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news you can trust I ** monDAY 06 april 2020 I vol. 19, no 535

Here are 2020/21’s 10 top risks for businesses in Nigeria, according to KPMG SEGUN ADAMS

black swan event, seen in the Covid-19 outbreak, will remain key in defining outlook for businesses in Nigeria and around the world, says KPMG Nigeria, which has pinpointed 10 top business risks for businesses in the country 2020/2021. The Risk Consulting practise of KPMG in Nigeria in a recent

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3 German banks join Siemens deal but hurdles remain See story on page 39

Continues on page 39

Inside Pushed to the wall, Nigerian tech firms fight back against coronavirus P. 38 Covid-19 and the Nigerian nation An overview of the ongoing pandemic, the local response, and prospects for the future P. 20-21

Heap of palm fronds inside the church during a Palm Sunday Mass by Catholic Bishop of Abuja, Most Rev. Ignatius Kaigama at Our Lady Queen of Nigeria Pro-Cathedral, Garki, in Abuja on Sunday.

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news Lagos discharges 5 more Coronavirus patients as one dies JOSHUA BASSEY & Godsgift Onyedinefu

ive more patients of the Coronavirus patients have been discharged from the Infectious Disease Hospital, Yaba, Lagos, bringing to 30 the number of recoveries since the index case in Lagos, in February this year. However, a 36-year-old patient of the virus was reported dead in a private facility on Sunday, to bring the number of deaths in Lagos to two, just as confirmed cases in the state now stand at 113. “Today, I am happy to inform you that five more patients comprising two males and three females including a 10-year-girl have consecutively tested negative twice to the COVID19 and have been discharged to reunite with their families. “It is however sad that the

… as Nigeria records 10 new cases, toll now 224 state has recorded another death, bringing to two the total number of deaths from COVID19 in Lagos State,” Babajide Sanwo-Olu said on Sunday. The governor said although, there were strong indications that the state was winning the battle against the killer virus, there was a need to remain steadfast and aggressive to curtail the spread. He added that the result of tests conducted on the recovered patients showed they pose no threat to the community. Against this background, he advised Lagosians against stigmatising the discharged patients as this act could bring feelings of shame, hopelessness and despair, “We need to do all we can to support them in whatever form to get

over the memories as soon as possible.” The governor thanked frontline health workers taking care of the patients, members of the Lagos State Health family and the Emergency Operation Centre for their kindness and flexibility in managing the patients and checking the spread of the disease. He assured that Lagos State would continue to do the needful in terms of responding to emergencies in an effort to ensure the health and wellbeing of our people. “We will do our best to make sure that other patients at the facility receive the best of care and attention so that they can return home to join their families and the community soonest,” he said.

Covid-19: Against ventilator deficit Nigerian professionals embark on production Daniel Obi

hree Nigerian engineering firms and other professionals with different specialities have teamed up to manufacture ventilators, the medical equipment that helps breathing, especially in emergencies. Seeing the need for the ventilators to save lives, the three indigenous companies – Lange and Grant involved in production of insulated panels for organisations; Mul-t-lock Nigeria Limited, an electronic and computerised firm involved in robotic machines; Transilient Technologies Limited, involved in energy saving, and Longe Paul, an anaesthetic doctor, came together to produce the equipment that is under test-run.

One of the clinical tests of the equipment was performed Sunday, April 5, at Mariamville Hospital, Bode Thomas Lagos, with doctors and the manufacturers putting heads together to perfect the equipment for use. The innovation is coming at a crucial time when ventilators are required globally to tackle emergencies, especially the coronavirus pandemic ravaging various countries. It is said Nigeria currently has less than 400 ventilators against an estimated 40,000 units at about $10,000 per unit required by the authorities concerned to fight coronavirus pandemic, which is spreading, hitting 224 cases in Nigeria as at Sunday afternoon. After the dummy tests with medical personnel, Tunde Okoya, CEO of Lange and Grant, said the team had noted

the areas that needed perfection. “We are going to effect them and perfect the device for medical use after approval by other relevant authorities,” he told BusinessDay at the testing point. Ekor Oluwayemisi, an anaesthetic doctor at Lagos University Teaching Hospital (LUTH), who was present at the equipment trial, commended the efforts of the Nigerians, saying, “It is a good development and I am happy Nigerians are looking inwards to produce such equipment at this time. We really need to continue to look inwards”. She agreed that the equipment needed a lot of improvement, but was a positive step forward, as “the trial is significant before it is commercially produced”.

Businesses, individuals contribute N360m to Kano committee on Covid-19 Adeola Ajakaiye, Kano

bout N360 million have so far been contributed by businesses and individuals in the commercial city of Kano, to a fund raising campaign on COVID-19 by the Kano State government, as part of ongoing efforts to help vulnerable persons in the state. The biggest contribution comes from an elder statesman and Kano-based billionaire and business mogul, Aminu Alhassan Dantata, who made a donation of N300 million to the campaign. Muhammed Yahuza Bello, co-chairman of the campaign code name ‘Kano State Fund Raising Committee’, made this disclosure while briefing journalists about the performance of the committee. Bello, who is the vicechancellor of the Bayero University, Kano (BUK), also revealed the contribution of N28.5 million made by the management of United Bank for Africa. One of Africa’s leading

entrepreneur, Aliko Dangote, has also pledged to provide all needed facilities for the earmarked 600-bed Isolation Centre, to be situated inside the playing turf of the Sani Abacha Stadium, in the Kano metropolis. In addition, two Kanobased businessmen, Abba Sumaila and Abubakar Dalhatu, chairman Al-Amsad Group, have donated 500 sacks of spaghetti and N5 million respectively to the fund. According to Yahuza, Barau Jubrin, made a donation of N4 million, while, Ibrahim Shekarau, and Kabiru Gaya, all senators, who are both former governors in the state, each made a contribution of N2 million. He added that 11 of the 24 members of the House of Representatives from the state have promised to contribute N1 million each, while the remaining 13 members made a commitment of N250,000 each. Also, all political appointees, including commissioners, and all the 44 local counwww.businessday.ng

cil chairmen in the state, have made a commitment to donate 50 percent of their salaries in the month of March, to the cause, Yahuza said. Responding to question from BusinessDay during the briefing, the chairman of the fund raising committee explained that the committee, which is sub-divided into five groups, was working out the modalities that would assist it identify vulnerable persons to benefit from the contributions. He further stated that a perimeter was being worked out that would be used for the purpose of distributing the generated funds to the needy individuals. “I feel highly honoured and humbled to welcome you all to this press briefing and to address you on the journey so far, as the chair of the Kano State Fund Raising Committee on Covvid-19 pandemic, which was inaugurated by His Excellency, Governor Abdullahi Umar Ganduje, precisely on Sunday, 29th March, this year. https://www.facebook.com/businessdayng

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comment Dr. J. K. Randle and others, so easily forgotten comment is free

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Bashorun J.K Randle

hat has in our moment of confusion, despair and alarm over the Corona Virus gone global and viral (pun unintended!!) is the list of those who have each written cheques of one billion Naira and handed them over to Mr. Godwin Emefiele, Gover-

nor of The Central Bank of Nigeria towards the CBN Fund to fight the pandemic. One billion naira used to be a hefty sum of money. To put matters in their proper perspective, it was in 1975 (forty-five years ago) that the budget for our entire nation exceeded one billion Naira for the first time ever. The then Military Head of State, General Yakubu Gowon was sufficiently overwhelmed to have (allegedly) declared to the nation: “Money is not our problem. It’s how to spend it”!! Shortly thereafter, while on a visit to one of the Caribbean Islands (allegedly) Trinidad and Tobago, their civil servants threatened to go on strike on account of several months unpaid wages. Compassion immediately kicked in. Nigeria dropped a huge cheque in dollars to bail out the indigent hosts. That was a long, long time ago. Hopefully, we have since learnt our lesson. But maybe not. Anyway, another lesson we may have forgotten is that this not our first encounter with a deadly virus. One hundred years ago (1920) Lagos and other parts of Nigeria were thrown into pandemonium over what was thought to be a pestilence. Large number of people died after bouts of coughing, sneezing and fever /high

temperature. It was more prevalent in the “Native” areas. The exclusive and opulent “GRA” (Government Reservation Area) where the expatriates (mostly colonial officers) lived was largely untouched. The indifference of the Colonial Government left Lagosians no choice but to resort to the invocation of the spirits of their ancestors. The King of Lagos summoned his chiefs and embarked on the appeasement of the deities who were allegedly angry at the defilement of ancient customs and the abasement of the tradition of uprightness, justice and trustworthiness. The diagnosis of Dr. J. K. Randle was somewhat different. He was convinced that it was a virus, albeit waterborne. His appeal to the Colonial Government to build water toilets and 2 rubbish disposal houses (incinerators) fell on deaf ears even though he was a member of the Lagos Executive Council. The good doctor would not let matters rest. With his own money he proceeded to build free water toilets and rubbish disposal houses (“Ile Idale Nu”) all over Lagos. Here we are, a century afterwards, the legacy of philanthropy and goodwill in the sphere of public health has been subverted and forgotten.

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Here we are, a century afterwards, the legacy of philanthropy and goodwill in the sphere of public health has been subverted and forgotten. Pope Francis is right to remind us: God always forgives; human beings sometimes forgive; but history never forgets

Pope Francis is right to remind us: “God always forgives; human beings sometimes forgive; but history never forgets”. In spite of the unrelenting efforts of government to bulldoze history and erase legacy, some of The Dr. J. K. Randle Toilets and Rubbish Disposal Houses are still functioning at the following locations: Behind King’s College, Lagos (Igbosere Road); Adeniji Adele Road; Ajele Street (off Campos Square); Cow Lane; Ita Faji Market; Opposite Cathedral Church of Christ, Marina; Iddo Motor Park; Junction of Olusi Street and Tokunboh Street. What is truly amazing is that politicians and Chairmen/Chairwomen of Local Government Councils have hijacked them and charging the public hefty fees!! They claim them as their personal fiefdom. Anyway, it is not only Dr. J. K. Randle who is the victim of our collective amnesia in matters pertaining to Public Health. There is not enough time or space to add: Dr. Ladipo Oluwole, Professor Oladele Ajose, Dr. Gabi Williams and a long list of old boys of King’s College (Harman’s House). I rest my case. Randle is Chairman/Chief Executive JK Randle Professional Services Chartered Accountants

Covid-19 economic stimulus bill - good thinking

n economic stimulus bill has been proposed for passage into law by some members of the House of Representative titled a bill for an Act to Provide Relief on Corporate Tax Liability, Suspension of Import Duty on Selected Goods and Deferral of Residential Mortgage Obligations to the Federal Mortgage Bank of Nigeria for a Fixed Term to Protect Jobs and alleviate the financial burden on citizens in response to the economic downturn occasioned by the outbreak of COVID-19 Disease and for related matters. This is a laudable initiative, and timely intervention to address some of the corrosive economic impact of the COVID-19 pandemic. The sponsors of the bill deserve commendation. The bill is aimed among other objectives at job protection and providing temporary relief to individuals and companies. The bill is also in the best interest of government both from a social stability and fiscal standpoint. The stimulus measures proposed in the bill are import duty waiver on medical supplies, deferral of payment of mortgages under the National Housing Fund and special tax rebate for employers to ward off looming job layoffs. This write-up will focus on the third element of the package for reason of economic impact and scale. The tax rebate benefit is targeted at employers that advance government objective of job retention by maintaining the same employee status from 1st of March to December 31st, 2020. The incentive is a rebate of 50 percent PAYE tax due or paid on employees by employers for an initial period of 10 months to December 2020. The overarching objective is to discourage employers from downsizing their workforce as a cost saving measure in the face of grim

economic outlook. The rebate shall be deducted through employer’s income or company income tax which suggests that the Federal Government shall bear the burden rather than treated as deduction from PAYE remittance which would have impacted the income of the various states that are already in dire financial straits. This is innovative thinking on the part of the sponsors of the bill. However, laudable as it is, the bill needs some rework if it is to achieve the desired impact. To start with, for an economy that was already flagging even before the current global economic collapse occasioned by COVID-19, and against the backdrop of huge fiscal packages by countries to prop up their economies, an incremental approach as set out in the bill may not align with the objectives. Clearly, we do not have the resources to match the level of stimulus packages by more advanced economies, but I think we can stretch ourselves to adequately mitigate the adverse economic impact of the pandemic. As such, far reaching measures are required. To put the proposal in perspective, expected total rebate for the initial 10 months in 2020 will translate to about N335 billion of tax savings by employers based on 2019 PAYE data by the National Bureau of Statistics (NBS), and assuming there are no layoffs in 2020 which could shrink PAYE collections. The projected tax rebate figure appears significant. However, from an employer’s perspective, the proposal translates to savings of just 9 percent – 10 percent of total wage bill using an Average Effective Tax Rate (AETR) of 18 percent – 20 percent (PAYE), possibly less, which to my mind may not be adequate. If the bill is passed into law as proposed, the options before www.businessday.ng

employers is to either keep their employees and claim 9 percent savings from total wage bill through the special tax rebate or contemplate deep cut in staff strength and save much more than 9 percent of the total wage bill, more so that the profit impact of the economic downturn for some entities could be as high as 50 percent, if not more. I will therefore suggest that 30 percent of companies’ wage bill be considered for special tax rebate as against 50 percent of PAYE deductions as proposed. This is likely to be more effective in mitigating the impending job losses, profit erosion, depressed demand, and negative GDP growth. Let me quickly mention that the revenue implication for government if this option is considered will be in the region of N1.1 trillion spread over one to three years depending on when the special rebate is utilised. The budget constraint that will result from forgoing potential revenue of N1.1 trillion seems too high a cost to bear on the part of the Federal Government - to look at it purely from that perspective is not a 360-degree view. Massive layoff by employers portends deep consequences fiscal status of states especially PAYE component of states’ revenue which constituted 61 percent of total IGR in 2019. The only resort for states at that point will be Federal Government bailout. Meanwhile, Federal Government revenue from taxes may plunge precipitously as well if the economy is not given a shot in the arm, and in large dose. The social upheaval that may erupt from massive job losses is better imagined. On another note, clarification is required with respect to situations where a company does not have taxable profit or where taxable profit or tax payable is less than the special rebate. Can the rebate be

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Glenn Ubohmhe

carried forward and for how long? Should the minimum tax provision in CITA be suspended until such a time when the rebate is fully utilised? These questions need to be addressed in the bill. Lastly, the bill seeks to exclude exploration and production companies in Nigeria. Such a blanket exclusion is counterproductive in view of the number of Nigerians working in the sector. The upstream petroleum sector is one of the hardest hit with players contending with low crude prices, high production cost and huge facility repayment obligations by independent/ indigenous players. One way to look at this is to identify players in the upstream sector that are more susceptible to the plunge in crude oil prices for inclusion in the economic stimulus bill. This way, it will be a win-win situation for employees, employers and government. Glenn writes from Lagos

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As markets reel from pandemic, where’s the bottom?

Patrick Atuanya

ow does one begin to invest in a market hamstrung by an invisible germ that has hobbled great economies from East to West, China to the Americas? But invest must Nigerian fund managers and Pension Funds undertake, as well as individuals who work today and hope to save/ invest enough in their nest eggs for retirement tomorrow. If that is the case and if there is no escaping the carnage that is all around markets today, what must investors look out for? One of the great advantage, market professionals often have is the ability to hearken back to similar periods of meltdown in

the past and use their experiences from such periods to navigate current times. So while market history may not often repeat itself, it often rhymes. Looking back at the last major global recession (2008/2009), what were some of the signals of a bottom in the selloff in risk assets? A big one was the movement in commodities and miners. Back then hard commodities like copper and steel were major proxies for global growth and were at multi year highs just before the recession hit, signalling a top. High flyers like Freeport McMorran (FCX) a U.S based operator of large, long-lived, geographically diverse assets with significant proven reserves of copper, gold and molybdenum, U.S Steel (X), and other such names, were selling off once the recession hit and were often the first to bottom out as investors began to feel that the Chinese demand that drove the stocks was roaring back. Today investors may want to look at these and other proxies for global growth to see if they have bottomed before pulling the trigger on risk assets. Another tell-tale sign for a turnaround in the markets is often the direction of oil prices. While a drop in oil prices is often seen as a tailwind for global consumption (or tax cut for the U.S, as President Trump has recently touted), the truth is that too much of a slump in oil prices often causes more harm than good. First of all take the finances of OPEC countries and other oil producers, which usually takes a beating during a time of falling

oil prices. Last month, the International Energy Agency or (IEA) and OPEC warned in a rare joint statement that developing countries’ oil and gas income could fall to their lowest levels in more than two decades if current energy market conditions persist. IEA Executive Director Fatih Birol and OPEC Secretary General Mohammed Barkindo expressed “deep concerns,” about the coronavirus pandemic, warning it could have “potentially farreaching economic and social consequences.” Birol and Barkindo said they expect developing countries to see their oil and gas income fall by 50 percent to 85 percent in 2020. This could mean losses of up to $500 million a day according to estimates by Reuters. That spending by OPEC members and other oil producers is often a major juice for the global economy and a source of demand for everything from European airplanes and American weapons to Latin American beef and Thai rice. There is also the small issue of U.S shale producers, getting blown out with thousands of jobs and billions of dollars in debt at stake. So a turn in oil prices, often signals a bottom is in for risk assets. It was true during the last 2 downturns in oil in 2015 and 2008/2009. How do investors know the bottom is truly in for oil? Often price action is positive in the face of what would otherwise be bad news, such as a major monthly inventory build-up or weak GDP numbers from a major consumer

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Investors should look out for these signs. Some are already happening, such as the massive stimulus being readied by global central banks and fiscal authorities

Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

Why there is no shame in asking for help

o thanks to the coronavirus we are faced with the double whammy of having to lockdown significant parts of our economy, and at the same time deal with the consequences of the collapse in oil prices. Last week the President announced the partial lockdown of two of our largest states, Lagos and Ogun, and the Federal Capital Territory. With a few exceptions the lockdown means that those economies have been asked to shrink at least temporarily. We are not the only one to use this tactic to try to slow down the spread of the virus. Everybody seems to be worried about recession but we, like many other countries, are deliberately putting ourselves there for good reason. However, we also have a second major challenge besides the direct effect of the pandemic. Since January crude oil prices have collapsed from around $60 a barrel to around $30 a barrel as at Friday. This is important for us because we are still heavily exposed to that market. Crude oil still accounts for near 90 per-

cent of our exports and around 65 percent of government revenue. Any collapse to oil prices was therefore going to have significant effects. To make matters worse, these two shocks could not have come at a worse time. We recorded our largest negative quarterly current account balance since we started keeping track of such data quarterly. Which is typically a symptom of building foreign exchange problems. On the fiscal side we recorded our highest deficit as a percent of GDP. According to data from the central bank, we may have actually broken the deficit ceiling of three percent of GDP as set in the fiscal responsibility act. The first time we would have done so since shortly after the return to democracy. Our debt levels are also kind of high. Officially the debt to GDP ratio is low but we know the challenges with collecting taxes. Our debt and debt servicing costs to revenue ratios are already in debt crisis levels. And the final option of just getting the central bank to finance the deficits has already been in use for some time now. www.businessday.ng

ECONOMIST

Credit to the federal government via overdrafts and “ways and means” has grown from about one trillion to over ten trillion in the last five years. It is not clear how much space there is left. Moral of the story, the options to respond to the two crises are limited. The Nigerian economy is also not in great enough shape to be left to its own devices. We know that growth has been sluggish with GDP growth in the last quarter of 2019 at only 2.55 percent, still much slower than population growth. The last time we measured unemployment in 2017 it was above 23 percent. Given the sluggish growth between now and then it is probably much higher now. We also know that, by many measures, we are not the poverty capital of the world with the largest number of people living in poverty. In short, if countries were patients, Nigeria would be the patient most deserving of an ICU bed. Where the ICU bed is in the hospital called the International Monetary Fund. Indeed, many countries are already queuing up asking

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such as the U.S or China. Lastly the bottom is usually in when governments of the major economies of the world panic and bring out the big guns. At last count Governments and central banks around the world have unleashed unprecedented fiscal and monetar y stimulus and other support for economies hit hard by the coronavirus pandemic. The G20 said on March 26 it would inject more than $5 trillion into the global economy to limit job and income losses and “do whatever it takes” to tackle the pandemic. Once Governments begin to panic, then we are usually at the phase of the crises, where if it’s not quite the end, it is the beginning of the end and a signal that the bottom is not much lower than the current levels. There is also the little matter that all that stimulus, will help to pump up asset prices once the uncertainty from the crises passes. Investors should look out for these signs. Some are already happening, such as the massive stimulus being readied by global central banks and fiscal authorities. Nigerian investors should also know that there is very little the Federal Government can do to turn this around locally. The current economic shocks began as a global black swan event triggered by the coronavirus, and it will end from the effects of the wall of liquidity primed to inflate asset prices, once the virus fades away.

NONSO OBIKILI

for funds from the IMFs rapid credit facilities. The funds for countries in need of emergency funding. The facility does not even typically come with the much dreaded conditionalities that our policy makers love to hate. Perhaps it is time our policy makers genuinely consider asking for help. I know we like to pride ourselves as the giant of Africa but even giants need help sometimes. The difficulty of our situation is that we will only start to really see the effects when the rest of the world starts to recover from the pandemic. By them we may be in an even deeper hole than we are now. Dr. Obikili is the chief economist at BusinessDay

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EDITORIAL Frank Aigbogun

On borders, boundaries and the lockdown

editor Patrick Atuanya

Policy makers must note the lessons for better actions in days ahead

Publisher/Editor-in-chief

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

wo days into the lockdown of three territories, the Federal Government reversed itself virtually by allowing four hours for shopping in Lagos and Ogun States as well as the Federal Capital Territory. The decision came as a surprise to many and a relief to persons already lamenting the deleterious effect of the shutdown. It also came after the Federal Government itself led in disregarding the lockdown instruction. Federal Government officials led by the Minister for Humanitarian Affairs, Disaster Management and Social Development, Hajiya Sadiya Umar Farouq, took to the streets of the FCT distributing cash in the conditional cash transfer scheme. The Federal Government claimed it gave out N20, 000 to each recipient, representing grants for four months. In 24 hours, according to the government, it gave out N3 billion! More significantly, the Minister and her aides ignored the prescriptions on social distancing, handling of cash and the gathering of large numbers of persons. Recipients

turned out in large numbers and queued to physically collect their share of this national cake. Justification for the lockdown was the imperative of containment as the number of persons positive to coronavirus in the country jumps daily with improved testing. At noon on Thursday, 2 April, the National Centre for Disease Control board registered 174 cases, nine discharged and two deaths. Lockdowns have worked in containment in several countries and Nigeria. Does the fourhour window for daily shopping not effectively negate the lockdown? Is it a better price to pay than the prospect of increased infections? Before the untidiness of cash distribution against the official policy to push for a cashless economy, there were issues around the procedures, legality and implications for federalism of the lockdown directives. President Muhammadu Buhari ordered the lockdown of the Federal Capital Territory, Lagos and Ogun States in a presidential broadcast on March 30. States such as Lagos, Rivers, Delta, Kaduna and Ekiti had also ordered shutdowns of their territories. The lockdowns raised significant and not-so-significant issues. Is it

right, logical and legal for states to shut off their boundaries that serve as connecting links to other states? What does that say for the right to freedom of movement, assembly and economic activity? Who pass the price for the delayed transactions and added costs arising from the actions? By Thursday, the restrictions were telling on the availability of goods. The Nigerian market may be open and fluid but there is a method to the flow of goods and services. Evident in the boundary closures was the absence of coordination. Each state played from its hymnbook and to a different orchestra. The Federal Government intervention in ordering lockdowns in three states only was a mimicry of what the states had done rather than an improvement. There was also the matter of procedure. Many states cited the Quarantine Act. However, declaration of emergency in almost all cases requires the concurrence of the legislature. At Federal level, the National Assembly had quickly abdicated its responsibility by taking a coronavirus leave as did the Federal Government in postponing meetings of the Federal Executive Council. Who was taking

these decisions? Central to democracies are the matters of principles and procedures as well as adherence to the rule of law. Some of the proclamations by state governors sounded like military decrees. Does the end justify the means? There was also the matter of definitions of boundaries and borders. It was not mere splitting on grammar or definitions. Many state governors spoke of the borders of their states. The border is at the outer edge and refers to the dividing line between countries while a boundary is the dividing line between two areas in the same geography. Finally, there is the matter of our federalism. In the absence of a somnolent federal government, the states decided on their measures. For a moment it approximated to the ideal of a federal state where the states could run their affairs. Except that their decisions impinged on the welfare and operations of other constituent units. The Federal Government belatedly frowned at the actions of the states yet failed to provide a compass. There are many lessons in the handling of the lockdown that policy makers should note for learning and action in the days ahead.

HEAD, HUMAN RESOURCES Adeola Obisesan

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Buhari goes AWOL from Nigeria’s Coronavirus battlefield global Perspectives

OLU FASAN

f crisis is an acid test of leadership, the ravaging Coronavirus or Covid-19 pandemic is a real test of crisis leadership. And, all over the world, presidents and prime ministers are being judged by their handling of the crisis. Are they actively communicating with their citizens in an open, transparent and honest manner? For as someone said, “faced with the global pandemic, people are looking to their leaders for information, reassurance and guidance”. So, how well is President Buhari doing in handling the Covid-19 crisis? Has he, so far, passed the crisis leadership test? Sadly, the answer is no! Instead of leading from the front, instead of providing visible leadership, Buhari is leading by self-isolation and distancing – no, not caused by Covid-19 infection but by his personal style! For more than four weeks after the Coronavirus pandemic broke out in Nigeria, with more and more Nigerians contracting the virus, President Buhari was incommunicado, holed up in the gilded opulence of the Presidential Villa. Then, suddenly, last week, on 29 March, he emerged from hibernation but only to put Nigeria in lockdown, ordering “all citizens to stay at their homes” and directing “the cessation of all movements”. As Professor Wole Soyinka rightly said, President Buhari apparently “woke up after a prolonged siesta and began to issue orders”. Buhari went AWOL – absent without leave – from the Covid-19 battlefront. It seems churlish to associate AWOL, a pejorative military term, with General Buhari. After all, he was a battle-hardened soldier, who led battalions during the Nigerian civil war and commanded the infantry, mechanised and armoured divisions of the Nigerian Army after the war,

not to mention that he later became the commander-in-chief of the armed forces. Yet, the truth is that General Buhari may have been battle-tested in conventional wars, he is a complete no-hoper in unconventional ones, such as fighting insurgency, terrorism and pandemics. For instance, although Buhari successfully led battalions during the civil war, he has utterly failed to defeat the Boko Haram insurgency or to tackle the widespread insecurity in Nigeria. And, now, with the invisible insurgency called Coronavirus, Buhari has failed to inspire confidence that he is in control of the situation to make Nigerians secure. Few were reassured by President Buhari’s belated address that his government can deal with the health, economic and social calamities the pandemic is unleashing. He said his government’s approach to the pandemic is “to protect the lives of our fellow Nigerians and residents living here” and “to preserve the livelihoods of workers and business owners to ensure their families get through this very difficult time in dignity and with hope and peace of minds”. But these are perfunctory statements that ignore the potential scale of the pandemic vis-à-vis Nigeria’s acute lack of capacity. Think of the government’s embarrassing plea on Tweeter to the US billionaire Elon Musk to support Nigeria “with 100 to 500 ventilators to assist with Covid-19 cases rising ever day in Nigeria”. The government later apologised for the Tweet, but the incidence exposed the utter falsity of any claim that Nigeria could cope with a serious outbreak of the Covid-19 pandemic. That’s, however, not my focus here. Rather, it’s on visible and communicative leadership, because this is not the time for leadership by committees or proxies; it’s the time for visible and engaging leadership from the top. That is exactly what’s happening elsewhere: national leaders are leading from the front. For instance, despite his initial cynicism about the Coronavirus, President Trump personally addresses a daily press conference on the pandemic, taking questions from journalists. Similarly, Prime Minister Boris Johnson holds a daily press conference, flanked by Britain’s chief medical officer and chief scientific adviser, to explain to his people how his

government is handling the pandemic and what they must do to stop the virus spreading. Neither President Trump nor Prime Minister Johnson hid away from the public only emerging to impose a draconian Coronavirus lockdown on their people. But that’s what President Buhari did. He disappeared from the public glare for weeks, despite the clear and present danger of Covid-19, and the fear gripping Nigerians. And when he eventually emerged, it was to give his quarantine orders; and even then, he did so through a pre-recorded broadcast. The address raised many unanswered questions that a live press conference would have allowed journalists to ask on behalf of Nigerians. For instance, the World Health Organisation says that while lockdowns are important for social distancing, it would be ineffective without testing. Thus, the WHO’s mantra is “Test, Test, Test” on the basis that without Antigen test to check for the presence of the Coronavirus in the body, you won’t know the prevalence of the virus in your country. Yet, the National Centre for Disease Control, NCDC, said it would only test those who have Covid-19 symptoms, and apparently tests fewer than 1,000 people a day throughout Nigeria, while South Africa is testing 30,000 a day. We are told that about 190 people have now contracted the virus in Nigeria, but, really, how do you know without widespread testing? In any case, does Nigeria have the capacity for such widespread testing? Does it have enough personnel, equipment and other resources? And if not, what does the government intend to do if, God forbid, Coronavirus hits Nigeria in full force? These are not just technical questions for the NCDC, but also political ones for the president. They are not even questions solely for the so-called Presidential Task Force, which President Buhari is seemingly hiding behind to avoid engaging directly with Nigerians. But the truth is that if the president only speaks to Nigerians through pre-recorded broadcasts or press statements or uses the PTF or any committee as a proxy for his leadership, he won’t inspire confidence in Nigerians and the international community that he is in control of the problem. The vice president, Yemi Osinbajo, said Nigerians

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Yet, the truth is that General Buhari may have been battle-tested in conventional wars, he is a complete no-hoper in unconventional ones, such as fighting insurgency, terrorism and pandemics

are not sensitised about the seriousness of the pandemic. But who will sensitise them? As elsewhere, the president must be the public face of the campaign. Sadly, President Buhari is not providing that visible leadership. Even sadder, we are told that’s his deliberate choice. In a recent interview, Femi Adesina, the president’s spokesman, said that Buhari’s refusal to address Nigerians on Covid-19 was a matter of style. “Not addressing Nigerians on coronavirus is a matter of style”, he said, adding: “Everybody is at liberty to adopt a style that suits them”. Really? A matter of style to be incommunicado when a global pandemic is threatening your country? Beyond belief! But Adesina was right. Covid-19 simply amplifies Buhari’s pre-existing traits. He’s both reclusive and taciturn; yet, effective leadership requires visibility and communication. Last year, a Chatham House report described Buhari as “an aloof and disengaged leader, walled off from Nigerians”. That’s a perfect description of the president. But an aloof, disengaged and distant leader can’t provide visible and effective leadership during a national crisis like the Coronavirus outbreak. As if that isn’t bad enough, President Buhari suspended the weekly meeting of the Federal Executive Council “until further notice”. The FEC is Nigeria’s highest policy-making body, required by constitutionally to meet “regularly” for the purposes of “determining the general direction of domestic and foreign policies.” Cabinets are meeting around the world, if necessary, via video-conferences, to determine national responses to the Covid-19 pandemic. So, while suspend Nigeria’s cabinet at this critical time? Unfortunately, it’s not only the cabinet that’s been tranquilised, the National Assembly is lulled, unable to hold the executive to account on its handling of the pandemic. But the buck stops with President Buhari. Sadly, once a battle-hardened soldier, he has gone AWOL from Nigeria’s Coronavirus battlefield. He must return to the Covid-19 warfront and lead the battle! Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

Meetings of the board

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eetings are the linchpin of everything. If someone says you have an hour to investigate a company, I wouldn’t look at the balance sheet. I’d watch the executive team in a meeting for an hour. If they are clear and focused and have the board on the edge of their seats, I’d say this is a good company worth investing in”. Patrick Lencioni For the effective discharge of its oversight and leadership roles, the Board of Directors is expected to meet regularly to deliberate and take decisions on key issues. Principle 10 of the Nigerian Code of Corporate Governance, 2018 (NCCG) provides that “Meetings are the principal vehicle for conducting the business of the Board and successfully fulfilling the strategic objectives of the Company.” The Companies and Allied Matters Act, 2004 (“CAMA”, “the Act”) allows Directors to regulate their meetings as they think fit. The Act provides that the first meeting of the Board must be held not later than six months after the incorporation of the Company. The Nigerian Code of Corporate Governance 2018 recommends that the Board meets not less than once a quarter. According to CAMA, every director is entitled to receive notice of a Board meeting at least fourteen days before the meeting. The Company of course can by the Articles of Association fix a shorter notice period. Failure to

give adequate notice to all Directors entitled to receive the notice shall invalidate the meeting. Where the exigencies of the business require that a meeting be convened with less than the statutory (or as fixed by the Articles) notice, each Director shall be required to waive their right to notice by expressly signing off a waiver form. Every Director is required to attend all Board meetings and such attendance record of Directors should be included in the criteria for re-election of Directors by members at the general meeting. Where a Director is unable to attend, he/she must send prior notice, stating the reason for such absence to the Chairman or the Company Secretary. It is good practice to agree annual meeting dates in advance to give Directors the opportunity of blocking off Board meeting dates in their diaries. Directors are expected to prepare appropriately for Board meetings and as such should receive Board Packs in good time to ensure they participate effectively. Directors reach their decisions by resolutions usually arrived at by consensus. However, whilst consensus is the norm, those Directors with divergent views should be encouraged to share these. Boards tend to waste too much time trying to achieve consensus and shy away from voting. Where there is sufficient dissent with respect to a significant issue, the www.businessday.ng

Chairman should step the matter down for further consideration and should not hesitate to call for a vote if the matter requires urgent attention. Each director is entitled to one vote, regardless of shareholding. The Chairman shall have a second or casting vote in the case of an equality of votes. Where it is not possible to have physical meetings with all the Directors present, resolutions can be passed via written resolutions signed by all the directors. To give effect to “round-robin” resolution, all (rather than majority) of Directors have to accent to the decision being taken. Given that meetings are integral to the overall performance of the Board, care must be taken to ensure optimization. As such, meetings must be properly and carefully planned and conducted to achieve desirable outcome and avoid unproductive time-wasting sessions. The robustness of deliberations and the quality of decisions taken at Board meetings are dependent on the adequacy of information presented to the Board. The Board should provide clarity as to the type, format and frequency of Management Reporting. Reports should be crisp, precise and straight to the point. The Chairman is responsible for coordinating the proceedings and ensuring that the meeting objectives are met. In performing this role, he/she must ensure that members

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Bisi Adeyemi have a clear understanding of the items for consideration. The Chairman should ensure that deliberations are inclusive and not dominated by an individual or a group (caucus). For Board meetings to be effective, the Chairman must elicit diverse views whilst guiding the Board to a collective decision. Reticent or silent Directors should be encouraged to contribute to Board deliberations to ensure the Board gets the benefit of the diversity of its composition.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. DCSL provides Governance Advisory, Corporate Restructuring & Board Evaluation, Board & Senior Management Training, Retreats & Strategy Sessions, Executive Talent Recruitment, HR Outsourcing, Company Secretarial services

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Monday 06 April 2020

BUSINESS DAY

In Association With

A grim calculus

A Balkan betrayal Bottomless Pit, inc

Covid-19 presents stark choices between life, death and the economy Bail-outs are The trade-offs required by the pandemic will get even harder Editor’s note: The Economist is making some of its most important coverage of the covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For more coverage, see our coronavirus hub

MAGINE HAVING two critically ill patients but just one ventilator. That is the choice which could confront hospital staff in New York, Paris and London in the coming weeks, just as it has in Lombardy and Madrid. Triage demands agonising decisions (see Briefing). Medics have to say who will be treated and who must go without: who might live and who will probably die. The pandemic that is raging across the world heaps one such miserable choice upon another. Should medical resources go to covid-19 patients or those suffering from other diseases? Some unemployment and bankruptcy is a price worth paying, but how much? If extreme social distancing fails to stop the disease, how long should it persist? The governor of New York, Andrew Cuomo, has declared that “We’re not going to put a dollar figure on human life.” It was meant as a rallying-cry from a courageous man whose state is overwhelmed. Yet by brushing trade-offs aside, Mr Cuomo was in fact advocating a choice—one that does not begin to reckon with the litany of consequences among his wider community. It sounds hard-hearted but a dollar figure on life, or at least some way of thinking systematically, is precisely what leaders will need if they are to see their way through the harrowing months to come. As in that hospital ward, trade-offs are unavoidable. Their complexity is growing as more countries are stricken by covid-19. In the week to April 1st the tally of reported cases doubled: it is now nearing 1m. America has logged well over 200,000 cases and has seen 55% more deaths than China. On March 30th President Donald Trump warned of “three weeks like we’ve never seen before”. The strain on America’s health system may not peak for some weeks (see article). The presidential task-force has predicted that the pandemic will cost at

least 100,000-240,000 American lives. Just now the effort to fight the virus seems all-consuming. India declared a 21-day lockdown starting on March 24th. Having insisted that it was all but immune to a covid-19 outbreak, Russia has ordered a severe lockdown, with the threat of seven years’ prison for gross violations of the quarantine. Some 250m Americans have been told to stay at home. Each country is striking a different trade-off—and not all of them make sense. In India the Modi government decided that its priority was speed. Perhaps as a result it has fatally bungled the shutdown. It did not think about migrant workers who have streamed out of the cities, spreading the disease among themselves and carrying it back to their villages (see article). In addition, the lockdown will be harder to pull off than in rich countries, because the state’s capacity is more limited. India is aiming to slow its epidemic, delaying cases to when new treatments are available and its healthcare system is better prepared. But hundreds of millions of Indians have few or no savings to fall back on and the state cannot afford to support them month after month. India has a young population, which may help. But it also has crowded slums where distancing and handwashing are hard. If the lockdown cannot be sustained, the disease will start to spread again. Russia’s trade-off is different. Clear, trusted communications have helped ensure that people comply with health measures in countries like Singapore and Taiwan. But

Vladimir Putin has been preoccupied with extending his rule and using covid-19 in his propaganda campaign against the West. Now that the virus has struck, he is more concerned with minimising political damage and suppressing information than leading his country out of a crisis. That trade-off suits Mr Putin, but not his people. America is different, too. Like India, it has shut down its economy, but it is spending heavily to help save businesses from bankruptcy and to support the income of workers who are being laid off in devastating numbers (see article). For two weeks Mr Trump speculated that the cure might be worse than the “problem itself”. Putting a dollar figure on life shows he was wrong. Shutting the economy will cause huge economic damage. Models suggest that letting covid-19 burn through the population would do less, but lead to perhaps 1m extra deaths. You can make a full accounting, using the age-adjusted official value of each life saved. This suggests that attempting to mitigate the disease is worth $60,000 to each American household. Some see Mr Trump’s formulation itself as mistaken. But that is a comforting delusion. There really is a trade-off, and for America today the cost of a shutdown is far outweighed by the lives saved. However, America is fortunate to be rich. If India’s lockdown fails to stop the spread of the disease its choice will, tragically, point the other way. Wherever you look, covid-19 throws up a miasma of such tradeoffs. When Florida and New York take

different approaches, that favours innovation and programmes matched to local preferences. But it also risks the mistakes of one state spilling over into others (see Lexington). When China shuts its borders to foreigners almost completely, it stops imported infections but it also hobbles foreign businesses. A huge effort to make and distribute covid-19 vaccines will save lives, but it may affect programmes that protect children against measles and polio. How should you think about these trade-offs? The first principle is to be systematic. The $60,000 benefit to American households, as in all cost-of-life calculations, is not real cash but an accounting measure that helps compare very different things such as lives, jobs and contending moral and social values in a complex society. The bigger the crisis, the more important such measurements are. When one child is stuck down a well the desire to help without limits will prevail—and so it should. But in a war or a pandemic leaders cannot escape the fact that every course of action will impose vast social and economic costs. To be responsible, you have to stack each against the other. Hard-headed is not hard-hearted A second principle is to help those on the losing side of sensible tradeoffs. Workers sacked in forced shutdowns deserve extra help; children who no longer get meals at schools need to be given food. Likewise, society must help the young after the pandemic has abated. Although the disease threatens them less severely, most of the burden will fall on them, both today and in the future, as countries pay off their extra borrowing. A third principle is that countries must adapt. The balance of costs and benefits will change as the pandemic unfolds. Lockdowns buy time, an invaluable commodity. When they are lifted, covid-19 will spread again among people who are still susceptible. But societies can prepare in a way that they never did for the first wave, by equipping health systems with more beds, ventilators and staff. They can study new ways to treat the disease and recruit an army of testing and tracing teams to snuff out new clusters. All that lowers the cost of opening up the economy.

inevitable— and toxic

How to design corporate bail-outs to protect taxpayers Editor’s note: The Economist is making some of its most important coverage of the covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For more coverage, see our coronavirus hub

N THE PAST month the biggest business handout in history has begun. The goal of helping firms survive temporary lockdowns is sensible, but it is hard not to feel uneasy (see article). At least $8trn of state loans and goodies have been promised to private firms in America and Europe, roughly equivalent to all their profits over the past two years. Over half a million European firms

have applied for payroll subsidies. Some of these handouts will involve grubby choices: Boeing, embroiled in the 737 MAX crashes, might get billions of taxpayer dollars. Broad rescue schemes could also leave a legacy of indebted, ossified firms that impede the eventual recovery. Speed is essential, but governments also need a clearer framework to organise the jumble of schemes, protect taxpayers and preserve the economy’s dynamism. That $8trn is a big number, and includes state and central-bank loans, guarantees and temporary subsidies to keep paying inactive workers. The total running costs of all American and euro-zone nonfinancial firms (excluding payments to each other) are $13.5trn a year, of which $11.6trn is wages. But there is still no guarantee that this mountain of money can prevent chaos. Firms also need to refinance $4trn of bonds in the next 24 months, and debt markets are still wary about racier borrowers. Carnival, a cruise Continues on page 13

Monday 06 April 2020

BUSINESS DAY

In Association With

Insular, but not isolating

Why covid-19 has spread among Israel’s ultra-Orthodox

Open schools and crowded prayers accelerate contagion

HIS WAS to be the week when Binyamin Netanyahu, the prime minister of Israel, finally won. After three inconclusive elections in the span of a year, he had all but convinced his bitter rival, Benny Gantz, to join him in government. There were still some things to be worked out, such as how fast to annex parts of the occupied West Bank, and who would lead the justice ministry and thus oversee Mr Netanyahu’s corruption trial. But Mr Gantz’s Blue and White party had already split, with about half its representatives supporting a coalition deal that would leave Mr Netanyahu in office until September 2021, when he would hand over to Mr Gantz. Alas, the outbreak of covid-19 is getting in the way. On March 30th Mr Netanyahu isolated himself after an aide came down with the virus. Mr Netanyahu tested negative for the disease and left quarantine days later. But he went back into isolation after the health minister was diagnosed with the virus on April 1st. Both the aide and the minister are ultraOrthodox. The outbreak is raging among their fellows. Take the ultra-Orthodox city of

Bnei Brak, which has the secondmost cases in Israel despite being its ninth-largest city. Ultra-Orthodox quarters of Jerusalem also have more infections than neighbouring ones, underlining how the virus is spreading more quickly among this community, which is about 12% of the population. For weeks after most Israelis began social-distancing at the behest of the government, life continued as normal in ultra-Orthodox communities, which retain a large degree of autonomy. The study of the Torah and Talmud did not stop in ultra-Orthodox schools even though the rest of Israel’s

education system shut down on March 12th. Prayers continued in crowded synagogues, despite data showing they were hubs of infection. Only at the end of March did ultra-Orthodox rabbis, who initially said the “Torah protects and saves”, at last stop their followers praying in public. Other factors made things worse. For example, the ultraOrthodox are forbidden by their rabbis from owning televisions and radios. They can buy mobile phones, but these are blocked from accessing the internet and messaging apps. That meant that public-health information was

slow to arrive. Many failed to receive text messages sent by the government telling them that they had the virus. And it was not hard for the infected to spread the disease. The ultra-Orthodox tend to have large families and often live in cramped quarters. Bnei Brak is Israel’s most crowded city, with 27,000 residents per square kilometre, three times the density of Tel Aviv. Mr Netanyahu, who relies on the support of ultra-Orthodox parties, was reluctant to close synagogues. Police were sent into ultra-Orthodox areas only after the rabbis themselves ruled that prayers should be held in private. On April 1st the prime minister restricted movement into and out of Bnei Brak. But some in the city are ignoring the government, holding prayers and keeping study halls open. For decades the ultra-Orthodox have been allowed to run their own affairs, with government funding. Most neither serve in the army nor work. Many Israelis resent this. As the ultra-Orthodox begin using up scarce medical supplies, more questions will surely be asked about their unique position in Israeli society.

Rosneft’s sleight of hand

Why Putin’s favourite oil firm dumped its Venezuelan assets

Russian taxpayers are left holding the can

OSNEFT is responsible for 40% of Russia’s oil output, but it is much more than just another oil firm. A large chunk of its shares are owned by the Russian state. Its boss, Igor Sechin, is one of Vladimir Putin’s closest henchmen. A former spook, like the Russian president, he has been at the big man’s side since the 1990s. In 2004-06 Rosneft gobbled up the remains of Yukos, Russia’s largest private oil firm, which was dismembered after its boss challenged Mr Putin. Since then Rosneft has been both a tool of Kremlin power and a driver of policy in its own right. Bear this in mind when trying to make sense of the announcement, on March 28th, that it has sold all its Venezuelan assets to an unnamed Russian government entity. For years the Kremlin has propped up Venezuela’s dictatorship, first under Hugo Chávez, then under his protégé, Nicolás Maduro. Russia has supplied loans, weapons and, lately, mercenaries to keep the regime in power, largely to annoy the United States. America, like many democracies, does not recognise the election-stealing Mr Maduro as Venezuela’s president, and has slapped severe sanctions on his country. Last week it unsealed indictments of Mr Maduro and his

cronies for alleged drug-trafficking (see article). Mr Sechin calculates that, if America supports democracies in Russia’s backyard, Russia should support despots in America’s. Rosneft’s role in all this has been to practise bare-knuckle petropolitics. It has traded Venezuelan oil to help Mr Maduro get around American sanctions. Rosneft lent his government $6.5bn in 2014-18, to be repaid in oil. At the end of last year it was still owed at least $800m, though the figures are murky. Thanks to a low oil price, sanctions and the Maduro regime’s spectacular corruption and ineptitude, Venezuela is in no position to repay all its debts. But this is not

too much of a problem for Rosneft, since it can dump its Venezuelan assets on to Russian taxpayers. They will no doubt be delighted to hear that they have paid for this with 9.6% of Rosneft’s own shares (worth more than $4bn), thus reducing their stake to just over 40%. The deal gives Mr Sechin ever tighter control of the firm. Minority shareholders, including BP and Qatar’s sovereign-wealth fund, which each hold just under 20%, have yet to comment. The main aim of the deal, it seems, is to help Rosneft escape the consequences of doing business with a pariah. Over the past two months America has penalised the company’s trading arms for handling Venezuelan oil. These

sanctions are global in scope and affect its customers, too. Sinochem International, the trading arm of a Chinese state-owned refinery, has rejected Rosneft’s oil. The Kremlin’s solution is to distance Rosneft from Venezuela while reassuring the Venezuelan kleptocracy that it still has Russia’s backing. “I received a message from brother president Vladimir Putin who ratified his comprehensive strategic support for all areas of our [relationship],” tweeted Mr Maduro. These shenanigans come at a turbulent time in the oil markets. The price of crude has fallen by half in the past month, as covid-19 has crushed demand and Saudi Arabia has opened its taps to punish Russia for refusing to extend an OPEC deal to curb production. The Kremlin would like cheap oil to drive American shale producers, whose costs are higher, out of business. This is a risky game. Russia has alienated the Saudis, who might draw closer to America as a result. Rosneft can survive oil at $25 a barrel. But under Russian law the royalties it pays to the Russian state fall sharply as the oil price slides. As covid-19 spreads in Russia, Mr Putin will have to draw on the country’s reserves to help ordinary people cope. Mr Sechin’s sleight of hand has solved a problem for Rosneft, but not for Russia.

Bail-outs are inevitable—and toxic Continued from page 14

line, has issued bonds at a crushing 11.5% interest rate. The plethora of support schemes—there are at least ten in America, with different eligibility rules—will baffle some firms and exclude others. A quarter of listed Western firms are heavily indebted, and if those facing slumping demand gorge on state loans they may wreck their balance-sheets. For a few giants the potential losses are so big that they alone could impose a significant burden on the state. Volkswagen says it is burning through $2.2bn of cash every week. Ideally private investors would swoop in—Warren Buffett is sitting on $125bn of spare funds and Blackstone’s funds have $151bn. But the duration of lockdowns is unclear, so they may be reluctant. As a result, alongside widely available cheap state loans, bespoke state bail-outs are starting. America’s latest stimulus package earmarks at least $50bn for the airlines and other firms vital for “national security” (Boeing and chums). Germany has loaned $2bn to TUI, a travel firm, and Singapore’s sovereign fund, Temasek, has bought more shares in Singapore Airlines. Such bespoke deals are easy to sign but often go sour. Uncle Sam lost over $10bn on the General Motors rescue of 2009 and the Wall Street bank bail-outs left an especially bitter taste. Negotiations can be hijacked by politicians who want pork or sway over firms’ strategies. If bailed-out firms end up indebted and burdened by long-term job guarantees, the economy can become ossified, sapping productivity. And it is unfair to ask well-run firms to compete with state-backed rivals. What to do? Governments need to offer support for business in an integrated way. There should be blanket offers to all firms of cheap loans and help in paying the wages of inactive staff for three to six months with few strings attached. This is what the $8trn of loans and guarantees mostly try to do, but there are gaps and doubts about how small firms will get cash. One answer is making sure banks have the resources to lend— even if this means suspending their dividends, as Britain did this week. The goal should be to freeze most of the economy temporarily, until the lockdowns ease.

Monday 06 April 2020

BUSINESS DAY

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Monday 06 April 2020

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

MARKETS

IIF sees Second Wave of EM Outflows Possible on growth concerns after March blues SEGUN ADAMS

merging markets (EMs) should be bracing up for another round of outflows due to bleaker growth outlook on the coronavirus fallout, Washington-based International Institution of Finance (IIF) warned last week, after announcing EM’s worst capital outflow on record. The institute said in addition to another wave of capital flight, there would likely be substantial valuation losses in Q1 2020 that would reduce foreign investor exposure to the region very substantially - a decline which combined with dovish global central banks is a stabilizing force for EM. “At the same time, it is possible markets are re-focusing on the potential fallout of the COVID-19 shock for emerging and frontier markets, which – even after big outflows in Q1 – carries the risk of a second wave of outflows,” it said. IIF said its high-frequency tracking of non-resident

portfolio flows to and from EM points to record outflows in Q1 2020 with the bulk of those outflows coming from EMs outside China. The institute had earlier reported that EM securities suffered around $83.3bn

in outflows during March, a record-breaking outflow episode worse than during the global financial crisis, the China devaluation scare of 2015 and the taper tantrum in 2014. It estimated Debt out-

around the spread of the COVID-19, large oil price plunge and financial shocks. As growth outlook dampens for the global economy, EMs will find themselves in an unfavourable position. According to the IIF, the position reduction foreign investors are experiencing in stocks and bonds is a stabilizing force for EM although it notes two arguments that weigh against that. First, the institute notes that a decade of extraordinarily easy monetary policy in the G10 pushed large real money flows into EM– the hunt for yield – with foreign holdings up substantially over the last decade, especially where inflows have been heavy like in South Africa and Chile, it said. Second, markets have so far been preoccupied with the economic fall-out from COVID-19 on advanced economies. “This focus may now be shifting to EM, which could set in motion a second wave of capital outflows, even after the unprecedented pace of outflows in Q1,” IIF said.

CSR

COVID 19: Bitcoin Entrepreneur, CEO, ABIT Gaius Chibueze supports Nigerians BIT Charity has announced a donation of more than N5,000,000 to support Nigerians, especially Lagosians who are facing difficulties due to the state-wide lockdown, Investor and Bitcoin Entrepreneur Gaius Chibueze, ABIT Chief has said. ABIT announced a support fund for all its registered members, which will involve the sharing of N30,000 each to its members as a way of alleviating hardship caused by the COVID-19 pandemic and restriction of movement in some states in the country. “ I am giving a total of 5 Million Naira ($13,000) to my community …to help them stay inside,” said Chibueze, who stated conditions for

China equities amounting to $12.3bn and flows to the remaining EM equity universe reaching -$40.1bn, the highest since it began publishing its trackers. The flow reversal was due to the impact of uncertainty

L-R: Sales Manager, Multipro Consumer Product Limited, Central Region Abuja, Miss. Acquaye Matilda; Marketing Manager MCPL, Mr. Muhammed Abubakar; Sales Manager MCPL, Mr. Enu Jubril , Incident Manager Covid 19 NCDC, Dr. John Oladejo; Assistant Director Logistics NCDC, Mr. Gbenga Joseph; and Head of Store NCDC, Mrs. Ali Hawal during HYPO donation of 200 cartons of Bleach to NCDC, Abuja

CSR

LUCKY NWANEKWU

flows at $31.0bn, the secondlargest monthly outflow on record, the largest having occurred in October 2008. On the equity side, IIF said the negative trend which it observed in March deepened, with outflows from

participation. “Distribution of this money is ongoing and if you are a member of @abitnetwork community then wait you will receive 30k Naira ($90) support to help you stay inside in peace.” President Muhammadu Buhari on Sunday last week announced a 14-day lockdown in Lagos, Abuja and Ogun state to curb the spread of the coronavirus disease and enable government trace potential carriers of the virus, he said. The move which would help Nigeria “flatten the curve”, is, however, coming at a significant cost of income loss to many Nigeria’s whose livelihood depends on daily wages. Some of those Nigerians are also within the cryptocurrency community. So far, celebrities and business moguls have announced

varying degrees of support for Nigerians. Chibueze is also giving a hand of support to its community and the cryptocurrency industry, ABIT charity said. ABiT Trader, the first cryptocurrency education and mentorship system in Africa, aims to train prospective investors/students to understand, trade and analyze cryptocurrencies and the blockchain technology. The main objective of this mentorship system is to help Africans take full advantage of crypto currency and the block chain technology. The main objective of this service is to make investors in cryptocurrency stay profitable while trading through the deploying of critical insights and analyses imbibed in the course of the training.

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Investment One upgrades “Ziing app” to deliver improved quality services MICHAEL ANI

eading financial services firm, Investment One, has upgraded its online savings and investment platform, Ziing, to enable it deliver more improved customer centric services. The upgrade, aimed at meeting the demand of the growing number of users who have signed onto using the Ziing mobile app, to carry out savings and investment activities across various financial asset classes. The new interface of the app now comes with various additional features that would enable both new and existing Investment One clients to sign up on Ziing in a simplified and improved process, the firm said in a statement. With a faster app speed and loading time, the new interface comes with a secured login through the biometric

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options of fingerprint and face recognition, which is activated as an initial login password after update of the app. There is also a revamp of security pin to aid the ease of setting and resetting of security details on the newly upgraded app. Users of the app can now enjoy features such as the new zPlan, that allows them to set up financial goals, by giving them an avenue to earn real-time interest on the amount they contribute

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periodically. The zSave transfer function of the app was also improved to give users the ability to save beneficiaries, relieving them the stress of having to copy and paste or remember emails or phone numbers of individuals they have transacted with. There is also an enabled feature on the new interface for users to trade on stocks with funds directly from their zSave or from their bank account.

Monday 06 April 2020

BUSINESS DAY

COMPANIES&MARKETS

Business Event

MARKETS

IIF sees Second Wave of EM outflows possible on growth concerns after March blues SEGUN ADAMS

IIF said its high-frequency tracking of non-resident portfolio flows to and from EM points to record outflows in Q1 2020 with the bulk of those outflows coming from EMs outside China. The institute had earlier reported that EM securities suffered around $83.3bn in outflows during March, a record-breaking outflow episode worse than during the global financial crisis, the China devaluation scare of 2015 and the taper tantrum in 2014. It estimated Debt outflows at $31.0bn, the secondlargest monthly outflow on record, the largest having occurred in October 2008. On the equity side, IIF said the negative trend which it observed in March deepened, with outflows from China equities amounting to $12.3bn and flows to the remaining EM equity universe reaching -$40.1bn, the highest since it began publishing its trackers. The flow reversal was due to the impact of uncertainty around the spread of the

COVID-19, large oil price plunge and financial shocks. As growth outlook dampens for the global economy, EMs will find themselves in an unfavourable position. According to the IIF, the position reduction foreign investors are experiencing in stocks and bonds is a stabilizing force for EM although it notes two arguments that weigh against that. First, the institute notes that a decade of extraordinarily easy monetary policy in the G10 pushed large real money flows into EM– the hunt for yield – with foreign holdings up substantially over the last decade, especially where inflows have been heavy like in South Africa and Chile, it said. Second, markets have so far been preoccupied with the economic fall-out from COVID-19 on advanced economies. “This focus may now be shifting to EM, which could set in motion a second wave of capital outflows, even after the unprecedented pace of outflows in Q1,” IIF said.

Ogbonnaya Onu (2nd r), minister of science and Technology; Mohammed Bello Umar (r), permanent secretary federal ministry of science and technology; Dame Pauline Tallen (2nd l)minister of woman affairs and social development; Hon. Abiodun Akinlade (l), former chairman science and technology committee house of representative, at the Closing Ceremony of the Science, Technology and Innovation Expo, 2020 Eagle Square in Abuja.

Hope Uzodimma (L),governor, Imo State; Maurice Iwu (c) explaining a point to newsmen, while other look on.

SIFAX Group acquires off-dock facility to expand operations, decongest port …NPA moves to facilitate port business during Lagos lockdown AMAKA ANAGOR-EWUZIE

etermined to expand its operations, SIFAX Group, parent company of Ports & Cargo Handling Services Limited (PCHSL), a terminal operator at Tin-Can Island Port, said it has acquired a new facility that would be used as an off-dock terminal. Taiwo Afolabi, Group Executive Vice Chairman, SIFAX Group, who disclosed this in Lagos last week, when Hadiza Bala Usman, managing director of the Nigerian Ports Authority (NPA) visited PCHSL, as part of her tour of all terminals in Lagos to assess the impact of the 14-days lockdown on port operations, said the facility would be used to decongest the main port terminal in Tin-Can. While thanking the NPA boss for visiting the port, Afolabi used the opportunity to solicit NPA’s assistance in conjunction with the Lagos Channel Management (LCM) in dredging the waters to allow for barges and even smaller ships to berth at the terminal, which location is yet to be

disclosed. Earlier, Adekunle Oyinloye, Group managing director of SIFAX Group, said operations at the terminal have been faced with daunting challenges since the lockdown begun. According to him, the staff were being harassed and detained by security agencies despite presenting their identification cards and cover letter from the NPA, adding that the closure of banks had also limited cargo owners from paying for import duties in order to take delivery of their consignments. “We will need your assistance to address these obstacles to our operations. Also, in order to avoid congestion at the ports, we have stemmed some of our containers to our off dock facilities,” he said. John Jenkins, managing director, Ports & Cargo Handling Services Limited, called on the NPA to help in sensitising security agencies on the importance of port operations, and prevailing on them to allow more trucks from outside Lagos to access the ports. He pointed out the need to also make public transportawww.businessday.ng

tion available for port workers. In her response, Hadiza Bala Usman, assured that the authority would work to resolve some of the challenges experienced by terminal operators like SIFAX Group due to the lockdown imposed on Lagos State alongside Ogun and FCT by Federal Government to contain the spread of Coronavirus in Nigeria. Usman noted that the agency is presently collating the challenges of all terminal operators and would pass them to the appropriate agencies for proper actions. She pointed out that the government was committed to having smooth operations at the port during this period in other to keep the economy running. “I want to assure you that we would continue to support the operations of SIFAX Group and other port operators around the country. Any assistance required from the authority should be put into writing and forwarded to my office. This is because I read all letters addressed to me and I would make sure that proper action is taken on the requests,” she assured.

L-R: Onari Brown, Executive Director, Marine & Operations, Nigerian Ports Authority; Hadiza Bala Usman, Managing Director, Nigerian Ports Authority; Dr. Taiwo Afolabi, Group Executive Vice Chairman, SIFAX Group and John Jenkins, Managing Director, Ports & Cargo Handling Services Limited Group during the NPA MD’s tour of all terminals in Lagos to assess the impact of the COVID-19 lockdown on port operations.

L-R: Permanent Secretary, Ministry of Social Development and Gender Issues, Mrs. Ehi Joy Ebhodaghe; Permanent Secretary, Cabinet, Mrs. Julie Olatunji; Coordinator, Internally Displaced Persons (IDP) Camp, Edo State, Pastor Solomon Folorunsho; Secretary, Edo State Chapter of the Christian Association of Nigeria (CAN), Sir. Humphrey Iriabe, and the Coordinator, Edo State Civil Society Organisation, Omobude Agho, during donation of the items to the IDPs at the camp premises, in Ovia North East Local Government Area of Edo State.

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Monday 06 April 2020

BUSINESS DAY

cityfile

Ibadan Central Abattoir donates beds, mattresses to curb Coronavirus REMI FEYISIPO, Ibadan

T Olatunji Disu (l), deputy commissioner of police, Lagos State/commander, Rapid Response Squad (RRS), enlightening some Muslim faithfuls at another gathering who were observing Jumat on the need to comply with law bothering on religious gathering at the Hausa Community Mosque in Isale-Oja, Agege Motor Road on Friday. Pic by Olawale Amoo

Covid-19: Kaduna risks malnutrition crisis, group warns ADEOLA AJAKAIYE with agency report

non-governmental organisation, Civil Society-Scaling Up Nutrition in Nigeria (CS-SUNN) has warned that the current Coronavirus pandemic could lead to serious malnutrition crisis in Kaduna State Coordinator of the group, Silas Ideva said that the lockdown to contain the Covid-19 has made it difficult for poor households with children to have access to quality food. According to Ideva, Kaduna with an estimated 1.8 million children under five years was already burdened with high rate of malnourished children. He pointed out that malnutrition in the state has remained malignant with very little prog-

ress as indicated by the National Health Demographic and Health Survey 2018. According to the survey, stunting rate among children under five years improved by only 6.1 per cent in the state in five years, from 56.6 per cent in 2013 to 50.5 per cent in 2018. The coordinator said that three out of every 10 children under the age of five in the state were malnourished, adding that the development posed a great threat to economic development in the state. He said that lockdown has drastically reduced access to nutritious food, particularly in poor households, stressing that the development will further increase the number of malnourished children in Kaduna “Children under five years in the state, most of which are

from poor households are currently faced with hunger crisis. “Most families depend on daily earnings to eat, but the current situation had made it very difficult for them to have access to required food to feed their children,” said Ideva. He described the situation as a “huge challenge,” adding that something needed to be done to avert the looming malnutrition crisis. Ideva however commended the state government for the procurement and distribution of N500 million worth of foodstuff to the vulnerable groups in the state to cushion the effect of the COVID-19 lockdown. “This is quite commendable and reflects commitment of the state government to the plight of the people, particularly the poor and vulnerable

groups. “However, I am appealing that priority be given to poor households with pregnant and lactating mothers, and children under five years, who need the relief more to survive,” he said. He also called on the state government to put measures in place to guard against hike in prices of foodstuffs to sustain access to affordable food by poor households. This, according to him, “will prevent children and women from becoming malnourished during this lockdown period.” He also called on non-governmental organisations and other civil society organisations to support government in keeping people safe while ensuring that children have access to nutritious food to stay alive and healthy.

Cross River to distribute food to 44,000 households MIKE ABANG, Calabar

ver 44,000 households are to receive food items from the Cross River government to cushion the effect of stay-at-home order over the Covid-19 pandemic. The state chairman of Covid-19 taskforce team, Betta Edu disclosed this in Calabar, weekend. According to her, the committee has to procure rice, garri, plantain, yams and other food items for distribution, following the state governor’s directive that food be distributed to the vulnerable citizens.

Edu, who doubles as commissioner for health, explained that the register of the vulnerable in the state was obtained from the World Bank Youth Employment and Social Support Operation (YESSO) programme. The gesture, she said, was to ameliorate the suffering of the vulnerable that cannot provide for themselves. She said that 5,000 bottles of alcohol based sanitisers have been produced and ready for distribution to residents in the state. “In line with Governor Ben Ayade directive, we have procured food ready for distribution to the vulnerable www.businessday.ng

people consisting of 44,000 households. “The state government has the interest of the people at heart. The gesture is to ameliorate the vulnerable in this critical stay at home period. “As a state government, we have also produced 5,000 sanitizers ready for distribution. We are expecting another 5,000; although we have the challenge of bottles,” she said. Edu also disclosed that the samples that were taken from suspected Covid-19 patients in the state returned negative after undergoing laboratory tests in Irrua in Edo State. “As we speak, Cross River

has been declared Covid-19 free. We want to state that our borders and all entry routes into the state will remain shut until the pandemic is contained in the country. “We thank the state government for releasing N500million and 20 cars to the taskforce team to help in the prevention of the virus in the state. “From April 6, any residents in the state who goes without a face mask will be held and quarantined because the state government had directed all residents to visit the garment factory and get a face mask for free”, she said.

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he Central Abattoir, Ibadan has donated 100 hospital beds with mattresses, furniture and mosquito nets to Oyo State government towards containing the Covid-19 pandemic. The abattoir, a publicprivate partnership with the state government, the 11 local governments in Ibadanland and butchers union, said that the items would assist the state at this critical period. Presenting the items to Bashir .V.A. Bello, the state commissioner for health, Oladayo Oladipo, the director of the central abattoir, said that apart from the items, the abattoir was also embarking on an enlightenment programme on the threat of Coronavirus to butchers, workers and customers of the abattoir. Oladipo also said that the standard protocol of social distancing by butch-

ers, workers and visitors to the abattoir was being enforced, adding that infrared temperature monitoring, hand sanitisers and washing of hands with soap and water were also in place at the abattoir. Bello, who received the items on behalf of the government, expressed gratitude to the central abattoir. He commended the abattoir for its effort in paying strict attention to public health safety in meat processing, noting that anyone conversant with animal related diseases would appreciate the measures put in place by the abattoir. The commissioner said that abattoir was conceived to ensure a wellstructured and organised facility that readily lends itself to proper monitoring and control of public meat consumption with a view to ensuring that the public is protected from diseases associated with meat processing for human consumption.

Red Cross plans door-todoor sensitisation

he Red Cross Society says it will begin a door-todoor sensitisation as a measure to tackle the spread of Coronavirus in Kaduna State. The communication coordinator of the Red Cross in Kudauna, Peter Ochu hinged the decision on the lack of proper information about the virus as one of the factors militating against total compliance with the lockdown, social distancing and sanitary measures. “As Covid-19 continues to bite hard and causing nations to lock down, the necessity for humanitarian intervention in the area of sensitising the populace about the deadly virus cannot be over- emphasised. “We want to embark on a door to door sensitisation for residents to safeguard their health and comply with the stay at home rules by the government. Ochu said that the Ka-

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duna Red Cross Emergency and First Aid Team were on standby in case of any emergencies. “ We w i l l c o n t i n u e to sensitise the people through different media in spite of the lockdown. “The branch secretary has put in place modalities to embark on door-to-door sensitisation throughout this period and beyond to enlighten the people on measures to stay safe from the virus,” Ochu said. According to him, the sensitisation would be led by the health coordinator, Aminu Aliyu, and the branch acting disaster management coordinator, Stanley Asukwo. Ochu said the organisation would distribute educational pamphlets to households and individuals on measures to improve on their hygiene. “Social distancing and hand washing demonstrations will be part of the sensitisation which will kick off in Kaduna metropolis this week,” he said.

BUSINESS DAY

Monday 06 April 2020

BUSINESS DAY

INSIGHT Day 1

Covid-19 and the Nigerian nation

An overview of the ongoing pandemic, the local response, and prospects for the future Femi Olugbile

T History

he virus SARSCOV-2 is now known the world over as the cause of the pandemic disease known as COVID-19. The effect of the virus was first noted in Wuhan, China, in December 2019. A pattern of illness characterized by fever, cough, difficulty in breathing, severe weakness and body pains as well as a variety of other possible symptoms was observed in increasing numbers. Over time the source was traced to a corona virus that appeared to have ‘jumped’ from an animal host to infect a human victim. There were two possibilities – that the virus had mutated to a more harmful variant before it made the ‘jump’, or that it mutated after getting into the human body, becoming capable of human to human transmission. The suspected animal hosts were bats and pangolins. It would appear that the Chinese authorities were slow off the mark and initially reluctant to admit the full scale of the COVID-19 problem when it started in Wuhan. China, despite the friendly face it seeks to present to the world, is an authoritarian society where information flow to Chinese citizens and the outside world is closely controlled by the ruling Communist Party. In the event, the approach of the Chinese New Year became a complicating issue. The New Year is the largest celebration in the Chinese calendar. It is the time when Chinese on the mainland as well as Chinese from all across the world travel home to celebrate with their families. The world at large was only just becoming aware that something big and bad was going on in Wuhan and threatening other districts of China when the New Year mass movement began. Eventually the government of China went into overdrive, locking down Wuhan and scaling up medical services by dramatic gestures such as rushing through the construction of two megahospitals in a matter of days. The scale of the response opened the

eyes of the world to the fact that a major crisis was unfolding, and the international community began to take notice. On 30th January 2020, the World Health Organization (WHO) declared the outbreak of CoVID-19 as a Public Health Emergency of International Concern (PHEIC). It was meant to highlight concern about the spread of the disease, but also to let it be known that it still fell short of the criteria for a pandemic. Meanwhile, with uniquely deadly efficiency, COVID-19 proceeded to seep its way – first into China’s Asian neighbours, then eventually into the European mainland and the Americas. By the time the WHO Director General, Dr Tedros Adhanom Ghebreyesus declared the disease a pandemic on the 11th of March 2020, the horse had bolted from the stables, and all the world could do was scramble frantically to catch up with it. COVID-19 has to date led to the greatest social, economic and health disruption the world has seen in peacetime in living memory. It has established a presence in 195 countries. While it has not yet reached the cataclysmic proportions of the so-called ‘Spanish Flu’the influenza pandemic which devastated the world (including four year old ‘Nigeria’, which

lost an estimated 500,000 dead from a population that was less than one tenth of its present population!) from January 1918 to December 2020, infecting a quarter of the world’s population and causing an estimated 50 million deaths. But in an age where human beings have walked on the moon and man is inclined to see himself as the master of the universe, armed with a solution to everything, COVID-19 has brought man’s Ego to heel in a way which even the Spanish flu never did. It has the most powerful nation the world has ever seen, the United States of America, quaking in its grip, with a leader who is forced every new day to eat the blustery words he uttered only yesterday in a vain effort to reassure his people. The global order is in shambles. The most economically successful nations in the world are facing recession, and the behemoths of Big Business are facing bankruptcy. More than two billion of the world’s population, including India, are in partial or full lock-down.

COVID-19 in Nigeria On the 22nd of February, an Italian national, who had recently arrived in Lagos became the first documented patient with the virus in Nigeria. Despite the fact that Lagos, the host state had been preparing for the possibility of just such a development and had activated an Incident Command Centre four weeks before the index case, it was a bit of a rude awakening for the nation when

the pandemic finally arrived on its shores. The patient was admitted to the Isolation Unit at the Infectious Diseases Hospital in Yaba. In time, he made a full recovery from the illness, and he was discharged after several days of treatment. Since the index case, the numbers of ‘Persons of Interest’ (POI) and ‘Confirmed Cases’ have risen, but perhaps not as steeply as some people might have expected given the figures

elsewhere on the continent and in the world at large. Interesting emerging trends (as at the end of March, 2020) included the fact that 82% of total confirmed cases were people who had recently returned from nations known as hotspots of the disease, including China, the UK and the USA. 16% were persons who had not travelled, but who had been in contact with others who had. The origin of infection for 2% of the cases could not be ascertained. 16% of all confirmed cases were foreign nationals, and 84% were Nigerians. According to a situation report from the office of the Honourable Commissioner for Health in Lagos State, as at the end of March, 2,645 persons had been kept under Surveillance since the arrival of CoVID-19 as ‘Persons Of Interest’. Of these, 352 had gone beyond the Incubation Period of the disease and their follow-up had been discontinued. Lagos has clearly learned from experience and deepened the infrastructure it developed since 2014 when it efficiently contained a threatened epidemic of Ebola Virus Disease. From the NCDC analysis, the virus has already spread to at least 13 of the states in the nation, and possibly more. Lagos (with 98), Abuja (38) and Osun State (20) are the epicentres. THE RESPONSE SO FAR From the outbreak of the pandemic and its first incursion into Nigeria, Lagos State, through the agency of its Incident Command Centre, led by the Governor, Mr. Babajide Sanwoolu, and the Ministry of Health, led by the Honourable Commissioner, Prof Akin Abayomi have, directly and in close alliance with the Nigeria Centre for Disease Control (led by the Director General, Dr Chikwe Ihekweazu), been working assiduously to treat confirmed cases, as well as to contain the disease and stop or slow its spread into the Nigerian population. The elements of this Containment strategy include screening of passengers coming into the country, especially those coming from countries where

the disease is already widespread. People coming in from affected countries were routinely monitored during a prescribed period of self-quarantine. They proceeded to scale up human and physical capacity in the isolation centre, and to train staff from other parts of the country who, unlike Lagos, had not previously been tasked with dealing with such a major public health challenge. In the course of time, travel restrictions were imposed on the recognized ‘hot zones’ of CoVID 19. Confirmation of the presence of CoVID 19 to date has been through the taking of nasal swabs and running the test through a PCR machine. There are currently fewer than ten functioning units of the equipment in Nigeria, but there are said to be plans to scale up in short order. The major Isolation Centre in Lagos is located at the Infectious Diseases Hospital in Ebute Metta. A collaborative private initiative with Guaranty Trust Bank delivered a 100 Bed Isolation Centre, built in the space of one week, on the grounds of the Mobolaji Johnson Stadium in Onikan. There are contingency plans to build other Isolation Centres in Stadia and other public grounds as the need arises. A private initiative by a group of professionals by the name of Young Presidents Organization, led by Mrs. Fola Laoye, Dr Richard Ajayi and Dr Ola Brown has set up a field hospital on the grounds of Landmark Centre in Victoria Island and is shortly to commence operations. Some other states in the federation have created Isolation facilities for the use of their citizens.

Femi Olugbile, a well respected doctor and health administrator, is also a prolific essayist. He pioneered the renaissance of the Lagos State Teaching Hospital where he was chief medical director for years and also served as permanent secretary for Lagos State Ministry of Health. Watch out for Day 2 tomorrow

Monday 05 April 2019

BUSINESS DAY

investigative Report ‘Ignoring the bigger picture: Why Buhari cancelled When peers around the continent are mulling an expansion of the metro systems designed in the early 1980s — the same era Nigeria conceived the Lagos metroline network — Lagos finds itself avoidably racing with dysfunctional cities to construct its first metro infrastructure, courtesy of Muhammadu Buhari’s sheer lack of will and slushy handling of a high-impact project that would not only have solved the perennial chaos from heavy traffic but propelled the development of the country, Writes TEMITAYO AYETOTO

t the close of the week’s activities on a warm F r i d ay e v e n i ng i n March, a man approximately in his 60s stood in a crowd of commuters hunting for a bus to ferry them from Apapa to Ojuelegba, Ketu or CMS. Living in Ikorodu, he has to cover a distance of about 33.8km daily on roads associated with the worst examples of gridlock traffic in Lagos, to get to work. With a tight grip of his hand bag, he readied himself for whatever rush was required to grab a seat in any approaching vehicle. Luckily, it was a Good Samaritan who approached in a private sports utility vehicle, offering a lift to Ojuelegba for just two people. He was one of them, not just comfortably balanced in the back seat but also escaping inflated fare. In 2020, the elderly man’s fate of moving wouldn’t have been by chance if Nigeria had seen the mass transit dream of building metro systems to fruition back in the early 1980s. Currently, deployment of more buses and ferries is the attempt to solve mass-transit problems in the commercial capital of Nigeria. Weighed against the transport needs of a rapidly growing population, this is nothing more than a few drops in the ocean. A PROJECTION INTO THE FUTURE When the then Lagos government led by Lateef Jakande (between 1979 and 19832) first mulled the initiative of metro system, it was a projection into the future. The volume of activities driving movement at the time already exposed the need to explore largescale means of transportation. Lagos had shelved its role as the political nexus to begin to realise its economic potential. The civilian government of President Shehu Shagari, despite earlier reticence eventually backed the project and instructed the Central Bank of Nigeria (CBN) to grant the required monetary support. By then, a Japanese company and a consortium of 19 French companies, Interinfra — each of them first-class companies — had been engaged by the state government. A 10 per cent essential contribution of about $70 million was also readied with expectation of more funding from the CBN. Preliminary preparations were ongoing until General Muhammadu Buhari came into the picture. A successful coup that terminated the civilian rule of Shagari enthroned Buhari as the military Head of State, leading to the beginning of the end of a highimpact project that would not only have equipped the state to solve

the perennial traffic challenge it still faces, decades after, but would also have pushed other states to follow suit and propel the country’s development. In what pundits have described as a decision induced by lack of will, poor appreciation and slushy judgment of the greater value of the project compared with his immediate suspicion that the project offered a source of corrupt enrichment by the then Unity Party of Nigeria (UPN), Buhari called the project off. CANCELLED BY BUHARI “It would have addressed 80 per cent of the chaos we are seeing today,” explained George Etomi, the transaction lawyer who consulted for 17 of the French companies engaged to handle the metro system project in 1983. “At that time, the Buhari government set up a mass enquiry against all the civilians because there was this notion that many of them were corrupt and needed to be brought to justice. “The thinking was that the UPN government merely used the metro line as a cover to sponsor their political party. So, they [the Buhari government] set up what was called

Justice Famakinwa Tribunal of Enquiry to investigate the project, check origins, check all the payments that were made and so on. Naturally, it truncated the project because they then had to scrutinize everybody. We had to take all our papers and track how much was paid.” Etomi was just seven years old at the bar when consulting for a consortium brought him to the centre of the project, worth some $700million. Interinfra needed to acquire property for its workers, acquire sites and do some preliminary work involving, in some cases, the rail path that had been chosen. There were houses that needed to be demolished, raising the need for compensation. The engineering, procurement, construction contract and the designing had begun in Paris. It was a ‘build, operate and transfer’ model and was meant to run a parallel railway bridge linking Third Mainland Bridge. The first phase was to go from Agege and terminate at the Tafawa Balewa Square (TBS). Ogogoro Island at Victoria Island was to be developed into a French village to accommodate workers. It was a comprehensive mass transit programme.

The French government’s support for the project was a decision drawn between giving export credit facility to either Nigeria or Algeria. Being export credit, it equally gave work to the French companies that were coming into the country for work. “We had that full backing, which also meant the French government was committed to ensuring the success of the project. That’s why it’s a tragedy that the plan didn’t go through,” Etomi told BusinessDay. But it didn’t take long before Etomi swung from merely representing them to fully defending the sanctity of the contract that bound the consortium and the government of Nigeria. The lack of precaution and poor tact that inspired the cancellation of the project gave little consideration to the potential

punishment an abrupt breach was likely to attract. BLINDNESS TO THE BIGGER PICTURE Having a broader knowledge of the contract as the consortium’s lawyer, Etomi knew that the very act of setting up a tribunal was in breach of the contract and didn’t hesitate to point out that there were better procedures within the con-

tract to settle dispute, if the government had any. With the volume of investment that the project was going to gulp and being the largest project going on in the country at the time, it wasn’t entirely out of place for the government to raise brows if it suspected misgivings. But “failing to see the bigger picture on the altar of suspicion”, Etomi says, was an error too expensive to make. The implication was not just that it exposed how politically unstable Nigeria was or the risk of poor perception it faced in the international community, it was equally about the weighty penalty that the country faced at the International Court of Arbitration. Some observers of the event famously tagged it ‘payment for a project that was never had’. “I still remember the tribunal judge almost threw me in jail for contempt because I raised some of these points — that we were not doing ourselves any favours

by doing what we were doing. When you begin to parade foreign nationals in the name of an enquiry, first of all you create fear in them. You de-market your country,” the lawyer said. But despite being politically charged, there are also differing views which ascribe the cancellation to a reflection of the economic realities of the 1980s more than anything else. By 1985, a huge concern of sustaining the system in terms of manpower and technology had risen in technical and economic quarters, says Tajudeen Bawa-Allah, General Manager of the defunct Lagos State Transport Corporation, appointed in 1986. The general opinion was that the state was in no position to provide what was required to sustain the system and perhaps the financial flow that should follow to bring it to fruition. “I disagree with the narrative of it being political decision because even Babatunde Fashola, when he conceived the idea of rail mass transit and wanted to start the blue line and he went to three or four places to seek funds, they still asked him how he wanted to sustain the system,” Bawa-Allah, who is now almost 80, explained to BusinessDay at the home he retired to, in Ikorodu.

Monday 05 April 2019

BUSINESS DAY

the metroline project that hurts Lagos till date

“Where is the capacity? He had already anticipated such questions and therefore established the school of transport in 2008. Technically, no matter what it takes an organization to bring up an idea, it must be backed by many factors, including funding and capability.” Similarly, journalist Yakubu Aliyu argued in a 2015 article that it was sound economics to halt the project in the midst of a wider economy that was struggling to get out of debt. His primary premise was that General Buhari regime met a chaotic economic situation defined by a huge debt crisis. THE TIMES WERE HARD Nigeria’s debt had sharply risen from $11.99 billion in 1982 to $17.57 billion in 1983, according to the World Bank. Key commodities were scarce, accompanied by a loss of confidence in Nigeria’s Letter of Credit (LOCs) by foreign suppliers. The developments in global interest rates had raised the amount of the debt without any corresponding transfer of real assets, he said, adding that the shortened loan maturities and reduced grace periods of these loans led to a clustering up of debt service payments, as interest rates began to rise. “The Lagos metro-line project might have suffered the same fate because the economic realities could not have supported its continuation given the onerous contract terms. General Buhari acted responsibly in respect of stopping all loan contracts that were haphazardly entered into, and focusing on debt repayments to regain the confidence of the international community,” Aliyu wrote. In the end, it appeared the sound economics of halting the project abruptly could not suffice as legal soundness. It was the big picture Etomi earlier said Buhari failed to see, making the country cough up heavy funds of sanction under compulsion. “We paid dearly for breaking the sanctity of contract. Even this P&ID case could have been negotiated,” Etomi said. WHERE IS THE LAGOS METRO SYSTEM TODAY? Following the termination of the great metroline project, the conversation about transportation in Lagos state switched to the need to seek alternatives that were less capital intensive. In 1986, Bawa-Allah was appointed General Manager of the transport corporation, with the task of mapping out the way forward.

The following year, the World Bank invited Lagos State delegates to its Washington DC headquarters to discuss alternatives. The objectives were to attempt to agree on the terms of reference for the preparation of a Mass Transit Study for the Metropolitan Lagos with the bank’s experts and to carry out full evaluation of possible system options, taking into account the scale of congestion, mobility hardship of commuters, the ever increasing population of the metropolitan and the economic climate of Nigeria then. They came back with terms of reference that favoured rail mass transit as the best option; they only made bus and ferry as the supporting cast. It was agreed that the impact of each transport system should be critically examined, as only the combination of the systems could meet the mobility demands of the projected population in the state. Lagos State has an area of 357, 700 hectares, 17 per cent of which comprise lagoons and waterways. In 1987, the state had a population estimated by the United Nations to be over 5 million. Out of this, Ebute Meta, Surulere, Apapa, Oshodi, Isolo, Ilupeju, Somolu, Ikeja and Agege harboured 4.5 million people, accounting for 89 per cent of the total population. Ironically, these areas constitute less than 20

per cent of the entire state. Since the 70s, the population of Lagos has grown at a rate of 34 persons per hour, including migration and birth. Unfortunately, this spontaneous growth was not planned for, especially in terms of facilities such as water, electricity and transportation. The lack of schemed location of these activities has left the population distribution concentrated wherever dry land is available. According to the ‘Finalisation of the Lagos State Mass Transit Study Procedure with the World Bank’, the experts noted that the transport system was suffering from inadequate systems integration and coordination, which results in street congestion as public transport does not provide such services capable of competing with private motorists. Buses cannot not keep their schedules, as they share road spaces with other vehicles. Public transport riders wait for long periods at stops due to delays experienced by the buses; travel times are excessive; interchange points are crowded and pedestrian movements unorderly. Fare structure is arbitrary. The corporation eventually adopted the bus systems as a feasible solution and had its own framework to facilitate that. The plan was that the fleet of buses in the state would be increased along-

side population growth. BawaAllah and his team projected that in 1986, the fleet strength would be increased to 400, as 278 buses would be added to 122 old buses. By 1987, some 222 buses would be acquired, 200 buses in 1988, 150 in 1989, and 150 in 1990. The total by 1990 was to be 1,000 buses in the state but that never happened. The plan was grounded on lack of implementation. GOING BACK TO THE 80s FOR SOLUTIONS In 2020, the transport challenge that should have been avoided persists, with the state population almost four times what it was in the 1980s. Lagos State has now had to fall back on the 1986 terms of reference that mass transit is a critical way out. Pending the completion of the Lagos Mass Transit System involving building two light 12 rail lines, which are together expected to carry nearly 2 million passengers per day, Lagos has been among African cities where commuter services have generally been small in scale, typically one or two locohauled return services per day, that is into the city in the morning and back in the evening. Whereas The Algiers Metro, serving Algiers, the capital of Algeria, is a rapid transit system conceived in similar period with that of Lagos in the 1970s and was designed to address the need for mass transport caused by the city’s growth. The project equally faced slow-down from financial difficulties and security challenges in the 1990s but recommenced in 2003 during the administration of President Abdelaziz Bouteflika. At a total cost of €900million, the metro system, which spanned 9.2 kilometres and 10 stations, opened to passengers in 2011, making Algiers only the second capital city in Africa, after Cairo, to have a metro system. A 4-kilometre extension opened for commercial service in 2015. The Cairo Metro was the first of the three full-fledged metro systems in Africa and was opened in 1987 as Line 1 with a length of 29 kilometres. As of December 2019, the Cairo Metro has 65 stations, three of which are transfer stations, with a total length of 77.9km, according to information on Cairo Metro website. The first section of the Lagos Rail Mass Transit network, Phase I of the Blue Line, is now expected to be completed 2021 after many delays from funding shortfalls. The shortfall of rail infrastructure has undermined the potential of the rail systems to play a strong contributing role in economic development. In fact, rail transport market share in most countries on the continent is below 20 per cent of the total volume of freight transport on lack of investment in infrastructure and the absence of a supporting institutional framework. LAGOS COULD HAVE BEEN LONDON Had Buhari sustained the rail project, Lagos might have been one

of the most popular cities Nigerians can’t stop visiting abroad. In London, a city of 8.9 million people — less than half the population of Lagos — Nigerian journalist Hannah Ojo-Ajakaiye’s need to move around is not direly tied to owning a car. The residence of the Chevening scholar receiving a Master’s degree in Education in the UK is just a minute distance from Southern Railway, one out of the 270 stations serving the city. In other locations, she has to walk for roughly 10 minutes to get to a nearby station with coach interiors that comfortably encourage reading or remote working. The metroline system is not only central to economic activities of city, it is the saving grace for the working class. “It is a disaster that there are no rail systems in Lagos,” says Hannah. “You don’t need to have a car because the public transport works like it’s the bedrock of economic productivity here. It is efficient. Compared that to Lagos, you spend a lot of productive hours in traffic. Here, you can predict your time and move around.” LAGOS: BIG CITY, NO INTERNAL RAIL SYSTEM According to Muda Yusuf, Director-General of the Lagos Chamber of Commerce and Industry, while many businesses — especially investors in intra-city transport — within the city bleed from poor productivity and low turnaround time as a result of traffic congestion, there is increased exposure to air pollution from risky emission levels and attacks from traffic robbers. “Having tons of buses won’t solve any problem if they will end up stuck in traffic,” he says. “There is no city as big as Lagos that doesn’t have functional intra-city rail system. If you are talking about mass transit, the most effective means is rail. It helps productivity. And you know mobility has a way of increasing output because the speed of transactions is much higher. You need effective transport systems to facilitate those things so that they can contribute to growth.” Average workers in Lagos spend the equivalent of 75 percent of a week’s total working hours commuting, according to a research finding by JCDecaux Grace Lake Nigeria, In 2015, Babatunde Fashola, former Lagos State Governor declared that the state loses over N250 billion to traffic annually. As of December 2019, Dangote Group had lost N25billion to the deplorable state of Oshodi-Apapa Expressway, its helmsman Aliko Dangote said after securing the federal government’s approval to reconstruct the road responsible for the Apapa ports congestion N72.9 billion. For both the common man and the executive, these losses roll in day after day, and will continue for a long time to come. Yet they could have been eradicated decades ago — if only Buhari didn’t cancel a project that would have transformed Lagos to a formidable economic force.

Monday 06 April 2020

BUSINESS DAY

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Monday 06 April 2020

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday Friday 03 April 2020

Top Gainers/Losers as at Friday 03 April 2020 LOSERS

GAINERS

Company

Opening

Closing

Change

ZENITHBANK

N11

N11.9

0.9

ACCESS

N5.5

N6.05

0.55

UACN

N6.5

0.5

CILEASING

GUARANTY

N17.3

N17.6

0.3

FLOURMILL

N20.2

N20.5

0.3

SKYAVN

DANGCEM MTNN

ASI (Points)

Opening

Closing

Change

N128.4

N125

-3.4

N92.8

N92

-0.8

N6.2

N5.6

-0.6

VOLUME (Numbers)

N22.5

N22

-0.5

VALUE (N billion)

N2.63

N2.37

-0.26

DEALS (Numbers)

MARKET CAP (N Trn)

21,094.62 3,988.00 235,298,007.00 2.978 10.993

Global market indicators FTSE 100 Index 5,415.50GBP -64.72-1.18%

Nikkei 225 17,820.19JPY +1.47+0.01%

S&P 500 Index 2,483.83USD -43.07-1.70%

Deutsche Boerse AG German Stock Index DAX 9,525.77EUR -45.05-0.47%

Generic 1st ‘DM’ Future 20,901.00USD -372.00-1.75%

Shanghai Stock Exchange Composite Index 2,763.99CNY -16.65-0.60%

Investors may go for bargain in new week ...As value stocks hit new lows Stories by Iheanyi Nwachukwu

ith declines in the price of a number of fundamentally sound stocks in the week ended April 4, market watchers expect some cherry picking at the beginning of new week. In the review trading week, the Nigeria stock market declined by -3.5 percent, pushing it negative return this year to a new high of -21.40percent. Many value counters were on offer. Some of these stocks fell below analysts target price as both foreign and domestic investors weigh the economic impact of Coronavirus-driven lockdown in Nigeria’s commercial capital, Lagos and the Federal Capital Territory (FCT), Abuja and

Ogun State. As remote trading on the Bourse continues, no doubt also that the performance of the market will still largely depend on event around

the continued spread of the Coronavirus in Nigeria as well as happenings in the Crude oil market. Oil price traded above $30 per barrel ($32.72) as at 7pm on Fri-

day. The Nigerian Stock Exchange (NSE) All-Share Index (ASI) depreciated by 3.5percent to close the review at 21,094.62 points and

N10.994 trillion respectively. All other indices finished lower with the exception of NSE Oil/Gas which appreciated by 2.33percent while NSE ASeM Index closed flat. Fifteen (15) equities appreciated in price in review trading week, lower than 34 in the preceding week. Thirty-six (36) equities depreciated in price, higher than 30 equities in the preceding week, while 112 equities remained unchanged, higher than 99 equities recorded in the preceding week. The market recorded total turnover of 1.534 billion shares worth N11.267 billion in 18,928 deals, in contrast to a total of 1.452 billion shares valued at N14.918 billion that exchanged hands the preceding week in 21,828 deals. The Financial Services

industry (measured by volume) led the activity chart with 1.105 billion shares valued at N7.100 billion traded in 12,225 deals; thus contributing 71.99percent and 63.02percent to the total equity turnover volume and value respectively. The Industrial Goods followed with 218.471 million shares worth N1.236 billion in 1,610 deals; and the Consumer Goods industry, with a turnover of 134.599 million shares worth N1.855 billion in 2,332 deals. Trading in the top three equities namely, Sterling Bank Plc, Zenith Bank Plc and Meyer Plc (measured by volume) accounted for 752.359 million shares worth N3.247 billion in 4,039 deals, contributing 49.03percent and 28.82percent to the total equity turnover volume and value respectively.

FCMB gets CAC approval to hold AGM with attendance by proxies

CMB Group Plc said it has obtained approval of the Corporate Affairs Commission (CAC) to hold its annual general meeting (AGM) with attendance by proxies. The financial institution referred to the publication of its Audited Financial Statements and the notice of its Annual General Meeting (AGM) scheduled to hold on Tuesday, April 28, 2020 at 11.00 am. The company notes the outbreak of the COVID-19 pandemic in the country and the partial lockdown of some states as announced by the Federal Government and some State Governments, towards securing their borders and preventing the further spread of the Coronavirus, which would be intensified by public gatherings. “We are also mindful of the legal framework and corporate actions predicated on the AGM, such

as payment of dividend to shareholders, approval of audited accounts and filing of the Company’s annual returns, ratification of the retirement of and appointment of Directors as well as the appointment of new Auditors in line with the

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Central Bank of Nigeria requirements. “Therefore, towards ensuring that these actions do not remain stalled as would be the case if the AGM is postponed or cancelled, we engaged the Corporate Affairs Commis-

sion (CAC) and have obtained their approval to hold the AGM with attendance by proxies, “ it said in a notice at the Nigerian Stock Exchange. FCMB Group shareholders are encouraged to send duly completed proxy form(s) indicating how they wish to vote on each of the Resolutions noted therein, to the Registrars Cardinalstone Registrars Limited, 358 Herbert Macaulay Way, Yaba Lagos or via e-mail to registrars@cardinalstone. com, not less than 48 hours before the time fixed for the meeting. This option is being adopted in line with the provision of section 230 of the Companies and Allied Matters Act (CAMA) on the use of proxies with the understanding that the quorum for an AGM can be achieved either through physical attendance or by proxy, the company further said.

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Nigerian Breweries targets N48bn from Commercial Paper issuance

igerian Breweries Plc has informed the Nigerian Stock Exchange and the investing public of the continuation of its Commercial Paper (CP) programme with the launch of Series 7 and 8 of the programme which opens on April 6, 2020. The CP Programme continues to provide the opportunity for non-equity

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investors to invest in the Company, support the Company’s cost management initiatives and serve as an additional source of funding for the Company. While Series 7 would be for a tenor of 182 days, Series 8 would be for 270 days. The CP Programme aims to raise up to a maximum of N48 billion to support the Company’s short term funding needs.

Monday 06 April 2020

BUSINESS DAY

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

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Coronavirus to boost Pharma stocks on government stimulus BALA AUGIE

uaranty Trust Bank or GTBank has generated much higher returns for its shareholders than any other lender in the country, a stellar performance it has held for close to a decade. That means the largest lender by market value in Africa’s largest economy knows what to do with its

N312m

5 “This month, we expect the riskoff sentiments to continue, given the current state of the global economy and investors’ flight to safety,” said analysts at United Capital Limited. “Also, we believe investors might continue to position in healthcare names, due to investments made by government and private sector in fighting COVID-19.”

The full year audited financial statement of the largest pharmaceutical companies quoted on the floor of the bourse showed they have financial strength and there are no threats to their going concerns. Fidson Health Plc, May and Baker Pharmaceuticals, GlaxoSmithKline Consumer Nigeria, and Neimeth International Pharmaceuticals can service their debts and meet financial obligations as combined average coverage ratio stood at 2.71 times, a figure that is higher than the 1.50 times benchmark. Despite the tough and unpredictable macroeconomic, the four largest pharmaceutical firms were able to turn each unit invested in sales into higher profit as net profit margins rose to 5.55 percent in December 2019 from 3.32 percent as at December 2018. Also, their cumulative net income spiked by 74.44 percent to N1.76 billion in the period under review from N1.0 billion the previous year. A breakdown of profit shows Fidson Healthcare posted net income of N312.02 million in the period under

review from a loss position of N97.44 million the previous year. The drug makers are able to use fixed assets in generating higher sales and profit as fixed asset tuner ratio increased to 3.86 times in the period under review from 0.40 times the previous year. The shares of Pharma companies are attractive as entry points for patient investors. May and Baker is trading at a price multiplie of 5.87, and it has a dividend yield of 9.35 percent. Neimeth International’s trades at a price to earnings ratio of 2.13 times, while its share price closes at N0.48 on Friday. There firms have embarked on aggressive expansion plans with a view to increasing their share of the market. Fidon has an ultra-modern plant in Ogun State, a facility that is of international standard. The manufacturing facility is equipped with six production lines-tablets, capsules, liquids, cream and ointments, dry powder and intravenous fluid to meet the needs of Nigerians and West African Markets.

GTBank generates higher returns to shareholders than any lender BALA AUGIE

SHORT TAKES After a disappointing 2018, Fidson healthcare seems to have regained its mojo as it records an after-tax profit of N312 million in full-year 2019 for the period ended 31 December. Revenue dipped 13.5 percent to N14.06bn from N16.22bn in the same period in 2018. Efficient cost management saw its cost of sales decline 17.35percent to N8.19bn from N9.91bn

nalysts are betting that pharmaceutical stocks will appreciate on the back of stimulus announced by government in order to cushion the effect of coronavirus on the economy. This is expected to bolster future earnings. Analysts say pharma stocks could offer investor’s shelter after the pandemic has waned and that sale of drugs/vaccines by companies will also underpin cash flow positions. Given the continuous impact of the Coronavirus pandemic on global supply chains, the Central Bank of Nigeria, (CBN), is to increase its intervention in local manufacturing and import substitution by N1 trillion. Apart from the N1 trillion intervention, the CBN in addition to the N50 billion soft loan to small businesses, increased its intervention by another N100 billion in loans to support health authorities, laboratories, researchers, and innovators work with global scientists to patent or produce vaccines and test kits in Nigeria to prepare for any major crises ahead.

P.E

owners resources, and its cost control strategy has helped it stay afloat and maintain reasonable level of profitability in an ever challenging business climate. GTBank’s return on average equity (ROAE) was 31.16 percent as at December 2019, as gleaned from its financial statement. This means that every N100 of common shareholder’s equity earned about N31.16 this year. GTBank’s returns compares

with, Access Bank, (17.17 percent), FBHN, (10.67 percent), United Bank for Africa, (16.19); Zenith, (23.17 percent); Stanbic IBTC Holdings, (27.69 percen); Sterling Bank, (9.96 percent), Union Bank, (8.43 percent), and Wema Bank, (8.40 percent). Banks future earnings growth hangs in the balance, thanks to stringent policies such as hike in minimum loans to deposit ratio to 65 percent as well as banning cor-

porates and PFAs from participating in its Open Market Operation (OMO). The recent earnings report showed profit is growing at a slow pace due to drop in interest income on loans and advances. Yields on short term government securities- a source of revenue- has been falling since the start of 2018. To exacerbate the already anaeContinues on page 27

The stock market declined for the fifth-straight trading session on Friday to end its worst week after CBN’s CRR policy weighed on banking stocks and set off 2020’s longest bear-run. Nigerian equities fell for all five trading sessions last week to close 2.65 percent lower weekon-week, and end January on a very different tempo than it began the month. Bank stocks shed 5.17 percent to push Year-to-date return to 7.46 percent, down from around 10 percent at the beginning of the week, while analysts say the bearish sentiment will likely extend to trading this week. “Next week, we expect bearish pressures on the equities market to remain, as investors continue to selldown on banking counters,” said analysts at Lagos-based Chapel Hill Denham in a note to clients.

N23bn Interswitch Limited has listed its N23bn callable senior unsecured bond with a tenor of seven years at a fixed rate of 15percent, embedding a call option that can only be exercised from the second year, are payable in full at maturity A callable bond is a bond that the issuer may redeem before it reaches the stated maturity date. In essence, a callable bond allows the issuing company to pay off their debt early. According to the company, this is part of its N30bn debt issuance programme through a special purpose vehicle, Interswitch Africa One Plc.

BusinessDay MARKETS INTELLIGENCE Team Lead: BALA AUGIE, IFEANYI JOHN; Graphics: FIFEN FAMOUS

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team balaaugie@yahoo.co.uk; augiebala@gmail. www.businessday.ng

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Monday 06 April 2020

BUSINESS DAY

MARKETS INTELLIGENCE Access bank records 39% of forecast merger savings in first year IFEANYI JOHN

ccess bank s h a re h o l d e r s are beginning to reap the efficiency benefits of the diamond bank merger as Nigeria’s largest bank by assets saw some traction in that regard in its first year of operations after the merger. According to the bank’s investor presentation document March 2020, Access bank disclosed that it expects to record N153.9 billion from cost saving and loss recovery strategies from the diamond bank merger between 2019 and 2021 and as of 31 December 2019 the bank had recorded 39 percent of the said sum or N59.9 billion. Access bank’s gross earn-

ings for FY 2019 stood at N666.75 billion as against the N528.74 billion, which

was recorded for FY 2018 showing a 26.1 percent increase as net interest income

recorded for FY 2019 grew to N277.2 billion from N173.6 billion recorded for FY 2018

DangCem’s Nigeria operations continue to power overall business …as Pan-African operations lag despite revenue surge IFEANYI JOHN

he NGN85 billion loss Dangote Cement reported from its Pan African businesses in FY 2019 was the fourth consecutive year since the economic recession of 2016 as its foreign operations continue to struggle to generate profit. The NSE’s largest company by market capitalization has now posted an accumulated loss position of NGN206.98 from its operation outside of Nigeria since 2016. One ordinarily expects that the expansion of any company’s operations to other locations is majorly driven by the goals of the firm to achieve increased market share and improved profits. However, this has not totally been the case for Dangote cement as it continues to record losses in company operations outside Nigeria, indicating that the cement giant may re-consider continued expansion to other countries.

However, deeper analysis shows that the Pan-African losses is not a revenue problem, rather, it is caused by excessive borrowings placed on the Pan-African business. Despite growing PanAfrican revenue by 50% in the last 4 years, losses in Dangote cement’s Pan-African operations may be attributed to the heavy finance costs burden with company having paid NGN257.30 billion in finance cost compared to their accumulated revenue of N786.84b from its PanAfrican operations since 2016. This finance cost burden leaves a debt service to revenue ratio of almost 33 percent on Pan-African business compared to a local DSR of 5.3 percent with finance cost only at N118b compared to accumulated local revenue of around N2.2 trillion. Meanwhile, analysis now point to the fact that the operations of the cement manufacturer in Nigeria has been solely responsible for the decent growth the company has enjoyed in the past few years. The company as www.businessday.ng

group has generated revenue in excess of NGN3 trillion and profit after tax (PAT) of NGN937.95 billion in the last 4 years. In 2016, Dangote cement posted NGN426.13 billion and NGN195.03 billion in revenue from Nigeria and Pan-Africa respectively, but posted an impressive NGN317.38 billion in Nigeria and a disappointing NGN21.01billion in losses from Pan-African operations. The cement manufacturer in FY 2016 recorded group revenue of NGN615.10 billion and PAT of NGN142.86 billion after excluding central administrative and elimination costs. However, in 2017 Dangote cement posted NGN552.36 billion and NGN258.44 billion in revenue from Nigeria and Pan-Africa respectively, but posted NGN265.53 billion in Nigeria and a disappointing NGN12.77 billion in losses from Pan-African operations. The cement manufacturer in FY 2017 recorded group revenue of NGN805.58 billion and PAT of NGN204.25 billion after

excluding central administrative and elimination costs. In 2018 Dangote cement posted NGN618.30 billion and NGN283.26 billion in revenue from Nigeria and Pan-Africa respectively, but posted an impressive NGN491.62 billion in Nigeria and a disappointing NGN87.90 billion in losses from Pan-African operations. The cement manufacturer in FY 2018 recorded group revenue of NGN901.21 billion and PAT of NGN390.33 billion after excluding central administrative and elimination costs. Dangote cement for FY 2019 posted NGN610.25 billion and NGN282.71 billion in revenue from Nigeria and Pan-Africa respectively, but posted NGN275.15 billion in Nigeria and a disappointing NGN85.29billion in losses from Pan-African operations. The cement manufacturer in FY 2019 recorded group revenue of NGN891.67 billion and PAT of NGN200.52 billion after excluding central administrative and elimination costs.

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representing a massive 59.7 percent increase. Access bank in FY 2019 earned NGN97.51 billion compared to the NGN94.98 recorded in FY 2018, showing a 3 percent increase in Profit After Tax (PAT). However, the banks total number of outstanding shares in FY 2019 stood at 33.53 billion as against 28.93 billion in FY 2018 due to the merger which was a cash and stock deal, giving Diamond shareholders equity in Access Bank. While investors in Access had benefited from a stock rally post-merger, the outbreak of coronavirus and oil price crash has wiped out almost all the gains made by Access shareholders postmerger. As at completion of the merger in April 2019, Access

bank’s stock price stood at NGN5.7 and closed the FY 2019 at NGN9.27, returning 62 percent to investors. However the stock price has now declined about 38 percent month to date, closing at N6.4 Friday. Analysts say the selloff could be related to foreseen difficulty for banks to deliver strong earnings growth this year due to economic growth concerns, coronavirus induced state lockdown and weaker oil prices which will have impact on asset quality of banks’ loans and other risk assets. Banks are yet to cut their earnings guidance but analysts say it’s only a matter of time before they do. It could also be a chance for investors who missed the earlier rally in the shares to buy in at a lower price.

GTBank generates higher returns... Continued from Page 26 mic position of financial institutions is the coronavirus pandemic that is hurting the economy.

‘

Oil has slumped to around $35 a barrel, below the government’s $57 budget target, amid a price war between Saudi Arabia and Russia, and as widening global efforts to fight the spread of the coronavirus risks triggering a drop in demand

’

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Banks will be cautious of lending to the real sector so as to avoid rising nonperforming loans, a dark reminder of 2016 when a sharp drop in oil prices paralyzed business activities.

According to the recently released data on the banking sector by the National Bureau of Statistics (NBS), banking sector credit to the economy grew for the second consecutive quarter by 5.8 percent quarter on quarter (q/q) in the fourth quarter (Q4) 2019 to N17.2 trillion, the highest level since 2007. Accordingly, credit growth rose significantly by 14 percent year on year (y/y) in 2019 compared to the decline of 4 percent in 2018. Oil has slumped to around $35 a barrel, below the government’s $57 budget target, amid a price war between Saudi Arabia and Russia, and as widening global efforts to fight the spread of the coronavirus risks triggering a drop in demand.

Monday 06 April 2020

BUSINESS DAY Harvard Business Review

MondayMorning

Your code of conduct may be sending the wrong message Francesca Gino, Maryam Kouchaki and Yuval Feldman

ases of corporate corruption and misconduct — from the fall of Enron in the 1990s to the more recent scandals at Wells Fargo and Volkswagen — have motivated companies across the globe to take steps to ensure that their employees are making ethical decisions. Accordingly, many firms have revised their codes of conduct, ethics training and everyday communications in recent years. In such documents, many companies intuitively choose personal language to make employees feel they are part of a community built on close, trusting relationships. Unfortunately, our research shows that personal “we” language can backfire. There is evidence that it actually increases misconduct. Here’s the problem: When we view our organization as tolerant and forgiving, we believe we’re less likely to be punished for misconduct. Across nine different studies, we find that personal language (“we,” “us”) leads to less ethi-

cal behavior than impersonal language (“employees,” “members”) does, apparently because people encountering more personal language believe their organization is less serious about punishing wrongdoing.

Seemingly subtle differences in the language used in organizational codes of conduct can send outsize cues to employees about the organization’s tolerance of wrongdoing, our results suggest. We urge leaders to re-

visit the language used in their codes and other internal communications, and, if necessary, rewrite them in the less personal language that has been shown to prompt more ethical behavior.

(Francesca Gino is a professor of at Harvard Business School. Maryam Kouchaki is an associate professor at Northwestern University. Yuval Feldman is a professor at Bar-Ilan University.)

Turn your hobby into a startup Daphne Demetry

hen we imagine the pathway to becoming an entrepreneur, we often envision a linear track: Quit your job and start a business. Being an entrepreneur is an all-or-nothing proposition, right? Not always. Like many things in life, the pathway to entrepreneurship can be more winding and accidental. This is what I found when interviewing 63 entrepreneurs in the culinary industry who started underground restaurants: alternative eateries taking place in people’s homes. In brief, underground restaurants are the bootstrapped, lean startup of the culinary world: They’re cheap to start and compatible with day jobs. The experience of underground restaurateurs may seem a quirky outcome of our food-obsessed world, but part-time entrepreneurship is not. A growing number

of people test the entrepreneurial waters by engaging in business activities on the side while maintaining their day jobs. As the lines between work and leisure become blurred, part-time entrepreneurship has become a particularly attractive avenue for people seeking to transform their passions into profitable

enterprises. Indeed, this cultural mantra of “following one’s passion” emerged as central to how underground chefs explained their motivations for running a part-time restaurant on the weekends. Often these chefs framed their parttime work as a passion project — a way to experiment with

their hobby, cooking. Initially, these amateur chefs had little plan to grow their ventures. Few expressed desires to ultimately become a professional chef and own a restaurant. As they received praise from diners and the media, however, their self-perceptions began to change. The prospect of a formal venture became a re-

alistic proposition. Once chefs had transitioned to a full-time venture, their self-perceptions changed to what we perhaps would have expected from the start; they no longer saw themselves as hobbyists but instead identified as entrepreneurs. These findings suggest several benefits to part-time entrepreneurship. First, it creates a safe and designated space for people to play and experiment with aspirational identities. Second, having a venture “on the side” enables entrepreneurs to gradually gain entry and acknowledgment with other professionals in their field, helping legitimize their activities to others. These benefits — and others — explain why it has been found that freelancing as an entrepreneur can actually increase the odds of business survival once one transitions to a full-time venture.

(Daphne Demetry is an assistant professor at McGill University.)

Monday 06 April 2020

BUSINESS DAY

Start-Up Digest

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Yammama: Improving farm productivity using simple technologies ODINAKA ANUDU

ne of the key challenges facing the agriculture sector in Nigeria and Africa is poor productivity due to lack of data and information as well as poor access to market and credit. African farmers generally struggle with issues that are already taken for granted in the West. For instance, many of the continent’s farmers do not know the cheapest means of moving their products from farm to the market. A lot do not have access to credit because they lack appropriate information and guidance. More so, many of them suffer terrible pre-or post-harvest losses owing to lack of managerial guide and data. Nasir Yammama founded Verdant AgriTech in 2014 to solve these major problems. Yammama’s family members are farmers, and he often joined them when he was small. The under-30 entrepreneur attended the Institute and Creative Technology at Middlesex University, London, where his knack for using technology to solve human problems grew. He subsequently partici-

pated in the Massachusetts Institute of Technology’s Global Entrepreneurship Bootcamp where he became a full-fledged entrepreneur desirous of solving major social problems. In fact, it is said that his involvement in technology dates back to his childhood days when he performed difficult things and won technology awards. Verdant AgriTech aims to boost agricultural sustainability in Africa by using simple modern technologies to increase productivity, raise efficiency of resource use, and reduce ecological impacts. The firm provides important data for agricultural decision making, and also offers information to rural farmers on extension services. Yammama provides cooperatives, governments, financial institutions and farm input companies his firm’s data solutions, enabling them to reduce costs and increase efficiency. So far, the firm has reached over 10,000 farmers, signed up more than 20 stakeholders and works with some international agencies. With a phone, farmers can register and interact on the platform, obtaining

Nasir Yammama

crucial data and linking to key stakeholders as well as services. They can also request a demo. His firm records information about global sustainability standards, weather forecasts, market prices, and agronomics tips. It likewise offers its data to the government to make vital decisions on food productivity, fertilizer distribution or availability and disease control. “We offer solutions to support farmers and other

stakeholders in the agricultural value chain for improved food production using novel technologies,” the firm wrote on its website. The young entrepreneur has won a number of awards. He has been featured in Forbes 30 Under 30— a list of 30 entrepreneurs in Nigeria or Africa that do extraordinary things or solves major continental problems. He won this award in 2017. He became Queen’s Young Leader in 2017. He

had won the Enterprise Challenge organised by the British Council in 2014. He refers himself as a creative technologist, entrepreneur, and nomad. He is intrigued by technology, enterprise, renewable energies, and agriculture. The young entrepreneur met Richard Branson, American billionaire and owner of Virgin Atlantic, at a Shoreditch restaurant known as Beach Blanket Babylon in 2014. Ever since then, his life has never remained the same. “I was one of the winners of the Enterprise Challenge, an apprentice-style competition backed by Virgin Atlantic and the British Council,” he wrote on his LinkedIn. “We were ‘young entrepreneurs’ who Richard Branson believed were ‘stars in the making’ — rich in talent and ripe with innovation. We’d have a masterclass with him and the whole place was set for it— from the media personnel to Virgin Atlantic and British Council executives. As you’d imagine, the busy restaurant was shut down for us,” he wrote. The young entrepreneur said he learnt five things from Branson. One is that entrepreneurs must try new

things and should not be afraid of failures. He also learnt that success is a mixture of hopeless optimism and extreme dedication. “Richard constantly harps on the necessity of trying out new things and often failing in order to innovate. He has, in the course of the last 45 years, faced numerous failures but has also been brazen in the face of setbacks,” he wrote. The young entrepreneur quoted Branson as saying, “Making mistakes and experiencing setbacks is part of the DNA of every successful entrepreneur, and I am no exception.” Branson also taught him that “if you look after your people, your customers and bottom line will be rewarded too.” Again, the suprepreneur taught the young agripreneur that fun is a responsibility and not a reward. “Throughout the Virgin group, fun is seen as a responsibility and not a reward. A lot of this, of course, stems from Richard’s adventurous, thrill seeking and mischief making nature. He famously crossed the Atlantic and later the Pacific in a hot air balloon,” Yammama wrote.

Entrepreneurs explain how business activities have dropped since COVID-19 outbreak Gbemi Faminu

ig e r i a n e nt re preneurs say the outbreak of coronavirus has hurt their businesses and altered their plans. They call on the federal and the state governments to financially support them after the outbreak to bounce back and rejig the economy. Owolabi Mercy, a Lagosbased entrepreneur who deals in bags, shoes, clothing items and pastries, told BusinessDay that since the outbreak, demand for her products had been slow with suppliers refusing to communicate with her. “When the pandemic started, my suppliers were initially responding, but I can’t reach them anymore,” she said.

“I am running out of stock and there is no opportunity for me to restock because I cannot travel, and logistics have suspended operations as well,” Mercy said. She further explained that her operating costs were still high because she had to keep her generators running, pay for electricity and other similar bills. “But I am not making sales like I was before, and I could as well just sit at home till this whole crisis goes away,” she said. Similarly, Oyedeji Dolapo, a mixologist, said although she was still able to get ingredients from her suppliers, she had to restructure her business operations and package the drinks for customers who ordered—at slightly higher prices. www.businessday.ng

Coronavirus has killed more than 50,000 people across the world and infected over 1 million. Nigeria has over 190 cases already,

and there are fears the disease will spread further. Many businesses, especially micro, small and medium enterprises (MSMEs),

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are hard hit by the disease which has elicited lockdown in many countries including some parts of Nigeria. Supplies have been slow or non-existent as many MSMEs import from China and other countries that are on lockdown. Local logistics services for goods delivery had been functional till the federal government placed a restriction on people’s movement in Lagos, Abuja and Ogun State, which are business hubs, to prevent widespread of the disease. Temiloluwa Smyth, CEO, Smyth Couture, said since the pandemic people had stopped making outfits because there had been no events or occasions to wear them to. Smyth, how ever, remained hopeful that once @Businessdayng

the pandemic subsided, business would return to normal. “People have to wear outfits so I believe after this phase passes, business will return to normal,” he said. Bongo Adi, a Lagosbased economist, said this was a bleak period for many businesses, especially the MSMEs, as no country had been able to arrest the virus neither did anyone know when it would be over. “MSMEs will experience a bad period because no one has been spared from the heat of the virus,” he said. “It is going to cause a vicious cycle as people are apprehensive and very soon will refrain from buying. This will affect the sales of these businesses and their revenue as well,” Adi said.

Monday 06 April 2020

BUSINESS DAY

Start-Up Digest

Meet Orizu, entrepreneur tackling Nigeria’s malnutrition problem Josephine Okojie

machukwu Orizu, founder and managing director of Mahauty Health Solutions, is one of the young entrepreneurs in Nigeria that are building phenomenal businesses focused on tackling the countr y’s malnutrition problems while creating jobs. According to the United Nations International Children’s Emergency Fund (UNICEF), malnutrition is a direct or underlying cause of 45 percent of all deaths of under-five children in Nigeria. In a bid to help Nigeria tackle its malnutrition challenges, especially among children, the biochemist-turned -entrepreneur was inspired to establish Mahauty Health Solutions in 2016 to promote infants and children’s health in the country. “ I w a s i n c re a s i n g l y worried by the number of children who came to the hospital daily and are diagnosed with conditions caused by malnutrition,” she says, while explaining her motivation. “Through research, I realised that there was no known healthy baby food product made in Nigeria.”

Mmachukwu Orizu

She was also inspired to establish her business owing to her experience as a mother.

“When I had my daughter, I started creating recipes and feeding her with it,” she recalls.

“When people observed how healthy my daughter was, family and friends who knew the recipe I

was using started making demand for it, and this led to the establishment of my company – Mahauty Health Solutions.” Sh e i s a p a s s i o nat e Nigerian using organic fruits and vegetables from the country to make food products for children while building a strong nutrition community. Her Somma’s Yummies is a 100percent natural food brand that is produced using freshly harvested grains, nuts, roots and tubers, legumes and fruits and vegetables. To further broaden her skills, Mmachukwu took up a training course with the United Nations International Children Emergency Fund (UNICEF) and also acquired an Advance Diploma in Nutrition. The young entrepreneur started her business with N150, 000, which she got from her personal savings. She has not taken loan from any money deposit bank. Since starting, the business has grown tremendously and it now has six ranges of baby food products. She has built a community of over 13,000 mothers across the continent and uses social media to provide regular advisory sessions for them to address the very problem of malnutrition in children.

Speaking on the business expansion plans, she says Mahauty wants to standardise its factory with an adjoining quality assurance laboratory. Also, the business plans to get its products on the shelves of retail stores and outlets across major cities on the continent. Orizu says that the constraint of getting licenses from the National Agency for Food and Drug Administration and Control (NAFDAC) and the Standards Organisation of Nigeria (SON) is the greatest challenge facing the business. She adds that procuring of advanced equipment and machiner y for the factory is other major challenge, owing to the high cost and difficult clearing process at the seaport. The business has won several awards both within and outside the country. In 2018, it was named the Health Innovation Company in Africa among 241 health businesses from 21 African countries by Amref Health Africa, an NGO based in Kenya. On her advice to other entrepreneurs, she says, “Know everything there is to know about your business. Be resilient, stay determined and committed to what you do. Make mistakes, learn from them and allow yourself to grow.”

How MSMEs can execute Nigerian law documents electronically during COVID-19 lockdown Anu Ogunro

usinesses have to thrive notwithstanding the lockdown in major parts of the world and some states in Nigeria. Hence, a lot of businesses have embraced remote working in order to continue their operations. Business transactions come with the need to execute documents and enter into contractual relations. This could be with other businesses outside the shores of Nigeria or with Nigerian business. Given the restraints on physical contact as a result of the lockdown, recourse has to be made to electronic or digital signatures as a means for authenticating documents or agreements. Thus, it is fundamental that

such documents or contracts be executed appropriately. This will help prevent needless disputes on the validity of the documents or contracts as well as the negative effects that invalidity of same could pose for a business. In essence, contracts or documents governed by Nigerian Law should be executed electronically or digitally, in accordance with the relevant laws that govern electronic/digital signatures in Nigeria. Electronic signatures are legally recognized as a means of signing documents or contracts in Nigeria. Section 17 of the Cybercrimes (Prohibition and Prevention) Act, 2015, provides that electronic signature in respect of purchases of goods, and any other transactions www.businessday.ng

shall be binding. Also, Section 93(2) of the Evidence Act, 2011, validates the use of electronic sig-

natures. In addition to executing your documents using avenues like electronic sig-

Anu Ogunro https://www.facebook.com/businessdayng

nature services, placing an existing scanned signature on a document, etcetera, you could also send confirmatory emails, attaching a PDF of the final agreed document. For documents that require witnessing of signatures, an adult who does not have an interest in the document can witness your signature by signing, as such witness, electronically. It is noteworthy that based on the provision of Section 17(2) of the Cybercrimes Act, some documents cannot be validly executed electronically. They include: documents relating to matters of family law; testamentary documents; death or birth certificates; Judicial documents; any cancellation or termination of utility services; any instrument required to accompany any transporta@Businessdayng

tion or handling of dangerous materials either solid or liquid in nature; and, any document ordering withdrawal of drugs, chemicals and any other material either on the ground that such items are fake, dangerous to the people or the environment or expired by any authority empowered to issue orders for withdrawal of such items. In conclusion, the need to flatten the Covid-19 curve through social distancing has resulted in a lockdown in several nations. However, business transactions governed by Nigerian law can be carried out and validly authenticated electronically, as outlined above. Anu Ogunro is the managing partner, Top-Notch Legal Practitioners and can be reached by e-mail - anu@ topnotchlegalpractitioners. com

Monday 06 April 2020

BUSINESS DAY

real sector watch 2020 already a tough year for struggling manufacturing sector ODINAKA ANUDU

his will be a very tough year for Nigerian manufacturers who are already hard hit by a number of factors beyond their control. Coronavirus, also known as Covid-19, has rattled everything from financial markets to logistics, causing a slump in economic activities across the world. More than one million people have been infected, with well over 50,000 deaths reported. Africa’s largest economy is not exempted from these exogenous events as local cases rise above 190 with lockdowns in Lagos, Abuja and Ogun State. Lagos and Ogun are two manufacturing hubs where over 80 percent of production activities in the country take place. In the first half of 2019, almost 95 percent of manufacturing activities took place in the two states, according to data supplied by the Manufacturers Association of Nigeria (MAN). With lockdown of Lagos and Ogun, many manufacturers believe the second quarter has be lost, with severe impact on projected margins for the year. “We cannot produce or sell now, and I do not know how our balance sheet will look like in the first half of this year,” an Agbara, Ogun State-based manufacturer,

said over the weekend. Pharmaceuticals, food and beverage firms are allowed to operate within the season. But many pharmaceutical firms have been unable to maximise the opportunity due to their inability to produce medical face masks. Food and beverage firms are making what another manufacturer described as ‘mild sales’. “The people are at home, yes. They need food, yes. They need water, yes. But buyers are cautious as they do not know how long the ‘holiday’ will last. So, they do not spend as much as you would expect. It is common sense,” another senior staff member of a food company said. Nigerian manufacturers’

post-coronavirus balance sheets may not look very good as they face povertystricken consumers whose incomes have been eroded by high inflation, high expenditure due to lockdown and economic slump. Nigeria is world poverty capital, with over 87 million people living on less than $1.90 a day, according to World Poverty Clock and Brookings Institute. More than 98 million Nigerians are living in multidimensional poverty, said a 2019 report by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI). Nigerian manufacturers will sell to these consumers

who struggle to buy food and basic needs. Pre-Coronavirus, many manufacturers had been in deep struggle to overcome an ailing economy growing less than its population. Unilever’s revenue had slumped by 58 percent to N9.13 billion in the fourth quarter of 2019, from N21.7 billion reported in the corresponding period of 2018. The revenue of McNichols Plc dropped 17 percent to N679.13 billion from N818.56 billion in the full year of 2019. Profit of the sugar maker followed similar trajectory, crashing 55 percent to N18.58 billion from N40.89 billion, the firm’s financials showed. Analysis of Nigerian Breweries 2019 full-year

results shows that revenue declined by a marginal 0.4 percent to N323 billion, from the 324 billion realised in the previous year. “The results of the company were adversely impacted by the increased excise duty rates which came into effect during the year coupled with a challenging operating environment,” Nigeria’s biggest brewer said in a financial report. But the company’s profit before tax fell to N23 billion from N29 billion. Also, profit for the year fell by 16 percent to N16 billion, from N19 billion. The 2019 full-year revenues of palm oil makers Okomu and Presco had also dropped 3 percent and 7 percent respectively while profits crashed 33 percent and 8 percent. “This is largely a reflection of the weak demand conditions,” Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), said. “S l u g g i s h e c o n o m i c growth impacts negatively on demand for goods and services,” he further said. The United States President Donald Trump plans to support businesses affected by coronavirus with over $2 trillion war chest. Many countries are also devising ways of supporting these players. But cash-strapped Nigeria has not signalled intention to support small businesses and manufacturers.

Ike Ibeabuchi, chief executive of a manufacturing outfit, MD Services, said the impact of coronavirus would be with manufacturers throughout the year. “Except there is a big, big stimulus, companies will record huge, huge losses,” he said. “You are selling to majorly poor consumers. Even if you are exporting, you won’t be able to sell as much as you used in the global market because many countries and even the global economy might be in recession,” he said. In 2016, Africa’s largest economy went into recession after slump in oil prices. As of Friday, April 3, Brent crude price was about $32 per barrel. In 2016, more than 200 businesses went under, including over 50 manufacturing companies, according to various research done by MAN and NOI Polls. With the current situation worse than 2016, analysts are expecting business closures and job losses except there is a stimulus to bail out firms. Manufacturers rely on petrodollars to import many of their inputs. Slump in oil price means fewer dollars for the players to import essential raw materials and machines. The sector contributes less than 10 percent to the economy, and capacity utilisation hovers around 50 percent. A number of closures were reported in 2019.

Officers disobeying NGF directive on allowing manufacturers unhindered movement — MAN ODINAKA ANUDU

ome security agents are disobeying the directive of the Nigeria Governors’ Forum (NGE) to grant manufacturers of certain products free movement in some states as the lockdown to contain the spread of coronavirus continues, the Manufacturers Association of Nigeria (MAN) says. The NGF and President Muhammadu Buhari had granted manufacturers of drugs, food and beverages the permission to move around to forestall shortage of essential items during the lockdown. In a statement mailed to BusinessDay, the association says the directive of

the NGF has yielded good outcomes in some states but adds that security operatives in some other states do not allow manufacturers unhindered movement. No state or security organ is mentioned in the statement. Lagos and Ogun states, including the Federal Capital Territory, are on lockdown. There have been restrictions in states such as Anambra, Osun, Oyo and a few others. Coronavirus cases have been on the rise in Africa’s most populous nation with over 190 cases. “Since the decision to lock down economic activities by different states and the eventual national declaration by the President of Nigeria, the Manufacturers Association of Nigeria has maintained consistent talks with relevant www.businessday.ng

government stakeholders on the survival and sustenance of livelihood of Nigerians via the operation of critical manufacturing sector and has indeed yielded positive results,” MAN says. “The food, beverage,

pharmaceutical and other complementing sectors that make the value chain of essential products available are very critical and the association is glad that government recognised this critical role in its directive for 14days

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lockdown,” MAN adds. “Let me add that the directive of the NGF has yielded good outcomes in some states as our members have testified to unhindered operations in the face of the lockdown. But notwithstanding,

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some security operatives in other states are not yielding particularly, the rank and file officers on the field.” The association says it is in talks with the NGF to give the necessary directives for adequate sensitisation of security officers to enable them allow unhindered movement by manufacturers’ vehicles. “While the Manufacturers Association of Nigeria continues to play its role as an advocacy body committed to creating friendly business environment for manufacturers, we can only rely on the government to reciprocate by implementing the suggestions of MAN on the support for the sector during this era of Corona virus pandemic,” MAN further says.

Monday 06 April 2020

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

What can you do to help right now?

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you are not in a position to lead an initiative yourself, focus your giving to credible public and private sector-led organizations or initiatives that have the ability to oversee the strategic and judicious utilization of the funds raised and that can ensure that funds are applied for maximum impact. Giving does not mean that you must give only financially; there are several other ways to give in a meaningful way. The possibilities of giving of your time, experience, talent and intellect are vast and by sharing your knowledge with others, you can add value to your community in this way. This time provides a great opportunity to involve your children in philanthropy from an early age as they are at

Giving does not mean that you must give only financially; there are several other ways to give in a meaningful way

‘

o one could have predicted the impact of the Covid-19 Coronavirus pandemic on our world, with the staggering number of fatalities, and with schools, businesses, and cities shut. The generous support of individuals, for profit, and not-for-profit organisations to try to turn the tide against the dreaded virus described as the worst disaster that has befallen the world since the 2nd World War, is already evident. Yet many sit on the side-lines and assume that philanthropy or charitable giving is an activity only for the very rich. This is not so. You might not be able to donate 1,000 beds or an entire ICU centre or fund much-needed life insurance policies for our heroic health care workers the way some of our great organizations are doing, but each one of us, as individuals, can play our part. We can and must all be involved in the herculean effort to avert a crisis beyond imagination. A philanthropist is “someone who donates his or her time, money, and/ or reputation to charitable causes”. Philanthropy affords one the opportunity and privilege of making a positive impact in society to shape or even save lives. By giving to community, the arts, cultural, sports, religious, and civic organizations, we are in a position to be deliberately involved in causes that we believe in. Philanthropy takes on many forms. It is our individual response to human need; it is about caring and serving; an opportunity to be involved. It can be through direct giving,

or through impact-investing which combines the profit motive of traditional investing with the social and developmental outcomes of philanthropy. Reflect upon how you can support our government in its efforts to stop the insidious spread of Covid-19. How can we come together to assist our fellow citizens, particularly the millions that are the most vulnerable at this time, as their daily living depends on a daily income; if they stay home, they don’t eat. None of us need look too far to see the desperate need. As you give, be mindful of the fact that sadly, even in such extreme and dire situations, there will always be unscrupulous individuals and groups who will try to take advantage of your generosity. If

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home and witnessing the drastic change in all our lives. It is not enough to just tell them to be charitable and kind; our own actions in supporting others will speak louder than any thing we can ever say. We must guide them through a program of action so that it becomes ingrained in their psyche and in their lives. Giving some attention to the present situation will teach them a powerful and vivid real-life lesson, that their personal money or posessions, no matter how little, can have a positive effect on the wellbeing of others. Embed the gift of giving into your financial plan. Determine what types of initiatives you wish to support and then review your finances to decide how

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much you can afford to give. Will it be a one-off donation or is it something you can continue to commit to even after this pandemic is behind us. Narrow your choices down to a few charitable organizations and initiatives that you feel comfortable with; do your due diligence on their stakeholders, ethos and track record. It may seem absurd to suggest that one should give in the midst of such uncertainty, yet it is during trying times when your finances may seem so stretched and unpredictable that you are forced to look inwards at what security really means and what is truly important in your life. The focus shouldn’t be only on making and saving money for oneself.

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Fortunately, challenging times compel us to recognize the true value that we hold as human beings and what makes us more successful, effective, balanced, and fulfilled people. Make philanthropy a part of your personal and business financial plan. By deciding to make a difference in someone else’s life, you can bring so much more meaning, value, and a lasting form of happiness to your own. It is time to stop and be still, and to make a difference. Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

Monday 06 April 2020

BUSINESS DAY

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Monday 06 April, 2020

BUSINESS DAY

BD Money Economy

Here are the most vulnerable Nigerian state economies amid Covid-19 pandemic BUNMI BAILEY

he total lockdown of commercial activities in some states in Nigeria to combat the spread of Covid-19 may affect the survival of people in those states as most of its adult population earn their income daily or weekly. According to Enhancing Financial Innovation & Access (EFInA), a financial sector development organization that promotes financial inclusion in Nigeria, Covid-19 poses a threat to the livehood of about 50 percent of the 99.6 million Nigerian adult population who earn their income on a daily or weekly basis. In Nigeria, unregistered household enterprises comprise a significant portion of its economy, accounting for as high as 65 percent of GDP, according to a research paper by International Monetary Fund (IMF). From the National Bureau of Statistic (NBS), Nigeria’s unemployment rate rose to 23.1 percent by the end of September 2018, up from 18.1 percent in 2017. The high unemployment rate has resultant to adults starting small businesses largely driven by the agric sector to survive. And most of people de-

pend on these businesses for their day to day expenses. A breakdown from EFInA shows that 32.o percent of its adult population earn its income daily, for weekly 17.5 percent, 18.5 percent earn their income monthly, 5.5 percent earn theirs annually, 18.5 income occasionally or upon completion of job, and 8.0 percent earn no income Here are the Nigerian states that may be mostly affected if a total lockdown takes place.

Rivers state Rivers state is top on the list, as 73 percent of its adult population earn their income daily or weekly. Its capital and largest city, Port Harcourt, is economically significant as the centre of Nigeria’s oil industry. According to NBS, the state recorded the second highest employment rate of 36.4 percent in the third quarter (q) of 2018 Bayelsa state Bayelsa state also an oil rich state like Rivers, has 72 percent of

its adult population earning their incomes on a daily or weekly. But despite its oil-rich state, it is believed that the majority of people live in poverty. With 32.6 percent, it is the third state with the highest unemployment rate. Imo state Imo state located in the southeast region has 71 percent of its adult population earning their incomes on a daily or weekly basis. The economy of the state depends primarily on agriculture and commerce. One of the primary agricultural production is the production of palm oil Anambra state The southeastern state, rich in natural gas, crude oil, bauxite, and ceramic has 70 percent of adults earning on a daily or weekly basis. Anambra state has many other resources in terms of agro-based activities such as fisheries and farming, as well as land cultivated for pasturing and animal husbandry. Sokoto state This state has over 80 percent of people living in the state practising agriculture. Located in the extreme northwest of Nigeria, 69percent of its adult population earn their living on a daily or weekly basis. Abia state Abia, an eastern state is the fifth

most industrialized state in the country, and has the fourth-highest index of human development in the country, with numerous economic activities and fast-growing populations as recorded by the United nations early 2018. It has the fourthhighest unemployment rate of 31.6 percent. 67 percent of its adult population earn daily or weekly. Delta state Delta, an oil and agricultural producing state in Nigeria, located in the South-South geo-political zone has 65 percent of its adult people earning daily or weekly. Akwa Ibom state This state is currently the highest oil- and gas-producing state in the country. It has the highest unemployment rate of 37.7 percent. 64 percent of its adult population earn their living either daily or weekly. Lagos, the top commercial city in Nigeria was placed on the is 11th position with 60 percent of its adult population earning income daily or weekly while Oyo state and Ogun state both have 63 percent of adults living from hands-to-mouth. The least vulnerable states, located in the northern region are Adamawa, Benue, Niger, Plateau, Nasarawa with 24 percent, 29 percent, 34 percent, 36 percent and 36 percent.

Why printing more Naira wouldn’t solve Nigeria’s problems: a simple explainer SEGUN ADAMS

f you have been following the news closely, you should be aware that Nigeria will likely face steeper revenue problems this year that could force the government to decide more on deliberately how it would spend and borrow going forward. The price of crude oil, Nigeria’s main export, has plunged due to a double-whammy of demand and supply shocks in the global oil market from low oil consumption as Coronavirus forces workers to stay at home, and spat between Russia and Saudi Arabia over production cuts and market share. The result has been a reduction in projected revenue from oil sales, which accounts for a third of the total expected income for Nigeria in 2020. Based on former benchmarks of 2.18 million barrels per day, $57 per barrel selling price and 305/$ rate, Nigeria would have made N37.9 million daily as revenue from oil sales. A downward revision of projected oil price to $30 even with 360/$ (CBN’s newly adjusted rate) would yield a daily oil sales revenue N14.36 million lower than previ-

ously estimated. But the decline in oil sales income is only a projection; it could be much worse given how sharp crude oil price has dipped below the $30 mark (although it rebounded late morning in Lagos time Friday) and the inability of Nigeria to find buyers for its oil amid tight market conditions. The government has cut its record N10.59 trillion budget by N1.5 trillion, to cope with new realities but the deficit is expected to widen, and Nigeria still have to finance governance, settle its debt and build much-needed infrastructure from

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its shrinking purse. Why not just print more money then? In some ways, Nigeria is already doing so with the Central Bank of Nigeria (CBN) lending more than it should to the Federal Government (above 5% of FG’s revenue) but this could affect price stability in the economy. Since fiat money (governmentissued notes) is in itself worth no more than the paper and inks used in creating it as well as the cost of rendering such printing services, the value of such money is determined by the forces of demand and supply to put simply. Remember that we need money because of what money can buy, so the value of money would rise whenever money is relatively scarce compared to our needs and the value of money would fall if supply is abundant. In Nigeria, inflation is affected more by problems around the supply of goods and services and printing more money would only worsen it. Printing more money would not lead to economic expansion (the creation of more value) but the reduction in the value of the naira because of inherent productivity issues in the economy.

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Aggregate labour productivity for Nigeria has fallen from as high as 26 percent of the average US worker in the 1970s to around 10 percent in 2017, according to World Bank estimates. Meanwhile, Non-SSA developing countries which had similar productivity with Nigeria in the early 1960s are now towards heading 30 percent (as of 2017) with advanced economies seeing a sharp increase to around 80 percent of the average US worker. The efficiency of converting the input to output in Nigeria, which is declining, is a drag on the creation of goods and services and in the event of a faster expansion in money supply, the prices of goods and services would increase without commensurate value addition. Also, excess naira would fuel demand for dollars which would, in turn, deteriorate the international value of the naira to fall causing imported inflation to rise as Nigeria keeps buying foreign goods. Some argue that printing money can be good like in the case of Japan from the late 2000s to 2015. What is wrong is excluding the fact that the country was facing deflationary pressure – continuous fall in the price of goods and services. Venezuela is a better example @Businessdayng

for Nigeria- both large oil producers and mono-income, with large debt and similar challenges in terms of governance. According to Euronews, last year a Venezuelan on minimum wage could only afford just over 7 coffees and 4 juices per month. By the end of 2019, the inflation rate was at almost 10,000%, which was still an improvement when compared to 2018’s 80,000%. How come? In response to an oil crash for the oil-dependent country, its president Nicolas Maduro printed more money. If Venezuela is too far away, there’s Zimbabwe with annual inflation at 540.16% in February according to its first official data released in over six months. Zimbabwe had printed money in 2008 to help bankrupt government finance its expenditure. The move lead to hyperinflation 79,600,000,000% per month by November of 2008, with $1 becoming the equivalent of Z$2,621,984,228. For Nigeria with inflation at around 12% compared to a preferred band of 6-9% and susceptibility of domestic price levels to exchange rate, there would be a sharp rise in inflation if printed “money is thrown at this problem”.

Monday 06 April 2020

BUSINESS DAY

BD Money Personal Finance

Here’s what you need to know about Ponzi schemes …as SEC raises red flag on 12 operators OLUFIKAYO OWOEYE

hey promise their potential investors jawdropping returns in few days and in some cases weeks. Sadly, investors fall into their trap without doing their due diligence. The Securities and Exchange Commission (SEC) has alerted stakeholders and the investing public against the activities of some unlawful/unlicensed market operators and promoters of other fraudulent schemed. SEC in a circular, said the investing public is advised against dealing with 12 fraudulent Ponzi scheme operators with their bogus investment and return claims. According to SEC, these activities are perpetrated by suspected promoters of Ponzi and other fraudulent schemes under the following identities: Loom Nigeria Money; Box Value Trading Company Ltd; Now-Now Alert; Flip Cash Investment; Result Investment Nigeria Limited; Helping Hand and Investment; No Failure Development and Empowerment Nig. Ltd;

MBA Forex and Investment Ltd; Federate Investors Trading Company; Jamalife Helpers Global Ltd; Flexus Global Solutions and Investment Ltd; United Capital Investment Company Limited How to identify a Ponzi scheme A notable feature of Ponzi schemes is that the returns promised participants are attractively high and based on this, investors

are promised early returns in the hope that the early investors will spread the “good news”, thereby inviting more contributors to the scheme. Once new contributors join the scheme, their cash would be used to pay out high returns to older investors. Also, Ponzi schemes by nature do not have any underlying assets that the money is invested in. The only way they can guar-

antee consistent returns is the recruitment of new members. Once the rate of growth of new members starts to drop, the likelihood of the Ponzi collapsing gets higher. Unlike most investment schemes such as mutual funds, pension funds, ETF’s, etc., which are all recognized and regulated by the Security and Exchange Commission (SEC), Ponzi schemes do not have such oversight. As such,

investors do not have any form of recourse, exposing them to the risk of losing their entire investment when it collapses. Investors must note that by virtue of the provisions of Section 38(1) of the Investments and Securities Act (ISA) 2007, only persons registered with the Commission can engage in capital market activities, thus making the actions of these entities listed above unlawful.

COVID-19 might mean salary cuts. Here’s how to cope BUNMI BAILEY

he impact of Covid-19 has affected or is affecting the financial strength of most companies globally, which has resulted companies to either lay off or do a salary cut for its employee. Although throughout the Covid-19 pandemic, your health is top most priority, but however, maintaining your financial health during this situation can be critically important. And with the uncertainty from companies if they can continue to stay afloat, staying at home presents a great opportunity to think of how to better manage your finances as the Covid-19 situation develops around the world.

on more easily. Reduce your discretionary spending One good thing of maintaining social distance by staying at home for weeks is that it helps to reduce non-essential spending from your budget. And often times, it is the easiest way to make budget cuts.

You can do an easy across the board cut on all these categories like clothing, accessories, entertainment etc. These types of cuts may make it easy to find the money that you need without drastically cutting back in any area. Boost your savings account Being at home in the coming

weeks will make it easier to resist the temptation of spending money on impulse buying. And this makes you save more on transport fees, eating out and travelling. Don’t change your retirement or saving plan Making cuts in your expenses can make you also want to cut on

Here are a few tips to guide you Re-adjust your budget Re-adjusting your budget is very necessary in managing your finances in these tough times. You can do this by building a new budget and by making sure that you list your essential and non-essential needs in separate columns. This will make it easier to find the adjust areas that you can cut back www.businessday.ng

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your savings or retirement contributions to make ends meet. However, this decision will hurt you in the long run. You can still continue to contribute into your income into your retirement accounts. Communicate with your creditors if you cannot pay With the total shutdown of commercial activities, you may not be able to pay you bills including your home loan and credit card repayments. If you are worried about that you cannot pay your credit card repayment bills, try and communicate with your provider to see how you can adjust your repayment plan instead of simply not paying Think about your long-term Goals This is the right time to think about your long-term goals especially if there is a pay cut. Be sure that you can still meet your other financial goals. This can include things like homeownership, retirement, college savings, or vacation planning. If you know this is temporary, for example staying home until your children are in school, make plans on how you will improve your income when it is time to re-enter the workforce. You may need to keep up with certifications or other training so that you can easily find a job.

Monday 06 April 2020

BUSINESS DAY

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Monday 06 April 2020

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 05 April 2020 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 215,048.62 6.05 10.00 224 15,405,978 169,287.14 4.95 2.06 322 31,121,145 UNITED BANK FOR AFRICA PLC ZENITH BANK PLC 373,618.28 11.90 8.18 607 27,753,101 1,153 74,280,224 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 141,786.41 3.95 6.76 329 59,680,466 329 59,680,466 1,482 133,960,690 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 1,872,615.20 92.00 -0.86 236 2,621,366 236 2,621,366 236 2,621,366 BUILDING MATERIALS DANGOTE CEMENT PLC 2,130,063.43 125.00 -2.65 329 4,119,848 144,164.77 8.95 -2.72 91 1,241,334 LAFARGE AFRICA PLC. 420 5,361,182 420 5,361,182 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 320,408.06 544.50 - 12 2,504 12 2,504 12 2,504 2,150 141,945,742 REAL ESTATE INVESTMENT TRUSTS (REITS) SFS REAL ESTATE INVESTMENT TRUST 1,386.00 69.30 - 0 0 10,175.81 40.70 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) UPDC REAL ESTATE INVESTMENT TRUST 8,405.05 3.15 - 0 0 0 0 0 0 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 0 0 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 52,512.75 55.05 - 12 5,946 OKOMU OIL PALM PLC. PRESCO PLC 36,450.00 36.45 - 5 11,680 17 17,626 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,500.00 4.25 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 2,100.00 0.70 - 9 520,163 9 520,163 26 537,789 DIVERSIFIED INDUSTRIES JOHN HOLT PLC. 217.92 0.56 - 0 0 S C O A NIG. PLC. 1,903.99 2.93 - 0 0 25,608.23 0.63 -3.08 30 1,469,403 TRANSNATIONAL CORPORATION OF NIGERIA PLC U A C N PLC. 20,169.08 7.00 7.69 14 262,000 44 1,731,403 44 1,731,403 BUILDING CONSTRUCTION ARBICO PLC. 423.23 2.85 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 29,106.00 22.05 - 44 445,124 ROADS NIG PLC. 165.00 6.60 - 0 0 44 445,124 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,468.48 0.95 - 4 150,000 4 150,000 48 595,124 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 6,263.60 0.80 - 7 40,800 GOLDEN GUINEA BREW. PLC. 829.98 0.81 - 0 0 GUINNESS NIG PLC 49,721.69 22.70 - 16 88,903 INTERNATIONAL BREWERIES PLC. 131,624.14 4.90 -2.00 36 1,042,563 NIGERIAN BREW. PLC. 175,931.85 22.00 -2.22 85 585,377 144 1,757,643 FOOD PRODUCTS DANGOTE SUGAR REFINERY PLC 106,800.00 8.90 - 43 150,580 FLOUR MILLS NIG. PLC. 84,057.78 20.50 1.49 41 1,425,469 HONEYWELL FLOUR MILL PLC 7,137.18 0.90 - 6 27,881 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 0 0 NASCON ALLIED INDUSTRIES PLC 22,520.23 8.50 - 16 37,701 UNION DICON SALT PLC. 2,993.06 10.95 - 0 0 106 1,641,631 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 13,147.41 7.00 -1.41 28 549,154 NESTLE NIGERIA PLC. 606,382.03 765.00 - 173 625,551 201 1,174,705 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 5,316.09 4.25 - 8 63,009 8 63,009 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 17,470.10 4.40 - 13 143,606 UNILEVER NIGERIA PLC. 57,450.05 10.00 1.01 18 177,917 31 321,523 490 4,958,511 BANKING ECOBANK TRANSNATIONAL INCORPORATED 71,563.25 3.90 1.28 68 2,121,137 FIDELITY BANK PLC 48,967.41 1.69 -0.59 106 8,289,116 GUARANTY TRUST BANK PLC. 517,988.75 17.60 1.73 430 43,559,474 JAIZ BANK PLC 14,142.84 0.48 - 5 97,179 STERLING BANK PLC. 31,957.36 1.11 - 5 101,401 UNION BANK NIG.PLC. 192,196.97 6.60 - 10 30,144 UNITY BANK PLC 4,909.52 0.42 - 0 0 WEMA BANK PLC. 18,130.00 0.47 -4.08 16 397,895 640 54,596,346 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 8,271.05 0.73 -1.35 21 5,668,730 AXAMANSARD INSURANCE PLC 18,375.00 1.75 - 0 0 CONSOLIDATED HALLMARK INSURANCE PLC 2,439.00 0.30 - 0 0 CORNERSTONE INSURANCE PLC 7,953.93 0.54 -6.90 6 492,310 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 0 0 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 1,537.92 0.21 9.52 11 2,000,000 LAW UNION AND ROCK INS. PLC. 4,081.51 0.95 - 3 270 LINKAGE ASSURANCE PLC 3,280.00 0.41 - 0 0 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 10.00 5 3,109,000 NEM INSURANCE PLC 10,930.64 2.07 - 2 5,962 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 2,960.40 0.55 - 0 0 REGENCY ASSURANCE PLC 1,333.75 0.20 - 0 0 SOVEREIGN TRUST INSURANCE PLC 2,272.89 0.20 - 0 0 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 0 0 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 1 1,000 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 6,237.84 0.26 4.00 9 1,404,798 58 12,682,070 MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 2,629.63 1.15 - 3 50,000 3 50,000

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MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 6,784.62 1.05 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,671.82 1.36 - 0 0 RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 0 0 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 7,200.00 3.60 - 70 1,656,527 CUSTODIAN INVESTMENT PLC 30,879.79 5.25 - 3 13,728 DEAP CAPITAL MANAGEMENT & TRUST PLC 495.00 0.33 - 0 0 FCMB GROUP PLC. 29,109.98 1.47 1.38 59 4,930,746 ROYAL EXCHANGE PLC. 1,029.07 0.20 - 3 291,357 STANBIC IBTC HOLDINGS PLC 252,119.22 24.00 0.42 50 2,451,937 UNITED CAPITAL PLC 13,080.00 2.18 6.34 57 3,068,638 242 12,412,933 943 79,741,349 HEALTHCARE PROVIDERS EKOCORP PLC. 2,991.61 6.00 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 994.88 0.28 7.69 3 542,000 3 542,000 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 593.50 0.60 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 5,299.36 2.54 - 20 354,138 GLAXO SMITHKLINE CONSUMER NIG. PLC. 5,740.21 4.80 - 37 121,976 3,692.00 2.14 - 11 168,150 MAY & BAKER NIGERIA PLC. NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 911.60 0.48 - 0 0 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 0 0 68 644,264 71 1,186,264 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 781.44 0.22 10.00 3 283,950 3 283,950 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,000.21 0.34 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 216.00 2.00 - 0 0 287.07 0.58 - 0 0 TRIPPLE GEE AND COMPANY PLC. 0 0 PROCESSING SYSTEMS CHAMS PLC 986.17 0.21 - 5 22,626 E-TRANZACT INTERNATIONAL PLC 10,962.00 2.61 - 3 948 8 23,574 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,123,311.48 298.90 - 8 13,506 8 13,506 19 321,030 BUILDING MATERIALS BERGER PAINTS PLC 1,941.82 6.70 - 4 24,615 BUA CEMENT PLC 1,195,411.70 35.30 - 2 3,030 CAP PLC 16,240.00 23.20 - 4 112,149 MEYER PLC. 265.62 0.50 - 0 0 1,769.32 2.23 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 10 139,794 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,192.12 2.03 - 0 0 2,465.85 1.40 - 4 15,080 CUTIX PLC. 4 15,080 PACKAGING/CONTAINERS BETA GLASS PLC. 34,998.04 70.00 - 0 0 GREIF NIGERIA PLC 388.02 9.10 - 0 0 0 0 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 14 154,874 CHEMICALS B.O.C. GASES PLC. 1,685.79 4.05 - 2 6,809 2 6,809 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 1 4,502 1 4,502 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 1 315,000 1 315,000 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 77.00 0.35 - 0 0 0 0 4 326,311 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,252.54 0.20 - 1 190,000 1 190,000 INTEGRATED OIL AND GAS SERVICES OANDO PLC 27,100.48 2.18 6.34 31 1,466,264 31 1,466,264 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 58,019.78 160.90 - 13 14,573 ARDOVA PLC 17,974.24 13.80 - 6 101,200 CONOIL PLC 9,125.47 13.15 - 36 156,200 ETERNA PLC. 3,116.91 2.39 - 22 660,380 MRS OIL NIGERIA PLC. 4,206.05 13.80 - 2 175 TOTAL NIGERIA PLC. 32,695.95 96.30 - 18 12,385 97 944,913 129 2,601,177 ADVERTISING AFROMEDIA PLC 1,509.28 0.34 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 15,796.05 1.62 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 235.27 0.20 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,603.05 2.81 - 11 56,324 TRANS-NATIONWIDE EXPRESS PLC. 421.96 0.90 - 0 0 11 56,324 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,259.15 2.75 - 0 0 1,870.92 0.90 - 6 31,600 IKEJA HOTEL PLC TOURIST COMPANY OF NIGERIA PLC. 7,076.28 3.15 - 0 0 TRANSCORP HOTELS PLC 30,401.62 4.00 - 0 0 6 31,600 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 3,960.00 0.33 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 205.63 0.34 - 0 0 LEARN AFRICA PLC 771.45 1.00 - 3 16,107 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 427.10 0.99 - 3 70,008 6 86,115 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 580.20 0.35 - 0 0 0 0 SPECIALTY INTERLINKED TECHNOLOGIES PLC 688.80 2.91 - 0 0

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Monday 06 April 2020

BUSINESS DAY

news

Oil nears $40 as OPEC meeting postponed till Thursday ... Mexico, US, Canada, Norway, UK may join production cut DIPO OLADEHINDE

il price rallied near $40 per barrel on Sunday evening, as a virtual meeting between Organisation and Petroleum Exporting Countries (OPEC) and its allies has been postponed till Thursday, amid mounting tensions between Saudi Arabia and Russia. The global oil price crash is setting up a bleak second quarter for many nations, including countries like Nigeria whose economies are heavily dependent on oil receipts. Nigeria is particularly vulnerable.

To solve this problem, OPEC and allies led by Russia, a group known as OPEC+, are scheduled to meet on Thursday to discuss a possible new global crude supply cut to end a price war between Saudi Arabia and Russia, which has prompted US President Donald Trump to intervene. The OPEC+ meeting was initially scheduled to take place on Monday, but was postponed to April 9 “to allow for more time to reach out to all producers including OPEC+ and others”, a Saudi source confirms to Reuters. At the weekend, there seemed to be some momentum on negotiations, OPEC

was rumoured to be exploring a scenario in which Saudi cuts by 3mbpd, Russia cuts by 1.5mbpd, non-Saudi Gulf States cut by 1.5mbpd, and the US, Canada and Brazil cut by nearly 2mbpd. While Norway has also said it would consider cutting production in any coordinated global effort. The Saudi source says Riyadh wants to avoid a repeat of the outcome of a March meeting where oil talks collapsed due to Russia’s refusal to cut output. The Thursday virtual meeting would include oil-producing countries from outside the OPEC+ alliance. Mexico, United States, Canada, Norway

and the United Kingdom, who are non-members, could likely be invited for the meeting. On Sunday, Saudi Aramco announced it would delay the release of its crude official selling prices (OSP) for May until April 10, to wait for the outcome of the proposed meeting between OPEC and its allies regarding possible output cuts. “That’s the most important thing on the supply side; they need to reduce the supply because the demand side is falling. Otherwise, the gap between supply and demand is so big,” Ang Kok Heng, chief investment officer at Phillip

Continues on page 39

Pushed to the wall, Nigerian tech firms fight back against coronavirus FRANK ELEANYA

igerian tech firms have been forced to close their offices and send their workers home to work remotely. This is following a two-week lockdown in Lagos, Abuja and Ogun State declared by the government on March 29 to curb the spread of the deadly coronavirus. A lockdown means potential customers are not earning money and fewer of them will patronise these tech companies. Should the lockdown be extended or the entire country forced to lock down, the story changes from bad to worse for many of the start-ups. Hence, for many of them, joining the fight to flatten the curve of the spread of the virus was inevitable. Success in stemming the tide is the only chance they

have of securing their business and the future of technology in Nigeria. Start-ups in the trenches Long before the ecosystem woke up to the seriousness of the virus, LifeBank, a health startup that finds and delivers blood, led by Temie Giwa-Tubosun, its founder, was already mobilising against the pandemic. In early February, two weeks before the first coronavirus case was confirmed in Nigeria, the LifeBank CEO started canvassing for the tracing and quarantine of all travellers from most affected countries. “All hands need to be on deck! We need to quarantine, trace contacts, and monitor patients! NCDC is already battling Lassa & now needs to respond to this threat! Are we increas-

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Banks to cut off lending tap as virus hurts economy BALA AUGIE

Oluremi Akande (l), head, communication and branding, LAPO Microfinance Bank, and Tayo Ayinde, Chief of Staff to Lagos State Governor, during a presentation of COVID-19 relief support from LAPO MFB to the state government.

NSE index shed almost 5,000 points in March, its biggest monthly decline in 5 years … 4th worst performance in history IFEANYI JOHN

he Nigerian Stock Exchange (NSE) All Share Index as at market close on March 31 recorded its single biggest monthly decline in five years as the bourse shed about 4,915 points in the month, outpacing the selloffs experienced during the economic recession in 2016. The biggest monthly decline on record remains October 2008 when the NSE shed up to 9,890.27 points in the aftermath of a global financial meltdown coupled with a sharp decline in global oil demand, leading oil prices to collapse from a record $144.28 in July 2008

to $33.87 in December 2008. The massive oil price decline of 76.5 percent brought about the second biggest decline of the NSEASI by 9,637.02 point in January 2009. Meanwhile, since then the Nigerian stock market has crashed every time oil prices plummeted at an alarming rate. The stock market shed 5,098.08 points in January 2015 as oil prices tumbled again from $115 in June 2014 to $49 in January 2015. The NSE Index dropped by around 12,920.41 points during the same period. The index performance in March slightly outpaced the selloffs recorded in January 2016 when oil prices fell below $30 for the www.businessday.ng

first time in several years. The NSE-ASI dipped by 4,726.10 points in January 2016, about 200 points less than was recorded in March 2020, making it the fifth worst month on record in the local bourse. However, the crash in oil prices from $73 in April 2019 to $26 in March 2020 is not the only factor responsible for the current selloffs on the NSE. The global outbreak of the coronavirus is also at the heart of these selloffs as the Nigerian economy comes under pressure due to the effect of full lockdowns in Nigeria’s biggest city economies, including Lagos where the local bourse is situated. The selloff is driven both

by local and foreign investors exiting the stock market to buy dollars largely as a hedge against potential losses arising from uncertainties caused by declining oil prices and a COVID-19 outbreak. These huge outflows especially by foreign investors put the naira under pressure, causing a devaluation to N380 at the I&E window. Meanwhile, the stock market is often a good predictor of future economic events. Analysts are now speculating that the market could be pricing in an economic recession in a few months going by the extent of losses on the exchange in Q1 2020. If it does happen, it will be Nigeria’s second recession

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eterioration in macroeconomic conditions brought on by the coronavirus pandemic and a sharp drop in crude oil price could force banks to stop lending to the real sector of the economy. Analysts say banks will be reluctant to create new loans in view of the disruption to economic activities following the lockdown in some key states across the country as well as the increased risks to asset quality. That’s double whammy for a country reeling from high employment rate, spiraling inflation, and decrepit infrastructure, and the virus has compounded such woes. “If the economy is fragile as we are seeing, lenders may be hesitant to lend as they fear that loans may go bad. And if the loans go bad, that might result in spiralling non-performing loans that will impair their capital,” said Ayodeji Akinwunmi, head of corporate banking at FSDH Merchant Bank. “The situation is presenting an opportunity for government to diversify the economy away from reliance on oil,” said Akinwunmi. With business activities grinding to a halt due the spread of the pandemic, customers may find it difficult to pay interest on money borrowed from financial institutions. Credit creation to the economy has been improving since the central bank introduced stringent measures such as hike in minimum @Businessdayng

loan-to-deposit ratio to 65 percent, as well as banning corporates and pension fund administrators (PFAs) from participating in its Open Market Operation (OMO). According to the recent data on the banking sector released by the National Bureau of Statistics (NBS), banking sector credit to the economy grew for the second consecutive quarter by 5.8 percent quarter on quarter (q/q) in the fourth quarter (Q4) 2019 to N17.2 trillion, the highest level since 2007. A c c o rd i n g l y , c re d i t growth rose significantly by 14 percent year on year (y/y) in 2019 compared to the decline of 4 percent in 2018. Oil price edged up to about $35 a barrel on Friday, below the government’s $57 budget benchmark, after it had fallen below $25 a barrel, amid a price war between Saudi Arabia and Russia and the impact of the coronavirus pandemic. Most Nigerian lenders have their oil exposure hedged at $40-$50 a barrel, which will mean they would have to make provisions if prices remain where they are, said Emmanuel Adeleke, a banking analyst at ARM Investment Managers in Lagos. He “expects flat growth in earnings for most banks this year”. However, the Banking Index was up 3.70 percent on Friday, thanks to a slight rebound in oil price that boost investors’ confidence. “On the demand side, we expect the pass-through impact of subdued economic activities to constrain the demand for credit from

Monday 06 April 2020

BUSINESS DAY

news

Here are 2020/21’s 10 top risks for businesses... Continued from page 1

biennial report published

Business activities at the food section of Kubwa market as people rush to restock their food items while the lockdown continues in FCT. NAN

3 German banks join Siemens deal but hurdles remain backed by the Ministry of Finance. However, DisCos’ finances are awful. There is an estimated shortfall of over N2.4 trillion in the Nigerian Electricity Supply Industry, which consists of market shortfall of N1.335 trillion caused by DisCos’ inability to collect adequately and fully remit their collections, and tariff shortfall of N1.109 trillion caused by the regulator’s decision not to allow cost-reflective tariffs according to a new government report. Piling $1.6 billion debt on a weakened balance sheet presents a difficult challenge. The deal had previously included a floating interest and lower equity contribution from Nigeria of around 20 percent on some key projects. Tenor would be for the construction period of two years plus repayment term of eight to 10 years. These terms have since changed. The three banks could finance the project at 2 percent interest if negotiations proceed according to plans. The German government will provide a guarantee.

President Buhari had on July 22, 2019 signed a power agreement with Siemens which was supposed to help double Nigeria’s electricity generation and raise distribution capacity three-fold to 11,000MW by 2023. Siemens would fix the power distribution and transmission aspect of the electricity challenge in a roadmap brokered by German Chancellor Angela Merkel when she visited Nigeria in 2018. According to the presentation Siemens made to the Nigerian government, seen by BusinessDay, the company’s intention was to deliver results similar to those in Egypt that are tailored to the specific needs of Nigeria. Siemens built three combined-cycle power plants and wind farms, adding over 14GW to Egypt’s capacity at the cost of £8 billion. In Nigeria, Siemens would carry out a comprehensive upgrade of Nigeria’s weak electricity grid capable of wheeling less than 5,000MW and reduce technical and non-technical losses. Siemens would also aggre-

gate all DisCos’ investments in their network including cables, switches, transformers, and substations to raise the distribution above the current 4,000MW. The German company would also resolve gas constraints to power plants by seeking to tap into the AKK pipeline for fuel supply so abandoned turbines can be restarted. Half of Nigeria’s 13,000MW generation is constrained due to a lack of gas. The deal which would see Siemens invest about $1.6bn into Nigeria’s power sector over the next five years tasks power distribution companies (DisCos) to improve collections aided by smart metering, cost-reflective tariffs and technical support. “Our intention is to ensure that our cooperation is structured under a Governmentto-Government framework. No middlemen will be involved so that we can achieve value for money for Nigerians,” Buhari had said in a speech announcing the deal. Analysts say the success of the deal will benefit all parties and the country in general.

Oil nears $40 as OPEC meeting postponed...

OPEC plus deal, along with its increase in production and agreements for discounts, all of which exacerbated the blow from the coronavirus. Saudi Arabia lashed back. In a statement Saturday, Saudi Foreign Minister Prince Faisal bin Farhan reportedly said Russian President Putin’s comments were “devoid of truth.” Saudi Arabia energy minister Prince Abdulaziz bin Salman also issued a statement Saturday saying comments from Russia’s energy minister Alexander Novak “were categorically false and contrary to fact.”

The statement said the Saudi minister “expressed his surprise at the attempts to bring Saudi Arabia into hostilities against the shale oil industry.” The minister noted that Saudi Arabia was a major investor in the US oil sector. President Trump recently met with US oil executives when he emphasised that he remained hopeful that the Saudis and Russians would reach a compromise to end the crude oil price war, although US oil industry is divided on whether it could or should contribute to production cuts to stabilise prices.

ISAAC ANYAOGU

hree of Germany’s biggest banks – Deutsche, Commerzbank, and KfW – have expressed an interest in providing financing to support the Siemens power deal with the Nigerian government, BusinessDay has learnt, even as the deal is fraught with teething challenges. Abba Kyari, chief of staff to President Muhammadu Buhari, Sale Mamman, minister of power, and their entourage met with Siemens executive and senior officials of these banks on March 9 to discuss the proposed $1.6bn power deal. The discussions were inconclusive, according to some people with knowledge of the meeting. According to an early draft of the negotiation between the Nigerian government and Siemens, a German bank through Siemens will fund an SPV (special purpose vehicle) or public entity to carry out the project. It is to be repaid by collections from DisCos,

Continued from page 38

Capital Management, said in a note. “Even if China wants to buy more oil to build its reserves, they would need to store and oil storage is full,” Ang said. He sees Russia being the obstacle to a potential ceasefire as Saudi appeared ready to reduce production. Brent crude jumped 4.17 percent to $36.11 per barrel on Friday, while US West Texas Intermediate gained 0.43 percent to $26.47 per barrel.

Plans for the surprised meeting renewed optimism that a truce may be in the offing after an intense price war between the Saudi-led group and Russia sent crude prices tumbling last month, hurting all exporters already reeling from an imminent sharp drop in demand as the global economy is set to shrink this year. Russian President Vladimir Putin on Friday blamed the collapse in oil prices on Saudi Arabia pulling out of the more than 3-year-old www.businessday.ng

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the result of a risk survey involving 108 top Nigerian business executives ranking the biggest threats firms face in the economy. Business executives across industries say for 2020/2021 Regulatory Risk will be the biggest risk in the country, moving this concern up from third place in 2018 and ahead of last year’s biggest worry: Foreign exchange volatility risk. Regulatory risk reflects the significant anxieties executives have continued to have over regulatory uncertainty as a result of increased regulatory scrutiny and sanctions within the country as at 2019, KPMG said. Directives that limited participation in certain segments of the financial market were some of the policies that significantly impacted business performance in the year and instruction for banks to boost lending would likely deteriorate bank asset quality. KPMG also noted that the vote for Regulatory risk was also informed by uncertainty about the actions to be taken by regulators to cushion the impact of the coronavirus pandemic on the economy. In terms of legislation, the Finance Act, the Minimum Wage Amendment Act, Deep Offshore (and Inland Basin Protection Sharing Act) and Police Trust Fund Act are seen as main laws to have a significant impact on businesses 2020 and beyond. To mitigate this risk, businesses should ensure adequate oversight processes have been established, and develop a framework for engaging and managing their

regulatory stakeholders. KPMG advised that businesses assign internal and external resources to monitor new and proposed regulatory changes and impact on business, as well as dedicate audit resources to evaluating the organisation’s processes for monitoring and complying with all applicable laws and regulations. The second biggest risk is seen in Fiscal and Monetary Policy Risk, which underscores concerns by businesses on the effect of fiscal and monetary policies on their strategic planning and the management of their core operations, especially in the aftermath of the Covid-19 outbreak. To reduce risk, businesses are to review their credit exposure to the public sector to reduce concentration and implement sales incentives to boost consumer spending, among other things. Foreign Exchange volatility and its impact of profitability worry Nigerian businesses, a risk that has lingered since 2018. KPMG said Nigerian businesses were still worried there would be a further devaluation after the CBN adjusted official rate to 360/$ in response to pressures emanating from a sharp drop in crude oil prices and the ravaging impact of the coronavirus pandemic. Buffers are seen in businesses building foreign currency-based income stream, utilisation of hedge instruments, reducing foreign-currency outflow through local sourcing, among other things. The fourth-biggest risk is cyber-security that has intensified with the exponential growth of digital touchpoints.

Pushed to the wall, Nigerian tech firms... Continued from page 38

ing their budget? Have we set up a war room for this? Who is the Corona Tzar? Where will the quarantine be?” she tweeted on February 2. Days after, Giwa-Tubosun is leading efforts to get more critical medical equipment as well as create a national register to track hospitals with working ventilators and respirators. “Tell your banks to fund biomedical research centres for the next five years. Tell them to fund a bioengineering school. Tell them to build PPE [personal protective equipment] factories. Tell them to open a latex factory! Tell them to do the hard things,” she said. LifeBank has partnered with the Nigerian Institute of Medical Research (NIMR) to build a mobile testing centre to help expand testing in communities. As of 31 March, less than five days after the idea was conceived, 70 people had already been @Businessdayng

tested. Abasi Ene-Obong, CEO of 54gene, an African genomic research services, also has an approach that has proved critical to the fight against the pandemic. The firm set up a fund to tackle the current challenges around testing for coronavirus and in less than 24 hours it secured $500,000. 54gene opened the fund with a donation of $150,000 and within 24 hours an additional $350,000 was secured from partners including Union Bank. The genomics research service plans to use the fund to increase the COVID-19 testing capacity in Nigeria by up to 1,000 additional tests a day. To achieve this, the company will buy testing instruments and the required biosafety materials such as biosafety cabinets and personal protective equipment needed to keep frontline healthcare workers safe.

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news

NGF, World Bank to rescue poor, vulnerable with $1.8bn in 36 states post COVID-19 Ignatius Chukwu, Port Harcourt

he Nigeria Governors’ Forum (NGF) says it is discussing with the World Bank as a development partner to support a post-COVID-19 scheme that aims to put N5,000 to each household in 200,000 households in the 36 states of the federation. The chairman of the NGF, Governor Kayode Fayemi of Ekiti State, who spoke with Ibim Semenitari’s Facebook YouTube programme Thursday evening (April 2, 2020)

from isolation and made available to BusinessDay, said the monthly payments would last for 18 months. Fayemi disclosed that $50 million would go to each state of the 36 states in a scheme to tackle hunger after the crisis, saying, “We at the NGF have considered that social protection/intervention is important. In Ekiti State, we already have a scheme for widows, the youth, etc. On the Coronavirus issue, we have given relief to 30,000 households in few days so far. We paid salaries for March on 25th. There is also a part of

conditional social payment. “The governors consider that beyond emergency mode, we must think about post-COVID-19 era. We must plan for life after the virus. That is why we are restructuring the budgets of the states. Just few hours ago, I was speaking with our development partners, the World Bank, on social protection for the 36 states for a scheme that would put N5,000 in the hands of a household (poor and vulnerable) for 18 months. This will amount to $50 million per state for 18 months.”

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Speaking more on hunger, the governor who is now testing negative, said: “Many people say that the looming crisis as a result of COVID-19 could be called HUNGERVID-20. They are asking how the governors are planning to handle hunger in the face of the fact that most persons are daily income earners that eat only after each day’s work and we are saying ‘do not go out”. He went on: “This is a legitimate concern to the governors, but every literature I have read on this matter recommends use of

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shock therapy so as to suffer once and hope to escape the bigger problem; this shock therapy is closure of borders, restriction of movement or total lockdown. Yet, we are only applying half measure such as partial lockdown like people selling in front of their houses and avoid crowding and touching. Do not imperil social distancing objective.” Reacting to how to convince the masses on the need to isolate and keep distances, including social distancing, the NGF boss said: “I agree that communication is an issue and that is my special

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area. Many want to know how we can drill the message down so that the ordinary folks can buy into it. “This is a big challenge and I don’t even know anymore. Its very difficult to tell a Nigerian not to backslap, hug, and shake hands. Nobody yet has a relation who died of COVID-19, so, it sounds Greek to the people. No Okada rider or farmer has died. So, it is not for them, not their portion. This is affecting the seriousness of the message. Nigerians believe in touch. So, until it touches them, they won’t believe the messages.”

Monday 06 April 2020

BUSINESS DAY

news COVID 19: Conservationists canvass action against illegal wildlife trade CHUKA UROKO

orried about the ongoing havoc coronavirus pandemic is wreaking globally, the Nigeria Conservation Foundation (NCF), along with other conservationists, has canvassed urgent action against illegal wildlife trade, saying the deadly virus is suspected to have originated from a wildlife market in Wuhan, China. The Foundation, which is the foremost environmental membership-based non-governmental organisation (NGO) in Nigeria, noted in Lagos that China had already taken commendable steps and banned the trade and consumption of wild animals, pending formalisation of this ban into law later this year. “We are deeply saddened by the loss of lives through the COVID-19 pandemic and our

thoughts are with the families who have lost loved ones, or who are sick and we wish them a speedy recovery,” Muhtari Aminu-Kano, the Foundation’s director-general, says. According to the Foundation, wildlife trade is reaching unprecedented levels, advising that while efforts are being made to combat this trade, national governments should enact effective laws that clamp down on this trade. Globally and particularly in Africa, illegal wildlife trade continues to be a growing multibillion-dollar business. Statistics indicate that illegal wildlife trade globally generates between $7 billion and $23 billion annually. It is estimated that one out of every four bird or mammal species globally is caught up in wildlife trade. In Africa, it involves trade and trafficking of elephant tusks and rhino horn, pangolin scales as bush meat, tropical

timber and endangered birds, including vultures. Among other consequences, wildlife trade is said to be increasingly driving species to extinction, and destroying biodiversity. The trade also threatens rural community livelihoods, hampers development efforts, and puts ecosystems at risk. “Perhaps, one of the frightening realities of this trade is the threat that it poses to the health of human beings, through spread of zoonotic diseases diseases that jump from animals to human beings. In recent past, the world has seen the emergence of animal-borne infectious diseases such as SARS, Nipah, Ebola and Lassa fever,” notes Stoyan Nikolov, EV New LIFE project manager/BSPB. Nikolov hopes that enacting effective laws to clamp down on the illegal trade will go a long way in ensuring protection and conservation of species and, per-

haps, help reduce occurrences of zoonotic diseases in the future,” notes Stoyan Nikolov, EV New LIFE project manager/BSPB. Internationally, the Convention on International Trade in Endangered Species of Wild Flora and Fauna (CITES) provides a legal framework to regulate trade in wild animals and plants. African countries which are party to the convention should consider mainstreaming various aspects of combating wildlife crimes, in line with CITES, into their national laws and drive strong enforcement of this legislations. “Banning wildlife trade in addition to more public awareness on the impact of this trade on biodiversity and the risks that this trade poses to human health is important. As a result, decisive action to stop the trade should be taken,” notes Cloé Pourchier, project manager of SCF.

LEKOIL restructures for efficiency SEGUN ADAMS

ollowing the current significant drop in crude oil prices, the Board of LEKOIL Limited has approved the immediate and accelerated implementation of the company’s general and administrative (G&A) cost reduction measures. These measures target an annual reduction of $8 million or at least 40% in G&A costs, which is inclusive of a reduction in staff numbers. LEKOIL commenced the immediate execution of the measures, which will be completed within the next four to six weeks. Despite the drop in oil price, production from Otakikpo for the rest of 2020 will be unaffected by

COVID-19: Warri video clips defying stay-at-home, fake - Delta Francis Sadhere, Warri

eltaStategovernmenthas urged the public, particularly Deltans, to discountenance video clips purportedly on Warri residents defying the stay-at-home order of the state government over the Coronavirus pandemic and confronting security operatives, saying it was concocted and therefore, fake. Commissioner for information, Charles Aniagwu, made the call in a statement on Friday in Asaba, saying the concocted videos were not a true representation of happenings in Warri or any part of Delta in the last 48 hours. According to Aniagwu, the videos in circulation are figments of the imagination of a few disgruntled elements bent at pitching the people against the state government. Aniagwu stated that the purported video of two military personnel threatening the residents of Warri was an arrangement of those who didn’t want the peace of the state, adding that the video was not a true representation of Nigerian military officers who knew the implication of threatening citizens with such an illicit video.

He added that the military command whose responsibility it was to deploy personnel, had debunked the video material. The commissioner, therefore, called on the public, especially Deltans, to disregard the video as it was the machination of those bent at causing disaffection between Deltans and military authorities. “Let me thank Deltans for their cooperation so far and urge them to discard the concocted videos aimed at causing disaffection between the military and Deltans. “There is no report of killing of soldiers in Warri or any other part of Delta. “The concocted videos were aimed at causing disaffection between Deltans and the security agencies carrying out lawful duties. “While we appeal to our people to remain law-abiding, it is imperative to state that videos trending in social media are not a true reflection of happenings in the state. “We therefore call on our people to discard the videos and continue to remain indoors as directed by the government to enable us curb the possible outbreak and spread of the COVID-19 pandemic in the state. www.businessday.ng

COVID-19: Unilever restates commitment to achieve competitive growth in 2020 ... recorded N60.5bn revenue in 2019 SEYI JOHN SALAU

ollowing the health and economic impact of Covid-19 on businesses across Nigeria, management of Unilever Nigeria has restated its commitment towards achieving a competitive growth for the year 2020. This commitment was stated as the manufacturing company released its audited financial statement for the year ended December 31, 2019. Unilever Nigeria recorded a turnover of N60.5 billion in the year under review, which represents a decline compared to N92.89 billion recorded for the corresponding year, 2018. The result shows the company also recorded a loss after tax of N7.42bn for the year ended December 31, 2019, relative to profit after tax of N10.55bn recorded for the comparative year December 31, 2018. These results reflect challenging operating conditions but also the company’s decision to tighten credit terms to address exposure from trade receivables and excess stock in

trade in order to better position the company for innovation and a return to competitive growth. Soromidayo George, corporate affairs director of Unilever, says the company is also better placed to adjust to the prevailing operating circumstances now emerging in 2020. George says given the current global economic uncertainty, Unilever will continue to monitor the business environment as well as focus on its strategy to deliver sustainable growth both in the medium and long term. George notes that the business acknowledged that 2019 was a challenging year for everyone, but also that there were measures taken to adjust those challenges. She reaffirms Unilever Nigeria’s commitment to support efforts to tackle the Coronavirus threat while keeping an eye on the fundamentals of the business, supporting its brands, ensuring the integrity of the route-to-market model. “...putting consumers and their needs at the heart of everything we do,” George states.

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these cost reduction measures. “We have kept our commitments on our world-class asset, OPL 310, despite the detrimental effects of the COVID-19 pandemic on the global economy and the subsequent fall in oil price. With the implementation of our cost reduction measures, we believe we are in a good position to navigate this challenging period,” Lekan Akinyanmi, LEKOIL’s CEO, said. LEKOIL is the oil and gas exploration and production company with a focus on Nigeria and West Africa. Founded in 2010, the company is led by professionals with extensive experience in the international upstream oil and gas industry as well as in global fund management and investment banking.

Covid-19: Leaving Oyo out of states with total lockdown pose threat to fight against pandemic - analyst REMI FEYISIPO, Ibadan

Mfon Bassey (m), Cross River State commissioner for environment, presenting hand sanitisers and liquid soap to the Commissioner of Police in Cross River State, Uche Anozie, to help in the fight against the spread of COVID-19 in Calabar weekend.

public affairs analyst and lecturer at Lead City University, Ibadan, Bayo Busari, says leaving Oyo State out the states declared for total lockdown poses a dangerous threat to the fight against Coronavirus, also known as Covid-19. While reacting to President Muhammadu Buhari nationwide broadcast on Sunday, Busari states that it is imperative that the Federal Government reviews its position on the lockdown, which only affects Lagos, Ogun and FCT leaving out Oyo, which has the third highest reported cases. In a statement made available in Ibadan, the Oyo State capital, Busari noted that Oyo State should be included in the lockdown in view of its proximity to Lagos and Ogun states, the epicentre of the pandemic. He urged President Buhari to without wasting more time, include Oyo in the list of states where he declared total lockdown, as the number of people infected with the virus continues to increase. Busari in the statement, who argues that the state has international boundary with Benin Republic as well as being a gate way to the Eastern and Northern parts of the country, insisted that leaving Oyo out the states where Buhari declared total lockdown will pose a dangerous threat to the efforts to flatten the curve of the spread.

“However, it is imperative that the Federal government reviews its position on the lockdown, which only affects Lagos, Ogun and FCT leaving out Oyo, which has the third highest reported cases. “Equally, Oyo State was not captured in the palliatives announced for Lagos State and the National Centre for Disease Control (NCDC) by President Muhammadu Buhari in his national broadcast. However, there is no doubt that the fight against the pandemic will task states, especially in terms of finances. This is why it is important that Oyo State benefits from the largesse that the Federal government is making available to fight the Covid 19. “Leaving out the state will pose a dangerous threat to the efforts to flatten the curve of the spread. A stitch in time saves nine, that is the counsel that the Federal government should harken to without delay or being bi-partisan. “There is no doubt that this is not the best of time for leaders, the world over in view of the rampaging corona virus pandemic which has tasked the entire world. Nigeria, as a member of the global village has mot been an exception with rising level of citizens who have contacted the disease with fatalities being recorded. This is why all efforts being made by state governors, especially the governor of Lagos State, Babajide Sanwoolu who leads the pack in the concerted efforts to fight the pandemic.

2.6m households have benefitted from N20,000 Covid-19 palliative - Farouq ...identifies 11m vulnerable persons Solomon Ayado, Abuja

inister of Humanitarian Affairs and Disaster Management, Sadiya Umar Farouq, has said 2.6 million households have so far benefitted from the N20,000 Covid-19 palliative issued by the Federal Government. Also, she stated that over 11 million vulnerable persons have been identified in 35 states to benefit from the palliative measure, saying the 2.6 million households were from the FCT, Nasarawa, Katsina and Anambra states. While fielding questions @Businessdayng

from newsmen at the presidential task force media briefing on Thursday, the minister said six vulnerable persons were identified in each household. She further said the ministry was working seriously to cover additional one million households subsequently. Insisting that there was no favouritism in the palliative support, Farouq stressed that the ministry captured the vulnerable persons by community engagement. This, she revealed that the ministry usually meet with the community leaders who decide those who were most vulnerable in the areas.

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news

Gencos express concern on gas supply as suppliers demand upfront payment HARRISON EDEH, Abuja

ower Generation Companies (Gencos) have expressed concern on the capacity to meet up with gas supply needed to enhance power generation, as gas suppliers demand an upfront payment before making available gas for power generation. Against this background, it is difficult for Gencos on the back of arrears of debt owed them. The Gencos, in a statement issued weekend, note that the unavailability of gas has greatly hindered power generation in thermal Power Plants, as gas cost constitutes over 60 percent of wholesale electricity tariffs in Nigeria, adding that if this goes on in the gas sector it has huge implications for the Nigerian

electricity supply industry. “The Association of Power Generation Companies is reiterating the commitment and readiness of Gencos to improve power generation from its Thermal and Renewable, Hydro Power Plants sources across the country. However, there is a shortage of gas supply for thermal generation companies as the thermal power from gas and steam turbines accounts for about 80 percent of Nigeria’s power generation. “In recognition of the importance of the services provided by the power sector, President Muhammadu Buhari directed that commercial establishments such as Power Generation Companies (Gencos), Transmission, and Distribution companies be exempted from the restriction placed on human and vehicular movements in

Lagos, Abuja and Ogun states. “Against this background, Gencos are working together to ensure the sustainability of adequate power generation during the COVID-19 global health crisis. This is evidenced in the increase in power generation which has averaged 4,024mw since the index case was recorded on 27th of February. “However, the gas suppliers have demanded an upfront payment (pre-payment) before they make gas available and the Gencos cannot afford to meet this request given the liquidity issues in the Nigeria electricity supply industry”. The statement further reveals that the Gencos are altering their business practices and developing strategies for dealing with the COVID-19 pandemic, as demonstrated by the establishment of telework protocols to ensure that

non-essential, non-critical employees work from home, while implementing its continuation of services plan to ensure operations and service delivery continue as usual to prevent even more economic disruption. “Gencos have a strong track record of preparing for numerous emergencies like the COVID-19 pandemic, as well as countless other types of emergencies. This is evidenced in ramping up to a total available capacity of over 7,500mw and gross generation installed capacity of over 13,000mw. “In preparation for the current situation, the Gencos have commenced close talks with the Federal Government and other power sector stakeholders to ensure that power plants have the resources they need to ensure generation of power”.

L-R: Isoken Omo, a member of Edo Development and Property Agency; chairman, EDPA, and a beneficiary, Rosemary Ogbebor, during the presentation of pack of food and other household items to mitigate the economic hardship of the pandemic COVID-19, in Benin City, Edo State. Photo: Edo State Government

EDPA extends relief materials distribution to Egor, Ovia North East

do Development and Property Agency (EDPA) has extended the distribution of relief materials to Egor and Ovia North West Local Government areas, in a move to mitigate the adverse effects of the coronavirus outbreak on the poor and vulnerable persons in the state. Executive chairman, EDPA, Isoken Omo, who led a team from the agency on the distribution exercise, said the items were pooled from the agency’s storeroom while other materials were sourced from personal contributions and donations from public-spirited Edo residents. She urged more persons to join hands in providing succour to the poor and vulnerable in the wake of the COVID-19 outbreak, as such moves would complement government’s effort to ameliorate the economic effects of the pandemic. According to Omo, “We were in Ikpoba Okha and Oredo Local Government Areas

recently and visited several streets to distribute the relief materials to them as a way to cushion the economic effects of the coronavirus pandemic. “Today, we are in Uselu and Evboutubu axis in Egor and would be in some communities in Ovia North East, to share more of the relief materials to persons that may be facing a rough time this period.” She further urged private individuals to join the train in providing for the needy, noting, “We are calling on more persons to take up the challenge to be their brothers’ keepers this period. It is the much we can do to help our people and support government’s directives on social distancing.” Recall that the agency commenced its relief distribution exercise with some streets along Stadium and Sokponba Roads on Wednesday, to help the people cope with the adverse economic effect of government’s stay at home order. www.businessday.ng

WAHO reiterates support to ECOWAS to tackle COVID-19 Innocent Odoh, Abuja

est African Health Organisation (WAHO) has reaffirmed its commitment to support Member States of the Economic Community of West African States (ECOWAS) in the fight against the COVID-19 (Coronavirus)pandemicbedevilling its Member States. As the institution designated by the highest authorities of ECOWAS to lead the coordination, collaboration and communication in the region with regards to Covid-19, WAHO in a statement said the institution had distributed over 30,000 diagnostic test kits, 50,000 specimen transportation kits and 10,000 personal protective equipment (PPE), and some medications to Member States supplementing what individual countries are doing by themselves. “WAHO has been very active in bringing together Member State to adopt a regional approach to the pandemic and to support them as necessary. As at February 2020, a few days after

the declaration by World Health Organization (WHO) of Covid-19 as a Public Health Emergency of International Concern, WAHO convened an emergency meeting of the Ministers of Health across ECOWAS on preparedness and response to the outbreak of Covid-19, and the meeting agreed on a unified regional approach to the pandemic,” the statement said. The statement noted further that “WAHO immediately strengthened the capacity of all 15 member states to test for COVID-19 through a regional laboratory training and distribution of the first batch of diagnostic kits to all member states. In all the 15 ECOWAS Members States, several actors including health workers are being mobilized to save lives. “However, there continues to be the challenge of securing sufficient materials given the disruption in global supply chains, this is something WAHO is tackling through its partnership with other agencies and bodies to ensure Member States do not run out of stock” the statement disclosed.

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Coronavirus: Transporters applaud Edo on suspension of revenue collection ...RTEAN urges members on compliance to guidelines

ransporters in Edo State under the aegis of Road Transport Employers Association of Nigeria (RTEAN) and the National Union of Road Transport Workers (NURT W) have commended the Edo State government for suspending revenue collection f o r t h e m o n t h o f Ap r i l , as part of efforts to cushion the economic effects and ease compliance with guidelines stipulated to curb the spread of the coronavirus (COVID-19) pandemic. A cross section of transporters who spoke to journalists in Benin City, said the move will ensure drivers comply with government’s guidelines on seating arrangements for passengers without a subsequent increase in fares. According to the new guideline by the state government, the seating guidelines for transporters are now that cars must carry one passenger in front and two at the back, while buses carry one passenger in front and two in each row. Commending the decision, a public transport driver, Osadolor Emmanuel pledged the drivers’ support to the state government’s efforts at curtailing the spread of COVID-19 in the state. “The suspension of revenue collection from transporters is a testament that Edo people are blessed with a governor who has the interest of the people at heart.

This will not only ensure that drivers comply with the new seating guideline but also certify that there is no increase in transport costs. It is good news for all Edo residents. “We commend the Edo State Government for this laudable decision to help cushion the effect of the coronavirus pandemic on residents. On our part, we will continue to support the Governor Godwin Obasekiled administration as it steps up measures to ensure the health and safety of the people.” O n his par t, an o t her public transpor t dr iver, Asemota Omo, noted: “This is an applaud-able move by a concerned and peopleoriented government. It is also a call to all citizens to support the state government as it fights to prevent spread of COVID-19. Government cannot do it alone. As citizens, apart from complying with the guidelines, we must ensure that we adhere and practice the basic precautionar y measures against the infectious disease.” Meanwhile, chairman of RTEAN, Edo State chapter, Sunday Erhabon has urged members to comply with the government seating arrangement in the interest of all residents. H e , h o w e v e r, s u e d for safety consciousness among drivers, emphasising the need to maintain social distancing to prevent further spread of the virus in the state.

Price hike: Group calls for ban of market unions Godfrey Ofurum, Aba

oalition of S outhEast Youth Leaders (COSEYL), a sociopolitical organisation, has appealed to Abia State government to ban all market associations in the state to remove monopoly and ensure that people buy goods at reduced rates. This is as they condemned hike in prices of food items like garri, noodles and other items, in Aba, the commercial hub of the state and other areas of the state. The group in a statement, signed by Goodluck Ibem, president general, COSEYL, and Kanice Igwe, secretary, COSEYL, alleged that leaders of garri union in Allen Market in Ariaria area of Aba, Monday, March 30, 2020, forced a garri dealer to sell his goods above his approved price of N14,000 per bag for N35,000 per bag, thereby increasing the price of the commodity by more than 100 percent. A paint bucket of garri, which sold for N600 to N700 before the Coronavirus restrictions in the area, in@Businessdayng

creased to N1,500. A cup of garri is now N100, instead three cups for N100. “The food market union now takes decisions that are contrary to the orders of the Governor of the state. They now wield so much power that could lead to the untimely death of so many people, through hunger. “The Governor should ban these wicked market unions, whose aim and purpose is to ensure that Abians suffer and starve to death. “As a group mandated, by the people to speak for them, we will not fold our hands and watch wicked market union leaders to exploit helpless people, because of the lockdown. “We call on the Abia State government, the Commissioner for Trade and Investment, the Abia State Price Regulatory Board and the Taskforce Committee for Covid-19 to immediately move into action and stop this wickedness. “We demand immediate ban of all market unions and prosecution of those found culpable in exploiting people, because of the one-week lockdown”.

Monday 06 April 2020

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

Europe prepares to ease coronavirus lockdowns

Countries including France and Spain plan their exit strategies while seeking to avoid a second wave of infections Ben Hall and Guy Chazan

overnments across Europe have begun preparations to ease the lockdowns imposed across much of the continent to contain the coronavirus pandemic, even if restrictions that have paralysed the economy are expected to remain in force for several more weeks. France, Spain, Belgium and Finland are among many countries that have set up expert committees to examine a gradual easing of stay-at-home orders for some businesses and schools while avoiding a second wave of infections that could overwhelm health services. Pedro Sánchez, the Spanish prime minister, on Saturday extended the shutdown of his country for another two weeks until April 26 but he said a ban imposed last month on all non-essential work including manufacturing and construction would be lifted after Easter. “When we have the [infection] curve under control, we will shift towards a new normality and towards the reconstruction of our economy,” Mr Sánchez added. “A specific team of epidemiologists has been working for two weeks now on a plan to restart economic and social activity.” Angelo Borrelli, head of Italy’s Civil Protection Agency which is in charge of co-ordinating the national response to the outbreak, suggested a “phase two” of the country’s lockdown could begin next month. “I don’t want to give dates, but between now and May 16 we may

A view of the completely empty Mayor Street in Madrid on Sunday. Spanish prime minister Pedro Sánchez on Saturday extended the shutdown of his country for another two weeks © JuanJo Martin/EPA

have further positive data that suggests we can resume activities and then start phase two,” he said. Édouard Philippe, the French premier, said last week that the process of “deconfinement” had no precedent and would be “fearsomely complex”, adding: “We are probably not heading for a deconfinement that would be absolute everywhere for everyone.” Denmark, which was one of the first countries in Europe to shut down activity and close its borders, last week became the first to put a timetable on the loosening of restrictions. “If we Danes for the next two weeks — beyond Easter — continue to stand together, at a distance, and if the numbers remain stable and reasonable, then the govern-

ment will begin a gradual, quiet and controlled opening of our society again,” Prime Minister Mette Frederiksen said on March 30. Few other governments are willing to put a timescale on the loosening of restrictions not least because, according to most experts, it will require a massive increase in testing capacity. Many also worry about undermining the stay-at-home message with the onset of the Easter holidays and warmer weather and with populations already chafing at weeks of confinement and the loss of earnings. Germany, where the daily rate of confirmed coronavirus cases and deaths has risen in recent days, has also begun preparing what one official called a “phase-

out” that would be “acceptable in terms of health policy”. “But we’ve been careful about what we say in public,” he added. “The important message now is: we are not in a phase of the pandemic where we can tell people the measures can now be relaxed,” Steffen Seibert, spokesman for German chancellor Angela Merkel, said on Friday. “Of course you can prepare for that mentally, but for the moment it’s this [stayat-home] message that matters.” However, some experts believe it is a big mistake for governments not to engage the public in a debate about loosening restrictions. “Although it is clear we cannot talk about when the opening up will take place, we can talk about how,” said Christiane Woopen,

professor at the University of Cologne’s Centre for Ethics, Rights, Economics, and Social Sciences of Health and a scientific adviser to the government of North Rhine-Westphalia, Germany’s most populous region. “The public deserve it. They are taking a lot of hardship. They have to trust what political leaders are doing in the next months.” Prof Woopen is one of a dozen academics — epidemiologists, physicians, lawyers and economists — who published a report on Friday for the Munich-based Ifo economics institute. The report is an attempt to frame what Prof Woopen calls an “opening strategy, not an exit strategy”, since there is unlikely to be any return to normality before a reliable vaccine against Covid-19 becomes widely available, which appears several months away. A separate Ifo study predicted the German economy could shrink by up to 20 per cent this year if the shutdown lasted three months and was followed by only a gradual recovery. Prof Woopen and her fellow authors said social and psychological strain was as important to alleviate as the loss of output. The Ifo report argues for a “riskadjusted” strategy whereby some age groups, regions and social and business functions can resume activity before others. Schools could begin lessons, given the lower risk of severe symptoms in children and the burden of closure on working parents, but older people and high-risk groups may remain cloistered for months. Highly automated factories could start up but nightclubs would be at the back of the queue.

US and Canada discuss putting tariffs on Saudi and Russian oil Global deal to reduce production hangs in balance ahead of Opec+ meeting David Sheppard and Derek Brower

S and Canadian officials are discussing the imposition of tariffs on Saudi Arabian and Russian oil imports if the two members of the Opec+ group do not quickly reach a deal to end their price war. Jason Kenney, the premier of Alberta — Canada’s biggest oilproducing province — told the Financial Times he had held discussions with Washington about tariffs, as a global deal to reduce production appeared to be hanging by a thread. US President Donald Trump has called on rival oil producers to cut production by as much as 15m barrels a day but said on Friday that tariffs “are one tool in the tool box” if Saudi Arabia and Russia do not quickly reduce supplies, threatening a deepening schism with Washington’s key Middle East ally. Mr Kenney said “prospective

import tariffs on oil coming into North America” were under discussion with Washington, even as he signalled Alberta would be open to participating with Opec in cuts to oil supplies. SonyaSavage,Alberta’senergyminister, would dial into the online Opec+ meeting this coming week, he said. “Opec+ started this fire and they have to put it out. We’re not going to surrender our industry and we’re prepared to go the distance here,” he said. Canadian provinces have autonomy over oil production policy, but joint tariffs with the US would require federal approval from Ottawa. US officials confirmed the Department of Energy was studying whether tariffs would be a viable way to force Saudi Arabia and Russia’s hand, though the discussions are preliminary and among several other options. On Saturday, Mr Trump said he believed Saudi Arabia and Russia would soon end their price dispute, www.businessday.ng

while taking shots at Opec+. “I’ve been against Opec my whole life,” Mr Trump said. “I think they’re going to settle [the dispute], because they’ll be destroying themselves if they don’t.” Should the two sides fail to resolve their disagreement, Mr Trump warned that he was ready to impose tariffs. “If I have to do tariffs on oil coming from outside or if I have to do something to protect our . . . tens of thousands of energy workers and our great companies that produce all these jobs, I’ll do whatever I have to do.” “The US seems more likely to show up to next week’s Opec+ virtual meeting with credible threats of reprisals than commitments to reduce production,” said Clearview Energy Partners, a Washington consultancy. Mr Trump has pushed Saudi Arabia and Russia to get a deal to remove as much as 15 per cent of global oil supplies, but the two countries remain at loggerheads, with an online Opec+ meeting now

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pushed back from Monday until later in the week after the two sides traded barbs. Russian President Vladimir Putin said on Friday that a cut to global oil production of 10m barrels a day was possible, but only if all major producers including the US joined in. But he jeopardised the potential for a deal when he accused Saudi Arabia of launching the price war to hurt US shale producers, in an apparent attempt to drive a wedge between Riyadh and Washington. Saudi Arabia’s energy minister Prince Abdulaziz bin Salman and foreign minister Prince Faisal bin Farhan both attacked the statement on Saturday, with the latter saying they were “fully devoid of truth” and accusing Russia of “falsifying facts”. An Opec official said “the SaudiRussia relationship now looks a challenge”. The prospect of a deal drove oil prices up around 40 per cent over Thursday and Friday, recovering @Businessdayng

from an 18-year low below $25 a barrel to above $30 a barrel. They remain down by more than half since the beginning of the year. The price slump has threatened the future of US and Canadian oil producers who generally require higher prices to turn a profit. Global demand for oil has plunged almost 40 per cent, Mr Trump noted on Friday, the biggest drop in history as measures to slow the spread of coronavirus hit economic activity. Independent US oil producers have pushed the White House to force Saudi Arabia and Russia to end the price war that has deepened the slump, including proposing tighter sanctions on Russian energy, bans on foreign oil imports, and targeting the Saudi-owned Motiva refinery in Texas. Mr Trump on Friday alluded to a suspension of US military aid to Saudi Arabia, when he said “we provide military assistance to countries for pretty much free . . . and they don’t even like us”.

Monday 06 April 2020

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Can oil ministers reach a deal on supply curbs? Market Questions is the FT’s guide to the week ahead FT reporters

il ministers from Opec and count r i e s t hat w e re part of the Opec+ alliance that collapsed last month are expected to take part in an emergency meeting this week to discuss cutting supply in response to the coronavirus pandemic. Ministers will participate in an online conference after US president Donald Trump said a deal was imminent between Russia and Saudi Arabia that could lead to as much as 15m barrels a day taken off the market, potentially supporting oil prices after a heavy decline earlier this year. The move has prompted questions about whether Saudi Arabia and Russia can mend their differences and what any potential deal might look like. Saudi Arabia has been supportive of a deal to cut supply as long as all global producers do their part. In recent days, the kingdom has also alluded to necessary participation from beyond the Opec+ group — which would include the US. The Opec+ alliance fell apart last month after Russia was reluctant to agree to a Saudi proposal for deeper and prolonged cuts in the face of a drop in oil consumption. In turn, the kingdom launched a war for market share, cutting prices for its crude and accelerating production to record levels of above 12m barrels per day. It is unclear how far produc-

ers might be prepared to cut, how the US might participate and what Russia wants to see before it agrees to any deal. As lockdowns and travel bans proliferate, traders have said oil demand could fall by up to 30m barrels a day this month — roughly a third of the world’s average daily consumption in 2019. Anjli Raval How much further will the pound fall? Data due for release on Thursday are expected to show zero economic growth in the UK in February — a fragile backdrop, before the full effects of the coronavirus outbreak hit the country in March. Already, the pound has been on a wild ride. The UK currency dropped more than 13 per cent from peak to trough last month,

reaching a low just above $1.14 before shooting back up to $1.23 by the start of April. But the pound remains vulnerable to flare-ups in dollar demand and the impact of coronavirus on the economy. Thursday’s data releases for February include those relating to GDP and industrial production. Analysts said rising unemployment, coupled with a poor performance by the manufacturing sector in March, point towards a deep recession. Andrew Wishart, UK economist for Capital Economics, forecast a 15 per cent drop in GDP in the second quarter compared with the first three months of 2020. He noted that would be a bigger fall in output than during the last financial crisis, or the

Great Depression. Derek Halpenny, an analyst at MUFG Bank, argued a slower death rate from the disease in the UK compared with Spain and Italy could lend some support to the pound. Eva Szalay Will the coronavirus crisis pave the way for eurobonds? The coronavirus crisis has forced a long-running debate back on to the agenda in the eurozone: the issuance of debt backed by all of the common currency’s member states. Last month, nine eurozone countries called for so-called eurobonds (sometimes now rebranded as “coronabonds”) as governments ramp up borrowing to tackle the pandemic. In a rerun of similar debates during the eurozone debt crisis,

a group of northern European countries including Germany and the Netherlands objected, saying they would prefer struggling nations to be given a credit line by the European Stability Mechanism, the region’s bailout fund. The topic is likely to dominate discussion at Tuesday’s meeting of finance ministers. Debt mutualisation in the eurozone would mean higher yields on Germany’s debt, and the push for greater burden sharing is one reason for recent pressure on Bunds, according to HSBC head of fixed income research Steven Major. Most investors think jointly issued bonds would trade somewhere close to debt issued by the ESM, meaning higher yields than Germany but much lower than fiscally weaker countries such as Italy. Whether or not the Dutch and Germans agree to eurobonds, Mr Major argued bond buying by the European Central Bank in effect already amounts to increased sharing of debt burdens across the currency bloc. The ECB announced an extra €750bn of purchases last month as part of a virus-fighting package, halting a sell-off in Italian bonds. “The near doubling of the ECB’s balance sheet to over 50 per cent of GDP, through the last decade, arguably says debt mutualisation is taking place anyway, albeit below the surface,” Mr Major said. Over the long term, he added, this trend was likely to mean further convergence of German yields and those in the rest of the eurozone. Tommy Stubbington

Why the oil price shock is nothing to celebrate Lower revenues exacerbate the damage for poorer producer nations The editorial board

S president Donald Trump has been struggling to make his mind up about falling oil prices. Last month he described the prospect of lower petrol prices as “the greatest tax cut”. On Thursday, he said that a possible agreement between Russia and Saudi Arabia to cut production — and lift prices — was “GREAT for the oil and gas industry”. His conflicting messages reveal a truth: the price collapse, possibly the biggest in history, has the power to force a rethink on even the biggest advocates of cheap oil. The collapse in prices will not deliver much of a boost to rich economies. The fall below $20, the lowest level since 2002, re-

flects a plunge in demand as the US and much of Europe went into lockdown and economic activity ground to a halt. There is no boost in spending power from cheaper oil when few are still burning it: planes are grounded and drivers are staying in. With large parts of the western world shut down, the effect of these lower prices will be felt most in poorer countries. Big importing — and populous — nations such as India and China will benefit, with cheaper oil potentially ameliorating some damage from coronavirus. Others, like Nigeria, will be hit twice: via a public health emergency and economically, as the price of its main export drops. The first fall in the price came in January when China put the city of Wuhan under quarantine, subduing demand. The ensuing www.businessday.ng

price war between Russia and Saudi Arabia only exacerbated the drop. Further falls reflect the collapse in economic activity: demand is down by roughly a quarter already. That is almost the entire output of the 13-nation Opec group. The millions of extra barrels being pumped by Saudi Arabia and Russia are relatively insignificant in the face of the 25m-barrels-a-day fall in demand due to the shutdowns. Both countries appear to have badly miscalculated. Russia, opportunistically, saw the coronavirus as a chance to launch a broadside against American shale producers and the US economy. If demand was falling anyway, why not rely on others to make output cuts and hurt a geopolitical rival in the process? Saudi Arabia did not play ball. A

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shock-and-awe strategy of increasing its own production sent oil prices tumbling and wiped billions off the market value of western majors. The price of oil initially dropped at its fastest rate since the Gulf war in 1991; it went on to have its worst quarter on record. Neither country could have predicted such a fall in demand. Coronavirus has spread much more rapidly than expected and the lockdowns that democratic governments have launched in response have cut demand for the world’s most important energy source. Attempts to force US shale producers out of the market will work only in the short term. Drillers may be forced to close and those that lend to them will take some losses. Once prices start to recover — and many Opec @Businessdayng

governments require higher levels to balance their budgets — new ventures will spring up. Few expect Russia’s struggling economy to be able to cope with such low prices for an extended period. Mr Trump’s inter vention boosted prices. That might reflect wishful thinking and the lobbying of the shale industry more than anything else. But Saudi Arabia did very quickly convene a meeting of the Opec+ group, which includes Russia. There are growing signs of an acknowledgement of the need for co-ordinated cuts but markets will need clarity before prices stabilise. An extended period of volatility may accelerate debate about the merits of a shift away from oil to cleaner fuels. But in the meantime, it is hardly what a struggling global economy needs.

Monday 06 April 2020

BUSINESS DAY

ANALYSIS

Can the sports industry survive the coronavirus shutdown? With events cancelled or postponed, revenue streams are drying up. Executives believe wider disruption lies ahead Murad Ahmed, Mark Di Stefano and Anna Nicolaou

artin Slumbers u s u a l l y w o rk s f ro m a w o o d panelled room overlooking the 18th green of the Old Course at St Andrews in Scotland. The chief executive of the R & A, golf’s governing body outside the US and Mexico, says his office was closed two weeks ago. The same goes for the ancient links, the first time this has happened since the second world war. The coronavirus pandemic has shuttered global sport, with North America’s National Basketball Association and Europe’s football leagues suspended and the Tokyo 2020 Olympic Games postponed. Others are at risk, including Indian Premier League cricket due to begin this month and the start of American football’s NFL season in September. Yet to fall off the calendar is The Open on July 16-19, one of the four annual golf “majors”, which makes up the vast majority of the R & A’s annual revenues of around £90m. Mr Slumbers says all options are on the table for this year’s tournament in Kent, England and the organisation has “rainy day reserves” to withstand the financial hit should it be forced to postpone or cancel the event. But Mr Slumbers — in common with sports administrators around the world — is also thinking further ahead. He is contemplating how to reduce expenses for future tournaments, such as installing a reduced number of grandstands for spectators or having fewer golfers compete. “The impact of this black swan event will make us think of how we manage the financial risk of The Open Championship,” says Mr Slumbers. Sporting groups across the world are facing up to the same problems. With the help of big money television and branding deals, they have transformed games played recreationally for decades into multibillion-dollar enterprises. Leading athletes are protagonists in unscripted, unmissable dramas for thousands in stadiums or billions watching on screens. Sport is a uniting passion. And, until the coronavirus shutdown, a growing global market, with sales in sport services and related goods worth $489bn in 2018. Now the business model of many sports is under threat. While each one has different characteristics, most of their money is made in three ways: broadcasting deals, sponsorship contracts and “match day” income from tickets, hospitality and spending during events. These revenue streams are drying up. There is optimism in some quarters that the lockdown measures will be a short-term blip to business. But many sports execu-

tives believe there will be lasting disruption. The willingness of spectators to rush back to crowded stadiums will be tested. Many governing bodies are scrambling to reorganise calendars to ensure delayed tournaments take place later this year. “[This] is the biggest disaster to hit the sports world in 75 years and the biggest challenge our business has ever faced,” Simon Denyer, chief executive of the television and internet sports streaming group DAZN, wrote in an internal email to staff. Greater changes await. Broadcasters are re-evaluating both the value of current deals and business models that are reliant on live sport to hold on to subscribers. Sponsors are slashing spending in response to an impending global recession. The pay packets of leading athletes will be depressed for months, if not years, to come. Even those imagining a glorious future have had ambitions overturned. Leeds United is top of the Championship, the second tier of English football, and well placed for promotion to the Premier League, the sport’s most valuable domestic competition, where the club would earn an additional £150m in revenues. Instead, postponed fixtures have led the players to agree to pay cuts as they await games to restart. “Imagine it for them, the players, coaches . . . they see the finish line, and this pandemic is stopping everything,” says Leeds United owner Andrea Radrizzani. “We’re all living and working on the edge.” Analysts caution that it is too early to calculate the damage to sport businesses. Consultancy KPMG predicts the “Big Five” football leagues and their member clubs in England, Spain, Germany, France and Italy face a collective hit of almost €4bn in lost broadcasting, sponsorship and match day revenue if the remaining games in their seasons are not completed. Some are expected to cope with the cash crunch better than others. The organisers behind the Wimbledon tennis championships, cancelled this year, and the Tokyo Olympics, postponed until next summer, believe their insurance www.businessday.ng

policies will recoup the vast majority of costs. But many football, rugby union and cricket clubs are among those to find their insurance arrangements do not cover pandemics. The shutdown has already brought casualties: MSK Zilina, seven-time football champions of Slovakia, and USA Rugby, the sport’s national governing body, are among those to declare bankruptcy in recent days. Industry executives say if social-distancing measures enforced in many countries continue for many more months, bigger franchises also face collapse. Many are responding by cutting costs. Even the world’s two highest paid athletes, footballers Lionel Messi and Cristiano Ronaldo, have accepted pay cuts or wage deferrals alongside teammates at Spain’s Barcelona and Italy’s Juventus. English Premiership rugby clubs, Australian Rugby League teams and top NBA executives are among those to have slashed salaries in recent days. In England, leagues and clubs want players to accept temporary salary cuts. But the Professional Footballers’ Association, the players’ trade body, has so far rejected that call and instead sought a deferral of wages. Bailouts are planned. Fifa, international football’s governing body, wants to draw on its cash reserves of $2.7bn to create an emergency fund for clubs, national federations and governing bodies. Enders Analysis, the research group, says Europe’s football teams, considered institutions in many cities and towns, are also likely to receive government assistance rather than be allowed to fail. A calendar of missing sporting events Indian Premier League Season due to begin on April 15 With India in lockdown, there are doubts if the league will be played this season NBA Basketball playoffs From April 18 Matches in US and Canada remain suspended; NBA is considering curtailed playoff schedule Uefa Champions League final May 30 Postponed. No new date for Istanbul final scheduled with tourna-

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ment postponed indefinitely Uefa Euro 2020 From June 12 The tournament of national sides, to be held in 12 European cities, has been delayed until 2021 Tokyo Olympic Games From July 24 The International Olympic Committee has postponed the games until next July Brett Gosper, chief executive of World Rugby, the international governing body of rugby union, says it is working on a “Marshall Plan approach”, wanting to borrow against its capital reserves worth between $150-$200m to backstop cash-strapped members. “Obviously we don’t have enough money to fund [rugby groups] to the level they are used to,” he says. “But we certainly can relieve some unions in some cases which have high pressure points.” These efforts will not help emerging competitions, such as women’s football in the US and UK, which have sought new investment to fund growth. And a generation of young athletes, unable to play and receive their first pay cheques, may be forced out of the game altogether. Broadcasters find themselves with empty airtime to fill. Rather than NBA basketball playoffs in April and May, US sports network ESPN has been offering viewers cherry pit spitting, hamburger eating contests and a “national puppy day” marathon. In the week up to March 22, ESPN’s primetime ratings were down 29 per cent compared to the previous week, according to Bernstein. The current lack of live sport is exposing the business model of traditional TV companies such as Disney and WarnerMedia in the US; Sky and Discovery in Europe; beIN in the Middle East. Each has invested billions in sports media rights in the search for a rare asset in the age of Netflix: a show that is best watched live. These companies recoup investment — and seek to turn a profit — by selling advertising alongside matches, asking consumers to pay for expensive subscriptions, or charging hefty fees to the cable companies that run their channels. This model has inflated the value @Businessdayng

of premium sports rights, and the industry’s value as a whole. In the US, the NBA in 2014 struck a nine-year TV contract with Disney and Time Warner totalling $24bn — more than three times the value of its previous deal. Last year, the English Premier League, the world’s most watched domestic football competition, revealed its domestic and international contracts will be worth £9.2bn between 2019 and 2022, an increase of around £1bn from the previous three years. Sports broadcasting rights contracts worldwide totalled $49.5bn in 2018, according to SportsBusiness Consulting. As coronavirus has become a worldwide problem, defending the value of broadcasting contracts has become critical. The Euro 2020 championships and Copa América, flagship national team tournaments in Europe and South America, due to be played in June have been postponed until next year. That is designed to allow domestic leagues to resume this summer to complete their seasons. Some leagues are contemplating quarantining some players to allow the resumption of matches as early as May but without spectators, sacrificing ticketing income to protect more valuable broadcast revenues. Formula One, the global motor racing series, has called off Grands Prix in Australia, Bahrain, Vietnam, China, the Netherlands, Spain, Monaco and Azerbaijan so far. Even so, it is drawing up plans for a curtailed calendar of between 14 to 16 races to begin later this year, down from the scheduled 22. F1 executives believe this is enough to satisfy the broadcasting contracts worth around $565m in 2019, around 40 per cent of F1’s overall revenues. One former F1 adviser recommends caution, however, saying: “[There’s] no way they will get that many races in.” Tricky negotiations have begun between sports leagues, broadcasters and advertisers on who foots the bill for lost coverage during the shutdown. Some discussions are friendly, as many TV companies do not want to jeopardise relationships and future deals. US broadcaster Turner has of-

Continues on page 46

Monday 06 April 2020

BUSINESS DAY

NATIONAL NEWS FT Bailey rejects monetary financing as tool in virus crisis Experts say Bank of England should directly fund government support measures Chris Giles

ank of England governor Andrew Bailey has rejected suggestions the central bank should use monetary financing to protect and boost the economy amid the coronavirus crisis, saying it would “damage credibility on controlling inflation”. Writing in the Financial Times, Mr Bailey signalled he would oppose any calls for the BoE to print money to allow the government to run up a bigger deficit as it seeks to support companies, workers and households. “Using monetary financing would damage credibility on controlling inflation . . . It would also ultimately result in an unsustainable central bank balance sheet and is incompatible with the pursuit of an inflation target by an independent central bank,” said Mr Bailey. Although monetary financing has been associated with disastrous economic consequences in Zimbabwe, Venezuela and Weimar Germany in the 1920s, such is the depth of the Covid-19 crisis that it has been recommended by some of the UK’s most distinguished UK economic policymakers. Figures such as Adair Turner, chairman of the Financial Services Authority during the financial crisis, and Charlie Bean, currently on the policymaking committee of the Office for Budget Responsibility, have said that judicious BoE financing need not lead to the hyperinflation, immiseration and the destruction of society seen elsewhere. Mervyn King, BoE governor from 2003 to 2013, said last week that the question was not whether or not the central bank should print money to buy government bonds, “the issue is how much money to print”. In an FT Webinar, Lord Turner said last week: “We are going to have monetary finance [in this

Andrew Bailey: ‘Using monetary financing would damage credibility on controlling inflation . . . It would also ultimately result in an unsustainable central bank balance sheet and is incompatible with the pursuit of an inflation target by an independent central bank’ © NEIL HALL/EPA-EFE/Shutterstock

crisis] . . . the only issue is whether we are going to be open and honest [that] there is going to be monetary finance.” At issue is how Mr Bailey and the other big figures of finance view the £200bn of government bonds the BoE committed to buying last month with money it created at the stroke of a computer keyboard after turbulence in the gilts market and a sharp slide in sterling’s value. Indirectly, this £200bn will finance the additional public borrowing that chancellor Rishi Sunak has committed to after unveiling support packages for companies, workers and households worth at least £60bn, at a time when tax revenues are set to plunge. Unlike its previous quantitative easing programmes, notably in the financial crisis, the BoE said the latest QE was necessary to improve the functioning of the government bond market rather than to lower interest rates. But many investors see the BoE purchases of existing government

bonds as paying for the inevitable surge in the deficit. Sir Charlie said in a blog post last week that the BoE might need to go further and finance government directly by buying newly issued gilts in the weeks ahead. He wrote that it was fully justified for governments to “borrow heavily” in a crisis. Recognising that the coming surge in the deficit would create “a financing challenge”, Sir Charlie said: “It would, in my view, be entirely appropriate for the Bank of England to help out by buying some of [the government bonds] directly from the government in the primary market.” Although these ideas have been firmly rejected by Mr Bailey and the BoE, the difference between the positions of the central bank governor, Lord Turner and Sir Charlie are smaller in practice than they appear. The classic problem of monetary financing comes from excess. If a government keeps spending without limit and gets the central bank to pay for this largesse, more money

will be spent than goods and services can be produced, generating impossible-to-resist pressure for higher prices. Should Mr Sunak, for example, want to send everyone a cheque for £20,000 financed by the BoE creating £1.3tn of newly minted sterling, very high inflation would be the inevitable result. [Inflation would only arise in cases] where the government determined how much money gets printed and I don’t think there is reason to believe, in Britain, we will go down that road Mervyn King But the numbers contemplated by Mr Sunak so far do not reach these levels. The Institute for Fiscal Studies, the leading think-tank, estimates the extra borrowing to be in the order of £150bn-£200bn. And although the BoE has rejected Sir Charlie’s suggestion of the direct financing of government on a temporary basis, it has not ruled out making such a move if the gilts market becomes disorderly.

This practice is outlawed in the eurozone, but most economists do not see a fundamental difference between the BoE buying existing gilts to allow investors to purchase new bonds, or just financing government directly. A bigger difference lies between Mr Bailey and Lord Turner over whether the latest QE programme is temporary. Mr Bailey was adamant that the £200bn of QE was not a “permanent” expansion of the BoE’s balance sheet. But Lord Turner rejected this position. “The idea [the bonds] will ever be repaid [by the government] is fantasy,” he said. His stance reflects a judgment that the £200bn of QE will not prove inflationary because it will be a necessary substitute for deficient spending by households and companies, and help maintain an orderly bond market while the coronavirus crisis continues. And that was also the point Lord King stressed in a webinar run by Policy Exchange, the think-tank. Lord King said a problem with inflation would only arise in cases “where the government determined how much money gets printed and I don’t think there is reason to believe, in Britain, we will go down that road”. All of these current and former policymakers, in different ways, were effectively saying that so long as the BoE determined the amount of government borrowing the central bank was willing to finance and how it would do so to keep inflation stable and the bond market calm, Britain would not turn into Zimbabwe. This ambition, they all accepted, would be aided by the UK’s institutional framework for inflation control in which members of the BoE’s Monetary Policy Committee have a remit to keep price rises close to a 2 per cent target. They are tasked with raising interest rates if inflation threatens to take off.

Can the sports industry survive the coronavirus shutdown? Continued from page 45 fered its advertisers a full refund on inventory they bought for the cancelled NCAA college basketball tournament, according to Michael Neuman, partner for Scout Sports & Entertainment, which manages $900m in sports assets for TV and digital advertising clients. The International Olympic Committee expects to roll over its global broadcast deals for the rearranged Tokyo games in July 2021. But DAZN, which has paid hundreds of millions of dollars to stream football and boxing worldwide, has told some leagues it will not pay for games left unplayed, while deferring payments for future seasons. In France, beIN and Canal+ have paused payments due to organisers of Ligue 1 football because of the lack of games.

The absence of live sport is also accelerating a debate within media circles about the long-term future of funding models for big broadcasters. Digital groups like Amazon, which has acquired the UK rights to broadcast some Premier League football fixtures as well as ATP Tour tennis, have emerged as threats and are offering fans cheaper, more tailored packages. Realising broadcasters will have less cash to spend on sports rights, some such as Germany’s Bundesliga football league have paused upcoming media rights auctions. Industry executives say privately they are braced for the value of sports rights to fall, as TV companies count the cost of the shutdown. In the UK, Sky has allowed households and pubs to pause their expensive sports subscripwww.businessday.ng

tions “until normality returned”. Allowing customers to halt subscriptions will cost Sky £700m if accounts are paused for a period of four months, according to Enders Analysis. These pauses are leading to concern about the longevity of expensive subscription bundles that marry sport with other entertainment channels, at a time when viewers are slowly moving to a payper-event model. “Broadcasters and sports like the Premier League have been locked into the hamster wheel of the big, fat bundle for a long time now,” says one European football broadcasting executive. “[Customers are] going to get more and more impatient with being locked in.” In February, eMarketer predicted 28m American households will cancel their cable TV subscriptions by the end of this year. The research

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company now suggests the current crisis will trigger further falls. “All we can tell you is: the forecasts are outdated,” says eMarketer analyst Ross Benes. With finances under considerable strain from coronavirus, many sporting organisations want to adapt in order to withstand the next financial shock. World Rugby’s Mr Gosper, says governing bodies may need to morph into regulators, closely monitor accounts of their members and enforce strict limits on spending. Many competitions already have these measures, but there are calls to tighten existing regimes. Last year, F1 introduced a “cost cap”, with no team allowed to spend more than $175m, although this does not include items such as driver salaries and marketing budgets. While most racing teams @Businessdayng

never reach such a figure, the constructors that do — Mercedes, Red Bull and Ferrari — dominate the sport. Zak Brown, chief executive of McLaren Racing, the F1 team, says the current crisis means it will be “irresponsible” not to reduce the cap further to $100m, a move to ensure smaller teams survive the shutdown. That will be fought by the richest teams. But Mr Brown reckons all sports groupsmust face the reality of a poorer future. “I think the damage caused is going to [go] far beyond what has happened for four months,” he says. “This is going to change the world. When we get back to racing, I don’t think everything simply picks up where we left off.” Buyers set to dictate terms of $55bn endorsement market

Monday 06 April 2020

BUSINESS DAY

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Monday 06 April 2020

BUSINESS DAY

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BUSINESS DAY Monday 06 April 2020 www.businessday.ng

PZ Cussons plc: Will plans to streamline operations change its fortune OLUFIKAYO OWOEYE

heir products once bestride the consumer market space like a colossus as consumers jostle to have a bite of their personal home care products. Sadly, things have changed for the consumer goods-giant as cash strapped consumers now go for cheaper products thereby putting sales of leading brands under pressure. Also, the country’s tough operating environment; decrepit infrastructures, porous borders, double-digit inflation and sluggish economic recovery, have further compounded sector players’ woes as they struggle to break-even. The company has in the last 120 years of doing business in the country been able to establish its brands to meet the basic daily need of millions Nigerian consumer market. It has strategically developed product lines that include soaps, detergents, toiletries, feminine hygiene products, pharmaceuticals, cosmetics, packaging materials, refrigerators, freezers, and air conditioners to appeal to the quality and price requirement of households. Brands such as Venus, Imperial Leather,Joy luxury soaps, Carex, Mamador Oil, Yo, Nunu, Bliss, Coast, Minerva, Zip detergent, Radiant detergent, Morning Fresh wash, , and the range of Haier Thermocool electrical (refrigerators, freezers, air conditioners, fans, air coolers, washing machines, water dispensers, water heaters, gas cookers and microwaves, among others) show a strong market presence of PZ in Nigeria. Nigeria’s huge population estimated to be around 180 million coupled with its rapid urbanization rate and the rising spate of the youthful population, eager to try new products and brands, provides a compelling reason for consumer-facing companies and retailers to jostle market in the country. According to World Bank data, Nigeria, South Africa and Egypt — contributes above 50percent of Africa’s total consumer spending. Financial performance mirrors industry woes In its full year 2018/19 financial result, the company’s revenue tanked 7.7percent year-on-year to N74.3bn. This was dragged by the decline in revenue from the more dominant Home & Personal Care (HPC) segment which fell by 19.3 percent to N47.2bn while revenue from the lowly weighted Electrical segment increased by 22.6percent year -on-year to N27.1bn. The decline in the HPC segment was due to lower sales volume which has been exacerbated by low consumer disposable incomes and growing competition from cheaper imported or unlisted brands.

Despite lower volume sales, Cost of Sales rose by 2.0percent to N57.7bn amid inflationary pressures. Consequently, Gross Profit declined sharply by 30percent to N17.1bn and Gross margin dipped, down 7.4ppts year—onyear to 23percent. Looking at the Operating Cost numbers, PZ’s operational challenges came to fore as the dominant Selling & Distribution cost grew 11.5percent to N10.7bn while the less dominant Administrative Expenses declined significantly by 37.2percent year-on-year to N4.1bn. Thus, Operating Profit plunged by 72percent year-onyear to N2.3bn. Finance cost declined significantly by 63.5percent year-onyear to N304.0mn while Finance Income also advanced sharply by 63.3percent year-on-year to N295.0mm. Also, PZ reported a

significant reduction in FX loss (down 91percent year-on-year to N444.3mn) amid stability in the FX market. In its half year result for the period ended 30th November 2019 revenue slumped 3.2 percent to N33.94bn from N35.05bn in same period in 2018. Its cost of sales surged 7.4percent to 28.15bn from N26.22bn, leaving gross profit at a meagre N5.79bn from N8.82bn in 2019. Selling and distribution cost dropped 9.6percent to N4.62bn from N5.11bn. Administrative expenses increased 34.1percent to N2.66bn from N1.98bn in half year 2019. Leaving the cosmetics and soap maker in a battered state with a loss of N1.58bn as compared with a profit of N1.22bn in same period last year. According to the parent company of PZ Cussons Nigeria, PZ Cussons in United Kingdom which

owns a 73.27percent stake in the group in Nigeria, the fortune of the company was impacted by a weak consumer spending in its major markets. New appointment new turn around? The c o n su m e r g ia nt a n nounced some new changes to its board. Most recent is the appointment of Zuber Momoniat, a South African as the new chief finance officer with effective from 1st April 2020. Momoniat is a certified chartered accountant with over 17 years of experience in account reconciliation, budgeting, internal controls, forecasting, and financial planning. The new appointment follows the resignation of Pedro Barreto, its chief finance officer with effective from 31 March. Also it announced the appointment of Panagiotis Katsis as its new chief executive officer from July 1st following the retirement of its current helmsman, Christos Giannopoulos. Contrary to media speculation that the company that has done business in Nigeria for 120years is planning to shut down following declining sales, the management of the company refuted making such plans. Surprising, last week announced the proposed sale of its Nigerian dairy business, Nutricima, to FrieslandCampina WAMCO Nigeria Plc, an affiliate of Royal FrieslandCampina in the Netherlands. PZ Nigeria in a statement on Monday said the proposed sale is in line with the group’s focus scale and accelerate strategy in order to streamline its focus on core personal care and beauty products. Nutricima’s major product portfolio includes milk and yogurt-based drinks such as Nunu, Yo, and Olympic. With this announcement, it brings to an end PZ Cussons foray into the diary market entered in 2005 through a joint venture with

Glanbia Plc with an immediate goal to supply evaporated milk and milk powder in Nigeria. This joint venture was however short-lived as PZ Cussons in 3015 bought Glanbia’s 50 percent stake in Nutricima, for £21 million in cash, giving PZ Cussons full ownership and control. Even though the partnership achieved few results such as the construction of a second facility for the manufacture of UHT products which was opened in 2009, Nutricima has also developed market leading consumer brands including Nunu, Olympic and Yo. Sadly, this has not impacted positively to bottomline of PZ Cussons. It is however not surprising that the consumer goods company which recently celebrated its 120years in Nigeria decided to spinoff the unprofitable business due to intense competition in the milk industry. In its profit warning issued in March 2018, the makers of Joy soap and morning fresh detergent noted that significant cost inflation in Nigeria kept discretionary income under pressure subduing milk sales in the country, hitting prices and margins. “As a result the usual peak season has not occurred to the expected level with inventory levels in the trade remaining very high leading to intense competition, most noticeable in the milk category, which in return is resulting in lower volumes, prices and margins” the company said. According to analysts, it expects operational challenges to intensify as an upward review of the minimum wage is likely to be counter-balanced by the upward review in VAT. This will be exacerbated if the currently porous borders are not effectively tightened to control the influx of cheaper smuggled HPC products, making it difficult to pass on the effect of the VAT to consumers as it will risk losing more market share. Also, the likely increase in electricity tariffs by July will further add pressures on PZ’s operational cost while concerns around FX devaluation later this year might hamper the recent recovery in the White Goods segment. The situation at the Apapa port – a major route for PZ’s raw material import is another source of pressure to be watched. Looking at all the above factors, the only positive that lies ahead for PZ, like all other players in the consumer goods sector, is the implementation of the new minimum wage which may be pressured by the proposed increases in levies on consumers. “Accordingly there would be further pressure on PZ’s earnings, but we see it as a good stock to buy for dividend seeking investors as it has historically not missed dividend payment and its low/nil debt exposure also supports future dividend payment,” analyst said in a note.

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