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Governor Babajide Sanwo-Olu’s promise: “I will rid Apapa of gridlock in the first 60 days of my government.”

World Bank revises Nigeria’s growth down to 2.1% in 2019 HOPE MOSES-ASHIKE

Outstanding issues need to be resolved before listing, say analysts

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NNPC still dithering 3 years after entering pre-listing mode hree years after envisioning to list on the Nigerian Stock Exchange (NSE), state-owned Nigeria National Petroleum Corporation (NNPC) has not made headway

President Muhammadu Buhari (3rd r); his son, Yusuf (m); Abba Kyari (r), Chief of Staff; Tukur Buratai (2nd l), Chief of Army Staff, and other Muslim faithful praying at the Mambila Barracks Eid Praying Ground during the 2019 Eid-El Fitr celebration in Abuja, yesterday. NAN

STEPHEN ONYEKWELU & DIPO OLADEHINDE

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in this direction and the plan to list remains at best a mere wish. The Federal Government had planned to list NNPC on the NSE after concluding reforms in the country’s petroleum sector, according to the draft National Oil Policy submitted to the Federal Executive Council (FEC) in No-

vember 2016. According to the draft oil policy, “The NNPC will be made autonomous from the state, it will relinquish all its policy-making and regulatory activities, and it will be treated on an equal basis with private sector operators for projects.”

The draft policy further stated that the NNPC would cease to exist as a statutory corporation and as a legal entity and would be succeeded by National Oil Company of Nigeria (NOCN). “The NOCN will be incorContinues on page 38

he World Bank on Tuesday revised Nigeria’s real Gross Domestic Product (GDP) down to 2.1 percent in 2019, from its earlier projection of 2.2 percent in January. GDP is the monetary measure of the nation’s overall economic activity. Continues on page 38

Inside Anthony Joshua may lose million-dollar sponsorship deals over P. 39 Ruiz defeat

Wednesday 05 June 2019

BUSINESS DAY

news Opportunity opens for SMEs as OPIC commits $200m to Nigeria

L-R: Victor Afolabi, chief executive officer/founder, Eko Innovation Centre; Kunmi Demuren, co-founder, Venture Garden Group; Babajide Sanwo-Olu, Lagos State governor; Akin Banuso, general manager, Microsoft, and Moruf Oseni, deputy managing director, Wema Bank, at the inauguration of Eko Innovation Centre in Ikoyi, Lagos.

...partners USAID on new $25.6m funding plan

ODINAKA ANUDU, The Hague, Netherlands

he Overseas Private Investment Corporation (OPIC) has committed $200 million to enable Nigerian enterprises to scale and create jobs. David Bohigian, chief executive officer of the United States government’s development finance institution, told BusinessDay at The Hague, Netherlands, that an agreement was signed to the effect with Union Bank of Nigeria with a view to increasing financial access to small businesses, including women-led businesses. “We want to help the entrepreneurial class in Nigeria,” he said at the ongoing Global Entrepreneurship Summit at The Hague on Tuesday. He said OPIC was interested in funding businesses in agriculture, energy, SMEs, housing, among others, adding that the institution worked with the private sector to unlock capital for people across the world. OPIC mobilises private capital to help solve critical development challenges, thereby advancing the foreign policy of the United States and national security objectives, BusinessDay learnt. It has approved $895 million in financing and political risk insurance across seven projects that will advance development in Africa, Asia and Latin America by expanding

access to energy, healthcare, financial services and housing. Bohigian said the institution had $24 billion in investments in 90 countries and would be willing to pump $60 billion to develop businesses. “We are working together to solve world’s largest problems,” he said. Similarly, OPIC and the United States Agency for InternationalDevelopment(USAID), an independent agency primarily responsible for administering civilian foreign aid and developmentassistance,havemadesubstantial commitments to drive women’s economic empowerment in developing markets. On Tuesday, the USAID announced $500,000 in funding and $100,000 in technical assistance to the Women’s World Banking Asset Management (WAM) blendedfinance fund, while the OPIC disclosed its intent to provide $25 million in financing women in Africa, the Middle East and the Indo-Pacific. The WAM fund is a blended-finance vehicle designed to attract private capital in developing markets by offering protection to commercial investors by lowering the risk of loss. The WAM fund is structured to protect investors from downside risks, making investment more attractive and helping to mobilise additional donor investment into the fund.

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Insurers’ claims rise 16.88% to N132.54bn in 2018 BALA AUGIE

nsurers in Africa’s largest economy are spending more on claims to generate each unit of premium income as exposure to the oil and gas sector heightens. Despite growing insured loss from Egina FPSO (oil field) natural catastrophe, the general consensus is that the capital rules by the regulator will enable companies write more risk and meet claims obligation as and when due. Total net claims expenses of 16 insurance companies were up 16.88 percent to N132.54 billion in December 2018, from N113.40 billion a year earlier, according to data gathered by BusinessDay. Average cost of claims, otherwise known as loss ratio, increased to 46.98 percent in December 2018 from 40 percent as at December 2017. This means an insurer spends N0.46 on claims for every N1 generated in revenue. “Major claims within the oil and gas may affect the industry and undermine profitability. The Egina claims are

enormous and any company that writes it will be affected,” said Moronfola Monsuru, actuarial analyst at Wapic Insurance plc. The facility, insured by Leadway Assurance Company Limited as lead insurer and over 10 other co-insurers, was said to have suffered damage in 2018 following a break and falloff of some part of the deepwater platform. Located some 130km off the coast of Nigeria at deepwaters, the Egina oil field is one of Nigeria’s most ambitious ultra-deep offshore projects. Primarily developed locally to accelerate the pace of Nigeria’s industrial fabric and the transfer of technology, the project is expected to produce 200,000 barrels of oil per day, i.e., close to 10 percent of the country’s total oil production. Insurers may jack up premium rates in class of business susceptible to claims like catastrophic events such as floods, albeit obligations to policy holders have reduced

Continues on page 38 www.businessday.ng

Saudi Arabia’s privatisation reforms hold lessons for Nigeria’s FDI pursuit Israel Odubola

oraboutthreedecades Nigeria was among the top three recipients of foreign direct investment (FDI) in Africa, thanks to oil endowment. But the story changed in 2018 when foreign direct investment inflows dipped to a record low of $2.2 billion, and the country lost its status as a choice market for patient money. Africa’s share in world FDI inflowsislessthan1percent,and the continent’s infinitesimal FDI share is largely associated with government’s full or majority ownership of public enterprises. Throughout the 1990s, Nigeria’s foreign inflows doubled that of Saudi Arabia, Asia’s fifth-largest nation by land area. The table turned as foreign inflows to Saudi Arabia outpaced Nigeria’s for 13 straight years to 2018. Saudi Arabia received $183 million FDI inflows in 2000.

Analysis The figure surged to $12.2 billion in 2012 but dropped slightly to $7.4 billion in 2016, compared with Nigeria’s $1.3 billion in 2000, $7.1 billion in 2012 and $4.4 billion in 2016. A few years back, Saudi Arabia disclosed plans to raise $200 billion in the next several years by partly privatising various sectors of its economy including oil and gas, education, aviation, health, and telecommunication, according to Saudi-based Arab News. Saudi Arabia continues to realise massive foreign inflows through its privatisation reform, and this gave impetus to foreign investors to commit their resources in those enterprises. The Asian country converted corporate assets to financial assets by selling majority-owned or whollyowned state enterprises to attract foreign investors, and

this holds a big lesson for Nigeria in its FDI pursuit. Saudi Arabia government plans to sell about 5 percent of its stake in Aramco, its state oil company, through an initial public offer to be listed on the Saudi Stock Exchange. This paid off for the Asian country, as the national oil giant made a record net income of $111 billion in 2018, and paid $58.2 billion in dividends to the Saudi Arabian government. This contrasts with Nigerian National Petroleum Corporation (NNPC) that incurred N548 billion in three years, with the country’s refineries dormant, a case of gross inefficiency. “Privatising state enterprises is an innovative strategy to catch foreign investors. It will help improve efficiency, provide financial relief, boost diversified ownership and increase the availability of funds for private sector,” said Olayinka Olohunlana, a Lagos-based economic analyst.

As part of its privatisation plan in the aviation sector, Saudi Arabian Airline has begun sellingitsmedicalservicestoprivate investors in Jeddah, the country’s port city. Also in the grain industry, plans are underway to sell the milling segment of Saudi Grain Organisation. Similarly, India’s current liberalisation reforms across sectors have positioned the world’s second-most populous country for FDI. India lifted restrictions on some private individual activities in the aviation, communication, defence, health, and retail sectors. This has helped FDI inflow appreciate consistently. FDI inflows to India surged 59 percent to $44.5 billion in 2018, from $28.2 billion in 2013. This is the right time for African nations, particularly Nigeria with a growth figure below population growth, to leverage the benefits associated with privatisationtoattractforeigninvestors and boost the economy.

Off-grid energy firm Azuri Technologies attracts $26m investment to deepen market expansion ISAAC ANYAOGU

zuri Technologies, a provider of pay-asyou-go solar home solutions to off-grid households across Africa, has announced a strategic investment of US$26 million, led by Fortune Global 500 company Marubeni Corporation, with additional participation from existing shareholders, including FTSE 250 company IP Group plc. The company says the strategic investment will accelerate its market growth plans in both East and West Africa and open up new opportunities for the business. Azuri Technologies pro-

vides solar home systems to offgrid consumers in sub-Saharan Africa on a pay-as-you-go basis. These systems enable households without access to the grid to benefit from modern conveniences, from electric light to satellite TV and Internet access via smartphones. Japanese corporation Marubeni has global interests in energy as well as substantial experience in Africa. Azuri says the capital infusion will enable it to accelerate expansion in existing sub-Saharan Africa markets and roll out its solar lighting, TV and additional services into new markets, with a focus on enhancing the lives of millions living without access to the grid.

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“We are delighted today to announce the equity investment by Marubeni Corporation and existing shareholders. The entry of a leading player in the international energy market into this sector demonstrates the increasing maturity of off-grid power and its role in serving the 600 million people in Africa that still lack access to electricity,” said Simon Bransfield-Garth, CEO of Azuri Technologies. Yoshiaki Yokota, chief operating officer, power business division, Marubeni Corporation, said the company believes “Azuri’s unique business model will have a profound impact on the growing off-grid energy market in Africa”. @Businessdayng

“The global energy market is evolving rapidly, with the introduction of new renewable technologies and energy-efficient devices. We are delighted to be a strategic partner of Azuri as a market leader and see their solar home solutions and services as catalysts for change in the Africa energy sector and beyond,” Yokota said. Jamie Vollbracht, partner at IP Group, said, “As an early investor in Azuri, we are pleased with its growth to date, with over 150,000 systems sold, positively impacting off-grid households in Africa. Today, we are delighted to welcome Marubeni to the business to help power the next exciting phase of growth for Azuri.”

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NEWS

New NILDS DG promises radio station OWEDE AGBAJILEKE, Abuja

he new director-general of the National Institute for Legislative and Democratic Studies (NILDS), Abubakar Sulaiman, has promised to establish a radio station for the Institute. This, he said, will help in the broadcast of the lecture series of the Institute by improving on its participation and deliverance. Sulaiman, a professor of Political Science and International Relations and former Minister for National Planning, also promised to ensure more collaboration with existing global institutions and work closely with democratic institutions at the state levels. The new DG stated this in Abuja at a maiden meeting with staff of the Institute. “This administration shall revisit the National and International lecture series of the Institute by improving on its participation and deliverance. ln achieving this, we shall establish but not limited to the following a press centre and radio station. The lCT Unit shall be expanded in this regard,” he said. The DG announced plans to move to the Institute’s permanent site along Airport Road, Abuja, ‘in the quickest possible time’. The former minister also said his administration would institutionalise an academic advisory board comprising of eminent academics. According to Sulaiman, the advisory board will proffer nec-

essary intellectual counsel to the Institute from time to time. He added: “We shall improve on the existing structures in academic content, physical structures and the capacity building of legislators and legislative aides. “The academic component of our mandate will be developed to an enviable world class standard. We will inculcate academic culture and expand/improve on the existing academic programmes such that the quality of our researches will address existing legislative and democratic challenges of our nation. We shall increase the quality of the Institute’s publications and give it a global outreach. In doing all these, we shall not condone unethical academic conduct such as but not limited to plagiarism, laziness/absenteeism, staff acrimony, partisanship and premodial cleavages. “We will expand our directorate, departments and units to accommodate units/departments like Academic Planning, Administration, Maintenance/ Works. It is my belief that this expansion will better our services. We will also restructure the Management of the Institute by creating the Office of a Deputy Director General (DDG).” NILDS is the training and research organ of the National Assembly, involved in capacity building, research, and policy analysis and extension services for the legislature at the Federal, State and local government levels.

PE remains Africa’s best chance of funding economic growth – Alexander Forbes FRANK ELEANYA

sforeigncapitalcontinuestolook in the direction of Africa, experts atAlexanderForbesInvestments have backed private equity (PE) as the best asset class for funding economic growth on the continent. Speaking during a press conference in South Africa, David Moore, head of Alternatives at Alexander Forbes Investments, said it was important for investors to be mindful of the nuances that frame African markets. Investing in Africa requires a lot of patience given well-known challenges such as illiquidity, regulation and

political uncertainty. “We still believe that opportunity exists, with access to some of the fastest growing regions and rapid urbanisation,” Gyongyi King, chief investment officer, said. “This gives rise to untapped investment opportunity, supported by policy reform and political improvements.” He outlined six investment opportunities on the continent that investors could leverage. One of them is the population of people on the continent, estimated at 1.216 billion as of 2016. The working population in Africa is projected to overtake that of China and India by 2034.

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Cross section of muslim faithful praying at Ile Zik Praying Ground, during the 2019 Eid-El Fitr celebration in Lagos, yesterday. Pic by Olawale Amoo

‘Petroleum extraction should develop lives, institutions in Nigeria’ DIPO OLADEHINDE

merican private foundation with the mission of advancing human welfare, Ford Foundation, says the process of extracting crude oil should develop lives and institutions in Nigeria, the 13th biggest oil producing country in the world. “They should at least provide jobs and wealth that will drive economic development in Nigeria to alleviate the suffering of the citizens, especially women and children,” Ford Foundation states in a note titled, ‘Social Protection Policy for Women in Nigeria Extractive Communities.’ For women in particular, the Foundation says extractive companies should be able to provide breaks for an improved life, which should include job prospects, access

to earned incomes, and huge investments in the extractive community. The Foundation explains that extractive resource utilisation has been a key source of economic growth and public revenue for Nigeria, but there has been a severe risk that has also driven exploitation and corruption on a national measure alongside. “Economic empowerment within this macroeconomic process of natural resource management can play a major role in deciding which path Nigeria takes. Extractive reform is a vital opportunity for the government and International donor agencies to set out a roadmap of practical, genuine, equitable and operative measures, focusing resources foremost threat,” it says. It might be assumed that a generous endowment of petro-

We will pursue criminals relentlessly, bring them to justice - Buhari Tony Ailemen, Abuja

resident Muhammadu Buhari on Monday commiserated with victims of terrorism, kidnapping and banditry in Nigeria, with a pledge to ensure that under no circumstances would criminals and mass murderers be allowed to hold the country to ransom. The President, who stated this in his Sallah message to the nation, also assured Nigerians that “the days of criminals are numbered,” adding that “this administration will pursue them relentlessly and bring them to justice.’’ The President, in the Sallah message, expressed satisfaction at the peaceful conduct of the 2019 general elections, despite what he called “doomsday predictions of social disharmony.” In the message, which was signed by Garba Shehu, senior special assistant to the President on Media and Publicity, President Buhari commended INEC for a good job despite the initial difficulties, and praised voters for their tenacity and strong faith in the democratic process. According to Buhari, “Be-

fore the 2019 general elections, prophets of doom didn’t give the country a chance to conduct peaceful elections. Despite these fears, the country overcame its political challenges. “For abandoning their businesses in order to vote, the voters had demonstrated great patriotism in coming out to exercise their civic duty. “Let me use this opportunity once again to reassure all Nigerians that your sacrifices in voting for me won’t be in vain. I will ensure the ordinary voters feel the positive impact of government,” the President said. Turning to the lessons of the Ramadan, he urged Muslims to always put humanity before personal interests, saying, “The Ramadan period is meant to reinforce us spiritually, therefore, we should use religion as an inspiration to do good at all times. “The virtues of the Ramadan should be sustained beyond the celebration. Going back to bad ways after the Ramadan might defeat the essence of the message and lessons the fasting period was supposed to inculcate in the hearts and minds of the Muslim faithful,” he said.

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leum would be an unambiguous blessing for a developing country. The sale of this resource would seem to offer attractive opportunities to generate national income and raise living standards. As an internationally traded commodity that attracts foreign exchange, oil is a quick source of capital accumulation. Huge revenues are realised from the wide differential between unit production costs and economic rents, royalties, petroleum taxes, and oil exports. In practice, it has proven to be extremely difficult to convert natural resource wealth into broad-based improvements in economic performance and human development. In fact, heavy dependence on the export of natural resources has been shown to negatively affect a country’s economic, social and political development.

Nigeria is a major oil-producing country and the importance of this commodity has been highly manifested in the nation’s economy. Starting from the early 70s, the petroleum industry has become the dominant industry in the economy following quickly after the agriculture the dominant industry before the discovery of crude oil. The oil and gas sector can best be described as the bride of the Nigerian economy, thus if it is well nurtured it can be so fruitful that the spin-offs are expected to transform it to the much anticipated, ‘Giant of Africa,’ axiom. Unfortunately, despite this key role the sector is expected to play, it has over the years failed to meet the yearning of many ordinary Nigerians in terms of playing the pivotal role of economic transformation and development of the country.

Lagos Assembly to inaugurate 9th Assembly Friday Iniobong Iwok

peaker of the Lagos State House of Assembly, Mudashiru Obasa, has announced that the inauguration of the ninth Assembly will hold on Friday. Obasa made the announcement shortly before rising after plenary late Monday evening, but however noted that the inauguration was subject to confirmation. According to Obasa, “Let me announce to you that the valedictory service of the House will come up on Thursday and the inauguration is on Friday, subject to confirmation.” Me a nw h i l e, t h e Hou s e passed the Lagos State Building Control Regulation 2018 and the Lagos State Physical Planning Permit Regulations 2018 after debates. Earlier, chairman, House Committee on Physical Planning and Urban Development, Setonji David, presented both reports of the Committee on the two regulations, which were debated and adopted as resolutions of the House. The House also adopted the Harmonised Rules and @Businessdayng

Business Order of South-West Legislature. The House equally debated the Lagos State Audit Amendment Bill, 2018, and also took a report of its Committee of Finance on the Lagos State Public Finance Management Amendment Bill 2016. It also received the report of its Committee on Housing on: A Bill for a Law to Regulate the Relationship of Parties Under Tenancy Agreement and Specify the Procedure for the Recovery of Premises in Lagos State and for Connected Purposes. The House took the report of its joint committees on Education and Judiciary, Human Rights, Public Petitions and LASIEC on the perennial crisis rocking the Lagos State Polytechnic (LASPOTECH), Ikorodu. After stiff debates on the joint committees’ recommendations, the House decided to step down the report for another allotted date for further debate. The lawmakers, however, took turns to express dissatisfaction over the attitude of the union members and the excesses of the management of the institution.

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Finding capital: Some pitfalls and considerations Small Business handbook

Emeka Osuji

here are so many financial packages available to the SMEsin Nigeria but they are mostly still starved of cash. Many people now say that finance is not a problem to SMEs any longer because of the availability of onlending facilities of different quantum, and targeting different segments of SME activity. That conclusion seems to have been drawn mainly among outsiders and people who cannot be described as operators in the SME sector. As far as the operators are concerned, finance remains a major problem. Dealing with the issue of funding in a growing economy, based on rudimentary financial markets, can

be tricky. Moreso when there are institutional and cultural biases that impair financial access. It is even more so for start-ups. To fund a start-up, many factors have to be considered, including source, cost, potential relationships and tenor. The first challenge the authorities had to deal with was transferring the available funds to the operators - getting the moneys earmarked for the SMEs to be disbursed to them. The drawdown rate was so low that the Central Bank began to seek alternative ways to dispense the cash. Several efforts were made to get them to draw down on the funds. It was difficult to say why the funds were not being disbursed to operators. Eventually it became clear that the banks themselves were afraid to lend to the operators. They added their own rigidities in the form of conditions precedent to drawdown and other conditionalities for operators to meet. The banks did not know much about the business of many operators. It is not in their DNA to do small time lending. The operators in the sector were also not well prepared to meet borrowing conditions. The banks were afraid of the risk they had to bear in acting as middlemen between the central Bank and the borrowing SMEs.

The banks have every reason to be afraid. The economic environment is so unstable that it is hard to do any business with high degree of certainty to succeed. The corporate sector has been ravaged by business failures – companies failing and shutting down for all manner of reasons. So, the informal sector, which is home to the SMEs could not be different. The banksmade sure only very serious operators got the facilities with their backing. Obviously, the CBN will not listen to stories about delinquent borrowers when the banks had agreed or covenanted to make good any losses arising from their onlending activity. The situation became so bad that the Central Bank had to think seriously of what to do to get the funds across to the operators. That was the origin of the new national microfinance bank promoted by CBN. Of course, there was considerable opposition to the establishment of the bank. Many thought it was a mere repeat of things that had been done unsuccessfully in the past. They sighted the Peoples Bank, which was floated to canalize financial resources to the informal sector but failed woefully to achieve that objective. The bank was overwhelmed by the level of delinquency it had to live with and

‘

What many of our entrepreneurs should know is that it is better to borrow money from banks than source it from family and friends... once you keep to the terms of a loan, the banks will not interfere with your business. Non-bank lenders will

eventually had to be subsumed in other institutions. In certain cultures, borrowing is even seen as a sign of weakness or something not to be proud of. This is why the concept of Other People’s Money is not yet imbibed among many of our entrepreneurs. They prefer to go it alone with their own funds. The idea of partnership has also not been fully developed. There is always something that goes wrong with our joint businesses. This is an area we need to improve upon. The so called scarcity of capital funds can be drastically reduced if people pull together and bring their funds into the business. What many of our entrepreneurs should know is that it is better to borrow money from banks than source it from family and friends. The reason is that once you keep to the terms of a loan, the banks will not interfere with your business. Non-bank lenders will. They will not ever go away but the banks will, until there is need to look in. Funding strategies is a subject that our entrepreneurs need to spend some time to understand. It will help them a lot. Dr Emeka Osuji is head of the department of Economics at Pan Atlantic University Lagos. eosuji@pau.edu.ng @Emekaosujii

The role of television in educating children: MultiChoice as an enabler Mayowa Owojaiye

or nearly 50 years educational television has charted a course for the cognitive development of young minds. In these years, well-designed television programs have assisted children in learning important academic skills like sound and letter recognition. Television has played a prominent educational role as a result of the way it uses language or a symbol system to convey a more experiential meaning, providing useful educational information to children in ways that differ from other communications media. Despite oppositions to the negative effects of uncontrolled consumption of TV by children, there is growing empirical backing that carefully crafted and targeted children programs can deliver an academic punch. In the best children programs, kids learn oral vocabular y and featured words. They learn about moral dilemmas, humanistic values, maths, diversity, and the complexity of life. They learn worldviews. These programs introduce children to stories, songs and traditions. Carefully planned television programs can open new worlds for kids, taking them on imaginative flights across the globe. These programs teach children about different cultures and expose them to ideas they may never encounter in their immediate environment. Children’s

shows with pro-social themes can influence kids’ behaviour, directing their attention to positive lifestyle choices. A recently released study in the United States, for example, has affirmed the immense impact of kids’ programs like ‘WordWorld’ in the educational development of kids, especially in the area of vocabulary. Experts have also concluded that educational television programs have contributed to reading habits in kids. Another study shows that kids who watch informative and educational shows as pre-schoolers tend to watch more informative and educational shows when they get older, using TV as a complement to school learning. Children who viewed educational content tend to have higher grades, are less hostile and exhibit positive attitude towards their studies when they reach high school. Allowing children to access targeted educational programs exposes them to millions of words, especially children whose parents are unable to speak better than them. Elsewhere, researchers have spent time trying to translate the impact of another popular kiddies show. ‘Between the Lions,’ a 10-year-old kiddies’ programme has been linked to significant gains in children’s understanding of how letters combine to make words. Television also plays an important role in the development of a child’s communication skills. A researcher, Van Evra, who conducted extensive review of major studies about television and child development pointed out that moderate viewing of television programs helps develop

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the communication skills of children, especially those from disadvantaged background. Television also teaches children vital pro-social behaviours. Well-designed programmes for children, like kiddies’ shows on DStv, can stimulate their imagination to the endless opportunities available in life. Television programmes on DStv channels such as PBS Kids, Mindset Learn, Disney Junior, and JimJam can expand a child’s understanding of the world just like good books. These content reflect the complexity of the emotional changes within the age group of these children and teach how they can deal with conflict that they may come up against. Television has taken advantage of the sophisticated technology of this age to develop multiple programs with valuable learning points for children on how to live in a community. For a long time now, DStv has been using its kiddies’ channels to provide engaging and educational content for children. Its array of kids’ channels teaches children various life lessons, ranging from problem solving to empathy. Most recently, the Pay TV provider in a partnership with PBS, another long-time player in the field of educational children content, to boost its offerings for kids. This relationship is huge on many fronts, considering the enormous reputation of PBS and the content they will be offering on the DStv platform. While announcing the partnership between DStv and PBS, Martin Mabutho, the Chief Customer Officer of MultiChoice Nigeria, revealed that this was in

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line with MultiChoice’s commitment to exploring new ways of “expanding our customer offering, adding a children’s channel that is not only entertaining, but also experiential and educational.” PBS KIDS is an avenue for kids to explore new ideas and new worlds. A survey of parents with young kids ages 2-6 revealed that media and technology are an essential part of preparing children to start elementary school. Parents considered PBS, the most reliable and trusted media brand for school readiness. In the area of school behaviour, PBS scored remarkably high, as parents revealed that children exhibited more positive behaviour after engaging with the network. This partnership between DStv and PBS will bring high-quality educational children’s content to DStv and GOtv in all sub-Saharan Africa from May 22. All active DStv subscribers and GOtv Max and Plus customers will be able to enjoy well-known PBS KIDS series like ARTHUR, PINKALICIOUS and PETERRIFIC and WORDWORLD on DStv channel 313 and GOtv channel 65. PINKALICIOUS and PETERRIFIC is based on the beloved book series by Victoria Kann that encourages self-expression in kids and the exploration of the arts, music, dance and visual arts. The show takes children on a creative adventure. With these new shows, parents can rest assured that time spent in front of TV by kids will yield immense value. Mayowa Owojaiye, a Public Relations/Communications professional.

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Character Matters with Daps

Dapo Akande

“

et there be justice or the heavens fall” is a quote often credited to the imposing symbol of the legendary Roman empire, Julius Caesar, though the veracity of this as it’s source remains disputable. For the sake of this discussion however, the source bears little significance. But what is justice, may I ask? There are a plethora of definitions but for simple me, whenever I cast my mind on this concept, these are the words that immediately flood my mind; equity, fairness and each person getting his just deserts. Meaning each getting what is due to him or her. Of course, what’s due to anyone can be good or bad, depending on what their commissions or omissions deserve. The import of this is that justice would not have been served if one gains or loses what one didn’t deserve to gain or lose. Whether it be reward or punishment. Let’s put it another way. Some boys are out drinking at a beer parlour and they get arrested for robbery, just because a robbery took place a little earlier in that vicinity. Next, they find themselves paraded on national television as suspects before conviction or before the trial even commences. This is a total injustice, no

matter how you look at it. I’m very sure if the shoe was on the other foot and any of the arresting officers had found himself in the position of those arrested and paraded, he would feel the same way. Why do we find it difficult to see the injustice in perpetrating or supporting something which we cannot readily agree to be applied to everyone? If it cannot be universalized and accepted to be so, it cannot be just hence it cannot be moral either. Regarding this, Immanuel Kant once said, “I cannot approve of whatever I do as morally right and disapprove same as morally wrong for others”. Like another wise man once said, “the fundamental principle of morality is that we should not make exceptions of ourselves.” To do this is indeed corruptive. Yet again, I align myself to those who say the height of corruption is when an individual makes himself an exception to something he prescribes or subscribes to. “Do unto others as you would like them to do unto you” is what the Bible says and this is universally acceptable and upheld as a sacrosanct principle for any human dominated community to harmoniously exist; so much so that it has for long been termed the Golden Rule. Same goes for any society which harbours any ambition to prosper. Without it, we may as well just wave any such ambition “bye bye”. It’s the very foundation of human dignity, to which we all have a rightful claim. So, if you lose your freedom as punishment for something you didn’t do, it’s goes against the grain of justice. Remember, I earlier said gaining or losing what you don’t deserve to gain or lose. The danger this portends if not curtailed is one of chaos. Why? Because those in position of authority who lack the necessary restraint to wield such power appropriately or

fittingly, if left unchecked will fall victim to absolute power. And we all know what that does to a man. Chaos, because it won’t take long for the ordinary man to lose faith and all respect for those who see their position as licence to oppress rather than to justly uphold the law. It’s a two way thing. I believe we can no longer feign indifference to our plight as Nigerians. Someone once said the Nigerian’s greatest undoing is his seemingly infinite elasticity to suffering. There seems to be some truth in this because filled with what I can only describe as a macabre sense of pride, we grin through our teeth while patting ourselves on the back for our famed resilience. No electricity, we adapt. Crater infested roads, we adapt. Government services are deliberately made inaccessible at the official price so we pay through our nose, we adapt. Those who have stolen from us before return to power in one form or the other to do same, a second and a third time, and yet we just adapt to the ever dwindling resources. Inadvertently, we continue to provide the perfect enabling environment for oppression, poor governance, impunity and lack of accountability to the people to reign. And the suffering goes on. Alexander Hamilton, founder of America’s financial system, the Federalist Party and the New York Post amongst several other accomplishments, was one of the nation’s founding fathers. In a study he conducted, he discovered that, “an economy with a very efficient judicial system, clear and enforceable property rights, and an effective and uncorrupt government will produce higher total wealth”. What this means is simply that a nation’s economic planners can

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A few fundamental choices set the pattern for a society. Among the most basic of these choices is the commitment to be governed by the rule of law

only manage to produce incomplete and unreliable plans and projections at best, if they fail to factor in the integral nature of the rule of law in a nation’s drive for prosperity. Perhaps even more instructive is Ronald Cass’s position which says: “A few fundamental choices set the pattern for a society. Among the most basic of these choices is the commitment to be governed by the rule of law. The depth and sustainability of that commitment affect societal prospects for wealth, for freedom and for many other goods.” So if the foundation set is not right, what will ensue from that moment on can only follow the established corrupted pattern. We shouldn’t continue to deceive ourselves either as a government or as a people, no matter how magnificent our plans may sound; if the rule of law and justice is not established as an unnegotiable recurring decimal, we’re going nowhere. It’s not a curse, it’s just a principle. If God was to go ahead anyway to bless a nation which wilfully turns it’s back on His laid down principle, would it not give us reason to question His claim to be just? I believe it would. The rule of law discriminately applied will not only produce injustice but also a pervasive sense of injustice amongst the people, which is never good. In closing, Lee Kuan Yew once said, “the key to peace and harmony in society is a sense of fair play”. Without justice, peace in any society will remain a pipedream. 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

A critical look at work experience

Jude Adigwe

arack Obama in his speech in 2007 titled Our Moment is Now mentioned in passing that experience could be right or wrong. In the Human Resource Management profession (HRM), most times, we focus on possession of years of work experience and pay little or no attention to the rightness or wrongness of the experience in question. Could this be as a result of the assumption that there is nothing like right or wrong experience? Could it be as a result of the inability to perform a surgery on work experience to thoroughly examine it for what it’s worth? Length of work experience should never be mistaken for depth and breadth. With the exception of those whose tenure on jobs are hinged on their expertise, some remain on jobs owing to their tremendous capacity for subservience and/or their relationships with those in the corridors of power (connections)…in my consultancy engagements (brief albeit), I have realized that some with years of experience have no felt presence in their organizations, they are simply “obedient”. The implied meaning of this is that if we

focus solely on length of experience without unpacking and thoroughly examining the richness (breadth, depth et cetera) of the experience in question, we run the risk of employing people with little or no strategic value to our companies. Beyond depth and breadth, we must also pay attention to relevance -- how relevant is the experience in question to the vacant job and the organizational objectives as defined by the management of the organization? Though we are embedded in a society that assumes that wisdom and insight comes with the passage of time, we must rise above the faulty assumption that only the ‘old’ possess insight and wisdom. This is important because a failure to acknowledge exceptional abilities of some individuals is to lose touch with reality. I believe we can recall vividly how some individuals in primary and secondary schools defied the norm by getting double or triple promotions because of their abilities which surpassed those of their peers. Another case in point is those who complete doctoral programmes in 3 or 4 years while majority take a few more years. My point is that there will always be exceptions hence we should not take a rigid stance when it comes to individual abilities, in this case as calibrated by years of work experience. Some will achieve in 3 or 4 years what others will achieve in 8 years career-wise. Work experience is not like a university course curriculum that is programmed and must be covered in a defined number of years and not less than -- this should not be confused with the doctoral example above. I am inclined to think that the rigid think-

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ing around work experience could also be as a result of lack of understanding of the concept of individual differences (perhaps a dismissal or denial of this existential reality). Maybe it is lack of a full grasp of the concept considering the fact that many still carry out measurements of individual abilities during selection exercises. If you believe that everyone must possess 5 years experience then there is no need to test them since you are convinced that 5 years experience is all that it takes to perform well on the job. To be rigid about years of experience and still go on to test individual abilities is to contradict oneself as it pertains the concept of individual differences, the focal point of differential psychology. At the heart of measurement lies individual differences -- you cannot measure if you do not believe in individual differences. It is paramount at this point to touch briefly on the rationales behind the strong grip on the work experience philosophy. This push for work experience is motivated by two major reasons: the intention to attract deep insight and solid skill set that will be brought to bear on day-to-day organizational affairs, and the intention to avoid training. The reason why a particular organization promotes strongly the philosophy of work experience is anybody’s guess. To promote work experience philosophy because of the need to attract unique insights and skill set is laudable, the only issue is how to engage the process. Questions worth asking should revolve around decision on the right number of years of work experience -- who decides that? Who is/are used as the benchmark for setting such requirements? Are they the best? Why are their experiences

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used for setting the standard? Isn’t it possible that there are people who are better than these individuals (that is they achieved more in less time)? My article titled On work experience:Addressing faulty recruitment assumptions and practices published in 2018 in BusinessDay newspaperdealt with some of these questions. I would be remiss if I fail to add that the idea of promoting the work experience philosophy in order to avoid investment in training is to have a limited understanding of the HRM system. In the aforementioned article, I opined that I would place open-mindedness, ability to learn fast and a good work ethic above work experience. This opinion of mine is based on the consideration that work experience is not foolproof, in other words it is suspect as mentioned above. Another novel thinking worth embracing is focusing on the ability of individuals to convert or transfer and adapt knowledge and skills across occupations -work (sometimes, not all the time) might differ in components but share same principles and require same skill mix. Critiques of long held practices in my opinion is one of the surefire ways of making improvements in different spheres of life. Despite the tendency for individuals and organizations to hold on to their views owing to thebackfire effect, I consider it important to share my views and engage your thoughts. Rethink. Adigwe is a certified Human Resource Management (HRM) professional and an Industrial-Organizational Psychologist. He offers consultancy services on OB and HRM issues. More details can be found on his website: www.adigwejude.com

Wednesday 05 June 2019

BUSINESS DAY

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

New vistas for Nigeria-India relations in Narendra Modi’s renewed mandate

ne week after a historic election that gave prime minister Narendra Modi of the Bharatiya Janata Party a second five-year term, India inaugurated the Prime Minister and appointed a new cabinet with portfolios and policy priorities. Election results became available May 23, and by May 29 the prime minister was in his new term and appointed ministers May 30. India is set to run its new race, with many lessons for Nigeria from the similarities and differences in its conduct and approach. More importantly, the new cabinet offers an opportunity for deepening growing trade and bilateral relations between the two countries. Modi won re-election as did our Muhammadu Buhari. He had strong support from the Hindu ethnic group that constitutes 80% of the Indian population of 1.3b. He also won beyond his primary area. His victory was an improvement on the figures of 2014 and positioned him as one of the legendary leaders of his country in the mould of Jawaharlal Nehru and Indira Gandhi. His party won 350 seats in the 545-seat Lower

House of Parliament. He does not need any coalition to govern. The Indian elections are a study in organisation, planning and meaningful execution. 600m people voted, with 67.1% turnout. There were no allegations of rigging, vote buying or intimidation. More significantly, they deployed electronic voting machines to poll and capture the results in quick time. The electorate endorsed Modi’s policies and actions on the environment, the economy, sanitation and foreign policy. The Indian leader has led an effort to tackle sanitation blight by building one million public toilets across India, ensured that government money reaches its recipients without bribes taking part of it and frontally tackled corruption, not merely sloganizing about it. He simplified taxation, overhauled the bankruptcy system and ran a favourable foreign policy that prioritised India against China and Pakistan while building stronger ties with the United States. And Nigeria. Under Narendra Modi, India has strengthened its bilateral and trade relations with Nigeria. Diplomatic and bilateral ties have lasted since 1958. India is today Nigeria’s largest trading partner with a trade value of US$11.7b in 2018. More

significantly, India is the largest buyer of Nigerian crude oil as oil imports accounted for US$9.29b of the US$9.5b exports to that country. We are the fourth largest supplier of crude oil to India and the second largest supplier of liquefied natural gas. On its part, India exports a broad range of goods and services to Nigeria. They include pharmaceuticals, automobiles and components, machinery and mechanical appliances and articles of iron and steel. Others include chemical products, paper and paperboard, and apparel and clothing. They also bring in plastics, electrical machinery and equipment and a growing list of services in software, human capital and power equipment. Records say there are 50, 000 Nigerians in India and 30, 000 Indians in Nigeria. Given the ubiquity of Indians here, the figure of their presence deserves a second look. India’s 135 companies and counting in Nigeria have invested about US$10b, making them a significant force. Not surprisingly, many Indian firms are household names here. They include Bharti Airtel, Tata, Bajaj Auto, Birla Group, NIIT and Kirloskar. Others are Ranbaxy Phar-

maceuticals, Aptech, Dabur, Godrej, Mahindra and Ashok Leyland. Immediate past Minister for Trade OkeychukwuEnalamah called for more investment by Indian firms to deepen the relationship beyond trade. Indian firms should invest in the project Made in Nigeria for Export. While we support this call, Nigeria needs to do more in its business and bilateral relations with India. Nigeria should seek expansion or broadening of the products in the basket of goods it sends to India. Oil currently accounts for more than 90%. It is not a balanced scorecard, given in particular the volatility of the oil markets and the search by various countries, notably India, for alternatives to crude oil. Key areas of cooperation and trade should include agriculture, alternative power as well as making existing systems work and better treatment of Nigerians in India. Nigeria should embrace Modi and his India even closer, make the trade flows reflect a greater diversity of goods and services from our country and press for more investments from the world’s fastest growing economy. More and better for Nigeria and India in the years ahead.

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Wednesday 05 June 2019

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PMB’s cabinet: Again, we are waiting! Franklin Ngwu

hile we await PMB to announce the cabinet for his second term, it is important to note that the South African Rand appreciated by about 0.5% upon the announcement of South African gender-balanced cabinet by the President, Cyril Ramaphosa 96 hours after his inauguration. As a week is about to elapse, we earnestly pray that we will not wait for months as we did in 2015 before the cabinet and other key members of the government are appointed. Given the litany of our development quagmires, these key appointments should have been made and announced about two weeks ago. With an imminent recession and negative outcomes in almost all other development indicators, our position as the poverty capital will worsen with our uncontrolled and exponential population growth. In the face of such a dire situation, what is expected of PMB in his second term is a pro-active and effective approach in the governance of our beloved country. With only two quarters remaining in 2019 and a shrinking GDP as revealed in the first quarter, there is no better time to demonstrate urgency and commitment to addressing our development crises than now: a quick and good start of the second term. As the type of cabinet PMB assembles

will determine the seriousness of the government and the extent to which our development quagmires will be addressed, it is important to plead that they should not resemble the last cabinet that even as at last month when the cabinet was dissolved, many of the ministers remained unknown, unheard of and largely ineffective. As many of the past appointees are just realizing and lamenting that four years is short, it is imperative that those to be appointed this time are determined and focused Nigerians that appreciate the enormity of our development problems and the rapid passage of time. I earnestly pray that God will guide PMB as he strives to complete this most important task that has immense consequences for living and unborn Nigerians. As it is PMB’s last opportunity to have a remarkable legacy, I implore him to have a deep retrospection on our rapidly escalating failures and crisis. The challenges are numerous and complex and as such, it has to be a first-class competent and committed team, painstakingly, strategically and most importantly, patriotically selected. As PMB pencils down the names as he is currently doing, I pray that utmost in his mind will be about the state and future of Nigeria. May God help him to appreciate that he is assembling a team that will understand and deeply appreciate what it means to be poor and rated as the poverty capital of the world with over 90 million brethren classified as extremely poor. A team that will be driven by their deep dissatisfaction that our beloved country is the 6th most miserable country in the world and ranked together with Pakistan, Afghanistan, Libya, Somalia, Syria and Yemen as the most insecure countries in the world. A team that will be pained that over 150 Nigerians are now violently killed almost every week with pervasive signs of geno-

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A team that will love Nigeria and work to create jobs for over 22 million compatriots through effective formulation and implementation of robust fiscal, monetary and supply-side policies

cide in many towns and villages of our much-loved country. A team that will love Nigeria and work to create jobs for over 22 million compatriots through effective formulation and implementation of robust fiscal, monetary and supply-side policies. A team that will be truthful to themselves, to Nigeria and to the President. A team that will disagree and agree among themselves and with the President and determined to stand for the truth and good of the country, including the overwhelming need to restructure Nigeria. A team that will truly serve with all their heart, mind and body for the betterment and growth of the country. Mr President, we need a good team please! A team that will meticulously reread and review all or parts of our 1999 constitution, particularly Parts 1 and 2 of the Second Schedule. And driven by their abiding love for a better Nigeria, they will patriotically tell and committedly help Mr. President and Nigerians to move certain items from the exclusive list to the concurrent list. Going through the 68 items on the exclusive list, a key question that should be asked is if Nigeria can be better with a reduced number of items on the list. As our development challenges have worsened over these years that we have had the 68 items on the exclusive list, I think that it is time for us to try a different option of moving some of the items from that list to the concurrent list to see if better development outcomes can be achieved. With a focus on the ones that might have the highest possible positive development impacts, a suggestion will be to move items such as railway, trunk A roads and Power to the concurrent list. This will allow our railways, trunk A roads, power generation, transmission and distribution to be developed by the states either individually or jointly. Imagine a situa-

tion where Lagos can now do a proper rail line from Epe to Victoria Island or where Lagos, Ogun, Ondo and Edo can collaborate to do a rail line from Lagos to Benin. Imagine a situation where there will be no Trunk A roads and every state will be held responsible for the repair, maintenance and management of all roads within their jurisdictions. During a strategy retreat that I facilitated for one of the Electricity Distribution companies (Discos), it was clear and unanimously agreed that a key cause of our electricity problem is the control of some significant components by the federal government. This results in a significant loss of generated power during transmission from the Gencos to the centralized transmission company of Nigeria on the one hand, and from the transmission company to the Discos on the other hand. Imagine the situation where states can individually or jointly generate, transmit and distribute electricity without recourse to the unnecessary, unhelpful and complex bureaucracies of the federal government. The benefits of having a good team is immeasurable. While Niccolo Machiavelli (The Prince) cautions that the effectiveness of a government can be deduced from the kind of individuals appointed into the cabinet, Proverbs 29: 2 states that “When the righteous are in authority, the people rejoice but when the wicked rules, the people groan”. Mr President, while I wish you the best, be assured of our prayers that God of creation will in his infinite mercy and wisdom guide you right and help you to know the truth to build a nation where prosperity, peace and justice shall reign and reign and reign!

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

Can a weak leader build strong institutions?

Tunji Olaopa

t is reasonable to predict that this question will appear a straightforward one with an equally straightforward answer. In a sense, this would be a fair assumption. But social scientific questions are rarely amenable to simple assumptions and layman presumptions. They are edged round about by theoretical postulations and methodological analysis. The discourse around structure and agency, and their relationship, is one that has generated serious intellectual and theoretical industry that swings between seeing structure as the fundamental variable in achieving a functional society, and contending that agency is the definitive factor in building institutions for a stable society. In recent times, and because of the resurgence of the new institutionalism as a theory of looking at human society, there has been a decided preference for institution as the best place to look for stability. This preference is further grounded by fundamental works like Why Nations Fail, the 2012 bestseller by Daron Acemoglu and James Robinson. The authors’ argument is that the difference between poverty and prosperity of nations depends on the institutions that guide the decision-making process of those states. Former president of the United States, Barack Obama, when he made

a visit to Ghana, keyed into this institutional argument by remarking emphatically that Africa needs only strong institutions and not strong men. The discourse on the Nigerian state, from Chinua Achebe town to many contemporary social scientists have however been couched in terms of leadership problem. According to Achebe, the trouble with Nigeria is not the land or the people or the weather, but simply the problem of leadership. Within this framework of agency, it is the leadership of a country that is saddled with the responsibility of creatively putting together the institutional elements of structures, systems and operational parameters as well as codes of ethics and the rule of law that could facilitate national development. This is the reason why, and maybe rightly so, Nigerians have had no patience whatsoever with any Nigerian leader since the commencement of the democratic experiment in 1999. Democratic governance is supposed to be a political invention that promotes human welfare and empowers our yearnings to live fulfilling lives in the political community. From Obasanjo to Yar’Adua, and from Jonathan to Buhari, Nigerians have asked serious questions about why governance has not transformed their lots and empowered them to live the good life worthy of human dignity. However, democratic governance is about functional institutions that are capable of transforming government policies into infrastructural development and sustainable economic growth that the citizens require to make sense of their existence. But, functional institutions not democratic mechanism that materialize out of thin air and serve human political needs and aspirations. On the contrary, they are deliberately cultivated to stand against human whims and

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caprices that, most often than not, undermine institutional dynamics in order to achieve human preferences that antagonize the common good of the citizenry. Dictatorial structures, for example, answer to the aspirations and imperatives of one man or a group of men. Left to their devices, and if the English philosopher, David Hume, is to be believed, humans are always motivated by selfish impulses that will tweak the institutions just to satisfy one ego above every other one. The egoistic impulse cannot be divorced from political consideration. Indeed, the whole essence of political or bureaucratic corruption is its elevation of personal interests over the interests of the collective. When one politicians or government official embezzle billions of naira or workers’ pension, such officials would definitely not want the institution to function in ways that will curtail such selfish impulses. We are therefore left with the question: how do we build such a strong institutional framework(s) that have curtailing capacities? This question leads us unerringly back to the question of leadership. If solid institutions do not just emerge of their own accord, then they must be subjected to the human creative political maneuver. We confront here a political difficulty. All across the social science literature, there is a loud reaction against military intervention in politics and any form of totalitarian, authoritarian or dictatorial forms of government. Even the ancient master, Aristotle, did not consider dictatorship to be the best form of government. The sin of authoritarianism is often taken to be the suppression of the democratic impulse. Democracy is taken to be the best form of government because it allows for the flourishing of the human will. It is also fundamental because it provides a level playing ground where different endowments are equalized and opportunities are democratized.

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A dictatorship imposes the political will of one human on the rest of the population. History and political scientists revile Adolf Hitler, Benito Mussolini, Samuel Doe, Robert Mugabe, Sanni Abacha, and the rest of the authoritarian rulers for undermining the will of the people. Joseph Stalin did not only stand against the will of Russians, he ensured that six million of his people were killed to service his own ego. From Lenin to Stalin, it is difficult to demonstrate how these dictators were able to install an institutional framework that would empower the people. But the opposite is also the case: weak leaders do not also have the political will and the ideological strength to facilitate the emergence of strong institutions that will limit human arbitrariness. If a dictator’s capacity to build institutional structures is often undermine by lack of regard for the citizens, and a weak leader fails to acquire the ideological will to build strong institutions, and democracy is often a camouflage for human selfish impulses, how then do we build strong institutions outside of an authoritarian government? This is a tough question to raise and answer. Outside of the many answers that have been proposed, I will propose that the answer lies in between authoritarianism and popular participation. What I mean to say is that strong institution is not a function of a strong man alone. It also requires the involvement of strong popular assent to what the strong man intends. Otherwise, what we are left with is just pure authoritarianism of the Stalin and Mugabe type. Note: The rest of this article continues in the online edition of Business Day @https://businessday.ng Prof. Tunji Olaopa, retired Federal Permanent Secretary & Professor of Public Administration. tolaopa2003@gmail.com, tolaopa@isgpp.com.ng

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Wednesday 05 June 2019

BUSINESS DAY

cityfile Ikorodu community protest installation of high tension cable IFEOMA OKEKE

Last minute rush at Oshodi market in preparation for Eid al-Fitr 2019 celebration in Lagos on Monday.

Pic by David Apara

Police nab 277 suspected robbers, kidnappers in Oyo REMI FEYISIPO, Ibadan

he p olice in Oyo say they ar rested 277 suspected armed robbers and kidnappers between January and June 1. Shina Olukolu, the Commissioner of Police (CP) in charge of the state, who briefed newsmen on Monday, in Ibadan, said 16 vehicles and 65 motorcycles were recovered

from the suspects during the period under review. According to Olukolu, 37 assorted weapons and 3,585 live cartridges were also seized from the suspects while 170 criminal were charged to court. However, the cases are still pending in court, as the command has been unable to secure conviction on any of the 170 cases. The CP paraded some of the suspects among whom

was a fake military officer, alleged to have conspired with others now at large, on January 9, armed with guns, jack knives and dangerous weapons to dispossess one Adebisi Ahmed of his Bajaj motorcycle in Saki. Four members of an armed robbery gang, cum kidnappers, who abducted one Babatunde Adetutu from his residence at Elesun Adeosun village near Ogbomosho, on April 24,

were arrested. The victim was later rescued at Odo-Oba area of Ogbomosho in the state. Two robbery suspects, who hijacked and diverted a Mack truck loaded with brand new electronics products along IbadanIjebu Ode road on June 1, were also paraded. The police chief assured the residents of Oyo of security of lives during and after the Eid el Fitri celebration.

No place for criminal herdsmen in Lagos, Ogun – AIG

he Assistant Inspector General (AIG), in charge of zone 2 command, comprising Lagos and Ogun, Shehu Lawal, says the zone is battleready against criminally minded herdsmen in the two states. Lawal disclosed while parading some suspected herdsmen, kidnappers and armed robbers at the zone-2 headquarters, Onikan Lagos. About 26 sus-

pects were arrested, with 50 different arms and 250 ammunition recovered in the two states. Lawal said there was no place for criminal herdsmen in the states, as “Operation Puff Adder” would check all forms of criminality in the zone. “I am sending a warning to herdsmen who want to commit crime in Lagos and Ogun States to relocate. We are battle prepared for them. We have employed www.businessday.ng

the public to give us information in time. The AIG said that a visible patrol had been deployed on the Lagos/ Shagamu interchange, especially on the long bridge between MFM Church Camp and Karrat Bridge notorious for armed robbery. Lawal also assured residents of the two states of adequate security during the Sallah holidays. On the trend of nega-

tive stories on the social media, the AIG appealed to the public to verify their facts before posting such stories. He stressed that false information could cause bigger crisis if not properly managed. He also advised the media to help in correcting false information on the social media, urging them to verify stories from the appropriate authority before going to the press.

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esidents of Gladys Kalesanwo Street at Agura-/Gberigbe, Ikorodu, area of Lagos have protested over the planned installation of high tension cables on the street by the Ewu-Agbo Community Development Association within the same area. The residents also accused officials of Ikeja Distribution Company (IKDC) of conniving with the Ewu-Agbo Community in attempting to install the illegal cables by allegedly issuing the Ewu-Agbo Community approval without following the due process. A petition obtained by our correspondent with the caption: ‘Save Our Soul on Dangerous Erection of High Tension Cables,’ dated May 27, 2019 and signed by Fatai Adebayo and Michael Obiorah, Chairman and General Secretary respectively, accused the Ewu-Agbo Community of attempting to put their lives in danger by insisting on mounting the high tension cables on the street despite its violation of law. The residents insisted that the approval was illegal as the street the officials of the distribution company in conjunction with the Ewu-Agbo Community wanted to mount the high tension cables is less than 30ft wide, as against 60ft approved by the law. The petitioners decried that structures were already built on the available lands before the coming on of the high tension cables and advised

the Ewu-Agbo community to make use of alternative roads, which they claimed were wide enough to accommodate such a project. According to the petitioners, the alternative roads are IyanaOdo Road, Igbota Road, CPI Road and several other options. The petition reads in part: “But, investigation by the members of the street indicated that the purported approval could not have been given for such a gigantic project based on the diameter of the street in question and inherent danger to the inhabitant of the street. According to the residents, the Ewu-Agbo Community claimed to have duly received an approval for the project, but wondered why the approval was still hidden away from them despite their request to get a copy of the approval. “Our street is less than 30 feet wide with structures already built on the land, which makes it inappropriate and dangerous for such a project. Besides, we the members of the community are not comfortable with the erection of any high tension cables on our street by the Ewu-Agbo residents, especially as it has to do with the safety of lives the residents of our community. “Apart from the fact that the poles are obstructing vehicular movement on the road, we all know how injuries high tension cables can be to the residents, especially when houses were already fully built in such areas before the coming on of the proposed project.”

Group decries rising insecurity in Abia GODFREY OFURUM, Aba

oalition of SouthEast Youth Leaders (CoSEYL), a sociopolitical organisation, has decried high rate of insecurity in Abia State, especially Aba, the state’s commercial hub. President general of the group, Goodluck Ibem, who raised the alarm, condemned the recent killing of a tricycle operator in Aba, by suspected kidnappers and called on security agencies to increase surveillance on the streets of Aba, to sanitise the area. The group argued that criminals harassed and shot indiscriminately without any form of challenge from the police or other security agencies, whose primary duties were to protect lives and properties of citizens. According to the group, incessant attacks on innocent citizens by hoodlums, has shown that the police and other security agencies were not doing enough, to secure @Businessdayng

the area. “We call on the commissioner of police, the army, and other security agencies in Abia state to rise up to their duties of protecting lives and properties. Security of life and property is the first responsibility of any government to its citizens. The government cannot run away from its primary responsibility. They should provide everything needed by our security agencies to do their job effectively.” An eye witness account has it that the victim was shot by his assailants for refusing to stop and allow them kidnap a certain lady on board his tricycle, who was the prime target of the attack. Apparently angered by the tricycle operator’s refusal to stop at their command, which led to the lady’s escape, they shot him in the head. The incident, which happened at about 7.00 am at Park Road, by George Street, in the heart of Aba metropolis, left many residents scampering for safety at the sound of the gun.

Wednesday 05 June 2019

BUSINESS DAY

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Wednesday 05 June 2019

BUSINESS DAY

BANKING

In Association with

7.8m banks customers borrowed N45.6trln in 3 years Stories by HOPE MOSES-ASHIKE

he Nigerian Deposit Money Banks (DMBs) totalling 7.8 million borrowed the sum of N45.6 trillion in three years. A breakdown of the latest report of the National Bureau of Statistics (NBS) revealed that 3.03 million customers borrowed N13.4 trillion in 2015, 2.5 million borrowed N16.3 trillion in 2016 while 2.3 million customers borrowed a total of N15.9 trillion from banks in 2017. Further breakdown of the NBS report shows that 8,186 customers of the banks borrowed above N1 billion, which amounted to N35.7 trillion in three years. The report shows that in 2015, 2.9 million bank customers borrowed up to N1.0 million totalling N252 billion, 2.3 million borrowed N226 billion in 2016 while 2.2 million customers also borrowed the same amount, which stood at N122 billion in 2017. During the period under review, a total of 12,356 customers borrowed above N50 million to N100 million, which amounted to N854.94 billion in three years. In terms of credit to private sector, the total value of credit allocated by the banks stood at N15.21trillion as at first quarter (Q1) of 2019.

This represents 0.52 percent compared with N15.13 trillion in the fourth quarter (Q4) of 2018. The selected banking sector data for Q1 2019 by the NBS show that Oil and Gas and manufacturing sectors got credit allocation of N3.49 trillion and N2.23 trillion to record the highest credit allocation as at the period under review. “The issue of enhancing credits to the private sector businesses is critical to our recovery process and effective collaboration of all stakeholders is, therefore, needed in this direction”,

Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) said in his personal statement in March Monetary Policy Committee (MPC) meeting. According to him, both the broad and narrow money aggregates, M2 and M1 performed below their benchmark in February 2019. M2 contracted by 1.98 per cent over the preceding December 2018, about 14.47 percentage points below the 2019 growth bench mark of 12.99 per cent.

Similarly, M1 declined by 6.16 per cent compared with the provisional growth bench mark of 17.08 per cent. Credit to private sector grew by 6.41 per cent in February, compared to the provisional bench mark of 9.41 per cent. Similarly, aggregate credit to the domestic economy grew by 10.64 per cent as against its provisional bench mark of 11.82 per cent. “It is my candid opinion that the current performance of monetary aggregates have been unsatisfactory and that, in particular, we need to channel more credits to private sector businesses in order to provide the much needed impetus to growth”, Emefiele added. Following banks’ continued patronage to the Federal Government securities, the MPC has frowned at that and has directed the management of the CBN to put in place policies or regulations that would restrict the banks from unlimited access to government securities. The CBN says it will address banks’ appetite for investing ‘only’ in FG securities. While details are not yet finalised, policies are under consideration that may limit the quantum of investment in government securities. It is hoped that through ‘further discussions’ banks might increase their appetite for consumer credit extension, Razia Khan, managing director, Chief Economist, Africa and Middle East Global Research, Standard Chartered Bank, London, said.

Heritage Bank empowers ‘HB Lab’ tech start-ups’ winners with $40,000 grants

s part of its efforts to support Nigeria’s aspiration and roadmap to become a leading Information Communication Technology (ICT) Hub in Africa, Heritage Bank Plc, Nigeria’s most innovative banking service provider has doled out $40, 000 grants to winners of the maiden edition of HB Innovative Lab. The maiden edition of Heritage Bank Innovation Lab Accelerator programme (HB-LAB) tagged, ‘Demo Day,’ is a 12-week programme, expected to provide technology start-ups seeking additional investments to progress and accelerate market introduction/adoption of their solutions with co-working and internet resources, guidance and mentorship with finch start-ups founder and seed funding. However, the bank’s commitment is to create enabling environment, resources and support required to innovate and accelerate impactful solutions with the potential to radically improve financial Inclusion/Intermediation, health, automobile, agriculture, and other related problems affecting critical sectors of the economy.

At the grand finale of the programme, of the seven groups, Trep Labs-Real Drip emerged the winner with the most compelling solution won the N10 million, whilst Ladipomarket.com.ng won the N5million prize, as the 1st runner-up, which is equivalent of $40, 000. Speaking at the event, Ifie Sekibo, managingbdirector/CEO of the bank, said the bank knew it was in the best interest of the country to pay attention to the development to the technology and industrial sector. According to him, “the future of the country lies in the hands of its youth. Our youths are talented, and Heritage Bank is committed to harnessing this talent to grow the economy.” He noted that although in Nigeria, technology start-ups still account for a relatively small share of all businesses, they have an outsised impact on economic growth, because they provide betterpaying, longer-lasting jobs than other start-ups, and they contribute more to innovation, productivity, and competitiveness. “Newly starting up a business is part of the most difficult stage of the business, you would

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need to source for capital and manpower. Considering the fact that you are a new business those items are not so easy and cheap for you to acquire,” he explained. “However, the presentations we have seen today shows how gifted Nigeria is with human resources, our youths have demonstrated that the country still has a beautiful future. “I am impressed with the start-ups. After six weeks of drilling and grooming they have been able to develop up to this point; everyone is a winner tonight as far as I am concerned. “Based on the success of this maiden edition we are going to continue this initiative, we would go back to our laboratory and create something bigger for the upcoming editions.” When asked what he felt about Artificial Intelligence being used in banks, he explained: “Technology has been playing a key role towards enhancing the banking sector. Thus, we saw the need to create an Artificial Intelligence product called Octopus, which has been piloted and its second edition is almost ready for launching. On his part, the co-founder TREP Labs, Alay-

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ande Abiola, said, “Emerging as first place and winning the ten million naira is going to help the growth of our clinical solutions. “Now we would be able to complete our clinical trials, optimise our products’ development and also provide enough healthcare solutions that are battling with the country.” Earlier, Ikenna Imo, the bank’s divisional head innovation and partnership, explained: “Twelve weeks ago we welcomed seven talented and diverse start-ups. At that time our intentions were clear that we were ready to create distinctive propositions that solves issues facing the country currently. “Today, I have no doubts that the start-ups we have assembled after a selective and competitive process have what it takes to accomplish that. Over the last 12 weeks, the HB Lab has hosted a number of business leaders and founders within in the tech ecosystem who shared the experiences and evolutions of their respective businesses with the aim to inspire and impart business knowledge in the young minds looking to start out their own tech-enabled businesses.

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Wednesday 05 June 2019

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

NSE major sectors underperform benchmark index as bears hold sway

Pg. 18

MARKET

8 firms hit fresh 1-year low as NSE begins June on bearish note OLUWASEGUN OLAKOYENIKAN

hare prices of eight listed companies were down to their weakest levels in one year as bears continued to dominate the Nigeria’s stock market, extending to the first trading session in June 2019. Despite gains recorded by MTN Nigeria, Dangote Cement and Nestle Nigeria, the three most-capitalised firms on the Nigerian Stock Exchange (NSE), the benchmark index of the NSE, the All-Share Index (ASI), failed to reverse its two-day losing streak on Monday as the index fell 0.45 percent to close at 30,928.29 points. This bearish performance was partly driven by Consolidated Hallmark Insurance, Dangote Sugar, GlaxoSmithKline, Julius Berger, Mutual Benefits Assurance, NASCON Allied Industries, Oando, and Seplat Petroleum Development Company which closed lower at their 1-year lows. Consolidated Hallmark Insurance fell N8.7 percent, its biggest daily loss in two months, to settle at 21 kobo. The insurer’s after-tax profit slumped in the first three months of 2019 by 5.12 percent to N198.92 million compared with N209.65 million recorded in the same period a year earlier. Dangote Sugar recorded a

marginal decline of 0.83 percent to reach N12 a share at the close of business on the NSE. Checks by BusinessDay on the financials of the largest sugar refining company in sub-Saharan Africa revealed that the company grew its net profit by 32.7 percent to N7 billion in the first quarter of this year from N5.3 billion recorded a year ago. GlaxoSmithKline led the losers’ chart on Monday with its 10 percent drop in value to N7.65 per share. Findings revealed that

the company’s net income fell 60.3 percent to N102 million as at three-month ended March 2019. Similarly, the bears did not spare the shares of Julius Berger as they shed 9.84 percent to close at N19.70. The construction giant could only declare N486 million as profit after tax in Q1 2019, this represents a decline of 67.4 percent when compared with N1.49 billion achieved in the corresponding period of 2018. Mutual Benefits Assurance

lost 9.09 percent to 20 kobo. The insurance company has neither released its 2018 audited financial statements as the time of writing this report nor its unaudited reports for the first quarter of this year. NASCON Allied Industries extended its negative trend to the new week having dropped 9.23 percent to N14.75 per share. It was observed that the company’s aftertax profit stood at N695 million in Q1 2019 as against N1.06 billion

gained a year ago. Oando was down 9.52 percent to N3.80 per share. The fall in the share price of the Oil & Gas company followed an investigative report by the Securities and Exchange Commission (SEC) over what it described as serious infractions. According to the capital market regulator, the wrongdoings committed by Oando comprise false disclosures, market abuses, misstatements in financial statements, internal control failures, and corporate governance lapses stemming from poor board oversight, irregular approval of directors’ remuneration, unjustified disbursements to directors and management of the company, related party transactions not conducted at arm’s length, amongst others. Oando grew its profit to N5.06 billion in the three months ended 2019 from a loss of N3.94 billion in the same period last year. Seplat Petroleum Development Company lost N49.90 on every unit of its shares of Monday, bringing the share price of the independent oil and gas exploration and production company to N500, its lowest level in one year. Seplat increased its net income in the first three months of this year by N3.74 billion to N10 billion, this implies the company only recorded N6.29 billion as profit in the same period of 2018.

Insurance

African Alliance incurs N2.7bn loss in 2018 on lower premium ISRAEL ODUBOLA

agos-based life insurer, African Alliance Plc, ended 2018 financial year in red territory, having incurred N2.7 billion losses caused by dwindled premium income and elevated underwriting expenses. The insurer incurred N6.2 billon losses in the preceding year, however comparing this figure with 2018’s N2.7 billion losses, revealed 129 percent deceleration in net losses. Gross premium income, which is the sum of gross premium written and unearned premium, dipped 9.2 percent to N6.9 billion despite unearned premium rose from N39.8 million deficit in 2017 to N62.6 million surplus in the review year. Analysis of the insurer’s gross premium income based on policy type showed 36 percent and 8 percent uptick in individual life and Esusu to N3.8 billion and N1.3 billion respectively, while group life, annuity and Takaful tanked 59 percent, 46 percent and 29 percent to N915 million, N544 million and N240 million respectively. Net underwriting loss of African Alliance decelerated sig-

nificantly by 64 percent to N2.6 billion in 2018 triggered by decline in insurance claims incurred and loss expenses adjusted, N204 million claims recovered and N1.15 billion gains realized from longterm insurance contracts. The life insurer’s investment income up 53 basis points from N3.22 billion in the preceding year to N3.24 billion in the review year. Investment income grew across all securities including bonds (4%), planned asset (14%), statutory deposit (2%) and loans and receivable. However, dividend income and income from cash and bank balances contracted 9 percent and 13 percent respectively to N12.7 million and N553.6 million. African Alliance saw its total assets depreciating by N2.4 billion to N41.3 billion in the review year, driven by massive contraction in cash & cash equivalents and loans & receivables. Three months back, the insurer rebranded its corporate identity to align with its new business strategy, drive efficiency, widen presence and deepen market penetration. The insurer’s new brand identity consists blue and grew colours,

with the former indicating loyalty, strength, wisdom, trust, technology and stability, and the latter stands for friendship, maturity, reliability, sophistication, security and imagination. African Alliance did not declare dividends to shareholders in 2018,

making it six straight years of nondividend payment. Shares of the insurer tumbled to 20 kobo after the Nigerian Stock Exchange (NSE) removed the par value price floor of 50 kobo in January 2018. The stock has remained dormant at 20 kobo per

share for over 12 months. African Alliance’s core business model is life insurance. The insurer owns full stake in Axiom Air Limited and Frenchies Food, Nigeria, and 96 percent shareholding in Ghana Life Insurance Company Limited.

L-R: Damilola Hassan, head, wealth management, Meristem Wealth Management Limited; Olusegun Olusanya, director, Meristem Securities Limited; Wole Abegunde, GMD, Meristem Securities Limited; Olaitan Onalaja, director, Meristem Securities Limited; Sulaiman Adedokun, DGMD, Meristem Securities Limited;Mubo Olasoko, MD, Meristem Registrars and Probate Services Limited, and Omosolape Akinpelu, head brand management, Meristem Securities Limited, at the maiden edition of Meristem Green Fest ceremony in Lagos. Pic by Pius Okeosisi

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

Wednesday 05 June 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

MARKET

NSE major sectors underperform benchmark index as bears hold sway SEGUN ADAMS

he equity market has swung high and low year-long in search of sustainable drivers of growth for Nigerian listed companies. However, the prospects of the market as it approaches the end of the first half of 2019 remains bleak with all sectors currently underperforming the broad market on a year-to-date (YTD) basis. Analysis of the performance of five sectors of the Lagos bourse show insurance sector to be the best performing sector with a YTD return of -6.86 percent – which is four times worse than the performance of the All-Share Index which stood at -1.59 percent as of Monday. The industrial goods sector opened for the year at 1,237.88 points, but the sector has so far lost 8.56 percent to settle at 1,131.94 points on Monday. Following closely, the banking

sector shed 9.65 percent after opening at 3,98.94 points for the year. On the other hand, the consumer goods sector plunged 16.07 percent since the beginning of the year to 628.48 points, while the oil & gas sector has shed 18.11 percent YTD to 1131.94 points. This placed the sector as the worst performing sector as at the close of trading on Monday. The Nigerian Stock Exchange (NSE) lost 0.45 percent Monday as YTD was only 0.01 percentage points shy of a 2 percent year’s loss. The equity market has closed in the red for three trading days straight since President Muhammadu Buhari took his oath of office for his second term on Wednesday, May 29. As a result, the bearish streak extended on Monday to the longest since MTN Nigeria listed by introduction on May 16 and supported the performance of the market for about six trading days, cutting the market YTD return from a double digits loss

to positive digits. In spite of the downward trend in the market, the woes of investors may not be blamed on the absence of an inaugural speech by President Buhari. “Tagging the whole downturn to Buhari not giving a speech will be over-flogging the situation however his failure to do so is bad for investment flow,” Yinka Ademuwagun, equity analyst at Lagos-based United Capitals explained to BusinessDay, adding that Oando’s fallout with the Securities and Exchange Commission (SEC) intensified anxiety to the market. Beyond the need for a sense of policy direction and the shaping of Buhari’s cabinet for the second term, rising trade tension between the United State of America and China raises fresh concerns for emerging markets. The outflow of fund from emerging markets threatens to pare gains realized the in the equity and bond markets with inflows to emerging markets plunging 115 percent in May.

L-R: Shadare Kayode James, tutor general/permanent secretary, Education District 2 Maryland, represented by director, administration and HR; Kudi Badmus, executive director finance/CEO, Eterna plc; Giwa Fasasi Oyebola, principal of Comprehensive High School Alapere Ketu, and Bunmi Agagu, company secretary/legal adviser, Eterna Plc, at the Comprehensive Senior High School Alapere Ketu Library commissioning by the Eterna plc team recently in Lagos.

CSR

FCMB rewards customers in first draws of season 6 ‘Millionaire Promo’ MICHAEL ANI

he first draws of season 6 of the First City Monument Bank (FCMB) savings reward scheme tagged ‘’Millionaire Promo’’, took place nationwide on May 23, 2019. At the end of the draws, another set of four customers of the Bank each won N1 million. Moreover, hundreds of other customers smiled home with various exciting prizes, ranging from LED televisions, power generating sets, decoders, tablets, smartphones, among others. Th e w i n n e r s e m e rg e d through a random selection of qualified customers across the four regions and 19 zones that make up the Bank’s footprint in Nigeria. In attendance were officials of the National Lottery Regulatory Commission, Consumer Protection Council, community leaders, thousands of customers of the financial institution and other dignitaries.

The winners are Olabisi Omotayo (Lagos region), Mustapha Egba (Abuja & North region), Helen Okon (Southeast & South-south region) and Sholanke Olalekan (South-west region). One of the winners of N1million, Helen Okon, commended FCMB for its commitment to the success of its customers through the ‘’Millionaire Promo’’ and other reward as well as empowerment initiatives. According to her, “I am very surprised to win N1million in the Promo; it is unbelievable. I thank FCMB, I am very proud to be a customer of the Bank and very grateful. This prize is very special to me. Surely it is going to change so many things for me. I don’t regret being a customer. I appreciate the Bank’s quality of service, FCMB is the best.” Speaking on the ‘’FCMB Millionaire Promo’’, and the draws, the Executive Director, Retail Banking of the Bank, Olu Akanmu, said, we are delighted

to produce another set of millionaires and winners of other prizes in the first draws of the promo as thousands of Nigerians have so far benefitted from this life-changing initiative since it commenced in 2013. According to Akanmu, “the bank will continue to reward and enhance the experience of our customers through this promo and other offerings, aimed at further empowering and adding value to them in line with our core values. We are also committed to distinguish our offerings in the retail banking space by delivering exceptional products and services that would ultimately ensure the growth and achievement of the personal and business aspirations of our customers. All our customers need to do to win in the millionaire promo is to keep on saving with FCMB.” The season 6 of the promo will produce another set of 16 millionaires. Thousands of other lucky customers will be rewarded with various exciting prizes.

L-R: Hannah Oladipupo, pupil of Randle Avenue Nursery/Primary School (Surulere); Ononogbu Ifeyinwa, school manager, Randle Avenue Nursery/Primary School (Surulere); Graeme McLuggage, head of procurement, Nigerian Breweries Plc; Amarachi Mbagwu, sustainability/regulatory relations support manager, Nigerian Breweries Plc; Grace Udensi, public affairs manager (Lagos/HQ), Nigerian Breweries Plc, and Funmilola Oreagba, category buyer-commerce, Nigerian Breweries Plc, at the Tree Planting Exercise marking the Heineken Sustainability Day in Lagos recently.

L-R: Omotayo Olaobaju, junior brand manager, Three Crowns Milk; Olayemi Juliana, a consumer, and Omolara Banjoko, marketing manager, Three Crowns Milk, during the Three Crowns World Milk Day Activation in Mokola, Ibadan.

CSR

StarTimes ends Easter promotion, promises more soon TEMITAYO AYETOTO

tarTimes has ended its 2019 Easter promotion which lasted for more than a month, rewarding subscribers across the country with a bouquet upgrade. Announcing the end of the campaign, Kunmi Balogun, the public relations manager, in a statement, said the company was impressed with the positive

response it got from subscribers who participated in the promotion. He noted that subscribers who took advantage of the promotion appreciated the initiative which gave a higher bouquet once payment was made for two months on their existing bouquet. “We are all about giving at StarTimes. We give way more for a lot less. Our subscribers www.businessday.ng

can testify to the fact the all our promotions are beneficial to them. In the coming days, we will launch another promotion which will see more value given to our subscribers.” StarTimes is a digital TV operator around Africa, serving nearly 20 million users through Digital Terrestrial Television (DTT), Direct-to-Home (DTH) and online streaming platforms with 480 authorized channels.

L-R: Fatoye Seyi, assistant legal adviser, Bet9ja; Adewale Akande, senior legal adviser; Kikky Boboye, head of human resources and organisational development; and Osobajo Olufemi, senior marketing manager, at the inauguration of ‘’MORE THAN A BET’’ CAMPAIGN in Lagos.

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Wednesday 05 June 2019

BUSINESS DAY

FINANCIAL INCLUSION

& INNOVATION

Will it take CBN 1 year to issue PSB license? Stories by Endurance Okafor

t is over seven months now since the Central Bank of Nigeria (CBN) released an exposure draft in October 2018 in which it proposed Payment Service Banks (PSB) aimed at deepening financial inclusion in a Nigeria, a country that has one of the highest exclusion rate in Africa. At least 30 business names have since applied for registration as payment service banks with the expected functions to: maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittance (including crossborder personal remittance) services through various channels within Nigeria; issue debit and pre-paid cards; and operate electronic purse. In less than five months, the PSB licensing period will be one year and the regulator of the financial institution is yet to give an official statement on the current state of the registration process. A call to the technical department of CBN’s Financial Inclusion Secretarial and the licensing unit confirmed to BusinessDay that as at Monday, no PSB

license has been issued to any of the applicants. “The head of licensing department is on leave but to the best of my knowledge no company has been given the PSB license,” the official from the central bank said on the condition of anonymity. The apex bank has a target to ensure that 80 percent of the country’s adult population are financially included into the financial cycle by the year 2020. Nigeria currently has 36.8 percent of its adult population excluded from the financial cycle, this translates to a population of 36.6 million adult Nigerians who at the moment are not included in the financial net.

This leaves the apex bank with an exclusion gap of 16.8 percent, estimated to be bridged in less than two years for it to meet its 20 percent exclusion target. Checks by BusinessDay revealed that the Telco-led model in driving financial inclusion in African countries reported tremendous progress owing to the already existing large customer base of the Telcos. Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more higher population, remains at 1 percent owing to its bankled model. Ghana’s decision to have a Telco-led model resulted

in a 73 percent increase in registered mobile money customers in just one year, according to World bank data, and has helped lift financial inclusion rates in Ghana to 58 percent in 2017 from 41 percent in 2014. This was not different for Ivory Coast who has experienced a mobile money revolution. As a result, there are now more adults with mobile money accounts of 24.3 percent than with bank accounts of 15 percent. Nigeria has a bank-led financial inclusion model, industry sources say is one of the reasons for the lag in the country’s inclusion rate. The proposed PSB by the apex bank was therefore a welcome development considering it will avail

other businesses, especially the Telcos, the opportunity to partake in providing payment services. The international Monetary Fund (IMF) applauded the CBN in April for its plans to plan to give Telcos and other businesses mobile money operators’ licenses. “The roll-out of Payment Service Banks guidelines that allows licensing of telco subsidiaries is welcome and should be implemented,” IMF said. The Washington-based organisation said in its recently published Article IV Consultation that the CBN should leverage the potential for mobile payments to include a wider range of the population into the financial sector. IMF also mentioned that reforms to increase the use of mobile payments system could substitute for a potentially more difficult build-up in traditional financial infrastructure and therefore help accelerate the provision of financial access to a wider part of the population. This is important because according to IMF “closing gaps in financial development and inclusion in Nigeria could yield additional real per capita GDP growth of more than 0.8 percentage points per year.” The Gross Domestic Product (GDP) figures by the state-funded NBS, for

the year 2018 suggest that Nigeria had a negative real economic growth considering the annual growth rate at 1.9 percent is less that the population growth rate of about 3 percent. This means there was no growth on per capital income basis, and the country’s annual GDP growth rate has remained below its annual population growth rate for more than 3 years, NBS data analysed by BusinessDay show. IMF therefore cited the range of further reforms that could help leverage the potential of the mobile payment system in Nigeria to include a wider range of the population into the financial sector. Some of the reforms as suggested by IMF include the need for routine cash payments to be digitised, particularly from and to the government. Enforcing consumer protection, such as by safeguarding client funds, mistaken and unauthorised payments, by requiring fee disclosure, and ensuring data protection and privacy, will be also important, the Fund said in its Article IV report. The international organisation also suggested that that Nigeria’s apex bank should consider reviewing, revisiting, and enforcing tiered knowyour-customer (KYC) regulations

savings culture and drive financial inclusion across the country. He noted that the initiative would be sustained by the bank in the future in line with the CBN financial inclusion mandate. Olufemi Odumuboni, the bank’s Head, Youth/ Women Banking, said “the promo dynamics were centred at making people to engage in financial discipline.” Odumuboni said winners were selected based on certain principles that made them eligible to qualify for the draw. He explained that apart from the N2.7 million set aside for the yearly schol-

arships, the bank had splashed about N900, 000 on customers that emerged winners at the various monthly draws for data purchase for their mobile phones. According to FBN Head, Retail Business & Community Banking, Abiodun Famuyiwa, the bank embarked on the initiative due to its belief in nation building. “We started this last year and the reason why First Bank is driving this promo is because of our belief in nation’s building. We cannot build a nation without the population, youths consists of over 50 per cent of the population.”

First Bank deepen financial inclusion with XploreFirst

ith the aim of contributing it quota to including the unbanked Nigerians into the financial cycle, First Bank of Nigeria recently launched a new scheme, XploreFirst, a promotional campaign aimed at rewarding its youthful customers, in line with its financial inclusion and educational development drive. This is in line with the plans by the commercial bank to contribute to the 80 percent inclusion target by the Central Bank of Nigeria (CBN). Chuma Ezirim, First Bank Group Executive, eBusiness & Retail Products,

said the six-month promo, which kicked off on October 1, 2018 and ends in May, was a First Bank savings account variant designed specifically for students between 18 and 29 years. He said a minimum of N1000 was required to open the account and account holders were required to maintain a minimum balance of N200. To participate in the promo, Ezirim said XploreFirst customers were encouraged to save or maintain a minimum amount of N10, 000 in their accounts during the promo period to be eligible for the scholarship raffle draw, and that incre-

mental deposits of N10,000 in the account entitled the account holder to multiple tickets for the raffle draw. To this end, a total of 198 winners emerged from the promo with 18 account holders (three from each of the six geopolitical zones) rewarded with scholarships of N150, 000 at the final raffle draw totalling N2.7 million. The 18 account holders who won the N2.7 million scholarships were Chukwuebuka Ezugba, Oluwatunmise Olorunfemi and Michael Offiong for Lagos zone. North-Central: Patrick Oginni, Aliyu Muhammad, Confidence Umeh; North-

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East West: Razaq Ibrahim, Habiba Ibrahim, Abdullahi Mannir; South-East: Victoria Umo, Armstrong Akoma and Deborah Fubara. South-South winners were Woyingi Kunoun, Shulammite Onyigabor, Stephen Okolo; South-West: Adenike Adekale, Dorcas Agbakwuru and Oghogho Onoigboria. Also, the bank rewarded 180 account holders with N5, 000 (N900, 000) airtime as consolation prizes, five from each of the six geopolitical zones. Ezirim said the initiative was targeted at the youth, especially those in tertiary institutions and the informal sector to enhance

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Wednesday 05 June 2019

BUSINESS DAY

Wednesday 05 June 2019

BUSINESS DAY

INTERVIEW

Buhari must put Nigeria and Nigerians first in 2nd term – Agbakoba OLISA AGBAKOBA, a human rights activist, maritime lawyer and former president of Nigerian Bar Association (NBA), in this exclusive interview with ZEBULON AGOMUO set some agenda for President Muhammadu Buhari as he takes the oath of office for a second term in office. He urges the President to dismantle the constitution; look out for competent ministers, embark on policies that would jump-start the economy, among other issues. Excerpts:

t’s been 20 years since Nigeria returned to the civil rule. Would you say the country is on the right path, democratically speaking? No. Nigeria is not on the right path at all; politically, democratically, economically; culturally, value-wise everything, unfortunately. I think part of the problem was how the Fourth Republic was restructured. I don’t want to go into too much history right back to 1950s and all that, but just looking at the transition process. And the part of the challenge for those of us in the human rights movement at the time was that we lost strategic vision of actually engaging the military into a conclusive democratic experiment. Everyone was all too excited that the military was leaving, everybody said; that’s great! We allowed them to dictate Fourth Republic in creating the constitution; because at that time we should have said as a condition for Fourth Republic, we have to have a national conference. We didn’t. So, we had General Abdulsalami write Decree Number 24 which gave birth to the Fourth Republic. And that Decree is still with us today. You can see that the constitutional construct of the Fourth Republic is constitutionally unsound and that is the problem that we face and we have not been able to come off it. We have had several attempts to open that discussion. Obasanjo tried it, Jonathan tried it without success. There is this belief that Nigeria appears to be going down and not keeping pace with the level of developments achieved by governments in the past, even in the military era. For instance, there are no new refineries, no new institutions of the type that were built in the military era. What today’s governments are doing is privatization- selling off those things put in place years back. How does this bother your? If the design of the product is wrong, unless you correct the design, it is not going to be right. So, let’s start by saying the design of the Fourth Republic was wrong. It’s a ‘chop chop’ Fourth Republic. It’s about sharing;

it hasn’t changed. There is no productive element to drive the Fourth Republic. Look at what is going on now at the 9th National Assembly. It is about sharing; who is going to be the president of the Senate or speaker, House of Representatives? It is not about what type of ideas are we bringing on the table? When you have a country that does not promote innovation, job creation or that does not promote anything; then they will be interested in selling everything. So, what this country does is just to ensure that on a day to day basis, it can take care of itself. There’s a very big disconnect between our rulers and the ruled. It is quite a wide gulf that sometimes I ask myself, do they even know what the people are going through? When I see the Inspector-General of Police on TV very smartly dressed; does he know how tattered and ragged an ordinary constable is on the street? He pretends to be their boss. Now, what’s going to make this tattered and haggard-looking constable to take pride in his job when he has no uniform? Because it is that ‘es spirit de corps’ that is generated by the rules of engagement of where you work that gives you the swagger. So, everything in Nigeria, unfortunately, has been designed not to succeed. And until we return to the discussion about how we propose to organise ourselves; am afraid, we are going nowhere. You took part before the last election trying to see that a new Nigeria emerged by pioneering the ‘Third Force’- The Nigerian Intervention Movement (NIM), but it didn’t work. What really went wrong? What went wrong was that we underestimated the capacity of those who are already entrenched; the ones that Professor Richard Joseph described as prebendal politicians– that is, ‘chop, chop’ politicians. We underestimated the degree to which they were prepared to defend their position, either as governor or senator or whatever. We thought we had reached the minds of Nigerians. In fact, at a point I was excited that we have about 7 million, but as the election date began to draw closer and closer; I didn’t see anything; and I began to get concerned about how is it such a thing could happen? I said, am tired of social media conversation;

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it is good to burst out into the street because social media is not going to vote, so, we failed woefully to convert the social media energy into action. The political parties were able to do it easily because they had the money, to the extent that the Vice President was in the market. How can I compete with that? I can’t? So, that just told me that we have a very big challenge. Some critics believe that the civil society group seems to have lost its voice. Looking at the roles some of you played which resulted in the exit of the military in Nigeria; can you say the group is still alive to its mission and vision, particularly given the body language of its members in the last election? The same question you asked me why the NIM did not succeed; is the same challenges that face the civil society. Back then, when we engaged the military; it was us versus them. Right now, it is not civil society versus politicians; it is civil society from South West; Civil Society from the North West; Civil Society from South East. So, Civil Society is no longer that cohesive, integrated, ideologicallydriven body that it used to be. It has completely changed. Anyone who thinks that the Civil Society today is driven by the sort of spirit that drove us in our time is mistaking. The civil society has become, to a large extent, corrupted by these prebendal politicians. So, what it does seem is that we’ve

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got to find a very clever way to skate around the problem. Because with this problem that stares us in the face of the military-created Fourth Republic; in fact, the military-donated constitution; unless that is taken away, we are going nowhere. We will just be having a circle of elections every four years and nothing more and we will just keep changing but no real change. It is a real problem. How can we now get this Nigerian experiment to take hold of its responsibilities? That’s the problem. You have always gone to court to seek one redress or the other. The other time you went to court over the alleged marginalisation of South East. This time around, you have also filed a suit challenging release of allocation to unconstitutionally constituted local governments. But in all of this, it appears going to court does not bother the government. They do not listen to or obey court judgments. So, what is really driving you? Well, I just want the record to show that for instance, on a particular day in May of 2019, somebody said this is not correct. I do not expect the government of the day to obey it. The government of the day is a military-induced government, masquerading as a democratic government. So, when they don’t obey rules; when they don’t obey judgments; I am not surprised. I don’t do it because I expect them to do anything about it; I do it so that when the history is told, they will say, ‘O, there was a guy who said no; and he kept filing cases’. Even though those cases are not enforced, maybe, one day, somebody will say, ‘let’s look back

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at all those suits and let’s see how we can make use of them’. So, I am not filing them because I tend to see a result; no; I don’t expect results from government that is essentially military. The Federal Government says the inauguration is going to be low-key on May 29 but that there would be an elaborate celebration on June 12 in line with the recognition of June 12 as Democracy Day. Now, the question is, if government has said Abiola indeed won the June 12, 1993 presidential election; why is it that government has not taken steps to gazette it. Why is it that there are no plans to accord Abiola all the rights and privileges of an elected president; posthumously. Or do you read some element of hypocrisy in all of this? I quite agree with you. When the award was first made, I think June last year; and I was asked the question; I said I was not going to throw away the baby with the bath water. I saluted and applauded government for indeed recognising MKO Abiola and by recognising June 12. But I thought there were two important things to happen. One; yes, June 12 was Abiola’s day, but it ought to be personal – MKO Abiola day; not June 12 day. If he is the symbol of it; then it is to his remembrance that day is dedicated. So, I would like the circle to be complete by naming it MKO Abiola Day. I would also like as you said, legislated action, so that he takes his position as Nigerian President. That is very important. Otherwise, it will look as if it’s got a political purpose. Those two things ought to happen. How worried are you over the security situation in the country at the moment? But you see, you said how worried am I over the security situation in the country? But I just told you that

the military bequeathed to us a non-existent nation where everything is about what I can get. So, if I am in office at whatever level– local government state or federal; it is not about what I can put in. So, nobody is interested about the security situation. Those whose responsibility is to quell it are not interested. They pay lip service. You see them on TV talking; they give lip service. It is not just this administration. It goes back to the Obasanjo administration. Because if Obasanjo had nipped Sharia in the bud when it started; things would not have been the way they are now. I led a team of human rights lawyers to go and challenge it in Gusau, Zamfara; and he said ‘no, no, no, anyone who wanted to do anything can do it’. That was the beginning. If he had nipped it in the bud, it wouldn’t have grown. He didn’t see it; and he didn’t care. So, that small, little drop of water has become a mighty ocean; and it is going to consume us because we are so disunited. If you don’t have a central purpose, you can’t fight anything. Nigeria is a very fragile country, held together by force of arms. Things are so bad in Nigeria today that if President Buhari were to bring 100 million passports and said, ‘Ah, who wants to be a Nigerian?’; nobody is going to come. If President Donald Trump were to bring 100 million passports and said ‘who wants to be an American?’ One billion people would come. There is no country here. I don’t know why it is not realised. We don’t have a country. The blowout in the north east which has been going on; which we thought was going to stop, has just suddenly spread. It is now in the north west; north central. North central is not too far from Lagos and before you know it, it spreads everywhere because Nigeria is in law grade civil war. And when you see all these guys in Abuja completely unconcerned; that will tell you that they are not addressing the problem. So, the spate of insecurity will continue to grow. The Unity Schools’ entrance examination result was released recently, and it showed what some critics have described as marked injustice. While the cut of marks of pupils from the south is so high, that of those from the north was abysmally low. How in your opinion does this help to build unity in Nigeria and how do we begin to address this inequality? By throwing away the constitution that we have. That is the starting point, and by allowing the freedom to do what we want at the base. It is called the principle of subsidiarity. So, education, health, all these things should be at the base. Why must there be one national standard in terms of education for primary schools. If in Zamfara, for instance, the standards are low, then let them set their own exams. Fine. But those who have different standards, should set their own exams to reflect their standards. Once you do that, there is no problem. But it is a problem, if there is one standard and someone scores low and is given admission into school while another who scored higher is refused admission. And that was the basis of the case I filed whether it is not discriminatory to take someone from Yobe whose cut off point is very low to the exclusion of someone from Anambra whose cut of point is high. It is this constitutional design that is at our throats. We have to find a way to resolve it.

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What areas do you think President Buhari should give priority in his second term? I want him to dismantle the constitution; let him not call another constitutional conference, but let him just review the Obasanjo files, the Jonathan files. Let him just set up a seven-man committee that can feel the pulse of Nigerians and give them the constitution that would work for them. And I think this is not difficult. I was at the national conference in 2014, everybody agrees that this strong centre thing should give way for stronger participation at regional level and state level; that was the bone of contention. Some said the 36 states should form the federating units, others felt the six zones should form the federating units. But everybody body was clear that the central power with the Federal Government should dissolve either to the states or regions. So, if all that is done, I don’t see why it should take, if the President wants to put all his energy into this, three months, to resolve the constitutional crisis in Nigeria. But pending that, the President would need to work on the economy. I think it is important that the President should try and initiate policies that would develop the Nigerian economy; because for now, Nigeria is a dumping ground. This is where I agreed with Donald Trump, even though he does it bombastically, in his policy of making America great again; he thinks about putting America first. We have to put Nigeria first; we can’t have people coming here taking our businesses, they go away and leave us with nothing. That is why I was happy that the government finally cajoled MTN to list at the stock exchange so that the money is here. Otherwise, MTN only have air; that is what they were selling; they don’t have building, or asset, and they can go on airplane and leave. They don’t have phones, just selling air. How can you have a company like MTN doing that? And then you look at the airline business, the same thing is happening; they made billions of profit last year, but nothing for Nigeria. Even British Airways does not have any office in Nigeria. Now, if you want to buy ticket, it is in India and then it goes on and on. So, I would hope that President Buhari should review our trade policy. Our trade policy is too liberal; we need import substitution policy so that we can stop importing and grow our industry. So, when we grow our industry, you are creating jobs; that is the magic President Trump has used in America, he has a strong economy, he has got the lowest unemployment rate among the black, white workers. If he goes to the election next year, it will be hard to defeat him. That is what the President Buhari should focus on; how can we put Nigerians first, so that all these small businesses can grow? There is no way the Nigerian economy can grow when interest rate is as high as 30 percent. The government and the Central Bank must sit down and agree that interest rate must be pushed down to single digit, which is the only way businesses can grow, if you take a loan you can pay it back. I refer this as quan-

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titative easing; you have to ease Nigerians of the burden, give them some relief, and you can’t talk of increasing taxation at this time. That is quantitative easing; so that if you are a vulcanizer, you can have the money to do business and then infrastructure, and then manage borrowing and create a national guarantee agency. The best possible crop of ministers, not from political leaning, should go in and manage the affairs of state. He needs highly competent ministers. A minister of finance that understands fiscal policy; he needs a minister of investment that understands how investment flows; a strong Attorney-General who fully understands the principle of law and order, and development. And then he needs to have strong security policy with strong men who are professionally qualified to run those offices. So, in other words, he needs to put the best guys so that we can see the change. It is doable. At that point, Nigerians would not care whether a President is appointed from the North; why they care now is because they are feeling the pain. And I think the Nigerian president can make Nigerians feel happy.

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Wednesday 05 June 2019

BUSINESS DAY

AGRIBUSINESS

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How low investment in seeds hampers Nigeria’s food security Josephine Okojie

ccess to adequate, secured and timely supply of quality seeds that can improve far mers’ yield per hectare is a major hurdle on the nation’s quest to return to its heydays with agriculture. Nigeria’s failure to invest in seeds has created a yawning seed gap estimated at N525 billion, leaving farmers to low quality inputs that portend danger to crop production and the country’s food-sufficiency target. “Most of the seeds in the market today are imported and this is because we do not produce enough seeds. The research institutes that are mandated to produce improved varieties of seeds are not doing anything,” Abiodun Olorundenro, manager, Aquashoot Limited, told BusinessDay. “There are lots of adulterated seeds in the country today because demand is much higher than supply. The level of investments in the industry is low. To bridge the gap, a lot of merchants are importing these seeds for farmers,” Olorundenro said. Despite the growth recorded in the numbers of seed companies in Nigeria, investment in the subsector is still low as farmers still find it

difficult to easily access improved seeds and seedlings to cultivate. “A lot of farmers are no longer growing cotton because of low patronage and lack of inputs. The inputs we get from the government usually come very late. When you delay in planting cotton, it affects the productivity,” said Abubakar Shiyaki, a cotton farmer in Niger state. “When we buy our seeds ourselves, we only buy low quality seeds. As a result of all these

Over 1m farmers benefit from CBN Anchor Program, says CBN Regis Anukwuoji, Enugu

ver 1,059,604 small holder farmers across the 36 states of Nigeria have so far benefited from the Central Bank of Nigeria’s Anchor Borrowers programme. Godwin Emefiele, governor of the central bank disclosed this while delivering a special convocation lecture of the University of Nigeria, at the Princess Alexandra Hall Nsukka, recently. Emefiele who was conferred with the institution’s honorary degree of Business Administration also said that the programme supported the creation of over 2.5 million jobs across agricultural value chain. The CBN boss stated that the A n c h o r B o r row e r P ro g ra m m e had helped to bolster agricultural production by removing obstacles faced by small holder farmers. The bank, he said, had improved access to markets for farmers by facilitating greater partnership with agro -processors and manufacturing firms in the sourcing of raw materials. Emefiele who’s lecture was titled ‘From Recession to Growth: The Story of Nigeria’s Recovery from the 2016 Economic Recession,’ challenged Nigerians and university communities to make good use of their vast arable land and invest in the aspect of agriculture they have competitive

advantage. He said that the CBN would continue to give access to loans to grow SMEs, while giving a key emphasis on improving rice production, given the considerable weight it had on Nigerian’s import bill. He stated that the focus on rice has enabled the country to increase production, which had led to net saving of $800 million in food import bill as a result of drastic declines in importation. He therefore appealed to Nigerians to make use of the opportunities they have to build a sustainable development base for the country. Emefiele who is an alumnus and member of the class of 1984 of the University of Nigeria said that efforts should be targeted at expanding inwards as the only solution that could help grow the country’s GDP, for it to overtake the population, hence he called on every Nigerian to contribute their quota to rebuild Nigeria. He said that it was to encourage Nigerians to go into farming that CBN came up with the Anchor Borrowers Programme initiative to enable farmers obtain loans for farming. Emefiele challenged Nigerians to grow their own fish and eat Nigerian fish instead of importing them, pointing out that Norway has been very good at producing fish because they made it a business to ensure adequate fish. www.businessday.ng

challenges, a lot of farmers growing cotton are now growing other crops because they cannot break even with cotton,” Shiyaki said. Nigeria’s seed industry potential stands at N777.38 billion, while what is locally available is estimated at N252.35 billion, thereby leaving a gap of N525.04 billion. Experts, however, suggest that this figure may have risen by five to 15 percent since 2015. The total national seed

requirements for eight major crops, including maize and rice, in Africa’s most populous country, stood at 388,690.64 metric tons (MT) in 2015, while the quantity available was 126,173 MT, leaving a yawning gap of 262,518 MT. Experts in the agricultural sector say that the government needs to prevent the supply-demand gap from widening further to prevent creating a fertile ground for the proliferation of unregistered and

incompetent operators who flood the market with fake or poor-quality seeds. They explained that legal backing from the National Assembly would empower the National Agricultural Seeds Council (NASC) to carry out its statutory mandate of regulation and supervision of seeds more effectively and seamlessly. To bridge the gaps, experts have called for collaborations between the government and the private sector to drive investments in seed production in the country. The experts also urged the government to create an enabling env iro nm ent that w ill spu r investments in seed production while enforcing stronger regulations to protect local investments. Afioluwa Mogaji, chief executive officer, X-ray Farms Limited, said no local seed company produces hybrid seeds for vegetables in the country. According to Mogaji, this is a huge opportunity for local firms to invest in vegetable hybrid seeds, stating that the value of the tomato seeds segment alone is valued at N2billion. Framers seek hybrid seeds owing to their productivity advantage, but most of them are imported, leading to high cost of production of farm produce and high prices of food items in the country.

OCP Africa, BoA, Novus Agro collaborate to provide finance, inputs for smallholder farmers Josephine Okojie

CP Africa Fertiliser Nigeria Limited has signed a Memorandum of Understanding (MoU) with the Bank of Agriculture (BoA) and Novus Agro Nigeria Limited to provide finance and inputs for smallholder farmers across the country. The funding programme is strictly of benefit to farmers who have one hectare of farmland and above, especially farmers’ groups. Caleb Usoh, country manager, OCP Africa, said that the signing of the agreement was a step further to strengthen its Agribooster Initiative in the South-Western part of the country.

Us o h sa i d t hat t h ou g h t h e Agribooster initiative had been ongoing in Kaduna, Kebbi and Niger states and that the need to expand and impact smallholder farmers in the South-West became imperative. He said the partnership would address the basic yearnings of smallholder farmers ranging from funds, inputs and access to market to boost productivity. “We have a lot of farmers doing wonderful things but the major thing they need is support from organisations structured to bring the desired support and that is what brought about the Agribooster project. “ We a re p a r t n e r i n g w i t h organisations who have access to the

L-R: Olabode Abikoye, executive director -wholesale banking south, BoA; Chike Nwagwe, chief executive officer of Novus Agro Nigeria Limited and Caleb Usoh, country manager, OCP Africa during the partnership agreement signing in Lagos recently.

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farmers and will serve as off-takers of the produce from farmers and that is where Novus Agro will come in,’’ Usoh said. He also expressed excitement over the restructuring of the BoA which had further positioned the bank as a strategic partner to achieve the mission of reaching more smallholder farmers across the country. O labode Abiloye, executive director -wholesale banking south, BoA, said that the bank identified with partners that met its primary objective to impact smallholder farmers and the rural economy. Abiloye also noted that the partnership was a hinge on the Federal Government partnership with the Kingdom of Morocco. “We are partnering with OCP Africa and what we intend to gain is expertise and support from the Kingdom of Morocco in those areas where they are much more advanced than we are, particularly in agriculture. “We are happy about this signing ceremony today because it begins to take all that we have discussed verbally out of the room of conversation to the room of practice.’’ Chike Nwagwe, chief executive officer of Novus Agro Nigeria Limited, said that the partnership would enable end-to-end solutions to the problems smallholder farmers faced.

Wednesday 05 June 2019

BUSINESS DAY

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Africa must get people out of subsistence agriculture to double food production—US expert ODINAKA ANUDU, Washington DC

. Scott Angle, United States director of the National Institute of Food and Agriculture, has said that Africa must consciously get its farmers out of subsistence agriculture to double food production. Addressing a group of international journalists in Washington DC, the U.S capital, as a prelude to the Global Entrepreneurship Summit in the Hague, the Netherlands, Angle argued that a large number of farmers in Africa were involved in subsistence agriculture, thereby making commercial food production in the region difficult. “It is a matter of moving from small-scale subsistence agriculture to more commercial agriculture,” he said. Subsistence agriculture occurs when farmers grow food to feed themselves and

their families. But commercial agriculture involves growing food for sale locally and globally. Subsistence farming has perpetuated poverty in Africa, with many farmers still using crude implements and tools to grow food. The sub-Saharan Africa (SSA) particularly is expected to feed the world in the next 50 to 100 years but progress in food production has been low. A Food and Agricultural Organisation’s 2016 paper estimated that 75 percent of farmers in the sub-Saharan Africa were involved in farming directly or indirectly. But the United States Council on Foreign Relations projects that 65 percent of farmers in the region are involved in subsistence agriculture. A 2016 Brookings report said that farming was the primary source of food and income for Africans, providing up to 60 percent of all jobs on the continent. The report, however, said

J. Scott Angle

food production in SSA needed to increase by 60 percent over the next 12 years to feed a growing population. Angle, on his part, argued that it was important to get the smallest farmer in any part of Africa to have access to quality information. A f r i c a’s 1 . 2 b i l l i o n population is projected to reach 2.5 billion between 2015 and 2050. Between 2017 and 2050,

NEXIM Bank unveils plan to provide cheap credit to boost cocoa production YOMI AYELESO, Akure

s part of the continue d dr ive of the Federal Government to harness the potentials that abound in the agricultural sector, the Nigeria Export and Import Bank, NEXIM, has revealed plans to make funding available to players in the cocoa value chain to boost productivity. Disclosing this recently in Akure, the Ondo State capital, Stella Okotete, executive director - business promotion, NEXIM, at a stakeholders’ forum tagged ‘Nigerian Cocoa and the World,’ posited that the bank’s intervention through single-digit interest rate funding to cocoa farmers and investors was to ensure that the produce met international market standards. According to Okotete, the interaction would enable stakeholders to brainstorm on the challenges of cocoa production and as well exchange ideas on possible solution for the benefits of not only those within the value chain but also for the country at large. “We are currently availing funds to cocoa processors and producers in the entire value chain at a single-digit interest rate. Currently, we are

one of the TFIs that have the lowest interest rate in terms of financing,” she said. “ The stakeholders’ interactive session in Akure is actually to address the challenges that cocoa farmers as well as producers and processors are having and we believe that from this interaction we would be able to gain more in-depth knowledge of their challenges and proffer solutions,” she added. Okotete who stated that NEXIM had been identifying ways of ensuring that loan seekers were not discouraged with the rigours and bottlenecks of securing loans in the country, noted that the plan to accept moveable assets was being looked into. She added that at the last stakeholders’ engagement NEXIM had in 2017, the bank was able to identify some of the major challenges that women and youth experience, and to address them, the bank introduced the Women and Youth Export facility. “In this product, we are willing and we have the board approvals to accept collateral registry certificate to form part of the collaterals which we are going to take into cognisance as moveable assets. “When we came in 2017, we actually didn’t have cocoa exporters in our books, as at www.businessday.ng

today we have been able to disburse nothing less than N10 billion to cocoa exporters and we are currently processing another N10 billion. We are hopeful to have more applications from cocoa farmers to access our singledigit interest rate of 9percent.” Lauding the move by NEXIM at coming to the rescue of cocoa producers and processors, , Gboyega Adefarati, the Ondo State commissioner for Agriculture stated that the global market for the produce is a huge one, which he said was growing at the average of 30percent per annum and must be optimised for the benefits of all. While reeling out the potentials of Ondo State as the largest producer of cocoa in the country, Adefarati maintained that, Nigerian cocoa is currently experiencing low and declining yields due to inconsistent production patterns, insect pests and disease attack, age of farmers and farms, land tenure system and weak linkage between producers and exporters. “In order to tackle this challenge and promote synergy between cocoa farmers and processors, the sector must be rid of bad eggs adopting sharp practices to destroy the prestige of the country among producing countries,” he said.

nine countries will account for half of the world’s projected population, including Nigeria, the Democratic Republic of the Congo, Ethiopia, Tanzania, and Uganda. For Angle, the continent’s farmers needed science and investment to raise food production in the face of surging population. “The only two ways of doubling food production are through investment and

science,” he said. In 2019, only approximately N138 billion ($383 million) was allocated to agriculture in Nigeria’s budget, representing just 1.5 percent of the total budget and lower than N173 billion (480.5 million) the previous year. The 2019 figure represents N690 ($1.9) per Nigerian each year. But South Africa has done better. It is perhaps one of the very few African nations that have invested significantly in agriculture and science. It allocated $2.097 billion ($30.7 billion) to agriculture and rural development, and another $1.26 billion (R18.4 billion) to land reforms. South Africa’s budget represents $59 per citizen. Angle, who worked for 24 years as a Professor of Soil Science at the University of Maryland, said Africa uses only 15 percent of fertilizers, which is why big firms are moving to the continent. But he advised farmers to use fertilizers in the right

quantity. “This is the continent with very good arable land. But particularly in the developing countries, a lot of countries understand the importance of fertilizers but they overuse it,” he observed. Nigeria has 200 million mouths to feed. But it is one of the least mechanised farming countries in the world with the country’s tractor density put at 0.27 hp/ hectare, which is far below the Food and Agriculture Organisation (FAO) recommended tractor density of 1.5 hp/ hectare. Nigeria is 132nd out of the 188 countries worldwide measured by FAO / United Nations in terms of the number of tractors in the country. This is one reason why farming has been mainly subsistence, rather than commercial. Angle believes that this is the same pattern for many other African countries which makes doubling food production difficult amid rising population.

AgroNigeria set to hold Feed Nigeria Summit Josephine Okojie

n line with the current economic thinking in the country, AgroNigeria, N i g e r i a’s l e a d i n g agribusiness online portal, says it plans to host the third edition of the Feed Nigeria Summit and agricultural awards to promote productivity in the sector and enhance economic growth. The theme ‘Unlocking Prosperity through Partnership,’ will focus on the narratives critical for unleashing the job creation potentials of the Nigerian ag r i c u l tu ra l s e c to r, t h e organisers said. According to AgroNigeria, the summit is a key step towards facilitating the engagement of the private sector, as well as all critical

stakeholders in the agric sector to develop homegrown solutions to challenges confronting the country’s agriculture. “We do not just need partnership on single front but on every front between the government and the private sector, private and private, small players and big players as well as players and communities to drive this change we want to see in the agric sector,” Richard-Mark Mbaram, CEO, AgroNigeria and director general of the Food Nigeria Summit 2019 Secretariat, said at a press briefing. “If we being to drive collaborations that will address critical issues around infrastructures, smuggling and capacity building for farmers among others, we would begin to make headway

L-R: Anant Badjatya, CEO, Stallion; Eustace Iyayi, registrar and CEO, Nigerian Institute of Animal Science (NIAS); Richard-Mark Mbaram, CEO, AgroNigeria and Adetoyi Olabode, country CEO, Hi Nutrients during a pressing briefing on the forth coming Feed Nigeria Summit in Lagos recently.

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in the sector,” Mbaram said. He stated that the country would not see economic development if agriculture does not take the flight to deliver the great potentials it has. Speaking also during the press conference, Angela Eni, associate professor, Covenant University, said that the summit would bring stakeholders in the sector together to chart a way forward for the sector and look at solutions to build partnerships that scale. “The discourse we are holding at the summit does not know boarders. We need to seek collaborations to manage issues that affect prosperity of our farmers,” Eni who is also the director, West African Virus Epidemiology (WAVE) Project – Covenant University Hub, said. Prof Eustace Iyayi, executive secretary of the Nigerian Institute of Animal Science (NIAS), said that the Feed Nigeria Summit (FNS) is Nigeria’s flagship agricultural sector convocation and has, over the years, earned its position as a unique platform which addresses the critical issues concerning the nation’s agro-economy. The summit is schedule to hold on the 27th –28th of August, 2019 at the Sheraton Hotels in Abuja.

Wednesday 05 June 2019

BUSINESS DAY

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Wednesday 05 June 2019

BUSINESS DAY

PENSION today

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Right of the worker under the Contributory Pension Scheme Ivor Takor, director, Centre for Pension Right Advocacy in this article captures the right of the worker under the contributory Pension Scheme, and why all stakeholders should give the scheme all the attention it requires to succeed.

n July 1, 2014 the Pension Reform Act 2014 or “the Act” was enacted into law commencing from July 1, 2014. The Act, which repealed the Pension Reform Act No 2 of 2004, governs and regulates the administration of the Contributory Pension Scheme in Nigeria. The Act confers on workers certain legal rights, some of which will be discussed here. The Black’s law dictionary defines a right as something that is due to a person by just claim, legal guarantee, or moral principle; a legally enforceable claim that another will do or will not do a given act; a recognized and protected interest the violation of which is a wrong, a breach of duty that infringes one’s right. The first right, is the right to pension. Section 3 of the Act, established a Contributory Pension Scheme for all employees of Public Services of the Federation, the Federal Capital Territory, States, local government and the Private Sector. The worker also has a right to the employer’s contribution towards his/her pension. Section 4(1) of the Act provides that the rate of contribution to the Scheme shall be a minimum of ten percent of monthly total emolument of the employee by the the employer, while the employee shall contribute a minimum of eight percent. The next right is the right to life insurance. Section 4(5) provides that in addition to the rates of contributions, every employer shall maintain a Group Life Insurance Policy in Favour of each employee for a minimum of three times the annual total emolument of the employee and that premium shall be paid not later than the date of commencement of the cover. For the enforcement of this right, the Act in Section 4(6) provides that where the employer failed, refused or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period. The right to determine how to access retirement benefits under the Act. Section 7(1) provides that a holder of a retirement savings account shall, upon retirement or attaining the age of 50 years, whichever is later, utilize the amount credited to his retirement savings account for the following benefits: withdraw a lump sum from the total amount credited to his retirement savings account provided that the amount left

after the lump sum withdrawals shall be sufficient to procure a programmed monthly or quarterly withdrawals calculated on the basis of an expected life span or annuity for life purchased from a Life Insurance Company licensed by the National Insurance Commission with monthly or quarterly payment. The decision to access benefits either through programmed withdrawal or annuity is the sole right of the employees. The right to contributions to the Scheme forming part of tax deductible expenses in computation of tax payment as well as retirement benefits being exempted from taxation. Section 10 of the Act provides that notwithstanding the provisions of any other law, contributions to the Scheme under the Act shall form part of tax deductible expenses in the computation of tax payable by an employer and employee under the relevant Income Tax Law; moreover, all interests, dividends, profits, investment and other income accruable to pension funds and assets under the Act, as well as any amount payable as a retirement benefit under this Act shall not be taxable. The other right, is the right to choose a Pension Fund Administrator (PFA). Section 11(2) provides that an employee to whom the Act applies shall notify his employer of

the Pension Fund Administrator chosen by him. This means that the worker has the sole right to choose a PFA, with no interference by the employer. The worker has a right to timely remittance of contributions into his/her retirement savings account (RSA). Section 11(3) (b) of the Act provides that not later than 7 working days from the day the employee is paid his salary, remit an amount comprising the employee’s and employer’s contributions to the Pension Fund Custodian (PFC) specified by the Pension Fund Administrator of the employee. As penalty for non compliance, Section 11(6) provides that an employer who fails to deduct or remit the contributions within the stipulated time frame, shall in addition to making the remittance already due, be liable to a penalty to be stipulated by the National Pension Commission (PenCom). Section 13 confers on the worker, the right to transfer his/her RSA from one PFA to another. This section provides that subject to the guidelines issued by the Commission, a holder of a retirement savings account maintained under the Act may not more than once in a year, transfer his account from one Pension Fund Administrator to another.

There is also the right to transfer an RSA from one employer to another. Section 14 of the Act provides that where an employee transfers his employment from one employer or Organisation to another, the same retirement savings account shall continue to be maintained by the employee or be transferred. Section 15 protects pension rights of employees in the Public Service of the Federation and the Federal Capital Territory accrued under the defined Benefits Scheme. The section provides that as from June 25, 2004, being the commencement of the Pension Reform Act 2004, the accrued pension right to retirement benefits of any employee in the Public Service of the Federation and the Federal Capital Territory who is already under any pension scheme existing before the commencement of that Act and has over 3 years to retire shall be recognized in the form of amount acknowledged through the issuance of Federal Government Retirement Benefits Bonds by the Debt Management Office, which shall be redeemed upon retirement of the employee. The Act grants a worker, the right to regular information. Section 55 provides among other duties of the Pension Fund Administrator, the duty to provide regular information on investment strategy, market returns and other performance indicators to employees or beneficiaries of the retirement savings account. The PFA shall also provide customer service support to employee including access to employee account balances and statements on demand. One of the new rights granted the worker after the commencement of the Contributory Pension Scheme is the right to apply a percentage of the pension assets in the RSA for residential mortgage. Section 89(2) of the Act provides that a Pension Fund Administrator May, subject to guidelines issued by the Commission, apply a percentage of the pension assets in the retirement savings account towards the payment of equity contribution for payment of residential mortgage by a holder of Retirement Savings Account. Each of these rights, carry regimes of sanctions ranging from letters of advice, caution, warning, monetary sanctions, naming and shaming and litigation for violations and non compliance by either the employer or the Pension Fund Administrator since the rights are derived from a duty imposed on them by provisions in the Act.

This section is created to increase awarness and deepen knowledge about the contributory pension scheme. If you have enquiries or contributions, send to this e-mail:

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Diamond Pension Fund Custodian Limited

1A, Tiamiyu Savage Street, Victoria Island, Lagos State. Tel: 01-4613753, 2713680, 2713954 Fax: 01-2713955 Email: info@diamondpfc.com Website: www.diamondpfc.com www.businessday.ng

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African insurers, UN Environment agree on collaborative initiatives for sustainable development Stories by Modestus Anaesoronye

frican insurance industry leaders and UN Environment have agreed on key collaborative initiatives in the region to drive economic, social and environmental sustainability, in other words called sustainable development. Earlier this month, the UN SecretaryGeneral said that the work of the United Nations—in peace and security, in human rights, in development, in relation to climate change can only succeed in the world if it succeeds in Africa. Under the auspices of UN Environment’s Principles for Sustainable Insurance Initiative (PSI)—the largest collaborative initiative between the UN and the insurance industry—African insurance leaders and practitioners, together with climate change, disaster resilience and sustainability experts, convened in Lagos last 29-30 April for the 2nd PSI African Market Event. The purpose of what has now become an annual event is to share experiences and ideas to support

Femi Oyetunji

the growth, resilience and sustainability of the African insurance industry, and to drive sustainable development. The Lagos event was hosted by Continen-

tal Re, the first African reinsurer to sign the PSI. It focused on three main sustainability issues in Africa: (1) closing the risk protection gap,( 2) resilient cities, and 3) sustainable food systems and agriculture. Participants agreed that there is a fundamental need to better demonstrate the value proposition of the insurance industry—as risk managers, insurers and investors—in addressing sustainability issues. And this value has to be communicated effectively to stakeholders—from individuals and households, to businesses and governments. “The recent devastation wrought by Cyclone Idai, and now Cyclone Kenneth, is yet another wake-up call for the urgent need for action and collaboration to better manage risk and support sustainable development,” said Femi Oyetunji, group managing director/ CEO of Continental Re plc. “The 2nd PSI African Market Event was a real success. We now have a set of concrete priorities for the next year to move from awareness to action, and achieve positive impact.” As a practical example, leading Nigerian insurers agreed to engage with local government authorities in Lagos to explore the development of a “city sustainable insurance roadmap”—a strategy and action plan to

L-R: Emmanuel Otitolaiye, chief finance officer; Okanlawon Adelagun, executive director, Technical; Daniel Braie, managing director/CEO; and Joyce Ojemudia, general manager, Marketing, all of Linkage Assurance Plc during the official opening of the Company’s refurbished Customer Service Centre at its corporate head office in Lagos

help Lagos become resilient and sustainable. With over 21 million inhabitants, the bustling megacity of Lagos is the economic, financial and cultural heart of Nigeria, Africa’s largest economy and most populous country. Lagos is vulnerable to sustainability risks such as flooding, sea-level rise, coastal erosion, disease outbreak, energy insecurity, and infrastructure failure. The idea to develop a Lagos sustainable insurance roadmap supports the aims of the Insurance Industry Development Goals for Cities developed by the PSI and ICLEI – Local Governments for Sustainability. The goals serve as a global action framework for the insurance industry to help make cities inclusive, safe, resilient and sustainable in line with UN Sustainable Development Goal 11. “The UN Sustainable Development Goals aim to deliver prosperity for all on a healthy planet, and are premised on the pledge to leave no one behind,” said Butch Bacani, who leads the PSI Initiative at UN Environment. “This is why the UN’s work to achieve sustainable development in Africa is absolutely essential. And this is why the PSI is working together with the African insurance industry to tackle key sustainability challenges—from climate change, environmental degradation, pollution and disaster vulnerability; to social inequality, financial exclusion and health risks.” “We are pleased to see more and more African insurers and reinsurers demonstrating sustainability leadership, action and ambition,” added Bacani. As part of the need to develop better data and catastrophe risk models and enhance climate risk management, participants agreed to look into opportunities to develop flood maps for the capital cities of Lagos and Accra in West Africa, and for the Southeast African countries of Mozambique and Mauritius. If this is achieved, there was optimism that the initiative could be rolled out further on the continent to help governments, communities and insurers plan ahead and work together to reduce flood risk and build resilience. Furthermore, the group agreed to gather information on agricultural insurance schemes to develop a Pan-African approach to promoting sustainable food systems and agriculture. The inaugural PSI African Market Event took place in Johannesburg in April 2018 and was hosted by Santam, the first African insurer to sign the PSI.

Cyber risk may mean big market opportunity – say Munich Re

unich Re wants to help the re/ insurance industry approach the cyber challenge as an opportunity for “sustainable new business,” rather than as an insurmountable obstacle to be overcome. This is according to Jurgen Reinhart, Munich Re’s chief underwriter for Cyber, who told Reinsurance News that the company was “ready to accept the challenge” of tackling cyber as it continues to build up its internal expertise. “We cautiously participate in growing primary and reinsurance business worldwide and are aiming to keep our 10 percent market

share in the growing cyber market,” Reinhart said in an interview. “Our approach is based on understanding cyber risks, assessing them adequately and thus making them insurable. This can only be done in close cooperation with experts from insurance and reinsurance, insured’s and external partners, in order to develop a common understanding of how cyber risks should be dealt with,” he explained. “In addition to risk transfer, this also includes risk management services and security measures. To this end, we deploy our global cyber teams and rely on a network of www.businessday.ng

renowned external partners to complement our own knowledge and range of services.” Munich Re has previously estimated that the cyber re/insurance market will grow to around $8-9 billion in 2020, which would be double the volume compared to 2017. Reinhart noted that this growth will be driven by ongoing digitalisation and increasing interdependencies, as well as more awareness within top-level management due to the impact of cyber incidents. “Each cyber incident shows current vulnerabilities and clearly outlines that every business may be affected – apart from size,

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location or industry,” he said. “Whereas high-profile incidents often make it to media headlines, often smaller or mid-sized companies may be affected by the same kind of attack posing an existential threat to them. This is for sure is one important reason why demand and take up rates for cyber policies are growing throughout all kind of industries.” Additionally, Munich Re is seeing more obligations imposed on the supply chain as requiring both higher standards of cyber security and more cyber insurance, while global legal developments, such as data protection laws, will also foster demand.

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Beyond growing the market, what compulsory insurances can do for the public? Stories by Modestus Anaesoronye

eyond the objective of developing the insurance industry to enable it contribute reasonably to the country’s economic growth through the implementation and enforcement of six compulsory insurances; it is to protect the public against accident, death and infringement of their rights in the course of other people’s activities. These laws being promoted by the National Insurance Commission (NAICOM) through its project on Market Development

and Restructuring Initiative (MDRI) was targeted that arming the public’s such that in the event of loss resulting from the activities of other people, they can be compensated to enable them continue with their life. While NAICOM, the market regulator has continued to emphasise on the cooperation of all stakeholders to make the compulsory insurances work, government has a major role to play in ensuring enforcement. In developed societies, it is often heard that Doctors, Nurses or Hospitals were sued for wrong handling of patients, and some people are made to pay dearly for it or such institutions closed down

or somebody’s operating license withdrawn. This is when people decide to enforce their rights when it infringed. Today, it has gotten to that point in Nigeria when people should no long close their eyes to everything. We should take on doctors, nurses, hospitals when the commit blunder that result to unwarranted pains or death of patients under their care, an analysts said. Majority of the medical practitioners are careless, do not have professional Indemnity cover and are not bothered because people still display high level ignorance when they do rubbish. So, people rise up to enforce their rights, they

can be made pay for these errors from their business or their license can be withdrawn. This emphasizes the importance of Health Care Professional Indemnity Insurance for medical practitioners as compulsory requirement for their practice. Professional indemnity insurance (PII) also called Professional liability insurance (PLI) but more commonly known as errors & omissions (E&O) in the US, is a form of liability insurance that helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and

damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. Health care Professional indemnity insurance is made compulsory in section 45 of the National Health Insurance Scheme (NHIS) Act 1999. Another case is that of Motor Third Party Insurance. Outside here, people sue owners of vehicles who drive without motor third party insurance or drive with fake certificate and cause accident. At the end of the day, the person is jailed or made to pay some good fine.

Motor Third party Insurance is made compulsory in section 68 of the Insurance Act 2003, which mandates every vehicle plying the Nigerian road to have at least a motor third party against third party damage as a result of accident. The people therefore should begin to engage lawyers to pursue their claims whenever they encounter a loss in the course of accident by a vehicle without motor third party insurance or when what they have is fake certificate. Genuine motor third party insurance is not less than N5, 000.00 and obtainable only from the offices of NAICOM registered insurance companies.

Allianz deepens UK presence £820m acquisition

L-R: Larry Ademeso, director; Adekunle Omilani, chairman; Tosin Awosika, MD/CEO; and David Sobanjo, director; at the 16th Annual General Meeting (AGM) of HCI Healthcare Ltd. held in Lagos.

lobal insurer, Allianz is to acquire Legal & General Insurance Limited, the general insurance business of Legal & General Group, in a deal worth £242 million, according reinsurance news. In addition, Allianz UK has also announced a deal to buy out the remaining 51 percent stake in LV General Insurance Group for up to £578 million from Liverpool Victoria Friendly Society (LVFS). Once tied up, these deals will see Allianz substantially broaden its UK presence, positioning it as the second largest general insurer with a 2018 combined gross written premium income of £4 billion and a market share of 9 percent. It will also establish the

company as a top 4 insurer in the UK personal home segment and mean 12 million general insurance customers are now part of Allianz in the UK. The firm has stated that customers will continue to be supported as normal. “We are pleased to announce the purchase of the Legal & General insurance business which supports our commitment to establish Allianz as a leader in the personal lines market in the UK,” said Jon Dye, Chief Executive Officer of Allianz Insurance. “The Allianz business is robustly capitalised, has a strong reputation for its focus on customer service and is committed to delivering the advantages of technology for the benefit of the Customer.”

HCI Healthcare promises better access, affordable healthcare services to Nigerians

he Board and Management of HCI He a l t h c a re L t d has reassured the Company’s commitment to providing Nigerians access to better and affordable healthcare services. This assurance was given during the Company’s 16th Annual General Meeting (AGM)

held at its Yaba corporate headquarters in Lagos. Adekunle Omilani, chairman of the Company addressing shareholders, board of directors and senior management team during the Meeting, disclosed that the Company achieved a modest 3.5 percent growth in turn-over www.businessday.ng

compared to the previous year. According to Omilani, although the political and economic challenges that the country faced in 2018 generally affected businesses, the HCI Healthcare is however now better positioned to deliver improved performance especially

through the upgrade and deployment of technology to drive operational efficiency and business growth, thereby ensuring that the Company is able to deliver better customer value. Expressing optimism about the Company’s future, he noted that “we are hopeful that with the

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measures put in place, there would be improvement in the company’s performance in the coming years”. HCI Healthcare Ltd is a leading national Health Maintenance Organization (HMO) established in 1997 and accredited by the National Health Insurance @Businessdayng

Scheme (NHIS) to provide quality healthcare services to all categories of consumers. It works with over 1,500 hospitals nationwide to deliver superior healthcare services to its over 400,000 subscribers. It operates from its head office in Lagos and 15 other branch offices nationwide.

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MANAGEMENTDIGEST

Case study: Was that harassment? was OK. He assumed she’d know what he was alluding to, but she just said, “I’m swamped. This program sounds great, but it’s a lot of extra work.” Rainer tried to reassure her: “I guess it will pay off in the long term for our careers.” Teaira smiled weakly. He believed what he’d just said. But was it true for Teaira, too?

J. NEIL BEARDEN A SALESPERSON WONDERS HOW TO RESPOND TO A COLLEAGUE’S JOKE.

JACKSON f Jackson Pierce was honest with himself, he hadn’t been a shoo-in for the leadership program. He was definitely a high performer, but since salespeople were often evaluated on numbers, it was obvious to everyone that he wasn’t in the top tier. Still, he was excited when his boss told him that he’d be part of the 2019 cohort of high potentials who were expected to go far at Coltra, a global beverage company. When he got to the conference room where the group was to participate in a kickoff conference call with the CEO, Jackson was happy to see Rainer Wolfson. Rainer was good at everything he did — whether it was selling the company’s least popular beverage line or just making people feel welcome. He’d transferred to the Houston office from Coltra’s Munich outpost three years earlier. “I was hoping you’d be here,” Rainer said. Jackson hit “Mute” on the speakerphone and started to joke around with his colleague. “How are we going to manage this program on top of everything else we’ve got going on?” he said. “I can barely answer all my emails these days.” “We’ll manage, don’t you think?” Rainer said sincerely. “It sounds like a cool opportunity.” “Of course it is. It just seems the better you are, the more work they give you. Do you know how they chose people for this anyway?” Nearly 50 salespeople from offices around the world had been selected for the program, and although the criteria weren’t explicit, Jackson assumed that sales numbers were a big factor. “It makes sense that you’re here, but a lot of us didn’t hit our targets last quarter.” “Those targets were crazy, though,” Rainer said reassuringly. “I don’t know how they set them, but barely anyone made them.”

“You did.” Rainer smiled uncomfortably. “And Ying did,” Jackson said. “She’s never missed — not a single quarter.” Rainer nodded. “She did this program last year.” “Who else are we waiting for?” “Teaira,” Rainer said. “Right — she’s been crushing it recently,” Jackson said, a little ruefully. His numbers hadn’t been as good. “Maybe they want to get you into leadership because you’re not good at sales,” Rainer said, giving him a friendly punch on the shoulder. Jackson laughed. “If that’s true, why did you get picked? They’d be better off keeping you in sales forever.” “It must’ve been my good looks,” Rainer said. “Yeah, right.” Just then Teaira came in, looking at the clock. The call was set to start any minute. “Hey,” Rainer said, leaning in to take the Polycom off mute. “I guess you’re here because of your good looks, too, Teaira.” Jackson had said it jokingly, but the other two didn’t smile. RAINER Rainer immediately felt a knot in his stomach. He could see the expression on Teaira’s face, and she wasn’t happy. Maybe it was more a look of confusion than anything else, but then again,

maybe it wasn’t. She opened her mouth as if she was about to say something and then stopped. The three of them shifted in their seats as Peter Mackenzie, their CEO, started his introduction. Rainer loved Coltra. Like many others on the sales team, he’d joined the company right out of university and had been there ever since, except for a brief stint to get his MBA at ESMT Berlin. He believed in the company’s fruit- and seltzer-based products and loved the culture. Sure, he had complaints about certain decisions the senior leaders made, but ultimately he knew he didn’t want to work anywhere else. The company had treated him well and given him the opportunity to live overseas for a few years. Houston wouldn’t have been his first choice, but it had the strongest sales team of any of the U.S. offices, so the move was a nobrainer. In the conference room, he was having trouble listening. He kept looking back and forth between Teaira and Jackson, trying to figure out what had just happened. But words kept popping into his head: “Harassment.” “Me too.” “Bystander.” Was that what just happened here? he wondered. Was that harassment? Peter’s voice on the Polycom took him back to an all-hands meeting a year earlier, when the CEO had announced the com-

pany’s zero-tolerance policy toward sexual misconduct and charged everyone with making Coltra a safe place to work. All the employees had gone through sexual harassment training. Lots of people had grumbled about it, but Rainer had taken it seriously. In fact, it had opened his eyes to what it must be like to be a woman at Coltra — or in any work environment. And he’d carefully read several of the studies that the facilitators had handed out about what held women back from promotions in corporate environments. Still, gender parity was pretty decent throughout most of the company. And for several years in a row the top salesperson had been a woman: Ying. Surely Teaira must feel comfortable here, even if guys like Jackson sometimes, without realizing it, said stupid things. Rainer glanced over at Teaira and saw that she was looking down at the table, frowning. Was she upset? Maybe Jackson’s comment was exactly the kind of thing that would make a woman feel undermined and as if she didn’t belong. His confusion turned to anger. Why had Jackson put him in this position? The call was scheduled to end at 10, but it didn’t wrap up until after 10:15. Jackson scurried out of the room, saying he was late to another meeting. Rainer followed Teaira out and asked if she

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SUZANNE Suzanne Bibb was surprised to see Rainer Wolfson’s name in her inbox. He was one of those employees who rarely asked for anything special and never caused trouble — just got promotions and raises and commendations. She told him to come by whenever he wanted, and he did, later that afternoon. Right away it was clear that Rainer was upset. “I wasn’t going to say anything, but I called a friend of mine back in Berlin, and she encouraged me to make a report to human resources,” he said. “A report?” Suzanne asked. Rainer relayed what had happened between Jackson and Teaira. He said that although he knew Jackson had been joking around, continuing some lighthearted ribbing Rainer himself had started, he didn’t want to stand by if Teaira had somehow been offended. Suzanne couldn’t say that she was surprised. She’d heard comments before about Jackson’s shooting off his mouth and rubbing people the wrong way. But this was different. Insinuating that a woman was selected for a leadership program because of her looks rather than her achievements fell under what the company had labeled “highly offensive” on the spectrum of sexual misconduct. And although it wasn’t “evident misconduct,” or even “egregious,” she knew she had to take it seriously. She asked Rainer a few followup questions and thanked him for coming. “So what happens now?” he asked. Suzanne explained the company process for handling such accusations. HR had seen an uptick in these kinds of complaints since #MeToo exploded, so she Continues on page 29

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The big idea: We get the news we demand

mance in distributing information. — News organizations expanding efforts to explain to consumers how they know what they know and to make sure consumers’ voices are heard in newsrooms. Complicating the issue for media platforms like Facebook, Twitter and Google is their very business model. That model relies on the ability to identify the implicit prejudices and desires of consumers in order to keep them from wandering away to other sites and to help advertisers hypertarget messages. Fixing false news thus creates a quandary for these platforms: Substantially altering their algorithms so that they don’t play to our predispositions would be commercial suicide. But even if these companies were able to change their stripes, and news outlets redoubled their efforts at transparency and community engagement, almost every study on the subject demonstrates that factchecking and other efforts to alert consumers to the dangers of misinformation have minimal positive effects, or even have negative effects.

And there is no evidence that, while important, transparency and community engagement have improved the public’s view of news organizations the least bit. AN OLD PROBLEM AND A NEW PROBLEM That’s a bleak picture but not a novel one. A basic history lesson provides a fresh take on what’s happening now. More than 600 years ago, Johannes Gutenberg launched a communications revolution that altered power relationships around the world. After centuries of monopoly control over the power to publish (by the Roman Catholic Church, largely), the movable type printing press made publishing affordable and easy enough to allow new entrants into the market. Suddenly, multiple viewpoints could be spread to the public. The Reformation, the Enlightenment and the American and French revolutions may not have occurred if radical ideas had not spread so far, so fast. In retrospect we view those upheavals positively, but in their time they led to enormous disruption and

death. Since most people were illiterate, printing presses produced more than just texts. Martin Luther and his graphic designer, Lucas Cranach, inflamed opposition not only to the Catholic Church but also to the ruling elites, using memes that would be the envy of any 21st-century troll. When the German Peasants’ War erupted, Luther initially approved, but as the death and destruction multiplied, he eventually condemned the uprising. In other words, communications revolutions beget social, cultural and political upheavals. Today, Mark Zuckerberg’s Facebook and the other social media platforms have transformed our culture at the Gutenberg scale. As with movable type, expanding publishing power to the masses creates many beneficial outcomes. For example, smartphones and social media have been important tools in bringing the public’s attention to issues like police brutality. At the same time, those with intentions to disrupt the truth have gained access to easy, affordable publishing and have wreaked havoc on the consensus around what constitutes facts. This new era presents us with four serious challenges: 1. The volume of information that floods over us each day makes it difficult to sort out the reliable from the fabricated. 2. New technologies to create and share information can mimic the look, feel, sound and sense of an authoritative source and then spread that credible-looking misinformation virally. 3. The conflict between speed and accuracy is intensifying. We all want information as quickly as possible, but faster access increases the chanc-

TEAIRA When she listened to the voicemail, Teaira’s first thought was: It’s never good when HR calls you. Raises, promotions, new assignments — all those come through your manager. Bad news comes from HR, especially on the phone. She’d seen Suzanne Bibb’s name on group emails, but she’d never spoken to her in person before. Suzanne cut right to the chase: “There’s been a complaint.” She explained that she had heard about Jackson’s comment the day before. Rainer, Teaira thought. She was annoyed. Why hadn’t he let her fight her own battles? Why hadn’t he said anything to her first? Then she remembered the concerned look on his face as they’d walked out of the conference room. “It really wasn’t a big deal,” Teaira said instinctively, although as soon as she’d spoken, she questioned whether that was true. Jackson had been competing with her since his first day on the job. It wasn’t anything she

hadn’t experienced before, at college or in her MBA program or in the office, but he cut her off in meetings and occasionally took credit for her ideas. She’d chalked it up to typical overly competitive male behavior, but she couldn’t say that she trusted Jackson. Still, it had been an easy thing to brush off. She’d seen Jackson later in the day, and he’d awkwardly tried to explain the comment, telling her it had been a meaningless joke, that she had come into the middle of a conversation, and that it would’ve made more sense if she’d heard what he and Rainer had been talking about before. It was a defense more than an apology, but she’d been on her way to another meeting, so she’d let it go. “Maybe I should start by talking to Jackson and seeing if we can clear this up?” Teaira said. “That’s up to you,” Suzanne replied. “But we take complaints like this seriously. And I urge you to do the same. Any comment about an employee’s appearance that makes another person uncomfortable is problematic.” “What if I do move forward

with the complaint?” Teaira asked Suzanne. “Will Jackson get fired?” “Until we’ve gathered more information, I can’t say what the consequences might be. As you know, we have a zero-tolerance policy. I suspect some people will advocate firing him — especially if you add your name to the complaint. But there are other, less harsh consequences for unprofessional behavior.” When Peter had announced the policy, Teaira had been proud that her company was taking a stand. Now, though, she wondered whether such a hard line was really a good thing. People were going to make mistakes, and certainly Jackson’s comment, while maybe mean-spirited, wasn’t a fireable offense. Or was it? As she walked back to her desk, Teaira’s frustration mounted. She thought about how few senior women Coltra had. The entire C-suite was men except for the chief HR officer. And only one board member was a woman. Were comments like Jackson’s part of the problem? She felt she

RICHARD HORNIK

he struggle to deal with misinformation has spawned a cottage industry of analysis and advice. Hardly a day goes by without some think piece promising to explain how we got to this crisis of confidence in facts, and often promising ways to ameliorate its effects. Some of the earlier studies, particularly efforts like one co-authored by Claire Wardle at First Draft Media, have added a great deal to our understanding of the challenge’s scope and complexity. Her 2017 report for the Council of Europe should be the starting point for all discussions of this issue. But Wardle’s report is the exception, not the rule. Unfortunately, if predictably, the vast majority of the solutions offered prove impractical or inadequate at best, and counterproductive at worst. A smorgasbord of initiatives funded by (mostly) well-meaning billionaires or undertaken by social media platforms and search engines (owned by mostly well-meaning billionaires) all presume that the problem lies with the quality of the information itself or the reputation of the information provider. That has led to efforts like: — Technology giants tweaking algorithms, partnering with factcheckers, and shunning or stigmatizing irresponsible or malicious third-party distributors. — Nonprofits and news organizations providing faster fact-checking of statements by public figures as well as of social media postings. — Startups rating information providers based on their past perfor-

Case study... Continued from page 28

was well versed in the protocol. She and her team had spent a lot of time explaining and reexplaining it, and many of the things brought to their attention weren’t actionable offenses. Still, she always told herself, it was better than having people stay silent. She told Rainer that she would talk with Teaira and then with Jackson, and their managers would need to be notified. “Will you tell everyone I reported it?” he asked. “Normally we let the employee filing the complaint decide whether to disclose that he or she was involved, but since you were the only other person there, it will be obvious to Teaira that it was you.” “Right,” he said. “At first I told myself that it was a small comment and Jackson probably meant no harm. But when I explained it to my friend, it sounded worse. I just don’t want things to get blown out of proportion.” “None of us want that,” Suzanne said. But she worried that was exactly what might happen.

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es that the information will be wrong. 4. We prefer information that supports our beliefs. With the internet and social media, it’s much easier to select only information that reinforces our existing ideas and filter out any challenges to them. A NEW SOLUTION THAT’S AN OLD SOLUTION Most of the ink and pixels spilled on extolling various “answers” to the false-news dilemma have focused on the supply side, the publishers. But as we’ve seen, the supply side is massive and unwieldy. Better answers to this challenge can be found on the demand, or consumer, side. Just as Gutenberg’s printing press made the ability to read and write an important element of citizenship, we now need a new literacy for the 21st century. Yes, the answer lies in learning — hardly a vanguard idea, but possibly the most effective one. Sam Wineburg, director of the Stanford History Education Group, says that means we must learn to read “laterally” — to use the power of the web to verify the web, to interrogate a site or story by checking its claims elsewhere. Overall, citizens must learn to: — Interrogate information instead of simply consuming it. — Verify information before sharing it. — Reject rank and popularity as a proxy for reliability. — Understand that the sender of information is often not its source. — Acknowledge the implicit prejudices we all carry.

could handle this kind of joking — but maybe some of her peers couldn’t. And maybe Jackson’s intention — whether subconscious or not — was to demean her. Then she remembered Rainer’s finger on the mute button. Was it possible that others had heard what Jackson said? If so, why hadn’t anyone else spoken up? And did she have a duty to call out that sort of behavior — especially if others knew about it?

Richard Hornik is a lecturer at the Stony Brook University School of Journalism.

J. Neil Bearden is an associate professor at INSEAD.

Wednesday 05 June 2019

BUSINESS DAY

MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

WACT to maintain strong presence in East Nigerian market with acquisition of $10m harbour cranes … New cranes to arrive in July amaka Anagor-Ewuzie

etermined to maintain a strong presence in Eastern Nigerian market through investment in more container handling equipment, the West Africa Container Terminal (WACT), Onne Port, Rivers State, the biggest container terminal outside Lagos, is perfecting plans to take delivery of two new mobile harbor cranes from Liebherr, valued at $10 million. The investment in cranes and other terminal equipment are part of WACT’s ongoing terminal upgrade, aimed at bringing it at par with its peers in Apapa and Tin-Can Island Ports, Lagos in equipment and operational efficiency. Aamir Mirza, managing director of WACT, said during the commissioning of four new specialised terminal trucks and an empty handler

L- R: Adolphus Ugwu, chairman, Flat and Cargo Truckers’ Association; Agbo Julius, acting port manager, Onne Port; Aamir Mirza, managing director, WACT; Yahaya Idris, assistant comptroller of Customs, Port Harcourt 2 Area Command, Onne, and Godwin Ololuka, chairman, Nigerian Port Consultative Council, Onne Port chapter, during the commissioning of new specialised terminal trucks and empty handler acquired by WACT recently.

in Onne on Friday that the mobile harbor cranes are expected to arrive Nigeria in July this year. According to him, the acquisition of four additional specialised terminal trucks brings to 10, the number of trucks acquired by WACT this

year, with four more expected before the end of the year. “Recall that four trucks arrived first in February, then we added two in April, and four have just arrived. Before now, we had 12 in use. The trucks are required to support the operations of mobile har-

bor cranes, which operates at a faster rate compared to vessel cranes,” he said. He further said the idea was to ensure the availability of trucks prior to the arrival of the two cranes in July, adding that the commissioning of the cranes would enable the

terminal to have all the required equipment that would enable efficient operation. “We have been investing in getting more equipment to our terminal to ensure continuity in serving our customers better, enable timely delivery of cargo and grow business. We assure customers of continued commitment in serving them better,” he added. While expressing appreciation to the Nigerian Ports Authority (NPA) and the Nigeria Customs Service (NCS) for their support and collaboration, Mirza said apart from investing in equipment, WACT had also focused on improving communication with its customers on major developments at the terminal. “We have also added more computers to the clearing agents’ office to enable them download invoices and complete their documentation before coming to the terminal. It is basically a mutual relationship that we are trying to maintain with all

stakeholders. We are taking steps to improve the level of service in order to ensure our business and theirs continue to grow,” Mirza said. Agbo Julius, acting Port Manager of Onne Port, who witnessed the commissioning of the four new specialised terminal trucks and empty handler, lauded WACT for its commitment to operational efficiency and service delivery at the port. “WACT have improved on their operation and I want to commend them for that. When we come around here and see how big the place is with operations going on smoothly using very modern equipment, we keep on moving closer to our goal of being the leading port in Africa. “The commissioning of this equipment is encouraging because it is not the first time WACT is doing this. When we have operational equipment, it means we will improve our efficiency and service delivery, which is the cornerstone of Onne Port,” Julius said.

and even on foreign-going vessels,” he said. Olopoeniyan said that seamen career is both very challenging and very rewarding, considering the diverse experiences at sea, but advised on the need for dedication and commitment on the part of the cadets.

Earlier, MkGeorge Onyung, chairman of the conference and president of the Shipowners Association of Nigeria (SOAN), advised the students to take their studies very seriously and forget about the challenges that they may encounter in the course of their studies.

Experts call for improved sea-time training for Nigerian cadets

iger ian cadets need an improved ways of getting sea-time training in line with the global training standards instituted by the International Maritime Organisation (IMO), shipping experts have said. Speaking at the fourth

edition of “A Day With Nigeria Maritime Students” on the occasion of the 2019 Children’ Day celebration in Lagos, Ade Olopoeniyan, a former president of the Nigerian Association of Master Mariners (NAMM), called on the relevant government agencies, ship owners, and

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the maritime colleges to begin to work out better ways of getting sea-time for cadets. This, he said, would enable them have needed practical training on board ships on voyage and not on anchored vessels. “I know that a lot of cadets here will not be able

to get the mandatory 12 months on a ship if the ship is not trading because cadets cannot get enough practical training onboard such a vessel. Sea-time enables cadets to get Certificate of Competency (CoC), and qualifies them to become seafarers that can be on coastal vessels

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Wednesday 05 June 2019

BUSINESS DAY

MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

Rethinking NLNG tax holiday to curb looming revenue losses in economy As the nation’s shipping industry awaits the new High Court judgement on the case between the Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian Liquefied Natural Gas (NLNG), AMAKA ANAGOR-EWUZIE writes that time has come for all parties to start a journey towards removal of the controversial tax holiday to enable the Federal Government through the Apex Maritime Regulatory agency, to generate more revenue for funding of government budgets especially infrastructural projects for the development of Nigerian Maritime sector.

xactly on Friday 29 March 2019, the Court of Appeal in Lagos set aside an earlier judgement of the Federal High Court, which exempted NLNG from the levies payable to the NIMASA under the NIMASA Act, Cabotage Act, Marine Environment (Sea Protection Levy) Regulations, and other laws of the federation. The Appeal Court ruling was based on the fact that NIMASA was not given fair hearing at the High Court. Justice Mohammed Lawal Garba, who delivered the judgement, ordered that the case be sent back to the High Court for fresh trial under a different judge. The effect of the ruling was that the Federal High Court is ordered to revert to the fundamental issue of fair hearing while NLNG continues to pay the statutory levies, pending another ruling by the lower court on the matter, said Lateef Fagbemi (SAN), NIMASA lead counsel. Findings have shown that over two months after the Appeal Court judgement, the NLNG is yet to revert to the basis by continued payment of the statutory levies and charges to NIMASA. Reacting to the ruling, Dakuku Peterside, director general of NIMASA, said the agency would continue to work closely with the judiciary in matters that need clarity and interpretation in order to realise its mandate of creating a robust maritime sector. “This judgement has further shown that the judiciary is unbiased and remains a beacon of hope for Nigerians. NIMASA and NLNG are neither foes nor competitors. We are corporate cousins working together for the common good of our great country. Judgement like this, only serves to strengthen our institutions and ensure greater bonding,” Peterside said. On his part, Andy Odeh, manager, Corporate Communication and Public Affairs, NLNG, said in a statement, that “NLNG as a good and responsible corporate citizen remains committed to conducting its business in accordance with the laws of

Dakuku Peterside

the Federal Republic of Nigeria, and to abide with all applicable laws including those that confer exemptions on and grant fiscal incentives to businesses, as a way of sustaining their operations and growing the economy.” Going down memory lane, it will be recalled that the LNG project started in 1988/1989 and at the time, the Federal Government not only recognised the company’s pioneer status within the provisions of the Industrial Development (Income Tax Relief ) Act 1971, but also granted it a package of investment incentives including a 10-year tax holiday under the Nigeria LNG (Fiscal Incentives Guarantees and Assurances) Act Cap. N87 Laws of the Federation of Nigeria 2004 (“NLNG Act”) on certain conditions. With the tax holiday, NLNG imported project cargo, and exported LNG from Nigeria, using vessels belonging to its whollyowned subsidiary, Bonny Gas Transpor t Limited (BTG) and other chartered third party vessels. The 10-year term was to elapse around 1998/1999 and at the end of the tax holiday, NIMASA wanted to begin the billing of its statutory levies under the NIMASA and Cabotage Acts on the vessels belonging to BTG and other chartered third party vessels. To start, in 1997, the office of the Commander-in-Chief of the Nigerian Armed Forces wrote a letter dated August 20, 1997 through the Federal Ministry of Transport, and www.businessday.ng

Tony Attah

directed that NLNG comply with the extant law at the time, being the National Shipping Policy Act of 1987, which mandated it to pay the then two percent statutory levy on international inbound and outbound cargo as well as submit to routine inspection. The dispute between NLNG and NIMASA started with the refusal of NLNG to pay three percent of the gross freight ; two percent surcharge on Cabotage trade as contained in the Coastal and Inland Shipping (Cabotage) Act 2003; and to comply with the Marine Environment (Sea Protection Levy). Still, in 2007 the Federal Ministry of Transport through a letter dated September 26, 2007 approved an action for NIMASA to commence the collection from NLNG. Afterwards, NIMASA in 2010 commenced an action against NLNG, where it sought for an interpretation of relevant provisions of the NLNG (Fiscal Incentives, Guarantees and Assurances) Act, CAP N87, Laws of the Federation of Nigeria 1990, and the NIMASA Act of 2007. In January 2013, the action by NIMASA was withdrawn in a bid to amicably settle the dispute out of court. Meanwhile, following the continued disregard of the provisions of the NIMASA Act and other relevant laws by the NLNG, in May 2013, NIMASA moved to enforce the provisions of the NIMASA Act and Cabotage Act as empowered under the Act, by demanding payment of the levies due from the NLNG, consequent

upon which NLNG vessels were detained through the imposition of blockade for non-compliance. Upon intervention by the Federal Government, through the office of the National Security Adviser (NSA), an agreement in principle was adopted, with NLNG undertaking to pay up all outstanding levies and comply with the requirements of the NIMASA Act 2007, the Cabotage Act 2003 and other relevant Regulations at the time. Consequently, NLNG made a payment of $20 million dollars and the blockade was lifted. Surprisingly, on the 18 June 2013, the Agency received a pre-action notice, from Counsel to NLNG, giving 30 days’ notice of their intention to commence legal action in accordance with Sections 53(2) of the NIMASA Act. This resulted in another blockade on 21 June 2013, during which various issues were canvassed in Court by the parties. Meanwhile, there was a peace treaty by the parties under which the following were agreed: NLNG effects payment of all outstanding sums owed to the Agency and henceforth all its vessels, including FOB cargoes, will pay NIMASA levies as and when due, as well as other sums as provided under the NIMASA and Cabotage Acts, albeit under protest. Also, NIMASA agreed to lift the detention orders placed on NLNG vessels and for as long as due payments are effected promptly, NLNG

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vessels will not be detained; NLNG will ensure that all outstanding FOB payments are made within four months from the date of the agreement failing which NLNG will assume responsibility for the payments. The outstanding due payments were made by NLNG on the 6 July 2013 and the blockade was lifted on Saturday, 7 July 2013. Based on the NLNG suit, the Federal High Court sometime in 2016 entered judgement in favour of NLNG. But not satisfied with the judgement, NIMASA immediately filed an appeal against the said judgement of the Federal High Court, which gave rise to the most recent ruling. BusinessDay findings show that NLNG’s refusal to pay the accumulated three percent gross freight on international inbound and outbound cargoes and two percent Cabotage surcharge over the years have drastically reduced the revenue available to NIMASA to carry out its operations and perform its statutory responsibilities. “The action has also compromised its ability to meet its core functions of maritime safety, security and shipping development. Therefore, I believed the Court should consider putting end to the tax holiday because NLNG has not only become successful but can help government to fund the nation’s over N9 trillion budget with payment of all the necessary taxes,” said a shipping expert, who does not want his name in the @Businessdayng

print. According to the expert, the nation’s maritime sector, which is presently underdeveloped, is faced with serious infrastructural and security challenges that needed popular funding to be tackled, thus the need for NIMASA to block all revenue leakages. “ The NLNG position could set a negative precedent as other companies could refuse to pay the three percent of gross freight on their international inbound and outbound cargoes and two percent surcharge on their Cabotage cargo,” the expert added. Of a truth, Nigeria is a country where close to 70 percent of its population live below the poverty line and where, according to the UNICEF, 10.5 million children are out of school. Recently, government has shown keen interest on broadening the tax base with the aim of reducing its reliance on oil revenue and making taxation the source of funds for infrastructural development. Therefore, government through the help of the legislature and the judiciary needs to put an end to signing away its tax revenues without any evidence to suggest that a careful costbenefit analysis has been carried out to ascertain if the tax incentives are economically beneficial to Nigeria and Nigerians. As a country that is desperately in need of more developmental funding, pundits believe that one of the lowest Human Development Index rankings in the world, and one of the lowest tax-to-GDP ratios, it has become critical that the three arms of government begin to re-evaluate the nation’s tax incentives framework. This is owing to the fact that for every tax the government gives away, the country may be giving away jobs, healthcare, security, good roads and improved workers’ welfare, especially in the wake of N30,000 minimum wage, which could be funded with revenue realised from payment of taxes and levies to the government.

BUSINESS DAY

Wednesday 05 June 2019

BUSINESS DAY

INTERVIEW

‘Our sustainability agenda remains to bring new life to used packaging globally’ ZORAN BOGDANOVIC is the Chief Executive officer, Coca-Cola HBC. In this interview, he speaks on how Environmental sustainability has remained a major focus for Coca-Cola HBC in the last decade. As the world celebrates the 2019 World Environment Day, he examines the efforts of the company to achieve its sustainability agenda. He speaks with Kelechi Ewuzie. Excerpts: Waste has become a big issue globally especially as it relates to how the planet is being impacted. What step has Coca-Cola HBC done to address it? think the amount of waste littering our planet has rightly received a lot of attention recently. I understand the strength of feeling about it because I too get annoyed when I see rubbish strewn in parks, beaches and our oceans. As a company in the business of bottling, selling and activating beverage brands in 28 markets, we, at Coca-Cola HBC, understand the problem and our role in addressing it. Last year’s World Environment Day theme was “beat plastic pollution.”. One year on, we have this opportunity to reflect on what we have done to date to tackle this and what we can do better in future.

The company has introduced some initiatives in the area of packaging one of which is ‘World Without Waste’ to address the challenge. Tell us about it and to what extent has this helped to change the narrative? We are doing a lot and all these are incorporated in our plans. Together, we and our strategic partners, The Coca-Cola Company, are embarking on a comprehensive, multi-year plan that directly addresses issues regarding packaging. This approach - World Without Waste - has a goal to collect and recycle the equivalent of a bottle or can for each one we sell by 2030. As a step towards this, we at Coca-Cola HBC launched a set

Zoran Bogdanovic

of commitments last year, to be achieved by 2025, and designed to ensure that we continue to drive sustainability through our entire business. The idea is to make our consumer packaging 100 percent recyclable by ensuring that we source more of the total PET plastic we use from recycled PET and commits us to help collect the equivalent of 75 percent of the containers used for our drinks. How far have you gone in this regard? We have already made some big steps towards these targets. Take for instance, 99 percent of our packaging is now recyclable and we’ve identified opportunities to improve this further by ensuring compatibility between our packaging and existing recycling streams, which are done through the use of the right colorants, additives and sleeves. In support of our efforts to use more recycled PET (rPET), we have teamed up with third parties to ensure better access to rPET suppliers and technologies. For example, in Austria, we have invested in a PET-to-PET plant, owning 20 www.businessday.ng

percent, together with other Fast Moving Consumer Goods (FMCG) companies, which have supported the delivery of our Austrian water brand Römerquelle in 100 percent rPET bottles this year. Also we announced a few days ago that from now onwards, every bottle within our Irish water brand, Deep RiverRock, will also be made from 100 percent recycled PET, with further water brands in Switzerland and Romania to follow this year. Additionally, we will increase the percentage of rPET used in our Coca- Cola and Coca-Cola Zero bottles in Switzerland and Austria

this year to 50 percent, while continuing to build our capabilities in this area across our portfolio in our 28 markets. What is the level of success achieved since the system started the recycling and packaging initiative globally? I can say we have done extremely well. In 2018, we collected a Groupwide average of 45 percent of our packaging for recycling, in collaboration with our partners. In Nigeria, The Coca-Cola System in partnership with the indigenous company, Alkem has been in the forefront of

‘

If we can get enough of the bottles back, with the right level of quality, they become a valuable raw material, as we can recycle and reuse them. And as technology advances, we will get better at doing that

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‘

As it stands, materials like plastic constitute a large chunk of waste in the environment. Why don’t you just stop using plastic? The challenge is that it is currently the best of all packaging materials available - because it is safe, hygienic, durable, flexible, resealable and recyclable in terms of the environmental impact of its production and transport. The problems we are dealing with today arise mainly after use, either with plastic sitting in landfill or left as litter in the environment. However, this doesn’t have to be the case. If we can get enough of the bottles back, with the right level of quality, they become a valuable raw material, as we can recycle and reuse them. And as technology advances, we will get better at doing that.

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promoting environmental safety. During the period of the partnership, a total figure of 23,000MT of PET was collected. Also, in Nigeria, the Food and Beverage Alliance (FBRA) where we play a leading role was instituted to advance this cause and so far, the alliance has yielded significant results with a total of 109.11 tons of PET collected between July 2018 and May 2019. We have launched some great initiatives to increase this further in other markets. For example, we took an active role in Russia last year to establish, together with the industry, the first Packaging Recovery Organisation (RusPRO). In parallel, we supported the initiative ‘Separate with Us’, which seeks to raise awareness around recycling and collect more used packaging. Additionally, we work with other stakeholders to support various local collection schemes which, depending on local conditions, include Packaging Recovery Organisations and Deposit Return Schemes. We are part of 19 other packaging waste management schemes across our markets and we have a Group-wide policy on packaging waste and recycling, which provides the framework within which our countries operate. Are you looking at any other alternatives to address the issue? We know that there is more to be done and we continue to work with universities and other organisations to seek durable alternatives to plastic. For example, one big opportunity is in secondary packaging where we are looking to switch from plastic wraps to carton trays to maintain cans in packs of 4-24 drinks. We are confident that as technology advances, awareness increases and more and better sources of recycled food grade materials are produced, we can raise the bar higher in terms of the sustainability of our packaging and bringing new life to the materials already in circulation. In addition to our efforts on packaging, our commitments, called “Mission Sustainability 2025”, also seek to further reduce emissions from our operations as well as continuing to focus our minds and actions on water use and stewardship, ingredient sourcing, nutrition, wellness and wellbeing within our organisation and our communities.

Wednesday 05 June 2019

BUSINESS DAY

TRANSPORTATION Motoring

RailBusiness

ModernTravel

Roads

Motoring

EVs targets 56% selected LCV markets by 2040 MIKE OCHONMA Transport Editor

lectric vehicles, or EVs, are on track to encroach significantly on the market for vans and short-distance trucking, according to the latest forecast from research firm BloombergNEF (BNEF). Based on analysis of the evolving economics in different vehicle segments and geographical markets, BNEF’s Electric Vehicle Outlook 2019 shows EVs taking up 57 percent of global passenger car sales by 2040, slightly higher than it forecast a year ago. Electric buses are set to hold 81% of municipal bus sales by the same date. For the first time, BNEF has, however, also incorporated in its forecast detailed work on the commercial vehicle market. Their projections show electric models taking 56 percent of light commercial vehicle sales in Europe, the US and China within the next two decades, plus 31 percent of the medium commercial vehicle (MCV) market. Heavy trucks will prove the hardest segment for electrics to crack, with sales of the latter limited to 19% in 2040. Their use case will mostly be in shorter-distance applications. However, conventional heavy trucks on long-haul routes will also face other, non-electric competition from alternatives such as natural gas and hydrogen fuel cells. “Our conclusions are stark for fossil fuel use in road transport,” says BNEF advanced transport head Colin McKerracher. “Electrification will still take time because the global fleet changes over slowly but, once it gets rolling in

the 2020s, it starts to spread to many other areas of road transport. We see a real possibility that global sales of conventional passenger cars have already passed their peak.” Meanwhile, the role of shared mobility services such as ridehailing and car-sharing will be important in this evolving picture. These services account for less than 5 percent of all passenger miles travelled globally at the moment, but this is set to rise to 19 percent by 2040. The BNEF team does not expect autonomous driving to have an impact on global transport and energy patterns until the 2030s. “There are now over a billion users of shared mobility services such as ride-hailing globally. These services will continue to grow and gradually reduce demand for private vehicle ownership.” The main driver for the electrifi-

cation trend over the next 20 years will be further sharp reductions in EV battery costs, thereby making electric cars cheaper than internal combustion engine (ICE) alternatives by the mid-to-late 2020s in almost every market, on the basis of both lifetime costs and upfront costs. Since 2010, the average cost of lithium-ion batteries per kilowatthour has fallen by 85 percent on a mixture of manufacturing economies-of-scale and technology improvements. The oil, electricity and battery industries will all be impacted by the rise of EVs. A year ago, BNEF estimated their impact on road fuel demand at 7.3-million barrels a day by 2040. However, it has now nearly doubled this to 13.7-million barrels a day, partly because of new forecasts

for electrification of the commercial vehicle sector and partly, paradoxically, because ICE fuel efficiency is expected to proceed more slowly than previously thought. BNEF estimates that EVs will add 6.8% to global electricity consumption in 2040, and that they will drive a surge in EV lithium-ion battery demand from 151 GWh in 2019, to 1 748 GWh in 2030. Despite the radical changes afoot, the outlook for road transport emissions remains far from rosy. The BNEF team sees the size of the global on-the-road conventional passenger car fleet continuing to grow until 2030. This means that road vehicle emissions will continue to rise for the next decade, followed by a sharp fall in the years before 2040, which will only return them to levels similar to 2018.

Hyundai Creta gets more glamour with Limited Edition flagship

yundai has bolstered its Creta compact SUV range with a new flagship called the Limited Edition and as the name implies, volumes are limited but the importer is at least offering more than just a handful, with 500 units set to hit showrooms. Numerous styling features set the Limited Edition apart from the ‘ordinary’ Executive models, including two-tone 17-inch alloy wheels, a black roof that contrasts with the white exterior paint, a black and red interior colour scheme with red inserts on the dashboard and red stitching on the leather seats. It also gets an upgraded touchscreen infotainment system with Apple Carplay and Android Auto connectivity. This is in addition to the features already fitted as standard to the regular models, which includes manual air conditioning with additional vents for rear passengers, cruise control, rear park assist with reverse

camera, auto headlights, electric folding mirrors, six airbags (front, side and full-length curtains) and ABS brakes. It is based on the executive model and buyers get the same choice of derivatives, namely a 1.6 normally aspirated petrol in six-speed manual or six-speed automatic guise and a 1.6-litre turbodiesel, mated exclusively to the six-speed autobox. All three derivatives offer front-wheel-drive only. The 1.6-litre petrol engine is rated at 90kW and 150Nm, while the 1.6-litre turbodiesel is good for 94kW and 260Nm.

Toyota provides nearly 24,000 licenses royalty-free

ith consideration for the amount of time, money and resources needed to develop sustainable mobility to help combat rising emissions and continuing to utilize currently available technology, Toyota Motor Corporation (TMC) has announced two measures related to its patents and technical knowledge to further promote the widespread use of electrified vehicles. First, Toyota announced that it will grant royalty-free licenses on nearly 24,000 patents it holds (including some pending applications) for vehicle electrificationrelated technologies. Second, the automaker will provide fee-based technical support to other manufacturers developing and selling electrified vehicles when they use Toyota’s motors, batteries, PCUs, control ECUs, and other vehicle electrification system technologies as part of their powertrain systems.

Global market leader in pursuit of global vehicle electrification

Ultimately, by granting royalty-free patents and providing technical support on its vehicle electrification systems, Toyota aims to help further promote the widespread use of electrified vehicles, and in so doing, help governments, automakers, and society at large accomplish goals related to climate change. www.businessday.ng

The royalty-free patents are advanced technologies found in electrified vehicles, particularly those used in hybrid electric vehicles (HEV) that have helped Toyota realize enhanced performance, reduced size, and cost reductions. More specifically, the patents included are for parts and systems, such as electric motors, power

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control units (PCUs), and system controls.These are core technologies that can be applied to the development of various types of electrified vehicles including HEVs, plug-in hybrid electric vehicles (PHEV), and fuel cell electric vehicles (FCEV). Together, it will offer approximately 23,740 patents awarded over 20 years of electrified vehicle technology development. The grant period will start immediately and last through the end of 2030. Contracts for the grants may be issued by contacting Toyota and discussing specific licensing terms and conditions. It has already been offering 5,680 patents related to its fuel cell electric vehicles (FCEV) since January 2015. Now, Toyota is adding approximately 2,590 patents related to electric motors, 2,020 patents related to PCUs, 7,550 patents related to system controls, 1,320 engine transaxle patents, 2,200 charger patents, @Businessdayng

and 2,380 fuel cell patents (bringing the total of fuel cell related patents to 8,060). As for the fee-based technical support Toyota will offer, specifics include providing overviews of vehicle electrification systems, control guides, and detailed explanations of tuning guides for vehicles that will utilize its systems. The guidance that Toyota will provide, for example, includes helping other automakers to achieve high-level product performance in terms of fuel efficiency, output, and quietness fit for the vehicles they are working to develop. The services will be contract-based. More details will be provided to interested parties. By offering both royalty-free patents and technical support for electrified vehicles, it sees an opportunity to encourage the development and market introduction of electrified vehicles around the world.

Wednesday 05 June 2019

BUSINESS DAY

TRANSPORTATION Motoring

RailBusiness

ModernTravel

Roads

Rail

Time for rail industry to come on board as world go digital

O Lagos-Badagry road project resumes soon, says governor MIKE OCHONMA Transport Editor

elief is on the way for residents and motorists along the decrepit Lagos-Badagry Expressway from Mazamaza to Okokomaiko, as the Lagos state governor, Babajide Sanwo-Olu, has assured Lagosians residents that rehabilitation work would commence on the corridor this month. The new state governor who gave this assurance last weekend during an inspection visit to Lagos-Badagry Expressway, said talks were ongoing with the Chinese Civil Engineering & Construction Corporation (CCECC) being the contractor handling the project to resume work on site once the required financing is in place.

Sanwo-Olu regretted that despite the completion of the highway from the National Theatre to Mazamaza, indiscriminate dumping of refuse and misuse of the road by traders has made the route impassable. He promised that massive clean-up would take place in the coming weeks. The state chief executive stated that, the various infrastructures that had been provided through the project including the rail line, but lamented that, the heaps of refuse littering the area had made it difficult to appreciate the quality of work done so far. He also disclosed that the state government would partner with the Federal Government in finding a lasting solution to the deplorable state of the Okokomaiko, through Agbara to Seme Border axis of the Lagos-Badagry Expressway.

According to the governor, “In this month of June we shall be moving to site. Work will commence on this road, so all the T’s and I’s will be done this week so as to move to site immediately. We will ensure that we firm up discussion with CCECC and move to site because work has been abandoned here for almost four years.” “We started the journey from Orile-Iganmu through Mazamaza, and finally here at the Trade Fair. The road from National Arts Theatre up to Mazamaza has actually been done,’’ adding that the huge refuse on the road has affected the quality of the work done in the area. While also acknowledging that it would be a major task to clear the refuse, he, however, said that work would commence immediately to restore orderliness to the area.

ver the last five decades, Rail transport has faced major headwinds. The transformation of global supply chains has made the logistics business more challenging than ever, with increasing pressure to deliver fast and flexible services at a lower cost. In that quickly-evolving context, freight rail is grappling with fierce competition from road transport which is a trend that will only intensify under the effect of disruptive technologies like autonomous trucks and on-demand mobility services. In addition, railways around the world have been hit by significant government budget cuts, limiting their ability to invest in infrastructure or maintain high service standards. Stiff competitions from roads, which have the door-to-door delivery advantage, have offered added pain. At the same time, railways are in the midst of a profound transformation, driven by emerging digital technologies like 5G, big data, the Internet of Things, automation, artificial intelligence, and blockchain. It is hard to overstate the impact of digitization on the railway sector. In fact, digital technology is disrupting pretty much every component of railway operations such as rolling stock.

Advances in automation, selfdiagnosing, or real-time geo-location tracking mean that trains are becoming considerably smarter and safer. Control and signaling systems: digital systems can radically enhance the reliability and performance of operations. From an infrastructure/asset management standpoint, they also eliminate the need for outdated railway signal boxes and heavy copper wires. Railway infrastructure. Internet of things sensors and devices are opening new possibilities for obstacle and damage detection, preventive maintenance, linkages with other systems, Government agencies, logistics providers, and transport modes. With these breakthroughs, digital development provides a unique opportunity for railways not just to stay relevant, but also to increase their share in the overall logistics market, and to become an integral part of the transition toward greener, more sustainable freight transport. The potential benefits of digitization include: Performance. Automated and predictive systems will lead to fewer delays and breakdowns, optimized dispatching, routing and scheduling, increased capacity with trains running closer together, lower costs, and more.

MODERN TRAVEL

IATA downgrades 2019 global outlook to $28bn from $35bn ….As 290 airlines ends AGM in South Korea

nternational Air Transport Association (IATA) has announced that it downgraded its 2019 outlook for the global air transport industry to a $28bn from $35.5bn forecast in December 2018 amid rising fuel prices and weakening world trade, AFP reported This disclosure made at the end of IATA’s 75th annual general meeting in Seoul last weekend as global aviation when leaders gathered to discuss ways to stay sustainable and tackle challenges in the industry. The event took place alongside the World Air Transport Summit (WATS). The event, attended by more than 800 guests from 290 airlines in 120 countries, their suppliers, governments, strategic partners, international organizations and the media was hosted by South Korea’s flag carrier South Korean Air Lines Co. It was the first time that IATA’s annual general meeting (AGM) came to South Korea, South Korea’s News Agency (Yonhap) reported. At the AGM, IATA announced that it downgraded its 2019 outlook for the global air transport industry to a US$28bn from US$35.5bn forecast in December 2018 due to rising

International Air Transport Association (IATA) Chief Executive Alexandre de Juniac (right) with Qatar Airways Chief Executive Akbar Al Baker (centre) and Korean Air Chief Executive Walter Cho during a press conference after the opening session of the annual general meeting of IATA in Seoul last Sunday.

fuel prices and struggling demand in world trade. Cho Won-tae, the new chairman of Korean Air, the president of this year’s AGM in Seoul said “I hope that the 75th Annual General Meeting will serve as a productive forum in which we’ll be able to bring to www.businessday.ng

light where the gifts of opportunity lie in our industry and how we may approach these opportunities to benefit collectively.” IATA Director General and CEO Alexandre de Juniac said “Creeping protectionist or isolationist political agendas are on the rise, and they

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threaten to compromise the value our industry creates. For aviation to be a catalyst of prosperity, borders must be open to people and to trade.” “Our biggest and most practical opportunity is sustainable aviation fuels and governments also need to act. They should build supportive @Businessdayng

policies to invigorate the sustainable fuels industry. “With the right policy environment, the aviation sector will potentially support 1.5 million jobs and $138 billion in economic activity here in 20 years”. de Juniac said. The International Air Transport Association is lowering its forecast for the airline industry this year to $28bn from $35.5bn amid rising fuel prices and weakening world trade, AFP reported. The Montreal-based IATA said yesterday that “margins are being squeezed by rising costs right across the board, including labour, fuel, and infrastructure.” It said competition among airlines remains stiff and “weakening of global trade is likely to continue as the US-China trade war intensifies,” primarily affecting the cargo business, although passenger traffic could also be hit if tensions rise. IATA members meeting in Seoul also backed a plan that will cap net emissions of the greenhouse gas carbon dioxide from international aviation at 2020 levels. Airlines will have to spend money on carbon reduction measures elsewhere to offset excess emissions.

Wednesday 05 June 2019

BUSINESS DAY

PRIVATEEQUITY &FUNDRAISING

UAC eyes PE financing for distressed Mr Biggs – Sources MICHAEL ANI

igeria’s foremost conglomerate and Marketers of tasty, nourishing convenience foods, United African Company of Nigeria (UACN) is planning on raising financing from Private Equity investors, BusinessDay has learnt from a reliable source The proceeds would be used to give a facelift to the firm’s distressed foods and restaurant business, Mr Biggs, which has been facing turbulent times arising from stiff competitions and poor management structure, according to a source familiar with the matter. “The firm has reached out to several PE players and are currently in talks with two investors who were former staffs of the embattled Dubai –Based PE firm, Abraaj”, the person who doesn’t want the name in print as they are not allowed to speak on the matter said. The source, however, did not disclose the amount the firm plans on raising. UACN was not available to comment when contacted as the phone number on the website of the consumer goods firm was not reachable at the time BusinessDay was filing this report UAC is a Holding Company with a

number of subsidiary, sub-subsidiary and Joint Venture Companies. It is also involved in some strong regional and international partnerships in a bid to enhance sustainable growth. The partnerships are: UAC Foods Limited – a business partnership between Tiger Brands Limited, holding 49 percent of the equity and UAC controlling 51 percent; MDS Logistics Limited, a joint venture with Imperial Logistics, which holds 49 percent equity with UAC controlling 51 percent and UAC Restaurants Limited, where Famous Brands holds 49 per cent of the equity, with UAC controlling 51 per cent. UAC also operates successful joint ventures in the real estate business and technical collaboration with Akzo Nobel for the manufacture of Dulux Paints in Nigeria. Since the inception of UAC as far back as 1879, the firm had enjoyed total goodwill for all its brands controlling about 87 per cent of the Nigerian consumer goods market. However, the tide turned badly for the conglomerate firm with the rise of Fast Moving Consumer Goods ( FMCGs), that posed a severe threat to the strong consumer brand loyalty that the firm had enjoyed over the years. Not only did the firm faced strong competition for its consumer goods brands, it also had to compete for market share in other of its subsidiar-

ies including logistics, real estates and paint making the arm. In 1973, UACN shops were rebranded as Kingsway Rendezvous, and they became Mr. Bigg’s in 1986. The chain witnessed rapid expansion after becoming one of the first Nigerian companies to sell franchises to investors, with Mr. Bigg’s outlets established in about 170 locations in Nigeria, including the country’s first drive-through restaurant, with other four locations in Ghana. The demise of the restaurant arm of the firm could not only be traced to intense competition as the source who spoke to BusinessDay argued that the firms’ goodwill and strong customer base was one of the strengths the company had leveraged on before the so-called competition arose. “The problems of bad management structure, poor corporate governance amongst others are some of the major issues that led to the downfall of the firm”, according to the source. “However, the company hopes to resuscitate the business with the new financing”. While most other food outlets were fully managed by their respective owners, Mr. Bigg’s went the way of a franchise, which many see as not ripe for the Nigerian market. Amid the numerous licencing of the franchise, the firm’s bureaucratic structure also culminated into its

downfall as several attempts aimed at reviewing the process proved abortive. This also affected many attempts at rebranding the restaurant business to meet consumers taste. The franchisor-franchisee agreements were not constantly reviewed as many of the franchise did not work on their total quality management. Most were producing low-quality products and even services as there were events where customers complained about being harassed for money by counter guys and security personnel. “I stopped buying food from Mr Biggs ever since I noticed that they had compromised on their standards”, said a one-time loyal customer of the firm who identified herself as Oluchi. “Their mince-pie became flour/yeastpie alongside the pilfering of their goods, untidy business environments and inflated procurement prices. I doubt if they studied their competitors”, she said. UACN operates a franchise scheme, which covers a five-year window. The Marketing contribution structure done by the firm is a monthly 2 per cent of the net proceeds of sales, which goes to a pool. The marketing department uses the funds towards national advertising and local in-store activations – from which the whole Mr. Bigg’s franchise system will benefit.

BusinessDay PRIVATE EQUITY & FUNDRAISING (Team lead: LOLADE AKINMURELE - Analysts: MICHEAL ANI, DIPO OLADEHINDE, ENDURANCE OKAFOR, DAVID IBEMERE ... Graphics: OGAR DAVID ) Businessday’s Private Equity and Fundraising section is a weekly publication that provides in-depth analysis on private equity trends and tracks deal activity in Nigeria.

Email the PE & F team loladeakinmurele@gmail.com

Continues on page 34

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news NNPC still dithering 3 years after... Continued from page 1

porated as a limited liability company; NOCN will

be governed according to the governancerulesoftheNigerian Stock Exchange prior to the listing of its shares, and by the rules of any bourse where its shares are eventually listed,” it said. Three years after the plan was submitted and approved by FEC, however, BusinessDay findings indicate that the status quo remains as little or no structural change has taken place in the NNPC. The NNPC is still an opaque enigma, with analysts questioning the correctness of the figures the corporation prints as revenue to the Federation Account. There is also lack of clarity over what is really being proposed for listing. “If you say you want to list the NNPC, is it the upstream or downstream segment?” asked Ode Ojowu, professor of economics and former head of National Planning Commission.

NNPC has subsidiaries in upstream and gas processing that include the Nigerian Petroleum Development Company (NPDC), Integrated Data Service Limited (IDSL), National Engineering and Technical Company Limited (NETCO), Nigerian Gas Company Limited (NGC), and Nigerian Gas Marketing Company (NGMC). These subsidiaries made N43.3 billion, according to figures from the NNPC’s operations and financial report for January 2019 actual, but this revenue was wiped off largely by the corporation’s downstream subsidiary operations which recorded deficits north of N32.1 billion. “Understand that the four refineries we have were registered as independent companies and they still report to the NNPC. The NNPC needs to be unbundled first. The refineries need to be put in a competition mode,” Ojowu said. Analysts agree that the decision to list NNPC is a step in the

right direction. A listed NNPC will not only drive huge capital accumulation in Nigeria, it also means the country will count on market forces to determine oil production, retail price for products and proper deregulation of the oil sector. Auditing and preparing the NNPC books for Initial Public Offer (IPO) implies showing the total and current disclosure of reserves capacity, total revenue, profitability, taxes, and other key metrics which are needed in modelling the profitability of NNPC plc and potential dividend it could pay to investors. A listed NNPC will lift Nigeria’s oil sector out of recession and uplift the country’s oil and gas reserves which have remained stagnant or dwindling while oil production has been on a decline. It also means huge gas reserves estimated at 182 trillion cubic feet (TCF) could help feed power generation for energystarved Nigeria. These reserves have largely remained undeveloped more than 20

years after they were discovered – due largely to NNPC’s inability to either fund the CapEx needed to develop the fields or let go of the fields for private oil firms to develop. “Privatising state enterprises is an innovative strategy to catch foreign investors. It will help improve efficiency, provide financial relief, boost diversified ownership and increase the availability of funds for private sector,” said Olayinka Olohunlana, a Lagos-based economic analyst. But Ojowu believes that to follow through with the NNPC listing, many outstanding issues need to be sorted out first. “Many people are counting on Dangote Refinery. This is dangerous because we are creating a monopoly for an indispensable commodity. There are really many outstanding issues to be resolved first,” he said. Ibe Kachikwu, former minister of state for petroleum resources, in an interaction with senior journalists in Abuja last week, said the

NNPC was not yet ripe for listing as there was still a lot more work to be done. “I have been telling the management of NNPC to enter a pre-listing mode. This does not mean it is happening any time soon but it involves publishing audited reports as at when due, with internal controls in place,” Kachikwu said. NNPC is not the first stateowned oil company that has either proposed to list or listed. Brazilian state oil company Petrobras was created in 1953 and sold its first shares to the public in December 1957. It listed on the Ibovespa or Brazilian stock market. The Brazilian government directly owns 54 percent of Petrobras’ common shares with voting rights, while the Brazilian Development Bank and Brazil’s Sovereign Wealth Fund each control 5 percent, bringing the state’s direct and indirect ownership to 64 percent. The non-state controlled shares are traded on BM&F Bovespa, where they are part of the Ibovespa index. In September 2010, the

World Bank revises Nigeria’s growth... Continued from page 1

Nigeria’s economy slowed to 2.1 per cent in the first quarter (Q1) 2019, according to the National Bureau of Statistics (NBS). In its Global Economic Prospects released on Tuesday, the World Bank said growth in Angola, Nigeria, and South Africa, thethreelargesteconomiesofthe region, has remained subdued in 2019. In Nigeria, the recovery in oil production has fallen short of expectations, as policy uncertainty constrains investment in new capacity, while weak domestic demand amid a challenging business environment has dampened non-oil growth. Reacting to the growth forecast by the World Bank, Ayodele Akinwunmi, head of research at FSDH Merchant Bank Limited, said Nigeria has the capacity to grow much more than the World Bank’s predictions. He said this should be a challenge to Nigerian government to implement policies that will support and exceed the growth forecast. The report stated that the recovery in sub-Saharan Africa fell short of forecasts at the beginning of the year, with weakening external demand, supply disruptions, and elevated policy uncertainty weighing on activity in major

economies. Growth in the region is expected to pick up to a lower-than-expected 2.9 percent this year. AccordingtotheWorldBank, regional growth is expected to accelerate to 3.3 percent in 2020, assuming that investor sentiment will improve toward some of the large economies of the region, that oil production will recover in large exporters, and that robust growth in non-resource-intensive economies will be underpinned by continued strong agricultural production and sustained public investment. While per capita GDP is expected to rise in the region, it willbeinsufficienttosignificantly reduce poverty. Even in areas where pushing back poverty has madeinroads,economicgrowth has been concentrated in urban areas, providing little benefit to the rural poor. The Washington-based bank said growth in Nigeria is anticipated to edge up to 2.2 percent in 2020, but foreign exchange restrictions, supply disruptions in the oil sector, and a lack of needed reforms are seen as constraints to stronger growth. Elsewhere in the region, growth is expected to rise to 4.9 percent next year. The recovery among industrial commodity

Insurers’ claims rise 16.88% to N132.54bn... Continued from page 2

as there is more liquidity in the system following a new foreign exchange policy by the central bank and a rebound in crude oil price. Julius Elusakin, analyst at NEM Insurance plc, said mounting obligations to policy holders are expected because more people are getting aware about their responsibility to claim their losses. He added that the support from NAICOM, the industry regulator, to assist customers to

access their claims also helped, adding, however, that it relates to corporate business. “The claim frequency for motor vehicle has been high from our end. As the population is growing so is the rate of accident getting high,” said Elusakin. The National Bureau of Statistics (NBS) in its latest figures indicated that there were about 11.8 million licensed cars on Nigeria’s roads as at Q4 2018, compared to 11.6 million in the corresponding period of www.businessday.ng

company raised as much as $70 billion in the world’s largest share sale to help finance its $224 billion investment plan to develop newly discovered oil fields. In Malaysia, Petronas, the state oil and gas company founded in 1974, was initially wholly owned by the government. Petronas has since listed at least three of its subsidiaries in the Bursa Malaysia or Kuala Lumpur Stock Exchange. Other oil companies closely identified with the state but now listed on stock exchanges include Statoil of Norway and Gazprom of Russia. Saudi Arabia also plans the mother of all IPOs for its state oil company Aramco. The IPO is the cornerstone of Prince Mohammed bin Salman’s economic programme to transform Saudi Arabia, dubbed Vision 2030. Saudi officials hope they will raise $100 billion by selling about 5 percent in the company, valuing Aramco at $2 trillion although the market is valuing it at $1 trillion. L-R: Ogochukwu Isiadinso, associate director, Andersen Tax; Margaret Olele, CEO/executive secretary, American Business Council (ABC); Joshua Bamfo, partner/ head, transfer pricing, Andersen Tax; Tunde Fowler, executive chairman, Federal Inland Revenue Service (FIRS); Chinedu Ezomike, partner and head, commercial practice, Andersen Tax, and Adejimi Adeduran, associate director, Andersen Tax, at the breakfast meeting themed ‘How tax policies can improve ease of doing business in Nigeria’ in Lagos. Pic by Pius Okeosisi

exporters will be supported by investment in new oil and gas capacity in Cameroon and Ghana, and increased mining in metal exporting countries, including Democratic Republic of the Congo and Guinea. The outlook, the World Bank said, is subject to several downside risks. A sharperthan-expected deceleration of activity in key trading partners – China, the Euro Area, and the United States – could weigh on growth. Lower-than

expected commodity prices would further pose a risk to the growth outlook, it said. Global economic growth is forecast to ease to a weakerthan-expected 2.6 percent in 2019 before inching up to 2.7 percent in 2020. Growth in emerging market and developing economies is expected to stabilise next year as some countries move past periods of financial strain, but economic momentum remains weak. Emerging and developing

economy growth is constrained bysluggishinvestment,andrisks are tilted to the downside. These risks include rising trade barriers, renewed financial stress, and sharper-than-expected slowdowns in several major economies, the World Bank said in its June 2019 Global Economic Prospects: Heightened Tensions, Subdued Investment. Structural problems that misallocate or discourage investment also weigh on the outlook. “Stronger economic growth

is essential to reducing poverty and improving living standards,” said World Bank Group President David Malpass. “Current economic momentum remains weak, while heightened debt levels and subdued investment growth in developing economies are holding countries back from achieving their potential. It’s urgent that countries make significant structural reforms that improve the business climate and attract investment.”

2017. According to the report, Nigeria witnessed a 2 percent increase in the number of licensed cars year-on-year, from Q4 2017 to Q4 2018. A breakdown of the figures shows Leadway Assurance’s net claims increased by 25.44 percent to N34.41 billion in December 2018, from N27.41 billion as at December 2017. Loss ratio moved to 48.06 percent in the period, from 39.28 percent the previous year. AXA Mansard Insurance plc’s claims expenses rose by 27.18 percent to N12.13 billion intheperiodunderreview,from

N9.53 billion the previous year. Custodian Allied Investment Insurance Plc’s claims expenses were up 10.07 percent to N15.30 billion in the period under review as against N13.90 billion the previous year. AIICO Insurance’s claims expenses increased by 14.89 percent to N23.86 billion in the period under review, from N20.77 billion the previous year. FirstBank Insurance’s claims expenses were up 9.50 percent to N4.71 billion in December 2018, from N4.30 billion as at December 2017.

Consolidated Hallmark Insurance’s net claims were up 26.48 percent to N1.80 billion in December 2018, from N1.42 billion as at December 2017. Loss ratio increased to 42.12 percent in the period under review, from 38.63 percent the previous year. Law Union and Rock Insurance’s claims surged by 328.83 percent to N1.60 billion as at December 2018 while loss ratio moved to 54.71 percent in December 2018, from 14.26 percent the previous year. The National Insurance

Commission (NAICOM) has increased the minimum paid-up capital of insurance companies in Nigeria by over 300 percent. In the new capital base, life insurance companies will now have a minimum paid-up capital of N8 billion from the previous N2 billion, general insurance companies will now have to recapitalise to N10 billion from N3 billion, while composite insurance companies will now need N18 billion to underwrite businesses, from the previous N5 billion minimum capital.

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Wednesday 05 June 2019

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news Anthony Joshua may lose million-dollar sponsorship deals over Ruiz defeat Anthony Nlebem

ritish boxer, Anthony Joshua’s surprise defeat to Mexican-American boxer, Andy Ruiz Jr. in New York, on Saturday night, has raised serious doubts among advertisers, who are likely to pull the plug on his multi-million dollars sponsorship deals. Boxing analysts did not foresee the 29-year-old ceding his WBA, WBO, and IBF titles in such dramatic circumstances. All the talk before the bout had focused on whether Joshua, previously undefeated in his first 22 professional fights, would next take on a highprofile opponent in Deontay Wilder or Tyson Fury. “Anthony Joshua’s invincibility has gone and he is now just a mere mortal,” said former British heavyweight, David Haye. Anthony Joshua was paid $25 million, while Andy Ruiz

Jr. got $7 million for their fight at Madison Square Garden, in which Joshua lost the WBA, WBO, and IBF Heavyweight Championships to Ruiz. Not only is Anthony Joshua a formidable force in the ring, he boasts of an impressive portfolio of commercial endorsements. The former heavyweight champion has quickly become a lucrative figure in his own right, striking deals with big name brands such as JD, Lucozade Sport and Beats and many more. Ranging from clothing to television and cars, Joshua has an extensive collection of endorsements from which he reportedly earned £2.7 million in 2017. Team AJ brand depends very much on Joshua’s success. With over 240,000 tickets reportedly sold for his previous three fights and an impressive 22-match winning streak, the British star’s image is bigger

than ever. In 2015, Joshua embarked on a joint venture with Freddie Cunningham and set up their own company, AJ Boxing and Commercial, primarily earning money through 13 sponsorship deals. This collection of sponsors is the marketing force behind ‘Team AJ,’ promoting the brand and its image across a wide range of platforms. Joshua’s deal with promotional company Matchroom Sport is believed to be worth £100 million in itself, while Forbes reported endorsement figures of $7 million for 2017. He invested in BXR gym in London and is provided with a set of wheels by Land Rover while the Londoner also has deals with Lucozade, Lynx, JD Sports, StubHub and Bulk Powders. Joshua reportedly earned £15 million from the bouts with Wladimir Klitschko and Carlos Takam, respectively, with total

winnings suggested to be $32 million as of May 2018. He boasts an incredible record of 21 knockouts from 22 fights, most recently defeating Alexander Povetkin by TKO in September 2018. According to Forbes, Joshua made $22 million in 2017. The bulk of those earnings ($18.5m) came from his two fights against Klitschko and Carlos Takam. Endorsements added $3.5 million to his total earnings. A breakout year for the rising talent doubled his bank balance. According to Celebrity Net Worth, as reported by the Daily Star, Anthony Joshua’s net worth is now estimated at around $45 million. AJ is on the verge of losing out in money spinning endorsement deals and in the next couple of months, and will be preparing for a massive world heavyweight rematch in a bid to reclaim his WBA, IBF, and WBO titles and retain his million dollars endorsement deals.

Time for sharing government money is over in Edo - Obaseki … warns tricycle, motorcycle operators against flouting ban

do State governor, Godwin Obaseki, has restated his commitment to serve Edo people, stressing that the time for sharing public funds to a few greedy politicians in Edo was over. The governor, who said this when he received Muslim faithful who were at the Government House to celebrate the end of the Ramadan fast, noted that he would not be distracted from fulfilling his promises to the people no matter the antics of detractors. According to Obaseki, “Only God gives power. What is going on in Edo State is the handiwork of detractors who want to frustrate the administration so we can fail in delivering the dividends of democracy to the people. But that will never happen. As a governor, I will continue to do my best and spend the state’s resources to ensure Edo people get the best.” He urged his guests to “continue to pray for the administration to succeed.” Noting that he would not succumb to pressure to share the people’s money to a few greedy persons, he said, “The election is still a year ahead. What is playing out is a plan by very few greedy people who are concerned about themselves. We will continue to do our best in paying our workers and pensioners and will continue to develop the

state as the time for sharing money is over. The resources of the state are meant for the people of the state.” He said he would continue to support the Muslim Community, noting that this was the first time he would be receiving Muslims at the Government House during a celebration like Sallah after the resolution of the crises at the Benin Central Mosque. Chief Imam of Benin Central Mosque, Abdulfatai Enabulele, expressed appreciation to the Governor for receiving the Muslim community, thanking him for his support. “We know leadership entails a lot of responsibility as we have witnessed your developmental strides in the state. We will continue to support and pray for your success. You have done a lot in delivering the dividends of democracy to the people of Edo State. Your administration has provided pragmatic, dynamic policies and programmes that have touched the lives of the people of Edo State,” he said. Meanwhile, the state government has restated the ban on tricycle and motorcycle operators from operating on major roads and streets in the state, warning commercial and private motorists as well as transport unions to desist from flouting the directive or risk prosecution by relevant agencies.

SEEDi tasks Buhari on quick ministerial nominations Josephine Okojie

L-R: Paul Akinde, acting registrar, Momas Metering School; Shittu Shuaib, deputy general manager, Consumer Affairs, Nigerian Electricity Regulatory Commission (NERC); Kola Balogun, chairman, Momas Electricity Metering Manufacturing Company Limited (MEMMCOL); Isaac Olorunfemi, chairman, Academic Board, Momas Metering School, and John Shoile, faculty member, Momas Metering School, during the graduation of the first set of student of the Metering School held at the Training School, Orimerunmu, Mowe, Ogun State.

Peterside seeks support for developing Africa’s ocean economy AMAKA ANAGOR-EWUZIE

hairman of Association of African Maritime Administrations (AAMA), Dakuku Peterside, has called on developed nations and corporate bodies to support Africa and other developing nations in building capacity and regulatory enforcement needed to maximise benefits of ocean economy. Peterside, who made the call in Oslo, Norway, at the ongoing world renowned ‘Nor Shipping Conference & Exhibition,’ noted that ocean industries would be contributing to sustainable development goals only when both developing and developed nations benefit

in a sustainable manner. The high-level ocean leadership meeting is organised by United Nations Global Compact and the Norwegian government, and it is holding at the residence of the Prime Minister of Norway as part of activities to mark the 2019 edition of ‘Nor Shipping’ engagements. Peterside, who doubles as the director-general of the Nigerian Maritime Administration and Safety Agency (NIMASA), also said 38 of Africa’s 54 nations were either coastal or island states that were faced with the same challenges as other coastal states globally. He listed the challenges to include pollution, climate

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change, poor ocean governance, overfishing, insecurity and marine litter, among others. According to Peterside, developing and small island states need partnerships in two principal areas, especially in building regulatory enforcement capacity and developing the skills and technology needed to tap into the ocean economy in a sustainable manner. He however challenged the private sector companies in offshore exploration and other ocean related economic activities to apply the same operating and environmental standards across the globe, and not have two different

standards, one for developed nations and another for developing nations. “Applying same standards will ensure no one is left behind in our collective quest for clean and sustainable ocean, which supports economic prosperity. Responsible ocean governance and economic opportunities are not mutually exclusive but complementary,” he said. Also speaking, Lise Kingo, CEO of UN Global compact, said the forum had a specific mandate to work with and inspire companies of all sizes and from all regions and industries to act responsibly and find opportunities to advance sustainable development.

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he Sustainable Entrepreneurship and Economic Development Initiative (SEEDi) has called on President Muhammadu Buhari to without delay, begin the process of constituting his cabinet ahead of the inauguration of the ninth National Assembly. According to it, the Nigerian economy is faced with a myriad of challenges that have continued to increase the misery and suffering of a large number of Nigerians, making it mandatory for the President to quickly nominate ministers

and other key members to keep the economy running without any form of delay. “We call on President Buhari to include portfolios for each nominees that will be sent to the National Assembly and as such, the culture of sending in nominations to the National Assembly without attaching the offices for which the ministerial nominees are been considered for does not reflect the seriousness ministerial nominations should be given,” Celestine Okeke, lead partner, SEEDi, said in a statement made available to BusinessDay.

CHANGE OF NAME

I, formerly known and addressed as Ngozi Jacinta Onochie now wish to be known, and addressed as Ngozi Jacinta Nwamu. All Former documents remain valid. General public please take note.

I, formerly known and addressed as Chinyere Iheoma Anyanwu now wish to be known, and addressed as Chinyere Iheoma Ibe. All Former documents remain valid. General public please take note.

CHANGE OF NAME

CONFIRMATION OF NAME

I, formerly known and addressed as John Joy Kapcit now wish to be known, and addressed as Kwamkkur Joy Kapcit. All Former documents remain valid. General public please take note.

I am same person bearing Oyediran Eunice Bolaji, Olowookere Eunice Bolaji and Joseph Funmilayo. Henceforth, I want to be addressed as Olowookere Eunice Bolaji. All former documents remain valid. Banks, general public should take note.

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NEWS SDG innovation winner, CYCDI, rejoices with Sanwo-Olu

Afreximbank, JBIC sign $300m export credit line agreement for projects in Africa

igeria’s United Nations Action Award winner for Sustainable Development Goals (SDG) in 2018, CYCDI (Creative Youth Community Development Initiative) has congratulated the newly sworn-in governor of Lagos State, Babajide Sanwo-Olu, on his assumption of office. In a statement issued in Basel, Switzerland, CYCDI CEO/ project director, Foluke Michael, extolled Sanwo-Olu and wished him a highly successful tenure in office, underscoring that Lagos is blessed to have a highly cerebral chief executive with positive credentials and enviable track record of performance to effectively deliver on the ‘Towards a Greater Lagos’ agenda. Michael indicates that of all states in Nigeria, Lagos still possesses the biggest potential to give expression to the values of the United Nations SDGs solution, majorly deriving from its ever-growing population and the focus of earlier administrations in the state towards achieving a sustainable Mega City status. “We at CYCDI are indeed very happy that Lagos State has a new governor, who among other qualities possessed, is a believer in the SDGs cause, which means

HOPE MOSES-ASHIKE

that creative solutions to curb and eliminate world problems as proposed by the United Nations would receive fair attention and better implementation under his administration,” she says. She states that the THEMES agenda of the Sanwo-Olu government perfectly resonates with the SDGs, and with proper implementation will put Lagos on the path of Sustainable City and Communities, a key element of the goals. In 2018, CYCDI’s work for driving SDGs gained global acclaim as it was recognized as the most creative solution and earned Michael, UN Action Award for innovation at the global SDG Summit. The process to replicate CYCDI’s Solution 17 model is currently ongoing in Morocco and India, while she has been a guest of several SDGs platforms to share ideas behind the model. To further drive the initiative, CYCDI has partnered with one of Nigeria’s leading strategic management outfits, CITC, to help expand on the offerings of her creative product; Solution17, which earned her the award and has put the organization on world map as one of the frontline campaigners of the goals.

he Afr ican E xpor tImport Bank (Afreximbank) and the Japan Bank for International Cooperation (JBIC) have signed a general agreement for a $300-million export credit line, which can be availed in US dollars and euros, to support projects in Afreximbank member states. The credit line, signed in Cairo on May 31, 2019, will enable Afreximbank provide funds for the import of machinery and equipment from Japanese companies and their overseas affiliates to support projects in the bank’s 51 member countries in Africa. Demand for machinery and equipment, which are needed for economic development, is expected to continue to expand in Africa and the credit line will support the efforts of Japanese companies and their overseas affiliates to expand exports to the Africa region. It will also help to further strengthen the economic relationship between Japan and Africa. Speaking at the signing

ceremony, George Elombi, Afreximbank’s executive vice president for Governance, Legal and Corporate Services, said the facility fully aligned with the bank’s strategy and mandate to support quality growth throughout the continent. “Through this forged strategic partnership and its shared objectives, we are confident that this relationship will promote Japan-Africa economic cooperation,” he said. Also speaking, Nobumitsu Hayashi, deputy governor of JBIC, said Africa was a land of opportunities with its diverse cultures and wealth. He said JBIC had found in Afreximbank a valuable, strong and credible partner to help it with its mission to grow its level of activity in Africa in line with the broader Japan-Africa initiatives being driven by the Japanese government. JBIC is a Japanese public financial institution and export credit agency created on October 1, 1999, through the merger of the Japan ExportImport Bank and the Overseas Economic Cooperation.

Glo showcases products for SMEs’ productivity

lobacom has called on Micro, Small and Medium Enterprises (MSMEs) in the country to utilise many of the telco’s solutions designed to promote productivity and profitability. Adekunle Adeleke, head, oil and gas, Glo Business Solutions, in an interview on the sidelines of the twoday African Food and Products Exhibition organised by the Nigerian-American Chamber of Commerce in Lagos, said Globacom, in a bid to enhance the efficiency of small businesses, had rolled out a bouquet of solutions with pocket-friendly rates. “We understand that no two businesses are alike and that each has its own unique needs. To address these needs, we offer a range of customised and communi-

ty-driven voice and data connectivity solutions that help to manage different networking systems,” Adeleke said. “These include internet connectivity, mobile money solutions, Wide Area Connectivity (WAN), credit check for post-paid subscribers, and mobile solutions for establishments,” he said. Adeleke said the company has an extensive infrastructure that covers the entire country, adding that the company’s reliable network was providing a solid platform and connectivity for digital transformation that will make small and medium businesses competitive all over the world. He said the company was a business enabler, always willing to assist businesses to design specialised ICT solutions that would match their needs.

Gas flaring, poisoned water, soot, may wipe off Niger Delta – group … calls for urgent measures Ignatius Chukwu

hree major factors in the pollution industry may wipe off majority of the Niger Delta population, if urgent steps are not taken, according to a human rights activist group. The head, Environment and Conservation Programme of the Centre for Environment, Human Rights and Development (CEHRD), warned on Tuesday, June 4, 2019, in Port Harcourt, Rivers State, that high levels of gas flaring, poisoned water and soot had caused over 90 percent pollution in the region. There is evidence that 92 percent of people globally do not breatheincleanair,andthatground level ozone pollution is expected to reduce staple crop yields by 26 percent by 2030, the CEHRD said. “This spells doom for the Niger Delta region whose primary livelihood is agriculture. Most unfortunate is the perennial soot that has characterised ambient air quality in coastal communities in the Niger Delta. Specifically, for over three years, Port Harcourt and many communities in Rivers State experience intense suspended particulate matter (also known as soot) that has caused myriad of health, environmental and socio-economic challenges for the citizenry,” it said. “Evidence also linked heightenedairpollutionintheNigerDelta todifferentrespiratorytractdiseases, skininfections,breathingdifficulties andothersocio-economicdefects,” according to the Group. On this score, CEHRD joined the world to mark the 2019 World Environment Day tagged “Air Pollution.” “We can’t stop breathing but we can do something about

the quality of air we breathe.” He said the 2019 World Environment Day celebration which focuses on ‘greening the blue’ could not have come at a better time given the increasing use of fossil fuels globally, which alters air quality with a measure of biological, chemical or physical pollutants. Chemical, biological or physical pollutants. Environmental degradation is a major issue, which affects human and ecosystem well-being and economic development. Not muchhasbeendoneindeveloped and developing countries to addressissuesrelatedtoairpollution, as most economies remain fossil fuel dependent. The concern is grave in developing ones given that they lack effective mitigation policies and technologies and form the base of impact sufferers. Specifically, he said, “Nigeria is the top oil producer in Africa and 6th globally. The 2019 World Environment Day theme contributes to several aspects of the sustainable development goals (SDGs), including climate action, life on land, and life below water. These SDGs form the major environment burden for people in the Niger Delta region of Nigeria, as the traditional livelihood structures of the people -farming and fishing, are tied to the goals. “Unfortunately, Nigeria still flares daily millions of metric tones of commercially viable crude oil associated natural gas, while the hub of oil production, the Niger Delta, consistently experience dark clouds and soot occasioned by diverse flaring activities. The Nigeria Government has proposed many dates to end gas flaring in the country but none has been achieved due to the ad-hoc approach adopted. www.businessday.ng

L-R: Emmanuel Bakare, manager, 2019 Shift Project, Redeemed Christian Church of God (RCCG); Zikiael Odeyemi, AGO/ coordinator, Northern region, RCCG, and Odun Emajealu, regional youth pastor, RCCG, during a press briefing by the Youth Initiative of Redeemed Christian Church of God (RCCG) on the forthcoming Youth Empowerment conference tag: ‘Abuja Shift 2019: The Emergence’ in Abuja. Pic by Tunde Adeniyi

Nigeria missing as global crude steel production up 6.4% y/y MIKE OCHONMA

rude steel production in 64 c o u nt r i e s t hat report to the World Steel Association (Worldsteel) increased by 6.4 percent year-on-year to 156.7 million tons in April, according to Worldsteel report. While Nigeria fails to make the chart of top steel

producers in the world, other European and Asian countries are having swell time on the worldwide production log. China’s crude steel production for April was 85 million tons, representing a 12.7 percent y/y increase. India produced 8.8 million tons of crude steel, which was up 1.5 percent y/y, while Japan produced 8.6 million tons of crude steel

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in April, which was 0.8 percent lower y/y. South Korea produced 6 million tons of crude steel, which was 1.4 percent more than that produced in April 2018. On the other hand, Italy produced 2 million tons or 5.7 percent decrease y/y, while France recorded an 8.1 percent y/y decrease in output to 1.3 million tons. Spain’s production was @Businessdayng

4.4 percent lower y/y at 1.3 million tons. The US increased its output by 7.3 percent y/y to 7.4 million tons. South Africa’s steel output increased by 18.5 percent y/y to about 576,000 tons, whereas Egypt’s production increased by 18 percent y/y to 726,000 tons in April. Worldsteel members represent around 85 percent of global steel production.

Wednesday 05 June 2019

BUSINESS DAY

POLITICS & POLICY

APC takes stock, laments internal crisis ...Blames Oyegun, disowns Lawal James Kwen, Abuja

he ruling All Progressives Congress (APC) has lamented the internal crisis rocking the party, resulting in the revocation of various elections won by it at the 2019 general election. In the aftermath of the general election, APC has witnessed disputations among some party leaders on account of post-primary issues and some losses recorded in some states, through the ballots or courts. APC accounts for 90percent of Certificates of Return withdrawn from wrongly nominated and elected candidates by the Independent National Electoral Commission (INEC) following court orders such as in Zamfara State where the ruling party’s victory was overturned by the Supreme Court and awarded to the main opposition People’s Democratic Party (PDP). Lanre Issa-Onilu, APC national publicity secretary, in an interview with journalists said if Oyo, Imo, Bauchi, Adamawa, and Zamfara States were taken one by one, it would be discovered that there were peculiar issues in the respective states that accounted for how the APC lost them rather than the voters preferring the PDP. “I would put the painful outcomes broadly under two reasons. One is indiscipline on the part of some members of our party in most of the states. The second reason is that the party leadership did not do much between 2015 and 2018 to move the party from being an amalgam of different political parties to become a truly blended progressive political party,” IssaOnilu stated. He said the next three years are very important as the APC under the leadership of the National Chairman, Adams Oshiomhole will continue to strengthen compliance with the rules, build support structures for democracy, ensures discipline across board, and deliver good governance for the benefit of all Nigerians. “We expect members who have different agenda to join their kind in PDP. We will welcome with open arms, those who share our progressive ideals, so that by 2022, we will have a party whose members are truly progressives,” the APC spokesman said. ‘Oyegun-led NWC accommodated impunity, certain members were superior to the party’

John Odigie-Oyegun

The APC spokesperson said the immediate-past National Working Committee led by John Odigie-Oyegun as national chairman lacked the courage required to confront the pockets of political despots who could not operate by the party’s rules. He said, this resulted in widespread indiscipline across party ranks, lack of respect for party supremacy as witnessed in the 8th National Assembly leadership and its overall inability to align the varying interests of the legacy parties that came together to form the APC in 2014. “Let me agree that the NWC that led the party into the 2015 elections and continued till June 2018 did nothing different from what you would find in PDP. It was a period the party was seen as a mere vehicle to attain political office. The system accommodated impunity as certain members appeared to be superior to the party. Their interests were far more important than the collective interests of the APC, even when most times such interests are at variance with the ideals the party stand for. “You would recall that it was under that leadership that some impudent members of APC called the bluff of the party by imposing themselves on the National Assembly as leaders contrary to the position of the party. Where was the party? Where was the discipline when this happened? It would be difficult to calculate what lack of courage to assert the party supremacy cost APC over that period. The consequences of the inaction of the party were unimaginable. We all saw the consequences on governance as www.businessday.ng

Lanre Issa-Onilu

the National Assembly practically held our government to ransom. The impunity, which President Muhammadu Buhari has rightly described as lack of patriotism, constituted an unfortunate hindrance to the smooth running of government. “The leadership under Chief Oyegun, with due respect to him, condoned all sorts of acts of indiscipline from certain members. It is not surprising that the current National Working Committee inherited such a huge mess, where the party was struggling to differentiate itself from the delinquent PDP. We all know that PDP was practically dead following the devastating defeat of 2015. The PDP bounced back not because the party has changed its insidious way or did anything different, but because APC did not live up to expectations. “It goes without saying that when an organisation is unable to enforce its own rules, it would suffer the consequences sooner than later. We should not be ashamed to say that our party’s leadership under Chief Oyegun lacked the courage required to confront the pockets of political despots who could not operate by the party’s rules”,

he stated. Letter by Party’s Deputy National Chairman (North), Senator Lawal Shuaib Issa-Onilu said Lawal Shuaib’s assertions in the letter to the National Chairman portrayed the NWC as a bunch of cowards looking for a scapegoat to pass on the blame following undesired results in his home state, Zamfara. “When he [Senator Lawal Shuaib] alleged that the National Chairman is running the party like a sole administrator, does that mean the rest of us are incompetent? I doubt if he would have many members of the NWC supporting him on this. The ability to face up to the challenges and to take responsibility for mistakes is important quality of a leader. If the NWC had taken any action that did not produce the desired result, it would be plain cowardice to look for a scapegoat or pass on the blame to another person. “Since the Comrade Oshiomhole-led NWC came to office, we have been doing our best to institutionalise the best ideals of progressive politics. We understand that we must bring everyone under the fold of the party, where all of us would be subject to our party’s

‘

It goes without saying that when an organisation is unable to enforce its own rules, it would suffer the consequences sooner than later https://www.facebook.com/businessdayng

rules and conventions. We understand that impunity can provide temporary advantage and even successes. But ultimately, those successes would be short-lived. PDP is a living example of the inherent calamity of impunity. The PDP era brought calamity to the country and ultimately led to the loss of power. What I read from that letter is a call to continue along that trend. With due respect, that is not what APC stands for,” he maintained. ‘Under Oshiomhole, APC improved significantly on 2015 results’ Despite some 2019 election losses recorded in some states, Issa-Onilu affirmed that the APC has improved significantly on the result of 2015 under the leadership of Oshiomhole. He said the National Chairman cannot be blamed for the avoidable losses recorded in some states as some stakeholders failed to follow the party’s directives and ensure internal democracy. “Since we are comparing 2015 to what has happened now, we should remember that our President was elected in 2015 with over 15 million votes as against the PDP’s 13 million plus. There was about 2.5 million votes difference. Under Oshiomhole, we have over 15 million votes as against PDP’s 11 million plus. There, you have nearly four million votes difference. So, for the Presidential election, our party has improved significantly on the result of 2015,’ he said. According to him, “The situation was expectedly different at the state level. The state @Businessdayng

players have the foremost responsibility to win elections in their states. What we can do at the national level is to provide the necessary support. The support starts from conducting transparent primaries that ensure the party produces popular candidates. Of course, certain state players in our party expected business as usual where other players are subjugated for them so that their wishes are imposed on other APC members in their states. This we could not do and I don’t think we need to apologise for doing the right thing. By now, the states that failed to follow the party’s directives are the ones that may be regretting. “We have examples of governors who are true progressives; who worked with the NWC to ensure things were done right. Look at Kaduna, Plateau, Niger, Kano, Nasarawa, Katsina, Jigawa, Borno, Yobe, etc. The governors and leaders of APC in these states worked according to the rules in conjunction with the NWC and we all can see that the sweetest victory is the one achieved under a free and fair engagement with the opposition.” The party’s national secretary further said: “This is what our party wants to showcase. This is the example President Buhari has shown by ensuring that we had a presidential election in this country without seeking to award himself any advantage over his opponents. The President has the instruments to use under him, but he rather subjected himself to the rules of the contest. If the President did not expect the party to manipulate his own election, why should anyone else expect that from the party? “These people who are looking for who to blame are not talking about Kwara and Gombe. These were PDP states that we won landslide. We won in these two states because the local players adjusted to the change agenda of the party. I am from Kwara, we won 100 percent in such a transparent manner that the PDP had nothing to complain about. Do not forget that the Senate President, Bukola Saraki is from Kwara. Kwara presented us the evidence that if we shun impunity and play by the rules, Nigerians would reward us with votes. The same is the situation in Gombe. Do these people want to give Oshiomhole credit for our victories in Kwara and Gombe states? Or they just believe APC must win by all means everywhere?”

Wednesday 05 June 2019

BUSINESS DAY

tax issues Digitalisation: International community agrees on road map for resolving tax challenges Iheanyi Nwachukwu

he international community has agreed on a road map for resolving the tax challenges arising from the digitalisation of the economy, and committed to continue working toward a consensus-based long-term solution by the end of 2020. The 129 members of the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) adopted a Programme of Work laying out a process for reaching a new global agreement for taxing multinational enterprises. The document, which calls for intensifying international discussions around two main pillars, was approved during the May 28-29 plenary meeting of the Inclusive Framework, which brought together 289 delegates from 99 member countries and jurisdictions and 10 observer Organisations. It will be presented by OECD Secretary-General Angel Gurría to G20 Finance Ministers for endorsement during their 8-9 June ministerial meeting in Fukuoka, Japan.

Drawing on analysis from a Policy Note published in January 2019 and informed by a public consultation held in March 2019, the Programme of Work will explore the technical issues to be resolved through the two main pillars. The first pillar will explore potential solutions for determining where tax should be paid and on what

basis (“nexus”), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located (“profit allocation”). The second pillar will explore the design of a system to ensure that multinational enterprises – in the digital economy and beyond – pay a minimum level

of tax. This pillar would provide countries with a new tool to protect their tax base from profit shifting to low/no-tax jurisdictions, and is intended to address remaining issues identified by the OECD/G20 BEPS initiative. In 2015 the OECD estimated revenue losses from BEPS of up to USD 240 billion, equivalent to 10percent

of global corporate tax revenues, and created the Inclusive Forum to co-ordinate international measures to fight BEPS and improve the international tax rules. “Important progress has been made through the adoption of this new Programme of Work, but there is still a tremendous amount of work to do as we seek to reach, by the end of 2020, a unified long-term solution to the tax challenges posed by digitalisation of the economy,” Gurría said. “Today’s broad agreement on the technical roadmap must be followed by a strong political support toward a solution that maintains, reinforces and improves the international tax system. The health of all our economies depends on it.” The Inclusive Framework agreed that the technical work must be complemented by an impact assessment of how the proposals will affect government revenue, growth and investment. While countries have organised a series of working groups to address the technical issues, they also recognise that political agreement on a comprehensive and unified solution should be reached as soon as possible, ideally before year-end, to ensure adequate time for completion of the work during 2020.

Andersen Tax looks at implication of FIRS moves to enforce collection of VAT on online transactions

ast month (May 18, 2019), the Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler, disclosed that the FIRS would soon begin the collection of Value Added Tax (VAT) on online transactions. According to the Chairman, the FIRS plans to start directing banks in Nigeria to impose VAT on online transactions for purchase of goods and services. VAT is a consumption tax imposed at 5percent on the cost of goods and services supplied in Nigeria except items specifically exempted or zero-rated under the VAT Act. The Chairman has stated that the move by the FIRS to extend VAT collections to online transactions is part of the agency’s measures to meet its 2019 revenue target of N8 trillion. The Chairman further stated that the FIRS would rely on multiple sources of information to widen the tax net and effectively capture all VATable transactions. Andersen Tax Nigeria states the implication The Chairman’s disclosure implies that the FIRS would intensify

its efforts in capturing e-commerce in the VAT net in order to boost revenue generation. Although a number of businesses are already compliant with respect to VAT remittances on ecommerce transactions, there are myriads of VATable transactions conducted daily without any VAT remittance. Thus, capturing on-

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line transactions for VAT purposes should help in widening the tax net and generating additional revenue for the government. However, directing the banks to impose VAT on online transactions could result in a number of unintended effects as it appears to impose additional obligations of monitoring and tracking various e-

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commerce transactions on banks. This could also expose the banks to tax audit risks, as the FIRS would seek to ensure compliance and proper remitting of the VAT imposed. More so, collection of VAT on such transactions by banks could amount to double taxation where the supplier of the good/ service has already charged and

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remitted VAT on same transactions given that the VAT Act imposes the obligation to charge and remit VAT on the supplier of VATable goods/ services. Another critical issue is how the banks are expected to determine VATable transactions and the mode of calculating and imposing VAT on the goods and services supplied online. The law allows a supplier of goods and services to make the necessary adjustments between the output VAT and input VAT before computing the VAT on the product supplied. As such, it would be absurd to mandate banks to make arbitrary deductions on the basis of output VAT. While it is desirable for the FIRS to expand the tax base in order to capture defaulting taxpayers, it is also necessary for the FIRS to keep proper records of online transactions and exercise reasonable caution in the VAT collection process to avoid imposing double tax on already compliant taxpayers. Taxpayers should also ensure to keep proper records and consult professionals where necessary, to ensure that they comply with the provisions of the law.

Wednesday 05 June 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

BRENDAN GREELEY

ay Powell, chairman of the Federal Reserve, signalled the central bank stood ready to cut interest rates, saying it would “act as appropriate to sustain the expansion” amid the economic impact of escalating trade wars. “We do not know how or when these issues will be resolved,” he said, in remarks that helped stoke a powerful rally on Wall Street. “We are closely monitoring the implications of these developments for the US economic outlook.” Mr Powell was addressing a conference hosted by the Federal Reserve Bank of Chicago, part of a year-long review of how the central bank carries out and communicates its monetary policy objectives. Referring to tariffs, which in the past month have been raised on imports from China and threatened on imports from Mexico, he said that the Fed would “act as appropriate to sustain the expansion, with a strong labour market and inflation near our symmetric 2 per cent objective”. Mr Powell’s speech follows similar comments from other Fed officials, often a sign that the Federal Open Market Committee wants investors to prepare for a shift in policy. On Monday, James Bullard, president of the Federal Reserve Bank of St Louis and a voting member of the committee, said that a

Jay Powell says Fed is ready to act if trade wars hit economy US central bank chairman puts tariffs on list of concerns that could lead to looser policy rate cut might be “warranted soon,” and that current interest rates might be “inappropriately high.” Last week Richard Clarida, vice-chair of the Federal Reserve, that he was “very attuned” to risks to economic growth, and that the central bank would be “nimble” to keep the economic expansion going. “I suspect [Mr Powell] goes to bed every night praying for a trade deal, and not just because that would be the best outcome for the country!” said Ian Shepherdson, chief economist for Pantheon Macroeconomics. Financial markets are indicating it will be almost impossible for the Fed to resist cutting rates this year, with the most likely outcome that there will be two quarterpoint reductions by the end of December. There is also an almost one-in-three chance of three cuts, according to futures pricing. Mr Powell’s comments briefly dinged the yields on government bonds, especially on the two-year Treasury, which is one of the instruments most sensitive to Fed policy. In recent weeks, bond yields have fallen as investors, fearing a sharp economic slowdown, have sought the safety of government debt. On Tuesday they were rebounding as some of the pessimism dissipated. While the two-year yield fell by 4 basis points after Mr Powell

Nasdaq nudges out of correction after earlier sell-off

ajor technology stocks were clawing back their heavy declines from the previous session and a fierce multi-day rally in Treasuries ended amid a rebound that had the broader US stock market on track for its biggest one-day gain since January. Growing momentum for the tech giants also had the Nasdaq Composite on course for its largest one-day gain since March and helped pull the tech-heavy index out of a technical correction, after Monday’s sell-off left it down just over 10 per cent from its peak close in early May. Alphabet, Facebook, Amazon and Apple shed a combined $133bn on Monday after US antitrust enforcers agreed oversight of the companies that paves the way for investigations into their competitive behaviours. The quartet’s recovery had a mixed start in early trade this morning, but had found a more solid footing by the session’s halfway point. Alphabet, Google’s parent, was up 1.3 per cent after midday in New York, following a 6.1 per cent drop in the previous session that had it closing on the verge of a bear market, which is defined as a 20 per cent drop from a peak. Apple was up 2.9 per cent,

more than recouping Monday’s decline. Facebook overcame early declines to be ¾ of 1 per cent higher following on from a 7.5 per cent tumble in the previous session, while Amazon added 1.4 per cent after a 4.6 per cent drop yesterday. The Nasdaq Composite was up 1.9 per cent, eyeing its largest advance since March 11 and leaving it down 8.5 per cent from its May 3 record-high close. The broader S&P 500 was up 1.6 per cent and on track for its biggest rise since January. The Philadelphia semiconductor index advanced 2.9 per cent on Tuesday. Gains for the index, which tracks 30 companies that design, distribute and manufacture chips, had been led in the previous session by Advanced Micro Devices after it announced a partnership with Samsung. The whippy trading over recent sessions has come against a backdrop of continued uncertainty around the US’s trade war with its allies and intensifying debate about the speed and direction of the Federal Reserve’s monetary policy. Jay Powell, Fed chairman, said in a speech on Tuesday morning the central bank would “act as appropriate” to sustain the US’s economic expansion as it keeps an eye on the impact of the escalating trade war between Washington and its allies. www.businessday.ng

spoke, it later resumed its rise as traders concluded the Fed would use potential rate cuts as an insurance policy to keep the economy growing. Equity markets were also rebounding sharply on Tuesday, with the S&P 500 up over 1.5 per cent by lunchtime in New York. “The Fed has come out and said they are listening,” said Jon Hill, an interest rate strategist at BMO Capital Markets. “They are beginning to pivot from a ‘patient’ stance to a ‘ready to act’ stance. That allows the market to reduce the chance of

the worst-case scenario.” Carl Weinberg, chief international economist for High Frequency Economics, said he was sceptical that a change is coming, and said that Mr Powell was just “reiterating the Fed’s mandate”. With the unemployment rate at 3.6 per cent, the bank’s more pressing challenge, he said, is to stop labour markets from tightening further, he said. The next read on the US labour market comes on Friday, when the May jobs report is released. With expectations of an interest-

rate cut increasing, the Federal Reserve is taking an unprecedented, sweeping year-long review of its policy objectives. Mr Powell focused his speech on Tuesday mostly on this review, pointing out the difficulty the bank has had in reaching and sustaining its target of 2 per cent inflation. The review is designed to consider different ways to hit its inflation target, whether it needs new tools to meet its statutory objectives and whether the Fed needs to improve how it communicates with markets, he said.

Trump’s Mexico tariffs leave US business reeling

Major US tech stocks recover amid broad rally for Wall PETER WELLS

Jay Powell, the Federal Reserve chairman, said the central bank will be ‘closely monitoring’ the fallout from trade wars on the US economy © AP

Knock-on disruption to domestic economy raises fears of a US recession SAM FLEMING

merica’s business executives are struggling to figure out how the global trading system will be reshaped by Donald Trump’s policies after his decision last week to open a second front in his trade war by targeting Mexico. The US president’s plan to use tariffs on Mexico as retaliation for illegal immigration has prompted a realisation among businesses and markets that his past decisions to levy tariffs, for example on steel and aluminium, were not simply negotiating tactics towards broader strategic goals, analysts say. “The market would like to believe the president is crying wolf on tariffs, but he isn’t,” according to Diane Swonk, chief economist at Grant Thornton, who said companies were now “walking on eggshells”. Federal Reserve officials have been flagging trade tensions as a threat to growth for more than a year, but US business has been slow to catch up. For many investors, Mr Trump’s decision to levy tariffs on Mexican imports marks an alarming turning point. Mexico is highly integrated into America’s critical auto market, with components often crossing the two countries’ border multiple times, potentially subjecting them

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to repeated tariffs. Mexico was also the second biggest national exporter of goods to the US last year after China, which ships more than $500bn a year to America. That means vast quantities of merchandise could be affected if Mr Trump ratchets up the tariffs, as he has threatened to do, even at the risk of significant economic and financial market disruption. A timeline showing how USChina trade war escalated Following sharp moves in the financial markets on Friday, investors are now placing significant odds on a US recession as they fret about the president’s willingness to pursue his increasingly antagonistic trade agenda. Seth Carpenter, US economist at UBS, said investors had woken up to tariffs remaining a “tool of choice” for the Trump administration, and further escalation could pave the way for a material slowdown in the US economy. “The penny dropped,” he said. Shares continued to slip this week as investors digested the growing economic threat. Jim Bullard, president of the St Louis Federal Reserve bank, said that a rate reduction might be needed “soon” given trade disputes and low inflation expectations. If all the threatened tariffs on Mexico and China are implemented, the boost to US core inflation could peak at 1.25 percentage points, ac@Businessdayng

cording to Goldman Sachs, hitting consumers’ spending power. The investment bank has shaved back its US growth forecast for the second half of this year by half a percentage point, to 2 per cent. Others are more pessimistic. More than two-thirds of chief financial officers surveyed by Duke University expect a recession by the third quarter of next year, according to a poll released in April. Trade tensions were a central driver of those concerns, said John Graham, a finance professor at Duke’s Fuqua School of Business. That poll came weeks before the president’s announcement in early May that he would boost tariffs to 25 per cent on $200bn of Chinese products, as well as America’s most recent actions against the Chinese telecoms equipment company Huawei, and the move against Mexico. Mr Graham said that investors and businesses were asking: “Is it going to be a nonstop trade war for the next couple of years?” Judging from movements in bonds and equities, the markets are pricing in a 37 per cent probability of recession, according to Roberto Perli of Cornerstone Macro. He described those odds as high, but not yet alarming. Ominously, however, Friday’s move in expectations for Fed policy was akin to those seen in times of financial crisis as investors price in higher odds of rate cuts.

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Wednesday 05 June 2019

NATIONAL NEWS

Albert Yuma reconfirmed as chairman of Congo state copper miner

Appointment a potential setback for foreign investors such as Glencore TOM WILSON

lbert Yuma was reconfirmed as chairman of the Democratic Republic of Congo’s state-owned copper miner, in another sign of the enduring influence of former president Joseph Kabila and a potential setback for foreign investors such as Glencore, which has battled Mr Yuma over revenue sharing agreements and new mining legislation. Mr Yuma was appointed to chair the Gecamines board in 2010 with a mandate to boost production after decades of dictatorship and war left its infrastructure destroyed and cash reser ves depleted. Formerly one of the world’s biggest copper producers, Gecamines now operates most of its mines in joint-ventures with international mining companies including Glencore, Eurasian Resources Group and China Molybdenum. Under Mr Yuma’s leadership, Gecamines has largely failed to increase its own output but fought a series of high profile battles with its foreign partners in an effort to boost its revenues. Last

year Glencore agreed to write off $5.6 billion in debt at its Kamoto Copper Company to end a longrunning dispute with Gecamines, which owns 25 per cent of the mine. A native of Mr Kabila’s copper rich Katanga region, Mr Yuma was one of the former president’s closest allies and potential frontrunner to be named prime minister before the little-known Sylvestre Ilunga Ilukamba was appointed to the position last month. When Mr Kabila in 2017 pledged to increase state revenues from the mining sector ahead of a contentious presidential election, Mr Yuma led the charge, intervening in the legislative process and introducing tax hikes and other changes into a new mining code that significantly increased the cost of doing business for investors. As chairman Mr Yuma will continue to head Gecamines’ nine-person board. New board members include the former AngloGold Ashanti country director Guy Robert Lukama, who joins the state-owned miner for the first time, according to a copy of the official nomination document seen by the Financial Times.

South African economy suffers worst slump in a decade

Ramaphosa under pressure as economic output drops sharply in first quarter JOSEPH COTTERILL

outh Africa’s economy has suffered its most severe quarterly slump in a decade, ratcheting up the pressure on President Cyril Ramaphosa to revive the continent’s most industrialised country. Severe power shortages caused by the crisis at Eskom, the struggling state power utility, dragged economic output 3.2 per cent lower in the first quarter on an annualised basis, according to Treasury data released on Tuesday. The bigger-than-expected drop was the largest quarterly fall since the depths of the global financial crisis in 2009. Activity in power-intensive mining and manufacturing fell sharply as Eskom, which generates nearly all of South Africa’s electricity, imposed its deepest power cuts in February and March. “This is worse than anyone expected, and things went wrong in several sectors,” said John Ashbourne, senior emerging markets economist at Capital Economics. “It would be difficult to imagine things could stay this bad for two quarters in a row” but a recession was “certainly possible”, he added. The sharp decline underscores the pressure on Mr Ramaphosa and his ruling African National Congress to fix Eskom’s problems after the party won re-election in May with its lowest-ever majority. Eskom, which epitomised the rot of state institutions under former president Jacob Zuma, needs help to control more than $30bn of unsustainable debt and to turn around its ageing, breakdown-prone power plants.

The scale of the first quarter’s contraction will also raise fears that 2019 will become another lost year for South Africa’s economy, despite Mr Ramaphosa’s pledge of a “new dawn” to replace stagnation under Mr Zuma. The economy has failed to muster annual growth of more than 2 per cent since 2013. It tipped back into recession last year, and faces deep structural flaws such as a jobless rate close to 28 per cent. South Africa’s Reserve Bank is already forecasting growth of only 1 per cent this year. The South African rand dropped 1 per cent against the dollar after the official statistics were released on Tuesday. Eskom’s woes exacerbated other obstacles holding back the economy, including industrial action at gold mines and weak investment. Since the blackouts peaked in March, the utility has gradually recovered its ability to generate power, but its finances remain precarious. Eskom received a $5bn state bailout in February but has since needed further emergency cash. Mr Ramaphosa has announced a plan to break up the utility’s monopoly into smaller state-owned companies, but this proposal faces resistance from the ANC’s trade union allies. He is expected to give more detail on the restructuring plan this month. Mr Ramaphosa, a wealthy businessman who unseated Mr Zuma last year, has faced a long battle to stamp his authority on the ANC and carry out a promised fight to stop graft. He picked a post-election cabinet last week that maintained economic reformers in key posts, such as the oversight of Eskom, and removed allies of Mr Zuma. www.businessday.ng

Donald Trump says any US-UK trade deal has to include NHS ‘Everything will be on the table — the NHS, everything,’ says US president GEORGE PARKER AND JAMES BLITZ

onald Trump on Tuesday laid down the battle lines for negotiations on a future US-UK trade deal, insisting that a “phenomenal” agreement was possible but only if Britain’s National Health Service was part of the talks. The US president, on the second day of a UK state visit, claimed that transatlantic trade between the two countries could be “two and even three times what we’re doing now” after Brexit, but made it clear that it would involve painful choices for Britain. “Everything will be on the table — the NHS, everything,” Mr Trump said at a joint conference with UK prime minister Theresa May, as he looked ahead to a post-Brexit trade agreement. The idea of opening up the taxpayer-funded NHS to more US medical companies — the health service already buys in some capabilities from the private sector, including US groups — is highly controversial in Britain. A trade deal with the US could also

potentially involve the NHS having to pay higher prices for drugs made by American companies. The NHS currently pays significantly less for medicines from US companies than American healthcare purchasers. Mr Trump’s comments prompted immediate denunciation from health secretary Matt Hancock, a contender to succeed Mrs May as prime minister, who tweeted: “Dear Mr President. The NHS isn’t on the table in trade talks — and never will be. Not on my watch.” Lord Lawson, the former Conservative chancellor, once said the NHS was “the closest thing the English people have to a religion”. Downing Street said Mrs May shared Mr Hancock’s views, which are widely shared across the political spectrum. Labour leader Jeremy Corbyn said that Eurosceptic Conservatives, vying to become Tory leader and implement Brexit, would embark on a policy of “disaster capitalism” once they had weakened links with the EU. “They all need to understand: our NHS is not for sale,” he added. The problem facing the Tory MPs seeking to succeed Mrs May — espe-

cially those willing to oversee a nodeal Brexit — is that a major US trade deal would be the single largest way of offsetting some of the lost commerce with the EU after Brexit. In 2017 the US accounted for 18 per cent of UK exports and 11 per cent of its imports, while the EU represented 45 per cent and 53 per cent respectively. But Washington will demand big concessions, insisting the NHS be opened up to more American companies and that the UK accept US food products such as hormonetreated beef and chlorine-dipped chicken, both currently banned under EU rules. Downing Street said this week that Britain would not accept any lowering of food or environmental standards when it leaves the EU, creating a further major barrier to a transatlantic trade deal. Mr Trump struck a generally emollient tone with Mrs May having previously criticised her Brexit negotiations, notably by holding out an olive branch on the vexed issue of Huawei, the Chinese telecoms equipment maker.

Sudan’s military stokes fears of power grab with early vote Earlier than expected elections undermine hopes of path to democracy TOM WILSON

udan’s military leaders have provoked fears that they were abandoning plans to pass power to civilians by announcing they would hold earlier than expected elections in an apparent push to consolidate power. The move by the leaders of the transitional military council has undermined the hopes of millions of Sudanese that months of demonstrations against former president Omar al-Bashir might open a path to democracy. The military council — which took power in April, ending Mr Bashir’s 30 years of autocratic rule — said on Tuesday that elections would now be held within nine months and not according to a previous timeline of two to four years. The shortened timescale will leave little chance to rebuild political structures and a civil society that were crushed under Mr Bashir’s 30-year rule and will make it easier for the former regime to keep power, experts said. In a statement broadcast on state television, Lieutenant General

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Abdel Fattah al-Burhan, the head of Sudan’s transitional military council, said the army had decided to “stop negotiating with the [opposition] Alliance for Freedom and Change and cancel what had been agreed on”. The only way to rule Sudan was through the “ballotbox,” he said. The announcement followed a deadly assault on pro-democracy protesters by the council’s troops on Monday as they cleared the site of a two-month sit-in at the defence ministry in Khartoum, the capital. At least 35 people were killed in the attack. Opposition leaders immediately called for a return to mass civil disobedience to force the military council from power, but troops from a feared army militia, the Rapid Support Forces, filled the streets of the capital on Tuesday, limiting people’s movement. At the same time local mobile operators, including South Africa’s MTN and Zain from the United Arab Emirates, blocked access to the internet, complicating communications for activists, according the Netblocks, a UK-based organisation that tracks internet @Businessdayng

disruptions. The military council seized power by toppling Mr Bashir after four months of anti-regime street protests. The move left many citizens sensing a once-in-a-generation opportunity to reshape Sudan’s future, even as suspicions lingered over the intentions of the military leaders, many of whom had served Mr Bashir loyally for decades. Their hopes are now hanging by a thread, analysts said. “The decision by the TMC to call a snap election is designed to short-circuit the transition [and] reinstall the army with quasi-legitimacy,” said Rashid Abdi, an independent Sudan expert. “The army is unilaterally opting out of the consensual process.” Despite initial promises to hand power to a civilian administration, negotiations between the military and leaders of the opposition movement stalled over the army’s role. During the talks, the opposition alliance had called for a fouryear, civilian-led transition to allow time to rebuild state institutions, which were hollowed out during Mr Bashir’s 30-year rule, before elections would take place.

Wednesday 05 June 2019

BUSINESS DAY

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COMPANIES & MARKETS

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Neil Woodford’s ties with Hargreaves Lansdown probed by critics Questions asked about influence of commercial relationships on promotion of fund KATE BEIOLEY

ast month Hargreaves Lansdown, the influential UK stockbroker, sent an update to its customers about investor Neil Woodford titled “a step in the right direction”. “We retain our conviction in him to deliver excellent longterm performance,” said the FTSE 100 broker, adding that the manager had “built his career by investing against the herd” and had “shown an ability to get the big calls right”. Weeks later, those same customers have their money trapped in Mr Woodford’s flagship fund after unprecedented action taken to stem a run. And Hargreaves has removed it from its list of favourite funds. Hargreaves has been one of the most prominent backers of Mr Woodford, showcasing his fund to its more than 1.1m customers and investing £600m of client money via its own-brand funds. But questions are being asked about whether commercial relationships had too great a role in its communications of the manager’s vehicles. Hargreaves’ customers owned around £2bn of Mr Woodford’s £10.1bn in assets at the end of March. In the funds’ annual filings it was disclosed that they owned 62 per cent of Mr Woodford’s then £705.8m Income Focus fund at the end of last year, and around a third of his flagship Equity Income fund, prompting contagion risk between both companies. “To own such a size of Mr Woodford’s fund is quite scary,” said Charles Younes, an analyst at Trustnet. Hargreaves has persistently included Mr Woodford’s funds in its “Wealth 50” list of favourite funds, which customers lean on when deciding what to buy and sell, in return for a discounted fee. Both Income Focus and Woodford Equity Income were removed from that list on Monday. In January, Hargreaves attracted criticism for readmitting both funds to the newly culled Wealth 50 list in a year in which Equity Income had lost almost 17 per cent in total returns against a 10 per cent drop for the FTSE All Share. The move followed a 10 basis point fee cut on Woodford Equity Income, reducing the charge to 0.5 per cent. “This was a conflict. Hargreaves had access to a cheap share class which they promoted to their benefit,” said a senior executive at a rival broker. A spokesperson for Hargreaves said price was “not the

determining factor for inclusion in the Wealth 50”. Mr Woodford also benefited from the deal, by ensuring any fee cuts were met with a promise of assets funnelled into his funds. At launch, Woodford Investment Management agreed to cut its fees in return for a significant injection of assets into his fund from Hargreaves. The rival broker claimed Woodford Investment Management refused to award his company a similar discount unless he could guarantee assets of at least £500m to invest. Hargreaves has claimed that customers benefit from the discounts it wrestles from fund managers. But critics have said they create warped incentives. Richard Wilson, chief executive of Interactive Investor, a rival fund platform, said: “It is widely accepted that Hargreaves’ fund selection is incentivised not purely by investment decisions but by commercial considerations too and there is a clear tension here.” Six of Hargreaves’ multi-manager funds are exposed to Woodford funds, including 14 per cent of its £3bn Income and Growth fund, a stake worth more than £400m, on which the company charges 1.31 per cent in ongoing charges. The multi-manager funds business is run by Lee Gardhouse, who also contributes to the construction of the Wealth 50. One person with knowledge of Hargreaves’ business said this created a potential conflict. “Hargreaves couldn’t advise to sell Woodford without damaging the customers that they’ve shovelled into the funds.” A Hargreaves spokesperson said: “The [Wealth 50] is a democratic process . . . Lee is one of almost 20 people who have input into [its] construction.” Hargreaves earns a 0.75 per cent management fee from customers in its own-brand funds, on top of a 0.45 per cent platform fee — double the fee revenue from platform customers who buy other funds. Hargreaves’ £3bn Income and Growth vehicle has lagged the average UK Equity Income fund over one, three, five and 10 years, having lost 8 per cent over the past 12 months. One financial adviser said: “Hargreaves clearly found themselves in a position where it couldn’t sell the funds from the multi-manager portfolios without hurting DIY investor clients [who were buying it on their own behalf ].” Hargreaves said its stakes were not large enough to create such an issue. www.businessday.ng

Walid Choucair, above, and Fabiana Abdel-Malek are both accused of insider dealing in relation to five attempted mergers between June 2013 and June 2014 © Bloomberg

SEC sues messaging app Kik over $100m ICO MAMTA BADKAR

he Securities and Exchange Commission on Tuesday said it sued Canadabased messaging app Kik for conducting a $100m initial coin offering without registering the offering with the US regulator. “By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions,” Steven Peikin, co-director of the SEC’s Division of Enforcement, said in a statement. The regulator alleges that in 2017 Kik’s management had predicted it would run out of money and sought to finance a new type of business through the sales of one trillion digital tokens dubbed “Kin”.

The company raised more than $55m from US investors and the complaint alleges that the Kin tokens traded recently at about half of the value that public investors paid for the offering. The complaint also alleges that Kik marketed the tokens as “an investment opportunity” and told investors rising demand would drive up value for the tokens. Kik, the SEC alleges, said it would help drive demand by incorporating tokens into its messaging app, create a Kin transaction service and build a system to reward companies that adopted the digital currency. However, the SEC said “at the time Kik offered and sold the tokens, the SEC alleges these services and systems did not exist and there was nothing to purchase using Kin”. “The SEC just filed a lawsuit against Kik for our 2017 sale of Kin. We are finally on the

path to getting the clarity our industry so desperately needs,” tweeted Kik chief executive Ted Livingston. “We are excited to take on the SEC in court, and are confident we will win. It is time to #defendcrypto.” At the heart of the SEC’s crackdown on ICOs is its argument that token sales are securities offerings, which need to be registered. Mr Livingston launched a crowdfunding campaign called Defend Crypto to support the company in a court battle and claims to have raised nearly $5m so far. “Kik told investors they could expect profits from its effort to create a digital ecosystem,” said Robert Cohen, chief of the SEC Enforcement Division’s Cyber Unit, said in a statement. “Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”

S&P 500 eyes best day since January as tech stocks recover PETER WELLS , MICHAEL HUNTER AND DANIEL SHANE

he S&P 500 was lining up for its biggest one-day gain since January, helped by a recovery in tech stocks and as a pledge by Federal Reserve chairman Jay Powell to sustain the US economic expansion helped support a back-up in bond yields. Up 1.6 per cent during lunchtime in New York, the S&P 500 was on track for its largest jump since January 3, while a 2 per cent advance for the Nasdaq Composite was on course to be its best since mid-March. Technology stocks had been hit hard in Monday’s session, with the sector’s biggest names potentially facing scrutiny by US antitrust authorities and continued concern over compa-

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nies’ exposure to any deepening tariff battle between the US and China. After a shaky start to the day, big names like Alphabet, Facebook, Amazon and Apple were all higher. That also helped pull the Nasdaq Composite out of correction territory, where it closed on Monday. US bank stocks were also performing strongly as analysts said the Fed chairman displayed a willingness to cut interest rates to insulate the domestic economy from the adverse effects of the trade war. In Europe, demand for carmakers helped the continent’s broad stock measures rise as they tracked strong sales data from the US. Frankfurt’s Xetra Dax 30 rose 1.5 per cent overall, with tyremaker Continental, BMW and Volkswagen its top @Businessdayng

three performers. The regionwide Stoxx 600 added 0.6 per cent. London’s FTSE 100 was up 0.4 per cent. China’s CSI 300 index made the biggest drop in a faltering trading pattern in Asia, down 0.9 per cent. Gold hit a three-month high — just shy of $1,329 an ounce — before it fell back to lose 0.1 per cent for the session as sentiment picked up. Yields on US 10-year sovereign debt also bounced up off their lows — by 6.1 basis points to 2.1418 per cent — as investors moved back out of the debt. The yield touched its lowest level since 2017 this week as investors increasingly bet on the possibility of two Federal Reserve rate cuts this year. Brent crude gained 1 per cent to $61.87, dragging it off some of its lowest levels of 2019.

Tuesday 04 June 2019

BUSINESS DAY

ANALYSIS FT WWDC 2019: Apple makes renewed push into services PATRICK MCGEE

pple’s competitors have caught up in the smartphone race, often equipping their devices with better cameras or selling them at price points that call into question why the iPhone commands any premium at all. Google’s Pixel 3a, a new midrange phone with a vaunted camera, sells for just $399 — one-third the price of an iPhone XS Max with the same 64 gigabyte storage, or $50 cheaper than an iPhone 7 with half the storage. At Apple’s Worldwide Developers Conference in San Jose on Monday, the iPhone maker responded to the increased competition by taking an aggressive stance on intangible features that its rivals will struggle to match. “Today was all about the ecosystem,” said Neil Cybart, an Apple

as in the case of “Sign in with Apple”, a feature enabling users, including those on Android, to log into thirdparty apps. Facebook and Google already offer this feature, but have gotten into trouble for handing over data to developers without users’ knowledge. Apple emphasised that its version would closely guard a user’s identity, even giving the option of logging in with a random email address that will auto-forward messages. Some developers may balk that Apple will require its sign in feature be an option for any app offering third party log-ins. But Carolina Milanesi, analyst at Creative Strategies, said the change could earn Apple plaudits with customers for an emphasis on privacy. “It’s not a question of higher moral ground, it’s that their business model allows them to do it,” she said.

analyst at Above Avalon. “[Apple] wants to compete on things that aren’t just the technology, but something more.” One example is Apple Maps, a service that was much derided when it debuted in 2012. But Apple said on Monday that it has rebuilt Maps from the ground up, flying planes and driving 4m miles to collect detailed images for Look Around, an on-the-ground viewing experience akin to Google Street View. A key feature for Maps is Apple’s pledge to let users navigate while “protecting user privacy”. Google parent Alphabet made a similar claim last month when it expanded Incognito Mode from its Chrome browser, but its credibility in guarding consumers’ data has been questioned, given that 80 per cent of its revenue come from advertising. “Compared to what’s out there, Apple goes further and says, ‘We have the privacy model’,” said Mr Cybart. “The business model is built on that, whereas for other companies it’s not.” The Maps improvement was one of dozens of small iterations announced on Monday. Others included menstrual cycle tracking on the Apple Watch and replacing the iTunes store with three distinct apps for music, videos and podcasts. Many of the new features were similar to those already used by rivals Spotify and Netflix, such as showing the lyrics of a song in real time, or giving personalised TV recommendations. But in many cases Apple riffed on a theme rather than just copying it,

The only significant hardware revealed on Monday was a new Mac Pro, starting at $12,000 and aimed at creative professionals. At $999, its display stand alone costs more than a mid-range desktop from Dell, putting it far out of reach for most consumers. The market for such a product is limited, but it harks back to the 1990s when Apple had a small market share yet was popular among musicians and film-makers. Analysts say the premium offering could also create a “halo effect” that makes other Apple products more appealing to consumers. Monday was also a big day for the iPad. Craig Federighi, senior vice-president of software engineering, spent much of his time on stage emphasising new capabilities, including split-screen functions and simpler ways to copy and paste images or text across apps. The iPad will now support external USB drives, appealing to users who want a tablet for more than just reading, listening to music and watching films. “It’s like the iPad is graduating to the next level,” said Wayne Lam, analyst at IHS Markit. Analysts say Apple’s push into services is rooted in a goal to be at the centre of consumers’ digital life. That push is less about creating the best products, and more about embedding users into an interconnected system that is simple to use across devices. “The value you get from the whole ecosystem is way more than the 1+1=2,” said Ms Milanesi. www.businessday.ng

Rare earths: Beijing threatens a new front in the trade war China believes its near-monopoly gives it leverage over the US but supply cuts would spur rival producers LUCY HORNBY AND HENRY SANDERSON

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them. They will become even more important as new technologies take root. Over 90 per cent of hybrid and electric cars use rare earth-based magnets in their motors. China accounts for almost 80 per cent of the global mined supply of rare earths, thanks to especially rich deposits and a high tolerance for the toxic and sometimes even radioactive process of mining and extracting. It enjoys an even higher share of the manufacturing of powerful rare earth magnets. Mr Xi’s visit, which came five days after the Huawei announcement, was a reminder that if the rest of the world threatens China, China can punch back. A few days later, China’s powerful state planning body threatened to use rare earth exports as leverage in the trade war with the US. “Will rare earths become China’s counter-weapon against the US’s unwarranted suppression?” the National Development and Reform Commission wrote. The People’s Daily weighed in with a phrase that presaged the India-China war of 1962 and a short war with Vietnam in 1979. “Don’t say you were not warned,” it wrote. “I think this is an attempt by China to cause second thoughts in Washington in hopes of moderating what has become a very aggressive US position towards China on all fronts,” says John Seaman, research fellow at the Institut Français des Relations Internationales in Paris. Long before rare earths became a cottage industry for security strategists, former Chinese leader Deng Xiaoping saw them as a way to earn export dollars. “The Middle East has oil, China has rare earths,” he noted during a 1987 tour of Baotou, Inner Mongolia, site of one of the country’s two large deposits. During the following decade China overtook the US as the largest producer of rare earths, although at a heavy environmental cost. It was a “race to the bottom”, according to Julie Michelle Klinger, assistant professor of international relations at Boston University, with low environmental oversight allowing China to export at the cheapest prices. A toxic lake grew in Baotou, while the cost of cleaning the soil and water in Ganzhou runs to billions of dollars. Cheap and dirty, rare earths were not on the radar of anyone outside the industry until a provocative 2006 proposal published in China suggested restricting exports of rare earths to Japan on national security grounds. The author, minerals expert Sun Lihui, touted the environmental benefits of curbs on mining, as well as the @Businessdayng

idea of luring processing technology to the country to take advantage of China’s lower costs. Soon after, Beijing imposed annual quotas on rare earth exports. A few years later the global financial crisis caused demand for rare earths to plummet. Seeing that 2009 export quotas had not been fully used, state planners cut quotas for the second half of 2010. When demand started to recover after the crisis, exporters with full order books were unable to secure quotas. Prices rose, just as sparring between China and Japan over the East China Sea came to a head in September 2010. International media reported that China had cut off supply to Japan. In fact, both Chinese and Japanese customs data show rare earths continued to be shipped to Japan throughout the fall of 2010. But the mere suggestion of an interruption, combined with the price rise, had a profound impact on the way government and industry thought about rare earths. Countries realised that China had the ability to use its market dominance as a bargaining chip. Mindful of its vulnerability, Japan poured money into finding substitutes. Last year Toyota announced new magnet technologies that would “significantly reduce” the proportion of neodymium, a rare earth used in magnets for electric and hybrid vehicles, needed to make its electric motors. Although companies like Mr Higgins’ in the UK were saved once the crisis subsided, the US defence department also took notice. Rare earths are used in lasers, radar, sonar, night vision systems, missile guidance, jet engines and alloys for armoured vehicles. Last September, a Pentagon report claimed that China had “strategically flooded the global market with rare earths at subsidised prices”. “China’s domination of the rare earth element market illustrates the potentially dangerous interaction between Chinese economic aggression guided by its strategic industrial policies and vulnerabilities and gaps in America’s manufacturing and defence industrial base,” it added. The tussle over rare earths is more complicated in 2019 than it was in 2010, but just as emotional. Back then, it revolved around minerals and oxides supply to Japan. This time, tensions with the US play out over longer and much more complex supply chains. “It would be difficult to make it hit just the US,” Yujia He, of Hong Kong University of Science and Technology’s Institute for Emerging Market Studies, says of any eventual Chinese restrictions on exports.

WEST AFRICA

ENERGY intelligence oil

gas

power

Wednesday 05 June 2019

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BUSINESS DAY

OIL

South Sudan: South Sudan reopens oilfield in the north, adds 5,000 bpd production Page 50 GAS

Algeria: Total to hold talks with Algeria over Anadarko assets Page 51 Market Insight

Debrief

Let’s face it. Petroleum subsidy is not going away anytime soon FRANK UZUEGBUNAM

Report: Solar, onshore wind costs set to fall below new fossil fuel energy Page 55 OPEC weekly basket price DAY

PRICE

31/5/19

64.15

30/5/19

67.10

29/5/19

67.75

28/5/19

68.84

27/5/19

67.42 Source: OPEC

ust few days ago, as the 8th National Assembly were winding down, the senate approved the sum of N129 billion ($422 million) payment to cover debts to local oil firms related to a fuel subsidy programme. They listed 67 companies that will get a portion of the payment. The government has struggled for years to make timely subsidy payments to fuel importers. Has Nigeria reached the point where the downside of huge petroleum subsidy payments by the government outweigh the benefit? Most certainly. Emmanuel Ibe Kachikwu, immediate past minister of state for petroleum resource, had said there was never been any doubt about the logic of trying to remove fuel subsidy but

that the reality is that Nigeria has a very unique situation. “There is a lot of anti-populism against the decision, so any president that is going to take that decision must weigh all the factors”, Kachikwu told journalists on the sideline of the second annual international conference by the Oil and Gas Trainers Association of Nigeria (OGTAN) in Lagos weeks before the federal executive council cabinet was disbanded. Zainab Ahmed, immediate past finance minister, also said the Nigerian government has no plan to remove fuel subsidy. “The IMF would say fuel subsidies are better removed so that you can use the resources for other important sectors, which is good advice, but in Nigeria, we do not have any plans to remove fuel subsidies at this time, because we have not yet designed buffers that will enable us to remove the subsidy and provide cushions for our people”, Ahmed said during a

ministerial press briefing at the 2019 International Monetary Fund and World Bank Spring Meetings in Washington DC. The Nigerian National Petroleum Corporation (NNPC), as the sole importer of petrol into the country after private oil marketers withdrew from the importation of the product, has been bearing the burden of subsidising the product. According to the Petroleum Products Pricing Regulatory Agency (PPPRA), Nigeria’s daily petrol consumption has increased by two million litres, from 54 million litres in 2018 to 56 million litres in 2019. Between 2017 and 2019, the country’s daily petrol consumption rose by 10 million litres. With the landing cost of petrol N35 higher than the pump price of N145 per litre, keeping up with the subsidy payments, thus, becomes huge albatross of any government. The subsidies continue to be contentious in Africa’s top

crude oil producer, which imports most of its gasoline due to underperforming refineries. While waiting for Dangote’s 650,000 barrels per day capacity refinery to come on stream, getting government’s refineries to ramp up capacity looks like a mirage. The NNPC financial records show that the corporation recorded losses in the region of N551.46b from January 2015 to December 2018, with most of the losses coming from the refineries. The refineries made a total loss of N132.5b in 2018 alone. That is a 39 per cent increase from the N95.09b losses it incurred in 2017. While weaning Nigeria from petroleum subsidy is not an overnight task, President Buhari should set a target and make deliberate effort to bite the bullet. Putting in place buffers for the citizens should not wait for another budget cycle and if the state-oil company fails to get the refineries working, it is time to let go of them.

Wednesday 05 June 2019

BUSINESS DAY

oil

WEST AFRICA

Outlook

Brief South Africa: South Africa approves Azinam offshore farm-in

South Sudan: South Sudan reopens oilfield in the north, adds 5,000 bpd production

outh Sudan has resumed oil production at one of its northern oilfields for the first time in five years, adding 5,000 barrels of output per day and pushing overall production to 180,000 barrels per day, Ezekiel Lol Gatkuoth, South Sudan petroleum minister, said. The world’s youngest country, which split from Sudan in 2011, has one of the largest reserves of crude in sub-Saharan Africa, only a third of which have been explored.

The country lost many of its oilfields to a civil war that broke out two years after its independence. A peace agreement last September is largely holding. Production resumed at the Al-Toor oilfield, Ruweng State, Gatkuoth said at an opening ceremony at the site. “Today we managed to resume AlToor oilfield. We will continue to make sure the rest of the wells are put into production.” In early May, the government put to-

tal production at around 175,000 bpd. That figure should rise by 70,000 bpd by June. The government has said production would reach pre-war levels of 350,000 to 400,000 bpd by mid-2020. Much of the landlocked East African nation’s oil infrastructure was damaged in the war, during which about 400,000 people were killed and more than a third of the country’s 12 million population uprooted.

outh Africa continues to make progress in its endeavor to woo increased investment in the country’s highly under-developed offshore oil and gas market as the government’s slow and delayed plan to make cuts on crude oil imports begins to take shape. Re-elected President Cyril Ramaphosa’s government has announced the approval of an application by Azinam Ltd, an independent Southern Africa Atlantic margin-focused oil and gas exploration firm, to farm into Block 3B/4B permits in the Orange basin, 120 to 250km offshore South Africa. The approval has paved way for Azinam to acquire 40 percent participating interest in the license from Ricocure (Pty) Ltd, which remains with 60 percent share. Azinam now has eight permits in both South Africa and Namibia with the acquisition of these two blocks, which lie in water depths ranging from 300 to 2,500 meters. Last year, Azinam signed agreements to acquire a stake in the two permits, which now expands its acreage to 80,530 sq km from the previous 62,000 sq km and making the company the “largest direct acreage holder in the region on a gross basis.” Azinam sounds optimistic largely

DR Congo: Total exits from key oil block in DR Congo

il major, Total, has relinquished its interest in the lucrative Block III in the eastern part of the Democratic Republic of Congo, Aime Ngoy Mukena, oil minister said. The minister also said the country is planning to launch a licensing round before the end of this year in which more than 20 onshore and offshore oil block would be on offer. “Total did not turn up for negotiations on the extension of their licenses as earlier agreed, but we have extended the permit for its partners and work is ongoing on the block,” he said. Total and the DRC government were supposed to discuss extensions for the Block III license in January but the company opted to write to the government terminating the exploration permit, Mukena said. The minister said one of the reasons

for this was because Total was focusing on the development of its flagship oil project on the other side of the border in Uganda. Total operates a stake in an oil exploration project on the Ugandan side of the border together with China’s

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CNOOC and UK-based Tullow Oil where more than 6.5 billion barrels of crude have been discovered. The minister said he hopes to launch a licensing round toward the end of 2019 and is hopeful that Total could take part in bidding for blocks that will include blocks in the coastal basin along the Atlantic Ocean, the inland Cuvette Centrale and around Lake Tanganyika in the southeast. Congo currently produces about 25,000 b/d from oil blocks on the Atlantic Ocean coast and the government has been planning to boost production by issuing new onshore licenses in the center and east of the country after passing a new oil law in 2015. The DRC is said to have over 5 billion barrels of crude reserves but conflicts in most parts of the country and the lack of clear oil code have hampered progress on raising oil output.

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buoyed by what it says is the findings of “historical drilling on the shelf and modern 3D seismic surveys of the Orange Basin that indicate the potential for both regionally significant shallow-water oil and gas projects and world-class deepwater discoveries.” “To continue to build our acreage footprint in an area now dominated by Majors and Independents is proof of Azinam’s offering as a competent operator and focused explorer, keen to move forward at pace,” the company said in a statement. Over the next 36 months, Azinam says it plans to drill eight “high-impact, multi-billion barrels of oil potential wells offshore Namibia and South Africa, thoroughly testing the margin’s potential and exploiting low drilling costs.”

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Wednesday 05 June 2019

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ENERGY intelligence

Algeria: Total to hold talks with Algeria over Anadarko assets

T Petronas signs deal to lease LNG storage unit to Vitol

alaysian state-owned energy firm Petronas has signed a deal to lease a liquefied natural gas (LNG) storage unit in the country to commodity trader Vitol for at least two years, industry sources told Reuters. Under the agreement, Petronas will rent one of its two 200,000 cubic metre LNG storage units at Pengerang in southern Malaysia to Vitol, the sources said. The lease is for at least two years and will likely start in the second-half of 2019, one of the sources said, adding that the other unit in Pengerang would be set aside for domestic use. Malaysia’s Pengerang peninsula sits strategically between the Malacca Strait and the South China Sea. Nearly all the Middle East oil and gas bound for North Asia’s industrial powerhouses of China, Japan and South Korea passes through those two bodies of water. Petronas LNG, a subsidiary of Petronas, and Vitol Asia signed a deal last year for long-term LNG supply from LNG Canada and from the global portfolio of Petronas, to start from 2024. Meanwhile, Asian spot prices for liquefied natural gas (LNG) remained steady at the seven-week low hit in the previous week, as lower prices attracted some demand from India, but the market was well supplied as new cargo deliveries were expected soon. Spot prices for July delivery to Northeast Asia LNG-AS are estimated to be $4.50 per million British thermal units (mmBtu), steady from the previous week, industry sources said. Several companies in India sought cargoes for delivery from August but the large requirement could be supporting the spot prices for July, the sources said. Demand from India is likely increasing for post monsoon when terminal utilisation is expected to go up, they added. India’s H-Energy is seeking to buy 19 LNG cargoes for delivery over September this year to December 2021, while Essar Group is looking to buy six cargoes for delivery over September to January, 2020, sources said.

otal will meet Algerian authorities for talks over its plans to buy Anadarko’s assets in the country and is not worried by media reports that Algiers would block the deal, Patrick Pouyanne, Total Chief Executive said. “We will meet Algerian authorities very soon,” Pouyanne told shareholders at the company’s annual meeting in Paris. “We are not worried. It is normal that authorities seek to have dialogue with their principal partners and Total is one of the partners of Algeria.” Algeria’s energy minister said he would seek a “good compromise” when asked about his earlier comments that Algiers would block Total’s plan. Occidental Petroleum has agreed to sell Anadarko’s assets in Algeria, Ghana, Mozambique and South Africa to Total for $8.8 billion if the US oil company succeeds in completing a takeover of Anadarko Pouyanne said Anadarko’s Africa assets were at the heart of Total’s strategy to remain a leading oil company in Africa and the global liquefied natural gas (LNG) market. “The (Anadarko) deal demonstrates our capacity to be opportunistic and agile,” Pouyanne said during a presentation at the shareholder meeting. “Anadarko assets representing around 3 billion barrels of reserves

resources which we will acquire for $8.8 billion are plainly at the heart of our growth strategy focused on our strengths,” he said. “Africa and LNG in Mozambique, Africa and deep offshore in South Africa and Ghana, and in Algeria.” Pouyanne added that the deal would also strengthen Total’s position as num-

ber two in the global LNG business and that it would have no negative impact on the company’s shareholder return policy. “I would even say the opposite because this acquisition will generate a positive net cash flow from 2020, even if the price oil is less than $50 dollars per barrel,” he told shareholders.

Ghana: Local gas market has significant potential to transform economy - GNPC

he local gas market is relatively small, but has significant potential to transform the economy, Hamis Usif, Manager, Gas Business, Ghana National Petroleum Corporation (GNPC), has said in his presentation at a Stakeholders Forum on Crude Oil and Natural Gas Marketing in Accra. He noted that the local gas market is relatively stable with demand driven

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mainly by power demand and growing at 7.3 billion cubic feet per year (Bcf/Yr); adding that lower gas utilization was as a result of lower demand and inadequate infrastructure for its transportation. “New gas infrastructure like the reverse flow and Karpower relocation is expected to increase gas demand by about 120 Million standard cubic feet per day (MMsfcd) of gas,” Usif stated.

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He said, gas availability and new infrastructure should support increase in traded gas and industrial demand. Usif, who spoke on the topic “Gas Marketing – GNPC’s Experience and Lessons,” said Ghana’s oil and gas reserves as at December 2018, which includes Jubilee, Mahogany, Teak, TEN, Sankofa and Gye Nyame had total Crude Oil and Condensate Reserves of 743 Million Barrels of Oil (MMBO) and total Sales Gas Reserves of 1,025 Bcf. With regards to pertinent issues on natural gas (NG), Usif said Ghana’s basins are proving to be a lot more gaseous than originally envisaged. He said the first priority use of NG in Ghana was to meet field operational requirements; stating that where contractor declares that a discovery was not commercial, GNPC might take over the discovery and develop the discovery if it had identified a market, through “sole risk”. He said flaring was only allowed under strict conditions; whereas natural gas liquids (NGLs) and condensates might be extracted offshore and added to oil. He said pricing for natural gas was influenced by the cost of development and the use to which the gas would be put.

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Wednesday 05 June 2019

BUSINESS DAY

power

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ENERGY intelligence

Report: Solar, onshore wind costs set to fall below new fossil fuel energy

lectricity generated by onshore wind and solar photovoltaic (PV) technologies will in the next year be consistently cheaper than from any fossil fuel source, a report showed, boosting the case for energy sources that do not emit carbon. The trend for cut-price renewable energy is already set but the report by the International Renewable Energy Agency (IRENA) gives fresh evidence of the speed of the decline, driven by increased production runs and technology improvements.

“Onshore wind and solar PV are set by 2020 to consistently offer a less expensive source of new electricity than the least-cost fossil-fuel alternative without financial assistance,” said IRENA, a government-backed body that aims to support countries in their transition to sustainable energy sources. The global weighted average cost of electricity generated by concentrated solar power fell by 26 percent last year from a year earlier, data compiled by the agency showed. Bio-enegy fell by 14 percent, solar PV and onshore wind by 13

percent, hydropower by 12 percent and geothermal and offshore wind by 1 percent. Costs of $0.03 to $0.04 per kilowatt hour (kWh) for onshore wind and solar PV are already possible in some parts of the world. Record-low auction prices for solar PV over the past couple of years in Chile, Mexico, Peru, Saudi Arabia, and the United Arab Emirates for example have seen a cost as low as $0.03/kWh, IRENA found. Over three quarters of onshore wind and four fifths of large-scale solar PV capacity to be commissioned next year shows lower prices than the cheapest new coal-fired, oil or natural gas sources, the report said. At the start of last year, IRENA forecast the global average cost of electricity could fall to less than $0.049/kWh for onshore wind and $0.055/kWh for solar PV by 2020. “A year later, the potential value for onshore wind in 2020 has dropped a further 8 percent to $0.045/kWh, while that of solar PV has dropped 13 percent to $0.048/kWh,” said the report, based on data from IRENA’s own members, business journals, industry groups, consultancies, governments, auctions and tenders. As well as 160 countries, IRENA’s membership includes utilities, project developers, research institutes and companies, all of which provided data for its Renewable Cost Database.

Ethiopia: Renewable energy programme targets to install 1,000MW

he World Bank’s board of executive directors have approved $200 million Renewable Energy Guarantees Programme (REGREP) to mobilise International Development Association (IDA) guarantees under a Multi-Phased Programmatic Approach (MPA). The programme will support the government of Ethiopia’s ongoing power sector reforms and leverage private sector financing for renewable energy generation. REGREP will support the development of over 1,000MW of Greenfield solar and wind energy Independent Power Producer (IPP) projects in Ethiopia, including the World Bank Group Scaling Solar initiative. “REGREP comes at this critical juncture and signals the government’s commitment to comprehensive power sector reforms and a private sector led renewable energy development programme that has the potential to be one of the largest in sub-Saharan Africa,” said Rahul Kitchlu, senior energy specialist at the World Bank. The REGREP marks the first IDA guarantees under deployment in Ethiopia.

Enabled by the 2018 Public-Private Partnership Proclamation, this programme reflects a new way of doing business in the energy sector in Ethiopia - transitioning from continued public-financing towards private sector led competitively tendered procurement of new renewable generation capacity. The programme is fully aligned with the World Bank’s Country Partnership framework for FY18—FY22. It will foster structural transformation for growth by enhancing private sector financing of infrastructure projects;

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build resilience and inclusiveness by increasing supply of electricity sustainably and help to manage the impact of climate change through diversification of energy sources. “With the support of the World Bank Group, this programme will create a platform for much-needed private sector participation in the crucial energy sector by lowering the risks of investing in Ethiopia,” said Carolyn Turk, World Bank country director for Ethiopia, Sudan and South Sudan “The programme has the potential to leverage over $1.5 billion in private sector investment,” Turk added. The Energy Sector Management Assistance Program (ESMAP) provided support in terms of resource mapping and validation, as well as technical studies to identify areas for wind development. To maximise the effectiveness of development results and make the environment for private sector investments more conducive, in addition to IDA guarantees, complementary instruments of the International Finance Corporation and Multilateral Investment Guarantee Agency will also be made available.

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Coalition to accelerate energy storage adoption in developing countries established

new international partnership has been established to help expand the deployment of energy storage and bring new technologies to developing countries’ power systems. The Energy Storage Partnership (ESP) comprises the World Bank Group and 29 organisations working together to help develop energy storage solutions tailored to the needs of developing countries. Energy transitions are underway in many countries with a significant increase in the use of wind and solar power. To integrate these variable renewable resources into grids at the scale necessary to mitigate climate change, energy storage will be key. The increased use of wind and solar power with storage can help decarbonize power systems, expand energy access, improve grid reliability, and increase energy systems’ resilience. The requirements of developing countries’ grids are not yet fully considered in the current energy storage market – even though these countries may have the largest potential for battery deployment. The current battery market is driven by the electric vehicle industry and most mainstream technologies cannot provide long duration storage or withstand harsh climatic conditions and low operation and maintenance capacity. “The fast growth we are seeing in the electric vehicle market is exactly what we need for energy storage in power systems around the world,” said Riccardo Puliti, senior director for energy and extractives at the World Bank. Puliti added: “We want to see batteries connected to the grid, serving mini-grids, and enabling much more use of renewable power from the sun and wind. “This is why we are convening the Energy Storage Partnership and we are honored to work with the partners who have joined this initiative. We’re looking forward to having more partners join the effort.” To enable the rapid uptake of variable renewable energy in developing countries, the World Bank Group is convening an ESP that will foster international cooperation on technology research development & demonstration, applications, system integration and planning tools, policies, regulations and procurement, enabling systems for management and sustainability. The ESP will take a holistic, technologyneutral approach by including all forms of energy storage, including batteries.

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Wednesday 05 June 2019

BUSINESS DAY

POLICY

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ENERGY intelligence

Like fund managers, Nigeria needs to reconsider oil-based portfolios STEPHEN ONYEKWELU

edge funds and portfolio managers are reviewing assumptions that oil prices will rise and liquidating bets because the USChina trade war paints a gloomy global economic outlook and Nigeria needs to see this as an invitation to act. Data compiled by Reuters show that money managers have reduced their net long position over the four weeks to May 21. Net long refers to a condition in which an investor has a portfolio consisting of more long positions than short positions in a given asset, market, portfolio or trading strategy. Investors who are net long will benefit when the price of the asset increases. The net long concept can also be applied to Nigeria economy’s dependence on oil. Africa’s biggest oil producer holds a net long position on oil. Unlike fund and portfolio managers who can move swiftly, Nigeria is unable to do so. Nigeria will find itself in a precarious situation if escalating US-China trade tensions drastically weaken oil prices. It is widely known that Nigeria relies heavily on crude oil exports which account for over 90 percent of export earnings and over 70 percent of government revenues. A sharp decline in oil prices has the potential to threaten Nigeria’s economic recovery while disrupting exchange rate

stability. The potential decline in foreign exchange reserves from lower oil is likely to weaken the Naira consequently translating to rising inflationary pressures. “Consumers and businesses will feel the heat as inflationary pressure mounts, while the drop in foreign reserves may complicate the Central Bank of Nigeria’s efforts to defend the Naira,” Lukman Otunuga, research analyst at FXTM told BusinessDay in an emailed response. For fund and portfolio managers, the

change in the net long position in the week to May 21 was almost exclusively due to liquidation of bets that prices will rise, not the opening of fresh short positions that prices will drop, OilPrice.com, an online oil intelligence and news platform reported. Portfolio managers have been selling lately Brent Crude and WTI Crude, as well as US gasoline futures, but they have been buying US heating oil and European gasoil, possibly expecting in-

Snapshot

When Nigeria develops the ability to export agriculture products across Africa and the globe, this will reduce the reliance on oil ultimately insulating the nation from oilinduced external shocks

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creased demand for heating oil and gasoil in the run-up to the new shipping fuel regulations by the IMO starting January 2020, according to Kemp. Nigeria needs to do something similar and start liquidating its net long position on oil by intensifying efforts at economic diversification. Nigeria’s economic potential certainly lies beyond oil with a strong focus on agriculture. With a very youthful population and fertile land, the nation has the potential to create employment through agriculture which will not only result in food security but support economic growth. “While there is no single silver bullet to solve our economic problems as such, it is my strong belief that for Nigeria to fast track its economic growth rate there has to be deliberate and sustained investments in basic infrastructures, particularly power and transportation; human capital; agriculture; and healthcare” Adekunle Olumide, a retired diplomat who served on various United Nations’ social and economic desks. When Nigeria develops the ability to export agriculture products across Africa and the globe, this will reduce the reliance on oil ultimately insulating the nation from oil-induced external shocks. While other non-oil sectors such as telecommunications, Information Communication Technology and even manufacturing have the potential to elevate the nation, heavy investments in infrastructure are needed to make this possible.

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Wednesday 05 June 2019

BUSINESS DAY

finance people appointments

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ENERGYintelligence

Total to move ahead with using palm oil at biodiesel refinery

Brief

otal is set to start up a biodiesel refinery using palm oil whose planned launch last summer sparked opposition from farmers producing vegetable oil and from environmental activists. The refinery in La Mede in southern France will begin production in two weeks, Chief Executive Patrick Pouyanne told journalists on the sidelines of the company’s annual shareholders’ meeting. “Operationally the project is starting,” he said. The start-up of the 500,000 tonne-per-year refinery has been delayed several times. Farmers expressed concern about palm oil competing with locally produced vegetable oil and environmental activists cited the deforestation caused in producing it. Palm oil cultivation results in excessive deforestation and its use in transport fuel should be phased out, the European Commission concluded in February,

although it granted some exemptions production by smallholdings or on unused land. Total, which has invested around 200 million euros ($223 million) to convert the lossmaking crude refining unit to biodiesel, hopes those exemptions help convince France to overturn its plan to end subsides for adding palm oil to diesel. “We can have a refinery that

is competitive,” Pouyanne said. If the French law is not changed, La Mede will not be competitive with its European peers,” he said. Total has committed to use less than 300,000 tonnes of crude palm oil per year at La Mede out of a total of 650,000 tonnes, with the rest coming from oils from other plants, recycled animal fat, cooking oil and industrial oil.

the Mercato Telematico Azionario, organised and operated by Borsa Italiana SpA (MTA), on the day before each individual transaction and, in any case, shall not exceed the higher of the price of the last independent trade and the highest current independent purchase bid on the MTA. The amount of purchases for 2020 will be announced to the market during the strategy presentation at which the new 2020-2023 Strategic Plan will be

illustrated. At present, Eni holds 33,045,197 treasury shares, equal to approximately 0.91 percent of share capital, acquired during previous buy-back programs. Eni subsidiaries do not own shares in the Company. Eni will announce the details of any purchases made to the market within the time limits and with the procedures required by applicable regulations.

China demand for Angolan crude oil stalls as buyers hold out for Eni board of directors approves lower prices measures to begin buy-back program

frican crude oil sales into China, the world’s biggest importer, have stalled as buyers wait for spot sale offers from top supplier Angola to fall in line with slumping benchmark prices, refining and trading sources said. Chinese refiners are in the market for Angolan imports in August, but they have been slow to finalise orders in the hope that the slide in Brent crude oil futures will lead to weaker cargo prices, industry sources said. In late April, Brent was almost 20 percent below its 2018 peak. At the same time, Brent backwardation LCOc1-LCOc2 - a market trend where prices for prompt delivery are higher than those in future months, has narrowed sharply, a sign that spot premiums may weaken soon, the sources said. Brent’s premium to Dubai quotes DUB-EFS-1M also fell below $3 a barrel, down from the highest since May 2018 recorded. That makes oil from the Atlantic Basin more affordable than those from Russia and the Middle East.

“Buyers are tending to wait in a downward (price) cycle while crude stocks remain high in Shandong,” said one trader with an independent Chinese refiner. Shandong is home to most of China’s independent refiners, known in the trade as ‘teapots’. Chinese independent refiners account for a fifth of the country’s crude imports, and have increased imports by about 300,000 barrels per day (bpd) in the first four months this year compared with the same period in 2018, up to 2.15 million bpd, Beijing-based consultancy SIA Energy’s Seng Yick Tee said. China’s slowdown in orders is now starting to impact prices for Angolan cargoes loading in July, the sources said. Angolan state oil company Sonangol was reported to have dropped cargo prices by around 20-30 cents a barrel from initial asking prices, though around 20 cargoes still remained unsold, traders said. Sonangol’s company policy is not to comment on commercial matters. www.businessday.ng

he Eni board of directors, in execution of the authorization granted by the Eni shareholders’ meeting of May 14, 2019 and within the terms announced to the market on that date, has approved measures to begin the 2019 share buy-back program, in the maximum amount of €400,000,000 and up to a maximum of 67,000,000 shares. The program gives the company a flexible option to give its shareholders an additional return beyond the distribution of dividends, in line with Eni’s commitment to a progressive shareholder remuneration policy linked to the growth in profits. The purchases will start in the first week of June 2019 and will terminate within the month of December 2019. In order to execute the program, Eni will engage an authorized agent, who will purchase Eni shares on a fully independent basis, including with regard to the timing of purchases and in compliance with the daily price and volume limits. In particular, the price of each transaction shall not be more than 5 percent greater or lower than the official price registered by the Eni SpA stock in the trading session of

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Wednesday 05 June 2019

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marketinsight Crude tumbles on talk of softer US approach to Iran sanctions

rude futures tumbled, following a US gasoline stock build and reports that the US may be softening its zero tolerance approach on Iranian sanctions waivers. ICE July Brent fell $2.58 to settle at $66.87/b, while NYMEX July crude fell $2.22 to settle at $56.59/b. According to a Wall Street Journal report, citing a senior US official, buyers of Iranian crude that have not hit their limits yet can continue to import barrels until those caps are reached. “So once people have reached that cap of what was negotiated, that then would be the limit of the oil that we would permit to move through that would not be sanctioned,” said Brian Hook, the US State Department’s special representative for Iran, in the WSJ article. In early May, the US allowed waivers for Iran’s biggest crude and condensate buyers to expire, part of US President Donald Trump’s push to bring Iranian oil exports to zero and starve the Iranian regime of revenue. “We have zeroed out purchases of Iranian crude and conden-

sate in a measured way,” Hook said at the time. The comments seemed to be “an acknowledgment that they won’t immediately get to zero,” said Paul Sheldon, chief political advisor for S&P Global Platts Analytics. While oil prices fell on the news, it was not clear if there was in fact a change in US policy. The State Department did not

respond to a request for clarification. White House advisor Mark Dubowitz, and CEO of the think tank Foundation for Defense of Democracies, said on Twitter that there are no waivers in place. “Senior [administration] officials tell me no change in policy. No waivers. Anyone buying Iranian crude is committing a sanctionable offense,” he said.

Global crude production drops sharply over last six months

rom Russia to Saudi Arabia, Iran to Venezuela, the list of crude oil supplies being curtailed or disrupted around the world is growing longer by the month. This story examines whether the market’s biggest supply shifts are actually netting out into a global shortage of oil or not. The answer is a complex one, hinging on the type of crude in question

and the time-frames selected. The simplest supply measure is all the oil pulled out of the ground globally. On this view it does indeed look like global production has fallen sharply over the past six months, as the OPEC+ group of countries slashed supply, while the US has toughened sanctions on the oil industries of Iran and Venezuela. Figures published by the Ener-

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gy Intelligence Group show that global oil production was 96.79 MMbpd in April. That is a drop of more than 2 MMbpd since the end of last year. But just a slightly a longer time-frame gives a different picture. If you compare April with a year earlier, production is actually up, by 570,000 bpd―pretty much in line with oil demand growth. While such a broad look at global oil production data offers some insight, it misses a lot of important detail. Most of the new refineries built in Asia and the Middle East in recent years were designed to run on a diet of heavy, sour crudes. These barrels feature a high proportion of large hydrocarbon molecules that need to be broken down into smaller ones to make high-value transport fuels. They also tend to contain relatively high concentrations of sulfur that must be removed to meet anti-pollution regulations. Booming production from the US Permian basin has driven a surge in the supply of light crude, which was up year-on-year by more than 1.8 MMbpd in April. By contrast, the increase since the end of 2018 has been much smaller, at 160,000 bpd.

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ENERGY intelligence OPEC Flakes Russia to consider extending oil output cut with OPEC

ussia will carefully consider extending its oil output reduction agreement with the Organization of the Petroleum Exporting Countries (OPEC) and other producers, Anton Siluanov, Russian First Deputy Prime Minister said. Moscow will weigh, in particular, the deal’s positive effect on oil prices against losses in market share to United States companies, he said. “There are many arguments both in favour of the extension and against it,” Siluanov said on the sidelines of a conference in Kazakhstan. “Of course, we need price stability and predictability, this is good,” he said. “But we see that all these deals with OPEC result in our American partners boosting shale oil output and grabbing new markets.” Russia’s energy ministry and government will determine their stance on the pact’s extension after weighing these pros and cons and the longevity of current market trends, Siluanov said.

OPEC, Russia and other producers agreed to cut output by 1.2 million barrels per day (bpd) from January for six months to boost oil prices by reducing global inventories. OPEC and the other producers involved in the supply agreement, an alliance known as OPEC+, are scheduled to meet to discuss extending the pact in Vienna during an OPEC meeting scheduled for June 25 and 26. The meeting, however, may be pushed back to July 3 and 4, two OPEC sources said on May 20.

OPEC oil output set for drop despite Saudi production boost

PEC’s oil production dropped to a 2015 low of 30.17 million bpd in May, as a major 200,000-bpd increase in Saudi Arabia’s production was unable to offset an even larger production decline in Iran after the US removed all sanction waivers for Iranian buyers, a Reuters survey showed. After the US choked off more Iranian supply with the end of the waivers, Saudi Arabia appears to have lifted its oil supply by 200,000 bpd to 10.05 million bpd, according to the monthly Reuters survey that tracks supply to the market from shipping data and sources at OPEC, oil companies, and consulting firms. Yet, even with the 200,000bpd boost in May, Saudi Arabia is comfortably below its 10.311m bpd cap under the OPEC+ deal as it had been overachieving in its share of the cuts by 500,000 bpd in the previous months. Despite the increased supply from Saudi Arabia, OPEC’s overall production was down in May by 60,000 bpd from April, as oil supply from two of the producers exempted from the cuts plunged. Iran’s oil supply dropped by 400,000 bpd month on month, while Venezuela saw another 50,000-bpd @Businessdayng

decline amid the US sanctions and continuously plummeting oil production in a severe economic crisis. Among other OPEC nations, production in Nigeria dropped as some pipeline flows and exports were disrupted and under force majeure for extended periods in May. The OPEC producers bound by the pact met 96 percent of the targeted production cuts in May, down from 132 percent in April, as Saudi Arabia, Angola, and Iraq increased output, according to the Reuters survey. According to OPEC’s official figures, the cartel’s crude oil production in April dropped by 45,000bpd, despite continued deep cuts by the largest producer, Saudi Arabia, and continued decline in Venezuela and Iran.

Wednesday 05 June 2019

BUSINESS DAY

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talking points

ENERGY intelligence

How OPEC outsider is combating for LNG dominance - Oxford Business Group DIPO OLADEHINDE

xford Business Group (OBG), a global publishing, research and consultancy firm has explained how the Organization of Petroleum Exporting Countries (OPEC) outcast Qatar is aiming to boost output in the Liquefied Natural Gas (LNG) by 43 per cent from 77 million to 110 million tonnes per year despite already been the world’s leading supplier. After Qatar announced it was leaving OPEC last year which it joined as one of the first members in 1961, in order to focus on gas, a development which will not only increase its present performance but also increase its added capacity and will allow Qatar to increasingly capitalize on and expand its overall market share. Oxford Business Group said with a significant expansion in output from its natural gas fields planned over the next five years, Qatar is confident that the additional supply will coincide with a growth in global demand for clean energy. “Investments in technologies and value-added products such as GTLs

and petrochemicals will allow Qatar to further develop in diverse energy and petroleum product markets, while the national oil company expands its operations internationally, winning exploration rights across several countries,” Oxford Business Group said. Qatar was the world’s fifth-largest producer of natural gas in 2017, after the US, Russia, Iran and Canada. Qatar produced 231 million tonnes of hydrocarbons in 2017, with natural gas accounting for 151.1 million tonnes of oil equivalent, while oil accounted for 79.9 million tonnes. Gas accounted for 65 percent of the country’s hydrocarbons production that year. In 2017 the country exported 18.4 billion cubic metres of natural gas to the UAE and Oman through the Dolphin pipeline and 103.4 billion cubic metres of LNG via shipping overseas. This represents 26.3percent of the global total of 393.9 billion cubic metres of LNG exported by all gas-producing countries combined for that year. Qatar’s main energy player is stateowned Qatar Petroleum (QP), formed in 1953 and turned into the national oil company in 1972, which has both upstream and downstream oil and natural gas activities has operated a number of subsidiaries responsible for exploration, production and local and international

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sales. QP’s Qatargas and RasGas, already the world’s top two natural gas producers, merged in January 2018, saving the company $550m in annual operation costs. The new company, under the name Qatargas, has PSAs with ExxonMobil, Total, ConocoPhillips and Shell, and is responsible for all of Qatar’s natural gas exports. The country also exports natural gas to its regional neighbours, the UAE and Oman, through the Dolphin pipeline built in 2007. The 48-inch pipeline was the first GCC cross-border refined gas transmission project and is the longest gas pipeline in the Middle East. Furthermore, Qatar’s energy policy is increasingly focused on gas, the discovery of which has propelled the country into the top ranks of international hydrocarbons producers and established the country as the world’s richest by per capita income. Looking to capitalize further on its natural gas reserves, in September 2018 Saad Sherida Al Kaabi, minister of state for energy affairs and president and CEO of QP, announced the country would seek to expand natural gas production by 43percent from 77m tonnes a year to 110m tonnes by 2024. According to BP’s “Statistical Review of World Energy 2018”, Qatar has

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proven reserves of 25.2 billion barrels of oil, ranking it 14th among oil-producing states in terms of oil reserves. BP’s analysis of the country’s reserves-to-production ratio suggests that Qatar’s oilfields can continue to produce at current levels for another 36.1 years. The report noted that in 2017 Qatar produced 1.9m bpd of oil and natural gas liquids (NGLs), representing a 2.7 percent decline in production from 2016, and making Qatar the world’s 15th-largest oil producer. According to OPEC’s calculations, which do not include NGLs, Qatar produced 609,000 bpd of crude oil in the third quarter of 2018. BP found Qatar’s proven reserves of natural gas were 879.9 trillion cubic feet, equivalent to 12.9percent of the world’s total natural gas deposits. The only countries with larger endowments of natural gas are Russia with 18.1percent and Iran with 17.2percent of global deposits. Based on production levels in 2017, Qatar’s natural gas fields can continue production through the year 2159. The international oil company also estimated that Qatar produced 4.8 percent of the total global production of natural gas at 175.7 billion cubic metres, a 0.5percent decline from 2016 output. However, from 2006 to 2016, the report noted Qatar’s production of natural gas increased by 12.9 percent.

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Wednesday 05 June 2019

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Wednesday 05 June 2019

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Live @ The STOCK Exchanges Prices for Securities Traded as of Monday 03 June 2019 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 222,157.66 6.25 2.46 114 2,774,459 UNITED BANK FOR AFRICA PLC 217,166.33 6.35 1.60 155 4,706,370 ZENITH BANK PLC 635,779.00 20.25 0.75 257 8,843,607 526 16,324,436 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 249,472.28 6.95 -1.42 96 4,112,582 96 4,112,582 622 20,437,018 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,780,426.48 136.60 0.07 198 1,465,587 198 1,465,587 198 1,465,587 BUILDING MATERIALS DANGOTE CEMENT PLC 3,404,693.38 199.80 0.15 149 1,283,534 LAFARGE AFRICA PLC. 161,077.95 10.00 -0.99 74 2,208,246 223 3,491,780 223 3,491,780 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 294,222.28 500.00 -9.07 25 113,403 25 113,403 25 113,403 1,068 25,507,788 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 14,408.66 5.40 - 1 95 1 95 1 95 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 1 95 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 2 4,423 OKOMU OIL PALM PLC. 70,589.34 74.00 - 6 3,300 PRESCO PLC 58,000.00 58.00 - 1 45,000 9 52,723 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 511.20 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,770.00 0.59 - 7 185,838 7 185,838 16 238,561 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 794.19 0.30 - 3 30,446 JOHN HOLT PLC. 182.90 0.47 - 1 755 S C O A NIG. PLC. 1,903.99 2.93 - 1 308 TRANSNATIONAL CORPORATION OF NIGERIA PLC 46,745.19 1.15 -0.86 49 3,766,474 U A C N PLC. 18,008.10 6.25 -8.09 138 24,334,114 192 28,132,097 192 28,132,097 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 26,004.00 19.70 -9.84 17 119,869 ROADS NIG PLC. 165.00 6.60 - 0 0 17 119,869 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 3,897.59 1.50 - 10 144,100 10 144,100 27 263,969 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 8,690.74 1.11 9.90 9 259,500 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 106,233.57 48.50 - 11 2,826 INTERNATIONAL BREWERIES PLC. 171,917.24 20.00 - 33 33,045 NIGERIAN BREW. PLC. 463,820.32 58.00 - 59 2,710,740 112 3,006,111 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 83,000.00 16.60 -1.48 61 711,697 DANGOTE SUGAR REFINERY PLC 144,000.00 12.00 -0.83 69 597,750 FLOUR MILLS NIG. PLC. 57,405.31 14.00 2.94 93 1,440,333 HONEYWELL FLOUR MILL PLC 8,643.92 1.09 -0.91 36 1,244,623 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 0 0 NASCON ALLIED INDUSTRIES PLC 39,079.22 14.75 -9.23 42 628,873 UNION DICON SALT PLC. 3,321.07 12.15 - 1 100 302 4,623,376 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 20,566.31 10.95 - 16 34,200 NESTLE NIGERIA PLC. 1,157,278.13 1,460.00 0.69 25 102,616 41 136,816 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 4,815.75 3.85 -9.41 17 635,475 17 635,475 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 32,359.39 8.15 0.62 25 458,197 UNILEVER NIGERIA PLC. 178,095.17 31.00 - 64 1,389,022 89 1,847,219 561 10,248,997 BANKING ECOBANK TRANSNATIONAL INCORPORATED 184,412.99 10.05 -9.87 41 1,385,988 FIDELITY BANK PLC 49,257.15 1.70 1.19 58 2,837,760 GUARANTY TRUST BANK PLC. 921,195.91 31.30 -0.95 183 33,986,838 JAIZ BANK PLC 14,142.84 0.48 4.35 51 5,356,630 SKYE BANK PLC 10,687.83 0.77 - 0 0 STERLING BANK PLC. 69,097.00 2.40 4.35 559 3,610,689 UNION BANK NIG.PLC. 203,845.27 7.00 2.19 55 1,717,827 UNITY BANK PLC 8,182.54 0.70 -1.41 10 225,000 WEMA BANK PLC. 23,916.17 0.62 -3.12 29 2,278,443 986 51,399,175 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 4,573.93 0.66 - 7 54,848 AXAMANSARD INSURANCE PLC 20,790.00 1.98 - 8 170,457 CONSOLIDATED HALLMARK INSURANCE PLC 1,707.30 0.21 -8.70 21 3,498,715 CONTINENTAL REINSURANCE PLC 19,811.94 1.91 - 0 0 CORNERSTONE INSURANCE PLC 2,945.90 0.20 - 2 2,825 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 0 0 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 2,197.03 0.30 - 5 138,418 LAW UNION AND ROCK INS. PLC. 1,976.31 0.46 - 2 100 LINKAGE ASSURANCE PLC 4,000.00 0.50 - 1 25 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 -9.09 7 525,292 NEM INSURANCE PLC 11,775.52 2.23 - 12 151,450 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 2,691.28 0.50 - 0 0 REGENCY ASSURANCE PLC 1,333.75 0.20 - 3 105,650 SOVEREIGN TRUST INSURANCE PLC 1,918.39 0.23 - 7 794,873 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 1 100 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 0 0 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 6 281,980 WAPIC INSURANCE PLC 5,353.10 0.40 - 29 1,806,209 111 7,530,942

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MICRO-FINANCE BANKS FORTIS MICROFINANCE BANK PLC 11,799.67 2.58 - 0 0 NPF MICROFINANCE BANK PLC 3,086.96 1.35 - 6 126,000 6 126,000 MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 3,780.00 0.90 - 1 70 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,796.93 1.39 - 2 23,911 RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 3 23,981 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 7,000.00 3.50 -3.58 39 1,345,912 CUSTODIAN INVESTMENT PLC 35,585.28 6.05 - 1 100 DEAP CAPITAL MANAGEMENT & TRUST PLC 660.00 0.44 - 0 0 FCMB GROUP PLC. 31,684.34 1.60 -0.62 78 70,558,374 ROYAL EXCHANGE PLC. 1,131.98 0.22 - 2 17,500 STANBIC IBTC HOLDINGS PLC 430,103.22 42.00 - 14 1,056,230 UNITED CAPITAL PLC 12,780.00 2.13 -5.33 81 4,933,759 215 77,911,875 1,321 136,991,973 HEALTHCARE PROVIDERS EKOCORP PLC. 1,680.29 3.37 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 852.75 0.24 - 4 596,500 4 596,500 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 593.50 0.60 - 2 527 2 527 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 7,575.00 5.05 - 1 500 GLAXO SMITHKLINE CONSUMER NIG. PLC. 9,148.46 7.65 -10.00 33 2,179,933 MAY & BAKER NIGERIA PLC. 3,933.54 2.28 - 15 533,875 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 1,063.53 0.56 - 15 129,168 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 1 25 65 2,843,501 71 3,440,528 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 852.48 0.24 -8.33 21 5,441,365 21 5,441,365 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 1 20 NCR (NIGERIA) PLC. 648.00 6.00 - 0 0 TRIPPLE GEE AND COMPANY PLC. 346.47 0.70 - 0 0 1 20 PROCESSING SYSTEMS CHAMS PLC 1,643.62 0.35 -7.89 22 1,489,815 E-TRANZACT INTERNATIONAL PLC 9,996.00 2.38 - 0 0 22 1,489,815 44 6,931,200 BUILDING MATERIALS BERGER PAINTS PLC 1,912.83 6.60 -0.75 30 676,007 CAP PLC 21,770.00 31.10 - 4 4,918 CEMENT CO. OF NORTH.NIG. PLC 197,152.51 15.00 - 34 271,416 FIRST ALUMINIUM NIGERIA PLC 844.14 0.40 - 0 0 MEYER PLC. 313.43 0.59 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,959.74 2.47 - 0 0 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 68 952,341 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 2,730.05 1.55 -3.12 29 1,883,696 29 1,883,696 PACKAGING/CONTAINERS BETA GLASS PLC. 37,497.90 75.00 - 6 2,635 GREIF NIGERIA PLC 388.02 9.10 - 0 0 6 2,635 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 103 2,838,672 CHEMICALS B.O.C. GASES PLC. 1,565.08 3.76 - 0 0 0 0 METALS ALUMINIUM EXTRUSION IND. PLC. 1,803.64 8.20 - 1 65 1 65 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 88.00 0.40 - 3 99,455 3 99,455 4 99,520 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,628.30 0.26 -7.14 24 1,273,449 24 1,273,449 INTEGRATED OIL AND GAS SERVICES OANDO PLC 47,239.37 3.80 -9.52 250 27,145,333 250 27,145,333 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 63,104.17 175.00 - 3 1,517 CONOIL PLC 15,266.95 22.00 - 26 44,062 ETERNA PLC. 4,760.13 3.65 - 9 34,995 FORTE OIL PLC. 35,036.74 26.90 -2.18 63 849,509 MRS OIL NIGERIA PLC. 6,354.80 20.85 - 2 200 TOTAL NIGERIA PLC. 55,002.54 162.00 - 8 11,769 111 942,052 385 29,360,834 ADVERTISING AFROMEDIA PLC 1,820.01 0.41 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 17,551.17 1.80 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 341.14 0.29 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 3,242.23 5.50 - 2 59,350 TRANS-NATIONWIDE EXPRESS PLC. 342.26 0.73 - 1 110 3 59,460 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,723.78 3.05 - 0 0 IKEJA HOTEL PLC 3,014.25 1.45 - 1 500 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 0 0 TRANSCORP HOTELS PLC 41,042.18 5.40 - 0 0 1 500 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,800.00 0.40 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 163.30 0.27 8.00 1 100,000 LEARN AFRICA PLC 1,033.74 1.34 - 5 32,630 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 849.88 1.97 9.44 8 1,307,753 14 1,440,383 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 464.16 0.28 - 3 68,650

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BUSINESS DAY Wednesday 05 June 2019 www.businessday.ng

Rare earths: Beijing threatens a new front in the trade war China believes its near-monopoly gives it leverage over the US but supply cuts would spur rival producers Lucy Hornby & Henry Sanderson

ine years ago, Ian Higgins’ company in the north-west of England was jolted by bad news from Volkswagen. Prices for rare earths were rising, so Europe’s largest carmaker warned it was planning to discontinue use of all rare earth alloys in its magnets. Mr Higgins braced for other clients to take a similar step, threatening his metal alloy maker Less Common Metals if the car industry moved away from the technology. Instead, to his relief, the scare died down. Until now. Rare earths — a group of 17 obscure minerals that are embedded in our digital lives — have been thrust into the centre of the US-China trade war following warnings by Beijing that it could cut off supply. Just as in 2010, when the price rise accompanied a dispute between China and Japan, Mr Higgins is again facing disruption to the supply of raw materials. During the past month, the trade tensions between the US and China have been raised to a new level. The US decision to in effect ban Chinese telecoms company Huawei from the US market is not just a short-term blow to China’s exports but could also hamper its long-term efforts to boost innovation. Beijing is looking for ways to retaliate in kind and believes that rare earths could be an important strategic weapon. On May 21, Xi Jinping visited a rare earths magnet-maker in Ganzhou, southeastern Jiangxi province, rattling global markets. The president’s talk of self-sufficiency reopened a furious debate about China’s dominance over a supply chain crucial to the military and high-tech industries. “If you do get prices spiking again for a second time the fundamental question is how much damage it could do to the rare earth magnet industry,” says Mr Higgins. The magnets used in electric vehicles are almost all reliant on rare earths mined in China. Prices for neodymium and praseodymium, the two main rare earths used in magnets, have risen from about $32 per kilogramme in early May to about $42/kg, according to UBS. In 2011, prices rose to over $160/kg. Rare earths — the 15 lanthanide elements on the periodic table, plus two other related elements, scandium and yttrium — are an integral part of modern life. Used in smartphones, lasers, instrument panels, wind turbines and MRI machines, they are incorporated so far up the manufacturing chain that most consumers are not aware of them. They will become even more important as new technologies take root. Over 90 per cent of hybrid and electric cars use rare earth-based magnets in their motors. China accounts for almost 80 per cent of the global mined supply of rare earths, thanks to especially rich deposits and a high tolerance for the toxic and sometimes even radioactive process of mining and extracting. It enjoys an even higher share of the manufacturing of powerful rare earth magnets. Mr Xi’s visit, which came five days after the Huawei announcement, was a reminder that if the rest of the world threatens China, China can punch back. A few days later, China’s powerful state planning body threatened to use rare earth exports as leverage in the trade war with the US. “Will rare earths become China’s counter-weapon against the US’s unwarranted suppression?” the National Development and Reform Commission wrote. The People’s Daily weighed in with a phrase that presaged the India-China war of 1962 and a short war with Vietnam in 1979. “Don’t say you were not warned,” it wrote.

“I think this is an attempt by China to cause second thoughts in Washington in hopes of moderating what has become a very aggressive US position towards China on all fronts,” says John Seaman, research fellow at the Institut Français des Relations Internationales in Paris. Long before rare earths became a cottage industry for security strategists, former Chinese leader Deng Xiaoping saw them as a way to earn export dollars. “The Middle East has oil, China has rare earths,” he noted during a 1987 tour of Baotou, Inner Mongolia, site of one of the country’s two large deposits. During the following decade China overtook the US as the largest producer of rare earths, although at a heavy environmental cost. It was a “race to the bottom”, according to Julie Michelle Klinger, assistant professor of international relations at Boston University, with low environmental oversight allowing China to export at the cheapest prices. A toxic lake grew in Baotou, while the cost of cleaning the soil and water in Ganzhou runs to billions of dollars. Cheap and dirty, rare earths were not on the radar of anyone outside the industry until a provocative 2006 proposal published in China suggested restricting exports of rare earths to Japan on national security grounds. The author, minerals expert Sun Lihui, touted the environmental benefits of curbs on mining, as well as the idea of luring processing technology to the country to take advantage of China’s lower costs. Soon after, Beijing imposed annual quotas on rare earth exports. A few years later the global financial crisis caused demand for rare earths to plummet. Seeing that 2009 export quotas had not been fully used, state planners cut quotas for the second half of 2010. When demand started to recover after the crisis, exporters with full order books were unable to secure quotas. Prices rose, just as sparring between China and Japan over the East China Sea came to a head in September 2010. International media reported that China had cut off supply to Japan. In fact, both Chinese and Japanese customs data show rare earths continued to be shipped to Japan throughout the fall of 2010. But the mere suggestion of an interruption, combined with the price rise, had a profound impact on the way government and industry thought about rare earths. Countries realised that China had the ability to use its market dominance as a bargaining chip. Mindful of its vulnerability, Japan poured money into finding substitutes. Last year Toyota announced new magnet technologies that would “significantly reduce” the proportion of neodymium, a rare earth used in magnets for electric and hybrid vehicles, needed to make its electric motors. Although companies like Mr Higgins’ in the UK were saved once the crisis subsided, the US defence department also took notice. Rare earths are used in lasers, radar, sonar,

night vision systems, missile guidance, jet engines and alloys for armoured vehicles. Last September, a Pentagon report claimed that China had “strategically flooded the global market with rare earths at subsidised prices”. “China’s domination of the rare earth element market illustrates the potentially dangerous interaction between Chinese economic aggression guided by its strategic industrial policies and vulnerabilities and gaps in America’s manufacturing and defence industrial base,” it added. The tussle over rare earths is more complicated in 2019 than it was in 2010, but just as emotional. Back then, it revolved around minerals and oxides supply to Japan. This time, tensions with the US play out over longer and much more complex supply chains. “It would be difficult to make it hit just the US,” Yujia He, of Hong Kong University of Science and Technology’s Institute for Emerging Market Studies, says of any eventual Chinese restrictions on exports. To begin with, the US imports very little of the raw material directly from China: the value of Chinese rare earths imports was about $160m in 2018, mostly for the oil and gas industry. Export restrictions would directly impact Japan and other Asian countries, which Beijing is not trying to antagonise. The US imports rare earth compounds, an intermediate product, from China or from Europe, where they are processed from raw materials mined in China. China will meet “the legitimate needs” of other countries, commerce ministry spokesman Gao Feng said last week. It just would not countenance its own rare earths supply being used “to crack down on China’s development”. David Abraham, a senior fellow at the New America think-tank in Washington and author of a book on rare earths, believes that Beijing is trying to ensure “that no rare earth material should end up in the US military supply line”. In his view, “some kind of complicated vague requirement” to ensure that their products do not end up in US military equipment “would be impossible to certify and [would] introduce uncertainty in supply lines”. Such a mechanism would be difficult to operate. The amount of rare earths used in metal alloys is too small to be easily tracked. Exports of lanthanum oxides and carbonates are destined for a wide range of products, including medicine to treat kidney disease, which makes it hard to filter out exports that end up in military applications. A more effective threat would be to restrict exports of rare earth magnets, a much larger industry that China dominates with a market share of more than 80 per cent. That would hamper the transition to electric cars. US and possibly European carmakers would be forced to buy from Japan, which would rapidly push up prices. Analysts note that

JLMag, the Chinese company that Mr Xi visited last month, is a major exporter of rare earth magnets. “If these bans do move further downstream that would impact the US electric vehicle manufacturing industry or act as a barrier to that industry forming in the US,” says David Merriman, an EV analyst at Roskill in London. Disruptions in Chinese rare earth supply would, however, stoke concerns in Europe and Japan that the country is not a reliable supplier. That would hasten moves already under way to reduce reliance on Chinese supply — just as it did last time. Already, rare earths mining is diversifying. Last year China became a net importer of rare earths, as it looked to other countries to provide raw materials, while it prioritised emerging high-tech industries such as rare earth magnets and electric motors. “Do they really want to weaponise it?” asks Will Smith, founder of Westbeck Capital Management in London, which invests in the raw materials needed by the electric car industry. “If there was a bigger and more secure supply of these things then the use of permanent magnets would be higher. The last time China limited supply it was to their detriment, the demand evaporated.” During the 2010 scare, prices for rare earths rocketed as much as tenfold, prompting a global flood of new mining projects. At one point there were over 100 listed rare earth companies, each claiming to be the answer to Chinese dominance, says Mr Smith. “I didn’t expect that only one would survive.” But one did: Australian-listed Lynas, which owns the Mount Weld mine in Western Australia as well as a processing facility in Malaysia. Its shares have risen by more than 90 per cent this year as a result of the trade tensions, and it made a profit for the first time last year. Its survival has been contingent on support from magnet makers in Japan. “The US never looked at it in that same strategic way that the Japanese did and were reluctant to get involved in a single company,” says Mr Merriman. China’s threats may finally push the US to revive its own rare earth industry. Last month Lynas announced it would build a rare earths processing plant in Texas, with Blue Line Corporation. The only US rare earths mine, the Mountain Pass mine in California, expects to start a processing facility next year. Mr Xi must balance the need to present the US with credible consequences for the trade war against the need to maintain the trust of the magnets and motors markets. “If rare earths were completely cut off it would definitely damage the Chinese market as well,” Mr Merriman says. “But don’t rule out China slightly damaging itself to push the bigger national strategic picture. They can use this bargaining chip to impact decisions on a more macro scale.”

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