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news you can trust I ** monDAY 07 september 2020 I vol. 19, no 645
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Lafarge, Transcorp, Seplat, others emerge winners at BusinessDay Top CEOs & Next Bulls Awards MERCY AYODELE
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Continues on page 31
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*NTB - Nigerian Treasury Bills; *CP - Commercial Paper
No pain, no gain: Why ending subsidies is right way for Nigeria ight years ago, Mark James (not real name) was one of the people who lined the streets of Lagos carr ying placards in protest against Federal Government announcement on January 1, 2012, that it was quashing a 30-year-old petroleum subsidy that was both expensive as it was wasteful. James, a middle-aged civil servant, and a hoard of other protesters succeeded in giving the wasteful subsidy a new lease of life, and they are raring to go again this year. That is following the government’s latest resolve to end the practice that has culminated in the pump price of petrol rising
FGN
Spot ($/N) 25-Feb-21 5-Mar-21 23-Jul-30 30-Apr-25 20-May-27 27-Feb-34
$-N 450.00 466.00 1m £-N 600.00 616.00 Currency Futures 30-sept-20 389.54 €-N 540.00 554.00 ($/N)
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Benchmark Sovereign & Corporate Bonds
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inners have emerged in the BusinessDay Top CEOs & Next Bulls Awards 2020 organised by BusinessDay Media in collaboration with the Nigerian Stock Exchange (NSE). The Award, now in its sixth Continues on page 31
Inside
Insurers see rise in claims, as businesses face high credit default in COVID-19 P. 2 L-R: Osarodion Ogie, director-general, Edo State PDP Campaign Council; Godwin Obaseki, governor, Edo State/governorship candidate of the PDP; Richard Osaigbovo, Enogie of Ukhiri-Eresoyen, and Philip Shaibu, deputy governor and running mate, during the governor’s visit to the traditional ruler, in Uhhiri-Eresoyen, Ikpoba-Okha Local Government Area.
Fidelity Bank H1 profits up 22% as gross earnings hit N105.8bn P. A6
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news Declaration of 2020 year of gas, evidence shows it is truly underway ISAAC ANYAOGU
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ome forward-looking gas policies by the Federal Government are creating opportunities for industries, as Timipre Sylva, Nigeria’s minister of state for petroleum resources,
retail outlets will offer a full complement of gas products as transportation fuels in addition to existing white products as a cheaper cleaner and more environmentally friendly alternatives,” said a speech read by Justice Dere-
Analysis
has dispatched his personal cars to turn them into dualengines capable of running on gas. To this effect, all NNPC retail outlets have been directed to offer a full complement of gas products as transportation fuel, indicating that the year of gas is fast gathering steam. After years of treating gas as an irritant in the quest for liquid gold (oil), the coronavirus pandemic, which has traumatised businesses globally leading to shut down of factories and farms, has also reduced oil prices to levels not seen in two decades, Nigeria is finally smelling the gas. Last week, the Ministry of Petroleum Resources held its third quarter 2020 Ministerial Mandate Performance Scorecard Review session of the minister of state petroleum resources, the permanent secretary and chief executive officers of agencies as well as other initiatives of the Ministry, and the insight provided points to a new national engagement plan with gas. The Federal Government through the National Gas Expansion Programme (NGEP), designed to expand domestic gas supply and stimulate demand in-country, is advancing policies that will tackle challenges with Nigeria’s gas sector including poor fiscal terms, lack of marketreflective prices and poor infrastructure as well as providing opportunities for local companies. Sylva in his address said the ministry had recorded positives in these projects - Nigeria Gas Flare Commercialisation Programme (NGFCP), National Gas Expansion Programme (NGEP), flag off of the National Gas Transportation Code, Marginal Field Bid Round, flag off of the construction of the Ajaokuta-Kaduna-Kano (AKK) gas pipeline and setting up a committee on Gas SectorWide Review of the Domestic Gas Pricing Framework. Autogas development (LPG, CNG & LNG) for automobiles The ministry says plans have reached advanced stages in line with ministerial directive and support for the development of liquefied petroleum gas (LPG), compressed natural gas (CNG) and liquefied natural gas (LNG) colocation in NNPC owned and operated mega stations in the 36 states and the FCT. “Under this arrangement
faka, technical adviser to
the minister on behalf of Mohammed Ibrahim, chairman of the NGEP, in the office of the minister of state. According to Derefaka, the NNPC and mega retail outlets owners and equipment providers are fully on board in this objective and measures are in place to achieve a roll-out of this programme by end of September 2020, using select NNPC owned outlets as pilots. Promotion of conversion initiatives for gas-powered vehicles The ministry says it is engaging large fleet owners, Nigerian Governors’ Forum, local governments, conversion companies and dispensing facility owners to collaborate in the conversion and establishment of refuelling facilities nationwide, leveraging already existing pipelines and mother stations to reduce the burden of conversion on consumers, which is a major impediment to auto gas development. To tackle gas facility deficit, companies engaged in virtual gas movement have been mobilised to ensure the development of a virtual gas grid that can serve the emerging domestic gas market and a rollout is expected by October 1. The ministry has drawn up a dual fuel engine importation and domestic manufacturing policy, which if approved will be issued in January 2021 through an Executive Order. “This will compel all engine imported or manufactured domestically to comply with the dual-fuel requirement as it is done in many other countries that have made significant progress in auto-gas utilisation. This will imply that all engine imports or manufactured domestically must comply,” the ministry states. The ministry notes that in the days ahead building up to the roll-out, parastatals under it will be presenting designated vehicles for dual fuel conversion. Abner Ishaku, technical adviser on downstream to the deputy minister who also oversees CNG initiative, said the NGEP had organised series of engagement with major stakeholders: Major Oil Marketing Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Auto Mobile Assemblers, Nigeria Railway Corporation, and others to discuss among stakeholders the use of CNG as an alternative fuel for Nigerians. www.businessday.ng
Lack of stakeholder coordination, improper value chain integration stall intervention programmes – farmers Josephine Okojie & Caleb Ojewale
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ack of coordination among various stakeholders in the agriculturalsectorand improper value chain integrationhasexposedthelimitations of the Federal Government’s agricultural intervention programmes, farmers say. The farmers, who spoke during a webinar last week at the fourth edition of the BusinessDay’s Annual Agribusiness Summit with the theme ‘Interventions-at-Risk: The Outlook for Smallholder Farmers’ Assistance, Empowerment, and Integration,’ say the Agricultural Promotion Policy (APP) did not deliver in boosting farmers productivity as the programme terminates later in the year. They call for synergy between the agriculture ministry, the Central Bank of Ni-
geria (CBN) and farmers to ensure that interventions get to the appropriate players. “The Anchor Borrower Programme (ABP) did not engage the real farmers because there is no proper stakeholder coordination,” noted Ibrahim Kabiru, national president, All Farmers Association of Nigeria. “The CBN has shown the world that it is committed to agriculture but it must work closely with stakeholders to achieve results. Farmers do not get the right quality of inputs under government intervention programmes and this hinders productivity,” Kabiru said. Nigeria had in 2016, launched the APP drafted to drive growth in the sector by boosting farmers’ productivity and attaining food security. Africa’s most populous country still has one of the lowest yields per hectare when compared with its Af-
rican peers in major staple crops, despite having agriculture as the main thrust of all its programmes. Nigeria’s yield per hectare for rice is two, whereas it is three for Ethiopia, 2.8 in South Africa and 4.2 in Kenya, data from the Food and Agricultural Organisation show. “There is no meter or parameter to gauge the success of intervention programmes if we stillcannotfeedourselves,”Nasir Yammama, CEO, Verdant said. “There is still no proper value chain integration for us to drive our agriculture and boost productivity,” Yammama said. He called for the involvement of the country’s National Seed Council in the management of key inputs distributed to farmers under intervention programmes. Sadiq Kassim, general manager- corporate affairs,
TGI Group, said there were challenges in intervention programmes but there was still room for expansion and impacting farmers’ livelihood. The government has made some progress in its intervention programmes, especially in the area of rice production but more focus should be given to other crops in its new proposed policy, Kassim said. “Our rice processing five years ago was less than a million metric tons but now we have a capacity of above three million metric tons,” he said. Speaking on the way forward and what the government should improve upon in its new proposed policy that will take over APP, Ikechi Mgbeoji, commissioner for agriculture, Abia State, said concentration of the activities of intervention programmes should be shared evenly across each geopolitical zones.
L-R: Adeyeye Ogunwusi, O’oni of Ife; Ibijoke Sanwo-Olu, first lady of Lagos State; Bola Tinubu, APC national leader; Abdulwasiu Lawal, new Oniru of Iruland, and his wife Mariam, during the coronation of the 15th Oniru of Iruland, in Lagos State, yesterday. NAN
Insurers see rise in claims, as businesses face high credit default in COVID-19 Modestus Anaesoronye
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ovid-19 pandemic and its attendant pressure on health infrastructure may not be all that is left to bear at this time, but also that businesses affected by the new normal are defaulting in meeting credit obligations. This incidentally is falling back on insurance companies that gave credit guarantees for these facilities, as they are currently witnessing unprecedented rise in claims from this area of business. Credit insurance is an insurance policy and a risk management product offered by private insurance companies to business entities wishing to protect their accounts receivable from loss due to credit risks such as protracted default, insolvency or bankruptcy. It also pays off an outstanding debt in the event of the policy holder’s death, disability, or termination of employment.
Augustine Ebose, managing director/CEO, Anchor Insurance Company Limited, says the impact of the pandemic on the insurance services could be felt in areas like high claims demand and credit risk exposures from businesses facing possible default. This has added to numbers of claims being recorded by operating companies at this time, Ebose states, listing other affected areas of insurance to include travel insurance and interruption insurance policies. He however notes that Nigeria insurers are already aware of this trend, and so have developed and perfected quick ways to pre-empting any challenge the pandemic throws at the businesses this time. Funmi Babington-Ashaye, managing director/CEO, Risk AnalystsInsuranceBrokersLimited, who also points out credit defaultasonetheincreasesatthis time of pandemic, says insurers are experiencing rise in claims. According to BabingtonAshaye, organisations are de-
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faulting in meeting their credit obligations, particularly loans, and this will fall back on insurers that provided default guarantee. Fitch Ratings, an international credit rating agency, had reported that Nigerian banks’ credit profiles face severe risks from the oil price slump and operating environment disruption due to the coronavirus pandemic. The ratings agency attributed the lenders’ asset quality deterioration due to high exposures to the oil and gas sector
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as the biggest threat to ratings. It noted that the nation’s operating environment risks had been accentuating when oil prices fell, especially when Nigeria crude oil exports represent 95 percent of the country’s export revenue, strongly influencing the broader economy. The rating agency stated that operating environment risks were compounded by economic and financial market disruption amid measures to counter the pandemic, putting pressure on all borrowers.
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Resilience [forging ahead] – long-standing grievances, worsening socio-economic crisis
Bashorun J.K Randle
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ven athletes have longstanding grievances as exemplified by the following publication on the front page of “The Republic” newspaper thirty years ago. Headline: “Victor Edet turns his back on Nigeria” “The treatment meted out to some U.S. based athletes who represented the country in the last Olympics in Seoul is still fresh in the memories of some of those concerned. One of the athletes, Victor Edet who ran the best time in the 4 x 100m event in Seoul has vowed that he would never wear the national colours again. I have nothing to do with the green white green colours anymore. I would never wear them again. I am not proud to be a Nigerian anymore because we don’t know how to treat our people. Our athletes are treated as if they are animals, not human beings”. Victor who is a student of Ohio University U.S.A. noted that during the Olympics while other countries were paying their athletes to train instead of racing all over Europe, Nigeria did not bother to ask her athletes how they were preparing. Victor’s bitterness stemmed from the fact that their allowances were withheld by NSC; (National Sports Commission) was resulting in their borrowing money in order to
return to their base. He warned that people should not be surprised if they hear that he had taken an American citizenship. “They, at least, know how to treat their athletes. I will only come to Nigeria on visits but not to stay permanently and never to run again.” Victor Edet is not alone in his being disillusioned by Nigeria. He is in good company having regard to the following “Breaking News” on CNN: “Nigeria’s former Minister of Petroleum Resources (from 2010 –2015) Mrs. Diezani Allison-Madueke, who is in exile in London says societal values have disintegrated to the extent that online fraudsters otherwise known as “Yahoo Boys” have become role models in Nigerian society. Diezani said this while delivering a lecture at a virtual event which was also attended by her former boss, exPresident Goodluck Jonathan. Speaking at the event which was organised by the Ijaw National Development Group, Diezani stressed the need for mentorship of Ijaw youths.” In order to ensure that Professor Gambari is not unduly dismayed, we should remind him that at King’s College, Lagos both Christians and Muslims jointly recited, in the Assembly Hall: “Let us sing the praises of famous men, and our fathers who begat us, through whom the Lord established his renown and revealed his majesty in each succeeding age. Some held sway over kingdoms, and made a name by their exploits. Others were sage counsellors (Chief of Staff !!) who spoke out with prophetic power. Some led that people by their knowledge of the nation’s law; out of their fund of wisdom and gave instruction. All these won fame in their own generation, and were the pride of their homes. Their prosperity is handed on to their descendants, and their inheritance to future generations. Thanks to them their children are within the
covenants - the whole race of their descendants. Their line will endure for all time, and their fame will never be blotted out. Their bodies are buried in peace, but their names live forever. Nations will recount their wisdom and God’s people will sing their praises.” Rather than be burdened by the premonition of danger and unpredictability in the face of the COVID-19 pandemic, compounded by nostalgia for bygone certainties, we have been offered solace by George Orwell (1903 – 1950) “The future is a boot stamping on the human face forever.” However, we cannot ignore the warning by T.E. Lawrence (1888 – 1935): “A man who dreams with his eyes open is a dangerous man. His anger is a cold and calculating one. He knows the quarter to direct his pent-up fury and he is more dangerous because he is highly educated.” This is the juncture when the focus should shift from the esoteric or eclectic to more practical issues. The late Professor Bisi Ogunfowora hit the nail on the head: “Nigeria is predominantly an agricultural country. Before the advent of oil, agriculture provided the bulk of the foreign exchange earnings; generated employment for over 90 per cent of the population; and supplied the national food and fibre requirements. The oil boom of the 1970’s marked the beginning of the gradual neglect of agriculture with consequent decline in agricultural production and productivity. The deteriorating performance of agriculture is reflected by: i.) Declining share of agriculture in gross domestic product (GDP); ii.) Declining share of agriculture in total export earnings; iii.) Rising rate of food in total import bill; iv.) High rate of increase in food price inflation;
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Victor Edet is not alone in his being disillusioned by Nigeria
v.) Excessive rural-urban migration that depleted rural labour force.” We have to thank Dr. Samuel Johnson (1709 to 1784) for his homily: “Poverty is a great enemy of happiness; it certainly destroys liberty, and it makes some virtues impracticable, and others extremely difficult.” We should also beam the searchlight on our social fabric and at society itself, guided by Friedrich Engels’s (1820 to 1895) summation: “The criminal statistics prove that a social war is being waged more vigorously, more passionately, and with greater bitterness every year.” Perhaps that is what prompted Prince Phillip, the Duke of Edinburgh to declare in the manner of a cricket umpire: “As for British society, we are confronted with an avalanche of lawlessness which is threatening to engulf our civilization.” He promptly resigned from active Royal Service!! Professor Gambari is by nature, disposition and temperament a man of peace as demonstrated by the number of peace-keeping missions he supervised during his career at the United Nations. However, here and now he is at the war front – actually, several war fronts. On its front page, the BusinessDay of today has as its headline: “These eight numbers capture Nigeria’s worsening socio-economic crisis.” “Rising inflation, a contracting economy, increasing poverty levels, plunging currency value and an ongoing pandemic amid a faulty health system can summarise the pains of people in Africa’s most populous nation.” J.K. Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN) and former Chairman of KPMG Nigeria and Africa Region. He is currently the Chairman, J.K. Randle Professional Services. Email: jkrandleintuk@gmail.com
Is it time for interest free banks to blossom?
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n my intervention on the subject matter of interest rates, especially as it pertains to Nigerian depositors (see Business Day, Tuesday, 01 September 2020, p.9), it became clear that this is not the best of times for depositors as they appear to be holding the short end of the stick. For deposit money banks (lenders), are they actually holding the long end of the stick? As the majority of them earn their bulk revenues through interest incomes, the pertinent issue to interrogate is how they are faring given the conscription in the interest regime space as occasioned by plethora of Central Bank of Nigeria (CBN) policies and initiatives. Time was when many banks were content with deploying most of their deposit liabilities to CBN’s treasury bills and other such investments and reaping bountifully thereafter. Not anymore! Today, deposit money banks are required to maintain a loan to deposit ratio of 65 percent. Failure to comply attracts severe debiting of their accounts with the apex regulatory institution. In addition, they are required to maintain liquidity and cash reserve ratios at 30 percent and 27.5 percent respectively. The anchor rate – the monetary policy rate (MPR) - remains at 12.5 percent. What the CBN had sought to achieve through moral suasion all this while, namely lending to the real sector of the economy, it has deftly done through this
deliberate policy. Even if deposit money banks are to rely heavily on government instruments for the bulk of their revenues as they were wont to, the rates are today abysmally low. From double digit rates the instruments used to attract, they are today below half of 10 percent. Save for the 364day Treasury bill that attracts about 5.3 percent (a little above half of 10 percent), others are below half of 10 percent. A 182day instrument of the same complexion, for example, attracts about 3.78 percent whilst the popular 91-day instrument attracts just 2.49 percent. This is in an era the inflation rate as recently released by the National Bureau of Statistics (NBS) for the month of July has peaked at 12.82 percent - the 11th straight month of such increases! What is true of Treasury bills applies mutatis mutandis to other instruments like the Federal Government of Nigeria (FGN) Bonds, Euro and Diaspora Bonds. With the grim picture starring many deposit money banks that rely heavily on interest incomes for their revenues, what is the strategic position of interest free banking institutions in the emerging scenario? Are they the Daniels that have come to judgment, in a manner of speaking? Is it their time now to blossom? True, many Nigerians are yet to understand the concept and philosophy behind interest free banking in contra-distinction www.businessday.ng
to the conventional banks whether Commercial, Merchant, Development or Mortgage. That there are about just two of such banks existing today in Nigeria, with one – Jaiz Bank Plc – quoted on the Nigerian Stock Exchange (NSE) eloquently buttresses the point. To some that want to make any meaning out of the concept, it simply refers to Islamic banking (that abhors usury) by another name! But interest free banking goes deeper than that. It simply connotes a system where customers of the bank involved in the practice are regarded as partners. In other words, instead of lending money to such customers and amortising the loans, the bank pools resources from its customers (read partners) and invests in a business/project of which it is part of by taking part of the equity. The bank participates in the running of the venture. If profit is realized, it is shared according to predetermined ratio(s). Equally, losses are not spared! Is it not safe for one to insinuate that by requiring deposit money banks to maintain a loan to deposit ratio of up-to 65 percent, the apex financial institution is encouraging the blossoming of the existing free interest banks and the coming on stream of new ones through the back door? Fortuitous promotion by the CBN may be another way of looking at the emerging scenario!
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Emeka Okolo
In an economy where conventional banks are pursuing halfheartedly the policy of lending massively to the real sector in order to promote industrialisation and curb the growing unemployment level which at the last count as released by the National Bureau of Statistics (NBS) stands at 27.1 percent, the strategic position of interest free banks cannot be over-emphasized. By directly participating in business ventures, interest free banks can no doubt contribute to the technical aspect of these businesses, thereby enhancing their profiles, aside from reducing the unemployment rate in the country. The so-called disruptive aspect of the CBN policy of LDR of 65 percent may actually turn out to be the building blocks needed in constructing new interest free banks and strengthening the pillars of the existing ones. Dr. Okolo is a Chartered Stockbroker and Management Consultant based in Lagos.
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The futility of Americanising Africa’s political discourse
David Hundeyin
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n 2014, I was a regular on a construction forum website called Skyscrapercity.com. The Nigerian section on the site had a busy political discussion board where fellow regulars would congregate to discuss the coming election after cooing over construction photos of mega-projects from around the country. Broadly, the posters on this board were divided into two - those who believed that Nigeria was nowhere near political maturity after just 15 years of democracy, and those who believed that Nigeria had developed a solid two-party system like in the U.S. A poster openly asserted in fact, that Nigeria not only had a solid 2-party structure, but also had a welldefined political spectrum with “conservatives” and “progressives.” PDP was the “conservative” party because it apparently was the entrenched political power, while the newly formed APC was the “progressive” party, possibly because it had the word “progressive” in its name. It seemed incredible to me that anyone would look at a new party dominated by decampees from the old one, and then conclude that they both somehow developed Americanstyle economic and social ideologies overnight, but I was in the minority. Needless to say these days, the board is almost entirely desolate as the events of the past 6 years have put paid to any such fanciful notions of Nigerian political maturity. However, the underlying problem behind such thinking still persists in Nigerian and continental economic and political discourse - an obsession with forcing ill-fitting American socio-political paradigms on our African situation. This
can be especially observed nowadays with the resurgence of 1960s-era Pan Africanist sentiment and wholesale copying of American trade dispute tactics. American-style Pan Africanism - an idea past its sell by date At a time when racial and cultural conflict in the U.S. is at its 21st century high and the internet has made it such that someone in Johannesburg has the same ability to interact with American news and discussions in real-time, it is very easy to quite literally forget that one is on a different continent halfway around the world, with a completely different social paradigm and a unique set of problems. The resurgence of independenceera Pan Africanist sentiment on the African continent over the past decade has coincided perfectly with the rise of public racial conflict in the U.S. This is no coincidence. As an African, it is hard to read news stories, watch social media videos and interact with real time conversations about the real sufferings of the African American population without feeling a significant amount of emotional connection to their historical and present situation. Apart from retaining a significant amount of cultural alignment and an obvious genetic relationship with the African American people, we also had our experiences at the hands of a hostile dominant power within our parents’ lifetimes. Many of us born in South Africa and Zimbabwe may have even experienced what life under an amped-up version of the American-style racial caste system is like in our own lifetimes. In fact, this convergence of experiences is what birthed Pan Africanism in its original form if traced back to Marcus Garvey in the early 20th century. It is what birthed the African independence movements led by Sekou Toure, Amilcar Cabral, Kwame Nkrumah and Obafemi Awolowo, which worked hand-in-glove with the American civil rights movement led by the likes of Rosa Parks and Martin Luther King. Viewing the African condition through the same lens as the African American condition made sense at the time and it played a useful role in achieving the twin aims of unshackling the continent from colonial tethers and obtaining full personhood for
black people in the United States. The problem however, is that everything I have just described took place more than 5 decades ago. The world has changed in that time, but the Pan Africanist doctrine has not. This doctrine, which centres “white supremacy” as the existential enemy of African life and achievement, no longer applies to the African continent. The African continent is no longer under the administrative control of anyone but itself. There is no longer a white colonialist hate figure controlling government policy, education, public spending, infrastructure development, trade policy, elections, monetary policy or personnel appointments. Africans themselves are in charge of their own destiny now. ‘White Supremacy’ is a real problem - just not an African one By all accounts, we are doing a terrible job of it but the situation is still very much recoverable. Despite the many obvious failures of 60 years of African leadership, the continent does in fact have many things going for it which give cause for hope and optimism. Africa is home to the world’s youngest population with a median age of 19.7, and the world’s fastest growing urban middle class. We also have a unique advantage of being a continent that has the sheer land mass to feed and support even double its current population, the natural resource inputs for any kind of development and potentially the human resources to power said development. If we can put the right continental trade policies in place and make the right investments in education and infrastructure, we are a huge success story waiting to break out. The big problem with imposing an American-centred one-size-fits-all lens on our socioeconomic discourse is that it completely ignores this obvious ability to impact our own destiny and erases our agency. It instead outsources all responsibility and blame to the convenient scapegoat of white supremacy, as though an independent African nation and a black inner-city neighbourhood in Houston share the same problems. In fact, if an African country elects competent leadership which institutes growth-oriented policy and
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There is no longer a white colonialist hate figure controlling government policy, education, public spending, infrastructure development, trade policy, elections, monetary policy or personnel appointments. Africans themselves are in charge of their own destiny now
Hundeyin is a writer, travel addict and journalist majoring in politics, tech and finance. He tweets @DavidHundeyin.
Reasons why you can’t save money
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lot of us find it burdensome to cultivate this habit of saving money. The first thing which may have come to your mind is that you don’t have enough money to save. If you think this article is about to further highlight that, you’ll be surprised to find that how much you earn, is not to blame this time. What other reasons might cause you to find yourself on this side of the savings wall? Your taste keeps increasing You probably first complained that you weren’t earning enough for starters and couldn’t possibly save any money. Now you got a raise or business started booming and you still wind up broke! It’s probably because you started overindulging in the finer things in life- expensive clothes, hair, restaurants, jewelry, luxury cars or whatever the case may be. All this while, you could have increased your net worth - the value of these things depreciates with time. Start building your liquid asset base with an investment account that doubles as a way to save money and learn to
find satisfaction in the simpler things. You keep comparing yourself to others So, you’re the only one in your group who isn’t driving a Camry, so you’ve not been to all the expensive places and so what? If you can afford it easily, without debt or risk of going broke, go right ahead to spend as you wish. But if you know that you cannot, please stop yourself before it’s too late. Envy is a deadly sin which makes people do very bad things. You have poor spending habits As soon as money gets into your account, you can’t seem to keep things calm right? When you splurge on frivolities and completely forget about your bills or personal goals, the result is an extravagant lifestyle without the funds to keep it up. While it may not happen overnight, your habits determine the quality of your life. Consider taking short classes on personal finance management or downloading simple personal finance tools to help you navigate your expenses. You procrastinate You don’t pay yourself first. Take a certain www.businessday.ng
percentage of your salary, and allocate it to savings- savings is for you and all your big plans. Think of it as your mini salary. The remainder is what you’ll be left with to use for bills and other expenses. Bad savers are often procrastinators, so they continuously tell themselves they’ll save later. Set workable reminders to do this every month if need be. You are way too nice Are you the family ATM? Do you freely lend money to anyone who asks? It would be harder to save money if you honestly try to keep up with every demand people around you have. Work to get over your fear of being seen as the “bad guy”, and practice saying “no” every now when it is unhealthy and detrimental to your peace of mind. Work out how you plan to lend money, especially if you know that the money is unlikely to come back. If it helps, decide a working percentage of said amount that you are comfortable losing. If your life has been so great for you moneywise, you probably won’t think much of savings but if your life is sort of unpredictable and
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liberalises the political and economic spaces, the resultant prosperity and freedom will make white supremacy an academic point for its citizens. African countries do have that power to positively affect the lives of their citizens - with or without the say-so of the white bogeyman. In other words, the political goals of the African half of the 1960s ideology have already been won – we now need to focus on creating wealth for ordinary Africans by opening up and streamlining our economies with each other across the continent. It would be a huge mistake to interact with our African problems through the prism of those whose primary day-to-day struggle involves fighting against a perceived external enemy. Similarly, with regard to American trade politics, especially its ongoing China trade war, it is very unhelpful to view such actions as templates for running an African economy. What African economies need above all else is increased trade volumes and velocities, not protectionist tantrums that may have little impact on the world’s top 2 economies, but will almost certainly multiply poverty and human suffering here. The type of interaction we should have with the U.S. involves plugging into its giant economy and other elements that will be useful to us. We should pick individual aspects of America’s economic and political paradigm such as Trade liberalisation which leads to private wealth creation, a democratic open society, religious pluralism, ethnic diversity and enhanced social freedoms Modern day continental Africans by and large, have scaled the second tier of Henry Maslow’s hierarchy of needs, while paradoxically failing to get past the bottom tier. Those whom some of us try to copy have done the reverse. Copying them can only lead to inadequate results. What we need is inward-focused politics and outwardfocused economics. We do not need America’s ill-fitting social theories any more than they need our poverty and lack of economic growth.
Money Brain with
JR Kanu cash is not so abundant, just one emergency could knock you off your feet. Think how peaceful your life would be if you took the bold step and started saving today. Kanu holds an MBA from Stanford University, a master’s in Journalism from NYU and a bachelor’s in Engineering from Calvin College. His career has included time at Konga, Amazon, The United Nations, Esquire, CNN, and Black Enterprise magazine. Armed with a strong conviction that you can live a great life no matter how much money you have, JR founded REACH Technologies, www. reach.africa. His company builds software to help young people and companies to manage and grow their money.
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Monday 07 September 2020
BUSINESS DAY
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Lesson for Nigeria: True federalism is the best route to progress global Perspectives
OLU FASAN
T
here is something very strange about public policy discourse in Nigeria. Despite what theory, evidence and history tell us, some people still trivialise politics. To them, all the talks about political restructuring are utter distractions. It is economic restructuring, not political restructuring, that matters, they say! The truth, though, is that no proper economic restructuring can take place without the right political environment. At the basic level, we know that political stability is a precondition for economic progress, and that the nature of a country’s politico-governance structure and political institutions determines its economic performance. That view, as I said, is established theoretically, evidentially, and historically. Take the theory first. In their famous book “Why nations fail: The origins of power, prosperity and poverty”, Daron Acemoglu and James Robinson argue that politics and economics interact in either causing poverty or creating prosperity. However, they put politics first because while economics creates the incentives for prosperity, it is politics that determines which economic policy and institutions a nation would adopt or create. For instance, if a political process produces a socialist or statist leader, no number of articles or editorials would make him enthusiastically embrace market-based policies or reforms. Also, if a political system centralises power, instead of diffusing it, economic management and governance would also be centralised. Yet, only decentralised political and economic governance can unleash dynamism, which produces innovation and economic progress, a point made by the economics Nobel laureate Edmund Phelps in his recent book entitled “Dynamism”. So, the theory tells us that politics and political institu-
tions matter. What about the empirical evidence? Well, in an empirical study by the UK Department for International Development, DfiD, they concluded: “The political settlement is central to all development”, and that “political settlements explain the difference in performance between countries with apparently similar endowments or disadvantages.” In 2017, Chief Emeka Anyaoku, former Secretary-General of the Commonwealth, said that “unless Nigeria goes back to regional governments, it may be embarking on an endless, fruitless search for meaningful development.” He added: “From my over 30 years’ experience of governance in over 50 Commonwealth countries, I believe that, given its history and pluralistic character, a truer federalism is a sine qua non for Nigeria’s achievement of its development potentials and enduring political stability.” So, from DfiD’s study and Anyaoku’s Commonwealth experience, we know, empirically, that a political settlement, based on having the right politico-governance structure, is a precondition for development and economic progress. Historically, classical economists like Adam Smith and David Hume were called “political economists”, rather than “economists”. Why? Well, because they were interested in how politics and economics interacted in the running of a country and in shaping public policy. Reading, for instance, Adam Smith’s “The Wealth of Nations” or David Hume’s “On the Balance of Trade”, one gains deep insights into the roles of the state and the market, and how both should interact to create wealth and prosperity for a nation. My advice to any economics student reading this column is: If your university offers political economy and economic history as options, take them. It would make you a rounded economist. If you want to work in a policy-setting, to influence economic decisions, it will help to have a good knowledge of political economy and economic history! Of course, as a political economist and an economic historian, I would say that, wouldn’t I? But that’s the truth! All of which brings me to the real focus of this piece: federalism versus centralism. And the key triggers are two recent issues that have received much coverage in the newspapers.
The first is the Federal Government’s decision to establish community policing across the country and, controversially, to collapse all state or regional security outfits, such as the South West’s “Operation Amotekun”, within the national scheme. The second issue, which Professor Wole Soyinka has raised vociferously, is the Water Resources Bill, once rejected in 2018 by the National Assembly, but now reportedly brought back. If passed, it would give the Federal Government absolute control over the use of water all over the country. At the heart of these two issues is the debate about true federalism. What does it really mean? Is Nigeria a true federal system or a quasi-unitary state? Take the policing issue first. The Federal Government recently approved N13.3bn for community policing in Nigeria. But the money won’t be used to support state or regional security initiatives, such as Amotekun. Rather, it will be used to create nationally controlled community policing structures, under which state or regional security outfits must operate. The Federal Government rejects the idea of standalone regional security operations. President Buhari’s senior media assistant, Garba Shehu, put it this way: “Whatever name they go by, Amotekun or whatever, they will be streamlined and they will be run in accordance with the structures defined by the InspectorGeneral of Police.” He added churlishly: “They can choose their own nomenclature, but it doesn’t make a difference.” This is unbelievable! So, all those laws that the South West state assemblies and governors enacted to give legal backing to Amotekun are utterly worthless – in a supposed federal system! According to the Encyclopaedia Britannica, the two main characteristics of true federalism are: non-centralisation and local autonomy. Indeed, in a true federal system, the federating units can provide a strong alternative to the policy of the centre. But hear again what President Buhari’s spokesman said: “So, we are going to have a single type structure community policing across the country and whatever is not in line with this does not have a place in the new scheme of things.” Really? A “single-type” community policing across Nigeria? That sounds like a unitary system. Sadly, that unitarist view is widely shared in the Presidency,
‘
There is no true federal system with nationally controlled policing
including by President Buhari’s chief of staff, Professor Ibrahim Gambari, who is viscerally opposed to regional security initiatives like Amotekun, and who seems to have provided the intellectual anchor for the Federal Government’s approach. Speaking in March at an event to mark the 80th birthday of General Domkat Bali, former defence minister, Gambari said we should not look at solutions to the security challenges from a regional perspective but “a national prism”, and condemned any regional initiative “which is not tied to the primacy of the national security apparatus.” But this is utterly wrong. There is no true federal system with nationally controlled policing. For instance, the Los Angeles or New York Police in the US does not take orders from Washington! Furthermore, truly federal systems do not have any uniform, national laws on most issues. Again, take the US. Most of the 50 states have different laws on key issues such as abortion, gay marriage, and death penalty. And the US federal government cannot impose a “single type” national system on any of these issues! That’s how a true federal system works! But in Nigeria everything must be centralised! Which brings us to the Water Resources Bill. I mean, how could the use of water be subject to licencing? Why do I need a Federal Government’s permit to sink a borehole in my home? And why would the Federal Government cancel my licence if I “fail to make beneficial use of the water”? Yet, these are some of the provisions of the bill. No wonder Professor Wole Soyinka asked rhetorically: “What next for the exclusive list? The rains?” He also alleged that the Water Resources Bill “is a deliberate, flanking move towards RUGA colonisation.” Well, whatever the rationale behind the centralised community policing scheme and the Water Resources Bill, the truth is that micromanaging Nigeria from Abuja will exacerbate political instability and undermine any chance of economic progress. Only true federalism will unleash Nigeria’s potentials. Which makes political restructuring an imperative! Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan
Waiver of statutory notice for board meetings
T
he frequency of Board meetings with the onset of the COVID-19 Pandemic has witnessed a spike, fueled by the ease of convening virtual Board meetings, our new normal. We should not however lose sight of the requirement to give notice ahead of such meetings. Statutorily, Directors are entitled to receive fourteen days’ notice (except otherwise provided in the Articles of Association). Business exigencies however sometimes require that meetings are convened with less than the statutory notice. The uncertainties thrown up by the pandemic have seen Boards meeting at very short notice to deliberate on emerging issues and how these impact strategic initiatives. Typically, Directors are required to sign a waiver of notice, where a Board meeting has been convened with less than the statutory minimum notice. Are these waivers valid? Section 266 of the old Companies and Allied Matters Act (CAMA) provides as follows: (1) Every director shall be entitled to receive notice of the directors’ meetings, unless he is disqualified by any reason under the Act, from continuing with the office of director. (2) There shall be given 14 days’ notice in writing to all directors entitled to receive notice unless
otherwise provided in the articles. (3) Failure to give notice in accordance with subsection (2) of this section shall invalidate the meeting. It can be argued that Section 266 imposes an obligation to give a minimum of 14 days’ notice. Thus, waivers have no place under Nigerian Company law and therefore cannot, except specifically provided for in the Company’s Articles be valid. It can also be argued that directors have the right to dispense with the minimum notice and waive their right to receive notice as contemplated by CAMA. This argument is supported by Section 263(1); “The Directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they think fit.” It is worthy of note that Section 266 uses the word “shall”, a word which connotes an obligation. This is in stark comparison to the word “may” in Section 263(1). Furthermore, it can be argued that the obligation on the company is to “give notice”. This cannot be waived. Thus, whilst there can be no compromise as to the giving of notices, there can be some flexibility as to the length of such notices if all Directors “waive” their right to the statutory minimum. Many companies have www.businessday.ng
Articles that provide for a shorter notice period – typically seven days and less. In the United States of America, the Articles of Incorporation may specify the notice that is required for Director meetings. The Model Business Corporations Act (MBCA) provides that notice is not necessary for regular board meetings, and that special meetings may be called with two days’ notice. In the United Kingdom, Directors are expected to meet regularly and a Director can call a meeting at any time provided reasonable notice is given to the Directors, unless the Articles provide otherwise. What is reasonable will depend on the type of company and precedent. To be clear, it is not sufficient that a majority of Directors “agree” to convene the meeting with less than the statutory notice period. The issue of “majority” is by way of quorum at a properly convened meeting. As the Board is called to take a decision on abridging the notice required to convene a meeting, the issue of quorum does not come into the equation. Without exception, each Director has to agree (waive their right to statutory notice) to convene the meeting with less than the statutory notice. The waiver has to be properly documented and signed by each Director. It is prudent to have a template, the wording of which
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Bisi Adeyemi should be simple and succinct. It should include the date, time and location of the meeting and the name of the organisation. The main paragraph should state something along the following lines: “I further agree and consent that any and all lawful business may be transacted at such a meeting, or at any adjournment that the other Directors deem advisable. Any business transacted at the meeting or adjournment shall be valid and legal and of the same force and effect as if the meeting or adjournment were held after notice”.
Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions to badeyemi@dcsl.com.ng
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Monday 07 September 2020
BUSINESS DAY
15
EDITORIAL Publisher/Editor-in-chief
Frank Aigbogun
Fighting COVID-19 on one hand with myopic policies on the other
editor Patrick Atuanya
…Policies leave Nigeria with more losers
DEPUTY EDITORS John Osadolor, Abuja Tayo Fagbule NEWS EDITOR Osa Victor Obayagbona NEWS EDITOR (Online) Chuks Oluigbo MANAGING DIRECTOR Dr. Ogho Okiti EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure ADVERT MANAGER Ijeoma Ude MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai COPY SALES MANAGER Florence Kadiri DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)
Bashir Ibrahim Hassan
GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu
N
ews on the catastrophic effect of the novel COVID-19 pandemic on economies, lives and livelihoods isn’t fresh anymore. Countries, businesses and households have resorted to ways of living with the deadly virus and returning to normalcy while hoping for a vaccine as the ‘ultimate saviour’. In Nigeria, however, the ‘plague’ which will – if not eradicated – continue to impede the growth and development of the economy as well as the welfare of its economic agents, especially households, is the poor and myopic policies of the country’s decision/policy makers. These policies are detrimental to growth and development. The impact of the financial repression policy by the Central Bank of Nigeria (CBN) has rendered unattractive Nigeria’s investment environment, especially in the fixed income space. Domestic investors particularly are forced to either opt for low yield investments or invest in riskier asset classes or one which
requires large capital outlay. Financial repression, a term which describes policies that lead savers to earn returns below the rate of inflation in order to allow banks to provide cheap loans to companies and governments, reduce the burden of repayments. It was effective at ensuring the federal government is able to borrow at extremely low interest rates. Now, what typically defines Nigeria’s fixed income securities is the deeper negative real return with the consistent acceleration in Nigeria’s inflation rate. Return on Nigeria’s one-year bond, for example, is 3.094 percent. When inflation is adjusted for at 12.8 percent, this puts real return at -9.7 percent approximately. While financial repression policies in themselves should drive investments via access to cheap debt capital to companies and households, to impact positively on economic growth, this may not be the case in Nigeria. Nigeria’s prime lending rate – a rate that commercial banks charge their most creditworthy corporate customers – as at June stood at 15.65 percent according to data
from the CBN. This reflects the credit risk still inherent in the economy made worse by the devastating effects of the COVID-19 pandemic. To most businesses, especially MSMEs which account for about 95 percent of businesses in the country and contribute 50 percent to GDP, the cost of obtaining credit is high and unaffordable. It is sad to note that the policies of the CBN, among other things, have successfully made borrowing cheaper for an entity whose expenditure accounts for just 12.6 percent of GDP—an entity whose debt levels have skyrocketed over the years with no economic growth to justify its debt accumulation. It is also a sad story that the CBN-induced low-interest-rate environment has left the economy with more losers and less gainers. More importantly, it is encouraging the federal government to borrow more. The focus should be how the FG can unlock dead capital, instigate a private sector-led economy through deregulation of key sectors; provide good business climate and boost non-oil revenue rather
than amass debt. Recently, the CBN also announced that interest on local currency savings deposits will be negotiable subject to a minimum of 10 percent per annum of Monetary Policy Rate (MPR). This takes the savings interest rate from 3.9 percent to 1.25 percent per annum or 0.104 percent per month. While this policy discourages savings and increases banks’ profitability while aiming to boost economic recovery, we see it boosting consumption and ultimately pressuring further already accelerating inflation rate. In the end, households are worse-off. We understand the need to boost economic growth and hope for a V-shaped recovery. However, policies that erode investors value aren’t one of such economic boosters. There are low-hanging fruits the country can pluck to steer recovery or exit the impending recession early enough. We advise that policies must be thought through critically before they are enacted else after the COVID-19 pandemic is gone, the country will still have bad policies to worry about.
HEAD, HUMAN RESOURCES Adeola Obisesan
EDITORIAL ADVISORY BOARD Imo Itsueli Mohammed Hayatudeen Afolabi Oladele Vincent Maduka Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Mezuo Nwuneli Charles Anudu Tunji Adegbesan Eyo Ekpo Wiebe Boer Paul Arinze Boye Olusanya Ayo Gbeleyi Haruna Jalo-Waziri Clement Isong Konyin Ajayi
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16
Monday 07 September 2020
BUSINESS DAY
Monday 07 September 2020
BUSINESS DAY
17
CHIEDU UGBO,
CEOINTERVIEW
Managing Director/Chief Executive Officer Niger Delta Power Holding Company( NDPHC)
Interview with Private Sector Leaders
‘We are determined to improve electricity infrastructure in Nigeria’ Niger Delta Power Holding Company (NDPHC) is the federal government agency responsible for the building and supervision of the National Integrated Power Project (NIPP). The project is a fast-track government funded power intervention initiative involving the construction of ten medium –sized gas-fired power plants, associated gas infrastructure, the critical transmission infrastructure and the distribution component. Supervision of this gigantic project is the responsibility of Chiedu Ugbo and his management team. He was first appointed Managing Director/Chief Executive Officer by President Muhammadu Buhari in August 2016 and reappointed last month for a second term. Before his appointment in 2016, he was the Senior Special Assistant to the President in the Office of the Vice President from October 2015 – June 2016, Advisor (Legal) to the Nigerian Bulk Electricity Trading Plc (NBET) from July 2013 – October 2015, Legal adviser on electric power purchase and resale contracts and Partner in the law firm of Benchmac & Inc, Electric Power and Infrastructure Development Consultants from May 2003 to October 2015 where he was in charge of Energy and Infrastructure Practice. He also played key role in the power sector reform programme. In this interview with BusineesDay Editors, JOHN OSADOLOR and OBINNA F. NWACHUKUWU, Ugbo, a lawyer and business turn-around expert, explained the role and contributions of NDPHC to the development and growth of the power sector in Nigeria with a firm assurance to do more.
S
ir, congratulations on your re-appointment for a second term which was announced by the Presidency. How do you feel about this development? I’m excited that His Excellency, the President and the Board of NDPHC still considered me useful and worthy of this position. I know that to whom much is given, much is expected and I know that much is expected of me and I’m assuring the president, the vice-president and the governors of the states who are major stakeholders of the company, Board, Management and staff of our company that my Executive Directors and I will do our best to meet our mandate. We shall work seriously to ensure that we bridge the gap in electricity infrastructure which is part of our mandate; ensuring that the power plants operate and run perfectly. The broad objective being that we want Nigerians to have electricity always and we believe God to help us achieve that. How would you assess the past four years and what are the things you would want to improve upon in the next four years? It was excitingly challenging, doing what you like doing but there were challenges along the way. In NDPHC we did our best to manage the situation despite challenges, so it was exciting as well as challenging. So I can say it was a mix. Our broad mandate is; we have 10 power plants, so we have to complete the plants that have not been completed and run those that have been completed, and actually we are not meant to run but privatize, and then intervene in transmission and distribution, and this we took on when we came in because the company already existed. In 2016, the challenges then were different from 2017 and 2018. In 2016 I was coming from the presidency and I knew the major challenge was how to improve generation which was hampered by gas supply. There was a lot of vandalism in the region, and the Vice President went round the communities in the Niger Delta. I can remember the vocado export line was attacked and was out for several months which led to shortage of gas supply. When the crude line was affected the gas productions were not ongoing and associ-
ated gas which could have been used for power could not be produced. So the Vice president got the issues resolved, when I came in my focus was to look at how to improve generation, gas and transmission. The five power plants in the west of the region did not have gas because of the issue, so that was resolved between end of 2016 and early 2017. The three operational power plants in the eastern delta, riverine in Bayelsa, halogen in Abia state and Calabar, they all had more than enough gas, again, gas network issue, you can’t flow gas from east to west. The challenge then was the transmission and there was a network that connect them that is the Ikot-Ekpene network transmission service, so we focused on that, my predecessor had done a great job bringing network to them, so as we came in we focused and put all our energy in it, there is what we call twelve circuit station, twelve lines coming out of one station so it is a huge one and the lines from calabar to Ikot-Ekpene, the lines from halogen to Ikot-Ekpene we completed those ones. Again in Calabar, we had the lines dedicated. In Akwa Ibom state, they were doing the pipelines crossing many rivers up to five rivers. We completed all that just to make sure that we have connection to Calabar. Government has resolved the gas challenge in the west so we are also working to resolve the challenges in the east including transmission. At a time it was no more transmission issues but gas issues, we commissioned the Ikot-Ekpene substation in November 2016 with the minister of Power, Works and Housing, Babatunde Fashola, doing the commissioning. The moment I got the issues resolved in 2017, the government has resolved the issue in the west, I have full gas in Calabar, I have full gas from halogen, we will resolve the gas challenge, which is, I have gas but the challenge is transmission. It is not just evacuation from the power plant because we have done that, transmission is on the highway and if there is congestion on the highway, like our own high way that can take traffic, we have traffic but transmission does not use traffic, electricity travel on less resistance. So electricity, if it does not see anywhere to go, it can break the system down. That is why we have system operator just to ensure reliability and safety of the grid, it operates from
Osogbo, that is the national control center, so the moment there is generation in the grid, and there is no instantaneous consumption at the other end of transmission, it cannot stay, so what they do is that they shut it down. The moment we resolved the gas and transmission lines challenge, we discovered another challenge and that is the off- take challenge, that was later referred to as load rejection by distribution companies. I know of the interface challenge between the DISCOs and TCN , so that is why you see that the total generation capacity and availability is about 8000 but we can only use 4000 that is because people are not taking it. So what that translates to is new challenge, how do I improve, because what we see is that I will have power stations, 6 units in Calabar, 4 units in Halogen, 1 in Igbaram full gas, no transmission and evacuation channel but you see them take two units in Calabar irrespective of the fact that I have a firm gas contract which I must pay. So you see the tight situation we are in. You have gas, power plant, grid connection but you can’t generate. So it means that you have to start looking for alternative ways and when you generate, you get paid not more than 30 percent annually of your invoice. In fact you may be receiving 15 or 20 percent in between. So that was the position in 2016, so in 2017 we worked hard and resolved the gas challenge, so having resolved the issue a new one came. So we sat back and said what do we do, first we are faced with a huge financial challenge, thank God for the intervention of the government. That was how we came up with the N701 billion that is payment assurance facility. What that means for generation company is that our buyers are not the transmission company, the man who buys electricity from us is NBET, who is 100 percent owned by government, so NBET is the one that was owing 70 percent of the debt, so NBET has government to back them up to pay because as generators we are not paying for gas, so the N701billion was brought, and I think right now we are been owed like 80 percent of our invoice. So first we are not doing dispatch, the product is not being taken, second, even when it is taken it is not fully paid for, so with the N701 billion, they are meeting us halfway and then in 2018 the situation conwww.businessday.ng
tinued, our focus was, let us speed up effort in our network intervention, transmission and distribution so we can help resolve the interface challenge on our own way. This is a government intervention and government company, we did a lot of projects over 70 projects, so we did transmission project, we did a lot of injection of substations for distribution, we did quite a lot, again the problem persisted, more importantly the financial problem and government came up with N701 billion to keep us afloat and
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these monies they are giving is not a bail out for me, as the money is coming I make them know that they are paying my receivable. So the issue now is to pay us our evasive that has not been paid, to put that in perspective, as at May 31 or June ending 2020, we were been owed about N160 billion, which organization can survive with that? The good thing for us is that we are full equity funded, so we don’t have debt service. This problem persisted, so what we did was to design a “FARMA CITIES program, until the minister came up with a little consular declaration, we @Businessdayng
were looking at can we serve them no matter where they are through the transmission and they pay directly, I don’t want to enter into the NBET and DISCO’s issues. Happily the minister came up with the consular declaration followed by the regulators, and then they started work on franchising, ours is a mix because we have franchising so we are working with discos, so we serve quite a number of customers but they are small, I think as at now we have like 39 to 91 megawatts we are signed on, we are also working with distribution companies to ensure that we have these franchise areas where we supply directly,
so as pilot cases, we have signed up with Port Harcourt DISCO, finalizing with the Enugu DISCO, but that does not stop us from going as far as Kaduna, we are discussing with them as well as Kano. So we are working to get that resolved. In terms of our generation, my focus has always been to prioritize whatever we earn to ensure that we maintain the golden geese that lay the golden eggs, to maintain the power plants, so I have to ensure that the power plants run. Of course power plants operation and maintenance has two ways, it is either scheduled, or unscheduled so fault can come from anywhere. We try to do our best, so our power plants are all fully insured to ensure that whenever issues come, we are covered by insurance, so we try to operate and maintain the plants very well in accordance with international best practice, no cutting corners, because these are high net-worth assets. So in terms of insurance, operation and maintenance, we make sure that the service agreement we have with the OEN, I think 32 out of 35, all our fleets are made up of 35units, I think GE technology is about 32 of them, so we have long term service agreement for most if not all, so we make sure that the long term service agreement we have is robust and user friendly, we also carry out a digitization of the power plant, so I can sit here and see what is happening and the operators, so we pre-warn them when something is about to happen, so that is it with running the power plants. In 2017, the president was concerned about the poorest of the poor, so this electricity that we are generating, what are we doing for those at the rural communities, to those that have not seen electricity before, so we started with solar home system for them until they get full connection, so we did solar home system, 20,000 units, deployed in 12 states across the north, and the plan is to take it across the country as seen in the economic sustainability plan, the government’s target is 5 million and we are part of those to implement because of our track record and it was well received, it created some level of employment as we engaged installers and people who would otherwise be idle. So I was actually very excited about that, with the kind of excitement that the villagers received, these people have never seen electricity before, www.businessday.ng
National Integrated Power Project (NIPP) Plant
so the petty traders will now stay much later doing their business, children will have electricity to read and prepare for their exams, so the advantages are enormous. So that is on the solar home system. Then in terms of distribution, we did quite a lot in distribution project, since 2015 we probably have completed over 70 distribution projects, in terms of big substations, in terms of distribution lines, high and low voltage distribution lines, there are some communities I go to and I feel so excited because they are happy, so in those communities even if it is 500 kilowatts they are taking, they are enough. The whole of the senatorial district in Ondo state were out of electricity for over 10 years, but we connected them back to the grid, so it is left for the Benin Disco to provide the electrons, even to get the electron, we went to Ondo town to repair the transmission substation so that they will be able to serve them. In Lagos, some villages were out of electricity for 10 years, we went to the substation we built to get electricity from a green power plan to ikeja west, so we did a number of projects. Last year we commissioned the Abeokuta 2 by 60 substation, that can conveniently transmit 100 megawatts, we also have the expansion of the Ota substation by 60 MVA, Right now, we are still doing quite a number of such projects. Also, Lafia is another interesting one because the whole of Nasarawa state had problem. We did a transmission line all https://www.facebook.com/businessdayng
the way from Ikot-Ekpene through Enugu, through Makurdi, then overhead Nasarawa state to Jos. Nasarawa state electricity situation was like Kano. The governor made a request and we took it up, we are working on it and it’s almost completed. We are building a massive transmission substation in Lafia and that substation will ensure that the state is well served, we are at 95 percent completion, so what we do is we bring down the lines going to Jos, from our substation, we will be able to back-feed Abuja again, so Abuja has multiple supply. So it is exciting, but in all these, we still have a huge debt, which is a payment challenge, what transaction people call payment risk. NBET is owed a lot by distribution companies. Ours is huge because we have 8 plants operating in the grid, if it was just one company probably it would be less. But as I speak to you, we are being owed nothing less than N160 billion. Despite that we are still doing our best. If you have eight operating plants, what happened to the remaining two? The other two were part of the initial mandate we had to complete; in fact that was our mandate from the beginning. So we had this contractor, apparently overwhelmed, but i don’t know what the issues were because the contracts were awarded as far back as 2006 or thereabout, but he didn’t deliver fully on any of the projects. He had @Businessdayng
Alaoji in Abia state, he had Igbaram in Bayelsa state; he had Omokun in river state and Egbema in Imo state. These plants were located in Niger delta states. In halogen, it was supposed to be combined circle, where we have the gas turbines and the steel turbines, the gas turbines boil the heat for the steel turbines to work. Unfortunately, he only erected the gas turbines, a store capacity of 500 watts. The steel turbine he didn’t do. We met him importing the equipment for the steel turbines, and this was a contract over ten years at that time, with Omokun half way completed, Egbema less than half way completed. The two were not completed. Of course we tried to work with him in 2017 to get this done, we got him to get the contracts done. Fortunately he also owed AMCON, so they took over the company under receivership. The company having gone under receivership and because AMCON was not an engineering company, they said we can take it over. So we terminated the contract with the board approval. AMCON took over in July 2018, we tried to see what we could do but Roxon Engineering had an international company that is not under AMCON. So when we assessed everything, we went to the board in 2019 and got the board approval, as I speak to you now, Covid-19 or no Covid-19, we have gotten BPP approval for the new board, because we have to Continues on page 18
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Monday 07 September 2020
BUSINESS DAY
CEOINTERVIEW Interview with Private Sector Leaders
We are determined to improve electricity infrastructure in Nigeria Continued from page 17
invite other international bidders, who are into power plant, and they have done their due diligence and they have approved. So in the next one year, we will focus on completing those projects, we have very serious-minded contractors now. So we have taken over and we have it under control. Is debt burden the only challenge? What of vandalism and host community issues? There were major issues when the lines in Ikot-Ekpene were not completed; we had issues with the communities. On vandalism, one of the lines that suffered most was the line from Afam to Ikot-Ekpene, that line has been vandalized in and out; we even had a military man who was killed there. Until we got a transmission company that energized our work, when we build to a point, they will energize it but it was wasting energy, but we have security, armed Nigeria military to manage the whole situation. So at the end of the day, it amounts to a huge cost of doing these projects. On the other side going from Ikot-Ekpene to Waji, it was one community in Abia State that was the issue. I had to go to the village , met with the people, gave them road, just to meet some agreements, pay compensation, so we engaged them and their king being understanding, the agreement worked, we played our part and they allowed our contractors to pass and it was not more than two weeks job. So that is what we do, we engage the communities, even the power plants communities, recently Sapele community came up with their needs, we just have to keep engaging them. For power plant communities we have a policy of ensuring that we do distribution and network projects for them, 5km radius for the power plants, however, they will have to be served by the distribution company responsible for their zones, because it will be complication, serving them from the power plants. In another community in Imo state, they vandalized the Egbema plant in Imo where we have our new power plant, we did the network, we did the substation, and we fixed it a year later. So those are the kind of price we pay. For Sapele, I had to go to the Orojie, and we were able to negotiate with the community leaders and the youths, but it keeps coming up, we promised this and that, it keeps coming up, it is not a one-time relationship, we just have to be sensitive to their needs like employment and electricity infrastructure, for them to assure us that we will have peace. So that is why we do not have issues with them. For Enugu, we are building a line from new heaven to Nsukka, that line again was vandalized, so
I went to the governor, Ifeanyi Ugwuanyi, who set up a committee headed by the Ohaneaze Ndi Igbo chairman. He helped us resolve the community challenges and of course we paid compensation. But another issue is when you pay to one set of people another set will come up to be compensated and we have to manage the situation. Did you make any attempt to bring these vandalizes to book? We have law enforcement agencies working with us. Just yesterday, I sent a letter to NSCDC to help us take over some of our sites. So agencies like the police, military arrest these people, we also engage the vigilantes in order to allow the communities take ownership of the program, and once they get them, they hand them over to the police for prosecution. There have been calls from the House of Representatives that the privatization of the power sector should be upturned. As an operator in the system, what is your view? I’m not just an operator; I was part of the power reform team. The truth is, the DG, BPE, Alex Okoh made a statement and I agreed with him entirely that the problem of privatization and post privatization have to be carefully managed. In terms of transaction structuring, and the transaction itself, it was acclaimed by the international community as one of the best you can find. So back to what the DG, BPE said, he said it is like taking a very sick person to the hospital, the person needs surgery to survive, you get the best
surgeon to perform the surgery and after which he leaves, so the post operation care has to be done, if you leave the patient without care, no matter the expertise of the surgeon, the patient will die. That is exactly what happens, issues emanated, most of them not envisaged and that is why you see trading issues between Discos and Government. This cost reflective tariff started all the way from what was promised to them but they too have their own issues, it is both ways. Should it be reversed? I don’t think so. In my candid opinion, I’m not speaking for government. But the point is, there are consequences from bargains entered into. Everybody who is coming to Nigeria is looking at your disposition towards contracts, because as a sovereign nation are you going to use your sovereignty to act arbitrarily or do you respect bargains?. So if you respect bargain and if there is anything wrong with the bargain you have made, you follow due process to correct or follow it up. But to say revoke or terminate, you must follow due process to do all things. So I do not agree that privatization should be reversed because it has far reaching consequences, first, most of the agreements have international arbitration clause, so anything you do will be known in the international community, and you are not sure of what the outcome of the arbitration will be, if it is against you, again it will lead to another issue of enforcement. In short the trouble involved is too much, especially on issues concerning perception of the government. I think the best thing is to manage it, sit them down. I also do not think
the Discos will be unreasonable; nobody puts in $100 million, $200 million into a business and would want the business to fail. I think it is just having an understanding between both sides. In all I feel that private sectors is still the way to go because they will have to bring the capital, with the Discos, there are a lot of regulatory issues involved, the economic regulations were regulated in such a way that tariffs are affordable by consumers. So, they have a hybrid called incentive regulation and price cap. So when you invest, you get a percentage of what you invest as your return. But they also cap it so that you don’t over charge. So that hybrid regulation is such that they will monitor your investment every year, you don’t over invest or under invest. But if you make a lot of investment it will go into your tariff for recovery. That is part of the issues they are arguing about, you cap what you can do, and you say we are not doing enough, you want me to meter everybody meanwhile in the tariff you gave me, you said this is the level of investment, you must not exceed XYZ. So there are issues involved and both parties have to sit down and resolve them. Government cannot entirely hands off the sector now, until some of these sectors begin to go on auto drive and can manage on their own. The issue of low metering and shading is a big issue, perhaps it would have been a major requirement. The privatization is dealt with in what we call technical, commercial and collection which are the main investment you have to make in distribution business. It is technical in terms of your network, substations and all that. Commercial in terms of theft, making sure that you have full proof system that does not allow for theft and collection. You have to prove your collection efficiency by metering. Collection efficiency is a problem that is one area that the system failed. So you have not invested in meters, you are giving customers estimated bills, and consumers have the right to know what they consume and pay for it and it is a problem. But all that will soon be a thing of the past as the government is facing that squarely. The president has approved our counterpart funding, and once we do that, all the aggregate commercial, technical collection will be brought back, and then the sector will begin to grow comprehensively from generation, transmission and distribution. The government is tackling that and we hope that by next year all these issues would have been resolved. Would it be an issue if government gets involved in meter manufacturing and distribution?
These are some of the issues in the Economic Sustainability Plan. Government is encouraging private sector investment in meter manufacturing and some of them have started doing that. The moment we have the meters, it will be easy. It would be a logistic nightmare to import the number of meters we need in the country and install them in a year, but if we have them in the country, it is just to go to the factory, take and install. So government is doing a lot to encourage local manufacturing of the meters and that will help extensively to resolve the metering, billing and collection issues which is a major problem, and that is what is affecting them, because the Discos are not collecting enough. Back to privatization, I believe that with the president’s initiative in the power sector and all the issues relating to privatization, the issue will be resolved and we will be happy for it. I don’t think we should rush to terminate it, let us see the outcome of the president’s intervention which I strongly believe will resolve the network challenges and improve power supply. What is going to be your major focus in the second phase of your tenure? My major focus is to improve electricity supply in Nigeria, improve the revenue base for the company so that we can continue to do more projects and add value to my shareholders who are also political leaders in the country both at the Federal and state levels, and how do I do it? I had only one buyer before which is NBET, but now working with consumers, through the Discos to market my products and that is what is called bilateral arrangement with the Discos. I have signed that with Port Harcourt Disco and we are looking at realizing it in the next 6 months but the one with Enugu Disco will take longer because it is a wider area. Port Harcourt is 100 megawatt Calabar, Enugu disco we are looking at between 200-250 megawatts from our halogen power plant, and we have other initiatives coming from other power plants, like the one along Osogbo in Osun state, and even Omotosho, we have signed with a few customers there. So that is what I’m doing, to get the output of the power plants out to end users, clean up the network, and meter the customers. For an area we are not reaching, I have upgraded my renewable unit to a department and we are focusing fully on renewable. We are going to be doing mini grids, we are going to be involved in clusters up not just solar home systems, so we are going beyond the north, I have said it all, supply them directly, clean up the network, supply electricity so in that way, I am serving my consumers and also improving my revenue.
Monday 07 September 2020
BUSINESS DAY
19
In Association With
What could go wrong?
ATheBalkan betrayal exception
America’s ugly election
Why is Wall Street expanding in China?
A disputed result in November could be dangerous
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ABOR DAY marks the beginning of the home straight in a presidential election. This one threatens to be ugly. The president’s supporters are clashing with Black Lives Matter protesters in Portland, Oregon. Donald Trump flew to Kenosha, Wisconsin, for a photo-op in front of burned-out buildings, a week after police shot and paralysed an unarmed African-American man and one of the president’s supporters shot and killed two demonstrators, possibly in self-defence. Having adopted a strategy built around profiting from fears about unrest, the president has an interest in stoking it. Many Americans worry that November could herald not a smooth exercise of democracy but violent discord and a constitutional crisis. Is this all hyperbole? America has had violent, contested elections in the past. In 1968 one of the candidates, Bobby Kennedy, was assassinated. In 1912 Teddy Roosevelt was shot in the chest while making a speech in Wisconsin. (He finished the speech before heading to hospital, and survived.) Historians are still arguing about who really won the election of 1876. Yet the country has always managed to gain the consent of the losers in its presidential elections—even in the midst of the civil war. That long unbroken streak suggests that doomsayers need to keep things in proportion. However, there is a real risk that things could go wrong in November. To ensure the peaceful handover of power, democracies need the losing candidates and most of their followers to admit defeat. A clear result on polling day helps a lot: the losers may hate it, but they accept it and start preparing for the next election. When the result is unclear, a backup system is needed. Contested election results are rare in mature Western democracies, but they happen. In 2006 Silvio Berlusconi narrowly lost an election in Italy and claimed, without evidence, that there had been widespread fraud. The country’s Supreme Court ruled in favour of his opponent, and Mr Berlusconi grudgingly surrendered. In 2000 America’s presidential election
It may be a step on the way to China becoming a financial superpower
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N THE TECH industry the rupture between China and America continues to grow. Will Uncle Sam force a sale of TikTok, a Chinese-run app popular in the West (see article)? Can Huawei survive the embargo? Is Apple shifting its supply chains from China? Yet in one part of the global economy the pattern is of superpower engagement, not estrangement: high finance. BlackRock, a giant asset manager, has got the nod to set up a Chinese fund business. Vanguard, a rival, is shifting its Asian headquarters to Shanghai. JPMorgan Chase may spend $1bn to buy control of its Chinese money-management venture (see article). Foreign fund managers bought nearly $200bn of mainland
was settled in the Supreme Court after contested recounts in Florida. In both cases, decrees from judges were just about enough to end the squabbling and let the country move on. In the case of a landslide win for Mr Trump or Joe Biden, about half of America will be miserable. Many Democrats view Mr Trump as a threat to democracy itself. If he wins again millions of them will be distraught. Among Republicans, by contrast, Mr Trump still enjoys an 87% approval rating. If he loses, many will grouse that the other side cheated. But that need not stop a smooth transfer of power if the margin of victory is big enough. If Mr Trump were to lose by eight points, as polls currently suggest he will, there will be no way to challenge the result plausibly—though he may try anyway, possibly fomenting further unrest. If the election is much closer, things could get even uglier. America is unusual in the degree of power it gives to Republican and Democratic partisans to administer elections. Decisions over who is removed from lists of eligible voters when they are updated, the design of ballot papers, where polling stations are situated, whether early voting is al-
lowed and how many people have to witness a postal vote—things which in other mature democracies are in the hands of non-partisan commissions—are all taken by people with a D or an R by their name. If the election is close then all this will be litigated over, and ultimately end up in courts presided over by judges who have also been appointed by Republican or Democratic governors and presidents. As if that were not worrying enough, covid-19 could add to the legal slugfest. Already more than 200 covid-related lawsuits have been filed by the campaigns (see Briefing). The evidence from party primaries suggests that though some states, such as Wisconsin, conducted a relatively orderly election despite the virus, others did not. Postal ballots were still being counted weeks after election day in New York’s primary. In November some swing states, including Michigan, will experiment with widespread voting by mail for the first time. If the election is close and there are delays in counting ballots on election night, it could well appear that Mr Trump is winning in some key states. He might then claim victory before the results were in, as he
did in Florida’s 2018 mid-terms. As more postal votes are counted, the result could then shift in Mr Biden’s favour. America would have two candidates claiming victory. Electoral cases in multiple states might have to be heard in the courts. Protests would surely erupt, some of them armed. The president might call out the national guard, as he threatened to do this summer, or send federal agents into Democratic cities to police restive crowds, as happened in Portland. At this distance, it is easy to forget quite how wrenching a disputed presidential election was in 2000. And that dispute took place at a time of maximum American selfconfidence, before 9/11, before the rise of China, before elections were fought on social media, and when the choice was between two men who would be considered moderate centrists by current standards. Now imagine something like the Florida recount taking place in several states, after an epidemic has killed 200,000 Americans, and at a moment when the incumbent is viewed as both illegitimate and odious by a very large number of voters, while on the other side millions are convinced, regardless of the evidence, that their man would have won clearly but for widespread electoral fraud.
Chinese shares and bonds in the past year. Far from short-term greed, Wall Street’s taste for China reflects a long-term bet that finance’s centre of gravity will shift east. And unlike in tech, both sides think they can capture the benefits of interaction without taking too much risk. Western, and in particular American, capital markets still reign supreme on most measures. Derivatives are often traded in Chicago; currencies in London. American firms dominate the league tables in asset management and investment banking. The White House has sought to weaponise America’s pre-eminence, by pushing Chinese firms to delist their shares from New York, for example. But if anything the trade war has shown the growing muscle of China in finance. A big wave of IPOs is taking place in Hong Kong, often done by firms keen for an alternative to New York. China’s prowess in fintech will soon be centre-stage with the listing of Ant Group, which may be the world’s Continues on page 20
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Monday 07 September 2020
BUSINESS DAY
In Association With
All helmet and no mettle
The UN’s peacekeepers are under pressure to quit Congo The peacekeeping mission has struggled to bring peace, but leaving could make things even worse
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N THE EDGE of Beni, a city in north-eastern Congo, a field is strewn with bricks and broken glass. Three Malawian soldiers, working for the UN’s peacekeeping mission, known as MONUSCO, lounge under a tree amid the rubble. It is all that is left of MONUSCO’s offices after they were burned down in November by locals furious that the mission had failed to protect them from rebels. “We have suffered years of massacres,” says one of those who took part in the burning. “We see UN soldiers all over town, but when the rebels are killing us they never come.” The peacekeeping mission in Congo, with over 16,000 soldiers and police, is the largest and third most expensive in the world. UN troops have been in Congo since 1999, when they arrived to oversee a ceasefire in a civil war that had left between 1m and 5m people dead, thanks to bullets, machetes and disease. For two decades the mission has tried to pacify the country’s embattled east. Yet more than 100 armed groups still hide there in the forests. They survive by smuggling minerals, looting and extorting cash from the locals. This year alone about 1m Congolese have been displaced by violence. Some of the bloodiest fighting has taken place in Ituri province, where two rival tribes have been clashing. Rebels have
hacked at least a thousand people to death with machetes, attacking 60 schools and raping children. Even though the violence still rages (see map), MONUSCO is under pressure from the UN Security Council to pack up and go. A report commissioned by the council last year says MONUSCO should aim to be out by 2022, largely because it is too expensive and has sputtered on for so long. President Donald Trump’s decision to cut America’s contributions to UN peacekeeping has squeezed MONUSCO’s budget to $1bn a year, almost a third less than in 2016. Yet conditions for the mission’s total withdrawal will plainly not be met by 2022, when Congo’s army is supposed to be largely back in control. So MONUSCO will probably be shrunk but
will not leave altogether. The peacekeepers are far from fulfilling their mandate to disband militias, protect civilians and stabilise the state. Armed groups are multiplying. Few Congolese civilians think the mission really protects them. According to a poll in 2018 by peacebuildingdata.org, an American NGO, only 15% of those surveyed said they trusted MONUSCO to keep their neighbourhood or village safe. Still, with nobody else to turn to, displaced people do often huddle around MONUSCO bases. At the best of times, bringing peace to eastern Congo is a very tall order. The eastern provinces are ten times the size of Switzerland. Much of the land is jungle. Murder and mayhem can occur quickly at night, so by the time UN soldiers arrive—if
they do at all—the rebels have invariably melted back into the bush. “Whenever I see the bloodshed, I always ask, where were we?” says Leila Zerrougui, MONUSCO’s head. “We can never do enough.” In any case, MONUSCO can stay only as long as the Congolese government wants it to. It is meant to work alongside the national army. Whereas Congo’s former president, Joseph Kabila, routinely threatened to kick it out, his successor, Félix Tshisekedi, is keener to co-operate with it. Yet working with the army is tricky. Its unruly, underpaid soldiers often collaborate with rebels, selling them guns and tipping them off. Sometimes they kill and loot together. Many former rebel warlords have been given senior posts in the army in exchange for surrendering their weapons. Their thugs tend to go on pillaging as before—but in army uniforms. “We cannot trust our soldiers and we do not know who the enemy is,” says a villager near Beni whose eight neighbours were rounded up and shot outside their houses last year. He says the killers were uniformed Congolese soldiers speaking Lingala, the language of the capital and the army. These murders took place barely a mile from MONUSCO’s offices, sparking the protests in which they were burned down. “Nobody came to help. We were forgotten.”
A reformer bids farewell
Abe Shinzo’s legacy is more impressive than his muted exit suggests He not only reshaped the economy and foreign relations—he also paved the way for future reforms
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HE RECORD was beaten in late August. Then, just four days later, the record-breaker said that he was, too. After serving the longest continuous stint of any Japanese prime minister (as well as the longest time in the job overall) Abe Shinzo announced his resignation on August 28th. Mr Abe blamed the abrupt decision, over a year before the rules of his Liberal Democratic Party (LDP) would have obliged him to step down, on an old digestive ailment. But many have cast his departure as an admission of defeat. The economy, which he has worked hard to revive after decades of listlessness, is swooning again because of covid-19. His campaign to revise Japan’s pacifist constitution to give the armed forces a proper legal underpinning has gone nowhere. His planned swansong, the Tokyo Olympics that were supposed to have taken place this summer, may never happen. His approval rating is dire. It is a gloomy moment. What with the depredations of the coronavirus, the growing pugnacity of China and Japan’s shrinking and ageing population, Mr Abe’s
successor, who will be chosen on September 14th by the LDP’s MPs, will have his work cut out (see article). But all these problems have been made more manageable by Mr Abe’s eight years in office. The outgoing prime minister has done a far better job than is commonly acknowledged. Before covid-19 struck, “Abenomics” was succeeding, albeit slowly, in resuscitating the economy. Japan, something of a wallflower in global affairs since the second world war, was playing an unusually prominent and constructive role in Asia and around the world. And Mr Abe was pushing through difficult reforms that shorter-lived and less adept
prime ministers had shirked for decades. He leaves a much more impressive legacy than his muted exit suggests. Abenomics was supposed to banish deflation and spur growth through lavish spending, radical monetary policy and structural reforms. Mr Abe never met his own, ambitious target to pump up inflation to 2% a year, but he did at least turn it positive. Before he took office, prices had been falling for four years straight; they have risen in all but one of the seven years since. During his tenure the economy enjoyed a 71-month recovery, just two months shy of a post-war record. And productivity has risen faster in Japan than in America. To get the economy moving, Mr Abe adopted policies previously considered politically or culturally impossible. As part of the Trans Pacific Partnership (TPP), a big regional trade deal, he agreed to slash tariffs and increase import quotas for agricultural goods, even though coddled farmers are some of the LDP’s most loyal supporters. Japanese women entered the workforce in droves, helped by free nursery school and other subsidies
for child care. They are now more likely to work than their American counterparts. And there are more than twice as many foreign workers in Japan as there were when Mr Abe took office, despite a supposed national phobia about immigration. Corporate governance has also improved dramatically. Almost all big listed firms have at least one independent director, compared with less than 40% in 2012. That in turn has broadened Japan’s appeal to foreign investors. Just this week Warren Buffett piled into Japanese conglomerates (see article). The main stockmarket index has more than doubled on Mr Abe’s watch, having barely budged for the previous decade. There have been mistakes, too, of course, most notably the decision to raise the sales tax twice, both times sending the economy into brief recession. But the pundits’ grim warnings—that the scale of government borrowing would prompt unaffordable rises in the interest rate it had to pay or, conversely, that the central bank’s adoption of negative interest rates would fatally injure the big banks—were simply wrong (see Free exchange).
Why is Wall Street expanding in China? Continued from page 19
largest IPO ever. And then there is the surprising rush of Wall Street firms and other foreign investors into mainland China. They have been knocking on the door for 30 years with little success. Now they are betting that China is serious about welcoming foreign finance. With its current-account surplus set to fall over time, or even fall into deficit, it needs to attract more foreign capital. The terms of access have improved. China is at last allowing Western firms to take control of their mainland operations and has made it easier for fund managers to buy and sell mainland securities. The potential prize is vast: a new source of fees for Wall Street banks, and for fund managers a huge universe of potential customers and companies to invest in. There are risks. China could bend the rules to protect local banks and brokers. Corruption is a hazard: in 2016 JPMorgan Chase was fined by American regulators for giving jobs to well-connected Chinese “princelings”. Worries over human-rights abuses may intensify. And navigating America’s sanctions regime will be tricky—global banks active in Hong Kong, such as HSBC, are already under pressure to cut off some Chinese officials there. Yet American financial firms’ exposure to China is low enough that they have little to lose. The tech industry is dangerously dependent on China: Apple assembles many of its devices there. By contrast, the top five Wall Street banks have only 1.6% of their assets exposed to China and Hong Kong. China’s ability to attract Wall Street firms during a bitter trade war shows the clout its capital markets have. But to become a financial superpower it would need to create its own global finance and payments infrastructure and make the yuan more freely convertible. The leading Chinese firms have a tiny presence abroad (just 5% of revenues for Ant) and most of China’s trade is invoiced in dollars, making it vulnerable to American sanctions. Building an alternative to America’s global monetary network is a huge task that will take years and require China’s control-obsessed officials to loosen their grip further. Still, the trade war has given China a big incentive to take the next step.
Monday 07 September 2020
BUSINESS DAY
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Monday 07 September 2020
BUSINESS DAY
Start-Up Digest
In association with
Oshiobugie: OAP who quit paid employment to start cheap school for orphans Odinaka Anudu
O
ne of the hallmarks of great entrepreneurs is their ability to sustain their vision and remain resolute even in the face of setbacks. This best describes Zion Oshiobugie, a former onair personality who, at onepoint in life, got sacked by his employer. After searching endlessly for another employment without finding any, he took up menial jobs to survive. Today, he has emerged from that setback to become a success story. Oshiobugie, a serial entrepreneur, is the founder of Clever Minds Integrated Services, a consultancy firm he started in 2017 with a seed capital from Tony Elumelu foundation. His outfit provides educational training and other allied services. He was born in Kaduna State, Nigeria, to a middle-class family and as the second of five children, he lived a reasonably simple life until things went awry. He recalls that while growing up, his father lost his job at one time and life became progressively hard, espe-
cially in light of the constant religious and political crisis that bedeviled Kaduna. His family had to move to Warri in Delta State while his mother became a petty trader, with each of his siblings taking up menial jobs to survive. He says that in a bid to survive, he resorted to carrying cement blocks as a job while assisting his mother in hawking plantains. While hoping for the better, things grew worse as he eventually became a houseboy for a distant relative. It was during this stormy moment that he made the resolve to become successful. The graduate of electrical engineering, who wears a cap as a school proprietor and prides himself as a social edupreneur, explains that his love for education dates back to 2010 while working as a school teacher. “I first conceived the idea of starting a school in 2010 while working as a teacher in a private secondary school. I noticed the lack of quality education in the riverine and poor communities in the Niger Delta. I was moved to tears and got stirred up to start a school that would provide the right education,” he says.
Zion Oshiobugie
But he could not immediately implement the idea to start a school because of lack of funds. “Not too long after, I lost my job as a teacher. It was suicidal for me because I felt all hope was lost. I looked at the job and typical of people in paid employment, I saw it as my only source of livelihood. I was depressed and frustrated.” Interestingly, in 2014 he got a job as an on-air per-
sonality in a radio station, but that did not last long as his desire to solve a problem in the educational sector kept driving him. In 2017, Oshiobugie voluntarily exited his radio job to start Cleverminds Nursery and Primary School, with a vision to cater to the needs of orphans and the vulnerable. “Our school, situated in Edjeba community of Warri, a poor community in Delta State, offers quality educa-
tion for a very cheap amount of money, and is free for orphans. The vision is to make education affordable to low -income families where they will access free basic nursery and primary school. Today we are up and running with more than 167 pupils,” he discloses. The Cleverminds founder says his goal is to educate over 20 million children in the next 20 years and to use education as a tool to end poverty and joblessness. The Tony Elumelu foundation and Young Africa Leadership Initiative (YALI) alumnus says he understands that life challenges are surmountable but advises that one must be are armed with the right information and surround oneself with the right mentors. “I learnt that things happen in life. I also learnt to respect my parents because when these things happened to me, I lost everything except the love of my parents and the mercy of God. I have failed at other little things, but I have succeeded in more things,” he recalls. The entrepreneur has, for his hard work and outstanding contribution to the educational sector, received several awards and recognition.
Among them are the Pace Awards for Mentoring and Educational development by Delta State Ministry of Education, and Glazia Person of the Year (2017) alongside other top players in the industry. His transformational work in the education sector has also been recognised by the Economic and Financial Crimes Commission (EFCC), in addition to his free school for orphans which has received leadership recognition by the Delta State Governor. Speaking on what he plans to achieve in the next five years as a passionate educationist, he says, “My plan is to build a chain of low- cost schools in the most rural parts of Africa to ensure that every disadvantaged child across the continent has access to equal education and other opportunities.” On his advice to young and budding entrepreneurs, the entrepreneur says, “Be a problem solver, not a job seeker. Think of a problem you can solve that can help millions of people and you will definitely become rich. Gone are the days when you graduate from school and get a readymade job. It is now the turn of entrepreneurs and problem solvers.”
Survival of MSMEs imperative for economic rebound post-COVID-19, say experts Gbemi Faminu
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mid the COVID-19 pandemic that has battered the Nigerian economy, experts have called on the government to provide adequate support for operators of micro, small and medium scale enterprises (MSMEs) to enable them significantly contribute to the country’s economic rebound postpandemic. Speaking at a webinar of the Nigerian Economic Summit Group (NESG) presummit themed ‘The Pandemic and Nigeria MSME’s:
Impact, Priorities and Strategies’ Wonu Adetayo, executive director at Kainos Edge Consulting Limited who doubles a NESG board member said that the MSMEs play a significant role in the country’s economic system and employs 71 percent of the country’s workforce. “With sustained efforts from the private sector, active collaboration with the government and the citizens, Nigeria’s MSME ecosystem will be able to draw the required investments that will make them a major contributor to economic development in the national interest,” Adetayo said. In a panel session, Bunmi
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Lawson, CEO, Edfin Microfinance Bank, urged MSMEs operators to incorporate innovations and adopt new strategies to enable them to adopt the new normal enforced by the outbreak of the pandemic. She added that the use of technology and digitalization is pertinent in line with the new trend that entrepreneurs must leverage to grow their businesses. She also urged the government to provide palliatives to cushion the impact of the pandemic on businesses such as tax cuts, improved infrastructure, and reduction in interest rates among others.
“There is a need to ensure the survival of MSMEs by exploiting innovative ways, there is also a need to encourage MSMEs to make use of online platforms to grow their businesses. Interest rates should also be reduced and loans made more secure.” Lawson explained. Teju Abisoye, executive secretary, Lagos State Employment Trust Fund, said the government on its part is working on rolling out various recovery methods for businesses despite the drop in its revenues. He added that the virus outbreak has forced the government to shift its motive of
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generating jobs to retaining jobs during the period. “Some sectors were more hit than others in the course of the pandemic, therefore we are helping sectors such as the tourism and hospitality sector and the education sector, that has been seriously affected by providing access to affordable financing and renewing loans for previous loan beneficiaries,” Abisoye said. Similarly, Umma Aboki, executive secretary, Kaduna Investment Promotion Agency, said the Kaduna government is making efforts to ensure the survival of the MSMEs through the provision of funds and technological
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advancement among others. “We are clustering MSMEs to get access to finance, we are also providing mortgage to businesses, developing e-commerce initiatives and providing tax incentives to the hospitality and agric sector to help cushion the effects of the COVID-19 pandemic,” Aboki said. Giving recommendations to the sustainability of small businesses, Degun Agboade, president, Nigeria Association of Small and Medium Enterprises (NASME) noted that the survival of MSMEs is very important to economic growth however it requires inputs from the government.
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real sector watch
Manufacturing, export face pressure on border closure, virus Gbemi Faminu
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he manufactur ing and export sectors are hard hit by the ongoing pandemic and the closure of Nigeria-Benin border. While border closure has prevented made-in-Nigerian products from reaching the West and Central African market, the pandemic has cut down manufacturers’ access to foreign exchange and raw materials. “The resultant effect of border closure is the decline in export to many countries and significant losses for many exporters, as many have closed down some of their production lines since then,” Ede Dafinone, chairman, Manufacturers Association of Nigeria Export Group (MANEG), told BusinessDay recently. The virus and the border closure had a strong impact on the non-oil exports within the quarter. Raw materials’ export fell by 56.2 percent in Q2 of 2020, compared with the level in Q1 of 2020. It represents a 52.4 percent slump in the second quarter of this year when compared with the same quarter in 2019. Manufactured goods export slumped by 42.8 percent in Q2 of 2020 as against the level recorded in Q1 of 2020, but it represented an increase of 139.6 percent compared with the corresponding quarter in 2019. The value of manufactured goods in Q2 of 2020 stood at N3.040 trillion. Out of this, the export component accounted for N254.2 billion. Similarly, agricultural goods export dropped 38.2 percent in Q2, 2020 compared to Q1 of 2020, but rose 6.3 percent year-on-year, the NBS said. Export of agricultural products fell to N78 billion compared with N126 billion in Q1 2020. Total exports in the second quarter of 2020 was 45.64 percent lower than the first quarter (Q1,2020) and 51.73 percent lower than Q2 of 2019, according to the National Bureau of Statistics (NBS)’s recent Foreign Trade Statistics’ data. This, however, included crude oil and minerals. Coronavirus pandemic hit Nigeria in late March, cutting global supplies and consumer spending. It has also done a big damage on the crude oil market, fuelling glut and more than 30 percent price slump. This has led to low foreign exchange inflows into Nigeria, forcing the central bank to come up with stringent policies to save
Nigerian reserves. The manufacturers are at the receiving end as they say they are unable to even get 10 percent of their dollar needs. The border between Nigeria and Benin has been shut for over a year now, hurting export, and FX that comes with it. “We have shut down our export segment because of border closure,” said Okhai Ehimigbai, export manager at Aarti Steel Yinka Ademuwagun, research analyst at United Capital, said slump in export and manufacturing was to be expected given the outbreak of the COVID-19 pandemic, the ensuing global lockdown, crude oil market crash and the movement restrictions which slowed down manufacturing activities. He further said that the impact of the pandemic was more significant on exports due to the huge reliance on a wide range of imported items. “Going forward, we expect the negative economic effects of the COVID-19 pandemic to have a significant impact on Nigeria’s trade position for the rest of the year. However, we anticipate an improvement on quarter to quarter basis in Q3 of 2020 following the gradual reopening of economies at the beginning of the quarter,” Ademuwagun said. Similarly, Akinloye Ayorinde, equity analyst at CSL stockbrokers, said underlying issues as well as the lockdown imposed by the federal www.businessday.ng
government affected the productivity of players in the sector. “The key factor behind the steep deficit in manufactured goods was the lockdown implemented to curb the spread of the coronavirus. However, underlying issues remain such as decrepit infrastructure and poor backward integration across industries. Heavy reliance on imported raw
‘ Without a
high level of competitiveness, it is difficult to boost manufacturing exports. Cost and operating costs are extremely high in the domestic economy
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materials was aggravated by the pandemic,” Ayorinde said. One of the key challenges affecting manufacturing and export is poor infrastructure. The power sector is in a shambles, leading manufacturers into searching for solutions elsewhere. Gas supply is erratic, and rails are still at inchoate stage. Roads are poorly maintained, with insecurity still a major issue across the country. “Going forward, with the country gradually adjusting to the pandemic, I expect to see a reduction in deficit levels. However, I believe tackling long-term concerns such as infrastructure would increase local manufacturing productivity and reduce dependence on imported brands,” Ayorinde recommended. Muda Yusuf, director general, Lagos Chamber of Commerce and Industry (LCCI), said the sector is struggling with lack of productivity and competitiveness, which are critical factors in the balance of trade position. “Without a high level of competitiveness, it is difficult to boost manufacturing exports. Cost and operating costs are extremely high in the domestic economy. There are also several regulatory, structural and institutional challenges which undermine the competitiveness of manufacturing firms. For the trade balance to improve, we need to address these constraints to productiv@Businessdayng
ity and competitiveness,” Yusuf explained. Industry experts say that the government should implement enabling policies to boost the country’s exports. Toki Mabogunje, LCCI president, said at a breakfast meeting recently that boosting the country’s export profile requires some policy implementation from the government that would intensify local production in the real and service sectors. “Government must lead from the front through assurances of continuity of policy and programmes, thereby giving impetus to the private sector and venture capitalists to make investment decision in priority intermediate and finished goods,” Mabogunje said. Unemployment numbers released by the National Bureau of Statistics (NBS) recently showed the job rate has risen to 27.1 percent in the second quarter of 2020, from 23.1 percent in the third quarter of 2018. Jobs are created by firms such as manufacturers and exporters, but their margins are now badly hit by border closure, COVID-19 and inflation rate which was 12.56 percent in June 2020. The AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent. It is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994 and a flagship project of Africa’s Agenda 2063, targeted at creating a single market for 1.2 billion people and exposing each country to a $3.4 trillion market opportunity on the continent. Trade among West African countries is about 12 percent, which is relatively low when compared with other regions. On continental basis, trade among African countries is 16 percent, which is poor when compared with Europe’s 59 percent, Asia’s 51 percent, North America’s 37 percent, and Latin America’s 20 percent, data show. The AfCFTA is beginning in January 2021 and there are concerns the pandemic and the border closure, including the poor treatment of Nigerians by Ghanaian authorities, could hurt it. The Ghanaian Ministry of Trades recently demanded $1 million from each Nigerian trader for the Ghana Investment Promotion Council (GIPC) registration fee, locking up shops belonging to Nigerians who were unable to pay.
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NEWS
Strike: Rivers, labour head for showdown IGNATIUS CHUKWU
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he war of words preceding Tuesday’s planned strike by the Nigeria Labour Congress (NLC) against the Rivers State government has intensified as no party is ready to back down. The NLC and Trade Union Congress (TUC) have denied receiving any court order restraining them from going ahead with the planned strike, while the Governor Nyesom Wike-led
government has threatened to press contempt charges against the two unions. Workers in Rivers State are pressing for full implementation of the N30,000 new minimum wage signed into law by President Muhammadu Buhari in 2019 and Tactically, the Rivers State government has secured the support of youth leaders to threaten to stop any street mobilisation. Wike is also getting the National Industrial Court (NIC) to issue contempt
charge should the unions carry on with the strike. On the other hand, the organised labour has handed over the coordination of the strike to their national leaders. The situation threatens to be a national crisis and Rivers State is now on hot spot. The Rivers State attorney-general and commissioner for justice, Zacchaeus Adangor, who addressed the media in Port Harcourt at the weekend, said the court would issue contempt charges
against labour leaders should they proceed with the strike. A youth leader who hails from the same local council area with Governor Wike has threatened against any street protests. The NLC national president, Ayuba Wada, has responded, saying the Rivers State government would be held responsible for any harm on protesting workers. He said that the protest must continue. All wings of labour have since been ac-
tivated such that many services especially fuel supply may be cut off. Waba urged Wike to rather use the bubbling energy to pay workers (teachers and health workers) their arrears, pay promotions since 2015 and pay pensioners since 2015. Sources said ego seems to have taken over as no side would want to blink first. Sources close to labour hinted that allowing the courts to stop the strike would kill the only weapon available to labour, strike,
UUBO, Bowmans enter into alliance IFEOMA OKEKE
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eading African law firms, Udo Udoma & Belo-Osagie (UUBO) and Bowmans, have announced they are taking a major step forward in collaborating to support clients across the continent. From September 1, 2020, UUBO and Bowmans have entered into an agreement that will see the two firms working more closely together. This alliance will replace the ‘best-friends’ arrangement that has been in place for several years. With a presence in eight key African countries: Ethiopia, Kenya, Malawi, Mauritius, South Africa, Tanzania, Uganda and Zambia, and over 400 specialist lawyers, Bowmans’ reputation for providing specialist legal services in the fields of corporate law, banking and finance law and dispute resolution spans over a century. “There are strong existing synergies between us -in services, culture, values, ethics and professionalism,” Aniekan Ukpanah, managing partner at UUBO said. “The Alliance gives us the opportunity to tap into the Africa-wide capabilities and presence that Bowmans offers,” Ukpanah said. “I’m delighted with this development,” adds Robert Legh, Bowmans’ chairman and senior partner. “UUBO is recognised as one of Nigeria’s elite law firms. Nigeria is the continent’s largest economy and the 26th largest economy globally. It’s also Africa’s most populous nation. Our Alliance with a firm of the calibre of UUBO is very good news for our respective clients across the continent.” Having been in a bestfriends relationship for several years, the two firms appreciate one other’s strengths and capabilities and have developed a mutual understanding and trust. www.businessday.ng
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to perish as other state governments and the Federal Government may borrow from the Rivers model. One source said the judge who awarded the injunction knew labour would not obey it. Meanwhile, a former governorship candidate of the All Progressives Congress (APC) in Rivers, Dakuku Peterside, has called on Wike to set aside pride and negotiate with the organised labour to avert avoidable industrial action.
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News Lafarge, Transcorp, Seplat, others... Continued from page 1
L-R: Abubakar Aliyu, minister of state for works and housing; Babatunde Fashola, minister of works and housing, and Ernest Afolabi-Omakhihe, permanent secretary, Federal Ministry of Works and Housing, during a day workshop for Federal Controller of Works and Engineers, in Abuja.
No pain, no gain: Why ending subsidies... Continued from page 1
to a record high of N162
per litre. According to James, the hike will crush the poor and jerk up the price of everything from food to transportation. What is worse is the timing, according to James, as this was a time when Nigerians have taken big hits to their incomes and are increasingly being laid off work as they reel from the harsh economic impact of the COVID-19 pandemic. “This government wants to strip away the only thing that the poor count on as dividend from the government,” James said, saying, “We cannot accept such madness.” The extent of James’ ignorance is deep. He does not understand that the rich, who consume far more fuel than the poor were actually the biggest beneficiaries of the practice and that the government was essentially subsidising the rich and not the poor whose biggest expenditure is on food. That is evidenced by results of surveys combining annual subsidy estimates with households’ expenditure data, which show that petrol subsidy is concentratedtohighincomegroups asthetop20percenthouseholds enjoy three times as much the benefit of fuel subsidies as the bottom 20 percent households. He does not understand that by consuming less fuel than the rich, the government was essentially taking from him and other taxpayers, through taxes, to subsidise the rich by reducing theamounttheypaidtofueltheir cars and power their generators. He also does not understand that the government spent four times more money last year, N730.9 billion, subsidising fuel than building new schools, health centres and equipping new science labs. He does not know that each time he fights against subsidy removal he denies his children and family access to more affordable education and healthcare. He is perhaps also unaware that artificially low petrol prices in Nigeria have also led to largescale smuggling of the prod-
uct to neighbouring countries where it is twice more expensive, which means the Nigerian government was also subsidising nationals of other countries at the detriment of its citizens. All of these somehow never matter when protests erupt over the controversial subsidy as another round of protests begins. The Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) already said they were in talks with civil society allies and relevant organs of Labour towards embarking on strike over the petrol price hike. “Clearly, the action of the Federal Government is most insensitive and an affront to the Nigerian people who are bearing heavy burden of the COVID-19 pandemic,” the president of NLC, Ayuba Wabba, said. “We will resist this latest move to impoverish the mass of the working people,” he said. Despite the unrest, the decision to abolish Nigeria’s fuel subsidy is the right one. While deregulating the downstream petroleum sector could hurt working Nigerians initially, it would bring relief in the long term. Thisisbecauseitwouldpave way for new investors in the sector and that would ultimately drive down the price of fuel and reduceNigeria’sdependenceon petrol imports. Stopping petrol imports also helps the CBN conserve scarce dollars. Keeping the domestic price of oil artificially low with the fuel subsidy has discouraged additional investment in Nigeria’s oil sector, according to a Brookings Institution report in 2012. This is why despite issuing multiple refinery licences, Nigeria still does not have a single well-functioning refinery. The problem for investors has been how to recoup their investment under the artificially low price structure. The abolition of the wasteful subsidy also frees up government resources to be invested in more meaningful social protection programmes that actually have a direct and meaningful impact on the poor. If keeping the petrol subsidy actually had an impact on the www.businessday.ng
livelihoods of the poor then it has failed after Nigeria became the poverty capital of the world in 2019, overtaking India for the first time despite having only a third of the Asian country’s population. Some 87 million Nigerians are categorised as poor as they live under $1.90 a day. There is perhaps no better time than now to end the fuel subsidy and channel resources into areas that can help reduce the poverty level in the country. Economists are of the opinion that production subsidies are more impactful on the economy and in protecting the poor than consumption subsidies, citing examples from even the United States that subsidises its farmers. Power subsidy Another subsidy that continues to create controversy for its ineffectiveness is the power subsidy. But even that may be set to end as the government doubles down on wide sweeping reforms to revive the ailing power sector. Consulting firm, PriceWaterhouse Coopers (PWC), estimates that Nigeria spent about N3.9 trillion to subsidise electricity and petrol consumption in the country between 2015 and 2019. PwC in a recent webinar conducted on the potential impacts of the Covid-19 on Nigeria’s power sector, said that between the aforementioned years, the country’s expenses on petrol subsidy amounted to N2.3 trillion while that of electricity was N1.63 trillion. The first bailout for the sector in that period was in 2014 when the federal government approved a loan of N213 billion for power Discos as part of the Nigeria Electricity Market Stabilisation Facility (NEMSF) by the central Bank of Nigeria CBN. In March 2017, the Federal Executive Council (FEC) equally approved a N701 billion CBN facility as Power Assurance Guarantee for the Nigerian Bulk Electricity Trading Plc (NBET) for a period of two years. In August, 2019, the government again signed the release of N600 billion for the power sector which was meant to cover the shortfall in the payment of monthly invoices by key stakeholders in the sector.
The government is however showing a resolve to also end the power subsidy. Homes and offices in Lagos are already receiving letters from their electricity providers notifying them of a hike in electricity costs as the government doubles down on ending the equally wasteful subsidy that benefited the rich more than the poor. The government approved a rise in rates starting September after a previous tariff hike slated for July 1 was halted by the parliament. Power distribution companies had been asked to put off any tariff increase until the first quarter of 2021 due to “the current economic challenges in Nigeria.” However, consumers, except those receiving less than 12 hours of supply, will have to pay more for electricity starting from Sept. 1, according to the Nigerian Electricity Regulatory Commission (NERC). The benefits of the move have been immediate. Weary investors are now renewing their interest in Nigeria’s beleaguered electricity sector as they count on the new service-reflective tariff regime kicking off today to breathe new life into the sector by vastly improving liquidity across the value chain, BusinessDay investigations reveal. One critical electricity venture that has been stranded for years, the $500 million Geometric Integrated Power project in Aba, could be the first beneficiary of this renewed investor interest. According to BusinessDay investigations, the Cairo-based pan-African multilateral trade finance institution, Afrexim Bank, has indicated its willingness to open a credit line of $100 million to complete the Geometric project in Aba now that the service-reflective tariff regime proposed by NERC is coming into effect and following a resolution by National Council on Privatisation (NCP) of the long-running battle over the separation of Aba Disco from Enugu DisCo, between Interstate Electrics (core investor in Enugu Disco) and Geometric Aba Power Limited, a dispute that dates back to the privatisation of Enugu Disco in 2013.
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edition, celebrates chief executives of quoted companies that have demonstrated the most impressive gains in both share price and profit-after-tax over the course of 2019. This year’s event, which held virtually in strict adherence to the COVID-19 guidelines on Saturday, September 5, 2020, had the theme ‘Advancing Against All Odds,’ demonstrating that it is not all doom and gloom as real business heroes are revealed when they come against big odds. Wole Oshin, group managing director, Custodian Investment plc; Sarbeswar Sahoo, managing director, Prestige Assurance plc; Adebola Akindele, group managing director, Courteville Business Solutions; Ganiyu Musa, group managing director, Cornerstone Insurance plc, and Hassan Usman, managing director/ CEO, Jaiz Bank plc, won in the Top CEOs category. Other winners of the Top CEOs Awards are Andrew Otike Odibi, managing director, C&I Leasing plc; Owen Omogiafo, president/CEO, Transnational Corporation of Nigeria (Transcorp); Olusola Peter Obabori, group managing director, Redstar Express plc; Khaled el Dokani, country CEO, Lafarge Africa plc; Patrick Ilodianya, managing director, SFS Real Estate Investment Trust; Babatunde Fajemirokun, managing director/CEO, AIICO Insurance plc; Ferdinand Moolman, CEO, MTN Nigeria plc; Herbert Wigwe, managing director/CEO, Access Bank plc; Roger Thompson Brown, CEO, Seplat Petroleum Development Company plc; Oyeyimika Adeboye, managing director, Cadbury Nigeria plc, and Abubakar Suleiman, managing director/CEO, Sterling Bank plc. The Next Bulls Awards winners include Fejiro Hanu Agbodje, founder/CEO, Patricia Technologies Limited; Obi Ezeude, president/CEO, Beloxxi Group; Pat McMichael, CEO, Eat ‘N’ GO; Titi Adeoye, managing director/CEO, Sankore Investments; Femi Adeoti, managing director/CEO, IINLAKS Computers Limited; Bimbo Adeoye, managing director/CEO, Fintrak Software Company Limited. Others are Adebola Sheidu, founder/chairman, Brains and Hammers Limited; Valentine Chime, managing director, Digital Nigeria limited; Thomas Pelletier, managing director of MASSILIA Motors and managing director of CFAO Nigeria plc. The award was introduced in 2014 to cel@Businessdayng
ebrate chief executives who through sound strategy, disciplined execution, world-class governance and adoption of a customer-first ethos have delivered alpha, thereby creating competitive shareholder value. Since inception, the annual awards have become the capital market pacesetter used by investors to identify the best performing CEOs and the most resilient stocks on the NSE. The winners of the award are selected by a proprietary survey carried out by the BusinessDay Research and Intelligence Unit (BRIU). Respondents include equity analysts, retail and institutional investors, financial journalists, sectoral experts, and professional advisers. Nomination of shortlisted companies follows the impressive growth, market reputation, regulatory compliance, and world-class corporate values of these organisations, under visionary leadership, and stead growth of these companies, attracting broad positive interest from sector watchers. Winners of the 25 CEO awards in 2019 included renowned CEOs Herbert Wigwe, group managing director of Access Bank, as well as Edwin Igbiti, managing director of AllCO Insurance, and a host of others. In 2019, Access Bank won the special category award as Best Media Communicator on the NSE and E-Tranzact International plc also bagged the award of the Best Transformation and Turnaround Company on the NSE. Past winners of Next Bulls Awards have included iconic companies like Airtel, Caverton Group, Enyo Retail & Supply, Halogen Security, Innoson Group, Mojec International, SystemSpecs, and Tolaram Group. BusinessDay, as the organiser of the Top CEOs & Next Bulls Awards, decided to hold the event knowing that there is no better time than now to give recognition to companies that are thriving in spite of challenges, as businesses are trying to navigate the disruption brought about the recent crisis. The celebration of the Top CEOs & Next Bulls Awards is worthwhile because these companies defied the odds in 2019 before ending the year as outperformers. Asides from the economic contribution and employment opportunities created by these companies, Nigeria direly needs such success stories to inspire young Nigerian entrepreneurs who are growing up in a society with far too few role models.
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NEWS
Post COVID-19: Trafficking, irregular migration to increase – IOM
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nternational Organisation for Migration (IOM) has warned of expected increase in trafficking and irregular migration post Covid-19 as a result of socio-economic pressure in some countries. This, it said, would make desperate migrants more susceptible to criminals. Franz Celestin, IOM head of mission in Nigeria, stated this in Abuja on Sunday. According to Celestin, the socio-economic pressure post Covid-19, will be so hard and will push a lot of people to migrate to countries with better economy as they always do. He explained that once the fear of the virus no longer existed and a vaccine was out and distributed, a lot of people would be on the move again. Celestin said that following the official closure of borders by countries, there had been a significant drop in the numbers of people crossing the borders unofficially at the humanitarian points, which also managed the unofficial borders. “What keeps the people from moving is fear. The of-
ficial borders that have been closed will reduce the numbers of people travelling officially because smugglers do not use official borders “It is a different process with trafficking because 80 percent of trafficked victims travel through official borders with official documents. But it is a different aspect as they usually travel through unofficial borders, the ones that are not guided by a border management agency. “We have seen a significant drop in the numbers of people crossing borders unofficially at the humanitarian points because the humanitarian points also manage the unofficial borders. “I think that it is calm before the storm and I think what is going to happen is that once the fear of Covid-19 is out of people and once we have a vaccine that is effective and widely distributed and the fear no longer exists. “The socio-economic pressure is going to be so hard and it is going to push a lot of people so hard to migrate and we expect to see a lot more being trafficked.
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Sanwo-Olu, Tinubu task Oniru on unity in Iruland Provide sufficient context for economic he was impressed that the data, journalists urged at PwC workshop JOHN SEYI SALAU monarch had displayed
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agos State governor, Babajide Sanwo-Olu and the national leader of the All Progressive Congress (APC), Bola Tinubu on Sunday called on the newly installed Oba of Oniru, AbdulWasiu Omogbolahan Lawal to work with the people of the kingdom as well as the state government to actualise his dreams for the development of Iruland and Lagos State. The duo also urged the monarch to strengthen the existing bond of unity and peace in Iruland for the overall development and progress of the Kingdom, saying that his passion for the development of Iruland will be successful only if he works with the people and other constituted authorities. Speaking at the coronation of Lawal as the new 15th Oniru of Iruland held at the Oniru palace, Sanwo-Olu, who was represented by his deputy, Kadiri Obafemi Hamza, expressed satisfaction with the progress made in the kingdom in the last three months. He said that
impressive actions characterised by wisdom, knowledge and large heartedness. The governor also called on the residents in the kingdom to stand firm behind the new monarch in order to allow the development and prosperity of the kingdom to flourish. On his part, Tinubu called on the monarch to work with the people of the kingdom as well as the state government to actualise all his lofty dreams for the development of Iruland and Lagos State. According to Tinubu, no matter how beautiful or good an idea is, without the support of the government and the people whom the development is meant for, it may not succeed. He urged the monarch to work effectively with people. Oba Lawal expressed gratitude to Governor Sanwo-Olu, Tinubu, traditional rulers in the state and all the people of the kingdom and assured that he would be fair to all and strive for the progress and development of the kingdom.
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SAAC ANYAOGU
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ournalists have been advised to go beyond merely regurgitating data and statistics to provide sufficient context or insights that readers will find useful. The advice came from facilitators at the 7th edition of the PwC Nigeria annual capability enhancement workshop for journalists. Andrew S. Nevin, partner and chief economist, PwC Nigeria in a presentation titled “Economic sustainability: Tracking and reporting the metrics that matter,” urged journalists to track key metrics such as the Sustainable Development Goals (SDGs), and other policy pronouncements of governments which they can use to benchmark their analysis of statistics from the National Bureau of Statistics (NBS) and enrich their reporting on the economy. The workshop which held virtually in line with Covid-19 protocols, had participants from traditional broadcast, print and new media platforms. It featured insightful presentations on vari-
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ous topics by subject matter specialists with the aim of building the capacity of journalists and enhancing their ability to execute their duties effectively while positioning themselves to take advantage of future opportunities. The annual workshop, which is now in its seventh year, is a key component of PwC’s corporate responsibility strategy and was instituted in recognition of the important role of the media in society and in particular, the role that the media in Nigeria has and continues to play in informing and educating the public, PwC said in a release. “Our support for the media through this workshop and the media excellence award is in line with our purpose which is to build trust in society and solve important problems,” said Taiwo Oyedele, fiscal policy partner and West Africa tax leader at PwC in his opening remarks at the session. This year, the topics discussed at the workshop were determined by the participants who made their pick from a pool at the point of registration.
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Monday 07 September 2020
BUSINESS DAY
NEWS L-R: Temitope Adetiba, head of sale; Lola Adedeji, general manager, and Korede Omole, assistant head of sales, all of Amber Energy Drink Limited, during the empowerment training programme organised for four hundred beneficiaries in Lagos.
Despite no subsidy regime, analysts say NNPC still subsidises PMS import HARRISON EDEH, Abuja
D
espite the ‘no subsidy’ regime of the Federal Government, the Nigerian National Petroleum Corporation (NNPC) still intervenes in Premium Motor Spirit (PMS) otherwise known as petrol by subsidising importation of into the country, analysts have said. The analysts said what is currently applicable in the downstream sector of the oil industry, can best be described as price modulated regime, although they acknowledged it as a step forward in attaining full deregulation of the corruption-ridden and unsustainable subsidy payment in the country.
“We have not finished deregulating and it is still expected that there are some forms of intervention by the NNPC. However, if that sort of intervention did not come, Nigerians may buy fuel at a much higher rate because of concerns of galloping exchange rate,” Henry Ademola Adigun, an oil sector governance expert told BusinessDay. Henry admits the government is taking the right step, noting that the NNPC’s head-start in getting foreign exchange at a subsidised rate from the Central Bank of Nigeria facilitates their swift intervention on the market. “The step is good, but we are not there yet. Right now, the PPMC, a subsidiary of NNPC is fixing the ex-depot price. This would enable
marketers to fix the capping based on certain probabilities and market strategies. “Right now, the real landing cost of fuel could be between N180 and N190. If we use the true value of the FX rate from the central bank, they can bring it in at N151 or N152. He also stated that marketers can play despite the head start the NNPC has in importation because the exdepot price is fixed for them by PPMC, as such they can fix according to the price cap and market probabilities. The NNPC, it would be recalled came under heavy attacks with its latest report revealing N5.3 billion provision for fuel subsidy payment despite a ‘no more subsidy policy ‘ of the Federal Government.
However, its spokesperson, Kenny Obateru, informed BusinessDay that the N5.3 billion it incurred from payment of marketers in June 2020 was not under-recovery but differentials in Petroleum Product Pricing Regulatory Agency’s (PPPRA) verified stocks. Meanwhile, the minister of state for petroleum resources, Timipre Sylva had earlier clarified that the government took the decision of no subsidy for the economic survival of the country, insisting that maintaining subsidy payment was no longer fashionable and sustainable. He explained that the government was no longer in a position to pay subsidy as the Covid-19 pandemic has impacted negatively on the country’s finances.
Nigeria’s stock market sees weekly gain of N155bn School reopening without adherence …as investors leverage cheap valuations across banking to COVID-19 protocols dangerous- ASUU IHEANYI NWACHUKWU
N
igeria’s stock investors booked over N155 billion gain in the trading week ended Friday September 4 amid renewed interest in the local bourse, despite pockets of profit taking activities. Going further into September, the market will remain on this path to recovery after March’s lows. The positive trend should be supported by investors buying banking stocks in move to qualify for interim dividends proposed by some lenders in their recently published half-year (H1) financials. Unattractive yield environment coupled with buoyant liquidity in the financial system as well as some positive H1 earnings publication spur locals demand for equity, said United Capital research analyst. Week-on-week (wow), the equities market of Africa’s largest economy closed
in green as investors took advantage of cheap valuations of some banking, consumer goods, oil& gas and insurance stocks. In the review trading week, NSE Banking Index increased by +2.76percent; NSE Oil & Gas Index (+3.65percent); NSE Insurance Index (+1.96percent); NSE Consumer Goods Index (+1.49percent), and NSE Industrial Index rose by +0.44percent. “Given that a number of fundamentally sound stocks remain below their fair values, the bulls continued to take advantage of cheap valuations, as bargain hunting activities were recorded in all of the five trading sessions of the week”, said equity research analysts at Lagos-based Vetiva Securities. With the consecutive gains recorded in the review week, the analysts expect the market to trade mixed in new week, “with continued bargain hunting in some counters and profit taking in others.”
A
cademic Staff Union of Universities (ASUU), University of Ibadan chapter, has warned against the reopening of schools without making for the schools to meet Covid-19 precautionary guidelines. Its chairman, Ayo Akinwole, stated this in a release he made available to newsmen in Ibadan on Sunday. Akinwole stated that the negative impacts of the pandemic on schools could be enormous if responsibility was not taken to ensure safety. He warned that no pecuniary gains would be more than the lives of lecturers and their students. Akinwole noted that before Covid-19 pandemic, public varsities were overcrowded with students and hostel facilities took more than its capacity. He warned parents not to jubilate at the news of a possible reopening of schools. However, they should ask the government to put measures in place so as not
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to have a surge in Covid-19 that might happen as a result of ill-thought out reopening, he said. “What we are saying is that the Federal Government should adhere to its own set guidelines. Our position, as a responsible union in all these is that; throwing schools open in the midst of all these, is an open invitation to the tragic explosion of the Covid-19 scourge on a scale never witnessed anywhere since its outbreak.” He said that the union was aware that there had been agitations from some quarters for the government to reopen schools. He said that those leading the campaign are the proprietors of private universities. He said, “ASUU is not in any way opposed to this call. “However, Nigerians should honestly interrogate this position. Has the Nigerian government met the Nigeria Centre for Disease Control (NCDC) criteria on Covid-19 protocols in our institutions? According to him, “Cov-
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Monday 07 September 2020
BUSINESS DAY
39
NEWS
Why we insist on full deregulation of downstream oil sector - marketers OLUSOLA BELLO
D
epot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) has insisted that the Federal Government takes a further step towards full deregulation of the downstream sector to enhance economic growth and development of the nation. According to the marketers, this is the only way that private investments can be attracted to the sector and increase employment opportunities. Their insistence
is coming amid the current hike in the ex-depot price of Premium Motor Spirit (PMS) by the Petroleum Products Marketing Company (PPMC) from N138.62 to N151.56 per litre. Full deregulation of the sector remains the most viable option for Nigeria to effectively navigate this period and ultimately safeguard the future of our economy and wellbeing of 200 million Nigerians, they said. The government in March of this year introduced a price modulation policy where international product prices and associated landing costs
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in Nigeria are used as input in determining final pricing to the local market by the government through the Petroleum Products Pricing Regulatory Agency (PPPRA) and disclosed periodically. Winifred Akpani, DAPPMAN chairman, while commending the government for consistently seeking ways to reposition the sector for effectiveness and profitability, said DAPPMAN was in full support of the implementation of a fully deregulated market, which will make operations in the downstream sector more seamless, enhance transparency, competitiveness, and
sustainable growth. “DAPPMAN is mindful of the commitment of the government and the functional organs managing the sector to ensuring value to every Nigerian and we salute them for this. We are indeed up against uncertain times.” According to Akpani, deregulation will open up the sector for fresh investments, market deepening, diversification, and expansion, culminating in stable demand and supply regime which is critical to ensuring that consumers have uninterrupted access to affordable quality products without the huge financial
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burden currently borne by the government. “We aware of the considerations that have dogged the issue of deregulation over the years and we believe they are very important. However, we believe these considerations will be duly addressed with a deregulated regime that guarantees long-term benefits and empowers the government to commit savings made in the process to infrastructure development, job creation, agricultural revolution, education and health. This will spur growth of Small and Medium scale Enterprises (SMEs) as well as
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large corporates, that would increase Nigeria’s human capacity index, competitiveness and ultimately drive inflow of foreign investments,” she added. On its response to the Covid-19 pandemic, Akpani who is also the managing director and CEO of Northwest Petroleum and Gas Company Limited, said DAPPMAN has contributed towards the upgrade of medical facilities, distributed tens of thousands of masks and sanitisers; and made donations of relief items to hundreds of thousands of beneficiaries across the nation.
40
Monday 07 September 2020
BUSINESS DAY
Access Bank Rateswatch Market Analysis and Outlook: September 4 – September 11, 2020
KEY MACROECONOMIC INDICATORS GDP Growth (%)
-6.1
Q2 2020 — lower by –7.97% compared to 1.87% in Q1 2020
Broad Money Supply (N’ trillion)
35.34
Decreased by 1.05% in June’ 2020 from N35.72 trillion in May’ 2020
Credit to Private Sector (N’ trillion) Currency in Circulation (N’ trillion)
29.18 2.3
Decreased by 0.15% in June’ 2020 from N29.23 trillion in May’ 2020 Decreased by 2.23% in June’ 2020 from N2.35 trillion in May’ 2020
Inflation rate (%) (y-o-y)
12.82
Increased to 12.82% in July 2020 from 12.56% in June 2020
Monetary Policy Rate (%) Interest Rate (Asymmetrical Corridor)
12.5 Adjusted to 12.5% in May 2020 from 13.5% 12.5 (+2/-5) Lending rate changed to 14.5% & Deposit rate 7.5%
External Reserves (US$ million) Oil Price (US$/Barrel) Oil Production mbpd (OPEC)
35.67 42 1.49
COMMODITIES MARKET
STOCK MARKET Indicators
Friday
Friday
Change(%)
4/9/20
28/8/20
NSE ASI Market Cap(N’tr)
25,605.64 13.36
25,309.37 13.20
Volume (bn)
0.42
0.14
Value (N’bn)
3.79
0.92
MONEY MARKET NIBOR Tenor
September 2, 2020 figure — a decrease of 0.27% from August start September 3, 2020 figure— a decrease of 4.87% from the prior week July 2020, figure — a decrease of 0.6% from June 2020 figure
Friday Rate
Friday Rate
(%)
(%)
OBB O/N
1.6300 2.2500
13.9000 14.9000
(1227) (1265)
CALL 30 Days 90 Days
2.9375 2.6404 3.0201
12.5800 2.7896 2.9449
(964) (15) 8
Friday
1 Month
(N/$)
Rate (N/$)
4/9/20
28/8/20
Official (N) Inter-Bank (N) BDC (N)
379.00 385.64 0.00
379.00 385.68 0.00
381.00 388.80 0.00
Parallel (N)
440.00
477.00
474.00
Tenor
(4.87) (6.99)
(34.84) (17.21)
2,620.00 133.65 64.50 12.11 555.75
2.87 8.97 (0.62) (5.02) 1.18
35.33 2.65 (16.77) (21.00) 28.20
1,939.36 26.90 301.40
(0.71) (2.18) (0.33)
47.19 56.49 (8.05)
Friday
(%)
Change
(%)
(Basis Point)
4/9/20
28/8/20
1 Mnth 3 Mnths
1.15 0.00
1.16 0.00
(1)
6 Mnths 9 Mnths 12 Mnths
1.15 2.25 2.85
1.18 1.54 2.24
(3) 71 61
4/8/20
ACCESS BANK NIGERIAN GOV’T BOND INDEX
Indicators
AVERAGE YIELDS
5-Year 7-Year 10-Year 15-Year 20-Year 25-Year
(%)
42.00 2.53
Friday
BOND MARKET Tenor
YTD Change
NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS
FOREIGN EXCHANGE MARKET (N/$)
1-week Change (%)
Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) 206.20 Agriculture Cocoa ($/MT) 311.46 Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Change Gold ($/t oz.) Silver ($/t oz.) (Basis Point) Copper ($/lb.)
28/8/200
Friday
4/9/20
1.17 1.18
4/9/20
Market
Indicators
Friday
Friday
Change
(%)
(%)
(Basis Point)
4/9/20
28/8/20
4.15 5.91 7.04 10.00 9.23
4.14 6.23 6.99 9.41 9.05
Global Economy In the US, trade deficit surged to $63.6 billion in July 2020, from a downwardly revised $53.5 billion gap in June, the highest trade gap since July 2008. This trade deficit reflected an increase in the goods deficit of $9.3 billion to $80.9 billion and a decrease in the services surplus of $0.8 billion to $17.4 billion, the lowest since 2012 according to the Bureau of Economic Analysis (BEA). Exports and imports increased in July but remained below pre-pandemic levels, reflecting the ongoing impact of COVID-19, as many businesses continued to operate at limited capacity or ceased operations completely, and the movement of travellers across borders remained restricted. Exports went up 8.1% to $168.1 billion, boosted by sales of cars, crude oil, semi-conductors and diamonds. Imports surged 10.9% to $231.7 billion, mainly due to cars, auto parts, civilian aircrafts, cell phones and finished metal shapes. In a separate development, the Ministry of Statistics and Programme Implementation (MOSPI) revealed that the Indian economy contracted 23.9% year-onyear in Q2'20, much worse than market forecasts of an 18.3% drop. It is the biggest contraction on record, as India imposed a coronavirus lockdown in late March and extended it several times, halting most economic activities. Construction (-50.3%), hotels and transportation (-47%) and manufacturing (-39.3%) recorded the biggest falls. Mining and quarrying (-23.3%); finance, real estate and business services (-5.3%); and utilities (-7%) also declined while the farm sector grew 3.4%. On the expenditure side, gross fixed capital formation recorded the biggest decrease (-47.1%). Private spending narrowed 26.7%, inventories fell 20.8%, exports tapered 19.8% and imports sank 40.4%. In contrast, government consumption jumped 16.4% as the government implemented relief measures to help curb the impact of the pandemic. Elsewhere, the Brazilian economy shrank 11.4% year-on-year in the Q2'20, following a 0.3% contraction in the previous period, officially entering a recession amid the coronavirus pandemic. The Brazilian Institute of Geography and Statistics reported that the services sector plunged 11.2% percent, after dropping 0.5% in the prior quarter, mainly transportation & storage (-20.8% vs -1.6%), trade (-14.1% vs 0.4%), public administration, health, defense & social security (8.6% vs -0.4%) and other activities (-23.6% vs 3.4%). In addition, industrial output slumped 12.7%, following a 0.1% fall Q1'20, in particular manufacturing (-20% vs -0.8%), construction (11.1% vs -1%) and utilities (-5.8% vs -1.8%). Output growth slowed in the primary sector (1.2% vs 1.9%).
1 (32) 5 59 18
Disclaimer This report is based on information obtained from various sources believed to be reliable and no representation is made that it is accurate or complete. Reasonable care has been taken in preparing this document. Access Bank Plc shall not take responsibility or liability for errors or fact or for any opinion expressed herein .This document is for information purposes and private circulation only and may not be reproduced, distributed or published by any recipient for any purpose without prior express consent of Access Bank Plc.
Friday
Friday
Change
(%)
(%)
(Basis Point)
4/9/20
28/8/20
Index
4,472.14
4,459.76
0.28
Mkt Cap Gross (N'tr) Mkt Cap Net (N'tr) YTD return (%)
14.46 10.14 82.06
14.35 10.07 81.55
0.75 0.70 0.51 2
TREASURY BILLS (MATURITIES) Tenor
Amount (N' million)
Rate(%)
Date
91 Day
19,783.59
1.2
12-Aug-2020
182 Day
54,592.59
1.5
29-July-2020
364 Day
27,000.00
3.1999
12-Aug-2020
Domestic Economy The Nigerian Bureau of Statistics reported that the value of Nigeria's merchandise trade stood at N6.2 trillion in Q2'20. This indicates a sharp fall of 27.30% in Q2'20 compared to Q1'20 and 27.46% compared to Q2'19. The value of total trade year to date amounted to N14.83 trillion, indicating a drop of 11.96% compared to half year 2019. The import component was valued at N4.02 trillion representing a drop of 10.69% in Q2'2020 against the level recorded in Q1'2020 but an increase of 0.39% yearon-year. The export component accounted for N2.22 trillion of the total trade, indicating a drop of 45.64% against the value recorded in Q1'2020 and 51.73% compared to Q2'19. Consequently, the trade balance recorded a deficit of N1.80 trillion, marking the third consecutive quarter of negative trade balance. This compares with trade in goods deficit of N421.3 billion recorded in Q1'20 and N579.06billion recorded in Q4'19 In a separate development, the Central Bank of Nigeria (CBN) has instructed deposit money banks in Nigeria not to pay less than 1.25% in interest on savings deposit accounts. This was contained in a circular dated August 31, 2020. Excerpts of the circular read as follows; “In line with recent market developments, the 'Bank has reviewed the minimum interest payable on savings deposits as provided in its Guide to Charges by Banks' consequently reviewing rates to 10% of Monetary Policy Rate. “Consequently, all deposit money banks are hereby informed that effective September 1, 2020 interest on local currency savings deposits shall be negotiable subject to a minimum of 10% per annum of Monetary Policy Rate.” Stock Market The bulls reigned supreme at the Nigerian stock exchange last week as we saw key indicators trudge
on stronger than the preceding week. The uptrend was impacted by gains recorded in large and medium capitalised stocks in sectors such as financial services, oil & gas, consumer and industrial good. Consequently, the All Share Index (ASI) and market capitalization closed at 25,604.64 points and � 13.36 trillion from 25,309.37 points, respectively the preceding week. This week, market is expected to remain in bullish territory as investors position ahead of their half-year audited earnings reports and dividend payments. Money Market The debt market was flush with liquidity following a net Open Market Operations (OMO) maturity of N262 billion. This inflow led to a decline in shortterm lender's charge such as the Open Buy Back (OBB) and Overnight (O/N) to 1.63% and 2.25% from 13.9% and 14.9%, respectively. Longer tenored rates such as the 30- day Nigerian Interbank Offered Rate (NIBOR) also dipped to 2.64% from 2.94% from 2.79%. This week, rates are expected to remain in single digit levels given the current liquidity glut in the market. Foreign Exchange Market The naira appreciated against the greenback across most FX market segments following the influx of the dollars last week. Panic selling reigned throughout last week as participants (majorly in the parallel market) were dumping the dollar in anticipation of the Central Bank resumption of forex sales to Bureau De Change (BDC). The anticipated sales is expected to push down the price of the dollar at the parallel market. Consequently, the Nigerian Autonomous Foreign Exchange Rate (NAFEX) as well as the parallel market rate appreciated. The parallel market rate gained � 37 to settle at � 440/US$. The NAFEX rate closed at � 385.64/US$ from � 385.68/US$. However, the official market rate was unchanged from prior week figure staying at � 379/US$. This week, the forex rate will be determined by the impact of the CBN sales to BDC which is expected to commence this week. Bond Market The Bond market was majorly quiet for the week ended September 4th, 2020. Nonetheless, the market recorded some attractive offers in the market for the 2023 and 2037 securities but with very few consummated trades. Yields on the 5-, 10- , 15-, 20- and 15-year papers rose to 4.15%, 7.04%, 10%, 9.23% and 10.07% from 4.14%, 6.99%, 9.41%, 9.05% and 10.05%, in that order. The Access Bank Nigerian Government Bond Index dipped slightly to 4,472.14 points from 4,459.76 points, 12.38 points higher. We expect that the bond market may be become bullish in the absence of attractive alternative investments Commodities The price of crude oil fell amid concerns over falling US fuel demand and worries over a global economic recovery. Recent data from the EIA showed US gasoline demand fell to 8.78 million barrels per day last week from 9.16 million bpd a week earlier. US data also showed private employers hired fewer workers than expected for the second successive month in August, raising fears that economic recovery was lagging. Bonny light, Nigeria's benchmark crude dipped 4.87% to close at $42 per barrel. In the same vein, precious metal prices were bearish amidst a stronger dollar, hopes of additional US stimulus, robust economic data and positive news about a potential COVID-19 vaccine. Consequently, gold prices tapered 0.71% or $13.85 to finish at $1,939.36 per ounce from $1,953.21 per ounce. Silver settled at $26.90 per ounce, a 2.18% drop from prior week price. This week, we anticipate that oil prices might trend higher as US refiners earmarked a long list of maintenance closures over the coming months, which would impact supply. Recent retreat in the value of the U.S. dollar and high sell-offs recorded in global equities is expected to lift the demand for the safe-haven metals this week. MONTHLY MACRO ECONOMIC FORECASTS Variables
Sep’20
Oct ’20
388
389
388
Inflation Rate (%)
12.90
12.96
12.98
Crude Oil Price (US$/Barrel)
44
46
46
Sources: CBN, Financial Market Dealers Association of Nigeria, NSE and Access Bank Economic Intelligence Group computation.
For enquiries, contact: Rotimi Peters (Team Lead, Economic Intelligence) (01) 2712123 rotimi.peters@accessbankplc.com
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Nov ’20
Exchange Rate (NAFEX) (N/$)
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Monday 07 September 2020
BUSINESS DAY
41
NEWS
Covid-19 slows down rail connectivity to Apapa port - Shippers’ Council boss Lekoil releases 2019 results, targets MIKE OCHONMA
…says every trip by rail will take out 38 trailers from road
xecutive secretary of the Nigerian Shippers’ Council (NSC), Hassan Bello says the standard gauge rail project meant to facilitate movement of containers out of the Apapa port and reduce the perennial traffic gridlock within the port precincts would have been gone far, but for the Covid-19 and its devastating effects on the global economy. Bello, who lamented the challenges being encountered within the ports, told newsmen in Abuja, that a diversified transportation system would reduce the cost of transport and port gridlock in the country, assuring that the President Muhammadu Buhari-led administration was working to realise this.
Noting that the various stakeholders in the maritime sector were collaborating to strengthen the standard operating procedure for the rail, Bello pointed out that that would mean two things: “We have an alternative to road, we remove a lot of trucks and we give the truckers a run for their money. With this, there will be competition, so this will mean prices of transportation will crash very in time to come and that will be one of the achievements. “I will give some examples to the road; our dependence on the road has cost us a lot, or has stiffened and made it impossible for transportation to make an expectant contribution in terms of revenue, in terms of employment and infrastructure.
E
“But the government is working on it. Like I said, if not for Covid-19, we will not be having gridlock; we would have connected the rail to the ports. The Federal Government has made a policy statement that all ports and I hope this will include dry ports that would be linked with rail. As I have said if not for Covid-19, the Chinese would have linked not just Apapa, but Tin Can with rail. Connection of the rail to the port is significant, because it will do two things. For every trip the rail makes, 38 trailers are removed from the port,’’ he said. According to Bello, the NSC is also looking at a very important aspect of access to the ports which is the batches inland waterways. He said a diversified means of transportation would give
room for competition, as the law of demand and supply will apply, thus, there will be reduction in transportation cost. “The moment there is inland connectivity, the gridlock in Apapa will disappear. That is apart from infrastructural efforts the Federal Government has made. The NSC boss, however, noted that infrastructure was not enough to manage traffic, adding that the various stakeholders were working at developing an electronic system that would ensure this. “You can’t rely on one mode of transportation. Nigeria Shippers’ Council has now encouraged rail employment and also evacuation from the ports and that will be at a cheaper rate,’’ Bello said.
2-year value appreciation
GBEMI FAMINU
L
ekoil, the oil and gas exploration and production company with a focus on Nigeria and West Africa, has committed to delivering greater value to its shareholders in the next two years. This commitment was made following the release of the company’s final audited results for the year ended December 31, 2019. In the 2019 financial year, production at the Otakikpo field averaged 5,305bopd and a plan to commence a five to seven well drilling programme that will increase production to around gross 15,000 to 20,000bopd is already in motion. The company further renewed the Otakikpo Field Licence within the year. Providing operational up-
Owolabi Salami retires from Allianz Nigeria MODESTUS ANAESORONYE
A
L-R: Victoria Shina-Aba, regional general manager, South West, Muritala Muhammed International Airport (MMIA); Obafemi Hamzat, deputy governor, Lagos State, and Rabiu Yadudu, managing director, Federal Airports Authority of Nigeria (FAAN), during the inspection of the MMIA on Friday by the deputy governor.
date about OPL 310, Lekoil notes that funding discussions are currently underway with industry partners. The company executed a legally binding cost and revenue sharing agreement to progress with appraisal and development programme activities at the OGO discovery. In order to diversify its portfolio of assets, Lekoil acquired 45 percent participating interest in a production sharing contract related to OPL 276 from Newcross Petroleum Limited. Preliminary resource estimates by Newcross, based on four wells resulting in four discoveries, reported gross recoverable volumes of 29 million barrels of oil and 333 Bcf of gas, upside of 33 million barrels of oil and 476 Bcf of gas (recoverable).
fter 30 years of a working career spanning the legal profession and the insurance industry, Owolabi Salami, the chief operating officer/executive director at Allianz Nigeria Insurance plc has retired to pursue other dreams. His retirement letter was accepted by his board of directors on Friday. Owolabi who confirmed the development to BusinessDay last night said he was leaving to venture into hospitality, music management, and market management. “I am 52 years old now, and having worked for 30 years, I think it’s time I go and build my own business.
He said he was already discussing with private equity firms to raise about $20 million to invest in the music industry. “I am already discussing with some private equity investors for the music industry and they have shown a lot of interest”. According to him, he is going to pursue an educational programme in music after which he hopes to kickstart the business. Owolabi would be remembered for building successful companies in insurance industry, having come from a legal background; He would as well be remembered for attracting one of the largest global insurance investors, Allianz into Nigeria.
Landlords edgy as expatriates exit on COVID-19 fears takes toll on rental market Enugu SME Centre records milestones as CHUKA UROKO
I
ncreasingly, landlords in the highbrow areas of Nigeria’s major cities are taking the hit as the exit of expatriates from the country in the wake of Covid-19 pandemic has started affecting significantly their rental income. The rental market in the country has been particularly hurt with many tenants who have either lost their jobs or taken pay-cuts as a result of the impact of the deadly virus on workplaces and businesses are finding it difficult to pay their rents. “It is a very dicey situation for landlords of these expatriates who left Nigeria thinking that the country wouldn’t be able to manage the coronavirus pandemic. Many of them may not come back again. Those who may come back may be doing so either later in the years or early next year.
“This leaves the landlords in a kind of dilemma because, for those whose rents are due for renewal, no landlord can say whether they will come back or not and it is not safe to rent out the apartments they were occupying. That means some landlords may lose money as a result,” Adeniji Adele, President, International Real Estate Federation (FIABCI), Nigerian Chapter, told BusinessDay. Adele noted that coronavirus has impacted the rental market in more ways than one, explaining that the market may be bidding goodbye to yearly rent and ushering in an era of shortlet market where people will be renting apartments depending on how long they want to use the space. Chudi Ubosi, principal partner, Ubosi Eleh + Co, affirmed, pointing out, however, that it was still early to conclude on the return or otherwise of the www.businessday.ng
expatriates. The impact of their exit is not being felt in the market yet; many of them are on yearly rentals and so, it is from next year during renewals that the impact will be felt. As for now, no,” he stressed. Overall, it is a very difficult time for landlords and other property owners as the property market has seen significant drop in both rents and sales prices on falling demand and dwindling household income, all occasioned by the devastating impact of coronavirus. Countries around the world, including Nigeria, evacuated their nationals in other countries in the wake of the pandemic, leaving in their trail high vacancy rates. This affects properties in highbrow locations more and the situation is made worse by depressed economy and excess product supply which clearly exceeds demand.
Hackathon Series discovers marketable ideas
OBINNA EMELIKE
…top 10 projects emerge
he Enugu SME Centre has recorded a remarkable milestone with its ongoing Hackathon Series, a quarterly series in partnership with the private sector to bring the ideas of the teeming youth of Enugu State to the limelight. So far, the contest has brought together the best innovative minds with disruptive ideas and solutions to address the changes to ways of life and business as a result of Covid-19 and the institutional change it has created in the global ecosystem. In its first edition, the quarterly series is targeted at both tech-inclined and non tech-inclined creative thinkers to develop sustainable platforms, products and ventures to rebuild, recreate and reinvent the future of business and innovation within Enugu State. With focus on projects
themes around agriculture, education, healthcare, small business tools and other use cases and services, the Hackathon Series has brought together over 300 teams in the first quarter, who tendered their ideas for consideration and consequent financial support. While 25 out of the 300 ideas were considered disruptive, 10 have been marked marketable. They include Areabuzz, Cosmos Automation, Creation Energy, Green Axis, Health Parameter Loop (Hepa Loop), Hovic, Igbo Scrabble (Egwuregwu Mkpuruedemede), Play, Learn and Win (PLW), Techsplen and Teen Coding Hub. According to the Enugu SME Centre, the creator and organiser of the Hackathon Series, the judging criteria were built on the basis of progress, concept, and feasibility, which the top 10 ideas met.
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Riding on their success so far, the top 10 marketable ideas would further engage in another round of contest for the final stage of the challenge on September 11, 2020, where Top 3 ideas with proven marketable, implementable concepts and funding-worth would be selected. Moreover, the Top 3 ideas would receive cash prizes, with the winner getting a $3,500 business support grant from the Enugu SME Centre that would include; mentorship, business advisory, product development, technical support, media publicity, digital marketing support, and financial advisory services. Speaking on the selection of the ideas, Enugu SME Centre, the organiser of the series, noted that the Hackathon was created to be a challenge, and not a competition of best ideas, and hence a contest of the best ‘marketable’ ideas.
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Monday 07 September 2020
BUSINESS DAY
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‘No investor or potential partner will rely on an account that is not audited’ Olusegun Osunkeye is the chairman board of directors of Omnibus Business Solutions Limited and Pilot Securities. The three times National Honors Awardee and also ICAN Merit Awardee was also the chairman of Nestle Nigeria Plc, Glaxo Smithkline Consumer Nigeria Plc and Lafarge Africa Plc. The fellow of the Institute of Chartered Accountants of Nigeria (ICAN), the Institute of Directors (U.K and Nigeria) and immediate past president of the Society for Corporate Governance Nigeria, Osunkeye who is also a multiple awards winner and a renowned boardroom guru spoke ahead of his 80 years birthday today September 7 in this interview with select journalist including Iheanyi Nwachukwu. Excerpts One of the overriding objectives of Economic Recovery and Growth Plan (ERGP) is to address the ease of doing business in Nigeria. To what extent is the objective being achieved? What are the gaps and the way forward? e are a high cost country, by that, I mean the cost of producing an item or providing a service is relatively high compared to other countries in the West African region or Africa and beyond. Why this so, one is might ask. The reasons are many, starting with infrastructure, unstable electricity, and poor road network, inefficiencies and bureaucracy at the ports. However, the government has been taking steps to reduce the cost of doing business. For example, the recent Companies and Allied Matters Act 2020, which received the President’s assent on 7th August 2020, is a welcome development. It will reduce the cost for start-up companies, which are small enterprises. Those engaging in start-ups are our youths, young graduates and so, it should ease unemployment. The 2020 CAMA, along with the recent revisions of the Taxation Acts, will also reduce the tax burden for small businesses and encourage the informal sector, which is huge in Nigeria. It will be beneficial for the country and help national planning. But more needs to be done in operational terms. By that, I mean the provision of stable electricity, portable water, and of course fixing of roads. It is daunting that most businesses have to own and maintain generators and boreholes to provide water, and in some cases provide access roads. Providing all these before producing a single unit of item, drive up the cost of production and renders us uncompetitive as a country. Whilst these infrastructure deficits are being fixed, it is very important to pay attention to the efficiency of the Naira spent, and the quality of the work done. You are one of the professionals that adhere to the principles of corporate governance in Nigeria. Is corporate governance practiced in its proper form? Nigeria is a member of the committee of nations. The quest for excellence in Corporate Governance is a challenge that is being taken seriously in many countries around the world, including our country. Nigeria is a player in the global economy and therefore
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Olusegun Osunkeye
must endeavour to apply best practices and standards. Sound corporate governance helps assure business partner in investment decisions. Nigeria has a good Code of Corporate Governance in place and the latest version which was painstakingly put together took effect in January 2018. It applies for now to the Private Sector only, but it is hoped that a Code of Governance for the Public Sector will come sooner rather than later. In this regard, the President has signed into law the new Companies and Allied Matters Act 2020 (CAMA 2020) on 7th August 2020. It is an important Act which has brought us more or less upto-date in the administration of corporate law. It has many innovative provisions not contained in the previous CAMA 2004. For instance, virtual meetings, in popular parlance, zooms, are now recognized. The same applies to electronic copies of documents and electronic signatures, thus bringing our corporate law into the digital age. The society for Corporate Governance Nigeria has made comments and commended many the innovative sections in the CAMA 2020. With the controversy dogging CAMA 2020, which areas would you advise the Federal Government to revisit? In the area of Corporate Governance, I would want that we give further thought. CAMA 2020 has lifted the threshold for describing small companies from a turnover of N2million to N120 www.businessday.ng
million and net asset value of N1 million to N60 million. The benefits accruing to SMEs will thus be available to far greater number of businesses and enterprises. However, in the area of corporate governance, I do not see the overall benefits. CAMA 2020 does not require small companies to hold annual general meetings or appoint auditors or company secretary. I do not view this as positive. No investor or potential partner will rely on an account that is not audited. The Federal or State Internal Revenue Service requires audited account to asses tax of a company. Banks and other financial institutions need to have reliable basis such as an audited accounts inter alia in considering credit etc. Under CAMA 2020, an SME does not have to hold annual general meeting which is an event set aside to review the company’s performance in the previous period, consider how the future environment is likely to be and take appropriate corporate action. CAMA 2020 has many clauses to help the cost of doing business in Nigeria. We would want to see corporate governance tenets enhanced even for SMEs so that businesses are run profitably and by extension, payment of income tax to government coffers. Some analysts have posited that implementation of national orientation and ethics in Nigeria should be reviewed for enhanced effectiveness. What is your take? When those of us in my age
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bracket look back to our youthful age and what we were taught to imbibe as we were growing up two or three generations ago, compared to what we are seeing now, we shudder and marvel. Dishonesty, cheating, violence, wickedness, waste, lack of career plan and lack of consideration for the next fellow, are all we see around us. It has not always been so from the beginning. As young ones, we were taught the virtues of honesty, hard work. I remember being drummed into our ears that hard work never kills, it is laziness/indolence that kills. It was an era honour system. For instance, if you were going on the road and you see the layers of yams or maize or oranges laid on the side of the road for sale, you pick the layer you want and drop the appropriate sum. The product may worth pennies, half-pennies and farthings as these are the types of denominations in those days. The farmer picks the proceeds of sale on his way back from the farm in the evening. It was therefore no surprise to me when I later sojourned in England, Switzerland and Malaysia where there is a similar transaction model. I would go round the corner, pick my newspaper, drop the money and walk away. It evokes memories of what I was used to and learnt in Nigeria. What would you regard as an equivalence of National Orientation in Nigeria when you were young? Back then, were taught civics in secondary schools, in my case, Kings College, Lagos which deals with how to behave and how to be a responsible citizen in your community. Essentially, it is an aspect of ethics being taught to us at an early age. Actually, civics or by extension ethics, in a broad sense should start from home, pre-school, with stories. In the 1940’s, we were educated with tales by the moonlight such as that of the crafty tortoises, foxes, snails etc. as the story stories have moral lessons. Our parents or grandparents who tell us the tales want us to imbibe or conversely not to imbibe the attitude of the central character. Now most these values and honour system seem to have disappeared. I believe this may be the need for National Orientation Agency. It is strategic to character development for young ones. For enhanced efficiency and effectiveness, the Agency should @Businessdayng
be re-vamped. This will make its presence felt. The Agency’s activities should be felt at the grassroots. The activities must cut across all socio-economic cadres. The time has come for the Agency to walk the talk and set example of virtuous behavior which will permeate every layer of the society and eventually become a way of life and fabric of our community as a people. This will ultimately become our national image and perception in the comity of nations. Other nations will treat us with courtesy, dignity and respect which we deserve and should expect. The cost of governance in Nigeria has been frequently criticized as extremely high. What are the cost centers that government should look into? It is true. Many have complained that the cost of governance is extremely high in Nigeria, and many have clamoured for a drastic reduction and made suggestions. To my mind, we should look at the three arms of government in the first instance. The Legislative arm is bloated as to number of legislators and the cost – salaries, constituency and other various allowances, are humongous. Even the several oversights Committee are duplicated in two Houses, then the various perks and other benefits. All these can be drastically reduced if we have a single chamber, say, the House of Representatives only, and do away entirely with the Senate. Many countries have adopted this model. Then we should take a look at the Executive arm. Let us slim the various Ministries and Agencies, eliminate the recurring issue of ghost workers, and take advantage of digitization. All payments and transfers must pass through the Banking system and since every person must have a Bank Verification Number (BVN), where the BVN appears more than once, alarm is raised, and no payment. Constitutional amendment may be required to prune down the number of Ministries and ministers, as the present situation requires that every State must be represented in the appointment of Ministers. The Judiciary should be strengthened to operate optimally. It should be financially independent. The numbers of judges at various levels should be increased, and digitalization entrenched with training and re-training. The pruning cost should also be replicated at the State level.
Monday 07 September 2020
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MARKETS INTELLIGENCE
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Analysts express optimism that CBN can stabilize Naira at $45 crude oil price BALA and IFEANYI JOHN
ing at roughly a 25 percent discount from its last year’s benchmark price, I think CBN exchange rate control may be back to 2019-like stability.” In fact, rather than a further devaluation of Naira, CBN resumption of dollar sales to Bureau de Change has triggered a rapid appreciation of Naira in the parallel market. In the past week the exchange rate has now dropped from N475 to N440 as at market close on Friday. Analysts say they expect Naira to continue its upward appreciation in the market as CBN continues to sell more dollars to more Authorized Dealers, thus
relieving the parallel market of some customers who should be seeking for dollars in the official market but were unable to be served due to the prolonged period of dollar scarcity. Analysts also expect that CBN’s decision to ban Authorized Dealers from opening Form M who payments are routed through a buying company or third party could also help liberate the hard currency from being hoarded by speculators who use bloated payments requests to improperly acquire dollars. According to CBN, this policy decision should help increase dollar availabil-
ity for the customers who actually need it for foreign transactions. “Except we see some serious relaxation of all COVID-19 reopening measures and it causes a second wave of the virus, we don’t see crude oil prices falling to its 2020 lows which triggered the previous devaluations. H2 devaluation is only possible if the oil market becomes oversupplied or a second wave triggers global city lockdowns. Both scenarios are highly unlikely in H2 in my opinion. With crude oil trading around $45 today, I believe we are fine for now,” said Ogedengbe.
…The dollar exchange rate has risen 55,998 percent in the last 38 years
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f you were to guess the one economic problem that every Nigerian and business has struggled with regardless of their wealth status in the country is the persistently declining exchange rate. In the last 38 years, the United States Dollar value has soared 55,998 percent against Naira in the official exchange rate market, moving from N0.67 to N379 as at Friday market close. This unequivocally puts Nigerian Naira among the worst performing currencies in the world in the last 4 decades. One of key mandates of the Central Bank is to ensure exchange rate stability; it’s far too obvious how woefully the apex bank has per-
N312m
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The Sanusis and Soludo were superior managers of Nigeria’s exchange rate IFEANYI JOHN
SHORT TAKES After a disappointing 2018, Fidson healthcare seems to have regained its mojo as it records an after-tax profit of N312 million in full-year 2019 for the period ended 31 December. Revenue dipped 13.5 percent to N14.06bn from N16.22bn in the same period in 2018. Efficient cost management saw its cost of sales decline 17.35percent to N8.19bn from N9.91bn
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fter enjoying 3 years of engineered stability by the Central Bank of Nigeria (CBN), Naira has now been feeling a lot of downward pressure in recent times. A combination of a global economic meltdown and oil price collapse has now triggered two currency devaluations in the last 6 months causing many to wonder if any round of devaluation may still happen in H2 owing to continued dollar scarcity. The first devaluation was around March after CBN devalued from N305 to N360 to $1 and then in August after continued speculation pressure and high import demand caused a second devaluation to N380 to $1. Many Nigerians are now scared wondering if they should be expecting a third devaluation later this year. However, analysts from EUA Intelligence told BusinessDay that they do not expect to see anymore devaluations this year if crude oil price continues to trade around $45 or higher in H2. Faith Ogedengbe, chief economist at EUA Intelligence told BusinessDay that “the likelihood of another devaluation in the second half of the year is less than 15 percent right now. Last year, CBN was able to manage the dollar at 305 N/$ with a $60 per barrel oil price benchmark. Considering we have done a 25 percent currency devaluation this year and that the current oil price is trad-
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formed at this task. Asides suffering annual average devaluation of around 18 percent per annum since 1982, the economy periodically struggles with multiple exchange rate, dollar rationing and delayed foreign transaction payments resulting in huge production losses, weaker purchasing power and huge foreign exchange losses for businesses and individuals. While the exchange rate has been devalued by every single one of Nigeria’s last 5 CBN Governors between 1982 and today, some Governors have fared far better than others in the management of the foreign exchange under their tenure. The most superior exchange rate management performance was achieved by Sanusi Lamido Sanusi who under his stewardship the Cen-
tral Bank managed to keep annual devaluation rate around 1.2 percent during his 5-year tenure as CBN Governor. Lamido Sanusi was CBN Governor between 2009 and 2014, during this period crude oil price rallied 38 percent from $80 to $110, proving the required earnings support to ensure Naira stability. Under Sanusi, dollar exchange rate moved from N148 to N157. Closely behind Sanusi was Charles Soludo who achieved an average annual devaluation of just 2.1 percent during his 5-year tenure between 2004 and 2009. While Soludo is widely remembered for the banking industry recapitalization, he is not given due credit with his impressive management of the Naira despite the crash in crude oil price in 2008. Crude oil price ral-
The stock market declined for the fifth-straight trading session on Friday to end its worst week after CBN’s CRR policy weighed on banking stocks and set off 2020’s longest bear-run. Nigerian equities fell for all five trading sessions last week to close 2.65 percent lower weekon-week, and end January on a very different tempo than it began the month. Bank stocks shed 5.17 percent to push Year-to-date return to 7.46 percent, down from around 10 percent at the beginning of the week, while analysts say the bearish sentiment will likely extend to trading this week. “Next week, we expect bearish pressures on the equities market to remain, as investors continue to selldown on banking counters,” said analysts at Lagos-based Chapel Hill Denham in a note to clients.
N23bn lied 143 percent between 2004 and 2008 before crashing by 41 percent between 2008 and 2009 during the Global Financial Recession. In 2004, crude oil traded at $37.66, rose to $91.48 in 2008 and fell to $53.48 in 2009. Under Soludo, the dollar exchange rate moved from N133 to N147. Joseph Oladele Sanusi who also spent 5 years at the helm of CBN between 1999 and 2004 was the third best Exchange rate manager amongst the past 5 CBN Governors. During his tenure, the average annual devaluation rate was just 7 percent although crude oil price grew by 127 percent during his 5 year tenure. Slow devaluation pace of this nature now seems like a lifetime ago considering the rate at which Naira has been devalued in recent times.
Interswitch Limited has listed its N23bn callable senior unsecured bond with a tenor of seven years at a fixed rate of 15percent, embedding a call option that can only be exercised from the second year, are payable in full at maturity A callable bond is a bond that the issuer may redeem before it reaches the stated maturity date. In essence, a callable bond allows the issuing company to pay off their debt early. According to the company, this is part of its N30bn debt issuance programme through a special purpose vehicle, Interswitch Africa One Plc.
BusinessDay MARKETS INTELLIGENCE Team Lead: BALA AUGIE, IFEANYI JOHN; Graphics: FIFEN FAMOUS
BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team balaaugie@yahoo.co.uk; augiebala@gmail. www.businessday.ng
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BUSINESS DAY Monday 07 September 2020 www.businessday.ng
P&ID contract: Inside details of how UK court found two Nigerians culpable of bribery DIPO OLADEHINDE & MERCY AYODELE
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iddles beclouding the 2010 ill-fated Gas Supply and Processing Agreement (GSPA), which led to the award of a $9.6billion judgment against Nigeria, is beginning to unravel after a UK court established that there are indications and evidence of bribery in the gas contract between Ireland’s Process and Industrial Developments (P&ID) and the Nigerian government. A ruling from Ross Cranston at the Commercial Court was critical of P&ID’s conduct in its efforts to secure GSPA for a Cross River State gas plant. “In my view there is a strong prima facie case that the GSPA was procured by bribery,” Cranston said. Payments to “public officials from individuals holding or seeking to obtain a contract are assumed to be bribes” under UK and Nigerian legislations. Payments The judge’s ruling highlighted payments to two officials, Grace Taiga, a former director, Legal Services in the Ministry of Petroleum Resources for medical expenses, and Taofiq Tijani, who led the Federal Government technical committee that reviewed the P&ID contract. Justice Cranston noted that Brendan Cahill, P&ID’s co-principal, made some payment to Grace Taiga for medical expenses she did not earlier mention after her retirement in 2015. “In their second statements both Ms Taiga and Mr Cahill accept that payments were made to her by P&ID, but their account is that they were intended for Ms Taiga’s medical expenses. There is no supporting evidence for this, such as contemporaneous communications between P&ID and Ms Taiga referring to her medical needs,” Justice Cranston said in his ruling. According to the ruling, “earlier this year, following the applications in New York under 28 USC 1782(a), the payments to Ms Taiga’s daughter of $4,969.50 and 5,000 on 30 December 2009 and 31 January 2012 respectively, were identified. The first payment is especially significant, since it was 11 days before the GSPA was signed.” The Court went on to say that Tijani, who led the ministry’s
source: ICIR
technical committee on the P&ID bid, “overlooked deficiencies” in the offer. Tijani attributed this to direction given to him by the then minister under late President Musa Yar’Adua, Rilwanu Lukman, who was a two-time Organisation of Petroleum Exporting Countries (OPEC) secretary-general. There was a suggestion that Lukman may also have received payments connected to the offering. The minister died in July 2014 but his daughter protested his innocence. According to Ramatu Lukman, her father accepted the ministerial job despite his illhealth, and as a two-time OPEC secretary-general, “he did not need to line his pockets.” “We, thus, state in the strongest terms that the claims made
against our father by you are false, disreputable, speculative, and an example of unprofessional and destructive conduct aimed at damaging the memory and public reputation of a diligent public servant. with an unblemished international reputation as a two termed OPEC Secretary-General who spent some of his final years whilst battling cancer, serving the Nigerian people as the Minister of Petroleum Resources,” she said in a letter demanding an apology from the attorney-general, Abubakar Malami. Justice Cranston said it was not his place to determine whether fraud had taken place. However, it was necessary to take something of a view on this, and when Nigeria had become concerned about this.
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Investigations into the GSPA are ongoing, and we are firmly committed to overturning the award, no matter how long it takes, to ensure that this money goes towards Nigeria’s future, not into the pockets of millionaires trying to exploit our country
“To enforce an award in such circumstances would implicate it in the fraudulent scheme,” he wrote. Experts reactions to ruling Umar Gwandu, the Special Assistant on Media and Public Relations, Office of Nigeria’s Attorney-General The country will now proceed to a full hearing of fraud challenge in the coming months. Investigations into the GSPA are ongoing, and we are firmly committed to overturning the award, no matter how long it takes, to ensure that this money goes towards Nigeria’s future, not into the pockets of millionaires trying to exploit our country. Ayodele Oni, energy lawyer and partner at Bloomfield Law practice Nigeria has been given room to re-appeal so it has to put forwards its own argument and court processes. Usually, in arbitration, the verdict should be final unless there are issues such as fraud or bribery when those exist, a re-appeal can occur. Henry Ademola, Team lead at Facility for Oil Sector Transformation (FOSTER) This whole thing was fraud from the beginning, so the promoters who approved the P&ID and took the bribes should go to jail.
Background The Deal In 2010, P&ID entered into a 20-year agreement to build a gas processing facility that would refine wet gas generated from oil drilling into lean gas that could be used for electricity generation. P&ID would refine the gas and give it to the Nigerian government for free and would make its profit from selling the by-products (Natural Gas Liquids) on the international market. In return, the Nigerian government would guarantee the supply of wet gas and construct pipelines and other infrastructure to transport the gas to the processing facility. By mid-2012, neither party had laid a single brick in respect to its obligations. P&ID viewed the failure of the government to construct the facilities to begin the deal as a renouncement of its obligations per the contract and began an arbitration proceeding against the government. Why arbitration? The contract detailed arbitration as the means for settling disputes with the seat of arbitration determined to be London, United Kingdom. Despite the Nigerian government contesting for the proceedings to take place within the country, a three-man tribunal (one representative appointed by each party and an independent member) was set up to assess the case in London.
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