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news you can trust I ** monDAY 03 february 2020 I vol. 19, no 490

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$-N 357.00 360.00 £-N 470.00 477.00 €-N 390.00 397.00

+0.25

Crude Oil $ 58.00

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Spot ($/N)

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3M 0.01 3.38

NGUS apr 29 2020 362.62

Oil majors’ profit dip is warning to crude-dependent Nigeria nglo-Dutch oil giant Shell and American oil supermajor ExxonMobil have both released disappointing financial results for the fourth quarter of 2019, sounding warnings for crude-dependent countries like Nigeria to look beyond oil.

Shell recorded a profit of $2.9bn in the last three months of 2019, down from $5.7bn in the final quarter of 2018. For the year as a whole, profits fell 23 percent to $16.5bn.

ExxonMobil saw its earnings fall 5 percent to $5.6 billion in the last three months of 2019, from $6 billion in the last three months of 2018. Cumulatively, earnings fell 31 percent from $20.8bn in 2018 to $14.3bn in 2019.

Another oil major, Chevron, posted a $6.6 billion loss in the

fgn bonds

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Nigeria targets N252bn from privatisation in 2020, says finance minister … VAIDS raises N95bn, increases tax base to 20m … Finance Act to further raise tax base to 45m in 3yrs LOLADE AKINMURELE & MICHAEL ANI

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igeria’s finance minister, Zainab Ahmed, says the government is expecting to rake in some N252 billion from sales of public assets in 2020.

Ahmed did not name the specific assets to be privatised.

Ahmed, who sat down for an exclusive interview with BusinessDay at the Udo Udoma and Belo Osagie Private Equity Continues on page 42

Inside

Disappointing earnings validate bleak outlook for consumer firms P. 2 L-R: Ogochukwu Ekezie-Ekaidem, head, corporate communications and marketing, Union Bank; Beatrice Hamza-Bassey, chairman; Emeka Emuwa, CEO, and Lola Cardoso, head, retail bank and digital, at the launch of Alpher-Union Bank’s Women’s Proposition in Lagos.

Pic by Olawale Amoo

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news 3 things 9Mobile can do to attract fresh investments in 2020 FRANK ELEANYA

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oor showing from the last couple of years may be one 9Mobile would like to put be-

hind it as it looks for new strategies to steady its struggling ship.

Data from

time finding a buyer for the telecom company in desperate need of new investments.

“The company really struggled after the banks took over because of the debt,” one of the sources who asked not to be named told BusinessDay. “People running it now are

Analysis

the Nigerian Communications Commission (NCC) show that the telecommunication company has struggled to get back on its feet in terms of recruiting data and voice subscribers to its platform.

In terms of voice subscribers, 9Mobile suffered the most loss in 2019. It opened the year with 16.3 million users and ended it at 13.6 million – losing about 2.7 million customers. Before then, the company saw a 10-month drop in subscriber number starting from March.

On the data subscriber side, between Januar y (9,882,966) and December (8,068,175), the company saw a record 1.8 million subscribers exit its platform. Remarkably, 9Mobile which is the fourth largest telco in Nigeria did not add a single subscriber for the entire 12 months.

Apart from not adding a single subscriber for the entire 2019, 9Mobile has also gone for about three years without seeing a new subscriber; instead, it lost more than 8 million subscribers between 2016 and 2019.

Sources close to 9Mobile told BusinessDay that current owners are having a difficult

looking for a buyer. It is a

royal mess. They will sell but the value keeps dropping daily.”

Experts have suggested three options before the telecom company to attract the investors it needs.

New spectrum bands Mayowa Owolabi, convener of Mobile Monday Nigeria, told BusinessDay that 9Mobile requires additional investments in spectrum.

Spectrum is the name given to a range of radio-waves used for communication purposes. This includes FM or AM radio broadcasts that people listen to on their way to work, and even other wireless forms of communication like Bluetooth and WiFi. Smartphones also use same radio waves to transmit data.

If anyone could broadcast signals at any frequency, there would be total chaos, and it would lead to a lot of interference, effectively rendering the spectrum useless for any kind of meaningful communication. That’s why the spectrum gets divided into bands by the government. Mobile networks and carriers in Nigeria began with two GSM bands with 2G

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Nigeria can get US immigration visa ban lifted if it does these SEGUN ADAMS

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n a release dated January 31, 2020, the United States announced it has placed Nigeria and five other countries on a Travel/ Visa Restriction, a move that prompted President Muhammadu Buhari on Saturday to set up a committee that would seek to reverse the ban.

The US said it has suspended the issuance of visas that would allow citizens of Myanmar, Eritrea, Sudan, Tanzania, Kyrgyzstan and Nigeria reside permanently in the country, citing non-compliance with international security standards among other things.

Temporary visas for tourists, business people, students and workers from these countries will not be affected.

Similarly, Special Immigrants whose eligibility is based on having provided assistance to the United States Government are exempted from the immigration policy.

The US travel/visa restriction will be telling on Nigeria which had 7,922 Immigrant Visas Issued at US Foreign

L-R: Moyosore Onigbanjo, attorney-general/commissioner for justice, Lagos State; Rabiu Olowo, commissioner for finance, Lagos State; Babajide Sanwo-Olu, governor, Lagos State; Bola Onadele. Koko, GMD/CEO, FMDQ Group, and Jude Chiemeka, divisional head, trading business, Nigerian Stock Exchange, at the Signing Ceremony of the Lagos State Government Series III N100.00 billion 12.5% 2030 Bond Issuance, at the Lagos State Secretariat, Alausa, Lagos.

Service Posts in 2018, the second-highest issuance among African countries.

According to US-based think-tank Migration Policy Institute (MPI), about 376,000 Nigerian immigrants and their children (first and second generation) live in the US, based on a survey between 2009 and 2013. Pew Research estimated as many as 327,000 Nigerians live in US as of 2015, the highest among African countries.

With familial ties threatened, and Nigeria’s international status in a bad light, the presidential committee chaired by Rauf Aregbesola, minister of interior, must address a number of concerns that could see the immigration visa ban lifted since, according to the US, “restrictions are not permanent if a country commits to change”.

Nigeria made the list because it failed to meet the US Identity-Management Information and Information sharing threshold, two categories out of three outlined

by President Donald Trump’s administration.

•Continues online at www.businessday.ng

MARKETS

Disappointing earnings validate bleak outlook for consumer firms BALA AUGIE

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o far, earnings releases by Fast Moving Consumer Goods Firms (FMCGs) have been disappointing, validating analysts’ bleak outlook for the industry.

Analysts had said that a myriad of challenges such as weak consumer spending, poor job creation, border closure, and eroding impact of double-digit inflation would hurt earnings.

That is beginning to show up in the 2019 audited financial statement of corporates.

Nascon Allied Industries plc saw a 56.75 percent drop in profit, the worst results in five years as revenue growth

couldn’t cover or absorb spiralling cost of production.

The company wasn’t able to generate much net income from each naira of sales as profit margins fell to 7.01 percent in December 2019 from 17.15 percent the previous year.

Guinness Nigeria plc’s net income dipped by 32.45 percent to N1.74 billion as at December 2019 while net margins dipped to 2.55 percent in December 2019 from 3.80 percent the previous year. However, an increase in price of key products could underpin future revenue as brewers in the country are one of the hardest hit from a harsh and unpredictable macroeconomic environment.

UACN Nigeria plc recorded a loss of N9.23 billion in December 2019 from N9.58 billion as at December 2018.

AnalystsatCSLStockbrokers say FMCGs particularly businesses with product portfolio skewed towards personal care will continue to struggle with volume growth in 2020 as familiar challenges continue to bite.

The research house added that beverage producers, particularly cocoa-related, would witness significant pressure on margins in 2020 as the cartel formed between Ghana and Ivory Coast (both of whom control 60 percent of world cocoa output) would keep cocoa prices high, hence significantly impacting material costs.

Nigerians are getting poorer as over 50 percent of a population of 200 million live on less than $1.98 a day, which means they have little in their pockets to go shopping.

According to data from Fitch solutions, household income is estimated to have grown by 8.8 percent year on year to $4,252 in 2019 from $3,908 2018.

2019’s 8.8 percent year-on-year growth comes in lower than the 10 .7 percent year-on-year (y/y) growth in 2018.

Inflationary pressures and the hike in fuel price continue to hurt consumers’ ability to increase expenditure which in turn continues to pressure consumer companies’

Continues on page 42

Fresh threat for Nigeria’s economy as Coronavirus poses risk to oil price DIPO OLADEHINDE

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he continuous spread of Coronavirus which has roots in China could mean additional headaches for Nigeria’s economy managers as the decline in global oil demand and the consequent fall in prices may throw the country’s 2020 revenue projection in disarray.

The World Health Organisation has officially declared the Coronavirus a public health emergency of international concern and Nigeria and other Organisation of Petroleum Exporting Countries (OPEC) members could either rise in defence of oil prices or adjust to the realities of dwindling oil revenue.

At least 213 people are now dead from the disease, and more than 9,709 cases are confirmed worldwide.

Coronavirus is the latest upheaval for the oil market, which has been struggling with demand concerns for

months. China is a large consumer of crude oil.

China is the world’s largest importer of oil, with over 10 million bpd in 2019. A dramatic slowdown in air travel, closure of offices and manufacturing plants and stoppages on infrastructure projects mean a deepening impact on demand at a time of weakening overall global demand.

The bigger worry among traders is that the more the virus spreads, the more it would lead to a general and sustained decrease in economic activity in China and, potentially, in other parts of the world, a development which is worrisome for Nigeria because the international oil price has dragged to $58 as at Friday, January 31.

The 2020 budget, which was signed by President Muhammadu Buhari in December, was based on oil production of 2.18 million bpd with an oil price benchmark of $57 per barrel.

“Nigeria is economically

exposed to the virus due to its oil-based economy. The Coronavirus is rattling markets and is arriving when the oil market was already awash in supplies and demand growth was modest,” Charles Akinbobola, a Lagos-based energy analyst, said.

Lower oil prices have often meant Nigeria, Africa’s biggest oil producer, struggling to earn more in foreign exchange and fund its budget deficit. This is because oil accounts for 90 percent of Nigeria’s foreign exchange and 85.6 percent of its total export.

The Federal Government is looking to generate N2.64 trillion in oil revenue, which is 32.34 percent of expected total revenue for this year, with non-oil revenue projection being N1.80 trillion.

Nigeria’s crude oil production fell to a record low of 1.57 million barrels per day in December 2019 from 1.66 million bpd in November, according to OPEC data.

Brent, against which Ni-

geria’s crude is priced, had risen above $70 per barrel earlier last month following the killing of an Iranian general, Qassem Soleimani, by the US on January 3.

The lockdown of a growing number of Chinese cities and cancelled flights threaten one of the steadiest growth areas of global oil demand, with jet fuel accounting for about 15 percent of demand growth in China, RBC Capital Markets said in a report.

The effect of Coronavirus on global crude oil demand is clearly a concern for OPEC. Oil prices had already been weighed down by oversupply and slowing demand from China. Last week, analysts at Goldman Sachs Group said the Coronavirus could cause global oil demand to slip by 260,000 barrels a day, with jet fuel accounting for some twothirds of that drop.

•Continues online at www.businessday.ng

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Ban on ‘Okada, Keke’: Lagos launches 14 ferry boats Joshua Bassey

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n what seems an effort to make up for the ban on the operations of commercial motorcycles (Okada) and tricycles (Keke), Lagos State government is set to launch 14 new ferry boats to strengthen its public transportation system.

This is coming as the ban on motorcycles and tricycles enters its third day today, with the effect heavily felt in different parts of the state metropolis, especially in Ikeja, Surulere, Victoria Island, Ikoyi and Oshodi. Major roads in the metropolis were still deserted of Okada on Sunday; operators complied with the government’s directive to stay off the roads.

The launch of the ferry service on Tuesday (tomorrow) by Governor Babajide Sanwo-Olu, is expected to cushion the effect of the Okada and Keke ban in areas of the state that can be reached through the waterways.

The state is targeting to lift at least 480,000 passengers daily on the waterways.

The new passenger boats are fitted with modern communication gadgets and Wi-Fi will be deployed in the first phase of the state commercial ferry service, which begins on Tuesday, February 4, at Obadore, in Ajah area of the state.

Ladi Balogun, managing director of Lagos Ferry, stateowned agency, said on Saturday, February 1, that Lagos Ferry will operate on all the water routes in Lagos, although, in gradual phases according to the available capacity.

“These boats are in the following capacities: 60Pax Capacity 3units, 50pax Capacity 2units, 40pax Capacity 3units, 30Pax Capacity 4units, 25Pax Capacity 2 units,” said Balogun.

The water routes that will benefit from the service, according to Lagos Ferry MD, include Ipakodo terminal , Ikorodu-Five Cowries terminal, Falomo Ikoyi, Ipakodoterminal,Ikorodu-Ebute Ero Jetty-Elegbata –Lagos Island, Marina terminal CMS and Five Cowries terminal, Falomo Ikoyi, -Badore terminal, Ajah-Eti in Osa local government.

Others are Ebute Ero Jetty in Ojo, Ijegun Egba terminal, Amuwo-Odofin to Marina, CMS-Mile 2 terminal, Amuwo-Odofin -Liverpool Jetty, Apapa- Marina terminal CMS and Badore terminal, Ajah, in Eti-Osa local government- Ijede Jetty, Ikorodu.

Balogun said the launch is a huge step forward in the integration of multi-modal transportation in the state, a process which has been on since 1999, and that technology will play a big role in the integration.

“Being a megacity and emerging smart city, it is quite obvious that efficient traffic management can best be experienced in Lagos state if the three modes of rail, road and water transportation are effectively integrated to complement one another. Commuting the over 20 million people of Lagos State largely on the road has, thus far, proven ineffective,” Balogun said.

First Bank hosts SMEs to its 2020 Inaugural Business Clinic By our reporter

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n furtherance to its identification with the role that Small and Medium Enterprises play towards the growth and development of the country, First Bank of Nigeria Plc, Nigeria’s premier and leading financial services provider, hosted SMEs in its 2020 inaugural SME Business Clinic. The event themed “Positioning your business to thrive in 2020” held on Thursday, 30 January 2020.

The SME Business Clinic

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featured Abayomi Adewumi, CEO of the Global Leadership Institute, an industry expert and business growth consultant with vast experience working with Small & Medium Enterprises. He engaged participants on the FirstBank SME diagnostic tool, designed for SMEs to check the health of their businesses, better understand it and drive profitability.

In the course of the year, the FirstBank SME Clinic will be held across all geo-political zones in Nigeria, thereby deepening the Bank’s impact

at bolstering the efficiency of entrepreneurs in the country.

In 2019, FirstBank organised an SME week in which 7 strategic pillars were identified and considered essential for the sustainability and growth of SMEs. The 7 pillars – connect to infrastructure, connect to talent, capacity building, policy and regulation, connect to resources, connect to market as well as connect to finance, are intended to promote a healthy business interaction and adaptability of the SMEs with their

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immediate environment.

The weeklong event which had SMEs mentored across multiple states in the country was the first of its kind in the industry.

The latest SME Clinic session was organized in partnership with SME Traction, a leading business coaching platform aimed at empowering SMEs to make informed choices about their businesses, thereby facilitating growth and bolstering their contribution to the development of the economy.

Speaking on the event, Gbenga Shobo, the Deputy

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Managing Director, FirstBank, said “at FirstBank, we recognise the impact SMEs have in promoting growth of the economy and are excited at the opportunity to continue to enable them prosper by strategically contributing to the sustainability of their business. We remain the trusted financial partner of SMEs and reiterate our resolve to be known as the brand that enables their success; much the same way that we have for over 125 years enabling Nigerians and the economy at large.”

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news

Manufacturing PMI begins year on slow growth of 59.2 index points HOPE MOSES-ASHIKE

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he Manufacturi n g Pu rc ha s i n g Managers Index (PMI) has begun the year on slow growth, expanding to 59.2 index points in Januar y 2020 from 60.8 points in December 2019.

The Central Bank of Nigeria (CBN) on Friday released the PMI, which indicated that the manufacturing sector expanded for the 34th consecutive time this month but at a slower rate.

Production level, new orders, supplier delivery time, employment level and raw materials inventories grew at a slower rate in January 2020.

Efforts to get Ahmed Mansur, president, Manufacturers Association of Nigeria (MAN) to respond to this was not successful as he could not answer his first call after ringing and the subsequent calls did not go through.

The Manufacturing and

Non-Manufacturing PMI Report on businesses is based on survey responses, indicating the changes in the level of business activities in the current month compared with the preceding month.

Of the 14 surveyed su b s e c t o r s, 1 1 re p o r ted growth in the review m o nt h. T h e s e i n c l u d e petroleum and coal products ; transportation equipment ; Paper products; Furniture and related products ; plast i c s a n d r u b b e r p ro d ucts; primary metal; food, b e v e ra g e a n d t o b a c c o products; chemical and p h a r m a c e u t i c a l p ro d u c t s ; f ab r i cat e d m e t a l products; textile, apparel, leather and footwear, and cement. The electrical equipment subsector remained unchanged while printing and related support activities and Nonmetallic mineral products recorded declines.

A composite PMI above 50 points indicates that the manufacturing/non-

manufacturing economy is generally expanding, 50 points indicates no change, and below 50 points indicates that it is generally contracting.

The production level index for the manufacturing sector showed growth for the 35th consecutive month in January 2020 at 59.6 index points compared to 61.8 points in December 2019.

The Manufacturing sector inventories index grew for the 34th consecutive month in January 2020 to 60.7 points as against 62.4 index points. Ten of the 14 subsectors recorded growth, 2 reported unchanged inventories while 2 reported lower raw material inventories in the review month.

The manufacturing supplier delivery time index stood at 59.1 points in January 2020, indicating slower growth when compared with 60.5 points in December 2019.

The employment level index for Januar y 2020

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stood at 57.3 points, from 58.0 points in December 2019. It grew for the 33rd consecutive month of which 11 out of the 14 subsectors reported increased employment level.

Employment level for the cement subsector was unchanged, while the electrical equipment and printing and related support services recorded lower employment level in the review month.

The composite PMI for the nonmanufactur ing sector stood at 59.6 points in January 2020, indicating a slow expansion compared to 62.1 points in December 2019.

At 59.8 points, the business activity index grew for the thirty-fourth consecutive month, indicating expansion in nonmanufacturing business activity in January 2020. Fourteen of the 17 surveyed subsectors recorded growth, 2 remained unchanged while 1 recorded decline in business activity in the review month.

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MTN Nigeria appreciates sales partners, holds award ceremony

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eeping to its tradition of rewarding longstanding partnership, MTN Nigeria recently held its Annual Sales Conference, starting with a forum on January 26, 2019, and culminating in an award ceremony on January 28, 2020. The award ceremony, which took place in Lagos, played host to MTN’s business partners from across Nigeria as well as top executives of the company.

The Gala and awards night was an evening full of glamour and entertainment with the Nigerian music legend, Innocent Idibia popularly called 2Baba thrilling the guests with his evergreen melodies.

Speaking at the ceremony, Chief Operating Officer, MTN Nigeria, Mazen Mroue said MTN is committed to

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ensuring that its trade partners have all the support needed to achieve their personal and corporate targets.

“This is an evening of appreciation and recognition.

We appreciate our partners for being with us through the years. Thank you for your patience, commitment and loyalty to our brand. We will continue to stand beside you and stay committed to you, as you have been committed to our brand.

This year is very important to us. Forget about targets, plans, strategies. The year is important to us because we remain together on this journey.”

In addition to the glitz of the night, MTN also rewarded outstanding partners with prizes such as cars, motorcycles, tricycles and other valuable gifts.

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The very last salute for Admiral Patrick Seubo Koshoni (1)

Bashorun J.K Randle

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n 25th Januar y, 2020 Admiral Patrick Seubo Koshoni former Chief of Naval Staff (October 1986 to January 1990) and Minister of Health (1983 - 1985) was given the last order by the Almighty. Being a devout Catholic, Seubo promptly saluted and complied with the order of the omnipotent Commander-In-Chief.

Indeed, the Supreme Commander will not tolerate any appeal for waiver or deferment. The curtain was drawn but we are nevertheless permitted to peep behind the veil and reflect on our shared experience going back over sixty years.

In his professional career, he commanded several naval bases – including Calabar and Lagos.

However, the first base where he was the “Flag Officer” was at his parents’ home at 55 Kakawa Street, Lagos.

His parents Pa Justin and Mrs. Felicia Koshoni were extraordinary. Their generosity knew no bounds regardless of their own humble resources. Whatever they had was there for all their children, extended family and friends of their children. Sedowe (the eldest child), was followed by Patrick Seubo, then their beloved sisters Margaret (“Maggie”) and Anise. The youngest was Gbegan a boy.

Sadly, Anise is the only one left now.

Maggie and her best friend, Muyinat King were adored and adopted by us all

as our own sisters.

The Koshoni household extended to the boarders such as late Bobo Doherty; Biodun Doherty (Igbobi College) and Lateef (Oga Lato!). It was our base and the list of happy “sailors” included (to mention a few) Tunde King and late Kunle Munis who were virtually next-door neighbours but preferred to hibernate in the room shared by Sedowe and Seubo.

It was as if the room had limitless capacity and would expand of its own volition to accommodate the likes of Afolabi Akerele (St. Gregory’s College); late Tunji Marquis; late Suppy Alonso; Tunde Keshinro; late Tunde Akeju; late Dr. Bolaji Durojaiye etc. I must not forget Engr. Segun Doherty (Igbobi College) who died a few days ago and Funsho Kinoshi as well as Fela Young (Igbobi College), late Dayo Wright (former editor of “The Punch” newspaper); Ademola Edu (Igbobi College) and Harrison Kuti. Also, on the list are Kunle Elegbede (King’s College); Muftau Elegbede (Methodist Boys’ High School) and Funlola Okunowo (ex-Igbobi College).

Although we were supposed to be at our various boarding schools – King’s College; St. Gregory’s College; Methodist Boys’ High School; CMS Grammar School etc., Kakawa Street was our sanctuary and unofficial base from where as teenagers we ordered fresh palm wine form a shed/ palm wine bar directly opposite Pa Koshoni’s house.

The default rate was exceptionally high.

We would savour the palm wine and offer to pay later but as an act of good faith we would return the container known as “Keregbe” (gourd) which the palm wine sellers appeared to value more than the palm wine. Anyway, this was before AMCON (Asset Management Corporation of Nigeria) the debt recovery agency emerged.

We also had unlimited access to the latest music records and tapes courtesy of Sidona whose record shop blaring with loudspeakers was just around the corner at the point where Kakawa Street intersected with Bamgbose Street.

Actually, the front entrance of Pa Koshoni’s house was on Bamgbose Street while the exit led directly into Kakawa Street. Woe betide the taxi driver who would drop us at Bamgbose Street and expect to be paid. On the pretext that we would be stopping for only a few minutes, we would gleefully exit through the backdoor into the bowels of Kakawa Street where the Tinubu compound provided ample refuge!!

From there we would send our scouts to be sure that the taxi driver was not still lurking around before we would emerge with renewed vigour for further escapades. Every now and again it was the hapless Mrs. Koshoni who would feign annoyance and exasperation.

“You (these) boys, you should not be hanging around here. Go back to your schools and read your books.”

Then she would be all smiles and ask if we wanted anything to eat or drink (but not palm wine!!).

It was at Kakawa Street that we learnt to smoke cigarettes. Our supplier, Peter operated from a canoe which was perched on the quayside located at the Marina. Before Apapa and Tin Can Island ports were built, ships would stay in deep waters in the Atlantic Ocean and deliver goods loaded on barges to the quayside. Peter was an equal opportunity entrepreneur. He traded in marijuana (Indian hemp) which he sold to visiting sailors at a vast profit for cash and cigarettes. I can testify that King’s College boys only bought cigarettes but I cannot vouch for what he sold to St. Gregory’s College boys!! We must be careful not to rely on hearsay or circumstantial evidence going by the pro-

‘

On one memorable occasion when late General Sani Abacha announced that there had been an attempted coup d’état to topple his military government, Peter marched boldly to Bonny Camp, Victoria Island where the Military Tribunal was sitting to debunk the alleged coup attempt

Randle is Chairman/Chief Executive JK Randle Professional Services Chartered Accountants

Dr Segun Aina, the fintech trailblazer, clocks 65

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n Friday, 31st January 2020, Segun Lawrence Aina turns 65. This opened another page in the life of a man who has made global professional banking practice, education, youth development, fintech ecosystem building, innovation and technology, community development, philanthropy and inter-faith harmony, his apostolate.

Today, he is globally known for his vision and activities in the financial technology ecosystem and is variously referred to as the “Grandmaster of Fintech” and Nigeria’s FinTech envoy.” These sobriquets are tributes to his many exploits as a leading enabler and ecosystem builder. Shortly after leaving the position of Bank Managing Director, he with a visionary mind, founded Fintech Associates Ltd, a finance and technology solutions provider, which started business in 2006. The term ‘Fintech’ only became a global buzzword in the last five years! Aina and Fintech Associates Ltd had incubated many tech startup companies some of which are today leading players in the Fintech industry with presence and market in various African countries.

He is respected for his tireless effort and passion, to see the concept of a financial technology revolution fully adopted in Nigeria for economic development. He is also very passionate about a digitally transformed “one Africa market”.

It is thus not surprising, that he initiated and founded the Fintech Association of Nigeria, with the support of various industry leaders, and became its first President in 2017. Not done with that, he initiated and founded the Africa Fintech Network, designed as a union of National Fintech Associations, which was inaugurated in December 2018, with eleven countries, and within a year, increased to thirty-one African countries, and still growing.

Aina who was born in 1955 and grew up in Ibadan, Oyo State, has spent a substantial part of his life and career not only giving back into communities where he was nurtured but also to his ancestral home, in the state of Osun.

A banker by profession, Aina is a graduate of Accounting from the University of Lagos, with a Master’s degree of Science in Banking and Finance from the University of Ibadan. His career in the banking industry began at UBA in 1974 and progressed to Ecobank where he rose in 1994 to the position of Executive Director in charge of operations and technology. In that capacity, he led efforts within the Ecobank Group to create innovative tech-driven banking products and services. He successfully drove the bank’s expansion plans in Nigeria, with concurrence responsibility for group training, operations in the then five countries where Ecobank existed such as Ghana, Benin Republic, Togo and Cote D’Ivoire.

His remarkable banking career culminated in becoming the Managing Director and Chief Executive Officer of Fountain Trust Bank Plc,(now Heritage Bank) which he led for six years with great accomplishments, before taking early and voluntary retirement from an illustrious banking career, spanning three decades.

To burnish his professional credentials, Aina undertook several courses including executive management programs at the Lagos Business School; INSEAD France; IMD, Switzerland and Harvard Business School in the US. He is a Fellow of the Chartered Institute of Bankers of Nigeria, London Institute of Banking and Finance, Institute of Directors, Nigerian Institute of Chartered Arbitrators (NICArB) amongst other professional organizations.

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was rewarded at home and abroad with appointments to various corporate leadership professional positions including, President West African Bankers Association (Nigerian chapter); Directorships in several banks and non-banking financial institutions such as First Securities Discount House (FSDH), Financial Training Centre (FITC), Nigerian Interbank Settlement System (NIBSS), First Atlantic Bank Ghana. In 2012, he served as the 17th President of the Chartered Institute of Bankers of Nigeria (CIBN). During the two-year term, education, research, technology and innovation were promoted as part of the highpoints of his tenure.

Indeed, a notable and international role he is currently playing is, representing Nigeria as the pioneer Chairman of the Global Banking Education Standards Board (GBEStB), which is an industry-led body set up by professional banking institutes across the world to “develop internationally-agreed standards for the education of professional bankers and enhances ethics and professionalism in banking worldwide.”

He is the first person to lead this international banking organisation, which is a global conglomeration of over forty professional Banking institutions.

Aina’s passion for education is not limited to his professional world. The Segun Aina Foundation (SAF) which he set up in 1995, has supported the brilliant, but financially-challenged with scholarships, mentoring, skills-enhancing training and leadership programmes, for over two decades because he believes that “the surest way to empower an individual is to give him or her good quality and focused education which is the foundation of any development.”

The Foundation has also instituted Endowments and Prize Awards in several tertiary

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nouncement (“obiter dictum”) of Justice Bode-Rhodes- Vivour (ex-St. Gregory’s College) of the Supreme Court.

Peter was quite a character. He lived alone on his boat and was nearly always half naked in strict adherence to what he considered to be the antidote to the oppressive heat. He was utterly fearless and brazenly hedonistic. He had no qualms about selling marijuana to policemen; soldiers; firemen and Customs and Excise officers (with a question mark over students of St. Gregory’s College!!). He claimed that mosquitoes were afraid of him and would never bite him.

On one memorable occasion when late General Sani Abacha announced that there had been an attempted coup d’état to topple his military government, Peter marched boldly to Bonny Camp, Victoria Island where the Military Tribunal was sitting to debunk the alleged coup attempt. When he was asked for his proof, he sent the tribunal into pandemonium by declaring: “Whenever a coup d’état is imminent, I receive extra orders from soldiers, air force men and navy officers. Prior to the day of the alleged coup, there was no surge in demand for marijuana.”

As usual, Peter was half-naked. He refused to give his name or provide and address. He only volunteered his rank!! He insisted that he had no wife, children, no next-of- kin or Tax Clearance Certificate. Definitely no landlord.

It was Major-General Duro Ajayi (exKing’s College) the Deputy Chief of Army Staff who promptly intervened and ordered Peter the hostile witness to withdraw his offensive remark: “A coup is just an inconclusive election by the military.”

Tayo Agunbiade institutions. In 2005, Aina funded the construction of a youth development centre, the Segun Aina Foundation Centre (SAF Centre), to serve as a resource and learning outlet for the youth population of his ancestral community of Otan Ayegbaju, Osun State and its environs.

One of the community projects closest to his heart is probably the grassroots development initiative known as Otan Ayegbaju Progressive Union (OAPU) which was founded in 1928 and has been a vehicle to push sustainable development in the town. Aina who believes that community-based development is the key to overall growth, served as OAPU’s President from 2003 to 2007, and as the first Chairman of its Board of Trustees. He was also President of Boluwaduro Local Government Development Union.

It is instructive to note that, Aina has also used his expertise in the banking sector to lead the establishment of a financial services institution in Otan Ayegbaju, known as Boluwaduro Microfinance Bank. He has also been closely involved with the Osun Development Association (ODA), a think-tank of eminent and accomplished Osun State indigenes, set up to drive socio-economic development, where he served as Secretary from 2001 to 2010 and became the Chairman in 2017.

His passion for intellectual activities led him to co-author a book titled ‘Otan-Ayegbaju-The Task of Re-Building’ and edited ‘OAPU at 80,’ a compilation of articles on the historical developments and prospects of the organisation.

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Themes that will shape the Nigerian Economy in the next decade

Patrick Atuanya

A

decade is a long period of time but when put in perspective against the last century or Nigeria’s progress since 1960, it doesn’t seem that long.

Since the country returned to democracy in 1999 and today (2020), two decades have passed with stunning positive developments and lots of disappointments for the country.

Between 1999 and 2009, Nigeria underwent significant reforms. It was the decade of the Telecommunications or GSM boom, Pension Reforms that has today led to N9.5 trillion in Assets under Management (AuM), bond market reforms that lengthened the yield curve while guaranteeing regular supply by the sovereign, sub nationals and corporates, to feed the demand side of Pension Funds, Insurers and other asset managers.

It was the decade of Nigeria Inc.,

with the emergence of billionaires like Aliko Dangote of Dangote Group, Mike Adenuga of GlobaCom and Tony Elumelu of the UBA Group, who ventured outside Nigeria to begin to build multinational businesses in the rest of Africa and beyond.

The country’s crushing dollar debt was paid off by President Olusegun Obasanjo under the guidance of then Finance Minister Ngozi Okonjo-Iweala, banking consolidation led to the emergence of mega banks, close to 1,000 government owned enterprises were sold by the Bureau of Public Enterprises, headed by one Nasir El Rufai, the stock market boomed, with the NSE main stock index which started the year 1999 at 5,672 points quadrupling in 10 years to close 2009 at 20,827 points, and Nigerians in the diaspora trooped home with the buzz word being ‘Repats’.

Alas the next decade between 2010 and 2019 was not quite as bullish.

In a sense it was a case of two half ’s with Nigeria continuing its ascent in the first half of the decade between 2010 and 2014, when the country was crowned as Africa’s largest economy, following a rebasing of the obsolete data that underpinned its GDP. However the commodity super cycle that powered most of the growth of resource rich nations in the earlier decade soon ground to a seeming halt with the emergence of shale drillers in the United States who began to take market share from OPEC and in the process depressed

oil prices.

The average Nigerian not familiar with Economics or Finance was introduced to a new word called ‘recession’, the Naira was devalued by close to 60 percent and the story of a rising Middle Class came to a screeching halt, with the ‘Repat’ buzz word now replaced with a more sobering one: ‘Canada’.

At the end of the next decade (2030), Nigeria could host a fourth of the world’s poorest people or the country could be in the league of the top 20 global economies, an expectation that had failed to materialize in the last decade.

BusinessDay held its economic outlook conference last week and various consensus emerged from speakers at the event about the themes that will shape the country between now and 2030.

The experts who spoke on the theme “Nigeria’s Prosperity Ahead 2030: Population, Data, Productivity,” said although, Africa’s largest economy might have missed the shot in the last decade, it has an opportunity of getting its economic prosperity right by rolling out the appropriate reforms that would retain and attract private capital and control rising poverty.

Global consulting firm, McKinsey estimates Nigeria’s infrastructure deficit requires $31 billion in annual investments over a 10-year period to fix. A large chunk of this would clearly come from the private sector as the sovereign balance sheet or fiscal position of the Federal Government or most states cannot finance such an outlay.

‘

The average Nigerian not familiar with Economics or Finance was introduced to a new word called ‘recession’, the Naira was devalued by close to 60 percent and the story of a rising Middle Class came to a screeching halt, with the ‘Repat’ buzz word now replaced with a more sobering one: ‘Canada’

Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

Five interesting facts about our pension funds

W

ith all the talk about pension funds and the federal government’s alleged attempt to borrow an extra N2 trillion at artificially low rates from it, I thought to share some facts about our current pension funds and the pension system.

First fact. Pensions are savings. In the past, with the public run pension system, it was kind of difficult to imagine pension funds as savings. The company, or the government, just internalised everything. With the system we run now though, it is very clear. Pensions are people’s savings. Every naira paid into a pension fund can be linked directly to an individual who is saving for his or her eventual retirement. Pension funds and savings accounts are not that different.

Except that one is given to a fund manager to manage on your behalf and you cannot really withdraw from it until you retire.

Second fact. You might have heard that pension funds have nearly N10 trillion but that does not mean they have N10 trillion in cash sitting down somewhere. In reality it means they have N10 trillion in assets. The fund managers

have invested your money in bonds and stocks and other funds and so on. So, it’s not like the pension funds have N2 trillion cash lying around that they can just loan out. If the pension funds wanted to raise the money, they would have to sell assets. They would have to sell N2 trillion worth of bonds and stocks and liquidate other investments. Which means someone would need to buy N2 trillion worth of assets from the pension funds.

Who is that someone?

Third fact. More than 70 percent of all those pension funds have already been loaned to government. As at 30 November 2019, 70.88 percent of pension assets were invested in federal government securities. To put it simply, of that near N10 trillion pension fund assets, over N7 trillion has been loaned to government. Not loaned as in “just give me the money”, but loaned as in the federal government sold bonds and treasury bills which the pension funds willingly bought. These are not wild statistics in case you are wondering. These are official statistics from PENCOM, the official government regulator of pension funds.

Fourth fact. The pension funds can invest in infrastructure. Nothing in the www.businessday.ng

ECONOMIST

laws says they cannot invest. But the investment must make sense and must be approved by PENCOM as making sense.

What kinds of infrastructure investments make sense according to the pension fund administrators and PENCOM? Infrastructure that has a proper legal framework and a legal and transparent revenue stream, typically in the form of a fund. In short, infrastructure in which money from that such can pay back the funds directly. As at November pension funds have invested over N40 billion in infrastructure funds. So obviously if the projects are there and structured right the pension fund administrators will invest without being forced to.

The final fact. The pension fund is valued at only roughly N10 trillion in total but according to the government’s own estimates we need about N10.8 trillion worth of investments every year for 30 years to close our infrastructure gap. Which means that the N2 trillion in question will not really change anything even if spent efficiently. But collecting that N2 trillion from pension funds via fiat may ruin the pension system indefinitely. So, there is a small benefit from the potential raid but a big risk of disas-

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In the new decade, CEOs say ‘data’ would shape Nigeria’s prosperity.

Andrew S. Nevin, Chief economist at PWC said going into the next decade, Nigeria would need to bring more people from the informal economy to the formal economy.

He also said Africa’s largest economy would need to unlock its dead capital; the country’s underutilized asset that can’t be used productively and “the biggest source of debt capital in this country is real estate,” which he estimates to be around $900 billion.Nigeria has an active informal economy, large informal trade, which funnels informal taxes to nonstate actors and billions in informal remittances.

According to PWC estimates, Nigeria’s informal sector in 2018 accounted for 55.8 percent of the country’s GDP. This is higher than the 49.6 percent contribution reported in the year before. The informal sector employs about 89percent of the total labour force in Nigeria.

Other factors that will shape the Nigerian economy in the next decade include the growing importance of the diaspora, presence of a small and diminishing public sector, ability to achieve the sustainable development goals or (SDGs) and the 36 state economies stepping up and playing a more important role in driving growth and development for the country.

NONSO OBIKILI

ter that confidence in the pension system will be destroyed.

So, there you have it. Five facts with which you can make up your mind on the seriousness of the government’s proposal to “borrow” 20 percent of pension assets. We need to learn that on this infrastructure problem we will need to do the hard work. These kinds of shortcuts typically only lead to bigger problems down the line. If we do the hard work of making our infrastructure projects investible then we won’t need to force anyone to invest. The world has trillions of dollars just looking for where to invest. It seems for now that we are not serious.

Dr. Obikili is the chief economist at BusinessDay

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Monday 03 February 2020

EDITORIAL

You shall not pass

Publisher/Editor-in-chief

Frank Aigbogun editor Patrick Atuanya

Government dithers as Nigerian passport weakens

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

A

passport is supposed to be a portal to the world, a permit that makes mobility easy. But for most Nigerians, the green passport is fast morphing into a burden, a barrier to the travel freedom they seek. Worse still, it is singling them out for discrimination. Urgent action from the government is needed.

According to thee Henley Passport Index, considered the most rigorous and sophisticated measure of global access and is based on IATA data, Africa’s biggest economy is ranked 95 with the ability to access only 46 countries without a visa.

To provide some context, the countries we beat hands down are North Korea, Sudan, Libya, Yemen, Somalia, Syria, Iraq and Afghanistan. South Africa, whose citizens can visit 100 countries without a visa, was ranked 56 and Ghana, our tiny neighbour to the west, was 78 in the ranking with unrestrained access to 65 countries.

A country’s passport ranking may be affected by several factors including security, business potentials and its internal policies because visa rules for most countries are reciprocal.

In December, the Nigerian government announced that it will issue visas on arrival for all African passport holders effective January 2020. The regional bloc Economic Community of West African States (ECOWAS) to which Nigeria belongs guarantees free movement (visa-free entry) for citizens across the 16-member bloc.

Nigeria has also signed on to African Union’s continental free trade area deal but in a move contrary to the spirit of the deal, has shut its land borders ostensibly to check smuggling.

The weakening of Nigeria’s passport measures the country’s waning global influence and retreat of foreign direct investments.

It is why Ghana is recording more foreign investments than Nigeria though it has ten times its population.

For ordinary Nigerians, the burden of a weak international passport is felt when they are singled out at international airports for embarrassing searches on suspicion of possession of drugs, forged passport or terrorist activities.

Japan was ranked top of the index, a Japanese passport offers its citizens visa-free or visa-onarrival access to an incredible 191 destinations around the world.

Asia dominates the top of the list, with Singapore in second place (with a score of 190) and South Korea tying with Germany in third place (with a score of 189).

European countries recorded a strong showing in the rest of the top ten, with Finland and Spain a joint fourth, Spain, Luxembourg and Denmark came fifth, and Sweden and France were sixth.

Nigeria’s poor ranking is at odds with its potential. It does not just have the continent’s largest economy; it has its largest population, which are mostly young, educated and vibrant. It has some of the world’s most intelligent

people but it’s often let down by poor leadership incapable of harnessing the strengths of the people.

It is little wonder that Nigerians: the brightest, best and businesspeople are opting to buy citizenship or visa by investment ­– Portugal, St Kitts and Nevis are popular passports and those who can afford $900,000 get a US visa.

The loss of capital, human and financial, when Nigeria needs it most is unfortunate. The Nigerian government must step up reforms to ensure easier entry into the country beyond just for African countries. Many countries depend on their embassies and diplomatic missions to peddle influence and realise their national objectives.

Nigeria must as a matter of necessity appoint only individuals well suited for this task.

While the government has made moves to ease travel into Nigeria from African countries, it should also step up negotiations to attract citizens from countries that can add value through investing in the economy.

HEAD, HUMAN RESOURCES Adeola Obisesan

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At last, Britain ends 47 years troubled political marriage with the EU global Perspectives

OLU FASAN

L

ast Friday, 31 January 2020, at exactly 11pm, the United Kingdom left the European Union. This followed the result of a referendum in June 2016 when Britain voted to leave the EU and end a relationship that started 47 years ago, in 1973, when it joined what was then the European Economic Community, EEC. That referendum decision led to three-and-a-half years of tortuous exit negotiations. But, at last, on Friday, the UK finally left the EU. It was a deeply emotional and yet momentous event. The front of No 10 Downing Street was turned into a Brexit countdown clock, which started ticking down from 10pm. Union flags lined Parliament Square. What’s more, the UK Treasury introduced 50p “Brexit coins” to mark the departure. One side of the coin bears the words “peace, prosperity and friendship with all nations”, the other side carries the map of the UK. Sajid Javid, Chancellor of the Exchequer, said: “Leaving the EU is a turning point in our history and this coin marks the beginning of this new chapter”. Boris Johnson, the British prime minister, described it as “the dawn of a new era”.

But why was leaving the EU such an epochal event that called for national celebrations and commemorative coins?

After all, this is a political divorce, the dissolution of a political marriage. Well, the answer is simple: one party in the marriage, the UK, was not happy and, thus, leaving the union was for it a “free-at-last” moment. The truth is that the UK-EU political marriage was not consummated

out of genuine love for each other but out of necessity. Britain was a reluctant party to the relationship in the first place.

In 1951, after the 2nd World War, when six European nations (Belgium, France, Italy, Luxembourg, the Netherlands and West Germany) signed the Treaty of Paris that established the European Coal and Steel, “to make war unthinkable and materially impossible”, Britain refused to join them. The UK also didn’t join them to sign the 1957 Treaty of Rome that created the European Economic Community or “Common Market”, the precursor of the European Union. Thus, Britain was not a founding member of the EU. But six years after the creation of the EEC, Britain applied in 1963 to join, but its admission was vetoed by the French president Charles de Gaulle. Britain applied again in 1967, and de Gaulle again vetoed its application, accusing the UK of a “deep-seated hostility” towards the European project. It wasn’t until de Gaulle left office in 1969 that Britain was allowed to join the EEC in 1973. Yet, Britain’s decision to join the EEC was very divisive in the country, so much so that a referendum was held in 1975 on whether it should stay in the EEC. The fact that such a referendum had to be held just two years after the UK joined the EEC shows how attitude to the EU in Britain has long been deeply polarised. Although 67 percent voted for the UK to stay in the EEC or Common Market, the issue caused a split in the Labour Party, with one faction that was pro-Europe leaving to form the Social Democratic Party.

Given that wobbly start, it’s not surprising that Britain was not wholeheartedly committed to the European project. But what really made matters worse was that while Britain joined the EEC purely for economic reasons, the other European countries wanted a lot more than economic integration; they wanted deeper political union and a distinct European identity. This later manifested in the creation of the European Union in 1992, with many symbols of statehood: common citizenship rights, single currency, European parliament and commission, court of justice, national anthem and flag,

free movement and abolition of internal border checks. The drive was towards an “ever closer union”.

But Britain did not want to be part of a European Super State. It was viscerally opposed to merging its national identity in a wider European one. Although Britain opted out of the single currency and the Schengen Agreement, which abolished internal border checks, it remained unhappy with the centralisation of powers in Brussels, the supremacy EU law over UK law and the free movement of people, which allowed citizens of other EU countries to come and live in the UK: there are currently 3m EU citizens in the UK, compared with 1.3 million British living in other EU countries. This caused resentment, and many British citizens felt they were losing their sovereignty and national identity to the supranational EU. Thus, the Leave camp’s slogan during the 2016 EU referendum campaign was “Take back control”.

If economics was the determining factor in the referendum, most British would probably not have voted to leave the EU. It is estimated that since joining the EEC in 1973, Britain’s per capita GDP has grown by 103 percent. The EU is Britain’s largest export market, with about 50 percent of UK exports going to other EU countries.

But as Tim Sullivan and Ray Fisman said in an article in the Harvard Business Review, “Appeals to rational economic principles fall flat in the face of intense emotion”. And concerns about loss of sovereign, erosion of national and uncontrolled immigration always triggered intense emotions when most British, more appropriately most English, people thought about the EU. To be sure, this is not about Europe itself. As Prime Minister Boris Johnson always says, “the UK is leaving the EU but not Europe”. In a recent article in the Financial Times entitled “No rowing back”, the author Louis de Bernieres, who voted to leave the EU, said he was “in love with Europe, but disillusioned with the EU” Citing loss of sovereignty as his reason, he said “our lives were increasingly being shaped by officials whom we had not elected”. It’s worth saying that

‘

The logic of Brexit is about taking back control to assert sovereignty and identity.

That emotion is becoming increasingly powerful globally

that’s not exactly true, given that the real decision makers in the EU are elected politicians and elected parliamentarians.

However, it’s undeniable that concerns about decisions affecting the lives of people at national level being taken in far-away Brussels were real and played a significant role in shaping most people’s views about the EU. But all that is now history, Britain has left the EU. So, what next? Well, nothing much will change immediately. From Saturday, 1st February, Britain entered into an 11-month “transition period” that will end on 31 December. During this period, it will remain a member of the single market and customs union, and continue to follow EU laws, but will not be part of EU political institutions.

The transition period will also be used to negotiate Britain’s future relationship with the EU. If a deal is reached, that would take effect from 1st January 2021; but if there is no deal, Britain would have to trade with the EU on onerous WTO terms. Under the Withdrawal Agreement, Britain can ask for up to two years extension of the transition period, but the UK has legislated that it would not ask for an extension; yet the European Commission has warned that 11 months is not long enough to negotiate a comprehensive deal. So, there are potential challenges ahead in the negotiations!

But here is the key takeaway. The logic of Brexit is about taking back control to assert sovereignty and identity.

That emotion is becoming increasingly powerful globally. The Brexit lesson for Nigeria is that any political union that did not emerge naturally can fracture if not nurtured; its unity cannot be taken for granted. As the Bible says in Amos 3:3: “Can two walk together, except they be agreed?” The UK and the EU could not agree and hence could not remain in a political marriage. Nigeria must learn the lessons of Brexit!

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

The Nigerian Code of Corporate Governance 2018 Principle 26 – Sustainability

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“

aying adequate attention to sustainability issues including environment, social, occupational and community health and safety ensures successful long-term business performance and projects the company as a responsible corporate citizen contributing to economic development.”

Corporate governance has long advanced beyond compliance and governance matters to include sustainability issues and other nonfinancial performance indices. According to the UN Brundtland Commission, Sustainable development is that which meets the needs of the present without compromising the ability of the future generations to meet their own needs. The concept of sustainability exists because organisations possess more responsibilities that transcend the financial implications of their activities and extends to the social and environmental implications of same.

In today’s world, organisations are considered as corporate citizens possessing rights and duties within their resident community which emphasizes the need for good corporate citizenship and responsibility. organisations have also come to realise that integrating sustainability into their businesses creates value, increases productivity and enhances brand reputation.

Principle 26 of the Nigerian Code of Corporate Governance (NCCG 2018) states

that paying attention to sustainability issues guarantees successful long-term business performance and projects the company as a responsible corporate citizen that contributes to economic development. In complying with this principle, the Board is expected to exemplify the sustainability culture and ensure that it spreads across all levels of the organisation including other stakeholder groups such as the investors, suppliers and the local community.

The Board should also insist that executives and key employees understand the emerging trends in corporate sustainability governance.

Understanding the stakeholder groups is crucial to sustainability. A stakeholder is any person that can be reasonably expected to be affected by an organisation’s activities, or that can affect the ability of the organisation to effectively implement its objectives. Stakeholders generally include suppliers, shareholders, customers, the community, trade unions, employees, Government, investors, regulators and other social stakeholders. An organisation must carefully identify its stakeholders and those issues that matter to each category of stakeholder and then develop strategies to respond to those issues.

According to a Bloomberg report, sustainability investments grew by about 25 percent from $1.8 trillion in 2015 to $2.3 trillion in 2017, thereby accounting for about one-quarter of all professionally managed www.businessday.ng

investments globally. Stock exchanges and financial regulators all over the world are also paying more attention as sustainability disclosure mechanisms are being added to listing requirements.

The NCCG Code requires that the Board establish policies and practices regarding its social, ethical, safety, working conditions, health and environmental responsibilities as well as policies that address corruption.

These policies are required to include the company’s business principles and practices towards achieving sustainability; its management of safety issues within the workplace; and the plan and strategy for addressing and managing the impact of serious diseases on its employees and their families. The Board is also required to monitor the implementation of sustainability policies and report on the extent of compliance with the policies.

Recognised barriers to integrating sustainability within organisation include competing internal commitments, short term focus on profit over long term value and benefits, resource and budgetary limitations, competing stakeholder interests. Regardless of these constraints, integrating sustainability within an organisation may be achieved by identifying the key issues, developing a strategy around the objective, establishing governance and accountability parameters, setting targets and action plans, and emplacing a monitor-

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Bisi Adeyemi ing, reporting, and assessment system. The benefits of integrating sustainability include fostering innovation, cost savings, and brand differentiation, improved market positioning, improved relations with stakeholders, and compliance with the relevant laws.

The role of accountability in relation to issues of sustainability is very crucial which further emphasizes the need to embrace Sustainability Reporting. Sustainability Reporting is an organisation’s practice of reporting publicly on its economic, environmental and social impacts and its contributions toward sustainable development goals.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. DCSL provides Governance Advisory, Corporate Restructuring & Board Evaluation, Board & Senior Management Training, Retreats & Strategy Sessions, Executive Talent Recruitment, HR Outsourcing, Company Secretarial services

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In Association With

Made in China

Will the Wuhan virus become a pandemic?

Probably. But public health services can help determine how severe it turns out to be

T

WO THINGS explain why a new infectious disease is so alarming.

One is that, at first, it spreads exponentially. As tens of cases become hundreds and hundreds become thousands, the mathematics run away with you, conjuring speculation about a health-care collapse, social and economic upheaval and a deadly pandemic. The other is profound uncertainty. Sparse data and conflicting reports mean that scientists cannot rule out the worst case—and that lets bad information thrive.

So it is with a new coronavirus, known as 2019-nCoV, which has struck in China. The number of reported cases grew from 282 on January 20th to almost 7,800 just nine days later. In that time four reported cases outside mainland China have multiplied to 105 in 19 territories. Doubt clouds fundamental properties of the disease, including how it is passed on and what share of infected people die. Amid the uncertainty, a simulation of a coronavirus outbreak by Johns Hopkins University in October, in which 65m people lost their lives, was put about as a prediction. It is not.

Those are the right questions, though: will the new virus become a global disease? And how deadly will it be? A definite answer is weeks or months away, but public-health authorities have to plan today. The best guess is that the disease has taken hold in China (see article) and there is a high risk that it spreads around the world—it may even become a recurrent seasonal infection. It may turn out to be no more lethal than seasonal influenza, but that would still count as serious (see article). In the short term that would hit the world economy and, depending on how the outbreak is handled, it could also have political effects in China.

The outbreak began in De-

A Balkan betrayal Why wait for death?

How a Ugandan hospital delivers health insurance through burial groups The insured are healthier, and their finances are too

A

SICK PERSON would once have to sell land or cows to pay hospital bills, says Owen Orishaba, a teacher in the Kigezi highlands of Uganda. But now “a goat can solve your problem.” Four years ago he joined a community health-insurance scheme managed by Kisiizi Hospital, a church-run institution.

With 45,000 members, it is the largest of its kind in the country.

Its success illustrates a wider truth: to deliver services to poor, rural people, begin with the systems they have built themselves.

In principle, Ugandans can get free health care at public clinics. In practice, government health centres are short of moncember. The repeated mingling of people and animals in China means that viral mutations that infect humans are likely to arise there; and mass migration to cities means that they are likely to spread between people. This virus probably originated in bats and passed through mammals, such as palm civets or ferret badgers, ending up in Wuhan’s wet market, where wild animals were on sale. Symptoms resemble flu, but can include pneumonia, which may be fatal. About 20% of reported cases are severe, and need hospital care; about 2% of them have been fatal. As yet, there is no vaccine or antiviral treatment.

The greatest uncertainty is how many cases have gone unrecorded. Primary health care is rudimentary in China and some of the ill either avoided or were turned away from busy hospitals.

Many more may have such mild symptoms that they do not realise they have the disease. Modelling by academics in Hong Kong suggests that, as of January 25th, tens of thousands of people have already been infected and that the epidemic will peak in a few

months’ time. If so, the virus is more widespread than thought, and hence will be harder to contain within China. But it will also prove less lethal, because the number of deaths should be measured against a much larger base of infections. As with flu, a lot of people could die nonetheless.

In 2017-18 a bad flu season saw symptoms in 45m Americans, and 61,000 deaths.

Scientists have started work on vaccines and on treatments to make infections less severe.

These are six to 12 months away, so the world must fall back on public-health measures. In China that has led to the biggest quarantine in history, as Wuhan and the rest of Hubei province have been sealed off. The impact of such draconian measures has rippled throughout China.

The spring holiday has been extended, keeping schools and businesses closed. The economy is running on the home-delivery of food and goods.

Many experts praise China’s efforts. Certainly, its scientists have coped better with the Wuhan virus than they did with SARS in 2003, rapidly detect-

ing it, sequencing its genome, licensing diagnostic kits and informing international bodies.

China’s politicians come off less well. They left alone the cramped markets filled with wild animals that spawned SARS. With the new virus, local officials in Wuhan first played down the science and then, when the disease had taken hold, enacted the draconian quarantine fully eight hours after announcing it, allowing perhaps 1m potentially infectious people to leave the city first.

That may have undermined a measure which is taking a substantial toll. China’s growth in the first quarter could fall to as little as 2%, from 6% before the outbreak. As China accounts for almost a fifth of world output, there will probably be a noticeable dent on global growth. Though the economy will bounce back when the virus fades, the reputation of the Communist Party and even of Xi Jinping may be more lastingly affected (see article). The party claims that, armed with science, it is more efficient at governing than democracies. The heavyhanded failure to contain the virus suggests otherwise.

ey, medicine and staff. The state accounts for only 15% of health spending, with another 42% coming from donor aid. Almost all the rest comes straight out of people’s pockets at private or faith-based facilities. Uninsured patients sometimes run from their beds to evade bills, says Moses Mugume, an administrator at Kisiizi Hospital. Even as he talks, a tearful woman, who is not in the insurance scheme, is brought into his office after being caught doing so.

How to reduce the burden on patients while generating steadier funding for the hospital? The answer lay in the hills.

For generations, villagers had carried the sick down from the steep slopes and thick banana groves on an engozi, a stretcher made from vines and bamboo.

They also pooled their savings to cover burial costs and to support Continues on page 17

Monday 03 February 2020

BUSINESS DAY

17

In Association With

Steal of the century

Donald Trump gives Israel the green light to annex occupied lands His proposal may not bring peace, but could still have a lasting effect on the conflict

F

OR MONTHS they said the timing was simply wrong. Members of the Trump administration, led by the president’s son-in-law, Jared Kushner, worked for two years on a plan to solve the decades-old conflict between Israel and the Palestinians, finishing last year. Then they waited for an opportune moment to release it.

On January 28th that moment arrived. Never mind that Israel was headed for its third election in less than a year, with a prime minister, Binyamin Netanyahu, facing trial for bribery, fraud and breach of trust. Or that, while Donald Trump unveiled the plan at the White House, senators at the other end of Pennsylvania Avenue listened to arguments in his impeachment trial. Or that the Palestinians had not spoken to America in two years.

The plan Mr Trump’s administration presented was unexpectedly detailed, with more than 50 pages of proposals and maps.

But as a blueprint for a two-state solution it was dead on arrival. It would not give the Palestinians a sovereign state immediately; that might come only later, after they built a government that satisfied both Israel and America. They would retain only about 75% of the West Bank, divided into three cantons linked by highways; a tunnel would connect it to Gaza, and to two remote plots of land in the western Negev desert swapped in exchange for Israeli settlements, which would remain in place (see map).

This land is your land Israel would keep control of the Jordan valley and most of Jerusalem. The Palestinian capital would be established in a few grim neighbourhoods, such as Abu Dis and Shuafat, that sit on the other side of a hulking concrete separation barrier. No Palestinian refugees would be allowed to return to Israel, only to Palestine or unnamed Muslim countries that would accept up to 50,000 each.

Israel would commit not to build new settlements in the land allocated for a future Palestine for four years; in return, though, it received an implicit American recognition of its claims to the rest of the West Bank. Mr Netanyahu declared that Mr Trump was “puncturing this big lie” that Jewish settlements in the West Bank were illegal. His cabinet may begin voting in early February to annex some of the American-allocated land.

The Palestinians rejected the proposal outright. It will end up “in the dustbin of history”, says the president, Mahmoud Abbas. His reaction should be no surprise.

There is much to criticise about the decrepit Mr Abbas, now in the 16th year of what was meant to be a fouryear term. But no Palestinian leader could accept a deal that in effect cedes Jerusalem and relegates his people to further statelessness. Far from a good-faith effort to solve the conflict, Mr Trump’s plan was a sop to hawkish ideologues in Jerusalem and Washington.

Perhaps it was never meant to be more. On March 2nd Israelis will go to the polls again. The previous two elections, in April and September, left Mr Netanyahu without a majority for his coalition of right-wing and religious parties.

By presenting the plan now, so close to the vote, Mr Netanyahu’s American backers hope it will dominate the campaign and energise his Likud base. He seems to need the help: polls so far show a slow but continuing erosion of his support. Hours before the plan was unveiled, Israel’s attorney-general filed formal charges against the prime minister in a Jerusalem court.

Over the next five weeks Mr Netanyahu will use the plan as his main platform (and a welcome distraction from his legal trouble).

His allies are pushing for a swift vote on annexing parts of the West Bank. “What is postponed until after the election will never happen,” says the defence minister, Naftali Bennett. But legal concerns may slow the process: the cabinet plans to ask the attorney-general if an interim government can approve such a drastic step. (Mr Kushner hopes Israel waits until after the election.) The cabinet cannot vote on implementing the full Trump plan, because that calls for relinquishing territory, which under Israeli law requires a referendum.

Regardless of the delays, mere talk of annexation could ben-

efit Mr Netanyahu politically. His main challenger, Benny Gantz, ran on a vaguely centrist platform in the past two elections, absorbing parts of Israel’s “peace camp”.

That won him a plurality of seats in September, but he too failed to form a coalition. In recent weeks he has moved sharply to the right, hoping to attract disgruntled Likud voters. Mr Gantz says he too would implement the Trump plan. Some members of his Blue and White party are more cautious. If they balk at annexation, Mr Netanyahu will paint them as weak and unpatriotic, liable to miss a “historic opportunity” that he likens to David Ben-Gurion’s decision in 1948 to declare Israel’s independence.

The Palestinians see all this not as an opportunity but a disappointment, one both historic and predictable. For a time they were guardedly optimistic about Mr Trump. Despite his pro-Israel campaign rhetoric, some Palestinian officials hoped an unconventional president might take an unconventional approach to diplomacy. His special envoy at the time, Jason Greenblatt, held a well-received listening tour of the West Bank in 2017, meeting Palestinian leaders and ordinary citizens.

But the relationship suffered a lasting rupture in December 2017, when Mr Trump broke decades of precedent and announced that he was moving America’s embassy from Tel Aviv to Jerusalem. The Palestinians claim part of Jerusalem as their future capital; most countries keep their embassies in Tel Aviv, arguing that to do otherwise would prejudge the status of the city. The following year Mr Trump closed the Palestinian diplomatic mission in Washington. He has also cut all American aid to the Palestinians.

Relations have not been this bad since 1987, when America labelled

the Palestine Liberation Organisation a terrorist group.

Mr Kushner and his aides did not seem to mind; they came to view the Palestinians more as a nuisance than a negotiating partner. Their plan would impose immediate costs on the Palestinians, with the benefits (such as a proposed $28bn in aid, none of which has yet been pledged) coming years, perhaps decades, in the future.

Instead they proposed an “outside-in” approach: encourage other Arab states to embrace the plan, then hope they would press the Palestinian leadership to accept it. This was always a farfetched idea. Jordan has rejected the plan. The Gulf states, which have worked hard to court Mr Trump, will not want to anger him by publicly criticising it. Ambassadors from Bahrain, Oman and the United Arab Emirates attended its release (Saudi Arabia was notably absent). But they are unlikely to do much to promote a proposal that the Palestinians have so firmly rejected.

On the eve of his inauguration, Mr Trump expressed almost preternatural confidence in his sonin-law, a property developer with no diplomatic experience. “If you can’t produce peace in the Middle East, nobody can,” he told Mr Kushner. Perhaps no one can. Mr Kushner is unlikely to bring peace, but his plan may still bring lasting change. If Israel annexes large parts of the West Bank, it will be all but impossible for the Palestinians to establish a viable state. The twostate solution, on which decades of American peacemaking had been built, has long been a fading dream; it would finally be buried.

Mr Trump may yet go down in history, not for making a deal, but for making one impossible.

How a Ugandan hospital delivers...

Continued from page 16

bereaved relatives. As Mr Mugume tells it, the hospital went to these informal societies and asked them a question: “Why do you wait for death to occur?

Why don’t you prevent death?”

In 1996 the hospital began enrolling engozi groups in health insurance. Group leaders register members and collect premiums, which range from 11,000 to 17,000 shillings ($34.50) per person a year. Members make a small co-payment to access services, such as 3,000 shillings for a basic examination or 40,000 shillings to deliver a baby. Chronic conditions are not covered, to keep costs down.

Group enrolment is a way to enlist the strong alongside the sickly.

The impacts are not just financial. Patients with insurance are less likely to be admitted to hospital than those without.

That is because they show up earlier, when their conditions are more easily treated. A study

by Emmanuel Nshakira-Rukundo and colleagues at the University of Bonn estimates that child stunting falls by 4.3 percentage points for every year that a household is in the scheme.

The cost still puts off the very poorest. Only about a quarter of the hospital’s patients are insured. But Kisiizi shows the potential to build on institutions which, as Mr NshakiraRukundo puts it, “emanate from a place of social solidarity”. In neighbouring Rwanda five-sixths of the population are enrolled in state-run health insurance delivered through local groups. By contrast the Ugandan government’s plan for a national health-insurance scheme, currently before parliament, says little about community models. Schemes like that at Kisiizi could continue alongside state initiatives, says Walimbwa Aliyi, a health official, but are too thinly spread to be the basis for it.

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Monday 03 February 2020

BUSINESS DAY

COMPANIES & MARKETS

Company news analysis insight

Health

Fidson back to profitability, records N312m Q4 profit ...as reduced cost of sales lifts bottom-line OLUFIKAYO OWOEYE

A

fter a disappointing 2018, Fidson healthcare seems to have regained its mojo as it records an after-tax profit of N312million in full-year 2019 for the period ended 31 December.

Revenue dipped 13.5percent to N14.06bn from N16.22bn in the same period in 2018. Efficient cost management saw its cost of sales decline 17.35percent to N8.19bn from N9.91bn Selling and distribution expenses dropped 24.21percent to N1.44bn from N1.90bn. Administrative expenses reduced 1.14percent to N2.58bn from N2.61bn. The com-

pany’s finance cost also dropped 10.9percent to N1.71bn from N1.92bn.

Promotion and advertisement spiked 3.56percent to N231m from N223m in 2018.

Breakdown of its revenue segment show that Over The Counter (OTC) revenue stood at N6.19bn from 6.7bn. Revenue from Ethical segment stood at 7.86bn from N8.58bn Salaries and allowances of its staff surged to 1.02bn from N745.5m, consultancy ballooned to N104.02m from N52.53m.

During its facts behind the figures held on the floor of the nation’s bourse in April, the company’s Head of Finance and Accounts, Imokha Ayebae shed lights on the rationale behind the

company’s rights issue.

The company raised N2.3 billion through a rights issue of 750 million shares at N4 per share.

Proceeds from the rights issue were used to deleverage its balance sheet and inject more working capital. As of November 2018, the company had an outstanding debt balance amounting to N6.1 billion.

Fidson’s state-of-theart factory in Ogun State and increased capacity utilization, the company carried out a number of cost-cutting measures to help achieve its targets, such as lowering finance cost with fresh capital and an increase in product prices.

The company is also enjoying a tax holiday under the pioneer status

incentive of the Federal government for a three

year period which would help retain working cap-

ital and deliver more value for its shareholders

L-R: Teslim Folarin, senator representing Oyo Central Senatorial District; Femi Gbajabiamila, speaker of Nigeria’s House of Representatives; Akeem Adeyemi, chairman, House Committee on Communications, and Fatai Buhari, senator representing Oyo North Senatorial District, at the commissioning of roads and erosion control projects facilitated by Adeyemi in Oyo federal constituency, Oyo State

Market

NSE sees worst week as CRR Hike bites hard on bank stocks SEGUN ADAMS

T

he stock market declined on Friday to wrap up a gloomy week, after CBN’s CRR policy weighed on banking stocks and set off 2020’s longest bear-run trimming broad market year’s return to single digits.

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

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

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

expect investor’s reaction to published earnings results to remain muted, in anticipation of the publication of audited financial results and dividend announcements.”

Banking sector was last week’s biggest loser, industrial goods declined by 2.83 percent, Oil and Gas stocks plunged 1.14

percent.

On the other hand, consumer goods stocks gained 0.09 percent while the Insurance sector gained 0.9 percent.

The CBN Monetar y Policy Committee in the year’s first policy meeting on January 24 moved to hike Cash Reserve Ratio

(CRR) for Nigerian banks by 500 basis points to 27.5 percent.

Apex Bank Governor Emefiele said the move was informed by the spike in inflation which hit 11.58 percent in December.

The hawkish stance by the CBN which would see Banks scramble for liquid-

ity saw an uptick in the primary auction NTBills last week, the first increase in rates for the first time in 16 weeks.

A previous policy stance by the CBN had pushed short-term bonds yields lower and supported flows to the equities market.

For instance, the Na-

L-R: Mienye Atedoghu-Badejo, deputy director, Federal Ministry of Labour and Employment; Niyi Soleye, HR, manager, BudgIT; Tanwa Ashiru, CEO, Bulwark Intelligence; Mazi Sam Ohuabunwa, president, Pharmaceutical Society of Nigeria (PSN), and Wale Olaoye, GMD/ CEO, Halogen Group, at the 2020 maiden State of the Nation Policy conference organised by Academy Halogen in Lagos

tional Pension Commission (PenCom) data as of 30 November 2019, there was an increase in equity exposure of local fund managers to 5.36 percent, up from 4.85 percent at the end of October.

“However, with yields showing signs of recovery, I expect PFAs to exercise patience to see if yields can come up to a decent level for them and thus could impact possible flows into the equities market,” said Ayorinde Akinloye, a research analyst Lagosbased CSL Stockbrokers Ltd late last week.

According to the NSE, top losers for the week were Eterna Oil (-23.81%), Hone yw ell flour mill (-17.8%), Associated Bus Company (-17.07%), UACN (-15.64%) and Unilever (-14.53%).

L inkag e Assurance (18.75%), Neimeth (17.02%), Vitafoam (10%), NPF Microfinance (9.73%) and Cornerstone Insurance (9.26%) were the week’s best-performing stocks.

Monday 03 February 2020

BUSINESS DAY

COMPANIES&MARKETS

19

Technology

Interswitch lists ₦23bn callable bond on NSE OLUFIKAYO OWOEYE

I

nterswitch Limited has listed its N 2 3 b n ca l l ab l e senior unsecured bond with a tenor of seven years at a fixed rate of 15percent, embedding a call option that can only be exercised from the second year, are payable in full at maturity A callable bond is a bond that the issuer may redeem before it reaches the stated maturity date.

In essence, a callable bond allows the issuing

company to pay off their debt early.

According to the company, this is part of its N30bn debt issuance programme through a special purpose vehicle, Interswitch Africa One Plc. Parties to the transaction are FBNQuest Merchant Bank and Stanbic IBTC Capital acted as Lead Financial Advisors/ Issuing Houses and ABSA Capital Markets Nigeria, FCMB Capital Markets, Quantum Zenith Capital & Investments and Rand Merchant Bank Nigeria.

Mitchell Elegbe, group managing director, Interswitch Limited, expressed delight with the capital raising effort of the company.

“We have evolved over the past 17 years into a technology unicorn focused on providing digital solutions to customers in Nigeria and across Africa. We, therefore, see this listing as a first step in a new phase of our journey and we are determined to keep going.”

He went on to thank The Exchange for its support

Real Estate

Veritasi Homes commits to provide affordable housing for Nigerians with Camberwall Court …commences construction works Josephine Okojie

I

n a bid to ensure that Nigeria’s middle class and lowincome earners can own a home, Veritasi Homes has announced the commencement of construction on Camberwall Court, the company’s flagship affordable housing scheme.

Camberwall Court, Abijo is an apartment development project conceived and executed to reduce the gap between young Nigerians and the opportunity to own property in Nigeria’s urban cities, the organisation says in a statement.

Speaking about the ongoing construction, Tobi Yusuff, head of marketing at Veritasi Homes commented that reactions to the project have been encouraging as investors are already trooping in to take advantage of the opportunity.

“It’s not every day you get the opportunity to reserve a world-class home with just one million naira,” Yusuff said.

In the same vein, Nola Adetola, chief executive officer and founder

at Veritasi Homes expressed his enthusiasm that this project would set the trail for affordable housing in Lagos, Nigeria’s commercial hub.

“Young couples and young professionals deserve to own homes and we are committed to making that a reality in Nigeria,” Adetola said.

He stated that the property is developed to make real estate more accessible to the younger population of the country while noting that Camberwall Court presents a unique combination of aesthetics, functionalities, and affordability.

According to him, with just N1million investors can reserve their apartment in Camberwall court, Abijo.

It requires N11million to complete payment on beautifully finished one-bedroom flats, while N15million will cover payment for a two-bedroom flat, the statement states.

The three-bedroom flats go for just 20million and investors can also take advantage of the payment options available.

Located in the heart of Abijo GRA along the Lekki-Epe expressway, Camberwall Court is an urban apartment development designed to reflect the magical merge of form and function.

Its design caters to modern living, convenience, and durability.

Unlike other real estate development projects in the region that tend to alienate average Nigerians with their price, apartments in Camberwall court are offered at affordable prices.

Featuring a splendid layout, visitor’s park, smart card access, renewable energy, and round-the-clock surveillance, Camberwall court boasts of modern amenities such as designated parking space, well-landscaped green areas, gazebo area for meetings, solar-powered street light among others.

Veritasi Homes offers simplified, rewarding and secure real estate investing. The organisation is committed to creating the right investment options for investors interested in the Nigerian real estate sector.

L-R: Sheriff Olagunju, director, food safety and applied nutrition, NAFDAC; Patrick Anegbe, chairman, Distillers and Blenders Association of NIGERIA (DiBAN); Oluwatoyin Karimu, assistant director, department of food and drug services, federal ministry of health, and Mobolaji Alalade, head, tech, DiBAN, at the kick off ceremony for the advocacy campaign against irresponsible and underage drinking in Lagos, yesterday.

Pic by Olawale Amoo

in achieving this feat,” he said.

The Issuer was assigned “Aa3” national scale programme rating by Moody’s and “Aa” national scale rating by Agusto, on the back of

positive secular industry shifts, a strong market position and a good liquidity profile. The Sponsor was also assigned “Aa” rating by Agusto.

Visa recently acquired a 20% stake in Inter-

switch, a deal which will saw Interswitch become Africa’s latest technology ‘unicorn’. Visa is thought to be paying $200 million, valuing Interswitch at about $1 billion (N360 billion).

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BUSINESS DAY

Monday 03 February 2020

Monday 03 February 2020

BUSINESS DAY

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Monday 03 February 2020

BUSINESS DAY

Monday 03 February 2020

BUSINESS DAY

23

Hamid Joda

CEOINterview

Founder/chief operating officer of TAJBank Limited

Interview with Private Sector Leaders

Successful Sukuk issuances increased awareness about non-interest banking Hamid Joda, founder/chief operating officer of TAJBank Limited, the latest non-interest bank in Nigeria. He is a banker with over 20 years banking experience covering Treasury, Business Development, Consumer/Retail Banking, Branch Banking and the Public Sector. In this interview with Osa Victor Obayagbona, Joda talks about how the North East and North West regions of Nigeria have the highest financial exclusion rates; what his bank is doing to change this, and that the financial sector regulator should continually introduce stiffer penalties against those flouting corporate governance in the Nigerian banking industry, among other industry issues. Excerpt: Hamid Joda is a banker with over 20 years banking experience covering Treasury, Business Development, Consumer/Retail Banking, Branch Banking and the Public Sector.

He began his career at Niger Insurance plc in 1999 before moving to City Express Bank Limited, Lagos, and the same year where he held the position of Senior Supervisor.

He also worked at Continental Trust Bank Limited, Kano, as a Senior Analyst and at the defunct Oceanic Bank International Nigeria Limited. He was the pioneer Branch Manager of Fidelity Bank plc, Kano, from where he rose to the position of Area Manager in charge of the North East.

His extensive experience led him to First Inland Bank (Finbank plc) Abuja, as Group Head Retail Banking (North), where he later rose to become the Divisional Head, Retail Banking of the bank.

Joda was the Divisional Head, Public Sector, First City Monument Bank (FCMB) Limited. He holds a BSc in Business Administration (Banking & Finance) from the University of Maiduguri and an MBA from Bayero University, Kano. He is also a member of the Chartered Institute of Banking of Nigeria (CIBN), Joda is the founder of TAJBank Limited. He led the team to realise the vision of setting-up of the second non- interest bank in Nigeria. He is also the Chief Operating Officer of the bank.

C

an you give us a brief history of your bank?

Our bank was licensed by the Central Bank of Nigeria on July 12, 2019, but the actual journey started around November 2015 when I and my cofounder, Sherif Idi, conceived the idea of setting up a non-interest bank. We went from conceiving the idea to capital raising, to documentation, to submission to the CBN and eventual grant of an approval-in-principle in August 2018, and subsequent grant of final licence in July 2019. It was a very tough journey that required mental fortitude but I am glad that we have weathered the storms and today we have opened the bank for business.

Under what licence do you operate and any plans on upgrading?

We are operating under a regional licence covering the North East and North West regions of Nigeria with headquarters in Abuja. We hope to raise more capital and qualify for a National License in less than two years of operation.

What are your plans for expansion and do you see yourself listing on the stock exchange; if so, when?

Expansion is actually top on our agenda. As I said earlier, we intend to acquire a National license in less than two years of operation and in compliance with CBN regulations guiding national banks we’ll expand to all states of the federation.

However, we want to focus less on brick and mortar branches and invest more in Information Technology thereby reaching out to and serving our customers through robust IT tools because that is where the future of banking is headed.

What are the products and services you offer?

As I mentioned earlier, we are a non-interest bank and we are guided by ethical principles; there are restrictions on areas we can finance.

For instance, we cannot finance arms and ammunition and other areas considered harmful to society. Like any other bank, we take deposits and finance customers among several other services we render.

First, on the financing side you have the partnership products where the bank can partner with a customer and go into a business with the aim of sharing the profit or the loss. Second, you have the sale based products like the Murabaha, which is a typical trading arrangement where the bank buys a product and sells to the customer at a mark-up while the customer pays over a period of time. The cost price and mark-up are disclosed to the customer in a transparent manner.

You also have the lease products where the bank buys a product or service and leases same at a mark-up to the customer. In addition, we have the Kafalah products, which give us the opportunity to offer bonds and guarantees on behalf of our esteemed customers. The trade finance product is also one that we offer and customers can do any kind of international trade finance transaction through the bank.

We also have a unique product called the Wakalah where the Bank acts as an agent on behalf its client to execute whatever legitimate mandate the customer may give the bank. This www.businessday.ng

product is unique to non-interest banks only.

Furthermore, on the deposit side we have the Mudarabah or partnership term deposit where customers place their funds with the bank while we use the deposit and share profit with customers based on a pre-agreed sharing ratio. We also have the Qard account which is a current account relationship that attracts zero account maintenance charges. We also have savings accounts variants. There are several other products we offer to our valued customers.

ryone irrespective of faith or belief, whether its employment or financing customers. If in the not too distant future it is accepted by everyone in Nigeria without questions as to whether it is for one segment of society then it is a big achievement.

What are your projections for the industry in the near-, short-, and long term?

If you look at it from a global standpoint, the industry currently has global assets of more than $2.4 trillion and a forecast of 7.7% compounded growth per year to reach $3.8 trillion by 2023.

No other segment of the financial services industry is growing at this pace. In Nigeria, we now have two standalone banks and hopefully we will have more. NAICOM recently issued approvals-in-principle to 3 Takaful companies.

There are several other Microfinance Banks.

The industry is gaining global acceptance in major financial centres of the world including but not limited to London and Luxemborg, which have become global centres of Islamic finance. With the growing acceptance of this model, there is no doubt that the industry will record unprecedented growth in Nigeria.

Are your services exclusively for Muslims?

Our services are open to everybody. We do not discriminate on the basis of religion. If you look at our bank today, there are people from all faiths and tribes currently working in the bank.

We will never discriminate on the basis of tribe and religion and we invite all and sundry to do business with us.

Can you tell us about the trajectory of Islamic banking in Nigeria?

The trajectory of non-interest banking in Nigeria is very impressive. Today there are two standalone non-interest banks and two windows.

I’m sure more players will come to the market soon. Asset size is also on the increase and I am confident that in the next 5 years non-interest banking assets will be within the 5-10% range in Nigeria.

In Malaysia, non-interest assets are almost 30% of the banking industry. Globally, Islamic banking is growing at more than 7% and even European countries like the United Kingdom have embraced this model of banking owing to its benefits to society. The successful Sukuk issuances by the Federal Government also increased awareness about the sector and put Nigeria on the map. The future of the industry is very bright.

What are the current challenges and opportunities in the industry?

As a growing industry, there are bound to be challenges. I think the biggest challenge of the industry today is the dearth of liquidity management instruments in the sector. There are several instruments including but not limited to bonds, treasury bills, open market operations, robust interbank market and a host of other instruments for the conventional banks, but for non-interest banks, beyond the FGN Sukuk, there are no other significant instruments to manage liquidity.

This is a major problem, and even though the CBN has developed some instruments, a lot more work needs to be done. With regard to opportunities, Nigeria is a huge market and people are yearning for non-interest banking because of the zero interest based financing model, adherence to fair practices and certainty in all transactions. In Nigeria today there are several growth sectors like agriculture, which is not receiving the desired attention by banks but we have several plans for the sector.

Even though there are not very many players in the Nigerian Islamic banking industry, what is your unique offering?

First of all, we are in the service business and we have observed a huge gap in service delivery,

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and as such we have devised methods to raise the bar in terms of service delivery to our customers.

Secondly, the banking industry is currently being disrupted by technology. Today the difference between a bank and a technology firm is very thin.

Some years back the winning model for Nigerian banks was investing massively in brick and mortar branch development. That model will not work anymore because customers no longer visit banks and the mobile phone is the new branch. We at TAJBank are not unmindful of this development hence our significant investment in information technology in order to keep up with the current and anticipated future trends.

What are the major milestones you have made so far?

We have recorded several milestones. We obtained an approval in principle from the Central Bank of Nigeria to set up TAJBank in August 2019. We proceeded to recruit tested industry professionals to set up the bank. All the hard work culminated in the issuance of a final licence by the CBN on July 12, 2019. We then had to deploy our core banking application, connect to SWIFT, develop our mobile and internet banking apps and a host of other work leading to opening our doors to the public on December 2, 2019. We are confident that we’ll record several significant milestones in future.

The CBN plans on raising banks’ capital base. How are you gearing up ahead of that?

Yes, we are gearing up very strongly. Recall that in the early part of the interview I told you of our plans

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to raise our capital to over N10 billion and qualify for a National Licence. We’ll continue to raise capital as business exigencies and regulatory directives demand.

In recent time, Nigeria has experienced increase in the number of banks and still many are unbanked. What do you hope to do differently to reduce the number of unbanked in Nigeria?

If you look at statistics, the North East and North West regions of Nigeria have the highest financial exclusion rates. In fact, research from Efina puts the financial exclusion rate in the upper 50’s. The CBN has put in a number of measures to address this problem, which include but not limited to the development of the agency banking network through SANEF. Looking at this challenge, and in an effort to solve this age long problem, we made financial inclusion part of our key strategic thrusts. We have developed some tools that we believe will go a long way in addressing this problem. Some of these initiatives include a robust agency banking model, a mobile wallet, our *898# USSD code, which makes it easy for the unbanked to open accounts and a host of other tools we are bringing to the market.

What legacy do you hope to leave in this sub sector of the Nigerian banking industry?

In terms of legacy. For me I think the best legacy to leave is to develop young Nigerians in the non-interest banking sector. Second is to bring non-interest finance into the mainstream of the financial services industry. Today, non-interest banking is perceived as banking for Muslims only and it still hasn’t gained mainstream acceptance. But it is actually for eve-

Human Resources in the industry is a major issue; how do you hope to tackle this and the various insiders’ dealings common with banks?

There are so many challenges related to Human Resources in the industry today. Key among these issues is finding staff with the right technical skill, especially for IT related roles. This situation is not helped by the emigration crises we are currently facing as a Nation. We have lost some staff to other countries because they have migrated to Canada, Australia and other countries.

You also mentioned Insider dealings, which is also another major challenge. If you do an analysis of the incidences of fraud in the industry, you will realise that staff are involved in most of the cases. Apart from this, you have a lot of corporate governance lapses especially at the top.

There is no silver bullet that can solve these problems. Over the past few years, the regulator introduced very stiff penalties for corporate governance infractions and we have seen a steady improvement since then. Banks have no option but to continually strengthen internal controls and also keep an eye on lifestyle changes because it could signal that a staff is involved in fraudulent activity. On the other hand, the regulator must also continually introduce stiffer penalties for flouting corporate governance. This will serve as deterrent to others.

gives you an idea of the size of the non-interest banking industry in that country. The sector is currently witnessing a global revolution. If you look at recent developments in the non-interest banking space in Nigeria, ranging from the successful Sukuk issuances by the Federal Government to the success recorded by current players in the industry coupled with the yearnings of the people for a better banking alternative you will agree with me that the non-interest banking space has tremendous potential, hence our interest in the sector.

What is your risk architecture/strategy or how do you hope to mitigate risks?

The advantage we have is that we don’t have legacy issues related to bad credits and the like.

This has given us the opportunity to not only start on a clean slate but develop a robust risk strategy for the bank. We will be very disciplined and methodical in our financing strategy with a view to ensuring that we maintain the lowest provisioning level in the industry.

NPL, according to latest data, is down to 6.67% in Q3. Is it safe to say the economy is de-risking?

I don’t think the economy is de-risking because the fundamentals of the economy haven’t changed significantly. The risks that existed before now are still very prevalent today. I would say that banks have developed a more disciplined approach to lending. There are also regulatory moves aimed at ensuring banks reduce NPLs. For instance, the direct debit on borrowers’ accounts is a major move by the CBN to tackle recalcitrant borrowers.

How big is the Islamic banking industry in Nigeria today?

Islamic Banking is still in its infancy in Nigeria.

We have only one stand-alone bank and two windows. In terms of asset size, the industry is not more than 2% of the entire banking industry unlike Malaysia where the industry is some-

Why the interest in Islamic banking?

As I mentioned earlier, the non-interest banking industry is still evolving and currently witnessing rapid change globally. The industry has global assets of more than $2.4 trillion and a forecast of 7.7% compounded growth per year to reach $3.8 trillion by 2023. The industry is well developed in Malaysia where non-interest (Islamic) banking assets amount to almost 30% of their entire banking industry, which has total assets amounting to more than $500 billion. This www.businessday.ng

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where around 30%. However, I think there is potential for significant growth. As you are aware, the non-interest segment is the fastest growing in the financial services industry globally and I am confident that this growth will rub off on the Nigerian industry. Considering the yearnings of the people for an alternative, the industry is on the cusp of tremendous growth in Nigeria.

Where do you hope to take this bank in the next five years?

Our vision is to be among the top 10 banks in the banking industry in the next 5 years. The vision is achievable. More importantly, we want to focus on where the other banks are not focusing on. There are several opportunities in the market and we’re geared to take advantage of the opportunities.

I believe Nigerians from all walks of life will love this model because it preaches win-win scenario in business. All parties have to be treated fairly.

What is your assessment of the economy so far in the outgone year?

The year 2019 was not very eventful in terms of business. The economy grew slightly north of 2% while our population grew at north of 3%. It was an election year and as you would expect, major focus was on the election rather than the economy. In terms of the economy there was no major event. An event worth mentioning is the inauguration of the Presidential Economic Advisory team. We hope to feel their impact this year and beyond.

We are also happy with developments in agriculture sector, especially the rice value chain.

There are several rice mills up and running in Nigeria today and this year we expect more than 20 more mills to come on stream. This is a testament to the tremendous success of the Anchor Borrower Programme of the CBN. The same support has been extended to cotton, and I believe we are on the cusp of a revival of our comatose textile mills. Despite the challenges, I am confident about the future of this country.

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Monday 03 February 2020

BUSINESS DAY

real sector watch

Power supply improves in industrial clusters as energy spend falls 24% ODINAKA ANUDU

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igeria’s manufacturers heaved a sigh of relief in the first six months of 2019 as power supply improved in industrial clusters, forcing energy spend in the manufacturing sector to fall by 24.3 percent.

Expenditure on alternative energy in the first half (H1) of 2019 declined to N32.68 billion, from N43.18 billion reported in the corresponding period of 2018, representing a 24.3 percent drop, a new report by the Manufacturers Association of Nigeria (MAN) said.

Manufacturers spent N49.92 billion on alternative energy in the second half of 2018, according to the report, which covered members of MAN, who are above 2,000.

“Electricity supply, particularly from the distribution companies (DisCos), though a core challenge of the manufacturing sector, has been improving albeit marginally since the second

half of 2018,” MAN admitted in the report.

The association said average hours of electricity supply in the H1 of 2019 was 10 hours per day, while the average number of power outages in within the period was five times daily.

The number of outages, however, represented an increase of one from four times daily recorded in the second half of 2018.

The report signifies a positive step towards reducing production cost, which is one factor that makes Nigerian manufacturers un-competitive in both local and global markets. There is, however, no guarantee that the situation will remain the same or improve in the H1 of 2020.

Industrial clusters in the country include Ikeja (Lagos), (Apapa (Apapa),

L-R: Alex Aiyemere, NEXPORTRADE Houses Limited (NHL) representative in Togo; Kalu Ugenyi of Nigerian Export-Import (NEXIM) Bank; Ede Dafinone, chairman, NHL; Olusola Iji, Nigerian ambassador to Togo; Ogbonaya of Nigerian Shippers Council; Idrissu Gbadamoisi, president, Nigerian Community in Togo, and Kueku Banka, director of Togo Trade Fair at the 16th Togo International Trade Fair held in Togo recently.

22 Nigerian companies defy border closure to exhibit products at Togo fair …as Stova Industries gets N4.4m order ODINAKA ANUDU

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espite the closure of NigeriaBenin land border, 22 Nigerian firms exhibited made-inNigeria products at the 16th Togo International Trade Fair.

The trip was facilitated

by NEXPORTRADE Houses Limited (NHL), a premier trade house that focuses on increasing and better organising trade relations among business groups in ECOWAS member states and African countries.

Some of the participating companies were Flour Mills of Nigeria Plc, Viju Industries Limited, Green Apple Allied, PZ Cussons Nigeria Plc, Stova Industries, SoulMate Industries and NEXIM Bank, among others.

To g o I n t e r n a t i o n -

Amuwo-Odofin (Lagos), Aba (Abia), Ogbaru (Anambra), Agbara (Ogun), and Sharada (Kano), among many others.

Energy spend constitutes 30 to 40 percent of manufacturers’ expenditure. Nigeria generates up to 7,000 mega watts (MW) of electricity but distributes 3,000MW to 4,000MW, which is grossly inadequate for a population of 200

al Trade Fair, popularly known as ‘The Fair of all Opportunities,’ took place between 22nd of November and 9th of December at the Centre of Exhibition Lome, Togo. It is a key event in West Africa with over 1,100 exhibitors and more than 300,000 visitors from 25 countries.

According to Ede Dafinone, chairman of NHL, participating in the Togo International Trade Fair was an excellent opportunity to launch NHL’s activities in Togo.

“It took courage for us to participate in the trade fair in the face of border closure,” Dafinone said.

“We requested 20 stalls initially, but reduced the number to 15 because companies were asking how they would be able to supply the goods if the people wanted them,” he further said. www.businessday.ng

Despite the challenges, Stova Industries, makers of Swiss Air Freshner, got an instant order of N4.4 million at the fair.

NHL seized the opportunity to visit the Assigame, Assiyeye, Adidogome and Adetikope markets. It was discovered that made-inNigeria products competed favourably with global products but were very scarce in the markets because of the border closure, the statement said.

“We assured the traders we interacted with that we will do what we can to restore made-in-Nigeria products in the markets,” the NHL statement added.

During the trade exhibition, Kodjo Adedze, minister of commerce and industry, Togo, visited NHL’s Nigerian stand, alongside Olusola Iji, Nigerian Ambassador to Togo, and other dignitaries.

million people, which is made up many households, industries, government and businesses.

Nigerian manufacturers self-generate 13,223.67 mega watts (MW) of electricity, according to a survey carried out by the Nigerian Energy Support Programme and Deutsche Zusammenarbeit (GZ) in 2016.

“It is great news that manufacturers alone have the capacity to produce such enormous mega watts of electricity,” said Adeola Adenikinju, then professor at University of Ibadan but now member of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), who was part of the preparation of the survey funded by the European Union and the German government, in Lagos.

A break-down of the report entitled ‘Survey of Power Demand and Energy Consumption in the Industrial Sector in Nigeria’ showed that the basic metal, iron/steel and fabricated metal product sub-sector had a self-generation capacity of 1,443 MW but pro-

duced 1,023.42 MW. The chemical and pharmaceutical sub-sector had the largest self-generation capacity with 3,153.28 MW. Similarly, manufacturers in the domestic and industrial plastics/rubber and foam possessed the self-generation capacity of 2,051.10 MW, but actually produced 1,491.42 MW. In the electrical/electronics industr y, s elfgeneration capacity was 818.10MW. The food, beverages and tobacco sub-sector had the self-generation capacity of 2,098.11MW. However, they actually produced 1,347.24MW. Also, the motor vehicle and miscellaneous assembly industry generated 853.74MW of power but self-produced 581.40MW. The non-metallic products sub-sector had the self-generation capacity of 716.86 MW of power, producing 389.82MW. A manufacturer said power was improving in some industrial clusters but was not sure how sustainable this would be.

Vietnam’s industrial success points way for Nigeria ODINAKA ANUDU

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ietnam has shown that success is possible where will is present. The once backward country has become a classroom study for doctorate degree students of economics who wish to understand how a backward economy could be transformed into one of the strongest manufacturing hubs in the world.

In an article entitled ‘Evolution of Vietnamese Industry’, researchers Nguyen Thi Tue Anh, Luu Minh Duc and Trinh Duc Chieu pointed out that the industrial sector in Vietnam contributes approximately 34 percent of Gross Domestic Product (GDP), with manufacturing being by far the most important industrial sub-sector, accounting for 87 per cent of total industrial gross output.

According to them, within manufacturing, the food and beverage industry stands out as the most important industry with around 19 per cent of total industrial output.

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“One of the most important policy decisions for Vietnam during the Doi Moi process was the shift from a strategy of import substitution (IS) to one of export orientation,” they said.

“Obviously, Vietnamese policy makers wanted to avoid the failure of the Latin American economies and to learn from the successes of the industrialised nations and newly industrialised economies (NIEs) of East Asia, the renowned ‘flying geese’. As a result, during the past decade, Vietnam’s industrial output has grown at an average annual rate of 15.2 per cent and total annual exports have increased 18.1 per cent (GSO various years),” they added.

Explaining further, they said that key to the success was a creation of the right atmosphere for foreign direct investment (FDIs). ”Dynamic foreign direct investment (FDI) and the private sector played key roles in manufacturing and exporting activities, in contrast to the earlier monopolistic behaviour and inefficiency of the centrally planned state@Businessdayng

owned enterprises (SOEs),” they disclosed.

Today, the remaining SOEs have become more active and competitive exporters, certainly a reflection of Vietnam’s continued learning process at both country and cross-sector levels, they stated.

With these steps, the results have become visible.

Today, it is possible that the clothes and footwear you are putting on right now are from Vietnam. In 2017, the Southeast Asian country earned $31 billion from exports of textile and garment industry alone, a year-onyear increase of over 10 percent, according to an online information platform Vietnam Briefing.

In 2018, the country made $16.24 billion from footwear, representing a 10.5 percent increase over 2017, according to Lefaso, the Vietnam Leather, Footwear and Handbag Association.

The country has gone from obscurity to fame in manufacturing, thanks to certain reforms done by the ruling class.

Monday 03 February 2020

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real sector watch

How Indorama sustains manufacturers, boosts Nigeria’s FX earnings ODINAKA ANUDU

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ndorama Eleme Petrochemicals Limited (IEPL) has emerged as a major value creator in the Nigerian economy.

It is responsible for the survival, growth and sustenance of many manufacturing companies in Nigeria today. A large number of plastic and allied firms depend on the Eleme-based company for petrochemical resins (or polymer resins) which serve as their raw materials.

The petrochemical company is just one of the several subsidiaries of Indorama-Nigeria Group, which also comprises Indorama Eleme Fertilizer & Chemicals Limited (IEFCL), Indorama PET Nigeria Limited, and Indorama Port Operations.

Since Indorama Corporation of Indonesia became core investor in the old Eleme Petrochemicals Company Limited (EPCL) in 2006 through privatisation programme of the Federal Government, the group has become a game changer in the Nigerian economy.

The petrochemical company has solved the major challenge facing a number of manufacturers— poor access to raw materials. Rather than scramble for foreign exchange to import inputs, the company ensures that manufacturers have access to their critical raw materials, enabling them to save costs and improve margins.

The major resins used by plastic and allied companies are polyethylene and polypropylene. Indorama produces about 45 grades of these products for various industries.

About 600 of such companies in Nigeria depend on IEPL

for their survival. They are estimated to have over 90,000 workers.

Recently, IEPL completed its 4th Turn-Around Maintenance (TAM), which it completed in record 24 days. This is the 4th since 2006 when it took over EPCL. This is remarkable considering the fact that in Nigeria, TAM is regarded as almost impossible in the refineries and other sectors.

Another subsidiary, Indorama Eleme Fertilizer & Chemicals Limited (IEFCL), has a Train-1 world-class fertilizer plant in Port Harcourt, funded majorly by the International Finance Corporation (IFC). The plant produces 1.5 million metric tons of urea fertilizer, which has revolutionalised farming, boosted food production, helped to ensure food security and propriety for farmers.

Indorama sells about half of the urea production to Ni-

gerian farmers and exports the rest to South America, Brazil, West Africa, Central Africa and other parts of the world, thereby earning foreign exchange which is badly needed by the Nigerian economy. The fertilizer company is one of the biggest non-oil exporters in Nigeria, according to the export records of the Nigerian Export Promotion Council (NEPC).

By the second quarter of 2017, a chemical product known as naphthalene was Nigeria’s biggest non-oil export product. It was exported by the Nigerian National Petroleum Corporation (NEPC).

But the situation changed in the third quarter of that year, as urea replaced the chemical product as the biggest non-oil export product. Urea’s share of the total export within the quarter was 8.82 percent. Incidentally, it was exported by Indorama-Eleme Fertilizer & Chemicals Limited. In fact, in

the second half of 2017, the value of Nigeria’s non-oil exports to various parts of the world rose from $592.715 recorded in the first half (H1) of the year to $888.617 million in the H2 of 2017. Companies that were responsible for the dramatic rise in the numbers were the NNPC, Olam International, and Indorama Eleme Fertilizer & Chemical Company Limited.

According to data prepared by the Central Bank of Nigeria, Indorama Eleme Fertilizer & Chemicals Ltd exported $69.815 million worth of granular urea in bulk to Uruguay, Brazil and Argentina in 2017.

Due to management efficiency and capacity to provide solution to farmers’ nagging fertilizer problem, Indorama Eleme Fertiliser & Chemicals Limited got $1 billion from the International Finance Corporation (IFC) in June 2018 for the construction of a new fertiliser plant in Nigeria.

Indorama is partnering the Federal Government in its Presidential Fertilizer Initiative (PFI), in which it supplies urea fertilizer to 13 fertilizer blending plants across the country for the production of NPK fertilizers at cheaper cost to farmers across the country.

Nigeria used to import fertilizers worth over $7 billion per annum. Today, the FG has restricted the importation of urea into the country. Indorama has been a beneficiary of the policy. But rather than use it to exploit Nigerians, the company has made huge investments in fertilizer production and helped Nigeria in its import substitution policy by selling fertilizers at cheaper rates to farmers.

Indorama’s Train-1 fertilizer plant is the world’s largest single-train urea facility.

It is building the Train-2 of its fertilizer plant, which is designed to replicate the Train-1 plant, and produce another 1.5 million metric tons per annum (MTPA).

The plant is expected to be completed by 2021. When it is completed, Indorama’s total urea production will be 3 million MTPA. Two million MTPA is expected to be exported to earn foreign exchange, according to the company.

For the records, in 2017, the company turned a wasteland at the Onne Port complex in Port Harcourt into a modern port facility, which now receives big vessels to carry the company’s bulk urea for export. This is a huge contribution to the nation’s maritime sector.

To ensure steady flow of gas feedstock to its fertilizer plant, it also constructed an 83 kilometer gas pipeline running 30 communities across Imo and Rivers states. Through robust

community relations engagement, the company is able to manage its pipelines without disruptions.

Furthermore, Indorama PET is a specialised petrochemicals product, also needed in the plastics, beverage, and pharmaceuticals and bottling companies. This is the only PET plant in West Africa.

Before the Indorama plant, Nigeria had been importing PETs from South Africa. This eroded the country’s foreign exchange, given the many uses of PET. But today, Indorama exports PETs to West Africa and other parts of the continent.

Recently, managing director of Indorama-Nigeria, Manish Mundra, was quoted as saying that the group’s total Foreign Direct Investment (FDI) in Nigeria will reach $4.6 billion in 2025.

Today, Indorama’s contribution to Nigeria’s GDP is estimated at $2.9 billion annually.

That explains why the company is regarded as the best success story of privatisation in Nigeria.

It is also believed to have one of the best public-privatepartnership (PPP) business models in the country, where its shares are owned by the core investor (Indorama), the Federal Government (through the Bureau of Public Enterprises – BPE), NNPC, the Rivers State Government, the host communities of Eleme, and the Nigerian employees. IEPL is perhaps the only company where community has 7.5 percent shares.

Its contributions to Nigeria’s economy are uncountable. First, it creates huge employment for Nigerians. About 7,000 citizens are employed directly and indirectly by Indorama across the country.

Nigerian economy loses $121m to insecurity, conflicts — LCCI Gbemi Faminu

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onflicts and issues around insecurity cost Nigeria $121 million in 2017, which was equivalent to 11 percent of the GDP in that year, according to a report by the Lagos Chamber of Commerce and Industry (LCCI) titled, ‘Insecurity in Nigeria: Implications for the Economy’.

“There is a strong correlation between insecurity and investment as insecurity creates a huge disincentive to investment,” the report says.

It further says that a majority of business operators in Africa perceive insecurity as

a major constraint to investment.

Insecurity is a major issue that continues to hurt the Nigerian economy, including local producers and those involved in trading activities.

Nigeria is hard hit by kidnapping, armed robbery, assassination and theft, all of which have scared investors and affected businesses negatively.

Foreign Direct Investment (FDI) into Nigeria in 2014 stood at $2.28 billion, but five years later, it declined to $1.19 billion, growing at a negative rate of 15 percent. Firms exited the economy in the last four years on poor policy choices.

In the first half (H1) of 2019, www.businessday.ng

FDI fell further by 8 percent.

Apart from its impact on investments, the report says the impact of insecurity and conflicts on food and crop production is also huge as the violent conflicts have taken heavy tolls on the quality and quantity of farm produce.

The Manufacturers Association of Nigeria (MAN) highlights insecurity as one of the challenges of local manufacturers as many have relocated factories from insecure to secure locations.

“The insurgency, especially in the northern part of the country, and violent conflict occur most times in the rural areas and local communities where large proportions of

food productions are carried out,” the report notes.

“Insecurity therefore obstructs production of food crops, livestock farming and stifles agro procession activities which can majorly be attributed to the displacement of the farming population, destruction of farm products among other things,” the report further says.

In its country report for Nigeria, the Food and Agriculture Organisation of the United Nations says that despite its position as one of the largest sectors, production hurdles have significantly stifled the performance of the Nigeria’s agric sector.

In terms of value, Nigeria

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has lost $10 billion in annual export opportunity from groundnut, palm oil, cocoa and cotton due to the continuous decline in the production of those commodities, the report discloses.

The report says that transportation is also affected as the wave of insecurity creates a sense of fear, causing a reduction in mobility which is necessary for business activities.

“Violent conflicts negatively affect transportation services particularly road transportation, which, in turn, constrains freight movement and haulage activities needed to move goods and services around the country, @Businessdayng

“This, therefore, hampers distributive trade, tourism activities and other economic activities facilitated by road transportation as Nigeria is reported to have one of the world’s largest rates of kidnap for ransom cases. In the first quarter of 2019, over 685 cases of kidnapping were recorded,” the report says.

As a recommendation, the LCCI advises that the government should engage in aggressive use of modern technology in the fight against insecurity, ensure concrete and sustainable means of reducing youth unemployment, encourage activities that will stimulate investments and implement community policing.

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Monday 03 February 2020

BUSINESS DAY

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Insurers having smooth ride with recapitalisation plans, as core investor’s throw weights Modestus Anaesoronye

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he initial fear and apprehension that greeted the insurance industry recapitalisation pronouncement due to paucity of funds and illiquidity in the capital market, is gradually going down as insurance companies are getting good support from their core investors.

A lot of the companies are embarking on rights issues, and reports coming in suggest a positive one, as their core investors are throwing their weights and ready to take up their rights.

This development has given a lot of hope to many of the insurance c companies particularly those whose majority shareholders control up to 60 percent equity stake.

For instances, the com-

L-R: Adebisi Ikuomola, executive director, Technical; Ime Umoh, company secretary/legal adviser; Ebose Augustine, managing director/CEO; Olubukola Koyenikan, head, Enterprise Risk Management; Jide Fasanmi, general manager, Business Development; Nelson Egboboh, head, Brand & Corporate Communications, all of Anchor Insurance Company Limited during Media Interaction with Insurance Correspondents in Lagos.

panies that have foreign ownerships would naturally fall back to them, which has

seen many of them coasting with joy to the dateline.

But for those with only

local ownership, their majorities shareholders are giving them hope with promise

to recapitalize them before the deadline, while they also hope to augment with private placements, if need arises.

Segun Balogun, managing director/CEO, LASACO Assurance Plc said its top 10 shareholders have given their assurance that they will bring the money when the time comes.

“They said they are just waiting for us to come to the public and say you are selling your shares and they will bring the money. So we have very good assurances that the current majority shareholders of LASACO will bring money to fulfill the recapitalization plan.”

Ebose Augustine, managing director/CEO, Anchor Insurance Company Limited also said his majority shareholder, the Akwa Ibom State government who controls about 61 percent of the shareholding has brought mon-

ey, that has enabled the company achieve 85 percent of the recapitalisation target.

The National Insurance Commission (NAICOM) had in a circular issued on Monday May 20, 2019 announced increase in the paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance companies from N10 billion to N20 billion.

According to the Commission, the minimum paidup share capital requirement shall take effect from the commencement date of the circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies shall be required to fully comply not later than 30th June 2020, before the recent extension in date to December 31 2020.

Allianz report shows economy, corruption major risk concerns for businesses in Nigeria Modestus Anaesoronye

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n Allianz Risk Barometer 2020 report released on Tuesday shows that Nigerian businesses are concerned about the economy and corruption.

Macroeconomic Development got 36 percent of the total response, followed by corruption which got 34 percent, to become first and second most important business risk in Nigeria, relegating Changes in legislation and regulation to fifth place, according to the ninth

Allianz Risk Barometer 2020.

The two risks have been in the top 10 since the launch of the Allianz Risk Barometer in Nigeria in 2017 with Macroeconomic developments topping the inaugural report until slipping down to 9th in 2019.

Globally, Macroeconomic developments is a new entry in the top 10 risks for 2020 (11 percent), driven by corporate fears over a global recession and debt accumulation, particularly in the US and China, notably with regards to the private sector.

The annual survey on global business risks from

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Allianz Global Corporate & Specialty (AGCS) incorporates the views of a record 2,718 experts in over 100 countries including CEOs, risk managers, brokers and insurance experts.

Economic growth showed no sign of an acceleration in Q3, reaching +2.3 percent year on year which results in approximately zero growth per capita, which is well below the +6% growth rates registered since 2014.

“In Q3, as during the last two years, growth was achieved in only about three sectors: Agriculture (non-

processed agrifood which accounts for only 4 percent of the Nigerian GDP), crude oil (non-refined oil which represents just0.1 percent of GDP) and telecoms.

Informality can be one reason, but this is obviously not the only one since manufacturing and construction output are stagnating, the report says.

For the time being, the relaxation of credit constraints implemented during last summer has failed to translate into more credit demand,” says Stéphane Colliac senior economist for France and Africa at Euler

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Hermes.

Theft, fraud and corruption was second with 34 percent of responses, and has always featured in the top 10 rankings since the launch of the Allianz Risk Barometer in Nigeria. The risk moved up one spot to second place in 2020. Nigeria along with other Sub-Saharan Africa countries scored the lowest on the Corruption Perception Index 2018, and has not yet succeeded in translating its anti-corruption commitments into any real progress.

However the index noted that despite stagnation across the region, there are

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some promising political developments, particularly in Nigeria, Angola, Kenya, and South Africa.

Business interruption – an undiminished threat with new causes is also a concern in Nigeria now. After seven years at the top, BI drops to the second position globally in the Allianz Risk Barometer. In Nigeria, BI leaped from seventh to third this year and is number one in Africa and Tanzania; two in Cameroon and South Africa and four in Ghana. The trend for larger and more complex BI losses continues unabated, says the report.

Monday 03 February 2020

BUSINESS DAY

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How technology, data and digitalisation are changing the face of insurance industry Modestus Anaesoronye

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he face of insurance is changing and this is driven by data, digitalisation and a need to engage the customer, Swiss Re 2020 Sigma report reveals.

“This current round of technology-driven change differs from those of the past, not least because of the speed and scale involved. Harnessed properly, these powerful forces offer new hope for the insurance industry to remain central to the lives of its customers”.

“Everybody wants to be customer-centric,” says Evangelos Avramakis, head Digital Ecosystems R&D, Swiss Re Institute.

“Digital technology provides an opportunity to really see things from the customer’s perspective when designing new products and services, Avramakis said.

Customer expectations are setting the pace One of the clearest ways to visualise how digital tech-

nology is impacting insurance is to think of the customer journey.

At every stage – assessing their needs, researching the options, interacting with insurers and making a choice – customers are evaluating potential providers, and making comparisons that go much further than a simple assessment of Insurer

As Avramakis explains: “Customer expectations are rising fast because insurance companies’ customers may already be using multinational ride-hailing or e-commerce companies – businesses that go to great lengths to ensure fast, effective consumer-focused experiences.”

Jonathan Anchen, head

of Swiss Re Institute Research & Data Support, wonders how the insurance industry could be affected by customers’ interactions with this kind of forwardlooking digital experience.

“If you have a problem with a property you’ve rented, you take a photo with your phone and upload it.

It’s kept simple for the cus-

tomer.”

“It’s not a direct comparison, of course. But that emphasis on a frictionless customer experience is shaping the way people expect to interact in the digital sphere.”

As customer interactions broaden out into this constantly evolving ecosystem of digital touch points, there will be more opportunities

for insurers with innovative products to find suitable ecosystem partners.

A customer renting a property may have an insurance requirement – perhaps in case their over-excitable dog damages something and they lose their security deposit. Where would they be likely to purchase their additional cover? If they could bundle it with their rental transaction, they might appreciate the ease that offers.

Automation and the human touch If it wants to provide the kind of seamless, frictionless customer service people expect, the insurance company of the future will need to be hyper-aware of what people want and when. One option will be to map customers’ life events. Buying a home, starting a family, setting up in business – these and many other milestones often trigger a reassessment of insurance needs. Gaining insight into them will offer an insurer a deeper understanding of a customer’s risk exposure and the way it changes over time.

Anchor Insurance targets N10bn premium in 2020 …as firm targets market expansion Modestus Anaesoronye

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nderwriting firm, Anchor Insurance Company Limited is hoping to grow its premium income to N10 billion this year, with plan to spread operations across different parts of the country.

Ebose Augustine, managing director/CEO of the Company who disclosed this during an interactive session with insurance journalists in Lagos, noted that the firm grew its premium income to N5 billion in 2019.

He stated that to achieve the set target for 2020, the general business firm has concluded plans to increase its branch network across the country; leverage the use of technology

Ebose Augustine, managing director/CEO, Anchor Insurance LTD www.businessday.ng

for products distribution and improve on its agency system to reach esteemed customers.

According to him, the firm is poised to play big post recapitalisation, adding that the company has so far achieved about 85 per cent of the new minimum capital requirement sect for companies its its category.

Ebose noted that Akwa Ibom State Government which own 61 per cent stake in the company has through right issues, injected N9.6 billion to the firm, stressing that the company hopes to raise its capital to N11.6 billion post recapitalisation.

The Anchor Insurance boss said the firm paid N1.3 billion claims in 2019, stating that the firm has automated its claims system

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making it possible for clients to access their claims without coming to the firm.

According to him, the firm has marshaled plans on how to deploy its post recapitalisation funds to enable it remain top in the sphere of underwriting business.

Anchor Insurance Company Limited was registered and licensed by the National Insurance Commission (NAICOM) in October 1989 as a general business (non-life) insurance outfit and started business in November of the same year.

The Company commenced operations at its registered office in Uyo, Akwa Ibom State and later, for business reasons, joined its fellow underwriting outfits in Lagos.

While it has its Victoria @Businessdayng

Island office in Lagos as its Corporate Head Office, its Uyo office remains its registered office. At the moment, Anchor Insurance Company Limited has expanded to not less than nineteen branch office network located at strategic cities across the country.

The Company has constantly been showing strength and innovation in product and customer service delivery, yearly bottom line performance and timely claims administration. The company’s audited accounts for year ended 31st December, 2018 shows a gross written premium of N3.4bn from N2.2bn written in 2017, total assets standing at N6.6bn, shareholders’ funds amounting to N5.2bn and solvency margin of N5.1bn.

28

Monday 03 February 2020

BUSINESS DAY

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Monday 03 February 2020

BUSINESS DAY

29

Access Bank Rateswatch Market Analysis and Outlook: January 31 – February 7, 2020

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.28

Q3 2019 — higher by 0.17% compared to 2.12% in Q2 2019

Broad Money Supply (N’ trillion)

36.48

Increased by 2.9% in Nov’ 2019 from N35.45 trillion in Oct’ 2019

Credit to Private Sector (N’ trillion) Currency in Circulation (N’ trillion)

26.41 2.20

Increased by 2.18% in Nov’ 2019 from N25.85 trillion in Oct’ 2019 Increased by 7.17% in Nov’ 2019 from N2.06 trillion in Oct’ 2019

Inflation rate (%) (y-o-y)

11.98

Increased to 11.98% in December 2019 from 11.85% in November 2019

Monetary Policy Rate (%) Interest Rate (Asymmetrical Corridor)

13.5 Adjusted to 13.5% in March 2019 from 14% 13.5 (+2/-5) Lending rate changed to 15.5% & Deposit rate 8.5%

External Reserves (US$ million) Oil Price (US$/Barrel) Oil Production mbpd (OPEC)

38.06 58.38 1.77

January 30, 2019 figure — a decrease of 1.25% from January start January 30, 2020 figure— a decrease of 5.91% from the previous wk December 2019, figure — a decrease of 1.34% from November 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

Friday

Indicators

Change(%)

31/1/20

24/1/20

NSE ASI Market Cap(N’tr)

28,843.53 14.86

29,628.84 15.26

(2.65) (2.65)

Volume (bn)

0.35

0.18

88.89

Value (N’bn)

4.21

3.51

19.72

Friday Rate

Change

(%)

(Basis Point)

(%) 31/1/20

24/1/20

OBB

14.0000

4.3300

967

O/N CALL 30 Days

15.3300 13.0833 9.7226

3.6700 3.6090 8.0731

1166 947 165

90 Days

9.5803

Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture Cocoa ($/MT) Coffee ($/lb.)

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Gold ($/t oz.)

Silver ($/t oz.)

Copper ($/lb.)

8.0974

Tenor

148

Friday

Friday

1 Month

(N/$)

(N/$)

Rate (N/$)

31/1/20

24/1/20

31/12/19

Official (N) Inter-Bank (N) BDC (N)

307.00 363.75 0.00

306.95 362.25 0.00

307.00 363.84 0.00

Parallel (N)

360.00

362.00

362.00

3-Year 5-Year 7-Year 10-Year 20-Year 30-Year

Friday

Change

(%)

(%)

(Basis Point)

31/1/20

24/1/20

0.00 7.99 10.09 9.76 10.99 12.24

0.00 8.16 10.13 10.18 11.13 12.49

0 (17) (4) (42) (14) (25)

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.

(5.91) (3.17)

(9.38) (40.12)

2792.00 100.90 68.60 14.76 559.75

0.76 (9.26) (1.59) 1.79 (2.91)

44.21 (22.50) (11.48) (3.72) 29.12

1579.25 17.86 252.75

1.29 0.34 (6.99)

19.86 3.90 (22.90)

Friday

Friday

Change

(%)

(%)

(Basis Point)

31/1/20

24/1/20

3.01 3.23

2.98 3.18

3 5

6 Mnths 9 Mnths 12 Mnths

3.72 4.55 5.17

3.60 4.28 4.99

12 27 18

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

AVERAGE YIELDS Friday

58.38 1.83

1 Mnth 3 Mnths

BOND MARKET Tenor

(%)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

FOREIGN EXCHANGE MARKET Market

YTD Change

(%)

NIBOR Friday Rate

1-week Change

Energy

MONEY MARKET Tenor

31/1/20

Friday

Friday

Change

(%)

(%)

(Basis Point)

31/1/20

24/1/20

Index Mkt Cap Gross (N'tr)

3,604.80 11.26

3,575.21 11.17

0.83 0.82

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

7.59 46.75

7.51 45.54

1.03 1.21

YTD return (%)(US $)

(9.09)

(10.27)

1.18

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

Rate(%)

Date

91 Day

49,839.65

3.5

29-Jan-2020

182 Day

54,592.59

4.5

29-Jan-2020

364 Day

3,000.00

6.5

29-Jan-2020

Global Economy In the US, the gross domestic product (GDP) printed at 2.1% year-on-year in Q4 2019, same as the previous quarter according to the Bureau of Economic Analysis (BEA). Consumer spending slowed sharply while net trade made the biggest contribution to growth since Q2 2009 amid a fall in imports. In contrast, negative contributions came from private inventory investment and nonresidential fixed investment. For the full year, the economy grew 2.3%, below the 2.9% increase from 2018 and the 2.4% gain in 2017, and missing Trump administration's 3 percent target for the second year. Elsewhere, the Chinese economy expanded 6% year-on-year in the last quarter of 2019, the same as in the previous quarter. It is the weakest growth since 1992 amid trade pressure from the US and sluggish demand from home and abroad. The full year 2019 GDP figures were reported at 6.1% according to the National Bureau of Statistics of China, still within the government target of 6%-6.5% but the slowest pace of advancement in 29 years. In a separate development, the Bank of England monetary policy committee voted to hold bank rates at 0.75% during its January meeting. Policymakers expect UK GDP growth to accelerate in early 2020 supported by a pickup in global activity, a further decline in Brexit uncertainties and government's announced spending measures, and inflation is seen lingering below the 2% target until at least 2021. However, officials revised down GDP forecasts for 2020 full year to 0.8% (vs 1.2% previously estimated), before quickening to 1.4% in 2021 (vs 1.8%) and 1.7% in 2022 (vs 2.0%). The central bank also said that interest rates may need to be cut if growth does not improve, or they could be raised "modestly" in future if the economy recovers in line with latest projections and inflation picks up. It was the last meeting presided by Governor Carney before Andrew Bailey takes over in March.

Domestic Economy Nigerian States and Federal Debt Stock data as at 30th September 2019 reflected that the country's total public debt portfolio stood at N26.14trn according to the National Bureau of Statistics (NBS). A breakdown of the Nigeria's total public debt showed that N8.27trn or 31.55% of the debt was external while N17.94trn or 68.45% of the debt was domestic. Total domestic debt for the 36 states and Federal Capital Territory was N4.04 trillion with Lagos state accounting for 10.9% of the total domestic debt stock while Yobe State has the least debt stock in this category with a contribution of 0.7% to the total domestic debt stock. The Nigerian Stock Exchange (NSE) published its monthly Domestic & Foreign Portfolio investment report for December 2019. The report revealed that the total transactions at the nation's bourse declined by 25.84% to N127.94 billion from N172.52 billion recorded in November 2019. The total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 2%. Total domestic transactions decreased by 24.44% to N64.80 billion in December from N85.76 billion in November 2019.

Similarly, total foreign transactions decreased by 27.22% to N63.14 billion from N86.76 billion during the same period. Total domestic transactions, which is split into retail and institutional investors, revealed that institutional investors outperformed retail investors by 24% during the period. Total retail transactions dipped by 24.03% to N24.47 billion in the reference month from N32.21 billion in November.

Likewise, the institutional composition of the domestic market decreased by 24.71% to N40.32 billion in December 2019 from N53.55 billion in the preceding month. The performance of the current month when compared to the performance in the same period (November 2018) of the prior year revealed that total transactions increased by 1.65%.

Stock Market The Nigerian stock market ended its bullish run last week as the all market index recorded its first decline in 2020. This decline is despite the

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

increasing number of companies reporting their Q4 and full-year unaudited earnings reports.

Consequently, the All Share Index (ASI) declined 2.65% to end at 28,843.53 points from 29,628.84 points the prior week. Similarly, market capitalization dipped by 2.65% to N14.86 trillion from N15.261 trillion the prior week. This week, we might see further declines due to profit booking by investors as more financial scorecards for 2019 are reported.

Money Market Money market rates hiked as a result of market anticipation of additional CRR debit due to 500 basis points increase in the cash reserve ratio to 27.5%. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates closed higher at 14% and 15.33% from 4.33% and 3.67%. The slightly longer dated instruments such as 30-day and 90-day Nigeria Interbank Offered Rate (NIBOR) settled at 9.72% and 9.58% from 8.07% and 8.10% the prior week. This week, we expect rates to trend lower due to open market operation (OMO) maturity of N311.54 billion.

Foreign Exchange Market The local unit went in varying directions last week.

The official rate and Nigerian Autonomous Foreign Exchange (NAFEX) depreciated against the dollar while parallel market appreciated. The official rate marginally declined ending at N307/$, a 5 kobo drop from the previous week whilst NAFEX lost N1.50 to close at N363.75/US$ from N362.25/US$ the prior week. The parallel market gained N2 to settle at N360/US$. The depreciation witnessed in the market is despite the Central Bank continuous intervention in the market. This week, rates are expected to remain around current levels with the apex bank's continuous interventions.

Bond Market The bond market was bullish last week as counterparties bought maturities that appeared to have attract yields. Overall yields on the five-, seven-, ten- twenty- and thirtyyear debt papers finished at 7.99%, 10.09%, 9.76%, 10.99% and 12.24% from 8.16%, 10.13%, 10.18%, 11.13% and 12.49% respectively, the previous week.

Consequently, the Access Bank Bond index increased by 29.60 points to close at 3,604.80 points from 3,575.21 points the prior week. We expect the buying sentiment to persist due to unmet demands at the bond market Commodities Oil prices deteriorated last week as worsening coronavirus outbreak continued to take its toll on economies. The outbreak of the disease, which began in Wuhan in China's Hubei province but has now spread to 16 countries and claimed 170 lives, has delivered a sharp hit to Asian markets. Bonny light, Nigeria's benchmark crude dropped 5.91% or $3.67 cents to close the week at $58.38 per barrel. In contrast precious metal prices jumped after the US Federal Reserve said the new coronavirus outbreak could hurt China's economy in the short term. Consequently, gold gained 1.21% to $1,579.25 per ounce while silver rose 0.34% to $17.86 per ounce. This week oil prices are likely to remain pressured by a bigger-thanexpected build in US crude stocks, which last week increased by almost seven times the expected amount. Precious metal might taper this week if expected economic data from China turns out positive.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Feb’20

Mar’20

363

362

362

Inflation Rate (%)

12.01

12.06

12.1

Crude Oil Price (US$/Barrel)

60

62

65

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

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Apr ’20

Exchange Rate (NAFEX) (N/$)

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30

Monday 03 February 2020

BUSINESS DAY

Start-Up Digest

In association with

LSETF: Providing cheap credit for Lagos entrepreneurs ODINAKA ANUDU

T

eju Abisoye is the acting executive secretary of the Lagos State Employment Trust Fund (LSETF), which focuses on delivering programmes targeted at tackling unemployment.

The LSETF programmes are structured to provide financing for the micro, small and medium enterprises (MSMEs), skills development for youths and support for innovation in technology-driven enterprises. Abisoye is a lawyer with over 14 years’ experience and also an alumna of Yale’s Women Leadership Programme.

She is focused on getting results and ensuring that unemployment rate declines dramatically in Nigeria’s commercial capital, Lagos.

The LSETF has three different types of funding support. One is called the Micro Enterprise Startup, which entitles start-ups to access up to N250, 000. The second one is the Micro Enterprise Owners, which is focused on businesses existing up to 12 months. Applicants can access up to N500, 000. The third one is called Small and Medium Enterprise Owners, which is for small businesses that are formalised and have existed for over 12 months.

Applicants can access up to N5 million.

The funds require that you live and do business in Lagos and have the Lagos State Residents Registration Agency (LASRRA) registration and at least one guarantor.

So far, the LSETF has disbursed N7.3 billion to over 11,000 businesses that have created about 100,000 direct and indirect jobs.

“What we do is to tackle unemployment,” Abisoye tells Start-Up Digest in an interview.

“First, small businesses provide the jobs. In Nigeria, 85 percent of the jobs are actually provided by the MSMEs, and not the large corporates. So we asked, ‘How do we ensure that we use MSMEs to galvanise job creation?’ One of those ways is them having access to affordable finance, with the hope that they will expand and create more jobs. That is the strategic reason behind intervening in the MSME

Teju Abisoye

space,” she explains.

The LSETF does not just give out loans to beneficiaries, but also provides them with capacity development so that they can run successful and sustainable businesses.

Abisoye says that the LSEFT also provides access to markets, promotions, and advisory services such as legal, accounting, HR and other things that can help the businesses to scale and employ more people.

“And we actually see that it has been an impact area,” she says.

“At the end of 2018, we collected an impact assessment. As of then, we had disbursed loans over 24 months. We had supported over 7,000 businesses and disbursed over N6 billion at that time. Together, those businesses had created about 92,000 jobs directly and indirectly. As of today, we have disbursed N7.3 billion to over 11,000 businesses. We are now talking about 100,000 jobs created directly and indirectly. That is the reason we are in that space,” she further says.

The LSETF tracks the jobs that its beneficiaries create. Initially, the government agency would send out business development service providers (BDSPs) who would meet these beneficiaries, discuss their challenges and collect job data for LSETF each month. However, the agency now carries out this exercise every 24 months to avoid interrupting the businesses of the www.businessday.ng

beneficiaries.

“When we are looking at job creation, we are not just looking at how many jobs you have created,” she notes.

“We are looking at how the fund has impacted the beneficiaries, their communities and their own immediate environment? How many dependants have they been able to support? That is the impact we are looking at,” she further notes.

The LSETF lends at a single digit rate of five percent and the tenor of funds can extend up to 36 months depending on the use.

“You can access up to N5 million for 36 months. It depends on use of the funds.

Are you buying equipment that will take time to install?

We would understand you need a moratorium if that is the case. But the tenor varies,” she discloses.

Many Nigerian banks do not lend to small businesses for fear that they may run to Canada with their money.

For the LSETF, many measures have been put in place to ensure that MSMEs return the money conformably.

“What we do to the best of our ability is due diligence regarding the promoter and use of funds,” Abisoye says.

“We will continue to do our due diligence not just on the beneficiary but also on the guarantor. If we do our due diligence right, we will be able to limit the number of beneficiaries that are nonperforming,” she notes.

The agency’s non-performing loans (NPLs) is around 14 percent at the

end of 2019.

“And that is because we use International Public Sector Accounting Standards (IPSAS). This says a loan is bad one day past due. Banks use different standards and most times they say loans are bad once they are past 150 days or so,” she explains.

“We had a pilot stage where we were learning on the market. Today, we understand that there are some local governments that you do not touch when it comes to credit. We learnt it the hard way. It has gone better at the moment. In terms of recovery, when people see you are serious about collecting your money, they will pay you back. What we experience is that people renegotiate. Instead of ending the loans this month, we give them six more months.

Now, we are taking them to court and reporting them to the Credit Bureau. If you are a serious business, you will realise that you can’t move forward until you pay the LSETF loans,” she warns.

She explains that banks do not like lending to MSMEs because a lot of them are not formalised.

She says some of them never operate bank accounts and do not have formal registrations at the Corporate Affairs Commission (CAC).

“If you go through our programme for 12 months, for you to be able to renew, your business must have been formalised. You now run bank accounts and we will have that record because you pay through your bank.”

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She reveals that the LSETF has a current capital of N11.1 billion from the government and grants that it has raised from the market.

“Apart from the lending programmes, we also do other programmes such as Employability, which is now Skills for Jobs,” she says.

The LSETF boss insists that Nigerian education institutions must tailor education to the needs of the market. According to her, the country’s focus should shift away from certificates and popular courses to education that is relevant.

“We have to look at what is relevant for the future and what is required in the market. We are churning out hundreds and thousands of lawyers every year, but is that what the market needs?

If we churn out one million marketers, can the market absorb them?” she asks.

“That is what I think education should be. It is not just about registering universities. It should no longer be ‘I want to study Law because my father is a lawyer.’ And it is about what is required in the market.

People talk about soft skills being a challenge with a lot of new graduates, but how are we ensuring that the skills are incorporated in training graduates. Let us cut everything else and focus on that as much as possible.

That way, you are able to empower the people,” she advises.

The LSETF has a programme known as Employability Support Project, which is aimed at helping young Nigerians gain relevant skills in order to enable them become employable. It is done with the support of the United Nations Development Programme (UNDP).

Abisoye explains that the programme focuses on demand and market approach.

“We look at the skills the market wants, and how to get people and put them in those jobs. So we started with construction, health care, tourism and hospitality, as well as garment construction. There are other areas that are relevant such as the front office management, document assistance and others. The programme takes what is relevant in the market. We make sure we train people to take those jobs,” she says.

She adds that the agency is working with GIZ on Mi@Businessdayng

grants, Returnees and Potential Migrants Programme, where the right skills are given to young people who are either returnees or potential migrants.

“We signed an agreement with the United States African Development Foundation, where we work to provide the right skills and ensure people get the skills.

As much as possible, 70 percent is practical, 20 percent is the soft skills and the rest is the theory. That is how every of our programme is divided,” she says.

“One of the things we are doing is the Dual Vocational Training. As you are training, you are attached to a company. You will do 70 percent in a company and 30 percent in a training school. Companies get to know you. We have trained over 5,000 people. More than 50 percent are in sustainable jobs either as employees or starting their own business.

We continue to seek avenues to ensure that placements continue to improve,” she assures.

Abisoye and her team are happy that they are part of success stories of many business owners in Nigeria.

“When companies tell their stories about their successes and they tell how LSETF was part of that, you feel happy that you are part of this journey. When they tell you they were able to raise equities in hundreds of dollars; when they say they started with six employees but now are 30, you feel happy about being part of their journey,” she says, adding that LSETF has reduced unemployment in Lagos by 6 percent.

But she acknowledges that the LSETF is just scratching the surface, calling on partners to join them in creating the change the country so desperately desires.

“I have thoroughly enjoyed the terrain. We want to get results,” she adds.

On Feb 5 and 6 in Lagos, LSETF will join other states and stakeholders who would wish to replicate its model in their domains.

“One of the ways to get results is to get other states and other stakeholders to see how model has worked so far in Lagos. We think the summit is an opportunity to network and get a lot of feedbacks about our programme,” she concludes.

Monday 03 February 2020

BUSINESS DAY

31

Start-Up Digest Business Opportunity

Nigeria can produce more millionaires through recycling — Nwobodo ODINAKA ANUDU

L

uther Kington N w o b o d o, r e searcher and CEO of Zeugnis International, has said that recycling of PET bottles and nylon is a gold mine.

In an interview with StartUp Digest, he said the country has the capacity to produce more millionaires if the citizens can understand the opportunity in the business.

“The business of PET recycling is very lucrative and the return on investment is over 100 percent,” he said.

Recycling is the process of converting waste objects into new materials. This big business is not yet popular in Nigeria as it is mainly done by few foreigners and multinationals.

Nigeria’s population is almost 200 million. The country’s citizens drink bottled water worth N938.6 billion annually, according to a re-

port by Euromonitor International.

The tendency to spend many hours in traffic in major Nigerian cities has also driven the growth of the industry.

The population of Nigeria is booming, and infrastructure and services are failing to keep up with the growth. Mismanagement of the public water system has compounded the problem, leading to warnings of a looming water crisis in Nigeria, especially Lagos.

Over 63 million Nigerians have no choice but to get water from wherever they can, while 57 million Nigerians don’t have access to safe water, according to Wateraid.

The water needs of Lagos are put at over 700 million gallons per day. The state has capacity of a little over 200 million gallons per day, but actually produces and distributes between 145 to 150 million gallons each day from its facilities, leaving a

huge gap of over 500 million gallons.

But this has created enormous opportunities as water is bottled in PET bottles.

CeedCap emerges first African studio to join GSSN ODINAKA ANUDU

C

eedCaphas announced its official membership of the Global Startup Studio Network (GSSN), a network of venture builders, giving startups the power to create and grow powerful businesses and make a meaningful impact wherever.

This milestone is a major move for CeedCap on its mission to become Africa’s leading venture builder and impact investor. CeedCap’s goal is to create 500,000 jobs across Africa by 2050 through digital innovation and impact investing in remarkable entrepreneurs with ambitious and sustainable ideas.

Startups in Africa are growing at a rapid pace.

Despite the recent successes and heightened global recognition, a lot of entrepreneurs still struggle to appropriately execute their ideas. A majority of startups still identify poor execution, limited funding, and market access

as the primary drivers of most failed innovative ideas. “ The studio model of building and launching new ventures has been around for a while, but has not been standardised. Becoming a GSSN Studio means we— like other studios—work to achieve the gold standard of building and launching more successful impact startups across Africa,” said KessienaMajemite, founder & managing partner at CeedCap. GSSN provides the highest quality support to studios and their founders, leading to incredible outcomes for startups across the globe. Best known for achieving local impact and global reach, GSSN Studios represents true leadership in the global industry.

“G S S N i s n o t f o r e veryone, and rightfully so.

GSSN Studios represent the world’s most respected studios as well as some of the most inspiring pioneers working to grow startup ecosystems in unexpected places. And this credibility

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benefits us all,” said Nick Zasowski, director, GSSN. CeedCap is the first startup studio in Africa to be named a GSSN Studio.

This membership gives CeedCap startups access to a number of opportunities.

It provides access to a community of investors interested in investing in both studio funds and startups raising capital within thestudio. It creates a platform providing connections for portfolio companies out of GSSN Studios to GSSN’s relevant corporatepartners.

It also encourages exclusive shared practices.

Also, startups in CeedCap’s portfolio have an opportunity to visit any GSSN Studio or GAN Accelerator (GSSN’s sister community) in the world for up to two weeks. It equally enables CeedCap’s startups to request mentorship or funding from the GAN Venture Fund,an early-stage investment vehicle.

“Our vision at CeedCap is to develop a framework for entrepreneurs to build sustainable ventures by providing the human and financial resources, as well as offer early-stage investors a vehicle to diversify and derisk their portfolios,”Kessien aMajemitefurther said.

“At CeedCap, we believe digital inclusion through early-stage investment is a channel to unlock nextgeneration opportunity and bridge the poverty gap for African.”

The major area of this opportunity is recycling. Hence it is now possible to recycle these bottles and even nylon into more advanced products

for industrial use.

Only few entrepreneurs have studied the business and want Nigerians to get more involved.

Zeugnis International Limited is organising a training session for Nigerians of all ages about the potential in PET plastic bottle and nylon recycling.

The training will take place on 14th March at the Lagos Chamber of Commerce and Industry, Ikeja.

Nwobodo told said that after the training, Nigerians would be confident of going into the recycling business.

“PET bottles are littered everywhere and I felt that someone had to find solutions with them,” he said.

“I went to a dump site, stayed there for six months, learned plastics and its different types and I was able to see the gold in it. It is a goldmine, but many people do not know,” he explained.

He further said that recycling is a going trend and the

opportunity is so huge that there are only three major participants in it.

“Ninety percent of our plastics are not recycled, unlike in Sweden where 95 percent are recycled. In fact, government will even pay you to bring PET bottled in that country,” he disclosed.

He stated that Nigerians need to learn and re-learn about plastics as it is capable of cutting down 23.1 percent unemployment rate in the country.

He said that participants in the training will have direct contacts of proven local and international vendors and could have access to funds/ free export financing.

“They could also get onthe-spot demand-supply business deals,” he said.

He said Nigerians should begin to explore opportunities in recycling to lift many out of poverty, urging those who wish to avoid wasting resources in machine sourcing to attend the training.

How British Council is driving entrepreneurial growth in Nigeria

O

ver the last 75 years, the British Council Nigeria has been providing a platform to budding entrepreneurs by creating programmes to hone in skills development and give access to mentorship opportunities in and outside Nigeria, allowing young eager minds to learn from the best brains around the world.

Recently the Br itish Council curated the opportunity for one-on-one mentorships with Richard Branson, which has shaped the evolution of life-transforming enterprises in Nigeria today.

Nasir Yammama, who was one of the participants, is the creative technologist and founder/CEO at Verdant Agri-Tech, after being named one of the winners of the Enterprise Challenge— an apprentice-style competition backed by Virgin Atlantic and the British Council.

Nasir Yammama’s new company Verdant Agri-Tech grew out of his participation in the 2014 British Council-supported Enterprise Challenge.

It offers solutions to farmers and other stakeholders in the agricultural value-chain for improved productivity and profitability. The company’s mission is to enhance agricultural sustainability in Africa by using simple technologies to increase produc-

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tivity, improve the efficiency of resource use and reduce ecological impacts.

The start of Nasir’s entrepreneurship journey was launched by his winning the British Council Enterprise Challenge in 2014.

This qualified him to be mentored by business magnate, Richard Branson. His professor at Middlesex University encouraged him to consider pursuing his idea for Verdant Agri-Tech, which was only the germ of an idea at that time.

“With these takeaways, I rebooted my entrepreneurial dream and for the most of 2015 and 2016 worked towards turning ideas into actionable goals, and relentlessly pursuing opportunities that propelled me closer to my dream. This involved starting a company in Abuja, going to the MIT Global Entrepreneurship Bootcamp in Boston and working with various partners in Europe and Africa to build solutions in Agriculture,” he says.

In less than a year, his enterprise experienced exponential growth in user base from 50 farmers in Katsina, his home state, to 25,000 farmers.

According to him, this has been due to the collaborative efforts channelled into onboarding stakeholders like the All Farmers Association of Nigeria and partnerships @Businessdayng

with international donor organisations such as OXFAM and German Corporation as well as state governments in Northern Nigeria.

His recent citation on the Forbes 30 under 30 as one of Africa’s young entrepreneurs doing great things gives credence to this claim.

In June 2017, he bagged the prestigious Queen’s Young Leaders Award in England.

He attributes these recent accomplishments to his choice to remain in Nigeria despite the hurdles associated with running a start-up.

“The Enterprise Challenge has been a remarkable competition which I thoroughly enjoyed. I believe it has not only developed my skills but exposed me to a whole new way of looking things from writing to pitching and presentation,” he says.

“The calibre of people I have been able to interact and network with is the absolute thing every aspiring entrepreneur and innovator wishes to associate with.

Meeting Sir Richard Branson was a priceless opportunity that I will continue to value immensely.”

British Council is inviting past programme participants as it plans to celebrate its 75th anniversary with them. The Council allows them to submit stories of their experience and the impact it has had.

32

Monda 03 February 2020

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

How to make your business relevant to the consumers of 2120 The Solid Wealth Messenger

Grace Agada

T

he Year 2120 is 100 years from now. In another 100 years, you will be dead.

Your current consumers will also be dead. Your business will be serving its third generation if it survives. And one of your own blood will seat at the helm of affairs. If bloodline succession succeeds. But if bloodline succession fails. Your business will also be dead or be in the hands of a total stranger.

I don’t know what may happen to your business. But what I know for sure is this. If your business fails to change. It will bleed to death. But supposing your business survives.

Will the consumers of 2120 still recognize your business or would they see your business as a business that serves the needs of dead men?

What your business will be. And whether it will survive or not. You are already making that decision today. To live 100 years from now and serve the consumers of 2120. Your business must remain relevant for many generations.

Relevance is the degree of usefulness of a business to its current and active consumers. It is the ability of a business to become more useful and valuable. Far ahead of competitors and the conscious needs of consumers. Businesses that are relevant are businesses that borrow ideas from the future. Ideas that occupy a central position in the hearts of consumers. And execute those ideas today. There are able to bring into existence. Solutions that benefit consumers over a long period of time. To maintain business relevance businesses must develop three abilities.

The first is the ability to travel into the future ahead of everybody else. The second is the ability to discover a need in that future that consumers will appreciate today. And to be the first to do so. The third is the ability to change and redesign a business to deliver that value today. It is the ability of a business to change in a timely and progressive manner. Based on certain consumer insights that make a business relevant for many generations.

Business relevance is thus all about progressive change.

Progressive change is the ability of a business to deliver superior value to its consumers. It is also the

ability of a business to raise its bar of value. And inspire consumers to raise their expectations of what is possible and acceptable. Change that is beneficial is the change that aligns with the needs of consumers. It also the type of change that increases consumer awareness of what is acceptable as new normal. Businesses that drive this type of change. Set themselves apart and attract massive wealth.

As consumers become inspired to accept and raise their expectations of value. Other businesses that remain at lower levels of value bleed.

These businesses lose market share and eventually dies. To prevent businesses from dying. Business owners must move ahead of time and the needs of consumers.

Moving ahead of time means driving change rather than reacting to change. To drive change there are three areas a business needs to focus on. These three areas are the three sources of change in a business.

The first area is consumer Interest. The second area is Personal Interest. And the third area is Competitor’s Interest. Consumer interest facilitated change is change that results from consumer’s own pain, disgust, needs, and awareness. It is also the type of change that make consumer demand for a higher standard of value. Due to certain new knowledge and information. Businesses undergo consumer interest change. When there move from one generation to the other. And within the same generation. To maintain relevance in the face of changing consumer interest. Business owners must predict change. There must also

develop solutions that meet the ever-changing interests of the consumer. Because consumer facilitated change originates from the consumer. They lack a certain surprise factor. And have a little and short-lived impact on long-term business relevance.

Personal change is the type of change driven by a business owner’s own pain, disgust or aspirations. These include dissatisfaction in existing structures. And a move away from the status quo. Personal change carries the greatest impact on business relevance. This is because it moves beyond the consciousness of the consumers.

And carry a certain surprise and appreciation value. Consumers appreciate proactive and beneficial change that did not originate from them. It shows them that a business is ahead in its thinking and can meet their needs and desires. Personal changes are effective because there break existing value standards. Challenge the status quo and drive consumer’s interests and expectations. Businesses that leads personal changes enjoy three advantages. First, they occupy an uncontended first position in the mind of consumers.

Consumers attach the change or innovation to their name. This increases business profit and brand reputation. Second, they enjoy long-term business relevance. As long as the change they initiated is unsurpassed. Businesses that initiates change remains relevant to the consumers. Throughout the validity of the change. Third businesses that initates change are successful businesses. They are rewarded with the wealth and

‘

To prevent businesses from dying.

Business owners must move ahead of time and the needs of consumers.

Moving ahead of time means driving change rather than reacting to change

profit from the change they initiate before other businesses are given a chance. These three advantages make personal driven change the most effective for long-term relevance.

The third area of Change is Competitor change. Competitor change is the change initiated by a related, complementary or competing business. That impact on the ability of a business to generate revenue. And make a certain profit. Competitive change carries the greatest risk for businesses. Especially those businesses reacting to the change. It carries great risk because businesses reacting to this kind of change. Are at the mercy of the business driving the change.

Sometimes they understand and can adapt to the change. Other times the resources, times and skills needed to change are out of their reach. Competitor facilitated change is thus the fastest way to kill a business. Businesses that are affected by competitor change must find ways to act swiftly and adapt to change or risk becoming obsolete.

Adapting to change means understanding the change. And knowing what to do to measure up with the change. Reacting to change is the most difficult way to stay relevant in business. Businesses must thus learn to drive change rather than react to them.

And where certain changes affect them. They must act swiftly to reduce the risk of death.

To remain relevant in business, business owners must embrace change. The ability to change is the ability to remain relevant across many generations. Only businesses that change in a timely and progressive manner will be relevant to the consumer in 2120 If you want to make your business relevant today, and in the next 100 years. We can help you.

We will help you create a system that produces a flood of innovative ideas. That drive impactful change and maintain long-term business relevance. If you want to make the most profit today and many years to come and enjoy the benefits of being No 1 in your industry.

Send an email to info@createsoldiwealth.com. For more information on how we can help you.

Grace Agada is a Generational Wealth Advisor, Business Longevity Expert, and Author of the popular Solid Wealth Book.

She Consults and Coaches a private group of clientele comprising Family Business Owners, C-Suite Executives, and the Boards of multinationals.

She helps her clients prepare their businesses and leadership for generational relevance, competitive advantage and Goodwill with consumers. Her role is to help her client plan and execute Leadership succession, Business succession, and Consumer succession.

Objectives • Solid Wealth Creation • Solid Wealth Preservation www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

Monday 03 February 2020

BUSINESS DAY

MARKETS INTELLIGENCE

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Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Nigerian companies deserve better valuation despite sluggish economy

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

BALA AUGIE

N

igerian companies deserve better valuation even amid prevalent slow recovery in growth and lack of transformation policy.

This is because Nigerian equities have the cheapest trailing price to earnings ratio (P/E) across Emerging Market (EM) and Frontier Markets (FM).

The benchmark stock market index had a PE ratio of 8 times (x) compared to MSCI EM and MSCI FM of 15.4x and 10.6x respectively.

African peers like South Africa, Egypt and Morocco trade at trailing PE ratios of 15.7x, 11.8x, and 21.1x respectively.

The EM and FM currently trade close to their 5-year average PE, while the Nigerian market trades at a steep discount to its 5-year average PE of 12.2x.

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). The price-toearnings ratio is also sometimes known as the price multiple or the earnings multiple.

A high P/E ratio could mean that a company’s stock is overvalued, or else that investors are expecting high growth rates in the future.

Since the start of the year, the

P.E

5

Nigerian Stock Exchange (NSE) All Share Index (ASI) has gained 8.17 percent, but the bourse ended 2019 with a negative return of -14.12 percent. The emerging markets and frontier markets ended last year with positive returns +15.40 percent and +14.30 respectively.

Nigeria’s economy is beset by absence of structural reforms, rising vulnerability to external shocks, and poor corporate earnings especially for consumer goods firms.

The above challenges are responsible for foreign investor lethargy towards the country’s equities.

For instance, the dual exchange rate system adopted by the central

bank discourages investors and encourages corruption.

Analysts say continued foreignexchange restrictions dampen long-term foreign and domestic investments and keep the economy reliant on volatile oil prices.

They however said that a unified, market-based exchange rate would support inflation targeting.

Data from the Nigerian Stock Exchange (NSE) showed that foreign inflows from January to November 2019 declined 28 percent to N397.44 billion from N553.47 billion in the same period in 2018.

The data further revealed that net outflows from January to November increased 62 percent to N84.53 billion from N52.07 billion in the same period in 2018.

Nigeria’s external reserve has fallen to $39 billion from $70 billion in 2013.

The International Monetary Fund (IMF) reiterated its forecast that the country’s economy, as measured by the Gross Domestic Product (GDP), will grow by 2.5 percent in 2020.

The IMF however downgraded its growth forecast for the global economy to 3.3 percent in 2020, representing a one percentage point decline from 3.4 percent forecast made in October last year.

The global economy has been hard hit by the trade war between China and the United States (US), but an agreement between the two world super powers could restore calm to global financial market.

Analysts do not expect a notable recovery in Germany’s economy as the Euro-area largest economy continues to grapple with lethargic industrial output.

Last week Thursday the Bank of England voted to keep interest rates on hold at 0.75 percent as the Monetary Policy Committee decided the improvement of the business sentiment since the general election made a cut necessary.

On the home front (Nigeria), this year may bring more challenges for companies as a torrent of stringent regulations by the central bank could hurt banks’ future earnings while a hike in VAT is inContinues on Page 34

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

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

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

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

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

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

BusinessDay MARKETS INTELLIGENCE (Team lead: BALA AUGIE - Analyst: Dipo Oladehinde, ENDURANCE OKAFOR, BUNMI BAILEY Graphics: FIFEN FAMOUS)

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team patrick.atuanya@businessdayonline.com www.businessday.ng

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@Businessdayng

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Monday 03 February 2020

BUSINESS DAY

MARKETS INTELLIGENCE In Aitel’s world Nigeria is the giant of Africa BALA AUGIE

N

igeria is Airt e l A f r i c a’s cash-cow as evidenced by its immense contribution to Group’s earnings.

The Chief Executive Officer (CEO) of the telecommunications giant said during a conference call with reporters across the continent that on a market specific basis, Nigeria has been leading the company’s growth with double digit voice revenue growth and over 70 percent data growth.

With a huge population of 200 million (largest on the continent) and the proliferation of smartphones in recent years, it is unsurprising that the country has

been taking a giant stride in data usage.

Analysts have attributed the improved earnings in the Nigeria operation to a stable foreign exchange environment. The central bank is to thank for this as the apex bank introduced a new foreign exchange regime that eased the flow of liquidity in the system.

Analysis of the nine month period for Airtel Africa, which ended December 2019 showed that it realized revenue of $2.52 billion.

Of the total Group revenue of $2.52 billion, Airtel Nigeria contributed 39. percent ($995 million); to this figure, East Africa 35 percent, ($851 million), and Rest of Africa, (25 percent), $644 million.

Airtel Nigeria’s recorded 23.40 percent revenue growth in the period under review, thanks to double digit expansion in data and voice data.

That compares with East Africa, (12 percent) and a reduction in sales for Rest of Africa.

Airtel Nigeria’s earnings are stable compared to peers across the continent.

It recorded 37.10 percent growth in Earnings Before Interest Taxation Depreciation and Amortization (EBITDA), that compares to a 14.40 percent expansion recorded

by East Africa, and a contraction of 12.60 percent in Rest of Africa.

O p e rat i ng p ro f i t i n creased by 62.80 percent in December 2019, that compares with East Africa, (30.40 percent), and a 35.40 percent

contraction in Rest of Africa.

The company is making money for shareholder as it is contemporaneously translating top line (revenue) impressive performance into bottom line growth.

Airtel Africa has been spending copiously on its Nigeria operations and it is

Fidson’s return to profitability may halt steep stock decline, or not IFEANYI JOHN

I

nvestors in Fidson are now breathing a huge sigh of relief after the company released its 2019 financial results last Friday which showed that the company returned to profitability during the financial year. Fidson, one of Nigeria’s largest pharmaceutical companies posted a profit of about N312 million during the 2019 financial year rebounding from a loss position of N97.4 million in the preceding year.

The poor financial performance in 2019 triggered a massive selloff in the stock which caused the share price to decline from N5.05 in mid-2019 to as low as N2.60 at market close on Friday, representing a decline of almost 50 percent.

Investors are now optimistic that the return to profitability could send the stock back to where it was at the middle of the past year.

A stockbroker who spoke to BusinessDay stated “it is not unlikely we see in a rebound

in the stock performance seeing that the company has returned to profitability. It is a dividend paying company and these companies typically get preference from local investors who usually only buy dividend paying stocks.

If the stock makes even a modest upward run in the coming months, we could see the stock returns impress a lot of investors.”

However not all analysts think there may be an upward surge in prices. Obinna Uzoma, chief economist at EUA Intelligence told Busi-

www.businessday.ng

nessDay that he thinks the stock may trend lower and settle around the N1.5-2 region given that the 2019 trailing earnings was only about N312 million and the company has a market capitalization of around N5.4 billion, translating to a price to earnings ratio of around 17x and an earnings yield of just 5.7 percent in an environment where long dated bonds yields are around 10 percent.

“Investors are currently seeking stable and growing companies that are lowly

priced and offer dividend yields that surpasses the treasury yields. Its unlikely we see much interest in healthcare stocks considering a lot of them are still struggling to grow sales in this slow growth economy,” Uzoma added.

Fidson revenue declined from around N16.2 billion in 2018 to N14.06 billion in 2019, representing a decline of more than N2 billion, however significant improvements in cost efficiency helped the company post a profit during the past year unlike its loss performance in 2018.

Fidson share price remained unchanged during the day, opening and closing at N2.60 even though about 174,454 shares were traded last Friday.

Fidson Healthcare PLC develops and manufactures a wide range of pharmaceutical products such as anti-infective, anti-arthritis, endocrinology, gastro-intestine, anti-retroviral, cardiovascular, pain relievers and consumer goods.

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taking the lead in the roll out of 4G network.

In November 2019, Airtel Network Limited (Aitel Nigeria) signed an agreement with intercellular Nigeria Ltd, in order to acquire additional MHZ 10 spectrum in the MHZ 900 in Nigeria for a consideration of $70 million.

Nigerian companies deserve better valuation despite ...

Continued from Page 33

imical to consumer wallets which could have a negative impact on companies.

To increase lending to the real sector, the CBN in July last year came out with guidelines to mandate commercial banks to direct credit to the real sectors of the economy particularly small and medium scale enterprises (SMEs).

It increased the minimum loans to deposit ratio (LDR) to 65 percent but analysts say forcing lenders to extend credit to the high risk sectors could result in spiralling Non Performing Loans (NPLs).

The apex bank earlier this year reduced fees for a number of transactions including e-transactions like Automated Teller Charges (ATMs), and what this means is that banks’ non-interest income (a major driver of @Businessdayng

gross earnings) would come under pressure.

A few weeks ago the Monetary Policy Committee (MPC) of the CBN hiked the Cash Reserve Ratio (CRR) by 500 basis point to 22.75 percent, to address the high liquidity in the banking system.

Analysts however expect the the revised CRR to have the following impact of banks: (i) Reduced downward pressure on asset yields as fixed income yields will likely reprice higher. (ii) Increased downward pressure on Net interest Margin (NIM). (iii) Slower credit growth on tighter liquidity available for lending amid swift macro conditions. (iv) Lower-than-expected earnings on the likely drop in net interest income.

Despite all these headwinds, Nigerian stocks remain cheap and could payoff for investors that take positions today.

Monday 03 February 2020

BUSINESS DAY

Live @ The Exchanges Stock investors lost N400bn in one week …year-to-date return lowered to +7.46% as sell off persisted Stories by Iheanyi Nwachukwu

I

nvestors at the Nigeria stock market lost approximately N405billion in last trading week in January.

The bearish trend which persisted at the equities market till the last trading day in the review week ended Friday January 31 led to a decline of 2.65percent in the market’s benchmark index.

The record loss pushed the year-to-date (Ytd) positive return lower to 7.46percent.

Except consumer good and insurance sectors, all other key sectoral indexes closed the week in red.

The NSE 30 Index which tracks the top 30 companies in terms of market capitalisation and liquidity declined by 3.06percent. Others are: NSE Banking (-5.17percent); NSE Consumer Goods (+0.09percent); NSE Industrial Goods (-2.83percent); NSE Insurance (+0.90percent); NSE Oil & Gas (-1.14percent); and NSE Pension (-3.77percent).

“The recent decision of the Central Bank of Nigeria (CBN) to increase Cash Research Requirement (CRR) for banks to 27.5percent is a downside risk”, analysts at United Capital said in a recent note to investors.

The review week saw

L – R: Oscar N. Onyema, chief executive officer, The Nigerian Stock Exchange presenting a replica of the closing gong to Mitchell Elegbe, chief executive officer, Interswitch during the Listing of Interswitch Limited’s N23billion Bond at the Exchange

many investors reduce their stakes in equities amid companies releasing their fullyear 2019 results at the local Bourse.

“The ASI fell below 29,000 basis point due to persistent sell offs experienced during the week”, said equity research analysts at Vetiva Securities.

With more Full Year 2019 earnings results expected to roll in the new week, “mixed reaction is expected at the local

bourse at week start,” the analysts added.

The Nigerian Stock Exchange (NSE) All-Share Index (ASI) decreased from 29,628.84 points to 28,843.53 points while the value of listed stocks decreased from N15.262 trillion to N14.857trillion.

As investors’ choice stocks appreciated in price, GTI Research analysts had expected to see a mixed reaction by active investors in this review trading week.

Honeywell disappoints market with record N900m loss in Q3

H

oneywell Flour Mills Plc disappointed equity investors following a record N925million loss after tax (LAT) the company reported in its recently released financials for the nine months period ended December 31, 2019.

The record loss when compared to profit after tax (PAT) of N143million in 2018 represents a decline of 747percent.

Despite that the unaudited results for the nine-month period shows a revenue growth of 6percent from N55billion to N58.2billion when compared with the same period in 2018, it reported loss before tax (LBT) of N878million against profit before tax (PBT) of N173million in 2018, which represents 608 percent decline.

The share price at N1.07percent as at close of trading on Thursday January 30 represents 8.1percent increase in year 2020.

Amid this disappoint-

ing outing in the review nine months period, the company said it is confident that its performance in the coming quarter and the new financial year thereafter will record significant improvement.

Meanwhile the company linked the growth in revenue to corresponding growth in sales volume by 5percent.

‘Lanre Jaiyeola, Managing Director commented: “Despite the challenging operating environment occasioned by rising input costs, reducing spending power of consumers and product evacuation challenges due to the traffic logjam at Apapa, the company grew its 9 months revenue by 6percent to N58.2billion, when compared to revenue of N55billion recorded in the corresponding period of the last financial year. This was driven by sales of our various Flour and Pasta products.

The Managing Director further said, “In line with our objective to continu-

ously improve operational efficiency, the execution of well–embedded operational efficiency initiatives led to 9-month operating profit accelerating at a faster rate than revenue by 19percent from N2.8billion to N3.4billion.

We will continue to improve our operational efficiency in order to maximize value to shareholders.”

“We have implemented strategies to maximize shipment of products to our customers in spite of the Apapa traffic gridlock. We are also well positioned to substantially increase our capacity utilisation of the Pasta production through continuous flow of input materials to the Pasta factory in Sagamu. We are also working on the introduction of new products tailored towards the preference of our most valued consumers in terms of satisfying their nutritional needs, taste and spending power”, it said in a statement following the released scorecards.

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Monday 03 February 2020

BUSINESS DAY Harvard Business Review

MondayMorning

In association with

Is your sales team aligned with your brand?

Chris Wallace

W

e wanted to understand how well companies are using customer data — purchasing behavior and preferences, focus group feedback and market research — to build their brand stories and train their front-line teams. Based on our research findings and our experience consulting with thousands of sales and marketing teams, here are a few tactics companies looking to align their brand message should consider: — ASK QUESTIONS TO HELP YOU FULLY UNDERSTAND KNOWLEDGE GAPS. One organization we consulted serves as a case in point. All its sales and customer service teams were required to attend a two-and-a-half-hour training session that covered technical details about the technology hardware they’d be using to sell products, but defined no clear value proposition. At every turn, people told us the same thing: “We don’t get the message we’re supposed to be communicating about the product.”

We created bite-sized training materials to fill knowledge gaps, one-sheets with infographics, and bullets describing the information they were missing or confused about.

Those accessible bits of knowl-

edge, vetted by select front-line reps, were easy for sales reps to consume and became effective vehicles for quick learning.

— CUSTOMIZE TRAINING BASED ON TEAM FEEDBACK. Sometimes the materials themselves aren’t the problem.

Sometimes the problem is how those materials are being delivered. By regularly asking employees for input and show-

ing them that it will be put into action, companies can also build environments of trust and gain worker loyalty. In the end, structure, consistency and follow-up create reliable ways to gather feedback from front-line teams.

FOCUS ON BUILDING CONFIDENCE. Confidence in telling a brand story determines how successful conversations

on the front lines will be. Sales reps and customer success advocates who feel prepared to have in-depth conversations with clients consistently outperform those who don’t.

Empowering employees to be a part of that story and to experience the brand they represent in their own way builds confidence and competence in a way that pushing information

cannot. When organizations establish guidelines for how the brand should treat customers and give employees the ability to put their own authentic stamp on the interaction within those guidelines, they’re nimbler, more customer-centric and higher-performing.

(Chris Wallace is the president and a co-founder of InnerView.)

When community becomes your competitive advantage munity skills and expertise in your business (e.g., reading and reacting to data, mentoring, moderation, conflict resolution, building and delivering incentives).

We are in the early stages of truly harnessing the potential of carefully crafted, productive communities. When intentionally woven into the fabric of the business, communities can offer a sustainable competitive advantage and drive brand awareness, value production and overall commercial valuation. The future of business is a more open, connected, engaging one, and communities are going to change the nature of how we interact with brands, products and other people.

Jeffrey Bussgang and Jono Bacon

I

f a company can transition from simply delivering a product to building a community, it can unlock extraordinary competitive advantages and both create and support a superior business model. Enthusiastic members help acquire new members, resulting in lower customer acquisition costs and a tight viral loop.

Members are loath to abandon the community, resulting in increased retention and therefore improved lifetime value.

Members support one another, resulting in high gross margins due to a lower cost of service.

Successful communities have seven key elements: — A shared purpose and values.

— Simple, easily accessible value consumption.

— Simple, easily navigable value creation.

— Clearly defined incentives and rewards.

— Carefully crafted account-

ability.

— Healthy, diverse participation driven by good leadership.

— Open, objective governance and evolution.

While there is no silver bullet for building a community, success is delivered by tracking a crisp, focused set of metrics and regularly evaluating and mak-

ing adjustments based on those evaluations. The areas you track should be: — COMMUNITY CONSUMPTION AND CREATION: Tracking active participation and the value that members consume and produce. For example, measuring community traffic, sign-ups, individual contributions (e.g., answering

questions, running events, improving content) and other areas.

— DELIVERY AND EXECUTION: Looking at how well your company is building community strategy, estimating work and executing effectively.

— ORGANIZATIONAL EXPERIENCE: Following the incubation and evolution of com-

(Jeffrey Bussgang is a senior lecturer at Harvard Business School. Jono Bacon is a community and collaboration strategy consultant.)

Monday 03 February 2020

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BUSINESS DAY

PHOTOFLASH

37

Christian Association of Nigeria (CAN) Prayer March against killings and insecurity in Nigeria

Pastor Enoch Adeboye (2nd r), General Overseer of the Redeemed Christian Church of God (RCCG), leading RCCG pastors and members on a prayer walk in Ebute-metta,

Members of RCCG Domino Sanctuary, Acme Road Ogba, Lagos

Members of Christian Association of Nigeria (CAN), Lagos State ChapterÂ

Members of RCCG, in Abaranje Ikotun, Lagos.

Members of RCCG Throne Room, Hilton Abuja

Members of RCCG, regional headquarters in Nigeria in Benin City.

Jirapye Magaji, chairman of CAN Taraba State/resident pastor, Christian Reform Church of Nigeria, CRCN, Jalingo, led the Christians on protest.

Some Pentecostal members in Nyanya/Karu, Nasarawa State.

Picures by Pius Okeosisi, Olawale Amoo, and David Apara

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Monday 03 February 2020

BUSINESS DAY

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Monday 03 February 2020

BUSINESS DAY

39

cityfile Abia bans block molding along Eziukwu road, Aba GODFREY OFURUM, Aba

A

Deplorable state of Moshood Abiola Way at Iganmu in Lagos.

Ogun seeks justice for murdered corps member

O

sun State government has urged security operatives to find the killers of Adebayo Mukaila, a youth corps member who was killed by a gang of armed robbers last week in the state.

A government delegation, led by Olayemi Lawal, the state commissioner for Youth and Sports, made the call during a condolence visit to the parents of

the deceased in Osogbo at the weekend.

Lawal said that the perpetrators of the evil act must be brought to justice.

The deceased, who was a serving corps member with Olorunda North local council development area of the state, was reportedly robbed and killed by armed robbers while returning home from his shop around 11:00 pm.

Lawal, who restated the citizens of government’s

commitment to security of lives and property, assured that no effort would be spared to ensure justice for the bereaved.

He advised corps members serving in the state to adhere to the security tips by the National Youth Service Corps (NYSC) and avoid endangering their lives.

“Governor sent us to condole with you on the loss of your son, Mukaila.

We are all saddened by the incident and we pray

that God will give you the fortitude to bear the irreparable loss.

“I assure you that we will not leave you alone, but we will support you in the best possible way.

The death of your son is a great loss, not only to your family but to NYSC and the state at large.

“I want you to take heart and believe that soon, the perpetrators will be brought to justice,’’ Lawal said.

Lagos equips 143 vocational centres with learning materials JOSHUA BASSEY

L

agos State Universal Basic Education Board (LASUBEB) at the weekend distributed different learning materials to 143 vocational centres across 20 local government areas of the state to enhance learning and skill acquisition.

LASUBEB chairman, Wahab Alawiye-King, at the distribution of the materials said that the effort was to ensure that every child access quality education.

The materials distributed inluded sewing machines, hammers, fridges, generators, printers and cardboard, white glue, tracing papers, felt pen, stapler and big plastic bowls among others.

Alawiye-King said that the current administration was determined to equip vocational centres of learning with the best materials.

He said that the distribution of the materials would equally aid pupils in building lifelong skills to assist them develop social competence.

“It gives me great pleawww.businessday.ng

sure to supervise distribution of materials to the various vocational centres in Lagos.

“Every child’s potential is realised by accessing basic quality education. This presentation is done in line with Governor Babajide Sanwo-Olu’s agenda to strengthen and support the goal,” Alawiye-King said.

The L ASUBEB boss said that the materials being distributed spanned across vocational training centres such as the computer, home economic, arts and crafts centres.

He urged the students

to make good use of the materials and promised that government would continue to give required support.

He said that the administration would also make provision for necessary tools and resources to enable the centres become more functional and engaging for pupils.

“We urge you to ensure that trainings at the centres are designed to enable pupils gain valuable and practical experiences, as we go on to Leave No Child Behind,” Alawiye-King said.

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bia State government has banned all forms of block molding on drainages, along Eziukwu road, Aba, to enable the contractor handling the reconstruction of the road to have full access to the road.

To ensure full compliance to the directive, the Abia State government gave the affected traders 48 hours, starting Thursday, January 30, to abate any form of nuisance their activities have posed along that axis or face the full wrath of the law.

Government warned that they must maintain a reasonable distance between the road and their business premises.

Consequently, Governor Okezie Ikpeazu, ordered the commissioner for environment and the chairmen of Aba North and Aba South local government areas of the state, to immediately move into that area and take all lawful and necessary steps to implement these directives.

The governor in a press statement, signed by, Onybuchi Ememanka, his chief press secretary, warned that any person that violates these directives shall be promptly

arrested and prosecuted.

“Government will not hesitate to shut down and take over that area should these illegal and unwholesome activities persist”.

The state government noted with great dismay the incessant acts of sabotage of the Eziukwu - Cemetery Road Project, by businessmen, who deal on sand and gravel, including block molders, along Eziukwu Road, Aba. Government observed that despite repeated appeals, by the contractor handling the Eziukwu road project, these set of people persisted in their acts of sabotage, by deliberately blocking the new drainage lines with heaps of sand and gravel.

“Some of them have convertedthenewdrainagelinesinto platforms for block molding and have been removing manhole covers installed, by the Contractor. These manhole covers were designed for safety purposes.

“Government shall no longer tolerate these nefarious acts. No responsible government will fold its arms and watch unscrupulous persons destroy infrastructural facilities, being put in place for the good of our people, under the guise of running a business.

Oyo partner Matan Arewa to relocate destitute, beggars to special centres REMI FEYISIPO, Ibadan

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n its bid to rid the state of destitute and provide succour to children used for begging, Oyo State government has evacuated 41 beggars and nine mentally deranged persons from major areas of Ibadan metropolis.

Among the beggars, there were nine boys under twelve years, six girls of the same age, fifteen men and ten women who were taken to special centres for rehabilitation by the government and a nongovernmental organisation, Matan Arewa Southwest Nigeria, a body that caters to the needs of destitute from the Northern Nigeria, headed by Aishat Ismail.

The exercise which began from Mokola, Ibadan North local government area, was led by the commissioner for women affairs and social inclusion, Faosat Sanni, alongside the NGO. The evacuated beggars, mostly from the Northern Nigeria, were taken to a special centre managed by the Matan Arewa, in Ibadan with the assurance that the state government would work together with body to give the children free education, feeding and other essentials to change their status.

Nine mentally deranged persons were moved to Emmanuel Rehabilitation Centre,

@Businessdayng

Oja’gbo, Ibadan, for medical care and rehabilitation.

The commissioner, Faosat Sanni, said steps have been taken to continually evacuate destitute and street beggars until the society accepted that begging was not a way of life and those with mental sickness should be taken to public health institution, rather than left to roam the street.

She added that the state administration had concluded plans to fortify orphanage homes in the State with household items and gadgets that would engage the children inhabiting the institutions in their pass time after coming from school.

“This evacuation exercise will be done continually till we rid the state of the menace of using children to beg for alms instead of taking them to social institutions provided by government and NGOs where they will be cared for, we shall be doing this alongside the effort to change parents’ attitude towards their wards,” she said.

The president, Matan Arewa Southwest Nigeria, Hadjia Aisha Ismail appreciated the government for the effort to take the less privileged from the slums to special centres where they could access free education, feeding and shelter, condemning the culture of begging among a particular side of the country.

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Monday 03 February 2020

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news

‘Favourable government policy to deepen human, capital investment in Nigeria’ SEYI JOHN SALAU

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s businesses in Nigeria continue to adjust to the harsh economic environment amid weakening consumers’ spending, favourable government policy is needed to deepen human and capital investment in country to grow the country’s Gross Domestic Product (GDP) and boost the internally generated revenue (IGR) of states.

To this end, the management of Upfield, a plant-based consumer products company, recently paid a courtesy visit to the Lagos State government as part of its commitment to deepen relationship with key stakeholders. It also reaffirms its commitment to human and capital investment in Nigeria.

Bamidele Amao, general manager for Upfield in West Africa, said government support especially that of Lagos State would help improve the value the company could bring to the country, as it enters the Nigerian market.

According to Amao, Upfield is aware of the commercial potentials of Lagos State and indeed Nigeria, hence the desire of the company to establish and invest in the country.

“Nigeria remains one of the largest, if not the largest economy in Africa. The Federal Government and indeed the Lagos State Government continue to attract investment through some dynamic policies with a view to investments in areas where the country has competitive advantage to grow its IGR and GDP. “At Upfield, our commitments are clear; investing in human and capital resources that would serve in creating employment and improve the

standard of living in the communities and countries where we operate.

“We pride ourselves in providing high-quality products that better the quality of life of our consumers to be healthier and happier. Product quality and doing things sustainably are core to the successful operation of our business,” Amao said.

Lola Akande, Lagos State commissioner of commerce, industry and cooperatives, who received the team, said the decision to site Upfield in Lagos affirmed the status of the state as the commercial hub of Nigeria while creating employment opportunities for residents.

“Our mission in the Ministry of Commerce, Industry and Cooperatives is to promote sustainable commercial and industrial growth through improved business support policies and infrastructure. We are therefore happy that Upfield is investing in Lagos State which will be beneficial in terms of increased job opportunities and revenue,” Akande said, assuring the team of necessary government support to help grow and thrive in Lagos State.

Motola Oyebanjo, head of corporate affairs and communications for Africa, solicited government support while acknowledging the status of Lagos as the investment destination in Nigeria. “It is on record that Lagos state has been home to many multinational organisations and start-ups with many of them still doing very well with their businesses,” Oyebanjo stated.

According to Oyebanjo, the accommodating business environment in Lagos and its people is responsible for the many thriving businesses in the state.

$321m looted fund: FG signs tripartite pact with US for repatriation Felix Omohomhion, Abuja

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ttorney-General of the Federation (AGF) and Minister of Justice, Abubakar Malami, Sunday departed Nigeria to attend a three-day meeting of the United States-Nigeria Binational Commission in Washington DC. At the meeting, the AGF is expected to, on behalf of the Federal Republic of Nigeria, sign a tripartite agreement with Nigeria, the Island of New Jersey and the United States of America for repatriation of $321 million looted assets, as part of the Federal Government’s efforts to recover more stolen funds stashed abroad.

In a statement on Sunday by spokesman to Malami, Umar Gwandu, the meeting is an annual event between Nigeria and the US aimed at

reviewing bilateral relationship and taking necessary steps to advance mutual interest in all diplomatic areas among the two countries.

The meeting is not an ad hoc event for addressing impromptu concerns, but a friendly bi-national meeting that holds annually devoid of intervening concerns or relating to the internal affairs of the participating states, said the statement.

Among Nigerian government delegation expected to be part of the meeting includes minister of industry, trade and investment, Adeniyi Adebayo, minister of defence, Bashir Magashi, minister of foreign affairs, Geoffrey Onyeama, National Security Adviser, Babagana Monguno, as well as minister of humanitarian affairs, disaster management and social development, Sadiya Umar Faruk. www.businessday.ng

L-R: Tinuade Awe, executive director, regulation, NSE; Kobby Bentsi-Enchill, executive director, Stanbic Capital; John Maguire, group chief financial officer, Interswitch; Oscar Onyema, CEO, NSE; Mitchell Elegbe, CEO, Interswitch; Taiwo Okeowo, deputy MD, FBNQuest Merchant Bank; Chinomso Nwachukwu, group chief financial controller, Interswitch, at the Listing of Interswitch Limited’s N23 billion Bond at the Exchange.

Pic by Pius Okeosisi

Here’s why tech-driven businesses will be ‘hot cake’ for private equity investment in Nigeria ENDURANCE OKAFOR

…as Lassa fever cases rise to 5

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for goods online or make bank transfer via a mobile app, and are now getting used to handling financial affairs as easily and conveniently as they do their email or Facebook page, this compare to when they would have to go to the four walls of a bank or shops to carry out transactions.

“I think what we are seeing right now is certainly a huge interest from large institutional investors, large development financial institutions who want to put their money into technology-led businesses in Africa,” Lexi Novitske, managing partner, Acuity Ventures said.

According to her, the fact that overpriced opportunities in developed markets are becoming less attractive for investment is making capital to look elsewhere for investment in emerging markets like Nigeria.

Last year, startups operating in Africa received a total of $1.3 billion in startup funding. Going

by Weetracker’s data, it’s the first time annual Africa-focused startup funding has crossed the $1 billion mark.

Analysis of the data revealed that the sizes of funding rounds also got bigger in 2019

rom fashion designing, real estate, financial services to transportation, technology is affecting the way businesses operate and has become the centre of the attraction for private equity in Nigeria.

According to the investors who converged on Friday at the second private equity summit

by Udo Udoma & Belo-Osagi, technology-driven businesses are a top investment choice for private equity because they are the future.

“Today, we are talking about technology-enabled businesses but in the next ten years, all businesses whether in the logistics sector or tourism will be tech-driven. This is where we are going to and it is very attractive for private equity investment,” Ijeoma AgbotiObatoyinbo said at the second plenary session of the summit.

Fuelled by the increase in smartphones usage in Africa’s most populous nation, technology has not only influenced the way businesses operate but it has massively changed the behaviour of consumers.

A lot of Nigerians now pay

NAMA to withdraw services to debtor airlines, airports by February ending IFEOMA OKEKE

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ig er ian A irspace Management Agency (NAMA) has given a 30-day final demand notice to debtor airlines and private/state owned airports to settle all outstanding debts owed to the agency.

The demand notice, which expires February 28, 2020, expects all debtors to settle their indebtedness or risk sanctions.

It would be recalled that the affected debtors had earlier been communicated with details of their respective indebtedness to NAMA but have

made no tangible effort to pay.

The said notice read in part, “NAMA hereby notifies debtor private /state owned airport operators and airlines that effective 28th February, 2020, our ser vices will no longer be available for the operation of their airports or airlines as the agency can no longer keep its personnel working at airports without payment.”

In the meantime, the affected debtors, where in doubt have been advised to liaise with the commercial department of NAMA for reconciliation and/or clarification within the stipulated grace period.

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as 26 deals (equalling 6 percent of the total deals), accounted for 83 percent of total funding raised in 2019.

Nigeria was ranked the top startup investment destination in 2019, thanks to its attractive Fintech industry with raised most of the funds, an annual funding report by WeeTracker shows.

Africa’s largest economy was ranked top both for the number of deals done and for their value as startup investment received grew nearly fivefold compared to 2018.

Nigeria accounted for 49.5 percent share of African venture capital in 2019, by country. This was followed by Kenya’s 32 percent and Egypt’s 5.9 percent.

“Technology-driven business is quite an exciting investment space for private equity right now,” Rotimi Oyekanmi said at a panel session with the title: fundraising and Capital development-Trends, Strategies and Perspectives.

Drilling to sectors that are most attractive for private equity investment, Novitske cited financial technology (Fintech).

“I believe there is still a huge opportunity especially for lo-

cal investors to tap from the industry as it is already getting the attention and investment from a lot of international players,” she said.

Commenting on the number of start-up investments that came into Africa in 2019, WeeTracker said the bumper rounds were largely recorded in Fintech. “The sector dominating startup funding yet again thanks to sustained interest from global payments giants backing African Fintech companies.”

Nigeria and Kenya were the continent’s top startup investment destinations, jointly accounting for 81.5 percent of investment received in 2019.

In November 2019, Visa paid $200 million for a 20percent stake in Nigerian payments processor, and also Interswitch made it Africa’s first Fintech unicorn.

Egypt also recorded strong growth with investment more than doubling in the last year, largely thanks to the funding raised by Swvl, the bus hailing company, which raised $4 million in June and has also expanded across and beyond the continent.

BEDC installs 2,500 Pre-paid metres in Edo, Delta, Ondo, Ekiti states IDRIS UMAR MOMOH, Benin

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enin Electricity Distribution Company (BEDC) Plc. says it installed over 2,500 prepaid meters in its franchise areas in 2019.

Funke Osibodu, the managing director/Chief Executive Officer made the disclosure on Friday at a media parley in Benin City.

Osibodu, represented by Abel Enechaziam, Chief State Head, BEDC Electricity Plc., said the installation was under the company’s community metering intervention scheme.

She said the meters were installed in the state of Edo, Delta, Ondo, and Ekiti out of the projected 10, 000 units to be installed in the period under review.

She explained that 500,000 meters would be installed across states under its jurisdiction in the next three years.

According to her, out of the @Businessdayng

500,000 meters, a total of 190,000 willberolledoutinEdoStateinthe next two years with a monthly cumulative average at 10,000 units.

She attributed the low prepaid meters so far installed to some challenges, but, promised to increase the figure considerably this year.

She however, assured customers of using Meter Asset Provider (MAP) to substantially reduce estimated billing in the year 2020 and reduce the metering gap to lower levels.

While noting that over 48 communities were connected to the national grid as at October 2019, she assured that connections of communities will be intensified in 2020 as well as collaborate with and encourage genuine and serious power generation companies to improve supply through embedded generation.

Monday 03 February 2020

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news

IFC delists Nigeria from top 5 investment destinations in Emerging Africa MICHAEL ani

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he International Finance Corporate (IFC), an arm of the World Bank focused on investing in emerging markets, says it has downgraded Nigeria from among the top five countries that are haven for attracting private investment in emerging markets The downgrade was as a result of the troubled investment climate that has bedevilled Africa’s largest economy in recent years, Eme Essien Lore, countr y manager for IFC, said Friday.

Lore who spoke at the 2nd pr ivate equity summit organised by Udo Udoma & Bello Osagie, said despite the vast deposits of human and mineral resources in the country, Nigeria is still faced with numerous challenges including external imbalance; increasing poverty; declining per capital income, as well as disturbing hu-

man capital indicators in health and in education.

Nigeria now stays w ith the re gion of top 10 economies where investors should look to invest, a decline from the previous spot of top five, she said.

According to Lore, Nigeria needs to embark on strong, bold policy reforms in the power sector, road infrastructure by collaborating with the private sector.

“Nigeria should be in top five given the enormous need we have for private capital. But we are not there because we are shying away from the reforms that can attract capital,” Lore said in a presentation at the event.

Lore noted that Nigeria’s low growth problem is overshadowing favourable demographics in the country. “An annual growth rate of 2 percent is poor for a developing economy adjudged to have the opportunity to grow between 7-10 percent annually,” she said.

USAID’s $15.7M agribusiness investment to finance 5,000 MSMEs in 7 states HARRISON EDEH & Godsgift Onyedinefu, Abuja

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he United states Agency for International Development, USAID’s $15.7 million ‘Feed the Future Nigeria Agribusiness Investment Activity’ will provide credit financing to at least 5,000 Medium and small enterprises across seven designated states in Nigeria, the Investment’s Managing Director, Adam Saffer, has said.

The director in a statement said the five-year Investment activity will facilitate $200 million in new lending for the MSMEs across five value chains to

include: rice, maize, soya, cowpea, and aquaculture in the states as well as $100 million in new agribusiness investments.

The selected seven states for the Agribusiness Investment Activity include Benue, Cross River, Delta, Ebonyi, Kaduna, Kebbi, and Niger.

Saffer speaking recently at a summit in Asasba, Delta State noted that the summit will provide a platform for agribusiness stakeholders to present, discuss, and prioritise the key challenges and opportunities for Delta to realise its massive earning and employment potential in the agribusiness sector.

He said the overall objective of the Activity was

to measurably improve the agribusiness investment climate, which plays a pivotal role in attracting foreign direct and domestic investment, leading to food security and improved nutrition for all Nigerians.

Saffer noted that the infrastructure and market reach of both formal and informal banking services was inadequate in many regions, and constituted a significant barrier for rural agricultural smallholder farmers (SHF) and MSMEs. He said the investment activity would broaden access to finance from financial institutions.

He added that the agribusiness Investment Ac-

tivity would help create a more conducive agribusiness enabling environment, improve access to credit, facilitate greater investment in the agribusiness sector, and sustainably enhance the performance of the selected agribusiness MSMEs. He also said the programme would facilitate the review of 28 agricultural enabling environment policies and support the approval and/or implementation of at least 10.

According to the director, at least 50 organisations would demonstrate sustainable organisational performance improvement via a series of training and capacity-building interventions.

Riders protest Lagos ban on motorcycles DIPO OLADEHINDE

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otorcycle riders on the p l at f o r m o f Gokada and Max staged a peaceful protest on Friday, to protest the ban announced by the Lagos State Government on motorcycles and tricycles, which takes effect from Saturday, February 1, in six local governments areas in the state.

The rally started from the Kudirat Abiola Way, Ikeja and proceeded to the Lagos State Government House in Alausa, with the riders voicing their antagonism to the ban.

Many of the protesting riders had different banners with inscriptions such as “Very soon poverty will be a crime in Lagos,” “Regulate, not ban”, “regulate us, not kill us”, “No helmet, no ride”, “WE NEED MORE JOBS, NOT LESS”.

They also argued that lack of job opportunities was the reason they chose to become E-hailing riders.

Critics say the ban is a harsh reality for investors of the bike-hailing companies and also meant more

hours in traffic for commuters in the city’s notorious gridlock. The ban will also result in the loss of livelihood for the majority of riders, critics say.

Several others, however, hailed the government’s decision as it aligns with the primary goal of a good government – to protect lives and property.

Several traffic robberies are aided by motorcyclists.

Recall, the Lagos State G overnment last week announced the ban of the activities of commercial motorcycles, popularly called Okada, and tr i cycles, known as Keke Napep, in some Local Government Areas, bridges, and highways in the state The affected area include Apapa LGA, Apap a Iga n mu LC D A , L a gos Mainland LGA, Yaba LCDA , Surulere LGA , It i re - I k a t e L C D A , a n d Coker-Aguda LCDA. Others are Ikeja LGA, Onigbongbo, LCDA, Ojodu LCDA, Eti-Osa LGA, Ikoyi-Obalende LCDA , and Iru-Victoria Island LCDA, Lagos Island LGA and Lag os Island East LCDA. www.businessday.ng

L-R: Ayodele Gbolahan, chairman, board of directors, Greenwood House School; Ekua Abudu, founder, Greenwood House School; Ibukun Awosika, chairman, First Bank of Nigeria, Folusho Phillips, chairman, board of governors, Greenwood House School, at the celebration of Greenwood House School’s 25th Anniversary in Ikoyi, Lagos.

FG sets up committee on bitumen exploration to drive wealth creation HARRISON EDEH, Abuja

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he Federal Government has set up a committee to work out modalities on the exploration and exploitation of bitumen resources in the country as part of the administration’s efforts to diversify the economy and create wealth for its huge unemployed population.

The Minister of Mines and Steel Development, Olamilekan Adegbite, who inaugurated the 9-man Committee on the development of Bitumen Resources, on Friday in Abuja, said bitu-

men is an important component mineral resource needed for road construction that is in abundance, which the country can explore and exploit for economic development.

Adegbite disclosed that Nigeria has an estimated reserve of about 42.74 billion metric tons of bitumen along the States of Ogun, Ondo, Delta, Rivers and Bayelsa, which remained majorly untapped for years.

Membership of the Committee which is chaired by the Director-General, Mining Cadastre Office, Simon Nkom, was drawn from staff

of relevant Departments in the Ministry and Bureau of Public Enterprises (BPE).

The Committee, which has 2 weeks to submit its report has the following terms of reference: Collate and study previous reports on development of Bitumen in Nigeria; identify current title holders and the level of exploration or exploitation; determine available bitumen reserves and recommend criteria for allocation of available reserves and ways of developing the resource to ensure maximum benefits for the country.

Adegbite enumerated

some of the benefits Nigeria would derive from the exploration of the bitumen deposits in Nigeria which includes the diversification of the economy, improvement in technological growth, establishment of international contracts vital for international cooperation in the new expanding technology and socio-economic impact on the areas of operation amongst others.

Responding on behalf of the Committee, Nkom assured the Minister that the Committee members would work assiduously to justify the confidence reposed in them

CBN stops Forms M for importation of NPK fertiliser HOPE MOSES-ASHIKE

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he Foreign Exchange Department of the Central Bank of Nigeria (CBN) on Friday issued a circular that prohibited Forms M for importation of

NPK fertilisers.

The CBN in the circular to all authorised dealers and the general public said the ban on the importation of all NPK fertilisers and any other variant remained in force.

“For the avoidance of

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doubt, no authorised dealer shall henceforth establish Forms M for the importation of these items,” the circular signed by Jibrin A. S, for director, trade and exchange department, stated.

The CBN threatened @Businessdayng

to sanction severely, any authorised dealer that established Forms M for the importation of all NPK fertilisers and any other variant, including management and staff responsible for the transaction.

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Monday 03 February 2020

BUSINESS DAY

news Oil majors’ profit dip is warning to crude...

Continued from page 1

fourth quarter due to $10.4

Godwin Obaseki (2nd r), Edo State governor; Ukinebo Dare (r), MD, Edo State Skills Development Agency (EdoJobs), and Derick Nwasor (m), founder, Xigma, and other innovators from Edo Innovation Hub, at the governor’s meeting with the Edo team, in Government House, Benin City, Edo State.

Nigeria targets N252bn from privatisation...

Continued from page 1

Summit in Lagos, Nigeria’s

commercial capital, said this would help in better utilising some government assets as the country seeks to explore various forms in generating revenue in the wake of falling crude oil prices.

“We have some government assets that have been scheduled for privatisation and we expect to generate between N250-252 billion from them,” Ahmed told BusinessDay on Friday.

Ahmed, who holds a double portfolio as minister of finance and budget and national planning, said although the privatisation process has been slow, “one of what we are doing is to see how we can improve it and make it faster”.

Data from the Central Bank shows Nigeria hasn’t privatised a single asset since 2016.

Buoyed by a revenue shortfall due to a collapse in oil prices which led to fivequarters of negative growth in 2016, Africa’s largest economy has said it would sell off some of its redundant assets, but has dithered in doing so.

Other African countries, particularly Ethiopia, are tak-

ing the initiative to open up their economies to private capital while Nigeria slumbers.

Global consulting firm, PricewaterhouseCoopers, estimates that Nigeria has $900 billion in dead capital trapped in real estate alone.

Although the minister never mentioned the assets that have been earmarked for privatisation, she noted, however, that plans are underway to ensure speedy sales of the assets.

Like the sales of assets, there have been several policies to increase the government revenue to meet ballooning cost of governance and huge infrastructural needs across various sectors of the economy.

One of these was a 2017 initiative designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose of payments of all outstanding tax liabilities.

The Voluntary Assets and Income Declaration Scheme (VAIDS) was not only meant to increase revenue for the government, according to Ahmed, but its implementation helped in increasing the number of taxpayers from 10 million in 2015 to about 20

Disappointing earnings validate bleak...

Continued from page 2

revenue.

Inflation for the month of December accelerated to 11.98 percent, the highest in seven months as price of basic foodstuffs skyrocketed on the back of border closure.

High level of unemployment at 23.1 percent as at September 2018 and poor job creation continue to pressure expenditure levels.

Valuations of consumer goods firms have been relatively expensive and the stocks are unattractive to investors who have been dumping shares.

The industry felt the pang

of a severe dollar scarcity that tipped the country into its first recession in 25 years.

The consumer stock index is tradingatapricetoearningsratio of 25.70 times. This compares to the NSE-ASI average of 8 times.

“They have lost considerable amount of value in the last two years. Their earnings have been reducing but share price has been reducing faster,” said Wale Olusi, head of research at United Capital Research Limited.

“Investment sentiment for them is poor and will remain so because of competition from cheaper brands. Consumer wallets will remain www.businessday.ng

million in 2018 while fetching N95 billion for the government, with about N75 billion going to the Federal Government while the states hold the remaining.

At 6 percent, Africa’s largest economy with a population of around 200 million has one of the lowest tax-to GDP ratios globally, according to latest figures from the Organisation for Economic Co-operation and Development (OECD), a grouping of the world’s leading market economies.

This ratio is meagre when compared with the 15 percent level which the World Bank says is necessary to achieve economic growth and reduce the over 90 million Nigerians living below $1.90 a day. It also falls behind other countries on the continent including South Africa with 29 percent, Ghana 18 percent, Egypt 15 percent, and Kenya 18 percent, says OECD. Although the VAIDS may have ended given that the scheme was for a three-year period, 2017 through 2019, Ahmed noted the new Finance Act would help in further growing the tax net, which the government expects to hit 45 million by 2022.

“The Finance Act would go a long way in expanding the tax base because some of

the measures we made were targeted at improving business and blocking loopholes on several of our tax laws that allow profit shifting for major multinational companies,” she said.

The Finance Act which was initiated to complement the 2020 budget kicked off implementation on February 1, 2020.

The Act is expected to set the tone for the country’s fiscal policy for 2020 and beyond by removing the bottlenecks in the country’s tax regime in order to expand the tax net and raise revenue for the government.

Among the stipulations in the Act are the slashing of tax rates for companies and an increase in value added tax from 5 percent to 7.5 percent which would be used to fund a 67 percent increase in the minimum wage, which Zainab said cost the government as much as N300 billion.

This figure excludes adjustment for pensioners and those engaged in the one-year compulsory National Youth Service Scheme (NYSC).

“With the Finance Act, we expect to achieve an increase of 50 percent collection of taxes since companies would be incentivised to pay taxes,” Ahmed said.

squeezed on the back of hike in VAT,” said Olusi.

Abiola Gbemisola, consumer goods analysts at Chapel Hill Denham Limited, said that the new minimum wage could invigorate consumer wallets as they would have more money in their pockets.

Gbemisola added that the higher Loans to Deposit (LDR) limit for deposit money banks would make it easy for consumers to access loans, hence paving the way for them to open their purse string in the short term.

“We see continued deterioration in margins but an increase in price of key products could underpin bottom line,” said Gbemisola.

It isn’t all gloom for the industry, though, even as the firms operate in a tough environment.

Analysts say if the Federal Government closes the borders for two years, then companies such as Flour Mills Nigeria plc and Dangote would continue to record stellar numbers.

This is because the companies produce goods that are susceptible to smuggling across the borders.

Flour Mills Nigeria just released its result for December 2019 and it recorded a 5.70 percentuptickinrevenuetoN423.37 billion and 3.17 percent increase in net income to N8.15 billion.

Butthemiller’smarginswereflat.

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billion worth of write-offs related to the company’s shale gas production sites in Appalachia, among others. 2019’s total earnings slid 80 percent to $2.924 billion compared with $14.824 billion in 2018.

Shell blamed weaker oil and gas markets for the dismal performance which has delayed its share buyback scheme after its profits halved in the final quarter of the year.

“All macroeconomic indicators are working against us, it is essential to have a resilient balance sheet to manage the kind of volatility we are seeing at the moment,” Ben van Beurden, Shell CEO, said in a call with journalists.

Analysts say this has serious implications for oil-dependent countries including Nigeria.

“A drop of their [oil majors’] income is generally a reflection of what would happen to the income of oil-dependent countries,” Ayodele Oni, energy lawyer and partner at Bloomfield law firm, said.

Oni argued that if these oil companies with very efficient systems suffer significant erosion of their profits, then governments who rely on oil income and with less efficient systems would likely suffer more.

Declining oil demand especially from China has soured oil markets and the outbreak of the Coronavirus further threatens to upend the market.

The oil cartel, Organisation of Petroleum Exporting Countries (OPEC), is facing tough questions on what it is going to do in response to Brent falling back below $60 per barrel.

It has responded in the past by cutting supply from members and may impose further cuts yet, even as the

supply side is not free from challenges as producers like Libya have seen around 1 million barrels per day in production lost to internal conflict.

The Nigerian government has often willed to diversify the economy away from oil but in practice the country’s economy still remains heavily dependent on crude sales.

Projected further decline of oil prices and deterioration of oil markets will further test this resolve.

Nigeria’s N10.59 trillion 2020 budget is benchmarked on a daily oil production rate at 2.18 millionperbarrel,withassumed oil price of $57 per barrel.

President Muhammadu Buhari in his budget speech said the sum of N8.155 trillion is estimated as the total Federal Government revenue in 2020 and comprises oil revenue of N2.64 trillion, non-oil tax revenues of N1.81 trillion and other revenues of N3.7 trillion.

The government has passed a finance law to leverage taxation to grow government revenue but economists say the fundamentals are not strong to support the fiscal system.

The economic outlook in Nigeria does not appear promising, said Andrew Nevin, partner & chief economist, PwC Nigeria. Growth has trailed a recovery path since the recession in 2017 and projected at 2.5 percent in 2020. Inflation is expected to keep soaring and stay about the single-digit target of the Central Bank in 2020 until the border closure is reversed.

The fiscal deficit-to-GDP ratio is projected to rise from 2.8 percent in 2018 to about 4.3 percent by the end of 2020.

Oil prices are expected at below $60 per barrel and the current account balance-to-GDP ratio will decline marginally to 1.7 percent by 2022.

3 things 9Mobile can do to attract fresh...

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capabilities and I UMTS band with 3G capabilities. This has since grown to include bands with 4G capabilities such as LTE 700 (28), LTE 800 (20), LTE 900 (8), LTE 1800 (3), and LTE 2300 (40).

By the time it left Nigeria, Etisalat handed over three frequency bands to the new owners of 9Mobile. Currently, the company also supports band 3 (1800MHz), a 4G LTE network. While the company has invested resources trying to push this band across the country, it is no match to MTN which controls a far more superior band 7 (2600MHz) and 20 (8000MHz).

Telecom spectrum starts from 800MHz and goes up to 2300MHz. Beyond that, it starts getting into the bands used for technology such as Wi-Fi and Bluetooth – Wi-Fi used to be 2.4GHz (2400MHz) and has startedtoshifttothe5GHzband.

Cashing in on PSB approval in principle Last year, it looked like 9Mobile hit a bull’s eye in the chase for the mobile money @Businessdayng

market in Nigeria when the CBN granted it an ‘Approval in Principle’ for a Payment Service Bank. However, an Approval in Principle (AIP) does not mean the CBN has granted the licence. It is merely a stepping stone and an indication that the regulator is willing to issue the licence subject to specific conditions.

In the meantime, an AIP gives 9Mobile leverage to start positioning itself for the mobile money market. Unfortunately, since September when the CBN issued the approval, little has been seen in terms of plans by 9Mobile regarding the space.

New products and equipment 9Mobile maintained a stoic silence on investment for the greater part of 2019, but the telco would need to invest in equipment for 5G, more base stations and possibly launch new products and conduct promos like other networks, said Owolabi of Mobile Monday Nigeria.

•Continues online at www.businessday.ng

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Savannah Petroleum adds new customer to Accugas

UPDC to raise N15.96bn by rights FG urged to back TSA, other fiscal reforms by law issue from capital market

avannah Petroleum plc, the British independent oil and gas company focusing on activities in Niger and Nigeria, has announced that Accugas has entered into a new interruptible gas sales agreement (IGSA) with First Independent Power Limited (FIPL) in relation to the provision of gas sales to the FIPL Afam Power Plant (FIPL Afam).

FIPL is an affiliate company of Sahara Group, a leading international energy and infrastructure conglomerate with operations in over 42 countries across Africa, the Middle East, Europe and Asia.

Afam has a current power generation capacity of 180mw.

The FIPL IGSA envisages the supply of gas (produced by Uquo, with a maximum daily nominated quantity of 35mmscfd or approximately 5.8mmboed) by Accugas to FIPL Afam in order to augment its existing gas supply on an interruptible basis for an initial term of one year with the ability to extend upon mutual agreement.

Securing an additional gas supplier to the FIPL Afam plant is another demonstration of FIPL’s commitment to its vision of being a stable power generation significantly contributing to the national grid.

Accugas currently sells to three customers, Calabar Nigerian National Integrated Power Plant, National Integrated Power

SEYI JOHN SALAU

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Project (a Niger Delta Power Holding Company-owned power station), the Mfamosing Cement Plant (located in Cross River State, owned by Lafarge Africa Plc) and Ibom Power (a power station owned

by Akwa Ibom State), for an aggregate maintenance-adjusted 2020 take or pay volume of 141.4mmscfd.

The commercial terms of the FIPL IGSA are expected to augment the weighted average profitability of the Accugas portfolio while Accugas’ sales volumes, revenues and cash flows are expected to increase with no incremental capital expenditure.

Accugas continues to make good progress in relation to gas supply to several other potential new customers and further updates will be provided in due course.

According to Andrew Knott, CEO of Savannah Petroleum, “I am delighted to announce the IGSA with FIPL, representing the first new gas sales agreement that the Accugas business has signed in over five years, and we look forward to partnering with the Sahara Group, who have notable experience with energy and infrastructure projects in Africa. We are confident that this will be the first of several new gas sales agreements signed over the course of 2020 and, through Accugas, we aim to be seen as the gas supplier of choice to the power sector in Nigeria.”

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ACN Property Development Company plc (UPDC) has concluded arrangement to raise N15.96 billion by rights issue from the capital market to repay its short-term debt obligations and significantly reduce leverage.

Stanbic IBTC Capital Limited is the issuing house, while the transaction is part of UPDC’s broader strategy to create long-term shareholder value by recapitalising and repositioning the company.

Shares in UPDC will be offered to existing shareholders whose names appeared in the register of members of the company as at September 30, 2019, that is, the qualification date in line with the rules and regulations of the Securities and Exchange Commission (SEC).

At the signing ceremony held at UPDC’s head office in Lagos, on January 31, 2020, Folasope Aiyesimoju, CEO of UPDC, said the rights issue would enable the company refinance its short-term debt and reduce finance costs.

According to Aiyesimoju, the allotment will be on the basis of 43 new ordinary shares for every seven ordinary shares held, at a price of N1.00 per share.

“The transaction will significantly reduce the company’s debt burden and is an important milestone in UPDC’s journey to attain a sustainable capital structure.

The company will continue to explore efforts to improve is capital and liquidity position whilst implementing growth strategies,” Aiyesimoju stated.

Deborah Nicol-Omeruah, the deputy CEO, said, “The rights issue is a critical step towards strengthening UPDC’s capital structure and will improve the company’s ability to pursue value-accretive opportunities in the Nigerian real estate sector, ultimately resulting in improved shareholder value.

“We acknowledge, with deep appreciation, the unwavering support we have received over the years from our stakeholders and shareholders and encourage our shareholders to re-affirm their support for the Company by fully participating in the Rights Issue.”

Full terms of the Rights Issue will be set out in a Rights Circular to be mailed directly to shareholders of the Company. The Rights Circular contains a provisional allotment letter and participation form and where in doubt, shareholders should consult their stockbroker, or any other professional adviser for guidance before subscribing.

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ormer Governor of Gombe State, Ibrahim Dakwambo, has urged the federal government to provide legal backing for all financial reform initiatives, particularly the Treasury Single Account Policy in order to ensure proper implementation and sustainability.

Dakwambo, who is also a former Accountant- General of the Federation (AGF) argued that except the reforms are catalogued and supported by legal frameworks, politicians could take advantage of the inherent loopholes for their selfish gains.

He was speaking at the public presentation/launch of the book, “Treasury Single Account Policy inNigeria”, authored by Salawu Zubairu, Director, Finance and Administration, Federal Ministry of Foreign Affairs in Abuja.

In his speech at the event, Dakwambo also highlighted the huge resistance he encountered in the course of the implementation of financial reform programmes while in office as the AGF. Recounting instances where his life was threatened by those who obviously opposed change, he said: “For people like me, we had to be

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given extra security, like they had to change our houses, we had to be accompanied by police because of the threats over the implementation of financial reforms”.

According to him, politicians could take advantage of loose reforms to win elections, except such initiatives are properly ring-fenced against abuse.

“I must tell you, if I want to win elections today and go out there and say ‘if I win elections today there’s no more TSA’, won’t I get their votes? But am I doing the right thing? But for me as a politician, I want to win and anyhow I win, I have no problem,” he added.

The former governor, therefore, challenged the incumbent AGF, Ahmed Idris, to ensure that existing finance acts are reviewed so the politicians who “come and go” do not influence them.

Speaking further, he commended both the author and Idris for documenting the TSA, which, according to him, remained one of the most important financial reforms so far undertaken by the treasury, and urged that other similar reports should be documented in the same way.

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Flight link with China, poor health infrastructure put Lagos at ‘very high risk’ for Coronavirus …No suspected or confirmed case as Lagos assures of measures to safeguard citizens JOSHUA BASSEY, ANTHONIA OBOKOH & DIPO OLADEHINDE

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a g o s , N i g e r i a’s commercial nervecentre, is at “VERY HIGH RISK” for Coronavirus and at “HIGH RISK” for Lassa fever, according to an update on 2019-nCoV and Lassa fever outbreaks issued by the Lagos State Biosecurity team on Sunday, February 2.

Although there has been no suspected or confirmed case of the virus in Lagos, according to Akin Abayomi, the state commissioner for health, the update says the state is at very high risk due to several weekly connecting flights from China (epicentre of 2019-nCov) to Lagos, megacity nature of Lagos (large population, overcrowding and congestion), several slum areas and behavioural pattern difficult to prompt correctional changes.

According to the update seen by BusinessDay and confirmed by a director in the Lagos State Ministry of Health, other reasons

for the “very high risk” for Coronavirus are inadequate health infrastructure and human capacity, poorly manned international ground crossing, several unmanned foot routes along/across international border, uncontrolled daily influx of people into Lagos, and inadequate findings to determine current status of pathogens of wild likely cross linking with human population.

The Lagos State government says it has put measures in place to safeguard the state from the virus.

“I would like to reassure Lagosians that our vigilance levels are very high and we are putting more measures in place to safeguard the state. Through our strategic initiatives with federal authorities, we are putting higher levels of surveillance into effect at all international airports in Nigeria including Lagos to ensure that we minimise the threat of entry of

any cases of Coronavirus,” Abayomi said in a public advisory issued on Sunday.

The state government advised all travellers returning from China or exposed to a traveller from China or any country where cases of novel Coronavirus have been reported to observe self-quarantine on arrival in Lagos.

“During unsupervised self-quarantine, we expect persons concerned to respond to the state advise and act like responsible citizens. You are required to restrict your movement to your home, monitor yourself closely, report any symptoms that may develop to the Ministry of Health on the contact numbers provided and engage in good personal hygiene,” Abayomi said.

There have been 14,559 confirmed cases of Coronavirus virus across 27 countries so far resulting in 305 deaths, according to the update. China alone accounts for 14,381 cases and 304 deaths. No confirmed case

has been reported in Africa.

Lagos is also at high risk for Lassa fever, said the Lagos State Biosecurity team, because it shares border with few currently affected states, uncontrolled influx of persons to Lagos from all states including Lassa endemic states, very high urban development causing encroachment into forest habitat of natural hosts, and common market environment with neighbouring affected states.

The death toll from Lassa fever has risen to 41 out of 95 confirmed cases as the virus has spread to 19 states, according to the update.

It said several emergency operation centres have been activated for the control of Coronavirus and Lassa fever, with involvement of all relevant stakeholders for coordination. There are also highly equipped and operational biosafety and biosecurity facility for diagnosis of pathogens, as well as heightened and enhanced surveillance system, among others, it said.

‘Fossil fuels, renewable energy will continue to play complementary roles’

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ountries must creatively complement the use of fossil fuels and renewable energy in the interim pending when renewable energy can stand alone as major source of energy globally, Lekan Akinyanmi, CEO, Lekoil, says.

He made this remark while speaking on the sidelines of the World Economic Forum’s annual meeting at Davos. Globally, there has been an increase in calls for reduction of fossil fuel consumption, which environmentalists have indicted for greenhouse gas emission.

“It is possible to keep an oil and gas company sustainable. The first thing we have got to do is to stop denying that there is an issue. Indeed, there is an issue, Akinyanmi said.

“The change over from fossil fuel to alternative energy or cleaner fuels is a multidecade or probably multicentury thing. The fossil fuel industry will still be relevant.

I think probably for the rest of our life time. What we need to do is to figure out ways to be responsible in the fossil fuel production and consumption process.

“Historically, a lot of fossil fuel companies have produced oil and flared the gas.

But it is actually the gas that is more efficient. It is friendlier to the environment, so we

Wigwe, Sadiku, Omisakin analyse AfCFTA at The Elevation Church’s Vantage Forum Endurance Okafor

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ndustry experts in the private and public sectors including Herbert Wigwe, CEO, Access Bank plc; Yewande Sadiku, executive secretary/CEO, Nigerian Investment Promotion Commission (NIPC), and Olusegun Omisakin, director of research/chief economist, Nigerian Economic Summit Group (NESG), last week, discussed crucial economic trends, government policies and other issues that can affect businesses in Africa’s rapidly evolving market.

At the sixth edition of the Vantage Forum, an annual high-profile business event organised by The Elevation Church (TEC), the business leaders analysed the African Continental Free Trade Area (AfCFTA) agreement, its economic implications and how Nigerians can maximise the opportunities it presents through innovation.

The AfCFTA was created by the African Continental Free Trade Agreement among 54 of the 55 African Union nations. The agreement was brokered by the African Union (AU) in March 2018. It requires members to remove tar-

iffs from goods, allowing free access to commodities, goods, and services across the continent.

Wigwe highlighted the benefits to be derived from the AfCFTA by Nigerians, stating that the initiative would boost intra-African trade from 16 to 52 percent, making Nigerian Small and Medium Scale Enterprises (SMEs) more competitive with access to a larger market.

“The AfCFTA could be the most important opportunity offered to African countries in a long time. This is because, for many years, the absence of a regional economic framework has limited the continent’s development,” Wigwe said.

According to Wigwe, the benefit of the initiative to Nigerians includes opportunities for business expansion, removal of tariffs on commodities, infrastructural development and free trade.

However, to take advantage of these opportunities, Nigeria needs to increase the quality of its products and improve its infrastructure, he said.

According to Sadiku, a senior Federal Government official, Africa is the “fla-

vour of the moment.” This is because of the future prospects of the continent. For instance, 60 percent of the African population is under 35, indicating a youthful and vibrant population.

“Nigeria has a youthful population and they need to be primed for readiness to take advantage of these opportunities. To maximise the prospects it presents, the private sector needs to be heavily involved in the actualisation of the AfCfTA,” Sadiku said.

The investment expert also listed the things needed to convert these exciting prospects into value, including skills, capital, and infrastructure and marketing resources.

On his part, Omisakin carried out an analysis of the current state of the Nigerian economy, including current trends, what could take the country back into recession and how to position to take advantage of key indices.

Emphasising on the importance of security in enhancing business activities, Omisakin said: “The foundation of all business activities is based on the premise that goods and services are secure. Insecurity increases risk and raises the cost of doing business.”

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need to shift our attention there. From our perspective in Lekoil, one of the things that helped us is that, a good chunk of our portfolio is actually gas so we are actually well on our way,” he said.

Energy analysts suggest that the renewable energy market will grow at a cumulative average growth rate of 7.6% between 2020 and 2025 to reach 3,812 gigawatts by 2025. Rising investment and improvement in technology have seen a drastic improvement in renewable energy output.

Between 2020 and 2025, the United States and other developed countries are scaling up investments in renewable energy. However, the Asia Pacific region is emerging as the fastest-growing market for renewable energy globally, accounting for nearly 27% of the global market share. Within the Asia Pacific, China and India together form the leading renewable energy markets having almost 75% of the installed capacity of renewable energy.

In 2018, China heavily invested in renewable energy projects having a total capacity of nearly 696 gigawatts and emerged as the leading country, dominating the global market in three renewable energy technologies, namely, wind, hydropower, and solar energy.

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Monday 03 February 2020

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World Business Newspaper Heba Saleh

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ahmoud Abbas, the Palestinian president, has cut relations with Israel and the US, in response to proposals by Donald Trump that pave the way for Israel to annex more occupied Palestinian land.

The announcement came at an Arab League meeting on Saturday where foreign ministers rejected a Middle East peace plan that they said was heavily tilted in Israel’s favour, describing it as a setback to peace.

“We’ve informed the Israeli side . . . that there will be no relations at all with them and the United States including security ties,” said Mr Abbas at the emergency meeting called to discuss the Trump deal. This would include all security ties and agreements with US intelligence agencies to combat extremism.

The Palestinian Authority also maintains security cooperation with Israel in areas under its control. Mr Abbas has previously threatened to cut ties with US and Israel but has not followed through. The Israelis have yet to comment on his statement.

The plan, which was unveiled in Washington by the US president and Benjamin Netanyahu, the Israeli prime minister, recognises Jerusalem as Israel’s undivided capital and allows the Jewish state to annex settlements it built on occupied Palestinian land that

Palestinians sever ties with US and Israel President Mahmoud Abbas cuts all links in response to Trump’s Middle East peace plan

Mahmoud Abbas, Palestinian president, waves as he arrives at the Arab League meeting on Saturday © Reuters

are viewed as illegal by the UN. It envisages eventually giving the Palestinians limited self-rule on disjointed enclaves connected by roads and tunnels, but only if conditions set by Israel are met.

The Arab ministers have slammed the Trump proposal as a setback to three decades of peace efforts, saying it was

destined to fail because it breached international law and ignored UN resolutions that had formed the basis of previous negotiations.

The ministers said Mr Trump’s plan was the culmination of “unilateral and unjust decisions by the US”, which had already moved its embassy to Jerusalem and

recognised Israeli sovereignty over the Golan Heights seized from Syria in 1967 and considered occupied territory by the UN. The US closed the Palestinian mission in Washington in 2018 and the Palestinians have not been part of negotiations for Mr Trump’s plan.

The foreign ministers reaf-

firmed their long-standing commitment to the creation of a Palestinian state with its capital in East Jerusalem within boundaries that existed before Israel occupied the West Bank in 1967.

Initial reactions from key Arab states to the Trump plan were less hardline. Egypt, the United Arab Emirates and Saudi Arabia urged careful consideration of the plan without explicitly endorsing it. They called for Palestinians and Israelis to resume negotiations under the auspices of the US. Diplomats and analysts said the Arabs did not want to anger Mr Trump, arguing that there had been a reordering of priorities in the region. The intractable Palestinian-Israeli conflict has become less important in the eyes of some governments, which increasingly see their national interest in closer ties with the US and even Israel.

Gulf countries are anxious about Iran, which they view as the main threat in the region.

Egypt has drawn closer to Israel as they fight Isis in the Sinai on their joint border.

China steps in to support financial system as coronavirus spreads Liquidity boost planned as trading set to resume on Monday after extended break

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eijing is poised to pump extra cash into China’s financial system on Monday, as part of a package of emergency measures to shield the economy from the effects of the deadly coronavirus outbreak.

China’s central bank said on Sunday that it would provide Rmb1.2tn ($173bn) in additional liquidity to money markets, as trading was set to resume on the country’s stock exchanges following an extended closure.

The liquidity injection will be China’s largest single-day open market operation since 2004, according to Bloomberg, although the net addition of liquidity will be lower because more than Rmb1tn of short-term funds will mature on Monday.

The People’s Bank of China also plans to lower lending rates to support companies, while financial regulators have delayed the

introduction of new rules in order to avoid further tightening market liquidity.

More than 14,000 people have been infected with the coronavirus in China and more than 300 people have died, according to health authorities. The number of infections is already greater than the total during the outbreak of severe acute respiratory syndrome, or Sars, in 2002-2003, which caused several months of market turbulence in China.

The Philippines reported the first death outside China on Sunday, as a number of countries imposed restrictions or outright bans on people travelling from China.

The crisis has led to the quarantine of about 40m people in China’s Hubei province, where the disease first appeared in December, and forced some of the country’s largest cities and manufacturing centres to extend the Lunar New Year holiday.

Some economists in China have www.businessday.ng

predicted that the outbreak could shave more than a percentage point off economic growth in the first quarter, pushing gross domestic product growth below 5 per cent.

China’s markets shut for the Lunar New Year on January 24. The holiday period was extended three days until February 3 as a result of the coronavirus outbreak.

Hong Kong’s Hang Seng index closed down 2.8 per cent when the market resumed trading on Wednesday after the Lunar New Year break, with travel and tourismrelated companies hit by fears that the outbreak would disrupt travel.

In contrast to 2003 with Sars, we’re now a decade into a bull market and valuations of some financial assets are stretched Simon MacAdam, Capital Economics Analysts said the virus — and efforts to contain it — were likely to hurt company performance and hit stock prices when they resume

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trading on Monday.

“In contrast to 2003 with Sars, we’re now a decade into a bull market and valuations of some financial assets are stretched,” said Simon MacAdam, global economist at Capital Economics, in a note to investors. “The new virus is a plausible catalyst for a market correction.”

The PBoC is partnering with several other Chinese financial regulators, such as the foreign exchange and banking watchdogs, to manage the impact of the virus on an economy that was already growing at its slowest pace in 29 years.

China’s banking and insurance regulator said on Saturday that it would extend a deadline beyond the end of 2020 for companies to meet new asset management rules. The regulations were part of a multiyear crackdown on shadow banking that led to a tightening on liquidity — and the announcement gives leeway on this.

The regulator also said that some @Businessdayng

insurers would be allowed to surpass the 30 per cent cap on investments in equity markets in a move intended to support stock prices.

While Chinese officials have said coronavirus infections could peak within a week, other experts outside China say that point could come as late as April or May. During Sars, China experienced a two-month sell-off that caused the market to drop about 10 per cent, according to research from Maybank. Singapore and Hong Kong markets suffered similarly.

“Markets, in particular Hong Kong and China equity markets, could be very volatile in the near term as markets anticipate a broader community outbreak to occur in coming months,” Prashant Bhayani, BNP Paribas Wealth Management’s Asia chief investment officer, said in a note. “Beijing is very likely to step up in policy easing when there are signs that the outbreak becomes a headwind to economic growth.”

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Pension funds and private equity: A puzzling romance Investors are supposed to be paid extra for lack of liquidity in investments. Not any more Jonathan Ford

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t is a guiding principle of finance that there is a premium to pay for tying up investors’ money in illiquid investments. The tighter those knots are, and the longer holders are bound in for, the higher the price.

Take private equity, where investors commit their cash for up to a decade in unsaleable investments.

You might think at first glance that this rule goes without saying. After all, don’t most buyout industry handouts show private equity investments returning much more than public market alternatives?

Returns data from the British Private Equity and Venture Capital Association’s 2018 performance measurement survey provide an example. These show that over the previous decade, UK private equity generated returns of 13.7 per cent a year, net of fees, far outpacing the 9.1 per cent on the FTSE All-Share index.

They suggest that when pension schemes fling their cash at buyouts, they can expect some reward for their patience. That is schemes such as Calpers, which is seeking to raise the proportion of its giant fund in private equity by a third, or Britain’s Universities Superannuation Scheme, which has roughly 21 per cent of its assets tied up in “private markets”.

So all’s well with the world then? Not so fast.

Look more carefully at that data and you start questioning the existence of the so-called “illiquidity premium”. Doubts cen-

Calpers is seeking to raise the proportion of its giant fund in private equity by a third © Getty

tre on the numbers, and whether they present a realistic picture of the relative performance of buyouts.

Academics have long questioned whether the internal rate of return (IRR) calculations favoured by buyout firms overstate their performance against quoted stocks.

Consequently, most recent studies favour the so-called “Public Market Equivalent” measure, which takes all the cash flows between the investors and a buyout fund, net of fees, and discounts them at the rate of return on the relevant benchmark (for example the stock market). On this basis, the outperformance vanishes.

A large study conducted in 2015 by three academics looked at nearly 800 US buyout funds between 1984 and 2014. They

found that before 2006, these funds delivered an excess return of about 3 per cent per annum, net of fees, relative to the S&P 500 index. In subsequent years though, returns have been about the same as on the stock markets. A study of European markets produced similar results.

So why are pension fund investors continuing to pump huge allocations at private equity?

Last year $301bn was poured into US buyout funds, a quarter more than the previous record set in 2017.

One intriguing explanation is that offered by the well-known hedge fund manager, Cliff Asness, in a recent article. He argues that pricing opacity and illiquidity are not actually bugs in the private equity model, but features that investors willingly pay for.

The reasoning runs as follows.

Most pension funds know that they need to boost returns if they are to redeem the costly promises they have made to investors. The only way they can do this is to take more risk — a.k.a more leverage.

Liquid, accurately priced investments let you know how volatile they are and smack your face with i Cliff Asness, hedge fund manager In theory they could do this without private equity. A pension scheme could assemble a leveraged portfolio of quoted stocks. True, it would sacrifice both control and the superior management skills private equity allegedly brings. But there’s a silver lining to this modest sized cloud: the fund would save private equity fees, presently running at 6 per cent a year.

One reason pension funds don’t do this, Mr Asness suggests, is not that it is beyond them. Rather it is the unwelcome freedom that transparentlypriced liquid equity brings. A bad downturn, or a spell of fierce volatility, might persuade them, or their trustees, to crack and sell out at a disadvantageous moment.

“Liquid, accurately priced investments let you know how volatile they are and smack your face with it,” he says.

Opaquely-priced and illiquid private equity, by contrast, obliterates the temptation. Just as Odysseus stuffed beeswax in his crew’s ears and had them lash him to a mast to resist the call of the sirens, pension funds use the manacles of a private equity contract to resist liquidity’s lure.

Of course, there are ways they could avoid paying up for the privilege, such as trimming that average 6 per cent fee charged by private equity.

But that presumes it is a conscious decision, not something they have slipped into almost out of habit.

Odysseus may have understood what he was doing when he had himself trussed up. But how many of the pension funds accepting private equity’s “illiquidity discount” are doing so knowingly?

Illiquidity is not costless. That is why it is supposed to be compensated. Those costs have been suppressed in recent years, when bear markets have tended to be short and sharp. But consider the impact of a prolonged 1970s style downturn. Then investors might rue the shackles they paid to don.

For today’s oil market the real threat is to demand, not supply Sharp fall in price after the coronavirus outbreak comes despite big outage in Libya David Sheppard

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or a generation of oil traders, so-called geopolitical shocks once meant conflicts and social ruptures that threatened supplies in the Middle East, and which almost invariably sent prices spiralling higher.

But at the start of 2020 a new reality has become cemented in even the most battle-hardened minds: this will be the decade when demand shocks become a bigger risk than sporadic threats to supplies.

From the long-term threat of “peak oil” demand to short-term hits to consumption, the oil market is now well enough supplied that fears of outages are being subsumed by worries over the world’s thirst for crude.

An obvious illustration is oil’s reaction to the coronavirus outbreak in China. Prices have dropped more

than 15 per cent from their early January peak to below $60 a barrel, as restrictions on transport — a direct blow to oil demand — and fears over the wider economic fallout have sent traders running for cover.

The move comes despite a loss of supplies from Libya, where outages caused by the 2011 revolution helped propel crude above $120 a barrel.

Now, output is almost completely shut off by an export blockade by forces challenging the UN-backed government in Tripoli.

A few diehard oil bulls have pointed out that the loss of more than 1m barrels a day from the North African country, equivalent to more than 1 per cent of global supply, exceeds even the most bearish projections for the coronavirus’s impact on demand.

But the price reaction is telling.

Traders have little doubt about the market’s ability to cover short-term supply shortfalls, be it from US shale

production or Opec spare capacity.

Even so, they have largely ignored Libya and zeroed in on the impact of the coronavirus instead. Brent, the international oil benchmark, has lost more than any other asset class since the scale of the health crisis started to emerge.

It is little surprise then that Opec has gone back to its well-worn playbook, starting to talk up the possibility of making deeper cuts to production to prop up the market. This has become commonplace since 2016, when the group first combined with Russia to try to boost prices. But talk of cuts is telling nevertheless, when some of Opec’s own members such as Venezuela and Iran — in addition to Libya — have reduced production because of conflict and sanctions.

That represents an acknowledgment from the cartel that demand shocks, rather than supply shocks, now set the pace in the market.

Opec members may still try to argue that fears over long-term demand are overstated, and that demand will stay solid as long as emerging economies are industrialising. But look at what they do, rather than what they say. The strongest members such as Saudi Arabia are doing everything they can to diversify their economies away from their near-total reliance on oil.

The political backlash against fossil fuels has intensified in the past year and shows little sign of fading.

International oil companies are under growing pressure from investors to find less damaging ways of fuelling the planet, while efforts to curb consumption are likely to eventually spread from Europe to the largest emerging economies. The long-term outlook for demand growth looks shaky, at best.

There are still vulnerabilities in the oil market. Supply risks are not insignificant. The drone and missiles attack on Saudi Arabia’s oil installa-

tions last September could have had a much more dramatic impact if the kingdom had not been able to restore exports so quickly. A direct military confrontation between Iran and the US would still have the power to unnerve the market and boost prices, at least temporarily.

But traders are not as on edge as they once were. Crude prices were relatively steady near $60 a barrel for much of last year, even as tensions rose in the Middle East. Price rallies much above that level look increasingly difficult to sustain.

Traders are acting accordingly, responding more to threats to demand such as the coronavirus — even if its full impact remains, at best, an educated guess. Analysts are estimating that demand could fall anywhere from 150,000 b/d to 600,000 b/d, but there are still fears the effects could be worse if the virus starts to really weigh on the global economy.

57

Monday 03 February 2020

BUSINESS DAY

FT

ANALYSIS

US election: Democrats deeply divided on how to take on Trump

As primary season begins, the party is split over whether to choose a progressive or a moderate Demetri Sevastopulo

R

oberta Rosheim has a dilemma. After hearing four Democratic presidential contenders speak in Des Moines, she still cannot decide who to support when Iowa kicks off the 2020 election with its Democratic caucuses on Monday.

As temperatures hovered around -15C in the state capital, she listened as Elizabeth Warren, Joe Biden, Pete Buttigieg and Amy Klobuchar made their case to the Iowa State Education Association, part of their frantic last-minute campaigning in the Midwestern state that decides who emerges with the early momentum.

“I support all of them. I love them so much,” says Ms Rosheim, 70, who is volunteering for Ms Warren but has not committed to supporting her in the caucuses. “I really like her plans, but I also like Amy a lot. And then people tell me, ‘We gotta like Biden because he’s got name recognition and he’ll win’ . . . It’s so hard to decide.”

Ms Rosheim is not alone. Iowans are famous for not making up their minds until the last minute. A Des Moines Register/CNN poll in early January showed that only 40 per cent had picked their first choice.

As the Democrats prepare for a five-month marathon primary process to decide their candidate, the party is more united than ever on the need to beat Donald Trump.

After winning the 2018 midterms by a margin of 9 percentage points, and with Mr Trump’s poll rating still historically low for a president starting his re-election campaign, many in the party hope they can harness that anti-Trump feeling to beat him despite the strong state of the economy.

But they are fiercely divided about what sort of Democrat is best-suited to take on the president, whether it is a progressive politician who can motivate the party’s base of minorities, younger voters and women, or whether they should choose a more moderate figure who can appeal to working-class whites and suburban Republicans turned off by the president’s bluster.

Audrey Baatz embodies the high level of uncertainty. Speaking at a Buttigieg rally in Emmetsburg, north-west Iowa, the independent-leaning woman is mulling over the moderates — Mr Buttigieg, the former mayor of South Bend in Indiana, Mr Biden and Ms Klobuchar, senator from Minnesota. But she thinks any of the leading contenders could emerge as the winner on Monday.

“The people of Iowa are just so undecided, especially in rural areas,” Ms Baatz says. “Any four or five people could win Iowa. It’s that close.”

Heidi Heitkamp, a former North Dakota Democratic senator, says voters are struggling because of the crowded field, which still boasts 11 candidates even after 16

have dropped out.

“You go to a Mayor Pete event and you go, ‘Wow I was blown away’, and then you go to Amy’s event and say, ‘Oh man she makes a lot of sense’. There’s so many people . . . active in Iowa that it makes the choice harder.”

But a majority of Iowans agree on one thing. J Ann Selzer, the Des Moines Register/CNN pollster, says 58 per cent think it is “extremely important” to pick someone who can beat Mr Trump, which Ms Heitkamp says is common. “If you ask any Democratic voter in North Dakota, their main goal would be to defeat Donald Trump.”

Judy Lentz, a Democrat at the Emmetsburg event, says she likes Mr Buttigieg but worries about his electability. “It is going to come around to who we think can beat Mr Trump,” she says. At a separate event nearby in Arnolds Park, Carolyn Brown, who is leaning towards Mr Biden, agrees that the only question is: “Who can beat Trump?”

Iowa contenders — strengths and weaknesses Joe Biden, former vice-president Strengths Strong name recognition, popular among African Americans, very experienced Weaknesses Has stumbled in debates, too establishment for some young voters Bernie Sanders, senator from Vermont Strengths Loyal support among young voters, who consider him authentic and bold Weaknesses Distrusted by the party elite, too extreme for some Democrats Elizabeth Warren, senator from Massachusetts Strengths Also strong, popular with young voters and many women who want to see a female president Weaknesses Lost momentum after heavy criticism of her healthcare plan Pete Buttigieg, former mayor of South Bend, Indiana Strengths The fresh face in the race, has been able to straddle moderate and progressive camps Weaknesses Inexperience.

Some more conservative Democrats may recoil at his sexuality Amy Klobuchar, senator from

Minnesota Strengths A persuasive moderate voice who could gain support if Mr Biden falters Weaknesses Although starting to rise in recent weeks, has struggled to gain traction in the campaign Iowa is notorious for surprises.

Jimmy Carter, then a little-known southern governor, came from nowhere to win the state on his way to the presidency in 1976. In 2008, Barack Obama came from far behind to beat Hillary Clinton, a result that showed he could win white voters in a rural state.

Howard Dean was the frontrunner in 2004 until John Kerry sprinted ahead in the last week, knocking the former Vermont governor into third place. And four years ago, Mr Sanders stunned Mrs Clinton again by coming tantalisingly close to winning.

“Nobody has any idea,” Mr Dean stresses. “I had no idea what was going to happen when I was there.”

On the question of how each contender would fare against Mr Trump, polls show Mr Biden winning by 4 points, ahead of Mr Sanders, Ms Warren and Michael Bloomberg. Mr Buttigieg is the only top Democrat who would lose. But when it comes to Iowa Democrats, polls show they remain at odds over who should be the standard bearer.

After long being the frontrunner in Iowa and New Hampshire, which holds the first primary a week later, Mr Biden was overtaken in Iowa last summer by Ms Warren. The Massachusetts senator was then eclipsed by Mr Buttigieg, who in turn was passed by Mr Sanders, before Mr Biden returned to the top of the group. Yet in the last week, Mr Sanders has moved ahead, while Ms Klobuchar has entered double-digits for the first time in the 2020 race.

Mr Bloomberg does not register in Iowa because of his decision not to campaign in the state. But he has jumped into fourth place in national polls, propelled by tens of millions of dollars in television ads that he hopes will catapult him into contention when more than a dozen states vote on the delegaterich Super Tuesday on March 3, when 13 states will vote.

The critical distinction is

whether the candidates fall into one of two camps — moderate or progressive.

Mr Biden and Ms Klobuchar say the way to beat Mr Trump is to attack from the middle, appealing to Democrats and independents who backed him in 2016 by staking out moderate positions. But the progressives, Ms Warren and Mr Sanders, urge bold ideas, such as a fully nationalised healthcare system. They argue that a lack of radicalism helped create the conditions for Mr Trump to win since they did too little to help struggling Americans.

Speaking in Des Moines before returning to Washington for Mr Trump’s impeachment trial, Ms Warren took aim at the moderates, saying, “Some folks in our party don’t want to admit” that the US is in a “crisis” over everything from the gap between the rich and poor, the soaring cost of healthcare and high levels of student debt.

“If they think that nibbling around the edges of big problems, running some vague campaign is somehow the safe strategy, they’re wrong,” Ms Warren told a packed gymnasium at Weeks Middle School. “If all the best Democrats can offer is business as usual after Donald Trump, Democrats will lose. We win with big ideas.”

While Mr Biden has generally steered clear of attacking his rivals by name, he aired an ad saying it was “no time to take a risk” on other candidates.

Mr Dean says there are plausible arguments on both sides.

“Biden is saying I’m better because I can appeal across a broader spectrum. Bernie is saying you can’t win unless you motivate the hell out of people, and Elizabeth is saying the same,” he says. “The number one criteria is who can beat Trump and nobody knows.”

Each candidate has strengths.

Mr Biden resonates with white working-class Democrats who backed Mr Trump and AfricanAmericans who remember his time as vice-president to the first black president. Mr Buttigieg, a gay, former mayor and army veteran, is the fresh face, while the folksy Ms Klobuchar touts her results-driven approach in Congress.

Ms Warren and Mr Sanders have strong appeal among young-

er voters, while the Massachusetts senator is also making a big pitch to women — in a push that helped her win some converts at her Des Moines event. “I came here to Iowa to support Pete Buttigieg, but I came to this town hall and she just spoke to me,” says Hailey McGuire, a high-school student.

“She just radiated girl power.”

Yet all the contenders also have significant challenges. With the exception of Mr Biden, most lag far behind with black voters, which raises questions about their ability to connect with a key segment of the Democratic electorate. Mr Biden has struggled at times with fundraising, which could be a problem as expensive TV ads become important in the bigger states. He also fares less well with younger voters than the progressives.

Speaking after a Biden rally at Simpson College, Kathryn Hays, a politics student who plans to support Ms Warren in the caucus, says her generation is gravitating to Mr Sanders and Ms Warren because of their idealism. She says Mr Sanders has been “radical throughout his whole political history”, which her friend Samantha Wuebker explains is “probably why Elizabeth is also doing so well among our generation too”.

Mr Buttigieg is also competing for the same college-educated voters as Ms Warren, but has to overcome concerns about his inexperience. At one event, he also faced a common question about his “really low” support among black voters. “African American voters who know me best support me,” he said.

Ms Warren also needs to boost her support among black voters, while she and Mr Sanders must show that they can win over enough moderate Democrats to beat Mr Trump in November. Illustrating that concern, Robert Brammer, a 70-year-old who was attending a Klobuchar event in Des Moines, says he prefers Mr Sanders’ progressive ideas but will campaign for the Minnesota senator because she is more pragmatic.

As the race moves out of the predominantly white Iowa and New Hampshire into the more diverse states, an important

Continues on page 58

58

Monday 03 February 2020

BUSINESS DAY

FT

NATIONAL NEWS

ISS chief on his battle with corporate America and the SEC Gary Retelny says business lobby played dirty over proxy adviser reforms Attracta Mooney

F

or a man in battle with Corporate America and the US financial regulator, Gary Retelny is in fine form.

In a two-hour video interview, the chief executive of Institutional Shareholder Services talks about everything from his childhood in Nicaragua to stamp collecting. He also cheerfully but methodically rebuts the many denunciations of the company he has led since 2011.

ISS is the world’s largest proxy adviser, an insipid phrase that belies its importance in global financial markets.

The governance division of ISS makes recommendations on how shareholders should vote at more than 40,000 company meetings a year, advising investors on whether to support a chairman’s re-election, reject a chief executive’s pay package or approve a merger.

Depending on who you speak to, ISS is far too powerful, rife with conflicts of interest and error-prone, or it plays a vital role in helping investors to navigate complex corporate governance matters across their portfolio of stocks.

“We get all kinds of criticism,” says Mr Retelny. “But the criticisms you hear now are incredibly dated.”

Gary Retelny Born March 1958, Nicaragua Total pay not disclosed Education 1979 BS in Civil Engineering, Stanford University 1980 MS in Civil Engineering, Stanford University 1983 MBA, Stanford Business School Career 1983-85 Morgan Guaranty Trust, M&A and financial analysis division 1986-88 Morgan Stanley, wealth and investment manage-

ment group 1989-91 Banco Santander, investment management NY office 1991-94 HispaniMedia 1994-96 James D. Wolfensohn, M&A and strategic advisory 1997-98 Morgan Stanley, wealth & investment management, head of Latin America 1999-03 Latin America Capital Partners/Cori Capital Partners, cross-border private equity 2003-14 MSCI, chief administrative officer, corporate secretary, and head of strategy and business development 2011 to present Institutional Shareholder Services (ISS), president and chief executive Mr Retelny, 61, is well versed in batting off attacks. First, he has spent the past three years defending ISS from an intense and sometimes unbelievable campaign from Corporate America and its lobbyists.

More recently the Securities and Exchange Commission proposed controversial new rules governing proxy advisers last November. The SEC’s consultation period for the rules ends on Monday.

ISS has argued strongly against the proposals, which include forcing proxy advisers to reveal their voting recommendations to a company’s management before they are sent to clients.

Speaking from New York, Mr Retelny is lively, engaging and unfailingly polite, but he does not back down from an argument — something the SEC discovered last year, when ISS decided to sue the regulator. The move drew gasps from the corporate and investment worlds. “That’s punchy,” says an executive at one of the world’s largest asset managers.

The lawsuit is currently paused while the SEC finalises the rules.

“But we expect to re-engage, depending on what the final rules are,” says Mr Retelny.

Although ISS has been in business for more than three decades,

‘We get all kinds of criticism’ says Mr Retelny © Tony Healey

scrutiny of it and its rival Glass Lewis has intensified in recent years, as big investors increasingly started to pay attention to corporate governance.

At the same time, many large shareholders globally became more willing to vote against management, including at oil majors ExxonMobil and Occidental in 2017, when shareholders backed climate-change resolutions to the frustration of management.

As Mr Retelny sees it, rather than pick a fight with their shareholders, disgruntled companies — annoyed that investors are voting against pay packages or all-male boards have singled out proxy advisers. “We have become a convenient point of attack,” he says.

Then he rattles off a range of facts and figures to counter the complaints about ISS. While the proxy adviser has been accused of publishing error-ridden reports, Mr Retelny says of the 6,498 reports it issued last year in the US, it made 48 material mistakes that led to a correction in its recommendation — an error rate of 0.7 per cent.

“We do make mistakes, but we correct them,” he said.

Another regularly touted criticism is that investors blindly follow ISS’s voting recommendations. But Mr Retelny says 88 per cent of its top clients receive tailored recommendations that are based on the investor’s voting policy rather than ISS’s default report.

He is also quick to defend ISS’s position as the largest proxy adviser, even if he says the company never set out to be the dominant provider.

Mr Retelny says scale matters in the proxy advice business, as asset managers are often invested in thousands of companies around the world.

“We do 40-odd thousand of these [reports] a year. It is quite a logistical undertaking and scale matters very, very much in order to provide the services on a timely basis that clients demand.”

Then there are complaints that ISS has become a de facto governance standard setter, unnecessarily wading into debates around environmental and social

topics and taking too prescriptive a view on issues such as executive pay and board competition.

Mr Retelny says ISS only opines on the resolutions for the meeting in its proxy report.

“If there is an environmental or social item, we certainly will provide a recommendation because that is what our clients expect of us.”

He also bats off criticism about a conflict of interest at ISS, which has a division that provides advisory services to companies on how to improve governance, while also issuing voting recommendations advice to shareholders in those companies.

Many companies provide different services to different clients, he says, adding that he would not consider selling either part.

In re c e nt w e e k s, I S S re launched an initiative called Protect the Voice of Shareholders, its own lobbying effort aimed at “correcting misinformation and educating visitors about the threats posed by proposals under consideration by the SEC”.

to have many volunteers on the ground Five days before the Iowa caucuses, Amy Rockhold has a meeting in a Des Moines coffee shop with Democrats who have volunteered to help get voters out for Pete Buttigieg on Monday.

Ms Rockhold is a precinct captain for Mr Buttigieg — a position most candidates aim to fill in the 1,678 precincts that will hold caucuses across Iowa’s 99 counties.

The role is important because of the unique nature of the caucuses, which reward candidates who have invested heavily in building up large networks of volunteers.

Democrats will gather in houses, schools, churches and other venues where they will form groups

based on who they are supporting.

They can then haggle with friends and neighbours to convince them to switch sides before the first round is completed.

Candidates must secure 15 per cent in the first round to be viable. If a voter joins a group for a candidate who does not meet the threshold, they can move to another group in a second, final round. That means the second preference of voters can be critical.

After the results are tabulated, candidates who have cleared the 15 per cent bar will be awarded a proportional number of the 41 delegates who will attend the Democratic convention in Milwaukee in July, where the party will formally nominate its 2020 candidate.

US election: Democrats deeply divided...

Continued from page 57 question is who can recreate the “Obama coalition” — a grouping of white voters in the north, black voters in the south, Hispanics, millennials and women — that swept Mr Obama to the White House in 2008.

“What it is going to take to beat Trump is to get out our voters,” says Mr Dean. “Our voters are under 35, female and people of colour.

All of those three groups have to be enthralled to a degree with a candidate. The problem is the Democratic candidates all speak to different people, and that is why nobody can decide.”

Kaleb Autman, a 17-year-old high-school student who came to Iowa with Mikva Challenge, a group

that helps young people to become engaged in politics, will vote for the first time this year. But he worries that some of the Democrats are too focused on winning over Trump voters and not enough on expanding the party.

“They focus too much on how to get Trump’s people on our wagon . . . rather than focusing on the people who didn’t show up to vote,” he says. “If you want to win this election, you have to go for new voters.”

One of the unusual factors is that three of the top candidates — Mr Sanders, Ms Klobuchar and Ms Warren — have had to stay in Washington for much of the past two weeks because of the impeachment trial, giving an advantage to www.businessday.ng

Mr Biden and Mr Buttigieg. Yet the restraints could help Ms Warren receive a boost over her fellow senators since she has one of the best on-the-ground organisations.

Iowa often has a winnowing effect on the race but the big field — the number of undecided voters, the trial-related restraints on the senators and the fact that the candidate with the most cash, Mr Bloomberg, is ignoring Iowa — means the caucuses may be even more unpredictable than ever.

“The old saying is there are three tickets out of Iowa [for the leading candidates],” says Mr Dean.

“Clearly that is not true this year.”

Follow Demetri Sevastopulo on Twitter: @dimi Complex caucus: why it pays

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BD Money

Monday 03 February 2020

BUSINESS DAY

COVER

PERSONAL FINANCE

Gold, Cryptos show why havens might be good bet amid global uncertainties

T-Bill rates rise first time in 16weeks on CBN’s cash reserve ratio hike

Recent events in the New Year, only a month old, have put the world on the edge showing just why investors should consider diversifying into havens and alternatives in an uncertain world.

For the first time in 16 weeks, fixed-income investors seeking high-yielding securities were not disappointed, as attempts to buy the federal government short-term debt instruments at attractive rates were accepted, thanks to the cash reserve ratio hike by the Central Bank.

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60

Monday 03 February 2020

BUSINESS DAY

Monday 03 February 2020

BUSINESS DAY

Cover Story

FixedIncome

Gold, Cryptos show why havens might be good bet amid global uncertainties SEGUN ADAMS

R

ecent events in the New Year, only a month old, have put the world on the edge showing just why investors should consider diversifying into havens and alternatives in an uncertain world.

From Trump’s World War III scare, the Australian forest fire, locust outbreak in Africa to a virus epidemic now declared

by WHO as a global health emergency, 2020 feels like it would be a long year.

A face-off between US and Iran threatened middle-east politics and pushed crude oil price up in early wins after Iraq and Iran talked tough. Precious metals, fresh off a great 2019 on the back of global uncertainties also surged in early January.

The recent outbreak of Coronavirus in Wuhan, China has now spread to almost 20 countries, infecting 9,000 and killing more than a hundred. The incident is weighing on stock markets in the US and some other countries but havens have seen noted impressive gains.

Gold, currently above a 7-year high, climbed marginally on the spot market on Friday to extend gains in the year to 4.1 percent.

The bullion hit $1,581.34 an ounce partly helped by the global health crisis.

Gold had surged to $1,588.13 per ounce, the highest level since April 2013, when Trump threatened immediate and “disproportionate” strike should Iran retaliated US’s killing of General Qassem Soleimani.

The increase in bullion price is because the metal is usually perceived as a safe store of value during periods of uncertainty. For instance, the precious metal gained 18.9 percent in 2019, characterized by geopolitical uncertainties, to record its performance in nine years.

Following suit, bellwether cryptocur-

61

T-Bill rates rise first time in 16weeks on CBN’s cash reserve ratio hike ENDURANCE OKAFOR

F

or the first time in 16 weeks, fixed-income investors seeking high-yielding securities were not disappointed, as attempts to buy the federal government shortterm debt instruments at attractive rates were accepted, thanks to the cash reserve ratio hike by the Central Bank.

A total of N229.63 billion worth of successful transactions was recorded at the Nigerian Treasury Bills (T-Bills) auction conducted Wednesday by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria (FGN), this was the same amount offered at the auction.

“It is not surprising that the market will react like that. The hike in Cash reserve ratio for commercial banks in the last Monetary Policy meeting from 22.5% to 27.5% is expected to suck up 5% of banks deposit, reducing the money supply,” Paul Uzuma, MD of Halo Nigeria Capital Ltd said.

The fear of a further spike in inflation regime forced the Central Bank of Nigeria

(CBN) to undertake a moderate tightening stance at the first monetary policy of 2020, leading to the raising of Banks’ cash reserve ratio (CRR) by 500 basis point, from 22.5 per cent to a new level of 27.5 percent.

The move by the Central Bank is to mop up what the apex bank described as liquidity surfeit in the Nigerian economy, responsible for driving the inflation since August of 2019.

A breakdown of the results for the Treasury bill auction for January 29, 2020, reveals that the allotment for the 91-day and 182-day maturities were oversubscribed by a joint N42.73 billion.The 91-day instrument was oversubscribed by N21.82 billion, the total amount that was placed on offer stood at N28.02 billion but investors jostled for N49.84 billion. For the 182-day, N33.68 billion was offered for auction but investors bid forN54.59 billion.

“This is the obvious impact of the increase in CRR. The increase took effect immediately and banks are therefore concerned about preserving liquidity,” Ayorinde Akinloye, a research analyst at Lagos-based CSL said.

While investors bid at rates as high as 12

percent, 11.5 percent and 14.4 percent on the 91-day,182-day and 364-day bills, the apex bank lowered rates across the three tenors to 3.5 percent, 4.5 percent and 6.5 percent, respectively. While the rates are the first rise since October 2019, they compare with 2.95 percent, 3.95 percent and 5 percent they cleared on the 91-day, 182-day and 364-day bills at the previous T-Bills auction which saw rates crash to a single digit for the first time in 3years.

“The investors’ panic mode has begun to subside. Due to the availability of other investment options like the Federal Government promissory notes with a higher yield,

investors bided at a higher rate. Also, investors are cautious to lock in their funds at a lower rate,” Ayodeji Ebo, Managing Director, Afrinvest Securities Limited.

Stop rates across all maturities took a downward turn from 11 percent in October 2019 to the lowest bid rate for 364 days at 4 percent, as compiled from market auction results for January 15, 2020.

Analysis of the auction result for Wednesday 29 January 2019 revealed that the 364-day maturity was under-subscribed by a tune of N42.73 billion. While a total of N167.93 billion was offered, investors bid were N125.20 billion.

Market analysts see the move by investors, the first in a long time as an indication of unwillingness to stay at the long end of the curve.

According to Ebo, the DMO could not achieve its planned offer for the 364 days due to the higher bid rates. “This may be the end to the downward trend in yields, albeit, we do not foresee any significant rise in yields at the next auction,” he said.

Akinloye expects this to persist in the face of tightening system liquidity “while upcoming maturities are not very significant.”

Here’s how you can recover your missing shares, dividend with Integrated Shares Finder HOPE MOSES-ASHIKE rency Bitcoin has jumped by around 14 percent since Wuhan, at the epicentre of the virus outbreak, was put on a lockdown.

While there’s a debate whether cryptos are havens, Bitcoin touched $9,545 last week for the first time since November last year. The crypto has gained around 34 percent in January alone.

Given that over 60 percent of the global Bitcoin mining takes place in China and a sizeable portion of global trade takes place in the country, it should makes sense that a major health crisis would support cryptocurrency price.

More so, as concerns that a slowdown in the Chinese economy and spill-over to other economies hurt stock markets, www.businessday.ng

investors in developed economies are expected to look for safety in havens and alternative assets.

However, some crypto analysts say the surge in Bitcoin might not be related to the virus outbreak.

The sceptics explain movement in Cryptocurrencies as being tied to shifting stance on regulation and activities of big crypto-investors (whales) in the market.

In October last year, Chinese president Xi Jinping emphasized that importance of the integrated application of blockchain technology to new technological innovation and industrial transformation in China.

While in a related event, China Merchant Bank, a Chinese bank that con-

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ducts businesses domestically and internationally, announced an investment in BitPie, said to be the Bitcoin wallet with the longest history and most users in China.

The events have been interpreted, alongside the passage of the cryptographic law by the Chinese government, to grant legitimacy to Bitcoin even though the official acknowledgement was for Blockchain technology.

While the crypto-world is still trying to understand the reason for the price surge so far, events both in 2019 and the past few weeks suggest that during uncertainties Cryptocurrencies along with other havens have seen impressive gains.

Nobody hopes for bad news, but 2020 has so far shown that there is no predicting which way the pendulum will swing. Nonetheless, investors can consider diversifying their investment so their portfolio remains strong whichever way the tides turn.

@Businessdayng

D

o you have missing shares, debentures, bonds, fixed income securities? Integrated Shares Finder (ISF) can help you find them, as well as recover your unclaimed dividends through direct payment into your bank account.

Integrated Shares Finder is a financial advisory product designed by Integrated Trust & Investment Limited to help the Nigerian investors to locate and recover their missing shares, loan stock and other capital market assets, so that they can enjoy the benefit due to them on their investments and boost their cash flow .

The benefits of the new product include to alleviate the suffering of investors over missing or lost investments; to reduce the incidence of missing shares and unclaimed dividends; as well as fixed income securities in the Nigerian Capital market, and among

others to restore and enhance investor’s confidence and bring investors back to investing in the Nigerian Capital market.

It is common to hear some shareholders say that they have lost their investment or that their company has closed down, simply because they have not heard from the company for a long time. Many Nigerians have shares in companies which are no more in business due to business failure, merger or acquisition.

Many are still holding on to share certificates issued to them many years ago whereas the underlying shares have been posted in their electronic form to an unknown Central Securities Clearing System (CSCS) account or registrars department in the aftermath of a capital restructuring scheme. In other cases, the shares have ‘evaporated’ as the business they invested in has officially been liquidated e.g. Nigeria Bottling Company Plc, Nigerian Tobbaco Company Plc, Trade Bank, Afribank, International Merchant Bank, Savannah Bank etc “Inadequate investor information is a major challenge which has contributed www.businessday.ng

greatly to low investor confidence and low participation of Nigerians in the stock market in recent time,” said Dele Lawore, group managing director/CEO, Integrated Trust & Investment Limited.

As at December 2019, unclaimed dividends in Nigeria rose to N130billion from N103.1 billion in December 2016, according to market sources. Despite the best efforts of SEC in reducing the amount of unclaimed dividends through the introduction and enforcement of e-dividends payment system, the amount of unclaimed dividends has continued to increase. Non receipt of dividends may serve as disincentive to further investment in shares by the retail investors who are always in love with their dividends.

“Under ISF, we have helped many shareholders to recover and to revalidate their dividends and we are determined to use ISF to assist many others too to recover their unclaimed dividends and missing shares,” Lawore said.

“Nigeria has a population of about 180million out of which only 3million or about 3%

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of the adult population invests in the stock market. Imagine how strong our stock market can be if at least 10million Nigerians were to invest in stocks and shares regularly?

Conscious effort must be made to develop saving and investment culture which can guarantee availability of cheap equity and loan capital for our country’s future growth and development,” he said further.

He said as at today, over 200 clients have subscribed to the ISF product and have been able to recover their missing shares and dividends.

“The feedback received from beneficiaries of the ISF show that it is a wonderful experience to recover a missing or lost asset. Some of them confirmed that it is as if they just won a jackpot or received a windfall! Who knows what investment or income you too have but is not known to you, which we can find for you?”

Biodun Fawonmi, former director and shareholder of the company said Nigerians should see this as asset. “It is important that everybody look for this asset,” he said.

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Monday 03 February 2020

BUSINESS DAY

Market Wrap-up

A

total turnover of 1.561 billion shares worth N26.073 billion in 21,444 deals were traded last week by investors on the floor of the Exchange, in contrast to a total of 1.237 billion shares valued at N22.762 billion that exchanged hands preceding week in 21,156 deals.

The Financial Services industry (measured by volume) led the activity chart with 1.154 billion shares valued at N13.650 billion traded in 11,306 deals; thus contributing 73.93% and 52.35% to the total equity turnover volume and value respectively.

The Consumer Goods followed with 137.115 million shares worth N3.177 billion in 2,908 deals.

The third place was ICT industry, with a turnover of 94.464 million shares worth N6.554 billion in 894 deals. The NSE All-Share Index and Market Capitalization both depreciated by 2.65% to close the week at 28,843.53 and N14.857 trillion respectively. All other indices finished lower with the exception of NSE Insurance and NSE Consumer Goods index which appreciated by 0.90% and 0.09% respectively Seventeen equities appreciated in price during the week, lower than thirty-two (32) equities in the previous week. Forty-four (44) equities depreciated in price, higher than twenty-eight (28) equities in the previous week, while one hundred and two (102) equities remained unchanged, lower than one hundred and three (103) equities recorded in the preceding week.

Chart of the week

WeekAhead Ahead Week

Chart of the Week: Record bid for FGN bonds at auction

Week (Monday, 8th April Friday, 12th April, 2019) In Ahead the equities market, the –trend witnessed this week is likely to persist,

as the dual impacts of the weakening sentiment and mixed earnings performances during earnings season are expected to pressure market return. Nonetheless, investors are advised to focus on taking positions in fundamentally justified stocks.

In the money market, inflows from OMO maturities from instruments worth NGN327.56 billion are expected on the 4th and 6th of February. This should boost system liquidity towards the end of the week and result in the OVN rate trending southwards week-on-week.

For Teasury Bills, as the cloud of uncertainty over the CRR adjustment gradually fades, we expect trading volumes to increase and yields to further trim in the NTB market, especially given that OMO maturities are expected to flood the market in the coming week.

In the bonds market, trading activity in the Treasury bonds market would remain high, supported by next week’s OMO maturities, and the still favourable yields in the Treasury bonds market.

In foreign exchange market, despite the rate of decline in FX reserves, which has heightened fears regarding the possibility of a currency devaluation, CBN will be able to sustain its naira defense through H1-20, at least. www.businessday.ng

FBNQuest reports remarkable outcomes in monthly auction of FGN bonds . Analysts at FBNQuest say the total bid of N625bn was the highest for at least six years, while sales hit a phenomenal N410bn (US$1.13bn). Marginal rates declined for all three instruments, and by 115bps for the five-year benchmark to single-digit levels.

“The auction has to count as a very positive outcome for the DMO, which is well-placed for the bond maturity of about N600bn next month,” FBNQuest said. “It raised N1.37trn from competitive sales in calendar 2019, compared with a target of N850bn.”

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Company IN FOCUS

BUSINESS DAY Monday 03 February 2020 www.businessday.ng

Julius Berger plc: Will improved Government spending see new era for construction giant?

OLUFIKAYO OWOEYE

L

ast week, shares of construction-giant, Julius Berger was the toast among investors after the company announced it recorded N10.3billion as profit for the full-year ended 31st December 2019. On Tuesday, price surged 9.93percent, almost 10percent gain that is allowed in a day to N22.15. On that day, a total of 12.55m units of shares exchanged hands, the highest volume since June 26, 2015, when a total of 136.23m units of shares was traded.

Still basking in the euphoria of an impressive result, investors swoop on the shares of the construction-giant on Wednesday and Thursday trading 1.22m and 1.74m units of shares respectively, prices up 0.45percent and 1.12percent on the two days, while profit-taking by investors took over on Friday with prices dropping 1.33percent.

Amid an economic recession, the company plunged into N2.39bn loss in 2016. Understandably, the construction-giant relies on public spending (Federal and State Government) spending.

During the economic contraction, the company was left exposed to a huge foreign exchange acquisition loss of N14.23bn.

While the foreign exchange losses have reduced with an improved economy, they still remain significant. Further devaluation in the nearest future (no matter how slim) could have a negative impact on the company’s results.

Julius Berger has since found the path of profitability, thanks to improved economic growth, though sluggish, with an uptick

in capital expenditure spending by government. In 2017, the company recorded a bottomline of N2.51bn, while in 2018, it ballooned to N6.1bn.

In its recently released consolidated unaudited fourth-quarter result for the period ended 31ST December, revenue ballooned to N264.55bn from N194.61bn.

Marketing expenses increased to N168.32m from 126.8m in 2018.

Administrative expenses stood at N35.31b from N34.46bn in 2018, leaving profit after tax at N10.3bn from N6.1bn in full-year 2018.

Further breakdown of the revenue segments of the group show that civil works segment recorded N150.79bn from N110.15bn in 2018, Building works segment recorded N89.94bn from N65.70bn in 2018, facility management services recorded N23.81bn from N17.39bn in 2018.

Following its vision for diversification, the JB plc in August announced that it would be participating in the bidding process for the Camalaniugan (Cagayan) Bridge in a consortium with FreyFil Corporation in the Philippines.

This may have led to a marginal increase in revenue from its Asia & Europe markets to N4.55bn from N4.26bn. It also announced the acquisition of 20% of equity share capital in Petralon 54 Limited.

Industry Analysis Nigeria is still battling with a humongous infrastructural deficit and according to the National Integrated Infrastructure Master Plan, an estimated $3trn would be required over a period of 30 years to bridge this gap. Another estimate also suggests that the country requires an annual investment of $15.0bn (or N4.6tn) - 45.0% of 2020 of budget - for 15

years to adequately develop its infrastructure nationwide.

Last year saw construction sector GDP expanded 2.37percent year-on-year in the third quarter and 0.7percent year-on-year in the second quarter. Its contribution to total real GDP was 3.01percent in the third quarter; same as its contribution in the same quarter of the previous year, but lower than in the second quarter where it contributed 4.45percent.

With government’s commitment to transport and housing infrastructure, the headroom for growth is clearly compelling for construction companies such as Julius Berger.

The demand from the public sector remains one of the strongest drivers for construction companies in Nigeria. While the execution of capital expenditure continued to underperform the budgeted figure, government spending on infrastructures such as road, housing, and rail transport has been sustained lately.

Over the last 8 years, the Federal Government has spent an average of N0.9tn per annum on infrastructure. According to President Buhari, some of the projects Nigerians should expect to come upstream from 2020 include: 47 road projects scheduled for completion in 2020/21, substantial work on the Second Niger Bridge; and completion of 13 housing estates.

There are signs the company might do far better in coming years considering and Julius Berger’s dominance in the market with Federal Government’s plan to borrow N2tn from N10tn pension assets for infrastructural investment.

Accordingly, a moderate implementation of 2020 budget to complete ongoing projects may buoy the top line of Julius Berger in this financial year.

Notable highway construc-

tion handled by Julius Berger include the Lagos–end of the Lagos-Ibadan Expressway, ongoing second Niger-bridge, the Abuja-Kaduna-Kano road, rehabilitation of Runway and Taxiways at International Airport, Abuja, the Construction of multi-purpose sports arena in Uyo, Akwa-Ibom State, Construction of the iconic cable-stayed bridge in Lagos; several turnkey building projects in the coastal areas, and many more.

In 2019, capital releases could only commence after the signing of the 2019 Budget on 27th May 2019. As at 30th September 2019, a total of about N294.63 billion had been released for capital projects.

With the early passage and signing into law of 2020 budget, the ministry of works and housing tops the list of top capital allocations in the 2020 budget with a total capital allocation of N259.20bn, with over N210 billion for the construction and rehabilitation of roads in every geopolitical zone of the country, N1 billion for construction of Terminal Building at Enugu Airport, N10 billion for construction of Second Run-Way at Nnamdi Azikiwe International Airport Abuja.

Corporate Governance Mutiu Sunmonu is the chairman of Julius Berger a first-class degree in Mathematics and Computer Science from the University of Lagos. On January 1, 2008, he was appointed the Managing Director of SPDC and Regional Vice President Production. On January 1, 2010 Sunmonu became the Country Chair, Shell Companies in Nigeria; Sunmonu resigned from Shell Petroleum Development Company (SPDC) in 2015 after 36 years of service. As at 20 March 2019, he owns 1million units of shares in the construction firm.

Lars Richter as Managing Director who holds a Doctorate Degree in Civil Engineering and has vast operational experience, broad technical know-how and a strong knowledge of Julius Berger, Nigeria-wide.

Other directors include Belinda Ajoke-Disu, daughter of billionaire businessman, Mike Adenuga. As at 20th March 2019, Bella has an indirect holding of 288.6million units of shares through Goldenstone Estates Limited and Bilton securities Ltd. Jafaru Damulak also owns 1.98m units of shares at 20th May 2019.

The renewed commitment by the government to develop the decrepit infrastructure would mean that Julius Berger’s bottomline would receive a boost. However, the firm needs to further intensify its diversification plans as reliance on public spending is no longer sustainable. The lessons from the last economic recession should push the company to further diversify its portfolio.

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