BusinessDay 07 Aug 2018 by BusinessDay

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news you can trust I **TUESDAY 07 AUGUST 2018 I vol. 15, no 112 I N300

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ising political tensions heading into the 2019 presidential elections in Africa’s most populous nation and fragile economic activity, are forcing banks to remain cautious and conservative with credit creation. Lenders largely forecast 10 percent loan growth guidance during investor presentations at the start of the year. A 10 percent loan book growth in

one year translates to an average of 2.5 percent growth per quarter. Despite already looking complicated as early as the first quarter of the year, when average loan growth was -5.2 percent (which meant lenders most grow their loan books by 4 percent for the next three quarters), the situation has become even worse in the second quarter as contracting loan books persist. Zenith bank, First Bank Holdings, First City Monument Bank (FCMB), Diamond bank and Sterling bank are the only banks to have published

ith the planned defection of Senate Minority Leader, Godswill Akpabio, to the ruling All Progressives Congress (APC) within the week, the People’s Democratic Party (PDP) Senate Caucus is already shopping for his replacement, BusinessDay has learnt. It was reliably gathered that the PDP Senate Caucus is already in talks with the national leadership of the party, with a view to finding a suitable replacement for the former governor of oil-rich

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Local oil firms ramp alternative financing as bank credits dry up ... tap contractor financing, insurance funds, private equity, pension funds

igerian oil companies are counting on alternative funding schemes including contractor financing, insurance funds, private equity, pension funds among others to get cash for new projects

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Trump’s Iran sanctions begin, to boost oil prices

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Akwa-Ibom State. Akpabio was elected as the Senate Minority Leader at the inception of the Eighth Senate in 2015 despite being a first time senator, a position usually occupied by ranking senators. Findings showed that there are 11 other PDP senators from the South-South geopolitical zone where Akpabio hails from. And that the Party and the Caucus are already looking at the lawmakers from the region with a view to arriving at a consensus. Investigations also revealed

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Olusola Bello, Frank Uzuegbunam, Isaac Anyaogu & Stephen Onyekwele

Defection: PDP scouts for Akpabio’s replacement OWEDE AGBAJILEKE, Abuja

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

Banks miss loan growth target as politics, fragile economy take toll LOLADE AKINMURELE

Currency Futures ($/N)

fgn bonds

Treasury Bills

DIPO OLADEHINDE

gainst bearish factors such as ramp-up in production by Organisation of Petroleum Exporting Countries (OPEC) and its allied partners; investors will be pon-

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Inside

Diana Chen, chairman, GAC Motors (l), with Lord Sebastian Coe, IAAF president, at the Asaba 2018 championship where GAC Motor is the official sponsor.

US investors pledge to revitalise Ibeto P. 33 Nigercem

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Analysis

NERC’s amended MYTO 2.0 and changes in electricity tariffs DIPO OLADEHINDE

s Nigeria Electricity Regulatory Commission (NERC) continues to come up with different strategies to revamp the Nigeria power sector, investors and consumers will be hoping the amended Multi Year Tariff Order (MYTO) 2.1 will provide lasting solution to the many challenges that has plagued the sector over the years. Stakeholders have been dissatisfied with MYTO 2.0, which set the tariffs for the privatised PHCN Successor companies as it was generally considered inadequate because it failed to achieve the objectives of incentive -based regulation which seeks to reward performance above certain benchmarks, and reduce technical, commercial and collection (ATC& C) loses. A major review was done on MYTO 2.0 leading to the introduction of MYTO 2.1 which increased average tariffs significantly in order to enhance cost recovery for Discos. However, MYTO 2.1 was also generally considered unsuitable and insensitive to electricity consumers, which caused NERC to amend the MYTO 2.1 to address the inequities in the original MYTO 2.1. However there are still some scepticism in the air in respect to how successful and impactful the new MYTO will be giving the past failures of MYTO 2.0. Oladotun Alokolaro senior Partner and head of the Energy and Infrastructure Group at Advocaat Law practice said amended MYTO 2.1 is a step in the right direction given the non-reflective tariff for electricity consumption as the new plan will also factor in fluctuation in inflation and foreign exchange. “We should see a reduction in revenue losses and also an improvement in the payments for other segments of the value chain which should allow the discos to invest in the necessary metering technology to reduce collection losses,” Alokolaro told BusinessDay. Alokolaro also noted that the way forward is to decentralize the industry so that there are mini transmission grids across the country while the discos should be recapitalized with cost reflective tariffs introduced.

Olayemi Anyanechi, Managing Partner at leading law firm Sefton Fross said the amendments to MYTO 2.1 was necessary as it sought to address the economic hardship on consumers, especially in view of poor supply of electricity and less than stellar performance by Discos. Power consumers will consider the amended MYTO 2.1 as a welcome development as it took away the recovery of collection losses from the consumer and passed these loses onto the Discos by more than 50 percent in some places as NERC warned that henceforth Disco’s collection losses, which is defined as the ‘amount billed but not collected’ is within the control of the Discos and such losses should not be transferred to customers. “Any Disco that wishes to pass through to its customers certain collection losses shall indicate same when applying to the Commission for Tariff review, providing justification with evidence the proportion of losses to be passed through to customers,” NERC warned in amended MYTO 2.1. However, Anyanechi managing Partner at leading law firm Sefton Fross noted that the major challenge with MYTO 2.1 as amended was that setting collection losses at zero was a distortion of the contractual ATC&C losses reduction levels agreed to by the new owners of the Discos under their Performance Agreements, which led them to declare force majeure under their respective Performance Agreements. “The beauty of amended MYTO 2.1 is also its vulnerability, because as long as the variables are not stable, reflective of arm’s length negotiations, or optimal, it becomes very difficult for the tariff methodology to achieve its objectives,” Anyanechi managing Partner at leading law firm Sefton Fross said. However, NERC noted that during Disco privatization process, that one of the major criteria for identifying preferred bidders was a consideration of the most aggressive but feasible ATC&C loss reduction trajectory over a 5-year period, from a Net Present Value (NPV) point of view. Continues on wwwbusinessday online.com

National Assembly leadership meets today, likely to reconvene OWEDE AGBAJILEKE, Abuja

he National Assembly leadership will meet on Tuesday over the possible reconvening of the federal legislature to consider some national issues, BusinessDay has learnt. The National Assembly leadership comprises both the Senate and the House of Representatives. It was gathered that the meeting is scheduled for 12noon on Tuesday. A source told BusinessDay that the meeting will be followed by another meeting with the leadership of the Independent National Electoral Commission (INEC) led by its chairman, Mahmood Yakubu. On July 24, the National Assembly adjourned for annual recess till September 25, 2018 but has come

under intense pressure to reconvene over pending national issues. Some of the pending issues include the approval of N242 billion virement request to fund the 2019 elections, approval of borrowings to fund the 2018 Appropriations Act and 2018 budget proposals of 64 government-owned corporations. The funds would enable the Independent National Electoral Commission (INEC) to commence preparations for the 2019 polls. Also pending are confirmation of appointments for the Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices and other related Offences Commission (ICPC), Assets Management Corporation of Nigeria (AMCON), Central Bank of Nigeria (CBN) among others.

L-R: Simon Hughes of International Banker Awards; Obeahon Ohiwerei, GMD/CEO, Keystone Bank; Sule Abubakar, deputy managing director, Keystone Bank, and Omobolanle Osotule, divisional head, marketing and corporate communications, Keystone Bank, when the bank was conferred with the “Best Innovation In Retail Banking Nigeria 2018” and The “Best Customer Service Provider of the year Africa 2018” at the International Banker Awards in London, recently.

Zenith Bank to pay N9.42bn as half-year interim dividend …represents 9% of N107.4bn pre-tax profit Iheanyi Nwachukwu

enith Bank Plc released its audited interim report for the half-year (H1) ended June 2018 with a proposal to pay an interim dividend of 30kobo per share amounting to N9.4billion from the retained earnings account as at 30 June 2018. The bank in H1’ 2017 paid interim dividend of N7.85billion being 25kobo per share. The proposed interim dividend represents about 9 percent of a record N107.358billion pretax profit for the review first half. The tier-1 lender’s financial scorecard for the H1 period shows it made a profit before tax (PBT) of N107.35billion in H1’18 period against N92.18billion in H1’17 representing an increase of 16.5percent. The bank’s Gross Earnings fell by 15.3percent to N322.20billion against N380.44billion in the corresponding first-half period of 2017. Investors raised bet on the

bank’s shares prompting a 10kobo gain, from N23.85 to N23.95 at the close of trading on the Lagos Bourse. If the proposed dividend is paid, the Bank will be liable to pay income tax in advance totalling N2.83 billion representing, 30percent of the interim dividend of N9.42billion. Only the shareholders whose names appear in the register of members as at close of business on August 17 will qualify for the proposed interim dividend as the bank closes its register of shareholders on August 20, to enable the Registrars prepare for payment of the interim dividend on August 24. Jim Ovia owns 2.946billion units or 9.38 percent of Zenith Bank shares while Stanbic Nominees Nigeria Limited accounts for 6.5billion units. The bank’s total market capitalisation is N751.946billion w i t h s ha re s o u t s t a n d i n g o f 31.396billion units. Investment analysts at Lagosbased Afrinvest expect a bullish stock market performance this

week “as investors anticipate positive H1:2018 earnings of bellwethers” and were positive on the performance of stocks on their equity watch-list which includes Zenith Bank Plc. Profit After Tax (PAT) increased by 8.5percent to N81.73billion, from N75.31billion in the corresponding first-half period of 2017. The bank’s Cost to Income Ratio (CIR) increased to 49percent from 45.2percent in H1’17; while Loan to Deposits declined to 73.1percent, from 75.5percent in first-half of 2017. Loans and Advances decreased by 10.9percent to N2.313trillion from N2.596trillion in H1’17; while deposits decreased by 7.9percent to N3.165trillion in H1’18 from N3.437trillion in H1’17. The bank’s Interest Income d e c l i n e d by 1 2 . 8 p e rc e nt t o N228.670billion in H1’18, down from N262.257billion in H1’2017. Loan Loss Expenses decreased by 77.1percent, to N9.72billion in H1’18, from N42.39billion in H1’17.

Explainer

How NNPC’s ‘under-recovery ‘short-changes Nigeria’s economic development DIPO OLADEHINDE

espite impressive oil prices in half year 2018 it’s worrisome that state owned Nigerian National Petroleum Corporation (NNPC) still continues to underperform, which was one of the basis 75 year old President Muhammadu Buhari’s won his 2015 election campaign with the view of modernising a company that’s been a byword for inefficiency and opacity since its creation in the 1970s. The Buhari-led government campaigned in 2015 on the bases of stopping all forms of subsidy payments on petroleum products however it has been secretly doling out billions annually as subsidy under the disguise of “Under-recovery” on petrol alone to oil contractors and their cronies in the NNPC. What is Under Recovery? According to online sources Arthapedia.com, Under-recovery is a term used in the Indian petroleum sector to denote the notional losses that oil companies incur due to the difference between the subsidised price at which the oil marketing companies sell certain products like diesel, fuel and kerosene and the price which they should have received for meeting their cost of production. For under-recovery to legally take

place, it must be supported by existing legal provisions, inappropriately for now, under-recovery is not recognised in Nigeria’s constitutional jurisprudence and any provision in any law purporting to grant such power to the executive cannot stand the test of constitutionalism. Cost to Nigeria’s economy BusinessDay analysis of the latest financial records of NNPC showed that from January 2018 to March 2018, the government has paid N139.334 billion for under recovery alone which is far higher than the capital allocation to majority of its key ministries and parastatals in the 2018 approved budget. For example, the amount spent from January till March of N 139.334 billion is 43.5 times higher than the total 2018 combined capital allocation of the country’s top 10 universities of N3.2 billion which include University of Ibadan N79million;University of Lagos N49 Million, University of Nigeria N1.3 billion; Ahmadu Bello University N439 million; Obafemi Awolowo University N44million; University of Benin N69Million; University of Jos N250million; University of Calabar N74 million; University of Ilorin of N6.7 million; and University of Abuja of N952 million. Also, the Under recovery deduction is 139 times more than the capital allocations to National Health Insurance Scheme (NHIS) of N 999 million, the

agency responsible for the health insurance of its over 190 million people. It’s also 5.9 times more than the capital allocation of N23.3 billion allocated to National Primary Health care Development Agency (NPHCDA) in 2018, the agency responsible for primary health care development in Nigeria. The under recovery money of N139.334 billion is also 1.35 times higher than the N102.901 billion capital allocation for the Federal Ministry of Education in the 2018 budget and 1.61 times higher than the N86.485 billion allocated to the Federal Ministry of Health for capital expenditure. Under recovery deduction is 0.93 times and 0.95 times the N149.198 billion and N147.2 billion capital allocations for the Federal Ministry of Agriculture and Rural Development and the Federal Ministry of Water Resources respectively in the 2018 budget. Solution The need to make NNPC curtail losses, improve transparency, attract investors, stimulate growth and increase government revenues have led to agitations for enactment of the reforms stipulated in the Petroleum Industry Bill (PIB) for the oil and gas sector. Continues on wwwbusinessday online.com

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Lagos tasks accountants N/Assembly warns against abuse of financial autonomy for state assemblies on ‘Smart City’ OWEDE AGBAJILEKE, Abuja

ational Assembly has urged state assemblies not to abuse the Constitution Amendment Act approving financial autonomy for state Houses of Assembly by approving jumbo allowances for state legislators. Clerk to the National Assembly, Mohammed SaniOmolori, said any infractions of the financial regulations on the part of clerks, legislators or presiding officers, would amount to corrupt practice. Speaking in Abuja on Monday at a Conference of State Houses of Assembly Service Commissions on Operating Within the Context of First Line Charge, he said the recent signing of the Constitution 4th Alteration Bill into law by President Muhammadu Buhari entailed greater responsibility for state legislatures. Declaring the event open, Sani-Omolori said financial autonomy for state legislatures was not an avenue for the legislature to become financially reckless. His words: “It is important to clarify that financial autonomy is not synonymous with the authority to operate outside the

ambit of extant financial rules and regulations. “Therefore, we must not misconstrue it as a license for Accounting Officers or Presiding Officers to embark on frivolous expenditure or approve ridiculous sums to State Legislators as jumbo allowances, wages and other forms of expenditure for themselves. “May I caution here that any infractions of the Financial Regulations on the park of a Clerk, a Legislator or Presiding Officer, will amount to corrupt practice. Corrupt practices on the part of a Public Official constitute betrayal of public trust and will have the net effect of damaging citizens’ confidence in democratic institutions.” Earlier, Ladi Hamalai, director-general, National Institute for Legislative and Democratic Studies (NILDS), told lawmakers that, “There cannot be effective financial autonomy without the establishment of a service commission.” She explained that for the legislature in the states to be autonomous, they must be fully responsible for all the affairs that concern them. With particular reference to the principles of separation of power, she said the legislature

could not be said to be independent if the executive arm was still in charge of employing and deploying staff members of the legislature. “We must all pass the Act establishing the Service Commission, it is part of the principles of separation of power,” she said. Reiterating the role of service commission in effective autonomy, the secretary of the National Assembly Service Commission (NASC), Olu Ajakaiye, said financial autonomy would be incomplete without administrative autonomy. He also called on state assemblies yet to establish State Assembly Service Commission to do so, adding that this would create independent bureaucracy for their day-today administration. He recalled that the period of financial dependence was very torturous as the legislature had to go cap in hand to the executive anytime they had a programme or project. He therefore admonished the lawmakers that they must also push for administrative autonomy and take over the management of their staff if they must reap the benefit of the financial autonomy recently granted them.

JOSEPHINE OKOJIE

agos State government has charged accountants in the state to upgrade their skills and knowledge of project management as strategic partners to join in the realisation of a ‘Smart City’ vision of the state. Folashade Adesoye, head of service, stated this yesterday, at the eighth annual public lecture of the Institute of Chartered Accountants of Nigeria (ICAN), Lagos State Public Service Chapter (LSPSC), in Lagos, themed: Infrastructural Renewal and Quest For A Functional Smart Lagos. According to Adesoye, the accountants’ quality and contributions in the area of the ‘smart Lagos’ initiative will go a long way to portray them and the professional body they represent as strategic partners of the state’s development and growth. “This is imperative in that we are duly involved in the financial management of the plethora of projects undertaken by our various agencies,” Adesoye, who was represented by Abimbola Shukrat Umar, accountant general of Lagos State, said. “ICAN, our unique Institute, therefore deserves all the accolades for turning our

professionals with integrity and orientations channelled towards Smart Lagos and making life more meaningful for its dwellers, as championed by the state governor. “Additional importance was accorded to the provision of specific infrastructure to really drive the noble objective. The bold effort of the current administration in Lagos state is seen to be achieving its goal in this regard due to the coincidence of purposeful leadership and prudent management of resources,” she said. She noted that the demographic status of the state and its attendant implications imposes the need to focus and embark on well planned and defined infrastructural renewal, in order to sustain its vintage position as the commercial and industrial nerve centre of the country. “It would therefore be appropriate to acknowledge the concept of Smart management of resources, to achieve smart objectives in Lagos State,” she further said. Also speaking during the event, Shuaib Babalola Badmos, chairman, ICAN, LSPSC, stated that the quest for a functional smart city with potential of becoming the third largest economy on the African continent was on course.

State, experts commit to action Paris Climate Change Agreement

takeholders and environmental experts have committed to developing a sustainable environment policy that will harmonise the agricultural, water and energy sectors in Edo State, and prep the state for the implementation of the Paris Climate Change Agreement. This was the resolution at the Stakeholders’ Meeting for Edo State Environment Policy, organised by the state government with support from the United Nations Industrial Development Organisation (UNIDO), at Government House, Benin City, the state capital. The UNID O national consultant, Eugene Itua, assured the state government of support in attaining the sustainable development goals, especially as it affects environmental issues. He said, “We are here to develop a more cohesive policy that will support every sector of the state, as the environment forms the bedrock of our society.” He noted that the stakeholders’ meeting is geared towards developing an environmental policy that would drive sustainable development.

Tuesday 07 August 2018

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Tax legislation, people are major investment Nigeria lags in retail banking market downsides in real estate sector - investors as only 2% can access credit facilities CHUKA UROKO

esides finance and the scourge of an emerging economy, tax legislation and the right people with the right skills are major downsides in real estate investment in Nigeria, investors in this sector say. The investors insist that their biggest challenge is in getting the right set of people to work with, because to do well, an investor in this sector needs people who are well trained, well-educated with high moral and ethical standards, and it is becoming very difficult to get people in this class. This challenge explains the ‘importation’ of labour from overseas and neighbouring West African countries including Togo, Ghana and Republic of Benin, who are in various building and construction sites as bricklayers, tilers, plumbers, site supervisors, engineers, etc, leading to capital flight in the economy. “If you get the right people, you do extremely well, and if you get the wrong people, you do badly. We have been very fortunate to have gotten the right set of people to drive our ambition and execute our dreams,” Paul Onwuanibe, CEO, Landmark Group, says, adding that training, nurturing,

CBN establishes ADR platform for mortgage banks, appoints CIBN as secretariat HOPE MOSES-ASHIKE

n a renewed effort to build public confidence as well as engender soundness and stability in the mortgage banking sub-sector of the Nigerian banking industry, the Central Bank of Nigeria (CBN) has established a Sub-committee on Ethics and Professionalism for mortgage bankers. The sub-committee, which is a self-regulatory body, is the Alternative Dispute Resolution (ADR) Platform/Financial Ombudsman for the mortgage banking sub-sector, and has the Chartered Institute of Bankers of Nigeria (CIBN) as the secretariat. The sub-committee will ensure the settlement of disputes between mortgage banks and their customers on one hand and among the mortgage banks on the other. In a statement, ‘Seye Awojobi, registrar/CEO of CIBN, lauded the establishment of the sub-committee, describing the development as “a noble initiative.” Awojobi, who also doubles as the secretary of the sub-committee, called on mortgage bank customers and the banks to take opportunity of the platform, which is free, to resolve their disputes with the banks and among themselves, respectively. Membership of the subcommittee includes representatives of the CBN, Nigeria Deposit Insurance Corporation, CIBN, Haggai Mortgage Bank, Abbey Mortgage Bank, Mortgage Bankers Association of Nigeria (MBAN), and Imperial Homes Mortgage Bank Limited.

rewarding and motivating them remain a fine balancing act in a very competitive marketplace. As an emerging economy, Nigeria is a place where there are huge regulatory limits, very little enabling and huge unplanned expenses on basic infrastructure expected from the municipal, state or federal authorities. This is why for everybody who runs a business in Nigeria, the challenges are similar. What differs is the size of the challenges and what resources and personnel each a person has to tackle them. Onwuanibe reasons that working within a system that occasionally appears punitive rather than supportive is a huge challenge; more so where there are no rebates for financing infrastructure costs that are outside your “patch.” “The regulatory environment is sometimes hostile and expensive to navigate; it is often unclear and bureaucratic,” he notes in an interview in Lagos. Tax legislation, as far as real estate is concerned, is fuelled by duplications and a bit too hard on a sector that is already reeling from issues including supply chain problems, which are compounded by an inefficient import platform. “I support and promote the payment of taxes but would like

to see a more transparent system where education tax benefits are seen in the education output, the same for health, IT and infrastructure taxes,” he says, adding, “as far as the real estate industry is concerned, a system where tax rebates are given to institutional developers based on creating employment, provision of local infrastructure and improving on the local streetscape, should be developed.” Nigeria is a special case when it comes to growth and development. This is why, contrary to what obtains in mature economies, Hakeem Oguniran, former managing director of AUC Property Development Company (UPDC), says an investor in this country has to be his own government. “You have to buy your own electricity generator, sewage plant, water treatment, provide your own security and improve the local environment around your business, by putting in place local infrastructure such as roads, beautification, drainage, etc. “None of these costs directly brings income and as such creates a major challenge to ensure your product is affordable. These things are often a distraction too as it shifts your focus from your core business,” he says.

… digitisation to bolster efficient lending to MSMEs JUMOKE AKIYODE-LAWANSON

i g e r i a , A f r i c a’s most populous nation, has a herculean task before it to speedily expand its retail banking market as report shows that the country is lagging behind with only 2 percent of its population having access to credit facilities, and less than 10 percent of these facilities available to consumers and MSMEs. This is ridiculously low numbers compared with other emerging economies. Miguel Llenas, managing director/CEO, Dun & Bradstreet Credit Bureaus, based in the Dominican Republic, said Nigerian banks need to stop focusing on offering credit facilities to public sector clients and a few corporate, which constitute only about 2 percent of the entire population, and start lending to consumers and Micro, Small and Medium enterprises (MSMEs), which are

the thrust of any economy. However, Indonesia provides 18 percent of its banking sector credit facilities to consumers and MSMEs, while Brazil has grown to 33 percent and South Africa far ahead of them all at 45 percent. Speaking at the CRC Credit Bureau industry forum themed “Growth & Innovation in Retail Banking: Building Sustainable Business Models” in Lagos, Llenas said, “You don’t develop a nation when you lend money only to corporate but to the people. Lending to small businesses that will engage in productive things that will grow the economy is more profitable than giving a $100 million to a large oil corporation.” Experts also advise that Nigeria adapts new global trends in credit scoring and embrace the mandatory IFRS 9 reporting system in order to grow its retail banking market to be at par with other nations.

Peter Ould, senior consultant, EMEA, Fair Isaac Corporation (FICO), said technology and digitisation were the way to go. “For efficient lending, automated processes to make decision in a matter of seconds and not days as well as the urgent need to make use of machine learning modules are very essential,” he said. Speaking at the forum, Tunde Popoola, managing director, CRC Credit Bureau Nigeria Limited, said Africa’s retail banking revenue had been estimated to grow to $53 billion (about N19.08 trn) by 2022. The figure represents 41 percent of the total banking revenues in the region in the next four years with Nigeria, South Africa among growth drivers. According to a 2018 African banking report recently released by McKinsey, the expected growth in revenues will come from South Africa, Egypt, Nigeria, Morocco, Ghana, and Kenya.

NSE to boost trading on exchange floor with X-Pay SOBECHUKWU EZE

n its effort towards supporting a cashless economy, ease of transaction and transparency, the Nigerian Stock Exchange (NSE) weekend launched the use of XPay as its e-payment platform from which payments could be made. The e-payment platform, which can be access by any smart devices, will enable users to conveniently make payments for products, services, events and trainings offered by the bourse, with features like invoice payments, intuitive products display and dynamic search functionality. The report from NSE homepage, Bola Adeeko, head, Shared Services Division, NSE, said, “We are thrilled to launch X-Pay, a solution that builds on our customer centric focus and our efforts to transform the Nigerian capital market into a more efficient model. “X-Pay reinstates our commitment to move towards cashless transactions and build a sustainable cashless ecosystem, while satisfying users’ preferences for self-serve bill payment options that is convenient and secure.” The X-Pay is a value-added service that accepts VISA, MasterCard Verve and UnionPay credit and debit cards. The platform aims to deliver a faster and safer payment method that is protected by best in class IT and card security features, in line with global best practices. “NSE is leveraging the power of innovation and digital technology to improve its efficiency and reduce the cost of transactions. With X-Pay, our stakeholders will now enjoy easy access to a wider catalogue of our products and services, be able to select and purchase from anywhere, at any time,” Adeeko said.

L-R: Segun Akanni, business manager, Sterling Bank plc, Igbogbo branch; Yemi Adebomi, group head, general internal services, Sterling Bank; Oba Semiudeen Orimadegun Kasali, the Adegboruwa of Igbogbo Kingdom, and Grama Narasimhan, executive director, retail and consumer banking, Sterling Bank, at the opening ceremony of the first and only bank branch in Igbogbo community by Sterling Bank, yesterday.

Mobilising Nigerians for development possibilities through exemplary leadership DANIEL OBI

nugu State governor, I f e a n y i Ug w u a n y i , says the only way to change the circumstances of Nigeria was for political and religious leaders across all layers of government and religious divides to be exemplary in their responsibilities to their followers. Ugwuanyi, who spoke at a thanksgiving service held at the Adoration Ministry of Enugu, to mark the recent Supreme Court judgment affirming his victory in the governorship elections, said it was only by living by examples worthy of emulation that leaders could effectively mobilise the people for peace and development.

The governor restated his commitment to exemplary leadership anchored on inclusiveness and transparency, and noted that although the demands of leadership might be overwhelming, especially in a challenged society like Nigeria, leaders will accomplish a lot more if they deliberately and positively mobilise the energy of the people towards a clearly defined goal. “I am here to thank and appreciate God because He alone provides the inspiration and motivation that has enabled us achieve what we have achieved so far. When we came into government, our goal was to ensure that the people feel our impact long after we had left of-

fice. I am happy that with the prayers of each and every one of us here, we are achieving what we have set out to achieve,” he said. While inviting those that went to court to challenge his 2015 election victory to join hands with his government to uplift the state, he also expressed his gratitude to the Ministry for its support and unceasing prayers for the success of his administration, noting that it was as a result of God’s mercies and special grace that the victory at the Supreme Court was achieved. He called on the people to sustain their prayers, especially as the 2019 elections gather momentum, and promised to sustain the

tempo of infrastructure development in all parts of the state, should his mandate be renewed by the people come 2019. Earlier during his Homily, the spiritual director of Adoration Ministry, Ejike Mbaka, extolled the virtues of leadership of Governor Ugwuanyi and pledged the c o nt i nu e d s u p p o r t a n d prayers of his Ministry towards ensuring success of the administration in the state. Mbaka described Governor Ugwuanyi as exemplary, especially in the inclusiveness of his government and the judicious way he had managed the resources of the state at a time of national economic slide.

Tuesday 07 August 2018

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Tuesday 07 August 2018

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Mass defections: Can PDP rise to the ball?

MAZI SAM OHUABUNWA OFR sam@starteamconsult.com

o very often, we pray for something. And sometimes when the payer is answered, a new problem emerges, that of managing the outcome. The problem is sometimes exaggerated when God decides to ‘embarrass’ you and give you more than you asked for or were expecting. There was this story of an Okada driver who had been praying for a child for seven years and eventually his wife became pregnant. Throughout the pregnancy he was full of joy, but could not afford to pay for a scan for his wife and so had no idea what was on the way. Because the wife’s stomach was very big, he suspected she could be expecting a twin. However on the day his wife was delivered, he was shocked to welcome six tiny children with their tiny fingers in their mouths gaping at him. He went through contradictory emotional swings. First, he was happy that God had answered his prayers. Then he looked at the tiny girls with their tiny fingers in their mouths and the man burst into tears and before you know it, he was wailing and as the hospital staff were gathering to find out what could make a man who received such bundle of multiple blessings from God to cry, wandering if it was a matter of tears of joy taken too far, the man took to his heels, abandoning his wife and the sextuplets. When eventually his relations caught

STRATEGY & POLICY

MA JOHNSON Johnson is a marine project management consultant and Chartered Engineer. He is a Fellow of the Institute of Marine Engineering, Science and Technology, UK.

wanda, a small landlocked country in Africa has a population of 11.9 million, a GDP of US$ 8.9 billion, and occupies a land area of about 24,670 Km2. Despite what is happening within the African continent in terms of political instability and poverty, Rwanda is already dubbed the “Singapore of Africa.” Attaining this potential greatness won’t be an easy task for the Rwandan authorities as current efforts must be sustained. Similarities between Singapore and Rwanda can however be found in the former which was abandoned by Japan after the Second World War leaving many Singaporeans jobless. Although Rwanda emerged from the 1994 genocide in which a quarter of its population died, the country is cur-

up with him and queried him on why he should behave in that despicable manner, he retorted that by asking why God should give a man blessings that could turn into sorrows? He said, he was finding it hard to take care of himself and his wife with his meagre earning from his Okada business and then to be confronted with six tiny children who on their first day on earth were sucking their fingers, indicating they were hungry and seemed to have voracious appetite. The only logical response in his circumstances was to run away from the unexpected windfall of six children. Of course his relations berated him and counselled the man to learn to accept every blessing and then learn how to deal with the consequences of every answered prayer. They tutored him to understand that every problem solved, results in a new set of challenges and so while praying or wishing for anything, we must always anticipate the new challenges that would naturally emerge. This story came back to my mind strongly last week as I pondered on the political events of the last couple of weeks. All of a sudden or so it seemed, the Peoples Democratic Party (PDP) has become a very beautiful bride attracting suitors in droves. At the last count, 15 Senators, 37 members of the House of Representatives, 3 State governors with their commissioners, most members of their state houses of Assembly and their local government chairmen and sundry political office holders have decamped from APC to mostly PDP. Did PDP pray for this turn of events? Yes, I believe they did. But did they imagine it would be a windfall? I do not quite think so. Are they adequately prepared to handle the challenges & consequences of this mass political gain? May be but most probably not.

So how does PDP handle all the myriads of conflicting self interests that have come with the defectors? I know that someone will soon tell me that the PDP umbrella is big or large enough to accommodate all. Yes that would be true when the rain is mere drizzle That then creates a big burden. The magnitude of the burden is amplified by the fact that the PDP itself is a party in transition, from instability to stability; a work-in progress in an effort to reinvent itself. After losing the national elections in 2015, it almost went into a tailspin. Its ‘game changer’ chairman, Muazu, who led the change from a ruling party to an opposition party after woeful defeat in the hands of APC, got himself changed. In a desperate bid to recover from the damage already suffered in the hands of the ‘game changer’ and APC, the party ran into the hands of a ‘one chance’ bus driver called Sheriff from Borno state. This guy did his best to finally liquidate the PDP. Like the case with the monkey, it was easy to give Sheriff the cup of leadership. But like ‘Ikiri’ it was very difficult to get the cup back from him. At this point many Nigerians had begun to sing the ‘Nunc Dimitis’ for PDP. That PDP came back to life after Sheriff is an indication that there are some people in PDP whose prayers God hears or it could be that God has not finished with PDP in Nigeria. The party must remain grateful for the way Senator Markarfi, former governor of Kaduna state, a man with a calm exte-

rior but an internal steel managed the party through its litany of court cases until the Supreme Court granted final victory to PDP. Of course the solidrock support of the PDP governors especially Nyesom Wike and Ayo Fayose; the former governors and the BOT held up Markarfi’s hand till victory was won. The job of reinventing the party finally fell on Uche Secondus. Realizing that this was like placing green snakes in one’s hand, Secondus seems to have approached this assignment with a lot of prayers, tact and steady steps. And now this windfall! My hope is that he will not do like the Okadaman father of the sextuplets who was overwhelmed by the blessings of God and took the least line of resistance- temporary escape from reality. Is there challenge with this gale of defectors from APC, who in the main should really be called returnees? Plenty! More than any chairman would wish for himself and perhaps more than any previous chairman has handled including the garrison commanders and cattle colonizers who used to eat pounded yam with OBJ. Before the defections, Atiku, Makarfi, Turaki, Ahmed and former Jigawa state governor Lamido were hassling for the PDP presidential ticket. With the defections, Kwakwanso and Tambuwal have joined the list. And I hear that Saraki is on the way! Who takes preference? Those who had remained in the party or the returnees? Headache! What of the defecting legislators at federal and state levels. What happens to the existing PDP aspirants? If we had any doubts in the past, we have now become all convinced that politics especially in Nigeria is essentially about self interest, not much about ideology since the ideology is same for most shades of politicians in Nigeria-stomach infrastructure. So how does PDP handle all the myriads of conflicting self interests that have

come with the defectors? I know that someone will soon tell me that the PDP umbrella is big or large enough to accommodate all. Yes that would be true when the rain is mere drizzle. But with the gale we are seeing, PDP may have to change their logo to a canopy or tarpaulin tent. My first free advisory is that the PDP CWEC, NEC & BOT must take a retreat in Accra Ghana or elsewhere in Africa for at least one full week and do three things. First, breathe down and pray, second to receive training and counsel on how to manage a windfall and the challenges, conflicts and contradictions that come with sudden good fortune. Third, develop a strategy on how to reintegrate the decampees and returnees while devising how to retain their current customers (members). They must see this as a serious challenge and make the investment and create the time to devise a proper strategy, not to act on impulse or use rule of the thump. They will minimize this challenge at a great risk. I believe this was one of the failures of APC in 2013/2014. They had no strategy to wield the party together. Also it will not be profitable to gain new customers and lose old and reliable ones. Nigeria has brought into the English lexicon a new phenomenon called ‘ des-camping’. It is different from ‘decamping’. Des-camping happens when a man decamps from APC today and decamps back to APC the next day or within a short period. And it is on our record that Senator Lanre Tejuoso from Ogun state is the first to practice the act in Nigeria.

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Rwanda: A rising star in Africa rently regarded as one of the stable economies in the continent of Africa. When it comes to ease of doing business, Singapore is one of the leading countries in the world. So also is Rwanda, which ranks 56th in the world and second in Africa to Mauritius. On the rule of law, work ethics and productivity, Singapore is in the forefront. The same goes for Rwanda, which is one of the few countries that have significantly improved its productivity and reduced corruption. In fact, Rwanda ranks 50 out of 170 countries in the corruption perception index, according to Transparency International (TI). Rwanda’s Kigali is reported to be “Africa’s cleanest city.” This comes at a price as the government has banned the use of non-biodegradable plastic bags since 2008. Rwanda has made some economic progress by creating four other big cities to stop population explosion in Kigali. Kigali’s Vision City and Lagos Eko Atlantic are among several smart city initiatives taking off in Africa. Today, majority of the world’s population resides in smart cities as the population grows over time. So building smart cities is increasingly becoming more important to cater to urban migration, according to experts. In addition, the country plans to modernize its agricultural sector. With plans to transition from an agriculturalbased economy to a modern hi-tech

based economy. Plans are underway to revolutionize tertiary education to graduate job creators, and not job seekers with focus on innovation and creativity especially Science, Technology, Engineering and Mathematics (STEM). A lot of progress has been made in tourism sector with the aim of attracting foreign direct investors. So sustaining an average of 8-10 percent GDP growth in the next 20-30 years would definitely make Rwanda “the Singapore of Africa” by 2050. The motive force for the socio-economic transformation of Rwanda is in the unity and peace of the country as citizens go about their lawful and legitimate businesses. Safety and security of the people are given top priority as policy makers in Rwanda are aware that without security of lives and property there can be no meaningful development. The ultimate objective is to have a country with sustainable economic development occasioned by steady economic growth. At every stage the citizens have agreed to stay united, peaceful, and be accountable. They have vowed to stay true to themselves not forgetting where they came from. They aspire to create a better Rwanda for future generations without forgetting their “ugly” history. They have pledged to stay away from identity politics by remaining focused on cooperation and exchange of constructive ideas instead of mudslinging each other for the sake of being “democratic.” Rwanda’s version of democracy is working well for the country.

The citizens of Rwanda are striving to create a politically and economically-free Rwanda that relies on their abilities only. It’s a country capable of producing majority of the goods and services for itself. Rwanda is also involved in trade with her neighbors and the rest of the world with focus on more exports than imports. The country has a target to be financially free and independent by 2025, and accordingly, has cut down aid dependency from 86% in 2000 to about 17% in 2018. The citizens of Rwanda led by Paul Kagame have realized that to be the “Singapore of Africa,” the country has to be without aid. This goal looks rather ambitious but the country has for several years been promoting tourism and investments. Within 7 years, Rwanda has “tripled the share of people connected to the grid, and brought electricity to 80% of schools, 76% of health centers and 94 % of administrative centers.” These statistics spurred this writer to write this article. Besides, the story in Nigeria’s power sector is different. Currently, Nigeria is gloating in darkness. Nigerians are paying the price for corruption in the power sector. Corruption has kept Nigerians in darkness for years with grave consequences on economic activities. Nigerian businesses expend about N5.0 trillion annually on importation, fueling and maintenance of generators, according to the Rural Electrification Agency. It’s time for the federal government to declare a state of

emergency in the power sector in order to have a prosperous nation of almost 200 million people. A government in charge of almost 200 million people needs to think before taking actions always. Without accountability and transparency, no foreign direct investor will be willing to invest in the power sector because of investment risks. A functional power sector is critical to Nigeria’s economic survival. Nigeria can rise above current circumstances and achieve success provided the political leaders are passionate and dedicated about their responsibilities. President Kagame has advised the citizens of Rwanda not to sit back and relax. So they have chosen to constantly work and improve themselves on both micro and macro-economic levels. Rwanda has survived the genocide, and now they live together peacefully. They want to live together and prosper. The government of Rwanda has concentrated efforts on manufacturing, agro-processing, mining and energy, financial services and ICT. Others are health services and education, real estate and construction, and above all tourism for branding and marketing. The country’s political leadership is fully aware that modernizing these industries will increase the GDP, create more jobs for a healthy and more prosperous Rwanda.

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[#StopTheKillings]Would foreign banks be beneficial for Ethiopia? (3)

RAFIQ RAJI “Dr Raji is chief economist at Macroafricaintel. He was previously an Africa Economist at Standard Chartered Bank, London, UK. (Twitter: @ DrRafiqRaji)”

Expertise, capital and jobs CB Group, Kenya’s largest bank, which opened a representative office in Addis Ababa in 2015, and has branches across East Africa, is one of many African and indeed foreign banks likely to make a foray into the Ethiopian banking sector. Clearly banking on the new reformist prime minister, it announced in late June the country could open its banking sector in about two years’ time. There would certainly be a lot of opportunities for newcomers. According to the central bank’s website, there are currently19 local banks in Ethiopia.That is about 6 banks for every 1 million Ethiopians. This is clearly inadequate; albeit this is not necessarily an intelligent measure, especially when you consider that the Commercial Bank of Ethiopia has about $18 billion in assets and a customer base of about 16 million. A couple of foreign banks have representative offices in the country but are not licensed to con-

duct plain vanilla banking services; that is, collect deposits and issue loans. The reformist Ahmedgovernment has raised hopes that this might change, however. It begs the question, though, about whether such a move would be beneficial. The government, old and new, is particular about financial inclusion. Incidentally, even in African countries where there are more liberal policies, financial inclusion remains a challenge. According to the World Bank, financial inclusion “means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.” The key question then is whether allowing foreign banks to participate in a country’s financial services sector engenders financial inclusion. The evidence is mixed. In fact, there is probably not much that they do in this regard. There are a few good stories, of course. For instance, some foreign financial firms specialise in microfinancing. But they are usually a drop in the ocean and not necessarily cheaper or sophisticated than local ones. The Ethiopian government is right to prioritise financial inclusion. According to the World Bank, it is “an enabler for 7 of the 17 Sustainable Development Goals (SDGs)” and reckons it to be crucial to poverty alleviation and shared prosperity. To this end, it has set a global goal of Universal Financial Access (UFA) by 2020, just two years away. Would this goal be reached

The key question then is whether allowing foreign banks to participate in a country’s financial services sector engenders financial inclusion. The evidence is mixed. In fact, there is probably not much that they do in this regard by then? Probably not. But much progress is being made. More relevant here is whether foreign commercial banks help with this goal. Quite frankly, financial inclusion cannot be the main reason for allowing foreign banks in to a country. Their advantages relate to the new capital they bring for the use of local and foreign firms doing business in the country. They also allow for more seamless trade. It is much easier to do business with a bank in-country as well as abroad for international trade, for instance. But pushed rightly, foreign banks can help with such idealized goals as financial inclusion. They certainly are able to deplore the latest technologies in this regard. That is as far as most would go, though. Brick and mortar branches add on unnecessary weight. And increasingly, when foreign banks make a foray to another country, they rely on local deposits to fund local loans. Their real advantage for a country are big ticket transactions. It is easier to get financing for mega projects

by firms if foreign banks operate in the country. True, while foreign multilateral development financial institutions do provide some funding, commercial ones not backed by their country’s government rarely do. Besides, there is a need to differentiate between foreign banks that are from other African countries and those outside the continent. Although, it is the latter than tend to get all the attention, the former have their advantages too. For instance, if a Kenyan bank is able to do business in Ethiopia, the gesture is expectedly reciprocated for an Ethiopian one in Kenya. But since a Kenyan bank might have no more heft than an Ethiopian one, it is not surprising that the more capable western and eastern foreign banks are the ones much sought after. In any case, South African banks remain dominant on the continent. The largest, Standard Bank, is excited about the Ethiopian opportunity, certainly. With a Chinese bank in its shareholding, it is increasingly the go-to-bank for transactions with the Asian nation. At least, it likes to portray itself as such. That is probably where the opportunity is. That is, pan-African banks looking to expand to Ethiopia. Otherwise, Western banks have been cutting back on their African exposure. Barclays, a British bank, is a recent example. Curiously, even these Western types might be interested in an Ethiopian venture. Investment banks are certainly keen. A capital market is virtually non-existent. Technology and expertise would probably be the key benefits.

For these to be realised, the Ethiopian government would need to liberalise the sector as quickly and as widely as possible. For if there is any whiff of uncertainty or hesitation in whatever liberalisation policy is announced, there might not be many foreign banks willing to take the risk. Potential investors would also be looking to see a more institutionally-directed and sustainable shift towards reform. Currently, it could be rightly said that there is a one-man risk. Were Prime Minister Abiy Ahmed to leave the scene, what then? And judging by the relative slow pace planned for banking sector reforms, Mr Ahmed may not be in office long enough to make a meaningful impact. Thankfully, there is an almost existential need to attract foreign capital. The perennial foreign exchange shortages would in due course spur even more protests as jobs become increasingly scarce and commodities more expensive. Nothing short of comprehensive reforms of the banking sector would do to resolve the problem. • The author, Dr Rafiq Raji, is an adjunct researcher of the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. This article was specifically written for the NTU-SBF Centre for African Studies

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Addressing education inequity in Nigeria: A pre-requisite for poverty alleviation

FOLAWE OMIKUNLE Folawe is the chief executive officer of Teach For Nigeria, a social enterprise focused on developing leaders who will drive the movement towards educational equity and excellence in Nigeria

ccess to quality education for all is an imperative for any nation that wishes to make any significant progress in reducing or eradicating poverty among its citizens. Recently, the world poverty clock, a web tool produced by World Data Lab indicated that Nigeria has now overtaken India as the ‘poverty capital’ of the world with nearly 87 million Nigerians purported to be living in extreme poverty and about half of the entire population living on less than $1:90 a day. This is surely a sad turn of events for the people of this great nation, so abundantly blessed with human and natural resources. Sadly, Nigeria’s poverty indices have been terrible for decades and successive governments have come up with diverse poverty alleviation measures to stem the gruesome tide, but poverty

is a stubborn thing that will not be easily carried away in a kekenapep or a wheel barrow or some of the other ineffective poverty reduction initiatives that have been embarked upon in the past. Indeed, multiple factors often contribute to a community or nation becoming impoverished, and conversely, many factors are often responsible for pulling a people out of poverty, of which education plays no small part in this mix. Access to quality education for all is an imperative for any nation that wishes to make any significant progress in reducing or banishing poverty from within its borders. It is important to understand the intertwined relationship between poverty and education and how each reinforces the other to perpetuate a vicious cycle of poverty. Although we measure poverty in monetary terms, poverty is not merely the absence of money, but is in fact, mostly a function of an individual’s low earning potential and lack of opportunities that enhance human capabilities to lead an acceptable standard of life; which is where the role of education becomes vital. Simply put, education has a direct correlation with income. The higher the level of education, the less likely the person is to fall below the poverty line. The Organization for Economic Co-operation and Development (OECD), Education at a Glance 2017 report found that 85% of young adults (aged 25 to 34), on average,

have attained upper secondary education in OECD nations; it is, therefore, no surprise that OECD nations are also the most prosperous nations in the world. Education remains the most potent and formidable tool for breaking the cycle of poverty and exclusion, and the more we act like this is not the case and allow our children, in their millions, go uneducated, the more our people will sink deeper into poverty. Unfortunately, the quality of education in Nigeria has continued to deteriorate, and access to what poor education we have remains an insurmountable hurdle for millions of Nigerian children. We know that over 10.5 million Nigerian children are out of school. It is also the case that most of the children who make it to school are not learning and nearly 6 out of 10 Primary six pupils in Nigeria cannot read at all. Consequently, the World Economic Forum’s In this fast-changing global economy, fueled by technology and globalization, it is now, more than ever, important for Nigeria to invest in human capital development (education) to ensure that every one of our citizens has the skills necessary to thrive. All of us - the Government, the private sector and well-meaning individuals - must take appreciable steps to ensure that the right measures and investments are made to improve the quality of education for every Nigerian from pre-primary school to tertiary level, otherwise Nigeria will continue on this path towards an increasingly untenable and unjust

future with a youth population that does not have the necessary foundation to contribute meaningfully to the growth of the economy, but have incredible capacity to do damage to society. Putting bandages on the current broken system is not working. To solve this crisis, it is important to note that there can be no single solution to a problem as systemic and complex as educational inequity. We will require many integrated solutions by diverse actors coming at the problem from different directions to meaningfully address this crisis. The private sector has a critical role to play as nation building is not a task for the government alone, substantial investments must be made to support the actions and plans of the government to achieve the standard of education that we deserve. We need to deploy our brightest minds to the education sector and channel more of our society’s most outstanding, well-educated and capable human resources against this problem and foster their leadership as a force for change inside and outside the system. The country also needs to develop a strong, collaborative network of determined leaders who understand the root causes of the challenges facing our public education system and are committed to challenging them with innovative solutions. Fortunately, citizens are already taking direct action in this regard via Teach For Nigeria.

Teach For Nigeria (TFN) is focused on developing a movement of leaders across the nation who are committed to ending educational inequity. In the short term through a two-year Fellowship, TFN recruits Nigeria’s most outstanding university graduates, existing teachers and young professionals of all academic disciplines to teach as full-time teachers (as Fellows) in high-need schools, in poor communities. Through this experience, our Fellows gain exposure to the realities of Nigeria’s education system and begin to identify their role in building a wider movement for educational equity. In the long term, TFN supports its alumni – equipped with the experience, conviction, and insight that comes from leading children to fulfil their potential – to be a force for change, working from across sectors to expand educational opportunity. In 2017, we deployed our first cohort of 45 Fellows to teach in 25 high need schools in low income communities across Ogun and Lagos state. This year we are expanding to the northern region and scaling our program across Lagos and Ogun state, by placing an additional cohort of 200 Fellows to teach in high need schools. We plan to be present in all six geo-political zones in Nigeria by our 10th year with a view to making our vision a reality, that one day every Nigerian child will have access to an excellent education.

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Tuesday 07 August 2018

Against the growing impunity on the rule of law

n insidious effort is afoot to pull the carpet on Nigeria’s democracy through a consistent pattern of the abuse of the rule of law. The rule of law is one of the pillars of democracy. Despite this, the federal and some state governments are working hard to diminish this vital element without regard for the fearful consequences. Top on the list of infamy on this matter is the man who should stand vanguard for the rule of law. The Minister of Justice and Attorney General of the Federation, Abubakar Malami, SAN, has through actions and utterances shown a careless disregard for what he should protect. Mr Malami has demonstrated a Janus face on the matter: he disobeys court orders and then sermonises on the imperative of the rule of law. The Federal Government has consistently denied former National Security Adviser Col Sambo Dasuki (rtd) his freedom despite five court orders. Malami issued a defence that confirmed the worst fears about the government’s attitude to the rule of law. “What I want you to know is that issues concerning law and order under Muhammadu Buhari are sacrosanct and obeying a court order is

compulsory” he was quoted as saying. Even so, the Federal Government would continue to disobey court orders on Dasuki. Malami’s justification? The Federal Government can violate the rights of an individual for the broader public good. “However you should also know that there is a consensus world over that where the dispute is only between individuals, then you can consider the issue based on the instant situation. But if the dispute is about an issue that affects an entire nation, then you have to remember that government is about the people not for only an individual. So you have to look at it from this perspective. If the issue about an individual coincides with that which affects the people of a nation and you are now saying the government did not obey a court order that infringes on a single person’s rights. Remember we are talking about a person who was instrumental to the deaths of over one hundred thousand people. Are you saying that the rights of one person is more important than that of 100,000 who lost their lives?” The Justice Minister, on the other hand, quickly ordered compliance with the order of the Supreme Court in the matter of the dispute over the chairmanship of the Nigerian Football Federation. The justification was the need to

comply with the dictates of the rule of law. In Benue and Imo State, there are ongoing disregard for procedures and rules in the matter of impeachment of state officials. The Federal Government deployed the police and security forces to enforce the closure of the Benue State House of Assembly. The plan is to get eight members of the Assembly, less than the statutory requirement, to impeach Governor Samuel Ortom. A similar abuse through the use of the security forces is unfolding in Imo State on the matter of the impeachment of the Deputy Governor, Prince Eze Madumere. For more than two years, the Federal Government locked up a journalist, Jones Abiri. In court on August 2, Government failed to provide evidence nor justification for this treatment of a citizen. There are many other instances. We reiterate. The rule of law is a cardinal principle of democracy. It demands that everyone observes the laws of the land. Everyone!!! As the one with the foremost authority in the nation and the enforcer of laws, the onus is on the government to lead in the observance of the rule of law. Nigeria is a signatory to various statutes of the United Nations. The United Nations General Assembly at a High-Level Meeting on the Rule of Law at the National and

International Levels on September 4, 2012 averred that “human rights, the rule of law and democracy are interlinked and mutually reinforcing and that they belong to the universal and indivisible core values and principles of the United Nations”. The UN says defines the rule of law as “a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards. It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in the application of the law, separation of powers, participation in decisionmaking, legal certainty, avoidance of arbitrariness and procedural and legal transparency.” Nigeria must avoid a regress to the rule of man where government officials have the discretion to choose which laws to obey, which statutes to follow and what rules with which to comply. Despite various shortcomings, Nigeria is better off under democratic governments than under military rule. Strengthening the rule of law is one sure way of ensuring we remain a democracy.

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Tuesday 07 August 2018

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Indigenous software firm out with cloud-based free POS for retailers … For business good management Stories by Daniel Obi Media Business Editor

adesoftlogic, an indigenous technology firm that designs software operation solution for various organisations and retail shops, has introduced ESOPOS, a cloud based point of sale, POS, free software for SMEs. The solution allows business owners to assess their services and sales process from wherever they are. With the App, the entrepreneurs can monitor sales, inventory, employee activities, manage customer data and prints and sends receipt to customers. Faith Imade, CEO of Madesoftlogic, told BusinessDay in Lagos that she is delighted on the opportunities the ESOPOS software provides Nigerian business-

es who have not embraced technology in the day to day running of their business due to cash constraints, poor power supply and lack of basic technology skills. “We discovered that one of the major reasons most small businesses avoid using POS is because of the cost of the software to run the operation and also poor power supply. We decided to come up with a solution that addresses this challenge. We are confident that our solution will boost productivity for SMEs. “ESOPOS allows you to effortlessly manage all your business processes from pricing to inventory management to analyzing sales and vendor performance to managing offers. It gives a real time business overview from any location, all from the cloud using any device, be it a smartphone, tablet, laptop or a desktop com-

puter. All ESOPOS features come for free without registration or subscription fee” she added. “If you have a shop and you are not always there but there is a sales person, from wherever you are, you can log into your account through Android phone and monitor sales so far the sales person is equally using ESOPOS to enter the sales” Imade said the new solution is part of her company’s efforts aimed at supporting Small and Medium Scale Enterprises (SMEs) in Nigeria regarded as catalyst for economic growth. According to her, the application also has a social market place feature that allows a network of businesses to connect online, meet new customers and increase sales via ESOPOS Social Marketplace. “The market place allows every shop using Esopos to relate with each other. For instance, a customer enters a shop and the shop does not have the particular item asked for, the owner of the shop can quickly check other shops on the network within the vicinity, find out the price and get it quickly for the customer, may be with little price increase”. She said businesses can log on to www.esopos.com to start using the ESOPOS solution stating that the company is also releasing campaigns on how to use the application. It can equally assist organizations set it up at free cost.

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Galaxy Backbone, Melvic Gold marketing agency, others emerge winners in West Africa Innovation Awards 2018

nderscoring their i n n ov a t i v e a p proach to doing business in subSaharan Africa, Galaxy Backbone, Infinity Trust Mortgage Bank, LSDPC, Crystal Finance, Brands Optimal, Melvic Gold marketing agency, FHA Mortgage, CAP Plc, others have been announced as winners in the West Africa Innovation Awards 2018. The colorful award ceremony which took place in Lagos recently witnessed chief executives officers of different organisations sharing their brand experiences and challenges of the year under review. The awards kicked off with Tunde Owoeye, CEO, of Phoster Communications, commending the organisers for putting up a reward platform for businesses that move out of their comfort zone to do

things differently. Speaking on the processes that led to eventual winners, the organizer of the Awards, Abidemi Adesanya said the process has been very rigorous. The panel of judges did a wonderful job by scrutinizing all the entries “ We have 20 categories and all the winners are deserving of the awards going by what they have achieved in terms of technology deployment, new products and others,” he said, According to him, “We are innovative; in fact, if not for innovation I don’t know what would have become of our private sector. Nigeria is the most innovative market in Africa apart from South Africa,” he said In term of expansion and new market, he added, Nigeria businesses have their foot prints across Africa and other markets.

Chuks, who emerged first and second runner up respectively, and gott N300, 000 and N200, 000 worth of training grant respectively, alongside a laptop and three trays of 33” Export Lager Beer each. Other seven top contenders also won consolation prizes of a laptop and three trays of “33” Export Lager Beer each. They are Sifa Asani Gowon, Gift Wogu, Idowu Addison and Adaora Nzotta. Others are Anuforoh Prosper Obum, Hannah Onoguwe, and Chukwudi Obila. Over 160 entries were received and judged by a jury of 3 acclaimed writers - Toni Kan, Pelu Awofeso and Olabisi Deji-Folutile. They shortlisted the best ten, from which the winners were later chosen.

Rotary Club of Akowonjo launches N20m appeal fund for community projects

otary Club of Akowonjo in Lagos State has launched a N20m appeal fund to Nigerians to enable it execute long standing community development project of the club. Speaking at the investiture of the 3rd female president and the installation of 33rd Board of Directors of the Rotary Club of the club in Lagos last weekend, the Inspiration President, Rotarian Bisi Taiwo, lauded the foresightedness of the club’s leaders and commended the work of Rotary which they established in the Akowonjo area of Lagos thirty three years ago in line with Rotary’s six areas of focus which included Basic Education and

Verdant Zeal group appoints Oladipo Adesida as COO

erdant Zeal Marketing Communications Group, an emerging marketing and communications conglomerate, has appointed Dipo Adesida as its pioneer Chief Operating Officer (COO) effective from August 1. This announcement was made by the Executive Vice Chairman of the organization, Tunji Olugbodi on behalf of the Board and Management of Verdant Zeal. Adesida appointment is seen as one of the strategic moves to advance the operational innovation of the group. By this appointment,

Adesida would have oversight functions for creative content, operational excellence, new market development and digital transformation of the group. “We are delighted to elevate Dipo Adesida to be the Pioneer Chief Operating Officer of the Group. He is a veteran of the Iconic Verdant Zeal class of 2007 who has been immersed in the workings of the organization. This advancement is also a clear indication of the new spirit of adequate recognition and reward system as the organization continues to expand its footprint across Africa.

Pen-down For Friendship Competition produces winners keogu Chinemerem Chibuikem, a blogger has emerged the star prize winner in the Pen Down for Friendship competition instituted by “33” Export Lager Beer to reward Nigerian journalists and bloggers as part of activities marking the 2018 World Friendship Day. He was announced the winner of the star prize of N500,000 worth of training grant, a laptop and other prizes including trays of “33” Export Lager Beer in the award presentation ceremony held at the Eagles Club, Surulere, Lagos last weekend. Other winners in the competition, which was open from 11 - 27 July, 2018, are Adeoye Emmanuel Aanu and Ben

L-R: Jury Member, Pen Down For Friendship Competition, Bisi Deji-Folutile Pelu Awofeso, Portfolio Manager Mainstream Lager And Stout Brands NBPlc. Emmanuel Agu, Star Prize Winner Pen Down For Friendship Competition Ikeogu Chinemerem Chibuikem, Raw Material Development Manager NB Plc ,Uzodinma Onuoha And Head Jury, Pen Down For Friendship Competition Tony Kan At The “33” Export City Of Friends Concert In Lagos.

Bisi Taiwo

Literacy; Disease Prevention and Treatment; Peace and Conflict Resolution; Water and Sanitation; Maternal and Child Health and Economic and Community Development. According to Rotarian Bisi Taiwo and in accordance with these areas of focus, she has identified Youth Empowerment: Training in various vocations; Expansion of the Library cum Completion of the ICT Project at Abati/Rauf Aregbesola Primary Schools and Adult Literacy Programme at Shasha area of Akowonjo amongst many others as her major areas of concentration in her 2018 - 2019 project year. Consequently, the Rotarian President appealed to wellmeaning Nigerians to give generously for these projects noting that “as we have started the year with new innovations through your support, I want to ask you not to relent in the work of Rotary for according to Paul Harris the founder of Rotary: “whether we do much or little in the way of public work, it is apparent that there is a large and unique field of usefulness in Rotary” adding that “the community needs us and I want to request that you give of your resources”.

BUSINESS DAY

o delight the ‘King’, MultiChoice, foremost video entertainment and Internet Company last week reduced GOtv price but, surprisingly offered more value for the ‘king’, the customer. The company announced a reduction in the price of GOtv Max, which is one of the packages on its digital terrestrial platform, from N3,800 to N3,200 which is 15.79 percent reduction starting August 1, 2018. In addition to the reduction, MultiChoice said it is introducing more live football from other leagues to the GOtv Plus and Max packages. Specifically, it said GOtv Plus customers, will now have access to over 220 live games per season, with two games each from the Premier League, La Liga, and Serie A. GOtv Max customers who are the kings will enjoy the best of La Liga and Serie A games, select Premier League games and 2 additional Champions League games. This is over 330 games per season. For the customer who is going through economic strain, this is a welcome development. Analysis of MultiChoice

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When GOtv reduces price for the ‘King’, but boosts value Daniel Obi action of offering the customer more for less price is possibly predicated on the skittish and jumpy behavior of the ‘king’. The customer is always driven by price and value proposition. Though, price is sometimes considered insignificant when products are uniquely valuable but MultiChoice has leveraged the economic situation to offer price and value at the same time on Gotv Max as a convincing and motivating factor for subscribers. Subscribers are expected to be hooked and attracted by this reduction to renew their subscription. This development is also anticipated to create traction for football, movie, news and documentary loving new customers to the platform. Football game is another

religion in Nigeria. Though, the Nigerian government has not given it the necessary attention which has led to dilapidation of some national stadia. However MultiChoice, with its DStv and Gotv is leading the pack in giving Nigerians football entertainment no matter where it is played. MultiChoice is

determined to dominate that scene, hence the reduction in Gotv price and offering more football content. Today, foreign teams and their players are more popular among Nigerian football fans. Even brands easily associate with foreign teams. They are filling the void.

With more operators in Nigeria’s pay TV market, competition is getting tougher. Ordinarily, the consumer’s natural behavior is to have options but GOtv, with array of offerings including music, entertainment, news, documentary, children channels, religion among others, has positioned itself as one-stop shop. Over time and with entry of new players, Nigeria’s pay TV market has become dynamic with innovations that signal survival of the fittest. Gotv appears not to be losing sleep in the game it knows how to play. Managing Director, MultiChoice Nigeria, John Ugbe explained that the price reduction has been effected to attract more ‘kings’ and widen their access to the great content on the GOtv platform. “Our goal is to give more Nigerians access to the great content on our platform without compromising on

quality or variety. With the new price on GOtv Max, our customers can now pay less to enjoy more.” The price reduction, according to an analyst is strategic for MultiChoice. The company recently hiked the tariff on DStv bouquets. Premium package moved from N14, 700 to N15, 800. Customers on Compact Plus from N9, 900 to N10, 650. The Compact moved to N6,800 from N6, 300. The Family package also increased by N200, from N3, 800 to N4, 000. Access package is N2,000 from the N1, 900. With reduction in GOtv price, MultiChoice is strategically encouraging the DStv subscribers who may be saddened by the price hike to move to GOtv and still enjoy almost the same value. However, the reduction of price on GOtv is a welcome development for the ‘king’ who appreciates good things with less price.

Why we introduced Mamba Energy Drink into Nigerian market - Titilola Poised to satisfy the lifestyle needs of health-conscious Nigerian consumers, Mamba Energy Drinks Ltd recently launched a new energy drink into the market. General Manager of the Company, Titilola Adedeji in this interview states the rationale for the launch of the new product in to Nigerian market. She also talks about the company’s plans to push the product and other economic issues. Excerpts. Your company has just launched Mamba Energy Drink into the Nigerian market. What informed this decision? s a matter of fact, the official unveiling of Mamba Energy Drink took place recently at an elaborate media parley. The exercise signaled our intention to make available to the Nigerian consumers our unique energy drink as a consumer delight. Our new energy drink is unlike competitors that are readily available in the Nigerian market as Mamba Energy Drink has been carefully and expertly formulated and exclusively

too for the Nigerian and Africa consumers. Mamba is configured to align with the lifestyle choice of healthconscious consumers, because it is low on caffeine and taurine content. It is more than just the typical energy drink. It contains citric-acid, an oxidant which enhances skin regeneration, smoothness and perfection. Why did you choose to start your market penetration in Lagos? We believe Lagos is the nerve point of Nigeria at large, once we conquer Lagos, we will effortlessly dominate the rest of Nigeria. With competition in the Energy drinks market,

We work round the clock to ensure we stay affordable and readily available. Like we said Mamba is for the African market so we understand how price sensitive the market is

Titilola Adedeji

how do you intend to break through? The quality of our product will always speak for us alongside our marketing strategy.

What is your brand’s competitive edge and USP? MAMBA is a premium energy drink with a fine fragrant taste made specifically for the African market. Our

winning formulation with reduced caffeine and taurine contents makes it suitable for all (excluding children & pregnant women) Are you importing the products presently or have you started local manufacturing? We are currently importing but will eventually start local manufacturing. We are passionate about growing the naira. We are hopeful that we can commence local production in the next 5 years at the latest, because we are particular about the quality of our product, we will take our time to ensure once we move production locally the quality is consistent. What is your view on the latest increase on exercise duties of some products like alcohol, tobacco by the federal government? It affects us, but if it will better the state of the economy assuming these tariffs are used properly, we on our part will try everything to ensure we stay competitive and consistent with our quality. How are you going to

cope with attaining desired sales in view of current consumer low purchasing power? We work round the clock to ensure we stay affordable and readily available. Like we said Mamba is for the African market so we understand how price sensitive the market is. What is your brand’s positioning plan? We intend to position Mamba Energy drink in our consumers’ minds as an energy stimulant/ booster that keeps you alert all day. Our product is premium and would therefore appeal to the elite, but the best part is that its pocket friendly and therefore the mass market can also experience the brand and aspire for a premium quality lifestyle. With this formula Mamba energy drink will grow to become the go-to brand for energy drinks in Africa. We intend to achieve this through high energy, mind stimulating, fun ATL & BTL engagements for our customers, & exciting incentives for our trade partners.

Tuesday 07 August 2018

BUSINESS

COMPANIES & MARKETS

DAY

Lufthansa Group 2018 half year revenue up 5.2%

Pg. 16

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

Neimeth stock up 31% in one week after strong Q3 report

African companies could free up additional $33.5bn of working capital

L-R, Alex Goma, managing director commercial, PZ Cussons; Peter Okoye, brand ambassador Olympic Milk, and Kalyan Bandyopadhyah, regional category marketing director- Africa, food and nutrition, PZ Cussons, during Peter Okoye’s contract renewal with Olympic, at PZ Cussons Office, Lagos

new financial year November of every year. Thus why other firms in the industry might be in their 2nd quarter or half year of operation, Neimeth books will be for a nine month or Q3 period. The firm has a one year return of -30.38 percent, according to data compiled by Businessday, with its share price touching its peak at N0.96 around 18th January 2018, but currently trading at N0.55 yesterday. Analysts said the recent result posted by the firm might increase investors’ appetite for the firm’s share thereby making the firm’s share price to rally. On what could have triggered the company’s profit for the quarter, Johnson Chukwu, the MD of Cowry Asset Limited said the fall in the company’s finance cost as well as administrative expenses aside the growth in its turnover, brought about an improved performance for the company. “The finance cost was as a result of either the company paying back its loan or the revision of their interest cost. This shows the company’s efficiency in cost. Hence, for the company to finance its debt, money was raised from the capital market but at a lower rate,” “Furthermore, there is a high tendency for the recent profit of the company will have positive impact on their share capital.” Chukwu said in a phone response to BusinessDay.

FCMB UK deepens inclusiveness with personal, business banking proposition

Deploying edge data centres will improve users’ online experience – MDXi

MICHEAL ANI

arely one week after Neimeth International pharmaceutical, a player in the Nigerian healthcare space declared its nine month unaudited financial result showing recovery, its shares has moved up by 31 percent at the Nigerian Stock Exchange. The firm’s share price that was trading as low as N0.42k, the lowest this year gained a 31 percent (13 kobo) rising to N0.55k at the end of trading Wednesday august 1, 2018. Given that the firm has outstanding shares of 1.73 billion, the market cap also increased

HOPE MOSES-ASHIKE

CMB Bank (UK) Limited, an independently incorporated subsidiary of First City Monument Bank Limited has introduced its Personal and Business banking proposition in London. The development follows the latest variation of permission obtained by the United Kingdom-based Bank to extend its services to include retail (investments) for individuals and business enterprises. This is in addition to the existing wholesale deposit taking activities, foreign exchange, treasury, corporate banking and trade finance offerings to corporate and institutional customers of FCMB Bank (UK) Limited. The variation of permission was granted by the Prudential Regulation Authority, the financial services regulatory body of

by 18.9 percent from 726 million to N863.253 million as at close of market Wednesday. “What this signifies is that investors are beginning to react to the positive result by the firm, Dolapo Ashiru a stockbroker said, and hence they are adjusting to their predictions based on the firms result”. The drug maker saw a positive growth reporting a profit after Tax of N31.7 million in the third quarter of 2018 after it recorded a loss of N63.4 million in the same period last year, according to figures obtained from its nine month unaudited financial statement. Revenue generated by the company also saw a 45.2 percent increase from N314.9 mil-

the United Kingdom, and it became effective on June 8, 2018. The Personal and Business banking proposition of FCMB Bank (UK) Limited is anchored on the Bank’s London leverage and Africa Awareness. This will enable the financial institution deliver its promise of being the Corporate and Private Bank for African-oriented entrepreneurs, investors and professionals across all their banking needs. Ladi Balogun, group chief executive of FCMB Group explained at the ceremony that the launch of FCMB Bank (UK) Limited’s personal and business banking proposition is as much a statement of substance as it is one of intent. According to him, “our successful UK platform has proven to be of great importance to the Nigeria stock broking and international trade finance activities of FCMB Group. Leveraging our

lion in 2017 to N457.4 million in 2018, with 99 percent of the revenue generated from pharmaceuticals, while 1 percent came from animal health. The finance cost also decreased by 45 percent to N18.9 million from as high as N35 million in 2017 Of this revenue figure, 98 percent came from its Nigeria arm, while 2 percent of the revenue generated was from the Ghana segment of the company. The firms Earnings per share (EPS) which is seen as a portion of the company’s profit allocated to each outstanding share of common stock currently stands at -0.24 Neimeth Pharma starts a

deep networks in Africa’s biggest economy, the importance of a London presence to many of our Personal and Business banking customers, and technological innovation, we welcome this opportunity to meaningfully serve more of our customers and grow the value of our UK franchise”. Also speaking, the CEO of FCMB Bank (UK) Limited, James Benoit, said, “with the extension of its services, the Bank is now able to receive deposits from both customer segments as well as provide them bank loans to enable them meet their financing needs. The deposit products on offer include current, notice savings and fixed deposit accounts at competitive rates; while its lending products include Buy-to-Let Mortgage Loans enabling target customers to acquire a piece of London and purchase property to include in their investment portfolios.’.’

FRANK ELEANYA

DXi, West Africa’s leading data centre provider, said users’ online experience can be greatly improved by leveraging the opportunities offered by the growing edge data centre ecosystem. The edge data centre ecosystem is enabling players exchange traffic on the African continent. Gbenga Adegbiji, general manager of MDXi was speaking at the Data Centre Dynamics Conference in Johannesburg, South Africa. He explained that leveraging the ecosystem will significantly lower costs, improve performance of the existing content ecosystem and enable new technology use cases in Africa such as electronic gaming, internet of things (IoT), artificial intelligence (AI) and big data.

f suppliers were to offer African companies payment terms of 30 days after delivery of goods and services, rather than demand payment in cash in advance, this could release more than 33.5bn dollars of additional working capital to be put to more productive use in 2018, according to Euler Hermes. In 2015, Euler Hermes estimated that if a payment term of 30 days were to be granted on the share of imports paid in cash (cash in advance), then it would free up over USD 40bn of working capital for African companies. Since then, the trade picture has changed; a commodity shock hit resourcerich African countries and slashed their exports revenues, reducing further their capacity to finance imports even further. This contributed to the -22 percent fall in African import values from USD 800bn in 2014 to $ 623bn in 2016. “Taking into account the new trade picture, our estimate stands at $ 33.5bn of working capital freed up for African companies in 2018. Lower imports combined with lower payment terms (64 percent of imports are

He also noted that Africa boasts some of the biggest opportunities including a population of 1.3 billion people, the fastest growing digital consumer market, estimated to reach 600 million within the next seven years and 6 to 7 per cent GDP growth by 2020. Already, local data centres have found innovative ways to deal with Africa’s most pressing problems including power generation through by-passing traditional transmission and distribution bottlenecks with direct grid connections. There is also the existence of local colocation facilities to meet hyperscale requirements. These activities have also earned recognition of the global community with awards being given to the high performers. Some of the awards include Payment Card Industry Data Security Standards (PCI-DSS), Uptime Institute’s Tier III Constructed Facility Certification (TCCF),

paid in advance) explain this result,” Euler Hermes chief economist Ludovic Subran said. Euler Hermes expects imports to grow at a +8% annual rate in this region. Should suppliers lengthen their payment term by 30 days, this would free about $ 45bn by 2020. The parallel development of trade finance is key to seize this great opportunity for the African continent. This huge amount of money wasted each year is a clear argument to develop domestic production capacity, since imports come with a cost due to low DSO. Here are a few examples. Oil exporters (Algeria, Nigeria, Angola, Libya…) account for $ 14bn wasted in cash vaults as a result of short DSOs, with Algeria ($ 5bn, 3 percent of GDP) at the top of this ranking. Republic of Congo for instance would free up the equivalent of 11 percent of its GDP (USD 0.9bn) with longer DSOs. In fast growing East African economies, greater DSOs would also be a nonnegligible growth boost. In Kenya for instance, it would free $ 1.6bn (2 percent of GDP), and about the same amount in Ethiopia.

as well as ISO 9001 and 27001 certifications. “With Africa’s largest economy (90 percent of Anglophone West Africa’s GDP), third most populous nation by 2050, and 8th global internet user country with 45 per cent of Africa users, Nigeria is a natural and strategic destination for West Africafocused hyperscale players to offer real-time data processing at the edge,” Adegbiji said. He further noted that with robust Internet Exchange Points (ISPs) and access via local interconnection points, data centres such as MDXi provide a platform for different networks to directly interconnect with other operators and exchange traffic in Nigeria to guarantee lower bandwidth costs and improved margins for content owners and OTTs, quicker access to more content providers and carriers as well as lower latency and improved experience for local users.

BUSINESS DAY

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COMPANIES & MARKETS

Lufthansa Group 2018 half year revenue up 5.2% IFEOMA OKEKE

u f t ha n s a G ro u p increased its t halfyear revenues by 5.2 percent in 2018, despite the impact of the first-time application of the IFRS 15 accounting standard. The airline reported total first half-year revenues amount of 16.9 billion euros, broadly in line with the prior-year level. Traffic revenue for the first six months totaled 13.2 billion euros, which excluding the first-time impact of IFRS 15, represents an increase of 7.0 percent. Adjusted Earnings Before Interest & Taxes (EBIT) – the key profit metric of Lufthansa Group – was roughly at its prior-year level at EUR 1,008 million. Adjusted EBIT margin amounted to 6.0 percent (compared to 6.1 percent in the first half year of 2017). Net income for the period also remained broadly stable at EUR 677 million (prior-year period: EUR 672 million).

“The prime features of Lufthansa Group’s development in the first half of 2018 were strong growth and a simultaneous improvement in our unit revenues. Achieving both simultaneously is a significant success. At our Network Airlines, we were able to more than offset the added burden imposed by higher fuel costs through structural cost reductions and improved results by 26 percent. “Without the integration costs at Eurowings, which we willingly accepted to further strengthen our market position in Europe, the Group’s result would have grown”, Ulrik Svensson, chief financial officer of Deutsche Lufthansa AG said. The airlines’ performance was the key driver of the Group’s results in the first half year. Some 67 million passengers were carried, a new record for the period. Capacity, volumes sold and seat load factor were also all at new record highs. The biggest driver here was the Network Airlines, with both Lufthansa German Airlines and SWISS making positive earn-

ings contributions by achieving not only higher unit revenues but above all substantial reductions in their unit costs. First half-year fuel costs rose by EUR 216 million to EUR 2.8 billion. The increase is attributable to both the higher volumes and a higher fuel price. An increase in the costs incurred through delays and flight cancellations had a negative impact on first half-year earnings. The main causes of these irregularities were strike action and the infrastructural inadequacies of Europe’s aviation systems, such as the current capacity problems at the continent’s national air navigation services providers. Extreme weather (such as storms) also adversely affected flight operations far more than usual in the first half-year period. The impact of these trends was felt by all airlines, not only the Lufthansa Group. However, Group earnings for the period were also depressed by the expense of integrating the aircraft formerly operated

by Air Berlin into the Eurowings fleet – a process which is unprecedented in its scope within the European airline industry and took longer than originally envisaged. Despite these adversities, unit costs were reduced by 0.6 percent in the first six months – thanks primarily to efficiency enhancements at the Network Airlines, which benefited from the comprehensive modernization of their aircraft fleets, the collective labour agreements reached last year with large parts of the workforce and a streamlining of operational processes and management structures. As a result of all these positive influences, first half-year unit costs at the Network Airlines (excluding currency factors and fuel) were 2.1 percent below their prior-year level. The Network Airlines’ focus on sustainable cost reductions and revenue growth was reflected in their earnings results for the first half-year period. Reported total revenues declined 3.9 percent to EUR 10.7 billion.

GSII opens integrated e-commerce platform for creative, emerging sectors

eorge Street Investment International (GSII) has introduced an e-commerce platform named ‘Profundo’ to cater to the needs of emerging sectors, improve customer experience, while boosting access to new products and services. According to the firm, the new platform was designed, re-engineered/deepened to change the face of e-commerce in Nigeria and Africa at large, by introducing an online solution with functional capabilities of optimising the market experience of players in the selected segments. “Driven by the absence of an exclusive online integrated market hub for emerging products and service providers, as well as creative interiors for homes, hospitality, offices, kitchen, lounge, arts and crafts galleries, George Street Investment International (GSII) will be unveiling Profundo (which means DEEP!), which was broadly designed as an online market hub to provide

SON raises concern over unfortified imported sugars HARRISON EDEH, Abuja

Suleiman Zarma Hassan, minister of state for power, works and housing, (r) inaugurating Royal Engineered Stones Ltd alongside management of the company, Lawal Idirisu, executive chairman (m), and Abdulrahim Bello, admin. manager (l) during the 12th Abuja International Housing Show in Abuja recently.

La Casera engages consumers on healthy living

he La Casera Company (TLCC) as part of its drive to deepen consumer engagement has enjoined Nigeria to imbibe the habit of healthy living through fruit consumption. Roland Ebelt, managing director, TLCC said the idea of encouraging healthy living, in the way of fruits, to family, friends and the needy in Nigeria is in line with the company

strategic effort to foster peace and offer comfort to many in our country today. According to Roland, “Nowadays fruits become an essential part of our daily life. We should include at least an apple in our daily diet as part of our whole healthy diet. Reduces the risk of heart disease, strokes. This will prevent certain types of cancer. Fruits always provide nutrients for health and for maintaining

our body. He further said that as a brand, La Casera is always looking at new ways to delight all consumers and so we put a lot of creative consideration into our brand. “We ensure that we ahead of the curve, while still retaining the high quality we have always been known for. This is the reason we have the highest percentage of real apple juice in the market”.

“We want to be able to give someone a La Casera in place of a real apple, and there wouldn’t be too much of a difference. That is the aim, to stay creative and innovative under the strictest of conditions. We recently launched our full option new bottles in Mini -35cl, Midi -50cl and Maxi - 60cl sizes, to ensure that everyone can enjoy premium apple at affordable prices for every pocket,” he said.

the first-of-its-kind exclusive and preferred online placement for products and services in the selected sectors,” the firm said. “It will also serve as a social channel for special broadcast relating to unique programmes and services. “By this insightful measure, the Nigeria retail e-commerce industry comes under the disruptive influence of a new brand that balances the act in setting the experience equilibrium between the vendor and the consumer using the PeakEnd Rule. “In other words, Profundo brings to the market a profound change of viewing customer experience from just a ‘consumer standpoint’ to a total customer experience involving the vendor as well, via a strategic combination of quality, trust and reach,” the firm explained. GSII plans to formally unveil the Profundo online market hub solution in an official unveiling programme, scheduled to hold on September 1, 2018 in Lagos.

sita Aboloma, the director General of Standard Organisation of Nigeria has directed a nationwide enforcement operation aimed at ensuring that sugar brands obtainable and consumed in Nigeria are fortified with Vitamin A and devoid of any harmful chemicals as stipulated in the Nigerian Industrial Standards (NIS) and World Health Organisation (WHO). The director general said the raid is part of measure to curb the spate of unfortified and impure sugar in the Nigerian markets; this is even as he revealed that the raid would ensure safeguard of the health of the nation while protecting local manufacturers from the influx of cheaper substandard sugar from abroad. Abuloma said in a statement issued on Thursday that the enforcement raids which were carried out simultaneously across the country, swooped on various markets and locations on the lookout for importers and dealers of impure and unfortified foreign manufactured sugar in the country, According to a statement, the nationwide enforcement was based on reports collated by the Operations Directorate of SON from surveillance of the 36 states of the federation which indicated that most of the imported brand of sugar found in our markets are suspected to have been smuggled into the country, unfortified with the required micro nutrient of Vitamin A and also contain

impurities. The statement pointed out that the commercial city of Lagos where different teams from SON raided different locations, of particular interest was the raid by the Surveillance and Intelligence Monitoring (SIM) Unit of SON to Iddo Lagos, where outlets were found not only stocking imported sugar suspected to be unfortified, but also re-bagging sugar into sacks of a popular Nigerian brand for sale to unsuspecting buyers. Speaking during an interview after the raid the representative of the DG SON and the Coordinator of SIM, Isa Suleiman stated that the sugar products put on hold and evacuated were Altmogiana, Usina (Bazan) and Usina (Santaisabel) brands with Brazil as the country of origin. He further disclosed that some shops were found with large quantities of empty sacks branded with the name Dangote suspected to be used for the re-bagging of these imported brands of sugar in very unhygienic environments and aside the health implications, this amounts to counterfeiting which is an illicit act of sabotage sanctionable by the law. According to him, although some shops were found to be stocked with sugar branded as Dangote Sugar and the shop owners claiming they are original, the organisation will not take it for granted but subject the samples drawn for further laboratory analysis in order to confirm their claims and if found to be untrue the perpetrators will be brought to book and their products destroyed.

Tuesday 07 August 2018

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BUSINESS DAY

COMPANIES & MARKETS Simba Agric assures Kano farmers of readiness to deliver high-quality tractor Adeola Ajakaiye, Kano

imba Agric and Power Products Industries Limited, an Indian company has assured farmers in Kano of its readiness to deliver high- quality tractors to enable them deepen their production capacity. Simba is involved in a partnership with Kano farmers under a scheme packaged for the purpose of mechanizing agriculture practice in the state, has assured of its readiness to deliver high-quality tractors. In addition to delivering high quality tractors, the company says it is also prepared to provide after sale service to its ‘FarmTract’ tractor brand, in order to ensure the durability of all the units of tractors that would be purchased from the company. Akshay Talwar, head of operations of the company gave the assurance in a speech

delivered on Monday in Kano, during the official flag –off of some of the tractors set to be supply to farmers participating in MECA-NIRSAL T4F scheme being supported by the Kano State Government. Talwar said that his company which has also always been in the forefront of deploying the best global brand of tractors recognized the need to offer tractors manufactured with the latest technology to its customers. Giving an insight into the capacity of the company to deliver on its promise, the head of the company revealed that the company remains one of the leading tractor manufacturers in India, as well as a highly acclaimed global bran. He also assured the farmers and Kano State Government that the company has in store enough spare parts in it Lagos, Kaduna, Abuja, Maiduguri, Yola, Sokoto, and Kano branches, to meet the need of its customers. In his address, Faruk Rabiu

Mud, chairman, All Farmers Association of Nigeria (AFAN), disclosed that Kano state required over 5000 tractors to fully mechanize the agriculture sector in the state. He expressed the readiness of the farmers in the state to make the scheme sustainable through adequate and timely repayment of loan facility that will be extended to them under the programme, in addition to taking adequate care of the tractors. In the same vein, I.B Gashinbaki, group country director, MECA, a consultant firm behind the partnership commended the companies participating in the scheme for their commitment to it successful take off. Abdullahi Umar Ganduje, Kano state governor, had during the occasion said his administration is providing the sum of #132 million for the take –off of the tractor acquisition programme, as a way of ensuring that programme succeeded.

Digital asset platform to enable Nigerians buy petroleum below pump price IFEOMA OKEKE

igerians now have an opportunity to tap into the digital asset economy in order to solve their basic energy needs at very moderate prices. This is coming on the heels of a new initiative being pioneered in sub-Saharan Africa, by Coin For All, (CFA), an emerging digital asset platform, determined to lessen the energy challenges in Africa, especially Nigeria. With the digital assets so acquired, Nigerians will be able to buy petroleum products like petrol, gas and kerosene at prices below the official pump price at partner fuel stations. This scheme will however be explained to members of the public during a free-entry seminar/conference coming up on Saturday, August 11, 2018 at Presken Hotel, Alade Street by Airport Bus Stop, Ikeja, Lagos at 10 am. Speaking during a press conference to announce the product, Faith Titus, the chief executive officers, CFA said: “CFA identified that energy is one of the biggest challenges in sub-Saharan Africa, and has gone into

partnership with some designated fuel stations in the country where Nigerians with CFA’s digital asset can purchase products below the official rates. With lower energy rates, cost of production will reduce as well as prices of goods and services. That is why we are going about to sensitise people on the need to tap into this opportunity”. Participants at the conference will be treated to freebies like T-shirts and branded notebooks as well as the opportunity to subscribe to CFA’s on-going ICO (Initial Coin Offering and earn ICO’S referral commissions. CFA coin’s overarching vision is to be the ‘’leading and preferred digital utility currency of choice in Sub-Saharan Africa for the purchase of petroleum and gas and for general use by the overall digital community’ In a period of rapid digitization of payments and finance, the CFA coin aims to bridge the financial and digital divide in Sub-Saharan Africa that continues to undermine the potential for small businesses to grow and for consumers to reap the benefits of digital inclusion and innovation. The coin will ensure this through strategic partnerships

and by focusing on providing financial inclusion for marginalized sections of society to gain access to petroleum/ gas products at comparably lower prices. Consequently, this will assist in creating an efficient system of managing financial transactions via the blockchain application. D or is O jueder ie, cofounder CFA said the oil and gas sector is one of the boom sector in Africa and a product that we cannot do without right now, hence everyone needs petrol for their cars or generators, gas for cooking, and kerosene for burning amongst others. “Here comes an innovation that gives u the ability to make money with petroleum resources or be a consumer at a minimal rate accessing these products using CFACoin. This is an innovation this is giving you an asset that increases in value like Gold at the same time u can use this asset to access petroleum products at a minimal value or less the value u getting this projects for. “This is investing or leveraging on the hottest commodity in Africa through CFACoin. And u can access this commodity with our coin from all our partnered fuel stations in Africa,” Ojuederie said.

Business Event

L-R: Salisu Jimoh, chairman, Ijede Local Council Development Area; Monsurat Idowu, beneficiary of the empowerment programme for Women organised by First City Monument Bank (FCMB); Diran Olojo, Group Head, Corporate Affairs of the Bank; Sherifat Ashiru, another beneficiary; Michael Ologunoye, Chief Operating Manager, Green Energy Biofuels Limited, and Bodunrin Gimba, president, Khatmena Gimba Foundation, during the presentation of bio-fuel stoves and gels to the beneficiaries at Ijede in Ikorodu, Lagos.

L-R: Bolaji Abimbola, managing director, Integrated Indigo Limited; Israel Opayemi, guest speaker, and Segun Mcmedal, chairman, Lagos Chapter, National Institute of Public Relations, during a presentation of certificate to the guest speaker shortly after his presentation at a lecture organized by Lagos chapter of National Institute of Public Relations held in Lagos on Friday.

L-R: Yaw Nsarkoh, executive vice president, Unilever Ghana and Nigeria; Funso Akere, chief executive, Stanbic IBTC Capital; Segun Olugboyegun, chief executive officer, JOF Nigeria, and Nitin Paranjpe, Unilever Global Foods president, during Nitin’s meeting with Unilever local partners in Nigeria

L-R: Otisi Diana, acting commercial manager, Ikeja Commercial Territory, Nigerian Bottling Company Limited (NBC); Chinedu Nwoye, winner of ‘My Million Don Land’ initiative; Christy Uhomabhi, area manager, GRA, Nigerian Bottling Company Limited, and Frank Edoho, Ace broadcaster and TV Show host, during the presentation of one million naira reward to the winner on the ‘My Million Don Land’ market activation initiative organized by NBC in Lagos.

BUSINESS DAY

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Tips & Talking Points

Harvard Business Review TALKING POINTS Out of the Loop 81%: In a recent global study, 81% of female respondents say that they feel socially excluded from most after-work gatherings that men go on. + Brain Drain 52%: Research from the Center for Talent Innovation reveals that 52% of qualified women working in the science, technology, engineering and math industries eventually leave their jobs. + The Limits of the Digital Revolution 6%: The Organization for Economic Cooperation and Development reports that information technologies account for just about 6% of gross domestic product in advanced economies. + Take to the Cloud 16: On average, companies today utilize 16 software-as-a-service applications, according to a survey conducted by BetterCloud. + Bowing Out $2 billion: In 2016 Uber sold its China operation to Didi Chuxing after having reportedly invested $2 billion in competition to overtake Didi.

To start a paid speaking career, start speaking for free

any professionals would love to speak at conferences and conventions. If you’ve established yourself as a capable speaker, you may be able to find gigs that pay well. But when you’re first starting out, speaking for free is a perfectly reasonable strategy: It will let you practice and hone your skills, and it will get you in front of audiences who could hire you in the future. There might be other, more tangible benefits too, such as the opportunity to

travel. Some conferences will cover your travel costs even if they don’t pay a speaking fee. Once you’re offered a talk, consider asking the organization to film it so that you can use the video to find new clients. Ask for a testimonial for your website, too. Even if you aren’t being paid, speaking connects you with people who care about the same things you do, which is an invaluable experience.

(Adapted from “How Much Should You Charge for a Speech?” by Dorie Clark.)

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(Adapted from “4 Ways to Deal With a Toxic Co-Worker,” by Abby Curnow-Chavez.)

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or studying abroad?

ne toxic person is all it takes to destroy a highperforming team. If you’re the team leader, dealing with a toxic employee is (relatively) straightforward: Acknowledge the effect their behavior is having and hold them to a higher standard. But what if the person is your peer? First, have a candid conversation with them. Explain the effect the behavior is having on you and on the group. Next, be a role model for how you want the team to act. Make collaboration and open dialogue the standards for the group. And finally, talk to your boss. Suggest that the team hold a meeting to address challenging behaviors and conflicts. This session should not be a ruse for taking the toxic team member to task. It should be an authentic interaction in which team members discuss one another’s perspectives and increase accountability around behavior.

Help an employee return smoothly from medical leave Keep a difficult conversation on track

hen an emometimes, ployee redespite turns from your best a medical intenleave, it’s their mantions, a difficult ager’s job to help them conversation ease back into work. The veers off course. process starts during Maybe your counthe leave: The manager te r pa r t ’s e m o should check in with the tions are making employee a few times so small-scale ways to test that they don’t feel cut right away. And consider how progress hard, or your options? To handle off from the office. When you can create a welcoming the conversation value complexity, consider they’re ready to return, experience for their first day k e e p s d r i f t i n g how you can help people reach out to come up back, whether it’s meeting away from the topic at hand. Asunderstand your decision with a transition plan, them at the door or having sess the situation by taking a deep once you make it. Espe- and think through the flowers and a card waiting breath, mentally popping out of cially when the decision precise details. For ex- for them at their desk. Once the conversation — as if you’re a involves trade-offs that will ample, ask the employee they’re back, check in with fly on the wall — and objectively affect others, you’ll want how they want their re- them more frequently than looking at what’s happening. You to be as clear as possible turn announced, and you normally would, to make might even describe it to yourself (in your head): “Every time I about your intentions. talk about any schedule sure they feel supported. bring up the sales numbers, he changes they need. Make (Adapted from “How to sure the transition plan (Adapted from “How to Wel- raises his voice.” Next, state what Get People to Accept a is phased, since the per- come an Employee Back you’re observing in a calm tone: Tough Decision,” by David son may not be ready to From Medical Leave,” by “It seems as if whenever the sales numbers come up, you raise your Maxfield.) return to 100% capacity Anne Sugar.) c 2017 Harvard Business School Publishing Corp. Distributed by The New York Times Syndicate

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Don’t let a toxic peer take down your team

Make a tough decision easier to accept

very leader has to make hard decisions that have consequences for their organization, their reputation, and their career. When you’re faced with a tough call, consider two things that make these decisions so difficult: uncertainty about the outcome and value complexity, the notion that any choice you make will negatively affect someone. To reduce the uncertainty in a decision, first consider the costs of not acting, and then think carefully about your options. Have you made any assumptions that are holding you back? Are there low-risk,

Tuesday 07 August 2018

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voice. Can you help me understand why?” Then suggest a new approach: “If we put our heads together, we could probably come up with a way to move past this. Do you have any ideas?” Returning the conversation to its original goal may be enough to get it back on track.

(Adapted from the “HBR Guide to Dealing With Conflict,” by Amy Gallo.)

BDTECH

BUSINESS DAY

Tuesday 07 August 2018

In association with

Accenture charts ways for cloud integration in business operations reskilling legacy staff to function in the cloud environment. And because cloud-based innovation projects often shift direction, leaders need effective ways to gauge progress quickly and accurately. Only then will they be able to mitigate issues as they occur.

Stories by JUMOKE AKIYODE-LAWANSON

hrough research, Accenture, a leading global management consulting firm that provides strategy, consulting, digital, technology and operations services has identified that many companies attempting to add cloud to a legacy organization are unprepared for the challenges ahead. Its findings suggest that the stakes for such unpreparedness can be high, as a failed cloud transformation can disrupt organizations and imperil business objectives. As companies reinvent themselves for the digital age, business owner and leaders need to consider how (and whether) to integrate their established legacy operations with the sleek new promise of their emerging agile organizations. They need to retain the institutional knowledge on the legacy side while simultaneously developing new skills for the future. Achieving this goal will compel them to operate in new and perhaps challenging ways, and success will require them to adopt the cloud with conviction, which requires an unconditional commitment to innovation. A survey of nearly 300 IT professionals’ reveals that two of the top reasons cloud implementations fail are a lack of clearly identified business objectives for migrating to the

cloud, and poor planning. Clearly, it is critical that the business and technology management are aligned on specific objectives and develop a detailed plan to adopt and embrace cloud technology. Integration success requires conviction During this critical transition period, a tepid approach or lack of strong operational alignment (behavior change) can cause a project to stall. It is critical to have a plan that ensures the legacy organization recognizes the magnitude of the changes ahead.

A recent survey asked 140 executives what problems their private clouds faced. Over 30 percent – by far the largest response – reported their failure to change their operational model as the primary stumbling block. Clearly, agile clouds need agile processes, and people can either become big supporters or ominous roadblocks on the trail to integration. Operationally, companies need to reconcile their legacy standard operating procedures with the cloud organization’s organic agility. In many cases, that means introducing multi-speed IT strategies and

Learning from cloud-based transformations For example, Netflix began life as a dot-com DVD innovator, offering a more convenient service than its bricks and mortar rivals by allowing customers to rent movies online and then receive their DVDs in the mail. The company’s legacy DVD mail business dropped from 20 million subscribers in 2010 to 5.3 million in 2015. By embracing agile resources, Netflix replaced them with 65 million cloud-enabled, live streaming customers worldwide. In the process, the company radically transformed itself from a movie rental competitor to a cloudfocused player that competes with global media players worldwide. In making this move, Netflix proved it could support a new business with a new operating model without facing major legacy conflicts. It split its DVD mail and streaming services in 2011, indicating a desire to let each grow and operate independently. Netflix is currently a leader in overthe-top content streaming, and in 2013 became a content production company, creating its own TV enter-

tainment that it streams to users. To integrate or not? Leaders face a series of key strategic decisions regarding whether the cloud business and organization nests in the legacy one, and if so, when does it make sense to separate them (if at all)? If integration is feasible, leaders need to explore their options in this area. Possible solutions include absorbing the cloud business into the legacy one, which then becomes “new” by osmosis, or rotating legacy talent through the separate cloud business unit to learn the new approaches and take them back to their original jobs. In either case, companies must learn how to operate in a multi-speed way. Critical choices ahead As more companies embrace the cloud to enable innovation and drive profitable growth, they need to make a clear-eyed assessment regarding how to position the cloud organization in the larger enterprise, and what needs to happen, when, to ensure its success. While the new cloud business may infuse agility, the organization might need to reengineer the legacy business, perhaps spinning off or streamlining certain areas while bolstering others. Likewise, the new cloud business could evolve into several different operational endstates – an agile standalone cloud play, for example, or an efficient and effective hybrid.

Cosmos Constellation emerges winner at //Re:Code Nigeria hackathon

eam Cosmos Constellation (C-Stell) emerged as winners of the //Re:Code Nigeria Hackathon 2018 themed “Data Hack” which was sponsored by Access Bank Plc in partnership with Africa Fintech Foundry (AFF). The team created a system to minimise demurrage contributed by human errors by creating a system that uses optical character recognition to fetch text from scanned documents. It also provides notifications to minimise demurrage and offers the tracking of shipments across ports. Coming first out of 115 multiple teams of talented developers, designers, problem-solvers, out-of-thebox thinkers, and code magicians

that participated in the event. Team C-Stell addressed all the problem statements for the //Re:Code Nigeria Hackathon 2018, which included; How financial technology can address supply chain challenges (from finished goods to retail) in the FMCG sector to drive profitability and growth. It also addressed the problem involved with leveraging bigdata analytics, identity management and behavioral analysis to identify customers’ needs, reduce risk, exposure, provide investment advice & lending services. And finally, the problem of financial inclusion for the Agric and related sectors with a focus on improving credit scoring and financing opportunities for small and medium scale operators.

Participants were grouped into 26 teams to provide solutions to these three problem statements, and pitch their solutions to the judges within a time frame of 48hours. The winners went home with a cash prize totalling almost N5million among other prices. In second place was Team Ace, with a solution called TrackIt. The team created a system that not only views and gives up to date tracking of shipments, but can check analytics and provide information of all payments accrued and shipments in process or honoured in real time. Team BAT (Building Awesome Technologies) came third. The team created a smart assistant which leverages Imputed data set, Unsuper-

vised Deep-learning algorithm and Internet of things to aid and guide the users in making informed decision while keeping engagement simple. Speaking at the event, Adeleke Adekoya, AFF’s business solutions architect said, “At AFF, we are known to lead and deliver a comprehensive digital strategy and be at the forefront in providing innovative technological solutions leading to significant improvements in customer satisfaction. We organize Hackathon to bring indigenous technological solutions to the global stage, and showcase Nigeria’s strides and solutions in the Fintech and technology space as this will rapidly unlock new economic opportunities and accelerate

our development as a nation.” Victor Etuokwu, Executive Director, Access Bank Plc said for Fintech to thrive in Nigeria, a framework that encourages innovation and ensures consumers are protected must be in place. “At Access Bank, we have a track record of technological innovation and as a leading Bank in driving digital banking in Africa. We seek to create new opportunities in emerging markets by providing a platform designed to inspire and challenge innovators and entrepreneurs, as such we have partnered with AFF and leveraged on our global platform to further foster innovation, drive entrepreneurship as well as economic development,” he stated.

BUSINESS DAY

Tuesday 07 August 2018

BDTECH

E-mail: jumoke.akiyode@businessdayonline.com

Data that speaks – Takes from the data analytics and visualization workshop Stories by JUMOKE AKIYODE-LAWANSON

ith the evolution of the 4th industrial revolution, the need to be skilled in the area of data analytics and visualization cannot be over emphasized. Data has transformed the world we live in. It is the fuel for success for any size organisation across all industries. Insights from data help you innovate and make smarter decisions. Being data-driven is about having the power to explore data and make predictions ensuring that the appropriate and accurate data required to answer critical business problems is collected, analyzed and presented effectively to drive maximum value. Data analytics and visualization is an expanding field concerned with analyzing, modeling, and visualizing complex high dimensional data. It offers tremendous opportunity for career growth. This involves exploring the use of the latest tools and analytical methods to interpret and communicate findings in ways that change minds and behaviors. Having seen its relevance, African Girls in Science and Technology Initiative (AfroTech Girls) introduced another Educate series, Data

L-R: Adeola Shasanya; co-founder, Afro-Tech Girls, Ijeoma Nwagwu; member of the Afro-Tech Girls board of advisors, and Morenike Johnson; co-founder, Afro-Tech Girls, at the recently concluded ‘Data that speaks’ workshop held in Lagos.

That Speaks, a Data Analytics and Visualization workshop using Tableau. “Our mission at Afro-Tech Girls is to encourage, educate and empower African girls of secondary and university levels in the Science Technology Engineering and Maths field (STEM) fields to follow through and achieve whatever goals they set for themselves through mentorship, teamwork, creativity and innovation,” the organizers say. Data That Speaks was a 5-week, Saturday only work-

shop for female university students and young professionals which introduced students to the field by covering state-of-the-art modeling, analysis and visualization techniques. The workshop took place at the conference hall of the Beni Gold hotel, Victoria Island on the 16th of June through 14th of July, 2018 with 18 ladies in attendance from different fields and four guest facilitators coming in each week to teach them on topics in Data Science, Data Analytics, Data Storytelling

and Data Visualization using Tableau. Each participant was made to work on a personalized project applying the learning and skills gained from the class. “We had Dolapo Amusat a creative and business analyst who taught the students introduction to Data Science and Data Analytics using Alteryx and Knime, Njideka Okafor a software developer/ analytics enthusiast who taught predictive and descriptive analysis using excel, Jubril Juma a UX researcher from Google who taught data

storytelling, different data visuals and what chart works best and Abisola Oni, a product consultant (Tableau) who took the final class on data visualization using Tableau,” Adeola Shasanya, one of the founders of Afrotech Girls said. The workshop came to an end on the 14th July and was commemorated with a presentation ceremony for the participants to provide an opportunity for them to share some of what they had learnt and network with members of the ATG community. The occasion was graced by Wole Oyekanmi, COO of Quantextive as guest speaker who spoke on “Application of Data Analytics in financial services” and other invited guests. Finally, there were short presentations from three of the participants with a question and answer session. Ifeoluwa Adedeji a 500L student of College of medicine, University of Lagos worked on the analysis of child mortality rate in the US over time, Chisom Ezeilo, a programme associate and natural hair enthusiast worked on the rate of return to natural hair and finally, Raqeebat Buhari, worked on the correlation between anxiety in children and overprotective parenting using linear regression and also the trend of performances of counties over the years in the World Cup games.

ICT company reiterates commitment to CBN’s financial inclusion agenda

nlaks, a leading system integrator and Information Communication Technology(ICT) infrastructure provider has reiterated its commitment to working towards achieving the Central Bank of Nigeria (CBN)’s financial inclusion vision 2020 strategy by bringing financial services closer to the people through mobile banking and other ICT tools. The CBN in collaboration with stakeholders launched the National Financial Inclusion Strategy in 2012, aimed at further reducing the financial services exclusion rate in Nigeria to 20 percent by 2020, down from 46.3 percent in 2010. Femi Adeoti, managing director, Inlaks’ said that the company believes that achievement of CBN’s financial inclusion goals will significantly impact the nation’s economy and so he made the promise of commitment while delivering a keynote address at the

Nigerian ICT Impact CEO Forum and African Digital Awards in Lagos, where he bagged the ICT Man of the Year award. According to him, the CBN’s approval given to Inlaks to function as a SuperAgent in the nation’s financial services system is also part of the effort to bring financial services closer to the people. Adeoti, who was represented by Oladimeji Talabi Koyejo, the director of value added services, said that the organisation through the provision of its services to the people is committed to extend the frontiers of CBN’s financial inclusion in Nigeria. ‘We are committed to the CBN’s financial inclusion agenda most importantly in the areas of poverty reduction, employment generation, wealth creation, improving welfare and general standard of living of Nigerians’, he said. In his address, Adeoti,

explained that 61percent of adults in the country who are currently excluded from the formal financial systems are under age 65 years. To attract these set of Nigerians into the formal financial system, Adeoti listed agency banking, mobile banking, electronic wallet,

internet banking, call centre banking and the automated teller machine [ATM], as some of the requisite channels that would make it possible to bring Nigerian adults closer to the fore front of financial development. ‘Mobile payment technology has become increas-

L-R: Ibeanu Chike Chamberlain, managing partner, Zdesigns and Development Consulting; Simon Bromfield, territory manager Africa, Autodesk Inc.; Vijay Raina, sr. technical sales specialist – AEC, Autodesk; Louis Iwegbuna, Nigeria Business Development Manager, Autodesk Inc,; Dolapo Ojelabi, industry specialist, Ideate Technologies; at Autodesk’s Future Forum, Nigeria recently.

ingly significant, especially in the context of developing economies, where many low income households and micro enterprises do not have ready access to financial services,’ he said. He added that with an impressive customer base including six Central Banks in West Africa, 18 of the 24 commercial banks in Nigeria and other major customers in the West African region, Inlaks has become the dominant information technology company in Africa. Adeoti concluded that Inlaks will work closely with the CBN and other stakeholders to reach the underserved population, as well as the financially excluded, in order to ensure that informal workers in Nigeria have access to affordable financial services through its agent network. The agent network is expected to also address social challenges in key areas such as health, insurance, credit accessibility, savings and wage payment.

Stakeholders collaborate to enhance digital banking capabilities

nformation Technology (IT) stakeholders and players in the financial services sector have decided to collaborate in a bid to boost the capabilities of digital banking in Nigeria. Temenos, a global banking software company, HID, an American manufacturer of secure identity solutions and Inlaks, a leading system integrator in Sub-Saharan Africa, all partnered with the Central Bank of Nigeria (CBN) on a recently held forum to highlight how digital banking technology is reshaping the financial services industry. The forum provided insights on various market trends and advances both locally and globally. Presenting a keynote address at the forum with the theme “Banking in the Digital Age”, Adedeji Adesemoye, deputy director, other financial institutions supervision (OFIS) department, CBN, identified fundamental approaches that banks can use to enhance their digital capabilities. Adesemoye itemized financial inclusion and digitisation as a means that can foster innovation across products, business models and allow straight-through processing that can automate and digitize a number of repetitive, low-value, and low-risk processes. He further stressed that the need for banks to have a vision of their future, technology, infrastructure and a well-defined corporate culture are major factors that determine whether a bank is successful in this age. In a similar vein, Nehal Batavia, head of sales – Microfinance & Saas (Africa), Temenos, shared that Temenos has been providing innovative solutions to financial institutions worldwide for 25years. Batavia stated that over 3,000 financial institutions use Temenos software, and among those are 41 of the top 50 banks in the world. He further shared that over 500 million end-customers rely on Temenos software in over 150 countries of the world. Batavia said at the event that Temenos also provides innovative software solutions to banks of all sizes, “all around the world, helping them to thrive in the digital banking age”. Adeyemi Ademiluyi, cyber security manager stated that there was no way that the issue of cybersecurity could be left unattended to when discussing banking in the digital age.

BUSINESS DAY

Tuesday 07 August 2018

EDUCATION

Weekly insight on current and future trends in education

Primary/Secondary

Higher

Human Capital

Curriculum change, funding top requirements for a competitive university system Stories by KELECHI EWUZIE

eading chief executives of private, public universities, government officials and stakeholders in education sector has identified curriculum change, better funding, quality management assurance, and improvement in ranking to as requirement to boost the university system to fit into 21st century main frame. They observe that in the developed world, tertiary institutions are identified as centers for societal development. This is because ideally their operation provides avenues for lecturers and students to develop their latent skills so as to measure up to current demands by both the public and private sectors. Aize Obayan, vice chancellor, Landmark University, Kwara state said there is for greater value on knowledge workers, noting that the boundaries are increasingly irrelevant and it is very vital for administrator of universities to redefine their products and services in term of the graduates they produce and

how relevance what they have being impacted with fair in global competitive market. To her, the online learning community is the vehicle through which knowledge is transmitted in the 21st century, as we are in the information age. She advised that leadership of universities should therefore make every effort to draw up a practicable plan that will help them meet up with the challenge of relevance. Obayan projected that once the leadership in the various aspect of university administration key into this it will in the long run provide educational, cultural and intellectual enrichment which comes with social benefits, development and progress. Peter Okebukola, former executive secretary, National Universities Commission (NUC) on his part expressed optimism that within the next ten years, 5 Nigerian universities will rank among the top 100 in the global Webomatric ranking once the political will by government and Nigerian Universities are there to support key area like research and development of their quality in term of knowledge

L-R: Eric Idiahi, Verod Capital Partner, Lai Koiki, executive director, Greensprings School and Folawe Omikunle, chief executive officer, Teach for Nigeria at the interactive session with Teach for Nigeria, Greensprings School, Anthony Campus.

delivery. Okebukola pointed out that there is the need for universi-

ABU students to represent Nigeria at Silicon Valley for Enactus World Cup

tudents from Ahmadu Bello University, Zaria has emerged winner of the 2018 National Champion of the Enactus Nigeria beating students from Covenant University; University of Agriculture, Makurdi and Federal University of Technology, Owerri and the opportunity to represent Nigeria at the Enactus World Cup taking place at the Silicon Valley, San Jose, California in the United States come October 2018. The keenly contested competition with the theme Facilitating National Transformation witnessed several grand breaking entrepreneurial actions and shared innovations by the students with the sole aim of transforming lives and creating a better future. At the end of the presentations by the schools, Ahmadu Bello University, Zaria projects that ABU’s project that centered on the intervention

in Bagega community, a suburb in Anka L.G.A. of Zamfara State, one of the worst hit states by lead poisoning in Northern Nigeria was adjudged the winner by season panel of Judges. Kabir Okunlola, member, Enactus Nigeria board of directors and Partner, KPMG while speaking at the event in Lagos said the competition is focused primarily at promoting and showcasing the remarkable work Enactus Nigeria has been doing in developing transformational leaders who are poised to champion socio-economic change thereby driving national growth in Nigeria. Okunlola said that Enactus journey of every Enactus student; team and faculty advisor has afforded everyone the life changing opportunity of contributing to implementing projects that impact our communities positively. “It has in many ways helped in preparing the next

generation of leaders that will adequately fill the leadership gap that we expect as a nation existing in a dynamic and fast paced world,” Okunlola said. The Enactus programme in Nigeria has, over the past years, continually transformed otherwise ordinary undergraduates into courageous, innovative, dynamic, and resourceful change agents who are also equipped with entrepreneurial and leadership skills. Some of these individuals are today filling the leadership gaps in our society and leading change either as employees or succeeding entrepreneurs across different sectors of the Nigerian economy. Enactus Nigeria is able to achieve this partly because of its firm believe that to be transformed as a nation, individuals or citizens must first personally experience transformation and transcend from a mediocre mentality to a mentality of excellence.

ties to have the right political will because according to him, “The resources are there

in this country, the potential to deliver is there so all the element to deliver we have it

except that political will”. The Lagos State University Don further revealed that among the measure to ensure that these projections are realised is the need for universities to support research. To him, “A lot of improvement in research should be the focus by our universities in the next ten years. There should be an improvement in our research infrastructure; there is the need to improve the capacity of our research for people to do quality research that will find their way into globally acceptable publication outlets”. Okebukola further disclosed that enhancing mix of international staff and students in our universities will go a long way in enhancing the way Nigerian universities are rated which will then improve the general ranking “Improve the international Staff and students mix; get many more non Nigerian students and staff into the Nigeria universities system. With all of these elements, we can get the Nigerian universities to move very fast to be on the top league of globally ranking tables”. He said.

Educationists advocate parents’ collaboration to curb distraction to learning among students

zinne Onoh, director, The Brains Premier School, (TBPS) Amuwo, Lagos, has called for greater collaboration from parents in the process of learning to curb the distraction that prevent the raising of a total child. Onoh while speaking at the 13th graduation ceremony of the school posited that to raise a 21st century total child, requires collaboration between the school authorities and parents to curb distractions faced by the child through nurturing and principle. She also advocated for the completion of Basic Six by pupils observing that most parents in recent times prevent their children from completing primary six. Onoh opines that the importance of having a pupil complete Basic six cannot be over-emphasied as the child is better equipped intellectually, physically and emotion-

ally compared to his or her peers who jumped from Basic four or five to junior secondary school, JSS one. “We strongly advocate that our pupils graduate at primary six. Although, some parents do not like the idea, with some opting out. However our standard is high and that is why we have only four graduands this year going into JSS 1,” she said. She further observes that the absence of some parents in the learning routine of their children account for the act of laziness some children exhibit. According to her, “The challenges of raising a total child are that today’s children do not want to work hard owing to lots of distractions they face and couple with their parents who are not there to nurture them” The director while explaining the steps taken by the school to encourage the goal of education in the lives of the

children said that the three key ingredients were ways put in place to mould the lives of the pupils in academic, moral and spiritual wellbeing. “The vision of the school is to have an institution that is different from other schools, where among other things the uniqueness of every child is appreciated; Have an environment that encourages fellowship of the child and with God. We also ensure healthy collaboration with the Parents Teachers Association, (PTA) and other stakeholders such as the government,” she said. Basil Ezeugo, director of studies said the curriculum of the school is a fusion of Nigerian, American and British curricular. He said decision to adopt this curriculum is towards developing international students. “We want to address fundamental issues in the education sector, hence our curriculum,” he said.

BUSINESS DAY

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EDUCATION

Tuesday 07 August 2018

INSIGHT

Challenges and responsibilities of nurturing a child today OYIN EGBEYEMI

arch, every year has become somewhat symbolic for women around the world, with both International Women’s Day and Mother’s Day occurring during this month. “Women issues” is a sensitive yet growing subject matter of today with movements such as “be bold for change” and “a day without a woman”; as well as many women’s marches around the world, which continuously convey such strong messages about inequality, harassment and the significance of the role of women.

There is growing awareness of very important issues women face on a daily basis, such as adolescent marriages; unequal compensation for the same positions as men at the work place, discrimination and many other issues as far as gender equality is concerned. These issues are real and they must be addressed in order for women to enjoy fair treatment and also to ensure that the rights of young women and girls around the world are protected. Coming down to our society in Nigeria, particularly in Lagos, there seems to be a lot of focus on the role of women. While, we seem to be following the global movement of female empowerment, sometimes there seems to be a conflict between this and the domestic obligations or expectations of the Nigerian woman.

Before the 1980s, the role of women in our society was somewhat clear; they were either homemakers or took on jobs which would enable them to leave work early enough to return home to cook, clean and take care of their families, while the men took on the larger responsibility of working longer hours in more challenging jobs so that they could earn enough to feed their families. Well, we are no longer in the 1970s as things have changed, and now there seems to be a shift in the role played by the woman in the home. In addition to cooking, cleaning and raising children, she is expected to contribute to the household income due to the realities that we face in today’s economy with the high cost of living and the slower pace of increase in incomes.

While young men and women do their best to meet the immediate needs of their families, which are essentially food to eat and a roof over their heads, we may very well easily forget about a critical aspect of developing the family unit, which is nurturing the children. With young parents working long hours, struggling to earn enough to make ends meet, who is left with the responsibility of taking care of children, ensuring that they are brought up with the right values and steered in the correct moral direction? Fortunately for some, grandparents still play a key role in the lives of their grandchildren. But what about those whose grandparents are no longer in the picture due to death, distance or neglect? Are parents left with no choice but to leave nannies in charge or, do they leave

the responsibility to schools alone? The argument could be that, children spend most of their non-sleeping hours on a weekday at school, so should be able to get all or most of the support that they require from there. This could very easily mean that the answer to this question should be “Yes, the schools should take care of everything”. It might also seem make sense to agree with this given the rate of school fees charged by many private schools. “We pay, so much so we should get our money’s worth, and we may not need to do much in addition to that.” It is very tempting to align with this assumption also because, in addition to struggling to pay school fees, parents are overworked and really may not enough time for their children if they do not make a very conscious effort to do so.

We do live in very challenging times whose conditions make it quite difficult to raise children. However, it is important to note that according to many researchers in the field of child psychology; only 30% of the responsibility of nurturing children lies in the hands of the school. The remaining 70% is from the home. So in order to ensure that we get it right and our children, the future of our country, are brought up with the right values, we need to take the right steps and make a very conscious effort to spend more time grooming them in collaboration with schools (and if desired, religious institutions)

Oyin Egbeyemi is an executive administrator at The Foreshore School, Ikoyi, Lagos.

Quota system in admission is killing attainment of quality in education -experts KELECHI EWUZIE

ndustry experts in the field of education have kicked against the use of quota system as a condition to gain admission into unity schools. This they say is killing the attainment of standard in the education system. Those who know in education sector insist that un-

less this abnormal trend is reversed, Nigeria education system will continue to suffer in the process of grooming students who are globally competitive. Concern stakeholders in their various summations at the 30th-anniversary symposium of the 1982-88 set of King’s College opines that the admission system has been tampered with. Kayode Soremekun, vice

chancellor, Federal University Oye Ekiti (FUOYE) observes that King’s College used to be an aristocracy of brains. Now, it just has the name. The college needs to go back to admission based on intelligence, not quota system, which is killing the college, to return it to its past glory. Soremekun however opined that irrespective of the decadence, King’s Col-

lege brand still stands in superlative profile adding that the management of King’s College should go back to admitting pupils based on intelligence. Sylvester Onoja, former Principal King’s College (PKC) is of the opinion that the inability to have men of character to administer the education system is the bane of the sector. According to him, “Un-

Members of the KCOBA 82-88 Set on a Courtesy Visit to HRH Mohammed Sanusi II, The Emir of Kano & Vice President KCOBA

less educationists are ministers, education will not improve in Nigeria. Today, we have an accountant for a minister. The quality of teacher training has also gone down. We don’t have quality teachers anymore”. Onoja advocated that Nigeria need to jettison the idea of monetising admission while reiterating that Federal government and mangers of education in the country must bring back merit, as opposed to quota system, and keep the population of the schools down. “If this is done, coupled with the recruitment of quality teachers, the unity schools will be better for it,” he said. Olumide Akpata, an active member of the Kings College 82-88 set said the idea behind the various infrastructure interventions in their Alma Mata is base on the fact that the school represents a foster mother to all the students. To him, “If we do not make efforts to move the school for ward, by the time we clock 60 years we will not meet anything to celebrate. We need plans, a l t e r nat i ve s a n d ma i n plans in case we hit a brick wall. If we can fix KC, we can fix Nigeria”.

Kashim Imam, President Kings College Old Boys Association (KCOBA) lauded the 82-88 set for donating a lawn tennis court, an ebraille library for the visually impaired and a waste management system In his words, “I am particularly proud of the members of this set because they have done exceedingly well in their chosen fields and, more importantly, for the three projects they have donated to the school. He obser ve that the Federal Government cannot provide ever ything that the education sector require based on the current realities, therefore it is left for old students to contribute to move not just their Alma Mata forward, but the education sector in general. On his part, Olusola Isaac Kolawole, Principal Kings College urged the old boys not to give up, but liaise with the government for help. “I want to suggest that in your communique you should put that KC should be seen as a national heritage. I want to appeal to the old students, don’t be tired. Forget all the past mistakes; let us join hands to take the college to the highest pinnacle,” he said.

Tuesday 07 August 2018

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BUSINESS DAY

Energy Report Oil & Gas

Power

Renewables

Environment

Dangote refinery insists it will generate 12,000mw to support national grid …to save $7.5bn through import substitute Stories by OLUSOLA BELLO

he construction of the 650,000 barrels of crude oil per day Dangote Refinery will through the gas from its pipeline augment the natural domestic gas supply while an estimated 12,000MW of power generation can be added to the national grid from the gas. The refinery is building the largest sub-sea pipeline infrastructure in any country in the world, with a length of 1,100km, to handle 3 billion SCF of gas per day. It also plan to construct a 570 MW power plant in this complex. This is as the project is expected to help Nigeria save over $7.5 billion through import substitution. Devakumar Edwin, group executive director, said the project, will put Nigeria on the global map as major oil and gas hub in Africa. Nigeria currently imports large amount of its petroleum products due to the inability of the country’s refineries to operate at their full capacity. For example, the National Bureau of Statistics (NBS) latest data showed that the

Dangote refinery

downstream of the Nigeria oil and gas sector imported N812billion of Premium Motor Spirit (PMS) during the first quarter of 2018. According to NBS, the country imported N349.45 billion worth of PMS in the month of March 2018, representing the highest volume of petroleum product import during the quarter under review. Specifically, the petroleum products importation statistics for first quarter 2018 reflected that 5.67 billion litres of PMS, 954.47 mil-

lion litres of Automotive Gas Oil (AGO); 66.914 million litres of Household Kerosene (HHK); and 5122.067 million litres of Aviation Turbine Kerosene (ATK) were imported into the country in first quarter of 2018. According to NBS, the months of March 2018 recorded the highest volumes of PMS imported into the country at 2.41 billion litres while the highest volume of AGO and HHK were imported in February and January 2018 respectively. This continuous importa-

tion of petroleum products has exerted undue pressure on the nation’s external reserve and induced depreciation of the naira. Edw in said that the Dangote Refinery therefore would help the Federal Government create a robust domestic refining sector that could reduce petroleum products imports and save the country from capital flight. He stated: “The refinery is going to save a huge amount of foreign exchange out flow because, today, forex is be-

ing used in the importation of petroleum products and our foreign reserves are being heavily depleted. And whatever little forex we are earning from the sale of crude oil, is being used to import petroleum products. Our petroleum refinery is going to have a major beneficial impact on the economy in terms of foreign exchange savings. “Secondly, the demand for Nigeria’s crude oil has reduced with the introduction of shale oil into the market. Shale oil is equally as good as the Nigerian crude and it is available in substantial volumes. Our biggest consumers like China and India have reduced their demand because they could get similar products. Even earlier, they had started focusing on heavier crudes because they believed that they could make more money. Our refinery will give an assured market for the Nigerian crude. Speaking on the refinery update, he said: “We are currently building the world’s largest single line Refinery, Petrochemical Complex and the world’s second largest Urea Fertiliser plant. “The Refinery will have the capacity to refine 650,000 barrels of crude oil per day.

The Petrochemical Plant will produce 780 KTPA Polypropylene, 500 KTPA of Polyethylene while the Fertiliser project will produce 3.0 million metric tonnes per annum (mmtpa) of Urea. “We will be adding value to our economy as all these projects will be creating about 4,000 direct and 145,000 indirect jobs. We will also save over $7.5billion for Nigeria annually, through import substitution and generate an additional $5.5billion per annum through exports of the refined petroleum products, fertilizer and petro chemicals.” He said the company has been championing a comprehensive overhaul of the energy sector in Nigeria, with a view to making a selfreliant nation. He attributed Dangote’s decision to investment massively in refinery to strong the group’s strong desire to help transform the industry into a veritable driver of national economic growth and industrialization. “We are confident that public policy will continue to move in the direction that will expand the space for private sector to assume leadership in the economic development arena,” he added.

Stakeholders say opportunities exist in downstream sector despite challenges …reinforces call for full deregulation

takeholders in oil and gas industr y have said that in spite of the challenges facing the industry there exist great opportunities and hope in the downstream sector of the industry as the refineries can still be effectively rehabilitated. According to the communiqué which was arrived at after the recently held Arety Adams Foundation lecture series, urged the government to rehabilitate the existing refineries and bring them back into operation to least at 80~90% capacity utilization. This they said should actually be at a least cost o p t i o n c o m p a re d w i t h building greenfield refineries of equivalent capacities. This can be achieved either through a private

sector led financing and rehabilitation initiative as is currently being pursued by NNPC, or through outright divestment of majority equity shareholding to the private sector from the current 100% ownership by Government. In addition to these, other resolutions that were reached include that the refineries should be managed on a fully commercial governance structure in which decision making should rest with the management and board of the plants, with full control of their funds; the refineries should market their products directly to off-takers, so as to recover maximum value. For the above to succeed, they said that the downstream sector should be freed from government control, adding that full

deregulation will make it attractive for private investors to build refineries to target meeting Nigeria’s needs and also that of West and Central Africa. This will also create jobs and grow our GDP. They also want the government to create an en-

Olusola Bello, Team lead, Analysts: Isaac Anyaogu, Stephen Onyekwelu, Graphics: Joel Samson.

abling environment with fiscal incentives to attract investments into refining in Nigeria and make this happen. While those interested in going into those interested in going into modular refining should carry out feasibility studies. DPR should

grant licenses and facilitating discussions for access to crude oil feedstock from upstream companies. Modular refineries should be treated as business ventures, not social services. The communiqué stated that In spite of the challenges facing the industry, opportunities exist to attract investors given that even if all the current refineries were operating at maximum capacity, there still exists a robust demand for petroleum products. Current aggregate product demand is put at equivalent refining capacity of 750,000bpd. Hence at least 300,000bpd capacity is required right now. With population growth, the shortfall in refinery capacity would rise to about 550,000bpd by 2028 assuming a growth rate of 3% per annum. Further-

more, Nigeria actually supplies petroleum products to neighbouring African countries through informal channels. An investor could target to formalize this. This must have informed the decision by Dangote Group to invest in the construction of a 650,000bpd refinery which is expected to come into operation by 2020 or soon after. The actual conventional refiner y capacity is 450,000bpsd, with the other 200,000bpsd being reserved for petrochemicals feedstock. Thus there would still be scope for another greenfield plant of at least 250,000bpd capacity, simply to meet Nigeria’s needs. A higher capacity would be justified if the intention is to supply the West and Central African regions.

Email: energyreport@businessdayonline.com, Tel: +234-8023020011; +234-7037817378;

BUSINESS DAY

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Tuesday 07 August 2018

Energy Report

Right framework will derisk Nigeria’s gas flare commercialisation program - Mama Chijioke MAMA, co-founder & senior project advisor at Meiracopp Nigeria Limited (MNL), a doctoral researcher in Business Management and a consultant with the Sustainability Policy Commission of the Nigerian Economic Summit Group (NESG), in this interview with ISAAC ANYOGU speaks on how Nigeria can succeed in its plan to monetize gas flares. The proposed commercialisation of gas flares has been lauded as a great program but some elements of the initiative remain hazy, why? n the simplest sense, monetization of flared gas is a response to an environmental hazard that simultaneously delivers economic benefits. Technologies, projects and programs around the monetization of flared gas constitute an emerging industry around the world and are of utmost importance to countries that flare a significant portion of Associated Gas (AG) from oil fields. The announced Nigerian Gas Flare Commercialization Program (NGFCP) is the Nigerian government’s new response to decades of hazardous gas flaring which has negative environmental and economic implications. Full detail on the program structure is still awaited by the industry, but it will help Nigeria provide a structured, de-risked and streamlined access to flared gas for monitization. It’s a new framework which may explain the perceived haziness, but it holds some investment promises.

A bid process is planned to start soon, what are the promises and concerns for a potential project developer? A project developer will be looking to gain access to flared gas under terms and condition which the NGFCP will define in the awaited bid process. Beyond that, developers will need to model the use-case for specific gas flare sites and then deploy a desired/suitable technology from a wide range of available options. Some of the use-cases are Gas to Power, Gas to Liquid (GTL) and Gas

outputs are in fairly good demand in Nigeria and moderately well priced. The conspicuous lag is that each flare site can only produce a limited volume which hinders the needed economies of scale. Consequently, promoters may need to hold sufficient number of flare sites (if the bid guidelines permit) with sufficient gas yield as well, in order to deliver good financial returns. From a macroeconomic perspective, since the flare conversion plants are relatively expensive, the governing fiscal regime (taxes and royalties) that envelops the projects within the NGFCP will either hurt or enhance the IRR.

to Chemical (GTC) most of which are promising from an investment perspective. A wide range of products are also possible depending on the technology deployed and the production environment, including; methanol, ammonia, diesel, gasoline (PMS), LNG, CNG and other products. The business case is procuring and monetizing flared gas, in-between which there are unique operational, technological, finance and political concerns which could be complicated by the nascency of this business area/program. How will you characterize the potential risks inherent in gas monetization projects/NGFCP program for investors? The overriding risk statement on flared gas monetization at this stage - from a global perspective - is that most of the technologies for small scale gas conversion (1-25MMscfd) are relatively new. In addition, the number of commissioned, commercial-scale, flared gas monetization project around the world is statistically insufficient for the purpose of generating a long term, reliable, project performance forecasts/models. While this is a technical constraint, there is a finance dimension to it, since midlife and late phase plant behavior and economics cannot be confidently modeled. That adds a layer of risk to any investment in flared gas projects. Though large scale GTL and GTC plants have been successfully deployed for decades around the world; the necessity for modularization and other necessary technical adaptions in the case of small GTL capacities (1-25MMscf/d), changes the

Chijioke MAMA

discus. This includes integration and operation on an FPSO for example. In addition to the technology risks, there are product demand risks and operational risks too, but it might be safe to say that technology risks will dominate. How bankable then are these projects and what could be the financing constraints, given these risks? This kind of project has unique dynamics, especially when you place them in Nigeria. With the amount of loan provisioning we have seen recently in Nigerian upstream projects, by some debt capital providers; you may expect some financing apathy for these projects, which should not really be so, in my opinion. If I am a debt capital provider looking to put about USD 10M in a GTL plant/ project for example; I will focus on the future cash flows of the project in structuring the loan as opposed to the value of the asset or the bor-

rower securing it. I will model the plant performance and technical risks for 8-10 years and haircut any estimation of future cash flows accordingly to reflect that. I will also look at the reserves report of the asset producing the feedstock gas, for evidence of reliable/ sufficient feedstock supply for the life of the gas conversion plant. I will seek smart ways of transferring the reserves risks and the commodity price risks to the promoter (which may otherwise lie with the debt capital provider). I will demand credit security over the plant and the project company’s shares and not the borrower’s properties. Providing debt capital to this kind of project may not fit the traditional Corporate or Project finance model so some insightful innovation may be required to protect lender’s interest in structuring the loan. The numbers may look good in terms of revenues, since the potential plant

gas feedstock price of $4/ MMBTU will require a minimum 10MMscf/d plant capacity to be bankable on a double digit return. That begs the question of what price monitizers will procure the feedstock; since that can distort the delicate economics of flare monetization projects. I think the core economics and numbers will have to be modeled on case by case basis.

As a new initiative how does the core project economics of running a mini flared gas monitization plant in Nigeria appear at this moment? The technologies and plants available for flared gas commercialization are diverse with distinct dynamics and risk profile. So from a Nigerian perspective, the profitability of the venture will depend on the nexus between a developers preferred technology, the technology cost, plant output and the demand side considerations for the product(s). For example, you have the gasoline (PMS) - high demand nexus, the fertilizer high demand nexus, the CNG-low demand nexus and the LNG-moderate demand nexus. Profitability will trail the capacity of the plant installed, which will range from mini system with 1 – 2MMscfd capacity to bigger ones with 10 - 25 MMscfd. One report from the World Bank Global Gas Flaring Reduction (GGFR) program, suggests that a

How optimistic are you that Nigeria can deliver on NGFCP management and coordination? I think it’s too early to evaluate the performance of the NGFCP management. You would naturally want to wait for the bid to be announced, conducted and concluded before evaluation. At that point we would look at core implementation and short term performance of the project (say 1 – 3 years). At the moment it appears the program is run by very a competent team and will be driven on a reliable framework. For example the development and designation of a resilient online portal as the one stop shop for information and participation in the program could help provide the needed clarity and bid process streamlining. There is now a strong regulatory framework for the NGFCP in the form of the Flare Gas (Prevention of Waste and Pollution) Regulation 2018. Remember the transactional framework and other details remain unannounced so you cannot do much of scoring at this stage. However, participants will anticipate a clear and transparent bid process, as well as a post bid regulatory and market support framework that sufficiently attend to gas producers and monitizers interests.

In July Nigeria’s biggest crude export rises were for Brass, Bonny and Forcados, Bonny Light increased to 127, 000 b/d in July from 87, 000 b/d in June Forcados flows were 204, 000 b/d versus 162, 000. Brass exports rose to 98, 000 b/d versus 32, 000 in June. Other major flows (in b/d) in July versus June, Agbami: 189, 000 versus 230, 000, Bonga: 123, 000 versus 158, 000, Erha: 123, 000 versus 95, 000, Escravos: 139, 000 versus 190, 000, Usan: 97, 000 versus 67, 000 and Qua Iboe: 215, 000 versus 253, 000. Amid the rising crude exports, Nigeria’s oil and gas industry is fraught with un-

certainties because of the political, legal and regulatory environment in which it operates. Nigeria has passed a governance aspect of the Petroleum Industry Bill (PIB) which was broken into four components, but the fiscal aspect which is the most important for guiding decisions on financial investments remain stuck in the national assembly over disagreements with terms. This in turn has led to low investment appetite among investors and low oil reserves replacement ration in Nigeria, people with knowledge of the industry say.

Nigeria’s crude production increase seen stabilising oil markets STEPHEN ONYEKWELU

rude production volatility caused by changing global oil markets due to the United States of America’s sanctions against Iran, Venezuela’s rapidly declining industry and bottlenecks in the Permian Basin are making experts see Nigeria’s crude production as critical for stability, a recent report by Global Risk Insights, stated. Nigeria’s crude exports rose in July, for the first time in four months as Shell lifted export restrictions on key Bonny Light grade, vessel track-

ing data obtained from the Bloomberg Terminal show. Total July exports, excluding Akpo, rose to 1.64m barrels per day (b/d) versus revised 1.61m b/d in June. Akpo condensate shipments, rose to 123, 000 b/d versus 95, 000 b/d in June. Combined crude and condensate exports rose to 1.762m b/d from revised 1.688m b/d. “This is a natural consequence of three factors, I will say. There is relative peace in the Niger-Delta, that is, militancy has abated. A corollary of this is that there has been no major pipeline damage or declaration of force majeure. The third factor is pure

market dynamics. Oil prices hover around $70 per barrel and this is driving supply” Ayodele Oni, Energy Partner at Lagos-based Bloomfield Law Practice said in a phone interview, earlier. However, with the risk of instability in the Niger Delta still present, and the damaging effect this entails on the region’s oil production, Nigeria adds more supply concerns to an oil market already saturated with instability. If Nigerian production decreases to 2016 levels, this development could compound with the above outlined risks, in addition to political risks in other pro-

ducers to cause a substantial price increase. Furthermore, Saudi Arabia and Russia’s spare capacity are diminishing following the 22nd June Organisation of Petroleum Exporting Countries (OPEC) production increase and this price hike becomes more likely as the supply-demand balance becomes tighter. It is unlikely; however, that Nigeria will suffer the economic devastation it endured in 2016. That said, any decrease in production could have major effects on global oil markets and cause Nigeria to lose the hard-earned steps toward a full recovery.

Tuesday 07 August 2018

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BUSINESS DAY

In association with

Marginal increase in transactions yet to change real estate sector’s growth narratives Stories by CHUKA UROKO

xpectation that the marginal increase in transaction rates in the real estate market would change the narratives which leave the sector in negative growth territory did not materialise in the second quarter (Q2) of 2018, a new report on the sector has revealed. Increased transactions were recorded mostly in the office market where demand for prime office space slowly picked up and a lot of enquiries were received for vacant spaces, but many of those transactions failed to conclude primarily due to high initial costs. However, the increased transaction and enquiries provided a welcome relief to investors and the sector which has struggled with high vacancy rates and oversupply of office spaces in the last four years. Analysts observe that ahead of the 2019 elections, pre-election uncertainties are threatening the fragile foreign investor confidence as this may drive uncertainty around government policies. There are fears, therefore, that these uncertainties may rob-off on activities in the real estate sector. As predicted and hoped for in the first quarter (Q1) of 2018, the economy regained some lost momentum in the Q2 2018 as the purchasing manager’s index (PMI) hit a new record high in May, oil prices remained firm in April and May, and inflation dropped steadily to its lowest rate since Q1 2016 to 11.23 percent in June. However, the new report compiled by International Real Estate Partners (IREP) notes that while investors seem set to benefit from this improving business climate, the delay in the implementation of the 2018 budget has stalled major investments and projects for the year. “To add to these woes in the real estate sector, the World Bank has ranked Lagos, the commercial capital of Nigeria, 36th and 31st out of 36 (when compared to the other cities in Nigeria including Abuja), for dealing with construction permits

Infrastructure Maintenance With Tunde Obileye

Maintenance management as a quality process

M and registering a property respectively. “It is clear that something urgent needs to change if the real estate sector is to see a rise in growth rates and /or reach the contribution to GDP levels seen in other emerging economies”, the report says. Unlike the oil sector which, according to the Nigeria Bureau of Statistics (NBS), witnessed a boost as its real GDP growth was at 14.77 percent year-on-year and 13.24 percent quarter-on-quarter in Q1 2018, real GDP growth in the real estate sector contracted by 3.48 percent to -9.40 percent in Q1 2018. Erejuwa Gbadebo, IREP’s CEO, noted in the report that this contraction made the sector the highest dip in two years and saw it in fourth consecutive decline, pointing out that the sector’s contribution to total real GDP also dropped to 5.63 percent in Q1 2018, lower than the 6.43 percent and 7.03 percent contributions recorded in Q1 2017 and Q4 2017 respectively. In Q2 2018, however, there were some upsides in the sector. There was a couple of new entrants into the market and there were some notable business relocations by some multi-nationals to prime office spaces in Ikoyi and Victoria Island. Some top indigenous companies also moved to their newly constructed office buildings. These, plus reduction in energy costs experienced by tenants in

the LEED certified Heritage Place and increased interest in co-working space, were no doubt welcome news to a beleaguered sector. These were also reflections of improved business environment. Asking rents for annual prime office spaces in Ikoyi and Victoria Island have largely remained stable at $700 and $600 respectively. But the challenges remain. Even though rental concessions are still being given, with the delivery of some building projects such as Desiderata, Kingsway Towers, Madina, Cornerstone and Grey Stone Towers, and the refurbishment of a couple of Grade B buildings, including the iconic IMB Plaza, over 50,000 square metres of new office space will be offloaded into the market this year. These will be further adding downward pressure to asking rents in the prime office sub-markets. In the retail segment of the market, Gbadebo noted a significant stability in the larger malls in Q2 2018 , adding that the wider retail industry is on the rebound with occupancy rates in many malls improving from lows of 30-60 percent to 60-80 percent. Asking rentals for the big malls, which are still largely dollar-denominated, have remained stable through Q2 2018 as many tenants have adjusted to the current state of the economy and are keeping up better with pay-

ments, probably due to rental discounts and concessions granted by landlords such as fixed exchange rates for dollar-denominated rents. The quarter witnessed an increase in smaller new entrants, especially along the Lekki corridor. This, evidently, has helped to boost the retail industry, with a lot of retailers expanding to take up spaces in newly built and well located, smaller neighbourhood retail centres. But a new trend in this segment of the market, which is somewhat disturbing, is the conversion of residential buildings on major streets to small shopping centres, catering largely to small retailers serving to completely change the look and feel of hitherto residential neighborhoods. “In the short to medium term, we expect that the larger malls will continue to strive to differentiate themselves from their smaller neighbours by seeking to create a more memorable shopping and entertainment experience for customers”, Gbadebo predicted. Changes in business dynamics have compelled many corporate and multinationals to rethink and re-order their priories, leading to a preference of short-let-apartments to full scale residential accommodation. Demand for short-let apartments has maintained an upward trend in spite of the challenging economic environment.

aintenance manag e m e nt ha s evolved over the years to meet the ever changing needs of the built environment. This has become more profound with the continued advancement of technology to drive the improvement and efficiency of the maintenance process. The resulting effect of a maintenance programme is its ability to provide assurances for reliability of the performance of equipment and fixtures/fittings. However, the model for quality assurance demonstrated in the ISO 9001:2000 standards ought to be applied to measure the success of a maintenance management approach. The future of maintenance process may well be based on practitioners of quality management system (QMS) as most modern maintenance management activities are not linked to QMS. QMS is a process-centered management system that is clear on PDCA as a process method. PDCA is an acronym for Plan, Do, Check and Act. Using these characteristics will clearly transform modern maintenance practice. The application of QMS in a maintenance management as a process model will significantly form the basis for best practice for reliability test. This is so because it is a globally acceptable system. In essence, certain elements of maintenance are relevant to PDCA. These elements include protecting components of equipment from stress, monitoring their condition and undertaking component replacement prior to the failure threshold. Taking it further, the components of QMS are preventive maintenance, condition monitoring and planned maintenance. Preventive maintenance involves a set of actions undertaken to provide protection against or reduce the rate of degradation of equipment. Condition monitoring, on the other hand, identi-

fies the rate of degradation towards the failure threshold level and ascertains the level of adequacy of preventive maintenance to impending failure. Planned maintenance takes place to prevent failure when the rate of degradation is getting excessive Aligning the components of QMS with the elements of PDCA will bring more efficiency and effectiveness to the maintenance management system. This will provide the trigger at the analysis stage to determine equipment status for likely improvements toward reliability. It will also identify root cause of challenges faced by facilities managers either in the form of improper operation or recommended end of life or lack of maintenance and will resolve improvement issues required for efficient and effective maintenance management. The application of this maintenance management system will provide performance assurances through feedback, measurement, record keeping, procedures/ work instructions and resource identification. The resulting impact of this system is the provision of a methodology for continuous improvement towards intended level of reliability. The ISO 9001: 2000 scope is customer focused with respect to the effective application of the QMS system therefore it promotes reliability through an improvement process that meets the requirements for the International Standard. The goal for the practitioners of facilities management and indeed the maintenance community should be fused all together into one standard for the practice of maintenance management. They all have the same objective of reliability. Obileye is a UK-trained lawyer and CEO, Great Heights Property and Facilities Management Limited Email: Tundeobileye@greatheightslimited.com

BUSINESS DAY

Tuesday 31 July 2018

How Nigerian mortgage guarantee programme will impact property market Endurance Okafor

ll hands seem to be on deck in bridging the housing deficit in Nigeria, as industry experts polled in a BusinesDay survey see the Central Bank of Nigeria’s plan to setup the Nigerian Mortgage Guarantee Company (NMGC) as a move in the right direction. This is following the plans by the government of Nigeria to start a mortgageloan guarantee programme next year in an effort to improve lending to lowincome earners and boost home ownership. This was disclosed by Tokunbo Martins, Director of Banking Supervision at CBN, who said the nation’s government, through the apex bank, is working on a project that will see the start of a firm this year called NMGC, which will be owned by the government and private investors. To this effect the government has obtained a $25 million loan from the World Bank to run the company, pending equity investments by the owners. On how NMGC will impact on the property market in a country with a housing deficit of about 17 million units, industry experts consulted by BusinessDay said the company will make it easier for an average Nigerian to access a mortgage, considering there is now a guarantor. “Putting a guarantor in place will enable an average Nigerian to access mortgage, and this is going to go a long way in making home ownership in

A cross section of participants at an infrastructure summit in Lagos.

the country much easier,” a property analyst who pleaded anonymity told BusinessDay on phone. Meanwhile, the plan of setting up this firm by the central bank is to establish a mortgage guarantee product, targeted at lower income borrowers that will be used to guarantee some of the credit risk for this special group of lenders, as a way of boosting home ownership in Nigeria. Meanwhile, the guarantor is expected to pay a mortgage-loan provider of about 40-50 percent of its losses if a customer defaults. Nigeria Mortgage Refinance Company (NMRC), a public limited company whose aim is to refinance mortgages from the capital raised in the market, will probably be the first shareholder of the company, as disclosed by CBN. Dolapo Omidire, Founder of Estate Intel, a real estate research firm, said it is a start and a good one at that but the amount would not be enough to tackle the deficit in Nigeria. “It is

something that can help the mortgage industry, it will make mortgage that is way out of reach for the average Nigerian more accessible,” Dolapo added. Meanwhile, in February 2018, ‘My Own Home’ scheme targeted at providing improved access to housing finance to aspiring homeowners was unveiled by stakeholders in Nigeria’s property market and it was domiciled with CBN. This was also expected to, among other things, provide awareness, education and practical tips to assist prospective homeowners in need of long-term housing finance. The public-private partnership scheme, according to the stakeholders, has the support of the World Bank, the Federal Ministry of Finance, the Federal Ministry of Power, Works and Housing, Federal Ministry of Justice, Mortgage Banking Association of Nigeria (MBAN), as well as primary mortgage banks through equity stake in NMRC. Despite the various poli-

cies and strategies adopted by the FG aimed at combating the housing problems faced by its citizens, it seems not much has been accomplished, as the current mortgage to GDP ratio in Nigeria is estimated at 0.5 percent, as opposed to 2 percent in Ghana, 31 percent in South Africa, 32 percent in Malaysia, 7o percent in the United States and about 80 percent in the United Kingdom. As to why Africa’s largest producer of crude oil lags other countries in providing housing for its citizens, CBN linked it to record high interest rates, poverty and lack of proper land deeds, as home loans total about 50,000 in an economy which vies with South Africa as the continent’s largest. However, stakeholders are optimistic that the end is near for the housing deficit in the country, as they see the various efforts by the government and its various institutions at closing the gap in the long run.

Global institutional investors in focus as experts converge for GPP infrastructure summit CHUKA UROKO

he issue of infrastructure development in Nigeria can hardly be over-emphasized until the country and its people get it right. This is why the focus of the forthcoming infrastructure summit to be held in the federal capital territory, Abuja is, among other things, on global institutional investors. The new focus has become necessary because Nigeria, Africa’s largest economy, needs, increasingly, to create avenues that generate sustainable income and wealth through global partnerships. As the largest economy on the continent, experts estimate the value of Nigeria’s total infrastructure stock, including roads, rail, power, airports, water, telecoms and seaports, at only 35 percent of GDP, as against peer emerging markets’ average of 70 percent . This calls for concern. The summit, organised by Global Property Partners (GPP), a consortium of firms with diverse interests in real estate and infrastructure development, is therefore expected to serve as a platform for the engagement of global institutional investors for infrastructure development. “Several critical issues relating to infrastructure financing and creation of an enabling environment for infrastructure development in Nigeria were discussed extensively last year”, recalled Emmanuel Odemayowa, GPP’s managing director and chief

executive officer, who explained that holding the summit in Abuja was aimed to make for a more robust and meaningful exchange of ideas between the public and private sectorson the way forward for this sector. He disclosed that the infrastructure summit was part of the company’s efforts at promoting global best practice in the infrastructure sector in the country, given Nigeria’s vast economic potential. The maiden edition of the summit, held in October 2017 in Lagos, was a huge success, attracting key players in the infrastructure finance and development industry both in Nigeria and internationally. Speakers and special guests at the event were leading personalities in the private and public sector of the country, including Minister of State, Power, Works and Housing, Mustapha Baba Shehuri; Lagos State Commissioner for Housing, Gbolahan Lawal and Special Assistant to the President on Foreign Affairs & Diaspora, Abike Dabiri Erewa. Others were the Chief Commercial Counsellor, US Embassy to Nigeria, Brent Omdahl; IMF Chief/Senior Resident Representative in Nigeria, Amine Mati; Senior Special Assistant to the President on Infrastructure, Imeh Okon; MD/CEO of Financial Derivatives Company, Bismarck Rewane; Founder, Chams Group &Smart City Resorts, Demola Aladekomo and Chairman, BritishAfrican Business Alliance, David Smith, among other dignitaries.

How promoting local content in building materials supports affordable housing CHUKA UROKO

ffordability is a recurring decimal in any discussion that borders on housing and homeownership in Nigeria, Africa’s largest economy, where homeownership level is estimated at less than 5 percent of its large and growing population. A major reason for housing un-affordability is the high cost of input materials which are over 75 percent imported. This is made worse by import duties and transportation cost which is

caused by bad roads. However, the ‘Buy Nigeria’ initiative being promoted by the government is, increasingly, gaining traction and acceptance in the building industry where a good number of materials manufacturers are promoting local content with their product offerings. The implication of this is that material cost will be low and this is expected to trickle down to house prices, leading to affordability which will ultimately bring more home-seekers into homeowners net. At the forefront of this push affordable housing

through locally produced materials is the West African Ceramics Limited (WACL), foremost manufacturer of the ROYAL brand of tiles; grouts; and tile adhesives, which has, through these products, given impetus to local content in building materials production. The company has, in the last couple of years, taken the Nigerian building materials market by storm, forming partnerships and pushing its frontiers with Royal Exclusive Showrooms in major commercial cities across the country including Abuja,Lagos, Kano, Nassarawa, Jos, Osogbo, Enugu,

Lagos, and most recently Port Harcourt and Aba. In Port Harcourt, the company has partnered with Marchambers Int’l Co Limited, a major building material dealership located along the stretch of EastWest Road in Rumuigbo while S. Nnadi Commercial Enterprises partnered the company to set up the showroom along Faulks Road in Aba. These partnerships are aimed to support government’s efforts at reviving the manufacturing sector and encourage patronage of locally produced goods. It would afford

builders, project owners and other professional stakeholders the opportunity to reduce risk and lower projects cost. “The Royal Exclusive Showroom initiative is our response to government’s efforts at resuscitating local production through effective distribution network to ensure that products are available at the right time, right place, and at the right price”, explained Bhaskar Rao, WACL’s general manager who spoke at the Port Harcourt and Aba showrooms. Rao explained further that the delivery of the prod-

ucts was done in a way that encourages the consumer to cultivate and sustain the ‘Buy Nigeria’ behaviour “because they do not just buy products but the collective experiences of product quality, affordability, and reliability delivered; product knowledge and application; unmatched customer services; and all the functional attributes of the product.” Ohazulumeh Chamberlain, CEO, Marchambers Int’l Co. noted that the key focus of the current administration which is to grow the real sector and revive the community of lo

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BUSINESS DAY

FEATURE

How FMBN is driving mortgage penetration and affordable housing When the Federal Mortgage Bank of Nigeria (FMBN) was set up over three decades ago, the aim was for it to meet the housing needs of all Nigerian citizens. Initially, the bank was given the responsibility of monitoring and regulating the activities of mortgage institutions in the country. Due to a number of factors ranging from undercapitalization to lack of appropriate legal frameworks and deficient corporate governance, the bank had been underperforming. But in the last couple of years, with a new management in place, there has been a change in its narratives, writes CHIKWENDU EZEALA

igeria, Africa’s largest economy and, indeed, the continent’s most populous nation, has the most challenging housing situation that seems to have defied solutions. The reason for this is handy: mortgage penetration is low and houses are not affordable for a good number of citizens. Low mortgage penetration, which is said to be less than 1 percent, is reason for the country’s wide housing demand-supply gap estimated at 17 million units. Because of its huge requirements and the high cost, mortgage has been not only inaccessible, but also unaffordable to many people who need it. It is said that Nigeria’s mortgage to Gross Domestic Product (GDP) is one of the lowest in the world. The country’s mortgage to GDP rate is about 0.5 percent which obviously lags South Africa’s 30 percent, the U.S rate at 60 percent and that of the UK at 70 percent. However, incrementally and on consistent basis, ideas on improving access to housing, mortgage loan and homeownership in the country keep coming into play in the housing sector. A lot of efforts and commitments are being made by relevant stakeholders to raise mortgage penetration, increase access and ultimately make housing affordable, especially to the low and mid-income earners. The Federal Mortgage Bank of Nigeria (FMBN), the country’s apex mortgage institution, which was set up about three decades ago as a major intervention in the housing sector, has been leading the way towards growing the country’s mortgage market and improving homeownership situation. The last couple of years has witnessed what could be called a renaissance or a new dawn at FMBN as the new management of the bank is repositioning it for efficient mortgage products and services delivery. Evidently, the bank is driving mortgage penetration that will ultimately make housing affordable for ‘homeless’ Nigerians. Aware that a major barrier to accessing mortgage is the equity contribution demanded by the lending institution, the new management of the bank led by Ahmed Dangiwa as Managing Director/Chief Executive Officer has largely resolved that by directing that loans not exceeding N5 million should attract zero percent equity, and reduced equity for

Ahmed Dangiwa

loans up to N6 million to 15 million from 20 percent to 10 percent. Between May 2015 and July 10, 2018, FMBN has issued 3,862 mortgages to Nigerians to acquire their own homes and has opened the National Housing Fund (NHF) to non-government employees. Cumulatively, the bank has created up to N80 billion mortgages since inception with over 20,000 housing stocks for the low and medium income earners. The apex mortgage bank had, sometime ago, packaged and launched a product it called ‘Informal Sector Co-operative Housing Scheme’ that was aimed at bringing that sector of the economy into the mortgage net to enable the operators own homes through mortgage loans. The new product also known as ‘Affordable Homeownership Through Co-operative Financing’ was launched as part of FMBN’s efforts at bridging the housing demand-supply gap, and for giving the vast majority of those in the informal sector the opportunity to have decent and affordable housing. A new effort which the bank is making to drive housing affordability is the rent-to-own scheme The scheme is about to be completed and sent to the FMBN’s Board for approval. The scheme, according to the bank’s CEO, is almost like an owner occupier. “You are paying rent and, at the same time, owning the house. Most of the houses that are ready and are on ground can be used as

testing ground for this scheme and it is good even for the informal sector”, Dangiwa noted. Despite obvious constraints, including under-capitalisation, lack of appropriate legal frameworks to enforce compliance to the provisions of the Act setting up NHF, and deficient corporate governance system eroding the confidence of critical local and international stakeholders, FMBN has been quite active with its statutory functions, especially with the operations of NHF which it superintends. In just 24 months, in pursuit of its mission anchored on ‘a mortgage finance change agenda, the Dangiwa-led management of the bank has been able to implement some of its strategic priorities, including the promotion of a sound corporate governance culture to ensure transparency and accountability, implementation of a robust enterprise-wide risk management framework, and an aggressive debt recovery drive. The result of this pursuit has been quite phenomenal and enabling in the drive towards deeper mortgage penetration and more access to affordable housing. This can only be explained more by taking a critical look at the activities of the bank in the last 24 months during which the bank has been able to disburse N7.1 billion (about 10 per cent) of the cumulative N78.2 billion NHF mortgage loans. Through this action, 993 Nigerians achieved their dream of becom-

ing homeowners. Its Home Renovation Loan portfolio, which provides microfinance loans to improve housing condition also grew from N2.1 billion to N9.9 billion and from just 2,579 beneficiaries to 11,927. Within this time too, the apex mortgage bank’s funded housing units rose from 20,435 to 25,850 while construction loan portfolio grew by N12.3 billion, a 16 percent rise from N79.2 billion to N91.6 billion. Overall, a total of N27.2 billion was disbursed within this period, representing 15 per cent of the aggregate loan portfolio of N179.7 billion. One of FMBN’s downsides in the past years was the handling and operations of the NHF which denied many of the contributors access to their contributions. But that story has changed. The bank’s process for the refund of NHF contributions has improved significantly, especially in the response to retired workers’ concerns. As a result of this, N7.8 billion, representing 42 percent of a cumulative N18.6 billion, was refunded to 64,676 ex-contributors within this period. Mortgage loans are given to subscribers to enable them buy, build or renovate existing houses. Consistent with that, 13,000 workers will be benefitting from the bank’s N13 billion Workers Home Renovation Loan Scheme. With a credit facility of N1 million, the bank will be able to reach that number of workers. The bank realizes that there are civil servants that don’t need

mortgage loan, but have their houses that need some upgrade. So, instead of excluding such workers, the bank has decided to give to them some micro-financing of N1 million to renovate their houses. 6,000 persons were given similar loan facility in 2016 when the bank disbursed over 6,000 home renovation loans and in 2017, it disbursed N6.5 billion. These are quite encouraging and impactful outing, but there is only so much the bank can do with its low capital base. As the federal mortgage bank expected to drive affordability in the nation’s housing sector, FMBN is operating on only N5 billion capital base. Even with the N5 billion capital base, only N2.5 billion, representing 50 percent, is paid-up, making the planned N500 billion recapitalization of the bank not only instructive but also urgent. The federal government is to provide the N500 billion over a fiveyear period with a view to making mortgage facilities easily available to Nigerians. The bank is still pursing the fund. It is yet to access the money but Dangiwa assures “talks are ongoing right now on the matter and we are optimistic that it will be approved sooner than later; the Council of Works and Housing is looking into the matter”. Expectation is high that when the money is disbursed, it will increase liquidity in the mortgage system and also impact significantly on the housing sector. Experts in the mortgage industry expect the N100 billion annual fund intervention to make housing more affordable and, in the long run, encourage more Nigerians to take mortgage as a choice of raising fund for acquiring their homes. “The plan will bring about positive impact on the mortgage industry”, Abiodun Akanbi, Head of Strategy at Infinity Trust Mortgage Bank, hopes, explaining that FMBN, through the NHF scheme, gives access to many Nigerians to obtain mortgage because of its single digit rate; so if funded, the bank will have capacity to do more than it had been able to achieve.” Yemi Stephens, Partner at Estate Links Limited, agrees, describing the N500 billion recapitalisationas a welcome development, stressing however, “it is like a drop in an ocean considering the huge housing deficit faced by the country which has the largest population in Africa”.

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Tuesday 07 August 2018

Markets + Finance ‘Providing proprietary research, commentary, analysis and financial news coverage unmatched in today’s market. Published weekly, Markets & Finance provides all the key intelligence you need.’

FCMB Nigeria Plc: Increased non interest income underpins profit ….ROAE surges 85 percent to 6.30 percent in HY 2018 … Investment banking division’s profit surges 3571 percent BALA AUGIE

irst City Monument Bank (FCMB) Plc in its recently released half year results for the period ended June 2018 showed improvements in profitability, digital banking, and key ratios. The lender’s risk management strategy has paid off as its cost of risk dropped, thanks to improved recovery and collection across sectors FCMB’s growing portfolio of digital banking services is responsible for the increase in transaction commission. Its digital banking service is expected to contribute to future profit. This means shareholders will be rewarded in form of dividend payment. The lender saw a 1,572 percent y-o-y surge in mobile banking enrolment in the period under review. There were N7.6 billion monthly mobile banking transactions in the second quarter of 2018 as per 1.76 million transaction count. Mobile banking income increased by 94 percent to N416 million in June 2018 from 214 million the previous year. FCMB plans to extend its digital lending platform to capture new (non-FCMB) customers in the third quarter of 2018, and it also intends to launch its Digital Savings & Investment Platform in the third quarter. With an upsurge in profit

Adam Nuru, managing director of FCMB

this quarter, it is expected that the bank will finish the year with strong earnings given the relative liquidity in the foreign exchange market since the central bank introduced the Importers’ and Exports (I and E) window last year. Digital bankig drives non interest income FCMB recorded a growth of 8.30 percent in gross earnings to N83.92 billion in June 2018 from N77.50 billion as at June 2017. Personal Banking, Corporate Banking, and Small and Medium Enterprises (SME) banking were the major drivers

of revenue. A breakdown of top line shows Personal Banking contributed 37 percent to Group revenue, SME Banking, 28; and Corporate Banking, 18 percent. FCMB’s interest income increased by 3.14 percent to N64.31 billion in June 2018 as against N62.35 billion the previous year, spurred by a 147.63 percent surge in investment in government other securities classified as held for sale and 179.56 percent surge in cash and cash equivalent. On the other hand, interest expense fell by 2.71 percent to N29.04 billion in the period un-

der review from N29.85 percent the previous year as a result of the combination of a reduction in deposit from bank to N95.91 billion in the period under review and a reduction in borrowings to N4.0 billion from N5.81 billion the previous year. Robust growth in operating income supported by increase in non interest income For the first six months through June 2018, operating profit grew by 14.40 percent to N51.30 billion in June 2018 from N45.29 billion as at June 2017, thanks to a 29.70 percent increase in non-interest income to N16.53 billion from N12.79 billion and a 38.10 percent reduction in impairment charge to N5.87 billion from N9.48 billion the previous year. A breakdown of non interest income shows net fees and commission income increased by 37.80 percent to N9.93 billion in June 2018 from N7.21 billion the previous year while foreign exchange income (FX Income) surged by 123.40 percent to N349.12 billion. Profit surged despite increase in operating expenses The bank’s pretax profit surged by 85.80 percent to N7.10 billion in the period under review from N3.82 billion the previous year while profit after tax spiked by 89.26 percent to N5.72 billion from N3.0 billion the previous year. The growth in profit was largely driven by an increase in operating profit and a reduction in impairment charge that helped offset the increase total operating expense. Total operating expenses were up 17.90 percent to N37.36 billion in the period under review from N31.70 billion the previous year; driven mainly by an increase in Asset Management Corporation of Nigeria charge (AMCON) and other expenses on alternate channels development. A breakdown of expenses shows personal expenses were up 4.43 percent to N12.022 billion from N11.51 billion the previous year while other operating expenses rose by 68.85 percent to N9.0 billion in the period under review from N5.33 billion the previous year.

Increase in balance sheet validates good asset quality FCMB’s total asset increased by 4.40 percent to N1.22 trillion in June 2018 from N1.17 trillion as at June 2017. The growth in assets was amid a sluggish financial intermediation that saw loans and advances dip by 9.70 percent to N585.98 billion in June 2018 from N649.20 billion the previous year. Total liabilities increased by 7.32 percent to N1.05 trillion in June 2018 from N997.21 billion the previous year. The growth in liabilities was driven by a 12.17 percent increase in deposit to N721.28 billion in the period under review from N633.47 billion the previous year. Notable growth in performacne ratio FCMB has utilized the resources of its owners in generating higher profit as return on average equity (ROAE)

Investment Banking profit before tax surged by 3571 percent to N273 million in June 2018 from N7 million the previous year, largely driven by CSL Stock broker Limited. Investment Banking accounted for 4 percent of Group profits in 2Q18 vs 5 percent in 1Q18. Market slowed down during the quarter as investors take caution in trading. CSLS’ 2Q18 value traded was N70 billion vs N102 billion in 1Q18 and it ended the quarter in fourth-ranked position but third position year to date. CSLS’ local business (retail and institutional) recorded 35 percent growth in value traded QoQ and 86 percent YoY due to engagement of PFAs and HNIs for portfolio restructuring and increased trading on its online trading platform. Historical background First City Monument Bank Ltd. was incorporated as a private limited liability com-

increased to 6.3 percent in June 2018 from 3.40 percent the previous year. Similarly, return on average asset (ROAA) increase to 1.0 percent in June 2018 from 0.5 percent as at June 2017. Net interest margin (NIM) moved to 8 percent in June 2018 from 7.60 in 2017 as at June 2017. The uptick in NIM can be attributed to growth in interest and non interest income as the lender continues to intensify its digital banking strategy with a view to magnifying shareholders’ earnings. Cost of risk improves to 1.80 percent in the period under review as against 2.80 percent the previous, thanks to risk asset quality, recoveries and impact of IFRS 9 first adoption Investment banking division profit surges 3571 percent

pany on 20 April 1982 and granted a banking licence on 11 August 1983. It was the first bank to be established in Nigeria without government or foreign support. On 15 July 2004, FCMB changed its status from a private limited liability company to a public limited liability company and was listed on the Nigerian Stock Exchange (NSE) by introduction on 21 December 2004. In November 2010, both FinBank and First City Monument Bank (FCMB) announced that FCMB has expressed interest in acquiring shareholding and become the strategic investor in FinBank, another Nigerian commercial bank that was undercapitalized. In February 2012, following regulatory approval, FCMB acquired 100% shareholding and began integration of Finbank in its existing operations.

BD MARKETS + FINANCE (Business Team lead: PATRICK ATUANYA - Analysts: BALA AUGIE and LOLADE AKINMURELE)

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Live @ The Exchanges Nigeria stock market opens week on negative footing Stories by Iheanyi Nwachukwu

ig er ia’s stock market opened this week on a negative note as investors continued weighing the nation’s political chess game and a mixed bag of first-half corporate scorecards. Advancing stocks failed to outnumber decliners on Customs Street (21 gainers as against 25 losers) prompting record marginal decline of 0.06percent by the NSE All Share Index (ASI). The stock market’s year-to-date (YtD) returns stood at 4.61percent, the All Share Index closed at 36,479.42 points from preceding trading day high of 36,499.67 points; while the

value of listed stocks which stood at N13.322trillion at the beginning of trading, declined by N7billion to N13.315trillion. Price gains by many large cap stocks could not help lift equities northwards. Lafarge Africa Plc share price gained most at Lagos Bourse from an open price of N28 to N30.5, representing N2.5 or 8.93percent gain. ETI advanced from N21.1 to N22, up 9kobo or 4.27percent; UBA Plc stock rose from N9.45 to N9.7, up by 25kobo or 2.65percent. Oando Plc recorded rally, from N5.6 to N5.75, up by 15kobo or 2.68percent; while Forte Oil Plc stock price increased from N23.4 to N23.55, up by 15kobo or 0.64percent. Beta Glass Plc recorded

the highest decline, from N85.8 to N78, down by N7.8 or 9.09percent. Okomu Oil Palm Plc declined from N76 to N73.1, down by N2.9 or 3.82percent; Nigerian Breweries Plc dipped from N103 to N100.9, down by N2.1 or 2.04percent. Also, Flour Mills Nigeria Plc declined from N26 to N24.6, down by N1.4 or 5.38percent; while Dangote Cement Plc lost N1, from N229 to N228, representing a decline of 0.44percent. In 3,203 deals, stock traders exchanged 182,291,105 units valued at N2.033billion. UBA Plc, United Capital Plc, Regency Alliance Plc, Access Bank Plc and Union Dicon Plc were actively traded stocks on Monday at the Bourse.

NSE promotes cashless economy with X-Pay launch

he Nigerian Stock Exchange (NSE) has announced the launch of X-Pay, the e-payment platform for the Exchange, which will enable users to conveniently make payments for products, services, events and trainings offered by the bourse. X-Pay can be accessed on PCs, tablets, smartphones and other mobile devices. With features like invoice payments, intuitive products display, dynamic search functionality, X-Pay is a value-added service that accepts VISA, MasterCard Verve and UnionPay credit and debit cards. The platform aims to deliver a faster and safer payment method which is protected by best in class IT and card security features, in line with global best practices.

Speaking on the development, Bola Adeeko, Head Shared Services Division, NSE, said, “we are thrilled to launch X-Pay, a solution that builds on our customer centric focus and our efforts to transform the Nigerian capital market into a more efficient model. X-Pay reinstates our commitment to move towards cashless transactions and build a sustainable cashless ecosystem, while satisfying users’ preferences for self-serve bill payment options that is convenient and secure”. According to Adeeko, NSE is leveraging the power of innovation and digital technology to improve its efficiency and reduce the cost of transactions. “With X-Pay, our stakeholders will now enjoy easy access to a wider catalog of our products and services, be

able to select and purchase from anywhere, at any time. Not only will X-Pay be convenient, it will also provide huge opportunity for NSE to maximize its capacity and realize increased efficiency through automated processes and better data integration”, he added. The Nigerian Stock Exchange continues to take huge strides in the digitization journey and position itself as a world class Exchange with best-in-class technology. In 2013, NSE launched X-GEN which is the fastest trading platform in Africa with low latency capabilities. The bourse implemented TradeSmart to assist its Dealing Member firms in achieving a broader reach, leveraging mobile phone penetration in the country.

SEC holds second CMC meeting 2018

he Securities and Exchange Commission (SEC) has scheduled the second Capital Market Committee (CMC) meeting in 2018 to hold from Thursday August 9 to Friday August 10 2018 at the Federal Palace Hotel, Victoria Island, Lagos. During the meeting, issues bordering on implementation of the Ten Year Capital Market Master Plan as well as other relating to the capital market and the economy would be discussed and the outcome made known to the media. While the key stakeholders in the capital market will meet on August 9, mem-

bers of the media would be briefed on Friday on outcome of the CMC meeting. However, SEC has advised that admission into the venue would be upon presentation of the CMC Identity Card and strictly by invitation. According to the SEC, “Attendance to both events is strictly by invitation. Invited participants are expected to come with their identity cards to be admitted into the venue and all invited participants are expected to be seated by 9.45am,” The CMC was mainly established to serve as a medium for exchange of ideas among market stakeholders as

well as for feedback to SEC on how to continuously improve the market activities and regulation. It is an industry-wide committee comprising members of the commission, representatives of capital market operators and trade groups and other stakeholders. The CMC meets every quarter to deliberate on various issues affecting the market and other policy matters. The ten-year master plan for the Nigerian capital market which is expected to refocus the market and help double its size over time and grow the economy was unveiled November 2014.

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Reform: Statistics Bureau sees huge mining activity in Edo, as granite, limestone top production

ase of doing business reforms and a receptive business climate by Governor Godwin Obaseki in Edo State have resulted in huge activity in the solid minerals sector, with dominance of granite aggregates and limestone production in Edo State last year. In a report entitled State Disaggregated Mining and Quarrying Data (2017) released by the National Bureau of Statistics (NBS), granite aggregates production in Edo in the year under review stood at 578,064 tons, while limestone production capped at 386,233 tons. Granite aggregates are used for drainage, sub-base under concrete, under decks, sheds, and pools, as base and joint material, while limestone is used in cement production. Governor Obaseki has led far-reaching reforms to ease doing business in the state with the signing of the private property protection law, easing up access to Certificate of Occupancy (C-of-O), and setting up an

investment bureau to unlock business opportunities in the state, amongst other initiatives. The report showed that clay production in 2017 stood at 61,200 tons; dolomite, 18,871 tons; feldspar, 1000 tons; granite dust, 68,586.08 tons; Kaolin, 4525 tons; laterite, 27,008.50 tons; marble, 3,245.07 tons and sand 47,604 tons. In all, a total of 1,196,337.19 tons of solid minerals was produced in the state, which is traced to the operations of cement, glass and ceramics companies, and quarries. Edo’s dolomite production, which stands at 18,871 tons, is highest in the country in the year under review. Dolomite, which is used in the production of glass and ceramics, is found in Ikpeshi and Akoko in the state. Some of the companies in the state that contribute to the impressive showing by Edo State in the report are cement companies, Time Ceramics Nigeria Limited, Rongsheng Glass Factory, among others.

ECA promotes use of disruptive tech to enhance financial inclusion HOPE MOSES-ASHIKE

nited Nations Economic Commission for Africa (ECA) is collaborating with the International Financial Corporation (IFC) and Ant Financial (Ant) to promote digital financial inclusion in Africa through investment and technical capacity building. Last weekend, Vera Songwe, ECA executive secretary, led Ant Financial’s CEO, Eric Jing, and IFC’s VP and treasurer, Jingdong Hua, to a meeting with President Mulatu Teshome of Ethiopia. Addressing a group of journalists right after the meeting, Songwe said, “Essentially, we were talking (with the President) about IT and the power of IT for financial, social and political inclusion.” The executive secretary noted, “Agenda 2030 and Agenda 2063 say we should leave no one behind, and many people have been asking what happens to SMEs with the AfCFTA. So, we are thinking about what platforms we can put together to ensure that not only big companies take advantage of the AFCTA but also small companies.” Songwe underscored, “We have an opportunity to leapfrog technology for social, financial and political inclusion,” adding

“today, we are bringing Ant Financial, which has the largest platform for financial inclusion and assists people with very small financial capacity to be involved in the society.” Ant Financial - an affiliate of the Alibaba Group – runs one of the world’s largest online payment platforms valued at $150 billion. According to Ant CEO, Eric Jing, the company serves over 650 million people on a daily basis. He stated, “We have expanded well beyond China, and are recording tremendous success in our effort to bridge the gap between the reach and the poor in many other countries such as India, the Philippines and more.” Jing said he would like to replicate his company’s success in Africa so that financial inclusion could be enhanced. Hua stated that IFC was supportive of Ethiopia’s poverty reduction initiatives. The delegations from IFC and Ant Financial also met with some senior staff of the ECA on Friday and expressed their willingness to collaborate with the Commission to foster inclusive growth on the continent. They were also briefed on what ECA does in line with IT and digital inclusion.

National UTME scores: Obaseki commends Oseghale’s performance

do State governor, Godwin Obaseki, has commended the performance of Alikah Oseghale, an indigene of the state, for emerging third best in the 2018 national Unified Tertiary Matriculation Examination (UTME) organised by the Joint Admission and Matriculation Board. In a statement by the special adviser to the Governor on Media and Communication Strategy, Crusoe Osagie, Obaseki notes that the feat achieved by Oseghale speaks volume of the outcomes of ongoing reforms in revamping the education sector in the state. According to JAMB, Alikah

Oseghale from Edo State, took the third position with a score of 357, coming behind Israel Galadima from Borno State who came first with 364 score, and Adekunle Jesufemi from Ogun State scoring 358. Oseghale was reported to have sat for the examination in Ekpoma, Esan West Local Government Area of Edo State. Governor Obaseki said his administration would not relent in driving reforms to reposition the education sector in the state beginning with the revamp of the basic education sector, noting that the reforms would improve access to quality education in public schools.

31 NEWS

BUSINESS DAY

Incessant data collection processes raise security concerns ... as Nigerians question data protection capabilities JUMOKE AKIYODE-LAWANSON

he shoddy data c o l l e c t i o n p ro cesses by governm e nt ag e n c i e s, banks and telecoms companies have raised concerns of Nigerians over data protection capabilities and cyber security risks, as several years of repeated biometric data collections have yielded no visible improvement in government processes and planning. Analysts question the use of repeatedly collected citizen data by different agencies, which is not harmonised. “It is questionable that people are allowed to register multiple times for the Bank Verification Number (BVN), especially if the names don’t match. If biometric data such as the photo, fingerprint and other information have

been captured electronically, it only makes sense that a person’s identity immediately pops up on the system regardless of the fact that the names are misspelled or mismatched,” Subomi Sodipo, CEO, CFmobile, told BusinessDay. “Same goes for the driver’s licence, international epassport, SIM card registration and others,” Sodipo said. Industry experts also worry about the high risk of inappropriate use of accumulated data, as personal information of citizens could easily become accessible to identity thieves who perpetuate obnoxious activities online. They say that even after the Senate finally passed the cyber crime bill into law after almost 15 years of deliberation as to whether or not the country needed such a law, Nigerians are still at risk of being

attacked on the virtual space because of the way personal data are being collected and handled by institutions such as banks and telecoms companies. “In Nigeria, we don’t know where the hospitals are keeping our personal health records. Personal identifiable information such as your financial records should only be for you and the government to see. All the BVN data that the banks are collecting, where are they being housed and who has access to it? Protection of personal information, storage of personal data, cyber crime, protection of shareholders stake in organisations and similar issues need to be covered,” Rex Mafiana, CEO, FPG Technologies, told BusinessDay in an interview. Nigeria is said to have a data retention law but not a data privacy law,

even though the collection agencies have a responsibility to protect all data in their custody. A cyber security report by Check Point Software Technologies Limited revealed that cyber criminals are not the only threat to the integrity and security of corporate data. Just as quickly as a hacker could penetrate a network, innetwork actions can also easily result in data loss. Check Point found that data can unknowingly leak out of any organisation for a variety of reasons, most of those tied to current and past employee actions in handling given data. The report stated that while most security strategies focus on protecting data from hackers coming in, it was equally important to protect data from the inside out, by way of handling and processing such data.

L-R: Napoleon Esemudje, director of resources, Transcorp; Enitan Oyenuga, group HR director, Coca Cola; Joseph Olofinsola, partner, human capital, Deloitte West Africa; Rosie Ebe-Arthur, group head, human capital and development, First Bank of Nigeria plc; Ugochi Okafor of UBA, and Charles Ugwu, head, professional standards and regulations, Chartered Institute of Personnel Management (CIPM), at the Deloitte Talent Management Platform in Lagos.

PWC projection shows further gains for mining industry in 2018 JONATHAN ADEROJU

lobal Gross Domestic Product (GDP) growth has been projected at approximately 4 percent over the next five years, in addition to infrastructure growth in emerging economies. This is expected to underpin continued demand for mining products. The infrastructure-driven growth in Asia, mainly China, has resulted in above average economic growth and a significant increase in demand for commodities like iron ore, copper and coal. However, the USA and Europe account for more than 40 percent of global GDP. Although their growth rates are

nowhere near as impressive as those of the emerging markets, relatively small increases, or declines in growth can have an impact on metal demand, especially consumer driven demand. Nigeria, being part of the big emerging markets, is having turn ups in the mining sector. Data from the National Bureau of Statistics (NBS) reveal that mining and quarrying sector grew by 14.85 percent from 10.7 percent in Q4 2017, and 22.64 percent in Q3 2018. The report shows a clear indication of better days for the Nigerian mining industry, which is experiencing a sustained improvement in its contribution to the economy. GDP from mining in Ni-

geria increased to N15.47 million in Q1 2018, up from N13.662 million recorded in Q4 2017. GDP from mining averaged N17.9 million from 2010 until 2018, reaching an alltime high of N24.1 million in Q1 2011, and a record low of N12.3 million in Q4 2016. The oil and gas sector still continues to be the dominating sector in the Nigerian economy, but the country is fast evolving in the mining jurisdiction. If the right steps are taken, and the current drive is sustained the country’s solid minerals sector will contribute up to 3 percent of GDP by the year 2025, according to the roadmap for the growth and

development of Nigerian mining industry. In the PWC outlook on the performance of mining in the global growth GDP, it is expected that the performance in the sector will improve in 2018. The projection is based on the historic performance alongside the estimates of the future key variables such as price, production and input costs. Revenues will continue to increase on the back of higher prices and marginally higher production volumes as in Q1 2018. Regardless of the successes of cost saving initiatives to date, it is expected that operating costs to rise as a result of inflationary pressures on input costs.

BUSINESS DAY

Tuesday 07 August 2018

STRATEGYBRIEFING IDEAS THAT POWER High PERFORMANCE

What Tesla can teach you about strategy BRIAN REUBEN

esla Motors is at the heart of the auto news. CEO Musk has demonstrated that electric cars production is real after all. On March 31, 2013 around 10pm, Elon Musk tweeted, ‘Tesla is in California, so it is not April Fool’s yet!’. ‘First profitable Q for Tesla thanks to awesome customers and hard work by a super dedicated team’ he had tweeted a few minutes earlier. On May 8 the company announced a net income of over $10 million on $560 million in sales. That beats the sales of incumbents Nissan and GM in electric cars in the US combined. Its Model S had sold more than the BMW 7 and Audi A8 put together. How was Tesla able to achieve this when its peers like Coda and Fisker had filed for bankruptcy? So how did Tesla come about this advantage? To answer that question I will like to reemphasize the dangers of competing with rivals on the same dimensions. ‘Me too’ strategy breeds corporate mediocrity and

business failure. If you are thinking about superior performance in the super competitive market place we now have then you need a thorough grapse of strategy. Again it does not really matter what you know about strategy,if your results does not bear witness of your ‘wisdom’ then your theory is probably wrong and you may need to unlearn and relearn. If Tesla had approached car manufacturing like its competitors did it would have definitely filed for bankruptcy like its peers. All superior performing companies focus on creating a unique position in the market. The Tesla narrative shows a company that made a unique value proposition to its target market based on a uniquely designed value chain. First, Tesla understood that an electric car is nothing more than a computer and a battery in a box. So the founders began by assembling a team that was a mix of specialist in the car industry and Silicon Valley engineers and that gave Tesla an important edge. Unlike Fisker that adopted a value chain similar to that of

IC engine car makers and outsourced almost everything, Tesla brought everything about the design and full assembly of its car under its roof. That’s a move quite unprecedented in the car industry. That’s rethinking the value chain, that’s seeking a unique position. Next, Tesla will not sale its cars through dealership as was the norm, it will rather use its own sales people who earned salary rather than commission as was consistent with the auto industry. They adopted this model because it will be hard for a dealer to emphasize the benefits of an electric car since that will mean encouraging a prospect to overlook the internal combustion engine cars he deals on. So to win, Tesla had to evaluate the entire value chain and created a model that gave them a competitive advantage. That’s strategy! You see when strategy is defined as positioning of a company in its competitive environment, understand that every single element in the value chain is a candidate of positioning. The reconfiguration of your value chain

in a way that sets you apart from others is what strategy is all about. This was what Musk and his team understood and applied. One thing that I love about the Tesla strategy is their marketing. In marketing the Model S, Tesla stressed speed, comfort and handling, before talking about low emissions. It also focused on the potential cost savings from gas and reduced service and repairs. Why was that important? Nobody cares about technical details and configuration of your product. What they want to hear is something that connects with their emotion. For a car- speed, comfort, savings, that’s what someone wants to hear. That’s something someone can connect with, so they communicated that. The key take away is that strategy is about establishing a

unique rather than a best position which you can protect and the ability to do this lies in your entire value chain. That’s how to create a competitive advantage. But sustaining that advantage is of course something else. Brian Reuben is an author, advisor to business leaders, keynote speaker and an entrepreneur. He has trained and advised senior executives at renowned organizations including Africa Reinsurance Corporation, UAC, United Securities Limited, BusinessDay among others. He is the Director of BusinessDay Training and sits on the board of a number of organizations in Africa. Was this article helpful? Share your thoughts with us on Facebook @bdtraininglive or email us on trainings@businessdayonline.com

Brian is an author, advisor to business leaders, keynote speaker and an entrepreneur. He has trained and advised senior executives at renowned organizations including Africa Reinsurance Corporation, UAC, United Securities Limited, BusinessDay among others. Brian is the Director of BusinessDay Training and sits on the board of a number of organizations in Africa.

This Page Is Open For Sponsorship, for details call 0708 234 5251.

Tuesday 07 August 2018

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NEWS

‘Nigeria needs N4bn to tackle infectious diseases’ ANTHONIA OBOKOH

EO, Nigeria Centre for Disease Control (NCDC), Chikwe Ihekweazu,hasdisclosed that the country needs N4 billion in order to strengthen the national strategy for reducing infectious diseases, prevent and control emerging epidemics. This was made at a roundtable to evolve ways the public and private sector can collaborate in keeping life-threatening diseases at bay, while launching the Alliance for Epidemic Preparedness and Response (A4EPR) in Lagos. The A4EPR is an initiative by the Private Sector Health Alliance of Nigeria (PHN) in collaboration with the NCDC aimed at getting key stakeholders in the health sector to combat infectious diseases. Ihekweazu reiterated the need to develop the Nigerian health care system to effectively prevent, protect and respond to disease emergencies, saying it was as important as, or more important than, an emergency

response. It costs less to invest in advance and to be ready. “Infectious diseases do not respect borders or class. There is an urgent need for investment in preparedness and the time to prepare,” he said, but pointed out that Nigeria actually needed about N4 billion to combat infectious diseases. This does not mean that all the monies must come from the government; the private sector has a role to play, he said. “There is the need for financial assistance in critical segments of combating infectious diseases such as infrastructure and equipment which needs about N1.8 billion. “The infrastructure and equipment are responsible for the machines and test variables whilewealsoneedresponseand logistics of about N700 million. “In Emergency Stockpile, we need N600 million, for the Technology and Innovation segment, we need N600 million, Capacity Development needs N200 million, while Advocacy and Community engagement will require N100 million,” he said.

The agency is mandated with the task of enhancing the country’s preparedness and response to epidemics. “Recently, Nigeria was hit by the Ebola outbreak. We would not have had a strong response without the private sector. This and other outbreaks have reinforced the need to adequately prepare for and respond to public health emergencies. “We want this to be the beginning of a conversation to support the Nigeria’s preparedness for, not just financial support but in building capacities, which is a lot of work,” he said. Osagie Ehanire, minister of state for health, said the role of the private sector in heath security in Nigeria was way beyond corporate social responsibility. “We must prioritise multisectoral partnerships to end epidemics because the next pandemic is only a plane flight away. Infectious diseases outbreaks are now of greeter global concern than ever before, propelled by the awareness that volume and ease of travel make an infectious diseases only a plane ride away,” Ehanire said.

Confidence index declines to 13.6 point in July – CBN HOPE MOSES-ASHIKE

verall confidence index on the macro economy declined to 13.6 index point in July compared to 34.7 in June, the Central Bank of Nigeria (CBN) revealed on Monday. The July 2018 Business Expectations Survey (BES) was carried out by the CBN in July 12-20, 2018, with a sample size of 1,050 businesses nationwide. A response rate of 94.7 percent was achieved, and the sample covered the services, industry, and wholesale/retail trade and construction sectors. The businesses outlook for August 2018 showed more confidence on the macro economy at 58.7 index points. The optimism on the macro economy in the current month was driven by the opinion of

respondents from services (9.3 points), industrial (3.6 points), construction (0.4 points), and wholesale/retail trade (0.3 points), sectors, while the drivers of the optimism for next month were services (34.8 points), industrial (16.5 points), wholesale/ retail trade (4.6 points), construction (2.8 points) sectors. Furthermore, the positive outlook by type of business in July 2018 was driven by businesses that are neither importnor export-oriented (7.8 points), import-oriented (2.5 points), both import- and export-oriented (2.5 points), and those that are export-related. Businesses expressed less optimism on own operations in July 2018 when compared to the previous month. However, respondents from services and wholesale/retail trade sectors expressed relatively more optimism

on own operations in the current month with indices of 0.3 and 2.7 respectively when compared with 7.6 and 0.9 reported in June 2018, respectively. An analysis of businesses with expansion plans by sector in the next month showed that the wholesale/retail trade indicates greater disposition for expansion with an index of 31.8, followed by the services and construction sectors with 28.7 and 8.8 index points, respectively. The surveyed firms identified insufficient power supply (64.1 points), high interest rate (58.1 points), unfavourable economic climate (54.3 points), financial problems (50.6 points), unclear economic laws (48.9 points), insufficient demand (45.1 points) and unfavourable political climate (45.1 points) as the major factors constraining business activity in the current month.

US investors pledge to revitalise Ibeto Nigercem

team of foreign investors from the United States of America on Monday assured that they would do every thing possible to support both the core investor and CEO of Ibeto Nigeria Limited, Cletus Ibeto, and the Ebonyi State government to ensure the revitalisation of the moribund cement company, Nigercem, located in Nkalagu in Ishielu Local Government Area of the state. The team in collaboration with Ibeto Nigeria Limited on Monday embarked on an assessment visit to the premises of the company. Addressing a cross section of stakeholders who thronged the company premises comprising National and State Assembly members, state executive council members, traditional rulers, opinion leaders, community leaders, youth organisations, etc, Cletus Ibeto said the delegation was on self assessment tour of the company.

Ibeto said prior to the visit that another team of Chinese contractors was in the state three weeks ago to finalise arrangement on the revitalisation of the cement factory. “I am standing before you with a team of American financiers who are here on an assessment visit to the cement company. They are here to see for themselves what is here at NIGERCEM cement company. “The team will help in realisation of the dream of Ibeto Group together with the Ebonyi State government in actualising the revitalisation of the company. “Very soon production work would commence in NIGERCEM with the production of 6,000 metric tons of cement per day. “The Chinese team, which visited the state before now would be working on designing, they would ensure that the 2015 Contract Agreement signed by Ibeto Group Limited and the host

community Nkalagu is executed to the latter.” The CEO reiterated that at the end of the assessment visit by the foreign financiers, every modality on the revitalisation of the company would take effect. The leader of the American foreign investors, Amanda Wester, said the team would do every thing possible to support both the core investor and the Ebonyi State government to ensure the revitalisation of NIGERCEM Cement Company Nkalagu. Governor David Umahi commended the foreign investors and Ibeto Nigeria Limited for their commitment in ensuring that the company commenced production. “We extol Ibeto Nigeria Limited, the core investor in NIGERCEM in their commitment to establish a new 6,000 tons per day dry process cement plant, 45 megawatt capacity power plant in this first phase of the project at Nkalagu.

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34 BUSINESS DAY NEWS

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Banks miss loan growth target as... Continued from page 1

their second quarter financial statements. Tier one lenders, Zenith and First Bank, saw loans and advances to customers decline 10.8 percent and 7 percent to N1.87 trillion and N1.86 trillion respectively as at the end of June 2018, from N2 trillion for both banks as at the end of 2017. Tier-two lenders, FCMB and Diamond bank, also posted negative loan growth, with FCMB recording a 9.95 percent contraction to N23 billion from N26 billion in the period under review, while Diamond bank’s loan book dipped 3.68 percent to N727 billion from N755 billion. Sterling bank was the only bank to buck the trend, growing its loan book by less than 1 percent to N628 billion from N598 billion in the period under review. “The onset of political activities came earlier than expected and economic activity remains fragile at best, making it almost impossible for banks to create credit assets,” said Johnson Chukwu, the managing director and CEO of Lagos-based financial advisory firm, Cowry Assets. After recovering from its first economic recession in 25 years in 2017, the economy grew 1.95 percent in the first quarter of 2018 thanks to higher oil prices and production, with the IMF forecasting growth of 2 percent for full-year. However, economic growth that is below the rate at which the population is growing (3 percent) means the GDP per capita will shrink for the third consecutive year in 2018. The IMF expects it will shrink eight

years straight. “The ruling party had conventions that created hiccups and there have been mass defections that have added to an already heightened political uncertainty,” Chukwu said. “Remember the banks are also keen to reduce their non-performing loans and the current environment is risk-laden.” Nigeria’s 2019 general elections look set to be one of the most tightly contested since the return to democratic governance, especially as the opposition People’s Democratic Party (PDP) seeks to return to power after being defeated in the last general elections by the All Progressive Congress (APC). This has taken a new twist following the recent coalition by the PDP and 38 other political parties to field a single candidate to pose a formidable challenge to the incumbent. More than fifty lawmakers and two state governors have quit the APC in the past week, with the vast majority switching allegiances to the PDP. Both parties have struggled with internal divisions but the mass defections seems to be breathing new life into PDP which ruled for 16 years (since the end of military rule in 1999), prior to President Muhammadu Buhari’s election in 2015. Aside the elevated political tensions, the fragile economic activity does little to make a case for banks to extend more loans. The banks, which largely mirror the health of the economy, are also in a better place than they were in the thick of 2016’s crisis. Oil prices have held above $70 per barrel for two months and that has seen non-performing loans improve

given that oil sector loans account for the largest share of the bank’s loan books. Brent crude for 3-month settlement sold for $73 per barrel as at August 6, according to Bloomberg data. During Q1 2018 investor conference calls, most banks admitted to seeing a gradual recovery in nonperforming loans. “Banks will need to aggressively grow loans by an average of 4.3% per quarter to be able to catch up with their FY’18 targets, which we think is unrealistic, as banks are more likely to be cautious with

loan growth in light of the still fragile economic fundamentals and the looming elections,” analysts at Cardinal Stone partners said in a note to clients.

Banks will also be risking higher impairment charges if in the bid to grow loans, they book sub-optimal and low-quality credit assets, following the adoption of IFRS 9 model- designed to help lenders better guard against bad loans, the Lagos-based investment bank said. “We expect average loan growth for FY’18 to come in at 5.0%, with banks like ACCESS and GUARANTY growing their credit assets the most by 7% and 5% respectively. On the other hand, we expect loan growth for banks like ZENITH and FCMB to be negative in FY’18.” Worried by commercial banks’ inability to lend to the real sector, the Central Bank of Nigeria Governor Godwin Emefiele at the last Monetary Policy Committee (MPC) urged corporates to raise commercial papers as an alterna-

tive to bank loans.

Continues on wwwbusinessday online.com

Tuesday 07 August 2018

Local oil firms ramp alternative financing... Continued from page 1

in an industry where lenders have become weary. In exchange for some of the funds, operators say they have been offering equity participation, profit sharing and various crude for payment schemes supported by the Nigerian National Petroleum Corporation (NNPC) which provides guarantees that gives the lenders confidence. “The contracting financing model we had with Schlumberger has a win-win element to it, but this would not have been possible without the support our joint venture partner, the NNPC gave us. Without this confidence to the contractor it would never have been possible,” Ademola Adeyemi-Bero, CEO, managing director First Exploration & Petroleum Development Company Ltd said at the Society of Petroleum Engineers Conference (NAICE 2018) held in Lagos yesterday. Nigeria needs over $20bn in new financing to ramp crude oil production to 2.5million barrels per day (bpd) but with local banks exhibiting low appetite for lending to the sector due to high nonperforming loans estimated last year to constitute about 40 percent banks NPLs , local players say they are being forced to task their brains for new solutions. In June, Nigerian National Petroleum Corporation (NNPC), FIRST Exploration & Production (First E&P) and Schlumberger signed a tripartite agreement for development of the Anyala and Madu fields under OML 83 and OML 85, offshore Nigeria at the cost over $700m.

Under the agreement, Schlumberger will contribute the required services in kind and capital for the project development until first oil. The joint project team will leverage the technical expertise of Schlumberger and the extensive local knowledge of the partners. Anibor Kragha Chief Operating Officer Refineries and Petrochemicals, who stood in for the NNPC boss, said that aside alternative arrangements players are tapping into including pension funds and private equity, the insurance industry can represent a pool of funds that serve this industry very well. “Their horizon is aligned with this industry in terms of what obligations they have, the returns they are looking for matches ours, we should add them to the pool of funds.” Kragha, further said, “As for the NNPC we are moving our JVs into incorporated JVs by the end of next year, As for the Nigerian Petroleum Development Company, we are going to utlise alternative funding to spur their growth and we are targeting half a million barrels from NPDC in the not too distant future.” Globally the oil and gas industry is evolving with talks about more prolific technologies that will displace hydraulic fracking, the impact of electric cars, move to low sulphur content which will render all of NNPC’s refineries obsolete, but poor policy, weak fiscal terms and corruption continues to destroy value from the sector in Africa’s largest crude oil producer. “Our industry cannot go on Continues on wwwbusinessday online.com

Trump’s Iran sanctions begin, set to boost... Continued from page 1

Godwin Obaseki, governor, Edo State (2nd l); Moses Alake Adeyemo, deputy governor, Oyo State (r); Idowu Abel Olayinka, vice chancellor, University of Ibadan, (m); Kemi Emina, national president, University of Ibadan Alumni Association (l), and Olufunke Adewoye, chairman, lecture award committee (2nd r), during the 2018 National Alumni Lecture of the University of Ibadan Alumni Association, at the Trenchard Hall of the University.

Defection: PDP scouts for Akpabio’s... Continued from page 1

that a few senators are already making overtures to their colleagues with a view to emerging as Minority Leader. The 11 PDP senators from the region include: Bassey Albert Akpan (Akwa-Ibom North-East), Foster Ogola (Bayelsa West), Ben MurrayBruce (Bayelsa East), Emmanuel Paulker (Bayelsa Central), Rose Oko (Cross River North) and Gershom Bassey (Cross River South). Others are: Peter Nwaboshi (Delta North), James Manager (Delta South), Clifford Ordia (Edo Central), Mathew Urhoghide (Edo South) and Osinakachukwu Ideozu (Rivers West). With six months to the 2019 general elections, some observers say Akpabio’s defection may hand the APC, which only recently lost about 14 senators including Sen-

ate President Bukola Saraki to the People’s Democratic Party (PDP), a boost in the South-South. With the planned defection b i l l e d f o r We d n e s d ay at a n elaborate ceremony in AkwaIbom State, the development will increase the number of APC senators in the South-South from six to seven. The other APC lawmakers are: Nelson Effiong (Akwa-Ibom South), John Enoh (Cross River Central), Ovie Omo-Agege (Delta Central), Francis Alimikhena (Edo North), Andrew Uchendu (Rivers East) and Magnus Abe (Rivers South-East). A high ranking member of the PDP National Working Committee (NWC) informed BusinessDay that the plot by Senators elected on the party’s platform to remove Akpabio as Minority Leader was halted by the national leadership of the

party four months ago. He pointed out that Akwa Ibom State Governor, Udom Emmanuel, had prevailed on the party leadership at the National Executive Committee (NEC) meeting last week to hasten the exit of his estranged political godfather on grounds of anti-party activities. The party chieftain said after a meeting between the Caucus and party leadership, the latter argued that removing the former governor as Minority Leader would plunge the party into crisis. “We prevailed on them (PDP senators) to stay action and they heeded our call. We held a marathon meeting at the weekend and there will be a follow-up meeting this week to arrive at a consensus. For us, there are no preferred candidate for the position. Our minds are open,” the party’s official who spoke on condition of anonymity, disclosed. Continues on wwwbusinessday online.com

dering more on the bullish factor that might lead to an increase in Brent crude price, the benchmark for Nigeria’s crude oil as US President Donald Trump re-imposes sanctions on Iran the world’s fifthlargest oil producer. The sanction which will begin to take effect today is expected to disrupt Iran’s oil production. The last time the OPEC member country was sanctioned more than half of its current export of about 2.4 million was removed from the market. Emmanuel Afimia, energy partner at Emmanuel Afimia Consulting said the US sanctions on Iran will lead to a fall in oil supply in the global market, which will in turn lead to increase in price of crude oil. “I hope Iran would accept Trump’s request for renegotiation of the nuclear deal in order to save its economy and citizens,” Afimia told BusinessDay. Luqman Agboola, head of research at Sofidam Capital Limited said the recent turn of event will lead to an increase in oil price as Trump is currently showing the rest of the world that that the present US government is not a country that honours previous administration agreement. The US has ordered all other countries to halt imports of Iranian oil by early November or face punitive measures. In a statement on Sunday Secretary of State Mike Pompeo said the White House will detail implementation of the

measures. The US sanction which was first announced on May 8 will come in phases after the 90-day wind down expires on August 6, while the second and bigger phase, targeting Iran’s energy industry, will take effect on November 5. The supposed “wind downs periods” are basically grace periods given by the US government to companies, both American and foreign, to wrap up their business, terminate operations, and pull their money out of Iran. Since US President Donald Trump withdrew from the agreement in May, businesses that were testing the waters in Iran have largely fled, fearing instability and a cutoff from the US financial system Companies including GE and Honeywell were among the US companies operating in Iran that had to pull back their investments because of the sanctions. Major foreign companies such as the French energy giant Total, and the Danish shipping line Maersk also started operations in Iran after the 2015 nuclear deal. But because of their presence in the US market, they too had to withdraw after Trump’s announcement, or else, they would have risked getting penalised by the US government as well. “That’s the negative effect of being adamant. Iran won’t have a choice in the long run,” Afimia told BusinessDay by mail. Mike Pompeo, a veteran critic of Iran whose appointment as secreContinues on wwwbusinessday online.com

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BUSINESS DAY

Osun APC crisis deepens as chieftains, members defect to ADP …Accuses Aregbesola of imposition party leaders in the administration of the state, and for allegedly refusing to make appointments into parastatals and other positions after assumption of his first and second tenure in office. The statement further accused the state governor of initiating anti-masses policies which had further impoverished the masses in the state, stressing that it had evidence that the APC chairman in the state worked for the emergence of Oyetola in the governorship primaries. “We are leaving the party. It has been observed that the APC administration under the watch of prince Adegboyega Famodun is gradually losing its credibility and becoming unpopular due to his insensitivity and insincerity and double-standard hypocrisy and a stooge to a few people who allow personal interest to over-ride the wishes of the major-

INIOBONG IWOK

he crisis rocking the All Progressives Congress (APC) in Osun State appears to have deepened, this is just as several chieftains and members of the party yesterday defected to the Action Democratic Party (ADP). In the recent time, the APC in the state had been plague in internal crisis over the controversial governorship primary which was won by the state current Chief of Staff Gboyega Oyetola. Agitations have been on following allegations that the process was manipulated to favour him. However, in a release to the media yesterday and signed by the Deputy state Chairman, Azeez Issa Adesiji and several state executives, they accused the state Governor Rauf Aregbesola of sidelining the

Aregbesola

2019: Idemili Consultative Assembly says no automatic endorsement for political parties, politicians EMMANUEL NDUKUBA, Awka

head of 2019 general election in Nigeria, a pressure group has emerged in Anambra State and vowed not to give automatic endorsement to political parties and politicians. The Idemili Consultative Assembly in Idemili North and Idemili South council areas of the state, have inaugurated local and ward ambassadors to benefit from political parties and politicians who seeks for their votes. Epu n d u Uzo r, C ha i r ma n , Board of Trustee of the group told newsmen during the inauguration on Monday that politicians and political parties had cheated the electorates enough in the area. “This is a political watchdog we have set up today in the two most populous council areas of the state. “For some time now all the political aspirants and those that had won elections in our local governments will abscond, leaving us with nothing. We have come under one umbrella to have a say

to whoever we have endorsed. “We will today elect our men and women ambassadors in the wards and local governments who will be at the polling booths during elections to ensure our people vote the right candidates with our mandate. “We will ensure that what you have promised us, you deliver. We will present their score cards to our people to know if they have done well or not from their manifestoes,” Uzor said. He said that the body would soon embark on sensitisation of the people in the area to actualise the purpose for the overall benefit of all. He said that they would use the platform to sustain zoning system in the two councils, pointing out that smaller communities in the area would be given opportunities to present candidates to vie for elective positions. Uche Ezeliora, a former Chairman of Idemili North Council and who also chaired the event said that the body was formed in 2014 with the vision and mission for the dignity of Idemili area.

ity of our party members. “In some cases, he was directed to work for alliance for democracy in Ondo state against the APC candidate and at the onset of this transition. Preparation the chairman have been working underneath for the chairman of Isiaka Oyetola . “Several meeting were held both in Lagos and Oyo with some leaders on how to work for the success of the above candidate at all cost. We challenge him to deny all this allegations. “The once-robust and highly structured Osun state chapter of the APC is deeply embroiled in series of crisis resulting from highhandedness from the executives arm of government that claimed lack of confidence in the state executives of the party. For no reason, the governor refuses to interact or meet with the executives since 2014 till date,” the release said.

Insecurity: Federal lawmakers from Kogi allege intimidation VICTORIA NNAKAIKE, Lokoja

distressed call has been sent to President Muhammadu Buhari over worsening security situation of Kogi State by members of the National Assembly representing Kogi State. According to the petition dated 30th July, 2018 which was addressed to President Muhammadu Buhari and jointly signed by the three Senators and five House of Representatives members from the state, was made available to newsmen in Lokoja last weekend. The signatories to the petition are Senator Dino Melaye, Senator Ahmed Ogembe and Senator Atai Aidoko, while members of the House of Representatives include Hon.Tajudeen Yusuf, Benjamin Ikani, Karimi Sunday, Emmanuel Egwu and Omale Hassan. The Honourable Members alleged that the Kogi State Governor, Yahaya Bello has been using large chunk of state resources to import Military Hardware illegally for his hoodlums who carry out his violent instructions. The petition equally added that the cry has become imperative because persons holding contrary or alternative political views with governor Bello can no longer move freely within the state, neither can they hold political meetings or conduct political activities such as Town hall meetings, Constituency Empowerment Pro-

grammes without violent interruptions by the state government and its agents. “The state governor now uses the state security apparatus at his disposal and hoodlums to disrupt political events and activities of the opposition party. This is unacceptable and anti democratic. Little wonder the state government was involved in importation of Military Hardware and Army camouflage few months ago, a matter that is being investigated by the National Assembly, although without much cooperation by the Nigerian Custom Service allegedly due to the powerful influence of the state governor,” they stated. The petition also noted that since 2016 when Governor Yahaya Bello assumed office, he has refused to conduct Local Government Councils as required by the Constitution and has been administering the Local Government throughout. “Mr. President, we cannot continue to fold our arms while the governor of our state sponsored armed Militia to silence the voice of the opposition in the state. It is undemocratic and it may lead to large scale anarchy. We therefore urge that you intervene immediately. It is imperative to note that Section 14(2) of the 1999 Constitution as amended provides that the Security and Welfare of the people is the pri-

mary purpose of government. We cannot be Striving in our little way to improve the welfare of the people of Kogi State, while the governor in a bid to frustrate us and out of sheer ambition, would unleash terror and violence on us and our Constituent in the name of party politics. The President and the International Community cannot continue to turn a blind eye at the happenings in Kogi State because if it is allowed to continue, it may further worsen the security situation in Nigeria”. In his reaction to the allegation, the Director General, Media and Publicity to Governor Yahaya Bello, Kingsley Fanwo, posited that Yahaya Bello has remain the best Governor in tackling insecurity in Nigeria, saying: “For a group of legislators in the National Assembly to alleged that the same Governor is arming thugs reflects the fact that they are either blinded by bitter partisanship or they do not know what they are saying. In Kogi State, thuggery has been blacklisted by the present administration. The previous administration in the state has a history of arming and prodding thugs to unleash violence on political opponents. Political assassinations were on the rise and opponents of government were living in fear until the present administration came on board to guarantee security for all Kogites irrespective of their political beliefs.

Nwosu emerges Abia SDP chairman, pledges to rescue state from misrule UDOKA AGWU, Umuahia

hidi Nwosu, a former two-term member of Abia State House of Assembly on the platform of the People’s Democratic Party (PDP) who has been elected

as the Chairman of the Social Democratic Party in the state, has vowed that his party would rescue Abia from the clutches of misrule come 2019. Nwosu made the vow in Umuahia soon after the State Congress of the party where 30 other members

of the State Executive Committee were elected. He said that the Agenda of SDP in Abia is to reposition the state through collective will and cooperation among the party members in particular and Abia electorate in general.

“Our character and willingness shall see us achieve our aim. All those opponents sitting in Government House should be packing their belongings before we take over the seat of government,” Nwosu said. The Abia SDP boss promised

that his party would guarantee from elected people through transparency in governance. Effiong Umoh and Isaiah Edebo, chairman and secretary, respectively of the SDP State Congress Committee conducted the election which was through affirmation.

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BUSINESS DAY

FINANCIAL TIMES HSBC profit weighed down by higher expenses

GAM says ‘significant’ conduct concern prompted manager’s suspenson Page A2

Page A3

World Business Newspaper

Hard work may not pay after all New research suggests long hours and overintensity damage careers Emma Jacobs

very year between May and September, all 54 employees of Basecamp, a Chicago-based web applications company, work a short week: just four days — a total of 32 hours. They work a conventional five-day week the rest of the year. “That’s plenty of time to get great work done. This is all we expect and all we want from people,” says Jason Fried, co-founder. “Working 50, 60, 70-plus [hours] is unnecessary. In fact, if you have to work 50, 60, 70plus hours a week, there’s a management problem.” The company’s summer workload must fit reduced hours, Mr Fried insists, otherwise the benefits of a shorter week — to recover from work, enjoy time with family and pursue outside interests — would be undone. His philosophy chimes with new research that finds it is not just long hours that are harmful to employees’ physical and mental health. It is also the intensity of work — tight deadlines and a relentless pace. Moreover, it suggests that intense work harms career prospects. That is because excessive hours and intensity are counterproductive, reducing the quality of the work. The forthcoming study, called “Implications of work effort and discretion for employee wellbeing and career-related outcomes: an integrative assessment”, to be published in the Industrial and Labor Relations Review, concludes that the level of intensity we apply to the work we do (defined as the level of effort supplied per unit of working time) is generally “a stronger predictor of unfavourable outcomes than overtime work”. The researchers, Argyro Avgoustaki, assistant professor of management at ESCP Europe and Hans Frankort, senior lecturer in strategy at Cass Business School, compared people in similar jobs and education levels, and found they were more

likely to suffer poorer wellbeing and inferior career prospects, including satisfaction, security and promotion, when they worked at an intense level for long periods. The authors say they want employees to understand “the limitations of excessive work effort, for employers to give discretion when viable, and for public policy [makers] to devise strategies that help limit the adverse consequences of work intensity”. Mr Frankort, senior lecturer in strategy at Cass Business School and co-author of the report, says the research suggests the career benefits of excessive work effort — longer hours or harder work than typical in one’s occupation — may never materialise. “So, it may be a mistake to accept reduced wellbeing in the hopes of improving future career prospects,” he adds. The researchers based their conclusions on data from a random sample of 51,895 employees from across 36 European countries. Employers and government should try to reduce work intensity rather than try to control excessive hours, the authors concluded. “Employers and policymakers focus a lot on the latter, but compared with overtime, work intensity predicts much greater reductions in wellbeing and career-related outcomes,” says Mr Frankort. Clearly there is a link between workload and hours. But, the researchers say, giving employees a choice about where and how they work can alleviate pressure by allowing them to choose the order, method and pace of work, as well as determining hours and breaks. Governments have recognised the dangers of extensive hours, and some countries, notably France, have granted workers the “ right to disconnect” at the end of the working day. The policy has been mirrored by some employers, including Volkswagen. Some large banks, including Goldman Sachs and Bank of America Merrill Lynch, have sought to reduce working hours.

Private equity challenged over $400bn fee haul Performance claims of high-charging managers questioned by new analysis Chris Flood

S private equity managers have extracted $400bn in fees and expenses from investors since 2006 but on average they failed to beat the returns from an S&P 500 tracker fund, according to a new analysis. The findings are an analysis

by Oxford Saïd Business School based on the Burgiss database. Pension funds and other institutional investors hunting better returns after the 2007-08 financial crisis ramped up allocations to illiquid private equity strategies. This created a gold rush for managers such as Blackstone, KKR, Apollo, Carlyle and CVC Continues on page A2

‘The Wolf of Wall Street’: research suggests long hours are detrimental to productivity, with workers prone to making mistakes, becoming anxious and burning out © Collection Christophel/Alamy

Pimco and BlackRock accused of subprime ‘profit gouging’

Asset managers accused of accelerating foreclosures by mortgage servicer Ocwen

imco and BlackRock have been accused of accelerating foreclosure action against struggling American subprime borrowers in the aftermath of the financial crisis. The allegation comes from Bill Erbey, founder of Ocwen Financial, the biggest subprime mortgage servicing company in the US, who is pursuing a legal action against the two asset management giants in the US Virgin Islands. In an action for unspecified damages filed earlier this year in St Croix, Erbey Holding Corporation and related entities claim a “covert criminal conspiracy” was perpetrated with the “specific intent and purpose of gouging enormous profits from the forced foreclosures and confiscation of the homes of hundreds of thousands of struggling families all across the United States”. Pimco and BlackRock, which have combined assets under man-

agement of around $8tn, are both big investors in the US mortgagebacked securities market. They are accused of a “wilful and wanton scheme . . . to cripple, if not outright destroy” Ocwen and its related companies in retaliation for Ocwen’s claimed attempts to push back against the asset managers’ “greeddriven pro-foreclosure campaign”. Both Pimco and BlackRock have filed motions to dismiss the action. Among their arguments is the claim that the complaint should be dismissed on jurisdictional grounds and because it is time barred. Ocwen, a $550m New Yorklisted company which grew exponentially in the aftermath of the financial crisis as new capital rules in the US forced banks to offload their mortgage servicing businesses to non-banks, has itself faced intense criticism for its part in controversial home loan foreclosures. As a mort-

gage servicer, it is responsible for collecting payments from homeowners that are then forwarded to holders of the loans. In 2013, the company reached a $2.1bn settlement with the Consumer Financial Protection Bureau (CFPB) over a long string of administrative errors and deceptive practices that allegedly pushed borrowers into foreclosure. A year later, Mr Erbey was forced to step down as chairman as part of a settlement with Benjamin Lawsky, then superintendent of New York’s Department of Financial Services, who had accused Ocwen and its many affiliates of backdating foreclosure notices to distressed homeowners. Then, in April last year, a fresh attack came from the CFPB, claiming Ocwen had subjected mortgage holders to “years of widespread errors, shortcuts and runarounds”, triggering dozens of claims at state level in the US.

Pemex defends for-profit refining as López Obrador plans reform Mexico’s state-owned oil company is in a stand-off with the country’s president-elect Jude Webber

he oil refineries of Mexico’s Pemex may only be operating at half capacity but after years of losses they are finally in the black, the head of its downstream business said, defending his strategy in the face of criticism from President-elect Andrés Manuel López Obrador. The comments from Carlos Murrieta, head of Pemex Industrial Transformation, reflect a stand-off between Mexico’s state oil company and the man who will set its priorities after he is sworn in on December 1, with potentially significant consequences for the country’s exports of crude oil to the world market and its imports of fuel from the US. “Pemex has plants that are stalled,

yes, but generating money,” Mr Murrieta told the Financial Times. “In the past, provided we could say we were operating at high levels, we were happy because we produced a lot — but we lost a lot [of money].” Mr López Obrador said the oil sector in Mexico had been “abandoned” and had singled out refining as the focus of a $16bn “rescue” plan. That included a new refinery costing nearly $9bn, to sever Mexico’s dependence on US petrol. But without spelling out where the funds would originate, or how he would increase oil production to process into fuel, analysts were worried that the president-elect risked diverting much-needed cash from Pemex’s upstream business. Pemex has six refineries, the oldest of which, Minatitlán, opened in 1906, but because of maintenance

and pending upgrades, not all are equipped to refine oil into highvalue gasoline or diesel instead of cheap fuel oil. “If I put more crude into the refineries and just produce more fuel oil than petrol, I lose, and it would clearly have been better to export crude and import fuel,” Mr Murrieta said. Mr Murrieta relies on an economic model that crunches 16,000 variables and 12,000 equations to determine whether Pemex should produce or import. The bottom line was whether margins — factoring in the price of crude, the volume of fuel produced and the cost of production — were positive. “When we’re operating, it’s because the variable margin is positive,” he said, likening it to a taxi that only drives when it has a passenger in it.

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FT Private equity challenged over $400bn...

Linde-Praxair $80bn megamerger faces fresh hurdles

Continued from page A1 Capital. Investors, however, have difficulty in assessing value for money because of complex and opaque agreements that allow private equity managers to charge multiple layers of hidden fees. About $2tn in new cash was raised from investors by US private equity managers between 2006 and the end of 2015. Ludovic Phalippou, a Saïd finance professor, said the funds launched in those 10 years have, on average, performed in line with the S&P 500, the main US equity benchmark. This delivered annualised returns, including dividends, of 8.6 per cent between January 2006 and the end of March 2018. Nine out of 10 of these private equity funds also beat the 8 per cent annual return “hurdle” that allows their managers to claim performance fees, which amounted to an estimated $200bn. A further $200bn was paid in management and other expenses, but there was less certainty over this data. The estimate could be conservative, said Mr Phalippou, an expert who has been hired by BlackRock as an adviser on private markets. These cost estimates are significantly higher than other published data. “We do not know the exact total of fees and expenses paid by investors because a lot of effort is spent by private equity managers to ensure this information remains as secret as the recipe for Coca-Cola,” said Mr Phalippou. He said investors had paid a lot for results that were “mild at best”. The American Investment Council, a lobby group for the private equity industry, disputed the data. “The industry consensus based on multiple analyses confirms that private equity outperforms public markets,” said Bronwyn Bailey, vice-president of research at the AIC. The AIC’s analysis found the median annualised return over the past 10 years from private equity was 8.6 per cent (net of fees), based on data from 163 US public pensions schemes. This was higher than the median 6.1 per cent return earned from public equity by the same pension schemes. Rows have erupted in Pennsylvania, Maryland and California over failures by pension officials to disclose multimillion-dollar payments made to private equity managers over decades. Joseph Torsella, Pennsylvania’s Treasurer, has accused the Quaker state’s two largest public pension funds of wasting $5.5bn paid as fees to Wall Street investment managers whose funds performed poorly. Maryland’s $49bn state pension scheme was forced to admit in May that it had paid $87m in previously undisclosed performance fees to its private equity managers for the year to December 2016. The largest of these US schemes, Calpers (the California Public Employees’ Retirement System) revealed in 2015 that it had paid $3.4bn in previously undisclosed performance fees to private equity managers over 25 years.

Tuesday 07 August 2018

German group fears deal may falter after US regulators demand further disposals Patrick McGee

GAM says ‘significant’ conduct concern prompted manager’s suspenson Bond fund manager was suspended last week, prompting unusual block on redemptions Attracta Mooney & Owen Walker

sset manager GAM has sought publicly to justify its decision to suspend a top bond fund manager last week, accusing him of poor due diligence, breaches of its gifts and entertainments policy, and the inappropriate use of personal email. In a letter sent on Monday in an attempt to halt clients fleeing its funds, chief executive Alex Friedman said that there had been speculation about the nature of the problems that led to Tim Haywood’s suspension last week, but branded “much of it inaccurate”. Earlier, GAM explained that he had not departed from a “legitimate investment strategy”. GAM made the unusual move of halting redemptions in its SFr11bn unconstrained/absolute return bond strategy last week, after investors attempted to redeem more than 10 per cent of the assets when Mr Haywood’s suspension was announced. The Swiss investment house

said it had carried out a thorough investigation that involved external advisers, which was “largely completed” and added that no other employees are being investigated. The letter said: “The investigation concluded that in certain instances Mr Haywood may have failed, in our judgment, to conduct or evidence sufficient due diligence on some of the investments that were made, or make accessible internal records of documents relating to these.” But it added that to date it had found the alleged actions had not lead to a material client losses. The fund manager’s investigation also claimed Mr Haywood may have breached policies by individually signing certain contracts where two signatories were necessary, as well as breaching the company’s gifts and entertainment policy by not asking for pre-approval. It also said he was using his personal email for work purposes. “Taken together, this conduct is of significant concern to GAM. The company seeks to uphold

high conduct standards in all areas of our business,” it said. Mr Haywood could not be reached for comment. In a separate Q&A the company posted on its website, GAM sought to reassure investors in the absolute return bond funds that Mr Haywood oversaw. It confirmed that no investors who had requested redemptions since it initially announced it had suspended Mr Haywood had yet been paid out. It said the funds had enough liquidity to meet the redemption requests — which amounted to more than 10 per cent of ARBF’s holdings — but such outflows would “lead to a disproportional shift in their portfolio composition, which could compromise the interests of remaining investors”. The company added: “We are working with the fund boards to consider all future options, including fund liquidations. Our priority is to provide liquidity and maximise value for clients in a timely manner. We hope to be able to resolve the situation as soon as practicable.”

Indra Nooyi to step down as PepsiCo chief after 12 years at helm Ramon Laguarta, a 22-year company veteran, to take top job in October Peter Wells

ndra Nooyi is to step down as chief executive and chairman of PepsiCo after more than a decade leading the US beverage and snack maker, the group said on Monday. Having taken the helm at the company in 2006, Ms Nooyi oversaw PepsiCo’s transition away from its traditional core business of sugary sodas as the company and its industry peers grapple with consumers’ growing preference for healthier food and beverage options. Ms Nooyi, who has consistently ranked among the most powerful women in the world, will step down from her role on October 3 this year, and will remain chairman until early 2019. Her impending departure continues a recent trend of CEO turnover among major US food and beverage companies, including Coca-Cola, Campbell Soup and Kellogg, whose stalwart

businesses are struggling for traction with consumers. The job of navigating those consumer tastes now falls to Ramon Laguarta, who will become PepsiCo’s sixth chief executive in its 53-year history. Mr Laguarta has been with the company for 22 years, and since September 2017 has been president, overseeing global operations, corporate strategy and public policy and government affairs. “He has a deep understanding of the changing preferences of consumers and other critical trends unfolding around the world, and he has demonstrated that he knows how to navigate them successfully,” Ms Nooyi said of her successor. The US food and beverage industry has seen no shortage of top level changes over the past two years. A parade of companies including Coca-Cola, General Mills, Kellogg, Mondelez International, Hershey and Starbucks have all replaced their chief executives since

the start of 2017. Campbell Soup, whose bet on fresh food failed to turn round its fortunes, is still looking for a new head. Like PepsiCo, the businesses those companies’ reputations were built on are no longer the engines of growth they once were. Earlier this year, Steve Cahillane, Kellogg’s CEO, made the stunning admission the company best known for Corn Flakes and Froot Loops could no longer hitch its future to the sales of its cereal products, while Coca-Cola’s most recent results were buoyed by its suite of no-sugar drinks. PepsiCo’s most recent results for the June quarter were slightly ahead of analysts’ forecasts, but revenues from its main North American beverages division were still shrinking. The unit makes up about a third of the company’s overall sales, but the main contributor to PepsiCo’s operating profit is its snacks division, which makes Doritos and Lays chips.

he megamerger between US gas group Praxair and German rival Linde is at risk of failing after US antitrust authorities demanded further disposals before giving the deal a green light. Linde’s tendered shares fell as much as 10 per cent on Monday after it said late on Sunday that US authorities were making demands that were “more onerous than previously expected”. It added there was now “a higher probability” that required divestments would exceed the threshold agreed by the two companies, which could scupper the deal. Praxair shares were down 6.5 per cent in pre-market US trading. The two companies, who together would form an $80bn behemoth and be the world’s largest supplier of industrial gases, have been working to complete the merger by October 24, a deadline set by German takeover laws. Analysts at Kepler Cheuvreux dropped their price target on Linde from €208 to €188, saying the deal now has just a one-third chance of taking place. UBS analysts maintained their buy recommendation but said the market was pricing in a 50/50 chance of the deal being completed. “It is serious,” a person familiar with the situation said. The companies now have two options: either they dispose of more assets than they would have liked, or they break up. The groups last month announced they would sell nearly $6bn worth of European assets to Japan’s Taiyo Nippon Sanso and about $3bn worth of assets in the Americas to CVC and Messer, pending approval of the deal. When a blueprint was signed in June 2017, the groups set a limit on asset disposals of €3.7bn in revenue or €1.1bn of earnings before interest, tax, depreciation and amortisation. According to UBS, the two disposals agreed so far would leave room to sell assets with another €1bn of annual sales, or about €400m of ebitda. Linde said the two companies were in discussions with the US Federal Trade Commission about the scope of further divestments. Brussels, meanwhile, said in June it was worried the merger would harm competition in Europe. The demands from US regulators will be a headache for Linde chairman Wolfgang Reitzle, who has pushed hard for the deal and staked his reputation on completing it. Arne Rautenberg, portfolio manager at Union Investment, said: “It wouldn’t be a drama for Linde but a heavy blow for Mr Reitzle.” A first attempt to merge in the summer of 2016 failed when Linde’s worker representatives objected. The collapse led to the exit of both the chief executive and chief financial officer, before new terms emerged that granted concessions to German workers.

Tuesday 07 August 2018

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BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

HSBC profit weighed down by higher expenses Spending on retail, investment banking drive rise in adjusted operating expenses Don Weinland & Martin Arnold

igher operating expenses continued to bite at HSBC’s profitability in the second quarter of the year as the bank stepped up investments in technology and its expansion in mainland China. The figures were published amid a trade war between China and the US that threatens to rock investor sentiment later this year. HSBC said on Monday that its adjusted operating expenses hit $8.1bn in the three months to end-June, 7 per cent higher than the same period last year. Pre-tax profits at the bank fell 1 per cent, missing analysts’ expectations, while its net profit was up 5.6 per cent at $4.1bn. The bank, which derives threequarters of its profits from Asia, is still in the throes of a multiyear turnround effort after several years of declining growth. Now led by John Flint, who became chief executive in February, and Mark Tucker, the former AIA chief who took over as chairman last year, the new leadership team is focused on controlling costs and boosting its return on equity. The higher operating expenses were mainly due to the bank’s investments in its retail and investment banking units, part of its latest strategic plan. Many of those investments have been focused on adding new technologies to its retail franchise in Hong Kong and China. “We have to be investing now for the opportunities in China,” Mr Flint said, adding that the uptick in costs were in line with the bank’s expectations. In June, Mr Flint released his

first plan as chief executive for returning the bank to growth. The plan has been viewed as a continuation of the strategy of his predecessor, Stuart Gulliver, with a focus on strengthening its business in Hong Kong and the Pearl River Delta in southern China, a so-called “ pivot to Asia”. HSBC wants to expand its insurance and wealth management businesses in Asia. An increasingly hostile trade dispute between the US and China has sent waves of volatility across global markets in recent months. HSBC is one of the world’s largest trade finance institutions, and many analysts have feared the spat between the world’s first- and second-largest economies would impact the trade finance business around the world. HSBC’s trade finance business has yet to be affected by the situation, Mr Flint said, noting that up until this point the US and China had mainly engaged in rhetoric. But he said the most likely impact on HSBC’s business would come from the softening of investor sentiment, a shift that could hurt its Asia wealth unit. “It is possible that this becomes more than rhetoric. It is possible that it impacts,” Mr Flint said. “I expect if that is the case we probably wouldn’t see that really coming through until the end of the year, beginning of next year. The more likely scenario in which our outlook is damaged is if the trade rhetoric just damages investor sentiment generally and investors go risk off.” Shares in the bank shed morning gains in Hong Kong following the results announcement, trading up about 0.5 per cent at HK$72.70, compared with a 0.6 per cent gain by the Hang Seng index.

Merrill Lynch wealth managers ditch Thomson Reuters for Factset Blow to Blackstone after it acquired data business Robin Wigglesworth & Mark Vandevelde

ealth managers at Merrill Lynch are switching to Factset and ditching rival financial information provider Thomson Reuters, an early blow to the business after it was acquired by Blackstone in a $17.3bn deal. Factset will later this year begin replacing Thomson Reuters as the primary market data provider for Merrill Lynch Wealth Management’s 15,000 advisers with its web-based platform, according to a statement on Monday. “It’s a significant deal for the company,” Philip Snow, the chief executive of Factset, told the Financial Times. “Wealth management is a relatively new area for Factset, but it’s an area we’re focused on and excited about.” Bank of America, which owns Merrill Lynch, began evaluating rival information providers for its

wealth management unit months before the deal to spin off Thomson Reuters’ terminals business to Blackstone was signed, according to people familiar with the matter. Nonetheless, the replacement of Thomson Reuters with Factset at Merrill Lynch Wealth Management, unit dubbed “the thundering herd”, is a blow to Stephen Schwarzman’s Blackstone. Blackstone in January agreed to buy a controlling stake in Thomson Reuters’ financial terminals and data business for $17.3bn, betting that it can reinvigorate the company and take on Bloomberg, the data powerhouse owned by former New York mayor Michael Bloomberg. Bloomberg enjoys a 33.2 per cent market share in the $28bn global data business, with Thomson Reuters at 22.5 per cent and Factset representing 4.5 per cent, according to Burton-Taylor International Consulting. But Factset is growing at a faster rate than its bigger rivals.

Cost impact of tariffs laid bare in corporate earnings From toys to tools and trucks, manufacturers tweak supply chains and plan price rises Andrew Edgecliffe-Johnson

onald Trump’s multifront trade battles are prompting warnings from some of the largest US companies that higher tariffs will squeeze their profit margins, force them to pass on the pain to suppliers and push prices up for consumers. An analysis of executives’ comments since the start of the second quarter reporting season shows that most US companies see little immediate impact from the trade actions announced by the Trump administration, most of which have yet to take effect, but makers of toys, tools and trucks have begun to take steps to respond. “This is a ver y dynamic situation that changes by the day . . . and we’re giving it substantial focus,” Honeywell chairman and chief executive Greg Lewis told analysts. With inflation accelerating in transportation, logistics and metals, the industrial conglomerate was adjusting its pricing “as necessary”, he said, and had begun evaluating “more structural solutions” to weather the tariffs over the longer term, including

finding new suppliers. “I think it’s going to be one of those things that goes through into consumer pricing,” cautioned James Quincey, chief executive of Coca-Cola, after the soft drinks group increased prices in response to increases in an array of costs, from freight to the metal used in Coke cans. Whirlpool also told investors it had raised its pricing in response to the “significant headwind” of steel and aluminium tariffs pushing up the cost of raw materials for its washing machines, and companies from Danaher to United Technologies said they were eyeing similar price increases. Stanley Black & Decker said higher prices had so far helped the tool maker fend off the effect of tariffs and unfavourable currency movements, but executives said they may still have to make changes to its supply chain should higher tariffs stay in place for the long term. Companies from 3M to General Electric expressed confidence in their ability to change their sourcing if needed, citing their diversified global supply chains. “Sometimes the hardest part is figuring out what the rules

are. But once it’s communicated, we can adapt pretty quickly,” said Scott Roe, chief financial officer of VF, the owner of clothing brands from Vans to The North Face. A few companies have spelt out the tariffs’ likely toll: the White House’s trade measures will cost Ford an estimated $500m-$600m this year, would cost GE $300m-$400m if it had taken no mitigating steps and are forecast to add $45m-$55m to Harley-Davidson’s 2018 costs, executives said. Harley, which last month drew fire from Mr Trump by shifting some production from the US after the EU targeted it in retaliation for US steel and aluminium tariffs, said it planned to keep the prices of its motorbikes unchanged. But that will put pressure on operating profit margins this year, for which it shaved its guidance by half a percentage point, to 9-10 per cent. The warnings come against the backdrop of an unusually strong earnings season for corporate America, despite other challenges including labour shortages, higher transportation costs and currency swings.

Kraft Heinz still hungry for ‘big brand’ purchases Food group’s shares jump on promise new products will help boost sales Mamta Badkar

he chief executive of Kraft Heinz said the food giant is still in the market to acquire “big brands”, even as it promised new products of its own would help it achieve sustainable sales growth. That promise — and the supporting evidence from better than expected revenues and earnings in its latest quarterly results on Friday — sent the company’s shares climbing as much as 9.4 per cent in early trading, on course for their best day in more than a year. Like its rivals, Kraft Heinz has

been struggling to reinvigorate sales to increasingly health- and cost-conscious consumers. It has responded by pushing new products such as Just Crack an Egg, a microwaved scrambled egg breakfast for consumers who want an alternative to cereal, and healthy pre-packed lunch boxes called Lunchables. “We believe we are now in a position to drive sustainable topline growth from a strong pipeline of new product, marketing and whitespace initiatives that are backed by investments in capabilities for brand and category advantage,” said Bernardo Hees,

Kraft Heinz chief executive. The optimistic tone came as second-quarter net sales rose 0.7 per cent from a year ago to $6.69bn, ahead of analyst expectations of $6.59bn, according to a Thomson Reuters poll. Organic sales, which strip out the impact of currency, acquisitions and divestitures, fell 0.4 per cent — better than the 1.9 per cent slide analysts had forecast. A 1.9 per cent drop in US organic sales was also shallower than consensus estimates of 3.3 per cent. “We saw consumption trends improve as Q2 unfolded,” Mr Hees said.

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Tuesday 07 August 2018

ANALYSIS Vienna becomes magnet for low-cost airlines Air Berlin’s demise sparks flight of European carriers to Austrian capital

ntil last August, Vienna airport had not been used to attention. But then the airport’s second-largest customer collapsed — and now it has become a battleground for Europe’s low-cost carriers. It is the demise of the Air Berlin Group, under €2bn of losses, that has been largely responsible for the airport’s new-found popularity as a clutch of carriers attempt to fill the void left by its collapse. Since last summer, Hungary’s Wizz Air and Level, IAG’s low-cost long-haul airline, have launched out of Vienna, while Lufthansa Group’s Eurowings and IAG’s Vueling have increased their flights from the Austrian capital. After a tortuous process, Ryanair took over Niki, which was part of the Air Berlin Group based in Vienna. Lufthansa then swallowed up the rest of Air Berlin. With easyJet establishing its European operations in Vienna in the wake of the Brexit vote, all of Europe’s major low-cost airlines are now operating out of Austria. But it is not just the fall of Air

Mr Jäger said the arrival of the low-cost carriers would lead to a 5 per cent growth in flights this year and 6 per cent in passenger numbers to 25.9m. Given that the number of flights to and from the airport had been gently dipping since 2010, this is an important change in direction. The booming tourist industry is another big plus for the airport. Tourism in Vienna grew 4.4 per cent to 15.5m overnight stays in 2017, according to the government. Vienna also has geographic charms for airlines, according to Mr Jäger, who pointed out that its catchment area contains parts of Slovakia, the Czech Republic and Hungary, and that it acts as a bridge between the continent’s east and west. However, it was the void left by Air Berlin that has been most significant, paving the way first for the Lufthansa Group to step up its operations and then for Wizz Air to establish a base in Vienna. Wizz Air plans to move three aircraft to the airport this year, accounting for 69 weekly flights. Last month, Level announced it would start flying from Vienna. Willie Walsh, chief executive of

Berlin that has prompted the rush to Vienna. A new incentive from the airport for low-cost carriers, an appealing regulatory environment and Vienna’s booming tourist industry have added to its appeal. David O’Brien, chief commercial officer of Ryanair, said the airport was “finally incentivising the basing of aircraft there”,although it remains to a certain degree a high-cost capital-city airport dominated by the Lufthansa Group and particularly its Austrian Airlines subsidiary. József Váradi, chief executive of Wizz Air, added that the airport’s management is now “far more commercial”, and thus willing to attract airlines, than earlier incarnations that relied on the Lufthansa Group, which carried 56 per cent of Vienna’s passengers before the collapse of Air Berlin. Julian Jäger, the airport’s joint chief executive, thinks it is the airport’s volume incentive that has impressed the likes of Mr O’Brien and Mr Váradi. This was introduced in January with the specific intention of attracting low-cost carriers: airlines that base at least three aircraft at Vienna and grow to more than 750,000 departing passengers a year receive a rebate of €540 per hundred people, with more favourable tiers of refunds as passenger numbers climb.

IAG, which also owns British Airways, said its four aircraft there would grow to 30. Ryanair’s involvement came through the complex and eventful purchase of Niki, now known as Laudamotion. This followed last month’s decision from the European Commission, allowing the airline to raise its share of Laudamotion from 25 per cent to 75 per cent, securing its ownership and position at Vienna airport. IAG, which had also been a bidder for Niki, said that despite not winning, it had been “overwhelmed by the support from the local market”,persuading the group to introduce Level there. However, Vienna has had its problems and controversies. Its rejected application for a third runway, later overturned by a higher court, remains contentious, in the eyes of some. Mr O’Brien, for example, is not convinced the third runway is anything more than “an unnecessary expense”, given that London Gatwick only has one runway and handled 21m more passengers than Vienna. Andrew Lobbenberg, analyst at HSBC, also raised the difficulties in making profits at the airport. “We have no doubt that all these carriers will make significant losses in Vienna,” he said in a recent note.

Josh Spero

‘The Tata Group is in safe hands,’ said Ratan Tata, the former head of India’s largest conglomerate © FT montage / Bloomberg

Tata ready to push forward after tumultuous 18-month legal battle New chairman aims to reinvigorate Indian group in wake of damaging boardroom feud Simon Mundy

hen Ratan Tata last Sunday addressed Tata executives at the conglomerate’s annual leadership conference, the 80-year-old group patriarch pointedly told them that the company had grown to $100bn in sales “not through mismanagement or unethical procedures”. To the assembled managers, the message was clear: India’s largest business group should now move on from the damaging controversy of one of its darkest episodes . On July 9, India’s National Company Law Tribunal ruled that holding company Tata Sons was within its rights to dismiss its chairman Cyrus Mistry in October 2016. Mr Mistry had swiftly launched a lawsuit against his ousting, and unleashed a series of allegations against the group. In its ruling, the court dismissed his claims of governance failings at the holding company and specific operating units, and of illegal interference in company affairs by Mr Tata during Mr Mistry’s brief tenure. Mr Mistry “should have been more careful in making allegations”, the ruling said. Mr Mistry — who had said from the start that he would take his case to the Supreme Court if necessary — immediately vowed to appeal, saying that he would bring fresh evidence to bear. “Subsequent facts and developments that continue to evidence oppression and mismanagement will be under scrutiny and will be pursued in full earnest,” he said. But Mumbai market watchers gave Mr Mistry little chance of succeeding in his legal campaign, and suggested that the group would now be able to move on even as it worked through the appeal process. “I don’t think it’s going to occupy the front pages any more,” said Prabodh Agarwal, chief financial officer of IIFL Holdings, a financial group. “Those allegations have been put to rest now. It’s really cleared the Tata name.”

The leadership conference where Mr Tata spoke marked the reopening of Bombay House, Tata’s headquarters. It had undergone its first renovation since 1924 on the orders of new chairman Natarajan Chandrasekaran— a project seen as symbolic of his broader mission to reinvigorate the group after a period of damaging distraction for the management. “The Tata Group is in safe hands,” said Mr Tata, who remains the chairman of the Tata Trusts, a group of charitable bodies that own 65 per cent of Tata Sons. Mr Mistry took over in December 2012 from Mr Tata, who had presided over two decades of dramatic growth since becoming chairman in 1991. His tenure was shortlived, lasting less than four years. While Mr Mistry said he was sacked for resisting interference by Mr Tata, the company said he had failed to pursue a clear strategy and dithered over key challenges. “Cyrus was too slow, probably not clear himself what was to be done,” one Tata company director said. In contrast, Mr Chandrasekaran — previously the chief executive of the conglomerate’s flagship business Tata Consultancy Services — has been seen as giving a new impetus to the group, settling some longstanding strategic headaches. Within weeks of taking over, he sealed an agreement in principle with NTT DoCoMo to end a bitter dispute over the Japanese group’s investment in struggling Tata Teleservices, paving the way for a sale of the telecom operator’s core business months later. Mr Mistry had come under fire from internal critics for not settling that dispute sooner. Another step forward for Mr Chandrasekaran came last September, when Tata agreed the merger of its European steel business with that of ThyssenKrupp — although the German group has since come under shareholder pressure to renegotiate. These talks began during Mr Mistry’s tenure, after Tata sparked concern in the UK by warning that its Port Talbot plant would have to be sold

if a buyer could not be found. Behind the scenes, Mr Chandrasekaran has shaken up the senior levels of the group, bringing in a team of former bankers to oversee the group’s finances, and replacing the leadership of some large units including the financial services and hotel businesses. “This guy doesn’t waste time,” one Tata company director said. “He’s bringing together people he can trust, and getting rid of people who are either not competent or who he finds difficult to work with. He’s getting across the message that weakness will not be tolerated.” Other insiders caution that Mr Chandrasekaran still has tough challenges ahead. One Tata insider warned that the group is still heavily loaded with debt at major businesses such as Tata Power, and that it still relies too heavily on TCS, which accounts for the clear bulk of group profits. “Siphoning cash from TCS is not something you can do forever,” the person said. Amit Tandon, co-founder of research firm Institutional Investor Advisory Services, said: “On account of the work Chandrasekaran’s been doing in the group, people are putting all that [ The legal battle] behind them. Investors are not . . . asking questions about the structure and so on.” Meanwhile, Mr Mistry’s family retain an awkwardly prominent position in the Tata ownership structure, with an 18 per cent stake in Tata Sons. And the ousted chairman’s public campaign has not been entirely fruitless. Two state agencies are pursuing investigations into an alleged “criminal conspiracy”, involving bribery of state officials, at Tata’s Indian joint venture with Malaysian airline AirAsia: one of the claims Mr Mistry pursued most vigorously. Among the suspects named in an investigators’ preliminary report was R Venkataraman, a close aide to Mr Tata and current managing trustee of the Tata Trusts, which own two-thirds of Tata Sons. Mr Venkataraman, Tata Sons and AirAsia have denied any wrongdoing.

BUSINESS DAY

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NEWS YOU CAN TRUST I TUESDAY 07 AUGUST 2018

Opinion My encounter with an Uber driver

OGHO OKITI Dr. Okiti is the president, Time Economics Ltd @ Dr_Okiti 081.7153.0058

ermit me to start with a confession – I was a late adopter of Uber. The reason is simple – I am not a techy person and I have always been a late adopter of any new technological developments. More so, I rarely require taxi services, but on the few occasions that I have (before Uber), I have found the Nigerian taxi set up and environment frustrating. So, for a little while, I have been enjoying Uber services, whenever I use them. But last week, I had a very interesting discussion with one of their drivers. The discussion started with my frustration at what I call our refusal to seek to make the right changes until they are forced on us. I have often been frustrated

by the sheer scale of the informal sector in the Nigerian economy. I believe the scale of that sector does not serve the Nigerian economy, nor the Nigerian people, including those engaged in it, well. I believe the scale of the informal sector means that millions of talented people, and their labour are being wasted. I also believe that it provides little room for growth in productivity. So, on our journey to the Island, from the Mainland in Lagos, I expressed my frustration that, neither the state government, nor the federal government, have been able to direct Nigeria’s vast economic activities away from the informal sector. While this time, the point was made in relation to the litter of small shops everywhere in Lagos, mind you, it is worse in Ibadan, where I grew up, it triggered one of the most basic economics discussion with a non economist. In response, he said that its impossible and difficult because that is what the people have always known. Then I started with my arguments. First, the statement “its what people have always known,

always done” is a resistant statement. It is said everyday in every circumstance to justify a refusal to make progress. However, I argued that there is nowhere that changes have come easy, and that I blame successive government for refusing to show Nigerians a better way. Foreign businesses, such as Uber, have been able to bring about positive changes that Nigerian government has failed to implement. After my initial arguments on the process of real change (not the one advocated by APC), he agreed that I was right and then went on to describe how he joined Uber. Now, follow how technology and its adoption disrupts established economic dynamics, lowers costs, improves productivity, create jobs, and better lives. According to him, a few years ago, he was a “car hire” service man, operating from Lekki, but lives in Orile, a distance of about 30 kilometres. He said he would normally leave Orile early on a Monday morning for Lekki, would work for about five days and return to Orile during the weekends.

During the week, while working in Lekki, he would sleep in the vehicle every night and wake up as early as 4am to freshen up for the day. But what I found very interesting is that, because it was a hire service, he and his colleagues would take turns and were rarely busy. Also, as would be expected the fares were relatively high, targeting only the well-off people in the Lekki axis. He and his colleagues maintained this routine for many years until Uber came. When Uber came, he told me, their economic activities started to decline, but it took a while for them to notice it, and then trace the cause. But eventually they did. Initially, they were very dismissive of Uber. They argued that it would close and leave Lagos within six months, since it was not sustainable. They also argued that Uber was all about the hype, and would soon realise that Nigeria is not ready for them. But few weeks after continuous condemnation of Uber, one of them joined. They called him to ask why he was no longer coming to the park, and he told them he had joined Uber.

Few weeks after, he (my Uber driver) was convinced to make enquiries and, as they often say, the rest is history. Now, there is resistance to Uber everywhere, even in developed countries, but I will like to focus on Nigeria. Prior to Uber, there were serious issues with Nigeria’s taxi business that made it easy for Uber to quickly assume a major role. First, Uber removes the haggling side of Nigeria’s taxi business. I have always found this bit very frustrating. Indeed, it usually gets so bad because in a place like Lagos, the driver will want to change fares midway, perhaps thinking he had originally been short changed. This creates uncertainty for the passenger. Tied to this is that Uber allows you to pay with your card and therefore in most cases, reduces the need to hold cash. But most importantly, the platform, by providing connection between drivers and passengers, reduces what we economists call “search costs”, in this case, the time both spend looking for each other. More importantly, before

Uber, taxi drivers were idle most of the time. This drives the economics of the taxi industry. In order to pay for their long periods of idleness, taxi drivers often charged the few customers that they were able to get higher prices, even though their vehicles are without air-conditioning, sometimes dirty, and passengers often feel uncomfortable. Uber has made it possible for drivers to utilize their time more efficiently, which allows them to charge passengers less by providing scale. Of course, there is still significant resistance, especially at the Abuja airport, where it is not unusual for the drivers to make one trip in two days. The model is weak. In conclusion, we can change things in this country, we can change our environment, and we can certainly change our approaches to business and technology. This will bring benefits to the country and its people. Just ask my Uber driver, who now goes home everyday to see his family, while making more money than he did few years ago. I thank you.

China’s debt threat: Time to rein in the lending boom MARTIN WOLF Wolf is the Chief Economics Commentator of The Financial Times.

f something can’t go on forever, it will stop.” This statement by Herbert Stein, chairman of the US council of economic advisers under Richard Nixon and Gerald Ford, tells us that debt cannot grow faster than an economy forever. That is going to be true for China, too. What we do not know is when and how it will end. Will it be sooner or later? Will it be easy to cope with or will it be devastating? The manageability of China’s enormous domestic debts will be of great importance, not just for China, but for the many economies whose exports depend on it. We cannot yet know how the debt surge will end. But we do know how it started. The trigger was the global financial crisis. Between early 2004 and late 2008, Chinese gross debt was stable at between 170 and 180 per cent of gross domestic product. This was higher than in other emerging countries, but not much higher. This seemed manageable. Then, in 2008, came the meltdown of the western financial system and subse-

quent deep recession in highincome countries. China responded with a huge investment programme amounting to some 12.5 per cent of GDP, probably the biggest ever peacetime stimulus. The challenge confronting Beijing was to offset the impact on demand of a fall in China’s net exports of 6 per cent of GDP between 2007 and 2011. In 2007, net exports had been close to 9 per cent of GDP. Since this was neither economically nor politically sustainable, the fall was permanent. Such a decline in net external demand needed a permanent offset. Given the structure of the economy and the levers in the hands of the authorities, only investment could be increased quickly enough and on a large enough scale. As a result the share of gross investment in GDP soared from an already extremely high 41 per cent of GDP in 2007 to 48 per cent in 2010. This huge investment boom maintained measured growth at close to 10 per cent after the crisis. It also led to a huge and sustained surge in debt, predominantly to non-financial corporations, including off-balance sheet local government financing vehicles. But ominously, far from raising China’s underlying rate of growth, a marked slowdown followed. In the longer term, China’s raised investment rate has delivered the disturbing

combination of more debt and slower growth. According to the Institute for International Finance, between the fourth quarter of 2008 and the first quarter of 2018 China’s gross debt exploded from 171 to 299 per cent of GDP. A simple measure of the efficiency of the investment is the incremental capital output ratio, which measures the ratio of the investment rate to the growth rate. Until the crisis, the ICOR had not exceeded four for any sustained period. Ever since 2011, it has been close to six. It was as though the highincome countries had passed the credit baton to China. For Beijing, this response to the financial crisis had an additional drawback — distracting it away from a necessary rebalancing of its economy. In 2007, then premier Wen Jiabao declared that China’s growth was “unstable, unbalanced, uncoordinated and unsustainable”. In that year, net exports were 9 per cent of GDP, up from 2 per cent in 2000, investment was 41 per cent of GDP, up from 34 per cent in 2000, public and private consumption were a mere 50 per cent of GDP, down from 63 per cent in 2000, and gross debt was 174 per cent of GDP, up from 146 per cent in late 2000. By 2017, net exports were back down to 2 per cent of GDP: that did represent a rebalancing. But investment was still higher than in 2007,

at 44 per cent of GDP, private and public consumption was still only 54 per cent of GDP and debt had soared to three times GDP. In sum, the rebalancing of China’s external accounts came at the cost of still greater domestic imbalances. So what happens now? There are four conceivable possibilities: a crisis, followed by lower growth; a crisis, not followed by lower growth; no crisis, but reduced growth; and no crisis and no reduction in growth. In a paper published in 2010, Moritz Schularick of the Free University Berlin and Alan Taylor of the University of California Davis argued that “credit growth is a powerful predictor of financial crises”. This finding was from a database of 14 high-income countries. Yet a paper by Sally Chen and Joong Shik Kang of the IMF, published this year, argues that the evidence also applies to China, saying: “China’s credit boom is one of the largest and longest in history. Historical precedents of ‘safe’ credit booms of such magnitude and speed are few and far from comforting.” This analysis suggests that a crisis of some kind is likely. The salient characteristics of a system liable to a crisis are high leverage, maturity mismatches, credit risk and opacity. China’s financial system has all these features. Among other things, China has a shadow banking sector, though a study by the Bank for International Settlements

argues that “securitisation and market-based instruments still play only a limited role”. It is, in all, less complex and more directly connected to the banks than the US system was. So why might the outcome in China be different than elsewhere? One answer is that the high indebtedness is just a result of China’s extraordinarily high savings rates. But its national savings rates were already very high before the crisis, when the levels of indebtedness were not exploding. Another proposition is that the rapid credit growth simply reflects normal expansion in the provision of financial services. But the IMF paper notes: “The leverage ratio in China is significantly higher than in countries with similar levels of development.” It could also be argued that China is a creditor nation with a controlled capital account. That makes it relatively invulnerable to a run by foreign lenders of the kind familiar to observers of financial crises in emerging economies. Yet financial crises are possible in countries that are relatively immune to such runs: Japan in the 1990s is an example. Another response is that China’s banking system has a lower ratio of credit to deposits than those of most countries that have experienced funding crises. But

this ignores non-loan assets. In China the ratio of non-loan assets — assets other than conventional bank loans — to total assets was 50 per cent in 2016, a relatively high level. This is one indicator of the scale of China’s shadow banking system. It is also asserted that the financial system’s assets are relatively sound. True, lending to non-financial corporate borrowers accounted for just over a half of the increase in debt between late 2008 and early 2018. But the quality of much of this lending is questionable. Moreover, “if debt is rising, but GDP is not, then the payment capacity is deteriorating”, the IMF paper argues. The strongest reply is that the government is powerful and has a well-run central bank, effective control over the banking system, ownership of vast domestic and foreign assets, untapped fiscal capacity and tight controls over transactions with, and by, foreigners. If it were determined to protect the financial system from collapse it could do so. But if gross debt were to rise above 400 per cent of GDP over the next decade, even that would be less certain. Note: The rest of this article continues in the online edition of BusinessDay @ https://businessdayonline. com.

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