BusinessDay 05 Aug 2019 by BusinessDay

FMDQ emerges Africa’s first vertically integrated financial market infrastructure group …unveils new status, corporate identity …SEC, CBN instrumental to achievement IHEANYI NWACHUKWU

oday, world financial markets are increasingly moving towards integration, connecting erstwhile fragmented seg-

ments and processes across the full value chain of the securities market. Nigeria is not left behind, with recent events in 2018 – such as the feat of straight-through-processing for the settlement of fixed

income trades achieved by the Central Bank of Nigeria (CBN), Financial Markets Dealers Association (FMDA) and FMDQ OTC Securities Exchange (FMDQ) in the fixed income market. There were also the introduction

of the first central clearing house in Nigeria, FMDQ Clear Limited (FMDQ Clear), a wholly-owned clearing and settlement subsidiary of FMDQ; the introduction of the FMDQ Dealing Member (Specialists) category, a new market for

securities dealing houses (stockbrokers) to trade fixed income with banks, amongst others, all geared towards boosting productivity of market participants and fostering

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businessday market monitor

Foreign Reserve - $44.92bn Biggest Gainer Biggest Loser Cross Rates - GBP-$:1.22 YUANY-N 52.09 FO MTNN N19.45 7.76pc N127.00 -1.59pc Commodities 27,630.46

Cocoa

Gold

Crude Oil

US$2,361.00

$1,453.30

$ 61.30

news you can trust I **MONDAY 05 AUGUST 2019 I vol. 19, no 364 I N300

FMDQ Close

Everdon Bureau De Change

Bitcoin

NSE

₦3,701,916.48 +3.77pc

Foreign Exchange

Buy

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$-N 357.00 360.00 £-N 443.00 454.00 €-N 393.00 400.00

www.

Market I&E FX Window CBN Official Rate Currency Futures

($/N)

fgn bonds

Treasury bills

Spot ($/N)

362.23 306.85

0.22 10.07

NGUS sep 18 2019 362.03

6M -0.11

0.12

10 Y -0.07

20 Y 0.07

11.11

13.61

13.68

13.78

NGUS dec 24 2019 362.48

NGUS jul 29 2020 363.53

Big banks join fintech loan party in boost for economy LOLADE AKINMURELE

ome of Nigeria’s largest banks are aggressively making inroads into the personal lending space after years of neglect in what holds the promise of having a transformative effect on Africa’s largest economy. To succeed, the banks would

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Inside

14 business leaders, 20 firms bag 2019 BusinessDay leadership awards P. 2

L-R: Tunde Afolabi, chairman/CEO, Amni International Petroleum Development Company; Pascal Dozie, founder/ chairman, Kunoch Limited; Layi Francis Fatona, managing director, Niger Delta Exploration and Production plc, all Lifetime Achievement awardees, and Simbi Wabote, executive secretary, Nigerian Content Development and Monitoring Board (NCDMB), recipient, Transformational Leader in the Public Sector award, at the 2019 BusinessDay Nigerian Business Leadership Awards in Lagos. Pic by Olawale Amoo

Monday 05 August 2019

BUSINESS DAY

news L-R: Devakumar Edwin, group executive director, strategy , portfolio development and capital projects, Dangote Industries Limited; Lamidi Adeyemi, Alaafin of Oyo, and Aliko Dangote, president/ CE, Dangote Industries Limited, during the Alaafin’s visit to the Dangote Industries’ head office in Lagos, weekend.

AIICO, Custodian, Zenith, FBN Insurance, Wapic set to meet new capital requirements BALA AUGIE

nly five insurers will meet the new capital requirements by the National Insurance Commission (NAICOM), the industry regulator, according to analysis by Chapel Hill Denham Limited, a leading investment house. The five insurers are AIICO Insurance, Custodian and Allied, Zenith General, First Bank Insurance, and Wapic General. Analysts at Chapel Hill Denham said they used share capital (plus premium) and retained earnings as qualifying capital in their analysis, but they added that if shareholders’ funds were used, 10 insurers (including Prudential Zenith Life, Custodian Life, Nem, Linkage Assurance and AXA Mansard) would have met

the new minimum capital requirements. “We expect these companies to comply with the regulatory minimum relatively seamlessly via capital injections from significant shareholders or strategic investors,” said analysts at Chapel Hill Denham. “We believe the insurers that are able to meet the capital requirement well ahead of the deadline will be the winners in the recapitalisation exercise,” said the analysts. NAICOM jacked up the capital bases of insurers so that they can take on more risk and accelerate contribution to the economy. The minimum paid-up share capital requirement for life insurance companies is now N8bn ($22.2m) vs. N2bn ($5.6mn) previously; general N10bn ($27.8m) vs. N3bn ($8.3m) previously; composite N18bn ($50m)

vs. N5bn ($13.9m) previously, and reinsurance N20bn ($55.4m) vs. N10bn ($27.7m) previously. The new capital requirement took effect on May 20, 2019 (date the circular was issued) for new application, while existing insurance and reinsurance companies are expected to fully comply by June 30, 2020. In a July 23 circular, the regulator mandated operators to submit their recapitalisation plan on or before August 20, 2019. The Insurance Act 2003 stipulates the consequences of not meeting the minimum paid-up capital and actions to be taken by NAICOM. These include (i) cancellation of the registration of any insurer or reinsurer that fails to satisfy the capital provisions as it relates to the category of operations of such insurer or reinsurer,

and (ii) publication of a list of insurers and reinsurers that comply with the capital provisions. Such list may be published not more than 30 days after the deadline stipulated by NAICOM, which is 30 days after June 30, 2020 if the date is not shifted for the new capital policy. Insurers in Africa’s largest economy have begun a race to recapitalise ahead of the NAICOM deadline. Wapic Insurance plc is seeking funds via capital injection from majority shareholders, but its general business is well capitalised, while life segment needs more money. “The regulator could withdraw the operating licence of companies that fail to recapitalise,” said Seyi Olusi, chief finance officer at Wapic Insurance.

•Continues online at www.businessday.ng

14 business leaders, 20 firms bag 2019 BusinessDay leadership awards MICHAEL ANI & OLUWASEGUN OLAKOYENIKAN

n recognition of exceptional business leaders and organisations for their sustained commitment to excellence in enterprise and contributions to the economy, no fewer than 14 tycoons and 20 companies including a public institution bagged different awards at the maiden BusinessDay Nigerian Business Leadership Awards. The leadership awards, adjudged the most prestigious cross-industry event for the recognition of innovators and success stories, was graced by top dignitaries across the length and breadth of Africa’s largest economy.

This year’s awardees were grouped into two categories: the global awards category which rewarded individuals and organisations whose performance and impact transcend specific industries, and the sectoral awards category which announced companies of the year in each sector in recognition of their business agility, market share growth, financial strength, leadership vision and resilience in varying economic conditions. Under the global awards category, Pascal Dozie, chairman, Kunoch Ltd; Ibukun Awosika, CEO, The Chair Centre Group and chairman, Board of Directors at First Bank of Nigeria Ltd; Haresh Keswani, group managing director, Artee Group; ‘Layi Francis www.businessday.ng

Fatona, managing director (MD), Niger Delta Exploration and Production plc, and Tunde Afolabi, chairman/ CEO, Amni International Petroleum Development Company, in no particular order, all received Lifetime Achievements Awards. Speaking at the event, Frank Aigbogun, publisher/ CEO, BusinessDay Media Ltd, said the reward was necessary in order to bring to limelight the great and innovative things happening in Nigeria whether they be in the private or in the public sector. The Nigerian Business Leadership Awards are a part of a wider remit at BusinessDay to spark impactful conversations with business for private sector-led growth

through a rich calendar of conferences and policy roundtables. Oke Maduewesi, founder/CEO, Zaron Cosmetics Ltd, won the category for the B2C SME CEO of the Year award; Elochukwu Umeh, MD/CEO, Terragon Group (B2B SME CEO of the Year); Benedict Peters, founder, Aiteo Group (Business Leader of the Year); Aminu Babangida, chairman, Unity Bank plc (Corporate Board Leader of the Year); Ayoola Oduntan, chairman, Amo Farm Sieberer Hatchery Ltd (Diversified Business Group CEO of the Year), and Mauricio Alarcon, MD/CEO, Nestle Nigeria plc (Most Admired CEO of the Year).

•Continues online at www.businessday.ng

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Access Bank’s N30bn Tier 2 Bond issuance gets CBN ‘No Objection’, SEC approval IHEANYI NWACHUKWU & HOPE MOSES-ASHIKE

ccess Bank plc has concluded the process for the issuance of a N30 billion Tier 2 Bond due 2026. The bank in an August 2 notice told the Nigerian Stock Exchange (NSE) that the Central Bank of Nigeria’s ‘No Objection’ to the Bond issuance as well as the Securities and Exchange Commission’s approval have been obtained. The bank last week announced that it successfully issued a Tier II N30 billion Fixed Rate Subordinated Unsecured Bond to further strengthen its funding base. The bond was oversubscribed by N13.6 billion, which further buttresses the confidence investors repose in the bank. Access Bank will undertake a listing of the Bond on the NSE, the bank told the investing public in a notice signed by its company secretary, Sunday Ekwochi. The Issuing Houses are Chapel Hill Denham Advisory Limited as the mandated Lead Issuing House and Coronation Merchant Bank Limited and First-Ally Capital Limited as the mandated Joint Issuing House. Ayodeji Ebo, managing director, Afrinvest Securities Limited, believes in the suc-

cess of the Bond, saying there are not many banks issuing local bonds. He sees the move by Access Bank as an effort to shore up its capital after it spent huge amount of money to acquire Diamond Bank. The acquisition deal, which started in December 2018, gulped over N72.5 billion ($200 million). “We are a bank with a rigorous and disciplined capital plan and the action taken today is in line with our fiveyear strategic plan. This is to ensure a strong capital buffer at all times and support our low risk appetite,” Herbert Wigwe, group managing director/CEO, Access Bank plc, said on the Bond issuance. “Following the merger, we identified some synergies and combined with this issue, we are confident of our capacity to attain the next level of being a more efficient bank,” he said. Banks are required to maintain a minimum regulatory capital adequacy ratio (CAR) of 10%/15%1 on an on-going basis. The CBN will take into account the relevant risk factors and the internal capital adequacy assessments of each bank to ensure that the capital held by a bank is commensurate with the bank’s overall risk profile.

•Continues online at www.businessday.ng

11,000-bpd Ogbele modular refinery may come on stream in 3 weeks ...as DPR inspects facility, awaits report of technical team OLUSOLA BELLO & DIPO OLADEHINDE

he 11,000-barrelp e r- d a y O g b e l e modular refinery being promoted by Niger Delta Petroleum Resources Limited is set to commence production about two to three weeks from now. The Department of Petroleum Resources (DPR) has undertaken a pre-commissioning inspection of the facility, which is a precursor to the final approval before the refinery goes into full-time production. “The refinery is almost ready to go. Seven years ago we built a 1,000-capacity refinery and we started upgrading the refinery roughly two and a half years ago so the total capacity of the refinery is going from 1,000bpd to 11,000bpd,” Lai Fatona, immediate past managing director of NDPR, said in an interview with BusinessDay. When commissioned, the refinery will produce diesel, marine diesel, jet fuel, heavy fuel oil (HFO) and premium motor spirit (PMS), according to sources close to the plant. “Our expectations are that it will be up and running anytime in August if we got the permission of DPR to introduce @Businessdayng

crude into the facility after their inspections,” Fatona said. This development is sure to bring relief to Nigeria, which currently depends wholly on imports to meet the demand for petroleum products. Importation of these products now constitutes a drain on the nation’s foreign exchange reserves. Also, many oil marketing companies that are almost out of business now and on the verge of going moribund because of the high cost of foreign exchange to import these products are expected to take advantage of this opportunity and swing back to action. According to sources familiar with the developments at the plant, the DPR technical team which was part of the inspection of the facility has been asked to wait behind to carry out a thorough assessment of the facility. The reason for this, according to the sources, was to ensure that the final technical report would be made available to the management of the DPR which would give the company final nod for full operation of the plants.

•Continues online at www.businessday.ng

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Mondauy 05 August 2019

BUSINESS DAY

NEWS

The numbers don’t add up on Buhari’s claim of lifting 5m out of poverty in 3yrs MICHAEL ANI

resident Muhammadu Buhari’s claim that some 5 million Nigerians have been lifted out of poverty within his first three years in office is a far cry from reality, going by BusinessDay analysis of available data. In a bid to demonstrate how well his administration has managed Nigeria’s economy, Buhari, last Thursday, said his administration lifted 5 million citizens out of poverty through the National Social Intervention Programme (NSIP) he established in his first tenure in office. Speaking through Boss Mustapha, Secretary to the Government of the Federation, at the opening of the Global Youth Employment Forum organised by the International Labour Organisation (ILO) in Abuja, Buhari claimed that with the help of programmes like N-power his administration has made tremendous progress in increasing the number of school enrolments and creating over 2 million direct and indirect opportunities for the populace. While it is unclear how the 76-year old Nigerian president arrived at these figures, his claim of lifting 5 million citizens out of poverty and creating 2 million jobs does not tally with published data from various reputable agencies, including the state-run National Bureau of Statistics (NBS). “The president’s claim seems not to align with current reality in terms of accessible data that is available to measure,” said Ayodeji Ebo, managing director and CEO of Lagos-based investment and financial firm, Afrivest Securities. According to Ebo, as long as growth in the economy continues to lag behind growth in population, more and more people would become impoverished. Data compiled by BusinessDay from various sources show that Africa’s largest economy might have done poorly in the last 5years on key macro-economic indicators that measure improvements in the standard of living of the citizens. These indicators as analysed by BusinessDay include unemployment rate, GDP per capita, inequality gap, poverty rate, Misery Index and Human Development Index (HDI). Unemployment President Buhari was sworn into office on May 29, 2015, after defeatingformer President Goodluck Jonathan. Since 2015, unemployment rate in the country has more than tripled as the country struggles to find its feet after a recession that dented President Buhari’s first term. As of the last data published by the NBS, the calculated unemployment rate jumped from 7.5 percent in first quarter (Q1) 2015 to 23.1 percent in Q3 2018. Similarly, underemployment rate stood at 20.1 percent, and the combined unemployment and underemployment rate was 43.3 percent, NBS said in a report published Wednesday. In nominal terms, a total of 20.9 million Nigerians are unemployed, signalling that about 3.1 million people have entered into the unemployment trap in less than a year. The NBS had earlier in Q4 2017 reported the number of unemployed Nigerians to be

17.8 million. If truly the aforementioned programme by the Buhari government had made the needed impact as claimed, it would have shown in the unemployment data published by the statistical agency. GDP per capita GDP per capita is a measure of a country’s economic output that accounts for its number of people. It divides a country’s gross domestic product (GDP) by its total population. Put differently, GDP per capita tells how prosperous a country feels to each of its citizens making it the best measurement of a country’s standard of living. When the GPD per capita of a country is increasing, it means the standard of living of the country’s populace is improving and vice versa. GDP per capita growth in Nigeria has been negative since 2015, data from the International Monetary Fund (IMF) show. It fell from 3.51 percent in 2014 to -0.03, -4.17, -1.79 and -0.67 in 2015, 2016, 2017 and 2018, respectively. In nominal terms, it declined from as high as $3,222.69 in 2014 to $2,028.18 in 2018. Poverty rate The World Bank defined poverty as living below $1.9 a day. Nigeria under President Buhari’s watch overtook India to become the poverty capital of the world, a 2018 report by the Brooking Institution said. The report put the number of people living below the poverty line in Nigeria to be 87 million (about 44% of its entire population). While countries like India and China have made giant strides in the fight against poverty, about six persons enter into poverty in Nigeria every minute, according to data by the World Poverty Clock, a real-time data that tracks poverty for almost all countries in the world. If the President’s claim were true, it would have shown in the data. Misery Index A country’s Misery Index is calculated by adding its inflation to the rate of unemployment. The index helps in determining how the average citizen is doing economically. A higher index shows that a country is becoming more miserable. For Nigeria, the Index currently stands at 34.92 percent, an increase from the 17.40 percent in 2015. Income inequality Data from the NBS show that consumers’ consumption power has been falling since it rose by 1.5 percent in 2015. Final consumption of households declined by 8 percent from N43.1 trillion in 2014 to N39.66 trillion in 2018. Although the figures provided for 2018 by the statefunded data agency were limited to Q2 2018, BusinessDay arrived at a full-year figure estimated on an annualised basis. Year on year, the decline in household spending rose 1.45 percent to N43.7 trillion in 2015, but as Nigeria entered its first recession in more than two decades, household spending fell 5.74 percent to N41 trillion in 2016. While the rate of decline slowed in 2017 as households spent N40.78 trillion, the estimates for 2018 suggest a plunge to 2.75 percent. www.businessday.ng

Unlocking capital market benefits, AIHN explains private sector, govt roles DAVID Ibidapo & Gbemi Faminu

he Nigerian capital market, which since inception has responded closely to economy cycles, monetary and fiscal policies, is believed to open more opportunities now than ever on some defined provisions, both on the part of private sector players and government at different forms. Addressing issues and prospects inherent in the Nigerian capital market at the second edition of the Association of Issuing Houses of Nigeria (AIHN) annual dinner and award night Thursday last week, capital market experts and stakeholders explained the critical roles of the private sector in harnessing potential infrastructure development via the capital market. “There is need for the private

sector and the capital market to play driving roles in achieving economic prosperity and development while partnering with the government at all levels,” Chuka Eseka, president, AIHN, said. He reiterated that the capital market needed to invest intellectual capital, which will translate into develop solutions for funding key national priority sectors to achieve transformational and catalytic economic benefits. “For the capital market to however deliver on its role as a catalyst of economic growth, market operators role in the financial system value chain must be strengthened,” Eseka stressed. While in recent times the Nigeria capital market has seen increased capital inflows into some asset classes such as

money market instruments, reduced inflow into the bonds market and massive sell offs in the equity space, Eseka pointed out major issues needed to be addressed for a vibrant and attractive capital market. Importantly is the consistent high interest rate, especially on short-term risk free instrument, which is perceived as a disincentive to long-term investors and unfavourable to our capital market as a source of risk capital formation in any economy. “We are not unaware of the economic challenges which forces the tight monetary policy regime but the need for fiscal and monetary policy balance to prevent the crowding out of the capital market cannot be over emphasised,” Eseka explained further. Hence the need for favourable capital structure to the capi-

tal market, as listed companies are more transparent in their financial reporting and pay much more in taxes compared with unlisted companies. Also, he raised the need for tax incentives such as reduced company income tax remitted period and reserving government privileges for private companies with a committed refined period for listing. “We encourage government to sustain the ease of doing business’ reforms in the regulatory environment. In this regard, we urge the Federal Government to inaugurate the PENCOM board just as the LCC board. This will strengthen governing structure of the pension industry and empower the regulator to make policy decisions for the benefit of the market and the economy,” Eseka said.

L-R: Iyke Ejimofor, executive secretary, Nigeria South Africa Chamber of Commerce; Ohis Ehimiaghe, director, NigeriaSouth Africa Chamber of Commerce; Kike Longe, principal, Capital Alliance of Nigeria; Darkey Africa, consul general of South Africa to Nigeria; Bola Ajibode, general manager, Conglomerates and Industrials, CIB Client and Coverage, Stanbic IBTC; Ubong King, director, Nigeria-South Africa Chamber of Commerce, and Kemi Leke Bamtefa, national sales manager, South African Airways, at the Chamber’s breakfast forum sponsored by South African Airways.

Education reform: Probe panel calls for memoranda on Agric College, College of Education, others JOSHUA BASSEY

he Commission of Inquiry set up by Governor Godwin Obaseki to investigate the activities of three tertiary institutions in Edo State, comprising the Colleges of Education, Ekiadolor and Igueben, Michael Imoudu College of Physical Education, College of Agriculture, Iguoriakhi, and the College of Agricultural Technology, Agenebode, has called on members of the public to submit memoranda to the commission in an effort to have robust engagements for the probe. In a statement, Secretary of the Commission, Obobairibhojie A. John, said, “It is hereby announced for the information of the general public that His Excellency, Mr. Godwin Nogheghase Obaseki, the Governor of Edo State, has constituted a Commission of Inquiry into the activities of Colleges of Education, Ekiadolor and Igueben, Michael Imoudu College of Physical Education, College of Agriculture, Iguoriakhi and the College

of Agricultural Technology, Agenebode from January, 2009 to 30th June 2019.” According to John, “The terms of reference of the Commission of Inquiry are, to examine the finances of the institutions (receipts and expenditure) and determine whether they were in accordance with the laws of the Institution, rules and regulations guiding the Public Service” Others are to “examine the administrative structure of the institutions in line with the laws establishing them and examine the mode of employment and promotions at the institutions with a view to determining whether due process was observed and investigate any other matter that may be incidental to (i) (iii) above.” He called on members of the public to submit memoranda in fifteen (15) copies to the Secretary of the Commission of Inquiry at the Office of the Head of Service, Government House, Benin City, on or before Wednesday, August 14, 2019.

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LASG adopts measures to curb pipeline vandalism Joshua Bassey

agos State government is adopting a new security measure that will tighten the noose on criminals engaging in pipeline vandalism and kidnapping. Part of the measures being considered by the state is the demolition of all structures around pipelines believed to serve as hideout for vandals. The state governor, Babajide Sanwo-Olu, during a meeting with heads of security formations in Lagos, weekend, said security agencies would up their game going forward. Special attention is also to be paid to the Lagos waterways and public properties. Sanwo-Olu, who spoke with journalists after the meeting, specifically said there would be renewed security assault against oil thieves and those aiding pipeline vandalism. The new measure, the governor said, would lead to demolition of some residential buildings and structures built close to oil pipes to protect the lives of innocent residents. @Businessdayng

He said: “We just finished our regular security meeting and I am reiterating our assurance to residents that, all security operatives in the state are well motivated to ensure security of lives and property. We have reviewed current security situation in the state. This has helped us to further re-energise our strategy that will make our state safe, secure for living and business. “There are other strategies that will be coming up but we have formulated our strategy on the areas of priority that we need to tackle. We are getting reports of possible threats around our waterways and government’s assets across the state. We are ready to tackle these security challenges and all logistics will be put in place as required. “Another priority is the incident around pipeline vandalism, which unfortunately brought us down last month. “It was extensively discussed, and we resolved amongst ourselves that we would stop at nothing. We will do everything possible, including engaging the community to give our people assurances.”

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Nduka’s spectacular party (but not a political party)

Bashorun J.K Randle

he media coverage of Prince Nduka Obaigbena’s 60th birthday party has been a blitz. The millennials would have tagged it a super blast. Strangely, not much has been said about the “political party” which ran simultaneously with the thanksgiving service at the Cathedral Church, Marina Lagos on 13 July 2019 followed by the sumptuous lunch at the Sky Lounge of Eko Hotel and Suites Victoria Island. Then on Monday, 14 July 2019 the celebrations climaxed with dinner in the ample ambiance of the Grand Ballroom of the Eko Hotel and Suites which had been transformed into a magical all green garden either in compliance with the dictates of climate change or a creative hint that suggested: Welcome to the Garden of Eden. At each event the politicians (former heads of state, governors and ministers) were pre-eminent, overwhelming and dominant – almost as an echo of General Ibrahim Babangida’s perplexing theory about the “balance of forces”. This time, the politicians clearly out – “PUNCHED” the publishers/journalists and insisted that they were indeed “THE GUARDIAN” of our “NATION’S” conscience and the custodian of our “DAILY TRUST” in the abundant blessings of the Almighty together with the assurance that we are entitled to our place in the shade away from “THE DAILY SUN” with the angels in “THE VANGUARD” heralding us in the “THE TRIBUNE” and “CHANNELS” – “THISDAY” and every day!! In the meantime, our complaints that “LEADERSHIP” is the main problem in our country are all over the media. Of course, the heavyweight businessmen (the moguls and tycoons) as well as royalty were in abundance. As for the ladies, the style section of ThisDay on Sunday has gone global with the special edition. They were like butterflies fluttering all over the ballroom while glamour was in fierce competition with self-promotion by actresses, models and wannabes. Anyway, as confirmation that the politicians meant “BUSINESS DAY” they insisted that it would be an evening of IDEAS, FOOD AND MUSIC.” Perfect. We all had a fabulous time. The only hitch (if any) was that at my table was Chief Olisa Agbakoba SAN the veteran combatant and unrepentant survivor (as a NADECO chieftain and comrade-in-arms of late Chief Gani Fawehinmi; late Bashorun MKO Abiola; late Chief Alfred Rewane etc.) of life-threatening confrontations with the military especially the muchdreaded dictator, General Sani Abacha. The scars of battle and the burden of hope that were once magical (and

all engrossing) but now laid forlorn were self-evident. The message was clear – we are trapped while our nation is in petulant and seething rage over banditry, terrorism, kidnapping, ritual murders, rampaging herdsmen and corruption fuelled with impunity. The dream of redemption has been subverted by the nightmare of hopelessness and helplessness. The invitation card meant for law and order has gone astray – perhaps it was delivered to the wrong address. The bankers have turned up with their five-star “generals” but they are unarmed. They are no match for the “real McCoy” – serving or retired Army Generals, Navy Admirals, Air Force Marshals or indeed the Inspector General of Police. One of the bankers, Chief Lawson Omokhodion appears to have broken ranks. He is ensconced at my table with a “Not Guilty” sign written all over him. He was the Chief Executive Officer of “THISWEEK” magazine founded by Nduka Obaigbena in 1987. It was a candle with a brief life but nevertheless midwifed (via IVF!!), THISDAY newspapers which has survived for almost twenty-five years – a phenomenal achievement. Anyway, the journalists cannot come to terms with being off-duty. Instead, they want me to confirm that I have been practising as a chartered accountant for fifty years and that I have been a weekly newspaper columnist for five decades as well as being the author of twenty books. Oscar Wilde was right: “Self-advertisement is the worst form of recommendation.” I decline to speak about myself. Instead, I direct them to what is streaming on my phone: (i) “Saturday Sun” newspaper Front page headline: HORRIFIC!! “How herdsmen raped, strangled and shot dead 6-months-pregnant woman in Plateau.” Security forces must fish out perpetrators – husband. (ii) Front page headline: “Sunday Sun” newspaper: “OLUSEGUN OBASANJO: THE STATESMAN MESSENGER AND HIS ACERBIC MESSAGE” (iii) Front page headline: “THISDAY” newspaper: “Nigerian politics is a corrupt prostituted type of politics where excellence doesn’t count; where lies take the upper stage; where people are anxious to serve not because they want to serve the nation but to enrich themselves.” - Professor Tam David-West (former Minister of Petroleum) (iv) Front page headline: “Business Day” newspaper: “Nigeria in trouble; faces unsure future. • Obasanjo; Anyaoku; Danjuma; Soyinka; others see danger. • BMO [Buhari Media organisation] warns groups; urges caution.” (v) Front page headline: “The Sun” newspaper: “AT 81, I STILL PARTY, DRINK, DANCE but … - Chief Robert Clarke SAN (vi) Front page headline: “The Sun” newspaper: “OIL BARON KASE LAWAL’S LITANY OF WOES” www.businessday.ng

(vii) Front page headline: “Daily Trust” newspaper “I AM READY TO LAY DOWN MY LIFE FOR NIGERIA” - former Governor of Anambra State, Peter Obi (viii) Roy T. Bennet “Don’t be pushed around by the fears in your mind. Be led by the dreams in your heart.” (ix) J.K. Rowling (not J.K. Randle): “Indifference and neglect often do much more damage than outright dislike.” Regardless, the journalists insist on reminding me of some of my articles which were published in “ThisDay” newspapers: (i) 1997 Chief Anthony Ani, Minister of Finance. “Our Nation borrowed 1 billion dollars (foreign loan) but the money never reached Nigeria. It was shared by two people and I have their names” (ii) Cow Meat (and K-leg!!) Nigeria’s 22 million cows are actually owned by only about 1,000 (one thousand) people. The herdsmen are not the real owners. Each cow eats ten times what each human being feeds on daily. So we are actually feeding 220 million plus our 180 million human population. That makes 400 million daily. It is unsustainable. (iii) The Black Forest Sambisa Forest which is the Black Forest of Boko Haram insurgents is vast in size – it stretches across the equivalent of five countries. In that forest, giant cockroaches and insurgents survive for two days after their heads have been cut off. They survive for two weeks without water; and a month without food. (iv) Extract from “GOD DOES NOT LIVE IN LOS ANGELES ANYMORE...” (by Bashorun J.K. Randle) 1985 “Nigeria is having the same trouble. Thankfully, no one has accused Major-General Muhammadu Buhari’s government of fraud. Indeed, T. Hawkins while commenting on the Nigerian budget observed that its economic inexperience notwithstanding, the military government is making a better job of managing the economy than its civilian predecessors – although the policy profile is not that different. It is management and policy implementation that have improved, with the military being more decisive, more courageous and altogether more determined. Bankers and businessmen agree that impressive progress was made in imposing fiscal and monetary discipline on an economy which previously had defied all such efforts. Great strides were made, too, towards correcting the twin imbalances that have so seriously threatened the economy since the 1980’s. Internally, the budget deficit was halved to N3.3 billion ($4.1 billion) – which is still far too large given the external constraints on the economy – while a semblance of order in the chaotic finances of the state governments was achieved by slashing their estimated deficit from more than N6 billion ($7.4 billion) in 1983 to N2 billion in 1984. Externally,

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…journalists cannot come to terms with being off-duty. Instead, they want me to confirm that I have been practising as a chartered accountant for fifty years and that I have been a weekly newspaper columnist for five decades as well as being the author of twenty books

the current account deficit which averaged more than N4 billion annually in the 1981/1983 period, was almost totally eliminated in 1984 when Nigeria broke even on current account. When capital transactions are included, Nigeria’s deficit at N102 million was the lowest since 1980. Most important of all, the rate at which trade arrears accumulated – N4.2 billion in 1982/83 – slowed dramatically with arrears rising a further N500 million during 1984. Monetary discipline was reflected in the very modest 4 per cent growth in the money supply, down from more than 12 per cent the previous year. Needless to say, the slamming of the fiscal and monetary brakes in this way has had very painful consequences. Many thousands of people – in government service and in the private sector, especially manufacturing – have lost their jobs. Reduced government spending meant smaller payrolls.” All the same, it was a terrific party by a great media mogul. Happy birthday Nduka. While we are still in the party mood, the next item on the programme is the annual thanksgiving and remembrance service for late Chief J.K. Randle which will hold on Sunday, 28th July, 2019 at 11 am at Christ Church, Christ Church Street, Chelsea, London SW3 4AS. It will be followed by a reception at Phene Arms, 9, Phene Street, Chelsea, London SW3 5NY. Chief JK Randle was born on 28th July 1909 and died at the age of 47 in 1956. If he was alive, he would have been celebrating his 110th birthday. Like many of his generation, he was passionate about Nigeria. As in previous years, the Vicar, Dr Brian Leathard will offer special prayers for peace in Nigeria while threats of insurgency, insecurity, violence and breakdown of law and order are all over the media, especially the international press. As in previous years, prayers will also be offered for the safe return of the remaining Chibok girls who were kidnapped in Chibok on 14 April 2014 as well as the rescue of the brave Leah Sharibu. In addition, the Randle family will once again appeal to the government for the return of their property – “Love Garden” (now known as MUSON Centre); and Dr JK Randle swimming pool as well as Chief JK Randle Memorial Hall (which is vested in the Trustees). American President Donald Trump is eager to come. Instead we shall settle for Boris Johnson the new Prime Minister of Britain and Mr Sadiq Khan, the Mayor of London. At the stroke of midnight, we shall unveil the joint proclamation by British Prime Minister Boris Johnson and Mayor of London Mr. Sadiq Khan at the Speakers’ Corner, Hyde Park, London W2 2EU: “Free speech is alive and kicking every Sunday at Speakers’ Corner in Hyde Park on the corner of Park Lane and Cumberland Gate.” Thereafter, we shall commence the Vigil of Redemption. Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

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Monday 05 August 2019

BUSINESS DAY

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Where’s the Deal?

Patrick Atuanya

he American Great Depression began by the complete collapse of the stock market on October 24th, 1929 when about 13 million shares of stock were sold. The damage was extended on Tuesday, October 29 when more than 16 million shares were sold making the day forever known as Black Tuesday. The value of most shares fell sharply, leaving financial ruin and panic in its wake. There had never been a collapse in the market that has had such a devastating and long-term effect on the economy. Businesses closed and banks failed by the hundreds due to the collapse, putting millions out of work. Wages for those still fortunate enough to have work fell sharply. The value of money decreased as the demand for goods declined. By 1932, the unemployed numbered upward of thirteen million, with many living in the primitive conditions of a preindustrial society stricken by famine, and by 1933, one in four Americans was out of work – roughly 15 million workers.

American President Franklin D. Roosevelt, who took office in 1933, responded to the calamity of the Great Depression, by launching the New Deal. It was a series of new programs designed to respond to a wide range of problems facing the country: stabilizing the banks and stimulating the economy, creating jobs and raising wages, investing in public works and modernizing lagging regions, and giving ordinary Americans a new sense of security and hope. The New Deal lasted until American entry into the Second World War at the end of 1942. In a sense the state that Nigeria is in today is as bad if not worse than America was during the Great Depression of 1929 – 1942. The stock market is now trading at two year lows. The latest Labour Force report by the National Bureau of Statistics (NBS), released in December 2018, shows the number of unemployed Nigerians rose from 17.6 million to 20.9 million. According to the report, the unemployment rate accordingly, increased to 23.1 percent in the third quarter of 2018, from 18.8 percent a year earlier and 5.1 percent in 2010. Worse still, youth unemployment and under-employment was 55.4 percent in the third quarter of 2018. The economy expanded 1.9 percent in 2018, and the International Monetary Fund (IMF) projects growth will be 2.3 percent in 2019. However because the population is growing much faster at around 2.8 percent per annum, the tepid GDP

growth rate is not doing much to move the needle on jobs or poverty reduction. GDP Per Capita is down 37 percent since 2014. The country with a population of almost 200 million people, has the world’s highest number of people living in extreme hardship, according to a report released last year by the Brookings Institution. Inflation has remained at double digits since 2015. Without reforms, Nigeria risks “a lost decade” of flat economic growth, the Brookings Institution, said in its report. Add the growing insecurity from kidnappings and herdsmen attacks on a daily basis, poor health facilities and inadequate schools, and worsening insecurity and a lack of decisive victory over the Boko Haram insurgency in the Northeast, and it reveals a country in dire need of a plan to restore growth, law and order and hope to millions of its citizens. In essence a Nigerian New Deal is needed, which would require bold and visionary leadership from the top. But what would such a plan entail? Perhaps we can learn a bit from the American experience. The American New Deal used an array of federal agencies, local governments, and private contractors to upgrade and expand the America’s infrastructure. It built hundreds of thousands of new roads, bridges, and tunnels (the American interstate highway system still in use today), city halls, libraries and post offices; hospitals, schools and auditoriums; dams, water works and sewage systems;

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In essence a Nigerian New Deal is needed, which would require bold and visionary leadership from the top. But what would such a plan entail?

and airports, parks and military installations. It spread these improvements across the country, bringing lagging American regions into the 20th century with paved roads, electric wires and telephone lines. This means that every region of America was deemed important in doing its bit to lift the whole out of depression. For Nigeria it would mean an infrastructure plan that eschewed favouritism/ nepotism and the politics of the 5% vs 95%, but truly embraces Nigeria as one nation, perhaps starting with an infrastructure audit across the country from Sokoto to Uyo, Lagos to Maiduguri, Enugu to Ibadan, Kaduna to Yola and everywhere in between. How to raise the capital (perhaps in tranches), needed for such a massive infrastructure undertaking should also be part of the plan, as well as the role of the private sector. The Ministerial nominee Babatunde Fashola has already proposed a N10 trillion infrastructure bond which is highly welcome. The plan should have at its core the empowerment of the Nigerian people and restoration of our dignity. Leadership is largely about inspiring citizens to believe in a better tomorrow. Roosevelt did it 86 years ago and today the American economy is the largest in the world. There can be no excuse today for the seeming lack of leadership, coming out of Abuja as Nigeria totters on the brink! Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

A Knife to the throat

popular saying has it that whoever pays the drummer dictates the tune. That saying may not hold true at all times because the drummer may on occasion allow her innate artistic flair to take over. The saying, however, finds a wide parallel in situations where governments do not fund their research institutions and agencies, thereby pushing them into the embrace of funding agencies with motives that may not be in sync with that of the governments. A case in point has to do with the way we are handling issues of biosafety. We do not appear to worry that the purveyors of genetically modified (GM) crops and products, apart from their pretentious messianic posturing, are mostly concerned with making profit out of our miseries. We do not worry that our staple crops are targeted and that these marketers are the ones declaring our vitamin or mineral deficiencies and presenting GM crops and foods as silver bullets to solve all our problems. We are happy when we are assured that GM foods and products will be labelled and that we will definitely have a choice with regard to whether or not we wish to eat them. We do not consider the fact that most of our staples are sold in ways that do not permit labelling. We do ourselves harm when we gloss over this issue. We do know that in the global north you can know the origin of the bananas, oranges and other fruits you buy from their labels. We have said several times that our sociocultural context does not allow for labelling in our informal marketing and sharing systems.

The African Agricultural Technology Foundation (AATF) announces that GM beans will be planted in Nigeria in 2020. We must not lose sight of the fact that we are in breach of the law if any GMO is released into our environment and to our markets; if it is not, and cannot, be labelled. Without the right of choice, we are forced to eat GM foods with a knife to our throats. Back to the payer and the drummer. Sometimes the drummer may go into a flourish, but that often happens when the payer starts what may look like limitless spraying of currency notes. If the Alliance for a Green Revolution in Africa (AGRA), Bill and Melinda Gates Foundation or Monsanto sprays you with seeds, or a laboratory, the dancer can go into a frenzy. The fervour with which we are open to being used as testing fields of hypotheses dreamt by speculators, and even by students in foreign laboratories, should capture our attention. We recall when the great work the International Institute for Tropical Agriculture (IITA) did in developing natural cassava varieties and methods for controlling the dreaded cassava leaf mosaic disease. These days they appear more bent to working on GM cassava for the increase of starch content in the tubers, not for foods for humans, but probably for industrial purposes. One such GM cassava was developed in a student project in a laboratory in Switzerland and brought to Ibadan, Nigeria, for testing. The so-called confined field trials have since been concluded but information on the outcome is not in the public sphere. The routine response of the agency when www.businessday.ng

asked for information on the basis of which they issue permits is to refer the enquirer to their website. When told that the information is not on their website, their response is to again reiterate their blanket reference to their website. The same laboratory from Switzerland recently sent another GM cassava for a willing Nigerian institute, the Nigerian Root Crops Research Institute (NRCRI) located at Umudike, to obtain a permit and carry out confined field testing of a cassava variety engineered to contain high levels of iron and zinc. Despite very detailed comments sent to show why approval should not be granted for its field testing, the approval was granted by mid-July 2019. The NRCI got the permit to carry out a confined field trial of the GM cassava on a plot measuring not more than 200 square metres. That is small, right? However, NRCI is to ensure a buffer or exclusion zone of 1.5 kilometres in which there must not be any non-GM cassava planted or growing wild. Is that possible in Abia State, or anywhere in Southern Nigeria? 1.5 kilometres without a cassava plant? Another requirement is that the place in which the GM cassava is to be planted must have security personnel keeping watch on a 24 hours basis. Really? The immediate area of the trial zone is to be surrounded by a pollen trap to prevent the spread of pollen grains from the GM cassava. The trap is not something mechanical, like a mouse trap. It is rather a planted area where the crops planted there must flower at the same time as the GM cassava in the confined

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Nnimmo Bassey

trial area. If that is not preposterous enough, consider who would ensure that the area is decontaminated after the field trial. That task will be done by “persons trained by the permit holder.” It is doubtful if such a person can be trusted to be objective in carrying out the task. It is obvious that entire scheme is a wild, needless gamble. Some of us are wondering if the biosafety regulatory agency in Nigeria should bother to advertise applications for introduction of GM crops and call for comments when they already have their minds set on being little besides a permitting agency. Expert comments sent to show why certain applications should not be approved are treated with contempt and brushed aside. The agency is averse to giving a response as to why they reject the contrary points raised by concerned citizens and groups. The arrogance and hostility towards those who do not dance to the GM beats keeps increasing by the day. This has to stop. Nnimmo Bassey is Director of Health of Mother Earth Foundation (HOMEF)

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Monday 05 August 2019

BUSINESS DAY

EDITORIAL Publisher/CEO

Frank Aigbogun editor Patrick Atuanya DEPUTY EDITOR John Osadolor, Abuja NEWS EDITOR Chuks Oluigbo EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua

Nigeria’s liquidity challenge in a world awash with capital

igeria struggles to fund its budget. But a global liquidity glut, the aftermath of the global financial crisis of 2008, has seen the four largest central banks in the world – US Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England – pump $13 trillion into the global economy. Using M2 – the amount of cash and deposits, savings deposits, money market securities, mutual funds, and other time-deposits – as a rough measure, the banking sector in Nigeria is shallow. The banking system cannot finance the economy; it is just 20 percent of the goods and services produced per year. In other words, 20 of every 100 naira required for running the economy is from the banks. In Egypt, which lately sorted out its illiquidity challenge to restore growth and stability, the figure is 92.3 percent. Nigeria is unable to tap from the stash of cash the world is awash with because those

who manage the economy have their minds fixated with growth and stability. Ayo Teriba, an economist, reckons that this is like focusing on an anaemic patient’s weight (growth) and blood pressure (stability) whereas the problem is lack of blood (liquidity). When the blood available domestically is insufficient, the proper thing to do is to find blood donors externally. We ask, ‘where, then, can Nigeria get blood donors from?’ Can it come from foreign direct investments, remittances, international capital markets (e.g. Eurobonds) or from local banks and investors who buy its Treasury Bills and bonds? Except for foreign portfolio investors, the flow of foreign direct investments into Nigeria is dwindling. Economic and regulatory uncertainties are scaring them away. Thanks to multiple exchange rates, Nigeria gets just over 60% of what Nigerians abroad send home annually (unofficial records estimate the true amount is $40 billion). Can local banks step into

this vacuum? Forcing banks to give loans at a single digit interest rate is a tough sell. Buying government debt is far less risky and the returns are attractive. Treasury Bills and government bonds are much more appealing for banks and foreign investors because of double digit interest rates. Local banks are constrained. They are mandated to keep 22.5 percent of customers’ deposits with the CBN. With only enough cash to meet transactional needs of the economy (most of the money in Nigerian banks are used for payments), there is little left, if any, to give out as loans. If banks do loan out monies, it’s to the bluest of blue chip companies, and, of course, the federal government. We are concerned that undue attention to growth and stability while neglecting the liquidity required to achieve both is crippling the economy. But, thankfully, there are options. Is Nigeria willing to attract some of the global surplus capital through sale of its shares in state-owned companies or telecommunications

spectrum licenses or through asset-based securities (e.g. diasp ora b onds) or rental income from a plethora of government property? Money realised from the commercialisation, liberalisation, privatisation and securitisation of state-owned assets will attract enough foreign exchange to strengthen the naira. And deepen the financial market too. The CBN can do away with multiple exchange rates, reduce interest rates and better curb unruly increases in general prices. With enough cash in its coffers, the government can fund the soft and hard infrastructure (security, education, energy and transport) and stem the descent of millions into poverty. It’s time to think the unusual: for instance, how to raise a 10 trillion naira bond. If the central bank governor, the soon-to-be announced Ministers of Finance, Trade and Investment, and Budget and Planning wonder where these ideas have been tried and tested, they can look to Egypt, India and China. We need to copy their hard work.

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Buhari’s ministerial choices: Party loyalty trumps technocratic competence global Perspectives

OLU FASAN

efore unveiling his ministerial list, nearly three months into his second term, President Buhari told Nigerians that he would not appoint unknown persons into his new cabinet. “This time around”, Buhari said, “I am going to be quite me”. He went on: “Me in the sense that I will pick people I personally know”! So, no “strangers”, only chums! But President Buhari is, as a Chatham House report once said, “an aloof and disengaged leader, ‘walled off’ from most Nigerians”. So, given that he should form a cabinet consisting of some of Nigeria’s best and brightest, the question was: how many of such people did he personally know? How many world-class technocrats – scientists, economists, political economists, name them – does Buhari personally know across Nigeria? It was a tall order for a very reclusive president! And, indeed, so it was! The ministerial list that President Buhari sent to the Senate on 23 July was shockingly political, devoid of any credible technocratic mind. The list was made up of loyal associates, campaign hacks and party apologists. When President Buhari said he would only appoint people “I personally know”, it turned out that he meant politicians, career politicians! Evidently, despite Nigeria’s great talent pool, Buhari doesn’t seem personally to know anyone of ministerial quality outside his political neck of the woods! The political nature of the ministerial appointments is really striking. For instance, of the 36 ministers in Buhari’s first term only 14 were reappointed, and all are politicians. Anyone who remotely looked like a technocrat, such as Dr Okechukwu

Enelamah, Buhari’s first-term minister of investment, trade and industry, was excluded from the new ministerial team. Indeed, Enelamah’s case is interesting. He was arguably the most active and reformist minister in Buhari’s first term. He drove the government’s ease of doing business agenda and successfully led, at the ministerial level, the negotiation of the African Continental Free Trade Area (AfCFTA) agreement, which President Buhari recently, if belatedly, signed. Of course, no one is indispensable, and the development and implementation of any government policy should not depend solely on one individual. Yet, any president interested in technocratic competence, rather than just politics, would reappoint Enelamah to continue to drive forward the reform agenda. But, apparently, Enelamah was one of the first-term ministers that Buhari didn’t “personally know”. And such “unknown persons” have no place in his secondterm administration. But who are those Buhari “personally knows” who made it into his second-term cabinet? Well, as noted above, out of the 36 first-term ministers, 14, all of them politicians, will return to the government. Among the returning ministers are former governors Babatunde Fashola, Rotimi Amaechi, Chris Ngige and Ogbonnaya Onu. These politicians held some of the most important portfolios, such as power, housing, transport, employment and science and technology, but, apart from “making a lot of noise”, which is what Buhari thinks ministers do, they failed woefully to make any significant impact. Where meritocracy counts, they won’t return to government. But politics matters more. So, they are returning! The second category of those personally known to Buhari who will be in his second-term government are his old political disciples. In 2015, when President Buhari was criticised for the lop-sidedness of his appointments, his response was that those he appointed had been with him “through trying times”, adding: “What then is the reward of such dedication and suffering?” Those who had been with Buhari “through trying times” included those who supported his presidential

ambitions under his old party, Congress for Change, CPC, and those who were actively part of his successful 2015 presidential election campaign under his new party, the All Progressives Congress, APC. For many years, Buhari’s wife, Aisha, had complained that these people were not rewarded. But, now, the president has brought most of them, such as Olurunimbe Mamora, Mahmoud Abubakar and Sharon Ikeazor, into his cabinet. They are those he personally knows! Another category of those Buhari personally knows who he is bringing into his second-term administration consists of people who played critical roles in his re-election earlier this year. Some of those prominent campaign hacks are Festus Keyamo, SAN, a Buharist, who was the director of strategic communications for Buhari’s re-election campaign, and Gbemisola Saraki, sister of former Senate President Bukola Saraki, Buhari’s bugbear, who played a pivotal role in securing Kwara State for Buhari’s re-election. They both made the ministerial list. Prominent politicians, such as former governors Godswill Akpabio, Timipre Sylva and George Akume, who played key roles in garnering support for Buhari’s re-election in the South-South and the Middle-Belt are also rewarded with ministerial appointments. Of course, it is impossible to talk about Buhari’s 2015 and 2019 election victories without mentioning the APC national leader, Bola Tinubu, former governor of Lagos State. Well, he too got those personally known to him and, by extension, to Buhari into the cabinet. They include Tinubu’s former chief of staff, Sunday Dare, and former governor of Osun State, Rauf Aregbesola. Former governor Adeniyi Adebayo of Ekiti State also made the list, as did several former senators. So, Buhari has decided to form his second-term cabinet completely in his image. It’s a bloated government of 43 ministers, all of them career politicians, but just 7 women! But what is wrong with a wholly political cabinet? Well, two things. First, it is absolutely wrong to have a cabinet consisting only of career politicians, who see everything through the prism of poli-

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Those who had been with Buhari “through trying times” included those who supported his presidential ambitions under his old party, Congress for Change, CPC, and those who were actively part of his successful 2015 presidential election campaign under his new party, the All Progressives Congress, APC

tics and political calculations. Of course, in a democracy, given the constraints of intra-party politics, you can’t form a cabinet that excludes career politicians or that ignores those who helped you win an election. But a good cabinet must have a substantial representation of nonpolitician technocrats, those brought in purely because of their technical expertise and knowledge of the institutions and policies that work in delivering social and economic progress. Buhari’s new cabinet lacks such technocracy. The second problem with the political cabinet is that it will be made up of “yesmen” and “yes-women”. The toe-curling display of blind loyalty during the Senate screening session when the ministerial nominees were simply told to “just take a bow and go” or were asked some mickey-mouse questions was a clear pointer to how the new ministers would behave in Buhari’s cabinet; unquestioning, subservient and acquiescent. That’s why, after all, Buhari appointed those he personally knows. The “take-a-bowand-go cabinet”, as someone tweeted, is also likely to be a rubber-stamp cabinet. But, as the Financial Times puts it in an editorial, “Surrounding yourself with ministerial doormats and excluding those ready to make opposing arguments is not sound politics”. Truth is, ministers matter. They are not just “the messengers”, as one commentator recently said. They can or should be able to influence the message. Indeed, under Nigeria’s Constitution, the cabinet is the country’s highest policymaking body, responsible for “determining the general direction of domestic and foreign policies of the Government of the Federation”. Surely, you can’t have ministerial poodles for such an important policymaking role.

Note: the rest of this article continues in the online edition of Business Day @ https://businessday.ng Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

On the continuing security challenges

t’s been a decade since the Boko Haram crisis started. What started as a seemingly minor scuffle between a religious group and the police has slowly devolved into chaos. After the then sect leader was killed in police custody the terrorist group was born. Ten years and tens of thousands of deaths later, the group and its factions continue to cause havoc in parts of the north east. In response to the deteriorating situation back in 2014, the government’s response could be summarized as “working harder”. Indeed, the new APC regime did work harder, shrinking the territory controlled by the group and announcing the group as “technically defeated”. The technically defeated and splintered group still however manages to ambush soldiers and strike at soft targets. Admittedly the Boko Haram crisis has morphed into a complicated mess with no easy and obvious way out. At the core, however, is the realization by many that the Nigerian state does not seem to have the capacity to enforce law and order across its entire domain and does not seem to have state legitimacy in many places. Apparently there are parts of the north east were ISWAP, a Boko Haram faction, collects taxes and enforces the law against things like multiple taxation, in ways that people in Nigeria controlled Nigeria could only dream of.

Once you see the north east crisis from this state capacity lens then a lot of the other security challenges start to sound familiar. Admittedly without the terrorism label. Take the new kidnapping epidemic for instance. It has become common knowledge that there are large swathes of land in the country where the Nigerian state essentially is neither present or lacks the capacity to enforce anything. So, non-state actors, in this instance kidnappers, have taken control of some of these spaces and extract their tolls from innocent Nigerians. The story is the same for bandits in the north west, oil bunkerers in the south-south, and the like. The expansion into spaces uncontrolled by the Nigerian state is not limited to violent criminals though. In almost every sphere of economic life there are non-state actors who have set up shop and who extract tolls; emboldened by the effective absence of the Nigerian state. From the name-redacted transport people who extract tolls from farmers looking to get their produce to markets, to self-appointed landlords who extract tolls from builders, and the faceless associations who mandate everyone in a particular line of business to “register” or face the music. The non-state actors are everywhere. So, what is the way forward? Obviously the Nigerian state working harder is good but is www.businessday.ng

clearly insufficient. Official state resources are stretched to the limit with most governments barely collecting enough revenues to pay staff salaries not to mention expanding. The incentive to wrestle legitimacy, and subsequently revenue, from these non-state actors is mostly absent, and where present difficult. It is easy to understand how difficult it is to eradicate a terrorist group in the north-east, but does anyone really think it will be easier to wrestle legitimacy and revenue from a transport union that may actually be larger than some states in terms of revenue generated? Just as an example. The path forward probably has to include a redesign of the architecture of the Nigerian state itself. A couple of years ago words like “restructuring” and phrases like “national conference” were thrown around but there appears to be little stomach for serious reform across the political spectrum. Are we destined to hit rock bottom before we begin to face the music? As economists and policy analysts we tend to underplay the role of security, basic law and order, and state legitimacy in our policy discussions but they are the foundations upon which every economy is built. Regardless of what kind of monetary policy you implement, if there is no security and law and order, then the economy is going nowhere. Regardless of

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ECONOMIST

NONSO OBIKILI what kind of industrial policy you implement, if your manufacturers cannot move cargo from point A to point B without tolls being extracted by numerous non-state actors, and without being kidnapped, then the economy is going nowhere. “A house must be built on solid foundations if it is to last. The same principle applies to man (and woman), otherwise he (or she) too will sink back into the soft ground and becomes swallowed up by the world of illusion.” On this tenth anniversary of the insurgency in the north-east, perhaps it is time to think about what changes can be made to the architecture of the Nigerian state. To say that nothing in the current structure can be improved is untrue. Everything can be improved. Dr. Nonso Obikili is Chief Economist at Business Day.

@Businessdayng

Monday 05 August 2019

BUSINESS DAY

In Association With

Fowl behaviour

A IceBalkan and fire betrayal

Preparing for no deal is a paradoxical process

The Arctic is ablaze

And separating theatre from reality is tricky

Peat fires in the Arctic are the latest symptom of climate change

HE RULES of chicken are simple: two parties hurtle towards each other at speed and the first to move out of the way—the chicken—loses. After posing with feathered friends at a poultry farm in Wales, Boris Johnson, the new prime minister, made it clear that he would not be the first to swerve. Mr Johnson demands that the EU bin the Irish backstop (see article) agreed on as part of the deal reached with Theresa May, his predecessor. The EU has repeatedly ruled this out. If they can’t compromise, he squawked, “if they really can’t do it, then clearly we have to get ready for a no-deal exit.” The game may play itself out in many different ways (see chart) before October 31st, the date on which Mr Johnson is committed to leaving the EU. Crucial to winning the game is to appear determined not to chicken out. Brexiteers say that the EU never really believed Mrs May’s “no deal is better than a bad deal” line, which weakened Britain’s negotiating hand. Mr Johnson has gone all-out to show that he means it. Sajid Javid, the new chancellor, has pledged an extra £2bn ($2.5bn) for no-deal preparations, on top of the £4bn-odd that Philip Hammond, his predecessor, set aside. Some £100m will be spent on adverts warning the public and businesses to prepare for the worst. Michael Gove, who led the Vote Leave campaign with Mr Johnson in 2016, meets top officials daily to orchestrate “nodeal” preparations. Add the magic words “no deal” to any spending request and it will find its way to the chancellor’s desk almost immediately, says an aide. Yet when it comes to no-deal preparations, separating theatre from reality is tricky. Beneath the fresh bluster, in most departments preparations involve blowing the dust off old plans. Britain has been here before. In March and April, the last time a no-deal exit loomed, departments were running 24-hour response units. According to the Institute for Government (IFG), 16,000 civil servants were beavering away on Brexit plans. Some progress has been made since. Earlier this month the Bank of

England noted that “UK-based firms have made further preparations to be able to serve EU clients” in the event that Britain leaves without a deal. It does not expect lending to firms and households to seize up. An upgraded customs system, needed to handle the large number of customs declarations that will have to be made once tariffs are in place, was not ready for March or April, but will now be partly in place by October. A lot more still needs to be done. By dint of its EU membership Britain has around 40 free-trade deals with non-EU countries. The government has said that it wants to reach bilateral agreements with these countries, so that the agreements roll over even if Britain leaves the EU without a deal. So far it has managed to roll over less than half. Britain has made even less progress on other international agreements to which it is party through its EU membership, including on nuclear research and competition. Yet there is only so much the government can do. Most of the issues thrown up by a no-deal Brexit are inherently bilateral, requiring the EU to play nice, points out Anand Menon of UK in a Changing Europe, a think-tank. Britain may throw open the port at Dover, for instance, but it would be for naught if officials in Calais enforce checks. The Confederation of British Industry says that the EU’s preparations lag behind

Britain’s. And while the government will determine the route Britain takes out of the EU, it is businesses that will feel the effects, and that must take action to mitigate them. But “businesses do not want to,” says Sam Lowe, a researcher at the Centre for European Reform, another thinktank. “They want government to bear this cost.” Kicking business into action is harder than it looks. The first problem is Duke of York syndrome. Some firms put in place contingency measures the last time a no-deal exit loomed. Many felt that their money was wasted. “Marching them back up the hill again will be a challenge,” said Martin McTague, from the Federation of Small Businesses, a lobby group, especially when Mr Johnson himself said during his campaign to become prime minister that no-deal has a “million to one” chance of happening. “The million-to-one line will resonate more than a technical notice or a billboard from government saying ‘get ready’,” says Joe Owen of the IFG. Second, scaring business into action sits uneasily with Mr Johnson’s pathological optimism. A description of the threat of no-deal alarming enough to get business to prepare energetically would frighten the horses; too rosy an account of the future and people will not prepare. The markets, at least, are taking seriously the government’s appar-

ent determination to leave with or without a deal. In Mr Johnson’s first week as prime minister the pound fell by 3% on a trade-weighted basis. It is nearing $1.20 against the dollar, its lowest level since the referendum. The government hopes that talk of a big fiscal boost will counterbalance the gloom. It is said to be planning an autumn budget that would get the economy “going gangbusters” by exit day. Mr Johnson has floated various giveaways, including raising the thresholds at which people start to pay the higher rate of income tax and more money for the NHS and police. At the poultry farm he promised to compensate farmers who lose out from any no-deal disruption. Yet Britain will not be able to spend its away out of no-deal chaos. In such an event, annual borrowing would anyway rise by some £30bn (1.4% of GDP) as the economy slowed, official estimates suggest. A government which promised lots of extra spending and tax cuts on top of that would test the confidence of investors. And a no-deal Brexit is likely to be primarily a shock to the supply side of the economy. Fiscal stimulus aimed at supporting demand would do nothing to help bottlenecks at Dover or firms that were no longer legally allowed to sell into the EU market. Not all types of chicken come cheap.

HE EASTERN SIBERIAN landscape does not normally resemble hell. In winter it is blanketed in snow; in summer, its forests are lush and its wetlands soggy. This year, however, the region is on fire, as are large parts of the Arctic Circle. Nothing on this scale has been observed since high-resolution satellite records of fires in the globe’s far north began in 2003 (see chart). A study in 2013 suggests that even the amount of burning seen in boreal regions in recent decades was outside the norm for the past 10,000 years. Researchers call this year’s events “unprecedented”. The data this summer are “insane”, says Guillermo Rein, an expert in peat fires at Imperial College in London. The fires began in June, spurred by an extremely hot and dry early summer. It was the hottest June on record, globally, according to America’s National Oceanographic and Atmospheric Administration. Temperature

increases owing to global warming are not evenly distributed, and the Arctic is warming twice as fast as the rest of the planet. In the regions that are burning, temperatures peaked at 8-10°C warmer than the average from 1981 to 2010. This has dried out the landscape, producing tinder for natural forest fires that were probably ignited by lightning. So far, hundreds of above-ground fires have been recorded by satellites, covering hundreds of thousands of hectares in the Arctic and sub-Arctic, from Eastern Siberia to Alaska and Greenland. The European Copernicus Atmosphere Monitoring Service estimates that fires within the Arctic Circle haveproducedmorethan100mtonnes of carbon dioxide, or roughly what Belgium emits in a year. That is a lot. But burnt vegetation can regrow within a decade, and in doing so reabsorbs much of the released carbon dioxide. It is what is happening below Continues on page 19

Monday 05 August 2019

BUSINESS DAY

In Association With

Rainforests

The Arctic is ablaze...

Deathwatch for the Amazon

Continued from page 18

Brazil has the power to save Earth’s greatest forest—or destroy it

LTHOUGH ITS cradle is the sparsely wooded savannah, humankind has long looked to forests for food, fuel, timber and sublime inspiration. Still a livelihood for 1.5bn people, forests maintain local and regional ecosystems and, for the other 6.2bn, provide a—fragile and creaking—buffer against climate change. Now droughts, wildfires and other human-induced changes are compounding the damage from chainsaws. In the tropics, which contain half of the world’s forest biomass, treecover loss has accelerated by two-thirds since 2015; if it were a country, the shrinkage would make the tropical rainforest the world’s third-biggest carbondioxide emitter, after China and America. Nowhere are the stakes higher than in the Amazon basin— and not just because it contains 40% of Earth’s rainforests and harbours 10-15% of the world’s terrestrial species. South America’s natural wonder may be perilously close to the tipping-point beyond which its gradual transformation into something closer to steppe cannot be stopped or reversed, even if people lay down their axes. Brazil’s president, Jair Bolsonaro, is hastening the process—in the name, he claims, of development. The ecological collapse his policies may precipitate would be felt most acutely within his country’s borders, which encircle 80% of the basin—but would go far beyond them, too. It must be averted. Humans have been chipping away at the Amazon rainforest since they settled there well over ten millennia ago. Since the 1970s they have done so on an industrial scale. In the past 50 years Brazil has relinquished 17% of the forest’s original extent, more than the area of France, to road- and dam-building, logging, mining, soyabean farming and cattle ranching. After a seven-year government effort to slow the destruction, it picked up in 2013 because of weakened enforcement and an amnesty for past deforestation. Recession and political crisis further pared back the government’s ability to enforce the rules. Now Mr Bolsonaro has gleefully taken a buzz saw to them. Although congress

and the courts have blocked some of his efforts to strip parts of the Amazon of their protected status, he has made it clear that rule-breakers have nothing to fear, despite the fact that he was elected to restore law and order. Because 70-80% of logging in the Amazon is illegal, the destruction has soared to record levels. Since he took office in January, trees have been disappearing at a rate of over two Manhattans a week. The Amazon is unusual in that it recycles much of its own water. As the forest shrivels, less recycling takes place. At a certain threshold, that causes more of the forest to wither so that, over a matter of decades, the process feeds on itself. Climate change is bringing the threshold closer every year as the forest heats up. Mr Bolsonaro is pushing it towards the edge. Pessimists fear that the cycle of runaway degradation may kick in when another 3-8% of the forest vanishes—which, under Mr Bolsonaro, could happen soon. There are hints the pessimists may be correct (see Briefing). In the past 15 years the Amazon has suffered three severe droughts. Fires are on the rise. Brazil’s president dismisses such findings, as he does science more broadly. He accuses outsiders of hypocrisy—did rich countries not fell their own forests?—and, sometimes, of using environmental dogma as a pretext to keep Brazil poor. “The Amazon is ours,” the president thundered recently. What happens in the Brazilian Amazon, he thinks, is Brazil’s business.

Except it isn’t. A “dieback” would directly hurt the seven other countries with which Brazil shares the river basin. It would reduce the moisture channelled along the Andes as far south as Buenos Aires. If Brazil were damming a real river, not choking off an aerial one, downstream nations could consider it an act of war. As the vast Amazonian store of carbon burned and rotted, the world could heat up by as much as 0.1°C by 2100—not a lot, you may think, but the preferred target of the Paris climate agreement allows further warming of only 0.5°C or so. Mr Bolsonaro’s other arguments are also flawed. Yes, the rich world has razed its forests. Brazil should not copy its mistakes, but learn from them instead as, say, France has, by reforesting while it still can. Paranoia about Western scheming is just that. The knowledge economy values the genetic information sequestered in the forest more highly than land or dead trees. Even if it did not, deforestation is not a necessary price of development. Brazil’s output of soyabeans and beef rose between 2004 and 2012, when forest-clearing slowed by 80%. In fact, aside from the Amazon itself, Brazilian agriculture may be deforestation’s biggest victim. The drought of 2015 caused maize farmers in the central Brazilian state of Mato Grosso to lose a third of their harvest. For all these reasons, the world ought to make clear to Mr Bolsonaro that it will not tolerate his vandalism. Food

companies, pressed by consumers, should spurn soyabeans and beef produced on illegally logged Amazonian land, as they did in the mid-2000s. Brazil’s trading partners should make deals contingent on its good behaviour. The agreement reached in June by the EU and Mercosur, a South American trading bloc of which Brazil is the biggest member, already includes provisions to protect the rainforest. It is overwhelmingly in the parties’ interest to enforce them. So too for China, which is anxious about global warming and needs Brazilian agriculture to feed its livestock. Rich signatories of the Paris agreement, who pledged to pay developing ones to plant carbon-consuming trees, ought to do so. Deforestation accounts for 8% of global greenhouse-gas emissions but attracts only 3% of the aid earmarked for combating climate change. The wood and the trees If there is a green shoot in Mr Bolsonaro’s scorched-earth tactics towards the rainforest, it is that they have made the Amazon’s plight harder to ignore— and not just for outsiders. Brazil’s agriculture minister urged Mr Bolsonaro to stay in the Paris agreement. Unchecked deforestation could end up hurting Brazilian farmers if it leads to foreign boycotts of Brazilian farm goods. Ordinary Brazilians should press their president to reverse course. They have been blessed with a unique planetary patrimony, whose value is intrinsic and lifesustaining as much as it is commercial. Letting it perish would be a needless catastrophe.

ground that most worries ecologists and climate scientists. Many of the Siberian and Alaskan fires are burning carbon-dense peat soils, which would normally be waterlogged. Peat fires produce much more carbon dioxide and methane from the combustion of carbon that has been locked in the ground for hundreds or thousands of years. Burning soil therefore eliminates important carbon sinks that cannot be replaced on any useful timescale. This in turn sets in motion positive feedback loops which are not accounted for in the climate projections of the Intergovernmental Panel on Climate Change. Climate researchers do cite the possibility that global warming will thaw Arctic permafrost, releasing large amounts of stored greenhouse gases. But if fires in the region become more common, that could have even bigger consequences. The emissions from this year’s fires make it more likely that the conditions will be met for peat to ignite again in coming summers, producing ever more emissions, and so on. Under these conditions, “I am convinced that it will actually be wildfires that will release much faster and bigger amounts of carbon,” rather than melting permafrost, says Mr Rein. The fires also produce a fine black soot known as black carbon which, if dropped on the Arctic sea ice by favourable winds, will darken its surface, making it more likely to absorb sunlight and melt. This decreases the reflectivity of the region as a whole (blue water absorbs more solar energy than white ice) and further increases Arctic warming. The full scale of the Arctic fires’ impact will not be known for months. The satellite data being used to estimate emissions from the wildfires cannot capture fires that are smouldering below the ground, which could double or triple the impact, according to Mr Rein. Smog from the fires is blanketing much of Siberia, from Kazakhstan to the Bering Sea, with carbon monoxide and other nasties. On July 31st, after a petition to declare a state of emergency garnered more than 800,000 signatures, President Vladimir Putin ordered the army to help fight the fires. It is likely to be too little too late. Fighting fires that have grown to such colossal sizes in remote regions with few roads is difficult or impossible.

Monday 05 August 2019

BUSINESS DAY

In Association With

US-China trade

More American tariffs on Chinese imports are coming The trade war just got harder to end

RESIDENT DONALD TRUMP sounded remarkably positive about the latest round of USChina trade talks, which ended on July 31st. He called them “constructive” and said that the two countries’ shared future would be “a very bright one”. The previous day the White House had confirmed a Chinese commitment to buy more American agricultural products—one of the ways in which China had hoped to mollify Mr Trump, who resents China’s large bilateral trade surplus. But his soft words concealed a sting. From September 1st, he said, his administration would be applying tariffs of 10% on $300bn worth of Chinese imports, on top of the 25% tariff already in place on $250bn worth. That means tariffs will soon cover almost all trade in goods between China and America. The announcement seemed to come as a shock to many. The S&P 500 index of leading American shares dipped. Interest rates on American government debt fell, generally a sign of investors seeking a safe haven in expectation

of economic turbulence. But the Trump administration could argue that it had given plenty of warning. Mr Trump’s announcement simply made concrete an earlier, vaguer threat. Due process had been followed, including seven days of hearings in June on the proposed tariffs held by the United States Trade Representative (USTR). During those hearings the USTR heard plenty of protest at the prospect of further tariffs. Steve Lang, the president of the American Bridal and Prom Industry Association, a lobby group represent-

ing makers of wedding gowns and tuxedos, reported that his firm was already paying millions of dollars in tariffs. (America has hefty levies on imported clothing quite apart from China-specific measures.) The proposed new tariff would cost him at least $5m, he said. Since his bank had already said it would not lend him the money to pay, his company would have to declare bankruptcy. Such stories confirm that the new tariffs will hurt Americans, though it is not yet clear exactly how much, nor who will suffer most. Exporters might cut their prices to

absorb some of the tariffs themselves—though academic studies of earlier tariffs, in 2018, found no evidence of that happening. The most recent round came into force only in mid-June, so there has been too little time for them to filter through to prices. Some companies may have stockpiled goods to avoid the duties (at the cost of extra storage space and loans). But there is good reason to think that the new round will hurt more than earlier ones. Most of the imports from China previously affected were components, meaning that their higher prices affected only part of an item’s eventual cost. The next tranche will feature end-products, such as clothing and consumer electronics. Mr Trump has placed the blame squarely on the Chinese, whom he accused of renegotiating a deal they had already struck; of failing to keep promises to buy more American agricultural products; and of allowing fentanyl, a deadly drug, to reach America. But his own actions have also made a deal harder to reach. The Chinese have made it clear that to be acceptable, any agreement will have to reverse all

the tariffs already applied. And Mr Trump’s latest move is humiliating to China’s negotiating team, points out Bill Bishop, the author of Sinocism, a newsletter about China. Trust between the two sides was fraying before. Mr Trump has just shredded it further. Both sides now seem to be digging in for a prolonged conflict. China’s government is reportedly touring the provinces to examine the resilience of the economy. And in America the departments of defence and commerce, as well as the USTR, are warning companies about the risks their China operations might pose to national security. The latest escalation will strengthen the view that China is not the best base from which to serve the American market. And it is becoming ever clearer that America will insist that any deal must involve the threat of tariffs to force China to stick to its side. Executives should understand that, with or without a deal, tariff risks will continue. Mr Trump could lift all his tariffs tomorrow, if he wished. But their effects will not be erased so easily.

Martín’s manoeuvre

Martín Vizcarra tries to end his presidency early Peru’s president issues a startling call for fresh elections

ARTíN VIZCARRA , Peru’s mild-mannered president, knows how to spring a surprise. As he wound up his 94-minute Independence Day speech to congress on July 28th, he called on lawmakers to end their terms, and his, a year early by voting to hold a general election next April. Peru’s 32m citizens are crying out for “a new beginning”, the president declared. They should decide the country’s destiny “even if this means that all of us have to go”. Mr Vizcarra’s gambit is a sign of frustration. He became president 16 months ago, when his predecessor, Pedro Pablo Kuczynski, was forced out of office over allegations that he had helpedsecurepubliccontractsforOdebrecht, a Brazilian construction firm that has bribed officials and politicians across Latin America. Mr Vizcarra has spent most of that time trying to reform a political and judicial system so rotten that all living former presidents are under house arrest, in jail or trying to avoid that fate. Congress, whose largest party is the opposition Popular Force (FP), has tried to stop him. It has not succeeded entirely. Last year congress reluctantly passed four reforms of politics and the judiciary. Three of those were enacted after a referendum in December. They included barring sitting congressmen from being re-elected. In April this year Mr Vizcarra submitted another

12 political reforms. When congress resisted he selected six that he deems vital. His priority is to empower a committee chosen by the supreme court to decide whether a lawmaker charged with a crime would lose immunity from prosecution. Now, congress itself makes that decision. It has so far refused to enact Mr Vizcarra’s proposal and has modified other reform ideas. For example, it has delayed by ten years until 2031 the date for requiring parties to field equal numbers of male and female candidates. Until now, Mr Vizcarra has tried to deal with congressional intransigence by submitting his government to votes of confidence. These operate under peculiar rules in Peru. A first government defeat in a presidential term leads to the dissolution of the cabinet

and the appointment by the president of a new one. That happened in September 2017, when Mr Kuczynski was still president (and Mr Vizcarra was vice-president). A second would trigger not only the cabinet’s downfall but congressional elections, while leaving the president in office. Mr Vizcarra used the leverage this gives him in September last year. Congress voted its confidence in his government, then enacted the first set of reforms he sought. He tried the same tactic in June this year, with less effect. Congress backed the government but thwarted some reforms. Hence Mr Vizcarra’s call for new general elections. What will happen now is uncertain. Opposition lawmakers want to get rid of the president without leaving

office themselves. Tamar Arimborgo, an FP congresswoman, called him a “dictator” for advocating early elections. His foes could try to impeach him. The vice-president, Mercedes Aráoz, would then take his place. But the constitution makes it hard to take out the president in a surgical strike. If Mr Vizcarra resigns, and induces Ms Aráoz to follow, the president of congress would be obliged to call general elections. Mr Vizcarra could call for a third vote of confidence. This would put congress in a quandary. An endorsement of the government would clear the way for the early vote that Mr Vizcarra wants. A no-confidence vote would allow him to call for a new legislative election. In either case, the 130 lawmakers would be out. One way or another, Mr Vizcarra and the current congress may well be gone next year. Government ministers argue that the country cannot afford another two years of gridlock. The economy is adrift. GDP expanded by 1.5% in the first five months of 2019, compared with 4.9% in the same period a year ago, according to the central bank. Mr Vizcarra is right to say that Peru needs a functioning government. But it is not clear that fresh elections will provide one. More than 20 political parties are registered to put up presidential and congressional candidates. Many have been tarnished by the Odebrecht scandal. FP and APRA,

another leading opposition party, have no credible presidential candidates. FP’s founder and leader, Keiko Fujimori, has been in detention since October awaiting trial for accepting illegal contributions from Odebrecht in 2011, when she ran the first of two losing presidential campaigns. APRA’s long-time leader, Alan García, a former president, committed suicide in April this year as he faced arrest for taking bribes from the Brazilian firm.

Monday 05 August 2019

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

AGRICULTURE

Palm oil makers’ net income plunges to 3-yr low on revenue slide DAVID IBIDAPO & SEGUN ADAMS

alm oil producers benefitted from the blacklisting of some 42 items including palm oil by the Central Bank of Nigeria in 2015 when a dollar shortage fuelled local demand for the agro-product, but those gains are fizzling out. Profit of listed agro-businesses, Okomu oil and Presco, slid to a 3-year low in the first half of 2019 as sales slowed in the period. Okomu Oil posted a profit of N2.53 billion while Presco announced N3 billion. The depressing performance was on the heels of increased importation of crude palm oil (CPO) on the back of improved dollar liquidity while the joint effect of a porous border has dampens prospects for domestic producers. “I do not think there is any sort of near term catalyst more so that local demand is low and there’s still no improved controls over the borders,” Gbolahan Ologunro, analyst at CSL stockbrokers told BusinessDay. “If measure to address the porous borders are put in place, local demand would revert back to the local pro-

ducers,” Ologunro suggested. In H1 2019 the two oil palm makers recorded a significant drop in their profit with Presco slowing down by 24 percent while Okumu’s plunged 57 percent. This extended a downward trend in profit which started in 2018 as a glut in major producing countries saw imported CPOs flood the Nigerian market, hence reducing demand for local palm oil outputs. As a result, the pace at which sales grew has worsened since its 5-year high in 2017. Presco noted 71 percent and Okomu had 65 percent in H1 2017. Growth in sales has trended lower in the last two H1 periods to -9.1% and -9.52 for Presco and 3.72% and -33.8% for Okomu. High cost of production amid infrastructural gaps and logistics concerns translate to higher prices which make local produce uncompetitive and create a viable market for smugglers plugging supply deficit in the sector. A myriad of downturns has hindered Nigeria from gaining substantial share of the global oil palm industry which worth about $62 billion

annually, casting doubts on government’s ability to grow non-oil revenue. Nigeria’s oil palm sector industry’s contribution to global market share is a meagre 1.40 percent as of 2018, according to data from United State Department of Agriculture (USAD), against 45 percent

in 1960. If the country had maintained its 45 percent market share today, it would have been earning $27.9 billion only from palm oil. Analysts at Afrinvest Research Ltd, in their 2018 outlook for the oil palm industry, attributed the production

downturn that damped market share to traditional and crude production methods by smallholder famers that account for 80 percent of the industry supply. The report also identified other stumbling blocks to include the country’s focus on exploration and export of crude product, persistent low yields per hectare, and the impact of the civil war on oil palm producing communities. In addition, analysts are not optimistic of the impact of the recently signed AfCTA on the palm oil industry. Squeezing margins The gross margin which measures how much companies retains from revenue realised net of direct cost dwindled year-on-year in H1

for both oil palm makers. For Presco gross margin slowed to 79.8 percent from 80.6 percent while for Okomu oil the margin fell to 80.2 percent from 86.1 percent yearon-year in H1 2019. EBITDA margin, an assessment of a firm’s operating profitability as a percentage of its total revenue, plunged for both oil palm producers. While Okomu’s EBITDA margin fell to 43.4 percent in H1 from 59.2 percent last year, Presco’s margin fell to 52.1 percent from 59 percent over the review period. Net margin, the proportion of revenue that a company keeps as net profit Dipped to 28.6 percent from 34.2 percent for Presco and to 45.9 percent from 29.5 percent for Okomu oil.

CONGLOMERATE

UACN sustains H1 profitability on deleveraged balance sheet ... sees rebound in Animal Feeds segment Olam Feeds which intensified competition,” Selling and distribution expenses grew to 2.72bn yearon-year from 2.44 in H1 2018, however, administrative expenses dropped to N3.05bn from 3.21bn in H1 2018. Sadly, the topline performance from other heavyweight segments failed to impress- Revenue from the Paints segment tanked slightly by 1percent accounting for

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he second biggest conglomerate by market capitalization, UAC of Nigeria PlC (UACN) revenue increase 12percent to N41.6b buoyed by higher revenue from one of its revenue segment, Animal Feeds, which accounted for 56percent of the group revenue. Buoyed by an increase in revenue, and 3percent growth in operating expenses to N5.4bn amidst a 25percent decline in finance cost to N1.8bn, profit before tax increased 61percent year-onyear to N3.4bn in H1. Another major positive in UACN’ s results was the 25percent decline in finance cost to N1.8bn. The decline in finance cost alongside a 24percent increase in finance income helped forced the net finance cost downwards by 85% year-on-year to N164m in

H1 2019 compared to N1.1bn in H1 2018. The significant decline in finance cost was on the back of repayment of interestbearing loans and lower borrowing costs, UACN made repayments amounting to N7.2bn in H1 2019, bringing total debt to N17.0bn

compared to N24.2bn in FY 2018. The free cash flow of the Group stood at a positive N5.0 bn in H1 2019, compared to a negative N0.6 bn in H1 2018. The double-digit growth of 12percent in Revenue was driven mainly by growth in only one segment of its six ma-

13percent of revenue, revenue from packaged food segment was flat accounting for 13percent of revenue, real estate segment accounted for 4percent of revenue where revenue grew 26% year-onyear and 101percent quarteron-quarter UACN is a conglomerate with activities in animal feeds, paints, packaged foods, Quick Service Restaurants, Logistics and Real Estate.

jor segments, its Animal Feeds segment(+ 23% y/y). According to analysts the strong growth was buoyed by recovery of lost market share aided by price cuts implemented in Q4 2018. “UACN lost market share in 2018 following the aggressive penetration efforts of

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: David Ogar

Monday 05 August 2019

BUSINESS DAY

COMPANIES&MARKETS BANKING

Doing More with Less: Nigerian banks where employees are most productive OLUWASEGUN OLAKOYENIKAN

nvestors and financial analysts use a wide range of key ratios including margins, return on assets (ROA), return on equity (ROE), among others to examine the financial health of companies. However, profit per employee is an important metric often ignored during this examination. Profit per employee ratio is a productivity indicator that measures how well a company creates wealth by converting the talent in the organization into value, and this gives an insight into how efficient the company runs its business since employees form an integral part of the organization. Although some analysts use revenue per employee ratio, we adopt profit per employee ratio since the idea is to have an insight of the productivity of an average staff bearing in mind all costs the company spent to keep the employee relative to the profit accrued to the firm. Profit per employee is calculated as a company’s total profit divided by its current number of employees, and the ratio is best used to assess companies in the same industry. The higher the ratio, the better for the company as it translates to greater productivity and efficiency. BusinessDay compiled the number of employees and profit before tax of each commercial bank listed on the Nigerian Stock Exchange (NSE) using the lender’s 2018 audited financial results since the components needed for the evaluation are not entirely contained in recent quarterly results. It is noteworthy that out of 13 commercial banks actively

trading on the NSE, employee details are not contained in the results of two including First Bank of Nigeria Holdings Plc and Ecobank Transnational Incorporated Plc, while Access Bank’s figures reflect its performance before merging with defunct Diamond Bank. 1. Guaranty Trust Bank Plc. Nigeria’s biggest bank by market capitalization, Guaranty Trust Bank Plc, is not only big by market value but also utilizing its investment in human capital optimally for profit. GTBank led other lenders in the country with a profit per employee ratio of N63.52 million. This indicates the bank realized an average of N63.52 million from each of its employees last year. The bank generated a pretax profit of N216 billion in 2018, the second-biggest profit in the nation’s banking industry, with only 3,394 employees. This is the lowest number of employees among all the four tier-one banks considered. 2. Zenith Bank Plc. The second on the list is Zenith Bank Plc. The tier-one lender trailed with a profit per employee ratio of N37.05 million, this is despite emerging the most profitable bank in the country in 2018. Zenith Bank’s pre-tax profit stood at N231.69 billion last year, but when this is compared to its 6,253 employees, the company made an average profit of N37.05 million from each of its workforce. This shows the bank wisely utilized its human resources. 3. Access Bank Plc. Access Bank took the third position since figures from the bank’s financials before consolidation were used. For the 3,406 people that

worked with the tier-one bank in 2018, each of them was able to return on average N30.3 million to the bank as profit before tax, bringing the bank’s pre-tax profit to N103 billion for the period. 4. Stanbic IBTC Bank Plc.

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Stanbic IBTC Bank Plc was the first mid-tier bank to feature in this ranking having recorded a profit per employee ratio of N30 million. The bank had N88 billion as profit in 2018 when this figure is divided by the bank’s 2,933

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employees, each staff’s return would translate to N30 million per annum for the bank. 5. Fidelity Bank Plc. Nigeria’s mid-tier bank, Fidelity Bank Plc, despite its N25 billion profit before tax in 2018 made it among

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the five (5) banks with the most productive employees. The bank was able to do more with 2,908 workforce population, thereby achieving a profit per employee ratio of N8.6 million per annum.

Monday 05 August 2019

BUSINESS DAY

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Monday 05 August 2019

BUSINESS DAY

Monday 05 August 2019

BUSINESS DAY

BOLA ONADELE. KOKO

CEOINTERVIEW

MD/CEO, FMDQ Securities Exchange plc

Interview with Private Sector Leaders

‘We are aligning FMDQ’s mission with Nigeria’s economic agenda’

“The Managing Director/Chief Executive Officer of FMDQ Securities Exchange plc (FMDQ Exchange, formerly known as FMDQ OTC plc), Bola Onadele. Koko, in this interview, shares insights on how the Company has transitioned from an OTC market to a full-fledged Securities Exchange and now a budding financial market infrastructure (FMI) Group crucial to supporting economic development in Nigeria within 5 years of its operation.”

ongratulations on FMDQ Exchange’s new status as a full-fledged Securities Exchange. What necessitated this change and how will this impact the future of the business going forward? Thank you, Sir. It has indeed been a challenging yet rewarding five (5) years for FMDQ Securities Exchange PLC and the markets within its purview – fixed income, currency and derivatives markets. Permit me to begin with some basics about FMDQ in order to paint a picture of how we began and have evolved over the years – from an OTC Market, to a Securities Exchange, and then a budding but critically important FMI Group. Over the years, development of the Nigerian financial markets has not kept pace with international reforms and the growth rates in trade volume, product development, market sophistication and best practices, to name a few. It was towards providing a roadmap to address some of the identified challenges inhibiting the growth of the market and its alignment with its global counterparts that the concept of FMDQ was birthed by a progressive collaboration between the Financial Markets Dealers Association (FMDA), the Central Bank of Nigeria, Debt Management Office and the Securities and Exchange Commission (SEC), amongst others. FMDQ was established on the foundations of strong governance and shared values evident in its culture of excellence, integrity and a strong collaborative disposition to make the Nigerian financial markets “GOLD” – an acronym we have adopted, which summarises our mandate and stands for Global Competitiveness, Operational Excellence, Liquidity and Diversity. Let me state here that the change of FMDQ’s status has been a long time in the making. Commencing operations in November 2013 as an OTC market, we inherited the existing inter-bank market with a responsibility to organise and act as a frontline regulator of this market. We saw the immediate need to improve market transparency – a mandate which BusinessDay from inception till date has helped us actualise through the publication of the FMDQ Daily Quotations List, – governance, as a self-regulatory organisation, and credibility of the market and its participants, as a first step towards ridding the market of the opaqueness which had characterised its activities. For us, this was the tip of the iceberg as we soon received the SEC’s approval of the FMDQ Bond Listing and Quotation Rules, a commendable act by the SEC, preparing the Nigerian debt capital market (DCM) for revolutionary transformation, and providing the market with choice, leading to improved secondary market liquidity, transparency and price formation, amongst others. I must say at this point, we had begun to better appreciate the unique-

ness of the FMDQ model, and in no time, we were opening our doors to different African countries (including Kenya, Uganda, Ghana, Angola, Zambia, Liberia etc.) who sought to learn and understudy the FMDQ model for their respective markets. Indeed, FMDQ inspired the introduction of Ghana Fixed Income Market to the Ghana Stock Exchange and this has now run successfully for two (2) years, and the Kenya market is in the process of setting up a FMDQ-model in Nairobi. Furthermore, in charting our roadmap for rebuilding of the Nigerian financial markets, our value proposition was centered on increasing the depth, breadth and sophistication of the market through product innovation, market development and deployment of technology as the foundation for market development. Looking beyond the inherited inter-bank markets, FMDQ began to provide a full range of services, in addition to its securities admissions service, including memberships, market connectivity, data and information, market regulation, introducing its post-trade service in 2017, its first venture beyond the execution phase of the securities market, into clearing and settlement, after receiving the SEC’s registration for its wholly owned clearing and settlement subsidiary, FMDQ Clear Limited. This subsidiary was fully operationalised in 2018. You see, the world over, the line between OTC markets and securities exchanges had become so blurry that it was increasingly difficult to differentiate between the two, especially given the spate of global regulations around the previously unregulated OTC markets, following the post-2018 financial crises. Having gone through this interesting journey for over five (5) years, it was evident that the Company had gone above its mandate to organise the markets and had indeed begun to provide services across the full value chain of the securities market, from the money market to the capital market. This therefore informed our engagements with the SEC towards officially changing our status from an ‘OTC Market’ to a ‘full-fledged securities exchange’; for which the SEC approval was granted in March 2019. Following this, we also went ahead to change the Company name to FMDQ Securities Exchange PLC to fully reflect its newly attained status. In terms of impact for the future of the business, our strategic horizon for FMDQ in 2019 is the integration of our markets with external markets, with a focus on consolidating operations across the full value chain of the financial market, to operate a fully diversified and integrated FMI Group, offering execution, clearing and settlement opportunities to market stakeholders. FMDQ will also continue to pursue product innovation and market development in line with its mandate to transform the Nigerian financial markets, not relenting on our drive to deliver a deep www.businessday.ng

and functional derivatives market in the coming years. In support of this agenda, and to promote settlement finality in the market, thereby reducing uncertainty, FMDQ will also focus on positioning FMDQ Clear to operate a central counterparty clearing for fixed income, currency and derivatives products in the near future. Finally, FMDQ needs to align its operations with the country’s economic development agenda some of which are espoused by the Central Bank of Nigeria (CBN) e.g. we must position the plan to provide seamless integration of the fixed income and commodities markets to support the agricultural revolution in the country. We gathered you recently established FMDQ Depository, in addition to the already operationalised clearing and settlement subsidiary, FMDQ Clear Limited. Could you shed more light on what motivated this new subsidiary? Yes, you are right. FMDQ Depository

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Limited, a wholly owned central securities depository (CSD) subsidiary of FMDQ Exchange, was incorporated in December 2018, and registered by the SEC in June 2019, to provide collateral caching, custody and settlement services in the Nigerian financial markets. The activation of this FMDQ entity completes the value chain of pertinent market infrastructure in the Nigerian financial markets, particularly the post-trade spectrum, following the introduction and operationalisation of FMDQ Clear. Well organised financial markets with high quality infrastructure are strong buffers against financial crisis. With the right structure and market architecture, they tend to assuage the effects of systemic shocks. In knowledge of this and ahead of achieving our first lustrum, the Board and Management of FMDQ quickly realised the crucial importance of shaping and integrating the business vertically, to ensure value is cascaded through the securities market value chain. This inspired our aspirations towards providing end-to-end services – exchange, clearing and

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depository – providing a means for government, regulators, banks, corporates, foreign investors, etc. to effectively harness the potential and opportunities inherent in the Nigerian financial market. Specifically, FMDQ Depository will, inter alia, eliminate principal risks in our financial markets by linking collateral to funds, thereby effectively supporting delivery versus payment. The CSD is positioned to serve as an innovative depository of choice, with excellent operational capabilities tailored to providing value-adding services to its stakeholders. Having taken on all these responsibilities, how does FMDQ, as an FMI Group, plan to galvanise the Nigerian economy in addition to organising the financial markets? So, when the operations of FMDQ Exchange began, its mandate was essentially to perform the role of a market organiser and self-regulatory organisation in the markets within its purview, that is, the fixed income, currency and derivatives markets. However, we soon understood that beyond organising the markets, there was the bigger

task of facilitating sustainable economic development and prosperity for Nigeria and Nigerians; and so, it was resolved that FMDQ’s activities should have direct (and otherwise) impact on economic development. If I remember correctly, this was the strategic message Mr. Godwin Emefiele passed on to me when he assumed duty as the Governor of CBN. With the Exchange’s product and market development initiatives underway, leveraging on the strength of our varied stakeholders and alliances, the Exchange expanded its role in the financial markets ecosystem in alignment to the GOLD agenda, to include being a catalyst for infrastructure capital, an advocate and adviser to governments/ regulators and acting as a financial market diplomat, with the aim of positively positioning Nigeria in the global financial markets space. As a catalyst for infrastructure capital, we recognise the need to look inwards and, indeed, to the private sector, to achieve the audacious task of bridging Nigeria’s infrastructure deficit. By providing an avenue where private capital can be tapped from domestic and offshore participants used to finance such crucial needs, the DCM under FMDQ’s purview plays a central role. It is towards achieving this and ensuring that all market participants, buy- and sell-side alike are aligned to this objective, that FMDQ not only activated the Debt Capital Markets Development (DCMD) Project - a marketwide initiative championed by FMDQ and its stakeholders and aimed at addressing and implementing solutions to the issues hampering the development of the nation’s DCM and by extension, inhibiting it from contributing effectively to economic development - but also activated six (6) Sub-Committees chaired by market subjectmatter experts, including the Sustainable Finance, and Housing and Infrastructure Sub-Committees. From ease of accessing the market, to favourable regulatory reforms and product education/knowledge, these three (3) sub-committees, amongst others covered in the Project, create a unified and highly targeted avenue on the foundation of advocacy and regulatory engagements to unlock avenues for sustainable and infrastructure financing through the DCM. The Housing Sub-Committee is specifically focused on tackling the Nigerian housing sector challenges towards facilitating mortgages and improving home ownership in the medium- to long-term, and leveraging green finance opportunity to begin addressing some of the basic-needs (sustainable energy to power, recycling/waste management, clean transportation and other environmentally friendly projects) confronting the citizenry. In view of the ministerial appointments, the Project Office has prepared position papers on ideas and initiatives to steer the course of Nigerian housing challenges towards positive tides. We have a mission to collaborate with othwww.businessday.ng

ers to deliver prosperity to Nigerians. Away from our continually evolving initiatives in the DCM space, there is also the very important area, which is instrumental to building a future for our dear country, Nigeria and its people – the country’s greatest asset. From poor educational systems to a continued decline and eventual dearth of knowledge in key areas such as financial markets, we recognise this under-invested area and as such, launched the FMDQ Academy, a fully-sponsored market education initiative, positioned to drive market development and capacity building by rallying financial market stakeholders, including the regulators, market participants, media and the general public, in alignment with FMDQ’s product innovation and market development agenda. Still in this space, and with a view to bringing our future leaders on board, the FMDQ Next Generation Financial Market Empowerment Programme (FMDQ-Next) – an all year ongoing initiative providing tailored financial markets education to primary, secondary and tertiary students, as well as fresh graduates – was activated in 2018. This Programme has impacted over two hundred and fifteen (215) students and fresh graduates since its inception about a year ago, and attracted the former United Kingdom Prime Minister, Ms. Theresa May, who engaged the 2018 Summer Camp participants extensively during her visit to FMDQ’s Exchange Place. The 2019 Summer Camp which is currently ongoing has attracted over two hundred (200) participants, at both primary and secondary levels, and we look forward to developing more Programmes for the participants and positively impacting the lives of our future leaders.

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Interestingly also, the planned launch of derivatives products by the Exchange in the medium- to long-term will not only attract sustainable investments and investors but would invariably support the government’s agenda attracting foreign capital to fund infrastructure deficit in Nigeria, for instance. The derivatives market will be supported by our clearing and settlement subsidiaries, FMDQ Clear and FMDQ Depository, thereby further promoting a safe and credible marketplace, with a seamless integration of all processes from execution through clearing and settlement. We await President Muhammadu Buhari’s assent to the Companies and Allied Matters Act (CAMA) Amendment Bill. There are some key provisions in the Bill that will ignite significant employment and career opportunities in the financial markets. Furthermore, from relaying the challenges faced to proffering plausible solutions, the importance of continued dialogue – both between the private and public sector participants as well as the government – cannot be overemphasised. It is to this end that FMDQ will, once again, bring together domestic and international financial market participants, governments, regulators and subject-matter experts to its Capital Markets Conference on November 7, 2019, in Lagos, a proven strategic way to foster two-way communication, towards improving the lives and businesses of the Nigerian people and beyond. The FMDQ Conference will be followed by its GOLD Awards – a platform through which market participants and stakeholders whose activities have positively impacted and have directly contributed to

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Monday 05 August 2019

BUSINESS DAY

CEOINTERVIEW Interview with Private Sector Leaders

‘We are aligning FMDQ’s mission with Nigeria’s economic agenda’ <<< the success of the FMDQ markets and, indeed, development of the Nigerian economy, are recognised. I can go on and on about our initiatives and aspirations for the Nigerian financial market and economy. However, I will end by adding that FMDQ is committed to innovation and deploying initiatives that empower our economy and invariably, improve the lives of Nigerians. Through FMDQ’s franchise, our message of prosperity will continue to be disseminated to all; governments - federal and states, investors – domestic and foreign, institutions and individuals alike. Despite the economic downtime experienced, how have the FMDQ markets fared over the last few years? The first five (5) years of FMDQ, from 2013 to 2018, were reflective of the Exchange’s unwavering commitment to make the markets GOLD. Attaining its first lustrum in November 2018 and closing the year with a market turnover of N182.86 trillion (from N103.57 trillion in 2014), I dare say that FMDQ has significantly improved the standards of the Nigerian fixed income, currency and derivatives markets and has continued to institute requisite product innovation and market infrastructure to support sustained development and best practices in these markets. The market turnover at half year 2019 was circa N100.00 trillion. The debt market size is currently at the N32.38 trillion level and the FX and FX derivatives markets have also continued to stabilise, thanks to the efforts of the CBN for sustaining the FX hedging product, the Naira-settled OTC FX Futures for which FMDQ acts as the Futures Exchange. Similarly, the Investors and Exporters FX Window now in its third year has continued to show commendable resilience to stress over time with year-to-date value of trades at the window rising to circa $37.60 billion by the end of July 2019. Indeed, five (5) years down the line, the FMDQ markets have been marked by the actualisation of strategic and indeed, far-reaching initiatives towards improving market activities and these markets have steadily continued to develop and perform reasonably better than, perhaps, expected. To this, I must commend the efforts of all the FMDQ Members and market regulators, through whom we have collectively built and sustained the market that we see and appreciate today. FMDQ is effectively 6 years in operation. Within this short period of operation, the Exchange can be said to have become a systemically important organisation. Looking ahead, what is your outlook for FMDQ and its markets in the next 5 years? FMDQ Exchange’s achievements and per your recognition,

its identification as a systemically important organisation, have been realised mainly because of FMDQ’s champions, architects, regulatory visionaries, such as the Securities and Exchange Commission, Central Bank of Nigeria, Debt Management Office, and National Pension Commission, Financial Markets Dealers’ Association, FMDQ Members, our Media Partners, such as your good self, and other partners and stakeholders working tirelessly to promote the franchise. So, firstly, I’d say that we would continue to leverage on these relationships and engagements, staying resolute to our commitment to make the Nigerian financial markets GOLD by pursuing our strategic roles of being an adviser to financial services regulators and government, the Nigerian financial markets diplomat and very importantly, the catalyst for unlocking infrastructure capital in Nigeria. In consolidating the gains from previous years towards the next 5 years, the Exchange, in the medium- to long-term is looking to integrate the markets within its purview with external markets, fostering an alignment of our standards with international best practices as a crucial step towards becoming globally competitive. Already, this integration has begun with notable activities in the area including the co-branding of the Nigerian Sovereign Bond Index with the world’s leading index provider, S&P Dow Jones Indices. The first co-branded index is the S&P/FMDQ Nigeria Sovereign Bond Index and a host of others are expected to follow. There is also the strategic partnership between

FMDQ and Thomson Reuters (now Refinitiv) towards providing the much-need capacity building and technical advancement for the Nigerian financial market. Furthermore, in partnership with Climate Bond Initiative, UK (CBI) and FSD Africa - a UK-Aid initiative - the Nigerian Green Bond Market Development Programme, a 3-year Programme to educate stakeholders on and promote the issuance of green debt securities targeted at environmental-friendly projects and investments in Nigeria, was launched, and will generate awareness and drive the required engagements to integrate the principles of green financing into the Nigerian DCM. To continue to fulfil its mission of empowering the Nigerian financial markets to be innovative and credible, in support of the Nigerian economy, as well as meet the expectations of its stakeholders, the Exchange, will not rest on its laurels, and will continue to strengthen existing and seek new strategic alliances to support its market innovation drive as well as improve its knowledge of global best practices. Furthermore, in line with FMDQ’s market integration agenda, 2019 and beyond will see the full operationalisation of the recently deployed FMDQ Dealing Member (Specialist) [DMS] market to reduce fragmentation and further consolidate the markets, as well as foster retail participation in the fixed income markets. FMDQ will also work assiduously to implement its Derivatives Market Implementation Roadmap towards developing the derivatives market. Given the urgent need to ac-

tivate hedging products for the benefit of both domestic and international market participants, the Exchange will ramp up all efforts to ensure market readiness towards launching derivative market products Also, we expect to activate new products such as repurchase agreement (Repo) with collateral management service, alongside other product innovation and initiatives arising from time to time in the course of meeting the needs of the markets. In addition to this, and critical to the well-functioning of the derivatives market, the operational capabilities of FMDQ Clear will be further developed in anticipation of its gradual positioning to offer central counterparty services, and the CSD subsidiary, FMDQ Depository, shall be fully operationalised to provide first-class services in the financial markets. Finally, our agenda to operate a fully diversified and integrated financial market infrastructure group, offering execution, clearing and settlement opportunities in a most efficient way to the market stakeholders, will invariably guide the direction of the business franchise in expanding its frontiers to other markets over the course of the next lustrum. As a full-fledged securities exchange, will FMDQ Exchange now play in the equities and commodities markets space? Every time I am asked this question, my response typically is same. The development of the Nigerian financial markets is the collective responsibility of all financial market participants, including FMDQ and its entities. Beyond providing a robust platform for execution, clearing and settlement, as a securities

exchange, our overarching aspiration remains to fully diversify and vertically integrate our markets, offering the full spectrum of products tradeable on an exchange, as well as the associated infrastructure towards ensuring capital access, investment opportunities, value transfer and undoubtedly, efficient risk management. The Exchange will, therefore, undertake and pursue interests required to harmonise and achieve its objectives of making the Nigerian financial market GOLD. We shall continue to engage our stakeholders and regulators and in so doing, proactively relay solutions to their market needs, whether within our immediate reach or otherwise. We are in business to anticipate the needs of the market participants and commence solving these even before they materialise, so we would engage in activities required of us as an entity to facilitate ease of investment flows as well as capital raising through our markets. We will get involved with any initiative that will promote the global competitiveness of the Nigerian financial markets, offer products and services that will de-risk the markets and bring prosperity to Nigeria, Nigerian corporates, investors in Nigeria and Nigerians. The last time BusinessDay caught up with you, you left a message for the President. Following President Buhari’s re-election, what in your opinion should he priortise over the course of the next 4 years? For Nigeria to rise above its challenges and break through the shackles, all hands must be on deck. You, me, everybody must play a role. For me, in addition to security, focus for the President is pretty straight forward. The 5-point Big Bang Prosperity Agenda for Nigerians remain: A. Make the State governments economically viable by allowing them to control their natural assets B. Galvanise an urgent private sector-led economic revolution on the back of market-friendly legal and regulatory frameworks. We need Jobs! Jobs!! Jobs!!! C. Champion the programme for massive private and public investments in education. This is the future of Nigeria D. Drive high healthcare standards galvanised through insurance and pensions E. Signal private sector investments in infrastructure and housing supply and drive demand with single-digit mortgages Whilst FMDQ Exchange has taken on the role of a financial market diplomat, showcasing the potential of Nigeria and the opportunities inherent in its financial market to the international community, the government must reciprocate these efforts by setting out key reforms and policy initiatives to support positive transition of the nation’s economy.

Thursday 01 August 2019

BUSINESS

Monday 05 August 2019

COMPANIES&MARKETS

BUSINESS DAY

Business Event

COMPANY RELEASE

Polaris Bank CEO, Abiru charge new employees on opportunities of digital Age …graduates trainees from Polaris Bank Business School

okunbo Abiru, Polaris Bank CEO, has charged the bank’s newly hired employees on the need to be professional in the discharge of their responsibilities as a key ingredient for a successful banking career. Abiru gave this charge while speaking at the graduation ceremony of Polaris Graduate Intensive Training (PGIT), in Lagos at the weekend. Addressing the new staff who were enrolled through the bank’s popular graduate trainee program called, Polaris Graduate Intensive Training (PGIT), the Polaris Bank CEO, advised that upholding professionalism in their respective assignments is the sure route to contributing to national and macro-economic development through their banking career. “You have been trained to be professionals and leaders, who will make the difference in whatever area of the bank you are deployed to. You are undergoing today’s graduation not because we sought to do you a favour, but because

you emerged successful from amongst thousands of Nigerians that sat for the same examination”. Continuing, Abiru noted that “The bank places a high premium on staff training and manpower development as a way of building an informed and competent work force to enable the employees excel in their assigned tasks. The Polaris Bank boss advised the new management trainees to be nimble and innovative, saying, “Giving the knowledge and experience of the resource persons that you interacted with during this last few weeks, I’m assured that you have acquired positive learnings and memories that would create the foundation of the career that you are about to start.” Abiru added that: “The future of work is changing because we live in a fast-paced era, the bank of the future is therefore, one that harmonizes the strength of its traditional background and combines it with the customer-centric model of the new players; it is one that shifts its focus from trading and wholesale bank-

ing to retail banking as this has proven to reduce costs. Retail customers expect to be able to move seamlessly across digital channels such as online and mobile banking” He finally summed up by charging the new employees to remain committed, self-driven and focused on the the future. “ Earlier, Polaris Bank’s Head of Human Capital Management, Mr. Taiwo Olupeka, said the 54 graduates were the first successful batch amongst the over 24,000 candidates who sat for the bank’s recruitment test. Olupeka described them as the ‘best of the best’ that emerged after a very rigorous exercise. He charged them to do their best to make the bank the first and leading commercial and retail bank in the country. Speaking after she received her prize of excellence as the overall best graduating student of the PGIT Stream from the CEO, Miss Titilayo Fawunmi said ”the experience was very educative and I was able to learn a whole lot of new things which has exposed me to what banking industry is all about”

L-R: Amarachi Iheanacho, president, University of Jos Chapter of Junior Chambers International (JCI); Grey Gozem Ejikeme, deputy vice chancellor administration, University of Jos; Adetola Juyitan, national president, JCI Nigeria, and Elizabeth Bassey, Collegiate chairman, JCI Nigeria, at the courtesy visit by JCI to the management of University of Jos

L-R: Oby Ezekwesili, senior economic adviser, Africa Economic Development Policy Initiative; Praise Fowowe, premier creator and trainer, Family Systems Engineering; Audrey Joe-Ezigbo, executive director, Falcon Corporation Limited, and Esther Akinnukawe, chief human resources officer, MTN Nigeria, at the 2019 Power Summit of the Queen of the Rosary College Onitsha, Alumni Association, Lagos Chapter, in Lagos where Akinnukawe spoke about Building a Strong Family Base Towards National Development.

COMPANY RELEASE

UBA market place 2019 puts Abuja on lockdown with SMEs … Wizkid Becomes UBA Ambassador

he over 20,000 guests who attended the UBAmarketplace 2019 were left in awe and full of commendation for United Bank for Africa and REDTV as they were treated to a great line up of activities during the two-day event which was held on the July 26th and 27th at the Transcorp Hilton hotel in Abuja. The UBAmarketplace event which took place on the sidelines of the 2019 edition of the Tony Elumelu Entrepreneurship Forum the largest gathering of the entrepreneurship ecosystem in Africa, provided the attendees and participants with a huge platform to get everything in one place. Guests and participants were able to network, while being engaged with a series of entertainment, panel sessions, fashion, fun, comedy, relaxation and shopping. At the event, they also had the unique opportunity to meet with some of their favourite stars and celebrities. The major highlight at the marketplace was the unveiling of Africa’s international

Afropop artist, Ayo Ibrahim Balogun aka Wizkid as the new brand ambassador for UBA. Just before the big announcement, Uzoka and Wizkid had sat in a fireside chat themed “Suits and Stars, Afropop meets High Finance” where they discussed issues regarding finance and the creative industry in Africa. Continuing, Uzoka said, “And so today, we are unveiling Wizkid as our brand ambassador to show our unrelenting support for SMEs and to further create a platform for them to thrive. This is a strong collaboration that will help us as an institution to propel our dream of making Africa a truly self-sufficient economy,” Uzoka noted. In his response, Wizkid, who sought for increased support of financial institutions for the African entertainment industry, expressed his profound excitement with the partnership, adding that the UBA brand shares his passion to make every child and youth in Africa have the opportunity to thrive. He said, “It is my passion www.businessday.ng

and my biggest dream to help the youth and to build schools around Africa, and this partnership, I believe, is a step towards that direction; UBA and Wizkid, now let’s change the world.” In a separate panel, Richard Mofe Damijo, the top Nollywood icon, Movie producer/director, Tunde Kelani , Cynthia Nassardine, a top actress from Cote D’ivoire, Ayoola Ayolola sat with the CEO UBA Africa, Victor Osadolor in a movie panel session to discuss the theme ‘The Big Picture: Business of film making’. The movie session which was moderated by Bola Atta, UBA’s Group Head, Corporate Communication and Executive producer for the Bank’s REDTV, deliberated on how entrepreneurs from the creative and film making industry in Africa can benefit from the opportunities in the world of finance. Music was not left out as Dj Cuppy, Dj Neptune, Pheelz the Producer and UBA’s Chief Credit Officer, Franklin Erebor discussed on the theme ‘Booth to Bank: How the beat becomes the profit’.

L-R: Lanre Fadayomi, chief operating officer, Nuture Technology; Uchenna Okezie, MD, Nuture Technology; Omololu Somuyiwa, brand ambassador, Moneybag; Amechukwu Okezie, chairman, Nuture Technology, at the MONEYBAG.NG- Media launch in Lagos

L-R: Cosmas M. Maduka, founder/CEO, BMW Group, Coscharis Motors Limited; Nnenna Obiejesi, CEO, Nestoil Group, Nigeria; Kunle Elebute, senior partner, KPMG Nigeria/chairman, KPMG Africa; Yinka Sanni, CEO, Stanbic IBTC Bank; Tokunbo Fagbemi, MD/CEO, Nigerian Aviation Handling Company Limited (NAHCO), and Dada Thomas, MD, Frontier Oil Limited presenting the 2019 KPMG CEO Outlook Report, at the KPMG CEO Roundtable in Lagos, recently

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Monday 05 August 2019

BUSINESS DAY

BUSINESSINTELLIGENCE

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The Nigerian Code of Corporate Governance 2018 Principle 14: Board Evaluation BISI ADEYEMI.

“A

nnual Board evaluation assesses how each Director, the Committees of the Board and the Board are committed to their roles, work together and continue to contribute effectively to the achievement of the Company’s objectives.” Principle 14, Nigerian Code of Corporate Governance, 2018 (NCCG). An effective Board of Directors is a critical factor in ensuring a wellgoverned, well-directed and successful organization. In line with the principles of good Corporate Governance, the NCCG requires that a Board should regularly assess its performance to ensure that it is fulfilling purpose. The Code recommends that the Board performance Evaluation process be externally facilitated by an independent external consultant at least once in three years. The evaluation system should include the criteria and key performance indicators and targets for the Board,

its committees, the Chairman and each individual Board member. The results of the evaluation should be taken into account in determining Director re-election and in developing Director Development Programmes. An effective assessment of the performance of the Board provides an opportunity for Boards and individual Directors to monitor progress and renew their commitment to performing their oversight responsibilities. If done badly, it can very well turn into a “mechanical exercise that tests the board’s patience and adds little or no value” - Beverly A. Behan. The focus of the Board assessment should be to identify areas of improvement in Board performance and how the Board can improve its effectiveness rather than giving the Board a Report Card. Assessing performance is a first step in achieving Board effectiveness, however it will achieve the intended purpose only if the Board is prepared to spend substantial time participating in the process, reviewing the findings, addressing the issues raised that impact on its performance and paying heed to recommendations made. Three main methodologies are employed when conducting a Board assessment – viz - Review

and Analysis of relevant Board related documentation (mainly minutes of Board and Committee meetings, charters, policies, disclosures, etc.); Questionnaires and Structured Interviews. The review of Board and Committee minutes seeks to get a sense of how the Board goes about taking decisions and following up on the implementation of such decisions. It also gives a sense of what matters the Board concerns itself with – strategy monitoring as opposed to micromanagement. Policies around risk management, internal controls, ethical conduct, etc are reviewed to determine how the Board performs its oversight of those matters within its purview. Questionnaires or online surveys are administered which seek to rate the performance of the Board in seven key areas - Board Structure and Composition - What is the process of appointing Directors? Is there a transparent and fair process? Diversity? Strategy and Planning - How involved is the Board with strategy setting and monitoring? Is there a Succession Plan in place? Board Operations and Effectiveness - Do Directors receive Board papers in good time to engender effective participation and decision making? Are Board Committees superfluous or really effec-

tive? Do Directors receive adequate and relevant training? Is there an Induction Programme for new Directors? Measuring and Monitoring of Performance - How and to what extent does the Board monitor Management Performance? Any KPIs?; Risk Management and Compliance - How effective is Board oversight of Risk Management; compliance and internal control?; Corporate Citizenship - Sustainability issues, ethical conduct ; and Transparency and Disclosure - How does the Board deal with conflicts of interest and related party transactions? etc. Peer Review surveys are administered to assess Director performance over the period covered by the evaluation. An assessment of the Chairman’s leadership by the other Directors is also undertaken. Director responses are collated and assist in determining areas of concern to Directors. To be useful, responses must be frank and provide qualitative feedback. One-on-one Director interviews are conducted following the completion of surveys. Directors have the opportunity to raise areas of concern not covered by the questionnaire and the interviews allow for probes and follow-ups. Interview sessions also provide an opportunity for individual directors to give candid feedback particularly with respect to the Chair and CEO. Directors are invariably more candid when talking to third parties and more apt to bring up unpleasant but unspoken issues. A report is then generated indicating the key findings and recommendations. The most critical aspect of the performance appraisal

exercise is an engaged discussion of the assessment results by the full Board that leads to a prioritization of key issues and an action plan to addresses them. The plan should then be reviewed periodically to monitor progress. Also critical, is the feedback the appraiser provides to the Chair and the CEO or indeed to any other Director that needs to be given some feedback. The clarity and timeliness of the feedback given in the spirit of achieving improvement is invaluable. The ultimate objective of a Board Performance Evaluation is to assist the Board to achieve optimal effectiveness in its oversight of Management. Sadly, only a small percentage of Boards fully engage with the process. More often than not, Directors consider the appraisal process a chore that must be undertaken to fulfil compliance requirements. However, increasingly, Directors are beginning to appreciate the utility of the exercise. If properly done, a Board performance appraisal has the potential to be transformational. Taking a snapshot with a comprehensive assessment allows the Board to see clearly its strength and areas requiring improvement. Investing the necessary time and effort for continuous improvement is the hallmark of an effective Board. • Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. For more articles, kindly download the DCSL Knowledge Hub via this link https://www.dcsl.com.ng/index/ pages/page/dkhub

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Monday 05 August 2019

BUSINESS DAY

insurance today

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E-mail: insurancetoday@businessdayonline.com

Insurance recapitalisation faces new twist as industry awaits helmsman BALA AUGIE

he direction and guidelines that follow the new minimum capital requirement set for insurance companies in the country may take a new twist in the coming days. The expected changes may follow the retirement of Mohammed Kari, the commissioner for Insurance whose tenure as NAICOM boss expired July 30, 2019 and was yet to be renewed for a second tenure after first four years. He has however handed over to Sunday Thomas, the deputy commissioner for Insurance, Technical in NAICOM who is currently acting as the commissioner/ CEO of the commission. Sources in the industry though were yet to confirm who the next commissioner for insurance will be, but there are feelers that the new helmsman will thinker with the guideline to suite his own ideology. Two weeks ago, NAICOM under Mohammed Kari leadership had cleared some ambiguities around the recapitalisation and gave insurers and reinsurers on or before Tuesday, August 20, 2019 to submit their recapitalisation plans. NAICOM issued the directive in a circular numbered, NAICOM/DPR/CIR/25 02/2019, dated July 23, 2019 entitled: Re: Minimum Paid Up Share Capital Policy for Insurance and Reinsurance Companies, signed by Pius Agboola, director, Policy & Regulation Directorate, NAICOM, and sent to all insurance companies, that in furtherance to the circular dated May 20, 2019. NAICOM stated that the recapitalisation plan should include among others; capi-

L-R: Segun Olalandu, head, Strategic Marketing & Communications; Olusanjo Shodimu, head, Shared Services; Babatunde Fajemirokun, executive director/COO; Adewale Kadri, executive director, Technical and Head, Corporate & Institutional Business, and Oladeji Oluwatola - chief Financial officer all of AIICO Insurance Plc during a press briefing to announce the Company’s half year result in Lagos

tal status of the companies as at the last audited financial statements; board resolution on how to comply with the directives; detailed action plan on how the funds for the recapitalisation are to be sourced with timeline and deliverables; While companies intending to seek funds from the capital market are required to submit their plan of action, and companies that intend to merge or acquire another should submit their proposal after which they must comply with Section 30 and 31 of the Insurance Act 2003. The commission had also noted that after the submission is made, it shall review and provide response on the submitted plans on or before September 17, 2019, adding that the review may require meeting the board and management of each of the insurance companies on its recapitalisation plan. The insurance industry regulator said it is engaging

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other regulatory bodies for possible palliatives in additional to those it is has considered. It also maintained that in furtherance to the circular dated May 20, 2019, the minimum paid up share capital shall be through any or a combination of the following; existing paid up share capital; cash payment for new shares issued; retained earnings capitalisation of un distributed profit; payment in kind (other than by way of cash) for new shares issues such as properties; treasury bills; shares; bond which must be converted to cash not later than three months to the deadline for recapitalisation and share premium. NAICOM added that the items listed above can be achieved through merger and acquisition. NAICOM said cash payment for new shares issued shall be deposited in the escrow account with the Central Bank of Nigeria (CBN),

adding that deposited funds shall be released not later than 30 days after confirmation and issuance of a new licence. The commission posited that the shareholders’ fund as at the last date of recapitalisation for existing insurance/ reinsurance companies shall not be less than the required minimum paid-up share capital. It said payment of statutory deposit shall be in accordance with the Insurance Act 2003 and shall be made not later than 30 days to the deadline for the recapitalisation, stressing that all mergers and acquisitions shall be concluded not later than 60 days to the deadline for the recapitalisation. Under the new recapitalisation, life insurance companies’ capital was raised from N2 billion to N8 billion, general companies from N3 billion to N10 billion, and composite insurance companies from N5 billion to N18 billion.

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CIIN celebrates six decades of manpower development in Nigeria

he Chartered Insurance Institute of Nigeria (CIIN), Nigeria’s premier professional Institution is set to commemorate its 60th anniversary with a schedule of activities lined up to acknowledge the Institute’s contribution to the development of manpower in the country in the past 60 years. Speaking to journalists at a media parley held to herald the celebration, Eddie Efekoha, president of the Institute stated that the anniversary celebration, provides all stakeholders of the Institute and the insurance industry, an opportunity to reflect on the history of the Institute and equally embrace the Institute’s relevance in the insurance sector and the Nigerian economy. He lauded the Institute’s commitment to its duty as the rallying point for insurance professionals in Nigeria while acknowledging the role of the founding fathers of the Institute. He said “it is clear to

see that the Institute has come a long way from its early days where it was a tenant at St. Peters House in Marina. This can be traced to the vision and efforts of Past presidents before me and the commitment of all Insurance stakeholders. I continue to remain grateful to them for the work they have done and it is important that we build on their efforts for the growth to be continuous. Now, we are saddled with the task of setting new standards and identifying new international benchmarks in our task of propagating insurance and ensuring the Institute remains relevant to industry stakeholders nationally and internationally”. Richard Borokini, directorgeneral, reiterated the president’s comments by stating that the Institute’s commitment to manpower development had not wavered over the years. In his words “We are consistently looking to expand the scope and quality of service through innovation in order to deliver real and added value to members of the Institute.

AXA Mansard on health benefits of breast feeding for ‘Mum and Baby’

hoosing to breast feed a newborn is one of the biggest decisions parents will have to make. With a myriad of alternative feeding options – both affordable and premium priced– parents are spoiled for choice. However, health care professionals argue that exclusive breastfeeding is best for a child’s first six months of life. Ideally this would be standard practice by new nursing mothers, but it might not always be the case. For health or other personal reasons, some women may be unable to breastfeed their new infants. Many of which have to turn to feeding formulas. In order to appreciate the stance of most healthcare professionals on this issue, it is important to understand the qualities of breast milk. Firstly, it’s a free source of most nutri-

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tional elements needed by the infant. Elements such as fats, proteins, carbohydrates, probiotics, white blood cells and water are all components of breast milk. Apart from its rich constitution, it is also easy to digest – a particularly desirable quality that prevents more colic in babies than infant formulas. Mothers who are able to breastfeed enjoy a few more benefits than their peers who do not. The benefits for both participants involved are listed below. Benefits for baby, breastfeeding decreases the risk of sudden infant death syndrome in the first year of life. It’s also been associated in the prevention of infants developing asthma, eczema and food allergies; breastfeeding increases resistance to infections, thus reducing the frequency of hospital visits.

Monday 05 August 2019

BUSINESS DAY

insurance today

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E-mail: insurancetoday@businessdayonline.com

New minimum capital brings Nigeria above some global peers BALA AUGIE

he Nigerian Insurance industry will be in a solid shape as the new capital base for composite insurers surpasses the minimum capital of insurers some countries in Africa, Emerging market, and Frontier Market, according to a new report by Chapel Hill Denham Limited. The report noted that the new $50 million capital base for Nigerian operators, which is higher than $14 million currently held, is second to China’s $58 million, but eclipses Egypt, ($27 million); India, ($14 million); Ghana, ($12 million); Indonesia, ($11 million); Kenyan, ($10 million); Brazil, ($4 million); Turkey, and ($2.20 million). “We believe the materially enhanced underwriting capacity of Nigerian insurers’ positions these companies for present and emerging opportunities for premium income growth in the industry,” said Ronke Akinsola, equity research analyst with Chapel Hill Denham.

National Insurance Commission (NAICOM) has jerked up the capital bases of insurer so that they can take on more risk and accelerate contribution to the economy. The new capital requirement took effect on 20 May 2019 with existing insurance and reinsurance companies expected to fully comply by 30 June 2020. In a July 23 circular, the regulator mandated operators to submit their recapitalisation plan on or before 20 August 2019. The industry consolidation of 2007 resulted in the reduction of insurance companies to 49 from 103 and reinsurers to 2 from 5, but the industry lags other sub-Saharan Africa countries in penetration rate. Nigeria, Africa’s largest economy, has an industry premium of 900 million, this compares with India ($98 billion); Brazil, ($83.30 billion); South Africa, ($47.80 billion); and Indonesia ($24 billion). Insurers are mulling tapping the capital market to raise funds to meet regulator deadline while others have approached investors for capital. “My company is trying to re-

structure from within and we are tapping the capital market to raise funds,” said Ganiu Safiu, Actuarial Scientist at Cornerstone Insurance Plx “We have an investor that trying to bring in some money” Safiu said NAICOM will not allow firms that are unable to meet the set target to sink, and he sees the regulator take them over and sell them off. However, Oluseyi Olusi, Chief

Finance Controller of Wapic Insurance said the regulator could withdraw the operating licence of companies that fail to recapitalize. He adds that his company’s General Business is well capitalized, but the Life segment needs more money and that they have approached shareholders to raise funds. Foreign investors from Europe, America, and South Africa are directing their reserve funds into Ni-

gerian insurance market to take advantage of new capital regime and indigenous firms’ inability to tap the capital market for funds. The introduction of the risk base risk supervision model few years ago saw foreign insurers like AXA, Sanlam, AFIG Funds, and Allianz, among others; acquire stakes in insurance firms in Nigeria. Analysts at Chapel Hill say they see the recapitalization as a step to strengthening regulations in the insurance industry, but they added that ultimate demand for key products is key to industry growth. The investment house highlighted the regulations, technology investment, and infrastructure investment as possible drivers of insurance demand in Nigeria and they added that tight regulatory framework such as risk-based capital model can also encourage trust in insurance companies as the risk of liquidation is minimised.“We also think public education will be key in order to enlighten people on the benefits of owning insurance products, which should help break the cultural barriers to the demand for insurance in Nigeria,” said analysts at Chapel Hill Denham

KPMG prediction on mergers, acquisition plays out in local markets ...Nigeria, Ghana, Kenya key focus Modestus Anaesoronye

xpert’s prediction about increased activity along mergers and acquisitions in most emerging market, which they said will determine growth and strength for big ticket risks, is coming to fruition with new regulations across countries. Africa will be up on this with Nigeria, Ghana now in new recapitalisation demands from their insurance regulators, the National Insurance Commission of Nigeria, and the National Insurance Commission of Ghana. Though, KPMG report in 2014 was of the view that this will be driven by need for synergy and stronger capacity for big ticket risks, most firms across the market may have this as last options to remain in business. According to KPMG , though many companies will want to remain with brand identify, the need to for synergy and capacity to take up on big ticket risks remain key drivers. At the beginning of 2014, KPMG Internationals Deal Advisory practice published a short report titled, Ten Predictions for Growth: Trends shaping the future Insurance M&A landscape. The predictions focused primarily on the importance of high growth markets and the impact of technology, alternative buyers and

regulation. As KPMG professionals supported clients throughout the year, it became evident that many of the predictions were unfolding as expected, with some surprises along the way. A Year in Review: Drivers and trends that shaped Insurance M&A in 2014, published in December, provides a good overview of the deals and market conditions that influenced the landscape throughout the year. We do not expect to see a fundamental change in the nature or volume of deal activity in 2015, assuming there are no significant

macro-economic shocks, says the KPMG report, at that time. But they however, anticipate subtle changes in focus and geographic areas of interest, it said. According to the report, the world’s largest corporates are expected to show an increased appetite for M&A deals and will likely have more capacity to fund prospective transactions in the rest of 2015, and now beyond. The pace of change in developing economies brings diverse challenges and opportunities. As companies look to take advantage of opportunities, where the newly elected govern-

ment has eased the restrictions for investors, or in Africa, where countries such as Nigeria and Kenya are resizing their GDPs to show the true value of their markets, the doors are open for a variety of businesses to enter. For Insurance, there are a number of important ways that high growth markets are expected to influence the M&A environment. The African region, and in particular Sub Saharan Africa, is becoming increasingly important to the insurance community. While the markets are still relatively immature and unable to move the dial of a large corpo-

L-R: Doyin Salami,non-executive director, Prestige Assurance Plc: Gopalan Raghu, non-executive director:Balla Swamy,managing director; Muftau Oyegunle, acting chairman during the 49th Annual General Meeting of Prestige Assurance Plc, held in Lagos recently www.businessday.ng

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ration in the short-term, the longerterm prospects are significant. Emerging markets The potential for Africa is supported by positive demographic change. The population is expected to double in size by 2050, a developing middle class (forecast GDP per capita growth of 28.6 percent between 2013 and 2019) and the adoption of technology, particularly leveraging mobile technology to grow financial services, present many opportunities. Excluding South Africa, insurance penetration remains close to just 1 percent of GDP. We saw a number of global insurers, as well as insurance groups from South Africa, look to capitalize on this underlying opportunity and complete deals in 2014, and this trend to continue, and indeed, increase in 2015 and beyond. Regulation Regulation remains perhaps the most important driver, with a unique ability to quickly and fundamentally change the market landscape and, accordingly, potential for M&A. Relevant areas of regulation include changes in foreign ownership restrictions, capital reform and conduct regulation. The increase in FDI limit is expected to act as a catalyst, helping the industry re-discover growth after a challenging period, while encouraging an increased focus on innovation, international best practice and improving standards which in turn will drive better customer experience.

Monday 05 August 2019

BUSINESS DAY

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Monday 05 August 2019

BUSINESS DAY

Start-Up Digest

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Gideon and Mmachukwu: Providing solutions to Nigeria’s malnutrition problem Josephine Okojie

igeria’s problems are multibillion naira opportunities. It is no surprise that malnutrition and obesity have created a boom as innovators and entrepreneurs jump in to address some of Nigeria’s biggest problems. According to the United Nations International Children’s Emergency Fund (UNICEF), malnutrition is a direct or underlying cause of 45 percent of all deaths of under-five children in Nigeria. For Gideon Olanrewaju, co-founder of BikeAnd Blend, malnutrition problem has a solution. His firm provides Nigerians, especially children, their daily nutritional requirements through 100 percent organic fruit drink variants, at affordable prices. He and his co-founder started the business small by raising money from their personal savings. Olarewaju, who studied Nutritional Biochemistry at Ladoke Akintola University, says the business uses purely organic fruits sourced across the country to make its products. The young entrepreneur is currently pushing to become a top brand in the country by leveraging technology and innovation to scale. Given his meteoric rise over the past year, there is a chance that he could achieve this dream. “Since starting, the business has grown and it now attracts various invitations to multiple events on weekly basis. We are managing to attract invitation to multiple events on weekly basis now and we are coping,” he says.

Gideon Olanrewaju

Mmachukwu Orizu

He has two full-time employees and two part-time employees. He says that innovation has driven the continual existence of the business despite the tough economic environment in the country. Flexible pricing strategy has made BikeAndBlend remain in business. The young entrepreneur says seasonality of fruits, inadequate storage facility and short shelf life remain biggest challenges facing the business. “With huge volume of demand, refrigeration doesn’t prevent fruits from spoilage, as we often tend to buy in large quantities to save cost and stock up for subsequent events,” he explains. BikeAndBlend plans to secure partnerships with corporate organisations and government at all levels for implementation of wellness programmes to drive nutrition in the country. It also plans to launch a franchise model.

Olarenwaju is a serial entrepreneur and has been honoured with a 2015 YALI Tech Camp Alumnus, a 2016 Teaching Fellow of the African Leadership Academy and a 2018 UNESCO Young Leader Award.

LCCI inaugurates sectoral group to raise creative & sports entrepreneurs JOSEPH MAURICE OGU

he Lagos Chamber of Commerce and Industry (LCCI) has inaugurated Creative, Entertainment and Sports Group (CES) as the newest in the fleet of its groups. The chamber eyes new set of disruptive entrepreneurs in the creative, entertainment and sports sectors. During the inauguration, Babatunde Ruwase, president, LCCI, said CES represents a very important sector of the Nigerian economy, as the creative and entertainment industry has become a tangible contributor to the nation’s Gross Domestic Product (GDP). Acknowledging the contributions of the Nigerian film industry, popularly known as Nollywood as the globally recognised second largest film producer in the world, Ruwase said the industry has contributed immensely to the growth of GDP as well as created jobs in the value chain. As a significant part of the art, entertainment and recreation sector, Nollywood contributed N239 billion, representing 23 percent to Nigeria’s GDP in 2016, valued at N156.5 billion in 2018, according to National Bureau of Statistics (NBS).

The sector has been adjudged as one of the fast-growing sectors in Nigeria with a GDP growth rate of about 2.5 percent and contribution of 0.2 percent in 2016. “It is in response to the importance and performance of this sector that LCCI decided to create this group,” Ruwase said. Explaining the rationale behind the creation, Ruwase said the aim was to provide the necessary platforms needed for the advocacy that would enable a better business environment for the creative, entertainment and sports sectors of the economy. The creative industry, according to the chamber, has generally made significant strides by engaging the youth population and generated employment over the years. This sector was propped by the emerging digital technology, which supported content creation, distribution and consumption. It has also uplifted middle class families in Nigeria and sub-Saharan Africa as well as support industries, which are rapidly growing. With the creation of CES, the chamber now operates 23 different groups. Felix Awogu, general manager, Super Sport West Africa, said the global value of entertainment (including sports) industry is about $2 trillion, arguing that sports should be part of entertainment and be called ‘sportainment’.

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Mmachukwu Orizu Orizu is the founder and managing director of Mahauty Health Solutions, a start-up promoting infants and children’s health. She is a passionate Nigerian using organic fruits and vegetables from the country to make food products for children while building a strong nutrition community. Her Somma’s Yummies is a 100percent natural food brand that is produced using freshly harvested grains, nuts, roots and tubers, legumes and fruits and vegetables. The young entrepreneur was inspired to establish her business owing to her experience as a mother. “When I had my daughter, I started creating recipes and feeding her with it,” she

recalls. “When people observed how healthy my daughter was, family and friends who knew of the recipe I was using started making demand for it, and this led to the establishment of my company - Mahauty Health Solutions.” Since starting, she has built a community of over 13,000 mothers across the continent and uses social media to provide regular advisory sessions for them to address the very problem of malnutrition in children. Speaking on the business expansion plans, she says Mahauty wants to standardise its factory with an adjoining quality assurance laboratory. Also, the business plans to get its products on the shelves of retail stores and outlets across major cities on the continent. Orizu says that the constraints in getting licensing with the National Agency for Food and Drug Administration and Control (NAFDAC) and the Standards Organisation of Nigeria (SON) are the greatest challenges facing the business. She adds that procuring of advanced equipment and machinery for the factory is another major challenge, owing to the high cost and difficult clearing process at the seaport. The business has won several awards both within and outside the country. In 2018, it was named the top Health Innovation Company in Africa among 241 health businesses from 21 African countries by Amref Health Africa, an NGO based in Kenya. On her advice to other entrepreneurs, she says, “Know everything there is to know about your business. Be resilient. Stay determined and committed to what you do. Make mistakes, learn from them and allow yourself to grow.”

Takwimu Africa launches open data platform for development champions Josephine Okojie

fricapractice, iHub and Code for Africa, with support from the Bill and Melinda Gates Foundation, have announced a launch of Takwimu – an Africa-focused digital information service for people working in the human development field. The launch, which was marked with a panel discussion on ‘Democratising Access to Data: Harnessing the Power of Actionable Insights for Decision-Making in Nigeria’ and moderated by Yinka David-West, academic director, Lagos Business School, had Joe Abah, country director, DAI; Laoye Jaiyeola, CEO Nigerian Economic Summit Group (NESG); Gabriel Okeowo, CEO, Budgit; and Musa Ali-Baba, CEO, Teasy Mobile in a panel discussion. “We are happy to be playing a small part in helping organisations working to create sustainable change across the continent find and use the information they need to participate more effectively,” Onyebuchi Ajufo, spokesperson for Takwimu, said in a statement. “We would like to thank the many talented NGOs, development officers, data scientists and journalists who have contributed to building Takwimu and we hope the service is

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a useful contribution to the African development community,” Ajufo said. ‘Takwimu’ is a Kiswahili word loosely translating to data or information that empowers African change-makers with access to high-quality analysis and data, thereby supporting their work to educate, influence and advocate for deeper development impact. It provides expert analysis of the key stakeholders, decision processes, policies, organisations and budgets that are driving development outcomes - combined with access to authoritative sources of national and subnational statistics in the health, agriculture, education and financial inclusion sectors. All Takwimu contents are visualised and packaged to be easily understood and freely shared. The goal is to make it much easier for development champions and storytellers to find, download, and share high-quality analysis and data visuals in their own materials. Takwimu also aims to stimulate broader participation in development policy and programming. Takwimu currently covers ten countries: Burkina Faso, DRC, Ethiopia, Kenya, Nigeria, Senegal, South Africa, Tanzania, Uganda and Zambia. The service is currently available in English only, with a version for French speakers to be released later in the year.

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Monday 05 August 2019

BUSINESS DAY

Start-Up Digest

DBN has $1.3bn for MSMEs: Here is how you can access it loaning to the MSMEs,” Okpanachi told BusinessDay. He explained that the bank, from time to time, carries out monitoring and evaluation to ensure that these loans that the financial institutions have taken are used for the right purpose and the impact is felt.

MICHAEL ANI

he Development Bank of Nigeria (DBN) is a wholesale development financial institution (DFI) set up to alleviate the financing need of micro, small and medium scale entrepreneurs (MSMEs). As a development bank, it was established to fulfil three mandates which are all targeted towards scaling up SMEs. The first, being the core of its mandates, is providing wholesale lending funds to financial institutions to on-lend to MSMEs. The second is to provide a partial guarantee to financial institutions so as to encourage them to be able to provide accessible credit facilities to MSMEs, while the third is on capacity building, by rendering technical assistance to financial institutions to empower MSMEs. Since inception in 2017, the bank through other financial institutions has so far extended N70 billion to about 50,000 MSMEs, according to a statement by Shehu Yahaya, chairman, board of directors for the bank. The amount according to him, would go a long way in solving the biggest challenge for the over 41.5 million MSMEs in the country that have been starved of funds in time past. Even though the development bank has been pushing out funds into the sector, many MSMEs are still left in the dark on how the bank operates and possible ways of accessing loans from the development

Participants at a 3-day masterclass on ‘Disruptive Digital Transformation Strategies for Businesses’ organised by Rhics Technology in Lagos recently

banking institution. How DBN operates Unlike other financial institutions like the Bank of Agriculture (BOA), Bank of Industry (BOI), and NEXIM, the Development Bank of Nigeria does not lend directly to borrowers. Instead, it works with other financial institutions including Deposit Money Banks (DMBs) and micro finance banks to disburse to end borrowers. Furthermore, unlike other financial institutions that focus on a particular sector of the economy, the DBN loans cut across all sectors of the economy. What this implies in that MSMEs, irrespective of the sectors they

play, can have access to DBN loans through its indirect financial institutions. You can access it in many of the banks in the country. Ask your bank about DBN loans and they may be helpful. The processes are usually clear. The DBN collaborates with other financial institutions registered under its network to provide funding to MSMEs. According to Tony Okpanachi, managing director of the bank, the DBN is currently working with 29 participatory financial institutions, cutting across commercial banks and microfinance institutions. Of these, 10 are commercial banks while the rest are micro finance banks.

...Continues poverty alleviation programs for local residents

How to make money from recycling

Gbemi Faminu

…Zeugnis to discuss recycling on August 24

What does it take to be a financial institution? According to the DBN, before a financial institution can be onboarded, it must have been profitable in the last two years of applying. After that, the prudential ratios of these banks are looked into. By prudential ratio, the bank means looking at the non-performing loans of these banks and by appraising how strong they are in the area of lending to the MSMEs. “We do not want to take a financial institution that is not interested in

What is the loan size of DBN? In terms of the size of funds available to the bank in dollar terms, the bank has about $1.3 billion, made up of debt and equity. The shareholders of the bank who have provided equity include the federal government of Nigeria, who is the majority shareholder, the African Development Bank (ADB) and the European Investment Bank (EIB), including the Nigerian Soviet Investment Authority (NISA). In terms of regulatory capital, the bank has about N100 billion. In terms of debt capital, it has the World Bank, African Development Bank, KSW of Germany and the French Development Agency (FDA) as debt providers.

Felicia Aduke Foundation empowers business owners

Business Opportunity

eugnis International Limited will expose opportunities in waste recycling in Lagos on August 24. Venue is the Lagos Chamber of Commerce and Industry, Ikeja. The firm promises to reveal secrets in making wealth from waste. Handled by Luther Kington Nwobodo, a PhD student and CEO of Zeugnis International Limited, the training will teach participants how to recycle waste nylons, PET bottles and other plastics to bricks and interlocking stones, the firm said. It will also enable Nigerians to learn opportunities in waste, including how to improve the environment through recycling it added. “On daily basis, Nigerians consume lots of pure water and soft drinks in PET plastic bottles which are thrown away to litter our environment,” Nwobodo said. “Plastic wastes are increasing day by day and our environment is not spared from pollution. These plastic wastes being thrown away are not really waste as we term them, but can be effectively recycled into useful various industrial materi-

Okpanachi noted that the bank plans to on-board as many financial institutions as long as they meet its eligibility criteria.

What is the maximum amount DBN can lend? According to the bank, the maximum amount of money it can lend to players in the micro segment is N10 million, while those in the small category is N150 million. Those in the medium corporates business can get as much as N600 million. Okpanachi explained that by the time these businesses are growing to the point that the bank sees they can stand on their own and can get access to bigger funding, they move out from that circle.

als. Hence, with adequate knowledge and recent technology, these non-degradable materials can be recycled into high strength bricks or interlocking stones that possess thermal and sound insulation properties and reduce the overall cost of construction,” he explained. “High-density polyethylene (HDPE) and polyethylene (PE) bags are cleaned and added with sand and aggregate at various percentages under intense heat to produce high quality and durable bricks/interlocking stones which are relatively cheaper to concrete types. “Also, colouring agents can be added to the mixture to attain desired forms or shapes. This technology is not new as it has been in existence in some African countries such as Uganda and Tanzania, among others, but new in our clime,” he said. He added that adopting this recycling process in Nigeria would not only reduce the amount of waste in the environment but create jobs to reduce high unemployment situation estimated at 23.1 percent. It would also reduce the huge cost of construction— that is governwww.businessday.ng

ment spending on construction of roads and other major projects that require bricks. In the forthcoming training next month, Nwobodo and his team would be discussing recycling processes and conversion stages, including acceptable outcome of recycled wastes such flakes, and pellets, the firm said. “A detailed process of converting waste plastics into interlocking stones and blocks will be unveiled, including machine sourcing and sources of raw materials,” he said. He explained that return on investment is over 100 percent and participants will be introduced to partners. “Anyone who wants to go into this business needs this training because it will reduce unnecessary waste of resources in machine sourcing and enable them to understand the difference in PET materials and be able to produce standard PET flakes,” he said. He further encouraged those seeking lucrative businesses to invest in to give the training a try and learn the secrets of making money

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n its efforts to alleviate poverty among rural dwellers, Felicia Aduke Foundation (FAF) has organised a one-day relief programme for residents of Alaso, a local community in Lagos state. The programme recently held in celebration of the posthumous birthday of Felicia Aduke. The FAF gave out medications, school materials for children, clothes for children and adults, medical check-up and also empowered micro scale business owners financially to boost their businesses. The foundation, which started operations in 2018, was established by Omonike Aremu and Ronke Akinbode in honour of the late Felicia Aduke and late Olufemi Abike , mother and sister to the founders, with the aim of carrying on their legacy as philanthropist. “The primary reason of the foundation is to keep the memories of my mother and sister alive. However, we aim to bless and empower as many families as we can and it starts with our local community” said Omonike Aremu, co-founder of the foundation. “Our vision and mission is also in line with sustainable development @Businessdayng

goals of no poverty, zero hunger, good health and well-being. We will try to widely reach out to people and improve their standard of living.” While concerns have been raised over government inadequacies in reaching a larger set of citizens living in extreme poverty, Aremu has this to say: “We cannot leave the government to do all these by themselves. That is why as a foundation we would try to reach as many people as we can, but interventions and donations will go a long way too.” Speaking to Stella Oreoluwa, the country director for the foundation, she stated that regardless of how little or how much it is, empowering people and helping them go a long way. “We started the relief program in 2018 and have been able to feed and empower no less than 400 residents of a local community.” “While it is not so easy attending to a whole lot of people, we would not relent in our efforts to keep helping people and fostering poverty alleviation activities.” Oreoluwa added. “I was given the sum of N10, 000 to boost my business as well as new outfits while my children were given new school bags and clothes” said Omoloye Kemi, a beneficiary of the relief programme.

Monday 05 August 2019

BUSINESS DAY

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Monday 05 August 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Why you need to know your advisor’s continuity plan The Solid Wealth Messenger

Grace Agada

eath is inevitable as it is one of the prime characteristics of any living thing. The problem, however, is not in its certainty but the fact that more often than not, it comes when we least expect it. This spells many challenges, and the relationship with your advisors is one of them. The Wealth management industry is full of many advisors a few of which are truly competent. Chances are that if you have a really good advisor, you wouldn’t change him or her on impulse. But unless your advisor is a cat with nine lives, it is crucial that he or she has a continuity plan in place to protect you and your family in the eventuality of death, retirement or incapacitation. In a time where so much attention is being drawn to the generational transfer of wealth, there is really no organized plan to also transfer the wisdom and knowledge that will shepherd the wealth across multiple generations. As such, there is a growing concern over the population of aging advisors – especially those without succession plans. Who will your children and your wealth be entrusted to? How will the continuity of sound advice be retained across multiple generations, and how will younger advisors benefit from the aging advisor population in such a way that gives your children an edge? If you are a wealth creator with a multi-generation wealth perspective in mind and you currently work with an advisor who is above the age of 50 without a continuity plan in place, then you have an

emergency situation on your hands. You may probably have spent a considerable amount of time stumbling over so many incompetent advisors to get to your advisor. So, you will already know that there is a large pool of incompetent advisors out there disguised in their suits and misleading the next generation of innocent victims. If you leave your children to decide for themselves which of these advisors are competent and which are not, chances are that they will fall into the wrong hands and your wealth can be put at risk. This is why your advisor needs a continuity plan. There are two prime problems that plague the wealth management advisory industry. The first is the lack of a continuity plan for the protection of client’s wealth affairs and the second is the lack of a succession plan that properly hands over the advisor’s business, expertise and knowledge to another advisor to preserve the advisor’s legacy. Older advisors are leaving the scenes without the necessary handshakes and hand overs that will protect you and your family and they are leaving behind an increasing number of incompetent advisors that your family and wealth will be exposed to. It is therefore no longer safe to work with an advisor who does not have a continuity plan in place because all your years of hard work may be exposed to the risk of a loss. Even when your advisor works with a larger organization or institution, this risk still exists – every big advisory organization is made up of people few of which are truly competent. Within every big organization there is that one person that understands you and is committed to serving you. Usually when this person leaves, retires or dies, it is hard to find their replacement even within the same large organization. It is also why clients have had to follow the same advisor to different organizations as they move. Sometimes,

Objectives • Solid wealth • Groomed Heirs • Undying legacy and Name • Rich relationships • Personal development • Healthcare Planning • Giving. www.businessday.ng

even big organizations simply do not have holistic and organized continuity process within them for making these necessary handshakes. The question you must ask yourself is this: does my advisor have an organized continuity plan?, Who will take over this critical relationship from my current advisor and does this person have the capacity to understand my family unique needs and service me the right away? Would I have a say or be involved in this transition process of who is a good fit for me and my family? Will this handing over process take place long before there is a crises and is there a contingency or back up plan in place? These and many more are the questions that you need to ask your advisor to be sure they are acting in your best interest in the long-term. The trust and relationship that you have built with your advisor over the years should not end with the end of your advisor. You need a system that hands you over to another competent advisor who you already know and who you are comfortable continuing the relationship with. This process should be repeated across generations. You owe it to yourself and your family to ensure that your advisors take all the necessary steps to prepare for continuity and a full range of a worst-case scenarios. To help your advisor get started so they can help you and you family is a new opportunity called “The Wealth Management Advisor Continuity Program”. This program will bring together in one place a highly curated group of advisors who are interested in creating a continuity plan that will protect their client and a succession plan for themselves. This program will also provide a platform where advisors within

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the wealth management industry can meet other independent advisors from the diverse wealth management industry for knowledge sharing, trust building, business relationships, and working relationships. Advisors will have access to an intimate community of advisors who want to connect as well as protect the long-term interest of their clients so they can determine which advisor is the best fit for their client. Advisors will be exposed to investment opportunities, merger opportunities, acquisition opportunities, as well mentoring opportunities for younger advisors. The client on the other hand will be involved in the transition and continuity process, and will have interactions with a new advisor long before the transition is complete. The ultimate beneficiaries of this program are the clients who will have the privilege of retaining a continuous supply of sound advice across multiple generations. Advisors that have a continuity plan in place are the ones who protect the best interest of their client. For more details about The Wealth Management Advisor Continuity Program for Advisors as well as their client kindly SMS “Advisor Continuity” to 08101860042. It’s Time To Ask Your Advisor the same tough questions that they have posed to you. It will save you and your family an enormous amount of pain and the risk of falling into the wrong hands.

‘

You owe it to yourself and your family to ensure that your advisors take all the necessary steps to prepare for continuity and a full range of a worst-case scenarios

Grace Agada is a Senior Wealth Advisor and Author with extensive experience in wealth creation, wealth preservation and wealth transfer. Email: info@createsolidwealth.com Tel: 08101860042

@Businessdayng

Monday 05 August 2019

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: August 2– August 9, 2019

KEY MACROECONOMIC INDICATORS Indicators

Current Figures

Comments

GDP Growth (%)

2.01

Q1 2019 — lower by 0.38% compared to 2.39% in Q4 2018

Broad Money Supply (N’ trillion)

34.89

Decreased by 0.77% in May’ 2019 from N35.17 trillion in Apr’ 2019

Credit to Private Sector (N’ trillion)

24.86

Decreased by 0.13% in May’ 2019 from N24.89 trillion in Apr’ 2019

Currency in Circulation (N’ trillion)

2.11

Decreased by 2.22% in May’ 2019 from N2.16 trillion in Apr’ 2019

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

11.22

Decreased to 11.22% in June 2019 from 11.40% in May 2019

Monetary Policy Rate (%)

13.5

Adjusted to 13.5% in March 2019 from 14%

Interest Rate (Asymmetrical Corridor)

13.5 (+2/-5)

Lending rate changed to 15.5% & Deposit rate 8.5%

External Reserves (US$ million)

44.92

July 30, 2019 figure — a decrease of 0.27% from July start

Oil Price (US$/Barrel)(OPEC)

63.54

August 2, 2019 figure— a decrease of 1.56% from the previous wk

Oil Production mbpd (OPEC)

1.86

June 2019 figure — an increase of 7.47% from May 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

Change(%)

2/08/19

26/07/19

27,630.46

27,918.59

(1.03)

13.46

13.61

(1.04)

Volume (bn)

0.16

0.13

23.54

Value (N’bn)

4.80

2.64

81.79

NSE ASI Market Cap(N’tr)

MONEY MARKET NIBOR Tenor

Friday Rate

Change

(%)

(Basis Point)

2/08/19

26/07/19

Indicators

2/08/19

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

1-week Change

YTD Change

(%)

63.54 2.16

(1.56) (3.14)

(1.43) (29.32)

2,389.00 97.65 61.66 12.01 479.50

(2.29) (2.50) (3.81) (0.08) (3.28)

23.40 (25.00) (20.44) (21.66) 10.61

1,437.52 16.21 261.05

1.32 (1.40) (3.01)

9.10 (5.70) (20.36)

OBB

5.6400

21.8600

(1622)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N

6.4300

23.2100

(1678)

Tenor

CALL

6.7500

21.0500

(1430)

30 Days

10.8557

10.8114

90 Days

11.2650

11.9585

(69)

FOREIGN EXCHANGE MARKET Market

Friday

1 Month

(N/$)

Rate (N/$)

2/08/19

26/07/19

2/07/19

Official (N)

306.85

306.90

306.95

Inter-Bank (N)

362.23

361.91

360.52

0.00

359.00

360.00

BDC (N) Parallel (N)

68 (57)

6 Mnths

11.19

11.16

9 Mnths

11.66

11.59

12 Mnths

11.94

11.98

(4)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Change (Basis Point)

2/08/19

26/07/19

3-Year

0.00

5-Year

12.91

13.00

(9)

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

13.69

(4) 12

(Basis Point)

8.90

(%)

13.41

(%) 26/07/19 10.61

Friday

13.65

(%) 2/08/19 9.57

(%)

13.53

Change

10.04

Friday

7-Year

Friday

1 Mnth

AVERAGE YIELDS

10-Year

Friday

3 Mnths

BOND MARKET Tenor

Global Economy In the US, the Federal Reserve cut interest rates for the first time in more than a decade, effectively putting monetary policy into reverse after raising interest rates four times in 2018. The move, which cuts rates to within a 2%-2.25% range, was largely expected. Eight of 10 Fed officials voted in favour of lowering the short-term benchmark rate to a range between 2% and 2.25%, while two officials dissented from the decision in favour of holding rates steady. The policy statement released after the meeting left open the door for the Fed to cut rates again in the months ahead. In a separate development, Eurozone GDP growth was 1.1% year-on-year in Q2 2019, slowing from 1.2% in the January-March period. Softening global demand and uncertainty about the outlook dampened economic activity. Italy, the third-biggest economy in the Eurozone, was a weak spot, showing zero growth after only 0.1% in the first quarter. European Commission officials forecast 2019 GDP growth of 1.3%, while the European Central Bank (ECB) is looking for just 1.2%. Both numbers are a long way below the 1.8% seen in 2018 and the 2.3% expansion clocked up back in 2017. Elsewhere in India, the inflation rate in June was 3.18%, up from 3.05% the previous month, government data showed. Core consumer inflation, which strips out food and fuel prices, was estimated at 4.09% in June, marginally lower than May's 4.1%. Food prices, which make up nearly half of India's inflation basket, grew 2.1% in June compared to 1.83% in May. Despite the rise, inflation remained within the Reserve Bank of India's target level of 4%.

Friday

Change

(%)

(Basis Point)

2/08/19

26/07/19

3,018.50

3,018.97

(0.02)

Mkt Cap Gross (N'tr)

9.15

9.05

1.08

Mkt Cap Net (N'tr)

5.88

5.81

1.26

22.88

22.90

(0.02)

-32.88

-32.89

0.01

Index

20-Year

13.76

13.79

(2)

TREASURY BILLS (MATURITIES)

30-Year

14.06

14.12

(6)

Tenor

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

91 Day 182 Day 364 Day

Amount (N' million) 5,849.03 26,600.00 74,598.13

Rate (%) 9.74 10.75 11.139

Date 17-July-2019 17-July-2019 17-July-2019

Local Economy The Manufacturing Purchasing Managers' Index (PMI) stood at 57.6 index points in July 2019. This indicates an expansion in the manufacturing sector for the twenty-eighth consecutive month. The index grew at a faster pace when compared to the previous month (57.4 points). This was shown in the latest PMI report by the Central Bank of Nigeria. A PMI above 50 points indicates that the manufacturing sector is generally expanding, while a reading below 50 points indicates a contraction. Thirteen of the sub-sectors surveyed recorded growth during the month, while the textile, apparel, leather & footwear subsectors recorded decline in the period under review. In a separate development, the Central Bank of Nigeria (CBN) in a recent press release clarified the proposed policy on FX restriction to milk importers. It reiterated a planned restriction of access to the Nigerian Foreign Exchange market by importers of milk with the objectives of ensuring forex savings, job creation and investments in the local production of milk. Elsewhere, businesses expressed optimism on Nigeria's macro economy in July 2019 according to the Central Bank of Nigeria (CBN) monthly Business Expectations Survey (BES). The report, which was posted on the apex bank's website stated: “at 28.1 index points, respondents' overall confidence index (CI) on the macro economy in the aforementioned period was more optimistic when compared to its level of 27.3 index points recorded in June 2019.” The respondent firms were made up of small, medium and large organisations covering both import- and export-oriented businesses. The positive outlook by businesses in July 2019, according to the report, was driven by the opinion of respondents from the following sectors: services (15.4 points), industrial (10.0 points), wholesale/retail trade (2.0 points) and construction (0.7 points) sectors. The surveyed firms listed insufficient power supply, high interest rate, financial problems, unfavourable economic climate, unclear economic laws, insufficient demand, unfavourable political climate and access credit in that order as the major factors constraining business activity in the reference month. The business outlook for June 2019 showed greater confidence on the macro economy with 64.1 index points. Stock Market The Nigerian equities market continued its bearish

streak last week on the back of price depreciation in bellwether counters. Specifically, investors lost N14 billion of their investment value as the NSE market capitalisation decreased to N13.46 trillion from N13.60 trillion it closed the previous week. The benchmark All Share Index also declined by 1.03% week-on-week to close at 27,630.46 points. This week, we envisage the bearish run of the market will ease as corporate scorecards are being released and the low prices spur bargain hunting activities on attractively priced counters. Money Market Cost of borrowing at the money market crashed as funds from the Federal Account Allocation Committee (FAAC) of N366 billion hit the system. Consequently, short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates dipped to 5.64% and 6.43% from 21.86% and 23.21% respectively last week. The 90-day NIBOR also closed lower to 11.27% from 11.96% the previous week. This week, we expect rates to further trend lower due to expected OMO maturity of N110 billion. Foreign Exchange Market The naira remained majorly stable across most markets except at the NAFEX window where it witnessed a slight depreciation of 32 kobo to close at N362.23/$. The official window saw a slight appreciation as it ended N306.85/$, a 5 kobo gain from the prior week. The parallel market also strengthened against the dollar by N1 to settle at N359/$. The appreciation and stability recorded in the parallel and official market segments may be attributed to the apex bank's regular efforts to boost FX liquidity and alleviate dollar shortages. This week, we envisage the stability in the market would continue due to consistent FX liquidity by the CBN. Bond Market Bond yields declined slightly last week as a result of occasional buy interest on some specific maturities such as the 2023, 2027 and 2036 bond. Yields on the five-, seven- , twenty- and thirty- year debt papers settled lower at 12.91%, 13.65%, 13.76% and 14.06 respectively. The Access Bank Bond index declined marginally by 0.47 points to 3018.50 points from 3,018.97 points the previous week. This week we expect buy sentiment given the high liquidity seen in the market. Commodities Market Oil prices crashed as fresh deterioration in US-China trade relations clouded the outlook for global economic growth and oil demand. The US President announced the US would hit $300bn of Chinese goods with a 10 per cent tariff starting on September 1, significantly expanding the amount of imports subject to levies. OPEC basket price settled at $63.54 per barrel last week, 1.56% lower than the previous week. Precious metal prices went in varying directions for the second consecutive week as gold prices edged up while silver prices declined. Interest rate cut by US Fed and other major central banks lifted gold prices. Consequently, gold price closed at $1,437.52 per ounce, up 1.32% from the previous week’s close. Some profit-taking was seen in silver prices which led to it declining to $16.21 per ounce compared to $16.44 per ounce. This week, oil prices might climb higher as the threat of softer demand looms as production remains robust in the US, hampering the ability of the Opec cartel to manage world supplies. For precious metals, heightened trade war might lend support to push prices higher.

MONTHLY MACRO ECONOMIC FORECASTS Variables Exchange Rate (NAFEX) (N/$) Inflation Rate (%) Crude Oil Price (US$/Barrel)

Aug’19

Sep19

362 11.4

361 11.5

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

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

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Oct’19 362 11.5

Monday 05 August 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

What to do when your boss betrays you RON CARUCCI

ewer things hurt more than being betrayed by someone you trust. When that person is your boss, the pain can be amplified. Whether your boss took credit for a project you spent months on or shamed you for someone else’s mistake, such betrayals can hinder your ability to trust others and accurately judge situations. While you may not be able to change your boss, you can keep his bad behavior from harming you. Here’s how: — HOLD FAST TO YOUR VALUES: If your boss betrays your trust, it’s important to ensure that you don’t unconsciously corrupt your

own behavior in response. Research indicates that if your boss behaves badly, you are more likely to follow suit. — PAY ATTENTION TO PATTERNS OF BETRAYAL: It’s common for people who toler-

ate abusive behavior to eventually conclude they deserve it. You can resist this by detecting your boss’s patterns and interrupting them as much as possible. If your manager takes credit for your work, make sure impor-

tant stakeholders associate your name with relevant projects. — REMEMBER: NOT EVERYONE WILL BETRAY YOU: When your boss betrays you, it can be easy to unconsciously conclude that other peo-

ple are untrustworthy. Be careful not to universalize your boss’s betrayal across other relationships. — PRACTICE FORGIVENESS, NOT RETALIATION: It’s natural to want to make your boss pay for his betrayal. But you shouldn’t stoop to his level. Instead, write down how you feel about your boss’s actions. Perhaps his betrayal made you feel inadequate or exploited. Learning to separate how others’ make us feel from what’s actually true about ourselves is the first step toward forgiveness. — DON’T BURY YOUR NEGATIVE EMOTIONS: Trying to keep a stiff upper lip while enduring betrayal can be hazardous to your health. Suppressing strong emotions can manifest in sleeplessness, headaches and

general irritability. It’s critical to have an outlet. Journaling, therapy and physical activity can help. — LET PURPOSE OFFSET ENTITLEMENT AND APATHY: Two of betrayal’s common side effects are believing you deserve restitution for what you’ve suffered and feeling indifferent toward your work. To avoid those feelings, remind yourself of the passion behind your choice to work in your field. If you work for a boss who habitually betrays you or your co-workers, get out from under that person as soon as possible. Until then, do whatever you must to protect yourself from hardening into a person you don’t recognize.

• Ron Carucci is a cofounder and managing partner at Navalent

Your organization needs a learning ecosystem WHITNEY JOHNSON

here is a symbiotic learning relationship between an employee and his organization. High-growth individuals who embrace learning make the organization smarter and contribute to its growth, but they can’t do it alone. They need their managers to have a reciprocal interest in individual growth and create a learning ecosystem to foster it. Like biological ecosystems, organizations are either growing or they’re

dying. And organizations grow when their employees are learning. If you want a high-growth organization, you need to cre-

ate a learning ecosystem to support high-growth individuals. When people are no longer engaged by their

work, their benefit to the organization is diminished. Redeploying them on new learning curves within the organization

keeps their expertise inhouse and allows them to share and build on it — a potentially exponential gain. Job swapping of this kind is only one strategy to put employees on new learning curves and help break down silos. Ongoing training and educational opportunities, job sharing, and mentoring and outreach programs are a few other examples. By creating an ecosystem that fuels continuous learning, an organization can build capacity ahead of the competition. And research indicates that the companies that survive

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are those that develop capacity — new technical skills and domain expertise, greater adaptability, and ways of leveraging institutional memory — before they need it. This capacity weakens when too many good people leave for greener pastures. If individuals aren’t learning, neither is the organization. When we facilitate learning, we create new carrying capacity for growth throughout our organizational ecosystem.

• Whitney Johnson is an executive coach

Monday 05 August 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

In association with

The problem with France’s plan to tax digital companies than other firms. Fourth, the selective imposition of taxes could violate bilateral taxation treaties. Finally, should all digital corporations pay the same 3% tax, irrespective of their business model or profits? We believe there is a need for more thoughtful and creative solutions than a onesize-fits-all regulation, especially because the shift from the physical world to the digital one affects economic systems in myriad ways. Imposing such a tax burden on digital companies would not only be unfair but also reduce innovation.

VIJAY GOVINDARAJAN, ANUP SRIVASTAVA, HUSSEIN WARSAME AND LUMINITA ENACHE

rance recently approved a 3% tax on revenues generated by large digital companies in its territory, a move that is now being investigated as a potentially unfair trade practice by the U.S. government. The French legislation, which would invariably affect U.S. tech giants such as eBay and Facebook, is the kind of tax that the European Union has wanted to impose for years. Asian and Latin American countries have also begun discussions on how to tax tech giants on revenues earned in their territories. But one-size-fits-all taxation of large digital firms based on their gross revenues is too blunt an instrument to address the budgetary deficits of local governments. The “remote” participation of digital companies in domestic economies is often seen as the key issue in the debate. As digital services

supplant physical products and websites replace shops, countless businesses are closing, which erodes the land-based revenues that cities receive from property taxes and development charges. And taxes collected on wages disappear when workers are rendered un-

employed by the rise of the digital economy. However, there are many arguments against the idea of revenue-based taxes on large foreign digital corporations. First, in the absence of a clear definition of what constitutes a “large” and “digital” company, EU pro-

posals are tantamount to selective targeting of American corporations. Second, some academics question whether there really exists a need for alternative sources of corporate taxes. Third, some critics argue that there is no consistent evidence that internet firms pay taxes at lower rates

•Vijay Govindarajan is a professor of management at Dartmouth’s Tuck School of Business. Anup Srivastava is an associate professor at the University of Calgary’s Haskayne School of Business. Hussein Warsame is a professor of accounting at the Haskayne School of Business. Luminita Enache is an assistant professor at the Haskayne School of Business.

Are new graduates happier making more money or having more time? choose between them: We might be forced, for various reasons, to accept a better-paying job and give up some socializing time. Society needs to work harder to make us all feel like we have the choice to prioritize time over money. However, when we do have the ability to choose which resource to prioritize, the data is clear: Valuing time is likely to bring us greater joy.

ASHLEY WHILLANS

ach year, millions of graduates are faced with decisions about trade-offs between time and money as they plan their future. Despite the importance of these choices, we know surprisingly little about how people navigate major life decisions (such as accepting a new job) that involve making more money at the expense of having less time, and vice versa. So we set out to study how people’s priorities shaped their career choices and happiness after graduation. We asked more than 1,000 college students from the University of British Columbia in Vancouver whether they generally prioritized time or money more. We also had them report their happiness by answering questions like “How satisfied are you with your life overall?” We then followed up with

•Ashley Whillans is an assistant professor at Harvard Business School

the students within two years of graduation and asked them to report their current happiness, the primary activity that was taking up most of their time and the reason they were doing this activity. What we found was that students who prioritized time

were happier than those who prioritized money. Even when we accounted for how happy students were when they started our study, those who valued time were happier and more satisfied with their lives and careers one to two years after

graduation. Our results provide strong evidence that valuing time puts people on a trajectory toward job satisfaction and well-being. Decisions about time and money are present in all of our lives. Sometimes we can’t

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Monday 05 August 2019

BUSINESS DAY

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

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Consumer Goods firms’ earnings slide amid weak economy BALA AUGIE

he largest Nigerian consumer companies’ generated earnings well below the levels of the past 4 years as a slow growing economy leaves them grasping for breath. The industry is the hardest hit from high costs of imported raw materials, decrepit infrastructure, and a pressured consumer wallets, the three monsters undermining their profitability. The cumulative net income of a the ten largest consumer stocks that have released half year 2019 results hit N582.83 billion, a 19.25 percent drop from the N721.83 billion recorded in the corresponding period of 2018. That compares with 3.90 percent

decrease in the period 2018-17 and a 127.43 percent surge in net income in 2017-16 period, when the introduction of a new foreign exchange regime by the central bank and a hike in prices of key products helped underpin margins. The woes of companies started when they could no longer pass on the high input cost to already beleaguered consumers. An increase in fuel prices and high inflationary environment dealt a blow on consumer wallets, leaving Nigerians impoverished. Post-recession, growth in real household consumption peaked at 3 percent in the final quarter of 2017, before falling to 1 percent in the second quarter of (Q2) 2018. Nigerians are getting poorer as over 50 percent of a population of 200 million live on less than $1.98 dollars a day, as the country overtook India

SHORT TAKES N610 billion

The Federal Government spent N610 billion to service domestic debt in first quarter of 2019. Breakdown showed that FG paid N257billion, N155 billion and N197 billion respectively as interest in January, February and March 2019. to become the world’s poverty capital. The road to higher margins and profitability for the firms appear to be increasingly uphill as economic recovery has been sluggish since the country existed a recession in the third quarter of 2017. The country’s GDP expanded by 2.01 percent in the three months through March 2019, from a year earlier; that compares with 2.4 percent expansion in the fourth quarter. While inflation figure for the month of June fell to a 12 months low of 11.22 percent, the figure, however, falls below the central bank’s target range of 6 percent and 9 percent. Further exacerbating the already anemic position of consumer goods firms is the menacing Apapa gridlock, as goods remain trapped at the ports, resulting in disruption in production process, a situation that undermines profit margins. Consequently, the cumulative average net profit margin of these firms fell to 4.68 percent in June 2019 from 6.50 percent the previous year. On a comparative basis, margins fell slightly to 7.35 percent in June 2018 from 7.68 percent in June 2017.

However, margins rose to 7.68 percent in June 2017 from 4.91 percent in June 2016. A deteriorating margin shows firms are inefficient and are unable to turn each Naira generated in sales into higher profit. Valuations have been poor since there hasn’t been a marked increase in revenue as a bleak macroeconomic outlook and lack of policy direction by the President Muhammadu Buhari led administration has forced investors to hold on to their money, resulting in stock market rout. Following the stomach-churning performance of stocks since the start of the year, as the All-Share Index (ASI) fell below the 28,000 psychological mark to settle at 27,630.46 points, year to date losses widened to 12.09 percent. A breakdown of the figures shows Nestle Nigeria’s net income increased by 22.31 percent in 2019-18, but it dipped by 19.43 percent in 2018-17. It surged by 29.88 percent in 2017-16. Unilever Nigeria’s net income fell by 38.54 percent in 2019-18, while it was up 5.53 percent in 2018-17, but it surged by 236.22 percent in 2017-16.

Market inefficiencies surface as NSE selloff persists IFEANYI JOHN

tock market enthusiasts who were waiting on a positive effect of the H1 earnings season might need to wait a while longer as market selloff continues to push the Nigerian Stock Exchange into bear territory. As these selloffs persists, there have been sightings of market inefficiencies as fundamentally stronger companies are currently selling at

lower valuation multiples compared to weaker peers. An inefficient market, according to efficient market theory, is one in which an asset’s market prices do not always accurately reflect its true value. Efficient market theory, or more accurately, the efficient market hypothesis (EMH) holds that in an efficient market, asset prices accurately reflect the asset’s true value. In an efficient stock market, for example, all publicly available information about the stock is fully reflected in its price.

P.E

AIICO recently published its half year result for 2019, and posted an annualized earnings per share of 82kobo. On the stock market, AIICO trades at N0.64 which puts the earnings yield at 128.13 percent and PE below 1x. This shows that if the entirety of AIICO was acquired by an investor today at N4.43billion, he could easily recoup his capital with 2019 profits. Tochukwu Okafor, Lecturer in Banking and Finance department at Covenant University explained that

“this is what happens when sentiment deviates from fundamental performance. Arbitrage profits can be made on mispricing and the AIICO situation is a prime example. If an investor borrows money from the bank at a reasonable interest rate, he could acquire the company and pay back with the full year profit and interest. This will require no commitment of capital from the investor with only a risk of overstatement of earnings by

$357, 256.90 Nigeria’s external debt service payment in first quarter of 2019 stood at $357, 256.90. Breakdown showed that 22 percent of the sum is paid to multilateral creditors, 19 percent to bilateral creditors and 59 percent as interest fee on Eurobonds. N145.4 Average price paid by consumers for premium motor spirit (petrol) fell 1.8% year on year and increased by 0.2% month-onmonth to N145.4 in June 2019 from N145 in May 2019. States with highest average price of petrol were Kogi (N147.91) and Kebbi (N146.43).

Continues on Page 41

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

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

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Monday 05 August 2019

BUSINESS DAY

MARKETS INTELLIGENCE Investor appetite for EM asset to remain muted despite Fed’s rate cut Israel O. Odubola

merging markets may not see foreign investors piling into its assets this time around despite a quarter cut in United States’ policy rate as global concerns ranging from uncertainties surrounding Brexit negotiations to geo-political tensions linger. Investors had already priced in the possibility of a first Fed rate cut in a decade, when the Powell-led Federal Reserve had sent dovish signals before its last meeting. “Even most emerging markets are going more accommodative, the implication being lower yields,” said Gbolahan Ologunro, analyst at Lagos-based CSL Stockbrokers. The Nigerian bond market is missing out on what should have been an increased buying interest from offshore investors following a 25 basis points cut in United States’ main interest rate on Wednesday.

The FGN bond market saw sustained demand pressure driven by local portfolio investors a day after the rate cut. Yields on the 10-year benchmark FGN bond note rose 25 basis points to 13.62 percent Friday, while the 2-year maturities dipped 2 basis points to 12.96 percent. “Foreign portfolio investors drove the local bond market in the first quarter of the year,”

Nnamdi Olisaloka, analyst at Zedcrest Capital said. “This is because they envisaged stability in the naira following the re-election of President Muhammadu Buhari in February.” Yields of around 16 percent early this year trended lower on the back of buy interest of foreign players, however offshore interest has diminished with profit taking

1 year NTBs stop rate ticks up from year’s low as CBN mops up N223.23bn SEGUN ADAMS

ollowing the conclusion of Central Bank Nigeria’s auction on Wednesday, stop rates on Nigerian 364-Day treasury bills rose marginally from year’s low. The rates have declined 332 basis points year-long to push yields lower. Stop rates are the maximum interest rate preferred by the central bank out of all bids received in an auction. In other words it is the maximum rate at which the apex bank is willing to sell its securities. Although the yearlong trend has been southward, the 364-day paper cleared at 11.18 percent from 11.139 percent last auction.

The 182-day paper cleared at 10.6 percent from 10.75 percent. So far in 2019 the 182 Day rate has fallen 25 basis points. On the other hand marginal rate on 91-day rose slightly to 9.75 percent from 9.74 percent on Wednesday, while year-to-date performance show a decline of 115 basis points. Report from Chapel Hill Denham notes that CBN sold N223.23bn worth of bills to roll-over corresponding maturities Thursday. The auction was oversubscribed by 1.68x with most demand on the 91-day paper (1.71x). Yields on 365-Day treasury bills have declined from 16.95 percent on 02 January to 12.53 percent as at 17 July. Analysts at Lagos based merchant bank, Fsdh last Monday said they

expect yields on NTB to drop further from the current level. The trend of declining yields in fixed income assets according to the Fsdh analysts will provides opportunity for large companies and the government to borrow cheap. “The secondary fixed income market was quiet today, trending slightly bearish following today’s primary market NTB auction,” analysts at Chapel Hill Denham noted. Discount rates on benchmark NTBs rose marginally by 2bps to 10.71 percent, as a result of sell sentiments on mid-DTMs (+10bps to 11.05%). However, rates closed flat on the short and longer dated DTMs at 9.95 percent and 11.02 percent respectively.

Market inefficiencies ... Continued from Page 40

the company.” A critical example of market inefficiency also lies in the Banking sector where Tier-2 banks have been selling at greater multiples than the Tier-1 banks.

Union bank, Wema Bank and Sterling Bank are currently priced at 10.18x, 6.96x and 7.31x. These valuation multiples are currently the highest in the Nigerian banking sector. “While four of the five tier one banks are selling below a PE ratio of 4x. Savvy investors should look to pick

the best banks in the market at maybe the cheapest price the market will see in the next few years,” Okafor added. The Nigerian Stock Exchange (NSE) ended Friday’s trading session in negative territory. The All Share Index closed at 27,630.46 basis points, down 0.43 percent. Year to date, the index is down by 12.09 percent.

observed. Foreign investors have become very short term on Nigeria and moved funds to money market increasingly of recent, which alongside the fact of an already priced in rate-cut explains reaction in local debt market. “Going into the meeting analysts were very expectant on Fed’s forward guidance the 25bps was

a given expectation,” Olisaeloka explained. The analyst explained the market was unsettled by Fed’s uncertainty about a future rate cut-which Powell said would happen only if there are strong reasons. The guidance disappointed investors who had already factored a further rate cut and resulted in selloff on Eurobonds in the early hours of trading and a slight recovery later in the day. “But the thing with local bond is that they were not significantly impacted given low supply of local debt at current levels,” Olisaeloka said. So far the market which has sustained buying interest has not been reacting to the activities of the Feds. Although local players as opposed to foreign interest sustains demand in the domestic market, analysts believe the only reason for a bearish tilt of the domestic bond market would be if CBN becomes less accommodative of systemic liquidity and increases its rate of OMO issuances.

Citadel adds traders to profit from central bank stimulus shifts Three new managers will join the $32bn hedge fund to help capitalise on looser policy Laurence Fletcher in London, FT

edge fund Citadel has boosted its team specialising in bonds and currencies with three new fund managers, as it seeks to capitalise on the market opportunities thrown up by dramatic central bank shifts towards looser monetary policy. Jonathan Bayliss, former head of macro rates and a partner at Goldman Sachs Asset Management who has also worked at hedge fund Tudor, has been hired as a senior fund manager in London, according to people familiar with the firm’s plans. Mr Bayliss, who will be part of the macro strategies team, is set to join the firm later this year. The hedge fund, which was founded by trader Ken Griffin and which runs $32bn in assets, has also hired Vishnu Kurella as a senior fund manager in New York. Mr Kurella, who specialises in cross-asset volatility and who previously worked at hedge fund Caxton, is set to join next month. Eric Rains, who previously worked at hedge fund BlueMountain, will join the firm as a fund manager in Mr Kurella’s team. Citadel declined to comment. The hires reflect a significant pickup in opportunities for macro hedge funds, which have chalked up their best half-year of returns since 2013, at 5.01 per cent, according to data from HFR. Macro funds, made famous by the likes of George Soros and Paul Tudor Jones, bet on moves in global bond, currency and stock markets. Such funds have struggled in recent years amid huge stimulus from central

banks and ultra-low interest rates that have proved hard to profit from. However, many are capitalising on the large fall in bond yields this year — the yield on the 10-year US Treasury has fallen from 2.69 per cent to 2.05 per cent and the 10-year German Bund yield has dropped from 0.25 per cent to minus 0.42 per cent — as central banks have performed a U-turn from tightening to loosening monetary policy. That has proved a profitable trade for funds betting on a return to lower borrowing costs. “Every central bank is live right now,” said one macro hedge fund executive. “The opportunity set is as full and robust as it has been in many years.” Among those making money from the bond market rally is Caxton Associates, whose main fund is up more than 13 per cent, while Brevan Howard has gained around 10 per cent, one of its best half-year of performances since the financial crisis. Profits on macro trades have helped Citadel’s flagship Wellington fund gain around 15 per cent so far this year, said a person who had seen the numbers, having risen 9.1 per cent last year. The hires also come as some rival firms cut back on their macro trading amid lacklustre performance. Element Capital recently cut around a tenth of its staff and closed its portfolio manager programme. Citadel’s recruits will be part of a team led by Colin Lancaster, who joined the firm at the start of last year from Balyasny to build out a macro trading team. A separate macro team, led by Edwin Lin, has been running at Citadel for around a decade.

Monday 05 August 2019

BUSINESS DAY

real sector watch

94% of CEOs say ports are biggest impediment to industries

…95% want harmonisation of taxes ODINAKA ANUDU & GBEMI FAMINU

inety-four percent of chief executives of m a n u f a c t u ring companies across the country say congestion at the ports significantly affects productivity negatively, a 2019 second quarter CEOs Confidence Index shows. In the survey, which was conducted by the Manufacturers Association of Nigeria (MAN), the CEOs complained that delays in clearing raw materials and machinery often result in high demurrages which increase production costs and slow down manufacturing operations. The report taps inadequate space inside the ports, weak trade facilitation infrastruc-

ture, poor road network and the associated traffic gridlock as critical issues that require government attention. A 2018 report by the Lagos Chamber of Commerce and Industry (LCCI) had supported the CEOs point. The report by the LCCI had disclosed that 5,000 trucks seek access to Apapa and Tin Can ports in Lagos every day even though they were originally meant to accommodate only 1,500 trucks. The data utilised in the MAN’s second quarter report was generated from the responses of over 400 CEOs of member-companies of MAN across the country as against 200 respondents engaged in the first quarter 2019. Analyses of data collected focused principally on the positions of CEOs on macroeconomic and business op-

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erating environments as well as perception on the diffusion factors. In the first quarter survey, 92 percent of CEOs said multiple taxation was their biggest impediment. But in the second quarter, the number rose to 95 percent. “This is substantiated by the numerous taxes, levies, fees and other charges that manufacturers pay to agencies of the federal, state and local governments,” the report says. “Consequently, there is the need to streamline multiplicity of taxes and ensure that only approved taxes/levies/fees are charged,” it says. Moreover, 76 percent of CEOs disagreed that the rate at which commercial banks lend to manufacturers encourage productivity in the sector. “This is evident in the double-digit cost of borrowing

from the commercial banks, which obviously discourages investment,” the report further says. It calls for lower cost of borrowing to increase productivity in the manufacturing sector. Access to credit remains a major problem, with lending rate to the manufacturing sector averaging 22.21 percent in 2018 and 22.84 percent in 2017, according to MAN. Nigeria’s benchmark interest rate is among the highest in Africa at 13.5 percent. Ethiopia’s is 7 percent; Kenya is 9 percent; South Africa is 6.75 percent; Zambia is 10.25 percent, and Cameroon is 4.25 percent. Similarly, Rwanda is 5 percent; Mauritius, 3.5 percent; Algeria is 8 percent, and Senegal is 4.5 percent. Sixty-six percent of CEOs of manufacturing companies

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in the new survey disagreed that the volume of commercial banks loans to the sector encourages productivity in the sector. “This obviously indicates that the current Central Bank policy aimed at increasing loan to the real sector of the economy to stimulate production is a step in the right direction and should therefore be conscientiously implemented and improved upon,” the report states. Furthermore, half of the respondents disagreed that government capital expenditure implementation encourages productivity in the sector. The CEOs’ perception rested principally on the delay in budget approvals, low implementation of budgetary provisions, award of contracts to foreign firms and dearth of basic infrastructure such as

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inefficient port infrastructure, inadequate electricity supply, deplorable road networks, and low patronage. “This therefore confirms the need to review the infrastructure development plan to deliberately stimulate sustained productivity in the real sector,” it adds. The report shows that foreign exchange access is still a critical challenge for many manufacturers, as 46 percent disagreed that the rate at which the sector sources foreign exchange (forex) has improved. While 36 percent agreed that there was more dollar access, 18 percent were not sure that forex has improved. Out of those interviewed, only 21 percent agreed that patronage of Nigerian manufactured products has improved as a result of the implementation of Executive Order 003.

Monday 05 August 2019

BUSINESS DAY

real sector watch

Chemical, pharma industries await Dangote plant for inputs

…FIIRO says has equipment for industries ODINAKA ANUDU

he chemical and pharmaceutical industries are hoping the ongoing Dangote Petrochemical Plant will be completed soon to free resins and other excipients/ raw materials to them. The two industries import most of their raw materials and often run into hitches during periods of foreign exchange scarcity. The industries struggled badly in 2016 in the heat of FX scarcity and hope the situation would not repeat in the future. “There is a lot of hope that Dangote Petrochemical Plant is being structured in a way as to address the inputs challenge faced by chemicals and pharmaceuticals sector,” Okey Akpa, immediate past chairman, Chemicals and Pharmaceuticals Group of the Manufacturers Association of Nigeria (MAN), said at an annual general meeting in Lagos last week.

Dangote Group is building a $12 billion facility in Lagos which contains a refinery, a petrochemical plant, fertilizer plant and gas pipelines. The petrochemical plant is expected to produce about 1 million tonnes of polypropylene and other inputs. Akpa said Nigeria has been talking about switching on the petrochemical indus-

try for long and now needs to take the lead by ensuring that manufacturers have access to inputs. “Virtually every raw material in this sector has a high import dependency ratio. If you then face the scarcity of forex like we do have in this country, it poses further challenge,” he said. Local input sourcing in the chemicals and pharma-

ATI unveils trade app to bridge trust gaps BUNMI BAILEY

frican Trade Inv e s t ( AT I ) , a digital trade and investment platform, has launched an app to solve trust issues faced among investors, buyers and sellers in Africa. The app, which was unveiled on August 1, 2019, is meant to make payment systems seamless and life easier for traders. Uju Uzo, CEO, African Trade Invest said, “A lot of trade in Africa is still done informally and most buyers and sellers prefer to deal in cash and not the documentation processes. So we are trying to make them trust us. We want people to change the narrative of how they see Nigeria. Most times they don’t trust us because of the mistakes done by

others.” “We have built credibility overtime and people see what we have done by connecting sellers and buyers together,”Uzo further said. According to a 2019 African trade report, Africa’s contribution to global trade remains marginal at 2.6 percent, up from 2.4 percent in 2017. While intra-African trade rose to 16 percent in 2018 from five percent in 1980, it remains low compared to intra-regional trade in Europe and Asia. “The app enables you to invest in what you want to. Formally, you will just bring in funds and traders of Africa will help you to invest. And a number of people don’t talk about interest but share of profit. So you can target what you want to invest in and you can also monitor your investments. www.businessday.ng

You don’t need to communicate to know how far your investment has gone or is going,” Tobe Nnadozie, board member, ATI said. Emmanuel Ikazoboh, group chairman, Ecobank Transnational Inc, said, “The major challenge in Africa is capital. We do not have enough liquidity. Therefore, we must try to encourage businesses that are trying to look at Africa and also give them the financial support that they need.” ATI started in September 1, 2017 in five countries such as Rwanda, Ghana, Kenya, Uganda and Nigeria. It is a pan Africa online market space for products produced in Africa and a point of convergence for quality trade in Africa. Currently, it has 15,000 online and offline suppliers from all over Africa.

ceutical industries is below 50 percent as most of the resins and other excipients are imported. “We need to have a petrochemical industry that will substitute what we are presently importing. It is a sector with a big potential, but this is largely unrealised because of lack of petrochemical industry,” he said. He said Indorama Eleme

Petrochemicals Plant has not reached the level where it can produce the precursors, stressing that there is no reason Nigeria cannot have a paracetamol plant locally. “If you look at the volume of paracetamol powder being imported into this country, you will see that we have no reason for not having a local plant here,” he said. He advocated for a right policy to attract investments in this area, which is capital intensive. “There must be a period for investors to recoup their investments. There also must be ‘smart protection’. I call it smart protection because if someone sets up a factory and produces in a high-cost environment like ours, and you still allow unregulated importation of what he is producing in a way that he cannot sell, he cannot sustain his investments. I will like to refer to that as smart protection.” He argued that the industries face the infrastructural challenge, which must be immediately addressed. “This industry is yet to be

competitive. If it’s not competitive, then it is set to face challenges when you throw it open to initiatives such as the African Continental Free Trade Area (AfCFTA), which is going to enlarge the market a lot more,” he said. He expressed gratitude to the government for sustaining the fiscal policy in the pharmaceutical sector, which goes to show that industry has a bright future. Chima Igwe, acting director-general of the Federal Institute of Industrial Research Oshodi (FIIRO), said the institute has developed a number of equipment for pharmaceutical and chemical industries. Igwe cited equipment for water recycling and treatment of effluents as well as dryers and stamping machines as some of innovative tools that can help manufacturers. He added that FIIRO has commercialised a high-density biscuit in collaboration with Nasco Foods. The biscuits are used for the federal government’s School Feeding Programme, he said.

‘Restriction of milk from FX market will hurt dairy industry’ Odinaka Anudu

he proposed restriction of milk from the foreign exchange market will hurt the dairy industry and put over one million jobs in jeopardy, according to the Lagos Chamber of Commerce and Industry (LCCI). In a statement signed by Muda Yusuf, director-general of the LCCI, the chamber said the Nigerian economy is not ripe for the policy and argued that it is tantamount to a ban on importation of milk in whatever form as most banks would not process Form M for any product on the CBN forex exclusion list. “We currently do not have dairy cows in the country,” the chamber said. “The dominant milk producing system in Nigeria is the Fulani Nomadic System whose cows have a milk yield of less than two litres a day,

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whereas a good dairy cow will produce an average of 28 litres of milk per day over ten months. During peak lactation, a high yielding dairy cow can produce as high as 60 litres of milk per day.” The CBN recently said time was ripe to restrict milk importers from the FX market to ensure high local input preference. The chamber, however, said Nigerian cows have very low yield because of poor genetic composition, poor feeding practices and the laborious nomadic system of breeding, which should first be addressed. The chamber said there are over one million direct and indirect jobs that will be in jeopardy across the value chains of these industries. “Enough timeline should be given to diary companies for a sustainable transition from the current state of affairs to the desired level of backward integration in the dairy @Businessdayng

industry,” the chamber said. It further recommended robust incentives to attract investors to the supply chain in the dairy industry in line with the backward integration aspiration. It stated that ministries of Agriculture and Water resources should take on the challenge of driving this change process through the creation of incentives for modern animal husbandry facilities and practices. “There should be generous support from government to facilitate the importation of cattle breed [dairy cows] suitable for milk production.” The LCCI said, on account of the foregoing, the CBN should put on hold its proposal to exclude the dairy industry investors from the FX market in order to save the economy of the consequential shocks, business disruptions, investment dislocations and job losses.

Monday 05 August 2019

BUSINESS DAY

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Monday 05 August 2019

BUSINESS DAY

news FMDQ emerges Africa’s first vertically integrated ... Continued from page 1

efficiency, cost effectiveness and transparency in the markets. Following an eventful year, 2019 has ushered in its own share of commendable market-impacting initiatives. Having obtained the approval of the apex Nigerian capital market regulator, the Securities and Exchange Commission (SEC or the Commission), for the amendment of the registration of FMDQ OTC PLC from ‘an OTC Market’ to a fullfledged ‘Securities Exchange’ in March 2019, the company has also since secured the necessary approvals for a name change to ‘FMDQ Securities Exchange PLC’ (FMDQ Exchange) effective immediately, thereby aligning its name to its upgraded status in the capital market. Furthermore, in June 2019, the Exchange received the SEC registration of its wholly-owned central securities depository subsidiary – FMDQ Depository Limited – positioned to provide collateral caching, custodian and settlement services with excellent operational capabilities tailored to provide value to its stakeholders, and completing the value chain of pertinent market infrastructure in the Nigerian financial markets, particularly the post trade spectrum, following the operationalisation of FMDQ Clear Limited. The implications are farreaching as the careful implementation of the FMDQ Entities – FMDQ Exchange, FMDQ Clear and FMDQ Depository – have not only created robust linkages between hitherto fragmented spheres of the markets, but also presented the market with an efficient, innovative and integrated financial market infrastructure (FMI) Group for the seamless execution, clearing and settlement of financial markets transactions. The erstwhile OTC Exchange commenced operations in November 2013, following its launch as an OTC market, primarily to organise the inter-bank market with focus on the fixed income, currency and derivative markets, and as a self-regulatory organisation, providing a worldclass governance structure for the markets within its purview. In view of this, FMDQ Exchange set out to transform the markets, in line with its agenda to make the markets globally competitive, operationally excellent, liquid and diverse; commonly known by market participants as FMDQ’s GOLD Agenda. Following continued collaboration with its varied stakeholders, including regulators and market participants, a resilient product and market development architecture, and a commitment

to operational excellence, FMDQ Exchange has positively evolved despite market challenges and economic headwinds. Attaining its first lustrum in November 2018, and closing the year with a market turnover of N182.86 trillion (from N103.57 trillion in 2014), FMDQ Exchange has assumed an expanded role beyond being a market organiser, to also becoming adviser to governments and regulators, catalyst for infrastructure capital and financial markets diplomat, aligning the domestic markets with its international counterparts and essentially, showcasing the potential of the Nigerian financial markets to the international community. Having set the pace in the fixed income, currency and derivatives markets, FMDQ Exchange, as a full-fledged securities exchange, will position itself to cover new markets - equities and commodities - in the near- to mid-term. Speaking to BusinessDay Media on this ground-breaking development, the Managing Director/Chief Executive Officer of FMDQ Exchange, Bola Onadele. Koko, stated that, “the development of the Exchange over the last five (5) years is reflective of the progressive and dedicated strategic leadership provided by its Board of Directors, as well as the Company’s everintensifying commitment to proactively deliver value to its stakeholders. Having successfully consolidated past gains and taken on new frontiers through the operationalisation of a budding integrated FMI Group across the full value chain of the securities market – execute, clear and settle – the Group is poised to enhance efficiencies in FMDQ’s markets to the benefit of market participants”. According to Koko, as he is popularly referred to in the financial market, it is in view of the resolute affirmation of the FMDQ Entities to influence and promote sustainable development in the Nigerian financial market, one which is in alignment with global standards, that a new identity is being unveiled today. The new FMDQ Logo, whilst maintaining its vibrant colours – deep blue, depicting trust, confidence, depth and stability; bright gold, showing off passion, value, prestige, quality and prosperity; and a touch of cool grey, representing conservativeness, professionalism and sophistication, also reflects FMDQ’s drive to “consistently move forward” and replaces the individual identities of FMDQ Exchange and its wholly owned subsidiaries.

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

L-R: Kyle Kapper, COO, Gokada; Obafemi Hamzat, deputy governor of Lagos State; Fahim Saleh, founder/co-CEO, Gokada; Babajide Sanwo-Olu, governor of Lagos State; Ayodeji Adewunmi, co-CEO/president, Gokada; Dolapo Adejuyigbe, chief strategy officer, Gokada, and Kayode Adegbola, director, government and regulatory affairs, Gokada, during Gokada team’s courtesy visit to the Lagos State Government in Lagos.

Big banks join fintech loan party in boost ... Continued from page 1

be competing against fintech companies who currently dominate the segment. A lower cost of capital and higher liquidity stand the banks in good stead in their quest while the bravery of the fintech companies means they may continue to ser ve risky borrowers. Guaranty Trust Bank (GTB), the country’s largest lender by market value, Friday, sent out emails to people with salary accounts domiciled at the bank, intimating them with some loan products. The loan offer ranges from N100,000 to as high as N30 million, depending on the borrower’s cash flow. It comes with an interest rate of 23 percent per annum and has a repayment period of up to three years that can be structured monthly, quarterly or yearly. The loan only requires a copy of the borrower’s staff ID card and duly signed application forms. The process takes 48 hours, according to information provided in the email. A GTB official declined to provide details on the uptake of the loans but simply said it was “generating interest”. GTB is not the only bank to have sent out emails in the past three months offering personal loan products to Nigeria’s working class. Access Bank, Nigeria’s largest lender by assets has been offering payday loans to some salary account holders. Stanbic IBTC, the local unit of South African bank, Standard Group, has been sending text messages saying people could access a quick 30-day loan in less than a minute and without any paper work. GTB

also offers a similar quick credit product that offers up to 5 million instantly at an interest rate of 1.75 percent per annum. BusinessDay’s interactions with some of the users of these loan products show that the money is largely being channelled to acquiring assets or running a small business. Strong uptake of the loan offerings would spur financial inclusion and could potentially stimulate consumption, boost aggregate demand and create jobs in an economy reeling from low growth and rising unemployment. “Technology has made it easier and cheaper for banks to assess the credit worthiness of borrowers unlike in the past when it was so difficult and as such made the banks to focus more on lending to big corporates and high net worth individuals,” said Taiwo Oyedele, an economist and head of tax and regulatory services at Price Waterhouse Coopers (PWC). “With that out of the way and banks willing to grow their retail loan books, it means credit will be more affordable and that can stir up productive activities in the economy,” Oyedele added. The renewed drive from the banks to boost retail loans is coming on the back of a push by the Central Bank of Nigeria (CBN) to get banks to create risk assets, rather than binge on Federal Government Securities. In late June, the CBN ordered the banks to lend at least 60 percent of their deposits to the real sector before the end of September. The target would require creating an additional N1.5 trillion in loan assets within three

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months. Commercial banks rarely lent money without collateral until now, which explains the preference for big organisations and high net worth individuals. The result is that only 350 Nigerians are said to be responsible for more than 80 per cent of the N5.4 trillion debt portfolio of AMCON, the ‘bad debt liquidator’. Banks are however now convinced that retail lending is the way to go for future growth. Segun Agbaje, the chief executive officer of Guaranty Trust bank said the tier-one lender will make a big push to grow its retail loan book this year and reduce the dominance in upstream oil and gas institutional lending. “We want to grow our retail loan book in an orderly manner without picking up Non-Performing loans,” Agbaje said during an investor conference call at the start of the year. “We want to push more consumer products- from car loans to mortgage financing- into the market to attain the retail lending growth,” Agbaje said. Zenith Bank’s CEO, Peter Amangbo also said in an interview that the country’s second biggest bank by assets plans to expand retail loans as a percentage of total credit to about 4 percent this year from less than 1 percent in 2018. Micro-finance banks and more recently fintech companies took up the responsibility of serving the retail space when it was snubbed by the commercial banks. Currently, platforms like Credit Direct, Paylater, Lydia, Kiakia, Zedvance, Branch, and Renmoney are among @Businessdayng

emerging credit providers that are helping individuals and businesses with the cash flow required to meet urgent obligations. Most of these platforms even claim to disburse loans without collateral and within 24 hours, although when interest rates are considered, it could be quite a steep price to pay. While low interest rates are available, this is often subject to the credit rating of a potential borrower, and could be as high as 60 percent. Ordinarily, such high interest rates would be discouraging for individuals or even businesses. But speed to market and convenience is attracted people to them irrespective of the cost, something the banks have taken note of and are borrowing a leaf from by offering quick credit using short codes. While the renewed drive by banks to grow their retail loan books would have a positive knock on effect on the economy, it is balanced with some level of risk. “Most of these loans are unsecuritised and could easily go bad if Nigeria enters another recession that brings job loses,” Wale Okunrinboye, Head of Research at Sigma Pensions told BusinessDay. The head of retail loans at one of the banks argues that the bank has adequate riskmanagement strategies in place to reduce the risk of bad loans to the barest minimum. “The fintech companies have been playing in that space and have recorded minimal default rates, so we are not overly worried by alarming default rates,” the banker who did not want to be named as she is not authorised to speak publicly said.

Monday 05 August 2019

BUSINESS DAY

news Nigeria needs flag carriers for role in AfCFTA - Aviation House Committee chairman IFEOMA OKEKE

he new chairman of House CommitteeonAviation,Nnolim Nnaji, says Nigeria needs strong flag carriers to be able to play a pivotal role in the emerging African Continental Free Trade Area (AfCFTA). Nnaji, who stated this while interacting with aviation correspondents at the weekend in Lagos, noted that it was regrettable that the country had remained passive in the continental aviation market in recent years despite huge passenger traffic out of Nigeria daily. According to Nnaji, “Though floating a fully government owned airline may not be an alternative, we will work closely with the Executive arm of the government to ensure that competent local airlines are supported to assume the status of flag carriers and operate internationally. “We all know the important role aviation plays in stimulating international trade, so if we must be relevant in AfCFTA initiative our aviation must be of global standards in every aspect,” he said.

Nnaji, who represents Nkanu East/Nkanu West Federal Constituency, Enugu State, further observed that findings had shown that most of the foreign carriers operating into the country had continued to exploit Nigerians with very exorbitant fares since the exit of Nigeria Airways, adding that the National Assembly would through legislation and every possible means seek to stem the tide henceforth. “I have also discovered that all the foreign airlines maintain city offices where they sell tickets directly to passengers as against what is obtainable globallytherebydenyingourlocaltravel agents the opportunity of earning legitimatecommissionsthatwouldhave reduced capital flights and provided employment for our people,” he said. He said the regulatory authority, the Nigerian Civil Aviation Authority (NCAA) would be made to explain the reasons for this anomaly. He equally added that his committeewouldpartneragenciesandthe MinistryofAviationwherenecessaryto make the country’s airspace safe, noting that NCAA must be strengthened to carry out its oversight responsibility without fear or favour.

UNICEF, Alive & Thrive partner FG to promote optimal breastfeeding AMAKA ANAGOR-EWUZIE

etermined to promote optimal breastfeeding practices for enhanced child survival in Nigeria, the United Nations International Children’s Emergency Fund (UNICEF), Alive & Thrive, CS-SUNN, Action Against Hunger and Nutrition International, will partner the Federal Ministry of Health on several key initiatives to raise awareness on exclusive breastfeeding across the 36 states in Nigeria and the Federal Capital Territory. The week-long event is part of activities marking 2019 World Breastfeeding week, scheduled to take place in Abuja on August 6, 2019, with the theme, “Empower Parents, Enable breastfeeding.” It will be hosted by Alive & Thrive, a non-governmental organisation (NGO) managed by FHI 360, and funded by the Bill

HI Farms Limited, a member of the TGI Group, and one of the leading agribusiness companies in Nigeria, has commenced the third phase of its training partnership with German NGO, AFOS Foundation, to grow the capacity of semi-formal educated Agriculturists in Nigeria. The one-year programme will see beneficiaries who are mostly ad hoc staff with the company in various capacities being equipped with best practices to become highly skilled Agricultural technicians. The training will combine both the theory and practical aspects of livestock management, feed milling, hatchery, production and processing equipment, while participants will be offered employment at the company after the program. Tunji Olaitan, general manager of CHI Farms, to flag-off the training said the company has been in partnership with AFOS Foundation since 2017, mostly in areas of management training. “… this new phase which will now provide world class training to our junior staff and operatives, equipping them with global

Extend your employment generation drive to Oyo, Alaafin begs Dangote SEGUN ADAMS

he Alaafin of Oyo, Oba Lamidi Adeyemi, has appealedtothepresident of Dangote Group, Aliko Dangote, to set up viable companiesinOyokingdomasheisdoing across the country. Speaking at the weekend during a meeting with the management of Dangote Group in Lagos, Oba Adeyemi lauded Dangote for employing thousands of Nigerian youths, noting that the nation would witness real growth and development when able youths are gainfully employed. In his response, Dangote assured the Alaafin of his readiness tobringinvestmentstotheancient town by exploring the agricultural potentials of the area to help reduce youth unemployment and vulnerabilityofwomen.Hepromisedtomandatethemanagement of Aliko Dangote Foundation (ADF) to look into social welfare projects it could undertake for the benefit of the people of Oyo. Dangotesaidallhandsshould be on deck now more than ever before for job creation in view

of the growing insecurity in the country, noting that joblessness isamajorfactorbreedingcriminal elements. “If we must enjoy what we have, we must be secured. The security of lives and property is not that of government alone, we all have a part to play. The whole thing still has to do with adequate funding,” Dangote said. The business mogul told the AlaafinthathisFoundationwould put up a team to study the situation and come up with projects that could be undertaken in Oyo that would have positive impact on the youths and the vulnerable women. Earlier, the Alaafin had told his hosts that he came because of the concern for the growing youth unemployment in his domain in particular and the nation in general,sayingheneededtobeassisted to create jobs for the youths. Oba Adeyemi pointed out that Dangote is a phenomenon in Nigeria and his companies are noted for job opportunities across the country and pleaded that the company should help look into areas where the Alaafin’s Palace

and Dangote Group can partner for mutual business relationship. He explained that Oyo is rich in agriculture and urged the company to come and tap into the agriculture potentials of the town to the benefit of the two parties, adding that the agricultural sector has potentials for job creation and food security. The Alaafin and his entourage were received by Dangote at Ikoyi global headquarters of the conglomerate together with the company’s group executive director, Devakuma Edwin, who told the monarch how the companyhadbeencontributingtothe engagement of youths in parts of the country through the Dangote Youth Rice Farm project. He then introduced Alaafin to themanagementofDangoteRice and assured that the team would take a study of Oyo town with a view to replicating the youth rice farm project which had earlier been introduced in neighbouring Iseyin, also in Oyo State, so as to create jobs for the teeming graduates. Edwin explained that the Dangote Youth Rice Farm project

is an out-grower scheme where the company would provide seedlings, fertiliser, chemicals andotherinputtotheyouthfarmers and upon harvest buy back the paddy rice from them at the prevailing market rate and then process for consumption. The GED regretted the growing youth unemployment, describing it as a serious issue that should be addressed quickly. He lamented that many youths have taken to crimes due to frustration arising from joblessness. “A situation where a brilliant child could not go to school because the parents are not paid salaries is very frustrating both to the child and the parents. A situation where others struggled to go to school and graduated only to bejoblesscouldbeveryfrustrating too,” Edwin said. “All these are what cascade to social malaise like terrorism, banditry, kidnapping and other crimes because if the youths cannot get job to do, they just would have to channel their energy towards a direction. This is just one of the reasons we started the youth rice farm projects,” he said.

and Melinda Gates Foundation, Irish Aid, the Tanoto Foundation, and UNICEF. Chris Osa Isokpunwu, head of Nutrition and SUN Focal Point, Federal Ministry of Health, says the campaign aims to address maternity protection, promote and support exclusive breastfeeding. Isokpunwu, who observes that certain cultural practices and lack of support for parents at work stand in the way of optimal breastfeeding, says immediate return to paidwork by mothers after childbirth is one of the main reasons for early cessation of breastfeeding as only 9 percent of organisations have workplace breastfeeding policy. He says this year’s celebration will advocate for parental social protection policies and legislation; parent-friendly workplaces in both formal and informal sectors, and parent-friendly values as well as gender-equitable social norms.

CHI Farms, AFOS Foundation commence third phase of agribusiness capacity training SEGUN ADAMS

best practices in the business. This is a reaffirmation of our belief that real quality in operations requires training to be extended to all cadres of staff and not just the management team,” Olaitan said. A participant at the training, Abejide Omolola, expressed her appreciation to CHI Farms Ltd, noting that the program would provide her and other participants with the opportunity to attain career growth in the industry, an edge that formal tertiary education in the field could have provided for the trainees. “This training will go a long way to help us because; my colleagues and I did not go to any university or polytechnic. Everything we gain will help us do our job better. I am very grateful to CHI Farms Ltd. and AFOS,” Omolola stated. The first two phases of the partnership between CHI Farms and AFOS which focused on trainings for senior and middle management staff respectively, covered areas such as change management, customer value analysis, project management, interpersonal and corporate communication, economics of animal husbandry amongst others. www.businessday.ng

L-R: Onajite Regha, CEO/executive secretary, E-Payment Providers Association of Nigeria (E-PPAN); Lucy Surhyel Newman, managing director/CEO Financial Institutions Training Centre (FITC); Uduk Mary Joseph, acting director-general, Securities & Exchange Commission (SEC); Aishah Ahmad, deputy governor, financial system stability, Central Bank of Nigeria (CBN)/chairman, FITC Board, and Ahmad Abdullahi, director, banking supervision, CBN, during the Thought Leadership Discussion on Financial Technology in Lagos.

FG tackling VAT exemption, others – Osinbajo Iheanyi Nwachukwu

ederal Government says it is already tackling the issues regarding stamp duties collection and the extension of the VAT exemption on capital market transactions. Vice President Yemi Osinbajo stated this at the Awards Night of the Association of Issuing Houses of Nigeria (AIHN), held in Lagos weekend. Recall that VAT charges on transactions in the capital market was suspended in 2014 by then minister of finance, Ngozi Okonjo-Iweala, to encourage increased trading activities in the market. That waiver ended on July 24, 2019. Vice President Osinbajo, who was represented by the acting director-general of the Securities and Exchange Commission (SEC), Mary Uduk, said this and other issues were

being addressed currently and a resolution would be announced very soon. According to him, “We have also commenced work on other aspects of CAMMIC’S requests that require government intervention and would be collaborating with many of you in the capital market community to successfully address them. My Office is actually represented on the CAMMIC. I will therefore be receiving periodic reports on suggestions to further strengthen our support of your efforts and the market as a whole. “We all desire a capital market that would broaden access to economic prosperity by enabling the emergence of financially responsible citizens, accelerating wealth creation and wealth distribution, providing capital to small and medium scale enterprises, and catalysing housing finance.

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Elections more appropriate for change of government, not revolution - Presidency Tony Ailemen, Abuja

he Presidency on Sunday urged the Global Coalition for Security and Democracy in Nigeria, which is planing a “revolution” march for Monday, to shelve the idea, adding that change can only come through the ballot box in an election under the democratic system. A statement by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, said the organisation championing the planned action is not fronted by any serious public faces. The Presidency, therefore, called “on the sponsors and organisers to have the decency to come forward and make their identity known – out of respect to all Nigerians - so that Nigerians can be fully aware in @Businessdayng

...Says days of coups are over whose name this ‘revolution’ is being proposed and who the beneficiaries may be”. “Following calls circulating on social and digital media, an organisation that calls itself the Global Coalition for Security and Democracy in Nigeria plans a ‘revolution’ march tomorrow, Monday, 5th August, with the aim of bringing ‘regime change’ in Nigeria without recourse to a nationwide vote,” the statement said on Sunday. Noting that the President of Nigeria and his administration respect and uphold the right of every Nigerian to peaceful protest and civil campaign, whether to raise awareness on issues, and even oppose the government, the Presidency stated that “it is the inalienable right of all citizens of the Federal Republic of Nigeria to do so”.

Monday 05 August 2019

BUSINESS DAY

cityfile NSCDC alerts to rise in criminal activities in Maiduguri

Members of Ogoja Movement, Abuja Chapter, during a peaceful rally to appeal to President Muhammedu Buhari to assent to the bill establishing the Federal University Technology Ogoja (FUTOG) in Abuja. NAN

We need to police 27 illegal routes in C’ River- NIS MIKE ABANG, Calabar

ommandant o f t h e Nig erian Immigration Service in Cross River, James Okey, says there is an urgent need to police 27 illegal routes across the state to check influx of illegal immigrants. Okey, who is newly posted to the state, stated this when he visited Governor Ben Ayade at Government House in Calabar. Responding, Ayade, who was full of appreciation to the NIS for their improvement in service delivery in the state, especially with regard to issuance of passport, promised to donate a gunboat, a land and monthly security subvention to facilitate the NIS’ operations. He said it was unbeliev-

able that a government office can be so efficient and prompt like the NIS passport office in Calabar has become. The governor said he was deliberately making the promises in order to encourage the service to perform to the optimum and ensure that they help the state curtail the huge number of illegal immigrants that have flooded the state, including the influx of Cameroonian refugees fleeing their country due to the political crisis there. “I do not have any hesitation in approving of all the demands you have made of me because the passport office in Calabar has made me really proud. The services and issuance of Nigerian passports to applicants are so efficient and fast without the usual

drawbacks. I am surprised a government office can be so efficient. “I have approved of the land you asked for. I have approved the donation of gunboat. I have also approved that monthly security support be extended to NIS. “I am happy you asked that a new passport office be opened in northern part of the state. I am so glad to give my support for that”, he added. The governor said there was high level of arm movement and drugs t h rou g h t h e 2 7 i l l e ga l routes by criminals and government opponents. Ayade called for greater collaboration with the NIS as well as visa waiver for foreigners that would be visiting the new Calas Vegas city, which he said

would be the most sophisticated in the country. “We have lot of press u re f ro m i n f l u x f ro m Cameroonian refugees in the state. We are profiling them. We are receiving very good response from foreigners in the state in the ongoing E-registration exercise directed by the Comptroller General of NIS. This will help other security agencies in profiling immigrants in the state. There is need to secure the state. We have deployed our men all over the state. This has helped to reduce the number of illegal immigrants and child trafficking in the state drastically. “We will sustain the acknowledged service delivery of the Calabar passport office,” the NIS commandant assured.

igeria Security and Civil Defence Corps (NSCDC) has raised an alarm over activities of a gang terrorising Maiduguri and its environs. Commandant of the corps in Borno, Abdullahi Ibrahim, said at the weekend that intelligence reports indicated that a cult group known as “Taka Maza” had been terrorising residents and was responsible for the fresh cases of theft and rape in the metropolis. “They maintain a powerful network and initiate teenagers into the gang.

Reports indicate that they meet at Goidongari Primary School in Railway Terminus area on Wednesdays and Thursdays; to plot their nefarious activities to disrupt relative peace in the metropolis,” he said. Abdullahi warned the gang members and other criminals to renounce their activities, adding that the command would not condone breach of peace by such elements. He called on the people to provide useful information on suspicious persons and activities in their communities.

Oyo demolishes shops over environmental nuisance REMI FEYISIPO, Ibadan

or violating the environmental law on building regulations Oyo State government has demolished five shops and relaxation centres. The state also sealed a filling station at Orita Challenge in Ibadan for accommodating a filthy drainage lane which environmental officers alleged exposed residents to varying degrees of environmental hazards. According to the director of engineering and beautification, ministry of environment and water resources, Moshood Adeola who led the enforcement team, government would not relent in enforcing the best environmental culture in the people for the sake of good living. “The refusal of the shop owners to vacate the premises, being a setback led to this demolition. Despite the abatement notices served on them for more than six

months to vacate the premises, they continued their illegal activities which constitute environmental nuisance; they did not yield and we have to come and pull the structures down. “Their offenses range from noise and air pollution, evidence of open defecation, accommodating illicit drug users within the environment and that is why those shops were pulled down.” He said despite the effort of the state government in maintaining a suitable and sustainable environment for all and sundry, some people were still engaged in street trading and non adherence to environmental laws. “This administration will not renounce its stance on zero tolerance for environmental disorderliness,” said Adeola. He warned those violating environmental laws or constituting nuisance to the environment to desist from the act or be prepared to face the law.

Sanwo-Olu kicks off free healthcare for children JOSHUA BASSEY

overnor of Lagos State, Babajide Sanwo-Olu, at the weekend, flagged off a free healthcare programme aimed at combating organ impairment and life-threatening ailments in children. The initiative tagged “healthy bee project” is a component of the state government’s development agenda to reposition healthcare and give disadvantaged children access to quality medical care. The free medical mission is organised in collaboration with Babajide Olusola Sanwo-Olu Kadiri Obafemi Hamzat (BOSKOH) Healthcare Mission International, a non-governmental organisation (NGO). The four-week programme will commence with a six-day screening in seven

Primary Healthcare Centres (PHCs) across the state, after which those whose conditions require higher medical examinations and surgeries will be taken to the tertiary healthcare facilities for the exercise free of charge. Flagging off the healthcare project at the premises of Lagos Television, on Friday, Sanwo-Olu, represented by his deputy, Obafemi Hamzat, said the programme had been designed to keep children fit for their study and activities that would make them attain their potential. He encouraged parents to utilise the opportunity to take their children for screening and treatment for medical conditions that can limit their mental and physical development. “If children lack access to good health facilities and quality medical attention, www.businessday.ng

they might lose their ability and functionality. We want to help them fight ailments that can put them at disadvantage. This is the reason the programme is essential to make sure our children live a good and fulfilling life. First lady of the state, Ibijoke SanwoOlu, who was at the event, explained that the medical mission was borne out of the commitment of the government to bringing down the rate of childhood diseases and disabilities. She said children whose conditions required advanced care would be examined by a team of children health experts and surgeons from the United States, Europe and Nigeria who are volunteers in the mission. She said: “As a mother and medical doctor, I understand the momentous

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mileage we stand to gain from this strategic intervention championed by the state government in partnership with BOSKOH Lagos Healthcare Mission International. “Anything we do for our children today will definitely play a key role in the adults they grow to become in future, and this healthy bee project is specially targeted at building a critical mass of healthy children and adults in the state.” Executive director of the NGO, Nike Osai, praised the government for approving the medical intervention, stressing that it was an investment the state would not regret. She said the programme would involve screening for ailments and those found to have visual or hearing impairments will be provided with glasses and hearing aids to help them overcome the condition.

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NEWS

DSS confirms arrest of Sowore … arrest is travesty, Soyinka tells police, DSS Innocent Odoh, Abuja & Joshua Bassey, Lagos

he Department of State Service (DSS) has confirmed that Omoyele Sowore, presidential candidate of the African Action Congress (AAC) in the last general election, is in their custody over his plannedprotestonMonday,which the secret police says is a threat to public safety, peace, security and social harmony. Briefing newsmen at the DSS headquarters in Abuja on Sunday, the public relations officer of the Service, Peter Afunanya, said the Federal Government would not sit and watch an individual or group of individuals threaten the nation with terrorism, sabotage and subversion. Sowore was arrested on Saturday morning in Lagos, over his planned “Revolution Now” nationwide protest. He has been reportedly brought to Abuja. “The DSS as we are all aware is charged primarily with the detection and prevention of crimes and threatsagainsttheinternalsecurity ofNigeriaandfundamentallymore importantly, the service is also charged with the responsibility of managing, containing, curtailing, eliminating threats against the national security of Nigeria,” he said. Meanwhile, Nobel laureate, Wole Soyinka described the arrest as a travesty and violation of the fundamental rights of citizens to congregate and make public their

concerns. According to Soyinka, the young politician has done nothing wrong to warrant the threat of treasonable act being claimed by the Inspector General of Police, Mohammed Adamu. Operatives of the DSS, in the early hours of Saturday arrested Sowore, who is also the convener of ‘#RevolutionNow’ protests. Sowore posted a distress tweet at exactly 1:25am with an eyewitnessconfirmingthathisphonewas forcefully taken from him. Soyinka, in a statement on Sunday,titled:“Surely,NotAgain!!!,” said the deployment of alarmist expressions such as “treason”, “anarchist”, “public incitement” by security forces had become so predictable and banal that they have become meaningless.” However, the DSS added that Sowore’s planned action constitutedseriousthreats,whichinclude “threatsofsabotage,threatsofsubversion, threats of terrorism and of course,threatsofespionageandall others including ethnic agitations, economic sabotage and all of that. “Now, if we are operating as a responsible security organisation and someone is calling for revolution in Nigeria, and what is revolution? Primarily, it means a revolt, it means an insurrection, it means insurgency, it means forcefultakeoverofgovernmentandthis is a democracy, Nigeria operates a www.businessday.ng

democratic system, Nigeria, we all are aware is not a banana republic and cannot suddenly be made one. Nigeria is respected in the comity of nations. “Nigeria is not just the giant of Africa, it is the pride of Africa and so, the DSS will not just sit by and watch someone or his group or cohorts would want to rise and threaten the peace, unity, constitutionalismofourbelovedcountry. WhetherSoworeiswiththeDSSor not,theanswerisintheaffirmative, he is with us. And why is he with us?Hehascrossedthelines,hehas threatened public safety, Sowore has as a matter of fact, threatened the peaceful coexistence, social harmony of Nigeria and there is apprehension, there is anxiety, citizens’ residents are worried as to what will happen next. “We want to use this opportunitytoassurelawabidingNigerians, friends of Nigeria, citizens of the world and indeed people of the world that come tomorrow 5th of August, 2019, that there will be absolute peace in Nigeria, nothing will happen, there won’t be any revolution, the government has beenelecteddemocraticallywillbe in place. There would not be any forcefultakeoverofgovernmentand theDSSwillnotstandbyandseeself serving people take laws into their hands; we will do what is necessary within the law to discharge our responsibility and ensure that there is peaceinNigeriabeyondtomorrow.

‘FG budgets N2.2bn for Ruga implementation in 2019 budgets’ … not meant for South East, South West, South South - Enang Tony Ailemen, Abuja

ndications emerged weekend that the Federal Government was pushing ahead with the implementation of the controversial “Ruga” policy, as the sum of N2.2 billion had been budgeted for it in the 2019 appropriation laws. Senior special assistant to the President on National Assembly (Senate) Matters, Ita Enang, made the revelations weekend, while calling on states in the southern part of the country to support the implementation of the proposed Ruga cattle settlement programme by making land available. Enang, who is yet to be reappointed but has been functioning in that capacity like others, disclosed that the N2.258 billion was provided for the implementation of the Ruga programme in the 2019 budget, when he hosted law students of Akwa Ibom origin attending Law School in Abuja Enang faulted the claims by some people that it was meant to create Fulani colonies, adding that it was not meant for states in the South East, South West and the South South, but 10 states, mainly North Central, and few states in North West and North East.

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“Ruga is not derived from Hausa or Fulani, but an acronym for Rural Grazing Area (RUGA) initiated in 1956 during the colonial era, and is not intended to Islamise, fulanised or colonise anybody,” he said. He fund s in the Volume 1 of the 2019 federal budget, submitted by the Ministry of Agricultural and Rural Development under the item number ERGP 5208 where the sum of N2.258 billion was provided and budgeted for the grazing programme, he said. He also cited other provisions in the budget such as N300 million for water and sanitation, N400 million developments for sweet potatoes, N350 million for ginger development, among several other budgeted. He said the Ruga policy was just one component of the budget under the Ministry of Agriculture, and stressed that the objective of the budget for Ruga was to promote cattle breeding and meet production. He said the Ruga programme was an integrated farm system, which had schools, good road, tractors and mechanisation, agricultural integration, with a provision for primary healthcare, vetnary, schools. According to Enang, there are other sums provided for the @Businessdayng

emergency of Ruga implementation programme approved in May by the National Economic Council for states that will make land available. Enang, who stated that he had been hosting students of Law School from Akwa Ibom State since 1999, said this year programme was specifically to enlighten them on the objective of Ruga programme against the misconceptions making the rounds. “One of the rumours was that President Buhari was going to acquire people’s land to feed cow,” adding that “if lawyers understand Ruga, the world will understand,” he said. ”The programme is meant to address the issue of cattle roaming and destruction of farmland, which would put an end to the herders/farmers crisis. ”The idea of Ruga graduated in 1978 into the Land Use Act, which states that a portion of land has to be reserved for grazing to avoid the destruction of farm produce by cattle. ”Over time cattle roamed and destroyed farms hence the introduction of the policy to address the issue,” he said. He noted that in places like the north, earth dams were constructed to cater for cattle.

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APCON, OAAN, LASAA begin investigations on indecent truck mobile advertisement seen at Lekki Toll-Gate Daniel Obi

igeria’s advertising regulatory bodies have started investigation to unravel the agencies and brands behind a repulsive viral video of semi-nude ladies in a see-through mobile advertisement truck along Lekki Lagos and which is circulating on social media. The offensive mobile advertisement for a yet-to-be identified product or service was exposed and driven along Lekki-Epe Expressway in Lagos in a truck with registration number APP 713XL. Condemning the advertisement, Advertising Practitioners Council of Nigeria (APCON), the apex advertising regulatory body, said it had activated all necessary measures to ascertain the persons or advertising agency or agencies or organisations behind the act. The acting registrar/CEO of APCON, Ijedi Iyoha, said the organisation shall also be working with other relevant government agencies and advertising stakeholders to

ensure that the rule of law was applied and to further ensure that such and similar abhorrent forms of advertisements were avoided in future. “APCON strongly condemns the advertisement which is grossly indecent, disrespectful to Nigeria’s culture and prepared with little or no sense of social responsibility. It violates the common principles of decency promoted in the Code of ethics of advertising practice and unnecessarily exploited and depicted unwholesome sexual behaviours,” Iyoha said. APCON is committed to ensure that all advertisement in Nigeria directed at the Nigerian market shall be legal, decent, honest, truthful, respectful and mindful of Nigeria’s culture, constitutional tenets and relevant lawful enactments as well as having a high sense of social responsibility, Iyoha said. Also, the Outdoor Advertising Association of Nigeria (OAAN) has condemned the outdoor mobile advertisement.

MTN seeks tax tribunal ruling over disagreement with FIRS SEGUN ADAMS

TN Nigeria has sought the judgment of a tax tribunal over variance with the Federal Inland Revenue S er vice (FIR S) on tax deductions from a fine imposed by the Nigerian Communications Commission (NCC) in 2015. An N1.04 trillion fine was slammed on MTN four years ago for failure to deactivate all unregistered lines within the period stipulated by the NCC. The fine was later reduced by 25 percent, then to N330 billion based on an agreement with the telecom regulator, which saw MTN list on the Nigeria Stock Exchange in May this year. While the sixth and final instalment of the fine was settled in May, the federal tax authority has queried the treatment of the fine by MTN as part of the cost of running its business, hence tax-deductible.

In a statement sent to the exchange on Friday, the telco acknowledged the “technical disagreement” with the FIRS and said it was seeking the ruling of tax tribunal on the matter. “ H o w e v e r, w h i l e t h e monies have been paid to FIRS, we have taken the disagreement to the Tax Tribunal set up by FIRS chairman and Minister of Finance, and are awaiting a decision,” the company said. The FIRS had said MTN’s treatment of the fine, as a tax-deductible item was wrong. “One cannot be given a penalty or fine, which is a punitive measure, and the company is saying it is tax-deductible so that it will get a tax credit on that,” Tunde Fowler, chairman, FIRS, said. “Initially they (MTN ) made the payment on account. The FIRS said, no, it is not on account, but it is tax due to government,” Fowler said.

Learners hail Nexford’s quality, payment plan BALA AUGIE

earners and alumni of Nexford University have hailed the quality of education they got while studying for a Master of Business Administration at the university. It was learnt that since launching in the market five months ago, Nexford University has enrolled hundreds of learners in Nigeria. While giving their testimonials, the learners rated the quality of the university high when compared with others. They applauded the university’s method of dealing with students, saying it rekindled their learning spirit. One of them, Rebecca Ebokpo, says she dropped another university’s admission to attend Nexford. In her testimony, the mother of two, says Nexford made managing her business, family and academic easy for her. She said, “Nexford gives an affordable learning environment that is very high in quality, so I didn’t end up trying to spend a lot of fortune trying to get an MBA. “The payment plan is very reasonable, especially if you don’t have huge sum to put into educa-

FITC engages stakeholders on fintech as CEO Newman lists achievements SEGUN ADAMS

he Financial Institutions Training Centre (FITC) has helditsThoughtLeadership Series2.0,ontheimplicationsofthe disruption of the banking industry byFinancialTechnology(FinTech). The event, held in Lagos and attended by industry leaders from banking,insurance,PensionFund Administrators (PFAs), National Pension Commission (PenCom), Nigerian Stock Exchange (NSE), SecuritiesandExchangeCommission (SEC), fintech firms and the CentralBankofNigeria(CBN),was anopportunityfortheparticipants to review preliminary findings of a FinTech Awareness and Skill survey deployed by FITC, FinTech AssociationandFinTechCircle,UK andprofferregulationsandoperational solutions for the emerging landscape of the financial services sector. The event, with the theme: ‘Emerging Financial Technology andtheNigerianFinancialServices Sector: Exploring Opportunities for Global Competitiveness’ had a panel session, where both regulatorsandoperatorsspokeonopportunities and threats presented by theemergenceofFinTechsandthe preliminary findings of the survey. Speaking at the event, FITC managing director/CEO, Lucy Surhyel Newman, said the financial services sector had experienced disruption because of the innovation related to technology. She said that FITC and its partners as named, chose to start from the basis of the research, by getting data on the industry and then get stakeholders to discuss key industry issues. Also speaking at the event, CBN deputy governor, Financial System Stability and chairman, FITC Board, Aishah Ahmad, said fintechs present a huge opportunity for the financial sector, especially in getting more unbanked to embrace financial services. She said fintech would help

in cross-boarder payment and help bring in more funds from the Diaspora into the economy, saying a large part of the Diaspora remittances were still in the informal sector, as there was a need to bring them into the formal sector through fintechs. Mary Uduk, acting directorgeneral, SEC, said the fintech market needed to be ahead of regulation. She said regulators would always watch to see loopholes in the industry operation and intervene through laws and guidelines for the sector. AdeBajomo,executivedirector, Information Technology at Access Bank plc, who was one the discussantatthepanellistsession,saidthe financial sector should welcome and adopt digital technology adding that fintech was the way to go. Other panellist included the director-general SEC, Mary Utuk, who chaired the session, CEO/ executive secretary, E-Payment ProvidersAssociationofNigeria(EPPAN), Onajite Regha, Babatunde Obrimah, representing FinTech Association Nigeria, and Aderemi Atanda,representingSystemspecs. Newman speaking at an interview after the event, said: “You can see from the panellist’s discussion, first of all, how they responded to the survey, and what their respective institutions are doing, and what they think regulators should do to help the system. For us at FITC, from the fact that financial technology has entered the financial services sector, we think it is better for the financial services sector to embrace it. For us at FITC, we are happy to bring such conversations, and hopefully, apt policies can emanate from today’s discussion.” Newman also spoke on her legacies at the FITC at the event, saying her biggest legacy was being able to take FITC beyond the aspired Financial System Strategy (FSS) 2020 environment, for FITC institutional members and stakeholders. www.businessday.ng

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tion at once, so it makes it flexible. Knowing that as a first time learner you get some form of scholarship was an advantage. Nexford makes education convenient. “I am a family woman with two children and the challenges became enormous. I was initially considering separation from my family because I wanted to marry. I also have a client base that would require my personal attention. So, I didn’t know what to do. I was confused, but determined to complete my MBA. I saw Nexford online at a time when I already enrolled in another university. “But when I looked at Nexford’s plan, strategy and efforts that the university is trying to put in place to ensure that it brings education to my doorstep, I thought that I should enrol in that.” Ebokpo adds, “I believe that the knowledge will go a long way with me in managing my law practice and relating with clients on business-related issues. “I’m happy to be part of the movement to the next generation of education. I am going to use my MBA to support my law practice and advise clients.”

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Monday 05 August 2019

BUSINESS DAY

PHOTOSPLASH

2nd annual dinner and awards night of the Association of Issuing Houses of Nigeria (AIHN) in Lagos

L-R: Ike Chioke, 1st vice president, Association of Issuing Houses of Nigeria (AIHN); a guest, Chuka Eseka, president AIHN; Sunny Ayere, past president, and Samuel Chidoka, director of treasury, AIHN.

Victor Ndukauba of Afrivest (l); Tajudeen Ahmed of BUA (m) and other guests.

Kobby Bentsi-Echill (l) of Stanbic IBTC Capital and guests.

L-R: Gboyega Soyannwo, deputy chief of staff, representing the governor of Lagos State; Mary Uduk, Ag DG, Security and Exchange Commission (SEC), representing the vice president, and Chuka Eseka, president, Association of Issuing Houses of Nigeria,

L-R: Ike Chioke.1st vice president, Association of Issuing Houses of Nigeria (AIHN); Kunle Alake of Dangote Group, and Oscar Onyema, CEO, NSE.

L–R: Chuka Eseka , president, Association of Issuing Houses of Nigeria (AIHN); Kobby Bentsi-Enchill, executive director and head, Debt Capital Markets, Stanbic IBTC Capital Limited; Mary Uduk, acting director general, Securities & Exchange Commission (SEC); Funso Akere, chief executive, Stanbic IBTC Capital Limited; Oyinda Akinyemi, executive director, Stanbic IBTC Capital Limited; and Tokunbo Aturamu, executive director, Stanbic IBTC Capital Limited, at the presentation of ‘Best Investment Bank 2018’ award during the AIHN 2nd Annual Dinner and Awards Night in Lagos on Thursday, 1 August, 2019

Cross section of guests at the event.

Mary Uduk, Ag DG, Security and Exchange Commission (SEC), representing the vice president (l); Chuka Eseka, president, Association of Issuing Houses of Nigeria (r) and Abubakar Sani Bello, governor, Niger State (2nd r ). www.businessday.ng

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Monday 05 August 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

BENEDICT MANDER IN BUENOS AIRES, NAJMEH BOZORGMEHR IN TEHRAN AND MICHAEL PEEL IN BRUSSELS

he International Atomic Energy Agency must be unyielding in reporting any failure by Iran to comply with a landmark nuclear agreement that is gradually unravelling, according to a leading contender to head the UN’s nuclear watchdog. Rafael Grossi, an Argentine diplomat who is in the running to take over the IAEA after the death of its previous director-general, Yukiya Amano, in July, said the agency had to “tell it as it is” and stick to its mandate of policing compliance with the 2015 deal. The atomic deal has come close to collapse since US president Donald Trump pulled out of it last year. The IAEA had consistently found Iran to be honouring its pledges under the accord, but the Islamic republic said in May it would gradually decrease its commitments to limit uranium enrichment activities. Iran has promised to renew its full compliance if European states do more to help it withstand US sanctions. Mr Grossi, 58, told the Financial Times that Iran’s stepping up of uranium enrichment may not threaten an imminent crisis, but was “a serious matter” that must be handled “extremely prudently” to avoid further escalation. “Stability must be restored,” he said. The nuclear deal, which gave Iran relief from international sanctions in return for curbs on its atomic programme, aimed to keep the country at least one year away from amassing

UN nuclear watchdog contender calls for strict Iran policing Argentine diplomat Rafael Grossi is vying to lead the International Atomic Energy Agency

enough fissile material to make a nuclear weapon. Mr Grossi indicated that Iran’s position had not changed in the recent past, saying it was still little more than a year away from reaching

Critics blame authorities as farmers’ wells are drained dry to send water to the city

urugan Sundaramurthy’s water business is buoyant. His fleet of tanker trucks have been fanning out across the countryside around Chennai for two decades, sucking water from boreholes and delivering it to homes to quench the city’s thirst. But demand today is as high as he can remember, prompting him to add 500 more vehicles to his existing fleet of 4,500. The public water supply, the supposed alternative for his customers, has been reduced to a trickle by a withering drought. But the shortages also reflect a pervasive problem across India: water management by the authorities that has been inadequate for years. Rain or shine, Chennai depends on water trucks because officials have neglected to invest in water infrastructure while allowing developers to build on wetlands. One result is rising communal tensions. Rural residents living near Chennai have staged violent protests to draw attention to complaints that their wells are being

drained dry to supply the city by members of a “water mafia” such as Mr Sundaramurthy. The businessman, who pays Rs400 ($5.75) for a tanker full of well water, argues that he supplies an essential service. “I agree that I am stealing water, that I am a robber, but the people drinking the water are also complicit in the crime,” he says. The drought this year has been so severe that experts say a days-long deluge at the end of July will have had no impact. “The water levels in the reservoirs have dropped below 10 per cent, a few days of rain is not going to bring up the reservoir levels up,” said Arunabha Ghosh, chief executive officer of Council of Energy, Environment and Water, a non-profit policy research group based in Delhi, adding that the rain “does not solve chronic water mismanagement”. Critics blame the local authorities. Unlike in Cape Town, South Africa — which mounted an extensive water conservation campaign last year as drought took hold to avert “day zero”, the day it said water would run out — authorities in Chennai at first dismissed the crisis as fake news. www.businessday.ng

and use of nuclear weapons. Mr Grossi said it was an open question whether Iran’s enrichment move was a protest at economic hardship caused by US sanctions or a “deliberate accelerated effort” that

Eastern Europe sees sharp rise in swine fever outbreaks

No end to crisis in sight as drought grips India’s Chennai STEPHANIE FINDLAY IN CHENNAI

a “breakthrough”. Iran insists that it has no intention of building a nuclear weapon. Ayatollah Ali Khamenei, Iran’s supreme leader, has issued a binding religious decree which forbids proliferation

could lead to a “more problematic situation”. On Sunday Iran’s Revolutionary Guards announced it had seized a foreign oil tanker for smuggling fuel last Wednesday, the latest detention of a vessel amid elevated tensions in the Gulf. Iran did not disclose the nationalities of the tanker or its seven foreign crew members. Mr Grossi is currently Argentina’s ambassador to Austria, and the country’s representative to international organisations based in Vienna, which is the home of the IAEA. Despite the “gloom and despair” provoked by the situation in Iran, he cast doubt on whether the world was entering a new era of nuclear proliferation. “History is not linear,” said Mr Grossi, arguing that just two years ago the world was far more worried about an “alarming” build-up of weapons in North Korea. Mr Trump has held three meetings and exchanged warm words with Kim Jong Un, North Korea’s leader, but the commitments agreed so far have been vague and there have been no firm indications that Pyongyang has curbed its nuclear programme.

Growing signs that devastating virus that has gripped Asia could hit Europe VALERIE HOPKINS IN BUDAPEST, MICHAEL PEEL IN BRUSSELS AND EMIKO TERAZONO IN LONDON

frican swine fever is threatening to take hold in Europe as a sharp increase in cases of the virus raises concerns among farmers and animal health experts about its potential to devastate the continent’s pork industry. In the past month Romania has seen a jump in reported swine fever cases among domestic pig herds with about 300 new outbreaks reported in July, up from nearly 80 in June and 30 in January. The European Commission said the fight against swine fever, which is fatal for pigs but poses no threat to human health, was an “extreme and urgent challenge” because of the threat it posed to the continent’s pig herds. African swine fever — which was identified in Kenya in the early 1900s — has spread rapidly in China and other parts of Asia over the past year, pushing up pork prices. More than 4m pigs have been culled in Asia and according to

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some estimates China’s pig herd could halve in size from last year as a result. In the EU, Bulgaria has also stepped up pig culls after 18 cases were diagnosed in July while Slovakia reported its first case of the disease last month. The virus has not yet spread to Europe’s leading pork-producing nations, including Germany, France and the Netherlands. But Justin Sherrard, an analyst at Rabobank, said that “as seen in China and Vietnam, if the disease were to spread, it will have devastating consequences [in Europe]”. All 28 EU member states are obliged to apply prevention and control measures where the disease is suspected or confirmed. Romania’s outbreak of the highly contagious disease is “an unfortunate mixture of politics, disorganisation and inefficiency,” said Ioan Ladosi, president of the Romanian Association of Pork Producers, which represents producers of more than 80 per cent of the country’s pigs. Romania culled more than 200,000 pigs last year when the country’s largest pig breeder was @Businessdayng

infected. Mr Ladosi blamed the government for the latest outbreak, saying it had “failed to implement in full” the recommendations made in EU audits over the past 12 months “for a simple reason: politics and votes” as politicians feared angering small farmers. Romania’s pig industry includes about 250 commercial pig producers, but more than 50 per cent of animals are raised by backyard farmers. Mr Ladosi accused politicians of favouring the small-scale businesses in an attempt to boost their votes, making the swine fever outbreak a “political disease”. The virus is mainly carried by wild boar which mingle with roaming domestic pigs. It was first detected in Georgia in 2007, from where it spread to Russia. By 2014 cases had been seen in Ukraine and Belarus and then Lithuania, but incidence had until recently been largely confined to wild boar. Vytenis Andriukaitis, EU health and food safety commissioner, last month urged member states to be extremely vigilant during the summer months, when incidents of the disease tend to peak.

Monday 05 August 2019

BUSINESS DAY

NATIONAL NEWS

Thousands flee Kashmir over rising terrorist threat New Delhi orders visitors including tourists and pilgrims to evacuate region AMY KAZMIN IN NEW DELHI

housands of people fled India’s Kashmir valley over the weekend after New Delhi ordered the evacuation of visitors including tourists, pilgrims and migrant workers, citing an elevated threat of terrorist violence. The Indian army said in a statement over the weekend that in the past week there had been numerous ceasefire violations along the line of control that divides Muslim-majority Kashmir between India and its neighbour and rival, Pakistan. Indian Air Force planes were assisting in the unprecedented evacuation of some 20,000 Indian and foreign visitors from the region, where many people rushed to Srinagar airport to try to get seats on commercial flights, sending ticket prices soaring. The army described a “spurt in activities of infiltration” by Pakistan’s border action team, which it said was seeking to provide cover for fighters to slip into Indian-held territory “to disrupt peace” along the line of control in Kashmir. However, Imran Khan, Pakistan’s prime minister, on Sunday accused India of using “cluster munitions” against civilians along the line of control in violation of international humanitarian law, and called on Washington to intervene. “President Trump offered to mediate on Kashmir. This is the time to do so as situation deteriorates there and along the LOC with new aggressive actions being taken by Indian occupation forces,” he tweeted. “This has the potential to blow up into a regional crisis.” Private colleges and their hostels have also closed indefinitely, with colleges advising students from outside the region to return home and laying on buses to help them leave. The exodus of outsiders from the picturesque but politically volatile territory generated anxiety and panic buying among Kashmir’s local population, who formed long queues for petrol and other supplies. Kashmiris were already on edge following the movement of tens of thousands of Indian security personnel to the heavily militarised region in recent weeks. Rumours have spread that Prime Minister Narendra Modi’s Hindu nationalist government is planning to abrogate the special legal provisions that protect Kashmir’s special character as India’s only Muslim-majority state, in-

cluding rules that bar outsiders from buying property and holding state government jobs. Omar Abdullah, former chief minister of Jammu & Kashmir, tweeted after the exodus began: “It is easy to accuse us of spreading fear but no one is bothering to tell the people what is happening so how do you expect that fear won’t be a natural result of this situation that has been allowed to fester.” The exodus began after Indian authorities announced late on Friday that they were cancelling the Amarnath Yatra, an annual pilgrimage to a sacred cave, after finding evidence of a planned terror attack on Hindu pilgrims. Security officials told Indian media that they had discovered a Pakistani-made landmine and an improvised explosive device near the pilgrimage route. The authorities then urged all other visitors to the region to leave, sending officials to hotels in mountain resorts to clear out visitors in a move that brought an abrupt end to the summer tourist season. Migrant labourers, who are thought to number nearly 200,000 in the state, have also begun to flee. Tensions between India and Pakistan — which have fought four wars over Kashmir since 1947 — have also risen along the line of control, the de facto border that divides the region between them. Earlier this year, India carried out a missile-strike on a suspected terror training camp in Pakistan, after a suicide bomber killed 44 paramilitary personnel in the Kashmir region. On Saturday, the Pakistani military accused India of using cluster bombs “in violation of international conventions”. The Indian army said it had dealt with infiltration attempts along the line of control with “utmost professionalism and responded in a calibrated manner to target terrorists and the Pakistani army’s complicity”. In a weekend statement, Pakistan’s foreign ministry warned that it was “strongly opposed to any move that would seek to alter the demographic structure” of the Kashmir Valley”, a move that it said would be “in violation of the UN Security Council resolutions and seriously endanger peace and security in the region”. The UK and Germany were among six countries that issued travel advisories this weekend urging their nationals to avoid all travel to Kashmir in view of the prevailing situation. www.businessday.ng

US rocked by two mass shootings in 24 hours Nine dead in Ohio attack after El Paso massacre kills 20 AIME WILLIAMS IN WASHINGTON AND REUTERS

t least 29 people were killed and dozens wounded in two separate mass shootings as the US was rocked by a weekend of gun violence. The latest incident came early Sunday when ten people, including the suspect, were killed in a shooting in Dayton, Ohio, and at least 16 others were taken to hospital with injuries, police said. Authorities gave no details about the circumstances of the shooting except that it occurred in the city’s Oregon district, a historic neighbourhood known for its nightclubs, bars, art galleries and shops. The incident followed a gun attack on a crowded shopping mall in El Paso, a Texan city close to the US border with Mexico, on Saturday in which at least 20 people were killed and 26 wounded. El Paso police identified the gunman as Patrick Crusius, a 21-year-old white male from Allen, Texas, following the shooting at a Walmart store and elsewhere at the Cielo Vista Mall, one of the largest malls in El Paso, on

Saturday morning. Greg Allen, El Paso police chief, said the killings could be a potential hate crime after police officers uncovered “a manifesto” linked to the suspect, whom he would not name. “That might step on the FBI’s toes, but for now we’re taking this down the road of simply a murder investigation with numerous casualties,” Mr Allen said. The suspect, who comes from a city more than 650 miles away from El Paso, faces several capital murder charges. US media reported that the anti-Hispanic manifesto posted on social media had expressed sympathy for the Christchurch mass killer, who murdered 51 in New Zealand. The FBI said more investigation was needed before the killer’s motives were determined. El Paso police said they had been assisted at the crime scene by the FBI, the sheriff’s office, and border patrol. “Everyone that carries a badge in this town pretty much turned up,” said Mr Allen. “Needless to say, the scene is horrific at the moment.” Sgt Robert Gomez earlier told reporters that “little to minimum force” was used to take the suspect

into custody, and that no officers fired their weapons. In a press conference, Texas governor Greg Abbott thanked law enforcement agencies for the “swift response they took to minimise the loss of life by directly confronting the shooter, getting him to disarm himself, and being able to arrest him”. Ryan Mielke, director of public affairs at the University Medical Center of El Paso, said the hospital had received 13 victims, one of whom had died, while some remained in a critical condition. A second hospital — the Del Sol Medical Center — also received 11 victims, it said in a statement. White House deputy press secretary Steven Groves said that US president Donald Trump had been briefed on the shooting, and had spoken with attorney-general William Barr and Mr Abbott. Mr Trump later tweeted: “Today’s shooting in El Paso, Texas was not only tragic, it was an act of cowardice. I know that I stand with everyone in this Country to condemn today’s hateful act. There are no reasons or excuses that will ever justify killing innocent people.”

German manufacturer eyes British Steel’s French plant Hayange mill tests materials from Saarstahl amid efforts to save UK group MICHAEL POOLER, INDUSTRY REPORTER

German group is interested in buying British Steel’s French factory, according to people aware of the situation, even as efforts drag on to prevent a breakup of the stricken company. British Steel collapsed into insolvency more than two months ago after the government rejected its plea for a bailout, throwing into doubt the future of one of the country’s largest manufacturers. With a process under way to find a buyer to rescue the busi-

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ness out of liquidation, the government and unions want it to be sold as a single going concern rather than flogged off piecemeal. They believe that is the best way to preserve production and the jobs of the company’s 5,000-strong workforce, more than half of which is based in Scunthorpe, Lincolnshire. However, some of British Steel’s smaller factories and individual business units have attracted the attention of potential suitors. Its Hayange mill in northern France has been eyed up by @Businessdayng

Saarstahl, a German steel producer, according to three people with knowledge of the situation. The facility employs around 400 people producing rails for train lines and tramways and is profitable, according to a person close to the business. Hayange is supplied with steel blooms from Scunthorpe but in recent weeks the French site has taken trial deliveries of material from Saarstahl for test rolling, according to two people. Saarstahl might also be interested in British Steel’s Dutch manufacturing subsidiary, FN Steel, they added.

Monday 05 August 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Berkshire Hathaway’s cash pile hits $122bn as profits jump

US stock surge lifts Warren Buffett’s equity portfolio but operating earnings fell

ERIC PLATT IN NEW YORK

arren Buffett’s Berkshire Hathaway on Saturday reported a jump in second quarter net profits and said its cash pile swelled to a new high, as the broader US stock market lifted the value of its multibillion-dollar equity portfolio. The sprawling investment conglomerate said profits in the second quarter climbed 17 per cent from a year earlier to $14.1bn, or $8,608 per class A share. The company attributed just under $8bn of its profits in the period to swings in financial markets and the sales of some of its securities, which offset lower insurance underwriting profits in the three months to June. Berkshire’s cash pile also continued its ascent, reaching a record $122bn in the period, while the value of its stock portfolio rose above the $200bn mark. Mr Buffett has struggled to clinch a significant takeover in recent years. In a letter to shareholders in February he warned that prices for businesses were “skyhigh” and that the group is likely to invest in stocks as it hopes for an “elephant-sized acquisition”. Instead the group spent roughly $442m in the quarter buying back its own stock, lifting repurchases in the first half of the year of class A and B common stock to $2.1bn. The share

buybacks are now closely watched by investors and analysts, with some hoping Berkshire will accelerate its repurchases. James Shanahan, an analyst with Edward Jones, said investors have been disappointed by the “lack of activity” at Berkshire recently; it last clinched a major takeover more than three years ago. Even after its $10bn investment in Occidental Petroleum to fund the oil group’s purchase of rival Anadarko is completed later this year, Berkshire’s cash pile could still be higher than year-ago levels come December, Mr Shanahan added. “The inability to identify attractive operating companies to acquire…that is a problem that has persisted for a long time,” he said. “This cash balance growing out to a new record level is frustrating to a lot of investors, but they have been taught over decades to appreciate the management team will be cautious and wait for opportunities.” The headline figures accompanied operating results from Berkshire’s dozens of businesses that point to weakness in the US economy. Operating earnings at Berkshire fell 11 per cent to $6.14bn in the three months to the end of June, partly weighed down by higher expenses at its insurance unit Geico and declining agriculture and consumer products shipments on its BNSF railroad.

The billion-dollar bet to reach human-level AI OpenAI believes that huge computing power is key driver RICHARD WATERS IN SAN FRANCISCO

n the race to build a machine with human-level intelligence, it seems, size really matters. “We think the most benefits will go to whoever has the biggest computer,” said Greg Brockman, chairman and chief technology officer of OpenAI. The San Francisco-based AI research group, set up four years ago by tech industry luminaries like Elon Musk, Peter Thiel and Reid Hoffman, has just thrown down a challenge to the rest of the AI world. Late last month, it raised $1bn from Microsoft to speed its pursuit of the Holy Grail of AI: a computer capable of so-called artificial general intelligence, a level of cognition that would match its makers, and which is seen as the final step before the advent of computers with superhuman intelligence. According to Mr Brockman, that money — a huge amount for a research organisation — will be spent “within five years, and possibly much faster”, with the aim of building a system that can run “a human

brain-sized [AI] model”. Whether a computer that matches the neural architecture in the human brain would deliver a comparable level of intelligence is another matter. Mr Brockman is wary about predicting precisely when AGI will arrive, and said that it would also require advances in the algorithms to make use of the massive increase in computing power. But, speaking of the vast computing power that OpenAI and Microsoft hope to put at the service of its AI ambitions within five years, he added: “At that point, I think there’s a chance that will be enough.” OpenAI’s huge bet points to a parting of the ways in the artificial intelligence world after a period of rapid advance. Deep learning systems, which use artificial neural networks modelled on one idea of how the human brain works, have provided most of the breakthroughs that have put AI back at the centre of the tech world. OpenAI argues that, with enough computing power behind them, there is a good chance that these networks will evolve further, right up to the level of human intelligence. www.businessday.ng

KKR wins race to buy German payments group for €600m Private equity firm beats rival bids to clinch deal for Heidelpay JAVIER ESPINOZA, PRIVATE EQUITY CORRESPONDENT

KR has won the race to buy German payments group Heidelpay for more than €600m in a fresh sign of investor appetite for companies that offer digital alternatives to cash. The private equity group’s offer for the AnaCap-owned business beat rival interest from Sweden’s Nordic Capital and EQT. Payments specialists Worldline and Nets also lost out, according to people briefed on the transaction. M&A activity in the payments sector has been booming in recent years, with 2019 becoming the third successive year of record-breaking deal volumes. A structural shift towards digital and online payments instead of cash has driven up valuations and encouraged companies to combine in search of greater scale and geographic reach. Heidelpay enables its clients to accept online and mobile payments, and is used by more than 30,000 merchants including companies such as L’Oréal. A person

familiar with KKR’s strategy said the buyout group hoped to expand the group by adding customers in Germany. Heidelpay expects to generate €40.5m in earnings before interest, tax, depreciation and amortisation this year, people with knowledge of its finances said. Private equity groups have been involved in several payments deals in recent years. A consortium led by CVC and Blackstone bought Paysafe for £3bn in 2017, while Hellman & Friedman bought Nets for $5.3bn a year later before combining it with Concardis, which was owned by Bain Capital and Advent. KKR was also involved in one of this year’s biggest payments deals, the $39bn sale of First Data to Fiserv. KKR was First Data’s largest shareholder, having originally bought the company in 2007. Bain and Advent, the two US buyout groups behind the first takeover of Worldpay, have also spotted new opportunities in France and Spain, including units at Crédit Mutuel in France and BBVA in Spain. The Heidelpay sale comes just

two years after AnaCap bought a majority stake in the business for an undisclosed amount. Heidelpay has expanded through its own smaller add-ons, including last year’s acquisition of mPay24 and the purchase of StarTec in 2017. As part of the agreed transaction, Mirko Huellemann, Heidelpay’s founder and chief executive, will retain a significant stake in the company. Heidelpay’s current owner AnaCap, whose name stands for “analytics before capital”, has raised €4.7bn since 2005 in combined private equity and credit strategies. Last month it generated more than a 50 per cent internal rate of return, a closely watched figure of performance, from the sale of French business intelligence company Ellisphere. KKR, Nordic Capital, Hellman & Friedman and EQT declined to comment. Worldline and AnaCap did not respond to requests for comment. An official announcement of the transaction, which was agreed on Friday, is expected as early as this week.

US defence secretary to review Pentagon cloud contract Donald Trump criticised process that produced Amazon and Microsoft as finalists AIME WILLIAMS IN WASHINGTON AND SHANNON BOND IN SAN FRANCISCO

S defence secretary Mark Esper has launched a review of the Pentagon’s $10bn cloud-computing contract after US president Donald Trump expressed sympathy with complaints that Amazon is being given an unfair advantage. Elissa Smith, a Pentagon spokesperson, said “no decision” would be made on the contract, known as the Joint Enterprise Defense Infrastructure contact, or Jedi, until Mr Esper had “completed his examination”. The Jedi project would transfer most

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of the Pentagon’s data to the cloud. The multiyear contract is seen as a plum prize by tech companies because of its scale, and the decision to award it to a single bidder. The Pentagon named Amazon and Microsoft as finalists in April after eliminating IBM and Oracle from consideration, and has said it expected to reach a decision by the end of the summer. Amazon, whose Amazon Web Services arm is the industry leader in cloud computing, is considered the favourite to win. Both Microsoft and Amazon declined to comment on Mr Esper’s review. @Businessdayng

Mr Trump warned last month that he could order a review the Pentagon’s awarding of the contract, claiming that “great companies” were “complaining about it”. He specifically named Oracle and Microsoft. Mr Trump has previously railed against Amazon over the company’s contract with the US Postal Service, has threatened antitrust action against the company, and has criticised it for not paying enough in taxes. Mr Trump has also feuded with Jeff Bezos, Amazon’s chief executive, over his ownership of The Washington Post, one of the president’s favourite media punching bags.

Monday 05 August 2019

BUSINESS DAY

ANALYSIS

Tom Barrack, a Trump ally with fingers in many pies Colony Capital founder under fire for mixing private diplomacy with business MARK VANDEVELDE

om Barrack’s route to becoming one of the most influential people in America has been to help everyone he could, and ask for little in return. As a private equity investor, Mr Barrack appeared to break every rule. The founder of Colony Capital let wealthy friends in on lucrative deals, such as the takeover of the Miramax film empire, which he completed with West Wing star Rob Lowe. He kept celebrities out of bankruptcy, helping Michael Jackson avoid eviction from his Neverland ranch, and coming to the aid of photographer Annie Leibovitz. When Harvey Weinstein fell from grace amid allegations of serial sex abuse, Mr Barrack tried to buy his movie studio. His talent for sealing property deals cemented lasting associations with everyone from Middle Eastern royals to a flamboyant New York real estate developer on course for high office. Since Donald Trump became US president, Mr Barrack has enjoyed a direct line to Washington, capping a three-decade career in which he shuttled by private jet among real estate deals and a California estate

where he makes wine and plays polo. “Karma really works,” Mr Barrack said some years ago. “It works, eventually.” But karma cuts both ways, and this week a US congressional report identified Mr Barrack as a key figure in a raft of initiatives that “virtually obliterated the lines normally separating government policymaking from corporate and foreign interests”. Drawing on private emails and text messages with business executives, diplomats and White House insiders, including Mr Trump’s son-in-law Jared Kushner, the report provided a candid first-hand account of his efforts at private diplomacy. TheexchangesshowtheLebaneseAmerican dealmaker trying to buy the nuclear reactor maker Westinghouse using Saudi and Emirati capital, while securing enough US ownership to bypass scrutiny from official bodies. It was allegedly described as part of an American effort to help Saudi Arabia “leapfrog Iran” and become a “leader” in nuclear power. Mr Barrack co-operated with the investigation but took issue with its conclusions, according to people familiar with his thinking, adding that he believes it conflates his proposal for a “Middle East Marshall Plan” with a later, abortive attempt to buy the nuclear company.

Fame and ‘Fortnite’ — inside the global gaming phenomenon It’s captivated a generation of teens. Now it’s making millionaires of its star players ANNA NICOLAOU

t first, it seems like any other sporting event. Parents sip beer from clear plastic cups. Children eat overpriced soft pretzels and pizza, holding giant red styrofoam hands I recognise from baseball games. But instead of a grassy field, today the Arthur Ashe stadium in Queens — best known for hosting tennis stars for the glitzy US Open — is anchored by a massive three-tier purple stage attached to the roof by cables. Tens of thousands of spectators are here to witness 200 players fight to the death on a virtual island. In reality, this translates to watching teenage boys — and they are all boys — pound their keyboards for roughly four hours. The last boy standing will be crowned a millionaire. I am at the first-ever Fortnite World Cup. At this three-day, Disneyland-esque festival, the virtual monsters and online memes of Fortnite, the global gaming phenomenon, have been transposed into the real world. This is Woodstock for a generation raised on smartphones and iPads. Fortnite is technically a video game, and one with a simple premise. At the start, players drop on to an island and shoot each other until only one person is left standing. Each match lasts about 20 minutes and slowly, the numbers whittle down. A storm

approaches, making the map smaller and smaller. If you jump off the island you die. Antoine Griezmann, the French football star, said playing Fortnite makes him more stressed than professional football. But Fortnite is so wildly popular that it’s become more than just a game: today it’s a social media platform in its own right, driving pop culture among teenagers — everything from clothing to dance crazes. It’s also at the forefront of esports, competitive online gaming that is attracting ever more sponsors to sell to ever bigger spectatorships. With more than 250m users across the globe, if it were a country Fortnite would be the fifth largest in the world. The Fortnite World Cup drew 2.3m concurrent viewers on YouTube and the streaming platform Twitch, according to Epic, the game’s developer. The prize money for the competition is equally outsized. Wanting to create high stakes, Epic, backed by private equity group KKR and Chinese giant Tencent, shelled out $30m for prizes. The winner — Kyle “Bugha” Giersdorf, a 16-year-old from Pottsgrove, Pennsylvania — walked away with $3m. That is almost six times more money than the cyclist who wins the Tour de France. It’s closer to the $3.8m taken home by the professional tennis champions of the US Open, which will be held at this same stadium later this month. www.businessday.ng

Richard Thaler: ‘If you want people to do something, make it easy’ The master of behavioural economics on the power of the nudge — and why Remain was destined to lose TIM HARFORD

he Anthologist doesn’t serve cashew nuts, so I order a bowl of smoked almonds instead. When they arrive, caramelised and brown as barbecue sauce, I ask for them to be put right in front of Richard Thaler. He protests that the waiter isn’t in on the joke. The readers will be, I assure him. “The educated ones, perhaps,” he concedes. Those educated readers may know that Professor Thaler is a Nobel laureate economist, but even more famous as the co-author of Nudge. They may even know — from his later book, Misbehaving: The Making of Behavioural Economics — that the 73-year-old is fond of telling an anecdote about a bowl of cashew nuts that sheds light on his approach to economics. He served the notorious bowl to some guests while dinner was roasting in the oven, then watched everyone compulsively munch on the nuts and gradually spoil their appetites. So Thaler decided to remove the temptation by hiding the cashews in the kitchen. His guests thanked him. It would be an unremarkable tale, except that such behaviour simply does not fit the rational economic model of human behaviour. Either eat the cashews or don’t eat the cashews, says classical economics, but don’t thank the person who moves them out of easy reach. Reflecting on such stories helped Thaler create “behavioural economics” — a branch of the discipline that aims at psychological realism. Doing so also helped him with the equally difficult task of persuading other economists to take the behavioural view seriously. True, it’s just a story about cashews — but if you don’t think short-termism and weak willpower are economically significant in the grand scheme of things, I have a payday loan, a pension drawdown scheme and an auto-renewing

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gym membership to sell you. And, sure enough, Thaler’s ideas about the importance of realistic human behaviour have permeated into the economic mainstream, particularly the study of finance. His policy proposals have influenced tax collection, organ donation, energy efficiency drives — and most notably pensions, where participation in workplace schemes dramatically increases when people must explicitly opt out if they are not to be automatically enrolled. Thaler cultivates a happy-golucky persona, a man whose own weaknesses help him understand the weaknesses of others. “You assume that the agents in the economy are as smart as you are,” he once told Robert Barro, one of the pillars of the economics establishment, “and I assume that they’re as dumb as me.” Barro was happy to agree with that. This sunny July, however, Thaler is a model of self-control. “Notice how many nuts I’ve had so far,” he announces, 20 minutes into our conversation. He gestures for emphasis. “Zero.” I’m not surprised by that, although I am when Thaler — who struck me as a bon vivant — admits that he has been skipping lunch entirely. He’s in London for a fortnight, teaching a course at the London campus of the University of Chicago Booth School of Business, and after a generous breakfast he says he has neither the need nor the time for lunch. This may also explain his lack of interest in the restaurant itself. We meet at the business school, and he’s chosen the closest place — announcing “it’s me again” to the waitress who stands outside. I don’t even glimpse the interior of The Anthologist, because she promptly directs us to a pavement table, which has a large masonry wall on one side and on the other — if you squint — a view down Gresham Street to a back corner of the Bank of England. The scooters and trucks roar past a couple of yards away, @Businessdayng

but Thaler has no trouble making himself heard. He used to squeeze more out of his annual fortnights in London. “I would spend the morning with the Behavioural Insight Team” — the famous “nudge” unit established by David Cameron and inspired by Thaler’s book with the law professor Cass Sunstein — “then come and teach all afternoon. And then half the nights there would be dinners with friends. And I was comatose at the end of the first week.” He does admit to having a few dinners planned, though — and to timing his visit to coincide with the Wimbledon Men’s Final. He and his wife, the photographer France Leclerc, had Centre Court tickets. Was he a fan of Djokovic or Federer? “We support Rafa. Although if he had been playing in a match like that it might have got too much for my wife. She would have been hiding somewhere by the fifth set.” It was the same on election night: the Trump/Clinton contest reduced his wife to a nervous wreck. “And who were you supporting in that one?” I ask. He gives me a withering look. “At least credit me with sentience.” President Barack Obama seemed to appreciate behavioural economics and gave Thaler’s coauthor, Cass Sunstein, a senior appointment. The Trump administration, observes Thaler, has no interest in behavioural economics. “Look, there’s no demand for expertise of any sort . . . The lack of competence and expertise is like nothing anyone has ever seen.” Whitehall’s Behavioural Insight Team seems to be displaying more longevity than the White House equivalent. “The key move they made very early on was to extricate themselves from government.” They’re now a semi-autonomous social enterprise in which the Cabinet Office retains a stake. They made that move, of course, before Cameron’s referendum-induced autodefenestration.

BD Money

Monday 05 August 2019

BUSINESS DAY

PERSONAL FINANCE

COVER

Commodities

8 things you have to consider when buying a car

What a Credit Score is and why it matters

What you should consider before renting an apartment

What experts think about investing in seed business

Musa and Chinwe, colleagues at a fast-growing technology firm approached a bank for loan. Chinwe wants N2 million and Musa, who has personal savings of N1.5 million, wants only N500,000.

When Okoro, 28, moved into Lekki, a highbrow area in Lagos, it seemed like the perfect choice for the young professional seeking a fitting residence for his family.

Nationally, the production capacity of the seeds companies in Nigeria relative to the countryâ&#x20AC;&#x2122;s need is limited, findings show. This leaves room for new entrants to play in an industry beset by a potential N525.04 billion gap.

The prospect of buying a new or used car is always exciting especially when you think you can afford to do so.

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Monday 05 August 2019

BUSINESS DAY

Personal Finance 8 things you have to consider when buying a car

Israel Odubola

he prospect of buying a new or used car is always exciting especially when you think you can afford to do so. Perhaps your car is giving you headache and you are tired of maintenance bills or you want some comfort, peace of mind, and maybe a little luxury. This is good, but it’s a task that requires caution. Beyond the car manual, nice deals and proposed discounts, here are few tips that might help you in getting the best bargains and most suitable car. Foreign or Nigerian used car The first thing you would most likely consider at first is whether you are going for a foreign or Nigerian used car. Different factors beyond the fact that one is imported defines the reason people prefer one over the other. According to car experts, foreign used cars are generally believed to be in good condition and more neatly used than local pre-owned ones. This is largely connected with the deplorable state of Nigerian roads among others. Whether or not they were purchased as brand new, it is the case that they have better usage life than what obtains in Nigeria. Therefore, it is cheaper to fix up a foreign

used car than a Nigerian-used one after purchase. Moreover, you are more likely to find your choice for second-hand car as foreign used car than a Nigerian used car. With foreign used car, chances are high that the car is in its first body, unlike Nigerian used cars that can be deceitfully be masked in a neat appearance. However, getting a foreign used car for Nigerian roads and by the Nigerian regulations may be a somehow tedious than buying a Nigerian-used car. From changing to left-hand drive in some cases to port clearance to getting necessary licences& registration documents, is very cumbersome. The advantage of Nigerian-used over foreign used is that it’s cheaper and you will spend less on registration. But the major setback of the Nigerian used car market is the high likelihood that the cars’ original interior have faded, and masked in neat appearance, but dire need of serious repairs. High or low mileage Mileage matters because some vehicle components wear out at a given mileage no matter how well the vehicle has been looked after. Generally, the mileage level of a car correlates with level of wear & test. However, some believed that a car with high mileage is a good buy, often been driven long distance on motorways, meaning brakes, clutch and gears.

The way a car is driven is probably more important than mileage but that is much harder to gauge and much harder to predict outcomes. There are some indicators that may give you an insight into the condition of the car and the way it was driven. Paintwork - chips and fading, under body - dirt, oil and rust, engine bay - cleanliness, oil, rust, leaks and streaks, tyres - wear patterns, exhaust - colour, interior - driver seat condition, brake pedal rubber wear. Inspection is non-negotiable Unless you are a mechanic, the best way to determine the condition of a used car (before you buy) is to have it inspected by a professional mechanic who can give you a detailed report on which to decide on. You You need to inspect every part of the car –engine, boot, seat, steering, brake, clutch, gear and door among others. You should also check under the car to see if there’s any fluid leakage. Check the Vehicle Identification Number (VIN) Every car on the planet has a VIN stamped into the chassis of the car that serves as the car’s unique identity code. It is important because it’s given to that car on the production linen and is thus fixed to that car forever. The first part of the VIN is the country and manufacturer identifier. For example,

WAD indicates German Audi. The second section is the vehicle description, with the remaining the VIN being the identifier. Checking a car’s VIN before buying is the safest way of establishing the true identity of the car. Traditional or Online Dealer Prospective car buyers seemingly have an array of options when they’re shopping for a used car, but one thing is seemingly consistent: a gruelling stressful car-buying process. Few dealerships provide an easygoing experience, and buyers feel burnt out by the end of the ordeal, even if they completed a transaction. Car experts say online purchase is better than the traditional process as the former gives optimal convenience. After all, buyers have the opportunity to complete the majority of the purchase from the comfort of their homes. To initiate the entire process, customers simply have to submit an inquiry to online car dealers like Cars45, Carmudi, etc. To initiate the entire process, you simply need to submit the specific car attributes you seek like such as model, year, mileage, price, transmission, etc. Location The road you ply most times is another factor you need to consider. If you reside in an area with bad road network, it is advisable you go for a rugged car with strong shock absorber. If you live in an environs prone to flood whenever there is downpour, a ‘high’ car might be your best bet to prevent water from damaging the car engine. Your pocket matters Be realistic about what you can afford. It’s a great step you are taking when you decide to purchase a car. It’s also nice to want finer things in life, however you have to select a car that is budget friendly. That nice Jeep you like many not be what you can afford. There may be similar cars that you can purchase that are budget friendly. You should work out a budget and plan. How much of your earnings will you allocate towards car payment? Will you have a surplus to sustain you and your family? Fuel economy Will the car you intend to purchase travel long distances with very little fuel? If yes this can be very advantageous to you. Fuel efficient cars will help you to save on premium motor spirit (PMS) otherwise known as petrol despite the size and your everyday driving needs.

About BD Money: This finance supplement is targeted at investors and other readers keen to make their money work harder. Team Members: Lolade Akinmurele (Lead); Hope Moses Ashike; Segun Adams; Oluwasegun Olakoyenikan; Temitayo Ayetoto; Israel Odubola; Olufikayo Owoeye; David Ibidapo; Graphics: Fifen - Famous www.businessday.ng

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Monday 05 August 2019

BUSINESS DAY

Personal Finance What a Credit Score is and why it matters SEGUN ADAMS

usa and Chinwe, colleagues at a fast-growing technology firm approached a bank for loan. Chinwe wants N2 million and Musa, who has personal savings of N1.5 million, wants only N500,000. As members of the research team, the techies are on the same pay scale but need a loan to fund the same kind of project. Both loan seekers say they would repay in exactly a year. Surprisingly, the loan officer says the bank would lend to Chinwe at 15 percent interest rate but would only be willing to oblige Musa at an interest of 25 percent. Musa, crest-fallen, wonders if he would be afford the high cost of borrowing, and worse: why the bank was “unfair” to him. Musa does not know he has a low credit score. A recent trend among banks, following directives from the Central Bank of Nigeria, has been the introduction of new products offering loans to fund your education, grow your business and support you in every way. Even though banks are seeking to lend more, lenders are still cautious of potential defaulters and bad business ideas that are a waste of cash. The Governor of CBN, Godwin Emefiele in July advised banks to mitigate credit risk and de-risk financial market via the creation of viable credit scoring system similar to what applies in developed countries. In case you are wondering what the CBN chief was talking about, here’s a guide: What is Credit Scoring? Credit scoring is a system used by lenders in determining whether to lend to you and at what rate. In other words it is an analysis lenders perform to ascertain your credit worthiness by assigning points to a number of criteria including past credit records. Credit score ranges between 300 and 850. A scoring range between 750 and 850 is considered as superb, 500-649 average and less than 499 poor. There are a number of credit scoring systems but the Fair Isaac Corporation (FICO) system and similar ones are the

most widely used. How FICO works FICO is a US-based data analytics company that uses algorithms to determine credit scores. A quick check by BusinessDay suggests Nigerian credit bureau companies fashion their scoring system after FICO. Although credit bureaus in Nigeria adapt FICO to suit domestic market need, the understanding of how the credit scoring system typically works provide useful information to borrowers. FICO assigns 35 percent weight to person’s payment history, 30 percent to Amount owed relative to credit limits, 15 percent to length of credit history, 10

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percent for Frequency of New Credit and 10 percent for Credit Mix. Information about a person’s transaction history can be gotten in a credit report. Payment history is trend analysis of how you pay bills. Do you settle obligations as when due? Do you default? When last did you default and how much? One thing however is payment history only reflects more recent transaction of say 7-10 years and not lifetime financial information. For amount owed relative to credit is simple debt to credit ratio. The bank wants to see your credit utilization or

Credit scoring is a system used by lenders in determining whether to lend to you and at what rate. In other words it is an analysis lenders perform to ascertain your credit worthiness by assigning points to a number of criteria including past credit records www.businessday.ng

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how much credit you are using compared to how much you have. If you use a credit card for example, FICO would factor in how much you have used up compared to the allowable limit. It is advisable to keep debt to credit below 50 percent. Length of Credit looks at how long you have say, your credit card, and how you have kept to deadlines in repaying debt. Frequency of new credit is important because the more debt one takes on, the higher the person risks defaulting. For instance you would be concerned when someone you recently gave a loan goes around looking for more money to borrow. A mix of different type of credit shows that the person seeking a loan is able to handle different types. Why it matters Going forward Nigerian Deposit Money Banks would be giving out a sizable portion of their deposits as loans, by CBN regulations. This means lenders would have to find a way of knowing who the right candidates for credit are. In other words, your ability to buy that dream house, fund your business, pay for your education and finance other needs through credit might depend on what statistical analysis of your transaction history say.

@Businessdayng

Monday 05 August 2019

BUSINESS DAY

Monday 05 August 2019

BUSINESS DAY

Cover Story

What you should consider before renting an apartment SEGUN ADAMS

hen Okoro, 28, moved into Lekki, a highbrow area in Lagos, it seemed like the perfect choice for the young professional seeking a fitting residence for his family. The serenity of the new estate justified the exorbitant rate he paid for a three bedroom apartment, until one Sunday it rained and Okoro came back from an outing to meet a river in his sitting room. Sally, 22, was very excited about moving into her new apartment in Festac. It was an upgrade from her former place where the noise from her neighbor’s generator kept her up late at night. What’s more is that her new apartment costs slightly lower than she had expected although her landlord promised to fix the water system, the security light and repair the broken window in the kitchen once she moved in. Six months after paying for the selfcontained apartment Sally has become frustrated at her landlord’s reluctance to deliver on his promise. She has to pay for fresh water supply every day, deal with mosquitoes and rodents entering her apartment through the damaged window while the nights frighten her. Renting an apartment sounds easy until you find yourself gunning for one. If you are thinking of getting a new place, here are a few things you should consider. How affordable is the place There is a saying advising to cut’s one’s coat according to one’s cloth. The real estate variant is that you should not rent a place your combined salary for two months cannot cover. This means if you earn N200,000 per month your ideal apartment should cost no more than N400,000 per annum or N33,333 per month. Matter of fact, the house would not seem to be the “el-dorado” six months down the line if you are struggling to pay rent. What are the Up-front fees Rent is just one of the many fees you would pay before getting that house you fancy. There’s the agreement and commission, service charge and often times a full year’s rent in advance. These fees usually take a huge chunk of one’s savings so if you had thought it was only a matter of settling rent, you might need to draw up another budget.

Location It is not just the beautifully structured house you are considering right? Location is important for two reasons: the first is because the topography and security in the area matters; is the neighborhood prone to flooding, erosion or any form of natural disasters? What is the crime rate there like?

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Landlords will say anything to convince you about their property. Think of the landlord as a salesperson- at the end of the day he or she only makes money by closing a deal

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The second is proximity to your work place. Would it be wiser moving to a cheap apartment while your work is at the other extreme of town or getting a costlier place which is less than a half-hour from work? Cost of living If you are moving from one part of town to another or changing cities be sure you know the full implication of relocating. What is the cost of living in that area? Are commodities more expensive, cheaper or the same. Rainy season is best time to hunt for a new place A trade secret is to set out for a new apartment during rainy seasons. The reason is that you would have a “worse-case” scenario to judge a building and the environment. Some houses that are attractive during dry seasons can be the worst places to live whenever it rains. In the same way, some people have found out rather too late that it is impossible to drive in or out of their streets whenever it rains. If your quest to get a new apartment is not for very urgent reasons it is advisable to wait for the rain so you know what you are bargaining for. Try to know who your neighbors In Nigeria who you live next to can sometimes affect the quality of life you lead. Ask peo-

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ple who have to endure inconveniences from neighbors like a noisy generator, a wrongly parked car, misuse of shared infrastructure and similar vices. Neighbors are not all bad, in fact you could start building a rapport before you actually move in. Perhaps they can even tell you more about the neighborhood and challenges they face. Whichever way, it would be fantastic knowing you are not moving in next to Nigeria’s most wanted person. Cost of moving and utilities The cost of moving comes in many folds; there is the financial cost of moving properties to your new apartment or buying new ones. You might need to fix a few things at your new place or spend on interior decoration to suit your style. If you have kids then moving could mean changing schools. The other cost is the social cost of moving as you may be leaving behind your friends and social circle when you relocate. Then there is utilities-water, electricity, internet, insurance etc. Be sure you can afford to pay for those services if your term of lease places the responsibility on you. Seeing must be believing Before you pay for the apartment insist

on visiting the place. Confirm ownership, run the taps, check the switch and power sockets, check if the toilet works, try the air conditioning, go through the cabinets and drawers- Leave Nothing To Chance. Be sure of utilities available in the facility and neighborhood: electricity, security, waste management and water. It would also do you good to visit the neighborhood over the weekend, at late evenings and if possible at night. The reason is to make sure you are not rudely shocked by a club or religious center blasting deafening music in the dead of the night after you move in. Understand the landlord-and terms of lease Where you can try to know as much as you can about the landlord. Is he or she an absentee landlord? Will he or she respect your privacy? Does his or her personal views influence the terms of lease? Does the landlord have a tendency of increasing rent frequently? Is the landlord eager to let out the apartment? It is not uncommon to hear people complain about their landlords locking them outside their apartment gate because they returned late from work. Be wary of promises to fix things after you move in Landlords will say anything to convince you about their property. Think of the landlord as a salesperson- at the end of the day he or she only makes money by closing a deal. Anything that is not fixed before you move in will not be done after-best believe this fact or you would find out by yourself. Family Size It is easy for an unmarried person who wants to live alone to decide between a mini flat and a four-bedroom apartment. If you are about getting married or just did, the size of the apartment you may want to rent becomes very important. Family size should also be factored into what kind of apartment you choose. Note that some apartments can be unsafe for raising children. Take for instance a building with low balcony or deep open swimming pools. Taste Your preference matter when choosing a place to stay-so far you are not breaking the bank for a shelter. Sometimes people go for cheap places to stay but end up feeling miserable because of the quality of lives they lead. Live is too short not to have the best roof you can afford over your head.

How you can make more cash as the new football season kick starts OLUFIKAYO OWOEYE

t is August and major football leagues across Europe will resume action, expectedly, the excitement and expectations by supporters of various clubs are already palpable. During the short break, top clubs have bolstered their teams by buying additional players and let go of some players. From the English premiership to the Spanish Laliga, Italian Serie A, German Bundesliga, French Ligue 1 and the UEFA champions’ league, the expectations are high, while the players and coaches are preparing ahead of a new season with pre-season matches, the fans are also ready to cheer them on. However, there is another group of fans who are exploring how to make money and other rewards from the football season. Football is a game of passion with massive follower-ship across the globe, it also creates opportunities for fans to earn more cash, earn rewards and even build businesses around it. Open a match viewing centre Football is a game watched with lots of excitement and energy, hence fans love to stay together to watch football in an atmosphere that is electric with passion. You

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can make a good income from the football season by running a match viewing center. This can be a side hustle where you make extra income and depending on your location and attraction, you can make a good income every game week. All you need is space, chairs, television and Satellite TV. You can go to your Satelite TV shop, for those in Africa it will be DSTV, for those in the UK it will be Sky/BT sport. Negotiate with them a package. You may want to go extra by sharing fliers and some publicity in your community about your match center. Make it neat and attractive, and fans will turn up during game days, you charge them per game. You can also sell drinks, snacks, and other items during games to boost income. Branding Football fans love to identify with the team they support this they do by wearing their team’s shirt, favourite players and any form of merchandise, some even decorate their cars and houses with their team’s merchandize. You can make and help with branding or order caps, hand bands, club jerseys, flags and so on carrying diverse club’s identity and sell to fans. People buy these stuff a lot and you will be amazed at how fast you will sell out. Sport betting

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If you are very good at predicting and reading games, you can bet and win big or small depending on the odds. You can bet on teams to win, scores of games, the first team to score and many more

Despite several religious inclinations to betting, it is a growing industry in Nigeria, and according to NAN, an estimated 60 million. Nigerians between the ages of 18 and 40 are involved in active sports betting while almost N2 billion is spent on sports betting daily, which translates to nearly N730 billion in a year. The growing youthful population and internet penetration in the country are some of the factors that have helped the growth of sports gaming in the country. If you are very good at predicting and reading games, you can bet and win big or small depending on the odds. You can bet on teams to win, scores of games, the first team to score and many more. Blogging You can also run a blog that talks about your favourite club, team or league. You can just focus on football in general. If you can get many people that read your blog, you will make money from it with ads and affiliate marketing. You can choose to open a regular blog where you write and share images about your team, leagues, and games. You can also run a video blog on YouTube. Where you talk about games and interview other fans. This method is cool. You just need a camera and a mic. Talk to fans in your city how they think about games and players. You give your reviews and previews. Once you have a good number of subscribers, you will make good money from ads, affiliate, and sponsorship.

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Monday 05 August 2019

BUSINESS DAY

Commodities

What experts think about investing in seed business Temitayo Ayetoto

ationally, the production capacity of the seeds companies in Nigeria relative to the country’s need is limited, findings show. This leaves room for new entrants to play in an industry beset by a potential N525.04 billion gap. Seeds can be major sources of food, industrial raw materials, object of scientific inquiry, agricultural input, commodities and instrument of technology transfer. With the total national seed requirements for eight main crops in the country hovering around 388,690.64 metric tons in 2015 and the available seeds only measuring 126,173 metric tons, imports have continued to thrive on that gap However, experts who spoke to BusinessDay during the retreat of the National Agricultural Seed Council in Ibadan believe entrepreneurs with passion for agriculture have a good market to explore. Robert Asiedu, West-Africa director at International Institute of Tropical Agriculture (IITA) We don’t have strong companies that are producing these seeds in large enough quantities. So it is again an area to be developed. For instance, if you are in Oyo north, it is a good area for producing yam for a lot of farmers. An entrepreneur thinking of seed yams can get loan access of $20,000 and link up with relevant agencies including IITA for the extension system, how to get the stocks of planting materials and get the training on how to multiply further. You get access to healthy seed stocks or the varieties that are in demand and you grow from there. In the first year, you are not thinking of covering a large area but you are building on it. You will then get known in the community as the source of good materials. If people buy the seed yam from you and they have been invaded by pests, they won’t come back. But if they get from you, good quality seeds and it grows very well and they keep coming back. You will expand from there. Also you need to be aware that for instance, you can have cassava varieties that on a hectare basis, you can get 30 tons. Of course, if they have one that is giving them 10 tonnes. If you use a variety that gives you 10 tonnes per hectare, what it means

“

There is a huge market for seed for farmers and resultant grains for agro-industrial concerns with high job-creation potential

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is that you are using a lot of lands. Developing a private seed business would serve as the sources of the new improved seed materials for the farmers who want to grow them. The government really as in many other countries is to ensure that the regulatory system works is really not the government’s role to actually be selling seeds. The regulations are and the new seed act that has come will strengthen it further. There is no fault with that. It is the implementation as always. Adesola Ajayi, professor of Seed Science and board member of National Agricultural Seed Council (NASC) I’ve been visiting California in the last few years and every time I go, the question I ask is why they are converting agricultural fields into buildings and the issue is that the United States felt that they have overproduced food and therefore can afford to also convert space. Globally, the seed trend has witnessed

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mergers and acquisition leading to consolidation of the market. Africa and South America have the lowest growth rates and on account of rising population across the globe, demand for food production is driving an increase, resulting in the growth of the global seeds market. Hence, there is a huge market for seed for farmers and resultant grains for agroindustrial concerns with high job-creation potential. There are possibilities of limited national production, financial, technical capacities benefitting from international technology and capital inflow through mergers and partnerships. However, attracting international players and assessing international market requires assurances through policy measures and regulatory frameworks. Commodification and commercialization of agricultural seeds gave birth to, and continues to drive, the seed industry globally.

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Monday 05 August 2019

BUSINESS DAY

Data

Federal government eurobond Yields on Eurobonds rose by 0.25 percentage points week on week from an average of 6.13 percent when the market closed last week to 6.39 percent following slight sell-off on Nigeriaâ&#x20AC;&#x2122;s Sovereign Eurobonds. Announcements by Jerome Powell, Federal Reserve Chief to hold off future rate cut unless there are strong reasons to, upset investors who already priced in an expected 25bps rate cut seen on Wednesday, and hoped for more cuts in the year. The guidance disappointed investors who had already factored a further rate cut and resulted in sell-off on Eurobonds in the early hours of trading and a slight recovery later on Wednesday.

Corporate eurobond For the corporate euro-debt market, yield across the tickers rose 0.092 percent points from 6.06 percent last week to 5.968 percent. www.businessday.ng

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Monday 05 August 2019

BUSINESS DAY

Funds

How fixed income mutual funds have performed by annualized return this year Israel Odubola

ixed income mutual funds has seen strong investor appetite, with yields among the most attractive in emerging markets. Assessing the portfolio value of the seven asset classes of recognized mutual funds revealed that fixed income funds outperformed six others to appreciate 57 percent to N90.7 billion for 19 July, 2019 week-end, since the start of the year. Figures from the Securities and Exchange Commission (SEC) show. This compares with bond funds that grew 49 percent, money market funds (+21%), real estate funds (+5%), ethical funds (-10%), mixed funds (-3%) and equity (-10%). Fixed income funds buy investments that pay a fixed rate of return like government bonds, investment grade corporate bonds and highgrade corporate bonds. They aim to have money coming into the fund on regular basis, mostly through interest that the fund earns. Presently, there are 18 fixed income funds registered with the Securities and Exchange Commission (SEC). This asset class accounts for about 12 percent of total asset under management (AUM) worth N786 billion.

BusinessDay computed the annualized return of 16 fixed income funds (for comparison sake), and rank them based on their returns. The analysis revealed that 11 funds delivered gains to investors, four lost and one remained unchanged. For context, annualized rate is a rate of return for a given period that is less than one year but computed as if the rate were for a full year. It is computed on time-weighted basis. The funds are ranked as follows: ACAP Income Fund This fund is an open-ended mutual fund under the management interest of Alternative Capital Limited Partners. Yearlong, the unit price of the fund appreciated 23 percent to N0.76 for week ended July 19, 2019 since the start of the year, with annualized return of 42.3 percent outpacing inflation figure of 11.22

percent. The portfolio value of the fund has surged some 40 percent to N220.35 million as at July 19-end, from N157.5 million at January 4 2019-end. Stanbic IBTC Absolute Fund This fund is a subset of Stanbic IBTC Umbrella Fund managed by Stanbic IBTC Asset Management Limited. It is specially designed for risk averse investors as it allocates 100 percent of assets to fixed income securities. The unit price of the fund has appreciated 8 percent since the year’s start to N3, 528.76, with annualized return at 14.1 percent above current inflation rate. The fund’s asset value has expanded 3.3 percent to N13.06 billion as at July 19-end, from N12.64 billion at January 4, 2019. Zenith Income Fund This fund is an open-ended mutual fund managed by Zenith Asset

Week Ahead Week Ahead(Monday, August 5 – Friday, August 9, 2019) Week Ahead (Monday, 8th April – Friday, 12th April, 2019) Commodity Oil: Brent likely to trade between $63 and $65 per barrel in near term. Heightened tension in the strait of Hormuz is expected to continue to provide support to the market. However, rising US Shale output and concerns about weak global demand could moderate gains. Sugar: Sugar prices down 0.40% to $12.57/pound driven by strong global supply. Increased ethanol production from sugarcane to lead to supply deficit and push prices up. Fixed Income We expect the local investor activities would drive the local debt market this week, and would remain mute towards a quarter cut in US Fed rate. Currency The naira is expected hover around N360 against the dollar on the Investors & Exporters window owing to the sustained injection of liquidity by the Central Bank in the foreign exchange market. Data Release The Nigerian Bureau of Statistics will on Tuesday, August 6, release data on Selected Banking Sector Data for second quarter of 2019. Snapshot for the previous quarter revealed that the total value of credit allocated by banks stood at N15.21 trillion, with oil & gas (N3.49trn) and manufacturing (N2.24trn) getting the highest allocation. www.businessday.ng

Management Limited. The fund is designed for investors with low risk tolerance, and invests mostly in high grade fixed income instruments. The fund’s price per unit has gained 7.6 percent year-to-date, with annualized return of 13.38 percent above inflation figure. Portfolio value of the fund has appreciated by 10.2 percent to N1.04 billion as at July 19 week ended from N943.7 million at January 4. Coral Income Fund This is an open-ended fund managed by FSDH Asset Management Limited, with the intent of preserving capital and achieving stable and consistent income flows. The fund invests at least 70 percent in fixed income securities and other interest bearing securities as well as other equity securities quoted on Nigerian Stock Exchange.

The fund’s unit price gained 7.6 percent year to date as it appreciated to N2, 946.17 as at week ended July 19 from N2, 764.34 at January 4 week ended, with annualized return at 11.58 percent. Also, the asset value of the fund has surged some 19 percent to N3.5 billion within the reviewed timeline. Coronation Fixed Income Fund This fund, managed by Coronation Asset Management has a low to medium risk profile. It invests in a broad portfolio of fixed income securities such as government and corporate bonds, treasury bills and other money market instruments. The fund’s price per unit has appreciated to N1.2 as at July 19-end from N1.12 at January 4-end, representing year-to-date and annualized return at 6.6 and 11.58 percent respectively. Portfolio value of the fund has appreciated by 9.5 percent to N360.16 million as at July 19 week ended from N328.85 million at January 4. Legacy Debt Fund This is a relatively low risk and open-ended mutual fund that invests in money market and shortterm maturity bonds. The fund is managed by First City Asset Management Limited. The fund gained 6.5 percent between January 4 –July 19, 2019 as unit price rose to N3.46 from N3.25.

Chart of the week Investment Announcements H1 2018 vs H1 2019

Investment commitment into various sectors of the Nigerian economy fell by 67 percent to $15.15 billion in H1 2019, compared to $45.74 billion in the corresponding period of 2018, Nigerian Investment Promotion Commission (NIPC) reports. Ondo state was the toast of investors as it displaced Rivers state on account of $1.1 billion proposed investment in H1 while Lagos and Ogun state followed in second and third place. Across sectors Mining and Quarrying account for 81 percent of investment, that is about $12.3 billion. Manufacturing (14%) was second choice destination of investment.

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Monday 05 August 2019

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 02 August 2019

Top Gainers/Losers as at Friday 02 August 2019 LOSERS

GAINERS Company FO BERGER CILEASING

ASI (Points)

Opening

Closing

Change

N129.05

N127

-2.05

CONOIL

N19.7

N18.6

-1.1

DANGFLOUR

N19.4

N18.5

-0.9

VOLUME (Numbers)

N6.4

N6.2

-0.2

VALUE (N billion)

N1.91

N1.72

-0.19

Closing

Change

N18.05

N19.45

1.4

MTNN

N6.25

N6.85

0.6

N5.5

N6.05

0.55

N8.3

0.3

N3.6

N3.87

0.27

GLAXOSMITH AFRIPRUD

Company

Opening

ACCESS CONTINSURE

DEALS (Numbers)

MARKET CAP (N Trn)

27,630.46 3,088.00 161,650,467.00 4.802 13.464

Global market indicators FTSE 100 Index 7,407.06GBP -177.81-2.34%

Nikkei 225 21,087.16JPY -453.83-2.11%

S&P 500 Index 2,924.50USD -29.06-0.98%

Deutsche Boerse AG German Stock Index DAX 11,872.44EUR -380.71-3.11%

Generic 1st ‘DM’ Future 26,326.00USD -217.00-0.82%

Shanghai Stock Exchange Composite Index 2,867.84CNY -40.93-1.41%

Market down 12.09% year-to-date as stock investors show less interest ...Over N142bn lost in one week Stories by Iheanyi Nwachukwu

earish sentiment at the Nigerian stock market continued till the trading week ended Friday August 2, 2019. Though, the Bourse had kicked-off this new month on a positive (+11percent) note, but the stock market still closed on a negative note in the review trading week. This record negative comes amid influx of mixed corporate scorecards for the first-half (H1) that attracted insignificant positive reactions from investors. Following Friday’s record dip of 0.43percent, the Nigerian Stock Exchange (NSE) All Share Index (ASI) decreased by 1.03percent week-onweek (WoW), while yearto-date (YtD), it is down by 12.09percent. The NSE ASI and equi-

L – R: Folusho Philips, board member, Special Olympics Nigeria; Haruna Jalo-Waziri, board member, Special Olympics Nigeria; Bola Adeeko, head, shared Services Division, The Nigerian Stock Exchange (NSE); Victor Gbolade Osibodu, chairman Special Olympics Nigeria and the Athletes during a Closing Gong Ceremony to commemorate their outstanding performance at the just concluded 2019 Special Olympics World Summer Games at the Exchange today.

ties market capitalisation which opened the review trading week at 27,918.59 points and N13.606trillion respectively closed the week at 27,630.46 points and N13.464trillion. This implies that investors lost over N142billion in just one trading week to August 2. In the absence of significant market catalysts,

the equities market followed some analysts’ earlier expectation of negative close. The NSE Consumer Goods Index recorded the highest weekly decline of (-5.07percent) while NSE Industrial Index appreciated most (+0.98percent). Other Indexes on the decliners list include NSE 30 Index with record weekly

Nigerian Breweries earns N170bn revenue in H1, records profit of N13bn

he Board of Directors of Nigerian Breweries Plc announced the Company’s results for the first half (H1) of the year ended June 30, 2019. According to the unaudited and provisional results filed with the Nigerian Stock Exchange (NSE), the Company reported revenue of N170.2 billion for the period under review and Profit After Tax of N13.3 billion during the period. While year on year there was a marginal revenue decline of 1.4percent compared to the N173 bil-

lion recorded in the corresponding period of 2018, the Company recorded a quarter on quarter 4percent revenue growth, buoyed by mid-single digit sales growth driven by strong performance in the Premium and Mainstream segments. The strong performance in the quarter was despite the impact of the increase

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in Excise Duty cost and other costs due to inflation. Continuous focus on cost initiatives helped the Company to return an Operating Profit of N24.5 billion and a Profit after Tax of N13.3 billion for the period. The operating environment remains challenging with another increase in the Excise Duty rate coming into effect at the beginning of June 2019. The Company remains confident that it has the right long-term strategy that will continue to deliver good return on investment to its shareholders.

loss of (-2.17percent), NSE Banking Index (-1.55percent); NSE Insurance Index (-1.58percent); NSE Oil & Gas Index (-1.06percent); and NSE Pension Index (-0.89percent). Lagos-based United Capital analysts in their August 1 equity market note asked whether they market will continue to ignore fundamentals.

The analysts overall outlook for equities is tepid in the second half (H2) 2019 despite the positive monetary policy stance in the global space. They imagined the likelihood of a late recovery by fourth quarter (Q4) of 2019 and estimated a -0.1percent year-on-year (y/y) return for equities by end of 2019, capping market uptrend

at 31,399.1 points due to the absence of pro-market policy reforms which may continue to constrain momentum despite strong fundamentals. According to the analysts, “despite the somewhat dovish tone across major central banks in the advanced economies since the beginning of first-half (H1) 2019, FPI flows into equities continued to taper amid increasing interest in short-dated debt securities in Nigeria.” By the National Bureau of Statistics (NBS) reckoning, FPI flows continue to account for the bulk of capital imported into Nigeria even as the net foreign purchases gap on NSE became wider in H1-19.” “Even though the argument for a rebound is increasingly compelling from a technical standpoint, uncertainties in the domestic policy environment linked to structural vulnerabilities are unlikely to change in the short term.

C&I Leasing eyes fresh capital to boost performance through rights issue and conversion of Aureos $10 million loan stock into equity

&I Leasing Plc plans to inject fresh capital into its operations to boost future performance. Chukwuma Okolo, chairman, C&I Leasing Plc stated this at the 28th annual general meeting (AGM) of the company held in Lagos last week. According to him, the fresh capital will be through rights issue and conversion of Aureos $10 million loan stock into equity before the end of the year. Speaking on the performance of the company for 2018 financial year, Okolo said gross earnings grew by 32 percent and 25 per cent for the group and company respectively in comparison

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with 2017 performance. “The group’s profit before tax also grew by 22 per cent from N1.3 billion in 2017 to N1.5 billion in 2018, while the company recorded an increase in profit before tax by 32 per cent from N506.9 million in 2017 to N668.3million in 2018. Also, the group’s profit after tax grew by 9 percent from N1.1 billion in 2017 to N1.2billion in 2018 while the company’s profit after tax decreased due to the impact of back duty tax by three percent from N451.3million in 2017 to N437.5million in 2018. According to him, the performance was a result of increased operational effi@Businessdayng

ciency, cost optimisation strategies and enhanced service delivery across the three major business lines which attest to the firm’s commitment to sustainable growth and undisputed market leadership in its chosen business. A dividend of N104.381 million was recommended for the shareholders for the 2018 financial year. According to Okolo, the outlook for 2019 remains positive for the company despite it being an election year. “We acknowledge the challenges posed by the rapidly changing geopolitical and social economic dynamics.

Monday 05 August 2019

BUSINESS DAY

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Monday 05 August 2019

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 02 August 2019 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. 220,380.40 6.20 -3.12 207 15,880,577 UNITED BANK FOR AFRICA PLC 201,776.59 5.90 -1.67 152 7,358,680 ZENITH BANK PLC 574,555.84 18.30 0.27 339 16,947,453 698 40,186,710 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 201,013.64 5.60 1.79 208 11,423,287 208 11,423,287 906 51,609,997 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,585,023.16 127.00 -1.59 101 25,367,525 101 25,367,525 101 25,367,525 BUILDING MATERIALS DANGOTE CEMENT PLC 2,896,886.26 170.00 -0.12 93 2,051,024 LAFARGE AFRICA PLC. 231,952.26 14.40 - 67 1,114,017 160 3,165,041 160 3,165,041 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 288,337.83 490.00 - 19 3,361 19 3,361 19 3,361 1,186 80,145,924 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 14,408.66 5.40 - 0 0 0 0 0 0 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 0 0 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 49,603.32 52.00 - 11 16,575 PRESCO PLC 44,800.00 44.80 - 5 5,340 16 21,915 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,520.00 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,350.00 0.45 - 1 1,935 1 1,935 17 23,850 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 767.71 0.29 -9.37 2 101,548 179.01 0.46 - 3 15,167 JOHN HOLT PLC. S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 38,209.11 0.94 -2.08 80 4,211,690 U A C N PLC. 16,567.46 5.75 - 35 207,830 120 4,536,235 120 4,536,235 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 27,192.00 20.60 - 16 76,500 ROADS NIG PLC. 165.00 6.60 - 0 0 16 76,500 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,936.19 1.13 - 3 1,000 3 1,000 19 77,500 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 13,231.85 1.69 - 2 5,000 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 100,757.61 46.00 - 14 31,155 INTERNATIONAL BREWERIES PLC. 103,150.34 12.00 - 14 226,003 NIGERIAN BREW. PLC. 399,845.10 50.00 - 50 134,567 80 396,725 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 92,500.00 18.50 -4.64 196 10,291,460 DANGOTE SUGAR REFINERY PLC 120,000.00 10.00 - 44 189,020 FLOUR MILLS NIG. PLC. 62,530.79 15.25 - 102 1,512,432 HONEYWELL FLOUR MILL PLC 7,930.20 1.00 -1.00 30 949,375 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 1 610 NASCON ALLIED INDUSTRIES PLC 37,092.14 14.00 - 8 100,105 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 381 13,043,002 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 21,411.50 11.40 - 10 4,094 NESTLE NIGERIA PLC. 1,006,673.44 1,270.00 - 33 7,614 43 11,708 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 5,366.12 4.29 - 12 224,340 12 224,340 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 23,822.86 6.00 - 8 24,911 UNILEVER NIGERIA PLC. 183,840.17 32.00 - 28 135,574 36 160,485 552 13,836,260 BANKING ECOBANK TRANSNATIONAL INCORPORATED 146,796.41 8.00 - 30 160,113 FIDELITY BANK PLC 44,331.44 1.53 -4.37 66 5,940,975 GUARANTY TRUST BANK PLC. 824,073.02 28.00 0.36 168 11,940,117 JAIZ BANK PLC 12,080.34 0.41 -6.82 11 208,335 SKYE BANK PLC 10,687.83 0.77 - 0 0 STERLING BANK PLC. 64,778.44 2.25 -2.17 29 3,139,910 UNION BANK NIG.PLC. 200,933.19 6.90 - 82 2,322,750 UNITY BANK PLC 8,650.11 0.74 8.82 26 1,235,720 WEMA BANK PLC. 23,144.68 0.60 -4.76 12 497,906 424 25,445,826 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 4,435.33 0.64 - 11 451,396 AXAMANSARD INSURANCE PLC 17,325.00 1.65 - 2 1,050 CONSOLIDATED HALLMARK INSURANCE PLC 2,682.90 0.33 - 2 1,400 CONTINENTAL REINSURANCE PLC 17,841.12 1.72 -9.95 4 232,432 CORNERSTONE INSURANCE PLC 2,945.90 0.20 - 4 56,600 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 2,489.97 0.34 3.03 5 226,998 LASACO ASSURANCE PLC. LAW UNION AND ROCK INS. PLC. 2,019.28 0.47 - 3 17,195 LINKAGE ASSURANCE PLC 4,160.00 0.52 - 2 9,000 MUTUAL BENEFITS ASSURANCE PLC. 2,458.00 0.22 -4.35 11 462,566 NEM INSURANCE PLC 11,353.08 2.15 - 3 26,310 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 2,583.62 0.48 - 2 747 REGENCY ASSURANCE PLC 1,333.75 0.20 - 3 410 SOVEREIGN TRUST INSURANCE PLC 1,668.16 0.20 - 5 4,795 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 - 1 100 WAPIC INSURANCE PLC 5,219.27 0.39 - 11 186,308 70 1,679,307

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Company IN FOCUS

BUSINESS DAY Monday 05 August 2019 www.businessday.ng

Behind Wema Bank’s best half-year performance in 5 years OLUWASEGUN OLAKOYENIKAN, SEGUN ADAMS & ISRAEL ODUBOLA

mid a declining interest environment which has seen banks interest income slump, Wema Bank’s digital drive and strong retail footprint of tier-two lender helped the lender record one of the biggest profit growths so far in H1 among lenders. Corporate history Wema Bank Plc is one of Nigeria’s longest surviving indigenous banks and was established on May 2, 1945, under the old name of Agbonmagbe Bank Limited. The mid-tier lender obtained a commercial banking license and started banking activities in the same year. The bank became a publicly quoted company in 1987 and was listed on the Nigerian Stock Exchange (NSE) in 1990. 11 years later Wema was granted a universal banking license. In 2009, the bank underwent a strategic repositioning exercise led by a new management team that saw its finances and profile rise considerably which eventually made it took a sound strategic decision to operate as a deposit money bank with a regional scope in South-South, South-West and Federal Capital Territory (FCT) in 2011. It was the first in Sub-Saharan Africa to fully deploy Finance 10.2 Core Banking Application which enhanced its branch and electronic banking services offered to customers while reducing system downtime and fostering access to banking services. The bank became a national bank in December 2015, with a capital base of over N44 billion, satisfying the regulatory requirements stipulated for a National Banking License by the Central Bank of Nigeria. Wema Bank introduced Alat, the first fully digital bank in Nigeria, in 2017, which has earned it various local and international awards including World Finance Award 2017 for the Best Mobile App and Best Digital App in Nigeria. Information from the bank’s analyst presentation for the first half of 2019 showed that the lender has 1, 173 professional staffs, 155 branches nationwide, 2.25 million customer accounts, 359 Automated Teller Machines, 5, 682 point of sale (POS) stations and 2, 067 agency banking partners. The bank has a Bbb stable rating from Agusto & Co and Global Credit Rating & Co. The administrative and financial affairs of the bank are overseen by Ademola Adebise, the Chief Executive Officer/Managing Director. Prior to his appointment as helmsman which took effect October 1, 2018, he held the position of a Deputy Managing Director. The Board of Wema Bank Plc is chaired by Babatunde Kasali, with Adeboye Adefioye, Samuel Durojaiye, Moruf Oseni and Folake Sanu to mention few as non-executive directors. The bank’s major shareholders include Neemtree Limited, Odua Investment Company, Petrotrab Limited and SWB Investment Limited, with a combined 54 percent equity stake. Wema Bank’s half-year net profit grows most in 5 years Wema Bank Plc. recorded an impressive performance in the first half of this year after it grew its profit for the period the most in 5 years, sustaining its profit growth momentum which it resumed in 2016 after a dip in 2015 half-year net profit. The lender grew profit after tax by 43 percent to N2.25 billion in the first half of 2019, the biggest leap since 2014, as against N1.57 billion achieved in the corresponding period of 2018. This was supported by the bank’s interest income generated from investments in securities as well as income on loans and advances which continued to account for a greater

proportion of its total interest income. Wema Bank’s interest income on loans and advances to banks and customers grew by almost a quarter to N28.37 billion from N22.82 billion. Similarly, the bank’s investment income on investment securities grew by 66 percent to N3.67 billion in the half-year 2019 compared with N2.21 billion achieved in the same period of last year. A trend analysis of the bank’s half-year non-interest income in the last five years shows the bank recorded significant improvement in 2018 and 2019 driven by increased net trading income for the periods. Net trading income rose from N0.66 billion in half-year 2015 to N0.69 billion in 2016 and fell to N0.52 billion in 2017. However, in 2018, the figure rose significantly by 534 percent to N3.30 billion and the bank sustained the trend with an 8 percent growth in the first six months of this year to hit N3.65 billion. As a result, Wema Bank’s non-interest income as a percentage of total income rose to 21 percent in half-year 2019 from 19 percent in the previous year, while interest income waned to 79 percent from 81 percent recorded in the comparative period of last year. Net interest margin of the lender dropped from the 2018 high of 7.08 percent to 6.69 percent due to a decline in the average yield on earnings asset, according to the bank, while the yield on assets maintained its downward spiral to 16.73 percent as against 17.75 percent recorded in end-year 2018 and 17.76 percent in 2017. Wema Bank’s deposits from customers rose from N369 billion in 2018 financial year to N446 billion as of June 2019, indicating

an increase of N77 billion within six months which represents 67 percent of the increase of N115 billion recorded in 2018. The bank deepened its retail customer base in H1 2019 by 18 percent. However, the relative size of retail, the bank’s largest segment, dropped to 36 percent from 37 percent recorded in the first half of 2018. The bank’s gross loans and advances to customers rose steadily by 11.07 percent to N290.55 billion since the start of the year. The growth in the loan books was driven mainly by loans to the construction, general commerce and manufacturing sectors of the economy which jointly account for about 70.6 percent of the increase in the loan books since the start of the year. Oil and gas sector got the highest portion of N54.26 billion, while the education sector took the least chunk of N2.22 billion from the bank. Also, the bank showed efficiency in its loan recovery strategies during the first half of this year as its non-performing loan ratio (NPL) fell to 3.55 percent from 4.98 percent recorded at end-year 2018. In the review period, 51 percent of Wema Bank’s loans went to corporate organizations; 35 percent, commercial; 10 percent, retail; and the remaining 4 percent, public sector. Loan to deposit ratio (LDR) fell to 63 percent in the period from 68 percent recorded in the 2018 financial year. However, this is still above the 60 percent LDR threshold mandated for commercial lenders across the country by the Central Bank of Nigeria (CBN) and due for implementation after end-September 2019. Net impairment loss on financial assets

rose more than double to N823 billion from N344 billion while operating income continued its growth 23.6 percent to N19 billion from N15 billion. Wema Bank paid N359 million as income tax expense for the review period from N244 million in the same period in 2018, while its earnings per share increased from N8.2 to N11.6. How Wema bank hopes to sustain earnings momentum Wema bank will continue to drive its growth through digital capabilities as its strategic thrust till 2020. The bank revealed six strategic pillars to help achieve its goal to become “the most innovative bank”. The pillars include enhancing capital and funding, driving aggressive growth in the core - corporate and commercial – banking, and growing market share in Retail and SME. Others include transforming the customer experience, digitizing business and operations, and building a high performing team which would be at the fore of the bank’s operations. Key enablers would be innovation, agile execution and partnership and alliances, the bank noted in a note to investors and analysts. In the short run, the mid-tier lender would remain focused on growth, doubling performance and leveraging on technology. “We are committed to ensuring we deepen our retail footprint with continued innovation,” said Funmilayo Falola, Head of Brand and Marketing Communications, Wema Bank Plc. With ALAT, Wema Bank was able to open over 380, 000 new accounts and issued 142,343 cards as at June 30, 2019. The bank has also executed 6.7 million transactions worth N175 billion and created 122, 894 saving goals. Management Guidance Management guidance for customer deposits growth is at 30 percent in the second half of the year. The guidance was improved after the first half where customer deposits rose 20.8 percent. The management also expects a 25 percent growth at the end of 2019, while growth for 2018 was at 45.13 percent. Guidance for Loan growth was also raised to 12.5 percent for H2 2019 on the back of expanded loan books. The full year is expected at 10 percent. Non-interest income growth is expected to grow at 25 percent in H2 and 2019 full year. The bank grew its non-interest income by 19.6 percent in H1 and 13.95 percent in the full-year 2018. Net interest margin is expected to grow to 8 percent in H2 and full-year 2019. This compares to 7.08 percent in full-year 2018. Wema’s Cost to Income Ratio is expected to be at 75-80 percent at year’s end while its non-performing loan, one of the lowest in the banking sector, is expected to be at 5 percent in H1 and full year 2019. The bank had 3.55 percent NPL in H1. Return on Average Equity according to management is expected to improve to 12 percent in H2 and full year 2019. Last year Wema had 9.43 percent ROAE. As at the close of business on Friday, August 2, 2019, shares of the tier-two lender fell by 4.76 percent on the Nigerian Stock Exchange (NSE) to close at 60 kobo per share, the negative performance further worsened its year-to-date return to 4.76 percent even though it outperformed the NSE broad index which plunged 12.09 percent since the beginning of the year.

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