BusinessDay 03 Mar 2020

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news you can trust I ** tuesDAY 03 march 2020 I vol. 19, no 511

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Borrowing costs to rise as S&P downgrades Nigeria N

No let-up for stocks as market rout deepens over virus fears SEGUN ADAMS

DIPO OLADEHINDE, MICHAEL ANI & SEGUN ADAMS

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nternational credit rating agency, Standard & Poor’s (S&P), has downgraded Nigeria’s outlook for 2020 due to declining foreign exchange reserves. The downgrade could dampen investors’ appetite towards Nigeria’s EuL-R: Ken Giami, CEO, African Leadership Magazine; Florence Ifeoluwa Otedola (aka DJ Cuppy), famous DJ/ humanitarian, and Akinwunmi Adesina, president, African Development Bank (AfDB), at the African Leadership Magazine award which conferred African Person of the Year on Femi Otedola, for his philanthropy and charitable contributions to society. The award was received on his behalf by his daughter in Johannesburg, South Africa.

3rd downgrade in 4 months

robond issuance and increase borrowing costs, analysts say.

S&P revised the outlook on Nigeria to negative from stable while at the same time affirming its ‘B/B’ for Nigeria’s long- and short-term sovereign

credit ratings.

The New York-based rating agency also lowered its long and short national scale rating for Nigeria to ‘ngA-/ngA-2’ from ‘ngA/ngA-1’.

Long-term and short-term

sovereign credit ratings of ‘B/B’ mean Nigeria remains in the non-investment or speculativegrade as an obligor that currently can meet its financial commitments but could face difficulty in Continues on page 38

igerian stocks saw their second-biggest decline in the year on Monday, set to match the longest bearishrun in 2020, as the coronavirus outbreak continues to put a question mark on economic outlook after pushing oil price to a year low.

The All-Share Index fell 1.53 percent to push the market, already at year-low, further down, with consumer goods stocks (down -5.19 percent) noting their worst performance in over a year.

“The day’s performance shows that investor sentiment for risky assets is still weak,” said Gbolahan Ologunro, analyst at CSL-Stockbrokers. “That will likely persist. In the short term, Continues on page 38

Inside

LEKOIL investigation committee says purported deal with QIA was fake P. 2 IFC partners Coronation Merchant Bank to boost trade finance in Nigeria P. 2 FG promises affordable rice price, commends Stallion Group’s contribution to food security P. 39

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news GTBank reports profit before tax of N231.7bn in 2019

... proposes final dividend of N2.50k HOPE MOSES-ASHIKE

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uaranty Trust Bank plc has released its audited financial results for the year ended December 31, 2019 to the Nigerian and London Stock Exchanges.

A review of the results shows positive performance across all financial indices, reaffirming the bank’s position as one of the most profitable and well managed financial institutions in Nigeria. Profit before tax stood at N231.7 billion, representing a growth of 7.5 percent over N215.6 billion recorded in the corresponding year ended December 2018. The bank’s loan book grew by 19.0 percent from N1.262 trillion in December 2018 to N1.502 trillion in December 2019, while customers’ deposits increased by 11.4 percent to N2.533 trillion from N2.274 trillion in December 2018.

The bank maintained a well-structured and diversified balance sheet with total assets and shareholders’ funds closing at N3.759 trillion and N687.3 billion respectively. Full Impact Capital Adequacy Ratio (CAR) remained very strong, clos-

ing at 22.5 percent. In terms of assets quality, NPL ratio improved to 6.5 percent in December 2019 from 7.3 percent in December 2018 while Cost of Risk (COR) remained flat at 0.3 percent. Complementing the improvement noted in NPLs, the bank maintained adequate loan loss coverage of 126.6 percent for Lifetime Credit Impaired Loans (NPLs) compared to 105.1 percent recorded in December 2018.

“At GTBank, we exist to provide excellent service to our customers and generate the returns that our shareholders expect. Our strong financial performance in 2019 demonstrates that we are delivering on both fronts.

We achieved healthy growth across all our major businesses despite varying degrees of uncertainty and volatility, and we are making progress in positioning our business for long-term growth in the face of a rapidly changing competitive landscape,” Segun Agbaje, managing director/CEO, Guaranty Trust Bank plc, said.

LEKOIL investigation committee says purported deal with QIA was fake … to recover $450,000 from Seawave … to review corporate governance OSA VICTOR OBAYAGBONA

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EKOIL, an oil and gas exploration and production firm with focus on Nigeria and West Africa, is set to review its internal corporate governance guidelines following the results of the investigation into the origination and execution of the loan agreement earlier announced by the company on January 2, 2020, with the Qatar Investment Authority (QIA).

As the company noted January 13, 2020, following the discovery that the Facility Agreement had not been entered into with the QIA, but instead with

certain individuals falsely purporting to represent the QIA, the Board established an independent committee to investigate the origination and execution of the Facility Agreement and steps that might reasonably be taken to retrieve money paid in association with the transaction.

The committee was supported in its review by Kroll Associates UK Limited acting as third-party forensic investigators. Advice was taken from Herbert Smith Freehills LLP, legal counsel engaged at the time of the investigation, on discreet issues arising from Kroll’s work.

The committee has reported to the Board the

following results of the investigation: The Facility Agreement was a part of a fraud perpetrated against the company. The Facility Agreement and the sums to be received by LEKOIL pursuant to it are not legally binding.

There is no evidence of any complicity of any Lekoil director or employee in the fraud.

The CEO led the interaction and negotiations with the individuals falsely purporting to represent the QIA, on behalf of the company, prior to ultimate approval being given by the Board to enter into the Facility Agreement.

The company has a legal claim to recover the

•Continues online at www.businessday.ng

Jack Welch, who led GE to become world’s most valuable company, dies at 84 ISAAC ANYAOGU

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ack Welch, a railroad conductor’s son who became chairman and CEO of General Electric and led it for two decades heralding its biggest growth, from $12 billion to $410 billion, has died at 84.

The cause was renal failure, his wife, Suzy Welch, said.

She did not say where he died.

Combative and blunt, Welch became the chief executive of General Electric in 1981, a few months after Ronald Reagan took office as president. It was a time of outsize gains for many of America’s big, multinational corporations and their leaders, who were helped by lower taxes and pro-business policies.

GE led the pack. The company’s revenue jumped nearly fivefold, to $130 billion, during Welch’s tenure, while the value of its shares on the stock market soared from $14 billion to more than $410 billion.

With a determination to win by busting up bureaucratic complacency, Welch earned two titles — “manager of the century” and “Neutron Jack” – the latter for slashing tens of thousands of jobs. Under his leadership, GE became the world’s most valuable company, after Microsoft. Its fortunes later turned south.

While at the helm, Welch bought and sold scores of

$450,000 paid to Seawave Invest Limited and its principals, in its capacity as introducer of those falsely purporting to represent the QIA. The Board only approved the execution of the Facility Agreement after a third-party global risk consultant engaged to undertake the due diligence investigation on Seawave provided a report, based on public record search, that did not identify any ‘red flags’ on Seawave or its principals.

The fraud, while relatively elaborate and sophisticated, should have been capable of being detected by parties engaged Continues on page 38

businesses, expanding the industrial giant into financial services and consulting. GE Capital Bank was founded seven years into his tenure.

His acquisitions included RCA – then-owner of NBC – and Kidder Peabody, the brokerage that became entangled in an insider trading scandal.

He also streamlined the conglomerate’s bloated bureaucracy by giving managers free rein to make changes they deemed beneficial to the bottom line.

Welch’s stardom extended beyond the business world.

In a 2000 auction for the rights to his autobiography, Time Warner’s book unit won with a bid of $7.1 million, a record at the time. Jack: Straight from the Gut, written with John A. Byrne, was published the next year and eventually sold more than 10 million copies worldwide.

He invented the “vitality curve”, in which managers were ranked into three groups.

The top 20 percent “A” group was “filled with passion, committed to making things happen”. The “vital” 70 percent “B” group was essential to the company and encouraged to join the A’s. Then there was the bottom 10 percent “C” group.

“The underperformers generally had to go,” Welch said in his 2001 book, Jack: Straight From the Gut.

•Continues online at www.businessday.ng www.businessday.ng

L-R: Ade Adefeko, vice president, Olam; Praveen Paulsamy, head, Olam Dairy, and Usman Abdullahi, chairman, at the MoU signing between Olam Dairy and Kano Dairy Cooperative Union on Pilot Milk Collection and Aggregation in Kano.

IFC partners Coronation Merchant Bank to boost trade finance in Nigeria HOPE MOSES-ASHIKE

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FC, a member of the World Bank Group, has announced a $40 million Trade Finance Guarantee facility to Coronation Merchant Bank under its Global Trade Finance Program. This will enable Coronation Merchant Bank to establish and expand correspondent banking partnerships with several international banks in IFC’s trade finance programme, broadening access to finance in Nigeria.

IFC’s Global Trade Finance Program (GTFP) will offer confirming banks full or partial guarantees to cover the trade-related payment obligations of Coronation Merchant Bank. The programme sup-

ports trade with emerging markets worldwide, allowing participants conveniently finance their imports and exports, and promotes the flow of goods and services between developing countries.

“The GTFP partnership is a critical milestone for us in our journey to become a leading financial institution in Nigeria. We are delighted to partner with the IFC in providing trade finance solutions to our customers and we assure all our clients of our continued support to enable them achieve their business objectives,” Banjo Adegbohungbe, acting managing director, Coronation Merchant Bank, said on the partnership with IFC.

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Kevin Njiraini, IFC’s director for Southern Africa and Nigeria, said, “We welcome Coronation Merchant Bank to the Global Trade Finance Program, which has been very active in Nigeria in the past.

This relationship will help improve the bank’s trade with other countries, and create new economic opportunities in Nigeria.”

Njiraini said the partnership attests to the continued growth of the Nigerian financial sector and restates IFC’s commitment to emerging markets around the world.

Coronation Merchant Bank was established in 2015 to provide wholesale banking to a long under-served market. The bank offers invest@Businessdayng

ment and corporate banking, private banking/wealth management and, global markets/ treasury services to its clientele. In 2019, Coronation Merchant Bank received awards such as Best Investment Bank in Nigeria by Global Finance, Best Investment Bank in Nigeria by World Finance, Best Investment Bank by Global Banking and Finance Review, and Best Investment Bank by Global Business Outlook.

The partnership with Coronation Merchant Bank underscores IFC’s commitment to Nigeria. IFC has invested in several projects in heavy manufacturing, technology and financial services, amongst other key sectors in the country.

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Tribute to all engineers

STRATEGY & POLICY

MA JOHNSON

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n the beginning, God created.

Yes, He created heaven and earth.

God is at the heart of the Biblical account of how the world we all live in today was engineered. With creative powers, God created man in His own image.

Indeed, someone once remarked that “God must be an engineer because the world is so beautiful.” I agree in- toto with the person who sees God as the “Master Engineer,” but the Holy Book did not refer to Him like that. Globally, the engineering family has made a career out of exercising this God-given creative power and analytical thoughts after Him. When the “Master Engineer” created the world, He laid the foundation on the seas, and it was fixed firmly on flowing waters. We can go further but we would not spend time in this article reflecting on the “Master Engineer” as we train more engineers for the future in order to work responsibly in this world.

Prince Phillip, Duke of Edinburgh, said in an interview some years ago how he holds engineers in high regard saying, “engineers come only second to God.” The Duke of Edinburgh is fantastically correct. Can you imagine a life without an engineer? No! It is because “Everything not invented by God is invented by an engineer.” Engineers, according to Prince Phillip, hold the key to the future of humanity and its ability to continue to thrive on the planet. Engineers play a vital role by helping to solve issues that arise as a result of the world’s increasing population.

This article is to celebrate engineers worldwide on the World Engineering Day. As we celebrate the Worlds Engineering Day for Sustainable Development tomorrow, 4 March 2020, we should

not forget that engineering will play a key role in achieving the United Nations (UN) Sustainable Development Goals as it utilizes the principle of science, technology, and mathematics to develop practical applications in food, water, shelter, energy, environment, sustainable cities, natural disaster resilience and other areas that are crucial to the existence of humanity. Indeed, if any developing country such as Nigeria hopes to prosper within the global economy in the next decade, capacity building in science, technology, engineering and mathematics is an absolute necessity. I strongly believe that Nigerian engineers have a crucial role to play in the sustainable development of the nation. It is because when engineering flourishes, everything flourishes.

Today, the United States of America (USA) is the most developed economy.

And from all indications the country has become a role model in terms of vibrant development in most fields of human endeavour. A glance into the USA political history reveals that quite a handful of its leaders had engineering background.

These include the First President of the USA and one of its founding fathers, George Washington (1732-1799). At the age of 16, he earned his living as a surveyor and his engineering heart, assisted him in laying the solid foundation on which the US has continued to prosper and flourish.

The other engineers/surveyors are as follows: Thomas Jefferson (1743-1826), who was the third President of the USA and was acclaimed to be the most versatile leader of his time. Abraham Lincoln (1809-1865) with his engineering mind saved the union from disintegrating and today, the greatest strength of the USA is its unity. As noted on his mausoleum, “No national leader has come from a humble beginning and non has achieved a more revered memory. Till today, Abraham Lincoln is still fondly remembered as the “Honest Abe”.

In Nigeria, it is worthy to acknowledge that an engineer of Herbert Macaulay’s calibre was the prime initiator of the country’s nationalism. Herbert Macaulay laid a solid foundation for our national emancipation, that even after his death, the fight for Nigeria’s independence

and her greatness have continued to gain momentum. After independence, Nigeria has equally paraded technocrats and engineers in politics such as Engr Olawale Ige who was then the Minister of Transport and Communication.

Others include erudite Professor Gordian Ezekwe, Professor Emovon, Dr LAZ Unaogu, General Sam Momah, General MT Kontagora, and Engr Bunu Sherif Musa. Also, the engineering background of General Olusegun Obasanjo assisted him to a large extent on two occasions when he steered the ship of the country.

Today, we have a few ministers, governors and lawmakers at state and federal levels respectively who are saddled with the responsibility of ensuring that our country develops.

It is therefore obvious from the preceding examples of local and international personalities how engineers were able to contribute to the development of their countries. There is no doubt that an engineer is an ingenious person. Engineers are therefore urged to continue to polish the gems in them and endeavour to salvage their noble profession and consequently, the country. At the national level, we must remain patriotic and at the grassroots, we must guard our profession jealously.

Why must engineers guard their profession jealously? It is because in the 21st Century, engineering will be at the heart of our modern world and crucial to the development of new technologies enabling the 4th Industrial Revolution such as artificial intelligence, Internet of Things, robotics or quantum computing etc. With the phenomenal advancement in technology, the fusion of genetic engineering with nanotechnology and robotics will undoubtedly, revolutionise our way of life.

In the task of transforming our society, the engineers have a crucial role to play and to do so effectively, engineers must be proactive politically in order to be politically relevant to national development. Engineers are essential for resilience to climate change, and to design and develop resilient infrastructure that will withstand the increasing weather-related events-floods, cyclones, and bush fires in most parts of the world.

‘

Today, the United States of America (USA) is the most developed economy.

And from all indications the country has become a role model in terms of vibrant development in most fields of human endeavour

Johnson is an author and a retired naval engineer who has passion for African development and good governance

Economic outlook for 2020: The human capital perspective

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he year 2020, the beginning of a decade that will birth inventions, and a corridor into the projections of the decades ahead; with huge expectation regarding the outcome of the year in terms of the economic relevance and impact on the welfare sustainability of the citizenry. Governance across the globe has an amazing influence on directions as impressed by her policies and strategies to align with macroeconomic factors within her economy. All these, inform the decisions that will be taken to impact the people, so it is of significant interest to analyse the provisions of the previous economic engagement and use same as a scope to seek clarity of the future.

The key economic elements are the derivatives from our day to day economic interaction which dictates our decision.

In the United Kingdom (UK), the coming months will have Prime Minister Boris Johnson work out a plan to reach an agreement with the European Union (EU) on strategic settlements upon the aftermath of Brexit or walk out of Brussels empty handed to face the reality that the years ahead will unveil without aligning with the rest of Europe, hoping to bridge the possible challenges and ensure that a more virile economically isolated United Kingdom emerges. Agreement has to be reached on trade and immigration policies especially because this will have direct impact on the economies of the UK and the member states

of the EU. This is a very remarkable period in Britain’s history as the decision of the coming months will go a long way in determining the economic relevance of United Kingdom to the region as well as the world at large. Careful analysis and sound negotiation skills must be brought to the fore to push through a fulfilling Brexit that will launch out a more prosperous United Kingdom.

On the other hand, their counterpart(s) in the European Union will also want to ensure that the exit of the United Kingdom does not leave the European Union weaker and less economically prosperous.

China at the turn of the decade is faced with the deadly Corona Virus with over 40,000 lives infected and over a thousand three hundred deaths which is sweeping through the nation due to the deadly virus ability to spread fast and wide; it is telling on the people as well as the economy as it has affected the socio-economic nerve centre of the Chinese economy. This has altered the economic indices of the nation with some cities on lock down and many others scaling down economic activities to almost a halt to avoid the deadly plague. Some global brands have either partially or completely shut down their factories and sales points across the country; this will further drop the growth rate of China that has dropped in the past year 2019 at 6.1 percent.

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as the United States (US) is geared to live out another year of presidential elections; with President Donald Trump trumping his way with daring policies to sway votes for his reelection, as usual the world stands to watch the political direction the US takes as it will affect the overall economic balance of other economies, her relationship with the Middle East, which gives a fresh perspective to where the year lies. Ensuring a beneficial trade ties with China, the health care policy and the continuous increase in the employment rate will be some of the key economic indicators of the campaign trains across the length and breadth of the United States.

In Nigeria, our economic compass is read through the price of the oil which our economy is almost solely reliant on, the outlook of the oil market shows that the price of Brent crude will stand at about $59 per barrel. The border closure will also not help matters as inflation is expected to rise from 11.3 percent in 2019 to 12.9 percent in 2020 which is still above the single digit target of the Central Bank of Nigeria (CBN).

Exchange rate is to see a marginal increase of 305.95 to 308.45 (N/US$) while CBN policy rate remains at 13.5 from 2019 and 2020. All these factors will impact the direction the economy of Nigeria will take.

Now looking at the possibility of pulling out of poverty as a nation, the Gross Domestic Product (GDP) growth of Nigeria is 2.1

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In seeking the engineering kingdom, Sam Momah, a former minister of science and technology, believes that, all engineers must respect professional ethics.

Furthermore, he is of the view that we (engineers) must make the code of practice sacrosanct; we must be less docile, less rigid, less materialistic and we must seek first, job-satisfaction and thereafter, every other thing shall be added unto us.

As engineers, we must identify ourselves with the aspirations of the people because we are at the vanguard of the foundational work in nation building.

As we all know, the engineering mind is critically required by our country because the engineer is among the most versatile, inventive, innovative, progressive, precise, logical, rational, result-oriented and brings to bear in governance unique ability in the skilful management or improvisation of resources.

I make bold to say that the developmental status of any country is measured by its standard of physical development, its productivity, and its overall ability to harness the forces of nature and add value to natural resources. How else can all these be attained than through the hands of engineers?

From the above, a nation that neglects or undermines its engineers remain underdeveloped and indeed an economic laggard. This is expected because engineering covers all known fields of human endeavours be it electrical and electronics engineering, civil, marine, mechanical, agricultural, chemical, industrial, aeronautical, environmental and genetic engineering amongst others.

Those in authority are requested to use the 2020 World Engineering Day to rethink and canvass for inclusive access to engineering for women and girls. And to encourage young people, especially girls to consider engineering as a career.

Please, permit me to respectfully join numerous men and women of goodwill to say, “if you want to change the world for better, become an engineer.” I salute all engineers worldwide for their contributions to the development of humanity.

Thank you!

Matthew Ogieva percent in 2019 to 2.5 percent in 2020 which is on a recovery path that sustains the growth momentum of 2017 following the recession that upset the economy in 2016 due to oil price decline. However fiscal deficit-to-GDP ratio is predicted to rise from 2.8 percent in 2018 to about 4.3 percent by the end of the year 2020.

This will still leave Nigeria best earning export outside oil, to be the people – migrants from the country – with remittances from abroad into Nigeria. The largest recipient of remittance flow to the Sub-Saharan African (SSA) in the year 2018; remittal from migrants has risen by 14 percent from $22 billion in 2017 to $25 billion in 2018, after a short drop in 2016.

2018 value represents a 6.1 percent of the country’s GDP, which is 11 times the Foreign Direct Investment (FDI) as well as 7.4 times larger than the foreign aids received in 2017.

Coupled with other factors the rising migrant population of Nigeria is expected to push it to over $29 billion by 2023 underlined. With over a million Nigerians in Diaspora this will surely remain a steady source of external inflow into our economy.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Ogieva is an economic analyst & management consultant

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Africa & 2020 Doing Business rankings ers

Rafiq Raji

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he World Bank’s Ease of Doing Business rankings are popular and controversial.

Countries, increasingly and lately African ones, make a big show of improvements. And even as reported reforms are not immediately palpable in some cases, better rankings tend to be welcomed by foreign investors. True, as Charles Robertson, global chief economist & head of macro strategy at Renaissance Capital tells me “it is not a perfect proxy for the business environment”. But it certainly “shows a government at least has a desire to show progress, when other governments don’t bother”, Robertson adds.

For Africa, Aliko Dangote, the continent’s richest man, asserts in an article for The Brookings Institution in February 2019, that “the perception of risk often exceeds real risk and the doing business environment is improving rapidly in several [African] countries.”

Mr Dangote identifies Mauritius, Rwanda, Botswana, Nigeria, South Africa and Kenya as African countries “offering ease in doing business through conducive environments and incentives.”

Nigeria & Togo among top improv-

In its Doing Business 2020 report released in late October 2019, the World Bank noted “two sub-Saharan African countries, [Nigeria and Togo], among most improved in ease of doing business.” What put Togo in the list of top improvers? And for the second year in a row at that. “Reforms lowering fees for construction permits and streamlining property registration procedures, among other measures”, were attributed by the World Bank.

Overall, the World Bank asserts Africa’s economies “conducted the most reforms in the areas of starting a business, dealing with construction permits and getting credit, with twelve reforms in each.” On average, the World Bank says, “it now takes around 20 days and costs 33.5 percent of income per capita to start a new business in the region, substantially faster and less expensive than the 62 days and 305 percent of income per capita it took in 2003.”

A reality check is apt at this point.

“The pace of reforms across the region has slowed overall”, the World Bank says. Besides, “only two Sub-Saharan African economies rank in the top 50 on the ease of doing business rankings while most of the bottom 20 economies in the global rankings are from the region.” And unsurprisingly so when the details are examined. For instance, South Africa implemented only a single reform in 2019 and just four in the past five years.

And the World Bank does not entirely make it seem the improvements are anything but incremental. It notes

for example, how “in getting electricity, businesses must pay more than 3,100 percent of income per capita to connect to the grid, compared to just over 400 percent in the Middle East and North Africa or 272 percent in Europe and Central Asia.”

And “when it comes to trading across borders and paying taxes, businesses spend about 96 hours to comply with documentary requirements to import, versus 3.4 hours in OECD highincome economies, and small and medium-size businesses in their second year of operation need to pay taxes more than 36 times a year, compared to an average of 23 times globally.”

Nigeria needs to do more In the more interesting Nigerian case, being as it is the most populous and largest African economy, the World Bank highlights “reforms impacting six indicators, including making the enforcement of contracts easier” as reasons why. Renaissance Capital’s Robertson tells me he is not surprised

by Nigeria’s improved ranking: “We wrote a piece in 2016/17 outlining how Nigeria could jump to 100th place”, he says.

“However, this improvement (from 146th to 131st) is not yet translating into increased foreign direct investment and we believe more progress needs to be made”, says Andrew S. Nevin, partner & chief economist at PwC in Lagos. So how do governments improve their rankings? Renaissance Capital’s Robertson says “it is a matter of targeting legislation, regulation and government practices.”

‘

One critical area include simplifying the regulatory environment - so this would require streamlining ministries, departments and agencies (MDAs) so business would deal with fewer government touch points, as well as reducing the costs of business

“Dr Raji is chief economist at Macroafricaintel.

He was previously an Africa Economist at Standard Chartered Bank, London, UK. (Twitter: @ DrRafiqRaji)”

The order on the capping of estimated bills within the Nesi: Matters arising

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he Meter Reading, Billing, Cash Collection and Credit Management for Electricity Supplies Regulations 2007 requires electricity distribution Companies (DisCos) to bill customers on the actual reading of the Meters on the customer’s premises and base an unmetered customer’s bill on estimated energy consumption in accordance with a method approved by the Nigerian Electricity Regulatory Commission (NERC). Consequently in 2012, NERC issued the Methodology for Estimated Billing Regulations to provide the method to be adopted

by DisCos in the estimation of electricity bills.

By that Estimated Billing Regulation, the three (3) categories of customers allowed to be estimated are: those with faulty meters; those who have meters, but meter readings could not be obtained; and those customers without meters.

Ideally, by the NERC Regulation for Connection and Disconnection Procedure for Electricity Services, connection of a customer to electricity supply should be upon the installation of an appropriate meter. Unfortunately, there were challenges for the DisCos to comply with this requirement which necessitated NERC’s order in May 2013, mandating the implementation of the Credit Advance Payment for Metering Implementation (CAPMI) scheme to bridge the metering gap. Unfortunately, the initiative which allowed customers pay for meters and get refunded via deduction of the amount paid from the energy bills was terminated at the last quarter of 2016. The Metering gap continued to increase due to the non-cost reflective tariff, which hampered the ability of the Discos to fulfill their metering obligations.

Another major reason for the huge metering gap was due to the difficulty faced by DisCos in funding their metering plans (especially through debt instruments) under a regulated (capped) CAPEX budget. The ability of the Investors and the DisCos to take on more debt has been largely constrained by their prolonged

exposure from acquisition and working capital loans, respectively.

In view of this, NERC issued a Meter Asset Provider Regulations 2018 mandating all DisCos to engage the services of Meter Asset Providers (MAPs) (persons/entities granted permits by NERC to finance, procure, supply, install, maintain and replace meters) to close the metering gap currently in existence. The project was to be implemented and completed within a period of three (3) years after the completion of the MAP procurement process.

To ensure compliance with the scheme, NERC was required to issue an Order within 120 days of the commencement of the MAP Regulations, which will aim at capping the bills of unmetered customers to address the issue of estimated billing.

NERC issued a Consultation Paper on the Capping of Estimated Billing for Unmetered Electricity Customers on November 19, 2018 for review and deliberations amongst key stakeholders within the Industry and in the same vein proposed three (3) methods for capping estimated bills as follows: a. Method 1 involved capping estimated bills based on the projected average monthly consumption of each tariff class in the MYTO model; b. Method 2 involved the use of the average energy consumption based on information from prepaid vending in each tariff class in a franchise area to set the cap for the estimated billing of unmetered customers in that tariff class; and c. Method 3 involved the use of the average energy consumption based on information from prepaid vending in each tariff class within a Business Unit of a Disco, to set the cap for estimated billing of unmetered customers within that Business Unit On February 24, 2020, NERC issued an Order on the Capping of Estimated Bills in the Nigerian Electricity Supply Industry (the Order).

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The Order specifically focuses on customers on the R2 and C1 categories. All customers have been categorised based on the quantum of electricity consumed by such customer and are billed according to their categories. These categories include: a. Residential: This category involves premises used for residential purposes only and are further classified as R1, R2, R3 and R4, with R1 being the lowest consuming customer of less than 50kWh per month, R3 and R4 being the low voltage and high voltage Maximum Demand (MD) customers. b. Commercial: This category involves premises for purposes other than residential and are further classified as C1, C2 and C3 with C1 being the lowest consuming customer and C2 and C3 being the low voltage and high voltage MD customers c. Industrial: This category involves premises used for manufacturing and further classified as D1, D2 and D3 d. Special Customer: Involves premises for religious purposes, government and teaching hospitals, government research institutions, education institutions etc. this category is further classified as A1, A2 and A3. e. Streetlights known as S1.

The Order’s focus on R2 and C1 customers is explained by NERC’s assumption of compliance with their past directives mandating DisCos to meter all MD customers within their network and the fresh directives within the Order that all customers on higher tariff classes be metered by April 30, 2020.

The key highlights of the Order are as follows: • The Order repealed the Methodology for Estimated Billing Regulations, since the Order now prescribes new methodology.

• The Order adopted method 3 proposed in the initial Consultation Paper in generating the cap for each of the DisCos. What this means in simple language is that

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On the specific Nigerian case, PwC’s Nevin highlights the steps required for improvements: “One critical area include simplifying the regulatory environment - so this would require streamlining ministries, departments and agencies (MDAs) so business would deal with fewer government touch points, as well as reducing the costs of business. In addition, clarifying the relationship between the federal government and the states is required, and in some cases, it is worth considering devolving power to states.”

Furthermore, PwC’s Nevin highlights the point that 60 percent of the Nigerian economy remains informal.

So, in his view, “the federal government and the states need to think carefully about why micro, small & mediumsized enterprises (MSMEs) stay in the informal economy, and how to make it attractive to move [them] from the informal to the formal sector.”

“While an informal economy is better than no economy, it is not as good as a more and more formalised economy, as the latter has higher productivity and investment, as well as the ability to scale and raise skill levels across Nigeria”, says Nevin. In fact, “EoDB challenges can be a major reason business choose to remain in the informal economy”, Nevin adds. A focus on formalising a greater part of the Nigerian economy might be a good next step for the government.

Kofo OlokunOlawoyin each DisCo cannot bill an unmetered customer within a particular franchise area beyond the stipulated cap. Taking Yola Electricity Distribution Plc as an example, the Order puts the electricity consumption cap on customers within the R2 single phase category within Bulumkutu Business Unit at 181/kWh. To calculate the maximum monthly estimated bill Mr. X, an unmetered R2S customer who lives within Bulumkutu Business Unit can be charged, Yola DisCo will multiply same by the tariff per kWh for the R2S consumers which is N23.25. Hence, Yola DisCo cannot bill Mr. X more than 181 X N23.25 = N4,208.25.

• The Order is to take effect from February 20, 2020 • DisCos are mandated to meter all A1 customers by April 30, 2020 and customers in R1 category are not to be billed above N200 per month • Customers on higher tariff not metered by the DisCos by April 30, 2020 are exempted from paying on estimated bill.

• Any customer whose current estimated bill is below the cap proposed by the Order must remain so without any increase • In the case of faulty meters that require repairs, the Disco is to replace within two (2) working days and the bill to apply for the specified period is an average of the customer’s last three (3) months vending or billing (in the case of a prepaid or post-paid meter respectively).

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Kofo is the Author of the fast selling book “The Nigerian Electricity Supply Industry- Post Privatisation Realities, Trends and Challenges”.

She can be reached on ko@kofoolawoyin.com or kofo.olokunolawoyin@gmail.com

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12

Tuesday 03 March 2020

BUSINESS DAY

EDITORIAL Telecom now backbone of many sectors Publisher/Editor-in-chief

Frank Aigbogun editor Patrick Atuanya

Critical National Infrastructure status imperative for telecoms

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

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major player in Nigerian telecommunications, Airtel Networks Plc, cried out in the last week of February. Vandals across the country are doing significant damage to Airtel’s infrastructure thus affecting quality of service to subscribers as well as revenues.

It has gone on for too long and the Macedonian cry of Airtel was merely a reminder to all stakeholders on the imperative of making telecoms in Nigeria a critical national infrastructure.

Airtel called on the Federal Government to take up the responsibility to “urgently deal with the menace of vandalism, insecurity and insurgency otherwise the current spate of dropped calls experienced by some telecommunications consumers would continue”. The operator said that Airtel alone recorded 1022 cases of fibre cuts between July 2018 and February 2020. Of these, 405 of the fibre cuts were the results of construction activities of road rehabilitation while 617 cases arose from vandalism.

The consequence is dropped

calls, poor network quality, network congestion and poor user experience for subscribers nationwide.

There are specifics that Federal and State Governments can do.

These include hastened approval process for right of way for fibre deployment, faster Environmental Impact Analysis procedures and approvals, and a reduction of repetitive taxes between the states and their local governments.

Security is another significant consideration. Sundry criminals vandalise, steal, bomb and destroy telecoms facilities and infrastructure. They come in the night or even in daylight, bring trucks and tow away generators that the telcos install to ensure power availability.

They kill security men. They steal inverter batteries, generators, and fuel.

Players in the telecommunications sector have canvassed a bill in the National Assembly to make telecoms critical national infrastructure over the last four years. It is a surprise that such a bill of critical importance has not gained traction nor attracted the positive nod of the legislature.

As a recent report noted, “The

challenge of fiber cuts (deliberate/ sabotage and accidental) is making a mess of the effort and investments of telcos and the lives and businesses of Nigerians. The menace is becoming overwhelming. So much money is sunk into security, but still the fibre cuts continue unabated and the networks keep going down. The industry is currently sitting on over 600 fibre cuts. That is very bad for business.”

Quality of Service issues affect not just the industry but all players in the telecommunications ecosystem. In the ICT age, the scope of the telecoms ecosystem keeps growing daily. Almost every facet of economic activity is now interconnected to power and telecommunications.

Telecommunications now affects banking and financial operations, security services, business-to-business operations, aviation, healthcare and government. Major government agencies such as the West African Examinations Council, the Joint Admissions and Matriculation Board, the Immigration Services and the registry for drivers licenses all run portals that require efficient power and telecoms.

Power, data and telecommunications are the lifeblood of the internet-enabled economy across the world. We must get them right.

In the case of telecommunications, the players have taken up such challenges like power that they can handle. Government must rise to support them with the others.

It is to the credit of the telecommunications sector that while they suffer from the paucity of services in power, security and governance, Nigeria manages to offer telecommunications services that compare well with other countries.

BusinessDay supports Airtel’s call. Telecommunications is now an integral part of the fabric of national life. Given the centrality of telecommunications, we cannot pay lip service to the imperative of protecting the sector. It is in the interest of the country to do so expeditiously.

We call on the Federal Government and the National Assembly to ensure that the bill on making telecommunications a critical national infrastructure and protecting telecommunication assets get accelerated hearing and passage within the next six months.

HEAD, HUMAN RESOURCES Adeola Obisesan

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

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ADVERTISING 01-2799110 08033225506 SUBSCRIPTIONS 01-2799101 07032496069 07054563299 DIGITAL SERVICES 08026011296 www.businessday.ng The Brook, 6 Point Road, GRA, Apapa, Lagos, Nigeria.

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Tuesday 03 March 2020

BUSINESS DAY

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Basket of rice and a kilo of LPG

Ekele Onuh Oscar

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ince man understood the importance of exchange as a means to compensate for what he needs but doesn’t have, the science of measurement began. The question of estimating the value of what I am giving in exchange for what I want and the question of ascertaining the value of what was paid for becomes critical, so critical that it is an entire industry. It is easy to accept money as a quick measurement of value for all things, thanks to the ingenuity of king Alyattes of Lydia, the Chinese Emperor in 700B.C and the European bank notes of the 16th century, money evolved and became standardised.

While money has gained standardisation from barter to banknotes, money is still evolving into the digital space of ones and zeros. Money’s acceptability as a unit of exchange is predicated on the assumption that it would be accepted by the other person as a unit of exchange. This brings me to my next line of thought, “ascertaining the value of what is to be purchased”. I will try to answer this in two schemes.

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The question of what was paid for and how to know if one got value for what was paid for is ubiquitous across all industries and the LPG business is no different. Custody management and custody transfer are common ways by which LPG retailers lose money. The above average plant owner installs the weighbridge as a means to ascertain the quantity of product receipt in her storage. This is done by establishing the weight of the truck on full load and the weight of the truck after unloading.

The difference is the net weight of the product received. The challenge with this method is that no two weigh bridges read the same. From differences in tolerances to differences in calibration methodology, the weighbridge of the supplier is often usually going to read different from that of the supplied, the challenge is often reconciliation. If I as the supplied record a reading on my weighbridge that is different from the claims on the waybill of my supplier, say the difference is a negative difference and I just recorded a loss, is my supplier meant to balance me the net loss or is my supplier going to contend the accuracy of my weighbridge reading?

How does the supplier meet the buyer halfway?

Growing up in Warri, against my wish, I accompanied my mum to the market. Common among market women is an agreed container of measurement usually referred to as a basket. This basket had no holes like a typical basket would, because it was

used to measure grains such as beans, rice, corn and/or garri granules. The equivalent in the south west and north is the mudu. In all the times my mum bundled me to the market, I never saw her carry her own basket to the market and insisted that her preferred measuring container (her basket) be used to measure her grains.

Applying this logic of the sellers measuring device usually dominating the choice of device used –although with the inspection and consenting of the buyer- the LPG retailer shouldn’t ascertain quantity received by readings from her weighbridge or should they not? Unlike my mum a typical plant owner might situate her plant thousands of miles away from the LPG depot where the trucks are being loaded, thus preventing observation of the loading process by the buyer. In business of trust, someone has to give.

Should the burden of establishing accurate quantity supplied not be on the supplier? The capital outlay in building a depot is huge; from engineering, to works, to personnel and safety. But would it not be better for all LPG carrying trucks to have attached to it, a mobile meter that can measure the quantity of liquid that has left it?

What if LPG trucks came with factory fitted or custom retrofitted load cells that could measure the weight in kg of LPG in its tanks per time? That way, the mutual suspicion between plant owners and depot owners on how faulty the other persons measuring device is, is eliminated and like the rice seller in Warri, I can see the basket you

‘

Should the burden of establishing accurate quantity supplied not be on the supplier? The capital outlay in building a depot is huge; from engineering, to works, to personnel and safety

are using to measure my rice and we can both agree that we both saw 1kg written on the scale, which is what I paid for. The benefit of observation that most plant owners lack hitherto would be granted on the installation of a measuring device deployed at the point of discharge. This brings me to the end of my first scheme.

Every LPG shipment ideally carries a test analysis of the product it contains. This test reveals properties of the LPG it carries, chief among them is the density of the product. The density of the product (LPG) if accurate, is critical in estimating the net weight of the LPG in a typical truck all things being equal. Lack of standard laboratories at depots to ascertain the true molecular content and properties of LPG shipment, makes the parameters, especially density of the product false.

If the density of the product is untrue, estimating the content in kilogram of the truck would be inaccurate.

The benefits of what a complete petroleum analytical laboratory would do for our depots as it pertains to regaining the confidence of product buyers, especially LPG plant owners, cannot be over emphasised. If you have come this far in this article, you are looking for answers, solutions to an age long challenge and like you, I want one. The ideas prescribed here in are random musings of an engineer who found himself selling cooking gas.

Ekele Onuh Oscar writes from Abuja. He is the CTO of Eegoja Gas. He can be reached via email: ekeleonuhoscar@gmail.com

Continuation of highlights of the new securities and exchange commission’s rules on central counterparty

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ther noteworthy sections of the new rules are as follows; Investment policy A CCP is to have an investment policy that is consistent with its overall risk management strategy which is to be fully disclosed to Clearing Members. – Rule 14 (1) (a). It should also invest its cash collateral in liquid assets with low credit, liquidity and market risks. - Rule 14 (1) (d).

A CCP investment shall: a) Be fully secured to mitigate against credit risk; b) Allow for quick liquidation with little, if any, adverse price effect. –Rule 14(2) Comprehensive risk management framework A CCP shall have a framework, policies and procedures for comprehensive management of risks which should cover: i. Legal basis that is clear, transparent and enforceable for each material aspect of its operations; ii. Credit exposures to Clearing Members and those arising from its payments clearing, and settlement processes where applicable; iii. Collateral and margin management requirements that are adequate and risk based; iv. Maintenance of adequate liquid resources to ensure timely fulfilment of payment obligations with a high degree of confidence; v. Risk management tools to effectively manage systemic risks arising from its interconnectedness with other CCPs and FMIs; A CCP is also required to have a Risk Committee that will continuously identify, measure, monitor, and manage the range of risks that may arise. Rule 16(1) Liquidity risks A CCP is mandated to have highly liquid

resources and committed line of credit. It should also have a diversified portfolio of liquid resources and avoid undue concentration with respect to any relevant asset class and issuer. -Rule 17 (1).

The Rules also provide that no instruments borrowed in a securities lending transaction shall qualify as highly liquid securities.

Furthermore, all highly liquid securities held by a CCP shall not be pledged, either explicitly or implicitly, to secure, collateralise or credit-enhance any transaction and cannot otherwise be subject to any further commitment.

The rules states that Highly liquid resources shall include a. Risk-free assets such as Sovereign government securities e.g. FGN bonds/Sukuk and Treasury Bills or FGN-guaranteed securities, that are liquid; according to the CCP’s determination of a liquid asset b. Central Bank of Nigeria Open Market Operations bills; c. Placement with Banks.

Collateral requirements The only form of collateral that a CCP can accept are highly liquid assets with low credit, and market risks. -Rule 21 (1) (a) A CCP shall also ensure that it carries out mark to market valuation of collateral on a real-time basis as well as monitor credit, liquidity and market risks of all collateral regularly.

A CCP shall avoid concentrating its collateral in one class of asset with the exception of Federal Government Securities.

Where a CCP accepts cross-border collateral, it shall: a) Take steps to mitigate risks associated with its use and ensure that the collateral can be used in a timely manner;

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b) Assess the foreign exchange, political and other country specific risks and set haircuts to adequately compensate for the additional risks. c) Make provisions in its rules and regulations on eligibility criteria for acceptance of the cross-border collateral which should be subject to the Commission’s approval.

Margin requirements A CCP shall have a: a) System that stipulates margin requirements proportionate to the risks and attributes of the relevant products and the markets; b) Reliable source of timely price data for: i) Exchange traded products, contracts and derivatives to determine margin requirements; ii) OTC derivatives contracts.

Default Fund A CCP shall: a) Establish and maintain a Default Fund to cover losses not covered by margin requirements. -Rule 23 Rule 24 provides that a CCP shall maintain additional financial resources which must amongst other things: a) cover potential losses not covered by margin requirements and the Default Fund; b) be freely available to the CCP; Default management procedure- Rule 26 A CCP shall have rules and procedures that enable it to continue to meet its obligations to non-defaulting Clearing Members in the event of a Clearing Member’s default; The rules and procedures shall: a) clearly define what circumstances constitute default of a Clearing Member b) allow the CCP to use any financial resources it maintains according to the Default Waterfall to cover losses and contain liquidity

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ULOAKU EKWEGH

pressures arising from default of a Clearing Member Stress testing A CCP shall test the sufficiency of its total financial resources available in the event of a default in extreme but plausible market conditions on an annual basis-Rule 27.

Recovery and resolution A CCP shall have processes and procedures to achieve adequate recovery when its going concern status is threatened so that its critical operations and services can be sustained.

CCPs are also required to make certain reports on a periodic basis to the SEC. The CCP rules are quite robust and stringent. The stringent nature of the CCP rules is no doubt to ensure that all stakeholders in the Derivatives trading transaction are adequately protected and attendant risks are mitigated. It is hoped that these rules will enhance Derivatives trading transactions in the country.

Ekwegh is a private legal practitioner with over 15 years legal experience in law firms and as in-house counsel. She is also a fellow of the Institute of Management Consultants. Email: uloekwegh@yahoo.com

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14

Tuesday 03 March 2020

BUSINESS DAY

COMPANIES & MARKETS

Company news analysis insight

Banking

UBA grows profit by most in four years as interest and non-interest income sees turnaround SEGUN ADAMS

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ier-one lender United Bank for Africa (UBA) grew profit by the most since 2016 after turning the corner to record improvements in both income and noninterest income last year.

The bank made N89.09bn in profit in 2019, 13.33 percent more than it did in the year before and the fastest bottom-line growth since a 21.14 percent growth four years ago.

The expansion followed impressive growth in noninterest income by 21.3 percent to N124.42bn last year compared to a decline in 2018, while despite a challenging interest environment, UBA was able to deliver 7.9 percent growth in net interest income also coming from a decline last year.

“The year 2019 was a very remarkable one for UBA given the adverse market developments. Nonetheless, we achieved sizable growth in balance sheet and earnings, even as we reposition the bank for the future,” said Kennedy Uzoka, GMD/ CEO, UBA. Net interest income

growth was propelled by a 7.8 percent and 13.9 percent growth in interest income from corporate loans and investment securities respectively, as well as a 4.0 percent cost of funds driven

by UBA’s stable retail deposits, the bank said, noting improvements in its cost efficiency.

UBA’s Cost-to-income

ratio declined to 62.7 percent compared to 64 percent in 2018.

Notably, gross earnings of the lender crossed the half-a-trillion naira mark to N559bn, while total assets also crossed the N5trn mark for the first time to hit N5.6trn.

Operating income rose by 12.4 percent to

N346.29bn while operating expenses rose 10 percent to N217.17bn.

Following CBN’s mandate for increased lending by banks in the country, UBA’s impairment charges rose 303 percent to N18.252bn.

UBA’s gross loan and advances rose almost 20 percent to N2.15trn while

customer deposits rose 14.4 percent to N3.83bn.

The Group recorded a 0.8 percent cost-of-risk reflecting our strict credit and underwriting standards, which has helped to keep Group NPL at 5.3 percent and 2.5 percent for the parent bank, said Ugo Nwaghodoh, UBA Group CFO. “As we will continue

to pursue a cautious loan growth strategy in 2020, we have strategically maintained strong capital adequacy and liquidity ratios at 23.4 percent and 43.9 percent respectively, ensuring sufficient headroom for growth,” Nwaghodoh said.

The 2019 profit of N89.1billion, translates to 16.2 percent return on average equity (RoAE) compared to the previous year’s 15.2 percent.

AhighROAEmeansUBAis creatingmoreincomeforeach naira of shareholders’ equity.

However the UBA’s efficiency in generating income from asset dipped slightly as Return on Average Asset (ROAA) dropped to 1.7 percent compared to 1.8 percent in 2018.

The Bank has proposed a final dividend of 80 kobo for every 50 kobo ordinary share, bringing the total dividend for the financial year ended December 31, 2019 to N1.00.

According to information on Bloomberg, dividend yield for the bank shares, priced at N6.7 per unit as of Friday, stands at 12.69 percent.

This is based on the 20 kobo interim dividend last reported.

Consumer Goods

Nestle grows profit by 6% to N45.68bn in 2019 SEGUN ADAMS

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he challenging operating environment in Nigeria’s slowly recovering economy was telling on Nestle after the FMCG giant’s profit growth slowed to 6.22 percent in 2019.

Profit rose to N45.68bn in 2019 compared to N43bn, the company said in its audited annual report published on the Nigerians Stock Exchange (NSE) March 1.

The slowdown in profit comes after-sales for the year grew 6.67 percent to N284.04bn. The food and beverage maker had grown Pre-and-post tax

profit by 36.3 percent and 22.3 percent respectively in the first half of the year.

Despite the slowdown in growth, Nestle beat United Capital analysts’ forecasted sales growth of 5.0 percent growth in 2019.

Nestle’s beverage segment grew by 10 percent to N107.95bn while food segment grew 4.71 percent to N176bn.

The consumer goods giant noted a slowdown in its cost of sale as it continued to benefit from local sourcing most of its raw materials.

Cost of sales grew 2.32 percent compared to 6.33 percent in 2018 and a

5-year average of 14.46 percent.

As a result, Nestle last year was able to retain N45.12 from every N100 sales as gross margin compared to N42.78 in 2018.

Operating income for Nestle grew almost 19 percent to N72bn as the company showed efficiency in keeping its selling, general and administrative expenses below the inflation trend.

Net finance cost rose in the year due to a sharper drop in finance income than in finance cost.

Consequently, profit before tax rose 19 percent to N71.12bn in 2019

compared to N59.75bnin 2018.

Nestle’s performance shows no let-up in the battle for consumers between listed and unlisted FMCGs brands as the Nigerian economy continues on a path of slow recovery.

The consumer goods sector, represented by Food, Beverage and Tobacco Industry in the GDP report, grew by 2.17 percent in 2019, representing a slowdown of 0.8 percentage point from 2018.

Woes of FMCG firms are directly linked to the performance of the economy especially the growth in household in-

come which in Nigeria has remained subdued with population growing faster than the economy.

Problems around the country’s infrastructures, low purchasing power and high inflation mean firms have to balance cost and pricing to remain attractive to consumers and profitable at the same time.

Despite the harsh operating environment, Nestle grew Earnings Per Share (EPS) by 6.21 percent to N57.63 while the company proposed a final dividend of N45 per share.

Nestle Nigeria manufactures, markets and distributes food products

including Milo Ready-ToDrink, Maggi Seasoning, Nescafe, Golden Morn among others.

It also manufactures Hydrolysed plant protein mix and other food products based on its local agricultural raw materials under its backyard integration program.

T h e c o m p a n y re cently appointed Juliet Ehimuan, the current countr y manager for Google in Nigeria, as an Independent Non-Executive Director of the Company.

The appointment took effect February 24, 2020 the company said in a note to the Nigerian Stock Exchange (NSE).

Tuesday 03 March 2020

COMPANIES&MARKETS

BUSINESS DAY

15

Business Event

OIL&GAS

Subsidiary sales boost Ardova profit in 2019 SEGUN ADAMS

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rdova, formerly Forte Oil, has announced a 520 percent growth in 2019 profit thanks to the sales of three subsidiaries from which the company said it realised N2.67bn.

The listed oil and gas firm, from which billionaire Femi Otedola last year divested his 75 percent stake, posted a profit of N3.9bn in the year.

“During the period ended 30 June 2019, Ardova Plc disposed of its subsidiaries, Amperion Power Distribution Company Ltd (Amperion), forte Upstream Services Ltd (FUS0 and AP Oil and Gas Ghana, the company said in its note to the financial statement.

The disposal of Amperion and FUS resulted in a gain of N1.55bn and N1.23bn respectively while the disposal of AP Oil and Gas Ghana resulted in a loss of N108m hence a bet gain of N2.67bn.

While the asset disposal helped bottom-line, Ardova recorded an improvement in revenue for the year across all its segments except solar system.

Specifically, sales grew by 31 percent to N176.55bn with fuel sales growing over 20 percent while LPG and Cylinder sales raked in N17.47m in the year.

A 34 percent increase in cost of sales however pared gross profit marginally to N11.28bn.

Ardova’s income from noncore business rose by over 100 percent to N4.3bn on profit from subsidiary sales along with foreign exchange gains, and positive net income from crude lifting contract.

This resulted in operating profit doubling to almost half a trillion naira.

A surge in interest income faster than the increase in inters cost helped prune the company’s negative net interest income by 86 percent to N270m.

A rd ov a c o n s e q u e nt l y posted a profit before tax of N4.65bn compared to 2018’s N1.03bn.

The company’s EPS jumped to N3 compared to 48 kobo in the year before.

Ardova recently officially unveiled a completely new brand, name, logo, and tagline, following approval by the company’s shareholders at an extraordinary

general meeting, held in Lagos on 18 December 2019.

“The most important quality we bring to the market right now is our history and legacy of more than five decades in the energy downstream sector. Our long and proud legacy gives us a vantage position from where we can see things differently about how energy is consumed today. It is from this platform we are building a new brand geared to lead to a future where energy is consumed differently, such that we are poised to deliver energy for a brave new world”, said the CEO, Olumide Adeosun.

Ardova, hewn from a combination of the Dutch/Arabic word: Aarde, meaning earth and the word ‘value’ mirroring the company’s ambitions to build a brand that has at the heart of its corporate strategy, sustainability leadership. The new logo features a hexagram styled icon as the leading visual concept and takes on the moniker (AP) which creatively connects the company to its rich history and heritage, a design approach the company took to help create a nexus between history and modernity.

L-R: Emeka Oparah, director, corporate communication and CSR; Veronica Onoja, director, customer service, and Adedoyin Adeola, vice president network operations, all of Airtel Nigeria, during a media briefing in Lagos.

Elliott pushes for big changes at Twitter after taking $1bn stake Activist hedge fund in talks with social media site’s board over Dorsey leadership S u j ee t I nda p, O r t en c a A l ia j and Hannah Murphy

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ctivist hedge fund Elliott Management has laid out concerns over Twitter’s corporate governance to the social network’s board and is pushing for the removal of its chief executive Jack Dorsey after taking a stake of more than $1bn in the social media company.

The New York-based fund has taken issue with Mr Dorsey simultaneously holding the CEO title at both Twitter and Square, the fintech company he also co-founded, according to people familiar with the matter.

Elliott, whose close to 4 per cent holding in Twitter places it among the company’s top 10 shareholders, has had talks with the board and has privately submitted four nominees to stand for election at the company’s annual shareholder meeting to be held in May.

The $38bn firm has flagged leadership issues with Twitter’s board of directors, said people familiar with its thinking, stemming from a CEO it believes is distracted with other activities and a high turnover rate among senior operating and financial executives.

Twitter’s board named Mr Dorsey chief executive in 2015 despite publicly stating that it would only accept a candidate that could do the job full-time.

Mr Dorsey has remained at the helm even as investors have flagged concerns that he has more skin in the game at Square, a company that is more valuable than Twitter and in which he owns a 13 per cent stake.

Shares in Twitter dropped by a fifth in October after the company reported a poor third quarter, marred by technical problems in its advertising placement technology.

The company’s shares trade just 25 per cent higher than

its 2013 IPO price and have been lapped by rival Facebook whose market cap of more than $500bn is 20-times that of Twitter.

The 43-year-old Mr Dorsey raised eyebrows last year when he announced plans to move to Africa for as long as six months in 2020 to explore opportunities in blockchain and digital currencies. Mr Dorsey owns more than a tenth of Square, a stake worth nearly $5bn. In contrast, his Twitter stake of roughly 2 per cent is worth around $500m.

Mr Dorsey did not immediately respond to a request for comment. Twitter declined to comment.

Twitter recently announced that its monthly user growth accelerated by more than 20 per cent in the fourth quarter.

But the company has not consistently converted users into advertising revenue and Elliott believes leadership changes can close the gap.

Sharon Ikeazor (r) minister of state for environment, with Lorenzo Fiorillo, managing director, Nigeria Agip Oil Company Limited, during his visit to the minister’s office in Abuja.

L-R: Joseph Yobo, Trophy brand ambassador/Super Eagles Assistant Coach; Tolu Adedeji, marketing director, International Breweries Plc; Samuel Eto’o Fils, Africa football legend, and Kudzi Mathabire, brand director, Castle Lager, at the launch of Castle Africa 5s hosted by Trophy Lager in Lagos.

L-R: Ibrahim Mamadu, team leader, WHO Nigeria; Olumuyiwa Babayemi, chairman, Ewekoro LG; Segun Soyoye, industrial director, Lafarge Africa; Tomi Coker, commissioner for health, Ogun State; Adesanya Ayinla, permanent secretary, ministry health, and Oladipo Ogunbode, team leader, Nigeria Centre for Disease Control (NCDC) during an on-the-spot-assessment of Lafarge Africa’s facilities at Ewekoro following the evacuation of Coronavirus-infected Italian and quarantine of 39 contacts

L-R: Temitope Akande, AGM Corporate Communication and Strategy LASAA; Churchill Nwagwu, managing director of Spread Out Media/Assistant General Secretary for (OAAN); Emmanuel Ajufo, president of OAAN; Adedamola Docemo, managaing director, LASAA, and Gbolahan Dixon, S.A operations LASAA, at the APCON/OAAN stakeholders meeting on Standard Operating Procedure for outdoor advertising practice at Sheraton hotel, Lagos, recently.

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BUSINESS DAY

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Tuesday 03 March 2020

BUSINESS DAY

Media business Out-of-Home operators move to jolt industry with standard operating procedure … APCON backs move Daniel Obi

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igeria’s multibillion marketing communication industry, like some other sectors in Africa’s most populous nation, is under burden of survival.

The sluggish growth of the country’s economy at 2.27% compared to 6% in 2014 and the lack of resolve by operators in the country’s marketing communication industry to assert their relevance through collective exercise of powers in their favour have combined to put the industry under strain.

The industry is also facing unhealthy competition among players, competition from other forms of consumer engagement, delayed payment by clients of upto six months for contract executed with borrowed funds, dearth of talents, regulation and practice by non-registered operators, developments that have chocked the industry.

Determined to wriggle out of these challenges and build a viable industry for clients and economy’s benefit, members of Outdoor Advertising Association of Nigeria, OAAN, a

L- R: Emmanuel Ajufo, president of Outdoor Advertising Association of Nigeria, OAAN; Ade Akinde, chairman of the occasion and Joe Eugene Onuorah, dep. director at APCON during the forum on guiding principle for outdoor industry in Lagos recently.

segment of the media industry came together last week under the auspices of APCON to establish Standard Operating Procedure, SOP for the conduct of out-of –home advertising business in Nigeria. They believe the SOP will assist to re-stimulate the industry.

Sharing the context of Nigeria’s present reality with the practitioners, Onyekachi Onubogu, CEO, Frutta Juice and Services told the OAAN members to protect their stake

Insight Communications marks 40 years of doing business in Nigeria Daniel Obi

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nsight Communications, a member of the Publicis Groupe and of Insight Redefini, has begun celebrations for doing business in Nigeria for 40 years.

The company, which clocked 40 on January 2, 2020, has over the years received national and international acclaim for exceptional work done with major brands in Nigeria such as Seven-Up Bottling Company (SBC), Pepsico, Nigerian Breweries, Dufil Prima, Friesland Camprina, First City Monument Bank (FMCB), Nestle Nigeria, Visa, amongst others.

On the milestone, the Group Chief Executive Officer, Ken Onyeali Ikpe noted that “We are celebrating 40 years of the audacity of one man who took the decision to weave in the spirit of never-ending thinking and the character trait of disruption into the fabric of the organization. We are celebrating determination, innovation, dynamic business modules and reward for tenacity”.

In the view to provide clarity on its efforts to ensure rel-

evance and sustained growth, Ken clarified that the strategy has always rested on four timeless pillars which seeks to focus on product creation, quality delivery, speed to market and return on investment.

Over the past four decades, Insight has led through various business climates and has so far birthed six other communications companies – All Seasons Zenith, Quadrant MSL, Starcom Media Perspective, Leo Burnett, Optimum Exposures and The Creative Counsel.

To celebrate Insight at 40, a 360-campaign will be fully launched with the theme #StillFoolish – which is a celebration of the idea that every single groundbreaking invention was termed foolish when it was first pitched. Explaining the concept, the Creative Director, Insight Communications, Chuka Obi gave different scenarios in history where then inventors and innovators who were termed foolish are now icons of pioneering a better way of life.

In furtherance to this, Chuka confirmed that since Insight’s ever learning culture seeks to drive all actions, the goal to remain foolish, audacious and disruptive takes centre stage. www.businessday.ng

if they consider themselves as stakeholders in the industry.

“As stakeholders, we all have a single interest in ensuring that the industry not only survives, but thrives”.

He agrees that the marketing and advertising sector in Nigeria is struggling and “that is why we are concerned about the declining revenue and the problem is if it keeps declining, then we are in trouble”.

To deal with certain challenges confronting the in-

dustry, especially delayed payment, patronage of nonregistered practitioners by clients and regulation, Onubogu sees cooperation among the OAAN practitioners as solution. “Unless we cooperate in the industry, nobody will win and there is no winner when the industry is sick”, he said.

Onubogu who wondered why agencies have not taken clients to court for breach of contract, advised them that until they can blacklist clients,

“you won’t wield powers.

But the only way to do it is if you work together as stakeholders in the industry to create and drive value not just for the clients but for your businesses”. To deal with nonregistered members, he said OAAN must create platform and procedures of engagement with clients with spelt out sanctions and that APCON should maintain a list of members that clients must abide for engagement.

Speaking at the forum, Joe-Eugene Onuorah, Deputy Director/Head of Registration and Professional Development at APCON said sometimes OOH may execute jobs haphazardly due to lack of funds thereby distorting the strategy of the campaign and the desired value delivered.

“With all the complications engendered by the absence of sustainable terms of engagement, committed to by the parties involved, everyone----the advertiser, buying agency, the OOH operator, and the regulator---loses revenue and value, one way or the other”.

He said rather than push the blame for consequential loses, it pays the stakeholders to come together to agree on

guiding principles for an outof-home advertising contract and commit to jointly enforcing the terms of the contract on any defaulting stakeholders.

Emmanuel Ajufor, president of the Outdoor Advertising Agencies of Nigeria, (OAAN) said the association understands the importance of the standard operating procedure in out-of-home advertising business.

The standard operating procedure becomes necessary in order to standardise how the business is being run and to adopt global best practices in the business.

In his presentation, Ade Akinde, the chairman of the occasion who quoted PWC report said out-of-home got N45 billion, 27.8% of total Ad budget of N162 billion in 2019. With projected decline of Ad budget to N47 billion in 2020, he said “the troubling question is what percentage will be within OAAN?” with 85 members.

Late last year, APCON held Advertisers forum in Abuja where stakeholders in advertising community identified challenges confronting the industry and offered possible solutions to ignite the Ad industry.

City of Stonecrest Mayor, Women Affairs Minister to deliver keynote address at Startups Africa 2020

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he Mayor of the City of Stonecrest, Georgia, USA, Jason Lary has been scheduled to be in Lagos, Nigeria as a keynote speaker at the Startups Africa 2020 conference for female entrepreneurs holding in March 27, 2020.

The event themed “Unleashing the Power of African Female Entrepreneurs” is a 2-day business conference targeted at improving, inspiring and empowering over

2000 female entrepreneurs in Africa.

In his acceptance letter, Mayor Jason Lary said, “I am honoured to participate in this incredible event. I truly believe in women empowerment. I have honoured many women for their outstanding accomplishments and contributions to the city of Stonecrest and beyond”.

Another top-tier speaker to join the Startups Africa’s conference 2020, is the current

Nigeria’s Minister for Women Affairs, Pauline Tallen. The minister will deliver address at the conference.

According to the convener of The Startups Africa, Felix King Eiremiokhae, Founder of Felix King Foundation, Mayor Lary is an Africanist and will be bringing huge entrepreneurial knowledge to the conference, having involved in series of the entrepreneurial activities in the City of Stonecrest, Georgia, USA.

Eiremiokhae said, “ business founders will Pitch to access seed funding of up to $10,000, courtesy of the startups Africa board and scale-up founders will have funding opportunity with Faster Capitalists, UAE, with investment funds worth between $25,000 to $1million and other offerings from Angel investors such as Echo VCs and Micro traction Nigeria. These offerings will in no small measure help our female entrepreneurs rise.”

Ufot, Akinwunmi, Maduegbuna to bag industry lifetime award at industry parley Daniel Obi

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hree industry giants in Nigeria’s marketing communications industry will be specially recognised for their evergreen outstanding achievements in the last decade at a special industry evening parley convened by Goddie Ofose, one of Nigeria’s top brand analysts.

The event holds on March 6, 2020 at Sheraton Hotel and Towers, Ikeja, Lagos and themed: “Advertising and the Power of the Nigerian Story”.

The three industry achievers are Udeme Ufot, CEO/ GMD SO&U/former APCON chairman; Lolu Akinwunmi, GMD, Prima Garner/former APCON chairman and Nn’Emeka Maduegbuna, CEO, C and F/foremost PR practitioner; According to Tolulope Ogunjobi, Chairman Industry Recognition Awards Committee, the pedigrees of Udeme, Lolu and Nn’Emeka in the advertising and PR industry respectively stood them out though they were few others who merited the laurel but the committee could only

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limit itself to the three most outstanding.

“We want to congratulate all the winners of the awards and the industry for doing

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great things in 2019 and the last decade. We believe that this 2020 and the new decade will be greater” he said.

Apart from the three lifetime awards, and the best ad of the decade award that goes to Airtel data is life commercial, 16 other categories will be rewarded for great performances.

Preceding the awards segment is a special interactive summit at the same venue that would be hosted by Gboyega Akosile, chief press secretary to Lagos State Governor, Babajide Sanwo-Olu, who is the special guest of Honour at this special event.

Tuesday 03 March 2020

BUSINESS DAY

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ADVERTISING Strengthening relationship with consumers in tough time, The La Casera model Brand loyalty can only be guaranteed with thorough understanding of the consumer and a deliberate plan and programmes such as product promotions and reward systems to satisfy and exceed the customers’ expectations.

Daniel Obi looks at this process and how La Casera engaged the consumers to strengthen relationship.

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L-R: Chinedum Okereke, managing director, The La Casera Company; Jeremiah Amobi, La Casera Refresh & Connect promo Smart TV winner; Oluwatobi Femi, iPhone X winner, and La Casera dealer in Lagos, Fair Bridge at the Lagos Grand Draw of the La Casera Refresh & Connect promo.

Connect’ aimed at rewarding the brand’s esteemed consumers and to further strengthen the existing bond with the consumers while also reinforcing its brand positioning as a major player in the CSD category.

La Casera ‘Refresh and Connect’ consumer promo was an expression of appreciation to consumers who have remained loyal and committed to the brand over the years, Managing Director of The La Casera Company (TLCC), Chinedum Okereke, said.

According to Okereke “we are in business because our teeming consumers have chosen to remain loyal and committed to our brand, the La Casera apple drink, which has been in the market for almost two decades”.

He stressed further that the Refresh and Connect promo was based on deep insight which reveals that the average Nigerian relish staying re-

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we are in business because our teeming consumers have chosen to remain loyal and committed to our brand, the La Casera apple drink, which has been in the market for almost two decades

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lobally, customer reward and promotions have been identified as marketing strategies to reinforce existing relationship between organisations and customers who are global citizens resident in a locality. The primary reason for the plans is to ensure brand loyalty and generate profit.

Employment of these strategies by organisations is with understanding that consumer loyalty is pre-requisite for success in a highly competitive environment like the Nigerian market. But more important to customer reward and promotions is the drive and sustenance of value and trust.

Many organisations like The La Casera Company, pioneer of PET bottled Carbonated Soft Drinks in Nigeria, which recognize that promotions alone which are normally shortlived cannot continuously guarantee consumer loyalty, have been able to fuse into this marketing strategy value and trust schemes driven by consumer insight.

As said by experts, organisations cannot buy customer loyalty, it is earned. According to them, the value perception by the customer has a direct impact on the level of loyalty to the brand.

For instance, in 2001 when The La Casera Company with plant at Mile2 launched apple non-alcoholic drink in a PET bottle, the drink immediately received market traction for its refreshing taste and for handy pet bottle which offered Nigerians the opportunity to drink on the go.

Apart from various consumer engagements and trade support programmes employed by the company to build brand equity with consumers, other factors that assisted to create appeal of consumers for the innovative soft drink in various flavours were product visibility and price.

In the last 18 years, the brand has found its way into the hearts and minds of consumers and has grown to become an iconic brand. The company is still innovating which is an indication that the company is striving to remain focused in its ability to offer quality customer service to its targeted audience. It recently introduced Bold drinks in variants such as Ginger, Orange. The company’s value propositions of customer- satisfaction and trust have combined to build consumer loyalty for its brands.

Sustaining brand loyalty For any brand, it is important to sustain the already built brand loyalty and create new ones. This is what La Casera which maintains prime position in the Apple segment for 18 years in the Nigerian CSD market, did recently when it held consumer reward through market promotions pan Nigeria.

Late last year, the brand owners held a promo called ‘under the crown consumer promotion - Refresh &

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freshed and connected to love ones, hence the promo idea.

The promo which ran from 1st of October to the 31st of December 2019 was an avenue for every consumer to enjoy a refreshing bottle of La Casera Apple drink with natural apple taste and also win big.

With the La Casera Refresh and Connect Consumer promo, the brand further connected with consumers as it encouraged them to partake in the promo and win big. Various prizes won include Smart TVs, Smart Watches, Laptops, Mobile phones, Bluetooth Headsets, La Casera products and airtime worth millions of Naira.

During the promo, crowns for the La Casera Apple drink were specifically designed and come in Yellow as against the regular Blue colour. Consumers who purchased La Casera promotional bottles in 35cL, 50cL or 60cL with a yellow cover participated in the promo.

He explained that consumers who bought La Casera apple drink showed that they trust the brand and the company, as the company would always ensure that its consumers get the highest quality of products always.

Okereke noted that The La Casera Company has resolved to continue to give Nigerians more innovative products, urging consumers to keep refreshing with the brand.

Consumers who looked under the bottle cap and sent the 8 digit unique code under the cap via SMS to 20055 or via WhatsApp to 09034509330 won airtime and participated in the monthly draws where the fantastic prizes were won.

He reiterated that consumers who participated up to 10 times each

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month qualified and entered into the monthly Grand Draw where various prizes were won. 6 Grand Draws were held throughout the duration of promo at different locations.

While explaining the idea behind the consumer promotion, the Marketing Director, The La Casera Company (TLCC), Emmanuel Agu expressed excitement how the promo generated joy among consumers across the country.

Also speaking, the Senior Brand Manager of the company, Ruth Ode, said that La Casera decided to hold the draws across several regions of the country in order to give consumers in all parts of the country the opportunity to win the prizes offered in the promotion.

Some of the winners included John Emeh, a clothing trader based in Port Harcourt who won a 43’ Hisense smart TV in the promo. He said he was very delighted to have been picked as a winner in the grand draw.

“I am so happy and excited”, he said.

Another winner of an IPhone X mobile phone in the promo is a cook, Esther Tobechukwu. She explained that she never expected to win but just enjoying her favourite apple drink La Casera anytime she craved for the taste of apple, but never believed she could win anything from La Casera.

“Today, I am glad and overwhelmed.

La Casera have made me an IPhone owner. I advise others to continue enjoying La Casera Apple Drink. I now know clearly that La Casera rewards”, she stated.

Oyekan Victor from Ibadan also won 43” Smart TV in the draw while Jeremiah Amobi and Oluwatobi Femi from Lagos won Smart TV winner and @Businessdayng

iPhone X winner respectively.

To underscore the promo as investment in people’s lives while driving growth , the management of La Casera visited the Emir of Kano, His Highness, Muhammadu Sanusi II, at the his palace as part of activities for the grand draw of the consumer promo.

Managing Director TLCC, Chinedum Okereke, thanked the Emir for the rare privilege of such a historical visit. He highlighted the pedigree of the company, which houses household brand names such as La Casera Apple drink, Smoov Chapman, Nirvana range of products and Bold Bitter lemon along with the newly introduced variants that form the Bold Franchise.

Chinedum while outlining the company’s contributions in building the nation and the economy through employments, said: ‘We employ over 1,000 people directly in our company operations and over 10,000 people indirectly across the country. We equally have close to 2,000 direct dealers handling our products, as well as several vendors in our value chain.’

The La Casera Company which holds the historical city of Kano as a key location for its business, in 2019, carried out a multi-platform educational enlightenment campaign against the ills of substance abuse, targeted at the youth.

The Emir in his remarks, underscored the significance and relevance of Kano not just as a major market for products but also as a strategic point through which goods travel to the whole of West Africa. He expressed his desire for Kano to develop further beyond a consuming market into a production and manufacturing hub.

He stressed that this was the only way to curb the social problems that bedevilled youth in the region.

Muhammadu Sanusi II also advocated for more investment in agriculture and manufacturing, urging The La Casera Company to have a strategic plan to put more infrastructure on ground in Kano, even as its business continues to expand.

After leaving the Emir’s palace, the TLCC team headed to the Vesicovaginal Fistula (VVF) Kwali Rehabilitation Centre, where donation of 3.5KVA solar power equipment to the centre was made. It had identified water and power as the major challenges faced by its inhabitants. The solar panels will provide electricity and help to power the water pump in the hostel.

Hauwa Bello Umar, who is the Officer-in-charge at the centre, thanked TLCC for providing succour to the centre inhabitants who have already been through their own ordeals.

Building brand loyalty is a deliberate effort which must start with consumer insight, supported with clear defined programmes such as promotions to exceed consumer expectations.

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Tuesday 03 March 2020

BUSINESS DAY

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Tuesday 03 March 2020

BUSINESS DAY

21

INTERVIEW ‘Leading with personal impact during slow growth’ At the forthcoming TEXEM, UK’s “leading with personal impact during slow growth” executive development programme, scheduled to take place at the Radisson Blu Anchorage Hotel, Lagos, from 4th – 5th March 2020, world-renowned Professor Roger Delves would deliver this programme. Currently a Fellow of the Royal Society of Arts, and educated at the University of Oxford, Professor Roger is Associate Dean and Professor of Practice at Ashridge Executive Education, Hult International Business School. His special interests are helping others to understand the roles of authenticity and emotional intelligence in Leadership and team engagement.

Professor Roger Delves is a seasoned and first-class coach. He is not only an accomplished academic, but he has also worked with brands from P&G, General Foods, Mars Masterfoods, Johnson Wax, Bosch, Sony and Sterling Health, helping to create award-winning advertising that moved products. Professor Roger Delves would be applying TEXEM’s tested, proven methodology and track record of training over four thousand executives; Professor Delves will share practical insights on Impactful Leadership and strategies for Optimum Performance in an era of slow growth. Through this interview Professor, Roger Delves shares valuable insights into Leadership.

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had done differently?

I wish I had moved away earlier in my career from the failed model of the hero leader and realized that a leader with frailties and vulnerabilities, a servant leader, dedicated to the team, is much more likely to gain commitment than a hero leader.

hat leadership rules should we (or could we) be breaking?

Leadership is more art than science. We can break any leadership rules which do not leave us feeling our integrity or values, or those of our organization or those of our nation have been compromised or flaunted.

When you’re considering partnering with another person or business, what factors are deal-breakers for you?

I have to be able to trust them, and their integrity has to be beyond question. There has to be a genuinely open relationship between us.

Where do our best ideas come from, and how can we spawn more creativity?

I think our best ideas come when we are trusted to make mistakes and to fail. If we create cultures which welcome error and failure as inevitable on the journey to success, then we will enable ourselves to be risk-takers in the ideas we create and adopt. Nobody ever succeeded by being afraid of failure.

What can we do to drive decisions down closest to the point of impact?

We can change our leadership paradigm from “decide and tell” to “ask and listen”. Get the people affected by the decisions to have a say in the decisions. Much wisdom in organizations is ignored because it does not wear a suit and tie. Listen, with an open mind.

Listening is not a commitment to act. But it should be a commitment to think.

What can we do to operationalize our vision, values and strategy?

Operationalizing vision, values and strategy requires convergent thinking. Once the vision, values and strategy have been agreed, then bring together men and women who want to attend to the management of detail to decide how to make those things happen.

High-class leaders create vision, values and strategy. High-class managers execute them. They converge strategy and execution, vision and action, values and behaviours so that the gap between each is minimized. Great organizations recognize the strengths of great leaders and great managers and develop them, for example via programmes such as TEXEM, UK’s “leading with personal impact during slow growth”.

As a decision-maker, what should be most important to me about developing my capability?

If your skill is decision making, then you have to be utterly clear about what you bring to the decision-making process which allows people who won’t be in the room with you to trust you, believe in you, be led by you. What informs your decision-making? How does it fit alongside the vision, values and strategy of your organization?

How do you keep your employees or team members keen and motivated?

By creating and maintaining an achievement culture within which every individual feels supported and valued.

Roger Delves

What is your “Secret Sauce?” i.e. what are the Leadership Principles that you have discovered and executed that have contributed to your success?

There are four principles which underpin and inform our emotional intelligence, and for me, they are the guiding lights of my Leadership. They are to be genuinely, deeply self-aware; then to be able, regardless of situation or circumstance, to self-manage so that what one does truly reflects who one is. A leader needs to be socially aware, truly inclusive, building cultures to be proud of, and finally to be committed to relationships which are open, honest and real.

What are leaders’ greatest failure?

And what can we learn from it?

The greatest failures of Leadership I see are the prioritizing of task completion by the leader over team building. Teams complete tasks, leaders build teams. That’s what they should be rewarded for doing and given the time and space to do. What we sadly don’t seem to learn is if we reward leaders for doing the wrong thing, then we’ll keep on getting mediocre teams.

Can you please talk more about execution?

What can I do to ensure that my/ organization Strategic Plans actually become a reality through execution? You have to keep asking yourself “what’s my job?” If your job is to identify the strategy, then once you’ve identified it and it’s agreed, step away. Somebody else who is good at implementawww.businessday.ng

tion should implement it while you go away and do more strategic thinking. Someone has the job of identifying strategic implementor. If that’s not you, then your contribution is finished when the strategy is accepted. If you ARE the implementor, then your question is, what is the strategy that I am to implement? Make sure it is agreed and entirely signed off. Then make it happen. Too many organizations make one person responsible for too many aspects of the workflow from idea germination to product distribution. Compartmentalize.

Get experts for each piece. Attend executive developing programme such as TEXEM’s leading with personal impact during slow growth What can I do to take care of my staff?

Have a real relationship with each and every one of them—even the ones you don’t like very much.

Let them feel your interest. Share hopes, fears, dreams and ambitions with them. Be vulnerable.

When there is trust, then find out what concerns them and help if you can.

Relationships – How do I continually deepen my personal relationships with my clients/customers/staff/ peers and leaders around me?

Pouring time into a relationship is like pouring water into a plant.

Time to ask and listen not just to tell. Time to build trust. Then failure can be allowed – and then risks can, therefore, be taken. Then difficult conversations can be had – so no more unresolved conflict like dragging the team underwater.

As a successful leader, which one thing do you wish you

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In a situation, when faced with tight decision-making, what process do I need to go through to reach a sound conclusion?

I have an acronym: RIGHT choices. What are the RULES? What action has INTEGRITY? What does a GOOD decision feel like to me? What HARM can I do through this decision, and how? Is there a TRUTH that I know I should abide by?

What can I do to lead better?

Keep thinking about your values – the person you want to be, the person you know you are. Are you that person as a leader? If not, why not? What’s stopping you and why? If you’re a good person, you can be a good leader. If you’re not a good person, please don’t lead…

Which is most important in an organization? Mission, core values or vision?

Core values. Your mission can and probably will change as the world we inhabit constantly evolves; your vision will certainly change as new opportunities emerge or are created by what you are doing now; companies cannot stay still, they must evolve. But through all this change and evolution, our values, those things that encapsulate the ditch we’d be prepared to die in, they are always the candle in the window.

What is the biggest challenge facing leaders today?

In order to prosper, or even survive, many industries, many countries need to undergo transformational change. That requires transformational Leadership, which is extraordinarily demanding and challenging and almost always comes up short. So the challenge for leaders is, have you got what @Businessdayng

it takes to be transformational – because somebody is going to have to be.

What is one mistake you witness leaders making more frequently than others?

They think their job is to DO things rather than to create an environment in which other people can thrive and act. Leaders are catalysts, cultivators and need to be developed.

What is the one behaviour or trait that you have seen derail more leaders’ careers?

A lack of emotional intelligence.

Most leaders fail not because they can’t do the cognitive stuff, but because they can’t do the interpersonal relationship stuff.

What are a few resources you would recommend to someone looking to gain insight into becoming a better leader?

Attend TEXEM, UK’s executive development programmes! Read some of the great management thinkers around Leadership – Goleman, Kotter, Drucker, Goffee & Jones, Stephen Covey, Amy Edmondson, David Caruso. They have deep insight and some great things to say. Never buy a book you’re not prepared to scribble notes on!

What advice would you give someone going into a leadership position for the first time?

You’ll do things wrong. Get over it.

The idea is to play the long game.

Set out your principles early and keep to them. Leaders are forged in the fires of experience, so you need to lead in order to learn. But those fires are a good deal easier if you have an asbestos suit of values or principles to help you through…

What will Leaders who attend this programme take to their Organizations afterwards?

Leaders who attend would: Develop their interpersonal influencing skill Learn to build enduring organizations that meet the needs of stakeholders. Learn to promote a trusting relationship in their organization—leverage social capital for enduring success.

Why should executives attend your programme holding later this month?

Let me quote from the statement of a previous delegate of TEXEM, UK, and you can be the judge.

Dayo Babatunde, Former Senior Partner, Ernst and Young, said and I quote: “I regard the These Executive Minds Executive Education programme as the best I have attended in recent times. Not one of them, but the very best as it was humanly perfect”.

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Tuesday 03 March 2020

BUSINESS DAY

EDUCATION

Weekly insight on current and future trends in education

Primary/Secondary

Higher

Human Capital

How private sector is driving academic excellence through investment in extra-curricular activities Today, there are many children in Nigeria, who were born with innate sporting potentials, but lack the required avenues to showcase their skills. This drawback may negatively impact the sporting and economic future of the country if not tackled. KELECHI EWUZIE writes on how Guaranty Trust Bank through its various sports education initiatives is creating opportunities that enables school children to harness their potentials.

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igeria, the largest economy in Africa by Gross Domestic Product (GDP) is grappling with a budging population of secondary school pupils looking for avenues to let out their innate skills, even as the country battle to address youth restiveness, idleness, illiteracy, growing number of out-of-school children among other issues.

It has become very worrisome that deficient school curricula and lack of proper investment in infrastructure for sporting activities have contributed to the failure of schools to provide their pupils with the appropriate outlets to exhibit their skills.

Physical and health education specialists are of the view that any country serious about preparing her future generation to be competitive across the globe will ensure her pupils are actively engaged not just in classroom work, but also in sporting aspects of learning from a very early age.

While most secondary schools in Nigeria in general and Lagos State in particular lay claims to having an effective physical and health education classes where they teach the pupils the rudiments of sports, serious efforts need to be channeled towards ensuring that practical football and other sporting education are taught in our schools. This will stimulate the revival of school sports in Nigeria as well as encourage the discovery of football and other sporting talents for the good of the country.

Industry watchers believed that it has become imperative that pupils across primary and secondary levels are provided with the opportunity to learn sports and if the right investment in sports development in schools are put in place, it will significantly improve the health and leadership characteristics of these pupils.

They opined that the pupils by engaging in these extracurricular activities in school, stand to benefit from the innumerable opportunities available in the world of sports.

Indeed, it could be argued that very few organisations understand the critical role sports education could play in Nigeria’s quest to remaining

L-R: Ajibade Odutola, Corporate Communications & External Affairs, GTBank; Egbeyemi Grace, Sports Officer, Kings College, Lagos; Risikat Yussuf, Representative, Board of Trustees, LAFGHECA; Biyibi Victor, Chairman LAFGHECA and Babajide Sipe, Head Experiential Marketing, Events & Activations, GTBank at the quarterfinals, GTBank Masters’ Cup Season 9 at Campos Mini Stadium, Lagos.

relevant in the global sporting arena than Guaranty Trust Bank does.

This foremost African financial institution understands this connection that is why its sustainability strategy is underscored by continued investments in sports education. Guaranty Trust Bank’s drive is evident in its support for education programmes inclassroom, out-of-classroom, infrastructure development, students’ scholarship and teachers training across Africa.

In keeping with its mission of creating enduring partnerships for sustainable development, the bank through its Sports Education CSR initiative is propelled to discover talented footballers in schools across the geo-political zones in Nigeria.

A case in point was the Principals Cup which is a football competition for secondary schools, aimed at fostering camaraderie and identifying local football talents at grassroot level. The competition begins at the start of new academic sessions in secondary schools and ends mid-June of every year.

For Guaranty Trust Bank, the value of sports as an aid to personal development is not far-fetched. In 2009, through a public-private partnership www.businessday.ng

with the Lagos State Government, it started the Principals Cup which has since been extended to Ogun State and Rivers State.

The vision of the bank for venturing into the Principals Cup was among other things to raise role models for the society as well as using sports as a tool to provoking academic excellence in secondary schools.

Again, the Principals Cup has since inception provided the platform to create football stars who has become Nigeria’s ambassadors as exemplified by Stephen Odey, who played in the second edition of GTBank-Lagos State Principals Cup where he was the captain of the winning Dairy Farm Senior Secondary School, Agege.

Segun Agbaje, managing director of Guaranty Trust Bank Plc opined that sport plays a major role in the development of life skills and the competition paves way for youths to cultivate their sporting talents and aptitudes, while fostering and building a healthier lifestyle at a critical stage in their lives.

Agbaje maintains that the outstanding performances on display annually by young pupils from participating schools in the competition spurs the

bank to provide an avenue for the pupils to showcase their talents and passion for the game of football even as they remain committed to their academics.

Research has shown that as a financial institution that is committed to the development of sports education, Guaranty Trust Bank, a youthoriented brand, maintains the lead in providing support for education and sports to enable young boys and girls explore their talents and reach for their dreams.

Also, GTBank is underscoring its commitment to sustainable development through sport education by not only providing a platform for pupils to excel, but also training sports teachers for greater efficiency.

The bank, has no doubt, through its educational initiatives have in over a decade seen it provide digital libraries and sporting infrastructure to schools in Lagos State and beyond while empowering pupils to pursue their dreams of engaging in sports.

Aside the Principals Cup, one other sporting initiative being championed by the bank is the GTBank Masters Cup an offset of the GTBankLagos State Principals Cup. The tournament was first

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conceived when the bank realised that grassroot football development was incomplete without the participation of all schools in Lagos state (private and public) especially those that dominated the Principals Cup over three decades ago, since its inception in 1954.

As a way to addressing this gap and ensuring full participation of all schools, the bank decided to create The Masters Cup in partnership with Lagos State First Generation Heritage College Association (LAFGHECA). This football tournament involves the heritage schools as well as other private schools.

To further strengthen the value chain of sports education in the country, the Camp GTBank programme was born.

The initiative powered by this innovative financial institution commenced in 2011 as an annual event that takes place after the football season. The programme entails camping the selected students where they are taken through training sessions on formations, strategy, tactics, conditioning, instructions and physical exercises.

The programme involves former Super Eagles national team players and coaches who in the course of the training @Businessdayng

take the players through all the aspects of the game, expose them to modern rules and regulations and improve their physical and mental conditioning and position them to become professionals.

These ex-footballers will also offer lessons to the school coaches and sports instructors over a two-day period to develop and enhance their knowledge and technical competence.

“Given the amazing talents shortlisted for this programme and the quality of the coaches overseeing their development, I am confident that Camp GTBank will be a seedbed for the emergence of professional footballers who will go on to have very successful careers”, says Segun Agbaje.

He further said that this goes to the heart of the bank’s sports education initiatives, which are aimed at actively engaging the youths through sports while identifying, nurturing and grooming young football talents.

“At GTBank, we will continue to invest massively in youth development through education and sports in order to help more youths actualise their dreams and to also grow their personal confidence and make them become better team players,” Agbaje said.

The super cup is a tournament designed for the selection of the champion of champions for each season of the tournaments. The championship kicked off as a challenge between the winners of the Principals Cup and Masters Cup in the male and female categories but later metamorphosed into a challenge between the winners of the Ogun and Lagos State tournaments.

These initiatives among others are proofs of Guaranty Trust Banks commitment to sustainable development of human capital in sports education for Nigeria.

It is the belief of stakeholders in education and sport sectors that with intervention such as what Guaranty Trust Bank is currently undertaking, sports education will spur the creative energies of secondary school pupils across Nigeria and go a long way to unleashing and helping them discover the glamour of showcasing their footballing skills.

Tuesday 03 March 2020

BUSINESS DAY

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EDUCATION OAU’s early success with EduTech products show innovation in public varsities STEPHEN ONYEKWELU

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bafemi Awolowo University, Ile-Ife in Osun State has produced three firstclass graduates using applying online learning management systems (LMS) through its partnership with EduTech, a company that developments technology for education. The three outstanding students acquired a Bachelor of Science in Accounting.

In business since 2012, EduTech has worked to bridge the gap between demand for and access to quality education by decentralising the traditional brick and mortar method of learning. The firm works with progressiveminded universities to digitise their on-campus learning experience and provide an exceptional remote learning experience for their students leading to increased value for all stakeholders.

Femi Shonubi, acting general manager, EduTech, said this feat shows the company’s e-learning platform provides students with an efficient system leading to the award of a degree.

With over 1.8million applicants in the last Unified Tertiary Matriculation Examination (UTME) and about 600,000 available physical spaces in Nigerian universities, carrying capacity of Nigerian public universities continue to shrink as the number young people seeking tertiary education increases.

“Our campuses here have big lecture rooms full of students where, only those seated at the front actually hear what the lecturer says while others don’t. This impairs learning,” Shonubi said. “The experience is quite different when these courses are taught online as students enjoy seamless access to study materials and lectures.”

The university’s decision to partner with EduTech was borne of the need to leverage on the company’s expertise in e-learning courseware development and other ancillary

facilities to fast-track Online Distant Learning (ODL) programmes.

Olabode Asubiojo, pioneer director of the programme said “EduTech has assisted in training our staff on courseware development and general upgrade of the Information Technology Unit of our Centre.

Now, all a lecturer needs to do is to simply enter any of the purpose-built studios and deliver his lecture. The video recording of the lecture is then sent online to students who have subscribed.”

One of the first-class accounting degree graduates from the programme, Emiola Lateef Adeola argued that the programme was dream come true. “I work with a top accounting firm and there’s very little time to study. The courses and exams are the same with that of the physical classes and we are even taught by the same lecturers.”

The mode of study is purely online. “It is only twice in a

Nestlé seeks to boost reading culture, upgrades facilities in community school

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tudents in Makun High School in the Sagamu community of Ogun State have a new opportunity to explore the exciting world of books in an enbaling environment as result of the resent commissioning of a library recently refurbished and furnished by Nestlé Nigeria.

There is growing concern over the perceived decline in reading culture among Nigerian youth. A 2019 report by the National Commission for Mass Literacy shows that 4 in 10 primary school children

cannot read for comprehension. For a country that has produced literary giants like Chinua Achebe and Wole Soyinka, these statistics are disturbing.

In line with its commitment to improve livelihoods in the communities directly connected to its operations, Nestlé Nigeria PLC recently renovated and equipped the Makun High School library to help revive a love for reading among the students.

Victoria Uwadoka, corporate communications and public affairs manager, for Nestlé

Nigeria said the refurbished facilities which include a fully equipped library, a crèche for nursing teachers, and an office for the Librarian, aligns with a desire to develop a strong desire to acquire knowledge in students. It would be difficult to encourage them to imbibe the culture of reading and learning if the environment is not conducive. “Therefore, we are continuously focused on improving learning and teaching environments in the schools within our communities,” Uwadoka acknowledged.

In 2019, Nestlé Nigeria had

L-R Olotu Omoba M. O. Oyedele, chairman RIDSCo, the Ewusi of Makun, Sagamu; Adewale Osiberu, HRH Oba Elepe of Epe, Sagamu (Rep. of the Akarigbo of Remoland); P.K Omotayo, zonal education officer (Rep. of the commissioner for Education), and Victoria Uwadoka, corporate communications and public affairs manager, Nestlé Nigeria. www.businessday.ng

refurbished facilities including classroom blocks, toilets, playgrounds and handwashing stations in primary schools close to its factories. One of the beneficiaries is the NUD Primary School in Owode Egba, Ogun State.

Community leaders, representatives of the ministry of education, teachers and students expressed delight at the improved facilities. In her speech delivered by the Zonal Education Officer, P.K Omotayo, the commissioner for Education, Science and Technology for Ogun State, Modupe Mujota, commended Nestlé Nigeria, “Education is both a necessity and an investment which everybody must embrace with the seriousness it deserves.

In building this library for Makun High School, Nestlé Nigeria has not only uplifted the reading culture but has lived up to its corporate social responsibility. It is also a show of good partnership with the State Government in the education sector.”

O. W. Sotunde, principal of the Junior School, said, “Today is a unique day because our teeming population of over 3,000 students and their nursing teachers now has the privilege of a top class library and a well-equipped crèche, both of which can match those of any renowned private school.”

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semester you need to come to the campus to interact with lecturers as the lectures are already pre-recorded for you and you can download it from the portal. You can rewind or fast forward the content as you desire to get a better grasp of the subject,” Adeola said.

The lectures are convertible into audio format and can be listened to it in the car, as the student commutes. “I usually listen to the lectures when I travel and I contact the lecturers on any difficulty once I arrive. Courtesy of the EduTech platform on the OAU ODL, not only am I able to increase my credentials, I also got promotions at work. Now, I’m a proud awardee of a B.Sc (Accounting) degree from OAU”.

EduTech currently facilitates both undergraduate and post-graduate programmes in two universities. In OAU, the platform facilitates onlinebased undergraduate programmes leading to the award of Bachelor of Science degrees

in Accounting and Economics as well as Bachelor of Nursing Science degrees.

At Ahmadu Bello University (ABU), the platform facilitates the Masters of Business Administration (MBA), Post Graduate Diploma in Education (PGDE), BNSc Nursing, B.Sc (Economics, Public Administration and Business Administration) courses online with plans to include 10 more programmes this year.

ABU students can enjoy the traditional first and second semesters (like in the conventional universities) and a third semester in which one can fast track and take the next session courses all in one year.

According to Shonubi, the firm has a plan to increase its students count from 6,000 currently to 130,000 across its partner institutions in the next five years and is looking at discussing with some financial institutions about the possibility of having access to student loans at favourable rates.

We will use ICT to transform education sector in Kwara - Commissioner SIKIRAT SHEHU, Ilorin

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atimah Bisola Ahmed, the Commissioner for Education and Human Capital Development in Kwara State, has outlined the efforts of the State Government towards using Information and Communication Technology in transforming the education sector in the state.

The commissioner, who stated this in Ilorin the state capital, explained that digitalisation of education sector, will come in two dimensions; the management and human capacity building respectively.

In the area of management, she explains the government is working relentlessly to introduce Education Management Information System (EMIS) by which education activities in various schools would be monitored within the state.

“EMIS will be configured such that monitoring can be exercised wherever the operator is... Wherever you are, you do not need to travel down to Kwara to monitor all education activities happening within Kwara state.

You do not need to travel to @Businessdayng

where the school is to get information,” she said.

On the human capacity building, she states that the state government is trying to revive all the ICT centres in all the schools across the state. This according to the commissioner would enable Kwara State be to key into digitalisation big time and prepare the students towards digital economy even before they finish from their respective schools.

Ahmed made reference to Kwara Sate School for Special Needs, revealing that the state government has revived the ICT center in the school, she disclose that the State Government spent about Twenty-Two million Naira in order to revive the ICT Centre, as she notes that this will be done for other schools in the state.

Kwara state is one of Nigeria’s advanced state in the area of Education with expectations on innovations through ICT demanded from the incumbent administration.

The government has constantly restated its commitment to advancing the Educational system in the state, embarking on various projects to back this up since emergence.

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Tuesday 03 March 2020

BUSINESS DAY

Carrying out a successful mega-deal Yves Perrier has won over staff to his unorthodox approach to the investment industry Owen Walker

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ves Perrier is a philosopher at heart.

The one-time footballer who now runs Amundi, Europe’s biggest investment group, signs off meetings with analysts and journalists with his catchphrase “life is beautiful”.

When we meet, after Amundi’s announcement of its latest acquisition, Spanish bank Sabadell’s investment arm, Mr Perrier, 65, offers a pearl of wisdom.

“If you want to build a ship,” he says, quoting the writer Antoine de Saint-Exupéry, “don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.”

Mr Perrier is explaining his approach to making sure large deals are well executed and integrated — especially when it comes to motivating staff through potentially traumatic transitions. Mega transactions in the investment industry have a notoriously low success rate.

The tie-ups in recent years between Standard Life and Aberdeen Asset Management, as well as Henderson Global Investors and Janus Capital, have resulted in larger but still underperforming businesses, accompanied by staff cuts, lost clients, low morale

and disenchanted shareholders.

The question of how to combine investment businesses successfully has become more pressing, following a spate of recent transactions, from Franklin Templeton’s $6.5bn purchase of Legg Mason to Jupiter Fund Management’s £419m capture of Merian Global Investors.

Mr Perrier is well placed to opine on M&A, having built Amundi up through a series of deals. The largest was the €3.5bn all-cash purchase of Pioneer Investments from UniCredit, the Italian bank. It stands out as the most successful of the industry’s recent large deals and catapulted Amundi into the trillion-dollar club, the world’s biggest investment groups by assets managed.

Since the deal was announced in December 2016, Amundi’s share price is up more than 60 per cent, compared with a 16 per cent rise for S&P’s index of global asset managers. Amundi says it has not lost any significant clients or portfolio managers as a result of the deal — problems that typically blight investment tie-ups.

On a range of financial measures, the deal also stands out as a rare success story in asset management M&A. The businesses were fully integrated within 18 months — an especially quick time for such a large transaction — while the €175m of cost www.businessday.ng

savings was €25m over that originally planned. Amundi’s net income is up 41 per cent to €959m since the Pioneer acquisition.

Mr Perrier formed Amundi in January 2010, bringing together the investment arms of French banks Société Générale and Crédit Agricole. He says that from the moment he and his fellow executives at the two lenders conceived the idea for the merger, they set out to become the biggest player in Europe. But he concedes that at the time the ambition was “not so realistic”.

Over the past decade the group’s assets have more than doubled, from €670bn to €1.6tn, placing it inside the world’s top 10 investment businesses.

Mr Perrier says that the early years after launching Amundi were the hardest, and lessons learnt then have made subsequent integrations easier. He says he initially struggled to convince staff that his belief that the industry needed to go through a period of what he calls “industrialisation” would work. “We were really presenting a view of the industry that was not mainstream,” he says. “Many people had doubts at the time. Today, nobody has doubts.”

He says the task of convincing staff to follow his unorthodox approach started with getting workers to buy into his ambition of becoming the leading player

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in Europe. Then he set about hiring managers who were convinced of the merits of the transformation and could carry it out.

But he says the most important aspect was being consistent with the approach, and how it was articulated inside and outside the business. “The strategy I defined in 2010 has not changed,” he adds.

Mr Perrier has a prosaic view of the investment industry. He compares it to car manufacturing, where core components such as equities or bonds are developed by the investment managers into products or savings vehicles, and then distributed to clients through a vast network of sales channels.

“With this view, we practice value analysis in order to improve efficiency, quality and reduce cost,” he says, adding that low interest rates have put efficiency at the centre of the company’s strategy.

The emphasis on cost reduction has inevitably led to large job cuts when businesses are bought and overlapping roles are made redundant. The Pioneer deal led to 600 roles being culled.

Mr Perrier says the best way to avoid staff morale being affected is to select the best performers to stay regardless of which side of the business they come from, so management cannot be accused of favouritism, and to act swiftly @Businessdayng

to limit anxiety.

Mr Perrier eschews the star fund manager culture that was so popular in the 1990s and 2000s. He insists there are “no stars at Amundi apart from Amundi itself”, and the group’s pay policy reflects that view.

Managers are paid well but not excessively, with bonuses linked to personal targets as well as corporate ones.

He received a 16 per cent pay rise last year, taking his salary to €1m with a €2m bonus, which in total was 21.9 times the average worker’s pay at the group. His pay rise was criticised by Institutional Shareholder Services, the proxy advisory group, but his overall remuneration is dwarfed by his peers at the top of UK and US businesses.

As a teenager, Mr Perrier rejected the chance to become a professional footballer for French club Lyon, favouring a career in finance. He has a passion for the game, in particular Manchester United.

But it is not the club’s former player and fellow amateur philos opher Er ic Cantona whom he most admires. He looks instead to ex-manager Alex Ferguson for leadership inspiration. “He built not only a team, but a club and then a brand,” Mr Perrier says. “And that’s what I have tried to build with Amundi.”

Tuesday 03 March 2020

BUSINESS DAY

25

CFA chief on failing the ‘world’s hardest exams’ Margaret Franklin says ageing populations and low rates have created a maths problem with no easy solution Attracta Mooney

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Margaret Franklin: ‘The complexity of what we’re dealing with requires really, really good people at the table’ © Tony Healey

times,” the Canadian native says.

“Nobody practising right now has any playbook for this. Forty years ago, we were dealing with extraordinary inflation, largely through the energy markets and, for a long period of time, you had declining inflation, declining interest rates and growing GDP, and that is the perfect trifecta for all assets to do well.

“And whether we’re at the end of it or the tailing end of it, this is going to be a very challenging time,” she says. “People living for longer and lower-for-longer returns, that’s a pretty interesting mathematical equation.”

She cites an example from her own family of the challenge facing the industry. Her father-inlaw started his teaching career aged 21 and retired at 50. Now aged 94, he has been drawing his pension from the Ontario Teachers’ Pension Plan for more years than he worked. Pension funds were never set up to operate this way, she says.

“It’s a maths problem for which there may not be an investment solution. And that’s why the complexity of what we’re dealing with requires really, really good people at the table. It requires deep thinking.”

The CFA’s job is to “capture those changing dynamics” and incorporate them into its flagship exams and into life-long learning, she says. As part of this, the organisation has been piling resources into developing www.businessday.ng

post-charter education. It spent the past 18 months looking at the main jobs in the investment industry in order to develop a new competency-based further education framework, which will be launched later this year.

The conversation turns to Ms Franklin’s experience as a woman in fund management. A former competitive road cyclist, she worked at Barclays Global Investors when the chief executive was Patricia Dunn, one of the best-known female asset management bosses. “That, for me, is a normal ecosystem and it has had a lasting imprint on me.”

Reflecting on almost three decades in the industry, however, she says there were times when being a woman meant missed promotions and pay discrepancies. She cites an example of where a male employee she managed was awarded a

similar bonus to her, with the justification that “he has a family to support”.

Now, she says, more and more businesses are thinking about diversity and tackling biases. As part of a CFA initiative, 20 asset managers are currently trialling various strategies to improve diversity and inclusions in their businesses.

Like the majority of the fund industry, the CFA is also looking to tap into growing demand for environmental, social and governance investing. The organisation recently launched a working group aimed at developing a taxonomy and standards for ESG investing, akin to the widely used global investment performance standards known as GIPS. More than 200 people applied to be on the working group.

She says the asset management industry is increasingly

‘‘

The CFA’s job is to “capture those changing dynamics” and incorporate them into its flagship exams and into life-long learning

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‘‘

argaret Franklin, the new head of the CFA Institute, failed her first round of tests when studying to become a chartered financial analyst.

She sat the first part of the CFA exams in 1994 as a new mother of a one-month-old boy. “I fell asleep in the morning exam. I thought I’d put my head down for just a moment and woke up significantly later, and did not pass my first level,” she says.

Although few will have made what she describes as an “insane” decision to take the test as a new mother, she is not alone when it comes to failing the CFA exams, which have been dubbed the world’s hardest. Only about 40 per cent pass the first level of the CFA exams, which are widely taken across the asset management industry. Fewer than one in five go on to receive the charter, which Ms Franklin was awarded in 1997.

It is a hard test, the chief of the association for investment professionals concedes. “For many programmes the difficult part is getting into the programme.

The material and content, oftentimes, is not nearly as difficult as the entry.

“For us, anybody can take it, but the actual programme itself is difficult and rigorous.”

The 54-year-old took the job as chief executive of the CFA Institute, whose research arm publishes the respected Financial Analysts Journal, last September. She is the first woman to hold the position in the body’s 73-year history and has spent much of the past six months flying around the world.

Over coffee at the Ned, London’s hotspot for business meetings, Ms Franklin says she is worried about her carbon footprint.

Small, lively and warm, she leans into the conversations in a way that gives the impression that she is taking the listener into her inner circle. As the conversation progresses she bats away requests for minute details, instead focusing on her overall argument.

Her appointment comes at a time of change for the CFA and the wider investment industry.

The CFA’s charter programme has been hugely successful, but a battle for talent between finance and technology and a changing investment landscape is driving a rethink at the Charlottesvillebased non-profit.

“We’re in really interesting

@Businessdayng

waking up to ESG risks, particularly when it comes to climate change where there are growing fears that the shift to a lower carbon economy could hit the valuations of some assets.

“You can see that Minsky moment when the market turns and pays attention to it, and there’s an immediate and material repricing of assets. And if your portfolio analysis and your due diligence and your research did not consider that, I think for most managers . . . that would create a problem.”

The CFA’s focus on ESG comes as younger people increasingly say they want to work in careers that make a difference. At the same time, the number of students sitting the upcoming CFA exams in June is expected to fall by more than 5 per cent, after a rapid rise during the past three years.

As well as ensuring clients’ cash is not put at risk, the growing focus on the environment will play a role in helping ensure the finance industry is an attractive place to work for young people, says Ms Franklin.

“We have a part to play in restoring the nobility of what we’re doing. At the end of the day, the financial system is not going away, asset management is not going away. It is a necessary activity, and done well can contribute so much to innovation, to financial security for citizens.”

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Tuesday 03 March 2020

BUSINESS DAY

Investments

ENERGY INTELLIGENCE

Market Insight Companies Commodity Tracker Policy

OIL

GAS

PETROCHEMICALS

POWER

Insight

Nigeria is missing opportunities to cut petrol subsidy as oil prices decline ISAAC ANYAOGU

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hile many analysts have warned of dire consequences for the Nigerian economy if oil prices continue to plummet, not much is being said about the opportunity it provides to exit the costly petrol subsidy programme that costs the country over a trillion naira every year.

In 2016, oil prices fell to less than $40 per barrel, combined with a lethal militancy campaign marked by the unprecedented destruction of oil and gas facilities, the economy slithered into a bruising recession whose repercussion are still felt nearly four years later. If Nigeria had announced an end to fuel subsidy programme, the pump of price of fuel would have seen only a marginal increase as crude oil have fallen.

In December 2018, oil prices again sank nearly 35 percent from four-year highs reached in October that year and were at their lowest levels in more than a year.

It was a clear indication that the agreement to cut 1.2million barrels per day (bpd) from global oil production by the Organisation of Petroleum Exporting Countries (OPEC) and non-members including Russia, was not going to lift prices leaving many oil producers scrambling. Nigeria did not also take that opportunity to exit the costly fuel subsidy programme.

Brent crude, the global oil benchmark, fell 3 per cent at $57.80 a barrel on London’s Intercontinental Exchange. West Texas Intermediate futures, the U.S. standard, were down 3.3 per cent at $48.24 a barrel on the New

York Mercantile Exchange. But the country’s petroleum sector administrators were not paying attention.

Again, Brent crude oil futures hit multi-year lows last Friday and were set for their steepest weekly decline in more than four years according to some analysts due to the spread of the coronavirus which has ravaged over 30 countries and has seen over 80,000 people infected leading to low crude oil demands from China who has shut many factories down to contain the threat.

Brent crude, which fell yet another 4 per cent on Friday, has lost over 12 per cent last week, putting it on track for its steepest decline since January 2016, analysts say.

Oil prices were down for a sixth consecutive day on Friday as a growing number of new coronavi-

rus cases outside of China fueled fears of a pandemic which could slow the global economy and lower crude demand.

Yet the threat is still present and could get worse for the oil market which had already lost over 4 million barrels per day in demand from China alone according to Vitol, an international oil marketing company. Crude oil imports into the world’s top oil importer and key growth driver would be weaker in March than in February, because most of the February volumes had been contracted, set, and en route to China when the coronavirus outbreak put the brakes on fuel demand in the country, reports an online energy resource.

March could be the month with the lowest Chinese crude imports this year, also because

some refiners typically schedule maintenance between the winter and summer fuel season. Saudi Arabia, is said to be cutting its crude exports to the world’s top oil importer by at least 500,000 bpd in March because of a slump in refinery demand amid the coronavirus outbreak.

The implication for Nigeria is that a fall in oil prices will trigger a collapse in public revenue and will force the Central Bank of Nigeria (CBN) into experimenting with unorthodox approaches to manage the fiscal and macroeconomic shocks to the economy.

As prices fall, the CBN is spending a fortune to prop up the naira, enacting eerie policies that wouldn’t even be progressive in the stoneage, including foreign exchange controls while depleting foreign reserves and piling on debt.

But one pragmatic way to control costs and reduce pressure on the naira is to cut subsidies on power and petrol. They are taking undue toll on the economy and the benefit does not even trickle down to the poor Nigerians they were purportedly created to serve.

“If oil prices keep going down, it affects our revenue and infrastructural development because there would not be much money for investments, so this is time to get out,” Ayodele Oni, energy analyst and partner at Bloomfield law firm said.

Oni also said that low oil prices has a potential to destabilise the economy because it piles pressure on the naira due to shrinking foreign exchange and if the government starts defending the naira, it could create problems for the economy.

For example, BusinessDay analysis showed that in 2018, the government spent N730.9 billion on what it called “Under Recovery” according to NNPC data which is far higher than total budget of Ministry of Education (N651 billion), Ministry of Health (N356 billion), Ministry of Transportation (N267 billion) and Ministry of Agriculture and Rural Development (N203 billion) in that year.

This pattern was replicated in 2019 even as the government claimed it budgeted N350bn for petrol subsidies. The Buhari administration seeks to avoid the uncomfortable toga of the government that devalued the naira and raised fuel prices but it is sacrificing real economic growth and plunging future generation into bruising debt to maintain the façade of a stable naira and it looks like too great a price to pay for a listless legacy.

Tuesday 03 March 2020

BUSINESS DAY

27

ENERGY INTELLIGENCE Market

$30bn oil sector investments threatened as Coronavirus delays FPSO deliveries DIPO OLADEHINDE

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here might be a decline in the global planned and possible floating production, storage and offloading (FPSO) projects in 2020, due to the outbreak of the deadly coronavirus disease which could dampen over $30bn worth of investments analysis show.

The World Energy report reveals that out of 28 FPSO vessels that are under construction in 2020, 22 are being built at shipyards in China, South Korea and Singapore, in a region most affected by the dreaded disease.

15 FPSO vessels are being built in China while seven are under construction in COVID-19 hotspot South Korea as well as in Singapore.

However, Norway based, independent energy research and business intelligence company Rystad Energy expects the outbreak of the coronavirus known as COVID-19 to cause extensive staffing and supply shortages in these countries that will in turn delay project deliveries by at least three to six months.

“Although operators and contractors are looking into ways to make up for some of the time that will be lost by fast-tracking other stages of development, we anticipate first oil or gas for these

projects will face clear delays,’’ says Audun Martinsen, Rystad energy partner and head of Oilfield Service Research.

Rystad Energy noted that if the epidemic escalates, the delays could increase to nine or even 12 months, especially taking into account the restricted time windows for heavy transport, installation and hook-up.

The average development time for an FPSO is 36 months, mean-

ing that companies could face a 30 percent delay.

“Our current assessment forecasts that COVID-19 could result in global E&P investments falling by around $30 billion in 2020 – a significant hit to the industry,” Martinsen said, adding that some of these investments are likely to come back in 2021.

China’s construction industry is facing pressures because most building sites are in urban areas

How cost of conversion slows increased adoption of CNG vehicles STEPHEN ONYEKWELU

T

he cost of converting petrol and diesel cars into Compressed Natural Gas (CNG) engines and the limited number of refilling stations are key issues delaying greater use of gas-powered vehicles on Nigerian roads.

CNG is fast becoming the preferred fuel for heavy equipment such as fleets of trucks with companies in Nigeria already taking advantage. It costs between N100, 000 and N300, 000 to purchase the kit needed in converting a car from petrol or diesel engine to a CNG engine, depending on the nature and condition of the car. But the conversion leads to a 40 percent savings in energy cost for car owners.

“These conversion kits are imported and should the government work out favourable terms and conditions such as free import duties and tax incentives, the cost per kit will fall and more car owners will participate, there is demand, no doubt” Abiodun Lawal, spokesperson of NIPCO told BusinessDay on phone.

There are over 4.5 million cars in Nigeria. Ensuring that a percentage of these cars are envi-

ronmentally friendly is an urgent need in Nigeria. This means converting them into Natural Gas Vehicles (NGV), a campaign Egypt has taken head-on and is making progress, is a necessity.

In 2019, NIPCO Gas Limited, a downstream oil and gas company started a pilot project in Edo State of converting sport utility vehicles (SUVs), taxis and buses from petrol to CNG engines and have successfully done so for over 5, 000 cars.

When this project got underway, the Nigerian National Petroleum Company partnered with NIPCO to supply the gas, which led to the formation of Green Gas Limited, a company that has reportedly ceased to exist.

NGVs maintenance costs are lower because CNG is a cleanerburning fuel and generates less wear-and-tear on some engine components. CNG is eco-friendlier than petrol. Natural gas produces far fewer harmful emissions and hydrocarbons than petrol. Unlike petrol CNG minimises harmful carbon deposits when combusted, Ayodele Oni, energy partner at Lagos-based Bloomfield Law Practice has argued.

The numbers look good too.

As of April 2019, the landing cost of Premium Motor Spirit (PMS), www.businessday.ng

also known as petrol was N35 higher than the pump price of N145 per litre, Ibe Kachikwu, the former minister of State for Petroleum Resources had said.

But without subsidies, CNG per cubic metre costs between N100 and N110 per standard cubic meter (the equivalent of a litre), Sumeet Singh, director - Sales & Strategy at Powergas Nigeria told BusinessDay. He also pointed out that their fleet of trucks runs on CNG. Zainab Ahmed, the minister of Finance, Budget and National Planning, in the build-up to the preparation of 2020 Appropriation Bill had stated that N450 billion was voted for subsidy on PMS. But the CNG may not need subsidies to save Nigeria billions of Naira as cars run on a cleaner and healthier fuel.

NIPCO has seven refilling stations for CNG in Edo State and Powergas Nigeria has also embarked a sustained effort to build stations across Nigeria starting from the South Western states.

“We expect the government to allow market forces to determine the price of CNG,” Singh said.

Today a CNG plant can be built in every petrol station and cars can do the same journey which one litre of petrol can do at N110 per cubic metre of CNG but N145 per litre of subsidised petrol.

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and remain shut down, with workers and contractors, who come from all over China, having more trouble returning to work, according to World Cement Association CEO Ian Riley, reported by the Financial Times.

He said while demand for cement is typically lower in the first quarter, production recovery will be slower this year, as oil and gas projects face new logistical issues in transporting material.

The association expects the Chinese government to implement stimulus measures to boost spending on infrastructure once virus spread is better controlled which could concentrate annual demand in the second half, potentially leading to supply shortages and higher cement prices, says the Times.

Chinese President Xi Jinping said that big projects, especially those in manufacturing, should start construction on time, adding that boosting consumption was a key hedge against the epidemic’s impact, Reuters reported on Feb. 15.

Fears of the coronavirus in China spreading there and globally are affecting the world markets most especially in the oil and gas industry while the construction sector is bracing for slowing economic growth, at least in the short term.

The epidemic, which is centred in Wuhan in Hubei province, has already killed more than 2,000 across the country and beyond, with the bulk of fatalities and the 80,000 infected people in the province.

First E&P to receive modified FPSO in $1bn deal … First Oil expected in May DIPO OLADEHINDE

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irst Exploration & Petroleum Development Company Ltd (First E&P) will receive Nigeria’s first floating production storage and offloading vessel (FPSO) modification and upgrading project in 2020 from a shipping company based in Singapore, Keppel Offshore & Marine.

FPSO Abigail-Joseph scheduled for work at Anyala and Madu discoveries in Oil Mining Leases (OML) 83 and 85 is designed for 15 years of operations without drydocking and is been chartered by First E&P on a seven-year contract with options to extend.

According to information published on Keppel Offshore & Marine website, the span of the project included refurbishment and life extension work, engineering and procurement, fabrication and installation of new structures including the helideck and riser balcony, as well as the installation, integration, and completion of topside modules.

The bareboat charter deal is also accompanied by operations and maintenance (O&M) deal, with the total value of both deals up to $901.79 million. The FPSO was previously deployed in Gabon at the Olowi field.

“This is our 134th floating production vessel, and we are pleased to be able to fast-track the project and upgrade it in less than seven @Businessdayng

months,” Chris Ong, CEO of Keppel O&M said in a statement.

The FPSO called Abigail-Joseph has a processing capacity of 50,000 bpd of oil and 60,000 bpd of liquid. It also has a gas compression capacity of 34 MMscf/d and a storage capacity of not less than 550,000 bbl of oil although Yinson’s website shows 870,000 barrels.

The plan for Yinson commenced in 3Q 2019 with delivery expected in 1Q 2020.

“The vessel is expected to reach Nigeria by early May after which she will undergo final commissioning works. Start-up of production is scheduled for end May 2020,” Yinson said in a statement.

According to Yinson, the FPSO is expected to reach Nigeria in May, where it will be moored over the Anyala & Madu fields in Block OML 83 & 85.

“This achievement reflects Keppel’s track record of reliability and quality, anchored in our strong engineering and project management capabilities, which enable us to offer value-adding solutions for customers,” Ong said in a statement.

OML 83 covers and aerial extent of 125 sq. km, with Anyala field as the only discovery within the acreage while Madu field which is the main discovery within OML 85, has an aerial extent of 521 sq.km. Anyala field is located at a water depth of 55m, about 45km off the coast of Bayelsa State.

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In association with

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Technology expansion poses health risk, as Nigeria is considered dumping ground for e-waste Jumoke Akiyode-Lawanson

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s Nigeria becomes a mobile first nation, with high import of technology equipments, so is the increase of risks to health and environment growing as a result of poor electronic waste (E-waste) management; even as used and obsolete electronic and electrical equipments find their way into third world countries that are hungry for information technology access.

In Nigeria, proper recycling and disposal of dangerous electronic components which contain mercury, lead, sulfur, phosphorus, copper, beryllium etc are often ignored, and this poses a great danger to environmental health, hazards to humans, livestock and ecology.

Industry analysts say it is worrisome that Nigerians are unaware of the dangers inherent in careless handling of E-waste which is already leading to the death of millions of people in the country and continent.

“There are major health hazards in the current disposal of electronic waste in this country. E-waste is the most rapid growing waste stream in the world right now and in Nigeria, we are still importing dead electronics. In fact, companies actually export electronic waste to us on purpose, because it is cheaper and more beneficial for them to export to us instead of treating it within their own plants,” Ifeanyi Ochonogor, CEO E-Terra

Technologies Limited and president, E-waste relief foundation told BusinessDay. According to him; every single piece of electronic device; whether its SIM cards, ATM cards, hard drives, or home electronics are supposed to be destroyed in an eco-friendly way when they are not in use anymore.

“That is the enforced law in developed countries. Technology is not just to innovate, but also to properly dispose by closing the loop of recycling and also to engage the proper circular economy. Mobile phones and other electronics need to be disposed in an eco friendly manner, so that it doesn’t

poison the environment and the people,” Ochonogor said.

Rapid technological growth leads to higher rate of production of electronics equipments which therefore increases the need for e-waste management, in terms of awareness and opportunities in the sector.

Research carried out by Research Gate reveals that about 20 to 50 million metric tonnes of E-waste are generated worldwide every year. In United States alone, 14 to 20 million personal computers are thrown out each year, with an annual increase of 3-5%. However, only about 13-18% is recycled. In the end, the disused

equipment, end up in landfills where they pose environmental and health hazards to humans, livestock and the soil. Some of these are incinerated, leading to environmental pollution from the fumes.

According to Computer and Allied Product Dealers Association of Nigeria, for example, up to 75% of electronics shipped to the Computer Village in Ikeja, Lagos are irreparable junk. Nigeria, like almost all other African countries, has a thriving market for pre-used electronic junks as a result of hunger for global IT relevance in order to bridge the digital divide.

Most countries in Africa are strug-

L-R: Vipin Chawla; chief technology officer, Eat’N’Go Limited, Opeyemi Okesola; deputy chief information officer, African Alliance Insurance, Pratik Roy; business group director, security and modern workplace, Microsoft, and Dele Adeyemo; group IT manager, Dufil Prima Foods Limited, during the 2020 Cyber Africa Summit in Lagos recently.

gling to manufacture local technology content; talk-less of capacity to safely dispose of them. Africa, in particular, is the latest destination for E-waste, referred to as the ‘digital dump’ by the Basel Convention Network.

“This is something that we are trying to change, because EPAs abroad also know about this and are trying to control it. Right now, we have the extended producer responsibility, so the Original Equipment Manufacturers (OEMs) need to cater for proper recycling and eco-friendly treatment of electronic waste,” Ochologor said.

Speaking recently at a global dialogue forum on decent work in the management of electrical and electronic waste (e-waste), which took place in Geneva, Ibiene Okelek, Nigeria’s NECA delegate and chief human resource officer, Ikeja Electric said; “While there are clear and present dangers from e-waste, there are also huge opportunities. It, therefore, requires the right framework, legislation and drive to ensure that proper sustainable action is carried out as far as e-waste management is concerned.”

In its report, E-Terra Technologies, pioneers in e-waste recycling and data destruction says that Nigeria’s used electronics refurbishing sector generates about $50.8million in a year.

Sadly, this statistic is only for e-waste management in Lagos state alone.

Stakeholders believe that the country will mop up revenue in billions if other state governments and citizens commit to engage in proper and professional e-waste management.

NCC states consumer satisfaction, service quality as main focal points Jumoke Akiyode Lawanson

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s Nigeria joins the rest of the global community to mark the World Consumer’s Right day on March 15, 2020, the Nigerian Communications Commission (NCC) is planning a series of initiatives to uphold and protect the interest of telecommunications service consumers in Nigeria.

Umar Garba Danbatta, the executive vice chairman (EVC) of NCC said that the interest of the telecoms regulator is primarily to ensure better

quality of service for consumers.

“We will abide by all the tenets of consumer rights in our day to day activities at the NCC,” he said.

The EVC’s statement underpins activities of the regulatory agency which has manifest oversight functions over the various network operators in Nigeria. The theme for this year’s event is ‘The Sustainable Consumer’.

The NCC has over the years hosted the flagship Telecom Consumer Parliament (TCP) where consumer issues are discussed extensively in a high profile session where the regulator,

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operators and consumers interact and answers got in the process.

Eighty-eight of such parliaments have been held so far in the major cities across Nigeria.

Besides this, no fewer than 110 Consumer Outreach Programmes (COPs) have been held. The event holds monthly in urban centres in the country.

Consumer Town Hall Meetings (CTM) which exclusively hold in rural communities have been well received across the land. So far, 53 of such events have taken place.

There have also been elite enlight-

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enment campaigns targeted at professional organisations during their yearly conferences.

The NCC says this is done to carry along the high profile professionals who may not have enough time to participate in the TCP, COP and CTMs which hold regularly.

There are campaigns too to empower the Nigerian youth through information and awareness creation regarding their rights and obligations within the Nigerian telecom industry as well as apprising them about the consumer protection initiatives of the

@Businessdayng

Commission.

“We participate in trade fairs where we engage the consumer on one-on-one basis”.

According to the EVC, the Commission has developed and produced Consumer Education materials on major telecom issues for distribution.

The developed factsheets are translated into the three major languages (Igbo, Hausa and Yoruba) including Pidgin. Such materials cover the DND Campaign, SIM Registration and Replacement, role of NCC in consumer protection among others.

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Tuesday 03 March 2020

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BDTECH

E-mail: jumoke.akiyode@businessdayonline.com

Innovation, excellent customer experience are fundamentals of digital payment space – Segun Agbaje Jumoke Akiyode-Lawanson

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s payment drives the growth of digital, banks have been advised to brace up and embrace both innovation and excellent customer experience to compete favourably with financial technology (FinTech) companies and telecommunication companies.

With over N138 trillion worth of e-payment channel transactions recorded annually, it is evident that innovation and technology have become key instruments for payments and financial services, and with FinTechs and telcos being licensed to play in the payments space, banks have no choice but to step up their game, innovate and provide excellent customer experience.

Speaking at the 2020 social media week in Lagos, on ‘Going beyond the digital experience’, Segun Agbaje, CEO Guaranty Trust Bank said that banks have realised that anybody who has the ability to leverage digital technology has become a competitor and is now competing with traditional banks who historically owned the payment and financial services space.

“About 30 percent of banking revenues come from the payment space. Of course there is also competition for loans, credit and for those who do salary advances; but the critical space that people are fighting for today on digital platforms is payments. All the other things that come on the back of that are add-ons,” he said.

Agbaje who gave a presentation on the growth of digital payment and how GTbank is strategically positioning itself to stay

ahead with innovative solutions, said digital payments in Africa is largely driven by the proliferation and ease of use of mobile devices and the large number of Small and Medium Scale Enterprises (SMEs).

“The ease and use of phones is really driving this payment revolution. Mpesa does over $30million. As the rest of sub-Saharan Africa starts to do about 68 percent, the amount up for us to fight for is about $60 billion in annual revenues of the payment space.

This is a very lucrative and very fast growing space and Africa’s youth population is clearly driving it.”

“The second thing that is driving it is SMEs. There are over 180 million SMEs in Africa, doing about 4.5 billion transactions a day, so when you take the young, technology adopting population, huge proliferation of SMESs, then you see the engine of growth that is really driving the payment space,” he said.

Fortunately, the African digital space has actually leap frogged and is more advanced that what obtains in many other developed economies; as mobile money technology is booming year on year, and the only country that might actually be doing better that countries in Africa is China.

This landscape is very developed and the competition is intense in Africa, as a result, industry experts say that there is more to gain and much more than technological skill is needed to service the digital payment sector adequately.

According to Segun Agbaje, GTBank is determined to stay relevant by building competing products on every payment platform space. Sighting GTCollections, GTPay, Habari, GTworld, GTtransfer and its other digital payment and service products, the CEO said the lucrative and fast growing digital payment space should never be neglected

Segun Agbaje, CEO, GTBank giving a presentation on ‘Going beyond the digital experience’ at the recently concluded Social Media Week Lagos last week Thursday, 27 February, 2020.

by traditional banks who are determined to stay afloat.

“The fundamentals of our digital space are constant innovation and end-to-end customer experience. Technology is going to become a commodity that will be easily bought; so it is definitely not the people that have the best tech that will win this space. What I think would be the differentiator will be the company that has the best technology and can give you the best customer experience by living you with that feeling that there are people who care.

At GTBank, we are going to win very easily because we have built all the digital platforms and we never stop engaging and interacting with our customers,” Agbaje said during his presentation.

Already, leading telecommunications service providers in Nigeria have been granted payment service banking (PSB) licenses, and have started intense push to ramp up mobile money numbers in volumes and value, especially as they seem to be advantaged with penetration levels and subscriber numbers. It therefore goes without saying, that traditional banks would need to do much more than simply provide digital payment options for customers in Nigeria.

It is also important for banks to note that apart from Fintech and Telcos, global companies which are not fintech but provide such services like Alipay, Amazon pay, Apple pay, Google pay and the rest, have advantages that local banks cannot have. These companies have the resources and the technical know-how, such that anytime they choose to play on the African continent, it would be an easy entry for them and 30 percent of banking income is easily at risk.

Why cyber security awareness programs are important in Nigerian universities Jumoke Akiyode-Lawanson

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he increasing usage of the internet is at an alltime high particularly among the academia ever since e-learning, Bring Your Own Device (BYOD) initiatives and free Wi-Fi access on campuses sprung up into the education system.

This evolution however makes users vulnerable to large scale data breaches, ransomware attacks, uncertainties about the use of research data, cybercrimes, surveillance and other cyber threats these all waver the trust of users and in turn affects the way

they use the internet.

The need to provide awareness and education on cybersecurity to academia who are potential targets for exploitation formed the basis of ESET ‘Secure School Initiative’.

ESET Secure School Initiative (ESSI) is designed to sensitize over 70 percent of the academia in Cybersecurity and the need for proactive protection of data, solution and devices.

University of Lagos was the first academic institution to take full advantage of the scheme where thousands of students and lecturers already have access to premium and total protection through the award-winwww.businessday.ng

ning cybersecurity product of the year, ESET Internet Security which comes with great features such as internet and data protection, web control, antivirus, anti-phishing, anti-theft, private WiFi protection, internet banking and online shopping protection and ransomware protection.

The initiative was greatly applauded and Adekunbi Adenike, a corps member that served in the school said this initiative resolved all her fear about using her devices with free internet, accepting external drives or loss of device and sensitive data.

Olufemi Ake, the country manager, ESET Nigeria and

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Ghana, during his visit to University of Lagos, encouraged the academic stakeholders to be IT security cautious.

He added that the turnout was massive and it shows how important the initiative is to the academic community at this time.

When asked if the initiative is only meant for individuals, Ake said that ESET Secure School Initiative is structured to deliver end-to-end protection for the IT environment of schools, which covers Servers, networked endpoint/workstations and mobile devices.

He also used the opportunity to encourage all academic institution in Nigeria to participate in @Businessdayng

this scheme as what they stand to enjoy is much more than special pricing but free IT security training for their IT administrators.

On his part, Olabanji Soledayo, manager, marketing and sales, ESET Nigeria and Ghana, further explained that initiative offers special and discounted pricing for networked IT infrastructure (Business Solution); free ESET internet security for desktop, laptop or smartphone users; unlimited access to IT security and device maintenance tips from ESET experts; special discount on all other ESET products at lowest possible price and free training on IT Security with certificate of participation.

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property&lifestyle Real estate posts fastest growth in 3years at -2.36% in 2019 ... projected to grow at 3% in 2020 ENDURANCE OKAFOR

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ig er ian real estate sector recorded the fastest growth yet since 2016 at -2.36 percent for the year ended December 2019, the fourth-quarter report by the National Bureau of Statistics (NBS) shows.

Despite ending 2019 in contraction mode, the growth reported by the property sector last year was 4.5 points better than the -6.86 percent recorded in the comparable period of 2016, the year NBS started collating data for the industry.

The adjustment to the new balance between property buyers and sellers was one of the factors why the property industry outperformed its growth performance in the last three years, as compiled from an industry survey.

“Developers are coming to the market with products that are within the reach of today’s consumer. Prices are not as fair as they can be but they are not as high as they used to be,” Ayo Ibaru, COO /Director - real estate advisory, Northcourt said.

Analysis of the NBS report shows that Nigeria’s property industry recorded a growth of -3.45percent in the last quarter of 2019, 0.40 points higher than the -3.05 percent growth reported in the comparable quarter of the previous year.

The 2.55 percent growth in Nigeria’s gross domestic

product (GDP) however eluded the real estate sector as it reported a contraction of -3.45percent in Q4 2019, lower by –1.13 percentages points relative to the 2.32 recorded in Q3 2019.

Nigerian economy grew the fastest since the recession in 2016. It’s GDP expanded by 2.27 percent in 2019, higher than the 1.91 percent growth reported in 2018. This was largely supported by the growth recorded in the final quarter of last year at 2.25 percent, the strongest level since Q3 2015.

While Nigeria’s GDP outperformed the World Bank and IMF predictions of 2.0 percent and 2.1 percent receptively, the non-oil sector

remained the key driver of growth in Q4’19, a sign that Nigeria has not succeeded in its economic diversification drive.

“The real estate sector is a laggard, but this is understandable. Not much progress can be made in this sector with a large portion of Nigeria’s population outside the housing market and mortgage still remains too expensive for many people to access and afford,” Adeniyi Akinlusi, CEO, Trustbond Mortgage explained.

After exiting 12 consecutive quarter recession in the first quarter of 2019, Nigerian real estate was hit by slow economic growth, lack of liquidity and dampened purchasing power in most

part of 2019 but ended the year with a new record.

Further analysis of the NBS report for Q4 2019 revealed that the real estate’s contribution to Nigeria economy was down 0.39 percentage points in the review quarter from 6.60 percent in Q4 2018 to 6.21 percent in the corresponding quarter of last year.

According to Andrew S. Nevin, Partner - West Africa Financial Services Leader and Chief Economist, PwC real estate is the most important sector to create jobs and alleviate unemployment.

“No other sector can have the multiplier effect of real estate and no other sector can compensate if

real estate languishes. So it is disappointing that the sector continues to not grow robustly,” he said.

With a housing deficit of more than 20 million units, Nigeria’s property market which requires an estimated N170trillon to N200trillion to bridge the housing gap is expected to stabilize and report growth in 2020.

Estimated by industry players to grow at 3 percent in 2020, Nigeria’s real estate market is expected to leverage market realization, new policies by both the Federal government and the Central Bank of Nigeria, and the surge in the demand for affordable housing to report growth.

Largely driven by Nigeria’s young population, the surge in the urban growth at 4.3 percent is one of the factors cited by industry players to spur growth in the industry as housing anywhere in the world is a basic necessity, which in the order of human needs, ranks third after food and clothing.

Having the highest population in Africa at 200 million, Nigeria’s homeownership of 25 percent is a laggard when compared to the 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South.

Faced with the challenges of low purchasing power fuelled by Nigeria’s slow economic growth, lack of functioning mortgage system and poor income level, more than 64 million employed Nigerians do not have the capacity to acquire

the expensive properties largely constructed by most real estate developers.

But the recent realisation by property developers to bridge the supply-demand with focus on the smaller unit apartment is an initiative expected by industry experts to bring growth to the sector.

“Developers are beginning to look into the small unit apartments especially because it has huge potential and from our data, we have a chunk of request for onebedroom and studio apartments,” Tunde Balogun, CEO of Rent Small-Small said.

The declining TreasuryBill rates is also considered an opportunity for the real estate sector as industry experts expect that it to draw investors’ attention to put funds into the sector since there are scarce investment options that can bring returns higher than the inflation rate.

“With limited attractive investment options in Nigeria, the real estate sector can get more funds this year and this can mean there will be more inventory in the market,” a Lagos-based real estate analyst said.

The treasury bills market went bearish from the beginning of Q4 2019 as treasury stop rates dipped.

The yields on the treasury bills went from double-digit at the beginning of Q1 2019 to single-digits towards the end of the year. Since then the rates have been hovering

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Luxury real estate buyers want these 4 features in their homes ENDURANCE OKAFOR

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he benchmark for rating a property as being luxurious has gone beyond sprawling houses with tennis courts and indoor pools, Coldwell Banker Global Luxury Report 2020 shows.

According to the recent report by the international real estate firm, smaller, more manageable square footage and modern amenities focused on wellness and technology are the kind of luxury properties high-net-worth home seekers are now flocking to.

After Coldwell Banker’s survey of 22 luxury real estate agents around the world, it came up with these four property types and features being sort after by the affluent.

Home automation Home automation ranked as the most desirable feature and was shoppers’ top in Coldwell Banker’s luxury report. About 81 percent of the surveyed agents said their

clients seek smart homes.

“If people buy a fully renovated turnkey home, part of that turnkey idea is to have smart-home technology that is voice-activated and precisely integrated,” Danny Hertzberg, Miami-based agent said in the report.

For luxury home buyers, though, smart technology transcends voice-enabled devices to denote such features as smart security systems, electric car docking stations and energy-producing roofs.

“The evolution of smart home tech has gone from convenience-focused applications to experience-focused integration of all components for daily living and energy efficiency,” Hertzberg said in the report.

Modern and move-in ready homes Wealthy home shoppers prefer modern residences – both in a design sense but also in construction age, the result of the survey by Coldwell Banker’s 22 luxury real estate

agents around the world said.

While some may not shy away from gut renovations of older or historic properties, the report stated that buyers tend to favour new builds with open-concept floor plans that support contemporary interiors.

Almost 80percent of the luxury real estate specialists surveyed by Coldwell Banker said that buyers want flowing layouts with easy, informal transitions. Meanwhile, about 70 percent of respondents said that new-construction homes have risen in popularity over the past year.

“Buyers are into the finishes and something in the house that gives it a wow factor,” Anne DuBray, Coldwell Banker Realty in Glenview, Illinois said in the report.

Apart from the newness of a residence, the report stated that wealthy shoppers want turnkey arrangements, which can offer more value in a deal by eliminating the need to move or purchase furniture.

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“Luxury home shoppers are willing to pay up for the brand new or newly renovated, and they will even give up a view if you have a new home requiring no work,” Roger Pettingell, based in Longboat Key, near Florida, was quoted in Coldwell Banker’s report to have said.

Wellness amenities According to Coldwell Banker’s report, luxury property buyers want more than traditional features such as spas and gyms in their homes.

The luxury home shoppers want is in the form of amenities that emphasize holistic health as well as environmental stewardship.

“Think energy efficiency, air and water flow and lighting quality as wellness considerations that underline the design, function and location of residences,” the report read.

According to the report, there are different levels of eco-friendly certifications that buildings can obtain (and use as a marketing highlight), an advancement that is a part of

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the growing global trend of wellness real estate.

Living in a “green” development often translates into 10percnt -20 percent premiums, the report stated.

For Paul Scialla, a former Goldman Sachs partner and founder of Delos, a startup focused on the wellness real estate, awareness and knowledge of the benefits of living in an eco-friendly environment coupled with an industry ready to support the building of wellness real estate will ensure that this segment continues to grow.

Other amenities that luxury buyers seek as cited in the report included providing services and designated spaces for children and pets.

Spaces to support a lifestyle Other features other than outdoor living spaces that foster a seamless indoor/ outdoor living are on the rise, and according to the report, they are seemingly elevated by well-off millennials. @Businessdayng

For instance, flexible spaces that can seamlessly shift their purpose appeal to millennial buyers, who may work from home several days a week or run their businesses. At the same time, au pair suites are in demand by young, affluent families who rely on live-in nannies to help care for kids.

According to Tracy Allen of Coldwell Banker Pacific Properties in Honolulu, Hawaii, “we’re seeing more of these multifunctional spaces because people want the ease of living.”

She also stated that “with everyone working on laptops and being so mobile,” she has noticed that many of her luxury listings must have a component that is multipurpose and multifunctional.

“Dining rooms can double as conference rooms; you can have a business meeting in the dining room, then put your laptop away and lunch is served,” Allen was quoted to have said.

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property&lifestyle Why Nigeria’s big real estate transactions are ‘swept under the carpet’

With Oluwakemi Adeyemo

ENDURANCE OKAFOR

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ost of the big real estate transactions in N i g e r i a ’s property market are usually executed informally and as a result, the National Bureau of Statistics (NBS), the government-funded data agency only has a record of the real estate services, checks by BusinessDay shows.

Since it started publishing the performance of Nigeria’s property industry in 2016, NBS has been using the data collated from certain real estate services to determine the sector’s contribution to the Nigerian economy, data from the state-funded bureau shows.

The fear of not been investigated or questioned for the source of funds amid the anti-corruption war by the current administration is one of the reasons why some developers and property buyers prefer to keep most transactions under wraps, checks by BusinessDay shows.

“The same government that funds NBS is the same one that controls the Economic and Financial Crimes Commission (EFCC) and also controls the Federal Inland Revenue Service (FIRS), so if a certain transaction shows up, they will look for everyone involved in it,” a real estate consultant who asked not to be identified told BusinessDay. According to the Lagosbased consultant, the above reason is why real estate service providers have chosen to keep transactions quiet “My resolve is to ensure that reforms are deepened

Lagos real estate regulations: the peaks and the dips

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such that there will be no hiding place for corrupt persons and proceeds of corruption. Also, I aim to ensure that no government financial transaction is done in secret and all are subjected to public scrutiny,” President Muhammadu Buhari said.

The anti-corruption war is one of the key agenda of the Buhari led-administration and since assuming office in 2015, it has channelled a lot of resources into curbing corruption in Nigeria.

Buhari’s administration has been working closely with the US, the UK, and various Middle Eastern countries to seize and repatriate assets from public officials that are suspected to have been purchased with illicit funds. Nigeria’s leading anti-corruption agency, the Economic and Financial Crimes Commission (EFCC), has also become more active.

But Nigeria still ranks low in the global Corruption Perception Index (CPI).

Africa’s largest economy ranked 146th with a score of 26 points in 2019. The 180 participating countries were ranked on the scale of 0 to 100 where 0 score means

highly corrupt and a score of 100 indicates an absence of corruption.

The CPI report indicated that the ranking was predicated on the relationship between politics, money and corruption. According to the report, Nigeria dropped from 144th position with a score of 27 points to 146th in 2019.

The informal transaction recorded in Nigeria’s property market makes it difficult for the government to keep track of the sector’s performance, industry experts said.

According to the industry players, the lack of sufficient data about the real estate sub-sectors is also a constraint to foreign investment into the sector.

For instance, the oftenquoted housing deficit of 20 million units has remained unchanged for over a decade even though Nigeria’s population growth rate has been at 3 percent per annum.

Analysis of the Q4 2019 report by NBS revealed that the contribution from real estate services to Nigeria economy was down 0.39 percentage points from 6.60 percent in Q4 2018 to 6.21 percent.

The sector contributed N13.36 billion to Nigeria’s economy in 2019, this made it the 6 largest contributors after Agriculture, trade, information & communication, manufacturing, and mining & quarrying sectors respectively.

C o m p a re d t o o t h e r countries, the real estate contribution in Nigeria is a laggard. In South Africa, the real estate sector contributes about 30 percent to GDP, and 70 percent in the UK. “The real estate contribution to GDP does not include all transactions, only services of a certain size.

The really big transactions don’t get reported,” Ayo Ibaru, COO /Director - real estate advisory, Northcourt confirmed.

Industry experts defined real estate services to mean any services relating to the occupation or use of a Nigerian property or the carrying out of either the enterprise business or other businesses at a Nigeria property, including, without limitation, cleaning, garbage disposal, repair, maintenance, receptionist services, utilities, mail delivery, copying and facsimile services.

Real estate posts fastest growth in 3years at -2.36%...

Continued from page 31 at a maximum of 6 percent.

More than N157.42 billion worth of failed transactions were 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) due to the excess liquidity in the financial system.

Fixed-income investors seeking high-yielding securities were disappointed, as attempts to buy the federal government short-term debt instruments at attractive rates were denied.

Investors bid at rates which were as high as 4 percent, 6 percent and 13.18 percent on the 91-day, 182day and 364-day bills re-

Talking Real Estate

spectively.

Subsequently, the apex bank lowered rates to 3 percent, 4 percent, on the 91day, and 182-day maturities; flat rates, as the rates were the same at the stop rate from the previous auction.

Also, real estate experts are sure that the new Finance Act which has a tax waiver for companies with an annual profit of about N25 million will catalyze real estate growth.

President Muhammadu Buhari signed the Finance Bill, 2019 (now Finance Act) into law in January and it was specially designed to support the implementation of the 2020 National Budget and to create an enabling environment for businesses.

Described by industry www.businessday.ng

experts as a major leap, the Finance Act which became effective February 1, 2020, is expected to be of great benefit to Nigeria’s property market owning to the investment incentive it holds for the industry.

According to section 23 (1) of the Company Income Tax Act (CITA) as amended in the Finance Act of 2019, “the dividend and rental income received by a real estate investment company (REICs) on behalf of its shareholders” shall be exempted from Company Income Tax (CIT) “provides that a minimum of 75 percent of dividend and rental income is distributed “within 12 months of the end of the financial year in which the income was earned.”

“By amending the CITA

provision on ‘Payment of Dividends by a Nigerian Company’ and including an exemption for distributions made by a REIC, this risk, and the obvious disincentive to invest in REICs, is managed,” KPMG said.

Commenting on how the new Act will impact the real estate industry, Albert Folorunsho, the Managing Consultant of Pedabo, a Lagos-based auditing firm said it will be encouraging for real estate investment as the company income tax will not be charged on the minimum 75 percent dividend.

“It is a major leap, and the provision can support the housing need of the public,” Folorunsho told BusinessDay.

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he Lagos state government recently enacted a Law: Lagos State Real Estate Transaction Regulatory Authority Law. The idea is that the law will curb activities of the unscrupulous real estate agents. As well as those who pose as estate developers. A lot of citizens have fallen victims of fictitious real estate investments opportunities which are non-existent in reality.

This law will be enforced by the Lagos State Real Estate Transaction Department. Although the department is now upgraded to an agency called Lagos State Real Estate Regulatory Authority (LASRERA). The regulatory authority will track the activities of real estate agents and real estate business in Lagos.

The regulatory process also appears to be one that will help recover more taxes from real estate transactions and practitioners. The government should track real estate transactions for tax remittance purposes.

But with a process that improves real estate business efficiency.

Section 11 and 12 of the Code of Conduct states that; (11) Agency fee(s) shall be as follows— (b) Sale or Purchase of interests in Land and Buildings where two or more agents are retained by the owner/vendor for the sale, the fee shall be the 15 percent of the total proceeds of the sale.

(12) A Licensed Real Estate Practitioner shall not prepare any legal document pertaining to any transaction handled by him but must be prepared by a Legal Practitioner and the fees shall not be more than 12.5 percent of the total consideration; This means that each principal in a transaction would bear a certain cost of at least a 15% fee to agents or realtors. The party who must also have an attorney will add an extra cost not more than 12.5%. These closing costs are not the only cost associated with a real estate sale or a buy transaction.

There are several other expenses associated with a real estate business or transaction. Any cost on a real @Businessdayng

estate transaction affects the asset value. And a part of these costs recurs every time a piece of real estate is bought or sold.

There is an age long deficit in housing inventory besides the over $900B dead capital. An increase in transaction cost puts a nail in the coffin of the already dead capital. This means the hope of resuscitating the dead capital is now almost zero.

Without a doubt, there is a need for proper inventory and records of real estate transactions.

There must be other efficient ways to achieve an updated inventory. While also ensuring proper taxation where necessary. For instance, in enforcing the land use charge in the year 2018, Lagos State embarked on an activity to capture the assessed value of properties in the state. The activity was carried out working with stakeholders in the state such as Estate Surveying and Valuation Companies.

This shows that there can be a more efficient way to capture real estate transactions in the state without much increase in the sale transaction cost.

The 15 percent fee as stated in Section 11b of the Code of Conduct would also appear as an incentive.

To draft in for formal registration, more real estate professionals in the brokerage business. Although this does not mean tax remittance will come naturally.

Going by the 27.5 percent least added cost per sales transaction as suggested by the Code of Conduct, there has to be a strong justification and value exchange for such fees.

A real estate developer or investor will prefer to reduce these fees as much as they can and in any way possible. Every business prefers to keep costs as low as possible.

A way to keep these costs low while still delivering quality service is to integrate teams and collaborate where possible on aspects of a real estate project. Major stakeholders on a transaction can also leverage existing relationships and experiences of professionals where applicable, to justify costs through valuable service.

Tuesday 03 March 2020

BUSINESS DAY

33

Live @ The Exchanges Market Statistics as at Monday 02 March 2020

Top Gainers/Losers as at Monday 02 March 2020 LOSERS

GAINERS Company

Closing

Change

NESTLE

N1130

N1017

-113

0.11

CAP

N24.6

N22.15

-2.45

N1.8

0.09

WAPCO

N15.5

N13.95

-1.55

N0.9

N0.99

0.09

UNILEVER

N15

N13.5

-1.5

VALUE (N billion)

N0.77

N0.83

0.06

GUARANTY

N23.8

N22.7

-1.1

MARKET CAP (N Trn)

Closing

Change

N4.7

N4.85

0.15

ETERNA

N1.99

N2.1

FCMB

N1.71

AFRIPRUD

LAWUNION AIICO

Company

ASI (Points)

Opening

Opening

DEALS (Numbers) VOLUME (Numbers)

25,816.57 5,054.00 325,261,259.00 6.026

Global market indicators FTSE 100 Index 6,656.03GBP +75.42+1.15%

Nikkei 225 21,344.08JPY +201.12+0.95%

S&P 500 Index 2,998.78USD +44.56+1.51%

Deutsche Boerse AG German Stock Index DAX 11,857.57EUR -32.78-0.28%

Generic 1st ‘DM’ Future 25,808.00USD +444.00+1.75%

Shanghai Stock Exchange Composite Index 2,970.93CNY +90.63+3.15%

13.449

GTBank declares N2.50kobo final dividend as FY’19 pretax profit rises to N231.7bn Stories by Iheanyi Nwachukwu

G

uaranty Trust Bank Plc (GTBank) r e p o r t e d impressive financials for the year ended December 31, 2019.

The snapshot of the group’s operating results for the review year shows it grew its gross earnings by 0.14percent to N435.306billion from N434.698billion in 2018, according to its audited

financial statement released on the Nigerian Stock Exchange (NSE) for the investing public.

Also, the group’s profit before income tax (PBT) increased by 7.48percent to N231.707billion as against N215.586billion in 2018.

GTBank’s profit for the year 2019 increased by 6.57percent to N196.849billion from N184.711billion in 2018. As at December 31, 2019, the group had eight (8) international banking subsidiaries and two (2) subsubsidiaries. The operations and management of these

subsidiaries are monitored and controlled by GTBank Plc. In the review financial year, GTBank recorded Earnings Per Share (EPS) of 696kobo, an increase from 654kobo in 2018. The directors of GTBank Plc have recommended the payment of a final dividend of N2.50kobo per ordinary share of 50kobo, bringing the total dividend for the financial year ended December 31, 2019 to N2.80kobo (2018: N2.75kobo per share).

The directors had during the 2019 financial year declared and

paid an interim dividend of 30 kobo per ordinary share on the issued capital of 29,431,179,224 ordinary shares of 50kobo, for the half-year period ended June 30, 2019. Withholding tax would be deducted at the point of payment.

According to the register of members as at December 31, 2019, no individual shareholder held more than 5percent of the issued share capital of GTBank except for the following: Citibank Nigeria Limited which held the 2,120,607,087 units of shares in its capacity

Stanbic IBTC plays key role in restructuring of A.G. Leventis Nigeria as custodian for the underlying shares of the Global Depositary Receipts (GDRs) issued by GTBank in July 2007, and listed on the London Stock Exchange.

Citibank does not exercise any investor rights over the underlying shares as beneficial owner. All the rights reside with the various GDR holders who have the right to convert their GDRs to ordinary shares.

Stanbic Nominees Nigeria Limited held 26.25percent of GTBank’s shares largely in trading accounts on behalf of various investors.

L-R: Abubakar Suleiman, divisional head, Finance and Account Securities and Isyaku Tilde, Wxchnage Commission; Mary Uduk, Ag. executive commissioner operation SEC; Frank Aul, Ag. director general, and head of department Finance and Accounts during an appearance at the House of Representatives Committee on Finance in Abuja.

Coronation Merchant Bank gets $40m trade finance guarantee facility from IFC

I

nternational Finance Corporation (IFC), a member of the World Bank Group has announced a $40 million Trade Finance Guarantee facility to Coronation Merchant Bank under its Global Trade Finance Programme.

This will enable Coronation Merchant Bank to establish and expand correspondent banking partnerships with several international banks in IFC’s Trade Finance programme, broadening access to finance in Nigeria.

IFC’s Global Trade Finance Program (GTFP) will offer confirming banks full or partial guarantees to cover the traderelated payment obligations of Coronation Merchant Bank. The program supports trade with emerging markets worldwide, allowing participants conveniently finance their imports and exports and

promotes the flow of goods and services between developing countries.

Commenting on the partnership with IFC, Banjo Adegbohungbe, Acting Managing Director of Coronation Merchant Bank stated that “The GTFP partnership is a critical milestone for us in our journey to become a leading financial institution in Nigeria. We are delighted to partner with the IFC in providing trade finance solutions to our customers and we assure all our clients of our continued support to enable them achieve their business objectives.”

“We welcome Coronation Merchant Bank to the Global Trade Finance Program, which has been very active in Nigeria in the past. This relationship will help improve the bank’s trade with other countries, and create new economic opportunities in www.businessday.ng

Nigeria,” said Kevin Njiraini, IFC’s Director for Southern Africa and Nigeria. “The partnership attests to the continued growth of the Nigerian financial sector and restates IFC’s commitment to emerging markets around the world.”

Coronation Merchant Bank was established in 2015 to provide wholesale banking to a long under-served market.

The Bank offers Investment and Corporate Banking, Private Banking/Wealth Management and, Global Markets/Treasury Services to its clientele. In 2019, Coronation Merchant Bank received awards such as Best Investment Bank in Nigeria by Global Finance, Best Investment Bank in Nigeria by World Finance, Best Investment Bank

by Global Banking and Finance Review, and Best Investment Bank by Global Business Outlook.

S

tanbic IBTC Holdings Pl c, a memb er o f Standard Bank Group, has played a key role in the restructuring of A.G Leventis Nigeria. Two of the company’s subsidiaries were involved in the implementation of a minority buyout and delisting of A.G Leventis from the Nigerian Stock Exchange.

Stanbic IBTC Capital Limited acted as Financial Adviser to A .G. Leventis and coordinated the entire transaction; while Stanbic IBTC Stockbrokers Limited was the official stockbroker.

A.G Leventis was formally delisted from the Nigerian Stock Exchange.

Stanbic IBTC had, for over a decade, engaged the management of A.G. Leventis and the Core Shareholders around the optimal corporate structure for the Company, considering its future expansion plans and capital requirements.

The successful delisting of A.G. Leventis signifies that the company will have the flexibility to raise the required capital while the Core Shareholders continue to provide the muchneeded support to turnaround the Company.

Tangerine Life acquires majority stake in ARM Life Insurance

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angerine Life Insurance Limited, (formerly known as Metropolitan Life Insurance Nigeria Limited), has announced the acquisition of a majority stake in ARM Life Insurance Plc. This acquisition, which takes effect from Monday, 2nd March 2020, places Tangerine Life as the 4th largest life insurance provider in Nigeria.

Speaking on the acquisition, Livingstone Magorimbo, Managing Director at Tangerine Life said, “The landscape of the insurance industry is evolving very quickly. At Tangerine Life, we have made a decision to ensure that we are always at the forefront of innovation within the industry. As part of that innovation strategy, we have found collaboration to be a key instrument in ensuring that we build and maintain a

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sturdy, profitable business”. He added that “the acquisition will provide a perfect springboard for Tangerine Life to utilize the distinct strengths that ARM Life brings to bare, thereby strengthening the insurance services provided by Tangerine Life to create and deliver better value.”

ARM Life Insurance PLC is a leading provider of Life Insurance services in Nigeria, with strong focus on Retail and Annuity based products. As members of the ARM Group, the company utilized the group’s global network to create a robust portfolio of clients under management.

“Innovation is paramount in ensuring customer satisfaction in today’s business landscape and we are keen to ensure that our customers receive the best at all touchpoints. We believe that this acquisition will ensure @Businessdayng

exceptional value creation for our customers and partners alike” said, Stephen Alangbo, Managing Director at ARM Life Plc. Presenting strong opportunities for value creation in the insurance industry, the aim of this acquisition is to combine the strengths of industry doyens, Tangerine Life and ARM Life.

This collaboration will place Tangerine Life firmly as the 4th largest life insurance business in the Nigerian market in terms of revenue.

Ta n g e r i n e L i f e i s a financial service provider that consistently goes the extra mile to improve the financial security of our consumers. By merging deep consumer insights and cutting edge technology, we have built a range of carefully tailored products which improve the quality of your life.

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Tuesday 03 March 2020

BUSINESS DAY

news

Russia unaware of proposal for further cuts as OPEC plans meeting ISAAC ANYAOGU with agency report

R

ussia has not received a proposal from OPEC to jointly cut the oil production by one million barrels per day, Alexander Novak, Russia’s energy minister, said on Monday, a development which could throw a wrench into plans to stem further decline of oil prices.

Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC) and its alliance are planning to hold their ministerial meeting as scheduled this week, pending a final decision Monday with a teleconference under consideration, sources told S&P Global Platts.

A source told the energy intelligence firm that the group is proceeding with plans and maintaining contact with the Austrian authorities. In recent times, OPEC meetings with its non-OPEC members have been

held in Vienna, Austria.

Delegations from the 23 countries that are members of the OPEC+ alliance are due to jet into Vienna to attend the meeting scheduled for March 5-6. OPEC is consulting with the World Health Organisation over whether the meeting would be a threat to public health if it goes ahead, sources said.

Representatives for the Austrian government say they are not participating in the decisionmaking process for the OPEC+ meeting.

“No general restrictions apply on [Austria’s] side. If the meeting is going ahead, however, can only be confirmed by OPEC,” a spokesperson for the Foreign Ministry said.

A decision to delay the meeting would leave the future of the OPEC+ 1.7 million b/d production cut accord with Russia and other allies up in the air.

The deal expires at the end of the month, and with oil prices cratering due to the expected

economic fallout from the coronavirus, OPEC kingpin Saudi Arabia has been pressing the producer coalition to deepen the cuts by some 1 million b/d through at least June, according to sources.

Oil exporting countries like Nigeria are understandably worried over the decline in oil prices.

At the height of the quarantines in China, oil demand in the country plummeted at least 25 percent from where they would normally have been. That alone was enough to send oil prices into a tailspin, knocking them more than 20 percent below their January highs and they could even drop to $50 a barrel or less.

Russian President Vladimir Putin said Sunday he backed continued oil market cooperation with the alliance but added that the current oil price was acceptable for his country’s budgetary needs, indicating some potential hard bargaining at the meeting this week.

NOVA Merchant Bank grows profit by 44% to N1.65bn in 2019 Segun Adams

N

OVA Merchant Bank, a full-service merchant bank, has announced a profit after tax of N1.65 billion in 2019, representing a growth of 44 percent in the year to deliver value to its shareholders, despite a challenging economy.

The merchant bank noted a significant increase across key metrics including a 1121 percent growth in loans to customers which hit N29.3 billion in 2019, and a 533 percent increase in customer deposits to N40.5 billion in the year.

“Our full-year 2019 performance resonates our resilience and commitment to excel and succeed despite being a fairly new Merchant Bank and macroeconomic headwinds that

persisted in 2019,” said Anya Duroha, MD NOVA Merchant Bank.

“Going into 2020 we will continue our resolve to be the best merchant bank in Nigeria,” he said.

Nova will leverage its track record of trust, to deliver on operational efficiency through digital innovation while proffering customer-centric solutions to our existing and new customers, the bank said.

Gross Earnings for the bank rose to N5.87 billion in 2019 compared to N2.76 billion in 2018, showing an increase of 113 percent year-on-year while the bank increased its efficiency with its cost to income ratio falling by 8 percent to 55 percent in 2019.

The bank’s operating expense grew to N1.95 billion in

2019 compared to N1.42 billion in 2018 (37% growth), however it was able to grow its Profit Before Tax by 56 percent to N1.5 billion in 2019.

NOVA also grew its total assets to N63.8 billion in 2019 compared to N25 billion in 2018 (155% growth) while shareholders Funds increased to N19.5 billion in 2019, 11 percent more than it stood in the year before.

“I am particularly delighted that the key ratios are trending in the right direction, we are beginning to see the results of our distinct and impactful business model as exhibited in the strong figures across all key indices. A notable reference that we recorded 0% Non-Performing Loans in 2019,” said Phillips Oduoza, the bank’s chairman.

Reforms: FG, Edojobs chart paths to skills development, job creation, others

E

do Skills Development Agency (EdoJobs) is exploring areas of partnership with the Federal Government on skills acquisition, job creation and entrepreneurship development programmes for Edo residents.

This is as part of efforts by the Governor Godwin Obaseki-led administration to tackle unemployment in the state through skills acquisition and empowerment programmes.

Managing director, EdoJobs, Ukinebo Dare, said this in an interview with journalists after she conducted a team of the Federal Government led by the minister of state, labour and employment, Festus Keyamo, on a facility tour to the state’s Innovation Hub

and the Production Centre in Benin City.

According to Dare, the tour was to chart paths on how to align the programmes of the ministry with the Edo Skills Development Agency for partnerships and support.

She noted that the agency was looking to surpass Governor Godwin Obaseki’s promise to create 200,000 jobs at the end of his first term in office.

“We are excited that the federal government has acknowledged our efforts at improving the lives of Edo people through skills development, entrepreneurship programmes and job creation. Today, we have a team of the Ministry of Labour and Employment, who visited our

facilities at the Edo Production Centre and the Benin Innovation Hub. “They are impressed with the trainings, other business and production activities taking place at the centres.

“Part of the reasons for the visit is to access the progress of these centres and identify how the programmes of the ministry will be aligned with the Edo Skills Development Agency for partnerships and support. We are confident that the outcome of this visit will further strengthen our ties with the federal government geared towards impacting lives of the Edo people through various entrepreneurial programmes and business inclined empowerments,” she said.

www.businessday.ng

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@Businessdayng

Tuesday 03 March 2020

BUSINESS DAY

35

news

N700m fraud: Court docks Ize-Iyamu, four others, fixes March 26 for ruling

Coronavirus threat disrupts global aviation regulations

...’We never charged Anenih,’ says EFCC counsel

IFEOMA OKEKE

… as IATA requests suspension of slot rules

I

Airlines are experiencing serious declines in demand including carrier experiencing a 26 percent reduction across their entire operation in comparison to last year. A hub carrier reporting bookings to Italy down 108 percent as bookings collapse to zero and refunds grow, many carriers reporting 50 percent no-shows across several markets and future bookings are softening and carriers are reacting with measures such as crew being given unpaid leave, freezing of pay increases, and plans for aircraft to be grounded.

Given these extraordinary circumstances as a result of the public health emergency, the collective view of the airline industry is that the application of the 80 percent rule during the upcoming season is inappropriate.

Flexibility is needed for air-

IDRIS UMAR MOMOH & CHURCHILL OKORO, BENIN

J

ustice M.G. Umar of the Federal High Court in Benin City has fixed March 26, 2020, for the ruling on applications filed by former People’s Democratic Party (PDP) governorship candidate in Edo State, Osagie Ize-Iyamu, and four others challenging the competency of the charges raised against them by the Economic and Financial Crimes Commission (EFCC).

The four other defendants in the suit include the state PDP chairman, Dan Orbih; former deputy governor, Lucky Imasuen; former member of the Federal House of Representatives, Tony Azegbemi, and Efe Anthony.

Recall that the anti-graft agency in Suit No. FHC/ BE21C/ 2016 had filed an eight count charge against the accused persons bordering on alleged illegal receipt of public funds to the tune of N700 million for the purpose of the 2015 general election, contrary to the provisions of the EFCC Act and the Money Laundering (Prohibition) Act. The EFCC further accused the defendants of conspiring among themselves to commit the offence in March 2015, alleging that they took possession and control of the funds without any contract award.

On resumption of hear-

ing on Monday, March 2, 2020, counsels to the five defendants, Ferdinand Orbih, Kingsley Obamogie, Pascal Ugbome, O.G Izevbuwa, and Ikhide Ehighalua, after adopting their written addresses, urged the court to strike out the charges against the defendants on the grounds that they were incompetent.

They argued further that the prosecutor’s reply to their addresses was in gross violation of the Legal Practitioners Act, Rule 10 (1), (2) (3) of the Rules for Professional conduct of legal practitioners, and averred that the court lacked jurisdiction to entertain the case because the petitioner’s reply was filed out of time.

Ferdinand Orbih contended that EFCC should have amended their charges against the defendants by removing Late Chief Tony Anenih’s name from the charges rather than saying the late politician was irrelevant to the substance of the case.

But counsel to the petitioner, Larry Aso, while adopting his written address, urged the court to uphold his argument, maintaining that Chief Anenih was never charged by the EFCC. He urged the court to dismiss the defendants’ applications, saying they cannot raise objection to the charges now as they have not taken their pleas, hence he described the defendants’ applications as grossly incompetent.

nternational Air Transport Association (IATA) is contacting aviation regulators worldwide to request that the rules governing use of airport slots be suspended immediately and for the 2020 season, due to the impact of COVID-19 (the Coronavirus).

Around 43 percent of all passengers depart from over 200 slot coordinated airports worldwide. At present, the rules for slot allocation mean that airlines must operate at least 80 percent of their allocated slots under normal circumstances.

Failure to comply with this means the airline loses its right to the slot the next equivalent season. In exceptional circumstances, regulators can relax this requirement. The COVID-19 crisis has had a severe impact on air traffic.

lines to adjust their schedules according to extraordinary demand developments.

Regulators have already been waiving the slot rules on a rolling basis during the COVID-19 crisis, primarily for operations to China and Hong Kong SAR. However, given the recent further outbreaks this is no longer contained to the Asia markets. Without certainty that these waivers will continue for the summer season (or winter season in the Southern hemisphere), airlines are unable to plan ahead sufficiently to ensure efficient rostering of crew or deployment of aircraft.

Suspending the requirement for the entire season (to October 2020) will mean that airlines can respond to market conditions with appropriate capacity levels, avoiding any need to run empty services

in order to maintain slots.

Aircraft can be reallocated to other routes or parked; crew can have certainty on their schedules.

“IATA research has shown that traffic has collapsed on key Asian routes and that this is rippling throughout the air transport network globally, even between countries without major outbreaks of COVID-19.

“There are precedents for previous suspension of the slot use rules and we believe the circumstances again call for a suspension to be granted.

We are calling for regulators worldwide to help the industry plan for today’s emergency, and the future recovery of the network, by suspending the slot use rules on a temporary basis,” Alexandre de Juniac, IATA’s director-general/CEO, said.

Sale of FGN houses: ICPC recovers N28.2m from defaulters Felix Omohomhion, Abuja

I

ndependent Corrupt Practices and Other Related Offences Commission (ICPC) has said it recovered over N28.2 million from defaulters in the sale of Federal Government houses.

It said the money had since been handed over to the Federal Capital Development Authority (FCDA).

In a statement on Monday, the anti-corruption agency said the money was aside the over N3.8 billion the commission previously recovered for FCDA since 2017, when it began tracking down beneficiaries of the Federal Government’s housing owner-occupier scheme for government workers.

The statement said some of the beneficiaries defaulted in their payments while many out rightly refused to pay.

The Federal Government had in 2005, introduced a policy that allowed public servants to buy-off government houses and pay back over a period of time.

However, many of the buyers defaulted in their pay-

ments after paying the initial sums that gave them the right of ownership of the properties while some others completely failed to make any payments, prompting FCDA to contact ICPC for help in recovering the monies from the defaulters.

Olatunji Jabaru of Asset Tracing, Recovery and Management Unit, ICPC, who handed over the money to the representative of FCDA, Omole Segun, noted that effort was ongoing to recover more money from the defaulters.

The money handed over was in bank cheques of N10 million, N8.2 million and another N10 million.

In her remark after receiving the cheques, Segun, who represented the director, AdHoc Committee on the Sale of Government Property, FCDA, Mohammed Umar Baffa, lauded the efforts of the commission that had led to the recovery of huge sums of money for the government.

She said the working relationship between the ICPC and FCDA would ensure that more defaulters were made to pay up. www.businessday.ng

L-R: Ashish Bakhshi, head of markets, EY West Africa; Henry Egbiki, regional managing partner, EY West Africa; Babajjde Sanwo-Olu, governor, Lagos State; Anthony Oputa, newly-elected EY Nigeria country leader, and Olubunmi Kuku, partner, EY Advisory Services, during a visit to the governor by EY Leadership team in Lagos.

Governor Sanwo-Olu praises Afriland’s investment in infrastructure

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t a ceremony marking the refurbishment of Afriland Towers, a state-of-the-art office building, the Governor of Lagos State, Babajde Sanwo-Olu, praised Afriland Properties plc for the successful renovation and commissioning of the world-class eight-floor office complex – Afriland Towers.

The dignitaries present at the event included the Oba of Lagos, Rilwan Aremu Akiolu and Erelu Angela Adebayo, founding chairperson, Afriland Properties plc, and chairman of Heirs Holdings, Tony Elumelu. Publicly quoted company, Afriland is one of Nigeria’s leading institutional real estate owners and developers, with a portfolio in excess of N100 billion.

The Afriland Towers devel-

opment is a key element in the redevelopment of the Central Business District of Lagos. At the event, the distinguished guests were taken on a tour of the 8-floor business complex, boasting an open plan office environment, with floor to ceiling windows, overlooking the bustling Marina district, whose contemporary décor is enhanced by energy-saving utilities, and spacious parking for the convenience of visitors.

Impressed by the ambience and size of the development, Governor Sanwo-Olu commended Tony Elumelu, chairman of Heirs Holdings, a lead investor in Afriland Properties plc. “My very good friend and brother Tony Elumelu continues to make Nigeria proud. His example of making strategic investments in infrastructure, that creates

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public good, is one we should all applaud. It is an honour to be here this afternoon to see yet again, an underperforming asset turned into what we are witnessing here,” he said.

The governor expressed his commitment to collaborating with Afriland for the development of the state. He said: “Afriland is making long term investments, which are greatly helping the revival of Central Business District of Lagos – I am delighted that Afriland is so clearly contributing to the redevelopment of Lagos. I want to thank the board and management of Afriland Properties for taking this bold initiative. You have put real money where your mouth is.

“I can assure you that we have seen you as a partner and we will continue to collabo@Businessdayng

rate with you. We are going to rebuild all our buildings to meet with the international standard Afriland Properties has set, and so, we are just going to ask all of you: If you want to build anything in Lagos, just go to Afriland.

“We are in government because we want the private sector to work, to thrive and to do well. When the private sector does well, the government does well, when the government does well, then our people benefit. We tackle poverty, unemployment, and education – something I am absolutely committed to”.

Tony Elumelu in his remarks commended the governor’s vision for a prosperous Lagos and emphasised the importance of private-public collaboration to catalyse development and employment in Lagos.

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Tuesday 03 March 2020

BUSINESS DAY

news

Galooli boosts Nigerian businesses with cost saving solutions Obinna Emelike

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alooli Nigeria, innovator of smart endto-end solutions for remote asset performance management, is set to boost business across Nigeria with its innovative products, especially its recently launched Generator Management System, which has over 100 generating sets integrated in the system.

The company unveiled the new product at a meet and greet event held at Southern Sun Ikoyi recently to introduce Tamir Piatecka, CEO, Galooli Nigeria, to the customers and stakeholders.

Speaking at the event, Piatecka noted that with the Generator Management System, their customers in Nigeria were going to save a lot more on operation cost, especially the high cost of generating alternative power and security across remote sites for telecom companies.

According to the CEO, the rationale for the innovative product is the fact that businesses in Nigeria today spend over 57 percent of their running cost on providing alternative electricity power.

“If you can save 25 percent of that cost and plunge it back to your business, you will grow the business bigger. We are giving focus to providing you with cost saving systems and more”, he said.

Aside the Generator Management System, the CEO

noted that Galooli, which has in the past offered customers Remote Management System, was also offering other new products such as efficient fleet management products aimed at enabling car leasing or rent companies manage their fleets in much more efficient way.

Also, another new product line, according to Piatecka is the battery trackers. For him, the product, which tracks batteries for telecom sites and big generators, solar among other heavy facilities, is necessary because the electricity problem in Nigeria opens a big market for battery business, as well, high rate of battery theft across the sites in remote places.

Also speaking on the innovative fleet and battery tracker, Festus Agbonifo, director of sales and business development, Galooli Nigeria, said that the products have enabled clients to monitor their fleets, drivers, facilities among others as the system reports activities at different sites, collect data and information that enable clients to curb sabotage, cut cost and run more profitable.

He also urged customers to patronise the Generator Management System because of the strength of over 100 generating sets integrated in the system, efficiency is guaranteed regardless of the model and the competitive pricing of the system.

High consumer prices, lending rates leave Nigeria world’s 7th most miserable country BUNMI BAILEY

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igeria’s high consumer prices (inflation rate) and lending rates are the major contributing factors for the country’s ranking as the seventh most miserable country in the world, according to the latest 2019 Hanke’s annual misery index.

Further findings from the index also show that although the country ranked amongst the top miserable countries, it improved by one position to seventh with a misery index of 36.8 in 2019 from 43.0 in 2018.

The misery index modified by Steve Hanke, a professor of applied economics at the Johns Hopkins University in Baltimore, Maryland, USA, shows which countries are getting less miserable

… improves by one position and which are getting more.

The index analyses 95 countries that report relevant data on a timely basis by considering the “sum of unemployment, inflation and bank lending rates, minus the percentage change in real GDP per capita”.

Ibrahim Tajudeem, head of research, Chapel Hill Denham, said coming at a time the country’s inflation is on an upward trajectory, the result was unfortunate.

“The reality is that there are no indications that this will change in the coming quarters. And interest rates are unlikely to moderate.

There are questions from the banks on cutting interest rates on lending. So we will probably be worse off in 2020,” Tajudeem said.

It is widely believed that

no economy can expect sustainable real growth when long-term rates are above a single digit. The Nigerian economy has been facing numerous challenges, amongst which are high inflation and interest rates which have been negatively affecting its overall economic activity.

In December 2019, Nigeria’s inflation rate rose to a 19-month high as food prices surged from the impact of the border closure by the government to put an end to smuggling. Last year, Nigeria lowered its interest rates by 0.5 percentage points, from 14 percent to 13.5 percent. But averagely, most commercial banks lend at 25-30 percent.

“The government should do more to reduce the lend-

ing rate because that has been a clog in the progress of most start-up businesses in Nigeria. Although the Central Bank of Nigeria (CBN) has been intensifying its efforts for banks to lend to the real sector and placing a penalty on failure for banks to comply, it is not enough,” Maxwell Maduka, an investment administrator at ARM Holding Company, said.

“And most banks are willing to take that penalty than to push money to start-up businesses because they are not sure of the sustainability of those businesses,” Maduka said.

In July 2019, the CBN increased commercial banks’ loan-to-deposit ratio to 60 percent in a bid to force them to lend more to the real sector. The LDR was further increased to 65 percent in October.

NCC boss to deliver ‘The Bullion Lecture’ on telecoms, digital banking, economic development Iniobong Iwok

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xecutive vice chairman/ CEO, Nigerian Communications Commission (NCC), Umar Garba Danbatta, is to deliver the 2020 edition of The Bullion Lecture, with the theme: ‘Telecoms, Digital Banking and Nigeria’s Economic Development’.

A press statement issued in Lagos by Ray Echebiri, founder/CEO of CFJ Nigeria, said the lecture would be chaired by Segun Aina, president, Africa FinTech Network and former president/chairman of Council, the Chartered Institute of Bankers of Nigeria.

He further said the distinguished panellists, who will dissect the lecture, are Chizor Malize, managing director/chief executive officer of Financial Institutions Training Centre, and Ade Remi Atanda, executive director, SystemSpecs Limited.

The statement further stated that The Bullion Lecture, a platform conceptualised by Centre for Financial Journalism (CFJ Nigeria) for lively discourse on national and international issues, “is always delivered by first-rate academics and professionals.”

The lecture, which will hold 10am on Thursday, March 26,

2020 at The Civic Centre, Ozumba Mbadiwe Avenue, Victoria Island, Lagos, is expected to be graced by government officials, captains of industry, banking industry executives, ICT professionals, members of the diplomatic corps, representatives of multilateral institutions, senior media executives and other journalists, and members of the public.

The statement further explained that the keynote speaker, Danbatta “is a renowned scholar, an erudite engineer, astute administrator, philanthropist, and a nation builder per excellence.

“Danbatta holds BEng and MSc degrees from the Technical University of Wroclaw in Poland, and PhD from the University of Manchester Institute of Science and Technology, United Kingdom.

“Until his appointment as EVC/CEO of NCC, Professor Danbatta was a lecturer in the Department of Electrical Engineering, Faculty of Technology, Bayero University, Kano, for 32 years, where he taught courses in telecommunications engineering and electronics and held academic positions of Dean of the Faculty and Head of Department at different times,” it said. www.businessday.ng

Adesola Adeduntan (l), CEO, First Bank of Nigeria Limited, being presented the Cranfield School of Management Distinguished Alumnus Award 2020 by Peter Gregson, chief executive and vice-chancellor, Cranfield University held recently at The Royal Society, London.

Lighter traffic witnessed on Kara-Ojodu Berger end of Lagos/Ibadan Expressway SEYI JOHN SALAU

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ollowing the recent opening of the KaraOjodu Berger end of the Lagos/Ibadan Expressway in-ward the long bridge to vehicular movement by the Federal Ministry of Works and Housing to ease the suffering of the road users, commuters plying the road have witnessed lighter traffic since the opening of both ends of the expressway consider to be one of the busiest road in Nigeria.

Reconstruction work on the Kara-Ojodu Berger axis of the road started mid-January and took the contractors about six weeks. “This

section started in the middle of January and we promised Nigerians that by the end of February we should be able to complete this section of the road, and the section has been completed; today is the end of February. So, a promise made is a promise kept,” said Adedamola Kuti, the federal comptroller of works, during the final inspection of the completed section of the Lagos/Ibadan Expressway towards the Kara-Ojodu Berger.

According to Kuti, the entire road was reconstructed with drainages on both sides of the expressway. “Our reconstruction work got to as much as 1.5meters deep and building up from there

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and of course expanding the road,” he said, indicating that the road had been expanded from its original six lanes into eight lanes to accommodate more traffic.

Kuti said the LagosIbadan Expressway was the busiest in Africa considering the volume of traffic it carry on a daily basis, hence the need for the expansion of the road.

“For anybody moving out of Lagos; coming into Lagos, this is the main corridor and of course by the time you get up to Shagamu interchange, you expect that 40% of the traffic would have drop-by and the remaining 60% is shared between those going into south-south/ @Businessdayng

south-east and those going towards Ibadan,” said Kuti.

Speaking further on the challenges witnessed in the course of the reconstruction of the expressway, Kuti stated that the heavy rain experienced towards the end of October in 2019 delayed the work. “The in-bound into Lagos took us about 13 weeks, which was as a result of the raining season.”

However, the completed section of the Lagos outbound section of the road only took the contractors about six weeks. Hence, the appeal from the minister of works, Babatunde Fashola urging Nigerians to give more support to the ministry.

Tuesday 03 March 2020

BUSINESS DAY

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Tuesday 03 March 2020

BUSINESS DAY

news No let-up for stocks as market rout ...

Continued from page 1

L-R: Abubakar Suleiman, divisional head, finance and account, Securities and Exchange Commission (SEC); Isyaku Tilde, acting executive commissioner, operation; Mary Uduk, acting director-general, and Frank Aul, HOD, finance and accounts, at a Pic by Tunde Adeniyi meeting with finance committee of House of Reps at the National Assembly in Abuja.

S&P downgrades Nigeria on declining...

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doing so in the face of adverse business, financial, or economic conditions.

A Nig e r i a nat i o na l scale ratings of ‘ngA-/ ngA-2’ means the lowest risk business in the country is susceptible to adverse economic conditions although its capacity to meet its financial commitment on the obligation is satisfactory.

According to S&P, Nigeria’s ratings remained constrained by falling FX reserves, slow GDP grow th, low GDP per capita, and low or negative real GDP per capita growth in dollar terms, increasing public debt and multiple exchange rates.

The downgrade in both the country’s outlook and credit rating is coming at a time when Africa’s largest economy is warming up to tap debt offshore for as much as $3.3 billion to plug its budget deficit for 2020 and refinance existing Eurobond.

S&P’s downgrade adds to a list of other international rating agencies to slap Nigeria with a negative outlook for the year, given current economic realities.

International rating agencies Moody’s and Fitch had last year revised their outlook for Nigeria from “stable” to “negative” in what they said was due to Nigeria’s increasing vulnerability from its current macro policy setting and the rising risk of disruptive macroeconomic adjustment in the medium term amid continued real appreciation of the naira.

However, while Fitch in its forecast had a slight-

ly higher rating at B+, both Moody’s and S&P had a much lower rating at B2 and B, respectively.

The downgrade could increase Nigeria’s cost of borrowing by making foreign investors request for a higher yield when the country finally embarks on its Eurobond roadshow, according to O luwatosin Ayanfalu, who holds the portfolio of an analyst at Lagos-based Zedcrest Capital.

Nigeria hopes to use the new capital raised to finance its huge infrastructural deficit which is expected to gulp $100 billion annually through the next 10 years.

The government w ou l d c o m m i t ab ou t $2.786bn from the Eurobond proceeds to finance capital projects in priority sectors of the economy in power, transport, works and housing, aviation, health, education, agriculture and rural development.

A part will also be used to finance existing $500m Eurobond that will mature next year, the Debt Management Office (DMO) said.

“Although the more important consideration will be the impact of the coronavirus on oil prices and how it affects our credit risk as a country given our dependence on oil, however, the report by the agency raises a lot of questions on our debt management practices and the vulnerability of the economy as this will also in a way be on the mind of investors who are looking at Nigeria’s debt securities particularly the foreign currency debt,” Omotola Abimbola, a macro and fixed-income www.businessday.ng

analyst at Chapel Hill Denham, said.

The new downgrade

by S&P adds to the country’s growing list of worries in the wake of the endemic coronavirus which has claimed 3,044 lives globally and tumbled oil prices following a slow demand from the world’s biggest importer of the commodity, China.

Brent crude, which is the international benchmark of Nigeria’s oil, plunged to $52 per barrel, below the country’s $57/b 2020 budget benchmark, a move S&P said would further put pressure on the reserves.

“We may lower the ratings if Nigeria’s international reserves decline markedly, external debt rises significantly faster than our current assumptions, or if our projections of gradual fiscal consolidation do not materialize,” S&P said.

Nigeria’s foreign reser ves which ser ve as a shock absorber have been blown out to $36 billion, lowest levels in more than two years, as the country continues to keep the naira from falling against the dollar.

The central bank, in a bid to reduce the pressure on the dollar, restricted non-bank financial institutions including pension fund operators (PFAs) and insurance players from accessing its shortterm bills. Following the directive, Foreign Portfolio Investors (FPIs) now hold about $12 billion of the country’s external reserves, S&P said.

However, while the move has helped in channelling up investment into other asset classes, it has culminated into freeing up excess liquid-

ity into the economy, with the CBN fearing likely inflationary pressure, with commodity prices rising to 21-month high of 12.13 percent in January.

With the fall in reserves and oil prices, S&P noted that the holdings of the CBN’s short-term bills could be subject to changes in foreign investor sentiment and a potential sell-off, thereby creating risks to current reserve levels.

“Given these risks, we have added CBN bills to general government debt.

Therefore, our estimate of general government debt, net of liquid assets, now stands at an average of 39 percent of GDP in 2020-2023,” the ratings agency said.

Last week, Nigeria’s state-funded agency, the National Bureau of Statistics (NBS), published figures of gross domestic product, showing an uptick in economic activities.

The economy grew 2.27 percent in 2019, beating both the World Bank and International Monetar y Fund forecast, to record its biggest growth since 2015, driven by the development in the oil sector, as the sector expanded 4.5 percent.

S&P noted that despite improvement in economic activities, Nigeria’s growth rate remains low relative to peers with similar wealth levels, and GDP per capita growth has remained negative in dollar terms.

The agency noted that nevertheless, the approval of the 2020 budget in 2019, before the start of the fiscal year, and much earlier than recent years, was favourable for budget execution and capital projects.

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less risky assets will gain.”

PZ, Unilever, Nestle, and Wapco all shed 10 percent in the day while the other top losers declined by at least 9 percent.

The stock market has now lost 3.82 percent in 2020 and has had seven straight days of decline.

Analysts say investors are still looking out for information whether a vaccine has been discovered to put a halt to the spread across major nations of the world.

So far, about 90,000 cases of the coronavirus disease have been reported around the world with death toll at 3,075, according to Singapore-based Channel News Asia.

While there has been no reported death in Nigeria given efforts by the government to keep the virus at bay by tracing the 100 persons who had contact with the index case, there isn’t much the country can do to stop the oil price decline that tests its key budget assumptions and the resolve of the central bank.

On the bright side, oil prices on Monday jumped by 5.17 percent to $52.24 as at 17:04 GMT+1 on expectations that OPEC will balance the oil market with a larger-than-expected production cut at its meeting later this week.

But a production cut

will prop up oil price at the expense of Nigeria’s oil production target for the year.

The head of Middle East North Africa research at Japan’s largest bank, MUFG, forecasts a 1.2 million barrels a day production cut but warns that a lower cut

by OPEC would worsen the oil market.

Meanwhile, global ratings agency S&P on Monday became the third of such to downgrade Nigeria’s creditworthiness over mounting external vulnerabilities from the downturn in oil price.

For the stock market, analysts at Afrinvest say the market presents opportunity for bargain hunting although the bearish sentiment would be sustained in the near term.

Investor sentiment as measured by market breadth (advance/decline ratio) rose to 0.4x from the 0.1x recorded in the previous trading session as nine stocks advanced relative to the 24 that declined, analysts at the investment bank noted in a report to clients.

The best performers in the day were LAWUNION (+10.0 percent), HONYFLOUR (+9.3 percent) and UPDCREIT (+8.1 percent), while UNILEVER (-10.0 percent), WAPCO (-10.0 percent) and NESTLE (-10.0 percent) led the laggards.

LEKOIL investigation committee says...

Continued from page 2

to advise on the Facility Agreement, internally or externally, prior to its execution, according to concerned stakeholders.

The due diligence undertaken by the company, including the above mentioned third-party due diligence report, prior to the signature of the Facility Agreement proved to be inadequate.

“First of all, I would like to thank the Committee for leading the review and the provision of the detailed findings to the Board,” Samuel Adegboyega, chairman of LEKOIL , said. “The B oard w ill s e ek, as a priority, to improve its standards of corporate governance and we welcome the recommendations received from the Committee, which are in the process of being implemented.”

As a result of the investigation, and following recommendations from the committee, the Board has taken the following actions: @Businessdayng

Commenced steps to recover the $450,000 paid to Seawave, including the issuance of pre-action letter of demand against Seawave and its principals, Bismarck Abrafi and Said Memene, and Rilk Dacleu Idrac, the purported representative of the QIA. Commenced a review of the company’s corporate governance practices and procedures for the review and approval of major transactions, with the intent of implementing suggested changes as soon as practicable.

While the company has a legal claim to recover the $450,000 paid to Seawave, and the company intends to exercise the rights and remedies available to it under law, there is no guarantee that the losses suffered by the company as a result of the fraud perpetrated against it will be recovered in full. The company will provide further updates on the outcome of the above actions, and any material updates on the matter generally as and when appropriate.

Tuesday 03 March 2020

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news

WHO says new Coronavirus cases in China falling Anthonia Obokoh

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s the Coronavirus epidemic spreads across other continents, World Health Organisation (WHO) officials said Monday that number of new cases outside China are almost 9 times higher than those inside the country over the last 24 hours.

“New cases in China are falling,” Tedros Adhanom Ghebreyesus, WHO DirectorGeneral, said during a press briefing at the agency’s headquarters in Geneva. It reported just 206 new cases on Sunday, the lowest number of new cases in that country since Jan. 22, he added.

Meanwhile, outside of China, the total number of cases now tops 8,739 across 61 countries, including 127 deaths.

Ghebreyesus noted that about 81% of cases outside of China are from four countries.

According to him, the epidemics in the Republic of Korea, Italy, Iran and Japan are the agency’s greatest concern, adding that world health officials arrived in Iran on Monday to deliver supplies and support.

“This is a unique virus, with unique features. This virus is not influenza. We are in uncharted territory,” he said.

He further said that of the other 57 affected countries, 38 had reported ten cases or less, noting that nineteen had reported only one case, and some countries have contained the virus and haven’t reported in the last two weeks, he said.

Ghebreyesus said health officials would not “hesitate” to declare the outbreak a pandemic if “that’s what the evidence suggests.

On Friday at a press briefing, he said that most cases of COVID-19 can still be traced

to known contacts or clusters of cases and there isn’t any “evidence as yet that the virus is spreading freely in communities.” That’s one reason why WHO hasn’t declared the outbreak a pandemic, Tedros said Friday.

Health officials have said the respiratory disease is capable of spreading through human-to-human contact, droplets carried through sneezing and coughing and germs left on inanimate objects. The virus appears to be particularly troublesome for older people and those with underlying health conditions, health officials have said.

Symptoms can include a sore throat, runny nose, fever or pneumonia and can progress all the way to multiple organ failure or death in some severe cases, they said.

Mike Ryan, executive director of WHO’s health emergencies programme, said Monday scientists still don’t know exactly how COVID-19 “behaves,” saying it’s not like influenza. “We know it’s not transmitting in exactly the same way that influenza was, and that offers us a glimmer, a chink of light, that this virus can be suppressed and pushed and contained,” he said.

Ryan also said health officials do not think countries aren’t being transparent, saying, “It’s very easy to be caught unaware in an epidemic situation.”

WHO officials Friday increased the risk assessment of the coronavirus from “high” to “very high” at a global level.

The world can still avoid “the worst of it,” but the increased risk assessment means the WHO’s “level of concern is at its highest,” Ryan said at the time.

FG promises affordable rice price, commends Stallion Group’s contribution to food security ADEOLA AJAKAIYE, in Kano

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he Federal Government plans to work with relevant stakeholders to bring down the market price of rice, a key staple in the Nigerian diet, according to Sabo Nanono, minister of agriculture and rural development.

Nanono, who disclosed this during a visit to Stallion Group’s Popular Farms and Mill Limited in Kano, commended the Group for efforts towards improving rice production and creating jobs for Nigerians, especially for its investment of $70 million to boost production of rice and sesame across the country.

The minister said the price of rice was on the high side and unacceptable by the government given its constant support to growers of the crop.

“I see no reason why a 50kg bag of rice should be sold for N17,000 when the same paddy rice is sold at N8,500 and maximum processing expense is N2,000, which translates to a total of N10,500,” Nanono said.

“It is unpatriotic to sell a bag of rice more than N14,000 toN15,000. I will take up this issue with rice millers at a meeting which my ministry is planning to hold with them. The meeting will enable us through persuasion to conclude on an affordable rate for

rice for the consumers,” he said.

“I wish to express the appreciation of the Federal Government to Stallion Group that has brought new investment of $70 million to scale up the Popular Farm`s local rice value chain from farmers to final retailers,” Nanono said.

“With this and other investments made in the past, Stallion Group has transformed itself into a productive and communitysensitive company helping outgrowers with all farming needs.

We are also glad to note that your company is making further investment in additional milling facilities geared at self-sufficiency in local rice need,” he said.

Stallion Group operates the biggest rice mill in Kano with an annualinstalledcapacityof430,000 metric tons and a consolidated capacity of 1.7 million metric tons.

The minister said the country’s land border closure had resulted in an accelerated and increased output by rice milling plants in Nigeria, adding the boost would reduce the high rate of unemployment.

He said with the improved production rate, Nigerian rice is bound to compete favourably in the global market the moment exportation begins.

“If we maintain this momentum in the next two years, we may export rice to other countries,” he said.

He said Nigeria has the necessary resources to achieve selfsufficiency in rice as there are over 50,000 agric graduates that can get associated with agric extension services to drive better yield in the country.

“New technologies in farming should now percolate from the research institutes to actual farming practices in the field. The Federal Government will soon introduce Mechanisation Hub for all 650 local governments that will support the farming community with training and stocking of farming equipment like tractors, power tillers, harvesters, among others,” he said.

Amit Kumar Rai, managing director, Stallion Group, said the Group is investing in additional milling facilities locally in order to achieve self-sufficiency in rice production.

Rai said the company has entered into a partnership with over 1,151 cooperative groups, having 41,486 member-farmers as well as 65,715ha of rice farm area for developing the rice business.

He said the Group has trained and distributed rice farming tools free to out-growers across the rice producing states in Nigeria as a part of fulfilment of dedicated service towards achieving its rice value chain initiative. About 20 percent of these beneficiaries, he said, “are women who diligently

work alongside their male counterparts in the fields to support their families”.

“The group believes that focus on empowering communities leads to more progressive farmers and greater economic and social opportunities for households,” Rai said.

“The group has also established collection centres across rice producing states to not only help farmers embrace modern farming techniques but also focus on distributing agric inputs through farmers’ cooperatives and associations,” he said.

Recently, KPMG valued two of the top Stallion Group rice brands, Royal Stallion at N66.1bn and Caprice at N41.508bn, a consolidated valuation of N107.6bn, establishing leadership in the formal retail market. Some of the other popular brands from the company are Tomato King, Double Bull, People’s Princess and Super Champion.

Nanono also visited Premier Seed Nigeria Limited and Value Seeds Limited in Zaria, Kaduna State. He re-emphasised the overall goals of the policy principles of the Agriculture Promotion Policy (APP), stating that it would concentrate on providing an enabling environment for stakeholders at the federal and state levels to play their distinctive roles.

Covid-19: Minister again calls for calm as 4 quarantined Chinese test negative Godsgift Onyedinefu, Abuja

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igeria’s minister of health, Osagie Ehanire, has again called on Nigerians to avoid panic and remain calm, stating that all suspected cases including the four quarantined Chinese have tested negative for Coronavirus since the first confirmation of the virus in the country.

Ehanire, while briefing newsmen on Monday in Abuja, said about 14 tests had been carried out and the results were negative, saying the four Chinese that were quarantined in Plateau State tested negative at the Nigeria Centre for Disease Control (NCDC) Reference Laboratory in Abuja, but were still under careful supervision.

The minister also reassured that government was working to track 156 passen-

gers in the flight that brought the index case, noting currently, the contact of the index cases identified were 19 in Lagos and 39 in Ogun State.

“As at the first of March, there is no new confirmed case in Nigeria, we are in touch with these contacts who are under supervised self-isolation and the states have provided them with temperature monitoring tools.

“We will continue to monitor the global situation with cases spreading quickly in countries as they are doing now,” the minister said.

He added, “It is important for Nigerians to focus on the facts and not on fear and not to generate panic, citizens must not abuse social media and not indulge in spreading misinformation that causes fear”. www.businessday.ng

L-R: Geoffery Onyeama, minister of foreign affairs; Abubakar Malami, minister of justice; Emmanuel Imohe, chairman of presidential committee on small arms and light weapons, and Vice President Yemi Osinbajo, during a meeting of members of Presidential Committee on Small Arms and Light Weapons at the Presidential Villa in Abuja, yesterday.

FG hails Dangote, others for supporting economy GBEMI FAMINU

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resident Muhammadu Buhari has commended investors in Nigeria, like the Dangote Group, for giving the Kaduna Chamber of Commerce, Industry, Mines and Agriculture the necessary support to undertake a successful fair, in the coming days.

The Dangote Group, a co-sponsor of the fair, had announced that its Special Day would hold on March 7, 2020, at the International Trade Fair declared open by President Buhari on February 29.

Speaking through the Minister of Trade and Investment, Adeniyi Adebayo, Buhari reiterated that the task of transforming

Nigeria into an industrial giant cannot be achieved without the needed collaboration with the private sector.

“Kaduna State today presents a wealth of investment opportunities in the manufacturing sector, ICT, hospitality, agriculture, mining, power and housing, has attracted investors such as Dangote, Flour Mills, Indorama, and Olam. “... this administration will welcome ideas, suggestion, proposals and initiatives from all stakeholders on how best to chart the path for sustainable economic development,” he said.

Adeniyi said the theme of this Fair tagged “unlocking Nigeria’s Economic Poten-

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tials through Regional Integration” was most apt and underscored the focal thrust of the present government’s economic policy and programmes.

This, he said, will be achieved by unlocking Nigeria’s economic potentials through regional integration given the country’s status as by far one of the largest markets in Africa.

Dangote Industries Limited has complemented efforts of the present administration towards promoting opportunities for its various sectors to thrive - agriculture, manufacturing, skills acquisition, petroleum, the construction of a world-class refinery in Lekki Lagos State for @Businessdayng

the benefit of Nigeria, and subSaharan Africa.

The minister said this year’s event was an opportunity to bring together investors, traders and operators of agricultural and agro-allied businesses from within and outside the country for the promotion of trade and commerce, wealth and job creation, and above all alleviation of poverty in Nigeria.

Meanwhile, the group chief corporate communications officer, Dangote Group, Anthony Chiejina, in statement said the Dangote Special Day offered opportunity for investors, customers and clients to visit the Dangote pavilion and see for themselves the various products on display.

Tuesday 03 March 2020

FT

BUSINESS DAY

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FINANCIAL TIMES

World Business Newspaper

Pete Buttigieg drops out of presidential race Former mayor’s withdrawal offers a big boost to Joe Biden’s campaign Demetri Sevastopulo and Lauren Fedor

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ete Buttigieg, the former mayor of South Bend, Indiana, who beat Bernie Sanders in Iowa, has dropped out of the Democratic presidential race following his disappointing performance in the South Carolina primary.

Mr Buttigieg, 38, an openly gay military veteran, followed up his stunning victory in the Iowa caucuses with a strong second place finish in the New Hampshire primary.

But he failed to attract non-white voters, winning only three delegates in Nevada last week and doing even worse in South Carolina on Saturday, signalling he would have struggled in the diverse states that vote on Super Tuesday on March 3.

His decision to abandon the race before Super Tuesday could provide a big boost to Joe Biden. The former vice-president won the South Carolina primary by a 29-point margin on Saturday but still faces an uphill struggle to the Democratic nomination, in part because of the large number of moderates in the field vying to overtake Vermont senator Bernie Sanders.

“Today is a moment of truth,” Mr Buttigieg told supporters in South Bend on Sunday night, as he announced his decision to withdraw his candidacy. “The truth is that the path has narrowed to a close, for our candidacy, if not for our cause.

“We have a responsibility to consider the effect of remaining in this race any further. Our goal has always been to help unify Americans to defeat Donald Trump and to win the

Pete Buttigieg has struggled to attract support from African Americans © Santiago Flores/South Bend Tribune/AP

era for our values,” he added.

“And so we must recognise that at this point in the race the best way to keep faith with those goals and ideals is to step aside and help bring our party and our country together.”

Mr Buttigieg’s withdrawal may put pressure on other centrist candidates, including Amy Klobuchar, to pull out of the race.

Ms Klobuchar has likewise struggled to appeal to non-white voters, but is leading the polls in her home state of Minnesota, which will vote on Super Tuesday. Ms Klobuchar’s team did not respond to a request for comment about whether she intended to remain in the race.

Mr Buttigieg had pitched himself as the younger moderate alternative to Mr Biden, a claim that he made more strongly after he came well

ahead of the former vice-president in both Iowa and New Hampshire.

He also tried to sell himself as the best alternative to Mr Sanders, the self-declared democratic socialist who has called for an economic revolution and leads in the delegate count.

Mr Buttigieg made a big effort to win black voters in South Carolina, but his campaign fell flat in the southern state.

“Buttigieg had a decent amount of appeal to white voters, which you could see even in the exit polls in South Carolina, but he never did anything for non-white voters,” said Kyle Kondik of the University of Virginia Center for Politics. “That was a running theme of Buttigieg’s campaign since he emerged as a leading candidate, and he just never

figured that part out.”

Mr Buttigieg’s poll numbers heading into Super Tuesday — when 14 state contests will award one-third of the total delegates ahead of the Democratic National Convention this summer — suggested he was in danger of winning very few delegates.

Staying in the race would have hurt Mr Biden and made it more likely that Mr Sanders would head to the Democratic convention in Milwaukee in July with the biggest number of delegates, even if he did not have the 1,991 needed for outright victory.

In recent weeks, Mr Buttigieg had fallen in national polls to fifth place on 11 per cent, just behind Massachusetts senator Elizabeth Warren. Mr Sanders leads on an

average of 30 per cent, more than 11 points ahead of Mr Biden, according to the Real Clear Politics polling average.

Mr Biden may get a bump in the national polls following his big win in South Carolina, which showed his strength — and Mr Sanders’ weakness — with African Americans.

He had argued that South Carolina would be the “firewall” that would rescue his campaign and prove that he was the strongest candidate in more diverse states.

The Rachman Review podcast Listen to the weekly podcast from Gideon Rachman, the FT’s chief foreign affairs columnist, and listen in on his conversations with the decision makers and thinkers from all over the globe who are shaping world affairs The latest Morning Consult polling showed Mr Buttigieg’s supporters split over their second choice, with 21 per cent preferring Mr Sanders, 19 per cent backing Mr Biden, 19 per cent supporting Ms Warren and 17 per cent behind Michael Bloomberg.

Mr Kondik said Mr Buttigieg’s exit from the race could provide Mr Biden with a big boost on Super Tuesday, especially among white voters in states such as Massachusetts and Minnesota.

“As good as Biden did in South Carolina and as good as he might do in other southern states on Tuesday, the south is not enough,” Mr Kondik said.

Many people in early voting states expressed enthusiasm for Mr Buttigieg but said they were concerned about his age and would rather vote for him in a future presidential election.

Sanders and Warren scare Big Tech but thrill its workers Progressive Democratic candidates receive most cash from tech workers ahead of Super Tuesday Dave Lee, John Burn-Murdoch and Alice Kantor

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emocratic presidential candidates Bernie Sanders and Elizabeth Warren have received the most donations from employees at California’s largest technology companies ahead of the crucial Super Tuesday primary contest — despite the progressive candidates’ threats to drastically curb the influence of Big Tech.

Senators Sanders and Warren have each received roughly one-third of all donations from workers at Facebook, Twitter, Google, Amazon, Tesla, Netflix, Uber and Apple, according to an FT analysis of Federal Election Commission data. The reasearch shows that their progressive politics still resonate in Silicon

Valley, the centre of the US high tech industry.

This compares with 26 per cent for Pete Buttigieg — who dropped out of the race on Sunday night — 8 per cent for Joe Biden and 2 per cent for Amy Klobuchar.

The candidates competing to take on president Donald Trump in November’s election have collectively poured millions of dollars into California, flooding the airwaves with ads and holding events across the state ahead of the March 3 primary. The Golden State, with its 415 delegates, is Super Tuesday’s biggest prize of the 14 states who vote that day.

Donations to 2020 presidential candidates from employees of the state’s most prominent tech firms totalled $1.1m by the end of January 2020, accounting for 2.6 per cent of all donations by individuwww.businessday.ng

als in California who stated their employer ($42m).

Mr Sanders and Ms Warren lead the way in small donations, with much of the money they have received coming from people giving between $50 and $1,000 over the past two years. This suggests that Mr Sanders and Ms Warren enjoy strong grassroots support, while other candidates including Ms Klobuchar and Mr Biden have received fewer, more generous contributions.

In a sign of how important Big Tech workers have become as voters, Mr Sanders — who is hoping to establish a clear lead in the nomination race with a big win in California on Tuesday — was in San Jose, the largest city in Silicon Valley, on Sunday for a rally.

The support of tech workers for the Vermont “democratic social-

https://www.facebook.com/businessdayng

ist” and Ms Warren — who have both proposed dramatic new measures to limit the influence of Big Tech — illustrates how progressive political activism has flourished at many Silicon Valley companies.

It also suggests there is a divide between the priorities of industry’s rank-and-file and the owners, founders and boards that have lobbied extensively against calls to restrict their power, pay more taxes or be split into smaller companies.

Facebook’s lobbying bill in 2019 totalled $16.7m, while Google’s parent company, Alphabet, spent $12.6m, according to database OpenSecrets.

“I’ve never volunteered with any campaign before,” said Janelle Jolley, 33, who until last August worked on Google’s search ads team. She now volunteers at the San Francisco field office for Bernie Sanders, based in the heart of the @Businessdayng

city’s predominantly Latino Mission District.

Other candidates have enlisted Silicon Valley’s brightest and most powerful for their cause. Billionaire former New York mayor Mike Bloomberg, for instance, who has spent half a billion dollars so far on a campaign that hinges on the outcome of Super Tuesday, poached Joshua To, formerly Google’s director of design for virtual and augmented reality, for his team. A source familiar with the move said Mr Bloomberg had personally contacted a high-level Google executive to help arrange the move to his campaign’s creative design team.

Mr Bloomberg has also brought on Gary Briggs, Facebook’s former chief marketing officer, and Jeff Glueck, previously chief executive of location-based app Foursquare, to work on his campaign.

41

Tuesday 03 March 2020

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

European markets slide despite signs of coronavirus support Central banks signal they are considering measures to ensure financial stability Myles McCormick, Katie Martin and Hudson Lockett

E

uropean markets l u rch e d l ow e r o n Monday despite signs that key central banks are preparing to deliver monetary support in an effort to soften the economic impact of the global coronavirus outbreak.

Asian stocks rallied overnight, with China’s CSI 300 index closing up 3.3 per cent in its best one-day performance since May. But an early pick-up in Europe quickly fizzled out, with London’s FTSE 100 index turning a 0.9 per cent gain into a 1 per cent decline. Similarly, Germany’s Dax index dropped 2 per cent.

The choppy moves reflect traders’ efforts to determine how far central banks can prop up financial markets, which last week suffered a heavy decline while the disease, which originated in China, spread more forcefully around the world.

The Bank of England said it was working with the Treasury, the Financial Conduct Authority and its international partners “to ensure all necessary steps are taken to protect financial and monetary stability”.

The Bank of Japan also vowed to fight the economic effects of coronavirus. In an emergency statement, governor Haruhiko Kuroda promised to inject liquidity into markets and hinted at raising asset purchases, indicating the central bank is moving

Equities had initially sold off across Asia after China’s official manufacturing purchasing managers’ index at the weekend showed factory activity in February hitting an all-time low © Aly Song/Reuters

into crisis mode.

The US Federal Reserve has also hinted at support, signalling that it was prepared to consider cutting rates in response to the virus’s “evolving risks”.

Bond markets climbed at the prospect of more monetary support, with the yield on US 10-year government debt sliding by 0.1 percentage points to a record low of 1.06 per cent. Yields fall when bond prices rise.

“While the path for risky assets will be determined by the degree of activism on the part of

global policymakers . . . the outlook for safe havens is unequivocally positive as either aggressive rate cuts provide support, or a perceived insufficient policy response underpins a flight-to-quality bid,” wrote analysts at Rabobank. They added that they see “a discernible near-term possibility” that the yield on the US 10-year note could drop below 1 per cent.

But economists and market analysts say it is hard to determine how much monetary support would alleviate the pressure. “Central banks can-

not cure the virus. They cannot force people to spend,” said Paul Donovan, chief economist at UBS Global Wealth Management. “However, central banks can help companies with cashflow problems, or whose debt service costs are challenging if demand weakens. Central banks exist to solve liquidity and credit problems, should those arise.”

Any optimism over the prospect of co-ordinated international action to fight the disease was tempered as the OECD warned global growth could halve this

year from its previous forecast, and by Chinese manufacturing data that showed factory activity in February plunging to an all-time low.

Brent crude was initially buoyed, with the international oil marker adding almost 3 per cent, before dropping back to trade up 1 per cent at $50.16 a barrel.

Governments are taking action to support their economies during the coronavirus crisis.

Italy said it would inject €3.6bn into its economy to mitigate the impact.

Energy’s stranded assets are a cause of financial stability concern Coal mines, oilfields and gas reserves look a bad bet in an unsustainably warming world Patrick Jenkins

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oose herds, rendered redundant by the 19th century switch from quills to metal-nibbed pens, were an early example. So were the whaling ships no longer needed when electric light replaced oil lamps.

So-called stranded assets have long existed. Today, their incarnation as coal mines, oilfields and gas reserves in an unsustainably warming world, is a growing cause of financial stability concern.

Last Thursday 500 men and women packed into London’s Guildhall to hear the Bank of England’s outgoing governor Mark Carney, and Christine Lagarde, president of the European Central Bank.

Launching the finance agenda of the UN’s COP26 climate summit, due to take place in Glasgow in November, Mr Carney and Ms Lagarde spoke of how important it is that companies — especially the banks and insurers they supervise — are transparent about their

exposure to climate change risks.

As the world moves towards a target of net zero carbon emissions companies will find themselves with a range of fossil fuel assets that will never be tapped. They could face large losses as a result. But so could the banks that lend to them, the insurers that underwrite them and the asset managers that invest in them.

Analysis by the Financial Times’ Lex team concluded that meeting the terms of the UN’s Paris Agreement — to limit global warming to 2C — would leave 29 per cent of oil reserves stranded and wipe about $360bn from the value of the top 13 international oil companies by reserves. That is well over a sixth of their total enterprise value. Meeting a stricter warming target of 1.5C would more than double the figures to nearly $890bn.

Financial regulators are most worried about the exposure of banks, which provided about $654bn in financing to fossil fuel companies in 2018, according to the latest data available from the

Rainforest Action Network.

The pressure for change is not just coming from regulators. Sir Christopher Hohn, founder of $28bn activist hedge fund firm TCI, has written to the chairmen of Barclays, HSBC and Standard Chartered warning them of a possible legal challenge if the trio do not stop lending money to coal mining companies. Barclays has also faced pressure from some of its shareholders to stop financing fossil fuel companies. It is expected to pledge significant cuts in an appeasement effort.

Specialist funds have led the investor drive for change in corporate and bank behaviour. But drawn by public interest in buying green funds, even the world’s biggest asset managers are now joining the fold. BlackRock chief executive Larry Fink recently pledged to stop financing significant thermal coal companies.

Fossil fuel companies are themselves beginning to change, amid louder protests from campaigners and investors. BP, under new chief

executive Bernard Looney, recently promised to be net zero by 2050.

Last week Nor wegian oil company Equinor abandoned a A$200m ($132m) plan to drill for oil and gas in the deep waters of an Australian marine park. In Canada, Teck Resources walked away from a $15bn oil sands project. UK energy generator Drax said it would stop burning coal at Britain’s biggest power plant by 2022.

It is unclear what role financing played in any of these decisions, but certainly banks’ sharpened focus on mitigating hydrocarbon exposures won’t have helped.

In the US, Peabody Energy and Devon Energy are among companies to have experienced or warned of the risk of shrinking access to finance.

So far financial regulators’ contribution to the pressure has been largely verbal. But bank stress testing is set to be adapted to incorporate climate risk scenarios. Some regulators are also openly debating whether bank capital rules could or should be redesigned to spur a

more rapid shift away from fossil fuels — either by cutting regulatory capital risk weightings on greener finance or raising it on brown finance. Mainstream thinking holds that this is dangerous territory — using financial stability regulation for policy ends could be a slippery slope. But the argument for change will be stronger once stranded asset risk can be quantified. In time, financing fossil fuels may become taboo for mainstream regulated banks.

It would be tempting to hail this as a victory for the planet. But that would be premature. As happened across other areas of banking as new tighter regulations were imposed after the financial crisis, non-banks — encumbered by little or no regulation and scant public scrutiny — sprang up to fill the gap. Private capital investors are showing growing interest in parts of the fossil fuel industry. As long as the cash flow is attractive, they will back coal, oil and gas, whether the traditional banks and big asset managers are there or not.

Tuesday 03 March 2020

FT

BUSINESS DAY

42

ANALYSIS

OECD warns coronavirus could halve global growth Central bankers say they are ready to act if needed to mitigate economic impact of the outbreak Chris Giles, Sam Fleming and Martin Arnold

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he OECD sounded the alarm about coroavirus on Monday, warning that it could halve global economic growth this year from its previous forecast.

The Paris-based group lowered its central growth forecast from 2.9 per cent to 2.4 per cent, but said a “longer lasting and more intensive coronavirus outbreak” could slash growth to 1.5 per cent in 2020.

It defined a more intensive outbreak as one that spread “widely” throughout the Asia-Pacific region, Europe and North America and issued its warning as new cases were reported around the world and the death toll continued to climb.

The OECD, a group of mostly rich countries, said the effect of widespread factory and business closures in China alone would cut 0.5 percentage points from global growth as it reduced its main forecast to 2.4 per cent.

Its warning came as heavy hints of central bank support for the global economy jolted stock markets higher on Monday following a dire week in which global equities lost one-tenth of their value.

The Bank of Japan said it would “provide ample liquidity and ensure stability in financial markets” while the Bank of England said it was working with international partners “to ensure all necessary steps are taken to protect financial and monetary stability”.

Two of Europe’s most senior central bankers have said they were closely monitoring the economic impact of the coronavirus and stood ready to act if needed.

Luis de Guindos, vice-chairman of the European Central Bank, said the ECB remained “vigilant and will closely monitor all incoming data” while underlining its standard guidance that it “stands ready to adjust all its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner”.

François Villeroy de Galhau, governor of the Banque de France, said in a radio interview on Monday:

People wearing masks at a subway station in Shanghai on Monday. The OECD says the effect of factory and business closures in China alone would cut 0.5 percentage points from global growth © Bloomberg

“We are vigilant, we are mobilised, but we will remain calm and proportionate in the responses that must be provided.”

The US Federal Reserve said on Friday that it would “act as appropriate” to support growth, using a phrase it has previously deployed to signal a willingness to consider cutting interest rates.

The IMF and the World Bank said on Monday that they were ready to provide “emergency financing” for countries hit hard by the coronavirus outbreak, as the world’s top multilateral financial institutions sought to blunt the impact on the world economy.

“We will use our available instruments to the fullest extent possible, including emergency financing, policy advice, and technical assistance,” Kristalina Georgieva, managing director of the IMF, and David Malpass, World Bank president, said

in a joint statement.

“In particular, we have rapid financing facilities that, collectively, can help countries respond to a wide range of needs. The strengthening of country health surveillance and response systems is crucial to contain the spread of this and any future outbreaks,” they added.

Ms Georgieva and Mr Malpass said they were paying “special attention to poor countries where health systems are the weakest and people are most vulnerable”.

The OECD called on governments to act “swiftly and forcefully” to combat the health and economic effects of the virus, calling for supportive monetary and fiscal policies to restore confidence.

It said governments should ensure first that there was “additional fiscal support for health services” but also that governments should help cushion households

and companies from sudden drops in income, by for example allowing companies to delay tax payments.

“More broadly, lower policy interest rates and stronger government spending can help boost confidence and assist with the recovery of demand once the outbreak eases and travel restrictions are removed,” the OECD said.

But it also recognised that economic policies could not offset the immediate effects of shutdowns in business activity designed to slow the spread of the virus.

New data on Monday showed that Italy endured its 17th consecutive monthly decline in manufacturing activity in February. On Sunday, the Italian government announced plans to inject €3.6bn into the economy.

In Brussels, Paolo Gentiloni, the EU’s economics commissioner, said there would need to be a timely

co-ordinated fiscal response to the coronavirus outbreak, warning that previous hopes for a “V-shaped” rebound could prove optimistic.

Eurozone finance ministers will this week discuss ideas for a fiscal reaction to the crisis in a conference call. “It needs to be very timely. You can’t take it too early, you can’t take it too late,” said Mr Gentiloni, adding that a “fiscal response cannot be an exhaustive answer” but could still prove very useful.

“It is time to declare that the EU is ready to use all the available policy options as and when needed to safeguard our growth against these downside risks,” he said. “This is time for solidarity, it is time to build confidence, it is time to act.”

Mr Gentiloni also said the EU would consider an expected request from Italy for greater budgetary flexibility in a spirit of “solidarity and understanding”.

Falling oil prices threaten to derail Putin’s spending promises Kremlin’s bid to boost economy relies on Russian budget surplus and national wealth fund Max Seddon

R

ussian president Vladimir Putin’s spending promises are under threat from falling oil prices that could hurt the savings the Kremlin is tapping to rekindle growth.

The coronavirus outbreak last week pushed Brent crude, the international oil benchmark, down 10 per cent to a year-low of close to $50 a barrel.

The fall puts prices near Rus-

sia’s break-even price of $42 a barrel, threatening to undermine the policy that has helped Moscow run a budget surplus and save $125bn in excess oil and gas revenue in a national wealth fund since 2017.

Facing a fall in living standards that pushed his approval ratings to record lows, Mr Putin pledged in January to spend Rbs4tn ($60bn) on infrastructure and social spending as part of sweeping changes that could allow him to remain in power.

The national wealth fund, squirrelled away during years of austerity, is key to those plans.

Officials want to tap Rbs1tn from the fund to help pay for Mr Putin’s spending drive. The fund also plans to spend Rbs2.55tn on buying the central bank’s controlling share in Sberbank, Russia’s largest lender; most of the proceeds will be used to finance the increase in spending.

Sinking oil prices could derail those plans by cutting inflows into the fund and weakening the

rouble, hampering Russia’s ability to purchase foreign currency to build further reserves. The rouble traded at 67 to the dollar on Friday, its lowest rate since September last year, as falling commodity prices prompted investors to sell their holdings.

“If the [oil] price stays above or in line with the . . . [Russian central bank’s] baseline of $55 a barrel this year, and then $50 a barrel in 2021-22, this financing operation for Putin’s political [special operation] will stay

on the rails,” said Christopher Granville, managing director at TS Lombard. “If oil were to dip towards $40, the adverse impact would be reinforced by a nasty pincer movement from the rouble exchange rate.”

On Sunday, Mr Putin told economic officials and the heads of Russia’s main oil producers that “the current level of oil prices is acceptable for the Russian budget and our economy”, Continues on page 43

43

Tuesday 03 March 2020

BUSINESS DAY

FT

NATIONAL NEWS

EU calls emergency meeting on deepening Turkey-Syria crisis Escalating conflict around Idlib risks new refugee crisis after Erdogan ‘opens gates’ Jim Brunsden and Michael Peel

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russels has called an emergency meeting of EU foreign ministers as Turkey’s escalating conflict with the Syrian regime risks creating a new refugee crisis.

Josep Borrell, the EU’s high representative for foreign affairs, said that the fighting around the province of Idlib, Syria’s last rebel-held enclave, represented “a serious threat to international peace and security” and that the EU had to “redouble efforts to address this terrible human crisis with all the means at its disposal”.

Recep Tayyip Erdogan, Turkey’s president, declared on Saturday that his country had “opened the gates” to the EU for the 4m refugees currently living in Turkey as he sought to pressure Europe into providing Ankara with greater support in Idlib.

More than 50 Turkish soldiers have been killed since the start of February as Ankara has sought to resist a Russian-backed offensive by forces loyal to Syrian president Bashar al-Assad.

Regime gains have forced hundreds of thousands of people to flee north towards the SyrianTurkish border, which remains closed.

Mr Erdogan has warned that his country cannot take any more people and has clamoured for international support. Having not received it, Turkish officials signalled on Thursday that they would no longer stop refugees from seeking to reach Europe.

The situation is a test of a refugee deal Turkey struck with the EU in 2016 that has limited the flow of irregular migrants and asylum seekers into Greece

A woman wears a face mask to protect against infection in central Milan © MARCO OTTICO/EPA-EFE/Shutterstock

in exchange for refugee funding from European countries.

The agreement contributed to a vast reduction in the number of migrant arrivals into the EU compared with the peak of the refugee crisis. New arrivals numbered fewer than 125,000 last year, compared with over 1m in 2015.

Mr Borrell said he had called the meeting, which will take place during the coming week, “in particular at the request” of the Greek government, whose refugee camps and reception facilities are already at breaking point.

The borders of Greece are the external borders of Europe. We will protect them Greek prime minister Kyriakos Mitsotakis Greek police said that, within a few hours of Mr Erdogan’s statement on Sunday morning, at least 500 people had arrived by sea at

the chain of Greek islands close to Turkish territory.

Greek prime minister Kyriakos Mitsotakis tweeted on Sunday that the country’s national security council had decided to “increase the level of deterrence at our borders to the maximum.

As of now we will not be accepting any new asylum applications for 1 month.”

“The borders of Greece are the external borders of Europe. We will protect them,” he wrote.

The UN’s International Organisation for Migration estimated this weekend that around 13,000 people — including Syrian, Afghan, Iranian, and Pakistani migrants, among others — were gathered at various points along the Greek-Turkish border.

There were reports on Sunday that Greek police had resorted to using tear gas to repel people seeking to cross over. Greek au-

thorities sent a text message to cell phones in the border area warning people not to enter the country illegally.

“We continue to follow closely the migration situation at our external borders,” Mr Borrell said in his statement. “The EU-Turkey Statement needs to be upheld,” he said in reference to the 2016 deal.

EU diplomats have long acknowledged the bloc’s lack of influence in the Syria conflict and that member states have limited tools to respond to the deepening crisis there.

European countries have resisted Russian pressure to normalise relations with the Assad regime in Syria and release large-scale reconstruction funds, although Hungary has upgraded its diplomatic presence in Damascus.

One EU official said one main

purpose of this week’s emergency meeting should be to shore up unity on Syria policy and the response on migration — and to “make sure panicky individual member states don’t go off on tangents”.

Ministers are also likely to review humanitarian support and migration response support for Greece, Bulgaria and Turkey, measures which closely involve the European Commission.

Bulgaria’s defence minister has said the country is prepared to send 1,000 troops to its border.

Frontex, the EU’s border management agency, said on Sunday that it was “in close contact with Greek authorities regarding additional support we can provide”.

The agency said on Twitter that it was “redeploying equipment and additional officers to Greece and closely monitoring the situation”.

Falling oil prices threaten to derail Putin’s spending promises Continued from page 42 according to a transcript of the meeting released by the Kremlin.

“Our accumulated reserves, including the national wealth fund, are sufficient to ensure the situation remains stable and that all budgetary and social obligations are fulfilled even if the situation in the global economy worsens,” the president said.

Russia could finance its budgetary obligations for four years even with oil at $30 a barrel, Anton Siluanov, Russia’s finance minister, also said on Friday.

Russia’s finance ministry told the FT it would continue to use surplus oil and gas revenues for foreign currency purchases as long as oil prices remained above the $42 cut-off price. If

prices were to fall lower, Russia would sell foreign reserves in proportion to the scale of the dip.

This policy is intended to prevent a repeat of the crisis during the last big slump in oil prices in 2014, after which the rouble’s value against the dollar halved and the central bank switched to a free float.

The central bank told the FT it “had sufficient instruments to prevent threats to financial stability” if market reaction to the coronavirus worsened, but it has not signalled it would intervene to strengthen the rouble.

“The rouble acts as a safety net because it is allowed to weaken with the oil price. But if the situation worsens then Putin will have to choose between priorities,” said Chris Weafer, a partner at Macro Advisory. www.businessday.ng

Although “people are very frustrated after six years of real income decline”, Mr Weafer said, “we also know that Putin is opposed to any action which will cut into the country’s financial reserves or at least reduce them to an uncomfortable level”. He added: “He is personally opposed to increasing national debt and prefers to have a comfortable financial reserve.”

Boosted by a weaker rouble rate that increases their domestic earnings from exported crude, Russian oil producers have compensated for past crises by pumping more oil. But that might not be an option this time: Moscow has yet to signal how it will respond to a call from Saudi Arabia to sign up to a significant collective production cut of an additional 1m barrels a day.

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“All the companies are performing stress tests for a lower price,” said Anna Butko, oil analyst at Aton. “While the low prices are negative both for companies and for the budget, at this stage it is too early to say about a hard hit on both given that the country’s budget is based on low oil prices.”

The $40bn Sberbank sale could help compensate for the fall in oil prices and buoy the rouble. That is because the proceeds, in foreign currency, would be channelled from the finance ministry to the central bank allowing it to reduce its foreign currency purchases by the same amount, said Sofya Donets, chief economist at Renaissance Capital.

Most of the proceeds will be returned to the budget, which is @Businessdayng

governed more loosely than the national wealth fund — enabling the Kremlin to tap it for Mr Putin’s spending plans.

The Sberbank sale proceeds “are meant to be spread out over three to six years, which means [Russia] could spend as much as $5bn-$15bn less a year on foreign currency”, Ms Donets said.

The finance ministry said it would keep its Rbs1tn spending process so long as the national wealth fund remained above 7 per cent of gross domestic product. Though sustained oil prices at $50 per barrel or below could threaten that pledge, the steps Russia has taken to insulate itself from external shocks through the budget rule and move to a free float give it strong protection, said Natalia Orlova, chief economist at Alfa-Bank.

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Tuesday 03 March 2020

BUSINESS DAY

POLITICS & POLICY

Southwest states in final stage to legalise Amotekun Corps …Ogun, Oyo State Houses set to pass bill into law …Bills in final stage in Ondo, Osun …Lagos Assembly committee to present report to lawmakers RAZAQ AYINLA, Abeokuta; AKINREMI FEYISIPO, Ibadan; KORETIMI AKINTUNDE, Akure, JOHN OLANIYI, Osogbo and INIOBONG IWOK, Lagos

T

he Bills currently before all the Houses of Assembly in Oyo, Ogun, Ondo and Osun states are receiving final legislative teeth to legalise the-much-awaited Western Nigerian Security Network c o d e na m e d “O p e rat i o n Amotekun”, which has since been unbundled and domesticated as state-by-state security operation instead of being a regional security network.

Although all Southwest states retain Amotekun Security Corps in various Operation Amotekun Bills submitted before their State Houses of Assembly across the Southwest, with an appendage of the State Security Network Agency, Operation Amotekun has since been unbundled in accordance with 1999 Constitution of the Federal Republic of Nigeria

to allow for legislation and constitutionality.

In Ogun State, the State House of Assembly is set to pass the bill establishing Ogun State Security Network Agency and Amotekun Corps this week as Olakunle Oluomo-led House of Assembly is putting finishing touches to the bill, just as Adebo Ogundoyin-led Oyo State House of Assembly has pledged to pass the bill on

Tuesday (today) in order to allow for an express passage of the bill to Governor Seyi Makinde for his assent.

Apart from Oyo and Ogun states that will join Ekiti State in passing bill in their various domains, the bills are on the final stage of readings at Ondo and Osun State Houses of Assembly, which gives assurance that both Governor Rotimi Akeredolu of Ondo State and his Osun

Ondo 2020: NMA President, Faduyile, joins governorship race

...says Ondo needs someone to explore potentialities for socio-economic development KORETIMI AKINTUNDE, Akure

A

head of the October 10 governorship election in Ondo State, the President of the Nigerian Medical Association (NMA), Francis Faduyile has declared intent to contest the governorship poll on the platform of the All Progressives Congress (APC), to challenge the incumbent Governor Rotimi Akeredolu in the same ruling party.

The Professor of Pathology, who declared intention to run for governorship at a meeting with party members and journalists in Akure, Ondo State capital on Sunday, said that the state needed someone who could explore all the potentialities of the state for socio-

economic development and good governance for all and sundry.

Faduyile had earlier contested for Assembly seat of Okitipupa State Constituency I on the platform of Action Congress of Nigeria (ACN) in 2011, but lost. He also tried his political popularity in 2015 when he contested on the platform of the All Progressives Congress (APC) to represent Okitipupa/Irele Federal Constituency and also lost.

Speaking on the crisis of APC, the NMA President appealed to all the disgruntled members to embrace peace, urging the National Reconciliation Committee led by former interim National Chairman, Bisi Akande to handle the crisis with care.

Faduyile, while expressing www.businessday.ng

optimism and confidence that he would clinch the gubernatorial ticket of the party since he has been with the people and familiar with their challenges, including the lingering power outage in the Southern Senatorial District of the state which he lamented that the subsequent administrations could not solve the 10-year-old power crisis, saying that the power outage had undermined the socio-economic activities of the district and had seriously affected Gross Domestic Product (GDP) and Internally Generated Revenue (IGR) of the state.

He, therefore, promised to fix the power outage problem within the first month in office if chosen by his party at the primaries and voted as Ondo State governor.

State counterpart, Governor Gboyega Oyetola, are awaiting the bills to become law after assent.

Speaking at a Public Hearing on Ondo State House Security Network Agency and Amotekun Corps Bill, Governor Akeredolu said the Southwest geopolitical zone couldn’t compromise security of its people, saying: “There is no going back and there is nothing that

can happen. Yoruba people must unite and live together.

This bill is about six states of Yoruba people.

“Though there is no regional house of assembly but we must look at our peculiarities. It is not about ethnicity but utmost importance of life”.

Also, Governor Dapo Abiodun of Ogun State said that the support and cooperation of traditional institutions would go a long way in enhancing the operation of the South West Security network “Amotekun”, to curb security challenge in the state and the country at large.

The Tunde Buraimoh-led Committee on Information, Strategy and Security of the Lagos State House of Assembly will today present the report on the proposed amendment of the state Neighbourhood Safety Corps Agency Law 2019 at plenary.

The law is being amended to create Amotekun Corps in line with the region’s effort to tackle rising crime waves such as kidnapping for ransom, killings, robbery and banditry and others which

have assumed an alarming proportion in recent times.

Last Monday, the House held a stakeholder’s forum; where there was overwhelming pledge and support for the creation of Amotekun in the state.

The House had suspended its recess two weeks ago to consider the executive bill sent to it.

Sources at the Assembly revealed that notice had been sent to lawmakers and legislative staff, that the bill would be laid and presented by the committee today at plenary at 12noon.

“The House shall consider laying and presenting the report on a bill for a law to amend the Neighbourhood Safety Corps Agency Bill 2020 tomorrow,” the source said.

Me a n w h i l e, t h e A a re Onakakanfo of Yorubaland, who is the Generalissimo of Southwest Army, Gani Adams has declared that the fight against insurgency is half-way done as Amotekun Corps will be positioned in such a way that subjects across the zonal will be drafted into it.

I have no anointed successor, says Udom ANIEFIOK UDONQUAK, Uyo

Governor Udom Emmanuel of Akwa Ibom State has said he was not interested in choosing his successor but keen in delivering on his campaign promises aspects contained in his ‘completion agenda.’

The governor, who spoke during the 60th birthday celebration and thanksgiving service of the Senator representing Eket Senatorial District, Akon Eyakenyi in Uyo, stressed that he would not impose or anoint any candidate as his successor.

According to him, he will await divine direction which would produce the desired candidate based on the collective decision of the people.

The governor maintained that the present day Akwa Ibom is such that her destiny cannot be determined by one man, explaining that he would rather pray that God

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reveals to him whom he has chosen rather than try to adopt God’s attributes.

“I don’t have the power to anoint anybody, but my prayer is, God reveal to me whoever you want as my successor so that I don’t waste my time on somebody that will not be. Let God show me who to queue behind. I am a mere mortal and I think God will do that,” he stated.

He described the 2023 elections issues as unnecessary distractions and appealed to the people to put aside such distractions, cautioning that he would not welcome consultation for 2023 elections this year.

“I want to appeal that for 2020 we want to work. We are out to work in year 2020; so, I don’t want any distraction. Let nobody come and consult me about any office in year 2020 because at the end nobody will ask you who did you anoint to go for what office, but what God used you to do within your powers @Businessdayng

and within that time that God gave you. We are combing the whole world looking for help everywhere, so let God see our effort and support what we are doing,” he said.

Udom lauded the unprecedented acceptability of Ahmad Lawan’s leadership at the National Assembly, describing the 9th Senate as one of the most peaceful in the history of Nigeria’s democracy.

He congratulated Akon Eyakenyi on her 60th birthday celebration, commending her for acknowledging God as her source and prayed for God’s help for greater accomplishments in her life.

The Senate President, Ahmad Ibrahim Lawan said that politics of the new Nigeria, which the 9th Senate stands for, is defined by it desired destination in service delivery, devoid of political party line and identified Governor Emmanuel as sharing in the aspiration.

45

Tuesday 03 March 2020

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46

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BUSINESS DAY

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Tuesday 03 March 2020

BUSINESS DAY

47

Live @ The STOCK Exchanges Prices for Securities Traded as of Monday 02 March 2020

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 273,698.24 7.70 -6.10 173 7,591,464 UNITED BANK FOR AFRICA PLC 220,586.27 6.45 -3.73 330 18,386,675 ZENITH BANK PLC 566,706.71 18.05 -2.43 805 44,186,887 1,308 70,165,026 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 168,707.88 4.70 1.06 302 16,763,899 302 16,763,899 1,610 86,928,925 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,238,996.44 110.00 - 219 2,686,528 219 2,686,528 219 2,686,528 BUILDING MATERIALS DANGOTE CEMENT PLC 2,896,886.26 170.00 - 87 361,812 LAFARGE AFRICA PLC. 224,703.75 13.95 -10.00 21 294,087 108 655,899 108 655,899 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 356,008.96 605.00 - 5 14,043 5 14,043 5 14,043 1,942 90,285,395 REAL ESTATE INVESTMENT TRUSTS (REITS) SFS REAL ESTATE INVESTMENT TRUST 1,386.00 69.30 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 8,405.05 3.15 - 5 32,551 5 32,551 5 32,551 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 5 32,551 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 64,865.88 68.00 - 9 200,027 PRESCO PLC 44,900.00 44.90 - 11 92,414 20 292,441 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,500.00 4.25 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,950.00 0.65 3.17 27 1,807,993 27 1,807,993 47 2,100,434 DIVERSIFIED INDUSTRIES JOHN HOLT PLC. 217.92 0.56 - 3 38,240 S C O A NIG. PLC. 1,903.99 2.93 - 1 980 TRANSNATIONAL CORPORATION OF NIGERIA PLC 35,363.75 0.87 -1.14 90 10,865,703 U A C N PLC. 21,321.59 7.40 - 66 1,177,489 160 12,082,412 160 12,082,412

BUILDING CONSTRUCTION ARBICO PLC. 469.26 3.16 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 29,568.00 22.40 - 17 245,740 ROADS NIG PLC. 165.00 6.60 - 0 0 17 245,740 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,208.64 0.85 2.41 46 8,915,289 46 8,915,289 63 9,161,029 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 6,185.30 0.79 -2.47 10 236,700 GOLDEN GUINEA BREW. PLC. 220.45 0.81 - 0 0 GUINNESS NIG PLC 55,197.65 25.20 - 26 194,671 INTERNATIONAL BREWERIES PLC. 189,377.58 7.05 - 12 12,455 NIGERIAN BREW. PLC. 323,874.53 40.50 0.12 178 6,926,930 226 7,370,756 FOOD PRODUCTS DANGOTE SUGAR REFINERY PLC 145,200.00 12.10 - 39 210,162 FLOUR MILLS NIG. PLC. 90,208.35 22.00 - 81 1,388,941 HONEYWELL FLOUR MILL PLC 7,930.20 1.00 - 12 24,774 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 1 50 NASCON ALLIED INDUSTRIES PLC 34,442.70 13.00 - 4 9,400 UNION DICON SALT PLC. 2,993.06 10.95 - 0 0 137 1,633,327 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 15,213.44 8.10 - 22 180,313 NESTLE NIGERIA PLC. 806,131.41 1,017.00 -10.00 137 1,860,411 159 2,040,724 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 1 40 VITAFOAM NIG PLC. 5,403.65 4.32 - 16 74,635 17 74,675 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 16,080.43 4.05 -10.00 30 816,842 UNILEVER NIGERIA PLC. 77,557.57 13.50 -10.00 28 631,001 58 1,447,843 597 12,567,325 BANKING ECOBANK TRANSNATIONAL INCORPORATED 93,582.71 5.10 -5.56 66 962,144 FIDELITY BANK PLC 53,603.37 1.85 -5.13 119 17,661,601 GUARANTY TRUST BANK PLC. 668,087.77 22.70 -4.62 899 93,694,470 JAIZ BANK PLC 15,910.69 0.54 -1.82 10 506,758 STERLING BANK PLC. 40,306.59 1.40 - 35 5,957,551 UNION BANK NIG.PLC. 189,284.89 6.50 - 26 415,324 UNITY BANK PLC 5,727.78 0.49 -2.00 11 719,150 WEMA BANK PLC. 20,830.21 0.54 - 15 383,039 1,181 120,300,037 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 9,404.07 0.83 7.79 27 2,595,958 AXAMANSARD INSURANCE PLC 17,640.00 1.68 - 12 110,975 CONSOLIDATED HALLMARK INSURANCE PLC 2,032.50 0.25 -7.41 2 149,500 CORNERSTONE INSURANCE PLC 7,512.05 0.51 - 4 76,010 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 0 0 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 1,684.39 0.23 - 10 836,555 LAW UNION AND ROCK INS. PLC. 4,253.37 0.99 10.00 6 808,294 LINKAGE ASSURANCE PLC 3,200.00 0.40 -4.76 11 770,843 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 0 0 NEM INSURANCE PLC 8,976.85 1.70 -5.56 12 704,381 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 2,960.40 0.55 - 5 532,165 REGENCY ASSURANCE PLC 1,333.75 0.20 - 14 3,547,700 SOVEREIGN TRUST INSURANCE PLC 2,272.89 0.20 - 1 100 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 1 2,000 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 0 0 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,282.48 0.32 -6.25 25 3,160,638 130 13,295,119 MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 1,989.37 0.87 -8.42 15 1,965,341 15 1,965,341

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MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 6,784.62 1.05 - 1 10 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 5,796.93 1.39 - 5 15,400 INFINITY TRUST MORTGAGE BANK PLC RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 2,949.22 3.02 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 6 15,410 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 9,700.00 4.85 3.19 96 2,393,979 CUSTODIAN INVESTMENT PLC 32,056.16 5.45 - 14 404,740 540.00 0.36 - 0 0 DEAP CAPITAL MANAGEMENT & TRUST PLC FCMB GROUP PLC. 35,644.88 1.80 5.26 85 8,052,277 ROYAL EXCHANGE PLC. 1,131.98 0.22 - 0 0 341,411.44 32.50 - 21 62,214 STANBIC IBTC HOLDINGS PLC UNITED CAPITAL PLC 18,600.00 3.10 -4.02 240 11,823,068 456 22,736,278 1,788 158,312,185 HEALTHCARE PROVIDERS EKOCORP PLC. 2,742.30 5.50 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 710.63 0.20 - 0 0 0 0 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 494.58 0.50 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 5,299.36 2.54 - 0 0 GLAXO SMITHKLINE CONSUMER NIG. PLC. 5,022.68 4.20 - 26 379,911 3,381.46 1.96 - 5 94,216 MAY & BAKER NIGERIA PLC. NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 873.61 0.46 - 1 15,000 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 0 0 32 489,127 32 489,127 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 745.92 0.21 5.00 11 12,306,923 11 12,306,923 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,206.13 0.41 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 237.60 2.20 -9.47 1 100,000 287.07 0.58 - 0 0 TRIPPLE GEE AND COMPANY PLC. 1 100,000 PROCESSING SYSTEMS CHAMS PLC 1,033.13 0.22 -8.33 20 9,672,450 E-TRANZACT INTERNATIONAL PLC 10,962.00 2.61 - 0 0 20 9,672,450 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,123,311.48 298.90 - 7 25 7 25 39 22,079,398 BUILDING MATERIALS BERGER PAINTS PLC 1,767.92 6.10 -9.63 33 1,070,411 BUA CEMENT PLC 1,258,060.75 37.15 - 14 247,436 CAP PLC 15,505.00 22.15 -9.96 21 402,765 MEYER PLC. 244.37 0.46 - 0 0 1,769.32 2.23 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 68 1,720,612 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,192.12 2.03 - 0 0 2,201.65 1.25 -5.30 10 231,676 CUTIX PLC. 10 231,676 PACKAGING/CONTAINERS BETA GLASS PLC. 34,998.04 70.00 - 0 0 GREIF NIGERIA PLC 388.02 9.10 - 0 0 0 0 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 78 1,952,288 CHEMICALS B.O.C. GASES PLC. 1,685.79 4.05 - 0 0 0 0 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 0 0 0 0 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 77.00 0.35 - 0 0 0 0 0 0 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,252.54 0.20 - 3 24,250 3 24,250 INTEGRATED OIL AND GAS SERVICES OANDO PLC 33,564.81 2.70 -3.33 90 2,249,619 90 2,249,619 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 48,031.29 133.20 - 23 32,235 ARDOVA PLC 22,142.18 17.00 - 12 70,971 CONOIL PLC 12,491.14 18.00 - 10 33,773 ETERNA PLC. 2,738.70 2.10 5.53 13 736,461 MRS OIL NIGERIA PLC. 4,206.05 13.80 - 1 100 TOTAL NIGERIA PLC. 36,328.84 107.00 - 20 17,057 79 890,597 172 3,164,466

ADVERTISING AFROMEDIA PLC 1,509.28 0.34 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 15,796.05 1.62 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 235.27 0.20 - 5 11,516 5 11,516 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 1,739.02 2.95 -9.23 17 1,213,500 TRANS-NATIONWIDE EXPRESS PLC. 421.96 0.90 - 0 0 17 1,213,500 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 1 1,000 1 1,000 HOTELS/LODGING CAPITAL HOTEL PLC 4,259.15 2.75 - 0 0 IKEJA HOTEL PLC 2,515.34 1.21 - 0 0 TOURIST COMPANY OF NIGERIA PLC. 7,076.28 3.15 - 0 0 TRANSCORP HOTELS PLC 30,781.64 4.05 - 1 512 1 512 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 3,960.00 0.33 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 223.78 0.37 - 0 0 LEARN AFRICA PLC 779.16 1.01 -9.82 8 2,750,000 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 1 139 UNIVERSITY PRESS PLC. 444.35 1.03 -8.85 4 150,006 13 2,900,145 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 497.31 0.30 - 2 49,700 2 49,700 SPECIALTY INTERLINKED TECHNOLOGIES PLC 688.80 2.91 - 0 0

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BUSINESS DAY Tuesday 03 March 2020 www.businessday.ng

The rise and dramatic fall of European investment banks in the US Europe’s lenders spent billions to crack the American market. But many have made a humbling retreat Laura Noonan, FT

W

hen HSBC interim chief executive Noel Quinn announce d a dramatic overhaul last month to try to restore the bank’s fortunes, he took aim at what has now become a familiar target for European bank bosses — the US market.

HSBC, which was just last year talking about adding 50 more retail branches to its 220-strong US network, is now closing 30 per cent of its branches after admitting the division is lossmaking.

Its US trading business is in the line of fire too; Mr Quinn is cutting its assets as measured by risk by 45 per cent, a bigger reduction than HSBC’s businesses elsewhere, after profits from the US markets business fell by more than 20 per cent last year.

The announcement was the latest in a series of humbling withdrawals by European banks from the US market. Last year Deutsche abandoned its quest to be part of Wall Street’s elite by closing its global equities business and cutting thousands of jobs.

UBS cut back much of its US bond trading business after the financial crisis, while Credit Suisse is also a much smaller force in the US, having pared back its investment bank and leaving US private banking in recent years.

These cuts represent a dramatic retreat from the two decades when European banks went on an acquisition spree in the US in a bid to capture part of the world’s most lucrative banking and trading markets.

Th rou g h d ea l s su ch a s Deutsche’s 1998 acquisition of Bankers Trust, Credit Suisse’s 2000 takeover of DLJ and HSBC’s 2003 purchase of consumer finance business Household, European banks pumped billions into the pre-crisis US market. Barclays joined the party later with the most prestigious deal of them all, the $1.75bn takeover of Lehman Brothers at the height of the crisis.

Amid the acquisitions, European banks hired some of Wall Street’s top dealmakers, won places on prestigious deals and became big players in areas such as leveraged finance and fixedincome trading.

“From 2002 to 2007 there was tremendous [market] share growth by the Europeans,” says a senior European investment banker of that era. “I don’t believe any of those banks would have got to where they were organically.”

But those heady ambitions now lie in tatters.

For some observers, the swingeing cuts now being made are a recognition that few Europeans have built strong businesses in the US. “We do not see

European bank management creating value to their shareholders with US . . . operations and would welcome exit strategies,” says Kian Abouhossein, JPMorgan’s head of European banks analysis.

Yet some of the bankers who were involved in the expansion believe that it was a lack of ambition — not overreaching — that has left the European banks in such a dilemma now.

“It’s very hard to retain the best people in the industry when your goal is to be number six,” says Ken Moelis, one of the most prominent investment bankers in Los Angeles who was hired by UBS and later founded his own boutique investment bank.

European lenders’ first move on the American market was in 1978, when Credit Suisse made what proved to be a trendsetting investment in top tier Wall Street advisory firm First Boston.

The Swiss bank took a controlling stake in its American partner in 1988. By 1998, Credit Suisse looked to have cracked one of the world’s most exclusive clubs, ranking third in US investment banking fees ahead of both Goldman Sachs and Morgan Stanley, according to Dealogic.

Meanwhile, European banks were increasingly rankled by competition on their home turf from the likes of Goldman Sachs and JPMorgan, which arrived in London in the 1990s and could

offer round-the-world services to corporate clients.

Enter Deutsche. In 1998, after years pondering how to crack the US market, the German lender set the record for the largest foreign takeover of an American bank with its $10bn purchase of Bankers Trust. “There wasn’t a hell of a lot of discussion,” recalls a Deutsche management board member of that era. “There was a sense that scale is everything.”

Two years later, Credit Suisse doubled down with its $11.5bn acquisition of leveraged buyout specialist DLJ, and UBS snapped up brokerage Paine Webber for $12bn that same year. HSBC spent $14.8bn on Household in 2003.

Bolstered by their acquisitions, the European investment banks had some of Wall Street’s most famous rainmakers at their disposal. They included Mr Moelis, Blair Effron, his colleague at UBS who set up private equity house Centerview, and Tony James, who also worked at Credit Suisse in that era and is now the number two at private equity group Blackstone.

“I joined in 2001 and to me it was an opportunity,” says Mr Moelis. “UBS had Warburg in Europe, it had just merged with Paine Webber, they really had nothing in the US, they were merging two very suboptimal investment banks . . . I did think I could bring them the US.” An executive who sat on

‘‘

HSBC, which was just last year talking about adding 50 more retail branches to its 220-strong US network, is now closing 30 per cent of its branches after admitting the division is lossmaking

‘‘

Whether the precrisis years were a boom or not for European banks in the US, many executives believe that the seeds for their decline were laid in that period Deutsche’s management board at the time of the Bankers Trust acquisition says the deal “totally changed the dynamic of the conversation with senior US bankers [Deutsche was trying to hire].

Deutsche Bank had a credible platform overnight.” Deutsche was able to muscle its way into some landmark deals, including a 2012 mandate to advise AIG on its return to the public market.

But even in the period before the financial crisis, which European banks regard as their heyday in the US, their record was patchy. Deutsche was the eighth-biggest earner of investment banking fees in 2002, its $872m far behind the $2.6bn earned by market leader Bank of America. By 2007, Deutsche had fallen to ninth, with $1.6bn of fees versus JPMorgan’s $4.4bn.

Barclays and UBS also remained outside the top five players in most areas of investment banking, leaving Credit Suisse as the only one that really challenged the Americans.

Although their trading operations expanded, the underlying profitability was unclear — es-

pecially as some of the profits they booked were linked to mortgage-related trades that later registered large losses. Retail operations also struggled, such as HSBC’s Household business, which it closed to new business a few years after buying it.

“I’m not sure any large British bank and maybe no European bank has ever made money over a couple of credit cycles in the US market,” says Paul Tucker, a former deputy governor of the Bank of England who is now at Harvard University.

A former European bank CEO says banks “went to enormous lengths to disguise” the economics of their US businesses. “They were trying to fool not only the clients but in some cases your own employees.” If employees had known how bad it was, they would have decided it was “better get a job down the road”.

Bob Diamond, chief executive of Barclays when it bought Lehman, stands firm. “They were all real, with the exception of subprime,” he says of the profits that Barclays enjoyed in that period. “And that was pretty much true across the industry.”

Whether the pre-crisis years were a boom or not for European banks in the US, many executives believe that the seeds for their decline were laid in that period.

“European banks had a false dawn,” says one senior investment banker, adding that from 2012 to 2019 their fortunes went down in a “straight vertical line”.

European policymakers say the region’s banks were allowed to take excessive risk. Unlike in Europe, the US has had an absolute cap on leverage since 1981.

European banks expanded their balance sheets to 60 times their common equity in the run-up to the crisis, versus 35 times leverage at their US peers, as they built up far bigger trading exposures. “(There were) abject failures of supervision. Partly regulatory failures as well,” says one former official.

In the decade since the crisis, the relative weakness of the European economy compared with the US has left the continent’s banks at a disadvantage and given their American rivals more resources to expand.

The US industry also benefited from the more proactive approach to bailing out banks in the aftermath of the financial crisis. “The government capital that helped put those guys hack on their feet meant that those competitors came back,” says one Credit Suisse banking executive. “I thought those guys would pay a heavier price for being wrong and have to struggle.”

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