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news you can trust I ** wednesDAY 05 february 2020 I vol. 19, no 492

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Revenue surge in H2 fails to lift Okomu, Presco

MARKETS

Corporates turn to debt market for cash amid liquidity glut T

…as smuggling continues ODINAKA ANUDU& GBEMI FAMINU

Flour Mills, Nigerian Breweries set to raise N65bn debt

OLUFIKAYO OWOEYE

F

ollowing the Central Bank of Nigeria’s directive restricting nonbanking corporates and individuals from participating in its open market operations (OMO) bills market,

LR: Hajara Adeola, chief executive officer, Lotus Capital Limited; Tunde Adeola, executive director, commercial banking, Sterling Bank plc; Thaibat Adeniran, head, Cornerstone Takaful, and Basheer Oshodi, group head, non-interest banking, Sterling Bank plc, at the noninterest finance executive forum in Lagos.

there is a renewed drive by corporates to raise capital through the debt market, taking advantage of falling interest rates.

Checks by BusinessDay show that currently two corporates – Nigerian Breweries plc and Flour Mills of Nigeria plc – are in the market to raise a total of

N65bn through bonds issuance and commercial paper.

Analysts say issuers are fully taking advantage of the liquidity glut in the money market, particularly as maturities of debt securities are expected to peak this month.

The return of corporates to

the fixed income market is a welcome development because analysts had in the past fretted over the crowding out effect of Federal Government’s borrowing on the private sector.

Inflows from OMO maturities Continues on page 38

he revenues of Okomu and Presco rose in the second half (July to December) of 2019, but they are not enough to lift the palm oil makers in the full year of 2019.

The closure of Nigeria-Benin border has put the kibosh on smuggling along that axis, which helped to raise the revenues of palm oil makers, but full-year results show that the firms need more than border closure to remain afloat.

Apart from low prices, smuggling of Malaysian and Indonesian oil into Nigeria has persisted in the porous borders in the northern part of the country, preventing the firms from keeping positive balance sheets in full-year 2019 despite improved second-half margins, an analyst said.

Okomu’s first-quarter (Q1) financial statement shows that revenue declined by 42.5 percent to N4.2 billion, from N7.3 billion in same period in 2018. Similarly, profit after tax declined sharply by 71 percent to N1 billion in Q1 2019 from N3.5 billion in Q1 of 2018.

The firm’s revenue declined in Continues on page 38

Inside

Inconsistent policies, insecurity, poor infrastructure to limit FDI inflow in 2020 P. 2

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news OPEC, allies consider deeper cuts to check coronavirus threat … may hurt Nigeria’s revenue projection for 2020 budget ISAAC ANYAOGU

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he Organisation of Petroleum Exporting Countries (OPEC) and its allies including Russia are considering more aggressive output cut after reviewing data that suggest that coronavirus impact on oil markets could be worse than previously thought.

The cartel and its allies met on Tuesday in Vienna for a technical meeting to discuss possible action following the coronavirus outbreak, according to reports from the Wall Street Journal based on interview with cartel officials.

For Africa’s biggest oil producer, deeper cuts are ominous. Nigeria’s production has already been capped at 1.7 million barrels per day but it is counting on financing the 2020 budget on a production of 2.18 million barrels per day.

OPEC officials say a final decision may be reached next week after another round of meetings.

The 14-member OPEC and its 10-nation allies led by Russia had initially considered cutting 500,000 barrels a day but do not look capable of denting the problem with slow demand from China.

The Asian superpower accounts for at least 14 mil-

lion barrels per day consumption. Since the outbreak of the virus, Chinese oil demand has dropped by about 3 million barrels a day, or 20 percent of total consumption, sending prices south.

The outbreak of the pneumonia-like coronavirus has left over 14,000 people infected and over 400 dead since the first case was reported on December 30 in Wuhan, the capital of China’s Hubei province.

According to the Wall Street Journal Report, one projection, which assumes the virus outbreak will be severe and last six months, suggests the market would be oversupplied by 1 million barrels a day in the second quarter if the cartel and its allies fail to act. To counteract this, the alliance would therefore have to cut output by 1 million barrels a day, but by no more than that.

Another scenario foresees a more moderate impact, resulting in a projected excess of 800,000 barrels a day in the second quarter, they said – meaning the alliance would have to cut output by at least 800,000 barrels a day and by no more than 1 million barrels a day.

The scenarios forecast Continues on page 38

Stakeholders urge Islamic banks to create wholesale assets to de-risk balance sheets BALA AUGIE

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o magnify their assets size and make liquidity flow in the system, Islamic financial institutions will have to harness their resources, even if it requires collaborating with conventional banks as they seek common risk appetite.

Stakeholders, who gathered at the Non-Executive Finance Forum organised by Sterling Alternative Finance unanimously agreed some existing assets could be converted into Sharia-compliant assets.

As at the end of 2018, the cumulative assets of Islamic banks stood at N160 billion, which is 0.40 percent of the total banking industry figure, and 0.69 percent of the bond market, according to data from the Central Bank of Nigeria (CBN).

“For us to get to 3 percent of the market we need to add another N700 billion to maintain the Sukuk,” said Bashir Oshodi, head, non-interest banking, Sterling Alternative Finance.

“We need an organised body that will help to propel

these assets. We can create some kind of securitisation or off balance sheet structure like the Sukuk. Over the past few years we have been creating risky asset. Now, we have to create whole new asset where you have other players – because that enhances the credit and it makes investors more comfortable,” said Oshodi.

Experts say it will be difficult for the industry to expand if beleaguered with dearth of knowledge.

Islamic banking, also known as non-interest banking, is a system based on the principles of Islamic or Sharia law and guided by Islamic economics.

Islamic banks make a profit through equity participation which requires a borrower to give the bank a share in their profits rather than paying interest.

A sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Islamic religious law commonly known as Sharia. Sukuk involves asset ownership while bonds are

Continues on page 38 www.businessday.ng

L-R: Georgina Ehuriah, permanent secretary, Federal Ministry of Interior; Mohammed Babandede, comptroller general, Nigerian Immigration Service; Rauf Aregbesola, minister of interior; President Muhammadu Buhari; Kashim Shettima, chairman, senate committee on interior; Nasir Daura, chairman, House of Representatives committee on interior, and Boss Mustapha, secretary to the government of the federation, during the launch of New Visa Policy at the Presidential Villa in Abuja, yesterday.

Inconsistent policies, insecurity, poor infrastructure to limit FDI inflow in 2020 …crude oil, ICT, transport to drive 2.5% growth, says FSDH HOPE MOSES-ASHIKE

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igeria is expected to record slowing Foreign Direct Investment (FDI) flows this year, to be driven by inconsistent policies, insecurity, and poor infrastructure, according to a report by FSDH Merchant Bank Limited.

Total investment inflows as at the third quarter of 2019 stood at $19.7 billion, higher than the $16.8 billion achieved in full-year 2018.

However, 73 percent of total inflows were Foreign Portfolio Investments (FPIs), while Foreign Direct Investments’ share at 3.4 percent was very low as investor sentiments tilted towards the capital market vis-à-vis the real sector, the report said.

Portfolio investments are skewed towards money market instruments, which

accounted for 80 percent of total FPIs. The significant drop in interest rates especially for shortterm securities could lead to some traction in the equity space. This factor will also limit FPI inflows relative to 2019.

Meanwhile, Nigeria’s economy is expected to be better in 2020 with GDP growth at 2.5 percent to be driven by crude oil, ICT and transport.

As output expands, prices are also expected to increase, leading to inflation rate averaging 11.9 percent in the year, following continued closure of land borders and implementation of tax increase.

Year-on-year inflation rate averaged 11.4 percent in 2019 as inflation rose to 12 percent in December last year.

The CBN is expected to continue in its effort to mop up the excess liquidity in the market to curtail inflation and

attract FX inflows.

On monetary policy, the higher liquidity levels have forced down interest rates of government securities. The CBN will resort to the use of multiple monetary policy tools to mop up excess liquidity and attract investment inflows.

This will shape the monetary environment in the year.

“To mop up this excess liquidity, we believe the CBN and the MPC will adopt several monetary policy tools in 2020. In the first MPC meeting in January, the CBN increased CRR to 27.5 percent. This is estimated to mop up an estimated N900 billion from the system,” analysts at FSDH research said.

According to the report, fiscal policies of the Federal Government are expected to stimulate economic growth with the early budget passage which will ensure improved budget performance. Govern-

ment’s aggressive revenue drive will result in an increase in non-oil revenue in 2020 to fund the budget. Revenues from taxes as well as other charges will improve overall revenue. However, revenue gaps due to slow collection rates will persist.

United Capital said in its report that no significant change is expected in the current dynamics in terms of capital flow. More specifically, the CBN is likely to sustain its OMO sale to FPIs in support of the reserves. This may keep FPIs’ interest dominant in money market funds at the expense of equity flows.

“Notably, we expect an upsurge in loans and other claims to continue, given the low interest rate environment in the international debt market. However, Foreign Direct Investment (FDI) flow may remain broadly muted,” United Capital analysts said.

Nigeria unveils new visa policy to improve business environment, attract FDI TONY AILEMEN (Abuja) & SEGUN ADAMS (Lagos)

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igeria has commenced the implementation of 79 classes of visas under the new Visa Policy, aimed at attracting innovation, specialised skills and knowledge from abroad to complement local capacity, President Muhammadu Buhari said on Tuesday.

The policy will enhance Nigeria’s visa on arrival which came into effect in January this year to pave the way for realising gains from the recently signed African Continental Free Trade Area (AfCTFA) deal.

“The implementation of the Nigeria Visa Policy 2020 will support the attainment of a globally competitive economy for Nigeria by building on

the efforts of the Presidential Enabling Business Environment Council,’’ Buhari said.

The president also noted that the Nigeria Visa Policy 2020 provides an avenue to achieve African integration by the introduction of visas on arrival for short visits to Nigeria for holders of passports of African Union countries.

“I, therefore, commend the document to the international community, foreign and local business entities.

We are open for business,’’ he said.

Nigeria improved by 15 places but still ranks low at 131st on the World Bank’s 2020 Doing Business Index with critical areas such as power still lagging.

FDI in the country as at the third quarter of 2019 accounted for 3.73 percent ($200.08m) of total capital

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inflow compared to 18.58 percent ($530.63m) of total capital imported in the same period of 2018.

Nigeria expanded its visa from six classes to 79 for comprehensive coverage of all areas of human endeavour.

Health, education, religion, business, aviation, security, intelligence, diplomacy, trade, investment, tourism and manufacturing are among the categories included, said Muhammad Babandede, comptroller general of Nigeria Immigration Service (NIS).

Babandede said the service had already put in place a technological hub, called the Migrants Information and Data Analysis (MIDAS), to ensure strict compliance with the conditions for the issuance of the visa.

The Economic and Financial Crimes Commission, @Businessdayng

National Intelligence Agency (NIA) and the Interpol also made inputs into the system and would be carried along in the processing before approvals, he said.

The new visa on arrival policy will be implemented at four of the nation’s international airports, which include Nnamdi Azikiwe International Airport Abuja, Murtala Mohammed International Airport, Lagos, Aminu Kano International Airport, Kano, and Port-Harcourt International Airport in Rivers State.

Nigeria Immigration Service revealed that a total of 24,000 aliens were registered at the end of the six months grace granted aliens to register beginning in July 2019.

“The visa policy is a step in the right direction given that

Continues on page 38

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Leadership, Poverty and the challenge of insecurity Small Business handbook

Emeka Osuji

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ome say Nigeria has no business with poverty. I think they are wrong. Nigeria has every business with poverty, until we recognize the nexus between poverty and politics. Poverty and politics are intertwined and positively correlated.

Indeed they are kindred spirit.

Bad politics will birth poverty; extreme poverty that is, and in the final analysis, insecurity. But don’t get me wrong. I am not saying that Nigeria’s present problem of insecurity is birthed by poverty exclusively. That thesis, which some top personalities have been promoting on television, is a fraud. We have an abject poverty problem but it is not at the root of the present looming calamity of mass carnage. India was wearing the poverty crown before now. How many people were butchered in India? Poverty will help bad people to get worse but it will not make good people bad. To blame poverty for the current level of insecurity in Nigeria is either fraudulent or simplistically unintelligent.

I was born before the civil war in a predominantly poor rural community, and I was old enough to know what it feels like having no food to eat. In all those painful years of lack, sweat, pain and death, I never saw anyone accused of violently robbing another. Most people were armed, even if it was with Dane gun and cudgel, but nobody was ever waylaid and killed by those who had noth-

ing to eat. Today, unarmed people become armed robbers and kill their fellow human beings in the name of banditry – a now elegant word we have put forward to compound our misunderstanding of the animal pursuing us. Poverty may make bad people worse but it cannot make good people bad. The part of the country I come from should be one of the poorest in Nigeria but for the self-help that the extended family provides, coupled with the culture of community development. Everything in my community, be it electricity, water and, name it, is from individuals and not the government. We have long since forgotten that governments provide things for communities. Yet, the boys are not attacking homes and burning people alive.

My cursory observation of the goings-on in regard to violence in Nigeria indicates to me that rather than being hungry, the “bandits” are angry with innocent Nigerians. The question is first and foremost, who are the bandits and where did they come from? Why are they angry? The little I know of what bandits do (real bandits per dictionary definition) is that they are robbers, not throatslitting blood thirsty executioners. I think it will be more productive for us to spend our time unravelling what has visited our dear country, rather than theorize that all poor people are looking for the flesh of others to eat.

That will misled and provide cover for the real enemy. And it is the challenge of leadership to understand challenges and apply appropriate solution. I believe it is the lack of proper diagnosis and understanding of the current challenges facing our country that has made everybody in government look bad. Look at the poor Service Chief and tell me how much sleep you would get if you were one of them. They have been reduced to topics of conversation even among

market women. And you don’t blame their traducers because only results speak for the worker.

Nigeria has outperformed its peers in several human endeavours; not in the building of a united nation; not in rocket science or engineering; not in STEM and not even in elementary domestic justice, but especially in endeavours that are devoid of national pride and honour.

We probably have the largest amount of money stolen by public officers in the world. For years, we have been repatriating funds stolen by a single man, the former Head of State, Sanni Abacha, and we are not half way done. Another tranche of about USD321 is being negotiated. Nobody seems to ask why do Nigerian leaders steal loot the treasury but even our poor close neighbours have no such thieves. The answer is simple and anybody who doesn’t know why is not worth his name. Some jokers will say its corruption as if corruption is a Nigeria word. Yet more stealing will go on because we almost always will not attack the disease but follow its symptoms. Why do Nigerian leaders loot the till?

Ordinarily, to be an oil rich country has its own problems but to be one and still be the poverty capital of the world is something to be scandalized about. How can we drop this crown of shame? It is by people-oriented leadership devoid of the current high levels of disarray in many areas.

Mass poverty is a product of failed leadership and leadership may fail for many reasons, of which incompetence and lack of capacity to analyse and understand issues or outright refusal to do the right thing, are only a small part. For as long as leaders, especially lawmakers, continue to preserve bad laws in the hope that they may profit from such laws in the future, for so long

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The question is first and foremost, who are the bandits and where did they come from? Why are they angry? The little I know of what bandits do (real bandits per dictionary definition) is that they are robbers, not throat-slitting blood thirsty executioners

Dr Osuji is head of the department of Economics at Pan Atlantic University Lagos. eosuji@ pau.edu.ng @Emekaosujii

Leading from the front

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hose who say Nigerians don’t have what it takes to compete with Western standards are the sort of people I like to keep away from. As much as I’m in the habit of pointing out where developed countries get some things right, where we don’t, and how it may well be expedient for us to take a cue from them, it’s not because I think we’re not capable. We are, and that’s what makes it the more tragic and frustrating that we find ourselves where we are.

Lagos, the Centre of Excellence truly lived up to its sobriquet by masterfully containing the Ebola the virus when the Ebola infected Liberian - American gentleman, Patrick Oliver Sawyer, imported the deadly virus into Nigeria a few years ago. Had it not been for the swift, decisive and efficient manner in which the Lagos State government’s apparatus, under the able leadership of the then Governor, Babatunde Raji Fashola, moved in to rebuff and confine it to “a corner”, the entire country would very likely have faced a disaster of epic proportions. This remarkable feat, which incidentally, officials of several other African governments later came to Lagos to study and adopt as the standard strategy in their own countries, is evidence enough that excellence is not by any means an exclusive preserve of developed nations. Even underdeveloped countries can still boast of “developed” individuals, many of whom are very quietly leading the way in their various fields. It’s really

all about leadership. That’s what makes the difference.

Stella Adadevoh was such a person. This beautiful, petite and lovely woman led from the front, as any leader worth his or her salt should. In her eagerness to fulfil her Hippocratic oath of treating the sick to the best of her ability and to do her utmost to save his life, and protect the lives of millions of her compatriots, she spared little thought for her own wellbeing, preferring to ignore the obvious hazards of exposing herself to perhaps the most virulent of infections known to man.

Mirroring the sacrificial and selfless leadership act of the Captain of a sinking ship who dutifully refuses to abandon the ship until all passengers and crew have disembarked or have been successfully rescued, even in the full knowledge that he may never make it off; this uncommonly brave woman risked it all.

As a leader both in name and in character, and with utmost devotion to her profession, she sacrificed herself for the sake of humanity and we Nigerians will forever remain grateful for this. As a distant relative on my mum’s side of the family, we had occasion several years before this sad but heroic incident, to chat in her sitting room, where she discussed her son’s schooling with me.

Little did I know that was to be the last time we would see. Till this day, I haven’t had the heart to delete her number on my phone just I haven’t been able to do for any of my late loved

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ones either. Stella Adadevoh, an epitome of excellence, an epitome of leadership, and as I’m even more proud to say, a Nigerian.

Leadership isn’t meant to be just about securing all privileges and “largesse” of position for yourself but it’s supposed to be about inspiring the led to be the best they can be and to be willing at the drop of a hat to sacrifice your comfort and perks for the benefit of all, whenever occasion calls for it. It calls for doing whatever is necessary, within the confines of the law and acceptable ethical practice, to move one’s organisation or nation forward even if this happens to be at one’s personal expense. It takes a mind willing to subject itself to standards beyond that which is expected of others.

It takes a heart which derives its joy and satisfaction from seeing the majority prosper as a result of one’s leading and actions rather than one which jumps at every opportunity to oppress his subordinates or compatriots and laud it over them. It takes a heart of humility, seeking to collaborate with others to achieve the best result and which readily confesses that each victory is a result of team effort and not one which majors in self-glorification. It also takes a mind which remains faithful to its principles no matter the temptation, the pressure or the inconvenience. Its anchors do not shift according to the tides of life but remain constant.

Heraclitus once said , “a man’s character is

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will their law-making be a waste of public resources. The National and State Assemblies have failed Nigeria in such a woeful way that they ought to be scrapped. They have not acted as defence for the people of Nigeria against oppressive governments.

Instead they team up with such oppressive governments, especially in the states to expropriate the people of their resources. The people are not angry with poverty; they are unhappy with a system that has no provision for the excluded.

As long as our institutions remain the private property of those appointed to run them, and offenses carry selective consequences, we go nowhere. The failure of our leaders to honestly reform the electoral system, for instance, has guaranteed that incumbency, cash and self-interest continue to dominate the political system. Even the process of recall; the so-called window for Nigerians to express their dissatisfaction with poor representation, is deliberately flawed. Nobody can ever be recalled through that process. We all know this but the so-called law makers are so shamelessly selfish that they won’t amend that process or stop governors from looting their states and getting criminal pensions.

Clearly, Nigeria needs a new constitution, not just for the purpose of devolution of powers but to reduce the degree of privatization of governments that has gone on since 1999.

Those clutching power and privilege should pause for a moment and think of the looming danger of societal disarray. The people have hit a brick wall and there is a danger of rebound. It is time for leadership. Let us cease the moment and save one of the greatest countries on the planet.

Character Matters with Daps

Dapo Akande his fate”. Call me foolish if you will but I’m of the strong opinion that if all Nigerians take a step back to assess their conduct and examine if it actually pays them in the long run, not just in the immediate; we might come to the realization that it actually doesn’t. And the gradual change in mind-set this self-awareness will subsequently initiate, would at the very least, represent useful baby steps towards producing better leaders. After all, they all emerge from our midst. They have never dropped from the heavens. If we’re to subscribe to Joseph de Maistre’s submission that, “every nation gets the government it deserves” the better we are, the better they should be.

Changing the nation...one mind at a time Akande is a graduate of the University of Surrey, UK, author of the acclaimed book: “The last fight: A personal journey to discovering values.” Contact: dapsakande25@gmail.com

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Nigeria is not ready for business

Olanrewaju Rufai

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he Lagos State government’s recent proscription of the use of motorcycles and tricycles for commercial transportation across several parts of the state is the latest addition to the litany of business-stifling government policies implemented in Nigeria.

Although the Nigerian federal government and several state governments, including Lagos state, continually declare their intentions of promoting the ease of doing business in the country; the actions of these institutions over the years have revealed these declarations to be mere tattle. In fact, there is no gainsaying that regulatory overreach and the enactment of business-stifling policies in various forms have been the hallmark of the Nigerian federal government and several state governments in recent years. Not only has the Nigerian state failed to ease doing business, enacted policies and actions have only succeeded in achieving the reverse.

Against this background, the Lagos state government’s recent decision is hardly surprising as it

simply follows the prevailing trend of overregulation and the enactment of stifling policies. This decision is especially unreasonable in the absence of an integrated transport system, adequate supporting infrastructure and viable alternatives.

The decision is particularly concerning as it explicitly proscribed operations of motorcycle-hailing start-ups. These start-ups have raised millions of dollars in funding from foreign investors in the past year alone. Thus, a proscription of their activities will not only result in unemployment and loss of income for the affected workers, it also sends a negative message to prospective investors. Such development is particularly worrisome for a nation whose economy has not only been in the doldrums for almost five years; but is also suffering from mass youth unemployment. Although the state has defended the ban as necessary for security and safety, the decision has only worsened the country’s notorious reputation as a difficult environment for businesses, particularly for small and medium enterprises (SMEs).

All over the world, small businesses are regarded as drivers of technological innovation and economic growth, providing employment for majority of citizens.

Nevertheless, Nigeria continues to hamper the growth of these small businesses. In Germany, SMEs contribute half of all economic output and provide over 60 percent of all formal jobs, with major support from the government. The reverse however is the case in Nigeria where government policies strangulate small businesses. Research shows

that 85 percent of small businesses in Nigeria fail within the first three to five years, mainly due to ill-thought government policies. In addition, the businesses which survive continue to suffer from crippling multiple taxation while the nation’s decrepit infrastructure ensures that the cost of doing business remain abnormally high. All of these do not point to a favourable business environment or a government keen on supporting businesses.

Furthermore, despite the fact that the recently published Ease of Doing Business index saw Nigeria climb 15 places to 136th place, there has been no evidence of this progress in the activities of SMEs. In fact, it would not be incorrect to postulate that regulatory overreach, multiple taxation and other forms of retrogressive policies have worsened in recent years, with dire consequences for businesses.

The inability and unwillingness of government to support business is best observed through the myriad of government actions and inactions which have worsened doing business in Nigeria. A government which closes its nation’s land border indefinitely with no consideration of the effects of such border closure on businesses cannot claim to be business friendly. Neither can a government which declares a unilateral ban on businesses for no good reason is adjudged open for investments.

Perhaps most tellingly, a government which is unwilling to tackle the structural and infrastructural issues which plague citizens and businesses is simply not ready for business.

The poor development of businesses in Nigeria has numerous ripple effects on the Nigerian economy.

‘

The inability and unwillingness of government to support business is best observed through the myriad of government actions and inactions which have worsened doing business in Nigeria

Rufai holds a first class degree in Management and Masters degrees in Management and Finance. He is a finance and strategy analyst and can be found on Twitter @LanreRufai_.

Of Balogun market and insurance policies in Nigeria: New matter arising? (1)

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Breaking the ice have read with great sadness news of the recent fire outbreak at Balogun Market in Lagos. My thoughts and prayers are with all those affected by the fire outbreaks and similar incidents elsewhere.

Though it is impossible to prevent that which has already happened, it augurs well that the future be well prepared for and risks mitigated to the extent minimally possible.

Raison d’être for the article The foregoing background in mind, this article builds on a 2015 paper I co-authored with some erstwhile colleagues at one of the leading Nigerian law firms. In the 2015 article, we analysed the implications of Section 50(1) of the Insurance Act 2003 and critically examined the legal issues as well as market practices with respect to the collection of insurance premiums.

Fast forward to the present day and taking into account how advisable it is for one to have a ‘valid’ insurance policy that covers risks, this article asserts that while it is important to have an insurance policy, the premium on such policy is expected to “paid in full and in advance” before the commencement of an insurance policy.

Generally, one would expect that an insurance policy is legally binding between the insurer and the policyholder. While this should be the ideal default state, this is not often the case as will be demonstrated in this publication. This article will examine how and why, under Nigerian law, an insurance “policyholder” may sometimes, be deprived of getting compensation that should ordinarily flow from the insurance policy taken.

Working example and questions for determination For the purpose of this discussion, I will use the hypothetical situation below and formulate two questions for determination.

Let us assume Mr. A decides to purchase an insurance cover or policy for his car and then enters into an agreement with the insurance company (insurer) to pay the premium for the policy on a monthly basis spread over a number of months.

I have formulated the two questions below and I will attempt to provide my responses in the succeeding paragraphs: Question 1: Would Mr. A be able to enforce the ‘insurance contract’ upon the happening of the event (risk) insured against?

Question 2: Can the insurer deny Mr. A the compensation he is supposedly entitled to, further to the ‘policy’ taken, on the ground that Mr. A did not pay in full and in advance the premium on the insurance policy, as mandated under Nigerian law?

Legal position on ‘no premium no cover basis’ In responding to the question of whether Mr. A would be able to enforce the ‘insurance contract’ upon the happening of the event insured against, it may be best to start by making recourse to Section 50 (1) of the Insurance Act 2003 (the ‘Insurance Act’) which provides: “The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium paid in advance.”

Upon a reading of the above stated provision, it could be argued that the intent of the

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drafters is that a valid contract of insurance would only come into force when the insured party has paid the insurance premium in advance of the commencement of such contract.

The argument that premium must be paid in full finds great support in the decision of the Court of Appeal in Industrial and General Insurance Company Limited v. Adogu (2009) 3 CLRN. In that case, the Court of Appeal held that Section 50(1) of the Insurance Act does not contemplate installmental payment of premium in an insurance contract. Similarly, the Court of Appeal equally held in Unitrust Insurance Co. Ltd v. Ambico Sendiran Nigeria Ltd (2012) LPELR-15417(CA), that premium must be paid fully, and in advance, for there to be a valid contract of insurance.

Additionally, the Supreme Court in Corporate Ideal Insurance Ltd v. Ajaokuta Steel Co. Ltd & 2 Ors. (2014) 2 CLRN have also held that non-compliance with Section 50(1) of the Insurance Act renders the contract of insurance invalid. According to the Learned Justices of the Supreme Court, the implication of Section 50(1) is that there shall not be any valid contract of insurance until and unless the premium is paid in advance. Their Lordships further reiterated the point that payment of premium is a condition precedent to a valid contract of insurance.

Meanwhile, Paragraph 4 of the National Insurance Commission (NAICOM) Guidelines 2013 provides that “all insurance cover shall only be provided on a strict, no premium no cover basis.” It further stipulates that “only cover for which payment has been received, directly by the Insurer or indirectly through a duly licensed broker, shall be recognisable as

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Low job creation, rising unemployment and weakening consumer demand are some of the obvious impacts. In addition, the frequent acts of regulatory overreach and enactment of business-stifling policies are further proofs of the longstanding tendency of the Nigerian government to hamper the growth of businesses operating in the country, a situation which will only have negative consequences on business performance and future foreign direct investment.

Overall, the ultimate purpose of government in business should be the fostering of an enabling environment to ensure that businesses can create and preserve value while adhering to set standards. However, a government which continually harasses firms will neither aid the creation or preservation of economic value. Furthermore, a country which espouses free market economy and aims to be an attractive destination for foreign business and capital should not operate as Nigeria does.

Thus, the stark reality is that a lot remains to be done to ease the process of doing business in Nigeria.

Policy inconsistencies and multiple taxations at the various levels of government need to be addressed.

Furthermore, there is an urgent need to strengthen the nation’s legal institutions to ensure contract enforcement, protect minority investors and resolve insolvency.

Only then can the nation boldly claim to be ready for business.

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Joseph Onele income in the books of the insurer.”

From a combined reading of the provision of Section 50(1) of the Insurance Act and Paragraph 4 of the NAICOM Guidelines 2013, it could be argued that Nigerian law does not recognise an insurance contract where the premium has not been paid in full in advance of the commencement of such insurance contract. In other words, it is questionable whether Mr. A has a valid contract of insurance, having failed to pay the insurance premium in full and in advance of the insurance contract. As unfortunate and unfair as it may sound, a review of relevant decisions in Nigeria will reveal Mr. A may be unable to enforce the insurance contract as the court may likely hold there was no valid contract of insurance to begin with.

In the second part of this publication, I shall consider whether the insurer can effectively deny Mr. A the compensation he is supposedly entitled to, further to the “policy” taken, on the ground that Mr. A did not pay in full and in advance, the premium on the insurance policy, as mandated under Nigerian law? Making recourse to relevant judicial decisions, I will provide a befitting response to this lingering question.

Onele is Joseph cut his teeth in legal practice, at one of the top tier law firms in Africa, where he routinely advised development finance institutions (DFIs), multinationals, commercial banks, start-up firms, and international corporations/ organisations on different areas of law. He can be reached via thejosephonele@gmail.com

12

Wednesday 05 February 2020

BUSINESS DAY

Editorial Publisher/Editor-in-chief

Frank Aigbogun editor Patrick Atuanya

On Nigerian immigrant restriction Buttresses why Nigeria must put its house in order

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

N

igeria has 180 days from January 31, 2020, to work with the United States government to secure removal of our country from the list of countries President Donald Trump slammed a restriction on immigrant access. The timeline is to enable diplomatic engagements, reviews and assurances about Nigeria’s willingness to tackle the deficiencies the United States identified in naming Nigeria among six countries it restricted the long-term entry of their citizens into America. It is in the interest of both Nigeria and the USA to take all necessary steps to rescind this decision. It does not benefit either country.

Proclamation 9723 of 2020 modified Proclamation 9645 of 2017 and identified “deficiencies in sharing terrorist, criminal or identity information” by the Nigerian government leading to “an unacceptable likelihood that information reflecting the fact that a visa applicant is a threat to national security or public safety may not be available at the time the visa or entry is approved.”

Nigerian-Americans have a significant presence and make valuable contributions to America.

The 2016 American Community Survey estimates that 380,785 US residents report Nigerian ancestry.

The 2012-2016 ACS estimates that 277,027 American residents were born in Nigeria.

Nigerian-Americans stand out for the quality of human resource that they contribute to America.

Rice University reckons from the data that Nigerian-Americans are the most educated ethnic group in the United States. The Migrations Policy Institute breaks this down to declare that 29 percent of Nigerian-Americans have graduate degrees compared to 11 percent of the overall population.

In 2018, US authorities issued 7,927 immigrant visas to Nigerians.

Up to 4, 525 of that number went to immediate relatives of Nigerians who had become American citizens.

These highly educated Nigerians work and contribute to medicine, science, technology and literature.

By locking out Nigerians from US immigration, America has locked out 25 percent of the African population.

Uncertainty and anxiety attend this blockade against Nigerians at home and in the Diaspora. Many Nigerians living in the United States based on immigrant visas do not know what would happen next and how they could be affected. Family, friends and colleagues of those in the United States are even more concerned.

For many Nigerians, failure to rescind the proclamation soon would mean loss of opportunities for study programmes and income.

Remittances from the Diaspora brought in $24 billion to the Nigerian economy. The American branch played a significant role.

The proclamation against Nigeria is another reliable indicator of the need to put the Nigerian house in order. It is sobering reading the proclamation as it spoke of efforts over two years to get Nigerian officials to do the right thing. It did not happen until the restriction.

The issues the American authorities want Nigeria to resolve also reflect the concerns of Nigerian citizens. They include the perennial failure to get the electronic National ID card scheme off the ground. Experts decry the absence of a central

database given the numerous data points with the Nigerian Police Force, INEC, the secondary and tertiary education bodies and the Federal Road Safety Corps. They need harmonisation.

Heightened concern in-country over the security challenges of the country must have additionally piqued the interest of the Americans as the problem links to terrorism.

While Nigeria is half Muslim and half Christian, the activities of groups such as Boko Haram paint the country in dark lights.

It is heartening that President Muhammadu Buhari took action immediately by empanelling a committee to tackle the issue. The Rauf Aregbesola Committee on the American Visa Challenge “will work with the U.S Government, INTERPOL and other stakeholders to ensure” proper implementation of all updates.

Aregbesola is Minster of Interior.

We urge the Aregbesola Committee to get on with the assignment and ensure positive outcomes. They should coordinate well with the Ministry of Foreign Affairs and all the relevant agencies. Nigeria-US relations should remain positive as much as we can help it.

HEAD, HUMAN RESOURCES Adeola Obisesan

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

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Wednesday 05 February 2020

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Nigeria’s corruption ranking: An opportunity for reflection

Franklin Ngwu

W

ith Nigeria’s 146th position of 180 countries surveyed in the 2019 Transparency International Corruption Report, it is becoming very clear that our current approach to fighting corruption needs a deep rethink. Believing that it was getting it right, the Federal Government has responded in a rather very reactive way especially with our retrogression from 144th in 2018 to 146th in the current ranking. Scoring only 26 of the 100 points, Nigeria is also ranked as the fourth most corrupt country out of the 19 countries in West Africa.

The question is not really about our ranking but on the appropriateness of our anti-corruption approach and if it is yielding the desired results. Reading through the responses from government agencies, it seems that a better and more holistic understanding and approach might be required. Most disturbing is the response from EFCC that maintained that, “the poor rating was a baseless and appalling report measured by a bogus and ambiguous criterion jaundiced and illogical. We (EFCC) insist that the rating is a far cry from the evident strides and achievements so far accomplished by the anti-graft agency in the fight against corruption, particularly under the administration of President Muhammadu Buhari.”

Will EFCC’s response be as reac-

tive as above if the ranking was an improvement from our 2018 performance? I don’t think so. As it is a decline from our 2018 ranking, the response should not be dismissive and somewhat angry as above. It should serve as a reflection and reviewing opportunity for the government and her security agencies such as EFCC. From the responses of anti-corruption agencies and even that of the Attorney General and Minister for Justice, it is evident that the understanding and anti-corruption fight is mainly based on legislation, enforcement and recovery of looted assets. This can simply be described as “Probe, Prosecute and Possibly Jail”. While important and part of the crusade, fighting corruption is significantly beyond this approach especially in a country like Nigeria. In reviewing the untidy way that Justice Onnoneghen was removed from office, I cautioned in my January 30th 2019 contribution, that the present approach of “probe, prosecute and possibly jail” in our anti-corruption fight while important might achieve only limited and unsustainable results. It is most interesting that just one year after the caution, we have retrogressed in our anti-corruption fight according to Transparency International. Aptly capturing the need for a rethink are the clarifying comments of Auwal Musa Rafsanjani, the Transparency international contact person in Nigeria. “When the people go to hospital, they encounter corruption. When they encounter the police either on the road or at the police station, they encounter corruption. When students are seeking placements in tertiary institutions nationwide, they encounter corruption. When they go to process international passports or driver’s license, they encounter corruption “.

While there is no doubt as to the right of the federal government and anti-corruption agencies to question our 146th position, it is difficult to

‘

To make any meaningful progress, we need to properly understand how our structure of governance, institutions, organisations and their interactions have helped to create a dominant culture of corruption in a very plural society such as Nigeria

doubt the validity of the Rafsanjani’s observation on the pervasiveness of corruption in Nigeria. Interestingly, if these observations are the basis of our retrogression, I think that the focus should not be on disputing the report. Rather, it should be on the important reforms or policies that can be implemented to reduce the pervasiveness. Take for instance the number of security agencies on the Lagos- Onitsha expressway and the consequent lamentable extortion of motorists in the guise of providing security.

The question that should be asked is why corruption seems to be increasing and getting more complex even with all the presumed efforts against it. In our reactive approach to governance, we lack deep and detailed examination of the historical and sociological genesis and growth of corruption in Nigeria, especially how our formal governance and legal systems have been the major sources and causes of corruption. I think that our leaders should do a deep, frank and sober examination and reflection on why Nigeria has consistently performed very poorly in all the key governance indicators such as Rule of Law, Regulatory Quality, Government Effectiveness, Voice & Accountability, Political Stability and Lack of Violence, and Control of Corruption.

Our persistent poor outcomes in all these variables over these years since 1996 when the measurements started clearly show that our recent poor corruption ranking is not isolated, and that fighting corruption is evidently beyond what EFFC and other security agencies are doing.

To make any meaningful progress, we need to properly understand how our structure of governance, institutions, organisations and their interactions have helped to create a dominant culture of corruption in a very plural society such as Nigeria.

The effectiveness of a law is depend-

ent on the extent to which the law (legal system) is understood, accepted, internalised and complied with. As our formal legal system is neither understood and accepted nor internalised and complied with, our poor performance in key governance indicators including anti-corruption fight should not be surprising. This unfortunate outcome can be attributed to two main factors. First is the inherent differences, contradictions and conflicts between our respective informal tribal legal systems (norms and values) and our adopted formal legal system. Second is the very limited integration of our multifarious tribes before the somewhat coerced adoption and usage of a foreign legal system.

To sustainably address the above challenge, the focus should be on how to make our formal legal system more effective. First is the need to rethink our structure of governance to ensure that instead of enhancing corruption as it is currently doing that it is fit for purpose and contributing to growth and development. A Key question is whether too much powers (including anti-corruption) are concentrated in the centre or not. Second is the resolution of the inherent conflict between our formal legal system and our respective tribal informal legal system with more superiority attached to the latter. This is very important given our immense plurality with a most recent evidence supporting this urgent need for legal reform being the Amotekun issue and the proliferation of other tribal associations and groups. With the above two important reforms, the effectiveness of our legal system will significantly improve through better understanding, acceptance, internalisation and compliance.

Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum.

E-mail- fngwu@lbs.edu.ng

Is electronic voting out of the equation?

F

rom the stand point of the present electoral situation in Nigeria, the following are discernible: Thuggery and violence, more than ever before are the bane of conducting free, fair and credible elections in the country; Buying of votes at polling centres is now the norm; Elections in Nigeria are heavily militarized, The Nigerian Judiciary is playing less than noble role in election matters; No serious efforts at reforming and improving on the electoral system.

Coming to terms with the last point will undoubtedly take care of the other issues.

As already highlighted, there is a pending electoral bill passed by the last National Assembly. It needs to be reworked in the light of recent experiences in the 2019 general and two recent off season elections. I have heard in the news that the present INEC is proposing some amendments to the present electoral law but curiously nobody is proposing the introduction of ELECTRONIC VOTING into the system.

The view out there is that INEC officials are not interested in electronic voting not because it is neither desirable nor feasible but largely because its introduction will rob them of avenues to award all manner of contracts ranging from printing of ballot papers to hiring vehicles to deliver electoral materials during elections. It may sound uncharitable but if an electoral body with all the challenges it has

had to contend with of late is not thinking in the direction of electronic voting, then one cannot really fault that line of reasoning. The great poser: can the present INEC present itself as a forward looking organization that is in tune with current realities if it is not considering electronic voting at this stage?

The counter argument to the proposal may be that the country is not yet ripe for that kind of project. What happens to those in the rural areas; how will they cope? A standard rejoinder will be to ask: those in the rural areas including the aged, don’t they use mobile phones today? A good analogy: when the present Registrar of Joint Admissions and Matriculation Board (JAMB), Ishaq Oloyede introduced the use of computer based test in the conduct of JAMB examinations in order to curb malpractices, it was greeted with much cynicism and derision. The same argument for those in the rural setting was canvassed.

Today that initiative is working everywhere in the country and people are applauding, while JAMB is constantly fine tuning the processes.

There is therefore nothing esoteric about Nigeria embracing electronic voting in this 21st century. If anything, it is more than overdue. My submission is very simple: let INEC immediately propose a bill to the National Assembly on this. Next general election period is still three years away. An urgent bill like that

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can’t take the National Assembly forever to pass. Give and take, INEC will have at least two years to educate Nigerians on the new mode of voting.

The advantages of electronic voting over the present arrangement are numerous.

However, the following will suffice for now.

First, the issue of thuggery and violence will be taken care of; there won’t be any ballot boxes to snatch or ballot papers to destroy.

The fear of insecurity which has contributed in no small measure to voter apathy presently will be a thing of the past. More importantly, the issue of militarisation of elections will be a non-issue.

Second, the humongous amount of money being expended currently to conduct elections will be significantly minimized and channelled to more productive ventures; personnel and logistics costs would be curtailed.

Third and as an adjunct, there won’t be any need to shut down the entire country in the case of general elections or some parts in the case of off season elections. The nation has had to contend with a lot of social and economic dislocations and/or costs just because of elections; the compelling need to restrict movements won’t be tenable anymore.

Fourth, having election results released on time is another outstanding advantage; the issue of delays leaving rooms for manipulation

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Emeka Okolo

won’t be there. Finally, the country will be saved the unviable status of being the nation with the highest electoral cases in the world.

The electorate and ONLY the electorate and not the election tribunals and courts will decide who is elected to any position of trust and authority in the country. Some of the bizarre judgments emanating from the courts these days will be history.

At this stage of its development and after twenty one years of uninterrupted democratic rule, the nation deserves better than it is doing presently, electorally speaking. Nigerians must insist on ELECTRONIC VOTING if the nation must move forward. Having the wrong people purportedly elected is the beginning of stagnation and corruption. No democracy can ever thrive without credible elections!

Dr. Okolo is a chartered stockbroker and management consultant based in Lagos.

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Wednesday 05 February 2020

BUSINESS DAY

COMPANIES & MARKETS

Company news analysis insight

AVIATION

SAHCO regains mojo as Q4 profit hits N530m on higher revenue, drop in administrative expense OLUFIKAYO OWOEYE

A

fter a disappointing 2018 when SAHCO recorded a loss of N665million, the cargo handling company has bounced back to the path of profitability.

In its unaudited financial statements for the period ended 31 December, SACHO’s revenue jumped 24.9percent from 6.13bn to N7.66bn. Although, the company’s direct cost, which is a price that can be directly tied to the production of specific goods or services, surged 21.5percent to N4.28bn from N3.52bn leaving gross profit at N3.38bn still 30percent higher than N2.60bn recorded in the same period the previous year.

The company recorded a net profit of N530.17 million from a loss of N530million in 2018. Administrative expenses also dropped 12.9percent to N2.43bn from N2.79bn Analysis of its revenue reveals that Cargo Handling Income stood at N4.43bn from N3.41bn, revenue from Hajj operations surged to N183.16m from a meager N37million in 2018, Equipment rental also increased N278.9m from N145.81m Skyway Aviation Handling Company Plc. (SAHCO), one of the aviation ground handling companies in the country came into being in 2009 following a prolong and complex privatization exercise.

Sifax Shipping Limited and Global Apex

Logistics Limited through SAHCO Limited acquired a 100percent stake of the Federal Government in Skypower Aviation Handling Company Limited as a result of the privatization of the company.

Global Apex Logistics Limited, however, sold its stake in the shares of the company. SAHCOL merged with Skypower in 2018 with the former being the surviving entity.

SACHO has invested in acquiring new equipment such as the LAM 35 High loader which is the first in the Nigerian Aviation Ground Handling industry and also the baggage tow trucks which has the biggest capacity in Cargo and baggage loading of up to 40 tonnes.

As part of SACHO’s

expansion plans, the company is building a 3-level commercial structure to accommodate its growing clientele, recently completed

the construction of an Export Cargo Accepting Bay to accommodate the growing export industry in Nigeria and this is being used judi-

ciously while empowering its Engineering and Maintenance team to innovate by building some equipment as well.

L-R: Folakemi Fadahunsi, chief financial officer, UPDC Plc; Deborah Nicol-Omeruah, deputy CEO, UPDC Plc; Fola Aiyesimoju, CEO, UPDC Plc; Azeezah Muse-Sadiq, partner, Banwo & Ighodalo, and Oyinda Akinyemi, executive director, Stanbic IBTC Capital, at the UPDC Rights issue signing ceremony in Lagos.

CONSUMER GOODS

Nigerian Breweries launches series 5 & 6 commercial paper amid plan to raise N45bn OLUFIKAYO OWOEYE

N

ig er ia’s larg est brewer by market share, Nigerian Breweries has announced the launch of series 5 & 6 commercial paper as part of the brewer’s plan to raise N45billion to support the company’s short term funding needs.

The Series 5 would be for a tenor of 180 days, Series 6 would be for 270 days. A Commercial Paper (CP) is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable, inventories and meeting short-term liabilities Following a successful run of the company’s first N100billion CP program which ran from 2015-2018 the board approved a new programme in July 2018.

The first CP helped the company to reduce its overall funding costs.

This new CP program would run for three years till March 2022. According to the management, this new CP program would support the cost management initiatives of the

company, complement traditional sources of financing to include nonbank financing options and provide opportunity for non-equity investors to invest in the company.

The CP’s will, after issuance, will be listed on the FMDQ OTC Securities Exchange, making it possible for investors to trade in them.

Analysis of the company’s recently released nine-month result for the period ended 30th September shows that gross revenue increased 2.7per-

L-R: Aditya Bhargava, vice president, international business, Schneider; Deepak Dalamal, chairman, Bhojsons Plc; Tobi Bakre, ex-Big Brother Naija(BBN) celebrity housemate; Vishant Dalamal, group MD, Bhojsons Plc, and Rajneesh Gupta, business unit head, Bhojsons Powerhub, at the launch of Amaze Power Back Up solution at the 2020 Dealers’ Meet in Lagos

cent year-on-year this was however affected by higher excise duty expense compared to last year.

The new excise duty which came into effect on 4th June 2018 to help boost the federal government coffers imposed excise duty on beer and stout at .30 kobo per centiliter in 2018 and .35 kobo per cl each in 2019 and 2020. This translates to N30 per liter of beer in 2018 and N35 per liter in 2019 and 2020 respectively During the period, operating expenses spiked 6.1percent, marketing, and distribution expenses also increased 14.3percent as the competition among other brands become more intense. The net finance cost stood at N2.9billion 141.5percent higher year-on-year, a 140.2percent year-on-year increase in finance costs outweighed a 59.7percent rise in finance income.

Wednesday 05 February 2020

COMPANIES&MARKETS

BUSINESS DAY

15

Business Event

POWER

Siemens licenses Tranos to make SIVACON S8 in Nigeria STEPHEN ONYEKWELU

T

ranos, a top indigenous Nigerian engineering and manufacturing company has clinched a new licence from Siemens to make metal-enclosed SIVACON S8 switchgear in Nigeria.

These types of switchgear are completely enclosed on all sides and top with sheet metal (except for ventilating openings and inspection windows) containing primary power circuit switching or interrupting devices, or both, with buses and connections.

Given its enclosed nature, it ensures safe power distribution, intelligent data and process management. SIVACON S8 is ready for the challenges of the future and digitalisation: with special features and a modular design to ensure it is highly reliable, safe, and flexible. Data from SIVACON S8 is available at all times for higher-level automation, energy management, and Cloudbased analysis systems.

This collaboration combines Tranos’ expertise in sheet metal designing and manufacturing with Siemens’ high quality and innovative power distribution components.

The licensing partnership makes Tranos a Level-1 partner with Siemens and will involve the transfer of cutting-

edge technology to Tranos.

The SIVACON S8 metal-enclosed switchgear/panels built

by Tranos will come with the Siemens brand and will be available for export.

SIVACON S8 low-voltage power distribution board is Siemens’ proprietary switchgear system with design verification according to IEC 614392, meeting the industry’s highest standards and Shell DEP. The SIVACON technology will be used to produce low voltage panels up to 7,000A and motor control centres up to 3,600A. The system is very flexible with the best safety features and digital connectivity.

Both companies have agreed to expand the partnership to include Siemens’ SIMOPRIME medium-voltage metal-enclosed switchgear to 17.5kV and 3,600A by the second quarter of 2020. This will make Tranos the leading switchgear manufacturer in Africa.

SIMOPRIME mediumvoltage switch gears from 17.5 to 24 kV offer the perfect combination of technology, reliability, quality, and service.

The air-insulated switchgear can be ideally combined with SION vacuum circuit breakers and is type-tested for indoor installation in accordance with IEC 62271-200.

“Tranos is a company that believes in providing value to customers by leveraging on technology. We are happy that

Siemens has seen our drive for quality and has chosen to work with us on this,” Jude Abalaka, managing director of Tranos said. “We must also recognise the support of the executive secretary of the Nigeria Content Development and Monitoring Board (NCDMB), Simbi Wabote and his team whose strong support has been instrumental in our expansion drive.”

Abalaka is confident that this newly acquired technology will be beneficial to customers in the oil and gas, telecommunications and fast-moving consumer goods (FMCG) industries who require a reliable and safe power supply.

“This means that for projects like the Nigeria Liquefied Natural Gas Train 7 and Shell’s Bonga South West FPSO, both low voltage (LV) and medium voltage (MV) metal-enclosed switchgear can be manufactured locally,” Abalaka said.

Tranos is an indigenous engineering and manufacturing leader; adding value to lives through innovative solutions. In its 12 years of existence, Tranos has grown into a reputable and internationally recognised brand, providing innovative products such as enclosures, electrical panels, switchgear, cable trays and ladders, racks, switches and sockets. Tranos also provides fabrication, installation and maintenance to the oil and gas industry.

L-R: Ademola Oshunniyi, head, brand strategy, GDM Group; Bukola Bodunyefa, GM, marketing operations; Victor Afolabi, founder; Labake Yussuff, chief operating officer, and Doja Ekeruche, member of advisory board, Eko Innovation Centre, at the Clients’ Appreciation Party to mark the 10th anniversary of GDM Group, in Lagos.

L-R: Bola Arotiowa, geographical business area director, West Africa; Martha Kayode, senior brand manager, West East and Central Africa; Kemi Saliu, head of marketing, West East and Central Africa, and Crispin Achola, GM, WECA, at the official launch of Huggies Nappy Pants in Lagos

TECHNOLOGY

Bhojsons Powerhub introduces Amaze power back up solution into Nigerian market Jumoke-akiyode-Lawanson

P

owerhub, a subsidiary of Bhojsons Group, an emerging power solutions company has launched Amaze power back up solution into the Nigerian market. The launch of Amaze - one of the leading power back up brands in India, is poised to help ease Nigeria’s lack of adequate power distribution, a situation similar to that of India.

Speaking at the launch event held in Lagos on Friday January 31, Vishant Dalmal, the group managing director of Bhojsons Group Plc, said that Amaze inverters and batteries are one of the best-in-class power back up solutions in its segment with a pedigree of over 30 years of manufacturing excellence and category experience.

Vishant further explained that the Amaze brand offers customers the best quality power solutions using cutting edge technology in a complete package that guarantees maximum performance.

“Amaze Power products

are designed for young achievers who demand more in their lives. Amaze delivers more performance, more reliability, more attractive designs with consistent power, and the assurance of quality of global manufacturing standards and 24x7 after sales service across Nigeria. The brand also has one of the most interesting aesthetic designs from France with a smooth sophisticated architecture and refined edges,” he said.

Earlier in his welcome address, Dalamal expressed profound gratitude and appreciation to the dealers for their immense support and contributions, which has seen the company grow over the years despite the difficult operating environment and challenges of the Nigerian economy as a whole.

He described the dealers’ as partners and strong pillars to the continued growth of the company. “We are really excited to see and celebrate you, our esteemed business partners for your support in growing our business to where it is today. Without you all, it

won’t have been possible to get to where we are,” he said.

Also speaking at the event, Rajneesh Gupta, the business unit head Bhojsons Powerhub stated that Amaze offers a technologically advanced power back up solution that meets the yearnings and power back up needs of Nigerians.

Gupta said that Amaze power products are manufactured with an edge to deliver higher reliability. He mentioned that Amaze inverters and batteries are manufactured using cutting edge technology which ensure deliver more back up for the same capacity. He continued that Amaze is 24x7 protected with Nigeria’s trusted after sales service provider “Bhojsons Care” to provide round the clock customer support to deliver customer delight always.

“Amaze power back up products are designed to reduce electrical losses, thereby improving power savings and efficiency. They are very safe, protecting appliances by delivering safe power output even under fluctuating input conditions,” Gupta said.

Goddy Jedy-Agba, minister of state power, receiving Oti Ikomi, CEO, Proton Energy, on a courtesy meeting in Abuja

L-R: Seyi Kumapayi, chief financial officer, Access Bank Plc; Rose Mordi, national president, Down Syndrome Foundation of Nigeria; Jasper Graf Von Hardenberg, MD, Daystar Power, and Akin Opeodu, chairman, Down Syndrome Foundation of Nigeria, at the Access Bank Financial Control and Enterprise Business Services CSR Initiative, in Lagos.

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Cashew farmers see higher output, better pricing ahead of 2020 season Josephine Okojie

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ashew farmers in the country are optimistic that the 2020 season that has commenced this month will be favourable to them as they expect better pricing and increased production.

The farmers say that expect output to reach about 350,000 metric tons (MT) for 2019/2020 season from 250,000MT recorded in the 2018/2019 season.

“With the reports we have gotten from cashew farmers across, we are sure that our production will be about 350,000MT this season,” said Ojo Ajanaku, chief executive officer, Seacos Nigeria Limited.

“A l s o, w e e x p e c t a favourable price this year and we are optimistic that farmers will earn more from cashew this year,” Ajanaku said.

He stated that farmers are very optimistic that 2020 crop production will surpass that of this year as many new trees will start producing coupled with the early fruiting of most trees in key producing states.

Nigeria is rated as the fourth-largest producer of

cashew nuts in Africa and sixth in the world, with a 275,000 metric per annum in 2019 and is expected to reach 500,000 metric tons by 2025, according to the National Cashew Association of Nigeria.

Cashew has become a top-notch cash crop in Nigeria and it is one of the focused commodities by the Buhari led government to revamp the Nigerian economy.

Since the Federal

Government renewed focus on agriculture, cashew crop has risen in its profile, emerging as one of the top-five exported non-oil commodities.

Data from the National Bureau of Statistics shows that Nigeria exported N35.7 billion ($116million) worth of cashew in the first nine months of 2019.

It was exported to the United States, Vietnam, Russia, Germany, Italy and many parts of Europe.

Akwa Ibom farmers unveil Ibom Golden Rice ANIEFIOK UDONQUAK, Uyo

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ice farmers in Akwa Ibom state have unveiled its brand of locally grow n ‘G olden Rice’ cultivated in Ibiono Ibom local government area of the state.

The brand was unveiled during an exhibition organised by Rice Farmers Association of Nigeria, Akwa Ibom chapter in conjunction with the state ministry of agriculture and women development as part of efforts to ensure food sufficiency in the state.

At a well-attended c e re m o n y h e l d a t t h e civil service secretariat, it attracted stakeholders in the agriculture sector including members of the state executive council and chairman, house of assembly committee on agriculture.

Speaking during

the exhibition, Glory Edet, Commissioner for Agriculture and Women Development reiterated the present administration is determined to give its full support to farmers in the state to boost food production.

“Food support includes the clearing of many hectares of farmland and provision of a one-point-five metric ton per hour rice mill at Ikot Essen in Ibiono Ibom local government area,” Edet said.

She said that the rice m i l l i s t h e p ro d u c t o f c o l l ab o rat i o n b e t w e e n the Federal Ministr y of Agriculture and the state g ove r n me nt ha s rea lly helped the rice farmers adding that with this, the processing of rice has been made easier for the farmers.

Edet who also announced that the state government has concluded plans to plant coconut across public schools in the state to further www.businessday.ng

boost agriculture adding all lands were not suitable for rice or cassava cultivation.

Unveiling the 100 bags of rice brought for exhibition, the commissioner expressed the hope that the local government area would feed the state and the nation’s son.

In his speech, Ekomabasi Akpan, chairman of the local government council said the gesture was to encourage food sufficiency in the area and the state at large he also called on the government to always support farmers.

“Today, Ibiono Ibom has showcased rice we planted; we came to Uyo so that everybody could see that Ibiono Ibom is working.

What we are witnessing today is a collective effort of Ibiono farmers. We have cultivated two thousand two hundred hectares of farmland and we are ready to produce more rice,” Ekomabasi said.

“Our harvest currently has already surpassed what we harvested last year by the period,” Olanrewaju Osifeso, chief executive officer of San-Jose said in a telephone response to questions.

“This is because some of our trees started fruiting this year and the weather condition has been favourable for the crop,” Osifeso said.

Currently, the price for a metric ton of cashew for

the current season is yet to be made available as the season will commence at the end of February.

“Last year, the season closed with prices hovering between N350,000 and N210,000,” Osifeso added.

Globally, the oversupply built up in the 2018/2019 season that leads to a downward pr ice trend seems to have been used up as the crop has a positive outlook.

Ni g e r i a’s c a s h e w i s usually harvested between Februar y-June, though farmers stock the crop and export it all year round.

It is eaten and also serves as industrial raw materials in firms producing chemicals, paints, varnishes, insecticides and fungicides, electrical conductress, and several types of oil among others.

Apart from helping to maintain a healthy heart and bones, cashew also helps in weight loss.

The crop can be grown in the entire South-West, South-South and SouthEast region, with Kogi, Oyo, Anambra, Osun and Enugu having the largest production areas.

Farmers and exporters of the crop are targeting to

earn at least $350million from export this season.

“If the harvest comes out better this year, giving the fact that the weather condition has been quite good and the harmattan moderate, we expect to earn at least $350million from export this season,” said Tola Faseru, vice president, African Cashew Alliance in a telephone interview. “ We e x p e c t a l o t of interest from the international market as most of our contracts were cancelled because of the gridlock at the port,” Faseru who is also the chairman of Colossus Investment Limited said.

Faseru said that the Nigerian cashew brand was presently gaining traction and referred to it as one of the best in the international market because of its good flavour that has given it an edge over other countries.

He called on the government to address the Apapa and Tin Can traffic situation as well as the slow clearing processes at the port to facilitate a seamless process in export.

He added that it will enable exporters’ timely meet up with their contractual supply agreements.

AVOSON appoints Adeniyi as new CEO Josephine Okojie

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he Avocado Society of Nigeria ( AV O S O N ) h a s appointed Sola Bunmi Adeniyi as its new chairman chief executive officer.

The appointment of Adeniyi is coming at a time when the association is taking giant strides in the commercialisation of Hass avocado production, processing, and exports in Nigeria. “ The overall aim of the association remains improving the viability and sustainability of avocado farming in Nigeria and I hope to will bring my vast experience and expertise in agribusiness to the avocado growing and processing sector,” Adeniyi said in a statement.

He is the founder of the Gogreen Impact Africa Initiative and to preside over the affairs of the association for the next five years.

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Sola Bunmi Adeniyi

He has an unparalleled passion for agricultural advocacy with tremendous experience in the agricultural industry.

Adeniyi is expected to bring his wealth of expertise to the association and further drive its transformative mission.

With his appointment, AVOSON hopes to further strengthen its partnership with multiple stakeholders – private and public – to provide a platform for the strategic implementation of innovative services in the industry.

He is a member of @Businessdayng

different agro-aligned boards, including the International Food and Agribusiness Management Association.

Similarly, he is an advisory member of the African Society of Agribusiness Professionals and Fellow and Council Member of the Institute of Agribusiness Management of Nigeria.

AVOSON is the national association of avocado f a r m e r s, p a c k e r s, a n d exporters in Nigeria duly registered with the Corporate Affairs Commission and Federal Ministry of Agriculture.

The association is at the forefront of promoting the sustainable production of avocado in the country, with a vision of generating seedlings for over 3000 acres of farmland across the Avocado producing states of Nigeria.

AVOSON partners with dif f erent inter natio na l avocado associations, with active participation in the global Avocado trade.

Wednesday 05 February 2020

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How inadequate agric research funding undermines Nigeria’s food security Josephine Okojie

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i g e r i a s ma l l h o l d e r farmers have continued to lag behind its peers’ in terms of yield per hectare and this is owing to the inability of the agricultural research institutes in the country to provide them with the technology that would boost their productivity.

Nigeria’s agricultural research institutes have continued to be the weak link in Nigeria’s drive to diversify the economy through the sector and make exponential gains by way of earnings, employment, and other spinoffs.

The agric research institutes across the country are however falling grossly s h o r t i n p rov i d i n g t h e technologies that would drive growth in the sector and are lagging behind smaller peer nations, where agriculture is less of a priority.

Experts have attributed this to poor funding. They identify poor research funding as the major challenge among others limiting the institutes

to provide vital research that would impact farmers’ productivity.

The institutes were established by the Federal Government in its efforts to increase agricultural productivity, improve the lives of rural communities and make Nigeria sufficient in food production.

The institutes were mandated to provide technologies that will increase farmers’ productivity and boost food production through the s cience of research.

But today, the dream has become dead, the vision blurred and the mission a mere statement of expression as majority of the institutes a re a m e re s h a d o w o f themselves. “ We h av e a t o t a l o f 13,000,000 staffs and 90 percent of the yearly allocation goes into salaries and emoluments. Only 10 percent goes into research.

This is why the institutes have not been able to improve farmers output,” Baba Yusuf Abubakar, former executive secretary of the Nigerian Agricultural Research Council

(ARCN) told BusinessDay. “We cannot conduct effective research which such stipends. Research plays a pivotal role in transforming the agricultural sector and that is why we must take it very seriously,” Abubakar said.

Data obtained from the budgetary allocation to the agricultural ministry shows that the research institutions got an average of N28 billion

yearly ($78 million) in the last five years.

C o mp a r i ng Nig e r i a’s annual spend on its agric research institutes with that of India’s $2 billion, Brazil’s $1 billion and China’s $700 million, shows that research is still grossly underfunded in the country.

According to Michael Oluwole Ajala, professor of Seed Technology, Federal University of Agriculture

Delta investment summit highlights opportunities in agric Josephine Okojie

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ntrepreneurs can tap into the numerous opportunities in the agricultural sector to create wealth and earn foreign exchange, experts say.

The expert who spoke at the just concluded Delta Agribusiness Finance and Investment summit held in Asaba urged investors to take advantage of agricultural opportunities in Delta State to establish businesses that will promote the commercialisation of the sector in the country.

Adam Saffer, chief of party and managing director of Feed the Future Nigeria Agribusiness Investment Activity, said agriculture has a big potential to contribute significantly to the state’s growth and development, but the sector remains rooted in subsistence farming.

Saffer said investors will help to make sure Delta‘s agricultural products and processes are up to international standards.

He stated that the team from the USAID Feed the Future Nigeria Agribusiness Investment Activity was in Delta State to brainstorm on opportunities and solutions to challenges in the agribusiness

sector.

According to him, the five-year programme aims to strengthen Nigeria’s businessenabling environment to encourage investment in the agriculture sector.

Saffer, said the Cultivating New Frontiers in Agriculture ( C N FA ) i s t h e p r i m e implementer of the agribusiness investment activity which is funded by the USAID. “A c t i v i t y i s p u r s u i n g a unique, robust businesscentered strategy to increase the depth, breadth, dynamism, and competitiveness of Nigeria’s agribusiness sector in line with the US and Nigerian governments’ commitment to growing the non-oil-based economy,” Saffer said in a statement.

He said the Activity is designed to create an improved environment by working toward four inter-related objectives of mitigating obstructive policies to make it easier to do business in Nig er ia’s agr icultural sector; broadening access to finance; promoting investment opportunities in agriculture, and strengthening the capacity of agribusiness to expand and scale up operations.

“As an integral part of these www.businessday.ng

efforts to create an improved enabling environment, the activity works to establish new linkages among a full range of public and private sector partners including agribusinesses, financial institutions, investment groups, and business development service providers,” he said.

“As the project cultivates more robust business conditions, Nigeria’s rural entrepreneurs and MSMEs will gain improved access to the business and financial services they need to grow and to become more efficient, competitive and profitable – benefiting the entire Nigerian economy,” he added.

Liz Oluwadare, coordinator, Feed the Future Niger ia Agribusiness Investment Activity, who was excited at the large turnout of stakeholders to the event stated that the activity will foster further development of the non-oil sector.

The summit, which drew participants from different sectors including financial institutions, was also designed to strengthen the capacity of agribusiness to expand operations.

The Feed the Future Nigeria Agribusiness Investment

Activity aims to strengthen the enabling environment for agribusiness finance and investment with a focus on the following five key value chains: rice, cowpea, soybeans, maize, and aquaculture.

It is a $15.7million five years intervention programme that seeks to sustainably link thousands of MSMEs and producer organizations with high-performing commercial actors in the following seven target states: Benue, Kaduna, Niger, Kebbi, Delta, Ebonyi, and Cross River.

Ifeanyi Okowa, Delta State Governor, has applauded the United States Government for its numerous intervention projects through the USAID Nigeria ‘Feed the Future programme.

O k o w a w h o g av e t h e commendation during the summit said that the state was happy and proud to be among the benefiting states of the interventions.

The governor, represented

by Julius Egbedi, the state Commissioner for Agriculture, said that the projects had enhanced the capacity of the state’s human resources for effective contribution to the development of its economy.

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Abeokuta (FUNAAB) the agric research institutions in the country are underfunded and lack basic facilities needed to conduct research.

Ajala stated that most of the equipment are obsolete and cannot be used for modern research work.

Similarly, a 2015 ActionAid report, states that for every $100 of agricultural output, Nigeria invests only $0.42 into agricultural research,

as compared to $0.94 and $1.40 in Ghana and Uganda respectively.

Despite the country’s large size of agriculture in relation to other African nations, Nigeria lags behind its peers in the sector in terms of research funding.

Nigeria has the highest agricultural research system in Africa though, in terms of investments and number of researchers, with over 80 government and high education institutes and over 2,000 researchers engaged in research.

In view of this shortfall, e x p e r t s e m p ha s i z e t h e need for the government to increase its investments in agricultural research if truly it hopes to revive the sector.

The experts stressed the need of government to address the issue underfunding if truly it wants the sector to play a leading role in its diversification quest.

They also underscore the need for private-sector participation in the funding and delivery of agricultural extension services so as to meet the needs of the farmers.

FG partners Global Fortunes on agro industrial parks

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ustapha Shehuri, Minister of State for Agriculture has stated that the Federal G overnment would partner Global Fortunes Limited to establish Agricultural Industrial Parks (AIPs) across the six-geopolitical zones of the country in order to create jobs and ensure food security.

Shehuri made this disclosure during a courtesy visit by a delegation of the Global Fortunes Limited led by Kidron Israel, in Abuja recently.

He pointed out that the project is going to be Public Private Partnership driven; adding that with the Federal Government is committed to the development of the agricultural value chain in Nigeria.

He said the project if implemented would ensure food security and create more employment for Nigerians. “ Ev e n w i t h t h e h u g e infrastructural deficit in Nigeria, we can still embark on this project, because the government is focused on diversifying the Nigerian economy,’’ he said. @Businessdayng

The minister said he will visit the Taraba State Agricultural Industrial Park with the relevant directors to see the model of the park that is the state.

He st re ss e d t h e n e e d for Federal Government in collaboration with the State Government and other relevant agencies to partake in the project in order to fast track progress.

In his remarks, Aminu Babadi, director -department of agribusiness, said the project is a welcome development but mentioned that some of the challenges that could hinder the smooth take off include; energy and space utilization.

In his presentation, K i d ro n Is ra e l , m a n a g e r, Global Fortunes Limited, said that the company is using this opportunity to establish Agricultural Industrial Parks across the six geopolitical zone of the country.

He also said that the system is the fastest way of changing the old farming culture to a state-of-the-art modern farming and also the fastest way of growing the economy.

Managing

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

Lawal Aliyu

BUSINESS

Acting managing director of Abuja Property Development Company ((APDC)

Interview with Public Sector Leaders

‘FG should boost banks’ liquidity to compliment FMBN funding for affordable housing’ Lawal Aliyu is the acting managing director of Abuja Property Development Company ((APDC), a property development subsidiary of Abuja Investments and Property Development Company. In this interview with BusinessDay Media crew in Abuja, Aliyu says the inadequacy of FMBN housing funds means the Federal Government, through CBN, has to find ways of expanding commercial banks’ liquidity so they can provide long-term loans for housing at single digit. He also points out other strategies to ease the huge housing deficit, build massive housing infrastructure, amongst others. Excerpts:

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ould you please bring us up to speed on what you do at Abuja Property Development Company?

Abuja Property Development Company was formed on July 1, 2006, from the erstwhile Abuja Investment and Property Development Company (AIPDC). We are still a subsidiary of the AIPDC, alongside other subsidiaries, like the Abuja Urban Mass Transit, the Abuja Marketing Company, Abuja Technology Village amongst others, with some wholly owned, others partly owned. We are handling the property business on behalf of AIPDC. We have a staff strength of about 50, both permanent and project staff, and right now we are into some property development.

How many projects have you handled since 2006 when APDC was formed?

We are currently building an estate along Kubwa Road which is our flagship of first estates, amongst other properties that we have developed. We have been involved in market development. In Wuse Market, we were involved in sanitization of the entire market during El Rufai regime because that time it was difficult even to access that market.We built new shops at the end of the day. We were involved in the construction of Abuja Geographic System (AGIS), That is a project that a foreign company was to do for over N1 billion and we were invited to take over the project and we did it with just N400 million. We had that opportunity because if you really want to develop your own capacity you have to involve your own companies, get them to compete with the foreign companies. In 2007 we took over the facility management of the Federal Secretariat. We started but unfortunately, we couldn’t go far because of change of administration. So when the new government came we were asked to hand over to the office of Secretary to Government of the Federation (SGF). I have passion for facility management and the in thing now is to do total facility management where you have one stop company to carry out the facility management. When you have electrical problem, when you have maintenance problem you just have one contact who now coordinate other vendors under one facility management company. You get the best services because it select the best in all the areas, then we get the best cost and in terms of service delivery you get more because we have somebody who is responsible for coordination of every other person’s job.

How many units of houses do you have ready?

In phase 1, we have over 700 units. Right now, as I said, we have commissioned 300 units that was in 2016, by this year we are also going to commission another batch of houses, over 200, then we are going to start phase II, that one is going to take about 500 houses. As a government owned company, we try to intervene by giving some ideas on how to solve some social problems in the FCT. For instance, we have drawn a design for public convenience in the FCT. There is absence of public convenience in the FCT, so we want to do it and a committee was formed by the honourable minister to look

Based on the categorization, we belonged to 1-50 so from this financial year we wish to double from 50-100. The major issue is finance. We have gotten some land and we are discussing with some banks, there are some banks that can give you a loan at a single digit.

into the provision of these public conveniences. The model we proposed is not for government to bring in money, it is public private partnership to get the private sector involved. All what government needs is to do the regulations. We want to do this, we have the designs. Government will provide the locations and approve the process. We are part of the committee that was formed, a report will soon be submitted to the honourable minister. Also, we have done a couple of other designs to see how we can solve some social problems. We did a design for senior citizens’ home. We don’t have such facilities here in Nigeria, most especially in Abuja. We also did one on youth hostel.

We look at the transition that Youth Corps Members go through in Abuja, from camp, after your NYSC, probably you have one or two things that you want to do. You need a small place to put up. Sometimes, for somebody that is just starting a new job, but yet to get accommodation, you can just stay there for a while instead of going to hotels that are so exorbitant. So we did a design which we also submitted to the Social Development Secretariat. Apart from doing business as a government company, we are also offering services. That is why if you look at our houses, their prices are a bit different from private companies. Our own motive is not just profit, but we try to play by the rules.

In our designs, we make sure that it is what the city regulation approved. Also the size of our roads, size of our parking space, like in every flat in our estate, we provide at least two parking lots. The road is so wide that you can have your visitor car parked at the side of the road and you can still have space to drive.

Is the cost of your houses influenced by the cost of land?

As a government-owned company the land is allocated to us by government. We don’t buy land from the open market but apart from that we have to contend with other costs like the compensation, just like I said before. The land is from the government, so we didn’t factor in the cost of land, like those who got land from the open market.

What we try to do is to just factor the cost we incurred in the course of getting the land, taking into consideration the compensation we have to pay and some other services that we have to do to secure the land. That is our only difference from the private developers that go to buy the land.

Just recently I was discussing with some government officials on this land matter and I said one of the problems of housing is allowing these speculators to be in control of land. Government doesn’t sell land, government allocates land. This allocation is given to someone who now speculates and sells. So the real person that has money to build may not be able to get the allocation, he will have to buy from the speculators at an open market rate.

The mortgage system is practically not working. Why it is not working is that the Federal Mortgage Bank is the only bank that is giving loan at 6 percent and it is really difficult for it because it has to rely on funds pulled from the National Housing Fund to disburse to some of these developers to build houses. Federal Government through CBN has to find ways of intervening to make commercial banks become so liquid that

How many units of houses do you think Abuja will need to enable an average civil servant get a decent home?

Majority of our interest comes from the civil servants and by the time you do the numbers, they can hardly afford the houses we are building. Somebody that is on grade level 10 for instance, if you check his year of service and how much his take home is, he cannot service a mortgage. You service mortgage with one- third of your salary and live on three-third. Now you will realise that it’s really difficult even if you take out equity.

If civil servants have to rely on mortgage as the system is in this country, it is going to be very difficult for them. The CBN proposal of accessing part of your retirement benefit towards owning a home is good but it implementation has not started. That money if it is released now, and it goes into the construction sector it will have a lot of multiplier effect on the economy. It generates a lot of employment; it generates a lot of businesses. That is why countries like China make sure their construction sector is viable, they focus more on that because of the multiplier effect. It contributes alot to their GDP so once it slows down then their GDP drops. We must begin to look at it from that angle, get that fund that is stocked somewhere and put it into the real sector where it will multiply and then the civil servant will be able to own a home.

they can give long term loans for houses at single digit. They have a lot of interventions and when they intervene the purpose is to lower the cost and make funds accessible.

We can do these things at the early stage.

Immediately somebody gets a job as a young person he has age on his side and he has many years of service then you give him mortgage and he has long time to repay.

From day one you get a job you are handed a mortgage plan and get a house which you pay for over 25 years.

What is your market share? Is it only within Abuja or do you have plans to

move to other cities outside Abuja?

Our primary catchment area is the FCT – as our name implies, Abuja Property Development Company. As a limited liability company we have the liberty to do business anywhere in the country, but at the same time we have to look at our immediate environment and catchment area. We have to put more efforts on the FCT, Abuja, before going to some other states or cities. But nothing stops us from doing business from around the FCT and very soon we have something doing in Kaduna.

What will you say is your percentage share in terms of market ratio in the property business?

Recently, we sent officials to the National Bureau of Statistics (NBS) to have some figures and statistics but most of these figures came from the World Bank. Here, it’s difficult to get primary data.

We always rely on secondary data. There was an assessment we did and we discovered we just have less than 5% share but that is unacceptable to us. We look at the average of the houses we built annually and I am not impressed. Like in the US, they categorize builders. Any developer that is building 1-50 houses per annum is regarded as belonging to one group. Then groups building from 50-100, 100-200, and 200-500 and they have a 1000 and above, that is how it is categorized.

What is the synergy like? Are you talking among yourselves as developers, and are you also interfacing with actors in government on this project?

We are not into policies, we are players like any other company but being a governmentowned company we are trying to see how we can come in to bring these parties together.

There is this issue of building houses in the FCT which the FCT Administration is trying to do so we will get some of these developers involved. We said if government is going to provide land for us to come together and build houses and provides some incentives to developers, you must justify that you have the funds to erect the building. You are not buying the land, government is providing land and then some level of infrastructure and discussing with Federal Mortgage Bank to give loans to those people that will buy the houses. You already have the off takers, you already have the land. We are about to sign an MoU with NMRC, we are trying to see how we will work together. If we must close the deficit, there must be a deliberate plan in terms of production. The rate of development in the whole country, the total production between public and private is not more than 100,000 and if you are going to close up that 17 million deficit, it will take over a period of 20 years, looking at 700,000 per annum. That is huge. In the FCT we are saying let FCTA have a plan of building 200 houses in each of the six area councils every year. There must be a deliberate policy on

the part of government but in our own case what we try to do as a company is to call other players to sit down and probably bring in government to seek for cooperation.

Now we have a proposal of about 5,000 houses to be built by FCT. We can’t do that alone, we will call in some private developers. We have to encourage government to develop also the transport system. If we have efficient transport system, we mustn’t live in the city centre. You can live outside the city and commute to the city. The light train and the buses have to be integrated.

You will have a transportation hub where the train will stop and where the buses will take off and from there you will have taxis.

We have to develop all these into a comprehensive programme to enable people stay where they are and be comfortable. If you have good transport system someone like me who doesn’t like the hustle and bustle of the city will stay outside the city.

Do you have plans on construction of high-rise buildings as a way of addressing housing challenge in the FCT? In the Federal Capital Territory, for instance, the Department of Development Control has stopped approving low rise building in all the area council. Any new plan you are taking to Development Control, must be high rise-that is the new directive. All the low-rise you see now are old approvals.

Now, any new development you are building must have to be a high rise.

Are you in touch with any global body on possibly of kick-starting affordable and social housing?

On affordable housing, we are discussing with Word for Word, to see how we could work with them. They come with their own contractors and you enter into some partnership agreements with them on who the off takers are, whothe people arebuying, while also performing their own profiling before giving out such loans.

The discussion with the Word for Word is that after you have paid back the loan, they would refund some part of the interest to the developer as an incentive to also continue the project. So there are collaborations we are having with these bodies, but the major issue like I said is this issue of title. These

international agencies and financiers don’t deal with Right of Ownership (R of O).They deal with C of O. If you are talking of mass housing or affordable housing of large expanse of land and you look at the premium, it is huge.

Recently, a Canadian company came and said they are interested in financing affordable housing project. They have their own design and if you are comfortable with them, they work with you. So, we are getting calls from these global financiers to see how we could work with them in providing affordable houses in the FCT. What is the average cost of houses built by Abuja Property Development Company?

Right now in Phase One, we have sold out most of the houses. Like when we started, one bedroom was selling for between N5 and N9 million. One bedroom entails having a living room, a parlour with kitchen and toilets. We were selling at N6.2 million up to the time we exhausted those units of houses. On our part, we are not even looking at maximising profit, but as a governmentowned company we are focused on rendering services. The Federal Mortgage Bank was able to come up with affordability index .They ranked houses. They give loans from N1 to N5 million, N5 to N10 million, and N10 to N15 million is the maximum. We use that yardstick in terms of measuring affordability. Recently, we had an agreement when we were approached by the Federal Government Staff Cooperative. We understudied what they could pay which is around N4.5 million. We did that house for Federal Government staff and they got the houses, according to what they could pay.

In fact, some of our staff even keyed into the project and they were able to buy the houses, and they were even able to fix the houses to their taste.

The most important thing, if we need to be honest with ourselves, is to let us get a roof over our head first, not at the detriment of getting a qualitative house but a house you can live in. There is what is called a livable house. It is a house that must have a toilet, doors and windows, power and water.

Tiling is not part of the requirements.

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Wednesday 05 February 2020

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MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

Investors plan to build three major roads around Lekki Port for $1bn amaka Anagor-Ewuzie

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etermined to ensure effective cargo e va c u at i o n from the $1.5 billion Lekki Deep Seaport project, the promoters together with the Lagos State Government is presently perfecting plans to woo new investors into developing three major roads to link the seaport to the hinterland.

Biodun Dabiri, chairman of Lekki World Wide, disclosed this in Lagos on Friday at the commissioning of the Ariel Food Factory and ground-breaking ceremony of 500-unit middle income residential housing located at Lekki Free Trade Zone.

According to him, there were three major roads that are coming towards the Lekki axis, adding that two of the roads would be coming from the port.

“The first one would be a 54km Port Express Road, which would start from North side of the port to the Epe Interchange between Epe and Ijebu.

The Ogun state part of the road would take about 15 percent while the Lagos

part of the road would take about 85 percent, and the road project would gulp almost about $1 billion,” he explained.

Dabiri stated that there were investors, who have carried out extra studies on the road projects, stating that any moment from now, both parties will finalise every detail concerning the road project.

“The second road would come through Epe to the Airport while the

third road would be the existing road through Eleko, which would be expanded, repaired and refurbished to carry the traffic from the port to the Lagos axis,” he further said.

On the other hand, he disclosed that the Lagos State Government has been working round-the-clock to ensure the effective utilisation of waterways.

“The idea was to turn Lekki Free Zone into a self-sustaining city with

AP Moller Capital, Olam partner AFC to invest in West African ports amaka Anagor-Ewuzie

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P Moller Capital will in partnership with Olam International and Africa Finance Corporation (AFC) invest in development of infrastructure in West African Ports and Logistics.

The proposed investment, which would be executed through the Africa Infrastructure Fund, will center on ports, trucking, warehouses and rail services to facilitate effective trade and create a foundation for local growth.

“From beginning, the focus will be on investing and expanding the ecosystem in connection with an existing mineral and gen-

eral cargo port in Gabon as well as developing new infrastructure ecosystems in Mauritania. It will start with a new multi-cargo port in Nouakchott, and a new modern bulk port in San Pedro, Ivory Coast,” according to AP Moller Capital.

Here, the Danish company will have 43 percent ownership of the platform which would be managed by “ARISE Ports & Logistics”, based in the UK while Olam will own 31 percent and AFC 26 percent of the company.

Olam is a global food and agri-business player with a significant track record in agri-business and infrastructure projects in Africa.

On the other hand, AFC is a multi-lateral African fiwww.businessday.ng

nancial institution addressing Africa’s infrastructure development needs. AP Moller Capital has substantial experience in operating and developing infrastructure in connection with transport and logistics.

ARISE Ports & Logistics will be a large shareholder in each ecosystem and will in most cases, have other co-investors. In both mineral and general cargo ports as well as the adjacent ecosystem in Gabon, has one of the co-investors as the country’s public development institution, CDC Gabon.

AP Moller Capital has also appointed Kim Fejfer as chairman of ARISE Ports & Logistics, which is subject to customary third party approvals.

adequate infrastructural capacity needed to contribute extensively towards easing the congestion in the city. The central part of Lagos is choked while we have ample spaces in the Eastern and Western parts needed to ease the tension in the central,” Dabiri said.

While stating that Lekki Seaport was a project, which was seen by Senate as an impossible deal to finance, has reached its financial closure, he pointed

out that Lekki Port project, which would be completed in 24 months, has survived almost five managing directors of the Nigerian Ports Authority (NPA), and four to five ministers of transport as well as four executive governors of Lagos State.

He disclosed that the Project Finance International (PFI), an arm of Thompson Reuters, recently awarded Lekki Port, the best Infrastructural Deal in Africa in 2019.

“This was achieved because the State Government allowed professionals to work and that was why we keep pleading that government should create an enabling environment for businesses to thrive,” he added.

According to him, achieving this feat, involved a 3-year process of finding and negotiating terms with new financiers after 13 years of an attempt to secure finances for the port project.

On Lekki Free Zone, Dabiri stated that the vision of Lekki Free Zone was born by the administration of Bola Tinubu, w h e n ma ny L ag o s i a n s

were wondering the purpose of the vision. “This was because at that time, nobody expected that any state can deliver on such expensive and expansive project like LFZ. Dabiri listed the significant economic benefits of LFTZ to include job creation and skill development for the locals. He stated that the Free Zone has about five major investors contributing to the projected investment volume of close to $20 billion in the next three years.

He applauded the steady support of the Lagos State Government, adding that without government support the project would not have achieved this milestones.

Lekki Port, currently being promoted by Tolaram Group in partnership with Lagos State and the NPA, is a multi-purpose seaport that is located at the heart of the Lagos Free Trade Zone, and at completion, it will be one of the most modern ports in West Africa, offering enormous support to the burgeoning commercial operation across Nigeria and the entire West African region.

Operator raises alarm as overtime cargo takes 30% of port space amaka Anagor-Ewuzie

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unde Keshinro, general manager, Ports and Terminal Multservices Limited (PTML), a terminal located at the Tin-Can Island Port, has decried the growing number of overtime cargo that have been abandoned at the terminal since 2016.

According to him, overtime cargo is currently occupying more than 30 percent of commercial space in the terminal due to the failure of the Nigeria Customs Service (NCS) to auction them as required.

Keshinro stated this when a team of the International Monetary Fund (IMF) led

by Amine Mati, its mission chief to Nigeria, visited the terminal at the weekend.

“Since 2016, we have

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been struggling with 30 percent of our space that was locked up under abandoned cargo because Customs has not been auctioning and that has become a serious concern for us,” he said.

Continuing, he said: “Terminal operators sell spaces.

How quick and fast we were able to turnaround space determines the profitability of the business. So, when certain portion of the space is locked up, that already will limit productivity.”

He further listed that the absence of clearing agents and failure to take delivery of cargoes during the weekend, as another factor affecting operations at the terminal.

“While the terminal is open 24 hours every day including weekends, clearing agents and banks do not operate during the weekends. Even on weekdays, clearing agents @Businessdayng

do not resume work until 1 pm, thereby wasting crucial operational hours,” he noted.

According to him, as terminal operator, PTML has deployed online payments and Customs also deployed online payments, but not all the banks gives value of online payments.

“If you go to the examination bay on Saturday, nothing would be happening there. In that state, if the ship discharges on Saturday, there would not be any other opportunity to do further activities on the cargo till Monday or Tuesday. We want other agencies to work in the real sense of 24 hours operations, not just on paper,” he solicited.

He further listed security concern, illumination problem and access road difficulties as challenges facing port operation in Nigeria.

Wednesday 05 February 2020

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Logistics

Maritime e-Commerce

Nigeria’s dredging industry needs regulation, skilled manpower - Essien amaka Anagor-Ewuzie

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bong Essien, a director of Julong Technology Limited, one of the world’s largest manufacturer of dredgers, said recently in Lagos that Nigeria’s dredging industry was in critical need of uniform regulations and skilled manpower to bring it at per with the rest of the world.

Essien stated this at a one-day seminar with focus on the Nigerian dredging tagged, ‘The Nigerian Dredging Outlook 2020 & Beyond.’

According to him, the seminar was centred on sharing information about the dredging industry in Nigeria.

Essien, whose company is a high technological, environmental a d engineering enterprise that is based in Shandong Province of Chi-

na, also focuses on providing one-stop-shop dredging solutions.

Julong Technology Ltd devotes to investing, consulting, designing, manufacturing, installation and operations as well as management of environment and protection engineering machinery.

Essien however stated that 30.8 percent of countries in the world have Julong dredging equipment.

He further disclosed that Julong has entered into a joint venture with some indigenous companies to build water-crafts, and provide business opportunities in Nigeria’s dredging industry.

On the dredging outlook for 2020, Essien, who stated that the Lekki-Epe axis has the highest daily sales of sharp sand, said such was an indicative of the massive construction works going around the axis involving Dangote Group, seaport,

airport and real estate.

“Ikorodu will experience increase in sand demand with several land reclamation on going, while Badagry axis will witness the highest demand of LPO for contractors due to rail and road construction and

consequent infrastructure development,” Essien said.

On his part, Edmond Chilaka, Dredge Skills and Marine Training Centre said the indigenous aspect of the Nigerian dredging industry lacks certificated workers.

According to him, many

of the workers in the sector are people who claim to have working experience with Westminster dredging, Julius Berger and others.

He stated that many of the workers do not have the former training to enable them understand the

L-R: Dakuku Peterside, director general, Nigerian Maritime Administration and Safety Agency, (NIMASA); Chibuike Rotimi Amaechi, minister of transportation; Paul Adalikwu, director, Maritime Safety, Federal Ministry of Transport (FMOT), and Hadiza Bala Usman, managing director, Nigerian Ports Authority (NPA), during a press conference on the progress of the Deep Blue Project held in Lagos recently.

mechanics of dredging, the theories and concepts of dredging or even the themes of sand mining.

“So, you find out that they have a lot of skill gap in their understanding and practice on the job. Because of that, they cost a lot to dredging companies – because they make a lot of errors. Many dredgers have been ruined because of poor handling and incompetence,” said Chilaka.

According to him, Dredge Skills and Marine Training Centre wants to bridge the identified industry gap by providing the educational base for the dredgers.

“Our trainees are going to spend at least a quarter of the training time onboard dredgers to give them proper dredging knowledge, which they will take back to their various companies. We should run the first course in Lagos within the next six month,” he added.

Fast track discussion with W/African neighbours on border closure, NAGAFF tells FG amaka Anagor-Ewuzie

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he National Association of Government Approved Freight Forwarders (NAGAFF) has called on the Federal Government to fast track its engagement with neighbouring countries in order to reopen the nation’s border to business.

Speaking to newsmen

in Lagos recently, Boniface Aniebonam, founder of NAGAFF, said while the association supports the decision to close the nation’s land border, that there was need for government to put in place sustainable measures to effectively police the borders.

According to him, smuggling of rice still thrives as contraband goods continue to find their way into the markets with smugglers de-

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vising new means including the use of motorcycles and camels to ferry goods into the country.

“We are asking government to fast forward the engagement and reduce the tension at the borders.

Hunger has no bounds and our borders are so porous.

If we allow this to continue, and we are not careful, government may end up losing more,” he warned.

Continuing, Aniebonam

stated that, “Our neighbours must be brought to round table to discuss those things that made government to shut down the borders for the public interest,” he advised.

According to him, the authorities should be able to take care and protect the borders but it becomes more disturbing when neighbours are not respecting the rules of engagement on transit cargo.

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Recall that the Federal Government had in November 2019 extended the duration of the border drill exercise to January 31st following an earlier closure in August as part of efforts aimed at reducing smuggling of foreign rice, arms and ammunition, and other contraband goods into the country.

Aniebonam also warned freight forwarders against making false declaration

@Businessdayng

to avoid their goods being seized by Customs, stating that the major problem in the cargo clearance process, was improper documentation by agents.

“Now, the revenue target for Customs in 2020 is higher than what they had in 2019, it means that Customs will do things differently, and this calls for concern that agents must try as much as possible to be honest in whatever they do,” he said.

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Wednesday 05 February 2020

BUSINESS DAY

cityfile Kano to spend N2.7bn on water treatment

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Tricycles Owners and Drivers Association of Lagos protesting over ban of their operation at Surulere Local Government secretariat in Lagos State on Monday.

Abia: How police killed 2 suspected kidnappers, rescued 3 victims GODFREY OFURUM, Aba

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he p olice in Abia State say they killed two suspected kidnappers and rescued three victims on Sunday at the Osisioma area of Aba, the commercial hub of Abia State.

Ene Okon, Abia Commissioner of Police (CP), who confirmed the incident, vowed that the command would make life uncomfortable for kidnappers and other criminal elements in the state.

Okon explained that the Special Anti- Robbery

Squad (SARS) killed the two kidnappers in a gun duel while trying to rescue their victims, noting that some of the gang members fled.

He attributed the feat to the command’s resolve to rid the state of kidnappers and other criminal elements and promised that efforts were on to arrest the fleeing members of the gang.

He said that the hoodlums had last weekend abducted three persons in the commercial city, including a lady. Giving the profile of the rescued victims, Okon said, “one Michael Madua-

buchukwu, 39 (male), was kidnapped at Ariaria Junction, by St. Mary, on Friday, while Emeka Emeyeonu, 38 (male) and Mercy Akuka (female), 30, were both abducted at Asa-Umudim, near Aba on Saturday.

He noted that the command got intelligence that the kidnappers moved the victims to their hideout at Ekeakpara, in Osisioma local government area of the state.

Okon said when he got information of the incident, he detailed SARS commander in Abia, Johnbull Obioguru, to fish out the hoodlums and rescue

their victims.

The CP said in the early hours of Sunday, the SARS commander with his team, stormed the kidnappers’ hideout to rescue their victims. He added that when the criminals saw the SARS team, they opened fire and the security operatives responded and two of the kidnap suspects were gunned down and the guns they used recovered.

The incident occurred barely few days after the police arrested a gang of five armed robbers, who robbed and killed a couple in the presence of their children in Umuahia, the state capital.

53-yr-old woman in EFCC net for defrauding pastor, church members SIKIRAT SHEHU, Ilorin

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lajumoke Rhoda Oyawoye, a senior official of Kwara State ministry of finance, has be en ar rested by the operatives of Economic and Financial Crimes Commission (EFCC) for allegedly defrauding job seekers under the guise of helping them to secure jobs with both the federal and state governments.

Oyawoye, a level 14 officer, allegedly received money amounting to

about N3 million from her job seeker victims and issued them fake offer of appointments.

It was gathered that trouble started for the senior civil servant when two separate petitioners approached the Ilorin zonal office of the EFCC to lodge complaints.

According to one of the petitioners, “I met her on April 27, 2018 in my church in Offa. She informed me and other church members that she used to help people get employment at the Kwara State Civil Service Commission and federal parastatals. She www.businessday.ng

told me that the money for the state employments is N250,000 per slot while the one for federal parastatals is N350,000.

The victim further stated: “I met her again in Ilorin and I informed her that my children and other church members are interested in both the state and federal appointments which include the Nigerian Immigration Service of which she gave me three forms with names of interested applicants. I gave her the sum of N2 million and she promised that the applicants have already been employed.

“On September 2018, I discovered that all what she said was false and the people she collected money from through me were pestering me to return their money back and she kept giving excuses.”

Curriculum Vitae (CV) of her victims, letters of offer of appointments by Kwara State Civil Service Commission and federal parastatals, among other items, were recovered from the suspect’s house.

According to EFCC, Oyawoye will soon be charged to court upon the conclusion of the ongoing investigation.

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ano State government is to spend N2.7 billion for procurement of water treatment chemicals aimed at ensuring potable water supply to millions of residents.

Muhammad Garba, the commissioner for information, told newsmen that the money has been approved by the state executive council which met on Monday.

According to Garba, the decision was part of government’s resolve to provide clean water to the populace for domestic and other uses.

The commissioner said that the sum of N150 million has been approved as outstanding counterpart funds for Sanitation, Hygienic and Water Supply in Nigeria (SWAWN) II project across the state in collaboration with EU and UNICEF. “The council approved the sum of N26.9 million for the conduct of General Household Survey of the state. The council also approved the release of N89.3 million for equipping and furnishing the upgraded Kafin Mai-Yaki Cottage Hospital in Kiru local government area of the state.

“The state executive council has given approval for the release of N24 million

for the celebration of the year 2020 International Women’s Day and the empowerment of 1, 500 women,” he stated.

The commissioner stated that the council also approved the sum of N441.8 million for the feeding of three boarding schools and activities of Bilingual College, Niamey, Niger Republic.

Others were repairs of 57 Girl Child Initiative Buses and selection of criteria for sponsorship of candidates for 2019 NECO/NBAIS SSCE Exams.

Garba said that N323. 4 million was approved for the provision of internet services, supply and installation of computers and accessories as well as literacy training of staff of the ministry of education.

Also on the list are construction of three classroom blocks, renovation of classrooms and toilets in some selected day and boarding secondary schools and the rehabilitation of staff quarters.

Others are renovation of dilapidated structures within the premises of Mariri Orphanage School, upgrading and conversion to Science Technical School and general renovation GSS Sakarma in Kiru local government area.

Oyo to check influx of banned ‘Okada’ from Lagos REMI FEYISIPO, Ibadan

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yo State government says it will not allow an uncontrolled influx of commercial motorcycles (Okada) into the state from Lagos where their operations have been restricted.

Akin Fagbemi, the executive chairman of Oyo State Road Transport Management Authority(OYRTMA)saidonMondayinIbadan.Accordingtohim, “we are aware of the exodus of affectedmotorcycleoperatorsto Oyo State, which is anticipated, but I assure you, that OYRTMA is on top of its game.”

Fagbemi added: “As we await the position of the state government led by Governor Seyi Makinde on proscription or otherwise of motorcycles on major highways in Oyo, it is crucial we get ourselves prepared for what is to come.”

He further noted that “although the state is reputed for its hospitality”, it will, however, take proactive steps to stop any breach in the security of Oyo State or overstretching of the available infrastructure.

Fagbemi disclosed that OYRTMA has put in place measures to have a central @Businessdayng

database of all commercial cab, tricycle and motorcycle operators within the state, so that the identities of the operators and their vehicles are known to the government.

He further noted that plans were at advanced stage to issue route permits to all commercial cabs, tricycles and motorcycles across the state.

This, he said, would enable easy identification in cases of stolen vehicles, road crashes and operational axis.

Fagbemi said with the support of sister security agencies, OYRTMA would continue with its ‘Special Operationone-Passenger’ (SOOP), which directs motorcycle operators within the state to carry only one passenger as against the common practice of two or more passengers.

He added that the operation, which started January, 2020, has tracked over 200 offenders who are presently standing before the state mobile magistrate court.

He called on commercial cab drivers to desist from carrying more than one passenger on the front seat. These measures, Fagbemi said, were aimed at reducing road crashes and preserving lives and property of the people of Oyo State.

Wednesday 05 February 2020

Harvard Business Review

BUSINESS DAY

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ManagementDigest

Clayton Christensen, the gentle giant of innovation Michael B. Horn

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t is said that Abraham Lincoln had a highpitched voice with a shrill quality to it. When he began his speeches, the audience at first wondered if this tall man was indeed the great orator of whom they had heard.

But as Lincoln’s words washed over them and Lincoln fell into a rhythm, the audience was soon mesmerized — both by the words they heard and how they were delivered.

When Harvard Business School Professor Clayton Christensen began a speech, the effect was similar. Instead of delivering thunder and lightning, his speaking was slow and methodical, soft and unassuming. But as Christensen — a tall man himself at 6 feet, 8 inches — dove into his stories and began teaching listeners how the world worked, he gained steam and cast a spell over a mesmerized audience.

When I shared this observation with Christensen — or Clay, as I called my mentor, friend, co-author and cofounder — he discounted it, with his characteristic humility. But that isn’t to say it wasn’t true.

In the hundreds of times I saw Clay speak, even after his first stroke had hindered his speech, he would still sweep the audience to its feet with the eloquence of his thoughts and insights.

It’s those words and thought patterns, but also his fundamental humanity, compassion and humility that I will miss so much. With Clay’s death on Jan. 23, the world lost a luminary who leaves behind a treasure trove of writings, recordings and influential relationships that will inspire innovators and thinkers in all fields for generations to come.

Clay was a master of using analogies from distant, seemingly unrelated fields to distill complicated problems to their essence and see solutions that others could not envision. He thought in terms of diagrams and stories, which enabled him to develop a set of broadly generalizable theories that

held explanatory power across different industries. He could tackle such seemingly unrelated challenges as a company’s growth, financial investing, education, health care, global prosperity, green energy and more, because, from his vantage point, he had seen some of the very same problems elsewhere before.

As he worked across fields, rather than assume that inconvenient facts or observations were wrong, Clay saw anomalies to his theories not as problems or “statistical noise,” but as opportunities to refine and improve them — or correct how he had applied them. It’s why he had a sign outside his office that said “Anomalies Wanted.”

Clay of course had flaws, as all individuals do — and as with many individuals, those flaws were often endearing. Sometimes modest to the point of not interjecting a thought, he could allow misunderstandings to linger.

When he told you that an idea you expressed was “interesting,” he was occasionally being genuine, but more often was acting as a patient coach, helping you to discover where you were missing something.

He was the consummate Socratic professor — as the Harvard Business School teaches www.businessday.ng

its faculty to be — seeking not to provide answers, but instead to ask questions to help people learn how to think, not what to think. He avoided conflict.

Only rarely would someone, in his opinion, cross the bounds of fairness or intellectual honesty to the extent that they deserved a rebuke, in which case few could be as withering or as pointed in their criticisms. But for the most part, he met criticism with kindness, challenges as opportunities, and interactions as chances to inspire and praise.

It was from Clay that I learned the importance of crafting the right organizational structure when I communicated, as without it, the logic would be lost. Clay was fond of saying that he never knew how complicated something was until he tried to write about it, but writing could help untangle many of the challenges until it was time to implement, test, and learn.

Once you see the world through Clay’s landmark theories of disruption and innovation, you can’t un-see them.

They pervade everything in your life. They are the lenses through which I think about everything I see in the world — so much so that at this point, much of my writing and speaking voice is in many ways inseparable from that of Clay’s.

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It’s just who I am.

Clay didn’t just impact me in this way. We often talk about coaching trees in football and basketball. In addition to the countless organizations, CEOs, and students he transformed, Clay leaves an impressive tree himself. From Bob Moesta to Scott Anthony and Michael Raynor, and from Karen Dillon and James Allworth to Efosa Ojomo and many, many more, Clay’s legacy isn’t just in what he produced, but in the people he affected.

Clay took a lot of pride in the careers he helped launch.

He spent significant energy on these endeavors — in part, I imagine, because he always believed that he had the best job in the world, one where he got to learn more from his students than they learned from him. Clay himself said in “How Will You Measure Your Life?”: “I came to understand that while many of us might default to measuring out lives by summary statistics, such as number of people presided over, number of awards, or dollars accumulated in a bank, and so on, the only metrics that will truly matter to my life are the individuals whom I have been able to help, one by one, to become better people. When I have my interview with God, our conversation will focus on the individuals whose self-es@Businessdayng

teem I was able to strengthen, whose faith I was able to reinforce and whose discomfort I was able to assuage — a doer of good, regardless of what assignment I had. These are the metrics that matter in measuring my life.”

This is why he viewed management as the noblest of professions — not because of managers’ ability to execute plans or make money, but because of their ability to impact the human lives of those they managed — and, by extension, their families and friends — for the better. The ripple effect of one good act, but equally of one bad act, was profound.

In reflecting on his life, I’ll remember that Clay was moved by kindness. He always put people first as he sought to support them, learn from them and improve the world with them.

Michael B. Horn, coauthor of Choosing College: How to Make Better Learning Decisions Throughout Your Life, is head of strategy for the Entangled Group and senior partner for Entangled Solutions, which offers innovation services to education institutions. He is also co-founder and distinguished fellow at the Clayton Christensen Institute for Disruptive Innovation.

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Wednesday 05 February 2020

BUSINESS DAY

insurance today

E-mail: insurancetoday@businessdayonline.com

Insurance claims expected to go up as more deaths arise from coronavirus Modestus Anaesoronye

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here is likelihood that insurance and reinsurance companies doing health insurance in china and other Coronavirus affected countries will have some risks to bear.

Experts say this might not likely go on noticed in claims size, even as 362 people are said to have died from the epidemic.

The coronavirus according to report shows that 362 people have died, with the first death outside of mainland China confirmed in the Philippines. There are well over 17,000 confirmed cases in mainland China, and more than 180 cases in 25 countries and territories spanning North America, Europe, Asia and the Middle East.

Analysts at AM Best believe that reinsurers could face higher levels of risk related to the ongoing Coronavirus outbreak than their primary life & health counterparts.

The rating agency noted that reinsurers typically have higher exposures to mortality and morbidity risks, and

may have as much as 40 percent or more of required capital held for these risks before diversification.

But in an effort to minimise the concentration of their mortality and morbidity risks, global reinsurers have been broadening their

risk exposures to include financial solutions, asset management solutions, and other annuity risk arrangements.

Accelerating spread: The number of Wuhan coronavirus deaths in mainland China has overtaken the

2003 severe acute respiratory syndrome (SARS) epidemic in the country, in a matter of weeks. The 2003 outbreak of SARS -- another coronavirus strand -- infected 5,327 people in mainland China, with 349 deaths. The vast majority of cases are in China, par-

African Alliance records 45% growth in Gross Premium Written Modestus Anaesoronye

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oremost life insurer, African Alliance Insurance, has recorded a 45 percent jump in its gross premium written from N5.17 billion in 2018 to N7.5 billion for the year ended 2019. This is according to the firm’s recently released unaudited financials for 31 December 2019.

According to the financial statement, the firm also grew its underwriting income from N5.11 billion to N6.94 billion representing a 36 percent growth year-onyear while customer claims increased by 8 percent yearon-year from N8.78 billion to N9.48 billion.

“The financials show a marked progress in our strategy to expand our retail presence and aggressively grow our market share de-

spite suspending our largest line of business, annuity,’ Funmi Omo, the firm’s managing director and chief executive officer, said in a statement.

“Our commitment to customer satisfaction is also clearly exemplified by our claims payment in the year 2019. For us, the customer

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is our life blood and we will always bend back to satisfy them every time they call on us,” she added.

On the sustainability of the business as a going concern, Omo allayed the fears of all stakeholders pointing to the various innovations that have taken place within the company over the past year. “We have put in place a virile Business Continuity Plan (BCP) as a way of telling our shareholders and investors that we are indeed here for the long term while our investment portfolio is now being looked after by a smart team of experts with demonstrated accomplishments in the financial services. Internally, we have instituted a paperless policy that has seen our use of paper drop to a negligible minimum. We have put our sales team through various training and retraining;

these are already yielding fruits as evidenced by the increased premium year on year. We are easily one of the most visible and engaging brand amongst our peers in the digital space. Indeed,we are not relenting in our drive to ensure we remain true to our commitment to be with the customer for life.”

Recall that the 60-yearold firm at its 50th annual general meeting (AGM) held recently had identified a combination of tactics including share restructuring, private placements and capital injection among others, to meet the minimum capital requirements as stipulated by the National Insurance Commission. Going by recent developments, industry watchers remain optimistic about the prospects of a firm widely regarded as a leader in the life insurance space.

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ticularly in the city of Wuhan where the virus is thought to have originated, with 213 people now believed to have been killed.

Currently, no deaths have been recorded outside of China, but the virus has spread to at least 22 coun-

tries, including the US, the UK, France, Australia, Japan, Canada and South Korea, sparking fears of a global crisis.

Notably, the number of coronavirus cases worldwide has now surpassed that of the 2003 SARS epidemic, although the death total is currently well below the 774 documented over the roughly 6-month SARS outbreak.

Overall, AM Best believes the life & health industry remains well capitalised and in a good position to withstand the coronavirus outbreak, although it warned that conditions need to be carefully monitored.

It also noted that technological advances should assist in minimising the impact, due primarily to communications and reductions in response time for care delivery. More uncertain are the economic implications of the coronavirus, with a potential slowdown in China likely to have a knock-on effect on worldwide growth.

For comparison, China’s GDP contracted by an estimated 1 percent in 2003 due to the SARS outbreak, which was also a coronavirus and similarly coincided with the Chinese New Year.

Insurers pay N648.16bn claims in five years Modestus Anaesoronye

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iving up to their mandate of restoring people to the state they were before risks occurred, insurance operators within five years paid N648.16 billion claims to claimants.

Data obtained from the Nigerian Insurers Association (NIA) revealed that life operators within 2014 and 2018 paid N315.47 billion, while non-life operators within the same period paid N332.69 billion.

A breakdown of the claims showed that life operators paid N35.95 billion, in 2014; N50.57 billion, 2015; N61.87 billion, 2016; N72.30, 2017; N94.78 billion, 2018, while non-life operators paid N51.06 billion in 2014; N54.65 billion, 2015; N57.76 billion, 2016; N70.52 billion in 2017 and @Businessdayng

N98.70 billion in 2018.

On what was paid to claimants based on region, South West got N171.29 billion; North Central got N19.93 billion; South South, N12.97 billion; North West, N4.73 billion; South East, N2.54 billion and North East, N52.91 million.

Ahmed Salawudeen, group president /CEO Standard Insurance Consultants Limited, Dr. implored insurers to do more in the area of claims payment, stressing that public confidence on Insurance could only be restored through prompt payment of claims.

According to him, the insurance industry will grow when underwriters live up to their claims responsibilities. He urged operators to esteem professionalism and execute their business based on trust which is the core of insurance operators.

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insurance today E-mail: insurancetoday@businessdayonline.com

Pension funds are about investment, not borrowing – say’s Ivor Takor Recently, there has been discussions around the plan by the Federal Government to borrow N2 trillion of the Pension Fund Assets being managed by Pension Fund Administrators (PFAs). In this article, Ivor Takor, director, Centre For Pension Right Advocacy presents the position of the Centre. Modstus Anaesoronye presents the report

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e have heard and read stories alleging that the Federal Government intends to borrow N2 trillion from pension fund to develop infrastructure. We have even been asked to comment on the issue. Our position at the Centre For Pension Rights Advocacy on the matter is that the pension reform carried out in Nigeria in 2004 brought about the enactment of the Pension Reform Act 2004, which has been replaced by the Pension Reform Act 2014. The Act established for the country, a Contributory Pension Scheme, which is fully funded, privately managed by Pension Fund Administrators, third party custody of the pension fund and assets by Pension Fund Administrators, who are all licensed in line with the provisions of the Act by the National Pension Commission (PenCom), the Regulator established under the Act. The fund is based on private individuals Retirement Saving Accounts (RSA).

The principal objective of the Scheme is to ensure that everyone who worked in the public services of the federal, states and local governments and the private sector who had contributed to the Scheme receives his/ her retirement benefits as and when due.

As at January 21, 2020, pension fund assets under the Contributory Pension Scheme had risen to 10 trillion Naira. This is a very good development for an industry that on its take off in June 2004, had a Federal Public Sector pension liability. Pension funds in nature contribute to a nation’s huge pool of long term investable fund.

Therefore it should not come as a surprise to anyone that the huge pension fund assets in the country will attract the attention of the Federal Government for infrastructural development.

The 10 trillion Naira pension Fund is not warehoused in any account of PenCom, the Central Bank of Nigeria, the Pension Fund Administrators or the Pension Fund Custodians. The fund is warehoused in the private individual Retirement Savings Accounts of contributors, who are workers cum beneficiaries. The funds are invested by the Pension Fund Administrators on behalf of the workers, based on guidelines issued by the Regulator. The investment is carried out with two principal objectives, which are adequate return on investment and the safety of the fund.

Therefore in answer to the questions we have been asked at the Centre and in reaction to the commentaries we have read in print and online media’s, we are stating categorically without any fear of contradiction, that pension Fund is about investment

and not borrowing. Pension Fund Administrators are investing Organisations and not borrowing Organisations. The spirit and letters of the Pension Reform Act 2014 envisage investment not borrowing. The Government, PenCom and Pension Operators know this very well.

We are aware that a Committee is currently studying and working out modalities of how a huge sum of pension fund can be invested in infrastructure. To us at the Centre, we see the development as a welcome one because the law and guidelines for investment of pension fund, makes provision for investment in infrastructures.

However, we want to believe and advise that critical stakeholders in the industry especially workers who are the owners of the fund are being carried along through their representatives, the industrial Unions and the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC). It should be noted that their understanding and buy in, in such huge investment is extremely important. There is a popular maxim that you cannot shave the hair of a person, in his/her absence. Pension Fund Administrators who are businesses have the interest of their shareholders first and other person or individuals are secondary while trade unions have the interest and welfare of their members as their principal objective. It is for that reason that they are established.

We want to point out that Retirement Savings Accounts of Workers are not www.businessday.ng

guaranteed by the Federal and State governments nor any other Organisation for that matter. The accounts and the funds in them are open to operation and investment risk, which is borne by the owners of the accounts. Therefore their representatives must have a say on any critical decision on

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To us at the Centre, we see the development as a welcome one because the law and guidelines for investment of pension fund, makes provision for investment in infrastructures

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the contents of the accounts.

The law doesn’t confer on the Federal or State governments, the power to decree or order how the funds in private individuals Retirement Account should be invested.

They can negotiate the terms and conditions under which they are ready to do business with those who have legal ownership and power to invest the fund.

The Governments especially the federal government, should have at the back of its mind the fact that some of the owners of the fund who have retired, are yet to be paid their retirement benefits as a result of federal government delays in paying their accrued rights of pension under the defunct Defined Benefits Pension Scheme.

Moreover, the Federal Republic of Nigeria Constitution as amended 2011, provides that pensions shall be reviewed with every public service salaries review or every five years, where there is no salary review. There was a salary review, with consequential 33% pension review for pensioners under the defunct Defined Pension Scheme and other pension adjustments without a consequential adjustment of pensions of pensioners under the Contributory Pension Scheme.

We conclude by submitting that the Contributory Pension Scheme has created a huge pool of long term investable fund, which should be utilized for infrastructural development. This should be done within an agreed framework put in place by all critical stakeholders.

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Wednesday 05 February 2020

BUSINESS DAY

BANKING Slashing of charges, banks have no choice but to implement it HOPE MOSES-ASHIKE

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ver two months after the slashing of bank charges by the Central Bank of Nigeria (CBN), some banks have shown compliance while few others are being stubborn about it.

As part of efforts to stabilise prices and balance rates, the CBN on December 20, 2019 released the regulatory guidelines on revised guide to charges by banks, other financial and non-bank financial institutions, to replace the one issued in May 2017.

Investigations revealed that a good number of customers do not monitor their transaction charges.

Some of those who do either complained or were satisfied with their banks in terms of compliance.

“I have not really looked at it that is just the bottomline,” a Lagos based importer told BusinessDay by phone.

The revision of the guide to charges and strengthening of the consumer protection regulation was necessitated by continued evolution in the financial industry over the past few years, which has spurred innovation and the introduction of new products, channels and/or participants. These developments have made it imperative for continued vigilance by the regulatory authorities to ensure the protection of consumer rights as more individuals are financially included whilst encouraging market forces to increasingly drive pricing for financial products.

“My bank (Polaris Bank) charged me N10 on one of the transactions and N25 on another transaction,” said a customer who lives Okoko and works in Apapa.

Following the new guidelines, which took effect from January 1, 2020, customers are to pay N10 for transactions below N5, 000. Transaction from N5,001 - N50,000 is to at-

tract N25 fee and above N50,000 is pegged at N50, instead of N50 – N52.50k charged before the new guideline.

Another bank customer, lady from Ikorodu said, I did transaction of N20,000 and GTBank charged me N10. I did another transaction with First Bank and I was charged N25”.

However, all the customers of Access Bank interviewed by BusinessDay complained that the bank is still charging between N50 and N52.50k.

Statistics from NIBSS on electronic transfers from June to November 2019 show that number of transfers below N10,000 accounted for 61 percent of the number of electronic transfer transactions. This is a confirmation that that the reduction of the charges for micropayments has huge potential for financial inclusion.

Johnson Chukwu, managing director, Cowry Asset Management Limited, said banks customers stand to gain in the new charges and that because they are the beneficiaries; it is in their interest to enforce it.

“Because it is now regulated to the extent that the CBN will enforce it, I don’t think the banks have the freewill to bypass or cirwww.businessday.ng

cumvent it”, he said.

Some of the major highlights of the new guide includes removal of card maintenance fee (CAMF) on all cards linked to current accounts, a maximum of one naira per mille for customer-induced debit transactions to third parties and transfers or lodgements to the customers’ account in other banks on current accounts only, reduction in the amount payable for cash withdrawals from other banks’ Automated Teller Machines (Remote-on-us), as well as from N65 to N35, after the third withdrawal within one month.

Other reductions include Advance Payment Guarantee (APG) which is now pegged at maximum of one per cent (1 percent) of the APG value in the first year and 0.5 percent for subsequent years on contingent liabilities.

Uju Ogubunka, president, Bank Customers Association (BCAN), said if the banks are still using the old guide to bank charges, they are overcharging customers and that shows disobedience the regulators.

“The earlier the banks begin to comply with the new directive on bank charges, the better for all of us”, Ogubunka told BusinessDay by phone call.

The development is part of CBN’s monetary instruments used to complement fiscal policies and tackle other challenges including checking inflation to grow the economy.

Inflation moved up to 11.98 percent (year-onyear) in December 2019, the highest rate within that year and also since May 2018.

More so, the rates cut can be seen as a buffer against VAT increase to 7.5 percent effective this month, which will in turn further spike prices.

Ayodele Akinwunmi, relationship manager, corporate banking, FSDH Merchant Bank Limited, said the magnitude of the increase in the VAT will be more than the reduction in the bank charges.

He noted that the Federal Government raised VAT because it needs more revenue as tax to revenue is low, revenue to GDP is low and interest expense to revenue is very low.

Akinwunmi said the FG is adopting this strategy to see how it can generate more money in its coffer.

He admitted that banks electronic transactions are increasing, and the CBN is trying to create more efficiency, through cost reduction.

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The two are addressing two different things he said adding that people will also adopt the cashless policy that the CBN is trying to push which also will drive efficiency.

It was stated in the revised guide to bank charges that any breach of the provisions of the new guide carries a penalty of N 2,000,000 per infraction or as may be determined by the CBN from time to time.

“Failure to comply with CBN’s directive in respect of any infraction shall attract a further penalty of N2,000,000 daily until the directive is complied with or as may be determined by the CBN from time to time,” the CBN said in the guide.

The innovations supported by a sound regulatory framework have indeed transformed the Nigerian financial landscape over the past decade which has driven financial inclusion (according to EFINA, financial inclusion increased to 63.2 percent as at December 2018 from 60.3 percent in December 2012 ) and the increased use of electronic payments across several channels by bank customers. Data from the Nigeria Inter Bank Settlement System (NIBSS) shows that PoS transactions increased by 4,692 @Businessdayng

percent between 2012 and 2018 from N48.46 billion to N2.3 trillion while electronic transfers increased by 1,967 percent from N3.8 trillion to N80.42 trillion.

Paper based cheque transactions declined by 32 percent from N7.48 billion to N5.03 billion.

The revised guide to charges according to Isaac Okorafor, director, communications department, CBN, is yet another move by the CBN to build an inclusive banking system that adequately caters for the needs of the banking public whilst preserving the financial sustainability of banks, other financial and nonbank financial institutions.

The Guide will incentivize stakeholders, especially those making micro payments, to further embrace electronic banking channels, thus improving financial inclusion. It will also reduce cost of banking services to customers to deepen access without much impact on bottom line of regulated institutions under the purview of the Bank.

Other changes introduced in the revised guide include card maintenance fee on current account which has been removed as the accounts already attract account maintenance fee.

Savings accounts will now attract card maintenance fee of N50 per quarter from N50 per month. Bank customers decried that their banks are still charging them N50 maintenance fees monthly.

Annual card maintenance fee on Foreign Currency (FCY) denominated cards is reduced to $10 from $20. Remote on us ATM charges are reduced to N35 after third withdrawal within a month from N65; the charge for hardware token will on cost recovery basis subject to a maximum of N2,500 from previous maximum charge of N3,500; and Bill payment via e-channels will attract a maximum charge of N500 from 0.75 percent of transaction value subject to maximum of N1,200, among others.

Wednesday 05 February 2020

BUSINESS DAY

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TRANSPORTation Motoring

RailBusiness

ModernTravel

Roads

Time to complete Lagos Blue, Red rail projects …Following ban on commercial motorcycles, tricycles

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the state.

Despite the latest government move, BusinessDay findings during the day show that commercial motorcycle operators are still operating along the Badagry/Mile 2 expressway in defiance of the new government law.

The Lagos-Badagry highway records one of the highest numbers of commercial motorcycle road crashes in the state with its antedant high fality rates in recent years.

Meanwhile, the state government said the ban was necessary because official records of the state, excluding the unofficial records showed over 10,000 people had died since 2016 following accidents caused by Keke and Okada.

Key to the ongoing efforts at rejuvenating the Lagos state transport masterplan do the first two lines in the series of urban rail projects comprise the Red and Blue lines projects estimated to cost $1.4bn. While the Red line measures 30 km long, and will run between Marina and Agbado, the

Blue line will be 27 km long, connecting Okokomaiko to Marina.

During the August 2019 Nigerian Bar Association general conference in Lagos, the commissioner for Transportation, Frederic Oladeinde said that over 1.6 million vehicles ply Lagos roads daily while 226 cars run on Lagos roads per kilometer compared to the National average of 16 cars per kilometer.

An estimated 75,000 commercial buses in Lagos currently cater for about 10,000 public-passenger trips per day while an average of 12,000 public transport trips are generated daily and about 50 percent of the statistics all along the Red and Blue rail corridors.

No doubt, the innovations presented by the Law of 2018 are laudable and has the potential of revamping the transport sector in Lagos State. According to a transport expert, it is one thing to have a law in place; it is another thing to ensure proper implementation.

The former without the latter makes the law a toothless bulldog.

MIKE OCHONMA

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MIKE OCHONMA Transport Editor

ollowing the ban on the use of commercial motorcycles and tricycles on designated roads and major highways within the Lagos metropolis and Africa’s most populous city, there are serious on the state government’s readiness in completing the Blue and Red line Lagos rail mass transit system project by 2022 which was started in 2009.

The Lagos state government had on February 1, 2020 announced the banning of commercial motorcycle popularly called Okada and tricycles referred to as Keke from major highways and strategic roads in 15 local governments and council development areas to curtail the menace and the increasing number of fatal accidents on the roads resulting from the use of these two modes of transporation in the state.

As workers prepare to go to their various places of work and businesses on Monday, many resorted to trekking and by various alternative means of transported, including taking horse rides with lamentation that the authorities did not provide an alternative before going ahead to ban the Okada described to be the cheapest means of transportation for most people in the state.

The ban triggered a protest in some parts of the state including Allen roundabout, Ikeja area the same Monday. This is coming a few hours after some of the riders protested at Ijora area of the state as angry motorcycle (Okada) riders made bonfires around Ijora-Olopa in protest of the ban slammed on their operations in some parts of

Fun day as Stallion Nissan demonstrates CSR

It is very important that the LASG defines a structure for implementation of the Law in order to actualize the vision to reform the state transport sector.

Lagosians wait the unfolding of a new dawn in its transportation system and the reality of a safe, fast, efficient and effective means of transportation for all including a functional rail system.

According to the state’s intermodal transportation plans, the Blue line starts at Marina station and runs along Ebute Ero and Iddo station same as the Red line.

From Iddo, the Blue line running on an elevated platform moves along the National Theatre station and makes a descent at Iganmu to join the expanded Lagos-Badagry Expressway.

The expansion is conceived to ease link between Nigeria and neighbouring West African states, Alaba, Mile 2, Festac, Alakija, Trade Fair station, Volkswagen station, LASU and finally reaches the Okokomaiko station where it ends.

uided by the vision of Enriching People’s Lives (EPL), Nissan Nigeria last weekend set out to give a “fun day at the movies’ experience to the children of a Motherless Babies Home and Vigilant Heart Orphanage.

Both of these charitable homes render exemplary service towards providing care for orphans and abandoned and underprivileged children in Lagos.

Around 70 children from the charitable organisations were taken along with their care givers to watch ‘Dr Dolittle’ and their enthusiasm was electric.

The children also watched short movies on road safety norms. This is one of the many activities that Nissan Nigeria undet the aegies of the Stallion Group decided to carry out this year’s charitable gesture to inculcate safe driving culture in the young minds.

This event was hosted in association with Silver Bird Theatre. Kiki Osinbajo, owner of the fashion power house Glam D Africa and Seyi the popular TV Personality of Big Brother Naija fame came out to cheer and support the children.

Amit Sharma, head of sales of Nissan in Nigeria added that the brand seeks to contribute to sustainable social development and carries out social contribution activities as a corporate citizen focusing on education, environmental awareness and humanitarian relief.

Truck deals as Shacman GM, TSS tours Dangote refinery MIKE OCHONMA

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hacman Trucks GM and Transit Support Services Ltd (TSS); assemblers of the brand in Nigeria with its officials visited the Dangote group; the biggest and most consistent buyer of trucks brand in the country. It also undertook a tour to the refinery at Ibeju-Lekki, a business district of Lagos. This follows the visit of Tian Chao, the general manager of Shaanxi Heavy Duty Automobile Import & Export Co. Ltd who was an official visit to the Nigerian market.

Tian expressed happiness that over 400 units of SHACMAN trucks were deployed in the refinery construction where they proved their ruggedness and reliability.

He commended Dangote group for their trust and support for the brand saying that Shaanxi Automobile will also provide an overall solution based services on the whole product life cycle and the whole process of customer operation.

L-R: Frank Nneji, chairman, TSS Limited; Abdul Dantata, ED, logistics and distribution, Dangote Group and Tian Chao, visiting Shacman general manager, during a meeting at Dangote Group office in Lagos recently.

The general maager assured that Shacman would continue to do its best in contributing to the refinery project by providing quality and affordable vehicles to support the smooth completion of the project” “We will join forces with TSS to continue to do a better job in afterwww.businessday.ng

sales service and parts support, and innovate business model to create greater value for our customers” Tian said.

On his part, Abdul Dantata, executive director in charge of logistics and distribution, Dangote Group, welcomed the officials of Shacman

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and TSS and thanked them for the visit and assured them that the group would continue to patronise the truck brand.

“Patronage of Shacman trucks was based on their quality, we hope it will continue and you will continue to give us the best, we will continue to give more business support to the brand. Being in the middle between Shacman and Dangote group, TSS have given much support to both companies, hence we will continue to patronize the brand” He said.

Thanking Abdul Dantata, executive director of Dangore group for the warm reception, Frank Nneji, chairman of TSS a subsidiary of ABC Transport plc, said that TSS e will continue to give all the support the is required.

Nneji said Shacman believes that the business does not end with selling the trucks, rather it continues with following the trucks through its life span and we will continue to respond very swiftly to calls with to its support even at very short notices. @Businessdayng

Shacman GM promised to consistently support TSS to provide more quality services to the customers and assured that TSS engineers will continue to be trained on the products; he also said that more units of trucks and spare parts will be available in Nigeria for a good price advantage to customers. ‘’Now customers won’t have to wait for months to get their orders and they will no longer patronize fake spare parts dealers. Plans are also ongoing between the two organisations to build a CKD assembling plant in Nigeria’’. He said.

Being the biggest customer, Dangote Group has since the entrance of the brand into the market through TSS Limited afive years ago bought over 2,000 units of the brand. It recently placed an order for about 350 units assembled at the ANAMMCO plant in Enugu. Its heavy and medium duty trucks and road tractors are one of the biggest trucks manufacturing company in China.

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Wednesday 05 February 2020

BUSINESS DAY

TRANSPORTation Motoring

RailBusiness

ModernTravel

Roads

Nissan shuts down plants in aggressive restructure MIKE OCHONMA

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Coronavirus: China auto sector hopes impact short-lived MIKE OCHONMA Transport Editor

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ears are rife that the worsening coronavirus epidemic is likely to wreak havoc on China auto sales and production in the first quarter, but the effects could ripple through supply chains worldwide if the outbreak continues to expand and the big test could come when factory workers return from holiday breaks in highcontagion areas.

Seeking to rein in the epidemic, which has killed more than 200 people, authorities over the weekend extended the weeklong Lu-

nar New Year holiday by three days to last Sunday, Februaury 2.

In mainland China, 11 of 31 provinces, representing more than two-thirds of automobile production in the country, have announced that returning to work for all non-essential businesses would be delayed to next week Monday on top of the extended holiday. That’s in addition to broad shutdowns of road, rail and air logistics and passenger travel.

Prior to the outbreak, forecasts for the world’s largest auto market this year had ranged from mild sales growth to small declines after two painful years of contrac-

tion due to a slowing economy, the U.S.-China trade war and the chaotic introduction of new emission rules.

Auto analysts at IHS Markit had already forecast 10% lower first-quarter production volumes in China before the crisis began, and they released new estimates on Friday.

Assuming no further disruptions, IHS predicted a first-quarter production decline of 350,000 units, or a 7 percent drop. But the analysts said a worsening crisis that keeps plants idled into mid-March could trigger a disruption across China’s massive supply chain, with the possibility of 1.7 million

units worth of lost production in the first three months, a drop of 32.3 percent from expectations before the coronavirus outbreak.

China, the world’s largest automotive market, is already coming off slowing sales and industrial output.

The China Association of Automobile Manufacturers said overall vehicle production totaled 25.721 million units in 2019, including commercial vehicles, down 7.5 percent on increased trade friction with the United States, lower subsidies for new energy vehicles and other factors. Sales slid 8.2% to around 25.77 million vehicles.

Kia previews new EcoSport rivalling compact SUV MIKE OCHONMA

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ia is getting ready to pull the covers off a new compact SUV that will slot beneath the Seltos and go head-to-head with the Ford EcoSport, Opel Crossland X and Renault Captur.

The official design sketches that you see here preview the concept version of this new crossover making its global debut at the Delhi Auto Expo early this month beginning from tomorrow till next week. The production variant, which is expected to be called the Sonet, is set to go into production in the second half of this year, Indianautosblog reports.

The SUV will be a twin of the Hyundai Venue recently launched in South Africa, boasting similar dimensions and mechanicals. But as the sketches imply, the Sonet will have completely unique styling that partially resembles the Sorento up front and the Sportage at the back.

The newcomer is expected to share its chassis and

issan is planning aggressive cost cuts to deal with an unexpected slump in sales as the expansionist strategy it inherited from fugitive former company chairman Carlos Ghosn flounders sources familiar familiar with the story reveal.

Japan’s second biggest carmaker is set to eliminate at least 4,300 white-collar jobs and shut two manufacturing sites as part of broader plans to add at least 480 billion yen to its bottom line by 2023, two of the people told Reuters.

The moves come on top of a turnaround plan unveiled in July and are likely to include

cutting Nissan’s range of cars and the array of product options and trims in each line, slashing jobs mostly at head offices in the United States and Europe, and reducing advertising and marketing budgets, they said.

Most of the planned cuts and measures to enhance efficiency were presented to Nissan’s board in November 2019 and received its general blessing, sources said. A Nis-

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el are also likely to be offered in the Indian market.

The Motor Show 2020 will be focused towards new technologies and innovation in the auto industry. This year’s edition aims at creating an alluring experience for the visitors by resurrecting a new brand image which will not only focus on static display of motor vehicles, but will focus on ‘Entire Mobility

Eco-System’, enveloped by the theme of “Co-Create, CoExist and Celebrate”.

This metamorphosis will not only rechristen the image of ‘Auto Expo internationally, but will also allow the discerning visitors to experience, comprehend and appreciate the kaleidoscopic journey of the automobile industry, especially over the last 20 years.

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cut 12,500 jobs from 14 sites around the world, from the United Kingdom to Spain, Mexico, Japan, India and Indonesia and reduce its model range by 10 percent.

There are indications that, the axe was also likely to fall at Nissan’s North American head office in Tennessee and its European headquarters in Geneva, as they were bloated with high-spending sales and marketing staff.

OEMs keen on auto market amid failed financing options MIKE OCHONMA

engines with the Venue, with the mainstay of the range being Hyundai’s 1-litre, threecylinder turbopetrol unit, which produces 88kW and 172Nm. Gearbox options are likely to include six-speed manual and seven-speed DTC dual clutch units, in both cases driving the front wheels only.

A 1.2-litre normally aspirated petrol and 1.5-litre turbodies-

san spokeswoman declined to comment on new restructuring measures or the view that weaker-than-expected sales were the catalyst for a global overhaul.

Under Ghosn, Nissan embarked on a global expansion, boosting capacity to add new models, driving more decidedly into markets such as India, Russia, South Africa and Southeast Asia and spending heavily on promotions and marketing to hit targets.

Now, many of those models are missing sales goals and executives at Nissan’s Yokohama headquarters estimate up to 40 percent of its global manufacturing capacity is unused, or under-used.

In July, Nissan said it would

ith the credit purchase scheme in Nigeria’s automotive system conspicusly missing and the middle class still finding it difficult to buy brand new cars, indications are rife that there are many automakers are still working silently on convincing many consumers to buy make their brands the most preferred brand.

Many of these automakers with exisiting plants many of which are either idle or producing far below the installed capacity according to BusinessDay privy informations are targeting West Africa’s 382-million people. But their challenge is finding banks that will offer loans to make new cars affordable.

Nigeria imports 1.2m vehicles in six years even as the country received a total of 1,216,131 used and new @Businessdayng

vehicles that were imported into the country between 2012 to 2017, a report by the National Bureau of Statistics (NBS) has revealed.

According to the U.S Department of Commerce, Nigeria imported 82,180 units of vehicles from the U.S in 2018, as against 48,899 units in 2017. This means that the numbers of vehicle imported into Nigeria grew by 68% year-on-year 2018.

P WC estimates that 410,000 cars were imported into Nigeria in 2014, out of which 74 percent were used with passenger cars and commercial vehicles leading vehicle sales with a combined share of 61 percent.

In a country where over 70% of imports are secondhand, new car ownership is rare, said a dealership source who sells older models shipped from the US and other European countries at half the price of a new one.

Wednesday 05 February 2020

BUSINESS DAY

31

FINANCIAL INCLUSION

& INNOVATION

Local investors missing out in Fintech investments as foreign players take positions Stories by Endurance Okafor

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hile Nig eria’s Fintech industry has been the sector of choice for foreign investments, local investors seem to be reluctant in taking a position in the young but underpenetrated industry.

Experts in the financial services industry are optimistic that the Fintech space has huge growth potential especially as Nigeria’s central bank recently opened the gates for mobile money -a sector pioneered in east Africa by Kenya’s Safaricom.

“We are seeing investment in the Fintech space but hasn’t been driven by local investors, even though there’s a lot of local capital in the ecosystem, they are not yet patronizing this opportunity and they are really missing out,” Lexi Novitske, managing partner, Acuity Ventures said.

Nigerian Fintech industry attracted $360 million in one week in November 2019, and according to industry sources, it was a sign of how seriously venture capital firms are taking the opportunity to build financial networks across the country and continent.

Before the end of last year, Visa announced a $200m investment in Lagos-based Interswitch and PalmPay, newly launched financial services company said it had raised $40m in a round led by

China’s Transsion.

These investments were followed by OPay, the Africafocused, Chinese-backed payments company founded

by Opera, as it announced that it raised $120m from a group of investors including Sequoia Capital China and SoftBank Ventures Asia, following a $50m fundraising in June.

“This is probably the largest ecosystem that is underpenetrated globally and I think global capital is recognizing that and its attracting investment in a big way. I think there is a lot of opportunities for local investors to invest in that space,” Novitske stated.

Fueled by the increase

in smartphones usage in Africa’s most populous nation, financial technology has not only influenced the way businesses operate but it has massively changed the behavior of consumers.

A lot of Nigerians now pay for goods online or make a bank transfer via mobile app, and are now getting used to handling financial affairs as easily and conveniently as they do their email or Facebook page, this compares to when they would have to go to the four walls of a bank to execute transactions.

With an unbanked population of almost 40million people, mobile money led financial inclusion has been recommended by experts as

the way to go in achieving the Central Bank’s target to 80 percent inclusion rate by 2020.

Telecommunication operators’ push to offer mobile money services in Nigeria received the official nod of the regulator, the Central Bank with the issuance of guidelines for players to apply for the licence.

“I think what we are seeing right now is certainly a huge interest from large institutional investors, large development financial institutions who want to put their money into Fintech,” Novitske said.

According to her, the fact that overpriced opportunities in developed markets are

becoming less attractive for investment is making capital to look elsewhere for investment in emerging markets like Nigeria.

Last year, startups operating in Africa received a total of $1.3 billion in startup funding. Going by to Weetracker’s data, it’s the first time annual Africa-focused startup funding has crossed the $1 billion mark.

Analysis of the data revealed that the sizes of funding rounds also got bigger in 2019 as 26 deals (equaling 6% of the deals total), accounted for 83percent of total funding raised in 2019.

Nigeria was ranked the top startup investment destination in 2019, thanks to its attractive Fintech industry with raised most of the funds, an annual funding report by WeeTracker shows.

Africa’s largest economy was ranked top both for the number of deals done and for their value as startup investment received grew nearly fivefold compared to 2018.

Nigeria accounted for 49.5 percent share of African venture capital in 2019, by country. This was followed

by Kenya’s 32 percent and Egypt’s 5.9 percent.

“Technology-driven businesses is quite an exciting investment space for private equity right now,” Rotimi Oyekanmi, Partner, APIS Partners said.

Industry experts believe there is still a huge opportunity for local investors to tap from Fintech industry even

though it has gotten the attention and investment from a lot of international players.

“The technology-drivenn financial services sector is dominating startup funding yet again thanks to sustained interest from global payments giants backing African Fintech companies,” WeeTracker said.

Nigeria and Kenya were the continent’s top startup investment destinations, jointly accounting for 81.5 percent of investment received in 2019.

Egypt also recorded strong growth with investment more than doubling in the last year, largely thanks to the funding raised by Swvl, the bus hailing company, which raised $4 million in June and has also expanded across and beyond the continent.

In contrast, South Africa, typically a top startup investment destination, recorded decline in 2019 with both the number and value of deals dipping.

While industry stakeholders believe that Nigeria has huge potentials for private equity investment especially directed to Fintech industry, the high-risk environment from policy uncertainty and infrastructure gap remains drag for the country which requires according to McKinsey $31 billion annually to bridge infrastructure deficit.

“It has gotten to a point where investors would prefer to look elsewhere, settle for the low returns but with less risk,” Bayo Odubeko from Norton Rose Fulbright said.

Microsoft equips half a million Nigerian youth with digital skills training …to upskill 50m more in Africa for inclusive economy

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icrosoft, a multinational technology company has revealed that its Technology for Social Change and Development Initiative has provided digital skills training to half a million Nigerian youth through a ‘train the trainer’ programme reaching 5,000 trainers from 10 states across the country.

According to Ibrahim Youssry, Regional General Manager Middle East & Africa Multi-Country Region at Microsoft, the tech company is focused on empowering educators to digitally transform classrooms and reimagine learning to build the skills necessary for the future workforce in Africa.

“Often unemployment arises due to a skills gap be-

tween first-time job seekers and employers. It’s essential to upskill youth with the right combination of technical and soft skills to immediately make a difference in the workplace,” he said.

Microsoft said it is has been able to achieve the aforementioned through various initiatives and programmes, such as Student2Business, an opportunity for youth to acquire experience at a leading technology company. Also, it Career Pathways programme offers various Microsoft learning resources, from formal technology certification exams to free online courses and detailed learning paths that help youth gain in-demand skills.

Funded by Bill Gates,

Microsoft stated that it is committed to helping every person and organisation in the Middle East and Africa prepare for the digital revolution. Microsoft is enabling a knowledge-based economy in the region by redefining education, empower ing youth and closing the skills gap through a combination of partnerships, training, realworld experiences and online classrooms.

“At Microsoft, we believe that technology is a powerful force for good in a rapidly changing world. We have a responsibility to bring everyone into the digital economy, and this will only happen if the right skills are available to enable the digital future,” Youssry said.

Since 2017, the company

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has been able to upskill 4.8 million underserved youth in Africa through its Digital Skills programme, thereby rendering half-a-million youth employable and supporting the direct employment of over 27,000 youth.

The Washington-based company said it was also able to provide 2,680 internship opportunities while enabling over 1,500 aspiring entrepreneurs to establish their own businesses.

In partnership with the African Development Bank, the Coding for Employment programme by Microsoft plans to upskill 50 million youth across Africa and create 25 million jobs in agriculture, Information Communications and Technology (ICT), and other key industries across

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Africa, by 2025.

Conscious of the need to encourage girls to pursue careers in STEM, Microsoft said it has been collaborating with FAWE (Forum for African Women Educationalists) since 2016 to train young women, teachers and students across 10 countries to adopt and use STEM curricula, teaching and learning materials and classroom practise that are gender-responsive.

Through this collaboration, “we have supported the training of 25,000 young women and 250 teachers on digital skills,” it assured.

Also, with support from Microsoft, the Zariah Elizabeth Foundation has provided 50,000 young women with digital skills training through a ‘train the trainer’ @Businessdayng

programme in UNES CO community centres, with 2,000 teachers and trainers receiving training and support to effectively teach digital skills.

“Regardless of the delivery method, technology can never replace good teachers in the classroom. We know that as we bring technology into the classroom, we need to be careful that we use it to complement, rather than replace, traditional teaching practices,” Microsoft said in a document seen by BusinessDay. Over 150,000 teachers and 5 million students in the last three years are already benefitting from these efforts to provide access to technology, content and training, it explained.

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Wednesday 05 February 2020

BUSINESS DAY

Corporate governance

Protecting confidential information Olayimika Phillips

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e live in a world where keen competition pervades all activities of men. Visible to most if not all are competitions that play out in schools, work place, political associations, businesses and strangely within families. Undoubtedly, the most prized asset of any business are its intellectual property and trade secrets which must at all times be kept confidential if the business must maintain its competitive advantage. This means protecting business information, employees’ information, clients/customers information from getting to the wrong hands, especially market competitors. Market players would typically be inquisitive to have valuable confidential information such as trade secret, intellectual properties, marketing and business plans of their competitors. A leak of valuable information of this nature could trigger a adverse chain of events resulting in loss of market confidence, and ultimately the collapse of a corporate empire. Could we pause and imagine how economically disastrous it would be if Apples’ trade secret on the production of its software and devices were leaked to its competitors?

The above underscores the importance of putting in place standards that are necessary to keep the business information confidential. As far as corporate governance is concerned, protecting the confidential information of companies is sacrosanct. Directors and employees are instrumental in protecting the confidential information of companies.

Indeed, under the law, both directors and employees owe a duty of confidentiality to the company. By virtue of their position, directors are constantly exposed to myriads of confidential information on their company as they set strategic and business goals, approve business and marketing plans, market expansion, financial statements and when necessary, business restructuring.

With this portfolio of mandates, directors hold a trove of information and are thus under the

duty to keep confidential, information received in the course of their activities as directors except otherwise authorized.

A director’s duty not to disclose the information of the company also extends to his or her relationship with the shareholders, notwithstanding that the shareholders own the company. It is not uncommon for shareholders, especially those who own majority shares in the share capital of a company, to nominate directors into the company’s board. Typically, such nominee directors would want to carry out the bidding of these shareholders by reporting most if not all the activities of the board to them. However, such nominee directors, notwithstanding the fact that they are appointed to the board by these shareholders, owe duty of confidentiality to the company and must not divulge the company’s information to these shareholders. Often times, directors hold multiple directorships in different companies. Information received from one company must not be disclosed to the other company and neither must the information be taken advantaged of for the benefit of the individual director or other companies.

Employees play crucial roles in the success of their employers regardless of the corporate structure. Employees have www.businessday.ng

access to a lot of confidential information, with varying degrees of limitation, due to their daily participations in almost all the activities of companies. Information such as customers/clients’ information, production or manufacturing secrets and others are mostly at the fingertips of employees. In order to maintain and advance corporate success, employees must be made to appreciate the significance and implication of keeping the information of the company confidential.

For instance, the corporate reputation of a company may

‘

Indeed, according to the Codes of Corporate Governance for Public Companies, relevant companies should have a whistleblowing policy that are known to all stakeholders including the general public

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be irremediably besmirched where an employee knowingly or recklessly leaks the information of a customer or the financial position of the business or pipeline transactions.

Damage control measures are typically ineffective in this age where news spread quicker than bushfires.

In terms of regulating confidentiality, various Codes of Corporate Governance in Nigeria have also identified confidentiality of corporate information as one of the issues in governance of companies.

The Nigerian Codes of Corporate Governance released by the Financial Reporting Council of Nigeria emphasizes director’s duty of confidentiality. The Code recommends companies to have a Code of Business Conduct and Ethics which would essentially contain, amongst other things, director and employees’ duty of confidentiality to the company.

The recommended Code of Business Conduct and Ethics would be made available to the directors and employees for guidance on how to protect companies’ confidential information. Whilst the recommendation of the Code of Business Conduct and Ethics is in order, boards of directors should also ensure that employees are trained not only on the importance of protecting @Businessdayng

confidential information but fundamentally on seeing corporate information as valuable assets worthy of protection.

Crucially, businesses must have in place structures which ensure that not all information is available to everyone. For example technology may be introduced which limits information access to only those who need to know and tracks the use to which information is put.

However, we note technology is not 100% foolproof against theft of confidential information, it significantly limits the risk of accidental breaches.

Whilst the issue of confidentiality of information is of great concern to the maintenance of corporate success, it does not however take away the freedom of stakeholders including employees to report unethical or illegal activities to the relevant authorities. Indeed, according to the Codes of Corporate Governance for Public Companies, relevant companies should have a whistle- blowing policy that are known to all stakeholders including the general public.

In conclusion, information no matter how viewed or appreciated may make or mar a corporate. Companies’ confidential information should therefore be guarded and protected jealously to avoid falling into the wrong hands. The success or otherwise of this depends on the structures that are set up to protect the confidentiality of corporate information.

Olayimika is a Partner in the law firm of Olaniwun Ajayi LP and has over 34 years of professional experience. She specializes in corporate governance, providing pragmatic solutions to the diverse challenges which confront corporates at different growth stages and serves on the board of several companies (listed and privately held).”

Wednesday 05 February 2020

BUSINESS DAY

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@Businessdayng

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34

Wednesday 05 February 2020

BUSINESS DAY

POLITICS & POLICY

Fashola’s efforts on infrastructure commendable – Group

A

pro-democr a c y g r o u p, Congress of Progress i v e Yo u t h (COPY ), has described as commendable, tireless activities of the Minister of Works and Housing, Babatunde Raji Fashola (SAN), on infrastructure development of the country.

In a statement signed by its Convener, Adebayo Oyenekan, the group therefore, urged every road user and well-meaning Nigerians to appreciate the minister in his task of giving

the country a facelift.

The group also called on other Public Office holders to emulate Fashola by discharging their duties in a manner that would be worthy of emulation by the Nigerian youth.

The human rights organisation also gave thanks to the Almighty God for blessing the administration with ministers in the mould of Fashola, whose performance has further shored up the administration’s popularity through his ministry’s sterling activities that give the citi-

Babatunde Fashola

Senator wants security summit for Taraba

...Tasks state Assembly on solution to insecurity Nathaniel Gbaoron, Jalingo

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usuf Abubakar Yusuf, a senator representing Taraba Central in the National Assembly, has advocated for a security summit in the state.

Yusuf made the call on Wednesday in a telephone interview with BusinessDay correspondent.

He said that the increasing cases of kidnapping, abduction and other violent crimes in the state were worrisome.

He however, noted that the situation was threatening to all citizens, saying that every citizen must contribute to the security of their immediate environment.

He also advised the Taraba House of Assembly to do a thorough debate on insecurity in the state and

to come out with resolutions that would suggest possible solutions to the situation.

Yusuf said that the National Assembly was committed to addressing the challenge, pointing out that the Senate had already commenced

Yusuf Abubakar

zenry motorable road network for which even the opponents of the government are also voicing out their commendations.

The group recalled some of the Works Ministry’s achievements to include brand new road networks across the country, 2nd Niger Bridge and Lagos-Ibadan Expressway, which it described as meritorious, commendable and heart-warming.

Also on National Housing Scheme, the human rights group added that the ministry had equally

their actions against insecurity in the land.

He expressed how the menace was worrisome to the members of the National Assembly.

“The insecurity situation in Taraba and the entire country is worrisome to all and the National Assembly has taken steps towards addressing the insecurity in the country. I will advise members of the Taraba State House of Assembly to devote their time and debate extensively on the situation with a view to passing resolutions that can suggest possible solutions to the situation.

“I also advise the Taraba government to hold a security summit that will bring all stakeholders together and proffer solutions to the insecurity situation in the state,” he said.

revived the sector that had been abandoned over 34 years ago with mortgage scheme that would guarantee affordable shelter for Nigerians.

“We enjoin the people of Nigeria to appreciate the God-sent President Muhammadu Buhari whose administration is guaranteeing dividends of democracy to the citizenry irrespective of their political leanings, social divides or religious affiliations and thus making the citizenry happy,” the group said.

BMO commends Buhari’s meeting with NASS’ leadership

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ith the just-concluded meeting between President Muhammadu Buhari and the leadership of the National Assembly on the state of security in the country, a lot of clarity has been given to the issues causing concern among Nigerians; the Buhari Media Organisation (BMO) has said.

In a statement signed by the Niyi Akinsiju and Cassidy Madueke, chairman and secretary, respectively, the group said it was gratifying that the meeting afforded the Senate President, Ahmad Lawan and the Speaker of House of Representatives, Femi Gbajabiamila the opportunity to get first-hand information on the efforts of the Buhari administration to curtail the spate of killings, kidnappings and other crimes in the country.

“From the outcome of the meeting, it came to the fore

that the President was very concerned about the rising insecurity and his administration is actually focused on securing the country and bringing the perpetrators to justice. Similarly, the meeting addressed the clamour for the sack of the service chiefs and noted that in the main, the responsibility of internal security rests with the Nigeria Police and that the military usually steps in to complement the efforts of the police,” BMO said.

The group further said: “We firmly believe that the President is in the best position to appraise the performance of his appointees, including the service chiefs, and therefore, knows who is suitable for any position.

“We note that the meeting equally addressed the fears and concerns of Nigerians with the announcement that a committee comprising the executive, legislature and the

All Progressives Congress will be set up to periodically evaluate the security situation in the country and proffer pragmatic solutions where the need arises.”

BMO said it note that the meeting also gave the National Assembly leadership the opportunity to distill the mind of the President on the issue and arrived at the conclusion that the country was in safe hands going by the commitment of the President to tackle the issues headlong.

“As the representatives of the people, we are glad that their interface with the President will go a long way to dousing the apprehension among Nigerians over insecurity.

“With the efforts of the Buhari administration, the terrorist group has resorted to attacking soft targets in some isolated areas of the North East, and the administration has shown the capacity to completely eradicate the menace.

ity to ensure the safety of lives and property of the citizenry.

“Whatever skill or ability to organise possessed by Agbaje and his co-travelers will be better deplored to resuscitate the moribund opposition party on life support machine. The efforts to mobilise and sponsor violent protests against a wellmeaning government policy is also not lost on all and sundry.”

Agbaje via his verified Twitter account on Monday had said that the outright ban on commercial motorcycles popularly known as okada on major routes in the state was anti-people.

According to him, “A Lagos City state for the 21st century

needs proper planning. The reasons for the ban on commercial motorcycles (Okada) and motor tricycles (Keke marwa) by the Lagos State Government are noted. But what about the people?

“My view is that such outright ban on major routes will be counterproductive and difficult to enforce. It will also have negative ripple effects on the economy with so many already out of work & cause inconvenience to commuters.

“The formal operators that have thus far regulated themselves should be allowed to continue, with stringent regulation and enforcement of traffic laws,” he said.

Lagos APC flays Agbaje over comment on ‘Okada’ ban Iniobong Iwok

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he All Progressives Congress (APC) in Lagos State has lambasted the People’s Democratic Party (PDP) governorship candidate in the last general election, Jimi Agbaje, over his comments on the partial ban of ‘okada’ and tricycle operations in the state, saying that he had zero idea about governance at any level.

In a statement issued and signed by the State Publicity Secretary of the party, Seye Oladejo, Lagos APC explained that the law being implemented had been in place for over

six years after painstaking efforts by the state’s House of Assembly to incorporate inputs from all stakeholders.

The party stated further that the gradual implementation of the law was a reflection of the thoughtfulness of the government not to create a shock in the polity.

According to the statement, “My attention has been drawn to the reaction of the PDP serial governorship candidate on the on-going debate on the partial ban of okada and tricycle operations in Lagos State.

“It was amusing to read his futile attempt to teach a government well-grounded in intellectual and institutional www.businessday.ng

experience how to plan. My check revealed Jimi Agbaje’s relative and inconsequential experience in business and zero idea about governance at any level.”

“Let me recall that the law being implemented has been in place for over six years after painstaking efforts by the Lagos State house of assembly to incorporate in-puts from all stakeholders. The gradual implementation of the law is a reflection of the thoughtfulness of the government not to create a shock in the polity,” he further said.

According to the statement, “While he noted the reasons for the partial ban, it was con-

venient not to acknowledge the measures put in place by government to stem the impact. May I use this medium to acknowledge and appreciate the voluntary compliance of some operators in line with the laws of the state.

“We also wish to encourage the riders to take advantage of opportunities offered by the Lagos State Employment Trust Fund, the Lagos State Vocational Training Institutes, the ministry of women affairs and poverty alleviation, civic engagement etc.

“The people remain the focal point of the Sanwo-Olu administration while not losing sight of its onerous responsibil-

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@Businessdayng

Wednesday 05 February 2020

BUSINESS DAY

35

Live @ The Exchanges Market Statistics as at Tuesday 04 February 2020

Top Gainers/Losers as at Tuesday 04 February 2020 LOSERS

GAINERS Company UBN

Opening

Closing

Change

N6

N6.6

0.6

Company

Opening

Closing

Change

N25

N22.6

-2.4

CAP

ASI (Points) DEALS (Numbers)

JBERGER

N21.2

N21.5

0.3

DANGSUGAR

N13.8

N12.45

-1.35

LAWUNION

N0.77

N0.84

0.07

ZENITHBANK

N19.9

N19.2

-0.7

N0.3

N0.33

0.03

UACN

N8.95

N8.5

-0.45

VALUE (N billion)

N0.97

N0.99

0.02

GUARANTY

N29.4

N29

-0.4

MARKET CAP (N Trn)

WAPIC TRANSCORP

28,432.27

VOLUME (Numbers)

5,199.00 254,860,393.00 3.043 14.645

Nigeria stocks erode gains as sell pressure continues Stories by Iheanyi Nwachukwu

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he Nigerian stock market sustained its losing streak on Tuesday February 4, 2020 as investors ignored buy recommendations.

The Nigeria Stock Exchange (NSE) All Share Index (ASI) decreased by 0.35percent to 28,432.27 points as against preceding

day high of 28,533.40 points.

In two trading this into this week, the market has decreased by 1.43percent, while the record year-todate (ytd) positive return decreased to +5.92percent.

All the NSE sectoral indexes closed in the red. The value of listed equities on the Nigerian Bourse decreased from N14.697trillion to N14.645trillion, representing N52billion loss.

In 5,199 deals, equity dealers exchanged

254,860,393 units valued at N3.043billion. Zenith Bank, FBN Holdings, Access Bank, UBA, GTBank were actively traded stocks.

With all the other subsectors losing again on Tuesday along with the negative market breadth, market watchers expect to see a negative close on Wednesday.

Though, they do not rule out bargain hunting on counters that have consistently been on offer in the last trading sessions.

CAP Plc led the gainers table after its share price decreased from N25 to N22.6, losing N2.4 or 9.60percent; followed by Dangote Sugar Refinery Plc which decreased from N13.8 to N12.45, after losing N1.35 or 9.78percent. The share price of Union Bank of Nigeria Plc increased most, from N6 to N6.6, adding 60kobo or 10percent, followed by Julius Berger which gained 30kobo, from N21.2 to N21.5, up by 1.42percent.

L–R: Olumide Bolumole, head, Listing Business Division, The Nigerian Stock Exchange (NSE); Oluwaseun Johnson; Emeka Nwagboso, acting executive director, Project Pink Blue; Ebunola Anozie, president/CEO, COPE Foundation; Bola Adeeko, head, Shared Services Division, NSE; Eno Essien, chief executive officer, Rheytrak; Abigail Simon-Hart, co-founder, Bricon Foundation; Chuks Igbokwe; Omolola Salako, founder, Sebeccly Cancer Care, during the Closing Gong Ceremony to commemorate the World Cancer Day at the Exchange.

Global market indicators FTSE 100 Index 7,434.00GBP +107.69+1.47%

Nikkei 225 23,084.59JPY +112.65+0.49%

S&P 500 Index 3,296.66USD +47.74+1.47%

Deutsche Boerse AG German Stock Index DAX 13,258.34EUR +213.15+1.63%

Generic 1st ‘DM’ Future 28,773.00USD +412.00+1.45%

Shanghai Stock Exchange Composite Index 2,783.29CNY +36.68+1.34%

NSE celebrates World Cancer Day …Launches fundraiser for 2020 NSE Corporate Challenge

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he Nigerian Stock Exchange (NSE) on Tuesday, February 4, 2020 joined the rest of the world to commemorate the World Cancer Day. The NSE hosted cancer change agents and survivors in a Closing Gong Ceremony held at the Exchange House in Lagos.

In line with the 2020 theme, “I am and I will”, NSE lent its voice to support the fight against cancer through an inspiring and positive social media campaign in collaboration with three leading organisations working to improve the lives of people living with cancer: Sebeccly Cancer Care, Project Pink Blue and Care Organization Public Enlightenment. (C.O.P.E). The campaign focuses on telling positive stories from cancer patients and survivors to amplify the message that cancer can be overcome through early diagnosis, and appropriate treatment, care and support.

Cancer remains the second-leading cause of death worldwide, responsible for over 9 million deaths annually with 70percent of these deaths occurring in low-to-middle income countries. Despite the fact that at least one-third of common cancers are preventable, the disease continues to have significant impact on global economies costing an estimated $1.16 trillion annually.

Commenting on the celebration, Olumide Orojimi, Head, Corporate Commu-

nications, NSE said, “We are pleased to celebrate the 20th edition of the World Cancer Day with strong advocates and brave survivors. In addition, we are using this opportunity to launch the fundraiser for the 7th edition of the NSE Corporate Challenge which is scheduled to hold on Saturday, 2 May 2020 at Muri Okunola Park, Victoria Island, Lagos.”

“We look forward to continued support and partnership from our key stakeholders as well as corporates and individuals who are passionate about overcoming cancer in Nigeria. Since 2014, NSE has leveraged its network and resources to raise awareness about the social and economic losses associated with cancer while advocating for early detection and an improved lifestyle as a way to overcome the disease.”

The NSE Corporate Challenge, an annual 5km race, themed, “e-Race Cancer”, is a one-day competitive and funfilled walk, jog and run event aimed at minimising cancer and maximising life by stimulating awareness about cancer, advocating for the importance of early testing/detection and raising funds to support the fight against this deadly disease in Nigeria.

The NSE Corporate Challenge has been highly successful, recording more than 2,035 runners from over 306 institutions, comprising c-suite level executives, top government officials and celebrities.

Capital market operators trained on requirements for Derivatives trading …NSE, CSCS to launch NG Clear

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he Nigerian Stock Exchange (NSE) on Tuesday, February 4, organised a workshop on the legal and regulatory requirements of Derivatives trading for capital market operators.

In anticipation of Derivatives trading on the E xchange, the NSE had released a derivatives market rule book that will serve as a guide for trading derivatives

on the bourse.

The Securities and Exchange Commission had earlier stated that developing an efficient derivatives trading market is one of the top priorities of the Commission in 2020.

Derivatives are securities that derive their value from an underlying security or asset.

The aim of the workshop held at the Exchange House in Lagos and organised in www.businessday.ng

collaboration with the Securities and Exchange Commission (SEC) was to guide market participants to properly interpret the approved Exchange traded derivative rules and recently released SEC’s derivatives and clearing rules, as well as address concerns on the onboarding process.

Delivering the opening remarks at the workshop, Oscar N. Onyema, Chief

E x e c u t i v e O f f i c e r, N S E said, “The introduction of Exchange- trade derivatives on our bourse is aimed at broadening the options available to support efficient implementation of r isk management and investment strategies across diverse asset classes and financial instruments. We are, therefore, delighted to host this event in recognition of the importance of capacity building and

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investor education to the development of this asset class.”

“We are working tirelessly to ensure that our Derivatives market remains aligned with International Organization of Securities Commission (IOSCO) principles by facilitating access to recognized and licensed derivative products, world class market surveillance technology, effective trading @Businessdayng

rules as well as appropriate risk management and clearing facilities.”

Speaking on the rules guiding the derivatives market, Head of Department, Registration, Exchanges, Ma rk e t In f ra s t r u c t u re s and Innovation at the SEC, Emomotimi Agama said, “The NSE and SEC have provided the platform and requisite rules to guide activities in the Derivatives market.”

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Wednesday 05 February 2020

BUSINESS DAY

tax issues

Addressing tax challenges from digitalisation: International community renews commitment to multilateral efforts Iheanyi Nwachukwu

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he Inclusive Framework’s tax work on the digitalisation of the economy is part of wider efforts to restore stability and increase certainty in the international tax system, address possible overlaps with existing rules and mitigate the risks of double taxation.

Taking a cue from the aforementioned, the international community has reaffirmed its commitment to reach a consensus-based long-term solution to the tax challenges arising from the digitalisation of the economy.

According to statement by the Inclusive Framework on base erosion and profit shifting (BEPS) released by the Organisation for Economic Cooperation and Development (OECD), international community will continue working toward an agreement by the end of 2020.

The Inclusive Framework on BEPS, which groups 137 countries and jurisdictions on an equal footing for multilateral negotiation of international tax rules, decided during its January 29-30 meeting to move ahead with a two-pillar negotiation to address the tax challenges of digitalisation.

Participants agreed to pursue the negotiation of new rules on where tax should be paid (“nexus” rules) and on what portion of profits they should be taxed (“profit allocation” rules), on the basis of a

“Unified Approach” on Pillar One, to ensure that MNEs conducting sustained and significant business in places where they may not have a physical presence can be taxed in such jurisdictions.

The Unified Approach agreed by the Inclusive Framework draws heavily on the Unified Approach released by the OECD Secretariat in October 2019.

Endorsement of the Unified Approach is a significant step, as until now Inclusive Framework members have been considering three competing proposals to address the tax challenges of digitalisation. A Programme of Work agreed in May 2019 has been replaced with a revised Programme of Work under Pillar One, which outlines the remaining technical work and political challenges to deliver a consensus-based solution by the end of 2020, as mandated by the G20.

Inclusive Framework members will next meet in July in Berlin, at which time political agreement will be sought on the detailed architecture of this proposal.

The Statement by the Inclusive Framework on BEPS takes note of a proposal to implement Pillar One on a “safe harbour” basis, as proposed in a December 3, 2019 letter from US Treasury Secretary Steven Mnuchin to OECD Secretary-General Angel Gurría.

It recognises that many Inclusive Framework members have expressed concerns about the proposed “safe harbour” approach. The Statement also highlights other critical policy issues that must be agreed under Pillar One before a decision can be taken.

The “safe harbour” issue is included in the list of remaining work, but a final decision on this issue will be deferred until the architecture of Pillar One has been agreed upon.

The Inclusive Framework also welcomed the significant progress made on the technical design of Pillar Two, which aims to address remaining BEPS issues and ensure that international businesses pay a minimum level of tax. They noted the further work that needs to be done on Pillar Two.

As VAT rate of 7.5% commences

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he implementation of the 7.5 percent Value Added Tax (VAT) rate under the new Finance Act has commenced since February 1, 2020. The VAT increase to 7.5percent is one of the few changes made to the country’s 2019 Finance Act to help the Federal Government raise additional revenues to meet its 2020 budget targets.

The Federal Government’s share of the VAT pool is 15percent, while the balance goes to the 36 states. Currently, some states are in need of the additional revenue to be able to meet the obligations of the minimum wage.

Like other VATable goods and services, the Value Added Tax charged on commissions related to capital market transactions has increased from 5percent to 7.5percent.

This change in VAT charged impacts commissions applicable to the capital market transactions – such as those earned by Dealing Members on the traded value of shares, payable to the Nigerian Stock Exchange, and payable to the Central Securities Clearing Systems Plc. While the upward review of the VAT could help the government reduce deficit spending and fund the new minimum wage, it will result in higher production costs which will

be passed on to consumers.

To reduce the tax burden on vulnerable segments, the VAT exemptions have been expanded to include more items under the basic food items, pharmaceuticals and education categories.

Basic food items generally refer to unprocessed and aqua-based staple foods and include bread, cereals, fruits & vegetables among other items.

In addition locally manufactured sanitary items and services provided by microfinance banks have been included in the exemption list. Tuition paid for nursery, primary and secondary education have also been classified as VAT exempt. Consumers will unfortunately have to pay more in power charges due to higher VAT charges on meter costs and electricity tariffs. Investors in the stock market will also have to bear the increase in transaction costs as VAT charged on commissions applicable to capital market transactions will increase.

Under the current law, companies with a turnover below the N25 million threshold are not liable to file VAT returns. However, this also disqualifies them from reclaiming input VAT incurred on their purchases especially those involved in the supply of products that attract VAT.

How to make the international tax system fairer Barbara Angus

U

nder the French presidency of the G7, the theme for the Biarritz Summit in 2019 was combating inequality. In the area of economic policy, which has long been a major focus for the G7, the French presidency has identified as its priority the promotion of more fair and equitable trade, tax and development policies.

Consistent with this prioritisation, an important part of the discussion at the meeting of the G7 finance ministers and central bank governors in June was centered on making the international tax system fairer.

The focus of the finance ministers was the OECD-led initiative launched in 2019 with the aim of achieving consensus on significant alterations to the global framework for taxing international business income. The impetus for the project is the tax challenges created by the growing digitalization of the global economy.

However, the changes contemplated will have implications well beyond technology companies and digital business models, and will affect the broad spectrum of businesses, both large and small, whose economic reach extends across national bor-

ders.

The first element involves revisions to the historical approaches for determining nexus and allocating business income among countries, with a particular focus on enhancing the share of income and corresponding taxing rights assigned to countries where customers or users are located.

The second element involves the establishment of a new system of global minimum tax rules for business income. To avoid creating barriers to the cross-border trade and investment that fuels the global

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economy, these changes must be made without giving rise to double taxation or increased uncertainty.

Three key factors are essential to the success of this initiative: Broad global consensus Both the G7 and the G20 have endorsed the OECD project. Currently, 132 jurisdictions are engaged in the work through the OECD’s Inclusive Framework. It is important that all parties are at the table and all perspectives are considered. Active participation in the dialogue is vital.

Not only must there be full consensus around the globe, but that consensus

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also must be fully informed.

High-level political commitment The stakes are high. Countries must accept changes in their rights to tax business income and in their ability to control the taxation of income earned within their borders.

For every country that will gain additional tax base in the application of the new rules to any given business, there will be at least one country that sees a corresponding reduction in its tax base from that business. Equal commitment is required from both categories of countries. Commitment will require that countries make changes to their domestic tax laws and amend their bilateral tax treaties to incorporate the new rules. For some countries, this will require modifying or eliminating existing measures that are inconsistent with the new rules. And commitment also will require good faith participation in robust new dispute resolution mechanisms.

Sound technical foundation Consensus and commitment must be built on a strong foundation.

The new rules should be principled.

They should be even-handed in their impact across industries and business models. The new rules need to @Businessdayng

be smoothly integrated into the overall global tax framework. Companies need to be able to apply the new rules with confidence, and tax authorities need to be able to administer them effectively. Given the diversity of businesses that operate globally today, it is unlikely that one single formula could deliver appropriate results in all cases.

Agreement on the new rules must be grounded in the technical detail developed by the tax policy experts working together through the OECD’s Inclusive Framework process.

This initiative to change the global tax framework is an ambitious undertaking. Tax policy is a fundamental matter of national sovereignty. At the same time, coordination on the taxation of international business income is central to a global environment that is hospitable to cross-border trade and investment.

Collective action is difficult under any circumstance, and it is especially difficult when it involves fiscal matters. Seeking consensus, fostering high-level political commitment and ensuring a sound technical foundation will require the devotion of time and resources, and all are essential to achieving a lasting global solution.

Angus is EY Global Tax Policy Leader

Wednesday 05 February 2020

BUSINESS DAY

37

INSIGHT

Nerc order on the transitional accounting treatment of tariff related liabilities: A breath of fresh air?

O

Introduction n 28 January 2020, the Nigerian Electricity Regulatory Commission (NERC or the Commission) issued the “Order on the Transitional Accounting Treatment of Tariff Related Liabilities in the Financial Records of Participants in the Nigerian Electricity Supply Industry” (the Order).

The Order was made in furtherance of NERC’s overarching mandate under section 32(1) of the Electric Power Sector Reform Act (ESPRA), to maximize access to electricity services; and for this purpose, to develop a financially stable electricity market that is attractive to private investors.

The Order recognizes the fact that private sector investment in the Nigerian Electricity Sector Industry (NESI) has, over the years, been frustrated by the incidence of tariff shortfalls - which have occasioned the accretion of tariff related liabilities in the financial records of licensed electricity distribution companies (the DisCos) and concomitantly affected their ability to raise the capital required for investments in their distribution infrastructure.

Ultimately, the Order seeks to resolve the continued accumulation of future tariff related shortfalls during the transition to a cost-reflective tariff, as it acknowledges the significant mismatch between the current retail tariffs approved by Commission (under the Multi Year Tariff Order 2015 and the NERC Minor Review Orders issued in 2019) and the truly cost-reflective tariff.

Ostensibly, the Order is made for the purpose of: (i) providing a guideline for the transitional accounting treatment of tariffrelated liabilities1 in the financial records of the market participants; (ii) ensuring that no new tariffrelated liabilities accrue in the financial records of the DisCos; and (iii) maintaining the creditworthiness of the balance sheet of DisCos for the purpose of raising capital towards the improvement of electricity networks and service delivery. The transitional accounting treatment prescribed by the Order takes effect from the market settlement cycle of January 2020 and will cease to have effect upon the issuance of an order of NERC directing the DisCos to settle their market invoices in full.

The NBET remittance model In the main, the Order prescribes a “transition regime” for the invoicing and payment of amounts due from the DisCos to the Nigerian Bulk Electricity Trading Plc. (NBET); a critical feature of which is the payment of the unpaid tariff-related portion of the NBET invoices from the Payment Assurance Facility2 and other funding sources in the Power Sector

Recovery Program (PSRP). Thus, in effect, the Order establishes a transitional “subsidy” regime under which the tariff-related portion of the NBET invoices which does not form part of the DisCos’ required remittance amount to NBET under the December 2019 Minor Review of Multi Year Tariff Order (“MYTO”) 2015 and Minimum Remittance Order for the Year 2020 (the MRO) is paid by the Federal Government of Nigeria (FGN) from PSRP funding sources.

In terms of its operational features, the Order provides that this transitional regime is to take effect as follows: 1. each NBET invoice must clearly indicate: (i) the amount to be paid by the DisCos in line with the MRO; and (ii) the amount to be paid by the by FGN from multiple funding Sources in the PSRP financing plan.

2. the amount designated in the NBET invoices to be immediately payable by the DisCos are to be promptly settled by the DisCos, while the portion of the NBET invoices designated to be payable by FGN is to tentatively remain in the financial records of the DisCos, as a liability, until the sum is paid to the GenCos from the Central Bank of Nigeria (CBN)’s Payment Assurance Facility (the PAF) or other financing sources in the PSRP financing. Pending its settlement by FGN, the unpaid sum designated in the NBET invoice as payable by FGN shall not accrue any interest.

3. NBET must apportion the funds drawn from the funding sources in the PSRP financing Plan to the DisCos in accordance with the minimum remittance thresholds approved by the Commission; and issue credit notes to the DisCos, confirming the liability that has been defrayed (by FGN).

4. any unpaid portions of the NBET invoice that is not directly attributable to the tariff deficit shall be recovered by NBET www.businessday.ng

through the DisCo payment guarantees.

5. Finally, the Order provides that settlement of NBET’s liability to the Central Bank of Nigeria (CBN) by the Federal Ministry of Finance, Budget and National Planning for the principal and interest on PAF and its supplementary funding under PAF-X is to have a commensurate impact on NBET’s associated indebtedness.

Areas of uncertainty Whilst the Order is a step in the right direction, in that it proffers what a appears to be a workable solution to the DisCos’ challenges in meeting their NBET remittance thresholds, there are as yet a number of grey areas; notably: 1. The Order focuses exclusively on NBET remittances, which represent just one of several other market remittances that the DisCos are required to make on a monthly basis. For example, the Order is silent on the treatment of Market Operator (MO) remittances, which, per the MRO, the DisCos are required to settle in full each month. Given that the MRO envisages that FGN intervention funds provided for under the PSRP will be applied to both NBET and MO invoices, to ensure their full settlement, the expectation was that the Order would treat all the remittances to the DisCos’ various creditors on a consolidated basis.

Not only is the Order silent on the treatment of MO invoices, it also does not discuss any form of FGN intervention to support monthly remittances to other DisCo creditors, such as the CBN (under the CBN-NEMSF) facility on a consolidated basis 2. The MRO provides that NERC will consider verified receivables from MDAs and the DisCos’ collection efficiency for MDAs in determining their compliance with their respective minimum remittance thresholds. However,

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the MRO does not provide clarity as to the manner in which these factors will be evaluated to excuse the non-attainment of minimum remittance thresholds by the DisCos; whether penalties will be waived, relaxed or postponed if the DisCos are able to demonstrate that their non-compliance was fully or partly as a result of MDA indebtedness.

The Order is also silent on this point, and in fact, it does not address the issue of MDA Debts at all.

Critically, there is a lack of clarity as to what exactly would constitute the “unpaid tariff-related portion” of the NBET invoices which FGN is supposed to take responsibility for; and whether MDA Debts would qualify as liabilities falling within this category.

3. The DisCos were required by the MRO to provide irrevocable standby letters of credit (SBLCs) which cover 3 months of invoiced payments from NBET and MO. In this wise, given that the SBLC’s currently provide payment security for the full NBET invoiced amounts (without a carve out for the “DisCo invoiced amounts” as distinct from the “FGN invoiced amounts”), there is some uncertainty as to whether NBET will be permitted to call on the SBLCs, in the event that FGN defaults in settling its portion of the NBET invoices as at when it falls due; which the current terms of the SBLC’s envisage. Although NBET’s right to enforce the SBLCs in such circumstances appears doubtful, given that the MRO varies the actual payment obligation of the DisCos so that it only covers their MRO remittance thresholds; the treatment and enforcement of the NBET SBLC’s henceforth will be interesting to observe.

4. The Order is silent on the implications (if any) of the new accounting regime on the Meter Assets Provider (MAP) scheme.

If successfully implemented, the @Businessdayng

accounting regime prescribed by the Order, coupled with the tariff increment introduced by theMRO, will significantly improve the financial position of the DisCos, therefore making them more attractive to prospective investors (both debt and equity). As such, the DisCos may be better placed to meet their metering obligations independently; that is, without the support of MAPs. 5. Whilst the Order is envisaged to provide some comfort to the GenCos, and improve investor confidence in the generation subsector (in view of its guaranteee of full payments to NBET, and in turn the GenCos), there remains some uncertainty around the payment sources to be utilized in settling FGN’s portion of the NBET invoices. Notably, the only known PSRP funding source that has been established and utilized for this purpose is PAF, and the CBN has has a track record of delaying disbursements under the PAF facility.

Conclusion The Order seeks to implement a critical aspect of the PSRP, in addressing the issues pertaining to the DisCo market remittances, which go to the heart of the current liquidity issues in the NESI. As previously observed, whilst there are a number of questions surrounding its implementation and practical implications, the Order certainly puts into motion the FGN’s commitment to bridge the funding gap created by the tariff shortfall, and is as such, a welcome development for not only the DisCos but also for the NESI as a whole.

This piece is from the legal firm of Olaniwun Ajayi.

Wolemi Esan Partner wesan@olaniwunajayi.net

Ibi Ogunbiyi Partner Iogunbiyi@olaniwunajayi.net

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Wednesday 05 February 2020

BUSINESS DAY

news Revenue surge in H2 fails to lift Okomu...

Continued from page 1

L-R: Greg Munyai, economic counsellor, South African High Commission; Ruth Enudi, head, legal & corporate services, Protection Plus Services Limited; Armah Anyebe, managing director, Protection Plus Services Limited; Foluso Phillips, chairman, Nigeria-South Africa Chamber of Commerce; Kunle Osisanya, comptroller (Visa Policy), Nigeria Immigration Service, Ajibola Olomola, director, Nigeria-South Africa Chamber of Commerce; Iyke Ejimofor of Nigeria-South Africa Chamber of Commerce, and AM Usman, comptroller of immigration, Nigeria Immigration Service, during the NSACC breakfast meeting in Lagos.

Corporates turn to debt market for cash amid ...

Continued from page 1

from instruments worth

N327.56 billion are expected this week.

“The unprecedented unorthodox policy measures of the CBN have also raised the risk appetite of local investors in search of investable assets offering higher yields, including corporate debt securities,” Chapel Hill Denham analysts said in a report.

Flour Mills in a notice to the Nigerian Stock Exchange dated January 16 announced the opening of a new N20bn bond offer under its N70bn Bond issuance programme, the first since November 2018 when the company raised a total of N20.1bn through a N10.1bn 3-year bond at 15.50

percent and N10.0bn 5-year bond at 16.00 percent. The book build process for this offer closes on Friday, February 7, 2020.

The choice of bonds by Flour Mills is to lengthen the maturity profile of its debt in a low-interest-rate environment, and also reduce refinancing risk of short-dated securities.

According to the management, proceeds would be used to refinance existing short-term debts to increase efficiency of its balance sheet.

Analysts at Chapel Hill Denham estimate FMN’s total debt at N133bn.

“This will lead to a debtto-equity of 86 percent and net debt-to-EBITDA of 2.14x, from 73 percent and 1.77x,

respectively, prior to the issuance,” Chapel Hill said.

Also, last week, in a bid to take advantage of the lowinterest rate to raise cheaper short-term debt, Nigerian Breweries, the nation’s largest brewer by market size, launched Series 5 and 6 of its Commercial Paper programme. The Series 5 has a tenor of 180 days, while the Series 6 has a tenor of 270 days, according to the management. The aim is to raise up to N45 billion to support the company’s short-term funding needs.

The 180-day tenor is priced at a yield of 5 percent (discount rate – 4.88 percent), while the 270-day tenor is priced at a yield range of 6.2 percent - 6.75 percent (discount rate range of 5.92 percent - 6.43 percent).

A Commercial Paper (CP) is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable, inventories and meeting short-term liabilities.

This is coming on the heels of a successful run of the company’s first N100 billion CP programme which ran from 2015-2018.

According to Chapel Hill Denham, after the completion of the CP programme, NB’s total debt would be N88bn comprising long-term debt of N40bn, short-term debt of N3bn and CP of N45bn.

“Resultantly, we expect NB’s debt-to-equity ratio to increase to 53.6 percent from 44.3 percent as at 9M-19, while net debt-to-EBITDA is expected higher at 1.30x from 1.07x in 9M-19,” the report said.

Nigeria unveils new visa policy to improve...

OPEC, allies consider deeper cuts to check...

Continued from page 2

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it is very difficult for foreigners to get the Nigerian visa,” said Bongo Adi, a faculty at the Lagos Business School.

“However, that is just one aspect because foreigners are following news about insecurity in the country.”

Nigeria recently fell out of favour with the US which placed the country on an immigrant restriction visa following concerns related to identity management and security concerns in the country.

The activities of Boko Haram, ISWAP and other terrorist groups in Nigeria earned the country, along with six others, a place on a Special Watch List (SWL), US States Department said in December last year.

“US actions serve as a barometer for other nations concerning the state of things in Nigeria,” said Adi, who pointed out Nigeria’s abysmal performance in recent international rankings including Transparency International’s corruption index, a down-

grade by Fitch Ratings as well as IFC’s removal of the country from top five investment destination in emerging markets.

“Buhari has not shown enough commitment to tackling insecurity in the country. His service chiefs should have been sacked by now,” said a banker who asked not to be named. “Nigeria saying it wants to boost tourism under this current situation is laughable while its readiness for AfCFTA is questionable.”

Following the signing of the AfCFTA in July 2019, Nigeria’s ability to take advantage of its size and position in harnessing inherent benefits of free trade has been questioned given the poor state of manufacturing in the country and its recent protectionist stance seen in the border closure.

Meanwhile, the influx of cheap cross Chinese goods, experts say, will continue to undermine the continental agreement in Africa where manufacturing capacity is weak. www.businessday.ng

demand growth being slashed by between 202,000 and 124,000 barrels a day for the full year, the officials said. Under either scenario of production cutting for the second quarter, OPEC is likely to ease its curbs later this year to avoid undersupplying markets.

Nigeria’sN10.59trillion2020 budget is benchmarked on a daily oil production rate at 2.18 million per barrel, with assumed oil price of $55 per barrel.

In his budget speech, President Muhammadu Buhari said the sum of N8.155 trillion is estimated as the total Federal Government revenue in 2020 and comprises oil revenue of N2.64 trillion, non-oil tax revenues of N1.81 trillion and other revenues of N3.7 trillion.

Some analysts say this kind of budget projection could lead to budget underperformance. If OPEC and its allies

agree to cut production by 1 million barrels per day, Nigeria could see its cap lower than 1.7 million bpd which could further impair the revenue projections in 2020 budget.

“It seems that our budgetary assumptions are overly ambitious,” said Chuks Nwani, energy lawyer based in Lagos. “The reality suggests that our budget projections should be modest so that they can be achievable.”

The concern for Nigeria, according to analysts, is that the fundamentals that should drive taxation from non-oil incomes are not strong.

Saudi Arabia, OPEC’s de facto leader, is pushing for the cartel and its oil-producing allies to make a deep, shortterm production cut as it seeks to stem the oil-price slump driven by the virus. But Russia and some members are unwilling to deepen cuts further so as not to cede markets to the United States which is ramping shale oil production.

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the second quarter of 2019 by 33.8 percent to N8.65bn, from N12.93bn in the previous quarter. Profit after tax (PAT) declined by 57.4 percent to N2.52bn.

On a year-on-year basis, turnover was down by 0.50 percent to N5.04 billion. Profit before tax was down 46.06 percent quarter-on-quarter, and 40.50 percent year-on-year.

But these turned the corner in the third quarter of 2019. According to the numbers released by Presco and Okomu, combined sales revenue nearly doubled to N11.8 billion in the third quarter of the year, from N7.7 billion in the preceding quarter.

Findings from the Q3 financial results of listed firms show that Okomu Oil Palm revenue increased massively year-onyear by 89.9 percent to N7.0 billion in Q3 2019 from N3.7 billion in Q3 2018. Presco’s revenue increased marginally by 4.3 percent to N4.8 billion in Q3 2019 from N4.6 billion in the year-earlier period.

But Okomu reported a 43.22 percent decrease in its profit after tax as at the period ended 30 September 2019.

“In the first two quarters, we had a lot of problems in having to sell our products locally,” Graham Hefer, managing director of Okomu Oil Palm, said while reacting to third-quarter results.

Hefer said that after the Nigerian government shut its land borders, the impediments to sales faded off as there was a loosening of grip by illegal imports, creating an opportunity for the company to market its products more easily.

“If you look at their performance in the third quarter, it was good compared to the first and second quarters which were terrible. So, because of the border closure, the companies’ revenue has

improved,” Abiola Gbemisola, research analyst at Lagosbased Chapel Hill Denham, had said while reacting to the third quarter results.

The full-year report of Okomu Oil Palm, a key player in the industry as of December 31, 2019, showed that the company’s revenue suffered a decline, as it realised a total of N19 billion, representing a 3 percent decline from the N20 billion recorded in the corresponding period of the previous year.

The company’s gross profit also dropped marginally by 8 percent to N13.7 billion in 2019 from N14.8 billion in 2018.

Similarly, Presco, another key player, recorded deficit in revenue and gross profit. The company’s revenue dropped by 7 percent to N19 billion in 2019 from N21 billion in 2018.

Its gross profit also dropped by 13 percent to N14 billion from N16 billion in the previous year, while its profit for the period dropped by 8 percent to N3.7 billion.

“Generally, it is not a bad result,” Ike Ibeabuchi, an analyst and CEO of MD Services Limited, said. “Border closure will go a long way, but consider so many issues such as high production cost, smuggling and low purchasing power of consumers, all of which would definitely affect them.”

Nigeria’s palm oil output is estimated at 900,000-1.3 million MT, experts say. Import is estimated at over N500 billion annually. With national demand of 2.1 million MT, the supply gap is around 800,000MT. Major players are Presco, Okomu and PZ Wilmar.

“The industry requires massive investments and the government has to come with policies which will support development of the oil palm industry in a holistic manner,” Santosh Pillai, managing director of PZ Wilmar, told BusinessDay in 2018.

Stakeholders urge Islamic banks to create...

Continued from page 2

debt obligations. Both sukuk and bonds provide investors with payment streams.

Hajara Adeola, chief excutive officer, Lotus Capital Limited, said that Islamic Finance could help provide funding for infrastructure and that sukuk could be used to build real projects.

Ijara can be used for road construction and it is traded in the secondary market. It is very flexible and it gives people returns before the project is completed.

The good thing is that the market has matured and now has an ecosystem that supports sukuk, analysts say.

The ijara contract involves providing products or services on a lease or rental basis.

In 2013, the Osun State government issued an N11.4 billion, seven-year Sukuk instrument used to finance the construction and rehabilitation of 27 roads.

In a bid to address the @Businessdayng

infrastructure challenge bedevilling the country, the Federal Government through the Debt Management Office (DMO) had floated over N100 billion third Sukuk Bond last year.

Nigeria alone needs to invest between $30 billion and $40 billion in infrastructure, Lagos-based Chapel Hill Denham Limited estimates, yet the national infrastructure budget has never surpassed $2 billion each year.

The country’s problems are made worse by the rapid growth of its population, which is expected to jump to 400 million by 2050.

Siadu Babayo, group head, non-interest banking, SunTrust Bank Nigeria Limited, said most Sukuk are financed by giant investment houses in the world and Nigerian Islamic banks would have to develop the mechanism to take care of the foreign exchange risk given the high volatility in naira.

Wednesday 05 February 2020

BUSINESS DAY

39

news

Harvard names Okonjo-Iweala Global Public Leaders Fellow Godsgift Onyedinefu, Abuja

T L-R: Greg Munyai, Economic Counsellor, South African High Commission; Ruth Enudi, head, Legal & Corporate Services, Protection Plus Services Limited ; Armah Anyebe, managing director, Protection Plus Services Limited; Foluso Phillips, chairman, Nigeria-South Africa Chamber of Commerce; Kunle Osisanya, Comptroller (Visa Policy), Nigeria Immigration Services, Ajibola Olomola, director, Nigeria-South Africa Chamber of Commerce; Iyke Ejimofor, Nigeria-South Africa Chamber of Commerce, and AM Usman, Comptroller of immigration, Nigeria Immigration Services, during the NSACC breakfast meeting in Lagos.

US may lift visa ban on Nigeria in one month – minister … Nigeria, US, Island of Jersey sign pact to repatriate new $300m looted funds Innocent Odoh, reporting from Washington DC

T

he United States may soon lift the ban on visa imposed on Nigeria and five other countries by the President Donald Trump administration, as the Nigerian government seems to have taken serious steps to address issues that led to the visa restriction.

Nigeria’s minister of Foreign Affairs, Geoffrey Onyeama, gave this indication in an interview with reporters at the ongoing 5th Session of the United States- Nigeria Binational Commission, holding in Washington DC. The minister noted that after productive deliberations over the issue, the US authorities

have assured they could lift the ban if the Nigerian government resolved the issue in one month.

The US had on Friday officially imposed immigrant visa restrictions on Nigeria, Eritrea, Sudan, Myanmar, Kyrgyzstan and Tanzania in an expanded ban, following alleged lack of credible background investigation system that security groups such as Interpol can rely on to vet and certify the originality of prospective immigrants to the US. The minister disclosed that the US was worried over discrepancies of Nigerian data system and third party involvement in the management of the passport system, especially information and data on lost and stolen pass-

Go back to site within 72 hours, Uzodinma orders Imo contractors … gives cars to permanent secretaries

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Iheanyi Nwachukwu

ontractors handling road projects in Imo State have been ordered back to site within 72 hours or have their contracts terminated.

Governor Hope Uzodinma frowned at a situation where contractors who had collected mobilisation fees from government abandoned projects.

This directive was given by the governor in a release signed by his Chief Press Secretary/media adviser, Oguwike Nwachuku.

He said: “This action is unjustifiable and totally unacceptable to the State Government. Dry seasons usually mark the peak of road construction works. Regrettably, the affected contractors have absconded from site in the peak of the dry season even after collecting mobilization fees from Government.”

It will be recalled that Governor Uzodinma has at every opportunity emphasised that his ‘3R’ mantra of Reconstruc-

tion, Rehabilitation and Recovery must be fully implemented for the overall benefit of Imo people.

Meanwhile, the governor Tuesday distributed brand new vehicles to permanent secretaries (PSs) in the state in fulfilment of his pledge to restore the morale of Civil Servants during his visit to the Secretariat a few days ago.

The governor, while delivering the cars at the Government House, said, “This is a new dawn, a new chapter and a new Imo” that he promised.

The gesture is in line with his promise to motivate the Civil Servants by providing them with necessary tools to boost efficiency at work, he said.

“The permanent secretaries who are the administrative heads are naturally the first beneficiaries of these programmes designed to motivate workers,” he said, and then proceeded to hand over the keys of 18 brand new salon vehicles to the Head of Service, Camilus Iwuagwu. www.businessday.ng

ports.

“One of their concerns is that the data we provide should not go through third party and we have been using a third party in the management of our passport issues.

So, they are a bit worried that security information should not go through private third parties before becoming available to them.

“So, we have been doing a lot already to address this. We are putting in place some data bases and ICT architecture that will capture these data and make them accessible in real time to Interpol and all the member countries of Interpol and it should be up and running within about a month,” he said.

According to Onyeama, in the meantime the Federal Gov-

ernment is also providing direct information on the lost and stolen passports within the six technical areas the US raised.

The US had urged Nigeria to begin to issue e-passports and keep them informed of all the details so that they can tell the genuine and non-genuine ones. The US had also requested Nigeria to share data and information on suspected terrorists and known terrorists.

He noted that Nigeria had satisfied most of the requirements, adding that it was also addressing the outstanding issue of lost and stolen passports. “So, we pretty much agreed with them that once we address these issues hopefully in not too distant future we will be removed from these restrictions,” he said.

Senate okays N238bn budget for Customs, queries MDAs over non-submission of audit reports Solomon Ayado, Abuja

T

he Senate on Tuesday approved N238 billion as budget for the Nigeria Customs Service (NCS) for the 2020 fiscal year.

Out of the approved sum, N98 billion was voted for personnel cost, and N15 billion as overhead while N123 billion was approved for capital costs, respectively.

The budget approval followed presentation of report on the Customs’ budget by the chairman, Committee on Customs, Excise and Tariffs, Francis Alimikhena.

This comes as the Senate queried ministries, department and agencies (MDAs) for not submitting their audit reports.

Consequently, the Senate president, Ahmed Lawan, has issued that henceforth, the Senate would take decisive action against any MDA that failed to submit its audit report.

By implication, it means that any MDA that does not submit its audit report, the

Senate will not approve their budgets. The Senate has further directed that with revert to budget from January to December cycle, it has become mandatory that all MDAs must present their audit reports before the end of every year.

Lawan said: “We expect MDAs to present their audited accounts before the end of the year, especially towards the end of December or at least the first quarter of next year that is if, we include all the calendar months.

“If any agency refuses or fails without any cogent reason; we have reason to take a drastic action when it comes to appropriation because it is to give account of what you have been given in the previous year.

“So, I’m advising the MDAs, especially those that are not up to date with their audited accounts to do so.

We could decide as a national assembly to take measures against agencies of government that are not up to date with their audited accounts.”

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he John F Kennedy School of Government at Harvard University has named former Finance Minister and World Bank Managing Director the next Angelopoulos Global Public Leaders Fellow.

Okonjo-Iweala who becomes the fifth since the programme’s inception in 2011 was preceded by distinguished previous fellows including Juan Manuel Santos, former president of Colombia; Ban Ki-moon, former secretary-general of the United Nations; Tarja Halonen, former president of Finland, and Felipe Calderon, former president of Mexico.

Making the announcement on Tuesday, Harvard Kennedy School Dean, Douglas Elmendorf, stated that Okonjo-Iweala who begins her fellowship this month ‘will bring to the Kennedy School a wealth of practical

experience and insights into the development challenges and achievements in Africa and across the developing world.

“As the longest-serving finance minister in Nigeria and a leader at the World Bank for more than two decades, she engineered successful new approaches to fostering sustained and inclusive growth in developing countries. She will enrich our campus conversation on the public policy choices needed for effective governance that serves societies,” he said.

In October 2019, OkonjoIweala delivered the Robert S. McNamara Lecture on War and Peace in the John F. Kennedy Jr. Forum at the Kennedy School. “I am honored to be able to return to the Kennedy School as the Angelopoulos Fellow, and to work with students and faculty who are wrestling every day with the world’s most complex development problems,” she said.

Ausso Leadership Academy targets to scale up 250 businesses annually Modestus Anaesoronye

T

he Ausso Leadership Academy (ALA), an institution founded to share prosperity and enable young entrepreneurs develop themselves to become successful and contribute to economy of Nigeria, says its target is to scale up 250 businesses annually.

Augustine Okere, the founder of ALA, made the disclosure at the formal inauguration and the maiden get-together of the Ausso Leadership Academy Alumni Association held in Lekki, Lagos, weekend.

Okere said the rationale behind the establishment of ALA was to mentor business leaders and entrepreneurs to scale up their businesses geometrically

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for shared prosperity and national growth.

Okere, who is also the founder of Computer Warehouse Group now known as CWG plc, said after establishing the CWG plc and nurtured it to a world-class company, which won the Global Growth Company at the World Economic Forum in 2014, he needed a platform to share his experiences to others coming behind him to help them to avoid the mistakes he made.

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40

Wednesday 05 February 2020

BUSINESS DAY

news

Customs Service intercepts Reps say FAAN under-remitted N63.6bn in World Cancer Day: Obaseki calls for concerted 6 years as authority refutes claim effort to fight scourge N2.9bn at Lagos airport tions of under-remittance, JAMES KWEN (Abuja) & IFEOMA

T

IFEOMA OKEKE

he Nigeria Customs Service (NCS), Murtala Muhammed International Airport (MMIA) Command, has intercepted $8,065,612 million (about N2.9bn) at the airport, packaged in 20 sealed wraps.

Hameed Ali, comptrollergeneral of NCS, told journalists at the airport on Tuesday that the consignment was packed in a coaster bus and loaded in six Bagco bags, and asuspect had been arrested in connection with discovery.

According to Ali, the consignment was intercepted at about 1200hrs on January 16, 2020, at the E- Wing of the tarmac of the Lagos Airport.

The next day, Saturday, January 18, 2020, Ali said the service took an inventory of the consignment in the presence of the Directorate of State Security, Customs intelligence unit, anti-money laundering and counter terrorism financing unit, the Police, and the suspect, when the value was confirmed.

He said the command was able to intercept the consignment through credible information gathered on the day it was supposed to be moved out of the country.

He explained further that the service was investigating into the consignment, the real owners and cohorts in the attempted smuggling, adding that after thorough investigation, the fund and the arrested suspect would be handed over to the Economic and Financial Crimes Commission (EFCC) for further interrogation.

He explained that names were written on each wrap of money, which were in $100 denomination.

Ali however noted that it was not a crime to ferry money out of the country, but noted any amount of money in excess of $10,000 must be declared to customs by the owners. He said: “Currently, the value of the threshold in Nigeria is the equivalent of $10,000 and above. Therefore, all travellers in and out of Nigeria must declare any physical cash in excess of this threshold of $10,000 or equivalent of other currencies or monetary instruments.

“The question is often asked, why do Customs or any agency of government need to know if a private person or company is taking out monies for their personal business out of the country. It is for the reason that illegal criminal activities like international terrorism.”

www.businessday.ng

OKEKE (Lagos)

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he House of Representatives on Tuesday said the Federal Airports Authority of Nigeria (FAAN) underremitted N63.6 billion worth of revenue in six years.

James Faleke, chairman, House Committee on Finance, during an investigative hearing meeting between the Committee on Finance and FAAN at the National Assembly Complex in Abuja, alleged that out of total sum of N74.663 billion expected revenue from FAAN between 2014 and 2019, the sum of N9 billion was remitted within the period under review.

Giving a breakdown of the sum, Faleke said out of a total sum of N9.48 billion expected revenue from FAAN in 2014, it remitted N500 million; N2.15 billion out of N10.89 billion in 2015, and N1.565 billion out of N11.6 billion expected revenue in 2016.

He said FAAN remitted N1.511 billion, N1.778 billion and N1.539 billion out of N13.19 billion, N14 billion and N15.49 billion expected revenues for 2017, 2018 and 2019 fiscal years, respectively.

Responding to the allega-

Rabiu Yadudu, FAAN managing director, said the agency could not afford to comply with the extant financial regulations on remittance of 25 percent operating surplus.

Yadudu explained that out of the 23 existing airports, 18 are not viable while the revenues accruing from the three viable airports are used to subsidise the others.

He stated that relevant documents which highlight various constraints facing the agency have been submitted to the supervisory Ministry of Aviation for onward transmission to the president.

The committee queried the FAAN management over the discrepancies between the internally generated revenue realised by the authority and the records provided by the Auditor General of the Federation and demanded for original copies of all the receipts of payments.

It directed the FAAN managing director to provide relevant documents of remittances made so far and reasons why the agency defaulted in meeting its financial obligations as provided by the financial regulations within one week.

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E

do State governor, Godwin Obaseki has called on Nigerians to join hands with the government to wage war against cancer scourge, noting that prevention remains a much-neglected weapon in the anti-cancer fight.

Obaseki said this in commemoration of the World Cancer Day, set aside by the World Health Organisation (WHO) to draw global attention to the disease, review progress on treatment and management options with global stakeholders.

According to Obaseki, while federal and state governments intensify efforts to bring cancer treatment closer to sufferers across the country, more than 80 percent of cancer cases could be avoided through prevention.

Obaseki, who decried the rate at which the terminal disease has claimed thousands of lives in recent times, said it was unacceptable, calling for concerted efforts from all Nigerians to tackle the scourge.

“Much as there are many reasons why people die from cancer-related illnesses, prevention remains a much under-funded and neglected weapon in the fight against the killer ailment. This calls for concerted effort among Nigerians, especially in creating awareness about the disease, which has claimed millions of

@Businessdayng

lives.

“It is imperative for people to become aware of the most common forms of cancer, their risk factors, preventive measures, and the importance of early detection.”

Speaking on this year’s theme, “I am and I will,” the governor said everyone has the capacity to address the cancer burden,” adding, “We can work together to reduce cancer risk factors. We can overcome barriers to early diagnosis, treatment and palliative care. We need to pull together to improve cancer control and achieve global targets to reduce premature mortality from cancer.”

World Cancer Day, organised by the Union for International Cancer Control (UICC) and celebrated each year on 4 February, is an opportunity to rally the international community to end the injustice of preventable suffering from cancer.

According to the WHO in its 2018 publication cancer is now responsible for almost one-in-six deaths globally. The WHO highlights that cancer no longer needs to be a death sentence, as the capacity exists to reduce its burden and improve the survival and quality of life of people living with the disease.

Wednesday 05 February 2020

BUSINESS DAY

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news

NEXIM Bank urges South-South to develop non-oil resources to boost export earnings

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GBEMI FAMINU

he Nigerian Export-Import Bank (NEXIM) has urged South-South leaders, businesses and stakeholders in the region to take advantage of the enormous non-oil resources to boost export earnings, create more jobs, and promote economic growth across the region.

NEXIM observed that apart from crude oil, which is its major resources, the South-South geopolitical zone has other resources it could develop for export across many sectors including, agricultural products, solid minerals, manufacturing and services, particularly hospitality and tourism.

Decrying the situation in his welcome speech at the Exporter Enlightenment Forum for the South-South Geopolitical Zone, which held in Asaba, Delta State, last week, Abba Bello, managing director/CEO, NEXIM Bank, noted that despite its enormous non-oil resources, the region had not been able to take advantage of them to boost its export earnings and further its economic growth.

“Our analysis, however, shows that the South-South had not fully benefited optimal from NEXIM’s intervention programme, hence the need for this Exporter Enlightenment Forum,” he said on the

rationale for the forum.

Speaking further at the forum, which held on the theme, ‘’Maximising Export Potentials in the South-South Region for Economic Growth,” Bello explained that the bank had found it necessary to organise the forum in order to bring to fore the non-oil resources of the South-south region towards attracting investment and accelerating the growth and development of the region.

According to Bello, sustained investments in the nonoil sector in the region would help in reducing the country’s over dependence on the crude oil sector, which currently contributes about 70 percent of government revenues and 95 percent of export revenues.

As well, such investments for him would save the country from the undue exposure to the volatility in the global oil market.

“While the recent episode of oil price slump, which triggered economic recession in Nigeria from 2016 to 2017 is still fresh in our memory, unfolding developments suggest that our country may once again be faced with oil revenue volatility in the current year, given the outbreak of coronavirus in China and trade war between major global players is expected to impact negatively on global oil demand, among other factors”, he said.

D

Signal Alliance appoints Practice Lead, Azure

S

ignal Alliance Limited, Nigeria’s foremost ICT firm and end-to-end systems integrator, has announced the appointment of Emmanuel David Ejoor as its Practice Lead, Azure.

Emmanuel is joining Signal Alliance from TekExperts where he was the head of operations.

He brings on board over 18 years’ experience in technical, operational and managerial roles to support Signal Alliance’s vision. Prior to this appointment, he had held positions in notable organisations such as Computer WareHouse Limited, where he started his career and rose to become the Service Centre manager before moving to Virgin Nigeria as IT Service Delivery manager and subsequently held Operational and Managerial roles in Dell Corporation, DellEMC and TekExperts.

He has a first degree in Mechanical Engineering from the University of Ibadan and

an MBA from Lagos Business School (Pan African University).

He also holds numerous professional certifications covering ITIL Service Management, ITIL Infrastructure Management, ITIL Service Management Managers Certificate as well as OEM/ Product Certifications.

Commenting on the appointment, Collins Onuegbu, executive vice-chairman of Signal Alliance, said: “We are very delighted to welcome Mr. Emmanuel Ejoor to the Management of Signal Alliance Limited.

His appointment was based on his remarkable technical skills, entrepreneurial spirit, academic, professional and corporate experiences, which are relevant to the needs of our Management.

As we prepare for the next phase of our enterprise transformation, we are convinced that his skills will no doubt add significant value to our quest to become one of Africa’s leading technology integrators.”

Unity Bank partners cashew farmers to boost export

U

nity Bank plc has partnered Nigerian cashew farmers under the auspices of the Association of Cashew Farmers, Processors and Aggregators of Nigeria (ACFAP), to boost production and drive export.

The bank, reputed for its focus on the agribusiness value chain, partnered ACFAP to host a stakeholders’ and export summit intended to promote

NIMASA’s new high-tech Ship Registry certificates to stem fraud

cashew processing and export in Lagos last week.

Nigeria is currently the sixth largest producer of cashew in the world, with the country producing an estimated 350,000 metric tons of cashew nuts and generating over $813 million in foreign exchange earnings over the past three years, according to the minister of agriculture, Sabo Nanono, who delivered a keynote address at the summit. www.businessday.ng

AMAKA ANAGOR-EWUZIE

etermined to reduce growing number of counterfeiting of Ship Registry certificates for the nation’s shipping business, the Nigerian Maritime Administration and Safety Agency (NIMASA) has introduced new Nigerian Ship Registry certificates.

The new certificates, unveiled to ship owners in Lagos on Tuesday by Dakuku Peterside, director-general of NIMASA, will run concurrently with all the old certificates that are still valid.

According to NIMASA, it would begin to issue the certificates that come with high levelled technical features that made it near impossible for quacks to fake, by end of

first quarter of this year.

Speaking at the Nigerian Ship Registry interactive forum with ship owners held in Lagos on Tuesday, Peterside pointed out that counterfeiting certificate renders the entire gamut of systems and processes designed to prevent the entry of unseaworthy and substandard ships into the Nigerian flag, a nullity. “It raises the spectre of marine accidents, loss of lives, destruction of vital marine assets and the lowering of our national esteem in the comity of maritime nations,” he stated.

As a hedge against these risks, he said, the agency settled on the deployment of state-of-the-art technology for the printing of security certificates with unique anticounterfeiting features.

“A Marine Notice will be issued at the appropriate time

to notify all ship owners of the existence of the new certificates and commencement date, while the old certificates will be gradually phased out,” he said.

He further said NIMASA goal as a Maritime Safety Administration, was to create a world class Ship Registry which will be attractive to ship owners with the aim of maintaining the influence of Nigeria in evolving international commercial and regulatory environment for shipping.

According to him, Nigeria operates a Closed Registry with about 2,725 active vessels of various capacity.

“In 2019, the International Maritime Organisation (IMO) ranked the Nigerian Ship Registry number two in Africa after Liberia (which operates an Open Registry) and 46 in the whole world,” he said.

He further stated that in 2018/19, Nigeria attracted into its register, two high index capacity vessels – “Egina FPSO” and “MT Ultimate”.

“We have no doubt that a lot more can be done to assist Nigerians in acquiring vessels and that was why we are making effort to disburse the Cabotage Vessels Finance Fund (CVFF). We are also partnering with the Nigerian Content Development and Monitoring Board (NCDMB) to drive capacity in the industry,” Peterside assured.

Emmanuel Ilori, chairman, Reform Implementation Committee, who gave an update on the reform of Nigerian Ship Registration Office, said that after its preliminary investigation, it was discovered that bureaucracy in ship registration processes resulted in delays and inefficiency.

Obafemi Hamzart (r), deputy governor, Lagos State, presenting gift to Abi Ayida, chairman, Berger Paints Nigeria plc, during courtesy visit of Berger Paint’s management team to Lagos State government.

FACTCHECK: Contrary to Lai Mohammed’s claims, more than 60 Nigerian in China are willing to come back DIPO OLADEHINDE

M

ore than 60 Nigerian in Wuhan, a Chinese town hit

by Coronavirus, have indicated interest to come back home, contrary to claims

by Nigeria’s information minister, Lai Mohammed.

Wuhan, a metropolis in China, is the location of the Coronavirus outbreak in January, a disease that has since killed over 200 people and has been declared a public health emergency by the World Health Organisation (WHO).

The minister of information while addressing journalists on Friday, January 31, 2020, claimed 16 Nigerians had not shown interest in returning to their country.

The Chinese Embassy in Nigeria says there are 60 Nigerians living in Wuhan, the Chinese city where Coronavirus broke out. Zhou Pingjian, Chinese ambassador to Nigeria, said this while addressing a press conference in Abuja on Monday.

“According to our check with your embassy (in China), there are 60, not 16 Nigerians, that are in Wuhan now. Your embassy has maintained regular communication with them. At this moment, no one risks much movements,” he said.

The Chinese government is taking relevant steps to contain the virus and keep residents safe, the ambassador said, noting, “There might be 40,000 or 50,000

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Chinese nationals in Nigeria,” and most of them are in Lagos.

Nigeria’s information minister, Lia Mohammed on Friday said the Federal Government was in touch with the about 16 Nigerians residing in the Chinese city, saying they had not indicated any interest in being evacuated to Nigeria.

“I know we have Nigerians in Wuhan; our Embassy in China has confirmed that we have about 16 Nigerians in Wuhan and they are in touch with them,” he had said.

A Twitter user, who said he’s in Wuhan, described this as untrue, alleging that the embassy does not even have a directory of Nigerians in the Asian country.

He said he had been in Chi@Businessdayng

na since 2016, both for studies and business, but did not disclose his identity. The use of Twitter is illegal in China and defaulters risk being detained.

“So far, the US government and a few other countries have made moves to move their citizens out from Wuhan. This is what makes a country great, not just by words or using media to lie about your citizens, such things as lie and media deceit should not be accepted,” he wrote.

“Let me shock you; the Nigerian embassy in China doesn’t have the database of Nigerians in China. They only started to collect the data ‘improperly’ a few days ago because everyone is now getting pissed at them and they swung to cover their tracks.

42

Wednesday 05 February 2020

BUSINESS DAY

news

VFD snaps 53.7% stake in Abbey Mortgage

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MICHAEL ANI

inancial servicesfocused proprietary investment company, VFD Group, has finalised a N2.37 billion investment in Abbey Mortgage Bank, according to an investment prospectus seen by BusinessDay. That’s about 54 percent of Abbey’s total market cap of N4.41 billion, putting the financial service firm as the majority stakeholder in the primary mortgage company.

The investment was first announced by both parties sometime in July last year but was completed January 24 this year, by way of a private placement of the mortgage firm’s

ordinary shares. The private placement involved the sale of 2,261,538,462 ordinary shares of Abbey mortgage firm at the rate of N1.05kobo per share to the VFD Group Plc. Kairos Capital Limited was Joint Issuing house to the deal and was cleared by the Securities and Exchange Commission (SEC). Nonso Okpala, managing director/CEO, VFD Group, says the success of the deal goes to reinforce the firm’s objective in building an ecosystem that would bring together all its platforms under one roof, be it in insurance, retail lending, commercial bank lending, real estate investments, asset management.

“The whole understanding is to bring them together under one roof and accentuate them

with the introduction of technology such that we build a very elaborate, compelling, effective ecosystem that serves Nigeria in one way or the order,” Okpala told BusinessDay. Incorporated under Corporate Affairs Commission (CAC) on July 7, 2009, but commenced business operations on 1 January 2011, the company’s subsidiaries include VFD Microfinance Bank, Everdon Bureau De Change, and Anchoria Asset Management.

Okpala noted that VFD was looking to go beyond financial services in the next five years hence we have an eye for automobile, hospitality, insurance, and every other business that reinforces our long term ecosystem strategy.

vices and the mobile app falls in line with the dream of the state government to integrate road, rail and waterway to achieve efficient inter-modal public transportation system that will move millions of residents seamlessly across the state.

The boats have the capacity to ferry 40 to 60 passengers per trip and will commute passengers across the following water routes: Ikorodu – Ebute Ero/Elegbata – CMS/Marina, Ikorodu – Five Cowries Ferry Terminal (Falomo, Ikoyi), Badore –

Addax Jetty (Victoria Island), Five Cowries Ferry Terminal (Falomo, Ikoyi), Ebute Ojo - Ijegun Egba – CMS/Marina, Mile 2 – Liverpool (Apapa) – CMS/ Marina, Badore – Ijede.

Governor Babajide SanwoOlu, at the launch, which took place at the Badore Ferry Terminal, Ajah, said asides the boats, the government will also be strengthening the operations of the Lagos Bus Services Limited with additional 500 buses, up from the 65 that were released on Monday.

Lagos flags off ferry services with mobile app JOSHUA BASSEY

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ixteen additional boats are to be launched later this year to further strengthen operations of the Lagos State Ferry (LagFerry), which commenced commercial services with 14 new boats on seven routes across the state on Tuesday. With the 16 boats, the state hopes to increase the number of boats in LagFerry’s fleet to 30 before the end of 2020.

The launch of the ferry ser-

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43 BUSINESS DAY

FT

Wednesday 05 February 2020

FINANCIAL TIMES

World Business Newspaper Demetri Sevastopulo and Adam Samson

T

he highly anticipated start of the Democratic presidential race was thrown into chaos after the Iowa Democratic party delayed announcing the results of its caucuses.

After a long night of confusion and anger from some candidates, the Iowa Democratic party on Tuesday morning said the smartphone app used to relay results from roughly 1,700 precincts to party headquarters was flawed.

It said it would try to release the results “as soon as possible” while ensuring their integrity.

“While the app was recording data accurately, it was reporting out only partial data,” the party said just after 8am on Tuesday, more than 13 hours after Democrats held the caucuses. It blamed the problems on a coding issue, adding that the issued had been fixed and did “not impact the ability of precinct chairs to report data accurately.”

The debacle sparked a tirade of criticism, ranging from former vice-president Joe Biden, who appeared to have a poor night based on data reported by some campaigns, and Donald Trump, who mocked the Democrats over the chaotic start to the 2020 race.

The leading Democratic candidates on Monday evening gave speeches suggesting that the race was close. But Pete Buttigieg, the former South Bend mayor who drew growing crowds at his events in the final weeks, claimed victory in a rousing speech in Des Moines.

“By all indications, we are going on to New Hampshire victorious,” Mr Buttigieg said.

In early morning interviews from New Hampshire, which holds the first US primary next Tuesday, Mr Buttigieg said internal data reported from his precinct teams showed he had won.

Democrats’ Iowa caucus result delayed after count chaos Party scrambles to deal with setback blamed on technical glitch

Pete Buttigieg claimed victory despite the lack of a clear result © AP

Bernie Sanders, the Vermont senator who had led the polls leading into the caucuses, said he had a “good feeling” while Massachusetts senator Elizabeth Warren said it was “too close to call”. Mr Biden said he was “feeling good” despite ominous early signs.

The chaos created a headache for the Democratic party, which had hoped the caucuses would start a smooth race that would produce a unity candidate to take on Mr Trump.

Instead, the botched process sparked anger from some candidates, including Mr Biden, who sent a formal letter of complaint to the Iowa Democratic party.

Andrew Yang, the entrepreneur and Democratic contender, said “it might be helpful to have a president and government that understand technology so this sort of thing doesn’t happen”.

The chaos surrounding the caucuses meant no candidate could officially claim victory yet, as Democratic contenders head to New Hampshire for the primary.

Democratic officials and volunteers around Iowa on Monday evening suggested the problem was related to the fact that the party was for the first time releasing three sets of results: the ranking of the candidates in the first round of the caucus, their

standing after the second and final round and the number of delegates they won.

The precinct chairs across the state were tasked with using a smartphone app for the first time to send the results to party headquarters. At some locations, they did not download the app and relied instead on the back-up plan of phoning the results, only to find the hotline at the party headquarters was constantly busy.

The party said precincts had paper records for voter preferences — another change to the caucuses this year — and that many had taken photographs of the results.

“Everyone’s having trouble

calling in the results,” said Des Moines county co-chairman Tom Courtney.

As the party blamed the app for the breakdown in the process, reports emerged on Tuesday about other problems that precinct chairs running the caucuses had faced. Jeannine Grady, the Democratic chair in Marshall County, said the instructions for the app were complicated, and “a lot of people are just not tech savvy”.

“I gave instructions to a lot of my precinct chairs to just call in the results, and they sat on the phone for an hour plus at a time,” said Ms Grady.

Roughly a third of Marshall county’s 19 precincts did not have problems, Ms Grady said. In the precincts that experienced issues, some chairs struggled with the app’s authentication processes.

Ms Grady said that most of the app’s problems, ironically, seemed to come from the “abundance of care [the party took] to make sure it was very secure.”

Others struggled to submit their results on the app due to spotty cell service — an issue in some of the more rural caucus locations.

Mr Trump’s re-election campaign seized on the moment, saying Democrats were “stewing in a caucus mess of their own creation with the sloppiest train wreck in history”.

Mr Trump crowed about the chaos on Tuesday morning.

“The Democrat Caucus is an unmitigated disaster,” he tweeted.

“Nothing works, just like they ran the Country.”

Malawi court decision is a victory for African democracy The annulment of the 2019 election result sets an important precedent

David Pilling

I

t is not often that what happens in Malawi, a poor tea-producing country of 19m people in southern Africa, shakes a continent. But the constitutional court’s historic decision on Monday to overturn the 2019 “Tipp-Ex election” has done exactly that.

After a democratic exercise whose counting irregularities would shame even Iowa, for only the second time in history an African court has annulled a presidential poll and ordered a fresh election. The first time was in Kenya in 2017.

In an era when electoral integrity is under threat even in established democracies, the members of Malawi’s constitutional court stand out for their

bravery. The pressure on them to rubber stamp an election that was marred by gross irregularities — including liberal use of white correction fluid on voting tallies — was enormous.

In a 10-hour judgment, read out to a court in Lilongwe, the capital, Healy Potani, head of the five-judge panel, said: “It has been our finding that the irregularities were so widespread, systematic and grave that the results of the elections have been compromised and cannot be trusted as a reflection of the votes”.

Official tallies of the May 2019 poll had Peter Mutharika, the incumbent, winning with 38 per cent in the first-pastthe-post system. Both main opposition candidates — Lazarus Chakwera, a pastor, on 35 www.businessday.ng

per cent and Saulos Chilima, a former telecoms executive, on 20 per cent — claimed victory.

The disputed result triggered a protracted crisis, with mass street protests in a country considered one of Africa’s most peaceful and democratic.

The constitutional court has ordered fresh elections within 150 days, though the decision can be appealed in the Supreme Court.

The verdict is a victory for democracy on a continent where, opinion polls consistently show, there is strong support for the democratic principles of competitive elections, term limits and representative government.

In some countries, including the continent’s most populous, Nigeria, those principles have

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been internalised in the form of reasonably credible and regular elections. A majority of countries in west Africa, from Ghana to Liberia, adhere to term limits, although Alassane Ouattara, president of Ivory Coast, may be about to test that constitutionally in this October’s election.

Popular demand — as well as international pressure — for elections is so strong that almost all African leaders, even the most authoritarian, feel obliged to at least nod to the democratic process. Paul Biya, 38 years as Cameroonian president and counting, holds regular, if deeply cynical, electoral exercises. Yoweri Museveni, Uganda’s eternal presidential presence since 1986, does the same.

Joseph Kabila was pushed by popular and international pres@Businessdayng

sure to hold an election in the Democratic Republic of Congo in 2018 after 18 years in power.

He resolved his dilemma by stitching up the process in favour of Felix Tshisekedi, a candidate he hopes to control. In Burundi, Pierre Nkurunziza this month agreed to leave the presidency he has occupied since 2005 in return for a luxury villa and a $530,000 pay-off.

Ordinary Africans frequently risk their lives to demand fair elections or occasionally to overthrow dictatorships as happened in Sudan last year. Other institutions of state, however flimsy, have also sometimes held the line. That is what makes the Malawi decision so important, setting a precedent as it does for other courts to step in when electoral exercises are compromised.

Wednesday 05 February 2020

BUSINESS DAY

44

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Markets not live, Tuesday 4th February 2020 Bryce Elder

H

ow long should a strategic review take? We ask apropos of Micro Focus, which has delivered one this morning that results in the disposal of its chairman and almost nothing else.

You may remember that Micro Focus said with a late August profit warning that it had “accelerated” its strategic review to “consider a range of strategic, operational and financial alternatives available to the company.” But where was it accelerating from? The previous mention of a strategic review was November 2018 results, where Micro Focus noted an ongoing review specifically to fix the many broken back-office systems brought on board via its disastrous HPE purchase. So, that’s at least 15 months -- unless we spin back to the only mention to shareholders of a strategic review actually beginning, in which case it’s 13 years.

Anyway. Micro Focus has concluded the process and decided that it should try to save itself rather than waiting to be rescued.

No assets are flagged for disposal, which seems likely to be because no one has shown a serious interest in buying them. (Note that back in October Canada’s Open Text was bounced into saying it was not considering a potential acquisition of Micro Focus, after Bloomberg reported that it had.)

Kevin Loosemore exits after 15 years, effective Valentine’s Day, to be replaced by Greg Lock as nonexecutive chairman. There’s also another small, not terribly surprising profit warning as investment requirements get cranked up for the long-term good. Will Wallis at Numis can give us the detail of the strategy review: We summarise the outcome as a focus on self-help, requiring upfront P&L investment. Key actions are: 1) improved product portfolio positioning, including Security and Big Data to be run broadly autonomously (along the model of SUSE previously); 2) acceleration of the SaaS transition, albeit in a measured fashion; 3) transformation of the sales organisation; 4) successful conclusion of the ongoing systems improvements. Over

the medium term, which we read to be c.FY23, management intends these self-help actions to deliver revenues flat to low single-digit growth, with EBITDA margins in the mid-40s.

On our new forecasts, the valuation is FY21 7.5x EBITDA, 7.8x P/E, 13% EqFCF yield and 6.5% dividend yield. We think additional self-help and near-term investment is in the long-term interest of the group. Our price target of 1,200p (was 1,500p) recognises the ongoing challenge, although we think 2,000p is realistic if the group hits management’s medium-term objectives.

And here’s Credit Suisse with the new numbers: The outlook points to medium term ambitions to return the business to flat to low single digit growth. But we can’t remember the last time Micro Focus actually delivered that. We reiterate our Underperform rating.

Guidance for FY20 is another year of -6 to -8% revenue growth and $70-80m of investment into the business. If we assume that underlying margins are flat, so EBITDA falls 7%, and deduct $75m of investment, it implies FY20 EBITDA of c$1.2bn vs cons at c$1.3bn.

And Stifel’s George O’Connor can do the c-suite stuff:

While we are surprised by Mr Loosemore’s departure, we note; (i) a spate of departures in the diaspora (Ginny leaves IBM, Mike leaves dxc), which we blame on a changing market as much as ‘time of life’, (ii) newbie Chair Greg Lock is well known to UK investors - he preceded over a halcyon period at Computacenter - a vote for continuity, and (iii) CEO Stephen Murdoch has been at Micro Focus since 2012 – he owns the playbook – note also he previously worked with Mr Lock at IBM. While UK investors are likely more nonplussed by the departure, the Mr Loosemore exit may unsettle some US investors who ‘bought the team’, but we are reminded of Saxon White Kessinger who tells us that “there’s no indispensable man” [his link, not ours].

The current issues are fixable, in our view. Remember Micro Focus navigated through similar problems in 2005 and 2012 when it faced declining maintenance and revenue. Investors have seen Sage (SGE.LN) recover from similar travails – it needs People, Products, Process. We urge: (i) more corporate actions to accelerate portfolio changes with a retire/sell the rest, (ii) increased sales productivity, (iii) a more aggressive building the SI partner base, (iv) be clearer on advocating certain products which support the ‘four pronged’ prod-

uct vision, use this to reconnect with customers. (v) Restructuring continues.

Of course it does.

But what about that Tesla, eh? Hitting $845 in premarket at pixel, having been up nearly 20 per cent overnight, its $780 regular session closing price giving the Wonka-esque car maker a market cap just shy of $141bn. Toyota, the world’s biggest automaker, is valued at $200bn or thereabouts -- meaning Tesla is being valued at 0.7 of a Toyota having done about 3 per cent of its deliveries last year. Okay, fine.

Pundits have agreed as one that it’s a short squeeze, a theory the data only partly supports.

Tesla shares on loan as a percentage of those outstanding have come down from 20 per cent-plus in early September to a recentmemory low of 7.19 per cent in mid January, Markit data show.

Here’s the chart: Explanations involving supply-demand interaction don’t help the analysts though. Morgan Stanley’s Adam Jonas -- deep underwater with a $360 target and a sell downgrade two weeks ago -- has taken to approaching Tesla as a kind of thought experiment.

At the time of this writing Tesla appears on track to trade roughly 47 million shares today (Feb 3rd,

2020) for a value of shares traded over $30 billion. For comparison, Apple (the world’s most valuable equity at more than 10x the market cap of Tesla) is on track to trade around $10bn of value today. Tesla shares will trade 3x the value of Apple. In our view, this sends a message not just to auto and tech investors, but to the management teams and board of directors of the world’s auto companies.

Stretching conventional thinking on what Tesla is. It is a topic of ongoing debate on the buy-side as to whether Tesla is an auto company, a tech company, or something altogether different. In our opinion, Tesla is all of the above.

For example, we are picking up investor excitement around Tesla’s potential to generate substantial returns in the battery business as a separate, vertically integrated business.

There follows a very long discussion about whether Tesla will keep buying lots of battery cells, start making lots of battery cells, or both. Contact Morgan Stanley directly if lithium-ion this is your thing. For everyone else we’ll cut to the numbers.

What’s in the price? Our $360 price target is predicated on Tesla achieving 2 million units of sales by 2030 with a 15% EBITDA margin. On our calculations, each incremental 1 million units of deliveries on top of this is worth between $150 and $200 per share depending on incremental margins, assumptions on capital intensity and other factors including the multiple applied on incremental volume by 2030. Solving only for auto division unit deliveries at $40k/unit and a 15% EBITDA margin, we estimate the current share price discounts between 3 and 4 million units by 2030 (at a 6x EV/EBITDA on 2030 and a 15% EBITDA margin).

The basic argument here is that if Tesla can grow to become the OEM supplying industry standardbearer for battery production and/ or autonomous driving then it can grow into the current valuation. If it can’t -- and there is no particular reason aside from cultism to believe that it will -- then it’s just a wildly overvalued car maker in an increasingly crowded market.

BP warns coronavirus could hit global oil demand growth by 40% Anjli Raval

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P said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent this year, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

Brian Gilvary, the UK oil major’s chief financial officer, said 300,000500,000 barrels a day were at risk this year — a big chunk of 1.2m b/d growth initially expected by the company and global energy agencies.

Mr Gilvary added that BP was closely watching “whether Opec balances or not” by enacting production cuts with allies including Russia to bring Brent crude prices “back to the $65 a barrel range”.

His remarks come as Opec and

Russia discuss emergency cuts in oil production after the crude price entered a bear market by falling more than 20 per cent in recent weeks to below $55 a barrel.

The falling price presents an additional challenge for BP just as Bernard Looney, its head of exploration and production, takes over as chief executive on Wednesday from Bob Dudley, who leaves the company after nearly 10 years at the helm.

BP’s earnings — like its rivals in the US and Europe — have been under pressure as increased production failed to offset lower energy prices, leading to a 26 per cent drop in fourthquarter profits.

In the three months to December 31, underlying replacement cost profits — BP’s definition of net in-

come and the measure tracked most closely by analysts — were $2.6bn, versus $3.5bn in the same period in 2018. However, the results exceeded analysts’ estimates of slightly less than $2.1bn.

However, BP’s confidence about its ability to generate more cash grew after the completion of a $1.5bn share buyback programme, new asset disposal targets and falling debt levels led it to raise its dividend by more than 2 per cent to 10.50 cents.

Its shares rose nearly 5 per cent in early London trading.

“It’s a relief for me that we have got the balance sheet trajectory to where we want it to go, which sets us up with a strong foundation for a new chief executive,” Mr Gilvary said.

BP reported full-year profits of

nearly $10bn in 2019, down from $12.7bn the year before.

The company’s results followed disappointing earnings from Royal Dutch Shell, ExxonMobil and Chevron, as an energy price slump and contracting chemicals industry margins hit the oil and gas sector.

France’s Total will report on Thursday.

BP is reconfiguring its portfolio of assets as part of a broad $10bn divestment programme to strengthen its balance sheet after a blockbuster deal to acquire mining group BHP’s shale assets in 2018.

Divestment proceeds tallied $800m in the fourth quarter and BP said it was ahead of its $10bn target for the end of 2020. It planned a further $5bn in sales by mid-2021, which it said would enable it to pay down debt after the BHP deal.

Gearing — which BP defines as net debt divided by the sum of net debt plus equity — fell to nearly 31 per cent in the fourth quarter, from close to 32 per cent in the previous three months. BP said it would move towards the middle of the 20 to 30 per cent range in 2020.

Oil and gas production for the quarter was up nearly 3 per cent compared with last year at 2.7m barrels of oil equivalent a day.

Operating cash flow was $7.6bn in the fourth quarter, excluding Gulf of Mexico oil spill payments. These payouts are expected to be less than $1bn in 2020.

BP’s capital expenditure is expected to remain towards the lower end of its $15bn-$17bn range for 2020, in line with 2019.

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ANALYSIS

Lex in depth: the $900bn cost of ‘stranded energy assets’

Climate targets may force energy groups to leave huge reserves of coal, oil and gas in the ground Alan Livsey

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onald Trump was thinking about the teenage climate activist Greta Thunberg when he took aim at what he called the “prophets of doom” at Davos in January. But just as easily he could have been targeting global investors whose trenchant criticism of hydrocarbons has led to a shift in investment away from the traditional energy sector and into renewables.

This move represents a big problem for energy groups such as Exxon, BP and Saudi Aramco.

Vast swaths of their oil, gas and coal reserves may never be extracted and burnt because doing so would intensify global warming, worsening freak weather events and threatening the loss of farmland and huge population displacement. That could leave them with large numbers of what are known as “stranded assets”.

In that context of the climate emergency, the cost of writing off stranded assets could be seen as a small price to pay. But the amounts involved would be breathtaking. According to Lex estimates, around $900bn — or one-third of the current value of big oil and gas companies — would evaporate if governments more aggressively attempted to restrict the rise in temperatures to 1.5C above pre-industrial levels for the rest of this century.

Even in what the industry might see as the more benign case of a 2C rise — which was the target countries agreed to meet at the 2015 Paris Agreement on climate change — energy producers, including coal miners, would have to write off over half of their fossil fuel reserves as stranded.

If the 1.5C threshold were to be met then the pain would be greater, leaving over 80 per cent of hydrocarbon assets worthless.

Carbon emissions were once thought of as a costless “externality” by business. But as evidence of climate change has mounted and public opinion shifted, energy companies have begun to look at the real financial consequences.

This has been most notable in the rising cost of capital for hydrocarbons groups and ever-cheaper money for renewables.

After much hand-wringing, BlackRock, the world’s largest investment manager, signed up to the Climate Action 100+ initiative, a group of 370 fund managers controlling some $35tn of assets. These investors want action on greenhouse gases, and energy producers with large

stores of hydrocarbon reserves are an obvious target.

These companies have 2,910 gigatonnes (GT) of potential CO2 emissions locked away in their assets. Two-thirds of that is coal, the rest crude oil and natural gas.

The question investors must ask is how long these assets can hold their value. Ben Caldecott, director of Oxford university’s Sustainable Finance Programme, says: “Oil companies need to think about [preparing] themselves for when their cost of capital soars.”

That cost has already begun to rise. Most international oil companies, and some national ones, have shares and bonds trading on the capital markets. The share prices of oil, gas and coal producers have lower valuations than five years ago. The threat is clear: hundreds of billions of dollars of value could be lost. NOCs, many of which have much more oil and gas in reserves than they can produce in a generation, face even greater risks regardless of their relationship with the capital markets.

On the assumption that the commitments made at the Paris climate conference hold, global warming must be kept to an additional 2C. Pursuing an even tougher target of 1.5C may well be necessary to put a brake on global warming, say climate change experts.

According to academics at Duke University in the US, since the pre-industrial period human activities have increased Earth’s global average temperature by about 1C. This number is rising by 0.2C every decade. At that rate, global warming is likely to reach 1.5C above pre-industrial levels sometime between 2030 and 2052, with a best estimate of around 2040.

The International Energy Agency defines stranded assets as “those investments which have already been made but which, at some time prior to the end of their economic life, are no longer

able to earn an economic return”.

These investments may involve the purchase of rights to explore in a given area, or assets with infrastructure in place actually producing hydrocarbons.

Switching decisively away from fossil fuels will be hard.

The Paris agreement set carbon budgets — allowable amounts of emissions — that would permit a certain amount of global warming. This was done on the assumption that expecting economic activity to halt abruptly was not reasonable, or even acceptable, to many countries.

Assuming a 50 per cent chance of meeting the 2C warming limit by the end of the century, the UN Intergovernmental Panel on Climate Change set out a carbon budget of 1,200 GT for fossil fuels which could be burnt by the year 2100. To meet the tougher 1.5C limit, only 464GT would be allowed, far below the equivalent of 2,910 GT of CO2 held in the remaining oil, gas and coal assets, according to Bernstein Research.

Last year about 33GT of carbon emissions were released according to the IEA. How quickly emission levels rise depends on factors ranging from population growth to macroeconomic activity. The increased take-up of non-fossil fuels for energy will also have an impact.

The various carbon budgets give some sense of just how much is at risk for energy producers, including the state-owned energy companies. In the best case for them, a rise of 3C, almost all of the remaining carbon stock — 96 per cent — could be burnt. But at the lower bound of 1.5C, using the IPCC allowance, a mere 16 per cent of the carbon is usable.

In other words, over 80 per cent of carbon in the ground would be stranded and theoretically worthless. Even at 2C, 59 per cent of fossil fuel reserves would be stranded.

Most IOCs understand the threats ahead, even if they do not

all appear to have accepted how much action is needed to solve the problem of excess carbon emissions. Some of the largest, such as Total of France and Royal Dutch Shell, have invested in renewable energy projects ranging from solar power to biofuels.

But the proportion of total capital expenditure by the largest oil and gas companies, going to low carbon businesses, represents less than 1 per cent of investment, says the IEA. For the most part these are consumerfacing retail businesses which many IOCs should be comfortable with. “Exxon and Shell both started out in the refining and marketing of fuels,” says Martijn Rats at Morgan Stanley. “The IOCs understand branding, the NOCs not so much.”

Can oil companies reinvent themselves? Denmark’s Orsted, previously DONG Energy, has become a wind farm specialist.

Of the larger oil companies, Neil Beveridge at Bernstein can only think of one that has done so.

India’s Reliance Industries has shifted its focus away from oil refining towards telecoms and online retailing.

To assess how much shareholder value is at risk, both the reserves under threat and the type of fuel involved must be considered. Coal accounts for two-thirds of potential carbon emissions held in reserve. There is a lot of it in the ground and it contains the largest proportion of carbon of the fossil fuels, according to the IEA. By weight, coal on average holds half again as much carbon as crude oil and twice that of natural gas.

In a 2C scenario, less than a quarter of coal reserves could be burnt, the rest stranded. Stock markets have priced in this likelihood. So to get a glimpse of what could happen to oil and gas producers unwilling or unable to do something about their collective impact on emissions, look at the share prices and valuation of coal

mining groups such as Peabody Energy and Yancoal Australia.

As the first target for asset owners keen to decarbonise their portfolios, coal miners have performed disastrously over the past decade. Bloomberg’s index of global coal miners, the largest of which are in China, has plunged 74 per cent from its peak in early 2011. These miners have become “value traps”, trading cheaply but without any obvious incentives to attract investors. That drop adds up to $300bn of market value for these 30 or so coal miners.

Using the same 2C scenario, much of the world’s oil (71 per cent) and gas (92 per cent) reserves could be burnt. That suggests relatively little economic impact on the producers. The market has made the distinction from coal. Of course, it is fair to say that cheap US natural gas, trading near 10-year lows, has also put pressure on thermal coal prices in that region. Collectively, world oil and gas company market values have fallen about half as much as coal miners since their own decade peak in 2011.

Calculating the value of these stranded reserves involves asking not just which warming scenario to use, but also making a stab at how stock markets value reserves generally. Putting natural gas specialists aside, stock markets have traditionally attributed a higher worth to companies with greater amounts of oil reserves.

For the largest listed oil companies, there is a positive relationship between enterprise value (market capitalisation plus net debt) and their reported proven reserves, for assets with the highest probability of development.

Of the remaining fossil fuels would need to remain in the ground to meet the 1.5C global warming target and put a brake on climate change 59% Of fossil fuel reserves would have to be left untouched to meet Continues on page 46

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NATIONAL NEWS

Tale of two doctors reveals how China controls the narrative As coronavirus spreads, Beijing cracks down on any dissent from the party line Don Weinland

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hen China was in the grip of the devastating Sars epidemic 17 years ago, two doctors emerged as the heroes of the crisis.

Jiang Yanyong, a semi-retired military doctor, blew the whistle on a cover-up of the Sars outbreak, while Zhong Nanshan was credited with discovering the virus behind the disease.

Within months, Dr Jiang was scrubbed from the official record after being deemed too outspoken by the Communist party. But Dr Zhong has re-emerged in January as the champion of efforts to control the spread of the new coronavirus.

The story of the rise and fall of the two men underlines the tight control China’s leaders try to maintain over the official narrative, especially when confronting a potentially destabilising crisis such as an epidemic.

This tendency to suppress bad news has only grown under President Xi Jinping, who has centralised power into his own hands since taking charge of China in 2013.

“Whistleblowers, like Jiang, are complicated because their heroism exposes these systemic problems — in Jiang’s case a massive cover-up of the extent of Sars,” said Mary Gallagher, director for the Center for Chinese Studies at the University of Michigan.

Until early 2003, only a handful of Sars cases had been officially reported in Beijing. But on April 9, international media reported that Dr Jiang had leaked a letter claiming Sars had killed six people and infected another 60 at a Beijing military hospital.

Jiang Yanyong, the doctor who blew the whistle on the Sars outbreak in 2003, was originally lauded but later shunned by the Communist party for being too outspoken © Guang Niu/Reuters

The revelation blew the cover off a government attempt to conceal the rapidly growing number of cases, eventually forcing Beijing to admit it had obstructed the truth about what would become a global epidemic.

While he was briefly lauded by state media as a hero, by May 2003 the Financial Times reported that Dr Jiang had been barred from talking to foreign journalists as authorities worried he was too outspoken. The FT called the 89-year-old’s home last week but was told he was unable to speak.

“This space for critique is extremely fragile,” said Maria Repnikova, director of the Center for Global Information Studies at Georgia State University. “If the crisis appears to be larger than anticipated . . . we may expect some of these spaces to shrink

and more propaganda to emerge.”

Dr Zhong has provided a much easier narrative for Beijing. In April 2003, his team isolated and identified the Sars virus, according to state media. The discovery was a turning point in treating patients in Guangdong province, where the outbreak had begun several months earlier. Chinese media portrayed Dr Zhong as a “white-gowned fighter” who worked until he collapsed on the job.

He has enjoyed a steady rise through the Chinese health sector and was most recently appointed head of an expert panel that is helping the National Health Commission conduct research on the new coronavirus strain.

The party thrust Dr Zhong back into the public spotlight when he told state television on

January 20 that the Wuhan outbreak was now being transmitted between humans, making clear for the first time the gravity of the situation.

The news came at a critical moment in the spread of the virus.

In the following weeks, the number of confirmed cases grew rapidly, reaching 20,348 by Tuesday with 425 dead, eclipsing the 349 people killed by Sars in mainland China. By pre-empting the explosion in the number of cases with a formal announcement from an authoritative figure such as Dr Zhong, the Communist party was able to dodge accusations that it had reacted too slowly or overseen a cover-up.

Dr Zhong’s outlook on the coronavirus — that it will peak within the next week — is by far the most optimistic view available

exposed to the biggest potential hits are those that will need the longest time to use up their reserves. This is known as reserve life. If you focus on the groups with high carbon intensity and long reserve lives — those with the most to lose — the names that appear are Rosneft, ExxonMobil, PetroChina and BP, according to Bernstein Research.

That leaves the NOCs, the largest overseers of hydrocarbons. A number of countries, particularly within the Opec cartel, have very long reserve lives. They produce crude relatively slowly compared with what they have. About 71 per cent of the oil in the ground belongs to these countries, from Iran to Iraq and Venezuela.

While the 50 largest listed international oil companies have sufficient oil and gas assets to last them for between 10 and 20

years, these countries on average would need 68 years to exhaust their supplies. A breakdown of the world’s oil and gas production into a top 50 reveals that 35 per cent is controlled by international groups, and the rest by national organisations. Use those percentages on the allowable carbon budgets, and it is clear that statecontrolled producers have a lot more to lose.

In a 2C scenario, applying the 65 per cent for NOCs to a carbon budget of 433GT leaves 281GT for country producers. But that means nearly half of sovereign oil reserves would remain in the ground.

Of course, any NOC depends on its sovereign state and vice versa. Adopting carbon friendly policies may not suit countries such as Venezuela or Nigeria which depend so much on oil

from a high-profile medical professional. Most other projections put the climax of infection several months later in April or May. There is also evidence of a crackdown on would-be whistleblowers as the coronavirus epidemic has grown. Online activists have pointed out how Wuhan police questioned eight medical personnel who had raised concerns over Sars-like infections as far back as early January.

“Under Xi, the tolerance for muckraking and whistleblowing has declined markedly,” said Peter Lorentzen, an associate professor at the University of San Francisco. He noted that social media, which did not exist during the Sars crisis, had become a perennial threat to party control.

“As I see it, the party — not just Xi — has decided that the benefits of better information and improved governance from whistleblowing no longer outweigh the cost in terms of potential destabilisation or delegitimisation.”

Dr Jiang’s legacy has gradually disappeared from public record in China. In 2004, he sent an open letter to China’s premier requesting the government reexamine the Tiananmen Square massacre that saw more than 1,000 people killed in June 1989.

The letter landed him in detention for a short period and has made him a permanent pariah in Beijing.

His name does not appear in searches on the website of Xinhua News or other state media sites. “We can see that the state is very active in scrubbing the records online,” said Elizabeth Brunner, author of Environmental Activism, Social Media, and Protest in China. “References to these events and people should be growing but the record is disappearing.”

How Japan Inc became a target...

Continued from page 45 the 2C global warming upper limit set for countries in the 2015 Paris climate deal 4% Of the remaining carbon stock would be left untouched in the unlikely event that the warming target was revised up to 3C On the basis of this relationship and assuming a 2C scenario, that would leave 29 per cent of oil reserves stranded and wipe off about $360bn in value of the top 13 IOCs by reserves. That is well over a sixth of their total enterprise value. But to meet the stricter warming target of 1.5C then that figure would more than double to nearly $890bn.

Separate estimates for the value of these oil assets from Rystad Energy, which depend on very long-term oil prices, would

lessen the impact. But the decline would still be significant.

Given that these producers have lost roughly $400bn in market value over the past three years, it is fair to assume that they could survive such a drop. However, should policymakers, driven by public fears about the environment, push climate change to the fore these declines may accelerate. A sudden drop in asset value could bring a disorderly decline for all oil and gas stocks.

Those companies with the highest carbon intensity in their oil and gas reserves face the greatest risk of writedowns as a result of changes in climate change policy. These include Canadian oil sands producers Suncor Energy and Imperial Oil, but also US shale oil drillers Pioneer and EOG. The oil and gas producers

and gas for government revenues, but suffer less pressure to change their behaviour from the investment community. Following its listing of Saudi Aramco, that would be less true for Saudi Arabia.

Markets will price in the risk of asset writedowns by the world’s oil and gas companies. That may happen gradually, but unless a solution is found for climate change in the coming decade, there is a risk of a sharp collapse in asset prices of IOCs, one that goes beyond the scenarios here.

The greatest threat is faced by economies that have become dependent on oil and gas. However, the effects of writing off stranded assets would be felt across the business world. It would be one of the biggest ever shifts in the allocation of capital.

Moral Money

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tax issues Addressing tax challenges from digitalisation: International community renews commitment to multilateral efforts Iheanyi Nwachukwu

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he Inclusive Framework’s tax work on the digitalisation of the economy is part of wider efforts to restore stability and increase certainty in the international tax system, address possible overlaps with existing rules and mitigate the risks of double taxation.

Taking a cue from the aforementioned, the international community has reaffirmed its commitment to reach a consensus-based long-term solution to the tax challenges arising from the digitalisation of the economy.

According to statement by the Inclusive Framework on base erosion and profit shifting (BEPS) released by the Organisation for Economic Cooperation and Development (OECD), international community will continue working toward an agreement by the end of 2020.

The Inclusive Framework on BEPS, which groups 137 countries and jurisdictions on an equal footing for multilateral negotiation of international tax rules, decided during its January 29-30 meeting to move ahead with a two-pillar negotiation to address the tax challenges of digitalisation.

Participants agreed to pursue the negotiation of new rules on where tax should be paid (“nexus” rules) and on what portion of profits they should be taxed (“profit allocation” rules), on the basis of a

“Unified Approach” on Pillar One, to ensure that MNEs conducting sustained and significant business in places where they may not have a physical presence can be taxed in such jurisdictions.

The Unified Approach agreed by the Inclusive Framework draws heavily on the Unified Approach released by the OECD Secretariat in October 2019.

Endorsement of the Unified Approach is a significant step, as until now Inclusive Framework members have been considering three competing proposals to address the tax challenges of digitalisation. A Programme of Work agreed in May 2019 has been replaced with a revised Programme of Work under Pillar One, which outlines the remaining technical work and political challenges to deliver a consensus-based solution by the end of 2020, as mandated by the G20.

Inclusive Framework members will next meet in July in Berlin, at which time political agreement will be sought on the detailed architecture of this proposal.

The Statement by the Inclusive Framework on BEPS takes note of a proposal to implement Pillar One on a “safe harbour” basis, as proposed in a December 3, 2019 letter from US Treasury Secretary Steven Mnuchin to OECD Secretary-General Angel Gurría.

It recognises that many Inclusive Framework members have expressed concerns about the proposed “safe harbour” approach. The Statement also highlights other critical policy issues that must be agreed under Pillar One before a decision can be taken.

The “safe harbour” issue is included in the list of remaining work, but a final decision on this issue will be deferred until the architecture of Pillar One has been agreed upon.

The Inclusive Framework also welcomed the significant progress made on the technical design of Pillar Two, which aims to address remaining BEPS issues and ensure that international businesses pay a minimum level of tax. They noted the further work that needs to be done on Pillar Two.

As VAT rate of 7.5% commences

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he implementation of the 7.5 percent Value Added Tax (VAT) rate under the new Finance Act has commenced since February 1, 2020. The VAT increase to 7.5percent is one of the few changes made to the country’s 2019 Finance Act to help the Federal Government raise additional revenues to meet its 2020 budget targets.

The Federal Government’s share of the VAT pool is 15percent, while the balance goes to the 36 states. Currently, some states are in need of the additional revenue to be able to meet the obligations of the minimum wage.

Like other VATable goods and services, the Value Added Tax charged on commissions related to capital market transactions has increased from 5percent to 7.5percent.

This change in VAT charged impacts commissions applicable to the capital market transactions – such as those earned by Dealing Members on the traded value of shares, payable to the Nigerian Stock Exchange, and payable to the Central Securities Clearing Systems Plc. While the upward review of the VAT could help the government reduce deficit spending and fund the new minimum wage, it will result in higher production costs which will

be passed on to consumers.

To reduce the tax burden on vulnerable segments, the VAT exemptions have been expanded to include more items under the basic food items, pharmaceuticals and education categories.

Basic food items generally refer to unprocessed and aqua-based staple foods and include bread, cereals, fruits & vegetables among other items.

In addition locally manufactured sanitary items and services provided by microfinance banks have been included in the exemption list. Tuition paid for nursery, primary and secondary education have also been classified as VAT exempt. Consumers will unfortunately have to pay more in power charges due to higher VAT charges on meter costs and electricity tariffs. Investors in the stock market will also have to bear the increase in transaction costs as VAT charged on commissions applicable to capital market transactions will increase.

Under the current law, companies with a turnover below the N25 million threshold are not liable to file VAT returns. However, this also disqualifies them from reclaiming input VAT incurred on their purchases especially those involved in the supply of products that attract VAT.

How to make the international tax system fairer Barbara Angus

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nder the French presidency of the G7, the theme for the Biarritz Summit in 2019 was combating inequality. In the area of economic policy, which has long been a major focus for the G7, the French presidency has identified as its priority the promotion of more fair and equitable trade, tax and development policies.

Consistent with this prioritisation, an important part of the discussion at the meeting of the G7 finance ministers and central bank governors in June was centered on making the international tax system fairer.

The focus of the finance ministers was the OECD-led initiative launched in 2019 with the aim of achieving consensus on significant alterations to the global framework for taxing international business income. The impetus for the project is the tax challenges created by the growing digitalization of the global economy.

However, the changes contemplated will have implications well beyond technology companies and digital business models, and will affect the broad spectrum of businesses, both large and small, whose economic reach extends across national bor-

ders.

The first element involves revisions to the historical approaches for determining nexus and allocating business income among countries, with a particular focus on enhancing the share of income and corresponding taxing rights assigned to countries where customers or users are located.

The second element involves the establishment of a new system of global minimum tax rules for business income. To avoid creating barriers to the cross-border trade and investment that fuels the global

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economy, these changes must be made without giving rise to double taxation or increased uncertainty.

Three key factors are essential to the success of this initiative: Broad global consensus Both the G7 and the G20 have endorsed the OECD project. Currently, 132 jurisdictions are engaged in the work through the OECD’s Inclusive Framework. It is important that all parties are at the table and all perspectives are considered. Active participation in the dialogue is vital.

Not only must there be full consensus around the globe, but that consensus

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also must be fully informed.

High-level political commitment The stakes are high. Countries must accept changes in their rights to tax business income and in their ability to control the taxation of income earned within their borders.

For every country that will gain additional tax base in the application of the new rules to any given business, there will be at least one country that sees a corresponding reduction in its tax base from that business. Equal commitment is required from both categories of countries. Commitment will require that countries make changes to their domestic tax laws and amend their bilateral tax treaties to incorporate the new rules. For some countries, this will require modifying or eliminating existing measures that are inconsistent with the new rules. And commitment also will require good faith participation in robust new dispute resolution mechanisms.

Sound technical foundation Consensus and commitment must be built on a strong foundation.

The new rules should be principled.

They should be even-handed in their impact across industries and business models. The new rules need to @Businessdayng

be smoothly integrated into the overall global tax framework. Companies need to be able to apply the new rules with confidence, and tax authorities need to be able to administer them effectively. Given the diversity of businesses that operate globally today, it is unlikely that one single formula could deliver appropriate results in all cases.

Agreement on the new rules must be grounded in the technical detail developed by the tax policy experts working together through the OECD’s Inclusive Framework process.

This initiative to change the global tax framework is an ambitious undertaking. Tax policy is a fundamental matter of national sovereignty. At the same time, coordination on the taxation of international business income is central to a global environment that is hospitable to cross-border trade and investment.

Collective action is difficult under any circumstance, and it is especially difficult when it involves fiscal matters. Seeking consensus, fostering high-level political commitment and ensuring a sound technical foundation will require the devotion of time and resources, and all are essential to achieving a lasting global solution.

Angus is EY Global Tax Policy Leader

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US election: Democrats divided on how to take on Trump As primary season begins, the party is split over whether to choose a progressive or a moderate Demetri Sevastopulo in Des Moines, Iowa

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oberta Rosheim has a dilemma. After hearing four Democratic presidential contenders speak in Des Moines, she still cannot decide who to support when Iowa kicks off the 2020 election with its Democratic caucuses on Monday.

As temperatures hovered around -15C in the state capital, she listened as Elizabeth Warren, Joe Biden, Pete Buttigieg and Amy Klobuchar made their case to the Iowa State Education Association, part of their frantic last-minute campaigning in the Midwestern state that decides who emerges with the early momentum.

“I support all of them. I love them so much,” says Ms Rosheim, 70, who is volunteering for Ms Warren but has not committed to supporting her in the caucuses. “I really like her plans, but I also like Amy a lot. And then people tell me, ‘We gotta like Biden because he’s got name recognition and he’ll win’ . . . It’s so hard to decide.”

Ms Rosheim is not alone. Iowans are famous for not making up their minds until the last minute.

A Des Moines Register/CNN poll in early January showed that only 40 per cent had picked their first choice.

As the Democrats prepare for a five-month marathon primary process to decide their candidate, the party is more united than ever on the need to beat Donald Trump.

After winning the 2018 midterms by a margin of 9 percentage points, and with Mr Trump’s poll rating still historically low for a president starting his re-election campaign, many in the party hope they can harness that anti-Trump feeling to beat him despite the strong state of the economy.

But they are fiercely divided about what sort of Democrat is best-suited to take on the president, whether it is a progressive politician who can motivate the party’s base of minorities, younger voters and women, or whether they should choose a more moderate figure who can appeal to working-class whites and suburban Republicans turned off by the president’s bluster.

Audrey Baatz embodies the high level of uncertainty. Speaking at a Buttigieg rally in Emmetsburg, north-west Iowa, the independentleaning woman is mulling over the moderates — Mr Buttigieg, the former mayor of South Bend in Indiana, Mr Biden and Ms Klobuchar, senator from Minnesota.

But she thinks any of the leading contenders could emerge as the winner on Monday.

“The people of Iowa are just so undecided, especially in rural areas,” Ms Baatz says. “Any four or five people could win Iowa. It’s

that close.”

Heidi Heitkamp, a former North Dakota Democratic senator, says voters are struggling because of the crowded field, which still boasts 11 candidates even after 16 have dropped out.

“You go to a Mayor Pete event and you go, ‘Wow I was blown away’, and then you go to Amy’s event and say, ‘Oh man she makes a lot of sense’. There’s so many people . . . active in Iowa that it makes the choice harder.”

But a majority of Iowans agree on one thing. J Ann Selzer, the Des Moines Register/CNN pollster, says 58 per cent think it is “extremely important” to pick someone who can beat Mr Trump, which Ms Heitkamp says is common. “If you ask any Democratic voter in North Dakota, their main goal would be to defeat Donald Trump.”

Judy Lentz, a Democrat at the Emmetsburg event, says she likes Mr Buttigieg but worries about his electability. “It is going to come around to who we think can beat Mr Trump,” she says. At a separate event nearby in Arnolds Park, Carolyn Brown, who is leaning towards Mr Biden, agrees that the only question is: “Who can beat Trump?”

Iowa is notorious for surprises. Jimmy Carter, then a littleknown southern governor, came from nowhere to win the state on his way to the presidency in 1976.

In 2008, Barack Obama came from far behind to beat Hillary Clinton, a result that showed he could win white voters in a rural state. Howard Dean was the frontrunner in 2004 until John Kerry sprinted ahead in the last week, knocking the former Vermont governor into third place. And four years ago, Mr Sanders stunned Mrs Clinton again by coming tantalisingly close to winning.

“Nobody has any idea,” Mr Dean stresses. “I had no idea what was going to happen when I was there.”

On the question of how each contender would fare against Mr Trump, polls show Mr Biden winning by 4 points, ahead of Mr Sanders, Ms Warren and Michael Bloomberg. Mr Buttigieg is the only top Democrat who would lose. But when it comes to Iowa Democrats, polls show they remain at odds over who should be the standard bearer.

After long being the frontrunner in Iowa and New Hampshire, which holds the first primary a week later, Mr Biden was overtaken in Iowa last summer by Ms Warren.

The Massachusetts senator was then eclipsed by Mr Buttigieg, who in turn was passed by Mr Sanders, before Mr Biden returned to the top of the group. Yet in the last week, Mr Sanders has moved ahead, while Ms Klobuchar has entered double-digits for the first time in the 2020 race.

Mr Bloomberg does not register in Iowa because of his decision not to campaign in the state. But he has jumped into fourth place in national polls, propelled by tens of millions of dollars in television ads that he hopes will catapult him into contention when more than a dozen states vote on the delegaterich Super Tuesday on March 3, when 13 states will vote.

The critical distinction is whether the candidates fall into one of two camps — moderate or progressive.

Mr Biden and Ms Klobuchar say the way to beat Mr Trump is to attack from the middle, appealing to Democrats and independents who backed him in 2016 by staking out moderate positions. But the progressives, Ms Warren and Mr Sanders, urge bold ideas, such as a fully nationalised healthcare system. They argue that a lack of radicalism helped create the conditions for Mr Trump to win since they did too little to help struggling Americans.

Speaking in Des Moines before returning to Washington for Mr Trump’s impeachment trial, Ms Warren took aim at the moderates, saying, “Some folks in our party don’t want to admit” that the US is in a “crisis” over everything from the gap between the rich and poor, the soaring cost of healthcare and high levels of student debt.

“If they think that nibbling around the edges of big problems, running some vague campaign is somehow the safe strategy, they’re wrong,” Ms Warren told a packed gymnasium at Weeks Middle School. “If all the best Democrats can offer is business as usual after Donald Trump, Democrats will lose. We win with big ideas.”

While Mr Biden has generally steered clear of attacking his rivals by name, he aired an ad saying

it was “no time to take a risk” on other candidates.

Mr Dean says there are plausible arguments on both sides.

“Biden is saying I’m better because I can appeal across a broader spectrum. Bernie is saying you can’t win unless you motivate the hell out of people, and Elizabeth is saying the same,” he says. “The number one criteria is who can beat Trump and nobody knows.”

Each candidate has strengths.

Mr Biden resonates with white working-class Democrats who backed Mr Trump and AfricanAmericans who remember his time as vice-president to the first black president. Mr Buttigieg, a gay, former mayor and army veteran, is the fresh face, while the folksy Ms Klobuchar touts her results-driven approach in Congress.

Ms Warren and Mr Sanders have strong appeal among younger voters, while the Massachusetts senator is also making a big pitch to women — in a push that helped her win some converts at her Des Moines event. “I came here to Iowa to support Pete Buttigieg, but I came to this town hall and she just spoke to me,” says Hailey McGuire, a high-school student. “She just radiated girl power.”

Yet all the contenders also have significant challenges. With the exception of Mr Biden, most lag far behind with black voters, which raises questions about their ability to connect with a key segment of the Democratic electorate. Mr Biden has struggled at times with fundraising, which could be a problem as expensive TV ads become important in the bigger states. He also fares less well with younger voters than the progressives.

Speaking after a Biden rally at Simpson College, Kathryn Hays, a politics student who plans to support Ms Warren in the caucus, says her generation is gravitating to Mr Sanders and Ms Warren because of their idealism. She says Mr Sanders has been “radical throughout his whole political history”, which her friend Samantha Wuebker explains is “probably why Elizabeth is also doing so well among our generation too”.

Mr Buttigieg is also competing for the same college-educated voters as Ms Warren, but has to overcome concerns about his inexperience. At one event, he also

faced a common question about his “really low” support among black voters. “African American voters who know me best support me,” he said.

Ms Warren also needs to boost her support among black voters, while she and Mr Sanders must show that they can win over enough moderate Democrats to beat Mr Trump in November.

Illustrating that concern, Robert Brammer, a 70-year-old who was attending a Klobuchar event in Des Moines, says he prefers Mr Sanders’ progressive ideas but will campaign for the Minnesota senator because she is more pragmatic.

As the race moves out of the predominantly white Iowa and New Hampshire into the more diverse states, an important question is who can recreate the “Obama coalition” — a grouping of white voters in the north, black voters in the south, Hispanics, millennials and women — that swept Mr Obama to the White House in 2008.

“What it is going to take to beat Trump is to get out our voters,” says Mr Dean. “Our voters are under 35, female and people of colour.

All of those three groups have to be enthralled to a degree with a candidate. The problem is the Democratic candidates all speak to different people, and that is why nobody can decide.”

Kaleb Autman, a 17-year-old high-school student who came to Iowa with Mikva Challenge, a group that helps young people to become engaged in politics, will vote for the first time this year. But he worries that some of the Democrats are too focused on winning over Trump voters and not enough on expanding the party.

“They focus too much on how to get Trump’s people on our wagon . . . rather than focusing on the people who didn’t show up to vote,” he says. “If you want to win this election, you have to go for new voters.”

One of the unusual factors is that three of the top candidates — Mr Sanders, Ms Klobuchar and Ms Warren — have had to stay in Washington for much of the past two weeks because of the impeachment trial, giving an advantage to Mr Biden and Mr Buttigieg. Yet the restraints could help Ms Warren receive a boost over her fellow senators since she has one of the best on-the-ground organisations.

Iowa often has a winnowing effect on the race but the big field — the number of undecided voters, the trial-related restraints on the senators and the fact that the candidate with the most cash, Mr Bloomberg, is ignoring Iowa — means the caucuses may be even more unpredictable than ever. “The old saying is there are three tickets out of Iowa [for the leading candidates],” says Mr Dean. “Clearly that is not true this year.”

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