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news you can trust I ** monDAY 09 DECEMBER 2019 I vol. 19, no 452

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Interest payments to gulp $573m per-annum China to provide 76% of loans

rare breakdown of how Nigeria intends to spend a $22.7 billion (N6.9 trillion) loan that still awaits approval of lawmakers shows the government will spend over half a billion dollars each year in interest payments for an average of 21 years. The $22.7 billion loan is the final tranche of a $29 billion infrastructure funding plan first tabled by President Muhammadu Buhari in 2016. Details showing the cost, source and intended use of the loan were first shared on social media platform, Twitter, by Ajuri Ngelale, the senior special assistant to President Buhari on Continues on page 42

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Inside details of Nigeria’s $22.78bn borrowing plan LOLADE AKINMURELE

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What deeper production cuts mean for Nigeria, OPEC, global markets DIPO OLADEHINDE

he decision by Organisation of Petroleum Exporting Countries (OPEC) and its major allies to cut their crude production by extra 500,000 barrels a day will have major implication for Nigeria, the oil cartel, and the global economy at large. OPEC had reached a preliminary agreement on Thursday after talks went into the night, but the decision had to be rubberContinues on page 42

Inside Financial crisis looms in states as federal P. 2 allocation, IGR shrink Special adviser to President Buhari on public affairs

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news Nigerian bank costs remain elevated compared to Kenyan peers …as Moody’s expects Kenyan banks to maintain superior profitability ENDURANCE OKAFOR

espite having a higher retail overhead cost, top banks in Kenya are more efficient than their peers in Nigeria judging by their low cost-to-income ratio, evidence that it is more expensive to run a bank in Nigeria than in Kenya. While the top three banks in Kenya posted an average cost-to-income ratio of 49.13 percent, their peers in Africa’s largest economy reported 57.96 percent, according to recent data by Moody’s. This, according to the ratings agency, together with lower provisioning requirements, supports the higher profitability of Kenyan banks. The cost-to-income ratio is a keyfinancialmetric,particularly important in valuing banks. To get the ratio, the operating cost (administrative and fixed costs, such as salaries and property expenses) is divided by operating income. The ratio gives investors a clear view of how efficiently the firm is being run – the lower it is, the more profitable the bank will be. According to Ayorinde

Akinloye, research analyst at Lagos-based CSL cost of banking in Nigeria remains very high from a regulatory standpoint and overhead costs continue to spiral. “Many banks pay several dues such as the AMCON contribution which has grown significantly due to growth in assets of many banks and in Kenya, banking is rapidly becoming much more digitised due to the penetration of mobile money,” Akinloye said. For an industry that requires power to run its operations, cost of electricity for banks in Africa’s most populous nation is one of the drivers of lenders’ high costto-income ratio. From its 146th position in the previous ranking, Nigeria moved up 15 places to rank 131 out of 190 nations in the latest WorldBank’seaseofdoingbusiness ranking released recently. On the other hand, Kenya ranked 56 among 190 economies in the ease of doing business. The rank of Kenya improved to 56 in 2019, from 61 in 2018. Ease of Doing Business in Kenya averaged 98 from 2008 until 2019.

•Continues online at www.businessday.ng

Public officials squeezed N675bn from Nigerians as bribe in 2019 – Report

…117m bribes paid in Nigeria annually ONYINYE NWACHUKWU, Abuja, & GBEMI FAMINU, Lagos

total of N675 billion was paid in cash bribes to Nigerian public officials in 2019, corresponding to 0.52 percent of the country’s Gross Domestic Product (GDP), according to a report by the National Bureau of Statistics (NBS), in conjunction with the United Nations Office on Drugs and Crime (UNODC) and UK Aid. The report, titled ‘Corruption in Nigeria: Patterns and Trends’, also shows that an estimated 117 million bribes are paid annually in the country, indicating an equivalent of 1.1 bribes per adult with over 93 percent of the bribes paid in cash with an average amount of N5,754 ($52). Based on a survey on corruption as experienced by the population, the report shows that while the prevalence of bribery may have decreased, the frequency of bribe-paying has not, especially in the public sector, despite the anti-corruption measures put in place by the President Muhammadu Buhari administration. Corruption, which over

the years has been a cankerworm eating deep into the Nigerian system, has not been rectified as the survey asserts that the government’s anticorruption agenda, which tends to be focused on largescale corruption, has so far marginally affected the menace of bribe request. “Although a smaller percentage of Nigerians that had contact with public officials paid bribes, or were asked to pay bribes, those who did pay bribes continued to do so quite frequently: in 2019, Nigerian bribe-payers paid an average of six bribes in the 12 months prior to the survey, or one bribe every two months, which is virtually the same as the average of 5.8 bribes paid per bribe-payer in 2016,” the report said. It also stressed the power relationship between public officials and citizens which typically favours the former. When public officials elicit a bribe, they tend to be successful and do so with impunity – an outcome that may embolden corrupt officials to make even more bribe requests, it said.

•Continues online at www.businessday.ng www.businessday.ng

L-R: Rajat Kapur, chairman/managing director, Expand Global Industries Limited; Funke Akindele-Bello, Nollywood actress/Waw detergent brand ambassador; Olumide Aniyikaiye, head of marketing, Expand Global, and Yinka Adebayo, executive director, media investments, OMG WeCa, at the unveil of new Waw detergent in Lagos.

Financial crisis looms in states as federal allocation, IGR shrink

…Experts say income diversification, fiscal discipline urgently needed Cynthia Egboboh, Abuja

ost states may fall into financial crisis sooner as their Internally Generated Revenue (IGR) remain a far cry from their annual budgets at a time when the monthly Federal account allocation committee (FAAC) disbursements –which they hugely depend on- also continues to shrink. Data from the National Bureau of Statistics indicate that the Federation Allocation to the federal, state and local government declined for the second consecutive month (September and October 2019). BusinessDay analysis of the 2019 budget size of some

states as against internally generated revenue (IGR) Q1Q3 (Jan-Sept), shows that Cross River state has a budget size of N1.148 trillion while its IGR for the period amounted to N19.941 billion representing 1.73 percent of the budget; Bayelsa state with a N299 billion budget had its IGR at N9.065 billion representing 3 percent of the budget. Kastina state budget stood at N202.4 billion while its IGR for the period stood at N6.417 billion representing 3 percent of the budget, Taraba state had budget of N146.1 billion while the IGR stood at N4.782billion representing 4.3 percent of the budget; Borno state budget stood at N144.7 billion as against IGR at N5.487 billion representing 3.79 percent of the budget.

Adamawa state budgeted N244.7 billion while its IGR of N6.384 billion represents 2.60 percent of the budget; Gombe state has a budget size of N122.4 billion and IGR at N3.347 billion representing 2.73 percent; Kebbi state budgeted N151 billion but recorded an IGR of N5.868 billion representing 3.88 percent of the budget; while Kogi state budget is N146.73 while its IGR stood at N9.213 billion representing 6.28 percent. The percentage of Net FAAC allocation disbursed in the first three quarters 2019 (Jan-Sept), as compared to the states’ budget shows that Cross river state received a total of N27.28 billion for the period representing 2.62 percent of its budget, Bayelsa state received

N102.43 billion representing 34.26 percent of its budget, Kastina state received N47.56 billion representing 23.50 percent of its budget, Taraba state received N34.99 billion representing 23.84 percent and Borno state received N46.30 billion representing 32 percent respectively. Similarly the Net FAAC allocation disbursed to Adamawa, Gombe, Kebbi and Kogi states in the first three quarters 2019 (Jan-Sept), stood at N36.29 billion representing 14.88 percent, N30.81 billion or 25.17 percent, N39.79 billion or 26.35 percent and N39.21 billion representing 26.72 percent respectively.

•Continues online at www.businessday.ng

CBN’s liquidity deluge spurs demand for corporate bonds ... Dangote Cement, Go and Eat Food, Flour Mills issue N60bn MARKETS

BALA AUGIE

he Central Bank of Nigeria’s (CBN) OMO policy which has led to a deluge of financial system liquidity, is spurring demand for corporate bonds, encouraging firm’s to tap the Nigeria debt market for cheaper working capital and expansion. Last week, there were three debut bond auctions by restaurant chain operator Eat & Go, and two commercial papers by Dangote Cement and Flour Mills, which shows some companies have confidence in the Nigerianmarketdespiteatough

macroeconomic environment. Eat ‘N’ Go Limited, a leading restaurant group behind the Domino’s Pizza, Cold Stone Creamery, and Pinkberry brands in Nigeria, launched a double-tranche offering (5-year and 7-year) to raise N10 billion under a N15 billion issuance programme. The offer is expected to close on Tuesday 10 December 2019 as the issuer is looking to price the 5-year bond at an indicative coupon of 13.50 percent –13.75 percent, and the 7-year bond at a range of

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14 percent –14.25 percent. Dangote Cement, the largest producer of the building material and the most capitalised firm on the bourse, plans to raise N45 billion under a N150 billion commercial paper programme for a tenor of 178 and 269 days. The series 13 paper is priced at an implied yield of 7.75 percent which offers a spread of 68 bps to the corresponding NTB, while the series 14 is priced at 8.50 percent, offering 115 bps spread to the federal government. Flour Mills Nigeria Plc, the largest miller by market capi@Businessdayng

talization, plans to issue N5 billion commercial paper at 8.87 percent and 9.50 percent under a N100 billion programme as it seeks to reduce debt and bolster earnings “Because of the new policy, people will have to find where to put the money. Treasury bills are usually oversubscribed. The demand for instrument has outstripped supply thereby creating an asset bubble that has seen bond prices go up while yields fall,” said Wale Okunrinboye, analyst at Sigma Pension.

•Continues online at www.businessday.ng

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P&ID: FG uncovered new fraud evidence, files fresh suit FELIX OMOH-ASUN & HOPE MOSES-ASHIKE

igeria on Friday filed a new and substantive suit in English courts in the ongoing fight against the controversial P&ID contract. This is contained in a statement issued by Umar Jibrilu Gwandu, special assistant, media and public relations office of the AttorneyGeneral of the Federation and Minister of Justice, and made available to newsmen in Abuja, weekend. According to the statement, the fresh suit is a major step forward in the bid to overturn the injustice of the $9.6 billion award. “The filing challenges both the underlying arbitral award and its enforcement, and lodges a fresh appeal against the subsequent High Court judgment,” the statement said. “Based on new evidence that has come to light in recent investigations, it is clear that the original contract was a sham commercial deal and designed to fail from the outset. The fraud was only recently discovered as a result of President Buhari’s anti-corruption efforts spearheaded by the Economic and Financial Crimes Commission.” The statement added that the Gas Supply and Processing Agreement (GSPA) was procured on the basis of fraud

and corruption, while the subsequent arbitral process was riddled with irregularities and deliberately concealed from the rest of the government. The filing is a significant step forward in the Federal Government fight to secure justice for the people of Nigeria. The Federal Government has recently expanded its legal team to include London law firm Mishcon de Reya. The team is led by Shaistah Akhtar, partner, and Mark Howard QC of Brick Court Chambers. The expansion will enable the Nigerian government launch in full its investigations and challenges,” the statement noted. It is important to note that clear and concrete evidence of fraud and corruption were only recently discovered. This followed an increase in the Buhari government’s wellregarded anti-corruption efforts. The new administration’s efforts have brought to light the fraudulent nature of the P&ID contract. President Buhari has established several initiatives aimed at tackling corruption. This includes the Presidential Advisory Committee Against Corruption and the Whistle Blowers Policy in 2016, as well as the ‘National AntiCorruption Strategy (NACS) 2017-2021” in 2017.

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E-payment: CeBIH, NIBSS unveil measures to sustain 120% growth

NASS joint committee on Land Transport inspects Lagos-Ibadan rail project

Hope Moses-Ashike

MIKE OCHONMA

ommittee of E-Banking Industry Heads (CeBIH) and Nigeria Interbank Settlement System (NIBSS) have unveiled measures to sustain the 120 percent growth in electronic payment transactions recorded under the Payment System Vision 2020 (PSV 2020). The measures, unveiled at the 2019 annual retreat of CeBIH held in Abeokuta Ogun State, include fingerprint authentication for ATM transactions, mobile phone enrolment of Biometric Verification Number (BVN), Global Standing Instruction (GSI) to curb loan defaults, increased emphasis on digital partnerships and open banking architecture. Nigeria recorded 120 percent Compound Annual Growth Rate (CAGR) in value of e-payment transactions under the PSV 2020 introduced by the Central Bank of Nigeria (CBN) in 2007. In addition to reviewing development under the PSV 2020, the CeBIH 2019 retreat, themed, ‘Payment 2020 plus: The Next Frontiers of Payments,’ focussed on measures to sustain this growth rate beyond 2020. CeBIH chairman, Stanley Jacob, in his welcome address, explained, “The theme of the retreat was selected to deter-

mine the next wave of execution that will accelerate growth in the nation’s digital space as well as transform various areas of the economy and government.” Speaking on CeBIH’s strategic intent on driving future growth, Jacob said, “As industry practitioners, we have identified digital partnerships and open architecture as a major recipe for accelerating growth in payments,” adding, “CeBIH will continue to focus strongly on data as the premium solid minerals for the payment sector.” In his keynote address, deputy managing director of NIBSS, Niyi Ajao, highlighted measures to be introduced from next year aimed at driving growth in the e-payment system. Represented by the NIBSS executive director, Business Development, Christabel Onyejekwe, Ajao said these measures include a system that would allow people use their mobile phones to enrol for BVN. He said this measure would commence this week, and was aimed at achieving 10 million BVN by 2020, in line with the vision of the CBN for 120 BVN by 2030. Ajao disclosed that NIBSS was also working to replace Personal Identification Numbers (PIN) with fingerprint for authentication for ATM transactions.

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igeria’sSenateandHouse of Representative committee on land transportation have commended the extent and quality of job so far executed on the Lagos-Ibadan standard gauge rail project by the contractor Chinese Civil Engineering and Construction Corporation (CCECC). The joint committee, who gave the commendation during their legislative oversight functions/inspection of the project, said they were fully committed to supporting the President Muhammadu Buhari-led administration. It would be recalled that minister of transport, Rotimi Amaechi, had last week declared free train ride along Lagos-Ibadan gauge rail corridor. Abdulfatai Buhari, chairman, Senate Committee on Land

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Transport who led the delegation on inspection from Lagos to Abeokuta, Ogun State, said the present administration had taken the transport sector as the major cardinal project and the committee was very happy with extent of job done so far. He said last week, the legislature appropriated more funds to further reinforce work and they had changed appropriation bill from January to December, adding that so far, the funds appropriated to the project have been utilised when matched with what is on ground. President Buhari noted that the ongoing Lagos-Ibadan project, Itakpe-Warri rail and the completed Abuja-Kaduna projects had added values to transportation system in Nigeria and believed more of the projects would add to economic development of the country upon completion.

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Why should we care? Trafficking and slavery of Nigerians Last in the series of address delivered at Dowen College, on 7th October 2019

Bashorun J.K Randle

s if that was not damning enough, “Vanguard” newspaper of the same day carried on its front page, the following headline: “we’ll get mastermind of 31 Nigerians sold into slavery in Burkina Faso – Governor Masari. “Governor Aminu Masari of Katsina State (and former Speaker of the House of Representatives) has vowed to arrest the prime suspect behind the trafficking and selling of 31 Nigerian citizens, from Katsina and Zamfara states, into slavery in Burkina Faso. The governor stated this when he received 23 of the victims, who

were returned to the state through the rescue mission initiated by the state government. Governor Masari said two out of the 31 were agents of the prime suspect and for fear of unknown, refused to come with others while the remaining six opted to come back on their own. According to him, “we are working on the little information we have about him (the prime suspect) but with the arrival of the victims, I am sure we are going to have as much information to enable us track him down. We would allow the security agencies debrief them to enable us to know the identity of the person who sold them into slavery.” On why they were 23 instead of 31 that returned, the governor said: According to them, six of them have some money on them so they decided to come back on their own. So, whether they are back or not, we don’t know because we don’t have their names. The other two refused to come because there is some suspicion that they are allies of the person who sold them. So, they are afraid of coming back home. That is why we ended up with bringing 23 of them.” The governor could not control his emotion, after seeing an elderly man among the victims. He said: “What is surprising is I’ve seen an old man among them. What is he going to do for you? Hard labour, slavery

in faraway Burkina Faso? But we will continue to liaise with our foreign missions in situations like this and see what we can do to return all Nigerians back home.” At the current session of the General Assembly of the United Nations, a former Ambassador of the United States of America summed up the Nigerian situation as follows: “While the military and the politicians broke the windows, the civil servants sweptup the broken glass while the judiciary, the press and the professionals looked the other way.” For good measure, he recalled the occasion when Alhaji Nuhu Aliyu, former Assistant Inspector General of Police won election into the Senate, his maiden speech was as follows: “Here we are in the hallowed chamber of the Senate but how come some of those I detained in Alagbon Police Station, Ikoyi, Lagos for drug trafficking; “419 fraud”; contract scams etc. are here?” All hell broke loose!! Nevertheless, (regardless of the rage, outrage and in-range) which has engulfed our nation, we cannot but implore the students of Dowen College to commit themselves to a purposeful life – no drugs, no excess/ over indulgence and the pursuit of genuine happiness. At Harvard University, the most popular course offered there is taught by Professor Tal Ben- Shahar, the “Professor of Happiness”. The course is titled “Posi-

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Nevertheless, (regardless of the rage, outrage and in-range) which has engulfed our nation, we cannot but implore the students of Dowen College to commit themselves to a purposeful life – no drugs, no excess/over indulgence and the pursuit of genuine happiness

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

Planning a transition from a middle-level manager to an executive leadership role (2)

till on the transition to an executive leadership role, we shall be concluding other points to consider as you plan for this change. Organisational politics Maintaining multiple relationships especially with people who are somewhat linked means you will have to be more politically tuned in. You will sometimes need to deploy charm – smile even when you’re not in the mood and so forth. You will have to identify key decision-makers, understand the decision-making processes and how people and processes are influenced. You will also need to master and deploy power dynamics – without throwing power tantrums. And, you will have to develop your own power so that when required, you can step up not just as a player in the political game but also as an architect of the political game. Clarity of purpose The executive leadership group has a sensitive mandate – it is held accountable for the success and failure of an organisation. It is also a smaller and denser group than middle management. Tasks and relationships are subtly entwined and members of the executive leadership group share ties that are more expressive than instrumental. When you join such a group you will, in the process of negotiating your identity in- and out-group, necessarily step down on some your beliefs and opinions. You will also have to adjust and adapt to some of the norms of the group. So, it is important to seek clarity of purpose long before you think of assuming an executive leadership role. Having clarity of purpose prior to accepting the invitation

prepares you for your new role in the sense that it helps you work out your uniqueness as well as the extent of your “belonging” to the executive leadership group. So, let’s say you long identified, clarified and prioritised your personal governing values. If you haven’t paid close attention, you might find upon transition that some of your top priority values do not align with the top priority values of executive management and that whereas you got along perfectly in your middle management role without having to make major value shifts, your executive leadership role is demanding that you make major, extensive shifts in values. In this situation you will find it difficult to present an authentic self and to live a life that resonates with who you really are. It can also stand in the way of the other successes besides career success that you want to achieve. Some demands of career advancement can question long held values and beliefs in very unsettling ways. On occasion there may arise a genuine need to rework one’s values – perhaps because they have become outdated or overtaken by events. But reworking values in such a way that one is forced to continuously live opposing values – sleep and wake with multiple clashing identities of self can cause the person extensive discomfort and can have adverse implications for mental health. Two questions will direct a profound conversation with oneself that can help gain clarity of purpose: What is my life purpose and how does it align with the executive role I want to take on in this organisation? Why do “they” want me? www.businessday.ng

To the first question, figure yourself out – your personality, goals, values, your credo. Then understand your organisation, what it represents through its executive leadership and how you fit into that maze. To the second question, recognise that the suites and spaces of executive leadership are not open to walk-ins. Employees typically don’t wonder or sneak into executive roles; they don’t gatecrash it either. Employees get invited into executive leadership. There are cases when people lobby their way into an executive leadership position. In such cases, post-lobby dynamics suggest that the new migrant has more or less been “admitted” into an existing culture which he/she is expected to adjust and adapt to. Whatever the case, when you receive that invitation or admission you should ask yourself why the gates of executive leadership have been opened to you and what you are expected to bring to the table. There are several reasons an employee is invited or admitted – to fill a quota, to represent some interest, to bring on new skills, new perspectives, target business, target networks, and so forth. Seeking accurate answers to both questions will to a large extent help you settle into your new role quickly. It is important to mention that your ability to stand alone on key issues usually shrinks when you become a member of the executive leadership group because you will for the most part be expected to journey with other members of the group as decisions are made for and on behalf of the organisation. Continuous lone-voice disagreements especially with key players and frequently standing solo

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tive Psychology”. The course teaches the secret to living a happy life. At its peak, close to 1,000 students would pack into his lecture hall twice a week to hear his words of wisdom. He has since gone on to write several bestselling books including “Happier” and “The Pursuit of Perfection” and now travels the world giving seminars on leadership, happiness and gratitude. According to him: “Expressing gratitude on a regular basis – writing what you’re grateful for before going to bed, can help us become not just happier and more optimistic, but also more generous, kinder toward others, and interestingly, physically healthier.” Fortunately, the government has announced that it wants to lift 100 million Nigerians out of poverty. This is in addition to tackling abandoned projects which are all over the country. There is a huge role awaiting the products of Dowen College provided they do not confine themselves to medicine, engineering, architecture, accountancy, pharmacy etc. a fresh spirit of adventure should enable them to widen their career choices to include public service, politics, military, police, intelligence service, entertainment, tourism, fashion, art and culture.

Nnimmo UCHORA Bassey UDOJI

without the requisite power is an accident waiting to happen. Whereas one might quite easily get away with this at the middle level, it is harder at the executive level. Remember, that unlike the middle management roll, you didn’t stroll into the executive role – you were invited or admitted in. So, knowing how to balance upholding your uniqueness with maintaining your identity with the executive leadership group will be a key skill. This is why it is absolutely necessary ab initio, to understand to a reasonable extent how your goals and values align with what your organisation and its executive leadership represent and later, why you were invited or admitted in. While some may elect to learn how to be an executive leader on the job it is usually better to have a good understanding of the role, before transition. It is important while working hard at daily tasks, to find the time to prepare for executive leadership roles ahead of time, if it is for you a priority dream to join executive leadership. Preparation is the fuel of readiness and readiness the fuel of success. I wish you all the best in your journey to executive leadership. Dr Udoji is a Senior Lecturer in Organisational Behaviour and Human Resources Management, Lagos Business School, Pan- Atlantic University. She has written this article in conjunction with the Christopher Kolade Centre for Research in Leadership and Ethics (CKCRLE) at Lagos Business School. CKCRLE’s vision is creating and sharing knowledge that improves the way managers lead and live in Africa and the World. You can contact CKCRLE at crle@lbs.edu.ng.

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How long will the carry trade party last?

Patrick Atuanya

n June 2007, Citigroup CEO Chuck Prince famously told the Financial Times: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Under the leadership of Prince, Citi embraced more risky products like subprime mortgages in a bid to compete with other major investment banks of the time such as Goldman Sachs, Bear Stearns and Morgan Stanley. Prince didn’t “dance” for much longer, as once the music stopped in late 2007, there were few places to hide, as almost all asset prices, from homes to commodities to stocks, began to crash. When he made the now infamous statement in June, Prince did not know that the party was already ending. By November 2007, he had retired from Citigroup and the worst U.S. financial crisis since the Great Depression had begun. Today in Nigeria the “carry trade” music is blaring and everyone that seems to matter is having

a darn good time, including the banks, foreign investors and the regulator, which is the Central Bank of Nigeria (CBN). A carry trade is a trading strategy typically based on borrowing in a low-interest rate currency and converting the borrowed amount into another currency, with proceeds placed on deposit in the second currency if it offers a higher rate of interest or deploying proceeds into assets – such as stocks, commodities, bonds – that are denominated in the second currency. Today the Nigerian dance floor is once again full with carry trade investors, so what happens when the music stops? Moody’s Investors Ser vice came out to warn last week that Nigeria’s reliance on hot money is damaging its economy and leaves it vulnerable to outflows when sentiment turns. The company cut its outlook on Nigeria’s B2 rating, which is five steps into junk territory, to negative on Wednesday. One of the problems it cited, along with “sluggish” economic growth, was the central bank’s increased issuance of short-term bonds to encourage inflows and protect the naira. The central bank’s stock of open-market operation (OMO) bills has risen to N17.4 trillion ($48 billion) from N11.3 trillion in 2017, according to BusinessDay’s estimates. That’s a 54 percent jump in 2 years.

About $16bn of the OMO securities are held by foreigners, many of which are carry traders enticed by yields of about 13 percent. “To attract foreign investors, the Central Bank of Nigeria is paying high interest rates on these certificates,” Moody’s analysts Samar Maziad and Marie Diron said in a statement. “This policy is very costly, and has a consequent impact on the yields of other government financing instruments.” The CBN has stopped publishing its annual report since 2018, however the most recently available public data shows the extent of the cost of its liquidity management. The CBN’s interest expense (interest payable on any borrowings – bonds, loans, convertible debt or lines of credit) jumped significantly by 192.8 percent to N1.3 trillion in the financial year ended December 2017 compared to N459.3 billion recorded in the corresponding year of 2016, according to data from the banks 2017 annual report seen by BusinessDay. The rise in the interest expense was as a result of increased OMO auctions carried out by the CBN in the review period. The draft annual report showed that the average monthly OMO issuance stood at N945.5 trillion in 2017 from N654.9trillion in 2016 and the average yield also increased to 19.43 percent in 2017 as against 14.60 percent, feeding directly into the higher interest expenses.

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Today the Nigerian dance floor is once again full with carry trade investors, so what happens when the music stops?

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

Is there hunger in the land?

while ago, a notable minister was quoted decrying the alleged level of hunger in Nigeria. How can there be hunger when you can eat a good meal for N30 in Kano, he said. I am paraphrasing but you get the gist. He based his belief in the absence of hunger in Nigeria on his questionable personal experience of buying food for cheap in Kano. You probably do not need me to tell you that is not a good way to determine the level of hunger. The good way would be to try and systematically measure it. Luckily, we have a very good statistical agency that tries to measure such things. They recently released the fourth version of the living standards survey in collaboration with the world bank. I know what you are thinking. World Bank foreign data. But I want to assure you that these are not wild statistics. They are as credible as it gets and collected by our very citizens on the ground. There are many things in the survey but first we can examine the hunger question. Spoiler alert. There is significant hunger in the land. On average across the country almost 37 percent of people sur-

veyed reported that they worried about not having enough food to eat because of lack of money. Also, 44 percent reported that they were unable to eat healthy and nutritious food because of lack of money, and 27 percent reported that they had to skip a meal because of lack of money. If you imagine that as representative of the population then that is tens of millions of people who worry about how to eat. This is not a stable trend either. Between the second wave of this survey and this present survey, which is the fourth wave, the number of households who reported having a food shortage increased from 11.1 percent in 2012/13, to 19.6 percent in 2015/16, and to 31.6 percent in 2018/19. A trend that should make even the most ardent policy makers nervous and a trend that demonstrates that these challenges are not a Jonathan or Buhari or APC or PDP thing, but a Nigeria thing. The challenges with hunger in the country are at odds with our agriculture policy which has had the rather predictable consequences of increasing food prices. For example, according to the survey, the most consumed food substances www.businessday.ng

The strategy has worked in terms of keeping the naira stable, a key aim of both President Muhammadu Buhari and CBN Governor Godwin Emefiele, who recently barred everyone except foreign investors and banks from playing in the primary and secondary OMO markets. The Naira has barely budged against the dollar this year and is Africa’s best-performing major currency after the Egyptian pound. Societe Generale a French multinational investment bank, says the trade, which has returned investors almost 30 percent in dollar terms so far in 2019, will not lose its appeal soon. The French bank forecasts that the naira will essentially trade flat next year, slipping only around 1 percent to N365 per dollar by the end of 2020. “Nigerian fixed income has provided excellent returns and attracted large portfolio inflows over the past couple of years,” SocGen analysts said last week. “We expect this to continue.” That will be great news for foreign investors, but for the rest of the domestic economy there’s a nagging feeling that just like it did for Citi’s Chuck Prince, the music may end abruptly, and an unwind of the carry trade by offshore investors will lead to Nigeria’s second recession or financial crises in a decade.

ECONOMIST are grains with over 97 percent of households reporting them as a major food source. The reliance on grains is more prevalent in the north where across the three northern geopolitical zones, over 99 percent of all households list grains as a major food source. These are the same regions with the highest levels of poverty by the way. You can therefore guess what effect our policies, such as those that ban or restrict their access to cheaper imported food, have on their bottom line. Talk about punishing those who really could do without being punished. Another interesting observation is the seasonal variation in food shortages. In the south the reported food shortages are mostly stable all year round. In the north however the shortages vary based on the season with May, June, and July the worst months. I guess this is because by this time the harvest from the previous year’s farming season is exhausted, but the new harvest is not ready yet. From September and October, once the crops are harvested, food shortages drop drastically. From other research I learned that the variation in the harvest time as you move from the desert south to the end of the

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NONSO OBIKILI

savannah is key to the region’s food security. It’s almost as if the same way cows move north to south and back to cope with the weather, food is harvested north to south also to cope with the weather. It makes me wonder what effect this border closure policy will have on food security in the region, and the disruption of the north south strategy. It looks like the ripples will be felt for some time. Anyway, the moral of this story is that we actually have a lot of good data being collected and we need to start to use such data to think about our challenges and craft adequate solutions going forward. Also, there really is hunger in the land and apparently it is rising. Dr. Obikili is the chief economist at Business Day

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EDITORIAL Publisher/CEO

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

Stopping the floods at Isheri North

he respite of the dr y s eas on and return of normalc y to the Isheri North Residential Scheme in Lagos provides an opportunity to take another look at the challenge of flooding in the area. In the last five years, Isheri North annually turns into a flooding basket case. Residents move out and businesses stall. The flooding was particularly devastating in 2019. It brought in its wake a disagreement on the causes of the annual damage between the residents of the area and the Ogun Osun River Basin Development Authority on water releases and flood control activities at Oyan Dam. It is time to apply the lessons of the past five years to ensure that there is no repeat experience in 2020. Good enough that the two parties have engaged themselves in stakeholder summits, meetings and in the exchange over causes. While the River Basin Authority points to climate change resulting

in “exceptionally high and prolonged rainfall experience” for the floods, the residents dispute this with rainfall data and history. They identify the conversion of parts of the dam to fishponds, an unintended economic activity, as a precipitator. Officials work with owners of the ponds to release water at the wrong intervals, flooding the surrounding areas. The government of President Shehu Aliyu Shagari built and commissioned the dam in 1983. The dam supplies water to Abeokuta and services the Lagos State Water Corporation. They installed three turbines for electricity generation in the dam. No one has deployed the turbines to date. Instead, following years of neglect, fishponds within the area have grown in number. They prevent the free flow of water released in the dry season so as not to endanger fish in their ponds. The Isheri community alleges that the release by the River Basin Authority of water from the dam in May 2019 at the peak of the rainy season rather than

in the dry season precipitated the floods. On its part, the Ogun Osun River Basin Development Authority (OORBDA) claimed residents built their houses on flood plains that land grabbers allegedly sold to them. This was the stand of OORBDA managing director Olufemi Odumosu. The facts available would lead to a conclusion away from both global warming and building on flood plains as causes for the floods. It is noteworthy that the incidents of flooding exacerbated only in the last five years. The community has existed for multiples of that without flooding. Something more recent is at play. The area was flood-free in the 1990s as both parties agreed following a summit in 2017. They recommended preventive monitoring of water levels and releases from the reservoir. However, the area flooded in 2018 and 2019. Records show that release of water by the River Basin Authority from the Oyan Dam reservoir happened during November, December, January through March, April, May, June

and July. They did not release water during August, September and October. A long-term look at rainfall patterns in the area does not support the claim of increased precipitation. If climate change were a causative factor, the Lagos Island and the adjoining regions would feel the impact first in significant flooding. It has not happened. We urge greater cooperation between OORBDA and the Isheri Community. OORDBDA needs to return to releasing water the reservoir of the Oyan Dam in the established safe period of November through July. That way the pool is almost empty in July enabling filling up in August September and October for flood-free experience in Isheri North. OORBDA should also consider making those turbines earn their investment. How about activating them for power generation as intended, directly or in conjunction with a GENCO with authority over the area? Every resource should pay and contribute in critical areas such as power.

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Failure to reform will deepen extreme poverty in Nigeria global Perspectives

OLU FASAN

igeria faces a perfect storm. A combination of unfavourable circumstances – low growth, low productivity and rising population – is locking this country in the extreme poverty trap. Already, Nigeria has overtaken India to become the “poverty capital of the world”. While India, with a population of 1.3bn has fewer than 70 million of its people living in extreme poverty, Nigeria, with a population of 200 million, has an estimated 100 million, half its population, classified as extremely poor, that is, living on less than $1.90 a day! Yet, the World Bank has now warned that the situation could get worse. In its Nigeria Economic Update, launched in Abuja last week, the World Bank said that, unless this country urgently undertook much-needed reforms, the number of its citizens living in extreme poverty could rise by more than 30 million by 2030; it would thus account for 25 percent of the world’s total population of the extremely poor. The World Bank based its dire prognostication on Nigeria’s “economic and demographic projections”, namely, the country’s anaemic productivity and growth levels and its bourgeoning population. Of course, growth is the rising tide that lifts all boats; it produces economic expansion, which helps to create jobs, while productivity drives efficiency, which ensures higher incomes and reduces poverty. But Nigeria’s economy is growing at just above 2 percent, while its population is growing at nearly 3 percent. Meanwhile, the average productivity of a Nigerian worker is $3.24/ hr, compared with $19.68/hr in South Africa. This combination of low-growth, low-productivity and rising-population is a trigger for a perfect storm: poverty. To avert a disaster, economic growth and productivity must rise much higher

than population growth. But higher economic growth and rising productivity do not just happen; they are products of structural reforms. Thus, the World Bank stressed the urgent need for reform in Nigeria, warning that “the cost of inaction is significant”! Yet, policy reform inertia is the defining characteristic of President Muhammadu Buhari’s government. The Buhari administration is long on intentions but very short on actions. For instance, President Buhari talked about “lifting 100 million Nigerians out of poverty in 10 years”, but the World Bank is concerned that his government’s inaction could actually cause the number of Nigerians living in extreme poverty to increase by 30 million by the end of that ten years. You can’t say that you want to lift 100 million people out of poverty in ten years and yet refuse to take the critical actions needed to achieve that goal. China did not reduce the proportion of its people living in extreme poverty from 60 percent in 1990 to 12 percent in 2010 by simply saying it; rather, it undertook far-reaching structural reforms. But, in Nigeria, it’s all talk and no action! Trade, investment and macroeconomic stability are the key drivers of growth and productivity, the main antidote to poverty. Yet, the Buhari government stubbornly refuses to recognise, despite the preponderance of empirical evidence, the strong links between open markets and poverty reduction, and between productivity and prosperity. An empirical study of OECD countries shows, for instance, that an increase of 10 percent in trade openness translates into an increase of around 4 percent in income per person. And a World Bank study found that, in the 1990s, per capita income grew more than three times faster for developing countries that had lowered trade barriers than for those that had not. Another study shows that productivity in European manufacturing increased by 11 percent between 1988 and 2000 as result of trade openness. Free trade gives local industries access to essential intermediate inputs but also puts them under a competitive pressure to innovate, adapt and become more productive. And the ability to export enables local industries to enter foreign markets and to grow. We also know that free trade benefits con-

sumers by offering them greater choice and better value, which lead to higher living standards. What about foreign investment? Well, you can’t credibly talk about tackling poverty without attracting significant foreign direct investment, which is a major source of employment. Inward investment also brings know-how and technology, boosting an economy’s productive capacity. So, the evidence, both theoretical and empirical, supports the argument that open markets stimulate economic growth and productivity, creating jobs and raising living standards. Which was why the World Bank urged Nigeria to leverage trade integration to harness the benefits of the African Continental Free Trade Area, AfCFTA. Yet, only recently, the minister of industry, trade and investment, Adeniyi Adebayo, said that the border closures and foreign exchange restrictions would boost Nigeria’s economy. Clearly, that statement betrays a lack of understanding of the mechanics and benefits of open markets and shows that Nigeria doesn’t see AfCFTA as an incentive to build its productive and trade capacities. Yet, unless Nigeria’s economy is open for and to business, trade and investment in Africa and globally, it would not generate the private-sector-led growth needed to create jobs and tackle poverty. Nigeria needs to adopt open markets, free trade and investment as a growth strategy, without which it cannot achieve strong and sustainable growth, and avert the detonation of the ticking poverty time bomb. But open trade and investment policies are not enough; they must be underpinned by macroeconomic stability. You can’t achieve competitiveness and productivity in an economy without a sound macroeconomic framework. Thus, the World Bank was right to stress the need for strengthening macroeconomic management in Nigeria. The confidence of businesses and consumers to invest and spend is predicated upon macroeconomic stability, particularly low inflation, low interest rate and flexible, stable exchange rate. Yet, by international standards, inflation and interest rates, at double digits, are too high to boost the competitiveness of industries or stimulate consumer spending in Nigeria. What’s

‘

In Nigeria, it’s all talk and no action! Trade, and macroeconomic stability are the key drivers of growth and productivity, the main antidote to poverty

more, the unwillingness of the interventionist Buhari government to allow efficient allocation of resources, such as foreign exchange, through the market mechanism, and the government’s often harsh treatment of foreign-owned companies in Nigeria, undermine investor confidence and constitute a barrier to business, trade and investment, to private sector dynamism and, thus, to job creation and poverty reduction. As I have written many times in this column, Nigeria must be an open, competitive market economy. It must be one of the best places in the world to start and grow a business. Without that, Nigeria can’t generate the growth and prosperity needed to tackle poverty and improve living standards. Free and open market are the surest route to prosperity. Finally, there is the critical role of human capital. Higher levels of education and skills expand an individual’s economic capabilities and facilitate technological diffusion and innovation, which stimulate growth and productivity. But, as the World Bank said, the productivity gap between Nigeria and comparator countries “reflects both its relatively low stocks of physical and human capital and the inefficiency with which inputs are transformed into outputs”. Truth is, the level and quality of education and skills in Nigeria are appallingly low. There is an acute mismatch between the quality of graduates and the needs of industries. Such a mismatch is a major barrier to growth and productivity, and a major cause of unemployment, low wages and poverty. Sadly, Nigeria de-prioritises and underinvests in human capital. Yet, to tackle poverty, it must pay attention to human capital development. Nigeria faces a no-alternative-tochange moment: Its growth, productivity and poverty crises are acute and call for urgent structural reforms. The World Bank is right to warn that inaction could be catastrophic. Sadly, Nigeria has a tendency to be sclerotic. Yet, it must urgently reform or deepen the misery of its people! Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

Import control through importers’ registry: A solution to import binge

he Trumpian bias about the US trade deficits and the US-China trade war is beginning to spill over, and we are beginning to see domestic versions of it in Nigeria (and the rest of Africa). The reluctance that trailed the signing and ratification of the African Continental Free Trade Agreement (AfCFTA) was a harbinger; and the eventual border closure is exemplary. The argument put forward was that while the nation looks to grow its local industries, entering the agreement would open the economy to presumably uncontrollable volume of imports especially from foreign countries outside the AfCFTA—as Nigeria is thought to be the target market—which could challenge efforts made to develop the cottage industries. Manufacturing countries in Europe, Asia, and America who have standing arrangements with sovereign states in Africa could exploit the free trade agreement to route their goods to other African countries, enjoying the exemption on tariffs and other benefits of the agreement. This would have a devastating effect on domestic manufacturing: business shutdown, job losses, and the loss of tariff and tax revenues. There would also be some exchange rate effects as the expanding import bill implies depreciation pressure on the naira exchange rate. Nonetheless, it is also likely that the AfCFTA

brings significant welfare benefits that offset the scenario above. For instance, increased imports could lower the prices of goods and services through economies of scale and competitiveness. This could, in turn, imply reduced inflationary pressure. Moreover, there is the “rule of origin” that attempts to checkmate the incidence of foreign goods smuggling. Yet, faced with a budget deficit of N1.9 trillion in 2019 and planned deficit of N2.18 trillion for 2020, the Nigerian economy is in desperate need of finance and the administration is doing everything it can to increase revenue: we have seen the government raise the VAT from 5 to 7.5 percent and introduced new tax schemes. The CBN recently enforced the exclusion of 41 import items from accessing foreign exchange (forex) via the official exchange window in a bid to reduce the pressure of import demand on forex. Only three months after signing the AfCFTA in June 2019, the government shuts down all land borders with Niger, Benin and Cameroon in jittery reaction to the likelihood of import binge, and the other consequential issues that may follow the implementation of the AfCFTA in 2020. This, however, is not peculiar to Nigeria alone: in Equatorial Guinea, the government talks about building a wall to prevent illegal immigration from other West African countries. Xenophobia in South Africa is another overt www.businessday.ng

resistance towards factor mobility. The Nigerian government is under pressure to protect its economy and win in the AfCFTA but its approaches are anti-free trade, protectionist and nearly indigenization of the economy, very similar to the trade ideology of President Trump in the US. As the government aggressively extracts revenue in tax from the society and prevents cross-border trade transactions, it directly stifles the economy, meting out hardship and misery on its citizens. By these actions, the government overtly reveals its preference for revenues over societal welfare, grossly undermining the continental trade agreement and the essence of regional integration; and by so doing, transmitting negative signals to other countries within the AfCFTA. Since the closure of the border, the consumer price index has gone up; small businesses struggle, hunger and poverty trend upward. Investors have also adopted a wait-and-see approach to the one step forward ten steps backward pace of the economy. The economy admits its weak manufacturing and infrastructure base; it would not stand the competition that would come. Uncontrolled import would challenge local manufacturing and ridicule industrial development especially the target on food self-sufficiency in the Economic

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AMAMCHUKWU OKAFOR Recovery and Growth Plan (ERGP). One way out of the woods A World Bank data shows that as of 2017, total imports to Nigeria amounted to 13.18 percent of GDP and trade growth of 11.56 percent. Even though participation in intraAfrican trade is relatively low at 4.4 percent, the AfCTA holds the potential for increased trade. It is therefore important to establish a system of importers registry based on certain stipulated criteria in readiness for the deluge of importation. These registration criteria need not be monetary payment but would include minimum capital requirements, loans credibility, tax returns, storage/warehouse facilities, logistics ability and etcetera. This approach would eliminate the myriads of micro importers—as is the status quo—that contribute to the pressure on forex while broadening the import business by giving a formal structure.

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cityfile Abia bans street trading in Ariaria, Aba GODFREY OFURUM, Aba

bia State government has banned street trading in Ariaria axis of Aba in a move to restore sanity and order in the area. This is following the successful dislodging of street traders at Enyimba area of Ariaria International Market, by the ministry of trade and investment. Governor Okezie Ikpeazu in a public announcement ordered that on no account should any form of street trading return to that area under any guise. “A ban is hereby placed on erecting any shops, tents or any other structure by whatever name called for the purposes of trading around that area”. Ikpeazu ordered all relevant agencies of the Abia State government to work with security agencies to effectively and decisively carry out these instructions. He also authorised security agencies to arrest and prosecute any person, who attempts to flout this order. He advised those who wish to do business to find spaces for their trading inside the market. Governor Ikpeazu further ordered the Abia State Public Utilities Management Agency to immediately move in to clean up the place and turn the surroundings into green areas by planting flowers and other ornamental trees, as well as restore the original plan for that area which is to create unrestricted access into and out of the market. He stated that government was fully determined to put an end to indiscriminate street trading and restore decency around our market environments and indeed along all major streets across the state.

Helen Deile, auditor-general, Lagos State; Folashade Jaji, secretary to Lagos State government, and Ogundeko Sesan, at the 2019 Lagos annual auditors’ retreat in Lekki, last week.

Police alert bank customers to robbers’ new strategy

NDLEA to rid Kogi of illicit drugs

he newly posted commander of the National Drug Law Enforcement Agency (NDLEA) in Kogi, Alfred Adewumi, says the agency will collaborate with sister security agencies and the state government to rid the state of illicit drugs. Adewumi gave the assurance in a statement issued in Lokoja, the state capital, on Friday. He took over from Mohammed Bello who had been redeployed to the Adamawa command. Adewumi promised to consolidate on the achievements of his predecessor whom he said performed excellently well. “We are determined to collaborate with the security-friendly government of Kogi under the leadership of Gov. Yahaya Bello to rid the state of the scourge of illicit drugs,’’ he said. Adewumi had served the agency in various capacities in Kebbi, Akwa-Ibom, Zamfara, Bauchi, Oyo and Anambra States. He was an assistant state commander in charge of operations and intelligence, Anambra command, before his deployment to Kogi command of the NDLEA.

he police in Ebonyi have alerted bank to a new strategy being used by criminals to rob bank customers. Police spokesperson in Ebonyi State, Loveth Odah, in a session with journalists in Abakaliki, warned members of the public, especially bank customers, to be security conscious when visiting their banks. According to her, the new strategy involves trailing their victims through a female member of their syndicate who usually monitor financial transactions around banks’ premises. Odah said that such members of the syndicate usually hang outside the banks with cellophane bag containing nails usually planted either at the front or rear of the victims’ vehicles. “As soon as the target comes out from the bank, enters the vehicle, he climbs the

unsuspecting bag of nails that automatically punctures the tyres. “The same people will follow you on a bike and will be showing you that your tyre is deflecting and as an unsuspecting citizen; you will stop the car, alight to check your tyre without closing your door. “They will reach out into the car, collect the money in your car without any stress and without shooting a gun, take it and speed off. “The new strategy has been used to rob some bank customers by the criminals and we have arrested some of them including a woman who confessed their involvement in the crime. “We are alerting the public on this latest antics of criminals and to advise bank customers to use security when withdrawing huge money. “Also car owners should always ensure that they use the car central lock while driving and whenever they alight from

the car,’’ Odah said. The spokesperson said that the command was, however, prepared to protect the lives and property of every citizen before, during and after the Yuletide. “The Christmas period is a season we usually experience heavy human and vehicular traffic with attendant social ills. “Bad elements in our midst will want to exploit the season to break the law by committing all sorts of crimes. “Though, Ebonyi is relatively crime free and the most peaceful in terms of crime in the South-East zone, we are still not going to relent in ensuring that we maintain the status quo. “We urge the public to cooperate with the police and when they see something, they should say something and a quick response by the police in crime situation will help put smiles on the victim or victims’ faces,” she said. NAN

Lagos seeks OPS involvement in transport sector reform JOSHUA BASSEY

agos State government has called for the collaboration of the Organised Private Sector (OPS) in the ongoing transport sector reform to fast-track its success. Obafemi Hamzat, the deputy governor, who made the call at the 2019 Lagos transport festival, weekend, said such collaboration would result in efficient transport system that caters to the need of the over 22 million residents of Lagos. Speaking on the theme “sustainable and equitable transport: the role of government and private sector stakeholders, Hamzat said the plans by the government to make public transport system more attractive and investors’ friendly was on course.

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He noted that transportation was an integral part of the nation’s economic growth, hence the need to give it top priority. Represented by the commissioner for transportation, Frederic Oladeinde, the deputy governor observed that achieving sustainable transport system had always posed a challenge in megacities around the world, but stressed that the state government was committed to creating the enabling environment to attract private sector participation in the ongoing reforms. The reform seeks to actualise the vision of a multi modal transport system, integrating road, rail and waterways for a seamless movement of people and goods across Lagos. While urging people to support the

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state in the ongoing reforms, he stated that plans have commenced to improve the public transport system, including the ongoing formulation of the transport policy which he said would continually dictate the goals and objectives of a viable multimodal system. He told audience that the state government has commenced intelligent transport system to save commuters travel time, adding that, data is required to study travel patterns in order to effectively plan the development of mobility in the nearest future. Hamzat further disclosed that the state government has created an open platform for private investors including countries like Netherlands and China to collaborate with the state government so as to achieve its multi modal transport policy.

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The twilight of the WTO

A Balkan A slender chancebetrayal for peace in Darfur

Sudan’s revolution could end the conflict in Darfur The transitional government is opting for talks instead of force

The trading system’s referee is about to leave the field

EN WITH guns fill the town of elFasher in western Sudan’s troubled Darfur region. At the airport dozens are boarding or disembarking from planes, wearing uniforms of the Rapid Support Forces (RSF), a unit formed from Sudan’s murderous militia known as the Janjaweed. Down the road is the headquarters of UNAMID, the UN peacekeeping force that was brought in 12 years ago to stop a genocide by the Janjaweed and Sudan’s army, whose base is in the centre of town. Seven months after the fall of General Omar al-Bashir, the Sudanese president accused of orchestrating that genocide, el-Fasher still looks like a town on the edge of a war zone. But it has become more colourful of late. Mud walls along dusty streets

Disputes are bound to get nastier

NE WAY of thinking about the world’s trading system is as a sports match featuring a sprawling, brawling international cast of players, each with their own tactics and tricks. The game works best when there is a referee, and for nearly 25 years a group of seven judges at the World Trade Organisation (WTO) has done the job. But on December 11th this body will cease to function, because America is blocking new appointments to it. The referee’s departure will make cross-border commerce unrulier and, in the long run, invite an anarchy that would make the world poorer. The WTO’s appellate body is one of those institutions that most people have never heard of, but which will be missed when it is gone. Set up in 1995, it hears appeals over trade disputes and grants the right to limited retaliation where there has been wrongdoing. Some 164 countries and territories follow

its rulings, and the body has prevented some of the nastiest rows from spiralling into outright tariff wars—for example, the epic spat between America and the European Union over subsidies for Boeing and Airbus. Since it was created, it has been the enforcer-of-last-resort for over 500 cases (see article). Before 1995 the system was less stable and less fair. The General Agreement on Tariffs and Trade, the WTO’s predecessor, had rules but no judges to enforce them. Big countries had bullying rights. The legal clarity and independence provided by the appellate body is one reason why trade rose from 41% of world GDP in the year before it was created to 58% in 2017. The immediate cause of the judges’ downfall is the Trump administration’s refusal to appoint new judges to replace those who are retiring, a symptom of the president’s suspicion of multilateral institutions. But it

is a mistake to blame everything on him. The WTO’s troubles expose deeper problems. Most countries like independent arbiters, until they suffer a critical ruling. American unease predates Mr Trump. The Bush and Obama administrations tried to influence outcomes by blocking the reappointment of judges. The WTO is also unwieldy. Ideally the rules would be updated every decade or so, giving countries a chance to modernise them and take on judgments they dislike. But the WTO’s membership has doubled since 1995, and because each country has a veto it has been impossible to update the rules to reflect, say, the disruption caused by China’s state-led model (it joined the WTO in 2001). Instead, grumbles have festered. What happens from December 11th? Some WTO members are trying to concoct an unofficial appellate body, drawing on retired judges, to resolve dis-

putes. A new president elected in 2020 might reverse America’s stance, although several Democratic presidential contenders are lukewarm on free trade. Most likely, the appellate body will die, or remain dormant for years. If so, expect a deterioration in conduct—Japan and South Korea are already in an ugly spat. Some Americans believe that their country’s size gives them the raw clout to impose rules on others, but it has yet to wrest any big concessions from China. Indeed, as the legal framework for trade decays, even America will be vulnerable to escalating tensions. So far, trade frictions have not caused a global recession. But trade has stopped growing and long-term investment by multinational firms dropped by 20% in the first half of this year. If there is a recession, the temptation of tit-for-tat tariffs will rise across the world. When the referee leaves the field, anything goes.

are daubed with murals of the national flag and revolutionary slogans like “Sudan is for all”. They reflect a burst of optimism that a revolution that swept through Khartoum, the capital, in April may bring peace to a region synonymous with suffering. This hope has been fuelled by a power-sharing agreement signed in August between leaders of the protest movement and the generals who had staged a coup when it was clear that Mr Bashir would fall. The deal committed the interim government to negotiating a “comprehensive peace” in Darfur and other states afflicted by conflict within six months. The new government, headed by Abdalla Hamdok, an economist-turned-prime-minister, has since set up a peace commission and revived talks with rebel groups in Darfur. Sudan has been at war almost Continues on page 17

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Democracy and the internet

Sudan’s revolution could end the conflict... Continued from page 16

How to police political advertising Lawmakers, not tech bosses, should take the lead

HE NEW YORK TIMES noted in 1859 that the telegraph was doing a lot to clean up politics. “The telegraph gives the speaker in the furthest East or West an audience as wide as the Union,” it wrote. That made it harder for politicians to promise to relax drinking laws in one city and impose Prohibition in another. A century and a half later the internet, the telegraph’s distant descendant, has once again transformed politics. Social networks have become the platforms of choice for politicians hoping to get their messages out and to give their opponents a kicking. The results can be seen in both the American and British elections. Online advertising, modest a decade ago, now accounts for around half the total. This time there is less happiness about the results. Elizabeth Warren, a contender for America’s presidency, has accused Facebook of “taking money to promote lies”, referring to the social network’s decision not to pass judgment on the content of the political ads it shows to its users. (To demonstrate her point, Ms Warren bought an ad stating, falsely, that Mark Zuckerberg, Facebook’s boss, had endorsed Donald Trump for re-election.) In Britain the ruling Conservative Party has embraced disinforma-

tion. During a televised debate on November 19th, the party’s Twitter account rebranded itself as “factcheckUK”, in an attempt to present party-political talkingpoints as disinterested truth. All this is merely one part of a greater worry that the internet, far from being a benevolent source of useful information, has become a swamp of lies, misdirection and conspiracy theories that is harming politics. Spooked—especially by the irritation of American politicians, who regulate them—some tech firms have changed their rules. Twitter is to ban nearly all political advertising. Google, which owns YouTube, says it will ban ads that make egregiously false claims, and restrict the precision with which political ads can be aimed at specific groups of people. For now, Facebook is sticking to its guns, saying it will not regulate political speech— though there are signs it is wavering (see article). Mr Zuckerberg is an unpopular man these days. Yet in this case he is right. The rules of digital democracy should not be set by unaccountable bosses in the boardrooms of a handful of American firms—let alone, in future, Chinese ones. If politicians want to change the behaviour of candidates, the levers are in their hands. It is their job

to make the laws under which everyone else—technology firms included—must operate. Partisan rancour and shortterm self-interest, particularly in America, may make that difficult. But history offers hope. Politicians have agreed in the past on whether and how to regulate other media technologies such as radio, television and newspapers. The rules created for analogue democracies offer a relatively uncontroversial starting-point for digital ones. In America, for instance, the source of political television ads must be disclosed. The same should be true online. Facebook’s decision to stand back looks more in keeping with the traditions of American democracy than Twitter’s or Google’s commitment to step in. Britain is much stricter. Political advertising is mostly banned on television and radio, with the exception of a limited number of tightly regulated “party-political broadcasts”. Again, it is not clear why the rules for online videos should be more relaxed than those for pitches that appear on television. New media offer new possibilities and hence raise new dangers. One is the ability to run “microtargeted” ads, aimed at small groups thought to be most receptive to their message. To the extent that it helps politicians deal

with particular worries among voters, this can be beneficial. If abused, though, it could amplify exactly the sort of two-faced campaigning the telegraph was supposed to have banished. It is too soon to limit microtargeting. Not only would it be hard to draw clear lines but, more important, politicians should be reluctant to ban each other’s speech. As a first step, they should enforce transparency, ensuring that even narrowly targeted ads are available for anyone to examine. Rival politicians will have incentives to dig up evidence of foul play by their opponents, helping keep everyone honest. The tech giants are already making similar moves voluntarily. That could make it easier to convert them into legal requirements. Another difference between old media and new is that the tech firms are planet-spanning in a way that newspapers and television never were. Democracy, though, remains a local affair. America and Britain have different traditions; those of France, Australia or India are different again. If governments decide to tighten the rules around online advertising—and perhaps attempt to drain the digital swamp more broadly—the result will be a profusion of local laws for the tech firms to comply with. That will be a burden, but it is the price of success.

without interruption since its independence from Britain in 1956. For years an Arab-dominated Islamist government battled rebels from the Christian and animist south. Perhaps 2m people died in these wars before South Sudan was recognised in 2011 as Africa’s newest country. In 2003 armed groups began a rebellion in Darfur, a relatively prosperous region the size of Spain where black African locals complained that the government in Khartoum was oppressing them. In response, Mr Bashir armed nomadic Arab cattle-herders, turning them into the Janjaweed, a horsemounted militia that was unleashed upon black farmers with such savagery that in 2010 the International Criminal Court (ICC) indicted Mr Bashir on charges of genocide. Many of those who were chased from their homes languish in camps near towns like el-Fasher or in neighbouring Chad. Their lands are occupied by armed Arab tribes that the victims still call the Janjaweed. Abdulrazig Abdallah, an elder in el-Fasher, says four people from his camp were killed in early September when they ventured to their farms for the harvest. Such incidents are commonplace. The new government has declared a ceasefire with rebels, which even the most recalcitrant seem to be observing. “This time both sides are serious,” says a UN official. Rebel leaders have been invited back from exile. And the government has markedly improved access for humanitarian organisations and journalists. Jeremiah Mamabolo, who heads the UN’s operation in Darfur, reckons a peace deal between the government and the rebels will be signed by early next year. But to have any chance of success it needs the support of Abdel Wahid al-Nur, the most influential but least compromising Darfuri rebel leader, who may soon return to the region after more than a decade in Paris. His faction of the Sudanese Liberation Army has, by some estimates, 2,000 fighters who are holed up in Darfur’s Jebel Marra.

Monday 09 December 2019

BUSINESS DAY

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Egalitarianism

Inequality could be lower than you think But there is plenty to do to make economies fairer

VEN IN A world of polarisation, fake news and social media, some beliefs remain universal, and central to today’s politics. None is more influential than the idea that inequality has risen in the rich world. People read about it in newspapers, hear about it from their politicians and feel it in their daily lives. This belief motivates populists, who say selfish metropolitan elites have pulled the ladder of opportunity away from ordinary people. It has given succour to the left, who propose ever more radical ways to redistribute wealth (see article). And it has caused alarm among business people, many of whom now claim to pursue a higher social purpose, lest they be seen to subscribe to a model of capitalism that everyone knows has failed. In many ways the failure is real. Opportunities are restricted. The cost of university education in America has spiralled beyond the reach of many families. Across the rich world, as rents and house prices have soared, it has become harder to afford to live in the successful cities which contain the most jobs (see Free exchange).

Meanwhile, the rusting away of old industries has concentrated poverty in particular cities and towns, creating highly visible pockets of deprivation. By some measures inequalities in health and life expectancy are getting worse. Yet precisely because the idea of soaring inequality has become an almost universally held belief, it receives too little scrutiny. That is a mistake, because the four empirical pillars upon which the temple rests—which are not about housing or geography, but income and wealth—are not as firm as you might think. As our briefing this week explains, these four pillars are being shaken by new research.

Consider, first, the claim that the top 1% of earners have become detached from everyone else in recent decades, which took hold after the “Occupy Wall Street” movement in 2011. This was always hard to prove outside America. In Britain the share of income of the top 1% is no higher than in the mid-1990s, after adjusting for taxes and government transfers. And even in America, official data suggest that the same measure rose until 2000 and since then has been volatile around a flat trend. It is easily forgotten that America has put in place several policies in recent decades that have cut inequality, such as the expansion

of Medicaid, government-funded health insurance for the poor, in 2014. Now some economists have re-crunched the numbers and concluded that the income share of the top 1% in America may have been little changed since as long ago as 1960. They argue that earlier researchers mishandled the taxreturn data that yield estimates of inequality. Previous results may also have failed to account for falling marriage rates among the poor, which divide income around more households—but not more people. And a bigger chunk of corporate profits may flow to middle-class people than previously realised, because they own shares through pension funds. In 1960 retirement accounts owned just 4% of American shares; by 2015 the figure was 50%. The second wobbly pillar is the related claim that household incomes and wages have stagnated in the long term. Estimates of inflation-adjusted median-income growth in America in 1979-2014 range from a fall of 8% to an increase of 51%, and partisans tend to cherry-pick a figure that tells a convenient story. The huge variation reflects differences in how

you treat inflation, government transfers and the definition of a household, but the lowest figures are hard to believe. If you argue that income has shrunk you also have to claim that four decades’ worth of innovation in goods and services, from mobile phones and video streaming to cholesterol-lowering statins, have not improved middle-earners’ lives. That is simply not credible. Third is the notion that capital has triumphed over labour as ruthless businesses, owned by the rich, have exploited their workers, moved jobs offshore and automated factories. The claim that inequality is being driven by the rich accumulating capital was a central thesis of Thomas Piketty’s book, “Capital in the Twenty-First Century”, which in 2014 made him the first rock-star economist since Milton Friedman improbably filled auditoriums in the 1980s. Not all Mr Piketty’s theories caught on among economists, but it is widely assumed that a falling share of the rich world’s GDP has been going to workers and a rising share to investors. After a decade of soaring stock prices, this has some resonance with the public.

Israel’s charged politics

Binyamin Netanyahu’s allies reconsider their indicted leader The prime minister faces corruption charges–and a leadership challenge

HE RALLY’S organisers feared that turnout would be low. Even after a flurry of text messages and a big internet campaign, an underwhelming crowd of several thousand people showed up in downtown Tel Aviv on November 26th to protest against the “coup d’état”. That is how Binyamin Netanyahu, Israel’s prime minister, refers to the legal campaign against him. Five days earlier he was charged with bribery, fraud and breach of trust stemming from three corruption cases. Mr Netanyahu is the first sitting prime minister to be indicted. He denies all charges. The prime minister claims to be the victim of a left-wing conspiracy. Biased courts, police and media are to blame for his problems, he says. But after a decade in power, his grip on Israeli politics is weakening. His coalition of nationalist and religious parties failed to win a majority in two successive elections, in April and September. The opposition, led by the Blue and White party, has also come up short. Yet it has frustrated Mr Netanyahu’s attempts (and failed itself ) to form a government, pushing the country towards

another election. Cracks are even showing in his own Likud party, where he faces the most immediate challenge to his rule. Likudniks stuck with Mr Netanyahu even as it became clear earlier this year that the charges against him were coming. Many believe he is indeed a victim. Others think his political acumen gives them the best chance of winning elections. But some are starting to question both notions. It “isn’t an attempted coup,” says Gideon Saar, a former Likud minister. “Not only is it wrong to say that, it’s also irresponsible to say that.” He plans to challenge Mr

Netanyahu for the party’s leadership: “I haven’t heard one person who thinks that after a third election, or a fourth, or a fifth, or a sixth, Prime Minister Netanyahu will succeed in forming a government.” Other Likud bigwigs are steering clear of the prime minister. The rally on November 26th was organised by the party, yet most of its members of the Knesset (parliament) didn’t show up. Mr Netanyahu has conceded that a vote on his party leadership is needed. Mr Saar wants it to be held immediately, so that a new leader would have a shot at negotiating a government with Blue and

White before the December 11th deadline, after which another election must be held. Mr Netanyahu prefers to delay in order to guarantee himself more time in power. Even if he loses control of the party, he would remain prime minister until a new government is formed. Since its founding by Menachem Begin and Ariel Sharon in 1973, Likud has had only four leaders. It has never voted one out. Most have been successful: prime ministers from Likud have led Israel for 30 of the past 41 years. Having grown accustomed to power, some members now fear losing it. Mr Netanyahu no longer resembles the political “magician” who won four elections and became Israel’s longest-serving leader earlier this year. But he is still popular with the party’s rank and file. And, so far, no high-ranking Likudnik other than Mr Saar has called for him to go. Mr Netanyahu could lose his job in other ways. The law does not explicitly require an indicted prime minister to step down, but many Israelis question Mr Netanyahu’s ability to run the government while mounting his defence, and note the potential conflicts of interest that come with his power over the justice

ministry and the police. His decision to remain in office is therefore likely to be challenged in court. Israel’s president, Reuven Rivlin, may also refuse to ask Mr Netanyahu to form a government even if he wins another parliamentary election.

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Monday 09 December 2019

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

OIL& GAS

Aramco raises $25.6bn in world’s largest IPO, beats Alibaba’s 2014 record OLUFIKAYO OWOEYE

audi Arabia’s statecontrolled oil firm, Aramco has raised $25.6 billion in the largest Initial Public Offering (IPO) ever, putting the value of the company at $1.7 trillion, higher than Apple ($1.2 trillion), Microsoft and Alibaba ($1.1 trillion) The IPO values Aramco at roughly $1.7 trillion, making it the most valuable publicly traded company in the world ahead of Apple which is worth about $1.15 trillion. This However fell short of the $2 trillion mark set by Crown Prince Mohammed Bin Salman. The oil-giant, Aramco will begin the trading of 3 billion units of shares on the 12th December, on the local Tadawul Stock Exchange at a starting price of $8.53. There are reports that most of the new shareholders are mostly Saudis and regional investors, as investors around the world have remained unsure about investing in the state-controlled oil firm due to concerns around transparency, governance

practices, security and targeted valuation, as well as profitability in the face of harsh environmental policies around the world. According to reports, the government could decide to increase the number of shares on offer by a further

15 percent of the IPO via what the investment bank adviser calls the “green shoe” mechanism, designed to ensure price stability when the shares start trading. Saudi citizens were by far the biggest number of applicants, with 4.95 million

seeking to buy in the IPO. But there was also significant demand from expats resident in the Kingdom, with more than 106,000 applying for shares Aramco has promised to pay an annual dividend of $75 billion through 2024. To some investors, this could

make the listing look more like a bond offering with promised payouts and lower risk. Aramco’s stock is expected to begin trading on Tadawul exchange in Riyadh later this month. The massive stock exchange debut would fund

Crown Prince Mohammed bin Salman’s Vision 2030 plan to wean the kingdom off oil and develop other sectors of its economy, while signaling to multinational companies and foreign investors that Saudi Arabia was open for business.

fied economy supported by vast oil and gas endowments, notwithstanding persistent credit weaknesses such as its very weak institutions and governance framework and in particular poor public finance management.” In order to attract foreign investors, Nigeria is paying high interest rates on these certificates. According to Moody’s

“this policy is very costly, and with consequent impact on the yields of other government financing instruments. Importantly, the large holdings of foreign investors make Nigeria’s external position vulnerable to an adverse change in investor sentiment that could quickly materialize given the short-term nature of the instruments.”

CREDIT RATINGS

Here’s why Moody’s downgraded Nigeria outlook to negative LOLADE AKINMURELE

hree days after the World Bank warned Nigeria is threading a disastrous economic and social path, Moody’s the global rating agency has changed the outlook on Nigeria from stable to negative. The change of outlook to negative was informed by the increasing fragility of Nigeria’s public finances and sluggish growth prospects, said Moody’s. It noted the increasing fragility of Nigeria’s public finances which it said was evident in the greater reliance by the government on financing from the Central Bank of Nigeria (CBN) over the last three years to cover persistently large fiscal deficits, with CBN cash advances reaching 2.5% of GDP on a net basis at the end of September 2019, in addition to government debt instruments held by the CBN worth 1.4% of GDP. In a statement made available to BusinessDay

Moody’s said The “negative outlook reflects Moody’s view of increasing risks to the government’s fiscal strength and external position. “Already weak government finances will likely weaken further given an extremely narrow revenue base and persistently sluggish growth that hinders fiscal consolidation.” In its alert to investors around the world, Moody’s warned that “as pressures mount, there is a risk that the Nigerian government resorts to increasingly opaque and costly options to finance a moderate but rising debt burden. Moreover, vulnerability to an adverse change in capital flows is building in light of Nigeria’s increasing reliance on foreign investors to fund the country’s foreign exchange reserves. Moody’s expects general government revenues to remain very low at around 8% of GDP until 2022, despite measures to such as the VAT rate increase to 7.5% from

5% in 2020. Consequently, debt affordability will remain weak, with general government interest payments at around 25% of revenues in the next few years. The administration’s focus on increasing infrastructure spending from very low levels will further exert pressure on fiscal deficits even if it is likely that much-needed capital expenditure will continue to be under-realised compared to the budgets, as capex is curtailed in order to contain the overall budget deficit. In general, Moody’s expects real growth to remain weak, at just over 2% over the next few years. The economy has yet to fully recover from the oil price shock of 2015 and the subsequent recession in 2016; real growth remains below population growth, denoting an erosion in incomes from already low levels. This low growth environment makes achieving the government’s objectives of job creation, improvement in social indicators, and fiscal consolidation via increased revenue collection

highly challenging. The implementation of economic policies to sustainably boost real GDP growth would alleviate some of the negative credit pressures. Moody’s which maintained its B2 credit rating, said the “decision to affirm the rating at B2 recognizes a combination of credit strengths including the country’s large and diversi-

L-R: Muda Yusuf, director general, Lagos Chamber of Commerce and Industry (LCCI); Babatunde Paul Ruwase, president/chairman of council; Toki Mabogunje, deputy president, and Wale Adegbite, deputy treasurer, at the 131 annual general meeting of LCCI in Lagos. Pic by Olawale Amoo

Monday 09 December 2019

COMPANIES&MARKETS

BUSINESS DAY

Business Event

Zenith bank supports start-ups, sponsors innovative ideas at its 2019 Tech Fair ( Ifeoma)

enith bank, leading multinational financial service provider in Nigeria has supported and sponsored various technology start-ups and innovative ideas at its recent Tech fair. Zenith Tech Fair, which was held at the Land Mark Event Centre, Victoria Island Lagos was themed ‘Future for ward’, which showcased leading technology innovation across every aspect of life. Speaking at the event, Jim Ovia, chairman, Zenith Bank Plc, said Zenith bank have always had some form of technology summit over the years, but the tech fair is a little bit different from the prior years because at this point in time, the world has gone so digital and Nigerian economy is being digitised. Ovia explained that this event is holding a time when so many Nigerian youths are creating new innovations such as start-up companies and start-up initiatives, adding that Zenith bank thought it needed to support start-ups and encourage them by sponsoring the various innovative ideas that they have. “We want to support them in the area of disruptive innovations and technologies and we all know what disruptive innovations will do to our economy. This is exactly why we are sponsoring this Zenith Tech Fair. “We believe in the years to come that we will build our own Silicon Valley as we

sponsor more innovations and creativities whether in the area of entertainment, technology, agriculture, amongst others. That is why we will encourage our youths to come up with various technologies and innovations that they have that is disruptive and will change the old ways of doing things to embrace new ways, which is the direction of the world economy. These include artificial intelligence and various forms of innovations,” he said. He stressed that Nigeria has well trained Nigerian engineers, IT and practitioners and there is a need to encourage them. Ebenezer Onyeagwu, MD/CEO, Zenith Bank, who was pleased with the turnout of people in attendance, acknowledged that virtually every stakeholder in the digital ecosystem was represented at the event. “I am very impressed with the quality of presentation. We had presentations from Google, IBM oracle and several others and every one of them talked about the huge potentials in Nigeria and the opportunity for growth expansion that awaits us, so I believe what we need to do is take it to an elevated level to see what happens. “Remember also that at the back of this building, we have a hacker ton. The essence of this hackathon is to help us identify those who have potentials for inauguration and creativity in terms of

coming up with new designs. For those who will be eventual winners, of course, the bank is going to be providing support to incubate them and see how we can get them to grow even bigger and better than what they are now,” he explained. Speaking on whether the Tech fair was mature for discussions around 5G technologies, Onyeagwu said it was mature, stressing that Nigeria needs to be aware of what is happening. “We need to be aware of the direction of travels so if everyone is taking about 5G and moving ahead, what you see in the digital space is that, if you fail to adapt to the latest technology, you will soon become irrelevant. So it is important that we understand it. It is important for us to talk about it and we should now do is fire our inspiration to see that we move in the same direction,” he said. Juliet Ehimuan, Google’s Country Manager in Nigeria who said she felt great being at Zenith bank’s tech fair stressed that technology has played a very important role and continues to play that role in transforming the way we live, work, do business and interact with one another. She noted that year on year; there are lots of sophistication in the technology space like artificial intelligence and machine learning being used in part of Africa and Nigeria and across multiple sectors, including agriculture.

L-R: Tobechukwu Okigbo, Chief Corporate Relations Officer, MTN Nigeria; Secretary to Lagos State Government and representative of the governor, Mrs Sherifat Folashade Jaji; Adeoluwa Ademuwa Ifeoluwa, First MTN Nigeria Kid-CEO and winner, 2019 mPulse Lagos State Private School Spelling Bee; Mohammed Rufai, Chief Technical Officer, MTN Nigeria; and Sean Cryan, Country Manager, Ericsson Nigeria, at the MTN 5G Demo showcase in Lagos yesterday. Pic by Pius Okeosisi

L-R: Bamidele Makanjuola, chairman, Vitafoam Nigeria Plc; Muhammad Makatifa of Makatifa and Sons, winner, vitafoam second best national distributor; Idi Ankwa of Idi Ankwa Enterprises, best national distributor; Benjamin Oti of Canopy Global Investment, third best national distributor, and Taiwo Adeniyi, group managing director, Vitafoam, during the Vitafoam’s national distributors’ Award in Lagos.

Banking

Rand Merchant Bank Nigeria launches custody offering

and Merchant Bank Nigeria (RMBN) has launched its custody offering, a banking solution aimed at enhancing the ‘posttrading’ activities of clients. Over 25 years ago, Rand Me rc h a n t B a n k c o m menced the offering of custody services out of South Africa. The Bank expanded its custody offering to neighboring southern African countries of Namibia and Botswana in the years 1998 and 2008 respectively. The Bank has since become a leading provider of custody services to a number of leading global custodians as RMB banks over 29 international banks, fund managers, pension funds, broker dealers, among a host of others. As a key part of its Africa Custody expansion strategy and in

line with growing client demand for regional custody services, RMB’s Group management approved the rollout of direct custody offering out of Nigeria in 2018. RMB Nigeria Custody is open for business and have started signing on clients. RMBs unique service proposition include providing clients with meaningful management Information, competitive pricing and leveraging South African Asset management industry coupled with our Prime Services capabilities. Michael Larbie, CEO RMB Nigeria and Regional Head West Africa stated that RMB’s team has the advantage of decades of proven experience, a network across the continent and deep roots in South Africa, enabling RMB experts

to provide the kind of custody services that safeguard your investments. Clients have recognized our unwavering commitment to constantly improving our services by voting us the market outperformer every year since 2016 in Global Custodian’s Surveys for Agent Banks in Emerging Markets. The Nigeria team is committed to building and maintaining sustainable partnerships, while our world-class platforms and systems empower clients to manage their funds from anywhere in the world Nadia Zakari, head of Global Markets, RMB Nigeria stated that the addition of custody services to the product offering of the bank will further deliver end to end efficient trading and post trading experi-

ence of the bank’s existing and future clients. Abiodun Adebimpe, head of Custody, RMB Nigeria stated that RMB Nigeria Custody Services offer domestic clients access to international markets through our partnership with our South African based team which extends our offering to over 100 markets outside Nigeria. Our clients benefit from our strong focus on excellent pre and post-trading services. We offer our international clients superior end-to-end service experience by supporting them at every stage of the investment cycle i.e. account opening, Fx trading & documentations, securities trading, clearing, settlement, corporate actions facilitation, reporting,

market information among others. The RMBN Custody is yet another offering that lives up to RMB’s vision

of continuously creating sustainable value, unique solutions and superior economic returns for clients and shareholders.

Monday 09 December 2019

BUSINESS DAY

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Allianz report shows five key risks company directors, officers must watch in 2020 Modestus Anaesoronye

he range of risks facing company executives or directors and officers (D&Os) – as well as the resultant insurance claims scenarios – has increased significantly in recent years. With corporate management under the spotlight like never before, a new report by insurer Allianz Global Corporate & Specialty (AGCS) highlights five mega trends which will have significant risk implications for senior management in 2020 and beyond. The report, “Directors And Officers Insurance Insights 2020”, also examines some of the factors which are driving recent changes in the D&O insurance market after a period of sustained large loss activity. “AGCS continues to see more claims against D&Os emanating from ‘bad news’ events not necessarily related to financial results,” says Shanil Williams, global head of Financial Lines at AGCS.

L-R: Ekperahwa James, head, Finance & Account; Aleshinloye Rotimi, head, Strategy & Performance; Leke Ogunbambo, head, Legal & Compliance; Kuponiyi Kunle, head, ICT; Igbiti Edwin, managing dirctor/ CEO; Umuolo Jane, head, Group Life Business;, Salami Ademola, chief finance officer; Seth Epelle, head, Marketing, all of Niger Insurance Plc during a media interaction with Journalists in Lagos

“Scenarios include product problems, man-made disasters, environmental disasters, corruption and cyber-attacks.” These types of “eventdriven” cases often result in significant securities or derivative claims from shareholders after the bad news causes a fall in share price or a regula-

tory investigation. Of the top 100 US securities fraud settlements ever, 59 percent are event-driven. There has also been a spike in claims resulting from the #metoo movement, where it is alleged D&Os allowed a toxic culture to take hold and endure within compa-

nies. Other prevalent types of events are cyber incidents. Climate change litigation on the rise Failure to disclose climate change risks will increasingly result in litigation in future. Climate change cases have already been brought in at least 28 countries around

the world to date with threequarters of those cases filed in the US. There are an increasing number of cases alleging that companies have failed to adjust business practices in line with changing climate conditions. Environmental, social and governance (ESG) failings can cause brand values to plummet. “Directors will be held responsible for how ESG issues and climate change are addressed at a corporate level,” says Nobuhle Nkosi, head of Financial Lines at AGCS Africa. “Increasingly, they will have to consider the impact of these when looking at strategy, governance, risk management and financial reporting.” Growth of securities class actions globally Securities class actions are growing globally as legal environments evolve. AGCS has seen increasing receptivity of governments around the world to collective redress and class actions, particularly across Europe but also in other territories such as Thailand and Saudi Arabia. At the same time the level of filing activity in the US has been at record

highs in recent years with over 400 filings in both 2017 and 2018, almost double the average number of the preceding two decades. Bankruptcies and political challenges impact AGCS expects to see increased insolvencies which may potentially translate into D&O claims. Business insolvencies rose in 2018 by more than 10 percent yearon-year, owing to a sharp surge of over 60 percent in China. In 2019, business failures are set to rise for the third consecutive year by more than 6 percent year-on-year, with two out of three countries poised to post higher numbers of insolvencies than in 2018. “Political challenges, including significant elections, Brexit and trade wars, could create the need for risk planning for boards, including revisiting currency strategy, merger and acquisition (M&A) planning and supply chain and sourcing decisions based on tariffs. Poor decision-making may also result in claims from stakeholders,” says Nkosi.

Niger Insurance commences process of settling outstanding liabilities …pays N1.4 billion in 9-months Modestus Anaesoronye

nderwriting giant, Niger Insurance Plc has commenced the process of settling its outstanding liabilities to customers, with passion and a common intent to write a great story in this new chapter of the company’s long and chequered history. The company’s new man-

agement who disclosed the plan during a media interaction in Lagos said the delay in payment of claims and outstanding customer benefits, was as result company’s large asset portfolio skewed towards fixed assets. Edwin Igbiti, managing director/CEO, Niger Insurance Plc who regretted the development however assured that the company’s assets are more than sufficient to settle all its liabilities, and

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that it has made significant progress towards liquidating some fixed assets to unlock cash and pay down all outstanding obligations soon. He stated that Niger Insurance Plc has paid over N1.4 billion to customers in the past 9months and used the opportunity to assure all others that their claims will be paid soonest. Igbiti also thanked all of its customers for their patience, trust and understanding dur-

ing this challenging period in its long and otherwise stellar history while reaffirming the company’s renewed sense of responsibility and commitment to excellence. The MD noted that the company was going through a transformation and repositioning for service excellence & profitable growth According to him, the company has designed a transformation blueprint over the next 5years (2020

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to 2024), focusing on operational and technological advancements in delivering bespoke insurance solutions to businesses, institutions and the growing populace of Nigeria. “The implementation of the transformation plan already began in the fourth quarter of 2019 following the appointment of the company’s new MD/CEO – Edwin Igbiti, a vastly experienced and well- respected business leader who recently

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completed five meritorious years as MD of AIICO Insurance Plc.” He further noted that the need for Niger Insurance Plc’s transformation is underscored by a combination of market & regulatory changes. “Having been in operations for 57years, it had become imperative to address legacy challenges as well as innovate to achieve service excellence, agility and & competitiveness.”

Monday 09 December 2019

BUSINESS DAY

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Insurers’ profit hits four year high

nsurance companies have recorded a fouryear high in profit which gives shareholders a glimmer of hope that they will be rewarded in form of dividend payment. Experts who spoke to BusinessDay attribute the increase to a successful implementation of cost control mechanism while investing in latest technology. Also, they added that investment in treasury bills that added strength to investment returns is a boon for operators in the industry. Insurers had parked their money in short term government securities when yields were favourable. Eighteen largest insurers saw combined profit increased by 39.59 percent to N23.05 billion in September 2019 as against N17.57 billion the corresponding period of last year. Interestingly, that compares with a 7.09 percent decrease from 2018-17 and 11.49 percent increase in

more liquid with to trade in marketable securities. However, insurers in the United States, United Kingdom, and Asia have diversified income streams that gives them the leeway to acquire financial institutions. The National Insurance Commission (NAICOM), the body that regulates insurance business in Nigeria, has taken the bull by the horn by insisting that operators in the industry jerk up their capital. The new rules will spur mergers and acquisitions, as some firms are raising capital so as to meet the new regulatory requirements, a mirror image of the banking sector consolidation. Consolidated Hallmark Plc has disclosed its plan to raise its capital base from N6.1 billion to N10 billion ahead of the deadline given by the NAICOM for recapitalisation. The Board of Directors of Wapic Insurance Plc have secured the approval of its shareholders to increase the authorised share capital of the company from N8.5 bil-

2017-16 financial years. “There has been improvement in digital channels as a lot of insurers are curtailing costs while intensifying their investment strategy,” said an industry expert who prefers to be anonymous. While profits of companies have been increasing steadily in the last five years, their dividend payment and market capitalization is abysmally poor when compared with banks. For instance, the dividend per share of the most capitalized insurer, AXA Mansard, is N0.06; that compares to the N2.45 Guaranty Trust Bank gave to its owners in 2018. Perhaps more worrisome is that the combined N24.51 billion in net income of the 18 most liquid and capitalized insurers is a far cry from the N55.18 billion net income that tier 2 lender Stanbic IBTC Holdings realised in the third quarter of 2019. Experts have argued that there is little basis for comparison, and that lenders are

lion to N15 billion, by the creation of 13 billion additional ordinary shares of 50 kobo each. Even though Nigeria has shown positive signs of development in this industry there is still room for more growth when compared to other emerging markets. There are challenges faced by the Nigerian insurance industry which include low penetration levels, for lack of consumer trust, low implementation of compulsory insurance and a lack of professionals that are adequately skilled in this space. A stuttering economy makes it difficult for firms to thrive and deliver a higher return to shareholders in from of bumper dividend payment. As a result of these challenges, Nigeria’s insurance penetration is at 0.31 percent, which is extremely low, even compared with countries with similar GDP per capita, for example India with insurance penetration at 3.69 percent.

Bala Augie

L-R: Muftau Oyegunle, deputy president, Chartered Insurance Institute of Nigeria (CIIN); Isioma Chukwuma, past president, CIIN; Eddie Efekoha, president, CIIN; Funmi Babington-Ashaye, immediate past president, CIIN; Edwin Igbiti, treasurer, CIIN; and Sunny Adeda, past president, CIIN at the 2019 Induction of Fellows and Associates of the Institute, held in Lagos recently.

Capital Express Holdings sell foreign operations to recapitalise Nigerian arms Modestus Anaesoronye

apital Express Holdings has announced the sale of its African operations with the exception of a subsidiary in Kenya. The sale is to focus and strengthen its Nigeria operations spanning Insurance, Asset Management, Investment Banking, Commodity trading, Trusteeship and Franchising. Yinka Obalade, group managing director, Capital Express Holdings said that the sales of its overseas assets is expected to be concluded by the first quarter of 2020.

Obalade who was speaking at their just concluded Strategic Retreat/Board meeting held in Lagos said the board has granted approval to utilize the proceeds in line with the strategic goals of the organization. The goals include the recapitalization of its life Insurance operations in Nigeria through the acquisitions of firms that will further increase the capacity of the company to meet the recapitalization requirement as directed by the National Insurance Commission (NAICOM). The acquisition will be an addition to the funds which the Holding Company is injecting in the first instance into the company. He reiter-

ated that its other areas of business like Asset Management, Investment, Banking, Trusteeship e.t.c. would also be beneficiaries of the funds towards repositioning the entire brand for greater competitiveness in all its areas of operations. The GMD maintained that the sales process of some of the companies are already concluded, while others are being finalized to ensure they that the deadline of 1st quarter 2020 is met. He said that the Board discussed other options before arriving at the conclusion to sell its overseas operations. In his words” the board having reviewed all options urged the group to ensure higher return on for in-

vestors and the funds injected in these companies should make it a brand to be reckoned with in its areas of operations” Finally, he stressed that the holding company believe strongly as part of its strategic goals in building infrastructure, enhancing technology, digitalization combined with seasoned professionals running key areas of its operations across board. It is believed that by the end of 2020, the results of some of these board strategic initiatives would start to yield dividends. He appreciated the board members for their confidence in the ability of management to deliver on these initiatives and in the Nigerian economy.

Africa Re achieves moderate growth in premium, RO1 in Q3 Modestus Anaesoronye

he African Reinsurance Corporation (Africa Re) has posted a premium income of $617.07 million at the end of the third quarter of 2019, translating to a growth of 6.87 percent over $577.41 million achieved in the same period of 2018. The improved performance was driven by Oil & Energy business from her production centres in Anglophone West Africa and Francophone West & Central Africa. Although, there were a number of large losses reported, the year-to-date net incurred loss ratio improved by 180 basis points to 66.57 percent from 68.37 percent reported in the previous year. The net underwriting performance for the 9 months to 30 September 2019 resulted in a loss of $11.13 million. This result was much better than

last year’s underwriting loss of $ 20.89 million. At this period, this is not new for the Corporation which believes that the underwriting result at the end of 2019 will be at least equal to the positive figure of $ 21 million recorded in 2018. Investment income at the end of the third quarter of 2019 recorded a major improvement, posting $47.56million, up from $24.68million in the corresponding period in September 2018. The Corporation benefitted from the positive upswing of the financial markets. The Net profit at the end of the reporting period was $33.65 million, outperforming previous year result of $3.44 million by a considerable margin. Corneille Karekezi, the group managing director/ CEO of Africa Re, commenting on the Corporation’s perforwww.businessday.ng

mance at the end of the third quarter stated: “The financial performance for the 9 months is very encouraging and we remain optimistic of achieving a net profit in excess of $ 60 million in the full year 2019 (9 months to 30 September 2018 was $ 31 million), barring any unforeseen major losses.’’ Established in 1976 by 36 member States of the African Union and the African Devel-

Corneille Karekezi, the group managing director/CEO of Africa Re

opment Bank Group (AfDB), the African Reinsurance Corporation (Africa Re), the leading reinsurance company in Africa and the Middle East, is a pan-African financial institution whose shareholding is split between African (75 Percent) and Non-African (25 PERCENT) investors. African shareholding comprises 41 African states, the AfDB and more than 100 African insurance/reinsurance companies from the 41 member countries. Headquartered in Lagos (Nigeria), Africa Re has a continental network of regional and local offices in Lagos (Nigeria), Casablanca (Morocco), Nairobi (Kenya), Abidjan (Côte d’Ivoire), Ebène (Mauritius), Cairo (Egypt) and Addis Ababa (Ethiopia) as well as two subsidiaries: Africa Re (South Africa) Ltd in Johannesburg and Africa Retakaful Ltd in Cairo (Egypt).

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BUSINESS DAY

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Monday 09 December 2019

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 06 December 2019 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 328,793.34 9.25 2.21 245 28,729,122 UNITED BANK FOR AFRICA PLC 229,136.12 6.70 -2.90 341 24,434,751 ZENITH BANK PLC 583,974.78 18.60 -0.53 354 18,919,284 940 72,083,157 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 238,703.70 6.65 -0.75 146 3,046,515 146 3,046,515 1,086 75,129,672 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,401,832.54 118.00 -0.84 95 1,543,958 95 1,543,958 95 1,543,958 BUILDING MATERIALS DANGOTE CEMENT PLC 2,431,680.41 142.70 -0.21 111 12,753,740 LAFARGE AFRICA PLC. 223,092.97 13.85 -0.36 86 1,531,452 197 14,285,192 197 14,285,192 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 323,467.98 549.70 - 12 10,228 12 10,228 12 10,228 1,390 90,969,050 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 1 58 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 11,873.80 4.45 - 1 10,100 2 10,158 2 10,158 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 2 10,158 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 51,988.10 54.50 - 20 79,134 PRESCO PLC 37,850.00 37.85 - 0 0 20 79,134 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,520.00 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,530.00 0.51 - 4 80,350 4 80,350 24 159,484 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 953.02 0.36 - 1 4,048 JOHN HOLT PLC. 217.92 0.56 - 0 0 S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 40,241.51 0.99 1.01 39 2,667,054 24,779.15 8.60 6.83 251 33,017,805 U A C N PLC. 291 35,688,907 291 35,688,907 BUILDING CONSTRUCTION ARBICO PLC. 641.52 4.32 - 2 7,160 2 7,160 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 25,080.00 19.00 - 8 28,072 ROADS NIG PLC. 165.00 6.60 - 0 0 8 28,072 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,598.40 1.00 - 6 106,218 6 106,218 16 141,450 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 7,281.43 0.93 - 1 316 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 63,521.10 29.00 - 23 348,502 INTERNATIONAL BREWERIES PLC. 86,818.21 10.10 - 19 67,263 NIGERIAN BREW. PLC. 409,441.39 51.20 - 38 289,490 81 705,571 FOOD PRODUCTS DANGOTE SUGAR REFINERY PLC 180,000.00 15.00 1.35 116 6,642,742 FLOUR MILLS NIG. PLC. 77,907.21 19.00 - 34 125,472 HONEYWELL FLOUR MILL PLC 8,088.80 1.02 -3.77 17 377,449 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 0 0 NASCON ALLIED INDUSTRIES PLC 37,092.14 14.00 - 12 34,260 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 179 7,179,923 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 18,594.20 9.90 - 16 163,953 NESTLE NIGERIA PLC. 1,070,085.94 1,350.00 - 56 64,498 72 228,451 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 4,878.29 3.90 - 4 19,740 4 19,740 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 20,845.00 5.25 - 16 114,374 UNILEVER NIGERIA PLC. 108,580.60 18.90 - 29 89,383 45 203,757 381 8,337,442 BANKING ECOBANK TRANSNATIONAL INCORPORATED 128,446.86 7.00 - 35 260,218 FIDELITY BANK PLC 58,529.09 2.02 -0.98 68 10,526,635 GUARANTY TRUST BANK PLC. 879,992.26 29.90 -0.66 143 4,430,994 JAIZ BANK PLC 19,446.40 0.66 -1.52 21 836,636 STERLING BANK PLC. 57,005.03 1.98 4.21 916 12,562,752 UNION BANK NIG.PLC. 203,845.27 7.00 - 19 86,943 UNITY BANK PLC 8,182.54 0.70 7.69 3 155,197 WEMA BANK PLC. 27,002.13 0.70 1.45 20 1,225,067 1,225 30,084,442 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 1 100,000 AIICO INSURANCE PLC. 5,128.35 0.74 -1.35 31 3,981,760 AXAMANSARD INSURANCE PLC 17,325.00 1.65 - 4 52,000 CONSOLIDATED HALLMARK INSURANCE PLC 3,170.70 0.39 - 0 0 CONTINENTAL REINSURANCE PLC 22,820.04 2.20 - 0 0 CORNERSTONE INSURANCE PLC 9,279.59 0.63 - 2 162,150 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 0 0 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 1,904.09 0.26 4.00 9 607,000 LAW UNION AND ROCK INS. PLC. 2,577.80 0.60 - 1 10,500 LINKAGE ASSURANCE PLC 4,080.00 0.51 - 0 0 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 4 710,245 NEM INSURANCE PLC 10,561.01 2.00 - 3 18,600 NIGER INSURANCE PLC 1,702.69 0.22 10.00 1 438,331 PRESTIGE ASSURANCE PLC 2,745.10 0.51 - 0 0 REGENCY ASSURANCE PLC 1,333.75 0.20 - 1 11,000 1,668.16 0.20 - 0 0 SOVEREIGN TRUST INSURANCE PLC STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 1 20,000 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 1 2,000,000 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,817.79 0.36 - 23 3,004,780 82 11,116,366 MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 2,538.17 1.11 - 10 190,253 10 190,253

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MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 4,200.00 1.00 - 0 0 7,370.87 0.50 - 0 0 ASO SAVINGS AND LOANS PLC INFINITY TRUST MORTGAGE BANK PLC 5,796.93 1.39 - 0 0 RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 0 0 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 8,400.00 4.20 - 30 279,591 CUSTODIAN INVESTMENT PLC 35,291.19 6.00 - 6 102,550 DEAP CAPITAL MANAGEMENT & TRUST PLC 600.00 0.40 - 0 0 FCMB GROUP PLC. 36,040.93 1.82 1.11 74 4,775,937 1,389.25 0.27 3.85 4 2,038,499 ROYAL EXCHANGE PLC. STANBIC IBTC HOLDINGS PLC 385,423.03 36.80 - 8 57,441 UNITED CAPITAL PLC 13,680.00 2.28 -0.87 55 2,275,018 177 9,529,036 1,494 50,920,097 HEALTHCARE PROVIDERS EKOCORP PLC. 1,994.40 4.00 - 1 50 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 923.82 0.26 - 1 1,253 2 1,303 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 494.58 0.50 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 7,093.62 3.40 - 27 404,763 7,175.26 6.00 - 30 210,180 GLAXO SMITHKLINE CONSUMER NIG. PLC. MAY & BAKER NIGERIA PLC. 3,692.00 2.14 - 7 38,850 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 1,386.38 0.73 - 1 11,000 556.71 3.62 - 0 0 NIGERIA-GERMAN CHEMICALS PLC. PHARMA-DEKO PLC. 325.23 1.50 - 0 0 65 664,793 67 666,096 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 923.52 0.26 4.00 3 800,200 3 800,200 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 486.00 4.50 - 0 0 TRIPPLE GEE AND COMPANY PLC. 316.77 0.64 - 3 100,000 3 100,000 PROCESSING SYSTEMS CHAMS PLC 1,737.54 0.37 2.78 9 738,160 E-TRANZACT INTERNATIONAL PLC 10,962.00 2.61 - 0 0 9 738,160 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,123,311.48 298.90 - 2 1,381 2 1,381 17 1,639,741 BUILDING MATERIALS BERGER PAINTS PLC 2,173.68 7.50 - 4 13,860 CAP PLC 16,800.00 24.00 - 14 63,976 CEMENT CO. OF NORTH.NIG. PLC 252,355.22 19.20 - 31 146,317 MEYER PLC. 313.43 0.59 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,769.32 2.23 - 0 0 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 49 224,153 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 2,712.44 1.54 - 10 157,435 10 157,435 PACKAGING/CONTAINERS BETA GLASS PLC. 26,898.49 53.80 - 5 1,034 GREIF NIGERIA PLC 388.02 9.10 - 0 0 5 1,034 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 64 382,622 CHEMICALS B.O.C. GASES PLC. 2,539.09 6.10 - 5 14,308 5 14,308 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 0 0 0 0 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 83.60 0.38 - 0 0 0 0 5 14,308 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,315.17 0.21 -4.55 12 525,824 12 525,824 INTEGRATED OIL AND GAS SERVICES OANDO PLC 44,877.40 3.61 1.11 59 1,507,902 59 1,507,902 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 53,332.04 147.90 - 16 4,258 CONOIL PLC 12,838.11 18.50 - 9 11,852 ETERNA PLC. 3,651.61 2.80 - 13 125,500 FORTE OIL PLC. 23,574.91 18.10 - 31 65,205 MRS OIL NIGERIA PLC. 4,663.23 15.30 - 2 4,853 TOTAL NIGERIA PLC. 37,652.97 110.90 - 18 36,953 89 248,621 160 2,282,347 ADVERTISING AFROMEDIA PLC 1,509.28 0.34 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 15,796.05 1.62 - 7 90,069 7 90,069 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 247.03 0.21 - 1 5,000 1 5,000 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,623.26 4.45 - 1 215 TRANS-NATIONWIDE EXPRESS PLC. 464.16 0.99 7.61 5 362,500 6 362,715 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,259.15 2.75 - 0 0 IKEJA HOTEL PLC 2,120.37 1.02 - 2 2,800 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 0 0 TRANSCORP HOTELS PLC 41,042.18 5.40 - 1 840 3 3,640 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,800.00 0.40 - 1 6,000 1 6,000 PRINTING/PUBLISHING ACADEMY PRESS PLC. 223.78 0.37 - 0 0 LEARN AFRICA PLC 964.31 1.25 - 4 13,636 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 582.40 1.35 -7.53 10 3,927,000 14 3,940,636 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 745.97 0.45 9.76 4 319,985 4 319,985 SPECIALTY INTERLINKED TECHNOLOGIES PLC 757.44 3.20 - 0 0 SECURE ELECTRONIC TECHNOLOGY PLC 1,126.31 0.20 - 0 0

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Monday 09 December 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Why investors react negatively to companies that put women on their boards ISABELLE SOLAL AND KAISA SNELLMAN

espite persistent efforts to tackle underrepresentation of women on corporate boards, most boardrooms remain mostly male. In a recent study, we examined board composition and financial data on 1,644 public companies in the U.S. between 1998 and 2011, controlling for numerous firm-specific characteristics. We find that companies that appoint women to the board see a decline in their market value for two years following the appointment, after which we no longer see any effect. Investors seem to be penalizing, rather than rewarding, companies that strive to be more inclusive. Why might the stock market react negatively to increases in board diversity? It is not because companies perform worse after they appoint female directors. We find that companies are no less profitable after appointing female directors to the board than they were before the appointment. Nor are they more profitable. Another explanation is that investors react to what they perceive to be a change in firm preferences. Increases in board diversity may signal to investors that the firm is motivated by social goals, and cares less about maximizing shareholder value.

And to the extent investors care about shareholder value, they will penalize those companies they suspect are putting other goals first. To test this theory, we conducted an experiment with 193 alumni and current students of a top-tier international business school. We found no difference in the perceived competence of men and women. There was, however, a differ-

ence in the perceived goals of a company. People believed that a company that appointed a woman cared more about improving the social performance of the firm and less about maximizing shareholder value. If investors are indeed interpreting female appointments as a sign that the company is less committed to maximizing returns to their shareholders, the effect of increases in board

diversity should be larger for those companies that demonstrate commitment to social goals in other ways. This is, in fact, what we found. Our research suggests that shifting the diversity discourse away from gender to other dimensions of expertise and experience might, in fact, help women and other underrepresented groups. With less emphasis on gender, female ap-

pointments might one day no longer be perceived as checking off a social performance box, and signal nothing about firm preferences other than its commitment to hiring the best people for the job.

(Isabelle Solal is a postdoctoral research fellow at INSEAD. Kaisa Snellman is assistant professor at INSEAD.)

Developing a talent pipeline for your digital transformation our survey are much more likely than poor performers to hire graduates with non-STEM degrees (76% to 39%), non-college graduates with high aptitude scores (71% to 38%) and vocational or trade school graduates who can be valuable contributors to teams. 4. THEY INCENTIVIZE EMPLOYEES TO GROW. Our leading companies are much more inclined than the laggards to reward higher skill levels with better compensation (67% to 41%), benefits (64% to 23%) and responsibility (78% to 58%). But, to our surprise, they do not offer significantly more training opportunities.

JEFF KAVANAUGH AND RAVI KUMAR S.

ompanies in every industry are digitalizing their operations, and many are struggling to find the talent they need to do it. But not all. In a global survey of 1,000 business leaders, we set out to discover what companies that are good at staffing their digitalization projects do differently. We saw that they do a combination of four things. 1. THEY LOOK FOR POTENTIAL, NOT CREDENTIALS. Given that the life cycle of any given technology skill (such as fluency in a popular programming language) is only about two years, the clock on technical expertise quickly runs out. A stronger candidate, therefore, may be someone curious, adaptable and quick to learn. A candidate who worked as a teenager, or joined the military

to pay for college, may be more motivated, resilient, agile and a better team player than someone from a more privileged situation. 2. THEY VALUE SOFT SKILLS AS MUCH AS TECHNICAL ONES. Information

technology development used to be about writing a spec and coding it, but today itâ&#x20AC;&#x2122;s more about finding problems and creating solutions. For instance, with digitalization initiatives focused on improving how customers and employees interact

with the company, so-called soft skills have become more important than technical ones. 3. THEY THINK ABOUT TEAMS, NOT INDIVIDUALS. Companies will always need Ph.D.s and MBAs to groom as future leaders. But the leaders in

(Jeff Kavanaugh is an adjunct professor at the Graduate School of Business of the University of Texas at Dallas. Ravi Kumar S. is president and deputy chief operating officer of Infosys.)

Monday 09 December 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

In association with

Adapting your leadership strategy as your startup grows RON ASHKENAS

ivoting from an initial product design or business model has become a given in the startup playbook. But even as startup leaders shift their businesses to meet a newly discovered need, they often fail to apply the same logic to themselves — and there they get into trouble. Each milestone achievement or shortfall in the business — revenue, head count, product introductions, new markets, numbers or types of customers and so on — must trigger a rapid reassessment of leadership. As you ask yourself how you might need to change your leadership approach alongside your business, keep these principles in mind: — LEADERSHIP JOBS WILL CHANGE FASTER THAN LEADERSHIP TITLES. However your job is defined today, your real responsibilities are probably going to change as the company grows or pivots, even though you won’t necessarily get a salary boost or

a new business card. If someone on the team isn’t willing to periodically work differently, they may need to take on a new role or leave the company. — DEVELOPING YOURSELF IS HARD TO DO ALONE, especially in an intense startup environment where everyone is

emotionally and financially invested in the success of the firm and may not want to even consider the possibility that their skills no longer fit. Therefore the team needs to either work together or get outside help to identify and make the necessary shifts.

— DON’T PUT OFF PAINFUL DECISIONS. While instituting this kind of change in yourself (and others!) can be painful at times, doing it regularly to mirror your company’s growth can also be an exhilarating opportunity for you and your team to learn, and develop themselves

— while dramatically increasing your company’s chances of continuing to achieve new levels of success in the future.

(Ron Ashkenas is a co-author of the “ Harvard Business Review Leader’s Handbook.”)

Create rules that are unique to your company of the rule are frowned upon. “Aggie Culture” is not exactly my cup of tea, but most of Texas A&M’s nearly 70,000 students could not imagine life without it. And they have an expression, which they have been reciting for decades, to capture what makes their culture so distinct: “From the outside looking in, you can’t understand it. From the inside looking out, you can’t explain it.” That’s a neat way to capture the power of culture in organizations from all sorts of fields: To build something distinctive in the marketplace, you first have to build something distinctive in the workplace.

BILL TAYLOR

en Horowitz, the highprofile venture capitalist behind some of Silicon Valley’s fastest-growing startups, is out with an intriguing book, “What You Do Is Who You Are,” which emphasizes the power of culture, rather than technology or money, as a driver of business success. One of his most intriguing insights is that powerful cultures are built around what he calls “shocking rules” — rituals and practices that are memorable, yet so “bizarre,” that people who hear about them wonder why they are necessary. Horowitz’s argument is as simple as it is powerful. Truly great organizations work as distinctively as they hope to compete. Detroit-based Quicken Loans, the hard-charging financial-services company, is now the largest originator of home mortgages in the country. Its culture is obsessed with a nonnegotiable rule: Every customer phone call or email must be returned on the same day it is received — even if it arrives

minutes before an employee is about to leave. Years back, I immersed myself in the colorful (and highly successful) world of Cranium, the Seattle-based maker of board games that reinvigorated a tired category of family entertainment. Everywhere I went — whether I was hanging out with products designers or the IT staff or the CFO — everyone would question whether a

particular product, process or meeting was “CHIFF.” What’s CHIFF? It stands for “clever, high-quality, innovative, friendly and fun,” and it was an ethos that was meant to infuse every aspect of how the company did business — from its games to its hiring process to its meetings to how the offices were designed. Students at Texas A&M don’t abide by business versions of

“shocking rules” — this is a campus, after all, not a company — but they have colorful rituals and traditions. Upperclassmen and alumni often pepper their conversations with the term “Whoop!” — which is how the school’s many different “yells” (fight songs and other expressions of spirit) often end. But students are not allowed to say “Whoop” until they begin their junior year, and violations

Brought to you courtesy of First Bank Nigeria

(Bill Taylor is a co-founder of Fast Company.)

Monday 09 December 2019

BUSINESS DAY

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Monday 09 December 2019

BUSINESS DAY

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Monday 09 December 2019

BUSINESS DAY

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Monday 09 December 2019

BUSINESS DAY

real sector watch

Why National Assembly must loosen grip on Ajaokuta Steel ODINAKA ANUDU

he National Assembly must allow the executive arm of government to concession the money-gulping Ajaokuta Steel Complex to save the country from wasting money on a complex that brings little value. The federal government had considered the option of concessioning the complex to allow a private sector player to fund and operate it while it would maintain some level of ownership. However, the 8th Senate put the procurement processes to engage a transaction adviser on hold by delisting the complex from the list of enterprises to be privatised. This follows agitations by groups of people who said government must maintain the complex. “It makes little sense to keep that complex in public hands. It is simply a waste of resources,” Ike Ibeabuchi, a manufacturer, said.

Ajaokuta Complex has the capacity to produce one million metric tonnes of steel, one million metric tonnes of coal , manganese and limestone, among others, but it is yet to produce a sheet. It has a managing director and staff members

who are paid from tax payers’ funds. “Currently, I am not sure those technologies at Ajaokuta are competitive in steel making. The world has moved on. What is required now is for the private sector to get more and more

Krisoral Group promises expansion, job creation after national recognition GODFREY OFURUM, Onitsha

risoral Group has promised to continue business expansion and job creation in the economy. Chris Chidume, chairman of Krisoral Group, said this after receiving the National Productivity Order of Merit Award on behalf of his company. Chidume, who is the traditional ruler of Omor in Ayamelum Local Government Area of Anambra State, said that award by the Federal Government of Nigeria will spur the company to contribute more to the economic development of the country. Krisoral Group consists of four distinct subsidiaries: Eastern Distilleries & Food Industries Limited, Krisoral & Company Limited, Krisoral-Agro Allied Company Limited and Liquid & Life Chemicals Limited. KRISORAL Group was honoured with the award in recognition of its contributions to the economic development and growth

of Nigeria, through its high professionalism, creativity, innovation and employment generation. Chidume lauded the President for recognising and rewarding excellence and promised that Krisoral Group will continue to invest in youth development through job creation and other empowerment programmes. Chiadi Chidume, one of the legal advisers of KRISORAL Group of Companies, while expressing joy over the honour done to the company, stated that the efforts the company had put into creating employment, especially for the youths, has been recognised by government. “We will continue to expand and in that process create more jobs for Nigerians,” he said. Krisoral and Company is the first indigenous company in Nigeria to have full process of ROPP cap and the only company that has top and side embossing technology, a development that many people are not aware of. Speaking further, company chairman maintained that, “Many people may not www.businessday.ng

know that facility of this nature exists locally and may still be importing and complaining that the Central Bank of Nigeria (CBN) is strangulating their businesses, by not giving them funds to import- yet paying more for less.” “The products are of high quality, as it goes through compression technology. Nothing can change the quality of the products because of the precision of the technology. The precision guarantees smoothness and consistency in dimension. It is a technology that says put your raw materials and go and sleep.” At the corporate level, The National Productivity Order of Merit (NPOM) Award is an award that seeks to acknowledge organisations that are self-reliant in their adaptation and application of technology in order to guarantee for themselves cost effective operation and productive efficiency. The award also recognises companies which show sustained increases in local sourcing of raw materials, capacity utilisation, employee welfare schemes and training facilities.

involved in the downstream and the upstream segments in the steel business,” Raj Gupta, chairman, African Industries Group, a consortium of 12 companies, including six steel plants, told BusinessDay recently. In December 2018, the

8th Senate passed a bill seeking to allocate $1 billion from the federal government’s share of Excess Crude revenue for the completion of Ajaokuta Steel Company. The Senate resolution followed the adoption of the ‘Ajaokuta Steel Company Completion Fund Bill 2018’, which was a bill presented by now Senate president, Ahmed Lawan. Ajaokuta was established in 1971 to develop Nigeria’s steel sector and stimulate the exploration of God-given natural resources, especially iron ore. Luckily for the country, large iron ore deposits were found in Itakpe, Ajabanoko and Oshokoshoko all in Kogi State. The Ajaokuta Steel Complex and Delta Steel Company were subsequently incorporated in 1979 as limited liability companies. Between 1980 and 1983, the then federal government stated that it had achieved 84 percent completion of Ajaokuta steel plant, having completed the light mill section and the wire rod mill.

Despite being unproductive, government after government has continued to pump billions into the complex. Government records show that successive administrations have pumped $8bn so far into the complex since 1979. The current government of Muhammadu Buhari has joined the party of spenders on a government facility that needs to be in private hands. In a move that shocked economists and finance experts, the federal government budgeted N3.9 billion in 2016 and N4.27 billion in 2017 for the resuscitation of the moribund Ajaokuta Steel Company, despite an earlier business case in the last administration showing that the complex could only work if properly privatised or concessioned. There was also a humongous budget on it in 2018. “The National Assembly must allow the complex to go into a private hand. It is long overdue,” a government official, who wants anonymity, said.

Mabogunje replaces Ruwase as LCCI president ODINAKA ANUDU

he Lagos Chamber of Commerce and Industry (LCCI), a leading voice in the organised private sector (OPS) in Nigeria, has elected Toki Mabogunje as president for the next two years. This followed the expiration of Babatunde Paul Ruwase’s tenure, having served the chamber in the same capacity in the last two years. Muda Yusuf, directorgeneral of the LCCI, said Mabogunje emerged as president after a duly conducted election at the chamber’s 131st annual general meeting held on 5th December, 2019 in Lagos. “Toki Mabogunje, a Fellow of the Institute of Management Consultants, is an astute boardroom guru who specialises in business development, value chain development, project financing, strategic organisation and management and the provision of legal and business advisory services to small and medium enterprises,” Yusuf said. “She has ser ved the chamber previously in various capacities such as

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Toki Mabogunje

deputy president, vice president, member, Trade Promotion Board; chairman, Professional Services Group; chairman, Financial & General Purposes Committee, among others.” Yusuf added that, “Indeed, we are very pleased as Toki Mabogunje assumes the role of president of the LCCI. As a council member and a key officer of the chamber, she has brought her extensive knowledge and experience to bear on @Businessdayng

the chamber mandate and has provided quality perspectives to deliberations at the chamber. Her election will enhance the chamber’s role as a leading advocate of best business policy and practice, with the objective of promoting and protecting the interest of its members and the business community at large.” She was formally inaugurated as president of the chamber on 7th December at an investiture ceremony.

Monday 09 December 2019

BUSINESS DAY

real sector watch FrieslandCampina WAMCO: Expanding dairy footprints to improve local input sourcing

ODINAKA ANUDU

rieslandCampina WA M C O i s expanding its Dairy Development Programme (DDP) to several states across Nigeria in order to increase local raw materials sourcing and grow the Nigerian economy. The dairy company started its DDP in 2010 to source raw milk, but more importantly to support the backward integration policy of the government and improve farmers’ income and welfare. Through the DDP, the company keeps farmers and their cows in one location. This has multiplier advantages. One, cows are healthier and more productive. Two, the farmersherders clashes are reduced, thus saving lives and creating harmony in communities. Also, the stress faced by farmers in moving cows from one location to another is reduced. The Dutch dairy company buys the raw milk off the farmers, thereby providing stable incomes, education and better livelihood for them. In late November, its Dairy DDP project was extended to Niger State. Muhammadu Buhari, president of Nigeria, and Mark Rutte, prime minister of The Netherlands, both witnessed the signing of a Memorandum of Understanding (MoU) between Abubakar Sani Bello, governor of Niger State, and Roel van Neerbos, president of FrieslandCampina Consumer Dairy, at the Presidential Villa, Abuja. The MoU was signed on the basis of a backward integration initiative on 10,000 hectares of land at the Bobi Grazing Reserve in the state under FrieslandCampina WAMCO’s DDP. The company said the initiative was in line with the federal government’s National Livestock Transformation Plan, which seeks to grow livestock farming in Nigeria and transform the dairy sector into an economic force that will yield the twin objectives of economic growth and people

L-R: Ore Famurewa, executive director, corporate affairs, FrieslandCampina WAMCO; Mustapha Bello, non-executive director, FrieslandCampina WAMCO; Roel van Neerbos, president, consumer dairy, FrieslandCampina, The Netherlands; Abubakar Sani Bello, governor of Niger State; Ben Langat, managing director, FCWAMCO; and Moyo Ajekigbe, chairman of the board of directors, FCWAMCO, in State House Abuja recently, after the company and the state signed an MoU in Abuja recently

empowerment. “As the Federal Government’s preferred partner on dairy development and backward integration initiatives, FrieslandCampina WAMCO continues to lead DDP in Nigeria by expanding to more states,” the dairy maker, which produces Peak Milk and Three Crowns, said in a statement made available to BusinessDay. “Currently, the company has developed pasture on 1,000 of the 10,000 hectares of land assigned to it at the Bobi Grazing Reserve, and established key infrastructure, including a milk collection centre with a high capacity cooling tank and high quality milk testing equipment. Furthermore, the company has emerged the first to introduce hydroponics – a method of growing high-nutrient grass in harsh environments – a green house pasture development that would ensure year-round feed for cows. It has also provided solarpowered boreholes to support farmers with potable water and provide water for the cattle.” The MOU between Niger State and FrieslandCampina WAMCO acknowledges the nine-year successes www.businessday.ng

of the company’s DDP in Oyo, Ogun and Osun States respectively. It seeks its replication and expansion of local dairy production at the reserve, as well as train dairy cooperatives in Niger State on best global practices. “The DDP was officially launched by our company in August, 2010, in Kwara State. This climaxed with the signing of an MoU between the Federal Ministry of Agriculture and Rural Development and FrieslandCampina WAMCO Nigeria as its partner on Dairy Development in April, 2011 and was subsequently renewed in June, 2016,” According to Ore Famurewa, the company’s executive director, corporate affairs, said. “The DDP enables dairy farmers to run their businesses optimally with higher yields and better milk quality. This successful and unique model has benefitted over 7000 farmers, including 950 women, a milk bulking center (MBC), six milk collection centers (MCC) and 20 milk collection points (MCPs) across Oyo, Ogun and Osun states,” explained Famurewa. FrieslandCampina WAMCO, w ith its DDP partners, is collaborating to deepen the inclusive

model for local sourcing of fresh milk in Nigeria. Its Farmer2Farmer is an initiative which allows Certified Dutch dairy farmers to share knowledge and technical knowhow with local dairy farmers through on-the-farm practical training bi-annually. Specialised trainings are organized on feeding and watering of cattle, calf-rearing, artificial insemination for breed improvement, milking hygiene and practice, milking machine maintenance, hoof care, housing and barn design for local farmers and cooperatives in its over 90 DDP communities to improve milk collection. The DDP is a sustainable business model that operates the smallholder system. According to the company, it empowers young farmers and traditional pastoralists with modern animal husbandry methods and provides them a guaranteed market together with its partners. Through the Dairy Development Programme, the company provides quality nutrition from Grass to Glass by breeding well cared-for cows which are the basis of good quality milk. With strong alignment to

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FrieslandCampina WAMCO’s business strategy, the DDP drives local product innovation that provides support in reducing incidences of malnutrition. As part of its achievement, the company recently invested €23million Euros into building an ultra-modern ReadyTo-Drink (RTD) factory in November 2019. With the commissioning of this factory, locally sourced milk is expected to be used in the manufacturing of Peak Yoghurt. FrieslandCampina has the ambition to improve the standard of living of dairy farmers in Nigeria where it operates its DDP, which has proven highly successful. Milk quality, safety and volumes have improved, thereby empowering dairy farmers and creating employment. Women are also given the opportunity to participate in technical and entrepreneurial trainings, thus safeguarding food security and nutrition, the company said. According to Roel van Neerbos, “This mission is an important step in strengthening our longstanding relationship with the Nigerian government. The collaboration aligns with our vision to provide better nutrition @Businessdayng

to the world with our Dairy Development Programme (DDP). FrieslandCampina enables the local dairy farmers, like in Nigeria, to run their businesses optimally and raise the quality and quantity of their dairy production via the DDP.” The MoU between FrieslandCampina WAMCO Nigeria Plc and Niger State Government was made possible by the intervention and support of the Central Bank of Nigeria, one of the dairy firm’s core partners in its DDP, according to the company. More so, the DDP has continued to impact lives of dairy farmers positively. “At FrieslandCampina WAMCO, we are proud of the over 7,000 farmers including female dairy farmers who have been empowered under our DDP across Oyo, Ogun and Osun States respectively. We are particularly happy with the increased access they have to a better life as they are able to support themselves and send their children to school,” Famurewa said. The company said it is a responsible corporate entity in Nigeria and does not condone any form of undue commercial exploitation in any of its processes. “The company is fully committed to preventing and eliminating any form of child labour in its supply chain. It continually works with stakeholders to develop and implement meaningful solutions, in line with the UN Guiding Principles on Business and Human Rights and with the OECD Guidelines for Multinational Enterprises,” the company said. “This ethos consistently forms part of our engagement with the pastoralist and smallholder farmers. Additional review will be done to ensure all practices remain in line with the Oyo State Child Rights Law 2006 in particular and the Laws of Nigeria in general,” the firm further said. It has engaged an international non-profit organisation, Partner Africa, to conduct an independent investigation of its DDP sites and will share the results of the investigation.

Monday 09 December 2019

BUSINESS DAY

Start-Up Digest

In association with

How Ayeni-Babajide makes money from wastes ODINAKA ANUDU

lamide Ayeni-Babajide is the chief executive officer of Pearl Recycling, a firm that transforms solid wastes, especially tyres, into sustainable, eco-friendly products such as furniture. Olamide is a computer engineer. Before she started Pearl Recycling, she had worked for more than 10 years on designs. The entrepreneur became interested in waste management when she discovered that one of the products she bought in the United Arab Emirates was made from waste. She then began to pay a closer attention to waste in Nigeria. “One of the things I realised was that we generate a lot of wastes in Nigeria. But most of them end up in canals and on the streets,” she says. The entrepreneur decided to do something different from plastics wastes, which was the area of focus when she started. “We have some companies picking these wastes, but the focus has been on

plastics. But something we are missing is the tyre waste. We have a lot of cars in Nigeria, but what happens to tyre wastes?” she asks. She saw the need to do something about tyre waste. She saw that the majority of Nigerians were poor and their major challenges were food, clothing, and then shelter. As a result, she designed some furniture products that would be affordable to all classes of people. “That was why we started,” she says. “We understand that a lot of people cannot afford luxury furniture, and they can’t afford the high-priced furniture. So, we have to create quality at an affordable price. We had to create durable products that last longer than the normal furniture made in the country,” she explains. “You can imagine buying very nice stools for N15, 000. Average working class people love them because they also buy something that fit into their leather. Our ability to make customised products that fit into their leather has helped a lot. That is one of the reasons why a lot of people come to us and refer others to others,” she tells Start-Up

Olamide Ayeni-Babajide

Digest. Between 2016 when Olamide started fully and now, a lot of things have changed. “When we started 2016, we were battling cultural stereotypes. We could hardly get calls asking what we were doing. Three years down the line, we now receive at least six calls per day from people who want to know what we do. A lot of people want to dump tyres

and sell. So they just call us to sell tyres. The awareness and patronage have gone up. We also did a lot of structural changes, we incorporated B2B and B2C. What we were doing before was to sell to individuals, but we deal more now with corporate organisations and collaborations,” she says. Due to the impact her products make, the United States Embassy in Abuja

and that of Lagos have supported her. She is doing a programme in schools, funded by the U.S. government, where she donates 400 chairs made from waste to schools and trains 800 students. “You can imagine what 400 chairs can do in the students’ consciousness. And then we train 800 of them who can go back and train their parents, friends and their communities. The awareness has gone up. A lot of people are calling us to volunteer to learn,” she further says. Olamide was selected as the Tech Women Emerging Fellow by the U.S. government in 2017. This is a programme where 100 women are selected to go to the Silicon Valley to intern for more than one month with top companies. Last year, her work was showcased at the White House to many dignitaries. Also in 2018, she was selected as the Most Outstanding Social Innovator by the Union Bank. More so, she is a 2016 Tony Elumelu Fellow. Olamide does not keep this knowledge to herself as she trains a lot of people

on the business of upcycling (turning wastes into products). She plans to start making interlocking tiles from plastics. “We have trained over 250 women. Ford Foundation sponsored 250 women for training last year. These people came from Abuja, Osun State, Oyo State. They are already doing these things in their communities and they are achieving the same purpose,” she says. But how does Olamide get her tyres? She has partnered with a large number of vulcanisers who keep tyres for her. “We teach them the type of tyres we buy and we pay them N100 for one tyre. This encourages them to keep he tyres for us as they make extra income,” she explains. Like other entrepreneurs, Olamide faces challenges. She cannot export her products despite huge demand from several countries. She laments that poor logistics chain in the country and Africa means cost of logistics is higher than whatever consumers are ready to pay. She adds that banks do not understand her business and are reluctant to fund good businesses.

Government must create environment where entrepreneurs, SMEs thrive — LCCI ODINAKA ANUDU

he Lagos Chamber of Commerce and Industry (LCCI) has said that the government has an enormous task of fostering an environment where entrepreneurs, small and medium enterprises can thrive. Speaking at the annual general meeting of the chamber held last Thursday, Babatunde Ruwase, outgoing past president of the LCCI, commended Nigeria’s improved ranking on the ease of doing business, attributing it to the efforts of the Presidential Enabling Business Council Environment (PEBEC) which worked hard to make the business climate better. Nigeria ranked 131 on the World Bank’s Doing Business 2020 index, 15 places better than its 2019 ranking. Ruwase said this is com-

mendable, but noted that Nigeria can do better and improve. He stressed that regulator y bottlenecks hurting businesses must be addressed, and insecurity curtailed. “Infrastructure such as power and road should be fixed and efforts at ensuring access to credit by businesses vigorously pursued,” he said. He said the naira has b e e n re l a t i v e l y s t a b l e against the US dollar across different market windows owing to sustained interventions of the Central Bank of Nigeria in the currency market. He explained that this is not sustainable. “We believe the CBN’s continued injection of liquidity into the foreign exchange market to ensure stability of the naira is not sustainable, as a potential crash in global oil prices may weaken the CBN’s ability to defend the naira,” www.businessday.ng

he said. “Also, the multiplicity of exchange rate windows continues to promote arbitrage and deters foreign investment.” He predicted that inflation will likely trend higher

in coming months as a result of the continued shutdown of the land borders, implementation of new minimum wage, proposed hike in value added tax (VAT) rate, festive-related consumer spending and

recent flooding incidences which may affect harvesting of food crops. “Increasing inflation may further worsen the poverty status of many and this calls for concern,” he said.

L-R: Knult Ulvmoen, deputy president, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, director-general, LCCI; Babatunde Paul Ruwase, outgoing president, LCCI; John Odeyemi , chairman, LCCI Board of Trustees, and Toki Mabogunje, incoming president, LCCI, during the 2019 Annual General Meeting at Commerce House, Victoria Island, Lagos last Thursday. https://www.facebook.com/businessdayng

@Businessdayng

He sai during his time as president, the LCCI has remained resolute in promoting polices that support private sector development and the progress of the economy. Ruwase said the chamber was consistent in policy advocacy and kept its promise of providing business development services to members and the larger business community. “To the glory of God, we have maintained our leadership position as a leading voice in the Organised Private Sector in Nigeria. This has led to notable rise of the chambers’ profile,” he said. “We organised business delegations to China, Turkey, Japan, South Africa, Thailand, and Brazil among others. The delegates had very meaningful business interactions with other Business delegates from around the world,” he further said.

Monday 09 December 2019

BUSINESS DAY

Start-Up Digest

MSMEs seen as path to economic growth Gbemi Faminu

he micro, small and medium scale enterprises have been tapped as paths to achieving economic prosperity. Analysts say small business can serve as economic catalysts if the government can pay full attention and resources to supporting them. This was the general consensus reached at the BusinessDay Media’s 2019 edition of the top 100 fastest growing SMEs in Nigeria themed ‘Unlocking Nigeria’s SME Potential: The path to economic growth’ held on Friday in Lagos. Speaking during a panel session, Chude Jideonwo, co-founder, Red Media Africa, said it is important to take MSMEs seriously because overtime they have moved on to become the frontiers of economic and structural changes. Ukinebo Dare, head, Edo State Skills Development Agency, said sup-

L-R Dumebi Okwechime, chief decision scientist, RenMoney; Ayodeji Rotimi, MD, Hills Harvest Limited; Deepankar Rustagi, CEO, Omnibiz; Ada Irikefe, head disruption team, PWC; Elo Umeh, CEO, Terragon Group; Chude Jideonwo, co-founder, Red Media; Collins Onuegbu, vice chairman, Signal Alliance, and Eloho Gihan-Mbelu, MD, Endeavor, at the first panel session during BusinessDay’s Top 100 Fastest-Growing SMEs held in Lagos on Friday.

porting MSMEs would be beneficial to the country and its economy because it would provide a sustainable source of income, encourage more investments

and foster job creation. Ada Irikefe, head, disruption team, PWC Experience Center, said in an interview that “SMEs represent the future and

new economy as they make tangible contributions to the economy.” Irikefe said there is a lot of growth in that sector, but stressed that more

Start-Up firm brings Lagos farmers under one platform MIKE OCHONMA

armers in Lagos were recently brought together in Lagos by Yanfunyanfun start-up firm under one roof, which provided an opportunity for them to showcase their farm produce. According to Trend Adams Makarios, chief executive officer of Yanfunyanfun Limited, the platform provides an efficient technology driven system for farmers and indigenous manufacturers to gather, promote, distribute farm produce and food products. The platform will also serve to provide access to market for them to reach consumers from the different parts of the world in real time. Yanfunyanfun is a farm product aggregation, promotion and distribution system that aggregates farm products. It promotes indigenous manufacturers and offers food subscription service whereby consumers get to

subscribe for food the way people subscribe for pay TV or pay phones. Makarios said that what stirred his interest in setting up Yanfunynfun while in his 20s was that he discovered that over time, he became concerned over how people imports virtually everything, including eggs. “This made me curious, so I started making inquiries and it was so sad because I found out that it was true. And I could not imagine that as big as Nigeria is, we are still importing eggs. My knowledge of this brought me to the conclusion that Nigeria can cater for herself, because we have the manpower and the land but no support system. This is why I came up with Yanfunyanfun, an online platform that aggregates farm produce and Nigerian food products from every part of Nigeria,” Makarios said. Asked if he took into consideration the level of education of some of the farmers, he said, “That is why we start from the basis to the complex by attending to a farmer who doesn’t know www.businessday.ng

how to use a mobile phone to the one who knows how to use a phone that is internet enabled.” The platform, he said, supports farmers that do not know about technology to the one who does, with the use of the USSD and ‘callme-back’ functions. On the non-availability of storage facilities in the country, which is key to the preservation of most perishable farm produce from getting spoilt even before getting to the consumer, the company boss affirmed that the online platform addresses issues from the consumer to the retailer, to the manufacturer, back to the aggregator, and then to the farmer. “It is a full circle support system that gets everybody involved. We arrange it in such a way that products that are perishable will get to consumers who are on demand. “But when products are requested in a large scale, then we will be able to reach as the demand comes. For an example, if we have a demand for a ton of pepper,

which is perishable, we will be able to get the products delivered because we already have the demand for it,” he said. This subscription will also be weekly or monthly with different packages of fresh farm produce, he said. “That is why we rely more on government agencies that ensure the quality of food that goes out to the consumer. And that is why we can guarantee. Farmers on our platform have access to finance, support services and access to innovative technology for agriculture. So, as a farmer, when you come on our platform, you are an active demand market.” At harvest period, the firm provides a linkage between the farm produce, and the final consumers who are in need of this farm produce. “You just need to let us know through the platform and we will make sure that you have income with all the modalities you may require to be able to meet up with the demand,”. Makarios concluded.

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could be achieved for the country to move forward if the country regards and empowers them. She urged the government to be more intentional about them because the rise of MSMEs implies continued growth for the economy. Speaking on the support for MSMEs, she said PwC has supported MSMEs for over 10 years by creating cost-effective streamlined advisory services for them, including providing discussion and networking opportunities for them. She added that PwC is working on doing more to grow MSMEs and provide a platform for improved visibility. Ayilara Olawale, CEO, Landwey Investment Limited, said operating a business in Nigeria is good and filled with opportunities but not without challenges. “Economic boom cannot be fully enjoyed without the existence of SMEs. Government is trying in its drive to enhance the operations of MSEs in Nigeria, but more work needs to be done by creating a more

enabling environment and implementing business friendly policies that will not stifle the growth of SMEs,” Ayilara said. Frank Aigbogun, publisher, BusinessDay Media, in his address of welcome, said SMEs are crucial to economic growth and can succeed despite environmental challenges. “I want to encourage you that whatever it is that you do, don’t look back. If you carry on with the zeal that you need, you will succeed despite the very harsh operating environment in Nigeria,” he said. He encouraged business owners to leverage relationships and partnerships, saying that these would help in growing their business. Speaking on the launch of the BusinessDay’s SME Toolkit, a book on MSMEs opportunities and challenges, he described it as a practical guide to boosting and growing business as an entrepreneur, as it is filled with necessary tips on business operations in Nigeria.

Go to market and engage your customers, Opeke urges young entrepreneurs ODINAKA ANUDU

unke Opeke, chief executive officer of Main One Cable Company, a Lagosbased communications services company, has advised young entrepreneurs to go to the market and engage their customers. Speaking at FATE Foundation’s Annual Celebration held last Thursday in Lagos, Opeke said there was an aura of uncertainty about the Internet when she started Main One, but added that it took efforts and courage for her to be able to raise $240 million with which she started the vision. She said even when there were temptations for her to go back while seeking funds, she was determined not to, as doing so could crash her. “We kept going from 1 to 2, to 20 till we got to where we wanted to be, to deliver the submarine cables that would run from Portugal,” she said. She explained that she was driven by the number of young people she saw in Victoria Island in Lagos without @Businessdayng

access to the Internet. “Every day, when I went out in Victoria Island, I would say, ‘If only 10,000 people could have access to the Internet, I would have made my contribution,” she said. Opeke further said that technology, energy, transportation, services and entertainment are key sectors that would be adding value to the economy in the future. She advised young people to build businesses that generate value and profits. “If your business is not generating profit, it will not be sustainable,” she noted. She dissuaded young people from relying on politicians or important people while pursuing their visions, but urged them to create products that solve problems sustainably. Fola Adeola, chairman, Fate Foundation, said the foundation graduated over 570 young entrepreneurs based in 16 cities this year, commending the entrepreneurs for their grit and determination in doing business in the country despite various odds.

Monday 09 December 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

How to resolve the reluctance to join family business The Solid Wealth Messenger

Grace Agada

he desire of every business leader is to maintain the family business within the bloodline for many generations. This desire would be easy to achieve if business leaders could live forever. But one day the life of a business leader will end. Business leaders must, therefore, find a member of their own blood who is willing and able to take over from them. Sometimes this member exists. Other times they are reluctant to follow in their fathers’ footsteps. When a family has a willing and ready successor, it means a business leader has inspired one of his own to take after him. When a family does not have a successor, it means business leaders have to look for other ways to preserve the family business. The absence of a successor means bloodline succession has failed. When Bloodline succession fails it is usually for two reasons. The first reason is that there is no willing and competent successor to take over the business. The second reason is that there are willing successors. But the successors that exist are not competent to lead the business. Willing but incompetent successors should not be allowed to lead the business. When successors are not willing but competent, it means they are not interested. A lack of interest from can come in two ways. First, a successor can have a revocable disinterest and second he can also have an irrevocable disinterest. When a successor has a revocable disinterest, it means that the lack of interest is caused by certain factors that can be resolved. These factors are usually linked to certain misunderstandings or misalignment of agendas. For example, successors may lose interest in a business for the following reasons. The fear of losing one’s autonomy, the possibility of losing oneself in the shadow of their father, the lack of a clear career path for growth and development and the rejection of certain ideas, interests, and agendas due to a difference in perspectives. These kinds of factors can be resolved when the right help is sought. A revocable disinterest is therefore not a real disinterest. It is the presence of certain concerns or fear that discourages the successor from taking on the business. When a successor has an irrevocable disinterest, it means he has

certain reasons for not joining the business that are irreversible. These reasons usually emanate from deep foundation issues that are neglected over time. For example a total lack of passion for an area of business can lead to irrevocable disinterest. A silent or expressed hatred or resentment for a business leader, a long-held misunderstanding that has resulted in blame and hurt and seeing joining the business as sacrificing one’s happiness. These types of disinterest can be difficult to resolve. Successors with irrevocable disinterest are better left out of the business. When a family only has these types of successors, business leaders must find other means of preserving the family business. But how do successors develop disinterest in the first place and where does it all begin? Successor’s disinterests are mostly caused by business leaders. Business leaders cause disinterest in successors in three related ways. First, they misunderstand what succession really means. They interpret it as a privilege or favor. While this is partly true, it is not the entire truth. Handing over one’s business to the next generation is not a privilege or favor. It is a fair exchange and here is why. The only reason business leaders pass on their businesses is because there is a time limit on their lives. While they have wealth as an advantage they lack a time advantage. The successor, on the other hand, has a time advantage but lacks a wealth advantage. When succession takes place business leader and their successor make up for their disadvantage. A Business leader gets the time advantage he needs and a successor gets the wealth advantage he needs. This makes it a fair exchange and not a favor. Second, business leaders see succession as a reverse relay. A relay is a race in which athletes run a pre-set distance carrying a baton and running towards the next athletes in front of them. A relay race is all about moving the baton towards the finish line. This, therefore, means that getting the baton to the next person in front is more important to winning the relay than remaining in one’s position. There has never been a reverse relay where the person close to the finish line runs backwards to the person at the start line. The movement of the baton is always a forward movement. Succession should be treated exactly the same way. It should be about preparing the business and successor for the future not maintaining them in the present. Business leaders must shift position and run towards the successors. This means that they must move from the rules that govern their generation to the rules that will govern the successor’s generation. They must align with the successor and redesign their businesses for the

Objectives • Solid Wealth Creation • Solid Wealth Preservation www.businessday.ng

future. Aligning with the successors is proof that a business will align with future customers. The more successors are stuck within the founder’s generation doing things that pleases the business leader. The more they will struggle. Everyone is designed to function best within their own generation and successors must be allowed to focus on moving the business into their own generation. If successors must thrive in the future they must be given permission to redesign and restructure the family business to suit where they are going. When successors concerns are not addressed, chances are high that future customers will have the same concerns. Rather than reject the changes and challenges successors bring into a business. Business leaders must be open to discussing and reviewing successors concerns. Third, business leaders display an attitude of entitlement. While it is hard to not be entitled to a business you have invested so much in, business leaders must find ways to manage this entitlement. They must shift base from an entitled position to a position where they see their businesses as a gift to the next generation. Treating the transfer of one’s business as a gift makes it easy for succession to take place. Take for example when a man wants to give the woman of his dreams a gift. He focuses on one thing only. He focuses on how his gift will be accepted and by extension how he will woo the woman. To achieve his goal, he must find out what the woman wants. That is what she desires and will appreciate. Then he must find the perfect gift that will deliver this value. When he finds the gift, he must then package it and device means to present the gift in ways that makes it irresistible. When he goes through this process, chances are high his gift will be accepted and his kind gesture returned. He will be successful with his gift because he focuses on the needs of the woman first in order to meet his own needs. This is how to present a gift that cannot be rejected. Business leaders must pass on their businesses with a gift mentality. They must seek to understand the needs and desires of the future generation. They must also prepare their businesses to meet these needs. When a business is designed for successors they know it and will accept it. No one accepts a gift that is perceived as not valuable

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‘

For Business leaders to hand over their business to the next generation, they must overcome any reluctance to join the family business

to them. The goal of a business leader is to package their businesses in ways that are motivating for future generations. For Business leaders to hand over their business to the next generation, they must overcome any reluctance to join the family business. Overcoming reluctance means business leaders must resolve pending issues that are holding successors back. Without the resolution of these issues successors will not join the business. And when force is used it will kill the business faster. To resolve succession conflicts Business leaders must seek the right kind of help. Perhaps you still struggle with aligning your succession goals with that of the next generation. We can help you. Through our Succession Resolution Program, we will help you reach a mutual alignment with your successors and show you how to prepare your business for the future. Being a successor generation ourselves and having worked with successful business owners. We know how to align both parties and help them make productive progress that will save the greatest wealth of the family from dissipation. For more information about how we can help you send an email to info@createsolidwealth. com This Article is an excerpt of my upcoming book “THE ORDER OF BLOODLINE BUSINESS SUCCESSION’ - How To Hand Over Your Years of Hard work to the Competent Hands of Your Own Blood. For more details send an email to info@createsolidwealth.com

Grace Agada is a Generational Wealth Advisor, Legacy Expert and Author of the popular Solid Wealth Book. She is a Consultant and Coach to an exclusive list of top executives and entrepreneurial clients running Businesses from $1-million to $1 billion in size. She help Affluent clients prepare and execute a Ten Generation Wealth Legacy, Diagnostic Family meetings, Family Business Succession, Family Bank Systems, 90 days Sudden death contingency plan, Next generation grooming, and second opinion review of existing Trust and Estate Plans to support generational wealth goals @Businessdayng

Monday 09 December 2019

BUSINESS DAY

MARKETS INTELLIGENCE Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Dangote Cement awash with cash, thanks to N45bn commercial paper issuance

ing capital of N85.16 billion in the period under review. This means it is liquid and it has the cash to run operations. Because the current yield of 7.75 percent is lower than the previous coupon rate of between 11 percent and 12 percent, there will be a reduction in the cement makers finance costs, which further adds impetus to profit. As at September 2019, Dangote Cement’s debt/EBITDA, net debt/ EBITDA and gearing ratio stood at 0.98x, 0.75x and 0.34x respectively, reflecting the strong cash generation of the group as well as solid capacity to service its liabilities. Gearing ratios measures the level of debt in the balance sheet of a company, the lower the better. Assuming the offer is completely subscribed and allotted, which is expected by analysts, debt/ EBITDA, net debt/EBITDA and gearing ratios could print higher at

1.09x, 0.86x and 0.41x respectively. Dangote Cement shares are cheap and attractive as it has a price to earnings ratio of 6.17 times, this compares with 7.06 times for the Nigerian Stock Exchange (NSE) All Share Index (ASI). “We expect investors to bid aggressively for the offer given Dangcem’s strong credit rating and the ample financial system liquidity. More interest could be seen on the longer-dated series on account of its more attractive spread,” said analysts at Chapel Hill Denham Limited. “We note that the spreads across both series are significantly lower than the previous issuances in July,” said Ibrahim. Activity in Nigeria’s corporate debt market seems to be ending the year on a strong note, thanks to the CBN’s liquidity easing policy which has buoyed demand for

corporate debt securities and encouraged corporates to tap the market for cheaper working and expansion capital. Eat ‘N’ Go Limited, a leading restaurant group behind the Domino’s Pizza, Cold Stone Creamery, and Pinkberry brands in Nigeria, launched a double-tranche offering (5-year and 7-year) to raise N10 billion under a N15 billion issuance programme. The offer is expected to close on Tuesday 10 December 2019 as the issuer is looking to price the 5-year bond at an indicative coupon of 13.50 percent –13.75 percent, and the 7-year bond at a range of 14 percent –14.25 percent. Flour Mills Nigeria Plc, the largest miller by market capitalization, plans to issue N5 billion commercial paper at 8.87 percent and 9.50 percent under a N100 billion programme as it seeks to reduce debt and bolster earnings.

Poor Sales, 9 years accumulated losses render FTN Cocoa technically insolvent IFEANYI JOHN

or the 9th consecutive year, FTN Cocoa Processors appear to be on track to post an operating loss according to their third quarter financial results which showed that the company had lost about N354.4 million in the first 9 months of the year. This loss was enough to pull the total equity of the firm into negative territory for the first time, as the company’s shareholders’ funds fell to -N286.6 million. A negative book value occurs when the total liabilities of a firm equals the total assets of a firm, which means that the company’s assets can no longer cover its total debt obligations, thus, render-

SHORT TAKES 6.67%

BALA AUGIE angote Cement Plc has tapped the Nigeria debt market to raise capital so as to boost its operating liquidity or cash levels and reduce its debts, giving the largest producer of Cement locally the financial strength to meet its day to operations. The company took advantage of receding bond yields to issue N45 billion commercial paper, which is part of a N150 million programme at an implied yield of 7.75 percent. The capital injection means the cement maker will have more cash or liquidity to pay suppliers so as to make up for customers owing it (debtors). Investors pay attention to working capital management because it shows how well a company is able to meet its obligations to suppliers of raw materials and machinery while effectively collecting money owned to it by debtors or receivables. The capital will help the company mitigate the problem of being out of cash. It will ensure that the cement maker never runs out of inventories. Dangote Cement current asset of N355.16 billion as at September 2019, exceeds current liabilities of N269.68 billion, to give a net work-

P.E

ing such company technically insolvent. Currently, FTN Cocoa is among a small list of publicly listed companies with a negative book value which means that shareholders’ have zero claim on any future earnings in the business until its liabilities are settled enough to ensure that total assets in the business exceed the total liabilities in the business. According to analysts, the fastest way for FTN Cocoa to become technically solvent again is for shareholders to inject more funds into the business. Going by the current negative book value, FTN Cocoa will need to inject not less than N300 million in fresh shareholders’ funds to restore the books to a positive standing. FTN Cocoa have battled liquidity and profitability challenge for

the last 9 years but this year solvency crisis has just compounded the woes of the struggling agricultural firm. Since 2011, the company has posted an accumulated loss of N4.25 billion which caused its total equity to drop from N2.3 billion in 2011 to -N286 million in Q3 2019. A look into the liquidity ratio and solvency ratios of the firm shows the extent of the financial crisis within the firm. The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. A company with a current ratio less than one does not, in many cases, have the capital on hand to meet its short-term obligations if they were all due at once, while a current ratio greater than one indicates the company has the financial resources to remain solvent in the

short-term. Between 2014 and Q3 2019, the average current ratio of the firm was 0.38, meaning that the company cannot cover up to 62 percent of its short term debt obligations without resorting to more borrowing which shows the extent of the liquidity crisis that has befallen the once booming company. The company’s borrowings have increased from just N602.4 million in 2014 to N4.07 billion in Q3 2019, representing a growth of 576 percent. At the end of 2018, the company’s financial leverage had reached 71x, making FTN Cocoa among the most highly leveraged company on the Nigerian Stock Exchange. According to finance analysts, Continues on Page 38

Non-performing loans (NPLs) in the banking sector fell to a four year low in the third quarter of 2019 as oil and gas companies paid down stubborn debt. Data released Tuesday by the National Bureau of Statistics (NBS) showed bad loans made up 6.67 percent of total gross loans extended by the banks in the third quarter of 2019. The first time it has collapsed to within single digits since 2015. NPLs dropped over 50 percent to N1.103 trillion in the period from N2.24 trillion a year ago. The recovery was driven by an improvement in non-performing loans to the oil and gas sector. Banks also saw some improvement in the NPL portfolios of Power and Energy (N116.01 billion); Real Estate Activities (N74.02 billion); Manufacturing (N43.67 billion); Information and Communication (N39.40 billion), and Finance and Insurance (N34.42 billion).

-14.56% The stock market is down by almost 15 percent so far in the year, after trading closed 0.22 percent lower on Friday. The top gainers by absolute change were UACN, Dangote Sugar, Access Bank, Sterling Bank, and Trans-Nationwide Express. On the other hand the worst performers for the day were MTN, Dangote Cement, GTB, UBA and University Press, according to NSE data. The Nigerian Stock Exchange (NSE) last week was down with all five trading sessions closed in the red.

N10.59trn The National Assembly on Thursday passed the N10.59 trillion budget for the 2020 fiscal year into law with an increment of N264 billion from the N10.33 trillion proposed by President Muhammadu Buhari. The approval of the budget by the Senate followed the adoption of the report of Senate Committee on Appropriation at plenary on Thursday. Presenting the report, Senator Barau Jibrin said the increase of N264bn in the budget is to allow for interventions in critical areas such as national security, road infrastructure, mines and steel development, health, social needs, and water among others.

BusinessDay MARKETS INTELLIGENCE (Team lead: BALA AUGIE - Analyst: Dipo Oladehinde, ENDURANCE OKAFOR, BUNMI BAILEY Graphics: FIFEN FAMOUS)

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team patrick.atuanya@businessdayonline.com www.businessday.ng

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Monday 09 December 2019

BUSINESS DAY

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Monday 09 December 2019

BUSINESS DAY

MARKETS INTELLIGENCE

FBNInsurance, Aiico, Mutual Benefit, NEM, Regency are more efficient than peers BALA AUGIE

n the insurance parlance, investors pay attention to how much of a company’s revenues are paid out as expenses because it determines to a large extent money left to pay dividend and fund

expansion plans. When claims, operating, and underwriting expenses exceed premium income, a company is said to be operationally inefficient, and it is beleaguered with underwriting losses. Despite the myriad of challenges undermining the growth of companies, three

firms have outperformed their peers to emerge the most efficient as gleaned from the third quarter financial statement of the largest insurers. For the first nine months through September 2019, FBNInsurance Limited, Aiico, Mutual Benefit, NEM, and Regency recorded combined ratio (CR) of 47.45 percent, 96.90 percent, 99.38 percent, 91.95 percent, a figure that is below the 100 percent bench mark. This compares with Custodian Investment, (123.86 percent); AxA Mansard, (112.03 percent); Wapic, (141.14 percent); Cornerstone Insurance, (139.55 percent); Lasaco, (114.98 percent); Consolidated Hall Mark, (114.93 percent); Law Union and Rock, (118.05 percent). Others are Continental Reinsurance, (100.77 percent); Sovereign Trust Insurance, (100.75 percent); Royal Exchange, (115.85 percent); Prestige Assurance, (126.17 percent);

Linkage Assurance, (149.17 percent), and Niger Insurance, (153.69 percent). The combined ratio is the sum of an insurance company’s loss ratio and its expense ratio. The industry norm is to achieve a combined ratio of less than 100 percent and the target is to bring it as low as possible. The implication is that a combined ratio of over 100 percent equates to an unprofitable company, though insurance companies can still be profitable with combined ratios of 100 percent by having other income streams, such as fee income from asset management subsidiaries. The continued deteriorating combined ratio underscores analysts’ view that companies have to be more cost efficient so that they deliver a higher returns to shareholders in form of bumper dividend and share appreciation. Insurers return on equity can’t cover their cost

Declining treasury yields could spark interest in FGN issued Eurobonds IFEANYI JOHN

he Central Bank of Nigeria (CBN) OMO ban which triggered a demand surge for treasury bills may likely cause a shift to dollar denominated assets. The sharp decline in treasury yields which followed within days after the OMO ban is now making FGN Eurobonds more attractive than treasury bills which may push local investors’ cash to dollar-based funds investing in Eurobonds. As at market close on Friday, the 90 days to 1-year FGN Treasury bill traded at a yield range of around 7.25 and 9.17 percent, compared to some long dated FGN Eurobonds which traded at yields ranging from 7.36 percent and 8.57 percent. Analysts told BusinessDay that treasury yields are naturally expected to pro-

vide a decent premium for local investors who worry that high rates of inflation in the country and increasing risks of devaluation could hurt the value of their funds if held in local currency investment. However, the OMO ban seems to have eroded what was originally around 5-6 percentage point premium for local investors who chose to buy treasury bills above investing in Eurobonds. “If the yields on both FGN Eurobonds and FGN Treasury bills are roughly the same, investors will most likely pick FGN Eurobonds because they are sure to enjoy protection from double digit inflation in the country and benefit from any currency devaluation that could occur in the country. Nigerians will always prefer to hold dollar over Naira if the interest rate earned on both currencies is the same, www.businessday.ng

buying the FGN Eurobonds is the equivalent of holding dollar and buying Treasury bills is the equivalent of holding Naira,” one analyst explained. “It is true that FGN Eurobonds are trading at roughly the same yields as treasury bills at the moment, but the longer duration of the Eurobonds doesn’t make it a normal like for like comparison. Eurobond prices are more volatile than treasury bills and as such investors could still lose money investing in Eurobonds once prices start to decline unlike treasury bills which are more stable,” said Obinna Uzoma, chief economist at EUA Intelligence. “Also, you must note that the Federal Government can technically default on its Eurobonds while it can’t default on repayment of treasury bills because the repayment currency of treasury bills is

its local currency. So, you see Eurobonds isn’t a direct substitute for Treasury bills. However, with more people scared that a devaluation may occur soon, you expect more people to be parking their cash in Eurobonds since the yields and roughly the same and they can benefit from the devaluation gains if it happens in the near term,” Uzoma added. “I also think foreign investors who see our treasury bills trading at a rate that is 4 percentage point below inflation and at roughly the same yields as our Eurobonds will rather buy Nigeria’s Eurobonds than lock their money up in our local currency while there is all sorts of fears on devaluation in the country. Honestly, it’s just bad business for CBN to make treasury yields drop so low, there are more negatives than positives to this,” Uzoma concluded.

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of capital because of rising operating expenses. However, it is expected that all Nigerian service industries have high costs thanks to inefficient energy supply and transportation. Analysts at Coronation Merchant Bank said that cautious underwriting can pass up on growth opportunities and that high costs can also mean high levels of investment in technology to prepare for future growth. The cumulative man-

agement expenses of insurers quoted on the bourse increased by 22.97 percent (higher than October inflation figure of 11.24 percent) to N46.06 billion while combined average expense ratio moved to 33.0 percent in the period under review from 30.80 percent as at September 2018. A high ratio means a firm is spending more in running its operations to generate each unit of revenue.

Poor Sales, 9 years accumulated losses render FTN Cocoa technically... Continued from Page 36 a highly leveraged company carries a great deal of risk and may increase the likelihood of default or bankruptcy. It is also likely to escalate financial losses if a company posts an operating loss while holding enormous amounts of debt. In FTN Cocoa’s case, the company posted an operating loss of -N273.3 million but still had to cough out another whopping N173.8 million to cover finance cost. A finance income of about N92.7 million helped cushion the effect of the large cash outlay to cover debt repayment. “In the end, everything boils down to the fact that the company is not generating the sales it needs to turn @Businessdayng

a profit. The company needs to be generating at least N1 billion in sales annually to stand a chance of posting a profit anytime soon,” an agricultural economist told BusinessDay. A look into the financials showed that the company needed to generate sales of at least N912 million to have earned a profit in Q3 2019 but it only managed to generate sales of around N503 million. As FTN Cocoa search for funds to ensure the continuity of the business, the best starting point will be to build a working strategy to boost sales to ensure that the company is able to start generating profit next year in order to cover the N286.6 million hole now staring at investor’s in the company’s balance sheet.

Monday 09 December 2019

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: December 06 - December 13, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.28

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

Broad Money Supply (N’ trillion)

35.26

Increased by 0.66% in Oct’ 2019 from N35.03 trillion in Sept’ 2019

Credit to Private Sector (N’ trillion) Currency in Circulation (N’ trillion)

25.80 2.06

Increased by 1.30% in Oct’ 2019 from N25.47 trillion in Sept’ 2019 Increased by 2.51% in Oct’ 2019 from N2.01 trillion in Sept’ 2019

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

11.61

Increased to 11.61% in October 2019 from 11.24% in September 2019

Monetary Policy Rate (%) Interest Rate (Asymmetrical Corridor)

13.5 Adjusted to 13.5% in March 2019 from 14% 13.5 (+2/-5) Lending rate changed to 15.5% & Deposit rate 8.5%

External Reserves (US$ million) Oil Price (US$/Barrel) Oil Production mbpd (OPEC)

39.62 64.87 1.81

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr)

Friday

6/12/19

29/11/19

26,855.52 12.96

27,002.15 13.03

Volume (bn)

0.20

0.23

Value (N’bn)

3.53

3.66

MONEY MARKET NIBOR Tenor

December 5, 2019 figure — a decrease of 0.21% from December start December 6, 2019 figure— an increase of 1.31% from the previous wk October 2019 figure — a decrease of 2% from September 2019 figure

Friday Rate

(%)

6/12/19

Change(%)

Indicators

06/12/19

1-week Change

YTD Change

(%) Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) (13.27) Agriculture Cocoa ($/MT) (3.47) Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Change Gold ($/t oz.) Silver ($/t oz.) (Basis Point) Copper ($/lb.) (0.54) (0.54)

64.87 2.42

(%)

1.28 (1.63)

0.64 (20.81)

2,628.00 125.85 65.23 13.17 525.00

1.19 6.25 (0.20) 2.81 (0.33)

35.74 (3.34) (15.83) (14.09) 21.11

1,476.32 16.96 267.10

1.31 0.18 0.17

12.05 (1.34) (18.52)

29/11/19

2.4300

3.7900

(136)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

3.0700 2.8500 11.0749

4.5000 4.6250 12.4500

(143) (178) (138)

Tenor

6/12/19

29/11/19

90 Days

11.0098

13.0300

(202)

1 Mnth 3 Mnths

11.11 9.84

13.47 13.80

(235) (397)

6 Mnths 9 Mnths 12 Mnths

9.55 11.58 12.50

10.14 13.95 14.77

(58) (237) (227)

OBB

FOREIGN EXCHANGE MARKET Market

Friday

1 Month

(N/$)

Rate (N/$)

29/11/19

6/11/19

Official (N) Inter-Bank (N)

6/12/19 306.95 362.74

307.00 362.45

306.95 362.31

BDC (N) Parallel (N)

360.00 360.00

Indicators

AVERAGE YIELDS Friday

Friday

Change

(%)

(Basis Point)

6/12/19 3-Year 5-Year 7-Year 10-Year 20-Year 30-Year

0.00 10.78 11.24 11.69 12.34 13.09

29/11/19 0.00 11.47 12.18 12.1 12.66 13.31

0 (68) (94) (46) (32) (22)

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

Friday

Change

(%)

(Basis Point)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

BOND MARKET Tenor

Friday

Change

(%)

(Basis Point)

6/12/19

29/11/19

Index Mkt Cap Gross (N'tr)

3,287.10 10.27

3,181.44 9.94

3.32 3.32

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

6.79 33.82

6.49 29.51

4.62 4.31

YTD return (%)(US $)

-22.00

-26.32

4.32

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

Rate(%)

91 Day

20,372.79

6.495

27-Nov-2019

182 Day

19,157.66

7.23

27-Nov-2019

364 Day

111,071.72

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

8.37

Date

27-Nov-2019

Global Economy In the U.S, trade deficit narrowed to $47.2billion in October 2019 from a downwardly revised $51.1billion in the previous month. Imports slumped 1.7% to $254.3billion to the lowest value in two years amid falling purchases of pharmaceutical preparations, auto parts, vehicles and cell phones and exports edged down 0.2% to $207.12billion. Exports of goods increased to all major trading partners: China (3.3%), Canada (3.6%), Mexico (8.1%), the EU (8.6%), Japan (12.3%), Brazil (8.5%) and OPEC (2.8%). Purchases fell from China (-0.2%), Brazil (2.4%) and OPEC (-14.5%) but rose from Canada (6.1%), Mexico (5.2%), the EU (12.4%) and Japan (6.8%). In the Eurozone, quarterly economic growth (GDP) was confirmed at 0.2% in Q3 2019, the same as in the previous period. Thus, reflecting stable economic performances in the region's big players. The economy was restrained by persistent external headwinds, a weak industrial sector and a cooling labor market. Among the bloc's largest economies, Germany's economy avoided entering a recession in Q3 2019 (0.1% vs -0.2% in Q2), largely driven by private and public spending, exports and investment in construction. Meanwhile, GDP growth was unchanged in France (at 0.3%), Spain (0.4%) and Italy (0.1%). Elsewhere in South America, recent data suggest that's the Brazilian economy is gaining gradual steam. The Brazilian economy advanced 1.2% year-onyear in Q3 2019, following an upwardly revised 0.5% expansion in the previous period. It was the strongest growth rate since the Q1 2018, as industrial and services activities expanded further, and the agricultural sector recovered. Domestic Economy In the recently released Selected Banking Sector Data report of the Nigerian Bureau of Statistics (NBS), banking sector credit to the private sector increased by 7.39% to N16.25 trillion in Q3 2019 from N15.13 trillion in Q2 2019. The report also revealed that banking industry Non-performing loans (NPLs) declined during the period to N1.11 trillion in Q3 2019 from N1.44 trillion in Q2 2019. The sum of N738.15 million was recovered from the oil & gas sector, N116.01 billion from the power sector, N74.02 billion from real estate sector, N43.67 billion from manufacturing amongst others. The latest drop means NPLs have hit its lowest since the Q1 2016. Also, a total volume of 800,201,498 transactions valued at N42.76 trillion were recorded in Q3 2019 as data on Electronic Payment Channels. NIBSS Instant Payments (NIP) transactions dominated the volume of transactions recorded and was valued at N26.18 trillion in the reference period. In other news, the overall business confidence index for the month of November stood at 29 index points, revealing optimism on the overall macro economy by respondents. Further analysis showed that businesses that are neither import- nor export-oriented, both import- and/or export-oriented drove the positive business outlook in November 2019. Respondent firms identified insufficient power supply, high interest rate, financial problems, unfavourable economic climate, unclear economic law, unfavourable political climate, insufficient demand, competition and access to credit as major factors constraining business activity in the review month. Stock Market Activities at the local bourse nosedived in the week ended December 6, 2019 due to profit taking in the financial services and industrial goods sectors. Consequently, the All Share Index (ASI) shed 0.54% to end at 26,855.52 points from 27,002.15 points the preceding week. Similarly, market capitalization fell by 0.54% to N12.96 trillion from N13.03 trillion the prior week. We expect investors to lock in value

stocks with attractive dividend yields in anticipation of the December rally. Money Market Interbank rates declined further in the week ended December 6, 2019 as a result of net Open Market Operation (OMO) credit of about N316billion into the system and retail Secondary Market Intervention Sales (SMIS) refund during the week. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates declined to 2.43% and 3.07% from 3.79% and 4.50% respectively the previous week. The longer dated instruments such as the 30-day and 90-day Nigeria Interbank Offered Rate (NIBOR) settled at 11.07% and 11.01% from 12.45% and 13.03% the prior week. This week, short tenure rates are expected to hover around current levels. Foreign Exchange Market The local currency appreciated against the greenback to close at N306.95/US$ from N307/US$ the prior week at the CBN official window. However, at the Nigerian Autonomous Foreign Exchange (NAFEX) segment, the local currency depreciated by 29kobo to close at N362.74/US$ from N362.45/US$ the previous week. The local currency traded flat at the parallel market segment, trading at N360/US$. The depreciation witnessed at the NAFEX window was due to demand by market participants. This week, we do not foresee a significant change in the current FX rates. Bond Market The Bond market ended last week on a bullish note due to the absence of better investment alternatives that can provide higher yield for various market participants. This resulted in continuous demand for various maturities which led to a further decline in average yields. Yields on the five-, seven-, ten- twenty- and thirty-year debt papers finished at 10.78%, 11.24%, 11.69%, 12.34% and 13.09% from 11.47%, 12.18%, 12.15%, 12.66% and 13.31% respectively, the previous week. The Access Bank Bond index rose significantly by 105.66 points to close at 3,287.10 points from 3,181.44 points the prior week. We expect robust liquidity to continue to drive buying sentiments in the near term. Commodities Oil prices kept up momentum as a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed to more output cuts in early 2020. Bonny light, Nigeria's benchmark crude added 1.28% or 82 cents to close the week at $64.87 per barrel. Precious metals prices inched up last week as conflicting signals from Washington and Beijing prolonged uncertainty about a trade deal. Consequently, gold gained 1.31% to $1,476.32 per ounce and silver rose by 0.18% to $16.96 per ounce. This week, oil prices may keep up the current trend due to the recent agreement to more output cuts to avert oversupply. For precious metals, prices may trend southwards due to China's announcement to waive import tariffs on some American goods.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Dec’19

Jan’20

Exchange Rate (NAFEX) (N/$)

363

362

Inflation Rate (%)

11.80

11.90

Crude Oil Price (US$/Barrel)

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

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Monday 09 December 2019

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news What deeper production cuts mean... Continued from page 1

stamped on Friday by the wider group of countries that have been involved in an oil alliance since 2016. The new production cuts will tally around 1.7 million bpd, an increase of around 500,000 bpd from a prior deal for 1.2 million bpd in curbs that expires in March 2020. The group, which pumps more than half the world’s oil, is expected to take on 372,000 bpd of the additional cuts that are effective from January, while countries outside the cartel will be responsible for 131,000 bpd. But Prince Abdulaziz bin Salman, the new energy minister of Saudi Arabia, said total cuts will be even higher at around 2.1m bpd once an extra voluntary cut of 400,000 bpd from the kingdom is accounted for. Implication for Nigeria The new production cut will have a big effect on Africa’s largest crude oil exporter who has made efforts in tweaking the agreement to accommodate its expanding oil industry. Nigeria has previously tried to draw a distinction between what it considers as crude and what it considers as condensates, an ultra-light crude-like product that doesn’t fall under the OPEC+ cut agreement. The questions of what can be classified as condensates or crude has also become more intense after an S&P Global Platts’ survey of industry officials, analysts and shipping data found out that Nigeria pumped above its production range in the month of October. OPEC does not publish a condensates figure, reporting only the crude output of its 14 members. The Nigeria National Petroleum Corporation (NNPC) also publishes no condensate numbers however analyst sources told Reuters that Akpo is the only substantial Nigerian grade marketed as condensate, which is typically exported at a rate of 100,000-133,000 bpd. Also, production of another condensate grade, Oso, has declined so substantially that it is blended into Qua Iboe crude exports. The quota increase will mean Nigeria will see an improvement in its compliance with the production cut accord. The commodity also accounts for 2/3 of Nigeria revenue and nearly all of the foreign exchange earnings. In recent weeks, Nigeria’s regulatory authorities have been instructing some companies to dial down production from their largest producing fields in order to meet its OPEC obligation. One clear case is the French’s Total operated Egina, which averaged 203,000 bpd in August 2019 and was only allowed to produce

180,000 bpd in October 2019. Supply pressure from outside OPEC Market analysts are also doubting if a mere 500,000 bpd reduction will alter the outlook for H1 2020 which, according to Paris-based autonomous International Energy Agency, will remain oversupplied. IEA said in November that OPEC faces a “major challenge” next year as accelerating production from rivals undermines its efforts to rein in oil production. OPEC’s actions in the past have angered US President Donald Trump, who has repeatedly demanded OPEC’s de facto leader Saudi Arabia brings oil prices down if it wants Washington’s to provide Riyadh with military support against arch-rival Iran. In the past few months Trump has said little about OPEC but that might change later in 2020 if oil and gasoline prices rise - a politically sensitive issue as he seeks re-election in November. Additional barrels are also expected to come online from countries such as Brazil, Norway and Guyana. This means the number of barrels required from OPEC to fill any gap is forecast to fall in 2020. This is part of the reason why some analysts believe that despite a deeper production cut of 500,000 bpd by OPEC and its allies, oil prices could feel some pressure in the aftermath of the meeting. Will Russia finally achieve 100% compliance? After the oil price crashed in 2014, Saudi Arabia looked outside of the producer group, to Russia, for help. Under previous oil minister Khalid al-Falih, this relationship was a priority. Now Russia’s own willingness to comply with the deal is being examined. Local oil companies have long believed that cutting production would only subsidise rival producers. Chief executive of Russian oil company Lukoil said recently that there is no reason right now to extend the cuts beyond March 2020. Russia had also reportedly asked that condensates no longer be quoted as part of output for countries, a move which would reduce the total impact of the cuts. So far Russia has consistently pumped too much, achieving its production cut target in just three months this year when chemical contamination shut down a major pipeline. Energy Minister Alexander Novak has offered several explanations for his country’s poor compliance, most recently blaming it on the startup of new natural gas fields that added more condensate into Russia’s oil mix. “In general, I think we Continues on page A2 www.businessday.ng

L-R: Akin-Olusoji Akinyele, SSA to CEO/head government relations, Nigerian Stock Exchange (NSE); Dumebi Okwechime, chief decision scientist, Renmoney; Ayodeji Rotimi, MD, Hills Harvest Limited; Deepankar Rustagi, founder/CEO, Omnibiz; Ada Irikefe, head, distruption team, PwC; Elo Umeh, CEO, Terragon Group; Chude Jideonwo, co-founder, Red Media; Collins Onuegbu, executive vice chairman, Signal Alliance, and Eloho Gihan-Mbelu, MD/CEO, Endeavor, after the first panel session at the BusinessDay top 100 Fastest Growing SMEs in Nigeria in Lagos, weekend. Pic by David Apara

Inside details of Nigeria’s $22.78bn... Continued from page 1

public affairs, before it was confirmed to BusinessDay by the Ministry of Finance. The loan, which would be sourced from a cocktail of multilateral development lenders including the World Bank, Africa Development Bank, China Exim Bank, Japan ICA and AFD, will cost the government some $12.1 billion (N3.7 trillion) over an average duration of 21 years. That works out to $573 million (N175 billion) each year. Economists say that’s cheap compared to borrowing from institutional investors and commended a rare show of public transparency regarding debt utilisation. The worry, however, was whether the loan will be invested in infrastructure from transport to power as highlighted in the breakdown and not frittered away with little to show for it. Their worry is supported by data that show despite a near tripling in the country’s debt stock in the last four years, there’s hardly been significant improvement in infrastructure with incessant power outages and bad roads bedevilling of a stuttering economy that has contracted in per capita terms for four straight years. This time, infrastructure has been prioritised with the proposed borrowing. The breakdown of the proposed $22.7 billion loan showed transportation, power and social investments will get the biggest chunk with $10.25 billion (44.9 percent), $5.6 billion (24 percent) and $1.6 billion (7.02 percent) respectively. The transport projects to be undertaken include a $5.5 billion splurge on a

railway connecting Ibadan in the south west of Nigeria to Kano, north of the country. China will provide the loan which will stretch over 20 years and cost 2.75 percent per annum. Then there is a Coastal Railway that runs through Calabar through Port Harcourt to the Onne Deep Sea Port. The government is seeking a $3.75 billion loan also from China with a similar maturity profile and cost as the Ibadan to Kano railway. The final transport project, also to be funded by China for $1.25 billion, is the Abuja Mass Rail II that will connect the city center to outer districts. The Power projects to be undertaken number four. T h e Ma m b i l l a Hy dropower Project, two Transmission Upgrade Programs for TCN and Lagos to Abeokuta as well as nine power sector vocational schools will require $5.6 billion in loans to be sourced from the China Exim Bank, the World Bank, AFD France and Japan ICA. Under Works, some seven roads will be reconstructed with a $1.2 billion loan from China and the Africa Development Bank. They include the EastWest Road, Gombe-Biu Road (120km), CalabarEkang-Ajassor Road (64km), Enugu-AbakilikiOgoja Road (246km), Katsina-Jibiya-Niger Rep Road (65km) and Maokwa-Kaduna Road (190km). Transport, Power and Works cumulatively account for 75 percent ($17 billion or N5.2 trillion) of the $22.7 billion loan, something analysts say could have a transformative effect on the economy if implemented to the letter. “If the government

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spends that much and there’s significant private sector participation, Nigeria can move the needle in terms of infrastructure development and economic growth,” said a former senior staff at the International Finance Corporation. Indeed the government will need the private sector to play a starring role in the infrastructure plan because even if 100 percent of the loan went into building roads, rail and upgrading power supply, it is only 22 percent of the $100 billion annual infrastructure investment needed each year for 30 years to bridge the country’s gaping deficit. The government will however have a tough time convincing Nigerians that the loan will be spent efficiently. Some also argue that the valuation of some of the projects is inflated. Angela Okoro, a banker, said that rather than spend as much as $500 million (N153 billion) on the digitalisation of governmentowned television station NTA, the asset should be sold off. “That’s too much for a local station nobody watches when we have obvious spending gaps in critical sectors from education to health,” she said. Nigeria is seeking the same amount that it plans to borrow for NTA’s digitalisation ($500 million) for Education from the World Bank, according to the loan breakdown. Spending as much as $200 million (N61.2 billion) on a database linking the Economic and Financial Crimes Commission (EFCC) the National Identity Management Commission (NIMC), the National Bureau of Statistics (NBS) and the Office of the Accountant General of the @Businessdayng

Federation (OAGF), was also deemed exorbitant by some Nigerians on social media. “There will always be doubts whether the money will be invested in bankable projects that can generate enough return to cover the cost of borrowing and at the same time trigger economic growth,” a source who did not want to be named to speak freely said. Another source who is a consultant for the government however argued that “By borrowing from the development institutions, it shows that the government is willing to be more accountable with the loan compared to raising a Eurobond from institutional investors who are primarily concerned with repayment and not if the money is wasted on funding an expensive fuel subsidy or a bloated civil service,” the source added. Where the bulk of the $22.7bn loan will come from China is expected to finance the bulk of the loans or 76 percent, thanks to the $17 billion transport and power projects to be financed by Beijing. The $500 million NTA digitisation project will also come from Beijing. There is also the $4.8 billion loan required for the Mambilla power project, coupled with the $328 million to be tapped for what the government described as “ICT backbone phase project 111” and a $381 million water supply project in Abuja, from the China Exim Bank. The next biggest source of funds is from the World Bank at $2.78 billion, followed by the African development Bank at $1.73 billion. Other lenders include AFD of France ($480 m), Japan ICA ($200m) and KFW of Germany ($20m).

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Reps say Enugu airport to re-open March 2020, refutes report on land dispute posing challenge …say no document has been sent on airport concessions, national carrier IFEOMA OKEKE

ouse of Representatives Committee on Aviation says with the progress of ongoing work at the Enugu airport runway, the airport will likely re-open for operations March 2020. This is also as the committee refuted reports on land disputes posing challenge to the completion of the runway. Speaking at the weekend with journalists in Lagos, Nnolim Nnaji, chairman of the Committee, said the government was doing a lot to ensure the airport was reopened as soon as possible. “I can tell you that the land dispute cannot be a problem because the custodian of land is the government and the governor has said it many times that whatever land is needed to get the Enugu airport runway back, he will provide. Work is ongoing. “The minister never said the delivery date is April next year. When Hadi Sirika, minister of aviation came for budget defence, he said if the fund is available, the runway will be complete before Christmas but because the funds didn’t come out as agreed, the minister now said the runway will be ready before the Easter season,” Nnaji said. He noted that the Sirika did not specify the month, but he believes that Enugu airport runway will be ready March, 2020. The chairman of the com-

mittee disclosed that the issue of concessions and national carrier for the committee was a situation of hear-say, as the committee was yet to get any formal document on the projects. “We just hear it like other people that there will be concessions. So, until we get the documents and study it at the committee level and the National Assembly, then we can talk about concession. “The same situation applies to national carrier. We do not act on hear-say. We act based on documents available to us and that is why we cannot really comment on it,” he disclosed. On construction of Abuja second runway, he said no document had been made available to the committee on the second runway but stressed that there was a need for a second runway. “On the issue of second runway, we have it in the budget and there are some funds for it in the budget but I’m also aware that that particular amount may not be able to execute the project fully,” he said. In a bid to address the paucity of fund and help upgrade airport infrastructure, the committee chairman said the committee had recommended that a 10-year development plan be put in place where a consolidated account would be created for remittance of the 25 percent internally generated revenues of aviation agencies be kept for aviation infrastructure.

What deeper production cuts mean... Continued from page 42 have a good level of compliance,” given that statistics include condensate output that has risen significantly, Novak told reporters in Moscow. The risks involving Aramco’s IPO According to sources, Prince Abdulaziz Bin Salman, the new Saudi oil minister, is expected to pressure countries that have not been holding up their share of the cuts to comply with the existing deal, a move which will be very important for its Saudi Aramco Initial Public Offering (IPO). The seasoned oil diplomat is anticipated to take a much harder line than his predecessor, warning that if OPEC peers do not enact their share of cuts fully in December and January, the kingdom will no longer shoulder the burden and could increase its own oil production. “Saudi Arabia is willing to do more than its share, but only if the others do their bit,” said Amrita Sen at consultancy Energy Aspects. Yet the people briefed on the kingdom’s position said Saudi Arabia believes the oil market will tighten in the coming months in any case, and officials are content with crude prices where they are — meaning they can bear that risk for now. Signs of weakness in glob-

al demand Persistent trade spat between the US and China and global economic weakness has forced global oil agencies to roll back assumptions for demand growth for this year and next. Oil prices went on a downhill in June this year with investors becoming increasingly concerned about slowing demand. Appetite for oil is at risk of a further slump if the U.S. and China fail to resolve trade differences in 2020, which will cause the global economy to weaken even more. The two world superpowers account for about 34 per cent of the global crude oil. With supply growth expected to swamp the rate of consumption, OPEC has itself said that there are “signs of stress” that could hit demand. Also, Saudi Aramco’s Initial Public Offering (IPO) prospectus seen by BusinessDay revealed oil demand is expected to peak around 2035 before levelling off, but that the inflexion point could occur by the late 2020s. The timing of peak demand has big repercussions for the planet and future of oil producers most especially countries like Nigeria who seem unprepared. www.businessday.ng

Prospects for ECOWAS single currency, Monetary Union in 2020 uncertain – Ahmed O n y i n y e N wac h u k w u & Innocent Odoh, Abuja

rospects for member countries of the Economic Community of West African States (ECOWAS) to establish a common economic block and adopt a single currency - being proposed as the ‘Eco’ – remain uncertain few months to the 2020 deadline, Zainab Ahmed, minister of finance, budget and national planning, admitted at the weekend. The uncertainty stems from the inability of member states to meet a set of convergence criteria before the Monetary Union can be established. To achieve a common monetary integration programme requires each member country to comply with a set of four primary and six secondary convergence criteria to ensure a stable macroeconomic environment. Those criteria were set in

November 2002 by the forum of finance ministers of the West African Monetary Zone (WAMZ) who decided to facilitate the harmonisation of fiscal and monetary policies, and introduced those two sets of conditions to drive the effective the establishment of the MU and adoption of a single currency proposed as Eco. The Primary Criteria include: Budget Deficit/GDP ratio (excluding grants) of less or equal to 4 percent; Inflation rate of less or equal to 5 percent; Central Bank Financing of Budget Deficit of less or equal to10 percent of previous year’s Tax Revenue, as well as Gross External Reserves of greater than or equal to 6 months of imports cover. The Secondary Criteria include: Prohibition of new arrears and liquidation of all outstanding ones; Tax Receipts/ GDP ratio of greater or equal to 20 percent; Salary Mass/Total Tax Receipts ratio of greater

or equal to35 percent; Public Investments financed from internal resources/Tax Receipts ratio of greater or equal to 20 percent; Positive Real Interest Rates; and Real Exchange Rate Stability. At a meeting of ECOWAS Finance Ministers and Governors of Central Banks in Abuja to review progress, Ahmed said only Togo was able to meet all the criteria in the last two years. While it is important for the ECOWAS economies to maintain macro-economic stability, they must see themselves bound by obligation to ensure that statistical data accuracy in their records are maintained, she said. This is because the crisis that threatens the Euro was not one that lies in the euro as a currency but with the economy and financial situations of the countries that used the euro. “Data must therefore be very factual and be real reflection of what is happening in our economy,” she urged.

The minister, however admitted recent major milestones, including, “the adoption of the flexible exchange rate regime, a monitoring of policy framework based on inflation targeting, a system which best accommodates our regional peculiarities were also adopted by our regional group. “We also adopted the ECOWAS Central Bank, and the name “ECO” for the future Ecowas single currency,” she stated, adding that, the process will lead to the establishment of an Ecowas central bank to oversee trade and financial integration, promoting the use of national currency to facilitate cross border trade payment, financial transactions, as well as reserve management. “But as these achievement is exciting, the prospect for currency feature in 2020 build in terms of macro economy stability and convergence is to say the least rather uncertain,” Ahmed told the gathering.

Stakeholders x-ray ways to boost cyber security IFEOMA OKEKE

takeholders in Nigeria recently gathered at a Cyber Security Workshop themed: ‘DDoS Evolution – Staying Protected’ to x-ray ways to boost cyber security within the country. The event, organised by the Information Security Society of Africa-Nigeria (ISSAN) in collaboration with 21st Century Technologies, was held at the 21st Century Technologies’ SOC Centre, Lekki, Lagos. While welcoming stakeholders, David Isiavwe, president of ISSAN, decried the worsening state of cyber security in the country. He said, “Those who watch the cyber space closely will all agree that there is a lot of happenings each and every day. New forms of attacks are being contrived and implemented by the bad guys, and all they need is one successful attempt. “We hear of all the various attacks both on individuals and companies alike. Indeed, even the cyber security gatekeepers are not spared. And huge sums of money are at risk each time there is a successful attack.” Isiavwe, who is also the group head, operations and technology, Ecobank Nigeria, lamented the fact that everyone and every institution was susceptible to these attacks as social engineering attack was unrelenting, data-based manipulation - insiders and outsiders - was on the rise, attack on card data and card processing technology infrastructure via rogue IT infrastructure, spear phishing attack and combination of different methodologies were rampant. He therefore called on all stakeholders to be proactive, create customer awareness activities, continuous and automated monitoring of systems and infrastructure, employment of AI and Machine Learning as well as robotics and data analytics. He also called on collaborations between all

stakeholders. Speaking on the theme of the workshop in a keynote address, Long Lee Shih - DDoS Security expert, Nexusguard Limited, also explained how individuals and organisations could avoid being victims of

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cyber-attacks, including Origin Protection (OP) for large networks, among others. His keynote address was followed by a robust plenary session that included Wale Obadare, MD/COO, Digital Encode; Long Lee Shih, Ig-

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hoakpo Eduje, chief information security officer, Heritage Bank; Igboa Abumere, chief information security officer, Stanbic IBTC Bank; Bharat Soni, chief information security officer, GTBank, and David Isiavwe.

Monday 09 December 2019

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‘Seplat has not broken any law over appointment of non-Nigerian CEO’ Olusola Bello

xecutive secretary, Nigerian Content Development and Monitoring Board (NCDMB), Simbi Wabote, says Seplat Petroleum Development Company plc has not broken any law by its appointment of Roger Brown as CEO-designate to replace current CEO, Austin Avuru. Wabote said this at the ongoing 9th Practical Nigerian Content Conference hosted by the NCDMB in Yenagoa, Bayelsa State. Whils clarifying the Board’s position on the appointment, Wabote, while addressing participants, said: “If you read the Act itself, it creates a 5 percent position for investors. The investment in Seplat is not coming fully from Nigeria; the company is publicly listed in the London and Nigerian stock exchanges. So, the company is bringing in external funds and most of these fund contributors would want to have some level of representation in such establishment. “There is no breaking of law by Seplat; but I think the point that was being made

was that Seplat has always been a poster child and you expect that they will continue to grow in terms of local content attainment. But of course, Seplat has a business reason to do the appointment, and the company has not broken any law.” The company had, last week in an announcement to the Nigerian Stock Exchange, refuted an allegation in a section of the media that the appointment of Brown negated the provisions of the Nigerian Oil and Gas Industry Content Development Act, 2010 (the Nigerian Content Development Act). A s s t at e d i n t h e a n nouncement dated November 18, 2019, Seplat had informed the public of the appointment of Brown as the successor to Avuru as CEO, when Avuru steps down on July 31, 2020. The company stated: “Seplat is a law-abiding corporate citizen that maintains the highest level of corporate governance standards. Mr. Roger Brown has been with the Company for six (6) years and has since his joining, served in the capacity of Chief Financial Officer (CFO) of the Company.

Government in aggressive push to protect tenants, regulate estate agency practice in Lagos CHUKA UROKO

s an active rental market where over three quarters of the residents are renters, Lagos is haven for fraudulent estate agency practices. But the state government says it is all out now against such practices. Findings show that estate agency practice in the state with over 20 million residents has assumed a monstrous dimension with persons who parade themselves as genuine estate agents making brisk business by defrauding prospective tenants. On case-by-case basis, the state is dealing with these professional infractions. Toke Benson-Awoyinka, special adviser to Governor Babajide Sanwo-Olu on housing, said recently at a press briefing that one of such fraudulent agents had been prosecuted and sentenced to 20 years in jail. The agent, she said, operated in Ajao Estate area of the state where he had been defrauding members of the public, saying, “The state government has taken over his property and will sell the property and money realised will be given back to the victims.” Benson-Awoyinka recalled a case in Alapere involving the sale of 15 units of selfcontained apartments to 262 home seekers. The estate agent on this fraud collected as much as N68 million from these unsuspecting home seekers. In Gbagada area of the state too, there were five units of housing and 70 people paid to a fraudulent estate agent for those few units, while in Agege, there was a case of 300 people paying for only 15 units of housing.

“We are taking our regulatory position as a department or a ministry; we believe that we will be failing as a government if we don’t do this to protect members of the public who are looking for houses to rent or buy,” the special adviser said. The state government, through the office of the Special Adviser on Housing, which superintends the Lagos State Real Estate Transaction Department (LASRETRAD), would be introducing a platform people could log into and do their real estate transactions without coming to the Ministry of Housing to register as real estate practitioners. “We are developing a portal that will be going life as from January 2020 where, as a player in the industry, you just log in and make all your enquiries. Here, we take all their data and thereafter go to verify their claims. We have to do this because we have a lot of briefcase agents and even developers,” she emphasised. Analysts are of the view that fraudulent activities flourish in Lagos because, as a city, Lagos is a very expensive housing market. A report on the state of its housing market says the state has approximately 3 million housing units’ deficit that requires an annual delivery of about 200,000 housing units for the next 10 years to close the gap Due to affordability issues, many of the residents are renters. According to the report, which was compiled by Pison Housing Company, about 80 percent of the state’s over 20 million residents live in rented accommodation, spending about half of their income on house rents. www.businessday.ng

L-R: Michael Larbie, CEO, RMB Nigeria/regional head West Africa; Abiodun Adebimpe, head, custody, RMB Nigeria; Nadia Zakari, head, global markets, RMB Nigeria; Ngover Ihyembe-Nwankwo, coverage head, RMB Nigeria; Mike Okon, head, structuring, RMB Nigeria, and Dalu Ajene, deputy CEO/head IBD, RMB Nigeria, at the RMB Nigeria Client Appreciation Event, which included the RMB Nigeria Custody Launch and Art Exhibition, in Lagos.

Stakeholders task FG on National Policy on Agricultural Mechanisation Cynthia Egboboh, Abuja

takeholders in agriculture have tasked the Federal Government on the need to review the agricultural mechanisation policy within the present drive to boost agricultural production as well as promote food sufficiency across Nigeria. Ogheneovo Ugbebor, deputy team leader, Propcom Mai-karfi Group, speaking at a day workshop captioned ‘Agricultural Mechanisation Policy Validation Workshop’ organised by Propcom Mai-karfi, said developing an implementation plan for agricultural mechanisation in the National Agriculture Promotion Policy as well as introducing policy on compulsory in-country assembly of tractors

and other agricultural machinery is critical in addressing the limitations in the sector. “Some of the limiting factors affecting our productivity in the agriculture space include; poor access to credit, high cost of agricultural equipment, minimal private sector engagement, weak advocacy and lack of a clear framework guiding implementation of the broad statements on agricultural mechanization in the National Agriculture Promotion Policy,” Ugbebor stated. “We hope to influence policy and help Nigeria define a path for improving mechanisation and expanding the required access to finance in Nigeria,” she said. Speaking further, she said the increasing demand for mecha-

nisation among an estimated 77 million farmer population as well as factors limiting better use of Nigeria’s agricultural mechanisation potential underscore the importance of reviewing the agricultural mechanisation policy within the present drive to make Nigeria more self-sufficient in its food requirements. Chijioke Osuji of Federal University of Technology, Owerri, in his remark, said developing federal policy on land development and offering financial incentives to states to develop farmlands, expanding the mechanisation policy to comprise irrigation infrastructure, land clearing and post-harvest storage activities, and extending the zero-tariffs policy to tipping trailers and agricultural machinery spare

parts were critical to addressing the identified limitations. “That the engagements and coming together of different agricultural stakeholders in Nigeria have actually gone up and we are seeing the benefits. Mechanization is a specialist area and it is something we must do well if we are to propel agriculture in Nigeria,” he said. “This is one of the few times in planning and policy processes for agricultural development where we have strict adherence to different components and stages of policy formulation before we arrive at a concise policy document, which in this case is the National Policy on Agricultural Mechanisation,” Ayoola Gboladade, Farm and Infrastructure Foundation (FIF).

SAA made maritime investors return to Nigeria - Okunbor

Lagos to begin first pilot of gas-powered vehicles next year

… says OMSL stopped insecurity on waterways

Desmond Okon

LUCKY NWANEKWU

hairman of Ocean Ma r i n e S o l u t i o n s Limited (OMSL), Hosa Okunbor, says prior to the Secure Anchorage Area (SAA) contract, maritime investors were avoiding Nigeria, saying SAA brought safety to the nation’s maritime territory. Okunbor also said the sudden stoppage of the contract by the Nigeria Ports Authority (NPA), without regards to OMLS’s investment, was not only embarrassing, but also capable of taking Nigeria back to pre-SAA days. He said this in Abuja during an investigative hearing by the Joint Committee on Navy, Marine Transport and Finance. Okunbor’s view is widely shared by industry experts, who said NPA’s action could expose the waterways to insecurity, thereby resulting in huge economic loss in the maritime sector. Okunbo said: “OMSL started in 2007 at the height of militancy where this coun-

try would have been producing less than 300barrels per day. Admiral Augustus Aikhomu late who was the first chairman of OMS and also who has been the Chief of Naval Staff was the one that came up with this idea. “At this time it was just an intervention and we wrote to the Navy In 2007, we bought only three vessels, we started this business with only three vessels because it was pertinent to open Mistras which was short in 70,000 per day. There were bullet holes on shells EA field. Adax was attacked on daily bases and shell was going to close the whole of their eastern production. “There were numerous challenges on our waters and we came in to intervene for the sake of National interest because then which Nigerian businessman will procure a vessel over $3 to $4 million or $6 million and hand it over to the Navy completely without insurance in Ramsay to defend this country. We took the risk, nobody was ready to.

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agos State commissioner for energy, Olalere Odusote, says the state will start the first pilot of gaspowered vehicles in 2020. He said this at the first edition of The Enyo Correspondents Breakfast event held in Lagos. At the event, organised by Enyo Retail and Supply, solutions to the problems in the energy sector were discussed. The commissioner made the statement while sharing on the plans of Lagos State towards improving the energy sector. “2020,” he said, answering a question, “We would start the first pilot of gas-powered vehicles next year.” Also speaking on the Lagos Energy City plan, he said plans were still on course and “in the next few months, we’ll be making some announcements.” Further addressing questions on the possibility of Lagos to be lit up in three years, Odusote expressed optimism that I could be achieved if everything was the way it should be. “It’s possible,” he said. “If @Businessdayng

everybody believes in toeing the part of common good, then we’ll do it.” In addition he said: “Lagos State intends to create sustainable support to the power sector to ensure that Lagos is fully lit in the next couple of years.” The Light Up Lagos initiative was started by the last administration to light up streets and major highways in the state. From inception, it was believed that the project would support the past governor’s plans of a 24/7 economy that will create employment and wealth for residents, and also support security. Speaking with BusinessDay in a separate interview on the gas-power vehicles expected to hit the market next year, while no specific time line was given, it holds promise for stakeholders if it materialises, according to Abayomi Awobokun, CEO, Enyo Retail and Supply. For Awobokun, the development means sustainable energy. “It’s great for the environment, it’s great for Lagos, it’s great that Lagos would pioneer something so laudable. It’s great for the industry –the more gas we sell, the cheaper gas for other uses.

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SON, stakeholders set to re-qualify gas cylinder

Sanwo-Olu rolls out master plan for Lagos smart city

… destroy 5,000 sub-standard LPG … focuses on transforming state through tech innovations cylinders worth over N51m services. investors to leverage on the of Lagos. OLUSOLA BELLO

n line with its mandate to ensure the safety of lives and properties across Nigeria, the Standards Organisation of Nigeria (SON) says it has opened collaborative talks with filling plants owners and other relevant stakeholders in order to commence the re-qualification gas cylinders in use. However, the agency stated that the exercise would appear daunting in view of individual ownership of liquefied petroleum gas cylinder in the country. In a related development, more than 5,000 substandard gas cylinders worth N51.3 million have been publicly destroyed by the SON. According to the standards body, the cylinders destroyed were imported into the country without SON’s Conformity Assessment Programme certification and did not comply with specifications in line the Nigerian Industrial Standards (NIS) 69. Obiora Manafa, director, Inspectorate and Compliance Directorate, SON, at the destruction exercise at one of its warehouses in Lagos, recently said the importer brought in 12.5kg cylinders not meant for camping gas, pointing out that the maximum capacity of cylinders required for camping gas were 3.5kg, 5kg and 6.25kg. In his words,” Those are the sizes of cylinders allowed for camping. Using 12.5kg you have to mouth the burner for camping the gas and when you are cooking, you are exposing a large number of gas to direct heat which is not allowed. It is a

threat to safety. “We did not give any importer approval to bring in 12.5kg for camping, but approvals for 3kg, 5kg and 6.25kg for camping. In this case, the importer brought in cylinders of 12.5kg as camping and that is why we have seized it for destruction, because we cannot allow it into the market.” Meanwhile, Manafa stated that plans were underway to work with stakeholders in the industry to begin a requalification scheme which would put every used cylinder through a requalification exercise to ensure that a cylinder is not used beyond its expiration date. Identifying some of the challenges to be faced by the programme, such as replacing the cylinders after withdrawal, he stated that in a country where gas cylinders are owned by individuals, it would be difficult to carry out the scheme as in other countries where cylinders are owned by marketers. “In Nigeria, cylinders are owned by individuals, but owned by marketers in other climes and once the cylinders are due for recertification, it is easy for withdrawal, but difficult to get these cylinders from individuals to do requalification,” he said. “The only way it can work is if any consumer takes a cylinder to a filling plant to refill and the plant owner checks the cylinder and it is due for requalification, the plant owners should be given powers to seize the cylinder. These are some of the things we are working with other stakeholders in the industry to address,” he said.

Lagoon Hospitals appoints new CEO

ygeia Nigeria Limited, owner of Lagoon Hospitals, has announced the appointmentofAkinosoOlujimi Cokerasthehospital’snewCEO, and will be responsible for driving quality, patient experience, team leadership, clinical innovation, as well as growth of the hospitals group. Coker qualified from the College of Medicine, University of Ibadan, Nigeria, and had his specialist surgical training in the United Kingdom. He was appointed Clinical lecturer in Surgery at University of Sheffield and Consultant General and Laparoscopic Surgeon at Doncaster and Bassetlaw NHS Trust (DBH NHS Trust) in 1999. He joined Tropical Health and Education Trust (THET – UK-basedcharity)in2000assurgical instructor and appointed member board of trustees from 2006 – 2010. He served as chairman of the International Devel-

Akinoso Olujimi Coker

opment Committee of Association of Surgeons of Great Britain and Ireland at the Royal College of Surgeons of England from 2007 – 2010. He was Director of Endoscopy Services at DBH NHS Trust from 2005 – 2010. He was the coordinator of the West African College of Surgeons in the United Kingdom from 2008 to 2011, and received an award at the Golden Jubilee Conference of the West African College of Surgeons (2010) for organising the first pre-conference WACS surgical outreach program in Calabar, Nigeria. Hewastheprincipalinstructor on advanced colorectal surgery at the Nairobi Surgical Skills Centre, University of Nairobi, Kenya from 2007 – 2015 with biannualtrainingworkshopsfor East African surgeons. InJanuary2011helefttheUK forsabbaticalinLagos,Nigeriato lead the surgical strategy including laparoscopic and colorectal surgery and was appointed Chief of Surgery at Lagoon Hospitals, Lagos. He worked in close collaboration with the Quality Improvement unit to achieve Joint Commission International (JCI) accreditation for Lagoon Hospital in 2011 (the first of such in sub-Saharan Africa) with reaccreditations in 2014 and 2018. After his two-year sabbatical, he resigned from the UK National Health Service in December 2012 to take up permanent appointment with Hygeia Nigeria as Group Clinical Adviser.

Jumoke Akiyode-Lawanson

few years ago, smart city was the buzz word on the mouth of Nigerians, as the country looked to information communication technology (ICT) as a favourable option for economic diversification. Today, with the sector contributing about 13.8 percent to nation’s Gross Domestic Product (GDP), it has become even more necessary for government to invest in smart city initiatives. A smart city is an urban development vision to integrate multiple information and communication technology (ICT) solutions in a secure fashion to manage the city’s assets such as schools, libraries, local department information systems, power plants, hospitals, transportation systems, law enforcement and other community

Lagos State is set on becoming a smart city through the launch of a technology master plan for good governance at the Art of Technology 1.0, an innovation strategy centred on transforming the country. Babajide Sanwo-Olu, governor of Lagos, who spoke at the AOT Lagos conference, which brought together about 2000 tech giants, policy makers and government officials, said there were many opportunities available for the development of software that could transform the way we see, do or think about life activities. Speaking about the AOT, he said, “Art of Technology 1.0 will open the window for ideas, concepts and principles buried in the creative recesses of our people to break out and transform the landscape. “I urge all participants and

opportunities available at Art of Technology 1.0 to synergise and network with other innovators to develop life changing software that will transform healthcare, agribusiness, transportation, food security, housing and education in Lagos mega city.” The governor said his administration would continue to provide opportunities that ease doing business in Lagos State for local and foreign investors to leverage on potentials available in the tourism and recreation. “It is our goal to foster the gains achieved by the Art of Technology 1.0 to enhance and empower the residents and investors in Lagos the obvious and preferred location of first choice,” he said. He pointed out the technology has taken over all sectors and industries, hence the need to grasp it and transform the city

The governor’s admitted to the challenges we face as a society and the creeping economic progress, he promises new sustainable measures for economic growth. “We cannot disaffirm the intractable challenges we face as a State. With a population of about 22 million and a crumbling infrastructure, new sustainable methods of transportation and infrastructure deployment must be formulated to keep up with the population growth. More so, “The use of artificial intelligence to predict movement of human resources and materials and reverse environmental degradation are critical solutions we need to adopt. Our challenges put us in a unique position to engineer not just our own solutions but engineer solutions for the world at large.

Ebenezer Onyeagwu (m), GMD/CEO, Zenith Bank plc; flanked by Abisoye Ajayi Akinfolarin (1st l); Frank Oshodi (2nd l); John Momoh (4th l); Kate Henshaw (5th l); rep. of Kechi Okwuchi (7th l); Deola Sagoe ( 8th r), Ade Odunfa (7th r), rep. of Stella Adadevoh (6th r); Kelechi Amadi-Obi (4th r); Ali Baba Akpobome (3rd r), and Kanu Nwankwo (2nd r), All Recipients of ‘ZYP Heroes Award’, with Executive Management of the bank at the 2019 Zenith Youth Parade themed “Heroes of our Times: Past, Present and Future” held at Ajose Adeogun Street, Victoria Island, Lagos.

Former Sahara Group boss charges regulators on Access Bank, Genesis House address partnerships in businesses at NCRIB-LAC AGM gender violence with Orange lecture 2019 IFEOMA OKEKE

o-founder and former group executive director of energy conglomerate, Sahara Group, Tonye Cole, has advisedregulatorstobecomecollaborators with businesses rather than become obstacles to them. Cole made this call at the 16th annual general meeting (AGM) and 2019 Annual Lecture of the Lagos Area Committee (LAC) of the Nigerian Council of Registered Insurance Brokers (NCRIB) held at Sheraton Hotel, Ikeja, Lagos. Speaking as the guest speaker at LAC’s AGM, Cole’s keynote centred on the lecture theme: ‘Management of Regulatory Issues as a Business Owner in Nigeria.’ The former Sahara Group boss noted that Africans by nature were traders, as the trade mind-set was evident across the continent. While informing insurance brokers at the AGM that the informaleconomyformstheheartbeat of the African market, he lamented that it remained largely unregulated, under-documented, understatedandunderestimated.

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He said 66 percent of unemployment in sub-Saharan Africa was in this sector. While reeling out dire statistics, he noted that 74% of employed here were women, while 80% of youths transitioningfromschool-towork were also in this sector. In calling for innovation in tapping into the business sector, he queried, “If the informal sector is such an inbred and pervasive part of African daily life, should we not be thinking smarter and more innovatively about how to harness its potential and make it a much more potent force for the good of the continent?” He however decried the fact thatamonghurdlesfacedbybusiness owners in Nigeria, regulators constitute a part, where they are more of competitors than collaborators. He therefore urged regulators to be partners with businesses and make themselves easily accessible to them and help them solve their problem as well as help facilitate capabilities. He also advised that the focus for regulators must begin to shift from ‘policing’ to one of enabling and fostering.

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SEGUN ADAMS

ith intent to address human rights violation and sexual violence against women and girls, Access Bank plc - through the Access Women Network (AWN) and Genesis House - hosted the 2019 edition of Orange Lecture on Wednesday last week at the bank’s headquarters in Lagos. A recent study by the Ministry of Women Affairs and Social Development and United Nations Population Fund (UNFPA) shows that 28 percent of Nigerian women aged 25 - 29 have experienced some form of physical violence since age 15, while nearly three in 10 Nigerian women have experienced physical violence by age 15. According to UNICEF, 1 in 4 girls and 1 in 10 boys in Nigeria has experienced sexual violence before the age of 18. Describing the statistics as worrisome during her keynote address, Harriet Thompson, British Deputy High Commissioner to Nigeria, lauded the efforts of Access Bank and @Businessdayng

Genesis House in organising the lecture, saying, “Without gender equality and women playing a full role in all aspects of society, no country can achieve its potential. We must also put an end to the violence against Nigerian children if we are to achieve the Sustainable Development Goals by 2030.” Now in its fifth year, the event was focused on encouraging stakeholders to lend a voice to the efforts in tackling violence against women, and to support vulnerable, sexually-exploited females by providing information on rehabilitation and support services available to help them overcome their ordeals. Speaking on the bank’s involvement, the group head, treasury, Sunmbo Olatunji, said, “With our promise to offer ‘More Than Banking’, the Orange Lecture is an important platform that we have chosen to champion. The AWN, has maintained a partnership with Genesis House, an arm of Freedom Foundation, to support their rehabilitation programs for survivors of domestic and sexual abuse.”

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FINANCIAL TIMES

World Business Newspaper

uhammadu Buha r i , Ni g e r i a’s president, is six months into his second term. A former military leader who returned three decades later as an elected president in 2015, Mr Buhari still has three years to build a positive legacy. So far, he has disappointed. Nigeria is going backwards economically. A combination of anaemic growth and a fast-growing population means the economy has been shrinking in per capita terms throughout Mr Buhari’s tenure. The security situation is unstable, despite some progress against Boko Haram, the Islamist terror group. Clashes between herdsmen and settled farmers are affecting much of the country. Crucially, Mr Buhari’s reputation for personal integrity has not translated into a discernibly more efficient — or honest — state. To be fair, the job Mr Buhari inherited is next to impossible. Nigeria has at least 180m people and some 500 languages. By all rights the continent’s wealthiest nation, it has more people living in absolute poverty — defined as below $1.90 a day — than India. Oil has ruined Nigeria, making it a rentier — rather than a production — economy. The business of government becomes that of divvying up revenue, a task that has corrupted the institutions of

There are no easy fixes for Nigeria’s problems Reforms to its oil industry and a more efficient state are vital

Nigeria’s president Muhammadu Buhari has three years left of his tenure — time enough to implement change © Siphiwe Sibeko/Reuters

state supposed to carry it out. Mr Buhari has understood this, at least in theory. He has complained of the manufacturing sector’s seeming inability to produce the simplest goods, hardly surprising given the lack of electricity, dire roads and absence of manufacturing inputs. Rightly, he wants diversification and support for farmers. Unfortunately, the president has sought statist solutions to these issues in a country where the state lacks

US secretary of state is thought to want Senate seat ahead of possible presidential run

Its room for manoeuvre on conventional monetary policy is small

hen the next recession hits the US economy, the country will be poorly positioned to deliver an effective countercyclical monetary or fiscal policy stimulus. The reason for the inadequacy of monetary policy is obvious: the Federal Reserve’s room for manoeuvre on interest rates is scant. The target range for the Federal Funds rate is 150 to 175 basis points. Before the financial crisis, a typical peak-to-trough policy rate cycle would see the rate cut by just over 500 basis points. The Fed is highly unlikely to take the target range into negative territory. It is afraid of causing upheaval in the money market funds sector. There also is a view held by some on Capitol Hill that a negative deposit rate would be a tax on banks lending to the Fed. Only Congress has the right to impose taxes. The same logic would identify positive policy rates as a tax on banks borrowing from the Fed. So only a zero policy rate would be constitutional — Islamic banking US style. In practice, for the Fed the zero lower bound is a binding constraint. It follows that 150 basis points will be all the conventional policy space the Fed will have to play with. Once the limited interest rate options have been exhausted, all that is left is unconventional monetary policy — quantitative and qualitative easing,

yield curve targeting and forward guidance about the timing of the end of the zero policy rate regime. Outside financial crises, changing the size and composition of the Fed balance sheet is poor man’s monetary policy. It still affects financial conditions, although with diminishing returns. And the transmission from financial conditions to aggregate demand is weak. The failure of financial conditions to have a meaningful impact on demand is due in part to the excessive indebtedness of the private sector. This is obviously the case in the non-financial corporate sector, but household leverage, too, is high by any standards except the crazy levels experienced in the years leading up to the financial crisis. Even if a weaker currency boosts demand for domestic output, the size of the tradable sector in the US is too small to make this a game changer. That leaves fiscal policy, which can and should be used to provide a countercyclical stimulus when the next recession comes. The US has fiscal sustainability issues, resulting mostly from the growth in social security and public health spending, and the already elevated public debt burden. But these should not stand in the way of a strictly temporary countercyclical stimulus. If there are concerns about the market’s willingness to absorb additional public debt issuance at tolerable interest rates, the Fed should volunteer to monetise it. www.businessday.ng

the drastic step of closing all land borders. Few think that policy can hold. There are some glimmers. Nigeria is vying with Kenya as Africa’s most dynamic tech hub. In November alone, its fintech companies attracted nearly $400m from foreign investors. Aliko Dangote, a businessman who has made money through state protection, is investing $12bn in a petrol refinery that could help curb the

Mike Pompeo plots a new career path through Kansas

The Federal Reserve will have to be creative in the next recession WILLEM BUITER

credibility. That has involved allocating foreign exchange to favoured industries — not a good solution when institutions are weak. In an effort to boost rice production, the government has funnelled capital to farmers and clamped down on imports of cheaper rice. Production has leapt 60 per cent since 2013, though ordinary Nigerians now pay more for the staple. Imports of smuggled rice are so large the government has taken

ludicrous practice of exporting crude oil and reimporting finished products. There are signs of more vigour in Mr Buhari’s government too. He has begun to implement long-delayed reforms to the oil industry. He is also seeking to raise value added tax by 50 per cent to a still-modest 7.5 per cent, a small step but better than nothing in an economy that collects tax worth just 5.7 per cent of output, according to the most recent figures from the OECD. He could go one better by removing the petrol subsidy, which distorts the economy and helps the middle class the most. In the time he has left, Mr Buhari should try to improve the efficiency of the state and its ability to provide public goods. Turning things around does not mean micromanaging or getting in the business of capital allocation. Rather it means reducing the space for arbitrage and nonproductive activities such as speculation. It also means providing the infrastructure, decent health and schooling that are the foundations of any national project. The task is formidable, but there is some low-hanging fruit here. Mr Buhari should grab it before it is too late.

AIME WILLIAMS

n a recent whirlwind diplomatic mission that took Mike Pompeo to the UK, Portugal and Morocco, the top US diplomat took an unusual detour — to Louisville, Kentucky. Mr Pompeo’s presence on a stage beside Republican Senate leader Mitch McConnell was one of many recent domestic appearances that has Washington speculating that the secretary of state is planning a career move that could lead to a presidential run in 2024. Speculation has mounted that the former CIA director will run for the Senate in his adopted home state of Kansas, where Republican Pat Roberts is retiring. The buzz has risen as Mr Pompeo has come under heat over the impeachment inquiry, and even Donald Trump has opened the door to the possibility. “He loves Kansas, he loves the people of Kansas,” the US president said last month, adding that Mr Pompeo would consider running if he thought the Republican party might lose the seat. “But you could never find anybody that could do a better job as secretary of state.” The Trump loyalist has been implicated in the backroom foreign policy deals that are at the centre of the impeachment inquiry. He has also faced tough questions over his apparent unwillingness to defend veteran diplomats from attack by the White House.

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“The impeachment inquiry is survivable for him, but it’s an example of what can happen if he stays as secretary of state,” said Bob Beatty, a politics professor at Washburn University in Topeka, the Kansas capital. “Trump’s foreign policy is off the cuff, and there’s potential for something like this to happen again.” The former congressman who graduated first in his class at West Point, the US military academy, was drawn into the impeachment inquiry by Gordon Sondland, the US ambassador to the EU who testified that the secretary of state was “in the loop” on efforts to pressure Ukrainian president Volodymyr Zelensky to investigate Joe Biden and his son, Hunter Biden. Mr Pompeo faces a conundrum: does he jump to the safety of a Republican Senate seat or stay by Mr Trump’s side until the end of the impeachment inquiry? By leaving he would be following the path of Nikki Haley, the former South Carolina governor who was Mr Trump’s UN ambassador, who left the administration ahead of what is tipped as a shot at the presidency in 2024. Mr Pompeo insists he will stay as long as Mr Trump wants. But much rides on maintaining the loyalty of a president who has fired a succession of top officials after souring on them. “Pompeo’s association with Trump has led to one of the most amazing rises in American politics, but it could lead to one of the most inglorious falls in American politics,” said Mr Beatty. “He might have a way @Businessdayng

out — and that’s Kansas.” In theory, Republicans should not need a heavy hitter such as Mr Pompeo to win the seat. Kansas has not sent a Democrat to the Senate since 1932. But some in the party fear that Mr Pompeo’s main rival for the Republican nomination in Kansas, Kris Kobach, is too conservative even for Kansas. Described by some local party figures in Wichita as “Trump before Trump”, Mr Kobach is known for his hardline conservative stances on issues ranging from abortion to illegal immigration, where he has vociferously backed Mr Trump’s plans to build a wall on the Mexican border. But he stoked anxieties among local Republicans by losing the 2018 gubernatorial race in Kansas to sitting Democratic governor Laura Kelly. Party locals worry that while Mr Kobach could easily win the Republican primary nomination in Kansas by appealing to the party’s conservative base, he is less appealing to the broader Kansas electorate, who are more moderate. Mr Kobach, who has enjoyed a close relationship with Mr Trump since meeting him through his son, Donald Jr, says he does not see Mr Pompeo entering the race. “It would be surprising if he jumped in,” he said. “If he leaves in the middle of an impeachment inquiry then it has the appearance of him leaving the president’s side and jumping ship. So I think he needs to stay and defend the president until that is concluded.”

Monday 09 December 2019

BUSINESS DAY

NATIONAL NEWS

Hong Kong protesters stage biggest march in 6 months Peaceful rally through financial hub’s centre defies Beijing’s efforts to stifle movement JOE LEAHY, NICOLLE LIU AND JAMIL ANDERLINI

undreds of thousands of people marched through central Hong Kong on Sunday in the biggest pro-democracy demonstration in the Asian financial centre since millions took to the streets when the protests began in June. The large turnout at the protest, the first street march in central Hong Kong approved by the police since mid-August, comes despite Beijing’s efforts to stifle demands for greater political freedoms in the territory. The protest wrapped up peacefully, a rare outcome in the months of often violent demonstrations. It comes two weeks after pro-democracy parties swept local elections in Hong Kong, the first electoral test of the city’s prodemocracy movement since the movement began. Demonstrators chanted “fight for freedom, stand with Hong Kong” while riot police kept vigil from the side streets and on pedestrian bridges. The organisers estimated 800,000 had joined the protest. Police estimates suggested there were less than 200,000. By early evening, three hours after the protest began, thousands of people were still joining the march. The peaceful but serious atmosphere at Sunday’s protest recalled

the movement’s beginning, when as many as 2m people flooded central Hong Kong to oppose an extradition bill that would have allowed suspects to be tried in mainland China. In the ensuing months, the protests have increasingly descended into violence while the movement has expanded its demands to include universal suffrage and an inquiry into alleged police brutality. “I am here to fight for democracy and freedom,” said a 74-year-old protester, who identified himself only as Mr Chu. “We have been suppressed by an authoritarian government.” On Sunday, police said they arrested 11 people and seized “a large amount of weapons” including a pistol and 100 bullets. “Intelligence suggested that the gang planned to use the weapons during the public procession today and to frame police,” the force said in a statement. The government sounded a more conciliatory note, however, saying it had learned from the failed extradition bill, which Hong Kong’s leader, chief executive Carrie Lam, later withdrew. “In view of the social controversies and disputes as well as other problems brought about by the legislative amendment exercise, the . . . government has learned its lesson and will humbly listen to and accept criticism,” a spokesman said in a statement.

FCA probes funds worth £15bn over links to Woodford Multi-manager products from Hargreaves Lansdown and Quilter among most exposed SIOBHAN RIDING

he City regulator is investigating funds worth more than £15bn that have holdings in Neil Woodford’s collapsed investment vehicle as it seeks to prevent the liquidity crisis surrounding the fallen stockpicker from spiralling. The Financial Conduct Authority is closely monitoring multi-manager funds with holdings in Equity Income — Mr Woodford’s flagship vehicle that was suspended in June — over fears that investors in these products are vulnerable to contagion spreading from the failed fund. At least 15 UK retail funds are invested in the Woodford vehicle, including popular multi-manager funds run by Hargreaves Lansdown, the UK’s largest fund supermarket, and Quilter Investors, the wealth manager, according to FTfm analysis of Morningstar data. Of Hargreaves’ six Woodford-exposed multi-manager funds, which together have £6.1bn in assets, three count Equity Income in their top 10 holdings. The fund accounts for as much as 11 per cent of Hargreaves’ £2.6bn Income & Growth fund. Quilter, which dropped a segregated mandate managed by Mr Woodford this year and switched its holdings into the Equity Income fund, has £8.9bn in multi-manager portfolios exposed to the collapsed fund. The holding represents about 1 per cent of the Quilter portfolios. Total assets in retail funds that have positions in Equity Income stand at more than £15bn. However, this figure understates the amount of assets that are indirectly exposed to the Woodford fund as it does not capture wealth managers’ discretionary portfolios.

Unlike direct Equity Income fund investors, who were trapped when the fund halted trading in June, investors in the multi-manager funds are free to redeem their cash. However, continued investor outflows from the multi-manager funds could spiral into a liquidity crunch, since the Woodford fund cannot be sold down to repay investors. In the event of an investor run, the funds would be forced to sell down positions in other funds, increasing the size of their Equity Income holdings. This could ultimately lead the portfolios to halt trading. Richard Wilson, chief executive officer of Interactive Investor, the UK’s second-largest investment platform, said his company had been contacted twice by the FCA about potential Woodford ripple effects. “[The FCA] had specific questions about the Woodford story in order to understand the situation across the UK [and] where the trail of contagion is,” he said. Interactive Investor has no multimanager funds exposed to Woodford. According to Morningstar, two multi-manager funds offered by investment platform The Share Centre have holdings in the failed fund. Other funds exposed to the strategy are the £106m CAF UK Equity, the £24m Gemini Principal Asset Allocation and the £12m Octopus UK Equity funds. James McManus, investment manager at robo-adviser Nutmeg, said there were “serious questions” about how the multi-manager funds were valuing the Woodford holding. The fund’s liquidators will start selling down holdings in January although investors are unlikely to receive all of their original investment. PJT, one of the fund’s liquidators, recently estimated investors were set to lose about one-third of their savings. www.businessday.ng

Algerians set to boycott first poll since fall of Bouteflika Low voter turnout expected with landmark vote seen as way to preserve status quo HEBA SALEH

or the five candidates competing in Algeria’s presidential election on Thursday the campaign has been a mostly humiliating experience. They have struggled to fill venues, angry crowds have heckled them at rallies and some of their campaign posters have been covered with garbage bags. The polls will be the first since protesters toppled the ailing president Abdelaziz Bouteflika in April after 20 years in power but many voters plan to stay away. The five contenders are all seen as regime candidates and the front runners, Abdelmadjid Tebboune and Ali Benflis, have both previously served as prime minister. For most Algerians the elections are little more than a mechanism to sustain an opaque and authoritarian political system put in place after independence from France in 1962. “I will not vote because I am not convinced by the candidates,” said Fatma, a school teacher. “They are all part of the Bouteflika gang. I am not convinced there will be any change.” “A real political opening up would mean ending the entire system,” said Soufiane Djilali, head of the Jil Jadid opposition party, which is boycotting the vote. “It would also mean holding many people to account and reviewing the big vested

interests of individuals tied to the power structure who operate in the economic and financial spheres.” Politicians like Mr Djilali argue that Algerians want genuine democratic change and will continue to rally against the military-backed regime regardless of who wins the poll. Since independence, the Algerian army has been the main arbiter of power in the political system, choosing presidents and controlling key political and economic decisions behind a facade of civilian leadership. In April, after weeks of anti-government protests, General Ahmed Gaid Salah, the army’s chief of staff and the country’s de facto leader, finally bowed to popular demands and forced out Mr Bouteflika who was on course for a fifth term as president. The elderly leader had suffered a stroke in 2013, which impaired his speech and had kept him largely out of public view for six years. In an effort to absorb popular anger, Gen Salah then sent scores of officials and businessmen to prison, some of whom had prospered under the Bouteflika regime as it poured billions of petrodollars into infrastructure projects. They included a brother of the former president who was tried and sentenced to fifteen years.. But neither the arrests of Mr Bouteflika’s cronies nor a crackdown on the demonstrations, which have continued since February, have

reduced the momentum of the leaderless protest movement that continues to mobilise huge crowds across the country. Despite the popular opposition, Gen Salah has insisted that the presidential poll, already delayed twice, must go ahead and urged Algerians to turn out in large numbers. Those opposing the election are serving foreign interests, he and other members of the regime have said. Salah Eddine Dahmoune, the interior minister, on Tuesday labelled the regime’s critics “pseudo-Algerians, traitors, mercenaries, perverts and homosexuals.” A day later, he said the target of his outburst had been those Algerians in touch with the European Parliament, which recently criticised the country’s human rights record. Dalia Ghanem, resident scholar at the Carnegie Middle East Center in Beirut, said she expected a low voter turnout. “Many Algerians don’t want to vote but it doesn’t mean there will be no voters at all,” she said. “I think the regime will mobilise some of its supporters from [governing] parties and from the bureaucracy but this won’t make the poll credible.” The election of a civilian president may temporarily remove the spotlight from Gen Salah but analysts warn Algeria needs to go through a credible electoral process if it is to address the economic challenges facing the country.

Ukraine agrees $5.5bn loan with IMF

Boost for Zelensky as he prepares to meet Putin in Paris for peace talks ROMAN OLEARCHYK

he IMF has agreed a new $5.5bn three-year loan programme with Ukraine, a boost for Ukrainian president Volodymyr Zelensky as he prepares to meet Russian counterpart Vladimir Putin for the first time on Monday for peace talks. The announcement of the deal, the third IMF package for Ukraine since Russia’s 2014 annexation of Crimea, followed a phone call on Saturday between Mr Zelensky and IMF managing director Kristalina Georgieva. The news broke hours before French president Emmanuel Macron hosts a summit of the so-called Normandy Four group in Paris with the two leaders, along with Ger-

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many’s chancellor Angela Merkel aimed at kick-starting the stalled 2015 Minsk peace agreement. These talks have so far failed to stop fighting between Ukrainian government forces and Russianbacked separatists in the breakaway Donbass region. The IMF’s decision and its timing is “politically driven — to get agreement for Ukraine before the Normandy talks”, said Bluebay Asset Management analyst Timothy Ash. In recent years, Ukraine has recorded annual growth of 2-3 per cent, an improvement on the 16.4 per cent plunge in gross domestic product seen in the immediate aftermath of the Russian annexation. Ms Georgieva said she had commended the president for progress in reforms and economic policies. “I assured the president of the IMF’s @Businessdayng

readiness to support the authorities’ policy agenda to maintain macroeconomic stability and lift the economy to a path of higher, sustainable and inclusive growth,” she said. Negotiations with the fund have stalled because of a dispute over the IMF-backed nationalisation of commercial lender PrivatBank. The announcement did not explicitly refer to PrivatBank, whose 2016 nationalisation is being challenged in courts by Igor Kolomoisky, the oligarch who backed Mr Zelensky’s presidential campaign this spring. “The IMF announcement is a critically important signal to investors and the business community demonstrating its seal of approval on Ukraine’s government’s reform process,” said Andy Hunder, president of the American Chamber of Commerce in Ukraine.

BUSINESS DAY

Monday 09 December 2019

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

FCA fines hit highest level in four years The UK financial regulator meted out nine £10m-plus levies this year CAROLINE BINHAM

crackdown on mis-selling and financial crime has driven fines issued by the UK’s financial watchdog to their highest level in four years. Penalties levied by the Financial Conduct Authority have totalled £391.8m so far in 2019, the highest since 2015 and more than six times the amount last year, according to new data. The regulator has also meted out more £10m-plus “blockbuster” fines, with nine of its 17 penalties this year topping that amount, compared with just two in 2018. Standard Chartered landed the largest FCA fine of 2019 to date, with the £102m issued in April as part of a global $1.1bn set of penalties to settle charges that the bank violated sanctions and ignored red flags about its customers. The latter included a diplomat who opened an account with £500,000 stuffed in a suitcase. The FCA also issued a record penalty against an individual this year when it levied £76m in January against Stewart Ford, the man behind the failed “death bond” firm Keydata, after a tribunal upheld the watchdog’s decision in late 2018. Mr Ford said at the time that he did not accept the tribunal’s findings. Mis-selling has been a common cause of FCA enforcement action, accounting for £163m of the total this year. That includes Standard Life landing a £30.8m penalty for mis-selling pension annuities and Carphone Warehouse receiving a £29.1m fine for mis-selling insur-

ance. RPC, the law firm that collated the data, said the regulator had “reinforced its commitment to protecting consumers from the risk of being mis-sold financial products” in its 2019-20 business plan, adding: “This outlined priorities such as reviewing remuneration practices that may encourage mis-selling and preventing mis-selling regarding defined-benefit pension transfers.” The step-up in fines comes at the end of a year in which the regulator has faced criticism that it has not done enough to protect ordinary consumers across a range of scandals. These include the £236m collapse of London Capital & Finance, which pushed unregulated minibonds on retail customers, and the implosion of Neil Woodford’s flagship equity fund. Penalties have see-sawed over the past four years, at points dropping to levels not seen since before the financial crisis. This has led some commentators to question whether the regulator was returning to a light-touch approach that was partly blamed for exacerbating the crisis. “After several years of relatively low levels of fines, the FCA is baring its teeth,” said Jonathan Cary, a partner at RPC. The FCA has a record number of investigations open on its books, at nearly 700, according to its most recent statistics. Lawyers complain that this means investigations are taking longer to complete — settled cases in the 2018-19 financial year had taken an average of 29 months — which has a knock-on effect on the level of fines.

Investors can change the narrative on climate transition But results will only follow if governments take the lead JONATHAN FORD

here is a moment in Naomi Klein’s recent book on climate change, On Fire, where the environmental campaigner considers the question of what individuals can do to tackle the challenge of global warming. Her answer, deflatingly, turns out to be precisely zilch. “You can’t do anything,” she writes. “In fact the very idea that we, as atomised individuals, even lots of atomised individuals, could play a significant role in stabilising the climate system is objectively nuts.” Ms Klein is talking here about consumption, and savaging the idea that we can achieve net zero carbon emissions by 2050 — or anything near it — through individual choices, such as eating fewer T-bone steaks, installing loft insulation, or buying a hybrid motor car. But what about our power as investors? Can’t we hurry along climate transition by putting pressure on carbon-emitting stocks to change their conduct while skewing our holdings towards the climate-friendly kind? Some people think so. Take the

students at Yale and Harvard universities who disrupted their annual football game last month to demand that their endowment funds dump their fossil fuel holdings. Or the European Investment Bank, which has just announced it will no longer back oil and gas projects. Or indeed TCI, the $30bn activist fund run by Christopher Hohn which, while advocating engagement rather than divestment, last week outlined plans to punish directors of companies that fail to disclose their carbon dioxide emissions. “Investing in a company that doesn’t disclose its pollution is like investing in a company that doesn’t disclose its balance sheet,” Sir Christopher said. If governments won’t demand it, then “investors should force it themselves”. Those who favour divestment cite the campaigns in the 1980s against apartheid South Africa. The idea is that by starving infringing companies of investment, you raise their cost of capital. This reduces the scope of their activities, and by extension their propensity to cause harm. While it all sounds pretty simple, selling publicly traded stocks is, in practice, an almost entirely pointless exercise. www.businessday.ng

Eddie Stobart will almost immediately receive a £55m loan to cover bank debt and help keep operations trading over Christmas © Bloomberg

Will sterling hold its gains through the UK general election?

Market Questions is the FT’s guide to the week ahead FT REPORTERS

he pound hit a sevenmonth high last week, rising above $1.30 against the dollar, as investors moved to price in a Conservative victory in Thursday’s general election. A majority for Boris Johnson’s party is seen as the most market-friendly outcome and would probably spark further gains for sterling and shares in domestically focused companies. However, given recent polling suggests a healthy lead for the Tories, the upside could be limited. A hung parliament remains a possibility and “would likely provoke a very negative reaction from financial markets,” according to David Zahn, head of European fixed income at Franklin Templeton. In the short term, Mr Johnson’s failure to win a majority would probably leave him unable to get his Brexit deal through parliament and would inject renewed uncertainty into the process of leaving the EU. That could conceivably open the way to a softer, more investor-friendly Brexit than the one negotiated by the prime minister. But getting there would be a complex and highly uncertain process — one reason why the pound has generally rallied recently

on strong Tory polling. A majority for the Labour party looks highly unlikely. Most analysts anticipate a sharp drop in sterling if Jeremy Corbyn pulls off a surprise victory as investors take fright at his promises of massive tax increases and nationalisations. “The pound would likely fall dramatically and all financial assets would likely decline, reflecting fears the UK economy could head into recession as quickly as the first quarter of 2020,” Mr Zahn said. “Most serious political commentators have ruled out an outright Labour victory, but if we’ve learnt anything in the last three years, it’s ‘be prepared for every eventuality’.” Tommy Stubbington Will signs of economic growth encourage the ECB to delay a rate cut? A rate cut was starting to look like a certainty at the European Central Bank’s last rate-setting meeting of the year on Thursday — until data started to show some mild improvement in the struggling eurozone economy. The trade war between the US and China has dented not just investor sentiment but also the outlook for manufacturing and exports from the eurozone. But after data for November showed that the slowdown in manufacturing in the region was bottoming out, analysts are shifting to the view

that the Christine Lagarde-led governing council will refrain from tweaking policy until next year. “We believe the bar for more easing is high,” said Philippe Gudin, chief Europe economist for Barclays. German data released on Friday complicates the matter; it transpired that the country’s industrial output had dropped by some 5.3 per cent in October from the same month last year. Still, George Buckley, an economist at Nomura, expects the ECB to hold off from cutting rates until March owing to broadly better data and persistently low inflation in the region. Barclays’ Mr Gudin takes the view that the central bank will not have to adjust its current -0.5 per cent rate at all throughout 2020 if growth continues to stabilise between 1 per cent and 1.2 per cent. Mario Draghi, the previous ECB governor, had called for Europe’s governments to “do more” after the central bank launched a fresh package of monetary easing measures in September. This has brought the possibility of fiscal stimulus to the forefront of investors’ minds. Royal Bank of Canada said fiscal policy had become a “buzzword” set to be used even more frequently in the year ahead.

Hedge funds key in exacerbating repo market turmoil, says BIS Bank for International Settlements point to firms’ thirst for borrowed cash to fire up returns TOMMY STUBBINGTON AND JOE RENNISON

edge funds exacerbated the recent turmoil in the repo market with their thirst for borrowing cash to juice up returns on their trades, according to the Bank for International Settlements. Investors, bankers and policymakers were left stunned in September when the cost of borrowing cash overnight in exchange for high-quality collateral such as US government debt shot higher, eventually forcing action from the Federal Reserve to keep the market functioning smoothly. In the aftermath, attention focused on the role played by banks, which had become reluctant to lend cash into the market despite the higher interest rates on offer. While the BIS acknowledged in its quarterly assessment of the health of global markets, released on Sunday, that the pullback by

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banks was a significant factor in the shake-up, it also said that cashhungry hedge funds had amplified the dislocation. “High demand for secured (repo) funding from non-financial institutions, such as hedge funds heavily engaged in leveraging up relative value trades” was a key factor behind the chaos, said Claudio Borio, head of the monetary and economic department at the BIS. The findings from the BIS — often referred to as the central bank for central banks — highlight the growing clout of hedge funds in the repo market. Millennium Partners and Capula are among the large hedge funds active in the market, according to people familiar with the funds. Both declined to comment. One increasingly popular hedge fund strategy involves buying US Treasuries while selling equivalent derivatives contracts, such as interest rate futures, and pocketing the difference in price between the two. @Businessdayng

On its own this is not very profitable, given the close relationship in price between the two sides of the trade. But people active in the short-term borrowing markets say that to fire up returns, some hedge funds take the Treasury security they have just bought and use it to secure cash loans in the repo market. They then use this fresh cash to increase the size of the trade, repeating the process over and over and ratcheting up the potential returns. The strategy was once popular among banks, but higher capital charges since the financial crisis have led to their displacement by hedge funds, which have more ability to take on risk. As banks have pulled back from the market, hedge funds have also sought cash from new sources, such as non-bank dealers or through a platform run by the Fixed Income Clearing Corporation that gives them access to cash from money market funds and other lenders.

Monday 09 December 2019

BUSINESS DAY

ANALYSIS

Boris Johnson outlines points-based immigration system Unskilled migrants would only be allowed into the UK temporarily to plug labour gaps JIM PICKARD

oris Johnson has set out plans for a new immigration system as opinion polls showed a Tory 10-point lead over Labour four days before the general election. The prime minister’s Conservatives have long promised a new Australian-style pointsbased immigration system after the UK leaves the EU and it featured in the manifesto a week ago. Now the party has set out the details of how the three-level system would work. The first element of the scheme would be fast-track entry for migrants identified as high-skilled or “exceptional”, for example sponsored entrepreneurs or people with “worldleading awards.” A second category would be “skilled workers” who would require a job offer as well as a specified number of points. The third part would only allow low-skilled workers to stay in

in demand for business,” he said. “Workers needed to boost economic growth must feel welcome in the UK. Until there is more detail, these plans will leave them nervous.” Priti Patel, the home secretary, said the vote to leave the EU was a vote to take back control of the UK’s borders. “Immigration will finally be subject to democratic control,” she said. “We will be able to create a fairer system, which will attract the brightest and the best from all over the world to come here and contribute to our society and economy, while getting overall immigration down.” Nigel Farage, leader of the Brexit Party, questioned the claim that overall numbers of immigrants would fall, given that the Conservative party had made — and broken — similar promises at the last three general elections. “The problem is they’ll make no real commitment to cutting the numbers coming in,” said Mr Farage. “This is the same Boris

the UK in industries where there was a labour shortage. That is likely to raise questions about which industries would face a ban on overseas workers, given that many sectors of the UK economy — from fruit-picking to the social care system — rely heavily on staff from abroad. The system would be rolled out from January 2021, after the conclusion of the 11-month “transition period” that will follow Brexit Day at the end of next month, Mr Johnson said. Mr Johnson told Sky News that he was “not hostile” to immigration but said the numbers had to come down: “We’re going to get lower.” Matthew Fell, CBI UK chief policy director said the proposals put too much emphasis on “the brightest and best” and a risk that foreign workers would feel unwelcome. “As important as attracting high-skilled workers is, lowlevel skills are still very much

Johnson who has called for mass amnesties for illegal immigrants. It’s very difficult to trust him and believe him.” Mr Farage, whose party appears to be heading for a disastrous result on Thursday, said it would continue under a new name, The Reform Party, even if the UK left the EU. Jeremy Corbyn pledged to tackle the social care crisis by providing an extra £10bn of annual funding towards offering free personal care for older people in England by 2023-24. The Lib Dems promised to invest £50bn in infrastructure outside London in a “regional rebalancing programme”. John McDonnell, shadow chancellor, said all anti-Semites would be kicked out of the Labour party as the Sunday Times revealed a cache of new complaints about anti-Jewish racism by members that remained unresolved for months — with some leading to lenient punishments or no sanctions. www.businessday.ng

Jean-Dominique Senard’s fight to rescue the Renault-Nissan alliance The boardroom changes have removed executives within the companies who seemed to work against the partnership PETER CAMPBELL AND DAVID KEOHANE , KANA INAGAKI I

n the bar at Yokohama’s swish InterContinental Hotel in late October, Renault chairman Jean-Dominique Senard was drinking with the future leadership team of Nissan when he received a call from a French government official. Fiat-Chrysler, the Italian-American carmaker that months earlier had walked out on Renault, was to merge with its French arch-rival PSA. The implication for those around the table was obvious — Renault and Nissan would have to set aside their substantial differences and make the alliance work. “We cannot survive if we don’t move quickly now to do real sharing,” says Mr Senard, who plans to unveil several combined projects in the new year designed to demonstrate that, finally, the alliance can function. A year on from the arrest of Carlos Ghosn, who held the companies together, the alliance, which includes Mitsubishi Motors, is fighting for its place in a car industry beset by falling sales, the global trade war, and burdensome investments into electric vehicles. While PSA and FCA are merging to pool resources, and Ford and Volkswagen have created their own alliance to combine some investments, the oldest auto alliance risks being left behind. Apart from jointly procuring components, the true cost savings achieved by the alliance have been slight, while many of the achievements held up during the Ghosn years have been revealed to be more smoke and mirrors. Left without FCA as a potential partner, Renault’s focus has been forced back to its Japanese bedfellow of two decades’ standing. The two companies had been corralled into co-operation for more than a decade by Mr Ghosn, the totemic leader who set them on a convergence course. Yet his stunning arrest last November on charges of financial misconduct broke open the nationalist fissures that had been inching wider under his tenure. He denies all the charges. In January, Mr Senard was parachuted into Renault by the company’s largest shareholder, the French state. His age — he is 66 — prevented him, under Renault rules, from being named chief executive, so he took the title of chairman, with specific orders to restore peace to the riven enterprises. It looked like a doomed task. By the middle of the year, Renault and Nissan’s chief executives Thierry Bolloré and Hiroto Saikawa, who had co-operated with each other while Mr Ghosn was in charge, were not on speaking terms and refusing to return phone calls, according to people on both sides of the alliance. Board decisions, once taken, were never implemented, undermined by systemic disregard for the parties across the table and the

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bedlam that followed Mr Ghosn’s arrest. Paralysis set in. To Mr Senard, who earlier in his career pushed through a painful restructuring of aluminium group Pechiney and closed factories at Michelin while chief executive of the tyremaker, the extent of the turmoil was breathtaking. “I had my doubts it would survive,” he admits in an interview in Paris. “Sometimes I say to myself alone in my office, good gracious, this is really tough.” When asked directly if there was a moment over the past year he thought the whole edifice would come crashing down, Mr Senard smiles: “If I answer now, no, I never had that, you would not believe me and you would be right.” The depths of dysfunction became apparent ahead of one board meeting, when the two sides refused to bring sensitive benchmarking data — details of comparisons about profits and costs with rivals. An exasperated Mr Senard said he would not attend unless the documents were shared. He also became embroiled in the infighting, threatening Mr Saikawa in June over Nissan’s refusal to appoint Mr Bolloré to several key board committees. Until Mr Senard was appointed chairman in January, Mr Saikawa said his efforts to connect with Renault were hobbled by suspicions that people inside Nissan had been behind Mr Ghosn’s downfall, something the Japanese company firmly denies: “In the beginning, it was a huge burden that we couldn’t hold any regular communication.” Both companies realised that change at the top was needed. But Mr Bolloré, having lived in Mr Ghosn’s shadow for so many years, was not about to go quietly. He sought to build power structures of his own within the company, using behaviour that echoed some of the more domineering instincts of his former mentor, according to people within Renault. Mr Senard tried to convince him to leave quietly, without success. His eventual ousting, in October, was greeted with widespread relief outside his circle. Mr Bolloré declined to comment for this article. Mr Saikawa’s departure was no less cathartic at Nissan. On the day he resigned following disclosures @Businessdayng

of improperly paid compensation, staff circulated WhatsApp pictures of champagne bottles. From the factory floor to the b o a rd ro o m s, t h e l e a d e r s h i p changes cleared air that had been poisoned by months of hostility. “When I came out of the last board meeting, I said to myself, gee, this is another world,” says Mr Senard. Nissan’s new chief executive Makoto Uchida began last week, while Renault is at the closing stages of appointing a new chief. The frontrunner is believed to be Luca de Meo, who leads VW’s Spanish Seat brand, a role that makes him no stranger to negotiating national identities within a single business. The boardroom turnover marks the end of the bloodletting at the businesses to rid them of executives — and nationalist forces — who seemed to work actively against the partnership. “If you wanted to kill the alliance, you would not have done anything else,” says Mr Senard, his diplomatic mask slipping in a rare flash of anger, leaning forward with his index finger raised to mark the moment. “I know exactly who was behind that. These people are no longer in the company.” He adds: “For the alliance, the future is bright. I would not have said that two months ago.” Yet real change will take far longer. “It runs deep down into the organisation, layers and layers and layers deep,” says one former highranking Nissan director. “Getting rid of a couple of people will not change the organisation”. The new year may bring answers, with a badly needed business reset planned for January. New joint projects will be launched, pooling development into areas such as electric vehicles and selfdriving technology. Each new venture will be headed by one person from one of the carmakers, who reports into the alliance board, with staff seconded on to the team from either side. The aim is to avoid the mirage of co-operation that existed under Mr Ghosn. Gone too will be the prior obsession with becoming the largest carmaker in the world, which drove a sales strategy that undermined profitability at the two companies, and obscured the lack of co-operation under the surface.

BD Money

Monday 09 December 2019

economy

Firms’ show confidence on financial condition at 12.8 index points

BUSINESS DAY

COVER Nigeria may borrow at a higher cost on Moody’s negative rating

The negative outlook for Nigeria by Moody’s, the global rating agency may have more impact on the country than Nigerian firms are optimistic in their outlook on financial just being a bad news as economic analysts have hinted conditions (working capital) and average capacity that it may lead to higher borrowing cost for the country utilization, as the indices stood at 12.8 and 19.1 index that has some $100 billion infrastructure deficit. points, respectively.

Detty December can be dirtier for your budget without these tips Christmas is one of the best times of the year for Andrews, a young consultant at one of the Big 4s. With lighter workload and bonuses paid in December, it would be “parte after parte” and Andrews is game.

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personal finance

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Monday 09 December 2019

BUSINESS DAY

Tender

Market Wrap-up

Nineteen equities appreciated in price during the week, lower than 31 equities in the previous week. While 35 equities depreciated in price higher than 32 equities in the previous week. 111 equities remained flat, higher than 102 equities recorded in preceeding week.

About BD Money: This finance supplement is targeted at investors and other readers keen to make their money work harder. Team Members: Lolade Akinmurele (Lead); Hope Moses Ashike; Segun Adams; Oluwasegun Olakoyenikan; Temitayo Ayetoto; Olufikayo Owoeye; David Ibidapo; Graphics: Fifen - Famous www.businessday.ng

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@Businessdayng

Monday 09 December 2019

BUSINESS DAY

Economy

Firms’ show confidence on financial condition at 12.8 index points HOPE MOSES-ASHIKE

igerian firms are optimistic in their outlook on financial conditions (working capital) and average capacity utilization, as the indices stood at 12.8 and 19.1 index points, respectively. Respondents’ outlook on the volume of total order and business activity in November 2019 remained positive, as both their indices stood at 17.3 points. Similarly, Nigerian businesses show greater confidence on the macro economy, with 59.9 index points in December compared to 29.0 point in the current month, the Central Bank of Nigeria (CBN) said in a report last week. The November 2019 Business Expectations Survey (BES), was conducted by the regulator from November 12-18, 2019 with a sample size of 1050 businesses nationwide. A response rate of 95.6 percent was achieved, and the sample covered the services, industrial, wholesale/retail trade, and construction sectors. The respondent firms were made up of small, medium and large corporations covering both import- and export-oriented businesses. The overall confidence index (CI) at 29.0 points indicated respondents’ optimism on the overall macro economy in the month of November 2019. The optimism on the macro economy in the current month was driven by the opinion of respondents from services (16.0 points), industrial (9.5 points), wholesale/ retail trade (2.9 points) and construction (0.6 points) sectors. Similarly, the major drivers of the optimism for next month were services (31.9 points), industrial (20.1 points), wholesale/retail trade (5.9 points) and construction (2.0 points) sectors. Further analysis showed that businesses that are neither import- nor exportoriented (19.6points), both import- and export-oriented (5.0 points) import-oriented (3.7 points), and those that are ex-

port-related (0.5 point) drove the positive business outlook in November 2019. However, Respondent firms identified insufficient power supply (66.3 points), high interest rate (57.8 points), financial problems (55.0 points), unfavourable economic climate (53.8 points), unclear economic laws (50.4 points), unfavourable political climate (45.3 points), insufficient demand (45.0 points), competition (44.7 points) and access to credit (42.5 points) as major factors constraining business activity in the current month. Respondents anticipate improvements in economic conditions, as the index of their expectation on economic growth rate in the short run stood at 36.5, 45.9 and 52.6 points for the current month, next six months and next twelve months, respectively. Godwin Emefiele, governor of CBN, said from 2.28 percent in quarter three of 2019, growth is projected to quicken to 2.5 www.businessday.ng

“

The CBN projected inflation to slightly by 11.7 percent by the end of 2019 from 11.6 currently and then moderate thereafter supported by its efforts at improving domestic production of staple food items

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percent by the fourth quarter of 2019. The report revealed that respondent firms expressed satisfaction with the management of inflation by the Government, with a positive net satisfaction index of 3.4 in November 2019. The net satisfaction index is the proportion of satisfied less the proportion of dissatisfied respondents. The CBN projected inflation to slightly by 11.7 percent by the end of 2019 from 11.6 currently and then moderate thereafter supported by its efforts at improving domestic production of staple food items. Respondent firms expect the naira to appreciate in the current month, next month and next twelve months, as their confidence indices stood at 25.5, 37.6 and 49.1 index points, respectively. Respondent firms expect borrowing rates to rise in the current month, next month and the next twelve months, as the confidence indices stood at 4.2, 3.1 and 6.7 points, respectively.

@Businessdayng

Monday 09 December 2019

BUSINESS DAY

Monday 09 December 2019

BUSINESS DAY

Cover Story

Personal Finance

Nigeria may borrow at a higher cost on Moody’s negative rating ENDURANCE OKAFOR

he negative outlook for Nigeria by Moody’s, the global rating agency may have more impact on the country than just being a bad news as economic analysts have hinted that it may lead to higher borrowing cost for the country that has some $100 billion infrastructure deficit. Even though the recent warnings and downgrade may not affect the ability of Africa’s largest economy to raise debt particularly offshore, analysts fear it may increase investors’ appetite to demand higher returns on their investments. “Nigeria remains a prime destination for portfolio flows. Thus it may not affect the government ability to raise debt, particularly via the Eurobond market. However, the concern would be investors demanding higher yields on their investment which would ultimately impact our borrowing costs,” Ayorinde Akinloye, research analyst at Lagosbased CSL said. President Muhammadu Buhari plans to raise $29.96 billion to fund what he called 39 emergency projects in the power, agriculture and transport sectors. To this effect, the president recently resent a proposal to the Senate for approval to borrow $29.96 billion offshore to fund the critical projects – but however did not present a detailed draft plan for that loan request – a major reason the Bukola Saraki-led 8th National Assembly refused to approve it. The President rather told the lawmakers to request further details from Zainab Ahmed, minister of finance, budget and national planning. According to Samar Maziad, Vice President - Senior Analyst Sovereign Risk Group at Moody’s already weak government finances will likely weaken further given an extremely narrow revenue base and persistently sluggish growth that hinders fiscal consolidation. “As pressures mount, there is a risk that the government resorts to increasingly opaque and costly options to fi-

nance a moderate but rising debt burden. “Moreover, vulnerability to an adverse change in capital flows is building in light of Nigeria’s increasing reliance on foreign investors to fund the country’s foreign exchange reserves,” Maziad said. Data by the Debt Management Office shows that the debt exposure of Africa’s largest economy has spiralled to $84 billion as of June 2019 against the $10 billion in 2015 when the new administration took overpower. Moody’s expects debt to GDP to reach N49 trillion by the end of 2021, or 27percent of GDP. Moody’s on Wednesday downgraded the outlook on Nigeria’s ratings from stable to negative and said is as a result of increasing risks to the government’s fiscal strength and external position. “The change of outlook to negative is informed by the increasing fragility of the country’s public finances and sluggish growth prospects,” the New Yorkbased said. The rating by Moody’s is coming three days after the World Bank warned that Nigeria is threading a disastrous economic and social path and projected www.businessday.ng

that extreme poverty may increase by more than 30 million by 2030. “With the recent warning from world bank coupled with the downgrade by the Moody’s it is likely that investors will want to demand a higher yield on investment if they look into Nigeria as a destination. This means we may be borrowing at a higher cost,” an economist who asked not to be quoted said. According to Andrew S. Nevin, Partner - West Africa Financial Services Leader and Chief Economist at PWC Moody’s announcement is just one more indicator of the issues Nigeria faces. “We have said for years that GDP growth persistently below population growth will inevitably lead to rising unemployment, increased poverty, and greater fiscal challenges,” Nevin told BusinessDay by mail. The increasing fragility of Nigeria’s public finances is evident in the greater reliance by the government on financing from the Central Bank of Nigeria (CBN) over the last three years to cover persistently large fiscal deficits, with the apex bank’s cash advances reaching 2.5perecnt of GDP on a net basis at the

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end of September 2019, Moody’s said. “The rating action is a call on the government to deepen revenue-based fiscal consolidation efforts to avoid a more damaging downgrade to B3,” Omotola Abimbola, Research Analyst at Lagos-based Chapel Hill. Moody’s expects general government revenues to remain very low at around 8perecnt of GDP until 2022, despite measures such as the VAT rate increase to 7.5percent from 5percent in 2020. The rating agency anticipates real growth to remain weak, at just over 2percent over the next few years. “The economy has yet to fully recover from the oil price shock of 2015 and the subsequent recession in 2016; real growth remains below population growth, denoting erosion in incomes from already low levels.” The Nigerian economy continued to expand at a sluggish rate in the third quarter of 2019 after state data agency, the National Bureau of Statistics (NBS), reported a 2.28 percent growth for the period. Although the fastest growth in four quarters, the GDP rate remained lower than the country’s population growth rate of 2.6 percent, the trend that has been constant since 2015. On how Nigeria can an upgrade its rating, Moody’s said although it is unlikely in the short to medium term given the negative outlook but a return to a stable outlook would likely be prompted by some of the following developments: a lasting reduction in reliance on foreign portfolio investors to sustain the level of foreign exchange reserves; prospects of effective implementation of structural reforms, particularly with respect to public resource management and a broadening of the revenue base; and/or, over the longer term, signs that economic policies are likely to foster stronger GDP growth on a sustained basis. “The FG and all Nigerians need to come together to implement policies that will increase the GDP growth rate significantly,” Nevin said. In his words, Omotola said while the recent rating by Moody’s might not necessarily raise borrowing cost for Nigeria given the largely favourable external financing conditions, the country should have a deliberate effort to reduce reliance on short term foreign portfolio flows (particularly into OMO bills) and increase the stock of foreign direct investments. “This can only be achieved by strengthening efforts on ease of doing business reforms and investment in infrastructure, so as to boost investor confidence and make Nigeria more competitive,” he said.

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Detty December can be dirtier for your budget without these tips DAVID IBIDAPO & SEGUN ADAMS

hristmas is one of the best times of the year for Andrews, a young consultant at one of the Big 4s. With lighter workload and bonuses paid in December, it would be “parte after parte” and Andrews is game. The consultant has a list of places he must visit to blow off steam. After a long year working to his bones, concerts, parties, road trips and visiting friends are on top of a long list of activities he has outlined. Andrews, however, has a budget that will determine which activities he would participate in. Last year, he learnt prudence the hard way and doesn’t want a detty budget this Xmas. Christmas season usually feels like a fast-moving train. You’re on it and this out-of-control ride can leave you exhausted and feeling like there is no escape. The season is one that widely celebrated whether one likes it or not, prices will increase whether or not you plan to celebrate, hence the need to plan. Create a budget: Making a checklist of things you want to buy during this period is a useful way of controlling spending. It is important that you prioritise your needs ahead of Christmas so that you are not influenced to buy what is not necessary. You should go over your list more than once so that you will not be making a last-minute adjustment on Christmas Eve. You should not forget to add the fun kinds of stuff because even if budgeting isn’t fun, it does not have to be Spartan. Plan for your concerts and parties too. Also, create a strategy for meeting your financial goals for Christmas. For example, you can consider saving your transitionary income for holiday spending. The best time to buy is now: Christmas is a time people spend a lot and price go up during festivities. In Nigeria, food items especially that of rice,

poultry, oil and tomatoes will certainly increase and you can buy them ahead of time especially if they are non-perishable. Matter of fact, you could buy more than you need and sell some of the items for good margins when inflation hits the market. It is also good to remember the phrase: Cheaper by the dozen. Look for Deals. Santa’s in town: Unless you have money to splurge, you can take advantage of discounts and

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promotions that usually characterize Christmas. Be on the lookout for those offerings that save you cash, although you should be wary of fake products because while Santa might be in town, there is no free lunch. Make plans for overnight guest(s): It’s the holidays; you may receive “unplanned visitors” and you should plan for such. You may need to stock up your fridge or freezers for that friend

Be on the lookout for those offerings that save you cash, although you should be wary of fake products because while Santa might be in town, there is no free lunch

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or family that appears at your doorstep unannounced. Sounds annoying right? But common its Christmas, as the popular jingo states, “Santa Claus is coming to town”, no one knows when he will arrive! It’s a time to give, do it smartly: Christmas is a time to share and giving of gifts shows love and care towards family, spouse, girlfriends and boyfriend, less privileged etc. Since resources to meeting needs and wants are limited, you may need to prioritise the beneficiaries of your gifts. Yes. You do not have to buy gifts for everyone on your street and in many cases all your loved ones want is just a token to show you care, not show expensive item. If you can afford to and if necessary buy whatever you want for your loved ones otherwise you can take the opportunity to unleash your inner creative self, wrapping gifts yourself or creating hand-made cards. Whatever you do, just put a smile on that person’s face!

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Monday 09 December 2019

BUSINESS DAY

Economy

Nigeria’s wobbling economy in four charts LOLADE AKINMURELE

igeria’s economy barely trudged along in 2019, with data likely to confirm another lacklustre year for Africa’s most populous nation. Chances are that the economy, tipped to grow 2.1 percent by year-end, expanded below population growth for the fourth straight year while foreign direct investment slumped to a six-year low of $848 million. According to ten economists polled in a Business Day survey, unemployment rate also probably soared by the end of the year as a rapidly growing labour force expanded faster than the rate of job creation. According to the World Bank’s latest economic report, over five million Nigerians entered the labour market in 2018, with 4.9 million joining a growing army of unemployed people compared to the preceding the year. The last unemployment report by government-funded data agency, National Bureau of Statistics (NBS), showed 23 percent of the labour force was unemployed while 43 percent were either unemployed or underemployed in the third quarter of 2018, a 22 percent increase compared to the comparable period of 2017. As at Q3 2018, 21 million Nigerians were unemployed and 39 million either unemployed or underemployed. If unemployed and underemployed Nigerians formed a country, it would

be as populous as Canada and two times the population of the Netherlands. More Nigerians were probably rendered jobless in 2019, with unemployment rate likely to have topped 30 percent, going by the trend over the past two years. That will set a record for the highest unemployment rate in over a decade and pushes the country’s misery index to a new high. The misery index is an informal measure of the state of an economy generated by adding together its rate of inflation and its rate of unemployment. Inflation rate will probably average 12 percent by the end of the year which is hardly an improvement from the 12.1 percent average last year. Going by this, the misery index could be 42 percent at the end of 2019. Nigerians are the biggest losers of an underperforming economy that is not able to create opportunities for them and has seen them grow progressively poorer since 2016, as evidenced by declining per capita GDP. “Nigerians have been getting poorer because we have had an uncompetitive and largely unproductive economy [with] poor infrastructure, poor human capital and education and poor welfare,” said Amaka Anku, Africa head for the Eurasia Group consultancy. “It would be great to see longstanding [infrastructure] projects completed, such as the [Lagos — Kano] railway that has been in the works since the early 2000s,” Anku added. In what is hardly new counsel, Nigeria must seek more investment as a way to get back to strong growth, even though it is unclear where that will come from. A surge in oil revenue-driven investment is unlikely. Other investments, besides short-term portfolio flows, continue to be hampered by the difficult operating environment and uncertainties in the foreign exchange market. However, to break out of this trap, Nigeria will need to show it is a serious investment destination, for example by enacting legislative-driven reforms to attract capital to infrastructure. For another indication that the economy stuttered through 2019, look no further from the stock market. The stock market could close the year with a loss of 14 percent, a streak that has now lasted two years on the bounce. In 2018, the market dipped 17.8 percent as political uncertainty and a lack of market reforms saw foreign investors pull back. That effectively suggests Nigerian stocks have shed about 30 percent of their value on average in the last two years. An investor who staked N10 million in stocks in 2018 would have lost N3 million if he chooses to sell today. That market risk is a big dampener on investor appetite and has contributed to the lull in the market in 2019 with local and foreign investors preferring a safe bet in government bonds. The 42 percent stock market return in 2017, www.businessday.ng

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which ranked Nigeria among the top three best performing stock markets in the world, now look a distant memory, with the government failing to build on that momentum to catalyse further growth. The stock market has largely reflected the state of the economy, with outlook constrained by a weak macroeconomic policy environment. “We see little scope for the economy to expand above 2.3% in Q4-2019,” said Omotola Abimbola, an investment researcher at Chapel Hill Denham. Abimbola implied that there were headwinds ahead for economic growth, with the oil and non-oil sectors faced with separate challenges. “The increased focus of OPEC on compliance with the oil production cut agreement by members led to a decline in Nigeria’s oil production (excluding condensates) by 2.0% mom in October to 1.81mb/d. Against this backdrop, we expect the oil sector to slow to 6.22% yoy from 6.44% yoy in Q3-2019,” Abimbola said. “We expect the non-oil sector to benefit from expansion in domestic credit, although the border closure remains a drag on trade while the telecoms sector will likely slow to single digit due to high base effect. “Nonetheless, we expect non-oil sector growth to accelerate to 1.95% yoy, driven by further recovery in agriculture,” Abimbola added.

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Monday 09 December 2019

BUSINESS DAY

Data

Federal government Eurobond Yields on Eurobonds fell 0.04 percent point week on week from an average of 6.58 percent last week to 6.54 percent this Friday following buying interest in Nigeriaâ&#x20AC;&#x2122;s Sovereign Eurobonds.

Corporate Eurobond Yields on corporate Eurobonds dipped 0.013 percent points across all tickers from 5.29 last week to 5.278 percent. www.businessday.ng

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Monday 09 December 2019

BUSINESS DAY

Banking

Here’s what you need to know about TIN requirement for banking activities OLUFIKAYO OWOEYE

here has been so much buzz around about the new Finance Bill passed by the National Assembly. The Finance Bill, 2019 which was presented alongside the 2020 Appropriation Bill to a joint session of the National Assembly on 8 October 2019 by President Muhammadu Buhari, has been passed by the Senate. The PITA amendment in the Finance Bill states that: “Every person engaged in banking shall require that a person intending to open a bank account for the purposes of its business operations must provide a tax identification number as a precondition for opening such bank account or continued operation of a bank account. With this amendment, when

signed into law will take effect from January 2ND 2020, individuals would be required to produce their Tax Identification Numbers (TIN) before they can operate new or existing banking accounts in Nigeria. TIN is a unique number allo-

cated and issued to an individual or Company as a duly registered taxpayer in Nigeria. Registration for TIN is free. For employee of an organization that remits Pay As You Earn (PAYE), then it means they already have

Week Ahead (Monday, December 2 – December 6, 2019)

Week Ahead

a tax identification from the State Internal Revenue Service. However, this must be regularised by the Joint Tax Board. While consultants who have done business with government or any organization where With-

holding Tax was deducted, then it means you must have at some point provided a TIN because the system now is automated. Make efforts to verify your number to be sure it is still valid. For student, self-employed or Nigerians resident in the diaspora, such category would be required to produce a TIN. According to the Joint Tax Board, individuals are automatically assigned with a TIN based on their BVN (Bank Verification Number) or NIN (National Identity Number). This presupposes that before you can have a TIN, you must be enrolled in BVN and the NIN. Thus if you already have a BVN or a NIN, you are likely to have been assigned a TIN. For those with BVN, verification can be done on the website of the https://tinverification.jtb.gov.ng/ Checks by BusinessDay on Friday show that the link has some glitches.

Chart of the week

Commodity Week Ahead (Monday, 8th April – Friday, 12th April, 2019)

Oil: Crude oil prices dropped on Friday on rumors that OPEC’s leading members aren’t willing to deepen output cuts. Brent shed 4.05 percent to settle at $60.71 a barrel as at 8:00PM Nigerian time, while the West Texas Intermediate slumped by 4.61 percent to $55.43 a barrel. Equity The Nigerian Stock Exchange sustained its bullish trend last week to book its fourth straight week of positive performance buy interest in fundamentally strong stocks continued to spur market performance. The equities market gained marginally by 0.04 percent on a week-on-week basis to cross the 27,002.15 points psychological level following the gains recorded on three out of the five trading days of the week, moderating its year-to-date return to -14.09 percent. Cement Company of Northern Nigeria Plc will hold a Court Order Meeting at Transcorp Hilton Hotel, 1 Aguiyi Ironsi Street, Maitama, Abuja on December 4, 2019 by 11:00AM. Ellah Lakes Plc will hold its Annual general Meeting at Constantial Hotel, No. 24-26 Airport Road, Benin City, Edo State on December 6, 2019 by 12:00PM. Currency The exchange rate was relatively stable across all market segments. It traded flat at N360/$ at the parallel market. At the interbank market, the currency hovered around N306 to a dollar, and closed at N362.81 per dollar on the Investor and Exporter window. Going forward, the naira is expected maintain stability across all windows given CBN’s continuous intervention in the currency market.

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Monday 09 December 2019

BUSINESS DAY

abujacitybusiness Comprehensive coverage of Nation’s capital

Aliyu tasks Auditors-General on accountability, transparency

L-R: Hauwa Abbas, commissioner, North West, World Hepatitis Eradication Commission; David Nwedu, project consultant, Hepatitis Zero, World Eradication Project; Garba Abari, DG, National Orientation Agency (NOA), and Mike Omotosho, president, World Hepatitis Eradication Commission, during an advocacy meeting of the Hepatitis Zero Nigerian Commission with the DG of NOA in Abuja. Picture by Tunde Adeniyi

James Kwen, Abuja

Nigerians in diaspora launch modular machines to boost local rice production in Nigeria Cynthia Egboboh, Abuja

igeria in Diaspora Organization (NIDO) at the weekend launched the modular rice milling machines to boost local production of rice in Nigeria. Eminike Chieji, President NIDO, Asia, speaking at the launch in Abuja said that as part of the organization’s effort to support the development of the Nigeria economy, it has centered its mandate on sourcing technology, funding, en-

gaging expertise, in health, energy, women empowerment, and promoting corporations between the home countries and the host countries. Chieji noted that the organization has plans to establish the factories as well as train local operators in the country to ensure its sustainability. He said, “one of the cardinal projects that we in Asia have taken up is in agriculture, we have decided to partner the Japanese company to introduce technologies that will help

our framers record growth in local productions. “ Ju s t l i ke w e hav e modular rice milling machine, our long term plan is to have 18-24 months we should have them produced locally, we are already training local operators for the machines. We want to sustain and ensure it is domesticated at the long run to increase the local output. “This machine mills and husks 110 kg per hour, we have these machines in Abuja, Lagos, Calabar, and Abakaliki and work-

ing to ensuring they are affordable”. Hadiza Abdulahi, President, FCT Chapter of the National council of women society commended the effort of NIDO saying that the initiative will not only boost the production level but also empower the women in rice farming. “This machine will be useful especially to small holder farmer, it is easy to operate and economical and it would boost our productivity and help us to compete with the foreign producers”, she added.

Former lawmaker calls for good governance AFRITEX launches All-Star innovation awards at EdTech summit 2020 through transparency, accountability Godsgift Onyedinefu, Abuja

ddie Mbadiwe, former Member of the House of Representatives has called for more efforts in ensuring good governance in Nigeria through improved transparent and accountable leadership. Mbadiwe who made the call in Abuja while analysing two of his books namely: ‘Stunted Nigerian Dreams’ and ‘A Scientist in Parliament’, explained that it was time for Nigerian leadership to move away from the trivialities of funfair and luxuries but see power as trust, especially the governors. ‘’A situation where a governor basks in adulation and vain glory, praise singing by deprived crowd who are unemployed, hungry and angry is nothing but cosmetic governance. ‘’Could the governors

please take a cue from the President, who is unfazed by this nonsense, we need some degree of quiet and candour in the polity,’’ the Author said. Mbadiwe stressed the need for a prosperous country, where food and job security would be nonnegotiable while education should be made compulsory for all to rescue the country from the doldrums of insecurity. He said people who did not go school were threats to peace in the society and scored most political parties low in terms of administrative excellence since the inception of democracy in 1999. While calling for timely preparation of budget in Nigeria as being done in other climes, the former lawmaker said, “it is cosmetic to delay budgets in the country compared to the U.S where budgets were prepared in two years in advance. www.businessday.ng

James Kwen, Abuja

FRITEX is launching All Stars innovation awards at the 2020 EdTech Summit which celebrates technology used to transform teaching and learning in Nigeria schools, and recognizes all those responsible for leading the way in the public and private sector. The All-Star innovation awards which holds at a date to be announced later is a celebration of schools from across the Nigeria using Education Technology to support teaching and learning. Oyeola Oworu, CEO/ President AFRITEX in a press release made available to BusinessDay observed that every day, government, schools and businesses work hard to develop learning that leads in innovation and engagement.

Oworu said, the EdTech All Stars innovation awards aims to recognize thought leaders and how they use technology in education, whether a supplier or creator of the technology itself, or a teacher that drives its usages that children and students with their delivery. According to him, the event showcases best-inclass examples that others can learn from and follow in a bid to help advance education as a whole and there are 25 categories of awards. “The EdTech All-Star Innovation Awards winners will be chosen from a mixture of public nominations and the insight of the judging panel. The awards us celebrate a wonderful sector, whilst recognizing the benefits of education technology and acknowledging the economic advantages of the growing EdTech sector to the whole Nigeria economy”.

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he Federal Capital Territory (FCT) Minister of State, Ramatu Tijjani-Aliyu has charged AuditorsGeneral for Local Governments/Area Councils in the federation to imbibe the culture of transparency and accountability in the discharge of their responsibilities. The Minister gave the charge at the 24th edition of annual conference of Auditors-General for Local Governments/Area Councils in the Federation held in Abuja. Aliyu who was represented by her Special Assistant on Area Council Ser vices, Muhammad Saba, noted that the task before local governments in Nigeria is enormous hence the need for assurance and performance that will ensure transparency, prudency and accountability in management of resources at the third tier. Speaking on the theme: “Laying the Groundwork for Nigeria’s Public Sector Transformation; the Place of the Auditors-General,” the Minister stressed that while government is making great effort towards the sustain ability of its policies at various levels including the Local Governments/ Area Councils, there was the need to ensure that financial rules, regulations and extant circulars are adequately followed in the application of funds at all levels of government. She also called for close monitoring by the offices of the Auditors-General to ensure the provision of dividends of democracy as well as adequate service

delivery at the Local Governments/Area Councils level are achieved. “The importance of the Office of the AuditorsGeneral cannot be over -emphasized especially now that the policy of government is geared towards fighting corruption, ensuring good governance, transparency, probity and accountability. “This conference is very apt because of the proposed financial autonomy of the Local Governments/ Area Councils where financial resource allocations would be channelled directly to them. The Federal Government is interested in the development of the grassroot for overall growth and development of the country”, she said. On his part, the Chairman House Committee on Public Accounts, Oluwole Oke identified poor stewardship reporting, administrative interference and inadequate qualified manpower as factors militating against proper auditing of local government accounts in the federation, just as he called on participants to right the wrongs. In her address, the Auditor-General FCT Area Council, Kurdirat AbdulHamid, noted that more than 2/3 of Nigeria’s population are domiciled at the grassroots, stressing that the welfare of the people at this level is paramount and it is the duty of Auditors to ensure that citizens at that level and the nation get what is best for them in terms of providing basic amenities such as infrastructures, education, health, security among others.

BON Hotels expands investment in Nigeria’s hospitality sector with 22 new hotels Harrison Edeh, Abuja

ON Hotels Group ha s e x p re s s e d confidence in Nigeria’s hospitality sector as they have revealed they would be opening over 22 hotels in major cities and secondary towns. Speaking to newsmen in Abuja, BON Hotels Executive Director (International) West Africa, Bernard Cassar said new hotels developments are set for major city routes, focusing on the Northern regions and the old trade route in the South. According to him, “ho@Businessdayng

tels can be expected in Jordan cities like Lagos, Abuja and Port Harcourt, as well as towns and cities such as Kano,Yola, Kebbi, Ekiti, Ibadan, Warri, Enugu, Asaba. “These properties, he noted will focus not only on local and international business travelers, but keen leisure travellers too. “Our ethos has always been to add value, create tourism circuits,and expand the hospitality sector in all rooms holistically and in so doing, extract value. That has been my mission and goal,” Cassar said.

Company IN FOCUS

BUSINESS DAY Monday 09 December 2019 www.businessday.ng

FTN Cocoa Processors: Testing new waters in the face of headwinds SEGUN ADAMS

igerian listed cocoa grinder, FTN Cocoa, last week, reported what was its first revenue growth in three years in 2018, but the company says it might no longer be able to beat last year’s performance, no thanks to Lagos ports. FTN Cocoa Processors (FTN Cocoa), based in Lagos, is a processor and exporter of cocoa commodities. The company’s products include cocoa butter, cocoa cake, cocoa powder, and cocoa liquor. The company announced a revenue of about N602 million for the 2018 business year, 636 percent more than it made in the prior year, halting a decline in sales since 2016. For nine months in 2019, FTN Cocoa has made N503 million in sales, four percent less than for the same period last year. Good deal gone bad FTN Cocoa Processors is struggling with funding its dayto-day operations and has not made a profit in a while, not even after last year’s revenue surge. FTN Cocoa’s woes can be traced back to when one of its foreign partners, Transmor Commodity USA, went into liquidation in 2017, affecting the Nigerian company’s ability to fund its day-to-day operations. Facing operational challenges, FTN Cocoa in 2014 agreed to sell 40 percent stake of the business to cocoa-trading house Transmor, which invested more than 1 billion naira in the business. The deal improved FTN Cocoa’s access to the international market and offered an alternative to more expensive local funds. Transmor also benefitted from the arrangement. “The investment in FTN provides a unique opportunity for both companies to expand our businesses to serve the needs of our international customer base,” Transmor said in 2014. In 2016 when the naira’s plunge from two years prior made the price of cocoa go up and caused grinders to operate way below capacity, FTN Cocoa’s Executive Director Akin Laoye told Bloomberg that of three Nigerian cocoa processors operating at that time, down from eight in 2014, at least two were only surviving because they were owned by or affiliated with foreign companies. “Anybody that must survive in cocoa today must have foreign ownership or partnership that gives it funding advantage, market advantage and access to dollars to help fund imports,” he said. However, blaming Brexit, the US unit of Transmor Group in

2017 filed for bankruptcy protection leaving FTN Cocoa high and dry. (Un)Ease of Doing Business in Nigeria With the Transmor deal gone bad, FTN Cocoa turned to local lenders to finance its operations. However, FTN ended up having its head office taken over by a local bank it owed, forcing it to operate from a rented apartment and reconsider its financing strategy. According to Laoye, the cost of borrowing locally is high and the country’s infrastructure problems are sapping cash and fuelling higher operating cost for the business which has to fund the deficits. FTN Cocoa’s cost of production has consistently been higher than the revenue it generates, in the last half-decade at least. “Some years ago, cost of transporting our goods from Ibadan to Lagos was around N360,000 but now it is about N1.1 million, a huge cost affecting profitability,” Laoye told BusinessDay. He also complained about the elongated time at the ports it takes to export its goods, and that goods are stuck at the factories due to the unavailability of vessels to lift them. While the Exports Stimulation Facility, an intervention fund, has been difficult for FTN Cocoa to obtain due to a bank guarantee requirement, the company will steer clear of local bank loans due to the bottlenecks at the ports and the long cycle from goods to cash which Nigerian banks do not consider when demanding for loans to be repaid. “Like most businesses, we are already used to the power situation, but the government should get to the root of the delay at the

ports,” Laoye said. “However, the roads are getting better and the plan to run rails into the ports is a fantastic one which would help improve traffic.” FTN Cocoa’s 2018 result states that it has discharged the United Bank for Africa (UBA) loan obligation and paid Union Bank loan. A new lease of life? The cocoa grinder told BusinessDay that it is in talks with international backers for what would be a “combination of partnership and sourcing working capital” and it is already in a trial period with the financiers testing the waters before a fuller commitment. “Because we are basically into exports, we are talking to financiers outside Nigeria and that accounted for the little turnover (we did in 2018),” FTN Cocoa told BusinessDay. “With working capital, we can boost revenue to N10bn-N12bn annually.” Laoye said the company has “done some little contracts” with the foreign financiers although he did not give any names and the amount under consideration. He says foreign loans can be easily structured to fit peculiar situations of firms and the financiers have a long-term view. “Getting money (locally) at more than 20 percent doesn’t make sense and we do not want to go back to where we are coming from,” Laoye said. “We do not longer owe any Nigeria bank.” The challenge for FTN Cocoa is simply getting funded according to its management but with attention from the foreign financiers, it must now figure out a way to beat the decrepit infrastructure and inefficiency at the ports so it can get its goods out of the factory to the market on budget-and time.

“As I am speaking to you since October, we have about N200m worth of goods we cannot export because of access to the port,” Laoye said. “We have restricted money being on trial and now that money is tied down since we get our money on document basis. It is shrinking our ability to turnover.” BusinessDay was told that the inability to move the goods out of its Ibadan warehouse has cost FTN Cocoa the opportunity to have exported three times since October. The Cocoa processor’s buyers won’t pay without delivery of the cocoa butters currently at the warehouse and this means that FTN Cocoa cannot convert the goods to cash. Although the company believes it has a viable business, it is concerned it might not be able to meet its projected revenue for the year if it is unable to access the ports. Cocoa grinders getting grounded Grinding of Cocoa beans worldwide has been steadily rising since 2015/16 with 4.75 million metric tonnes of ground cocoa beans in 2018/19 according to data from Statista. While the data for Nigeria is currently unavailable the decline in the number of cocoa processors and underutilisation of plants among existing players points paints a grim picture. Nigeria had around 18 grinders processing around 230,000 tonnes a year in 1986 but that number fell to eight around in 2014 and only three functional grinders in 2016. FTN Cocoa Processors, one of the two or three functional grinders in 2016 was operating at about 4 percent of its capacity (20,000 MT) down from 9

percent in the previous last year, according to a Bloomberg report. In 2017, Akin Olusuyi, chairman, Cocoa Processors Association of Nigeria (COPAN) told journalists that the total installed capacity of cocoa processing plants in the country was 270,000 metric tonnes but cumulatively, the industry was operating below 15 percent capacity which is 40,500 metric tonnes. Nigeria at that time was world’s fourth-largest cocoa producer, according to the International Cocoa Organisation (ICCO) but has slipped to the sixth position currently although cocoa production has steadily increased since 2014 according to data from The International Cocoa Organization (ICCO). There might be end at the light of the tunnel with Multritrex Integrated, the country’s largest cocoa processor with 65,000 MT per annum capacity, which was taken over by AMCON said to be coming back on board while Osun Cocoa plant, Ede has returned after more than three decades of struggle. Experts say resolving issues around access to funding, fixing infrastructure and addressing issues of cocoa pricing can help revive the industry. Snap Shot of financial performance FTN Cocoa sustained a gross loss of N284 million compared to a gross loss of N251 million in the preceding year but improved its bottom-line even though it was a net loss. In the third quarter of 2019, revenue stood at N502.97 million, a decline of 3.86 percent year-on-year. A 13.54 percent increase in direct cost pushed gross loss to N275 million which trickled down to weigh on bottom-line. Working capital stood at a negative of N519.64 having declined steadily from a deficit of N1.63bn in 2017. On an annualized basis, FTN Cocoa has revenue of N670.62 million, which means at the current rate, sales could be 11 percent more than in 2018. About FTN FTN Cocoa Processors Plc was incorporated on 26th August, 1991 in Nigeria as a private company limited by shares under the name Fantastic Abiola Nigeria Limited which later became Fantastic Traders Nigeria Limited on 26th August, 1998. The company became a public limited liability company on 29th February, 2008 and got listed on the Nigeria Stock Exchange. The principal activities of the company includes the processing of cocoa beans and palm kernel into the cocoa cake, liquor, butter, palm kernel oil and palm kernel cake for export and sales to local manufacturing companies.

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