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news you can trust I ** wednesDAY 08 january 2020 I vol. 19, no 473

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BD Investigative Series

How security agencies hunt, extort local farmers over border closure (2) A highly organised racket involving security agencies has been exploiting rural farmers and traders in border communities since the closure of Nigeria’s land borders in August 2019. In this second part of the investigative report, CALEB OJEWALE uncovers how the racket is structured and who gets what.

President Muhammadu Buhari (m); Mahmood Yakubu (3rd l), chairman, Independent National Electoral Commission (INEC); Abba Kyari (3rd r), chief of staff to the president; Mohammed Adamu (r), Inspector-General of Police, and others during a briefing by INEC chairman at the Presidential Villa in Abuja, yesterday.

Power sector in a flux 5 months after new minister’s appointment FG seen not implementing sector roadmap released last year Reverses suspension of Ogunbiyi as REA boss

ISAAC ANYAOGU

ive months into the appointment of the minster of power, Sale Mamman, the sector continues in a state of flux with only 3,623.8MW of

recorded generation on Tuesday, despite over N1.3 trillion intervention fund in the sector by the Federal Government. This situation informed the public outrage over plans by the regulator, the Nigerian Electricity Regulatory Commission

(NERC), to raise electricity tariffs with labour leaders and other interest groups kicking against the plan. NERC in a statement clarified that the tariff increase is not immediate and justified an increase on grounds that all the

variables that fed into electricity pricing, including foreign exchange rate, gas prices, inflation and generation capacity, have changed. “Raising tariff without solving the fundamental problems Continues on page 35

he quarantine document turned out to be a scam after all. It was nothing but a piece of paper that was to serve as payment voucher for three units – Customs officers at Olorunda; A10 (a feared patrol unit also with the Customs service), and some Nigeria Agricultural Quarantine Service (NAQS) personnel. The document, seen by this reporter, reads: “This is to certify that these goods e.g Tomatoes/ Pepper/Pineapples/Grains/ PKC etc are produce (sic) within Imeko/Obada areas. Kindly allow the bearer with vehicle registration numbers..........” The quarantine document, Continues on page 34

Inside

Why Nigeria may not automatically benefit from rising oil prices P. 2

Wednesday 08 January 2020

BUSINESS DAY

news USA sends security agents to assess Lagos airport amidst global threats

Abubakar Malami (m), attorney general and minister of justice; Paul Usoro (2nd r), president of Nigeria Bar Association (NBA); Dayo Apata (r), solicitor general and permanent secretary, Ministry Justice, and other dignitaries during the inauguration of National Depository of Treaties in Abuja, yesterday

Ifeoma Okeke

Lagos targets N886.041bn IGR in budgeted N1.169trn for 2020 … capital-to-recurrent expenditure ratio at 61:39 … budgetary provision for personnel cost includes new minimum wage IHEANYI NWACHUKWU & JOSHUA BASSEY

agos State government is targeting total internally generated revenue (TIRS) of N886.041 billion in the budgeted N1.169 trillion for 2020. The performance of the budgeted N1.169 trillion is expected to be well above the record 80 percent it achieved as at the fourth quarter of 2019. The current administration which has put several measures in place said it would leave no stone unturned in ensuring the full implementation of this budget. Babajide Sanwo-Olu, the state governor, had on De-

cember 31, 2019 signed into law the 2020 budget after the State House of Assembly passed it on December 30. The approved 2020 budget is made up of N711.033 billion for capital expenditure and N457.529 billion for recurrent expenditure, giving a 61:39 capital-to-recurrent expenditure ratio strongly in favour of capital expenditure. Sam Egube, commissioner for economic planning and budget, disclosed this in Lagos on Tuesday during the state’s analysis of the budget tagged “Budget of Awakening”. The total revenue is estimated at N1.071 trillion, while the deficit is N97.53 billion, “which will be financed by a combination of external and

internal loans well within our fiscal sustainability benchmarks”, Egube said. Egube gave the analysis of the 2020 budget alongside Rabiu Olowo, finance commissioner; Gbenga Omotosho, information commissioner, among other cabinet members. The year 2020 budget reflects the Sanwo-Olu administration’s goals to enhance development across all sectors of the economy in line with the THEMES development agenda, he said. Lagos State remains the nation’s economic hub and one of the leading economies in Africa. The objectives of the state’s 2020 budget is to attract private sector investments by creating an enabling environ-

ment; aggressively develop, upgrade and maintain infrastructure; invest in human capital development –that is education and healthcare; facilitate sustainable social investment and enterprise; and improve capacity to collect due revenues as efficiently as possible. The state also hopes to improve civic engagements and participation in governance, leveraging technology; build impactful partnerships with the Federal Government, other states and local governments, development partners and civil society; and improve the quality of the environment and the public spaces generally.

•Continues online at www.businessday.ng

Insurers set to play greater role in agricultural investment, job creation

… as NAICOM approves 5 firms for index-based products MODESTUS ANAESORONYE

he nation’s insurance industry is now better positioned to protect investments in the agricultural sector and also help in employment creation for the economy, the National Insurance Commission (NAICOM) has said. This is coming on the heels of approval of five underwriting companies to undertake agric index-based insurance, which is expected will boost food production by providing cover for farmers against the vagaries of weather. Adewale Motajo, deputy director/head of research, statistics and strategy at NAICOM, made the observation

during a seminar for insurance journalists held in Kano, Kano State. Motajo said that NAICOM is in collaboration with Nigeria Incentive Risk Based Sharing for Agricultural Lending (NIRSAL) to reduce the level of risk exposure of agricultural entrepreneurs. “This will boost food production by providing cover for farmers against the vagaries of weather, and also generate employment in the agricultural sector,” he said. According to him, a working group on Agric Index Insurance has been inaugurated by NAICOM, while necessary trainings have been conducted to ensure effective take-off of the

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scheme in Nigeria. In 2017, a consortium of five insurers had underwritten index-based agricultural insurance programme to grant group yield cover for that farming season. Consequently, they received product approval from NAICOM for the pilot scheme in 10 states including Adamawa, Bauchi, Benue, Kaduna, Kano, Katsina, Kebbi, Nasarawa, Taraba and Zamfara for rice, maize soya and sorghum. Index-Based Agricultural Insurance (IBAI) is a relatively new financial instrument for transferring agriculture risks from individuals or groups of farmers to risk carriers (insurers).

In an index-based system, when a claim is triggered for a specific area, all insured units (farmers) within a given geographical area and having similar characteristics are compensated at the same payout rate, usually a percentage of the sum insured, on events specifically covered by the policy. IBAI pays out benefits on the basis of a predetermined index (e.g., rainfall level, crop yield) for loss of assets and investments, primarily working capital, resulting from weather and catastrophic events, without requiring the traditional insurance services.

•Continues online at www.businessday.ng

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three-man Transportation Security Administration (TSA) from United States of America has arrived Nigeria to commence security assessment of the Murtala Mohammed International Airport (MMIA), Lagos. The Nigerian Civil Aviation Authority (NCAA) said that the delegation would commence its duties immediately. Sam Adurogboye, general manager, public relations of the authority, made this known in Lagos in a document posted on the NCAA’s website on Monday night. The agency said the team, comprising transportation security specialists, was received by Abdullahi Sidi, acting director-general of NCAA, at the Aviation House. Adurogboye said the assessment, which was expected to cover critical areas of the airport, would last 10 days. This assessment though carried out annually is coming at a time when the USA feels it may be facing security threats across various countries after President Donald Trump carried out a lethal targeted strike against an Iranian general, justifying the strike as an act of self-defence.

John Ojikutu, former commandant of the Murtala Muhammed Airport, Lagos, said the TSA audit is a little bit higher than the International Civil Aviation Organisation (ICAO) audit. He said the TSA agents come mainly because they have their airline that comes to Nigeria and they want to ensure that the standard of security is not below their own standard. “They have a lot of checklist. They will go round the perimeter checks, check the baggage screening and checkpoint screening. They will check the outbound and inbound passengers. If they don’t have American airlines coming here, they won’t be here,” Ojikutu said. “They are coming at a time when they sense a threat to the American interest in virtually every country including Nigeria, where there is Boko-Haram insurgency and with what has happened in Iran, they are hoping that it won’t spread through the airports,” he said. Ojikutu said the presence of the TSA agents means that if there are areas that are open that terrorists can penetrate, “they will tell us to close up the areas and if we don’t close it up, they will stop their aircraft from coming in”.

Why Nigeria may not automatically benefit from rising oil prices STEPHEN ONYEKWELU

il prices extended Friday’s gains into the new week but chances that Nigeria will benefit from these gains depend on how Africa’s biggest oil producer deals with factors that are limiting its oil production. On Monday, oil prices traded higher extending gains following Friday’s more than 3 percent jump. International benchmark Brent crude traded at $69.62 at around 12:15pm London time, up around 1.5 percent, having briefly climbed above $70 a barrel earlier in the session. It was the first time since May that Brent futures had surpassed this psychologically important level. Oil prices surged on Friday, following the assassination of Iran’s most powerful and visible military leader, Qassem Soleimani, by US forces in Iraq. The attack was carried out following a direct order from US President Donald Trump and was aimed at “deterring future attacks” on US diplomats and service members throughout the region. Nigeria’s oil and gas sector is unfortunately not wellpositioned to benefit from this windfall. First off, the country’s production capacity has been capped at 1.7 million barrels of oil per day by the Organisation of Petroleum @Businessdayng

Exporting Countries (OPEC), 400,000 bpd below Nigeria’s budgeted 2.1 million bpd. In addition, with the new Finance Bill, offshore exploration and drilling activities have stalled with only one offshore rig operational in 2019, according to experts, and the Bonga South West Final Investment Decision (FID) suspended. “Offshore drilling activities in Nigeria have stalled and the USA is putting pressure on Saudi Arabia to pump more oil so that oil prices come down,” said Adewale Ajayi, partner and head, energy and natural resources unit at KPMG. “So, Nigeria may not really benefit. Many projects have been put on hold, which would have increased the volume of oil produced in Nigeria to drive foreign exchange earnings.” The new Finance Bill proposes to repeal section 60 of the Petroleum Profit Tax Act (PPTA) and Section 43 of CITA, which means the dividend distributed from profits already charged to Petroleum Profits Tax would be subject to withholding (WHT) up to 10 percent. This could be quite adverse for the upstream oil and gas exploration and production sector which is chargeable to the highest tax rate (up to 85 percent in some instances).

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Wednesday 08 January 2020

COMMENT The challenges of enterprise transformation comment is free

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SMALL BUSINESS HANDBOOK

EMEKA OSUJI

ransformation is a change in the composition and form of a thing. Transformation is not mere cosmetic change on the external part of a thing. The appearance of a house could be altered by the application of fresh colours of paint on its external walls. Anybody that sees the house will notice the change, even though they may not know that the change is only external. That is not real transformation. Real transformation is more internal than external but encompasses both. It is important to note that the process of transformation of a child comes with its own challenges, both for the child and its parents, and in so many areas, including food and nutrition, health and security. A child under good parental care will experience positive changes at every stage of this transformation process. As the child transforms, it becomes more irritable in the sense of the excitatory quality of living organisms to respond to changes that occur around them or in their environment. It feels cold and the parents wrap it up in warm clothes. It feels hungry and food is served. All the demands and, especially, the real needs for growth and good health are provided as the child grows from one stage of life to another. The same thing happens in the

life of an enterprise. Enterprise transformation therefore shares some commonalities with child or human transformation. It is not a mere fancy word used by economists to bamboozle their audience. In a technical sense, enterprise transformation may be seen as the application of dynamic and effective management principles to realign, reform, reshape and restructure an enterprise and its products to meet the needs of a dynamic world. It encompasses such transformation elements as digital transformation, whereby physical brands, processes and service offerings of a business are brought online. Almost all enterprise transformation processes include I.T Transformation. Essentially IT transformation seeks to change such cost centres as IT to service delivery sections with possible change to revenue centres, if not profit centres. For our particular purpose in this piece, enterprise transformation seeks to turn larger microenterprises of the economically active poor to small businesses. Just as operators must understand the times in the lives of the institutions they run, lenders must do the same to the enterprises they fund. For instance, most microenterprises start as composite organizations and this is not the form of any proper corporate organization. They need to be known for certain things. Microenterprises are usually like Jack of all Trades, involved in several business activities, including foe instance, growing crops, collecting the raw crops, processing them and even retailing the produce. They make their own baskets to hawk their own fruits. Evidently, many of these enterprises would do better and increase their productivity if they limit the number

of activities they take upon themselves. The big question is whether they know when to make such a limiting decision – so they can buy the baskets for hawking the fruits rather than making the baskets themselves; or sell to middlemen instead of directly to end user of their produce, for example. Thus, entrepreneurs must know when to make the move and let go of some services while taking on somethings new – that’s transformation. In like manner, lending institutions have a great role to play in the transformational life of the microenterprises they finance. They must begin with an understanding of the critical elements of transforming enterprises. As transforming institutions focus, perhaps, on limited number of activities, new challenges show up. Such new challenges will reflect in the structure and composition of their staff complement, technology, marketing, credit and cash management and supply systems. Transforming enterprises have need for staff transformation. As they usually start with a staff complement that is skewed in favour of family members, the first challenge of transformation is to reform the staff colouration to something more translucent, if not entirely transparent, rather than opaque. Transformation takes an enterprise to new markets that must be large enough to absorb increasing output and stable enough for sustainability. These will have to be complemented by sound technology, way beyond the one at the starting blocks of the enterprise. Additionally, enterprise transformation calls forth additional needs in the areas of product supply, cash management and financing or credit. A transforming enterprise that has developed new markets and acquired rel-

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Transformation takes an enterprise to new markets that must be large enough to absorb increasing output and stable enough for sustainability. These will have to be complemented by sound technology, way beyond the one at the starting blocks of the enterprise

Dr Osuji is head of the department of Economics at Pan Atlantic University Lagos. eosuji@ pau.edu.ng @Emekaosujii

To know is not enough

believe rape and other forms of sexual abuse have been with us from time immemorial. Has it increased exponentially in the last decade or two? Or has the advancement of technology in the form of social media etc. merely led to greater awareness, bringing the issue further to the fore? I believe it could be both. Unfortunately, in a society bedevilled with a myriad of problems like our own, one of the earlier casualties will invariably be its value system. Sadly too, a society which has a high propensity to devalue what God values while valuing what God devalues can only go in one direction...southwards. To make matters worse, a nation which refuses to uphold the rule of law (which God specifically prescribes must be upheld) will go from bad to worse. That has been the story of Nigeria for some time now. Why is all this relevant to this conversation? It’s because in the history of our nation, there have only been 2000 convicted cases of rape. Yes, just 2000!! In a country where I’m sure most of you will agree such things happen almost on a daily basis, this statistic is shocking. The reason is at least twofold, though there are many more. One, the archaic law which addresses rape is so skewed against the victim to get a successful prosecution. In fact it’s almost impossible. Something urgently needs to be done about this. Being the victims in nine out of ten cases, I do believe if we had more women in positions of authority, little time would be wasted in making the necessary amendments to these laws and we would all be the better for it. Two, ours is a society where we are so emasculated by our fear of what people will say about us and because of that, most cases of sexual abuse never get reported to the relevant authorities so the perpetrator pretty much gets away

with it. And as it’s true to man’s nature, he’ll continue doing something when he believes there won’t be any punitive consequences for his actions. Why do our politicians continue to appropriate our commonwealth for themselves? Because they’re rarely held accountable for their actions. Impunity sets in and each act becomes more brazen than the previous. There’s no gainsaying that if the family members of those sexually abused could learn to place a higher premium on getting justice for the hapless victim than on what people will say we may start to get somewhere. The stigma we attach to it simply needs to go if we want things to change. If would be perpetrators know that they will definitely face the music for their fiendish act, they will think twice. And thinking twice alone could save our womenfolk and children. Many a time we hear of policemen who “blame” the rape victim who comes to report, for dressing too provocatively thereby inviting the man to take her by force. Such rubbish. This, amongst other reasons, is why many don’t even bother to report. I can only imagine how painful and offensive it must be for a victim, having suffered such a harrowing violation of her body and very being to now be blamed for it. Talk about insult upon injury. I’m certainly not advocating indecent dressing by any means because that in itself, if not curbed, diminishes our general moral code as a society. It’s like playing dominos. Once one card falls, it will inevitably cause others to fall too. It’s the pervasiveness of moral decadence that makes it so destructive. It’s never a “stand alone” thing. A common thread that runs through lying, stealing, cheating, bribery, injustice and even indecent dressing is that they all sully, debase and progressively decay the system until it sinks to what becomes a new norm.

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Sadly, what a lot of people don’t seem to realise is that Dr Martin Luther King was absolutely right when he said, “Injustice anywhere is a threat to justice everywhere.” That which affects some people directly will nearly always affect others indirectly. I have always counted our policemen to be amongst the worst treated groups of people in our country. They’re severely undermanned, criminally underpaid, often left to fuel their official vehicles themselves and they live in barracks which condition is demoralising enough to dehumanise anybody and to cause them to see all others as enemies. Unfortunately, the common man who’s not the source of the policeman’s unenviable situation but finds himself in a similar boat often bears the brunt of his frustrations. Why would anyone who finds himself a victim of rape or any other offence, whether directly or vicariously, fight for the inalienable rights of policemen to be treated fairly and with dignity as all human beings should be, when the supposed enforcer of the law essentially turns the other way because “that” injustice doesn’t affect him directly. What goes around comes around. It’s a shame because Nigeria is a country where people in authority expect you to accept suffering as a way of life. So as long as you’re not a member of the ruling class, physical and emotional brutalization should not come as a surprise. If you don’t like it then do whatever you can to get yourself amongst that group. And that’s precisely what many do, by hook or by crook. And we wonder why the rate of crime is so high. It’s often a desperate effort to escape from the group of the ruled. Bertrand Russell averred that all human actions are driven by our desires. However, because not all desires are good, the individual

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evant improved technology to service them will, of necessity, need to ensure that its own supply system is stable, reliable and not subject to unwarranted disruptions. This would require the enactment of secure, stable, and long-term supply contracts to prevent disappointments. Finally, but without an attempt to assume exhaustiveness, successful enterprise transformation requires two more important acts. First, the keyman or director of the enterprise should be bold enough to know and establish a clear distinction between two types of cash that come into his possession – his private and the enterprise’s cash. This is usually one of the last parts of the transformation “give-ups”, and evidently the root cause of many enterprise failures. Micro and small enterprise owners who hope to become corporate leaders must wean themselves of the wrong idea of the business being the same as its owner. The distinction between the founder and the business - the establishment of sustainable institutional structures – is a prerequisite for effective enterprise transformation and growth. Accordingly, cash management takes on a new meaning as an enterprise transforms. Lastly, transforming institutions must recognize the challenge of liquidity and proper funding. This could be met by way of additional capital but every enterprise in transformation needs a stable source of credit. Growth calls for additional funding, especially by way of working capital. This must be ensured, one way or the other.

CHARACTER MATTERS WITH DAPS

DAPO AKANDE must be trained culturally, morally through the family, schooling and the society he resides in, not just to recognize the desires which are morally acceptable and the ones which are not, but to have the moral strength to refrain from doing what he shouldn’t. Information and knowledge are as good as useless if they can’t be correctly utilized to make good judgement. Regarding this, John Dewey insists schools have a huge role to play by including in education, ways to help pupils to develop into individuals with the ability to translate moral concepts into concrete action. Educators shouldn’t make the mistake of believing a pupil will automatically become a moral individual just because he has learned in theory the difference between moral, immoral and non-moral ideas. Only character can convict them into doing right and it must be deliberately nurtured. Not even the most indecent mode of dressing can ever justify rape. It’s only a man who lacks character who will search for reasons why he couldn’t do right. To such a man, it’s always the fault of other. Changing the nation...one mind at a time Akande is a graduate of the University of Surrey, UK, author of the acclaimed book: “The last fight: A personal journey to discovering values.” Contact: dapsakande25@gmail.com

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Nigeria’s 2020: No respite on the horizon Olanrewaju Rufai

n an alternate reality, Nigeria has attained the goals set out in its lauded Vision 2020:20 and has become one of the 20 largest economies in the world. Furthermore, Nigeria has consolidated its leadership role in Africa and has established itself as a significant player in the global economic and political arena. Unfortunately, that remains wishful thinking and could not be farther from actual reality. As a new decade starts, not one goal of the vaunted Vision 2020:20 has been met, and Nigeria’s potential remains largely unfulfilled. The end of the previous decade drew the curtain on another year of economic stagnation for Nigeria, as the nation continues to grapple with basic socio-economic problems including poverty, corruption and social injustice. Furthermore, rather than focus on bettering the lot of citizens, the political class continues to engage in needless politicking, doubling down on the hare-brained policies which had led the nation to its first economic recession in 25 years.

While Nigeria’s 2019 could be assessed as a year of stagnation, there is no indication that the New Year 2020 will be any better. In fact, the outlook of nation’s macroeconomic indices for the New Year does not make a pretty picture. Inflation, which rose to its highest in nearly a decade partially driven by the government’s on-going border closure, is likely to remain high. Since the announcement of the border closure, the nation’s inflation rate has been on an upward trajectory. Already, basic commodities including food, transportation etc. has become more expensive, with the severest effects suffered by the nation’s poor. Unfortunately, as long as the border closure persists, it is unlikely that inflation will subside, with ripple effects on poverty. In addition, Nigeria is likely to retain its ignoble position of being home to the largest number of people living in extreme poverty globally for the foreseeable future. Even though an estimated 87 million Nigerians live in extreme poverty, poverty alleviation remains a buzzword backed up with no holistic government policy. Thus, that the nation’s poverty levels will be reduced this year is simply wishful thinking. In fact, all indicators point to the opposite – that the poverty will worsen this year due to a myriad of factors, particularly the national unemployment rate. Since 2015, the unemployment rate in Africa’s largest economy has soared, rising from 8.2 percent to 23.1 percent in the third quarter of 2018. For young people aged 15 to

35, the figures are even worse as 55 percent of the youth population are unemployed or underemployed. With a stagnating economy and restrictive trade policies, there is no indicator that unemployment will reduce in the nearest future. In addition to all of these, there is no doubt that Nigeria’s government is severely cash-strapped, evidenced by the government’s desire to seek fresh loans. Considering that the nation’s debt stock already stands at over ₦24 trillion, news that the nation intends to add more debt in 2020 is worrying, Furthermore, considering that debt servicing already consumes over 60 percent of the nation’s revenue, the nation’s future economic sufficiency has never been in more jeopardy. Such is the state of Nigeria as the new decade starts. Despite achieving rapid economic growth in the early years of the 21st century, much of the attained progress, driven by debt relief and private sector involvement in the economy, have been undone in the immediate past decade, and this malaise is likely to extend to this new decade. Overall, a combination of poor leadership, corruption and incompetence has resulted in a failure to develop the nation’s economy, invest in critical infrastructure and harness the nation’s most valuable resource – its people. Thus, as the nation enters a new decade, there is seemingly little or nothing to celebrate. In fact, it will border on selfdeception or delusion to envisage an upturn in the nation’s economy without any significant shift in na-

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Rufai holds a first class degree in Management and Masters degrees in Management and Finance. He is a finance and strategy analyst and can be found on Twitter @LanreRufai_.

Should non-profits merge?

BC foundation was established to tackle poverty in its local community. It does this by organising training seminars where beneficiaries are taught skills that will empower them to live better lives. A similar foundation exists within the community too, working towards the same goal of poverty eradication. They provide start-up capital to people who are skilled but do not have the finances to start or scale their businesses. They also support them with other non-financial resources that will grow their businesses. Foundation A and B share a single purpose. They render different but complementary services. The first will teach the clients how to fish while the second takes it further by providing the fishing kit, consequently, driving them towards sustainability. Both share similar challenges; from finding and retaining donors, recruiting volunteers to optimize available resources to maximize impact. Both do important work. Considering their shared goals, should they combine strengths to form a unified organization? And if they do will they truly make more impact? Not to underestimate the complications of mergers and acquisitions, when two profit aimed organizations merge successfully, there are gains. Besides inheriting a diverse set of staff as a result of

the merger, the new company becomes better positioned to increase capital, boost productivity and even take on the stronger competition. Unfortunately, we cannot say the same of non-profit as these sets of organizations do not merge for profit-making or market dominance motives. Instead, they do for impact sake. If done right, a merger will improve the quality of existing services and open up opportunities for robust funding. We can speak of shared expertise, as well as access to new geographies, amongst other benefits. However, the competition also exists in social business. New charities sprout every day in an already overly saturated sector, many times within the same community, offering no new innovation, yet competing for the same clients and funding of existing ones. Interestingly, some of these organizations are born out of the private experiences of the founders, which makes the work they do personal, thus they may not welcome the idea of a merger because such a proposal may threaten any inherent fulfilment derived in having autonomy over operations. Charity organizations battling financial constraints will likely welcome the idea of a merger because of the perception that doing so will solve their money problems. They believe that there will be cost savings from economies of scale, administrative

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expenses or using an integrated system. Not to downplay the importance of finances for Non-profit, but this notion is not totally true. Some charities do not have any operational policies. They may be stuck with outdated program models or may need to look into other non-financial concerns affecting their ability to raise or sustain finance. These concerns range from financial mismanagement, reactive planning as against proactive sustainable long term planning; an inefficient administrative system, a shallow understanding of the needs of targeted beneficiaries or even the lack of connection between them and donors. No one likes to be remembered only when a favour is required of them. Thus, when charity leaders ignore seemingly insignificant matters like that, then a lack of finance should not drive a collaboration project. On the other hand, when healthy nonprofits combine they create value. Hence, it is essential that the merger is approached in the most thoughtful and strategic manner. It makes sense if both parties identify how their work is different or compliments and how this new partnership will benefit them and their clients. How will they work together? Will they form a new name or will they combine their old names? How will they handle existing assets and liabilities? How will the new organization be governed? Will they have separate manage-

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tional economic and trade policies. Therefore, if Nigeria is to have a successful 2020, and by extension, a successful decade, the political will for progress is imperative, given the deep-rooted changes that must be implemented. There must be an urgent will to address pressing issues such as the nation’s reliance on oil earnings, the bloated civil service and public corruption. In addition, the nation’s ticking time bomb of youth unemployment must be resolved through the enactment of viable job creation policies and enhancement of labour productivity. This however will not be possible without sustainable investments in education and infrastructure development. Subsequently, Nigeria’s ballooning debt problem must be swiftly addressed. The nation is currently expending over sixty percent of its revenues on debt servicing, thereby leaving nothing for infrastructure development. Therefore, the rising national debt volume must be tackled with urgency, perhaps starting with reducing government spending on recurrent expenditure. Overall, if Nigeria is to have a successful year and by extension a successful decade, fiscal prudence is essential. Unfortunately, there is no indication that this will happen. Rather, there is every chance that 2020 goes the way of 2019 – wasted and culminating in stagnation.

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OSAYI ALILE

ment or will they combine leadership and operations? How will this merger impact clients? Will better services be provided for less and will there be expanded services? If they share similar struggles, how can they join forces to resolve them? While sentimentalities are bound to pose a threat to what can become a viable venture, it helps if a third party consultant is involved in the process. This third party will serve as a neutral entity, conducting due diligence and assessing the feasibility of this new partnership. They will ask the hard questions, exposing all possibilities which will eventually lead to informed decision making. Asides that, they help to keep things in perspective by ensuring that everyone is focused on the purpose and possible outcomes of the merger. More funders and volunteers are encouraging mergers nowadays. With many non-profits contending for their money and time, it helps them focus on the ones in a better position to thrive. A merger is always a good idea if it makes a good fit and used where it has the ability to create important structural changes that will add to a stronger and improved non-profit sector.

Wednesday 08 January 2020

BUSINESS DAY

Editorial Publisher/Editor-in-chief

Frank Aigbogun editor Patrick Atuanya

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

Bashir Ibrahim Hassan

Protecting small businesses in Lagos

n 2019, the National Bureau of Statistics (NBS) and the Small and Me dium Enterpris es Development Agency (SMEDAN) came up with an interesting survey showing that the number of micro, small and medium enterprises (MSMEs) in the country jumped from 37 million in 2013 to 41.5 million in 2017. Lagos, Nigeria’s economic capital had 11.5 percent share (8.395 million) of the number. The reason behind this growth is quite obvious. Between 2013 and 2017 – which mirrored periods of oil price decline and Nigeria’s economic slump – many young Nigerians lost their jobs and started their own businesses. Many of these young Nigerians were resident in Lagos where opportunities abounded. According to the Lagos State government data, 6,000 Nigerians come into Lagos every day. Whether this is believable or not, the survey proved that many Nigerians within

this period sought opportunities in the economic capital. Lagos has become a hub for virtually all businesses in the country – from finance to industry, ICT to energy. However, the state’s tax system seems to cause more harm to small businesses than good. The website of the LIRS lists approved state taxes as personal income tax (imposed on individuals in employment or running businesses), Pay As You Earn (deducted from salaries), capital gains tax (paid on profit made from sale of capital assets like land), stamp duties (imposed on legal documents/ instruments), business premises (tax on property), land use charge (imposed on land used for business) and withholding taxes. However, Lagos has become a hub for touts who force small businesses to part with different forms of tax, levy and fee. Our re cent investigation showed that local governments have various charges ranging from shop permits to parking rates, television/ radio to “portion” permits. These mainly

occur at the local government level. It is interesting that most of those taxes, levies and fees are not receipted as found by our reporter, putting transparency and accountability in doubt. One of our respondents said he was asked to pay N200,000 for television/radio license even when he was not a media organisation, nor did he have anything to do with television or radio. Such backward-looking taxes do more harm to the state’s prospect of attracting more investors than good. Micro traders on the streets bear much of the brunt as their profits are often eroded and their capacities erased. According to the survey earlier cited, MSMEs created 59.647 million jobs between 2013 and 2017. It is possible that the businesses created 6.86 million jobs in Lagos, judging by the 11.5 percent contribution of the state to the MSMEs numbers. It may even be more considering that the major activities took place in Lagos. Imagine what happens to jobs when touts and faceless entities and individuals force small businesses to part with huge

amounts that are sometimes bigger than their entire profits. In Nigeria, riding a tricycle for example has become fashionable as unemployment rises in the country. But the tricycle riders are also not spared. They pay one form of levy or the other. The state government, on its part, must harmonise these taxes and make the system more transparent. Otherwise, it will continue to lose sizeable revenue to private pockets as found by our reporter, and small businesses will continue to search for friendlier environment. Many investors were driven from Lagos to Ogun State because of multiplicity of taxes in Lagos. In Ibikunle Amosun’s eight – year tenure (2011-2019) as Ogun governor, 304 companies set up plants in the states. Most of the firms have mere administrative offices in Lagos but factories in Ogun. Local governments, on its part, must begin to take the issue of transparency seriously. What happens to use of official bank accounts or simple digital tools to plug leakages?

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BUSINESS DAY

Wednesday 08 January 2020

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2020 and Strategy in Turbulent Environment

FRANKLIN NGWU

s I exchanged Seasons Greetings during the break, it was clear that our Chief Executive Officers (CEOs) are very concerned on how they will ensure continued growth and performance of their firms in a turbulent Nigerian business environment. I hope you had a good break, I asked the CEO of an upcoming manufacturing firm. Not sure what to answer, the office was closed but my head was busier than the time the office was open. I slept less during the break as I am trying to figure out the best way to ensure good performance of my firm in this your challenged economy, he replied. If I don’t perform well and pay dividend this year, I think I might relocate to Canada as my job will be on the line, another CEO replied. The above replies fit very well with initial questions I pose to firms and MBA students during strategy sessions. First, is there any difference between strategy and strategy in a turbulent environment. Based on the

responses, I sometimes further clarify the question with other questions such as should a firm with operations in Nigeria, Ghana, Cameroon and Germany have a single and common strategic plan that can be used across these countries. Another clarifying question is should a firm with operations in different parts of Nigeria have one strategic plan and execution approach or different approaches. To the first question, the answer is yes, there is a huge difference between strategy and strategy in a turbulent environment. While strategy in a stable environment can be replicated in similar stable environment, strategy in a turbulent environment is different. The institutional peculiarities and differences especially in the levels of volatility, uncertainty, complexity and ambiguity which characterise turbulent economies makes it difficult to replicate. The challenge therefore to most CEOs in a turbulent environment such as Nigeria is how to develop and execute an effective strategy for continued growth and superior performance. Three key things are required to overcome the challenge. First is that the CEO, senior management and majority of the employees should have very good understanding of both the local and global economy. With such knowledge, the second thing is to carry out a critical and detailed review of the implications of the economic factors and policies on the firm. If the critical review is properly done, it offers deep

‘

Based on the economic outlook and the key factors that will shape our national growth and development outcomes in 2020, a GDP growth of less than 3 percent is possible, inflation will remain at double digit and Naira will likely be devalued or forced to exchange within a band of N360N375 to a US Dollar

insights on the strengths, weaknesses, opportunities and threats (SWOT) facing the firm. With good understanding of the economy and implications for the firm, the third step is then to craft a strategic plan that the firm can use to ensure continued growth and superior performance. As the focus should be on how to create value, the emphasis should be on how the strengths can be deployed to tap into the opportunities and reduce their weaknesses and threats. Based on the economic outlook and the key factors that will shape our national growth and development outcomes in 2020, a GDP growth of less than 3 percent is possible, inflation will remain at double digit and Naira will likely be devalued or forced to exchange within a band of N360- N375 to a US Dollar. While crude oil price and capital market may still experience volatile and sluggish growth depending on how the reforms and other global factors play out, unemployment will remain high with the manufacturing sector likely to be weak. Even with the above possible outlook which suggests that 2020 will be a challenging year for Nigerian firms, the stakeholders of firms still expect the firms to perform. While the shareholders expect higher dividend, the government want more taxes and compliance with regulations. For the employees, they want higher wages and other incentives while the customers demand for good quality products and services at

a reasonable price. And to the community, they are constantly asking for more corporate social responsibility or what is currently being referred as impact investing. In my interactions with many firms in Nigeria, the level of understanding of the socio-economic issues is limited even among the senior management. With such limited understanding of the issues, the critical evaluation of the implications to the firm will also be limited and weak. Given such double jeopardy, the strategy will be poorly formulated and executed and as such the poor performances of many firms. On the other hand, with good understanding of the socio-economic issues especially in terms of the volatility, uncertainty, complexity and ambiguity inherent in a turbulent environment as Nigeria, a firm will be able to develop and execute an effective strategy for superior performance. It enables the firm to ask four fundamental question that ensures effective execution of strategy. Do we have the right RESOURCES? Do we have the right PEOPLE? Do we have the right PROCESSES? Do we have the right CULTURE? Do we have an execution ROAD MAP?

Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- fngwu@lbs.edu.ng

The importance of building bridges

s a transmission mechanism for production outputs over short to medium distances, bridges are the second most important wholesale transportation invention in human history (after railways). Everywhere they exist as obstacles to trade and communication, the conquering of chasms and water bodies by human engineering and ingenuity has been followed by economic development. More than mere symbols of technical prowess however, bridges are also important landmarks of civilisation, and the triumph of human organization over the inherent chaos of nature. Bridges have proven so useful to humans that every “easy” bridge that can be built in the world has already been built. The only bridges left to build are the difficult ones. The ones that pose incredible structural, environmental and financial challenges, and/or require levels of human cooperation and organization that have proven hard to attain. For much of our history in Africa, the latter constraint has sadly been the more common. Thankfully, this historical reality is changing; albeit slowly. In the decade just ended, several landmark bridge connections that had remained on the “drawing board” for too long were finally built. Four notable examples will illustrate. Early in the decade Cote d’Ivoire led the way with the commissioning of its new 1.9km bridge across Abidjan’s Ebrié Lagoon (AFC played an important role in the regional consortium that led the financing of this project, at a total cost of about US$365m). This critical transportation link transformed the traffic pattern within the city, significantly easing pressure on the two existing bridges and improving travel times across the Lagoon. Around the same time, the 1.4km Lekki-Ikoyi link bridge was completed in Lagos, Nigeria, at a total project cost that has not been publicly disclosed. Developed and financed entirely by the state government, the value of this critical link is best estimated

by imagining what travel times between these constricted suburbs of the already chaotic Lagos islands would be without the bridge. In 2018, the Senegal-Gambia bridge was finally completed, another 1.9km long infrastructure solution which not only links the two countries, but also two halves of Gambia itself; cutting travel times by multiple days. The project had been in concept since the 1970s, and eventually cost about US$95m to construct. As with the Cote d’Ivoire bridge, the African Development Bank (AfDB) played an important role in the financing of this project. Early last year, the “longest suspension bridge” in Africa (which had been in concept since 1989) was finally opened to the public, straddling the Indian Ocean to connect Maputo and Katembe in Mozambique. This 3km long bridge along with associated feeder roads cost US$785m to build, and considerably reduces travel times between the Mozambican capital and the southern rump of that country (adjacent to South Africa). Chinese financiers underwrote this project, which was supported by the full faith and credit of the government. The above successes illustrate that there are several potential paths to meeting the very real challenges (engineering, financial, social and environmental) of delivering transformational bridges; provided the human organizational capabilities are in place. Given that there is no shortage of difficult bridges to build in Africa, it is important to explore the learnings from these successes, so that they might perhaps be replicated in more projects. I will share a few briefly and conclude with a shortlist of some important bridge projects in Africa today that are meeting squarely with the challenges and will thus be completed this new decade. Unsurprisingly for a large infrastructure project, the first critical capability is planning. Successfully making the case for time, money, human resources and political capital to be invested in a particular project likely to cost

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hundreds of millions of dollars (over countless other demands) usually demands diligence in gathering and presenting information. Every “difficult” bridge has not been built exactly because the cost-benefit analysis is not straightforward enough to be a “no-brainer”. Perhaps there are economic, commercial, technical, environmental, social or political constraints. Two examples will illustrate, one from history and the other contemporary. In early 20th century colonial Nigeria, a fierce debate raged for many months between British civil servants in London and political officers on the ground about the economic wisdom of constructing a rail bridge across the Niger at Jebba. Was there a sufficient volume of trade and human traffic to justify it? Could the government afford the repayment of principal and interest? In the end, a compromise was negotiated (interestingly, by a young politician named Winston Churchill, then Under Secretary of State for the Colonies). A rail-bridge was built to land on Jebba island in the middle of the river, with a rail-car jetty completing the trip; linking two quadrants of the country for wholesale transport. Eventually, the entire river width was bridged when the traffic volumes proved eminently satisfactory to justify the investment. More recently elsewhere in West Africa, the debate continues about the prudence of constructing a 7km bridge linking Lungi Airport just north of Freetown to the country’s capital (located across the Sierra Leone river). Some estimates have suggested a US$2bn price tag for such a connection, a figure that will continue to give pause to any reasonable observer. Which brings us to the other critical point: “reasonable” price tags are an essential condition for success, whatever the financing path that is being considered for a project. Transformational as they are, bridges do not make sense at any price. Once a certain estimated cost

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FOLA FAGBULE threshold is exceeded, it is very prudent to consider that perhaps the bridge does not exist for a quite good reason. In addition to all the above, other key considerations for success include ready availability of way leaves along the proposed alignment, favourable environmental and social impact assessment outcomes, and a very carefully imagined project design. Now, to my top picks for the next decade: these bridges are in concept, already under development or in construction and will serve as testimonies to the organizational abilities and sheer will-power of the parties responsible for them. In no particular order (drums roll): the 1.6km Second Niger bridge near Asaba (alongside a 10.3km highway) already being built thanks to the herculean leadership efforts of the folks at the Nigerian Sovereign Investment Authority; the 1.4km Rosso Bridge linking Senegal and Mauritania; the long overdue 4km road and rail bridge connecting Brazzaville to Kinshasa across the great Congo river (last two projects both led by AfDB), the 1.5km Mombasa Gate Bridge in Kenya (Japanese financed), and my hometown favourite, the potentially radically transformative Lagos Fourth Mainland bridge (likely to be an at least 5km bridge accompanied by more than 30km of ancillary roads). My fingers are crossed for these and many more landmark transportation connections driving trade and development across Africa this decade. Fagbule, is Senior Vice President, Africa Finance Corporation. His Twitter handle is @folafagbule

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Wednesday 08 January 2020

BUSINESS DAY

cityfile Oyo to acquire 10 firefighting trucks REMI FEYISIPO, Ibadan

Students of Pace Setters’ Academy Abuja during the resumption of Schools from long term holiday to start new term academic session in Abuja. Pic by Tunde Adeniyi

Residents lose N5bn to Ponzi schemes in Ebonyi … as state to intensify fight against schemes Regis Anukwuoji

bonyi State g ov e r n m e n t would be intensifying efforts against Ponzi schemes, as residents are said to have lost over N5 billion to various Ponzi scheme scam in the state in 2019. Acting commissioner for human capital development and monitoring, Uchenna Orji, said no stone would be left unturned in quest to stamp out the fraudulent practice in the state. “The Ponzi scheme operators should know there

is no compromising our fight against their operations. Ebonyi is not a safe haven for them.” The commissioner advised the people to be wary of the Ponzi schemes’ activities. “Their activities amount to economic sabotage and the people should realise that government’s actions over the issue are in their interest. “We will continue to screen and allow only the legitimate empowerment schemes to operate in the state. Mechanisms have been set in motion to achieve this objective. “A ny i n d i v i d u a l o r group that comes to Eb-

onyi to execute empowerment programmes should consult with the ministry to be adequately screened and documented and this has been approved by the governor,” he said. He added that the ministry would ensure effective private sector participation in its activities and systematically outline plans to engage development partners and multinationals to achieve the objective. “We will also take advantage of the Central Bank of Nigeria (CBN) activities, donor agencies among others with the state government off-setting its counterpart fund-

ing to access available interventions. “We will enlighten multinational companies in Ebonyi and other business enterprises on the need to perform their corporate responsibilities, while naming them in the hall of fame to appreciate their contributions to the state’s development,” he said. Orji said that the state government had spent over N6 billion on its various empowerment schemes since 2015 and the ministry would reactivate the Governor David Umahi Empowerment Beneficiaries Association (GUMEBA).

Borno to construct N4.2bn flyover in Maiduguri

orno State government is constructing a N4.28 billion flyover bridge in Maiduguri, the state capital, in continuation of efforts to further expand road networks in the north-east state. The project, which is to be handled by Eighteen Engineering Company International Limited, would be ready in 18 months. The state governor, Ba-

bagana Zulum who laid the foundation for the bridge, on Monday, said other asides it, similar projects would also be implemented in the state in 2020. “The flyover bridge is designed to empower the people, rebrand the economy, strengthen their resilience as well as facilitate return of normalcy to the state. “It is also an impetus for economic competitivewww.businessday.ng

ness, security and as well as quality of life. The flyover is expected to be delivered within 18 months while work on the Post Office roundabout flyover will begin by the end of 2020,’’ said Zulum. He charged the contractors to adhere to the quality of work, and also directed the ministry of works, to ensure compliance with specifications. A c c o rd i n g t o h i m, township roads in Jiddari

Polo, Mala, Kyariri Zannari Roads, Pulk -Ngoshe, Monguno and Biu as well as Askira and Ngala roads would also be constructed Other roads to benefit are Umarari-Ngarranam and Abujan Talakawa. The governor added that the state government was working towards the reconstruction of the Maiduguri-Gamboru road, Maiduguri-Bama-Banki as well Damboa-ChibokMbalala roads.

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yo State government is to acquire ten modern fire-fighting equipment through a competitive bidding process. The state’s commissioner for infrastructure, transportation and public works, Raphael Afonja, disclosed this during an on-the-spot assessment of the fire ravaged Akesan market, (Oja Akesan) in Oyo town. This followed last weekend’s fire incidents in which lives and properties worth million of naira, were lost in Ibadan and Oyo. The state governor, Seyi Makinde had earlier promised to unravel the causes of the fire incidents. Afonja, who visited the scene of the incident with his counterparts- commissioner for environment, Kehinde Ayoola and the permanent secretary, ministry of health, lamented that the government of Makinde inherited a fire service department with weakened capacity as a result of obsolete equipment. According to him, the incumbent government has flagged off a process of rehabilitating the service-

able fire-fighting trucks so as to provide immediate service to the people. He also stated that the process of rehabilitating the inherited trucks was still ongoing when the outbreak of fire incidents occurred repeatedly. The commissioner said: “The last time fire-fighting equipment was procured in the state was in 2006. The present government has, however, kick-started the rehabilitation of the few serviceable fire-fighting trucks. The one that was vandalised in Oyo was just repaired before it developed gear problems after returning from an assignment. “Last month we engaged a company that will help us refurbish and salvage some of our existing trucks including the one that was vandalized in Oyo. “We are also publishing tender request that will allow companies to bid for and supply the state with 10 modern fire-fighting trucks through an open and competitive process.” In a post on his social media handles, Governor Makinde had commiserated with the victims of the fire incident, assuring them of his government’s determination to end such disasters.

NSCDC records 30 cases of child trafficking in Kaduna

igerian Security and Civil Defense Corps, (NSCDC) says it recorded 30 cases of child trafficking in Kaduna State in 2019. Spokesperson of the command, Orndiir Terzungwe said that some of the cases were traced to community members from eight local government areas of the state. “In a bid to end increasing violence against children and women, the Nigeria Security and Civil Defense Corps, Kaduna State command through its anti-human trafficking unit received and treated 30 cases in the state last year.” He said the victims were mostly from Jigawa, Katsina and Kaduna States, adding that 16 survivors were rescued and reunited with their families. Terzungwe disclosed that three suspects held in connection with the cases of child trafficking and forced @Businessdayng

labour were handed over to the National Agency for the Prohibition of Trafficking in Persons (NAPTIP), for further investigation. “Also on sexual violence, two defendants were remanded in prison while their case files were referred to the Ministry of Justice for legal advice,” he added. He also disclosed that cases of domestic violence were referred to the Citizens Rights desk in the ministry of justice. Terzungwe noted that some cases of physical violence were treated out of court and survivors reunited with biological parents for further care under the supervision of the ministry of human services and social development. He explained that as a form of succor for survivors, cases of child neglect were handled out of court and victims reunited with family members while alimony was being paid for the upkeep of victims.

Wednesday 08 January 2020

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

OIL & GAS

ExxonMobil predicts tepid Q4 result on weak earnings …as other players write down assets OLUFIKAYO OWOEYE

ll is not well with major players in the oil and gas industry as ExxonMobil, the secondlargest publicly traded oil and gas company has warned of a decline in its fourth quarter result on the back of a projected loss in chemicals and lower profit in refining, two of its three major business segments. The oil-giant in its fourth-quarter result s expectation filling noted that operating profit in its largest business, oil and gas production, could be $2.3 billion based on the midpoint of its estimate, up from the third quarter but down from a year ago. The good news however is the gains of as much as $3.6 billion from the sale of its Norwegian oil and gas production, part of a plan to divest about $15 billion in assets by 2021, offsetting the weak result for the year. In its third-quarter result released recently, Exxon Mobil earned $3.2

billion in the third quarter, down from $6.2 billion, a 49percenr drop on lower oil prices and higher costs. Exxon Mobil joins a list of oil-giants who have predicted a contraction in earnings amid a disappointing demand outlook. Royal Dutch oil giant, Shell announced that it plans to write down up to $2.3billion in the fourth quarter, an impairment of $500-600 million from deferred taxes and another $100-200

million from well decommissioning. A l s o, C h e v ro n a n nounced on December 13 that it is writing down the value of its assets by more than $10 billion, a concession that in an age of abundant oil and gas some of its holdings won’t be profitable anytime soon. According to the oil-giant, the write-downs this quarter are related to a deepwater Gulf of Mexico project, which needs higher oil

prices to churn a profit, and shale gas in Appalachia, which has suffered from low natural gas prices. It is considering selling its stake in a cultural region in the Eastern United States Appalachia shale and the proposed Kitmat LNG project in Canada. Spanish energy giant Repsol also announced a $5.3 billion write-down of its assets while also pledging to be carbon-neutral by 2050. The announcement

L-R: Adekunle Mokuolu, president, Nigerian Society of Engineers (NSE); Joseph Ohonyon, plant manager, International Breweries plc, Ilesa, and his wife, Ekiomado, at the conferment on Ohonyon of the fellowship of the Society in Lagos.

comes after Repsol set a goal of becoming a leading international player in renewable energies. Likewise, US-based Schlumberger took a massive $12.7 billion writedown in October, largely due to the slowdown in shale drilling, while British Petroleum (BP) also wrote down $2.6 billion in assets in October. “Part of the reason why companies are increasingly acknowledging the likelihood of lower longterm prices is because of the energy transition which is a worrisome trend for oil companies,” Emmanuel Afimia, an energy analyst and CEO of Afimia Consulting Limited said. US-based Institute for Energy Economics and Financial Analysis (IEEFA) said in a report that the write-down is also an indictment of shale gas drilling in Appalachia as low prices and a track record of not producing any profits have soured investors in the sector. A recent analysis by IEEFA found that the seven largest Appala-

chian gas drillers burned through half a billion dollars in the third quarter. “Despite booming gas output, Appalachian oil and gas companies consistently failed to produce positive cash flow over the past five quarters,” the authors of the IEEFA report said Nigeria, Africa’s largest oil producer, is still dependent on the oil sector for 90 percent of its foreign exchange earnings. The country has Africa’s second-largest oil reserves with estimated known reserves of 37 billion barrels of oil and 202 Tcf of proven gas reserves. Globally, there is a paradigm shift from fossil fuels to electric cars with many advanced countries considering a ban on the sale of gasoline-powered cars. If this trend continues, there would be a reduction in Nigeria’s oil revenue which will have an adverse effect on the exchange rate; oil companies may lay off workers, debt profile may increase while a sick government balance sheet looms.

DEALS

Afreximbank tops Bloomberg 2019 book running league table OLUFIKAYO OWOEYE

frican Export-Import Bank (Afreximbank) has emerged top of the Bloomberg 2019 Africa Capital Markets League Tables as the leading Bookrunner in Africa. The 2019 Africa Capital Markets League Tables released recently by Bloomberg showed that Afreximbank was the top Bookrunner for Africa Borrower Loans, ahead of Mitsubishi UFJ Financial Group Inc. and Standard Chartered Bank. The table represents top arrangers, bookrunners, and advisors across a broad array of deal types including loans, bonds, equity, and M&A transactions; according to Bloomberg standards. According to Bloom-

berg, Afreximbank recorded a loan transaction volume of over $2.79 billion that is 8.7 percent of the market share while Mitsubishi UFJ Financial Group Incorporated and Standard Chartered Bank accounted for 6.8 percent and 6.4 percent of the market share respectively. Afreximbank also ranked second among the Mandated Lead Arrangers for Africa Borrower Loans on the League Tables, moving up one place from last year’s ranking. Its market share was 6.7 percent on a volume of $2.1billion. Afreximbank came in behind the Standard Bank of South Africa, which accounted for 8.1 percent of the market share but was ahead of Eastern and Southern African Trade and Development Bank

whose market share stood at 4.5 percent. In the Administrative Agent ranking category,

Afreximbank came in ninth with a 5 percent market share and a volume of $8.85 billion. The category

leader was Standard Chartered Bank, with a market share of 14.3 percent, followed by BNP Paribas with

8.4 percent market share and the National Bank of Egypt with 8.1 percent market share.

L-R: Sola Oyetayo, secretary, Association of Reporting Accountants and Auditors in the Capital Market; Ayodele Othihiwa, partner/head, financial services industry, KPMG; Chioma Obaro, associate director, PWc; Daniel Asapokhai, executive secretary/ CEO, Financial Reporting Council of Nigeria; Elizabeth Ekpo, team lead, listing analysis/listing regulation department, NSE, and Sunny Nwosu, acting chairman, RT Briscoe, at the 2019 Annual Conference of ARAACAM in Lagos

Wednesday 08 January 2020

BUSINESS DAY

COMPANIES&MARKETS

Business Event

APPOINTMENT

Lekoil appoints two new non-executive directors DIPO OLADEHINDE

ondon listed oil and gas exploration and Production Company with a focus on Nigeria and West Africa Lekoil has announced the appointment of Mark Simmonds and Tony Hawkins as Non-Executive Directors, with immediate effect. Also, Lekoil announced Greg Eckersley, who has served as Lekoil’s interim Chief Financial Officer since May 2019, will not be returning to his previous role on Lekoil’s Board as a NonExecutive Director following the completion of his sixmonth term in that position. Non-Executive Director, John van der Welle, will also be stepping down from LEKOIL’s Board with immediate effect with Hezekiah Oyinlola assuming the role of Chair of the Audit Committee following John’s departure. “It has been a pleasure to be part of the Lekoil story from its inception, and as a founding Board member since IPO. In the last seven years, it has acquired worldclass assets and has built a highly skilled and technically competent team,” Greg Eckersley, interim Chief Fi-

nancial Officer said. John van der Welle, NonExecutive Director said having served on the board for over six years since the IPO in 2013, through the early stages of the Company’s growth achieved in challenging times in the E&P sector, he would like to wish the Company the very best as it embarks on an exciting operational programme moving forward. Mark Simmonds, aged 55, was the Foreign & Commonwealth Office Minister with responsibilities for Africa, the Caribbean, UK Overseas Territories, International Energy and Conflict Prevention. He served as a Member of the UK Parliament for 14 years and was also a senior advisor to the then Prime Minister, David Cameron. He focused on driving and facilitating inward investment into Africa and the Commonwealth across a range of key economic sectors including Hydrocarbons, Financial Services, Healthcare, Infrastructure, Energy & Agriculture. While Tony Hawkins, aged 48, is an English and Australian qualified lawyer of 20 years’ experience, who has worked in both private practice and corporate

roles. He is a senior energy lawyer, asset manager, and commercial negotiator, predominately in oil and gas but also in power, LNG and renewables. Tony Hawkins is currently the Chief Executive Officer at Columbus Energy Resources plc as well as owning a consultancy firm. Previously, he was Legal and M&A Director at Columbus Energy Resources plc which followed his role as General Counsel & Head of Commercial for Sterling Energy plc, a London listed oil & Gas Company. Prior to Sterling Energy, Tony Hawkins spent six years at Centrica plc (a FTSE 100 listed utility), where he had several roles, including interim General Counsel for Centrica Energy. Prior to that, he worked for ten years in private practice in Australia and the UK, most recently with Dewey LeBoeuf in London. Hawkins is a member of the Association of International Petroleum Negotiators and was previously a member of the legal committee of Oil & Gas UK where he was instrumental in helping to develop the standard DES LNG Master Sale Agreement for the European Federation of Energy Traders.

L-R: Femi Jaiyeola, chairman, finance committee, Compliance Institute, Nigeria (CIS); Pattison Boleigha, president, CIS; Ametekhai Affi, deputy director, Central Bank of Nigeria (CBN), learning centre, Lagos; Lateef Dabiri, chief compliance officer, Union Bank, and Oluyemisi Olukoya, chairperson membership committee, CIS, at the CIS 3rd investiture and induction ceremony in Lagos. Pic by Olawale Amoo

Nicky Okoye (m), founder/chief strategist, Nicky Okoye Organisation (NOO), flanked by Vice Sampson (l), and Mike Goldstein (r), representing Institutions in strategic partnership with NOO on its global capital strategy road show in Washington DC, United States.

COMPANY RELEASE

New Nokia C1 lets you tap into new possibilities, anywhere with a stunning display

MD Global, the home of Nokia phones has announced the introduction of Nokia C1, a smartphone designed to entertain – anytime, anywhere. Featuring an impressive 5.45” display, fans can watch their favourite videos and listen to music with ease. With lighter apps and less bloatware, you are able to store up to 3,000 songs or 24 hours of videos for offline consumption, cutting down on data usage. Combined with all-day battery life, you’ll have enough power to keep you watching, listening and talking from sunrise to sunset. Joseph Umunakwe, general manager, West, East and Central Africa, HMD Global, said “As consumers in Nigeria look to upgrade from a feature phone to an affordable 3G experience, we wanted to ensure that we offer them a smartphone that offers the same Nokia brand values of quality, reliability and ease of use. We have designed the Nokia C1 as an affordable 3G alternative for these consumers – offering them a combination of a large 5.45” screen and all-day battery life. Not only does the impressive 5.45” display let you immerse yourself in your favourite videos anywhere, but coming with Android 9 Pie (Go edition), the Nokia C1

has fewer pre-installed apps and is designed to optimise storage, meaning you can keep more of your favourite content with you. The Nokia C1 comes with enough internal storage for up to 3,000 songs or up to 24 hours’ worth of videos and can be expanded with a micro SD card to up to 64GB for those that need more. Coming with 3G connectivity and all-day battery life, the Nokia C1 really is a go-to smartphone for entertainment, allowing you to keep the chat and apps going from sunrise to sunset. The Nokia C1 stands out thanks to its stylish metallic finish. It’s built with a durable polycarbonate cover to withstand the knocks of everyday life and look good doing it. The removable cover gives you access to the battery if needed. Raise your selfie game with the front-facing flash and 5MP camera, helping you get that perfect shot even after dark. Plus, you can now take and make video calls, be it day or night. Combined with a 5MP rear camera, you can snap memories in the moment. Point and shoot stunning photos with the auto-focus rear camera. View and edit your memories offline with Gallery Go; a light, fast, and offline gallery

optimised for your phone. Enjoy one-tap editing and easily relive all your memories with automatic organisation – even offline. The Nokia C1 comes with easy access to helpful innovative services including the Google Assistant, helping you get things done throughout the day, even on the go. To get started, just press the Google Assistant button and you can find out the latest weather, news, sports information, call your family, play videos and more. Users can tap into new possibilities with Android 9 Pie (Go edition), enabling easy access to YouTube Go, helping you download, enjoy and share videos with limited storage or slower network speeds. This means you can watch your favourite videos offline, in addition to using helpful apps like Google Maps on the Google Play Store. Android 9 Pie (Go edition) is built leaner, faster, and safer than ever before, so you can go bigger in everything you do. For example, Google Maps Go provides your location, real-time traffic updates, and directions, plus train, bus, and city transit information. You can even search and find phone numbers, addresses, and information about millions of places.

Chukwuka Monye, global managing partner, Ciuci Consulting, and Tayvanie Nagendran, advisory board member, Ciuci Consulting, at the Health Investor Power 50, an exclusive event in London for major players in the UK health sector,

L-R: Olabisi Tofade, CEO; Elizabeth Ebi, director, and James Fadel, chairman, Four Season Legacy, at the presentation of Nigeria Dream Homes by Four Season Legacy Limited in Lagos.

Wednesday 08 January 2020

BUSINESS DAY

FINANCIAL INCLUSION

& INNOVATION

AFI outlines framework to advance women’s financial inclusion using DFS Stories by Endurance Okafor

he ubiquity of mobile technology adoption and usage, coupled with rising innovations in financial technologies is one of the reasons why experts have recommended the use of digital financial services (DFS) in achieving inclusive financial inclusion. According to the Alliance for Financial Inclusion (AFI), a global organisation on financial inclusion policy and regulation, the use of DSF presents an unparalleled opportunity and leverage mechanism to advance women’s financial inclusion. The Malaysia-based organisation said it, however, observed that DFS, as a utility, can exacerbate several barriers prohibiting access to and usage of basic financial services by women, posing a serious setback to millions of women who may still remain excluded. AFI has therefore presented policy framework of four critical considerations that should be taken by policymakers to advance the agenda of women’s financial inclusion through DFS usage, and they include gender-sensitive DFS policy, customer protection, infrastructure, and Gender-centric regulatory interventions. “All AFI members are encouraged to adopt this framework to develop or improve their women’s financial inclusion policies and regulations using DFS,” the organisation said in a recent report. Among the 89 member countries of AFI, Nigeria has

a financial exclusion gender gap of 12 percentage points. According to 2019 data by EFInA, financial exclusion stands at 36percent for women and 24 percent for men. “Since 2012, although women’s exclusion has dropped, the gender gap has grown, revealing that men’s inclusion has improved more rapidly than women’s20,” the Lagosbased financial inclusion organisation said. According to Ini Abimbola of Thristle Consulting, the results of the research were not surprising because more women have low income from subsistence farming and trading and are not interested in the charges from the traditional banks. Analysis of the study by EFInA showed that the most important drivers of financial exclusion for both genders are lack of income, poor level of education, and low trust in Financial Service

Providers (FSPs) and the factors are also drivers of the gender gap. Women have a lower income, education, and trust levels than men, these factors also, to a large extent, explain the gender gap in overall exclusion, the report read. Interpreting the report, an industry source said it implies that women and men with similar levels of income, education, and trust in FSPs are approximately equally likely to be financially excluded yet women typically have much lower levels of income and education than men do. Agada Apochi, the CEO of unified payments in his intervention, identified areas that need to be worked on to improve financial inclusion in Nigeria, namely regulation: “Ensure that everyone has a level playing field, Capital: especially for local players and accessibility; availability and willingness

by investors.” The Central Bank of Nigeria (CBN) plans to give access to 80 percent of Nigerian adult population by 2020. In order to achieve this target, the apex bank in 2012 launched the National Financial Inclusion Strategy (NFIS) as the road map to achieving 20 percent financial exclusion rate. However, according to the revised NFIS, Nigeria is not on track to achieve its 2020 targets. Recent data by EFInA put Nigeria’s financial inclusion rate at 63.2 percent, meaning that as much 36.8 percent adults still lack access to financial services. “For a large number of the country’s population to be financially included we would have to leverage technology, for millions of Nigerians to have access,” Uzoma Dozie, the last Group Managing Director of defunct Diamond Bank, and Founder/CEO of Sparkle

said. While 75percent of the adult population in Kenya have access to a mobile money account, it’s only 1 in 10 Nigerians, and according to industry experts, the gender gap in Africa’s most populous nation represents a major issue to be resolved if the country is to achieve the targets it set in its NFIS. A further analysis of the recent policy framework by AFI which was stemmed from learnings, good practices and successful interventions among AFI member countries revealed that for emerging economy like Nigeria to give access to more women through the use of digital financial services, it would have to increase internal gender diversity by developing, mentoring and implementing women’s leadership programs among government agencies, regulatory and policy institutions. “Create a policy guideline/note for central banks that can serve as a vision document to leverage on DFS for women’s financial inclusion. Develop communication and consent guidelines for DFS information dissemination using pro-women channels, language and content, etc,” it recommended. In terms of infrastructure, the AFI report stated that policymakers like the central bank of Nigeria should promote the development and access to retail payments, information, communication and technology infrastructure such as switching, national automated clearinghouses, telephony and internet services, that facilitate access to and use of DFS.

“Facilitate and encourage enrolment of women into market-wide identity systems to ensure that women’s access to proof of identity, such as Digital ID, is guaranteed through policies promoting simplified/tiered know-your-customer (KYC) processes, e-KYC and customer due diligence (CDD) principles,” it said. AFI suggested that gender-centric regulatory interventions should also be established. It said guidance for the provision of appropriate and reliable access points for distribution of DFS, such as cash-in/cash-out (CICO) agents, merchant payment points etc., particularly for underserved areas and areas that are women-friendly and easily accessible by women cooperatives, selfhelp groups, and village/ community associations, should be encouraged. Also, the gender exclusion report by EFInA suggests that women want financial solutions that offer value propositions that fit the existing context of their lives. The report revealed that women make multiple decisions daily to manage limited income and meet their needs. “Mostly, they seek solutions that provide them with greater control over their money and allow them to balance their cash flow.” The study identified relevant financial products and services for excluded women to include: Familyoriented financial products and services. For example, joint family accounts for household spending or savings, particularly where multiple people have a stake in household finances.

Ecobank welcomes slash in bank charges, applauds regulator

cobank Nigeria, a subsidiar y of Ecobank Transnational Incorporated (ETI) has announced that it has complied with the CBN directive on the reduction of bank charges, meant to make banking more affordable and accessible to residents of Nigeria. In a statement signed by Patrick Akinwuntan, Managing Director of Ecobank Nigeria, the lender specifi-

cally praised the regulator for coming out with new guidelines regulating the fees charged by banks and financial institutions operating in the country. In furtherance of its quest to make financial services more accessible and affordable to various stakeholders in the economy, the Central Bank of Nigeria (CBN) reviewed downward most charges for banking services. With effect from Jan-

uary 1, 2020, charges on electronic funds transfer, for instance, will attract N10 for transactions below N5,000; N25 for those between N5,001 and N50,000, and just N50 for those above N50,000. This is compared to the initial flat rate of N52 per transfer. “In a bid to encourage financial inclusion and to reduce the burden of bank charges on consumers of financial service, CBN has issued a revised Guide to

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charges by Banks, Other Financial and Non-Bank Financial institutions in response to the evolution in the financial industry over the last few years,” the apex bank said on its twitter handle on Monday. The Guide which was first released 15 years ago was revised in 2013 and 2017 in the light of market developments such as innovations in products and/or channels and new industry participants.

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The new Guide sent to Banks, Other Financial and Non-bank Financial Institutions as contained in a circular includes, amongst others, a downward review of charges for electronic banking transactions, removal of Card Maintenance Fee (CAMF) on all cards linked to current accounts, reduction in the amount payable for cash withdrawals from other banks’ Automated Teller Machines (Remote-on-us), review of @Businessdayng

other bank charges to align with market developments, and inclusion of new sections on accountability/responsibility and a sanction regime to directly address instances of excess, unapproved and/or arbitrary charges. It will be recalled that in October 2019, Ecobank announced the elimination of session charges on its USSD platform, about three months before the new CBN directive.

Wednesday 08 January 2020

BUSINESS DAY

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@Businessdayng

Wednesday 08 January 2020

Harvard Business Review

BUSINESS DAY

MANAGEMENTDIGEST

The founder of Chewy.com on finding the financing to achieve scale RYAN COHEN MORE EXCITING THAN THE COMPANY’S MULTIBILLIONDOLLAR SALE WAS THE FIRST SIGNIFICANT INVESTMENT. ost people assume that the high point of my professional career came on April 18, 2017, when the owners of PetSmart paid $3.35 billion for Chewy.com, the pet retailer I had co-founded six years earlier. No doubt, that day was incredible. But believe it or not, another deal mattered even more to me. That one happened on Sept. 26, 2013. I had launched Chewy two years earlier with Michael Day, using our own cash and small loans, but my vision was to build a large business, and I knew that significant capital would be required to finance the growth. We approached dozens of venture capital firms explaining how Chewy would succeed by delighting customers and running an efficient operation. But everyone turned us down. Larry Cheng at Volition Capital was one of the people we pitched our company to. We first met him in 2012. I remember that he asked me, “Who’s going to take this company to $100 million in sales?” I was only 26, but I confidently answered, “I am.” He didn’t invest. He followed up with us about six months later, though. We’d beaten our sales projections, and he was impressed. A few days later he signed off on a $15 million investment in Chewy. The satisfaction was even greater than the pride I felt following the eventual sale. From that point on, our mission was straightforward: to build a best-in-class, customer-obsessed pet retailer. We also wanted to leave everyone who’d backed us a winner. I’ve been working since I was 13, when I started building websites for family members and local businesses. From there I moved into affiliate marketing. I met Michael in an online chat room discussing website design and computer programming. We hit it off immediately and started talking about collaborating on a business.

We settled on what we thought was a terrific idea: online jewelry sales. We built the website, bought the inventory and even put a safe in the office to store it. But about a week before our scheduled launch, I had a revelation. I was in a local pet store with my toy poodle, Tylee, asking the owner about the most healthful food I could buy for her. That’s when it hit me: I was getting into the wrong business. I didn’t care much about jewelry, but I was passionate about what I bought for Tylee. The pet industry was growing and it was clear that the opportunity was huge. So we pivoted. We sold all the rings and bracelets, and started learning about the pet industry. We built a new website. We found a local distributor and partnered with a thirdparty logistics company. In June of 2011 we launched. With limited resources, we served as our own C-suite. I was CEO, and Michael was chief technology officer. We knew that superior customer service had to be one of our core competencies, so our first priority was building a team to work in our call center. From the outset we reinvested all our cash in the business, but eventually we needed larger www.businessday.ng

pools of money. After months of searching, we finally found Larry and Volition. With that money we could invest in developing the systems, technology and teams needed to scale up. We could also bring stocking and shipping in-house. Consultants had told us that it would take a year and a half to build a warehouse from scratch. But with 300% growth year over year, we didn’t have that much time. The logistics company handling fulfillment couldn’t keep up, so the Chewy customer experience had begun to deteriorate. We needed more control, and fast. We started scouting potential sites in February of 2014. The location we chose — Mechanicsburg, Pennsylvania — would allow us to provide overnight delivery to customers in the densely populated areas of Connecticut, New York and New Jersey. By that summer we’d opened a 400,000-squarefoot facility. It certainly wasn’t easy. We couldn’t hire people to work in the warehouse fast enough. When we were finally staffed, we were tackling issue after issue 24/7 until we worked out all the kinks. We also focused heavily on marketing. From day one, we

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invested almost exclusively in direct response ads, so every dollar spent could be tracked. We expanded by investing in the team and processes to effectively acquire the right customers at the right cost. Our sales more than doubled from $205 million in 2014 to $423 million in 2015. Ultimately we raised six rounds of financing totaling more than $350 million from T. Rowe Price, BlackRock, Greenspring, Lone Pine, Verlinvest and the investment bank Allen & Company. Our revenue was $901 million in 2016 and growing 100% year over year. That got us thinking about an initial public offering. As we prepped for the IPO, Petco, one of the biggest U.S. pet retailers, approached us about a merger. The company couldn’t meet our terms, so we shook hands and parted ways. In early 2017 PetSmart, Petco’s primary brick-and-mortar rival, also reached out. It was one of our top competitors, so we proceeded carefully. I explained that we were preparing for an IPO, so we expected a certain price in an all-cash, public-style deal. In April of 2017 we signed an agreement to sell the company for $3.35 billion. It was the largest e-com@Businessdayng

merce acquisition in history. Our investors were happy too. The early-stage ones made huge gains, and the later-stage ones earned significant money. Chewy’s revenues continued to rise post-acquisition, hitting $3.5 billion in 2018, while its losses narrowed to $267 million. In June of 2019 PetSmart spun Chewy off into a publicly traded company at a valuation near $9 billion. I left the company in March of 2018. It wasn’t an easy decision, but I felt I had done all I had set out to do. The company was sound, the foundation strong and the vision set. But I was no longer in full control. And I didn’t want a boss. My work was complete. When I think back to why raising the money to help grow the business was one of the best moments of my life, I realize it’s because the journey was far more exciting than getting to the finish line. I relished the challenges of disrupting an entire industry and trying to delight customers to a degree that had never been achieved before.

Ryan Cohen is the co-founder and former CEO of Chewy.com.

Wednesday 08 January 2020

BUSINESS DAY

AGRIBUSINESS

In association with

ag@businessdayonline.com

Prospects, challenges of Nigeria’s agriculture in 2020 Josephine Okojie

n 2019, the Federal Government continued with its renewed focus on the agricultural sector in an attempt to diversify the economy away from oil. The sector which was neglected had since 2016 be came an option for diversification owing to its vast potentials to drive a more sustainable economic growth in Africa’s most populous nation in terms of job creation and revenue diversification. To accelerate this growth, the government in the last five years had devoted a lot of energy at deepening agriculture with initiative like the Anchor Borrowers Programme (ABP), ban on the impor tation of some agro commodities and the shutting down of its land borders without addressing fundamental issues of mechanisation, irrigation, seeds, extension service, insurance, research and development, among others. As a result, yields have continued to remain low and progress made initially is now on a downward trajectory as the sector’s g row t h rat e ha s b e e n slowed. Data from NBS shows that the sector grew by 3.17 percent, in the first quarter of the year, it also grew at a slower rate of 1.79 percent in second quarter and picked up marginally to 2.28 percent in the third quarter of 2019. Data for the four th quarter is yet to be published by the bureau of statistics. Similarly, during the year, agricultural export for the period experienced strong growth from January to September 2019 but this was fast eroded as the agricultural imports for the period far outweigh exports, thus, dragging the sector’s trade balance into deficit. Nigeria imported N949.8 billion worth of agricultural goods in the period as against N180.7 billion of exports for the same period despite the ban placed on the importation of several agro commodities, data from the Trade Report shows. Experts attributed the

slow growth and trade deficit to the inability of the government to address fundamental issues. They noted that the country can only drive growth in the sector when agricultural products become highly competitive. The experts noted that the country must increase its mechanisation scale to meet the ever-increasing demand for food before the country can talk about earning foreign exchange through the sector. Also, they added that t h e g ov e r n m e n t m u s t provide the needed infrastructures such as power and motorable roads to drive down production cost, effective and efficient rail transportation linking where the food are produced in the north and markets in the south as well as irrigation facilities to aid all-year farming. With all this in place, they

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stated that the country’s agricultural products will be competitive as a result, importation will be discouraged. Issues such as land ownership, infrastructural deficits, and inadequate access to finance, quality seeds and mechanisation among others are inherent problems the government is yet to address. “We have increased our crop production of various commodities but the government has still not done anything in addressing fundamental issues. We still do not have sufficient seeds and seedlings, nothing in place to increase mechanisation,” said Abiodun Oyelekan, chief executive officer, Farm Fresh Agric Ventures. “ The only thing the government has done is shifting attention to the agricultural sector. People now want to invest in the

sector than before and this is why there is an increase in production,” Oyelekan added. He stated that the country cannot make further process if farmers cannot produce at a cheaper cost. Also, lots of youths that invested in the sector through entrepreneurship are diverting into other sectors owing to the high failure rate caused by some underlying problems in the country’s agricultural sector. Experts recommended the development of linkages between farmers and the market, stating that youths can only find agric attractive when such linkages are provided. They say developing agriculture requires the rehabilitation of dams and irrigation facilities to boost farmers’ productivity and also drive down cost of

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production. Border Closure In an attempt to tackle issues of smuggling that has deterred growth in some subsectors under the agricultural sector, the Federal Government had since August 2019 shutdown the Nigerian borders. The polic y has spur demand in crop and livestock products across the country and created investment opportunities for potential investors across the various value chains in the agricultural sector. Also, it made farmers and millers ramp up production especially for rice and poultry production to meet the ever-growing demand for food in the country. “Lots of rice farmers are increasing their production areas because there is a huge market for paddy since the border closure,” said Aminu Goronyo, national president, Rice Farmers Association of Nigeria in a telephone response to questions. “This is because millers are patronising rice farmers now and off-taking all that they produce immediately,” Goronyo said. He stated that before the border closure, farmers had over 20,000 tons of paddy lying fallow because millers were not off-taking from them. Similarly, the policy compelled Nigerians who g e n e ra l ly have a h ig h preference for foreign varieties to shift to local @Businessdayng

brands. The Poultry Association of Nigeria (PAN) estimated local poultry production to have increased to 7,000metric tons since the policy took off. “Since the closure, we have increased our local production to about 7,000metric tons and if it persists, we could cascade its production to 1.5metric tons within a short period,” said Onallo Akpan, director-general of Poultry Association of Nigeria (PAN). This shows that there is a vast potential in the sector which the government must harness with sustainable policies. But despite the gains made by the policy, food prices in the country have been on an upward trajectory since the border closure. The inflationary pressure has reduced consumers’ disposable income, hence, making basic needs elude Nigerians. “We cannot afford to buy the things we usually buy before because prices of everything have gone up,” said Blessing Orizu, a mother of three and buyer at Mile12 market. “It has been really difficult for my family. We now buy little of what we feel is important. The painful thing is that my salary is still the same despite a high rate of inflation in the economy,” Orizu added. Inflation in Afr ica’s most populous nation accelerated to 11.85 percent in November 2019 and was basically driven by food inflation, the National Bureau of Statistics (NBS). The figure surpasses the Central Bank prediction of 11.7 percent for headline line inflation for the year-end. The budgetary allocation for the agriculture sector over the last few years shows that the allocation to agriculture, as a percentage of the overall annual budget to all sectors increased from 1.25 percent in 2016 to 1.82 percent in 2017 and 2.23 percent in 2018. However, the allocation to the sector as a percentage o f t h e ov e ra l l b u d g e t declined in 2019 by 1.56percent and a further decline to 1.3 percent in the 2020 budget.

Wednesday 08 January 2020

BUSINESS DAY

AGRIBUSINESS ag@businessdayonline.com

Ogun to boost farmers’ productivity with CBN’s Anchor Borrowers Initiative …facilitates farm-to-market RAZAQ AYINLA, Abeokuta

s part of efforts to boost agricultural p ro d u c t i o n i n Ogun state, the government has begun a systematic review of the CBN’s Anchor Borrowers initiative to increase farmer’s p ro d u c t i v i t y a n d v a l u e addition. To ensure that farmers harness the opportunities in the initiative, the Ogun State government in partnership with the apex bank organised a town hall meeting to address issues limiting farmers’ productivity. Adeola Odedina, special adviser to the Governor on Agriculture, noted that the town hall meeting was held to work out modalities by which loans granted by CBN and other financial institutions would be judiciously invested in agriculture. Odedina says the state would create the enabling e nv i ro n m e nt a n d o t h e r incentives, while National Commodity Association

would be involved in ensuring that farmers are linked to credit, inputs and ready markets. “The focus of agriculture in the state is to link farmers to industries, and get raw materials from them and the Government cannot do

it alone, that is why we are doing the Public-Private Partnership,” he said. “ We h a v e o f f - t a k e r s (representatives of industries and factories) in our midst to off-take cassava from the farmers, as the CBN is ready to make the State a model for

L-R: Biodun Akinpelu, director general, Nigerian Studies, Lagos State University; Oluyemisi Oladejo, director of studies, Triune Biblical University (TBU), USA; Alli Akinola Sikiru, guest, and Maurice Odiete, president, Nipem Int’l at the 13th convocation of TBU, USA, Lagos campus recently.

Agro industrialisation is key for economic transformation, food security – Mbaram Josephine Okojie

ichard-Mark M b a r a m , managing director, AgroNigeria, says agro industrialisation is vital for economic transformation, food security, and nutrition in the country. Speaking in Lagos, M b a r a m a l s o d i r e c t o rgeneral, Feed Nigeria Summit said agriculture p l a y s a c r i t i c a l ro l e i n transforming economies to reach the goal, along with achieving other essential development goals such as ensuring food security and improving nutrition. He observed that underp e r f o r m i n g a g r i c u l t u re is stifling the effective functioning of the industrial sector; consequently, this has resulted in weak linkage between the agricultural and industrial sectors, in the face of a myriad of opportunities. He called for increased economic momentum through partnerships to advance the industrialization of the agricultural sector. Nigeria, according to him, has a huge potential for

cassava production in Nigeria, as the success of the State in cassava production would be replicated in other states in the country,” he added. Ye m i s i O l u k oy a, representing the CBN, stated that the job of the apex bank is to provide access to affordable

agro-allied transformation. This includes hosting a large spectrum of suitable agro-climatic conditions that allow a broad range of agricultural production. According to him, using agriculture to power industrialization calls for a s t ro n g p u b l i c-p r i v at e s e c t o r p a r t n e r s h i p t hat increases small farm holders’ productivity and enhances their contribution to national and regional value chains. He praised Muhammad S a b o Na n o n o, Mi n i s t e r of Agriculture and Rural Development, for the partnership for the African Development Bank (AfDB) t o p ro m o t e a g ro - a l l i e d industrialization. He stated that Nanono has demonstrated the ready to work with AfDB to use agroallied industrialization as an effective strategy to achieve productive employment and reduction in poverty. He added that the Agric Minister is doing all to support a homegrown agenda for economic and social transformation through strong collaborative effort with the private sector. According to him, the www.businessday.ng

Ministry of Agriculture is preparing conditions for industrialization through modernization of agriculture that will raise incomes and productivity of poor farmers, lowering food prices, and improving nutrition. Mbaram says the keys to making agricultural transformation a reality is making modern technologies available and supporting investment in agricultural research and development (R&D). He said the National agricultural research system needed to be funded to find new technologies suitable for local conditions. He s a i d A f D B G ro u p President Akinwumi Adesina had identified Staple Crop Processing Zones (SCPZ), as potential joint venture opportunities for Nigeria’s agricultural investment. T h ro u g h t h e i n i t i a t i v e, he said the bank seeks to transform rural areas from zones of economic misery to zones of economic prosperity. He urged Nigerians t o s u p p o r t t h e Fe d e r a l Government towards achieving the agro-allied industrialization agenda.

loans for farmers, which would be repaid in due course, as well as creating the assurance of a ready market through the off-takers initiative. She noted that stakeholders had been formed into the committees that would let the apex bank know what cost of production is, the expected yields and the interest rate, then there would be considered for the Agricultural Insurance Corporation to mitigate against the unplanned losses. “All these are being made for the farmers to know their profit margin, the variety of what they want to plant and what it would cost them to pay the people that would clear their land,” she said. A l s o, B o l a O ku n e y e, chairman, Anchor Borrowers Programme Steering Committee, noted that the Committee had done the necessary paperwork to have a successful scheme in the state, just as he stated that the essence of the stakeholders meeting is to establish a window between the farmers

that are buying and those that are supplying them. Okuneye also submitted that the meeting became imperative as the Committee is trying to bring the major stakeholders (the buyers, the bank, CBN, input suppliers) together to minimise the problems of the farmers and ensure increased productivity on the part of the farmers. Isola Olusegun, a rice farmer from Ijebu-Igbo, while lauding the State government for keying into the ABP, expressed his satisfaction with the meeting, saying that the farmers would make profit from the ABP if inputs, fertilizers, chemicals, and seeds are delivered on time as well as the mechanised aspect is completed at the right time. He, however, advised his colleagues that they should not see the financial aspect of the ABP as a give-away, but a loan or grant that would be repaid, saying that they should be sincere with whatever output that comes out of their farm.

AfDB to make Oyo Agro-Processing Zone, says Makinde REMI FEYISIPO, Ibadan

overnor Seyi Makinde has disclosed that the Africa Development Bank (AfDB) is set to make the state an Agro-processing zone to drive agricultural productivity in the region. The governor added the development would provide employment opportunities for the teeming youths in the state. According to him, the project will also focus on providing security and on the expansion of the state’s economy through value chain development. “We know that it is through agribusiness that our teeming youths can get jobs and I am pleased to announce that African Development Bank (AfDB) has agreed to include Oyo State in the Agro Processing Zone,” he said. The Governor, who was speaking at his investiture as a Distinguished Member of the Ibadan Progressives Union (IPU) during a Special Reception held recently in

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Seyi Makinde

Ibadan. He declared the readiness of his administration to sustain the high tempo of development in the state. He said that his administration has so far executed some landmark projects without accessing any borrowed fund. S p e a k i n g f u r t h e r, Governor Makinde told the gathering that the Ibadan Progressive Union was the only social Club he belongs to due to the uniqueness of the association adding that his late father was a member of the association. “To set the record straight, Ibadan Progressive Union @Businessdayng

is the only Club I belong because my father was also a member before he died.” The governor promised to continually contribute his own quota for the development of Ibadan, adding that all well-meaning Ibadan indigenes must contribute to moving the historic city in particular and Oyo State in general forward. “The issue is, we don’t have any other place of origin and, as far as that is the situation, we will continue to do our best for Ibadan and the rest of the state,” he said. Olayinka Alli, president of Ibadan Progressive Union, who spoke earlier, said that pioneer members of the IPU set it up as a platform to ensure qualitative education for every Ibadan indigene. “IPU is committed to the development of Ibadan land. We have come here to celebrate one of our own. The first thing we noticed when we met him was humility,” he said. “The vision that formed IPU is to give Ibadan people education so that they can become liberated,” he added.

Wednesday 08 January 2020

BUSINESS DAY

PENSION today

In Association With

CPS helping young people realise, define their future on time

is made. The law guiding the contributory pension scheme allows workers to switch PFAs at least once in a year without any reason, meaning that people who may have made sub-optimal decisions regarding the choice of PFA can easily and conveniently change to another PFA. The opening of the

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People in very high energy professions like banking suffer burn outs and fatigue after years of working, and wish to retire at about 45 years or so to settle for a less demanding personal or family business

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he thinking of young people about planning for retirement and saving towards this important age in life has changed, thanks to the introduction of the Contributory Pension Scheme (CPS). Ordinarily, most people will start planning for their retirement late, leaving issues about their old age care until the last few years of their working life. And because it was considered not important at that early stage, a lot of time was wasted and this largely affected planning time and goals target in the short and longer term. This brought sufferings to a lot of the retirees in the past, as they never thought retirement was something to bother about early in life. So, the coming of the Contributory Pension Scheme following the Pension Reform Act 2004 as amended in 2014 has redirected the focus of young employees who have become more conscious with planning for their retirement through the compulsory contributions with their employers. Experts advise that retirement planning should start while you work. Under the CPS, workers can actively participate in decisions regarding their retirement. From the choice of Pension Fund Administrator (“PFA”), to additional voluntary contributions and well planned withdrawal modes, workers can plan and ensure a safe and secure retirement. Other issues such as owning a home, taking life insurance policies, writing a Will, and setting aside towards your health care in retirement are issues that young workers should be concerned with. Workers planning towards their retirement should also seek to monitor closely the performance and activities of their PFAs, and other financial advisors. Workers must be aware that the choice of a PFA is a serious decision that should be made after serious consideration. Many workers have chosen PFAs based on subjective reasons, and many others have simply followed the “band-wagon”, without proper enquiry. A proper enquiry into the PFA’s experience and track record in investment management, financial resources, quality of ownership and management as well as quality and transparency of customer service and reporting should be made before a choice

Pension transfer window by the industry regulator, the National Pension Commission (PenCom) is being expected soon as the operators and regulators conclude data cleaning exercise. Another issue in planning your retirement while you work revolves around changing jobs and redundancy. For the upwardly mobile worker, changing employers under the CPS poses no challenges at all. The RSA is portable, and all that will change is that your old employer would stop contributing, and your new employer will be informed of your account details, and will continue contributing on your behalf. Taking an early retirement is also something that a lot of young workers consider today. People in very high energy professions like banking suffer burn outs and fatigue after years of working, and wish to retire at about 45 years or so to settle for a less demanding personal or family business. Decisions like this are becoming increasingly popular. People should plan adequately towards an early retirement, and where they want to run a private family business, should thoroughly research it, so that it doesn’t become another high-stress

activity like their previous employment was. The Act also makes provisions for the following two scenarios: An RSA holder who disengages or is disengaged from employment before the age of 50 years and is unable to secure another employment within four months of such disengagement is entitled to 25 percent of the RSA balance in order to cushion the burden of not being in employment. Such an individual, after obtaining another job, can continue with the RSA. If there is no further employment, the individual will have to wait until he/she is 50 years of age before being allowed to access the remaining RSA balance. On the other hand, an RSA holder who has willingly retired before the age of 50 years will not be allowed to access the RSA balance until they attain the age of 50 years, except such an individual is employed in the private sector, where the policies of that particular company allows for a retirement age of earlier than 50 years. In this case, the RSA Holder will be considered a normal retiree and will also be allowed to access the RSA Balance based on any option he/ she chooses. Another issue that comes to mind regarding retirement planning while you work, is death-in-service, as well as death during retirement. The Act also provides that where a contributor dies during employment, the balance in his RSA will be transferred to his known beneficiary as named in a Will, his/ her spouse or children, his named next of kin, or the administrator of his/her estate as determined by the probate registry. The same provision also applies to retirees who have started receiving retirement benefits through a programmed withdrawal, and die. This provision of the Act makes it uniquely different from the administration of retirement benefits under the old public service scheme, where pension payments cease and are not made to a retiree’s beneficiaries at their death. The Act also provides that employers provide a compulsory life insurance cover for each employee for up to a minimum of three times the employee’s total emoluments. The proceeds of the life insurance will also be paid to the employee’s beneficiaries, at death.

IS NOW RC634453

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

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This section is created to increase awareness and deepen knowledge about the Contributory Pension Scheme. If you have enquiries or contributions, send to this e-mail: accesspfcbusday@yahoo.com

Wednesday 08 January 2020

BUSINESS DAY

insurance today

E-mail: insurancetoday@businessdayonline.com

Bancassurance gets a boost as NAICOM approves 18 licences Modestus Anaesoronye

he nation’s insurance industry has made reasonable headway in implementing the referral model of the bancassurance model approved in 2017 between the National Insurance Commission (NAICOM) and the Central Bank of Nigeria (CBN). NAICOM disclosed Monday that it has approved 18 applications out of 20 applications sent in by operators to enable them drive the retail business through bancassurance platform. Adewale Motoja, deputy director/head of Research, Statistics and Strategy in NAICOM made the disclosure in Kano, Kano State during the Insurance Journalist Seminar organised by the Commission. Speaking on the topic “Strategic focus of the Commission in the year 2020: From Compliance to Development: Recapitalisation; Annuity; Enforcement of Compulsory Insurance and Financial Inclusion”, he said a lot will happen in that space in the coming year. According to him, the remaining two applications are going through approval process and will be concluded soon. Following the release of the operational guideline

L-R: Adamu Balanti, a director; Sunday Thomas, acting commissioner for Insurance/CEO; and Olufemi Olaniyi, a director, all of the National Insurance Commission (NAICOM) during a seminar for Insurance Journalists held in Kano, Kano State.

on bancassurance by the National Insurance Commission, insurance companies have commenced the process of getting regulatory approval to sell their products through banks. Pius Agboola, director, Authorisation and Policy, NAICOM had said during the maiden bancassurance certification workshop for insurance employees at the College of Insurance and

Financial Management in Ogun State that “NAICOM shall approve the referral bancassurance agreement between the bank and insurance company, subject to obtaining references from the Central Bank of Nigeria,” he said. According to Agboola, bancassurance is a model by which insurance products are distributed through experts who are generally employees or representatives of

an insurance company. The bank, which was partnering the insurance company, he explained, would through its employees, identify prospects who would then be contacted by an insurance expert. Doug Sumner, owner and principal of Third Sector Capital Management who lead discussion on a master class on the theme “Strategy and Global Best Practice for Banks and Insurers” A FEW

years back said “for bancassurance to succeed, the bank branch staff must understand the benefits and basic operations of insurance, and so will require training by insurance companies to give soft landing in selling the products, he said. The CBN in letter with Reference No: BSD/DIR/ GEN/ LAB/08/014 titled ‘Guidelines On Bancassurance Products- Referral Model’ dated March 16

and addressed to all banks, stated that the guidelines were issued based on recent developments and the need to ensure synergy in the financial system in exercise of its power. “The guidelines set out the regulatory framework for the offering of bancassurance products through the non-integrated referral model. The choice of this model is premised on the fact that it does not preclude banks from focusing on their core banking businesses and does not undermine the essence of the CBN’s New Banking Model.” The banking watchdog explained that the Bancassurance refers to an arrangement in which insurance companies leverage on the customer base of banks to sell insurance products to banks’ customers. It further stated that the referral model is the arrangement in which the bank refers its customers to its partner insurance companies. In return, it receives a commission on each lead closed by the insurance company. Under the guidelines, banks are not to engage in any other model of bancassurance other than that spelt out by the CBN and for which the regulator has given its approval. In addition, banks are not expected to offer banking products that incorporate insurance features.

Insurance Brokers, Loss Adjusters gets two years licence renewal period Modestus Anaesoronye

he National Insurance Commission (NAICOM) has said it will commence a 2-year licence renewal process for insurance brokers and loss adjusters by April 1, 2020. Pius Agboola, director, Policy and Regulation Directorate, NAICOM, disclosed this at the 2020 NAICOM seminar for insurance journalists held in Kano, Kano State, adding that the commission has released the guideline for the implementation of the initiative. Giving his welcome address at the seminar, Sunday Thomas, acting

Commissioner for Insurance, said the second phase of the Market Development and Restructuring Initiative” (MDRI) will soon be unveiled and that the regulatory body will mark out clear targets and tasks for all stakeholders in the insurance industry. According to him “Going forward, we shall vigorously pursue the continued implementation of Compulsory Insurances in every nook and crannies of the ountry. We are certainly not unaware of the challenges inhibiting the successful implementation of these classes of insurance thus far hence, our resolve to work with relevant stakeholders to ensure a seamless drive.” www.businessday.ng

While stating that the successful implementation of compulsory classes of insurance across the nation will ensure adequate protection of strategic National Assets, he promised that the commission

will be working with the relevant security agencies to guarantee effective and efficient monitoring of compliance. On the ongoing recapitalisation exercise, he said, the essence of the recapi-

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talisation is a move to ensure that insurance industry becomes more robust in its technical competence and financial base, building confidence, trust and enhancing market value. This, he stressed, is aimed at repositioning the sector for self-actualisation in terms of growth and development. Stressing that the financial inclusion strategy has been central to the Federal Government developmental plan, he said, the commission, has, over the years, invested hugely in the development of financial inclusion mechanisms which includes the introduction of Microinsurance and Takaful Insurance products. @Businessdayng

The Commission shall continue to deploy more energy and resources in building public trust and confidence in insurance despite years of poor perception, he promised. According to him, annuity business has been making headlines recently with a boost in the contribution of the business to the sector. The public, he added, is becoming more exposed and knowledgeable about the workings of Annuity, expecting that this will continue as the future is looking very bright for annuity business. This has also shown a positive growth in trust and confidence in the insurance sector, he pointed out.

Wednesday 08 January 2020

BUSINESS DAY

MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

Nigeria to gain over $1bn worth of FDI in 5-years on development of National Fleet …Fleet to create additional 1,675,000 tonnages amaka Anagor-Ewuzie

igeria can only have the capacity to open-up its maritime sector to opportunities that can attract over $1 billion worth of Foreign Direct Investment (FDI) within a five-year period, if it develops fleet of vessels that are owned and crewed by indigenous players, the National Fleet Implementation Committee (NFIC) survey, has stated. According to NFIC, the nation’s maritime sector is also expected to increase its national gross tonnage carried by ships owned by indigenous ships by an additional 1,675,000 within 5 years of running National Fleet. Hassan Bello, chairman of NFIC, who gave insight into the survey in one of his recent meetings with Nigerian ship owners, stated that failure of Nigeria to have functional National Fleet of vessels participating in freighting Nigerian imports and exports cargoes, has had serious impact on the economy. Listing some of the impacts, Bello said that many Nigerian youths, who ordinary would have benefited from either seafaring jobs or other indirect jobs in the maritime sector, have been out of jobs. However, NFIC survey estimated that upon the development of National

Crude carrier for importing and exporting oil

Fleet, over 131,304 direct and indirect jobs would be created for Nigerians in fiveyear period. According to Bello, Nigeria has also been recording low gross in national tonnage capacity as only few indigenous owned ships are available to compete with foreign ships in the carriage of goods. This, he said, has resulted in Nigerian maritime industry losing billions of dollars in freight earned from shipping business. For instance, NFIC estimated that Nigerian economy has loss over $120.53 billion in gross freight paid on import and export cargoes to foreign owned vessels in the

past 14 years (2004 to 2018). A breakdown shows that the nation’s economy loss a total of $57.94 billion on freight paid by Nigerian shippers on imports while $62.59 billion was loss on freight paid on exports. “Without the establishment of National Fleet of vessels, Nigerian maritime sector has been making insignificant contributions to the nation’s Gross Domestic Product (GDP). Against this backdrop, it has been estimated that over $5.42 billion is expected to be added to the GDP while over $1.63 billion would be generated into the Federation Account as corporate income tax paid by indigenous ship-

ping firms within five years,” Bello said. He listed other impact of lack of National Fleet to include distorted trade balance and poor image and class status among comity of maritime nations. Bello, who acknowledged that owning of Nigerian registered, flagged and crewed ships would have an immeasurable effect on the economy, stated that Nigerian ship owners have been losing by allowing foreigners to own and operate ships on the nation’s waters. He said that shipping business, together with other aspects of the maritime industry, would finance Nigerian annual budget if

properly harnessed. On his part, Mina Oforiokuma, member, Governing Council, Nigerian Content Development & Monitoring Board (NCDMB), said that for Nigerian ship owners to compete favourably with its foreign counterparts, the NNPC must provide the contracting tonnages that would enable Nigerian operators to invest in vessel acquisition. He stated that NNPC, which is the biggest employer of marine assets that feed the import of petroleum products into Nigeria, and services the export of petroleum products, can be an enabler by providing those contracts of carriage

that would make vessel acquisition a more bankable investment in Nigeria. “Nigeria needs to increase the number of indigenous players in its shipping sector, by participating in the Direct Sales and Direct Purchase (DSDP) of Crude oil contract especially importation of refined products, which NNPC can reserve for Nigerians,” he suggested. In a different forum in Abuja, Emmanuel Iheanacho, chairman of Integrated Oil and Gas Ltd, noted that unfavourable crude oil trade terms of Free on Board (FoB) in place of Cost, Insurance and Freight (CIS), has been a major factor hindering Nigerians from benefiting from the lucrative shipping business. According to him, it has become very important that Nigeria begin to add value to its trade, and that crude oil carriage, is the easiest place to start with the value addition, which includes participating in the carriage of export crude and refined petroleum products. “The Nigerian National Petroleum Corporation (NNPC) is managed by Nigerians, and there was nothing difficult in arranging a meeting where crucial stakeholders could express themselves. In such meetings, those Nigerians who have the capacity to provide these services should say it and if NNPC has contrary opinion, it should also be stated,” he suggested.

How scrubber device would aid global CO2 reduction - Study amaka Anagor-Ewuzie

s the global Maritime Community begins the implementation of the International Maritime Organisation (IMO) 2020 Sulphur Cap Regulation, using scrubbers while burning residual fuels has been identified as a device that can help reduce global CO2 levels, a new study published by Norwegian researchers has confirmed.

The continued use of heavy fuel oil with an exhaust gas cleaning system (EGCS) is the most environmentally beneficial means of meeting global greenhouse gas (GHG) emissions targets, Elizabeth Lindstad, chief scientist, stated in a study published by Norway’s SINTEF. “Studies indicate that two-stroke engines with Exhaust Gas Recirculation (EGR) and scrubbers represent the most cost- and GHG-effective way of meetwww.businessday.ng

ing both IMO Tier 3 NOx rules and the 2020 sulphur cap,” Lindstad said. Lindstad stated that based on the energy consumed during the global production of distillate fuels, the continued use of residual fuel will have a positive impact on global GHG emissions, given the energy required to produce distillates would result in higher levels of CO2 being released into the atmosphere. “With new modern refineries set up to convert crude

into higher priced products, High Sulphur Fuel Oil (HSFO) will, from early this year, be delivered from existing refineries where its share of energy consumption can be considered to be next to nothing. The explanation is that the heavy bunker oil coming out from the refinery is the bottom of the barrel. If we acknowledge the lower energy consumption in delivering HSFO and deduct the refining we get 9 to 10g of CO2 equivalent per MJ for HFO, rather than 13 to 15 of

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CO2 equivalent per MJ for low sulfur fuel oil (LSFO)/ Marine gas oil (MGO).” Lindstad also believes that emissions abatement rules need to be reviewed to consider pollution problems in different areas. “To meet climate targets, i.e. reduce global GHG emissions, we can no longer afford to have standards that are strict in areas where we do not have local pollution problems, while areas with high pollution may need even stricter rules @Businessdayng

than today,” Lindstad told the Clean Shipping Alliance 2020 (CSA 2020). Ian Adams, CSA 2020 executive director, noted that the industry has long realised that there was an energy penalty differential in the production of fuels. “Using higher sulphur fuels with an exhaust gas cleaning system will have a beneficial impact on the global reduction of sulphur and nitrogen oxides emissions, and also on GHG emissions,” Adams concluded.

Wednesday 08 January 2020

BUSINESS DAY

MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

Ghana, India, Netherlands emerge Nigeria’s major export trading partners in Q3, 2019 - NBS amaka Anagor-Ewuzie

ith total export revenue of N908.6 billion, and equaling 17.18 percent of the total export trade recorded in quarter three (Q3) of 2019, Ghana has emerged Nigeria’s leading export trade partner in quarter three of 2019, the National Bureau of Statistics (NBS) Foreign Trade in Goods report, has revealed. According to NBS, India, which is a major off taker of Nigeria’s crude oil products, emerged Nigeria’s second largest export trade partner in the period under review with total export revenue valued at N775.7 billion, amounting to 14.67 percent. Meanwhile, the Netherlands became Nigeria’s third largest export trade partner with total export revenue valued at N519.3 billion, equaling 9.8 percent while Spain emerged the fourth with total export revenue valued at N454.7 billion, amounting to 8.6 percent. NBS further stated that the United States became

Nigeria’s fifth largest export trade partner with total export revenue valued at N332.2 billion, amounting to 6.3 percent. On the other hand, analysis of trade by region showed that Nigeria exported most products to Europe valued at N1, 861 billion, equaling 35 percent, followed by Africa with export value of N1, 459.7 billion, amounting to 27.6 percent while Asia became

the third biggest region that imported Nigerian goods with trade volume valued at N1, 361.3 billion, equaling 25.74 percent. Also, America emerged the fourth biggest region that imported Nigerian goods valued at N598.3 billion, equaling 11.3 percent and Oceania became Nigeria’s fifth biggest region to trade more with Nigeria, recording trade volume valued at N8.1 billion, amounting to

0.1 percent. According to NBS, “Within Africa, exports to ECOWAS member states was worth N1, 140.1 billion, equaling 21.56 percent of total exports. The value of exports to Africa and ECOWAS was notably high in third quarter 2019 due to exports of cable sheaths of iron and submersible drilling platforms exported to Ghana.” NBS further stated that, the value of total exports in

quarter three 2019 stood at N5,288.5 billion, indicating an increase of 15.02 percent against the level recorded in the preceding quarter and 8.97 percent more when compared with its value in same quarter in 2018. Ho w e v e r, t h e c r u d e oil component of export amounted to N3, 747.8 billion or 70.84 percent of total exports during the period under review while noncrude oil export grew significantly in the quarter under review and was valued at N1, 540.7 billion or 29.13 percent. On exports by section, NBS revealed that mineral products accounted for the largest proportion of exports, amounting to N4, 220.1 billion or 79.8 percent. Other major sections in exports were base metals and its articles amounting to N771.6 billion or 14.6 percent as well as vehicles, aircraft and parts totaling about N200 billion or 3.7 percent. NBS further listed Sesamum seeds, whether or not broken; good fermented Nigerian cocoa beans; cashew nuts, shelled; superior quality raw cocoa beans; other frozen shrimps and

prawns; natural cocoa butter and cashew nuts (in shell) as the most traded agricultural products in Nigeria within the quarter under review. This was as the value of agricultural exports decreased by 42.69 percent in the period under review relative to the preceding quarter in, 2019 and 7.30 percent when compared to third quarter in the previous year, 2018. NBS recorded that the value of manufactured goods exports increased by 839.44 percent in the period under review when compared with the value recorded in preceding quarter, and over 1,000 percent compared to same quarter in 2018. Meanwhile, the value of raw material goods exports in the third quarter of 2019 decreased by 5.74 percent against the preceding quarter two and 8.84 percent against same quarter in 2018. Also, the value of solid minerals exports decreased by 17.08 percent in the period under review against the preceding quarter in 2019, and 34.97 percent against the corresponding quarter in 2018.

Here are requirements for obtaining permit for barge operation in Nigeria amaka Anagor-Ewuzie

or an operator to qualify to be given permit to participate in the business of evacuating cargoes from the seaports to other destinations using barges, the intending operator must

comply completely with existing extant regulations, the Nigerian Ports Authority (NPA) has stated in a publication on its website. According to NPA, the intending operator must first write a letter, requesting for permit for barge operation, which was to be submitted to the General Manager

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Marine and Operations with evidence of the following; First, the operator must present the Nigerian Maritime Administration and Safety Agency (NIMASA) Certificate of Seaworthiness for the barge, and the comprehensive insurance cover for barges and cargo. Also, the Harbour Master

must certify the tugs and gears to be deployed as: “fit for purpose” with respect to safety and functionality; and towing method shall be either by “pushing” or by “short tow”, with maximum length of tow determined by the Harbour Master. “In addition, the intending barge operator must

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ensure that tugs to be deployed shall have Pilotage Exemption Certificate (PEC); evidence of availability of handling equipment at the Jetty of operation; evidence of adequate Quay infrastructure at the Jetty of operation and inform port operations before the commencement of any towage

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operation,” NPA stated. The NPA however noted that the intending operator must ensure that all accruable revenue to the Authority shall be paid before commencement of each operation while the approved timeline for receiving the permit was estimated at six weeks.

Wednesday 08 January 2020

BUSINESS DAY

TRANSPORTATION Motoring

RailBusiness

ModernTravel

Roads

Travelers return amid low RTC, no kidnap cases …As checkpoints still prolongs journey time

MIKE OCHONMA

MIKE OCHONMA Transport Editor

igerians that travelled to various parts of the country with their families and relations by road to celebrate the Christmas and New Year are gradually returning back to with no official reports of kidnappings and reduced road traffic crashes, BusinessDay checks reveal. Although travellers encountered a number of challenges ranging from high transport fares and prolonged travel-time that more than doubled to over 12 hours, there were very few cases road traffic crashes and no reported incidence of kidnapping. When contacted through WhatsApp text messages to get the official report on road traffic crashes during the Christmas and New Year travel period, Bisi Kazeem, Corp Public Education Officer, Federal Roads Sfaety Corps (FRSC) said the report is not yet ready as the command’s operation is still ongoing. Checks by BusinessDay across major transport companies in Lagos, Abuja and over parts of the country in the past weeks before, during and after the festive period shows that in some terminals, transport fares increased by over 100 percent as demand for services by travellers outstriped the number of buses available. Despite the year-end rush by road transportation, investigations reveal that advanced travel bookings by travellers going to different areas of the country dropped by 30 percent, while bookings by road travellers to the West Coast of Accra increased by

Tankers, trailers take-off over Lagos-Badagry highway

40 percent. The 30 percent drop in local travels by road our reporter gathered was not not unconnected with the rising cases of kidnappings and kilings on the road which they lament has remained a serious challenge to the travelling public. The increase in the number of people travelling to the West Coast of Accra, Lome and Seme some company officials who who spoke to our reporter say this situation may be as a result of travellers quest to find alternative holiday destinations amid fear and tensions created by kidnap cases and armed robbery on the road. As prolonged journey took its toll on travels, Ogenna Nwosu who embraked on a journey with his family of four during the period said their bus departed its Lagos terminal by 5 a.m. on a Friday preceding the Christmas day and arrived Oguta in Imo State by 3.12 a.m. the next day Saturday.

While the craze to travel by Nigerians is on the upscale despite repeated kidnappings, armed robbery and banditry, the ugly and most worrisome aspect of it is the multiplicity of the barricades and extortions that go with it which accounts for long journey delays and feeling of frustrations by travellers on journey that otherwise would have been pleasurable. Across all the federal highways in the country, with the east and southern parts of the country as typical examples are the intimidating and frustrating checkpoints by a plethora of security agencies that cut across the army, police, National Security and Civil Defence Corps (NSCDC), Nigerian Customs Service, Federal Road Safety Corps (FRSC), Immigrations and the National Drug Law Enforcement Agency (NDLEA). The various agencies have regrettably resorted to duplications of checkpoints which also increases journey time such that

it is possible for the road user to sight another checkpoint less than 300 meters from one checkpoint between one kilometre intervals. On daily basis, travellers are subjected to all forms of stopand-search by these security agents on road blocks to squeeze the commuters. After the verifications of car essential documents, accessories and baggage, what follows it is the demand for bribes by hook or crook which in most cases negate the good intention of keeping the highways safer for road travelers. There are reports that, there are over 300 checkpoints between Lagos and Onitsha alone which has more than doubled travel-time for road users, and the scenario is the same in many parts of the country. For instance, the multiplicity of road blocks referred to as security checkpoints from Onitsha to Asaba which is a journey of less than one hour of travel time now takes about three hours.

emporary relief came the way of motorists plying the the completed section of the Lagos-Badagry expressway declared open for use by governor Babajide Sanwo-Olu of Lagos state, but it appears, that, that excitement that greeted the commissioning of the Agboju to Trade Fair stretch of the highway is fading away as tankers and trailers have turned the service lane of the section into a permanent parking lot. On last week Friday, a newly constructed section of LagosBadagry Highway was declared open for public use by the state governor in fulfilment of the promise he made during his campaign and subsequent assumption of office. Following the official approval of the 4-kilometre section, which stretches from Agboju to Trade Fair for public use last week which project work started shortly after the current administration took off, journey time has reduced minimally, but the infiltration of tankers and trailers on the completetd sections of the road is hampering free flow of traffic on the service lane linking Alakija with Festac Town. Sanwo-Olu had led members of the state’s executive council to Lagos-Badagry Expressway to open the completed section, while also declaring the commencement of construction work on the Phase II of the project, which will take off from Trade Fair to the main gate of the Lagos State University (LASU) in Iba town. The construction of the Phase II of the expressway it was gathered is expected to be completed next October, after which the final phase will take off from the main gate of LASU gate to Okokomaiko.

CES kicks-off as automakers tackle disruptions MIKE OCHONMA

s the global automotive industry grapples with technology-fueled disruption from electrification, autonomous driving and upstart business models, the Consumer Electronics Show (CES) which holds between January 7 and 10 is becoming the venue of choice for brands to prove to consumers, and each other, that they are embracing the future of mobility. More than 160 automotive technology companies, including 10 major automakers, are attending this year’s show looking to forge partnerships and recruit hard-to-find technology and engineering talent. Several top auto industry executives attending the event includes Daimler CEO Ola Kallenius, Ford Chief Technology Officer Ken Washington and BMW research &

development boss Klaus Frohlich. U.S. Secretary of Transportation; Elaine Chao delivered the keynote www.businessday.ng

address on the state of innovation and DOT initiatives to integrate new technologies into U.S. transportation systems.

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While global industry followers say the CES, lacks the new-model cachet of a premiere world auto show and carmakers not yet using the Las Vegas electronics extravaganza to shine the spotlight on their newest creations, here is a roundup of what automakers expect to show at the historical event. BMW presented what an interior concept of its i3 EV looks like. The “BMW i3 Urban Suite,” said to have the “relaxed feel of a boutique hotel,” features a large seat with footrest, a screen that flips down from the headliner and a “personal Sound Zone.” Fisker will debut the Ocean allelectric crossover, powered by an 80-kWh lithium ion battery pack and with an expected range of up to 300 miles. Production should begin at the end of 2021. Ford will show its 2021 Mustang @Businessdayng

Mach-E crossover. The highly anticipated mass-market EV, with a 300-mile range, is Ford’s answer to Tesla, General Motors and others that beat it to the electric market with long-range EVs. GM demonstrated what the integration of Amazon’s Alexa Auto voice-controlled virtual assistant in a new Cadillac CT5 looks like, Honda showcased technologies being jointly developed by its incubator Honda Xcelerator and startups focused on improving workplace ergonomics and manufacturing efficiency. Honda also showed a demo of exoskeleton devices and a voice-enabled, AI-powered personal assistant developed with SoundHound. And it will show its “Smartphone as Brain” technology, which allows motorists to safely use their phones while on Continues on page 27

Wednesday 08 January 2020

BUSINESS DAY

TRANSPORTATION Motoring

RailBusiness

ModernTravel

Roads

Toyota Century tackles Rolls Royce exclusivity MIKE OCHONMA Transport Editor

xclusivity is a powerful coin. Sometimes exclusivity is deliberate just as Lamborghini doesn’t want too many people driving Urus SUVs after all, for instance. For the super luxury marques, the combination of materials, design, and customization drive prices up so high that only the privilaged few can afford them. Such is the case with the $400,000 Rolls-Royce Cullinan (customization excluded). And for some hardcore, high-end automotive luxury freaks, there is a luxury vehicle that is even harder to get than a Rolls-Royce. It’s called the Toyota Century which started similarly to Nissan’s Patrol. Toyota and Nissan were both competing on a project and instead of a four-wheel drive SUV, the companies were competing for the chance to build a car for Japan’s Imperial Household. Debuting in 1967, the firstgen Century eventually became available to other VIPs like the CEOs, diplomats, and so on. Since then, the Century has only been updated two more times. The second-gen debuted in 1997, according to Automobile. The thirdgeneration did not appear until 2017. But even when Toyota sold the Century outside the Emperor’s immediate family, there weren’t many takers outside of Japan. Although

CES takes kicks-off as

automakers... Continued from page 26

Toyota made 100 left-hand drive second-gen Centuries, only 27 were sold. The thirdgenenration is not being sold outside of Japan at all. What makes the Toyota Century a rival to RollsRoyce’s finest? True, as Jalopnik reports, the Toyota Century doesn’t have the latest infotainment system. But that’s because Toyota wanted to ensure no Century would ever break down. Rather like the 4Runner in that regard. And when it comes to customization, Rolls-Royce does have just a bit more to offer. Roadshow reports that Toyota only offers the current-gen Century in four colours of black, burgundy red, silver, and blue. But this paint, like the rest of the Century, is more than what it seems.

Only four people in the whole of Toyota are allowed to paint the Century. One of them has apparently been working the Century line since the first-gen car. It isn’t just hand-painted, it is also hand-sanded and hand-polished and more like lacquerware than the average factory paint line. And the rest of the car shows that, while Toyota doesn’t offer many options on the Century, that doesn’t make it any less luxurious. The phoenix badge at the front of the car of the 2018 Toyota Century is a reference to the Imperial House of Japan, and takes 45 days to hand-carve. The bodywork itself is finished by hand by three craftsmen. Rolls-Royce prides itself on the quality of its leather.

Toyota, while it does offer leather in the Century, places equal pride in its wool upholstery. Japan is a very humid country, and wool is both more breathable and quieter than leather. The seats are also coil-sprung, as opposed to foam-filled, for maximum comfort. Century, then, isn’t necessarily about the latest technology. It is about refining every aspect of car craftsmanship into making the most serene and unobtrusive experience and even a previous-generation unit has a lot to offer While the current-gen Century uses a hybrid V8 and does have upgraded safety features, earlier Centuries are no less impressive and not just because of the second-gen with a

5-liter V12 which, incidentally, wasn’t shared with any other Toyota vehicle. Even first-gen Centuries had a Sport Mode for their engines, and electronicallyadjustable suspension. Both the front and rear quarter-windows are electric. The front passenger seats (the second-gen car had bench seating up front) had a pass-through so the VIP in back could stretch their legs out and nap. In the rear armrest, there is a built-in cassette recorder. The climate control and stereo could be controlled by a remote from the back seats. Those back seats also have a massage function, one of the earliest systems fitted to any car. The engine is fuel-injected, meaning you won’t have to mess around with carburetors.

the road. Hyundai revealed details about a flying vehicle concept and a “highly customizable” prototype car with autonomous-driving capabilities. The automaker has said it plans to evolve into a “smart mobility solution provider” by 2025 and will invest more than $50 billion in electric and fuel cell cars, autonomous driving, flying taxis and mobility services. Mercedes exhibited a concept vehicle it described as “envisioning a completely new form of interaction between humans, technology and nature,” and show its EQ EVs. Mercedes said it expects to introduce a fleet of 10 EVs by 2022, starting with the EQC electric compact crossover set to arrive in the U.S. in 2021. Nissan came with its Ariya electric crossover concept. A production version of the five-seater could arrive in the U.S. in 2021. U.S. dealers briefed on the product last summer said the new EV will have a 300-mile battery range and go from 0 to 60 mph in less than 5 seconds. Renault demonstrated technology that allows connected devices in the home to be controlled from a car dashboard. The company also plans to show a battery-powered EV with a hydrogen system that triples a zero-emission vehicle’s range. On its part, Toyota revealed details around its new mobility ecosystem and demo several concept vehicles.

Lagos MoT sets up 10-member committee on abandoned vehicles MIKE OCHONMA

n a move to further ease free flow of traffic in the metropolis, Frederic Oladeinde, commissioner for transportation, Lagos state recently inaugurated a 10-member Ad-Hoc Committee to oversee issues of vehicles abandoned on highways and major streets in the state. The commissioner charged them to see their appointments as call to duty. While urging them to be honest in the discharge of their duties, the he charged them to see their appointments as an opportunity to assist the state government to address lingering issues of constant traffic gridlocks

in the city. He assured the committee that, the ministry would further train them on how to do the job in the most civil way while advising that they should be guided by the regulations and their terms of reference, adding that government’s intention for inaugurating the Commitwww.businessday.ng

tee was to improve on traffic situation in the state and not to punish anyone. While reeling out the committee’s terms of reference, the commissioner took time to explain conditions upon which any vehicle could be declared and treated as an abandoned vehicle. These include vehicles

which had been left unattended to or stationery for a period of time, any vehicle parked upon or within 10 feet of the travelled portion of the high ways; any vehicle parked in frontage of a private property in excess of 7 days or in a public property for more than 30 days without being attended to. Among their terms of reference as stated by the commissioner are; identification of the abandoned vehicles where they were parked and subsequently, reporting such to the authority, recording the locations of the vehicles, street names, mode and make of the vehicles, vehicle particulars, including photographs and other convincing evidence

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about the vehicles and pasting of removal notifications on such vehicles. He explained that a vehicle or equipment shall not constitute an abandonment, if such equipment or vehicle are used or to be used in construction sites or in the operation or maintenance of highways or public utilities, facilities or left in a manner that does not interfere with normal vehicular movement. Some of the newly inaugurated committee includes; Henry Babatunde Ige, chairman of the committee, Ismail Monsuru Akinloye and Sola Sometan. Members include are Speechee Onakoya, Benson Muiz Adedeji, Olorunkemi Ademisere and @Businessdayng

Oluwatoyin Tiamiyu, representing Ministry of Transportation. Others are Olusegun Ismail Odusote representing LASTMA, Adeshola Opemipo, representing Vehicle Inspection Service and finally, Nuhman Olalekan Edet who will serve as the secretary of the committee. Responding on behalf of other members, the committee chairman, Henry Babatunde Oke pledged the commitment of the members to the vision of the state government in unlocking traffic gridlocks in the state, promising that his committee would follow the rules and regulations and the terms of reference set by the state government.

Wednesday 08 January 2020

BUSINESS DAY

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Wednesday 08 January 2020

BUSINESS DAY

Corporate governance

Sound Corporate Governance: A new year resolution Olayimika Phillips It has become a universally accepted practice for many to seize the end of a year as an opportunity to reflect on the events of that year and make resolutions for the new year. The idea behind making new year resolutions is to learn from mistakes of the past and implement necessary changes going forward. This also evinces the ability and willingness of people to constantly improve and develop themselves. However, whilst making new year resolutions is ordinarily applicable to natural beings, nothing stops its adaptation to corporate entities, albeit through the instrumentality of their directors, management and officers. Typically, there are many ways in which a company may seek to improve and develop after reflecting on the events and transactions of the previous years. Such would typically include, generating more revenues and profits which would lead to increased dividends for members, improving the acceptability of its products or services, and improving the welfare of its staff. Importantly, the company would also seek better ways to adhere to the demands and obligations imposed by applicable laws and regulations governing its activities. These demands and obligations include maintaining a sound corporate governance system. Corporate governance encompasses discipline, independence, transparency, accountability, responsibility and fairness in the management of a corporate entity. There is little doubt that many companies have struggled in developing and maintaining a good corporate governance system. This new year thus presents a golden opportunity for these companies to reflect and put in place the necessary structures to attain sound corporate governance as demanded by the law and regulations. The elements that constitute sound corporate governance are not exhaustive as these would be determined by the various requirements of the law and most importantly, the Codes of Corporate Governance

(the Codes) made by regulatory authorities in Nigeria. This notwithstanding, there are certain minimum requirements that are mandatory before it could be said that a company is well governed. The soundness or otherwise of the governance of a company is dictated by the directors, who direct, control and manage the company. The composition of the boards of directors (the Board) of companies and the qualities of the directors who sit on these Boards are therefore of utmost importance in the governance of companies. Most of the Codes are aligned that the Boards of companies, majorly public companies, must consist of a mix of executive, non-executive and independent directors. This mandatory composition is intended to guarantee a mixture of independence and integrity of the Board as a whole in the management of corporate entities. Beyond this, the directors must possess the requisite qualifications, skills, knowledge and experience to drive the corporate vision of a company. Companies in making their new year resolutions should therefore reflect on the existing composition of their Boards and if need be, mandatorily resolve to follow the composition prescribed by the applicable Codes. www.businessday.ng

A fundamental aspect of a well-governed company is the existence of a platform in which shareholders can participate in the governance of their company. This entails holding general meetings, engagement of equity owners and the protection of their rights. In a well governed system, general meetings are not held only because the law requires such a meeting to be held but also when it is necessary to carry the owners of the company along or when their interests would be impacted by a decision to be made. Companies, in their checklist of new year resolutions, should thus bear in mind that an avenue or policy in which shareholders are guaranteed the rights to make unfettered representations and contributions are in place. Perhaps, one of the key aspects of corporate governance is the system of audit put in place by a company. Auditing is essential in ensuring that the requisite accounting standards and norms are applied by a company. It also helps the shareholders to ascertain the reliability and integrity of accounting statements. The Codes and the law, as may be applicable to each company, are replete with the structures that are required for a sound audit system. These include the establishment of internal audit

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control, risk management, audit committee and appointment of independent external auditors. A sound audit system enhances the confidence of the shareholders in the Board. For companies whose audit system has been below the standards prescribed by the law, this new year presents an opportunity to bring its existing system in tandem with legal prescription. Most importantly, accountability, transparency, fairness and integrity should form the bedrock of the actions and decisions of the Board. Companies therefore need to reflect on the performance of the Board from the previous years in this regard. All stakeholders in the corporate world are now cognizant of the importance of maintaining sound corporate governance. Weak corporate governance is capable of affecting the integrity of the market, financial stability and investorsâ&#x20AC;&#x2122; confidence. Whilst companies have been making efforts to comply with the Codes issued by different Nigerian regulatory authorities pursuant to their enabling statutes, struggles at compliance are still apparent. This new year is however an opportunity for companies to reflect on the gaps in governance and bring to fore, the needed structures to effect maximum compliance. @Businessdayng

Olayimika is a Partner in the law firm of Olaniwun Ajayi LP and has over 34 years of professional experience. She specializes in corporate governance, providing pragmatic solutions to the diverse challenges which confront corporates at different growth stages and serves on the board of several companies (listed and privately held).â&#x20AC;?

Wednesday 08 January 2020

BUSINESS DAY

tax issues

Practical solution to solving tax deductibility conundrum of sole costs in Oil & Gas upstream business

Adewole Orobiyi and Temitope Samagbeyi

uite separate from the discuss on the recent amendment bill on royalty, there is the issue of sole cost which has been a subject of litigation as to whether it should be included in the allowable expense of the Oil and Gas companies or not. The Federal Inland Revenue Service (FIRS) posited that the Deep Offshore and Inland Basin Production Sharing Contract Act did not make provision for the allowance of sole cost as deductible expense, but the Tax Appeal Tribunal (TAT) took the view that sole cost is deductible expense so long as it meets the Wholly, Exclusively and Necessarily tests. In May 2016, the TAT sitting in Lagos ruled that parties in PSCs with the Nigerian National Petroleum Corporation (NNPC), can take tax deduction for sole costs, where the deduction of such expenses is permissible under the Petroleum Profits Tax Act (PPTA), regardless of the provisions of any contractual agreement. Although, sole cost in the

context of petroleum operations refers to any cost incurred that is not directly towards petroleum operations. But that “Subject to the express provisions of this Act, for the purpose of ascertaining the adjusted profit of any company of any accounting period from its petroleum op-

erations, no deduction shall be allowed in respect of disbursements or expenses not been money wholly and exclusively laid out or expended, or any liability not being a liability wholly or exclusively incurred for the purpose of those operations” which implies that cost incurred

for the purpose of petroleum operations is deductible. What this means for the oil companies is that if the companies can give sufficient evidence that the cost incurred was for the purpose of facilitating their operations, then they have the backing of the law but in the situ-

ation where the companies cannot prove to the FIRS that the cost incurred is for the purpose of the operations, then they will either disallow it or take the matter to the court. It is a well-known fact that the FIRS is mandated by the law to collect taxes for the government but the drive towards collecting of the taxes should not be to shut down the companies in the Oil and Gas industry the unnecessary disallowance of sole costs, which are wholly and exclusively incurred for the purpose of the companies operations. Also, Companies in the Sector should render true and relevant returns to the tax authorities. To avoid future litigation and create more certainty in the administration of taxation in this Sector, the National Assembly should define in the context of PPTA and DOIBPSCA what constitutes deductible sole cost since it is not expressly stated in the law. This will make it easy for the FIRS to collect the taxes effectively as well as help oil companies to comply accordingly. Orobiyi is Tax Manager, EY while Samagbeyi is partner/ EY Oil and Gas Sector leader

KPMG Tax Alert

TAT clarifies the basis for computing interest on tax liabilities Wole Obayomi

he Tax Appeal Tribunal (TAT) sitting in Lagos on October 16, 2019 delivered judgement in the case between Ikeyi & Arifayan (the Appellant) and the Lagos State Board of Internal Revenue (LSBIR or the Respondent) to the effect that interest on additional tax assessment should be computed only on the principal tax liability before adding penalty to that principal liability. Facts of the case The LSBIR issued a demand notice to the Appellant for outstanding tax liabilities for 2013 tax year, inclusive of penalty and interest. After series of correspondence between the parties, the LSBIR issued the Appellant a notice of refusal to amend the alleged tax liability. Consequently, the Appellant filed a notice of appeal at the TAT seeking an order to set aside the demand notice. While the issue was before the TAT, the parties entered into settlement discussions and agreed on the principal

liability due to the Respondent. However, the parties could not resolve the dispute relating to the penalty and interest imposed on the principal liability and therefore, submitted the issue to the Tribunal for determination. Issues for determination

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a) Whether the Respondent could impose penalty and interest on a tax liability that was not final and conclusive; b) Whether the Appellant was liable to pay penalty and interest in the circumstances of this case; and c) Whether interest should be

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levied on the principal tax liability or the net tax payable after the addition of 10percent penalty. TAT’s decision After considering the arguments of both parties, the TAT held that: • Interest and penalty were

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validly imposed as the Appellant did not fully remit the tax liability as and when required by the Personal Income Tax Act (PITA); • Having accepted underremittance of PAYE tax (consent judgement debt) due to the Respondent, the Appellant was liable to interest and penalty on the established tax liability; • Section 40 of the Federal Inland Revenue Service Establishment Act and Section 82 of PITA are silent on the base on which interest should be computed. Therefore, interest on additional tax assessment should be computed only on the principal tax liability before adding penalty to that principal liability as submitted by the Appellant. Comments The TAT decision on the basis for computing interest payable on assessed tax liability has resolved the uncertainty in this area of Nigerian tax laws. While the tax authorities are expected to apply the principle laid down in this case, taxpayers now have a precedent to rely upon to object to any assessment raised by any tax authority contrary to the TAT decision.

Wednesday 08 January 2020

BUSINESS DAY

BANKING Banks’ notification on new charges versus implementation HOPE MOSES-ASHIKE

t is one thing to issue notification to customers about old and new transaction charges but another thing to implement same. The Central Bank of Nigeria (CBN) on December 22, 2019, reviewed downward most charges and fees for banking services as contained in the new Guide to Charges by Banks, Other Financial, and Non-bank Financial Institutions, with effect from January 1, 2020. Some of the major highlights of the new guide includes removal of card maintenance fee (CAMF) on all cards linked to current accounts, a maximum of one naira per mille for customerinduced debit transactions to third parties and transfers or lodgements to the customers’ account in other banks on current accounts only, reduction in the amount payable for cash withdrawals from other banks’ Automated Teller Machines (Remoteon-us), as well as from N65 to N35, after the third withdrawal within one month. Other reductions include Advance Payment Guarantee (APG) which is now pegged at

maximum of one per cent (1 percent) of the APG value in the first year and 0.5 percent for subsequent years on contingent liabilities. Following the new guidelines, customers are to pay N10 for transactions below N5, 000. Transaction from N5,001 - N50,000 is to attract N25 fee and above N50,000 is pegged at N50, instead of N50 – N52.50k charged before the new guideline. However, instead of complying indeed with the CBN’s directive, what the banks have done so far was to issue notification of compliance to their customers, whereas in practical terms they still

maintain their old charges. “I transferred N8,000 to First Bank on Monday morning (January 5, 2020) using my Access Bank mobile App and I was charged N52.50k from my current account”, a customer who works in Apapa, Lagos, and could not disclose her name told BusinessDay. Uju Ogubunka, president, Bank Customers Association (BCAN), said if the banks are still using the guide to bank charges, they are overcharging customers and that shows disobedience the regulators. “The earlier the banks begin to comply with the new directive on bank charges, the

better for all of us”, Ogubunka told BusinessDay by phone call. Access Bank Plc on Sunday issued a notification to its various customers about new changes for electronic banking, titled ‘Important Update on Bank Charges’.

Part of the notification reads, “There will be changes to the charges applicable on some of the transactions you carry out on your account (s)”. It was stated in the revised guide to bank charges that any breach of the provisions of the new guide carries a penalty of N 2,000,000 per infraction or as may be

determined by the CBN from time to time. “Failure to comply with CBN’s directive in respect of any infraction shall attract a further penalty of N2,000,000 daily until the directive is complied with or as may be determined by the CBN from time to time,” the CBN said in the guide. Another bank that has issued notification to their customers is Fidelity Bank Plc. Its notification reads: “In line with the Central Bank of Nigeria’s (CBN) directive to implement provisions in the Revised Guide to Bank Charges (RGBC), we wish to inform you about the reduction in charges for the following transactions effective January 01, 2020”. Also, First Bank stated: “Following CBN’s revised Guide to Charges by Banks, Other Financial and NonBank Financial Institutions, charges on our electronic banking channels have been reviewed downwards and would take effect from 1 January 2020. You can now carry out more transactions at reduced charges”. Ecobank Nigeria said it has complied with the Central Bank of Nigeria’s recent directive on the reduction of bank charges. The bank commended the CBN for

taking bold steps to further strengthen the financial inclusion drive in the country. It will be recalled that in October 2019, Ecobank announced the elimination of session charges on its USSD platform - *326#, months prior to the new CBN directive. Customers using *326# for their transactions such as inter and intra bank funds transfers, bill payments, airtime top-up, and balance enquiry, among others, can do so at zero session fees. Further to the removal of the session charges, Patrick Akinwuntan, managing director, Ecobank Nigeria, advocated stakeholder buy-in to make banking more affordable and accessible to all. He noted that lower charges would encourage the unbanked to adopt structured financial services, thereby driving financial inclusion and economic growth. Ecobank has been at the forefront of the campaign for inclusive, affordable banking. Anyone, regardless of their social class, can open the Ecobank Xpress Account with zero naira, from any phone type, simply by dialing *326#. The account opening process is fully “do it yourself” without any documentation or paperwork.

Sterling Bank is Nigeria’s 3rd best in retail banking - KPMG

terling Bank Plc, Nigeria’s leading commercial bank, is the third best retail banking institution in Nigeria, according to KPMG Nigeria in its 2019 Nigeria Banking Industry Customer Experience Survey released in Lagos recently. The ranking, which singled out Sterling Bank as one of the biggest movers in the banking industry since 2017, was the outcome of a research that was completed across the second and third quarters of 2019 and collected via face-to-face and online survey methodology. According to the survey, which covered 25,466 retail customers, 3,045 SMEs and 369 commercial/corporate organisations, “After the 2017 peak, we have now seen two years of decline in overall customer experience (CX) performance in the retail segment with

nearly half of the rated banks falling below the industry average.” Sterling Bank scored 72.1 percent, along with Access Bank, but both trailed GTBank and Zenith Bank Plc which scored 74.2 percent and 73.4 percent to rank first and second respectively in the period under review. The report said the top two performers had remained the same for the fourth consecutive year although GTBank replaced Zenith Bank as the top-rated bank in this year’s rankings while Sterling Bank, First Bank and UBA are the biggest movers this year occupying 3rd, 5th and 7th positions respectively. It noted that only two banks recorded actual increases in their customer experience scores - reflecting higher customer expectations and the imperative to respond to rapidly evolving customer expectations. www.businessday.ng

Further analysis of the report showed dynamism in the SME segment in this year’s ranking. Despite lower levels of overall satisfaction for SMEs, Fidelity Bank and Ecobank made the greatest improvements with both banks moving up more than four places into the top ﬁve. “In the corporate segment, we also see a dip in overall CX scores compared

to the previous year’s performance. Citibank and GTBank maintained top spots from last year, with new entrants Standard Chartered and Access Bank making top ﬁve positions at 3rd and 5th places respectively,” the report said. “When assessed against the six pillars, integrity, deﬁned as being trustworthy and engendering trust,

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is the pillar where Nigerian banks perform the strongest. This is not unexpected given the role banks play in the lives of customers,” the report noted. It also observed that integrity was fundamental to great customer experience because, without it, the experience loses value. It, however, noted that personalisation, which is the bank’s ability to use individualised attention to drive an emotional connection with the customer, lags other pillars. The report said, “Ultimately, as more banks progress towards an average score, less differentiation is noted amongst them by customers while performing well is the new minimum standard required and adapting to changing expectations is critical to success.” According to the report, while the Nigerian banking landscape has constantly @Businessdayng

been characterised by steep competition, the stakes have been raised even higher and performing well on customer experience is the new minimum standard. It added that as the race for the customer intensifies, front-runners would be those who demonstrate an understanding of the customer’s speciﬁc circumstances to consistently deliver a personalised experience. To participate in the research and to be able to respond to questions on a speciﬁc bank, respondents must have interacted with that bank in the last six months. Since 2007, KPMG in Nigeria has been asking customers across segments about their individual experiences with their banks. Over this period, more than 200,000 customers have been interviewed across the country.

Wednesday 08 January 2020

BUSINESS DAY

MADE in aba

NEPC sensitises Aba SMEs on appropriate packaging for export GODFREY OFURUM, Aba

l u s e g u n Awolowo, executive director/ CEO, Nigerian Export Promotion Council (NEPC), has advised small and medium entrepreneurs (SMEs) in Aba to improve the quality and packaging of their products to gain export market. He observed that quality was essential in export business, while appropriate packaging and labelling were criteria determining quality. This advice was contained in Awolowo’s address at one-day sensitisation workshop on appropriate packaging of products for export, organised by the Aba Smart Office of NEPC in Aba, the commercial hub of Abia State Represented by Rose Ekanem, trade promotions advisor, the NEPC boss stated that the council carried out different programmes in the past as

part of its effort to ensure that the Aba business community, especially the SMEs, developed their products to meet the required standard for export. He explained that the w orkshop intended to create awareness on the right packaging/quality of products to meet international standards,

enlighten participants on the rudiments of export trade, expose them to various NEPC activities and study the participants packaged products and render advisory services to SMEs, during the section, and many others Paul Ajayi of the Abuja Office of NEPC, who delivered a paper titled ‘Developing packaging

and labelling for small and medium enterprises products’, observed that a well packaged product would sell more than high quality product with poor packaging. According to him, it was a trend that must be followed systematically, based on consumers behaviour towards the packaged product.

He explained further that the dynamic nature of a well packaged product would enhance the sustainability of the safety and the quality of the product. I n h i s w o rd s, “ T h e packaging material preserves and has contact with the product. The packaging material varies from product to product. Consequently, the producer

must understand the component of the material,” Ajayi said. He stressed the need for manufacturers to understand the properties of the packaging materials— physical and chemical—to be used in the packaging of a product for export. “The producer must understand the compatibility of the material and product as well as environmental factors on the material, among others.” Other factors he outlined to be considered before packaging products for export included product component, product seize/ shape, dimension/weight, transportation and climate condition of the importing country. He further pointed out that proper labelling was required to ensure that the consumers have access to complete information on the content and composition of products in order to derive their satisfaction, noting that good labelling of a product enhanced value addition to packaged product.

Fashion designers seek special cluster in Aba GODFREY OFURUM, Aba

ashion designers in Aba, the commercial hu b o f Ab ia St ate, have appealed to the state government to create a special cluster for them in Aba. They argue that a cluster will facilitate conducive environment for the subsector, which is mainly made up of micro entrepreneurs. Godwin Iheme, m a n a g i n g d i re c t o r, I C I Garments, explained that the Association of Tailors and Fashion Designers (ATFAD), an association of practicing tailors and fashion designers in Abia State, had already applied for land and hoped that the state government would respond positively. He commended the tailors for their camaraderie disposition and enjoined their leaders to ensure that they maintained the unity that currently existed among them for the good of the association.

He noted that locally made products, although superior to most imported labels, cannot compete favourably with imported finished clothing items due to cost of production. According to him, for local producers to compete favourably with their foreign counterparts, electricity and other infrastructure must be put right and urged the Federal Government not to relent in its quest to achieve constant power supply in the country. He stressed that epileptic power supply and multiple taxation were major challenges faced by the manufacturing sector and urged government to support the sector, which according to him, held the key to the industrial development of the country. “The industrial cluster system we are asking for i s g o o d f o r d e v e l o p i ng e c o n o m i e s a n d m i c r o, small and medium scale enterprises, which plays a key role in economic www.businessday.ng

growth,” said Onyebuchi Nwaigwe, president, ATFAD. “It also ensures equitable development in developing economies like ours for their contribution to employment generation, poverty reduction and wider distribution of wealth and opportunities. “The potential role of our association in developing the nation’s economy is often not realised because of problems associated with our size and scattered businesses of our members. “ They have difficulty achieving economies of scale in purchasing raw materials. “It also affects our businesses by discouraging c o l l ab o rat i ve e f f o r t s i n pu rc ha s i ng e q u i p m e nt, gaining access to financing opportunities and human capacity development,” the association said. Nwaigwe explained further that the cluster would enable it to take advantage of available market opportunities requiring large quantity of production,

uniform standardisation and regular supply which w o u l d b o o s t N i g e r i a’s economy. They also pleaded for a well-equipped Common Facility Centre (CFC) to train their personnel and create

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large scale exportable quality garments. T h e g ro u p i m p l o re d the government to help its members to access business funds to purchase stateof-the-art equipment and access to markets, which had @Businessdayng

hindered their development for years. The group observed that if their requests were granted, the outcome would be high quality production, which w ou l d i n c re a s e f o re ig n exchange earnings for

Wednesday 08 January 2020

BUSINESS DAY

news

BEDC embarks on infrastructure projects to boost power supply IDRIS UMAR MOMOH, Benin

eninElectricityDistribution Company (BEDC) plc says ithasembarkedontheconstruction of major infrastructural projects across its franchise states - Edo, Delta, Ondo and Ekiti - to boost power supply. A statement by the corporate affairs manager of the electricity company, Adekunle Tayo, made available to newsmen in Benin City on Tuesday, noted that the projects were geared towards improving electricity supply within its network. Tayo said the projects were carried out during the outgoing 2019 operating year, saying the projects embarked on include commissioning of over 32 transformers, eight new injection substations and construction of three new 11kv feeders. He also disclosed that the company commissioned 7, 11kv feeder extensions, while many projects such as new 33kv lines, 11kv lines, rehabilitation of 33kv and 11kv lines, the replacement of power transformers, charging of distribution substations were ongoingwithinitsfranchisestates. He listed projects commissioned in Edo State to include 300KVA transformer in Omozogie (Uteh), 500KVA transformer in Idunwowina (Ohenhen), 300KVA transformer in Ohovbe and two 500KVA transformers in Idokpa community, all in Benin City.

He also added that 500KVA transformer was installed for use in Ikhueniro, 500KVA transformer in Ohoghobi community, 300KVA transformer in Ogbebor community in Edo State. “In Delta State, the company listed the commissioned transformers to include; six 300kva transformers in Onicha-Olona, 300KVA transformer in Ujevwu, two 300KVA transformers in Egborode community, and six 300KVA transformers in Egini community, respectively. “300KVA transformer in OtorUdu , 300KVA transformer in Iwhrekan, 300KVA, 500KVA, four 300KVA and two 200KVA transformers in Akwukwu Igbo community in Delta State. “In Ekiti State, the company commissioned a 300KVA transformer in Asin community, 200KVA transformer in Oju Oro community, and 300KVA transformer in Ilupeju 2 community. “BEDC equally put a 200KVA transformer in Ipinsa 1 community, 500KVA transformer in Kajola community, and a 500KVA transformer in Store community also in Ondo State,” he said. The corporate affairs manager further added that the company equally boosted the capacity of its injection sub stations with additional capacity of 65MVA. “The new injection sub-substations energised with more capacity include Evbuabogun (NIPP), Edo State, Uteh (NIPP), Edo State,

LEKOIL appoints Mark Simmonds, Tony Hawkins as non-executive directors

EKOIL Limited, an oil and gas exploration and production company with a focus on Nigeria and West Africa, has announced the appointment of Mark Simmonds and Tony Hawkins as non-executive directors, with immediate effect. Simmonds, 55, was the foreign and Commonwealth Office Minister with responsibilities for Africa, the Caribbean, UK Overseas Territories, International Energy and Conflict Prevention. He served as a member of the UK Parliament for 14 years and was also a senior advisor to the then Prime Minister, David Cameron. He focused on driving and facilitating inward investment into Africa and the Commonwealth across a range of key economic sectors including Hydrocarbons, Financial Services, Healthcare, Infrastructure, Energy and Agriculture. Simmonds has a deep knowledge of the economic and political composition of African Governments, countries and regions and has chaired the UN Security Council on two occasions. He is chairman of Africa Oil Week, “The Davos of Africa’s Hydrocarbon Industry” the link between African Governments and the Private Sector and chairs the African Oil Week Advisory Board. He is additionally involved in clean technology for the Hydrocarbon Sector. He has several other international roles which include being a senior advisor to Kroll, chairman of the Advisory Board of

the global investment platform, Invest Africa, senior adviser to a Global Multi-Strategy Hedge Fund, senior adviser to a large UK based Family Office, Chairman of GIG Technology and an Advisory Board Member of the Commonwealth Investment Council. He also has roles with not for profit organisations, including as Honorary Vice President of Flora & Fauna International. He is a Trustee of the British Institute in East Africa, a Board Member of Engender Health and of a member of Her Majesty’s Privy Council. Hawkins, 48, is an English and Australian qualified lawyer of over 20 years’ experience, who has worked in both private practice and corporate roles. He is a senior energy lawyer, asset manager and commercial negotiator, predominately in oil and gas but also in power, LNG and renewables. Hawkins is currently the CEO at Columbus Energy Resources plc as well as owning a consultancy firm. Previously, he was legal and M&A director at Columbus Energy Resources, which followed his role as General Counsel & Head of Commercial for Sterling Energy plc, a London listed oil & gas company. Prior to Sterling Energy, Tony spent six years at Centrica plc (a FTSE 100 listed utility), where he had several roles, including interim General Counsel for Centrica Energy. Prior to that, he worked for 10 years in private practice in Australia and the UK, most recently with Dewey LeBoeuf in London. www.businessday.ng

L-R: Nasir el-Rufai, governor, Kaduna State; Ezekiel Osarolube, managing director of Kaduna Refining and Petrochemical Company, who represented Mele Kyari, group managing director of the NNPC; Ali Janga, commissioner of police in Kaduna State, and others, during a visit to the gas explosion site at Sabon Tasha, in Kaduna. While sympathising with families of those affected in the unfortunate incident, the NNPC warned against patronising unauthorised gas stations.

Lagos records 39 fire incidents first week of 2020 BUNMI BAILEY

agos State recorded about 39 fire incidents in the first week of 2020, the government states in a statement on its Twitter handle. This revelation was made know Tuesday by the Lagos State commissioner for special duties and intergovernmental relations, Adewale Ahmed, at a media briefing at Ikeja. “There is a need for all residents to be more careful as the dry harmattan period enhances the spread of fire easily,” Ahmed said. Whilereiteratinggovernment’s determination to secure the lives andpropertyofLagosians,Ahmed enjoined residents to place gas cylinders outside the kitchen.

He also implored residents neither to store petrol or diesel nor usecandlesexceptwhennecessary during a power cut, adding that it was essential for people to put off candles before going to sleep to prevent fire accidents. On the recent fire outbreaks experiencedinsomemarketplaces across the country, he called for caution among the market men and women, advising that all electrical appliances be put off at the end of business hours every day. “I enjoined parents to educate theirchildrenandwardsaboutbasic things in regards fire outbreaks andtheneedtobesafetyconscious always, maintaining that every building, private businesses or public,shouldhaveanemergency exit door,” he advised.

Nigeria risk losing 194,000bpd if Chevron’s crisis lingers Olusola Bello

igeria is on the verge of losing some 194,000 barrels of crude oil daily production if the dispute between the management of Chevron Nigeria Limited and a branch of its union, Petroleum and Natural Gas Association of Nigeria (PENGASSAN) is not resolved on time. The dispute has lingered for three days and it does not seems as if there is an end in sight, as most of the meetings organised by both parties to resolve the issue have not yielded any result. The protest embarked upon by the union is being carried out at the various locations of the company. If crude oil production is halted, it means the country’s foreign revenue earning would be affected as the Federal Government owns 60 percent of the joint venture. It means the country would not be able to benefit from the current upsurge in the price of crude oil, which has now hovers around $68 and $70 per barrels because of the current face-off between the United States of America and Iran over the killing of latter’s military general. As at Tuesday evening, the Federal Government through the Ministry of Labour was said to be intervening in the dispute.

Lumumba Okugbawa, general secretary of PENGASSAN, in a telephone interview, told BusinessDay that the meeting was still ongoing. But another source close to the company said the issue was likely to be resolved Tuesday. The workers were said to have taken to protest when they discovered that their allowances were seriously slashed by the managing directors. According to inside sources, after agreement reached between the management and workers, some allowances were paid to the workers across board. But this time around, the managing director was said to have told the workers that the economic situation of the company would not allow him do much in respect of allowances. So, he employed flat rate formula for everybody to the extent that even the people at the lowest level of the salary cadre became so dissatisfied with the development. The PENGASSAN Chevron branch has called for the removal of the chairman and managing director of Chevron, Jeff Ewing. They said the protest was to express their lack of no confidence with the leadership of Jeff Ewing. According to them, he should be removed and never be reassigned to another office for his lack of integrity.

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Wednesday 08 January 2020

BUSINESS DAY

news How security agencies hunt... Continued from page 1

EXTORTION OF LOCAL FARMERS Security Agencies ‘criminalise’ goods produced on Nigerian soil

which is now procured for N25,000, used to be “free”

before the border closure. If drivers wanted their consignment examined, all they paid was N500 and the only other cost was N30 to make photocopies of the document. Now, no examination is done – simply pay N25,000 and the document is issued to you. Failure to pay means you would remain stuck in the village with the farm produce and watch it rot away. Breaking down the extortion racket Midway into the journey with Timi, who was taking 172 crates of tomatoes to Lagos, he revealed the tomatoes he was transporting were “smuggled”. At this time, we had successfully passed more than 15 checkpoints without incident. All that mattered was paying up, and goods passed. Along the road to Abeokuta, the document was only requested at five out of 26 checkpoints. And even after showing the document, the necessary payment still had to be made. The document was finally retained at the Customs’ checkpoint at Olorunda, where an officer in plainclothes asked, “Is this from Alhaji?” “Yes,” Timi replied. At this point, the document becomes a payment voucher, used to claim that unit’s share of the N25,000 paid to a man called “Baba Akere”, an elusive man who plays a pivotal role in this syndicate. To give some context, up to 50 Ford Transit buses load every day from Ilara, Iwoye, Imeko/Afon axis with at least N1.25 million paid daily through the said Baba Akere. In just 100 days of the border closure, he had collected at least N125 million in extortion fees on behalf of the two Customs’ units earlier mentioned, as well as the NAQS. In smaller communities where N2,500 is paid on small cars for the same quarantine document, the amount realised from extortion is substantially low, but still not less than N12.5 million since the border closure. While tomatoes attract a N25,000 fee before they can be moved from many of the villages to a city like Abeokuta or Lagos, pineapples attract N50,000 payment upfront to obtain the quarantine document through Baba Akere

Imeko-Afon Local Govt

N125

million

collected by 'Baba Akere' on behalf of Nigerian Customs Service and other security agencies

N50,000

to obtain “quarantine document” to convey a bus of pineapple out of the villages

N150,000

paid including bribes to convey pineapples

Source: BusinessDay Investigation

in Ilara. Before he became middleman for the security agencies, sources revealed that Baba Akere was a well-known smuggler who brought every type of food item into Nigeria – from rice to turkey and palm oil. If it was edible, Baba Akere smuggled it in. Now, he is unable to do that business like before and “has gone to double cross us”, said Timi. “People like him still want to make money in any situation, even if they have to connive with security agencies to exploit their kinsmen.” Timi said they are made to get documentation from smugglers, which shouldn’t be. “If you refuse to pay through them, they would call Customs and tell them to arrest us. They would not call Customs unit in our area, but that of another town far from us, describing our vehicle, how far we would have gone and where to wait for us,” he said. Furnished with such information, the concerned Customs unit would waylay such a driver, ask for all manner of documents and failure to produce any would lead to the vehicle being impounded. This reporter later visited Ilara where the notorious Baba Akere resides. Ilara shares boundaries (not actual borders) with the Republic of Benin, and crossing from one country to the other is as easy as walking across an unmarked road. For residents

N668 million in extortion within 100 days of the border closure

N25,000

to obtain “quarantine document” to convey a bus of tomato out of the villages

N75,900

paid including bribes at 36 checkpoints between Ilara and Abeokuta to convey Tomatoes Infographic: David Ibemere

here, however, the difference is known only too well. Posing as a fruits dealer from the Mile 12 market in Lagos, this reporter got Baba Akere’s number and called him to lament about the increase in cost of moving pineapples to the city. Under the pretext that I suspected his employees of cooking up non-existing fees, I asked to meet with Baba Akere to negotiate a special arrangement for my constant shipments. Baba Akere was, however, elusive. According to local informants, he is fetish and may have sensed that I was not the fruits merchant that I claimed to be. In a recorded telephone conversation later, Baba Akere would admit that he indeed coordinates collection of N50,000 for every pineapple shipment on behalf of the Nigeria Customs Service and other agencies. He said the money is used to settle different law enforcement agencies who have insisted nothing would move out from the area since the border was closed. “We are not supposed to say they are collecting money from us, but this is only being done because of the border closure,” he told this reporter. “We are the ones that know how the money (collected from farmers and traders) is shared among the different agencies.” However, as Timi told this reporter, “If any vehicle loads

and does not see Baba Akere, he [the driver] cannot leave, and if he does he is joking with his vehicle.” How bribes are paid along the road After paying Baba Akere N25,000 on behalf of the security agencies, Timi had to part with another N30,000 at barely a dozen checkpoints between Ilara and Imeko, a short distance of 15 minutes’ drive. From Imeko where this reporter joined the vehicle, N20,900 was paid on the three-hour journey to Abeokuta. Checkpoints are often manned by indigenes of communities in the area. Filled with disdain, other villagers and drivers would refer to them as “Aja Custom”, “Aja Olopa”, or “Aja Immigration”, as the case may be. These translate to “Customs’ Dog”, “Police Dog”, or “Immigration’s Dog”. These “Aja”,as locals refer to them, are the ones who collect money at every checkpoint, insisting on what amount to be paid, and initiating search where any motorist is “proving difficult”. The payments start from N200 and gradually increase to N2,000. Timi was lucky on this trip as no checkpoint insisted on getting the usual N2,500 and above, a sign that things had improved from a month earlier. The bus departed Imeko at 4.55pm and two minutes later, arrived at the first checkpoint in “Oyor Imeko”, where NAQS collected N200 and Army collected N500 – after checking the quarantine document. Three minutes later, the next checkpoint was still in Oyor Imeko, where Immigration collected N200, NAQS N500, and the police N500. At 5.04pm, the bus got to Oke Elefun. Here, the driver was asked to park and his conductor was asked to alight. Mobile police officers sitting under a makeshift tent asked the conductor to bring the money. He returned shortly to say the policemen rejected the N1,000 he gave them and asked for N2,000 instead. “Oga, please I beg you in the name of God,” the driver said when he got down, pleading to the mobile policemen to accept the N1,000 but they refused. For what they termed “stubbornness”, the policemen asked the driver to open up the tomato consignment for inspection. The vehicle had to be wedged with a stone to avoid us rolling back downhill. After the purported inspection, the driver still paid the N2,000 and the journey

Vehicles conveying tomatoes waiting for the sun to go down. The later they move, the lower the extortion www.businessday.ng

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continued at 5.13pm. At 5.18pm, we encountered another group of mobile police officers at “Baba Oloola”. Here, the mobile police officers, like the previous group, also rejected the N1,000 offered and insisted on N2,000. “Pay your money, pay your money o! You know how much you are supposed to pay,” yelled one of the officers. Eight minutes later, at 5.26pm, the vehicle got to a Customs checkpoint at “Oloka”, where N1,000 was paid after the quarantine document was checked. Here, the driver observed that the actual Customs officers were just arriving in a car and those manning the checkpoint were the “Aja Custom”. The “Aja” at the checkpoint was identified as a Benue indigene who originally came for farm work and later started working with Customs officers, albeit illegally. At 5.41pm, we encountered a SARS patrol team from Lagos with number plate BDG 789 AH at Owode and paid N2,000. The SARS patrol unit from Lagos came all the way to unleash terror on the mostly naïve villagers, this reporter learnt. In over two dozen interviews conducted by this reporter, one law enforcement unit was consistently mentioned – SARS – even though there was only one unit of SARS sighted in the entire region. Hours after leaving this checkpoint, the driver received a phone call from another driver. It turned out that the other driver had met the SARS team and did not want to pay the N2,000 demanded. “2,000 ni ko fun won ki won ma lu e ooo,” he said in Yoruba to the caller. This translates as, “Give them N2,000 so that they won’t beat you.” There were other pockets of payments to local government agents, N200 at Owode and N500 at Obada instead of N200, also increased because of the border closure. There was another N500 for Oke Ogun LCDA. A particular N500 ticket at Obada, collected at 5.56pm, was, according to the driver, the only useful document on this journey as it would also be useful for him at Berger before getting into Lagos. At 6.23pm, we arrived at an Army checkpoint at “Olodo” where, as usual, the driver offered N1,000 to the “Aja Army”, while the soldiers relaxed under a tree. The “Army Dog” insisted on N1,500 which had to be paid before the vehicle could leave. At 6.32pm, we stopped at another checkpoint, still in Olodo, where they again rejected N1,000, insisting on N2,000. At that checkpoint, a truck containing what appeared to be bags of flour was being offloaded to punish the driver and his conductor for “proving stubborn”. To leave the checkpoint with his goods, the driver would still have to pay. At 6.55pm, we came to a mobile police checkpoint at Olorunda, where N2,000 was paid before the vehicle could continue its journey. There also, a Customs unit identified by the driver as “A12” @Businessdayng

collected N500 as well as the quarantine paper, asking if it was from “Alhaji”, a reference to Baba Akere. The next checkpoint was close to Target Filling Station after Olorunda, where another Customs team collected N500. At 7.07pm, yet another Customs team in Akinyegun collected N500. At 7.08pm, another Customs team in Akinyegun rejected N500, insisting on N1,000. “Oga, what happened sir? Please I beg you,” the driver kept repeating, but the “Aja Custom” manning the checkpoint refused, asking him to go park in front. A man the driver identified as “OC Patrol” sat under a tree receiving fresh air, his shirt off. At 7.23pm, we arrived at Orile Aje, a bus-stop where notorious armed robbers used to hold sway. A local vigilante group had successfully chased the robbers away, according to the driver, and now has a checkpoint there, but the group does not ask for money. “These ones deserve money even if they ask,” said Timi, the driver. At 7.34pm, just before the Kunfayakun mosque, and Denro Baptist Church right after it, a Customs unit mounted yet another roadblock and collected N500. At 7.38pm, we arrived at an Army checkpoint before the Alamala Barracks where the driver offered N500 and it was rejected. “No be tomatoes he carry? If he can’t pay N1,000, he should go and park there!” yelled one of the soldiers sitting under a tree as the “Aja Army” negotiated with the driver. At this checkpoint, the soldiers previously collected N200 before the border closure, this reporter was told. At 7.55pm, we got to a place called “Rounder”, which appeared to be a way of referring to roundabouts. Here, he gave N500 to a mobile police unit and was given N400 change, meaning he paid only N100. The driver declared this was the last extortion point. However, a few unexpected bonus payments were ahead. Three of them collected N100 each, and two collected N200 each. There was a SARS unit at Mile Two, and there was an Army unit which was the last to be paid at 8.12pm. Things weren’t always this bad Before the border closure, Customs did not usually extort motorists or those moving agricultural goods. “Some sort of power descended on them following the border closure,” said Timi. “Before, we would simply drive by with our farm produce.” Even immediately following the border closure, BusinessDay investigations showed it was not so bad at the beginning. An arrangement was reached for every farmer and trader conveying farm produce to pay N5,000 to the Customs’ unit known as A10,

Continues on page 35

Wednesday 08 January 2020

BUSINESS DAY

news How security agencies hunt... Continued from page 34

N500 to the Customs unit at Olorunda and N2,000 to another Customs unit at Idofa, making a total of N7,500. Some locals, however, switched the game having seen an opportunity to cash in on the misfortune of their kinsmen. “The road to Lagos is not so difficult. Here to Abeokuta is the main problem. They are the real Boko Haram,” Timi said. Before August, drivers conveying farm produce to Lagos carried big baskets of tomatoes at N450 each “because things were easier”, he said. As extortion increased at the checkpoints, the cost to farmers and traders also increased, and it now costs N1,000 to carry each basket. For small baskets, N160 was charged per basket in July 2019; those small baskets are now carried for N350 each. Then, drivers took goods to Lagos and got paid N60,000 for the full load of their vehicle, and they still had “excess after spending all required extortions on the road (hardly exceeding N9,000)”, Timi said. That was when Nigeria was good. “There was no A10 Customs or anything. They didn’t bother us initially, then suddenly we were hearing tomato is also on the prohibition list, maize, etc,” he said. The border was supposedly closed to goods coming from outside Nigeria, but BusinessDay investigations in these border communities of Ogun State have revealed a systemic oppression of farmers and traders in those areas, who are made to pay thousands of naira before they can move their goods to markets in the cities. A trader at the Imeko market told this reporter that before the border closure, a trip to Abeokuta using a small car cost N2,500; now it costs N10,000 plus N5,000 for fuel

Stuck with her tomatoes, a female trader looking dejected

and N1,500 for loading. “What is left for the farmer of trader?” the trader asked. Traditional rulers are either complicit or maintain a distance, the “big men” too On a sunny market day in Ilara, hundreds of tomato baskets cook slowly under the sweltering sun as desperate farmers count their losses with every passing hour. It is worse for those who have fruits, especially pineapples. Heaps of these go bad in the middle of the market as no trader wants the misfortune of being caught with what is now becoming the equivalent of “illegal weapons”. At the market, the story was told of woman whose pineapples were seized on the road and she literally ran mad at the scene, out of shock at the loss that had befallen her. All efforts to find her or her relatives proved futile, and it remained an unproven casualty story. Every four days, famers and traders keep a date at the market, where diverse farm produce are sold. From tomatoes to pepper, oranges, yams, maize, pineapple and other fruits, the market showcases balanced diet in its raw form. However, when farm-

ers should be coming to the market with joy, they come instead with apprehension and uncertainty. If Sidi (not her real name) failed to sell all her tomatoes today, it would be the second consecutive market day, and those from the previous week would surely not make it to the next market day. Preservation is not her problem. Instead, those who would usually buy from her are no longer eager to make purchases. Asked how much a small

Power sector in a flux 5 months after new...

precedents outlined in the ruling documents and effective separation of its operations, assets and liabilities from those of the Transmission Services Provider licensee”. The independent operator will manage administrative functions while technical people grapple with the finer details of transmission. The Bureau for Public Enterprises (BPE) was directed to appoint representatives on the board of DisCos, perfect shareholder loan and options for loan recovery for the Federal Government’s investment in DisCos. BPE was also directed to effectively monitor operators’ obligations under their Performance Agreements. The Nigerian Bulk Electricity Trading Company (NBET) was equally directed to design, and present for policy direction and NERC regulatory action, measures to refinance the accumulated debts DisCos owe it and the debt NBET owes generation

Continued from page 1

including generation and

transmission will still not solve the problem,” said Desmond Ogba, energy lawyer and partner at Templars Law firm. Ogba said a holistic approach is required to fix the issues in the sector ranging from transmission, generation and the electricity market where liquidity will still be a problem even after these tariffs are raised because, as NERC admitted, it will still not be cost-reflective. Nigeria’s national grid collapsed about a dozen times last year in the clearest demonstration of the magnitude of technical problems in the sector. Meanwhile, even as generation capacity is over 12,000MW, Nigeria’s power plants on average generate only about 4,000MW. The Ministry of Power in June last year issued policy

directives and timelines to fix critical issues in the sector involving generation, transmission and distribution. It directed NERC to abide by the requirements for periodic major and minor reviews and processing of valid claims for deficits in tariff as provided for in the rules. The Federal Governmentowned Transmission Company of Nigeria (TCN) was directed to progress implementation of grid expansion plans, enforce full payment of the Market Operator’s invoice in accordance with market rules, and support transmission requirements of bilateral contracts with other investors to allow for more commercial use of transmission assets. To better handle technical issues in electricity transmission, the FG directed that TCN should “spin off an independent system operator after satisfying the conditions www.businessday.ng

basket of tomato costs, the women said N500, even though for a serious buyer, the cost could come down to as low as N200. In the past, the same basket would sell for N1,000. However, since the border closure, many farmers are stuck with their farm produce, and even when buyers come, they offer ridiculously low prices so as to compensate for the hazards on the road. “Write that the king also expresses his displeasure over the plight of his subjects,” said

This basket of tomato sold for over N1000 before border closure, but farmers and local traders are now forced to sell as low as N200

companies (GenCos) and the Federal Government. NBET was further directed to work with NERC to establish a deadline to transit vesting contracts of DisCos to bilateral contracts with defined quantities and delivery points with specific GenCos and enforce DisCos’ contract securities based on agreed thresholds of reducing technical and collection losses and tariff deficits. But not much has been achieved on these fronts, and analysts call for more positive focus on achieving all of these directives going forward. “Reviewing tariff is an important step and the minister should build on this,” said Chuks Nwani, a Lagos-based energy lawyer. However, the minister’s firing and hiring policies have so far dominated news reports and the recent moves by NERC to raise tariffs have had media focus at the expense of critical reforms waiting to happen.

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Sunday Ogunrinde, a local chief who was asked to speak on behalf of Oba Samuel Alabi Adeluyi, the Oloola of Ilara. “I can’t teach you how to do your job, so make up the words.” Oba Adeluyi on whose behalf Ogunrinde was supposed to speak was indisposed, as physically verified by this reporter. Coincidentally, his son, Tosin Adeluyi, is also the chairman of the LGA, though seemingly uninterested in the extortions his people are being subjected to. At Iwoye-Ketu, market leaders gave this reporter a designation of their own choosing – a representative of the Federal Government who has come from Abuja to hear their plight. This was the only way the farmers and traders at this market would agree to speak with this reporter. On a visit to the palace of Oba Joel Ademola Alaye, the Ooye of Iwoye, the traditional ruler, like others who spoke with BusinessDay, said extortions were no longer a source of concern like in the past. Now armed with the information that a certain quarantine document had become a requirement before agricultural goods could be moved from those villages to the cities, this reporter asked if that was also a requirement in Iwoye. “No, there is nothing like that here,” Oba Alaye said. According to him, the quarantine document is not being imposed on farmers within his domain as is done in the neighbouring communities. At 7.19 the following morning, when this reporter was preparing to embark on the day’s rounds, a call came in from a strange landline. The caller would later introduce himself as one of those present at the palace meeting the day before. “I cannot say what the king said is a lie, but it is also not quite like that,” said the caller, whose identity is also being concealed. The caller later narrated how Oba Alaye supposedly went to the quarantine service to “snatch” the documents, put-

ting them under the control of the Community Development Association which he had appointed. In essence, the Oba who looked this reporter in the eye and said the fraudulent quarantine document does not exist in his community was the one overseeing its administration, according to sources. Some people would rather not talk about the extortions, and even when they did, only few wanted to be seen in public with this reporter. “There are spies everywhere,” one villager said, speaking in Yoruba. Security agencies, particularly Customs, have locals who spy on their fellow villagers. Initially, it could have been in order to provide information on those conveying banned goods. Now the reason is to target dissidents and those who fail to cooperate with the extortions. A market woman who had volunteered information to this reporter would not let him accompany her vehicle in order to have a firsthand experience of how the extortions take place. “It is not safe for me to be seen with you,” she said. As one departs Imeko, a new tomato plantation is being set up on the right hand side of the road. With time, the new investors would find out they have sunk millions of naira into an area which, even though it is Nigerian soil, has been marked by law enforcement agencies as foreign land, one from which they are entitled to illegal taxes and extortions before anything can move out. While the government claims it shut the borders to protect farmers, the opposite is what is playing out in some border communities and those in their immediate vicinity. “We have no one to fight for us, we are suffering and have no choice but to endure it,” Timi said. “From Rounder to Ilara, there is no single company. We have to eat, so what do we do other than farming and trading in farm produce? Or aren’t we part of Nigeria?”

President Muhammadu Buhari on Tuesday reversed the suspension of Damilola Ogunbiyi, former managing director of the Rural Electrification Agency, who was suspended three weeks ago by the minister of power. Ogunbiyi had already tendered her resignation since October before she was suspended in December which was within the three months’ notice period she gave to the ministry. This suspension was widely condemned by industry stakeholders. Ogunbiyi’s resignation followed her appointment as special representative of the Secretary-General for Sustainable Energy for All. United Nations SecretaryGeneral António Guterres on October 29 announced Ogunbiyi’s appointment as his Special Representative for Sustainable Energy for All and Co-Chair of United NationsEnergy. The Secretary-General also welcomed the an-

nouncement by the Administrative Board of Sustainable Energy for All (SEforALL) that Ogunbiyi has been appointed CEO of SEforALL. In 2018, DisCos reported accumulated losses of N713.63 billion since the 2013 privatisation exercise while payables to both NBET and the Central Bank of Nigeria (CBN) would now be approximately over N2 trillion. “There needs to be more synergy between the various government power agencies, Discos, Gencos, NERC, TCN and the presidency,” said an expert in the sector. In July last year, the Federal Government reached an agreement with Siemens to ramp Nigeria’s power generation, transmission and distribution capacity, but while this is being coordinated in the presidency, industry stakeholders fear other government agencies and even operators are not being carried along.

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Insecurity delaying Taraba council elections - TSIEC chairman Nathaniel Gbaoron, Jalingo

hairman, Taraba State Independent Electoral Commission (TSIEC), Philip Duwe, on Tuesday said insecurity in some parts of the state was responsible for the delay in the conduct of the Local Government Council Elections. Duwe, who disclosed this in an interview with journalists in Jalingo, said the commission and the government were willing to conduct Local Council elections, but noted that the lingering security in the state was hampering the exercise. He explained that the commission had already prepared its budget which had been approved by the State House of Assembly, but was waiting for signal from security agencies as to when it would be convenient to hold elections. “As a commission, we are well prepared. Our budget and activity profile are all ready. The only thing we are waiting for is the instruction from the Governor who is the Chief Security Officer of the State. “You all know that Taraba has come under serious security challenge and the Governor can only give instruction for the conduct of election based on security report from security agents,” Duwe said. Taraba and other states in Nigeria’s Northeast region were the hotbed of the attacks by the Islamist Boko Haram group that started in 2009. The attacks led to the death of millions while many

more were displaced from their homes. “As we speak, a lot of people who were displaced are still in IDPs camps especially in southern and northern parts of the State which was the worst-hit in the crisis. “Even though people are agitating for elections to be conducted in the Local Council, we cannot risk the lives of the people and disenfranchise others in the process,” Duwe said. Duwe thanked politicians who were already displaying posters for the council polls for their willingness to participate in the process and urged them to join hands with the government and security agencies to restore permanent peace to communities to enable the commission conduct election. This is even as he thanked God for a reduction in the level of crisis in the state and the media for their objective reportage of the peace process. The chairman expressed optimism that with the concerted efforts being made by all the stakeholders towards peace, the commission may likely commence the process of conducting council elections by the end of the first quarter of 2020. Our correspondent gathered that the tenure of the elected Local Government Council chairmen had elapsed since 2019 and the state government has been appointing Caretaker Committee to administer the councils.

Improved intra-state trips expected as Lagos earmarks N117bn for transport infrastructure JOSHUA BASSEY

agosians can look forward to improved intrastate trips, as the Babajide Sanwo-Olu administration gets cracking with implementation of the N1.169 trillion 2020 budget. A breakdown of the budget shows that the sum of N117.248 billion is projected to be spent on critical transportation infrastructure, in what is expected to address perennial gridlocks in Nigeria’s biggest sub-national economy. The sum is N85 billion higher than the N31.673 billion allocated to the sector in the state’s 2019 budget. With an estimated population of over 22 million people, compounded by poor transportation infrastructure, Lagos, Nigeria’s former capital city and economic hub, is daily bedevilled by road congestions. But the government believes the projected 2020 spending will help breathe new life into the clogged transportation sector of the state. Listed to benefit from the N117.248 billion are road maintenance, development of the coastal lines, ongoing Blue Line rail infrastructure, and traffic management, among others. Sam Egube, the state commissioner for economic planning and budget, at the 2020 budget analysis on Tuesday, said the government was poised

to take on more in the transportation sector, this year, as a justification for the increased allocation. “This increase shall address the zero-pothole strategy, create link-roads within the metropolis to resolve traffic congestion and its attendant risks,” said Egube. On the development of infrastructure along the coastline, the commissioner said N11.288 billion had been earmarked to curb ocean surge and protect lives and properties. Speaking further, the commissioner said the sum of N44.510 billion (as against N17.590bn allocated in 2019) had been budgeted to push the Blue and Red rail lines rail projects, improvement of junctions around the state and completion of trailer parks, towards taking trucks off the roads and bridges. The Lagos State House of Assembly passed the 2020 budget of N1.169 trillion on December 30, 2019, and was signed into law by Governor Babajide SanwoOlu on December 31, 2019. The budget is made up of N711.033 billion capital expenditure and N457.529 billion recurrent expenditure, showing 61:39 capital to recurrent expenditure ratio in favour of capital expenditure. The total revenue is estimated at N1.071 trillion, while the deficit is N97.53 billion, which the state government hopes to finance through a combination of external and internal loans. www.businessday.ng

R-L: Gbenga Omotoso, commissioner for information and strategy, Lagos State; Sam Egube, commissioner for economic planning and budget; Rabiu Olowo, commissioner for finance, and Akin Abayomi, commissioner for health, during a press briefing on detailed analysis of Year 2020 Budget at Bagauda Khalto Press Centre, The Secretariat, Alausa, Ikeja, yesterday.

FG suspends N-Power ghost teachers in Sokoto following BusinessDay’s investigation Ibrahim Adeyemi

ederal Government of Nigeria has ordered the immediate suspension of the N-Power ghost teachers in Sokoto State, following an investigative report published by BusinessDay newspaper. Zayanu Dalhatu, the desk officer of N-Power in the state, confirmed the suspension of the truant beneficiaries on Monday, noting that the Federal Government, through the National Social Investment Programmes (NSIP), had also ordered further investigations on the N-Power ghost teachers, operating in cahoots with corrupt school principals in the state. BusinessDay earlier reported how racketeers amongst N-Power teachers in Sokoto state were conniving with corrupt school principals to shortchange the Federal Government However, the senior special assistant to the President on job

creation and youth empowerment, Afolabi Imoukhuede, affirmed that the truant beneficiaries indicted in the report would be thoroughly investigated. According to a statement signed by the assistant director of the N-Power job creation unit, Nsikak Okon, the activities of the racketeer volunteers should not be a yardstick for the assessment of the programme. “The newspaper undercover report, which focused on one of the sub-components of the N-Power Programme, the NTeach aspect of the programme in Sokoto State, made several claims which highlighted the endemic problem of the ghost worker syndrome in Nigeria specifically mentioning names of truant beneficiaries that abscond from their various places of primary assignment (PPA) but regularly earning monthly stipends,” he said. “These revelations are shocking and disheartening to us over here at the N-Power

team. The actions of these rogue beneficiaries do not in any way reflect the ideals of the Social Contract we signed with the participating Nigeria Youths or this government’s dedication to addressing the educational needs of the country. “Over the last few years, we have worked tirelessly to respond to the social issues confronting Nigerians in the face of the volatility of oil prices and production,” the statement noted. Okon also faulted school heads who were supposed to monitor the truants but were involved in the corrupt act. He continued: “The beneficiaries are to be monitored by the school heads and monthly reports expected to be made to the state government appointed Focal Persons who then forward the report directly to the central N-Power office. “While several complaints and observations have been made which have resulted in the expulsion of affected

erring beneficiaries from the Programme as also reported in this article, we, however, note attempts of some school principals who directly interact with these beneficiaries, who provide unreliable data, further reiterating the deep-rooted corruption in the system.” N-Power was conceived by the government as a youth empowerment scheme aimed at fostering productivity through skill development and valuable knowledge sharing and acquisition for economic growth and social development. In 2016, the N-Power was introduced as part of the National Social Investment Programme (NSIP). Although NSIP has five components: N-Power Teach, N-Tax, N-Health, N-Agro and N-Build, the N-Power Teach seems to be most popular because a large number of Nigerian youths have shown interests in it. The scheme was designed to support regular elementary school teachers in educating young minds.

Nasarawa inaugurates Minimum Wage, IGR committees, tasks on workable templates, recommendations Anthony Adgidzi, Lafia

mid growing concern of the financial position of the state as well as to come up with a sustainable strategy for the implementation of the new national minimum wage, Governor Abdullahi Sule of Nasarawa State has inaugurated a 23-member committee to come up with a template and workable recommendations that would assist government in it policy direction to that effect. Similarly, in his resolve to revitalise the economy of the state and to improve its internally generated revenue (IGR) profile, Governor Sule also commissioned a 15-man committee to take the state out of financial dependency for the overall development of the state. The committees, which to be guided by a 10-points terms of reference each to carryout it assignments, have however

three weeks to submit its report to government for appropriate action. Inaugurating the two standing committees Tuesday at the Government House in Lafia, the governor revealed that a committee to look into workers promotions, salaries arrears and other entitlements would be inaugurated next week Monday to enable workers derive satisfaction in service. He reiterated that his government would give topmost priority to the welfare and wellbeing of workers in the state, saying, “Government is not unaware of the outstanding promotions, arrears and proper placements of the civil servants in the state. “In this regard a committee has been constituted to advise government on how best to implement the promotions. The committee will soon be inaugurated in our commitment towards improving the welfare

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of our workers for optimum productivity. “This is in line with our determination to improve the welfare of public servants as they are the cornerstone for the implementation of government policies and programmes. “It is also intended to put machinery in place to reinvigorate the revenue generating capacity of government to finance development projects.” Governor Sule, who decried the level of financial dependency of the state on Federal Allocation, tasked members of the committees to come up with a workable template and recommendations for implementation that would guide the decision of government. The committees, while carrying out its assignment, should be guided by the revenue accruals to the state vis-à-vis its ability to pay the Minimum Wage. “In this wise, this administra@Businessdayng

tion is ready to open its book of account to serve as a guide to the Committee towards making appropriate recommendations to Government,” he said. He said the state was not only blessed with resources, but also one of the richest states in the country and wondered why the Nasarawa State would be begging or relying on federal allocation to survive. The governor, who explained the decision of government in setting up the committees, said, “These committees should not be misunderstood to mean any intention to infringe on the rights and privileges of our workers in particular, nor in any way cause hardshiptothecitizensofthestate. “I, therefore, appeal for your understanding, my fellow compatriots and urge all and sundry to give the committees necessary cooperation to enable them carry out these assignments successfully.”

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Multi-billion Ayakoromo Bridge not abandoned - Delta Francis Sadhere, Warri

elta State government has denied news report that the Ayakoromo Bridge project in Burutu Council Area of the state has been abandoned. The state government had in 2017 approved N7.04 billion (about $22.7m) for the implementation of two major projects, the Ayakoromo Bridge and the establishment of an Agro-Industrial Park at Aboh Ogwashi-Uku in Aniocha South Local Government Area. Two years after the approval for the construction of the bridge, the Ijaw Peoples Development Initiative (IPDI) in conjunction with Ayakoromo youths had threatened showdown with the state government over the project, saying the project had been abandoned. But the state commissioner for information, Charles Aniagwu, in a statement on Tuesday in Asaba, said the state government was desirous of completing

the project, assuring that work on the bridge would commence in the early part of the year. Aniagwu urged the IPDI and Ayakoromo youths to sheathe their sword and shun their planned protest as government had already made provisions for the completion of the bridge in the 2020 budget. “As a government, we are committed to the construction of the Ayakoromo Bridge to link communitiesinUghelliSouthand Burutu Local Government areas. “The Okowa administration is concerned about the slow pace of work on the bridge and had already taken steps to fast track its completion by making enough provisions for the project in the 2020 budget. “The state government remains committed to the development of riverine communities in Ijawland as well as other parts of the state, and will stop at nothing until we give a new lease of life to rural and coastal communities in Delta State.

L-R: Vanessa Uansohia, manager, corporate communications, Skyway Aviation Handling Company plc; Olumuyiwa Akande, group head, corporate communications, SIFAX Group; Basil Agboarumi, managing director, Skyway Aviation Handling Company; Rotimi Oladele, former national president, Nigerian Institute of Public Relations, and Philips Ojo, officer, corporate communications, SIFAX Group, at the 2019 national NIPR dinner where Taiwo Afolabi was awarded with the 2019 PR Personality of the year award held at Sheraton Hotel, Ikeja.

IMF says ready to support implementation of Eco HOPE MOSES-ASHIKE

nternational Monetary Fund (IMF) says it is ready to engage with the West African authorities and to support the implementation of the planned new currency called the Eco. Kristalina Georgieva, managing director of the IMF, in December 21, 2019, issued a statement on the reform of the West African Economic and Monetary Union’s (WAEMU) CFA franc framework. She said, “I welcome the reforms to the WAEMU’s CFA franc currency arrangement

Dry season: Contractors return to Edo roads, resume construction works

ith the end of the holidays and commencement of dry season, contractors working on major and inner-city road projects across Edo State have returned to site to speed up work on the state government’s urban renewal and infrastructural projects. In a statement, special adviser to the governor on media and communication strategy, Crusoe Osagie, said a number of the contractors have returned to site after the holidays to take advantage of the dry season to fast track work on road projects across the state. According to Osagie, “We are hard at work at our urban renewal and infrastructural development programme in the state. That is why we ensured that the contractors working on our roads stayed on site to work on the portions of the road that could be done during the rainy season. “With the dry season, the contractors have resumed on site this week. Massive construc-

tion work is ongoing across the state. If you move around, you would see a lot of earthmoving equipment at work. This is to ensure that the we maximise the dry season to cover a lot of ground and deliver on these projects to Edo people. “Ekenwan Road axis of the state, the contractor has resumed work close to the University of Benin campus, after finishing work on the drainage late last year. You can also see them on other sites across the state.” He noted that the contractors cannot afford not to be on site because it was the best season for them to work on the projects, adding, “We are very positive that a lot would be done this season. The roads will be fixed and erosion control projects would either continue or new ones would begin soon. These are all geared towards ensuring that we provide the right infrastructure to drive development in communities and cities across the state.”

Jumoke Akiyode-Lawanson

as we continue to rapidly scale and widen the scope of our operations in Nigeria,” Uche Okafor, Bolt’s regional manager for West Africa, said. “At Bolt, we will continue to find innovative ways to make our platform thrive whilst empowering our people to champion new roles and frontiers. We are also committed to rewarding excellence and diligence. This is the reason we are elated to appoint Femi as his performance on previous roles have been stellar,” Okafor said.

Abia to assist traders rebuild burnt Umuahia Timber Market GODFREY OFURUM, Aba

Bolt appoints Akin-Laguda to drive Nigeria’s operations

he on-demand transportation platform, Bolt, has appointed Femi Akin-Laguda as the country manager for its operations in Nigeria. Having served in various capacities at Bolt over the last three years, most recently as city manager for Lagos where he engineered the introduction of an identity verification portal - a first of its kind safety feature for drivers and riders in the country, AkinLaguda has been selected to drive the company’s operations and expansion moves across Nigeria. “As a company deeply committed to raising transformational leaders, we are excited to have Femi Akin-Laguda run operations and lead the Nigerian team to execute a global vision of transforming urban mobility and empowering thousands of young people within the local ecosystem. We are thrilled about what this means for our business

that were announced by Presidents Ouattara and Macron in Abidjan. They constitute a key step in the modernisation of long-standing arrangements between the West African Economic and Monetary Union and France.” Georgieva said the announced measures build on WAEMU’s proven track record in the conduct of monetary policy and external reserve management. In recent years, the WAEMU has recorded low inflation and high economic growth, the fiscal situation has improved, and the level of

FEMI AKIN-LAGUDA

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bia State government has promised to assist in rebuilding as well as aid in replacing the machines that were burnt during the inferno that engulfed some parts of Timber Industrial Market, Umuahia. The governor gave the assurance on Monday, when he visited to the market, and therefore directed the leadership of the market to come up with a list of equipment and an estimate of articles that were lost in the incident and bring them to a meeting with him and the commissioner for trade and investment, which would be convened on or before Friday this week. The governor, who expressed grief over the huge loss and sympathized with the affected traders, described the fire outbreak as unfortunate, noting that it is a bad way to begin the year. He however called on the victims not to be discouraged, by the incident, but forge ahead with their businesses since there was no loss of life. He stated that investigation must be carried out to identify the remote and immediate causes of the inferno, as it would help to prevent further occurrence.

Ikpeazu, while stressing the need for all to apply caution, especially during this harmatan period, equally encouraged them to be calm and never lose faith in God and prayed that God would strengthen them to work harder to achieve a better 2020. Cosmas Ndukwe, commissioner for Trade and Investment, who accompanied the Governor on the visit, commiserated with the affected traders and described the incident, as painful. He encouraged them not to lose hope and thanked God that no life was lost in the incident. Earlier, the management committee chairman of Timber Market, Umuahia, Austin Onyenweaku, explained that the Fire Service personnel tried their best to salvage the situation on that fateful day, but all to no avail. He disclosed that 48 machines and a Lister Generating Set were lost including wood and other articles, and thanked the Governor for coming to see things for himself. It would be recalled that in the early hours January 1, 2020, fire engulfed a section of the Timber Market and property worth millions of naira was lost.

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foreign exchange reserves has increased. The reforms also maintain key elements of stability that have served the region well, including the fixed exchange rate with the euro and the guarantee of unlimited convertibility provided by France, she said. “The IMF stands ready to engage with the regional authorities, as needed, and to support the implementation of this important initiative.” However, Zainab Ahmed, Nigeria’s minister of finance, budget and national planning, sees the possibility of establish-

ing a common economic bloc and adopting a single currency being proposed as the ‘Eco’ - by the Economic Community of West African States (ECOWAS) Member countries as uncertain. The uncertainty stems from the inability of member states to meet a set of convergence criteria before the Monetary Union can be established. To achieve a common monetary integration programme required each member country to comply with a set of four primary and six secondary convergence criteria to ensure a stable macroeconomic environment.

Midwestern Oil lifts students, empowers youths on skills acquisition

n furtherance of its corporate social responsibility in 2019, Midwestern Oil and Gas Company Limited has awarded scholarships to 48 students drawn from host communities and across Delta State, taking the tally of sponsored students to 217 since the inception of the programme five years ago. The successful students beat over 500 students in a written aptitude test to emerge as recipients. The Midwestern Scholarship, which covers tuition fees and living expenses for deserving university and secondary school students, is annually renewed for beneficiaries who maintain a high level of academic excellence. The company did not limit its intervention to students in pursuit of academic success alone. In it alignment with its Economic Empowerment Plan also continued its Skill Acquisition Programme. In 2019, it enlisted 26 new trainees who are to be trained in a variety of trades. Also, the programme turned out 57 graduates in 2019, bringing the total number of beneficiaries since the start of the programme to 175 youths. These youths have all been empoweredwithworkingequipment, start-up stipends, as well as rent to enable them start businesses in their chosen trades, thereby making them viable contributors to the economic development of the host community as well as the nation at large. In his welcome address at the award ceremony December 2019, Charles Odita, group managing director/CEO, expressed appreciation for the peaceful coexistence between the organisation and the host communities. Odita said the annual award ceremony,whichtookplaceatthezonaloffice of the company, was a celebration of the company’s efforts in developing young minds in the communities. According to Odita, “Apart from expanding the company’s empowerment profile, the event serves as a @Businessdayng

culmination of the company’s developmental efforts in the past year in the form of scholarship awards, provision of starter packs, and physical development projects.” He further stated that in accordance with Global Sustainable DevelopmentGoals,youthdevelopment is one of the cardinal focus of Midwestern, adding that, “the beneficial outcome to youth empowerment programmes are enormous and may include improved social skills and behaviour, increased academic achievements, increased self-esteem and self-efficiency, allleading toa healthier and more wholesome society.” Speaking further at the ceremony gracedbytheOduosaofUtagba-Ogbe, who was represented by Mike Obi Opia, Igala-Uku 1 of Utagba-Ogbe kingdom,othercommunitychiefsand dignitaries,heexplainedthatthecompany’sinitiativescreatedopportunities for the youths to make better career choices and focus on developing their talents towards a good life. As a part of its CSR initiatives, the Company carried out a free medical outreach in Kwale from November 25 to November 29, 2019. The three communities of Umusadege, Umusam and Ogbeani of Kwale felt the presence of the company as they took turns to consult with doctors on health issues. They received drugs for their ailments, and eye glasses were prescribed and dispensed as required, all these were issued for free. From the inception of this programme in 2017, over three thousand patients have been examined, screened, and treated. Other empowerment programmes embarked on by the Midwestern JV includes the recognition of the various age grades in its activities. The firm also built a block of six classrooms in UtagbaOgbe Grammar School, Kwale, and the one-kilometer Udeaka road in Umusadege, Utagba-Ogbe, Kwale.

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FG admits ‘cabals’ frustrating reforms in Nigeria’s power sector HARRISON EDEH, Abuja

ederal Government has admitted that certain unscrupulous elements, popularly known as ‘cabal’ in Nigerian parlance, are hell bent on frustrating numerous reforms currently being embarked on in Nigerian power sector. Mamman Sale, minister of power, in a statement issued by Aaron Martins, his special adviser on media on Tuesday, said although the cabals exist in the Nigerian power sector, the Buhari administration was determined to deliver power supply to millions of Nigerians through various reforms. “As early as November last year, this cabal began to sponsor insidious reports using some faceless groups in Lagos, claiming that the Ministry of Power was failing under the

new Minister,” he said. While making specific reference to recent appointments in the Rural Electrification Agency (REA) and Nigerian Bulk Electricity Trading Company (NBET), the minister expressed concern that a section of the media had gone to town with allegations of ethnic, regional or religious discrimination without examining the substance of the changes. According to Sale, “One group even went to the bizarre level of accusing the Minister of discrimination against women.” The minister noted that he had no particular interest in any particular appointments in the ministry other than to put square pegs in square holes for maximum results. Those talking about changes and appointments are

merely engaged in idle talks, he said. He said further that all right thinking Nigerians were aware that since assuming power in 2015, President Muhammadu Buhari had poured billions of naira and attracted huge foreign investments into the power sector with the aim of providing generation and distribution of electricity to Nigerians. He noted further that Nigerians should be asking why there was not much improvement in the sector after such concerted efforts by the government. “Many Nigerians are not unaware of the squabbling and unfortunate infighting affecting the two agencies as well as other infractions. This obviously affected their performance in impacting the entire electricity industry,” he said.

Transmit agreements, treaties in your custody to Justice Ministry, AGF urges ministries, agencies Felix Omohomhion, Abuja

ttorney General of the Federation and Minister of Justice, Abubakar Malami, Tuesday, called on all ministries, departments and government agencies to transmit to the National Depository of Treaties domiciled in Federal Ministry of Justice all executed agreements, Memoranda of Understanding, and treaties in their custody. The minister also told them to make known to the ministry those to be entered in the future in their original form. The minister made this call at the commissioning of the National Depository of Treaties in Abuja on Tuesday.

According to Malami, the electronic National Depository of Treaties will serve as the depository of all treaties entered into between the government of the federation and any other country of any ministry, agency or department in line with Section 4 of the Treaties (Making Procedure, etc.) Act Cap. T20 Laws of the Federation (LFN) 2004, which domiciled in the National Depository of Treaties in the Federal Ministry of Justice. The minister said the call was in further compliance with the Service wide, Circular Reference No. HCSF/ LU/FEC/M/938 dated 2nd March, 2017 issued by the head of the civil service of the Federation as directed by the

Federal Executive Council. “It is our hope that very soon the National Depository of Treaties will be in the cloud for a more global outlook and accessibility from any part of the world. “It is about transparency, accessibility and order in line with the tenements of Open Government Partnership and access to justice, which the government of President Muhammadu Buhari is committed to uphold,” he said. He said the goals of the project were to achieve functional National Depository of Treaties, maintain a comprehensive updated register of treaties and ensure that all treaties, agreement and protocols entered into by the government were preserved.

Ikpeazu urges Igbo merchants to invest in manufacturing to boost region’s economy GODFREY OFURUM, Aba

bia State governor, Okezie Ikpeazu, has charged traders from the South-East region of Nigeria to invest in manufacturing to boost economic development of the region. He urged them to think beyond the traditional buying and selling, which according to him, has become endangered by current economic realities. The governor stated this on Monday at Government House Umuahia, while inaugurating a seven-man Exploratory Committee for the setting up of University of Science and Technology in Aba, with eminent Nigerian Anya O Anya, a professor, as chairman. He charged the members to conceptualize and deliver a 21st-century University of Science and Technology to help feed the manpower needs of companies and industries coming up in Aba, Abia State and the South East.

He explained that the university will form the fulcrum that would open new vista of development in the SouthEast and Nigeria at large. The governor enjoined the Committee members to leverage on the advantages of small and medium (SME) manufacturing and availability of massive equipment and resources at the Meteorological Complex in Aba, to drive home the vision of establishing the university. Governor Ikpeazu, who described the Committee members as individuals with capacity to drive the vision of building a University of Science and Technology, expressed confidence that the Committee would do a good job. This is as he urged them to do whatever they thought was needful to achieve the goals of the committee. According to Ikpeazu, “The essence of the University is to produce manpower that will assist in the economic development of Ndi Igbo, as the position of Ndi Igbo in www.businessday.ng

trade and commerce is been threatened and need to be salvaged, through aggressive technology in its economic development.” The terms of reference given to the Committee included exploring viability of siting the university in Aba, giving options for funding, leveraging commercial and SME activities around Aba, to drive the university, look at the rich human capital of Ndi Igbo and finding options of collaboration with development partners Anya .O. Anya, chairman of the Committee, commended the governor for setting up the committee to develop a university Ndi Igbo and Nigerians at large, would be proud of. He observed that there could not be an effective Enyimba Economic City without a Science and Technology base and assured that the Committee, would do everything within its powers to achieve the Governor’s vision of building a university Ndi Igbo and Nigeria would be proud of. https://www.facebook.com/businessdayng

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Wednesday 08 January 2020

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FINANCIAL TIMES

World Business Newspaper NAJMEH BOZORGMEHR

s millions of Iranians poured on to the streets of Tehran to mourn the death of the military commander Qassem Soleimani, the country’s supreme leader, Ayatollah Ali Khamenei, faced a difficult question: how to satisfy the Islamic regime’s desire for revenge for the US killing, while avoiding a war. During four days of mourning, huge crowds have demanded retribution for the assassination last week of their most revered military leader. Publicly, the regime has issued bellicose statements. But in private, even hardliners have said Tehran must strike back but avoid a full-blown conflict. “We cannot ignore this aggression easily and have to prevent the US from repeating its rogue behaviour,” said Hamid-Reza Taraghi, a politician close to Iran’s hardline forces. “But our strategy is retaliation in such a way that we do not go to a war.” Washington and Tehran have been engaged in a game of brinkmanship since the US withdrew from the Iranian nuclear deal in 2018. In June, Iran shot down a US drone and then seized a Britishflagged tanker in July. In September, it was blamed by Washington for air strikes against Saudi Arabia’s biggest oil installation. But the elimination of a senior military commander in targeted US air strikes was an unexpected and unprecedented escalation that means Tehran must proceed more carefully, Iranian analysts said. The

Iran considers options for retribution over Soleimani killing Regime insiders eager to strike back while avoiding full-blown war

Iran’s Supreme Leader Ayatollah Ali Khamenei, centre, leads a prayer over the caskets of Qassem Soleimani and Abu Mahdi al-Mohandes after they were killed in a US air strike on Thursday © -/Iranian Presidency/dpa

previous brinkmanship was based on a calculation that Donald Trump did not want another war in the Middle East. Now the US president has threatened to hit more than 50 targets in Iran, including cultural sites, if the Islamic republic retaliates. “This extremely complicated

Franklin Templeton heads for sixth year of outflows

ranklin Templeton is set to mark 2019 with more outflows than any other US fund manager, according to the latest data from research group Morningstar, led by an exodus of investors from a bond fund run by emerging markets guru Michael Hasenstab. Investors clawed back $21bn from the company’s mutual funds and exchange traded funds in the first 11 months of last year, a rate of $430m per week, according to the data. The outflows extend a string of annual investor withdrawals that stretch back to 2014 and represent a sizeable chunk of the group’s assets under management, which stood at $692bn at the end of November. This amount has fallen by a quarter in the last five years despite the surging markets that helped mask outflows from active funds at many of its peers. The largest outflows came from the Templeton Global Bond Fund helmed by Mr Hasenstab, which suffered $4.6bn in redemptions. Mr Hasenstab has gained a reputation for bold bets on cheap, unloved sovereign debt, but was wrongfooted by two key developments last year. His fund largely

Top US military officials say leaked letter was a ‘draft’ that should never have been revealed

missed the rally in US government bonds. He also faced steep losses on Argentine debt as President Maurico Macri was swept from office, with his holding of Argentina’s bonds falling $1.8bn in a single day. The fund fell short of its benchmark, the FTSE World Government Bond index, by 5.3 per cent. Other funds to lose assets included the Franklin Mutual SharesFund, a US-focused stock fund, which shed $3.4bn, and the Franklin Mutual Global Discovery Fund, a global stock fund, which suffered $3.1bn in withdrawals, according to Morningstar data. Both funds also missed their benchmarks for the year. The outflows reflect the challenges for active managers both in outpacing the benchmarks they are measured against and fighting the onslaught of passive investing. Morningstar’s latest estimates show Franklin Templeton edged ahead of Invesco, which suffered $20bn in outflows for the first 11 months of 2019, and T Rowe Price, with $17bn. Companies are set to confirm full-year figures in the coming weeks. T Rowe said that those outflows had been offset by inflows into other funds it runs, such as investment trusts. www.businessday.ng

Iran’s immediate response is more likely to include efforts to reduce US influence in the Middle East in other ways, analysts and regime insiders said. Tehran has already pulled back from all its commitments under the 2015 nuclear accord and on Sunday exercised its influence in Iraq’s parliament to

US denies it is withdrawing troops from Iraq

Company looks set to be worst among US fund managers as Hasenstab vehicle bleeds assets RICHARD HENDERSON

situation is not only a dilemma for the supreme leader but the whole [Iranian] system,” said one Iranian analyst, who asked not be identified. “Iranian leaders are stuck between addressing public emotions and the expediency of the political system which is not to militarily retaliate.”

help pass a vote to expel US forces from the country in retaliation for the air strikes. Iran’s parliament passed a bill on Tuesday to increase the budget of the Quds force by €200m over the next two months. The vote was non-binding but if Iran could force the US out of Iraq — where the Americans have invested hundreds of billions of dollars since ousting Saddam Hussein in 2003 — it would be considered a big victory for Iranian foreign policy, according to one regime insider. “Iran’s call for the US to leave the region is not little and should not be underestimated,” the insider said. “It is similar to the months before the Islamic revolution when Imam Khomeini [the founder of the revolution] had one simple slogan ‘Shah must go’ and he left.” Mr Taraghi, the hardline politician, suggested that the US also wanted to avoid a war. “If Trump were serious in his threats, why has he sent 16 countries’ representatives to beg us not to hit back?” he said. If Iran does retaliate with force, it will do so directly and not through its proxies in the likes of Lebanon, Iraq, Syria or Yemen, Mr Taraghi added. “Their decision to retaliate is theirs. We will need to act ourselves, separate from them.”

KATRINA MANSON, JAMES POLITI, CHLOE CORNISH AND NAJMEH BOZORGMEHR

eneral Mark Milley, the US’s top military official, denied that America was pulling troops out of Iraq, saying that a leaked letter by the commander of US forces in the country indicating preparations for withdrawal was a “draft” and a “mistake”. In an afternoon of confusion at the Pentagon, Gen Milley told reporters on Monday that the unsigned letter, which was obtained and posted online by news agencies, should never have been revealed. “That letter is a draft, it was a mistake, it was unsigned, it should not have been released . . . poorly worded, implies withdrawal, that is not what’s happening,” the chairman of the joint chiefs of staff said. Mark Esper, the US defence secretary, also said that reports of a possible US troop withdrawal from the country were inaccurate. “There’s been no decision whatsoever to leave Iraq”, he said. The fate of US forces in Iraq has come into sharp focus a day after the country’s lawmakers voted in favour of removing foreign forces from Iraqi territory, a

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move triggered by the US’s killing of a top Iranian general, Qassem Soleimani, in Baghdad last week. The US-Iranian dispute sparked a rise in the price of oil on Monday, sending Brent crude up 2 per cent to more than $70 a barrel after Washington warned of increased threats to energy facilities in the Middle East. In Asian trading on Tuesday afternoon, Brent crude fell 1.2 per cent to $68.12 a barrel as investors pared bets on the prospect of a direct confrontation between Washington and Tehran. Iran’s parliament passed a bill on Tuesday to increase the budget of its elite Quds force, which were led by Soleimani, by €200m over the next two months. The Islamic republic is under public pressure to avenge the killing of Soleimani, who Iranians consider a national hero who kept the country’s borders secure in a volatile region. US allies were caught off-guard by reports that Washington was withdrawing from Iraq. State department officials have insisted the US wants to stay in the country to avoid ceding further influence to Iran and continue to fight against Isis. The letter in question was sent by William Seely, the Iraq task force commanding officer, to an official in the Iraqi defence minis@Businessdayng

try. It said the coalition would be “repositioning forces” in the coming days and weeks “to prepare for onward movement”. The letter also hinted that the US understood the Iraqi government’s wish for foreign troop withdrawal. “We respect your sovereign decision to order our departure,” it said. President Donald Trump had responded to the non-binding parliamentary vote by threatening Iraq with sanctions if it forced out American troops. Adel Abdul Mahdi, Iraq’s caretaker prime minister, wasted no time in pressing the US to begin pulling out in a meeting with Matthew Tueller, the US ambassador to Baghdad on Monday. Mr Abdul Mahdi, who had recommended parliament vote in favour of expelling foreign troops, stressed the “necessity of joint work to implement the withdrawal of foreign forces” in accordance with parliament’s decision, according to the prime minister’s office. About 5,000 US military personnel form the backbone of an international coalition formed to help Iraq fight Isis in 2014, and have been training and assisting Iraq’s security forces. The antiIsis coalition would be unlikely to continue without the US army, which provides protective cover to its partners.

Wednesday 08 January 2020

BUSINESS DAY

NATIONAL NEWS

Spain’s parliament confirms Pedro Sánchez as prime minister in tight vote Socialist leader to take office at head of country’s first coalition in modern history DANIEL DOMBEY

pain will have a coalition government for the first time in its modern history — including ministers from the far-left — after parliament confirmed Pedro Sánchez as prime minister by a wafer-thin margin. Tuesday’s 167-165 vote, which came after a furious debate in the country’s chamber of deputies, paves the way for Mr Sánchez to be sworn in on Wednesday at the head of a coalition of his Socialists and the radical left Podemos movement. In a combative speech ahead of the vote, Mr Sánchez portrayed the new government as a break with four years of political instability in which Spain held four general elections and lacked a strong government. “There are only two options: either a progressive coalition or a continuing impasse for Spain,” he said, as he called on the right to accept the result of the last, inconclusive election in November, when the Socialists came first but fell far short of an overall majority. The new administration — which will be the first to include Communist ministers since the 1936-1939 civil war — plans to increase taxes on big corporations, bolster collective bargaining, reduce carbon emissions and combat gender-based violence. The vote is a personal achievement for Mr Sánchez, who had previously tried and failed to win parliament’s backing to form a government in both 2016 and 2019. He came to power 18 months ago only through winning a

vote of no confidence in the previous centre-right administration. But the tiny margin indicated the new administration’s limited room for manoeuvre, while the angry debate highlighted the increasing polarisation of Spanish politics. In bad-tempered exchanges rightwing politicians rounded on Mr Sánchez for his reliance on Catalan and Basque separatists in Tuesday’s vote. “You are the Trojan horse [being used] to destroy the state,” said Pablo Casado, the leader of the centre-right People’s party, as both sides made references to the civil war and rightwing deputies shouted “Long live Spain!” and “Long live the king!”. “If you satisfy the demands of your partners against the system, Spain will be broken. If you do not, they will throw you on to the street.” The Socialists and Podemos have only 155 members of the 350-seat chamber of deputies, meaning that to take office the government required the abstentions of the ERC, the biggest pro-independence Catalan party, and of EH Bildu, a far-left Basque secessionist party. The Catalan independence dispute is the most divisive issue in Spanish politics today, while many rightwing speakers evoked the bloody legacy of Eta, the now disbanded Basque group that killed more than 800 people over four decades. Mr Sánchez had sought to avoid both a coalition with Podemos — which he said in September would keep him awake at night — and relying on the Catalan and Basque separatists.

France and US seek to resolve digital tax dispute Officials to hold talks to head off new round of US trade sanctions VICTOR MALLET

rance and the US have given themselves two weeks to resolve a bitter trade dispute over a new French digital tax targeting big tech companies such as Google and Amazon, Bruno Le Maire, the French finance minister, said on Tuesday. Mr Le Maire, faced with the imminent prospect of a new round of US sanctions that could subject $2.4bn of French champagne and other products to 100 per cent tariffs, said he and Steven Mnuchin, US Treasury secretary, had “agreed to redouble the effort in the coming days to find a compromise on digital tax in the framework of the OECD”. They are due to meet again at the World Economic Forum in Davos later this month. Mr Le Maire was speaking after a meeting in Paris with Phil Hogan, the EU’s new trade commissioner, who described digital taxation as “a very major bone of contention with the US”. Mr Hogan said: “We will look at all possibilities if any tariffs or measures are imposed by the United States. The European Commission will stand together with France and all other member states who wish to have the sovereign right to impose digital taxation on companies in a fair way.” France and several other European nations, including the UK,

argue that big tech companies have not been paying fair levels of tax on profits generated in some of their biggest markets because they are able to divert those profits to tax havens. Mr Le Maire, who says France will abolish its national digital tax as soon as an international minimum taxation level is agreed at the OECD, called the US sanctions plan “unfriendly, inappropriate and illegitimate” and said France would react and take its case to the World Trade Organization if the new tariffs were imposed. “We would enter into a trade conflict between the United States and Europe,” said Mr Le Maire. “Is that what we want? No one wants there to be a trade conflict . . . It’s not even a French problem, it’s a more general problem between the US and Europe.” At the end of last year, the US reversed its previous stance on the multilateral negotiations at the OECD, with Mr Mnuchin saying the US had “serious concerns” about plans about a proposed new system of international corporate taxation. Paolo Gentiloni, the EU’s economy commissioner, responded to the US move by saying the bloc would be ready to revive its own plans — originally pushed by France but ultimately foiled by a few member states — for an EUwide digital tax if the OECD talks failed.

Tokyo prosecutors obtain arrest warrant for Carole Action against former Nissan boss’s wife comes 24 hours before his expected Beirut press conference LEO LEWIS, KANA INAGAKI AND CHLOE CORNISH

rosecutors in Tokyo have obtained an arrest warrant for the wife of Carlos Ghosn as the Japanese justice system responded aggressively to the former Nissan chairman’s escape from its clutches last month. The prosecutors announced the warrant for Carole Ghosn’s arrest on Tuesday evening — about 24 hours before her husband is due to hold a potentially explosive press conference in Beirut. The prosecutors alleged in the statement that Mrs Ghosn gave false testimony last April when she was questioned by judges over payments made by a Nissan subsidiary to an Omani dealer. In a move that has already sent shudders through Japanese officialdom, Mr Ghosn previewed the Wednesday press conference by telling a US television interviewer that he would show “actual evidence” and reveal the names of Nissan executives and Japanese government officials whom he claims plotted a

coup that brought him down. A spokeswoman for Mr Ghosn and his family in Beirut pointed out that Mr Ghosn’s fourth arrest in Japan last April came after he announced he was to hold a press conference. The day before he was due “to speak out freely for the first time, they issued an arrest warrant for his wife Carole Ghosn”, the spokeswoman said. “Nine months ago, Carole Ghosn voluntarily went back to Japan to answer prosecutors and was free to go without any charges,” said the spokeswoman, who added: “The issuance of this warrant is pathetic.” Obtaining an arrest warrant for Mrs Ghosn may be designed to target her status as an American passport holder. Although Japan has no extradition treaty with Lebanon, and government officials ascribe a low chance of convincing Beirut to hand Mr Ghosn over to face trial, Japan does have such a treaty with the US. In the face of limited options to bring Mr Ghosn back, a separate government official did not entirely rule out the option of taking economic measures to apply pressure

on Lebanon. “We are assessing Lebanese law to see whether various diplomatic efforts are possible, and we will be working closely with foreign ministry officials in considering our response,” the official said. The prosecutors’ targeting of Mr Ghosn’s wife follows more than a week of speculation over whether Mrs Ghosn, who was not allowed to visit her husband during his second stint on bail, played any role in organising his escape. Diplomatic sources say that people close to Mrs Ghosn were involved in Mr Ghosn’s dramatic exit from Japan by bullet train and private jet but she and her husband deny it. The allegation of false testimony revolves around $35m in payments that were made to Suhail Bahwan Automobiles, an Omani distributor with ties to a friend of Mr Ghosn, between 2011 and 2018. People familiar with the case have said part of that money was allegedly diverted to Beauty Yachts, a company owned by Mrs Ghosn, to buy a €10m luxury yacht via a Lebanese company called Good Faith Investments, which was set up by Mr Ghosn’s former lawyer, and other vehicles linked to Mr Ghosn.

UBS to cut 500 jobs in wealth management overhaul

New division chief Iqbal Khan makes first major move since joining from Swiss arch rival STEPHEN MORRIS

BS is preparing to cut 500 jobs in wealth management, the latest move by the division’s new chief executive Iqbal Khan to revive performance at the world’s largest wealth manager. Switzerland’s largest bank is merging its private-bank financing and trading operations with those at the investment bank, according to an emailed memo on Tuesday seen by the Financial Times, which was confirmed by a spokeswoman. The changes follow UBS’s plans, reported last month, to break up its dedicated unit for the ultrawealthy. Mr Khan and his USbased wealth co-head Tom Naratil said in the memo on Tuesday that the latest move “will accelerate decision-making and time to market . . . reducing organisational duplication and increasing business unit autonomy, which comes with more accountability.” About 500 jobs will be lost in the overhaul, equivalent to 2 per

cent of the wealth-management’s global workforce, according to two people familiar with the plans. The FT reported last month that executives have become concerned the bank is “too bureaucratic”, with some people suggesting that several layers of management could be eliminated without damaging performance. Tuesday’s memo says the changes will allow employees to spend more time with clients and create a “division agnostic approach to financing” by more closely linking wealth and asset management staff with traders at the investment bank. Executives say dividing clients into brackets based solely on the overall value of their assets, rather than how they deploy them, is no longer relevant. The overhaul is the first major move by Mr Khan, who joined from arch rival Credit Suisse amid a swirl of controversy three months ago. UBS chief executive Sergio Ermotti has charged him with reviving the fortunes of the $2.5tn wealth management business. Mr Khan successfully

pursued a similar lending-driven and regional strategy during his six years at Credit Suisse. Under Mr Khan’s predecessor Martin Blessing, the wealth management division suffered a 10 per cent drop in pre-tax profit in the first nine months of 2019 as inflows slowed and clients shifted to more conservative products, or moved into cash, in light of a more uncertain geopolitical and macroeconomic outlook. UBS has been forced to start passing negative interest rates on to its richest clients and is also undergoing a simultaneous overhaul of the struggling investment bank, which could see hundreds more roles go. Its shares have fallen 1 per cent in the past 12 months and lost about a fifth of their value in the last three years. Mr Khan and Mr Naratil hope that closing the expensive, standalone ultra-high net worth (UHNW) division and folding it into the global family office (GFO) will reduce expenses and boost high-margin lending to a wider range of customers.

Wednesday 08 January 2020

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

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Digital currencies will not displace the dominant dollar Proposals of a ‘synthetic hegemonic’ alternative face steep obstacles GITA GOPINATH

The writer is IMF chief economist he global discussion on the future of money has been irreversibly altered in the six months since Facebook announced plans for a digital currency. While Libra’s own prospects have dimmed, major central banks are considering whether “public” digital currencies are needed to fill a gap in retail payment needs. Some analysts suggest that the addition of private and central bankbacked digital currencies could provide the long expected but elusive shock that finally dislodges the US dollar from its decades-long dominance in global trade and finance. These technological advances could also become the ingredients for a “synthetic hegemonic currency” — a digital basket of reserve currencies — as recently proposed by outgoing Bank of England governor Mark Carney. While these are intriguing possibilities, they are improbable in the near term. Improvements in payment technology may have lowered the cost of switching from cash to digital payments, but there is little evidence they have done much to reduce the expense of moving among currencies. Such costs are nonpecuniary. Widely-held perceptions of the dollar’s safety and stability have kept it dominant in the international monetary system for decades. The dollar holds strongly reinforcing roles in trade invoicing — it accounts for five times the US share of world trade — and global banking. These have created large network effects: the more people use the dollar, the more useful it becomes to everyone else. This has been reinforced as emerging markets, which rely extensively on the dollar, increase

their share of global economic activity. Their share of global domestic product now stands at 60 per cent. Advances in payment technologies do not address fundamental issues of what it takes to be a global reserve currency. Consider the euro, which has been the leading contender to replace the dollar over the past 20 years. Its impact on the dollar’s dominance has been modest at best, owing to financial fragmentation, inadequate fiscal risk-sharing, and slow progress on the euro area’s governance framework. Uncertainty about the long-term stability of the eurozone does not help. It is difficult to imagine how technology would address these issues. The dollar’s status is bolstered by the institutions, rule of law, and credible investor protection that the US is seen as providing. Simply raising the supply of an alternative currency will not be enough to surmount these considerations. Chinese efforts to internationalise the renminbi have met only limited success despite a policy push and liquidity support through bilateral swaps with more than 30 central banks. When sovereign governments, investors, and traders are confronted with digital currency choices, they are likely to reassess what currency to use for transactions across borders. Their choice will be based on many of the same factors as in the past — liquidity, stability, convertibility — but also new concerns, such as the technological superiority of the issuing country. This latter issue could become a decisive factor, given legitimate concerns about privacy and security with digitised monies. Few sovereigns will meet such criteria. The US may parlay its leadership in combating global money laundering and terrorism finance into making the dollar the dominant digital currency.

Goldman’s consumer unit still accounts for small sliver of profits Bank heavily reliant on established business even as it pushes toward Main Street LAURA NOONAN

oldman Sachs’ consumer division generated just 5 per cent of the group’s pre-tax earnings in the third quarter of 2019, new disclosures reveal, highlighting how heavily reliant the firm still is on its well-established businesses. The 151-year-old Wall Street company, which will hold a landmark investor day on January 29, revealed divisional earnings late on Monday as part of a transparency drive under chief executive David Solomon and finance boss Stephen Scherr. The filings show that Goldman’s consumer and wealth management unit, which includes online bank Marcus and the newly-launched Apple Card, generated $124m of Goldman’s $2.4bn pre-tax earnings in the three months to end of September. The division’s net revenues

for the quarter were $1.3bn, around 16 per cent of Goldman’s total. The consumer and asset management pre-tax profits in the third quarter were an improvement on the prior two quarters. Revenue growth has been modest, up only $14m from the most recent quarter from the last quarter of 2018, the first period for which Goldman disclosed the data. The biggest earning division in the third quarter of 2019 was global markets, home to the group’s trading unit, which earned $1.2bn on revenues of $3.5bn for the three month period, followed by investment banking, which made almost $800m of pre-tax profits on $1.8bn of revenues. Asset management, a key area slated for growth in Goldman’s strategy as the bank builds out its private equity investing platform, made pre-tax profits of $364m in the third quarter on revenues of $1.6bn. www.businessday.ng

House prices in the UK rose 33% from 2010-2019 compared with 117% in the previous decade

UK house price affordability worsens over past decade Would-be homeowners struggle as rises exceed earnings growth VALENTINA ROMEI

ouses in the UK have become increasingly unaffordable over the past decade, despite average price growth slowing significantly compared with the previous 10 years, analysis of data released on Tuesday indicated. House prices in the UK rose 33 per cent from 2010-2019 compared with 117 per cent in the previous decade, according to a Nationwide Building Society report released on Tuesday. However, the increase still exceeded that of earnings, resulting in reduced affordability. Despite a downward trend since 2017, the house price-toearnings ratio — a measure that indicates reduced affordability when it is high — stood at 5 in the fourth quarter of 2019. This was higher than 4.4 in the same quarter of 2009 and close to the all-time high of 5.4 registered at the end of 2007, Nationwide reported. An FT assessment of the Nationwide data shows that in the past 10 years, the house price-to-

earnings ratio for first-time buyers averaged 4.5 across the UK. This is the highest of any decade since the Nationwide data was first gathered in the 1980s. “The pace of adjustment [in the house price-to-earnings ratio] has been very slow”, said Hansen Lu, property economist at Capital Economics. “We expect house prices to stay high relative to incomes for the foreseeable future . . . [which] will continue to constrain house price growth over the next few years.” Bar chart of Average house price growth, % showing London house prices increased the most in the last decade London house price growth was twice as fast as the national average over the past decade, despite a contraction over most of 2019. “The last decade has seen a significant widening in the gap between the least affordable and most affordable regions,” said Andrew Harvey, a Nationwide senior economist. London’s house price-to-earnings ratio averaged 7 in the past decade, the highest of any region and well above the 4.5 of the 2000s and 3.3 of the 1990s. The region

with the lowest ratio over the past decade was Scotland, where it was 3.2. Column chart of House pricesto-earnings ratio for first time buyers, average of quarterly ratios showing UK houses are becoming increasingly unaffordable “For the property market, the cooling of price inflation triggered by the decision to leave the EU was arguably a net positive, especially in London and the south-east,” said Jonathan Samuels, chief executive of property lender Octane Capital. But, he added, the high house price-to-earnings ratio “is still a massive obstacle for the majority of would-be homeowners”. Housebuyers can at least enjoy record low mortgage rates. The cost of servicing the typical mortgage as a share of take-home pay shrank to 34 per cent over the past decade, compared with 36 per cent in the 2000s, according to FT calculations. But that might not last for long. “Mortgage interest rates are more likely to rise than fall over the next decade, which will further constrain house price growth,” said Mr Lu.

Oil slips and stock markets rise as investors reassess Iran fears A measure of risk sentiment returns following two days of losses PHILIP GEORGIADIS

lobal markets rebounded while oil gave back some of its sharp gains on Tuesday, as investors reassessed the likelihood of direct confrontation between the US and Tehran. Asian stocks rose as a measure of risk sentiment returned to the market following two days of losses. Japan’s Nikkei rose 1.6 per cent, largely recovering the previous session’s sharp fall, while Australia’s ASX also outperformed with a gain of 1.5 per cent. Europe’s broad Stoxx 600 index climbed 0.4 per cent, with markets in Germany, France and the UK all advancing. S&P 500 futures rose 0.1 per cent. Brent crude fell 1 per cent to trade at $68 a barrel. It has gained nearly 3.5 per cent this year on fears over Middle East supply

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disruptions. “The market continues to await any signs or hints on how Iran may retaliate to last week’s US air strike,” said Warren Patterson, head of commodities strategy at ING. Mr Patterson noted that the US State Department has warned Saudi oil facilities are at risk of attack, while there are also worries over Iraqi supply after President Trump waded into a confrontation with Baghdad over the future of US troops in the country. In a chaotic afternoon in Washington, the US denied it is pulling its forces out of the country after a leaked letter emerged indicating preparations for a withdrawal. “There’s been no decision whatsoever to leave Iraq,” said Mark Esper, the US defence secretary. Strategists at Wall Street bank Goldman Sachs said they remain @Businessdayng

“mildly pro-risk” in asset allocation looking ahead to 2020, following a year which was “a bull market in everything”. “The recent developments in the Middle East as well as the US elections are likely to keep the markets’ focus on geopolitical risks, which might weigh further on investor sentiment.” Haven assets were steady, with gold flat but still trading around 7-year highs on the increased geopolitical tensions. Sovereign bond yields hovered in a tight range as a rally in government bonds ran out of steam. “With a near-term hard Brexit scenario significantly reduced and the signing of a ‘Phase 1’ trade deal between the US and China looking likely on 15 January, we now see how the US-Iran relationship unfolds as the largest macro driver of rates in coming weeks,” said RBC strategist Peter Schaffrik.

Wednesday 08 January 2020

BUSINESS DAY

ANALYSIS

The Green Beret ex-con who allegedly helped Carlos Ghosn escape Mike Taylor has transformed a military career into a private security profession overseeing high-stakes rescues JOSHUA CHAFFIN AND LAURA PITEL

s a member of the US Army’s elite Green Berets he was trained to make daring parachute jumps behind enemy lines. As a security contractor he boasted deep experience across the Middle East, particularly in Lebanon, and had overseen high-stakes kidnapping rescues. He had also served time in prison for a bribery scheme involving $54m in US defence department contracts. In others words, Mike Taylor appeared to have the right skills to help pluck Carlos Ghosn, the former Nissan chief executive, from Japan, where he was embroiled in criminal proceedings, and spirit him to his native Lebanon. Mr Taylor’s purported handiwork as the orchestrator of Mr Ghosn’s daring escape has emerged in recent days, inspiring a sense of awe and wonder

Mr Taylor had been toiling to rebuild his security career after his criminal conviction while also hustling for cash. He launched a sports performance drink called Vitamin1. In a recent promotional blitz, Mr Taylor touted Vitamin1 as the official sports drink of the American football camp run by Rob Gronkowski, the former New England Patriots star. Born in Staten Island, New York, Mr Taylor endured an itinerant childhood. After high school in Massachusetts, he followed his stepfather into the army, quickly moving into special forces. His cold war-era speciality was known as “special atomic demolition munition”. He and other operatives were trained to jump from planes at high altitudes, deploying their parachutes only at the last instant. Their mission was to detonate portable nuclear weapons in Germany’s Fulda Gap in the event of a Soviet

Carlos Ghosn’s flight to his native Lebanon began with a 300-mile trip aboard a bullet train from Tokyo to Osaka

around the world at an episode that played out like a James Bond film. It began, according to Japanese media reports, with a 300mile trip aboard the country’s famous bullet train from Tokyo to an airport in Osaka whose security procedures had a soft underbelly. Mr Ghosn was then loaded into a packing case typically used for musical equipment to avoid passport controls. From there he departed on a private jet, arriving in Turkey, where he swiftly climbed aboard another private plane bound for Beirut. Mr Taylor, 59, who transformed a military career into a series of private security businesses, did not respond to requests for comment. But he reportedly spoke publicly for the first time about the fugitive businessman in an interview with a news site for US military veterans, published late on Monday. The site, Connecting Vets, said that Mr Taylor had declined to speak on the record about the extraction of Mr Ghosn from Japan and whether or not he was involved. It quoted him as saying: “The bottom line is this guy was a damn hostage that’s what it was. If he popped out of North Korea or China it would be a totally different narrative.” Prior to the Ghosn escape,

invasion. A turning point in Mr Taylor’s life came in the early 1980s. He was dispatched to Lebanon to assist Christian militias after the assassination in 1982 of the country’s president-elect, Bachir Gemayel, and the Israeli invasion. “It was through this work that Mr Taylor would begin a life-long relationship with Lebanon’s Christian community,” his attorney wrote in a memorandum arguing for a lenient prison sentence. Mr Taylor left the army the next year but returned to Lebanon to work as a private security contractor, helping to train Christian forces. He learnt Arabic, and also courted Lamia Abboud, whom he married in 1985. Lebanon also appears to be where he met George Zayek, a man who would work for Mr Taylor’s security companies in the Middle East and was, according to authorities, also involved in Mr Ghosn’s escape. Mr Taylor and his wife returned to America and settled in a four-bedroom house in the rustic town of Harvard, Massachusetts. According to his lawyers, he used his experience to work as an undercover agent helping the US Drug Enforcement Agency, and others, to bust drug and counterfeiting operations back in Lebanon. www.businessday.ng

Bust-up in adland: can M&C survive without Saatchi? Founder’s exit has brought to an end the most influential partnership in modern advertising ALEX BARKER

he year was 1995 and the Saatchi brothers, once lords of global advertising, were pitching to resurrect their careers after being ousted from the firm that bore their name. British Airways executives arrived at a swish Mayfair building. But all was not what it seemed. Maurice and Charles had borrowed the office from a friend, shipping in art and staff for the day to give it some Saatchi sparkle. In the pitch room itself was an even more far-fetched sight: three manshaped cardboard cutouts. The props were the so-called “three amigos” — Jeremy Sinclair, David Kershaw and Bill Muirhead — fellow exiles from Saatchi & Saatchi and partners in the new breakaway Saatchi venture. Stuck on “gardening leave”, which meant in theory they were not supposed to be involved in the pitch, the trio had recorded a video for the airline executives. In it they tore around a field on tractors, wearing huge sombreros, and with Mr Sinclair chewing on a Romeo y Julieta cigar. The chutzpah was classic Saatchi, what biographer Alison Fendley called the executives’ modus operandi: “Promise anything now and work out how it can be achieved later.” It did the trick. BA moved from Saatchi & Saatchi, an era-defining ad agency for companies and politicians alike that became the world’s biggest before the brothers were ejected in a boardroom coup. With BA onboard, overnight the new business — M&C Saatchi — had a foothold in the global advertising market. “I was genuinely interested to see whether lightning would strike twice,” says Mr Sinclair. “I think it did.” That goes for the good and the bad. Almost 25 years on, M&C Saatchi is in crisis, torn apart by an accounting scandal, boardroom intrigue and another extraordinary Saatchi exit. The parallels with Saatchi & Saatchi are not hard to spot. Like in the 1990s, the M&C Saatchi finances were run to the brink and its share price has tumbled. One more London-based advertising business has Saatchi on the nameplate, but no Saatchi in the building. With a hint of relish, David Herro, a US investor who battled the Saatchis in the 1990s, says: “What we are seeing today [at M&C Saatchi] is not a surprise to me.”

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There is one big difference. This time Lord Maurice Saatchi sided with the non-executive directors, who have criticised the way his former partners ran the business. On a dramatic December afternoon, he walked out with M&C Saatchi’s three independent board members, a cross-section of Britain’s establishment: Michael Dobbs, a Conservative peer who wrote House of Cards; Michael Peat, a knight who once served as the Queen’s treasurer; and Lorna Tilbian, a City adviser and media industry financier. His one-sentence resignation letter to his lifetime colleagues was signed: “Regrets, Maurice”. The bad-tempered dispute was over M&C’s financial health, the role of independent directors and the blame for what went wrong, according to several witnesses. But it was more than just a spectacular boardroom bust-up. With characteristic brio, the Saatchi resignation ended possibly the most influential and long-lasting partnership in modern advertising, one that held together for the best part of half a century before being brought low by fear of failure, a touch of hubris and the personal wrench of a bereavement. The three amigos, though, are sticking with the firm: Mr Sinclair, the 73-year-old creative force of the partnership, as executive chairman; the chief executive Mr Kershaw, the youngster of the group at 67; and executive director Mr Muirhead, an Australian who first started working with the Saatchi brothers in 1969 aged 23. One rival ad executive says the global M&C agency network, made up of entrepreneurs who part-own the 141 companies, sometimes felt like the founders “were living their past glory while other people were doing all the work”. Succession questions have been raised for 15 years. But the financial storm has only strengthened the partners’ resolve to hold on and steady the ship. Now the question is whether a trio that helped sell Margaret Thatcher, Concorde and Silk Cut cigarettes to the world can again reinvent themselves — and the bruised Saatchi brand — in the face of adversity. “We will stick together, sort this out and then we will work to find successors,” says Mr Sinclair. “The thing I love . . . is the model of individual entrepreneurs. I’m convinced because it is the future. I would hate the model to die because of a financial screw-up.” What made the early Saatchi @Businessdayng

& Saatchi a success was brazen self-confidence (the “nothing is impossible” motto), a knack for publicity (the brothers announced their arrival in 1970 with a full-page ad in the Times) and a nonconformist streak (no potential client was off-limits). They did some groundbreaking corporate ads. But it was Thatcher’s 1979 election campaign that really cut through. After the release of their “Labour Isn’t Working” poster, then-chancellor Denis Healey accused the Saatchis of “selling politics like soap powder”. It made their name. The business was a magnet for talent. Alumni include Martin Sorrell, the financier who built WPP into the world’s biggest advertising group; Tim Bell, the late PR executive and Thatcher spinner; Adam Crozier, the former head of ITV television; and Steve Hilton, the Downing Street adviser turned Fox News anchor. Sir Martin once described Saatchi & Saatchi as the most effective agency he had ever seen: “We were in the coup business.” An acquisition spree made Saatchi & Saatchi Europe’s biggest agency by turnover in 1981, and the biggest in the world by 1986. The Saatchi expenses — and debt pile — grew just as fast. The brothers’ reputation was compared to “Howard Hughes or one of the de Medicis” in the New York Times.. Peak exuberance came with a tilt at buying Midland Bank in 1987. “Everything had gone so well for so long we thought we could walk on water,” said Lord Saatchi in 2001. “Then the gods looked down and decided, ‘those boys need cutting down to size’.” M&C was the atonement. The Golden Square offices in London’s Soho were painted stark white. There was to be no debt, and only organic growth through “a federation of entrepreneurs” (typically with a 20 per cent stake in their businesses). The creative mantra: “Brutal simplicity of thought.” Line chart of Share price (pence) showing M&C Saatchi’s share price has tumbled after accounting scandals Charles Saatchi caused an early row by overspending on flowers, then stepped back from M&C to concentrate on art. But the other four acted as equal partners, with a veto on decisions. Their seventh floor office was designed to be open plan, and secret-free. Until its flotation in 2004, there were no outside investors to accommodate.

Wednesday 08 January 2020

BUSINESS DAY

POLITICS & POLICY PDP governors defend Umahi, says anti-party ‘Oshiomhole works against Oba of Benin’s peace move’ activity allegation against him baseless SOLOMON AYADO, Abuja

h e P e o p l e ’s Democratic Party (PDP) Governors’ Forum on Tuesday denied that one of its members, Dave Umahi of Ebonyi State is involved in anti-party activities as recently alleged in some quarters, saying the fabricators of the information are envious of the governor over 2023 presidency. There was circulated online reports that Umahi belonged to both the PDP and the All Progressives Congress (APC). But the PDP governors in a statement issued in Abuja and signed by the DirectorGeneral of the forum, Earl Osaro Onaiwu, condemned the report and said it was blatant falsehood orchestrated to denigrate the image of the Ebony State governor. The governors noted that those circulating the fake news are simply envious of the track records and projects that the governor has so far achieved in Ebonyi State. However, they insisted that Governor Umahi has the constitutional right to contest for whatever office in the land after he would have left the governorship seat in 2023. “The news circulating online that our dear membergovernor, H.E. Engr. David Nweze Umahi of Ebonyi State said he belongs to both the PDP and APC is a blatant falsehood aimed at tarnishing the image of the governor

and as well derailing him from his focus. The author of that publication acted in bad fate, with malice and certainly with ulterior and sinister motives. “On several occasions and at all times even in the face of stiff opposition and blackmail, Gov. Umahi has always proven to be a committed party man. He loves the party; he loves the PDP Governors Forum, and they in turn love and cherish the friendship and bond between them. “It is therefore, no gainsaying that all these are about 2023, but may we hasten to add that there are more civilised and cultured ways to go about it. “Yes, he like every other

key-player in the political arena, may have his ambitions and dreams upon the end of his current service tenure in 2023; he may aspire for any of the offices at the Presidential Villa, which of course he is constitutionally fit and qualified for, but that will certainly be on the platform of the PDP. “We have enough reasons and instances to believe that he may have been quoted out of context in the now-viral online publication. We smell mischief. “We see the handiwork of detractors who are too scared of his credentials and constantly growing legacies so far attained in governance in Ebonyi State.” According to the state-

ment, the Forum further said: “We perceive falsehood from the pit of hell taken too far by those who are envious of the numerous gigantic projects his administration is handling; detractors who hate the fact that in the past four, going to five years, Ebonyi State has now become a huge construction site for infrastructural development, too numerous to mention. “Finally, we wish to emphatically state that Governor Umahi is 100percent and above dedicated to the People’s Democratic Party. We can boldly say that he has never and will never indulge in the profanity of playing double standards, not with a party like PDP which he holds dear to his heart.”

President Muhammadu Buhari (r) with Bola Tinubu, All Progressives Congress (APC) chieftain, during the visit of APC chieftain to the president at the Presidential Villa in Abuja on Tuesday.

2023 will be no different from 2019 elections, unless - Onovo INIOBONG IWOK

artin Onovo, a former presid e nt i a l c a n didate of the National Conscience Party (NCP), has said that the 2023 general election in Nigeria would be no different from 2019 general election unless it is not going to be supervised by President Muhammadu Buhari. He also supported the agitation for the zoning of the presidency to Southern Nigeria in 2023, saying that it is the turn of the Igbo to rule the country. Onovo, who contested the presidential election in 2015, said democracy was about justice, equity and representation which necessitated that every group should be treated fairly, while stressing that campaign for the 2023 general

election may be too early. Since the advent of the Fourth Republic in 1999, there has been a rotation of the presidency between the South and the North in Nigeria. The arrangement was practised during the 16 years the PDP ruled the country; although it is not constitutional. Based on the arrangement, it is expected that power would shift to the South in 2023 after the incumbent President, Muhammadu Buhari of the ruling All Progressives Congress (APC), a northerner, who assumed office in 2015, must have concluded the constitutional two terms in office. However, speaking in an interview with BusinessDay Tuesday, Onovo said the continued focus on 2023 election rather than governance was caused by the www.businessday.ng

ruling party’s nonchalant attitude. “My view is that democracy requires representation, fairness and justice and that representation at the highest level requires that Nigeria zones the presidency to the Southeast. But it is too early to discuss 2023 and you don’t jump the gun. “That time table from INEC may not happen until 2022, it is the general ambience of lawlessness caused by the ruling party that has caused this situation,” Onovo said. Speaking further, the former presidential candidate, said the 2023 presidential election may not hold or make any meaningful change if the current status quo remains. He predicted that the electoral process would be hijacked, while the election result manipulated by

IDRIS UMAR MOMOH & CHURCHILL OKORO, Benin

s the Edo State chapter of the All Progressives Congress (APC) crisis remains unabated, the factional leadership of the party has accused Adams Oshiomhole, the national chairman of the party of working against the peace move by the Oba of Benin. The factional state publicity secretary of the party, Joseph Osagiede, who spoke with newsmen at the party’s secretariat in Benin City yesterday, alleged that the former governor of the state, Oshiomhole, truncated the Oba’s peace move. According to him, the APC crisis in Edo state is gradually coming to an end because we know that Edo People’s Movement (EPM) is already folding up and also its members are reaching out to us that they want to come back home. “I believe that the national chairman of the party, Adams Oshiomhole will also learn some lessons for what is going on because for Oba of Benin, Ewuare ll, to have led Benin traditional council to meet with President Muhammadu Buhari last year on this matter, Comrade Adams Oshiomhole to still be harbouring these dissidents, forming EPM and still supporting them, he is working against the wish of Oba. “Once Oba has expressed a wish about anything it

becomes a command to us all in Edo State. So, the Oba’s wish is a command that there should be peace on this imbroglio. “Recently, the Oba also in a meeting with Edo State council of traditional rulers and chiefs announced that we should go into prayers and fasting to avoid calamity this year all because of this political imbroglio. “Any wise man, any wise leader, any wise political chairman that knows that he is directly responsible for all this crisis should take a cue from such statement made by the Oba by calling the governor to meet with the monarch and says ‘Baba we have reconciled and that we don’t want crisis in the state any longer’. That is how you will know a child that is well brought up,” he said. He also disclosed that the Governor Obaseki-led faction of the party rejected the Senate President Ahmed Lawan-led reconciliation committee set up by the national leadership of the party to resolve the crisis in the state. He called for the setting up of a reconciliatory committee to be set up by a neutral body like the President and Benin monarch. Reacting to the allegation that Adams Oshiomhole worked against the wish of Oba of Benin, Chris Azebamwen, the suspended publicity secretary of the party, described the allegation as baseless and unfounded.

January election rerun: Let the people’s will prevail - Buhari members of the cabals in the presidency in 2023 if the current administration still remains in office till then. “There would be no 2023 from my point of view. From elections held in 2019, was there such high number of accredited voters in Borno State as presented by INEC?? If you believe that you believe anything; if Buhari is in office in 2023, then 2019 would repeat. If Buhari is out of office, then there would be major political adjustment. “There would be major changes in 2023; idle people can continue to scheme for 2023, which would not exist. Did election count in 2019?” he said. Onovo however, supported the agitation for the amendment of the constitution and the Electoral Act, but added that there was no point amending the Act if it would not be followed.

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....Meets IGP, INEC chairman TONY AILEMEN, Abuja

head of the January, 2020 pending 28 rerun elections, President Muhammadu Buhari on Tuesday charged the Independent National Electoral Commission (INEC), to ensure that the will of the electorate is allowed to prevail in all the elections. The President, who met with officials of the Commission and the Inspector General of Police, Mohammed Adamu, and INEC Chairman, Mahmoud Yakubu, at the Presidential Villa, charged the top officials to ensure that no underhand tricks or manipulation is allowed. A statement by Presidential Spokesman, Femi Adeshina said President @Businessdayng

Buhari told the commission to ensure that the game was played by the rules, without fear or favour. “Those that you declare as winners must be the candidates that the people have chosen. Democracy is about free will, and the will of the people must be allowed to prevail. Get your acts right, and leave no room for underhand tricks or manipulation,” he said. This is coming against the backdrop of the ugly incidence that trailed the last Kogi gubernatorial elections. The President said he was determined to give Nigeria an electoral system that meets with best practices anywhere in the world, and charged the electoral umpire to stick to the rules of fair play and adherence to justice.

Wednesday 08 January 2020

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Tuesday 07 January 2020 Company

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PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 398,106.53 11.20 3.70 357 27,440,070 288,985.11 8.45 4.97 596 86,782,674 UNITED BANK FOR AFRICA PLC ZENITH BANK PLC 659,326.37 21.00 5.00 934 73,214,429 1,887 187,437,173 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 251,267.05 7.00 0.72 408 34,717,858 408 34,717,858 2,295 222,155,031 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,190,145.60 107.60 -0.37 155 3,413,141 155 3,413,141 155 3,413,141 BUILDING MATERIALS DANGOTE CEMENT PLC 2,556,076.11 150.00 2.74 268 4,686,140 LAFARGE AFRICA PLC. 226,314.53 14.05 1.08 155 10,989,119 423 15,675,259 423 15,675,259 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 346,888.07 589.50 - 13 6,548 13 6,548 13 6,548 2,886 241,249,979 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 11,873.80 4.45 3.49 17 1,596,498 17 1,596,498 17 1,596,498 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 17 1,596,498 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 53,895.92 56.50 - 45 1,266,110 OKOMU OIL PALM PLC. PRESCO PLC 48,150.00 48.15 1.37 39 2,469,630 84 3,735,740 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,500.00 4.25 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,380.00 0.46 -8.00 15 807,017 15 807,017 99 4,542,757 DIVERSIFIED INDUSTRIES JOHN HOLT PLC. 217.92 0.56 - 0 0 S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 41,867.43 1.03 -0.96 91 19,166,095 U A C N PLC. 26,651.99 9.25 - 41 712,780 132 19,878,875 132 19,878,875 BUILDING CONSTRUCTION ARBICO PLC. 521.24 3.51 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 26,268.00 19.90 - 43 563,382 ROADS NIG PLC. 165.00 6.60 - 0 0 43 563,382 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,806.27 1.08 8.00 10 670,000 10 670,000 53 1,233,382 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 7,438.02 0.95 - 2 200 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 65,821.00 30.05 - 46 384,006 INTERNATIONAL BREWERIES PLC. 79,081.93 9.20 -1.08 56 6,428,239 NIGERIAN BREW. PLC. 448,226.36 56.05 -0.09 83 1,444,467 187 8,256,912 FOOD PRODUCTS DANGOTE SUGAR REFINERY PLC 180,600.00 15.05 -0.33 93 2,262,544 FLOUR MILLS NIG. PLC. 88,158.16 21.50 2.38 157 6,641,379 HONEYWELL FLOUR MILL PLC 8,009.50 1.01 - 17 209,702 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 4 97,872 NASCON ALLIED INDUSTRIES PLC 38,416.86 14.50 3.94 27 372,756 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 298 9,584,253 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 19,815.03 10.55 - 19 251,321 NESTLE NIGERIA PLC. 1,165,125.42 1,469.90 - 53 266,831 72 518,152 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 5,866.46 4.69 -0.21 45 1,361,276 45 1,361,276 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 22,234.67 5.60 9.80 55 763,601 UNILEVER NIGERIA PLC. 114,900.11 20.00 - 72 3,424,723 127 4,188,324 729 23,908,917 BANKING ECOBANK TRANSNATIONAL INCORPORATED 139,456.59 7.60 2.70 181 5,638,091 FIDELITY BANK PLC 63,454.81 2.19 -1.79 166 13,269,716 GUARANTY TRUST BANK PLC. 897,650.97 30.50 -1.61 349 17,582,556 JAIZ BANK PLC 19,151.76 0.65 -4.41 37 3,051,009 STERLING BANK PLC. 57,580.84 2.00 -1.96 32 1,938,298 UNION BANK NIG.PLC. 168,900.37 5.80 1.75 67 1,938,379 UNITY BANK PLC 9,351.47 0.80 9.59 22 3,454,555 30,088.08 0.78 5.41 66 10,242,159 WEMA BANK PLC. 920 57,114,763 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 5,197.65 0.75 2.74 39 19,738,336 AXAMANSARD INSURANCE PLC 21,000.00 2.00 - 2 12,450 CONSOLIDATED HALLMARK INSURANCE PLC 2,926.80 0.36 9.09 4 125,525 CONTINENTAL REINSURANCE PLC 22,820.04 2.20 - 0 0 CORNERSTONE INSURANCE PLC 9,279.59 0.63 8.62 6 399,645 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 1 100 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 1,904.09 0.26 -3.70 27 15,366,011 LASACO ASSURANCE PLC. LAW UNION AND ROCK INS. PLC. 2,191.13 0.51 - 0 0 LINKAGE ASSURANCE PLC 3,840.00 0.48 - 1 38,300 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 3 1,100,000 NEM INSURANCE PLC 12,778.82 2.42 - 12 179,598 NIGER INSURANCE PLC 1,547.90 0.20 - 1 88,231 PRESTIGE ASSURANCE PLC 2,960.40 0.55 - 0 0 REGENCY ASSURANCE PLC 1,333.75 0.20 - 0 0 SOVEREIGN TRUST INSURANCE PLC 2,272.89 0.20 - 5 164,036 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 3 50,000 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 1 100 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,683.96 0.35 -2.78 14 482,556 119 37,744,888 MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 2,629.63 1.15 - 2 5,960

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BUSINESS DAY Wednesday 08 January 2020 www.businessday.ng

The Mekong Delta: An unsettling portrait of coastal collapse One of Asia’s biggest wetlands is subsiding into the sea — and climate change is only partly to blame John Reed

ome environmental disasters present themselves over years; others come with a bang — or a splash. The latter happened one day in August, when residents of Binh My, a commune in Vietnam’s lush Mekong Delta, heard a loud cracking sound. They went outside to watch a 30-metre-long chunk of the highway that runs alongside their houses collapse into the river as the asphalt gave way. One of Asia’s biggest wetlands is subsiding into the sea, the result in part of rising sea levels created by climate change. But when asked what caused the collapse, a local farmer who gave his name as Bo points to a crane mounted on a boat mid-river — about a kilometre away — that is mining sand. “They are making the bed of the river deeper and deeper,” he says, miming a scooping action. Researchers monitoring the Mekong say a crisis that has been building on the river for years has turned into a full-blown emergency in recent months. They blame two man-made phenomena: the mining of sand from the riverbed and the building of new dams upriver in Laos and China that are altering the river’s flow, sediment content and even its colour. Mining boats are everywhere in the delta. Sand is in brisk demand for the concrete needed to build Ho Chi Minh City’s high rises and for land reclamation across the sea in Singapore. Yet all the activity masks the growing cost of sand mining, a globally buoyant but deeply opaque and minimally regulated trade. What’s at risk is not an untrammelled eco-paradise, but an economically vital, densely populated region that the Vietnamese call their “rice bowl”. Equivalent in size and population to the Netherlands, the delta is the garden of Ho Chi Minh City and the country’s biggest inland fishery — a leading source of shellfish, fish and fruit. The first dams of 11 planned on the mainstream of the lower Mekong are beginning operations, a development scientists say will change the river forever. Hundreds of kilometres upriver in Laos, two of these came into commission last year, blocking sediment that used to be nature’s way of replenishing the sand that the mining boats dredged. “It’s like your house: when it’s eroded in the foundations, your house collapses,” says Duong Van Ni, chief executive of the Wetland University Network, a group of researchers who have tracked the delta with growing alarm. For a world where the loss of coastal communities is a rising concern, the region offers an unsettling portrait of a future present. Villagers in Binh My told the Financial Times they had been told to move their furniture out of their houses and be prepared to evacuate at short notice. In Thailand to the north, people who live alongside the river say its level has dropped sharply and the normally brown water has turned blue since the Xayaburi dam in Laos began operating in October.

Ecologists call this “hungry water” because it moves faster and causes greater erosion. Just as neighbouring China has discovered in the past two decades, economic lift-off is often accompanied by environmental harm. Last month Vietnam agreed to import more electricity generated by the dams Laos has built in order to sustain an economy growing at a rate of 7 per cent — one of the fastest in Asia. Yet the country is paying with rising levels of pollution, resource exploitation and unchecked development. “Most companies think they aren’t dependent on the river, but if you lose fisheries, then food prices go up and wages go up,” says Marc Goichot of WWF Greater Mekong in Ho Chi Minh City. “It’s reputational risk if you put communities at risk, and regulatory risk if you don’t account for the scarcity of water or sand.” He adds: “It’s all business risk.” The Vietnamese call the delta “Cuu Long” (“nine dragons”) because the river, after running from the Tibetan plateau through six countries, splits into multiple channels on its final approach to the South China Sea. In geological terms, it is young, created about 6,000 years ago from sediment that washed out to the ocean, forming protective sandbars that became land. Mangroves grew, and panthers, crocodiles and other wildlife made it their home before being driven out when humans arrived. About 20 per cent of Vietnam’s 96m people live in the delta, including many of the workers who commute to jobs making clothes, furniture and electronics in and near Ho Chi Minh City, the country’s economic engine room. For more than a century people were enticed or pushed to the delta, from French colonial times through the US-backed Republic of South Vietnam and now under the communist government. Today the delta is “one of the most engineered places on earth”, according to Brian Eyler, south-east Asia director with the Stimson Center think-tank and author of Last Days of

the Mighty Mekong. “The use of the delta is outweighing the ability of the delta to manage itself,” he says. “What we are seeing is diminishing economic returns, and the region is falling behind on economic growth.” Two decades ago, the delta was still gaining land from the sea. Researchers now say the region is losing as much as 12 metres of its coast in some places. Higher water and sinking land are causing more salt water to intrude, upsetting the balance of fresh water, salt water and brackish water on which the delta’s rice, fruit and shrimp farmers rely. A recent paper published by Climate Central, a non-profit organisation, briefly made a splash in Vietnam when it forecast that by 2050 most of the delta would be submerged. However, some questioned the methodology used in the forecast, and researchers say the sea level is rising slowly, for now, at about 3mm a year. A more immediate threat, according to researchers and residents, is land erosion. “Climate change is gradual and adaptable,” says Nguyen Huu Thien, an environmentalist and consultant studying the delta. “Development mis-steps can be corrected with policy change, and in fact policy is changing in Vietnam,” he adds. “But the impact from upstream dams will be serious, permanent and irreversible once the dams are built.” The impact can already be felt on Minh, an island in one of the Mekong channels. Residents used to subsist on fishing, but have recently planted rambutan,grapefruit,longanandother fruit trees to cash in on demand for fruit. A graphic with no description The sense in the community is that they are living on borrowed time. “People are losing their homes, their land, their gardens,” says Bui Hong Nam, a reporter for local TV and radio who has reported on erosion in the area. Ho Van Chien, a local official in the island’s An Binh commune, says two houses collapsed into the river in October, and about 10 households have moved to “the mainland”. The

local people want the government to build a dyke, he says. “If they don’t do it, the land will collapse.” Like others in the delta, he blames the erosion on sand mining. “All the ships go to Saigon,” he says, using Ho Chi Minh City’s historical name. As the delta subsides, urban dwellers will be affected too. Can Tho, the region’s biggest city, has a new South Korean-built bridge that runs nearly 3km across the Hau river, one of the Mekong “dragons”. There is a newly built riverside Vinpearl hotel and Vincom Plaza mall built by Vingroup, Vietnam’s biggest conglomerate. Marring the view of the waterfront, a green fence obscures a part of the riverbank that has collapsed. Six of the delta’s 12 provinces now require “urgent measures”, Vietnamese state media reported in September, and have declared emergencies or cordoned off land near the river’s edge because of erosion. Vietnam’s communist planners have adopted an emergency plan, Resolution 120, outlining measures needed for “resilience” in the delta. In large part, it is focused on finding threatened communities new ways of making a living and places to live. Most of the world’s sand used in construction comes from rivers. It is a commodity that is free of charge, apart from legal and licensing regulations, and mining has been common in Vietnam, Cambodia, and Laos for more than 20 years. Production accelerated over the past decade thanks to demand from construction and infrastructure in Vietnam and land reclamation projects in Singapore. Column chart of Cement production* (tonnes, billions) showing A boom in construction is fuelling demand for sand In response to rampant exploitation, Hanoi has sought to rein in the industry. Its environment ministry has told miners where they can and cannot dig, under threat of prosecution. But researchers say these regulations are easy to get around. On a ferry crossing the Co Chien, another Mekong channel, the local reporter Mr Nam points to a boat

mining mid-river on a weekday morning. The area where the boat is mining is illegal, he says, brandishing an environment ministry map meant to regulate the trade. Sand mining boats use a number of ruses. Because enforcement efforts are carried out by provinces individually, some boats sit mid-river, on the provincial boundaries, ready to dart next-door to evade fines. They also take advantage of the river’s expanse. “They work after midnight — four or five ships — because the government has only enough force to catch one,” says Mr Nam. Even if miners are caught, the fine they pay is small. According to delta researchers and residents, the people in communities most under threat from erosion sometimes clash violently with mining crews, using slingshots or sticks. The backlash coincides with a growing awareness of the price the delta will pay as more dams enter operation. “Given what we know, in the future, when the 11 dams are online, there will be no sand,” says Mr Thien, the environmentalist. “The sand we have now, that’s it.” Vietnam’s authorities are increasingly putting climate change at the centre of policymaking. Environmental problems, such as the 2016 toxic spill at a Taiwanese-owned steel plant, have been a cause of unrest in a country that prizes stability. The government’s Resolution 120, on “sustainable and climate-resistant development” in the delta, attempts to address some of the local issues. “Erosion has been intensified because of sand mining,” says Mai Trong Nhuan, vice-chairman of the Vietnam Panel on Climate Change. He estimates that sediment in the river has been reduced by at least half compared to before the Mekong dams began being built about a decade ago. He says the government has tried engineering measures such as riverside concrete walls, but is increasingly rejecting these on a costbenefit basis. Government is also focused on awareness campaigns, “so people can recognise the near-term danger of collapse”. They are afraid of losing their livelihoods, adds Mr Nhuan: “They have river-based skills.” Vietnam’s government is encouraging mining companies to find other ways of getting sand: grinding it from sandstone for construction, or processing sea sand to make it suitable for landfill, Mr Nhuan says. The country also banned sand exports from 2017, although environmentalists believe miners are finding ways to bypass the ban. Vietnam’s state-controlled press — a good indicator of both official preoccupations, and the boundaries of acceptable debate — has begun reporting what’s happening in the delta. A recent story about Ca Mau, one of the provinces most exposed to the sea, said that authorities were evacuating households and building new housing for 5,000 people. Some of the reports, with images of collapsed roads and houses, make for unsettling reading. “The Vietnamese government is looking for a 180-degree change,” says Mr Eyler. “It’s recognising its mistakes, and that’s helpful.”

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