BusinessDay 05 Oct 2020 by BusinessDay

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news you can trust ** monday 05 october 2020 I vol. 19, no 664

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ntb

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3m 2m 25-nov-20 30-Dec-20 391.71 394.55

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*NTB - Nigerian Treasury Bills; *CP - Commercial Paper

As provision for loan defaults hits 3yr-high

Reasons FG, developers rule out low-cost houses for Nigerians CHUKA UROKO

Oluwafadekemi Areo

uilding low-cost houses is not practicable in Nigeria because such a venture is not economically viable, the Federal Government and

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Dangote Cement plc

385.80

Nigerian banks gather defences to ride out virus storm igerian banks are setting aside more money than they did in the last three years for bad loans amid the coronavirus (Covid-19) pandemic, indicating that the banks see a need to further shore up reserves to weather a wave of defaults. Analysis of 11 commercial banks including Access Bank, Guaranty Trust Bank, First Bank, United Bank for Africa, Zenith Bank, Sterling Bank, Stanbic IBTC, Fidelity Bank, Union Bank, Wema Bank, and Ecobank shows that the provisions for loan defaults soared by a combined 58.5

FGN

Spot ($/N) 11-Mar-21 5-Mar-21 23-Jul-30 30-Apr-25 20-May-27 27-Feb-34

$-N 450.00 466.00 1m £-N 600.00 616.00 Currency Futures 28-Oct-20 388.88 €-N 540.00 554.00 ($/N)

Benchmark Sovereign & Corporate Bonds

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Inside

Prices of facemasks, sanitizers, thermometers drop as COVID-19 cases P. 2 crash 78% Emmanuel Amgbaduba (r), commissioner for oil and gas, Delta State, presenting Timipre Wolo, CEO, TFN Energy, with the “Niger Delta Most Outstanding Humanitarian Personality Award” at the GbaramatuVoice 5th Anniversary Lectures/Awards held recently, at the Presidential Hotel in Port Harcourt.

Nigeria urged to tighten security ahead border re-opening P. 2

Monday 05 October 2020

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news Nigeria’s stock investors gain N350bn in one week … year-to-date return turns positive Iheanyi Nwachukwu

igeria’s stock market moved further north by 0.57 percent on Friday, October 2 – the first trading day in the new month. Weekon-week (wow) investors booked over N350 billion gain, as market’s year-to-date (YtD) returns turned positive at +0.54 percent. The market strengthened its positive trend as more investors bought shares of Africa’s leading cement producer, Dangote Cement plc, and that of the leading telecoms operator, MTN Nigeria plc. Also, GTBank plc, which continues to reoccur among investors’ top picks as well as stocks like Dangote Sugar Refinery plc and Julius Berger Nigeria plc were on demand. The Nigerian Stock Exchange’s (NSE) recent bullish trend is attributed to the stability seen in the crude oil market as well as the recent decision of the Monetary Policy Committee (MPC) to reduce the Monetary Policy Rate (MPR) - benchmark rate by 100basis points (bps) to 11.50 percent. This now drives buying interest in most fundamentally attractive stocks. Despite recent positives, analysts still believe a number of stocks listed on the Nigerian bourse trade below their fair

values – though there is need to trade cautiously in the short term as the domestic market remains soft in the face of global and local uncertainties. In the four-day trading week, the stock market increased by 2.53 percent, thanks to banking and industrial goods, and oil and gas stocks that recorded increased bargains. In the week under review, NSE Banking Index increased most by +4.24 percent; followed by NSE Industrial Goods (+3.25%); NSE Oil & Gas Index (+1.79%), and NSE Insurance Index (+0.64%). The NSE All Share Index (ASI) and Market Capitalisation had opened the review trading week at 26,319.34 points and N13.755 trillion, respectively, but closed at 26,985.77points and N14.105 trillion. At the close of trading on Friday, Dangote Cement rallied most, from N142.9 to N144, adding N1.1 or 0.77 percent; followed by MTNN, which rose from N129 to N130, adding N 1 or 0.78 percent. GTBank also increased from N28.05 to N29, adding 95kobo or 3.39 percent; Dangote Sugar Refinery rose from N12.4 to N12.9, adding 50kobo or 4.03 percent, while Julius Berger advanced from N16.05 to N16.25, adding 20kobo or 1.25 percent.

Prices of facemasks, sanitizers, thermometers drop as COVID-19 cases crash 78%

… low compliance level responsible too Bunmi Bailey& Godsgift Onyedinefu

rices of facemasks, sanitizers, gloves and thermometers have dropped as Nigeria sees a gradual but significant drop in the number of Covid-19 cases in the last two months. Covid-19 cases in Nigeria were reported at 624 on July 28, but this fell to 136 on September 28, representing 78.2 percent crash, BusinessDay analysis of the Nigeria Centre for Disease Control’s (NCDC) data shows. BusinessDay market survey in Lagos and Abuja shows that the prices of some of the items have fallen by over 50 percent due to slowing demand caused by low Covid-19 numbers and low compliance level.

At HealthPlus Pharmaceutics Limited in Lagos, a pack of disposable facemasks containing 50 pieces now sells for N8,000 from N18,000 between February and March 2020, representing a 56 percent decrease in price. A 250ml of sanitizer now costs N2,000, as against N2,800 in early part of the year, which is a 29 percent decrease. At Careforte Pharmacy in Lagos, a pack of facemasks now goes for N3,700 as against N6,450 in the first quarter (Q1) of 2020, representing a 43 percent decrease in price. Similarly, a pack of gloves sells for N3,650 from N6,500, while a 500ml of sanitizer costs N3,500 today as against N4,000 in Q1 2020. At most pharmacies, a non-contact infrared thermometer costs between N28,000 and N29, 000 from as high as N52,000-N85,000

in Q1 2020. “The rush for these products is not much today, unlike during the outbreak of the pandemic,” Tomisi Akinyemi, a pharmacist at HealthPlus Limited, said. For the facemask, which is mandatory, Tolu Esan, a pharmacist at Teen Pharmacy & Stores, noted that competition from the local fashion designers, who sell at N100 per piece, reduced the price for the disposable facemasks. Jide Atolagbe, a consumer analyst at Lagos-based Afrinvest Limited, noted that prices of these products had dropped because demand had slowed over the last few months. “This can be attributed to a number of reasons, particularly low compliance level with Covid-19 protocols, and also prices are responding to excess supplies,” he said

ith the recent signal by the Federal Government to re-open the land borders soon after several months of closure, trade sector analysts have urged the Nigerian authorities to ensure the protocol agreements it reached with its West African neighbours are strictly followed. Vice President Yemi Osibanjo had last week signalled the government’s willingness to re-open the borders, which some sector analysts say may have been part of the preparations before the African Continental Free Trade Area (AfCFTA) agreement commencement January next year. Though Osinbajo did not indicate how soon the borders would be re-opened, his media aide, Laolu Akande, while speaking with BusinessDay on the issue, said the process for the re-opening was already ongoing. “As the Vice President said, the border will be re-opened once all the issues which are already being tackled are settled,” according to Akande. But those who spoke with

BusinessDay say it is important that those conditions already outlined by the government are strictly adhered to. Ken Ukoha, a trade sector expert, notes that the government must put its feet on the ground and ensure that the 15-point agreement reached with other West African neighbours is strictly adhered to. “The starting point before the government opens the borders is that the 15-point protocol agreement reached by ECOWAS member countries must be well documented in a memorandum of understanding, so that such agreements would become a template for measuring the implementation of other transactions within the sub region. “This commitment by member countries should make each parties hold each other accountable to the commitment they have made,” Ukoha states. He says further that the most important protocol is the intra-state transit protocols, which make the MoU becomes very critical, noting that all the 15- member countries have signed on to an electronic signal, which ECOWAS has

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Continues on page 30 L-R: UK Eke, group managing director, FBN Holdings plc; Isa Ali Pantami, minister for communications and digital economy, and Femi Hamzat, deputy governor, Lagos State, at the launch of a revolutionary tech experience centre by TD Africa, a subsidiary of Zinox Group on Independence Day at its Yudala Heights office, Victoria Island, Lagos.

Nigeria urged to tighten security ahead border re-opening HARRISON EDEH & TONY AILEMEN, Abuja

Going forward, Atolagbe expects prices to trend lower given the continued weak demand. As of September 30, Nigeria had reported 58,848 cases and 1,112 deaths, with a discharge rate of 86 percent. Nigeria has tested only 519,140 as of September 30, according to the NCDC. South Africa with less than one-third of Nigeria’s population has tested over 2 million. Experts say lack of testing hides the spread of Covid-19 in Africa’s most populous nation. In Abuja, before the gradual ease of the lockdown in July, virtually all stores and pharmaceuticals ventured into the sales of facemasks, Infared thermometer, hand sanitizers, face shields, Vitamin C, Chloroquine, among others. Prices of these prod-

High cost, poor road infrastructure limit inland terminals’ capacity to ease congestion at port

… as residents groan over gridlock constituted by terminal operators

AMAKA ANAGOR-EWUZIE

igh cost of doing business, unnecessary delay during cargo examination and poor road infrastructure have been identified as factors limiting inland container terminals’ capacity to ease the high rate of congestion effecting seaports in Lagos State. Inland container terminals, popularly known as bounded warehouses, are facilities located outside the seaport where containers are moved for Customs examination and clearing in order to reduce or avert congestion in the main seaport terminals. Usually, once there is up to 70 percent yard occupancy at the port terminal, it means there is need to transfer some of the laden containers to bounded warehouses licensed by the Nigeria Cus-

toms Service (NCS) in order to decongest the port yard. Presently, Apapa Port is experiencing 90 percent yard occupancy, which shows that there is congestion and longer dwell time for imports. This has also affected waiting time of vessels as ships now spend between 30 and 50 days on Nigerian waters before being able to enter the port to berth. Sadly, Nigeria has not been able to leverage the existence of these inland container terminals to deal with the congestion in Apapa and Tin-Can Island ports. A recent visit to some of the terminals at Mille 2 axis, Festac Town, Amuwo-Odofin and Satellite Town where over eight different bounded warehouses are located, residents and consignees have been finding it difficult to commute as container carrying trucks lay siege to the roads designed

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with gullies and portholes. It is also discovered that access roads leading to most of the bounded warehouses in Lagos are presently in bad state causing serious congestion and delay in cargo evacuation from the terminals for both consignees as well as residents. Another factor limiting the efficiency of inland container terminals is cost associated with moving the container from the mother port to the allotted bounded warehouses. BusinessDay checks show that before containers would be transferred to these bounded warehouses, the shipping liners must first discharge the containers at the seaport before they are moved by barges and trucks in most cases to these terminals, which come with extra cost. As a result of the cost, most importers forbid shipping liners from moving their con@Businessdayng

tainers from the mother ports to bounded warehouses in order to avoid paying transfer charges. Emma Nwabunwanne, a Lagos-based importer, says payment of transfer charges is like paying double transportation or haulage charges because after the container is cleared from the bounded warehouse, one would need to pay the trucker to move the container from inland terminal to his personal warehouse. “This is why we don’t like shipping liners to transfer our consignment to bounded warehouses because at the end, the consignee bears the cost of transferring the container from the mother port to terminal,” he says. Giving insight into how such charges originate, Tony Asiadiachi, general manager,

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NEWS

Nigerians insist on disbandment of SARS …as IGP bans ‘killer’ police unit from routine patrols DESMOND OKON

n Saturday, a video appeared on social media showing a team of the Special Anti-Robbery Squad (SARS) of the Nigeria Police allegedly shooting and killing a young man. The incident was said to have occurred in front of Wetland Hotel, Ughelli in Delta State. The trending footage shows them speeding off in the victim’s vehicle – a white Lexus SUV. Eyewitnesses said the police operatives stole the victim’s car after they killed him. This incident has again sparked wide outraged nationwide with residents recounting ugly encounters with SARS and calling on outright disbandment of the unit on social media. Amplifying the voices of ordinary Nigerians who are often victims of the bloodthirsty and money-seeking SARS, Nigerian celebrities joined the social media campaign to call for an end to SARS. Multiple award ward-winning musician, Wizkid asked President Muhammadu Buhari to ‘do something’ urgently over the excesses of SARS. “Donald Trump is not your business! Old man! Police/ SARS still killing Nigerian youth

daily! Do something! “….Face your country,”Wizkid tweeted in response to Buhari’s well wishes to America’s President Donald Trump, who contracted coronavirus. Also joining the campaign, comedian, Frank Donga queried when the Nigeria Police Force would end the menace of SARS despite visual “evidence of SARS men abducting citizens, harassing, threatening and shooting people, especially in unmarked vehicles with no identification.” “Is the Nigerian Senate looking away?” Donga quips. While ace actress, Kate Henshaw believes that until SARS kills one of their own, only then will they care; another Nigerian artiste, known as Mr. Eazi emphasised the need for a reform. “Dear Nigerian leaders, we need police reform laws urgently. It’s been 15 years since the killing of the #ApoSix and our young men and women are still being harassed by those who should protect us. #EndSARS,” Eazi said. The Presidency’s reaction Responding to the mounting pressure to dissolve the anti-robbery unit, the InspectorGeneral of Police, Muhammed Adamu, banned the dreaded special anti-robbery squad and

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other police tactical squads from carrying out routine patrols following widespread campaign demanding the shutdown of SARS in Nigeria. In a statement released by the presidency on its social media page, the IG said all tactical squads must also desist from the invasion of the privacy of citizens particularly through indiscriminate and unauthorized search of mobile phones, laptops and other smart devices. He said SARS operatives must always appear in their police uniforms or approved tactical gear. “The IGP’s directives come against the backdrop of findings by the leadership of the Force that a few personnel of the Tactical Squads hide under this guise to perpetrate all forms of illegality, contrary to the Standard Operating Procedure (SOP), Code of Conduct and Rules of Engagement establishing the squads,” the statement reads. While one might expect the ban, accompanied by the IG’s condemnation of “every act of unprofessionalism, abuse of human rights and high-handedness by some personnel of the Squads” to appease citizens, Nigerians received the announcement as another hoax to keep them quiet.

I have lifted 18-year embargo on recruitment into civil service - Ayade MIKE ABANG, Calabar

overnor Ben Ayade of Cross River State said at the weekend despite the state’s lean financial standing, his administration has recruited thousands into the civil service since assuming office in 2015. Ayade, who addressed some workers that were delisted from the payroll at the U.J.Eusene Stadium, Calabar, explained that their employment was without his knowledge, as “the civil service commission did the employment without recourse to me.”

He frowned at a situation where the picture was being painted to give the erroneous impression that his government sacked the workers, when in fact, his government has employed more workers into the state workforce after lifting an 18-year embargo on employment. According to him, immediately he took office in 2015 he lifted the embargo on employment into the civil service and employed 2,500 teachers. The situation at the state water board, he said, was dire

“when I came in because staff there had not been paid for a very long time, because they were ad-hoc staff. I decided to convert them to permanent staff, made them civil servants, pay-rolled them and paid their backlog” Asking the affected workers to put him in their shoes, Ayade inquired, “If you were the governor of the state and you suddenly discovered an additional 2,500 staff on your payroll that you did not authorise, that you did not know about, nobody consulted you, what you will do?”

Shell Nigeria Gas to build gas pipeline infrastructure in Oyo REMI FEYISIPO, Ibadan

yo State government and the Shell Nigeria Gas have signed a Memorandum of Understanding (moU) to enable the company extend gas pipeline infrastructure to the state. Speaking after signing the MoU, Governor Seyi Makinde stated that the partnership was an indication that the policies and programmes put in place by his administration to expand the economy of the state were

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…signs MoU with state beginning to yield positive fruits. He explained the project was timely and would aid the industrialisation drive of the state, adding that the gas pipeline infrastructure project would be run on a Build, Operate and Transfer basis for 15 years. Managing director of the Shell Nigeria Gas, Ed Ubong, who signed for the company, said the development would aid the industrialisation effort of the

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state amid the ongoing efforts by the Governor Seyi Makinde administration to expand its economy. Ubong, who maintained that the partnership with Oyo State was an opportunity to further promote gas as a more reliable, cleaner, and cost-effective alternative to liquid fuels in the state, said “gas is the key to boosting industrialisation.” The event took place at the exco chamber of the governor’s office, Agodi, Ibadan.

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Nigeria at 60: A nation trapped by the accidents of its birth GLOBAL PERSPECTIVES

OLU FASAN

n July 14, 1960, the British Government introduced the “Nigeria Independence Bill” in the House of Commons. During the Bill’s second reading the next day, the Secretary of State for the Colonies, Iain Macleod, hailed Nigeria’s progress towards independence as a “model” for Africa. Speaker after speaker wished Nigeria well and expressed confidence that it would succeed as an independent nation. The excitement in Nigeria was indescribable. In his book “There was a country”, Professor Chinua Achebe said that “the general feeling in the air as independence approached was extraordinary.” He added: “We had no doubt where we were going. We were going to inherit freedom – that was all that mattered.” The fact that two of Nigeria’s three regions, Western and Eastern regions, had successfully practised self-government for six years, since 1954, certainly created a strong sense of: “We can govern ourselves.” The British, too, believed the tradition of self-rule was an advantage. Indeed, the title of Achebe’s book “There was a country” was intended to paint a positive picture of Nigeria before independence. “Nigeria was once a land of great hope and progress”, he said. Things worked well because “there was a very highly competent cadre of government officials imbued with a high level of knowledge of how to run a country.” Yet, after independence on October 1, 1960, Nigeria quickly became a cesspool of corruption and misrule. Within six years of independence, there were two military coups and then, a devastating civil war. The country is crisis-prone, always teetering on the edge of a precipice. Today, Nigeria is a fragile, if not a failed, state, with elusive unity, stability and progress. So, what hap-

pened to the hope of great nation after independence? Well, if you want to know what’s wrong with a country, look at its creation and evolution. Just as a child’s birth and upbringing can affect his or her future, a nation’s accidents of birth and its evolution can shape its destiny. My theory is that trapped by its birth defects. Of course, like humans, nations can escape their past, but that requires decisive actions in the right direction. Now, there are three aspects of Nigeria’s birth and evolution that continue to hinder its unity, stability and progress. The first is nature of its creation in 1914; the second is the way Britain transferred power to the country in 1960; the third is the dismantling of the pre-independence political and constitutional settlement. Take Nigeria’s creation. True nations emerge naturally, but Nigeria was purely a human construct. When the British came to the territories that would later become Nigeria in the late 18th century, they met ancient kingdoms that had existed for centuries. But, in 1914, the British cobbled these disparate nations together, without negotiation or agreement, to form a country called “Nigeria” Professor Achebe said that the ancient kingdoms, which could be independent nations in themselves, were “held together by a delicate, some say, artificial lattice.” Chief Obafemi Awolowo described the political construct as a “mere geographical expression” in the sense that, as the title of a speech by Professor Wole Soyinka says, Nigeria may be a “nation space”, but lacked “nationhood”! Throughout the colonial period, from 1914 to 1960, there was hardly any genuine effort to forge a sense of national unity. Even when the pre-independence constitutional conferences in London in 1953 and 1957 were defined by ethnic politics; everyone fighting for his ethnic group. But this is not surprising for, as Achebe put it, “The structure of the country was such that there was an inbuilt power struggle among the ethnic groups.” So, the cobbling together of Nigeria, without engendering nationhood, created a tension-prone country, and the failure to tackle the problem head-on remains an obstacle to unity and stability. But the inherent problems of a nation-

space without nationhood was compounded by the divisive way in which the British transferred power to Nigeria. Archival evidence shows that the British deliberately manipulated the pre-independence elections to hand over power to the North. As Achebe said in his book, the governor-general, Sir James Robertson, who was brought from Sudan because of “his understanding of the Muslim way of life”, as one British MP put it, “threw his weight behind Abubakar Tafawa Balewa, who had been tapped to become Nigeria’s first prime minister.” Chief Obafemi Awolowo and Dr Nnamdi Azikiwe, both Western-educated, who successfully led self-government in their regions for six years before independence, were, apparently, too independent-minded for the British. Instead, Britain wanted Nigeria’s first prime minister to be a Northerner, even though the North vehemently opposed Nigeria’s independence. As Achebe noted: “The British made certain on the eve of their departure that power went to that conservative element in the country that had played no real part in the struggle for independence.” Britain’s decision to favour one of the ethnic groups over the others deepened inter-ethnic tensions in Nigeria. In his book “Because I am involved”, Emeka Odumegwu-Ojukwu, the former Biafran leader, put it this way: “An impossible federation was created in which all cards were stacked in favour of one component of it.” That sentiment that “all cards are stacked in favour of” the North is as strong as ever, and the structural imbalance is a major obstacle to unity, stability and progress in Nigeria. But the circumstances of Britain’s departure from Nigeria created another problem. After independence, the British expatriate officers in the civil service left Nigeria because neither the Nigerian nor the British government was willing to pay them salaries at world market rates. Of course, educated Nigerians, “the lucky generation”, occupied the positions vacated by the British, moving not only into the jobs they left behind but also into their homes! Yet, there were not enough Nigerian expert administrators. Even worse, the politicians soon corrupted the civil service and the military later destroyed it. Thus, Nigeria’s independence became a hollow one because, as one British MP said during

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Nigeria must be restructured to tackle its birth defects and remove the structural obstacles created by its flawed evolution. Without that, unity, stability and progress will, sadly, remain elusive!

the “Nigeria Independence Bill” debate, “Independence in Nigeria does not mean independence in full sense if the country doesn’t have an efficient civil service.” Much of Nigeria’s governance problem has been caused by lack of a strong and effective administration and civil service. Which brings us to the third structural problem. In his speech during debate, Britain’s Secretary of State for the colonies, Iain Macleod, said that, given Nigeria’s extraordinary diversity, “it is not the least surprising that the political development it has chosen is that of a Federation in three regions, with each region self-governing in its own concerns.” Yet, that regional arrangement, under which each region had its own constitution, was terminated and replaced, first with a unitary system, and, then a “federal system”, where power is overcentralised and the regions are fragmented into barely viable state governments that are mere appendages of the central government. Weakening and stripping the regions of autonomy is contrary to the logic of the independence constitution of 1960, under which each region self-governed “in its own concerns”, and the 1963 constitution, which gave the regions even greater autonomy. The dismantling of the pre-independence political and constitutional settlements remains another major obstacle to Nigeria’s unity, stability and progress. So, Nigeria is a victim of its past. First, it was cobbled together without any attempt to forge a national identity. Second, the British favoured one ethnic group over the others, thereby entrenching a structural imbalance that deepens inter-ethnic tensions. And third, the federal constitutional arrangements that gave the regions autonomy over their affairs were terminated and replaced with what is effectively a unitary system. Nigeria must be restructured to tackle its birth defects and remove the structural obstacles created by its flawed evolution. Without that, unity, stability and progress will, sadly, remain elusive! Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

Executive compensation – striking the right balance

he need to achieve some alignment between the interests of the Owners (Shareholders/Principals) and Management (Agents) has its basis in the Agency theory, which suggests the possibility of a conflict between the interests of both parties. Performance-based compensation is one way of resolving the conflict and achieving balance between Principals and Agents. However, according to the Harvard Business Review - “Why Incentive Plans Cannot Work”, the biggest problem with rewards, is that while many people believe monetary compensation is a major driver of performance, research has found little evidence to support the assumption. In fact, bonuses and other financial incentives in some cases can do more harm than good. “When it comes to producing lasting change in attitudes and behavior,” writes Alfie Kohn, “rewards, like punishment, are strikingly ineffective. Once the rewards run out, people revert to their old behaviors.” Extrinsic motivators don’t change the attitudes that underlie behavior. Be that as it may, given the significant responsibilities and performance expectations of Executive Management, a robust compensation plan ensures that the Company is able to attract and retain the right talent Research has further shown that companies that prioritize compensation plans outperform those who do not. The controversy around executive compensation has its roots in accounting scandals which

triggered compensation-related regulations and statutes such as the 2002 Sarbanes-Oxley Act which cracks down on corporate fraud. The Act bans company loans to executives and gives job protection to whistleblowers. It also strengthens the independence and financial literacy of corporate boards and holds CEOs personally responsible for errors in accounting audits. According to Principle 16 of the Nigerian Code of Corporate Governance, 2018 (NCCG), “The Board ensures that the Company remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.” The NCCG provides detailed recommended practices to guide remuneration governance, including requiring the Board to set the direction for addressing remuneration on a Company-wide basis and approving policies that articulate and give effect to fair, responsible and transparent remuneration. Such policies are expected to be designed to attract, motivate, reward and retain high performing human capital. The Code provides that the CEO and other Executive Directors should not receive sitting allowances and Director’s fees from the company, its holding company or subsidiaries for attending Board and Committee meetings as it is expected that time spent on the board, its committees and related work are included in their remuneration. The Company’s remuneration strategy and director’s remuneration are required to be reported in www.businessday.ng

the Annual Reports. Non-Executive Directors should not receive performance-based compensation as this can result in prejudice in decision-making and undermine their objectivity. The Code introduces the payment of compensation to directors for loss of office or retirement. It is not clear if this is with respect to all Directors. However, in the case of the MD/CEO, Executive directors (ED’s) and senior management, the compensation due for any loss of office or termination of appointment is required to be fair and in accordance with their contractual terms. Yet another first is the requirement to emplace a Claw back policy to recover excess or undeserved rewards such as bonuses, benefits, profit sharing, stock awards or any other performance-based rewards from Directors and senior employees. A Claw Back may be defined as a contractual arrangement whereby money already accrued to an employee has to be returned to an employer, which sometimes comes with a penalty. The Claw back is triggered where the account or financial result on which the incentive was based is later found to be significantly inaccurate, misrepresented or deceptive, for example, instances of misdemeanor, fraud, material violation of company policy or material regulatory infractions. The introduction of Claw back is expected to ensure that liability for “wrong-doing” is suffered by those responsible. It is expected that Claw

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BISI ADEYEMI back policies will include staggered incentive payment to ensure that the company actually has something to claw back. Above all, executive compensation should be fair and the basis of determining what has been earned should be clear and transparent. Concerns about fairness should not arise when the criteria of rewards are standard, based on defined metrics and obvious to all–especially when individual contributors are the ones being rewarded. Opaque and “off radar” remuneration that cannot stand the test of scrutiny should not be paid to Directors and the Board should continue to strive to strike the right balance in linking reward to performance and ensure that appropriate disclosures are made in the interest of transparency and accountability. Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions to badeyemi@dcsl.com.ng

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Resilience [forging ahead] – effectiveness and legitimacy

BASHORUN J.K RANDLE

ere is what the late Ambassador of the United States to Nigeria, Dr. Walter Carrington had to say about Nigeria: “When I came here as an ambassador in 1993, the first place I went to was Ibadan and I almost wept, I could not believe what I saw. In 1959, on the eve of independence, there was so much great hope and now with the 50th anniversary, I hope to be able to come back to celebrate, but I think the theme of it should be a new beginning. Nigeria, as a nation, has great human resources but also has natural resources. Nigeria has been one of the most successful in terms of their works in the US. With some right leadership, things will work out.” The Ambassador who died in Boston, Massachusetts a few days ago should have added a quip which has at various times been attributed to Oscar Wilde; George Bernard Shaw; Winston Churchill and Georges Clemency: “America is the only country that went from barbarism to decadence without civilization in between.” As we speak, Nigeria like the rest of the world is in the grip of the COVID-19 pandemic. Our public health crisis has exposed the delinquency and way-

wardness which we have accumulated over the years in addition to endemic corruption as well as outright incompetence. Headline: COVID-19: Nigeria’s Health System Zero, Fight by the Grace of God — SGF Boss Mustapha The Presidential Task Force Chairman and Secretary to the Government of the Federation, Mr Boss Mustapha, have expressed concern about the inaccessibility of some COVID-19 hotspots in the country. He said: “Some of the hotspots are not easily accessible. That we are still standing as a country in the fight against COVID-19 is by the grace of God because our health system is zero. More worrisome is the fact that the initial hotspot areas were easily accessible to medical support. Albeit, the new ones are areas more removed from such support.” Mustapha spoke on Thursday at the PTF media briefing in Abuja. He said the PTF would continue to get Nigerians to understand that the COVID-19 fight is about self-preservation. “If we can get Nigerians to at least have slight attitudinal change, we would have flattened the curve. If we can up our game a little bit, I can assure you we will be able to handle the impact of this pandemic until any form of treatment comes up. Similarly, this unpredictability is reflected in the last twenty-four hours when Plateau State witnessed the highest daily number of confirmed cases. This call becomes more imperative when we realise that from an initial ten (10) hotspot Local Government Areas in the country, we moved to sixteen (16) and now have twenty (20) of such, indicating spread to other areas,” he

SGF said. On the recent reported cases of infection among some students sitting for the Senior Secondary School Certificate Examinations in Gombe State, Mustapha expressed concern about the development and emphasized the need for more vigilance by those in the education sector. “Furthermore, the recent case of infection amongst some students sitting for the Senior Secondary School Certificate Examinations calls for more vigilance by the education sector and all of us.” The PTF chair blamed low COVID-19 testing of about 3,000 daily on failure of some Nigerians to come for tests. He allayed their fears, saying “everything we need to fight COVID-19 is at our disposal but the greatest challenge in fighting the pandemic has been the attitude of Nigerians”. He said the pandemic curve would have flattened the curve if many Nigerians had adhered to simple instructions. The ambitious target of achieving two million COVID-19 tests within three months between May and July 2020 was not met. The PTF Chairman said though Nigeria now had infrastructure to test up to 15,000 per day, the daily records show that tests done for now are between 3,000 and 6,000. Mustapha said though it is gladdening to note that the country had been diligently following science in its national response, there is a need for Nigerians to start seeing the need to take advantage of the improved testing infrastructure and go out to get tested for COVID-19. He emphasised the unpredictable nature of the virus, adding that it had

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The corona virus continues to display unpredictable characteristics that show its relentless nature on populations that disregard common and simple protective measures. Such behaviour has been amplified in the surge in some states of the United States of America

been more devastating with populations that had failed to regard advice on precautions, highlighting the viciousness of its unpredictable nature with the surge in case records in Plateau State in the last 24 hours. “So far, our National Response has shown that Nigeria is following the science through effective case management but needs to improve our testing. Our testing infrastructure has been increased to undertake up to 15,000 tests per day but we are currently testing between 3,000 to 6,000 daily due mainly to people still not subjecting themselves to testing. I, therefore, want to seize this opportunity to enjoin Nigerians to get tested. The corona virus continues to display unpredictable characteristics that show its relentless nature on populations that disregard common and simple protective measures. Such behaviour has been amplified in the surge in some states of the United States of America. On the planned resumption of international flights, the SGF said: “As we further open up the aviation sector with the planned operation of international flights from 29th August, 2020 beginning with the Nnamdi Azikiwe and Murtala Mohammed International Airports (NAIA and MMIA), the PTF seeks the cooperation of all stakeholders to work at arriving mechanisms that would be mutually beneficial to all stakeholders.”

J.K. Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN) and former Chairman of KPMG Nigeria and Africa Region. He is currently the Chairman, J.K. Randle Professional Services. Email: jkrandleintuk@gmail.com

Umunne-Economics: The Igbo apprentice model

arties after parties in my village, everyone who comes home at the end of the year seems to have money to splurge. Those in the village think that everyone makes it in the big cities. Even though these statements are totally false, it is inspired by a vague lifestyle and events only seen during the usual and annual Igbo Xmas homecoming celebrations. With all these, there is a deeper urge to make it big when you’re from such Igbo villages. So Akubata with very little formal education sets out to that expedition of success too. With nothing but a dream of making it big and coming back home to build a big house and then contribute to his home community, he sets out to a big city for fortune. He left the village with the last night bus going to Lagos just after Xmas! Immediately he got down from the long bus trip, hustle started. By daybreak after sleeping in the park, he walked up to one of the guys hawking Gala in traffic and in about an hour, they seemed to get along well. One of them is Chisom; Aku’s new friend. Chisom was willing to take him to Hakeem who deals in the wholesale and distribution of table water and soft drinks. Chisom stands as a surety to have Aku’s first consignment on credit. That same day, they form a tag team (with Aku selling soft drinks and the friend selling Gala, both complementary products that need each other from consumer behaviour’s POV). From henceforth, daily Aku was on the busy road of Lagos struggling with other hawkers to sell to the passengers on the bus and individuals in their cars. Luck shone on him from the first day, as he successfully sold 15 packs of table water that day. The struggle continued for over 6 months with Aku scaling up from one product to the other, yet he insisted that he wouldn’t go back to his village unless he was successful. The trend continued for about 3 years before Aku met Ikenna who deals in the sales of electronic appliances. After 2 years of apprenticeship, Aku secured his own little shop at Alaba International Market, same as his boss and he started off fully. In order

to ensure the smooth operations of his business, Aku travelled back to his village after about 4 years of rigorous struggle to scout for young boys who would serve as apprentices to him. And in about 8 months, one of them, Ebuka, had gotten a shop for himself too. And that’s how the trends go on and on. But wait, where did all these start from? In the world of Economics, we have experienced aged-longed economic playbooks which have laid a successful economic model that has been adopted and practised by many companies across the world, while some disruptive companies created their economic playbooks with the likes of Toyota, Amazon, Apple, IBM, Microsoft, Google, Samsung, and General Electric etc. Great economist authors have written several playbooks with the likes of Adam Smith (The Wealth of Nation), Eric Ries (The Lean Start-up Methodology), Jim Collins (Built to Last and Good to Great), Peter Thiel (Zero to One) and so on. Business Ecosystem has created their playbooks like the Silicon Valley playbook but one intriguing fact is that these playbooks build an economy that is monopolistic in nature. This suits the Western world and the rest of the world, except Africa. Today we will be looking at a business model practiced by one the Africa nation and culture, which has made Africa successful and has endured age-long philosophy. The Igbo Apprenticeship Model that is practiced mostly by the Igbo tribe in the Southern part of Nigeria has been one of the most successful business models ever to be invented. A business model where the apprentice becomes a competitor to his boss that plays more as a mentor; yet they’re both successful. This business model can be divided into three ‘Imu ahia’ known as learning trade, ‘Igba boi’ known as apprenticeship and ‘imu oru’ known as learning craft. It is an unpaid system business incubation system which allows someone to learn a trade for a period of time (2 to 7 years) depending on the type of trade and apprenticeship agreement. www.businessday.ng

At the end of the service, the apprentice gets cash infusion, guidance and support to kick-start their business from their master. Mostly here the master provides basic amenities like housing, feeding, even health support. Here a successful business man goes back to the village to pick or look for young boys who will work under him on his business while he teaches them how to make wealth. Let’s explore a case study. It’s that of a small Igbo town called Nnewi. Nnewi according to the Forbes Magazine has bred more billionaires than any other town in Africa (It’s the hometown of Cletus Ibeto of Ibeto Cements, Cosmas Maduka of Coscharis, Chika Okafor of A-Z Petroleum, Ilodibe of Ekene Dili Chukwu Transports, Ifeanyi Ubah of Capital Oil, Innocent Chukwuma of Innoson and hundreds more. But why are they so successful? Is it something about where they are from? Absolutely yes! It’s about their Igbo apprenticeship model, their culture and the ability to support each other to the top. It’s something about their thoughts and dispositions that fuel their drive. It’s about their associations too. The Igbo apprentice model is built on Grit, Street Smartness, Trust and honesty, Competency, Accountability and Discipline. Here the master assigns an outlet or shop to him to manage out of his master’s watch with another apprentice under him. He gives a report to him directly. The apprentice in the phase gets to learn skills that will actually propel and drive him in his own business. He is now a master of his own, operating an arm of his master’s conglomerate. The apprenticeship system problems are 1. The system has low age and educational entry barrier and lacks formal training and certifications: 2. Lack of teaching skills by most masters or ‘Ogas’ deter pupils from apprentice training completion 3. Lack of guaranteed access to startup funding after apprentice training completion due to general economic conditions

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EIZU UWAOMA 4. Lack of written contract to enable legal and regulatory backing by government or its agencies. 5. Innate interests, ability and capability of apprentice are not primary considerations when matching pupils with their masters 6. General belief that apprenticeship is for persons from poor households and unable to cope with formal education. The Igbo apprentice model is a subset of the Igbo Ideology of wealth sharing. This is also a part of the larger Ubuntu leadership style and culture in Africa. This Igbo cultural philosophy and ideology is known as ‘Umunnannwezuoaku’ which in its literal form means community wealth. This philosophy states that the wealth of a man is a wealth for the community. That a man is obliged to teach his brothers the secrets of wealth, in order to create an even and balanced community. It is also further broken down into ‘Akuruno’ which is obtained from the Igbo adage ‘Aku ruo uno amara onye kparaya’ . This translates as “Making wealth get home, so people will know who owns it”. This ideology compels a man to take home his wealth back to his family and also his village for the wellbeing of others. This system is designed for a man to take out his family from poverty, then show off his arrival, add value and in that process inspire others too. This model has some core distinction from other business models, which requires no capital, no equity and a lot of simplicity. It should be taught in our schools. Uwaoma is a start-up, corporate restructuring and strategy consultant. contacteizu@gmail.com

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Dr. Okolo is a Chartered Consultant based in Lagos

Monday 05 October 2020

BUSINESS DAY

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Africa - United only in self-destruction

DAVID HUNDEYIN

hen I was a little younger and more inclined to see the best in everything, I spent a good 2 or 3 weeks in a state of palpable excitement when an announcement was made in 2016. Chadian president Idris Deby and Rwandan president Paul Kagame stood side by side at the 27th Ordinary Session of the African Union holding a small red booklet. The longawaited AU passport was finally here and I was part of the African generation that would finally know what it means to be conceptually “African.” Culturally, economically, recreationally - this was going to be the game changer. There were smiles all round as the implementation timetable was announced. Issuance to the general public would begin in 2018, they said. By 2020, x number of African travelers were expected to use the AU passport every year to transact business across borders and travel seamlessly. After decades, perhaps centuries of the idea of Pan-Africanism being limited to an intellectual exercise dominated by the names of long-dead people, finally Africa was about to open up to itself. So naturally, no such thing happened. 4 years later, the AU passport, like the rest of the “Agenda 2063” mission of the AU remains fully rhetorical. A Tanzanian buddy of mine informed me that his sister has one of the gorgeous red things. I mean she’s a high ranking diplomat in the AU, so technically she doesn’t count as part of its issuance statistics, but at least it

exists hey? I hear Aliko Dangote also has one, which must be nice. Apparently you need to be a high ranking AU official to have this passport, in which case you probably didn’t need it anyway. That or you just need to be Africa’s richest person. So just the $8.1 billion per passport then. I mean I’d easily pay this amount for the passport if only they had it in flying cockroach brown… Africa is a very unserious continent I do not have the statistics to support this claim, but based on my personal network and anecdotal encounters, I am willing to bet that there are a large number of Africans with a net monthly disposable income in excess of $1,000 who can retain this income despite physical relocation. I am talking about people who participate in the digital economy. Freelancers of all kinds. Graphic designers. Programmers. Journalists. Musicians. Artists. Consultants. Accountants. You name it - the productive capacity does in fact exist here. The problem of course, is that very few if any African cities offer these high income earners the standard of living that could motivate them to stay and build instead of emigrate to Canada and Australia. In case the solution to this problem was not obvious, there is the world’s biggest example of such a solution sitting just a few hundred kilometres northeast of Africa - Dubai. Dubai’s leaders observed a similar problem in South Asia and built a world class city specifically designed to attract and retain the best South Asian talent, who brought their skills and high incomes with them. Without even levying an income tax (Dubai levies only a basic sales tax and a small business tax), Dubai thus built a $405bn economic juggernaut in which oil now contributes only less than 1 percent of GDP. It is no coincidence that Dubai’s visa process is so streamlined and optimised for ease. The leaders of Dubai want you to go there and spend your money. Every transaction you make

there puts some money in the city’s coffers. They want you to spend as much time there as possible because the city’s self-selecting economic nature makes it such that if you are there, that means you either have a productive job or money to spend. It is not that the Emiratis like foreigners or outsiders - it is that they are wise enough to understand how to extract value from them and keep them coming back for more. I mean I would know because I am one of said Dubai junkies. In this column, I have mentioned before that countries like Equatorial Guinea are excellently positioned to give Africa’s top talent its own “Dubai” ecosystem. In that article however, I also mentioned that I expected absolutely nothing from the likes of Teodoro Obiang and his family rulership enterprise because people like that are not wired to think big. This unfortunately applies to the rest of the continent too - from the big-for-nothing sexagenarians in the western corner to the existentially confused countries in the central, eastern and southern areas. Africa has no understanding whatsoever of the value of aggregation in building an economy, or how ease of movement aids certain especially beneficial types of aggregation. Wanna live in Ghana? That’ll be $2,000 please Say an independent journalist whom we shall refer to as David Hundeyin were to decide to relocate from Nigeria to a quieter part of the continent and his heart settled on Ghana, one of his childhood stomping grounds, that shouldn’t be too hard right? Well actually, yes. It is. Very hard, actually. First there is the COVID-19 test before boarding a flight from Lagos. That’s about $120. Then there is the flight to Accra, which now costs up to a scarcely-believable $450. Then there is the post-flight COVID-19 test which will set our hero back by $150. Then there is the modest Airbnb which takes another $400 for 30 days. We’re

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It is no coincidence that Dubai’s visa process is so streamlined and optimised for ease. The leaders of Dubai want you to go there and spend your money. Every transaction you make there puts some money in the city’s coffers

Enjoy your stay my friend!

Note: the rest of this article continues in the online edition of Business Day @https://businessday.ng Hundeyin is a writer, travel addict and journalist majoring in politics, tech and finance. He tweets @DavidHundeyin.

Op-ed: The thorny issue of financial inclusion in SMMEs

he concept of financial inclusion is relatively well understood, thanks to a long history of discovery and innovation across Africa. From the “Green Revolution” of the 60s to the present-day Fintech boom, it’s long been accepted that financial inclusion is vital to the growth of emerging economies. Simply put, financial inclusion is defined as the availability and equality of opportunities to access financial services by businesses and individuals alike. As much as there have been successes on this front, there has always been a disconnect between that understanding and its implementation, particularly when it comes to Small, Medium and Micro Enterprises (SMMEs) Thus far, with few exceptions, the success story of the recently realised financial inclusion “opportunity” has all been focused on the consumers and immediate consumption. Rural remittances, urban bill payments, other mobile “push” payments and nanocredit has all been about immediate consumption and cash replacement transactions between individuals and bill-pay aggregators for regular (mostly) urban recurrent consumption. This leaves a glaring gap in this success story, however, and that is small businesses (SMMEs). While the individuals who run these businesses benefit equally from consumer products, the businesses themselves don’t. This is particularly true of the productive and informal economy. If we are to truly address financial inclusion, we need to bring the productive economy - farmers, artisans, mutual societies, and small, medium and

d Stockbroker and Management s.

micro-enterprises across all sectors - into the formal financial system with digital transparency and a range of financial products and services that can unlock growth and wealth creation. Micro-merchants need to be able to receive and make payments, reduce their dependence on cash and enjoy the benefits of higher quality financial services. Digital transparency is critical to delivering this. And it is lacking in many mobile payment offerings. Banks need sight of payments in a small business. They need to see and predict transaction activity and source data from other historical sources to be able to determine what services the business can afford and benefit from. SMMEs generate up to 40 percent of GDP in emerging markets, and are responsible for 50% of global employment, according to the 2019 GSMA State of the Industry Report on Mobile Money. That’s a considerable chunk of the market that is not being financially included. What’s holding MSMEs back? A number of issues. Cards are expensive, require specialised hardware and suffer from the inherent risk of compromised data privacy. Risk mitigation and compliance rules like Visa/MC 3D Secure and PCI compliance rules complicate the transaction and add costs, even with virtual cards. Then there are delays in settlement of funds, the cost of devices such as card machines and POS systems, the inability to quickly convert payment back to cash and the general lack of trust in money they can’t www.businessday.ng

see or feel. Cash is real now and trusted. To compete against cash there has to be real and immediate value in digital. Financial services providers need transparency in order to develop and provide appropriate services that are valuable enough to overcome both merchant scepticism and their reluctance to pay service fees. Combined with mobile payments, digital transparency can enrich the payment process with consumer incentive and loyalty while opening the window of transparency for an acquiring bank to extend a broader range of financial services. Without databased insights, financial services providers cannot assess risk, nor understand what kind of offerings would be of the most value. Digital transparency of cash flow, coupled with track record data from suppliers and other sources can be used to build a profile of risk and create effective demand for more enriched financial services such as insurance, savings, transactional banking, and lifestyle-related financial services. Digital has to bring positive external benefits that are much more valuable than a simple cash replacement. Digital payments are the gateway to formal financial products and services. The more formal finance that can be provided to an MSME, the greater the opportunity to grow the business and contribute to wealth creation, jobs and a mutually beneficial relationship between the enterprise and formal finance. As these businesses are enriched by formal finance, they grow and in turn, increase the total addressable market for financial services.

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well past $1,000 already, which is basically half of Nigeria’s per capita GDP but we’re just getting started. Want to open a bank account old chap? In addition to eleventy documents and a couple of DNA samples from your grandma’s grave, you’re also going to need a residence permit. Why do you, an ECOWAS citizen, need a residence permit in another ECOWAS country, you say? Well because...you know, you can pay for it. African countries don’t see well heeled, upwardly mobile, footloose digital nomads as prized domiciles who bring in vast amounts of forex and also boost the local economy. They see you as simply cash cows to be exploited and gouged once. I say once because after the bad experience you’ll probably never be back again and you’ll be off to more serious places - like Dubai for example. But that’s fine by them. They only need to catch you once anyway. Anyway where was I? Yes, the residence permit. So the thing about that is you don’t just need to get a residence permit old chap. You also need to get a health assessment, which is basically some bloke filling a sheet of paper to say that they did a bunch of tests on you that they never did. That sheet of paper will cost you $180. Then you’ll need a “non-citizen ID card”. That will cost you $120. If you can’t see why the residence permit and the ID card have to be separate, then join the club. By the way, the residence permit will set you back another $800 my friend. So when you total everything up, you’re already down $2,000 before you have even started living in Ghana.

MURRAY GARDINER What is needed is an easy way to break from legacy card payments. A domestic mobile digital accountbased payment that can reduce cost and maintain profitability by reducing redundant legacy costs – plastic, compliance, hardware, risk - and challenge cash with digital mobile payment in local currency and that presents no technological dependencies on foreign entities. A payment with cross-border capability but under local rules and governance. Not a plastic card dependent on foreign rules and off-shore transaction processing. A domestic digital scheme should provide for a full four-party interbank payment (issuer, acquirer, customer and merchant) that can clear transactions between people or merchants and provide for the behind-the-scenes interbank settlements, with no cards, no dollar-based fees, and no dependencies that could imply sovereign dependency that could be exploited in a trade dispute. The right kind of domestic mobile payments, combined with value-added merchant-centric services can bridge the gap between the informal and the formal economy. Small farmers, artisans and entrepreneurs need to be able to access financial services and develop a relationship with formal finance that can unlock their real economic potential and drive scale. The technology exists and is available on the continent. It’s time to move mobile payments forward in Africa. Gardiner is the MD, Bluecode Africa

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BUSINESS DAY

Monday 05 October 2020

EDITORIAL At 60, manufacturers’ productivity still hampered

PUBLISHER/EDITOR-IN-CHIEF

Frank Aigbogun EDITOR Patrick Atuanya

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

FG must identify, fix fundamental issues and draw up industrial strategies

or Nigeria, the last 60 years has been characterised by a bitter-sweet tale of progress marred by failures. The manufacturing sector, which is the true gauge of countries’ level of development, is not left out. The Import Substitution and the Nigerian Enterprises Promotion Decree of the 1970s, for example, were two of the earliest policies set up by the military interregna to build an inwardlooking and competitive real sector that would be prominent on the global map. As of the time of setting up these policies, Nigeria was one of the world’s top four in palm oil, cocoa, rubber and groundnuts. The Nigerian Industrial Development Bank, now Bank of Industry, had been set up in 1964 to support the sectors and boost value addition needed to transform the young independent country into an industrialised nation. The country controlled 43-45 percent of the world’s palm oil market, which means over $10 billion annually today. Though the policies were marred by corruption and protectionism, they started Nigeria’s industrial journey as industries such as Ajaokuta Steel Complex, Aluminium Smelter, Delta Steel and many textile and palm oil firms came on board. Also, Kainji Dam and Ughelli Thermal Plant, among other infrastructure projects, sprang up during this period.

After many years of policy flipflops, the Olusegun Obasanjo administration initiated a cement industry revolution in 2006. He assembled the bourgeoisie and cement importers and encouraged them to set up local plants. As long as they were willing they would be entitled to import quotas. This helped to shore up local production of cement, making Nigeria a net exporter today. Fourteen years down the line, Nigeria produces over 40 million metric tonnes of cement, with Dangote Cement, BUA, and Lafarge as the major players. There is no doubt that the Nigerian manufacturing sector has made some progress, contributing over 8 percent to the GDP, but age-old challenges have remained. Nigeria has missed several opportunities to rebound on the industrial front. The receipts during periods of oil boom were not properly utilised to build infrastructures that would aid productivity of factories. Railways were abandoned to rot; roads became decrepit, and the ports were merely money-making machines rather than trade facilitators. The major culprit is the resource curse, which shifted policy mind-sets to crude oil at the expense of industries. This is why the 1980-2005 remained the worst period of de-industrialisation in Nigeria’s history. It was a period when Nigeria lost its 45 percent position on the global palm oil market, controlling just 1.7 percent share up till today. Rub-

ber firms such as Michelin and Dunlop exited. Dunlop has transformed into DN Tyres and joined many traders to import tyres into Nigeria. This is the story of Nigeria’s industrial journey. Progress has been made by the Muhammadu Buhari administration in terms of improving the business environment. In 2020, Nigeria jumped to 131 from 146 in the 2020 World Bank Doing Business Report, signalling an improved business environment. However, age-old problems have continued to hurt manufacturers in Nigeria and these seem to defy solutions. For instance, despite tax reforms done in 2019, the country is still mired in multiple taxes, and touts are disrupting business activities in many states. Also, policies have been inconsistent and incoherent at times. The Automotive Policy, for example, places 35 percent levy and 35 percent duty on imported vehicles with a view to promoting local vehicle assembly. But the country seems to be promoting damaged or “accidented” vehicles which have lasted 15 years now rather, because these vehicles officially enjoy a rebate of 30 percent. What this has done is to encourage the importation of rickety vehicles, which make up 70 percent of imported cars today. Also, no one knows what has happened to the cassava policy initiated by the Jonathan’s administration. Moreover, the 2013 National Industrial Revolution Plan (NIRP) represents Nigeria’s most comprehensive indus-

trial policy since Independence. No one knows where that document is today. These challenges have impeded growth in the manufacturing sector till date. The sector contracted -8.78 percent in the second quarter of 2020, as against -0.13 percent in the second quarter of 2019. In the last five, the manufacturing sector has only seen growth twice, Q2 2017 and Q2 2018. The major challenges remain high cost of energy and poor infrastructure. Four hundred CEOs of major manufacturing companies in Lagos said in the first quarter of 2020 that Apapa and Tin Can were threatening to shut down their companies. The issue of the Lagos ports seems to have defied solution despite over N5 billion in revenue to the federal government. For Nigeria to become truly industrialised, it must address these issues and propose an industrial strategy. The country is still a rent-seeking economy where importers get more money from banks than local manufacturers; where the government thinks that shutting borders will suddenly make uncompetitive manufacturers better; where governments do not understand that road construction is not just to earn votes but to aid movement of goods and persons. Except these fundamental issues are addressed, Nigeria cannot make headway sooner. And with the African Continental Free Trade Area (AfCFTA) coming in January, it will be interesting to see how Nigeria fares.

HEAD, HUMAN RESOURCES Adeola Obisesan

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Monday 05 October 2020

BUSINESS DAY

Start-Up Digest

In association with

Babajide Esho: Entrepreneur plugging gaps in Nigeria’s educational system Josephine Okojie

igeria’s educational sector is confronted w i th a c o m bination of issues ranging from inadequate funding to obsolete organisational structures. It is also hurt by lack of quality teachers, decreasing quality of teaching, increasing cost, and limited access to information. To change this narrative in the country’s educational sector and ensure that parents can effectively manage school fees, access educational loans, monitor grades, and track their children’s educational activities, Babajide Esho is using technology to redefine the sector. Babajide is the chief executive officer of Edustripe. com – an online platform that manages educational processes. The actuarial scientistturned-entrepreneur was inspired to establish Edustripe out of his desire and that of his co-founder to become change-makers.

“Our founding team aspires to change the world. We believe that it is possible to live in a world where all children can succeed through access to high-quality teachers,” he says. Babajide says their initial start-up capital was $2,500 – an amount the co-founders saved while executing freelance contracts for clients. Since starting in 2019, the business has grown steadily. Edustripe has worked with over 500 parents on a beta testing School Fees Cooperative Programme. “We graduated our first cohorts of 50 Students on our TechTeens Summer Bootcamp where we introduced teens to various technology concepts,” he says. “We have also worked with partners such as CoCreation Hub, Imisi3D, Facebook Nigeria and Venture Garden Group,” he further says. The business currently has 11 full-time employees that manage its marketing, software, operations, sales, and business development processes. He says the COVID-19 pandemic has affected his

Babajide Esho business negatively as many of its planned activities for the yearhave been put on hold. Also, he notes that the business lost a huge part of its revenue pipeline owing

to the pandemic. Speaking on how the business is re-strategising to survive the pandemic, the University of Lagos graduate says the business is fo-

cused on building products to reach parents directly without going through the schools. “We have also carried out work on creating virtual content for students and parents through programs like V-Engage by Edustripe,” he says. Despite issues associated with online learning in the country, his business has ensured it iqs building the right products for its clients. To do this, he says Edustripe conducted various researches to understand their customers while designing features that are tailored to what their users need to achieve their educational goals. Similarly, the business has developed virtual content that can help improve digital learning as well as educate parents and schools on ways to incorporate Edustripe tools and products. Evaluating the country’s education industry, he says the industry is still in the nascent stage and that it is grossly limited by underfunding. He advises the country to increase its funding for the sector post-COVID-19 while

playing an active role in digitalising learning in the country. He says the business plans to increase its educational content to appeal to a wide range of students. For its long-term plans, it hopes to spread its services to three other countries in Africa by 2023. Speaking on the challenges confronting the business, he says data is a big challenge for the business, including the un-willingness of some schools to digitise learning and their processes. He urges the government to be more radical with data collection in the industry, saying it is crucial for planning and resource distribution for the sector. The business has been invited to the 2020 Founder Institute Class of Businesses. Also, Edustripe is a graduate of the 2019 Startup School program by Y Combinator where it got the AWS Funding of up to $3,000 and other key resources. Edustripe has also completed workshops on Data Privacy Reviews facilitated by Global Partners Digital, Paradigm Initiative, and CoCreation Hub.

How Merryheart became cherished brand in event industry Odinaka Anudu

he story of theOluwafemi Tolulope is relatable. Having grown up to discover she had a passionfor cooking, she kept honing the skill. One would have expected that she would pursue a career in that direction, but she ended up studyingComputer Engineering in one of Nigeria’s universities. But this was merelyto satisfy society’s expectation. However, the call tobe in the food sector kept nudging her. After graduating from the higherinstitution, she had a stint in the banking industry as well as oil and gassector.

Today, Tolulope hasfound herself fully in what life has shaped her for, rising as a founder of Merryheart Cakes and Kitchen, which came on board six years ago when she badefarewell to paid employment. “My journey ofturning my passion to business started as a side hustle while still in paidemployment,” she says. “Cooking has alwaysbeen what I love doing. I have a passion for it. But in 2013, I took a decisionto take it professionally. So, I enrolled in a culinary school to be trainedprofessionally. Since then, I have taken many selfdevelopment courses and havereceived certifications like the London professional training on food safety,”she

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Merryheart

discloses. She has also gone astep further with a master’s degree in Business Administration. The food expertsays she has

delved into catering for individuals, weddings, corporate organisations,among others, stressing that in a bid to be innovative and meet the needs ofgrowing clientele base, she introduced what ‘Appreciation Trays’ and ‘CelebrationBoxes.’ Speaking on factorsthat contributed to her success today, she says, “Excellence and hard work. Igrew up with a disciplinarian father who taught me the importance of excellenceand quality.” She says her fatherreminded her always that the two attributes were strong pillars to his success. “He had always toldme that the utmost key to success is hard work and that has always been mydriving force

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in everything I do. I must say there’s no shortcut to successother than hard work and dedication.” As a way ofrewarding her dedication in the event industry, she was a nominee underthe category of Event Caterer of the Year by the Association of EventVendors of Nigeria(ASSEV) in 2019. She has since been recognised for othersterling qualities. Tolulope is alsoknown to have a passion for empowerment, which is why in the space of her sixyears, has given back to society through free trainings to about a 100 youngNigerians who also aspire to be in the industry. She has furthertaken her empowerment a notch higher by launching online courses

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to accommodatethose who cannot engage in the physical classes. The entrepreneuradvises aspiring and budding entrepreneurs to prepare to take up challenges asthey are inevitable. “One of thechallenges I had to confront as a startup was getting people to trust ourbrand. It was a lot of struggles in the beginning of the business because a lotof people didn’t want to work with a new brand. “I had to work sohard to convince people to trust me with their events and jobs. But gradually Iworked my way through dedication, hard work and perseverance. I also had issueswith charging right.”

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Monday 05 October 2020

BUSINESS DAY

In Association With

America’s election

Bidenomics: the good the bad and the unknown Joe Biden should be more decisive and ambitious about America’s economy

HE TWO presidential contenders squared up this week in the first debate before America votes on November 3rd. President Donald Trump set out to make it a brawl, even throwing a punch at the validity of the electoral process itself (see article). Joe Biden spent the evening jabbing at Mr Trump for bringing the country to its knees. And the president went for what he hoped would be a knockout blow, accusing his opponent of being a weak man who would succumb to the left’s plans to dramatically expand government and cripple business. Fear of just such a leftward lurch under Mr Biden is circulating among some American business leaders. However, as we explain (see article), the charge is wide of the mark. Mr Biden has rejected the Utopian ideas of the left. His tax and spending proposals are reasonable. They imply only a modestly bigger state and attempt to deal with genuine problems facing America, including shoddy infrastructure, climate change and the travails of small business. In fact, the flaw in Mr Biden’s plans is that in some areas they are not far-reaching enough. When Mr Trump took power in 2017 he hoped to unleash the animal spirits of business by offering bosses a hotline to the Oval Office and slashing red tape and taxes. Before covid-19, bits of this plan were working, helped by loose policy at the Federal Reserve. Small-business confidence was near a 30-year high; stocks were on a tear and the wages of the poorest quartile of workers were growing by 4.7% a year, the fastest since 2008. Voters rank the economy as a priority and, were it not for the virus that record may have been enough to re-elect him. Yet, partly owing to the pandemic, Mr Trump’s shortcomings have also become clear. Long-term problems have festered, including crumbling infrastructure and a patchy social safety-net. The underlying dynamism of business remains weak. Investment is muted and fewer firms have been created even as big ones gain clout. Mr Trump’s chaotic style, involving the public shaming of firms and attacks on the rule of law, is a tax on growth. Deregulation has turned into a careless bonfire of rules. The confrontation with China has yielded

AAnBalkan betrayal avoidable tragedy

Famine in Yemen need not happen Millions of people are on the brink of starvation. Yemen’s warring parties can save them

HE WAR in Yemen seems to play on an endless loop. Atrocity follows atrocity. The government is backed by a Saudi-led coalition that bombs civilians; the Houthi rebels are backed by Iran, and recruit children and fire shells indiscriminately into cities. Efforts to make peace go nowhere. A swap of 1,081 prisoners, agreed on at the end of September, raised only faint hopes. A similar exchange, involving 15,000 detainees, was arranged in 2018 but never fully implemented. The loop is unbroken. In the past six years the conflict has killed tens of thousands of people and gravely harmed millions more. Now it is escalating again. few concessions, while destabilising the global trading system. As the 46th president, Mr Biden would alleviate some of these problems simply by being a competent administrator who believes in institutions, heeds advice and cares about outcomes. Those qualities will be needed in 2021, as perhaps 5m face long-term unemployment and many small firms confront bankruptcy. Mr Biden’s economic priority would be to pass a huge “recovery” bill, worth perhaps $2trn-3trn, depending on whether a stimulus plan passes Congress before the election. This would include short-term money, boosting unemployment insurance and help for state and local governments, which face a budget hole. Mr Biden would also extend grants or loans to small businesses which have not received as much aid as big firms. He would ease tensions with China, soothing the markets. And if a vaccine arrives, his co-operative rather than transactional approach to foreign relations would make its global distribution easier and allow borders to reopen and trade to recover faster. The recovery bill would also aim to “build back better” by focusing on some long-term problems for America that have also been Biden priorities for many years. He is keen on a giant, climate-friendly infrastructure boom to correct decades of underinvestment: the average American bridge is 43 years old. Government research

and development (R&D) has dropped from over 1.5% of GDP in 1960 to 0.7% today, just as China is mounting a serious challenge to American science. Mr Biden would reverse that, too, with more R&D in tech and renewable energy. He would scrap Mr Trump’s harsh restrictions on immigration, which are a threat to American competitiveness. And he wants to raise middle-class living standards and social mobility. That means more spending on education, health care and housing and a $15 minimum wage, helping 17m workers who earn less than that today. This is hardly the agenda of a socialist. Mr Biden has ignored the Panglossian fantasies of the left, including Medicare For All, a ban on nuclear energy and guaranteed jobs. His plans are moderate in size as well as scope, adding up to an annual increase in public spending of 3% of GDP, assuming they could all pass the Senate. That compares with 16-23% for those of Elizabeth Warren and Bernie Sanders. He would raise taxes to pay for about half of the spending that is approved, with higher levies on firms and the rich. Even if all of his tax plan were enacted, which is highly unlikely, studies suggest corporate profits after tax might drop by up to 12% and the income of the top 1% of earners by up to 14%. If you are rich that would be an irritant, but not a catastrophe.

The real risk of Bidenomics is that his pragmatism will lead him to be insufficiently bold. Sometimes he fails to resolve competing objectives. For example, he rightly supports ladders for social mobility as well as a better safety-net for workers who lose their jobs; his plans range from more affordable housing to free public universities. But equipped with these safety buffers, he should be willing to welcome more creative destruction so as to raise long-run living standards. Instead Mr Biden’s instinct is to protect firms, and he has too little to say on boosting competition, including prising open tech monopolies. Incumbent firms and insiders often exploit complex regulations as a barrier to entry. His plans are wrapped in red tape. Making trade alliances great again Mr Biden’s climate policy represents real progress. Building greenpower grids and charging networks makes sense because the private sector may hold back. But, again, its effect will be blunted by the rule that 40% of spending must favour disadvantaged communities and by perks for domestic suppliers: a recipe for inefficiency. His plan to cut emissions involves targets, but shies away from a carbon tax which would harness the power of capital markets to reallocate resources. That is a missed opportunity. Just last month the Business Roundtable, representing corporate America, said it supported carbon pricing.

Civilians died in August in greater numbers than in any other month this year. The economy is collapsing, covid-19 is spreading unchecked and a rusting tanker off the western coast, laden with roughly 1.1m barrels of oil, risks causing an ecological catastrophe (see article). Amid this litany of suffering, Yemen’s most pressing problem is famine. About two-thirds of its 30m people need food aid. Many millions, the UN says, are on the brink of starvation. It should be possible to feed them. International bodies have sounded the alarm; relief groups know what to do. The question is whether Yemen’s rich neighbours, who have sustained the fighting with arms and money, will have the decency also to sustain the country’s people with food and medicine—and whether the war’s stubborn and self-interested combatants will allow the aid to get through. Two years ago the UN requested billions of dollars for the relief effort. It was a good time to ask. The Saudis Continues on page 19

Monday 05 October 2020

BUSINESS DAY

In Association With

No contest

How big firms rip off African consumers

Competition law alone may not be enough to break their grip

OKO MINGI VIII, king of the Nembe people, had a vigorous approach to trust-busting. In 1895 he led a pre-dawn raid on the headquarters of the Royal Niger Company, a British firm that had monopolised the palm-oil trade in the Niger delta. Koko captured 60 hostages and demanded to be allowed to trade freely. The British sent in the gunboats instead, and monopolists have had the upper hand in Nigeria ever since: the country did not enact an overarching competition law until last year. King Koko’s trust-busting heirs have their work cut out, and not just in Nigeria. In much of Africa formal economies are dominated by large firms that rip off consumers. The IMF reckons that firm markups are about 11% larger in sub-Saharan Africa than in other developing regions, and that prices are 20% higher. The challenge for African governments is not only to make markets more efficient, but also to undo a history of economic exclusion. Colonial economies were built around European trading firms, with licensing rules that hindered the emergence of black African capitalists. That logic was taken to extremes in South Africa, where just six conglomerates controlled 87% of the stockmarket at the end of apartheid. “The structure of our economy was designed to keep assets in a few hands,” noted Cyril Ramaphosa, the president, in his state-of-the-nation address last year. Change has been slow. An IMF working paper released

in September argued that South Africa could boost annual GDP growth by 2.5 percentage points by encouraging competition. Politics continues to stifle competition. Public contracts are not always won fairly: in 2012, for example, Zambian authorities accused two fertiliser companies of dividing up the market and rigging tenders to supply a state subsidy scheme, costing taxpayers $21m. In other cases, governments use protective regulations to cosset state firms, such as national airlines. Some 70% of all air routes to, from or within sub-Saharan Africa have only one carrier flying them, according to Cirium, a data firm. New entrants are often kept out of the skies by regulatory barriers or are unable to compete with subsidised incumbents. Economic factors are also at work.

Most African markets are too small to sustain more than a few competitors in heavy industries such as steelmaking or cement (which is much more expensive in sub-Saharan Africa than elsewhere). In emerging sectors such as telecommunications there are network effects, as consumers opt for the same service as their friends. In Kenya one mobile phone firm, Safaricom, holds 99% of the market for mobile money through its M-Pesa service. Policymakers acknowledge the problem. Last year 31 countries in the region had competition laws, up from 12 in 2000. But many competition agencies “just exist by name” and lack the resources to do their job, says Mor Bakhoum of the Max Planck Institute for Innovation and Competition. Those in South Africa and Kenya, the regional leaders, in-

Continued from page 18

vestigate several hundred cases a year; the average agency in Africa investigates just two. There is debate about what competition law should do. African countries have borrowed from European and American models, which prioritise market efficiency. But they also try to promote development and “make markets more inclusive”, says Grace Nsomba of the Centre for Competition, Regulation and Economic Development at the University of Johannesburg. South African authorities put unusual weight on public-interest criteria, such as how a merger will affect jobs or the growth of black-owned enterprises. A landmark case was the takeover in 2012 by Walmart of Massmart, a South African retailer. The deal was approved with conditions, including the reinstatement of retrenched workers and the creation of a fund to support small businesses. Other countries also consider public-interest factors. Francis Kariuki, director-general of the Competition Authority of Kenya, says he is mindful of the country’s “economic topography” including the likely effect on small businesses, whenever he considers a merger. The authority is probing supermarkets that pay their suppliers late. And it showed flexibility during the covid-19 crisis, allowing airlines to club together for cargo flights to cope with a drop in volumes. “We didn’t need to change our laws,” says Mr Kariuki. “We just employed the public-interest criteria.”

The most infected Arab state

Iraq is too broken to protect itself from

As the country spirals downwards, the disease spreads

ITY THE doctors of Iraq. Thousands are thought to have contracted covid-19. If the disease doesn’t get them, local tribesmen might. “Every time a patient dies we all hold our breath,” says Dr Tariq al-Sheibani, the director of a hospital in southern Iraq. A month ago a young man from the Hasnawi tribe died of covid-19 in his hospital. That night, as Dr Sheibani left work, 20 of the dead man’s relatives beat him unconscious. The doctor is trying to press charges (CCTV cameras captured the scene), but officials told his family that they would be safer if he did not. Most Arab regimes have dealt with covid-19 by tightening their grip. Not Iraq. It gave up on lockdowns long ago. The government seems powerless to enforce social distancing or the wearings of masks (some men see the coverings as an insult to their virility). It has little money to spend on a health service gutted by war and corruption. Clergymen still organise mass gatherings. Officially the virus has infected more than 350,000 Iraqis and killed more than 9,000. That is surely an undercount, yet it is still more than in any other Arab country. Like Iraq’s tribes, the coun-

try’s Shia ayatollahs set their own rules. They are going ahead with Arbaeen, an annual pilgrimage to Karbala, a holy city. Thousands of Shia faithful have already begun walking the 500km from Basra, eating and bedding down together in wayside huts. The risk of transmission will increase further when hundreds of thousands more converge on Karbala on October 7th. The surrounding province already has the country’s second-highest infection rate, probably because of a pilgrimage in August. The government has tried to limit foreign pilgrims by closing

Iraq’s land borders and restricting flights from Iran. But there is only so much it can do. “People believe visiting the tomb of Hussein [in Karbala] cures covid-19,” sighs a former government health adviser. Muqtada al-Sadr, a firebrand cleric, has led a campaign to keep the shrines open and defied a ban on Friday prayers. Lately Iraqis have been haphazardly digging up relatives who were buried in a special “coronavirus cemetery” so that they can be given proper funeral rites. Better medical care would help. Iraq spends about half as much per person as its poorer neigh-

Famine in Yemen need not happen...

bour, Jordan, on health. A lot of it is wasted—or stolen. The health ministry is led by a technocrat, but it is full of Mr Sadr’s men, who stand in the way of reform. Just ask Alaa al-Alwan, who tried to clean it up. The former health minister resigned last year, citing excessive pressure from within the ministry. Other officials persuaded him to stay on—but he resigned again months later, citing corruption, blackmail and defamation. Today there are fewer hospital beds and doctors in Iraq than before the American invasion in 2003, though the population has almost doubled. Some 20,000 doctors have fled abroad, says the Iraqi Medical Association, the doctors’ syndicate. Many of those who remain recently went on strike over poor working conditions (basic items, such as masks, are lacking). Hospital directors are so short-staffed that they are loth to let infected doctors go into quarantine. Meanwhile, falling revenues caused by a collapse in the price of oil mean the government has no money to hire thousands of medical graduates. The prime minister, Mustafa alKadhimi, suggests they volunteer. The least the government could do is protect them from angry tribesmen.

were eager to repair their image, tarnished by the war and the killing of Jamal Khashoggi, a dissident journalist. The United Arab Emirates (UAE), which led the coalition’s ground war in Yemen until last year, was also on a publicity drive. Along with Kuwait, they both gave generously. As a result, countless lives were saved. Lately the Saudis, Emiratis and Kuwaitis have had other priorities. Saudi Arabia hosted an international pledging conference in June, after it vowed to give $500m this year (down from $750m last year). The kingdom has since lowered its commitment to $300m—better than the UAE, which so far this year has pledged nothing. “It is particularly reprehensible to promise money, which gives people hope that help may be on the way, and then to dash those hopes by simply failing to fulfil the promise,” says Mark Lowcock, the UN’s emergency-relief co-ordinator. The resulting decline in Yemenis receiving food aid is being aggravated by the coalition, which has cut off fuel supplies to Houthi-controlled areas. Its blockade has pushed up prices and shut down vital services for lack of fuel. Saudi Arabia deposited $2bn in Yemen’s central bank in 2018. Now it is nearly all gone and the currency is collapsing, making food, most of which is imported, even less affordable. Neither do Saudi Arabia’s alleged air strikes on farms help Yemen’s harvest. Saudi Arabia, desperate for a face-saving way out of the war, may be turning the screws on the Houthis. Starving the north is unlikely to work. But the Houthis will not like the loss of revenue—they themselves divert aid and sell it for profit. They even tried to impose a 2% levy on aid shipments. To ensure food reaches the right people, the UN wants to introduce a biometric ID system. The Houthis, though, are loth to cede control. Neither the government nor the Houthis seem to care about the people they hope to rule any more than their backers do. To prevent famine would not take much— more money from the Gulf states, a lifting of the blockade and cooperation from the Houthis. Alas, if the belligerents were at all moved by the suffering of Yemenis, the war would have ended long ago.

Monday 05, October 2020

BUSINESS DAY

COMPANIES&MARKETS Nigerian bank shareholders lose N345bn in 9 months on COVID-19, FX policy DAVID IBIDAPO & FAVOUR OLAREWAJU

hareholders of Nigerian banks lost N345.223 billion in market value in the first nine months of the year 2020. During the period under review, shareholders in the 11 biggest commercial banks in the country had their worth eroded by approximately 12 percent cumulatively, induced by the outbreak of the COVID-19 pandemic which saw most banking stocks hit their lowest valuations in 2 years, as investors flock to safe haven assets to hedge against the negative implications of the pandemic. While ten of the eleven banks were negatively affected by the COVID-pandemic just one bank – First City Monument Bank (FCMB) – stood out with a relatively impressive performance. During the period under review, FCMB was up 18.38 percent, delivering a real return of 5.18 percent when adjusted for 13.2 percent inflation as at August 2020. The bank’s progress despite the pandemic is truly a breath of fresh air. The year 2020 can be described as a bad year for Nigerian banking stocks, especially, coming from a strong performance in the fourth quarter of 2019. Nigerian banking stocks saw a short-lived gain from the artificially low-interest-rate environment triggered by the CBN’s repression policy

until the COVID-19 pandemic struck. Most banking stocks especially Tier-one banks recorded gains above 15 percent from October when the policy took effect through December 2019. First Bank stock price rose 40 percent, Access Bank (50.65%), UBA (43.90%), Zenith Bank (16.58%) and GTB (7.02 percent) respectively. Mid-Tier banks weren’t excluded also from the excess liquidity which flooded into the stock market. Being a safer bet for investment, banks such as FCMB, Fidelity, Unity Bank and Stanbic IBTC also benefited from buy pressure. Stock prices rose 26.06 percent, 39.41 percent, 26.98 percent and 11.84 percent respectively. However, the outbreak of the COVID-19 pandemic and decline in global oil prices, however, saw banking stocks consistently trended downwards through April. For example, First Bank stock price declined 39.83 percent. This means erosion by the same rate in investors’ shareholding value. GTB dipped 41.75 percent, UBA (-32.17%), Zenith (-40.86%) and Access Bank (-45%).

As crude oil prices began recovering in Mid-April, domestic investors began taking advantage of cheap banking stocks which provided some form of respite for banking stocks. On the average, all other banks excluding FCMB shed 14.53 percent in market value during the 9-month period. This indicates that N465.88 billion was wiped off the combined market capitalisations of these ten banks. When FCMB is added to the mix, the average decline of stocks yield improves to -11.57 percent, thereby indicating that the presence of this singular bank reduces the overall market stock loss to N362.93bn. Tier-1 banks like GTB, Zenith, Access, UBA and First banks bore 76 percent of the brunt losing a whooping N253.29bn loss signalling the COVID-19 induced selloff on these banks. The other 6 banks combined lost N91.93bn, 26 percent of overall losses. Given that the big banks account for about 71 percent of combined market capitalisation, with smaller banks taking 29 percent, the

proportion of loss-sharing is almost equivalent to the market value distribution. ETI and Access bank had the greatest losses of over 30 percent, to the tune of N174.17bn combined while Stanbic Bank saw the least dip of just -1.2 percent, amounting to a mere N5.56bn. However, Access bank saw the largest decline in its stock market value by N117.3bn, which was double of the value lost by GTB who had the second greatest stock market loss of N56.87bn and 143 times over that of Stanbic bank. The outlook for Nigerian banking stocks remains bleak given the CBN’s reluctance to undergo the most advocated FX reform which has kept foreign investors on the side-line despite cheap valuations of banking stocks. Banking stocks are most considered a safer bet for foreign investors and marks their first destination before considering other stocks in the market. Foreign investors must be sure when they come in they can exit at any time. The current CBN’s dollar management and naira obsession is a major disincentive for foreign investment and will weigh on the quick recovery of banking stocks. Although the banking index plunged by 38 percent to 219.94 index point in the first 3 months of the year, the index has sluggishly improved to 310.39 points with year-to-date performance of -12.7 percent.

Domestic consumption, industrialisation remain under-tapped opportunities in Nigeria’s gas market DIPO OLADEHINDE

ith its huge reserves and potential for economic transformation, the need to explore gas for domestic development and implement policies to drive its utilisation, especially as it relates to domestic consumption and industrial growth, remain a major agenda for stakeholders in the natural gas space. Nigeria is home to the largest natural gas reserves in Africa and the ninth largest in the world but it has continued to suffer supply shortage over the years. With less than 20 per cent of the natural gas produced in the country going to the domestic market despite huge demand, most stakeholders have advocated for a higher market penetration by putting the right regulations, fixing infrastructure and encouraging the private sector in order to unlock the nation’s huge gas potential. ED Ubong, managing director Shell Nigeria gas said there are huge opportunities in the domestic gas market which can come through Nigeria’s industrial cycle through important sectors such as manufacturing, power, feedstock among others. With the coronavirus disrupting global energy balance, leading to declining oil prices due to low demand, the need to encourage local consumption of gas, especially for power generation in a country with a huge energy deficit remains key. “We need to put regulations in place that will put long term clarity on the availability of gas, Ubong said. “Most In-

vestors want to know if gas will be available in the next 10 years, not just a year contract.” Justice Derefaka, programme manager, Nigeria’s Gas Flare Commercialisation Programme (NGFCP) said industry players need to put economic diversification as a front burner and make sure gas infrastructure is well developed across the country. “We need to look at how to explore more opportunities in using gas to build more petrochemical industries in Nigeria,” Derefaka explained to the delegates, at the BusinessDay Energy Series, titled Gas Market Development – Opportunities, Drivers & Challenges. Adedayo Adeshina, Manager of the implementation of Nigerian LPG expansion plan, Office of the Vice president said the downstream sector of gas which is the LPG space needs a lot of expansions most especially in the north who boast of a large population with most people still depending on local means of cooking. “We need to ramp up more domestic production of LPG to meet local demands by incentivising the private sector to operate more in rural areas,” Adesina said. Omotunde Hassan, CEO of Solad said that there is huge potential in the market and the government can come in with lots of interventions and policies to stimulate local consumption of gas. Edwin Devakumar, group Executive Director of Dangote Industries Limited said Nigeria needs to use gas in adding value to raw materials which can be used in solving the country’s import substitution problems.

Nigeria’s biggest oil and gas firms see profit dip 185% in H1 2020 FAVOUR OLAREWAJU & MERCY AYODELE

igeria’s biggest oil and gas firms by market value recorded a combined loss of N35.8bn in H1 2020 down from a profit of N41.8bn in June 2019. The three oil and gas companies listed on the Nigerian Stock Exchange (NSE) are Seplat, Mobil Oil and Total Nigeria Plc. This profit decline was driven by a 24.18 percent dip in their revenue earnings to N267.35bn in H1 2020 from N352.61bn in H1 2019. Lower revenues by the oil & gas companies combined was accompanied by a 10.5 percent reduction in cost of sales. This indicates that despite trying to reduce cost, their to-

tal revenues depleted greatly by N27.6bn, thereby being insufficient to cover cost. The COVID-induced lockdown led to a crash in oil price as a result of lower oil demand. “The lower oil production and supply consequently resulted in muted export proceedings, which was made worse by falling oil prices triggered by the pandemic”, said Gbolahun Ologunro, a research analyst at CSL Stockbrokers. Oil price averaged 38

percent in the first half of 2020 down from the average of 66.7 percent in June 2019. In like manner, the overall average share price for oil and gas companies plunged by 25 percent to N227.9 from N305 YTD. Downstream Players: Mobil Oil and Total Nigeria Plc Mobil (11 plc) is the only oil and gas company among the NSE 30 that made a profit during the period. However, 11 plc saw its profit dip by 39.6

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percent to N2.5bn in H1 2020, from N4.17bn as at June 2019. Mobil saw a 13.2 percent drop in revenue to N80.5bn from N92.8bn within the period under review. Also, cost of sales dipped by 11.3 percent to N75.6bn in H1 2020 from N85.27bn in June 2019. Meanwhile, Total Nigeria recorded a loss of N537 million in June 2020, a 513 percent crash from the N129.9million recorded in the same period last year. Similarly, Total saw revenue drop by 29 percent to N106.7bn in 2020 from N150.8bn on half-year basis. Cost of sales also plunged by 29.7 percent to N94.3bn in H1 2020 from N134.1bn in June 2019. “For the downstream players, reduced vehicular move-

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ment, especially for interstate movement as imposed by the implementation of lockdown measures, negatively affected domestic production, distribution consumption of PMS across retail outlets by huge volume nationwide”, said Ologunro. “In addition, the pre-existing regulation by the government as against market forces on PMS prices has continued affecting profitability of downstream players. So, pricing is still largely regulated which limits players ability to increase margin given the higher cost measures”. Upstream Players Seplat also played a major role in the poor performance of this sector with a N37.8bn loss in H1 2020, a 201 percent decline from the profit of N37bn recorded in H1 2019. @Businessdayng

The biggest oil player also had a 26.5 percent dip to N80.1bn from N109.97bn in the period being observed. To make matters worse, cost of sales rose by 47.9 percent to N67.19bn in H1 2020 down from N45.4bn in H1 2019. “For the upstream players, Seplat, which is the major oil player, saw a steep downturn in oil prices particularly in Q2 2020 with a 30 percent drop compared to Q2 2019”, said Ologunro. In considering the way forward, Ologunro proposes a complete deregulation of the downstream sector to adjust prices for flexible import and sales at market-based prices for significant recovery of earnings given the poor performance of these oil firms for the past three years.

Monday 05 October 2020

BUSINESS DAY

COMPANIES&MARKETS

Business Event

MARKETS

Nigeria economy - a new quarter but same old story

Lukman Otunuga, Senior Research Analyst at FXTM

frica’s largest economy entered the new quarter with a strong likelihood of following the same old story, namely COVID-19 headwinds, recessionary trends and widespread local and global market uncertainty. What are the chances of a plot twist? In a year full of twists and turns, the Central Bank of Nigeria (CBN) surprised investors with a 100 basis point interest rate cut from 12.5 percent to 11.5 percent. The monetary policy signal is a green light for more affordable lending which could stimulate economic growth and temper recessionary pressures. However, the same green light could speed up the inflationary pressures which weigh on the economy. The currency markets may view the CBN’s rate cut as a sign that monetary policy no longer prioritises foreign investors seeking high returns on deposits. Until now, the CBN’s hawkish monetary policy helped to maintain and grow the banking system’s foreign currency reserves, providing the Naira with

a cushion against further weakness. The current weakening global and domestic economic outlook does not support a high-interest rate environment in the short term. Faced with a protracted recession or runaway inflation, the CBN appears to have chosen the lesser of two evils. The central bank’s latest statement indicates that high interest rates have not been successful in checking inflation, which the CBN blames on structural factors like rising fuel and electricity prices. This raises the question of why an Oil-producing country faces inflation in fuel and electricity prices when fossil fuels are locally produced and ought to be more affordable. The answer is the strange economic distortion created by COVID-19. In this case, Nigeria applied to borrow $3.4 Billion from the IMF in order to bail out the economy because of the COVID-19 pandemic. The money will have to be repaid - cue a hike in electricity tariffs to increase government revenues from utilities and bolster its repayment capacity. This would be credit-positive as the last thing Nigeria needs

in such extraordinary times are doubts over its creditworthiness. Weaker global Oil prices make Nigeria’s creditworthiness even more of an important factor because the state is hardpressed to cover its budgetary needs in the current climate of low demand for crude Oil. Now that the CBN has put checking inflation lower down in its priorities, does this signal further rate cuts in the near future? The case for further pandemic-driven rate cuts appears to be strong. The COVID-19 outbreak shows no signs of abating. On the contrary, at the time of writing, the number of new cases in Nigeria is on the rise after lockdowns eased. Further monetary stimulus to the economy appears unavoidable. Of course, it all depends on what happens with inflation. If the inflation rate keeps rising in sectors like fuel, electricity and food it may drag on consumer spending, outstripping the economic benefits of lower interest rates. Medical costs have also risen because of COVID-19, according to the August inflation statistics.

L-R: Mustapha Abdul-Ahmed, permanent secretary, energy and mineral resources, Lagos State; Chantelle Abdul, group managing director, Mojec International Holdings; Lere Odusote, commissioner for energy and mineral resources, Lagos State, and Mojisola Abdul, chairman, Mojec International Holdings, during the official visit of Lagos State Commissioner for Energy & Mineral Resources and other top governmental functionaries to Mojec International Holdings in Lagos. Pic by Olawale Amoo

L-R: Anders Einarsson , managing director; Tiwa Savage, Twisco brand ambassador, and Abiodun Ayodeji , marketing manager, all of Promasidor Nigeria Limited during the official launch of Twisco Chocolate Drink and unveiling of Tiwa Savage as the brand ambassador in Lagos.

Ujali introduces digital platform to bridge corporate learning gap HOPE MOSES-ASHIKE

JALI Limited, a B2B technology company, has introduced an innovative digital platform known as UJALI Pro, which provides an adaptive marketplace where corporate organizations can connect with the best subject matter experts in the broad area of human capacity development. The platform is ready to bridge the gap in corporate learning by providing the medium that allows business schools to create tailored programs for African businesses. In a 6-hours virtual conference attended by participants from Africa, Europe and other parts of the world, Onyinye Igbokwe, founder of UJALI

Limited, was among the transformational leaders that addressed the Nigerian Youths during the 2nd anniversary lecture of anaedooline.com themed “The Place of Youth in Politics and Economy”. During her presentation, she told the audience that Nigerian youths can only innovate their way to the top. “We have to engage ourselves in things that are fruitful. We must start to invest in ourselves rather than waiting for the government to do things for us” “Where do we go from here? We must create a platform that will allow entrepreneurs to thrive. We can build incubators where Venture Capitalists (VCs) can invest in ideas that are bankable, sustainable and viable.”

L-R: John Okoko, outlet manager, Enyo Retail and Supply; Ochuwa Ayaosi, service advisor, Enyo Retail and Supply; Nwamaka Ineh, service advisor, Enyo Retail and Supply; Gbenga Abejoye, outlet manager, Enyo Retail and Supply, and Muhammad Al-Amin Kassim, area manager, Enyo Retail and Supply, at the unveil of Enyo Retail and Supply’s new commemorative Uniform to celebrate Nigeria’s 60th Independence Anniversary in Lagos

Other speakers who spoke at the much-anticipated annual lecture include Wole Soyinka, the first Nobel Laureate from Africa; Peter Obi, former Executive Governor of Anambra State; Innocent Chukuwma, the CEO of Innoson Vehicles; Kingsley Moghalu, a former Deputy Governor of Central Bank of Nigeria (CBN); Nonso Smart Okafor, a state legislator from Anambra State. Onyinye Igbokwe is a Stanford trained project management professional with rich experience in engineering, mining, interior architecture and building sectors, where she had worked either as part of a project team, led the business operations or strategically managed people to deliver on the organisation’s set objectives.

AdronHomes launches empowerment promo to celebrate Nigeria at 60

dronHomes, a real estate development company recently launched the ‘6060 Empowering Everyone Promo’, a mega 60 hours sales promotion campaign in celebration of Nigeria’s 60th Independence anniversary. Through this initiative, Adron Homes aims to reward its customers with deep discounts across its 34 estates across Nigeria. In line with its commitment to empower Nigerians and provide them with decent and affordable hous-

ing solution, the promotion which lasted for 60 hours starting from 12noon September 30, ended 12noon October 2. “During this critical period when everyone across the nation is striving to survive the adverse effects of the pandemic, this serves as our own way of celebrating the achievements of this great country while concurrently empowering young and ambitious Nigerians by making the incredible affordable to Nigerians across board,” said Adetola Emmanuel King, the www.businessday.ng

group managing director of Adron Homes. He there stressed the importance of building the nation right and living in peaceful communities just as the company guarantees in all of its estates. Alongside the aforementioned offerings, Adron Homes will also be empowering customers through skills acquisition programs focused on Information Communication Technology (ICT), photography, food processing, fishery, catering and others.

L-R: Chris Ibeh, senior category and channel manager-premium, Nigerian Breweries Plc; Funso Ayeni, national trade marketing manager, Nigerian Breweries Plc; Juliet Ifebueme, business manager- modern trade, Nigerian Breweries Plc; Tayo Williams, MD/CEO Price Pointe Wholesale Club; Olubukola Dare, regional business manager, and Kehinde Kadiri, portfolio manager, NAD, at the grand opening of Tiger Den at Price Pointe, Ilupeju, Lagos. Pic by Pius Okeosisi

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Monday 05 October 2020

BUSINESS DAY

INTERVIEW Investing in government-approved citizenship by investment programme will enhance visa-free travel access - Williams PAUL WILLIAMS is the Chief Executive Officer and founder of La Vida Golden Visas. Paul qualified as a Chartered Accountant with accountants PWC subsequently working with consultants Deloitte and held several senior positions at multinational companies before forming La Vida in 2002. With a career that spans 30 years, Paul has advised many high-networth individuals, families and companies on international accountancy, investment property, residency and golden visas. Paul is an Advisory Board Member for the Investment Migration Council, the worldwide association for investor immigration and citizenship-by-investment. In this interview with IFEOMA OKEKE, he speaks on opportunities inherent in investing in a quality government-approved citizenship by investment programme and the Grenadian Citizenship by investment (CBI) programme amongst others issues.

e have seen an increasing trend of Dual Citizenship across the globe and most especially from Africa. Why now? Whenever geopolitical issues arise in any country, we tend to see an increase in demand for second citizenship or residency. With so much uncertainty currently in the world, people are often looking for a ‘’Plan B’’. More than ever before, there is an increased awareness of such programmes which is also driving the demand. Ten years ago, there were just a handful of citizenship by investment programmes available, but the industry has grown substantially in the last decade and there are now more than 80 investor visa options available across the globe. Africa’s affluent middle class are also becoming wealthier, giving them the opportunity and motivation to take part in citizenship by investment programmes. What are the current challenges with the Nigerian passport? As a standalone passport, Nigerians have visa-free travel to just 54 countries and territories worldwide. Many are other African countries such as Ghana and Ethiopia. When you break this down, Nigerian passport holders, shockingly, have access to just 2.1 percent of the world’s GDP or 3.1 percent of the world’s travel popularity. For HNWIs and business people from Nigeria, this is very limiting and could be holding them back from various opportunities, restricting them with business, education and leisure. How can Nigerians step up their global travel? Investing in a quality government-approved citizenship by investment programme will enhance your visa-free travel access dramatically, and in turn, open up other opportunities. For example, if you pair a Grenadian passport with a Nigerian passport, one will gain access to 163 destinations worldwide, which includes the UK, EU Schengen zone, China and Russia. Now you have visa-free access to 58.7 percent of the world’s GDP, a huge improvement on the 2.1 prcent that a standalone Nigerian passport offers. How do you apply for Gre-

gramme could be a businessperson looking to extend their global reach, or an affluent middle-class family who may want to broaden their global opportunities, both for business and education reasons. It’s rare that applicants look to relocate to Grenada, and the beauty of the programme is that there is no requirement to do so.

Paul Williams

nadian Citizenship by investment (CBI) and what are the benefits? Grenada’s Citizenship by Investment (CBI) is one of the world’s top ranked CBI programmes and allows individuals and their families to obtain citizenship in Grenada. It offers a userfriendly second citizenship and a first-class investment opportunity whereby applicants can buy Government-approved real estate from USD220,000 like a unit in the Kimpton Kawana Bay resort, which is currently the most popular project. An application for Citizenship by Investment in Grenada takes only 60-90 days, has low family fees, and no interview, education, language test or management experience is required. There are no residency requirements and dual citizenship is permitted. Once your passports are issued, you have visa-free travel to over 140 countries. Grenada does not tax worldwide income, wealth, gift, inheritance or capital gains. What is the Grenadian Citizenship by Investment project and how does it work? Kimpton Kawana Bay is a new beachfront 5-star luxury resort in Grenada. Title deeded studios and suites are for sale for the minimum investment of $220,000 through Grenada’s acclaimed Citizenship by Investment (CBI) programme, which allows purchasers to apply for Grenadian citizenship for themselves and their family in one application. The resort www.businessday.ng

is ideally positioned on Grand Anse Beach, voted by CNN and Condé Nast Traveller as one of the world’s best beaches. The resort will be operated by an internationally recognised hotel brand – Kimpton Hotels & Restaurants, part of IHG (InterContinental Hotels Group), one of the largest hotel groups in the world. What are the benefits for investors at Kimpton Kawana Bay? Kimpton Kawana Bay offers hassle-free ownership with no annual out of pocket fees. There is a projected rental income of 3-5 percent through the transparent revenue-sharing model and personal accommodation usage of up to two weeks each year. After five years, you can disinvest and recoup your initial investment. The hotel will feature an infinity edge pool overlooking Grand Anse Beach, state-of-the-art gym and spa facilities, exquisite fine dining restaurant, roof-top bar, beach bar, lounge with terrace, and water sports facilities. What does it cost and who is this best suited for? Asides from the $220,000 investment in the Kimpton Kawana Bay project, investors will need to budget for the government’s application, processing and due diligence fees. For a single applicant, the total cost, inclusive of fees will be $306,000, whereas a family of four would be around $320,000, depending on the ages of the children. A typical Nigerian investor taking part in the pro-

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Why should more wealthy Nigerians adopt a second Passport? Visa-free travel, increased global business and education opportunities, creating a legacy for one’s family and having a ‘’Plan B’’ are just some of the many reasons investors take up second citizenship. Grenadian Citizenship offers several added attractions that many of its competitor countries do not. Grenada is one of the only CBI countries which has visa-free access to China and Russia. Grenada is also the only Caribbean CBI country to hold an E-2 Visa treaty with the USA. This means, once Grenadian citizenship has been granted, there is the opportunity to then apply for residency in the USA through business investment, should one wish to do so. How long does it take from investment to citizenship? The government processing time is between 60-90 days from the date the application is submitted. La Vida’s in-house processing team will assist applicants with the entire process from start to finish, providing investors with a seamless and stress-free service. What is the E2 visa and why does it matter? The E-2 Visa is an optional and secondary application which is available as an extra service to those who may want to gain residency in the USA. Should investors decide to take this step, they need to budget for an additional investment into a US business. There is no fixed amount set by the government, but it is recommended that applicants invest a minimum of $120,000 upwards and become at least a 50 percent shareholder in the company. This route is fast becoming more popular than the direct EB5 programme to the US which has lengthy delays and requires a much larger investment of $900,000+. It’s important to note that the E-2 visa category is not affected by the recent immigration bans announced by president Trump. How long does the E2 Visa @Businessdayng

take to process? The timeframe for this is usually two months from the time the E2 application and business investment are made. Applicants will be issued with a five year US residency visa with unlimited renewals. What is it like, living in Grenada? Grenada is an enchanting and unspoiled tropical island located in the Caribbean. Grenada boasts the quintessential laidback Caribbean lifestyle with lush landscapes, pristine beaches, and warm and friendly people, many of which have historical family ties back to West Africa. The official language spoken in Grenada is English and the population of Grenada is approximately 112,000 people. The magnificent environment with its safe surroundings and exquisite new resorts makes Grenada an alluring destination for tourists and investors. The country is one of the most open and business friendly economies in the region and continues to grow steadily. The island has an established health care system and is home to St George’s University, one of the world’s largest American accredited medical schools, drawing students and faculty from 140 countries. It is easily accessible with a number of daily direct flights into Grenada’s International Airport from major US cities, London and a number of regional flights from the surrounding islands. The airport also offers fixed-based operator services for private jets. Grenada is close to the equator, which ensures a year-round tropical climate. Its cooling trade winds make temperatures comfortable. Most notably it is located outside of the hurricane belt. From your own perspective why is this a much needed opportunity for Nigerians asides chasing the American or English dream? It’s different in that this is about access, visa free travel and a Plan B. With the direct US and UK immigration options, applicants are usually required to reside full time in the country. Many Nigerians do not wish to leave their country and relocate, they just want more flexibility. Grenada’s CBI programme has no minimum stay requirement. As it is part of the commonwealth, Grenadian passport holders are entitled to spend up to six months per year in the UK too.

Monday 05 October 2020

BUSINESS DAY

INTERVIEW ‘Our government’s focus is to ensure the process of obtaining Grenada citizenship is seamless’ The Hon. PETER CHARLES DAVID is Minister for Foreign Affairs and Labor in Grenada. After the 1999 general elections, he qualified as a barrister-at-law and continued his political career. He has been a member of the House of Representatives from the town of St. Georges and served as the Deputy General Secretary of the New National Party. He was the Minister of Foreign Affairs from July 2008 to November 2010 and subsequently served as Minister of Tourism until April 2012. In this interview, he speaks on why Grenada is a highly sought-after country for second citizenship, the country’s investment environment, the CBI programme, Range Developments’ planned Six Senses resort at La Sagesse, among other issues.

hy is Grenada such a highly sought-after country for second citizenship? Grenada’s Citizenship by Investment program is well recognized as one of the best in the Caribbean. There are many programs throughout the region and other parts of the world but we have found that because of the features of our program and nature of our investments we have been able to distinguish ourselves – such features include the donation option; our relationship with the US with Grenadian citizens being eligible to apply for E2 visas; a passport which is highly recognized and has integrity so when it is presented to border officials they know it is a reliable passport; solid investment options, for example, the Range Developments project. Range has a history throughout the region having completed projects in St. Kitts and Dominica. How would you rate the investment environment in Grenada especially for foreign investors not very familiar with local laws and practices? To invest in Grenada is safe. Grenada relies heavily on foreign direct investment be it tourism, agriculture, industry, I.T. The government having recognized this, has through the Grenada Industrial Development Corporation, put measures in place for such investments which has improved the process of doing business in Grenada over the past few years. What processes or institutions are in place to protect the investment of foreigners and for recourse in the events of a dispute? Grenada has a British Colonial history. Grenada has maintained links with Britain and we have a British legal Common-law system; which most of our investors would be familiar and comfortable with. Most of our business is conducted on the basis of practices in Britain and the United States. Can you tell us about your citizenship by investment programmes and its significance to Grenada? Our CBI program is extremely critical to the development of Grenada. Most of the recent investment in tourism has been through the real estate investment option of CBI. The Range Development project for example will bring to our shores the first Six Senses

the years. Again, because foreign direct investment is so crucial to our development, this government has taken steps to improve a number of services which will result in placing Grenada at the fore as a business and investment hub. READ ALSO: CBN grants 7 barred companies access to bank accounts for payment of winnings, salaries What testimonies about Grenada have you heard from foreign investors in your country? A number of foreign investors have not only done business in Grenada but also made Grenada their home. Can’t think of any specific testimony but the general consensus is that Grenada is a safe place and their investments are secure here

Roosevelt Ogbonna

Hawa Ajisafe, clients relations manager taking the Nigerian Air Force team on a tour of Tranos facility

resort and will build our hotel room stock. Grenada relies heavily on foreign direct investment and our CBI program is one such vehicle which drives such investment, and as such the focus of this government has to ensure that the process of obtaining citizenship of Grenada is as seamless as possible. As the only Caribbean country whose citizens are eligible for the US E2 non-immigrant visa, how would you describe your relationship with the US? Signed in 1983, the E2 treaty was a reflection of the good relations between the US and Grenada. I have no doubt that the relationship between the US and Grenada will continue to grow from strength to strength. What goes into consideration during due-diligence and background checks on investors interested in Grenadian citizenship? In order to ensure that our CBI program is of the highest quality, the due diligence and background checks undertaken are stringent and all-encompassing. This is in an effort of ensuring that persons granted citizenship of Grenada would not bring the people pf Grenada any disrepute. Through our various relationships the background checks capture and confirm applicants’ personal www.businessday.ng

identification information, employment history, any criminal records or pending investigations, civil litigation, whether the applicant is a politically exposed person. Are there limits to the rights and freedom enjoyable by investors who buy second citizenship in Grenada? The short answer is no. Persons who become citizens through CBI have all the rights and constitutional privileges enjoyed by all citizens of Grenada. As far as we are concerned in Grenada we have one set of citizens despite the various ways one can become a citizen, – by birth, marriage, descent, investment; everyone is treated equally under our laws. Is citizenship transferable to applicants’ offspring and to what extent are spouses and extended family members covered? Yes the citizenship is transferable to the applicants’ offspring and other family members such as parents and siblings can also be added. How does Grenada help new citizens and their families integrate into the island country’s society? Despite not being required to visit or live in Grenada, we encourage our new citizens to treat Grenada as their “home away from home.”

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To look at the many opportunities we have available for secondary investment. Integrating into life in Grenada is easy. We are a friendly people, one of the safest countries in the world, traveling to and from Grenada can be done through a number of international hubs Are there programs that facilitate this? Not that I am aware of. Can you talk about Grenada to Nigeria diplomatic relationship over the years and how it has evolved? Grenada to Nigeria relations have not been as good as they should be, in fact Grenada to Africa relations have not been as good as they should be. We are all aware that the majority of our citizens are of African descent. Nigeria is the most developed of the African countries. We are looking to strengthen relations by establishing an Embassy in Nigeria. I have had discussions with Nigerian Diplomats and business persons and I am very excited of the prospect of deepening ties. We are seeking to attract more investment from Nigeria, through trade missions. In the next five years, where do you envision Grenada as a business and investment hub? I have seen the ease of doing business in Grenada improve over @Businessdayng

What are your thoughts and expectations about Six Senses La Sagesse by Range Developments? I am very excited about Range Developments’ planned Six Senses resort at La Sagesse. Hotel development has been predominantly in the south of the island so to bring such a luxury development to St. Davids will have a huge impact that will benefit not only the people of St. Davids but Grenada as a whole. Range Developments’ track record was a deciding factor when the government made the decision to approve the project under our CBI program. Having brought 5-star luxury resorts to our sister islands of St. Kitts and Dominica through their respective CBI programs mean that Range is familiar with building in this part of the world and working with the government and people. I look forward to welcoming guests of the Six Senses La Sagesse to Grenada. For Nigerian investors seeking to invest in Grenada, what is the most important thing to keep in mind? To play on a legal maxim, he who comes of Grenada must come with clean hands. Apart from easy access to US residency, what are the other benefits of a Grenada citizenship? Citizenship for life for not only the investor and spouses and children but also for the investors’ parents and siblings, visa-free travel to more than 130 countries including the UK, China, Russia and Europe; the right to live and work in Grenada, all the rights available under the Constitution of Grenada.

Monday 05 October 2020

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 02 October 2020

Top Gainers/Losers as at Friday 02 October 2020 GAINERS Company DANGCEM MTNN

GUARANTY

DANGSUGAR JBERGER

LOSERS Opening

Closing

Change

N142.9

N144

1.1

N129

N130

N28.05

N29

0.95

N12.4

N12.9

0.5

FCMB

N16.05

N16.25

0.2

CORNERST

Company

Opening

Closing

Change

N6.95

N6.5

-0.45

N21.65

N21.5

-0.15

N4.2

N4.1

-0.1

N2.19

N2.1

-0.09

N0.65

N0.6

-0.05

UACN FLOURMILL ETI

ASI (Points) DEALS (Numbers) VOLUME (Numbers) VALUE (N billion) MARKET CAP (N Trn)

26,985.77 4,553.00 459,790,564.00 4.304

Global market indicators FTSE 100 Index 5,902.12GBP +22.67+0.39%

Nikkei 225 23,029.90JPY -155.22-0.67%

S&P 500 Index 3,354.49USD -26.31-0.78%

Deutsche Boerse AG German Stock Index DAX 12,689.04EUR -41.73-0.33%

Generic 1st ‘DM’ Future 27,647.00USD -42.00-0.15%

14.105

Shanghai Stock Exchange Composite Index 3,218.05CNY -6.31-0.20%

‘Mutual Funds are the growth story of coming decade’ Guy Czartoryski, head of research at Coronation Asset Management speaks to Iheanyi Nwachukwu on the company’s recently released Mutual Funds report, other related issues. Excerpts Can we know why the Mutual Funds report this time? s soon as we looked at the Mutual Fund industry we were struck by its remarkable growth. The size of its assets under management grew by 305percent during the period between 2015 and 2019, doubling in inflation-adjusted terms. In the first half of this year – a year of recession – the total funds managed by Money Market Funds grew by 11percent and the total funds managed by Fixed Income Funds grew by 60percent. A transformation is underway, and it is about savers turning away from banks as the default destination for their money and turning to Mutual Funds instead.

In the report, you foresee Mutual Funds rival Nigeria’s Pension Funds in size. Why this optimism? Pensions Funds were the growth story of the last decade: Mutual Funds are the growth story of the coming decade. There are several factors at work. The biggest is that Nigerian Treasury Bills no longer yield more than inflation, as they did for most of the period between 2010 and 2019, so investing has suddenly become much more challenging than before. This demands a spectrum of competing products which Mutual Funds offer. Second, banks tend not to offer attractive Savings Deposit rates because of a number of policy measures they endure, notably the cash reserve requirement and the loan-todeposit ratio. So, savers are looking for something better than banks’ savings accounts. Third, saving has become important to an increasing number of Nigerians as they come to understand retirement planning, whether or not they are members of a for-

some fintech platforms, which do not have their own in-house investment management capabilities, are become customers of fund management firms and are investing in Mutual Funds.

mal pension scheme. Put those factors together and we understand the rise of mutual funds. In terms of regulation, what should improve as Mutual Fund industry hugely expands? The Securities and Exchange Commission has laid down the ground rules for what Mutual Funds can invest in, measures to ensure that Mutual Funds act in their fund holders’ interests, and requirements for regular and accurate reporting of data. These rules are set out in ‘Amendments to Rules on Collective Investment Schemes’ which form part of ‘New rules and amendments to the rules and regulations of the Commission’ from December 2019, and which are due for enforcement now. We expect the SEC to continue developing these rules. At the same the Fund Managers Association of Nigeria provides a wealth of data, which is free online, on unit price performance of Mutual Funds over several years. We expect reporting standards to improve and this will facilitate improved comparison between funds. Now that the era of high returns from Nigerian Treasury Bills has ended. Are you making strong case for investment in Mutual Funds? There is a transformation underway in the way Nigerians save, and this is happening because Nigerian Treasury Bill yields have fallen and, we believe, may not rise above inflation again for some time because the monetary authorities no longer believe that inflation can be cured with interest rates. So, savers and investors are having to think of different ways of obtaining adequate returns. Above all, this means accepting a degree of risk, because a Nigerian Treasury Bill is www.businessday.ng

Guy Czartoryski

essentially risk-free while Mutual Funds cover varying degrees of risk. A Money Market fund involves very little risk; a Fixed Income fund involves a little more risk, then come Balanced Funds and Equity Funds. The risk/return principle has to be understood and indeed investment managers need to put it at the core of their processes.

a transformation, because the key emerging skills are risk management and educating customers about risk. Risk management is the key area we are investing in with our partners Cardano, a specialist Pension Fund risk adviser based in the Netherlands. Risk management techniques have become central to our investment process.

How are Mutual Funds benefiting from lower rates on banks Savings Accounts? In the past banks offered sufficient returns to attract Savings Deposits but at the same time presented themselves as subject to the CBN and NDIC, with the result that customers understood they held a guarantee. When it comes to Mutual Funds there is a high level of regulation from the SEC but no guarantees. So the shift from bank deposits to Mutual Funds involves the prospect of a return in exchange for an acceptance of risk. And this is why we talk about

How are Mutual Funds managers helping to retain new generation of young savers. The growth of the Mutual Fund industry reminds one of the tech industry. In fact, part of this growth is due to the tech industry. A generation of Nigerian savers expects to save from a mobile device, transfer money quickly, and have real-time information on investments. This is a significant driver across retail financial services and the Mutual Fund industry is no exception. However, this also means that the roles of asset-gatherer and investment manager are becoming separable. So

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What other kinds of investors are you seeing moving lately to Mutual Funds? All kinds of institutional investors that have been using bank deposits as their default option are now using professional fund managers such as ourselves, and it often comes down to offering exposure to different asset classes through Mutual Funds. The great thing about Mutual Funds is that they are open to everyone, whether a retail investor, a person who is building up a long-term retirement fund, or an institution. We see the key area of growth coming from people preparing for retirement, because it is possible to build up a diverse and balanced portfolio of long-term investments through Mutual Funds. In Nigeria, there are not enough information on Mutual Funds performance to facilitate fund selection by investors and professional advisers? How can this situation improve? As mentioned already, the Fund Managers Association of Nigeria offers a free online service with a wealth of historical data on the until prices of funds, going back several years. This is going to be developed over the coming years and the approach the levels of disclosure and fund comparison in markets like the UK. In our report we give examples of the comparisons that can be generated from the MorningStar UK website and the Financial Times Fund Comparison Service, both of which offer free access. One

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key development will be standardised measures of fund performance and this could come about through the adoption of Global Investment Performance Standards (GIPS). Your report noted that one of the two major challenges Nigeria’s Mutual Fund industry faces is risk management. Why and what are we not doing? In the era - take the years between 2010 and 2019 - when Nigerian Treasury Bills generally yielded more than inflation, investment management generally consisted of buying Treasury Bills and Federal Government of Nigeria bonds. There was little need for sophisticated risk management. Now this is changing because savers need a variety of different assets to invest in, each with their own risk attributes. Risk management involves accurate performance attribution, careful scenario modelling, back-testing and, at the end of the day, judgement. It is the heart of the investment management process. What is your advice to existing and potential investors in Mutual Funds? Our advice is to start with an acceptance of risk, because the days of risk-free inflation-beating returns with Nigerian Treasury Bills are over. Then learn about risk. This need not be technical, just an appreciation that difference categories of Mutual Funds carry different levels of risk. Next, gather information on fund performance from the free online sources that provide it. Gather information and insight from financial advisers. Decide on the desired term of your investment and work out a plan to reach your financial goals. Consider everything carefully and then invest.

Monday 05 October 2020

BUSINESS DAY

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BUSINESS DAY

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Monday 05 October 2020

BUSINESS DAY

Access Bank Rateswatch KEY MACROECONOMIC INDICATORS Indicators GDP Growth (%) Broad Money Supply (N’ trillion)

Market Analysis and Outlook: October 2 – October 9, 2020

Current Figures Comments -6.1 Q2 2020 — lower by –7.97% compared to 1.87% in Q1 2020 Increased by 1.63% in August’ 2020 from N36.59 trillion in July’ 2020 37.19

Credit to Private Sector (N’ trillion)

30.13

Currency in Circulation (N’ trillion) Inﬂation rate (%) (y-o-y) Interest Rate (Asymmetrical Corridor) Oil Price (US$/Barrel) Oil Production mbpd (OPEC)

The debt market was ﬂush with liquidity last week as Open

to 53.2 in September 2020 from a preliminary reading of 53.5. It

Market Maturity (OMO) of N120 billion hit the system. These

Decreased by 1.04% in August’ 2020 from N2.4 trillion in July’ 2020

remains the biggest increase in factory activity since January

inﬂows led to a signiﬁcant decline in short-term lender's

12.82

Increased to 12.82% in July 2020 from 12.56% in June 2020

2019, on the back of faster expansion in production and a solid

charge such as the Open Buy Back (OBB) and Overnight (O/N)

11.5

Adjusted to 11.5% in September 2020 from 12.5%

rise in new orders. As a result, ﬁrms continued to enlarge their

to 1% and 1.58% from 10.33% and 11.5% respectively. The

Lending rate changed to 13.5% & Deposit rate 6.5%

workforce numbers, as hiring increased following further

more downward sticky longer tenored rates such as the 30-

11.5 (+2/-5)

External Reserves (US$ million )

Money Market

In the US, the IHS Markit Manufacturing PMI was revised lower

Increased by 0.24% in August’ 2020 from N30.06 trillion in July’ 2020

2.37

Monetary Policy Rate (%)

Global Economy

35.72

September 29, 2020 ﬁgure — an increase of 0.15% from September start upward pressure on capacity. Meanwhile, cost burdens and 90-day Nigerian Interbank Oﬀered Rate (NIBOR) settled at

38.94

October 1, 2020 ﬁgure— a decrease of 4.51% from the prior week

notched up sharply once again, with selling prices increasing at

August 2020, ﬁgure — an increase of 0.13% from July 2020 ﬁgure

the fastest rate since January 2019. Nonetheless, output

expected to remain at single digit levels as another OMO

expectations moderated in September amid increased

maturity of N569 billion is set to hit the system.

1.48

NSE ASI & Bond

uncertainty regarding the coronavirus pandemic and the

FX Market N/US$

Inﬂation Rate

External Reserves & Oil price

2.32% and 2.45% from 1.62% and 1.79%. This week, rates are

upcoming presidential election. In a separate development,

Foreign Exchange Market

the Euro Area seasonally adjusted unemployment rate

The local unit went in varying directions last week. At the

increased to 8.1% in August 2020 from an upwardly revised 8%

Nigerian Autonomous Foreign Exchange Rate (NAFEX)

in July according to European Statistical Oﬃce (EUROSTAT). It

window the naira weakened, settled at ₦386.49/US$ from

is the highest jobless rate since July 2018, as the coronavirus

₦386.04/US$ the preceding week due to low liquidity as bids

pandemic hit the labour market. The number of unemployed

continued to outweigh oﬀers at the investors and exporters

persons rose by 251,000 to 13.18 million, despite temporary

window. In contrast, at the parallel market, the naira gained ₦2

government job-support programs and the relaxation of some

to settle at ₦465/US$ from ₦467/US$. The oﬃcial market rate

containment measures. Among the bloc's largest economies,

remained ﬂat at ₦379/US$. This week, we expect the Naira to

the highest jobless rates were recorded in Spain (16.2%), Italy

trade at same levels and we anticipate that the Central Bank

(9.7%), and France (7.5%) while the lowest was observed in

will continue its foreign exchange sales to foreign portfolio

Germany (4.4% percent). Elsewhere, Brazil's trade surplus

investors.

expanded to $6.2 billion in September 2020 from $3.8 billion in

STOCK MARKET

Indicators

COMMODITIES MARKET

2 Weeks Change Ago (%) 2/10/20 25/9/20

Indicators

Last Week

NSE ASI Market Cap(N’tr)

26,319.34

2.53

14.11

13.75

2.55

Volume (bn) Value (N’bn)

0.46

0.34

36.94

4.30

4.28

0.63

MONEY MARKET NIBOR

Last Week 2 Weeks Ago Rate (%) Rate (%)

Tenor

OBB O/N CALL 30 Days

2/10/20

25/9/20

1.0000 1.5800 2.6250

10.3300 11.5000 16.7000

2.3158 2.4535

90 Days

Energy

26,985.77

Change (Basis Point) (933) (992) (1408)

1.6178 1.7922

1 Month Ago 2 Weeks Ago Rate (N/Rate (N/$) $) 2/10/20 25/9/20 2/9/20 379.00 379.00 379.00 386.49 386.04 385.70 0.00 0.00 0.00

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

465.00

2,463.00

(4.57)

27.22

106.10 65.34 13.36

(5.73) (0.23) (0.60)

(18.51) (15.69) (12.85)

Wheat ($/bu.) Metals Gold ($/t oz.) Silver ($/t oz.) Copper ($/lb.)

565.75

3.33

30.51

1,905.75 23.85 287.00

2.47 4.47 (2.96)

44.64 38.74 (12.45)

INTERBANK

Last Week Rate (%)

4.23

4.26

(3)

10-Year

5.62

5.92

(30)

15-Year

8.80

8.50

20-Year

8.13

8.45

(32)

30-Year

TRUE

Change (Basis Point)

25/9/20

1 Mnth

0.83

0.77

3 Mnths 6 Mnths

0.93 1.27

0.91 1.13

2 14

9 Mnths 12 Mnths

2.03 2.10

2.08 2.47

(5) (37)

2/10/20

Last Week

Indicators

(54)

25-Year

2 Weeks Ago Rate (%)

2/10/20

Indicators

2 Weeks AgoChange Rate (%) (Basis Point)

2.61

7-Year

BILLS

440.00

25/9/20 3.15

5-Year

TREASURY

ACCESS BANK NIGERIAN GOV’T BOND INDEX

BOND MARKET AVERAGE YIELDS

Tenor

467.00

2.48

(39.59) (18.85)

Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.)

Tenor

Last Week Rate (N/$)

(4.51) 13.24

Cocoa ($/MT)

FOREIGN EXCHANGE MARKET

Market

38.94

Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture

NIGERIA YIELDS

70 66

1-week YTD Change Change (%) (%)

2/10/20

Index

4,700.65

Mkt Cap Gross (N'tr)

15.26

Mkt Cap Net (N'tr)

10.89

YTD return (%)

91.36 -1.03

YTD return (%)(US $)

TREASURY BILLS PMA AUCTION

9.16

9.15

9.34

9.26

8 Tenor

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

2 Weeks Ago

91 Day 182 Day 364 Day

Change (Basis Point)

25/9/20

4,645.61 15.02 10.71 89.12 -3.27

1.18 1.60 1.76 2.24 2.24

Amount (N’ Rate (%) Date million) 1.2 19,783.59 12-Aug-2020 54,592.59 1.5 29-July-2020 27,000.00

3.1999

12-Aug-2020

the same period of 2019 according to the Ministry of

Bond Market

Development, Industry and Foreign Trade. When adjusted for

The bond market was bullish as we witnessed demand for

the working day average, exports declined 9.1% from a year

some select maturities due to robust system liquidity.

earlier to $18.5 billion, while imports fell 25.5% to $12.3 billion.

Accordingly, buying interests were recorded for the 2023, 2034

Among major trading partners, exports dipped to the EU (-

and 2050 securities amongst others. Yields on the 5-, 7-, 10-

43.6%) and the US (-23.9%) while shipments to Asia climbed

and 20-year papers tapered to 2.61%, 4.23%, 5.62% and

9.1%. Imports dropped to Asia (-0.5%), the EU (-18.7%) and

8.13% from 3.15%, 4.26%, 5.92% and 8.45%, in that order. The

the US (-26.6%).

Access Bank Nigerian Government Bond Index edged up to 4,700.65 points from 4,645.61 points, 55.04 points higher.

Domestic Economy

Market performance this week is expected to remain bullish

Fitch Ratings recently revised the outlook on Nigeria's Long

following unmet demand from prior week session.

term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and aﬃrmed the IDR at 'B'. It stated that the

Commodities

reason of the upgrade was a decrease in the level of

The price of oil tumbled further and broke $40/barrel this week

uncertainty surrounding the impact of the global pandemic on

after US President Donald Trump tested positive for COVID-

the Nigerian economy. Increasing relative stability in oil prices,

19 raising worries about the impact on the outcome of the

easing of global funding conditions, and domestic restrictions

presidential elections. Prices were already under pressure

on movement all had an impact in the revised outlook. The

amid mounting concerns over fuel demand recovery as the

report also projected Brent oil prices to average $41/barrel in

number of coronavirus infections continue to rise worldwide

2020, $45/barrel in 2021 and $50/barrel in 2022. In a separate

including major economies like the US, the UK, Germany and

development, the Central Bank of Nigeria (CBN) is planning to

France. Bonny light, Nigeria's benchmark crude sank 4.51% to

move ﬁnancial inclusion gender gap from 8.5% (based on 2018

close at $38.94 per barrel. Precious metal prices went in

data) to no gender gap in 2024. The Bank disclosed this in the

opposite direction as we saw prices climb for both gold and

Framework for Advancing Women's Financial Inclusion in

silver metals. Investors sought safe-haven assets after US

Nigeria. According to the framework, this is to be achieved in a

President Donald Trump tested positive for COVID-19 just few

two-step process. The ﬁrst milestone on this path is the

weeks ahead of the US presidential election. Consequently,

reduction of the gender gap by one half by end 2021; this is the

gold prices rose 2.74% or $45.85 to ﬁnish at $1,905.75 per

target set by members of the Alliance for Financial Inclusion

ounce from $1,859.90 per ounce. Silver settled at $23.85 per

(including Nigeria) under the Denarau ActionPlan5. The

ounce, a 4.47% jump from prior week price. This week oil prices

second milestone is to eliminate the gender gap by end 2024.

will remain pressured by an impending supply glut. The culprits

The 2018 EFInA access to ﬁnance survey in Nigeria shows that

for this production increase is mostly Iran and Libya, both of

the national ﬁnancial inclusion rate was 58.9% of women

whom are exempt from the OPEC+ production quotas.

compared with 67.4% of men, or a gender gap of 8.5%.

Bullions are likely to trend higher amid low interest rates, a

Stock Market

heightened uncertainty heading into the US elections.

resurgence in Covid cases in some parts of the world, and the

The bulls regained market dominance at the Nigerian stock exchange as performance indicators index rose week on week. Sto c k s i n t h e ﬁ n a n c i a l s e r v i c e s, co n s t r u c t i o n , telecommunication, consumer and industrial goods were

Monthly Macro Economic Forecast

majorly responsible for the turnaround witnessed in the stock market. Consequently, the All Share Index (ASI) and market capitalization closed at 26,985.77 points and ₦14.1 trillion from 26,319.34 points and ₦13.75 trillion, respectively the preceding week. This week, market participants are expected to remain wary while they reposition their market portfolio

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

Oct’20

Nov’20

Dec’20

388

389

388

13.6

13.85

13.89

considering current macroeconomic realities. Sources: CBN, Financial Market Dealers Quotation, NSE, NBS, Energy Information Agency, Oilprice, Bloomberg and Access Bank Economic Intelligence Group computation. * Crude oil (Bonny Light) is as at the previous day.

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

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@Businessdayng

Monday 05 October 2020

BUSINESS DAY

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@Businessdayng

Monday 05 October 2020

BUSINESS DAY

NEWS

Inflows from OMO bills worth N567.7bn to hit financial market next week ...as Naira gains N2 on black market HOPE MOSES-ASHIKE

igeria’s financial market liquidity would boost up next week, following the expected inflow from Open Market Operation (OMO) worth N567.7 billion. Financial system liquidity stood at N194.7 billion on Monday, down from N908.1 billion at the close of last week, the interbank rates -Open BuyBack (OBB) and Overnight (OVN) - opened the week lower at 3.0 percent and 4.0 percent w/w respectively from the close of 10.3 percent and 11.5 percent, the previous week. By Thursday, the rates declined significantly to 1.0 percent and 1.8 percent as inflows from maturing OMO instruments entered the system. By the close of the week, the rates stood at 1.0 percent and 1.6 percent as system liquidity closed at N335.1billion, according to a report by Afrinvest Securities Limited. To absorb liquidity from maturing treasury bills, the CBN offered a total of N114.0 billion across the short, mid and long-tenor instruments at the primary market auction on Wednesday. The instruments were oversubscribed at an aggregate bid-to-cover of 3.1x as subscriptions totaled N348.3 billion and the highest demand was recorded at the longest tenor with bid-tocover ratio of 3.7x. Instruments worth N134.0 billion were sold across the three maturities at marginal rates of 1.08 percent, 1.49 percent and 2.80 percent respectively, slight declines from respective rates of 1.09 percent, 1.50 percent and.3.05

percent recorded at the previous auction. In the secondary market, performance turned bullish as average yield across tenors declined 22bps w/w to 1.7 percent from 1.9 percent last week. Significant buying interest was recorded at the mid end of the curve as yields fell by 48bps to 1.6 percent. Yields also declined at the long end by 32bps to 2.4 percent while short-term yields rose by 13bps to 1.2 percent. “In the coming week, we expect inflows of N567.7 billion from maturing OMO bills to boost system liquidity and pressure yields in the secondary market. However, we believe CBN would resume OMO auctions to keep rates and system liquidity in check,” analysts at Afrinvest said. Nigeria’s currency gained N2 against the dollar at weekend exchanging for N460 compared to N463 traded on Friday on the black. Naira remained stable as the dollar was traded at N465 at the Bureau De Change segment of the foreign exchange market. The 5,000 BDCs who funded their accounts on Wednesday receive disbursement on Friday after the holiday. At the Investors and Exporters (I&E) forex window on Friday, naira appreciated by 0.05 percent as the dollar was quoted at N385.80 against the last close of N386.00. Analysts at FSDH research said most participants maintained bids between N380.00 and N386.00 per dollar. The CBN is still committed to its weekly FX sales to BDCs, which is expected to inject more liquidity to the FX market’s retail segment.

NIMASA to ban int’l oil firms from engaging unregistered vessels the agency released a marine notice to announce the decision, Bashir Jamoh, igerian Maritime director-general of NIMAAdministration and SA, said the notice was part Safety Agency (NI- of efforts to ensure strict MASA) has issued a three- enforcement of the Coastal month ultimatum to com- and Inland Shipping (Cabopanies engaged in Cabotage tage) Act 2003 and Guidetrade in Nigeria to register lines on Implementation of all vessels used in coastal the Act. Jamoh said that the Caband inland waters trade. In addition to registra- otage Act provided that tion in the applicable Spe- every vessel intended for cial Register for Cabotage use in domestic trade must Vessels and Ship Owning be duly registered by the companies, and obtaining Registrar of Ships. “The law provides that the Certificate of Cabotage Registration/License, op- every vessel intended for erators with expired reg- use under the Cabotage Act istration certificates are must be duly registered in to ensure the renewal of the appropriate register and their Cabotage Operational the operational certificates Certificate/License for all be renewed annually. We Cabotage vessels within are out to ensure strict implementation of NIMASA’s three months. According to the agency, mandate under the law,” it would at the expiration of he said. Jamoh, however, stated the three months, notify relevant government authori- that NIMASA’s intention ties and International Oil is to build and continue Companies (IOCs) to stop to enhance the capacity of engaging vessels without Nigerians in the shipping invalid Cabotage certificates. dustry in line with relevant Speaking shortly after international regulations. AMAKA ANAGOR-EWUZIE

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L-R Adetoun Odubanjo-Odusote, content-business lead, Popcentral TV; Femi Taiwo, executive director, LEAP Africa; Ndidi Nwuneli, founder, LEAP Africa; and Ogochukwu Ekezie-Ekaidem, head of corporate communications and marketing, Union Bank ,at the annual Social Innovators Programme and Awards (SIPA) 2020 virtual conference organised by LEAP Africa and sponsored by Union Bank, in Lagos.

Nigeria loses N1.2trn to ASUU strikes …as university teachers spend four years at home on strikes JOHN OSADOLOR, ABUJA

Nigeria may have lost an estimated N1.2 trillion to strikes embarked upon by Academic Staff Union of Universities (ASUU) since 1999 when the country embraced democracy, BusinessDay has learnt. The amount, according to data seen by BusinessDay, indicates that the money was spent on university teachers in the nation’s public universities who went on strikes for a total of 19 times with a cumulative period of about 1,437 days, a few days short of four cumulative years, the data show. An analyst told Busi-

nessDay that this development led to the production of half-baked graduates who could not apply the knowledge acquired in the universities nor could be employed. A human resources analyst told BusinessDay at the weekend that most Nigerian universities’ graduates are unemployable because they are poorly trained and lacked the required minimum knowledge expected of their level of learning. The trend, according to the analyst, also led to many parents sending their wards to foreign universities at very high costs, and also causing a drain to the nation’s foreign reserves. The university lecturers who are currently on strike

since March 9, had gone on strike every year in the past 21 years with the exception of 2014 and 2015, the two years the teachers did not go on strike, the data show. Education experts told BusinessDay in Abuja that the four cumulative years could have been used to produce four-year circle graduates. There are 168 universities in Nigeria; the Federal Government has 43, states have 47 while the remaining 78 are privately owned by individuals and faith-based institutions. Available data indicated that the teachers have been on strike this year for 204 days, which is over seven months (March 9 till date).

The ongoing strike started on March 9, with a two-week warning. The indefinite strike, which commenced on March 29, according to sources at the National Universities Commission (NUC) is the longest in the history of ASUU strikes. The sources at the NUC told BusinessDay that the over N1.2 trillion lost by the Federal and state governments to the teachers’ strikes represented total emoluments paid to them during the period of the strikes, as the two tiers of government never invoked the provisions of the extant Act on “No work, No pay”. The amount covered the payment of staff in 43 Federal and 47 state univer-

Nigeria-Niger Republic rail line will boost economy - Amaechi GIFT WADA, Abuja

inister of transportation, Rotimi Chibuike Amaechi said on Friday that the idea behind the construction of the rail line from Kano to Maradin, in Niger Republic was economical and not political. Amaechi, who stated this in Abuja said that Nigerians should talk more on the employment opportunities the project would generate as well as imports and exports activities that would open up for Nigeria through the neighbouring countries. The minister said in a statement that “the decision to invest in Kano-Maradin rail line is purely economical, no politics, people are the ones politicising it. I made

that decision because there is a competition between the coastal states of Nigeria, Benin Republic, Togo, and Ghana. “The other three countries are able to move cargoes from these landlocked countries to their seaports for either exports or imports; they are able to do those businesses but we are not able to do them because the landlocked countries are complaining of crimes, the road are not safe in Nigeria, there is Customs’ interference, police checkpoints here and there. “Therefore, they find it difficult to do business in Nigerian seaports. So to be able to attract those cargoes, we decided to construct a rail line from KanoMaradin. Maradin is a village in Niger Republic and we will also build warehouses there to be able to attract cargoes from neighbouring countries and transport them effectively to

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Tin-Can or Apapa seaport for onward movement outside the country. “Nobody has talked about the employment this investment will generate; nobody has talked about the economic benefits, that we will raise funds for the country and that the economic interest is by far outweigh the current investment.” He, however, noted that it was the duty of the ministry to construct railways while the ministry of finance provides the fund to construct and also ensure that the loan was paid back, noting that they would definitely comply with the terms of the loans and pay back. He added that Nigeria would need about $36 billion to $40 billion to connect the whole country through the state capital with rail. @Businessdayng

“We have had debt forgiveness before but that is not the aim. Our aim is to be able to pay back and to pay back there are so many things we can do. We are constructing new seaports in Lekki, Bonny via Port Harcourt. We expect that money from there should go to the national till from which we can also pay back from. “We can also pay back if we begin to push manufactured cargoes to different areas of the country and run it efficiently to be able to generate some funds which we can also use to pay back. “If we don’t mismanage our crude oil investment, we should also be able to pay back from there, but what is critical is the cost of building this infrastructure now because it will not be the same in the near future if we don’t build now,” said the minister.

Monday 05 October 2020

BUSINESS DAY

news Reasons FG, developers rule out low-cost... Continued from page 1

property developers in the country have said. Though other housing sector stakeholders say building housesforlow-incomeearners is economically viable, government and these profit-driven investors insist that it does not make economic sense, citing cost of land, building materials and high interest rate. “If you want low-cost housing, where is low cost land, low cost cement, low cost doors and low cost labour to deliver low cost hous-

ing?” Babatunde Fashola, Nigeria’s minister for works and housing, asked at a media programme in Abuja recently. The minister explained that he had not been talking about low cost housing because “there is no low cost land; what government can do is to make the houses affordable and dignified.” Bamidele Onalaja, Lagos State chairman of Real Estate Development Association of Nigeria (REDAN), affirms, saying it will be difficult to have, for instance, a N2 million house on the market without the government providing the land. He stresses that land had remained a big factor in house production, hence the need for government to do more by providing free lands, which complicates the matter further as the government says there is no free land. According to the REDAN chairman, part of the reasons houses were costly in Nigeria was the price of land which, he explained, depended on location and building materials. This validates findings by the Centre for Affordable Housing based in South Africa, which notes that the lowest cost of a house produced by

a private developer in Africa at the cost of $8,000 (about N2,999,900) is affordable to only 26 percent of the urban population in Nigeria. At a press briefing recently, Ayodeji Ojo-Omoniyi, group executive secretary, Adron Homes and Properties, said his company would build affordable instead of low cost housing because they were in business to make profit and not to solve other people’s problems. Ojo-Omoniyi said their focus was on middle income earners to whom they deliver decent and quality houses and find ways of making the purchase easy for them through flexible payment plans and discount sales strategies. Tolulope Onalaja, executive director at RevolutionPlus Property Development Company, also explained why low cost housing was not possible in Nigeria, citing cost and time of property registration and documentation, calling for speedy processes for land titling and documentation, which still has no time frame to complete transactions. “In the United States, you can get your title under 48 hours, but it is different here; governor’s consent can take up to two years as there is no time frame; it is becoming a big challenge because you cannot get a time frame and relate same to Diasporan Nigerians that buy properties from developers like us,” she said. Continuing, she advised, “Government should give a time frame for getting titles and allow for more coordinated ways of searching and getting titles. Government still has a lot to do as regards the Omonile malaise, and property taxation, which is killing businesses. They should give tax holidays to companies and encourage private businesses that are still trying to survive.”

High cost, poor road infrastructure limit... Continued from page 2

Denca Bonded Terminal, states that during a recent visit to the terminal, that containers transferred to their terminal come with bills such as transfer charges to cover the cost of transporting it from the mother port to the bounded terminal using (barges and trucks). According to Asiadiachi, some containers leave the mother port with terminal storage charges, which must be paid by the operators of the bounded warehouses before the seaport terminal operators would allow them to move the container away from the seaport. Such payments and expenditure that are made in advance to seaport terminal operators, barge operators and truckers must be recouped by the bounded terminal owners from the cargo owners, he states. Confirming this, Lawrence Eboji, head of operations, Kachicares Resources Limited, an inland container terminal located in AmuwoOdofin, notes that bounded

warehouses do not collect any abnormal charges as most of the cargo owners complained. Eboji states that storage/rent charge usually originates from the mother port, especially if the bounded terminal, which the containers are allocated, is not able to lift the containers directly from the vessels but allowed it to overstay the rent free days in the terminal. He says most of the bounded terminals are working with seaport terminal operators to see to it that cargoes transferred to them are not entangled with storage charges. Meanwhile, the situation has been made worse with the ban placed on collection of transfer charges on containers moved to inland container terminals without the consent of the consignee and storage charges impose on such containers. Hassan Bello, executive secretary, Nigerian Shippers’ Council (NSC), says shippers are worried about the high cost of doing business at inland container terminals. www.businessday.ng

L-R: Tubosun Falowo, chief operation officer, Greenwich Merchant Bank; Olutoyin Okeowo, non-executive director, Greenwich Merchant Bank; Oba Otudeko, chairman, FBN Holdings; Tony Uponi, non-executive director, Greenwich Merchant Bank, and Benson Ogundeji, executive director, Greenwich Merchant Bank, during the official commencement of Greenwich Merchant Bank operations at the weekend in Lagos. Pic by Pius Okeosisi

Nigerian banks gather defences... Continued from page 1

percent to N152.7 billion in the first half of 2020 from N96.3 billion for the same period in 2019. Loans given out by these banks jumped by a combined 19.8 percent to N16.8 trillion in the first half of 2020 from a year earlier of N14 trillion. Inthefirsthalfof2020,combined profits for the banks

slumped by 1.99 percent from a year earlier, and combined return on equity fell to 80.34 percent from 92.92 percent for the same period in 2019. With a combined loan default provision to total loans given out of 0.88 percent, Nigerian banks seem to be showing optimism that the bulk of loans they gave out will not go bad. Why are the provisions for loan defaults increasing?

Provision for loan defaults is increasing because of the fragile state of the Nigerian economy, which has been hit this year by the twin shocks of Covid-19 and slump in global oil prices. Nigerian banks are creating higher provisions for defaults given the increased risk in the operating environment. The economy contracted 6.1 percent in the second quarter of 2020, as the virus took a toll on economic activity. The Purchasers Managers’ Index (PMI) indicates that Nigeria would sink into its second recession in four years by the third quarter. Periods of economic downturns affect the cash flow of businesses and tend to lead to higher loan defaults. Another reason for the jump in the provisions for loan defaults is the adoption of International Financial Reporting Standards (IFRS) 9 in 2018 by Nigerian banks.

Unlike the previous standard that was based on an incurred loss model, IFRS 9 is a more forward-looking standard that emphasises the need for banks to make adequate provisions on their expectations of loans that they project will go bad in the short to long term. What this means for banks Increases in the provisions for loan defaults will put a downward pressure on the profits of banks till the end of the year, according to analysts. This could be a warning sign for the banks that have to continue to give out loans based on the mandate by the Central Bank of Nigeria (CBN) to give 65 percent of their deposits as loans. “Nonetheless, when you look at the fact that many banks have been taking advantage of the credit facility restructuring approved by CBN, it is possible that Non-Performing Loans (NPLs) for the

rest of the year may not reach the height they were in the last recession in 2016,” Gbolahan Ologunro, a research analyst at CSL Stockbrokers, states. “On a short-term basis, therefore, there is a likelihood of seeing a gradual deceleration of the provisions for loan default to 30-40 percent yearon-year as the economy tries to stabilise as away from the initial impact of twin shocks on the economy,” Ologunro says. What it means for individuals and businesses If the banks have to keep increasing provisions for loan defaults, then there is a chance that the number of approved loans will decrease as banks would have to manage their risk exposure. The Credit Conditions Survey Report for the second quarter of 2020 reveals that banks are already tightening their credit scoring criteria and as such saw a surge in the credit available to households and corporates.

Nigeria urged to tighten security ahead... Prices of facemasks, sanitizers... Continued from page 2

developed to assists Custom administration in tracking and facilitating transparency and accountability. Speaking further, he notes that the warehousing around the buffer zones be destroyed as it has been established that it serves as a conduit pipe for smugglers. He expresses concern that Nigeria’s ‘big brother’ kind of approach has not paid off, noting that the country is suffering from insurgency, banditry, insecurity and smuggling. “We need to be strict. Customs must stand up strongly to man the borders; there should be strong security presence at the border site, strict implementation of the rules on Nigerian side. That would help in checking other criminal activities, like the influx of people and goods into the country,” he states. Tony Ejinkonye, a former president of Abuja Chamber of Commerce and Industry, notes that the government needs to strengthen surveillance to avoid influx of smuggled goods. “The government needs to get emphatic commitment from our West African neigh-

bours and specific penalties if the protocols are violated. No country should become a conduit for smuggling into Nigeria. Nigeria must stand up on this,” he stresses. The current president of the Abuja Chamber of Commerce and Industry, Adetokumbo Kayode, on his part observes that “nothing has changed since the borders were closed. “Why do we always like to blame our problems on others? Even as we speak, our border post at Seme is demarcated with a rope.” Kayode, who notes that it is the responsibility of the government to secure the borders and protect its citizens against harmful practices, states, “Government must take the blames for its failures,” noting, “it was not smart of government to have closed the borders in the first instance. “The questions we ask government are, 13 months after the border closure, what have we done differently? What has changed? Have we successfully reformed the Customs, is our border more secured now, or can we confidently say that we have checked the incidence of smuggling?

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ucts were described as outrageous. A leading pharmacy at Bwari, Abuja, sold a pack of facemasks for N20,000 in April-July, but now sells it for N6,000. The same product was sold for N30,000 at another big pharmacy in the Central Business District, but now goes for N6,500 at the same store. A sales manager in one of the Bwari pharmacy store, Wisdom Onuoha, described the business of facemasks as the business of billionaires, but said it had now declined significantly because the supply was far higher than the demand today. “Surgical facemasks were something else then. A single mask was sold for N500 to N1000, depending on the purchasing power of the buyer, but it has crashed to N100,” he said. The prices of face shield have also crashed. A petty trader at Wuse area of Abuja, Praise Abiodun, said she sold her face shield for between N4,000 and N5,000 because of the high demand for it in April to July, but now sells it for less than N500 because consumers are not willing to buy face shields any more at @Businessdayng

that previous price. “During the pandemic, I usually bought these face shields for 1,200 or N1,500 and would sell for N4,000 or N5,000. But now, I sell for as low as N300. The cost price has also dropped; you can get these shields for N200,” according to Abiodun. Another essential commodity was the hand sanitizer. A pharmacy store at Gwarimpa, Abuja, said it sold hand sanitizers for N10,000 during the peak of the Covid-19, but the price has now dropped to N2,000. “We don’t even have and we don’t even care about getting it again, because it will tie down your money,” Jacob Yakubu, a sales attendant at another pharmacy at Bwari, Abuja, said. The prices of Infared thermometers in Abuja has also dropped from N100,000 at the peak period to N10,000. The prices of Vitamin C and Zinc, and even fruits such as lime, oranges and peer and other foods that boost the immune system are not left out. A pharmacist in an Abuja store, Ifeanyi Onyekwere, said his store started witnessing a drastic decline early August when lockdown restrictions were eased further.

Monday 05 October 2020

BUSINESS DAY

abujacitybusiness Comprehensive coverage of Nation’s capital

Breach of contract: Reps visit NAF invaded property in Rivers James Kwen, Abuja

L-R: Tony Okpanachi, MD/CEO, DBN; Bayo Olugbemi, president/chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN); Patrick Akinwuntan, chairman, conference planning committtee/CEO, Eco Bank Nigeria, and Femi Pedro, former deputy governor, Lagos State, during the 13th annual banking and finance conference, theme ‘Facilitating a Sustainable Future: The Role of Banking and Finance’ in Abuja recently. Picture by Tunde Adeniyi

Flood: FCTA to seek assistance of Ecological Funds Office ... As Minister donates 50 cooking gas, mattresses

James Kwen, Abuja

he Federal Capit a l Te r r i t o r y Administration (FCTA) has disclosed plans to approach the Ecological Funds Office for assistance to tackle the flood disaster ravaging the nation’s capital. FCT Minister of State, Ramatu Aliyu made this known during donation of 50 pieces of cooking camp gas, mattresses and assorted food items to victims of flood disaster in Trademore Estate, Lugbe area of the Abuja Municipal Area Council and Kwali Area Council respectively.

Aliyu who warned FCT residents to stay off waterways, however commended occupants of Trademore Estate for demonstrating maturity and sense of patriotism during the disaster, stressing that governance is a collective responsibility. She said: “I came this afternoon bearing in mind all that has happened to residents of this estate. Despite my tight schedules, I still finds it pertinent to come here in person to commensurate with you over the loss of life of our brother and the wanton destruction of property. “ I a m h e re t o a l s o appeal to you as much as possible before any

intervention from Ecological Funds office or any relevant government agencies to stay clear of water ways. Certainly, this year’s rain not only in Trademore is very heavy with colossal damages associated with it. This also tells us to appeal to our brothers in this estate and other parts who have constructions along the water-line to move to higher ground for now. “One, it is better to be alive. This is not time to trade blame over who construct what on the waterways. But we are appealing that if you are along the waterline, you have to move before something else happen to you.

“So I want to appeal to you that natural disaster do happen without advance notice. It is not within your power or that of government. We feel your pains and we know what it means to loss a life. I want to also thank you for your patience and understanding with the government and the situation we find ourselves in”. Earlier, the Chairman of Trademore Estate Phase 3, Adewale Adenaike commended the Minister for her prompt response to the flood victims, and called on the FCT Administration to address the situation urgently before it gets out of hand.

Nigeria at 60: China awards N4.9m scholarship to Abuja Varsity students Godsgift Onyedinefu, Abuja

he Chinese Government has awarded N4.9 million scholarship to 49 students of the University of Abuja in commemoration of the 60th Independence anniversary of Nigeria. The beneficiaries which comprised seven post graduate students and 42 undergraduates were chosen on the basis of equity, gender, accademic performance with one from each state of the federation and the Federal Capital Territory (FCT). Zhao Yong, Charge D’ Affaires of the Chinese Embassy in Abuja who

presented N100,000 cash to each beneficiary said the award was to commemorate both the country’s Independence anniversary on October 1, as well as years of friendship and bilateral relations between the two countries. “October 1 is our joint holiday and October 1 marks the 60th anniversary of the Independence of Nigeria, as well as the 71st anniversary of the founding of the People’s Republic of China. “Celebrating October 1st together constitutes a unique bond between China and Nigeria. I wish to express my warmest congratulations to the 49 winners who are rewarded www.businessday.ng

with the October 1 awards and I hope you together with your peers will carry on China-Nigeria friendship and become goodwill ambassadors of our two people”, he said. In his remarks, Vice Chancellor of the University, Abdurrasheed Na Allah, expressed gratitude to the Peoples’ Republic of China for the gesture and assured the country of the institution’s partnership. Na Allah charged the beneficiaries to utilise the scholarship judiciously by ensuring that they excel in their academics and contribute to the development of Nigeira. The Vice Chancellor while noting that the University has benefitted

tremendously from the generosity of China, disclosed that the institution will soon launch a new accademic programme in B. Eng Degree in railway engineering largely due to China’s support. “As I speak today, we have received quite a number of equipment, some are still in the Apapa Port in Lagos that are coming to us, we are working with two institutions in China and these institutions have been here severally, several of our staff have also gone there for training. Recently we finished an online training, so we are working together for the future of this country”, he said.

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he House of Representatives joint Committees on Airforce and Justice have embarked on an oversight function to carry out on the spot assessment on the alleged excessive use of force by the Nigerian Airforce Property against Blue Boulevard Nigeria Limited, Port Harcourt, Rivers State. This is coming months after the House had in a petition by Blue Boulevard promised to wade into the matter to see that issues are resolved amicably by parties involved. The Company is accusing the Nigerian Airforce Property ofusingexcessiveforceandmilitary might against it and reneging in a contractual agreement they had to build a shopping mall at the Mami Market in Port Harcourt, Rivers State. The tour had the presence of the both parties with the Committee demanding for the bid of quantities, engineering drawings and joint evaluation report tendered. In his opening speech the leader of the delegation, Dekor Robinson (PDP, Rivers) promised to be fair and transparent in their report. He said: “The reason why we are here is to visit the site and this is in furtherance of duties as it affects this particular investigation as it affects the House. “Whatever we are going to do here will form part of our report to be submitted to plenary. So what we expect from you is to give us the best cooperation so that we can address this issue and have a permanent resolution to this particular problem “Our mission here is mere

fact finding so I crave your indulgence to give us the best in terms of contributions. After the inspection I will expect we also sit briefly to address one or two issues before we depart. ‘’The Managing Director of Blue Boulevard said 640 shops for cluster one are all sold out with occupancy rate of about 20 percent”. But the Managing Director of NAF Property, AB Bagari (Air Vice Marshal) said the clusters do not represent completion, adding that at the point of agreement the completion of the project is the point it is tenable. The Managing Director of Blue Boulevard Nigeria Limited, Peter Osunde noted that the ongoing project was halted following the invasion of the Military in March 2017. He also noted that NAF Property had written to them in October 2017 to negotiate for an out of court settlement but they did not do the needful and took them on a merry go round while a N3 billion loan taken from First Bank continued to increase. Recall that a Federal High Court in Port Harcourt had ordered men of the Nigerian Airforce to vacate the premises of Blue Boulevard limited, a multi shopping complex in Port Harcourt. Justice Hillary Oshomah who gave the order in an application filed by Peter Osunde ( 1st Applicant , Blue Boulevard limited (2nd Applicant) against Nigerian Airforce Property Limited said the continued stay of men of the Airforce at the business premises was ultra vires and beyond her statutory responsibilities.

Military rehabilitates 28 schools, 14 clinics, commissions 81 boreholes Godsgift Onyedinefu, Abuja

n addition to its ongoing kinetic operations, the Nigerian military has renovated 14 schools, 14 clinics and commissioned 81 boreholes across the country in the last three months. John Enenche, Co-ordinator of Defence Media Operations (DMO) who disclosed this in Abuja, also said the military constructed road, installed transformer and solar power equipment, rehabilitated two worship centres to some host communities, in the period under review. The Co-ordinator said this is part of the Civil Military Cooperation Activities (CIMIC) of the armed forc@Businessdayng

es, adding that the military also fostered several stakeholders and reconciliation meetings between hostile communities and carried out medical outreaches in host communities. Ennenche also noted that troops carried out land, maritime and air operations across the various theatres of operation including; clearance, ambush, air patrols, offensive air strikes, air interdictions, anti-crude oil theft antipipeline vandalism operations, anti-smuggling operations, among others. This, he said resulted in the death of atleast 869 terrorists and bandits, rescue of hudreds of kidnap victims, destruction of over 70 illegal refineries in the country, among several other successes.

Monday 05 October 2020

BUSINESS DAY

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A2 BUSINESS DAY

Monday 05 October 2020

NEWS

Banks resort to cost-cutting as macroeconomic uncertainties affect revenue BALA AUGIE

ith declining yields, string e nt re g u latory environment coupled with the impact of the coronavirus pandemic that heightened macroeconomic uncertainties, banks are leaning on cost-cutting to achieve their goals. Data gathered by BusinessDay show that in the past four years, largest lenders in Africa’s largest economy spent a combined N1.19 trillion on staff, while they expended N3.64 trillion on other operating expenses. A breakdown of the figure into individual component indicates combined personnel costs increased by 6.60 percent to N269.52 billion in June 2020 from N252.81 billion the previous year. However, other operating expenses were up 16.58 percent to N626.48 billion as at June 2020, as lenders grapple with enlarged franchise, rising inflation, and currency devaluation. They are also reeling from huge overhead cost, which means they spend a lot of money on diesel fuel to run

head office and branches across the country. Regulators induced cost like Asset Management Corporation of Nigeria (AMCON) charge that varies with total assets is increasingly becoming large cost components. In the last four years, staff costs have been growing at single digit, as banks are beginning to tackle their costly and top management structures so as to boost efficiency ratio or bolster return on equity. The total staff strength of the banking sector declined by 9.50 percent year on year (y/y) and 2.60 percent quarter on quarter (QoQ) to 94,498 persons according to latest data by the National Bureau of Statistics (NBS). Analysts say banks will have to seek regulatory approval before they embark on reduction in headcount, and it is unlikely the central bank will grant such approval at time that unemployment rate is at 27.10 percent. “I think a number of them have streamlined operations. We have seen the closure of branches that will enable them cut cost, especially cost of power,” said Gbolahan

Ologunro, equity research analyst at CSL Stock Broker Limited. Ayodeji Ebo, senior economists/head of research and strategy, Greenwich Merchant Bank, said since the cost of doing business has increased on the back of foreign exchange devaluation, banks’ operating cost will definitely go up since they are a part of the economy. He added that companies should consider the review of workers’ salaries because inflation has already eaten deep into disposable income. “Banks will incur more cost given the challenging environment. So far this year, they have been able to take advantage of foreign exchange revaluation gains,” said Ebo. The coronavirus pandemic has exposed banks to rising bad loans because customers were unable to service interest payment during the four months lockdown period. This means future profit could be pressured, while the reduction in charges and very low yields on short term government securities will continue to crimp interest income and noninterest revenue.

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Monday 05 October 2020

BUSINESS DAY

NEWS

Industry Group, BusinessDay host dialogue on taxation, development of non-oil sectors DIPO OLADEHINDE

T L-R: Adebola Aina, deputy director, Nursing Services; Yejide Kolawole, director legal, LASUTH; Caroline Oghuma, head, corporate affairs, MultiChoice Nigeria; Adetokubo Fabamwo, chief medical director, LASUTH; Akaoma Onyeonoru, CSI executive, MultiChoice Nigeria; Ibrahim Mustafa, director, Clinical Services & Training, LASUTH; Kehinde Gbajumo, director, Hospital Administrative & Human Resourses, and Ajofoyinbo, head, Audit Unit, during the presentation of protective gear and face masks to Lagos State University Teaching Hospital (LSUTH), in Lagos.

Stop-gap measures won’t drive economic sustainability - experts HARRISON EDEH, Abuja

ndustry stakeholders have submitted that the adoption of stop-gap measures by the government in driving Small and Medium Enterprise (SME) development would not bring about sustainable growth and development in that economic subsector. They urged the government to initiate a sustainable funding options and clear-cut sectoral policy for SMEs’ development to drive wealth creation. The Nigerian government has at various occasions initiated intervention funds for the SME sub-sector, which analysts said were not a viable economic option for a sector touted as the engine of Nigeria’s economy. For instance, the Federal Government last month launched an SME survival fund of N75 billion, informing further that the survival fund was targeted at 1.7 million entities and individuals across the country, whereas Nigeria has over 40 million SMEs. “We are largely an SME

country. How many Dangotes do we have? We must stop pretending that we’re not an SME country. The funding option must be sustainable and reliable to drive wealth creation and lessen the burden of unemployment,” Adetokumbo Kayode, president of Abuja Chamber of Commerce and Industry, said in an exclusive conversation with BusinessDay. According to Kayode, “we really must have to put together coordinated efforts in driving SME growth. That is what most countries are doing and that is why there is an enterprise bank which we’ve advocated to the Central Bank of Nigeria since the past four years,” Kayode further argued: “This enterprise bank ought to come in form of a public-private partnership arrangement such that there could be special interventions, special interest rates, and other things could be captured in the bank. I know the whole idea is what gave rise to the NIRSAL microfinance bank but it is still being run like the government stuff with lots of things still grey and not so clear.

He emphasised that the hand-out mentality and interventions would not work for SME development, noting that the way forward was an SME bank that involves the organised private sector. “The way forward which would comprise of Nigerian Association of Chambers of Commerce, Industry Mines and Agriculture (NACCIMA), Nigeria private sector alliance, Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), National Association of Nigerian Traders (NANTS) as recognised organisations could pull their membership and track any lending and proper revolving of loans that would cover many people. Also, Celestine Okeke, lead partner, Small and Medium Scale Advocacy Initiative and associate consultant to the British Department for International Development, (DFID), expressed concern on how the unsustainable programmes and poor institutional capacity dragging Nigeria’s leap in SME development. Making further sugges-

Aquila Leasing appointed as MTN Nigeria’s fleet management technical partner AMAKA ANAGOR-EWUZIE

quila Leasing Limited (Aquila), an indigenous leasing firm, has been appointed as Fleet Management Technical Partner by MTN Nigeria Communications Plc, a leading telecommunications operator. A statement signed by Boniface Ekong, company secretary has said. According to the release, a copy of which was made available to BusinessDay, the appointment will involve the management of existing vehicles, and acquisition of over 500 new operational vehicles for MTN to enhance effective and efficient service delivery; and to continue its positive contribution to the Nigerian economy through the creation of job opportunities, and an increase in the gross domestic product (GDP).

The fleet management service contract, which is for an initial five-year term, is aimed at enhancing MTN’s operations, logistics, equipment and staff commuting. “The partnership will create over 2000 job opportunities, ranging from relationship managers, fleet administrators, drivers, mechanics to many other operational stakeholders. It will also open more opportunities to a host of business entrepreneurs who will be involved in the value chain that the contract covers,” Ekong said. The statement noted that Aquila offers similar services to other multinationals across different sectors of the Nigerian economy, including companies in the FMCGs, Financial, Oil and Gas, and Communications sectors. It also offers leasing services to state governments, cooperative organisations and www.businessday.ng

SMEs. Aquila gained the market reputation as a specialised full-fledged leasing company following its excellent performance over the years. Currently, Aquila ranks amongst Nigeria’s top independent lease operators and is the market leader in fleet management. The company currently has over 1000 vehicles under its management, and with the new MTN partnership, the number of vehicles will increase to over 1,600. It operates nationwide using three regional offices in proximity to its customers, and has its presence in all the states. According to the statement, “Aquila will leverage on its proficient fleet management experience garnered over the years to help transform MTN’s fleet management, overall positive impact on the telecoms sector and add value to the Nigerian economy.”

he Telecommunication and Technology Sustainability Working Group (TTSWG) in partnership with BusinessDay Media Limited, plans to host an industry conversation expected to address the country’s economic recovery and sustainability of organisations from a tax perspective against the backdrop of the global coronavirus pandemic and the resulting economic downturn. The w ebinar themed “Fast-tracking Economic Recovery through Robust Tax Policies and Practices” slated for October 9, 2020 will feature speakers such as Ben Akabueze, directorgeneral of Budget Office and Muhammad Nami, chairman of Federal Inland Revenue Service (FIRS). Other experts confirmed to join the conversations are Taiwo Oyedele, fiscal partner and West Africa tax leader at PwC Nigeria, Gbenga Adebayo, chairman, Association of Licensed Telecommunications Operators in Nigeria; and Olusola Teniola, presi-

dent, Association of Telecommunications Companies of Nigeria (ATCON). A combination of dwindling oil prices and global supply chain disruptions, pose a serious threat to Nigeria’s economic sustainability due to heavy revenue exposure to the oil and gas sector. The dialogue will, therefore, explore how organisations can support the government through the postpandemic phase beyond tax remittances whilst also discussing exhaustively opportunities for innovation, collaboration, and progressive regulatory practices. The option is to focus on the non-oil sectors and give it optimal attention such as the manufacturing, agriculture, information technology, and most importantly the SME sector which can drive job creation, improve industrialisation, increase GDP performance, and play a crucial role in the process of economic growth. Significantly government needs to consider widening the tax net of the country. Experts are expected to come up with ideas to unlock

opportunities in the non-oil sector which many argue can set the pace for real economic growth if the government takes needed steps to implement them. The non-oil sector of the Nigerian economy can generally, be described as those groups of economic activities which are outside the petroleum and gas industry or not directly linked to them. These include: telecommunication services; financial sector (banking and insurance) services; tourism service (hotels, restaurants, parks, carnivals, movies); wholesale and retail trade; Health services; export trade; agricultural activities; mineral activities; power(conventional and renewable); Manufacturing; environmental services among others. Expected to participate in the dialogue are government agencies, ministries of finance, industry, trade and investments, federal and state internal revenue agencies, telecommunications and technology regulators, corporate organisations, and industry experts, among others.

World Teachers’ Day: Nigeria needs better support for teachers post COVID-19 KELECHI EWUZIE

igeria’s teaching profession is bedevilled by poor remuneration and training, lack of interest in teaching, among other things that need to be addressed as Nigeria joins the rest of the world to mark the World Teachers day on October 5. Every October 5, since 1994, UNESCO has celebrated World Teachers’ Day (WTD) to commemorate the anniversary of the signature of the 1966 International Labour Organisation/UNESCO recommendation concerning the status of teachers. The day is the occasion to celebrate the teaching profession worldwide; to take stock of achievements, raise awareness on the challenges facing teachers, and highlight their role towards the attainment of global education targets. This year, the celebration revolves around the theme “Teachers: Leading in crisis, reimagining the future.” It is an opportunity to address the role of teachers in the education system, and the society in general, as the world grapples with the Covid-19 crisis. Educationists observe the pitiable state of the teaching profession in public primary and secondary schools, characterised by poor teacher welfare, leading to low level commitment to teaching;

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poor attitude to life-long learning which makes it difficult for them to update their knowledge and teaching methods; weak capacity in using exciting teaching strategies to boost academic performance. There is also the absence of an academic standard that will develop teachers to be at par with their counterparts globally. The Federal Government has not spent up to 15 percent of its total budget on education in the last 10 years. The highest allocation so far was in 2008, when it allocated 13 percent. Concerned educationists observe that while the topic of leadership has been somewhat neglected amongst the multitude of issues facing the teaching profession in the push towards achieving SDG 4, the issue is not just timely, but critical in our time of pandemic response. The contributions that teachers have made to provide remote learning, support vulnerable populations, re-open schools, and ensure that learning gaps in the curriculum are bridged are outstanding. Oladapo Olarinmoye, managing director, Bridge Nigeria, said “teachers play a significant role in shaping young people’s lives and the future of their countries so it is the most important job in the world. “Every teacher needs adequate support and profes@Businessdayng

sional development and many teachers are not getting that,” Olarinmoye said. In sub-Saharan Africa countries the average teacher does not perform better on reading tests than the highest-performing grade 6 or 12-year-old pupils. In six of such countries, 40 percent of primary school teachers are not as knowledgeable as their pupils. According to the World Bank, teachers in low and middle income countries often lack the skills or motivation to teach effectively. This lack of quality teaching is linked to poor outcomes, school drop-outs and long term out-of-school children. Covid-19 has significantly added to the challenges faced by already overstretched teachers. To date, at least 63 million primary and secondar y teachers alone have been affected by the pandemic. In response to the crisis, the International Task Force on Teachers for Education 2030 released a Call for Action on Teachers which, among other things, advocates for teacher participation in short, medium, and long-term planning and policymaking as we move forward. Ejike Uchechukwu, an education analyst told BusinessDay that the issue of teachers’ welfare is so serious that any forward looking country should take serious effort to resolve.

Monday 05 October 2020

BUSINESS DAY

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Monday 05 October 2020

BUSINESS DAY

RESEARCH&INSIGHT

In association with

A WEEKLY PUBLICATION OF BUSINESSDAY RESEARCH & INTELLIGENCE UNIT(BRIU)

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Making LPG affordable to more households in Nigeria NAOMI MBAMA

he use of cooking gas over the years has witnessed a steady progress as many households have left behind the use of kerosene stoves and firewood for a healthier and more economical method which is the cooking gas. Though, there has been an increase in the number of households using cooking gas, the percentage of households employing this means of cooking still doesn’t match up to the amount of cooking gas being produced in Nigeria. For instance, in the latest statistics published by the National Bureau of Statistics (NBS), captured under Nigeria Living Standard Survey 2018-2019, the nation’s data agency reported that 51.5 percent of Nigerian household cooked with 3-stone/open fire, and the rural area having 70.8 percent of their households using this mean of cooking. Compared with LPG usage, only 17.1 percent of the households in the country use LPG for cooking. Its usage is dismally poor in the rural area where only 5.1 percent rural households were reported to be using LPG. Based on available data, Nigeria is the largest producer of cooking gas in Africa, but not one of the top consumers of this cooking gas, as most households are still heavily reliant on kerosene stoves. The year-on-year graph shows the growth in price of cooking gas across the thirty-six states in Nigeria between August 2019 and August 2020. It can

Source: NBS

be seen from the above graph that majority of the states saw a decrease in the price of cooking gas, while some of the states saw an increase instead in the price of cooking gas within this period. In comparing the various quarters, however, the average price of cooking gas as at December 2019 was N4,176.20 and at the first quarter of the year 2020, it was N4,180.68, showing that there was a marginal increase in the price of cooking gas by 0.11%. The average price of gas in the second quarter of 2020 however was N4,145.87 showing a decrease in the price of cooking gas between the first quarter and the second quarter by 0.83% and a decrease in price of cooking gas between December and the second quarter by 0.73%. The highest average price for cooking gas in 2020 was in March at N4,181.22, while the lowest average price of cook-

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ing gas was recorded in July 2020 at N4,126.82. The drop in the price of cooking gas around the second quarter could be attributed to the lockdown that ensued due to the coronavirus pandemic, as demand for cooking gas reduced. The top ten states that

experienced growth in price of cooking gas between August 2019 and August 2020 were Niger, Delta, Taraba, Ebonyi, Edo, Nasarawa, Lagos, Kogi, Anambra and Borno. Niger State, with a growth rate of 3.93%, recorded the highest growth rate in LPG price and it was followed by Delta with a growth rate of 2.14%. Taraba State saw price increase to the tune of 1.91%; Ebonyi, 1.48%; Edo, 1.45%; Nasarawa, 1.14%, Lagos, 0.90%; Kogi, 0.78%; Anambra, 0.53%, and Borno with a growth rate of 0.21%. Amongst all the states in Nigeria, the three states that had the highest average price of LPG in the first quarter of 2020 were Cross River, Akwa Ibom and Bayelsa. Cross River had an average price of N4,678.11; Akwa Ibom had an average price of N4,670.62, and Bayelsa had an average price of N4,679.62, while the states with the lowest average price in the first quarter were Kano, Zamfara and Kaduna N3,716.67 in the first quarter of 2020 while

Zamfara and Kaduna had N3,768.79 and N3,823.17 respectively. In the second quarter of 2020, Cross River, Bayelsa and Akwa Ibom emerged as the states with the highest average price of cooking gas. Cross River had an average price of N4,612.99 as it experienced a decrease of 0.08% from the previous quarter’s price. Bayelsa had an average price of N4,609.99 as it experienced a decrease of 1.46% from the previous quarter’s price, and Akwa Ibom had an average price of cooking gas of N4,596.46 leading to a decrease of 1.59% when compared with the previous quarter’s price. Unlike the top 3 states of the first quarter which remained the same for the second quarter, the last three states for the second quarter in terms of average price changed. They were Oyo, Lagos and Zamfara. Oyo had an average price of cooking gas at N3,777.54; Lagos had an average price of cooking gas at N3,836.12, and Zamfara had an average

Source: NBS

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price of cooking gas at N3,841.89. Over the years, the federal government has continually subsidized kerosene, making it cheaper than the cooking gas, and so, a huge hindrance to the growth of cooking gas. The government also put in placed harsh tariffs and tax policies on cooking gas and its related equipment, making the product quite expensive. Other than the taxation and tariff policies, the government also put in place very strict conditions on the certification to import LPG equipment. Importers of LPG equipment are made to pay the flight and accommodation fees for government agency workers to inspect the standard of the equipment to be imported, according to information gathered from Energy Mix Report, an online energy publication, news service and resource centre for petroleum industry professionals. During importation they are made to pay a percentage as the import charge. These caused the importers of cooking gas to increase prices so at to make profit, making cooking gas expensive. As such, to solve the problem of high price of cooking gas, the government would have to get involved. The tariffs and taxation policies would have to be relaxed. Subsidies be made available for importers of cooking gas related equipment such as gas cylinders, etc. The conditions for certification to import would also have to be relaxed, so as to reduce the burden of importers and the eventual cost of the cooking gas.

Monday 05 October 2020

BUSINESS DAY

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Monday 05 October 2020

BUSINESS DAY

REAL SECTOR WATCH

Drug makers shine as COVID-19 boosts margins, raises prospects GBEMI FAMINU

OVID-19 has become a blessing in disguise for Nigeria’s drug makers as the pandemic shot up their revenues in the second quarter of 2020. In the last five second quarters (Q2), the revenue of the second quarter of 2020 appears to be the largest, BusinessDay found. The affected drug makers are May and Baker (M&B), Fidson and GlaxoSmithKline plc (GSK). Collectively, the three d r u g m a k e r s re p o r t e d revenue of N22.47 billion in Q2 of 2020, from

N13.06 billion recorded in Q2 of 2016. The three firms reported revenues of N18.49 billion in Q2 of 2017; N20.48 billion in Q2 of 2018; and N21.19 billion in Q2 of 2019, BusinessDay analysis of their financial reports has shown. Their collective revenue in Q2 of 2020 shows an increase of six percent from that of Q2 of 2019. According to analysts, the growth recorded in the industry stemmed majorly from the impact of the pandemic which forced a change in the lifestyle of people, thereby pushing consumers to spend more on drugs to keep them safe and healthy. In addition, the pandemic also saw a rise of

Source: NSE, BusinessDay

over 50 percent in the prices of drugs and medical supplies, they said. Ambrose Oruche, acting director general, Manufacturers Association of Nigeria (MAN), said that

Unitellas partners Zadara to boost data safety for manufacturers, service providers ODINAKA ANUDU

nitellas International Limited has partnered Zadara to help manufacturers, service providers, financial institutions and government store their data locally and properly manage their IT infrastructures. The partnership is targeted at empowering all service providers in Nigeria to meet international standards with regard to data storage infrastructure, service, pricing and security. Speaking at a press conference held in Lagos recently, Smith Osemeke, managing director and CEO of Unitellas International Limited, said local service providers in Nigeria would not be able to compete with international cloud service providers in terms of infrastructure, pricing, service delivery and management. This, to him, has caused a lot of companies in Nigeria to patronise international public cloud service providers by storing data from Nigeria in other countries, thereby making it impossible to comply with the Local Content Law. He said financial service institutions (FSI), manufacturers and other key organisations often invested millions of dollars annually in acquiring and managing IT Infrastructures instead of focusing on their core businesses because they must have an IT department that should build and manage their data storage infrastructure. This service, he said, should be handled by local service providers in Nigeria.

the pandemic gave room for essential items such as food and drugs to thrive. “The pandemic period gave room for essential products which were necessary at that time, espe-

cially the food and healthcare subsectors,” Oruche said in a phone interview. Fi d s o n p h a r m a c e u ticals made revenue of N7.37 billion in 2019. However, in 2020, the firm grew its revenue by 11 percent to N8.2 billion with significant contributions from its ethical unit worth N4.6 billion and its over-the-counter goods of N3.5 billion. M&B’s revenue de cline d by a marginal one percent, after realising N3.84 billion in Q2 of 2020, as against the N3.86 reported in the corresponding period of 2019. It made its largest sale from pharmaceuticals which contributed N3.8 billion to its revenue. Its gross profit stood at

Wemy launches facemasks, PPE in fight against COVID-19 ODINAKA ANUDU

W L-R: Blessing Omo, director of operations, Unitellas; Amos Maisamari, company secretary; Smith Osemeke, MD/CEO, and Vijay Gurav, technical consultant to Unitellas, during a press conference on Zadara’s data storage solutions in Lagos recently.

If this sad narrative is not corrected, he said, sensitive data from Nigeria would continue to be stored outside the country, leading to data insecurity. “Unfortunately, Nigeria is one of the countries lacking data security due to the inability of service providers to effectively store and protect data locally,” he said. Osemeke noted that Unitellas was ready to change this narrative in Nigeria to ensure that data used by organisations were properly protected. He noted that Unitellas was the official distributor of Zadara solution in Nigeria, adding that the partnership would provide local service providers with infrastructureas-a-service and enterpriseStorage-as-a-service model which eliminate huge capital expenditure (CapEX) with minimum operational expenditure (OpEX). “By subscribing to Zadara Data Storage services with Compute Capability, local service providers and www.businessday.ng

MSPs can now offer data storage and compute services with the latest data protection mechanism, competing effectively with renowned public cloud providers in infrastructure, security, pricing, management and service,” he noted. He further said that Unitellas was willing to migrate all existing data of organisations willing to subscribe to Zadara platform without fee. “The hardware will be installed in the agency or organisation’s data center to enable them protect the data with storage immutability at no infrastructural cost, but payment is based on actual usage,” he stated. He said that as the sole distributor of Zadara Storage Solution in the region, Unitellas was willing to implement immutability storage, enterprise sata as-a-service, infrastructure as-a-service to all government agencies and service providers in Nigeria with no infrastructural cost, only pay by consumption.

N1.45 billion, representing a 19 percent growth from N1.22 billion in 2019 while its profit after tax stood at N407 million after a 48 percent increase from the N275 million realized in 2019. GSK recorded an increase of 5 percent in its revenue, moving from N9.96 billion in 2019 to N10.43 billion in 2020, after making N7.5 billion in sales and N1.59 billion in profit from pharmaceutical products sold. Its gross profit dropped by 7 percent to N2.7 billion from N2.9 billion in 2019 while its profit for the period stood at N447 million after a 16 percent drop from the N531 million it made in 2019.

emy Industries, the manufacturer of Dr. Brown’s and Nightingale range of products, has started the production of facemasks and hand sanitizing wipes. The company started this journey on October 1. The addition of these new hygiene products into Wemy’s production line is in response to the shortage of Personal Protective Equipment (PPE) in the country, Wemy said in a statement sent to BusinessDay. “The increased risk of infection, especially to health care workers who are highly susceptible to contracting the virus, motivated Wemy Industries to partner with the Mastercard Foundation COVID-19 Recovery and Resilience Programand Wema Bank,” the company said. Through the partnerships, Wemy Industries will provide PPE to health personnel, first responders, frontline workers, isolation centres, hospitals, and other relevant organizations around the country. The project will also include the donation of 7.8 million masks to healthcare centres supporting

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Paul Odunaiya

the medical needs of the most vulnerable for the duration of the pandemic. “With the support of the Mastercard Foundation, Wemy Industries will be able to produce and distribute 13 million surgical face masks and 400,000 packets of hand sanitizing wipes per month for the domestic market. In addition, through its distribution channels, it will be able to directly reach many of the frontline healthcare workers in Nigeria,” said Chidinma Lawanson, country head, Nigeria, Mastercard Foundation. In line with the recommendation of the Center for Disease Control and Prevention (CDC), Wemy Industries will pro-

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duce alcohol-based hand sanitizer and quality 3ply facemasks that filter out airborne particles and tiny droplets to ensure maximum safety. “With the use of facemask and hand sanitizer already established by the World Health Organisation as critical equipment in preventing and minimising the spread of COVID-19, we hope that the commencement of our new production line will have an impact countrywide,” said Paul Odunaiya, managing director, Wemy Industries. “We considered many factors in the roll-out of this project, including pricing, market size, longterm sustainability, and the import substitution policy of the federal government. However, our overriding motivation is the positive impact that it will have on the healthcare sector as it fights to prevent the spread of COVID-19,” added Odunaiya. Wemy Industries is a hygiene company that pioneered the indigenous m a n u f a c t u r i n g o f D r. Brown’s baby diaper and Adult Diaper in Nigeria. On the other hand, The Mastercard Foundation works with visionary organisations to enable young people in Africa and in Indigenous communities in Canada to access dignified and fulfilling work.

Monday 05 October 2020

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A timeline of the facts in Alta Semper, Health Plus case Oluwafadekemi Areo

he past week has seen a power tussle between UK based private equity firm, Alta Semper Capital and the founder of one of Nigeria’s top pharmaceutical companies, HealthPlus. The tussle arose after the Board of HealthPlus announced changes in the Company. Alta Semper Capital LLP particularly invests in leading markets and businesses across Africa and following their investment in Egypt’s medicated cosmetics company, Macro Pharma in 2017, they invested in Nigeria for the first time, through HealthPlus. In March 2018, Alta Semper Capital signed an agreement with HealthPlus Africa Holdings to invest $18 million into the healthcare business. In the signed contract, the investment was to be made in two tranches, with $10 million paid in the first tranche and the remaining portion paid in the second tranche at the end of 12 months. Bukky George, a Nigeria and UK trained pharmacist w ith over 25 years pharmaceutical industry experience founded HealthPlus in 1999, which has become one of Nigeria and West Africa’s leading pharmaceutical companies. To continue to grow the business, George said in 2018 that “Alta Semper is the right partner for our next stage of growth as they focus on the healthcare sector, and also invest patient and flexible capital which will allow us to grow strategically across Nigeria and further our mission to provide high quality and affordable healthcare products and services to a market that is large and growing.” The $10 million invested gave Alta Semper Capital 53.8 percent shares in HealthPlus, thus giving them control of the majority shareholding. However, and to the surprise of many, an array of social media mudslinging broke when a letter addressed to the Pharmacist Council of Nigeria (PCN) on the 25th of September 2020 by the Board

of HealthPlus announced the termination of the appointment of George as the CEO of the Company. The letter stated that Chidi Okoro, a teacher of Strategy at Lagos Business School and Founder/Executive Consultant of Drugs and Medicaments Nigeria Ltd, will join Health Plus as the Chief Transformation Officer to optimize day-to-day management and elevate the business and boost profitability. The letter, signed by Afsane Jetha and Zachary Fond, Managing Partner & CEO, and Director of Alta Semper Capital, respectively, also stated that George was going to remain a Director and a shareholder and would be allowed to par-

ticipate in decision making at the company level. The statement was however ruled as false by George, who said Alta Semper’s statement was not authorised. “We wish to inform the General Public, the Pharmacists Council of Nigeria, our Staff, loyal Customers, Vendors, Landlords, Bankers, and all Stakeholders that the press release was not authorized by the company or anybody acting on its behalf, and that the announcement of the appointment of a CTO is wholly false,” she said. George also said that Alta Semper did not hold their end of the deal, as even after 18 months, they are yet to pay up the balance of the initial

‘‘

In response to the HealthPlus founder, Alta Semper Capital released a statement saying “the move was made in full compliance with Nigerian laws, and follows a long and drawn-out process of engagement,” as the founder failed to meet up to expectations even as the company continues to face a pressing cash need

agreed investment. She also emphasised during a private press interview how this contract breach has affected the working capital of the company resulting in an inability to put drugs on their shelves. In response to the HealthPlus founder, Alta Semper Capital released a statement saying “the move was made in full compliance with Nigerian laws, and follows a long and drawn-out process of engagement,” as the founder failed to meet up to expectations even as the company continues to face a pressing cash need. “The board had explored a range of options that would enable her to continue to play an alternate leadership role but she rejected it and it became clear that an amicable resolution was not going to be possible because the persistence of the multiple issues required urgent action to avoid adverse impact on the entire business, including customers, employees, suppliers, and other key stakeholders,” Alta Semper Capital said. Alta Semper also tried to help George with growth capital for the company despite her not being able to achieve the target set for her but “Mrs. George has not only refused to agree to offers of additional investment on commercially reasonable terms, but attempted to force ASC to restructure the existing binding contracts

governing their relationship agreements, which she readily signed in 2018, after taking independent legal and financial advice.” Business lawyers told Business Day that as a majority shareholder of Health Plus, Alta Semper has the right to make such decisions. The superiority of Alta Semper on the board of Health Plus typically puts the firm in pole position to influence major decisions for the business. A Majority shareholder is a shareholder who owns and controls most of a corporation’s stock. Only those persons who own more than 50 percent of a company’s shares can be a majority shareholder. Generally, a majority shareholder has more power than all of the other shareholders combined. Majority shareholders also have the authority to do things that other shareholders do not have, such as replacing a corporation’s officers or board of directors. Alta Semper has over 53 percent stake in Health Plus and that gives the PE firm the right to make decisions at the phar maceutical company. This means the firm is acting within the law. HealthPlus in May 2020 tried to avoid what they called “a hostile takeover” and took legal actions at the Federal High Court against Alta Semper Capital from continuing to run and manage the company, according to George. Since the 2016 collapse in oil price that sent Africa’s largest economy into 5 quarters of negative growth, Foreign Direct Investment (FDI) has continued to decline. Data from the National Bureau of Statistics (NBS) shows that FDI fell by 59 percent to $934 million in 2019 from $2.29 billion. These numbers are expected to fall further given the pandemic that has heightened economic uncertainties and spooked outflows. For a country that is thirsty for FDI to boost its dollar reserve and create jobs for its timing youthful population, the squabble could cast a cloud by scaring investors away from the Nigerian market.

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