BusinessDay 08 Oct 2020 by BusinessDay

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news you can trust ** thursday 08 october 2020 I vol. 19, no 667

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Nigeria records successful PE investments despite ownership tussles Analysts say country still suited for big-ticket deals Call for due diligence by founders, PE investors

Seven reforms that will make Nigeria’s petroleum downstream sector competitive ISAAC ANYAOGU

Odinaka Anudu

igeria is replete with tens of rancour-free and successful private equity (PE) investments in spite of ongoing ownership tussles between some Nigerian founders Continues on page 31

L-R: Elijah Owolabi, chairman, Apapa Local Government; Hakeem Odumosu, commissioner of Police, Lagos State; Vicky Haastrup, executive vice chairman, ENL Consortium and chairperson, Seaport Terminal Operators Association of Nigeria (STOAN); Adekunle Oyinloye, group managing director, SIFAX Group; Onari Brown, executive director, Marine and Operations, Nigerian Ports Authority, and Oba Fatai Oyeyinka, Ojora of Ijora land, at the commissioning and unveiling of the new SIFAX Container Terminal, Ijora Causeway, Lagos.

ome private sector stakeholders have given some recommendations they believe would make Nigeria’s petroleum downstream sector competitive. This is coming at a time when lawmakers are

reviewing the Petroleum Industry Bill (PIB). These recommendations are contained in a document seen by BusinessDay. Th e p r i vate s e c to r stakeholders, however, crave anonymity so that Continues on page 31

Thursday 08 October 2020

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news Over $3.9bn expected from private sector investment ... as FEC approves infrastructure projects for concession Obinna Nwachukwu, Abuja

ome key Federal Government investments across the country are billed to generate over $3.9 billion additional funds following approval for them to be sold to private investors. These moribund infrastructure projects have for years become drain pipes to government funds necessitating the need to give them out to private sector operators with requisite experience to manage them. The concession is in line with Federal Government’s policy on public-private partnership (PPP) agreements, aimed at allowing private sector operators manage some non-performing government projects for efficiency and better service delivery. The action, which follows accepted public bidding procedure, is being midwifed by the Infrastructure Concession Regulatory Commission (ICRC) in collaboration with relevant government ministries, departments and agencies (MDA). Section 1 (1) of the ICRC Act, 2005, states that any Federal Government MDA

involved in the financing, construction, operation or maintenance of infrastructure by whatever name called may enter into a contract with or grant concession to any duly pre-qualified project proponent in the private sector for the financing, construction, operation or maintenance of any infrastructure that is financially viable or any development facility of the Federal Government in accordance with the provisions of the Act. In line with this, the Federal Executive Council (FEC) Wednesday, approved the Full Business Case in respect of the Bonny Deep Water Port Project, Port Harcourt Industrial Park, the Nigerian Correctional Service Shoe and Garment Factory Aba and the Port Harcourt – Maiduguri Narrow Gauge project, respectively, for concession. This development allows the respective ministries to proceed to commercial close and eventual signing of concession agreement with successful investors expected to generate over $3.9 billion to the national treasury. The approval formed part of the outcome of FEC meeting in Abuja, yesterday.

Nigeria accounts for 20% of poor in sub-Saharan Africa – World Bank … says Covid-19 to add 150m extreme poor by 2021 HOPE MOSES-ASHIKE

orld Bank on Wednesday said Nigeria with poverty rate of 39.1 percent had the largest poor population (79m extreme poor) in Sub-Saharan Africa (SSA), accounting for 20 percent of the total poor in the region. The Washington DC, United States-based international financial institution, noted this in its biennial Poverty and Shared Prosperity Report released on Wednesday, October 7, 2020. Almost half of poor people in SSA live in just five economies: Nigeria (79m), the Democratic Republic of Congo (60m), Tanzania (28m), Ethiopia (26m), and Madagascar (20m). Global extreme poverty is expected to rise in 2020 for the first time in over 20 years as the disruption of the Covid-19 pandemic compounds the forces of conflict and climate change, which was already slowing poverty reduction progress, the World Bank noted. The Covid-19 is estimated to push an additional 88 million to 115 million people into extreme poverty this year, with

the total rising to as many as 150 million by 2021, depending on the severity of the economic contraction. Extreme poverty, defined as living on less than $1.90 a day, is likely to affect between 9.1% and 9.4% of the world’s population in 2020, according to the biennial report. This would represent a regression to the rate of 9.2% in 2017. Had the pandemic not convulsed the globe, the poverty rate was expected to drop to 7.9% in 2020. “The pandemic and global recession may cause over 1.4% of the world’s population to fall into extreme poverty,” said World Bank Group President David Malpass. “In order to reverse this serious setback to development progress and povertyreduction,countrieswill need to prepare for a different economy post-Covid, by allowing capital, labour, skills, and innovation to move into new businesses and sectors. World Bank Group support—across IBRD, IDA, IFC and MIGA— will help developing countries resume growth and respond to thehealth,social,andeconomic impacts of Covid-19 as they work toward a sustainable and inclusive recovery.” www.businessday.ng

N9.53trn received in 18 years fails to lift Niger Delta from underdevelopment - NEITI

... region still riddled with poverty, indebtedness HARRISON EDEH, Abuja

espite receiving N9.53 trillion from federation account from 2000-2018, the oil-producing South-South region of the country comprising six states is still bedevilled with underdevelopment. This was revealed by the Nigerian Extractive Industries Transparency Initiative (NEITI) on Tuesday at a book launch in Abuja. NEITI, in a book titled ‘Perception of the Impact of 13% Oil Derivation Allocation’ launched in Abuja, lamented that these huge allocations and various other interventions in the Niger Delta had failed to reverse the conditions of poverty and underdevelopment suffered

by the region. The South-South states are Edo, Delta, Bayelsa, Rivers, Cross River and Akwa-Ibom. In a section of the book titled ‘Oil Revenue Management and Benefits Capture in Nigeria’s Niger Delta,’ authored by staff of NEITI — Dauda Garuba, Dieter Bassi and Adaure Njoku - the transparency agency stated that the amount allocated to the six SouthSouth states was three times the allocation to the states in the South-East region. “A breakdown of the figures reveals that N9.53 trillion was allocated to the six states of the South-South geopolitical region between 2000 and 2018. This is almost double of the allocation (N4.73trn) to the second highest geopolitical zone, North-West, and over three times the allocation

to South-East geopolitical region,” NEITI said. “The 13 percent oil derivation allocation to the SouthSouth states is the major reason for the observed huge revenue disparity. Even though Abia and Imo States in the South-East region and Ondo State in the South-West region also draw from the 13 percent derivation funds, their shares are way insignificant – both in terms of their contribution to quantum of oil produced and the number of states that produce oil in their regions – to warrant any significant difference in the observed figures posted by these regions, let alone the figures of other nonoil producing regions,” it said. NEITI explained that this reality, added to the deepening social and environmental consequences of extrac-

tion, had turned the Niger Delta into an epicentre of unmatched contradictions. On the one hand, according to NEITI, the region is home to highest subnational revenue earners from the Federation Accounts, while on the other hand, it shows very limited impacts in terms of the real value realised from the huge revenue allocation and disbursement to its component states. It said that the top four subnational oil producers and revenue earners, namely, Akwa Ibom, Bayelsa, Delta and Rivers states, received N1.60 trillion, N1.20 trillion, N1.38 trillion and N1.54 trillion, respectively, from 2001 to 2018, noting that despite earning so much, the four states are also among the highest indebted states in Nigeria.

Geoffrey Onyeama (3rd r), Nigeria’s minister of foreign affairs; Mamadou Tangara (m), Gambia’s minister of foreign affairs and international cooperation; Zubairu Dada (3rd l), Nigeria’s minister of state for foreign affairs; Omar Faye ((2nd l), Gambia’s minister of defence, and other members of the Gambian delegation to Nigeria led by Tangara, after a bilateral meeting in Abuja, yesterday.

Seven months of strike: Nigerians urge FG, ASUU to go back to negotiating table over IPPIS MARK MAYAH

s a result of the disagreement between the Federal Government and the Academic Staff Union of Universities (ASUU) over the Integrated Payroll Personnel Information System (IPPIS), which led to the shutdown of academic activities in tertiary institutions since the past seven months, Nigerians have urged the two parties to be considerate in their positions to aid the possibility of reaching a common ground. The strike started March 23, 2020. Some of them, including key stakeholders in the education sector, who spoke with BusinessDay, emphasise the need for government and the university lecturers to place the interest of the nation and the young students affected by the impasse, well above any other consideration. The government had continued to insist on paying

salaries to only lecturers that have enrolled into the IPPIS platform, and the lecturers had vowed to resist IPPIS they said was a fraud. In the place of the IPPIS, ASUU has offered its option – the University Transparency and Accountability Solution (UTAS) – a model it says would tackle the unwholesome issues around wages payment, which government says IPPIS would eliminate. But Nigerians have urged those concerned to remember the place of education in the growth and development of any nation and make sacrifices so as to reach common grounds that could ensure the re-opening of the universities. Speaking with BusinessDay on telephone, Moyosore Ajao, ASUU chairman, University of Ilorin, advises the Federal Government to continue to dialogue with the union to rescue varsity education from further crisis. “The only way forward is continuous dialogue with the

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union; if they discuss with us, there will eventually be resolution to all these issues,” Ajao says. He, however, warns that failure to embark on mutual dialogue would result to “anarchy,” with many casualties. Adesegun Olagoke, an educationist, also believes there is the need for the government and ASUU to come to a peaceful resolution hinged on sincerity of purpose and willingness to reach a compromise. The crisis could be forestalled with both parties sitting at a round table to address all grey areas causing the problem, Olagoke says. According to Olagoke, the Federal Government must, for instance, recognise the peculiarity of the university system and all its processes based on its constitutionallybacked autonomy as is the case everywhere in the world. “If government can recognise and capture on the IPPIS such multifarious peculiarities as the issue of Sabbatical, 70 years retirement age, external @Businessdayng

examiners and external assessors, earned academic allowances, visiting adjunct and part-time consultancy services, among others, it would have allayed the fears of Nigeria’s university teachers,” he notes. But the chairman of ASUU at Obafemi Awolowo University (OAU), Ile-Ife, Adeola Egbedokun, insists that only respect for autonomy for universities would bring peace. Egbedokun, who notes that the autonomy in the university system is backed by law, adds that the Federal Government is ignoring this aspect of the law, saying until the law of autonomy returned to universities, there would continue to be tension on the campuses. Olayinka Awopetu, a senior lecturer and chairman of ASUU at Federal University of Technology, Akure (FUTA), agrees, saying the University Transparency and Accountability Solutions (UTAS), which ASUU had already suggested, is a better alternative.

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FG to begin movement of containers to Onitsha River Port by Q1 2021 AMAKA ANAGOR-EWUZIE

n a push to decongest the Lagos ports, the Federal Government is perfecting arrangements for the Onitsha River Port to begin full operations in the first quarter of 2021. This is coming on the back of the recent commencement of trial movement of containers from Onne to Onitsha River by the National Inland Waterways Authority (NIWA). NIWA is also expected in the next couple of weeks to begin another trial movement of containers from Lagos to Onitsha River Port. Jibril Darda, acting general manager, corporate affairs, NIWA, who confirmed this to BusinessDay, said the authority recently carried out a test run movement of laden containers from Onne Seaport to Onitsha River Port. Darda, who described the operation as the first phase of test run, said the operation would also involve movement of export

goods from Onitsha River to Onne Seaport. According to him, the second phase of the test run would involve movement of container from Lagos Seaports to Onitsha River Port as well as returning empty containers and export goods from Onitsha to Lagos Ports. Queen Uba, area manager, NIWA Area Office Onitsha, Anambra State, told newsmen in Onitsha, that the authority has been making frantic efforts toward full operation of a port in the Southeast since George Moghalu, managing director of NIWA assumed office. She also disclosed that the commencement of operation of Onitsha River Port was being put on hold due to the ongoing concessioning process. “NIWA has put in place all necessary things for effective operation of the port and we are just waiting for the completion of the concession process. While we are waiting for the completion of the concession process, the management has

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entered into agreement with Connect Rail Services Limited to kick start the lifting of goods from the port to other places in the country,” Uba disclosed. Baba Spencer, Onistha River Port manager, said the port was ready for use with all facilities needed to operate effectively in place. “While the concession is ongoing, the Connect Rail Services Limited has been contracted to use the port stacking yard as a bonded terminal to kick-start the functionalities of the port operation on temporary basis until the concession is fully concluded. When the port commences full operation, it would reduce the cost of moving goods and human from Onitsha to other parts of the country,” he said. The Onitsha River Port was built under the administration of President Shehu Shagari in 1983 and since then has been laying fallow and until 2012, when it was rehabilitated and commissioned by former President Goodluck Jonathan.

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High yielding bond funds drive mutual fund asset to 9yr-high Endurance Okafor

n the hunt for high yield, investors’ increased appetite for bond funds amid lowinterest-rate environment has pushed Nigeria’s mutual fund industry to a record high of N1.37 trillion in September. Rising from N1.04 trillion in January, the total asset controlled by fund ma na g e r s i n c re a s e d by N325.79 billion as at the third quarter of 2020. The asset under management at N1.37 trillion is the highest the industry has reported since 2011 when the Securities and Exchange Commission (SEC) started publishing the data. The rapid growth in the mutual fund industry was skewed towards the high yielding bond funds as it reported a net asset value (NAV) increase of 358 percent. That is over eight times more than the 31 percent growth in the net asset value of the entire mutual funds market in the country. The NAV of bond funds, a measure of the level of investment in the asset, added N176.58 billion yearto-date from N45 billion recorded at the beginning of the year. The funds contribution to the asset managed by the industry increased from 4.73 percent in January to16.50 percent. Fu n d ma nag e r s have made the most of a bond rally this year driven by dovish central bank policy, said Omotola Abimbola of Chapel Hill Denham. The relative attractiveness of bond funds this year stems from the higher yields they offer compared to other types of mutual funds. While a one-year treasury bill is yielding 3.5 percent, the 10-year bond is at 8.5 percent. “The fact that interest rate is low and unattractive in the money market space is the major reason why a lot of investors are buying bonds,” Yinka Ademuwagun, research analyst, FMCGs, United Capital Plc said, adding that it is the reason why there is “rotation of fund from the money market funds to the bond funds. Lower interest rate means higher and higher prices of bond.” With a NAV increase of N176.58 billion, the investment channelled into bond funds in the review period is 15.88 percent higher than the combined N152.38 billion that was attracted by the six other mutual fund instruments. “The low-interest-rate environment has helped fixed income fund managers to record strong appreciation in their Net asset values. This has been the key driver,” Ayo Ayorinde

…at N1.36trn in Q3 Akinloye, a research analyst at CSL Stockbrokers Limited, said. A l t hough the 10-year bond fund is below the inflation rate, which quickened to a 29-month high of 13.22 percent in August, it still offers higher yields than any other mutual fund and that has caught the eye of investors. Bonds, money market and equity funds are all types

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of Mutual funds. A mutual fund is a professionally managed investment scheme, usually run by an asset management firm that pools funds from a group of people and invests their money in securities such as bonds, short-term debt and stocks. In the case of bond funds, the fund manager only invests in bonds while an eq-

uity fund invests solely in equities/stocks of listed companies and a money market fund invests in short-term debt instruments like treasury bills. Bond funds are also less risky than other mutual funds and as such the increased appetite could well be a reflection of the lack of investor confidence in the economy, as sur vey has shown that investors are only interested in resilient investment instruments.

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Analysis of the bond funds that attracted the m o st a ss e t s i n t h e f i rst nine months of this year shows that Stanbic IBTC Bond Fund which is managed by Stanbic IBTC Asset Mgt. Limited with a net asset appreciation of N93.29 billion was top on the gainer’s list. From net asset value of N14.09 billion in January Stanbic IBTC Bond Fund grew its asset to N107.39 billion as at September 2020.

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Wi t h a NAV t hat i n creased by N60.59 billion in nine months, United Capital Bond Fund which is managed by United Capital Asset Mgt. Ltd was the second on the list as it was able to grow its asset of N4.33 billion reported in January to N64.92 billion in September. Other gainers include United Capital Euro Bond Fund which added N7.5 billion to its NAV and FBN Fixed Income Fund with a NAV increase of N7 billion.

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Perspective is the difference LEADERSHIP SHEPHERD WITH BABS

BABS OLUGBEMI

ast week, we discussed the need to change focus to the team and the workplace culture to make the difference in the year 2020. The difference between a leader that focuses on his or her people, helps them to be better to deliver on the commitment to the stakeholders and the one that focuses on self is perspective. Perspective is a little difference between leaders and followers. Still, the slight difference makes a significant difference in how organisations achieve sustainable results and transform into institutions that last the test of time. The significant difference is what all the leaders desire without much focus on the little difference that enables the vast difference. A person could be in a leadership position but have the perspective of a follower. If your leadership perspective is deficient, you will be self-conscious and focused. Leaders who operate with followers’ mindsets and perspectives breeds followers and leave the team worse-off than they met because they focused on personal rewards in the process. So, the starting point is to check your leadership perspective to make the 2020 difference. Perspective is defined as a mental view or prospect. It is the worldview of yourself and your position in the workplace. It is how you see your role as a leader that dictates your action and disposition to others. A savvy person with a wrong perspective of leadership in this dispensation will be inept in the way he manages his

team and the result the organisation will achieve. In the machine age, the focus of leadership is on the equipment and the process. Processes are more important than people, and people are made to function in line with the existing process to produce the outcome. But in this emotional age, people’s emotions are essential to keep productivity high. Hence, leaders with the perspectives of enablers will focus on the team’s feelings and work to create an enabling culture and environment to aid sustainable productivity. Leaders with views of positions and entitlement with focus on the perquisites of their offices ahead of the team effectiveness might achieve results, but the results cannot be sustainable in the long run with stiff competition. Peter Chao did excellent work in his article on leadership perspective. He identified two lenses that determine our perspective and influence leadership behaviours as the ‘Beings’ and ‘Vision’ lens. The Being lens reflects on the personality of the leader. It is the lens that determines the identity of the leader, his or her understanding of the process and posture of leadership. The outcome of the perspective of the person (the being lens) of the leader in the emotions and depth of his or her role as reflected by the identity and understanding of the process of leadership. This is what I termed the knowledge attribute of a leader in last week’s article. The vision lens is how leaders perceive and define reality which determines appropriate actions or directions to be taken. It is the leaders’ insight, foresight, hindsight and lifting sight, which connects vision to possibility and reality when actions are made toward the realisation of the concept. It is essential for you as a leader to examine your perspective at regular intervals and ensure your vision and lenses are in alignment with the reality

of your environment and nurture of your team. A clear view that your role as a leader is to deliver value through others with a positive and purposeful relationship in a process will focus your attention on what is truly important for your team to succeed. A compelling scenario is a case of our process as a nation at the individual and collective leadership levels. Though we have exceptional leaders among us, we have limited results due to the environment and culture which attribute leadership to the persons rather than the process. At the individual level is the example of Kolawole. Kolawole was a divisional head in his organisation ten years ago. His perspective to leadership at the ‘Being’ lens was about his person. In his division were five teams with managers as the team leads. Kolawole, though intelligent as a person, his perspectives and vision to get noticed at the top affected the process of leading his team. As his team member, you must not reply or send emails to other departments without his review and corrections. No team members can go home until he leaves office even if he’s waiting for traffic to his house to subside. You must put others in the copy of emails based on seniority instead of the need to know. Kolawole succeeds in advancing himself with his politics but left his team without a trace of leadership before his forced exit after ten years. He did achieve his personal career progression at the detriment of the development of the team he was leading. He denied the organisation the services of smart staff who resigned their positions due to his defective leadership perspective. Another corollary of a defective leadership perspective is Nigeria’s political offices where leaders amass wealth as rewards for being elected and get power arrogated to them. Seeking political offices has been a journey to self-enrichment rather than services to the people who are impov-

‘

For things to improve, leaders must review their perspectives at every stage of their leadership journey

erished due to leaders’ perspective of “milk them die”. The trend is broad as the political elites have started planting their children and cronies in the offices to replace them aside from the massive looting of public funds. Imagine what the children of today’s senators will do when they succeed in getting to the senate in the future. They have seen how their parents’ wealth grew geometrically due to allocations not worked for, and the community project funds siphoned into private pockets. The children are not only learning from self-oriented perspectives but are equally learning to be heartless to the plight of the poor masses being denied a good life. I’m sure when they get to the senate, they will be chartered “Stealnators” than their parents. For things to improve, leaders must review their perspectives at every stage of their leadership journey. The starting point for being an institutional leader with generational impacts is to have an attitude that leadership is not about you but about the number of others you influence positively to achieve outcomes that will outlive you. We are in search of leaders in all spheres of our public lives and the search starts from the re-orientation of what leaders do and how leaders see their positions and roles. The first port of call is your perspective if you want to be a better leader in 2020 than you were in previous years. Conclusively, the word of Peter Drucker that leadership involves “the lifting of a person’s vision to higher sights, the raising of a person’s performance to a higher standard, and the building of a person’s personality beyond its normal limitations” is relevant to you only if your perspective about your roles as a leader is clear and beyond the benefits to you. Olugbemi FCCA, the Chief Responsibility Officer at Mentoras Leadership Limited and Founder, Positive Growth Africa. He can be reached on babs@babsolugbemi.org or 08025489396.

Nigeria’s diamond independence anniversary: The tortuous journey to nation-hood and greatness

efore the British people colonized Nigeria, and introduced representative government to us, the disparate ethnic groups that make up Nigeria had their peculiar systems of government. In the north, the Hausa/Fulani had the emirate system while the Yoruba people in the west operated the Obaship system of government. The Igbo people, whose homeland is in the east, were/are republican in nature, and had no centralised system of government. The pre-colonial Igbo society was acephalous in nature. However, then, during the pre-colonial era, each town in Igbo society had either an Igwe or Eze, who presided over the affairs of the town. But the coming of the white people to Nigeria disrupted the evolutionary growth of our traditional pre-colonial types of government. So, the African continent was partitioned by European colonialists, and they ruled their colonies based on the precepts of democracy. That’s why, today, some African countries are former French colonies while others are former British colonies. And we have African countries, which are former Belgium and Portuguese colonies, respectively. In Nigeria, the British imperialists used the policy of association-both direct rule and indirect rule – to administer the territories, which are collectively called Nigeria, now. Sadly, they did not consult the natives, not to talk of getting their consent before amalgamating the northern and southern protectorates of

Nigeria. It was Lord Lugard, who coupled the northern and southern protectorates of Nigeria together for administrative reasons, and political expedience and convenience. But was it a judicious deed? Perhaps, the lumping together of the southern and northern protectorates of Nigeria was one of the causes of our problem of disunity and ethnic hatred. It should be noted that Sudan, which had almost the same colonial experience as Nigeria, had disintegrated with South Sudan emerging from it. This is a grim pointer to the fact that the amalgamation of Nigeria was a fatal error; and that it has contributed in no small way to our problem of ethnicity. But Nigeria is a cat with nine lives considering the fact that it emerged from countless sectarian conflicts, political troubles, and gratuitous civil war not dismembered. The Nigeria-Biafra civil war, which raged between 1967 and 1970, the cancelled June 12, 1993 Presidential election problem, the Maitatsine religious uprising, and the hijacking of political power by the cabal during President Alhaji Umaru Musa Yar’adua’s terminal illness failed to upend Nigeria and cause its disintegration. So, now, Nigeria has continued to exist as one country against all expectations. And, surprisingly, the American political pundits’ prediction about Nigeria’s imminent doomsday and disintegration failed to materialise. Although Nigeria has not disintegrated, it is still a disunited country. The sad fact is that Nigerians place their selfish

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and parochial interests and the interests of their ethnic groups above Nigeria’s interests when issues affecting the country crop up. Our problem of disunity becomes obvious and rears up its ugly head when we are to hold general elections to elect the President of Nigeria. Here, in Nigeria, the factors of religion and ethnicity do determine those who will become our national leaders. However, the numerical strength of the northern electorate, their dominance of the Nigeria military then, and their political sagacity ensured that northern people of Hausa/Fulani extraction, and Islamic religious backgrounds ruled Nigeria for the greater part of its independence years. And all the military rulers we had, save Aguiyi Ironsi, came from the northern part of Nigeria. But the sad and indisputable fact is this: Since 1960, when Nigeria became a sovereign nation-state, and, until now, it has never been led by its best politicians, who possess probity, fealty, leadership qualities, and political sagacity. We have not forgotten that Alhaji Tafawa Balewa was helped by the departing British overlords to become our Prime Minister in 1960 as the enthronement of northern political hegemony in Nigeria would serve the interests of Great Britain. And, in the second republic, when we shelved the cabinet system of government for presidentialism, a political dark horse, Alhaji Shehu Shagari, was helped to become our executive president in 1979. More so, Chief Olusegun Obasanjo was

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CHIEDU UCHE OKOYE helped by northern political kingmakers and other power brokers to win the 1999 presidential election so as to placate the indignant Yoruba people over the annulled June 12, 1993 presidential election. He was a beneficiary of the unwritten rotational presidency formula adopted by PDP to douse political tension in the country and save Nigeria from disintegrating. His successor, Alhaji Umaru Musa Yar’adua, died in office and Dr. Goodluck Jonathan fortuitously became our president. Now, it is evident to us, and bears restating here, that our recruitment processes and political culture do throw up political leaders, who cannot entrench lasting peace and unity in the country and harness our vast human and material resources to transform Nigeria, positively. So, it is imperative for us to re-think and re-jig our political recruitment processes and mechanisms so as to be able to elect political leaders at different governmental levels, who can better our lots in life, and take Nigeria to greater economic and technological heights. But re-thinking and rejigging our political recruitment processes and mechanisms presuppose that we change our political culture and orientation by socialising the masses into acceptable democratic norms and political culture, and inculcating ennobling and lofty family values into them.

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Donald and Melania Trump: Coro hits the jackpot

IK MUO

ast week, I agreed with ‘the presidency’ that Nigeria has always been divided. It evidences leadership failure that rather than assuaging public angst about our sorry state of affairs and itemising steps taken and highlighting the ones in the making to make things better, we were told gleefully that ‘it has always been so’. But we were promised ‘next level’ just the other day. If we have to continuously ‘go yesterday’ to the previous level, then the next level becomes a mirage. Unfortunately, the ‘oga at the very top’ did not do better because he wasted the diamond opportunity provided by our 60th anniversary. Anyway, the second option in our MCP is: Nigeria is more divided now than ever. You know as much as I do that this is also true. We have moved from Northernisation, to Islamisation, to Fulanisation to Kastinisation and then to NIGER-isation. However, today, we discuss developments in the Coro front, which we totally ignored last week. The greatest front-page news in the past one week, a news item that is still trending, is that Coro has upped the ante in its celebrity status by invading and ‘dominating’ the White House. It has shown the Trumps that it meant and still means business and that it is not only the streets that should be dominated! Some uncharitable and bad-belle people have accused him of faking the Coro-positiveness so as to avoid further presidential debate appearances and to refocus all attention (and sympathy) on himself for possible

emotional and political gains. Anyway, I wish him well, just as I wish all ‘coronised’ people well but probably, going forward, he should take serious things seriously. I am also awaiting his attitude towards face-mask and chloroquine basedtreatment, because he will now be talking from experience! With Trump going under, the coronisation of Sadio Mane (Liverpool Forward) and other lesser mortals is no longer as newsy as it would have been. In China, millions are indulging on ‘revenge tourism’ to recover the months lost to quarantine and lockdowns; in UK, cases doubled in areas of local lockdown; Spain is seriously considering an extension of its coroinduced emergency and President Erdogan of Turkey has been accused by Turkish Medical Association of manipulating and underreporting Coro cases. Governor Cuomo, who had argued that God had nothing to do with some of the successes achieved in the WAC( war against coro) has ordered some New York Schools to be closed due to resurgence of Coro; in Bangladesh, some garment workers are engaged in post-coro protest over wage related issues while Italy just recorded 2548 new cases, the highest number since May. In any case, WHO has estimated that about 10 percent of the global populace has caught the mean and audacious virus and while that is happening, more than 6000 have been infected by the rat fever in Siri Lanka. So, while we are yet to come to terms with Coro, other pandemics are warming up! At home, we continue to do our own things in our own way. The Government has ordered all schools (secondary tertiary and special-purpose) to open with immediate effect. ASUU immediately reminded the government that it was still on strike while NASU and SSANU greeted the announcement with a warning

strike. The government strategy for the opening was just to order the schools to maintain all relevant protocols and there is no evidence that the schools were empowered to do so. You remember how the Ministry of Education ordered all universities to commence online teaching-just like that. The Minister is in the habit of acting as if he has the power to call things that are not as if they were! Anyway, ASUU has just stated emphatically that ‘The frenzy of opening universities and façade of online teaching, matriculation and graduation are not informed by realities. University administrators…know for sure that no public university as at today can meet the requirements of facilities needed to observe Covid19 protocols. Neither can they boast of infrastructure for impactful online teaching or meaningful e-learning’. (ASUU Strike Bulletin 20, 22/9/20)’ Furthermore, the cheery news has just been released that about 25000 passengers will fly into Nigeria weekly, following the recent increased passenger-slots allocated to the airlines. That is good business to those in the aviation eco-system, including Federal Airports Authority of Nigeria which has increased every possible charge. However, with the coro-spike, second and third waves, and with hurried closure of schools recently reopened, across the world, we need to be cautious. More so, as 80 of the incoming passengers had tested positive after 7 days of arrival with the PTF expressing fears of a second wave in Nigeria. The NCDC boss has also declared unequivocally that we lack the capacity to produce vaccines (and I doubt we have the capacity to buy as things are now). Our people say that ‘Nkwucha abuhu ujo’ (Precaution is not an act of cowardice). Meanwhile, the National Human Rights Commissions has accused some hospitals, particularly in River State, of forcing asthmatic patients

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So? Coro is still very much around. We should take all necessary precautions and be truthful in our coro-based communication. We should also avoid the herd tendency (Policy Copy and Paste) in the management of our Coro affairs

Note: The rest of this article continues in the online edition of Business Day @https://businessday.ng Dr Muo is of the Department of Business Administration, OOU, Ago-Iwoye

Currency slump inducing cryptocurrency transaction in Africa

t a time like this when the global pandemic has put more countries than ever imagined in a state of economic turmoil, Nigeria was not left out as the Central Bank created currency restrictions to reduce access to dollars. This has left multiple individuals, enterprises, institutions and businesses with limited options, hence seeking alternative ways of performing financial transactions as data now reveals the spike in the use of cryptocurrency for Intra-African and International transactions. Recent report by Chainalysis, a blockchain market intelligence firm showed that Kenya, South Africa and Nigeria are leading in the adoption of cryptocurrency while other countries in the top 10 list include Ukraine, Russia, Venezuela, China, USA, Colombia and Vietnam. Two years ago, the Nigerian, South African and Kenyan governments were all kicking back on the adoption of cryptocurrency with concerns about a lack of regulations, security of customers as well as not considering it as a legal tender. Roughly $3.7 billion worth of cryptocurrency was transferred to and from overseas addresses to those based in Africa from July 2019 to June 2020, with $562 million of that coming in retail-sized payments under $10,000 as collated by Chainalysis. In an emailed interview I had with Marius

Reitz, General Manager for Africa at Luno, one of Africa’s oldest and leading Cryptocurrency exchanges headquartered in London, he was of the opinion that as the demand for cryptocurrency rises, there is a need for regulations to be put in place. “Regulation in the crypto industry is important for many reasons, but chief among them is consumer protection. Regulations should ensure that standards in the industry are lifted and create barriers to entry for operators with low concern (or capabilities) for consumer protection. An effective regulatory regime typically imposes obligations that promote the protection of customer funds and the crypto ecosystem more broadly.” The South African Rand for example, has been below the dollar in the last decade and is one of the most volatile fiat currencies and as such, has overtime led to the rise in the use of cryptocurrency which for some is a better way to store the value of their money as well as perform transactions. The impact of the pandemic has also affected the valuation of the naira, making the availability of dollars a herculin task. I also spoke with Kenyan Bitcoin miner Pauline Kithuka, who says regulations won’t change the adoption of cryptocurrency in any country. “We are currently sending each other value using Bitcoin in the region at low costs. The only problem for the government

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is that they are not going to collect enough revenue from foreign exchange companies.” – Pauline said According to Marius, General Manager for Africa at Luno, with regional hubs in Johannesburg, Cape Town and Singapore said as a continent, Africa is still lacking key infrastructure such as crypto platforms to make access to cryptocurrency safer and easier. Marius also pointed out the need for education which he says is also critical. “Unfortunately, a lot of people’s first introduction to crypto is through a scam such as traders promising sky-high returns. A lot of work needs to be done to ensure improved education on the benefits and risks of cryptocurrencies which will go a long way to improving adoption”. While in Nigeria, the CBN has handed the responsibility of regulation to the Securities and Exchange Commission, a U-turn from the CBN’s initial reaction in 2018, stating that crypto-currencies including Bitcoin, Ripples, Litecoin among others weren’t regarded as money. So far, bitcoin and others now give players in the market alternative ways of evading restrictions and regulations, strict financial oversight, cash flow monitory, unlike crypto transactions which have only ID’s and no details of the sender or receiver, and no for licensure structure. I also spoke with Eniola Agbaoye, Man-

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to accept positive coro-status while the coro-testing has become another avenue for criminal entrepreneurship international travellers who pay the money without any results! Ndubuisi Ekwulonu paid N42000 twice while Iyabo Ojo paid N51000 and both did not get any results. Of course, BusinessDay has just reported that for Coro tests, Nigerians pay on the average, 42% higher than our peers, including Ghana and Senegal. I am writing this from ‘home’ (Igbo-Ukwu, Anambra State) where people have gone back to the ‘old normal’ in all material particularly and if you check NCDC records, the number of states filing their Coro statistics has been fluctuating around 12. Yes; just 12 out of 38 (FCT, 37th; Niger Republic, 38th)! On an odd and inexplicable note, a 50-year old Leroy Chacon has allegedly broken into a mortuary and sexually defiled a dead female coro victim. This happened in Guyana, South America. For what? This world and a good number of its inhabitants have gone CRAZY! The man, who is surely incomplete’ upstairs’ was first quarantined (and treated with taxpayers money) before he was jailed for 3 years for the despicable act, for endangering himself and for endangering the community So? Coro is still very much around. We should take all necessary precautions and be truthful in our coro-based communication. We should also avoid the herd tendency (Policy Copy and Paste) in the management of our Coro affairs. The discourse on the divided, more divided and soon to be divided status of Nigeria continues next week Nigeria Have a Covid-Free week

IRENE UBANI ager at Andersen Tax in Nigeria who says that CBN circulated a memo preventing banks and financial institutions from having anything related to crypto, while in other countries you have banks like Santander bank using Ripple (XRP) for cross border payments. In his opinion, only capital gains or profit should be taxed at the point of selling cryptocurrency, though all transactions need to be reported. Financial systems are fast evolving as it experiences an unprecedented transition from centralised authority to decentralised network. As the United Nations described it, Cryptocurrency is not bound by geography because it is internet based. Therefore, the question becomes the likelihood of Central Banks and Federal Reserves of banks across Africa paying closer attention to the wider use of Cryptocurrencies, the dent in the value of currencies as a result of the economic crunch caused by the pandemic as well as possibilities of collaborating with crypto exchanges in order to catch up with the wave of this almost one decade long mode of transaction.

Ubani is Business Journalist/Communications Consultant

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Thursday 08 October 2020

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Parliamentarism can offer Nigeria an escape from bad governance and weak institutions (2)

CHRISTOPHER AKOR

fortnight ago, I began the argument about the conduciveness of parliamentarism to institution building and had to interrupt the flow to answer to a rejoinder. I had made the point – drawing largely from empirical research employing a global data set– that parliamentary system, in addition, is also positively correlated with good governance and superior performance. On the economic front, “presidential regimes consistently are associated with less favourable outcomes than parliamentary regimes: slower output growth, higher and more volatile inflation and greater income inequality.” Most of the misgivings about parliamentary democracy, especially in Africa, are about the level of bickering, debates and deliberations involved in parliamentary democracies. Frustrated Africans easily dismiss such practices as “rudderless, confused and chaotic chattering”. Most even point to the bickering and confusion over the Brexit deal happening in the UK currently as one of the reasons parliamentary democracy won’t work in Nigeria. But again, as research has shown, despite a fusion of the executive and the legislature in parliamentary democracy, the checks and balances in the system is far superior to that in the presidential system. All programmes of the executive are subjected to relentless scrutiny and it is much un-

likely deleterious policies would pass in a parliamentary system than in a presidential system. Although the bickering, endless debates and deliberations in a parliamentary system may seem offensive to Africans, who prefer to have philosopher-kings as leaders, the checks and balances in a parliamentary system, empirical research has shown, leads to better economic performance in the long run. In Nigeria’s presidential system, for example, although the constitution provides for a strict separation of structures and personnel and independence of the three arms of government, in reality however, the president can, and often, do work to ensure the almost total subjugation of or control of the other arms of government. Last year, the speaker of the House of Representatives, Femi Gbajabiamila, invited the Service Chiefs to brief the House on the spate of insecurity in the country. The Service Chiefs ignored him and refused to appear before the house. The only response a thoroughly embarrassed Speaker could give to that affront on constitutional authority was that he was going to report them to the president. Of course, nothing came out of that report nor has he summoned the courage to invite them to the House again. The Senate President was quoted on more than one occasion as saying the Senate will do whatever the president wants. However, alarmed by the insecurity in the country, it made passionate representations to the president to sack the service chiefs over the floundering war with the Boko Haram insurgency. The President flatly refused and has continued to retain the services of the failed service chiefs, who have exceeded their statutory years of service leading to low morale, grumblings and dissatisfactions in the

armed forces. So bad has the situation gotten that, in July, the Senate passed a motion calling on the service chiefs to resign following the incessant killings of soldiers fighting insurgency and banditry in the Northeast and Northwest of the country. Of course, the service chiefs ignored the Senate and Mr Buhari curtly reminded them that the prerogative of appointing and sacking security chiefs remains his and he won’t abdicate it to the National Assembly. Case closed! We supposedly have a third arm of government – the judiciary, which is theoretically independent from the executive and adjudicates on dispute between the other arms of government and protects individual liberties from government overreach. But the very head of the judiciary was illegally booted out of office, justices of the Supreme Court harassed and intimidated into silence and the courts have become more or less the mouthpiece of the executive such that no one is left in doubt as to where the courts stand these days. We could all see how the judges disposed off the electoral cases against the election of the president. Both the judges at the court of appeal and the Supreme Court were not just content with dismissing the cases for lack of proof, but they actively turned defendants of the president in the case on perjury. Truth is, our constitution created a dictator president that would be difficult to handle were he to go rogue. But a parliamentary system not only provides for a system to hold the executive firmly accountable, its emphasis on political parties leads to the development of a strong party system that can constrain the behaviour of its members. In South Africa, the ANC’s ability to peacefully and seamlessly ease out an obstinate and

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Truth is, our constitution created a dictator president that would be difficult to handle were he to go rogue. But a parliamentary system not only provides for a system to hold the executive firmly accountable, its emphasis on political parties leads to the development of a strong party system

thoroughly corrupted Jacob Zuma out of office and immediately get its party leader, Cyril Ramaphosa, elected as president by parliament showed the pre-eminence of the party and its ability to discipline all party members regardless of rank or position. Re: Pay attention to the science Martin Ihembe has continued with his implausible argument about the failure of parliamentary democracy in Nigeria and West Africa. And what evidence does he cite? A book written in the first few years of independence and published in January 1965 – to support his thesis. But even a fresh student in politics will immediately observe Authur Lewis was dealing with the wrong variables – and hindsight should have rendered most of the thesis of the book totally irrelevant. Besides, Ihembe seems to have real difficulty differentiating empirical/scientific work from mere philosophical/prescriptive work. There is absolutely nothing empirical or scientific about the book. It’s an angry denunciation of the single party state in Africa and a normative prescription on how to organise politics that recommends the replacement of “rogues” with “good men” for politics to work in Africa – a laughable thesis at best. If Ihembe blames parliamentary democracy for the collapse of Nigeria’s first republic and most of the democracies in West Africa, what will he blame for the collapse of Nigeria’s second republic presidential system in 1983 – just after four years? I wonder if he has ever heard of military coup d’état and the theory of contagion effect of military takeovers! Besides, institution building is a process and takes time.

Re-pay attention to science: A response to Martin Ihembe

equel to my rejoinder to Christopher Akor’s article of 24th September last week, he replied by calling my attention to “science”. He faulted my response on two grounds: it is at variance with the focus of his piece which argued that the parliamentary system of government is better at building strong institutions of restraints and delivering good governance than presidentialism, and its lack of “empirical evidence” on the assertions I made. Consequently, my response will be on these specifics. While I cannot discountenance the findings of Gerring’s research and his colleagues, given that the focus is on Nigeria, my contention is that the result does not support its reality. Rather, it is in contradistinction to Nigeria’s phenomenological reality. Yes, the relationship “may” exist between parliamentarism and good governance in other climes as the research of Gerring et al has shown, but such was a rarity as Nigeria’s experiment with parliamentarism has shown. Of course, Akor knows empirical scholarship abounds on this issue in Nigeria. To be sure Nigeria is not an isolated case in this regard, the empirical research of Arthur Lewis – Politics in West Africa – showed that the inherited Westminster parliamentary democracy in British West Africa was responsible for the emergence of authoritarian rule after independence in that region. What happened to the “strong institutions of restraints and delivering good governance”? This, as Lewis posits, was a consequence of the majoritarian electoral

systems (otherwise known as winner-takesall) the Brits bequeathed to their erstwhile colonies in the region. Again, the research of Fukuyama et al on four East Asian countries has shown that presidentialism survived in those countries as a result of institutions of restraint that contained personalist rule. Two things are worth noting from the foregoing: scientifically speaking, the result of Gerring’s research and his colleagues’ generalisability matrix. Secondly, parliamentarism failed on Akor’s matrix of developing and sustaining strong institutions in the West African case, and I dare say, delivering good governance. Nigeria has fared better under the subsisting presidential system in the Second and Fourth Republics in the area of developing institutions of restraint, even though good governance remains elusive. This brings me to the “political engineering” embarked upon by the “49 Wise Men” which I noted was remarkably impressive and ingenious in modern history, but Akor faulted this submission for lack of evidence, even though it was not conjectural. Since Akor is a political scientist himself, an erudite one for that matter, I felt rehearsing this point was unnecessary. But since he has broached the issue in his response, I will oblige him by elaborating on three salient ingenious institutional designs of that era. The most heated and controversial issue that confronted the framers of the 1979 Constitution was the politics of religion, which amply reflected in the Sharia legal system debate. How to resolve the conflict between the interface of Islamic law with Western

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jurisprudence in a society with plural jurisprudence was a difficult task, especially bearing in mind this could be the source of blood-bath, which already, the embers of religious fanaticism were being fanned (at the Conference and in the larger Nigerian society) while the debate was ongoing. The impasse between the pro and anti-factions of Sharia was resolved with a provision that appeals from State Sharia Courts should go to the Federal Court of Appeal and be heard by three judges versed in Islamic jurisprudence. To address the incompatibility of the majoritarian electoral systems that engender cut-throat politics as well as steer the country away from regional politics characterised by ethnic rivalry, the “49 Wise Men” did the following: political parties were expected to have national outlook, as against the regionally based parties of the First Republic. Since the parliamentary system allows room for more parties which engendered the proliferation of ethnic parties, this provision drastically curtailed it. Aside from making provision for a presidential system which merged the power of the Head of State and that of the Head of Government – the president – in one person, s/he was required to secure 25 percent votes in 2/3 states of the federation before s/he can be declared winner. These were institutional designs targeted at bringing about placatory behaviour among political actors that is a sine qua non in guaranteeing political stability, which was totally missing. More to this, the power of the president was to be kept in check us-

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MARTIN IHEMBE

ing the mechanism of horizontal accountability by the legislature and the judiciary. These are all institutions of restraint? Of course, there are several other institutional designs. But as I said, I will limit myself to these ones that are central to the survival of democratic governance in Nigeria. Accordingly, it is safe to argue that the major preoccupation of the “49 Wise Men” was centered around developing institutions’ restraint for the embryonic Second Republic. Maybe because of its life span, the subsisting Fourth Republic under a presidential system has witnessed more institutional engineering in Nigeria’s history, and the country is still developing more. Therefore, we cannot say with certitude that Nigeria has witnessed institutional recession/weakness because of its fixation with the presidential system. Like I noted in my rejoinder last week, institutional weakness in Nigeria is not a consequence of the presidential system but that of political actors who drive the institutions. Hence, I reiterate my argument that parliamentarism, despite the rhetoric of its exponents in Nigeria will not magically solve the problem of good governance deficit.

Ihembe is a postgraduate student in the Department of Political Sciences, @ the University of Pretoria, South Africa. Reachable via martinihembe@gmail. com WhatsApp +2347036396194. @Businessdayng

BUSINESS DAY

Thursday 08 October 2020

EDITORIAL PUBLISHER/EDITOR-IN-CHIEF

Frank Aigbogun EDITOR Patrick Atuanya

DEPUTY EDITORS John Osadolor, Abuja Lolade Akinmurele NEWS EDITOR Osa Victor Obayagbona NEWS EDITOR (Online) Chuks Oluigbo MANAGING DIRECTOR Dr. Ogho Okiti EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha ADVERT MANAGER Ijeoma Ude MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai COPY SALES MANAGER Florence Kadiri DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

Nigeria needs economic not political restructuring Nigeria’s future is hinged on reform

overnments, citizens and businesses across the world wish COVID-19 pandemic ends today and normalcy returns. This same prayer is offered in Nigeria. But would Nigeria return to an economy that is characterised by underperformance, unemployment, poverty and hardship? In Nigeria, COVID-19 pandemic didn’t necessarily usher in new challenges and economic struggles, but rather amplified existing ones the country had been battling with. Since 2015, the economy has been suffering from a snail-paced growth, with GDP growth averaging 0.94 percent compared to the country’s boom periods between 2010 and 2014 when the economy grew by an average of 6 percent. Clearly, these periods have been determined by swings in crude oil prices given Nigeria’s heavy dependence on the oil market. Periods with higher GDP growth have been associated with higher oil prices in the same period while lower growth periods are linked to lower oil prices. Because Nigeria’s economic growth is strongly correlated with

the highly volatile global oil market, any major shock such as the COVID-19 pandemic automatically throws the country into a miserable state. We cannot, therefore, over-emphasise the importance of economic restructuring. We believe restructuring the Nigerian economy should take precedence over political restructuring being canvassed across the country. Some months back, the Yoruba Submit Group (YSG) threatened that Nigeria must restructure before the next election in 2023 or face doom. This, in our thinking, is a misplaced priority. We expect that the clamour for diversification, boosting investments in various sectors, closing infrastructure gaps, eradicating poverty, ensuring businesses thrive and making Nigeria truly the largest economy in Africa among others, should be the fulcrum around which all advocacy for restructuring should revolve. The federal government must find ways to position the country away from oil so as to be able to compete and win in an increasingly complex world for the benefit of over 200 million Nigerians. This does not, however, mean that oil should be totally done away with. Of course not. We are rather of the opinion that While it lasts, efforts

must be made to focus on growing other sectors of the economy. In this case, diversification should be nonnegotiable; it is mandatory. However, we cannot be talking about growing other sectors without investment. Making other sectors attractive to private and foreign investors would require the FG churning out market-friendly policies and regulations while acknowledging the role of the private sector in economic development. Without equivocation, we believe that COVID-19 pandemic provides Nigeria a chance to re-imagine and reawaken its strategies for growth. The country is starved of good policies and the economy is largely governmentdriven. Regulations that stifle sectoral operations, performance and investment opportunities are still prevalent. For this reason, we have seen Foreign Direct Investments (FDIs) in Nigeria which promise growth for any economy dwindle sharply to levels below peers in Sub-Saharan Africa. It is the same story with Foreign Portfolio Investors. The Nigeria stock market which is their main destination remains bearish as foreign investors stay away from the market despite low valuations of

fundamentally strong stocks following CBN’s dollar demand management strategy to protect the Naira. We believe that economic restructuring has the capacity for building strength and buffers on a number of viable sectors in the economy. It only involves diversifying the economy and improving sectoral contributions to GDP growth. To achieve this, the government must be ready to build a private sectordriven economy while creating a business and policy-friendly environment. This is why we re-emphasise that the government has no business doing business. The private sector of any economy has the potential and ability to grow and develop such an economy. As a country, Nigeria has seen the benefits of this in some sectors like telecommunications, pensions and cement in the past. All that is required is to replicate these successes in other sectors of the economy. COVID-19 may have affected many economies but the effects differ in degrees. For those with no diversified buffer like Nigeria, the effects are severer. Hence economic restructuring is not just an option but also a must-do because we see the future of Nigeria hinged on this singular reform.

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COMPANIES&MARKETS Nigeria’s GTB suffers first dip in profit in 7 years as virus takes toll FAVOUR OLAREWAJU

uaranty Trust Bank (GTB), the largest Nigerian bank by market value, posted its first decline in net profit since 2014 in the first half of 2020. Profit after tax for half-year 2020 dipped 4.9 percent to N94.27 billion from N99.13 billion in the first six months of 2019. It’s the first time GTB is recording a decline in profit since 2014 on a half-year basis. Considering that this occurred in the first half of 2020, this profit drop might be attributed to the unexpected difficulties imposed by the coronavirus pandemic. Also, profit before tax declined for the first time since 2014 to N109.7bn in halfyear 2020, a 5 percent drop from N115.78bn in H1 2019. This profit decline was majorly driven by costs rising at a much faster pace than earnings. While gross earnings increased by 1.5 percent to N225.14bn in H12020 up from N221.87bn in H1 2019, operating expenses rose by a higher magnitude of 16.9 percent to N69.28bn from N59.25bn within the period being observed. Specifically, between half-year 2019 and 2020, finance cost skyrocketed to N212.19million, a 143.9 percent rise from N87million of the previous year, drastically driving costs up. This is despite more than

30 times (or over 2,800 percent) increase of net impairment reversal on other financial assets (provisions against bad debts) to N3.18billion in H1 2020 from N108.4 million in H1 2019. This implies that the cost of borrowings and liabilities incurred increased drastically. Deposit insurance premium costs more than doubled to hit N8.26bn in H1 2020 up from N4bn in H1 2019. Advertising cost jumped by over 84 percent to N3.26bn in the first six months of 2020, from N1.77bn in the same period of 2019. Also, depreciation and amortization rose by 32 percent to N14bn in 2020 from N10.6bn in 2019 on a halfyear basis. Other operating expenses also escalated to N49.5bn in

half-year 2020 from N 39.4bn in the same period of 2019, reflecting a 25.6 percent increase. This makes finance cost the largest driver of higher costs, followed by advertising and operating expenses. Earnings per share also dipped by 5 percent to N3.32 in H1 2020 down from N3.5 in H1 2019. Further, since its recovery from the 2014 slump in profit after tax and remarkable turnaround to see profits rise by 21 percent in 2015 and 34.5 percent in 2016, profit has been increasing at a slower rate of 16.6 percent, 14 percent and 3.7 percent in 2017, 2018 and 2019 respectively on a half-year basis. This could mean that GTB has had this profit slump coming and COVID-19 just

helped to make it a reality. January to June 2015 saw gross earnings rise by 15 percent to N152.9bn from N132.9bn in the same period of 2014. Despite the further rise in gross earnings by 37 percent to N209.87bn in H1 2016, it grew by a mere 2 percent to N214bn in H1 2017 and 5.8 percent to N226.6bn in H1 2018. But the rising gross earnings from 2015 till 2018 dwindled by 2 percent to reach N221.87bn in half-year 2019. Alongside the dip in gross earnings, operating expenses and advertising costs plunged by 3.4 percent and 31.7 percent respectively but finance cost saw over 10 times increase, that is over 1 thousand percent rise to N87million in H1 2019 up from N7.2million in H1 2018.

Unity Bank rolls out rewards to mark 2020 Customer Service Week HOPE MOSES-ASHIKE

nity Bank Plc has kick-started programmes for 2020 Customer Service Week celebration to reward staff and teams that have created an exceptional customer service experience in the Bank. The 2020 Customer Service Week is a week-long event which will be celebrated from October 5 – 9 across the lender’s over 200 branch networks in Nigeria. The theme of this year’s s year’s Customer Service Week is: “Dream Team” and it is to reflect the importance of teamwork in providing outstanding service to all customers. As part of activities to mark the week’s celebration, all branches of the Bank will engage in several activities aimed at making the celebration exciting and memorable. There have also been several activities lined up to reward outstanding teams across all branches and units of the Bank within the week. Also, Unity Bank’s Managing Director/Chief Executive Officer, Tomi Somefun, will be engaging directly with the customers within the week to personally appreciate their continuous patronage and assure them of more reliable services and customer-centric business. Commenting on the programmes, Somefun, said that “in the recent past, the Bank initiated a dynamic customer services experi-

ence strategy which enabled the Bank and customers to adjust quickly to the new normal caused by the pandemic”. With an increasing focus on digital strategy, the Bank has continued to prioritise the customer over the past few years. This, it has achieved, through introducing innovative digital products such as the USSD banking *7799# in local languages, and mobile banking solution, UniFi which have boosted customers’ access to the Bank’s services, while facilitating convenience. These electronic banking channels are constantly updated with new and exciting features to put the customers first and make their banking experiences top-notch in the industry. Speaking on this year’s Customer Service Week, Chief Customer Service Officer, Unity Bank Plc, Titilayo Abraham said: “Over the past two decades, Unity Bank has maintained a sterling customer service record and will continue to strive to maintain this. With our dynamic and vibrant customer care team, we shall continue to put our customers at the heart of our business operations.” “The evolving business landscape requires a dynamic approach to customer service and we will continue to evolve with these trends to cater to all nuances of change in customer behaviour to guarantee excellent customer service in the years ahead,” she added.

Credit Direct recognises, appreciates teachers on WTD 2020 BUNMI BAILEY

redit Direct Limi t e d , a l e a d i ng consumer lending institution in Nigeria, has again shown support for teachers across the country as it appreciates outstanding teachers on the World Teachers’ Day celebration. In an event that took place at the company’s head office, Credit Direct presented the most outstanding teachers w ith cash gifts and non-cash rewards. With a focus on rewarding excellence and building loyalty, the organization appreciated over 25 teachers nationwide. Speaking at the event, the MD/CEO Credit Direct Limited, Akinwande Ademosu, represented by the country head, sales, Abiodun Adigun empha-

sised the role of teachers in every society as they help to shape the lives of many and the future of a nation,

he stated that “teachers are one of the most priceless assets of a nation, their role is very crucial to nation

building; most of the greatest talents that we have in different organizations are trained by teachers and we

L-R: Orman Esin, commissioner of culture and tourism, Akwa Ibom State; Akparawa Ephraim Inyang-Eyen, chief of staff, Akwa Ibom State Government; Fred Maina, chairman, Icon Hotel Group Africa, and Adetope Kayode, managing director, Icon Hotel and Resorts Nigeria, during the official Handover Ceremony of Ibom Hotel and Golf Resort to the Management of Icon Hotels and Resorts Nigeria. www.businessday.ng

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celebrate and encourage them to do more and to let them know that they play a major role in Nation building.” Reacting after the presentation, one of the awardees at the event, Victor Akindele, a Lagos State teacher, congratulated his fellow teachers and appreciated the management of Credit Direct for recognising their hard work over the years, stressing that it is a profession they chose with passion and are happy with the results so far. According to him, “this profession comes with a lot of passion, and we are glad about the results over the decades; I have personally trained some good hands in different organizations in this countr y, having taught for so many years. It is a good thing that an @Businessdayng

organization like Credit Direct Limited celebrates with us on a special day like this, we feel honoured and are encouraged to do more”. This year’s Teacher’s Day celebration was also extended to social media platforms where people were asked to reminisce the best moment with teachers that shaped their lives. Credit Direct Limited is the pioneer of unsecured consumer lending in Nigeria and a leading innovation-driven financial technology organization, whose services are hinged on partnerships with employed individuals and employers to provide friendly innovative loan and investment products and remain the leader in Nigeria’s consumer-lending space.

Thursday 08 October 2020

BUSINESS DAY

BUSINESS INSIGHT How to Bankrupt-Proof Your Business During an Economic Downturn (Part 3) 3. Are we gold-plating or should we procure off the shelf? 4. Can we renegotiate commercial terms?

Akin Monehin

Be brutal with operating expenses (OPEX) A low hanging fruit which many business owners are emotional about. Moreover, many that I refer to as “care-takers”, ie business leaders of corporations, with relatively little stake in the profitability of the business, may do the barest minimum, just to keep the business afloat. The problem with that is if the recession deepens or extends longer than anticipated then the business goes belly up; it becomes bankrupt and no longer a going concern. Chicago Booth’s recent study

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Fuel to a Bugatti is analogous to cash in your business. No matter how profitable your business is, once cash dries up, the company ceases to be a going concern

‘

ough times don’t last but tough people (and businesses) do. Throughout economic history, recessions last, on the average eighteen (18) months. Many businesses are however fragile. Sadly, over two (2) million businesses that planned to shut down temporarily, in the US, since COVID-19 triggered a global lockdown seven (7) months ago, will now be closed permanently. This series is about business sustainability in the short to medium term; to outlast the recession the world is currently facing. Part one (1) introduced the concept of bankruptcy. Part two (2) talked about the first (1st) action businesses should take to improve resilience. I will share two (2) more actions business leaders take to improve business resilience.

led by renowned Economics Professors, Jonathan Dingel and Brent Neiman, concludes that, depending on the region (or country), approximately 37% of jobs can be done entirely from home. This presents an opportunity for businesses to review the fundamentals of hiring, relocation, office costs, etc. Airlines, known for super-thin margins, use trade by barter as a cash preservation strategy. Also, airlines, for example, will not pay cash for your service if they can get away with offering you a free ticket. Before approving that OPEX, I suggest business leaders challenge themselves with these 4 questions: 1. Is expenditure a must-have or a nice-to-have? 2. Is this an opportunity to reduce purchase quantity and/or quality?

Delay outflow of cash A Bugatti Chiron Super Sport can go up to an amazing speed of 450km/h. If you are driving one and it is about to run out of fuel, with no fuel station anywhere close, you will most likely turn off the air conditioner, reduce your speed, and generally take advantage of the terrain, to conserve fuel. You do this because you know that if the car runs out of fuel, it doesn’t matter that it is the fastest car on earth, you are not going anywhere. Fuel to a Bugatti is analogous to cash in your business. No matter how profitable your business is, once cash dries up, the company ceases to be a going concern. During a recession, businesses that are intentional about cash preservation (ie they delay cash outflow) display a high level of financial intelligence. Focus on your account payable ledger and delay payments for as long as contractually possible. A business owner in the United States that I recently spoke to negotiated with her landlords to cancel her office rental cost from March till May. She is now paying 70% of the rent till year-end. She is conserving cash so her business outlasts the ongoing downturn. Be strategic and save your business. Look out for the concluding part on Thursday 22nd October 2020

About the Author:

Akin Monehin is a thought leader, writer, speaker and business strategist. He is privileged to have worked in leading organisations like British Airways, Virgin Atlantic & Nigeria LNG Ltd. He is a 2015 recipient, Choiseul Institut France’s Award of Top 100 African Business Leaders under 40 Years old and has worked in over 10 countries including French and Arabic speaking ones. He can be reached on akin. monehin@chicagobooth.edu Views expressed in this article are personal and do not represent the views of any institution.

Blue Band and Margarine’s morph into meaningfulness Larry Light

rand revitalisation requires finding and satisfying a new, important customer need. Brand success requires being the best at something relevant and differentiated. It means never taking your eye off of changing customer needs. As veganism and vegetarianism diets become more embedded into people’s lifestyles, anything plantbased is now perceived as good. Plant-based foods and beverages are seen as healthy and planet-friendly, an image that appears to override the idea that processing also takes place in their production. Margarine is a non-dairy spread that was previously marginalised due to its hydrogenation, which turns polyunsaturates into saturates and trans-fatty acids. Because of hydrogenation, and its non-buttery texture and taste, margarine sales declined over the last decade. But, now margarine is morphing into healthier fare, as margarine is naturally plant-based. And, hydro-

genation is no longer used to make margarine firmer and texturally closer to dairy butter. Current alternative butter brands made from plants contain healthy unsaturated fats. Brands, such as Blue Band, that were derided as pale non-dairy substitutes are now desired as manufacturers update and revise ingredients. Margarine has now become a darling of the alternative dietary regime crowds. Margarine has an interesting past. France’s first president (18481852), Napoleon III, the nephew Napoleon I, asked for an alternative to butter due to food shortages that affected feeding the French army. A chemist, Hippolte Mege-Mouries created “oleomargarine” and the rest is history. Unilever built a global margarine and spread business that included over 100 brands including Flora, I Can’t Believe It’s Not Butter, Blue Band. In 2017, after a very highpriced bidding war, investment firm KKR walked away with the prize, offering Unilever approximately $7.7 billion (€6.8bn). The acquired business was set up under a new corpowww.businessday.ng

rate entity called Upfield. Ordinarily, the terms brand revitalization and private equity are not commonly used in the same sentence, so kudos to KKR. Rather than starve the former Unilever brands, KKR saw an opportunity that could not be overlooked: the appeal and profitability of plant-based foods. With some recipe changes and new marketing, KKR could leverage its portfolio as a healthier and more sustainable way to eat. Some products were jettisoned, but this was to be laser-focused on the brands that fit the overarching portfolio’s new positioning. This new positioning is clearly articulated on Upfield’s website… “We are the largest plant-based consumer products company in the world and we have embarked on a journey to deliver a ‘Better Plant-Based Future’ to the benefit of our customers and consumers alike.” Along with this statement is the commitment to sustainability including a policy paper titled, “A Better Plant-Based Future.” According to Financial Times, Upfield is determined to change the

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image of margarine. By focusing on the sustainability of margarine, Upfield is altering its ingredient lists by “…reducing each product to around five natural ingredients to create cleaner labels.” Financial Times reports that originally KKR intended to “…strip out inefficiencies but decided on a new strategy after spotting consumer appetite for ‘sexy’ plantbased foods.” Apparently, Upfield made the correct decision, as its net sales grew 1.3% in 2019. And, The Good Food Institute reported “… sales of plantbased alternatives to meat, dairy and eggs rose 11% year on year in the US to $5 billion in 2019.” In the US, Earth Balance is one of Upfield’s biggest competitors. Earth Balance is a two-decades-old enterprise that makes vegan alternative butter spreads, nut butters and snacks. Its products are vegan, plantbased and non-GMO. The products have been designed to create “… a conscious, rewarding way of living.” As part of its philosophy is its original commitment to being “ethically plant-based.” The palm oil it uses is a non-GMO, non-hydrogenated @Businessdayng

oil. Earth Balance is involved in the Roundtable on Sustainable Palm Oil (RSPO), committed to environmentally and socially responsible palm oil production. Upfield is also focused on sustainable palm oil. Upfield states that it, too, sources 100% of its palm oil from physically certified sustainable sources. Additionally, as part of its investment, Upfield is pouring €50 million into a new Food Science Centre in Wageningen, the Netherlands, which will focus on sustainability, health, and taste in plant-based food, according to foodnavigator.com. The current eating scene is undergoing vast alterations. There are no clues as to which dining and cooking behaviours will last or fall away fast. What is clear is that the appeal of plant-based food alternatives is a growing customer desire. Revitalising a brand by focusing on satisfying changing customer habits and attitudes keeps brands relevant for enduring profitable growth.

Larry Light is the CEO of Arcature Brand Consulting

Thursday 08 October 2020

BUSINESS DAY

Thursday 08 October 2020

BUSINESS DAY

INTERVIEW

How Apis prepared DPO for landmark sale to Network International After taking investment from Apis Partners, a private equity firm, in 2016, DPO, a digital payments company, grew rapidly. It went from processing about $50 million annually to $2 billion and expanded to 19 countries from only two countries prior to the investment. It had also grown its merchant base to 100,000 from only 8,000. In this interview, MATTEO STEFANEL and ROTIMI OYEKANMI of Apis Partners take LOLADE AKINMURELE, Business Day’s Deputy Editor, through the journey with DPO that started in a mid-sized conference hall in Cape Town, South Africa, to the eventual sale of the company to Network International, one of the Middle East and North Africa (MENA)’s biggest payments processor.

hen did Apis invest in DPO and what was the attraction then? Matteo: It’s been such an interesting and a great story for us, a great adventure with the DPO founders and the company itself and all the consolidation of the payment space in Africa. Whether organically or by acquisition, this was a business that from the very beginning, we thought could grow very fast and could be a champion in Africa for online payments and digital payments. We had a number of reasons why we thought that investing in DPO was worth it. The first reason was that, generally speaking, around Africa,; the high-speed internet connection has been coming live, as you know, and the last mile to home penetration has increased massively over the past five years which means that internet speeds, generally, all around the continent, have increased over the past five years. The consumer’s use of mobile device as well as access to internet and online shopping has increased enormously. And of course, DPO is almost entirely focused on online shopping, digital payments and increasingly, merchants, I should say, having taken over DPO services also for their offline work. The difference between online and offline has become increasingly less as the business has been growing both online and offline. So, today, DPO is processes the transactions of approximately 50 airlines. This is by far the largest number in the continent, in fact, globally actually. I think it’s the largest, they are all smaller airlines but it’s still 50 airlines. DPO processes big brand names that you would recognize throughout the continent and that is testament to what they’ve built. But it is also testament to the desire of the young consumers to increasingly get the services that they desire: to be able to pay for cinema tickets, airplane tickets, their Takealot deliveries, wherever there’s amazon, they want to be able to access these services in full. This is what DPO does. DPO allows you to pay using cards, but also using your mobile wallets. I mean, you can use such a huge number of payment methods. Matteo: Basically, DPO is the leader throughout Africa in terms of number of merchants, number of online merchants; it operates in 19 offices with over 300 employees. It has a relationship with over 50 banks to process transactions for them and 7 mobile operators; all the main mobile operators in Africa. It plans to be in 30 countries by 2022. So, it’s a very serious player and with significant value proposition to its customers. DPO wasn’t like this in the very beginning. Today compared to 2019, it has doubled its merchant base from 50,000 to approximately 100,000 merchants. The names you would recognize are Uber, Airtel, Kenya Airways, Booking.com, Takealot, Jumia Travel,

KFC, Shell, and Expedia. So, these are the names of international and regional champions with a very low concentration by revenues. It’s extremely high-quality business being created with over $2bn of processing value. These numbers mean a lot I think that’s what means the most to us. In 2015, Apis Partners discussed the type of Payments Company we want to back in Africa. We wanted to build a regional champion and we realised it was going to be a lot of work, we realised that the payments ecosystem in the continent is very fragmented and there are a lot of smaller players, but we wanted to create a champion. And that’s exactly what we did. We met a few and then we said, “Why don’t you all come over to this theatre in Cape Town that we rented.” I still remember it. It was really cool actually. There was this stage and the 50 companies and young entrepreneurs, everybody really excited. We were introducing everybody and everyone was presenting to each other and there was such energy and at the same time we were seeing who were the ones that had a real product, who were the ones that had energy to create a real business and the founders of 3G Direct Pay (as they were known at that time) came out as real leaders. Good leaders that lead by charisma. At the same time, others were clear in terms of having great products and others were clear in terms of being a little bit tired. The founders of one of the companies which DPO later acquired had been running the business for over 20years and they were ready for a change.” VCS was the name of the company and it was the second company we acquired under DPO. The company CEO came from a South African bank and they ran it for 20 years and they were clearly tired and for us there was an obvious consolidation opportunity and we had consolidation opportunities of companies where the management wanted to exit or where the management of the companies wanted to stay on and so we rolled then into management and now the management of those companies is part of the top management of DPO Group. In Cape Town, we clarified who was going to be the consolidator and how the growth path through M &A was going to proceed. Indeed, we delivered on all of this and we made 5 acquisitions in the end over the years. So, the consolidation process worked really well and Rotimi can talk about how it was done in Nigeria as an example, although, of course, this is early days but it’s proceeding extremely well. We also identified countries where the best path for growth was organic growth: starting a company, getting a license, getting clients. Rotimi can speak better about this. Rotimi: We identified Nigeria, Ghana and Morocco as countries with good prospects and where we wanted to establish operations. As you would know, in the beginning, DPO operated exclusivity in East Africa and with the acquisitions the company expanded into

Southern Africa. Our plan of being Pan Africa meant we had to expand into West Africa and North Africa. We started with a few major West African countries: namely Nigeria, Ghana, Cote d’Ivoire, Senegal. In these countries, we went through the operators exploring potential acquisition candidates because we thought it was better for us and was quicker to market by acquisition. But we found that either the business models were not aligned with ours, or as you probably know, when you have a small player in a big market and a fragmented market, a leader might be a small player but they all had exaggerated valuation expectations which were not reasonable. So, what we did in Nigeria, after discussions with about 15 companies we decided to apply for a PSSP license from the Central Bank of Nigeria and we are now expecting to have the final license. The delay in obtaining the final license has been caused by COVID-19. In Ghana; as in Nigeria, we met with several players in Ghana and when we couldn’t find any player that we would fit into our plans we decided was to commence the business in Ghana. Incidentally, at the time we commenced our business in Ghana, there was no licensing regime, but subsequently, Ghana introduced a license which we’re working on securing. We’re already operating in Cote d’Ivoire and we are at an advance stage of securing a license in Morocco. Each of the countries has its own licensing regime so we have had to understand each country’s licensing requirement to secure the required license. Today, we operate across East Africa, Southern Africa, West Africa and soon in North Africa. In summary our approach is can we acquire a business and if we cannot, then we proceed to apply for the relevant license. We can also talk about some of the ways we have supported the business. Matteo talked about being connected to at least 50 banks across Africa. We have been very supportive with introduction to some of the Pan-African banks and some local banks. Matteo: The point is, DPO is by far, the largest player in the online space in Africa and what has been tremendously valuable is us being able to rely on a management team as motivated and as charismatic as the one that DPO has and for them to be able to rely on us, on people like Rotimi, myself and our colleagues to be able to deliver on both the organic and inorganic expansion. It’s a game of numbers but numbers don’t matter unless they’re large. You need to be able to provide your clients with the ability to accept lots of payments. If you tell Uber that you can accept only accept payments in one country or provide them a service only in one country, it will not be as attractive as what we can do, which is provide them with services in 19 countries across the continent then we become a one-stop-shop solution for these international players.

Rotimi: One of the things you’d see we’ve talked about is how we add value to the businesses, not just improving the governance of the businesses. And because we are sector-specific, and we understand this sector globally and are able to attract global strategic partners to the businesses. Being sector specific means that the depth of our support is not just governance but in the operations of the businesses themselves such as strategy of the businesses, what is happening in other countries, how the industry is developing and how do we prepare for the next stage in the evolution of the industry in Africa.

Rotimi Oyekanmi

Matteo Stefanel

It would be really useful if you could highlight clearly where DPO were before Network International came in and where they are now, just to get a sense of before and after for DPO so it becomes clearer the hard work Apis had to do to grow the company to the level it is today where it was attractive to the likes of Network The journey itself started in 2016 when we invested and at the time, the total amount they processed was about $50 million and by the time we exited, it was just over $2 billion. I think that’s the best way to show how much it’s grown. When we invested, it was in two countries, but by the time we signed the agreement to exit, it was in 19 countries. Network International, in their presentation, said DPO had 50,000 merchants, I think we count them differently because from our view, it’s 100,000 merchants; every instance of a merchant is a different merchant, even if it’s a chain, you have a different presence, a different shop, etcetera. The growth in revenues has been in excess of 50% per year from the time we invested to the time we exited. And as I mentioned, we have done 5 acquisitions: 5 inorganic mergers and acquisitions since we invested. So, this has grown massively, the merchant base when we invested was only 8,000 compared to the 100,000 on the same base of counting. And when we invested, in terms of local workforce, it was approximately 15 people, which grew to over 300. So, this is real growth. Network International was not the only one to show interest in DPO. What convinced you that they were the perfect suitor? Let me start by saying we know Network International well and I have a lot of affection for the company. I saw it growing from the leading player in the United Arab Emirates into what is now- the largest payments company in the Middle East

and Africa without exception. I was on the board of Network International many years ago, between 2011 and 2014, if I remember correctly, when the company I was at the time before we started Apis Partners was an investor in Network International and then I followed the growth of Network International with affection. One of Apis board members was also on the board of Network International and we have spent a lot of time brainstorming with Network international but by no means was Network International the only party interested (or keen) to acquire DPO. It was quite a contested situation at the beginning when a lot of parties called us expressing interest before we even started an official process. We got all these inbound calls, but we decided very early on that this asset, DPO, was just perfect for Network International. Network International is a phenomenal company in terms of its product suite, in terms of its African presence, but it was lacking the online payments element that DPO could bring to them. The African payments market is today, the fastest growing in the world and the fact that DPO is a 100% Africa-focused would really consolidate their exposure to this market. In terms of products, the strengths of DPO are in e-commerce, online, mobile money and account to account payments. Whereas the strengths of Network International are all in point of sales solutions and wide label, let’s call it corporate services to banks so a very different and very complementary product suite which on one hand, Network International could roll out its products to DPO clients in Africa, and on the other hand DPO can roll out its products to Network International clients in the Middle East where Network International doesn’t have the same product suite. It’s a real geographical and product suite synergy story and that is why it was such an important transaction for them. It also brings growth, DPO is growing so fast and obviously this is going to accelerate the growth of Network International. Network International is a larger, more mature company, but with this acquisition its growth increases significantly. This is why we felt Network International would be the ideal new owner of DPO because it wants Africa and wants to focus on it. It also wants to

focus on online digital payments which it didn’t have. It had presence in Africa, but not enough and this makes it by far, the leader in Africa. Rotimi: Just to add that we had lots of inbound interest and some of these interests were from Africa, but it was very important to us to connect Africa to the rest of the world. This is a very important objective for us and that’s why you normally would look at businesses with scale that can expand to operate in multiple countries and eventually become Pan-African. This is because we want to be able to connect Africa to the rest of the world. When we looked at some of the inbound interests, we found that some of them were just Africa-focused businesses and we thought we would prefer a deal that could lay the building blocks to connect Africa to the rest of the world rather than even just operating within Africa. This is also one of the reasons why we chose Network International. Another somewhat significant yet underrated reason that attracted and endeared Network International to DPO is the fact that it is a truly Pan African business operating in 19 different countries and with the relevant licenses. It sounds very easy when you say, “we’re in 19 different countries or we’re going to be in 30 countries in a few years.” but the rigors to secure licenses are enormous. In one of the countries we started our application for a license in 2017 and we got an approval in principle on the last day of 2019. So, it’s not easy to get licenses in different countries. For Network International, getting those licenses along with this acquisition is almost priceless because all they have to do is just plug DPO into Network International and “boom!” you’re already expanding your business across Africa. One thing Apis has done well is to attract international strategic investors to invest in Africa. For example, we divested our remittance business Transfast to Mastercard. That’s just one of several deals we have done with a view to connecting Africa to the rest of the world. Matteo: I couldn’t say it better. This is very straightforward for us, as long as you keep companies as a purely Africa play, you’re missing a trick. The world today is

about connectivity, it’s about being able to provide services across continents and it’s for companies to be able to invest in Africa without thinking that it’s going to be different. The interest that we got for DPO and also Transfast was due to their ability to provide services in a seamless, modern, and profitable manner throughout the continent in a way that literally an International player can, as Rotimi said, plug in and just play throughout the continent. This is the main attraction. That is why, as Rotimi hinted earlier, we tend to shy away from investments that are single country. We will consider them (single-country businesses) but we tend to shy away because we do believe that, generally speaking, connectivity, both within and outside of Africa is one of the big value additions that we as a private equity investor can bring. The other value added elements are what Rotimi mentioned so our ability to help our portfolio companies to obtain licenses, to work within, sometimes, confusing difficult or time-consuming regulatory frameworks and benefit from our knowledge of how things are done in other markets so you can compare and contrast. I always give the example that the mobile money legislation in Kenya is very advanced but in India it isn’t so our ability to bring to Indian companies, the knowledge of mobile money that we have as it is in Kenya is a great value that we bring and likewise, there are different legislations whether it is agency banking legislation in India which is very advanced that we are able to bring to a country like Tanzania for people to realize how it actually works in other countries. For me, I think this is such phenomenal value added. Helping with growth doesn’t just mean helping with mergers and acquisitions which, of course, we do, but it also means helping in dealing with regulators, helping in setting up strategy, learning from other countries, helping the connectivity within and outside the continent. That is growth. That is what we see.

Matteo: It’s important that this goes out to tomorrow’s entrepreneurs so that they know this is the type of charismatic entrepreneurs that we are looking to back. Pretty much all of our companies are entrepreneurfounded and entrepreneur-managed and what we can bring to our entrepreneurs is enormous because of our specialization in financial services and in the sub-sectors of financial services like payments, credit, insurance, we know what we’re talking about and we can really help the businesses to grow to the next stage; to do as we’ve done with DPO. This is what we do. This is what we love to do, and we can do it because we only do financial services, nothing other than financial services and we love to back entrepreneurs. How easy or difficult is it to find the right kind of companies that you’re looking to back, the ones that meet the kind of criteria you’re looking for? Matteo: (laughing) Like all good things in life, it’s very difficult. It’s difficult not because there are few good companies out there, but because you want to find the match between ourselves and the company and entrepreneurs. You want to be able to add value. It’s like a marriage; there needs to be a good fit for it to last and be successful. This is why it takes long and it’s difficult but we are in the market, we are present, we’ve got in addition to our office in Lagos, people in Johannesburg, Nairobi and throughout our investment area beyond Africa and we meet a lot of people and organise a lot of events. So, the answer is it is not easy but it’s not for lack of opportunities, it’s because you want to find the right matches between ourselves and the entrepreneurs and the companies.” Rotimi: I think that summarises it. If you look at the story of DPO and how we said the African online payment industry was fragmented and the need to find a champion that would lead a Pan African business, it’s the same thing you’d find in most African countries most operators have single country operators with dreams to expand across their region. Our goal is to find regional players who can expand to be Pan-African players. Therefore, one of the biggest challenges we have in Africa, or should I say Sub-Saharan Africa is that entrepreneurs usually have a tendency of not wanting to part-

ner with each other and this is why you find most of the companies are fragmented. Where they could work together, prefer to work alone and run small businesses. This is where independent arbiters like PE funds come in and play a key role to drive consolidation. So, you’d find most of the investment opportunities we see today require scale which can mostly be achieved with consolidation. We have to bring like-minded entrepreneurs together to build a compelling business which can be attractive to global strategic investors. With Private equity generally, you’re looking for the best fit as Matteo said and looking for the best fit means you have to talk to many people especially when you have a fragmented market and find out who you think will be the best party that you can work with. With the issue of scale in mind, there is need for entrepreneurs to stop focusing solely on maximising valuation but to also focus on value that the PE firm can create. You said there are a lot of opportunities in the payments space, that’s undeniable. Are you looking to do any new business in that space any moment from now? Absolutely. We love payments. Payments, in our opinion, is one of the most attractive spaces in financial services globally and in Africa. The rise of the consumer, the growth in online and offline transactions, the increase of digital payments in general and the transition from cash to digital payments is extremely strong. It’s being pushed by so many different reasons: convenience, the desire of the government to be able to monitor flows so as to tax properly on transactions and also now, more recently, COVID. Of course, digital payments have less risk of transmissions, so we think payments is going to grow even faster moving forward. So, we’ll keep on investing. To all those entrepreneurs out there, we would love to have chats, we would love to know of their business model and the particular way to crack this transition from physical to digital and to make this as widespread as possible throughout all the countries we invest in. Rotimi: Let me give a different dimension to that. For example, Apis has classified financial services into five sub verticals - payments, savings and credit, insurance, capital markets and service providers. When you look at all of these sub verticals, you’d find that payments are like the platform that allows most of them to flourish and grow exponentially especially in Africa where the businesses are targeting the retail segment, so a good payments platform helps efficiency whether it is banking, insurance, capital markets, savings, ecommerce etc. If you look at the Apis portfolio, about 60% of our portfolio is payments and that’s because an effective payments system is a boost to all these other segments. Matteo: Completely agree. Payments, at the end of the day, has been overlooked in its importance to provide the backbone to all other

financial services and actually to all other economic activities. At the end of the day, if it’s easy and quick to pay and get paid, you need less credit, for instance, because you don’t need to bridge the time between paying and getting paid. You can purchase more. The economy grows faster and as a result, everyone benefits more – as the velocity of money increases, economic activity increases as well, and everybody benefits. Payments for us is the backbone to grow. There was a McKinsey study that analysed how much an increase of 1% in digital payments in a country increases growth and it was phenomenal, it was like a multiplier effect. Is there any other point you’d like to touch on before we round up? “No, we just want the entrepreneurs out there to reach out. To let us know of their businesses. We’re looking to invest $20m - $50m per investment and we love companies that are already strong, and we want to make them super strong. I think that’s the best way to put it. Rotimi: “We’ve talked about DPO and a bit about Transfast. Let’s end with talking about Apis Partners and its AuM of about US$1b. Matteo: At Apis, we are happy to have been lucky enough to have created a business for about 6 years that has grown from 3 people and a few more junior colleagues in London and now we’ve been blessed with the confidence or the trust given to us by or investors which include governments, the developmental financial institutions, including the CDC from the UK, the World Bank, the European Investment Bank. We have got government institutions as well as, and this is a crucial point: majority of our investors are actually institutions, they are corporate, they are banks, they are insurance companies; whether Prudential of the United States, Intesia of Italy, Bank of Yokohama of Japan. These are the type of investors that we have. We’ve also got the International Monetary Fund pension fund, so their pension fund invests in us. As a result of that we had a first fund of just under $300m which is what we invested in DPO. We also raised a second fund at over $560m which helped us grow exponentially. We also have a single smaller fund at the venture stage investing primarily in technology. And we’ve got a number of smaller investments that we do on a case by case basis with some of our Limited Partners (LPs) and our investors when the opportunity arises. And as Rotimi was saying, we now manage approximately a billion dollars. Our fund 1 is performing very strongly and we’re very happy with it. DPO of course, contributed as well to that. We have 18 investments currently and it’s a great ride. We’ve got close to 30 colleagues in Lagos, Nairobi, Johannesburg, London, Mumbai, Singapore and I think we’re still having fun. That’s great. There’s no need to fix it if it’s not broken. It’s a winning model.

Thursday 08 October 2020

BUSINESS DAY

RESEARCH&INSIGHT

In association with

A WEEKLY PUBLICATION OF BUSINESSDAY RESEARCH & INTELLIGENCE UNIT(BRIU)

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The rising fortune of digital payment platforms ISAAC ESOWE

he cashless policy introduced by the Central Bank of Nigeria (CBN) in 2012 which required a daily total limit of N500,000 and N3,000,000 on free cash withdrawals across all accounts owned by individual and corporate customers respectively propelled the growth trajectory recorded in the digital payment platform in the recent past. Although, a significant share of the Nigerian population remains either unbanked or underbanked, most citizens, especially, of the rural settlements still prefer storing up cash or use local channels such as community banking such as Ajo, Esusu among others as means of making transactions and other financial obligations. The financial exclusivity that characterized the said individuals (unbanked and underbanked) can be attributed to a limited public awareness of other instruments, low rate of literacy level, and limited access to banking infrastructures. In addressing these challenges, the CBN has taken some steps to improve this situation, although, much has not been recorded and as such the directives have not met its full objectives, part of such directives are the rules for establishing Payment Service Banks, as part of its efforts to creating a nation that is financially inclusive as a way of promoting electronic payments in the country. Upon the Implementation of this strategy, it impacted positively on the rate of access to financial services. Despite not at its full scale, the adult exclusion rate reduced from 46.3 per cent in 2010 to 39.7 per cent in 2012. All the geopolitical zones in Nigeria equally recorded improvements with exclusion rate declin-

ing between 2010 and 2012 as follows: North East, from 68.3 per cent to 59.5 per cent; North West, from 68.1 per cent to 63.8 per cent; North Central, from 44.2 per cent to 32.4 per cent; South East, from 31.9 per cent to 25.6 per cent; South West, from 33.1 per cent to 24.8 per cent, and South-South, from 36.4 per cent to 30.1 per cent, the CBN data shows.

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Nigerian digital payments market, so far, what has changed? A recent study carried out by BusinessDay Research and Intelligence Unit (BRIU) shows that so far, the digital payment markets has witnessed tremendous growth since the introduction of the cashless policy by the CBN. Since the launch of this initiative; the digital space

has seen many unique and state of the art product innovations in the digital payment industry. Besides, the growing young population who are tech-savvy has enabled faster technological advancements in the digital payment space. This can be evident in the increasing volume of mobile inter-scheme transactions and other payments channels. A brief analysis for a

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five-year period shows an impressive growth across all digital payments’ platforms. In FY 2019, the volume of mobile inter-scheme transactions stood at 41.2 million and valued at N828.1 billion. Similarly, the banking public grew although slightly, as of FY 2019, the total number of active bank customers (Individuals) stood at 72.3 million. This represents 3 per cent growth against 69.9 million recorded in FY 2018. Put differently, the total number of bank accounts grew slightly by some 6 per cent from 118.1 million accounts in the previous period, as this moved to 124.78 million in FY 2019. Note, only 71.2 and 79.3 million accounts were active in 2018 and 2019 respectively. Data from Nigeria Inter-Bank Settlement System Plc (NIBSS) reveals. The scheme continues to demonstrate significant growth across all payment channels in the first 8 months of 2020 (January – September 2020). Among other categories – NIP transaction, Point of Sale (POS) among others, the mobile transaction recorded the most growth transaction volume and value increase significantly by 84 per cent and 97 per cent when compared to FY 2019, data from Nigeria Inter-Bank Settlement System Plc (NIBSS) shows. The healthy transactions growth recoded in the digital payment space during the reference period can be attributed to the restriction of movement caused by the lockdown induced by Covid 19, as many Nigerians who are financially inclusive opted to the use of mobile apps for transactions and settlements of other business commitments. Digital payments competitive landscape Nigeria remains a largely cash-dominated society,

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primarily due to limited financial literacy and a lack of financial infrastructure, aside the fact that the market is moderately concentrated. The competitive rivalry in the market is moderate as a good number of players in the industry prevail despite the existence of several companies. The global perspective On the global scene, the digital payments market is expected to hit $6.7 trillion worth of transactions by 2023, according to the data extracted from Statista and LearnBonds.com. In 2019, digital payment transactions totalled more than $4.1 trillion, with point of sale spearheading or rather making up 18 per cent of this figure, or $745 billion. This is projected to grow or account for 30 per cent of the digital transactions by 2023. The US digital payments market accounted for 24 per cent or $979 billion of the total digital payments and it is expected to grow by 33 per cent to $1.3 trillion by 2023. China on the other hand dominates the digital payments sector with $1.6 trillion worth of transactions in 2019 and this is expected to grow more than $3 trillion by 2023, available data shows. Companies such as Alibaba and Tencent have grown quickly in the past few years, exploiting the corresponding growth in the use of smartphones to improve the availability and use of digital payment methods. India, according to the data, is also another fastgrowing digital market. The country’s peer-to-peer sector was projected to grow from $10.5 billion in 2017 to $159.2 billion in 2022. This feat will be specifically driven by radical reforms such as the “demonetization” in 2016, which saw the withdrawal of smaller currency notes, among others.

Thursday 08 October 2020

BUSINESS DAY

LegalBusiness BD Business Law Industry Report Practice Intelligence Partnerships

Courage is the most important attribute of the lawyer – Chuka Agbu, SAN In this edition, CHUKA AGBU, SAN, FCIArb (UK), Founding Partner, Lexavier Partners speaks with Legal Business about being conferred with the rank, ‘Life Bencher’. In this interview, he talks about the responsibility associated with his role as a Life bencher; his journey in the legal profession and his advice for younger lawyers. EXCERPTS...

he Act establishing the Body of Benchers states that the body is made up of legal practitioners of the highest distinction in the legal profession in Nigeria. Life Benchers are appointed from members of the body upon the recommendation of a committee from among themselves. How do you feel about being honoured with the status for life as a Bencher? The appointment to me is a call to further service in upholding the ideals and ethics of the profession. It does come with rights and privileges such as the exclusive right to sit in the Inner Bar and to mention any motion, in which the Life Bencher is appearing, out of turn on the cause list; rights which I have had the privilege of benefiting from for years as a Senior Advocate of Nigeria. So, this one is really a call to serve a profession to which I owe so much. As a member of the screening committee of the Body of Benchers in the last five years, I have actively participated in the screening of thousands of candidates for suitability to be called to the Nigeria Bar as fit and proper persons. This has been done at the expense of my personal comfort and resources, as the discharge of the duties assigned to me sometimes entailed travelling out of my primary base. One of the responsibilities of the Body of Benchers is to take all measures necessary for maintaining the traditional values of the legal profession. As a Life Bencher, do you think that traditions still have any role to play in the transformation of the profession in a

have evoked such emotions.

virtual and digital era The emphasis is on values, particularly the core values that lawyers should hold dear such as belief in the rule of law as enshrined in the Constitution, independence, confidentiality, integrity alongside other values others, in preference to conduct that is unethical and compromising. As for traditions, they die hard in our profession. From the strict dress code to good mannerisms, etiquette, carriage and command of the English language to consummate intellect. Let us take just one example from History on how tenacious traditions have been in the profession. Queen Mary, who jointly ruled with her husband Williams 11 of Britain died of smallpox in 1694, more than 300 years ago, and to mourn her demise, judges and lawyers wore long black robes in mourning. To this day, lawyers in Nigeria - which sometimes has an incredibly hot climate and suffocating

heat - still adorn the erstwhile black funeral robes for the courtroom and other ceremonial outings. This tradition is not about to change. Chief O.C.J Okocha, SAN, chairman of the Body of Benchers in 2020, still wears his robes elegantly. Chief Christopher Alexander Sapara Williams, first indigenous Nigerian lawyer, called to the English bar on 17th November 1979 wore his black robes with dignity. On a lighter note despite the call from some quarters to discard some aspects of our rich tradition in the profession, there is the perception in our traditional African context of a fully robed Barrister being akin to a big masquerade in a court appearance. It is a paradoxical blend of the imported tradition and the native. I once witnessed, during a Benchers procession, the joyful tears of some proud parents seeing their daughter decked out in the coveted wig and black robes on the call to bar day. I wonder if a lesser offering could

You have had an illustrious legal career spanning more than three and a half decades. What experience have you found most gratifying? This year marks 38 years of unbroken private practice of the law for me, having been called to the bar at the age of 21. My experience is versatile and cuts across most areas of practice in Nigeria. I was particularly opportuned to have practiced with two titans of the profession - Dr. Olisa Agbakoba SAN and Dr. Wale Babalakin SAN, two gentlemen who I will describe, with due respect, as huge brains and very talented. My take away from these associations many years later has been the appreciation of courage as the most important attribute of a lawyer. It is more important than competence or vision. Courage propels you to seek to break new grounds in the profession and makes it imperative that you must have the matching knowledge for your objective. I found my admission to the rank of Senior Advocate of Nigeria (SAN) very satisfying. From facilitating the business law class at the Lagos Business School (LBS), I was inspired to undergo a three-year programme of the Swiss Business School (SBS) where I was awarded a Doctoral Degree in Business Administration. This is particularly satisfying. I do not count the litigations I have handled; but I should mention that in 2010, my firm Lexavier Partners obtained over 2,500 judgements for the Asset Management Corporation of Nigeria which has enhanced their remarkable debt recovery rate in no small way. Recently, I chaired the Blockchain and Virtual Financial Assets Committee set up by the Securities and Exchange Commission (SEC) to look into regu-

lations for the Virtual Financial Assets space (inclusive of cryptocurrencies) in Nigeria and my committee of dedicated industry experts completed the task within the given time frame and presented its report. It is very satisfying that the SEC recently released a Statement drawing from this report, which is presently positively agitating that space for the economic progress of the country. What is your advice to younger colleagues at the Bar? The terrain is changing at a very fast pace. Everything is going virtual and digital. Acquire as much knowledge and skills as you can of the current technology in relation to legal practice in order to enhance and open up income streams, but remember that no other profession sets higher ethical standards and rules of discipline than the legal profession. Guard your reputation jealously. The bar has that sacred obligation to lead the way in obeying the laws and maintaining the highest ethical standards. Take to heart the words of Earl Warren, United States Supreme Court Justice who said that, “In civilized life, law floats in a sea of ethics. Each is indispensable for civilization. Without law, we should be at the mercy of the least scrupulous. In fact, without ethics, law will not exist.”

Dr. Francis Chuka Agbu SAN, FCIArb (UK) is the Founding Partner of Lexavier Partners with almost 40 years’ experience in the legal practice across sectors. He chairs the committee set up by the Securities and Exchange Commission (SEC) to advice and produce a draft of regulatory provisions relating to the emerging area of digital assets in the Nigerian Capital Markets.

Pencom DG: Igbo lawyers ask Buhari to withdraw nomination ONYINYE UKEGBU

awyers under the aegis of the influential Otu Oka Iwu (Law Society) have warned President Muhammadu Buhari against breaching the 1999 Constitution and the Pension Reform Act 2014, asking him to “immediately withdraw” the nomination of Hajia Aisha Dahir-Umar to replace disengaged Director General of the Pension Commission (PENCOM), Mrs. Chinelo Anohu-Amazu.

In a statement by its President, Joy Nzube-Uzoeghelu, the lawyers expressed “shock and dismay” at the

Why New Wigs are not making

INSIDE it past 5 years in Legal Practice

“flagrant disregard of the enabling law setting up the commission,” warning that “the propensity of the Buhari Administration to ride roughshod over Nigeria’s Constitution and extant laws is a grave threat to the rule of law and to Nigeria’s unity.” “It is deeply troubling that while the president was preaching unity as a hallmark of Nigeria’s 60th anniversary celebration, he has exhibited an unparalleled level of cronyism never witnessed in the history of our country,” said the Igbo lawyers’ union. “In

NBA sets up task force for the release of abducted lawyer, Paulette Ajayi

practical terms, President Buhari has done more to foster centrifugal forces in the country than to promote unity, even as he preaches ‘togetherness’ in commemoration of Nigeria’s 60th anniversary. The latest nomination is yet another infamous example in a landscape littered with consistent lopsided appointments.” The law society stated that “save for mischief or unbridled self-interest, there is unquestionable clarity from Section 21(2) of the Pension Reform Act (PRA), 2014 that ‘in the

Legal Obligations of Online Entrepreneurs/Retailers in a Virtual World

event of a vacancy, the President shall appoint a replacement from the geopolitical zone of the immediate past member that vacated office to complete the remaining tenure.’ Clearly, the nominee should come from the South East zone as the former Director General who was ousted by the Federal Government under hazy circumstances. “The nomination equally breaches the 1999 Constitution, the Federal

Continues on page 21

Arbitral awards as sovereign debt risks: Impact of P&Id and eurafic cases

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Thursday 08 October 2020

BUSINESS DAY

LBPERSPECTIVE

INDUSTRYFILE

Why New Wigs are not making it past 5 years in Legal Practice

NBA sets up task force for the release of abducted lawyer, Paulette Ajayi

CHUBA AGBU

was never really convinced law was the career for me; in fact, I was quite adamant about this, and, this was after having obtained a Masters’ degree and Call to Bar certificate. At this stage, several personal factors had linked up to form a formidable shackle; parental pressure, fear of the unknown and the law degree certificates that begged the question as to whether the last 5 years of my life were for nothing. My disposition is hardly anecdotal because lawyers in Nigeria seem to be leaving the profession in droves. I do not have access to exact data, but from personal observation, four out of every five people I know from law school did not end up in legal practice. So, why are lawyers jumping ship after years of rigorous training? From a global perspective, lawyers leave the profession for obvious reasons such as demanding work hours and work pressure. However, when observed within the Nigerian ecosystem, it is apparent that practice here, for a budding lawyer, is in and of itself a fairly compelling reason to flee at breakneck speed. Law is a demanding profession, and the fact of the matter is that not everyone can hack it. Anyone who has ever picked up one of John Grisham’s novels will know that its difficulty is not exclusive to Nigeria. Many recent law graduates harbour doubts with respect to starting a legal career and lawyers in this existential dilemma undergo what

I would term, the “dipping your toes” stage, which is done almost in a bid to reinforce their convictions. In more organised and economical stable environments, one could quite easily see a scenario where, in spite of existing doubts, a good chunk of qualified lawyers took the full plunge and convinced themselves that law was indeed their calling. The Nigerian experience, however, just like its enforcement system, will viciously and with little provocation, beat any fickle resolve you harbour. If there is a sardonically positive element about law practice in Nigeria, it is that it makes sure that only those with supreme resolve towards legal practice remain in the profession. Arguably, the most pertinent of all the reasons lies in the concept of fair compensation. As individuals, we sometimes ask ourselves, what am I really worth? The juxtaposition of work output in relation to remuneration is something I believe will traumatise Nigerian lawyers for a long

time. Till this day, I have intrinsically questioned my self-worth, and, in the face of employment negotiations, undervalued myself as a professional. Obviously, several socio-economic factors affect the value of professional service from one jurisdiction to the other. Nigeria, being a developing nation, will fall in the lower end of this spectrum. However, one can’t help but blame our legal culture as to why remuneration in law practice is particularly bad. That overarching belief that work experience in itself is enough reason to pay lawyers salaries that barely cover monthly transport is one of the most discouraging phenomena in the legal profession. Another, common theme in the conversations I had leading up to this article is the difficulty involved in getting assigned to the desired practice area. Save for the incredibly progressive law firms, any dream of being a hotshot in Continues on page 21

Olumide Akpata

n Saturday, October 4th, 2020, news of the abduction of a Legal Practitioner, Paulette Bisola Ajayi, by at least four men dressed in combat fatigues and dark T-shirts, in front of her home in Rumukrushi Port Harcourt, filtered in. The news of the abduction was confirmed by the mother of the abducted Legal Practitioner when the NBA President, Olumide Akpata got in contact with the family. Further to this incident, the NBA President has set up a Task Force to take necessary steps towards the release of our abducted Colleague. The members of the Task Force are: John Aikpokpo-Martins, 1st Vice President; Kunle Edun, Welfare Secretary; Prince Nyekwere, Chairman NBA Port Harcourt;

Victor Frank-Briggs; Irene Pepple; Anthonia Osademe (ViceChairman NBA Port Harcourt; Ngozi Ajayi The NBA is in contact with the Rivers State Governor, AttorneyGeneral of Rivers and Rivers State Police Headquarters, on this issue. In an official statement from the association, the NBA publicity secretary, Dr Rapulu Nduka stated that the welfare of Legal Practitioners remains paramount at all times and assures that no stone will be left unturned in ensuring the release of our dear Learned Colleague. The NBA further urged the public to make available any useful information that will ease the work of the task force and lead to Ajayi’s release.

under PART A and B of CAMA. This implies that companies such as Micro, Small and Medium Enterprises (MSMEs), who are mainly unregistered due to their sizes cannot benefit from this palliative. This is quite unfortunate because the MSMEs are said to be the major drivers of the economy. According to Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), MSMEs make up about 47.8% of the National Gross Domestic Product (GDP) and contribute 7.2% to export. Similarly, a survey carried out by the Nigeria Bureau of Statistic, revealed that MSMEs in Nigeria account for 50% of Industrial jobs and nearly 90% in the manufacturing sector. Also, a study carried out by the Federal Office of Statistics revealed that 97% of all businesses in Nigeria are MSMEs of which the sector provides 50% of employment and 50% of its industrial output. In order to benefit from the provision of the Bill, the government

should make it mandatory for MSMEs to be registered before they can be entitled to the palliatives available. This can be achieved by offering free registration to MSMEs in collaboration with the Corporate Affairs Commission (CAC) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). In conclusion, the introduction of the Bill is a welcome development even though it is not sufficient to ameliorate the economic hardship which the pandemic has impacted on businesses. However, the government may also introduce incentives such as waiver of income tax to be paid by companies, tax rebates, grants and loans etc, so as to enable companies especially those that has been hard hit by the pandemic to stay afloat during this period.

Highlights on the emergency economic stimulus bill, 2020 Continued from last week

eferral of mortgage Payment under the N a t i o n a l H o u s in g

Fund Pursuant to Section 8 of the Bill, individual contributors to the National Housing Fund may defer payment for residential mortgages by 180 days effective from 1st March 2020. The Bill further provides that the President may grant additional extension of not more than 180 days. The above measures put in place by the government to ensure stability of the economy during this period of this pandemic is commendable. However, there are some loopholes contained in the Bill. By the provision of the Bill, it is the intention of the drafters of the Bill that the tax rebate contained in Section 3 of the Bill is for the benefit of the employers. However, by the provision of the

Personal Income Tax Act (PITA), personal income taxes are borne directly by the employees not the company. Section 108 of PITA defines a “taxable person” as any individual or body of individuals (including family, any corporation sole, trustee or executor) having any income which is chargeable with tax under the provisions of this Act”. It is clear from the provision of PITA that a company is not a taxable as contained in the Act. The Court of Appeal in the cases of 7up Bottling Co. Plc v. L.S.I.R.B and D.S.A Agricultural Machinery Manufacturing Company Ltd v Lagos State Inland Revenue Board and Nigerian Breweries v. L.S.I.R.B, had to consider the effect of Section 53 on “assessments which is now section 54 of PITA. According to the Court, assessment is a matter between the RTA and the taxable person and not between the tax authority and an employer. The Court further held that the “taxable person” under PITA and “the PAYE system is the www.businessday.ng

employee and not the employer. The PITA imposes tax on income of individuals and not corporation. It is the responsibility of the employer to remit to PAYE taxes of its employee to the Relevant Tax Authority (RTA), thus the employer acts as the agent of the RTA. Even though the Finance Act, 2019 grants tax relief to some companies based on the revenue generated by the company in a given year, it is expected that this Bill will provide for the waiver of corporate tax liability of companies during this period. As a company’s income is chargeable with tax under the Company Income Tax Act as against the Personal Income Tax Act as envisaged by the drafters of the Bill. Another defect occasioned by the Bill is that the benefit to be derived from the provision of the Bill as it relates to business is restricted. By the provision of the Bill, the tax rebate contained in Section 3 of the Bill is solely restricted to companies registered

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Michael Ezeh and Latifat Moradeyo Associates (KMO Legal)

Thursday 08 October 2020

BUSINESS DAY

LegalBusiness

Legal Obligations of Online Entrepreneurs/Retailers in a Virtual World activities and use of data, there should be a cookie policy in place in line with the GDPR and NDPR.

DAVIDSON OTURU (Partner, Aelex)

lectronic/internet commerce (commonly called e-commerce) refers to the sale of goods or services using the internet, and the consequent transfer of money and data to execute these transactions. E-commerce platforms can therefore be likened to a marketplace, but online. Over the last few years, there has been some growth in e-commerce and the number of online shopping platforms. With the advent of COVID-19, and the attendant restrictions on physical interactions there has been a further shift towards e-commerce. Additionally, with a lot of brick and mortar institutions closed or having their employees working remotely due to the coronavirus pandemic, many businesses with limited or no previous ecommerce presence are changing their businesses’ trajectories. This is because of the significant increase in consumer bulk buying online with statistics showing that e-commerce accounts for more than three quarter of retail growth in 2020. Even as the lockdown eases out, it is projected that e-commerce is likely to continue in its increasing growth pattern as consumers are adapting to online shopping and may be unlikely to risk physical exposure where alternative purchase methods are made available.

Although different types of e-commerce models may exist, there are four main types that describe almost every transaction that takes place. They are as follows: a. Business to Business (B2B): when a business sells goods or services to another business (e.g. where a company sells its white label technology to another business). b. Business to Consumer (B2C): when a business sells goods or services to an individual consumer (e.g. where a consumer buys his products from Amazon or Jumia). c. Consumer to Business (C2B): when a consumer sells their own products or services to an organisation or a business. An example of this is where a social media influencer offers exposure to her online audience in exchange for a fee from the business. d. Consumer to Consumer (C2C): when a consumer sells a good or service to another consumer (e.g. when a consumer sells his old furniture on eBay to another consumer).

TYPES OF E-COMMERCE MODELS

LEGAL MATTERS ARSING The increase in online commer-

cial activities has also brought its own challenges and there is a need for business owners to critically consider the customer purchase processes which may not be as simple as they appear. For entrepreneurs running e-commerce startups, legal infractions come in many forms, with each infraction presenting a different challenge for the business. It is therefore pertinent that owners of these platforms engage a knowledgeable lawyer and familiarise themselves with a few legal obligations that usually arise in e-commerce transactions. Here are a few things to note when determining if an e-commerce platform is compliant with established laws and legal principles. 1) Data protection and privacy This is arguably one of the most important issues that entrepreneurs running e-commerce platforms should take into consideration, particularly in the light of the provisions of the General Data Protection Regulation (GDPR) and the Nigerian Data Protection Regulation (NDPR).

Why New Wigs are not making it past 5 years... Continued from page 20

a specific area of practice, right off the bat, is promptly dispelled upon resumption in a typical firm. Considering that our system is derived from English and Welsh legal system, a peculiar aspect about practice is that there is still no concrete demarcation between Barristers and Solicitors as the Nigerian Law School doesn’t offer specific exams for either. This means that for many lawyers, irrespective of whether they want it or not, most of the early years will be spent building competition-level stamina, jostling for space in a courtroom, and despite the emphasis older lawyers place on courtroom experience, the verdict is still out on whether or not this is completely integral to reach the heights of the profession. Especially now that the current NBA president is exclusively a solicitor. The truth is that some lawyers are only able to contemplate legal practice if they can compromise

by carving out niches. When presented with a path that is contrary to this and left on that path indefinitely, it can be demoralising and ultimately lead to looking beyond the legal profession for career fulfilment. Practice, in itself, although overstated in its negative aspect, does have its systematic challenges. A sluggish outdated culture coupled with an equally ancient judicial system means that all your technological wisdom is for nought. Those who are fortunate enough to have strictly “commercial” practice obligations only have to deal with the continued trepidation our system has towards technology. (Although there are signs that show slow but steady progress regarding technological adoption). The court, however, poses an entirely different challenge, more akin to what we associate that term with. It takes real endurance to cope with the structural limitations of some Nigerian courts but this could be seen as symptoms of www.businessday.ng

operating in Nigeria in general. Regarding the systematic inefficiency, I had a conversation with a lawyer who left to go and practise in England after being frustrated with the sluggish pace of the court system in Nigeria. He commented that in three years of practice in Nigeria he had only completed one case from start to finish but after moving to England to practise as a county court advocate, he couldn’t even count the number of cases he had completed. This efficiency not only boosted his legal acumen and morale; it also meant he was making more money because of the quick turnaround. Stalwarts in the industry are quick to use the shining beacons as examples of what could happen if one perseveres. However, they conveniently leave out the numerous elderly lawyers who after 30 years of practice still come to court in weather-beaten suits, barely scraping by; the prestige and lustre the profession clings unto may simply be a relic of a different era.

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Most e-commerce platforms are reservoirs of sensitive customer information, which is often collected via contact forms, customer registration and during the checkout process. As consumers share their information with businesses online, they expect such information to be kept confidential. By leaking valuable information of a customer, the business can lose its image and reputation and be subject to a lawsuit. In order to ensure that the platform is compliant with the data protection laws, there must be a comprehensive data protection policy that takes the following into consideration: a. Cookies policy: E-commerce platforms typically use cookies or similar technologies in running their businesses. A cookie is information that a business owner places on its platform so that it can remember details about its visitors when they visit subsequently. It can also be used to track the consumer’s shopping activities and habits. With this sort of tracking

b. Privacy policy E-commerce platforms typically collate and process personal data from their customers and visitors to their platforms. It is therefore imperative that owners of these platforms ensure that they have a comprehensive privacy policy that is NDPR compliant. The policy should also be clearly visible on the platform and provide visitors with the option of determining whether they want their information disclosed to other parties. c. Electronic Marketing without consent After receiving the data of visitors to their platforms, businesses usually target these visitors by sending marketing communications and emails without the consent of the prospective customer. These actions can breach data privacy rules and legal advice should be sought before embarking on such marketing activities. To be Continued next week

ALEX is a full service Commercial & Dispute Resolution law firm with offices in Nigeria and Ghana. Contact us: https://www. aelex.com/. LinkedIn. Twitter. Instagram. Facebook. info@ aelex.com

Pencom DG: Igbo lawyers ask Buhari to... Continued from page 19 Character Commission (Establishment, Etc) Act and the oath of office sworn to by Mr. President to be fair to all Nigerians irrespective of their ethnic affiliation. “We call on President Buhari to exhibit the same level of statesmanship and commitment to his Oath of Office and the Pension Reform Act 2014 as shown by former President Olusegun Obasanjo in 2006 when he removed then PENCOM Chairman, Mr. Fola Adeola and replaced him with late Chief Wole Adeosun, also from the South West zone.” Noting that there has been a “brazen and relentless deployment of state apparati to systematically weed out Igbo technocrats from key government agencies,” the lawyers warned the Senate “to refuse to be used as a mere rubberstamp for egregious breaches of the Constitution and extant laws. “We call on the Senate Committee on Establishment and Public Service Matters to throw out this provocative nomination, as it is designed to further polarize the country and needlessly heat up the polity. There have been a few instances where the Senate has not shown sufficient diligence in its screening process. This is one instance where the Senate and its leadership must assert @Businessdayng

the independence of this critical arm of government and shake off any perception of being a mere rubberstamp.” Commending Senate Minority Leader, Senator Enyinnaya Abaribe for his “principled stand” on the matter, the Igbo lawyers urged him to “galvanize the South East Caucus of the National Assembly and your colleagues who quest for justice, equity and fairness to resist any attempt to railroad the Senate on this matter.” Warning that it would resist any attempt to push through the nomination, the law society said: “For the avoidance, we shall not hesitate to activate other measures to vigorously resist any move to trample on the Nigerian Constitution, the Federal Character principle and the enabling law setting up the commission.” It is recalled that President Buhari had submitted Umar’s name for confirmation as the substantive Director-General of PENCOM. Other nominees by President Buhari are Dr. Oyindasola Oluremi Oni (North Central) chairman; Hannatu Musa (North West), Commissioner; Clement Oyedele Akintola (South West) Commissioner; Ayim C. Nyerere (South East), Commissioner and Charles Efe Sylvester Emukowhale (South South) Commissioner.

Thursday 08 October 2020

BUSINESS DAY

ARBITRATION

LegalBusiness

Arbitral awards as sovereign debt risks: Impact of P&ID and eurafic cases Continued from last week

n Botas Petroleum Pipeline Corporation v. Tepe Insaat Sanayii AS [2018] UKPC 31, the Privy Council held that the question of whether assets are state property is to be determined by first considering whether the property was owned by the state or a separate entity. Thus, the state must have some proprietary interest in the property for immunity to be conferred. While separate entities may have close relationship with the state, they are not covered by state immunity unless they are acting “in exercise of sovereign authority”. Additionally, embassies, goods and monies held in banks account for a sovereign’s diplomatic mission will not be generally available for enforcement. A Central Bank of a foreign sovereign is also given absolute immunity under English law, subject to the written consent of the Central Bank. In AIC Limited v. The Federal Government of Nigeria & Anor. [2003] EWHC 1357 (QB), the question before the court was whether funds in a bank account in the name of the Central Bank of Nigeria were liable to execution if those funds were used or intended for use for commercial purposes. The court held that even where the use of the funds would be commercial, the property of a Central Bank should not be subject to execution. The same reasoning was applied in Thai-Lao Lignite (Thailand) Co. Ltd. v. Government of the Lao People’s Democratic Republic [2013] EWHC 2466. Arbitration Awards as sovereign debt risks Considering the nature of arbitration and the minimal procedural delay in enforcing arbitral awards, sovereign states may suffer debt risks on account of arbitral awards rendered against them. First, the award may be recognised and enforced as a judgment of a court in any country that is a state party to the New York Convention. Where an award is so recognised, the assets of the state used for non-consular activities stand the risk of being attached to satisfy the award. It is noteworthy that Eurafric Power has identified about 33 assets belonging to the Nigerian government but situate in England, which are used for nonconsular activities, against which the company intends to enforce the arbitral award made against the government of Nigeria. This was communicated through a letter by the company’s counsel, Godwin Obla, SAN to the Attorney-General of the Federation. In addition to identifying the assets of a state judgment debtor and enforcing the judgment debt against such assets, where the award was made by the International Centre for the Settlement of investment Disputes (“ICSID”), being an organisation of the World Bank, the centre could utilize the capacity of the Bank

to compel compliance. It is also noteworthy that the World Bank may aid a judgment debtor even where the award is not a product of ICSID arbitration; in so far as the award is made against a member of the World Bank. The Way Forward In the light of the foregoing, it is recommended that there is urgent need to review all existing bilateral agreements to which Nigeria is a party. Nigeria has over 30 Bilateral Investment Treaties (“BITs”) signed with various foreign countries, though only 15 of them are in force. These BITs explicitly afford various forms of protection in cases of disputes and provide a right of recourse to international arbitration. The BITs with France, Germany, Korea, the Netherlands, and the United Kingdom provide exclusively for ICSID arbitration. All the other BITs allow investors to pursue an arbitration claim through ICSID or ad hoc arbitration in accordance with the UNCITRAL rules or any other rules as the parties may mutually agree. It is important to note that the seats of arbitration in these treaties are all foreign. In any case, Nigeria is bound by the provisions of these BITs as they have the force of law by virtue of being treaties as identified under Article 2(1) (a) of the Vienna Convention on the Law of Treaties (VCLT), to which Nigeria is a party. However, by submitting to a foreign jurisdiction in a BIT, Nigeria waives its sovereign immunity. Therefore, she can be made a party to proceedings in a foreign court. The case of Libyan American Oil Co. (LIAMCO) v. Socialist People’s Libyan Arab Jamahirya 482 F. Supp. 1175 (D.D.C. 1980), vacated without op., 684 F.2d 1032 (D.C. Cir. 1981) illustrates this. Around 1973/1974, Libya nationalised LIAMCO’s rights under petroleum concessions that it had granted nearly twenty years earlier. Dissatisfied with the compensation for its interest and equipment, LIAMCO pursued arbitration and an award was rendered in Geneva in favour of LIAMCO. When LIAMCO tried to enforce the award in the United States, Libya opposed it by www.businessday.ng

claiming, inter alia, that the Libya is immune from proceedings in a foreign jurisdiction. The court denied Libya’s sovereign immunity claim on the grounds that by agreeing to arbitration governed by foreign law, Libya waived its sovereign immunity. In the light of the foregoing, there is therefore an urgent need to review the existing BITs and all future BITs. It is suggested that future treaties be negotiated to include a dispute resolution provision with Nigeria as the seat. With respect to existing BITs, it is suggested that the provisions be renegotiated with the aim of making Nigeria the seat of arbitration. Where renegotiation is not possible, it is further suggested that the BITs be revoked. While it may be a concern that revocation or termination of BITs may discourage investors and reduce the inflow of foreign direct investments (“FDI”), recent studies have shown than investment inflows are driven by a number of factors and the presence of BITs is clearly not a determining factor. For instance, Ecuador began to terminate BITs in 2018 and as at 2018, the overall FDI stock into Ecuador increased by 38 percent, from $13 billion to $17 billion. Notably, after Ecuador terminated its investment treaty with Uruguay in 2008, FDI from Uruguay into Ecuador increased by 420 percent, from an annual average of $6.3 million before termination to $32.6 million after termination. Similar indices are seen in Bolivia, South Africa and Indonesia. The article, therefore, calls on the Federal Government of Nigeria through the office of the AttorneyGeneral of the Federation, the Minister for Trade and Investment and the National Office on Trade Negotiation to set up a committee for the review of all bilateral agreements between Nigeria and foreign entities. Furthermore, there is need to amend relevant statutes that govern investment promotion and arbitration in Nigeria. This will help not only to protect Nigeria’s sovereign immunity but also to improve the arbitration framework in Nigeria and make Nigeria

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an arbitration hub. It is noteworthy that some countries are already taking steps in this regard. For instance, South Africa enacted the Protection of Investment Act (the “PIA”) in 2015. The PIA creates a framework for the resolution of investment disputes in South Africa. Section 13 of the PIA provides that where a foreign investor is aggrieved by an action of the government, he may request the Department of Trade and Industry to appoint a mediator to resolve the dispute. Alternatively, the investor may approach any competent court, independent tribunal or statutory body within South Africa for the resolution of such an investment dispute. Taking a cue from the foregoing, especially given that investment treaty arbitration is statute driven, there is need to review the relevant statutes governing investment arbitration in Nigeria. These statutes include the Nigerian Investment Promotion Commission Act, Cap N117, Laws of the Federation of Nigeria 2004 (“NIPC Act”). Specifically, Section 26 of the NIPC Act provides that disputes between Nigeria and foreign investors shall be determined in accordance with the provisions in the BITs. It is suggested that the provision of this section be amended to include a proviso that notwithstanding anything contrary contain in the BITs, the seat of the arbitration must be Nigeria where the dispute arises between an investor and the government of Nigeria. It is also recommended that the provisions of Arbitration and Conciliation Act (Cap A18, Laws of the Federation of Nigeria 2004) (“the ACA”) which defines international arbitration in Section 57(2) (b)(i) and (d) to include an arbitration that has its place in a foreign country and where the parties agree that the arbitration should be treated as an international arbitration should be amended. Section 16 of the ACA which allows an arbitral tribunal to determine Victor Akazue Nwakasi Partner/Head– ADR/Arb. Group Olisa Agbakoba Legal @Businessdayng

adviser to the Ministry of Justice in which both persons admitted receiving $100,000 each from the said counsel while the arbitral proceedings are pending. Nigeria should not merely rummage on allegations of corruption upon which it secured its current reprieve but the consequential lack of broader policy, institutional and professional protocols on arbitration undertakings especially where the country is a party as a sovereign entity. The corruption allegations might have buoyed up the UK Court in granting the relief sought by Nigeria for extension of time, but the lessons should be of broader significance in terms of fostering attitudinal change in people and procedure. For instance, a National practice framework on international commercial arbitration and adoption of critical principles that emphasize and guarantee sincerity, selflessness, loyalty, conscientiousness and diligence in arbitral proceedings to which Nigeria is a party, would be of wholesome effect. This will help to curb the legal risks and economic implications of having an award rendered against Nigeria. Conclusion Interestingly, the Honourable Attorney-General of the Federation, Mr. Abubakar Malami has announced the Federal Government’s intention to launch the National Arbitration Policy. Originally the brainchild of Dr. Olisa Agbakoba, SAN, the policy is premised upon the concept that arbitration agreements in respect of all disputes arising from contractual relationships in Nigeria will have Nigeria as the seat of arbitration. It is recognized that the implementation of this policy will require statutory interventions and amendments, legislative advocacy, regulatory frameworks review, policy directives and extensive stakeholders’ consultations to ensure that the basic principles of international arbitration are upheld and avoid the risk of engendering the Country to become an arbitration pariah state. For instance, statutes which contain provisions on arbitration, especially investment arbitration ought to be amended to accommodate this policy. It is expected that with the implementation of the National Arbitration Policy bearing in mind the suggestions made in this paper and other critical opinion and contributions harmonised through series of consultations, Nigeria would achieve a highly recognized and balanced status as an Arbitration destination supported by systems that ensure the exposure to legal and economic risks on account of arbitral awards rendered and enforced in foreign jurisdictions will be greatly reduced. Ugochukwu Eze Associate Counsel, ADR/Arb.Group Olisa Agbakoba Legal

Thursday 08 October 2020

BUSINESS DAY

FEATURE

In Lagos and Akwa-Ibom, Sadiya Umar Farouq raises the sceptre for Conditional Cash Transfer ANIEFIOK UDONQUAK writes on how Federal Government’s Conditional Transfer was recently launched in Uyo to the excitement of over 20,000 beneficiaries and partnership of the Ministry of Humanitarian Affairs, Disaster Management and Social Development with Lagos State, EU and UNDP for Unconditional Cash Transfer in Lagos.

n Tuesday September 29, 2020, the excitement was palpable and could be touched when thousands of people from 9 Local Government areas in Akwa-Ibom State came out for the official commencement of the Federal Government’s Conditional Cash Transfer, one of the pro-poor intervention schemes under the Social Investment Programme (SIP). On ground to receive the Minister of Humanitarian Affairs, Disaster Management and Social Development, Hajia Sadiya Umar Farouq was Akwa Ibom State Deputy Governor, Mr. Moses Frank Ekpo who represented Governor Udom Emmanuel. The 24,929 beneficiaries of the cash transfer from the oil-rich state who are mostly women will share N993, 450,000 covering stipends for about 8 months. During the flag off of the scheme at the Holy Child Primary School, Nung Udoe Itak Ikono, Local Government Area, Sadiya Farouq noted that women in rural communities across Nigeria and in Akwa-Ibom in particular are important economic agents who sustain the rural economy with their trade and other vocations, adding that the women despite other challenges have continued to thrive in all areas of human endeavour against all odds. ”Women from Akwa Ibom have played and continued to play a prominent role in poverty eradication in the state and are pivotal to our poverty elimination programmes. Apart from the war against corruption, President Buhari has prioritized social protection interventions to pull 100 million people out of poverty over the course of 10 years.” The Minister underscores the importance President Muhammadu Buhari and his government places on easing the burden of poverty on Nigerians especially those on the lower rung of the ladder noting that the President principally created her Ministry to have a more coordinated and sustainable approach to Humanitarian and Social Development in Nigeria. “As part of efforts to actualize this dream, the government established the Federal Ministry of Humanitarian Affairs, Disaster Management and Social Devel-

Hajia Sadiya Umar Farouq opment to consolidate on existing social safety net programs at the Federal level, ensure policy cohesion and effective implementation of social protection programs in the country,” the Minister said. Umar Farouq explained that other social protection schemes such as the Conditional Cash Transfer, the Youth Employment and Social Support Operations, Community and Social Development Programme were established under the coordination of National Social Safety Nets Coordinating Office (NASSCO) to implement the Federal Government poverty alleviation intervention schemes. “A coordinating body has also been set up with support from the World Bank, alongside a Social Register of Poor and Vulnerable Households (PVHHs) for targeted programmes.” Beneficiaries of the CCT in Akwa-Ibom were enrolled in 2019 and commencement of payment was delayed due to logistics issues and the need to clean up the register to enthrone more openness and transparency. The Minister assured that the beneficiaries will get all that has accrued to them since 2019 when they were formally enrolled. “I must note that the payment cycle should have commenced in September 2019 when the beneficiaries were enrolled, however issues of inefficiency with the previous Payment Service Provider led to their termination and the subsequent recruitwww.businessday.ng

ment of a replacement. “I am therefore using this opportunity to assure Your Excellency that as I flag off the Conditional Cash Transfer at Holly Child Primary School, Nung Udoe Itak Ikono LGA, all the backlogs for selected beneficiary Local Government Areas in Akwa Ibom State will be paid,” the Minister assured the Governor of Akwa Ibom and the people. In his address at the official launch, Deputy Governor of state, Mr. Moses Frank Ekpo, who represented the Governor thanked President Muhammadu Buhari for extending the Conditional Cash Transfer to Akwa Ibom and called on the minister to also send more palliatives to the state to assist the indigenes whose means of livelihood had been negatively impacted as a result of the COVID-19 pandemic. “The government and people of our state are happy that this Social Investment Programme of the Federal Government, especially the Cash Transfer to the very poor who need the money has finally come. The essence of government is to look after the welfare of the people. We thank you, Honourable Minister for coming to personally flag off this initiative in Akwa-Ibom. It clearly shows the importance the President and your Ministry attach to this programme. As a government, we will continue to cooperate and collaborate with the Federal Government to get all the benefits of the Social Investment Programmes for our people,” noted the Deputy Governor.

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Breakdown of the 9 participating Local Government Areas and number of beneficiary households and amount per local government are Easrern Ibolo 2,170 (N86,790,000), Mkpat Enin 2,889 (N115,290,000), Nsit Atai 3,657 (N145,660,000), Nsit Ubium 2,213 (N88,110,000), Onna 3,058 (N121,860,000) Ukanafun 1,935 (N76,770,000), Uruan 3,169 (N126,110,000) and Orukanam 2,523 (N100,920,000) and Ikono 2,889 (N115,290,000). Since it was launched in 2016, the Conditional Cash Transfer has been a major tool for the economic transformation of rural and underserved communities across Nigeria. It has benefited women mostly, many of whom have formed cooperative groups around their monthly N5000 stipends from where they have raised capital to start small businesses through which they have been able to contribute to their household economy. So far, a total of 6,107,524 direct beneficiaries across the country are receiving cash of N5000 while N1, 147,084,650 was saved from the scheme by 28,817 saving groups and 10,354 Cooperatives were registered by the beneficiaries of the CCT. In the same vein, the Minister same day of September 29th, 2020, was in Lagos to attend the launch of Unconditional Cash Transfer for those mostly affected in poor communities by Covid-19 in Lagos. The United Nations Development Programme (UNDP), in partnership with the Lagos State Government and the Federal Ministry of Humanitarian Affairs, Disaster Management and Social Development (FMHDS) collaborated on the Unconditional Cash Transfer project targeting the poor and vulnerable in Lagos state, largely funded by the European Union (EU). With a total sum of N 885.5 million, the project implemented under the Nigeria One UN COVID-19 Response, seeks to alleviate the socio-economic impact of the pandemic on the beneficiaries and strengthen resilience of communities in selected Local Government Areas (LGAs) across the state, deeply impacted by the COVID-19 crisis. The Honorable Minister of Humanitarian Affairs, Hajia Sadiya Umar Farouq who could not make it to Lagos on time due to flight schedule from Uyo on same day of September 29th, 2020 to personally attend the launch in @Businessdayng

Lagos, sent the Special Assistant to the President on Social Investment to stand in for her. Governor Babajide Sanwo-Olu, the Senior Special Assistant to the President on Sustainable Development Goals (SDGs), Princess Adejoke Orelope-Adefulire, the EU Ambassador to Nigeria and ECOWAS, Mr Ketil Karlsen and the UNDP Resident Representative, Mr. Mohamad Yahya, witnessed the unveiling of the project in Lagos. Lagos State not only has the largest number of recorded cases of COVID-19 in Nigeria but also the highest number of micro, small and medium enterprises (MSMEs) nationwide at over 3 million micro-enterprises and more than 8,000 SMEs, which have been adversely affected by the pandemic. In key areas such as Victoria Island, Ikorodu, Ifako-Ijaye, Alimosho, Apapa and Lagos Mainland, 22,600 families will benefit from cash transfers, while over 5,000 small and medium enterprises (SMEs) and start-ups will receive funding for business continuity or innovative start-ups that will benefit their communities. At the launch of the Unconditional Cash Transfer in Lagos, the Minister expressed her happiness on the reliability of the National Social Register which provides the most reliable data of poor and vulnerable people in Nigeria and how the register which the EU and UNDP relied on was expanded to 4 million households following the presidential directive of March 29th stressing that her Ministry will continue to work with the State Governments to ensure continued rapid expansion of the Register. She said further, “I am gratified that the ministry is working alongside the UNDP in implementing this intervention, courtesy funds generated via the One UN COVID-19 Response Basket Fund. By offering shock responsive social safety nets such as cash transfers to vulnerable groups, this intervention by the One UN COVID-19 Response Basket Fund will go a long way in helping MSME’s jump start their businesses and rebuild their livelihoods. This is critical given MSMEs are the engine room of growth for developing economies such as ours. Lagos occupies a pivotal position in the scheme of things not just as the Center of Excellence but Nigeria’s commercial nerve centre.”

Thursday 08 October 2020

BUSINESS DAY

BUSINESS TRAVEL Without urgent support for airlines, thousands may lose their jobs – Dana Air manager Obi Mbanuzuo is the accountable manager of Dana Air. In this interview with IFEOMA OKEKE, he speaks on why the government needs to support domestic airlines urgently, and explains why Dana Air is staying afloat amid the impact of COVID on airlines in Nigeria and across the world. How have operations been for Dana Air since domestic flights resumed? ince the lockdown, it has been very difficult. Even after flights resumed, the aviation industry worldwide has been struggling. But after the resumption of domestic flights, people are gradually coming back to fly. There have been no incidents of infection as a result of the procedures we have put in place. July was not good enough but it was better than expected. In July, the load factor was about 32 percent, but the good thing was that we saw people coming back to fly. It was just the beginning. August was better than July, and September was better than August. Every month, there have been increments. As I mentioned, we had about 32 percent load factor in July, 43 percent in August and about 50 percent in September. We are still far ahead of breaking even, but there have been some slimmer of hope. We hope the government will intervene with the palliatives. We are doing our best to keep people in their jobs. In Dana Air, we haven’t fired anyone yet. During the lockdown, people could not work because we were not in operations, but now we have half of our workforce back at work and we hope that the rest can return to work because that is really what we are doing.

With the reduction in flight frequencies as a result of low passenger traffic, do you have all your aircraft flying currently? All our airplanes are not flying. We started with only two airplanes flying out of six because we knew that it didn’t make sense to fly aircraft that were empty. We didn’t even start flying to all the destinations we used to fly to. When we resumed operations, we only flew to Abuja and Port Harcourt. We are gradually coming back to other routes now. In July, we only operated two airplanes, but now we are about to add a third airplane. We are really being careful. We started Owerri a month ago. We are looking to start Uyo soon. We are also looking to resume operations in Enugu in October.

airlines may go down. It is not something we wish for, but it will happen if these airlines don’t get support. Now we are flying, we are paying operational costs of flying these airplanes. We are just trying our best to conserve cash and keep jobs. Without the airlines, the airports will be shut down, and the Nigeria Civil Aviation Authority (NCAA) will not do anything. The aviation industry contributes a big chunk to the economy, to development and travel and tourism, among others. We just have to get urgent support or else thousands of people may lose their jobs. In addition to the impact of COVID-19 to your operations, I know the high foreign exchange rate has compounded your woes. How has this affected your operations? The exchange rate is a big factor when it comes to increase in losses. The naira was about N360 to a dollar before lockdown, but now it is about N450 to a dollar. Our tickets are sold in naira but the spare parts, the leased airplanes, the insurance and many more are paid in foreign currency. We don’t have access to foreign exchange at the official rate. When we get foreign exchange, there is limitation on how much can be paid on a daily basis. There was a time the Central Bank of Nigeria (CBN) mandated us to pay a maximum of $10,000 a day. For instance if I have one spare part that costs $40,000, it would take four days to www.businessday.ng

spend for just one spare part. That means I can’t pay for anything else during the four-day period. The people abroad do not understand these things. This is why we need the government to support us. Let the government at least make foreign currency available. Do you have any aircraft out of the country on maintenance? We have one aircraft out of the county on maintenance but hopefully it will come back in a week’s time. A second aircraft is due to go on maintenance. Before the lockdown, we had brought in two new Boeing aircraft to add to our fleet.

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We started with only two airplanes flying out of six because we knew that it didn’t make sense to fly aircraft that were empty. We didn’t even start flying to all the destinations we used to fly to

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Looking at the losses you incurred during the four-month lockdown, do you think you will be able to recover in the next one year if the government provides palliatives? I don’t think airlines can recover the losses they incurred in a year because it wasn’t just the fact that we were shut down; airlines still had to pay for several things. Some of the airplanes are leased, and we had to pay for them. Even the airplanes that were not being flown had to be looked after on a schedule. Whether we fly or not, the engineers do some checks daily. Some engineers had to go in there, start up the engines, check major parts and fix what needed to be fixed. So, there was still money being spent even though we were not flying. Now that we are flying, it is even worse because we are not making profit but we are paying for fuel, spare parts, landing charges and several other charges. So, the palliatives are only to get us through. What I see is that some

Obi Mbanuzuo

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Now that you are back in operations, what is the next big thing for Dana? Before the lockdown, the big thing was to do fleet renewal. The 737 we got were just a stop-gap. We were looking at a complete fleet renewal but the pandemic, which has affected market dynamics, has meant that we put others on hold. For now, we are trying to conserve cash, and keep giving customers’ confidence so as to increase capacity and patronage. We need an average of 65 percent load factor to break even. The more we keep giving people confidence to come and fly, the more we are able to break even. By next year, we should see some major improvements. We are just trying to be consistent, conserve cash and stay alive. Despite these challenges you are facing, you have not increased fares. How are you able to manage with low passenger traffic, yet low fares? When we wanted to start flight operations, we sat down and looked at the dynamics and we knew that fares were going to go up, especially as the Federal Airports Authority of Nigeria (FAAN) said it would increase Passenger Service Charge (PSC). So we were thinking whether to absorb these internally or pass it to the passengers. We knew that, somehow, fares would go up. However, we are in a competitive market and some have decided that they can survive at a lower price, which drives the market down. So, we are trying to be intelligent at what we are doing. We are trying to increase our average fares, as we have a depart@Businessdayng

ment that is focused on that. If you buy your tickets, you can still get some cheap prices but we have, on average, increased the fares. For instance, on a flight of 100 passengers, 50 people pay N20, 000 each and the other 50 people pay N22, 000 each, so the average fare is N21, 000. So, we manage to get something extra from the fares. So, we have increased fares slightly, however, we are in a marketplace and we cannot ignore competition. I might want to sell tickets for N35, 000, which will make us try to break even but we know the market is price-sensitive. At this time, it is not easy for the passengers and it is not easy for the airline. Is Dana Air complying strictly with the COVID-19 protocol set out by the federal government? Even before the COVID era, we had quality control. So long as we have that quality control that is working, we just know that everything will fall in place. The regulator, in conjunction with port health and the airlines, has put in procedures for protection of passengers. We have taken those procedures and we have incorporated them into our procedures. We have quality control that makes sure that the procedure is done every day and every time irrespective of who is watching or who is not watching. For instance, there is a rule that says on a row of three passengers, the middle passenger should have a face shield and that face shield will be provided by the airline. Initially we were the only airline doing that. We have quality control for how we operate, so once we put that COVID-19 procedure into our normal operations, and it will always be there. What other policies do you think the government should put in place to help grow the aviation sector? We have been very bureaucratic. The airline is a business and having to go through several processes to get things done shouldn’t be so. For instance, when we want to import our aircraft we have to go through many processes just to import an aircraft. Apart from palliatives, we need to implement the ease of doing business we hear every day. Passengers have had to feel several forms when they travel. We need to get them done easily. They need to work on visa processes for foreigners coming in. There are better ways to work out things and make them easier.

Thursday 8 October2020

BUSINESS DAY

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Thursday 08 October 2020

BUSINESS DAY

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2.91

4.24

0.64

-1.83

-11.63

8.45

NSE Oil/Gas Index

NSE Lotus II

458.69

191.99

1,888.10

1,161.46

1,035.79

455.27

195.43

1,944.34

1,199.19

1,059.65

-0.75 -23.21

1.79 -25.56

2.98 5.97

NSE Ind. Goods Index

3.25 11.49

NSE Pension Index

2.30 0.53

Here are analysts’ views on stock market this week Storeis by Iheanyi Nwachukwu

t has truly been a good time lately for equity investors in Nigeria. If not for anything, the return from the stock market of Africa’s largest economy has gone back to its preCovid-19 levels. Though the bulls have continued to dominate in the equities market, the quality of companies’ third-quarter (Q3) earnings to be released in the market will either strengthen the rally or usher in activities of profit takers. As focus begins to shift to Q3’2020 scorecards, here are some equity research analysts’ views on the market this week that should as your guide. “We expect the market might continue to benefit as domestic investors seek alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market. “However, we advise investors to trade in only fundamentally justified stocks as the weak macro environment remains a significant headwind for listed companies”, Cordros research analysts said in their recent note. Research analysts at Lagosbas e d Mer istem exp e ct the sustained depression of yields in

the fixed income space, coupled with the dearth of attractive investment options to continue to drive funds into the equities market. “This drive is expected to be supported by increased liquidity in the system, particularly from OMO maturities which cannot be rolled over due to the CBN restriction”, the analysts added. They however expect investors to begin to take positions in low-

priced quality tickers ahead of the release of nine months 2020 financial results. “Though we do not rule out the possibility of slight profit-taking on counters which have recorded significant gains, we expect the combination of factors highlighted above to drive the market to a positive close”, Meristem. “We anticipate a sustained bullish run this week as investors continue to position in

fundamentally sound stocks ahead of earnings releases for the third quarter”, said Afrinvest Research analysts. “The Nigerian equity market recovered significantly in the month of September-2020, as the NSE-ASI was up by 5.1percent month-on-month (m/m) to close at 26,612.0 points. As of October 5, year-to-date (ytd) return was up 2.7percent, back its pre-COVID 19 levels.

“Clearly the recent rally is driven by the low-interest rates environment which dawned on the market amid the surprise rate cut by MPC during its September policy meeting”, United Capital research analysts said in their recent note. “This month, we expect that the positive sentiment in the equities market will be sustained as investors position for third-quarter (Q3) 2020 earnings publications”, the analysts added. “ We e x p e c t s o m e o f t h e scheduled OMO maturity of N1.7trillion in October 2020 to filter into the equities market as investors continue to search for alpha returns. “Overall, we are of the view that the equities market is not only in correction mode but set for a positive close for the year. As such, we advise hesitant investors to get involved”, United Capital research further noted. “After two weeks of bullish trend, we expect to see a seesaw movement in the market performance this week, owing largely to anticipated profit taking by active traders, and possible drawback of foreign investors as a result of the renewed pressure on crude oil prices in the international market. Hence, we see the NSE-ASI retreating mildly this week,” GTI Research analysts said in their October 5 note to investors.

FGN Savings Bonds offer for October closes tomorrow

Allianz to invest $100mn for controlling stake in Jubilee Holdings

he subscription for Federal Government of Nigeria Savings Bond offer for this new month will close tomorrow October 9. The 2 and 3 years Savings Bonds, which guarantee quarterly coupon payments, re-opened on Monday October 5, 2020. Debt Management Office (DMO) issues the Savings Bond on behalf of Federal Government of Nigeria. The 2-year FGN Savings Bond due October 14, 2022 is offered at a coupon rate of 2.453percent; while 3-year FGN Savings Bond due October 14, 2023 is offered at a coupon rate of 3.453percent. The Registrar and Settlement Agent is the Central Bank of Nigeria (CBN) while the Custody, Clearing and Settlement of the Savings Bond is by the Central Securities Clearing System Plc (CSCS).

llianz, one of the world’s leading insurers and asset managers with subsidiary in Nigeria and Jubilee Holdings Limited ( JHL), East Afr ica’s largest insurance group, have signed an agreement to establish a strategic partnership in the five African countries where Jubilee Insurance currently operates. In the proposed partnership structure, Allianz will acquire controlling stakes in each of Jubilee businesses for total consideration of $100 million while JHL will retain a significant minority stake. The partnership covers the general insurance business (also known as the property & casualty insurance segment) in Kenya, Tanzania and Uganda as well as the short-term insurance segment in Burundi and Mauritius. JHL

Modestus Anaesoronye

These Savings Bonds are investment vehicles offered by the Sovereign that will serve to meet the investment needs of low-high income citizens in the economy by enhancing their savings culture while also acting as an efficient debt management tool for the Nigerian Treasury. Coupons for these ongoing FGN Savings Bonds offer will be paid on January 14, April 14, July 14, and October 14. The purpose of FGN Savings Bond is to deepen the national savings culture; p rov i d e o p p o r t u n i t y t o a l l citizens, irrespective of income level to contribute to national development; enable all citizens participate in and benefit from the favourable returns available in the Nigerian Capital Market; and diversify funding sources for the Government. www.businessday.ng

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will retain ownership of its Life and Pensions operations and its Medical insurance business in Kenya, Uganda and Tanzania. JHL’s subsidiary in Kenya, Ju b i l e e G e n e ra l I n s u ra n c e Limited is the future joint venture company which will also acquire the business of Allianz Insurance Company of Kenya Limited. The transaction, which will require regulatory approvals in the five markets as well as a restructuring of JHL’s subsidiaries in Uganda and Tanzania into

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separate general insurance units, result in Allianz becoming coshareholder alongside JHL in five general insurance subsidiaries of the JHL Group, holding between 51 percent and 66percent in each company. On a preliminary pro-forma basis, these general insurance companies represent 1 2 . 3 p e rc e nt o f JH L’s to t a l consolidated net assets of KES 32.3 billion (EUR 252 million, USD 299 million) as at June 30, 2020. Allianz, with its headquarters in Germany, serves more than 100 million retail and corporate customers in more than 70 countries worldwide and has over a century of history in Africa, where it has built a meaningful footprint across the continent. It is currently present in12 countries in Africa and serves customers in 49 African markets. Globally, Allianza achieved total revenues of $168 billion and an operating profit of $ 14 billion in 2019.

Thursday 08 October 2020

BUSINESS DAY

news

Airsmat appoints Uche Olukoju vice president, business operations

irSmat, the Artificial Intelligence (AI) enabled software company providing valuable intelligence from the sky to customers using drone and satellite data, has appointed Uche Olukoju as vice president, Business Operations. In her role, she will drive with intent to maximise AirSmat operating capabilities, oversee market strategies and lead all customers and goto-market operations for the organisation. Uche joins AirSmat with a background in business management and a broad knowledge in people and portfolio management as well as a high success rate at handling clients’ expectations. She is an executive with exceptional experience in proactive team building, research analytics, strategic planning, problem solving and innovative process improvement. In her cumulative experience working in diverse sectors, she is versatile in performance driven results such as action plan execution, corporate leadership, pricing strategies, establishing rates, project management, budgeting, and operational efficiency.

Uche holds a degree in Human Resource Management from the University of Portsmouth, United Kingdom. With her interest in helping businesses to achieve their goals, she proceeded to study Business Management at Murdoch University, UAE. She is passionate about assisting businesses and corporations to have a breakthrough experience using technology to support operations and boost productivity. About AirSmat AirSmat is a software company founded on the belief that drones will shape the future. The company is aimed at providing cutting edge software solutions to rapidly growing industries adopting drones into daily operations.

L-R: Boss Mustapha, secretary to the government of the federation, Vice President Yemi Osinbajo and President Muhammadu Buhari during a virtual meeting of the Federal Executive Council at the Presidential Villa in Abuja yesterday. NAN

FG explains why Third Mainland Bridge will be closed totally for 3 days CHUKA UROKO

he federal government says there will total closure of the Third Mainland Bridge for three days, beginning from mid-night of Friday, October 9, to mid-night of Sunday, October 11, 2020, in order to ensure there will be no vibration during the casting in-place of the newly installed expansion joints. This closure, according to a statement from the federal ministry of works, Lagos, is also to allow for setting of the special concrete, which allows the concrete to achieve its required compressive strength. “Due to the number of expansion joints to be cast on the closed section of the bridge and the traffic situation in Lagos State, especially during the week days, the casting of the expansion joints will be in two stages to ensure that the total closure is only at the weekends when there is less traffic plying the route,” Olukayode Popoola, Controller, ministry of works, Lagos, explained further. Popoola noted that the contractor handling the repair work

on the bridge, Borini Prono & Co (Nig) Limited, was nearing completion of work on the closed section of the 11.8-kilometre bridge. This, he said, required the total closure of both bounds of the bridge between Adeniji Adele and Adekunle in addition to the closed bound of the bridge. The other bound from Adekunle to Adeniji Adele, he added, would also be closed to enable completion of the work. The controller stated that while this first total closure of the bridge between Adekunle and Adeniji Adele would take place on the dates and time stated above to allow the contractor complete the first stage of casting works, the second total closure of the section of the bridge between the same Adekunle and Adeniji Adele would be communicated at a later date. “We regret any inconveniences this 3 – day closure will cause,” Popoola said, assuring that the section of the bridge between Adekunle and Iyana – Oworo would still remain open, and traffic could move from Ebute-Metta/ Adekunle to Iyana – Oworo and vice-versa.

Correction and Clarification Re: There is no such thing as Nigerian culture In the Wednesday, October 7, 2020 edition of BusinessDay, we erroneously ascribed authorship an Op-Ed titled ‘There is no such thing as Nigerian culture’ to Fola Fagbule, a Senior Vice President and

Head of Financial Advisory at the Africa Finance Corporation (AFC). The article was authored by Kpakpando Anyanwu, a postgraduate student at the London School of Economics. We regret the error and apologise for the inconveniences that the wrong attribution may have caused. www.businessday.ng

Analysts upbeat on Q3 earnings amid coronavirus BALA AUGIE

here are cautious optimisms that the worst of the coronavirus pandemic as it affects the economy is blowing over as the gradual easing of lockdowns and low interests environment are expected to add impetus to third-quarter earnings growth. Analysts are upbeat that some entities that capitulated to the headwinds and recorded losses in the second quarter will revert to the path of profitability in the third quarter. As a result of the Covid-19 pandemic and collapse in oil prices that damaged the demand and the supply side value chain, 26 listed companies posted a collective net loss of N84.03 billion as of June 2020, according to data gathered by BusinessDay. A breakdown of the figures into sectors shows all the dominant players in the hotel and hospitality sector: Ikeja Hotel, Transcorp Hotels, Tourist Corp, and Capital Hotels recorded

combined net losses of N8.98 billion as of June 2020. Across the globe, the hospitality industry is the hardest hit from the Covi9-19 crisis as flights were grounded for four months while lovers of pleasure could not hit the bar and hotels. Before the advent of the pandemic, Nigerian companies had been reeling from weak consumer spending, currency volatility, poor government policies, and decrepit infrastructure. PZ Cussons, International Breweries, Champion Breweries, and Unilever Nigeria, recorded combined losses of N29.18 billion. And there are concerns that the recent hike in electricity tariffs and subsidy removal could further exert more pressure on consumer wallets. Seplat Petroleum, the largest listed upstream oil, and gas company recorded a loss of N37.15 billion, as oil majors embarked on aggressive reduction of headcount to stay afloat. Chevron Nigeria Limited said on Friday it would slash its workforce by 25 percent as it was reviewing its manpower

requirements in the light of the changing business environment. Nonetheless, analysts see the reopening of the economy to drive a sharp rebound in activities, and that the dovish monetary policy of the central bank and the multilateral supports will ease the deficit financing pressures on the government. Johnson Chukwu, managing director and CEO of Cowry Asset Management Limited is optimistic that a lot of companies will cut back on losses. “We should expect the economy to do better as there will be moderation in contraction in GDP. The Brewery industry will benefit from the gradual reopening of the economy,” said Chukwu. A few days ago, P Z Cussons released its first quarter 2020 results that showed net loss reduced to N212.58 million from N1.09 billion. Real GDP contracted by 6.10 percent year on year (yoy) in the second quarter (Q2) 2020, according to recent data by the National Bureau of Statistics (NBS).

Analysts at Chapel Hill Denham Limited recently said GDP will contract by 3.0 percent. The financial institutions and telecoms sectors will be the greatest beneficiary when the economy fully recovers given strong potentials. Yinka, Ademuwagun equity research analysts is of the view that the current low interest rate environment will pave the way for companies to borrow money from banks to fund expansion plans. The Nigerian equity market recovered significantly on the back of the surprise rate cut by the Apex bank as year to date (YTD) was up 6.70 percent as at October 7, 2020. “This month, we expect that the positive sentiment in the equities market will be sustained as investors position for Q3-2020 earnings publications,” analysts at United Capital Limited. Analysts have issued a rallying call to government to increase public investment by accelerating infrastructure spending that will help bolster aggregate demand.

Improved power expected as PHED signs pact with workers to end operational disruptions Ignatius Chukwu, Port Harcourt

ower disruptions in the four states under the Port Harcourt Electricity Distribution Company (PHED) may have come to an end following the conclusion of six-year-old negotiations and eventual signing of the much belaboured Conditions of Service (CoS) between the Disco and workers’ union. Managing director of PHED, Henry Ajagbawa, who signed on behalf of the management along with the general manager, human capital development, Monica Benson, revealed that the Disco almost went under about one year ago due to poor revenue and debt crisis. Labour was represented by the secretary-general of National Union of Electricity Employee

…Disco’s revenue up N2.7bn from N2.2bn p/month (NUEE), who is also the deputy president of the Nigeria Labour Congress (NLC), Joe Ajaero, while the zonal director, ministry of labour and productivity, Eligbai Iziren, witnessed the signing amid solidarity songs by workers and union leaders. Ajgbawa said there has been a threat on the company and the Disco almost collapsed due to heavy debts and financial crisis. “Our revenue cannot pay salaries. We had to restructure and resort to technical improvement. All funds have been going to system improvement. We had to embark on the Rumosi power project to boost power supply and increase revenue. “We are committed to better salary without prompting or pressure from labour. We even

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intend to do profit sharing with the workers as a matter of policy and promise made. We had been running at a loss, grossing at most N2.2 billion per month, but it has increased a bit to N2.7 billion due to reforms. “We want you to take it for granted that when we get out of the woods, workers welfare would be looked into. We are aware that living wage is important for a worker, otherwise he will steal. That was why we increased wages of some categories of workers such as DSOs and linesmen. It is basic economics that income is equal to expenditure plus savings. If income cannot solve basic needs, the worker would go to his savings. If this does not exist, he may steal. So, salary is @Businessdayng

important to us as a company,” he said. Secretary-general of NUEE, Ajaero, said it was good that the CoS was being signed at last. He said the union adequately engaged the management of PHED over the years. He warned that in the new tariff being expected, it would be wrong to factor in other costs without salary increase. “It will not work because we will not work.” Speaking, the zonal director of the ministry of labour and productivity said it was NUEE that brought them into the dispute. “It was a prolonged one because it is a pioneering negotiation. Labour and management are partners and this is key,” said Iziren.

Thursday 08 October 2020

BUSINESS DAY

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How Century Group is using local content to halt, build capacity for the economy BALA AUGIE

igeria’s first decade of local content development has being a voyage of gains, pains, and some gaps coincide with a period of exchange rate crisis, however firms like Century Group is championing a vision of bold innovations, social investments, and local capacity development. Before the enactment of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act 2010, also known as the Nigerian Content Act, most operations in the nation’s oil and gas space were executed by International Oil Companies (IOCs). The glaring lack of technical know-how in-country led to the importation of skills, with the affected expatriates being remunerated in the United States dollar. This cost the country capital flight to the tune of $380billion putting more pressure on Nigeria’s local currency. Put differently, the dismal contribution of local content to the sector pre-NOGICD was much more painful because the oil and gas sector, which accounted for 90 per cent of the nation’s revenue, contributed less than 38 per cent to the nation’s Gross Domestic Product (GDP). The above narration is changing as companies such as Century Group and other indigenous firms are demonstrating how Nigerian companies can provide bespoke and world-class oil servicing support to the industry, a development that means good news for Nigeria’s naira. For many, Century Group was not a name that rang a bell four years ago but the company is gradually rising from obscurity to arguably a major player in the upstream sector. As typical of emerging giants in the sector, the Company is primarily focused in the upstream industry, harnessing exploration and production opportunities in the African continent with current emphasis on the Niger Delta Petroleum Province and the West African sub-region. “The confidence that we have and indeed one of the bright spots is the fact that the local content has allocated a lot of support services to indigenous resource in terms of manpower and all that,” Ken Etete, Group CEO Century Group said. According to Etete, “the more scope is domiciled, executed by local resource and local entrepreneurs, the more confidence we

Ken Etete, group CEO, Century Group

would have in the Naira.” As typical of emerging giants in the sector, the Company is primarily focused in the upstream industry, harnessing exploration and production opportunities in the African continent with current emphasis on the Niger Delta Petroleum Province and the West African sub-region. “We are definitely in a position to make all the other foreign competitors become more expensive. So more local companies would be doing better, they will increase their volume in supporting the services. So, in many ways, there’s a positive to it. The moment we start to build internal capacity against international competitors, we would become more competitive, our ability to supply will become more,” Etete said. A true Local Content Champion, Century Energy Services Limited is the only indigenous company in Nigeria that wholly owns two Floating Production Storage and Offloading (FPSO). One of the company’s major project includes Operation and maintenance of the Front Puffin FPSO, at OML 113 in the Benin Basin owned by Yinka Fola Petroleum (YFP)/Chevron Nigeria Deepwater and Vitol Exploration Nigeria. The company also offers a range of services to the oil and gas industry in Nigeria including: Operation and Maintenance (O&M) of offshore production and storage facilities including EPS, FPSO MOPU, FSO and Drilling Rigs/Jack up; Operation / Maintenance of Flow Stations; Drilling / Drilling Support Services; Field Development Solutions; Engineering, Procurement, Construction and

Simbi Wabote, executive secretary (NCDMB)

Installation (EPCI) of Oil and gas facilities; Mooring and Installation; Chartering and Management of Offshore Support Vessels, Anchor Handling among others. “In the upstream, most contracting work are paid in a currency split of 65percent Dollar currency to 35percent Naira. Local content is far less about savings than about capacity building,” Toyin Akinosho, geologist and Publisher Africa Oil and Gas Report said. Nigeria’s economy had barely recovered from a slump brought on by the 2014-15 oil price collapse when coronavirus hit. Oil accounts for around half of federal revenues and nearly all of the country’s foreign exchange, so plunging oil prices combined with lockdowns to control the virus outbreak hit the economy hard. The crisis threatens to tip Nigeria into its deepest recession for decades. The CBN has adjusted the official exchange rate twice this year. The first one was from N307/$1 to N360/$1 and then just last week, from N360/$1 to N380/$1. “We are in that infant stage where even the heavy hitter local content companies: Ciscon, Geoplex, Century etc, use foreign technology largely. The philosophy is that if you don’t attempt to do it here, you will not ever tie the oil industry to the rest of the economy,” Akinosho said. The growth of local content development from five per cent in 2010, to 28 per cent in 2017, and 31 per cent currently is seen by many as a remarkable feat by most stakeholders. It also means more money for

the nation’s economy, improvement in local capacity, retention of foreign exchange hitherto spent on the hiring of expatriates, and completing jobs abroad. The development, which also translates to timely delivery of projects, indeed makes the country selfreliant and a net exporter of skills to emerging oil and gas countries, not only in Africa but in other parts of the world. Only recently, the NCDMB commissioned a 17-Storey building as a testament to what it has achieved in local content development within 10 years. The structure located in Yenagoa took five years to be erected and was executed by an indigenous civil construction company, Megastar Technical & Construction Limited. In terms of crude oil production and exploration, companies like Eroton, Seplat, Aiteo, Oando, First E & P, as well as the Nigerian Petroleum Development Company (NPDC) are success stories to refer to. These local companies have been able to compete with majors, growing the level of activities and output in the period under review. Seplat, which made its first acquisition in 2010, for instance, has risen to become a leading indigenous oil and gas operator in the country. Its gross operated liquids production at OMLs 4, 38, and 41 at the time of acquisition was 14, 000 bopd. But the company has grown this to a peak rate of over 84, 000 bopd. The NPDC has, on its part, emerged as the leader in the Upstream Sector and it currently operates about 28 concessions. About

BD MARKETS + FINANCE Analyst: BALA AUGIE www.businessday.ng

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21 of which are OMLs and 7 OPLs. It has 100 per cent ownership of five blocks, including OMLs 64, 65, 66, 111 & 119. It also has a 60 per cent participatory interest in four blocks- OMLs 60, 61, 62 & 63. The company also has 55 per cent equity in nine blocks- OMLs 4, 26, 30, 34, 38, 40, 41, 42 & 55, and regarded as the fifth-largest crude oil producer in the country. Nigeria has also recorded successes in the area of fabrication as reflected in the rising number of fabrication yards scattered across the country. Indeed, the construction of the topsides of the Egina FPSO modules was integrated by Samsung Heavy Industries Limited (SHI-MCI) at LADOL Yard, in Lagos. The development also gave rise to two world-class pipe mills – the SCC Pipe Mill with an installed capacity of 270, 000 MT per annum, and the Yulong Pipe Mill, with the capacity to manufacture 400, 000MT HSAW line pipes per annum. There is also a $50million Nigerian Content Research & Development Fund aimed at driving the development of indigenous technology and innovation. The Nigerian Content Development and Monitoring Board (NCDMB) targeted increasing local content to 70 per cent in the next 10 years in a bid to retain as much as $14b in the country yearly and to create as much as 300, 000 jobs. Consequently, the NCDMB intends to pursue and bring to fruition, projects that would promote in-country manufacturing, domiciliation of work, employment generation, capacity enhancement, and capital retention.

Thursday 8 October 2020

BUSINESS DAY

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Thursday 08 October 2020

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80m Nigerians lack access to electricity – REA …as agency seeks $2m to electrify 3.742m households

Dozie Emmanuel

anaging director of Rural Electrification Agenc y (REA), Ahmad Salihijo has disclosed that 80 million Nigerians lack access to electricity. Salihijo also that said $2.245 million was required to provide electricity to 3,742,857 households via isolated and interconnected mini grids. The REA boss stated this on Wednesday during the REA-NASS workshop held

power to Nigerians. Represented by the Senate Chief Whip, Orji Uzo Kalu, Lawan said while they optimise the on-grid option as the primary option for electricity access in Nigeria, the government was aware of the need for decentralised deployment of electricity infrastructure to serve Nigerians across the country using off-grid solutions. Lawan maintained that for power to improve there must be a synergy between the legislature and REA. Senate committee chairman on power, Gabriel Sus-

at the Transcorp Hilton, Abuja. He informed the lawmakers and stakeholders that $235.714 millon was required to power 785, 714 households in the country. Salihijo pointed out that approximately 41 million people would be electrified via grid extension between 2020 and 2030. He further explained that most of their programmes were design for private sector participation. The Senate President, Ahmed Lawan, noted that the Federal Government and the 9th National Assembly were willing to deliver on

wan said it was a sad commentary on the country’s infrastructure that 80 million Nigerians were without electricity. He observed that most Nigerians in the rural areas were dependent on renewable energy, adding that constant power supply in such areas would create job opportunities for the rural dwellers. The agency was established under Section 8892 of the Electricity Power Sector Reform (EPSR) Act 2005 to provide access to electricity to the un-served and underserved communities across Nigeria.

Draiklinas advocates stringent regulation, investment in cleaning and hygiene sector SEYI JOHN SALAU

ollowing the health implication of the coronavirus pandemic and the need for more hygienic society post-Covid-19, Tunde Ayeye, the managing director of Draiklinas limited, a cleaning and laundry service provider, has advocated for a more stringent and structured investment in the cleaning and hygiene sector in Nigeria. Ayeye, a public health specialist and entrepreneur said there is an urgent need for the sector to transit to a properly regulated sector because of its potential economic impact on the health and wellbeing of Nigerians. “Effective regulation will increase investment in the sector, encourage professionalism and unlock the massive economic potential in the sector in addition to the desired health and environmental benefits,” said Ayeye. He decried the current situation wherein many operations in the sector fail to establish proper organisations. Ayeye noted that effective regulation of the sector will check challenges arising from quackery, use of unskilled and untrained persons as cleaning and hygiene operatives. Draiklinas was established in 1980, and has grown into a commercial and industr ial cleaning

company, and now a growing business group with operations in West and Southern Africa. As part of its social responsibility initiative of giving back to its community, Draiklinas announced it will adopt a garden for beautification and maintenance in conjunction with Lagos State Park and Gardens Agency (LASPARK). Ayeye stated further that corporate organisations should look at the positive side of the coronavirus pandemic in giving back to the society. “The present challenges should push more corporates towards corporate social responsibility (CSR) rather than away from CSR. Be creative with simple solutions to CSR,” said Ayeye, stating that the time has come for businesses in Nigeria not to die with their founders. “Building transgenerational business will help strengthen and deepen Nigeria’s economy,” he said. Afolabi Abrahams, the business director of the group, said Draiklinas has employed over 10, 000 in its four decades and currently structured into three major strategic business units (SBU). According to him, the business is structured into commercial and industrial cleaning; integrated pest management and fumigation, and industrial laundry services.

Independence promo: Union Bank to reward customers HOPE MOSES-ASHIKE L-R: Michael Collins Ajereh, also known as “Don Jazzy” and Teniola Apata, popularly called Teni The Entertainer, both Globacom’s new brand ambassadors; Abdulrazaq Ande, the company’s regional manager, primary, Lagos 2, and Adeboye Adeniji of Globacom’s enterprise business group, at the launch of a new tariff plan called Glo Berekete, in Lagos. Pic by Pius Okeosisi

Respite for importers as SIFAX opens new terminal in Lagos AMAKA ANAGOR-EWUZIE

mporters doing business in Apapa and Tin-Can Island Ports can heave a sigh of relief as SIFAX Group, an indigenous terminal operator, has opened a new bonded terminal in Lagos. With this facility situated along the Ebute Metta Creek, in Ijora, consignees can now escape the dreaded Apapa gridlock by designating their cargoes to the new terminal where containers can be moved from the main seaports using barges. Speaking at the commissioning of the facility in Lagos on Wednesday, Taiwo Afolabi, group executive vice chairman of SIFAX Group, said the company decided to invest in the facility to make the process of cargo clearing a wonderful experience as

opposed to what currently obtains. Afolabi, who was represented by Adekunle Oyinloye, group managing director, SIFAX Group, said the new terminal, which sits on 11 acres of land, would leverage technology and innovations to deliver unparalleled customer experience as well as cutting-edge inland container services. “The SIFAX Container Terminal, Ijora, Lagos is our modest response to a major issue in the maritime industry – access to Lagos ports. The logistics nightmare in Apapa caused by the traffic congestion experienced by port users compelled the group to look for a solution that addresses this seemingly intractable problem. With this terminal, agents, truckers and consignees don’t have to go

to the ports before getting their consignments cleared,” he said. On the unique advantages of the terminal, Afolabi said consignment would be transferred primarily through barges from Apapa and Tin-Can Island ports, adding that the good road network in the area also offers clients faster and efficient cargo clearing. “This terminal is IT-driven because we have decided to invest in technology to sustain quality service delivery to our clients,” Afolabi further said. In his business presentation, Paul Linden, managing director of Ijora Causeway Terminal, expressed the readiness of the terminal to exceed the expectations of clients through the acquisition of modern cargo handling

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equipment and deployment of experienced and professional workforce. Hadiza Bala Usman, managing director, Nigerian Ports Authority (NPA), who was represented by Onari Brown, executive director, Marine and Operations, commended SIFAX for its solution-driven mindset and aggressiveness in pursuing the dream of getting the terminal ready for operations in record time. She promised the support and cooperation of the agency in realising the vision of the new business. Vicky Haastrup, executive vice-chairman, ENL Consortium and chairman, Seaport Terminal Operators Association of Nigeria (STOAN), lauded SIFAX Group for being at the forefront of innovations in the country’s maritime sector.

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n commemoration of Ni g e r i a’s 6 0 t h In d e pendence anniversary, Union Bank has announced plans to reward its customers in an Independence promotion that will run during this October. The promo is par t of the bank’s efforts to acknowledge and reward the indefatigable, enduring Nigerian spirit, and celebrate both new and existing customers during this special season. As part of the campaign, each weekday in October, the first 60 customers to activate their debit cards and spend a minimum of N1,000 will receive a N2,000 cash-back reward. In a d d i t i o n , t h e p ro m o offers all Union Bank customers ‘Independence from Charges’, throughout October, as they will enjoy zero fees on bill payments made via the UnionMobile App or the Bank’s USSD Code, *826#. While unveiling the Ind e p e n d e n c e Ca mpa ig n , the bank’s head of Retail Banking and Digital, Lola @Businessdayng

Cardoso, praised Nigerians for their tenacity and focus, despite often tough conditions. She explained that the promo is a part of Union Bank’s efforts to reward her customers as they celebrate Nigeria’s 60th Independence anniversary. According to Cardoso, “Union Bank is excited to give back to her customers through this Independence Promo. This month, as we celebrate Nigeria at 60, it presents a wonderful opportunity to reward our c u s t o m e r s i n way s t hat matter, as we continue to deliver products and services that enable them to achieve their personal and business goals.” The Independence promo offer is open to both existing and new Union Bank customers. Prospective customers can now open Union Bank accounts at their convenience via the UnionMobile App, or by visiting the nearest Union Bank branch. U n i o n B a n k re m a i n s committed to providing simpler, smarter services and enabling success for the average Nigerian.

Thursday 08 October 2020

BUSINESS DAY

News Seven reforms that will make... Continued from page 1

these proposals could be considered on their own merit. Ensure product supply, quality standards, and competition The stakeholders recommend private sector participation in the procurement/ importation of refined petroleum products through a transparent inclusive process as a way of reducing the current inefficiencies in the sector. To this end, they call for the foreign exchange required to procure refined petroleum products to be made available to the Oil Marketing Companies (OMCs) and other businesses at the same competitive rate being offered to the National Oil Company (NNPC) and the process made open for audit. However, if the government chooses to manage access to supply or limiting demand, they recommend this be done transparently by sector, allowing all petroleum downstream operators with a minimum physical asset base such as a minimum number of retail outlets (100 filling stations) and a minimum storage depot capacity (15KT) domiciled within Nigeria having equal access to foreign exchange at the same rates exclusively for the importation of petroleum products. This would encourage transparent inclusiveness and competition as well as eliminate market dominance by NNPC and round-tripping by briefcase businessmen. The stakeholders call for strict regional fuel quality standards and specifications for imported refined products as well as for local refineries to be continuously negotiated within the sub-region and upgraded to create or tap into regional cost synergies, enable more stringent vehicle emissions standards and protect the local and regional environment. They recommend the eventual discontinuation of the Direct Supply Direct Purchase (DSDP) programme and implementation of policies encouraging local refineries to develop Nigeria into a refining hub and a more active role for the Federal Competition and Consumer Protection Commission (FCCPC) or other relevant organisation to check anti-competition activities. They also recommend the implementation of a pump pricing framework in which the OMCs or other petroleum products distributors independently set retail or pump prices for petroleum products according to their cost strategies and efficiencies without prior review or approval by any official authority. The fuel pricing regulations should, however, provide and insist that all costs are fully recovered and all applicable taxes and levies fully paid by all market operators. No operator, including NNPC, should be permitted to sell products at a loss and risk driving competition out

of the market based on market dominance, direct, exclusive or limited access to government-owned or government constructed logistics capacity. The stakeholders also want transparent, equal, and equitable access to governmentowned logistic infrastructures such as jetties, pipelines, storage facilities, and other infrastructure that should be continuously verified and guaranteed by the regulator. “In implementing the objective of achieving full cost recovery by market operators, the determining authority shall take into account the equally important objective of minimizing considerable pump price fluctuations and towards this purpose may take a maximum of forty-five (45) day pricing periods into consideration in determining whether an operator is pricing his product below its product and operating cost price,” they say. Safeguard stock The private sector stakeholders also recommend that safety and strategic stocks be accorded the much-needed attention and the cost of maintaining strategic or security stock be taken into consideration when determining the product and operating costs. “A separate Limited Liability Company with ownership by willing private sector operators with government participation could be incorporated with the mandate to own and develop a network of jetties, pipelines, storage tanks, and other bulk logistics transportation infrastructure throughout the country, mandated to warehouse strategic stock for the country for sale to OMCs through a transparent pricing mechanism guaranteeing equity,” they say. Guaranteepricemonitoringandconsumerprotection The private sector stakeholders want the Petroleum Products Price Regulatory Agency (PPPRA) and the Petroleum Equalisation Fund (PEF) scrapped so that the Department of Petroleum Regulation (DPR), the National Oil Spill Detection & Regulation Agency (NOSDRA), or any other Federal or State agency should have oversightpowersoverthedownstream petroleum industry. The former employers of PPPRA and PEF could be redeployed to other agencies outside the industry, they suggest. “The new Authority or new downstream Regulator should be populated by downstream industry experts from the DPR and the private sector with private sector customer-friendly exposure with the objective that the regulator is progressive, supportive, technology and optimisation inclined, innovative and focused on growing the downstream petroleum industry to be more self-sustaining, autonomous and capable of generating funds for infrastructural development and improvements. This Regulator shall not intervene in pricing determination,” they say. www.businessday.ng

L-R: Richardson Ajayi, chairman, governing board, Lagos State University Teaching Hospital (LASUTH); Ibijoke Sanwo-Olu, first lady, Lagos State; Adetokunbo O. Fabamwo, chief medical director, LASUTH; Akin Abayomi, commissioner for health, Lagos State, and Idowu Osuolale Obasa, donor of the New Holding Bay/High Care Unit, during the commissioning of the New Holding Bay/High Care Unit, at LASUTH Ikeja, Lagos.

Nigeria records successful PE investments... Continued from page 1

and their investors.

BusinessDay reported last week how some local business founders went up in arms against their PE investors or venture capitalists (VCs) over issues around ownership and who controls what. The issue, according to analysts, belies the fact that Africa’s most populous nation is laden with several exemplary deals between PE investors and Nigerian founders that have stood the test of time. “There have been good examples of successful partnerships between foreign investors and local businesses, which created mergers and improved corporate governance. Stanbic IBTC is an example of such,” Ngozi Edozien, CEO, InVivo Partners and former managing director of Actis West Africa, told BusinessDay. In September 2007, IBTC Chartered Bank merged with Stanbic Bank Nigeria Limited, a then subsidiary of Stanbic Africa Holdings Limited (SAHL), a wholly owned subsidiary of Standard Bank Group Limited of South Africa. SAHL acquired a majority equity stake of 50.1 percent in the enlarged bank named Stanbic IBTC Bank. Thirteen years after, key players in the deal have no cause for regrets as the merger has provided good returns for shareholders and positioned the bank as the best subcustodian bank (providing top security services to global clients) in the country, according to the Global Finance Magazine, which assesses banks in seven regions and over 80 markets. In 2016, Beloxxi Industries, an Agbara, Ogun State-based biscuit maker, closed an $80 million deal with a consortium of 8 Miles (London), African Capital Alliance (Nigeria) and KFW DEG Bank (Germany). The deal has raised the firm’s capacity from 40,000 metric tons (MT) to 80,000MT and birthed two new biscuit lines as of February 2019, according to Obi Ezeude, managing director, Beloxxi Industries, who spoke during the commissioning of the second and third lines by Vice President Yemi Osinbajo, in early 2019. BusinessDay understands that the company is on the verge of

closing another PE deal, due obviously to the success of the 2016 investment. Similarly, Paystack deals have shown that PE or VC deals, if properly done, can shore up local businesses, boost operational efficiency and jobs. In 2016, the fintech company secured $1.3 million seed investment from Tencent, Comcast Ventures and Singularity Investments, with participation from Spark, M&S Partners, Tokyo Founders Fund, Blue Rinc Capital, among others. As of 2018, Paystack was servicing more than 17,000 businesses, processing over 15 percent of all online payments in Nigeria. Its monthly processing volumes were 30 times bigger since it announced its first seed round in December 2016. The success of the previous deal led to a new PE investment in 2018, with the firm closing an $8 million Series A funding in a round led by Stripe. The company founded by Shola Akinlade and Ezra Olubi is the first Nigerian tech company to be admitted into the Silicon Valley-based, Y Combinator accelerator. “Customers are now paying over $27.5 million to Paystack merchants every month,” the firm said in 2018. Similarly, Paga is an example to behold. In 2015, Adlevo Capital-led consortium of investors raised $13 million in a Series B financing round to strengthen the agent network of Paga, a Nigerian mobile payment company. This was after securing a deal from the investors three years earlier. As of August 2016, Tayo Oviosu-led Paga had five million users on its service. Duetothesuccessoftheprevious deal, the mobile payment firm raised another $10 million in a Series-B funding round led by London-based Global Innovation Fund. Also, impact investors Goodwell Investments, UnreasonableCapitalandOmidyar Network and Mauritius-based PE fund Adlevo Capital were also part of the deal. In January 2020, Paga acquired Apposit, a software development company based in Ethiopia, for an undisclosed amount, and plans a Mexico launch. There have also been many recent PE and VC deals

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that highlight the opportunities in the Nigerian market and investor confidence in locally founded enterprises. In 2019, Nigeria-based African genomics firm 54gene raised a $4.5-million seed fund from Y Combinator, Fifty Years, Better Ventures and KdT Ventures. In April 2020, it secured another $15 million in Series A capital in a round led by Adjuvant Capital, a life sciences fund backed by the International Finance Corporation, Novartis, and the Bill & Melinda Gates Foundation. This is considered the biggest round for a Nigerian healthtech startup. Also, in May 2020, Tomato Jos, an agro-processing company, raised €3.9 million in PE funds led by Alitheia Capita, a partner of the Goodwell Umunthu Fund. In April 2020, TLcom Capital invested $1 million in Okra, a fintech Nigeria-based company that connects bank accounts to apps. “Both Tomato Jos and Okra transactions demonstrate the willingness and ability of the PE asset class to step in when other capital sources don’t,” Tokunboh Ishmael, CEO of Alitheia Capital and chair of the Board of the African Private Equity and Venture Capital Association, told BusinessDay. She explained that foreign capital had become a game changer in Nigeria and Africa as over 150 PE deals have taken place on the continent targeting diverse strategies across sectors, regions and investment sizes. “Between 2014 and 2019, there were 1,046 PE deals across Africa investing $25.3 billion in businesses on the continent. The evolution of the industry has increased the awareness of entrepreneurs, business owners and governments to the benefits of PE investments in businesses, economies and communities,” she said. Cash-strapped Nigeria is in dire need of foreign capital. In the second quarter of 2020, total FDI inflows into Nigeria, including portfolio, direct and equity investments, plunged to $1.29 billion, representing 77.88 percent slump, from the $5.85 billion inflows reported in the preceding quarter, according to the National Bureau of Statistics’ (NBS) capital importation report. Local businesses are desperately scrambling for liquid@Businessdayng

ity as financial institutions lend at 22 to 35 percent, according to analysts. Nigeria has one of the highest lending rates in sub-Saharan Africa. The country’s Monetary Policy Rate is 11.5 percent, while South Africa’s repo, equivalent to Nigeria’s MPR, is 3.5 percent. Kenya MPR is 7.25 percent, while Zambia’s is 8 percent. Recent PE deals by many local firms have gone awry. The most notable is the HealthPlus saga, where founder Bukky George accused PE investor Alta Semper Capital LLC UK (AS) of announcing an $18 million investment but bringing far less two years after. The firm recently removed George as CEO, replacing her with Chidi Okoro as chief transformation officer. Alter Semper with the majority 53.8 percent shareholding said it had been unable to reach an agreement with George, which had hindered the operations of the company and delayed the implementation of its growth plans. It further said the difficult decision was made in full compliance with Nigerian law and following a long and drawn-out process of engagement with George. The investor accused George of ‘breaches’ and mismanagement of the business, but she had publicly denied the allegations. Several others such as Wakanow, PathCare-Synlab, Filmhouse Imax, among others, are also having some issues with their PE investors, according to BusinessDay findings. But analysts have called for caution, saying unless all the details of the deals are laid bare, it would be unwise to apportion blame. Toki Mabogunje, president, Lagos Chamber of Commerce (LCCI), said some of the cases were sub judice, stressing that it would not be wise to make public judgments when all the facts were yet to emerge. On her part, Edozien, earlier quoted, who is also the founding CEO of Equity Vehicle for Health in Africa, said local founders must do their due diligence and engage professional advisers while going into PE or VC deals, urging PE investors to understand the markets they wish to enter and the visions of business founders before investing their money.

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BUSINESS DAY Thursday 08 October 2020 www.businessday.ng

Nigeria’s financial inclusion scorecard: 2012-2020 in review Tunde Bello

he battle for the things that are important cannot be won in a day. There is a process of planning and testing and execution, tweaking and, sometimes, admitting mistakes. Back in 2012, the Central Bank of Nigeria set 2020 as an initial deadline within which to meet the goal of 80 percent inclusion. Since that time, the apex bank has implemented a series of policies aimed at achieving that goal – some haphazardly, others more determinedly. While a great many things have had a desirable effect, others have not. This piece could not hope to explore them all. Exclusion rates have fallen by just around 10 percent in the decade since that target was set, but progress has been driven largely by an increased access to informal financial services – that is, by those individuals who rely on non-regulated financial products or services such as savings clubs, esusu, ajo, and moneylenders – who are less able to catalyse the improvement of socio-economic outcomes in the way that digital financial services can, for the poor. In addition, intractable conflicts within the digital financial services ecosystem have been allowed to fester. This continues to stagnate inclusion levels and stunt the potential of what could be achieved – even as various regulators across the sector continue to hand down policies and guidelines largely in silos. The most recent example is the debate around charges for Unstructured Supplementary Service Data (USSD) within the financial system. Contrary to common industry belief, there is no indication that serving lower income customers hurts financial performance. Indeed, a study conducted by Mastercard and the Grooming Centre revealed that 300 market women turned over N1 billion in just six months. An EY report showed that excluded populations could generate incremental annual revenue of $200 billion for banks. In addition, while compelling, innovation is not enough. A key challenge to inclusion over the past few years has been poor product-market-fit. Service providers hitherto have not had a clear understanding of the underserved/excluded consumer segment and how best to approach it. The increasing pressure on banks and other service providers to bring new functionality to market quickly has - relatively speaking - improved user experience for Nigeria’s already savvy included population, but further alienated un-served and marginalised Nigerians. It is not enough to simply strip down an existing financial service to its bare minimum and offer it as a ‘micro’ service to the bottom of the pyramid personas. A hi-tech digital assistant launched by a microfinance institution is of little use to a market woman who speaks Tiv but whose business

deals in the sorts of volumes that make her a prime candidate for credit. For financial inclusion - and indeed the economic development of any nation- infrastructure is central: from physical brick and mortar institutions to the road networks which enable proximity to financial institutions. Increasingly, however, the absence of digital infrastructure is weighing heavily on Nigeria’s inclusion goals. In addition, the gaps in telecoms infrastructure - ubiquitous as mobile phones are - and an insufficient national social register remain fundamental obstacles to inclusion. The Scorecard From inception, telecoms companies who have historically had the largest consumer base have been excluded from the provision of mobile money services. However, over the course of the decade, the flaws with this strategy have become all too evident. One of the outcomes of the efforts by traditional banks and emerging fintechs to maintain a monopoly on financial services was the establishment of a Shared Agent Network Expansion Fund Initiative (SANEF) designed to introduce extra 500,000 agents by 2020 - in order to extend financial services to a further 60 million Nigerians in rural and underdeveloped areas. However, the agency banking promise has not delivered as planned. Agency exclusivity has been restricted and caps on

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True financial inclusion is also economic inclusion, which is the ability for one to lift oneself out of poverty by leveraging the suite of available tools to do so

agent fees have been minimal compounding the challenge of access to those services by lower income groups. Despite the elaborate and lengthy licensing process preceding the introduction of mobile money services, around 2 percent of the adult Nigerian population now rely on mobile money services. Also, and depending on how you see things, you might say that the CBN’s refocus on inclusion towards the end of the past decade has driven it to embrace a more superior role as an enabler of wider participation in financial service deepening. However, despite clear evidence suggesting the need for wider participation in financial services and despite the CBN’s introduction of payment service banking licenses in 2018, it has taken the apex bank another two years to issue full approvals to three players - a poignant reminder of the bank’s sentiment around wider participation in financial services. True financial inclusion is also economic inclusion, which is the ability for one to lift oneself out of poverty by leveraging the suite of available tools to do so. And so more than just financial service access, we must assess the performance of other financial tools and services. For example, despite an increasingly maturing financial services sector, there are still inadequate microcredit products/services for individuals at the bottom of the pyramid. Past CBN decisions handed down to players in the sector signalled renewed efforts to accelerate inclusion - particularly as the 2020 deadline approached. For example, the CBN in June 2019 instructed each branch of all microfinance banks to acquire 64 new customers each month (774 new customers each year). Outcomes or progress as a result of this instruction are still unknown, however. Another circular issued by the apex bank in August 2019 mandated all deposit money banks to maintain a loan-to-deposit ratio (LDR) of 60 percent - and subsequently, 65 percent. While some of these interventions have been timely and noble, others have also been distortionary and largely unable to drive the sort

of leaps that Nigeria must attain to meet its inclusion goals. In the insurance industry, while the regulator, National Insurance Commission, has indicated willingness to evolve the regulatory environment and advance penetration goals, its refusal to license new players for several years inevitably had a detrimental impact on the market - notwithstanding its lofty goal of consumer protection. In addition, the industry does not appear to have the capacity to roll out microinsurance offerings. Only in 2019 did Goxi become the pioneer standalone microinsurer in the country, with operations in Lagos State alone. Early in 2019, President Muhammadu Buhari launched the Micro Pension Plan, designed to drive micropension penetration and achieve coverage of 30 million people in the informal sector by 2024. However, challenges with identification and awareness of the programme continue to hamper uptake. In any case, the regulator has not had a permanent director general for the past few years and its board has remained largely unconstituted and unavailable to provide corporate governance direction - with attendant implications for pension penetration. Taking Stock of the Gains Part of progress is taking stock of our mistakes and crafting new ways forward. For example, over the past decade, there has been a historic misunderstanding of what civil registration and identification are, and how to approach them. Policymakers have, hitherto, generally favored identity registration for the purpose of issuing an identification document - in the mistaken belief that said document represents one’s identity. That policy and decision makers appear to be moving from that belief, to an understanding of the urgent need for a foundational identity database represents significant progress. Additionally, the most vulnerable members of our society, more often than not, struggle to provide the documentation required to meet financial service know-your-customer (KYC) provisions. Here, the CBN’s efforts to lessen financial service access barriers have been notable- from introducing ‘tiered KYC’ requirements in 2013 to Bank Verification Number (BVN) Lite for excluded customers who could not meet the new BVN requirements introduced in 2015. Looking to 2024 The Central Bank has set a new, somewhat aggressive target of 95 percent inclusion by 2024. This means that each year, inclusion must grow by around 8 percent yearly until then - or by nearly 8 million people every year. Contrast this with the fact that exclusion rates fell by a little over that amount over a decade and you will find that the goal is ambitious but laudable, and it demands focus on certain key areas. First, known risks can be assessed, but unknown risks cannot. If we do not collect disaggre-

gated data on the important things, we lose sight of the opportunities to catalyse inclusion and risk being trapped in a cycle of failed policy making / poor product-market-fit. Also, it must be said that there is a role for government that does not have to be distortionary. We cannot discount the impact of moral suasion by government regulators and decision makers on private actors. This, accompanied by better information, can be expected to put Nigeria on course to achieving the 2024 goal. Next, there needs to be greater understanding and acceptance of the fact that traditional financial service infrastructure is expensive and often difficult to deploy at scale in large countries like Nigeria. As such, private actors must be encouraged to play in spaces hitherto deemed unprofitable, but they cannot do that in a vacuum. This means a significant degree of regulatory certainty must be established quickly. Guidelines, once issued, must form the basis on which regulatory oversight and/or approvals are undertaken/handed down. On a related note, in the face of fiscal constraints, the federal and some state governments appear to consider taxation of the digital economy as the solution to revenue challenges - a classic example of mistaken belief that nations can tax themselves into prosperity. Lastly, one of the most critical determinants of the attainment of Nigeria’s inclusion goals is regulatory cohesion. The overlaps between regulators over the last decade may not have a direct impact on the poor, but certainly can cause significant delays in the development or passage of regulations that might affect them. The NCC and CBN appeared to have reached an understanding in 2018 on ways to work together. However, that understanding has yet to translate to broader collaboration. Time and again, the benefits of greater inclusion - of increased participation in the formal economy- have been extolled. However, this recognition has done too little to accelerate the pace of inclusion. And, perhaps, a warning is more fitting: If nothing else, COVID-19 has exposed some of the worst of our vulnerabilities. As the seasons come and go, so too will other pandemics. Today presents a meaningful opportunity to make our most marginalised groups more financially resilient to withstand the inevitable shocks of such humanitarian and health emergencies. As we proceed into the next phase of Nigeria’s inclusion journey, let us consider more holistically, the potential for a more equitable and resilient Nigeria, where families and individuals are able to hold insurance against key risks, transact safely and affordably, access the capital they need to scale - or simply accumulate long-term wealth against retirement.

•Bello is an independent journalist based in Nigeria.

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