cloning for the first time said a lot of people wished he died during the period of his ill health. “Alotofpeoplehadhopedthatldied duringmyillhealth.Iwillsooncelebrate my seventy sixth birthday, l am strong.” He described the sponsors of the rumours as “ignorant and irreligious.” He disclosed that pressure was placed on Vice President Yemi Osinbajo to nominate people for the position of Vice President, when he was still recovering in Britain following rumours of his death. “Yes, a lot of people had hoped

that l was dead and called on the Vice President and asked whether he would consider them as vice president because they thought l was dead.” “He visited me when l was convalescing. It is real me. l assure you. I will soon celebrate my 76 th birthday and l am still going strong. I only get harassed by my grandchildren, they are getting too many” President Buhari said. Buhari also expressed his happiness with the report by the Nigerian Ambassador to Poland, Eric Adagogo Bell-Gam, He disclosed that his administration had degraded Boko Haram who used to control about 17 local governments, but now use hit and run method to attack innocent citizens “This is because they understand the terrain better. It is not easy financing the war against terror” He lamented the status of Infrastructure in the country, saying they were nothing to write home about as at the time they took over power, adding that “ but now, we have been fighting to improve on that” On the economy, the President said Nigeria have virtually stopped the importation of food, especially rice, while encouraging young peo-

INEC grapples with preelection litigations... Continued from page 2

in partnership with European Centre for Electoral Support, ECES. Yakubu who observed that INEC and the country have witnessed the most acrimonious party primaries in recent history said parties that failed to respect the democratic process in selecting candidates during primary elections lack the moral right to complain about secondary elections. He announced that 73 political partieshavefieldedPresidentialcandidates at the end of the period for the substitution and withdrawal of candidates.

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AccordingtoINECChairman,“atotal of 1,848 candidates (1, 615 male and 233 female)arevyingfor109SenatorialSeats while 4, 635 candidates (4,066 male and 569 female) are competing for the 360 seats in the House of Representatives. “As for the State elections, total of 1, 068candidates(980maleand88female) are contesting for 29 Governorship positions with 805 male and 263 female Deputy Governorship candidates.” YakubualsodisclosedthattheINEC is working on the list of candidates nominated by political parties for the 991 State Assembly Constituencies as

ple to take to farming. The President while responding to question on whether he will be visiting Poland after his re-election, said “I am trying to save a lot of money, l only go out when it is necessary. My priority is to secure Nigeria” he said Responding to question on the standard of education in Nigeria, the President said he was always upset seeing little children carrying plates begging for food, while they are being denied opportunity to attend formal education. President Buhari told his audience that the Constitution recognize and assign responsibilities of taking care of education to all the three tiers of government, and appealed to the state and local governments to take the issue of education in their domains seriously. He noted that such efforts will help to ensure that youths do not engage in violent acts as education helps them to live above ethnicity and religious manipulation “I am always upset when l see little children taking bowls about begging for food. They are being denied education. Educated people are removed from ethnicity and religious politics, which is a major problem we are having in our country” he said. well as the 8 Area Councils Chairmen and Councillors for the Federal Capital Territory and full details will soon be published for public information in line with time table and schedule of activities for the 2019 general elections. Ontheimportanceoftheworkshop, the Chairman said it will enhance the capacity of the INEC Press Corps in givingaccuratereportsoftheprocesses, procedures and activities of the Commission for the next year’s polls, adding that the umpire body will always give unfettered access to media as a critical partner in the electoral process.

•Continues online at www.businessdayonline.com

market value, Guaranty Trust bank, closed at N34.50 per share Friday in Lagos, just N2 shy of a 52-week low of N32.50. The stock is down 37 percent since a peak of N54.71. Investment banks have written a raft of reports advising clients to take advantage of low valuations to buy fundamentally strong companies. Dangote Cement and GTB have 80 percent BUY ratings with an upside potential anywhere between 40 to 70 percent. Some fund managers and institutional investors interviewed by Business Day said they were waiting to see if valuations could go any lower before they swoop. “Trying to pre-empt a floor in this market is like trying to catch a falling knife,butthedeclineinoilpricesmeans there isn’t a shortage of negative events topushstockslower,”afundmanagerin South Africa told Business Day. The stock market of Africa’s largest oil producer mirrors the dynamics of oil, which is the lifeblood of the economy; therefore it hasn’t surprised market observers that the renewed dip in oil prices has pushed stocks lower. Even signs last week that the US Fed may begin to slowdown the pace of rate hikes haven’t helped Nigerian equities or even the naira to the extent at which it has benefitted other emerging and frontier markets. The naira slipped to N364 per US dollar at the market-driven Investors and Exporters window Friday, the weakest rate since inception in April 2017, as lower oil prices threaten to test the resolve of the Central bank in defending the naira. Brent crude, the international

benchmark, fell to as low as $57 per barrel as at 1pm Friday, and is down 34.5 percent since a peak of $87 per barrelinSeptember.Alleyeshaveturnedto anOPECmeetingDec.8whereexpectationsareforthecarteltoannouncefresh supply cuts to help prices stabilise. Another Nigerian company to have collapsed to a 52-week low is Diamond bank, despite the tier-two lender’s announcement that it was in talks with a multilateral agency to raise mediumterm funding over a 5-year period and will repay a $200 million Eurobond due in May on maturity from its own cash and other sources. The bank said it has completed due diligence and agreed indicative terms with the agency, which it declined to name. Diamond Bank stock, which has been in free-fall this month, dropped 3 percent on Friday to a new record low of 0.65 naira per share. Nigerian banks have USD3.6 billion of outstanding Eurobonds, maturing mostly in 2021 and 2022, and some of them are redeeming the bonds. In August 2018, First Bank of Nigeria called its USD300 million Eurobond before final maturity in 2020, while Guaranty Trust Bank has recently redeemed two bonds early. Large Nigerian banks’ early redemption of Eurobonds highlights the improvement in their domestic foreign-currency (FC) liquidity, as well as a lower appetite for FC loans among borrowers, according to global ratings agency, Fitch. With FC liquidity becoming less of a risk for banks, asset quality is again the main risk for Nigerian banks as it remains vulnerable to a fall in oil prices.

Stock markets as at Friday, Nov. 30 Country Daily change Week to dateY ear to date Ghana -0.06% 0.10% -0.80% South Africa -0.53% 1.80% -1.50% Egypt 0.08% -2.60% -11.30% Kenya 0.40% 0.80% -15.10% Nigeria -1.43% -3.50% -19.27% Stock markets as at Friday, Nov. 30 Country Daily change Week to dateY ear to date Ghana -0.06% 0.10% -0.80% South Africa -0.53% 1.80% -1.50% Egypt 0.08% -2.60% -11.30% Kenya 0.40% 0.80% -15.10% Nigeria -1.43% -3.50% -19.27%

P/E ratio 22.4x 15.2x 12.5x 11.2x 9.4x

Source: NSE, Meristem research, BusinessDay

Source: NSE, Meristem researc Education, Power, Mining sector least... Loans (NPL) are close BusinessDay Performing to their peak; we also believe capital Continued from page 2

Distribution companies are discouraging banks from lending to them. The Distribution Companies, created following the unbundling of the former Power Holding Company of Nigeria, are currently facing financing impediments, which has reduced their capacity to distribute power to their customers across the country. The low credit extended to education and mining and quarrying sectors in the third quarter fell short of the volume of credit they received in the previous quarter, according to the figures. These were N10.17 billion, for the mining and quarrying sector in the second quarter, while education received N71.8 billion in the same period. “I think there is simply not enough scale and depth in private education to make it worth the trouble,” Raji said. Oil and gas and manufacturing sectors got credit allocation of N3.59trillion and N2.15trillion to record the highest credit allocation in the period under review. Credit to the private sector by Nigerian banks increased marginally (quarter-on-quarter) by two percent from N15.3 trillion in Q2 to N15.6 trillion in Q3 2018. Earlier this year, Renaissance Capital (RenCap), an emerging and frontier market-focused investment bank, said Nigerian banking sector was on the recovery path with improving asset quality outlook. “We think the banking sector Non-

buffers will rise as profits improve and banks are increasingly more comfortable using an exchange rate of N330/$ (which is an average of the official rate and Investors and Exporters window rate) to value their foreign currency portfolios,” RenCap stated. On a year-on-year basis the amount of credit to the private sector represents a 1.3 percent decline from N15.8 trillion in Q3 of last year to N15.5 trillion in the review quarter. The total credit figure reported for Q3 2018 was not up to the N16.2 trillion recorded in Q3 2016, the highest credit Nigerian banks have given to the private sector since BusinessDay started collating the data in Q1 2015. Meanwhile, the gross loans of the banks in the review period stood at N15.8 trillion and the sector’s Nonperforming Loan (NPL) increased by 16 percent from N1.93 trillion in Q2 2018 to N2.24 trillion in Q3. The ratio of banks’ NPLs to total loans stood at 14.16 percent in the review quarter compared to 12.45 percent reported in the previous quarter. BusinessDay analysis of the report shows that share as a percentage of total credit was 0.39 percent for education, 0.04 percent for mining and quarrying and 2.7 percent for power. This is compared to manufacturing sector, which received 13.79 percent of the banks’ credit to private sector; for oil and gas, agriculture and trade, the ratios were 23.08 percent, 3.8 percent and 6.89 percent respectively.

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Access Bank Rateswatch Market Analysis and Outlook: November 30 - December 07, 2018

KEY MACROECONOMIC INDICATORS GDP Growth (%)

1.50

Q2 2018 — lower by 0.45% compared to 1.95% in Q1 2018

Broad Money Supply (M2) (N’ trillion)

25.71

Increased by 1.73% in Oct’ 2018 from N25.28 trillion in Sept’ 2018

Credit to Private Sector (N’ trillion)

22.72

Increased by 0.72% in Oct’ 2018 from N22.56 trillion in Sept’ 2018

Currency in Circulation (N’ trillion) Inflation rate (%) (y-o-y) Monetary Policy Rate (%) Interest Rate (Asymmetrical Corridor) External Reserves (US$ million) Oil Price (US$/Barrel) Oil Production mbpd (OPEC)

1.97 11.26 14 14 (+2/-5) 42.08 58.09 1.75

Increased by 1.54% in Oct’ 2018 from N1.93 trillion in Sept’ 2018 Declined to 11.26% in October’ 2018 from 11.28% in September’ 2018 Raised to 14% in July ’2016 from 12% Lending rate changed to 16% & Deposit rate 9% November 29, 2018 figure — an increase of 0.31% from November start November 30, 2018 figure — a decrease by 6.42% from the prior week October 2018 figure — a decrease of 0.96% from September 2018 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr)

Friday

30/11/18

23/11/18

30,672.38 11.20

31,678.70 11.57

Volume (bn)

0.11

0.22

Value (N’bn)

1.62

2.63

MONEY MARKET NIBOR Tenor

Friday Rate

(%)

Change(%)

Indicators

30/11/18

Energy (3.18) (3.18) Crude Oil $/bbl) Natural Gas ($/MMBtu) (48.64) Agriculture Cocoa ($/MT) (38.26) Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Change Gold ($/t oz.) Silver ($/t oz.) (Basis Point) Copper ($/lb.) 277.55

1-week Change

58.09 4.63

YTD Change

(%)

(6.42) 7.67

(8.88) 51.51

2157.00 111.80 78.99 12.98 510.00

1.32 (0.93) 0.27 3.51 0.64

11.42 (14.13) 1.92 (15.33) 17.65

1221.14 14.23

(0.09) (0.49)

(7.32) (17.22)

30/11/18

23/11/18

OBB

16.5700

5.8300

1074

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

17.3600 15.0400 13.8500

6.5800 5.5500 11.9682

1078 949 188

Tenor

90 Days

13.9400

13.6557

Friday

1 Month

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

(N/$)

Rate (N/$)

30/11/18

23/11/18

30/01/18

Official (N) Inter-Bank (N)

306.80 360.16

306.75 360.64

306.60 362.47

BDC (N) Parallel (N)

364.00 370.00

359.36 364.00

361.00 363.00

Friday

Change

(%)

(Basis Point)

30/11/18

23/11/18

3-Year 5-Year

0.00 15.27

0.00 15.16

0 11

7-Year 10-Year 20-Year

15.46 15.48 15.73

15.50 15.48 15.62

(4) (0) 11

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

Change

(%)

(Basis Point)

30/11/18

23/11/18

13.11 13.04

11.51 13.44

160 (39)

6 Mnths 9 Mnths 12 Mnths

13.57 16.46 17.06

13.74 15.33 16.87

(17) 113 18

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

AVERAGE YIELDS Friday

Friday

(%) 1 Mnth 3 Mnths

BOND MARKET Tenor

Friday

Index

Friday

Change

(%)

(Basis Point)

30/11/18

23/11/18

2,673.86

2,673.80

0.00

Mkt Cap Gross (N'tr) Mkt Cap Net (N'tr)

8.35 5.18

8.35 5.20

0.01 (0.29)

YTD return (%) YTD return (%)(US $)

8.85 (46.88)

8.85 (46.86)

0.00 (0.02)

Rate (%)

Date

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

91 Day 182 Day

24,372.79 23,157.66

11.2045 14.0155

28-Nov-2018 28-Nov-2018

364 Day

103,071.72

16.8829

28-Nov-2018

Global Economy In the US, the Bureau of Economic Analysis released its second report on gross domestic product growth for the third quarter of 2018, confirming a preliminary release in October that indicated the economy grew at a real rate of 3.5% from July through the end of September. This marked a decrease from 4.2% in the preceding quarter as upward revisions to non-residential fixed investment and private inventory investment were offset by a downward revision to consumer spending and a higher drag from net trade. According to Bureau of Economic Analysis, Personal consumption expenditure contributed 2.45% (revised from 2.69% in the first estimate), spending for services rose to 3.1% (revised from 3.2%) and durable goods at 3.9%(from 6.9%) while investment declined to 1.7%(revised from -7.9%) and residential investment at -2.6%(from -4%). Elsewhere, in Japan, unemployment rate rose to 2.4% in October 2018. The Statistics Office of Japan reported that this was the first increase after 4 consecutive months at 2.3%.The number of unemployed increased by 80,000 to 1.68 million in October from the previous month. In another development, Eurozone unemployment rate was reported at 8.1% in October 2018, unchanged in the last three months. The number of unemployed in the Euro Area expanded by 12,000 to 13.172 million. According to European Statistics, member countries with the lowest unemployment rate were Czech Republic (2.2%) and Germany (3.3%) while Greece (36.8%), Spain (34.9%) and Italy (32.5%) recorded the highest rates. Domestic Economy The Central Bank of Nigeria (CBN) has increased its foreign exchange injections for Bureau De change (BDCs) operators. The apex bank disclosed this in a circular published on its website titled Introduction of Special Intervention of Foreign Exchange Cash Sales to Bureau De Change Operators. According to the circular, ‘in addition to the existing market days of Monday, Wednesday and Friday, the CBN has introduced a special intervention day every Thursday for $15,000 per BDC commencing on Thursday, December 6, 2018.” The move, the apex bank disclosed, was to address the rising demand for the dollar due to the approaching yuletide season. The CBN also warned operators to ensure strict compliance with provisions pertaining to foreign exchange transactions. Any infraction, it stated, would be met with appropriate sanctions. In a separate development, the Manufacturing Purchasing Managers' Index (PMI) stood at 57.9 index points in November 2018. This indicates an expansion in the manufacturing sector for the twentieth consecutive month. The index grew at a slightly faster pace when compared to the previous month (56.8 points). This was shown in the latest PMI report by the Central Bank of Nigeria. A PMI above 50 points indicates that the manufacturing sector is generally expanding, while a reading below 50 points indicates a contraction. All the fourteen subsectors surveyed, recorded growth during the month. Stock Market The downward trend on the Nigerian Stock Exchange persisted last week amidst share price depreciations by many blue chip stocks. The All Share Index (ASI) - Nigeria’s benchmark equities index, closed at 30,672.38 points compared with 31,678.70 points recorded the previous week. Aggregate market value of all quoted equities on the NSE also dropped to N11.19 trillion from prior week’s opening

value of N11.57trillion. This week, we expect the market to remain depressed in the absence of a significant positive market trigger. Money Market Rates inched higher at the money market in the week ended November 30, 2018 as market liquidity declined owing to the Retail Secondary Market Intervention Sales (SMIS), Open Market Operation(OMO) auction & wholesale SMIS that occurred in the week, mopping up over N600 billion. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates jumped to 16.57% and 17.36% from 5.83% and 6.58% respectively the prior week. Longer dated placements also saw an uptick in rates. The 30-day and 90-day NIBOR settled at 13.85% and 13.94% from 11.97% and 13.66% the previous week. This week, rates may trend lower emanating from the aftermath of Federation Accounts Allocation Committee (FAAC) disbursement that is expected to hit the system. Foreign Exchange Market The local currency witnessed mixed signals across all markets last week. The interbank window appreciated by 48 kobo to close at N360.16/$ from N360.64/$ the previous week. At the official window, it depreciated 5 kobo to close at N306.8/$ from N306.75/$ the prior week. At the parallel market, the local currency shed N6 to settle at N370/$. This week, we anticipate depreciation at all the market segments reflecting dollar shortage occasioned by rising demand for the greenback. Bond Market Bond yields rose last week. This was a spillover from the increase in rates by 25 basis points at the OMO auction carried out at the end of the week. Yields on the five- and twenty- year debt papers settled at 15.27% and 15.73% from 15.16% and 15.62% respectively the previous week. The Access Bank Bond index fell by 0.07 points to close at 2,673.86 points from 2,673.80 points the previous week. This week, we anticipate bearish sentiments as market participants remain cautious about yield levels. Commodities Oil prices dipped last week, weighed down by uncertainty over the US-China trade war and signs of increased global crude production. The OPEC Reference Basket (ORB) ended $3.99 lower at $58.09 per barrel. In a similar vein, precious metals prices retreated amid expectations of another interest rate hike this year. US Fed meeting minutes last week showed the central bank is expecting to hike interest rates but did not offer a timeline. Rises in interest rates reduce demand for safe haven assets like precious metals, which do not generate regular payments the way other investments, like bonds, do. Gold slipped 0.09% to $1,221.14 per ounce, while silver lost 0.5% to close at $14.23 per ounce. This week, the direction of oil prices will largely take a cue from the outcome of the upcoming OPEC meeting. For precious metals, prices will be largely influenced by development at the G20 meeting where U.S. and Chinese leaders are scheduled to discuss trade matters after months of tensions. MONTHLY MACRO ECONOMIC FORECASTS Variables

Nov’18

Dec’18

Jan’18

Exchange Rate (Official) (N/$)

363

364

365

Inflation Rate (%)

11.30

11.61

11.45

Crude Oil Price (US$/Barrel)

77.00

78.00

Sources: CBN, Financial Market Dealers Association of Nigeria, NSE and Access Bank Economic Intelligence Group computation. For enquiries, contact: Rotimi Peters (Team Lead, Economic Intelligence) (01) 2712123 rotimi.peters@accessbankplc.com

BUSINESS DAY

C002D5556

LegalPerspectives

With

Monday 03 December 2018

Odunayo Oyasiji

Case Review

A. O. Afolabi & ORS. V. Western Steel Works Limited & ORS.LPELR-SC.29/2004

hat to note: This is a matter that was decided by the Supreme Court of Nigeria in 2012. The case touches on the issue of corporate personality, acquisition of one company by another, proof of acquisition of one company by another and labour matter. Fact: The appellants were the plaintiff at the High Court and they were also the appellants at the Court of Appeal before appealing to the Supreme Court. The 1st to 5th appellants were employees of the 1st defendant/respondent. The 6th and 7th appellants are unions to which the 1st to 5th appellants belong to. It must be noted that this matter was instituted on behalf of themselves and other employees of the 1st respondent. The employees were laid off in 1982 without paying their entitlements. They then instituted this action bringing in the 3rd respondent that acquired the 1st respondent. The basis for bringing in the 3rd respondent was because they claimed that they are to be paid by the 3rd respondent since it acquired the assets and liabilities of the 1st respondent. They lost at both the High Court and Court of Appeal and they have appealed to the Supreme Court relying on the same reasoning. Issues for determination The appellant formulated two issues for determination i.e. “1. Whether having agreed that the learned trial judge made contradictory and inconsistent findings on the status of the 3rd respondent vis-a-vis the 1st respondent, the lower court was right not to have resolved these findings to determine who was actually liable to the Appellants claims and thereby occasioning a miscarriage of justice. 2.Whether upon the pleadings; the uncontradicted evidence of the appellants’ with the clear provisions of section 146 of the Evidence Act, the lower court was right to have held that the appellants’ failed to discharge the burden of proving that the 3rd respondent had acquired the liabilities of the 1st respondent.” The 1st and 2nd respondent

formulated only one issue for determination- “1. Whether or not the appellants have discharged the burden of proof of their allegation of acquisition of the liabilities of the 1st and 2nd respondents by the 3rd respondent.” The 3rd respondent also formulated only one issue for determination- “1. Whether the lower court was entitled to hold as it did that there is no credible evidence before the court, showing that the 3rd respondent acquired the liability of the 1st respondent to make it liable to the plaintiffs’/appellants”. Arguments/ Submissions The counsel to the appellant argued that the court should hold that there has been a miscarriage of justice because inconsistent and contradictory findings were made and relied on to reach a decision. Therefore, a retrial should be ordered by the court. The contradictory findings being referred to is when the trial court stated that there is no legal evidence to establish the fact that the company has taken over the assets and liabilities of the 1st defendant. The same court later said that the evidence that the 3rd defendant had taken over the 1st defendant is overwhelming. Counsel to the first and second respondent on the other hand argued that the issue of miscarriage of justice and retrial does not arise because the findings of the Court of Appeal are not perverse. Therefore, he urged the court to dismiss the appeal. The learned counsel to the

3rd respondent submitted that the issue of retrial should not arise because it is not the credibility of the witnesses that are in issue but the character of evidence required to prove merger, acquisition or takeover of a company. He further submitted that the judgement of the Court of Appeal should be upheld unless the findings of the court is perverse. This is because Court of Appeal was also in a good position to evaluate the evidence. On the second issue formulated by the appellant, the counsel argued that the fact that the signboard of the 1st respondent was removed and replaced with that of the 3rd respondent was enough evidence to show that the 3rd respondent was in possession. He stated that takeover strictly need not be pleaded. Counsel to the 1st and 2nd respondent submitted that the appellants case failed because they didn’t rely on any credible evidence to establish the fact that 3rd respondent acquired the liability of the 1st respondent. Judgement The Supreme Court held that “A body corporate is a juristic person. It has a legal personality and can be an occupier of premises. It can sue and be sued in its corporate name. It also has the capacity to enter into any agreement in its corporate name. In order to prove this corporate status of a Company, one must produce a Certificate of Incorporation in respect of the company.” The Court further held that “the legal burden of proof that

the 3rd respondent acquired or bought the 1st respondent is on the appellants. The question is whether the plaintiffs/ appellants discharged the burden of proof. The Court of Appeal answered the question as follows: “The acquisition of shares in companies and take-over of one company by another are matters regulated by Company and Allied Matters Acts. The transfer of shares or allotment of shares on a limited liability company must be registered and appropriate papers filed. It is not just a question of removing one company’s signboard and replacing it with another. It was therefore to be expected that documents from the Corporate Affairs Commission would be placed before the lower court to enable it determine whether or not the 1st defendant company had been acquired by the appellant.” And with that, the Court of Appeal held that the 3rd respondent had not acquired the 1st respondent. I agree with the Court of Appeal. The purchaser of a company buys its assets and liabilities.” The Supreme Court also stated that in order to establish to the “court that a Company had been bought by another Company, the person who asserts must place before the court documents from the Corporate Affairs Commission to justify the assertion. Documents such as: (i) Instrument of transfer; (ii) Documents to show acquisition of shares of the 1st respondent by the 3rd respondent (iii) Filing of relevant papers. In the absence of documentary

evidence (above) credible evidence was led to show that the 3rd respondent acquired, or bought the 1st respondent. Such an issue is never resolved solely on testimony on oath. There must be documentary evidence to support oral testimony, thereby making oral testimony more credible. The appellants, as plaintiffs failed woefully to discharge the burden of proof placed on them by law. Section 146 of the Evidence Act provides for the well-known principle of law that possession is prima facie proof of ownership. That is to say possession of the property in dispute (the 1st defendant company) is good title against anyone who cannot prove a better title. Section 146 of the Evidence is irrelevant in deciding whether a company was acquired by another company. Issues such as acquisitions, mergers are regulated by the companies and Allied Matters Act. In the absence of relevant documentary evidence, the appellants’ failed to show that the 3rd respondent acquired the 1st respondent.“ The court unanimously dismissed the matter. Conclusion A party that seeks to rely on the fact that a company acquired another company and thereby takes over its assets and liability must go the extra mile of obtaining relevant documents from the Corporate Affairs Commission to establish this to the court. Failure to do this will result in the failure of the matter.

Monday 03 December 2018

C002D5556

BUSINESS DAY

The landlord and tenant relationship in Lagos State (part 1) ment is express or implied, oral or written, or partly oral or partly written or for a fixed period. 1.1. Nature of Tenancy The relationship between a landlord and tenant is that of owner and occupier. The landlord owns the land while the tenant is entitled to occupy and use the land, on a temporary basis, subject to payment of rent and good behaviour. Apart from tenancies which subsist by virtue of statute, the relationship between landlord and tenant is essentially contractual – that is, agreement which may be oral, express or implied from the acts of the parties or from other circumstances. Being a matter of contract, its terms and conditions cannot be altered unilaterally by either party without the agreement of the other, subject to the provision of any statute governing the type of tenancy. The parties are bound by the terms of Tenancy Agreement. In determining the nature of tenancy between a landlord and a tenant, especially where the agreement

Adetola Adeleke Lead Partner, Crowncourt Attorneys

ach state of the federation has its tenancy law. The focus here is on Lagos state. Lagos State has an estimated population of about 21 million people, yet it is the smallest in area of Nigeria’s 36 states. With housing deficit in the millions, the relationship of landlord and tenant is inevitable and so also is the recovery of premises from tenants by their landlords. As with many other legal relationships, the difficult issues usually relate to how parties understand their roles and obligations. Tenancy law of Lagos State 2011 is the law governing tenancy in Lagos. 1. Tenancy Agreement Whenever premises are granted by the landlord to a person for value, a tenancy agreement shall be deemed to exist, whether the agree-

Do you know?

ection 11 of Lagos State Tenancy Law, 2011 states that “ From the commencement of a tenancy it shall be the duty of the party who engages the services of a profes-

A look into different types of demand guarantees sional in respect of the tenancy agreement to pay the fees for such professional services. “ Therefore, it is illegal for the landlord to instruct an agent or lawyer and ask the tenant to pay their fees.

Recent judgement of the Supreme Court of Nigeria

n the recent case of DAUDU v. FRN (2018) 10 NWLR (Pt.1626) 169, 183 E -F (2018) LPELR-43637(SC), the Supreme Court of Nigeria stated that “the burden lies on an accused person to explain properties he acquired which are disproportionate to his known legitimate earnings.” Therefore, one may be asked to explain the source of his wealth if what he has

exceeds his legally known source of income. An example of such situation is a civil servant who has been working for the government all his life and the person is worth billions. His source of income is the monthly salary he earns and as such he is not expected to be worth that much. Such a person can be called upon to explain how he acquired all that he has.

Locus Classicus Donoghue V Stevenson (1932) A.C p. 562

efore going into the fact of the case, the principle of law that was established in this case is that “A manufacturer of products owes the consumers of his products duty of care in ensuring that such products reach the ultimate consumer in the good form in which the products left him with no reason-

is oral, the court would consider the intention of the parties, which is discoverable from the circumstances surrounding a particular transaction. 1.2. Terms of the Tenancy The terms of a tenancy is either express or implied. The express terms are those which are mutually agreed to by the parties while the implied terms are those implied by law. For instance, where the Tenancy Agreement provides that the tenant cannot erect any building on the premises without the consent of the landlord and the tenant goes ahead to erect a garage without the consent of the landlord, the former has violated the Agreement. On the other hand, implied terms are those terms the law provides to regulate the tenancy relationship. It is implied by law that the tenant will pay rent and keep/deliver the premises in tenantable condition. It should be noted that it is illegal for landlords to collect more than a year’s rent from tenants.

able possibility of intermediate examination and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer’s life or property. On August 26, 1928, Donoghue and a friend went to a cafe in Glasgow. Donoghue’s friend ordered and paid for her drink (ginger beer). The cafe purchased the product from a distributor that purchased it from Stevenson. Donoghue drank some of the contents and her friend lifted the bottle to pour the remainder of the ginger beer into the tumbler. The remains of a snail in a state of decomposition dropped out of the bottle into the tumbler. She instituted an action against the company that manufactured the ginger beer and the court finally held in her favour.

he below are some of the major types of demand guarantees that are being used across the world when transacting business1. Performance guarantee/ bond- This is usually used by contractors, exporter and suppliers. It is a guarantee that the underlying contract will be performed from beginning to the end as agreed by the parties. It is like cash in hand i.e. cash retained as security for a situation where there is a breach in the performance of the underlying contract. The primary aim of this type of guarantee is to ensure timely and accurate performance as it is a form of financial penalty if the contractor, seller or supplier fails to perform his side of the contract. The value of the performance guarantee issued in favour of a beneficiary is usually 5 to 10 percent of the contract valuedepending on the agreement of the parties. 2. Tender guarantee/ bid bond- It is often used in a situation where a contractor is bidding

for a contract. That is why it is also called a bid bon/guarantee. It is usually part of the condition a contractor must fulfil when tenders are invited. Its purpose is to prevent unserious bidders from bidding for contracts. If the contractor that issues it is awarded the contract and he chooses not to execute the contract he will forfeit the amount in the tender guarantee to the beneficiary. This goes a long way to ensure that only serious minded contractors bid for contracts. 3. Retention guarantee – Contracts sometimes depending on their nature are usually executed in phases. Example of this is construction contract. Payment is usually made in phases too after certificate issued by engineers certifying the job is received. However, a percentage of the money to be paid is usually retained for some time in case of defect in the performance of the contract. If there is a defect, the beneficiary keeps the money. What the guarantee does is that

the employer releases the entire sum in exchange for the guarantee as he can readily get paid by the bank in case if a defect is later found. The guarantee is usually in place for one year. This in a way helps the contractor to get a good part of the contract sum and it also ensures that quality work is done by the contractor. 4. Advance payment guarantee- Sometimes, part of the contract sum is paid to a contractor in advance before performance of the contract. In this situation, the employer of the contractor is at a risk of losing his money if the contractor does not perform. The usual means of protecting the employer is usually through the issuance of an advance payment guarantee. This guarantee secures the repayment of the amount paid in advance to the contractor should he fail to perform as expected. The value of the guarantee is usually between 10 to 20 percent of the contract sum. The advantage is that the employer will have the confidence to release money in advance for the execution of the project/contract while this reduces the headache of the contractor in the area of funding. 5. Maintenance guaranteeThis is useful after the completion of a construction contract. Usually, the retention moneys are to be retained for some time after the completion of the contract in order to cover for defects and malfunctions that may be discovered. However, the issuance of this guarantee ensures that the contractor is paid in full. He can claim under the guarantee if defects are detected. The advantage of this is that the contractor gets fully paid and thereby giving him enough fund to attend to other contracts he might be executing.

BUSINESS DAY

C002D5556

This is M NEY A daily guide to your Personal Finance

Monday 03 December 2018

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

Make a difference this Christmas who would be glad for a decent meal and some of the clothes you no longer need. Visit the elderly Have you ever visited an old peoples’ home in Nigeria? Get a few friends, put some money together and take some gifts and treats to the elderly who have found themselves in one of a handful of old peoples’ homes in the country, as our extended family social system evolves to a more nuclear model. Cheer them up; the gift of happiness and good stimulating company for an old person who might be lonely during the holiday season, would make such a difference. How is your Alma Mater doing? Do you often reminisce about how things used to be at your old school and how far standards have fallen? Why don’t you do something about it? With an endowed gift, you can provide permanent support for the educational institution. Your contributions will be invested and each year a distribution made to fund the program or area that matches your interest in a particular field of study. Once it is officially established, you or anyone else may continue to add to the fund at any time. You may also

‘ It is not enough to just tell children to be charitable and kind. Our own actions in supporting others or changing lives will speak louder than any thing we can say

‘

rom Christmas lights to trees, gift-wrapping, ornaments, sumptuous meals and carols what started as a most significant Christian celebration has taken on a major commercial significance. In a sense, Christmas has become all about spending. Amidst it all, it is so easy to lose sight of the true meaning of Christmas. What can you do this year that epitomises the true spirit of Christmas? Here are a few ideas that are worth considering: The definition of a philanthropist is “someone who donates his or her time, money, and/or reputation to charitable causes.” By giving back to your community, religious organisations, for education, for sports or for the arts, you afford yourself the opportunity and indeed the privilege of making a positive impact on other people’s lives. Material possessions will eventually lose their shine, but through philanthropy, one can make an impact, and can shape or even save lives. What causes do you identify with? Decide what initiatives you may want to support and then review your finances to decide how much you can afford to give. Will it be a one-off donation this Christmas or is it something you can continue to commit to year on year. Narrow your choices down to a few charities or initiatives that you can identify with and do some research on them to ensure that their ethos and mission is in consonance with your core values; then choose say one or two to support. Follow up to see the impact your action is having. We all love to see the excitement on children’s

faces on Christmas Eve or Christmas morning ripping the wrapping paper off their presents. The experience of receiving piles of gifts makes them believe that they must have lots of new things for Christmas to be perfect. Try to emphasise the non-material aspects of the season, such as family, fellowship and thoughtfulness. “It’s what you do and not what you say” It is not enough to just tell children to be charitable and kind. Our own actions in supporting others or changing lives will speak louder than anything we can say. We must guide them through a program of action so that it becomes ingrained into their psyche. It teaches them a powerful lesson about kindness and generosity and that their personal money or talent can have a positive effect on the wellbeing of others. It will also show them graphically how fortunate they are; as they take so much for granted. There are so many people in need of the most basic necessities that only a privileged few can take for granted. Think about all the food that goes to waste on Christmas day and what a difference it would make to the numerous homeless people

decide to, through the title, forever link your name or that of a family member to excellence at the college. Your contribution will go a long way in improving the standards of education so badly needed in our country. Be grateful for what you have Even if you have had a really hard year yourself, and it sounds absurd to even conisder giving what you don’t have, focus instead of being grateful for what you do have. If you look around, you will find that there is always someone worse off than you are; unemployment and deep-

ening poverty have become normal for millions of Nigerians Give of your time and talent Giving does not mean that you must give only financially; there are several ways to give meaningfully. Can you commit to teaching someone how to read, how to play a musical instrument, how to code, how to sew or bake? What can you teach? The possibilities of giving of your time, experience, talent and intellect are endless and by sharing your knowledge with others you can add sustained value to your community

in this way. Give Christmas investments Amidst the toys and gadgets, include financial gifts for your children. Cash will always be a favourite, but there are ways of giving money that keeps giving. The gift of a mutual fund invested in a portfolio of money market securities or equities, will get them started in a life of saving and investing. The gift of health insurance for a family that cannot afford decent health care would have a huge impact on their lives. Don’t just give it; teach them what it means, so that after the period of your gift, they will be encouraged to stay insured. As we get caught up in the whirlwind of festivity, socialising and present buying, it is little wonder that we often forget the true meaning of Christmas. How can you make a difference? If you haven’t been doing much for others before now, this is a good time to start. As you prepare for Christmas, let us not forget what we have been given; God’s gift of His Son Jesus Christ. This Christmas, be a blessing to others. Merry Christmas Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

Monday 03 December 2018

C002D5556

BUSINESS DAY

Stocks

Currencies

Commodities

C002D5556

Rates + Bonds

Economics

Funds

Week Ahead

Monday 03 December 2018

Watchlist

SHORT TAKES

ECONOMY

These charts show lenders’ profit have recovered since 2016

$8.134 billion In August, the central bank ordered MTN and its banks to bring $8.134 billion back into Nigeria, sending the company’s shares plummeting. The regulator alleged the firm had sent the funds abroad in breach of foreign exchange regulations.

BALA AUGIE

rofit of Nigerian largest lenders has been improving since the 2016 prerecession period, thanks to the combination of higher crude oil prices and a benign foreign exchange environment. The banks are Zenith Bank Plc, Access Bank Plc, Fidelity Bank Plc, First City Monument Bank (FCMB) Plc, Guaranty Trust Bank (GTBank) Plc, Stanbic IBTC Holdings Plc, First Bank Nigeria Holdings Plc, Sterling Bank plc, Wema Bank Plc, and United Bank for Africa (UBA) Plc, Unity Bank Plc, Union Bank Plc, and Diamond Bank Plc. For the first nine months through September 2018, 13 banks made a profit of N537.27 billion, which represented a 14.13 percent increase from the N501.550 billion recorded in the corresponding year of 2017. However, profit decreased by 11.31 percent to N428.50 billion in 2016 from N483.15 billion in the corresponding period of 2015, a period when the sudden drop in crude oil prices from above a $100 per barrel to near $40 forced banks with heavy exposure to the sector to write off loans that began to go bad. The uptick at bottom line means lenders have surmounted the headwinds that undermined earnings during the era of severe dollar scarcity that tipped the nation in its first recession in 25 years as customers are paying back interest on money borrowed. Also, some lenders have taken a haircut in 2016 on NonPerforming Loans (NPLs), a proactive strategy that validated their risk management strategy. Many of them, especially the big ones, have reduced lending to the oil and gas sector. For instance, the cumulative Non Performing Loans of (NPLs) of 10 lenders have fallen by 16.15 percent to N1.01 trillion from N1.21 trillion as at September 2017, according to data gathered by Markets and Intelligence. Global ratings agency Flitch has upgraded Tier 1 lenders, thanks to sound financial metrics, reasonable capital buffers, and franchises. Fitch Ratings has revised the Outlook on Zenith Bank’s (Zenith) Long-Term Issuer

P.E

14 percent Nigeria’s central bank kept its main interest rate at 14 percent on Thursday, its governor Godwin Emefiele said.

25 years

Default Rating (IDR) to Stable from Negative and affirmed the rating at ‘B+’. It upgraded United Bank for Africa Plc’s (UBA) Long-Term Issuer Default Rating (IDR) to ‘B+’ from ‘B’. The Outlook is Stable. The ratings agencies revised the Outlook on Guaranty Trust Bank Plc’s (GTB) Long-Term Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at ‘B+’. A breakdown of the profit figures of some big players in the industry validates the recent elevation. For instance, Zenith Bank’s net income stood at N144.17 billion as at September 2018, this compares with N129.23 billion, N95.38 billion, 83.08 billion, and N71.04 billion recorded in the corresponding period of 2017,2016,2015 and 2014 periods. GTBank’s net income stood at N144.17 billion in September 2018, this com-

pares with N125.57 billion, N117.681 billion, N75.16 billion and N66.73 billion recorded in the corresponding period of 2017,2016,2015 and 2014 periods. But one of the leading global rating agencies, Moody’s Investor Service, in a recent report, pointed out that the smaller banks or the tier 2 banks, are operating with weaker capital buffers, which indicate vulnerability of these banks. Of course some of the these small lenders are beleaguered as Unity Bank’s net income has been falling like pack of cards and it is the brink of technical insolvency as accumulated loses have overwhelmed shareholders’ fund. Unity Bank’s net income slumped to 585.84 million in September 2018, from N2.44 billion in 2017, N3.42 in 2016, N9.31 billion in 2015, and N11.05 billion in 2014.

Nigeria emerged from its first recession in 25 years in 2017 but continues to suffer from sluggish growth and high inflation.

Diam0nd Bank’s net income has been ebbing as net income fell to N2.26 billion in September 2018, from N3.70 billion in 2017, N5.91 billion in 2016. Investors and analysts are more concerned about the ability of banks replicating the growth momentum this year as falling yields on treasury bills since August 2017 could be challenging for the industry. Yields on treasury bills now are around 15 percent, which compares to around 22 percet for the most part of last year.

“There may not be very significant improvement in profitability going forward as the economy is not expanding. I have not seen any sector the banks have lent to,” said Johnson Chukwu, managing director and CEO of Cowry Asset Management Ltd. “The interest rates on treasury yields have been falling, although there has been gradual uptick in the yields in recently. The impact of the increase will only be felt my year end,” said Chukwu.

1.50 percent Economic growth dipped to 1.50 percent in the second quarter, continuing a slowing trend that began in the first quarter.

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

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

Monday 03 December 2018

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Markets Intelligence

Investors swoop on FCMB’s shares on Q3 stellar performance BALA AUGIE

he market has reacted positively to First City Monument Bank) Plc’s stellar performance in the third quarter as they swoop on the shares of the lender. Lender’s share price gained 9.85 percent to close at N1.45 as at 2:00 pm in commercial city Lagos, while its market capitalization stood at N28.71 billion. The result was good and l guess that’s why the market has reacted to it but going forward the rally may not continue as investors will be more interest in the full year result of the lender, according to Wale Olusi, equity research analyst with United Capital Research. For the first nine months through September 2018, FCMB’s net income surged by 107.38 percent to N11.34 billion, the highest in 2 years. Its profit growth is the highest among tier 2 lenders. The growth in profit was largely driven by a sharp jump in foreign exchange revaluation gains of N10.40 billion in the period under while an increase in noninterest revenue by 77.33 percent to N33.02 billion in the period under review added impetus to the bottom line. However, interest income dipped by 0.89 percent to N95.41 billion as lenders in Africa’s largest economy have

turned off he tap on lending. FCMB’s is efficient in managing cost while magnifying profit as cost to income ratio fell to 65.93 percent in the period under review from 71.84 percent the previous year. “FCMB result was quite impressive and we believe the bank is on track to post a solid FY 18 result,” said analysts at ARM Equity Research, in a recent note to client. “The stock is trading at a P/B of 0.14x, a discount to average P/B (0.15x) of Fidelity (0.28x) and Diamond (0.07x). Our last communicated FVE on FCMB is N2.34 which translates to a BUY rating on the stock. We will revisit our numbers after further analysis and discussion with management,” said analysts at ARM. FCMB is efficient in utilizing the resources of shareholders’ generating higher profit as return on equity increased to 3.34 percent in September 2018 from 1.96 percent the previous year. Weighted average cost of funds (WACF) increased to 3.34 percent in the period under review from 1.96 percent the previous year. “An increase in WACF could mean that the bank is becoming more retail focus and interest expense has reduced. It getting more in savings and current account than fixed deposit,” said Kayode Tunoye, Fund Manager at United Capital Research.

Investors Chronicle: Pennon, Greggs, Thomas Cook Companies analysis from our sister publication

mpressive performance in the current cycle and a rapidly growing waste business underpin our buy call, along with a prospective yield of 5.4 per cent, writes Tom Dines. As the current five-year regulatory cycle approaches its end in December of next year, the water companies are pushing their credentials in the hope the regulator will look favourably on their draft business plans in its initial assessment at the end of January. Pennon’s plan was awarded “enhanced” status for the current cycle, and management is keen to repeat that success. These half-year numbers should help, with the group achieving its highest ever customer service score and a cumulative return on regulated equity — a key metric for water utilities — of 11.8 per cent. The future performance of the water business now sits in large part with the regulator, but while it is making its assessments, waste management business Viridor looks to be performing well. Cash profits reached £78.4m in the first half of the year — equivalent to 27 per cent of the adjusted total, up from 23 per

cent in the same period last year. Most of Viridor’s returns come from its energy recovery facilities, which have been ramping up rapidly. Three out of four new facilities are now operational, generating a 29 per cent increase in profits in the period. Management remains confident in the long-term prospects for this part of the business, forecasting a capacity gap of more than 7m tonnes for energy recover facilities by 2030. Bloomberg puts the consensus earnings per share forecast at 52.2p for the March 2019 year-end, from 50.9p in full-year 2018. Greggs is clearly defying the odds when it comes to high street retailing and we expect it to do well over the festive period. Shares in baker Greggs rose by as much as 13 per cent after the group revealed that strong sales growth had continued from the third quarter into October and November. As part of a trading update, the group revealed total sales growth of 9 per cent over the eight weeks ended November 24, with company-managed shop like-for-like sales up 4.5 per cent. That underlying performance beat management’s expectations, prompting improved full-year adjusted pre-tax

profit guidance of £86m, up from £82m. This performance was in direct contrast to the wider issues blighting the UK high street. October marked another month of declining visitors to town centres as consumers continued to head online. The vacancy rate is also at a 15-month high, after several brands disappeared from the high street this year. While there is still a lot to play for before the end of the year — especially as retail enters its peak trading season — it’s encouraging to see sales performing strongly against tough comparatives. Brokerage Peel Hunt also said the bakery’s Christmas ranges had “landed well” — retail speak for “resonated with customers” — but work had also been done to reduce queueing times and convert new customers into sales. As analysts there argue, it is not that visitors to the high street are making a dedicated trip to Greggs, but rather that potential customers find the products appealing, the service helpful and the environment conducive to a quick and convenient purchase. Despite a lack of detail on margins, a good like-for-like sales per-

formance has inevitably fed into this, as has a tight grip on operational costs. As such, Peel Hunt followed the company’s lead, marking up current-year pre-tax profit forecasts to £86.7m and full-year 2019 profit forecasts from £85m to £89m. While the brokerage says the next six weeks are “crucial”, it admits it got “carried away” with Greggs’ sales slowdown earlier this year, describing the weak spring/summer season as “no more than a blip”. Sell: Thomas Cook (TCG) The shares have lost roughly 70 per cent of their value over the past 12 months and now trade at 35p, or just five times forward earnings. It’s been widely reported that a warm summer discouraged Brits from seeking sunshine abroad. In fact, most UK-listed tour operators have blamed heatwave-induced staycations for subdued growth in the latter part of the year. But for Thomas Cook, the situation is so dire that it has prompted a second profit warning in the space of just two months, only days ahead of full-year results. Ultimately, the company decided to cancel its fullyear dividend. Despite a 6 per cent rise in like-

for-like sales to £9.58bn, underlying operating profit fell by nearly a fifth to £250m, missing analyst expectations by 10 per cent. Most of this shortfall came from an £88m decline in tour operator profits, dented by heavily discounted late bookings after Brits were less inclined to book last-minute summer getaways. But the miss also included £28m of “legacy and nonrecurring charges” to underlying operating profit, which included a write-down of historic hotel receivables, £4m-worth of flight disruption costs and £10 in “transformation” costs. Now, Thomas Cook has set itself some “strategic priorities” for the coming year, which include addressing the poor performance in the UK tour operator business and better management of capacity and operational flexibility. Cost savings are also on the agenda, as is a focus on selling higher-margin own-brand hotels and holidays. September’s profit warning also blamed the recent weather for discouraging holidays abroad. But this second update, released three days ahead of the group’s annual results statement, is more worrying.

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Presidential candidates must show blueprint on fixing broken infrastructure

recommends attention should be given to, increasing the number of housing units in order to close the current and projected housing deficit estimated at 17 million housing units at the moment. Andrew Nevin, partner and chief economist for PwC, advises that besides addressing the energy, water and roads infrastructure needs of citizens, Nigeria needs to build more houses to match the growing population and rapid urbanisation, pointing out that Nigeria’s yearly demand for property is about 1 million, but the yearly supply is just 100,000 units. Chii Akporji, an executive director at Nigerian Mortgage Refinance Company (NMRC), blames Nigeria’s housing deficit on the country’s infrastructure deficit. “Infrastructure is all encompassing and remains the bedrock of the economy”, she posited, stressing that it contributes to the cost of housing.

“Infrastructure constitutes about 25 percent of construction cost. It is the major cause of housing deficit” , Akporji insists, suggesting that government should initiate an infrastructure fund that focused specifically on housing. She says that critical infrastructure, especially power, energy and water are still a huge challenge in most cities, pointing out that globally, cities account for up to 70 per cent of energy use and 80 per cent of greenhouse gas (GHG) emission. These cities also host most of the infrastructure exposed to risk from climate change, requiring them to invest in resilience as well. “In these cities too, the International Finance Corporation, an arm of the World Bank, predicts 37 percent growth in energy consumption, and that 96 percent of growth will occur in developing countries; global water consumption has grown at more than twice the rate of population increase in the last century and, in developing countries, this will increase by another 50 percent by 2025”, she said. All these should be the concern of both sitting and intending leaders. The solution to all these lies in building critical infrastructure including green building which, in its design, construction or operation, reduces or eliminates negative impacts on climate and natural environment, preserving precious natural resources and improving quality of life. Therefore, the next set of leaders in Nigeria, including local government chairmen, state governors and the president, should have it at the back of their mind that infrastructure is the backbone of the economy and that any step towards building same means a journey towards economic prosperity and sustainability.

He further explained that the goods being imported are more than the capacity of the port, as individuals, industries and companies make use of the port for shipping their goods ignoring the existence of other ports in the country. According to him, ways through which this problem can be solved is to upgrade the transport facilities, especially the railway, proper traffic management and establishment of a more orderly, effective and efficient methods of mobilisa-

tion of goods and services. Also speaking at the event, Adewale Ajayi, partner in Tax, Regulatory and People Services Practice of KPMG Advisory Services Nigeria, advised that the government should fast-track the validation of other components of the Petroleum Industry Bill, such as the Petroleum Industry Fiscal Bill and Petroleum Hosts Community Bill to have a promising competitive tax environment. He said this would in aid government’s steps in simplifying start-ups in Nigeria.

CHUKA UROKO

ith a population put conservatively at 170 million and growing at about 2.8 percent, Nigeria has one of the fastest growing populations in the world. Experts say the country’s population is set to exceed 250 million, which is roughly 50 million households, by 2030. This, ordinarily, is a great socioeconomic asset for any nation, but not Nigeria, where this growth is far ahead of infrastructure development and even the country’s gross domestic product (GDP), thus creating growth imbalance that needs to be given urgent attention. Nigeria is challenged a great deal by dearth of infrastructure which is limiting its economic growth in many ways. This is made worse by the country’s rapid urbanisation which is also growing at an estimated rate of 4.3 percent per annum. A World Bank report says 50 percent of the world lives in cities today and 70 percent is expected to live in urban areas by 2050. In Nigeria, it is projected that unless something urgent is done now, about 50 percent of the country’s population will live in cities by 2025. These statistics, as scary as they look, are real, but Nigerian government does not seem to be bothered about their implications to economic development. In 2013, the National Integrated Infrastructure Master Plan (NIIMP) that would span 30 years was presented to the government by a presidential advisory committee set up to address that. The government of that time did

Buhari

little or nothing on the plan which then required about $30 trillion to implement. Today, following its review in 2017, the country requires about $460 trillion to attend to the plan which provides the roadmap for building world-class infrastructure that will guarantee sustainable economic growth and development. Nigeria is just a couple of months away from another round of electoral process that will bring in a new set of leaders. Muhammadu Buhari and Atiku Abubakar are the presidential candidates of the two dominant political parties. Both of them are not new to governance, which is why citizens’ expectation is high that whichever of them that emerges as president of the country next year should prioritise infrastructure. Whoever becomes the next president should revisit the infrastructure plan which is also aimed to enable Nigeria take advantage

Atiku

of the vast opportunities in the domestic and global economies to enhance its competitiveness and improve the quality of life of the citizenry. It provides an integrated view of infrastructure development in Nigeria, with clear linkages across the key sectors. A close look at the plan shows that about 50 percent of investments in the plan would be directed at the roads sub-sector in order to refurbish cross-national highways and expand the regional road network and linkages to other modes of transportation. This is quite understandable given that Nigeria has the worst roads infrastructure in Africa. Roads infrastructure in the country is critical to the economy as it accounts for 90 percent of passenger and freight traffic and is therefore the backbone for all other economic infrastructure. Another priority area in the plan is housing, which the plan

Why Nigeria needs strong public sector Gbemi Faminu

n view of the forthcoming general elections, analysts want Nigerian politicians to have a clear-cut plan on fixing the public sector. Oluwole Adedokun, a senior manager at KPMG Nigeria, says there is a need to strengthen the capacity of the public sector in Nigeria in order to accelerate economic development in Nigeria. Adedokun said this at the KPMG 2019 CFO forum themed ‘Plan-

ning with Purpose: 2019 Economic Outlook’. According to him, special projects require government intervention, which will serve as basis for economic growth. He explained that in order to facilitate development in an economy, there is a need to envision projects and policies, make plans towards the achievement and then take steps towards the implementation of that project. He stated that due to the limitation of not having a well-equipped and functioning public sector capac-

ity, there are loopholes in delivering the proposed polices thereby hindering plans to develop the economy. In order to combat this, there is a need to strengthen the capacity of the public sector, he stated. Making reference to the Apapa port situation, he explained that the problem with the port was not solely about the lack of infrastructure but also the problem of traffic management, coupled with the fact that the port is being used to the point of saturation.

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Nigeria’s next president must take firm position on AfCFTA

time it makes up its mind to sign, experts warn. Babajide Sodipo, regional trade adviser at the African Union Commission, said at the 12th Annual Business Law Conference of the Nigerian Bar Association Section on Business Law (NBA-SBL) in Abuja, that nobody will wait for Nigeria if it does not sign the treaty. “It will simply mean that life will go on without Nigeria, and then it becomes progressively much more difficult for you to catch up because, eventually, to the extent

that you do not want to cap your growth, to the extent that you do not want to lose the market opportunities that you have, you still have to sign,” Sodipo said. The Manufacturers Association of Nigeria (MAN) believes that the country is not competitive enough to sign on the agreement. MAN also believes that the AfCFTA is shrouded in secrecy and that Nigeria will be worse for it if the country signs the agreement in its current form. Frank Jacobs, former president of MAN, had argued that there were no studies validating the benefits of AfCFTA, saying that it would be unwise for the country to go ahead with the treaty. Findings show that a once disaggregated Europe came together in Maastricht, Netherlands, on November 1, 1993, to form a formidable free trade union made up of 28 countries with a GDP of $18.4 trillion, making it the second largest economy in the world after the United States. A study published in July of 2014 by the Bertelsmann Stiftung, a German foundation, showed that German real GDP jacked up at an average of €37 billion per year since 1993, translating into a yearly income rise of €450 per person. Danish citizens’ yearly income rose by €500 over that same period.

manufacturing, among others, as key focus areas in these markets. EY also has a project called EY Ripples, which helps it to, in a better way, do more investments in corporate social responsibility, he added. Ben Afudego, partner and advisory leader for West Africa, said EY wants to give experience to the people in the AIM markets instead of letting them go abroad. “We want to keep EY business outside the country’s cyclical family,” Afudego said, urging Nigeria to diversify its economy. “We cannot continue to run an economy where GDP growth is lower than population growth,” he said. “Tax policies need to be reviewed. Nigeria can have a tax policy targeted at consumption,” he said.

He stated that a credible election is necessary in 2019 in order not to erode the confidence of investors. “In 2019, there will be more expenditure on media, advertising and the like. There will be less funding to other sectors,” he forecast. “Government may stop funding construction-related projects, which will create some effect on wages and earnings. It can also have an effect on GDP. We have to pray so that oil price will remain stable and there will be no militancy. I am not seeing a significant improvement next year because of these issues. “Let us see if Nigeria can have ministers ready as soon as the election is over. Let us not create uncertainty in the system. We need to pay enough attention to governance in Nigeria and rest of Africa,” he added.

ODINAKA ANUDU

igeria’s next president must be one that can take a firm position on African Continental Free Trade Area (AfCFTA). Nigeria has failed to take a decisive step on the AfCFTA, which targets to liberalise trade among African countries. Already, 49 countries have signed onto the agreement, with South Africa, second biggest economy, also among them. Discussions on the treaty are on now, with Africa’s biggest economy and most populous country missing. President Muhammadu Buhari had wanted to sign on the agreement in March at Kigali but pulled back on pressure from labour unions and the Manufacturers Association of Nigeria. “AfCFTA is entering critical stages and negotiations are going on in priority sectors while Nigeria is still indecisive. We must therefore remember that the world will not wait for us. We need to sign so that we can be involved in negotiations, especially with regards with our areas of concern,” Iyalode Alaba-Lawson, national president of the Nigerian Association of Chambers of Commerce,

Industry, Mines and Agriculture (NACCIMA) said. The AfCFTA is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994, targeted at creating a single market for Africa’s 1.2 billion people and exposing each country to a $3.4 trillion opportunity. The deal is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 if all African countries sign up. The treaty will liberalise 90 percent of products produced in the

continent. This means that a country that is bound by the AfCFTA can only protect 10 percent of its local industries. Experts say the world will not end if Nigeria does not sign the treaty, but investors will prefer a small African country which has access to 1 billion people— a potentially bigger market— than the protectionist Nigeria with an access to just about 200 million people. Other countries will also move on without Nigeria and the country will be a late comer by the

What Nigeria can learn from Saudi—EY …as AIM holds lessons for the country

rnst & Young (EY) says Nigeria can learn a lot from Saudi Arabia’s diversification drive to fix most of its problems. In the wake of oil price crisis in 2014 to 2016, Saudi Arabia took clear measures to diversify into manufacturing, tourism and healthcare. Saudi Arabia’s tourism revenues are expected to exceed SR211 billion ($56.67 billion) by end of the year, compared with SR193 billion recorded in 2017, said a report. The travel and tourism sector in Saudi Arabia has grown at a much faster rate, according to Tourism Information and Research Center (MAS) of the Saudi Commission for Tourism and National Heritage (SCTNH). “Saudi is an oil-dependent econ-

omy like Nigeria, but they now focus on tourism, building massive city. They are offering $500 billion tourism opportunity,” Paul Sommerin, financial services leader for Africa, India and the Middle East (AIM), EY. “They are also paying a good attention to manufacturing. Third is the healthcare. Most Saudis used to go to London to get medicals, but things are changing. They also opened up the furniture market and built a big city in Riyadh,” he explained. He further said that India is doing a similar thing in technology, manufacturing, healthcare and tourism, which Nigeria can emulate. EY has created AIM to achieve borderless advisory services for their clients. The borderless services help EY clients benefit from stream-

lined, cross-border sector specific advice, enhancing greater growth and efficiency across these three markets, which have a combined GDP of over US$5 trillion. “About two years ago, we started looking at our markets. We were looking at achieving integration, accelerating our services, increasing resilience and profitability,” said Hennie Human, advisory and market leader, EY. “AIM gives us the opportunity to be more resilient. It gives us the opportunity to integrate our intellectual property (IP) since we have an incredible IP across these markets. It gives us vehicles to utilise specific skills by pulling 7,000 consultants across geographical regions,” Human said. He added that EY has identified financial services, public sector, technology, energy, assets and

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Monday 03 December 2018

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FINANCIAL TIMES

Federal Reserve prepares to give investors murkier view on policy

Climate change: Populism vs Paris Page A60

Page 59

World Business Newspaper

Trump and Xi face hurdles in trade talks after fragile tariffs truce New round of talks between Washington and Beijing will be fraught with pitfalls JAMES POLITI

onald Trump, the US president, and Xi Jinping, China’s president, are facing hurdles in building on the fragile truce they reached in their trade war, after the two countries left many thorny issues unresolved and offered different interpretations of the agreement. In a much-anticipated working dinner in Buenos Aires following the G20 summit, Mr Trump and Mr Xi agreed on Saturday to a temporary ceasefire, in which the US president suspended his decision to impose higher tariffs on Chinese imports next year. But the bare-bones agreement will trigger a new round of talks over the coming months between Washington and Beijing that are bound to be fraught with pitfalls, as the two countries aim to tackle some of the more sensitive issues, including ownership and access to technology and intellectual property. “This is a welcome step, but the process is far from over. Now all eyes shift from the dinner table to the negotiating table to see whether the US and China can actually reach a meaningful deal,” said Wendy Cutler, a former US trade negotiator and vice-president of the Asia Society Policy Institute.

According to the terms of the deal outlined by the White House, the US will not ratchet up tariffs on more than $200bn of Chinese goods from 10 per cent to 25 per cent in January, as had been planned, to give more time for the talks. Meanwhile, China would move to purchase a “very substantial” amount of farm, energy and industrial goods — though the amount was not specified — in order to reduce the trade gap with the US. The US also set a deadline of three months for the talks to address China’s alleged intellectual property theft and forced transfer of technology. Failure in this regard would result in a new escalation of tariffs. “This was an amazing and productive meeting with unlimited possibilities for both the United States and China,” Mr Trump said as he flew back to Washington on Air Force One. Business groups welcomed the breakthrough but said it was only the beginning. “Setting aside the imposition of tariffs is the right course of action for US workers, job creators, and the economy,” said Myron Brilliant, head of international affairs at the US Chamber of Commerce. “The hard work begins now.” Andy Rothman, an investment strategist at Matthews Asia, said both Washington and Beijing faced “difficult choices” if they wanted the truce to stick.

“Trump will have to accept that the US will have to share economic and strategic power with a rising China . . . and fundamental changes to China’s political structure cannot be dictated by outsiders,” Mr Rothman said. “The Xi administration will have to accept that along with its professed desire to use its rising power within the existing global infrastructure, comes a responsibility to follow the rules of that system and to be transparent.”

Complicating matters further were different interpretations of the deal emerging on Saturday night from the two capitals. China raised the prospect that the tariffs could be eliminated entirely after the new round of talks, which the US did not highlight. Beijing did not mention the 90-day deadline for the negotiations, or the possibility that the tariff escalation could return if no agreement was reached. China was also much less detailed on the

purchases of American goods it was committing to. However the optimistic tone struck by the two leaders in Buenos Aires suggested a willingness to strike a deal. In opening remarks at the dinner, Mr Xi said it was a “great pleasure” to see Mr Trump. “A lot of things have taken place in the world. Only with co-operation between us can we serve the interest of both peace and prosperity,” he said.

Google chief prepares to testify before Congress

Trade truce provides time for Beijing to stabilise

Sundar Pichai expected to face grilling over privacy and political bias

GAVYN DAVIES

KIRAN STACEY AND RICHARD WATERS

oogle is preparing for one of its toughest weeks in recent years, as its chief executive testifies before the US Congress for the first time, a day before he is due to take part in a meeting with other technology bosses at the White House. Sundar Pichai will on Wednesday be questioned by members of the House judiciary committee in a hearing that officials say is likely to be wideranging and potentially tempestuous. With the company facing criticism for working on a censored search engine for China and facing allegations that it suppresses certain results for political reasons, officials said they expected the questioning to be tough. One aide to a senior member of the committee said: “This is going to be a free for all, where members will get a chance to ask him about anything they are angry about. I expect a really, really wide array of questions — from privacy to political bias and everything in between. “This will be something similar to the Facebook hearings,” the person said, referring to the two Congressional appearances by Mark Zuckerberg, Facebook’s chief executive, after the revelations surrounding Cambridge Analytica. This is the first time Mr Pichai has been subject to the same kind of hos-

tile political scrutiny that many of his fellow technology bosses have faced in the past year, and comes as politicians weigh up enacting America’s first national data privacy law. In September, the Google boss was represented by an empty chair after he refused to testify alongside Twitter’s Jack Dorsey and Facebook’s Sheryl Sandberg in front of the Senate intelligence committee. Google has been working hard this year to distance itself from the scandals surrounding Facebook, and opted to draw the anger of Congress rather than risk being seen in the same light as the embattled social network. Following that hearing, Mr Pichai met Republican leaders to discuss their concerns at which it was reported he agreed in principle to Wednesday’s hearing. In a statement issued ahead of the session, Kevin McCarthy, the Republican leader in the House, said: “Recent reports suggest Google might not be wielding its vast power impartially. “Its business practices may have been affected by political bias. Additionally, reports claim the company is compromising its core principles by complying with repressive censorship mandates from China.” The perceived leftwing bias of the big tech platforms — and Silicon Valley in general — has aroused considerable Continues on page A9

As the US economy slows down, China will be pivotal for global growth in 2019

s the G20 nations concluded their fractious meeting in Argentina with a statement that papered over some deep and worrying divisions on climate and trade policies, the latest results from the Fulcrum nowcast models continue to suggest that the global economy is slowing down quite markedly. This autumn, there have been shades of the more serious market crisis in 2015-16, when a major slowdown in China, together with a tightening by the Federal Reserve, triggered an episode of severe nerves about global deflation. The good news is that the Fed has now changed its tune, with Jay Powell’s speech and the FOMC minutes last week clearly indicating that the central bank is preparing the markets for a pause in rate hikes after the December meeting. China, however, still remains a major downside risk to global growth. The latest nowcast has fallen to only 5.2 per cent, much lower than forecast earlier in the year. Admittedly, the current episode has still not quite reached the extremes of the 2015/16 crisis. Whether or not it does so depends on the eventual success of the trade talks with the US, taken alongside the policy

easing currently under way in China. If Beijing’s fiscal stimulus fails to boost domestic demand sufficiently to offset any further tariff increases, the outlook for global growth next year will be quite bleak. Fortunately, that now looks like a downside scenario, not the base case, for 2019. Trump/Xi talks make limited progress The outcome of the Trump/Xi dinner on Saturday represents nothing more than a truce in the escalating trade wars. Entrenched problems remain, notably around US concerns about the protection of intellectual property, and the long term direction of Chinese industrial strategy. It is still very difficult to imagine that these gulfs can be bridged without further threats of trade protection from the Trump administration. Nevertheless, the planned January increase in the American tariff rate from 10 per cent to 25 per cent on another $200 billion of Chinese exports will now be shelved while talks continue. Furthermore, the threat of extending 25 per cent tariffs to all Chinese exports during 2019 looks less probable than hitherto. The downside risk from 25 per cent tariffs on all goods would be severe. Many economic simulations have indicated that the damage to

Chinese GDP growth next year would be of the order of 1.0-1.5 per cent. This shock could be too large to be handled by the new style of policy easing currently under way in China. Stimulus 2.0 in China The Chinese economy has been slowing sharply since mid 2018 (see box below), largely as a result of the Xi administration’s determination to reduce leverage in the financial system over the period from 201720. This objective is clearly having a major dampening effect on credit growth, with total social financing (a broad aggregate) slowing from 17 per cent in late 2016 to 11 per cent now. These domestic issues have been far more important this year than the direct effects of trade sanctions. It is clear that the government’s tolerance for a slowing economy has now been exceeded, and policy has been eased on all fronts — monetary, exchange rate, fiscal and regulatory — since mid year. This easing is beginning to take effect, with a rise in local government bond issuance leading to a rebound in infrastructure investment, after a period of shrinkage. Other factors that have supported the economy have been the acceleration of exports to the US to avoid future tariffs, the slide in the exchange rate and the announcement of corporate and personal tax cuts.

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NATIONAL NEWS

US charges Mike Lynch over $11bn Autonomy sale...

Deutsche Bank — 20 years after the deal that sealed its fate

Continued from page A8

anger on the right, putting the issue at the top of the Republican-led committee’s agenda for the hearing. At the end of last week the Daily Caller, a rightwing news site, published an internal email from a Google engineer that it said showed the company was deliberately suppressing rightwing new sources in its search results, providing extra ammunition. Thursday’s White House meeting is being billed as likely to be less confrontational, with topics reportedly due to include artificial intelligence, 5G wireless networks and quantum computing. But Google executives are aware that they face increasing pressure from President Donald Trump, who has accused the company of returning biased search results. Mr Trump tweeted in August: “Google search results for ‘Trump News’ shows only the viewing/reporting of Fake News Media. In other words, they have it RIGGED, for me & others, so that almost all stories & news is BAD.”

Goldman eyes monitoring of high-risk staff after 1MDB Bank looking to show officials that ‘lessons have been learned’ over scandal

LAURA NOONAN

oldman Sachs is considering a special surveillance programme to monitor higher risk employees in far-flung locations so the bank can demonstrate that “lessons have been learned” from the 1MDB scandal. Goldman’s shares have fallen about 15 per cent in the month since the Department of Justice revealed indictments against two former Goldman bankers for their alleged role in the multibilliondollar bribery and embezzlement scandal. The DoJ said that Goldman had prioritised “consummating deals . . . ahead of the proper operation of its compliance functions”. Lawyers and compliance officers at Goldman have spent years trawling through emails and other records of the entire 1MDB deal team, according to a person familiar with the internal probe and the plans for changes. The person said that Goldman had not found any evidence of any wrongdoing beyond that alleged of Tim Leissner and Roger Ng, the two men indicted by the DoJ. He also said that Goldman had not found any evidence of deficiencies or weaknesses in its internal compliance mechanisms, some of which were beefed up shortly after the 1MDB deal at the request of the Federal Reserve Bank of New York. “We looked at it [the 1MDB deal] every way,” the person said. Nonetheless, Goldman believes it is likely to have to offer up some improvements in a potential settlement with the DoJ, something in addition to existing compliance and staff monitoring operations. “Things can always be better,” the person said. “One thing we’re thinking about is looking at people who have an up and down P&L [a profit and loss account that varies], are operating in far-flung places and have a compliance record, however minor, and maybe having a special programme of surveillance for those kind of people”.

Monday 03 December 2018

Bankers Trust acquisition in 1998 was when the German lender went all-in at the casino TOM BRAITHWAITE

T French president Emmanuel Macron and his interior minister Christophe Castaner visit riot police and firefighters in Paris on Sunday © AP

Macron calls emergency meeting after riots leave France in shock Demonstrators wreak havoc in protests as government considers boosting security forces HARRIET AGNEW

mmanuel Macron held an emergency meeting of ministers on Sunday after antigovernment riots left Paris and other French cities in a state of shock and the French president facing his most severe political crisis. Returning from the G20 summit in Argentina, Mr Macron rushed to the Arc de Triomphe to assess the material damage done by the so-called “yellow jacket” demonstrators when they clashed with police in the heart of Paris the day before. Measures under consideration by the government include the imposition of a state of emergency and the deployment of soldiers to help contain the next protests, Christophe Castaner, interior minister, said. Saturday marked the third consecutive weekend of protests by the gilets jaunes — named after the fluorescent security vests car drivers have to keep in their vehicles. The spontaneous grassroots movement that began as an online protest against a planned rise in fuel taxes has evolved into a wideranging protest against the 40-year-old president, whose economic reforms have yet to yield tangible results.

About 136,000 demonstrators were counted across France on Saturday, of which more than 5,500 were in the French capital, according to authorities. This compares with 166,000 demonstrators last Saturday, and 282,000 across the country the weekend before that. At least 263 people were injured and 412 arrested in the capital on Saturday, the interior ministry said. The wealthy west and centre of Paris were worst hit, with stores smashed and looted, barricades erected, dozens of cars burnt and the Arc de Triomphe covered in graffiti. Many protesters were masked to protect themselves against tear gas and many had written “Macron demission”, or “Macron resign”, on their vests. During the emergency meeting in the Elysée Palace, Mr Macron “stressed the importance of judicial follow-up so that no [criminal] acts remain unpunished” and asked Mr Castaner to conduct a security review, according to an official. The French president also told prime minister Edouard Philippe to start consultations with parliamentary leaders and representatives of the protest movement. “What happened in Paris has nothing to do with the pacifist expression of legitimate anger,” Mr Macron said on

Saturday at the end of the G20 summit. “No cause justifies the police being attacked, businesses being looted, passers-by or journalists being threatened, the Arc de Triomphe being defiled.” The French government has sought to blame the far-right and the far-left for encouraging the clashes, but surveys have shown that a vast majority of the French population support the protests. “There are people who came from the ultra-right, the ultra-left, but there are also many people who just came to Paris to wreak havoc,” Mr Castaner told BFMTV. In an editorial published on Sunday in the weekly newspaper Le Journal du Dimanche, 10 self-proclaimed gilets jaunes representatives called for a freeze of planned fuel tax increases and the holding of countrywide consultations over taxes. Yet, despite mounting discontent, there was little sign that the government was open to any gestures to protesters. “We said we would not change course because the course is the right one,” Benjamin Griveaux, government spokesman, said on Sunday. “It’s been 30 years since people changed course every 18 months and if we had not changed course every 18 months for 30 years, the country would be better.”

Anil Ambani group launches 26 lawsuits against politicians and media Organisations including the FT are sued for a total of at least $11.4bn DON WEINLAND

ompanies controlled by the Indian businessman Anil Ambani have launched 26 lawsuits against politicians, journalists and news organisations, including the Financial Times and Bloomberg, a sharp rejoinder to recent media coverage of his troubled Reliance group. Once one of Asia’s wealthiest tycoons, Mr Ambani has seen his paper fortune fall sharply in value as Reliance struggles with a heavy debt burden. His group has also faced criticism from opposition politicians and the media over India’s €8bn purchase of Rafale fighter jets from France’s Dassault, which involved a partnership with his defence business. Several of the lawsuits brought by various group companies, all filed in the western city of Ahmedabad, relate to coverage of the fighter jet deal. These include a defamation claim seeking $1.4bn against NDTV, a prominent Indian television news station. NDTV has described the move as “an unsophisticated warning to the media to stop doing its job”. A spokesman for Mr Ambani’s Reliance group did not respond to a request for comment. Scroll, an Indian website that first reported the extent of Reliance’s legal campaign, said that it had established

the damages being claimed in 16 of the pending cases amounted to a total of $11.4bn. Other lawsuits relate to reports on the financial position of Mr Ambani’s businesses, in particular the troubled telecom group Reliance Communications. Last December, RCom agreed to sell most of its core telecom assets to rival Jio, a subsidiary of Reliance Industries, controlled by Mr Ambani’s brother Mukesh. RCom is claiming $1.1bn in damages from the Financial Times over an FT report on the deal, which highlighted the two brothers’ contrasting fortunes since they divided their father’s business empire between them in 2005. The company has also named two FT journalists as defendants, though it has not formally served proceedings on them. The market capitalisation of Anil Ambani’s companies has dwindled to less than $4bn, while Mukesh Ambani’s Reliance Industries stands at $98.7bn. RCom has also filed three lawsuits against Bloomberg News and several of its employees. Reliance Naval & Engineering, a shipbuilding company, is separately suing James Crabtree, a former Financial Times journalist, over a commentary relating to RCom’s deal with Jio. Meanwhile, Reliance companies

have brought suits this year against Indian news groups including the Indian Express and Economic Times, and eight lawsuits against opposition politicians. Mr Ambani is also suing Forbes Asia in his personal capacity. Ahmedabad is a popular venue for defamation cases. Its courts cap fees at about $1,000, regardless of the amounts being claimed. A chronic shortage of judges in Indian courts means that such cases can drag on for decades without resolution. There are currently 2.18m active court cases that are more than 10 years old, according to the latest official data. Some of the lawsuits are an attempt to “intimidate the media and ensure critical questions are not asked about the Rafale deal”, in the view of Siddharth Varadarajan, editor of news site The Wire, who is among the journalists being sued by Reliance companies. Controversy around the Rafale jet deal erupted in September after former French president Francois Hollande claimed the Indian government had insisted that Dassault select Mr Ambani’s group as a local partner. Under “offset” rules, which require defence suppliers to make local investments, it formed a joint venture with Mr Ambani’s newly established Reliance Defence, to manufacture aircraft parts.

w e n t y y e a r s a g o t o d ay , Deutsche Bank announced the deal that made it the biggest bank in the world — and sealed its fate. The German bank paid $10.1bn for Bankers Trust, the largest foreign takeover of an American bank and an acquisition that saw Deutsche leapfrog UBS and Citigroup to become the world’s largest bank by assets. In a sign of things to come, Deutsche committed $400m in bonuses to retain Bankers Trust staff. Some individuals received $10m each. Since then no other foreign institution has committed more capital to making it on Wall Street. At times during those two decades, the land grab looked to have paid off. Before the crisis, with a balance sheet that could outmuscle the competition and star bankers attracted by Deutsche’s willingness to pay above the market rate, Deutsche brought in hundreds of millions of dollars on daring derivatives trades. Trader Greg Lippmann was immortalised in The Big Short for an outrageously successful bet against the US housing market. Indeed, as US investment banks migrated away to midtown Manhattan, Deutsche was the last bank in the cradle of US finance, the only “Wall Street firm” that fully justified the term. Yet it was mostly a mirage, paving the way for the turmoil that continues today— police raids, capital calls, management upheaval. Mike Mayo, a long-time bank analyst who worked at Deutsche between 2005 and 2007, says: “It’s always hard to make an investment bank acquisition work because you have to pay twice — once for the business and then for the people.” It feels like Deutsche and longsuffering shareholders have paid many more times for Bankers Trust — including in multi-billion-dollar penalties for a staggering array of flouted rules. “Deutsche Bank reflects a trifecta of pain due to an acquisition, lost share and lack of capital,” says Mr Mayo. Patience and prudence — all those qualities that used to be associated with German financial behaviour — were ignored. If Deutsche had husbanded capital and made safer bets rather than rushing to conquer the world with the Bankers Trust acquisition, it might today be in a place to be the universal banking champion that Europe lacks. But the US deal cast the die, which was then used to gamble money away. This is the bank that literally owned a Las Vegas casino and yet acted like the high-rolling punter (with a fully loaded credit card). This was the bank of last resort for Donald Trump. After the 2008 crisis, proud to have avoided a government bailout, Deutsche did not engage in the cost-cutting and capital conservation that much of the rest of the industry did. Never mind that its income statement was flattered by hidden losses. Never mind that the rules had changed.

Monday 03 December 2018

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FINANCIAL TIMES

BUSINESS DAY

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Federal Reserve prepares to give investors murkier view on policy Guidance assuring traders that further ‘gradual’ increases lie ahead may face the axe SAM FLEMING

espite Donald Trump’s protestations, the Federal Reserve is preparing to lift US interest rates higher. The question for chairman Jay Powell and his colleagues, once they get past a probable increase on December 19, is how much further they will need to go given tepid inflation and a widening array of risks on the horizon. Minutes from the Fed’s latest rate-setting meeting indicate that 2019 will be a much murkier period for monetary policy than markets have been accustomed to. The Fed could, as soon as its next meeting, ditch now familiar guidance telling traders that further “gradual” increases in rates lie ahead. That by no means suggests the rate-raising cycle is about to end, but it does mean hand-holding will give way to a more improvisational approach. Markets will still be able to fixate on policymakers’ interest rate forecasts published in the Fed’s quarterly “dot plot”. But with policy entering the so-called neutral range where it neither boosts the economy nor holds it back, Mr Powell wants a freer hand as he watches data and gauges how past rate rises are affecting growth and inflation. From January, the Fed will also find it easier to change policy at any meeting because Mr Powell will hold press conferences after each gathering, enabling him to explain rate setters’ decisions. The Fed chair currently only briefs the press four times a year and the central bank has in recent years restricted its rate changes to those meetings. The move by the Fed away from explicit guidance and towards a more “data dependent” approach has long been in the works. The Fed has already dropped assurances

that policy will remain “accommodative”. In May Mr Powell argued that forward guidance would play a much smaller role than during the financial crisis. What was notable from the Fed’s communications over the past week was that a slightly less ebullient note has crept into the central bank’s discussions. Mr Powell sent equities rocketing with a speech on Wednesday that suggested the Fed would not have to lift rates very far to get them into the neutral range that neither stimulates the economy nor holds it back. And while minutes to the Fed’s latest rate-setting meeting, held on November 7-8, were broadly upbeat about the US economy, with “almost all” central bankers expecting further rate rises, there were also flickers of anxiety about the outlook. To some traders, the more dovish signals point to a Fed that has been browbeaten into softening on rate rises by Mr Trump. The president has been for months attacking Mr Powell for tightening p olicy. In a Washington Post interview published before the chairman’s New York speech Mr Trump said that “so far I’m not even a little bit happy with my selection of Jay” for the chairmanship. However Fed watchers such as Diane Swonk, chief economist at Grant Thornton, strongly doubt the president is managing to dictate policy. “The Fed is not going to change policy because the president says they should,” Ms Swonk said. Instead she argues that the Fed is now having to take greater account of a range of global risks, including the danger of an escalation in trade tensions with China. “They want flexibility. There are storm clouds on the horizon, and they don’t know how bad the storm is going to be,” Ms Swonk said.

Calastone switches mutual fund trades to blockchain JENNIFER THOMPSON

alastone is making a bold bet on the power of blockchain to transform fund management by moving more than 1,700 financial companies — for which it processes mutual fund trades — to the online ledger. The London technology group will complete the switch in May. It will be one of the industry’s biggest transfers to date in terms of widescale use of blockchain to buy and sell funds. The change will help “transform the way in which funds are traded”, said Julien Hammerson, chief executive at Calastone. He said funds were “hampered by continually rising costs and threat of competition, ultimately rendering the current system economically and operationally unsustainable”. Blockchain emerged as a means to keep track of bitcoin ownership but mainstream financial groups have been keen to explore its po-

tential to simplify processes and cut costs. In a traditional fund transaction, companies ranging from transfer agents to asset managers often have to input the same information, which is costly, time-consuming and open to error. Blockchain eliminates most of the laborious practices. Calastone estimates that switching to blockchain could shave up to £3.4bn from fund distribution costs. This figure excludes the US market where the Depository Trust & Clearing Corporation already provides a centralised system for settling trades. Calastone said it was too soon to say whether its charging structure would change, as blockchain would fundamentally alter how transactions take place. It said it was up to fund managers to pass on any savings from lower costs. BNP Paribas Asset Management and Ostrum Asset Management have completed end-to-end fund transaction tests using blockchain technology.

A move by the Fed away from explicit guidance and towards a more ‘data dependent’ approach has long been in the works © Reuters

Southern Water criticised for prioritising dividends over pensions Utility agrees to pay additional £50m into fund after threat of enforcement action GILL PLIMMER

he Pensions Regulator has publicly rapped for the first time a water company for prioritising investor dividends over the pensions of its employees. Southern Water, which supplies 4.6m customers in Kent, Sussex, Hampshire and the Isle of Wight, has agreed to pay an additional £50m into its pension fund over a shorter period after being threatened with formal enforcement action by the regulator. The regulator’s action comes amid growing frustration across the political spectrum with the 10 privatised regional water monopolies, which have continued to deliver generous rewards to shareholders and executives despite failures on leakage and pollution. The opposition Labour party has pledged to renationalise the industry. Southern Water’s owners, a consortium of investors including UBS Asset Management and JPMorgan Asset Management, received a total of £190m of dividends in 2016 and 2017, part of a wider plan to extract £210m between 2015 and 2020. At the same time they almost halved annual contributions to the pension scheme to £10m a year between 2016 and 2019. The defined benefit scheme,

also known as final salary, has 4,000 members and its most recent threeyearly valuation in March 2016 showed a deficit of £252m. The pensions watchdog said it believed that Southern Water’s scheme members were “being treated unfairly relative to the company’s shareholders, despite us having raised the issue with them in previous discussions”. Following the regulator’s intervention, Southern will pay £223.5m into its pension scheme over 12 years compared with £170.5m under its old plan. The watchdog revealed that it had taken steps to formally force the company to make a cash injection into its pension fund, but dropped this action after a settlement was reached. Other water companies have also been cutting back on staff retirement benefits while maintaining high dividends to shareholders. United Utilities, the stock market listed water monopoly that supplies the north-west of England and parts of Wales, cut back on benefits for retirees earlier this year, despite having a pension surplus of £220m in September 2017. In November, United announced a 3.9 per cent increase in dividends, an estimated £280m for shareholders this year, on the back of an inflationbusting increase in water bills for

customers. Steve Mogford, its chief executive, has received £4.2m in pay and benefits over the past two years. The private equity-owned Anglian Water, which supplies the east of England, first closed its DB pension scheme to new members in 2002. But it is now moving all current and former employees into a defined contribution scheme with reduced benefits. Anglian had a £279m pension deficit at its latest valuation one year ago. But it paid £128m in dividends in 2016/17, while Peter Simpson, its chief executive, earned £1.5m during the period. The regulator declined to comment on whether it was investigating any other companies for prioritising shareholders over its pension scheme members. Martin Blaiklock, an independent infrastructure consultant, said the news provided further proof that “benign sector regulators were watching impassively as current and future pensioners get short-changed”. Southern Water said: “We are pleased to have completed negotiations for our final salary pension scheme and an updated plan is now in place. Given the increased pension deficit we have agreed to increase contributions to ensure that members’ interests continue to be our priority.”

Neptune Energy to look beyond North Sea for growth CEO insists private equity-backed explorer is not in race with rivals for acquisitions DAVID SHEPPARD

eptune Energy, the private equity backed oil and gas producer led by former Centrica chief Sam Laidlaw, plans to ramp up organic growth and exploration alongside acquisitions as the group moves to increase output. The company, which is backed by the Carlyle Group, CVC Capital Partners and China Investment Corporation, became a full-scale producer and explorer early this year after the acquisition of Engie’s oil and gas production assets, giving it a footprint stretching from the North Sea through north Africa and south-east Asia. It has been linked with a string of potential assets in the North Sea, including Chevron’s network of oil and gasfields, but Mr Laidlaw insisted it was not in a race with other private equity-backed operators that have proliferated in the maturing North Sea basin in recent years. “Private equity are generally patient, careful investors,” Mr Laidlaw, who is chairman of the

company, told the Financial Times. “We don’t have to do anything fast and we have a bigger canvas than just the North Sea. We can look to north Africa and south-east Asia as well.” His comments come as a series of big North Sea assets have been put on the block by US energy majors, who are refocusing their operations away from older basins towards the US shale sector. That has sparked talk in the industry of a major opportunity for financially savvy private equity operators to snap up a host of assets in one go, potentially transforming the scale of their oil and gas businesses overnight. Ineos, the privately owned company run by Jim Ratcliffe, the UK’s richest man, entered exclusive talks with ConocoPhillips for its North Sea oil and gas assets earlier this month, paying a deposit to essentially lock out other potential bidders, which were said to include Neptune and Chrysaor, another private equity-backed operator. The Chevron assets, which the company put up for sale this sum-

mer after a strategic review, include its stakes in the Britannia platform and its satellites, alongside the Jade, Erskine, Elgin/Franklin, Alder and Alba fields. Mr Laidlaw said he would be surprised to see any significant transactions before the end of the year, with the company focusing on optimising existing assets and exploring opportunities within its portfolio. Jim House, Neptune’s chief executive officer who joined from Apache Energy this year, said the company had uncovered a host of potential opportunities from employees they took on through the Engie transaction. “As we’ve peeled back layers we’re finding numerous opportunities,” Mr House said. “We’re not in a position when we have to do a transaction. We’re in a position to grow organically. We’re going to have a robust exploration programme for 2019.” The executives were speaking as they revealed third-quarter results — a nod towards the company’s plans to eventually list.

BUSINESS DAY

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Monday 03 December 2018

ANALYSIS Apple tunes into terrestrial radio to amplify digital service Late EU stumbling block comes as May comes under pressure to make compromises ANNA NICOLAOU AND TIM BRADSHAW

T Climate change: Populism vs Paris The rise of populist leaders threatens the climate deal struck in the French capital in 2015 and will make UN talks more fraught LESLIE HOOK

t is three years since more than 150 heads of state gathered in Paris to negotiate a climate pact that, for the first time, covered the whole world. The landmark deal — following tortuous talks — was celebrated as a triumph not only for the environment, but also for global co-operation. At the exact same time, on the other side of the Atlantic, Donald Trump was on the campaign trail decrying the deal. Few in Paris took much notice of the long-shot presidential candidate who had not yet secured the Republican nomination. Yet as this year’s UN climate talks kicked off on Sunday in Poland, Mr Trump and other populist leaders like him have become the single biggest threat to the climate pact. At heart the Paris agreement is a good faith deal, one that relies on co-operation to be effective. Each country will set its own emissions target, starting in 2020 when the pact comes into force, and then choose a new target for reductions every five years. This year’s talks, known as “ COP24”, must agree on a set of rules for how this will be done, working out the fine print left out of the original deal. The rise of populism from Europe to Latin America and Asia has made the pact, built on a set of ideals that now appear in short supply, look fragile. And the US proposal to withdraw from the agreement has emboldened others to be more critical. “It takes a globalist response to deal with climate change, and if you are a nationalist, then you believe that was not what you were put on this earth to support,” says Jerry Taylor, president of the Niskanen Centre, a think-tank in Washington. Mr Taylor was a prominent climate change denier before switching views due to scientific evidence. “The rise of populism on the right has turbo-charged climate denial, because it introduced these elements of anti-elitism, anti-globalism, and anti-global engagement.” The political backlash against the Paris deal coincides with a rise in global emissions of carbon dioxide, due mainly to growing coal consumption. As the annual climate talks commence in Katowice, a former coal town in southern Poland, the setting highlights how difficult it is to quit fossil fuels — a state-owned coal company is one of the sponsors of the conference. Although signatories to the Paris deal pledge to limit global

warming to “well below” 2C, the existing pledges are far from sufficient to achieve that. Scientists say the world is on track for more than 3C of warming by the end of the century, if current policies persist. This is made all the more difficult by the fact that the election of Mr Trump has been followed by the emergence of other nationalist leaders — many of whom share his views on the Paris deal. In Brazil, president-elect Jair Bolsonaro has publicly toyed with the idea of withdrawing from the agreement and said he wants to relax controls on Amazonian deforestation. Last week Brazil backtracked on its offer to host the climate talks in 2019. Izabella Teixeira, the country’s former environment minister, who helped negotiate the Paris agreement, says it has been difficult to watch the climate deal come under attack. “I’m afraid because you have this new global transition in the world — what’s happened in Brexit, in the US, in Australia,” she says. Across a growing number of countries a pushback against the idea of co-ordinating action on global climate change is taking hold. In Australia, former prime minister Malcolm Turnbull was ousted in August after he tried to introduce an emissions reduction plan. In Germany, a showdown is looming over coal, made more complicated by the rising power of the AfD, a far-right party that believes climate change is a hoax. Meanwhile in Canada, the carbon tax introduced by Justin Trudeau is expected to be a major issue in elections next year. While in the Philippines, President Rodrigo Duterte called the climate deal “absurd”, before eventually signing the pact in 2017. “We really have to turn our attention to how to deal with these forces,” says Nicholas Stern, professor of economics and government at the London School of Economics and Political Science. “If you are nationalistic, you don’t like collaboration, and climate involves collaboration,” he says. Adding that “the question is how we rise to those sorts of challenges . . . Brazil will be a good test.” A string of natural disasters and wildfires this year have highlighted the impact of a warmer planet — the world has warmed 1C since pre-industrial times. A UN report in October found even 2C of warming would have devastating consequences for the earth. “The next 20 years are arguably more important than any in history,” Lord Stern explains, because humans will shape the future of the planet in ways that may be irreversible.

Michal Kurtyka, the president of the Katowice summit, says delegates are gathering against a much more subdued backdrop. “The appetite for multilateral solutions is not as it was in 2015,” he says. “The general mood is different.” Mr Kurtyka, a deputy minister appointed by Poland to lead the summit, has the task of herding the negotiators to agree on a rule book by the end of next week. He says it will be “challenging”, but he is also hopeful about the outcome. “In the end, all 196 countries need to agree,” he points out. “There are lots of complexities to be solved.” The mission of this year’s talks will be “all the more complicated” by the new political situation, says Christiana Figueres, the former head of the UN climate secretariat and a key architect of the Paris deal. The rule book will determine how countries’ greenhouse gas emissions are reported, monitored and verified by the UN body. “It would not have been that difficult to agree on that [the rule book], had we not had the results of the US election,” Ms Figueres says. “Technically there really is very, very little concern there. The unfortunate thing is that it has been caught up in the politics.” Sh e a rgu e s t h e r i s e o f M r Trump and Mr Bolsonaro has had a “spillover effect”. “Climate, that should not be a partisan issue, has become bound up in that ideological camp, mostly because of the allergy I think to the role of government, and the role of multilateral agreements . . . So climate ends up being one of the sacrificial lambs.” A key issue under debate at this year’s talks is whether there will be one set of rules for everyone, or whether there should be different rules for countries at different stages of development. China, which has assumed more of a leadership role at the climate talks — seizing the opportunity offered by the US stepping back — wants much more flexibility for developing countries, a difficult position for many western nations to accept. One of the biggest sticking points for China is how emissions reports will be monitored and verified without sharing sensitive economic information, as Beijing does not want outsiders probing its internal data, particularly its economic forecasts. In the absence of any political muscle from the US, however, China could get its way, and observers believe the most likely outcome of the talks is a rule book that will be much weaker than if the US had been fully engaged.

he late Steve Jobs is widely credited with launching music into a digital future with the invention of the iPod and the iTunes store. Now his successor, Tim Cook, is seeking to grow Apple’s influence in music through one of the oldest forms of listening: terrestrial radio. Apple’s discussions about a potential deal with US radio group iHeartMedia, which were first reported by the Financial Times last month, underscore how the iPhone maker is looking to nurture the close relationship with the music industry that Jobs fostered. Music executives say that after a late entrance to music streaming in 2015, the tech group has been gaining confidence and ratcheting up its efforts to grow Apple Music. The number of subscribers has grown to 56m, up from 50m in May, and Apple recently overtook Spotify to become the top music streaming service in the US, the world’s biggest music market by revenues. “Apple stumbled out of the gate with an inferior product three years ago. Apple Music did not become this spectacular product like iTunes was,” said a senior executive at one of the

artists such as Drake. But Apple has not given up on Beats 1, its 24-hour digital radio station helmed by DJs such as former BBC star Zane Lowe. Despite celebrity DJs such as Nicki Minaj bringing in large audiences, the daily broadcaststyle radio service has not taken off in the way that Apple hoped when it first launched three years ago. Apple’s talks to invest in iHeartMedia, the bankrupt company that dominates the US radio business, demonstrate how it is looking for new ways to broaden the audience for Beats 1. Any deal could also help Apple close the gap with Spotify, which remains the global leader in music streaming, and industry executives say has been better at attracting customers. Despite Apple Music adding 6m customers in the past six months, Spotify is still growing at a faster pace globally, increasing by 12m subscribers to 87m in the same timeframe. Label executives also say that Spotify’s audience tends to be younger and uses the service more frequently than Apple Music’s more mature demographic. News of the potential move by a Silicon Valley giant into the struggling traditional radio business surprised

“big three” record labels. But the executive added that in the past year, Apple has “become more aggressive”. “They’re getting more serious . . . they’re coming to us with new ideas all the time, that they wouldn’t have done two years ago.” ‘A changing of the guard’ Like Spotify, Apple Music offers unlimited “on demand” access to a library of millions of tracks for $10 in the US (£10 in the UK) a month. Apple’s service is tightly integrated to its other services and devices, from Siri to its HomePod speaker. Since kick-starting its streaming efforts with the purchase of Beats, the headphone and music app maker, in 2014 for $3bn, Apple has continued to ramp up its offering through acquisitions. In September this year, it purchased Shazam, the music recognition start-up, for $400m. It also spent tens of millions of dollars to hire the founders of Asaii, a music analytics company, in October. Meanwhile, Beats co-founder Jimmy Iovine retired in August and Oliver Schusser, who previously worked in Apple’s London office, moved to California this year to run the music service worldwide. In August, Apple Music hired Brian Bumbery, a veteran music publicist to stars such as Madonna, as its head of publicity. “There’s definitely a changing of the guard,” said one music label executive, pointing to the shift away from Mr Iovine’s strategy of paying high prices for exclusive releases from

many in the music world. But any iHeartMedia deal would also be aligned with Apple’s emphasis on human taste and curation, rather than algorithmic recommendations, to choose new artists to promote or compile playlists. According to people familiar with the negotiations, Apple has considered buying a stake in the radio group, as well as signing a marketing or promotional partnership. Another option under consideration is for Apple to acquire iHeartRadio’s streaming platform, which would be a relatively cheap way to reach the service’s 120m registered users. “Terrestrial radio is not the force it once was, but there are millions of people listening to the radio,” said one major music label executive. “These radio listeners will inevitably migrate to online services, and they could be herded towards Apple.” Mark Mulligan, analyst with Midia Research, said any deal could lend Apple the knowledge required to succeed in radio, which is often driven by strong personalities and brands. “Apple understands that when it gets radio right, that’s going to be an important asset,” he said. “They’ve shown an understanding that building radio is not as simple as putting music in the sequence. “You have to know how to programme, build personalities and brands,” he added. “Apple is still on that journey [with Beats 1], and [iHeartMedia] would give them industry IQ on that.”

Monday 03 December 2018

BUSINESS DAY

Monday 03 December 2018

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63 NEWS

BUSINESS DAY

36 days after new terminal commissioning, Port Harcourt still world’s 3rd worst airport IGNATIUS CHUKWU & DAVID EJIOHUO

ravellers going into Port Harcourt still have to go through the harrowing experience of walking through make-shift canopies to wait for their luggage. This is because the new international terminal that President Muhammadu Buhari travelled to Port Harcourt, Rivers State, to

commission in an elaborate ceremony on October 25 this year, remains nonfunctional. Many travellers using the terminal had hoped that the commissioning of the new terminal, located in Omagwa, and built with the help of a US$500 million Chinese loan, would mark the end of Port Harcourt’s 2017 rating as having the World’s third-worst airport. That has not happened.

Wabote, Inoyo laud Nigerian businesses over in-country capacities, capabilities FRANK UZUEGBUNAM

xecutive secretary of Nigerian Content Development and Monitoring Board (NCDMB), SImbi Wabote, and the vice chairman, ExxonMobil affiliates in Nigeria, Udom Inoyo, have lauded Nigerian businesses for their contribution to in-country capacities and capabilities. “Nigerian businesses are taking up the challenge to grow their outfits and thereby contribute to in-country capacities and capabilities,” Wabote said in his keynote address during the official opening of Global Process and Pipeline Services Limited (GPPS) operations base and corporate office in Port Harcourt, adding that GPPS operational base currently had one of the largest in-country pumping, process and pipeline services’ equipment fleet, capacity and competency with uncommon focus within this product service line in Ni-

geria. Wabote said the NCDMB board “is proud to identify with GPPS for the establishment of this company to provide world class services to the oil and gas sector without compromising standards and safety. This tallies with our 10-year strategic roadmap aimed at increasing the level of Nigerian Content in the oil and gas sector to 70 percent by 2027. “Within the last few months I have attended the commissioning of a subsurface research and laboratory centre, a supply vessel, a security vessel, and a safety training centre. There are also several completed training activities targeted at Human Capacity Development. It is always a delight to attend such events and I look forward to more invitations.” On his part, Inoyo said the international oil company embraced local content in the oil and gas sector even before the inception of the Nigerian Content Act.

CoronationMB wins Best Investment Bank in Nigeria

oronation Merchant Bank has been named the Best Investment Bank in Nigeria at the 2018 Global Business Outlook Awards held recently in London, UK. Now in its fifth year, The Global Business Outlook Awards is internationally recognised as the landmark finance event to reward achievements, commend best practices and celebrate excellence in the African banking landscape. The award also provides a platform to bring together industry leaders from across Africa whilst celebrating the achievements of those driving economic growth across Africa. Commenting on the awards ceremony, publisher of Global Business Outlook Magazine, Daivick Bhaskar, said, “Our goal is to create a platform to celebrate organisations that are at the vanguard of creating a more responsible and sustainable industry than the one that existed ten years ago.

“Over the past 12 months, these organisations have helped set new benchmarks for the financial sector in terms of customer service and digital innovation. One Bank that has recorded remarkable accomplishments in its very short years of operation is Coronation Merchant Bank. The Bank has established itself as a dominant player, sitting at the very top of the investment banking industry in its native Nigeria.” Receiving the award on behalf of the bank, the Group Managing Director/CEO of CoronationMB, Abu Jimoh, said, “We started our investment banking business in 2016, and in less than three years, it has contributed immensely to the development of the capital market—both on the equity side and the debt capital side. “I am happy we have established ourselves as a formidable player in the capital market, having raised over N300 billion for various companies in multiple sectors of the economy”.

BusinessDay investigations show that travellers are still forced to use the domestic wing of the airport which is in a very bad state. Ho w e v e r, He n r i e t t a Yakubu, general manager, corporate affairs, the Federal Airports Authority of Nigeria (FAAN) told BusinessDay that in few days the airport would be ready. “The governor of the State has promised FAAN that the government will

work on the airport road which leads to a village. Lufthansa inspected the road and said that until the State government gets rid of the road or takes some security measures, they won’t approve of the airport for landing or take-off,” she said. Yakubu said that as result of this major security issue, FAAN was committed to working on it before operations kick off at the airport. “The security of our

passengers is paramount to us,” Yakubu added. She gave assurance that situation would be addressed in few days and that FAAN was looking up to the State government to ensure the road got fixed. There have been insinuations that the facility was commissioned prematurely by President Buhari. It is not clear why the president was hoodwinked to commission an airport

terminal that was not ready for use. Since the commissioning, the new terminal has slipped back into its state of idleness instead of receiving the millions of passengers who use Nigeria’s thirdbusiest airport, located in the country’s oil and gas capital. What Buhari commissioned was the international terminal but the domestic terminal is still under construction.

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Manufacturing sector sustains growth as PMI expands for 20th month ENDURANCE OKAFOR

igeria’s manufacturing sector sustained its growth as the Purchasing Managers’ Index (PMI) expanded for the 20th consecutive month in November, the Central Bank of Nigeria (CBN) noted in a report released Thursday. The manufacturing PMI in the month of November 2018 stood at 57.9 index points, indicating a 1.1 index point increase when compared to the 56.8 recorded in October, the report said. Manufacturing sector index grew at a faster rate when compared to the index in the previous month, the central

bank explained. “All sub-sectors recovered from contraction; production level, new orders, supplier delivery time, employment level and inventories grew at a faster rate in November 2018,” CBN said. PMI is one of the key economic indicators used by economists to gauge the performance of an economy. A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding; 50 points indicates no change, and a value below 50 points indicates that it is generally contracting. All the 14 sub-sectors surveyed in the review month reported growth in

the following order: electrical equipment; furniture and related products; cement; food, beverage and tobacco products; paper products; transportation equipment; plastics and rubber products; chemical and pharmaceutical products; printing and related support activities; petroleum and coal products; fabricated metal products; non-metallic mineral products; textile, apparel, leather and footwear, and primary metal. The primary metal subsector had contracted in the previous month, which resulted to 13 the sub-sector growth recorded in October. The November 2018 PMI survey was conducted by the

Statistics Department of the central bank during the period November 12-16. The respondents were purchasing and supply executives of manufacturing and non-manufacturing organisations in all 36 states and the Federal Capital Territory, according to the report. PMI for the non-manufacturing sector stood at 58.4 points in November 2018, indicating expansion in the non-manufacturing PMI for the nineteenth consecutive month. “The index grew at a faster rate when compared to that in October 2018. Of the 17 surveyed sub-sectors, 16 recorded growth,” CBN noted.

L-R: Miriam Hennessy, Mother Superior, Sancta Maria Nursery & Primary School, Nkpogu; Aku P. Odinkemelu, executive director, Commercial & Consumer Banking, South, Fidelity Bank plc; Frank O. Anumele, regional bank head, Rivers-Bayelsa 1, Fidelity Bank plc, and Chris Nnakwe, head, HRBP& Recruitment/ CSR & Sustainability, Fidelity Bank, at the handover ceremony in Port Harcourt recently where desktop computers were donated to the Resource/ICT Centre of Sancta Maria Nursery and Primary School, Compassion Home.

Fayemi mourns Fredrick Fasehun’s death N800bn subsidy debts: Oil marketers give FG

kiti State governor, Kayode Fayemi, has mourned the passing of the founder of O’odua Progressive Congress (OPC), Fredrick Fasehun, saying the country has lost a major pillar of her democratic struggles. Fayemi, in a statement signed by his chief press secretary, Yinka Oyebode, described the late OPC leader as an accomplished professional and a committed patriot who devoted his life to the struggle for the enthronement of democracy and good governance as well as in defence of the people’s rights. The governor recalled his relationship with the late OPC founder, describing him as a Yorubaman par excellence, a patriot who loved his race and country and did everything humanly possible to ensure that his people were free from tyranny and oppression. He said: “We have lost

another strong pillar of our democratic struggles. Dr Fasehun would do anything to defend the rights of his people against any act of tyranny and oppression. “Dr Fasehun fought a good fight as a frontline leader in the struggle for the democracy we now enjoy. He challenged and encouraged many of the younger generation with the way he fought for democracy with all his energy and resources. “We shall surely miss his amiable personality, simplicity, wisdom and courage. “But we are encouraged by the fact that Dr Fasehun fought a good fight and left behind a good name and a legacy of selfless service that is worthy of emulation. This we believe should a source of consolation to the children and the entire family. “Our prayer is that God grant the family the fortitude to bear the irreparable loss and grant Baba eternal rest, “ the statement added.

7-day ultimatum to pay debts in cash

OLUSOLA BELLO

il marketers have issued a sevenday ultimatum to government to settle all outstanding debts including forex differentials and interest rate component owed them in cash, over the inability of the Federal Government to pay outstanding debts of over N800 billion. The marketers, under the aegis of Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association (DAPPMA) and Independent Petroleum Products Importers (IPPIs), said failure to meet the deadline would force its members to disengage their workers, as extension loading of petrol at depots would automatically cease. Confirming the notice, Patrick Etim, the legal adviser to IPPIs who confirmed it in Lagos on Sunday, said the

ultimatum became necessary as all investments and assets of oil marketers were being taken over by banks, while payment of workers’ salaries remained serious dilemma. According to Etim, marketers have asked their workers to stay at home from December 1, as salaries of workers could not be paid due to huge debts owed by the government on subsidy. “The only way to salvage the situation is when government pays the outstanding debts though cash option for marketers to pay workers than other form of payment instrument like (promissory note) would save the intended mass retrenchment. “As at tail end of 2018, several months after the assurances received by government would pay off the outstanding debt, but as I speak, nothing has been done.

Monday 03 December 2018

EXPLAINER:

This is why Africa’s LNG market could soon crowd out Nigeria DIPO OLADEHINDE igeria’s failure to attract investments to its Liquefied Natural Gas (LNG) is not only short changing itself from generating higher revenue but also making the country lose its competitive advantage in Africa’s LNG market as other African countries are gradually gaining momentum and looking set to dominate market share. According to data from a Norway based independent energy research and business intelligence institution Rystad Energy; in Africa’s market share, Nigeria’s LNG production will shrink to about 10 percent by 2029 from having a huge junk of about 50 percent in 2019, while another African country Mozambique will by 2029 dominate the market share with at least 55 percent from Zero in 2019. Although, data from Rystad Energy showed Africa’s production capacity is almost expected to double over the next decade, North Africa and the Middle East which include Djibouti, Egypt, Libya and Algeria are also expected to take over the market by next year. What other countries are doing right A consortium led by Anadarko Petroleum plans to give its investment approval to a large new liquefied gas export plant in Mozambique in the first half of next year after a sharp reduction in costs, the latest move in an investment boom that is expected to transform the country into a gas supplier to the world. PricewaterhouseCoopers (PwC) in its Africa oil and gas report said Mozambique is expected to become the second-largest exporter of LNG by 2025, as the country steps up production from 10 million tons per annum (Mtpa) in 2017 to an envisaged

50Mtpa which will serve as access to the lucrative Asian LNG market and could act as a catalyst for meaningful economic development. Also reports from Rystad Energy explained that the participation of super-majors like Total and ExxonMobil, and Norwegian E&P Equinor and British Independent Tullow as well as Kosmos and FAR Limited who have already seen success in the Mauritania Senegalese waters, shows encouraging signs for near term future exploration activity in Africa in the remaining of 2018 alone as 10 of such high impact wells, including Total’s Tarif prospect onshore Egypt; Tullow’s Cormorant prospect offshore Namibia; FAR’s Samo prospect offshore Gambia and so on, are expected to be drilled. Also, Kosmos and partner BP Plc are targeting first gas from Tortue by 2022, bringing it online four years after Africa’s first floating LNG facility, a Cameroonian project that started output earlier this year. The last bureaucratic steps are on track and a final investment decision is just “weeks away,” Kosmos spokesman Thomas Golembeski said last Wednesday. Encouraged by the increasing need for electricity, Morocco has recently decided to expand the use of LNG through a gas-to-power project which involves the construction of a new LNG terminal within five years at Jorf Lasfar port, near the western city of El Jadida. Despite delays in the initial timeline, the government has mentioned its full support for the project on several occasions. The Moroccan government also launched international tender seeking foreign investments for the LNG terminal, which attracted bids from more than 93 companies, including French, British, Spanish and American companies.

CBN introduces special $15,000 cash to BDCs ahead of Yuletide HOPE MOSES-ASHIKE

entral Bank of Nigeria (CBN) has introduced special intervention of cash dollar sales to the tune of $15,000 to each Bureau De Change (BDC) operator every Thursdays, ahead of Yuletide season. The move is to enhance dollar liquidity in the foreign exchange market to meet demand for personal/business travel allowance during the Christmas season. In a circular to BDC operators and the general public, signed by Abdullahi U, for director, trade and exchange

department, the CBN notified all BDCs that the cut-off time for receiving naira deposits into their respective bank accounts for Thursday’s special intervention shall be 10am on Thursday. The CBN sells $20,000 to each BDC operator numbering over 4,000 members three times weekly - Mondays, Wednesdays and Fridays. “All operators are hereby advised to ensure strict compliance with the provisions of the extant regulations on the disbursement of forex cash to their respective customers as any of infraction will be appropriately sanctioned,” the circular read.

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Housing revolution begins in Lagos as Echo Stone deploys new building technology … to deliver four 2-bedroom bungalows in 14 days CHUKA UROKO

hat promises to be a revolution in the Lagos State housing sector has begun with the deployment of a new building and construction technology by Echo Stone and its local partners in the state. Echo Stone is an innovative housing system developed to address housing shortages worldwide. As a technology, it is a lean design and construction concepts, value engineering, and procurement solutions. It is a proprietary approach to building sustainable communities beginning from programming through financing, planning, design, and construction. A major high point of this technology is its speed of housing production such that it has capacity to produce four-bedroom bungalows in just four days, and also indus-

trialises labour in the housing industry. With this technology, the company will be producing 2,000 housing units as part of the Lagos Public Housing (LAPH) initiative, which targets 20,000 housing units to be built over the next four years. A groundbreaking event was performed Thursday, last week, to commence the construction of the 2,000 units that will be built across three sites in Badagry, Imota and Ayobo areas of Lagos. Anthony Recchia, Echo Stone’s global CEO, disclosed at the event that works on the first 250 units had already started in Badagry. Arguably, housing is one of Lagos State’s major challenges. A report by Pison Housing Company estimates housing demand-supply gap in the sprawling city at 3 million units. The report also estimates that 80 percent of the state’s residents live in rented

accommodation and spend about 50 percent of their income on house rent. Gbolahan Lawal, the state’s commissioner for housing, quoted a survey by his ministry which revealed that to close its housing deficit, the state needed to produce 20,000 housing units annually for the next 10 years. He said it would require approximately N8 trillion to resolve the deficit at an estimated $10,000 per unit. “But this will be difficult to accomplish, even if all other variables were constant, using the conventional method of building, which is not only costly, but also takes a long time, say 12-24 months to deliver a housing unit,” Lawal observed. “If we have to close this gap, there is need for mass housing and we need a technology that can make that possible. This is why and how we arrived at the joint venture initiative with Echo

Stone”, the commissioner explained. He was optimistic that with the Echo Stone technology, the LAPH initiative would achieve its purpose of delivering 20,000 housing units in the state in the next four years. He assured Echo State officials that there was a ready market for their products. This initiative by the Lagos State government is just one aspect of efforts at addressing Nigeria’s 17 million housing deficit which is projected to hit 20 million units by 2025 when the country’s rapidly growing population is also projected to hit 200 million. At the national level, Northcourt Real Estate, in its recent report, says there are on-going initiatives by the Federal Government to increase housing supply, pointing out that those initiatives are targeted at mass housing projects across 33 states of the country.

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NPA remitted N30.4bn operating surplus in 2017 - Usman AMAKA ANAGOR-EWUZIE

ollowing the queries from the Senate insinuating that the Nigerian Ports Authority (NPA) is yet to remit its 2017 operating surplus into the Consolidated Federation Account (CFA), the management of the NPA says it has already remitted the revenue as expected. According to a statement signed by the management of NPA led by Hadiza Bala-Usman, the managing director, the allegation of the senators was without foundation. The statement disclosed that the total revenue generated by the authority in 2017 stood at N303.9 billion while the sum of N205.8 billion stood as recurrent and capital expenditure. “Of the N303.9 billion generated revenue, the sum of N60.12 billion represents uncollectable revenue from concessionaires attributed to clauses in the concession agreements, which the authority is currently reviewing,” NPA said in the statement. “Consequently, the operating surplus for the authority in 2017 was the sum of N38 billion.” The statement further noted that the sum of N30.4 billion, which rep-

resents 80 percent of the operating surplus that the authority was required to remit to the Consolidated Revenue Fund (CRF) in line with the Fiscal Responsibility Act, 2007, had been duly paid into the CRF by the authority with receipt of payment already issued by the office of the Accountant-General of the Federation. It stated that the authority had already remitted the sum of N11.3 billion for 2018 CRF contribution into the Consolidated Revenue Fund with the use of the authority’s management account ahead of auditing for 2018. These computations arise from the authority’s management account pending the conclusion of the audit of the 2017 financial statement, which is ongoing. “The Authority wishes to state its readiness to present all documents needed to provide clarification to the Senate Committee on Marine Transport and the Senate. “While we appreciate the constitutional oversight role of distinguished senators on the operations of the NPA, we suggest greater restraint on issues that deal with the integrity of national institutions even as we assure of our respect for the Senate,” according to the statement.

Nigeria still faces challenges to eliminate mother-to-child transmission of HIV ANTHONIA OBOKOH

L-R: Matt Cox, head, Open Banking at Nationwide; Adedeji Olowe, trustee, Open Banking Nigeria, and Yvonne Dunn, partner, Pinsent Masons, in a panel session speaking on the topic -Three Different Perspectives On The Future Of Open Banking at the recently concluded Open Banking Expo in London.

Branch clinches Artificial Intelligence Award at African Fintech summit DANIEL OBI

ranch, a start-up firm focusing on credit lending in Nigeria, has bagged Artificial Intelligence (AI) excellence award at the African Fintech Summit in Lagos. The summit is a global initiative founded on the idea that fintech can unleash unprecedented economic firepower in Africa. The company, alongside other local and international start-ups and companies operating in the financial technology space, was present at the summit. In what was a well-deserved recognition, Branch was awarded with the excellence award for best use of AI in financial innovation. Maria Rotilu, general

manager of Branch Nigeria, in a statement expressed gratitude for the recognition and reaffirmed the Branch’s commitment to its users. “We are committed to continuously offer worldclass financial services to our esteemed users, through continuous advancement of our technology to allow every Nigerian access to best in class financial services via their mobile phone,” Rotilu said. AI sits at the core of Branch’s operational processes in its goal to deliver world-class financial services to its customers. AI allows Branch to leverage smartphone data to make lending decisions and eliminate the need for a collateral, paperwork, or guarantors. It also allows Branch to

serve customers who are traditionally unable to receive loans from traditional financial institutions. As a result, millions of underserved customers in Nigeria now have an opportunity to access quick loans in minutes and build credit regardless of their banking history. Rotilu said since the global company launched operations in Kenya three years ago, Branch had been focused on a mission to deliver world-class financial services to the mobile generation. This, she said, is evident in the widespread use of the Branch mobile app by millions of users across Africa and Latin America. “Branch has leveraged the rapidly growing penetration of smartphones and the emergence of machine

learning to build a secure, convenient and customerfirst financial product for people. At the moment, Branch has disbursed over $250 million in loans to over 2 million customers across its operational markets through the app,” she said. In Nigeria, she said Branch provides small loans ranging from N1,500 to N150,000 to users. “ Branch is positioned to eliminate the need for paperwork while requesting for loans, as all processes--from application to disbursement-are done in-app. The only requirement to access a Branch loan is an Android smartphone. Branch also gives customers the freedom to spend the money whenever and however they want.

irector-general, National Agency for the Control of AIDS (NACA), Sani Aliyu, has disclosed that Nigeria is still facing some challenges on the effort to eliminate motherto-child transmission of human immunodeficiency virus (HIV). Aliyu, while addressing the media on the 2018 World AIDS Day (WAD) celebration on December 1, therefore called on Nigerians to get tested to enable them know their HIV status. The Joint United Nations Programme on HIV/AIDS (UNAIDS) data show that in 2016, Nigeria had the highest share (26.9%) of new mother-to-child HIV infections out of 23 priority countries. It estimated that 37,000 children younger than 15 years were newly infected with the virus. The theme for this year, according to NACA, “Know Your Status” is an opportunity for every community to unite against HIV, show support for people living with the disease and remember those who have passed away

due to AIDS. According to Aliyu, the WAD is an opportunity to remind the public of the importance of testing for HIV. “Nigeria is still facing some challenges, as only about 50 percent of pregnant women are present for antenatal care. “Having an HIV test is an essential step towards accessing life-saving HIV treatment as we progress towards putting everybody living with HIV in Nigeria on treatment. “The agency would continue to embark on awareness programmes to get more pregnant women to attend antenatal care,” he said. This is the 30th anniversary of the first World AIDS Day. Since the human virus emerged, HIV has become one of the world’s most infectious killers, infecting 76.1 million people and accounting for the death of 35 million people due to AIDSrelated illnesses. Nigeria has the second largest burden in the world after South Africa with an estimate of 3.2 million people, with only 1 million on Antiretroviral Therapy (ART).

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Dana Air concludes NCAA re-certification, assures of CoronationMB emerges top additional flights, to acquire more aircraft in 2019 brand to watch in 2019 IFEOMA OKEKE

ana Air has concluded its recertification exercise conducted by the Nigerian Civil Aviation Authority (NCAA), and has assured its guests of additional flights to ease the pain of travellers who have had to bear the high cost of tickets as a result of flight shortage across the country. The airline also revealed its plan to acquire more aircraft in the coming year as part of its strategic route and fleet expansion programme and its desire to continue to provide its guests with the best in terms of in-flight service, on-time performance and customercentric products. Kingsley Ezenwa, the airline’s media and communications manager, during an interview with newsmen in Lagos, said, “We have finally concluded our re-certification exercise with the NCAA. “Re-certification in Nigeria’s aviation industry is a standard practice conducted every two years by the NCAA and during the period, an airline’s operation is totally reviewed from ground handling to quality assurance and particularly safety standards and we are glad to have scaled this rigorous process.” The Dana Air spokesman, while thanking the NCAA for carrying out a thorough check on its operations before recertifying the airline, decried a negative report by an online platform during the course of the re-certification describing it as unnecessary. “We wish to commend the NCAA for doing a thorough job and for giving us a clean

bill of health, which on its own reassures our guests that our 10 years experience in Nigeria’s airspace is no fluke. We are however worried about some orchestrated and baseless stories that were circulated while the exercise lasted. Unfortunately the sponsors of the story displayed crass ignorance of simple regulatory exercise as a result of their mischievous intentions. “Dana Air presently has five aircraft out of which two are undergoing mandatory maintenance which in aviation is called C-checks. The safety and comfort of our guests comes first before any other consideration and we find such report really unnecessary. We advise the purveyors of such report to rather commend us, having served Nigeria for over 10 years and counting and showing massive commitment to changing the narrative about domestic airlines and Nigeria’s aviation industry as viable,” he said. He however noted that the airline really feel the pain of its guests who have had to travel by road as a result of the shortage of aircraft across the country and hike in fares, and wish to reassure them of Dana commitment towards putting an end to it in the coming year. He said at the moment, discussions with its financial partners were ongoing and very soon it would acquire some aircraft to add to its fleet.’ “In the interim, our smart scheduling team have created additional flights to ensure that individuals, friends and families travelling this yuletide for business or leisure are not stranded or suffer unreasonable hike in fares for poor service.

eading African financial institution, Coronation Merchant Bank has emerged as the top brand to watch in 2019 during the Top 50 brands Nigeria awards held recently in Lagos. Now in its fourth year, Top 50 brands Nigeria is an annual selection of top brands (companies) in Nigeria. The rating agency recognises brands that have shown tremendous leadership in their sectors and across the corporate Nigeria. The award also provides a platform to bring together industry leaders in Nigeria whilst celebrating the achievements of those driving economic growth across Africa. Commenting on the awards ceremony, CEO of top 50 brands Nigeria, Taiwo Oluboyede said, “the essence of the yearly rating is to make brand owners appreciate the importance of brands, which is the most valuable asset of their corporate entity and a major success factor to their businesses. At this very important time in our country, the brands play important roles in our business space. “They provide the muchneeded jobs, goods and services, create wealth and also are socially responsible, with many interventions endearing them more to the people.” In emerging a top brand to watch a 2019, CoronationMB has shown exciting promises that have attracted a lot of people to them. Receiving the award on behalf of the bank, the Group Managing Director/ CEO of Coronation MB,

Abu Jimoh, said, “We are delighted to be recognised as a leading brand in Nigeria. To be rated the top brand to watch in 2019 further shows that we are on the right path towards becoming Africa’s premier investment bank. Since its inception in 2015, the banking group has been at the heart of economic growth, connecting customers to opportunities through its wide range of distribution channels and robust digital services. Coronation MB Group applies its extensive knowledge of the sub-Saharan region, backed by its in-house research capabilities to provide solutions to the most complex financial problems. The Groups operation style, staff conduct and service delivery models are built on four core principles; Focus, Intelligence, Network and Execution. These principles inform its value proposition and social pact with its clients and stakeholders. Driven by its vision of becoming Africa’s premier investment bank, the group has been the recipient of numerous International and National awards for product innovation and sound corporate governance practices.

Monday 03 December 2018

Youthniversity Consult lifts youths with transformational leadership skills

outhniversity Consult, a human resource development organisation, newly held three-day training programme is geared towards empowering young Nigerians with transformational skills. The training, which is first of its kind, was organised to give youths skills that will enable them better contribute to the development of Nigeria. Youthniversity Consult is set up to specifically address leadership gap among youths. The training brought together young people from across Nigeria as well as facilitators from various different sphere of human endeavour. Participants were trained in various areas of business development, ethics, public speaking, relationship management, patriotism and leadership. According to Bamidele Adedeji, lead consultant of Youthniversity and convener of the conference, “We are focusing on young people because we know they are the future of this great country, we believe that any investment in the youths will shape the future. “We put together a very unique, tailor-made and intensive training package that

will equip this group of youths with the necessary skill sets for successful careers in the corporate, national and global spheres. This 3-day training programme tagged Leadership Launch Pad is aimed at re-orientating the youths for nation building.” Also speaking at the opening ceremony, Adedayo Ojo, managing director/CEO of Caritas Communications, who was the keynote speaker, told the youths that they were under obligation to develop themselves to the level where they can become assets, not just to themselves but also to the nation. He also told them that they had a responsibility to live in such a way as to please their maker. “As young people, you must acquire relevant skills, re-orient your mindset, focus on ethical renaissance, become entrepreneurial, and make a deliberate decision to rebrand yourself. I would like to reiterate the point on ethical renaissance. This is critical in view of the reality of our society,” Ojo said. The event, which was co-sponsored by Cordros Capital and Caritas Communications, had in attendance many other distinguished resource persons.

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BUSINESS DAY

ABUJACITYBUSINESS

COMPREHENSIVE COVERAGE OF NATION’S CAPITAL

Ajibola tasks professional bodies on economy, development STELLA ENENCHE, Abuja

lumuyiwa Alade Ajibola, newly inducted President of Association of Professional Bodies in Nigeria (APBN) has charged all certified members to champion Nigeria’s quest to achieve economic and developmental growth. Ajibola who gave the charge in Abuja during his investiture ceremony, said notwithstanding the country’s natural resource endowment, professionals without doubt remain the country’s best assets and ready to be challenged. In the bid to unlock the potentials, he harped on the need for synergy between government and APBN, for solution and collaboration in all areas of the economy and governance. According to him, Nigerian professionals are very much aware of the multitude of challenges facing

Nigeria today, stressing that what is required is the conducive environment needed to thrive. Ajibola who disclosed that the APBN comprises 30 foremost professional bodies, said Nigeria has produced some of the best professionals in several fields, who have served and are still delivering meritorious and life changing services around the world. He said: “however, painfully, Nigerian professionals do not appear to enjoy this level of recognition, in our own clime. The question is why this so? “Without prejudice, one would like to suggest that since we are the same people who are in good reckoning abroad, the answer cannot be in our gene, but lies in the prevailing conducive systems in those countries that open up the space for knowledge and expertise to thrive and inform development in all areas of life.

L-R: Adetokunbo Kayode, president, Abuja Chamber Commerce and Industry (ACCI); Yutaka Kikuta, Ambassador Extraordinary of Japan to Nigeria, and Johnson Anene, vice president (Commerce) ACCI, during the Envoy’s working relationship visit to ACCI in Abuja. Pic by Tunde Adeniyi

Uwaleke elected president of FCT Minister hails military capital market academics on security in Abuja JAMES KWEN, Kano

inister of the Federal Capital Territory (FCT), Muhammad Bello has lauded the Nigerian Armed forces and other security agencies over their contributions to peace and security across the capital city. Bello stated this while welcoming the Armed Forces Command and Staff College Senior Course 41 Participants, from Jaji, Kaduna State. He said the FCTA will continue to work with the military and other security agencies in the territory to build a capital city that will rank among the best cities through the provision of first-class infrastructure and service delivery. The FCT Minister who was represented by the Executive Secre-

tary, Federal Capital Development Authority (FCDA), Umar Jibril, noted that their visit coincided with the Armed Forces Remembrance Day Celebrations and the sacrifices of the nation’s heroes both fallen and standing, who have given their life in service to the country will always be acknowledged. Bello said a lot of efforts have been made towards the development of the FCT since the movement of the federal government from Lagos to Abuja in 1991, bringing the city into the rank of other new capitals like Brasilia, Canberra, among others. “We would continue to convey our sincere delight to the Nigerian Armed Forces and, indeed other security agencies for their contributions to the peace and security of the FCT”, the Minister stated.

CYNTHIA EGBOBOH, Abuja

igeria’s first Prof of Capital Market, Prof. Uche Uwaleke has been elected the President of the newly registered Association of Capital Market Academics of Nigeria (ACMN). According to the certificate of incorporation no CAC/IT/NO 121224 issued by the Corporate Affairs Commission, the aims and objectives of the Association include: to serve as a forum for galvanizing ideas from capital market scholars as well as provide a platform for disseminating research findings as regards the capital market in institutions of higher learning in Nigeria. Speaking with newsmen in Abuja, Prof Uwaleke, who is the Head of Banking and Finance Department at the Nasarawa

State University Keffi, said the Association is a forum that brings together principally Academic Staff of Tertiary Institutions in Nigeria engaged in research and the teaching of capital market related courses such as Securities and Investments, Portfolio Management, Financial Derivatives, Introduction to Capital Markets, Corporate Finance, Investment Law, etc. So, membership is inter-disciplinary cutting across teaching in various programmes in tertiary Institutions in Nigeria including Banking and Finance, Economics, Accounting, Management and Law. The Association (ACMAN) shall be disseminating research findings and keep members abreast of developments in the global and national capital markets through regular academic conferences and publication of

an international journal of capital market research. He equally added that the Association will serve as a bridge between the Academia and the Industry by working closely with academically-minded capital market operators in conducting joint research with practical relevance. Prof. Uwaleke described the birth of ACMAN as a new dawn for capital market education in Nigeria and hopes that key stakeholders such as the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) will in the near future leverage the Association’s reach and membership strength in promoting capital market literacy in Nigeria. ACMAN has as its Secretary Barrister George Ibekwe who teaches Investment Law at the Nigerian Law School, Kano.

“It facilitates Nigerians to be able to do their businesses and also to move their money and do trading here and there without risking all what it entails when you have to move money and such like. “There are many Nigerian companies that are coming in, so with this trade agreement now, we have more companies, factories and manufacturing, developing and that kind of things bring closer relationship. “When you have Nigerian companies in Senegal and Senegalese working in Nigerian companies and there is interaction so many other similar interactions,” he said. While expressing satisfaction with the trade relation between Nigeria and Senegal the envoy however stressed the need to move the trade relation away from informal. “The volume of trade is quiet high and it is quite encouraging for both parties especially when you look at the informal sector. I think is now that we need to formalize and solidify it so to speak.

“There is a lot of interaction and it is beneficial to both sides, there are things Nigerians need in Senegal and there also things that Senegalese need in Nigeria. He said the essence of the visit of the Nigerian Foreign Minister, Geoffrey Onyeama, to Senegal recently was to achieve the goal of economic diversification of the Federal Government. The Envoy said that the visit has helped in revitalizing the moribund joint commission between the Senegal and Nigeria. The joint commission, according to him provides avenue to strengthen the bilateral relations between the two countries with the view to look at the issues that affect the two countries. “It enables the two countries to carry their relations to a higher level by implementing all the requirements that will facilitate trade, movement of goods and services and development of the two nations.

Group solicit support for Girl-Child Nigeria has single highest private investment in Senegal – Envoy education, women empowerment KEHINDE AKINTOLA

OYIN AMINU, Abuja

imipre Wolo, Founder of Centre for Gender Equality, Education and Empowerment (CGEEE), a nongovernmental organization, has called on corporate organizations and philanthropists to support Girl-Child education and women empowerment schemes across Nigeria. Wolo who gave the charge at the annual fund raising dinner held in Abuja described education as a vital tool for sustainable economic development achievable with quality education, irrespective of status at birth. The annual fund-raising was organised on the sideline of a Queen Arise mentorship initiative with the theme: ‘Discover, Believe, Take Charge’, as part of

the Centre’s plan to expand the scope for women empowerment and security of girl child education in the country. According to Wolo, CSI targets young girls from rural communities, orphanages and internally displaced persons in IDPs camps with the view to provide education scholarships including: tuition, books, medicals, transportation, feeding, clothing and other incidentals. “The rationale behind providing a comprehensive scholarship program is to ensure that the girls remain in school, having become victims of circumstances they had no control over. “It is sad to note that these young girls who should ordinarily be in school are actually assigned the responsibilities of fending for themselves,” said Wolo.

alisu Umaru, the Nigerian Ambassador to Senegal at the weekend, disclosed that Nigeria has the single highest private investment in Senegal. Umaru who stated this during a chat with Nigerian media in Dakar at the weekend, expressed delight at the revitalization of the moribund joint commission between Senegal and Nigeria. The Envoy who described the bilateral relations between Nigeria and Senegal as excellent, however noted that it was difficult to measure the volume of trade because most of the transactions were informal. “The trade relation is very good; we have single highest investment of the private investment in the country which is Dangote cement factory. “It is producing and we are quite comfortable with that, we also have Nigerian banks: UBA, First Bank, Diamond Bank, they are all engage in businesses here.

BUSINESS DAY

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news you can trust I monday 03 december 2018

Insight GLOBAL perspectives

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

he Financial Times recently interviewed me and quoted me in a special feature on Nigeria as saying that restructuring “is the defining issue in Nigerian politics” and that “If it is not done, it will never go away”. Regular readers of this column will not be surprised that I hold those views. Restructuring is one of the main themes of this column over the past four years. I believe Nigeria can’t make progress unless it is restructured; and that its stability and unity would be seriously endangered without an enduring political settlement and a suitable governance structure. The motto of the London School of Economics, to which I am affiliated, is: “To understand the causes of things”. That is a sensible endeavour for any human being, organisation and, indeed, country. If something is not working, the right thing to do is to understand why and how to fix it. Truth is, Nigeria is not working; it’s acutely underperforming. Above all, it is deeply divided, with strong schismatic tendencies. Nigeria looks like a country sitting on a ticking time bomb, its deep internal tensions make it a tinderbox ready to ignite. The country seems perpetually at the centre of a perfect storm, always facing headwinds. Only those benefitting from the rut will deny these realities.

Restructuring Nigeria is a task that must be done But why is Nigeria in such dire situations? Some will blame leadership, some followership. Both are right. Leaders like Lee Kuan Yew, of Singapore, had positive impacts in shaping the destinies of their nations. And societies with a critical mass of well-informed citizens that demand progress and put pressure on leaders will perform better than those in which the citizens are docile and can’t hold their leaders to account. So, both leadership and followership matter. But Nigeria’s problems are far more structural and fundamental than that, even though, in the end, it would still take the right leadership and followership to solve them. But, as the LSE motto says, you can only solve a problem when you understand its nature or causes. So, what are the root causes of Nigeria’s predicament. Well, the truth is that Nigeria’s problems stem from its birth defect and flawed governance structure. By “birth defect”,I mean the way Nigeria was created or, as Wole Soyinka puts it, “cobbled together”.And by “flawed governance structure”, I refer to the over-centralised politico-governance system that ignores Nigeria’s multi-ethnic nature. Understanding the problems posed by Nigeria’s birth defect and flawed governance structure is really essential to appreciating the need for restructuring the country. So, let’s start by reminding ourselves how Nigeria came to be. Now, as everyone knows, what later became Nigeria was not a noman’s land. For centuries, the Yoruba, the Igbo, the Hausa/Fulani and other nationalities owned and lived in their territories almost independent of one another. Then, in the mid-1880s, George Goldie, a British businessman – most British colonies started as commercial entities – came and used the “Maxim guns” to beat the different nationalities into total surrender. Having defeated them, he created their territories into the Northern and Southern protectorates. Goldie ran

these protectorates until 1900, when he handed them over to the British government, as all colonial commercial entities eventually were. Fredrick Lugard then took over the two protectorates as the representative of the British government. In 1914, Lugard merged the two protectorates to form one country, and called it Nigeria. Indeed, it was Lugard’s wife, Flora

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...restructuring Nigeria is not just about political stability and unity, it’s also about administrative consolidation (to reduce the cost of governance) and economic efficiency

Shaw, who gave the country its name. So, neither the creation of Nigeria nor its name was indigenous; neither resulted from negotiations or explicit agreement by the people. Now, it’s worth reiterating that the nationalities that make up Nigeria existed, as I said, centuries before Nigeria itself was created, with distinct history, culture, language and a strong sense of national pride. As David Pilling, Africa editor of the Financial Times, once wrote, “Africa’s so-called tribes are better seen as mini-nations, with mutually unintelligible language as distinct as French, English and German”. Each of the nationalities that were cobbled together to form Nigeria could easily have been an independent nation. Note, for instance, that what was known as British India used to include today’s India, Pakistan, Bangladesh, Burma and Sri Lanka. They are now separate coun-

tries. So, if the British had wanted, they could have constituted the Yoruba, the Igbo, the Hausa/Fulani, the Middle Belt and the Niger Delta into independent nations. But the British decided to keep Nigeria as one country. As a British colonial official once wrote in a British newspaper, the British government wanted to create Nigeria as a regional power. Fair enough. There are many advantages in having Nigeria as one country, including the size, the people, the resources etc. But here’s the rub. If you want to keep different nationalities together in one country, you must make sure they enjoy equal status and feel the fullest autonomy of nationhood within a federal structure, rather than become vassals to a powerful centre. As I told the FT in the interview, “The idea you can have a federal structure with a very powerful centre and weak regions is a non-starter”. Indeed! Chief Obafemi Awolowo, Nigeria’s pre-eminent federalist, who advocated a federal structure for Nigeria, wrote in his book The People’s Republic that every multilingual or multi-national country “must either have a federal constitution … disintegrate or be perennially afflicted with disharmony and instability”. Wasn’t he prescient? Isn’t Nigeria perennially afflicted with disharmony and instability because it refuses to have a truly federal structure? Chief Awolowo said he came to his view after studying the constitutions of virtually all countries in the world (and, of course, you can be sure he did!) and was convinced that only a federal structure was suited to the diverse population of Nigeria. Chief Emeka Anyaoku, former Secretary General of the Commonwealth, offered a similar view a few years ago when he said: “From my over 30 years’ experience of governance in over 50 Commonwealth countries, I believe that, given its history and pluralistic character, a truer federalism is a sine qua non for Nigeria’s achievement of its development potentials

and enduring political stability”. So, why, despite the preponderance of evidence about how a multi-national country should be organised, are Nigerian leaders still showing arrogant antipathy towards political restructuring? President Buhari, whose arrogance on this issue is beyond belief, recently said, patronisingly, that “There are too many people talking lazily about restructuring in Nigeria”. Really? Was he referring to those, like Chief Anyaoku, who understand comparative politics and know that no country with a multinational structure like Nigeria is organised so centrally as Nigeria is? Does President Buhari know a federal state that has an “Exclusive Legislative list”, under which the federal government can do virtually everything? Does he know a federal state where the police iscontrolled centrally or where business people have to go to the federal capital to obtain a licence for virtually everything? The British themselves knew the dangers of over-centralising Nigeria. They rejected the Macpherson constitution of 1951 because it overcentralised governance in Nigeria, and created the Lyttleton constitution of 1954, which shifted power from the centre to the regions. Indeed, the 1963 constitution devolved even more power to the regions, enabling strong and effective regional governments. Of course, the military came and reversed everything, centralising governance in Nigeria. If the British knew what restructuring Nigeria meant, why is Buhari, as Nigeria’s president, behaving arrogantly and ignorantly on the issue? In 2015, the then British prime Minister, David Cameron, announced a restructuring or devolution plan in which the nations of the UK would “become more powerful, with wider responsibilities”, adding that “our plans are to create the strongest devolved governments anywhere in the world”. But why?

Well, because “we have to bring together the different nations of our United Kingdom”. So, if the UK, which created Nigeria, recognises that radical devolution of powers to the nations is the only way to bring the country together, why is Nigeria ignoring the fact that its stability and unity depend on political restructuring or political settlement thatcreates strong sub-national governments within a federal state? But, of course, restructuring Nigeria is not just about political stability and unity, it’s also about administrative consolidation (to reduce the cost of governance) and economic efficiency. Who can deny that the multiplicity of government administrative structures in Nigeria drains the country’s limited resources? Can Nigeria really afford an expensive presidential system with a behemothic presidency, more than 500 overlapping federal agencies and resourcing-draining federal legislature? Equally, can Nigeria afford 36 barely solvent states, some technically bankrupt, with each having extensive and expensive administrative structures while borrowing heavily and relying on the federal government for bailouts? Surely, restructuring would rationalise governance in Nigeria. The logic of economic efficiency, based on notions of economies of scale and competitive federalism, also favour restructuring. Surely, strong and autonomous regions that can exploit economies of scale and their comparative advantages and compete healthily with each other is better than weak and fragmented states. Thus, I told the FT that Nigeria must be divided into “8 – or a maximum of 12 – regional governments” in a competitive federalism. The truth is that political imperative (stability and unity), administrative efficiency (cost of governance) and economic efficiency make restructuring Nigeria unavoidable. It is indeed a task that must be done!

Pricing of Eurobonds in the International market: Nigeria’s recent Eurobonds Kelechi Okonkwo

he International Capital Market (ICM) is one of the sources for accessing funds by multilateral organizations, sovereigns and corporations. As the name implies, it is a market that operates across several countries, with several players ranging from regulators, investors, investment banks and rating agencies amongst others. A diverse number of securities are issued and traded in the ICM. Perhaps the most prominent among the securities are Eurobonds which are typically issued for varying amounts and tenors. In the past 10 or more years, emerging and frontier market economies including those in Latin America, South East Asia, the Middle East and Sub-Saharan Africa have raised capital through the issuance of Eurobonds. Nigeria issued its first Eurobond in January 2011. A number of reasons were adduced at that time by the Debt Management Office (DMO) for Nigeria’s foray into the ICM because prior to that issuance, Nigeria had relied on domestic borrowing and concessional loans from multilateral and bilateral sources to meet its financing needs. The reasons given were: to increase and diversify the sources of funds to Government; reduce dependence on the domestic market for borrowing; free-up space for other borrowers in the domestic market; position Nigeria positively among the international financial community and create a benchmark in the ICM to support Eurobond issuance and foreign borrowing by Nigerian entities. It is on record that the debut Eurobond issuance achieved all these objectives as the ICM has

become a reliable source of funds for the Government and many local banks. Nigeria has raised an additional USD11.2 billion (including a USD 300 million Diaspora Bond) after its first foray in the ICM to finance budget deficits and many capital projects. These borrowings have been at lower interest rates than the domestic market, of longer tenors - up to 30 years, and more importantly reduced Government’s borrowing in the domestic market. Also, many Nigerian corporates amongst which are Access Bank, Guaranty Trust Bank, First Bank of Nigeria, United Bank for Africa, Fidelity Bank and Zenith Bank have issued Eurobonds to raise stable capital to shore up their balance sheet and comply with regulatory capital requirement. In addition, Nigeria now regularly features in respected research and financial publications in the ICM and is a destination for both foreign portfolio investors and foreign direct investors. The pricing of Nigeria’s tripletranche Eurobond on November 14, 2018 has attracted comments, some of which show a limited understanding of the facts that determine the pricing of a Eurobond at the time of issuance. The factors include the credit rating of the issuer, comparable Interest Rates in the ICM, economic indicators such as GDP and employment rates in the G7 countries, policies and interventions by the central banks of the major advanced countries (Federal Reserve Bank - US Fed, European Central Bank - ECB and the Bank of England - BoE). Given this combination of factors, it is inappropriate to compare the coupon on a Eurobond issued in one period to that issued in another period without a consideration of the market conditions prevailing at the time the Bonds were priced.

A cursory look at the Coupons on Eurobonds issued by Nigeria which is also typical for African sovereigns, and other countries with similar ratings will show that in each instance, market forces were at play. For the debut Eurobond, which was for a benchmark size of USD500 million and a tenor of 10 years, the Bond was priced at a Yield of 6.75% based on Nigeria’s credit rating and liquidity. Liquidity was strong at the time as the US Fed, ECB and BoE were all pursuing expansionary monetary policies to reflate their economies which were in recession at that time as result of the global financial meltdown. In July 2013 when Nigeria accessed the market again, this time for USD1 billion, there was still liquidity in the market largely as result of the Quantitative Easing Programme of the US Fed. It was therefore no surprise when the dual-tranche Bonds were priced at lower interest rates than the Eurobond that was issued in January 2011: the USD500 million 5-year tranche was priced at 5.375% while the USD500 million 10-year tranche was priced at 6.625%. The next time Nigeria approached the ICM was February 2017, its economic conditions had weakened under a collapse in crude oil prices in the international market and lower production levels in Nigeria which impacted adversely on Nigeria’s economic strength. Not surprisingly, with a lower sovereign credit rating and higher US Dollar Interest Rates as the Fed Funds Rate had been increased by 50bps, Nigeria raised USD1.5 billion at a higher Yield of 7.875% although this time; it was for a longer tenor of 15 years. By the time Nigeria issued a USD3 billion dual-tranche (10-year and 30-year) Eurobond in November 2017, the Nigerian economy was stronger and had emerged from

recession. Thus, in spite of another 50bps increase in the Fed Funds Rate and expectations of more increases by the US Fed, Nigeria raised the full amount at lower rates of 6.50% (10 years) and 7.625% (30 years). In February 2018, when Nigeria issued USD2.5 billion Eurobonds at 7.143% and 7.696% for 12 and 20 years respectively, US Dollar Interest Rates had inched upwards as the Fed Funds Rate had risen by another 25bps from 1.25% to 1.50% in December 2017. Between March and September 2018, Fed Funds Rate had been raised by a further 75bps from 1.50% to 2.25%. The increase in the Fed Funds Rate, the increasingly frequent instances of volatility in major financial markets, as well as, the sudden downward spiral in crude oil prices were the backdrop against which Nigeria’s USD2.868 billion Eurobonds were priced on November 14, 2018. Information from the website of the DMO shows that the Bonds were priced at 7.625% for the 7-year, 8.75% for the 12-year and 9.25% for the 30-year. It is therefore clear that market conditions

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It is unfortunate that the current administration assumed office at a time when Revenues from crude oil - which has accounted for 80% of Government revenues for many years, crashed suddenly

(influenced by a myriad of factors) and the credit rating of the issuer are the principal determinants of the coupons at which Eurobonds are issued. This is no different from the domestic fixed income securities market. Experts have commended Nigeria on its ability to attract an Order Book of USD9.5 billion for its USD2.868 billion Offer which is also indicative of investors’ acceptance of Nigeria’s credit story. It is noteworthy that by issuing these Eurobonds, Nigeria now has a strong presence in the ICM in terms of information for potential investors in the real sector and equities market, as well as, a sovereign yield curve which are all beneficial to the sovereign, corporates and the macroeconomy. Critics often ignore these benefits of Nigeria’s presence in the ICM. It must be noted that the alternative to the external capital raising totaling (USD 10.2 billion or about N3 trillion) which the Government has done in the ICM through Eurobonds and Diaspora Bond between February 2017 and November 2018 to bridge the revenue shortfalls in the 2016, 2017 and 2018 Appropriation Acts, would have been to increase domestic borrowing. In an era of tight monetary policy, this would indeed have resulted in significantly higher domestic interest rates, higher debt service costs and a crowdingout of the private sector. It is also doubtful that the domestic market would have been able to absorb these borrowings in addition to the New Domestic Borrowings of N1,182.798 billion, N1,254.273 billion, and N793.791 billion provided in 2016, 2017 and 2018 according to the Appropriation Acts for each of these years. N3.231 trillion of new domestic borrowing and another N3 trillion of the external capital raising had been done in the domestic mar-

ket in a space of 3 years (2016-2018) would have taken a severe toll on the domestic market. Nigerians have a right to express concerns about the growing Public Debt Stock and New Borrowings by the Government and Debt Service figures especially when compared to Revenues. What many fail to realise however, is that the Debt Stock is an accumulation of borrowings over a long period covering several administrations. It is unfortunate that the current administration assumed office at a time when Revenues from crude oil - which has accounted for 80% of Government revenues for many years, crashed suddenly. With Revenues slashed by half, the Government had to resort to borrowing in the short term. It is, however, pertinent to note that the ICM borrowings are to fund Capital Projects that will lead to increased GDP and ultimately increase the revenue base. For example the US$2.86 billion raised from the most recent Eurobond issue will be used to fund the Capital Expenditure in the 2018 budget. It is also comforting to note that the level of New Borrowing is reducing – N2.322 trillion in 2017, N1.643 trillion in 2018 and a projected N1.5 trillion in 2019. We expect the Government to continue in this direction while aggressively focusing on the real issue, which is revenue generation. The government is exploring all avenues to diversify its revenue sources and improve revenue generation. This includes investment in critical infrastructural development projects which is key to the achievement of the revenue diversification initiative of the government. Kelechi Okonkwo is an investment banker and lives in Lagos.

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