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news you can trust I **WEDNESDAY 05 SEPTEMBER 2018 I vol. 15, no 133 I N300

Sell

Foreign Exchange

$-N 357.00 360.50 Market Spot ($/N) £-N 459.50 467.50 I&E FX Window 362.11 €-N 410.00 418.00 CBN Official Rate 306.20

3M 6M 1.63 -0.18 12.04 13.15

Currency Futures ($/N)

fgn bonds

Treasury Bills 0.00

10 Y 0.12

20 Y 0.00

14.97

15.25

15.26

NGUS OCT. NGUS JAN. NGUS JUL. 30, 2019 24, 2019 31, 2018 0.00 363.05

0.00 363.50

0.00 364.40

MTN disagrees with Attorney General’s $2 billion tax bill Iraq, Iran ramp-up oil

Foreign investors freeze investments over CCI controversy production, reserves, Companies to be hit with more tax demands defying odds as

Jumoke Akiyode-Lawanson

Nigeria drags

TN Group yesterday said it strenuously rejects the findings of Nigeria’s Attorney General’s investigation Continues on page 37

2019: Mark promises restructuring, security, good economic policies

... Duke picks SDP presidential form as Shekarau returns to APC ... IYC condemns raid on Pa Clark’s residence in Abuja James Kwen, OWEDE AGBAJILEKE, Abuja

STEPHEN ONYEKWELU & DIPO OLADEHINDE

R-L: Vice President, Yemi Osinbajo; Usman Alhaji, secretary to the state government, and Abdullahi Umar Ganduje, governor, Kano State, during the vice president’s visit to Kano State.

To be at par with African peers, Nigeria needs $14bn FDI ... FDI stock underperforms MINT economies

ormer Senate President David Mark on Tuesday purchased his Nomination and Expression of Interest Continues on page 37

LOLADE AKINMURELE

o be at par with African peers, Nigeria needs $14 billion in Foreign Direct Investment (FDI), but only managed 7 percent of that

requirement in 2017, casting a cloud over how Africa’s largest economy will grow sustainably and provide the jobs needed for its ballooning population. In arriving at the $14 billion estimate, BusinessDay derived

the FDI inflows per capita for South Africa, Egypt and Ghana in 2017 using World Bank data, before finding an average and then multiplying it by Nigeria’s 180 million people. South Africa’s FDI per capita Continues on page 37

espite two Gulf wars and United States’ sanctions, the Organisation of Petroleum Exporting Countries’ (OPEC) two top crude producers, Iraq and Iran have not only boosted oil production but have also increased reserves and developed more oil wells, while Nigeria continues to dillydally. According to the BP annual statistical bulletin released June 2017, OPEC member Iran has increased its oil reserves from 138 billion barrels in 2006 to 158 billion barrels in 2016 while Iraq’s oil reserves moved from 115 billion barrels in 2006 to 153 Continues on page 37

Inside Unity Bank sells $1.1bn bad loans to Frontier Capital P. 2

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Unity Bank sells $1.1bn bad loans to Frontier Capital Endurance Okafor & Sobechukwu Eze

nity Bank Plc says it has sold its $1.1 billion (N400 billion) of bad loans to Frontier Capital Alternative Asset, the advisory and investment arm of Frontier Capital Group. The lender’s non-performing loans ratio is now nearer to zero from almost 50 percent since it transferred its toxic assets to Frontier Capital Alternative Asset, which has helped to shore up Unity Bank’s liquidity, Ebenezer Kolawole, Chief Financial Officer at Unity bank, said, as compiled from Bloomberg. The lender cleaned up its balance sheet as it seeks to conclude talks for a cash investment which is aimed at stabilizing the Nigerian commercial bank. The Lagos-based investment firm acquired the bad loans of the bank after it made an initial payment of N6.4 billion to Unity Bank, Kolawole said in a statement. “ItrecoveredN5billioninthefirsthalf of this year while both companies have an agreement to share the recovered funds over the next five years,” he said, The CFO, Kolawole, however disclosed in a statement that the offload of the bank’s non-performing loans has helped the lender sign an agreement with a foreign equity investor that IT hopes to finalize during the first half of 2019. Meanwhile, Unity Bank plans to raise about N270 billion to recapitalize its operations after missing a

regulatory deadline last year to bolster the amount of cash it sets aside as a buffer against potential shocks. “We are on the verge of completing our capitalization,” Kolawole said. “We are raising substantial capital that will block the hole in the bank.” Meanwhile the bank’s search for investment comes after negotiations with New York-based private-equity firmMilostGlobalInc. as a capital injection investment failed in March 2018. Meanwhile, Unity Bank is yet to release its 2017 financial statements after reporting its second straight year of negative capital adequacy ratios in 2016. Unity Bank has had to switch its business model to rely more on transaction income as its ability to lend is curtailed by its capital levels, Kolawole said. The company is looking to boost customer accounts to 15 million by 2022 from four million today by automating its services and introducing new liability and asset products, he said. “We have room to grow the business,” Kolawole said. “We just need to settle the capital issue.” The bank currently has a market capitalisation of N8.65 billion and as at market close yesterday, 4th of September2018itsstocktradedat74kpershare. The data available on the Bloomberg terminals showed that the bank has a year-to-date return of 34.55 percent from 55k per share in the beginning of the year to 74k as at market close Tuesday.

Apapa Oshodi expressway: N72bn reconstruction cost holds lessons for FG CHUKA UROKO

he new cost of reconstructing Apapa-Oshodi Expressway in Lagos to be undertaken by Dangote Group at N72 billion, representing over 1000 percent increase compared to an earlier contract sum for reconstructing part of the expressway holds significant lesson for the federal government and its managers. Though the new cost is for the reconstructing the expressway from its root at Liverpool Bridge to where it terminates at Oworonsoki Junction, there is a huge difference between this new cost and the N6.2 billion which was the contract sum for reconstructing the expressway from Sunrise Bus Stop to Cele Bus Terminus in 2010. Construction experts argue that the distance between Cele Bus Terminus and Oworonsoki Junction is not enough justification for the huge difference between N6.2 billion and N72 billion, arguing that if the contract had been awarded for the reconstruction of the entire length of the expressway at that time, it wouldn’t have taken up to 50 percent of the present cost. “This huge increase simply speaks to the waste in government circles and also highlights some avoidable costs government frequently incurs for its tardiness, neglect, poor maintenance

culture, excessive bureaucracy and lack of seriousness even with matters of national interest and economic importance,” Johnson Onoja, a civil engineer noted in telephone interview. Following sustained outcry by businesses, port users, media organizations, and sundry road users on the collapse of this expressway which is a major route to the country’s premier sea ports, the federal government awarded a contract for its reconstruction in November 2010 to Julius Berger and Borini Prono at the cost of N6.2 billion. “For the benefit of the generality of Nigerians and particularly concerned Nigerians who daily experience the excruciating condition on this road, it is necessary to present the facts of the case and to confirm that the contract for this road has been awarded to Julius Berger Plc and they in turn have accepted the award,” Taye Akinyemi, Chief Press Secretary to the then works minister, Mohammed Dagash, stated. “The Ministry on Wednesday, November 10, 2010 presented a memo to the Federal Executive Council (FEC) in which it gave the background to the project, the derivable benefits, the scope of work and the tender procedure adopted.

•Continues online at www.businessdayonline.com

L-R: Uzo Akumah, Real G ist content manager, BusinessDay; Kehinde Onigbogi, exco, BMW Club Nigeria; Michael Batemue, exco; Robson Omasheye, motorsport manager; Matthew Adinnu, tech head; Theodore Samouris, tech head; Chioma Nwosu, general secretary; Anthony Osae-Brown, editor, BusinessDay; Kennedy Njideofor, president, and Lehle Balde, strategy and partnership, BusinessDay, during the visit of the club to BusinessDay head office (The Brook) in Lagos, yesterday. Pic by Olawale Amoo

Current oil reserves put each Nigerian’s share at about N5m

... as experts urge action on diversification, petroleum sector bill ISAAC ANYAOGU reporting from Ghana

f all the proven crude oil reserves in Nigeria were drilled and sold in the oil market at current prices, every Nigerian alive will receive only $14,202 or about N5million as his share hence experts have urged the government to think seriously about diversifying the economy as crude oil alone cannot deliver the Nigerian dream. With estimated proven reserve of 37 billionbarrels,apopulationof198million people and oil price of about $76 per barrel, a back of the envelope computation of Nigeria’s oil per capita gives $14,202 (N5.1million).Thiscomparespoorlywith Angola’s $20,672, Algeria’s $22,040, Saudi Arabia’s $603,060, Gabon’s $73,5166 and Equatorial Guinea’s $63,627. Ghana’s oil per capita is at $12,897. “According to the National Bureau of Statistics, Nigeria is now over 198million people which they arrive at by measuringpopulationgrowthrate.This

means that crude oil cannot deliver the Nigerian dream considering the large populationanditsoilincomehencethe need to focus on reforms and diversify theeconomy,”DaudaGaruba,atechnical adviser at the Nigerian Extractive IndustriesTransparencyInitiative(NEITI) said at the African Regional Extractive Industries Knowledge (REIK) Hub by the Natural Resource Governance Institute (NRIGI) in partnership with German International Development Cooperation (GIZ) in Ghana on September 2. The Department of Petroleum Resources (DPR) which regulates Nigeria’s upstream sector, said in its 2016 report that Nigeria holds 36.7billion reserves of crude oil and condensate and 197 trillion cubic feet of gas. For the past six years, Nigeria has only seen a marginal increase in capacity addition in 2014 when it rose from 36.5billin in 2010 to 37.4billion in 2014 but fell again to 36.7billion in 2016. Nigeria’s rig rate fell from 46 in 2013

to 12 in 2016. Rig rates or rig utilisation rate describes the number of oil drilling rigs in operation. Also the number of wells drilled fell from 150 to 77 between 2013 and 2016. In the whole of 2016 only one field, which belongs to the sole risk agreement was drilled. “A total of 718,612,967 barrels of oil (and field condensate) was produced at an estimated average daily production of 1.96 million barrels of oil per day. There was a 9.6% decline over the average production rate for 2015,” said the DPR report. Meanwhile, agriculture and industries have largely been abandoned. “A country cannot progress if exports what it does not consume and consumes what it does not produce. Nigeria exports jobs to other countries by abandoning its agriculture and industries sectors, concentrating on imports from other countries thereby failing to add value locally,” said Garuba.

•Continues online at www.businessdayonline.com

What next now that Buhari withholds assent to Electoral Act Bill? OWEDE AGBAJILEKE, Abuja

ith less than six months to the 2019 General Elections, President Muhammadu Buhari has declined assent to the Electoral Act 2010 (Amendment) Bill. This is the third time in 2018 that the President has withheld his assent to the bill, having rejected the Bill in February and August this year. The development came in spite of earlier assurances given by the Senior Special Assistant to the Presi-

Analysis dent on National Assembly Matters (Senate) Ita Enang, who had last week given hope that the President would sign the proposal into law. “We will do the needful before the Bill expires,” he had assured. But in a statement on Monday, Enang explained that the President was declining assent to the bill due to some “drafting issues that remain unaddressed following the prior revisions to the bill.” He pointed out that there was also

an issue with the conduct of primaries by political parties and the dates they should submit names of their candidates to the Independent National Electoral Commission (INEC), adding that if signed into law, the electoral body would have only nine days to collate and compile lists of candidates in the 91 political parties. What next for NASS? The only option available to the National Assembly is to override the President’s veto.

•Continues online at www.businessdayonline.com

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Wednesday 05 September 2018

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PDP writes May, Merkel over impunity, rights abuses in Nigeria OWEDE AGBAJILEKE, Abuja

he Peoples Democratic Party (PDP) has petitioned British Prime Minister Theresa May and German Chancellor Angela Merkel, over what it called growing culture of impunity, disrespect for Judiciary and other anti-democratic tendencies. The letter which was made to BusinessDay at the PDP national secretariat on Tuesday in Abuja drew attention of the two world leaders to President Muhammadu Buhari’s brazen attack on the principle of rule of law. The document which was dated August 30, 2018, was received at the Brit-

ish High Commission on September 3, 2018, was signed by the party’s national chairman, Uche Secondus. It would be recalled that the two world leaders had visited the country last week. According to the party, the Economic and Financial Crimes Commission (EFCC), under this administration, has metamorphosed into a draconian agency, showing scant regard [for the rule of law and respect for human rights. PDP says that the commission has turned the process of investigation into a media event to embarrass and tarnish the image of key opposition figures and sub-national governments of the federation perceived to be averse to the whims

and electoral interest of the ruling party. On the alleged steps taken by the Buhari administration against the judiciary and Rule of law, the opposition party declared that “the recent outburst by President Muhammadu Buhari that he will jail more looters, created national outrage and concern about the role of the judiciary and respect Of our institutions. The opposition party added that the president’s recent declaration, at an event of the Nigerian Bar Association (NBA), that rule of law will take second stage on issues involving alleged threat to national security, raises fresh concern about this administration’s attitude and respect for constitutional rule.

WAMA, WAMZ, WAIFEM meets in Nigeria to review ECOWAS single currency UDOKA MOKWUNYE

he West African Monetary Agency (WAMA), West African Monetary Zone (WAMZ) and the West African Institute of Financial and Economic Management (WAIFEM) will meet in Nigeria this week to review the Economic Community of West African States (ECOWAS) single currency. This was made known by the Central Bank of Nigeria (CBN) as published on its website. The 2018 mid-year statutory meetings holding September 6 -14, 2018 in Abuja, would examine the status of implementation of programmes under

the ECOWAS Monetary Cooperation Programme (EMCP), member countries compliance with the convergence criteria, harmonization of payments system, harmonization of monetary policy framework and exchange rate regimes, harmonization of statistics, capital account liberalization, financial integration as well as other administrative and governance issues in those institutions among others. The meeting would also determine the readiness of member countries to meet the deadline for the introduction of the single currency in ECOWAS by 2020. The meeting will be preceded by the 33rd joint ordinary meeting of the

Economic and Monetary Affairs Committee and the Operations and Administration Committee of the West African Monetary Agency (WAMA) from September 6 to 8, followed by the 38th meeting of the Technical Committee of the West African Institute for Financial and Economic Management on September 9, 2018. Also, the technical committee meeting of the WAMZ College of Supervisors (CSWAMZ) would hold along side the meetings. The meetings would end with the Convergence Council which comprises Ministers of Finance of all WAMZ member countries on September 14.

Pencom clarifies stance on employment protest CONRAD OMODIAGBE

he National Pension Commission (PENCOM) has clarified its position, and reason behind its failure to admit the 42 recruited staff members scheduled to resume on May 2nd 2017, citing infringement of Federal Character Commission’s laws as the root of the problem. Speaking on a recent protest at the Pencom head office in Abuja, the Acting Director General, Aisha Dahir-Umar made it known that the previous administration had failed to fully comply with the rules of the Federal Character Commission during the recruitment process, thereby prompting the Federal Character Commission to put push for a stop in the entire recruitment process. Dahir-Umar while recalling the entire contro-

versy, explained that for the commission to recruit, it is imperative for compliance certificates also known as “no objections” to be collected from the Federal Character Commission in a bid to ensure fairness in the employment process. This certificate to be collected twice, first at the point of initial recruitment granting permission to hold tests or interviews and again when letters of employment are to be served, was only collected at the initial stage of the recruitment exercise. She further explained that the previous administration had violated the Federal Character Commission laws by first of all going against the original compliance certificate which stated that only 16 applicants be recruited by recruiting 42, and secondly by handing out letters of employment without receiving permission in form of the no objection certificate from the

Federal Character Commission. This, according to Dahir-Umar led to the Federal Character Commission submitting the case to the National Assembly and further actions were set in motion to halt the entire process. As to why the breach occurred, Dahir-Umar stated that at the time she headed another department, only resuming as Acting Director General in April 2017. On the role of the board in the case, Dahir-Umar informed pressmen that the board was not involved in the recruitment exercise as this was an entry level recruitment, and the board gets involved in only top level managerial recruitment Imbalance in the ratio of the Pencom staff to states of origin was also another factor the Acting Director General noted might be a motivation behind the decision to nullify the exercise, made by the Federal Character Commission.

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In Association with

NPF Microfinance Bank takes stock at 25 HOPE MOSES-ASHIKE

ounded on the vision to be the clear leader in the provision of services, via the mission of creating value and wealth for its stakeholders through sustainable provision of microfinance products and service, the NPF Microfinance bank Plc, in celebrating its 25 years of banking services is taking stock of its performance Azubuko Joel Udah, Chairman of the bank, at the award night where some important personalities were recognized as part of the celebration recalled with nostalgia how the journey of the organization started with one man’s dream, 25 years ago. Addressing a well-attended gala night, witnessed by AIG Adamu Ibrahim, who represented the Inspector General of Police, Ibrahim K. Idris; retired Inspector Generals of Police, serving and retired DIGs, AIGs, CPs and other top Police Officers as well as representatives of the Central Bank of Nigeria, Securities and Exchange Commission, Nigeria Stock Exchange and Nigeria Deposit Insurance Corporation, among other personalities noted that twenty-five years in the life of an individual or organisation is indeed very significant. According to him, from a humble beginning which started on August 19, 1993 to date it has been a steady and progressive step in the history of the bank. With a start-up capital of N500,000, staff of less than 10 and a single branch, the Bank has metamorphosed into a market leader with 28 branches spread across the six geo-political zones of the country and staff strength of over 500. Udah paid a glowing tribute to the founding father of the bank, Ibrahim Atta (IGP rtd) whose vision and foresight has given employment

hope to many Nigerians. “We celebrate Atta today and subsequent IGPs for their unflinching support and trust in us. Serving and retired Directors for their selfless service, the regulatory authorities for keeping us on our toes, our teeming and supportive valuable customers who have continued to be very supportive of us and driving the microfinance genre together, the management and staff of the Bank who through their commitment to the vision of the Bank has kept the flag flying and to others who have in one way or the other contributed to our growth and success”, he said. During his remarks, Akin Lawal, managing director of the bank, also appreciated the vision of the founding father Aliyu Atta IGP (RTD) whose vision germinated into a reality that has come to stay having stood the test of time. Lawal said the bank started with an authorised share capital of ₦500,000 in1993 and this has grown over the years to a significant ₦3 billion. Presently, its shareholders’ fund stands at ₦4.75 billion with a total asset above ₦16 billion, adding that the bank has been paying dividends consistently to its esteemed shareholders for the last 22 years. “Operationally, I am pleased to inform you that NPF Microfinance Bank Plc is a professionally managed and conservative financial institution providing a wide range of banking products and services to customers in all our outlets. Some of our services includes various types of current account, savings account, loans and advances as well as financial advisory services to members of the Police community and the general public”, he said. In recognition of its high level performances, the Bank has, over the years, won several laurels, among which are the top 25 CEO’s of companies quoted on the floor of Nigeria Stock

Exchange (2015 and 2016), PEAL Award as highest dividend-yielding Microfinance Bank (2015), CIBN most supportive microfinance bank (2015, 2016, 2017, 2018), Crime Watch Microfinance Bank of the year (2017), and BusinessDay Banking award: the best Microfinance Bank in CSR (2016). Presently, the bank has a work-force of 600 made up of 317 permanent staff some of whom have been with the bank since the commencement of operation which depicts sustainability, stability, consistency, firmness and reliability. “Our staff are loyal, dependable, reliable, trustworthy and experienced, they are ready to give their all for the course of the organization and I believe this is what has contributed to the success of the bank. It is good to put on record that the bank has the highest number of certified microfinance bankers as an institution within the microfinance sector”, Lawal acknowledged. The bank credits its successes on professionalism, integrity, customerfocus, excellence, loyalty and team-work, the guiding principles that has helped the organization to be focused and single-minded in achieving its objectives over the years.

Similarly, the bank’s pricing is equal to none in the industry, making it possible to compete favorably in the market thereby encouraging good patronage, by business model and learn new skills to make its business more efficient. The bank is driven by strategic planning usually with a life span of three years, with a robust risk management culture and over the years has been consistent in adopting International Standard Organisation (ISO) risk management process in carrying out its business activities with a view to providing an effective response to the management of inherent risk in the organization. Another striking feature is the bank’s culture of zero tolerance to fraud as any reported cases of fraud are met with appropriate sanction, as it maintains Efficient Management Information System (MIS) that facilitates effective organizational and individual performance management. Aggressive marketing, driven by market-facing organogram and dominant field officers as part of its staff mix has further sustained the banks operations over the year. As part of its outreach plans the bank currently have an approval for seven

new branches within the next one year, a development that will increase its network to a commendable number of 35 by 2019. The bank’s current strategic plan running out in 2018 is to be replaced with a 2019-2021. According to Lawal, the bank’s focus is to be technologically driven and is currently deploying world class IT solution, so robust in service delivery to enable it embrace electronic banking products such as USSD, mobile banking, agency banking, internet banking among other channels, assuring that with the support of shareholders, the board, and the quality of management and staff the bank will continue on the part of diligence, hard work and innovation, as there is a good chance that in the next 25 years to come, the bank will be operating at another phase of banking categorization in Nigeria. He said that every successive Inspector General of Police (IGP) has contributed immensely to the success story of the bank and the vision to improve the welfare of police officers and men. The bank looks at future with enthusiasm haven lined up plans to cushion effects of hard economy and reducing the excruciating pain of doing business in

Nigeria via so many ways. The bank intends to achieve this with the collaboration of the Central Bank of Nigeria, CBN and has enlarged number of reputable organizations to help it in the fight against poverty. The bank is currently collaborating with Development Bank of Nigeria (DBN), involving them in the national MSME clinic tour in search of Micro and SME customers and deepening financial inclusion which is symbiotically rewarding. As the bank wraps up its first phase of three year strategic plan 2016 to 2018, the management is in discussion with a world class consultant that is not only knowledgeable in Local economy but versatile in Microfinance banking to start off a more robust audacious goals that will be anchored on its key business mantra which are safety, return and speed of transactions. The management intends to reduce its concentration risks and increase the deposit base of the bank at a reasonable opportunity cost of transaction. NPF also incorporated a significant Corporate Social Responsibility (CSR) index to support government initiatives in dealing with the burden of poverty, nutrition challenges within internally displaced persons (IDP) camps now overwhelmed by influx of refugees fleeing Boko Haram exploits. Recognizing the needs of persons in the camps, NPF visited a couple of IDPs in the country and other homes for the needy as part of its celebration. In line with its avowed CSR commitment, the Banks management in commemoration of its 25 anniversary visited the IDP camps in Benin City and Maiduguri where materials and other items valued at millions of naira was donated to inmates. The bank put smiles in the faces of inmates and children at the Living Spring Orphanage Victoria Island Lagos.

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COMMENT SMALL BUSINESS HANDBOOK

EMEKA OSUJI Dr Emeka Osuji School of Management and Social Sciences Pan Atlantic University Lagos. eosuji@pau.edu.ng @Emyosuji

know this is the wrong time in Nigeria to ask questions as to the progress in any government project. This is because when politics enters, common sense flies away; at least that is our experience in Nigeria. However, while we sigh, clap, course or jeer, in reaction to politicians’quadrennial dance of shame, which brings every good thinking in government to a halt, let us exercise our own brains with some of the nullities they throw at us. The Economic Recovery and Growth Plan (ERGP) of the Buhari administration promised to take the SME rout to industrialize Nigeria. I am one of those that were excited at that particular component of the plan. I believe if sincerely driven, things, very good, could happen from it. I think it holds the key to some of the radical innovative breakthroughs we have all wanted but failed to see. But that requires some level of thinking and commitment, often not associated with the endowments of our category of politicians, who literally carry a mirror that they frequently peer in to see nothing but themselves and their political future. Almost all innovations and discoveries that have moved the world forward have come from the West – Europe and America. This is a fact that we have to live with, though we

MAYOWA AMOO Mayowa Amoo is an investment banker based in Lagos.

igeria is now the poverty capital of the world! An unflattering award to say the least but does it hold true? The signs are visible. Achieving very high or full financial inclusion could help. India previously held the award but has since used financial inclusion to bring several millions out of poverty. This piece is not about India but it examines the status of financial inclusion in our beloved only country and proposes that the Nigeria Postal Services (NIPOST) can lead the charge to deepen financial access and use in rural areas, where the poor really are. We must also not give up on the very challenging work of organising financial inclusion around the informal “esusu” or “ajo” or other informal social groupings across the country – they must be linked (not converted) to formal financial services. Lastly, on financial literacy, why teach financial education to the poor in any of our 250 or more Nigerian languages, when they mostly, if not, all understand and rightly identify emotionally with “pidgin?” After banks, postal operators and their financial subsidiaries contribute the most globally to financial inclusion. Postal offices around the world have no less than 662,000 contact points, making them the largest net-

Wednesday 05 September 2018

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The ERGP and industrialization through SMEs: What is going on? may not like it. Many people have wondered why it should be so in a world where everybody has an open sky at which to gaze freely and think. Some have found explanations of our failure around the fact that the West is developed and have all the facilities and laboratories that empower thinkers to think and create things, while we do not. The South, they argue, has no such facilities and should not be blamed for the lack of innovation among its people. Yet others blame the historical antecedents of the South, including slavery, colonization and neocolonialism, which made it impossible for the South to learn from its own experiences and traditions, and grow. Truly, the exploitation of the South by the West, which climaxed in the scramble and the partitioning of Africa into private properties of European nations, was a great setback. However, that point has been well made. It is now no longer fashionable, after several decades and tons of money from the same West, either as payment for our resources like oil, or grants and aids, to continue to lament colonization and blame it for all the failure of the South. It is therefore, time to be more serious in finding answers to our inability to create and innovate our way out of poverty. I think our failure to make bold strides in the area of innovation has something to do with our environment – the setting within which we work; and especially our politics. But who determines what our operating environment becomes? We do. Sometimes I wonder what would have happened to the Cable Network News (CNN) if Trump was an African or Nigeria leader. President Jonathan used to say that he was the most maligned president of all time. Am sure he has long since withdrawn that title having seen what Donald Trump is going through. The

‘

…it does appear that the freedom in the west also helps to open their brains. Our siege mentality must be responsible for our inability to think outside the many boxes of failed states in which we are caged

’

American freedom has been stretched to its limit. Someone needs to remind the American press that they are teaching us something very bad – disregard for our presidency. God help anyone of you in Nigeria that mistakenly takes your freedom even one mile close to any airport from which you could fly to America. Anyway, it does appear that the freedom in the west also helps to open their brains. Our siege mentality must be responsible for our inability to think outside the many boxes of failed states in which we are caged. Somewhat ironically, there is hardly any field of endeavor in which the world has made outstanding progress, in terms of achievement that Africans and particularly Nigerians, are not in the forefront. But this happens only outside Africa. We recently read of a Nigerian doctor that took out a child from the womb, operated on it and put it back, and it was delivered on full term. Nigerians have set records on Robotics in the United States and

made waves in venture capital investments around the world. The territory called Nigeria seems to abhor deep thinking and repel innovation. As the title of a popular book goes, the fault is not with the gods. Rather it is with the system that we have built. Nigeria recently launched the SME Clinic programme, which was kicked off in Aba. The idea was to encourage SMSMEs by delivering visionary support to these entrepreneurs and thereby help them grow and contribute to national development. One had thought that government was about to do something innovative with the many skills and years of experience residing in these boisterous individuals. For one, I thought we were going to borrow their skills, reform and refine them and use them to kick off the implementation of the industrialization programme of the ERPG. May be we will. We may recall that one of the practical and, in my view, workable plans in the ERGP is the proposition to industrialize Nigeria through the SMEs. That avowed target or strategy of the plan is yet to find any expression. One had thought that the first thing to do would be to come close to the real business people in Nigeria – the small entrepreneurs making shoes in Aba, labelling and successfully passing them off as made in Italy, to show them what it means to be proud of one’s own output. It is no longer news that many of the beautiful suits we see people wear and labeled something like “Italiano Jabrando” are all rolled out in Aba garment factories under extreme conditions. Ditto for shoe makers in Kano and many forgotten cities bereft of government presence. The computer villages in many states have become technology hubs that can be propped up to something great. We could appoint technology champions in the different field to mentor these people. We have

indigenous computer companies like Zinox, which could be commissioned to lead change in that sector, as agents of government to mentor the boys. These agents will be transparently appointed and challenged to come up with ideas of grooming the mini geeks swarming in these technology centers called computer villages. I believe so many ideas will surface if government calls for open bids on this project. The job possibilities would be great. What about the apprentice system of Igbo traders. This system is complete. It trains the apprentice in the skills for the particular trade and imbues him with the culture of honesty and patience. An apprentice spends like five years. During that period he is taught to be smart with money (financial management), be patient (sometimes he won’t eat dinner, depending on what hid wrong) and to wait for his time. When he graduates he suddenly draws from the goodwill of the master, by getting supplier credit from his former master’s foreign partners. Big time business has started. Why do you think almost all Igbo businesses have the appellation “International” in their names? We could borrow this singularly successful business model and transform it to a national strategy to develop an indigenous system the world will come to study. Today, we have all manner of technical and vocational schools overgrown by weeds. We could adequately fund these institutions and link them to the technology centers and SME hubs. But we won’t. But when cattle herders now graze and keep their cattle in the classrooms we scream Fulani herdsmen! Jokes apart, we have a penchant for laying out grandiose plans without execution and monitoring.

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Financial inclusion in Nigeria: Which way forward? work of contact points in the world, albeit underutilised for financial inclusion. In particular, in order for posts to become pivots for financial inclusion, they must have extensive networks, qualified and trained staff, financial capacity, technology-driven processes and most of all public trust. There are successful postal financial inclusion models for NIPOST in China, Brazil, Japan, Namibia, Senegal, Bangladesh, India, Serbia and Papua New Guinea. NIPOST has already sunk the cost of an established postal network and is supposedly not seeking to maximise profit. Therefore NIPOST represents a good option in making financial services accessible and affordable for the rural and even urban poor. However, NIPOST’s network would require close examination of the state of its physical and non physical (if any) network vis-a-vis investment requirements, IT connectivity and staffing with a view to assuring modernisation and suitability for the role of champion of financial inclusion. The Banco Postal business partnership with Bradeso, a private bank, is a successful model in Brazil, having brought millions of unbanked individuals into the formal financial system. Banco de Brasil subsequently paid an entry/partnership fee of US$1.7 billion to Banco Postal which highlights the financial payoff that

public private postal partnerships can generate. Operationally, NIPOST can choose to start from the base of the ladder as a cash-in-cash-out merchant and then move up the scale to eventually either own its own postal bank or enter into a JV with a financial services provider to secure financial expertise and mobile network operators (MNOs) for electronic financial communications. Overall, the more investment and participation NIPOST has in the operating model, the higher the revenue it generates. CBN’s 2012 National Financial Inclusion Strategy makes mention of cooperatives and informal clubs and self help groups (together referred to as non bank micro finance institutions) as stakeholders. That group needs to move from simply one being monitored by the CBN to one that becomes an anchor for achieving full financial inclusion in Nigeria – that group of new clients is represented by the almost 40 million adult Nigerians that are excluded from financial services. It is instructive to leverage such clubs across the country by linking them to formal financial services at scale, possibly through transfer of savings mobilised into specialised accounts with micro finance banks (or other formal financial inclusion agents.) Whatever operating model is adopted for such linkages will not be 100% right or fitfor-purpose the first time. Patience, resolute commitment and continuous

improvement will be key. Research by Accenture in 2016 indicates that informal savings & loans groups are an effective entry point for linking financial institutions to the financially excluded. The community savings and credit cooperatives in Rwanda, SACCOs are a model to examine because they exist successfully in every administrative sector in the country. As at 2016, the country had already achieved 89% financial inclusion which is expected to reach 90% by 2020. More than 90% of Rwandans live within a 5km radius of a SACCO – a financial cooperative set up legally as savings banks and run by members that live in the 416 administrative sectors in the country with sole aim of maximising benefits to its members. SACCOs which were created in 2009, benefited from subsidies for operating cost. The subsidies ceased once the SACCOs reached break-even. It is important to note that the Rwandan authorities simultaneously with propagation of SACCOs, pursued strategies such as policies to further the expansion of bank and MFI branches, agency banking, mobile banking/money and roll out of ATMS. The national financial literacy strategy may require re-examination for the simple reason that the basic language of national communication must urgently shift to or at least incorporate pidgin. Pidgin needs to rank

side by side formal English language because it immediately and quickly removes the psychological barrier for our vast non English speaking poor population. There is some market wisdom behind the thinking of the likes of WAZOBIA FM radio station and the more recent BBC Pidgin. Financial literacy programmes must also take advantage of socially cohesive groups where members can assist one another to acquire the necessary skills and behaviours required to thrive in a formal financial services setting. FMCG distributors, retail companies and telecommunications operators can also assist in imparting financial literacy. India even went further when in 2014 it licensed such companies as payment banks to serve solely the poorest members of society offering easy access to bank accounts, fund transfer, digital debit cards and interest rates on savings accounts. There has been rapid uptake – Pay TM one of the most popular such businesses had attracted 300 million customers within just two years of operations. A shared responsibility and shared interest approach creates a virile circle of growth and general economic well being for Nigeria as a whole. Every Nigerian can live a decent life. Yes, we can!

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NBS Q2 2018 GDP report: Key lessons for the ERGP

UCHE UWALEKE Uche Uwaleke is a Professor of Finance & Capital market and the Chair of Banking and Finance Department at the Nasarawa State University Keffi

ddressing participants at the 17th meeting of the Joint Planning Board/ National Council on Development Planning recently held in Abeokuta with the theme: “Accelerating implementation of the Economic Recovery and Growth Plan: the role of stakeholders”, the Minister of Budget and National Planning, Senator Udo Udoma expressed delight that the implementation of the ERGP was yielding positive results. According to him, “not only is Nigeria out of recession, the country is beginning to grow again particularly in the non-oil sector. The latest NBS numbers revealed that the non-oil sector grew by 2.05 per cent in Q2, 2018’’. He was right. Be that as it may, that same report by the National Bureau of Statistics contains some key lessons for the ministry to note as it undertakes a mid-term review of the four-year (2017-2020) plan. The first lesson is to recognize that time is running out in the light of the current slow pace of economic growth which is a far cry from the set target of 7 per cent by the year 2020, only a few months away. Therefore, a sense of urgency is required in the implementation of the various strategies set out in the ERGP to address the five execution priorities of stabilizing the macroeconomic environment, achieving Agriculture and Food Security,

TEMITAYO LAWAL Temitayo Lawal is an analyst at WNT Capitas, a communications consultancy, and a member of The Peter Bauer Foundation (aka The Liberal Forum)

pinion polls have changed from being mere straw polls – as obtainable in late19th century and early 20th century –where pollsters simply travelled, say, on a train and surveyed opinions at their convenience. Polling is now a highly sophisticated process that involves big data, computer models, rigorous and robust sampling processes; it is serious, big business. Professional pollsters conduct polls on various issues using diverse methods and platforms, but political polls conducted online are the subject here. Surveys to predict election outcomes and gauge topical political issues are the staple of political pollsters. The advent of the internet and the proliferation of social media platforms have enabled a new, flexible form of polling through ready access to many people and produces results quickly. Nigeria with over 90 million internet users is a pollster’s

ensuring energy sufficiency in power and petroleum products, improving transport infrastructure as well as driving industrialization through Small and Medium Enterprises. The Plan envisages that Real GDP will grow by 4.6 per cent on average over the Plan period. Against this backdrop, the NBS report to the effect that ‘’in the second quarter of 2018, Nigeria’s Gross Domestic Product grew by 1.50% (year-on-year) in real terms, –0.45% points slower than 1.95% recorded in the first quarter of 2018’’ provides cause for concern. This number, which in actual fact represents a plunge from 2.11 per cent recorded in Q4 of 2017, should bother every Nigerian because if this downward trend is not reversed, the ERGP goal of attaining real GDP growth of 7 per cent by 2020 would be a pipe dream. The second lesson is the fact that the agric sector is beginning to post disappointing performance and so needs to be rescued fast. As disclosed in the NBS report, ‘’the agricultural sector in the second quarter of 2018 grew by 1.19% (year-on-year) in real terms, a decrease by –1.82% points from the corresponding period of 2017, also a decrease by -1.81% points from the preceding quarter. The sector in the quarter contributed 22.86% to overall GDP in real terms, lower than the contribution in the second quarter of 2017’’. This is not a good commentary for a sector that used to be the star of the Nigerian economy even during the recent recession (when virtually every other sector was in the negative territory) growing by 4.88 percent in Q3 2016. The ERGP hopes that ‘’agriculture will continue to be a stable driver of GDP growth with an average growth rate of 6.9 per cent over the Plan period’’- obviously not at the current growth rate. To change this narrative, the incessant farmers/herdsmen clashes must be tackled squarely in addition to vigorously walking the plan already spelt out to achieve self sufficiency in food production.

‘ Nigeria’s experience

over the years has shown that implementation of Development Plans suffer neglect whenever there is a change in government

’

The third lesson is that oil revenue, a function of crude oil price and output, remains critical to the financing of the ERGP and so no stone should be left unturned in ensuring that any adverse variance in crude oil output is not significant. The marked decline in Q2 2018 GDP growth has a lot to do with shortfalls in crude oil output. The NBS report disclosed that ‘’in the second quarter of 2018, average daily oil production was recorded at 1.84million barrels per day (mbpd), lower than the daily average production of 1.87mbpd recorded in the same quarter of 2017 by - 0.03mbpd and also lower than the production volume of 2.0mbpd seen in the first quarter of 2018 . Real growth of the oil sector was –3.95% (year-on-year) in Q2 2018 indicating a decrease by –7.48% points relative to the rate recorded in the corresponding quarter of 2017. Growth also decreased by -18.72% points when compared to Q1 2018’’. The report added that the fall in oil GDP happened despite the fact that ‘’crude oil price (Brent) maintained steady rise from $65.32 per barrel in January, reaching $76.98 in May, before falling slightly to $74.4 per barrel in June’’. The ERGP

projects crude oil output to average about 2.2 mbpd this year rising to 2.5 mbpd in 2020. It bears repeating that in order to ramp up crude oil production, the government should continue to engage with stakeholders in the Niger Delta region. By the same token, the President’s nod to the Petroleum Industry Reform Bill holds a lot of promise for new investments in the oil sector. Arguably, the big lesson is that the ERGP has come face to face with political risk - a major threat least accommodated at the formulation stage- which has to be addressed going forward else the economy risks a reversal of the modest gains already recorded in the non-oil sector. Nigerians have been told many a time that the ‘’strong commitment and political will’’ on the part of the government to drive the process sets the ERGP apart from previous government Development Plans. This assurance is comforting. At the same time, it is vital to recognize that the Plan faces considerable downside risks beyond ‘’the uncertainty in the current global economic environment’’ and some others identified in section 8.1 (pg 112) of the ERGP document. It is a no brainer that numerous other vulnerabilities exist but the biggest threat to the ERGP seems to be political risk which received no mention under the section. Nigeria’s experience over the years has shown that implementation of Development Plans suffer neglect whenever there is a change in government. Against this backdrop, the ‘’Political Will’’ argument holds water only in the context of stability in government which is guaranteed where the Visioner (the President) is in office throughout the Plan period. This condition must be met for any National Plan to succeed. By implication, a Plan can be jettisoned once there is a change of baton even within the same ruling party. The major challenge therefore is how to ensure that the ERGP is pursued to a logical conclusion regardless of the party in

power come May 2019. From a broader economic and political perspective, the following question is pertinent in relation to the ERGP: will the federal government receive the cooperation of the state governments if a majority of states become controlled by the opposition party in 2019? Allied to this is whether the National Assembly will continue to play a supportive role if majorities in the House and Senate are held by the major opposition party. Having identified political risk as the major threat to the ERGP, what then is the safeguard? A cursory look at Puerto Rico’s Fiscal and Economic Growth Plan (FEGP) provides the answer. In order to ensure the success of the country’s FEGP, the National Parliament of Puerto Rico passed the Fiscal Responsibility and Economic Revitalization Bill. The FRER Act established a Board independent of government, with oversight authority over most government entities having powers to levy sanctions for noncompliance with measures contained in the FEGP. By the same token, Nigeria needs an enabling law to back up the ERGP. The idea of setting up a Delivery Unit in the Presidency to assist the Ministry of Budget and National Planning in overseeing the ERGP implementation is necessary but not sufficient not least because if the Delivery Unit is not a creation of the Law, it may not have the powers to discharge its duties. To this end, the Executive as a matter of urgency, should forward a Bill to the National Assembly that would take care of all issues specific to the ERGP distinct from the current Fiscal Responsibility Act of 2007 which focuses on annual budgets and the three year Medium Term Expenditure Framework. Indeed, the NBS Q2 2018 GDP report essentially points to the limited time left to prove that the ERGP will not go the way of its forebears.

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Online political polls, caveat lector paradise. Although easy and convenient, online polling isn’t entirely safe. Polls, which aren’t just about simple majority, can be misleading; it’s a complicated process. To produce relatively reliable results, the sample from which generalizations are made must fulfill some basic requirements, randomization and representativeness are important. In other words, it must have predictive power. Unfortunately, online polls especially in Nigeria, aren’t structured to capture these. Pollsters just set up online platforms and ask, “who would you vote for as president if the 2019 elections were held today?” At best, what it measures, is the level of political participation online. It doesn’t tell us how the elections are likely to turnout. Polling companies invest so much human and financial capital in gathering and analyzing data. They know that random and representative sampling methods that put into consideration sample size and other critical factors like age, gender, socio-economic profile and other relevant demographics are what produce reliable results. They

go as far as drawing large random samples from telephone directories and other available national data banks. To conduct credible polls, traditional polling institutions also take cognizance of the wording of the questions, data processing, margin of error and randomization. Yet they fail, sometimes. Remember Brexit, for instance. Many polls wrongly predicted that the NO votes were in the majority. We were all shocked when a similar event played out in the 2016 US presidential elections. Hence, the validity of polls that don’t go through such a process leave a lot to the imagination. Online political polls in Nigeria are a glorified attendance exercise; the wording of the questions, the survey design, the sample size, demographics are given short shrift. Well-structured online polls capture relevant demographics and factor in not just those willing to vote but those who can i.e. those with a permanent voter card (PVC). It is, however, difficult to factor in the sample and population. For instance, a poll conducted on a clearly partisan blog or by a social

media influencer, will usually reflect the same political leaning and bias of the blog or influencer. Relying on such online polls is like patronizing prophets with a penchant for prophesying after the event. Another issue that’s gained prominence in political polling is how to determine respondents who are likely to vote. The internet is available to everyone, young and old. Millennials including teenagers are the most prominent users. So, it is important to know, for instance, the age of respondents. If not, we might have a sizeable chunk of respondents below the voting age. This makes the poll invalid and misleading. Another peculiar polling issue is margin of error. Unlike what you might think, margin of error isn’t about the poll itself but the sample size. People who are in the business of statistics call it Margin of Sampling Error (MOSE) and it is determined by the sample size. The greater the sample size, the lower the MOSE and hence the more confidence one can have in the poll results. Traditional polling institutions always include this in

their results. For no experts it can be somewhat tricky. Take for example a poll result in which 52 percent of respondents say President Jonathan was likely to win the 2015 election with a 5 percent margin of error. In other words, President Jonathan has a plus or minus 5 percent chance of winning the election i.e. between 57 and 47 percent. MOSE is, however, calculated for each candidate independently. That means the opposition candidate favoured by the remaining 48 percent of the respondents is somewhere between 43 and 53 percent. So, it’s anybody’s guess. To poll how Nigerian voters will cast their ballots in an election, any survey sample worth its salt must be robust, representative and reliable. The sample must resemble as far as possible the relevant demographics of the voting population whose behaviour it’s trying to predict. Online polls today don’t meet these requirements and are at best barometers for issues heating the body politic.

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EDITORIAL Fresh FM’s demolition: Worrisome development for the media

PUBLISHER/CEO

Frank Aigbogun EDITOR Anthony Osae-Brown DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya

EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure ADVERT MANAGER Adeola Ajewole FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu HEAD, HUMAN RESOURCES Adeola Obisesan

ecently, Yinka Ay e f e l e ’s M u s i c House located in Challenge area, Ibadan, Oyo state, was demolished by the Oyo state government. The Music House which houses Fresh FM was said to have contravened Oyo state urban planning structure. As expected after the partial demolition of the house, accusations and counter accusations of compliance and noncompliance followed. Oyo state government continues to insist that Music House deviated from its original building structure plans and that series of letters asking the owners of the building to rectify and update the building licence were not respected. On their part, the owners have consistently maintained that they have, in writing, responded to all the correspondents from the state government. Exploiting grey legal spots, the Oyo state government went ahead to partially demolish the building. While Fresh FM continues to count its losses and hinging such on its inability to campaign for and support the government of Governor Abiola Ajimobi, the government has continued to reiterate that the exercise has nothing to do with politics. Against the perceived

notion by the FM station and some members of the public that the exercise was to witch-haunt Fresh FM, the government insists it followed due process in the demolition. Whatever be the case, the demolition of the building demonstrated how those at the corridors of power could either disobey the laws or use their powers against their perceived enemies. The actions of the government once again call to mind the ugly relationship that existed between the media and the junta during Nigeria’s undemocratic era. Oyo state government should be mindful of this and desist from taking us back to the military era where the press and individuals were afraid of airing negative views against juntas. The core of democracy is the strict adherence to the rule of law by the ruled and the ruler. Any government that wants to follow democratic principles must first show its citizenry that it is willing to obey the principles of the rule of law.And this is why Bishop Matthew Hassan Kukah advices the rulers to make themselves believable and trustable before the people. This is because when rulers demonstrate willingness to follow democratic due process and obey the rule of law, the governed will be willing to follow suit without being intimidated

to do so. The government at all levels must be willing to accept criticism, irrespective of where such criticism is coming from. In fact, a civilised democracy listens to the opposition more than its supporters, knowing that constructive criticism from the opposition is likely to represent the true feelings of the masses than the praise of regime supporters. To have a prosperous and developed country where things work, institutions would have to be strengthened. The first step towards doing this is to ensure that everyone (both government and the governed) operates strictly according to the law and governments especially respect the freedom of expression of everyone in the society including their opponents. No government worth its salt will engage in the illegality done by the Oyo state government. What is more, it was done on an odd day and odd hour with the pretence that the building violated urban planning code. Come to think of it, the legality or illegality of any structure is the duty of the judiciary to determine, and no one else. With relevant arguments and documents, it is the duty of the courts to determine if Music House had violated the law or not. Demolition notice did not repre-

sent a ‘demolition order’ from a court of competent jurisdiction permitting Oyo state government to demolish the property. Upon serving the so-called “demolition notice’’ to it, Music House took civilised and appropriate steps to stop the demolition of its properties by approaching the court to restrain the government from the planned demolition, pending the outcome of the case earlier filed before it by Ayefele. But the court could not determine anything as the demolition was done on Sunday, August 19. We wholeheartedly agree with the Broadcasting Organisations of Nigeria (BON) that such behaviour by the state government is an oppressive and high-handed act which demonstrates flagrant “muzzling of the media and press freedom, which must be condemned by all civilised minds.” Indeed, as the National Broadcasting Commission (NBC) puts it, “the demolition was a worrisome development and did not speak well of the state government.” We commend the commitment of NBC in opening up discussions with the state government in order to find a balanced, consensus solution for both parties. And we hope the outcome will not amount to empty government promises as NBC rightly observed was the case of Breeze 99.9 FM in Nasarawa State.

EDITORIAL ADVISORY BOARD Dick Kramer - Chairman Imo Itsueli Mohammed Hayatudeen Albert Alos Funke Osibodu Afolabi Oladele Dayo Lawuyi Vincent Maduka Maneesh Garg Keith Richards Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Sim Shagaya Mezuo Nwuneli Emeka Emuwa Charles Anudu Tunji Adegbesan Eyo Ekpo

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Wednesday 05 September 2018

BUSINESS

COMPANIES & MARKETS

DAY

Expert brings innovation, safety into world of Art with ‘Ginger Starch’ Pg. 14

C o m pa n y n e w s a n a ly s i s a n d i n s i g h t

PZ Cusson’s finance cost affects bottom line CYNTHIA IKWUETOGHU

h e a n nu a l re port of PZ Cussons Plc for the year ended 31st of May 2018 shows a 47.7 percent drop in aftertax profit, hit by a surge in the Net finance cost of the company by 434.1 percent. The expected uplift in trading did not materialize along with an increased competitive pressure as the Group posted a Net finance cost of N651.72 million, 434.1 percent from the Net finance income of N195.09 million posted in the last fiscal year in 2017. The w eaker revenue growth and increased operating expenses due to inflation resulted in a reduction in group’s Profit after Tax (PAT) to N1.93 billion down from N3.69 billion in the previous year. Profit before Tax (PBT) also declined by 51.9 percent. According to Kolawole Jamodu, chairman of PZ Group, “as higher oil prices have contributed to increased foreign exchange reserves and a relatively stable exchange rate regime, liquidity has not flowed down into the economy making the

GDP growth rate to be less than 2 percent.” “Inflation continued to drop as the naira strengthened closing the year at 11.6 percent with high interest rate bringing borrowing cost to hover around 20 percent per annum. With these developments, the expected uplift in trading did not materialize couple with increased competitive pressure.” “These factors impacted on volumes, prices and margins across most categories and segment that the business participates in leading to a bearing on the performance of the company” R e v e nu e g row t h w a s marginal with 2.9 percent to N80.55 billion from N78.22 billion in 2017, with 94 percent of the revenue generated domestically and 6 percent from export to other countries. Cost of sales also increased by 11.6 percent to N56.1 billion from N50.27 billion in 2017. Selling & distribution cost and Administration expenses grew by 5.6 percent and 17.6 percent respectively bringing a decline in operating profit by 37.74 percent to N8.23 billion from N13.22 billion in the comparative period in 2017. Foreign exchange loss was

L-R: Abubakar Suleiman, managing director Sterling Bank; Toyin Sanni, chief executive officer, Emerging Africa Group, and Ijeoma Obatoyinbo, managing director, FBN Quest Funds, during the Nigerian Bar Association (NBA) Panel Session on Financial Inclusion and Wealth Management in Abuja.

down by 38.7 percent to N5.39 billion. The decrease in profit on disposal of fixed asset brought about a 35.2 percent fall in other income to N128.75 million. Interest income was down by 62.8 percent to N180.66 million owing to a major fall in the interest earned from PZ related company, Harefield Industrial Nigeria and PZ Wilmar Limited

UK Azimo partners Interswitch on instant money transfers

uropean digital mone y transfer service, Azimo, has announced a strategic partnership with leading African payments business, Interswitch Group, to further enable instant money transfers from 23 countries in Europe to any customer in Nigeria. Speaking on the partnership, Michael Kent, founder and CEO of Azimo, stated that Nigeria’s teeming population makes it Azimo’s biggest market. He said: “A huge and rapidly growing population, coupled with the explosion of smartphone ownership, means that Africa, and Nigeria in particular, is one of the most exciting fintech markets on the planet. “We look forward to working with fintech leader, Interswitch, to build new digital low-cost financial services that drive inclusion

and transform the financial lives of our customers in both the UK and Africa.” Digital money transfers play a significant role in the growth of Nigeria’s economy – the largest in Africa. Remittances to the nation were worth $22 billion in 2017 - the equivalent of 5.6 percent of Nigeria’s GDP and higher than the country’s oil revenues. By reaching millions of customers in Nigeria, Azimo’s partnership with Interswitch will also help to tackle the problem of financial exclusion in a country where 40 percent of the population is unbanked. Commenting on the new alliance, Mitchell Elegbe, Group Managing Director and CEO at Interswitch, said: “We formed this partnership with Azimo as they are a global leader in crossborder payments with great tech capability and a strong

knowledge of our core markets. This agreement is a key milestone in our common strategy to better serve Nigerians wherever they are located around the world.” In the longer term, the deal will see the two companies build new mobilebased financial services for Interswitch’s rapidly expanding customer base of over 25 million people in Nigeria, Kenya, Uganda and Tanzania. The partnership comes at a time when British Prime Minister Teresa May, on a recent visit to South Africa, divulged that the scale of opportunity for London’s businesses across Africa is huge. She noted that 111 African companies have already come to London to raise the funds needed to invest and grow, hence their desire to ensure that the UK is the partner of choice for African nations.

whereas, interest cost grew by 186.6 percent to N832.37 million in 2018 from N290.48 million in 2017. Gross Margin which represents the portion of each dollar of revenue that the company retains as gross profit fell to 30 percent in 2018 from 36 percent in the previous year. Return on Equity (ROE) measures a corporation’s

profitability by revealing how much profit a company generates with the money shareholders have invested also decreased to 4 percent from 8 percent in 2017. Earnings per share (EPS) of PZ decreased by 45.2 percent to 46 kobo from 84 kobo in 2017 while the share price of the company remained unchanged at N15 from its previous close at the close of

the market on Friday, 31st of August 2018. “During the last few months of the year, trading conditions in Nigeria were further tightened. There has been no structural change in the landscape of the categories in which we operate with brand shares remaining strong.” As reported in June trading update by the group.

Progress urged at Bangkok Climate talks on Paris Agreement Implementation

gainst the backdrop of severe and record heatwaves, bushfires, droughts and floods across the world, governments are convening a supplementary meeting in Bangkok to prepare the implementation guidelines of the Paris Climate Change Agreement. The guidelines are needed to make the Paris Agreement work fairly and transparently for all. Following a two-year negotiation process, the implementation guidelines are set to be adopted at the annual climate conference, COP24, to be held in Katowice, Poland in December. While the talks have made modest progress, the Bangkok meeting is the last opportunity before COP24 to accelerate negotiations. “Building on progress made, countries now need to take a decisive step forward in preparing the ambitious and balanced outcome that we need in Katowice,” Patricia Espinosa, executive secretary of UN Climate Change, said at

a press conference Reaching success at COP24 will be challenging without the preparation of an official negotiating text on the implementation guidelines. “It will be critical for negotiators in Bangkok to produce solid text-based output that can function as the basis for the concluding negotiations in Katowice and be turned into the final implementation guidelines of the Paris Agreement at COP24. The texts capturing progress to date are not yet refined enough for this purpose,” Espinosa said. “With only six additional days for negotiations in Bangkok, UN Climate Change is carefully coordinating demands to fully support countries in their important task,” she added. Highly technical in nature, the implementation guidelines are needed to monitor progress on climate action. Such action includes measures to deal with climate impacts such as droughts or floods and urgent support to enable

developing countries to contribute to climate action. They are also essential for determining whether emissions are being reduced at an ambitious rate to achieve the Paris Agreement’s goal of limiting the global temperature increase to well below 2°C, and as close to 1.5 °C as possible this century. Importantly, the guidelines are also needed to make the agreement’s institutions fully operational beyond COP24. “Every year, the impacts of climate change are getting worse. This means that every year, the poorest and most vulnerable, who have contributed almost nothing to the problem, suffer more,” Espinosa underlined. “Completing the operational aspects of the Paris Agreement and unlocking practical climate actions by putting in place the implementation guidelines represents a key opportunity for the multilateral process and society at large to address a global problem.

BUSINESS DAY

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Wednesday 05 September 2018

COMPANIES & MARKETS Expert brings innovation, safety into world of Art with ‘Ginger Starch’ Modestus Anaesoronye

etermined to provide options in p ro d u c t i o n materials for works of art as well as innovation in printmaking, Awoh Stella Mofunanya, an artist has explored the benefits of ginger starch for creative works. Apart from the health benefits and the culinary possibilities of ginger, Stella Awoh has gone further to reveal other benefits that were not know in the industry. In her research spanning several years of hard work on “exploring pulverized ginger starch as a vehicle for printmaking, using a constructed multipurpose

machine, Mofunanya has been able to demonstrate and prove that ginger starch can indeed be introduced into the print making process to neutralize the potential toxic components in the print making process. Mofunanya will be unveiling her works during an art exhibition titled ‘A New Dawn’- A synthesis of Art Product’ slated to hold between the 6 and 11 September 2018 at Didi Museum, Victoria Island Lagos. The exhibition, which will have as special guest of honour Folorunsho Alakija, deputy chairman, FAMFA Oil Limited and guest speak as Oluwatoyin Ogundipe, vice chancellor, University of Lagos will showcase body of works based on explorations of a production of pulverised

ginger starch, used in a constructed multipurpose printmaking machine. dryer and printing ink based on pulverised starch for her production process. Her rationale is that artists are consistently exposed to a plethora of potentially toxic chemicals in the materials available to them for art production. In her work she investigates the chemical compositions and antimicrobial activities of pulverized ginger starch to determine its effect on printing ink. In this the antibacterial of the starch against the toxicity of the ink sharply reduces the harsh odour of the printing ink. It also eliminates the toxic mutagenic and carcinogenic material in the ink, making it safer for artists use.

L-R: Paul Adebo, head, SME liability, First City Monument Bank (FCMB); Hamid Joda, divisional head, public sector; Enahoro Okhae, chief executive, Pause Factory; Abimbola Adebayo, managing director, PointLine Limited; Rose Anoh, chief executive officer, Nutrihit Nigeria Enterprises; Abdullahi Mainasara, acting regional head, Abuja & North, FCMB, and Sola Oyegbade, head, training academy of the bank, during the free FCMB Business Empowerment & Sustainability Training (BEST) for SMEs held in Abuja.

EkoCorp positions for growth University names Conference Centre after FCMB Subomi Balogun after transformation HOPE MOSES-ASHIKE

koCorp, the quoted company of Eko Hospital has positioned for growth after completing the first phase of its transformation programme. The Board of EkoCorp, at the beginning of this year made a decision to launch a transformation program, aimed at setting the organization on a path for growth. The first phase- a 6-month period, which started in March was largely focused on laying a foundation for the transformation and was led by one of Nigeria’s leading management consulting firms – Ciuci Consulting. The six-month interim managers led by Chukwuka Monye, interim chief cxecutive officer/ Ciuci Consulting, managing partner, focused on improving the operations of the organization by optimizing processes, enhancing the financial management systems and improving patients’ experience. According to the interim managers whose term ends August 31, 2018, it was imperative to address fundamental operational issues before embarking on the growth agenda so that the implementation of the related strategies are sustained and all stakeholders can enjoy the resulting benefits. Monye said Eko Hospital enjoys significant patient patronage on a daily basis across its

different locations, particularly Surulere and Ikeja. With its patient volumes, it was important to transition the organization into an operationally efficient organization. One critical way to achieve this objective was to automate key areas of its operations, specifically, implementing a hospital and patient management system and a robust account management system. The management team increased the visibility of financial activities by ensuring online real-time daily reporting and proactive interventions when discrepancies occur in transacting with HMOs. The impact of this new system can be seen in the average monthly revenue of the last 6 months, which surpassed that of 2017 by 13 percent. Although there are several experiential touchpoints for patients, the critical areas that were prioritized during the first phase phase included improving customer service; patients’ wait time and the hospital’s ambience. Speaking at a press conference in Lagos, Monye said the interim management team commenced the implementation of a comprehensive strategy to enhance its human capital. “A lot of emphasis was placed on capacity building in different areas. Another major program was restructuring the performance management system to ensure that all clinical and non-clinical staff make patients the priority in everything that they do”.

he University of Ibadan (UI), Nigeria’s premier tertiary institution, has again honoured the Founder of FCMB Group, Michael Olasubomi Balogun by naming its modern and multi-purpose conference centre after him. In a brief ceremony on Thursday, 6th of September, 2018 the Center will be unveiled and renamed Otunba Subomi Balogun Conference Centre. According to the University, the decision is in recognition of Balogun’s numerous and significant contributions to the development of the institution, education and the country over the years. The University of Ibadan, in a letter to the FCMB Founder from the Governing

Council and signed by the Registrar and Secretary to the Council, Olubunmi Faluyi, said: ‘’We acknowledge with gratitude, your prayers and goodwill for the continuous progress of the University’’. Michael Olasubomi Balogun is said to be the first Board Chairman of UI Ventures, who brought his business acumen into play to transform the organisation into a full-fledged business group. Today, UI Ventures whose hotel arm has about 110 rooms of quality standard, is into printing, landscaping and horticulture, consulting, bakery products, has a computer training centre, petrol station as well as a fast food business, among other interests.

Commenting on the naming of the architectural masterpiece after him, Balogun expressed profound gratitude to the University of Ibadan for finding him worthy of the honour. He stated that: ‘’I thank you for appreciating my services and commitment to the University of Ibadan by this recent honour that you bestowed on me. I feel honoured by and I deeply appreciate the long and personal relationship I have had with the University of Ibadan over the years. It is my prayer that the University will continue to retain the position of a primus-inter-pares among the tertiary institutions in Nigeria’’. The newly named Otunba Subomi Conference Centre

has five halls altogether. It can accommodate between 3,000 and 5,000 guests in the main auditorium and up to a total of 7,000 guests in the entire complex. The parking lot that can accommodate about 700 cars is also a major value added. The interior of the conference rooms are tastefully decorated. The Center comes equipped with varied facilities and a high standard of service to complement its relaxed and friendly atmosphere. It offers an extensive range of modern facilities and services. Such facilities include presentation screens, projectors and individual highly sensitive microphones that can be used independently in each of the halls or in all the halls simultaneously.

Orange Academy showcases creative work on ‘art of positive thinking’

t’s about that time of the year when Africa’s 1st Practical School of Integrated Brand Experience and Idea Management, Orange Academy, holds the Art of Positive Thinking Exhibitions and annual Immersion ceremony themed ‘The Game Changer’. The Academy is set to showcase creative works done for social causes and induct recent graduants of the class of 17th and 18th session of its most prized program: The school of Integrated Brand Experience, also known as IBX.

The Immersion ceremony is an annual rite of passage for every graduating Brand Experience Specialist and an induction into the Art of Positive Thinking (APT) through the exhibitions of creative works from students that will conscientize the public on topical societal issues. This year’s Art of Positive Thinking (APT) Immersion which also serves as a rallying point for stakeholders and opinion shapers in Nigeria’s brand and marketing industry is slated to hold on 9th of September 2018 in Lagos. The grad-

uants are to showcase some of their creative works focused on ‘Dyslexia’ and ‘Election violence’ as a part of this year’s APT Initiative. With well over 5000 Alumni scattered across the diverse economic landscape, Orange Academy in technical partnership with CoolBrands House of the Netherlands has for over a decade been at the forefront of discovering, developing and deploying young talents for the Brand Marketing Communications and Nigeria’s Commercial Arts Industry.

Tunde Owoeye, a member of Orange Academy’s board and a facilitator at the Academy, in his remark stated that “Orange Academy’s core essence is to nurture change agents that will revolutionize the business of telling Africa’s story within and beyond. In line with this notion, we are introducing what we call the Orange Xchange, as a part of this year’s Immersion which will serve as a common ground for our Alumni to cross-pollinate ideas with one another based on varying industry experiences”.

Wednesday 05 September 2018

BUSINESS

DAY

COMPANIES & MARKETS Tecno mobile boosts SME growth in new campaign Jumoke Akiyode-Lawanson

ECNO Mobile’s 2018 light up your dream campaign came to a remarkable end as four budding fans and entrepreneurs each went home 1million Naira richer to help achieve their dreams. After thousands of entries and weeks of tedious work, 20 participants were selected to make a live pitch before fans, staff, executives, guests and judges, Actress Bisola Aiyeola of Big Brother fame and Celebrity blogger Noble Igwe at a glamorous event which took place at the TECNO headquarters in Lagos, where the grand prize winners Jeremiah Okoh and Henry Emeka Nnamani went home smiling with 1 million Naira and a brand new TECNO SPARK 2 each. The contestants who came 3rd – 10th went home with brand new TECNO SPARK 2 smartphones, while those in 11th to 20thposition went home with brand new rechargeable fans. It was an emotional moment for one of the grand prize winners; Jeremiah Okoh, a ginger Agropreneur from Kaduna,

when he spoke on how grateful he is to God and TECNO as tears of joy trickled down his eyes “standing here and holding this cheque is a dream on its own. I cannot believe this.’ Speaking on how he participated he said “my friend drew my attention to this activity, I decided to give it a shot and see me today, I really cannot believe this is me holding a 1 million Naira cheque in my hands” Also speaking at the event, Jesse Oguntimehin, PR and strategic partnership manager TECNO Nigeria, said; “you already know that at TECNO, giving is part of our DNA. Nigeria is filled with a lot of talented people that do not have the opportunity to bring that dream to the fore due to several reasons which of course includes finance. So, we are doing our bit by providing the finance to make things easier for them and we are very glad to get these young dreamers closer to their dream.” The search for the millionaires began on the 13th of June 2018, after the launch of TECNO’s latest smartphone from the Spark stable – TECNO SPARK 2, a device built to capture impressive bright and clear

Business Event pictures, gave an opportunity to everyone with a dream to win the sum of 1 million naira by just creatively showcasing their special talent or life goals. Interested participants were simply asked to upload a video, image or text of their dream, and demonstrate how they will celebrate if they eventually win the 1 million Naira. After they make the submissions on their social media platforms with the hashtag #LightUpYourDream2018 and tag TECNO Mobile with its different social media handles, they get their friends to like and share to support them. Also, interested participants who were probably too shy to do something creative, were also given the opportunity to win by simply walking into any designated TECNO retail store to purchase the new TECNO Spark 2 as a raffle ticket will be given to themthat raffle automatically gave them the opportunity to win the money also. The Light Up Your Dream competition was started last year after the launch of the first TECNO Spark edition, and is seemingly becoming an annual event.

Shoprite creates traction to store, entice consumers prices

he leading store brand, Shoprite has commenced daily prize give away totaling N1million to celebrate its anniversary among various in-store promotions. The promotion tagged, “the Birthday Jackpot” kicked off from 30 July and will end on 27 September 2018. According to Carl Erickson, general manager, Shoprite Nigeria, “to participate, customers simply have to purchase 3 or more of the participating products.” He said, “Once all the items have been rung up at the till,

the cashier will inform the customer if they have won and participants stand a chance to win from N5, 000, N50, 000, and N250,000. “With this promotion we want to reward our customers for their loyalty. It’s not only a celebration of Shoprite Nigeria’s birthday, but also the people staff and customers - without whom our business would not exist,” said Erickson. According to him, customers can enter the Birthday Jackpot as often as they wish, provided a minimum of three participating products is purchased every time.

He named participating products to include Aquafina, Bounty, Pepsi, Mars, Milo, Molfix, Ocean Beach, CloseUp, Heineken, Nescafe, Sunlight, President Margarine, Nestle Golden Morn, Cooks, Hollandia Yoghurt, Golden Phoenix, Dettol, Amstel Malta, Five Alive, and Jameson Irish Whiskey. Shoprite launched in Nigeria in 2005 with the opening of its first store in the Lekki area of Lagos state. Each year Africa’s biggest retailer celebrates its birthday with massive discounts and in-store competitions.

L-R: Veronica Nwanze, senior human resources business partner manufacturing, Nigerian Bottling Company Limited; Yanju Olomola, chief executive officer, The Source Coaching Limited; George Polymenakos, managing director, NBC, and Toyin Sanni, chief executive officer, Emerging Africa Capital, at the launch of Women in NBC Network in Lagos.

L-R: Sunny Nwagboi, head, corporate communication, NSIA Insurance Company; Ebelechukwu Nwachukwu, managing director; Shola Tinubu, president, Nigerian Council of Registered Insurance Brokers (NCRIB); Ekeoma Ezeibe, NCRIB hon treasurer, and Hafeez Toriola, director, Lagos State Vehicle Inspection Service, at the August Edition of NCRIB Members’ Evening in Lagos

L-R: Priscilla Vande, head coach, UAM Tillers; Odenigbo David Ebuka, Team Captain, UAM Tillers; Isaac Daniel, team captain, UNIMAID Dessert Warriors, and Daniel Usman, head coach, UNIMAID Dessert Warriors, at the pre-match press conference for the Higher Institutions Football League (HiFL) final first round match between UAM Tillers and UNIMAID Dessert Warriors in Makurdi.. recently

Airtel celebrates Africa’s outstanding achievement in film, television Industry

eading telecommunications services provider, Airtel Nigeria, on Saturday, September 1, 2018 reaffirmed its commitment to the development of Africa’s film and television industry with the sponsorship of the biggest award night for African movies, the Africa Magic Viewers’ Choice Awards (AMVCA). Speaking on its sponsorship of the AMVCA, the telco said that the creative industry is bringing about positive change in the perception of the African continent, growing recognition of talents and the rich culture of

the continent’s tradition, noting that its sponsorship of the awards is also to connect Africans as well as promote and support the entertainment industry in Nigeria and Africa at large. The sixth edition of the Airtel-sponsored Africa Magic Viewers’ Choice Awards (AMVCA) had over 120 nominations for 27 categories, filmmakers and actors from several African countries including Kenya, Malawi, South Africa, Ghana, and Nigeria in attendance at the Eko Hotel and Suites, Victoria Island, Lagos. East African movie 18 Hours,

which tells an authentic African story was crowned the Overall Best Movie at the awards. Tatu by Akpe Ododoru and Tunde Akinniyi won the Best Lighting Designer Movie/TV Series; Okafor’s Law by Yinka Edward clinched the Best Cinematography Movies/TV series; The Bridge by Ngozi Obasi and James Bessinone won Best Costume/ Designer Movie or TV Series. The Flesh Business by Dennis Wanjohi was announced as Best Documentary. Tunji Afolayan bagged the Best Art Director Award for his outstanding role in Lotanna.

Bukar Bukarambe, director-general, Nigerian Institute of International Affairs (NIIA), (l) with Nagabhushana Reddy, Indian High Commissioner to Nigeria, , during the NIIA ambassadorial news conference in Lagos. NAN

16 BUSINESS DAY

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Leadership

Wednesday 05 September 2018

SHAPING PEOPLE INTO A TEAM

Cloud computing is helping smaller, newer firms compete NICHOLAS BLOOM

s digital technology a democratizing force that allows smaller, newer companies to compete against giant ones? Or does it provide even greater advantage to incumbents? That question has gotten a lot of attention lately, in response to data showing that the rate of new business creation in the U.S. has slowed, and that in most industries the biggest firms have higher market share than they did a decade ago. Despite those trends, our research suggests that technology can in fact provide an advantage to small and new firms. In recent research, we studied the adoption of cloud computing across U.S. businesses. Cloud computing is an information technology paradigm based on remote access to a shared pool of computing resources. Putting data “in the cloud” essentially means paying people to manage your data, and being able to connect to their servers via the internet to access the data whenever and wherever you need it. The popularity of cloud computing has exploded during the last half a decade. By cutting the fixed costs of computing — avoiding the need to hire IT staff, servers and hardware — even the smallest firm can satisfy large and unexpected computing needs. For example, KenSci, a small Seattle-based health care analytics company, uses machine learning techniques to analyze hundreds of variables about patients’ conditions to provide real-time predictions about mortality, readmissions and other health-related risks. By relying on the cloud, KenSci has been able to scale up and offer its services worldwide, without building a sizable ITinfrastructure beforehand. The computational agility of cloud

computing has been playing a role in manufacturing as well, fostering the creation of new smart products. Pivothead is a firm with 25 employees producing wearable technologies to help the blind and visually impaired. Information collected by the wearable sensors are sent to the cloud, processed through machine learning algorithms, and transformed into speech or text in order to help the client navigate the surrounding environment. These anecdotes suggest that cloud computing has “democratized computing” by bringing it to the masses of firms. Our research based on a data set of over 1 million U.S. firms confirms this. The data set comes from Aberdeen Information’s call center, which has been keeping a record of the hardware and software used by U.S. firms since the 1980s. Specifically, we found three key results. First, cloud computing has seen massive recent growth. Second, the adoption of cloud computing has occurred across the U.S., not just in one region — albeit

with heaviest and earliest adoption being concentrated in urban and educated areas. But third, and most strikingly, cloud computing — unlike other technologies like personal computers and e-commerce — has been adopted first by smaller and younger firms. THE ADOPTION OF CLOUD TECHNOLOGY ACROSS INDUSTRIES IN THE U.S. Cloud computing has been rising since 2010. We see cloud adoption rates rising from 0.3% in 2010 to 7% in 2016, which is an annualized growth rate of almost 50%. Moreover, this rise has occurred in every broad industry group we studied, highlighting how the increase in cloud computing has spanned the U.S. economy. Our research also shows the geographic spread of cloud computing, showing a broad adoption across U.S. counties. This is not just a technology used by startups in New York and San Francisco — it’s being adopted all across the country. SMALL, YOUNG AND CLOUDY Our data also show that the very

smallest firms have the highest adoption rates. Firms with fewer than 25 employees have adoption rates of 10% to 15% on average, while medium-sized firms have lower adoption rates. Indeed, adoption rates are lowest in firms with about 100 employees, perhaps because they have enough scale to adopt in-house computing systems but not enough scale to be able to afford both those in-house systems and cloud services. The largest firms — those with 500 employees or more — again see rising adoption rates, typically with 5% to 10% of firms adopting cloud computing. This increase in cloud computing use also turns out to be surprisingly robust. We see this across industries, firm types and years in our data. Small firms really do seem to be the pioneers of cloud computing adoption. For contrast, we compared the adoption of cloud computing to adoption rates for two other technologies: PCs and e-commerce. These show the more classic pattern of greater adoption by large

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firms. Cloud computing stands out as being particularly attractive to small firms. But it’s not just small firms driving the adoption of cloud computing. Young firms are adopting cloud computing faster than older ones. So, the newest entrepreneurial companies are the pioneers of adoption. Again, we did not see that with other technologies — older firms tended to be the first adopters of PCs and e-commerce. All of this suggests that cloud computing is an unusual technology that appeals to smaller, younger firms. We believe its ability to provide high-powered computing without the overhead costs associated with in-house software and hardware provision has driven this. In this sense cloud computing has been democratizing for many industries. Flexible access to computing resources allows small firms to scale rapidly and to experiment with new products and features. This operational agility can be particularly valuable when facing uncertain demand or a fast-evolving competitive environment. These are encouraging findings, especially in light of the decline in business dynamism and the rate of new startup creation. Although we don’t have data on how cloud computing affects firm performance, it’s not hard to imagine that lowering computing costs would substantially improve the chances of success for younger and smaller companies.

(Authors’ note: We thank Toulouse Network for Information Technology for funding the data.) Nicholas Bloom is the William Eberle professor of economics at Stanford University. Nicola Pierri is a Ph.D. candidate at Stanford University.

Politics & Policy Wednesday 05 September 2018

C002D5556

BUSINESS DAY

Timi Frank raises alarm over fresh plot to arraign, embarrass Saraki INNOCENT ODOH, Abuja

ormer Deputy National Publicity of the All Progressives Congress (APC), Timi Frank, has raised alarm over fresh plots by the Presidency and the ruling APC to arraign President of the Senate, Bukola Saraki on cookedup charges in their desperate bid to nail the Kwara-born politician. Frank in a statement in Abuja said the aim of ASO ROCK and the Adams Oshiomhole-led APC is to embarrass Saraki and frustrate Saraki’s chances of being nominated by the People’s Democratic Party (PDP) to run against Buhari during the party’s upcoming presidential primary election. According to Frank the presidency has ordered the police and a foremost anti-graft agency to arraign him in court this week over spurious charges. Frank said: “Events of the last three years has shown that the raison d’être for President Muhammadu Buhari-led administration ferocious attacks against Saraki is based on their phobia that the President of the Senate may contest for President and defeat Buhari in 2019.

Frank

“Now that their worst fears have been confirmed by the formal declaration of Saraki to contest the 2019 presidential election last week, they are once again frantically foraging for criminal charges to hang on his neck. “I have it on good authority that the fresh plot to arraign Saraki this week is the first out of the series of strategies being perfected by

APC to clamp down on opponents of direct primaries JAMES KWEN, Abuja

he ruling All Progressives Congress (APC) has threatened to severely deal with members opposing the adoption of direct primaries in nominating candidates for the 2019 general elections. APC National Executive Committee, NEC had at its last Thursday meeting in Abuja resolved that both direct and indirect primaries as well as consensus nominations be utilized. But barely 24 hours after NEC resolution on the mode of nomination, the National Working Committee, NWC of APC rescinded the decision and ordered for the adoption of direct primaries for nomination of candidates for all offices. Yekini Nabena, APC National Publicity Secretary in a statement on Sunday said , “the attention of NWC has been drawn to an illegal meeting to hold on Sunday at Transcorp Hilton hotel in Abuja by some members of our Party organs, with a view to fault the decisions made by the NWC followed by the National Executive Committee (NEC) as regards the mode of the

Party’s primary elections”. According to Nabena, APC “want to state clearly that the meeting which has been fixed for 2pm is illegal and an attempt to puncture the sincere efforts being made by the Comrade Adams Oshiomholeled NWC to reposition our Party ahead the 2019 General Elections and to ensure unity, equity and justice in the Party”. He said, “the outcome of such meeting which is already known will be a nullity and we admonish our members to disregard such meetings in the interest of the Party. It is illegal to call such a meeting outside the purview of the constituted authority. “The identities of those plotting such meetings have been identified and unless they desist from such they will be dealt with in line with the Party’s Constitution at the appropriate time. “The NWC will resist any attempt to disrupt the current peace and harmony prevailing in our great Party after the exit of some members of our Party. “We urge any member who is not satisfied with the decisions of the Party to utillize channels provided by the Party’s constitution to air their view.

Buhari and his cronies at their ongoing ‘business trip’ in China.’ “Recall that in a statement on Friday, I had alerted the nation and the international community that Buhari’s APC Governors, Senators and heads of security agencies studded entourage is not in China to boost trade between both countries but to plot the removal of Saraki and how to

rig the 2019 elections in favour of the APC. “Come to think of it, the French President, Emmanuel Macron, U.K. Prime Minister, Theresa May and German Chancellor, Angela Merkel, all came to Nigeria with a retinue of captains of industries and highly reputed Chief Executive Officers (CEO) of thriving business organizations to prospect for trade and investment opportunities in Nigeria, but Buhari is in China with his wife, an armada of APC politicians and heads of security agencies to plot judicial and extra-judicial measures against the leaders of opposition political parties in the country and how to compromise the 2019 general elections,” Frank declared. He added: “Recall that I have continued to cry out against the unmitigated intimidation, harassment, persecution, intolerance, vilification, arrests and kangaroo trial being unleashed against those opposed to Buhari’s re-election bid - to the exclusion of his key allies with corruption allegations against them. The former APC chieftain however called on Nigerians and members of the international community not to be deceived by the fresh charges being concocted by the

Presidency against Saraki. He insisted that the bogus charges being drafted by the assigned security agencies are simply to frustrate Saraki’s presidential ambition the same way they have tried unsuccessfully in the last three years to emasculate his leadership of the Senate and to remove him from office as President of the Senate. “It is a proven axiom that no democracy can survive without a vibrant and virile opposition, therefore any attempt to gag opposition political parties in the country and decimate their presidential aspirants for the 2019 elections amounts to another coup against democracy and I call on Nigerians and friends of Nigeria to remain vigilant and continue to speak-up to safeguard the nation’s hard earned democracy. “Above all, I don’t want Nigerians to forget that Adams Oshiomhole has vowed to get Saraki out of office by hook or crook. He also threatened to end Saraki’s dominance of Kwara politics in 2019. “Now that Saraki has thrown his hat into the ring for the presidential election, the party in connivance with the presidency is out to sully his name and stop him from participating in the upcoming election,” he said.

Why I remain in PDP - Mohammed Ajia SIKIRAT SHEHU, Ilorin

ohammed Ibrahim Ajia, a g overnorship aspirant of the People’s Democratic Party (PDP) in Kwara State, has declared that he remains in the opposition party because he has all it takes to become the next governor of the state. Ajia, who spoke with journalists immediately after a meeting convened by Concerned Emirate PDP Elders Forum in Ilorin at the weekend said: “I remain in PDP because I have all it takes and I know that no one else can take the (governorship) ticket other than me. I am confident and confortable. “I have checked the data of registration of voters, the highest registered voters are within my age grade. From 40 to 18, they have over 60 percent registration capacity. “Politics is a game of number, this alone is enough for me to be comfortable in going to any election. We will go into the election and I am sure, I will emerge. So, I’m calling on all PDP in Kwara State to do all they can do and rally round support for me if really they want us to succeed in 2019.

“Because it is not just going to be election, it is going with the right candidate. Everywhere in the world now, we are talking about the youth and young people. So, it is our time now and I feel that PDP too would not make any mistake in supporting a youth candidate.” Speaking further, the governorship hopeful declared “I am a PDP member and I would remain a PDP member. The time I was supposed to leave the party, I never left the party when everybody was leaving because they were feeling that there would be dominance when the bigwigs of the country come into the party. But for me, I see that as a progress because their coming is to give us grand avenue to win the state. “So, for me, I am not considering not winning the primary election. I have been on the ground in this party putting things in order.” According to him, he joined the governorship race purposely to transform Kwara State, by creating wealth across the state, drive economy from the grassroots, improve infrastructure, overhaul all sectors and as well build on what has been done by past governors of the state.

He lamented that the 68 year old state was blessed with human and material resources that have not been fully harnessed for the common good of the people, as he even promised to mobilise resources internally to address peculiar needs and fund capital projects for infrastructure development. Ajia, founder of Mohammed Ajia Ibrahim Foundation who has touched hundreds of lives across the state, pointed out that his blueprint would ensure that youth are positively engaged to reduce crime rate in the society. “Our mission is for a new Kwara, a Kwara where a son of nobody can become somebody, a Kwara with economy that works for everybody even the rural women, a Kwara where the local governments have infrastructure; that is what we desire by a new Kwara. “I was invited to the meeting of Concerned Emirate PDP Elders Forum headed by Oba Ajara. At the meeting, I was able to explain to them what the mission and my blueprint for a new Kwara is about and at the end of the day, elders were impressed and gave me a nod and promised to do all that it takes to support my ambition.

BUSINESS DAY

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Wednesday 05 September 2018

Politics & Policy

Political narratives in Enugu: The Ugwuanyi strategy ANUKWU OJI, Enugu

t is very clear that the 2019 governorship election in Enugu state might just be a mere formality, if the number of organizations supporting the second term bid of Ifeanyi Chukwu Ugwuanyi is anything to go by. Popularly known as ‘Gburugburu,’ Ugwuanyi has in the past few months had several endorsements by various groups from different quarters both in and outside the state. Among the 17 local government areas of the state no fewer than two different groups from each of the local governments are seriously drumming support for the second coming of Ugwuanyi. It is the same story among nonindigenes resident in the state. Even some people in other political parties are drumming support for him. As of today most people who were fighting the former governor for not endorsing them as governorship candidate of the People’s Democratic Party, PDP in 2015 seemed to have realized that Ugwuanyi was the right choice. Though some of them have defected from the PDP to other parties, they still could not contest Ugwuanyi’s political sagacity as they are either interested in the senate or House of Representatives position. It is believed in some quarters that the name Gburugburu has either put fear in some politicians especially those from Nsukka zone or that the stakeholders from Nsukka counseled them to drop their ambition to enable Ugwuanyi complete his second tenure. However, a former senator from the zone who recently lost his case against Ugwuanyi at the Supreme

Ugwuanyi

Court over 2014 PDP primary is rumored to have concluded plans to defect to the APC in order to pick the party’s governorship ticket to square with Gburugburu in the 2019 governorship election. A few weeks ago, another indigene of the state from Enugu East Senatorial District declared his intention to contest for the number one seat under the APC at the Nnamdi Azikiwe stadium not minding the governorship zoning arrangement in Enugu which favours Enugu North zone. Enugu west zone handed over to the North in 2015 which means after Ugwuanyi’s tenure, Enugu East zone would be expected to produce the next governor. One thing that also surprised many people was the endorsement of the governor by the Enugu

state traditional rulers which is the first of its kind in the history of the state. The reason for this particular action may be because of the governor’s humility and how he is trying to stamp his feet in every Autonomous community in Enugu state through visit every community, (VEC) projects where the government is working with the leadership of the communities to execute a project of their choice that will cost N10m in each of the communities. In some quarters Ugwuanyi is viewed as someone who had a blueprint before he became governor. During his campaign days Ugwuanyi said he was going to develop Nsukka and build up more urban areas. Today Nsukka town can compete with any other city

2019: FCT Minister, Bello issues quit notice to appointees, others JAMES KWEN, Abuja

s political activities leading to the 2019 general elections gather momentum with aspirants jostling for elective offices, Minister of the Federal Capital Territory, Muhammad Bello has directed political appointees and civil servants with political ambitions to resign. The directive is meant for political and career office holders in both the Federal Capital Territory Administration, FCTA and the Federal Capital Development Authority, FCDA. Bello ordered that, those affected are expected to handover all government property in their custody to the Permanent Secretary, upon the submission of their letters of resignation. The Minister’s directive contained in a circular PS/FCTA/589, dated 28th August, 2018 which Business Day is privy to, was sent to the Executive Secretary, FCDA, Chief of Staff to the FCT Minister, Secretaries of Mandate Secretariats and Senior Special Assistants for onward circulation to the entire workforce. The circular was also made

available to all Directors in the FCTA and FCDA, Special Advisers (Community Relations), Special Assistants, Heads of FCT parastatals and agencies. Christian Ohaa, FCT Permanent Secretary, personally signed the circular which reads in parts; “you may wish to note that in compliance with the provisions of the Constitution of the Federal Republic of Nigeria, 1999, (as amended) and the Electoral Act

Bello

2010, (as amended), the Independent National Electoral Commission (INEC) has issued the Timetable and Schedule of Activities for the conduct of the 2019 General Elections “Consequently, the Honourable Minister of FCT, Malam Muhammad Musa Bello has directed political appointees and other employees in the Federal Capital Territory Administration who wish to seek elective positions to formerly resign from their current positions to enable them pursue their political ambitions.” “Finally, I wish to express the deep appreciation of the FCT Administration to the effected officers and to wish them success in their future endeavours.” No political appointee or civil servant has so far resigned in compliance with this directive but Business Day learnt that the Mandate Secretary for Education, Isa Maina, Special Adviser on Community Relations, Isah Bwari, Amanda Pam the Mandate Secretary for Health and Human Services Secretariat and Umar Shuaibu, Coordinator of Abuja Metropolitan Management Council are those seeking elective offices.

in the state with good roads, street lights among others. He has also indicated interest in Awgu, one of the oldest local governments in the state, that has been neglected for too long by past administrations in the state. Despite the fact that the nation is facing financial challenges, the governor pays civil servants on or before 25th of every month. He promised to complete the Diagnostic center to stop Nigerians from traveling outside the country for medical checks. Today, the center has been completed with the state of the art equipment and will soon put to service. The governor told residents of Enugu that everybody including the traders must benefit from the resources of the state. True to his

pledge, traders in Enugu state are enjoying traders’ empowerment scheme through Raffle draw in all the registered markets all over the state. Ugwuanyi has humility as one of his greatest weapons with which he silenced his assumed political enemies (if he has any). This is because for the past three years as the governor of Enugu state one of his highest achievements is restoring peace in the state. He sees the people of Enugu as his brothers and sisters where everybody is important This is a state where members of other political parties attend the governor’s functions. Within the three years in the office he has boosted the state government IGR base through the adoption of treasury single Account (TSA) which helped to plug major revenue leakages and enhanced the state internally generated Revenue to N22billion in 2017 fiscal year, completed construction of 52 roads in various parts in all the 17 local governments, thereby boosting trade and commerce in the state. Within the three year in office in office the governor was recognized with special Awards, among them are Association of Nigeria Accountants where the government of Enugu state scored very high in financial management and overall good governance, Enugu is ranked 8th out of 36 in Fiscal Sustainability Index by Budget, 3rd most suitable state in Nigeria, 1st in the southeast and 9th in the country based on Internally Generated Revenue as against Federal Allocation. Enugu is also one of the 12 states in Nigeria that can survive without allocations from the Federal Government and best state in rural and urban development, which was conferred on it by BusinessDay among many others.

Agbaje calls for free, fair, credible PDP convention SAMUEL ESE, Yenagoa

lujimi Agbaje, People’s Democratic Party (PDP) candidate in 2015 governorship election in Lagos State has stressed for a free, fair and credible national convention of the party ahead the 2019 general election. Agbaje stated this Monday at Toru-Orua in Sagbama Local Government Area of Bayelsa State during a condolence visit on Governor Henry Seriake Dickson over the loss of his mother, Gold Coast Dickson. A statement by Dickson’s Special Adviser on Media Relations, Fidelis Soriwei, said Agbaje noted that there would be no internal conflicts in the PDP if the accreditation, voting and entire processes at the convention are transparent and credible. He described the array of presidential aspirants jostling for the party flag as the beauty of democracy and making of choices saying the party was not losing sleep over it, but looking forward to a peaceful, free, fair and transparent national convention. He stated: “Democracy is about choices. What normally creates a problem is when people feel the

process isn’t fair. If for example, on the day of the convention, accreditation goes well, there is no contest about who the delegates are and then people go out to vote peacefully, then the exercise will be seen to be free and fair. “The idea of having many aspirants is good for our democracy. I don’t think we should lose sleep if there are many aspirants.” Agbaje described the death of Dickson’s mother as painful in view of the close relationship that existed between her and her children including the governor and urged him to be consoled by the fact that she lived an exemplary life. Describing Governor Dickson as a friend and a good party leader, he expressed gratitude for his invaluable contributions towards promoting internal democracy within the PDP, particularly the supportive role he played during his governorship election in 2015. In response, Governor Dickson thanked Agbaje for taking out time to visit his country home to commentate with his family on the death of his mother saying the death has created a huge vacuum in the family that would be difficult to fill.

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Politics & Policy

2019: Why I’m the PDP presidential aspirant to beat - Kwankwanso Rabiu Musa Kwankwaso represents Kano Central in the National Assembly and one of the PDP presidential aspirants in the October 5 and 6 presidential primaries. The immediate past governor of Kano State spoke to journalists after he picked his party’s Nomination and Expression of Interest forms at the PDP national secretariat in Abuja. OWEDE AGBAJILEKE was there. Excerpts: What is your reaction to the dissolution of Kano State PDP exco by the party’s national leadership? onesty, I am hearing it for the first time. Some of these things, when they happen, you just try and find out, do your best to make the best out of it.

In the past, you have argued that the PDP should pick its candidate from the North West. Don’t you think that will polarise the party from other geopolitical zones? Everybody has his own opinion. Even when the party zoned this position of president to the North, you may find somebody who will even want to come and vie from elsewhere. You are free to bring any advice, we are here as members of PDP to advise our leaders, other stakeholders especially the delegates on how to win election easily. By the grace of God PDP will win election in 2019 but I think what you said was a suggestion that look if you are picking, and consider the issue of numbers because politics is a game of number, it is not a game of quality or whatever. Especially that from all indications the APC will print only one form for one person and everybody knows where that person comes from. So, if you go and take from the other side we are afraid that he or they may win as a result of sentiment or as a result of whatever feeling of people from that part of the country. Unfortunately, we find ourselves in this situation now and we have to take everything into consideration. I pray to almighty God to show me when a political party will field a candidate in this country without zoning without anything. So that at the end of the day, Nigerians will look around and pick the best out of Nigeria. But as of this moment we are not there yet unfortunately. Will you elect for direct primaries for PDP? Well, I think parties should look out their situation. The situation of PDP is such that we have gone through all the processes. And we are experienced enough to select the best system for the party. Some of you may still remember that in 1999 when I was elected as governor, the PDP then elected their candidates through direct primaries. And from that experience, we sat down here in this secretariat and thought there was need for us to review it. And that was why in 2003, and since then, we are doing indirect elections. And I am sure one day the party may decide to go back to direct election. But I think now, a decision has been

Kwankawaso

taken by the party to do indirect election. And we are all abiding by the position of the party. So, I think now, it is beyond my opinion or your opinion. The party has taken a position. Don’t you think the October primary is too close to the General Election? There are two issues. There is an issue of parties, there are also issues of INEC. INEC has given us a deadline and each and every party must comply. Most of those people who purchased forms or who are going to purchase forms are either my colleagues as governors, ministers, senators, members of the House of Representatives and so on. We know ourselves very well and for me, I can assure you that we will do everything possible to have a rancour-free primary election and after the primary election, we will come together again and ensure that the party wins. Don’t forget, in 2014, I contested the same seat in Lagos and I came second. I am sure you didn’t hear me say anything against what happened at that time. And we came as a family and I am sure you remember that we had 484 counsellors without any rancour, 44 local government chairmen, 40 state assembly members all for that party (APC) and of course 24 House of Representatives members, three senators, a governor and almost two million votes for the man who is on

the seat now (Buhari). So that is how we operate. I don’t think there is anything that will happen different from what we have seen and done in previous years. What is your reaction to the President’s refusal to sign the Electoral Act (Amendment) Bill into law? Our leaders must have known this and must have deliberated. And immediately we resume, I am sure they will bring it up. And as a senator I don’t want us to start speculating now. When the time comes, I am sure you will see me in the chamber of the Senate probably tell the whole world my opinion on that. What is your take on the issue of consensus candidacy? Normally, that is the best. But you see, life is not that easy. There may be some people who would tell you

Some of you may still remember that in 1999 when I was elected as governor, the PDP then elected their candidates through direct primaries

that they would prefer to get one vote and there is nothing you can do. This party should follow due process and rule of law. This party must ensure that everybody is given an opportunity. But if there is that window, which I believe exists, if our leaders can come together and say you are our consensus candidate, I am sure they will give a form and we will stand by you. What stands you out from other presidential aspirants? Looking at you, I know you know the answer. I think there are so many things that are working for me as an aspirant. Some of these things are just by mere luck. Some of them are as a result of hard work, determination and commitment. Take for example, if you come from Kano, it is the most populous state going by the last census in this country and politics is a game of number. Secondly, North West is also the most populous zone. If you look at the figure as they stand now, North West is roughly North East plus North Central. And therefore, North West has more population when you compare it with any other zone in this country. And that is on one side. On the other hand, we are lucky that by the grace of God, we are given long life, we have done so much. We had so many opportunities to interact with so many people in this country. And it is difficult to go to any place now without seeing

my personal friend. Because don’t forget, I was Deputy Speaker of the House of Representatives in 1992. We had 593 members. We lost just over 100. And you can see that we still have quite a number still living. And I do relate with them. And all these members who are automatic delegates to this Convention are automatically Kwankwasiyya members; meaning they are my supporters. That is the starting point. And we can go on and on. As Minister of Defence, I had so many colleagues. And now I have my colleagues as senators or as members of the National Assembly. And of course, I was in the Niger Delta Development Commission (NDDC) representing North West. And I am very happy that I was there to represent North West and it was an opportunity for me to understand the issues in the Niger Delta. I found a situation very horrible to the extent that I had to resign. People were sharing money and doing all sorts of things, I had to resign and submitted my resignation letter directly to the then President Goodluck Jonathan. So I had an opportunity to go round. And above all, we worked so hard in Kano State, especially as governor for eight years to the extent that we did things that many people thought was a miracle the way we did it. And that is why many people are saying that ‘we want him to come and do to Nigeria what he did to Kano State’. In addition, we have also worked as a movement - the Kwankwasiyya Movement. I can tell you today in Northern Nigeria, it will be a great surprise if you get to one house without a member of Kwankwasiyya there. And you must have known by now that the Kwankwasiyya Group is a well -disciplined group. We are so committed to Project Nigeria. I am sure you must have seen some of them who came here for my declaration, which saw so many young men and women from almost all Northern states; some of them were even hiring trailers to come to my declaration during raining season. You can imagine yourself in a trailer and it is raining. But they were happy because they want to ensure that there is good leadership in this country. And I am so happy that we have such young men and women in this country who support us as Kwankwasiyya members. These are people who are not looking for money to go for election. These are people who are determined to vote and protect their votes. And that is the meaning of Kwankwasiyya so all these things put together, gives me an edge over all other (presidential) aspirants.

BUSINESS DAY

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BUSINESS DAY

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In association with

a g @ bu s ines s dayo nl ine. co m

Why FG must curb foreign traders’ access to farm-gates ...fuels illegal export

Stories by JOSEPHINE OKOJIE

takeholders in the agricultural sector have asked the Federal Government to curb the rate at which foreign traders are accessing farms to purchase agric produce directly from farmers, while exporting them using improper channels. This practice, the stakeholders say, is against globally acceptable standards and robs Nigeria’s governments of revenue accruable to them, given that the produce are moved out of the country without payment of export taxes and necessary registration with government and private sector agencies such as the Nigerian Export Promotion Council (NEPC) and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA). Nigeria’s exporters are by law expected to pay 0.5 percent of their export products (Free on Board) as well as other fees collectable by the NEPC, NACCIMA and other government parastatals, depending on the type of commodity. This is what the foreigners have evaded over the years, which has disrupted the distribution value chain. “The international practice is through the commodity exchange or licensed warehouses. But in Nigeria, there are no regulations stopping foreigners from going into our farms to source for agric products, “said Obiora Madu, former chairman, export group, of the Lagos Chamber of Commerce and Industry (LCCI). “The implication is that the economy is being short-changed in the process and government

L-R: Wale Oyekoya, chairman, Bama Farms Limited; Antti Ritvonen, country manager, Dizengoff Nigeria and Paul Ilona, country manager, HarvestPlus Nigeria during a media chat in Lagos recently.

is losing revenue because in a situation where it is foreigners that is taking our products out it is possible that all the money will not come back into the country,” Madu added. Most of the foreigners that are involved in this practice do not bring back foreign exchange into the country as their transactions do not take place through the banks. Key players say this is bad for Nigeria’s economy which is badly in need of foreign exchange, hit by recession arising from oil price lows, which has slashed government revenue by over 50 percent, creating market distortions, and job losses. According to industry players, the international practice on purchase of agro produce is through the commodity chain or licensed warehouses. A commodity chain is a process used by firms to gather

resources, transform them into goods or commodities, and finally, distribute them to consumers. Most foreigner traders, especially Indians, work hand in hand with some dubious Nigerians in purchasing the produce directly from farmers, thereby creating unemployment for agro exporters who also source agro produce for exports. “The foreign traders cut us off from accessing the produce from farmers, as they prefer selling to Indians rather than Nigerian because of higher price offer. This makes it difficult for us to source locally and also increases our cost,” said Francis Irubor, chief executive officer, SJ-Emerald Global Limited, in a telephone response to questions. “It is not done anywhere in the world, that foreigners will

come into the country and source their produce directly from farms. Government at all level need to regulate their activities,” he said. The country’s export sector is still largely unorganised, undocumented and hard to track, as the majority of trade takes place in the informal sector which is wide open to corruption and robs government of much needed revenue. “There is a high rate of smuggling of agric produce through the borders to Benin, and some foreigners go into our farm gate to buy from farmers, using improper channels to take it out of the country,” said Tola Faseru, national president of the National Cashew Association of Nigeria. “All these affect our statistics and we are calling on the government to support farmers and stakeholders

in the sector in controlling the way foreigners go into our farm gates,” Faseru added. The Nigeria Export Promotion Council (NEPC) confirmed in early 2015 that 80 percent of non-oil export transactions of the country were not being recorded, accounting for the wide disparity in official statistics in the country and those provided by the ITC, a subsidiary organisation of the World Trade Organisation (WTO) and the United Nations Conference on Trade& Development (UNTAD.) There is often a wide disparity between the ITC data and data from Cobalt International Services, which is the indigenous company assigned with the role of calculating non-oil exports in Nigeria. This is because Cobalt calculates Nigeria’s non-oil exports from the point of exit or at the ports, while ITC calculates countries’ non-oil export figures from import countries or points of arrival, the point NEPC acknowledges. BusinessDay compared data between the two and found that more goods are leaving Nigeria u n re c o rd e d , d u e t o l a c k o f formalisation of several businesses in the country. Stakeholders in the sector called on the government at all levels to organise the commodity chain and regulate the activities of foreign traders in the country. Madu stated that the problem is with the country’s commodity chain. He observed that governments need to organise commodity chains in a way that each group plays its role, thereby ensuring that agric produce gets to the buyers through the proper distribution channels.

Nigeria’s fishing industry contracts by 1.4% in Q2 2018

igeria’s fishing industry has contracted in the second quarter of 2018 by 1.4 percent from a growth of 4.3 percent recorded in the previous quarter, data from the National Bureau of Statistics shows. On a quarter on quarter basis, the sector had a negative growth of 1.3 from a negative growth of 2.7 in q2 2017 to a negative growth of 1.4 in q2 2018. Key industry players that spoke with BusinessDay attributed the contraction in the subsector to a number of challenges. “If our government is not proactive about the problems in the industry, things will get very bad. Fish farmers across the

country suffered from the high cost of feeds last year and now cannot source finance anywhere,” Tayo Akingbolagun, former national president, Catfish Association of Nigeria (CFAN) said in a response to BusinessDay questions. “We cannot access any of the Federal Government intervention funds for agriculture and market for our fish is reducing. “The government is yet to address the request of the United States government as our fish is still being denied entry. Just three days ago, our dried fish was seized by the US government. All this is what is responsible for the sharp contraction in the sector,” Akingbolagun said.

He noted that the growth recorded in the industry in the last three years is fast declining and said

if nothing is done to address the issues, things would get worst. BusinessDay had on the May 3,

this year (2018) reported about the ban on fish and all fish products from Nigeria into the US, owing to the failure of the government to fully supply information requested by the Self Reporting Tool (SRT) before the due date. Up till now, the government has failed to provide the full information in the SRT, and this has continued to reduce market access for fish farmers in the country, as majority of the fish being produced locally are smoked and exported to the US, Canada and Europe. Real growth rate in the overall agricultural sector decreased by -1.8 percent from 3 percent in the q2 2017 to 1.2 in q2 2018 on a year on year basis.

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BUSINESS DAY

ag@businessdayonline.com

AgroNigeria launches Agronolly to showcase agric potential JOSEPHINE OKOJIE

ichard Mark Mbaram, chief executive officer, AgroNigeria says the organisation is planning to launch Agronolly, a TV series, to showcase the potentials in Nigeria’s agricultural sector. Mbaram, speaking at a press briefing recently in Lagos, said the organisation would be partnering with Nollywood actors to highlight the opportunities in the sector through the TV series. “We are taking agriculture to the next level with AgroNolly. We intend to have a TV series on agriculture to take up issues in the sector as they occur in Nigeria and Africa at large,” Mbaram said. To use the screen to demystify the nature of agriculture and demonstrate that there is wealth in it. If you want to feed Africa; you cannot feed Africa if you did not fix Nigeria’s agriculture because Nigeria is at the heart of Africa.

We are not talking Nigeria, we are talking Africa. “It is too long that agriculture has been kept secret; we want to democratise information about

How cashew processing offers high export opportunities JOSEPHINE OKOJIE

ashew is a crop with high export potentials, especially when processed. Currently, Nigeria processes less than five percent of its total cashew exports, causing an annual loss of N1.5 billion to the country. According to Anga Sotonye, chief executive officer, Universal Quest Limited, the biggest opportunity in the cashew industry is processing and the industry is waiting to be tapped. “Processing is where the money really is but we process very little for export. A ton of processed cashew as we speak, is $12,000 while a ton of raw cashew is $1,200. You can see the difference is massive,” Anga said. Export of cashew is now one big business, as Vietnam, the world’s largest cashew exporter, is currently experiencing its worst drought in a century. Cashew sells like hot cake in the United States, India, Spain and many parts of Europe. Apart from helping to maintain a healthy heart and bones, cashew also helps in weight loss. Ca s h e w nu t s a re u s e d i n producing chemicals, paints,

v a r n i s h e s, i n s e c t i c i d e s a n d fungicides, electrical conductors and several types of oil. Cashew exporters in Nigeria made $250 million in 2015 and $300 million in 2016, according to Tola Faseru, president, National Cashew Association of Nigeria (NCAN), who disclosed this to journalists at the Annual Cashew Logistics meeting, held in Lagos recently. Two good things about cashew are that its return on investment is as high as 55 percent and its payback time is just 12 months, say experts. The cashew crop can be grown in the entire South-West, South-South and South-East region, with Enugu, Oyo, Anambra, Osun and Kogi having the largest production areas. Nigeria’s cashew is usually harvested between February-June, though farmers stock the crop and export it all year round. Tips for Cashew export As a potential investor, it is very important that a thorough research is carried out to have a clear understanding of the business, what it entails and the target market. If you wish to process for the local or international market, then be ready to procure machines such as boilers, shellers or crackers, dryers and packaging machines. Cashew nut kernels are produced by shelling the raw cashew nuts which grow at the end of the cashew apples, using a sheller or cracker. An average hand sheller machine can shell 900 cashew nuts per hour. Cashew nut kernels are primarily judged by their size, colour and moisture content. Ivory colour whole cashew kernels represent the highest quality grade, while the broken kernels are seen as quality deterioration.

agriculture. This sector has to work for Nigeria and Africa,” he added. He stated that the organisation has gotten the support of the African Development Bank (AfDB), OXFARM

and the International Centre for Tropical Agriculture (CIAT), saying that funds will be raised through corporate sponsorship across the continents.

He said that the TV series will be an avenue to project the continents agriculture and also help disseminate information to farmers while also highlighting their challenges. Mbaram added that it would be a top to bottom approach. “We are going from the top to bottom, we are not going to start from the bottom to top. We feel that a top-bottom entry will be practicable; there are lots of players on ground now doing a lot of things. If they see some measure of window they can connect. “We want to hit at the opinion leaders; the core determinants in the socio-economic structure; policy makers, business leaders, financial sector providers; these are the elements we will bring together so that we can have a cascading of benefit to begin to mobilise at the grassroots. He also stated that the TV series would showcase the success stories in the country’s agriculture sector to help attract youths to agriculture.

How to establish an oil palm plantation OLUMAKINDE ONI

il palms are native to West Africa. Nigeria used to be the World’s largest producer of oil palms before the oil boom era. Malaysia has now taken the leading position. Oil palm plantations and allied industries are now the main stay of the Malaysian economy. According to experts, Malaysia came to Nigeria in the seventies to obtain oil palm seedlings. Apart from household consumption, oil palms serve as byproduct to numerous industries such as the food and beverage, cosmetics and the pharmaceutical industry. The palm can be used in various ways: the leaves are used in making brooms and as roofing materials (in the rural areas). The bark of the frond can be peeled and woven into baskets. The main trunk can be split like dawn timbers and used as part of building materials. Palm wine can be obtained from oil palm, red palm oil is readily obtainable from the fresh fruit bunches. When the fruit is processed, the residue obtained can be used as fuel (for cooking and fertilizer to improve soil nutrient). Red palm oil is used in cooking, making soap, candles and margarine. Palm kernel oil can be extracted from the nut. The residue obtainable in the process of palm kernel oil extraction, otherwise called palm kernel cake, is used to as livestock feed. Palm kernel oil is used in vegetable oil and soap making. Palm kernel shells are also useful as energy source and industrial raw materials such as mosquito coils when binded. The uses to which oil palm can be made seem non exhaustive. This

clearly indicates that investment made in the establishment of oil palm plantation is nothing but a wise one. The market is guaranteed for all the products of oil palm plantation in this era of global food crisis. Technical Information To establish an oil palm plantation involves getting a good site where rich, well drained acidic soils are abundant. The soil should have adequate quantities of potassium, magnesium and nitrogen. Soil tests should therefore be carried out to determine the nutrient status of the land. It is usually better to use the early maturing variety called Tenera, which bears fruits as from the fourth year. Other requirements include the procurement of seedlings, this can be obtained from reputable nurseries. Prospective investors must engage the services of agricultural experts in the course of establishing this project. Other cultural practices are planting, regular weeding, pruning and fertilizer application. Serious minded investors will be guided accordingly in the implementation of this project. Financial Aspect We are recommending a 20 hectare plantation for a start. A 20 hectare oil palm plantation can conveniently service a palm oil mill that will be established by the owner when the plantation starts to fruit. To establish a 20 hectare plantation a sum of N19, 300,000 will be required which can be broken down as follows: Pre-Investments: N300, 000 Land Acquisition: N10, 000,000 Land Clearing/Preparation: N3, 000,000 Seedlings procurement

400/hectare (8000 @ N500) : N4, 000,000 Other Cultural practices @ N100,000/hectare. : N2,000,000 TOTAL N14,000,000 ========= Note: The project scope can be higher or lower, depending on the financial strength of the prospective investors. Various governments (Federal, States and Local) can also set up this project and lease it out to individuals and corporate bodies on maturity. It is a way of diversifying the economy and also to create jobs and income opportunities for Nigerians. It is also one of the strategies for food security in the country and also in line with the transformation agenda of the present Federal Government of Nigeria. Income Analysis A matured plantation will start to give investor 12.5 tonnes per hectare of red palm oil annually from the fourth year per hectare. About 250 metric tonnes of oil can be obtained annually from a 20 hectares plantation. A tonne of red palm oil is a minimum of N150,000. Gross revenue of N37.5 million is obtained from red palm oil. We can also get 7.5 metric tonnes of palm kernel per hectare. This gives us 375 tonnes from 20 hectares. This translates to annual income of N26.25 million. Total income realisable is about N63.75 million while the annual operating expenses is put at N15 million. This leaves us with net income of N48.75 million annually for the investor, for the rest of his/her life. There are still other sources of income such as palm fronds and palm kernel shells. Serious minded investors can be assisted in the realisation of this worthwhile investment.

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Financial Inclusion

BUSINESS DAY

& INNOVATION What SANEF mean to individual, financial sector, government Supported by:

disbursed. The stakeholders have carried out trainings in different region, including Anambra, Kebbi and Kano among others. Also market storm has been done in Kaduna, Kano and a few other states, sensitising and awareness creation.

HOPE MOSES-ASHIKE

ecently, specifically in March this year, the Central Bank of Nigeria (CBN) in collaboration with the Bankers Committee established the Share Agent Network Expansion Facility (SANEF). A lot of Nigerian consumers and businesses have been asking questions about this project and how it can help improve the economy. Here are what you need to know about this project Shared Agent Network Expansion Facility is a project powered by the Central Bank of Nigeria, Deposit Money Banks (DMBs), Nigeria Inter-Bank Settlement Systems (NIBSS), licensed Mobile Money Operators (MMOs) and Shared Agents with the primary objective of accelerating financial inclusion in Nigeria. Financial inclusion The CBN in collaboration with stakeholders launched the National Financial Inclusion Strategy on October 23, 2012 aimed at further reducing the financial exclusion rate of adult population from 53.0 percent in 2008 to 20 percent by 2020. Several policies and initiatives have been introduced by the CBN to ensure that the target is met. The CBN introduced the cashless policy in 2012 as part of efforts to reduce the cost of banking services (including cost of credit) and drive

Risks Conflict of interest and customers’ complaints are seen as part of the risk factors but the project committee chairman has explained that conflict resolution mechanism has been incorporated in the project plans, while assuring that there would be no conflict.

What has been done so far There has been the creation of over 70,000 new financial access points, and nine operators are currently party to SANEF with N4.5 billion

Future plans There are plans to scale up Bank Verification Number (BVN) to 70 million by 2020 from 33 million currently. Already, 10,000 remote BVN devices have been ordered by NIBSS and currently being deployed to Banks, MMOs and Super Agents. NIBSS and the banks are committed to enroll 40 million new unique BVNs between now and year 2020, of which 10 million would be enrolled in 2018, 15 million in 2019 and 15 million in 2020, and NIBSS will pay agents N100 for every unique BVN enrolled. The SANFE project will see new product design that will help deepen financial inclusion such as a savings account bundled with an array of features (insurance, pension, micro credit). This will create a pull factor to attract the financially excluded into the system.

create a partition between the rich and the poor, educated and illiterate, and urban and rural dwellers because those with formal financial access have unlimited access to enhance their financial power with varied options from the formal finance providers. The lack of access to finance is dislcosed by analysts to be a critical mechanism for the persistent income inequality, as well as slower growth which influences resource allocation and the comparative economic opportunities of

individuals of the economy. Access to formal finance creates opportunity for people to increase their income and productivity through purchase and sales of goods and services with possibility of reduction in poverty and improvement in standard of living. Meanwhile, the Central Bank of Nigeria (CBN) said the 80 percent financial inclusion target is still possible, despite its initial statement that disclosed the country was not on track to meet the traget, as compiled from the apex’s bank website.

Godwin Emefiele

financial inclusion by providing more efficient transaction options and greater reach. In collaboration with other key financial sector regulators, the CBN in 2006 conceptualized the Financial System Strategy 2020. Also to further ensure that the financial inclusion target is met, the CBN, in 2017, inaugurated the Financial Inclusion State Steering Committee ( FISSCO) as well as the Financial Inclusion State Steering Committee (FISSCO). Why introduction of SANEF The initiative involves onboarding 40 million low income and unserved Nigerians into the financial system, increasing financial access points from the current 50,000 to 500,000 by 2020 and deepening access

to mobile and digital financial products and services such as savings accounts, micro loans, insurance, pensions by Nigerians. The project seeks to deepen financial inclusion in Nigeria through an integrated ecosystem with strong regulatory oversight, consumer protection and interoperable payment systems with limited concentration risk. It will create a platform for Nigerian owned financial services companies to grow, whilst empowering and creating jobs for Nigerians. So, wherever the SANEF sign is, a customer can perform basic financial services such as account opening, cash deposits, cash withdrawals, funds transfers and bills payments.

What Nigerians stand to benefit from the project It will reduce transaction cost, provide convenience, job opportunities and increased adoption of digital financial services. It provides a platform to handle government social disbursements and initiatives. In addition, it promotes Financial Inclusion and empowerment, positive social impact and development. 500,000 new jobs will be created through SANEF by 2020. To the financial sector The initiative will Increase adoption of digital payments, agility and flexibility, lower operational costs. It will reduce the barriers of lending to individual and small businesses, as well as help in Integration of the formal and informal

economy, social impact and development. To the CBN and the government The project will promote financial inclusion and social economic development. It will help in integration of the formal and informal economy, inclusive growth and development. It will enhance the ability to drive digital payments; improve tax collections, reduce crime and make social disbursements. The initiative will reduce cash dependency and improved data gathering.

Financial inclusion: Access or use? ENDURANCE OKAFOR

he two main issues in financial inclusion are the access to financial service and it usage by the people. Access to financial services and use of financial services are not the same when examined in the context of financial inclusion because some people may have the financial services available to them and they can indeed patronise the financial service providers. While others may may

have access and will not petronise the banks or any other financial institution. This is different from those who wish to be integrated into the financial system but they cannot do so because the providers are not within their reach. There is disparity in the use and access of financial services because the majority of people in sub-Saharan Africa, and especially in Nigeria are excluded from participating fully in the financial sector due to several reasons which in most cases are beyond the ability of the

vulnerable. Nigeria currently has about 41.6 percent financial exclusion rate and data from world showed that there was a decline in the banked adults in the country from 49 percent in 2014 to 44 percent in 2017. meanwhile, lack of access to financial service is a major factor responsible for persistent income inequality and slower growth as dsiclosed by Serrao et al. in a statement in 2013. The world bank however defined financial inclusion as the ability of individuals

and businesses to have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way. Access to formal financial services or financial inclusion in developing economies is critical to economic growth and reduction in inequality among citizens of a nation. Studies have showned that financial power that is derived where access to finance is possible could

BUSINESS DAY

Wednesday 05 September 2018

CityFile

LASCOPA threatens closure of shops over expired products JOSHUA BASSEY

agos State Consumer Protection Agency (LASCOPA) has served a seven-day notice to shop owners along Estate Plaza, Iju road, Agege to remove all expired products from their shops or face the wrath of the law. The monitoring and enforcement team of the Agency handed down the warning while working on a tip-off from a consumer who bought a pack of expired canned drink from the shop. On inspection of products in the shop, the LASCOPA team found out that most of the drinks were either expired or looked substandard. According to LASCOPA, the monitoring and enforcement team of LASCOPA would be revisiting the shop at the expiration of the notice to ascertain the compliance level. The agency further stated that it would monitor the activities of the shop in accordance with section 26 of the Lagos State Consumer Protection Agency law (supra) Kemi Olugbode, the general manager of LASCOPA, said that the ultimatum was part of the agency’s efforts to ensure that consumers not only get value for their money, but that all displayed consumable products are wholesome. Olugbodesaid that the action became necessary in order to rid the state of all forms of unwholesome products and ensure the safety of consumers from the dangers of expired products. Continuing, she warned that failure of the shop operators to comply with the notice served by the Agency would lead to the application of the full sanctions of the law on the owner of the shop. She further stressed that the era of cheating and short-changing consumers in Lagos was over and urged Lagosians to visit the agency’s office, call or send emails to report any individual or company infringing on their rights. Some of the expired products discovered at the shop includes: packs of Fayrouz, Star lager beer, Heineken lager and “33” export lager beer.

NDLEA raids clubs, hotels for drugs in Oyo

he National Drug Law Enforcement Agency (NDLEA), Oyo State command has commenced the raiding of hotels and clubs in Ibadan. The agency said that the action was to check drug trafficking and the use and sales of abusive substances. The state commandant, Omolade Faboyede, said this through the agency’s public relations officer, Mutiat Okuwobi, in Ibadan. The agency’s chief in a statement said that the first in the ongoing raids took place at 8.30 p.m. on Sunday at a beer parlour in Sango area of Ibadan. “The raid resulted in the interception of some abusive substances including 30 kegs of “Skrushy’’ drink and 20 bottles of the same drink. “Others were ladies’ bag containing cannabis sativa, bottles of codeine syrup, and 10×1ml Pemadex Dexamethasane injection, 11 shisha pipes and its pots. “It is worthy to note that “Skrushy” is a cocktail drink that contains mixture of different hard drugs including cannabis sativa, codeine, tramadol and watermelon to give it flavour,” she said. According to her, the combination or mixture depends on how sophisticated the area is. Faboyede said that NDLEA officials would still visit more joints and hotels where the illicit transaction was taking place. She noted that the agency’s recent investigations revealed that ladies and young adults were more prominent in the sales and usage of “skrushy” drink. Faboyede cautioned drinking joints popularly known as pubs and hotels against the sales of these illicit and abusive substances.

Newly built Pedestrian Bridge at Secretariat bus stop, Lagos-Ibadan Expressway by Lagos State Government.

19 foreign nationals arrested over oil theft

bout 19 nationals of Benin Republic have been arrested in Lagos by the Nigeria Security and Civil Defence Corps (NSCDC) for alleged theft of over 50,000 litres of petroleum products. Lagos State commandant of the NSCDC, Tajudeen Balogun, who confirmed the incident to journalists, said the suspects were arrested between August 28 and 30. He added that 13 of the suspects were picked up in a boat at Badagry while

heading for Benin Republic from the Niger Delta area. According to Balogun, the other suspects were arrested at Atlas Goove and Lagos Island. He said that they were unable to explain how they came about the products stored in different jerry cans and drums. “We recovered 300 jerry cans of 30 litres each containing petroleum products. ‘‘We recovered 40 jerry cans of 30 litres each containing diesel and another 40 jerry cans of same litres containing

kerosene. “We intercepted another Cotonou boat with 118 drums of different products, with each drum containing about 250 litres. “We have contacted the NNPC for the evacuation of the products to their depot at Mosimi in Ogun. All the suspects will be charged to court as soon as investigation is concluded,” said Balogun. The commandant commended sister security agencies, particularly the Nigerian Navy, for the collaboration to effect the arrest and seizures.

Lagos records 200% increase in domestic violence ... as over 3,000 recorded in 8 months JOSHUA BASSEY

agos State Domestic and Sexual Violence Response Team (DSVRT) has decried increase in domestic and sexual violence in the state saying over 3,089 cases have been recorded in eight months. Adeniji Kazeem, the state commissioner for justice and attorney general, disclosed this while briefing the media as part of activities to mark domestic and sexual violence awareness month in Lagos. According to Kazeem, the figure represents over 200 per cent increase compared to last year’s figure of 1,044. Represented by Funmilola Odunlami, the permanent secretary Lagos State Ministry for Justice, Kazeem said that seven persons had so far been convicted in the period under review. He said: “From January 2018 till August 2018, DSVRT has received 3089 reported cases. This indicates that the number of reports has doubled since last year when DVSRT handled a total of 1044 cases for the entire year.

“From January 2018 till August, 2018, the team has handled 1037 cases in the office. About 939 domestic violence cases, 245 child abuse, 40 defilement cases 22 rape cases, 13 cases of attempt to commit rape and sexual assault by penetration, 10 sexual assault by penetration cases and 48 other cases. We have started to see on average 150 new cases monthly. “There have also been reported cases through the 6820 USSD platform which was commissioned in 2017 to facilitate the swift reporting of incidents of domestic violence, sexual violence and child abuse. From 1st of January 2018 till date, DSVRT has received 2052 reports via the 6820 short-code. “A total of 718 actual cases were reported (a lot of the reporters were testing the short code to see if it actually works). Hence, DSVRT has responded to 357 reports of domestic violence, 195 reports of sexual abuse and 166 reports of child abuse, all reported via the 6820 platform. “What is most exciting about the platform is that it breaks the initial barrier of people not want to make a formal report at an office or police station, we are now

able to interact directly with survivors and concerned witnesses and take vital steps in dealing with a case.’’ The commissioner said that the team has also given a stronger focus on children who have witnessed Intimate partner violence this year, saying a total of 1187 children have been exposed to Domestic Violence within the home. ‘’Some of these children have been taken through counselling programs to ensure they are able to psychologically deal with the events they have witnessed without it having a permanent and negative impact on them,’’. He explained that the trends from the data revealed a steady increase in men coming forward to report cases of domestic violence, disclosing that’’ As at August, 2018, a total of 103 men came forward to report. This implies about 10 per cent of cases handled this year so far were reported by men.’ “We have also witnessed an increase in reporting of cases, via telephone and walk ins from other states, mostly from Ogun, Oyo and have referred such cases to the relevant agencies in the states,’ he said.

Wednesday 05 September 2018

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Pension Today

BUSINESS DAY

In Association with

Contributors still asking about safety of their pensions…

ike many other contributors, Segun is asking about the safety of his pension funds and how it is managed by the Pension Fund Administrators (PFAs) and secured by Pension Fund Custodians (PFCs). Here, experts at ARM Pensions provide answers and insights into some of the issues bothering contributors and retirees. What is the Contributory Pension Scheme about? The Contributory Pension Scheme (CPS) which commenced in 2004 is fully funded, privately managed, with third party in custody of the funds and assets and is based on individual accounts. It ensures that everyone who has worked receives his/her retirement benefits as and when due. Is the scheme mandatory for every worker? The CPS was extended in 2014 to cover employees in the public, state and private sector with at least three (3) employees and workers under the Federal Capital Territory. It is expected that those in the informal sector will soon be brought under the scheme. How does the scheme work? Every employee or contributor under the new pension scheme is expected to open a Retirement Savings Account (RSA) in his/her name with a Pension Fund Administrator (PFA) of his/ her choice into which all his/ her contributions and returns on investment are paid. An employee shall make monthly contributions of a minimum of 8 percent (formerly 7.5 percent) of the total of his/her monthly emoluments (i.e., monthly basic salary, transport allowance and housing allowance) while the employer in turn also contributes 10 percent (formerly 7.5 percent) into the employee’s RSA. Is there a regulatory function and what is its function? The National Pension Commission (PenCom) is

empowered by the Pension Reform Act 2004 (amended by Pension Reform Act 2014) to supervise and regulate the new pension scheme. The National Pension Commission issues licences to PFAs and Pension Fund Custodians (PFC), regulates their activities and generally formulates, directs and oversees the overall policy guidelines on pension matters in Nigeria. How is it different from any other previously existing pension scheme in the country? Most of the old pension schemes were not fully funded. Therefore, upon retirement, there were no ready funds to pay the pensioners. The new pension scheme is fully funded. Money is contributed into individual employee’s Retirement Savings Account (RSA) and when he/she retires; there will be money in his/her RSA to pay his pension. How much of my salary is being deducted? A minimum of 8 percent (formerly 7.5 percent) of the total of your monthly emoluments (i.e., monthly basic

salary, transport allowance and housing allowance) is deducted and your employer contributes another 10 percent (formerly 7.5 percent), thus bringing the total minimum monthly contribution to 18 percent. What role does my employer play in the scheme? Asides the 10 percent (formerly 7.5 percent) monthly emolument contributed by an employer into the employee’s RSA, your total contributions will be remitted by your employer directly to a Pension Fund Administratorof the employee’s choice. What is being done with my contributions? Your contributions are being invested by your PFA in line with the guidelines issued by the National Pension Commission and income from such investment is also credited into your RSA. When can I access my funds? Access to the RSA will only be allowed upon retirement. If an employee retires at the age of 50 years or more he/ she can have immediate access to the RSA. Similarly, if

RC634453

Diamond Pension Fund Custodian Limited 1A, Tiamiyu Savage Street, Victoria Island, Lagos State. Tel: 01-4613753, 2713680, 2713954 Fax: 01-2713955 Email: info@diamondpfc.com Website: www.diamondpfc.com

an employee retires before the age of 50 years due to mental or physical incapacity, he or she can have immediate access to his/her RSA. Whereas an employee under the age of 50 years who resigns or is disengaged in accordance with the terms and conditions of employment will not access the RSA until after four (4) months of such retirement if he/she does not secure another employment. Can I withdraw my entire balance at once? Withdrawal from your RSA can only be in line with the Act and regulations issued by the National Pension Commission. How do I access my funds and how long will it take? At retirement or loss of job, you are to contact your PFA with all necessary supporting documents as evidence of your exit from employment to enable them determine and advise you on benefits due to you in line with the Act and guidelines issued by the Commission. Accessing your benefit takes between 5 days to 2 weeks once you have submitted all necessary

documents. How safe is the scheme? All those managing or keeping custody of pension funds and assets are licensed by and continually regulated and supervised by the National Pension Commission. The functions of the Pension Fund Administrator (PFA) and Custodian are clearly spelt out in the Pension Act 2014.The Act and investment guidelines provide adequate safeguards against the misuse of the pension funds by any operator as it clearly states where, what and how pension Funds are to be invested. What is the guarantee that another government will not come and reverse the scheme? The Government cannot tamper with the pension funds in your RSA, because the Government does not have access to the account. Besides, the Government is primarily concerned with ensuring the safety of the contributions in your RSA by the enforcement of strict rules and regulations through the National Pension Commission. In the event of death, how easy will it be for my beneficiary to access my funds? Where an employee who has been contributing under the new pension scheme dies before his/her retirement, upon receipt of a valid Will admitted to Probate or Letter of Administration confirming the beneficiaries under the estate of the deceased employee, the PFA shall with the approval of the Commission release the amount standing in the RSA of the deceased to the personal representative of the deceased or to any other person as maybe directed by a court of competent jurisdiction in accordance with the terms of the Will or personal law of the deceased employee as the case maybe. How long will I continue to receive pension payments after retiring?

For as long as there remains a balance in your Retirement Savings Account. How much I am charged The PFA charges fees for the services being rendered on the RSA subject to such guidelines as may be issued by the National Pension Commission from time to time. Currently a maximum monthly fee of N100 and N5 for VAT for every monthly contribution is allowed under the regulation. Will my PFA continue to invest my funds after I retire? Yes, your PFA will continue to invest any amount standing to the credit of your RSA and the income from investment credited into your RSA as long as you remain on a program withdrawal with a PFA after retirement. How can I monitor my pension balance? Your Pension Fund Administrator (PFA) in addition to sending you an SMS notification once a remittance from your employer has been processed into your RSA, will also send regular/periodic statements of accounts showing all your contributions and income from investments to your preferred address. You can also view your statement online by obtaining log in details from your PFA. Can I change my PFA? An employee or contributor under the PRA 2014 has the freedom to move his account, once a year, from one PFA to another without giving any reason(s). This window will soon be opened by the National Pension Commission. What happens if I change jobs? Movement from one employment to another does not affect pension under the new scheme. The reform has removed the bottleneck associated with transfer of service from one organisation or sector to another, especially with regard to qualification for pension and the sharing formula for payment of pension as between employers.

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

BUSINESS DAY

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Wednesday 05 September 2018

E-mail: insurancetoday@businessdayonline.com

Analysts fear more oil and gas risks will leave offshore in new Tier-based capital …as insurers receive assessment advice Stories by MODESTUS ANAESORONYE

f the October 1, 2018 implementation date for the Tier-based solvency capital recently announced by the National Insurance Commission (NAICOM) holds, the industry might lose larger share of the domestic oil and gas risks to offshore reinsurers, analysts have said. The arguments is based on the fact that if only about six insurance companies make it to Tier one, at the end of the Tier assessment exercise being conducted by the Commission, it means that they few Tier one survivors will have to take just certain percentage of the total domestic risks, particularly the NNPC Consolidated Oil and gas accounts for general business. According to the analysts, the few companies will take percentage based on their risks appetite, so the other portion left, which other insurance companies had shared in the past before they were screened out, will be left for placement abroad. “You know that these companies will also watch their capital, so they can’t afford to take more than they can swallow, one of the analysts said. The analysts further stated that this however will be in the short run of about one year, till NAICOM clears more firms that will be raising new capital to up their Tier level (Tier One) in July of 2019, according to the timetable. The analysts also commended the NAICOM’s initiatives to embark on the Tier based classification, but stated that it is short timed but would have gained more traction

L-R: Lanre Ojuola, director of Operations, Nigeria Insurers Association (NIA); Yetunde Ilori, director general, NIA; Segun Omosehin, chairman, NIA Investiture Committee/ managing director/CEO, Mutual Benefits Assurance Plc; Bimbo Onakomaiya, committee member & managing director/CEO, Peak Thrust Insurance Brokers Ltd, and Jide Orimolade, committee member/managing director, Law Union & Rock Insurance Plc, during the pre-investiture press briefing on Tope Smart Investiture as the 23rd chairman of NIA held in Lagos.

if operators were given some time to raise funds. Meanwhile, BusinessDay learnt on Monday that NAICOM has released Tier assessment advice to companies, with fears that only five firms made the Tier one list. NAICOM in recent circular signed by Barineka Thompson, director, Supervision Directorate on behalf of the commissioner for Insurance announced takeoff date of now 1st October 2018. “In the exercise of the powers conferred on the Commission under extant laws, it hereby issue this circular for the introduction of the Tier–Based Minimum Solvency Capital Requirements, for assessment of capital adequacy and solvency control levels of all insurance companies in Nigeria, with effect from

October 1, 2018.” The circular further reads that, all insurance companies are required to ensure strict compliance with these circular by formally directing their staff to comply. “Only companies that meet the respective Tier requirements shall lead on new businesses in those categories with effect from October 1, 2018. Any case of violation shall attract penalty equal to the sum of the advised gross premium involved and in addition, the CEO and other relevant Officer(s) of the insurer shall be penalized as the Commission may “determine.” On the basis of assessment, the circular further said that companies shall be assessed in the first instance on their approved financial statement for 2017, and/or audited half year accounts for 2018. However, where a

company is yet to obtain approval for its 2017 financial statement, its last approved audited accounts will be used for the assessment. “Where in the event of an assessment failing below higher Tiers, such that an insurer does not meet the commensurate capital requirements, the insurer shall continue to service the obligations on the existing policies of the higher Tiers which are yet to expired, or arising on risks underwritten up to September 30, 2019 or until all obligations on them are exhausted, except in the case of annuity or other life businesses.” “All insurer that do not meet Tier 1 or 2 minimum solvency capital requirements but presently underwrites businesses in those Tiers, may however continue to participate in existing specific policies on

facultative insurance basis up to December 31, 2019.” “In the case of annuity or other life businesses, the process of portfolio transfer must be incepted within six months from the date of conveyance of Tiers assessment and concluded not later than one year and twelve (12) months for any subsequent re-categorization.” “ “At all times, an insurer shall not underwrite insurance policies or undertake risks outside the Tier Level of a risk class or combination thereof in the case of a composite insurer, that is authorized by the Commission. Any case of violation shall attract penalty equal to the sum of the advised gross premium involved and in addition, the CEO and other relevant officer(s) of the insurer shall be penalized as the Commission may

be determine.” In the new Tier-Based Minimum Solvency Capital, Tier 3 companies are those that falls within existing paid up capitals of N2 billion for life business; N3 billion for non-life business and N5 billion for composite business. Companies in this category will be limited to underwrite only risks in life business in the following areas - Individual Life, Health Insurance, Miscellaneous Insurances; while for nonlife they will be limited to underwrite risks in these areas - Fire, Motor, General Accident, Engineering (only classes covered by compulsory insurance), Agriculture and Miscellaneous Insurances. Tier 2 companies are those whose paid up capital has increased by 50 percent above the existing minimum capital. For life business, their paid up capital will be N3 billion and they are to underwrite all Tier 3 risks and Group Life Assurance (GLA); while for non-life, their paid –up capital base will be N4.5 billion and they will underwrite all Tier 3 risks, Engineering (All inclusive), Marine, Bonds Credit Guarantee and Suretyship Insurances. Tier 1 companies are those whose paid up capital has increased by 200 percent, above the existing minimum requirement. Life companies in this category will have capital of N6 billion, and will underwrite all Tier 2 risks and Annuity. While for non-life business, the paid up capital will be N9 billion, and will underwrite all Tier 2 risks and Oil & Gas (oil related projects, exploration & production), and Aviation Insurances. Composite companies in Tier3 will maintain N5 billion; Trier 2 N7.5 billion and Tier 1 will have N15 billion.

AIICO partners Wema Bank to deepen insurance penetration

IICO Insurance Plc., a leading insurance Company in Nigeria has concluded arrangements with Wema Bank to increase access to retail insurance products leveraging on the bank’s robust and efficient retail distribution

network. This is following the recent endorsement by both The National Insurance Commission (NAICOM) and The Central Bank of Nigeria (CBN). Adewale Kadri, executive director, Technical of AIICO Insurance Plc. stated

that it is another move by AIICO to demonstrate its commitment to increase awareness, access and deepen insurance penetration in Nigeria.“The public can now be linked to AIICO’s bouquet of retail products through Wema Bank’s digi-

tal channels anytime and anywhere” he said. Dotun Ifebogun, head, Retail & SME of Wema Bank stated that the bank is delighted to be partnering with AIICO on this initiative. He said “both organizations have a shared legacy of trust and

resilience that has won the loyalty of customers over decades. We look forward to fruitful outcomes on this endeavour to the delight of our highly esteemed customers and the general public”. AIICO Insurance Plc., a leading life insurer in Nige-

ria, commenced operations in 1963. It provides life and health insurance, general insurance, investment management and pension management services as a means to create and protect wealth for individuals, families and corporate customers.

Wednesday 05 September 2018

C002D5556

BUSINESS DAY

E-mail: insurancetoday@businessdayonline.com

Tope Smart, transformative leader the industry awaits ...Investiture holds next week Stories by Modestus Anaesoronye

nsurance trade group, the Nigerian Insurers Association (NIA) is lucky to have the person of Tope Smart, managing director/CEO, NEM Insurance Plc lead its executive council at this time, the investiture Committee of the Association has said. According to them, he is coming at a time when the market needs a transformative leader that will take the industry to the next level. “He is the pride of the industry and we have absolute confidence in him, says Segun Omosehin, chairman of the Investiture Committee. His investiture has been slated for 12th September at Oriental Hotels in Lagos. Known with ‘FIRST’ since his young age, Smart born 14th April 1964 had his Secondary Education at Community Grammar School, OmuoEkiti where he completed his O’ level examination and emerged as the overall best graduating student in 1981.

In 1987, he graduated with a Second Class Upper degree Insurance at the University of Lagos, and also won the University’s prize for the overall best graduating student in Insurance department; as well as the Unity Life and Fire Insurance Company Limited prize for the best graduating student in Insurance in the same year. Smart proceeded immediately after graduation for the National Youth Service Corps program at Everyman Insurance Brokers, Abuja where he was involved in the overall operations of the branch office, and was later offered employment as a Branch Manager with the same firm. He however left Abuja to join NigerianFrench Insurance Company Limited as one of the pioneer staff in 1989. In 1991, Smart completed his professional examination with the award of CII London where he equally won the prize for Distinction in Property and Pecuniary Insurance. He served Nigerian French in various capacities and became an outstanding staff in the company. No wonder, he

Tope Smart

was rewarded with a double promotion and was made to head the Marine Unit of the company, a position he held till he left the company. In 1991 he left Nigerian French and joined hands with two other people to pioneer Perpetual Assurance Company Limited as

Assistant Controller. He later rose to the position of a Controller, barely a year after the company commenced operations in 1992. In 1994, due to his continuous impressive results he was again promoted to the position of Assistant General Manager (Operations) of the company.

In the year 1995, Tope Smart joined Vigilant Insurance Company Limited as the General Manager/Chief Executive Officer. In view of the outstanding results posted in two years, the Board in 1997 approved his elevation to the position of Managing Director/Chief Executive Officer with shareholding in the company. Smart transformed the company from N6 million annual premium income in 1995 to an industry leader with a recorded premium income of about N1 billion in 2005. The company was acknowledged and adjudged as one of the fastest growing insurance companies in Nigeria then. The company was not only making profit but consistently paid dividends to its shareholders throughout the period. In 2007, Smart successfully spearheaded the merger arrangement between Vigilant Insurance Company Limited and NEM Insurance Plc, and was appointed the Managing Director of the merged entity. The company has since become the delight of shareholders and brokers alike. He has properly posi-

tioned NEM to be one of the industry leaders today. The company has won several awards. A visionary leader, Tope Smart, a very passionate Insurance Executive initiated the construction of a befitting edifice for NEM Insurance Plc. The building, now a pride to the Industry has contributed to the promotion of the image of the Nigeria Insurance Industry. In 2009, he set up a subsidiary in Ghana, named NEM Insurance Ghana Limited which he wanted to use as a Springboard to launch out to other West African Countries. Smart presently sits on the Board of Regency NEM Insurance and NEM Asset Nigeria Limited among others. In 2014, he was appointed by the Federal Government as Co- Chairman of Insurance Industry Transformation Committee. An alumnus of Havard Business School, he is a member of Ikoyi Club 1938. Smart an Assistant Pastor with Redeemed Christian Church of God is happily married with children.

Prestige Assurance to provide cover to Nigerian farmers FBNInsurance commits to Customer Amazement

n its desire to address the yearning of the general public and farmers in particular for protection against losses at affordable prices as well as expanding its share of the market, Prestige Assurance Plc has responded to the call in providing the muchneeded protection the players in the agricultural business desire. The Company known for its initiative exclusivity in special product design and development has already secured the approval of the Industry Regulator, the National Insurance Commis-

sion (NAICOM) to underwrite these agricultural insurance products tailored to suit the need of all classes of Nigerian farmers. Thus, reiterating its preparedness to offer agricultural insurance to Nigerian farmers at all levels and potential investors in the agriculture business. Speaking on the Company’s preparedness to underwrite agricultural insurance, Balla Swamy, managing director, stated that NAICOM’s approval is a testimonial to the Company’s capacity, competence and sincerity in supporting the growth of agriculture in

Nigeria. He stated that the Company acting as burden bearer, intend to take the worry out of the players in the agricultural sector and give them opportunity to make wealth. He stated further that the disasters that befall the farmers anytime there is a natural calamity, have serious adverse effects on the financial position of the nation. Farmers who suffer losses from catastrophic events usually look up to the government for financial aid, which may or may not come as these aids run into several millions of Naira.

BNInsurance has restated her commitment to outstanding Customer Service through the firm’s sponsorship of the 2018 Customer Amazement Revolution Masterclass with renowned Customer Service expert, Shep Hykens and accomplished economist, Benjamin Akande, a professsor. Speaking at the conference, Lead Facilitator, Shep Hyken, emphasised the need for every business to realise that today’s customer no longer compare apples to apples, but they compare the quality

of service received from the business to the best they have enjoyed elsewhere even if the industries were different. He went ahead to propose the Out-Convenience model for winning back the customer’s trust at all times. In his presentation, Prof Akande charged business leaders to commit to building a vibrant generation of youth leaders who will affect the Nigerian economic space going forward. Val Ojumah, managing director/CEO, FBNInsurance, who was also a discussant at the conference, commended the organisers

and other sponsors of the conference for their support. He reiterated his firm’s commitment to better customer service as a pre-requisite to continuous customer satisfaction via multiple touch points. The Masterclass, which was put together by The Workplace Centre, had various professionals from the financial services, health sector amongst others in attendance. Recall that recently, FBNInsurance hosted a successful Customer Forum in Aba as one of the avenues to engage with the business.

STI set to present accounts to shareholders

T L-R: Farouk Aminu, head, Research Strategy Management Department, National Pension Commission; Nkechi Naeche, CEO, Business Today and Akin Ogunbiyi, chairman, Mutual Benefits and Kemi Oluwashine, executive directed, Premium Pension Ltd during the five years Anniversary of Businesstody held in Lagos

he drive to continue to uphold comprehensive growth strategy still forms the bedrock upon which Sovereign Trust Insurance Plc is built, just as the company announce plans for its Annual General Meeting this month. Amidst the various challenges that characterized the industry within the year, Sovereign Trust Insurance Plc was able to record Gross Premium Written of N8.5 billion representing a 33 percent increase over the N6.3 billion recorded in 2016. The Net Claims Expenses in 2017 was N1.3billion which is a 9.5 percent improvement over the sum of N1.44billion recorded

in 2016 because of efficient claims management. In the same vein, the company recorded a Profit Before Tax of N202 million as against N44 million recorded in year 2016 representing over 351 percent increase. Profit after tax also stood at N157million, a 569% increase when compared with the sum of N23million recorded in 2016. Consequently, the Return on Capital Employed (ROCE) recorded a positive performance of 1.87 percent as against 0.47 percent achieved in the corresponding year of 2016. Similarly, the Investment income rose by 41.6 percent from N286million in 2016 to N406million in 2017.

In addition, the total assets rose from N9.5billion to N10.8billion representing 13.7 percent increase. The composition of the assets was well structured to position the company for better future performance. Olaotan Soyinka, managing director of Sovereign Trust Insurance Plc, reiterated the company’s unwavering commitment to creating value to both Shareholders and Stakeholders alike. In his words, “the path through achieving growth and sustaining same is not without its challenges but with the perseverance and doggedness of every member of staff, we were able to overcome and succeed as a team”.

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Transnet records 11.3 percent revenue increase Page 32

Africa, Europe 2017 tourism growth fastest since 2010

How to eat healthy at your hotel buffet

Page 31

‘Nigerians must benefit from foreign rail technology transfer’ Page 32

VW plans strategic comeback

...As auto-policy remains on neutral gear

acts have emerged that Toyota and Uber’s new $500 million deal strengthen the future of mobility globally. The car maker and the ride-hailing app’s tie-up will make selfdriving technology safer, more reliable, and enable the prediction of demand ahead of time. This is because the combination of Toyota’s purpose-built vehicles combined with Uber’s vast customer base and continuous data is set to make

Stories by MIKE OCHONMA

hile the search for a clearer dire c t ion on the 10 year old National Automotive Industrial Dvelopment Plan (NAIDP) by Nigeria which will restore investor confidence in terms of commitment and seriousness, the Federal Government and Germany has signed a memorandum of understanding to develop a joint vision for an automotive hub in the country. During a recent visit of Angela Merkel, the Chancellor of Germany to Nigeria, Volkswagen (VW) took the opportunity to sign a Memorandum of Understanding (MoU) in the presence of both the Chancellor and President Muhammadu Buhari in Abuja The Head of Volkswagen Sub-Saharan Region, Thomas Schaefer signed the agreement on behalf of Volkswagen with Okey Enelamah, the Nigeria’s Minister of Industry, Trade and Investment, . Following this development, the VW brand has taken the next step in expanding its influence and presence in Sub-Saharan Africa. This comes a day after the signing of the MoU in Ghana in the presence of Merkel and Mahamudu Bawumia Vice President of Ghana, whereby the automaker committed to set up a vehicle assembly and conduct a detailed feasibility study for the development of an integrated mobility solution in Ghana. In the MoU, Volkswagen undertakes to implement a phased approach in relation to the assembly of vehicles, initially from assembly kits with the long term view of establishing Nigeria as an automotive hub on the West Coast of Africa. This will include establishing a training academy in conjunction with the German government, which will train the initial employees. The academy will also provide broader technical training in automotive skills. It is also intended that a comprehensive VW vehicle and service network is developed in the country subject to commercial viability.

L-R: Thomas Schaefer, Head of Sub-Saharan Region & managing director of VW Group South Africa with Okechukwu Enelamah, Minister of Industries, Trade and Investment during the signing of Memorandum of Understanding (MoU) in Abuja, for the setting of automotive hub in Nigeria recently.

In turn, the Nigerian Government undertakes to accelerate the approval of the Nigerian Automotive Policy, currently under consideration. This includes the gradual transition from the importation of used cars to the manufacture and distribution of new passenger vehicles. The government has committed to providing a conducive legislative environment that will encourage the manufacturing of motor vehicles in Nigeria. According to Okey Enelamah; “The MoU is a major step in our walk towards the development of the automotive industry to achieve its potential contribution to the continuous economic development of the country.” The minister noted that, government believes in the strategic and catalytic role of the auto industry in the diversification of the economy and remains committed to encouraging and partnering with relevant stakeholders, especially investors and friends of Nigeria. Overall objective is to restore assembly and develop local content, thereby creating employment, acquiring technology and

reducing pressure on the country’s balance of payment. On his part, Thomas Schaefer commented: “This week Volkswagen has been able to demonstrate with conviction that it is serious about its intentions in sub-Saharan Africa. We are well placed to become a dominant player in Africa, as the continent continues to stabilise and develop economically, as the last frontier for the auto industry.” Volkswagen has a fully-fledged manufacturing facility in South Africa, and assembles vehicles in Kenya, Algeria as well as in Rwanda, in conjunction with an integrated mobility solution offering community car sharing and shortly to be launched Ride Hailing. Volkswagen will continue to grow its importer network in Sub-Saharan Africa and explore other opportunities for growth and development. As a next step, exploratory talks are being held with the Government of Ethiopia. “We are only starting with our initiatives in Africa and will continue to develop sales and service networks where applicable. We are also looking at future

Auto analysts say Toyota, Uber’s $500m deal will strengthen future mobility

assembly locations to determine if the markets have the potential and the necessary policy frameworks to be developed, to accommodate vehicle assembly,” added Schaefer. Thomas Schaefer is also the President of the Association of African Automobile Manufacturers and stated in his capacity as the President that he believed that it was important that a Pan African Auto pact be developed to promote and grow a connected Auto Industry in Africa. Under its TRANSFORM 2025+ brand strategy, Volkswagen is strengthening the regions and focusing on new up-and-coming markets. Alongside North and South America as well as China, the Sub-Sahara region plays an increasingly important role. Although the African automotive market is comparatively small today, the region could develop into an automotive growth market of the future. “Africa’s time is now and with good alignment between the African countries with automotive aspirations we can create intra African trade and a Win-Win situation for all,” concluded Schaefer.

self-driving technology safer, more reliable, and enable the prediction of demand ahead of time. Auto analysts believe the deal which has seen Toyota commit $500m (£385m) investment in Uber’s self-driving car programme a great endorsement in the future of mobility and sets an exciting precedent. Self-driving vehicles are a data-first problem. The more data you have, the more accurate the decisioning models can be, but also the more complex this data becomes to handle and process. The data used for autonomous vehicles is often petabyte (or more), so unless data processing technology exists to accommodate this extreme-data at sub-second response time, companies will be unable to effectively bring self-driving cars or fleets to market.

Wednesday 05 September 2018

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MTRAVEL

BUSINESS DAY

odern

Africa, Europe 2017 tourism growth fastest since 2010 ….China $258bn tops global outbound travels Stories by MIKE OCHONMA

nternational tourist arrivals grew seven per cent in 2017, the highest increase since 2010, according to the United Nations World Tourism Organisation’s (UNWTO) latest collection of Tourism Highlights. Last year’s growth was the highest since 2010, led by the regions of Europe and Africa, which received increases in arrivals of eight and nine per cent, respectively. Growth in arrivals was echoed by a strong increase in exports generated by tourism, which reached $1.6trillion in 2017, making tourism the world’s thirdlargest export sector. UNWTO Tourism Highlights 2018 Edition shows that international tourist arrivals reached a total of 1,323 million in 2017, some 84 million more than the previous year and a new record. The sector has now seen uninterrupted growth in arrivals for eight straight years even as international tourism receipts increased by five per cent in 2017. In addition to the $1.3 trillion in receipts that destinations earned, international tourism generated another $240 billion from

international passenger transport taken by nonresidents. This raised total tourism exports to $1.6 trillion, or $4 billion a day, which corresponds to seven percent of the world’s exports. These strong 2017 results were driven by sustained travel demand for destinations across all world regions, including a firm recovery by those that have suffered from security challenges in recent years. Strong outbound demand from virtually all source markets, includ-

ing rebounds from major emerging economies Brazil and the Russian Federation, benefited both advanced and emerging destinations. The new report also illustrates that China continues to lead global outbound travel, having spent $258 billion on international tourism in 2017. This is almost one-fifth of the world’s total tourism spending in 2017, which stood at $ 1.3 trillion, some $94 billion more than in 2016. Among the top markets and destinations in the

world, in 2017, Spain rose to become the world’s second most-visited destination in terms of international arrivals, after France. Japan entered the top ten in tourism earnings in tenth place after six straight years of double-digit growth while the Russian Federation reentered the top ten of world spenders at eighth place. Available data for early 2018 has since confirmed international tourism’s continued strong growth, with a year-on-year increase of six per cent in arrivals between January and April.

Voters gear up heard World Spa Awards

pa industry professionals comprising senior executives, travel buyers, tour operators and media along with spa consumers, are invited to cast their votes to decide which spa organisations are the leaders in their field. This follows the closure of voting for World Spa Awards; the global initiative to recognise, reward and celebration of excellence in the spa and wellness sector on August 17, 2018. Voting takes place across the whole spectrum of the global spa industry with categories including Best Hotel Spa, Best Spa Design and Best Spa Destination. The winners will be invited to attend the 2018 World Spa Awards Gala Ceremony, which will take place at The St. Regis Maldives Vommuli Resort on October 26th. Hundreds of industry leaders from around the world are scheduled to attend the spa tourism event of the year. Unrivalled luxury, stunning beaches, an amazing underwater world, as well as spectacular spa and wellness offerings, make the Maldives the destination of choice for World Spa Awards.

A spectacular 40-minute seaplane flight from Malé International Airport, The St. Regis Maldives Vommuli Resort promises an unrivalled private island escape in the southern Dhaalu Atoll. An eco-conscious design draws on island-inspired style and contemporary architectural elements, villas come with private plunge pools. The St. Regis Maldives Vommuli Resort is home to the unique lobster-shaped Iridium Spa, which is the largest overwater spa in the Maldives, making it the perfect venue to celebrate the brilliance of the global spa industry. Launched in 2015, World Spa Awards is a dynamic awards programme designed to drive up standards within spa and wellness tourism, by rewarding the organisations that are the leaders in the field. Event partners for the fourth annual World Spa Awards include The St. Regis Maldives Vommuli Resort, Visit Maldives, Trans Maldivian Airways and Bastien Gonzalez. World Spa Awards is the sister event to World Travel Awards, currently celebrating its 25th anniversary.

Corvette Z06 marks Hertz centenary special edition

How to eat healthy at your hotel buffet

hile holidays are meant to be for indulgences, many travellers go overboard when it comes to their hotel breakfast buffet. They are determined to get value for money that they binge eat and end up feeling sick afterwards. Breakfast is the most important meal of the day. Having a good breakfast while on a travel trip gives you the necessary fuel to conquer the day’s activities. However, everything in moderation. Here are some of her tips: Do not gobble everything in one go as hotel buffets can be tempting. From their freshly baked pastries to their hot breakfast options, it can be hard to resist. However, travellers staying a few days at a hotel should pace themselves

H instead of having everything on offer. “Try to manage what you want to eat. You can perhaps choose the chicken in one sitting and the next day chooses the fish option. This way you get to enjoy the offerings without bingeing too hard.”

If you want value for money, choose luxury items and if travellers wanted value for their money, they should go for luxury items that they probably would not have at home, like salmon, cream cheese or a selection of nuts.

Make sure you focus on your fruit and vegetable intake. It is advised that travellers should incorporate fruit and vegetables into their breakfast. This could be anything from an omelette with mushrooms and tomatoes to a fruit smoothie.

ertz is celebrating its centenary by teaming up with Chevrolet to offer a unique anniversary edition Corvette Z06. One hundred of the high-performance cars will be available to rent exclusively at select US Hertz locations. An excited Jayesh Patel, Hertz senior vice president of brand, said that Hertz is a leader in the car rental industry for delivering a premium experience that is fuelled by our longstanding commitment to provide customers with caring and efficient service, and access to a variety of specialty and top-rated vehicles.

“We’re thrilled to continue to delight our customers and build upon our legacy of superior service and unique vehicle offerings with our special Corvette Z06.” Hertz offers a variety of vehicles to meet every customer’s needs. The anniversary Corvette Z06 joins Hertz’s impressive line-up of high-performance sports cars available for rent, giving thrill-seeking travellers a fully-charged driving experience. The Corvette Z06 is outfitted in a classic Corvette racing yellow tint coat with dual black racing stripes, matching Hertz’s black and yellow brand marks.

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Wednesday 05 September 2018

Local and global rail news as it breaks

Transnet records 11.3 percent revenue increase

‘Nigerians must benefit from foreign rail technology transfer’ MIKE OCHONMA

otimi Amaechi, Nigeria’s minister of transportation who accompanied President Muhmmadu Buhari to China alongside other retinue of federal and states government officials have insisted that one of the must take-aways at the end of all rail projects in the country should be the transfer of skills and technology to the locals. Prior to his departure to China last week, the Transportation Minister stated during the monthly LagosIbadan standard gauge project monitoring tours that stated that, Nigerian youths will be deployed to understudy railway engineering and technology under China Civil Engineering Construction Corporation (CCECC), the contractor handling project. At the end of stakehold-

ers meeting held with the management of CCECC at Papalanto, Ogun State office of CCECC last month, the minister told journalists that this was one of the resolutions reached at a meeting. In his words, the minister said; “They should deploy our engineers to understudy them, and they will be paid by us. In fact, what we have agreed today is to move our young boys and girls to understudy them. Reflecting on the on the original plan of the $1.6 billion Dollars Lagos-Ibadan standard gauge railway contract, Amaechi said, “The project is a three-year contract and the contractors have done 50 per cent in less than one year. We are pushing for one year out of the three. “In China, they agreed that they construct 1,000 kilometres of rail per year; and this is just 115 kilometres, so they should deliver it.” Amaechi stated that completion of track laying, to him,

is not the problem, but the completion of the stations for the standard gauge rail tracks. “I hope”, he emphasized, “they will complete all the stations before December. He declared. While expressing disappointment that the CCECC has slowed down on the speed at which work was progressing on the project, the minister directed that they have to deploy four track laying machines on site to enable him deliver the project on time instead of using only two track laying machines. On the extent of earthwork carried out so far, the minister said, the contractors have done 90 per cent of the earth work from Iju up to Abeokuta. In his words, he said, ‘’But am not satisfied with the progress of work, but the reason is that the contractor can’t control the elements. And this is earth work. You cannot do earth work during rainy season’’. He said there is no way the

contractor could have done earth work during the rainy season. “The fear is that in the next one or two weeks the rain will come down again “We pray that the rain will stop so that they will do the earth work. They think that in two weeks after the rain stops they can finish the 10 per cent remaining so that by the time the rain stops they would have finished all the bridges from Iju in Lagos state to Abeokuta, the Ogun State capital. When completed, 120 wagons, 40 coaches and about 16 is expected to be deployed along the corridor. Meanwhile, there are feelers that the federal government have placed orders for the fabrication of the coaches and the locomotives for use on the standard gauge rail corridor. Rotimi Amaechi, stated that the government is committed to meeting the December 2018 or January 2019 completion deadline for the project.

Siemens to present world’s first autonomous tram

t InnoTrans 2018, Siemens Mobility and development partner Verkehrsbetrieb Potsdam (ViP) will present their research into developing the world’s first autonomous tram. On a 6km section of the Potsdam tram network, the pair will demonstrate a test tram driving autonomously in real traffic between September 18-21. The tram, one from public transport operator ViP’s fleet of Siemens-built Combinos, is only for research and development purposes, it is not designed for commercial use. It is equipped with multiple lidar, radar and camera sensors that serve as “digital eyes” by capturing the tram and its traffic environment.

At the same time, complex algorithms will function as a “brain” by interpreting and evaluating data from the momentary operating situation, providing a prognosis for further development of the situation, and then triggering an appropriate response by the tram. Thanks to its artificial intelligence capability, the tram responds to trackside tram signals, stops at tram stops, and reacts autonomously to hazards such as crossing pedestrians and other vehicles. The project aims to identify the technological challenges of autonomous driving under real-life conditions, then developing and testing solutions for them. A continuation of

the cooperation between the two parties is being discussed. Siemens Mobility CEO Sabrina Soussan said: “Our autonomous tram can already master essential operating tasks in real road traffic at this stage of development. “By relying on the “Siemens Tram Assistant” collision warning system being used in,

among other places, our Avenio M tram operating in Ulm, Germany, we have already reached series maturity – an important milestone on the way to autonomous driving. “By making trains and infrastructure intelligent, we can guarantee availability and enhance safety in local and long distance travel.”

ransnet, South Africa, which is one of the consortium concessionaire technical partners of the LagosKano narrow gauge rail project, has reported an 11.3percent revenue increase to Rand 72.9bn ($US 4.9bn) for the year ending March 2018, up from Rand 65.5bn compared with the year ending March 2017, as it moves towards implementing its new Transnet 4.0 strategy. Under the period, operating costs rose by 6.5 percent to Rand 40.4 bn

Transnet achieved a 2.3 percent increase in export iron-ore volumes to 58.5 million tonnes, although accidents, particularly mainline derailments, resulted in volume losses. Transnet says, it has largely achieved the objectives of its Market Demand Strategy (MDS), which included some of the country’s largest capital projects, and is switching to the new Transnet 4.0 strategy, which involves the investment of a further

including an average 13.6 percent increase in energy costs, while Transnet also achieved savings against planned costs totalling Rand 3.1bn. Ebitda increased 18 percent to Rand 32.5bn while net profit improved by 75 percent from Rand 2.8bn to Rand 4.9bn. Total cash generated from Transnet’s overall operations grew 12.6% from Rand 31bn to Rand 34.9bn. Transnet Freight Rail increased revenue by 11.7 percent to Rand 43.7bn and transported a record 77 million tonnes of coal, a 4.3 percent increase including a monthly record of 7.2 million tonnes in September 2017. Wagon cycle-time also improved to 62.6 hours, down from 63.7 hours the previous year. Despite disruptions caused by adverse weather conditions,

Rand 163.7bn over five years to take the company to “new heights of digitisation and innovation. The investments completed during the past year under MDS include: Transnet’s investments include the purchase of 1,064 locomotives to modernise its fleet in anticipation of a rise in general freight volumes and solidifying its ‘road to rail’ strategy. A total of 402 locomotives have entered service while 16 have been delivered and are currently undergoing testing. During the year, Transnet Freight Rail and Transnet Engineering built: 2,500 coal containers to service Eskom power stations, 300 CR-13/14 wagons for the iron-ore business, 86 SCL wagons for the automotive business, and 364 CR wagons to be used within the mining sector.

Wednesday 05 September 2018

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BUSINESS DAY

FEATURE

ERGP: Removing bottlenecks to business growth … ‘Focus Lab’ seen creating solutions across key sectors IHEANYI NWACHUKWU

eeds are not readily visible because they require time, nurture and support to mature and grow into visible fruits that people can see and enjoy. Nigeria’s Economic Recovery Growth Plan (ERGP) is like a seed planted to unlock business opportunities across key sectors which will have a trickledown effect to the common man. Today, ERGP has taken off but there seems to be limited understanding of the huge potentials of the initiative and the journey so far around it. When the Economic Recovery Growth Plan was launched in 2016, it was aimed at stimulating the economy, activating growth of non-oil sectors and delivering a robustly diversified and sustainable economic growth and development. Also, it is designed to among others sustain private sector growth, help businesses grow capacity, and remove bottleneck to business growth. In less than a year, following its launch by President Muhammadu Buhari, the implementation of the ERGP has seen the country’s economy record significant strides, including its exit from recession last year and improved stability in the fiscal and monetary markets. Nigeria went into a recession in the second quarter (Q2) of 2016 when the economy recorded two consecutive quarters of Gross Domectic Products (GDP) contraction of 0.4percent and 2.1percent, respectively. Considering the state of the economy in May 2015 when President Muhammadu Buhari took office, his administration knew they needed to take swift action to diversify and place it on an inclusive and sustainable growth path. This led to the launch of the short-term Strategic Implementation Plan 2016 (SIP 2016) to stem the recession, and then the Economic Recovery and Growth Plan (ERGP) in 2017. The ERGP set a GDP growth target of 4.62 percent average annual growth between 2017 and 2020. From the negative growth in 2016, real GDP is projected to peak at 7percent in 2020. In last year’s World Bank Doing Business index, Nigeria jumped 24 places and was listed among the 10 most reforming economies globally, feats that have attracted wide applause and commendation for the economic policies of the Buhari administration. The Federal Government through the Economic Recovery and Growth Plan has demonstrated string commitment to restoring growth and provide strategic economic direction for the country over the medium term, 20172020, with a target of 7percent growth rate by 2020 and 15 million jobs over the Plan period. The ERGP in essence articulates government’s vision for the country and lays the foundation for long term growth. The underlying philosophy is to optimize local content and empower local businesses. The three strategic objectives of the ERGP are to: restore and sustain growth; invest in the people; and build a globally competitive economy. At its core is a focused approach to ERGP implementation, supported in particular by the highest level of politi-

Yemi Osinbajo

cal will, from the President. However, the ERGP requires billions of dollars in investments to ensure its success in achieving our long-term goals. Since its development and launching in 2017, the FG has been implementing the various initiatives and reforms outlined in the ERGP which has resulted in the economy recovery we are currently experiencing. In line with the administration’s economic focus and direction, which includes restoring growth and building a competitive economy, the ERGP Focus Labs were inaugurated to drive new investments that would create hundreds of thousands of jobs for Nigerians across the 36 states of the federation and, in the long-term, continue to grow the economy. The ERGP Focus Labs constitute one of the many initiatives introduced to further facilitate the implementation of the Plan and consolidate the economy’s recovery. “The Labs in Nigeria are designed as closed-door investment platforms to identify and accelerate high-impact projects with significant impact on Gross Domestic Product (GDP) and job creation,” President Buhari said. The initial focus areas of the Labs are: Agriculture and Transportation; Manufacturing and Processing; and Power and Gas. The focus on Agriculture and Transport is to increase private sector investments in selected crops and products (agro-business); and to provide necessary transportation infrastructure that would enable transportation of agricultural products, so as to provide a major boost to the agricultural sector. On Manufacturing and Processing, the focus is to increase private sector investments in selected manufacturing sub-sectors and products; and the processing of selected solid minerals in Nigeria; while on Power and Gas, the focus is to increase private sector investments in: The power sector, that is electricity generation across its value chain and energy mix, and the gas industries including expansion of the domestic market. Before now, investors in Agriculture faced difficulty in accessing lands and occupancy related documentations. Other challenges they faced include nonexistent of access roads

to project sites (Weathered roads, erosion etc), lack of power supply, lack of water supply, difficulty in accessing incentives prescribed for Agricultural projects, heavy import duty cost on Agricultural equipment(s), difficulty in accessing loans from banks due to protracted processes and stringent requirements, and prize competitiveness of local farm produce like start when compared to the imported products due to low import duty. The Central Bank of Nigeria (CBN) through the Focus Labs created awareness for accessible financial options for investors. Also, investors were made aware of the availability of services in the supply of electricity, water and road networks by the ministry of Agriculture to the investors and the processes in enjoying thus. Also, through the Focus Labs, investors were made aware of incentives applicable to them within the Agricultural sector. Interestingly, requests for permits on transportation were vetted and approved during the Focus Labs. Also, through consultations, agreements were made to increase the tariff on imported starch to be competitive in pricing with the local starch. Through networking at the Focus Labs, ideas shared helped in the maximal growth and utilisation of resources for investors within the sector. On Power, the focus Labs helped create a platform of engagement and direct discussions between the public sector representatives which included the Minister of Power, permanent secretaries, and key representatives alongside Private investors. Through the Focus Labs, some challenges raised to improve power in Aba (Aba Ring Fence) were immediately implemented by the Bureau of Public Enterprise (BPE), which will improve the industrial hub through reliable Power. On transport, issues highlighted at the Focus Labs include difficulty to access lands for operations and lack of access to Funding. As solutions some investors at the Focus Labs were given access to lands to support their investments; while the focus Labs also helped bridge the gap to accessing fundings as representatives for key financial institutions with funding support for transportation improvement were present at the focus labs.

A major criticism that trailed past efforts at development planning in Nigeria has been the weakness of implementation. “I made a promise that this administration would be committed to full implementation of the ERGP” Buhari said at the launch of ERGP Focus Labs. The implementation of the ERGP, together with a firming up of crude oil prices, has helped the economy to recover from its recessionary trend as economic growth bounced back into positive levels from negative growth of 0.9percent in the first quarter of 2017 to 1.4percent and 1.9percent in the third and fourth quarters, respectively. There are also noticeable improvements in key economic indicators including declining inflation, foreign exchange (FX) rate stability, rising foreign reserves, and Nigeria’s improved ranking in ease of doing business index. To further consolidate the improvements recorded in the economy, the Federal Government decided to conduct sector-specific labs as part of the implementation strategies of the ERGP. For instance, the Focus Lab which is a problem-solving platform that focuses on tackling issues faced by an entity through an iterative troubleshooting process. Given that the conduct of Focus Labs is an innovative method of plan implementation in Nigeria, it is necessary to explain the process to Nigerians. The idea of adopting Focus Labs to fast-track the attainment of the strategic objectives of Nigeria’s Economic Recovery and Growth Plan (ERGP) was the outcome of the Federal Government Cabinet Retreat on ERGP Implementation held in Abuja on August 10, 2017 under the theme: “Getting Implementation Right”. Most of these investments would, of course, be from the private sector. So the Federal Government’s focus was to deal frontally with the issues facing private sector businesses. In February 2018, Federal Government commenced Wave 1 of the ERGP Focus Labs to accelerate the implementation of the ERGP. For six weeks, the participants of the labs, made up of both public and private sector representatives, rigorously drilled down the issues with the projects presented, and brain-stormed on how to resolve these issues, and the bureaucratic reforms needed to fast-track the development of Nigerian economy. The ERGP Focus Labs, therefore, are intended to ramp up implementation and delivery of the strategic objectives of the ERGP by unlocking private sector capital in some key areas of the economy. Government resources alone are insufficient to finance the projects/ programmes in the ERGP. The conduct of the Labs is also consistent with the underlying principles of the ERGP to leverage the power of the private sector in driving economic recovery and sustained growth. “The progress we have witnessed during the gallery walk in the various labs reflects the enormous amount of work put in the past three weeks”, said Minister of Budget and National Planning, Udoma Udo Udoma, adding that “data from the three labs show that we are on course to meeting our target of $25 billion investment commitment”. Significant progress was made at

the end of the Labs. Generally, the Labs were able to identify 164 projects spread over the six geopolitical zones of the country with a total potential investment worth $22.5 billion and 513,981 jobs by 2020. Of this amount, $10.9 billion worth of private investments are categorized as ‘most ready’ to go. Specifically, disaggregating with respect to each of the work-streams, $4.73 billion worth of investment was identified in the Agriculture and Transport Lab, with a potential to create about 129,000 jobs; $9.25 billion investments, with a potential of 378,000 new jobs, were identified in the Manufacturing and Processing Lab, while $8.57 billion worth of investments is expected from Power and Gas, with the potential to create 7,000 jobs. The investment projects unlocked in this initial set of the ERGP Labs extend beyond 2020. By projection, the cumulative investment value of the identified projects will reach $39.12 billion by 2025 and about 716,079 jobs would be created. In specific terms, the Labs were intended to: identify projects that will drive catalytic growth and impact; and that have the capacity to contribute by increasing private investments and creating new jobs for Nigerians; unlock private investments that are stranded/stalled due to red-tape and bureaucracy, breakdown ‘silos’ to harness private-public partnerships; develop clear, down-to-earth implementation plans for each Entry Point Project (EPP), with identified budgets, key individuals responsible for these activities and accountable lead ministers, along with key performance indicators (KPIs). “The ERGP Focus Labs succeeded in identifying more than $22.5 billion in private investments from about 164 projects, which can be unlocked. Of this amount, $ $10.9 billion of them are what we call ‘Most Ready’ projects, that is, we are almost sure to unlock these projects and accelerate their delivery by the private sector. These projects are forecast to create more than half a million new permanent jobs for the people of Nigeria up until the year 2020, demonstrating the farreaching impact of the ERGP Focus Labs in unleashing a brighter future for our country”, said Vice President Yemi Osinbajo. “The ERGP is unlike others introduced by governments in the past. At its core is a focused approach to its implementation, supported in particular, by the highest level of political will, from the President himself through to our civil servants on the ground… It is no longer business as usual for us in government”, Osinbajo said. He said that following the six weeks of lab work, which included the participation of around 300 individuals from the government, working to resolve issues and problems presented by captains of industry, “we as a government are clearer today as to what we can do today to remove the regulatory and bureaucratic bottlenecks within the ambits of the law. The reality is that if we say that we are committed to improving the business environment and serious about making our economy more market-driven, we cannot but take the outcomes of the Labs very seriously.”

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FIRS Q1’18 revenue data show huge leap across various taxes

Wednesday 05 September 2018

Tax Issues

Lagos Head of Service to speak at PROWAN seminar

IHEANYI NWACHUKWU

he Federal Inland Revenue Service (FIRS) tax revenue collection data for the first-quarter (Q1) of 2018 show the agency made remarkable progress when compared to the corresponding first-quarter period of 2017. In the first-quarter of 2018, the FIRS total tax revenue was N1.17trillion representing an increase of N394.81billion or 51percent increase when compared to N778.19billion in Q1’17. Non-oil tax revenue at N528.83billion in Q1’18 increased from N439.89billion in Q1’17, up by N88.94billion or 20.2percent; while Petroleum Profit Tax (PPT) at N644.77billion in Q1’18 against N338.29billion in Q1’17 represents an increase of N306.48billion or 90.6percent. Having posted an unprecedented performance in 2017 the Federal Inland Revenue Service jacked-up its tax revenue collection target from N4trillion in 2017 to N6.7trillion in 2018. It would be recalled that FIRS broke boundaries in 2017, notwithstanding the country’s slow activities and exit from recession, to achieve a record N4trillion in tax revenue collections. Companies income tax (CIT) at N203.68billion Q1’18 grew from N152.41billion in Q1’17; Capital Gain Tax at N110million in Q1’17 increased to N310million in Q1’18; Stamp Duty increased to N4.25billion in Q1’18,

from N2.63billion in Q1’17. A l s o, t h e Ni g e r i a Cu s t o m s S e rvice (NCS) import VAT increased to N49.99billion in Q1’18 as against N46.40billion in Q1’17; while nonimport VAT at N219.79billion in Q1’18 represents remarkable increase from a low of N174.97billion in Q1’17.

“Let’s continue to pay our taxes. If we do, we will make Nigeria great again,” he said. “Good taxpayers who are doing their duties conscientiously, by paying taxes as and when due, will m a k e Ni g e r i a g re a t a g a i n ,” Tu n d e Fowler, Executive Chairman, Federal Inland Revenue Service had said.

olasade Adesoye, Head of Service, Lagos State will be the keynote speaker at the forthcoming seminar being organised by the Professional Women Accountants in ANAN (PROWAN). The PROWAN seminar holds on September 18, 2018 at the Lagos Chamber of Commerce and Industry (LCCI) building in Alausa Ikeja. The seminar is themed “Economic Independence: A Catalyst for Financial Ballooning –Nigeria Women on the Front Burner”. Speaking to BusinessDay on the seminar, Elemanya Ebilah, chairperson, Professional Women Accountants in ANAN said it is in line with PROWAN’s contribution to the economy. She noted further the sub-topics to be discussed, which include: entrepreneurship and innovation: a growth path to economic independence, self-sustainability and the inward-looking finance strategy; and economic independence and work-life balance.

Taxation of Health Maintenance Organisations in Nigeria (2) UGOCHI NDEBBIO & BLESSING IDEM

n our view, this creates a regulatory overlap which should be re-evaluated by the law-makers (alongside the continued inclusion of Pension (regulated solely by the Pension Commission) under the Insurance Act). Given the above findings and in view of the subtle similarities in the business model, accounting and, strictly speaking, regulatory framework of HMOs and insurance companies, HMOs may be considered to be carrying out health insurance, as opposed to only “management of health care service providers”. This therefore culminates in the question: whether they can be seen to be insurance companies for purposes of taxation under the Companies Income Tax Act (CITA)? Are HMOs Insurance companies for purposes of income tax? The Companies Income Tax (CIT) Act, Cap. C21, LFN, 2004 (as amended by the CIT (Amendment) Act, 2007), (“CITA”) provides the framework for the taxation of companies (other than upstream oil and gas companies) in Nigeria. The CITA also contains specific provisions which guide the taxation of specialized companies. One of such provisions is Section 16 which provides the basis of taxation of insurance companies. The section neither defines the term “insurance company / business” nor makes reference to any other legislation which may be relied on in establishing the extent of this definition. Although the primary point

of reference may assumed to be the Insurance Act and, by extension, NAICOM Act. However, can it really be cast in stone that the extent of the application of the special regime cannot be stretched to include other recognised forms of insurance, regulated by other specific statutes (for example, NHIS Act, which is simply another Act regulating this specific form of Insurance in Nigeria)? In view of the non-specificity of CITA on the definition of an insurance business, it could be argued that since health insurance is recognised by the Insurance Act as a form of life insurance notwithstanding that health insurance is not regulated by NAICOM, providing health insurance HMOs can be deemed to be carrying out health insurance business and should therefore be taxed as insurance businesses. The salient provisions of section 16 sets different parameters for calculating the adjusted profit of insurance companies, by restricting amounts claimable as other reserves and outgoings for tax deductibility. Also, the period for carrying forward losses is limited to 4 years only. In addition, it prescribes a different and more stringent tax base for calculating minimum tax for insurance companies. Overall, the tax regime for insurance companies as provided in section 16, can be seen as more punitive than the regimes applicable to other forms of businesses. Therefore, there may rightly be a reluctance for HMOs to wish to be subjected to tax under the provisions of section 16. However, notwithstanding the legislative

challenges of the section, and the current acceptable practice of taxing HMOs as noninsurance companies, HMOs may indeed be recognised as insurance companies who should be subject to tax under section 16 of CITA, given the provision of the Insurance Act and the NHIS Act. Practice in other jurisdictions If we were to take a cue from the practice in other jurisdictions such as the United Kingdom, India, and South Africa, health / medical insurance is statutorily included as either general or life insurance and the taxation regime follows in tandem. A review of the practice in United Kingdom, shows that there is a single Act which provides the framework for the regulation of general (nonlife) and life insurance businesses. Health insurance is included as a form of general insurance, and is not taxed under a special tax regime. The same practice of a common Act and a common regulator for all insurance companies is obtainable in India. South Africa on the other hand, has separate laws for general (including health insurance) and life insurance. Although both are regulated by the same agency, life insurance is taxed under a special tax regime while general insurance is not. Conclusion Currently, HMOs in Nigeria are not necessarily seen as carrying out insurance business, and as such, are not taxed under section 16 of CITA, applicable to insurance businesses. This practice, as we can see from the above analysis has regulatory lapses,

as HMOs (companies carrying out health insurance businesses) are regulated solely by the NHIS even though the Insurance Act mandates all Insurance business to register with NAICOM. We, therefore, recommend an amendment of the insurance Act, such that the regulation of health insurance businesses be specifically ceded to the NHIS. Alternatively, a unification of NAICOM with NHIS may be considered. This will diffuse concerns around regulatory overlaps and ambiguity and will also align with the trend in several other jurisdictions. Also, for insurance businesses, given the issues with the existing taxation regime, it is obvious that the current insurance taxation regime requires reform to ensure that insurance companies are not unduly disadvantaged relative to other Nigerian companies and their counterparts abroad. Therefore, we believe that there is no better time for government to consider an amendment of the punitive provisions of section 16 of CITA. Should all these reforms be favourable, the taxation of HMOs as insurance companies may indeed become desirable. Finally, the reform will go a long way in providing an enabling business environment for HMOs. This should ultimately avail Nigerians health insurance that entitles them to quality and cost-effective health care, thereby improving the standard of living in the economy. Ugochi Ndebbio is a Manager and Blessing Idem is a Senior Adviser. Both are with the Tax, Regulatory and People Services Division of KPMG Advisory Services, Lagos

BUSINESS DAY

Wednesday 05 September 2018

Live @ the Stock exchange Prices for Securities Traded as of Tuesday 04 September 2018 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

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Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 270,476.53 9.35 -0.53 198 38,450,505 UNITED BANK FOR AFRICA PLC 275,305.34 8.05 1.90 237 54,440,571 687,583.21 21.90 2.58 290 7,805,058 ZENITH INTERNATIONAL BANK PLC 725 100,696,134 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 328,441.93 9.15 3.39 226 4,066,730 226 4,066,730 951 104,762,864 BUILDING MATERIALS DANGOTE CEMENT PLC 3,919,316.70 230.00 - 34 88,820 LAFARGE AFRICA PLC. 203,825.56 23.50 - 49 308,359 83 397,179 83 397,179 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY LTD 382,488.96 650.00 - 0 0 0 0 0 0 1,034 105,160,043 60,050.00 60.05 - 4 42,096 PRESCO PLC 41 1,075,711 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 511.20 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,890.00 0.63 5.00 6 585,571 6 585,571 47 1,661,282 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 1,058.92 0.40 -4.76 1 100,000 225.71 0.58 - 2 1,215 JOHN HOLT PLC. S C O A NIG. PLC. 2,111.93 3.25 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 49,184.07 1.21 4.31 48 1,869,645 32,270.52 11.20 -7.44 24 193,013 U A C N PLC. 75 2,163,873 75 2,163,873 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 33,000.00 25.00 - 9 8,200 ROADS NIG PLC. 165.00 6.60 - 0 0 9 8,200 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT CO. LIMITED 4,079.48 1.57 - 0 0 0 0 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,900.00 95.00 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 11,300.89 45.20 - 0 0 24,014.43 9.00 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 0 0 9 8,200 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 14,093.09 1.80 - 2 20,707 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 197,134.45 90.00 - 27 13,349 INTERNATIONAL BREWERIES PLC. 275,067.58 32.00 - 74 116,249 NIGERIAN BREW. PLC. 743,711.89 93.00 -2.11 74 288,943 177 439,248 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 39,750.00 7.95 -0.62 43 247,131 DANGOTE SUGAR REFINERY PLC 181,200.00 15.10 - 30 314,066 FLOUR MILLS NIG. PLC. 90,208.35 22.00 0.23 57 823,881 HONEYWELL FLOUR MILL PLC 12,609.01 1.59 -0.62 84 744,959 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 1,158.30 6.50 - 1 40 NASCON ALLIED INDUSTRIES PLC 52,988.77 20.00 - 39 352,247 UNION DICON SALT PLC. 3,676.41 13.45 - 0 0 254 2,482,324 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 18,875.93 10.05 - 12 111,853 NESTLE NIGERIA PLC. 1,188,984.38 1,500.00 - 37 17,684 49 129,537 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 3,377.28 3.24 - 11 53,870 11 53,870 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 53,601.44 13.50 -10.00 81 320,824 UNILEVER NIGERIA PLC. 287,250.27 50.00 - 15 94,450 96 415,274 587 3,520,253 BANKING DIAMOND BANK PLC 28,950.49 1.25 8.70 56 4,316,276 ECOBANK TRANSNATIONAL INCORPORATED 366,991.02 20.00 - 35 145,060 FIDELITY BANK PLC 49,257.15 1.70 4.94 82 5,402,940 GUARANTY TRUST BANK PLC. 1,090,425.19 37.05 1.51 229 15,754,330 JAIZ BANK PLC 14,437.48 0.49 8.89 21 2,429,612 SKYE BANK PLC 7,634.17 0.55 5.77 60 7,361,056 STERLING BANK PLC. 39,442.87 1.37 - 41 2,028,792 UNION BANK NIG.PLC. 170,356.40 5.85 - 31 83,467 UNITY BANK PLC 8,650.11 0.74 - 8 86,819 WEMA BANK PLC. 23,144.68 0.60 - 17 679,788 580 38,288,140 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE COMPANY PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 6,860.90 0.99 10.00 88 14,311,077 AXAMANSARD INSURANCE PLC 24,150.00 2.30 - 5 72,250 CONSOLIDATED HALLMARK INSURANCE PLC 2,450.00 0.35 6.06 4 1,000,020 CONTINENTAL REINSURANCE PLC 15,559.12 1.50 - 8 107,193 CORNERSTONE INSURANCE COMPANY PLC. 3,535.08 0.24 - 9 302,975 GOLDLINK INSURANCE PLC 2,411.47 0.53 - 0 0 GREAT NIGERIAN INSURANCE PLC 1,913.74 0.50 - 0 0 GUINEA INSURANCE PLC. 1,964.80 0.32 -8.57 2 4,009,114 INTERNATIONAL ENERGY INSURANCE COMPANY PLC 487.95 0.38 - 1 5,000 LASACO ASSURANCE PLC. 2,270.26 0.31 -3.12 20 1,416,203 LAW UNION AND ROCK INS. PLC. 3,136.32 0.73 - 4 55,471 LINKAGE ASSURANCE PLC 5,440.00 0.68 -5.56 10 397,050 MUTUAL BENEFITS ASSURANCE PLC. 2,400.00 0.30 7.14 10 384,076 N.E.M INSURANCE CO (NIG) PLC. 17,478.46 3.31 -4.06 22 650,486 NIGER INSURANCE CO. PLC. 3,405.37 0.44 - 6 106,295 PRESTIGE ASSURANCE CO. PLC. 1,832.36 0.48 - 2 1,519 REGENCY ALLIANCE INSURANCE COMPANY PLC 1,467.13 0.22 - 3 33,673 SOVEREIGN TRUST INSURANCE PLC 2,085.21 0.25 - 8 165,710 STANDARD ALLIANCE INSURANCE PLC. 4,518.86 0.35 -7.89 1 100,000 STANDARD TRUST ASSURANCE PLC 4,483.72 0.48 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 10.00 4 1,742,128 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 1 400 UNIVERSAL INSURANCE COMPANY PLC 5,760.00 0.36 -10.00 1 4,500,000 VERITAS KAPITAL ASSURANCE PLC 3,744.00 0.27 - 1 2,024 WAPIC INSURANCE PLC 5,620.75 0.42 7.69 63 4,035,832 273 33,398,496 MICRO-FINANCE BANKS FORTIS MICROFINANCE BANK PLC 11,799.67 2.58 - 0 0 NPF MICROFINANCE BANK PLC 3,681.49 1.61 1.90 17 930,303 17 930,303

MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 4,914.00 1.17 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 5,922.05 1.42 - 0 0 INFINITY TRUST MORTGAGE BANK PLC RESORT SAVINGS & LOANS PLC 5,664.87 0.50 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 0 0 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 8,000.00 4.00 - 43 654,741 CUSTODIAN INVESTMENT PLC 31,820.89 5.41 4.64 19 987,961 DEAP CAPITAL MANAGEMENT & TRUST PLC 660.00 0.44 - 0 0 36,040.93 1.82 -1.09 48 2,500,476 FCMB GROUP PLC. NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 1,234.89 0.24 - 0 0 ROYAL EXCHANGE PLC. 485,456.37 48.00 1.04 38 35,227,241 STANBIC IBTC HOLDINGS PLC UNITED CAPITAL PLC 18,000.00 3.00 -0.66 51 791,227 3,312.39 103.20 - 0 0 ValuAlliance Value Fund 199 40,161,646 1,069 112,778,585 HEALTHCARE PROVIDERS EKOCORP PLC. 1,680.29 3.37 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 1,030.41 0.29 3.57 22 940,924 22 940,924 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 544.04 0.55 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 8,100.00 5.40 -10.00 12 187,139 GLAXO SMITHKLINE CONSUMER NIG. PLC. 15,665.98 13.10 - 8 93,000 2,352.00 2.40 - 14 236,385 MAY & BAKER NIGERIA PLC. NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 1,035.90 0.60 - 9 200,460 556.71 3.62 - 0 0 NIGERIA-GERMAN CHEMICALS PLC. PHARMA-DEKO PLC. 411.96 1.90 - 0 0 43 716,984 65 1,657,908 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 710.40 0.20 - 1 40,000 1 40,000 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 680.40 6.30 - 0 0 NCR (NIGERIA) PLC. TRIPPLE GEE AND COMPANY PLC. 381.11 0.77 -9.41 1 1,115,122 1 1,115,122 PROCESSING SYSTEMS CHAMS PLC 1,455.78 0.31 - 0 0 16,590.00 3.95 - 1 3,000 E-TRANZACT INTERNATIONAL PLC 1 3,000 3 1,158,122 BUILDING MATERIALS BERGER PAINTS PLC 1,898.34 6.55 - 2 186 CAP PLC 19,845.00 28.35 - 0 0 38,831.34 30.90 - 15 112,784 CEMENT CO. OF NORTH.NIG. PLC FIRST ALUMINIUM NIGERIA PLC 717.52 0.34 - 1 100 MEYER PLC. 361.24 0.68 - 0 0 2,364.38 2.98 - 3 1,800 PORTLAND PAINTS & PRODUCTS NIGERIA PLC PREMIER PAINTS PLC. 1,279.20 10.40 - 0 0 21 114,870 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 3,487.42 3.96 - 26 174,271 26 174,271 PACKAGING/CONTAINERS BETA GLASS PLC. 38,997.82 78.00 - 5 2,769 GREIF NIGERIA PLC 388.02 9.10 - 1 500 6 3,269 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 1 130 1 130 54 292,540 CHEMICALS B.O.C. GASES PLC. 1,752.39 4.21 - 1 7,254 1 7,254 METALS ALUMINIUM EXTRUSION IND. PLC. 1,803.64 8.20 - 1 716 1 716 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 55.00 0.25 - 0 0 0 0 2 7,970 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,628.30 0.26 8.33 39 2,275,503 39 2,275,503 INTEGRATED OIL AND GAS SERVICES OANDO PLC 64,643.34 5.20 4.00 83 1,067,584 83 1,067,584 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 64,907.15 180.00 - 13 3,725 16,863.04 24.30 - 65 15,160 CONOIL PLC ETERNA PLC. 8,998.60 6.90 - 18 114,749 FORTE OIL PLC. 24,747.14 19.00 -4.28 89 996,021 MRS OIL NIGERIA PLC. 8,701.65 28.55 - 4 1,531 TOTAL NIGERIA PLC. 64,407.29 189.70 - 10 5,522 199 1,136,708 321 4,479,795 ADVERTISING AFROMEDIA PLC 2,219.52 0.50 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 18,818.75 1.93 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 541.12 0.46 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 3,065.38 5.20 - 5 5,338 TRANS-NATIONWIDE EXPRESS PLC. 365.70 0.78 - 2 12,740 7 18,078 HOSPITALITY TANTALIZERS PLC 674.44 0.21 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,801.22 3.10 - 0 0 IKEJA HOTEL PLC 4,718.87 2.27 - 2 10,100 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 0 0 TRANSCORP HOTELS PLC 51,302.73 6.75 - 3 2,198 5 12,298 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 5,280.00 0.44 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 302.40 0.50 - 0 0 LEARN AFRICA PLC 864.02 1.12 - 4 70,000 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0

BUSINESS DAY

SHIPPING

C002D5556

LOGISTICS

Wednesday 05 September 2018

MARITIME e-COMMERCE

Container throughput at Nigerian ports hits 387,016TEUs in Q1 …As ship traffic declines by 3.5% Stories by UZOAMAKA ANAGOR-EWUZIE

he volume of containerised cargo in the nation’s seaports stood at 387,016 Twenty-foot Equivalent Unit (TEUs) in the first quarter of 2018, representing a 7.1 percent drop from 416,806 TEUs recorded in the preceding quarter four of 2017. Recent statistics as released by the Nigerian Ports Authority (NPA) shows that the number of ship calls at the Nigerian seaports has dropped to 985 in the period under review from 1,017 recorded in the corresponding period in 2017. This represents 3.15 percent decrease in number when compared with that of the previous year, and 2.3 percent decrease when compare with 1,008 vessels in the 4th quarter of 2017. The NPA report however stated that ships had a higher gross tonnage of 31,693,650 metric tons as against 30,980,444 metric tons recorded same period in the previous year, but a

Front Row: L-R: Saheed Lasisi, general manager, Business Development, SIFAX Group; Taiwo Afolabi, group executive vice chairman, SIFAX Group; Rohey Malick Lowe, first female Mayor of Banjul, Gambia and John Jenkins, group managing director, SIFAX Group during the courtesy visit and facility inspection of Ports & Cargo Handling Services Limited, one of the subsidiaries of SIFAX Group by the Gambian Mayor, recently.

decrease when compared with 32,598,477 metric tons recorded in the 4th quarter of 2017. Similarly, the number of used and new vehicles declined as a total of 37, 584 vehicles were brought into the ports within the period under review, representing a decrease of 13.2 percent when compared to 43,338 units of vehicles received in

the 4th quarter of the previous year. Surprisingly, the NPA report reveals that cargo throughput grew by 8.6 percent to 18,729,889 metric tons in the first quarter of 2018, as against the 17,250,334 metric tons of cargo that was handled at seaports in the preceding 4th quarter of 2017. According to NPA, in-

Infrastructure, security concerns blamed for low cargo volume in eastern ports

orried by importers’ apathy to designating their consignments to seaports in the eastern part of the country, the Nigerian Ports Authority (NPA) has identified lack of infrastructure and security concern as the major factors responsible for low cargo throughput in the eastern ports. The eastern ports include Delta, Calabar, Rivers and Onne. Speaking at the Nigeria Port Consultative Council (NPCC) meeting held in Lagos recently, Hadiza Bala Usman, managing director of the NPA, listed that insecurity, shallow channels leading to the ports, bad roads and lack of rail infrastructure in the states where ports are located, as

the major challenges affecting the volume of activities. Usman, who noted that for the eastern ports to attract cargo, there must be improvement in the state of infrastructure to aid port business, pointed that there is no need for shippers to route their cargoes to ports where they will be difficult to reach their warehouses and end users. “In terms of security, there has been restiveness in the areas where eastern ports are located, and no investor will like to toy with his or her goods. Hence, they prefer Lagos ports where security is guaranteed, unlike in the Eastern ports,” Usman said. Explaining further, Usman said that Calabar port is strategically located to service theNorth-East and

the North-West parts of the country, but the link roads to these areas from Calabar are bad. “The situation of the road makes it difficult for articulated vehicles to ply the route for movement of cargo.” She however appealed to the relevant federal government agencies responsible for infrastructure development to assist the NPA in the provision of the needed infrastructure for smooth cargo movement in the Eastern zone. “The coastal communities need to ensure security and less restiveness among the youths in order to attract investment in their area even as the NPA will in partnership with the Nigerian Navy and the Marine Police, continue to work in order to restore sanity on Nigerian waters,” she assured.

ward cargo traffic stood at 10,617,318 metric tons in the 1st quarter of the year, representing 56.7 percent of the total cargo handled at the ports, while the outward cargo traffic stood at 8,112,671 metric tons, representing 46.3 percent of the total cargo traffic handled within the review period. The NPA report further reveals that the turnaround

time of vessels stood at 3.8 days when compared to 4.1 day in the 4th quarter of 2017, while berth occupancy rate was 32.8 percent as against 33.8 percent in the 4th quarter of 2017. Commenting on the report that was released at the Nigerian Port Consultative Council (PCC) quarterly meeting held in Lagos recently, pundits, who rated the port performance report fairly, compared to the slow economic growth in the country, attributed the stable port activities to the growing volume of export of non-oil goods and stability of naira to dollar. They say the nation’s seaports would have recorded better performance, if not for the poor road infrastructure that limits movement of cargo in and out of the ports. On vehicle traffic, Emma Nwabunwanne, a Lagos based importer, who pleaded on the Federal Government to consider slashing the 70 percent import duty and levy charged on vehicles that come through the ports, said that slashing the duty will automatically make smuggling

of vehicles through the land borders, unattractive. “More Nigerian importers would continue to patronise ports in the neighbouring countries like Cotonou, where it is cheaper to buy and smuggle vehicles into Nigerian market, but reducing the tariff payable at the ports, will put the act to rest,” he said. On the poor state of the road, Godwin Onyekachi, president, Nigerian Importers Integrity Association (NIIA), said that the major problem was the collapse of the Apapa–Oshodi Expressway, the major entry and exit for the ports, which has been neglected for several years by the Federal Government. According to him, the situation forces truckers to use the Apapa-Ijora-Wharf road, which is very narrow and has been under construction for more than a year. He called on the NPA to support and redirect the Navy in managing the traffic by regulating trucks’ access to the ports and deploying their tow trucks to remove idle or broken down trucks that are contributing to the gridlock.

SIFAX Group explains investment in Gambian logistics chain

aiwo Afolabi, Group executive vice chairman of SIFAX Group has explained why the company has proposed to invest millions of dollars in Gambian logistics chain. The desire to contribute meaningfully to the rebuilding of the Gambian economy was responsible for the inroad being made into the West African country, Afolabi says. Recall that SIFAX Group recently signed a Memorandum of Understanding (MOU) with the government of Gambia to build and operate a dry port in Banjul. Afolabi, who gave the explanation during the courtesy visit and facility inspection of Ports & Cargo Handling Services Limited (PCHSL), one of the subsidiaries of the company, by Rohey Malick Lowe, first female Mayor of Banjul, the capital of Gambia, as part of the build up to the SIFAX Group’s multi-million dollar investment in Gambia.

According to Afolabi, Gambian economy is emerging into a new dawn and deserves all the support. “Gambia has a new leader who is willing to open up the country for foreign investment and to develop the economy. I believe so much in the economic growth and development driven by Africans. Africans should be major stakeholders in the economic transformation of Africa. The new Gambian president has also promised an enabling environment that is conducive and inviting for investors,” he said. Afolabi stated that he personally embarked on research to find out about the country before proposing the investment. “Of all the African countries we visited to do business recently, The Gambia offers a unique business proposition that seeks to keep investors business running with good returns. “SIFAX wants to replicate the success of its business

models in Gambia. Our 30 years’ experience in the maritime industry will be very useful in building the economy of Gambia. We promise that Gambian economy will feel our impact as we do not intend to limit our interventions to the maritime sector alone but will extend to other areas in future.” In her response, Lowe, the visiting Mayor commended Ports & Cargo for its giant strides in the Nigeria’s maritime sector. Impressed by the state-ofthe-art facilities at the terminal, she urged the company to bring same positive effect to her country. “I must commend Ports & Cargo for a job well done. I am very impressed. So many critics back in Gambia are skeptical of SIFAX Group’s capacity to handle the job, but with what I have seen today, there is no doubt that the company can successfully transform our economy,” she said.

Wednesday 05 September 2018

C002D5556

BUSINESS DAY

NEWS MTN disagrees with Attorney General’s $2 billion... Continued from page 1

which demanded $2 billion in for taxes and believes it has fully

settled all fees owed to the Federal Government. In a conference call with investors which BusinessDay listened to, MTN indicated that the Attorney General of the Federation (AGF) assumed a flat tax rate in its calculations, compared with a reality of different rates. “This is most likely where the discrepancy is coming from,” MTN said on the call. According to MTN some noted areas of concerns in the AGF’s computation include the AGF assuming: a flat 5 percent value added tax (VAT) on foreign payments, a 15 percent average rate on import duty and the AGF also making an analysis of capital expenditure (capex) on MTN Nigeria’s balance sheet and assuming it was all foreign and doing their calculation on the basis of this. The announcement of the tax bill incurred over the last decade comes days after the central bank of Nigeria (CBN) ordered MTN’s Lagos-based unit to hand over $8.1 billion that it said was illegally sent abroad. Mobile operator MTN disclosed it had been in talks with Nigeria’s Attorney General about an investigation into tax compliance in a statement outlining the background to the case of the money sent out of the country. “In this process, his (the Attorney General’s) office made a high-level calculation that MTN Nigeria should have paid approximately $2.0 billion in taxes relating to the importation of foreign equipment and payments to foreign suppliers over the last 10 years,” MTN said. MTN, whose Nigerian business brings in a third of its annual core profit, or EBITDA, said its total payment of around $700 million over the 10-year period fully settled the amount owing under the taxes in question. “In August 2018 MTN submitted

comprehensive documentation to the office of the AG. MTN Nigeria has also completed an initial assessment of the full period which indicates that total payments made to the tax authorities in regard to these foreign imports and payments in aggregate are $700 million. There are valid reasons for the differences between the actual payments and the AG high-level assessment. In the statement made available to BusinessDay, MTN Nigeria said; “It is both regrettable and disconcerting that despite the historic engagements with the Nigerian authorities by MTN Nigeria, the senate investigation into the CCI matter, and the multiple tax assessments done by the Nigerian tax authorities over many years that were satisfactorily concluded, that these matters are being reopened.” Shares in MTN dropped 5.6 percent to 81.95 rand as of 1250 GMT, bringing losses since last Thursday, when the central bank issued the $8.1 billion demand, to nearly 25 percent. “These are old issues that have been investigated and closed but now they are being reopened,” said Byron Lotter, a portfolio manager at Vestact in Johannesburg. “I’m not surprised that a lot of people are selling and saying ‘these guys are just too volatile, I’m out’. I wonder if MTN are thinking the same.” Speaking on the CBN allegations Tobe Okigbo, MTN corporate relations executive said: “From the CBN’s own letter and subsequent statements, it is clear that there is no dispute that the capital captured in MTN’s books and for which CCIs were issued was imported into Nigeria, and this is acknowledged explicitly by the CBN. It is equally clear that Nigerian law provides for guaranteed unconditional transferability of funds through an Authorised dealer in freely convertible currency relating to dividends or profits attributable to the investment, payments and in respect of loan

servicing where a foreign loan has been obtained.” Okigbo added that “All dividend repatriation done by MTN Nigeria to its shareholders was done on the basis of its equity capital and all the historic dividends were declared against valid equity CCIs and in fact no preference dividends were declared and no interest in respect of these preference shares was paid. This means that it is incorrect to suggest that the conversion of a shareholder loan to preference shares has any relation to the repatriation of dividends. The two are simply not connected and we are trying to understand this position that the Central Bank has taken.” Speaking on the Attorney General’s ‘demandnotice’forhistoricaltaxobligations, Okigbo said: “MTN has conductedadetailedreviewoftheseclaims,and provided evidence of tax remittance to the Attorney General’s office. The Attorney General’s notice indicates that he is rejecting this evidence. We believe that all taxes due to the Nigerian government have been paid and these allegations have not been raised by any of the revenue generating agencies that MTN engages with regularly, and from whom MTN has received numerous awards for compliance.” The latest demands come two years after MTN, Africa’s biggest telecoms company, agreed to pay more than $1 billion to end a dispute with Nigeria over unregistered SIM cards. Although MTN Nigeria says it will continue to engage with the relevant authorities and will vigorously defend the firm’s position on the matter, BusinessDay sources close to the Nigerian Communications Commission (NCC) confirm that the regulator was made aware of CBN’s plans to revisit the CCI issue. “The NCC was aware of the letter sent to MTN Nigeria to return the funds to the central bank,” the source said. Meanwhile Nigeria’s already struggling foreign direct investment (FDI) inflows is set to take a further hit as foreign investors have put a

hold on new investments due to the controversy created by the Central Bank Nigeria (CBN) demand that MTN refund US$8.1 billion. Sources in the private equity investment community told BusinessDay that they have been receiving calls from their investors overseas first; to find out if they have course to be worried about the Certificate of Capital Importation (CCIs) upon which they brought money into the country and also to note that all investments are being put on hold until there is some level of clarity around the CCI issue. Most private equity firms have also embarked on a review of all the CCIs in their possession to ensure they are fully compliant with CBN regulations while they are also putting on hold any new fund raising activity until they get some clarity around the issue, sources in the private equity community told BusinessDay. South African hotels and casino group Sun International said

on Monday it was in final stages of exiting Nigeria following clashes with regulators and shareholders. It is following in the footsteps of retailer Woolworths and food maker Tiger Brands, both of which quit Nigeria over the last three years. Nigerian only managed to attract US$982 million in FDI in 2017 and there is now fear that the panic created by the CBN sanction on MTN and some of biggest global banks that control 81 percent of total capital flows into the country would only lead to lower inflows in the short run and possibly damage the country’s credibility in the international capital markets. Sources familiar with Government plans tell BusinessDay that this may only be the beginning of aggressive pursuit of real or perceived back taxes against private sector companies operating in the country. “Unfortunately this is just the beginning, expect some more bad news in the coming days. No one knows when this will end,” the source said.

Iraq, Iran ramp-up oil production, reserves, defying... Continued from page 1

billion barrels in 2016.

OPEC statistics showed Iran’s oil producing wells have being moving at an arithmetic rate from 2,204 in 2013 to 3,130 in 2017 while Iraq’s oil producing wells have also increased from 1,735 in 2013 to 2,662 in 2017. “The removal of US sanction on Iran in 2015 led to the acceleration in the rate of investments in the country’s oil and gas sector while Iraq has not experienced any major crisis in recent times as the relative peace in the country has led to the smooth running of the country’s oil and gas sector, thereby creating room for steady increase in the rate of investments in that sector,” Emmanuel Afimia, energy economist and CEO of Afimia Consulting Limited said. For Nigeria, the storyline is different. Nigeria’s oil reserve decreased to 36.247 billion in 2011 from 37.200 billion recorded in 2010, while in 2012 there was relative improvement to 37.139 billion, it went down again to 37.071 billion in 2013. In 2014, it stood at 37.448 billion before sliding down to 37.062 in 2015 while in 2016 it stood at 37.453 billion. Afimia, said the country has since been struggling to increase its output as a result of security issues in the Niger Delta which has reduced oil output from 2.2mbpd to a paltry 1.6mbpd. In Iraq, the passing of a new constitution and the election of a democratic government, continued civil

unrest, sectarian violence, together with a lack of political cohesion between the central and regional governments were major challenges the industry had to overcome to restore its output to pre-war levels and even higher. Nigeria, under Obasanjo-led government set two growth targets for the nation’s oil and gas industry: increase oil reservesto40billionbarrelsandproductioncapacityfrom2.5millionbarrelsper day to four million bpd by 2010. However eight years after the target date, Africa’s biggest crude oil producer’s ambition seems bleak as the fiscal and regulatory regimes that would activate this ambition experienced a major setback because President Muhammadu Buhari withheld assent to the Petroleum Industry Governance Bill (PIGB). Abayomi Fawehinmi an expert in a Lagos based oil firm said Nigeria’s inability to attract investment to its oil fields is obstructing growth and efficiency in the sector. “When last did we do oil bid rounds to sell acreages?” Fawehinmi asked in a phone interview with BusinessDay. “In the last two years Nigeria’s reserve replacement ratio has declined significantly. Low oil price meant most IOCs cut back on exploration activities thereby further reducing replacement ratio,” Jubril Kareem, energy analyst at Ecobank Plc, told BusinessDay.

•Continues online at www.businessdayonline.com

2019: Mark promises restructuring, security, good... Continued from page 1 L-R: Hamsatu Zanna, representative of the wife of the president; Hadiza Muhammed, wife of the governor of Bauchi State, and Suzy Iliya, wife of deputy governor of Gombe State, at the advocacy workshop on reproductive maternal, newborn child and adolescence health nutrition (RMNCAH+N), in Bauchi State, yesterday.

To be at par with African peers Nigeria needs... Continued from page 1

came to $58, given that it attracted $3.2 billion in FDI in 2017, and is home to some 55 million people.

Egypt, with a population of 95 million, was the top destination for FDI last year, and attracted $7.4 billion, implying an FDI per capita of $77.8. Ghana, with a population of 28 million, has an FDI per capita of $107, having attracted $3 billion. “It seems this government will give an arm and a leg to attract FPI but is stifling FDI,” a business leader who didn’t want his name in print said. “The CBN raised interest rates to 19 percent last year and paid an interest expense of $3.7 billion to attract portfo-

lio investment (FPI) of $7.3 billion, yet FDIgetshitoverprocedural paperwork from a decade ago,” the person said. According to state statistics agency, the National Bureau of Statistics (NBS), FDI inflows to Nigeria dipped to an 8-year low of $981.7 million in 2017, giving Africa’s most populous nation an FDI per capita of $5.4, underscoring the need for increased foreign investment in Nigeria, projected to be the world’s most populous nation after India and China by 2050. Foreign direct investment to Nigeria was spooked by a complex exchange rate regime which was preceded by a naira devaluation, low growth and an unpredictable business environment in 2017, according to Charles Robertson, chief economist at

investment bank, Renaissance Capital. “Very few investors would plan to bring money to Nigeria when the official exchange rate was N305/$ and the unofficial exchange rate was N360/$ (or weaker). “Secondly,investmentrequiresoptimism about the future – and low growth in Nigeria has not made many investors very optimistic about the near-future. “Third, investors need to feel there is a predictable business environment,” Robertson said in an emailed response to Business Day. “Getting a fully functioning electricity market in place and improving adult literacy would also help a great deal in attracting sufficient FDI. Countries can grow without FDI, but they grow faster with FDI,” Robertson said.

•Continues online at www.businessdayonline.com

forms to contest the presidential primary on the platform of the People’s Democratic Party (PDP). Marksecuredhisformsafterpaying themandatoryN12millionattheparty’s secretariat in Abuja. The primary election is billed for October 5 and 6, 2018.

The immediate past Senate President promised restructuring of the country, while assuring that he would fix the economic and sociopolitical challenges threatening the existence of the country. The longest serving senator said he has the wealth of experience to govern the country, insisting that President Muhammadu Buhari is beatable in the February 16, 2019 General Election. “It is my fundamental right to aspire to any position and I think I can make a difference. I have something to offer,” he said. Mark also promised to embark on restructuring of the country if given the opportunity, saying “irrespective of our political persuasions, it is incontrovert-

ible that restructuring of the nation is an idea whose time has come. “I believe it will further strengthen our bond of brotherhood and unity more than ever before, because everyone would have a sense of belonging and live in harmony in any part of Nigeria without any fear of molestation and intimidation.” He declared that his blueprint tagged 730 will turn the economy around within two years, adding that youth will be the drivers of the process. “Specifically, we will deal with poverty, unemployment and neglect which have forced some of our young people to undertake the very risky route of going through the Sahara Desert and the Mediterranean Sea in their quest for greener pastures in Europe. “We will concentrate on developing our infrastructure, delivering on affordable housing, roads, rails and power. We will focus on Education and create a pool of highly trained citizens with excellent IT skills who will be employable as well as create jobs.”

•Continues online at www.businessdayonline.com

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Apapa-Oshodi road new reconstruction cost holds lessons for FG CHUKA UROKO

he new cost of reconstr ucting Apapa-Oshodi Expressway in Lagos to be undertaken by Dangote Group at N72 billion, representing over 1000 percent increase in an earlier contract sum for reconstructing part of the expressway holds significant lesson for the federal government and its managers. Though the new cost is for the reconstructing the expressway from its root at Liverpool Bridge to where it terminates at Oworonsoki Junction, there is a huge difference between this new cost and the N6.2 billion which was the contract sum for reconstructing the expressway from Sunrise Bus Stop to Cele Bus Terminus in 2010. Construction experts argue that the distance between Cele Bus Terminus

and Oworonsoki Junction is not enough justification for the huge difference between N6.2 billion and N72 billion, arguing that if the contract had been awarded for the reconstruction of the entire length of the expressway at that time, it wouldn’t have taken up to 50 percent of the present cost. “This huge increase simply speaks to the waste in government circles and also highlights some avoidable costs government frequently incurs for its tardiness, neglect, poor maintenance culture, excessive bureaucracy and lack of seriousness even with matters of national interest and economic importance”, Johnson Onoja, a civil engineer noted in telephone interview. Following sustained outcry by businesses, port users, media organizations, and sundry road users on the collapse of this express-

way which is a major route to the country’s premier sea ports, the federal government awarded contracted for its reconstruction in November 2010 to Julius Berger and Borini Prono at the cost of N6-2 billion. “For the benefit of the generality of Nigerians and particularly concerned Nigerians who daily experience the excruciating condition on this road, it is necessary to present the facts of the case and to confirm that the contract for this road has been awarded to Julius Berger Plc and they in turn have accepted the award”, Taye Akinyemi, chief press secretary to the then works minister, Mohammed Dagash, stated. “The Ministry on November 10 2010 presented a memo to the Federal Executive Council (FEC) in which it gave the background to the project, the derivable benefits, the scope of work and the

tender procedure adopted. “The Council after the presentation approved the award of the contract for the rehabilitation of Apapa – Oshodi Expressway section 11: km 7+00 (Beach land Junction) to km 12 + 600 in favour of Julius Berger (Nigeria) Plc in the sum of N6,241,059,730,33 (Six billion, Two hundred and Fifty one Million, Fifty Nine Thousand, Seven Hundred and Thirty Naira, Thirty Three Kobo) with a completion period of 12 months”, Akinwunmi added. Specifically, the rehabilitation of the expressway was to start from Km7 to Km15 (NNPC, Atlas Cove) to Cele Bus-Stop (the Sunrise Bus stop or Beach Land Estate junction to Cele Bus-Stop by Julius Berger while Borini Prono would start from Km zero to Km7 (Apapa-Tin Can Island Port to NNPC(Atlas Cove).

L – R: Karimot Tukur, head, consumer banking, Diamond Bank Plc, Bede Nnebedum, Car winner; and Osita Ede, head, consumer liabilities products, Diamond Bank Plc, during the DiamondXtra Season 10 Quarterly draw prize presentation ceremony held at the bank’s head office in Lagos.

uktar Usman, director general of the Nigeria Civil Aviation Authority (NCAA), has stated that most Nigerians are now buying into the into the proposed national carrier project by the Federal Government after the initial reservation due to the failure of previous administrations to set it up. In a chat with journalists in Lagos, Usman who assured that the project is still ongoing stated that the government is working round the clock for a successful take-off. Usman said that the Nigeria Air project arrange-

Law students propose taxing of social media to generate revenue HOPE MOSE-ASHIKE

aw students from 20 different schools in the country have proposed the taxing of social media as a means to generate revenue in the country. This was one of the key topics debated on during the national tax, hosted by the University of Lagos (UNILAG) tax club students last week. During the debate it was noted that 60 percent of the Nigeria Gross Domestic product (GDP) is made up of the service sector, several of the transactions that happens in the sector are taxable using vat and withholding tax , these are viable tax type to reap the benefit in that sector. Prior to this fact, one of the speakers who debated on the topic stated that intermediaries and businesses should be focused on, stating that Ebay, Instagram are some of the biggest platform of services of which three parties are involved the buyer, seller and platform, by putting a check to what they do and when they do which will be a very good way to tax these companies because they lack physical establishment. By taxing the transaction and leveraging on vat and WHT, revenue can be generated. One of debaters from UNILAG stated that, there is so

much of fake news and business scam in Nigeria. Nigerian youth spend 9hours a day so they should be able to pay for it, the money will be directed to small and medium enterprises (SMEs) so hardworking youth can get to start businesses” Hillary Ekezie, president of the UNILAG tax club stated that the National Tax debate is a student organized event which featured over 20 Universities to debate various issues on taxation and proffer solutions to pressing issues on taxation and policy recommendation. “Today we feature four different teams on the finals, we started from 20 teams using writing competition which enabled us cut down to 12, down to four and the finals and we had them to talk about increment of the VAT to 10 percent whether it should be or not, and it was an enlightening section” Hilary added “the way the government is run has been an issue for the youths, most times they feel they are not part of the administrative of the government, this debate is for the youth to have a say on policy issues, with the help of our sponsors Federal Inland Revenue Service, PWC, Dangote, KPMG, DRUDGE consulting and many other firms we have been able to sustain this over the years”

Police raid Abuja residence of Edwin Clark INNOCENT ODOH, Abuja

he Police on Tuesday raided the Abuja residence of a former Federal Commissioner for Information and South South Leader, Chief Edwin Clark. The Police men, who searched all the rooms of the Elder Statesman’s house, alleged that they were in the house to search for arms which they accused him of keeping. The Policemen who were said have arrived the Asokoro residence

NCAA say Nigerians key into proposed national carrier IFEOMA OKEKE

Wednesday 05 August 2018

ments would continue until it is delivered to the Nigerian people, stressing that, even though people are now quiet about it, it does not mean that the project has stopped at all. On the role of transaction advisers, Usman said “It is a process and the process is on-going. It is transparent as people can see as it is to get the best for Nigeria. Nigerians has been yearning for the gaps created by the lack of having strong and viable carrier that would meet the demands of domestic market, regional market and the International market”. Assuring that the December take-off date is very feasible, the NCAA DG said that, as far as the regulatory agency is concerned to deliver on

the two major certificates, the Air Transport Licence (ATL) and the Aircraft Operators Certificate (AOC), all things being equal is 90 days. “We still have more than 90 days to the end of the year, so, it is still feasible, all things being equal, am just talking from the regulatory point of view”, Usman said. In July this year, the federal government, through the Minister of State for Aviation, Senator Hadi Sirika, revealed the name and logo for a new national flag carrier referred to as the Nigeria Air. During the unveil at the Farnborough Air Show in London, United Kingdom, Sirika pledged that the government is fully committed to fulfilling the campaign

of Clark at 1.30pm, left the premises 2.30pm. They did not find any incriminating evidence or ammunition in the house, a source said. Force Public Relations Officer, Jimoh Moshood did not pick calls put to him by our correspondent for confirmation, neither did he respond to text message as at the time of writing this report. However, the police source said that they stormed the house on the orders of the Inspector- General of Police, Ibrahim Idris.

Former STG staff accused of hostile takeover SOBECHUKWU EZE & OMOBOLA ADU

acques Roomans, Founder of Sea Truck Groups (STG) and West Africa Venture has accused Telford Offshore Limited under Frazer Moore; a former chief operating officer of Sea Truck Groups of a suspicious move to take-over the asset of the company as seen by the Campaign Against Impunity Organisation (CAIO). In a press conference “On a grand conspiracy in the Nigerian Oil and Gas Industry”, Sina Loremikan, Coordinator of CAIO stated that, “We have noticed a grand conspiracy in the Nigerian oil and gas sec-

tor, which is occurring on a scale capable of destroying confidence in the country’s business environment. Sina Loremikan described the move as a “Board Room Coup”. Jacques Roomans, a Nigerian of Dutch heritage who came to Nigeria in the 1960s to invest, started an insurance business and subsequently went into the oil and gas sector by establishing a marine charter business. Roomans grew his company and incorporated it in West Africa under an umbrella company West Africa Venture (WAV) while Sea Truck Group Limited (STG) handled the rest of its operations outside Africa.

However, years later the foreigners who Roomans brought started using the $575 million they advised him to take from international financial institutions for expansion in 2013 to unseat the founder from the company. The interesting event is that after meeting up with the interest payment for three years, the expatriates then acting as managers saddled with the responsibility of meeting these obligations, acted suspiciously by deliberately defaulting on the obligations on the bond and instigated the liquidation of Sea Trucks Groups, without the recourse to the owner of the company.

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Benin, Abuja, Ibadan have highest number of prepaid meters BUNMI BAILEY

n the three months ending June (Q2), Benin, Abuja and Ibadan, topped list of locations with the greatest number of installed prepaid meters according the National Bureau of Statistics (NBS). Details of the NBS Q2 2018 power sector report shows Benin had 282,868 meter consumers, Abuja had 270,918 and Ibadan the capital of Oyo state had 254,261. While the lowest meter consumers were Yola, Jos and Kano which had 37,329, 54,395 and 65,060 respectively. In Q1, the numbers remained unchanged as Benin and Abuja maintained their position as top prepaid meters consumers, except Abuja, which increased by 3.9 percent to 270,918 in Q1 from 260,667 in Q2. Total number of con-

sumers with prepaid meters increased by 1.59 percent to 1.62million customers in Q2 from 1.59million customers in Q1. Mojec International Limited, an indigenous prepaid meter manufacturing company in Lagos attributed this progressive development to the introduction of vendor finance programme. Chantelle Abdul, managing director, MOJEC said, “Two out of these states are our clients and Mojec is responsible for getting majority of those meters out to them through a financing program called meter vendor finance programme.” “The purpose of this financing programme is to produce and deliver the meters to the electricity distribution companies (DISCOs) in advance after which they pay back after some period of time,” Abdul explained. The DisCos are obligated by National Electricity Regu-

latory Commission (NERC) by virtue of their performance contracts to provide meters for customers however they were constrained by foreign exchange challenges which sent the price of meters through the roof. They further said they were handicapped by poor collections and low tariff due to refusal of the government to allow them raise electricity tariff. Meanwhile, the prepaid metering system provides an effective mechanism for measuring electricity supplied in the country as the device makes it possible to accurately measure power consumption. NERC had disclosed in a report earlier this year that the metering gap for electricity consumers in the country has increased to about 4.7 million over the past few years. The report stated that,

“The metering gap for all distribution licensees was reported at 4,740,275 meters as of December 31, 2017. This is projected to significantly increase upon the conclusion of the ongoing customer enumeration exercise.” However, Abdul said that there are opinions in the market that the metering gap is about double or triple the official metering gap in the country Also from the NBS report, a total average of 81,561 MegaWatt per hour (MWh) of energy was generated daily by power stations. Daily energy generation attained a peak of 98,573 MWh on April 18 even as thermal stations generated a peak of 77,010 MWh the same date while the hydro stations attained a peak of 22,858MWh on June 28. The lowest daily energy generation of 52,074 MWh was attained on June 9, 2018.

Creating over N1.15trn annual trade through effective sustainable banking principles Continued from back page to the psychological satisfaction that his yams are sold and consumed in ‘London’ (Obodo oyibo). It will help Mrs Abuse of Vandekiya village of Benue state to train her kids through the export of mangoes that are in abundance and wasting in her village. Alhaji Aminu from Fagge in Kano state will live in peace with Joshua in Jos as they are both involved in the export of carrots and groundnuts. Mr Gbadamosi will prefer to live in Ogbomosho than in Lagos due his Amala processing plant which provides him with a good income through the supplies he makes to his in-law, Femi in Peckham London. Imagine the yearly impact of N1.15 trillion on less privileged Nigerians! The benefits are endless! With the high and constantly increasing population of Nigerians in the UK and the possibility for lower prices as compared to the food items

CHANGE OF NAME

I, formerly known and addressed as Akinwunmi Esther Yemisi now wish to be known and addressed as Obagbodi Esther Yemisi. All former documents remain valid. General Public please take note.

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I, formerly known and addressed as Gabriel Chukwuamaka now wish to be known and addressed as Gabriel Obi. All former documents remain valid. General Public please take note.

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I, formerly known and addressed as Odumbaku Samson Olugbenga now wish to be known and addressed as Odumbaku Samson Oluwamuyiwa. All former documents remain valid. General Public please take note.

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L-R: John Ugbe, managing director, MultiChoice Nigeria; Nick Imudia, CEO, Konga Online, Wangi Mba-Uzoukwu, channels director, Africa Magic and Nnamdi Ekeh, CEO, Konga Offline at the 2018 Africa Magic Viewers Choice Awards (AMVCA) in Lagos. Pic by Pius Okeosisi

Legislative aides threatens NASS shutdown over N5.8bn unpaid allowances OWEDE AGBAJILEKE, Abuja

egislative aides to members of the National Assembly have threatened to shut the federal parliament if they were not paid the sum of N5.8 billion allowances allegedly owed them. The legislative aides gave the threat as they protested on Tuesday at the lobby of the National Assembly. Sam Melaye, chairman of the aggrieved legislative aides, said the entitlements totalling about N5.8 billion must be paid before resumption of the lawmakers this month, adding that failure to pay would lead to shutting of the federal par-

liament. The entitlements according to him are Duty Tour Allowances (DTA) not paid to any one of them within the last three years which is over N2billion and Training Allowances which based on calculation of N1 billion per year is N2billion. “By laid down procedures and yearly budgetary provisions of N250m on quarterly basis, each of the legislatives aides is expected to go for training on the template of capacity building the totality of which is N1bn per year but for the past three years, no category of the aides have been sent on any training, let alone, paid the required allowances”, he explained.

Commissioner makes case Delta State foreign investment summit

he Commissioner for Commerce and Industry in Delta State, Mary Awhoto Iyasere has opined that her Ministry will host over 100 foreign investors, who are expected to take part in the Delta State 2018 Investment Summit/Product Exhibition as a prelude to the state trade fair coming up around middle of November, 2018. According to the commissioner, the State Government is ready to embrace the foreign a well as local investors expected at the investment summit by providing a favourable environment for the rapid establishment of new indus-

tries that would create tens of thousands of jobs for the indigenes of the state. It was noted that the summit which is largely a private sector initiative will be attended by Diplomats, Captains of Industries, manufacturers, investors and other important dignitaries both in the public and private sectors of the economy. She further stated that the event is being organized by the ministry of commerce and industry in conjunction with Delta State Chamber of Commerce in partnership with Vega Nigeria Limited and Maxiyield Asset Management Limited.

39 NEWS

BUSINESS DAY

I, formerly known and addressed as Mrs Fati Sobande now wish to be known and addressed as Ms. Fati Adamu Thompson. All former documents remain valid. General Public please take note.

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from other countries, demand will be higher than the supply. As most of the Nigerian banks with UK subsidiaries are yet to generate profits, this project if properly pursued and managed is a business of over N1.15trillion every year and can be the game changer in the banks’ efforts for increased revenues and profits especially for their foreign branches. While it is good for the banks to advertise in foreign media as they currently do, it is also good for them to look inwards to see how they can truly help the lower class of the Nigerian society and themselves. Not only will it ensure the consumption of Nigerian foods by Nigerians in diaspora, it will lead to financial inclusion, employment generation, economic empowerment and better human rights especially for the women which are the core principles of sustainable banking. The time to act is now!

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Wednesday 05 September 2018

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BUSINESS DAY

FINANCIAL TIMES Brexit politics jolt pound from summer slumber

South African recession adds to emerging market gloom Page A2

Page A3

World Business Newspaper

China pledge of $60bn loans to Africa sparks anger at home Xi Jinping under fire for prioritising foreign aid over spending on local concerns LUCY HORNBY AND TOM HANCOCK

i Jinping’s pledge of $60bn in new loans to Africa has triggered a wave of grumbling in China, the latest sign of popular hostility to the president’s international ambitions and to the tightening of political controls at home. Censors quickly moved to delete critical posts that proliferated online after Mr Xi announced the fresh commitments at the triennial Forum on China-Africa Cooperation on Monday. Th e p re s i d e nt ’s larg e ss e prompted rare criticism among Chinese on social media over why their government was not spending the money on them, with one blogger suggesting that $60bn could fund China’s cashstrapped ministry of education for three years. “China is a poor country as well . . . Is there any country that can provide China with $60bn in aid?” asked another blogger named “tinyfool” in a post that was promptly deleted. In his speech announcing the $60bn package — addressed to representatives from 54 African countries, including several heads of state — Mr Xi countered a separate barrage of criticism from abroad, where some analysts have accused Beijing of trying to ensnare African governments by engaging in “debt diplomacy”. “Only Chinese and African people have a say when judging if the co-operation is good or not between China and Africa. No one should malign it based on imagination or assumptions,” Mr Xi said. Mr Xi’s pledges involved a combination of grants, low-interest loans, financial investment and trade finance. But in China’s state media on Tuesday, such overseas

commitments were presented as “aid” or “support”, implying that the country would make no profit. The Global Times, a statecontrolled tabloid known for airing forthright views on China’s foreign policy, fired back at Mr Xi’s domestic critics. “Chinese people should also be aware that major powers must fulfil their obligations. Otherwise they can hardly stay where they are for long, not to mention going forward.” With Mr Xi’s latest measures, concessional loans from China to Africa have jumped to a record $5bn a year, according to an analysis by Deborah Brautigam, director of the China Africa Research Initiative at Johns Hopkins University. However, the total Chinese government commitment of grants and loans to Africa, including commercial lending, has declined. Beijing has shifted more of its engagement on the continent to Chinese companies, as African states have lobbied for more investment in manufacturing and services. Behind the public grumbling lies a deeper unease as China gears up to renegotiate loans. Mr Xi’s announcement that Beijing would offer debt relief applies to a programme to forgive interestfree loans to the poorest nations. But it does not appear to address concerns over China’s exposure to countries such as Zambia, home to vast mining investments, which faces about $10bn in debt restructuring. Chinese displeasure with overseas aid has boiled over in the past, most notably in 2011, when Beijing donated 23 school buses to Macedonia despite rarely providing them at home. The donation came shortly after a crash that killed 19 children in a retooled van, the most common form of school transport in the Chinese countryside.

Amazon joins Apple to become second $1tn company Shares in the ecommerce group have more than doubled in the past 12 months

TIM BRADSHAW AND SHANNON BOND

mazon has hit a $1tn market capitalisation, capping an extraordinary surge that has seen the ecommerce group’s stock more than double in 12 months. While Apple was first to $1tn last month, Amazon’s rise is record-breaking in its own right. The iPhone maker’s relatively steady climb contrasts with Amazon’s vertiginous recent rally, adding some $520bn in equity value in the last year alone. That increase is itself as large as the market capitalisa-

tions of Berkshire Hathaway and Facebook, respectively the world’s fifth and sixth most valuable public companies. Amazon’s share price has accelerated as it has shown Wall Street that it is no longer afraid to turn a serious profit, following July’s delivery of its first quarterly net income above $2bn. What began as an online bookseller was founded by former hedge fund manager Jeff Bezos, now the world’s richest person, in his garage in Bellevue, Washington, in Continues on page A2

President Xi Jinping (centre) with African leaders during the Forum on China-Africa Co-operation in Beijing. Concessional loans from China to Africa have jumped to $5bn a year, the highest ever © AFP

Egyptian farmers hit as Nile Delta comes under threat Water shortages, pollution and soil problems create crisis in area struggling to support millions HEBA SALEH

bdel Aziz Haikal reaches down to grab a green shoot from a paddy field in Egypt’s northern Nile Delta at a time of year when the plant should be filled with rice grains. Instead the farmer rubs the husk between his fingers and says: “Look how empty it is.” Land in his village was traditionally fed by fresh water from the Nile river, which helped to make his province, Kafr al-Sheikh, one of the most fertile in the delta. But Nile water stopped reaching Mr Haikal’s village of Abu Saieed five years ago and is becoming ever harder to replace. For centuries, the banks of the Nile have been home to farms producing rice as well as cotton and wheat. But now water shortages, soil degradation and pollution have created a crisis that has undermined agriculture in the delta, which is struggling to support millions of impoverished farmers. Mr Haikal and his neighbours

find that they have no choice but to irrigate their fields with untreated agricultural drainage water polluted by nearby fish farms. They complain it is leading to smaller harvests. Compounding their problems, the river has become a focus of regional tensions since Ethiopia began to construct a $4.8bn hydropower project on the Blue Nile, the source of most of the water reaching Egypt. The Grand Ethiopian Renaissance Dam will be the largest of its kind in Africa and a linchpin of Ethiopia’s ambitious plans for economic development. Cairo fears that its already strained water resources will decline further when the dam has been completed. But the problems in the Nile Delta have been decades in the making. Rising sea levels in the Mediterranean have increased the salinity of underground water and the soil. Population growth has put more pressure on existing water resources, while the mass dumping of industrial waste in irrigation

canals has polluted waterways. Ahmed Abdel Alti, Egypt’s irrigation minister, said recently that water scarcity was imposing limits on Egypt’s economic development. The impoverished farmers of the northern Delta have been the first to see the effect in the shape of declining productivity. “The Delta is already suffering a water crisis due to existing environmental problems,” said Mohamed Ghanem, a researcher at the government’s agricultural research institute. “The farmers are feeling it and the Ethiopian dam could make things worse.” Egypt falls well below the internationally accepted definition of water poverty, which is set at 1,000 cubic metres or less per person a year. The country has less than 600 cubic metres per person. Khaled Abu Zeid, head of the Egyptian Water Partnership, a non-governmental organisation, said the priorities were to conserve existing resources and find ways to treat waste water so that it can be recycled for agriculture.

Pimco’s Ivascyn sees opportunities in emerging market turmoil Chief investment officer notes ‘challenged’ outlook but says it is looking interesting ROBIN WIGGLESWORTH

imco has begun to take advantage of the “attractive” opportunities thrown up by the recent emerging markets turmoil even as they continue to reduce the overall riskiness of their bond funds, according to the asset manager’s investment chief. Markets in the developing world have been roiled by the Federal Reserve’s interest rate increases and the US dollar’s renaissance this year, plunging Turkey and Argentina — two of the most vulnerable emerging economies — into financial crises and rumbling the rest of emerging markets. That has helped send JPMorgan’s EM currency index down to a record low and caused the biggest monthly

losses for EM bond investors in nearly two years in August, according to exchange traded fund prices. However, Dan Ivascyn, group chief investment officer at Pimco, argued that developing world bonds are now beginning to look more enticing despite the still “challenged” outlook for fixed income more broadly. “There are clearly a lot of challenges in emerging markets. But we see a little bit of value. It’s beginning to look interesting,” Mr Ivascyn said in an interview. “We don’t see the same complacency in emerging markets as we do in other markets . . . We are more buyers than sellers.” The more positive stance towards EMs comes despite Pimco slowly but surely shifting many of its

multibillion-dollar bond portfolios into more defensive positions over the past year, concerned that the slow but sure reduction of post-crisis central bank stimulus will eventually rattle global markets. Pimco is Argentina’s single biggest bondholder, albeit according to fund filings that run to the end of the first quarter, with about $5.3bn worth of holdings at the time. Mr Ivascyn’s $113bn Pimco Income Fund had a roughly 2 per cent allocation to the country at the end of March, and suffered a 0.7 per cent reversal last month. That wiped out its gains for the year, but the Income Fund is still beating its index and remains one of the best performing bond funds over the past five years, according to Bloomberg data.

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NATIONAL NEWS

Amazon joins Apple to become second $1tn...

Wall Street picks a favourite in New York attorney-general race

Continued from page A1 July 1994. His 16 per cent stake is now worth more than $160bn, accounting for the vast majority of his personal wealth. The company went public just three years later, in contrast to today’s tech “unicorns”, such as Uber and Airbnb, which have stayed private for many years after achieving huge scale. Amazon raised a modest $54m in its 1997 initial public offering, which valued the company at $438m. It has since grown to become one of the world’s most feared and admired companies, shaking off controversies about demanding work conditions in its warehouses and headquarters alike. Fuelled by the continuing growth of its core retailing business and the efficiencies that come with vast scale and a valuable trove of customer data, Amazon has successfully expanded into higher-margin cloud computing, advertising and online video, while also investing in longer-term bets such as artificial intelligence, healthcare and its own distribution network– whether by truck, plane or drone. Mr Bezos’ unbounded ambition rattles boardrooms far beyond Silicon Valley. There have been flops along the way – most notably its Fire phone, which was discontinued in 2015 after just a year on the market – but Mr Bezos has always encouraged his staff to take risks. “I’ve made billions of dollars of failures,” he said at a conference in 2014. “Experiments are by their very nature prone to failure. But a few big successes compensate for dozens and dozens of things that didn’t work.” For the best part of two decades, that aggressive approach to investment in the future yielded meagre profits. Amazon did not surpass $1bn in quarterly net income until the end of last year. The company only survived the dotcom bust thanks to a lastminute convertible bond deal that raised $672m in February 2000, just weeks before the market started to crash. It took until 2003 to report its first annual net profit. In the mid-2000s, with its share price languishing, some wondered if Mr Bezos was still the right person to run the company, after the founders of Yahoo and Google had brought in “adult supervision” to run their businesses. Amazon’s stock would not return to its dotcom peak above $100 until 2009. But the last 10 years have seen its market capitalisation increase by an astonishing $965bn to reach Tuesday’s trillion-dollar milestone, when the stock hit $2,050.50 in morning New York trading. Today the company employs more than half a million people and is in the midst of a public search for a second headquarters to expand from its Seattle home. It continues to be the target of political scrutiny ranging from President Donald Trump, who has slammed the company over taxes, its relationship with the US Postal Service, and Mr Bezos’s ownership of the Washington Post, to Vermont Senator Bernie Sanders, who has recently spoken out against its working conditions and wages.

Lawyers and property tycoons back congressman for role as the industry’s ‘sheriff’

LINDSAY FORTADO AND JAMES FONTANELLA-KHAN

South African recession adds to emerging market gloom Rand falls sharply after second quarter data shows first downturn since 2009

JOSEPH COTTERILL

outh Africa fell into its first recession since 2009 during the first half of the year, despite early optimism over the country’s economic prospects when Cyril Ramaphosa replaced the corruption-hit Jacob Zuma as president. Output in sub-Saharan Africa’s most industrialised nation fell 0.7 per cent in the second quarter, on top of a 2.6 per cent contraction during the first three months of 2018, South Africa’s official statistics agency said on Tuesday. The South African rand fell more than 2 per cent against the US dollar following the release of the data, hitting its lowest level since early 2016. Agriculture, trade and manufacturing all recorded declines in activity in the second quarter, the statistics agency said. The first quarter contraction was also steeper than initially estimated, it added. “The starting point was even worse than we had assumed,” said Razia Khan, chief Africa economist for Standard Chartered. “South Africa will have

to try harder to achieve positive growth. Positive political change on its own is not going to be sufficient.” South Africa’s economy has failed to grow more than 2 per cent a year since 2013, and faces serious structural obstacles such as unemployment of more than 27 per cent. Rising fuel prices have recently increased the pressure on South African consumers. The return to recession underscores the challenge for Mr Ramaphosa in turning round a long period of stagnation under Mr Zuma, who was forced out of office earlier this year after losing control of the ruling African National Congress. Mr Ramaphosa, a trade union leader turned tycoon who won a power struggle to become ANC leader, came into the presidency with a pledge to bring an economic “new dawn” and attract $100bn of foreign investment. In his first steps Mr Ramaphosa boosted business sentiment by replacing the boards of economically crucial state-owned enterprises compromised by graft under Mr Zuma. He also appointed a technocrat finance minister and removed allies of Mr Zuma from his cabinet.

More recently Mr Ramaphosa secured pledges of billions of dollars of investment from the Gulf and China. But investors remain wracked by uncertainty over regulations in key parts of the economy, particularly mining. The industry has grappled this year with the ANC over draft rules setting new targets on local ownership of mines. Mr Ramaphosa has also sought to reassure investors that proposals by the ANC to speed up land reform will not compromise property rights. The party is debating a constitutional amendment to allow expropriation without compensation in some circumstances, in order to tackle post-apartheid inequality. Weak growth also poses a dilemma for the South African Reserve Bank, which recently signalled that it would keep interest rates at current levels rather than cut them amid instability in other emerging markets. On Tuesday the SARB governor, Lesetja Kganyago, told the Financial Times “there is not much monetary policy space” to boost growth. “Our monetary policy stance as it stands now is accommodative,” he said.

Clash of the US and Chinese tech giants in Africa American groups must adapt to face competition on the last frontier AUBREY HRUBY

he Trump administration has made a perceived global rivalry with China the centre of US foreign policy. This competitive stance has coloured the view of African countries in Washington and a tale of Chinese mercantilism in the region has come to dominate the narrative, under which China greedily demands privileged access to Africa’s natural resources in exchange for no-strings-attached infrastructure financing. But that story is outdated and fails to capture an emergent area of true competition — that among US and Chinese tech giants. Over the past decade, Chinese commercial engagement has quietly become more diversified and increasingly private-sector led. Chinese tech companies, in particular, have taken a deeper interest in African markets. Building on their success in other emerging markets, Huawei, Tecno, ZTE, Tencent and, now, Alibaba, are making investments in countries from Nigeria to Kenya.

The Forum on China Africa Cooperation, which is held every three years, is happening this week in Beijing and presents an opportunity for recalibration. US policy and business leaders will have to reframe their understanding of Chinese commercial engagement in African markets and prepare for growing competition in tech and ecommerce. To remain competitive in African markets, US groups such as Amazon will need to be increasingly flexible in their market entry strategies and focus on providing a diversified, innovative product mix. US and Chinese tech companies are not new to Africa’s tech landscape. For more than two decades, western companies from IBM to Microsoft made multimillion-dollar investments in Africa’s digital infrastructure. Huawei and ZTE were later to the game but helped build out the second wave of the continent’s mobile network. These early investments contributed to an explosion in mobile telephony and the birth of ecommerce in African

countries. Today, internet penetration is growing, especially in more advanced markets such as Nigeria and South Africa, and unique mobile subscriber penetration has reached more than 44 per cent. Chinese phonemaker Transsion Holdings has become Africa’s top smartphone maker, selling more than 80m phones a year. Online access coupled with increased urbanisation is creating an environment ripe for ecommerce and mobile entertainment services, where revenue is expected to reach $29bn by 2022. From music and movie streaming to social media and collaboration platforms, there are hints of battles to come. In Africa’s pay TV market, which is expected to reach more than $6bn in revenue by 2021, the new on the scene Chinese provider StarTimes has more than 10m subscribers and just announced a 10-year $7m contract with Uganda’s football association. Meanwhile, Netflix has expanded to provide its service to all 54 countries on the continent.

enior figures from Wall Street are lining up in support of a three-term Democratic congressman in the race for New York attorney-general, as the finance industry frets over who will be elected to an office that holds significant sway over its fortunes. Congressman Sean Maloney, a lawyer and former White House staffer under Bill Clinton, has won the biggest donations from Wall Street heavyweights, according to an examination of public filings that show he has already raised $1.8m for his campaign. While many are focused on the midterm elections for Congress, which could change the balance of power in Washington, the New York attorney-general race is the single most consequential for Wall Street. Because of New York’s role as the US financial capital, the state’s chief legal officer has become known as the “sheriff of Wall Street”, after previous holders such as Eliot Spitzer used it to pursue wide-ranging legal cases against the industry. In heavily Democratic New York, the party’s primary currently under way is likely to determine the eventual winner, and Mr Maloney has opened up a funding lead over rival candidates Letitia James, Zephyr Teachout and Leecia Eve. Donations for Mr Maloney have come from marquee Wall Street lawyers including Marty Lipton of Wachtell, Lipton, Rosen & Katz; and Rodgin Cohen of Sullivan & Cromwell; real estate executives like David Simon; and billionaires such as Ron Perelman, who owns MacAndrews & Forbes, a cosmetics-to-biotech conglomerate. Mr Lipton said that all four Democrats were “excellent candidates” but Mr Maloney “is the most qualified”. Mr Maloney’s record in Congress has been praised by several senior Democrats for opposing President Donald Trump but he also voted in favour of changes to the Dodd-Frank law that loosened regulations for Wall Street. Ms James, who has the support of New York’s Governor Andrew Cuomo, is seen as the establishment candidate. Currently the New York City public advocate and a former member of the city council, she is second in the fundraising race with $1.6m. Her biggest donors are unions, although she has also raised funds from John Catsimatidis, the Republican former mayoral candidate, who founded the Gristedes grocery chain, and Jennifer Soros, daughter-in-law of hedge fund manager George Soros. Ms Teachout, a law professor endorsed by several Democratic Socialist candidates and two of the major New York newspapers, has collected $920,156, and Ms Eve, a staffer to Joe Biden, former US vice-president, has raised $334,898, according to election records. Despite the big donations for Mr Maloney and Ms James, the race has no clear frontrunner.

Wednesday 05 September 2018

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BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Brexit politics jolt pound from summer slumber Volatility rises as investors try to gauge how low the currency can fall ROGER BLITZ

f markets were calm about Brexit over the summer, they are less so now. The summer had left analysts puzzled by relatively low sterling volatility, given the absence of Brexit progress in the run-up to the March 2019 exit date, but anxiety levels have risen since the start of September. Sterling-dollar one-month implied volatility — the price of insuring against sterling swings against the dollar — is on the rise and at its highest level in six months. True, the level is some way below this year’s mid-February peak, but what looks clear is that after months of disinterest, investors are on alert for Brexit developments. Their main preoccupation is about the floor in sterling which, since its 2018 peak of $1.43 in mid-April, has fallen 11 per cent. The working assumption is that somehow the UK and the EU would come to an arrangement that would win sufficient approval in the UK parliament and among EU member states, in which case the pound would strengthen. Short of that outcome, sterling would fall, but by how much? Peter Kinsella, forex strategist

at the Commonwealth Bank of Australia, said sterling was already weak and most of the worst-case scenarios were broadly priced in. But if UK prime minister Theresa May faces a leadership challenge, that would add to Brexit uncertainty. A successful challenge would result in “a more dramatic sell-off” by making a no-deal scenario more likely, he said. Kamal Sharma at Bank of America Merrill Lynch puts sterling in a broad range: $1.10 (no deal) to $1.50 (no Brexit), with $1.30 and above probable should a deal be built around Mrs May’s Chequers agreement. As things stand, investors have little to guide them. They pushed the currency higher on Tuesday after Mark Carney said he was willing to remain Bank of England governor to smooth the Brexit process, but the rally barely lasted a couple of hours. The only thing that can be said with a fair degree of certainty is that politics is now the driver of sterling. As Jane Foley of Rabobank said, the value of the pound against the euro has been “binary” and that regardless of data, sterling has been “closely aligned to the market’s interpretation of the odds of a hard Brexit”.

US manufacturing survey raises the stakes for emerging markets Strongest reading of US manufacturing in 14 years will add upward pressure on the dollar JOHN AUTHERS

merican manufacturing really does look as though it might be great again. Tuesday’s ISM purchasing manager survey, set so that 50 marks the dividing line between expansion and recession, saw a leap to 61.1. That was its highest in 14 years. With the exception of one month in 2004, when the measure hit 61.2, US manufacturers apparently have not felt stronger since 1984, when President Reagan was proclaiming it was “morning in America”. Presidential gloating over this number would be justified. The last election hinged in large part on the awful decline in US manufacturing. Now it is coming back. The question now, though, is whether the very strength of US manufacturing will require the presidential tweet button to be devoted once more to putting pressure on the Federal Reserve not to raise interest rates. More or less every part of the report was strong, with new orders, inventories and employment healthy. Export orders were down from a big spike earlier in the year, probably induced by attempts to get in orders before tariffs were imposed, but stayed healthy at 55.0; the “trade war” has not yet had a serious negative effect. But for anyone worried about the need to head off serious overheating, the evidence was there. The accompanying report said that “the nation’s employment resources and supply chains continue to struggle,” while purchasing

managers were “overwhelmingly concerned about tariff-related activity”. Could good news - and for many Americans that is what this is - become bad news for markets, and hence bad news for the many more people around the world who are affected by them? This has to be a risk. Numbers this strong make it hard to see the Fed desisting from raising rates twice more this year. A hike later this month seems to be treated as a certainty, but the chance of a December hike, the median prediction of Fed governors, is still seen as only about a two in three shot on futures markets. Stock markets continued to fall on the ISM news, while bonds sold off, with the 10-year Treasury yield briefly recapturing 2.9 per cent for the first time in almost a month. Crucially, Treasury yields rose more than yields in Europe, bringing the spread of Treasury over bund yields back up to 2.55 percentage points. That ended a brief dip, and adds to the continuing upward pressure on the dollar. Jay Powell of the Federal Reserve appeared to try to talk the dollar down last month, with some initial success, but dollar strength will not go away. The ISM figure was released as JPMorgan’s index of the EM foreign exchange had hit a new all-time low against the dollar, with the South African rand now falling the fastest. More strong data this week, particularly from US non-farm payrolls on Friday, could undo the latest more dovish message from the Fed, and might bring emerging currencies to a cathartic sell-off.

ING to pay €775m in money laundering case Penalties are the largest ever imposed on a company by Dutch public prosecution service MARTIN ARNOLD

utch bank ING has agreed to pay €775m in penalties for compliance failures that allowed companies — including a Curacao lingerie company and Russian mobile phone operator — to allegedly launder hundreds of millions of euros and pay bribes over six years. The penalties are the largest ever imposed on a company by the Dutch public prosecution service, which said it found “clients were able to use accounts held with ING for criminal activities for many years, virtually undisturbed” from 2010 to 2016. The bank’s failings were unearthed after the Dutch prosecutor probed wrongdoing at four companies that had accounts at ING, including $55m in bribes paid to the daughter of Uzbekistan’s president by a unit of Russian mobile operator VimpelCom. The other ING clients it investigated included a Curacao-based women’s underwear company that allegedly laundered €150m, a Suriname one-man building materials group that is accused of laundering €9m, and a fruit and vegetable importation front company for money laundering. The prosecutor said the breaches of the Dutch anti-money laundering and counter terrorism financing act “took place in such a

way that the bank is also accused of culpable money laundering: the bank failed to prevent bank accounts held by ING clients in the Netherlands between 2010 and 2016 from being used to launder hundreds of millions of euros”. The settlement is a blow for the reputation of the largest bank in the Netherlands, which said it had started disciplinary procedures against about 10 current and former employees in the Netherlands, including suspending them and “holdbacks” of untested bonuses. Ralph Hamers, chief executive of ING since 2013, admitted the bank had not done enough to tighten its compliance operations after being fined $619m by US regulators for breaching sanctions by helping Iranian and Cuban companies move billions of dollars through the US financial system. “Although our investments in this area have been increasing since 2013, they have clearly not been to a sufficient level,” he said, adding that in the past 18 months it had increased its staff working on “know your client” and transaction monitoring from 150 to 450. The bank also expressed its “regret” and said its executive committee would waive their 2018 bonuses. Earlier this year the bank was forced to abandon a plan to give Mr Hamers a 50 per cent pay rise to as much as €3m, after politicians accused it of acting like

a “cookie factory”. The settlement was made up of a €675m fine and a €100m disgorgement that represented the “underspend” by the bank for cutting corners on its customer due diligence and financial crime prevention systems. ING said the size of the fine “reflects the seriousness, extent and duration of the identified shortcomings but also expresses the fact that it was not possible to determine to which extent and for what amounts bank accounts at ING Netherlands were actually misused”. The prosecutor said ING’s compliance department “was understaffed and inadequately trained” and “the system for monitoring transactions was set up by the bank in such a way that only a limited number of money laundering signals were generated”. It added: “Only the proverbial tip of the iceberg was investigated.” The prosecutor is using a 2015 law for the first time that allows it to fine up to 10 per cent of a company’s revenue. The bank said shortcomings found by regulators included missing or incomplete customer files, failure to exit business relationships in a timely manner, classifying customers in the wrong segments, lack of resources, insufficient post-transaction monitoring and failure to review its financial crime prevention process.

MTN extends slump after Nigeria hits it with $2bn tax bill Shares in Africa’s largest mobile phone operator shed more than 17% PAN KWAN YUK

TN was dealt another blow on Tuesday after Africa’s biggest mobilephone operator by subscribers said Nigerian authorities are seeking $2bn in back taxes. The news comes less than a week after Nigeria’s central bank ordered the South African company to return $8.1bn that it claimed was illegally taken out of the country, which sent MTN shares tumbling more than 17 per cent on Tuesday. The drop takes the stock’s losses since last Thursday to nearly 33

per cent and underscores market concerns over the company’s mounting woes in the west African country. Nigeria is the Johannesburglisted group’s biggest market, accounting for a quarter of its 240m subscribers last year. MTN said in a statement on Tuesday that it has been in talks with Nigeria’s attorney-general over taxes that the group should have paid over the past decade on the import of foreign equipment and supplier payments. While MTN argued that it owed just $700m and has paid this sum in full, Nigerians authorities rejected

the company’s finding last week and are looking to recover $2bn. “It is both regrettable and disconcerting that despite the historic engagements with the Nigerian authorities by MTN Nigeria, the senate investigation into the CCI matter, and the multiple tax assessments done by the Nigerian tax authority over many years that were satisfactorily concluded, that these matters are being reopened,” MTN said. Last year MTN agreed to pay $1bn and list its local operations on the Lagos stock market to settle earlier claims that the repatriation was illegal under foreignexchange regulations.

BUSINESS DAY

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BUSINESS DAY

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NEWS YOU CAN TRUST I WEDNESDAY 05 SEPTEMBER 2018

Opinion Making sense of the growing clan of interest groups

CHIDO NWAKANMA Nwakanma Â is Â a Â Visiting Â Member Â of Â the Â BusinessDay Â Editorial Â Board Â and Â serves Â on Â the Â Adjunct Â Faculty Â at Â the Â School Â of Â Media Â and Â Communication, Â Pan Â Atlantic Â University, Â Lagos. Â Email Â chidon-Â wakanma@gmail.com. Â

s the election approaches, interest groups are announcing their presence for attention and negotiation. Most seek to leverage their position to count for something in the elections. They ordinarily want to influence the tide of the election as well as subsequent public policy. The configuration of Politics Nigeriana, however, has seen ethnic associations as the primary aggregators of interests after the political parties. Political parties are not coming out with any plans and programmes. There is no ideology. Indeed, the parties are

increasingly becoming identified along ethnic lines once again. The Manufacturers Association of Nigeria has been at the forefront of interest group advocacy in Nigeria. Its heyday was the era of Military Rule where, in the absence of representatives in the Legislature, MAN took on the task of speaking up mainly on economic and budgetary matters. Professional associations such as the Nigerian Bar Association also took up advocacy for both their interests and those of the larger society. Groups such as the Harvard Business School Association of Nigeria played roles in budget and policy analysis. There is, of course, the Nigerian Labour Congress which spearheaded workersâ&#x20AC;&#x2122; rights and fought gallantly against the serial increases in the pump price of petrol over many administrations. NLC often won in the breach because each time Government succeeded in effecting an increment even if not at the quantum it initially set out to achieve. Until the humungous increment under PMB and the NLC went to sleep. Most of our groups are also sleeping on duty concerning various matters of national, group

or professional interest. Very few have spoken up on the kite the Federal Government floated the other day indicating a resolve to tamper with the statute books on the matter of individual rights versus the rule of law. The danger is looming. What has taken centre stage is the growing number of ethnicbased groups and sub-groups. It would seem as if the various sub-groups have determined to fill the gap. They range from the Miyetti Allah, which has grown in notoriety and influence since cows became an essential subject of national discourse, to previously established groups such as Northern Elders Forum, OhanaezeNdigbo, the OoduaPeoples Congress and the Ijaw National Congress. Of interest is the fact of the growing number of these groups. Some would describe the phenomenon pejoratively as mushrooming. There are now a large number of groups in the Ijaw nation. From Ohanaeze, the Igbo now have many groups all seeking to articulate the Igbo interest in the best way that they understand it. Many are off the radar as they operate quietly behind the

scenes to influence policy and action using direct contacts and their extensive networks. The highly regarded Encyclopaedia Brittanica says an interest group, also called special interest group or pressure group, is an association of individuals or organisations that organises and seeks to influence public policy in its favour based on one or more shared concerns. â&#x20AC;&#x153;All interest groups share a desire to affect government policy to benefit themselves or their causes.â&#x20AC;? The goal could be a policy that benefits their members exclusively, a segment of society or one that advances a broader public purpose.

Pluralism is the underlying philosophy of our political system. It requires skill in advocacy, negotiation and all the tools deployed in pushing interests

Interest groups grow out of a community of interest. Those communities of interest are a natural and essential part of most societies. Interest groups are also contributory to the evolution and sustenance of democracies. They are â&#x20AC;&#x153;a prevalent, permanent, and essential aspect of all political systems -democratic, authoritarian, and totalitarian regimes alikeâ&#x20AC;?. Interest groups operate at all levels of government. Some are increasingly playing roles across geographies. Their tactics include lobbying, agitation and propaganda. Some also serve as think tanks, researching into issues and articulating them for the benefit of peak associations that represent the broader interest, such as Ohanaeze, or as direct input into policy conversations and process. These are ideal constructs. Pluralism is the underlying philosophy of our political system. It requires skill in advocacy, negotiation and all the tools deployed in pushing interests. It would be necessary for the various groups to identify their primary areas and focus. It would also be essential for the ethnic associations to ensure they do

not, in the name of activism, work at cross purposes. In Imo State, recently, individuals and groups loyal to the Indigenous Peoples of Biafra as well as opposition parties boycotted the local government elections. They were protesting the alleged shenanigans that Governor Rochas Okorocha brought to play. In doing so, however, they handed over powerful instruments of state power at local levels that would empower Okorocha in his quest to institute a familiocracy in the state. In fighting the micro, they lost sight of the more significant issue. Our growing band of interest groups should contribute to political participation. How many of them are actively mobilising citizens to register and vote? More importantly, how many are ensuring the accountability of government to the people? They would do this through surveillance and by initiating dialogue on policies and programmes. We need to see these groups play a more significant role with direct impact on the political process. Then a large number of such groups would translate to active political participation.

Creating over N1.15trn annual trade through effective sustainable banking principles

FRANKLIN NNAEMEKA NGWU (PHD)

Dr. Â Ngwu Â is Â a Â Senior Â Lecturer Â in Â Strategy, Â Finance Â and Â Risk Â Man-Â agement, Â Lagos Â Business Â School, Â Pan-ÂAtlantic Â University

ith the excitement that greeted the visit of UK Prime Minister, Theresa May, last week, it is disappointing that even after over 100 years of trade relations, the value of exports from Nigeria to the United Kingdom is still surprisingly below ÂŁ1billion. With a trade deficit of about N62.21 billion in 2016, the value of Nigerian exports to UK was N300.66billion while the value of imports was N362.87 billion. However, with effective practice of Sustainable Banking Principles to which the banks agreed and signed to at the Bankerâ&#x20AC;&#x2122;s Committee retreat on July 14, 2012, the level of exports from Nigeria to the UK can increase to over N1.15 trillion within one year. The launched Sustainable Banking framework is made up of 9 key principles: 1. Business Activities: Environmental and Social Risk Management, 2. Business Operations: Environmental and Social Footprint, 3. Human Rights, 4. Womenâ&#x20AC;&#x2122;s Economic Empowerment, 5. Financial Inclusion, 6.Environmental & Social Governance, 7. Capacity Building, 8. Collaborative Partnerships, and 9. Reporting. During the launching of the principles by the CBN and the banks, it was stated that they were adopted based on interna-

tional standards but adapted to the Nigerian environment. The overriding aim of the principles was for the financial institutions to make positive development impacts on our society while protecting the communities and environment. Like other externally adopted policies, the problem is rarely with the details or contents of the policies, but in the effective implementation. This is exactly what is happening to our well celebrated 2012 Sustainable Banking Principles. In a random assessment I conducted in about 11 Nigeria banks, less than 40% of the sample (bank officers) were aware of the principles and acknowledged their application in their bank operations. Given our level of socio-economic development and the potential contribution the effective application of the principles can have, it is sad that the principles are almost being forgotten within six years of its being launched. With the hope that the banks are interested in contributing to our sustainable growth, then there are varied and practical ways through which they can help and which will have wide ranging positive effects on our society including the banks. Most helpfully, some of the ways or projects can be executed even by one of the banks or through a collaborative approach within their strategic Corporate Social Responsibility (CSR) agenda. It will result in the realisation or practice of about 7 of the 9 principles. It will lead to positive social foot print and womenâ&#x20AC;&#x2122;s economic empowerment due to the inherent involvement of women in the projects and trade that I will explain. A more effective and sustainable finan-

Interestingly upon inquiries, the main reason why both the big and small UK supermarkets do not source these food products from Nigeria is due the poor packaging standard in Nigeria

cial inclusion will emerge due to the inherent buy-in that will be generated and the need to use the formal banking sector that will be required. Capacity building and collaborative partnerships will be enhanced through the empowerment of local institutions and the less privileged. With the expected empowerment, avenues for a better integration of our informal and formal economies will emerge resulting in a higher and more sustainable holistic development of the economy. I will explain one of the ways or projects with a focus on the export of Nigerian food products to the UK. With millions of Nigerians in many parts of Europe and USA, only a very small quantity of the foods consumed by diaspora Nigerians actually come from Nigeria. Sadly, majority of the food products are imported from South American and Asian countries. In the UK for instance, we have about 2 million resident Nigerians that spend on average about ÂŁ30million every day on food (ÂŁ15.00 each person). This translates to about ÂŁ900million

every month and ÂŁ10.8billion every year. As majority of Nigerians will prefer to consume Nigerian foods, the question is: What percentage of the annual ÂŁ10.8billion should be sourced from Nigeria? For a start, I think that setting a target of ÂŁ2.5 billion (over N1.15 trillion) is realistic and achievable. Another important question is why the majority of the foods that Nigerians consume in the UK are sourced from outside Nigeria. While Plantain and Banana are imported from Argentina, Ecuador and Uruguay that are about 14hours by flight to UK as compared to 6hours from Nigeria, Okro and other vegetables and fruits are imported mainly from Pakistan and India. Ethiopia exports over ÂŁ1million worth of fresh flowers to the UK every day. This might sound surprising but it is true

expensive not because of the quantity as in the Nigerian case but due to the distance of the countries from the UK. So there is a big opportunity for Nigeria to supply the majority of the food products required and preferred by Nigerians in the UK. Interestingly upon inquiries, the main reason why both the big and small UK supermarkets do not source these food products from Nigeria is due the poor packaging standard in Nigeria. This is where the bank(s) can come in to make the sustainable banking principles practical and really sustainable. What is required is for one, two or more banks to build and manage food packaging centres of international standards near our international airports. As earlier stated, this they can even do as part of their strategic CSR project. For a start, one packaging centre can

Numbers: N300.66bn â&#x20AC;&#x201C; Value of Nigeriaâ&#x20AC;&#x2122;s export to the UK in 2016

N62.21bn â&#x20AC;&#x201C; Nigeriaâ&#x20AC;&#x2122;s trade deficit with the UK in 2016

and I mean normal flowers for expressing love and affection, for condolences and birthdays etc. This does not mean that some food products do not come from Nigeria, but they come in very small quantities and as such are very expensive and unable to meet the demand. The ones that come from Asia and South American countries are equally

be built in each of our international airports namely: Lagos, Port Harcourt, Enugu, Abuja and Kano. It will also require the setting up of a warehouse or distribution centre(s) in London for onward distribution to other parts of the UK. As some of the banks are involved in training SMEs, an important component of the

packaging centre will be the training of the villagers and traders on food packaging and handling. To ensure sustainable success, the banks will need to set a management unit for the packaging centres in Nigeria and UK. While the Nigeria unit will be responsible for the buying and packaging of the food products for onward freighting or shipping to the UK, the UK unit will be responsible for the distribution of the foods to the supermarkets and shops. I am aware that some banks might argue that building and managing a food packaging centre is not part of their core businesses. However, given the level of poverty in our society and the banks agreement to the sustainable banking principles, I think that they have both business and ethical responsibilities to get involved. Moreover, banks in other countries have been and are still involved in the development and industrialisation of their economies beyond their normal intermediation functions. South Koreaâ&#x20AC;&#x2122;s development and industrialisation is largely attributed to their banksâ&#x20AC;&#x2122; central involvement in creation and management of SMEs and big industries. However, if the Nigerian banks do not want to get directly involved in the buying and distribution of the foods, then they can train and support SMEs that can handle that aspect of the business. Irrespective of whether they get directly involved or not, the benefits from this idea are immense: Not only will it lead to better revenue for Ozor Nwanjiam of Abakaliki, it will increase his life span due

Continues on page 39

Published Â by Â BusinessDAY Â Media Â Ltd., Â The Â Brook, Â 6 Â Point Â Road, Â GRA, Â Apapa, Â Lagos. Â Â Ghana OIĂ&#x20AC;FH Business Â Day Â Ghana Â Ltd;Íž Â ABC Â Junction, Â near Â Guinness Â Ghana Â Limited, Â Achimota Â â&#x20AC;&#x201C; Â Accra, Â Ghana. Â Tel: Â +233243226596: Â email: Â PDLO#EXVLQHVVGD\RQOLQH FRP Â Â Advert Â Hotline: Â 08034743892. Â Subscriptions Â Â 01-Â2950687, Â 07045792677. Â Newsroom: Â 08169609331 (GLWRU $QWKRQ\ 2VDH %URZQ. Â Â All Â correspondence Â to Â BusinessDAY Â Media Â Ltd., Â Box Â 1002, Â Festac Â Lagos. Â ,661

WEST AFRICA

ENERGY intelligence oil

gas

power

Wednesday 05 September 2018

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BUSINESS DAY

POLICY

Diesel prices could rise on new sulphur cap regulation Page 5 finance people appointments

L-R: Dada Thomas, president, Nigerian Gas Association; Fisoye Delano, chief executive, Delphi Ventura Group; Adeola Adenikinju, director, CPEEL & Lateef Akinpelu, lecturer, Dept. of Petroleum Engineering, University of Ibadan at the third roundtable dialogue of Centre for Petroleum, Energy Economics & Law (CPEEL), University of Ibadan recently

Debrief

Tunisia government raises fuel prices, fourth hike this year Page 6 OPEC weekly basket price DAY

PRICE

31/8/18

74.96

24/8/18

72.09

17/8/18

70.36

10/8/18

71.88

3/8/18

72.61 Source: OPEC

Who reaps from re-imposition of sanctions on Iran? FRANK UZUEGBUNAM

he market fundamentals are gathering and it is difficult to situate the impact of re-imposing sanctions on Iran will have on global oil prices. Already, oil prices rose, extending gains on growing evidence of disruptions to crude supply from Iran and Venezuela and after a fall in US crude inventories. Benchmark Brent crude oil was up 50 cents a barrel at $77.64. US light crude was 40 cents higher at $69.91. With the November 4 deadline looming, Iran’s oil exports are tumbling again as the coun-

try’s key buyers in Asia take fewer cargoes in the weeks before US sanctions take full effect. Iranian crude exports dropped to a little more than 2 million barrels per day (bpd) in August. This is the lowest since March 2016 against a peak of 3.1 million bpd in April, as importers bow to American pressure to cut orders. In May, Trump pulled the United States out of the Iran nuclear agreement between five other world powers and Tehran. The administration is urging countries to cut purchases of Iranian oil from the Islamic Republic to zero or face possible sanctions after November. However, the United States in certain cases will consider waivers for

countries that need more time to wind down imports of oil from Iran while re-imposing sanctions against Tehran, US Treasury Secretary Steven Mnuchin has said. But Iran is poised to fight back, threatening to close the Strait of Hormuz, a vital conduit for Middle East shipments. According to military sources, Iran plans to halt Middle East oil exports if it is not allowed to ship its crude through the Strait of Hormuz, according to a top military official. If the Islamic Republic cannot use the Strait for its oil exports, “there will be no security for others either and no other crude will be exported from this region,” Armed Forces Chief of Staff Mo-

hammad Bagheri said. The Strait of Hormuz is at the mouth of the Persian Gulf, the world’s biggest concentration of tankers that carry about 30 percent of all seaborne-traded crude oil and other liquids during the year. “A sudden drop in Iranian crude shipments from the market will cause big shortages and a negative impact on oil prices,” Alaa al-Yasiri, head, Iraq’s stateoil marketer SOMO, said, referring to a possible increase in prices. “It’s very difficult to predict what is going to happen in next OPEC meeting but producers must find ways to make up for Iranian crude that the market will lose.”

02 BUSINESS DAY WEST AFRICA Outlook Brief Gabon: Panoro Energy reports oil discovery offshore Gabon

anoro Energy has reported an oil discovery in the Ruche North East Marin-1 (DRNEM-1) well drilled in the Dussafu Marin PSC, offshore Gabon. The DRNEM-1 well was drilled to identify additional oil resources in the pre-salt Gamba and Dentale formations in the greater Ruche area, and completed within budget. These resources may be developed together in the future with the existing Ruche field discoveries made by Panoro in 2011, 3 km to the southwest. “This is another exciting oil discovery at Dussafu, where since 2011 we have had an outstanding drilling

success rate with nine consecutive well penetrations finding oil. We are pleased by this positive result and we are now moving forward with the appraisal program,” John Hamilton, CEO of Panoro said. Drilled with the Borr Norve jackup unit in 115-m water depth, the DRNEM-1 well reached a vertical depth of 3,400 m within the Dentale formation. Log evaluation, pressure data and fluid samples indicate that approximately 15 m of good-quality oil pay was encountered in the Gamba formation and 25 m of oil pay in stacked reservoirs within the Dentale formation. Additional technical evaluation is currently being undertaken to appraise this discovery. The forward plan includes a sidetrack which will appraise the Dentale sands in an updip location and the lateral extent of the Gamba reservoir. Panoro expects to provide a further update in September.

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2018

oil

Ghana: Aker Energy to submit plan for Ghana offshore field in 2019

orwegian oil firm Aker Energy will delay submitting a plan for development of its block off Ghana until early next year to allow time to complete appraisal drilling, expected to start in October, Jan Arve Haugan, its chief executive said. The unlisted firm, controlled by Norwegian billionaire Kjell Inge Roekke, bought a 50-percent stake in Ghana’s Deepwater Tano Cape Three Points (DWT/CTP) block from Hess for $100 million in February this year. Aker had initially intended to summit a development plan in the second half of 2018, but has since changed its mind. “The forecast now is to start drilling in October. Our goal is to identify the oil/water contact to update the reservoir model,”

Haugan said. Aker Energy plans to make a final investment decision and to submit a field development plan to Ghanaian authorities early next year, with production seen starting in late-2021 or early 2022, Haugan added. The plan involves develop-

ing around 400 million barrels of oil by using a floating production, storage and offloading vessel (FPSO). “We believe that we should be able to increase the volumes further, but that depends on the recovery rate and on the possibility to tie in nearby

discoveries,” Haugan said. The volumes in place are estimated to be more than a billion barrels, he added. The company has signed a letter of intent to use Maersk Drilling’s Maersk Viking drillship, which was previously employed by Exxon Mobil and is currently located in the US Gulf of Mexico, Haugan said. Executives of Aker, which has a 50 percent stake in Aker Energy, have previously compared the Ghanaian field to Norway’s Arctic Johan Castberg field in terms of break-even costs. Norway’s Equinor, operator of Johan Castberg, estimates the field’s break-even price at below $35 a barrel. Aker Energy holds 50 percent in the DWT/CTP block, Lukoil has 38 percent, Ghana National Petroleum Corporation 10 percent and Fuel Trade 2 percent.

well location for Samo, a frontier drilling effort off the coast of Gambia. Seismic data are used to get a better understanding of the reserve potential in frontier prospects Drilling is scheduled for the fourth quarter and will last about 40 days. It will be the first well drilled offshore Gambia in 40 years. Two Gambian blocks combine for an estimated 1 billion barrels of unrisked barrels of oil and are in close proximity to the SNE oil field offshore Senegal, one of the largest finds in recent years.

FAR’s joint venture partners in March completed a geotechnical study of a 2,900-squaremile permit area off the coast of Senegal that includes the flagship SNE oil discovery. The results revealed another 198 million barrels to the estimated 641 million barrels in the best estimate scenario of contingent reserves. FAR already has a drillship contracted for the well. The Australian company estimates the Samo prospect contains prospective resources of 825 million barrels of oil.

Gambia: PETRONAS enters Gambian oil industry

alaysian e n e r g y company, PETRONAS, is funding 80 percent of the costs to drill into an emerging oil basin off the coast of Gambia, a project developer stated. Australian energy company FAR Ltd., which has a core focus in West Africa, said the Gambian government signed off on a deal that brings a subsidiary of Petroliam Nasional Berhad in as a partner in the Samo prospect offshore. “By securing the approval of the Gambian

Ministry of Petroleum and Energy, FAR has achieved another milestone towards its objective of drilling the substantial oil resource potential of the highly prospective Blocks A2 and A5 in The Gambia,” Cath Norman, FAR Managing Director said in a statement. PETRONAS took a 40 percent stake in the Samo prospect for $6 million in cash and agreed to fund 80 percent of the exploration costs for the first well, up to a maximum of $45 million. After reviewing seismic data, FAR selected a final

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Wednesday 05 September 2018

gas

ENERGY intelligence

Australia: Exxon drills deep for Australian natural gas

WEST AFRICA

Brief

sso Deepwater Gippsland, a subsidiary of Exxon Mobil, said it has started the search for new sources of natural gas by drilling two new wells off the coast of Australia. Esso Deepwater Gippsland said it started drilling two exploration wells in the deepwaters of the Gippsland Basin off the southern coast of Australia. The company said the wells will be drilled in the deepest waters of the basin at close to a half mile. “These wells are targeting gas prospects, with the objective of proving up resources for timely development and contribution

BUSINESS DAY

Asia. The company started operations at its Wheatstone LNG project in October. At its peak, the facility will supply nearly 9 million tons of super-cooled gas every year to the emerging and energy-hungry economies of Asia. French supermajor Total in July took another step toward LNG leadership with the start of operations at the Ichthys project off the Australian coast. The company said it expected the project to be in service for the next 40 years, with a peak production capacity of 285,000 barrels of oil equivalent per day. Exxon’s subsidiary said

Egypt: Eni reports gas discovery in Obayed concession

ni announces a gas discovery in the Egyptian Western Desert. The discovery well has been drilled on the Faramid South exploration prospect located in East Obayed concession, 30 km NorthWest of the Melehia Concession. The well reached the target depth of 17,000 ft and encountered several gas bearing layers in the Kathabta sandstones of Jurassic age. The well has been opened to production delivering 25 MMscfd, confirming the potential of the East Obayed Concession. Eni has started the studies to develop these relevant gas reserves that, together with the gas potential of the Melehia Concession, can contribute to increase the country gas production from the Western Desert basin. Eni, through its Op-

erating Company AGIBA, which is equally held by Eni subsidiary IEOC and the Egyptian General Petroleum Corporation (EGPC), currently produces 55,000

boed from the Egyptian Western Desert. AGIBA owns 100 percent of the East Obayed Concession. Eni has been present in Egypt since 1954, where is

the main producer with approximately 320,000 boed equity. Such production is expected to further grow within the year, thanks to the ramp up of Zohr field.

China: PetroChina aims to grow natural gas output at faster rate than oil

to the Australian domestic gas market,” Richard Owen, Chairman said in a statement. Most of the supermajors are involved to some degree in the Australian natural gas sector. Chevron put its flagship Gorgon liquefied natural gas project in Australia at full capacity last year. The project will eventually produce 15.6 million tons of LNG per year, a fuel described by Chevron as “essential” for markets across

it has a drilling rig in place for gas operations off the southern Australian coast. Drilling is expected to take “several months.” Elsewhere, however, the company identified more than $3 billion in projects that could open up more doors in the LNG sector. “ExxonMobil Australia is also actively considering a potential LNG import project to bring additional supply to the east coast gas market,” Owen stated.

etroChina is aiming to grow its gas output at a much faster rate than oil over the next five years as oil companies rush to meet Beijing’s call for cleaner fuels, while ageing reserves limit the scope to grow output of oil. Despite the anticipated growth in oil and gas production by China’s biggest upstream company, the incremental volumes would fail to close the gap with China’s growing need for energy resources, according to the company’s vice chairman Zhang Jianhua. “Domestic oil and gas resources are not good enough for significant pro-

duction increases,” Zhang said on the sidelines of the company’s interim briefing in Hong Kong. Company executives added that while PetroChina was aiming to annually grow its gas output by

about 4-5 percent over the next five years, annual oil production would grow by a modest 1 percent over the same period. Zhang added that PetroChina would lift crude oil production in response to the government’s calls to speed up exploration and development work in an effort to meet the country’s strong domestic demand for fuels. PetroChina’s domestic proven and developed crude oil reserves fell below 9 billion barrels by the end of 2008, from 9.05 billion barrels in 2007. The downward trend has continued since then, hitting 5.18 bil-

lion barrels by the end of 2016, although it had recovered slightly to 5.59 billion barrels at the end of 2017, according to filings with the US Securities and Exchange. The decline was because of ageing of its flagship Daqing oil block. The downtrend is unlikely to be reversed despite new oil discoveries by the company. But PetroChina has set a target to lift domestic natural gas production by 4-5 percent annually, lagging behind the country’s demand growth for gas, an indication that the country would be dependent on imported gas and LNG in coming years.

04 BUSINESS DAY WEST AFRICA ENERGY intelligence Gabon: China’s TBEA to invest in €180m Gabon hydropower project

hinese energy firm TBEA will invest in a €180 million ($209 million) hydropower project in Gabon alongside the West African country’s sovereign wealth fund, a Gabonese official said. The project will have a power generation capacity of 70 megawatts in the first phase, Liban Soleman, general coordinator of the Bureau of Coordination and Planning for an Emerging Gabon, said. “There are going to be multiple phases,” said Soleman, who is in the Chinese capital for the Forum on China-Africa Cooperation, adding that the project, known as FE2, was located in the north of Gabon near the border with Cameroon and Equatorial Guinea. Gabon, a member of OPEC pumping just under

Wednesday 05 September 2018

power

Malawi eyes coal to power industries, Nigeria can learn from it STEPHEN ONYEKWELU

200,000 barrels of crude oil per day and one of the world’s biggest producers of manganese, is working to diversify its economy, which is projected to grow by around 2.2 percent this year, said US-educated Soleman, who also chairs Gabon’s National Agency for Investment Promotion. The investment by TBEA, a private company involved in wind power in China and solar power in Pakistan, will be “direct, not with debt”.

Liberia: Monrovia rolls out wasteto-energy programme o n rov i a’s Mayor Jefferson Koijee has announced his plans to govern the city through the motto of the Monrovia City Corporation (MCC) - “To Monrovia clean, green and safe”. “We developed a 180day quick impact inception

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work plan for Monrovia City Corporation - March 1 to August 21, 2018. The plan was divided into six key components that addressed how we intended to comprehend the workings of the city government and seek to build on gains made by our predecessors and to improve on lapses,” Koijee said. The key components mentioned include: internal actions, consultations, and institutional assessment; quick impact actions to support the government’s pro-poor agenda for city safety, cleanliness and organisation; assessment of funding and revenue generation sources; engagement with stakeholders; activities for legal and policy reform and work plan output evaluation and reporting.

alawi has signed a deal with a consortium of Chinese companies to build a coal-fired plant because its industries are energy hungry but Nigeria seems to ignore its own vast reserve of coal. On August 31, two days before official opening of the 2018 Forum for China-Africa Corporation (FOCAC), Peter Mutharika, the president of Malawi met Chinese consortium of companies to discuss energy generation project and to build a coal-fired power plant at Kammwamba. Coal supplies a third of all energy used worldwide and makes up 40 percent of electricity generation, as well as playing a crucial role in industries such as iron and steel, according to Paris-based energy thinktank the International Energy Agency (IEA). Despite legitimate concerns about air pollution and greenhouse gas emissions, coal use will continue to be significant in the future. Therefore, greater efforts are needed by government and industry to embrace less polluting and more efficient technologies to ensure that coal becomes a much cleaner source of energy in the decades to come. While there is no official master plan to develop the coal market in Nigeria, heavy manufacturing industries, such as cement factories are turning to coal for their electricity needs. This is because it is readily available, reliable and requires less capital expenditure to mine amid pipeline vandalism and

gas shortages, which jeopardise power generation. Mutharika and his delegations met the chairperson of the China Energy Engineering Group Ltd (CEEC) the Parent company of the China Gezhouba Group International Engineering Company; Wang Jianping and directors of the company. Gezhouba Group International Engineering Company is the Chinese company that is to construct the 300MW coal-fired power plant at Kammwamba in Neno, with a lifespan of 30 years. “We need the extra energy as soon as yesterday. That is why we are very serious about this project. If we have the extra wattage from this project, our economy will perform much better than now,” Mutharika said. Malawi generates about 251MW of power and a paltry 10 percent of the country’s population is connected to the power grid of Electricity Supply Corporation of Malawi (Escom).

Nigeria, Africa most populous nation’s long history of romance with coal as a major energy resource was cut short due to machinery and equipment failures, geographical and infrastructural weaknesses, human resource deficiency and lack of government interest. At the peak of Nigeria’s coal age, production increased annually from 583, 487 tonnes to an all-time high of 905, 397 tonnes before 1960. After 1959, production decreased significantly each, until today no production is recorded on book. Nigeria still holds large coal reserves, estimated to be at least 2 billion metric tonnes. Nigeria’s coal industry suffered a blow in the 1950s when oil was discovered. Up until this point, the Nigerian Railway Corporation was the largest consumer of coal in the country. However, after the discovery of oil, the Railway Corporation began to replace its coal burning

trains with diesel-powered engines. An additional negative impact came when the Electricity Corporation of Nigeria began converting its power generation equipment from coal to diesel and gas as well. The Nigerian Civil War also negatively impacted coal production; many mines were abandoned during the war. Following the war, production never completely recovered and coal production levels were erratic. Nigeria’s coal is in high demand because it is one the most bituminous in the world due to low sulphur and ash content, and rated environmental friendly in line with global campaign on cleaner source of energy in order to reduce negative impact of climate change. The proven reserves of coal so far in Nigeria are 639 million tonnes while the inferred reserves are about 2.75 billion tonnes, consisting approximately of 49 percent subbituminous, 39 percent bituminous, and 12 percent lignitic coals. According to the International Energy Agency (IEA), the top 10 coal producers in 2016 were (MT) China 3,576, India 707.6, United States 671.8, Australia 503.3, Indonesia 460.5, Russia 365.5, South Africa 256.9, Germany 175.6, Poland 130.6, and Kazakhstan 97.9. Most research work on Nigerian coals is focused on their usefulness in the metallurgical industry. The few research works carried out on Nigerian coals as regards power generation have not comprehensively characterised Nigerian coals based on the contemporary requirements of power plant designers and operators.

Wednesday 05 September 2018

C002D5556

POLICY

BUSINESS DAY

WEST AFRICA

ENERGY intelligence

Diesel prices could rise on new sulphur cap regulation ISAAC ANYAOGU

y January 1, 2020 the deadline to establish a sulphur cap of 0.5 percent for marine fuel from 3.5 percent by the International Maritime Organisation (IMO) would have kicked in with analysts forecasting that diesel prices will hit the roof. According to IMO, the objective of the rule is to curb pollution from ships as high combustion of sulphur fuels is believed to lead to respiratory problems and endangers the climate. IMO ratified the new rules after series of false starts to cut ship

air pollution which is linked to approximately 400,000 premature deaths from lung cancer and cardiovascular disease alone and around 14 million childhood asthma cases annually, according to a UN research. While the climate may benefit from this provision, the operating model of many businesses would struggle. This rule has rattled ship owners globally and in Europe there is now a drive towards refining distillates as a cheaper option to comply with the 0.5 percent sulphur cap. Many ships are expected to experiment with blended fuel oils and new products which are outside of current standards.

Already the cost of producing diesel has been higher due to additional capacity and operating costs. But this new measures are expected to create an oversupply of high-sulphur fuel oil while demand for low sulphur fuel would spike which is expected to compel refiners to re-examine their models. Analysts say over 3.5 million barrels per day of high sulfur fuel oil would need to be converted to distillates which includes diesel, portending higher prices. Refiners would also need to re-strategise hence they would become more selective about the quality of high sulphur crude that they purchase. It is

projected to drive down demand for high crude grades increasing the price differential between both crude grades. Refineries are certainly gearing up for the increase in diesel demand. But given the time, complexity, and expense of increasing capacity to meet the new demand, it is possible that there will be insufficient supplies when the new specifications come into effect. Hence this is expected to drive up the price of diesel as refiners would have to pay more for sweet crudes or spend a pile of money to equip their refineries with the ability to reduce the sulphur content of the crudes they buy. Hence price differen-

tials between petrol and diesel would grow wider from 2020. Analysts say that diesel prices could rise significantly. Low sulfur crudes like West Texas Intermediate (WTI) will likely see demand spike as well. But that is not the only concern about the new IMO rule. There are fears that with the absence of global standards for some of these new blended fuels that could be produced to pass the bar of low sulphur content, there may be some potential safety issues including those related to the use of compliant but incompatible bunkers which could lead to loss of power on a ship while in the middle of the ocean.

06 BUSINESS DAY

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ENERGY intelligence

T US sells 11m barrels of oil from reserve to six firms

finance people appointments

Tunisia government raises fuel prices, fourth hike this year

Brief

ix companies, including ExxonMobil Corp, bought a total of 11 million barrels of oil from the US Strategic Petroleum Reserve, a Department of Energy document showed, in a sale timed to take place ahead of US sanctions on Iran that are expected to remove oil from the global market. Sale of the oil from the reserve was mandated by previous laws to fund the federal government and to fund a drug program, but the Trump administration took the earliest available time to sell the crude under the law. The sale’s timing “would appear to reflect President Donald Trump’s concern regarding oil market tightness associated with the reinstatement of Iran oil sanctions,” analysts at ClearView Energy Partners said after the sale was announced on August 20. In May, Trump pulled the United States out of the Iran nuclear agreement between five other world powers and Tehran. The administration

Wednesday 05 September 2018

is urging countries to cut purchases of Iranian oil from the Islamic Republic to zero or face possible sanctions after November. The United States in certain cases will consider waivers for countries that need more time to wind down imports of oil from Iran while re-imposing sanctions against Tehran, US Treasury Secretary Steven Mnuchin has said. ExxonMobil bought about 3.3 million barrels of oil from the reserve, held in a series of underground caverns in Texas and Louisiana. The other companies purchasing the oil were Marathon Petroleum Corp, which bought nearly 1.4 million barrels, Motiva Enterprises LLC, with 2.4 million barrels, Phillips 66, with more than 2 million barrels, Royal Dutch Shell PLC, with nearly 1.6 million barrels, and Valero Energy Corp bought 330,000 barrels. The oil, for shipping by both pipeline and vessels, sold in a range of $67.66 a barrel to $69.05 a barrel.

unisia’s government raised fuel prices by about 4 percent, the fourth hike this year, in an effort to rein in its budget deficit and meet reforms requested by the country’s international lenders. The price of a litre of petrol will rise to 1.985 Tunisian dinars from 1.925 dinars, the industry ministry said in a statement. The three previous increases this year were in March, January and June. Fuel subsidies this year will rise from an expected 1.5 billion dinars to 4.3 billion dinars with the rise of world oil prices, officials said. The IMF has been pressing Tunisia to trim its budget deficit and increase fuel and electricity bills to offset a rise in oil prices that is pressuring already-strained public finances. “Staying the course on reducing the fiscal deficit this year and next is criti-

cal to stabilise debt and reduce excessive demand for imports given the recent increase in global oil prices,” the IMF said after a mission visited the country. The two sides reached

an initial, or “staff level”, agreement on the next reforms, the IMF statement added. Tunisia has forecast that the budget deficit will fall to 3.9 percent in 2019 versus 4.9 percent of gross

domestic product expected in 2018. The country has dropped into a deep economic slump following the overthrow in 2011 of autocratic leader Zine ElAbidine Ben Ali.

Kenya imposes 16 percent VAT on petroleum products

enya’s revenue authority imposed a 16 percent value added tax on all petroleum products, defying lawmakers who had voted earlier to delay the levy for two years

due to concerns about the cost of living. Parliament’s decision to postpone the introduction of the tax on fuels, which had been pushed back several times previously, was seen as a blow to government efforts to raise state revenues. But the revenue authority said in a statement it was proceeding based on previously approved budget bills. “Kenya Revenue Authority informs the general public, oil marketers, resellers and retailers that VAT will be charged on all petroleum products at a rate of 16 percent on all transactions with effect from September 1, 2018,” it said.

To become law, the bill on delaying the tax that was passed in parliament still needs approval by President Uhuru Kenyatta. The Energy Regulatory Commission (ERC) said it had recalculated the maximum pump prices that will be in force between September 1 and 14 in order to take into account the new VAT. “This notwithstanding, if the amendment to the Finance Bill 2018 as passed by the National Assembly is enacted into law, the pump prices shall be re-adjusted accordingly,” the ERC said in a statement. The retail price for petroleum in the capital, Nairobi, will now be quoted at 127.80 Kenyan shillings

($1.27) per litre, while diesel is priced at 115.08 shillings, the regulator said. The planned tax hikes were designed to fund a range of government development goals including universal healthcare and affordable housing. KRA said it had advised importers, depots, distributors and retailers, including roadside fuel stations, to charge, account and submit returns on a monthly basis. “KRA has instituted measures to support oil industry players in complying with the law. We have also engaged the Energy Regulatory Commission in order to ensure coordinated action by relevant government agencies,” it said.

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marketinsight

Oil rises on Iran Sanctions, lower US fuel inventories

il prices rose, extending gains on growing evidence of disruptions to crude supply from Iran and Venezuela and after a fall in US crude inventories. Benchmark Brent crude oil was up 50 cents a barrel at $77.64. US light crude was 40 cents higher at $69.91. Brent has risen by almost 10 percent over the past two weeks on widespread perceptions that the global oil market is tightening and could run short in the next few months as US sanctions restrict crude exports from Iran. Iranian crude exports are likely to drop to a little more than 2 million barrels per day (bpd) in August, against a peak of 3.1 million bpd in April, as importers bow to Ameri-

can pressure to cut orders. The Organization of the Petroleum Exporting Countries, in which Iran is the third-biggest producer, will discuss in December whether it can compensate for a sudden drop in Iranian supply after sanctions start in November, the head of Iraq’s state oil marketer SOMO, Alaa al-Yasiri, said.

Crude exports from crisis-struck OPEC member Venezuela have also fallen sharply, halving in recent years to about 1 million bpd. Official US oil inventory data also helped the bullish trend. US commercial crude inventories fell by a larger than expected 2.6 million barrels in the week to August 24,

OPEC Flakes OPEC to discuss compensating for Iranian supply drop after US sanctions to 405.79 million barrels, the Energy Information Administration said. US production was flat from the previous week’s record of 11 million bpd. The International Energy Agency (IEA) has warned of a tightening market towards the end of the year because of falling supply in countries such as Iran and Venezuela combined with strong demand, especially in Asia. “Definitely there are some worries that oil markets can tighten towards the end of this year,” IEA Executive Director Fatih Birol said. “As Iranian oil exports are lost to the market, Venezuelan production continues to decline, Angola struggles to maintain output and Libya is subject to episodic outages,” said Harry Tchilinguirian, BNP Paribas global oil strategist.

Oil seen getting $4/bbl boost on tough new ship-fuel rules

ew regulations to curb pollution from the world’s shipping fleet could lift crude prices by $4/bbl when the measures come into effect in 2020, according to a Bloomberg survey of 13 oil industry analysts. That is because the changes from the International Maritime Organization, a United Nations agency, are likely to

stoke refiners’ demand for lower-sulfur crude while prompting some plants to run as hard as possible to maximize profits. In just 16 months, the IMO’s rules to cap the sulfur content of ship fuel are set to create a once-in-ageneration upheaval in the oil market, as the regulator seeks to limit emissions of a pollutant that has been linked to asthma and acid

rain. The global shipping fleet is reliant on refiners to supply IMO-compliant fuels, and it is not clear there will be enough to go around. Prices for lowsulfur products are already climbing, while those for high-sulfur grades are collapsing. A similar effect is expected in the crude markets. Banks including Societe Generale and Morgan Stanley have said the regulations will likely lift crude benchmarks Brent and West Texas Intermediate, which have a relatively low sulfur content. Brent’s premium to higher-sulfur Dubai crude, the Middle East benchmark, has already swelled to more than $4/bbl in 2020. Bloomberg asked ana-

BUSINESS DAY

lysts to estimate the likely price effects of the regulatory change. Crude prices are forecast to rise by $4/ bbl in 2020 due to the IMO rules specifically, according to the median estimate of 13 responses that ranged from a $2 drop to a $20 increase per bbl. By 2020, global crude oil demand is set to rise by 2 percent to 87.7 MMbpd, according to a forecast from the Paris-based International Energy Agency in March. If crude prices surge by $4 a barrel due to the IMO rules, that would amount to an increase of about $128 billion in the world’s oil bill by 2020, Bloomberg calculations show. Brent crude, the global benchmark, is now trading near $77.50/bbl.

PEC will discuss in December whether producers can compensate for a sudden drop in Iranian oil supply after US sanctions against Tehran start in November, Alaa al-Yasiri, head, Iraq’s state-oil marketer SOMO, said. Yasiri said a sudden drop in Iran oil exports will have a negative impact on prices and market fundamentals. “A sudden drop in Iranian crude shipments from the market will cause big shortages and a negative impact on oil prices,” he said, referring to a possible increase in prices. “It’s very difficult to predict what is going to happen in next OPEC meeting but producers must find ways to make up for Iranian crude that the market will lose.” “The major issue dur-

ing next OPEC meeting will be are producers really ready to pump more oil to compensate Iran’s share,” he added. Iraq has resumed crude shipments to Iran from its Kirkuk oil fields following a few days stoppage due to logistical issues, he said, adding that so far Iraq had only shipped 500,000 barrels and hopes to ship a total of 1 million before the November US sanctions against Iran kick in.

OPEC August oil output hits 2018 high despite Iran losses

PEC oil output has risen this month to a 2018 high as Libyan production recovered and Iraq’s southern exports hit a record, a Reuters survey found, although a cut in Iranian shipments due to US sanctions limited the increase. The 15-member Orga-

nization of the Petroleum Exporting Countries has pumped 32.79 million barrels per day in August, up 220,000 bpd from July’s revised level and the highest this year. OPEC and allies agreed in June to boost supply as US President Donald Trump urged producers to offset losses caused by the renewed sanctions on Iran and to dampen prices, which this year hit $80 a barrel for the first time since 2014. In June, OPEC, Russia and other non-members agreed to return to 100 percent compliance with oil output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 percent.

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2018

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The dire need for a rebirth of the oil, gas downstream industry AUGUSTO & CO

he oil and gas downstream Industry remains largely import dependent due to Nigeria’s dismal domestic refinery production. Over the last five years (2012 – 2017), the local refineries owned by the Nigerian National Petroleum Corporation (NNPC) have operated at an average capacity utilisation of 16.5 percent. NNPC intends to improve the operational capacities of the refineries and reduce importation significantly by 2019. The national oil corporation is currently engaged in a series of negotiations with a number of private investors to improve the operational efficiency of these refineries and to possibly construct modular refineries within these plants. Refinery production may also improve in the near term if the Dangote Refinery construction meets the 2020 operational kick-off target. In spite of the plans to ramp up local production of refined petroleum products, adequate investment in the distribution network is highly germane. The distribution network of the downstream industry relies significantly on the tanker trucking system due to the inefficiencies of the pipeline network – which is subject to at least a thousand breaks annually. Over 95 percent of refined petroleum products are transported by road. Some of the other key challenges affecting the Industry include government regulations on pricing, inadequate funding, sensitivity to foreign exchange volatilities and increasing rate of pilferage. Not so much of a good era for private downstream operators Petrol accounts for almost 80 percent of white fuels consumed in Nigeria and is also the only petroleum product with price controls. The Nigerian government ended the payment of petrol subsidies in 2015 and reviewed the price of petrol downward from ₦87 to ₦86.50 per litre. This coincided with declining global crude oil prices in 2015 (average Brent price: 2014 - $99pb, 2015 - $53pb).

Nonetheless, the subsidy claims from the prior years (pre-2015) still remain outstanding, with claims accumulating to over ₦800 billion as at October 2017. These accumulated subsidy claims have impacted the financial health of downstream operators, leading to weaknesses in the Industry’s bankability, while constraining growth. In May 2016, the price of petrol was reviewed upwards to ₦145 per litre to enable a full cost recovery for importers of petrol, following the devaluation of the Naira. The sustainability of the capped price and the petrol market’s operational dynamics came under pressure in 2017 as global crude oil prices rebounded. The increase in crude oil prices translated to an uptick in the price of refined petroleum products in the global market. This has led to a wide disparity between the international price of crude and Nigeria’s regulated pump price. The regulated price regime has created several impacts on Nigeria. Firstly, it creates arbitrage opportunities in neighbouring countries (such as Benin, Togo, Niger and Chad), where petrol is sold at higher prices. The regulated petrol price regime has also resulted in the ‘resumption’ of petrol subsidies and the payment of underrecoveries, currently borne by the NNPC. The relatively high price of refined petroleum products in the global market and the rigidity of the pricing template on cost

elements like the exchange rate of 285NGN/ USD, has made it unprofitable for petroleum marketers to import and sell at the regulated pump price. Following the difficulties in the import of petroleum by downstream marketers, NNPC became the major supplier of petrol for most of 2017 and now in 2018. Due to the cost differences, NNPC incurred cumulative losses of ₦144.5 billion in 2017 and has spent an average of ₦40billion monthly in 2017 on under recoveries. The 2018 budgetary allocations to a number of key Federal Ministries are well below ₦40billion. The fiscal impact of the petrol price controls and subsidies is fast becoming acute, particularly if the price of petrol pump is neither reviewed nor liberalised. The kerosene – LPG market connection Owing to more investments in distribution infrastructure for cooking gas, the consumption of kerosene continues on a downward spiral. Increasing health consciousness and awareness of the need for more environmental friendly cooking fuel options have also bolstered the consumption of cooking gas. The consumption of kerosene has declined by an average of 27 percent over the last four years (2013 – 2017). Given the removal of subsidies on kerosene and the improving LPG market, we expect consumption to dip further in the near to medium term. The argument for improving domestic production of petroleum products There are several arguments against the viability of refineries, given the divestment in a number of refineries in certain parts of the world. Nonetheless, we believe Nigeria could benefit from capturing this viable part of the oil and gas value chain. First, the price of locally refined petroleum products are likely to be cheaper than imported products due to the high cost structure in imports’ logistics such as carriage and freight charges as well as demurrages. Another key benefit will be the economic benefits from the multiplier effect of refineries. There are possible employment gains from supporting businesses, given that refineries do not typically require a high number of personnel,

such as logistics service providers, petroleum retailing, service companies (waste management, plat treatment, shutdown support and data management). We also believe a thriving refinery segment of the downstream industry could pave way for export opportunities to the Sub Saharan Africa region and create a thriving market for petrochemicals. The path towards regulatory certainty The Petroleum Industry Bill, expected to incorporate key laws and regulations for all oil and gas operations is categorised into four tranches: Petroleum Industry Governance Bill (PIGB), Petroleum Host and Impacted Communities Development Bill (PHICDB), Petroleum Industry Administration Bill (PIAB) and Petroleum Fiscal Bill (PIFB). The Nigerian Senate and House of Representatives passed the PIGB in May 2017 and January 2018 respectively. In June 2018, draft PIGB was transmitted to the Presidency for assent into law. Key recommendations of the PIGB will be the liberalisation of the refined petroleum market and harmonisation of regulatory functions to a sole regulatory body. In the event that the PIGB is approved, the regulatory focus will be centred on creating the enabling environment for private sector investments, particularly building a strong antitrust framework. Nonetheless, we are conscious of the complexities and significant changes to institutional frameworks this bill will require. In addition, given the tenuous political environment currently focused on the 2019 elections, we do not expect the PIGB will be given the attention it requires. In conclusion, we believe that despite the positive outlook on the crude oil market, the fiscal burden from the heavily regulated market could stoke higher macro risks as it leads to an expansion of the fiscal deficit. In our opinion, to pare back the burgeoning fiscal deficit, the Federal Government would need to liberalise the white petroleum market while divesting from key downstream assets (storage depots, pipelines and refineries). Augusto & Co is a research, credit rating & credit risk management firm