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LOLADE AKINMURELE

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he 2010s were meant to be the decade of promise for Nigeria, or so it was thought.

In December 2005, leading global investment bank Goldman Sachs named some 11 countries it expected would become the world’s largest econo-

were expected to eventually rival the world’s economic heavyweights also referred to as the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States).

At the end of the 2000s, it was Nigeria that had the fastest growing economy of the Next 11 countries, posting an average

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Decade of the locust: Nigeria cedes ground to Next 11 peers mies in the 21st century.

They were Mexico, Indonesia, Nigeria, Turkey, Bangladesh, Egypt, Iran, Pakistan, Philippines, South Korea and Vietnam.

These countries, selected based on their enormous economic potential, were mooted as successors to the BRICS nations (Brazil, Russia, India, China and South Africa) and

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Treasury bills

growth of 7.68 percent between the years 2000 and 2009, according to World Bank data.

Vietnam (6.65 percent) and Bangladesh (5.5 percent) were in second and third place, respectively.

Behind them were Indonesia (5.11 percent), Egypt (4.98 percent), South Korea (4.68 perContinues on page 42

NGUS jan 27 2021 367.48

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4 laws that could shape Nigeria’s economy this year MICHAEL ANI

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he year 2019 was an eventful one for lawmaking in Africa’s largest economy.

It was a year of harmonious relationship between the legislative and executive arms of the Federal Government which led to enactment of several laws that have the capacity to spur growth in Nigeria’s fragile economy.

BusinessDay tracked a toContinues on page 42

Inside Oshodi Transport Interchange records 1.6m passengers

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LASUTH pushes expansion of emergency wards’ capacity after BusinessDay’s investigation

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news LASUTH pushes expansion of emergency wards’ capacity after BusinessDay’s investigation Temitayo Ayetoto

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agos State University Teaching Hospital (LASUTH) is moving to get state authorities to expand the capacity of secondary health facilities across the state to handle emergency issues and so reduce pressure on the state-owned tertiary facility.

This is coming after a twopart investigation by BusinessDay exposing the deplorable state of tackling emergency issues at both Lagos University Teaching Hospital (LUTH) and LASUTH. To reduce the sad incidence of turning away helpless patients at LASUTH, Adetokunbo Fabamwo, chief medical director of the institution, said the hospital was in the process of enlisting stakeholders, including the Lagos State commissioner for health, to key into the expansion idea, educate the public and enforce a ‘no-referral letter, no-admission’ policy in the state tertiary hospital.

Within LASUTH, the director is considering conversion of both medical and surgical units from bungalows of slightly over 60-bed combined capacity to a storey building each in order to double the capacity of both units to over 120 beds. This is expected to enable the hospital to accommodate more needy patients than it currently does.

“I think the way forward is to expand our emergency units and my own prescription is that the spaces should be doubled. Our current surgical emergency unit should go up one floor with equal number of beds so that we have a total of 60 beds. Our current medical emergency

will go up another floor and double the numbers of beds [from about 30 currently],” Fabamwo said in an exclusive interview with BusinessDay. “Also lot of them [patients] in surgical unit, for instance, are neurosurgical cases. They are long-stay patients. What we really need is a spill-over ward where we can keep these kinds of cases which will be in for a long time but we don’t have that. So they clog up our emergency spaces and block ways for others and we can’t throw them out on the street because they still need some form of intensive care,” he said.

While lack of bed space is a core factor that leads to long, often traumatic wait by patients at emergency centres, other factors that complicate emergency response include over-subscription of available facilities, conditions requiring long stay, shortage of health professionals and poor adherence to protocols of easing patients’ flow from emergency units to main wards of speciality treatment, Fabamwo, a professor of Obstetrics and Gynaecology, explained.

As at 11am on January 2, all 37 beds in medical emergency unit were occupied with only one of 30 beds in surgical emergency vacant, according to data reeled out by the CMD. In the midst of that, Nigeria’s medical brain drain has equally taken a toll on the quality of care available.

Where a typical 30-bed ward should be overseen by five nurses, in the ratio of a nurse to six patients, LASUTH unfortunately grapples with a maximum of two during the day and one nurse at night.

•Continues online at www.businessday.ng

Nigerian banks’ loans to private sector among lowest in the world BALA AUGIE

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rivate sector loans

by Nigerian banks are only a drop in an ocean when compared with emerging and frontier market countries, which underscores the country’s slowing economic growth.

As at December 2018, Nigerian banks have lent $43 billion to the private sector.

That compares with South Africa ($242 billion), Indonesia ($404 billion), Mexico ($422 billion), Turkey ($525 billion), Brazil ($1.15 billion), India ($1.36 billion), and China ($21.92 billion), according to recent data from KPMG. Economists across the globe have agreed that efficient provisioning of credit has a positive and significant effect on the output and employment opportunities while a low level of financial development and its attendant inefficient private credit system distort economic growth.

The Nigerian economy

expanded by 2.28 percent (based on third quarter 2019 figures), which is lower than the population growth rate of 2.61 percent. The country’s per capita income of $2,236 is one of the lowest in the world.

Unemployment rate is at a high of 23 percent while over 50 percent of the country’s 200 million people live on less than $1.28 a day. The country has overtaken India to become the poverty capital of the world.

Inflation rate rose to a 17-month high of 11.85 percent forthemonthofNovember2019 as prices of food items spiked on the back of a border closure by the Federal Government.

The Central Bank of Nigeria (CBN) in October last year hiked the minimum loan to deposit ratio (LDR) for Deposit Money Bank (DMBs) to 65 percent from 60 percent previously in its bid to revive the economy through increasing lending to the real sector and small businesses.

Continues on page 34 www.businessday.ng

L-R: Onyeche Tifase, president, Nigerian-German Chamber of Commerce (NGCC); Katharina Felgenhauer, head of delegation, German Industry and Commerce; Stefan Traumann, German consul-general; Gbenga Adebija, director-general, Nigerian-German Chamber of Commerce, and Peter Sengpiel, MD, Festo Automation Limited, at the official launch of the NGCC at the German Consulate in Lagos.

Oshodi Transport Interchange records 1.6m passengers

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frica’s foremost transportation icon, Oshodi Transport Interchange has recorded 1.6 million passengers in the first 250 days.

Managing Director of Planet Projects, Biodun Otunola disclosed this on Sunday whooe taking media executives on a tour of the facility He said the passenger traffic was recorded in Terminal 3, currently in full operations adding that terminals 1 and 2 are set to take off in the first quarter of the year.

Lagos State Commissioner

for Information & Strategy, Gbenga Omotosho described the project as beautiful adding that although he saw the project when the foundation was laid, the outcome is commendable.

He said the position of the Sanwo-olu administration is that all on-going projects must be completed to provide service to the people.

In a presentation to media executives, Otunola noted that the project’s viability will be determined by multiple streams of income including ticketing, advertisement and rentals from.retail sales

outlets.

He said the full activation of the project will enhance its viability.

Thanking the Lagos State Governor, Babajide Sanwoolu for his tremendous support since the inception of his administration, Otunola said there has been increase in the number of buses from 35 to 100 and the routes from three to four due to the support of the administration.

He said the increase in the buses enabled more riders to commute and helped to achieve the 1.6million passenger traffic in 250 days.

The facility tour, which covered first to third terminal, included the reception, ticketing booths, waiting areas containing 500 steel chairs and the loading bays where passengers embark on journeys.

While terminal 1 is designed for inter-city trips to other state capitals, terminal 2 will accommodate the Bus Rapid Transport service that will service Abule-Egba route.

Otunola urged governments across the federation to invest in transport interchanges which the majority of Nigerians use just as they invest in airports to serve the elite.

Nigeria’s refineries record N123bn losses in 10 months DIPO OLADEHINDE

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verywhere in the world, particularly in oil-producing c o u n t r i e s, t h e business of refining crude oil is an elixir for improved economic performance, provision of jobs for a large number of people, reduction of capital flight and building of a new set of industries, especially petrochemicals.

But in the case of Nigeria,

Africa’s largest oil producer, refineries are more of a drainpipe and a means through which few individuals enrich themselves at the detriment of the masses.

Data released on Thursday from Nigeria National Petroleum Corporation (NNPC) show the country’s ailing refineries had an operating deficit of N123.2 billion between January and October 2019.

Further analysis shows that throughout 2019, the

deficit in Nigeria’s refineries has been moving at a geometric rate. In January 2019, the refineries recorded a deficit N8.6 billion which skyrocketed to N18.89 billion in February. In March, the refineries recorded a much higher deficit of N34.9 billion which increased further to N59.9 billion in May 2019.

By June 2019, Nigeria’s refineries recorded an operating deficit of N77.4 billion which ballooned to N104.4 billion in August 2019. In September

and October, the refineries had losses of N111.5 billion and N123.2 billion, respectively.

The highest average capacity utilisation of the three refineries in an 11-year period from 2008 to 2018 was 26 percent recorded in 2009, while the latest data from NNPC revealed the three refineries currently operate at zero percent capacity utilisation.

•Continues online at www.businessday.ng

Risk-averse investors drive mutual fund AUM to N100bn in 2019 …as money market funds post 73.33% market share ENDURANCE OKAFOR

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igerian mutual fund industr y defied odds to post an asset under management (AUM) of almost N100 billion in the struggling 2019 economic year.

The country’s N85.42 billion AUM as at December 2011 surged by N884.93 billion to post N970.35 billion as at December 2019, according to data compiled from the Securities and Exchange Commission (SEC).

Rising from N644.56 billion

at the beginning of 2019, Nigerian fund managers’ total asset under management added N325.79 billion as at year-end, representing a 50.54 percent growth.

The strong growth in Nigeria’s AUM is driven by robust growth in low-risk investment funds – money market, fixed income and bond funds.

This reflects the conservative investment strategy of investors packing cash to mutual funds as they reckon Nigeria is somehow a risky market.

“Such a huge percentage

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of mutual funds in money market instruments speaks to the anomaly of high rates that we have witnessed in prior three years. This has discouraged directing flow of funds to risky investments, “Ayorinde Akinloye, an analyst at Lagosbased CSL Stockbrokers, said.

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The primary advantage is that they provide economies of scale, a higher level of diversification, and @Businessdayng

liquidity. But investors are required to pay various fees and expenses to manage the fund.

A breakdown of the 2019 data by SEC shows that the money market funds segment, which makes up 73.33 percent of the mutual fund industry in Nigeria, grew by 45.95 percent in the year under review as investors poured up to N224.01 billion into money market funds which have enjoyed double-digit returns for years.

•Continues online at www.businessday.ng

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FG explains how NLNG Train 7 project will make Nigeria gas hub HARRISON EDEH, Abuja

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ederal Government has explained that the Nigeria Liquefied Natural Gas Train 7 FID project signposts a major gas revolution for Nigeria, which would make the country a gas hub.

On several occasions, Nigeria has been severally described as a gas country more than crude resourced rich country, while investors are continuously looking for a pathway to explore Nigerian gas resources with a defined framework and policy.

Recall, the Nigerian Gas Policy clearly articulates the policy goals, strategies, and implementation plan of the Federal Government of Nigeria to reposition the country as an attractive gas-based industrialised nation through the prioritisation of local gas demand requirements.

“For starters, Train 7 means growth for the Nigerian oil and gas industry. Part of the project will guarantee gas supply in the upstream sector. This will open up new development opportunities in the industry,” Justice Derefaka, technical adviser, Gas Business and Policy Implementation to the Minister of State for Petroleum Resources, said in a statement.

He explained further noting, “As a nation, we have been looking to expand export markets for our more than 200Tcf of proven gas reserves in a bid to cut reliance on oil revenue already hit by a drop in global prices.

“Taking FID for train 7 will help our aspiration in line with the National Gas Policy for Nigeria to become one of the

world’s most important LNG gas hubs and help to leverage our abundant associated gas resources as well as further reducing the gas that would otherwise have been flared.”

In terms of kick off of the project, the project is expected to start in 2024, it will increase Nigeria’s LNG output capacity by 35% from current levels of 22.5 million mt per year to over 30 million mt per year.

The expansion project will enable us produce an additional 7.6 million mt per year of which 4.2 million mt will come from one new liquefaction train (Train 7), and 3.4 million mt will come from the debottlenecking of existing trains, he said.

From an investor point of view, Derefaka said the taking off of this Final Investment Decision (FID) was an indication that there was renewed hope and confidence of international investors, particularly those Nigeria has been doing business with over the years.

And the ministry is putting up a robust investor friendly initiative to attract more investors into the Nigerian gas sector.

On revenue drive, he said, “The train 7 project is expected to generate $20 billion in net revenue for the government and create 10,000 direct jobs during construction phase and 40,000 indirect jobs.”

In terms of local content, the project will also support the development of local engineering and fabrication capacity, he said, saying it would accelerate, “Access to infrastructure, a clearly articulated pricing path and institutional capacity strengthening.”

Godwin Obaseki, governor, Edo State (4th right), with migrant returnees who benefitted from the Edo State government empowerment programme, at a forum organised by the Edo State Taskforce Against Human Trafficking (ETAHT), in Benin City, Edo State capital.

Three days after, banks yet to comply with new charges …N2m sanction per infraction awaits offender HOPE MOSES-ASHIKE

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igerian banks may be calling for the Central Bank of Nigeria’s (CBN) hammer as they have failed to comply with the new directive on bank charges, which took effect on Wednesday, January 1, 2020.

The CBN on December 22, 2019, reviewed downward most charges and fees for banking services as contained in the new Guide to Charges by Banks, Other Financial, and Non-bank Financial Institutions, with effect from January 1, 2020.

BusinessDay investigations show that banks still maintained their old charges as at Friday, January 3, 2020. For instance, a customer from Mazama, Lagos, said she transferred N10,000 from Access Bank plc to First Bank and the former charged N52.50k from her current account.

“On Friday, I did another transaction, this time from Access

Hailing operators commend Lagos reforms in transport sector Josephine Okojie

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embers of Transportation Hailing Alliance of Nigeria (THAN), an association of top motorcycle operators in Nigeria - comprising of MAX, ORide, and Gokada, has commended Governor Babajide Sanwo-Olu for his unwavering commitment in getting rid of gridlock in the state.

The group appreciated the governor and his team for not relenting in taking on the daunting challenges of transportation in a fastgrowing mega city like Lagos.

They assured stakeholders in the state’s transport industry of their continued cooperation and support for the development of the sector in the state.

“Our goal as an industry is to align quickly with the Government on an agreeable framework,” Adetayo Bamiduro, CEO, MAX said in a statement made available to BusinessDay. “ Fo r u s , t h i s m e a n s both levies that are feasible and partnering to deploy technology infrastructure that helps the government achieve its broader vision of a smart city,” said Bamiduro.

Responding to a news

report that recently surfaced online, alleging racketeering and demanding kick-backs

by Government officials, the association condemned the report in the strongest possible terms.

They describe the report as lacking all the basic ethics of journalism.

“There was not a single credible and identifiable source quoted in the entire report that tied to the crux of the allegation. Instead, the author built alternative facts by stringing totally unconnected stories and sources to paint a picture of exploitation,” said Fahim Saleh, CEO, Gokada.

Speaking on other developments in the industry and outcomes from the association’s recent meeting, Seun Alley, director of policy and partnerships, ORide, said: “As a group, we are excited about 2020 and the potential for growth for our individual businesses, particularly within a huge city like Lagos.”

“Our goal remains to continue to deliver on our mission of safe, reliable and affordable transportation for everyone, and as a group, we promise to raise the bar, even for the entire transportation industry in Nigeria,” he said.

… two lenders issue compliance notice to customers

Bank to Zenith Bank and I was charged N52.50k. on Thursday, January 2, I bought things at Shoprite with my Access Bank debit card and I discovered that I was charged N51 for using PoS. This is not fair. The banks should stop this charges,” the customer, who refused to mention her name, said.

Efforts to reach Herbert Wigwe, group managing director/ CEO of the bank to respond to the development failed, as he could not respond to his call and text message.

However, Uju Ogubunka, president, Bank Customers Association of Nigeria (BCAN), said if the banks were still using the guide to bank charges, they were overcharging customers and that showed disobedience to the regulators.

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

It is stated in the revised guide to bank charges that any breach of the provisions of the new Guide carries a penalty of N2,000,000 per infraction or as may be determined by the CBN from time to time.

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

Uche Olowu, president/ chairman of council, Chartered Institute of Bankers of Nigeria (CIBN), is of the view that banks cannot flout regulation, saying it could be that banks have not configured their system to begin to charge appropriately.

However, two lenders have issued commencement notification to their customers. Part of the messages from Fidelity Bank read: “In line with the Central Bank of Nigeria’s (CBN) directive

to implement provisions in the Revised Guide to Bank Charges (RGBC), we wish to inform you about the reduction in charges for the following transactions effective January 01, 2020”.

First Bank stated: “Following CBN’s revised Guide to Charges

by Banks, Other Financial and Non-Bank Financial Institutions, charges on our electronic banking channels have been reviewed downwards and would take effect from 1 January 2020. You can now carry out more transactions at reduced charges”.

Banks are required to log every complaint received from their customers into the Consumer Complaints Management System (CCMS) and must generate a unique reference code for each complaint lodged, which must be given to the customer. Failure to log and provide the code to the customer amounts to a breach and is sanctionable with a penalty of N1,000,000 per breach, the CBN said in the new guide.

ECOWAS will focus on regional integration programmes in 2020 – Official

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… pledges support to Guinea Bissau post-election

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COWAS Commission says its focus in 2020 will be on the implementation of regional integration programmes and monetary policies.

Aderemi Ajibewa, the commission’s director of Political Affairs, said this in an interview with the News Agency of Nigeria on Friday in Abuja.

He noted that focus on the implementation of the regional integration programmes and policies were in furtherance of the directives of the Authority of ECOWAS Heads of State and governments.

Ajibewa said that the authority had at its 56th Ordinary Session held in Abuja on December 21, instructed the commission to implement the policies.

According to Ajibewa, the attention will be on the implementation of socio-political, economic, monetary, and humanitarian policies as well as

programmes aimed at promoting the free movement of goods and services through the African Continental Free Trade Area (AFCFTA), energy and infrastructure, among others.

“With respect to what ECOWAS will be doing in 2020, the Communiqué of December 21 in Abuja has been given a backing to that.

“So, it can be looked at from the socio-political, economic, monetary as well as the humanitarian dimension. On the respect to the issue of the implementation of the regional integration programmes, these would be implemented in 2020 against the backdrop that the macroeconomic environment in member states would be structured along the transformation of their economies, to facilitate achievements of a monetary union by 2020.

“Also, on the creation of the monetary union, it also seem

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that efforts have been made

by Member states in 2020, as directed by the heads of state,” Ajibewa said.

He said the proposed symbol of ECOWAS on the single currency, Eco, would be adopted and not only that, it would also be seen to align with the Central Bank of West Africa.

“So, regarding the single currency, we have all listened to the various issues going on UEOMA, Authority of Heads of State and Government, and within the ECOWAS , and both organisations would work together to facilitate its integration into the ECOWAS Monetary zone, that is ECO. “With respect to the free movement of goods and services, ECOWAS has expressed in the communiqué that the efforts on the issue of the AfCFTA would be resolved.

“Some areas are still lingering over there, and that would @Businessdayng

be resolved so that a single common offer could be sent to the African Union Commission,” he said.

The director said that with respect to other areas, ECOWAS had made a steady progress on the issue of ECOWAS Service Policy Review.

He noted that this has also helped in arriving at a common position on the schedule of specific commitments in this area, and this would be further intensified in 2020.

With respect to the energy and infrastructural development, he said ECOWAS would also intensify its commitments with member states in 2020.

Ajibewa said collaboration with member states to step up on implementation of the regional structured projects, would help in opening up some countries and ensuring seamless intracommunity trade, and enhance security. (NAN)

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The Metropolitan Club – If you think you are surrounded by idiots (2)

Bashorun J.K Randle

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hirty years later, while the Metropolitan Club is celebrating its 60th Anniversary, the challenges are undiminished. Neither is the mission diluted. Even if we dispute the suggestion that the club is surrounded by idiots, we cannot fail to recognise that the nation is under threat from serial political upheavals. Whatever standards prevailed when the club was founded have been subverted and compromised.

Everything around us has deteriorated.

What has set in is PTSD (Post Traumatic Stress Disorder) as we grapple with decay, decadence and infrastructural collapse – without boundaries.

Is it conceivable that even before the founding fathers exited in glory, the foundations were already fraying at the edges? From the internet, Google has availed us of the outcome of case studies, carried out by “The Asian Aspiration”, of ten countries in East Asia – China, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam.

There is not much evidence that The Metropolitan Club has directly intervened in the management of Nigeria’s economic or financial affairs. Hence, if guilt is to be ascribed to the Club as an institution or the members as individuals, it can only be by default!!

According to Dr. Kingsley Moghalu, a former Deputy Governor of the Central Bank of Nigeria (non-member of the

club) and a presidential aspirant at the last elections: “Nigeria is a good example of development statis and retrogression. The country’s average nominal GDP per capita between Independence in 1960 and 2018 is U.S. $1736 according to the International Monetary Fund [IMF]. It is ranked 157 out of 189 countries in the Human Development Index of 2017. In 2018, The World Bank ranked Nigeria 152nd out of 157 countries in its Human Capital Index and Nigeria is now ranked the “poverty capital” of the world by the World Poverty Clock, with 92 million of its 200 million people living in extreme poverty. All of this is largely due to poor governance and weak, market unfriendly economic policy and business environment.”

The Metropolitan Club is not guilty.

Not even plea bargain!! I have been advised by my solicitors that since I did not join the Club until 9th May 1983, I cannot be held personally liable for whatever the club did (or failed to do) between the date (13 October 1959) when it was founded and the date I was accorded a membership number R24.

Over the last thirty-six years of being a member of the club and having had the privilege of interviewing and engaging the founding fathers, I must give them kudos for their foresight. Ab initio, they appear to have limited their role in the affairs of our nation to being referees or umpires in the expectation that everyone would play by the rules.

Within the premises of the club they accommodated different points of view without letting matters deteriorate into a vicious and toxic environment. It is to their credit that they appreciated that national institutions constitute the anchor of democracy and good governance. Hence, they must be protected and nurtured. As the founding President of the Club, Sir Adetokunbo Ademola wore a second cap - as the Chief Justice of Nigeria. Hence, law and order were right at the top of the list. It was not

by co-incidence or happenstance that amongst the other founding fathers were Sir Louis Mbafeno (Supreme Court) and Justice Charles Dadi Onyeama (Supreme Court) both of them were old boys of King’s College.

The Founding fathers, without exception were sufficiently alert to appreciate that Nigeria was in the cusp of history and that what the British handed over on 1st October 1960 was a fragile nation and the democracy that came with it was already labelled with “fragility” stamped all over it together with the health warning: “Fragile. Handle with care. Breakage is dangerous for the health of the nation.”

They also assessed the other risks accurately – Democracy may fail and the institutions may malfunction. Conflicts would arise – some would be trivial while others would be really serious.

Rage may insist on hoodwinking and bamboozling outrage. it may rapidly deteriorate – no longer a case of two kids (or two generals) quarrelling.

It is tempting to believe that democracy is impregnable and sacrosanct.

However, the Greek philosophers Plato, Socrates, Aristotle etc. were the first to beam their search-light on its frailties and its vulnerability especially when invaded and assaulted by a demagogue (or several demagogues operating across vast territories in various jurisdictions).

Incidentally, long before the upheaval on 15th January 1966 when the first military coup took place, the warning signals were already flashing.

In choosing the first Nigerian to head the Army, Brigadier Babafemi Ogundipe, the most senior in rank and most professional among the contenders was the preferred choice of the British. The Sarduana of Sokoto, Sir (Alhaji) Ahmadu Bello, Premier of The North plumped for Brigadier Zakariya Maimalari (a fellow Northerner) or Brigadier-General Samuel Ademulegun while Rt. Hon. Dr.

‘

Over the last thirty-six years of being a member of the club and having had the privilege of interviewing and engaging the founding fathers, I must give them kudos for their foresight

Nnamdi Azikiwe, the President of Nigeria chose his kinsman, Major-General Johnson Aguiyi-Ironsi.

Apparently, it was one of the founders of The Metropolitan Club who broke the deadlock – and Major-General Aguiyi-Ironsi emerged as the winner.

That was the outcome of the respective consultations by the Prime Minister, Sir Abubakar Tafawa Balewa; Sir (Alhaji) Ahmadu Bello and Dr. Nnamdi Azikiwe with the one person each of them trusted absolutely.

It was the late Chinua Achebe who has succinctly captured the essence of the Tuesday Lunch at The Metropolitan Club, even though he was never a member. I have no recollection of his ever being a guest either. “A man who calls his kinsmen to a feast does not do so to redeem them from starving. They had food in their own houses. When we gather together in the moonlight (or broad daylight) village ground, it is not because of the moon (or the sun). Every man can see it in his own compound.

We came together because it is good for kinsmen to do so. Therefore, let us continue with the team spirit and enjoy the power of togetherness. Let’s smile not because we don’t have problems but because we are stronger than the problems.”

However, the challenge is where do we draw the line?

Dr. Kingsley Moghalu has thrown down the gauntlet by reminding us that: “Asia achieved rapid poverty reduction and transformed hundreds of millions of lives within a generation. Africa has a population problem, with 1.3 billion people, projected to double by 2050 and with 70 per cent of its youth population unemployed. Without real development, the continent’s youth bulge could explode with extremely negative social and other consequences.”

Randle is Chairman/Chief Executive JK Randle Professional Services Chartered Accountants

New Year’s Day address Fellow Lagosians. ith gratitude to the Almighty, I greet you all and welcome you to the New Year. The year 2020 will bring joy and prosperity to every household in Lagos and Nigeria.

As experience has shown, there is no better moment than the end of one calendar year and the beginning of another to reflect on how well we have realised our aspirations and discharged our duties in the just concluded year.

In addition to reflection, this period also presents us with a perfect opportunity to chart a path for the New Year. It is expected that our learning from the shortcomings of the past year will provide a solid foundation for the successes of the New Year.

My good people of Lagos State, I am deeply grateful for the confidence you have reposed in my party, the All Progressives Congress (APC) and me through the ballot box, and for the privilege of being here at this time.

Our administration came into office six months ago with high hopes, fully determined to justify the expectations and the confidence of the overwhelming majority of Lagosians, who had given us a sweeping victory at the Polls.

Looking back, there is no doubt that the task has begun in earnest, and the evidence of progress so far recorded is all around us, even in the face of the challenging realities of governance confronting us daily.

The welfare of the people, it has been said, is the supreme law in politics. It is therefore my pleasure to inform you that just yesterday, the final day of 2019, I signed into law the 2020 Lagos

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State Budget.

Our 2020 budget is a painstakingly prepared people-oriented document that summarizes our administration’s plan to move Lagos forward this year, and outlines our path to achieving the greatest good for the greatest number of people.

Let me specially thank the Lagos State House of Assembly for working hard to consider pass the budget in good time. You have by this action signalled the seriousness of the Lagos State Government to carry on with the urgent task of people-centric governance.

As we begin the New Year, I would like to reiterate our vision for a Greater Lagos - pertaining to critical areas of governance embodied in our T.H.E.M.E.S Agenda, namely: Traffic Management and Transportation; Health and Environment; Education and Technology; Making Lagos a 21st Century state; Entertainment and Tourism; Security and Governance.

Fellow Lagosians, from the feedback I have consistently received from you, it is clear that transportation ranks very high on the list of issues that concern you.

Our administration identifies strongly with these concerns, and we are doing everything we can to improve transportation and traffic situation across the State. It is unacceptable that Lagosians spend a significant part of their time on the road, caught up in traffic jams that put productivity and security at risk; as people travel between their homes and work places.

It is for this reason that we are seriously building on the efforts of previous governments in the quest to significantly improve the transportation experience in the State. www.businessday.ng

In this regard, we are focusing on the following: A massive programme of road repairs, which we have tagged ‘Zero Tolerance for Potholes Initiative’. Many of you will already have started seeing and feeling the impact of this on major roads and highways.

Our Public Works Corporation (PWC) has been working round-the-clock to ensure no stretch of road is left untarred.

Let me use this opportunity to appeal for your patience and understanding in this regard. For every road that is being worked on, there will be others that require work.

We do not have unlimited resources, and also cannot do everything at once, but I can assure you that we have a robust plan and timetable in place to ensure every part of the State benefits from this exercise as quickly as possible.

As part of the Roads Repair Programme, there is a Junction Improvement Scheme to resolve bottlenecks at critical roundabouts and junctions. We have identified 60 of such junctions, and in the first phase, upgrades have begun on four of them.

We are prioritizing investments in infrastructure to shift the burden of transportation away from the roads, and onto alternative means of transportation: our waterways and rail.

Lagos is blessed with a large body of water that has been under-exploited as a means of moving people around safely and efficiently.

That is now set to change, with the work being done by the Lagos State Waterways Agency.

In terms of rail, the pace of work on the Blue Line from Okokomaiko to Marina will peak this year. We intend to launch the first phase before

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BABAJIDE SANWO-OLU the end of 2021. Work will also commence on the Red Line, connecting Agege to Ebute- Meta this year.

We are also making progress on the plans to deliver new roads and highways, including the all-important 4th Mainland Bridge for which the procurement process is underway, the Agege Pen Cinema bridge, the Lekki Regional Road, Aragadun and Agilaso in Badagry and several boundary roads in Alimosho Local Government.

Fellow Lagosians, for Lagos to realize its true potential as a megacity that is admired around the world, we need to set new standards of investment in health and education, to cater to the needs of our rapidly growing population.

To this end, we are, in this 2020 Budget, the first budget of the new decade, almost doubling our spending on healthcare. Those funds will go into building new healthcare facilities across the State, upgrading existing ones, and further investing in a robust and universal health insurance coverage scheme for Lagosians.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Sanwo-Olu is the governor of Lagos State

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What will happen to asset prices in 2020?

Patrick Atuanya

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he best performing asset class in the past decade (2010 – 2020) was Bitcoin which was up some 9,000,000 percent, according to estimates.

For the first year (2020) of the next decade which assets are set to outperform and what clues should investors be looking at for direction?

In a sense it is probably the most difficult it has been in a while to be an asset or fund manager today in Nigeria and trying to generate alpha.

For one the regular asset classes have seen subpar returns in recent times.

Treasury bill and Bond yields have collapsed and for some tenors are well below inflation.

The stock market has gone nowhere in 5-years and was down again in 2019, while Real Estate is tricky and largely not liquid enough

to attract interest from large domestic fund managers.

Yet Pension Funds (the largest pool of domestic institutional funds) in the country have assets under management of about N9 trillion which is growing at over N300 billion per annum which they need to deploy.

There’s a further $2bn - $3bn controlled by other domestic fund managers which also need an outlet some of which can be seen in the explosive growth of money market funds in recent times.

Looking at the investment landscape however a couple of broad themes will continue to shape the thesis in coming years.

One of these would be demographics growth and the demand that would flow directly from it.

With a population set to exceed the 200 million mark and growing at about 2.5 percent per annum, Nigerians will need food, housing, connectivity, data, energy and so on.

This means your Dangote Cements, MTNs, Nestles will continue to see organic growth in revenues.

These may not be in double digits but even high single digits growth will eventually translate into the bottom line and perhaps multiple expansion.

What this means is that fund managers have to return to being active managers and stock pickers if they want to outperform their peers or inflation in the coming years.

What about the fixed income market?

Regulatory induced depression of yields is unlikely to be sustain-

able over the medium to long term.

In that sense duration and timing is key for fund managers playing in this space over the next 18 months.

With the Federal Government still needing to finance a large chunk of its budget deficit domestically and deficits set to be a major feature of the national budget for a while to come due to gaps in tax collection, we see room for yields to normalise to positive levels in real terms soon.

The Private Equity space is another area where opportunity will abound for deals to unfold.

The key thing about deals in this space will be that, those able to solve any of the major problems faced by the Nigerian economy and by extension the growing population, will be winners.

This will range from Fintech solutions for financial inclusion to productivity apps for farmers and anything that will solve the vexing issue of getting land/property titles and the shortage of affordable Real Estate.

For investors looking to the Financial Services space the stance of the regulator and the fast adoption of innovation by lenders will determine valuations going forward.

Banks have to be nimble to respond to a rapidly evolving sector with many new Fintech entrants and some new brick and mortar banks (e.g. Globus) recently licensed, which will make for intense competition in coming years.

How will the sector grow to match the potential in the space given the large number of un-

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Fund managers have to return to being active managers and stock pickers if they want to outperform their peers or inflation in the coming years

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

In 2020, do not be held hostage to ideology

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espite the politics and the constant gbas and gbos between political parties on performance while in office no government has been completely bad. Every political party always claims this government is clueless, or that government did nothing for 16 years, or the other government destroyed the economy, and so on. The reality is a lot more nuanced. Every government since independence has done some good things, some not so good things, some bad things, and some very bad things. Every government has been completely useless in some areas and pretty good in other areas. In my opinion there are two questions that really count; is governance and policy getting better and are we moving the needle forward fast enough in terms of the quality of life of ordinary people.

If the answers to those two questions are positive then I can live with that.

With the caveat that people are not jailed arbitrarily, abused, or killed in the process of course.

The idea of some good and some bad is also true for President Buhari.

Despite what some of the naysayers may think, President Buhari has actu-

ally done some very good stuff. The most recent example is his government getting the final investment decision for the NLNG train 7 over the line. It is difficult to argue with that as it has been a long time coming and moves Nigeria further down the path of becoming a major gas player. A very good thing. In fact, if you think about it, in areas where you need government to go big this government has not been that bad.

The failures have been in areas where you do not need government and where you need the private sector to take the lead. I could list out many instances mostly relating to prices and trade but there is no need. The classic example of this failure is in infrastructure. Nigeria needs tens of billions of dollars’ worth of investments in infrastructure every year for at least 30 years to close our infrastructure gap.

The government does not have the money, and everyone knows it, and desperately needs the private sector to take the lead. Yet the government has stubbornly stuck to its historic policy of controlling everything. All the talk about amending the exclusive legislative list has fallen on deaf ears. www.businessday.ng

ECONOMIST

The strategy has been “give us money let us do it” which given the reality of the country we are talking about is not something that many investors want to hear. With a few exceptions of course.

If you are to judge this government on my two key questions then wahala dey. Is governance getting better? You can maybe argue about that. What you cannot argue about is that the quality of life of average Nigerians is not improving. It may even be getting worse.

This is not conjecture but based on the cold and calm statistics. My advice for the government in 2020? Leave ideology behind in 2019. If Nigeria is to work then pragmatism is needed and the private sector must drive part of the process. Leave all the price control this and trade restriction border control that in 2019. In many instances leaving people to their devices is the best thing to do. Also, rule of law please. Thank you.

Governance does not begin and end with the federal government of course.

State governors cannot be spared. The same two questions apply to them too.

Even if the space for policy is a little bit more restricted there is still potential to move the needle. Some governors

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banked and financially excluded people? What other shock and awe type regulations are to be expected from the Central Bank, which could put a dampener on earnings or valuations?

The CBN recently came out with directives for banks to cut fees charged on a range of products and services, while also penalising banks that failed to meet its regulatory minimum loan to deposit ratio (LDR) levels by sterilizing north of N1trillion from banks.

This is likely to be a major headwind for bank stocks at least until those who are able to innovate their way out of the regulations (meant to boost lending in the economy) are able to do so and is reflected in their profit numbers.

Whatever the case may be we foresee a further segmentation of the banks not just by tiers as currently is the case but by those who are able to generate profits through innovations in a tough and evolving environment and those who are increasingly left behind.

Investors must continue to watch these trends and quickly respond to a change in regulations or policy to take advantage for the benefit of the funds they manage.

In the coming years the direction of asset prices will be influenced by a number of factors, however only those nimble enough to understand and swiftly embrace change will profit!

NONSO OBIKILI

appear to be trying to make a difference while others are fooling around on a quaballistic level. As a whole we seem to be hearing only the same old stories on how the governors need more revenue and so on. Not that they do not need more revenue, but we also need to see more impact. At some point they have to turn off the political mix tape and play the governance mix tape. And of course, there are local government chairpersons, senators, representatives and so, but the space for this column is limited. The advice is the same though. Let 2020 be the year of pragmatism.

Dr. Obikili is the chief economist at Business Day

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EDITORIAL Publisher/Editor-in-chief

Frank Aigbogun editor Patrick Atuanya

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)

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GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

Deploy borrowed funds to self-funding and revenue-generating projects

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owards the tail end of the year 2019, discourse on Nigeria’s debt profile exploded in the social media, especially Twitter, when former President Olusegun Obasanjo spoke on the potential risk of bankruptcy facing Nigeria because of its penchant for loans under the current administration. The words of the former president elicited reactions from Nigerian and government officials seeking to refute or approve his claims on the possibility.

The concept of debt is inherent in all aspects of life across individuals, corporates, government agencies, and also the global space; what is certain, however, is that no one enjoys accumulating debt as it threatens the success of any entity if not disciplined in its management.

Hence, when incurring obligations, it is wisdom to channel such funds into productive activities that would generate enough revenue knowing well enough that taking a loan today means upfront consumption, so wasting it means creating a vacuum of income

in the future.

Nigeria’s public debt portfolio as at 30 June 2019 had increased to $83.88 billion (N25.70 trillion) at an official exchange rate of $1 to N306.40 with total external debt accounting for 32.38 per cent and total domestic debt, 67.62 per cent respectively, according to data by the debt management office. The current debt level of Nigeria stands at 31.46 per cent above levels as of June 2015 ($63.8 billion) when the exchange rate was N155 to a dollar.

Ironically, there has not been justifiable growth in the Nigerian economy as our measure of economic performance GDP as barely grown at two percent in the last four to five years. The situation begs the question, for what did the nation use the borrowed funds? From performance, we can infer that these funds lacked discipline in management and the authorities used them for the wrong causes.

“There is yet no cause for alarm. -This is because Nigeria has a debt ceiling of 25 per cent in the total public debt stock to Gross Domestic Product (Debt/GDP), which it has operated within. The ratio for Dec.

31, 2018, and June 30, 2019, were 19.09 per cent and 18.99 per cent respectively.” These were the words of Lai Mohammed, Nigeria’s minister of information at a press briefing in Lagos.

The minister is missing the point. Nigeria’s debt to GDP ratio may be within acceptable limits but is not a justification to keep borrowing with little or nothing to show for it.

“A well-calibrated debt for infrastructure and other developmental goals could be very positive. However, we do not need to speculate. We need to examine our historical experience. Everyone knows that our governments are notoriously deficient in serious and adequate discipline and most often lack competence and consistency as well,” ex-president Olusegun Obasanjo stated.

Projects like the Lagos light rail which can fund itself and repay its future income vacuums are reasonable justification for government borrowings, but sadly, the light rail has remained a rocket science.

The downside to this is that when we keep funding activities or projects without the ability to fund itself and generate revenue, we keep using up more than 50

percent of government revenue – which we should deploy to grow the economy – to service debt as the case is today. Such a position has proven to be detrimental to the wellbeing of the people and the economy at large.

Fuelling further our thirst for debt would likely position Nigeria in a debt overhang situation – a condition where the existing debt is so high that the country cannot easily borrow more money, even when that new borrowing is a good investment that can pay for itself. This can lead to under-investment.

With the new $22.9 billion – a balance from $30 billion loans approved in 2016 ­– loan yet to approved by the National Assembly, how well can we trust the federal government to deploy such fund to infrastructural development after it failed to use the initial $7 billion to infrastructure development?

With about 77 percent coming from China, Nigeria risks losing whatever collateral pledged to the control of the Chinese upon default. We must, as a country, be intentional and disciplined in concentrating borrowed funds into viable projects that will reflect on economic performance.

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The dystopia of Lagos, Nigeria’s commercial hub, calls for special interventions global Perspectives

OLU FASAN

W

hen the Financial Times interviewed me last year for its special report on Nigeria entitled “Investing in Nigeria”, it specifically wanted to know my views about the situation in Lagos State. “Has Lagos stopped working?”, David Pilling, the newspaper’s Africa Editor, asked me.

The question implied, of course, that Lagos used to work. In truth, it once worked. But that was ages ago – a distant memory! Yet, some Nigerians still remember the 1950s, 1960s and early 1970s when traffic worked in Lagos, when night life was without hazzles and when many basic amenities were available and worked well. For many, in those days, Lagos was, as one writer recently said about old memories of California, a “litany of platonic ideals of human happiness”, with the prevalence of opportunities, entertainment and prosperity.

But let’s put those blissful years in context, an important context, in fact: demography. In 1960, Lagos had just 200,000 people, the population reached 1.4m in 1970, but today, in 2020, it is 22 million. One study says that the population might be 30 million by 2040. More scarily, according to Global Cities Institute, Lagos would have a population of 88 million by 2100, making it the world’s most populous city. But before we worry about 2040, let alone 2100, we have the immediate problems of today, when Lagos’s population of 22 million has turned it upside down. The stark truth is that Lagos that once worked is no longer working!

From the litany of platonic ideals of human happiness, we now have a dystopian reality, a litany of human

woes: endless blackouts, lack of decent houses for the vast majority, crippling traffic jams, terrible roads, shocking sewage and waste conditions, not to mention insecurity, joblessness and a multitude of other joy-sapping problems associated with Lagos life.

Lagos is, indeed, an oxymoron. Here is a state with a GDP of $136 billion, the 7th largest economy in Africa, and a nominal average income per capita of $5000, which is twice the Nigerian average. Yet, two out of three people in Lagos State live in slums, according to the World Bank. What’s more, as a recent analysis by the Deutsche Bank showed, Lagos had the lowest quality of life among all the cities in the world in 2019.

But why is Lagos not working?

Clearly, the overarching problem is inadequate infrastructure to mitigate the exponential population growth. A state with a population of 22 million can’t have infrastructures that can barely serve 10 million people. Of course, given that every public governance problem is a failure of policies and institutions, it is clear that the problems of Lagos State are entirely man-made: it’s a failure of governance. Put simply, both the federal government and the Lagos State government have failed the state.

Take the federal government. It should long have granted Lagos a special status, with a dedicated federal grant. Lagos State is the commercial nerve centre of Nigeria; its GDP is 25% of Nigeria’s; it is the highest source of non-oil revenue for the federal government. I told the Financial Times that “Lagos should keep more of its relatively healthy tax base” and that “Like the oil-producing states, Lagos needs a bigger slice of the federal budget”.

The six oil-producing states get a 13% derivation revenue from the Federation Account in recognition that the oil revenues are “derived” from these states. But Lagos, which accounts for much of the corporate, VAT and trade taxes that accrue to the federal government is left alone to struggle under a heavy burden of infrastructure crisis.

It is short-sighted to have ignored the economic value of Lagos to Nigeria, its role as the country’s commercial hub.

But there is also the political value.

Lagos is Nigeria’s melting pot, attracting people from all over Nigeria who are looking for opportunities, settlement and a better life. To most ordinary Nigerians, living in Lagos is the closest thing to living overseas! But as people move from all over Nigeria to Lagos, that puts enormous pressure on the state’s inadequate infrastructures.

It behoves the federal government to recognise the burden that Lagos carries on behalf of the country and grant it a special status and federal support.

Sadly, in 2016, for the second time in three years, the Senate rejected a bill to grant Lagos a special status. Partisan and ethnic politics were put above national and social cohesion.

However, let’s be clear, federal neglect is not the only cause of the infrastructure crisis in Lagos State. I also told the Financial Times that Lagos’s infrastructural problems “can’t be tackled without significant federal government and private-sector interventions”. Surely, as I have argued above, ahead of restructuring Nigeria, an imperative, the federal government should grant Lagos State a special status and give it a form of “derivation revenue” to support the state’s infrastructural development. But the second form of intervention is also important, even more important: private sector investment. However, this is something that must be incentivised by the state government through good governance.

Yet, despite all the hype, Lagos State has not been transparently and effectively run. As a result, first, it is not attracting as much internally-generated revenue, IGR, as it could. For instance, according to an analysis, only 600,000 of those liable to pay tax do so and, as a recent BusinessDay investigation revealed, much of the revenue collected actually “goes into private pockets”.

Second, the state is not attracting sufficient private capital and investment to fund infrastructure projects.

Indeed, since Lateef Jakande, the state’s first civilian governor, launched the potentially transformational Metro Line project in 1983, which was torpedoed by the military regime of now President Buhari, no serious initiative has emerged to tackle the state’s traffic, housing and other infrastructural

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Of course, given that every public governance problem is a failure of policies and institutions, it is clear that the problems of Lagos State are entirely man-made: it’s a failure of governance

problems or to attract significant foreign investment.

To be sure, political wrangling and policy inconsistency have been a bane of governance in Lagos State. For instance, in 2016, the government of Akinwunmi Ambode launched the Office of Overseas Affairs and Investment, also known as “Lagos Global” to make Lagos “the most desirable investment destination in the world”. But what became of the idea, what outcome did it achieve? Now, Ambode’s successor, Babajide Sanwo-Olu, is talking about T.H.E.M.E.S, an elaborate programme covering traffic management and transport; health and environment; education and technology; entertainment and tourism; as well as security and governance. But he knows, or should know, that his ambition to “make Lagos a 21st century economy” is just a pipe-dream without significant private capital and investment.

Yet, Lagos has a serious problem with governance. Its politics is closed; its governance is not transparent.

Lagos is a one-party state that has the semblance of medieval feudalism.

Everyone knows that the state governor, whoever he may be, is not his own man. He must answer to a godfather or a politburo. As the fate of Ambode, who was denied a second term, shows, a governor will fail utterly if he falls foul of the godfather, former governor Bola Tinubu, the party politburo or, even, the state bureaucracy, an extension of the party structure – virtually every Lagos State Civil servant is a card-carrying member of the ruling party, All Progressives Congress, APC! It is hard to see how an attractive destination for quality investment and international business such a state can be!

So, Lagos’s problems are mademade. The federal government neglects the state, and the APC runs it like a fiefdom. Yet to succeed, Lagos needs a special status and federal support; it must also be run well to attract significant local and foreign investors’ interest in its infrastructural development.

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

Board diversity: A key imperative

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iversity is the variation of social and cultural identities among people existing together in a defined employment or other setting. Discussions around diversity typically revolve around gender. Board diversity however entails cultivating a broad spectrum of demographic attributes and characteristics in the Boardroom with the intention of making the Board less homogenous. These include the following: Skills, expertise and experience: Having the optimal mix of skills, experience and expertise is important in ensuring that the Board of Directors is collectively equipped to guide the business and strategy of the company effectively.

Ethnicity: Ethnic diversity connotes a mix of individuals from various racial, cultural and religious backgrounds. The ethnic mix of a Board should ideally represent the area in which the company operates.

Age: Age diversity is often overlooked in the Boardroom. Board members tend to be older as many Directors equate age with experience. While older Directors provide a wealth of knowledge, younger Directors introduce fresh perspective into the Boardroom. Given the place of innovation and

disruption in business growth, a Board that will add value to the organisation cannot afford not to have the younger generation represented in its composition as this allows for adaptability and faster reaction to changes in the environment.

Geography: In an increasingly global world, neglecting this element of diversity would be particularly imprudent for a multi-national company as it may result in Boardroom perspectives lacking a robust understanding of the company’s operating environment. Similarly, any business that seeks to do business nation-wide should give careful consideration to achieving a good balance in the composition of its Board such that it is perceived as truly “national”.

Gender: Historically corporate boardrooms have been largely male dominated.

The benefits of gender balanced Board are now being recognised with 80 percent of buying decisions globally made by women.

“It is clear that boards make better decisions where a range of voices, drawing on different life experiences, can be heard. That mix of voices must include women” Lord Davies of Abersoch, CBE. Women typically tend to bring new perspectives to issues, ask more questions and pay significantly more attenwww.businessday.ng

tion to detail.

Many Boards have started to recognise the tremendous value women bring unto corporate Boards and are consciously giving priority to women when appointing new Directors. To ensure that this does not end up as mere tokenism, women need to properly equip themselves with the appropriate skillset that will enable them make valuable contributions to Board effectiveness. They also need to strengthen and deepen their networks to enable them take advantage of opportunities in this regard.

Independence: Independent directors bring a balanced perspective to the boardroom as they assess matters more objectively. They are also able to help the Board find a middle path when seeking to balance conflicting stakeholder interests.

The benefits of having a diverse Board cannot be over- emphasized. These include; More effective decision making - A diverse Board will take decisions more effectively by paying more attention to managing and controlling risk as well as having a better understanding of the company’s customers/ clients. The diversity of its composition will ensure that diverse perspectives are considered in decision making.

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Bisi Adeyemi Better utilisation of talent pool - A diverse Board is likely to possess different personal characteristics which lead to dissimilar leadership, thinking, emotional styles, risk preferences and behaviours. It also opens up wider networks and business connections to the Board.

Note: The rest of this article continues in the online edition of Business Day @https:// businessdayonline.com/ 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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In Association With

Johnson’s northern strategy

A Balkan betrayal Technology and society

To help England’s north, link it up Public spending on transport in the north is barely half what it is in the south-east. That must changemust change

H

AV I N G W O N scores of former Labour strongholds across the north of England in 2019’s general election, Boris Johnson is determined to offer his new voters something in return. “We will repay your trust,” he promised on a triumphant visit to his new turf on December 14th. Northerners have heard this kind of talk before. David Cameron’s government promised a “northern powerhouse” economy—only for the idea to fall by the wayside under Theresa May. After the Brexit referendum of 2016 there was much talk of the need to look after “left-behind” places that had voted Leave—instead the government spent three years focusing on its battles in Westminster. Yet with his newly remade Conservative Party, Mr Johnson relies on the north like no recent Tory leader (see article). If he is to keep his promise to improve life in the region, how should he go about it?

The north of England has been in economic decline relative to the south since the late 19th century. That is not something any government can reverse in five years. But Mr Johnson means to make a start. His fiscal plans allow him to spend up to £80bn ($104bn), 3.8% of GDP, on capital projects in northern constituencies over the next five years.

His first task is to jettison the idea, common in London, that the north is an economic monolith where everything is grim.

Prosperous cities like Manchester, Liverpool and Newcastle are almost unrecognisable from two decades ago. In 2017 (the most recent year for which data are available) Newcastle and Liverpool enjoyed faster growth in gross value added, a measure of output, than the capital. In 2018, according to IBM, a computing

Pessimism v progress Contemporary worries about the impact of technology are part of a historical pattern

F

giant, Manchester and Liverpool were among the top ten cities in the world for inward foreign direct investment.

The left-behind parts of the north are not its cities but its towns. Many have still not recovered from deindustrialisation under the Conservative governments of the 1980s. Their labour markets lag behind the rest of the country, with poor employment rates and lower wages. The clearest sign of this economic failure is that young residents are leaving.

Towns like Redcar and Scunthorpe have seen the number of resident 18- to 24-year-olds fall by more than 20% since the 1980s, while the number of over-65s has risen by 30% or more. Ageing populations have cut local spending power and put pressure on stretched local-government budgets as the demand for social care rises.

Northern towns are stalling even as their neighbouring cities are doing well partly because dire transport links make the likes of Manchester or Newcastle seem a world away from Wigan or Hartlepool. The transport infrastructure of the north has suffered from

decades of underinvestment. In 2018-19 government transport spending per person was £903 in London, against less than £500 in the north. In the past five years the government has spent more on transport infrastructure for 9m Londoners than England’s 15m northerners.

The consequences are clear.

In the south, Brighton has weathered the decline of its tourism industry by becoming an attractive place to live within easy reach of the capital.

Blackpool, a once-lively seaside resort in the north-west, is a byword for decline. Although it is closer to Manchester than Brighton is to London, the trains take 20 minutes longer and are a quarter as frequent. Inter-city connections in the north are a mess. By train, it is quicker to travel 250 miles (400km) to Newcastle from London than it is to get to Newcastle from Liverpool, just 120 miles away.

Buses are slow and pricey. And pity anyone without a ministerial helicopter if they need to get to Scotland. North of Newcastle, the A1 (a “strategic national road”, no less) in some places narrows to a

single carriageway that is often blocked by tractors.

Rail is just the start. According to firms surveyed by EY, a consultancy, ropy infrastructure, including power, internet connectivity and transport, is the largest reason for not investing in English towns. Better vocational training would mean that once residents of Blackpool arrive in Manchester, they would have more chance of getting a job. A comprehensive deal with the EU would be better for the north than the skimpy effort that Mr Johnson seems intent on dashing off by the end of 2020.

Giving more powers to English city mayors would help them draw up integrated regionaltransport plans. Although improving railways would be a long-term project, buses could rapidly be made better—perhaps in time for the election in 2024, when northerners will get to decide whether to cement their relationship with the Conservatives. The north does not need or want to rely on London to get back on track. If the government would only stump up the cash, the north will help itself.

ASTER, CHEAPER, better—technology is one field many people rely upon to offer a vision of a brighter future.

But as the 2020s dawn, optimism is in short supply. The new technologies that dominated the past decade seem to be making things worse. Social media were supposed to bring people together.

In the Arab spring of 2011 they were hailed as a liberating force.

Today they are better known for invading privacy, spreading propaganda and undermining democracy. E-commerce, ridehailing and the gig economy may be convenient, but they are charged with underpaying workers, exacerbating inequal-

ity and clogging the streets with vehicles. Parents worry that smartphones have turned their children into screen-addicted zombies.

The technologies expected to dominate the new decade also seem to cast a dark shadow. Artificial intelligence (AI) may well entrench bias and prejudice, threaten your job and shore up authoritarian rulers (see article). 5G is at the heart of the Sino-American trade war. Autonomous cars still do not work, but manage to kill people all the same. Polls show that internet firms are now less trusted than the banking industry. At the very moment banks are striving to rebrand themselves as tech firms, internet giants have become the new banks, morphing from talent magnets to pariahs. Even Continues on page 17

Monday 06 January 2020

BUSINESS DAY

17

In Association With

Borderline disorder

Donald Trump’s wall will irrevocably change America’s south-western border

Is it worth the cost?

O

N A CRISP clear morning in November Fidel Baca, a Customs and Border Patrol (CBP) agent in El Paso, was driving west on Cesar Chavez Highway, which runs alongside the Rio Grande. Mexico was just yards away, behind a few mesh fences and the reddish-brown trickle of river. An alert came on the radio telling him that a surveillance had camera had caught four people emerging from the river’s concrete channel on the American side.

Stopping by the side of the road, he pointed first to a couple of fresh footprints, and then, just behind them, to fresh wet sand atop the highway barrier: someone had just jumped it. The chain-link border fence behind the barrier showed a fresh cut.

Less than a mile away from where Mr Baca patrolled, a new wall is rising, and it will not be so easily sliced through. America’s new border wall is made of 30-foot-tall (18 in some places) steel bollards filled with concrete, sunk six feet deep into a concrete foundation and topped with fivefoot slabs of solid steel designed to impede climbing. Though American taxpayers rather than Mexico are paying the bill, and it is far from “beautiful”, Donald Trump is honouring his promise to build a wall along America’s border with Mexico.

Some Democrats argue that Mr Trump is merely replacing walls that already exist. That is not true.

When a 30-foot wall, impenetrable to wildlife and surrounded by a network of roads and lights, replaces a low fence, it really is a new structure, in much the same way that replacing a garden shed with a ten-storey office block would be. A journey from El Paso to San Diego makes clear just how deeply the wall will change the character of America’s south-western border. Emma Lazarus’s poem on the Statue of Liberty welcomes to America the world’s “huddled masses yearning to breathe free”. Mr Trump’s wall sends the opposite message.

On a map, El Paso appears to sit directly across from Ciudad Juárez. But in many ways the two cities are really one, separated by the border. Parents in Juárez send their children to America each day to private schools in El Paso, while professionals who work in Juárez often prefer to live in El Paso. Each day an average of around 80,000 people cross into America from Juárez by bus, car and on foot.

As of early December 2019, 27.5 miles of new wall have been built in El Paso, with contracts for another 24 miles expected to be signed soon. The CBP argues that the wall is particularly important in urban areas such as El Paso because it buys them time. When someone crosses a border in a remote area, Mr Baca explains, CBP has hours, perhaps even days,

to catch him before he reaches a place where he can blend in. He recalls that when he was seconded to a mountainous region in rural West Texas, “by the time you apprehend someone, they’ve been walking for three days, maybe five.

If we were tracking someone, you could smell them before you saw them.”

In cities, says Mr Baca, “we have seconds to minutes...People can just blend in once they reach the city.” Of course, no barrier is completely impenetrable. Smugglers have reportedly sawn through Mr Trump’s wall. But slicing through a chain-link fence is quick and easy; cutting through concretefilled steel bollards takes energy, probably multiple motorised saw blades and most importantly for the border patrol, a long time.

Gloria Chavez, the acting chief of CBP’s El Paso Sector, which includes all of New Mexico’s largely rural frontier, argues that “There’s a misconception that the wall was built to stop the flow. It was built to manage the flow. It’s a tool.”

What comes next for the wall builders? The next completely new sections will be in south-eastern Texas, and progress there might be difficult. Much of America’s border lands are public, but in Texas, land is mostly privately owned.

The government will have to buy it from landowners, which can be a tricky process.

A CBP official points out that records in south Texas are spotty, and ownership of many parcels unclear. During the last big wallbuilding fit in 2008, the official said they found one parcel in South Texas with 86 possible claimants (“we’ve introduced cousins to each other,” says the official). In some cases, the government has to seize land. That is unpopular everywhere, but especially in rural Texas, where distrust of the federal government runs deep.

The government’s use of eminent domain in 2008 led to hundreds

of lawsuits, some of which are still ongoing.

Farther west along the border, in Arizona, many are concerned about the wall’s environmental impact. Along the new sections of wall in Organ Pipe Cactus National Monument lie massive, fallen saguaro cactuses in sections—bulldozed for the barrier. Saguaro, with their chubby upturned arms, have a vaguely human look; the Tohono O’odham, the local native population, consider them embodiments of their ancestors. They can live for centuries. Some of those cut down were probably standing before Arizona was a state.

But the wall’s potential environmental harms extend well beyond fallen flora. Activists worry that water used in mixing concrete for the wall’s foundation will deplete precious desert aquifers, imperilling not just an endangered species of fish whose sole American habitat is Quitobaquito Springs, in Organ Pipe, but all desert life (a CBP official contends that his agency is not using any groundwater within five miles of Quitobaquito). The lights planned for the wall could disrupt the bats that pollinate the saguaro. The new wall, with its deep foundation and closely built bollards, could act as a dam and worsen floods.

Such concerns seem remote in downtown San Diego. Yet Jerry Sanders, the city’s former mayor and police chief, fondly recalls bird hunting along the border decades ago, when the only barrier was “a cable, just so you couldn’t drive straight across.” That was more or less the state of fencing along much of America’s southern border until surprisingly recently. The first border fence designed to stop illegal immigration started going up just south of San Diego in 1990. Security fears spurred a fit of construction under George W. Bush.

Frontier psychiatrist No president has made a barrier—or hostility to immigration—as central to his political

platform as Mr Trump. CBP says it has funding for 509 miles of construction. From Mr Trump’s inauguration until October, Congress provided nearly $3.1bn to replace or upgrade border fencing. Mr Trump redirected billions of dollars from defence funding to wall construction, endangering dozens of military-construction projects—though on December 10th a federal court blocked Mr Trump from using that money on his wall.

Many have raised concerns over how much the wall costs, and who is building it. The Defence Department’s inspector-general will audit a $400m construction contract given to a North Dakota firm whose boss has repeatedly sung Mr Trump’s praises.

Cactus if you can In total the wall could cost as much as $25m a mile just to build, not including maintenance.

And it is far from clear what it will achieve. A wall will certainly make life harder for fence jumpers. But the number of people trying to evade immigration controls to come to America to work has fallen for years. Most of the increase in arrests at the border has come from families and unaccompanied children who want to be caught by CBP officers because they intend to claim asylum, which they have a legal right to do. For such people a wall is much less of a deterrent.

That is why Nancy Pelosi, the House Speaker and Mr Trump’s most effective political opponent, called the wall “an immorality”.

Fortifying a border is not inherently immoral. Doing it this way, however, may be unwise. America’s global success derives not from its military might or power projection, but from its shaping of the world’s multilateral institutions, its openness, and its ability to constantly redefine itself as it assimilates and is changed by successive waves of immigrants.

A wall tells the world that America is turning away from those values.

Pessimism v progress Continued from page 16

their employees are in revolt.

The New York Times sums up the encroaching gloom. “A mood of pessimism”, it writes, has displaced “the idea of inevitable progress born in the scientific and industrial revolutions.” Except those words are from an article published in 1979. Back then the paper fretted that the anxiety was “fed by growing doubts about society’s ability to rein in the seemingly runaway forces of technology”.

Today’s gloomy mood is centred on smartphones and social media, which took off a decade ago. Yet concerns that humanity has taken a technological wrong turn, or that particular technologies might be doing more harm than good, have arisen before. In the 1970s the despondency was prompted by concerns about overpopulation, environmental damage and the prospect of nuclear immolation.

The 1920s witnessed a backlash against cars, which had earlier been seen as a miraculous answer to the affliction of horse-drawn vehicles—which filled the streets with noise and dung, and caused congestion and accidents. And the blight of industrialisation was decried in the 19th century by Luddites, Romantics and socialists, who worried (with good reason) about the displacement of skilled artisans, the despoiling of the countryside and the suffering of factory hands toiling in smoke-belching mills.

Stand back, and in each of these historical cases disappointment arose from a mix of unrealised hopes and unforeseen consequences. Technology unleashes the forces of creative destruction, so it is only natural that it leads to anxiety; for any given technology its drawbacks sometimes seem to outweigh its benefits.

When this happens with several technologies at once, as today, the result is a wider sense of techno-pessimism.

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BUSINESS DAY

COMPANIES & MARKETS

19

COMPANY NEWS ANALYSIS INSIGHT

Oil & Gas

Exxon Mobil dumps Nigeria for Egypt as tussle for capital tilts in favour of competitive countries OLUSOLA BELLO

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igeria’s many failings in positioning itself as an investment destination have been laid bare yet again. This time by oil major, Exxon Mobil’s, decision to sell down its Nigeria assets while going for fresh acquisitions in Egypt.

After unveiling plans to divest some of its assets in Nigeria last year, Exxon Mobil which has planned recently announced the acquisition of oil and gas resources, spreading across more than 1.7 million acres, located off the coast of Egypt.

Of the total acquired resources, 1.2 million acres are in the North Marakia offshore block, while 543,000 acres are situated in the North East El Amriya Offshore block.

In both the blocks, the leading integrated energy player will have operating interests of 100 percent. The company expects operations to commence in 2020. Notably, the takeover of seismic data is part of ExxonMobil’s operations.

For Nigeria, losing one of its FDIs to Egypt is a big blow given the amount of capital the former needs at a time of weak economic growth.

Nigeria lost out to Egypt in 2018 with the latter emerging the biggest destination of foreign direct investment according to data by UNCTAD. With $7 billion in FDI, Egypt got more than double the $3 billion investment Nigeria attracted despite being smaller in terms of population and economic size.

ExxonMobil is leading downstream presence in the nation. Hence, with the award, the company has diversified its portfolio of energy business in Egypt. It has primarily been involved in marketing fuels, lubricants and specialties in Egypt since 1902, representing the company’s Roughly 10 months back, the energy major had made world-class natural gas discoveries off the coast of Cyprus.

Hence, with the purchase of upstream acres in Egypt, ExxonMobil has strengthened its presence in exploration operations in Eastern Mediterranean.

American multinational oil and gas corporation joined the league of multinational oil companies divesting from Nigeria assets According to sources, ExxonMobil is weighing the possibility of selling its stakes in Oil Mining Leases (OML) 66, 68, 70 and 104 with a total production capacity of 120,000 bpd as at 2017 which might provide an opportunity for indigenous companies who have in the past purchase billion worth of assets from firms such as Eni, Shell, Chevron and Total in the past five years.

ExxonMobil is one of the largest oil and gas producers in Nigeria, with 106 operated platforms. Its oil output in the West African country reached 225,000 barrels per day (bpd) in 2017.

Exxon officials have held talks with several Nigerian companies to gauge their interest in the fields.

The IOCs account for more than 70 percent of the nation’s daily crude production.

Some of the indigenous players may acquire the assets and look for a foreign company able and willing

to develop and produce the oil assets. This is called rent seeking,” industry source told BusinessDay. Stakeholders believed that majority of the indigenous players will be preparing to feed fat on purported story of the planned divestment of the oil majors, which once fed heavily on the rumor mill, has since become a glaring reality today.

“One of the key things we have targeted with our current capital structure and our balance sheet is to, at a very short notice, be able to participate in any acquisition opportunities,” Austin Avuru, CEO of Seplat said at the firm’s ‘Facts behind the Figures’ presentation at the Nigerian Stock Exchange last year.

Ademola Henry Team leader at the Facility for Oil Sector Transformation (FOSTER) said beyond the questions of who is buying the assets we need to take a critical look at what we are not doing right that is scaring away investors and reducing FDI. “ We n e e d t o e n s u re we send the right signals out,” Henry told BusinessDay.

However, the IOCs’ attempts to sell their assets to local companies have not always been smooth, particularly where bureaucracy, difficult operating or security conditions feature prominently.

Government’s recent directive regarding the transfer of operatorship of OML 11 from Shell to Nigerian Petroleum Development Company (NPDC) Ltd generated a lot of ripples in the industry because NPDC was seen as unfit to develop and produce the oil fields. Besides, NPDC already has 32 prolific oil fields in the Niger Delta.

Buoyed by the high oil price and the need to boost local content in the nation’s oil industry many banks doled out loans to indigenous players for the acquisition of assets being divested by international oil companies such as Royal Dutch Shell, Chevron and Total.

Between 2010 and 2018 a number of indigenous companies including Starcrest Energy, Aiteo, Oando, Seplat, Eroton, First E&P, Neconde, Midwestern, Notore Lekoil, PanOcean, Newcross and

Shoreline threw in billion dollar cheques in their scramble for assets divested by major multinational oil firms which have recorded mixed performance.

Seplat Petroleum Development Company PLC successful bought assets such as OML 4, 38 and 41 which were producing 15,000 barrels per day (bpd) but today are now producing 80,000 bpd as Seplat invested probably an excess of $5billion to $6 billion from those assets.

The involvement of NNPC and NPDC and the exercise of pre-emption rights have also periodically posed a challenge to previous divestment attempts. NPDC has often encountered difficulty in attracting acquisition finance from foreign backers, due to perceived operator risk, though, arguably this has provided local banks with an opportunity.

In a bid to remedy some of these challenges, NNPC has explored the possibility of seeking technical partnerships for the NPDC to put forward joint bid for future divestments.

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Monday 06 January 2020

BUSINESS DAY

COMPANIES&MARKETS MARKETS

These are the stocks that have gotten off to a great start in 2020 SEGUN ADAMS

I

t’s been only two trading sessions since the Nigerian stock market got off to its best start of a year with a marginal gain Thursday.

As such, it might be too early to say what stocks will deliver the most returns, but that has not deterred investors from early positioning- especially in penny stocks.

Cornerstone Insurance (+17.78%) This insurance stock gained 125 percent last year to emerge among the top-five price gain. Cornerstone is leading the advancers already in 2020 with 17.78 percent gain to 53 kobo per share in just two trading sessions. The broader market has gained 0.47 percent in the same period.

Niger Insurance (+10%) Another insurance stock is on high-gear and has gained 10 percent since the market opened Thursday.

Niger insurance currently trading at 22 kobo per share had last year declined by almost 17 percent.

Royal Exchange (+10%) Sharing second-spot is Royal Exchange, another insurance and penny stock, which has impressed so far in 2020.

Royal Exchange has

gained 10 percent to 33 kobo per share, after a 36.4 percent surge last year.

First Bank of Nigeria Holdings (+7.32%) FBNH, like most of its tierone peers, suffered a decline last year. However a 7.32 percent gain so far this year might be promises of better performance for the banking stock.

FBNH is closed at N6.6 per share on Friday.

Transcorp (+7.07%) From worst-performing conglomerate to one of the market’s best at the start of the year, Transcorp will be looking to maintain current momentum.

The stock price has appreciated by 7.07 percent to N1.06 per share in the first two trading sessions of the year.

Business Event

as at Friday, Vitafoam has started the year on a good note.

Africa Prudential (+6.25%) Africa Prudential gained 3.4 percent last year and is continuing on a good note in the New Year.

Africa Prudential is up 6.25 percent to N4.25 per share as of Friday.

Japaul Oil (+5%) Japaul Oil and Maritime Service Shares shed almost 5 percent last year but a 5 percent gain in early 2020 trading could be promising. It might be too early to tell.

Nonetheless, this stock has outperformed its Oil and Gas peers and closed at 21 kobo on Friday.

EcoBank Transnational Incorporated (+6.92%) ETI shed almost 54 percent of value last year but has gained 6.92 percent to become fifth best performing stock in 2020.

ETI closed at N6.95 per share on Friday.

Mutual Benefits (+5%) Mutual Benefits Assurance ties with Japaul Oil in terms of share price movement in 2020. This insurance stock fell by almost 5 percent last year but so far has impressed.

Mu t u a l B e n e f i t s h a s gained 5 percent to 21 kobo so far this year.

Vitafoam (+6.82%) This stock traded flat in 2019 but an impressive 2019 profit growth (coupled with plans to pay dividend) has lured investors to Vitafoam shares.

With an impressive 6.82 percent gain to N4.7 per share

UBA (+4.9%) United Bank for Africa is up almost 5 percent after a year that saw big banks stocks slide.

The tier-one banking stock closed at N7.5 per share after a 4.17 percent gain on Friday.

L-R: Mukhtar Sirajo, president, Nigerian Institute of Public Relations; Alero Okoruwa, general counsel, XLR8; Calixthus Okoruwa, CEO, XLR8, and Rotimi Oladele, immediate past president, NIPR, at the 2019 Presidential Dinner and Awards ceremony where XLR8 won

L-R: Wasiu Olatunbosun, commissioner for information, culture & tourism, Oyo State; Oba Saliu Akanmu Adetunji, Aje Ogugunniso 1, Olubadan of Ibadanland, and John Ugbe, CEO, MultiChoice Nigeria, at the opening of the ultramodern service center in Ibadan

MARKETS

NSE records lowest investors exposure in 3 years as weak confidence prevails DAVID IBIDAPO

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oncerns over the Nigerian stock exchange market – a barometer for the Nigerian economy –is heightening as outlook dampens on prevailing negative sentiment of foreign and domestic investors.

Investors participation and exposure as measured by value of transactions on the nation’s bourse dipped to its 3-year low in November 2019 characterised by capital flight after almost doubling in 2017 after the Nigerian economy exited recession in 2016 which saw more inflow into the market.

Exposure in the equity market fell by 21 percent halting a 2-year growth in 2017 and 2018 respectively as total transaction stood at N1.8 trillion against N2.27 trillion in corresponding period of 2018. The period saw domestic retail and institutional investor take caution as transactions of both classes of investors dipped in 2019. Domestic retail investors transacted N452.85 billion in value compared to

N496.72 billion in 11 months into 2018. Meanwhile, institutional investors transaction N467.85 billion as against N622.80 in the same period.

More importantly is the activities foreign portfolio investors who are the major drivers of prices of stocks on the equity market. During the period, transaction of FPI amounted to N879.40 billion, however, foreign outflow accounted for 55 percent of this value.

Sadly, fiscal and monetary policies in the previous year was not able to restore confidence among investors has the All share index - an indicator of market performance - closed 2019 at -14.6 percent.

This has seen the market maintain a two consecutive years of negative returns to investors after in 2018 ASI closed at some -17 percent.

This means investors on the exchange have seen their holdings shed cumulatively some 31 percent in 2 years.

Major highlights that shaped the behaviour of investors in 2019 included the general elections which investors hoped could have

turned out differently, CBN’s aggressive moves to increase lending to the private sector of the economy which included a mandatory 65 percent LDR by banks, OMO ban on corporates and individuals and reduction other income sources of bank (transfer transaction cost, POS transaction cost), and federal government protectionist moves to boost local production (border closure).

With low confidence among investors, President Buhari would have to hasten reforms necessary to boost the economy and increase investors’ confidence.

Outlook for the stock market in 2020 remain bleak.

Amid infrastructure woes, corporate earnings have not been really impressive which has made investors less pessimistic about the market which is one of the cheapest among its frontier and emerging market peers. This is coupled with Moody’s downgrade review in the Nigerian economy on expectations that real GDP growth will remain weak amid other pressing issues.

L-R: Onini Johnson, director, Nursing Services; Adegbaju Fatimoh, mother of the baby; Jide Odelola, senior brand and innovation manager, Mouka, and Wasiu Jimoh, assistant director, department of physiotherapy, Obafemi Awolowo University Teaching Hospitals Complex (OAUTHC), Ile-Ife, Osun State, at the gifts presentations by Mouka to the first baby of the year at OAUTHC.

L-R: Bukola Iluyomade, MD, Aimart International; Taiwo Oyeniyi, winner of the Toyota Camry, and Martins Iluyomade, husband of the MD, Aimart International, at the unveiling of the company’ new brand identity and draws for special season’ promotion in Lagos.

Monday 06 January 2020

BUSINESS DAY

COMPANIES&MARKETS COMMODITIES

Gold nears 4-month high, oil surge as US-Iran tension push investors to haven SEGUN ADAMS

I

nvestors on Friday fled to safe-haven assets after a US strike that killed Iran’s revered General, Qassem Soleimani, heightened fears that both countries will engage in a military faceoff, sending low-risk assets including oil to early gains and gold near a four-month high.

The trump-ordered killing of the head of Iran’s elite Quds Force saw bullion rise in early trade by about 1.4 percent to $1,550.43 per ounce, the highest level since price hit $1,552.55 last September. Oil rose as high as $69.35 per barrel, almost 5 percent gain in the intraday trade.

Other assets including the US bonds and Yen gained, while US stocks fell as investors reacted to the news of Iran’s Supreme Leader Ayatollah Ali Khamenei vowing to avenge Soleimani.

The market feared disruption to oil-supply in the events of a conflict in the

oil-rich Middle East.

However, Chief economist of Renaissance Capital Ltd, Charlie Robertson told Bloomberg that there are key buffers in place to withstand the ever-present risks to oil supplies.

“Strategic petroleum reserves are probably large enough in the US, China and the EU to cope with disruption to Saudi oil facilities or the Straits of Hormuz,” he said.

Higher energ y costs would raise production cost and weigh on demand in economies that rely on oil; this would be a drag on global growth.

While upside risks to energy cost are expected to subside, just as it did in September when supposedIranian drones attacked a Saudi Arabian oil facility, there is still risk that the USIran conflict could unsettle the Middle East over the foreseeable future, at least.

US has asked its citizens to leave Iraq, where the Iranian top General was killed in an airstrike. Uncertainty looms as Iranians de-

nounced US and its leaders said that “harsh retaliation is waiting”.

The recent events suggest that expectations of a lessturbulent geopolitical space that would support growth in 2020 might have been a bit idealistic, although it is still too early to tell.

The US-China long trade war that inflicted both of the world’s largest markets and robbed global economies of faster expansion is de-escalating, informing a favourable growth outlook for the New Year.

Washington has already set January 15 as the date to sign phase one of a trade deal with Beijing, but US’s action against Iran might cause new worries.

For gold, the impact of a US-Iran conflict might not be a tailwind to support price.

Geopolitics typically don’t have a lasting impact unless broader consequences for the economy or financial markets arise, Carsten Menke, an analyst at Julius Baer, told Bloomberg.

L -R: Charles Oyakhilome, CEO, Airopay; Manish Rohtagi, CEO, Simba Group; Adenrele Oni, CEO, Richway Microfinance Bank; Margaret Oni, Shareholder, and Tosin Temiye, relationship manager, at the presentation of award to Richway Microfinance as the SME Bank of the year 2019, at the Nigeria Entrepreneurs Award

L-R: Funso Finnih, senior manager, digital products, MTN Nigeria; Praiz, Music artiste,; Srinivas Rao, chief digital officer, MTN Nigeria; Oye Akindeinde, CEO, MusicTime, and Djinee, Music artiste, at the MTN Music Time Exclusive Hangout in Lagos

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Monday 06 January 2020

BUSINESS DAY

real sector watch

Ports, taxes, funding top concerns of CEOs of manufacturing companies Gbemi Faminu

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op chief executives of manufacturing companies in Nigeria say congested state of Apapa and Tin Can ports in Lagos, multiple taxation across the country, and high interest rates of available funds in deposit money banks are critical issues hurting the growth of industries.

Data from the Manufacturers CEOs Confidence Index (MCCI) for the third quarter of 2019, compiled by the Manufacturers Association of Nigeria (MAN), showed that 87 percent of CEOs of manufacturing companies in Nigeria agreed that the congested state of Apapa and Tin Can ports in Lagos was a big impediment to the growth of the industrial sector.

The CEOs, who were interviewed in the course of the report, said that congestion at the ports significantly affected productivity negatively with the prevalence of poor access

and road network, heavy traffic and undue congestion at the ports.

“The slight improvement, notwithstanding, port related challenges are still present, particularly delay in clearance of imported rawmaterials and machinery that are not locally available by manufacturers, including

the associated high and unwarranted demurrage which oftentimes slows down manufacturing operations and increases cost of production in the sector,” the report said.

MAN recommended addressing challenges such as dilapidated infrastructure, inadequate space, weak trade facilitation infrastruc-

ture, poor road network and the associated gridlock to enhance competitiveness at the ports.

Apart from the congested ports, 89 percent of the chief executives identified multiple taxes and levies as big impediments to the growth of the industrial sector.

The CEOs said multiple

taxes and levies depressed production in the manufacturing sector with records showing that manufacturers paid over 30 different taxes, levies and fees to agencies of the federal, state and local governments on account of increased revenue targets.

The report recommended harmonisation of various tax rates to encourage investment, particularly into the manufacturing sector.

Taiwo Oyedele, policy partner and West Africa tax leader for PwC, at a recent breakfast meeting, said that there were over 60 types of taxes in Nigeria.

Similarly, 82 percent of the CEOs flagged poor credit access as another impediment which decreased growth and productivity.

The CEO-respondents said the rate at which commercial banks lent to the manufacturing sector discouraged productivity in the sector.

“There is the need for CBN to review the guidelines of the various development funds to ensure that the

terms and conditions are liberal enough to attract borrowing from the industrial sector,” the report recommended.

Furthermore, 80 percent of the CEOs said the volume of commercial banks loans to the manufacturing sector would not encourage productivity in the sector.

“This highlights the need for the apex bank to improve and sustain the current policy aimed at increasing loans to the productive sector of the economy to stimulate national output,” the report said.

“No economy will grow when businesses get interest rate at a very high rate. What we need is a single-digit interest rate as manufacturers.

We believe that this is what can stimulate growth,” Frank Jacobs, former president of MAN, told BusinessDay in 2017.

The Manufacturers CEOs Confidence Index (MCCI) was created by MAN to gauge the pulse of the economy on quarterly basis.

ABC pledges more advocacy for American businesses in Nigeria …admits new members ODINAKA ANUDU

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he American Business Council (ABC) in Nigeria, an affiliate of the United States Chamber of Commerce, has admitted eight new corporate members into its council, pledging more advocacy for American businesses in Nigeria.

The new members were Aviat Networks Nigeria, Jumia Nigeria, Springrock Energy Group, and Cisco Nigeria. Others are Redstar Express, Verraki Partners, Africa Resource Center and U.S. Soybean Export Council (USSEC).

ABC is the voice of American businesses in Nigeria, protecting American businesses through advocacy and promoting trade and investment between both countries.

Claire Pierangelo, consul general of the U.S. in Lagos, said the council had brought together potential businesses in Nigeria and the US, which had helped to strengthen the commercial ties between both countries.

She pledged the support of the US government for productive discussions that would lead to mutual ben-

eficial trade in seeing the US government and private sector work together.

“I give you my assurance of the American consulate general’s commitment to foster strong relationship with American Business Council and its members,” she assured, adding that the newly enlisted council members

could count on the support of the consulate because the “mission to foster and promote US-Nigeria trade and investment is what we fully share and support.”

Margaret Olele, ABC chief executive officer, said that the council was working with partners to create an enabling environment for U.S. compa-

nies in Nigeria.

She said the council had always strove to advocate for US companies in Nigeria.

“In working with partners, we would help in creating enabling business environment, whether it is regulatory or policy issues,” she said.

On his part, Dipo Faulkner, president, ABC, said the

L:R: Dipo Faulkner, president, American Business Council/ country general manager, IBM West Africa; Margaret Olele, chief executive officer/executive secretary, American Business Council; , Sidney Ogueri, territory sales manager, Aviat Networks; Temitope Osunrinde, marketing and communication manager, Verraki; Claire Pierangelo, US consul general; Sola Obabori, managing director, FedEx; Tito Ejenavi, finance manager, Springrock; Babatunde Ogunleye-Johnson, lead, Africa Resource Centre Supply Chains and Logistics Centre; Isioma Udeozo, Cisco’s channel lead for West Africa, at the event organised by American Business Council for new members in Lagos recently. www.businessday.ng

https://www.facebook.com/businessdayng

council usually drove business advocacy for American companies in Nigeria, as well as trade and investment.

“We create a platform for them to speak about their problems. We not only listen to them, we also put them in front of the right audience throughout the conversation,” he said.

Looking forward this year, the council hopes to continue engaging government to fashion out best ways of boosting the ease of doing businesses, especially for American businesses present in Nigeria.

Olele reaffirmed the council’s commitment to supporting and collaborating with government in different areas in order to build the right capacity and capability to get things off the ground so as to be able to make businesses a lot seamless for US companies.

“As the environment gets more complex in term of advocacy issue, in term of easy of doing business, definitely, you will find us engaging government a lot more in trying to get things done,” Olele reiterated.

On her part, the US envoy said she looked forward to more robust trade partnership between Nigeria and US @Businessdayng

in the coming years.

She charged the US business community and potential investors to use the opportunity of the upcoming US Fair, in March, to showcase their businesses and deepen their partnership in Nigeria.

“Nigeria remains one of our largest trading partners in Africa and we are excited about the partnerships that will be coming up in 2020,” Pierangelo said.

Faulkner prayed that as the ABC intensified its efforts in playing its roles as the mouthpiece of American businesses in Nigeria, the efforts the Council made in 2019 and previous years would yield more results in 2020.

“Advocacy is not something that happens overnight.

It is about process; it is about you staying on course about the discourse in bringing key stakeholders together to have discussions about issues affecting all of us,” Faulkner noted.

“We will continue the same trust of the company – advocacy. We speak as the voice of American businesses in Nigeria through advocacy.

We do not do it alone, we do it with the US mission in Nigeria and other stakeholders,” he further said.

Monday 06 January 2020

BUSINESS DAY

25

real sector watch

Manufacturers to access more funds in 2020 amid protectionist policies — LCCI ODINAKA ANUDU

M

anufacturers in Nigeria will likely have access to more funds in 2020 owing to the current favourable credit policies by the Central Bank of Nigeria (CBN), the Lagos Chamber of Commerce and Industry (LCCI) has said.

In a statement signed by Muda Yusuf, director-general of the LCCI, the chamber projects that the manufacturing sector will continue to benefit big from CBN’s aggressive credit push to the real sector.

It, however, says that competition between foreign and local producers will fade on prolonged closure of land borders.

The CBN has raised loanto-deposit ratio from 60 to 65 percent to force deposit money banks to lend to the real sector. The CBN last week debited deposit money banks about N600 billion for non-compliance with the 65 percent LDR, BusinessDay reported last Friday. The bank had given banks up to December 31, 2019 to com-

ply with the 65 percent LDR or face sanctions.

The LCCI sees this posture as positive for the economy.

But it warns that it may raise non-performing loans ratio as the domestic economic landscape is still fragile and borrowers might find it difficult to fulfil obligations. The LDR compares bank’s total loans to its total

deposits for the same period. If the ratio is too high, as the case, it means that the bank may not have enough liquidity to cover any unforeseen fund requirements, Investopedia says.

The LCCI adds that early budget implementation for capital projects is positive for the manufacturing sector.

“We are of the view that failure by government to fix

structural constraints with regards to fixing power challenges and rehabilitating deplorable road networks will perpetuate the poor productivity and performance of the sector,” the statement says.

It also expects the CBN to raise the LDR from 65 percent to around 70 percent by 2020, in a push to improve credit flows to the real sec-

tor to stimulate economic growth.

On the closure of Nigeria-Benin border since August 2019, the chamber projects that government will maintain its protectionist economic policies in 2020. “ W h i l e p ro t e c t i o n i s t policies might help local industries stay afloat, it makes them remain less competitive to their foreign counterparts,” the statement says.

“It is probable that government will leave the land borders shut till it gets the desired level of commitment from neighbouring countries. The economy will continue to feel the heat of the policy action in 2020 in terms of higher food prices due to supply shortages,” the chamber notes.

It maintains that effective border policing, not shutting the borders, is a better approach to curtailing smuggling.

“In furtherance, we see the Central Bank of Nigeria maintaining status quo in 2020 by restricting forex supply to the 43 items on the exclusion list. While the policy has benefited some investors, it has penalised

others,” the LCCI says.

The chamber foresees high cost of doing business in Nigeria, infrastructural challenges such as erratic power supply, congestions at ports, inefficient road and railway system, combined with the multiplicity of levies, inconsistency in government policies and excessive regulations as constraints that may continue to hinder ease of doing business in 2020.

“While Nigeria may record improvement on the ease of doing business ranking, as a result of some recent policy measures, realities on ground will continue to differ if the challenges highlighted are not properly addressed,” the LCCI also says.

It further predicts that the CBN, like it did in 2019, will maintain status quo by not relenting in supporting the agriculture sector with much-needed funds to ensure that the wide gap between local demand for food and supply is bridged.

“We also see improved credit flow to agriculture on the back of proposed increase in deposit money banks’ loan to deposit ratio to 70 percent,” it adds.

Great Lakes Investment & Trade Conference holds in Kigali, 18 March Odinaka Anudu

F

ollowing the Peace, Security and Cooperation Framework Agreement (PSC-F) signed by 13 African countries to register their commitments at the national, regional and international levels to achieve peace and stability in eastern Democratic Republic of Congo (DRC) and in the Great Lakes region, an investment conference would be held in Kigali, Rwanda, March 18-20, 2020.

Named Great Lakes Investment and Trade Conference (GLITC), which is designed to open up the region for investment opportunities for investors across the world for development, is a follow-up action to the first Private Sector Investment Conference, held in 2016 in Kinshasa.

The conference is targeted at mobilising private sector investments into the region in order to harness the ex-

tensive natural resources and existing economic opportunities that could be catalytic in creating shared prosperity and destiny for the region.

Jiaming Miao, political affairs/liaison officer, special envoy to the secretary general for the Great Lake Region, said private sector collaborative investments were highly needed in the region as they bore the potential to contribute to the collective efforts towards sustainable peace, stability and the transformation of the Great Lakes region.

“The conference will focus on cross-border trade and investment as catalysts for regional integration, which constitutes the theme of the conference,” he said.

According to Miao, the conference would showcase the region’s investment opportunities in identified projects, across agriculture, energy, finance, ICT, infrastructure, mining and tourism.

Some 700 participants inwww.businessday.ng

clude government representatives, CEOs of international companies active in the region, CEOs of prospective investors, equity firms and banking institutions, pension funds and sovereign wealth funds, bilateral and multilateral development institutions are expected to attend the investment conference.

Others include high-level segment with heads of governments, high profile investors and dignitaries.

There would also be industryspecific sessions and exhibition stands for member states to showcase their countryspecific projects.

It has been said that the region, especially DRC, hous-

es a number of resources needed in global market in large commercial quantities.

For example, of the $15-20 billion that is required annually till 2030 to achieve universal energy access in Sub-Sahara Africa, DRC’s estimated hydroelectric potential represents 23 percent of the global potential and 52

Miao https://www.facebook.com/businessdayng

@Businessdayng

percet of the African reserves, said Miao.

In agriculture, according to Miao, 30 percent of global arable land sits in the Great Lake Region. Investing in agriculture, including its value-added chains, in the region would take care of food security and growing global food demand, he said.

In mining, global thirst for energy and petroleum due to industrial growth, explosive demand from electronics manufacturers for rare minerals and increased demand for gold, silver and diamonds from emerging markets have increased the demands for minerals, globally.

“Governments of the region are increasingly positioning themselves as hubs for mining processing,” said Miao.

The conference will identify business opportunities, expand network of top business contacts, promote businesses and brands, gain strategic insights and be a driving force in the private sector for peace, prosperity in region.

26

Monday 06 January 2020

BUSINESS DAY

insurance today

In association with

E-mail: insurancetoday@businessdayonline.com

NAICOM Thomas giving insurance regulation a human face

Modestus Anaesoronye

T

he Pension Transitional Arrangement Directorate (PTAD) has paid one month Pension Arrears to the tune of N842.81 million to 11,331 pensioners of the defunct NITEL/Mtel in December, 2019.

Modestus Anaesoronye

T

he coming on board of Sunday Thomas as acting commissioner for Insurance in the National Insurance Commission (NAICOM) a few months ago has brought an unprecedented peace and cooperation among the different stakeholders in the industry.

Consultation and engagement with the stakeholders including operators, consumers and even investors have increased with a lot of progress on policy development, focused on market expansion and growth.

It is now predictable and no longer difficult to get approvals on appointments and new products within stipulated time, as long as necessary criteria have been met, underscoring a better understanding between the industry players and the regulator.

This cooperation was demonstrated at its peak on December 30, 2019 when NAICOM announced extenuation of the recapitalization deadline from 30th July 2020 to 31st December 2020.

“The Commission has reviewed the recapitalisation plans submitted by operators and various levels of compliance. Similarly, it has noted the inputs from the various engagements with relevant stakeholders, the Commission therefore hereby extends the recapitalisation deadline to December 31, 2020, according to the NAICOM circular.

The implications of these are that we may no longer see the kind of litigations that had characterized the industry in the past, which were as result of non agreements between

PTAD pays NITEL, Mtel pensioners one month areas The payment was made to the pensioners as part of the Federal Government’s commitment to reduce inherited pension liabilities.

Chioma .N. Ejikeme, executive secretary of PTAD therefore assured pensioners that their welfare remains a priority to president Muhammadu Buhari’s Administration.

Insurance brokers names Ooni of Ife Industry Ambassado

T

L-R: Tunde Oguntade, vice president, Nigerian Council of Registered Insurance Brokers (NCRIB); Bola Onigbogi, president, NCRIB; Babajide Olatunde-Agbeja, past president, NCRIB; Fatai Adegbenro, executive secretary; Oba Adeyeye Ogunwusi, Ooni of Ife during a courtesy visit of NCRIB to Ooni of Ife Palace.

the operators and the regulator, which did not only affect the growth of the industry, it presented the sector negatively in the eyes of watching publics.

If the current tend under Thomas is sustained, we may begin to see NAICOM that mirrors a CBN, where policies are agreed with the banks before it is released to the public.

In this case, it does not come as a surprise to the banks, and implementations are not contested but supported.

The Federal Government on August 9, 2019 appointed Sunday Thomas, the acting commissioner for Insurance/ CEO of the National Insurance Commission (NAICOM) pending the appointment of a substantive Commissioner.

The appointment was announced in a letter entitled: Re: Handing Over Note: Appointment of Acting Commissioner for Insurance, referenced, F.1948/

www.businessday.ng

BFPIAC/S,2/24, dated August 9, 2019 and signed for Permanent Secretary, Finance by deputy director, Home Finance, A.O. Bello.

According to him, the appointment was to ensure the effective administration of the commission in line with the provisions of the National Insurance Commission Act 1997.

Thomas was appointed Deputy Commissioner for Insurance Technical by President Muhammadu Buhari On April 15, 2017, having had over three dedicates of experience in the industry, both as regulator and operator. Prior his appointment in April 2017 as Deputy Commissioner in charge of technical matters at the Commission, Thomas held the position of Director –General at the Nigerian Insurers Association (NIA) for seven years from May 2010.

He is a vastly experienced and knowledgeable Insur-

ance Professional with over 35 years uninterrupted service to the Nigerian insurance industry.

During these years, Thomas worked as a Director for seventeen (17) years at the National Insurance Commission from 1992 to December 2009 where at different times, he superintended over different departments in the technical division. He had also worked as an insurance operator for over 10 years and rose to the position of Assistant General Manager at AIICO Insurance Plc until he left in 1992 to join NAICOM. Thomas is an active participant in the insurance industry activities and had served as member of several Committees not only within the insurance industry but the entire Financial Services Sector. He holds a BSc (Hons) in Actuarial Science and an MBA Finance both from the University of Lagos.

https://www.facebook.com/businessdayng

he Nigerian Council of Registered Insurance Brokers has named the Ooni of Ife, Oba Adeyeye Ogunwusi as the Insurance Broking Ambassador in Nigeria.

Bola Onigbogi, president of the Counil said this at the courtesy visit paid by the delegation of the Council to the traditional ruler in his palace in Ile Ife, Osun State.

The NCRIB President noted that the traditional ruler has continued to demonstrate outstanding leadership and commitment to the growth of the insurance broking profession in Nigeria, stressing that the insurance industry’s capacity for growth would be enhanced if notable figures identified with the profession which she noted was the bastion of national economic growth.

Onigbogi implored the royal father to utilize his position in the comity of other prominent traditional rulers in the country to assist with the propagation of insurance to enhance their understanding of the pivotal place of insurance for strengthening of social relationship at the grassroots as well as being a safety valve against perennial losses of property and lives.

“It is often the case that traditional rulers by virtue of their closeness to the grassroots are

@Businessdayng

often the first point of contact by the people, especially when they suffer a loss and the embrace of insurance by the people would reduce the misery they often suffer and at the same time enhance the relevance of the traditional rulers to the people” Onigbogi said.

Responding, Oba Ogunwusi promised to assist the Insurance Broking profession and the industry generally to underscore the crucial place of insurance as a risk mitigating device amongst traditional rulers in the country, stressing that there is no economy that could archive desired progress and development if insurance and risk management are not giving their deserved place.

In a similar vein Gboyega Oyetola, , governor of Osun State assured that Osun State would continue to deploy insurance as a prudential strategy for protecting the human and material assets of the State.

Oyetola who spoke when a delegation of the Nigerian Council of Registered Insurance Brokers, led by its president, Bola Onigbogi paid him a courtesy visit in Osun State noted that the state was already working our ways to collaborate with the National Insurance Commission to grow the industry and accelerate its acceptance in Osun State by giving impetus to the law on compulsory insurances.

Monday 06 January 2020

BUSINESS DAY

insurance today

27

In association with

E-mail: insurancetoday@businessdayonline.com

Putting ‘MIDAS’ touch to insurance regulation Tope Adaramola

L

eadership often requires making unpopular decisions, but a skilled leader is also sympathetic to the feelings of others and takes care to avoid unduly upsetting or alienating anyone.

Of course, this requires maturity, restraint and the exercise of imagination and good judgement on the part of the leader. This apt words of Alan Axelrod in his celebrated book “Elizabeth I CEO” could not have better describe the leadership style of the acting commissioner for Insurance in Nigeria, Sunday Olorundare Thomas, in handling regulation of the insurance industry in the last couple of months.

It makes no news that the Nigerian Insurance Industry has been finding it difficult to get its rhythm amongst the financial services players in the nation’s economy, little thanks to multifarious reasons, among them, recessive economy, noxious traditional belief system, unethical practices by operators, poor image and, of course, ineffective regulation.

These bogging factors have limited the scope of insurance growth in the country as compared to its peers in other climes where the industry is the pivot of economic growth and social stabilization.

Although the industry’s players and the regulator appeared to have put their fingers on these militating factors against its growth, the pathway for surmounting the challenges seem to have been strewn with some difficulties. Many operators, made up of insurance underwriters, Brokers, Loss Adjusters, Reinsurers and Agents have had a convergence of views about their expectations of better regulation from the government regulatory agency- the National Insurance Commission (NAICOM).

This expectation could not be said to be out of place, going by the dissonance between the regulator and some of the operators in recent times. Some

Sunday Thomas, acting commissioner for Insurance

argued that what the industry had witnessed before the advent of the present leadership was something akin to a grave yard silence, due to what they regarded as “harsh regulatory prescription” occasioning icy relationship between the operators and NAICOM. For instance, on the Insurance Brokers side, many of the operators have had to contend with huge fines and penalties for minor infractions, warranting the Nigerian Council of Registered Insurance Brokers (NCRIB) to invent a mediatory platform to reduce the life threatening policies towards its members. Also, insurance underwriters have their tale of woes to tell from similar fines and penalties from the Com-

www.businessday.ng

mission.

Much as it is necessary to sanitise the industry and heal it of its impurities, operators held the view that regulations should be with a better human face to have desired effect.

The frosty relationship between the regulator and the operators was quite evident in the contemplated legal cases intended at some point by the NCRIB against the Commission on the proposed implementation of the States Insurance Providers (SIP) perceived

by Brokers as a death knell to their already fragile existence. Also, the insurance underwriters under an anonymous group challenged the decision of the Commission on its directive on the Tier-based capi-

talization in court. These situations besmirched the reputation of the industry more in the eyes of the public as an industry that is not at peace with itself and compounded its challenges of better appeal from the public. Happily today, the environment in the industry has become more clement, with the hope of more steady progress based on understanding and consensus building under the current leadership of the Commission.

In recent times, the Commission has been involved in more friendly and pragmatic regulations devoid of the usual “headmaster-pupil relationship” that it was noted for. Consultation seems to have now become the norm between the regulators and the operators for a better industry. Even though the industry, particularly underwriters had been on the heat concerning the need for them to meet the deadline for recapitalization initially set for June 30, 2020, a circular from the Commission indicated that “following a review of recapitalisation plans by the operators and various levels of the compliance observed” there was the shifting of the deadline to December 31, 2020, a step that has received laud plaudits from cross session of operators, financial services experts

https://www.facebook.com/businessdayng

and shareholders.

Many were of the view that the initial June 30, 2020 deadline had put the underwriters on the edge because they perceived it could lead to loss of operational profits, giving more minuses to the already fragile state of the insurance industry. On another thought, some are of the opinion that the postponement should be taken with more seriousness by operators to avoid losing steam with the drive for funds, only to be cut up with the new date suddenly. But while the breeze of hope was blowing across the underwriters divide, the Insurance Brokers and Loss Adjusters are also coasting in on the euphoria of the extension of their practicing license renewal with the Commission to two years as against the yearly exercise. It is believed that the new regime would remove the drudgery involved in the renewal process which often impede their concentration on the core task of growing their businesses and act as a disincentive to their professional practice.

While the challenges of growing the insurance industry through diligent prosecution of the law on compulsory insurance and ensuring financial inclusion across the industry is squarely facing the Commission, the present style of leadership of

@Businessdayng

the Commission is likely to take the industry to its desired destination. As a practical step to achieving sectoral embrace of insurance, it is heartening that NAICOM had in recent times been engaging critical stakeholders such as the Lagos Chambers of Commerce and Industry (LCCI), held meetings with Insurance Directors on a regular basis and diverse insurance consumers across the country.

Since it is often said that the buck rests on leadership, whether positively or negatively, substantial credits has to go to the acting commissioner for Insurance, Sunday Thomas for applying the Midas touch towards regulating the industry in the past few months of his ascension. Suffice it to state that Thomas has been properly seasoned for the task on hand, having served in the Commission for close to three decades and rose steadily to become the Director Technical, a position from which he retired with infallible track records of achievements in his trail.

Definitely, his appointment as the Director-General of the Nigerian Insurers Association (NIA) after leaving NAICOM gave him more penetrative insight into the activities of the Association, regarded as one of the critical cornerstones of the insurance industry in Nigeria, before providence railed him back to NAICOM as the Deputy Commissioner in charge of Technical before his present position.

There is no doubt that if the present environment of amity, consensus building and empathy that have characterized the operations and disposition of NAICOM towards insurance operators persists, it would just be a matter of time for the insurance industry to experience the much desired sustainable growth, for which great credits would go to the present leadership of the Commission under Sunday Thomas and his dynamic team.

Tope Adaramola is with the Nigerian Council of Registered Insurance Brokers

28

Monday 06 January 2020

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: January 3 – January 10, 2020

KEY MACROECONOMIC INDICATORS Indicators

Current Figures

Comments

GDP Growth (%)

2.28

Q3 2019 — higher by 0.17% compared to 2.12% in Q2 2019

Broad Money Supply (N’ trillion)

36.48

Increased by 2.9% in Nov’ 2019 from N35.45 trillion in Oct’ 2019

Credit to Private Sector (N’ trillion)

26.41

Increased by 2.18% in Nov’ 2019 from N25.85 trillion in Oct’ 2019

Currency in Circulation (N’ trillion)

2.20

Increased by 7.17% in Nov’ 2019 from N2.06 trillion in Oct’ 2019

Inflation rate (%) (y-o-y)

11.85

Increased to 11.85% in November 2019 from 11.61% in October 2019

Monetary Policy Rate (%)

13.5

Adjusted to 13.5% in March 2019 from 14%

Interest Rate (Asymmetrical Corridor)

13.5 (+2/-5)

Lending rate changed to 15.5% & Deposit rate 8.5%

External Reserves (US$ million)

38.60

December 31, 2019 figure — a decrease of 2.79% from December start

Oil Price (US$/Barrel)

71.31

January 3, 2020 figure— an increase of 5.43% from the previous wk

Oil Production mbpd (OPEC)

1.80

November 2019, figure — a decrease of 0.33% from October 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

Friday

Change(%)

03/01/20

27/12/19

26,968.79

26,416.48

2.09

13.02

12.75

2.09

Volume (bn)

0.61

0.22

173.63

Value (N’bn)

3.76

3.04

23.73

NSE ASI Market Cap(N’tr)

MONEY MARKET NIBOR Tenor

Friday Rate

Friday Rate

Change

(%)

(%)

(Basis Point)

03/01/20

27/12/19

OBB

2.3600

4.5700

(221)

O/N

3.0700

3.9300

(86)

CALL

3.0000

4.0625

(106)

30 Days

10.7738

10.6835

9

90 Days

10.6710

11.3390

(67)

FOREIGN EXCHANGE MARKET Market

Friday

Friday

1 Month

(N/$)

(N/$)

Rate (N/$)

03/12/19

03/01/20

27/12/19

Official (N)

307.00

307.00

306.95

NAFEX (N)

364.44

363.84

362.56

0.00

0.00

360.00

362.00

362.00

360.00

BDC (N) Parallel (N)

Indicators

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture Cocoa ($/MT) Coffee ($/lb.)

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Gold ($/t oz.)

Silver ($/t oz.)

Copper ($/lb.)

3-Year

Friday

Change

(%)

(%)

(Basis Point)

03/01/20

27/12/19

0.00

0.00

5-Year

9.31

9.08

23

7-Year

10.30

10.91

(62)

10-Year

10.76

11.13

(37)

20-Year

11.72

11.74

(3)

30-Year

12.77

12.88

(11)

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

(%)

(%)

71.31 2.12

5.43 (3.64)

10.63 (30.63)

2,536.00 127.30 68.86 13.33 556.25

5.45 0.00 (0.55) (1.70) 0.41

30.99 (2.23) (11.15) (13.05) 28.32

1,546.11 18.15 277.50

2.38 1.74 (2.22)

17.35 5.58 (15.34)

Friday

Friday

Change

(%)

(%)

(Basis Point)

03/01/20

27/12/19

4.01

5.71

3 Mnths

4.47

5.02

(55)

6 Mnths

4.46

5.30

(84)

(170)

9 Mnths

5.10

5.70

(60)

12 Mnths

5.29

6.03

(75)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Iindex Mkt Cap Gross (N'tr)

0

YTD Change

1 Mnth

AVERAGE YIELDS Friday

1-week Change

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS Tenor

BOND MARKET Tenor

03/01/20

Mkt Cap Net (N'tr) YTD return (%) YTD return (%)(US $)

Friday

Friday

Change

(%)

(%)

(Basis Point)

03/01/20

27/12/19

3,498.17

3,361.13

10.93

10.50

4.08

7.32

6.97

5.01

42.41

36.83

5.58

-13.43

-19.01

5.58

4.08

TREASURY BILLS (MATURITIES) Tenor 91 Day 182 Day 364 Day

Amount (N' million) 10,000.00 20,000.00 3,000.00

Rate (%) 3.5 4.9 5.495

Date 2-Jan-2020 2-Jan-2020 18-Dec-2019

Global Economy In China, the central bank reduced the amount of cash that lenders must hold in reserve, and signaled continued action in 2020 to reduce borrowing costs for companies. The required reserve ratio for commercial lenders will be trimmed by 50 basis points from Jan. 6, releasing about 800 billion yuan ($115 billion) of liquidity into the financial system, according to the People's Bank of China. The cut aims to help banks reduce their lending rate to businesses.

Currently, the required reserve ratio is 13% for big banks and 11% for smaller ones. In a separate development, the US IHS Markit PMI revised slightly lower to 52.4 from 52.5 in December 2019. It compares with 52.6 in the previous month. Output and new business expanded modestly while employment growth was the second-fastest since May, with firms stating the increase largely stemmed from greater production requirements. Companies commonly attributed the rise to the partial pass-through of higher costs on to clients. Finally, business confidence picked up, with optimism reportedly stemming from new product development, new client wins and investment in new facilities. Elsewhere in Brazil, trade surplus decreased $5.6 billion in December 2019 from $6.428 billion in the same month of the previous year as reported by Ministry of Development, Industry and Foreign Trade. Exports slumped 6.2% from a year earlier to $18.16 billion, dragged down by lower shipments of manufactured goods, mostly fuels (14.6%); aluminum oxides/hydroxides (-20.6%); motor engines & parts (-6.9%) and auto parts (-22.7%).

Imports went down 2.8% to $12.56 billion, as purchases fell for capital goods (-11.8%); consumption goods (-3.3%) and fuels & lubricants (6.2%).

Local Economy Data by the National Bureau of Statistics (NBS), revealed that the Federation Accounts Allocation Committee (FAAC) disbursed the sum of N702.02 billion among Federal, States and Local Governments in November 2019 from the revenue generated in October 2019. The amount distributed was from the statutory account, value added tax (VAT), solid mineral revenue and exchange gain differences comprising of N587.20 billion, N104.91billion, N8.7 billion and N1.11 billion respectively. A breakdown of the sum disbursed among the three tiers, revealed that the Federal Government received N295.74 billion, states received N192.70 billion and the local governments received N144.99 billion. The oil producing states received N49.16 billion as the 13% derivation fund. In a separate development, the Manufacturing Purchasing Managers' Index (PMI) stood at 60.8 index points in December 2019. This indicates an expansion in the manufacturing sector for the thirty-third consecutive month. The index grew at a faster pace when compared to the previous month (59.3 points). This was shown in the latest PMI report by the Central Bank of Nigeria. A PMI above 50 points indicates that the manufacturing sector is generally expanding, while a reading below 50 points indicates a contraction. Thirteen of the sub-sectors surveyed recorded growth during the month, while the paper products subsector recorded decline in the period under review. Elsewhere, businesses expressed optimism on Nigeria's macro economy in December 2019 according to the Central Bank of Nigeria (CBN) monthly Business Expectations Survey (BES). The report, which was posted on the apex bank's website stated: “at 30.3 index points, respondents' overall confidence index (CI) on the macro economy in the aforementioned period was more optimistic when compared to its level of 29.0 index points recorded in November 2019.” The respondent firms were made up of small, medium and large organisations covering both import- and export-oriented businesses. The positive outlook by businesses in December 2019, according to the report, was driven by the opinion of respondents from the following sectors: services (16.3 points), industrial (9.8 points), wholesale/retail trade (3.2 points) and construction (1.0 points) sectors. The surveyed firms listed insufficient power supply, high interest rate, financial problems, unfavourable economic climate, unclear economic laws and unfavourable political climate in that order as the major factors constraining business activity in the reference month. The business outlook for January 2020 showed greater confidence on the macro economy with 58.6 index points.

Stock Market The Nigeria Stock Exchange started the year on a bullish momentum. This is based on market players' expectation that economic recovery would be propelled by ongoing regulatory initiatives and the government's economic reform policies, particularly the new Finance Bill and oscillating crude oil prices.

Consequently, the All Share Index (ASI) jumped by 2.09% to end at 26,968.79 points from 26,416.48 points the previous week. Similarly, market capitalization rose by 2.09% to N13.02 trillion from N12.75 trillion the prior week. We expect investors take advantage of low prices, ahead of economic data and portfolio managers repositioning for the New Year.

Money Market Cost of borrowing declined last week as Open Market Operations maturity of N592 billion hit the system, thereby boosting liquidity. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates closed lower at 2.36% and 3.07% from 4.57% and 3.93%. The slightly longer dated instruments such as 90-day Nigeria Interbank Offered Rate (NIBOR) settled at 10.67% from 11.34% the prior week. This week, short tenored rates are expected to remain around current level supported by OMO maturity of N448 billion.

Foreign Exchange Market The local unit was majorly stable across most market except at the Nigerian Autonomous Foreign Exchange (NAFEX) where it witnessed a slight depreciation. The official rate and parallel market rate remained unchanged week-on-week at N307/US$ and N362/US$ respectively. The NAFEX segment declined by 60 kobo to close at N364.44/US$ from N363.84/US$ the prior week. The relative stability of the local currency continues to be supported by the intervention of the apex Bank. This week, we expect the naira to remain around prevailing levels, boosted by the Central Bank's sustained supply of liquidity to the market.

Bond Market Bullish sentiments on the medium and long end of the curve resulted in average yields dropping in the week ended January 3rd, 2020. Most of the demand was from Pension Fund Administrators for the 2027, 2029 and 2036 maturities. Yields on the seven-, tentwenty- and thirty-year debt papers finished at 10.30%, 10.76%, 11.72% and 12.77% from 10.91%, 11.13%, 11.74% and 12.88% respectively, the previous week. The Access Bank Bond index jumped by 137.05 points to close at 3,498.17 points from 3,361.13 points the prior week. We anticipate a continuation in the buying sentiment owing to relatively liquid market.

Commodities Market The price of oil spiked last week after US airstrikes in Iraq killed a top Iranian commander, heightening geopolitical tensions. China's decision to cut cash reserve requirement as a means of boosting credit to shore up the slowing Chinese economy also helped push oil price up. Bonny light, Nigeria's benchmark crude climbed 5.43% or $3.67 cents to close the week at $71.31 per barrel. Precious metal prices inched higher last week amid a weak dollar and trade optimism. Traders also flocked to safe-haven counters following US airstrikes in Iraq flaming new tensions in the Middle-East. Consequently, gold gained 2.38% to $1,546.11 per ounce and silver rose by 1.74% to $18.15 per ounce. This week, oil prices are likely to jump over increasing tensions in the oil-rich Middle East countries. Bullion counters may witness strong upside momentum on safe-haven demand amid Middle East tensions.

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

Feb’20

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@Businessdayng

Mar’20

363

362

362

11.90

11.96

12.1

65

66

67

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

Sources: CBN, Financial Market Dealers Association of Nigeria, NSE and Access Bank Economic Intelligence Group computation.

www.businessday.ng

Jan’20

Monday 06 January 2020

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

29

In association with

Why likable leaders seem more effective CHARN MCALLISTER, SHERRY MOSS AND MARK J. MARTINKO

A

recent trend in leadership research is to define a new “style” of leadership (e.g., authentic, ethical) and then demonstrate how following its principles can improve performance. As such, there has been an unending proliferation of leadership styles that have been espoused by researchers and practitioners.

Yet, despite evidence supporting each form of leadership as predictive of leader and follower performance, we began to recognize a problem: If subordinates rated one item on a leadership survey positively, they tended to rate the other items the same.

This is problematic because each of these leadership styles is considered conceptually distinct. The fact that subordinates tend to rate a single leader similarly across each different style supports the idea that there is a common underlying factor in their ratings. We began to suspect that being liked was the driving force behind leadership ratings.

We developed a five-item questionnaire that measured the extent to which an employ-

ee liked his or her leader. The results suggested that subordinates tend to rate leaders based on their personal liking of that leader rather than the leader’s actual behaviors.

But our research also suggests that “likership” is not the opposite of leadership. Instead, being

liked is probably one of several key ingredients in the effectiveleadership formula. Well-liked leaders can expect subordinates to consider them authentic, transformational, ethical and not abusive. Likewise, teams who like their leaders will be happier at work, go above and

beyond what is required of them, experience greater well-being and perform at a higher level.

While being liked is undeniably important, it is not the only answer to effective leadership.

Nonetheless, for leaders to simply ignore whether their subordinates like them will undoubt-

edly prove detrimental to their success.

(Charn McAllister is an assistant professor at Northeastern University.

Sherry Moss is a professor at Wake Forest University. Mark J. Martinko is an emeritus faculty member at Florida State University.)

The case for the public option over medicare for all REGINA HERZLINGER AND RICHARD BOXER

H

ow can the United States better control its health care costs and quality and still achieve universal coverage? The strongest choice is not Medicare for All, which would eliminate private insurance; it’s the public option, which would allow people to choose from Medicare or private insurers.

What the United States needs, and Americans want, are lower premiums and outof-pocket costs for health care, a sufficient number of competitive private insurers to honor the promise “if you like your plan or doctor, you can keep it” and, as surveys reveal, no exclusion for preexisting conditions, no lifetime limits on benefits and coverage for children up to age 26 on parents’ insurance.

The Medicare component of the public option is wildly popular. Beneficiaries pay only

a fraction of the cost, passing the rest onto future generations.

Yet Medicare’s enormous scale confers genuine administrative and purchasing efficiencies. The public option can take advantage of these efficiencies, but only if it is implemented

without the financing gimmicks that have artificially lowered the costs of Medicare at the expense of our progeny and that would allow it to unfairly compete with private insurers.

To assure that all insurers play on a level playing field,

public-financing principles must conform to those of private insurers. For one, the public option’s expenses must be financed by current users, not future generations. The public option’s accounting also should include all its expenses, such as

the unfunded liability for Medicare employees’ post-retirement benefits, which are often buried in some fund other than Medicare’s. It must also account for the cost of the money that American taxpayers and debt-holders have invested in building Medicare’s infrastructure, including its buildings, equipment and workers.

Private insurers will be forced to compete with the public option’s lower costs through improved pricing, service and quality. Americans generally like both private insurance and Medicare but universally deplore their costs. Medicare for All eliminates private insurers and increases taxpayers’ burden. The public option keeps private insurers and controls health care costs.

(Regina Herzlinger is a professor at Harvard Business School.

Richard Boxer is a clinical professor at UCLA’s David Geffen School of Medicine.)

30

Monday 06 January 2020

BUSINESS DAY

Start-Up Digest How engineer shapes small chops business in Lagos In association with

There are many providers of finger foods, commonly known as ‘small chops’ in Nigeria. But a 25-year-old engineer is determined to disrupt that market space through smallChops.ng. Since 2016 when smallChops.ng started, it has expanded to become one of the largest small chops providers in Lagos, Nigeria today. The company recently opened a new state-of-the-art production centre in Surulere, Lagos. In this interview with Desmond Okon, Uche Ukonu, CEO, smallChops.ng discusses how the company started, and how they are taking it to another level.

Kindly tell us about smallChops.ng t is Nigeria’s first technology-centered finger foods provider. We pride ourselves in providing the best quality small chops in Lagos, including signature offerings that are not available for delivery anywhere else in this country.

Our finger foods are made with the best quality, locally sourced ingredients. Our motto is, ‘Made with love, delivered with care.’ So far, through one of the easiest ordering processes offered by any finger food delivery service in Nigeria, we have delivered over 100,000 packages to about 10,000 customers here in Lagos.

I

Why small chops? What was the inspiration behind venturing into such a business here in Nigeria?

The real question is, why not small chops? Back in 2015, I was fresh out of an Engineering degree programme at Covenant University, home and bored. One day, I wanted to enjoy a pack of small chops, just one. I called the wellknown small chops vendors in Lagos at the time, and was told that it was impossible to order a single pack of small chops. I had to order a minimum of five packs before they could deliver.

The disappointment got me thinking. So I did some research, ran surveys, and

we designed a system where our customers can get small chops delivered to them in a few clicks or taps, through Whatsapp, Instagram, Twitter, browsing the web or phone calls. Wherever our customers catch that craving for delicious small chops, we are a click or tap away.

found out that a huge part of the reason why more people did not order small chops when they craved them here in Lagos was Minimum Order Quantity (MOQ) restrictions on orders from the big guns.

I saw an opportunity in that problem, and combined with my minimal coding experience at the time, decided to bridge the gap. SmallChops. ng then became the first food delivery service in Nigeria to have no MOQ restrictions of any kind.

Another key inspiration for smallChops.ng stems from the fact that it is an intersection of two of the things I love most— technology and food.

You have been redefining the food industry through small chops consistently for three years. How do you do it?

I would say that our menu is one of its kind in Lagos, and perhaps in the country. Beyond the usual small chops, we have added unique items such as crunchy meatballs, money bags, stuffed potatoes and a variety of seafood options available for same day delivery. We also pride ourselves in being one of the most accessible finger food vendors, with a dedicated support team across Whatsapp, Twitter, Instagram and our hotline. By visiting any of our social media pages, @smallChopsNG, you will get an agent responding to

Uche Ukonu

your requests in a matter of minutes between the hours of 9am and 6pm. Our goal is for our customers to be able to order from whatever platform at their convenience.

Our fully functional website at www.smallchops.ng allows you to place orders, save delivery locations and track your orders, all without making a single phone call or text. These and many more features we incorporate into our business, I would say, have helped us redefine the industry so far.

What makes your company really stand out from competition?

Our goal at smallChops.ng has never been to outshine the competition. We strongly believe that if you create value consistently, your customers would notice, stick with you, and maybe even tell their friends about you too. All our innovations and plans have always been geared towards the customer –from procurement of raw materials to delivery of the finished goods. With that in mind,

Research around small businesses in the world today shows that innovation drives growth. What innovative practices has your brand put in place to remain competitive?

At smallChops.ng, we have four core values: Quality, Efficiency, Technology and Heart.

These four pillars are at the foundation of all we do at smallChops.ng and combine to form the steering wheel for our innovative practices.

We are constantly asking ourselves ‘Is this the best quality achievable?’, ‘How can we make our processes more efficient?’, ‘How can we use technology to drive that efficiency?’, and ‘How do we make sure our customers feel a little better every time they purchase our product?’ The answers to these questions are the ways we continue to innovate, to make sure we provide only the best for our customers, and we believe this is what truly makes us competitive.

in a fast-paced environment like Lagos?

It is important to note that to maintain any form of control or uniformity in our country, you have to be flexible enough to alter your processes when circumstances demand it, and quickly too. At smallChops.ng, we implement the best business practices, with an open policy for timely change based on economic realities and customer feedback. Being alert to changes and reacting correctly and quickly while retaining your core business proposition is very crucial.

How do you maintain quality control and uniformity in your product and services,

Pricing is a key factor for food businesses in Nigeria and beyond. How do you manage your relatively low prices, while providing quality?

This is a tough one, especially in an economy as volatile as the one we are in. The key is to have significant control over your operational costs – which is everything from supply chain to how you reward your workers. This should be optimised. It also helps if you design your pricing in a way that you have a significant operational margin to hedge against fluctuations in the economy year-on-year without altering your pricing model. When all of these factors are considered, it is easier to price adequately in a way that still provides quality and allows you turn a profit.

tion,” she further says.

Owie, who says she has so far trained four persons while eight persons are currently under her tutelage, notes that the business has recorded steady growth in the past one year.

“Ninety percent of my client base came from referrals, and that just helps me get better because I believe I have to keep satisfying you so that you can tell someone about me. That has been the cheapest and fastest mode of advert for us,” she says.

“In spite of the downturn in Nigeria’s economy, there have been consistent patronage, particularly from foreign clients because of my alluring and creative designs”, she states.

She however, attributes poor power supply and numerous competitors as the major challenge militating against the growth of the busi-

ness in the state as well as in the country.

“If there is anything that really stresses me out in Nigeria, it is the power supply.

“Businesses are confronted with the onerous task of dealing with rivals, and there is a large number of competitors in the clothing world. So, we need to stay focused and stand out,” she notes.

She realises that every business has its challenges, adding that Omella Designs is immersed in how to stay creative and know what to produce every season, including understanding what each client needs.

“Omella Designs is looking forward to commencing production of ready-to-wear clothes in 2020, and investors and partners are free to make commitment to the project which will hopefully yield a worthwhile outcome,” she discloses.

Omosede Owie storms 2020 with ready-to-wear brands Churchill Okoro, Benin

F

ashion designing is one of the most lucrative small businesses in Nigeria today. The sub-sector of the textile industry has not only provided a means of livelihood for a greater number of households, especially the female folks, but has also proven to be a vehicle in reducing unemployment in the country.

The lucrative nature of the profession has attracted both the old and young, including graduates, undergraduates, school dropouts, primary and post primary pupils, as an alternative to white collar jobs.

Coupled with the downturn in the nation’s economy, it has served as a profitable means of navigating out of poverty.

It is as a result of the bene-

fits inherent in the sub-sector that spurred Omosede Owie, a graduate of Linguistics from the University of Benin (UNIBEN), to take advantage of it and create a niche for herself in the clothing world.

The 25-year-old, who is the chief executive officer (CEO) of Omella Designs, says passion for creativity and determination to produce ready-to-wear clothes motivated her to invest all her N400, 000 savings realised during her National Youth Service Corps (NYSC) in the profession.

“I started nurturing the business during my compulsory National Youths Service Corps (NYSC) in Niger State, where I bought a sewing machine and took advantage to make stylish wears for a lot of non-indigenes in the state,” she recalls.

“After my NYSC, I was invited for an interview in a www.businessday.ng

telecommunications company in Lagos. I knew then that I was not the 9-5 type of person. Thereafter, I returned from Lagos and took the bold step to open my fashion home with the N400, 000 I saved, and I am more than glad I took that decision,” she says.

“Today, I am proud to say that I am a fashion designer.

I make clothes for ladies of all sizes. I started sewing in 2009, immediately after secondary school. My mum is a fashion designer, so I actually loved how creative she was and I had a flair for it,” the entrepreneur explains.

“We had a machine in the house, and I started learning the trade by loosening my already-made gowns and re-sewing them. By so doing, I started getting better and mastering the art on my own,” she also says.

The budding entrepreneur, whose target in 2020 is

Omosede Owie

to commence the production of ready- to- wear clothes, notes that her motivation for the job is not only for pecuniary gains but the joy and satisfaction of making people look good and beautiful.

“My motivation has never been money, but the joy I derive when I see how happy I make my clients. We all know women can do anything for fine clothes. Also, my mum has been my utmost motiva-

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Monday 06 January 2020

BUSINESS DAY

31

Start-Up Digest

Our customers have access to funds under three hours — Page Financials CEO

Segun Akintemi is the CEO of Page Financials, a fintech company that provides quick online loans without collaterals. Page Financials is among the 100 fastest-growing SMEs in Nigeria recently selected by BusinessDay for recognition. In this interview, he speaks on his firm and how government can rev up small and medium businesses in the country.

Tell us about yourself and business.

I consider myself passionate about life, family and creating value for the benefit of many.

This passion has driven several of my antecedents since starting Page six years ago and through my banking career which spans over 31 years.

Although I have a background in technology, I am service oriented and find that the delivery of excellent service to customers, exemplary leadership and optimal returns to stakeholders are important elements of growth and sustainability in business. These have become my pillars as an entrepreneur.

Page Financials represents empowerment and opportunities to our customers and we hope to extend this to other Nigerians. We realise that access to finance is sometimes the difference between a great idea and its actualization. Whether it is getting a post-graduate degree, moving homes or expanding a business, we are here for well-meaning Nigerians who can achieve these targets and settle their obligations over a convenient period of time.

At Page Financials, the focus is offering our products through the most innovative, convenient and speedy platforms and processes. Customers can easily get access to finance under three hours by applying through our website or mobile app, sending an email, calling our contact center or even visiting the office. We understand that people sometimes make financial decisions that require an urgent need for cash, and we ensure they get what they need, right when they need it. We offer two categories of loans: Personal loans to salary earners and business loans to support SMEs. We offer loans of between N200,000 to N5 million to salary earners in Lagos and Ibadan. Subject to approval, disbursement time is in less than 3 hours.

We also have an investment plan where investors can get up to 20 percent return on investment (ROI), depending on the amount they

Segun Akintemi

invest with us and the tenor.

Our customers also use our mobile app to pay bills and transfer money to any bank in Nigeria at a zero-naira service charge. This means you get to save transaction charges any time you transfer money or pay bills with our app. We are one of the first fintech companies to embrace the ₦0 on transaction charges while performing financial operations.

How is the Nigerian business environment impacting your business?

The small and medium enterprises (SMEs) account for a large proportion of the total employment growth in many countries. In the developed economies, SMEs and micro enterprises account for over 95 percent of firms, 60-70 percent of employment, 55 percent of GDP and generate the largest share of new employment. In the case of developing economies, the situation is not very different.

For instance, in Morocco, 93 www.businessday.ng

percent of firms are SMEs and account for 38 percent of production, 33 percent investment, 30 percent export and 46 percent employment.

In Nigeria, SMEs contribute about 76 percent of the workforce, with contribution to GDP at about 50 percent and contribution to exports at 8 percent. The SME business culture in Nigeria is entrenched in our values as a people, although now gradually evolving beyond societal idiosyncrasies and adopting global best practice in certain areas. In the SME sector, we still grapple with issues such as accountability, timeliness, short-term focus, and gender bias, among others, and these limit the growth opportunities of businesses, especially when combined with prevailing infrastructure and regulatory constraints.

However, there are many reasons to be optimistic as Nigerian entrepreneurs are becoming more aware of the need for structure and policies that guide business

operations. The fintech community is somewhat peculiar.

A lot of the inspiration and activities that happen in that space are based on global trends, hence, there is more adoption of creative and innovative values which are required to survive and flourish in the sector. More so, many of the players in the field are either millennials or have a large portion of their teams as millennials who are more exposed to the ‘global village’ and pursue goals beyond the dictates of their local environment. These factors have played a major role in the rapid growth of the sector and it is without doubt that the Nigerian fintech space will be competing globally in the very near future.

What are the most critical problems your industry faces?

The industry has evolved well, although a lot of companies have gone under in the process based on their focus, target market and

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many other factors. The government is trying to encourage investment in the sector as one of the major issues in this space remains funding. The government has been very proactive with the provision of N220 Billion MSME Fund focused on the development of SMEs disbursed through microfinance banks. The Bank of Industry (BoI) has also been active in lending to the real sector, thus supporting its growth and development. These are the factors that are going to help us in terms of growth. But there is still a lot more to be done, particularly in terms of regulations. The regulatory framework is evolving in line with the realities of today, with the aim of building more resilient and robust financial institutions. So, I see the industry evolving and developing as the deposit money banks (DMBs) have in the last decade. The ease of accessing financial services has also increased significantly with the use of ATMs, POS and the USSD technology which does not require smart phones. This has further propelled growth in the sector, but the potentials and opportunities remain huge and can only be fully tapped with very innovative thinking.

Can there be any end to the constraint of financing for SMEs? One of the biggest measures of growth for an economy is your consumer credit ratio to GDP. If you look at the advanced countries, their rates are averagely above 70 percent while Nigeria is barely 20 percent. If you do not drive consumer credit, which in turn grows the economy, then we can’t witness improvement in our GDP growth.

What we should be doing as an entity is to identify how to further empower and enrich our consumer credit culture so our SMEs have access to credit and the average Nigerian too. Naturally, it is a way of infusing growth and driving the velocity of money, which is what propagates the growth of GDP. @Businessdayng

Do you think the existing policies and regulations are sufficient to ensure proper functioning of the SMEs in your industry?

The government is putting in efforts to ensure that SME businesses in Nigeria in general function properly. However, there is still so much room to do more.

What policies and regulations do you propose should be introduced to support SMEs? Government should intensify intervention programmes that aid growth of MSMEs by making affordable financing options available. Additionally, more attention and support should be given to knowledge acquisition through access to requisite trainings and apprenticeship systems based on global standards. Local businesses now have to provide goods and services that compete with foreign products. With international exposure through robust trainings and apprenticeship models, these local businesses can learn value-adding techniques that improve their processes and standards. Lastly, government should focus on access to credit. From a recent government survey, about 85 percent of capital for SMEs is sourced from personal savings and family, with loans from financial institutions amounting to just around 5 percent. As regards MSMEs struggle with tax harmonisation, government must support by offering tax rebates/holidays, and grant pioneer status, especially to tech start-ups. This would further aid in addressing the ease of doing business for companies in Nigeria. Page International Financial Services Limited will continue to seek opportunities to work with stakeholders such as the government, regulators and other players in the industry to ensure growth in the financial services sector and especially for accessibility to credit by well-meaning Nigerians who have the capacity and willingness to repay such facilities.

32

Monday 06 January 2020

BUSINESS DAY

cityfile 19 killed as gunmen attack Kogi community

G

Demolition of unwanted fence and structure under the Bridge at Outer Marina in Lagos on Friday.

NAN

C’River: Women accuse multinational firms of engaging in deforestation MIKE ABANG, Calabar

W

o m e n f r o m Mbarak o m c o m munity in Akamkpa local government area of Cross River State, have protested against what they termed ‘land grabbing’ by multinational companies, saying the unchecked acquisition of their land has denied them access to forests, medicinal herbs, vegetables and firewood.

According to the protesting women, led by Hali-

ma Oja, these are species and condiments they have, over the decades, depended on for their daily living.

The deforestation without compensation, according to the women, has adversely affected their livelihood.

Godwin Ojo, the executive director of Environmental Rights Action and Friends of the Earth, who addressed journalists in Akampa, together with the women, said it has become necessary to draw the attention of the Cross River State government to the impact of land grabbing

on the people and environment, particularly the womenfolk and how this is affecting food production and the local economy.

Philomina Essien, a resident of Mbarakom, who spoke with Cityfile, alleged that in the case of one of the companies, expanding its oil palm plantations, community lands were appropriated without compensation of any form.

Margaret Thompson, another woman from the community, alleged that since losing her husband in 2018, who was a staff

of one of the multinationals, she had been put into untold hardship through non compensation by the company.

Also, Patience Edet, another woman who joined others in the protest, said she was sacked for asking for maternity leaf from one of the companies. According to her, the Cross River State House of Assembly is currently looking into the matter.

The women demanded compensation from the companies in view of the adverse effect being suffered from their activities.

NSCDC arrests 1,314 suspects in Edo

T

he Nigerian Security and Civil Defense Corps (NSCDC), Edo command, says it arrested 1,314 suspects for various crimes in 2019.

The state commandant of the corps, Makinde Ayinla, made this known, weekend, in Benin, while reviewing the activities of the command in 2019.

Ayinla said the suspects were arrested for offences ranging from illegal mining, vandalism, armed robbery, cultism,

farmers-herders clash, to prostitution.

He also disclosed that the command within the period resolved 200 conflict cases and secured 16 convictions out of the 36 cases of suspects prosecuted, while 15 cases were pending in courts.

The commandant also disclosed that about 50 cases involving suspected armed robbery and recovery of stolen vehicles were transferred to the Edo command of the Nigeria Police Force. www.businessday.ng

“Also, about 15 cases on human trafficking were similarly transferred to the National Agency for Prohibition of Trafficking in Persons (NAPTIP).

“We also transferred 10 cases that fell under the purview of the Standard Organisation of Nigeria (SON) to the agency,” he said.

Ayinla also said that the crisis management department of the command provided necessary warning for the civilian populace through sensitisation.

He added that the de-

partment carried out rescue operations and control of volatile situations within the state.

“The department also assisted the Federal and State Fire Service in fire fighting operations, detection and demarcation of danger areas, providing emergency medical services to accident victims across the state,” he said.

He disclosed that the command also recovered about N5.1 million from breach of trust during the year under review.

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unmen at the weekend killed 19 people in Ta w a r i c o m munity in the Kogi local government Area of Kogi State, burning buildings, including the palace of the king of the community.

The public relations officer of Kogi police command, Williams Anya, confirmed the development.

He said that a police assessment team visited the community and that several buildings, including places of worship were burnt.

Tawari community is a few kilometres off Gegu town along the LokojaAbuja highway.

A resident of Tawari community, Comfort Solomon, who survived the attack, said that the gunmen, numbering about 100 invaded the community. According to her, the gunmen came in their numbers on motorcycles and descended on the village, killing and burning buildings until the early hours of Friday.

Solomon said that many places of worship, including the palace of the Akuma of Tawari were burnt down by the invaders.

“The gunmen were up to 100 in number. They came into the community with motorcycles around 11:15 p.m. when villagers

were sleeping.

“They entered selected houses, packed foodstuff and motorc ycles and burnt selected houses, including homes of clerics.

They killed more than 15 men. The attackers were communicating with each other in Hausa language,” Solomon stated, weeping profusely.

Similarly, a NAN staff, Rita Nuhu, an indigene of Tawari, who also spoke on the attack, said that her father’s house was completely burnt down.

“My people have been calling me from home that my father’s house was burnt down by the attackers.

“My mother and her sister were ordered out of the house after which the house was set ablaze, while about 15 men were killed.

“We are calling on security agencies to bring the perpetrators to justice.

We appeal to the federal and state governments to come to our aid,” she pleaded.

The king of Tawari, Idris Yusuf, confirmed the incident, saying it was the first time the community was experiencing such attack.

“This is the first time we are witnessing such deadly attack in our community. Our community has been very peaceful.”

C’ River gives traders 7 days to relocate to markets MIKE ABANG, Calabar

C

ross River government has given a 7-day ultimatum to traders on illegal structures along major streets in Calabar to relocate their businesses to Watt or Marian markets or face demolition.

Newly appointed commissioner for environment, Mfon Bassey, gave the ultimatum last weekend during an inspection tour from NIPOST office in Calabar to Watt market.

Bassey said activities of the traders were impeding the free flow of traffic.

Addressing the hawkers at different points, the commissioner assured of the state government’s commitment to a clean and green environment, hence the need to relocate all roadside sellers back to the markets.

He reminded the hawk@Businessdayng

ers that the government had earlier issued an ultimatum on December 27, 2019, asking them to remove all illegal structures, shanties and containers from the roadside.

He directed that all structures on drainages be removed to allow for a free flow of storm waters. Bassey added that the exercise was to ensure a more organised Calabar and prevent flooding during the rainy season.

At the stadium junction where commercial drivers had formed an illegal park on the walkway and verge opposite the stadium, the commissioner ordered them to relocate from the spot forthwith.

“This move is to ensure a clean and green Calabar free of illegal structures that are militating against the government’s effort of making the city a better place,” he said.

Monday 06 January 2020

BUSINESS DAY

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NSE 30 profit jumps after admitting MTN, CCNN, and FCMB BALA AUGIE

T

he inclusion of MTN Nigeria Communications Plc, Cement Company of Northern Nigeria (CCNN), and First City Monument Bank (FCMB) Plc to list of Nigerian Stock Exchange (NSE) 30 index has added impetus to index’s earnings.

Before these bellwether firms were included on the list of the most liquid and capitalized firms, combined profit was N1.06 trillion as at September 2019, but it now stands at N1.21 trillion, which represents N150 billion difference.

Interestingly, these firms have been growing margins and profit more than their peer rivals as their future expansion plans continue to allure investors.

For instance, MTN Nigeria has been recording double digit growth in earnings since it listed its shares on the bourse last year.

Its net income of N148.15 billion is 12.17 percent of the entire NSE 3O index profit.

In terms of positioning of the industry player based on subscriber base, MTN remained the biggest

player with a subscriber base of 65.80 million (market share: 36.60 percent) as it continues to aggressively invest in 3g/4G bandwidth coverage.

CCNN became the postal child of the cement industry when it began a series of inorganic strategies while copious investment in coal (a cheap alternate energy) helped save costs.

Last year, the cement maker merged with Kalambaina and Obu cement to form a single entity. After the marriage, its total capacity hit 8 million metrics tonnes, to emerge as the third

largest producer of the building material.

Analysts say the Federal Government proposed infrastructure spend will accelerate demand for building materials, a boon for CCCN and other operators in the industry.

First City Moment Bank’s risk management strategy has yielded fruit as it has one of the lowest Non-Performing Loans (NPLs) in the banking industry.

The slowing economic growth coupled with inflationary pressures means rising volatility in the financial market as investors

dumped shares due to lack of policy direction on the part the President Muhamadu Buhari’s led administration.

Last year, the NSE ASI was the worst performing among developing and emerging market countries as it closed as -15 percent but it began the year on a sound footing closing on 0.47 percent as at 2:00 pm in Lagos.

The NSE 30 profit increased at a single digit (4.22 percent) as at September 2019, which was largely dragged down by consumer goods firms, disappointing results that underscore the harsh and

unpredictable macroeconomic environment.

The inflation figure for the month of November 2019 stood at 11.85 percent, the highest in 17 months, thanks to skyrocketing food rice brought on by border closure.

While the economy expanded to 2.28 percent in the third quarter of 2019, it is below 5.94 percent expansion in the third quarter of 2015, before the pang of a sharp drop in crude oil price began to bite.

Niger ian Stock E xchange (NSE) data on domestic and foreign investor participation for November 2019 revealed that foreign investors’ outflows from Nigerian equities outpaced inflows for the second consecutive month.

Absence of structural reforms in strengthening the resilience of the domestic economy, rising vulnerabilities to external shocks, poor corporate earnings delivered mostly by consumer goods companies and in recent times, the flurry of regulatory guidelines from the CBN which has raised uncertainties in the banking sector dampened foreign investors’ appetite for Nigeria.

Nigeria’s currency regime outlives usefulness as deficits mounts BALA AUGIE

F

or a period of 12 months through November 2018 to 2019, Nigeria has been recording foreign exchange

deficit, a situation analysts blame on the multiply exchange rate of the central bank.

The chart below showed inflow exceeded outflow only in the months of March and May 2019, and the surpluses for the period

were 2.50 billion and 420 million respectively.

Analysts say the foreign current regime is increasingly undermining foreign direct investment as it confuses investors, while external reserve has been depleting due

to the gyrations in the global oil market.

The huge gap between the foreign exchange supply and demand leads to price distortions and increased demand in the parallel market which contributed to a wide gap between the official and parallel rates, according to Olusegun Zaccheaus, Associate Director at global accounting firm, KPMG. Zaccheaus said that the introduction of multiple windows in 2017 led to an increase in foreign

exchange supply from $21.4 billion in 2017 to $38.1 billion in 2018.

For now, the Governor Godwin Emefiele hasn’t plenty of firepower at his disposal. Foreign exchange reserve has fallen by $4.45 billion to $38.62 billion as at December 2019, from $43.07 billion in January.

The parallel market rate hit a record low of about N500/$1 in February 2017.

The Naira has remained steady at $305 on the official market and $360 parallel market rate.

BusinessDay MARKETS INTELLIGENCE (Team lead: BALA AUGIE - Analyst: Dipo Oladehinde, ENDURANCE OKAFOR, BUNMI BAILEY 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 patrick.atuanya@businessdayonline.com www.businessday.ng

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Monday 06 January 2020

BUSINESS DAY

MARKETS INTELLIGENCE

13 Banks set to record combined N955bn in net profits in 2019 … banks are set to grow profits by up to 113% from 2016 levels IFEANYI JOHN

I

f t h e re w e re a n y doubts that banks are true titans of business in Nigeria, the 2019 performance of Nigerian banks is set to dispel any such thought. The new year marks the beginning of the audit season for Nigerian banks who will be preparing their financial performance for the full year 2019 for stakeholders.

Analysts who spoke to BusinessDay say they forecast that the 13 publicly listed banks on the Nigerian Stock Exchange earned between N920-960 billion in 2019, representing an 11.35 percent growth in Profit After Tax recorded in 2018.

BusinessDay analysis of the 2019 9 months performance of the banks revealed that banks generated about N716.9 billion in net profit between Q1 and Q3.

Assuming the profit trend continues till year end, the annualized 2019 net profit is expected to reach N955.8

billion for the year 2019.

In the two years postrecession, the profitability of the 13 banks have grown from N447.8 billion to N858.4 billion in 2018, marking a growth of 92 percent. With profits expected to exceed N900 billion in 2019, this will mean that banks have been able to double their profit in just 3 years post-recession.

This remarkable profit

Nigeria could benefit as increased tensions in the middle east send crude oil prices higher IFEANYI JOHN

B

rent crude oil price jumped 4.39 percent on Friday to $69.16, its highest level in 4 months after an air strike by US Forces killed a top Iranian military general, escalating tensions in the middle east.

Nigeria has seen its foreign external reserves deplete at record pace to the declining prices in crude oil prices and sluggish oil production growth, however, January may see the country’s fortunes turnaround after increased geopolitical tensions between US and Iran send crude oil prices higher.

According to Andrew Walker from BBC World Service economics, the potential disruption to the global oil market from conflict in the Gulf could be catastrophic on oil production which may send crude oil prices rising.

Safety passage of crude oil through the sea is critical to keep crude oil supply flowing freely but with Iranians infuriated by the killing of their military commander, there is no guarantee as to how they will behave in the coming weeks.

Some analysts suspect that Iran could attack US or even oil

shipments of its middle eastern neighbours in retaliation which could cause an even worse conflict in the region.

It is almost impossible to put such attacks past Iran after drone strikes from Iran backed Houthi rebels caused Saudi Arabia’s largest oil refinery to be shut for a few days last year.

The US Energy Information Administration estimates that 21% of oil used in 2018 passed through the Strait of Hormuz, a narrow passage which has Iran on its northern shore.

Some of the biggest producers would be affected if the Strait could not be safely navigated. Saudi Arabia, Iraq, Kuwait, Iran, UAE and Qatar all ship some or all of their exports via the Strait.

Saudi and the UAE have pipelines that bypass the Strait, but they have nowhere near the capacity to take all the oil.

If Iran decide to attack its neighbours, demand for oil may shift to other large oil exporting countries like Nigeria to fulfil demand. While there is no clear evidence that Iran will attach oil shipments of its neighbours, Nigeria will still be happy to benefit from the increased price of crude oil prices during this tensed period in the middle east. www.businessday.ng

report speaks volume to the financial strengths of banks who have continued to expand their bottomline at double digit pace despite the slow economic growth environment. While the industry appears to be very profitable, almost three quarter of the profit generated by the banks was contributed by the five Tier 1 banks alone.

In the Q3 2019, Tier 1

banks generated a profit of N521 billion in the first 9 months of the year, which is 14.5 greater than the N455.9 billion generated during the same period in 2018. The 9 months profit by Tier 1 banks in 2019 accounted for 73 percent of the industry profit, up from 70 percent during the same period the previous year, proving that profit growth in the Tier 1 banks outpaced the other

bank Tiers.

Despite the 11.35 percent growth forecasted for Nigerian banks, the banking index returned -11 percent in the last one year as bank shareholders have continued to suffer from broad market selloffs on the local bourse. Many analysts struggle to comprehend why banks are most affected by the negative sentiment of bearish investors in the capital market.

“Banks have been the main muscle of the Nigerian capital market for years. Investors have earned steady dividends which we expect to climb by at least 10% considering the strong growth in profitability recorded last year,” said Obinna Uzoma, chief economist at EUA Intelligence. “I think the surge in regulatory risk for banks last year caused investors to panic and triggered another round of selloff like we saw in 2018 during the election selloff season. However, considering most foreign

investors are invested in bank stocks, anytime they exit our markets, banks stocks typically decline on increased selling pressure,” he added.

“I don’t think 2020 will be as rosy for the banks as the last 3 years considering that yields which were in double digits since 2016 have now declined to less than 7 percent. Also, cost of risk and non-performing loans is expected to trend higher with the rush to increase loan exposure based on the new directive of CBN to raise loan to deposit ratio to 65 percent. The increased loan loss provisioning and lower prime lending rates and lower treasury yields in 2020 will have a negative impact on profit growth this year. However, we already see banks trying to protect their net interest margin by giving very low deposit interest rates which should pull interest expense lower this year which adds some positives to hopes for a decent profit growth for 2020,” Uzoma concluded.

Gold funds dazzle in list of 2019’s top performers Investors in gold and small and mid-caps enjoyed the best returns Emma Agyemang, FT

G

old funds dominated the topperforming investment funds of 2019, boosted by a sharp rise in the price of the yellow metal during the year.

The best-per for ming fund, Charteris Gold & Precious Metals, made 52 per cent — the highest total return of more than 2,500 UKbased funds.

The fund aims to provide investors exposure to gold primarily through worldwide blue-chip equities with direct exposure to precious metals, such as gold mining companies.

Ruffer Gold, which also invests in gold miners, returned 44 per cent and was the third best performing fund, according to analysis

by Shore Financial Planning using FE Analytics data.

The strong performance of both funds was supported by a rise in gold prices dur-

ing 2019. This was driven by investors’ fears about a potential recession, geopolitical tensions and falling bond yields — particularly over the summer. Gold ended the year at $1,520 per ounce having started 2019 below $1,300.

UK mid-cap and smaller companies funds also performed strongly despite the political uncertainty over Brexit. Aberdeen Standard UK Smaller Companies posted the second-best total returns of 46 per cent and Franklin UK Mid Cap came in at fourth place with 42 per cent.

“It was a storming year for investors,” said Ben Yearsley, director at Shore Financial Planning. “There are of course a few exceptions [for example] Mr Woodford, but overall returns were excellent across most asset classes.”

Targeted absolute return funds — which aim not to lose investors’ money — were among the worst

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performers. The bottom three performing funds of 2019 were Garraway Absolute Equity with negative total returns of 57 per cent, BMO Equity Market Neutral which finished the year down 30 per cent and Oxeye Hedged Income, down 22.5 per cent.

The fourth worst-performing fund was Neil Woodford’s former vehicle, the suspended LF Equity Income fund, down 22 per cent during 2019. Investors cannot trade the fund, but daily pricing continues to be produced

by Link Fund Solutions.

However, the analysis showed the vast majority of funds ended the year up. Of the 2,582 onshore funds with a record of at least one year analysed, 2,533 delivered a positive return.

All fund sectors were also up on the year, though there was large variation in performance — with the top sector, technology and telecoms, returning 30 per cent in contrast to the lowest @Businessdayng

performing sector, UK direct property, which made 0.04 per cent.

Mr Yearsley attributed the widespread good performance to the continuing loose monetary policy by central banks.

“2019 changed when the Fed cut rates last January.

Without that we would have been looking at very different numbers last year,” he said. “Monetary policy has propped up markets yet again stretching valuations in some markets even further. The phrase longer for lower is often used, but there seems no real path back to ‘normalised’ rates.”

Darius McDermott, managing director at Chelsea Financial Services, said: “I would be surprised if we had such a strong year again.”

However, his firm believes there are opportunities this year for “decent returns” in small-caps and domestic facing companies in the UK, continental Europe and Japan.

Monday 06 January 2020

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

35

• Utilities • Managing your Tax

The most important succession of all - consumer succession The Solid Wealth Messenger

Grace Agada

S

uccession is the exchange of value and advantage between two generation. The first generation, the older generation is the generation with business wealth advantage. The second generation, the younger generation is the generation with time advantage. When these two successive generation come together during succession, they exchange their values.

The older generation hands over the business asset to the younger generation. And the younger generation uses its time advantage to perpetuate the business. Thus, in a successful succession, business wealth is preserved even after the death of the founder of the business. It is the ability of business leaders to transfer tangible wealth that is Business wealth.

And intangible wealth that is knowledge, wisdom and values.

That preserve a business legacy for many generations. To guarantee business legacy, business leaders must engage in three types of succession. The first is Leadership succession. Leadership succession is the transfer of leadership over a business to a younger generation. The second is Business Succession and the third is Consumer succession. These three types of succession are important.

But consumer succession is the most important of them all and here is why.

Consumers are the life blood of a business. Without them businesses would die. Consumers carry the financial resources businesses need to breathe.

They exchange these resources when businesses help them solve important problems.

The ability to solve problems is therefore critical for the long-term survival of a business. But consumer problems do change. The consumer problems of today are not the same as the consumer problems of tomorrow.

When consumers problem change, businesses must change with it. It is the ability of businesses to change in ways that align with future consumers that spare the life of a business longterm. To change business leaders must understand the desires of future generation.

Unfortunately, Business leaders are the least likely to understand future generation. They are mostly pissed off, irritated and frustrated by the priorities and values of the younger generation. This is reflected in the many fights between fathers and their Sons and conflict between business leader and successors. Busi-

ness leaders are therefore not in the right mindset to prepare their businesses for future consumers. They are more inclined to maintain their businesses the same way that serve the consumers of their own generation. Research shows that people of a generation are more aligned with the mindset and activities of their own generation. This makes business leaders a poor candidate for changing a business for the future.

Consumers of the future belongs to a different generation. They belong to the generation of the successors.

Successors are therefore more likely to design businesses that align with future consumers.

They have mindset, priority, and needs that are aligned with future consumers. Business leaders must therefore collaborate with successor to rebirth their businesses. Collaborating with successors give business leaders insight into the world of future consumers. What they need and how these needs may affect the business of the future.

So how can business leaders prepare their businesses for the future and ensure the continuous flow of cash. Business leaders can do three things.

First, they must clearly define the new problem of future consumers.

That is, they must understand the pains of future consumers and what drive buying decisions. Second, they must ensure leadership succession is progressive. Third they must reinvent their businesses to align with the needs of future consumers.

These three things are what business leaders need to do to survive longterm. Below I will explain each of them in detail.

First, Customers are the life blood of a business and a business must clearly understand their problem. Unfortunately, consumers change between generations and this change can be significant. Understanding consumers problem as they transition from one generation to the other means digging deep into the unseen, unspoken and unexpressed. It means thinking ahead of the customers and driving innovative change rather than reacting to them. To understand the deep-seated pain of future consumer, business leaders must put themselves in the consumer’s shoes. This is a difficult thing to do especially if business leaders are already pissed off by the younger generation.

Nevertheless, business leaders can gain insight by collaborating with successors. Collaborating with successors allow business leaders work with someone who already lives in the customers shoes. This will help business leaders gain insight into the hearts of consumer and find great impact problems. To find impact problems business leaders must dig deep, ask the right questions and test to arrive at the right solution. If businesses must stay rel-

Objectives • Solid Wealth Creation • Solid Wealth Preservation www.businessday.ng

evant in the future, they must evolve to become businesses that align with the consumers of the future.

Second, businesses are driven by leadership and good leadership is critical for the survival of a business.

But not all leadership are beneficial.

The only type of leadership that is beneficial is progressive leadership.

Progressive leadership is leadership that transport people and organizations to a pre-defined destination in the future. Regressive leadership is leadership that take people and organization backwards. Business leaders must ensure that leadership transition within their organization is progressive. That is leadership at the Board, Shareholders and C-suite Management level must move the organization forward. Progressive leadership is the only type of leadership that redesign the business for the future.

Third, businesses need to reinvent to survive. Reinventing a business means accurately predicting the future and adapting the business to meet future consumer needs. All businesses must reinvent in order to live. They must change, transform or die. In the past it was possible to maintain a business for a fairly long time. For example, it was possible to find a son work in the same company as his father during his active career years. But today it is almost impossible for children to work in the same company as their fathers. By the time they are ready to enter the work force, the companies are dead, transformed or merged with another company.

In a rapidly changing economy businesses must change to meet changing consumer demands or die.

There must reinvent their competitive advantage because the competitive advantage of today will be irrelevant tomorrow. Today’s core Products and services may become tomorrow’s secondary products. Preparing a business for the future means walking away from the things that are working today. And looking forward to the things that will work tomorrow. The odds are slim that what is working today will work tomorrow.

Businesses must therefore reinvent or die. Thankfully the ability to reinvent is inherent in successors. Successors when trained and groomed can change a business in ways that are aligned with future consumers. To make these changes business leaders and successor must focus on one thing. The demography of future con-

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‘

In a rapidly changing economy businesses must change to meet changing consumer demands or die.

There must reinvent their competitive advantage because the competitive advantage of today will be irrelevant tomorrow

sumer.

Demography is the characteristics and composition of a particular human population. The demography of future consumers give insight into the behavior and drivers of the next generation. For example, future consumer demography studies show that they will be an increase in the populations of singles. Women will occupy more managerial and decision-making position. There will be a redefinition of value. The rate of unemployment will increase. There will be a decline in the purchasing power of the middle class and there will be increased focus on health.

These changes will affect the way consumers relate with businesses and the way businesses are run in the future. Changes in consumer behaviors must therefore drive changes in business design.

The consumer is king and he set the pace for the future. Businesses must therefore stay close to consumer in order to survive. Consumer succession, leadership succession and business succession are critical for the longevity of a business. But consumer succession is the most important of them all. Although important it is also the most difficult to implement. It is difficult because it requires a change in thinking of business leaders. It requires the collaboration between business leaders and successors. And it requires the understanding of the factors that drive future business decisions.

Finding what future consumers want is not easy. It requires deep thinking, analysis and testing to land a big idea. Perhaps you need help coming up with this big idea that matter to future consumers. This is where we come in. We belong to the future consumer generation and have great critical thinking and analytical capacity. We will help you understand future consumer behavior as it relates to your industry, help you identify consumer problems that are of great impact and help you create perfect match solutions so you can guarantee the cashflow of your business. To find out more about how we can help you and your business prepare for the future send an email info@createsolidwealth.com The success of your business tomorrow is dependent on your accurate understanding of future consumers

Grace Agada is a Generational Wealth Advisor, Legacy Expert and Author of the popular Solid Wealth Book. She is a Consultant and Coach to an exclusive list of top executives and entrepreneurial clients running Businesses from $1-million to $1 billion in size. She help Affluent clients prepare and execute a Ten Generation Wealth Legacy, Diagnostic Family meetings, Family Business Succession, Family Bank Systems, 90 days Sudden death contingency plan, Next generation grooming, and second opinion review of existing Trust and Estate Plans to support generational wealth goals @Businessdayng

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Monday 06 January 2020

BUSINESS DAY

INSIGHT What will it take for 2020 to truly be the year of Gas in Nigeria?

Naming 2020 the year of gas for Nigeria has a really nice ring to it, but marketing alone will not cut it NJ Ayuk

“

N

igeria’s Minister of State for Petroleum Resources, H.E. Chief Timipre Sylva has declared 2020 as the year of Gas for the Nation”, the news piece started. What amazing news! And certainly long overdue.

As it seems, Nigerian officials have finally taken the cue. As I have said ever so often, more than an oil nation, Nigeria is a gas nation. It just doesn’t act like it.

Undoubtedly, natural gas has the enormous potential to diversify and grow the Nigerian economy, power its industries and homes, produce ever-so-lacking wealth, create jobs, develop associated industries in the petrochemical sector, raise people out of poverty, the list goes on.

Mr. Sylva’s demonstrated intent could perhaps become the most relevant political action anyone has taken in Nigeria in years and could change the country forever; and yet, the work ahead is so vast, we can only hope he has the strength to pull it off.

To be sure, naming 2020 the year of gas for Nigeria has a really nice ring to it, but marketing alone will not cut it. Concerted governmental action is essential if we are to see true growth in the liquefied petroleum gas (LPG) sector, and first of all, we need to see a conclusion to the long delayed Nigerian Gas Flare Commercialisation Programme. Sylva stated that this was his main priority, so let’s hope it happens soon.

Once the programme is cleared, oil producers will have a more conclusive alternative to flaring. They will be able to monetize a resource that has so far been wasted, but still that will not suffice.

The flaring issue in Nigeria is tremendous. Every year, 2 million tonnes of LPG are flared, instead of being used as a source of power or feedstock. That means millions of dollars literally going up in smoke.

Nigeria’s zero-flaring programme has been on-going for years, and yet, the Nigerian National Petroleum Corporation (NNPC) has just released results that indicate that gas flaring has been consistently increasing over time. More specifically, “a total of 276.04 billion cubic feet (bcf) of natural gas was flared from Nigeria’s oil fields between September 2018 and September 2019”. Further, NNPC stated that “the volume of gas flared within this period was more than what was supplied to power generation companies for electricity production

which was 275.31bcf”. This is taking place in a country where 45% of the population does not have access to electricity, besides the extremely detrimental effect that has on businesses ability to compete and the extraordinary environmental damage that represents.

Already, the federal government announced in August that it would not be able to fulfill its Zero Routine Flaring target by 2020 and is yet to provide a new deadline for this goal to be achieved.

The problem remains the same as ever. It is much, much cheaper for producers to flare up and pay the fines than do anything about it. This can not continue to be.

Stronger action is needed and it falls on Mr. Sylva’s leadership to see it done.

I don’t mean by this to point the finger at oil producers. Most would probably want to monetize that resource, and would if they could. But we lack legislation, infrastructure, pricing regulations, and actors ready to receive the feedstock. They can’t just pipe the gas somewhere and hope for the best. We need to focus on deepening domestic gas penetration and promote adoption amongst the population, foster the development of gas associated industries like ammonia and urea plants, use this resource for power generation, etc. Demand doesn’t grow out of nowhere.

For this to workout, everybody needs to work together. That means the ministry and the NNPC need to partner with the international oil companies, the indigenous oil companies as well as with the country’s financial institutions to create the solutions that can make www.businessday.ng

this industry flourish. That is a tall job, but an essential one.

Of course, the news that the output of liquefied natural gas (LNG) coming from the Bonny LNG-plant is going to expand by 35% once the 7th LNG train is operational is fantastic. Nigeria will strengthen its position as one of the world’s biggest LNG exporters and that will bring considerable wealth for the country, but its people continue to be in the dark.

And LNG expansion projects are something IOCs are well prepared to do, but there are other important roles in boosting the gas industry that have to be taken by others.

I speak of course of marginal field development, a topic that is of fundamental importance to me and that I have extensively covered in my most recent book Billions at Play: The Future of African Oil and Doing Deals. Both for oil and gas, Nigeria’s marginal field development programme showed incredible promise when it was first launched in 2013. It gave opportunities to local companies to explore smaller discoveries that were uninteresting for the majors, which in turn allowed them to gain experience in leading exploration and production projects on their own. Further, it opened opportunities for domestic use of natural gas for power generation. That programme is now being copied

by Angola, and yet, it has stalled in Nigeria.

Further, as I have extensively debated over the years, and most extensively in Billions at Play, we need to dramatically invest in Nigeria’s ability to negotiate and manage contracts. This applies both to

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the need to respect the sanctity of contracts, a fundamental part of giving international investors the confidence to trust that what they sign for will be respected, but also learning to choose who to sign contracts with. The current debacle with P&ID, an unknown little company that has managed to sue the Nigerian government for breach of contract in the English courts and is seeking USD$9.6 billion in compensation, is an incomprehensible situation that should never have taken place. We need to know who our partners are and who we should be signing contracts with, and then stick by them.

Only by combining the role of the majors, the indigenous companies, the necessary infrastructure development for gas transportation, bridging with the nation’s banks to help finance projects and by giving a clear legal framework to the sector, can we hope to succeed.

I do not doubt that this is possible to accomplish in 2020 and the years to come, but coming from the experience of recent years, it does not seem probable, and no one pays the price for that more than everyday Nigerians, that continue to fail to benefit from its country’s resources.

Action is necessary as a matter of urgency.

This week it was disclosed that international oil and gas companies were holding back an estimated USD$58.4 billion in investments in oil and gas projects in Nigeria because of regulatory uncertainty.

Foreign Direct Investment in Nigeria was USD$1.9 billion in 2018. It’s not like we don’t need the money.

But how can we expect international oil companies to feel @Businessdayng

comfortable signing off on billions in investment if after 20-plus years of negotiations we still haven’t managed to settle on the Petroleum Industry Bill that will oversee the sector? Who can blame them for waiting to see what happens? They are waiting for us to figure out how we want to regulate the industry, and after 20 years, we still don’t seem to know. That has to change, and soon.

Nigeria has an estimated 200 trillion cubic feet of gas reserves.

It is high-time to put them to use.

With the right policies we could change the face of the country completely. We could give light to our people, we could power our industries, releasing them from the handicapping dependency on diesel generators that make it all but impossible for them to be competitive, we could relinquish ourselves from our dependency on imported fuel for power and heat, we could create new opportunities for job creation and industrial development, we could take millions of people out of poverty... Further, strong domestic gas and gas-based industries could help boost intraAfrican trade, create new synergies with our neighbours, boost integration of power generation networks, establish new partnerships, even contribute to peace.

What I am saying, I say as an African, and it applies to many countries across the continent.

However, Nigeria is in a prime position to truly enact change and be a beacon to others by showing leadership and resolve. It is the continent’s biggest economy and has the continent’s biggest reserves of hydrocarbons, both oil and gas.

NNPC already works with some of the best major IOCs and the country has Africa’s best and most developed indigenous exploration and production capabilities. Let’s give ourselves the opportunity to be better and to live better, by taking advantage of the resources we already possess.

Mr. Sylva is showing leadership and drive. So far, he has proven himself to be the leader that Nigeria needs to develop new LPG and LNG industries that will take the country to the next level of development, not only economically speaking, but socially, environmentally, humanly. So let’s hope he can pull through the great transformations that need to occur for 2020 to truly be Nigeria’s year of gas.

NJ Ayuk is the Executive Chairman of the African Energy Chamber and author of Amazon best-selling book, Billions at Play: The Future of African Energy and Doing Deals.

Monday 06 January 2020

BUSINESS DAY

37

FEATURE

The help from hell some employers; execute acts that are not pleasing on those working for them.

Example of this was the outrage on social media over how one Muyiwa Folorunsho and his wife Glory Osei, were alleged to have used their business to defraud their employees by treating them improperly, make them work for months without pay and later, come up with flimsy excuses to lay them off.

Aside from such extreme cases like death or theft, it would also help to a large extent in solving cases of poor services, job abandonment and incompetency’s as seen from the services provided by domestic staffs since many of them are usually recruited via words of mouth or through middlemen.

More so, the platform will also be helpful to government agencies like the National Agency for the Prohibition of Trafficking in Persons (NAPTIP) in tracking employers who recruit underage children to perform domestic works, maltreat them, and refuse to send them to school.

MICHAEL ANI

I

t was a “sad” day when news of the death of Hungarian-born Bernadett Kurucz, wife of the managing director of Maersk, a shipping company with operations in Nigeria, filtered out. Kurucz was allegedly murdered in her home in Ikoyi on a Sunday night, by two men, Olamide Goke and Ade Akanbi.

Goke and Akanbi gained entrance into her home under the guise of electricians coming to fix some electrical faults in her apartment. Both men would later depart , leaving a trail of wickedness after they reportedly stab Kurucz to death and left her husband in critical condition while their three children watched helplessly.

It was tragic for me on hearing about this incident. It took my mind back to the bitter experience of a friend, Segun Afolabi, who was murdered in cold blood on November 5, 2019 by his gateman who was allegedly envious of his growing success. Report has it that he was slain because he recently bought a new car.

Afolabi, 26, was a promising and intelligent young man with a heart of gold and a clear plan about the future. Until his death, he was a financial analyst with Afrinvest, a Lagos-based investment firm.

One striking connection about these two stories is the increasing household risks arising from seeking the services of domestic staff or other contractual employees with unfettered access to a person’s living quarters.

The risks associated with securing the services of domestic staff transcend the case of death to issues like theft, defilement of minors, child abuse etc.

For instance, one Alice Musa from Benin Republic was alleged to have stolen $700 and 600 dirhams from her employer. In another instance, a certain Mercy Edeh, a female house help, was alleged to have molested her employer’s daughter in Lagos to mention just a few.

Investigations have shown that people are usually employed through an informal process of referrals, where a family requests the services of a person or agency to search, then present candidates for screening and employment, often for a significant finder’s fee plus expenses.

These families rely on the words of these middlemen and women and have no way of independently verifying the information provided to them. Most families have been disappointed with the quality of services provided by their domestic staff, and some have been subjected to theft, job abandonment, poor services, incompetence, and in extreme cases, physical harm to their families like poisoning, kidnapping and even murder.

Regrettably, robbers, kidnappers and all sorts of criminals now hide under the guise of domestic workers to attack employers who seek their services.

They even go as far as registering a company to play the role of middlemen to outsource domestic workers. They advertise their companies on online sales portals to further deceive members of the unsuspecting public. In 2019 alone, domestic workers, according to data tracked

by BusinessDay, carried out no fewer than 20 cases of murder and kidnaps; this excludes cases of theft and abuse.

Solutions Gone are those days when we could

26-year old Segun Afolabi murdered by his envious gateman after the late investment banker purchased a new car.

How does it work?

A simple illustration will show how the platform works. For example, if Mr. A wants to recruit Mr. B for a job, by using the platform, Mr. A will not only have the advantage of checking information about the person, he will also see what others who might have had an encounter with Mr. B in the past, have appraised about him. This provides A with detailed information on Mr. B to make informed decision on whether to employ him. The same goes for the employee as well.

Woman arrested by police after beating black-and-blue her 12-year old maid

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Wife of the MD of Maersk, killed at her apartment in Ikoyo, by two men who disguised as electricians

rely alone on the use of the closed-circuit television (CCTV) camera—a kind of video surveillance that transmits a signal to a specific place, on a limited set of monitors—to checkmate the occurrence of events that are illegal and unlawful.

The CCTV camera has shown usefulness mostly after when such wicked and ruthless acts have been done by the perpetrators and their accomplice.

Put differently, its usefulness over time has been reported more in detecting suspects after the crime must have been completed, and except for major large firms that have securities whose job is to stay put at the central system where the surveillances are transmitted to, for small firms as well as household, that might not be the case.

Also, at an average cost of $200 (N72, 000), to install a security camera, how many average Nigerian households or firms, can afford to put CCTV cameras around their houses or business surroundings? I bet the numbers will be low.

However, there is a more affordable and more pro-active way in which households, employers of labour and their employees can use in tackling the menace of domestic risk, and this is the use of “CheckMyPeople” platform. www.businessday.ng

The CheckMyPeople platform has an identity verification service, which to a large extent can help in tackling the increasing risk faced by Nigerians from employing unknown and unverified persons.

The platform leverages on data generated of registered Nigerians under the National Identity Management Commission (NIMC)—the statutory government organization, founded in 2007 to operate and regulate the country’s management systems—to verify, provide information and records of an individual.

The platform provides users with the opportunity to “verify” or check the identity, information and records of people through the use of their National Identity Number (NIN), before they get them to carry out a certain task.

Data generated from the platform in most cases constitutes a person’s work history and background information on each domestic employee, which will be available for search by prospective employers within a community.

It is not only built to favour employers but also employees as they too can verify information of those demanding their services.

We have seen from experience how

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How can the government come in to support this fight?

The success of online verification platform like CheckMyPeople is tied to identity registration of Nigerians by the NIMC. The government can strengthen the commission to ensure that all Nigerians are enrolled under the NIMC and given the unique National Identification Number (NIN).

As of today, the NIMC has only succeeded in enrolling about 40 million Nigerians both home and abroad since its inception over 12 years ago, according to a statement by Kayode Adegoke, Regional director, NIMC, Lagos. This number shows that the NIMC still has a long way to go, given that the entire population of Nigeria, based on the United Nations (UN) estimate, is over 200 million.

NIMC’s partnership with the World Bank, Agence Francaise de Development (AFD), European Union (EU), and the Federal government has led to significant improvement in the number of people enrolled for the NIN in recent times.

How can the private sector assist in this fight?

One simple and efficient way the private sector can support in the fight against domestic risk, is ensuring that their current and prospective employees have registered or have the NIN. This will help in verifying their identity.

Interestingly, NIMC has taken a bold step in removing the age limit for enrolment that was hitherto placed in the system hence, there is no excuse whatsoever from anyone (whether as a child or an adult) for not having the NIN.

@Businessdayng

38

Monday 06 January 2020

BUSINESS DAY

FT

FINANCIAL TIMES

World Business Newspaper

KATRINA MANSON, CHLOE CORNISH AND NAJMEH BOZORGMEHR

D

onald Trump has warned Iran the US had identified 52 targets that it would “hit ver y fast and ver y hard” if Tehran retaliated over the assassination of its top military commander, Qassem Soleimani.

“We have . . . targeted 52 Iranian sites (representing the 52 American hostages taken by Iran many years ago), some at a very high level & important to Iran & the Iranian culture, and those targets, and Iran itself, WILL BE HIT VERY FAST AND VERY HARD. The USA wants no more threats!”, the US president said in a tweet on Saturday night.

Mohammad Javad Zarif, Iran’s foreign minister, responded to Mr Trump on Twitter on Sunday, saying a red line had been crossed: “Those masquerading as diplomats and those who shamelessly sat to identify Iranian cultural & civilian targets should not even bother to open a law dictionary. Jus cogens refers to peremptory norms of international law, i.e. international red lines. That is, a big(ly) ‘no no’.”

He also said the US attack that killed Soleimani on Friday was a grave breach of international law and that threats to target cultural sites of Iran would be a war crime if carried out. “Whether kicking or screaming, end of US malign presence in West Asia has begun,” he said.

Mike Pompeo, US secretary of state, came to Mr Trump’s defence in an interview on Sunday, denying that the president’s threat to attack Iranian cultural sites would constitute war crimes under the Geneva

Donald Trump threatens 52 targets if Iran takes revenge US president warns Tehran not to retaliate after killing of military commander Soleimani

People carry the coffins of Qassem Soleimani and Abu Mahdi al-Muhandis during a funeral procession in Najaf, Iraq, on Saturday © ALI AlMUMEN/EPA-EFE/Shutterstock

Convention.

“We’ll behave inside the system.

We always have, and we always will,” Mr Pompeo told ABC News’ This Week on Sunday. “Every target that we strike will be a lawful target.”

The heated rhetoric exchanged between Tehran and Washington came as hundreds of thousands of mourners gathered in Iran to pay tribute to Soleimani, whose death

Danish energy group Orsted believes wind production forecasts across the industry may be too high

New head of Liaison Office, Luo Huining, has no experience of the Asian financial hub

B

eijing has replaced its top representative in Hong Kong, parachuting in a highranking veteran with no experience working in the Asian financial hub in the first major reshuffle since protests began more than six months ago.

China’s State Council ann o u n c e d o n S a t u rd ay t h a t 62-year-old Wang Zhimin, who had worked his way up the ranks of China’s Hong Kong bureaucracy over a decade before becoming head of its Liaison Office in 2017, has been succeeded by Luo Huining, who was previously boss of the northern province of Shanxi and higher in the Communist party hierarchy than Mr Wang.

Mr Luo‘s appointment marks the first time that anyone without direct experience of Hong Kong has been appointed to the top Communist party position in the territory. The Liaison Office reports to China’s State Council and is the vehicle through which Beijing can influence policy in the semi-autonomous territory.

Two people who speak regularly with the Liaison Office told

the FT that the replacement indicated Beijing’s displeasure with Mr Wang.

“He’s been kicked out . . . If this mess [the Hong Kong protests] hadn’t happened he would have stayed until he was 65, at least,” said one. The other speculated that the move was to make Mr Wang take the blame for what had happened in Hong Kong.

Ching Cheong, a veteran China watcher based in Hong Kong agreed: “I believe it’s a way to hold Wang accountable for the mess in Hong Kong.”

Mr Luo — who at 65 is the age when officials of his ranking usually step down from positions of responsibility at provincial level — has been a full member of the Communist party’s Central Committee, a top decision-making body of about 200 people, since 2012.

Zhang Lifan, a Beijing-based independent political commentator, said the Chinese leadership was looking to take more direct control of Hong Kong policy with the appointment and to make a clean break from the territory’s bureaucracy, which Beijing sees as having failed to handle the protests effectively. www.businessday.ng

“tough revenge” and warned that Iran’s response would be long and drawn out.

Major General Hossein Salami, the leader of Iran’s Revolutionary Guard, said that the country would adopt “strategic revenge” to “put an end to the US presence in the region”.

The assassination of Soleimani in a US drone strike on Friday

Offshore forecast fears blow through European wind farms

Beijing replaces its top Hong Kong representative CHRISTIAN SHEPHERD, SUE-LIN WONG AND NICOLLE LIU

Tehran has vowed to avenge.

Iran’s president, Hassan Rouhani, on Saturday drew parallels between the killing of Soleimani, who controlled Tehran’s extensive influence across the Middle East from Lebanon to Iraq, Syria and Yemen through the Revolutionary Guard’s Quds Force, and the USengineered coup that reinstated the Shah in 1953. He promised

helped to “create a new energy over an expansive geography” by which various Islamic groups would “act spontaneously . . . and determined to take revenge . . . over time and with lasting impacts”, he said.

The Trump administration insists it killed Soleimani to thwart imminent threats to US personnel in the region and has worked hard to convince allies that it does not want to start a war.

The stand-off between Washington and Tehran was triggered by Mr Trump’s decision to withdraw the US from the nuclear accord with Tehran in 2018 and impose crippling sanctions on the Islamic republic.

The European signatories — the EU, France, UK and Germany — have sought to keep the agreement alive, but Tehran has increased its nuclear activity and is due to announce its next step this week.

Josep Borrell, the EU’s top diplomat, spoke to Mr Zarif, Iran’s foreign minister, over the weekend and called for de-escalation and continued efforts to save the 2015 nuclear agreement Tehran signed with world powers.

Mr Borrell “expressed his deep concern about the latest increase of violent confrontations in Iraq, including the killing” of Soleimani, the EU said on Sunday.

NATHALIE THOMAS

O

n the Holderness coast in the north-east of England, radar technology normally used to track hurricanes in the US has whipped up an unwelcome storm in Europe’s offshore wind industry.

Since 2016, Orsted, the world’s largest offshore wind developer, has been using the radar system to collect 3D images of the wind as it blew through its Westermost Rough project, in waters eight kilometres from the shore.

The 3D data collected from Westermost Rough, along with observations from Orsted’s other schemes, aroused suspicions within the Danish company that previous assumptions about how wind interacts with large offshore turbines — and how it affects their production levels — were possibly too simplistic.

Orsted went public with its findings on October 29 last year, describing the problems as “industry wide” and revising down offshore wind production forecasts made to the market a year earlier.

Shares in the company, previously known as Danish Oil and Natural Gas, fell 7 per cent on the day of the announcement as investors were caught off guard and wondered whether other developers would also follow suit.

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The revision marked some rare negative news in an industry that has been declared a “major game changer” in meeting the world’s future electricity needs by the Parisbased International Energy Agency, and which has undergone rapid growth since the first offshore wind turbines were installed in Danish waters in 1991.

Concerns over production levels have been raised at a time when profit margins in the sector are already decreasing, as competition to build offshore wind schemes intensifies and governments also seek to reduce — or scrap altogether — subsidies for the industry.

Rival offshore wind developers rushed to check their own models.

“We have obviously gone round it [our models] again after they [Orsted] said something,” Alistair Phillips-Davies, chief executive of SSE, the UK power company, told the Financial Times.

“We believe that we are in a solid position and there’s nothing yet in what they’ve [Orsted] said that’s made us change our mind about our fleet and our portfolio.”

Spanish energy group Iberdrola said its own forecasts tended to be on the “conservative side” when it made a final investment decision to press ahead with an offshore wind scheme.

“Our operational offshore data [then] shows that performance @Businessdayng

is higher than the figures that we base the investment case on,” an Iberdrola spokesman said.

At the heart of Orsted’s findings are two wind effects known as “wake” and “blockage”. The wake effect describes how wind slows after hitting a turbine, affecting those situated further downstream.

Blockage is where wind slows down as it approaches a turbine.

Both effects have long been recognised by the renewables industry but Orsted believes their scope and complexity have been underestimated.

It has long been understood that there is an “individual” blockage effect for every single turbine but Orsted identified a “global” blockage effect that is greater than the sum of the individual effects. This arises from individual turbine losses also affecting neighbouring turbines.

Orsted also hypothesised that as more offshore wind farms are built, there could be higher wake effects from neighbouring wind farms.

Henrik Poulsen, Orsted’s chief executive, insisted it was not a case of the company’s previous forecasts having been too aggressive, as some competitors implied. “We have over the years benchmarked our internal production estimates against thirdparty views from industry experts and other developers,” Mr Poulsen told analysts.

Monday 06 January 2020

FT

BUSINESS DAY

39

NATIONAL NEWS

Al-Shabaab fighters attack Kenya base used by US military

Four members of Islamist group killed in assault on Manda Bay Airfield DAVID PILLING

A

l-Shabaab fighters stormed a Kenyan air base used by the US military in Lamu County in the north of the country on Sunday in a particularly brazen attack by the al-Qaeda-linked Somali terrorist group on Kenyan soil.

Kenya Defence Forces said in a statement that four al-Shabaab militants had been killed in the early morning assault on the Manda Bay Airfield and there were no reports of other casualties. It said the attack had been repulsed and that the airstrip was secured.

A civilian airport, which is used by tourists visiting nearby Lamu island, was closed, but diplomats described this as “purely precautionary”, saying the airport itself had not come under attack.

US Africa Command said alShabaab was exaggerating the seriousness of the situation on the ground, and that the facility had been cleared and was in the process of being secured.

“Al-Shabaab resorts to lies, coercion, and the exertion of force to bolster their reputation to create false headlines,” General William Gayler, Africom’s director of operations, said in a statement.

The group has a history of overstating the impact of its strikes. AlShabaab said in a statement earlier that there had been “severe casualties on both American and Kenyan

troops”, but there was no independent confirmation of that claim.

“The mujahideen fighters covertly entered enemy lines, successfully stormed the heavily fortified military base and have now taken effective control of a part of the base,” it said.

Diplomats cautioned against making any link between the Lamu attack — one of several mounted by al-Shabaab in recent years — and the US killing of Qassem Soleimani, Iran’s military commander. The border between Kenya and Somalia is the scene of constant skirmishes between militants and Kenyan troops.

There were reports that three aircraft, two helicopters and several US vehicles were destroyed in Sunday’s raid, which took place just after 5am, but there was no immediate verification.

Kenya has been a target of attacks by al-Shabaab because its troops have participated since 2011 in a UN-backed mission to fight terrorism in neighbouring Somalia.

Al-Shabaab has been waging an insurgency in the south of Somalia for more than a decade. Last week, it killed more than 80 people in a bomb blast in Mogadishu, the capital.

In January 2019, more than 20 people were killed by al-Shabaab fighters in Nairobi in an attack on the Dusit hotel and office complex.

In 2013, 67 people were killed in the nearby Westgate shopping mall.

Japanese prosecutors condemn Carlos Ghosn’s escape

Statement says his action was unjustifiable and made by ‘illegal means’ LEO LEWIS AND KANA INAGAKI

J

apanese prosecutors and the country’s Justice Minister have broken a week of silence since Carlos Ghosn escaped their clutches saying there was nothing that justified his actions and that his stunning flight from bail was likely made by “illegal means”.

The prosecutors’ first public statement, which was much delayed by a protracted Japanese shutdown for New Year, represents an attempt to answer the fiery condemnation of the Japanese justice system that Mr Ghosn issued shortly after his arrival in Lebanon.

Mr Ghosn justified his flight — a complex move that involved ex-US special forces and which intelligence experts believe could have cost him in excess of $20m — by saying he had not fled justice but the injustice and political persecution of a “rigged” Japanese legal system that had violated his human rights.

One of his lead Japanese lawyers, himself a veteran critic of a justice system where conviction rates are around 99 per cent, used his blog on Saturday to express sympathy for Mr Ghosn’s decision.

But in a two-page statement issued on Sunday morning, the prosecutors fiercely defended their handling of Mr Ghosn saying that his flight from bail meant that he did not want to abide by the ruling that would be made by the court and that there was “no room to justify his actions”.

“His escape strongly ignores our country’s justice system and we are

deeply disappointed by this act, which likely constitutes a crime,” Takahiro Taito, the deputy chief prosecutor, said in the statement.

Prosecutors argued strongly against the court granting Mr Ghosn bail. In the statement, they stressed that they had thought the tycoon’s “ample financial wealth and global network would make it easy for him to flee”.

Mr Ghosn’s arrest in November 2018, his long period of incarceration and bail conditions that prevented him seeing his wife have put Japan’s justice system under unprecedented international scrutiny, and revived many longstanding criticisms of the way cases are built by prosecutors.

“On this case, prosecutors have strictly carried out proper procedures in line with the law and the former chairman’s rights were sufficiently guaranteed as we conducted our investigation and trial proceedings,” the prosecutors’ statement said.

In a separate statement on Sunday, Masako Mori, the justice minister, confirmed that there was no record of Mr Ghosn leaving Japan, suggesting that he had “left the country illegally using some kind of illegal means”. She added she had instructed a strengthening of departure procedures at airports.

Noting Interpol had issued a “red notice” to Lebanon asking the country to arrest Mr Ghosn, Ms Mori said Japan will take “all possible measures to ensure our criminal proceedings are properly carried out.”

Ivanka Trump is scheduled to speak at CES on Tuesday © AP

CES defends invitation for Ivanka Trump

US president’s daughter and adviser will speak about the future of work at world’s largest tech conference

PATRICIA NILSSON

T

he world’s largest technology exhibition CES has defended its decision to invite Ivanka Trump to speak on “the future of work”, after criticism that it has been overlooking women leaders in the field.

CES chief Gary Shapiro, who is set to interview the daughter of the US president on stage, said the interview would focus on collaboration between industry and government on topics such as people losing jobs to artificial intelligence and the race to compete against China.

“There is a concern in the US and elsewhere about jobs,” the chief executive of the Consumer Technology Association, which organises CES, told the BBC. Mr Shapiro said that Ms Trump’s role as co-chair of two governmental advisory boards on workforce issues had made her a suitable speaker at the conference, which is expected to attract rough-

ly 170,000 people. He declined to say whether the White House had requested that she make the address.

US president Donald Trump has previously faced criticism for the prominent political role he has given his daughter, who serves as his adviser. Earlier this year he claimed to have considered nominating the 38-year-old former fashion designer to lead the World Bank.

Ms Trump is scheduled to speak at CES on Tuesday, as the three-day long event kicks off in Las Vegas with some of the world’s biggest companies and hundreds of start-ups showcasing their latest consumer products in fields such as augmented reality and the internet of things.

She will join other speakers such as Salesforce chairman and co-chief executive Marc Benioff, Samsung president Hyun-Suk Kim as well as previous HewlettPackard chief Meg Whitman and media mogul Jeffrey Katzenberg, who are preparing to launch the

new short-clip streaming service Quibi.

CES, which started as a small gadget fair in 1967, has previously been criticised for sidelining women working in the industry with some recent years featuring all-male line-ups of keynote speakers.

Carolina Milanesi, tech analyst at consultancy Creative Strategies, wrote in a blog post that lacklustre attempts at addressing the underrepresentation of women in technology explained the “frustration of seeing Ivanka Trump selected to be one of the two women delivering a keynote”.

“There are many more women who are in tech and are entrepreneurs who could run circles around Trump on how technology will impact the future of work,” she said.

“I don’t think I am unfair in believing that [Ivanka] Trump did not stop and think if she was the best woman for the job before accepting the invitation from the CTA.”

EU weighs plastics waste tax to plug ‘Brexit gap’ in budget Brussels hopes to boost coffers with levy on non-recycled waste and revamp of carbon trading MEHREEN KHAN AND SAM FLEMING

B

russels is preparing a fresh push to create an EU-wide tax on plastics waste and to use profits from carbon trading to break an impasse over how to fund the bloc’s next long-term budget.

As the EU27 prepare for fractious negotiations over the next sevenyear budget which runs from 2021, officials and diplomats have told the Financial Times that member states are ready to agree a plastics recycling tax — the first new EUwide revenue to be directed to the bloc’s coffers since the establishment of VAT. “We have a Brexit gap. Member states know this and will eventually have to accept new revenue streams,” said a senior EU official.

As part of its initial budget proposal in 2018, the European Commission proposed a levy on non-recycled plastic, with the proceeds going directly into the common budget rather than to governments that collect them. The surcharge is estimated to raise €42bn over the course of the budget which will run until 2027.

Although the commission and European Parliament have traditionally lobbied for the creation of pan-EU taxes, member states have historically resisted attempts to divert revenues from their national coffers to Brussels.

But the debate over the so-called “own resources” has shifted as the current round of budget negotiations has proved to be particularly bruising due to the €15bn hole left by the departure of the UK. Five “frugal” governments — Germany, the Netherlands, Sweden, Denmark and Austria — have said they want a budget not larger than 1 per cent of the gross national income, falling far short of Brussels’ proposal of 1.1 per cent and the 1.3 per cent the European Parliament wants.

In addition to the plastics levy, Brussels will attempt to convince governments of a more controversial plan to divert profits from the EU’s cap-and-trade carbon emissions system (ETS) to the common budget.

Profits from the ETS are currently collected by member states. Ten of the poorest EU member states — including Poland, Bulgaria, Hungary and Romania — receive a portion of ETS profits to help fund low-carbon investments.

An EU official said the commission would suggest using a significant share of all the carbon trading profits for the budget when it proposes a revamp of the ETS in the middle of next year.

Brussels wants the ETS to become a more lucrative source of new cash as it tries to extend the system to include the maritime industry and reduce the number of free allowances given to airlines in a bid to

drive up the carbon price under its European Green Deal plan.

A senior official warned that the negotiations over how to reform ETS and what to do with the profits would be far more contentious than the plastics levy. “It is always easier to create new sources of revenues rather than take away existing money as happens with the ETS,” the person said.

In 2018, the commission proposed taking a 20 per cent share of ETS revenues for the budget. Zsolt Darvas of Bruegel, the think-tank, said the amount of money at stake was negligible, estimating that it could yield €2.1bn a year, or €14.7bn over 2021-27, depending on the carbon price and auction volumes.

Poorer countries that receive a portion of ETS funds are likely to raise the most objections, said diplomats. The idea would need unanimous support to be accepted.

Any moves to open the door to EU own resources are also likely to be met with resistance from countries that have been sceptical of giving Brussels autonomous taxraising powers.

Helen McEntee, Ireland’s minister for EU affairs, told the FT in December that further work needed to be done on how to set up a plastics waste tax and that when it came to the use of the ETS as own resources, her country was not supportive of the idea.

40

Monday 06 January 2020

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Fund CIOs call US-China tensions biggest challenge for 2020 Investment chiefs overseeing $19tn see risks in ultra-low interest rates CHRIS FLOOD

U

ncertainty surrounding the US-China trade war remains the biggest challenge facing the global economy in 2020, according to investment chiefs at 10 of the world’s largest fund managers overseeing $19tn of assets.

Positive comments by Washington on progress in negotiations with Beijing, along with China’s decision to reduce tariffs on imports of 850 goods, helped the US stock market achieve a fresh all-time high in the final days of 2019.

The S&P 500, the main US equity benchmark, returned 31.5 per cent including dividends last year in its second best annual performance this century, extending a recordbreaking bull run that stretches back to March 2009.

But further gains for US stocks in 2020 are expected to be much more modest, with asset management CIOs increasingly concerned about the possibility of a correction after Wall Street’s most sustained expansion.

“The likelihood of a large drawdown for equities and other risky assets remains high,” cautioned Greg Davis, CIO at Vanguard, the world’s second largest asset manager. He added that investors should be prepared for the “geopolitical uncertainty and unpredictable policymaking” of the past few years to persist in 2020.

The US-China trade war, which has dragged on since June 2018, is the single biggest threat to the stability of

financial markets, according to the CIOs polled by FTfm. Their opinions were sought before US-Iran tensions ratcheted up last week with the assassination of Qassem Soleimani in a US air strike.

“The crucial issue to monitor [in 2020] will be developments on the trade front,” said Joanna Munro, HSBC’s asset management CIO. Akiyoshi Nagashima, CIO at Sumitomo Mitsui Trust Asset Management, said signs of progress towards an initial Phase 1 agreement on trade issues between Washington and Beijing should strengthen confidence in companies’ capital investment.

“The global economy will then head toward a steady recovery,” he added.

Other fund companies that singled out US-China trade tensions as a concern included BlackRock, LGIM, UBS and Vanguard.

President Trump’s efforts to stay in the White House will provide another focal point for investors given US equities historically perform well in presidential election years.

Amundi, the French asset manager, expected gains of between 5 and 10 per cent for the US stock market in 2020.

“In a US election year, the S&P 500 tends to perform well, although an economic recession could change that. Trump will do whatever it takes to avoid [a recession],” said Pascal Blanqué, Amundi’s CIO.

High demand prompts launch of Europe’s first cannabis ETF

Shareholders demand British bosses increase ‘skin in the game’ Pressure builds for chief executives to top up their company shares pot ATTRACTA MOONEY

T

he bosses of British public businesses will face intense pressure to invest their own money in the companies they run in 2020, as big investors increasingly demand chief executives have “skin in the game”.

Schroders, the UK’s largest listed investment company by market cap, Aviva Investors, the £380bn asset manager, and Allianz Global Investors, the €557bn fund house, are among the big shareholders demanding chief executives buy more shares in their companies.

The issue is set to be one of the themes dominating negotiations ahead of this year’s annual general meeting season.

The growing pressure from shareholders comes after a string of UK corporate scandals, including the collapse of Carillion, raising questions about whether more can be done to align the interests of shareholders and chief executives.

Mirza Baig, global head of governance at Aviva Investors, said he wanted chief executives to share risks with shareholders. “We want to see more co-investment,” he said.

Eugenia Unanyants-Jackson, head of environmental, social and governance investing at AllianzGI, said: “There is now more emphasis on having greater shareholding by the executives.”

According to research from S&P Global Market Intelligence in 2018, companies where chief executives have large stock option holdings have historically outperformed their index, in aggregate, over subsequent quarters.

Companies typically set out how many stocks an executive should

Similar products in North America have proved popular despite a poor year for the sector OWEN WALKER

E

uropean savers will soon be offered their first opportunity to invest in an exchange traded fund focused on the fast-growing legal marijuana industry.

Canadian fund group Purpose Investments plans to launch the Medical Cannabis and Wellness ETF from January 13, which will be Europe’s first such product. The fund will be listed in Germany and made available to investors in the UK, Italy and Ireland.

Marijuana funds have proved popular in North America, despite a poor year for the sector. The world’s largest cannabis ETF, the US-listed ETFMG Alternative Harvest, which has $673m of assets according to data compiler ETFGI, lost 28.5 per cent last year. The second largest fund, the $327m Horizons Medical Marijuana Life Sciences ETF, listed in Canada, lost 33.8 per cent.

Purpose, which manages C$8bn of assets in Canada including the C$34.2m Marijuana Opportunities Fund, worked with ETF issuer HANetf on the European launch.

The fund will charge 80 basis points, or 80 cents for every €100 committed, and invest in public companies with legal activities in the medical

cannabis, hemp and cannabidiol, or CBD, market.

The legal market for cannabis was worth nearly $11bn globally in 2018, and is expected to reach at least $50bn by 2029, according to Jefferies equity research. Other research groups predict the market could be at least three times that size.

Last June, the Church of England dropped medicinal marijuana from its list of excluded investments, which followed the UK’s decision to legalise medicinal marijuana in October 2018.

Before legalisation, the UK emerged as the biggest producer and exporter of legal cannabis for medical and scientific purposes, according to a report by the UN’s International Narcotics Control Board.

“Medical cannabis is an emerging industry with huge growth potential and significant investor interest,” said Hector McNeil, co-founder and co-chief executive at HANetf. “Up until now, European investors have experienced restricted access to the cannabis market.”

He said he expected interest in the product to come from private banking, wealth management and institutional investors, which had been the main backers of North American marijuana ETFs. www.businessday.ng

Mirza Baig, of Aviva Investors, says he wants to see chief executives share risk with shareholders © PA

hold and in what timeframe they have to build that pot. For example, a chief executive might be required to have shares equal to 200 per cent of salary, building the holding within five years.

But one big shareholder said: “We are seeing a lot of executives get to their shareholding requirements in time because of share awards as part of their remuneration, not by going into the market and buying shares.”

Ms Unanyants-Jackson added that it was not enough that chief executives built up a shareholding through their bonus and share awards, arguing that these were “free” stocks. Instead, she called on bosses to buy shares in the market from their own pockets. “You need to have skin in the game,” she added.

She said that AllianzGI wanted chief executives to hold a minimum of 200 per cent of their salary in shares. “If someone is earning £1m, we expect them to have several million [pounds worth of shares] within a few years.”

Guidance from the Investment Association, the trade body, said that

executive directors and senior executives should build up significant holdings in their company’s shares.

“Executives are encouraged to purchase company shares using their own resources in order to provide evidence of their alignment with shareholders,” the trade body said.

According to research from Deloitte, the median shareholding requirement for a FTSE 100 chief executive is 300 per cent of salary, although about half of chief executives hold shares worth more than 500 per cent of salary.

The IA wrote to the remuneration committee chairs of British businesses in November 2018 to update executives about which shares could count towards shareholding guidelines.

The trade body recently said that during the upcoming annual meeting season, shareholders will push for so-called post-employment shareholding requirements — which outline how long shares need to be held for after leaving a company — to be introduced for all new policy approvals.

The ‘transition’ bonds bridging the gap between green and brown Debt is tied to clear targets for carbon-heavy businesses to clean up their acts ANNA GROSS AND TOMMY STUBBINGTON

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arfrig, the world’s secondlargest producer of beef, seems like an odd beneficiary of a wave of enthusiasm for green finance. But that did not stop the Brazilian company, which has been linked by campaigners to deforestation in the Amazon, from raising $500m with a green-tinged bond in August.

Marfrig’s bankers came up with a cunning plan: market the debt as a “transition” bond that would encourage the company to clean up its act by channelling proceeds towards cattle farmers who had not encroached on the rainforest. Investors came on board in droves, ordering three times the amount on offer.

The deal could be a sign of things to come. So far, only a handful of such bonds have been sold around the world but analysts expect more to come as companies capitalise on demand from investors who want to be seen to be doing good.

“The 2010s was the decade we saw

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an awakening of the concept of green but the 2020s will be defined by the concept of transition,” said Yo Takatsuki, head of ESG research at Londonbased AXA Investment Managers.

Mr Takatsuki argues that demand for sustainable investments is so fierce it cannot be satisfied by traditionally green industries alone. Lending to the much larger universe of “brown” industries — and encouraging them to become a little greener along the way — can help fill the gap.

“We started to think, the middle part of our portfolio is made up of highly industrial and extractive sectors,” he said. “If we don’t tackle carbon emissions coming out of those, we don’t stand a chance.”

Column chart of Total value of bonds ($bn) showing Green bond issuance has soared globally since 2013 Any increase in issuance of transition bonds is likely to be controversial.

Sceptics fear they offer polluting companies an easy boost to their images, without necessarily requiring that they change their business practices. When oil tanker group Teekay tried to issue a green bond in October, for example, investors balked at the apparent “gre@Businessdayng

enwashing” and the bond fell short of its target.

Marfrig said its bond is being continually audited to ensure the funds are being used to address environmental and sustainability issues.

On the evidence of the early deals, transition bonds function like any other corporate debt instrument, but have relatively short maturities and are tied to clear targets for decarbonising businesses. “They’re a living document of what a company aims for, over time,” said Trevor Allen, a sustainability research analyst at BNP Paribas.

Based on this broad framework, AXA IM worked with Crédit Agricole, the French banking group, to launch a transition bond on the Luxembourg Stock Exchange in November. AXA was the sole buyer of the €100m, 10year bond that pays a coupon of 0.55 per cent.

Crédit Agricole plans to lend an equivalent amount to carbon-intensive sectors to help them shift to cleaner fuels. The bank has clear targets for cutting emissions along the way, though the bond does not contain any penalties if the targets are not met.

Monday 06 January 2020

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ANALYSIS

Venezuela’s Juan Guaidó faces crucial parliamentary vote National Assembly to decide on Sunday whether to keep the opposition leader as its president GIDEON LONG

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he head of the Venezuelan opposition Juan Guaidó faces a stiff test of his leadership later on Sunday when the National Assembly, or congress, votes on whether to keep him as its president.

Mr Guaidó’s claim to be the legitimate interim president of Venezuela is based on the fact he heads the assembly. If he loses Sunday’s vote, that claim goes up in smoke and his political future will be in serious doubt.

He retains the support of the US and dozens of other countries in his bid to unseat President Nicolás Maduro but that could change if the parliamentary vote goes against him.

The opposition commands a majority in the 167-seat congress and most of its legislators have vowed to back Mr Guaidó, who needs a simple majority of votes cast.

had fled Venezuela to escape government intimidation was “definitely a factor” in the vote.

“That’s exactly what the regime has been aiming for but still I think Juan Guaidó will be reelected,” he said.

Mr Guaidó burst on to Venezuela’s political stage in January 2019, declaring himself interim president in front of thousands of cheering supporters and securing the backing of much of the international community.

He spoke confidently of ousting Mr Maduro and leading a transitional government towards new elections.

But the socialist president has resisted all attempts to topple him and enjoys the support of Russia, China, Cuba and his own armed forces.

Norwegian-brokered talks between the government and the opposition have fizzled out and some moderate opponents have openly broken ranks with the 36-year-old opposition leader

Juan Guaidó’s claim to be the legitimate interim president of Venezuela is based on the fact he heads congress © AFP via Getty Images

However, a small number of rebels have said they will abstain and Caracas is rife with rumours that the government has bribed other assembly members of the opposition to do the same. For now, Mr Guaidó is the only candidate but a rival could emerge during the proceedings.

Complicating the maths is the fact that about 30 opposition legislators are either in jail, exile or hiding. The National Assembly recently changed its rules to allow them to vote online but the Supreme Court, controlled

by Maduro loyalists, quashed the move.

All this means the contest could be tight.

“He has the votes, but he doesn’t have much room for manoeuvre in my opinion,” said one opposition member of congress and a supporter of Mr Guaidó, speaking on condition of anonymity.

An exiled legislator, speaking to the Financial Times from the US, said the fact that so many opposition deputies

and are negotiating with the government.

In Washington, the Trump administration, so vocal in its call for regime change in Caracas early in last year, seems to have turned to other issues — notably the Middle East, where it killed Iran’s top military commander Qassem Soleimani last week in an audacious drone strike.

Jason Marczak, director of the Adrienne Arsht Latin America Center at the Atlantic Council in Washington, said Sunday’s election marked “the beginning of an incredibly consequential month for Venezuelans”.

January 10 marks the first anniversary of the start of Mr Maduro’s second term in office while January 23 marks a year since Mr Guaidó first claimed the Venezuelan presidency.

“Expect Nicolás Maduro — especially with global attention turned to the Middle East — to deploy every tool in his toolbox to disrupt the vote and intimidate legislators,” said Mr Marczak. www.businessday.ng

The Mekong Delta: an unsettling portrait of coastal collapse One of Asia’s biggest wetlands is subsiding into the sea — and climate change is only partly to blame JOHN REED

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ome environmental disasters present themselves over years; others come with a bang — or a splash.

The latter happened one day last August, when residents of Binh My, a commune in Vietnam’s lush Mekong Delta, heard a loud cracking sound. They went outside to watch a 25-metre-long chunk of the highway that runs alongside their houses collapse into the river as the asphalt gave way.

One of Asia’s biggest wetlands is subsiding into the sea, the result in part of rising sea levels created by climate change.

But when asked what caused the collapse, a local farmer who gave his name as Bo points to a crane mounted on a boat midriver — about a kilometre away — that is mining sand. “They are making the bed of the river deeper and deeper,” he says, miming a scooping action.

Researchers monitoring the Mekong say a crisis that has been building on the river for years has turned into a full-blown emergency in recent months. They blame two man-made phenomena: the mining of sand from the riverbed and the building of new dams upriver in Laos and China that are altering the river’s flow, sediment content and even its colour.

Mining boats are everywhere in the delta. Sand is in brisk demand for the concrete needed to build Ho Chi Minh City’s high rises and for land reclamation across the sea in Singapore. Yet all the activity masks the growing cost of sand mining, a globally buoyant but deeply opaque and minimally regulated trade.

What’s at risk is not an untrammelled eco-paradise, but an economically vital, densely populated region that the Vietnamese call their “rice bowl”.

Equivalent in size and population to the Netherlands, the delta is the garden of Ho Chi Minh City and the country’s biggest inland fishery — a leading source of shellfish, fish and fruit.

The first of 11 dams planned on the mainstream of the lower

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Mekong are beginning operations, a development scientists say will change the river forever.

Hundreds of kilometres upriver in Laos, two of these came into commission last year, blocking sediment that used to be nature’s way of replenishing the sand that the mining boats dredged.

“It’s like your house: when it’s eroded in the foundations, your house collapses,” says Duong Van Ni, chief executive of the Wetland University Network, a group of researchers who have tracked the delta with growing alarm.

For a world where the loss of coastal communities is a rising concern, the region offers an unsettling portrait of a future present. Villagers in Binh My told the Financial Times they had been told to move their furniture out of their houses and be prepared to evacuate at short notice.

In Thailand to the north, people who live alongside the river say its level has dropped sharply and the normally brown water has turned blue since the Xayaburi dam in Laos began operating in October. Ecologists call this “hungry water” because it moves faster and causes greater erosion.

Just as neighbouring China has discovered in the past two decades, economic lift-off is often accompanied by environmental harm. Last month Vietnam agreed to import more electricity generated by the dams Laos has constructed in order to sustain an economy growing at a rate of 7 per cent — one of the fastest in Asia. Yet the country is paying with rising levels of pollution, resource exploitation and unchecked development.

“Most companies think they aren’t dependent on the river, but if you lose fisheries, then food prices go up and wages go up,” says Marc Goichot of WWF Greater Mekong in Ho Chi Minh City. “It’s reputational risk if you put communities at risk, and regulatory risk if you don’t account for the scarcity of water or sand.”

He adds: “It’s all business risk.”

The Vietnamese call the delta @Businessdayng

“Cuu Long” (“nine dragons”) because the river, after running from the Tibetan plateau through six countries, splits into multiple channels on its final approach to the South China Sea. In geological terms, it is young, created about 6,000 years ago from sediment that washed out to the ocean, forming protective sandbars that became land.

Mangroves grew, and panthers, crocodiles and other wildlife made it their home before being driven out when humans arrived.

About 20 per cent of Vietnam’s 96m people live in the delta, including many of the workers who commute to jobs making clothes, furniture and electronics in and near Ho Chi Minh City, the economy’s engine room.

For more than a century people were enticed or pushed to the delta, from French colonial times through the US-backed Republic of South Vietnam and now under the communist government.

Today the delta is “one of the most-engineered places on earth”, according to Brian Eyler, south-east Asia director with the Stimson Center think-tank and author of Last Days of the Mighty Mekong.

“The use of the delta is outweighing the ability of the delta to manage itself,” he says. “What we are seeing is diminishing economic returns, and the region is falling behind on economic growth.”

Two decades ago, the delta was still gaining land from the sea. Researchers now say the region is losing as much as 12 metres of its coast in some places.

Higher water and sinking land are causing more salt water to intrude, upsetting the balance of fresh water, salt water and brackish water on which the delta’s rice, fruit and shrimp farmers rely.

A recent paper published by Climate Central, a non-profit organisation, briefly made a splash in Vietnam when it forecast that by 2050 most of the delta would be submerged. However, some questioned the methodology used in the forecast, and researchers say the sea level is rising slowly, for now, at about 3mm a year.

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Monday 06 January 2020

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news 4 laws that could shape Nigeria’s economy...

Continued from page 1

tal of 14 such bills that were passed by the legislature and assented by the president in the past year, excluding many others passed by the 9th National Assembly but still awaiting presidential assent.

Of the 14 bills assented by the president in 2019, BusinessDay notes four that analysts say could have a significant impact on businesses and the economy in 2020 and beyond.

MinimumWage Amendment Act 2019 Amid concerns on the impact of declining allocations to states owing to falling crude oil prices, President Muhammadu Buhari, in April last year, signed the Minimum Wage Amendment Act of 2019.

The new law repealed the National Minimum Wage Act No.6, 1981 as amended CAP N61 Laws of the Federation of Nigeria, 2004.

Among other things, the Minimum Wage Act, 2019 reviewed upward, by 67 percent, of the amount paid to the least workers in the country – from N18,000 to N30,000.

The upward review was necessitated by agitations from the labour unions who held the view that the N18,000 minimum wage was long overdue for an increase in the wake of higher inflation and naira devaluation that have eroded the real value of money.

Analysts, however, doubt the sustainability of the new minimum wage. They argue that it would inflict more injury on the finances of states which, to a large extent, have depended on monthly allocations from Abuja to meet their obligations.

Despite having revenues from combined sources ( Int e r na l l y G e n e rat e d Revenue+FAAC), Nigerian state governors got financial bailouts last year from the Federal Government to the tune of N614 billion. This shows how states’ finances are stressed out already as many are struggling to pay back.

As of today, only Lagos, Jigawa, Adamawa, Kebbi, Borno, Kaduna, Kano, Katsina, and Bauchi States have approved the new wage increase, while others have only expressed willingness to. This is despite the December 31, 2019 deadline stipulated in the agreement on the implementation of the new wage.

On several occasions, the labour union had said it would not guarantee industrial harmony in states that failed to meet the December 31, 2019 deadline, noting that it was a law that must be obeyed by governors.

Whether or not the states implement and sustain the N30,000 new minimum wage this year would surely have an impact on the overall economy.

Police Trust Fund Act In order to increase funding for the police and improve security in the state, President Buhari on June 24, 2019 assented to the Nigerian Police Trust Fund Act.

With the new law, companies operating in Nigeria will now have to pay a levy of 0.005 percent of their net profit into the funds.

Analysts say though a 0.005 percent levy (N5 per N100,000) of net profits may not be very significant, it could place additional burden on corporate taxpayers who have seen weak sales owing to low consumer purchasing power.

The analysts noted also that since the levy is imposed on companies operating a business in Nigeria, it may also apply to establishments of foreign companies which might hurt direct investments more.

Another aspect of the law stipulates that the Fund will also consist of 0.5 percent total revenue accruing to the Federation Account, in addition to proceeds from grants, intervention funds, aids, donations, and investment income.

The Act also calls for the winding up of the Fund six years after its establishment with assets and liabilities transferred to the Nigeria Police Force.

Deep Offshore (and Inland Basin Protection Sharing Contract) Act The Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Bill 2019 was signed in 2019 to repeal the old Act of 1993.

The amendment, among other things, introduces the provisions for price reflective royalties, eight-year periodic review of the Production Sharing Contracts (“PSCs”) and penalties of no less than N500 million and/or at least a five years imprisonment for noncompliance with the Act. Under the newly amended law, there is a revision of how royalties are calculated.

Under the old Act, royalties were calculated based on the water depth of the field. This ranged from 12 percent to zero percent.

However, the amendment has eliminated the zero percent rates as royalties would now be calculated on a field basis, dependent on the chargeable volume of the crude and condensates produced per field. The new rates are 10 percent (for fields in the deep offshore – greater than 200m water depth) while that of the frontier or inland basin is 7.5 percent as opposed to 10 percent under the old Act. The amendment also imposes an additional royalty rate to account for an increase in the price of crude above $20 per barrel.

The government through the law is hoping to shore up its revenue stream by raising around $500 million in 2020 and over $1 billion in 2021 from new taxes levered into the fiscal terms of the contract.

This has generated mixed reactions across the country, with some stakeholders holding the opinion that the new levies would make deep offshore projects less profitable and result in lower investment.

•Continues online at www.businessday.ng www.businessday.ng

L-R: From Eloff, project manager, Hitech Limited; Babajide Sanwo-Olu, governor, Lagos State, and Obafemi Hamzat, deputy governor, during the inspection of the ongoing construction of Agege Pen Cinema flyover bridge in Lagos.

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Decade of the locust: Nigeria cedes...

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cent) and Pakistan (4.49

percent).

The economies of Iran and the Philippines were tied, having expanded 4.46 percent in the period under review.

Tu rk e y a n d Me x i c o rounded up the list with economic growth of 3.97 percent and 1.48 percent, respectively.

Enter the next decade, 2010-2019, and Nigeria’s promise completely vanished.

The economy fell from top spot to rank eighth out of the Next 11.

A decade of 7.68 percent growth was followed by another of 3.81 percent growth.

Full-year growth numbers for 2019 are yet to be published but expectations are for a 2.2 percent growth, which still leaves the economy wallowing at below 4 percent, about half of the growth recorded in the decade before.

The new look Next 11 now has Bangladesh (6.61 percent), Turkey (6.40 percent), the Philippines (6.34 percent) and Vietnam (6.23 percent) in top four.

Nigeria only betters Egypt (3.61 percent), Mexico (3 percent) and Iran (2.65 percent).

While Nigeria, Egypt and Iran all fared worse in the most recent decade, Mexico made some progress from the decade of the 2000s when the economy expanded by 1.48 percent.

It should come as no surprise that the last decade was a lost one for Africa’s largest economy with all its promise and potential.

Early into 2019, a report by the Brookings Institution said without reforms to reduce its oil addiction, Nigeria risks “a lost decade” of flat economic growth. With hindsight, that is exactly what happened.

Goldman Sachs did warn of a possibility of failed potential for the Next 11 countries that were commoditydependent.

The caveat for Goldman Sachs was that shifts in global

commodity prices would affect the Next 11 producers of the commodities.

For Nigeria, its heavy reliance on crude oil proved its economic undoing.

Despite data by Statista, a global data provider, showing that crude oil prices were higher on average between 2010 and 2019 than in the 2000s, the five years between 2015 and 2019 did the damage that marred a decade of promise.

In the 2000s, prices averaged $47.5 per barrel. That figure increased by 62 percent within 2010-2019 to $77 per barrel.

In the last five years, however, oil prices averaged $55 per barrel, about half the average price of $104 per barrel in the four years (2011-2014) preceding that period.

It was also within the last five years, 2016 specifically, that oil production fell to a decade low of 1.2 million barrels after a wave of militant attacks on oil installations.

Lower oil prices and oil production caused a sharp drop in economic growth that plunged Nigeria into its first recession in 25 years.

The economy contracted 1.6 percent in 2016.

Nigeria is not the only net commodity exporter of the Next 11 countries, but the other countries had better buffers in place to resist an oil price shock. Nigeria didn’t.

The government introduced a raft of capital controls that irked investors and forced them to flee, thereby exacerbating what was already one of the lowest points of the Nigerian economy in three decades.

The economy would later exit recession in 2017 but economic growth of 0.8 percent was too little to make impact in an economy with the population of Russia and Canada put together.

Nigeria has a fast growing population. Annually, the population grows at a rate of 2.6 percent.

Economic growth below 2.6 percent means the economy is not able to absorb

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its growing population and there aren’t enough job opportunities for new graduates.

This has been the trend since 2016 with economic growth yet to match population growth of 2.6 percent. In 2018, the economy expanded 1.9 percent and probably grew 2 percent in 2019. Median forecasts for 2020 point to a growth of 2.2 percent while the government is targeting 3.5 percent.

The International Monetary Fund expects the country’s negative per capita GDP to persist for another five years.

Weak economic growth, though the single largest indication of Nigeria’s lost decade, is not the only one that captures the country’s fumbling.

After the excitement that came with the debt relief negotiated by the then President Olusegun Obasanjo that trimmed the country’s debt burden, it’s on the rise again.

Nigeria’s public debt to revenue ratio could rise to an alarming 400 percent in 2020, says international ratings agency, Fitch, while government debt may exceed 30 percent of GDP. At the start of the decade, public debt to GDP was 9.6 percent. In 2018, it jumped to as high as 16 percent.

While public debt has increased to compensate for lower oil revenues, the government may not have been efficient in deploying the debt.

Economic growth has remained tepid, something that would have been different had the government spent the borrowed money on infrastructure development.

Several governments have failed to keep the lights on in Nigeria which continues to generate about a tenth of the power its economy requires.

Several roads have remained in deplorable state, notably the Lagos-Ibadan Expressway.

The GDP rebasing which presented an outsized economy that initially drew the world’s attention to the most populous black country has @Businessdayng

been short-lived and foreign direct investment has disappointed.

Rather than end the decade with the promise of being one of the richest countries and fastest growing economies in the world as Goldman Sachs had forecast, Nigeria ended the decade with the unviable badge of the poverty capital of the world.

Nigeria’s success in the new decade will depend on whether the government opens up the economy for an influx of private capital.

Other emerging countries have used private capital to grow and create ample opportunities for their citizens.

The need to open up new sectors to private capital as a way of boosting economic growth is hardly new counsel in Nigeria, but that advice has not been heeded.

What’s worse from a Nigerian perspective is that other African countries are recognising the role of private capital in growing the economy and are providing good competition for capital.

Take Ethiopia, Africa’s second most populous nation.

Ethiopia plans to sell a minority stake in state-owned monopoly Ethiopian Telecommunication Corp to foreign investors in 2020, as well as two new licences to drive competition in the space, as Prime Minister Abiy Ahmed opens up the economy to foreign ownership for the first time in decades.

Ahmed’s ambitious privatisation plans don’t end there.

Six sugar plants will also be sold to foreign investors while sectors including international aviation, where stateowned Ethiopian Airlines dominates, as well as power and postal services, will be open for private sector partnership with the government.

Ethiopia is not alone.

Ghana and Egypt are also putting incentives in place to attract capital while Nigeria slumbers.

Turning the tide around in Nigeria in the next decade would also need purposeful and deliberate leadership.

Monday 06 January 2020

BUSINESS DAY

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news

DisCos studying modalities of NERC’s directive on cashless payment — ANED chairman

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ssociation of Nigeria Energy Distributors (ANED) says Distribution Companies (Discos) are studying the modalities of the directive issued by the Nigerian Electricity Regulatory Commission (NERC) on cashless payment by customers.

Chairman, ANED, Sunday Oduntan, spoke with the News Agency of Nigeria on Friday in Lagos.

The NERC had on December 31, 2019, directed the 11 DisCos to transit to cashless settlement platforms for the billing/collection of industrial and commercial customers by January 31, 2020.

It also directed the Discos to transit to cashless settlement platforms for the billing/collection of the R3 class of residential customers by March 31, saying Discos should leverage available banking channels approved by the Central Bank of Nigeria in complying with the directive.

It said failure by DisCos to comply w ith the order would be treated as a breach of the terms and conditions of the distribution licence.

The commission said the move was expected to reduce the collection leakages being experienced in the sector.

Oduntan said ANED was in support of any idea that would improve ser vices between the layers in the power sector, noting that there was however need to examine the modalities concerning its implemen-

tation.

“We are studying the modalities of the directive.

In principle, we support any idea that will reduce cash transactions; so, to us it is a good idea, especially for security purposes.

“But we also have to look at our customers across the country, especially those in the rural areas.

“S ome of them don’t have bank accounts, don’t do internet banking and some even have cooperatives who collect these cash from them to help them make payments.

“So, we have to look at how we can factor them in and that is why we are yet to come out with our position.”

He said ANED had channels of communication with NERC and would not hesitate to sit down with the regulatory agency to sort out the grey areas.

However, Godwin Idemudia, general manager, corporate communications, Eko Electricity Distribution Company (EKEDC), said the company had since early 2019 adopted cashless policy among its employees.

I d e m u d i a s a i d : “ We started before everybody.

We have since started and we are going to make sure that there is no problem with compliance.

“From our own end, our staff do not collect cash anymore. Those that are collecting cash are vendors working for us. They are the ones taking the risk, but we will still make sure that we tidy all the loose ends.” NAN

AXA Mansard recommends early start to financial planning in 2020

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XA Mansard, a member of AXA, a global leader in insurance and asset management, has advised Nigerians to kick off the year making wise financial decisions in order to achieve set goals in 2020, and starting the journey towards financial independence.

Yearly, people all over the country aspire for financial independence by starting out with New Year resolutions and set goals. However, many are still unable to realise these goals due to various reasons including low financial literacy, low determination, unclear goals and late implementation of financial plans – although it is better late than never.

Speaking on this recently, Alex Edafe, chief operating officer at AXA Mansard Investments Limited, explained, “It is important to start taking decisive steps now to foster the achievement of 2020 financial goals. Financial goals differ for everyone and could be short-term (0 - 1 year) such as investing towards the next house rent, school fees, travels, wedding, automobile among other. Medium-term (1 – 5 years) goals will not be limited to investing towards buying a property (land/house/shop), advance/continuing education, starting a business/equity ownership in business(es),

future school fees whereas long-term (after 5 years) goals include philanthropy, retirement savings, financial independence among others.

“Key strategies that can be applied for financial success in the new year include paying attention to one’s health, building an emergency fund whilst improving financial literacy, taking insurance on risks you are unwilling to take, getting an extra source of income, automating one’s savings and investments, getting out of debt, creating and living within budget, proper recordkeeping of savings and investments.”

Edafe concluded by saying, “Financial independence can be achieved by focus and intentionality. As we go into the year, a great way to achieve financial independence is to invest in the AXA Mansard Money Market Mutual Fund which provides Unit Holders with capital preservation and competitive return. “The fund is liquid, hence a unit holder can liquidate within 24hrs, affordable when you consider the minimum investment amount of N1,000, accessible through various online and offline channels and professionally managed by AXA Mansard - a Fund Manager registered by the Securities & Exchange Commission.

AXA Mansard wishes everyone a prosperous 2019.” www.businessday.ng

L-R: Jegede Olajide, MD/CEO, ABUCOOP Microfinance Bank Limited; Abubakar Sadiq Suleiman, president, NNPC Cooperative, and Michael Arokodare, chairman, board of director, during the 2018 annual general meeting of the bank in Abuja.

Pic by Tunde Adeniyi

Decision to hike prices in 2020 will compound FMCG’s woes – analysts Bunmi Bailey

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igerian listed fast moving consumer goods (FMCG) companies could see further decline in revenue and margin in the year 2020 on attempt to hike prices of their products, according to BusinessDay survey of four analysts on the outlook of consumer goods industry.

The year 2019 was horrendous for the consumer goods space as industry players faced myriads challenges from fragile economic growth to unfavourable protectionist policies of government – border closure and foreign exchange restriction for food imports.

Given the increment in Value Added Tax to 7.5 percent effective January 2020, combined with continued closure of the land borders as well as possible hike in electricity tariff, consumer goods players should get ready for a

tougher year.

“The expected increase is premised on the fact that these companies have been patient enough for the economy to recover,” said Ayorinde Akinloye, consumer analyst at Lagos-based CSL Stockbrokers, “However, this is not yielding desired results as margins are suffering.”

BusinessDay review of the earnings’ scorecards of 10 listed players between January and September 2019 was unimpressive, as only three – Nestle, Cadbury and UACN recorded uptick of 11.2 percent, 276.9 percent and 30.2 percent in post-tax profit year-on-year.

The brewery sub-sector churned out the most disappointing numbers in the first nine months of 2019, as all players in this space recorded drastic decline in their net income. Nigerian Breweries’ bottom-line fell by 17 percent; Guinness by 47 percent and International Breweries had the greatest decline of 130

percent.

Others player such as Flour Mills of Nigeria, Dangote Sugar, Unilever and PZ Cussons all saw their net income trend downwards in the review period.

“The expected decision is based on recent policy actions of government and also on the fact that they are not making money as before,” said Abiola Gbemisola, analyst at Lagosbased Chapel Hill Denham.

The Nigerian economy is yet to recover fully from a recent recession, as growth of the wider economy, which printed at 2.28 percent in the third quarter of 2019, underperforms population growth rate estimated at some 3 percent. This indicates that Nigerians are getting poorer even as GDP per capita or income per head, a perfect proxy for living standard, fell by 40 percent between 2014 and 2018, official data show.

According to the World Bank, Nigeria’s tepid growth

is driven by weak consumer demand combined with low private investment and contracting net exports. The bank expects Nigeria to expand by 2.1 percent by 2020-end, implying that an average Nigerian may get poorer in the New Year.

“The decision to hike prices will put industry players in a tight corner, given the price-sensitive nature of Nigerian consumers,” said Damilola Adewale, a Lagos-based economist and independent consultant.

According to Adewale, if they attempt to raise price, they should expect lower sales revenue as consumers will most likely switch to cheaper substitutes.

A research report by Lagosbased Coronation Merchant Bank published earlier in 2019, corroborated Adewale’s stance, that most Nigerian consumers are leaving premium brands for cheaper value brands.

Passengers stranded at Lagos airport over lack of parking space IFEOMA OKEKE

...FAAN says AirFrance emergency flight was given priority

Qatar Airways Boeing 787 on Sunday filled with holidaymakers and school children returning to Nigeria was unable to find a parking spot at Murtala Muhammed International Airport, the country’s busiest airport, after a nine-hour trip from Doha, Qatar.

Tired passengers on the flight QR 1407 got upset held up inside the plane which was in a holding position on the Lagos taxiway for an additional hour after touch-down on Sunday morning.

Airport officials claim the airport is congested but experts say the situation speaks of the rot that has been the lot of Nigeria’s busiest international airport and defeats talks of becoming a regional air hub.

After an hour of landing at the airport, an Air Côte d’Ivoire plane moved and the Qatar plane parked.

According to sources, the situation could have been avoided

with proper planning in place.

A Lufthansa jet and an AirPeace plane are parked at the airport, which is said to be congested. However, these two airlines usually fly into Lagos in the evening, sources told BusinessDay. However, Henrietta Yakubu, general manager, corporate affairs of the Federal Airports Authority of Nigeria (FAAN), said an AirFrance flight came in with an emergency patient and was given priority to park at the position Qatar was supposed to park.

Yakubu alleged that Qatar was given another parking space but declined the offer but after much negotiation, another aircraft was moved for Qatar to park.

However, earlier in 2019, the FAAN directed owners of used aircraft parked at the Murtala Muhammed International Airport (MMIA), Lagos, to remove them from the aprons of the airport in order to create space

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for other serviceable and functional aircraft.

The agency also offered the owners of the unused aircraft to move them to less busy airports like Ilorin, Enugu, Port Harcourt and others without additional cost and charge from FAAN. BusinessDay checks show that after the order many of the airlines have failed to remove the aircraft.

Victoria Shin-Aba, regional manager, South West, explained that FAAN had space constraints at the airport, lamenting that despite this, some airline operators prefer to park their unused aircraft at the airside under the claim that Lagos was their operational base.

She explained that the agency was planning to build additional apron at the airport, which would be ready very soon.

She emphasised that FAAN had about “32 international airlines flying into Nigeria, around 272 international aircraft movement daily for both arrival and @Businessdayng

departure.

“On the domestic scene, we have 27 arrivals and 32 departures, while we have 30 cargo arrivals and 28 departures.

“At our cargo apron, the capacity is meant to take four aircraft at least two wide-bodied aircraft and two smaller aircraft at the same time. Once in a while we have more than capacity, once this place is filled up, we take the cargo flights to the international airport and that is additional cost to the cargo airline as they need to deploy and truck their goods from international to cargo.

“This is why we need to create space for airlines. On the left is supposed to be the expansion and we are on it. Safety issues can also arise due to congestion, which is what happens most times. The expansion is looking at increasing the cargo apron to accommodate eight widebodied aircraft. So when work commences that is what we are looking at.”

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news

Alleged N4m bribe: I never encountered Shehu Sani in person - CJN Felix Omohomhion, Abuja

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hief Justice of Nigeria (CJN), Justice Ibrahim Tanko Muhammad, has debunked insinuations that the detained former senator, Shehu Sani, demanded money from some individuals to pass it to him to settle other judges to sway the course of justice.

Justice Muhammad was reacting to reports alleging that Sani had demanded N4 million from one Sani Dauda of ASD Motors to pass on to the CJN to help resolve a court case involving him (Dauda).

The Economic and Financial Crimes Commission (EFCC) last week arrested Sani for alleged name dropping and duping individuals on the pretence of helping them to resolve cases with the EFCC and courts.

Justice Muhammad on Sunday said in a statement signed by Akande Festus, director of press and information, Supreme Court of Nigeria, that he had never encountered Sani personally or at any capacity, stating he would take measures to clear his name.

The statement read in part: “Our attention has been drawn to the story making the round in some national dailies where it was reported

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that Senator Shehu Sani allegedly approached Alhaji Sani Dauda of ASD Motors and purportedly demanded for the sum of N4,000,000 to give to the Chief Justice of Nigeria, Hon. Dr Justice Ibrahim Tanko Muhammad, to settle some unnamed four Judges over a case he (Shehu Sani) allegedly claimed won’t see the light of the day.

“Let it be known that if the statement credited to Shehu Sani was actually made by him, it is simply a blatant lie, a figment of his imagination and an orchestrated falsehood immodestly concocted to malign, smear and disingenuously tarnish the good image and reputation of the CJN with a view to gaining financial reward.

“Even though the veracity of the true source of the unsubstantiated statement has not yet been ascertained to know if it was really from the former Senator, it is, however imperative to keep the records straight by letting the public know that Justice Tanko Muhammad has never, in his entire life, seen or had any form of encounter or interactions, either directly or remotely with Shehu Sani, let alone giving him assurances of what is not only unethical but equally despicable and inglorious, to say the least.

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Anchor Borrowers’ Programme: RIFAN in Nasarawa urges members to repay loans

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hairman, Rice Farmers Association of Nigeria (RIFAN), Abbas Ramallan, Nasarawa State chapter, has urged its members to repay the farm inputs loan they received under the Federal Government’s Anchor Borrowers’ Programme.

Ramallah made the call at the Wet Season Loan Recovery meeting with local government and zonal chairmen of RIFAN held in Keffi, on Sunday.

News Agency of Nigeria reports that the Central Bank of Nigeria (CBN) Anchor Borrowers Programme was launched

by President Muhammadu Buhari on November 17, 2015.

It is intended to create a linkage between anchor companies involved in the processing and small holder farmers (SHFs) of the required key agricultural commodities.

Ramallan noted that the programme started in the state in 2018 and no fewer than 20, 000 farmers had benefited so far.

Disturbed by the non-payment of the loan facility which was in the form of farm inputs, the chairman said that the items given to farmers in the state were on loan basis and not for free.

He said the loan to be repaid was converted to bags of paddy which was based on the number of hectares of land cultivated, saying, “It is not

charity; it is a revolving loan.

We should do things that our children will benefit from in years to come.

“Any loan given must be paid. Individuals signed indemnity with RIFAN, as well as for others and accessed the loan so it must be paid to the last kobo. I will make sure they pay.

“The year 2020 is a year of hard work. And we must achieve our aim in the year. A situation where you indemnify someone that is not capable of repaying you should know you are liable and you will face the wrath of the law.”

While stating that the state was expected to provide 50,000 bags of paddy for the loan recovery, Ramallan gave the farmers a time frame of Jan. 30 to pay up at least 80 per cent of the loan.

He, however, commended President Buhari for the effort at diversifying the economy through agriculture with the collateral-free loan for farmers in the country at large.

National deputy secretary of RIFAN, Iliyasu Awodi, said there were bags of paddy to be collected and those already collected was a far cry from what was envisaged.

“The last time we were at CBN, we learnt that there will be no anchor borrower if the association fails to pay 75 percent of the loans collected.’’

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NERC has not increased electricity tariff ... says it release was retrospective Olusola Bello & HARRISON EDEH

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he Nigerian Electricity Regulatory Commission (NERC) says it wish to notify Nigerians that no tariff increase has been approved by the commission.

It however stated that the commission, in discharge of its statutory responsibilities enshrined under EPSR Act, shall continue to undertake periodic reviews of electricity tariffs in accordance with prevailing tariffs methodology.

The organisation in statement on its website signed

by Usman Abba Arabi, general manager, public affairs, stated, “The attention of the Nigerian Electricity Regulatory Commission has been

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drawn to publications in several electronic and print media that end - user electricity tariff have been increased following the approval of minor review 2016 - 2018 of the 2015 multiyear Tariff Order on August 2019.”

He stated that the organisation wish to provide guidance that the minor review implemented by the commission was a retrospective adjustment of the tariff regime released in 2015 to account for charges in macroeconomic indices for the year 2016, 2017 and 2018, thus providing certainty about the revenue shortfall that may have arisen due to differentials between tariff approved by the regulator and actual end user tariff.

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We’re set for implementation of 2020 budget - Sanwo-Olu Joshua Bassey

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overnor of Lagos State Babajide Sanwo-Olu says his administration is set to begin full implementation of the 2020 budget of N1.168 trillion.

He stated this Sunday at the 2020 annual thanksgiving service of the state government, held at the State House, Ikeja, with over a thousand people in attendance.

Sanwo-Olu, who read the fourth lesson at the thanksgiving service, taken from Philippians 4: 4-8, said the gathering was necessary to appreciate God and to seek his divine guidance to provide better governance in Lagos.

“We are gathered here to give praise and thanksgiving to the Almighty God, who has seen us through the past year, and made it possible for us to see the beginning of a new year and a new decade.

It is indeed a wonderful day; we shall rejoice and be glad in it.”

The governor noted that the implementation of the 2020 was imperative because the government was committed to delivering on its six-pillar THEMES agenda.

“This year is very crucial for us as an administration, because it will be our first

full year of governance, and we are keen to justify the confidence that the people of Lagos have reposed in us. This year also marks the beginning of a new decade, the third decade since democracy returned to Nigeria in 1999.

God has given us a new opportunity to refine our vision, redefine our priorities, and renew our energy for the journey ahead.

“As a government, we are determined and committed to the realisation of our vision for Greater Lagos. Our strategic plan is hinged on the six pillars of our T.H.E.M.E.S agenda.

As a mark of our commitment which is also shared by the other arms of government especially the legislature, the 2020 appropriation bill was passed in record time, and I had the privilege of signing it into law at the close of 2019. It therefore gladdens my heart that as I speak today, the budget for this year is ready for implementation,” he said.

The budget was signed into law on December 31, 2019 with the government saying it targets to achieve 90 percent performance.

The 2020 budget is about 34 percent higher than 2019 election-year budget, which stood at N874 billion.

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AIB commences investigation on Turkish Airlines accident in P/Harcourt

UBA recruits 4,000 new staff, promotes 5,000, raises salaries up to 170%

… as FAAN reopens airport for operations

ver 5,000 staff of the United Bank for Africa (UBA) plc started the New Year with a lot of cheer as the bank today announced its promotion to new grades as well as salary upgrades with immediate effect this January.

Those who are beneficiaries of this exercise will receive up to 170% increase in their salaries and benefits, while a good number have been moved to higher grade levels.

In a carefully planned restructuring embarked upon by the bank in the last quarter of 2019, UBA has transformed its grading system and processes to become one of the most competitive within the industry. The bank crashed its grade levels to 12 levels from entry level to the top of the pyramid where previously it had been 16 levels. This means that staff will now find it much easier to attain top leadership management positions at UBA as their careers progress much faster.

In a massive recruitment drive, over 4000 new staff members resumed in the last week of December 2019 in Nigeria alone at the bank. UBA currently stands as the highest employer of labour among Nigerian banks with staff strength of close to 20,000.

UBA’s group managing director/CEO, Kennedy Uzoka, who announced the bank’s new staff improvement initiatives to the excited employees, noted

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ccident Investigat i o n Bu reau ( A I B ) has star te d investigation into an incident involving an A330-300 aircraft, with registration number TC-LOL, operated by the Turkish Airlines.

The general manager, public affairs, AIB, Tunji Oketunbi, made this known in a statement issued in Lagos on Sunday.

Th e s t at e m e nt n o t e d that the bureau was notified that at about 3:30am local time, on December 31, 2019, the aircraft was e n ro u t e Po r t Ha rc o u r t f r o m I s t a n b u l , Tu r k e y , with 295 passengers and 11 crewmembers on board.

According to the statement, the aircraft suffered a bu r s t t y re o n l a n d i ng on runway 21 of the Port Ha r c o u r t I n t e r n a t i o n a l airport; veered off the runway and managed to taxi to the new international terminal.

It confirmed that all the occupants disembarked with no injury.

Th e s t at e m e nt n o t e d that the bureau was open to receiving any video clip, relevant evidence or information that might assist in its investigation.

“The Bureau will like to call on the press and the

public to respect the privacy of the people involved and not to pre-empt the cause of the incident,” it said. However, the Federal Airports Authority of Nigeria (FAAN) has announced the reopening of Port Harcourt International Airport for operations.

FAAN general manager, c o r p o ra t e a f f a i r s, He n rietta Yakubu, made the disclosure in a statement made available to News Agency of Nigeria in Abuja on Sunday.

“The Federal Airports Authority of Nigeria wishes to inform the general public that the Port Harcourt International Airport has now been re-opened to operations. “ This is by follow ing a careful evaluation and mitigation of the impact o f t h e b u s h f i re e a r l i e r reported around the airport and the dissipation of smokes around the air side,” she said.

According to her, normal flight activities have therefore re-commenced at the airport.

Ya ku b u a s s u re d t h a t FAAN was committed to its core values of safety, security and comfort of passengers and airport users. NAN

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that UBA is continually seeking new ways to improve the fortunes of its staff as they are the backbone of the organisation.

Uzoka, who spoke to the staff in a bank-wide live broadcast said, “As a leading financial institution, we do not take issues relating to our staff lightly.

We take great pride in being a listening bank that has the ears of our employees as they turn the wheels which make the organisation successful for our customers and shareholders.

UBA recruits highly talented staff who perform at the best standards and deserve to be remunerated accordingly.”

Continuing, Uzoka said, “We have also taken steps to ensure that our bank remains at the top tier as it relates to talent pool. We want to train the best and we have crashed the grade structure to make it easier and faster for our employees to progress along their careers.

With this new grade structure, it will be possible for a new graduate employed at UBA to rapidly chart their own careers and become GMD by the age of 36.”

UBA is one of Africa’s leading banks with operations in 20 African countries. The bank also has presence in the global financial centres of London, New York and Paris.

UBA provides banking services to more than 17 million customers globally, through diverse channels.

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Live @ The STOCK Exchanges

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Monday 06 January 2020

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COVER

Economy

26-yr old Nigerian shares plan to save five million Naira by year’s end

Tips for entrepreneurs in 2020

New Year, New me” for a young finance professional in Nigeria is to have saved at least five million Naira by the end of 2020.

Christy, a 26-year old who works as an investment analyst in Lagos, claims she has figured out a way to become five million Naira richer in 366 days, and it isn’t for the faint heart.

It is a New Year- in a sense an empty book with 366 pages to be filled. There are different plans in motion to make it a successful one, and business owners are not left out.

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Economy

26-yr old Nigerian shares plan to save five million Naira by year’s end SEGUN ADAMS

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ew Year, New me” for a young finance professional in Nigeria is to have saved at least five million Naira by the end of 2020.

Christy, a 26-year old who works as an investment analyst in Lagos, claims she has figured out a way to become five million Naira richer in 366 days, and it isn’t for the faint heart.

Christy says she earns around N750,000 per month and has an investment portfolio (mostly made of stocks) of nearly three Naira already.

Whether you can keep up with Christy or surpass her, adapting the young professional’s style to suit your financial situation would certainly be rewarding.

Save at least 10k per day automatically for 366 days Putting aside ten thousand Naira every day will not be an easy thing to do but it would be worthwhile at the end of the year, Christy says.

N10,000 a day translates to N310,000 for a 31-day calendar month, and would be 41.33 percent of a N750,000 per month income.

This “aggressive” level of saving is twice the recommended “20%” in the 50-30-20 (needs-wants-save/invest) principle for a N750,000 income size but the relative saving size drops as income level increase, says Christy.

She advises the use of automatic-savings platforms like Cowrywise and Piggyvest that can debit straight from your bank to make saving easier.

Asides removing the ‘stress of manual labour’, such platforms help prevent you from giving up half-way, she says.

“You should endeavour such platforms pay attractive interest rate unless you do not want interest on your money,” she says.

Since 2020 is a leap-year you should have N3,660,000 plus whatever interest rate you are paid.

Double hustle N3.66m is almost two-third of the N5m savings target, and here’s where side-hustles comes into the equation, says Christy.

“Getting money from extra jobs is as easy as pie,” Christy says. “I can teach a skill, write paid-for articles, practice photography, model part-time and do a dozen other stuff, each of which would earn me more than N100,000 per month.”

Christy says getting one or two sidewww.businessday.ng

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Putting aside ten thousand Naira every day will not be an easy thing to do but it would be worthwhile at the end of the year

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jobs is especially important for those who may not be able to comfortably save up to N750,000 in a month.

By the end of the year, Christy would have made N1,200,000 from side-gigs.

Combined with the daily N10,000 savings, this would be a total of N4.86m excluding the interest on savings.

Cut down expenses and save the money Christy is an Amazon when it comes to personal finance management. She says a step further would be to cut down on some expenses and save whatever she makes from doing so.

“Netflix subscription, shopping, expensive dates and outings are important but I would cut down reasonably on some of them,” Christy says.

Christy says she would also consider taking turns to share ride with a colleague that lives close to her part of town; she would give her friend lifts on some days and ride in the friend’s car on others.

Christy says eating out during workdays is a significant part of her daily expenses and would instead try to take food to work as often as possible.

“Anyone interested in such an adventure could also make use of an accountability partner,” she says.

At the end of the year, Christy expects to have saved up to N420,000 cutting down on several wants.

Christy notwithstanding says young people should not be too fixated on saving to the detriment of ‘living their lives’ and vice-versa.

Combined with N4.86m already noted, N420,000 will result in a total of N5.28m net of interest.

Save 50 percent of all unexpected income People make more money in a month than they realize, at least according to Christy.

“It differs with people but on the average, my transitionary income per month is N50,000,” says Christy, who explained she gets monetary gifts from friends, family, colleagues at work as well as, efficiency wage, 13th month salary and bonuses too.

So for the young investment analyst, this would translate to a minimum of N600,000 in a year plus whatever interest she earns on that amount.

At this point, she theoretically has N5.88m saved.

(BusinessDay understands transitionary income is by definition uncertain so this should be the last box you tick.)

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Tips for entrepreneurs in 2020 Gbemi Faminu

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t is a New Year- in a sense an empty book with 366 pages to be filled. There are different plans in motion to make it a successful one, and business owners are not left out.

The year 2019 brought many challenges and opportunities to businesses like restriction of FX for importing certain items, the AfCFTA signing, Border Closure, CBN’s directive for banks to lend more, introduction of new finance bill and tax regime, Visa-n-arrival policy, and Stamp duty and Bank charges review, among others.

The New Year comes with renewed energy and anticipation for endless possibilities.

Some of the themes that will shape 2020 for businesses include possible subsidy removal or review, electricity tariff adjustment, anticipated re-opening of borders, possible VAT hike, faster economic growth, possible increase in bank lending, and so on.

Inevitably, there is a need to reflect on the activities of the previous year and to set goals for the present year.

Here are some tips for entrepreneurs in the New Year.

Reflection: there is a need to reflect on the activities of the previous year and take note

of things well done and things poorly done.

Evaluate your mistakes and successes, this will serve as a guide to know what should be done as well as what should be avoided going forward this year. Review your business model and operations and make necessary corrections.

Set goals: after reflecting and making necessary evaluations, it is necessary to draw up targets, goals, objectives and develop projections to be achieved this year, for effectiveness,

it is better to draw up the goals on a quarterly or monthly basis, this is more realistic and sustainable moreso, it will aid in tracking the progress made during the year.

Prepare: make preparations for possibilities, be updated with global and economic activities, understand the latest business trends, learns necessary skills and acquire relevant certificates. This will help in making you and your business grow Finances: funds are a crucial part of any

business, avoid past mistakes and draw up a sustainable budget targeted at business growth and whatever profits are realized should be ploughed back into the business. Furthermore, cut cost when necessary Expansion: make moves to grow the business, Consider hiring temporary staff or interns during busier times to help save on overall costs throughout the year to ensure effectiveness and efficiency that will guarantee customer satisfaction.

Improve marketing strategy: the abundance of competitors in the market, as well as other products, requires business owners to be continually innovative and proactive.

Employ simple, affordable, and creative measures to remain distinct from competitors and endear yourself and your products or services to clients. Grow your network and on a daily basis pitch your business to no less than three people also fully utilize the use of social media in a way beneficial to your business.

Learn: Engage in a regular activity of studying other businesses and entrepreneurs, copy what works for you and sift the advice you take.

Give yourself a break when necessary: While you are working on growing your business, ensure you grow yourself as well, engage in healthy activities and give yourself a break when it is deserved.

Consumers show no plans to buy big-ticket items next 12 months HOPE MOSES-ASHIKE

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ealers in big ticket items such as motor vehicles, house amongst others may be in for tough time this year as consumers show no plans to buy such durables in the next 12 months.

This is evidenced in the consumers overall buying intention index in the next twelve months, which stood at 36.5 index points.

This indicates that majority of consumers believed that the current quarter was not the ideal time to purchase such big-ticket items.

The buying intention indices for consumer durables, motor vehicles and house and lot were below 50 points, indicating that respondents have no plans to make these purchases in the next twelve months.

The fourth quarter (Q4) 2019 Consumer Expectations Survey (CES) was conducted by the Central Bank of Nigeria (CBN) during the period November 18-27, 2019, covering a sample size of 2,070 households drawn from 207 Enumeration Areas (EAs) across the country, with a response rate of 99.9 per cent.

In the survey, respondents’ distribution by educational attainment showed that 8.6 per cent had university education, 10.7 per cent had higher non-university education, while 26.9 per cent had senior secondary school education. Respondents with junior secondary and primary school education accounted for 4.9 and 19.7 per cent, respectively, while those with no formal education accounted for the balance of 29.3 per cent.

Most respondents expect prices of goods and services to rise in the next 12 months, with an index of 17.0 points. The major drivers are food and other household needs. www.businessday.ng

With indices of -6.3 and 16.5 points, respectively, consumers expect the borrowing rate to fall, but expect the naira to appreciate in the next 12 months.

The consumers’ overall confidence outlook rose in Q4 2019, as consumers were optimistic in their outlook. The index at 3.3 points was 6.4 points lower than the index in the corresponding period of 2018. Respondents attributed this favourable outlook to improved family income and family financial situation. The consumer outlooks for the next quarter and next 12 months were positive at 19.7 and 30.2 points, respectively.

The outlook could be attributed to the expected increase in net household income, expectations to save a bit and/or have plenty over savings and an anticipated improvement in Nigeria’s economic conditions in the next 12 months.

Robert Asogwa, member of the Mon-

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etary Policy Committee (MPC) said the outlook for the Nigerian economy is a little changed from the position from two months ago which was the last MPC meeting for 2019.

After a soft patch in Q2 GDP growth, which declined to 1.94 percent in Q2 2019 from the Q1 2019 GDP growth of 2.10 percent (revised from 2.01% due to oil output revisions), a subtle turning point appears to have started in Q3 2019 as the GDP growth moved upwards to 2.3 percent.

The central scenario remains that the Nigerian economy will on average grow by 2.3 percent in 2019, but then the growth rate will pick up to about 2.9 percent in 2020, and further to 3.3 percent in 2021.

The unemployment index for the next 12 months remained positive at 21.0 points in Q4 2019, indicating that consumers generally expect the unemployment rate to rise in one year.

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Monday 06 January 2020

BUSINESS DAY

Market Wrap-up

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he market opened for four trading days this week as the Federal Government of Nigeria declared Wednesday 1st January 2020 a Public Holiday to mark the New Year celebrations.

A total turnover of 2.309 billion shares worth N21.675 billion in 14,906 deals were traded this week by investors on the floor of the Exchange in contrast to a total of 735.702 million shares valued at N7.132 billion that exchanged hands last week in 7,138 deals.

The Financial Services industry (measured by volume) led the activity chart with 1.924 billion shares valued at N10.148 billion traded in 9,287 deals; thus contributing 83.31% and 46.82% to the total equity turnover volume and value respectively.

The Conglomerates Industry followed with 188.538 million shares worth N284.531 million in 530 deals. The third place was

Industrial Goods industry, with a turnover of 56.007 million shares worth N4.793 billion in 1,304 deals.

Trading in the Top Three Equities namely, Omoluabi Mortgage Bank Plc, Transnational Corporation of Nigeria Plc and Zenith Bank Plc. (measured by volume) accounted for 1.131 billion shares worth N3.600 billion in 2,249 deals, contributing 48.98% and 16.61% to the total equity turnover volume and value respectively.

Forty-four equities appreciated in price during the week, higher than thirty-one (31) equities in the previous week.

Twenty-four (24) equities depreciated in price, higher than seventeen (17) equities in the previous week, while Ninety- seven (97) equities remained unchanged, lower than one hundred and seventeen (117) equities recorded in the preceding week.

Chart of the week

WeekAhead Ahead Week Week TradeAhead (Monday, 8th April – Friday, 12th April, 2019) The extension of the border closure would continue to have an impact on the trade of agricultural commodities in the coming quarters.

Foreign Exchange Market The supply-demand dynamics to determine the exchange rate movement in January.

In the interim, lackluster demand from corporates yet to fully resume and decelerating foreign exchange demand from manufacturers and traders for raw materials imports and inventory buildup will likely offset the expected increase in the demand for foreign exchange for international school fees payment Stock Market We expect the market to be more volatile as profit-taking by foreign investors continue.

Furthermore, fund managers are rebalancing their portfolios. These activities, alongside a slowdown in business activities in early January, will weigh on the stock market’s performance.

Wheat Prices The lower global output levels as a result of delayed harvest in the US would drive the price of wheat up in the coming weeks. This would lead to an increase in Nigeria’s import bill as spending on wheat imports rise.

Sugar Prices The price of sugar will continue its upward trend in the coming weeks as strong global demand boosts prices, outweighing the reduction in supply. This is expected to have a negative impact on Nigeria’s trade balance, as the country is a major importer of the commodity (10th largest importer globally)

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Vitafoam grows profit by most in over 5yrs to trumph billion-naira mark Listed manufacturer of foam products, Vitafoam has announced its profit more-thanquadrupled and crossed a record billion naira-mark in 2019 after company sales jumped 14 percent.

Vitafoam posted an annual profit of N2.46bn for the business year ended 30 September 2019. This is 309 percent more than it made in the previous year and the fastest bottom-line growth in at least five years.

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@Businessdayng

Monday 06 January 2019

BUSINESS DAY

59

abujacitybusiness Comprehensive coverage of Nation’s capital

NACA urges Nigerians to know their HIV status in 2020 Godsgift Onyedinefu, Abuja

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L-R: Jegede Olajide, MD/CEO, ABUCOOP Microfinance Bank Limitedl; Abubakar Sadiq Suleiman, board director, ABUCOOP/president, NNPC Cooperative; Micheal Arokodare, chairman, board of director, ABUCOOP, and Kayode Odumosu, company secretary, during the 2018 annual general meeting of the bank in Abuja.

APDC to commission 250 housing units this year in Abuja James Kwen, Abuja

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buja Property Development Company (APDC) will commission 250 housing units and commence Phase II of it’s estate in Kubwa District of the Federal Capital Territory (FCT), Abuja.

Lawal Aliyu, Acting Managing Director of APDC who disclosed this in an interview with BusinessDay also said 300 housing units in the phase I of the estate were already commissioned.

Aliyu explained that phase I of the estate which has all infrastructure, including roads, drainages, water, car parks, among others is housing over over 200 families.

He said as a as a govern-

ment owned company, APDC also tries to intervene by giving some ideas on how to solve some social problems in the FCT. According to Aliyu, APDC has drawn a design for public convenience in the FCT, transitional hostels for exiting National Youth Service (NYSC) Members and Senior Citizens Home.

“There are absence of public convenience in the FCT, so we want to do and the Committee was formed by the Honourable Minister to look into the provision of these public convenience.

“The model we proposed is not for government to bring in money, it is public private partnership to get the private sector involved. All what government needs is to do the regulations.

“Also we have done a couple of other designs to see how we can solve some social problems. We did a design for senior citizens home. We don’t have such facilities here in Nigeria, most especially in Abuja.

“We also did one on youth hostel. We look at the transition that Youth Corps Members go through in Abuja, from camp, after your NYSC, probably you have one or two things that you want to do you need a small place to put up. Sometimes, for somebody that is just starting a new job without accommodation can just stay there for a while instead of going to hotels that are so exorbitant”, he added.

The APDC Managing Director stated that apart from doing business as a government company, it offers services and that is

why the prices of its houses are a bit different from private companies.

“Our own motive is not just profit but we try to play by the rules. In our designs, we make sure that it is what the city regulation said and we conform to that. Also the size of our roads, size of our parking, like in every flat in our estate we provide at least two parking lots. The road is so wide that you can have the your visitor car parked at the size of the road and you can still have space to drive.

“There are some private companies that came to our estate and wanted to partner with us but whenever they come they see what we provide in terms of the facilities, in terms of sizes and the space and most of them will say we can’t do this”, he said.

PTAD pays N842 million pension arrears to 11,331 NITEL/Mtel retirees Cynthia Egboboh, Abuja

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he Pension Transitional Arrangement Directorate (PTAD) disclosed that is has paid one month

pension arrears to the tune of N842.808 million to 11,331 pensioners of the defunct NITEL/Mtel in December, 2019.

According to a statement issued by the direcwww.businessday.ng

torate at the Weekend, the payment was made to the pensioners as part of the Federal Government’s commitment to reduce inherited pension liabilities.

The Executive Secre-

tary, Chioma Ejikeme in the statement reiterated her commitment and assured pensioners that their welfare remains a priority to President Muhammadu Buhari’s Administration.

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he National Agency for the Control of AIDS (NACA) has urged Nigerians to know their HIV status as they enter into a New Year as HIV testing remains the only gateway to HIV prevention, care and treatment.

Director General of NACA, Aliyu Gambo assured Nigerians that as they joined the rest of the world to end the scourge, NACA, through all stakeholders will ensure 90 percent of Nigerians know their HIV status, are placed on treatment and they achieve viral load suppression.

Gambo in a statement

by Toyin Aderibigbe, Head, Public Relations and Protocol, said: ‘’why are we making noise saying HIV should be under control in the next couple of years?

“It is because we want Nigerians to know their HIV status, if negative they continue to live a normal life and if positive, they can get treated’’.

He further stated that being aware of one’s status

is no longer difficult as Nigerians can now get tested in a matter of minutes by getting a test strip.

According to the statement, in the last few years, NACA in partnership with development and implementing partners, including stakeholders at both States and Local Governments level, has taken bold steps to prevent new infection by consistently providing information, education, and availability of HIV/AIDS related services to Nigerians irrespective of where they reside in the country.

“We must build on the successes recorded so far as individuals, families and communities by ensuring deliberate efforts are putin to avert new infection as we move into a new decade and most importantly, make efforts to know our HIV status, which allows individual to make informed decisions either way the result turns out.

“Remember, people still get infected with HIV every day, mostly as a result of indiscriminate sexual behaviours”, the statement read.

Candido signs over N8.705 billion 2020 budget into law James Kwen, Abuja

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he Abuja Municipal Area Council (AMAC) Chairman, Adamu Candido has assented to the Council’s N8.705 billion budget estimates for the 2020 financial year.

In a brief signing ceremony at AMAC Headquarters in Area 10, Garki, Abuja, the Chairman disclosed that the 2020 estimates were budget of actualization of promises made to the people.

Candido said the present FCT Area Councils Administrations has only two years to deliver and tasked Supervisory Councillors and Special Assistants that he wants to see projects between 1st January and 20th May, 2020.

On his plans to free up funds for capital expenditure and reduce overhead cost of the Council, he vowed to flush out ghost workers on the payroll of AMAC. “We’ve taken a look at our payroll and discovered that some people (AMAC staff ) are no more with us so we will identify them and have their names removed from our payroll, some of them have moved to other places. @Businessdayng

“Identify these names and put a stop to it immediately. They should not be paid beginning from this December. Whoever is supporting them to take salaries without working, we will stop them because we cannot allow them to be collecting salaries in two places, it is cheating and it is not acceptable “, Candido maintained.

He disclosed that the AMAC has entered into agreements with the Abuja Environmental Protection Board (AEPB) and Department of Outdoor Advertising and Signages (DOAS) on revenue collection and service delivery, which would remove frictions and increase internally generated revenue.

The Chairman also appreciated the AMAC Legislature for keeping sleepless nights to work on the budget in record and urged them to carry out healthy oversight and monitoring.

He pointed that priority areas of focus would include infrastructure, especially standard roads in the communities, water supply, healthcare and other deliverables that could be of benefit to the people in this financial year.

Company IN FOCUS

BUSINESS DAY Monday 06 January 2020 www.businessday.ng

Can Vitafoam sustain this new found path of profitability?

OLUFIKAYO OWOEYE & SEGUN ADAMS

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isted manufacturer of foam products, Vitafoam has announced its profit more-than-quadrupled and crossed a record billion naira-mark in 2019 after company sales jumped 14 percent.

Vitafoam posted an annual profit of N2.46bn for the business year ended 30 September 2019. This is 309 percent more than it made in the previous year and the fastest bottom-line growth in at least five years.

The stock beat the general market performance with a year’s return of almost 20 percent while the NSE’s main equity gauge lost nearly 15 percent in 2019.

The manufacturer grew revenue by 14 percent to N22.28bn with sales from foams and other products up by 10 percent yearon-year while Freight income which was dormant in 2018 contributed N779.328m in 2019.

The addition from the latter segment was a significant boost to Vitafoam earnings.

Cost of sales declined by 1.15 percent which resulted in an increase in gross profit by almost 50 percent to N8.76bn.

The results meant that for every N100 sales Vitafoam was able to retain N39.33 after settling direct costs. This is an improvement compared to a gross margin of 29.98 percent or N29.98 per hundred naira sales.

Profit from operating activities was 112.44 percent higher in 2019 compared to N2bn recorded in the preceding year.

Vitafoam also noted a 27.62 percent rise in its finance income although net finance income slumped almost 27 percent after finance cost rose by 23.79 percent.

Net finance income stood at

N948.67 million compared to N1.298bn in 2018.

Profit before tax grew by 340.36 percent while Earnings Per Share (basic) jumped 222.1 percent from 56.64 kobo to N1.8244.

Vitafoam announced that its board recommended a dividend of N525m which would translate to 42kobo per share for the 2019 business year.

The dividend is subject to shareholders’ approval and withholding tax.

Retrospectively, Vitafoam had consistently made losses in the last three years. The company made a loss after tax of N71.9 million in 2015, N32 million in 2016 and N127 million in 2017.

At its last Annual General Meeting, the company announced that it has secured N2billion loan facility from the Bank of Industry. The loan facility has a tenor of five years with a 12percent interest with a oneyear moratorium on principal.

According to the management, this is to augment its working capital, provide significant savings on its cost of funds, increase margins and profitability from bulk procurement of major

chemical raw materials directly from manufacturers at lower cost compared to procurement from the third party suppliers.

In a bid to also boost and diversify its revenue base, the foam maker introduced established Vitaparts Nigeria Limited, new subsidiary to manufacture oil filters. While a new production line was added to its soft furnishing subsidiary, Vitablom Nigeria Limited.

The group consists of Vitafoam Plc (the company), as well as subsidiaries controlled by the company, including Vono Products Plc which it merged with in 2015. While Vitafoam (the company) has consistently made a profit, its subsidiaries have struggled. Last year’s results show most of them made loss.

Vitafoam was established in 1962 by two giants: British Vita and Unilever. The Nigerian Promoter Decree No. 3 of 1977, mandated companies to sell sixty percent of their share to the Nigerian public, thus in compliance with the decree, Vitafoam became a public company in 1978 and listed on the floor of the Nigerian Stock Exchange in 1978.

In 2008 and 2009, Vitafoam Ghana Limited and Vitafoam Sierra Leone Limited respectively were established. In 2010, Vitafoam became a major shareholder of Vono Products and established two sister companies: Vitapur Nigeria (an insulation products manufacturing company) and Vitablom (fibre processing and soft furnishing company). In 2012, Vitafoam established its youngest inclu-

sion; Vitavisco for production and sales of Viscoelastic foam and Latex products.

On the board of the company is Taiwo Adeniyi who is the CEO and managing director.

Adeniyi holds a BSc Degree in Chemistry and MSc Degree in Pharmaceutical Chemistry from the University of Lagos and MSc Degree Engineering and Logistics from the University of Warwick, United Kingdom. He joined the Vitafoam Group in 2007 and was appointed to the Board in July 2012. Prior to his appointment as Acting Group Managing Director/CEO, Mr. Adeniyi was the Group Technical & Development Director.

Bamidele Makanjuola is the chairman of Vitafoam Plc. Makanjuola is a first-class Chemical Engineering graduate of University of Ife (now Obafemi Awolowo University), Ile-Ife. He holds a Doctor of Philosophy degree in Chemical Engineering and Economics from the Loughborough University of Technology, UK. He is a member of both the Polymer Institute of Nigeria and the Nigerian Society of Engineers.

Prior to his appointment as the

Chairman of Vitafoam Group, He has served as the Executive Director in charge of Corporate Planning and Development in December 2001 and appointed as the Managing Director on 1st April 2006.

Other members of the board include Olufemi Deru, John Erinne, Adebayo Adeola, Abbagana Abatcha.

The manufacturer also advised the Exchange and investing public of the appointment of Achike Charles Umunna as a non-executive director with effect from December 19, 2019.

Vitafoam in a duopolistic market There are two major brands competing for market share in the Foam business in Nigeria.

The two major players namely; Vitafoam and Mouka foam has continued to dominate the market forcing other small players to the fringes.

To keep itself in the face of its loyal consumers, Vitafoam has changed its business model by not only adding more product lines but also improve on the quality and visibility of its headline products through the opening of more comfort centers across the country while also deepening its logistics and distribution business. Vitafoam has also doubled down on advertising as the race for market leadership heats up. In its 2019 financial year, it spent N327.24million on advertising compared to N269.15million in 2018.

Price of Vitafoam shares rose 10 percent, the maximum allowable limit for a trading session, to N4.4 per unit following the announcement of the results on Tuesday No doubt, the once lossmaking company is now back on the path of profitability and shareholders have every reason to smile. How long this would last, only time will tell.

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