BusinessDay 09 Sep 2019 by BusinessDay

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news you can trust I **MONDAY 09 SEPTEMBER 2019 I vol. 19, no 389

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Curious case of Nigeria’s rising debt but falling GDP growth FG debt stock to hit N26trn in 2019

GDP stuck at 2%

BALA AUGIE

LOLADE AKINMURELE

15 percent surge in profits for the five largest banks in the most recent quarter (Q2), has not been enough to pique investor interest as financials

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Inside Sanwo-Olu and the Greater P. 2 Lagos vision Coronation Research projects 25 insurance companies to meet NAICOM capital requirement P. 2

fgn bonds

Treasury bills

L-R: Chidi Ajaere, CEO, GIG; Tara Fela-Durotoye, CEO, Tara House of Fashion; Dan Agbor, senior partner, UdoUdoma and Bello Osagie; Kayode Falowo, president, NBCC; Atedo Peterside, founder/chairman, ANAP Business Jets; Bisi Adeyemi, MD, DCSL Corporate Services, and Prince Bimbo Olashore, chairman, Olashore International School, at the NBCC Breakfast Meeting on Succession Planning.

igeria’s economy is not growing at the pace of its debt, a sign that Africa’s most populous nation is racking up debt in an unsustainable manner. While the Federal government’s debt stock has nearly doubled to N24 trillion in four years, growth in economic activity has been stuck at around 2 percent. Latest GDP data for the second quarter (Q2) of 2019 showed growth slowed to 1.9 percent from a revised 2.1 percent in the first quarter. The Debt Management Office is yet to publish the Federal government’s debt stock in Q2 but going

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Monday 09 September 2019

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news 100 DAYS IN OFFICE

Sanwo-Olu and the Greater Lagos vision Gbenga Omotoso

e all saw it as a simple exercise to shake off that lethargic feeling that often visits after a heavy lunch or a short night rest. Or a physical exercise to keep us awake. It all turned out to be that and more – the power of dreams, sheer imagination, some deep thinking and a test of the fecundity of the human mind. “Just close your eyes and L-R: Courage Eboigbe, head, media and corporate affairs, EBIR; Aliyu M. Ehizogie, head, ICT, EBIR; Bidemi Olumide, MD/CEO, Taxtech; Abiola Sanni, chairman, BoD, Taxtech; Efe Edamwen Iserhienrhien, board secretary, EBIR; Tosin Yusuff, non-executive imagine the Lagos of your director, Taxtech BoD; Lucky Imumwen, process driver, lottery and gaming, EBIR; Jafar Easy Idris, board secretariat, EBIR, and dream, the Lagos you would Ekpen Osagie, ICT staff, EBIR, at a courtesy call by Taxaide Technologies Limited (Taxtech) to the Edo State Board of Internal like to see.” That was the diRevenue (EBIR). Taxtech is the Revenue Stream Partner of the EBIR for the Pools and Betting Automation Stream. rective from the instructor at one of the sessions during the three-day retreat for members of the Lagos State Executive Council and Permanent Secretaries. The results were as exciting as they were imaginary. Some dreamt of a Lagos at peace with nature – beautiful parks and gardens, with COM, the Telcos, and Bankcircular requiring steep inin Africa has insurance Modestus Anaesoronye, Bala creases in authorised capital penetration (total gross ing, then you are on track exotic flowers and lush green Augie & Endurance Okafor by June 2020. Current total premium/GDP) at 0.31 to achieve the 3.69percent grass, clean air and seductive ut of 59 under- capital is approximately N300 percent. This is extremely penetration in 8-10 years, but beaches on which coconut writing insur- billion, which brings the defi- low, even compared with if you don’t have that collabo- trees sprout freely. Others saw a Lagos with ance compa- cit to an estimated N169.1 countries with similar GDP ration, then that is where the nies operating billion. per capita, for example real risk lies. So I think it is a smooth and wide roads, free in Nigeria, 25 According to the industry India with insurance pen- case of necessity,” the head of of pestering street hawkers and traffic robbers. A Lagos are projected to meet the new report titled: ‘Moving from etration at 3.69 percent. Research explained. minimum capital require- the Lagoon to Ocean’, the According to Corona- where nobody goes to bed “Experience in other ment set by the National 2019 insurance reform will countries shows that, in tion Research, the growth without food, where no kid Insurance Commission (NAI- most likely take the turn of the right conditions, in- reported in other subsectors misses the education train for COM) when the deadline the banking reforms of 2004. surance can be rolled out of Nigeria’s financial industry lack of money, where the old are catered for, where all have comes on 30th June 2020. Fifteen years ago, Nige- to India’s level in eight to holds hope that insurance This is according to Coro- ria’s banking industry was 10 years. So Nigeria could will also see the break of access to good healthcare and where religious harmony nation Research, a part of hit by a capital requirement go from 0.31percent pen- dawn. thrives. A Lagos driven by Coronation Merchant Bank, reform which saw the reduc- etration to 3.69percent Abiodun Sanusi, direcin an insurance industry out- tion of banks from 89 to 25. penetration in eight to 10 tor, Investment Banking, technology, where investors will be willing to stake their look report released Friday However, industry experts years,” Czartoryski said. Coronation Merchant Bank cash and jobs will be more in Lagos. expect the higher capitalisaFor this growth to be commented that the ongoing available. “As a result of the capital tion to increase underwriting achieved, the Research arm recapitalization in insurance Again, the power of requirement, insurance com- capacity and then provide of the bank recommended will eliminate the industry dreams. “Are these possible?” panies are likely to reduce. In potential to roll-out a much a collaboration of three in- of fringe players, strengthen “Can we do it?” “Yes; we can!” our view, the number of Ni- bigger industry than cur- dustry regulators; Central capacity of those who sur- we all screamed. gerian insurance companies rently exists. Bank of Nigeria (CBN), the vive to enable them deliver That has been the team will drop from 59 to a figure “Nigeria’s insurance sec- Nigerian Communications consumer value, meet claims spirit propelling the adminisaround 25,” Guy Czartoryski, tor presents perhaps the Commission (NCC) and obligations, roll out products, tration of Governor Babajide head, Research, Coronation most remarkable investment NAICOM, in order to enable embark on brand awareness Olusola Sanwo-Olu and his Merchant Bank told Busi- case of any industry in Ni- industry expansion and avail- campaign, and most impor- deputy, Dr. Kadiri Obafemi nessDay on the side-lines of geria,” Coronation research, ability of different products. tant restore confidence and Hamzat, which is 100 days the report launch in Lagos. old today, having been insaid in the report. “If you have a good regu- build trust. In May 2019, Insurance At current level, Nigeria latory collaboration; a good •Continues online at augurated on May 29 to lead regulator NAICOM issued a with the largest economy collaboration between NAIwww.businessday.ng the journey to that “Greater Lagos” we all dreamt of. Driving the vision are the Six Pillars of Development, with the lyrical acronym, T.H.E.M.E.S, which stands The CBN in 2017, issued part 2(A and B): interest rate Rapid urbanization is also Hope Moses-Ashike the guide to banks and other and lending fees subsection causing a proliferation of for Traffic Management & Transportation, Health & he Central Bank of financial institutions, to mod- 2.1.3 mortgage finance to slums and shanty towns. Nigeria (CBN) on erate charges on various read “negotiable”. Nigeria’s mortgage in- Environment, Education & Friday removed the products and services offered The measure is part of dustry is small, with the Technology, Making Lagos a cap on interest rates by banks and other financial efforts to boost home owner- equivalent of $260 million in 21st Century Economy, Entertainment & Tourism as well as for mortgage finance by the institutions in Nigeria. ship in a country where only loans, compared with more Security & Governance. Primary Mortgage Banks Consequently, the CBN 50,000 people out of almost than $90 billion for South At the centre of it all are the (PMBs), effective September said it’s attention has been 200 million have housing Africa. people. That is the song that 9, 2019. drawn to some implementa- finance. Nigeria’s total mortgage Mr. Sanwo-Olu sings, believIn a circular to all other tion challenges in respect of The government faces a debt to gross domestic prod- ing that a policy is most meanfinancial institutions in the part 2 section 2.1.3 (mort- daunting challenge to close uct is estimated at 0.6 per- ingful when it is immensely country, dated September 5 gage finance) in respect of a shortage of 17 million cent versus 2 percent in beneficial to the people. Has and signed by Kevin Amugo, the maximum cap of MPR houses. Ghana, according to the the administration kept to this director, financial policy and +5% placed on mortgage Nigeria has no formalized Nigeria Mortgage Refinance line of thought, considering its regulation department, the finance rates. title-deeds registry and most Corporation NMRC . In actions? Discerning members CBN said the “subject to a The CBN after due con- homes consist of informal South Africa, that ratio is of the public, among who the maximum of MPR + 5%” is sideration of the concerns of structures on land passed 20 percent, according to good people of Lagos number, no longer applicable. stakeholders, amended the down through generations. Moody’s Investors Service. will surely testify to this.

Coronation Research projects 25 insurance companies to meet NAICOM capital requirement

…industry to achieve 3.69% penetration ratio on CBN, NCC, NAICOM collaboration

CBN removes cap on interest rate for mortgage finance

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An 110-bed Maternal and Childcare Centre (MCC), a four-storey edifice that is a piece of architectural delight, was opened on Tuesday at Eti Osa Local Government to boost the battle against infant and maternal mortality, with plans to upgrade the facility to a general hospital. A beautiful school, 12 blocks of classrooms, built in partnership with the state government and the Redeemed Christian Church of God (RCCG), Tabernacle of David Parish in Alaguntan village, also in Eti Osa, was opened. For one month – from August 1 to 31 – there was a festival of surgeries. A team of volunteer doctors, who are specialists in various areas of medical practice, performed thousands of surgeries, especially on children with deformed limbs. Free. There were many moving spectacles – of fathers shedding tears of joy after seeing that their crippled children could walk again, of many having their sights saved from glaucoma and others having their troubled health restored – courtesy of BOSKOH Lagos Health Mission International (HMI), a Non-Governmental Organisation. More than 25,000 Lagosians were treated and 1,417 surgeries were carried out. It was delightful to find our senior citizens singing and dancing last Friday after being handed their pensions and gratuities – about N5b. Some shed tears. Others were speechless, just staring. Many were just praying for SanwoOlu. The Alhaji Jakande Gardens Estate - 492 homes with sporting facilities, good roads, car parks, a sewage treatment plant and a mini-water works - was commissioned on Wednesday in Igando, in a daring bid to reawaken the housing sector. So symbolic was the ceremony that Alhaji Lateef Kayode Jakande,90, the state’s first civilian governor, after whom it was named, and his wife attended. So was Chief Tajudeen Olusi, member of the respected Governor’s Advisory Council (GAC) and many members of the ruling All Progressives Congress (APC). The Lagos State Employment Trust Fund (LSETF), also on Wednesday, gave out N4b cheques to women entrepreneurs. So glad was Access Bank Group Managing Director Herbert Wigwe that he announced that the facility would be increased to N10bn to get more Lagosians employed. There is also the World Bank agriculture loan scheme; 1,700 people will benefit. Each will get N2m. An integrated

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United Nation’s stress test for Nigeria (1)

BASHORUN J.K RANDLE

ll those who underrated António Guterres, the Secretary-General of the United Nations have been proven totally wrong. Regardless of being somewhat self-effacing, he has turned out to be a consummate diplomat and exceptional leader. He has added “visionary” to his intimidating credentials. His previous position as the United Nations High Commissioner for Refugees (from May 2005 to December 2015) has quadrupled his emotional intelligence far beyond what he experienced as a former Prime Minister of Portugal. While he is clearly a goal getter, he understands perfectly how the United Nations as an organisation works. Virtually all major decisions are conceived and vigorously debated at the committee level before being sent upstairs to the Council through the Secretary-General. That is where Guterres has proven to be an adept hand at managing complex geo-politics and the cross-currents of huge egos as well as rapidly shifting intrigues and power play. The people around him appreciate his brilliance but have managed to demonstrate that they are not overwhelmed by it. Indeed, his genuine humility is his most endearing characteristic and at-

tribute. It is not by pure happenstance that the newly elected President of the United Nations General Assembly is Nigeria’s permanent representative to the United Nations, Tijjani Muhammad-Bande. Officially, going by the website of the United Nations, what prompted António Guterres to place Nigeria at the top of the list of countries to be subjected to the stress test was the warning by Mo Ibrahim, Founder of the Mo Ibrahim Foundation. “Africa’s greatest asset is also its defining challenge – its growing population of young people. With 60 percent of its population under 25, Africa is the world’s youngest continent. By 2100, almost half of the world’s youth are expected to be from Africa (predominantly Nigeria).” Added to this was the muscular petition from foremost human rights lawyer, Femi Falana: “Owing to unequal justice (in Nigeria) that has become the hallmark of the nation’s criminal justice system, the prisons and police cells are filled with victims of our unjust socio-economic system. On account of prison congestion due to inadequate funding, majority of the inmates who are awaiting trial are locked up with convicted prisoners. Upon their release from dehumanising prison conditions, the awaiting trial inmates and convicts’ team up to join criminal gangs constituted by frustrated young men and women in the larger society. The criminal gangs drawn from the ghettoes in the cities are fighting back on the streets in broad daylight and in the homes of the rich and not so rich people in the dead of the night. Instead of teaming up with the victims of frustration to

terminate institutionalised injustice in the land, Nigerian lawyers are using the law to defend the status quo under the rule of law. The NBA, which does not hesitate to mobilise hundreds of lawyers to defend indicted senior lawyers and judges, has not deemed it fit to extend free legal services to indigent defendants facing trial for poverty-related offences in the courts. It is common knowledge that Nigeria operates a double criminal justice system – one for the rich and one for the poor. Majority of indigent defendants who are tried in the magistrate and area courts have no access to lawyers. Regardless of the gravity of certain offences, indigent defendants are represented by young and inexperienced lawyers assigned to them by the state.” The Secretary-General of the United Nations was “shocked to the marrow” when the front-page editorial of the “Nigerian Tribune” newspaper of June 14 2019 landed on his desk: “Nigeria’s outrageous railway contract sum” “The country was shocked to the marrow recently when it became public that the Ghanaian-European Railway Consortium (GERC) had agreed to construct a 340-kilometre standard gauge railway line in Ghana for $2.2 billion. This is against the background of the cost of the 156-kilometre Lagos-Ibadan railway line, handled by the China Civil Engineering Construction Corporation (CCECC) and put at $2 billion. The implication of this is that while a kilometre of railway line costs $6.5 million in Ghana, the same length costs $13.6 million in Nigeria. It is nothing short of a scandal that the Ghanaian project handled by a European con-

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Africa’s greatest asset is also its defining challenge – its growing population of young people. With 60 percent of its population under 25, Africa is the world’s youngest continent

Note: the rest of this article continues in the online edition of Business Day @ https://businessdayonline.com/ Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

AMCON-Shebah: The untold story

he media recently reported an interim order obtained by AMCON appointing a receiver/manager over ABC Orjiako’s assets both within and outside the shores of Nigeria. This included Shebah Exploration & Production (E&P) Company Limited and Allene BVI Limited. We all know that stories are better told, when underlying questions are asked to unravel hidden facts. Yes, AMCON made the move in line with the tenets of its existence but it ignored questions on what transpired during the long transaction processes. Regulatory moves without proper investigation would impact negatively on businesses. No doubt, most industry watchers and legal experts have followed these development closely, as it agrees with cross boarder laws, processes and judgement enforcement. Like AMCON, every government established institution is expected to encourage investments. Although, opportunities abound in the oil and gas sector of the economy but many of such opportunities are capital intensive accompanied with CAPEX risks. Besides these risks, cost overruns and schedule delays are common and most financiers often underestimated them. While loan facilities are good for viable businesses, they can fairly be tagged “bad”, if established that there is no intent to repay. Interestingly, this is not the case in this issue against Orjiako. The message is that whether or not recent developments are deliberate , the truth is that any stone thrown at him is best described as one detrimental to the economy because he has positively changed the global narratives about doing business in Nigeria as shown in areas he has made marks.

Disappointingly, this is happening when President Muhammadu Buhari is looking forward to investors making inroads to Nigeria, evident in his recent trip to Japan. Aside Seplat, Orjiako is on the board of companies in various sectors. He is the chairman of Neimeth Pharmaceutical International plc, listed on the NSE; a director of MPI, listed on the New York stock exchange (NYSE), Euronext Paris and a director in Leadway Assurance Company Limited. By invitation of the London Stock Exchange (LSE), he became a founding member of the London Stock Exchange Group’s Africa Advisory Group (LAAG), a select group working towards generating, channelling ideas and solving problems affecting the African continent from a commercial and social perspective. How it all started In 2012, Shebah E&P obtained a $150 million loan facility from a consortium of banks (Afrexim/Diamond now Access and Skye bank now Polaris) led by Afrexim. The purpose was to fund the drilling campaign at the Ukpokiti field (OML 108) operated by Shebah E&P. In the offshore Niger Delta, Shebah drilled a successful horizontal well - first of its kind - and tested 4,000 barrels per day (bpd) of oil and condensate production. However, it encountered large gas reserves. Then, the company decided to find a solution to the huge associated gas based on professional oil field best practices before it continues the oil/ condensate production. Shebah required more funds to commercialise the gas to avoid excessive flaring while producing the discovered oil. Afrexim led a consortium of lenders, but could not provide further facilities to conwww.businessday.ng

sortium, which is reputed for charging more for infrastructure construction, is far cheaper than the Nigerian contract. We make bold to say that the country has been fleeced through the project, and we are unequivocal in our condemnation of this. Why would the construction of a kilometre of railway line in Nigeria cost more than double what it costs in Ghana? This certainly is an indefensible rip-off of the country by a few people in connivance with a foreign interest. It is even more perplexing that this fraud is taking place in the life of a government that has made fighting corruption a plinth of its administration. This certainly is a scam of the country. It is a conspiracy of those in government against the people of Nigeria. It is an unpardonable theft of the common patrimony by the perpetrators of the act. This must be condemned by every Nigerian citizen. The civil society cannot afford to keep mute about this. Nigerians must rise as one people against those whose stock in trade is the perpetual pilfering of the commonwealth. But apart from the differential in the costs of the two projects being a demonstration of a rape on the country, it is also agonizingly symbolic and reflective of the differences between the two countries. It explains why Ghana is advancing and Nigeria is on a retreat. It explains why electricity generation and supply is improving in Ghana while same is worsening in Nigeria.

SEGUN ADEOYE clude Shebah’s operations. In 2014, Shebah approached Zenith Bank, who appraised the situation and provided a $200 million loan facility fully approved by its board.. Zenith proposed to pay the consortium $50 million to reduce their collective exposure, enhance the facility to $300 million, provide Shebah with additional funds to monetise the gas and produce the discovered oil. In line with Shebah’s need, Zenith bank further requested to have a moratorium period of nine months to conclude the projects and extend the facility tenure to five years. This was meant to spread the cash flow and enable easy repayment of the enhanced facility. Surprisingly, the Afrexim consortium rejected the $50 million offered by Zenith Bank on the grounds that Zenith should not lead the syndicate, while not willing to extend the tenure of the facility which should be over in about two and a half years upon Zenith’s offer. The Afrexim consortium rejected all the efforts being made by Shebah and proceeded to file an action to call the facility in 2014 (just two years after final draw down). The call ahead of the maturity triggered default on the loan. On the 19th of February 2016, Justice Phillips of the London High Court, delivered a judgement in favour of the Afrexim consortium for the repayment of the $150 million loan facility. The creditors further registered the judgement in the Federal High Court in Lagos applying for an enforcement of the judgement. The defendants (Shebah E&P and ABC Orjiako) immediately opposed the registration and the judgement enforcement based on their rule of law convictions, stating their

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willingness to negotiate settlement and loan repayment out of court under a restructured arrangement. This case is still pending before a federal high court in Lagos. The next hearing date is October, 2019. Contrary to the syndication agreement by the Afrexim consortium, Polaris Bank unilaterally transferred its share of the judgement facility to AMCON. Notwithstanding, the unilateral action by Polaris Bank, AMCON should have joined the existing court case in the federal high court Lagos but instead it initiated a fresh action in the federal high court Abuja, giving no concern to a case already rule upon in London and subject to contested enforcement proceedings in the federal high court Lagos. It is by the fresh case that AMCON obtained the Ex-Parte order reported by various media platforms. There are indications that the second defendant ( Orjiako) who was the loan guarantor had provided about $68 million to Shebah to pay the AFREXIM consortium toward the repayment efforts prior AMCON’s intervention. Worthy to note, this payment indicates a strong willingness to settle debt. The media reports of AMCON’s purported move to impound the personal assets of Orjiako and Shebah can only cripple their efforts to meet the debt obligations. This portends a strong disincentive to the spirit of encouraging investments in the country. Adeoye, an economist & public affairs analyst based in Abuja

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Too Busy to Hate

PATRICK ATUANYA

hen a group of Poor Township dwelling South African thugs began a wave of deadly riots and xenophobic attacks on foreign immigrants largely from Africa, the fallout could hardly have been foreseen to reverberate across the continent. The rioting that began in Pretoria before spreading to nearby Johannesburg and environs has led to reprisal attacks in Lagos, Abuja and Lusaka. Tanzania’s national carrier suspended flights from Dar es Salaam to Johannesburg, while some African leaders boycotted (or failed to show up) at the ongoing world economic forum (WEF) Africa conference in Cape Town. It has morphed into one big mess, with various countries in the poorest continent on earth who should be embracing trade, free markets and movement of its people as a recipe for sustainable growth, now seeing looting, unhelpful rhetoric (from the party chairman of Nigeria’s ruling APC, and some South African

Ministers), and attacks on each other as fair game. In the Lagos carnage that erupted last week, looters targeted a Mall in the Lekki axis that had South African retailer Shoprite as its anchor tenant. Tens of Nigerian owned stores were however also ransacked in the ensuing melee, as they became collateral damage or unintended casualties of a stone first thrown some thousands of miles away in Pretoria. It becomes all the more depressing when you realize that just a few months ago African leaders came together to sign an agreement on a ground-breaking trade deal that promises to ease borders across the continent, while revving up growth. The Africa Continental Free Trade Area or AfCFTA aims to close a gap in African intra-country trade which is a mere 15 percent of the total value of African trade, compared with 20 percent in Latin America and 58 percent in Asia, according to data from the African Export-Import (AFREXIM) Bank. This could more than double within the first decade after implementing AfCFTA, according to estimates. There are 200 million young Africans aged 15-24 who need to see the continent move up a gear to a higher level of economic growth if they are to secure jobs and contribute to their countries prosperity as the workers of the future. As such trade and investment between Africa is vital as can be seen in some Nigerian corporates who are beginning to expand and invest all across Africa.

Dangote Cement the giant Nigerian maker of the building material is present in 25 countries in Africa (excluding Nigeria) and in the 6 months period (January – June, 2019) it had sales of N467.7 billion, a third of which (N140bn), came from its rest of Africa operations including South Africa. Other Nigerian corporates are also expanding outside the country including United Bank for Africa (UBA), present in about 21 African countries, Guaranty Trust Bank, Access Bank and First Bank. So while tempers flare, cooler heads must prevail as there is no use for grandstanding in place of governance, especially for Nigeria and South Africa, the two largest economies on the continent that are both suffering from high unemployment, low growth and uninspiring leadership. Growth in Africa’s largest economy (Nigeria) slowed to 1.9 percent in the second quarter of 2019 from a revised 2.1 percent in the first quarter, state-statistics agency, National Bureau of Statistics (NBS), said last week. There has been scant policy progress since President Muhammadu Buhari was re-elected in February. Most Ministers sworn in recently have barely settled in and frustration has set in for investors seeking clarity. If you are an investor in Nigerian stocks you have lost -13.6 percent so far this year. South African President Cyril Ramaphosa is also facing criticism from business and investors for the slow implementation of reforms, while proposals published by the Na-

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So while tempers flare cooler heads must prevail as there is no use for grandstanding in place of governance, especially for Nigeria and South Africa, the two largest economies on the continent that are both suffering from high unemployment, low growth and uninspiring leadership

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

On the slow GDP growth, please can we return to textbook solutions?

he National Bureau of Statistics (NBS) released the second quarter GDP data last week and the numbers were disappointing. GDP growth rate slowed to 1.94 percent despite a more than five percent growth in oil GDP. The non-oil sectors slowed to 1.64 percent. The slowdown was present in almost all key sectors from agriculture to manufacturing to trade to finance. The slow growth combined with Nigeria’s high population growth means that real income per capita has declined for four straight years. To put that in simpler English, Nigerians on average have been getting poorer since 2015. We have not gotten unemployment data since the third quarter of 2018 and have not gotten poverty data for years but the fact that the slowdown was across major job creating sectors like agriculture, trade, and manufacturing means that we are likely not making progress on those fronts. All of which should make our policy makers very worried. So why is our economy struggling? Well, we are suffering from textbook problems. That is, problems that are in the textbook with some solutions that are also in the textbook. I cannot describe all here, but we can focus on the macroeconomic stability problem. When an economy is hit with a com-

modity term ‘trade shock’, a scenario where the value of its exports suddenly drops relative to the value of its imports, policy makers are faced with two choices. Either choose between allowing the exchange rate to adjust to absorb the shock or have the economy decline to absorb the shock. Ok, in practice it is not as straightforward and simple as that as there are things involving timing and frictions but that is the broad gist. It’s either exchange rate or economy. If policy makers choose to let the exchange rate adjust, then the economy and inflation might take a hit but then after the adjustment things go back to normal. If the policy makers choose to sacrifice the economy for exchange rate “stability” then the economy declines and may be stagnant for years. This brings us to the Nigerian economy. In 2014/2015 we suffered a classic terms of trade shock, no thanks to a rather dramatic collapse in the price of crude oil followed by a drop-in production. What did we choose? We choose the exchange rate. We implemented all sorts of policies under the auspices of conserving foreign exchange to prevent the currency from depreciation. From the demand management policies to others designed to attract foreign exchange at all costs. The result? The economy collapsed. We grew some sense after things got www.businessday.ng

really bad and opted to choose the economy over the exchange rate for a while. Recently though it looks like we are back to our unfortunate default mode of sacrificing the economy at the altar of exchange rate stability. We are back to demand management, closing the borders to prevent smuggled imports, and are heading back to a higher interest rate environment to attract foreign portfolio funds to keep the exchange rate stable. Our economy is already dancing like this and like that. This is all textbook stuff really. To be fair there are lots of other things that count besides the exchange rate and the macroeconomic policy environment. If your capacity to move goods across the country becomes more difficult because everyone is afraid of being kidnapped, then the economy suffers. If people lose confidence in their ability to settle disputes and get justice in an orderly manner, then the economy suffers. If businesses have their bank accounts arbitrarily frozen for simple tax related reasons that could be resolved more easily, then the economy suffers. If investors fear that the returns on their investments will be seized over technicalities, then investment suffers, and the economy suffers. If people expect a currency devaluation and opt only to invest in short-term risk-free govern-

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tional Treasury last month to revive the economy have been shot down by the country’s biggest labor-union federation. South Africa’s unemployment rate climbed to a 15 year high of 27.6 percent in the first quarter of 2019, while Nigeria’s jobless rate is at 23 percent. Both economies which together make up half of Africa’s GDP are suffering from low growth rates with South Africa forecast to expand by just 0.3 percent this year, compared to 2 percent for Nigeria. With large populations of jobless young men and women it is no surprise the recurring violence in South Africa, which hurts all, citizens and foreigners (for instance one woman is murdered every three hours in South Africa, according to police data), and Nigeria where the Lekki riots turned to attacks against innocent Nigerians, never mind kidnappings, 419 and other crimes in the country. My sense is that both countries need each other more than ever (some 800,000 Nigerians live legally in South Africa) and everything should be done by the adults on both sides to come through these difficult times. Africans, Nigerians and South Africans have bigger fish to fry (of providing jobs for hundreds of millions of young people amid a global economy moving away from commodities), and time is running out. Like Atlanta both countries and Africa in general should be “Too busy to hate”!

ECONOMIST

NONSO OBIKILI

ment instruments, then the economy suffers. If government spends its scarce resources subsidizing fuel as opposed to building roads on investing in education and health, then the economy suffers. I could go on and on. All these are not things which no one has seen before. These are not things that are brand new to Nigeria. These are challenges that others have faced and dealt with. In short, these are things that are in the textbook with solutions also in the textbook. So, can we just go back to doing textbook policy. Too often we yearn for “Nigerian solutions to Nigerian problems” and are urged to “think outside the box.” Based on our GDP numbers and economic trajectory perhaps we should just stick to the textbook for now and go back to thinking inside the box. Nonso Obikili is chief economist at Business Day.

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BUSINESS DAY

Monday 09 September 2019

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

$9.6bn debt: The buck stops on the AG’s table

ash statements by Nigerian officials and those of Process and Industrial Development (P&ID) on the matter of a judgement debt of $9.6 billion dangling over Nigeria, threaten to reduce the issue to vaudeville. Except that it is deadly serious and could engulf more than a fifth of Nigeria’s foreign reserves. We submit that the buck on this matter stops on the desk of Nigeria’s Attorney General and he must take charge and drive the narrative in the direction of the law instead of politics. Abubakar Malami, Minister of Justice and Attorney General, in interviews with a foreign station shifted responsibility for the P&ID case to a previous government. He stated, “The government as a unit was delicately involved,” referring to 2010 administration, “the award was in 2012, and then three years after the current administration under the leadership of Mu-

hammadu Buhari came into place. So, the time when this administration resumed in 2015, the award was over three years, there was no appeal, no application for execution, no application to set the award aside.” As the minister surely knows, the government is a continuum. The matter concerns the Nigerian government, and he has served as the country’s chief law officer for five years now. The latest deliberations on the case happened in the pendency of his control over the ministry. He cannot and must not be allowed to pass the buck or deny responsibility as he has tried to do. The political considerations on when and where the problem started is irrelevant. Deal with the current situation. The $9.5 billion judgement underlines the importance of the sanctity of contracts. The Nigerian government has become notorious for failing to honour commitments into which it wilfully enters. It is not right for the country’s reputa-

tion. It is okay to seek a reversal of the judgement, but we must do this within the ambit of the rule of law and appropriate procedure. Respecting the sanctity of contracts lies in observing process and requirements. Nigeria must follow due process in the pursuit of this matter, including in potential application for the deployment of the silver bullet of a UK legislation that protects the country from any arbitrary seizure of our assets. Accountability also at issue. For five years, the federal government never mentioned that there was such a contract between Nigeria and any player nor bothered to brief. The matter remained “confidential” until P&ID then got this humungous judgement amount. Then there is the matter of the standing of our judiciary. Because Nigeria undermines its judiciary in several ways, many international partners no longer want to rely on the Nigerian court to resolve disputes. The quality of bureaucracy is

troubling. What manner of civil service is available to support the executive and what variety of counsel are they offering? There is no accountability for the egregious errors that attended this contract. No heads are rolling. Why so? Ignorance and incompetence at play. While at it, Nigeria needs an inventory of cases involving it and contractors. P&ID has also behaved strangely. Creditors hardly openly antagonise their debtors from whom they expect to collect payment. P&ID is doing so. They have been taking on key officials of the federal government in the media. Is it smokes and mirrors? Is it a diversion? The way out is to engage. Tackle the matter in the courts and through direct engagement and negotiation, where necessary and feasible. The court of public opinion or trying to score points for the government now will not make a difference in the case. Nor would antagonising Britain. Deal with the legal, primarily.

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Monday 09 September 2019

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Title: Xenophobic attacks: South Africa is biting the hands that once fed it GLOBAL PERSPECTIVES

OLU FASAN

outh Africa is at it again, displaying its customary Xenophobia. Last week, there was a wave of Xenophobic attacks on other Africans, particularly Nigerians, living in the country. In 2015, for over four weeks, hundreds of South African youths wielded machete and other dangerous weapons, looting and burning businesses, asking other African nationals to “return to their home countries”. Similar Xenophobic attacks took place in 2008, when a wave of anti-immigration violence left about 62 people dead. In 2006,Xenophobic riots broke out for several months in Cape Town. To be sure, what is often called Xenophobia is actually “Afrophobia”, hatred of fellow Africans. After the 2015 attacks, the then South African police minister, Nathi Nhleko, said there was widespread Afrophobia in South Africa. The country’s current foreign minister Naledi Pandor, said the same thing, following the recent violence, “there is a prejudice in South Africa against people from other African countries.” But why would South Africans hate their fellow Africans? Leaving aside the fact that the country calls itself a “rainbow nation”. There is something about the attacks on other African nationals that smacks of ingratitude. Do they not remember their own history? Have they forgotten so quickly how Nigeria, and other African countries, supported their struggle against apartheid? How could they forget, that Nigeria harboured several prominent ANC exiles, and made significant financial and diplomatic contributions to help accelerate the collapse of apartheid? Okay, maybe the South African youths brandishing machete and at-

tacking Nigerians have no memories of Nigeria’s role in their country’s anti-apartheid struggle. But do they also not know that Nigeria is the most important African market for South African companies, with an estimated investment of N6.5 trillion (about $18bn) in this country? Nigerians with commercial interests in South Africa are mainly traders and small-business owners, whereas South African large companies, such as MTN, MulitChoice and Shoprite, have significant commercial presence in Nigeria. Economic logic suggests that when a country has strong economic interests in another country, it would do nothing to rupture that relationship. The sad thing, though, is that South African leaders, who should know better, give tacit encouragement to the Xenophobia by fuelling anti-foreigners’ sentiments. In 2015, the Zulu king, Goodwill Zwelithini, was widely criticised for saying that foreigner nationals should “pack their bags and go”, although he later said he was misquoted. But, as the Financial Times said last week, the main political parties in South Africa, the ruling African National Congress (ANC), and the Democratic Alliance (DA), dabbled in populist rhetoric targeting foreigners in recent elections, with the DA campaigning on the message of “secure our borders”, while an ANC minister said that South African cities were becoming “80 percent foreign national … we are surrendering our lands.” Of course, as populists do, the leaders were only playing on the fears of the people for electoral advantage. The truth is that those fears, which stem from deep poverty and inequality, are the root causes of the Xenophobia. South Africa is one of the world’s most unequal countries, and has one of the world’s highest unemployment rates, currently 29 percent. Over 10 million South Africans are unemployed and half the country live below the poverty line. Surely, when you have the combination of grinding poverty and inequality as well ingrained culture of violence, which is a legacy of decades of brutal apartheid regime, you have a tinderbox waiting to ignite. And the existence of a large and visible immigrant community amid widespread local

unemployment, poverty and inequality is a spark that could easily ignite the tinderbox. It is estimated that about two million of South Africa’s 55 million-strong population are either documented or undocumented immigrants, that is, foreign-born. So, South Africa faces a unique challenge, which, though doesn’t justify the Xenophobic attacks, cannot be ignored. The poverty, inequality and economic exclusion of millions are very problematic. I once worked briefly in South Africa as a research fellow and it was always shocking to see hundreds of youths roaming the streets during the day jobless, with most even unemployable due to poor education. Yet, given its relatively sophisticated economy, South Africa attracts a lot of immigrants from other African countries, which breeds envy and resentment from the poor locals. Sadly, some Nigerian immigrants don’t help matters. Because of their bad behaviours, they can really be a pain in the neck. The South African foreign minister said recently that many Nigerians in South Africa are drug traffickers. Of course, this breeds local resentment. But, unfortunately, it’s law-abiding Nigerians, those living legally in the country and undertaking legitimate businesses, that bear the brunt of such resentment and the Xenophobic attacks. Of course, Xenophobia is not a unique South African problem. It is an African and, indeed, a world problem! What is unique about the South African brand of Xenophobia is the violent attacks. Countries all over the world respond to challenges posed by immigration in different ways. It is a shame that South Africans have allowed their own fear of immigrants to have a violent streak. There is certainly no excuse for any form of violence. Yet, hypocritically, Nigeria, a very violent country, where Boko Haram and criminal herdsmen kill fellow Nigerians with impunity, has taken the moral high ground. Buhari, Nigeria’s president sounded tough, the foreign minister, Geoffrey Onyeama, summoned the South African high commissioner and Vice President Osinbajo withdrew from the World Economic Forum meeting in Cape

‘

Xenophobia is not a unique South African problem. It is an African and, indeed, a world problem! What is unique about the South African brand of Xenophobia is the violent attacks

Town. Bizarrely, Nigeria’s ruling party, All Progressives Congress (APC), called on Buhari to nationalise MTN, DSTV and other South African companies and banks in Nigeria. The party’s national chairman, Adams Oshiomhole, wanted Nigerians to stop patronising MTN and other South African companies in Nigeria. Meanwhile, sadly, there were reprisal attacks on MTN, Shoprite and the South African embassy in Nigeria, forcing its closure until further notice. One would think, with such reactions, that Nigeria is a model for African inclusivity. Yet, it is not. Take its love-hate relationship with Ghana. In 1969 Ghana deported thousands of Nigerians and other immigrants for flimsy reasons. Then, in 1984, under the military regime of the now President Buhari, it was Nigeria’s turn to be Xenophobic: it deported up to one million Ghanaian and other African migrants. Later, in 1985, another 300,000 Ghanaians were asked to leave Nigeria at short notice. In 2012, South Africa deported 125 Nigerians; Nigeria, under the administration of Goodluck Jonathan, retaliated by deporting 84 South Africans in two days! So much, then, for African unity! Surely, none of this bodes well for African economic integration. The newly established African Continental Free Trade Area (AfCFTA) and any push for free movement of people cannot succeed in a climate of Afrophobia. The impetuous calls for economic sanctions against South Africa suggest that Nigeria, a reluctant integrationist, could use such Xenophobic attacks as excuse to renege on its commitments to AfCFTA. But, economic integration apart, South Africa has a moral duty to treat citizens of other African countries well. As Jacob Zuma, South Africa’s president in 2015 said the solidarity of other African countries, “was critical to achieving the freedom and democracy we are enjoying today.” South Africans will do well to always remember that! 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

Nigerian code of corporate governance 2018 Principle 17- risk management

BISI ADEYEMI

isk is an underlying factor in every business and can be defined as the probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities. ISO Guide 73 defines risk as the effect of uncertainty on objectives which may be positive, negative or a deviation from the expected, usually described by an event, a change in circumstances or a consequence. In business, risk is typically the driver of strategic decisions and the management thereof is embedded in the activities of the company. Risk Management is an integrated process that encompasses the identification, assessment and ranking of risk facing an organization and the practical efforts expended in

mitigating and controlling them. The management of risk is at the heart of corporate governance as the sustainability and continuity of a company depends largely on its ability to measure, monitor and mitigate various dimensions of risk. The responsibility to effectively manage risk in a manner that ensures business continuity rests squarely on the Board of Directors and derived primarily from Directors’ fiduciary responsibilities. Principle 17 of the NCCG Code provides that, “A sound framework for managing risk and ensuring an effective internal control system is essential for achieving the strategic objectives of the Company.” A Risk Management Framework is the structured process used to identify potential threats to an organization, define the strategy for eliminating or minimizing the impact of these risks, as well as the mechanisms to effectively monitor and evaluate this strategy. The Code recommends that the board should articulate, implement and review the company’s internal control systems to strengthen the risk management framework. Risk management is not about eliminating risk - which is indeed a fundamental driving force in business and entrepreneurship- rather it should provide a framework that enables www.businessday.ng

the articulation of an organization’s risk appetite (the amount of risk the company is willing to accept in pursuit of stakeholder value), tolerance and capacity and would serve to ensure that decisions are considered within this context. A Risk Management Framework assures stakeholders of the company’s commitment to profitability and sustainability. The Nigerian Code of Corporate Governance provides that the Board is to ensure the establishment of a risk management framework that defines the company’s risk policy, risk appetite and risk limits. It recommends a framework covering all aspects of the company’s business and ensures that mitigating strategies have been put in place to manage identified risks. The board shall ensure that the framework is able to identify all possible risks that may affect the company. A significant risk that needs to be clearly articulated and monitored for impact is that of information and communication technology, given the rate with which technology is advancing. Cybersecurity and data protection are front burner issues that the board must be very deliberate about and ensure these are adequately covered by the framework. Directors should carefully assess the adequacy of the company’s data security measures. Cyber risk is not going away, so it

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is imperative that board and management do what they can to manage and minimize cyber risk. This includes identifying those areas where the company is most vulnerable and understanding how it may be at risk. Boards also need to have a response plan in place if and when a cyberattack occurs and ensure they have adequate insurance coverage for data breaches. Failure to adequately oversee this risk, can cause dire consequences for the company. The Risk Management Committee plays an important role in establishing and implementing the risk management framework. The board should thus ensure that members of the committee have a clear understanding of the company’s business, sector and the business environment, to be able to provide the required oversight of risk management.

Note: the rest of this article continues in the online edition of Business Day @https://businessdayonline.com/

Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions tobadeyemi@dcsl.com.ng

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Monday 09 September 2019

BUSINESS DAY

REAL SECTOR WATCH

Flour Mills completes sugar merger, grows Rom Oil capacity by 13% ...tough environment hits margins Stories by ODINAKA ANUDU

s part of internal restructuring towards achieving efficiency, Flour Mills of Nigeria (FMN) plc has merged Golden Sugar Company with Sunti Golden Sugar Estates Limited. The reason behind the merger is to properly align the business for enhanced performance and create more opportunities for growth and profitability, said John G. Coumantaros, chairman of FMN. Speaking at the annual general meeting held by FMN in Lagos last Wednesday, Coumantaros said the restructured sweetener value chain has begun to yield positive result for the group as it has begun to declare an accretive value. “For the first time after the restructuring, we were able to declare a positive bottom line to create value for the investment of our shareholders and other stakeholders,” he said. Nigeria President Muhammadu Buhari commissioned FMN’s N50 billion Sunti Golden Sugar Estates in March 2018, featuring 17, 000 hectares of irrigable farmland and a sugar mill processing 4,500 metric tons (MT) of sugarcane per day. At full capacity, the estate can

produce 1 million tons of Sugarcane which roughly translates into 100,000 MT of sugar yearly. According to Coumantaros, the Sunti Golden Sugar Estates achieved its first development target of reaching 2,836 hectares of land under cane in July 2018. He said the company completed the construction of three drain pump stations with

the heightening and strengthening of dyke along 10 kilometres on the North-Eastern side of the recurrent challenges of flood. He recalled that in September 2018,the company’s dykes were breached, causing serious damage with most of the cultivated land submerged. “I am happy to report that we

Economy to grow bigger with well-developed manufacturing value chain—MAN ODINAKA ANUDU

he Nigerian economy will experience rapid growth if the manufacturing value chain is properly and fairly developed, according to the Manufacturers Association of Nigeria. (MAN). Speaking at the just concluded annual general meeting (AGM) of the association, Mansur Ahmed, president of MAN, said firms producing the initial goods often do not make as much money as those that do the final processing due to broken linkages in the value chain. “The Nigerian farmer produces cocoa and sells it abroad, but we find is that at the end of the day, the guy who converts the cocoa into chocolate makes 90 per cent or more of the total value while the guy that produced the cocoa makes 10 per cent or less,” Ahmed noted at the AGM themed, ‘Improving the Value Chain in the Manufacturing Sector for Competitiveness and Job Creation’. He said it is important for any economy interested in growing to ensure that every part of the value chain is maximised to

share the values of the product and business fairly among all the participants. “This means we have to use of local raw materials,” he said. “The more we use more of our local raw materials, the more our manufacturers expand, grow and employ more people and the more they create value as a whole,” he added. He stressed the need for consumers to buy made-in-Nigeria products, saying that doing so means consuming what is produced locally and producing what is consumed. “It is the best way to enrich our country and the best way to spread wealth and alleviate poverty,” he said. On the controversial closure of Nigeria-Benin Republic border at Seme, Mansur said the action would obviously reduce the capacity of those depending on border trade to produce and do their businesses. “We know that this closure is necessitated by the insecurity and massive smuggling taking place, but we expect that it is going to be short-lived to ensure that the government organises itself to create long- term sustainable measures to tackle smuggling that will help www.businessday.ng

manufacturers to grow,” he noted. Segun Ajayi-Kadir, directorgeneral of MAN, said manufacturers have had to grapple with supply side constraints limiting their competitiveness. “And before we can be competitive, we have to take advantage of situations where we have comparative advantage. So we decided to link the value chain to competitiveness and with the oncoming of the Africa Continental Free Trade Agreement (AfCFTA), there is a need for countries to take advantage of the 1.2 billion people market that we have in Africa,” he said. He stressed that if Nigerian manufacturers are not competitive, they would not be able to sell their products outside the country in the AfCFTA era. “If you do not take advantage of the value chain that exists within your economy, you will not be able to compete in terms of price and there will not be economies of scale. We use this AGM to signpost the fact that this should be something the government and business men and women should take seriously and what the country should focus on going forward,” he added.

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have been able to recover the areas lost due to the flood, and a project to further strengthen our dyke by placing 300,000m3 additional material along 13km has been completed,” he disclosed. FMN ‘s group revenue fell 3 percent to N527.40 billion in March 31, 2019, from N542.67 billion in March 31, 2018. Profit from continuing

slumped to N4 billion, from N13.6 billion in the corresponding period. But the company paid some of its debt as net debt fell by N21.2 billion while finance cost crashed 30 percent to N22.9 billion, from N32.7 billion. The financial position shows that Nigerian manufacturers operate in a tough environment as poverty rate of almost 50 percent and unemployment of 23 percent continue to shrink consumer wallets. FMN’s subsidiary Rom Oil Mills, which is currently exporting to West Africa, raised its production within the financial year by 13 percent to 134,082.58 MT. “This improvement was recorded despite shortages in key raw materials and intense competition pressure arising from inward smuggling of crude palm oil, which is sold at outrageously cheap prices,” he said. He disclosed that Rom Oil, supported by its subsidiary Agri Palm’s 3,500 hectares of oil palm plantation, has achieved a solid step-up performance. For Premium Feed Mills, one of FMN’s subsidiaries, Coumantaros said the company commissioned a new extrusion line with a capacity of 5,000 MT of aquafeed per month, adding that the line is designed to meet the needs of the Nigerian market.

Lafarge moves to reduce capital flight through tilers’ training RAZAQ AYINLA

afarge Africa Plc has begun vocational training for hundreds of tilers in the country with a view to improving their skills and expertise. Lafarge Africa, one of the giant cement and building solutions firms in Nigeria, has also innovated super tiling adhesive solutions through the introduction of Lafarge Supafix, a tile adhesive made of cement, aggregates as well as organic and inorganic additives, as part of the company’s strategy ( Lafarge’s Strategy 2022), focusing on building for growth strategic plan for the country. Speaking at the Lafarge Africa Plc Sports Day 2019 held at Sagamu International Stadium in Ogun state over the weekend, Michel Puchercos, the country chief executive officer, Lafarge Africa Plc, said that the firm’s belief in Nigeria’s project, her economic growth and development, prompted the company’s innovations that are being targeted on economy and human capital development. Puchercos, who was represented at the event by Adamu Mohammed, Ewekoro Cement Plant operations manager of Lafarge Africa Plc, said, “As a company, we are producing products that meet our customers’ demands. Beyond that, we are going into inno@Businessdayng

vations to ensure that will satisfy the customers, give them products that they have not experienced before. “We have Supafix which is a new product. We are bringing it to market, to help in placing tiles, there are innovations that Lafarge is involved in, to satisfy the customers and even go beyond expectations. “One thing that makes us different is that we don’t just send products out, we follow the products to see how they are used and what we can do to impact people that are using the products positively, in terms of of giving them required knowledge because. “It is one thing to have a product, but if you don’t know how to mix or the right proportion to mix, it becomes something that will not give you the right value. So, we organise seminars for block makers to enlighten them on what to do. Now that we have this new product which is Supafix, it’s again important to engage these tilers, let them know how to utilise this product because if you have a good product and you don’t know how to use it, you can’t get a full benefit. “ As a company, I can assure you that we will engage the tilers and make them understand how it’s going to be used. It’s not about them alone, it’s about those that pay money to get the job done. They will not be happy as somebody who has bought the product and somebody applied it and after sometime, the tiles are falling off.”

Monday 09 September 2019

BUSINESS DAY

REAL SECTOR WATCH Cocoa value chain benefits elude Nigeria amid global demand GBEMI FAMINU

igeria is making little money from cocoa as it fails to turn it into chocolates. Nigeria produces 250,000 metric tons of cocoa, earning $547.5 million at Friday’s price of $2,190 per ton. The country has a 5.2 percent share of the global cocoa market estimated at 4.85 million tons in 2019. A report puts the global chocolates market at $103.28 billion in 2017 and is expected to hit $161.56 billion in revenue by 2024, growing at a compound annual growth rate (CAGR) of around 7.0 percent between 2018 and 2024. Assuming that Nigeria produced chocolates in 2017, it would earn $5.37 billion in 2017, with a market share of 5.2 percent. “So the money-making thing here is value addition,” said Attah Anzaku, CEO of AgroEknor, an international commodity trading firm, “Why most people are not so interested in exporting value added products is that they are just satisfied with the little dollar they get from raw products. But if

that is what you want out of life, good for you. If you go abroad to all the shelves and retail stores, you see most of the things we sell to them. I was in Barcelona around some time ago and I saw tiger nuts bar. A tiger nut was selling for 20 euros. If you are selling that in a raw form, you will not get as much as that,” he said. Cocoa is a local crop product widely known for its uses and versatility as well as its economic

value. Although abundant in various countries, 70 percent of the world’s cocoa beans come from West African countries of Ivory Coast, Ghana, Brazil, Nigeria, and Cameroon. Reports from WorldAtlas show that Ivory Coast is the top cocoaproducing country globally, supplying 33 percent of the world’s total cocoa with its annual output of 1.44 million metric tonnes.

BUA redefines cement industry with capacity-building …partners ITF, SON to train over 500 technicians, block makers ODINAKA ANUDU

o reduce frequent incidences of building collapse, BUA Cement has trained block makers and other players on the technicalities involved in construction. In doing this, the cement maker, in collaboration with Industrial Trust Fund (ITF) and Standard Organisation of Nigeria (SON), embarked on training building technicians and block markers on the nittygritty of cement usage in building constructions. Tosin Olokuntoye, regional manager, South West, BUA Cement, said so far, over 500 building technicians and block makers have been trained with the latest conducted in Ilorin and Lagos. According to Olokuntoye, the programme was designed to offer standard practices to stakeholders to address the series of building collapses across the country. Speaking with newsmen at the end the workshop held in Lagos, tagged ‘Optimizing Cement Usage to Achieve Better Quality and Yields in Blockmaking’, some stakeholders shared their experiences of using BUA Cement.

“BUA Cement dries fast and it is stronger because when the blocks are molded today, the next day the blocks are already dried and strong. Also when you are loading the blocks in the truck, it is the same amount of blocks molded that will be there. None will be broken or shattered,” Samuel Daniel, deputy chairman, Ogbomoso Block Industry, said. Famuagun Caleb, a building technician from Ado-Ekiti, said the efficacy of BUA Cement is unquestionable, adding that the product has always given good quality without errors, as neither rain nor sun could affect the quality. “I want to testify that BUA Cement is super strong,” he said. Addressing the stakeholders, Nasiru Ladan, general manager for sales, BUA (Obu) Cement, warned building technicians on wrong application of cement and other construction materials in a bid to reduce cost and maximise profits, thereby producing substandard infrastructure within the country. According to Ladan, the company would continue to intensify efforts targeted at educating, training and creating awareness to end users on the www.businessday.ng

correct use of the cement mixes in collaboration with relevant standard and regulatory bodies. According to him, BUA Cement has consistently made it its responsibility to educate stakeholders in the building and block-making industry on the proper mix and application of cement with other materials. “We believe that standard building of high-quality is possible only if the mix of the cement with other materials is appropriate,” he said. According to him, BUA Cement comes in 42.5 and 52.5 texture grades, which are in accordance with highest quality texture which mix and dry up easily. Usman Mohammed Sanni, area manager, ITF, Lekki, Lagos, said his organisation is willing to collaborate with BUA Cement because of the quality of the product. As the formal skill training agency of the government, Sanni said the organisation is willing to collaborate with any company that is ready to build the capacities of workers. “Any organisation or company across the country that wishes to develop the capacity of its workers, the best option is the Industrial Training Fund,” he said.

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Before the discovery of oil in the 1960s, agriculture was the mainstay of the Nigerian economy, with cocoa and palm oil as the major drivers. The country produced an average of 400,000 metric tons through its cocoa producing states such as Ondo, Cross River, Edo, Osun, Oyo, Kwara, Kogi, Adamawa and earning favorable foreign exchange for the economy. Data from The International Cocoa Organization (ICCO) show that cocoa production in Nigeria declined to 210,000 metric tons in 2017 despite the increasing demand for the product, with the country ranking 6th among cocoa-producing countries globally. The major export destinations of Nigeria’s cocoa beans are Netherlands, Germany, Indonesia, Malaysia and Belgium where it is converted into products like chocolate, meal spread, and Choco drink. Cocoa and cocoa products earnings by Nigeria were valued at $338.17 million, accounting for 20.8 percent of the total non-oil exports value in 2015. It declined in 2016 to $242.23 million, representing 20.13 percent. Aging trees, aging farmers

and low investments in the last decade are key challenges facing the industry. Speaking on problems of the cocoa industry, Dara Akala, executive director of Partnership Initiatives in the Niger Delta (PIND), said at a breakfast meeting that “Nigerian cocoa beans are being sold at a discount price in the international market, resulting in low profitability for actors in the value chain especially the farmers.” He also noted that a value chain study had revealed that the poor yields and poor quality of local cocoa beans were reasons for low productivity and profitability of the cocoa industry. According to U.S. Department of State Country Commercial Guide, Nigeria’s total agricultural income is estimated to be approximately US$1.6 billion yearly and the agricultural sector has the prospects of contributing more to improving the country’s export earnings if properly equipped with value addition that can compete globally. Experts are of the opinion that value addition will contribute more to the country’s economic development and GDP growth.

UACN subsidiary Mr Bigg’s rejigs operation …rolls out new restaurants GBEMI FAMINU

r Bigg’s, the quick service restaurants (QSR) arm of UACN of Nigeria, which is run by a subsidiary UAC Restaurants Limited, has remodelled its restaurants in a new initiative aimed at redefining the lifestyle of its numerous customers. The new initiative is aimed at sustaining the heritage of the 33-year-old outfit by raising the customer service to a new level. The new initiative, according to Ethel Mba, marketing manager of UACN Restaurants, is to remodel the restaurants into a go-to restaurant of high value lifestyle. Speaking at the pioneer model restaurant located at Northwest Filling Station by the Victoria Garden City, VGC, Lekki, Lagos, during a media tour of some restaurants on Wednesday, Mba stated that the new approach promises to sustain excellence in a wide variety of dishes, pastries and confectionaries to the delight of consumers, which is the heritage of Mr Bigg’s. She explained that the VGC restaurant, which was opened on the 9thof July this year would remain the ‘signature poster’ for all the other restaurants in the new concept, aimed at bringing worldclass meal experience for Nigerian consumers with regard to customer service and restaurant ambience. Mba said that apart from the VGC Restaurant, two other restaurants will spring up in Amuwo Odofin by Festac town and Abule @Businessdayng

Egba along Lagos Abeokuta Express Way soon. “The new restaurants will be patterned after the structure of the Northwest restaurant by VGC to deliver high-quality food and good ambience as the basic standard. The menu offering will be aimed at providing wide variety of choices to meet the customer tastes and trends,” she said. Not a few customers agreed that no restaurant would survive without offering quality food and service aimed at giving patrons a satisfying experience. Gbemisola Lekan, a customer who walked into the VGC restaurant with her kids, said that a good family restaurant is one that offers delicious food that reminds adults of the favourite meals their mothers cooked when they were kids. She recalled with excitement that products like Mr Bigg’s meat pie, chicken pie, and scotch eggs are legendary and still remain the best. Other customers said the new restaurant provides comfort as it is spacious enough for all classes of people. Mr Bigg’s history began with the coffee shops inside Kingsway Department Stores in the 1960s. In 1973, these shops were rebranded as Kingsway Rendezvous, which became Mr Bigg’s in 1986. It saw rapid expansion after becoming one of the first Nigerian companies to sell franchises to investors. In 2012, UAC Restaurants adopted a full franchising business model making it the first to establish franchise restaurants in order to grow the brand’s footprint and equity.

Monday 09 September 2019

BUSINESS DAY

In Association With

Stony ground

A Balkan British politicsbetrayal

Why Pope Francis struggles in Africa The church is growing fast there, but it is tough terrain for a liberal pontiff

YEAR AGO President Filipe Nyusi of Mozambique went to the Vatican and announced triumphantly that he had persuaded the pope to visit his country. Pope Francis retorted that he would make the trip in 2019—if he was still alive. This week the 82-year-old pontiff is keeping that promise, making only his second trip to sub-Saharan Africa, which is by far the biggest area of expansion for Christianity. His tour also takes in Madagascar and Mauritius. In some ways the itinerary is apt. In Mozambique alone he can see many of the woes that afflict his burgeoning flock across Africa: terrorism, interfaith conflict, environmental harm and the spectre of state failure. Madagascar, a fragile store of biodiversity, is similarly afflicted by poverty and rapid deforestation, which reduces nature’s resilience against disasters, such as the cyclones that swept the region last spring. Around 2m poor Mozambicans were hit by storms and floods. With the locus of Christianity moving southward, this troubled continent represents the faith’s greatest hope. According to Pew, an American research institute, the share of the world’s Christians who live in sub-Saharan Africa will surge to 42% by 2060, up from 26% in 2015 (see chart). Without that demography-fuelled expansion in Africa, Christianity would be destined to fall rather swiftly behind Islam as the world’s most popular faith. Pew predicts that by 2060 Muslim numbers will be 70% above 2015 levels, whereas the Christian flock will have risen by just 34%. As a net result, Pew reckons, Christians will make up 32% of the world’s population and Muslims just one percentage point less. But Africa also presents pastoral problems that seem at times beyond the reach of any religious leader, no matter how charismatic. Nor does Francis, despite his compassion for African migrants to the rich world, find the African church easy to navigate, given the doctrinal conservatism of its leaders. In Mozambique’s northern tip, a radical Islamist movement has claimed hundreds of lives, prompting at least one Catholic

Boris Johnson’s Unconservative Party The Tories’ tightening embrace of radical populism sets Britain up for a dangerously polarised election

bishop to excoriate the government for failing to provide protection. Elsewhere, too, the country looks fragile. Only last month the government signed a final peace accord with the guerrillas of Renamo, its enemy in a bloody civil war that supposedly ended in 1992. Some parts of Renamo have rejected the deal, which requires fighters to disarm and co-operate in elections in October. An independent Catholic peacemaking agency, the Sant’Egidio community, has been deeply involved in mediation in Mozambique, and Francis will add his weight to the cause of reconciliation with Renamo veterans. Christian-Muslim conflict is also sputtering across west Africa and would now make any papal visit there a logistical and security challenge. In Nigeria Christians say they are at ever-increasing risk both from the Boko Haram terrorist group, part of which is aligned with the jihadists of Islamic State, and from Muslim Fulani herdsmen who have attacked crop-growing farmers. At least three Catholic priests have been killed this year. Francis has always stressed the primacy of economic factors in fuelling conflict, and he has refused to engage in ChristianMuslim name-calling. That marks

a contrast with his predecessor, Benedict, who provoked a storm in 2006 with a speech that unintentionally seemed to link Islam with a propensity for violence. As Jimmy Burns, a biographer of the current pope, puts it: “Francis is convinced that environmental damage, inequality and competition for resources are the factors behind religious fundamentalism of any kind.” In recent days Francis seemed to confirm his doveish credentials in matters of Christian-Muslim relations by giving a cardinal’s hat to Archbishop Michael Fitzgerald, a British expert on Islam who had been demoted by Benedict, apparently for being too emollient. Arguments based on economics as a cause of interfaith conflict may resonate in academia but some Catholic leaders from Africa are pressing Francis to serve up stronger doctrinal medicine. Among the most powerful of African-born prelates is Cardinal Robert Sarah, who grew up in Guinea under a harsh Marxist dictatorship and developed a strong antipathy to left-wing authoritarianism. Sarah’s conceptions Cardinal Sarah has endeared himself to conservative critics of Francis by describing Islamist

terrorism and liberal ideas about reproduction and sexuality as coequal threats to the integrity of the Catholic faith. “What Nazism [and] fascism and communism were to the 20th century, Western ideologies on homosexuality and abortion and Islamic fanaticism are today,” he declared in 2015. Cardinal Sarah, who is responsible for worship and liturgy at the Holy See, is more or less loyal to Francis, but many traditionalists hope he will be the next pontiff. An African candidate more in line with Francis’s thinking would be Cardinal Peter Turkson of Ghana, the Vatican’s point-man on development. Even leaving aside the sensitive ideological questions that divide conservatives from relative liberals like Francis, the sheer size of the African Catholic church makes it difficult for anyone to control. Take a recent clerical dispute in Nigeria. Francis tried in 2017 to use the might of his office to force priests in the diocese of Ahiara to submit to a bishop who was not a member of their cultural and linguistic group. The clerics were told to write personal letters of apology for their reluctance to accept the unpopular prelate. Some letters were penned, but the Vatican blinked first: the bishop stepped aside.

ORIS JOHNSON has been Conservative leader for little more than a month, and until this week had appeared in Parliament as prime minister only once. But that did not stop him carrying out the biggest purge in the party’s history on September 3rd. After a backbench rebellion led to a resounding defeat of his uncompromising Brexit policy, 21 moderate Conservative MPs, including seven former cabinet members and a grandson of Winston Churchill, had the whip withdrawn and were told they would not be allowed to stand as Tories at the next election. It was the most dramatic step in a long process: the transformation of Britain’s ruling party from conservatives into radical populists (see article). The capture of the Tories by fanatics determined to pursue a nodeal Brexit has caused the party to

abandon the principles by which it has governed Britain for most of the past century. With an election looming, and the Labour opposition captured by an equally radical hard-left, the Tories’ sinister metamorphosis is terrible news. Junking more than 40 years of cautious pro-Europeanism after the referendum of 2016 was itself a big change. But under Mr Johnson and his Svengali-like adviser, Dominic Cummings, who masterminded the Leave campaign, the Tory party has become not just pro-Brexit but pro-no-deal. Mr Johnson claims he is working flat-out to get a better withdrawal agreement from the EU. Yet in his flailing performance before MPs this week, like an undergraduate bluffing his way through a viva, he was found out. He has no real proposal for replacing the contested Irish backstop. Reports that Mr Cummings privately admitted Continues on page 19

Monday 09 September 2019

BUSINESS DAY

In Association With

Lexington

Boris Johnson’s Unconservative...

Trumped by the Taliban

Continued from page 18

Donald Trump has created an opportunity for peace that he looks singularly unable to capitalise on

FGHANS OFTEN celebrate auspicious events with volleys of gunfire. The Taliban went one further on September 2nd by detonating a suicide-bomb in Kabul just as an American diplomat, Zalmay Khalilzad, was confirming the outline of the draft settlement he has negotiated with the jihadist group. Up to 30 people were reported killed in the blast. Half a dozen more were shot and wounded by police in the protests that followed. The violence underlined why the draft agreement, which would cover an initial withdrawal of around 5,000 of America’s 14,000 troops in Afghanistan within five months, has been cautiously welcomed by many sceptics. The Taliban control much of the country, cannot be defeated and the war’s toll on Afghans is intolerable. It also indicated how much America, 18 years after it bombed the jihadists from power, has capitulated to them. Mr Khalilzad, a former ambassador to Afghanistan, set three conditions when launching peace talks with the militants in Doha a year ago. America would consider withdrawing only if they agreed to a ceasefire, recognised Afghanistan’s government as a negotiating partner, and renounced their former alliance with al-Qaeda. This offer was itself a significant climb-down. Under George W. Bush, America refused to negotiate with the Taliban. Under Barack Obama, it started to, but stopped after Afghanistan’s government—at whose behest America claims to be operating—objected. Donald Trump’s decision to revive the talks over President Ashraf Ghani’s more vociferous protests was therefore a big concession to the militants, even if justified by their strength. Yet Mr Khalilzad seems to have won little by this gamble. Though he has released few details of the draft agreement, he appears to have dropped all but his third condition. The Taliban have agreed to participate in an intra-Afghan dialogue while the Americans draw down, but have not recognised the govern-

ment, which has been excluded from the talks. Last weekend Mr Khalilzad let Mr Ghani read a copy of the draft, provided he hand it back afterwards. As the slaughter in Kabul indicates, the militants have also refused to countenance a ceasefire or discuss a more lasting settlement. Beyond maintaining their commitment to re-establishing an Islamist regime, they have not indicated what power-sharing or constitutional arrangement they might be willing to accept short of total victory. That raises obvious concerns about their commitment to peace—without which it is hard to imagine how their anticipated promise to cut their cord to foreign terrorists could be verified, especially in the absence of American troops. This is dispiriting but not surprising. As the war has dragged on, the American government’s leverage over the Taliban has been eroded by its floundering and their success. According to Ronald E. Neumann, a former ambassador to Kabul, America has undertaken nine major policy shifts in Afghanistan—or three per sitting president—since launching the war. Mr Bush was against nationbuilding, then for it. Mr Obama ramped up the war, then ended it. Mr Trump lambasted the war for years, seemed momentarily energised by the prospect of succeeding where his predecessor failed, and now—aching for a foreign-policy win—may simply want the troops out before next year’s election. No wonder the

Taliban’s leaders, at the helm of a profitable insurgency and confident of victory sooner or later, are not minded to compromise. To stand a fair chance of arresting Afghanistan’s descent to civil war, America will have to persuade the militants it has more sticking-power than they think. Mr Khalilzad implies it is willing to. He maintains the withdrawal will be “conditionsbased”, which suggests it could go into reverse if the Taliban do not get more enthusiastic about peacemaking. And indeed, Mr Trump has better cards than the militants may imagine. With another 8,000 Western troops in Afghanistan, the alliances that sustain America’s effort look solid. Neighbouring Pakistan and China helped push the militants to the table. And America’s current level of commitment to Afghanistan appears sustainable; Congress and the media generally ignore the conflict. There are two problems with this somewhat hopeful case. Mr Trump may prefer to fold. His supporters want an end to America’s wars almost as much as a border wall—and, having failed to wall off Mexico, he may consider the former campaign promise easier to keep. That would be consistent with an emerging paradox of his presidency. His unorthodoxy has consistently created novel opportunities—a possible splurge on infrastructure at home; a peace process with the Taliban abroad—that his personal short-

comings make him especially unlikely to realise. More fundamentally, ushering the Taliban and government to the table, and keeping them there, would require a degree of political nous and flexibility that America lacks above all else in Afghanistan. Its efforts have been disjointed, with soldiers, diplomats and spies pushing conflicting priorities that only the faraway president can adjudicate between. Hence the policy shifts, as Mr Bush and his successors flitted from one recommendation to the next, often in response to domestic pressures. The complex politics of a country torn by war and ethnic rivalry, and between modernity and tradition, have rarely penetrated that self-absorbed process. A republic, if they can keep it The limited understanding of American political officers, cycled in every six months or so, has made matters worse. Mr Neumann recalls his unsuccessful effort to persuade Mr Ghani’s predecessor to sack a provincial governor convicted of selling heroin in America. It was months before the then ambassador learned that the president owed a big favour to the drug-pusher’s father. Remember that next time you hear politicians cudgelling each other with arguments for and against state-building. There is little recent evidence that America is capable of it. Even the more modest task of saving Afghanistan’s current shaky structure may be beyond it.

the negotiations in Brussels are a “sham” ring all too true. Mr Johnson’s unconservative plan seems to be to win a quick election, either after crashing out with no deal or, as it has turned out, claiming to have been thwarted by “enemies of the people” in Parliament. The religion of no-deal has wrecked other Conservative principles. Sajid Javid, the fiscally prudent chancellor, this week dished out billions of pounds worth of pre-election goodies. He gave money to public services without demanding much in the way of reform, and focused on day-to-day spending rather than investing for the future. Spending power was supposedly being kept aside to cope with a no-deal crashout. But faith dictates that no-deal will do no great harm to the economy, so no safety-net is required. To show any such caution, as Mr Javid’s predecessor (now an ex-Tory) did, is a form of heresy. The most unconservative behaviour of Mr Johnson’s government has been its constitutional recklessness. Not only has it suspended Parliament (having said that it would not), so as to limit MPs’ time to legislate on Brexit (which, again, it said was unconnected). It also toyed with using even more underhand tactics, such as recommending that the queen not enact legislation passed by Parliament. Would the government abide by the law, a cabinet ally of Mr Johnson was asked? “We will see what the legislation says,” he replied. In a country whose constitution depends on a willingness to follow convention and tradition, even making such a threat weakens the rules—and paves the way for the next round of abuses, be it by a Labour or Tory government. This week there were still just enough conservatives in the Conservative Party to block the most dangerous part of Mr Johnson’s Brexit policy. As we went to press, a bill designed to stop no-deal was making its way through the House of Lords. But the defeat of the government, and its loss of any sort of majority, points towards an election. It will be a contest in which, for the first time in living memory, Britain has no centreright party. Nor, thanks to Labour’s far-left leader, Jeremy Corbyn, will it have a mainstream opposition.

Monday 09 September 2019

BUSINESS DAY

In Association With

About face

Chinese netizens get privacy-conscious A backlash against a popular app’s data-grubbing terms of service are the latest example of growing concerns about misuse of personal information

N THE NIGHT of August 30th, soon after ZAO—an app whose name means “to make”—was launched, it proved so wildly popular that its servers crashed repeatedly. Almost as rapidly, a sudden backlash from its many fans nearly unmade it. Technologynews outlets and meticulous netizens who had combed through the terms of its user agreement found that by signing up, users had granted ZAO “completely free”, “irrevocable” and “perpetual” rights to all content they uploaded to its platform. Furious comments flooded Apple’s app store in China, where ZAO is now rated a measly two stars out of five. (This did not stop it from becoming China’s mostdownloaded free app in the store.) WeChat, a dominant Chinese app—always eager to stick it to a potential rival—blocked ZAO links from being shared on its messaging service citing “security risks”. ZAO swiftly removed the offending clause. On September 3rd it apologised to users and pledged to protect their personal data “in every possible way”. China’s freewheeling internet users hand plenty of precious information over to the country’s data-grubbing apps. A report published last month by a Chi-

nese cyber-security think-tank found that 1,000 of the country’s most-downloaded mobile applications hoover up an average of 20 types of data from each user. These often include call logs and videos of no obvious relevance to the apps themselves. And the notion of digital privacy seems almost quaint in the face of the vast data-gathering apparatus of an authoritarian state that regards public consent as optional at best.

So why did ZAO hit a nerve? One reason is that it appears to belong to a new crop of apps that generate “deepfakes”, computational creations that use artificial intelligence to doctor video footage. One form involves pasting a face onto someone else’s body—in ZAO’S tantalising offering, your kisser can be stitched onto the svelte silhouette of an actor or actress in a hit film or television drama.

Until recently such fakery had required hundreds of images to conjure a convincing clip. But deepfake technology has rapidly improved. ZAO’s winning claim is that, as its slogan promises, it takes “just one photo for you to star in all the world’s shows”. But for the best result, ZAO requires precise facial mapping, which users can feed into the app by following prompts to blink and move their mouths about.

When ZAO’s grasping terms of service came to light, many users were alarmed at the idea of these biometric data being misused. Facial verification is being widely tested in China: to pay in supermarkets, glide through the gates at railway stations and even withdraw cash. On September 1st Alipay, a big payment app, assured users that “images created through face-swapping apps, no matter how realistic, cannot trick our system”. The government, too, has taken note. On September 4th it summoned Momo, a Chinese dating-app giant with ties to ZAO, to explain itself and launched an inquiry into the company’s “datasafety issues”. The state’s reaction continues its clampdown that began in January on non-consensual harvesting of personal information (by private firms, that is). Citizens are increasingly anxious about online fraud. More than four-fifths of respondents to a survey last year by the China Consumers’ Association said they had suffered from data theft. In an unusual case in May, a man from Jiangxi province sued Tencent, the internet giant behind WeChat, for sharing his personal data across its many services without his approval. The court ruled in the plaintiff’s favour—and ordered Tencent to stop the practice.

All bets are on

Ethiopia has caught gambling fever A craze for wagering on football is sweeping the nation

ETABALEW SEIFE is beginning to feel suspicious. Four times a week he saunters into the same bar in downtown Addis Ababa and puts down a bet. He often punts on Manchester United, his favourite football club. But he almost always loses. “I think Manchester United is somehow supporting the betting companies,” he says. Still, he returns. “I’m playing just to get my money back.” Like Getabalew, Ethiopia has caught gambling fever. Sports betting shops are springing up across the country. “People have gone crazy,” he says. His friend had to sell his car last year after a run of bad luck. Others, though, are making out just fine. “It’s a cash cow,” says Sophonias Thilahun of Bet251, which plans to open 100 betting shops in Addis Ababa over the next six months. It may soon compete with 18 other companies, most of which were granted licences in the past year. Sports gambling has been growing across Africa, fuelled by the spread of smartphones and mobile money. Kenya, Nigeria and South Africa lead the way, with multimilliondollar gambling industries. A survey in 2017 across six sub-Saharan

and may soon permit casinos. It is motivated by the potential for new tax revenue, says Sophonias. But the boom also reflects deepening economic frustration among the country’s youth. “Almost everyone is playing for money, not entertainment,” says one punter. “You could get money here that you can’t get anywhere else.”

African countries found that more than half of young people had tried gambling. Over 75% of young Kenyans have placed a bet. Ethiopia was until recently a laggard. Addis Ababa had a hotel casino in the time of Emperor Haile Selassie, but this was closed by the Marxist junta known as the Derg in the

1980s. Its successor, the Ethiopian People’s Revolutionary Democratic Front, shared the Derg’s suspicion of gambling. The first betting licence was not granted until 2013 and the market remained mostly empty until 2016. Foreign firms are still prohibited. Recent improvements in Ethiopia’s telecoms infrastructure help explain

the boom. “Without internet you couldn’t do anything,” says Michael Demissew of Abyssinia Bet, a gambling firm that uses mobile money. The government has also softened its stance since the appointment of Abiy Ahmed, the relatively liberal prime minister, last year. It has allowed gambling advertisements on radio and television

Monday 09 September 2019

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

These numbers show Shoprite, DSTV, MTN sell more in SA than Nigeria LOLADE AKINMURELE

outh Africa has less than a third of Nigeria’s population, yet it is in Africa’s most industrialised economy that the likes of Shoprite Holdings, Multichoice (DSTV) and MTN make the most cash. The sales data of all three firms show that their South African operations contributed a combined 58.5 percent to Group revenue in 2018 and 2019. Historically, with exception to MTN, the South African units of Shopr ite and Mult i c h o i c e h av e a l w a y s outperformed the Nigerian unit. This finding negates a widely-held view among most people that Nigerian operations are the life blood of these South African companies. Mo re t h a n 9 0 p e rcent of respondents in a BusinessDay sur vey assumed Nigeria is the largest market for the companies. This is not to say the Nigerian market doesn’t matter to these companies, but talk about its relevance are slightly exaggerated. Here’s what numbers gleaned from the annual report of these companies say. Shoprite Shoprite is Africa’s largest retailer with 2,934 outlets across 15 countries on the continent and an employee base of 147,268.

Contrary to assumptions that the Nigerian business contributes the most to the Group’s revenue because Nigeria has a larger population, the South African business is actually the dominant unit. Shoprite’s supermarkets in South Africa contributed 75 percent to total group sales as at the end of June 2019, an increase from 74 percent in 2018, according to the company’s financial statement. Th e Nig e r ia n u n i t, along with other nonSouth Africa operations, contributed 14.2 percent as at June, a decline from 15.2 percent in 2018, dragged by Angola and Nigeria. Sales growth (in dollar terms) in the Angolan unit declined 38.4 per-

cent while sales growth in Nigeria recorded zero growth, literally 0.00 percent. In local currency terms, Nigeria’s sales growth of 5.6 percent was dwarfed by Ghana’s (16 percent), Zambia’s (10 percent) and Madagascar’s (8.8 percent). Multichoice Multi-choice are owners of satellite TV, DSTV and Gotv. With presence in 49 geographies, it is Africa’s largest pay-tv operator. Its South African operations contributed 67.3 percent to Group revenue, according to information gleaned from its 2019 annual report published on its website. The South African business has a customer base of 7.4 million in full-year 2019 (going by the firm’s

unconventional calendar which means the year ends in June.) The rest of Africa, including Nigeria, contributed 29.6 percent of the Group revenue, which is less than the South Africa contribution. Of the non-South African operations, Nigeria accounted for 34 percent, ahead of Kenya (11 percent) and Zambia (10 percent). The Nigerian market however trailed the combined operations of other (ex-South Africa) African countries which was 45 percent. This means that while Nigeria is the company’s single largest market after South Africa, it is not as important as other African operations combined. What this then implies is that while shut-

ting the Nigeria unit will affect the company to some extent, saying it would cause the company to collapse is slightly exaggerated. In f a c t, t h e i r n o n South African operations, including Nigeria, has been loss-making for two years in a row now. In 2 0 1 9 , w h i l e t h e South African business turned a trading profit of 10.2 billion rand (ZAR), the company reported a loss of 3.7 billion rand. MTN Then we have MTN Nigeria. MTN is the largest wireless phone carrier in Nigeria with 61.5 million subscribers as at June 2019. That’s almost three times the subscriber base of 24 million in South Africa. However, those numbers don’t correlate with revenues. The most revenue is made in South Africa. According to its annual financial report for 2018, the Nigerian unit contributed 28 percent of the Group revenue

while the South African unit contributed 33.2 percent. The Nigerian unit has declined in contribution to revenue on the back of currency devaluations. However, there’s scope for the Nigerian unit to generate more revenue than the SA unit in the future as data and fin tech revenues grow. As at 2018 though, the SA unit contributed the most to revenue. Same applies for Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). Analysts say the sales data of Shoprite, Multichoice and MTN reflects t h e f a c t t hat av e ra g e incomes in Nigeria are lower than in South Africa. W h i l e t h e av e r a g e South African earns close to $5,000, the average Nigerian earns about half of that at around $2,000. This implies that consumer spending in South Africa is larger than that of Nigeria even though the latter boasts superior population numbers.

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: Samuel Iduh

Monday 09 September 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

EQUITY

Listed SA companies reverse losses as investors remain unresponsive to Xenophobic attacks DAVID IBIDAPO

hare prices of listed South African (SA) firms reversed losses by gaining in market value as investors remained unresponsive to Xenophobic attacks on Nigerians and other African nationals in SA. Companies like MTN South Africa, Shoprite and Pepkor holdings gained at the end of trading on Friday, returning gains lost by investors three days in the attacks. “It is too early for investor to response to these attacks,” Gbolahan Ologunro, an analyst at CSL stockbrokers explained. This was not the case however for Multichoice holding listed on the JSE, stock price picked up a little by 1.1 percent after a 4-trading day downward spree, closing at 12,408 ZAr on Friday. The response of investors on Friday was different from observed reactions in the last four trading days. Not only did “Xenophobia”- the fear or hatred of that which is perceived to be foreign or strange - claimed the lives of Nigerians and other neighbouring countries’ citizens in South Africa, the effect has also wiped off approximately $64.34 billion of listed South African market worth across African markets, BusinessDay analysis show.

MTN South Africa stock on the Johannesburg stock exchange was not spared as price slumped 2.26 percent, losing in market value 567.76 billion ZAr ($38.289 billion) after stock closed at 10,027 ZAr. Amongst other listed South African peers observed in our analyses, MTN South Africa stood as the worst hit in dollar term. Nigerians in response to attacks embarked on a retaliatory attack on South African companies. This saw MTN, DStv and Shoprite close tentatively operations across the country. However, the damage had been done. Multichoice, parent company of DStv on the JSE bled some whooping $23.64 billion in market value after stock price slid to 6.37 percent to 12,463 ZAr to maintain a 3-day bearish trend upon Xenophobic attacks. Shoprite holdings, despite maintained a stable price, shed marginally 0.53 percent during the period, losing approximately $2.43 billion as at the close of trading on Thursday. Stock price of Nigeria’s biggest foreign direct investment (FDI) MTN, dipped 2.09 percent from a 3-month high of N141 at the last trading day of August to N138.05 at the end of trading on Thursday, upon inception of the Xenophobic attacks on Nigeria and other nationals in South Africa.

In the four trading days, MTN Nigeria lost N50.87 billion ($140.42 million) in market value as worth stood at N2.817 trillion. “The trend we are seeing in MTN stocks is more of profit taking. If investors were to respond to Xenophobic attacks, great will be the fall in the Telco stock price,” analysts told BusinessDay. Investors, who are more interested in the value of their holdings ignored the Telco’s public statement which stated their stance against ongoing attacks in South Africa. “We strongly condemn hate, prejudice, xenophobia and reiterate our unequivocal condemnation of all violence,” Ferdi Moolman, CEO MTN Nigeria stated. Pepkor holdings on the JSE buoyed however a bullish run in price, gaining 5.70 percent in market value to 60.237 billion ZAr after price rose to 1,759 ZAr. This is despite Nigerians ravaging Pep stores in Lagos in a bid to revenge the xenophobic attack going on in South Africa, taking-away clothes and items worth millions of naira. Meanwhile, no attack so far on Stanbic IBTC despite being owned by Standard bank, a South African based financial service provider, listed on the JSE. “A lot of people are not aware that Stanbic IBTC is a South African owned bank,” an analyst told BusinessDay.

L-R: Gbola Oba, chairman, Automedics; David Rayner, chief finance officer, OVH Energy; Yinka Folawewo, representing chairman of Motormechs and Technician Association of Nigeria (MOMTAN); Huub Stokman, CEO, OVH Energy; Jacob Omonide-Fayehun, chairman, National Automobile Technician Association (NATA), and Babafemi Olabiyi, chief marketing officer, OVH Energy, at the Oleum Academy Season VI Ceremony at the OVH Energy HQ in Lagos.

L-R: Chiamaka Odunze, head, retail marketing; Robert Giles, head, product insights and capablities, all of Access Bank Plc; Nwogu Ijeoma, DiamondXtra Season 11 quaterly draw winner; Chioma Afe, head, retail marketing and analytics, and Jacob Danjuma,head, consumer liabilitiy products, all of access Bank plc, at the DiamondXtra cheque presentation ceremony in Lagos. Pic by Pius Okeosisi

BANKING

Access Bank grows half-year profit by 59% as merger benefits kick in …proposes 25 kobo interim dividend SEGUN ADAMS

ccess Bank, Nigeria’s biggest lender by asset, is reaping early fruits of a merger with Diamond Bank which has seen its profit rise 59 percent in midyear 2019. The tier-one lender saw its profit surged to N63.025 billion in half-year 2019 compared to N39.63 billion posted a year ago. This is the fastest pace mid-year profit has grown in at least five years. “To summarise the result, those benefits associated with the merger are being crystalized faster than initially anticipated,” said Gbolahan Ologunro analyst at Lagos-based CSL Stockbrokers Limited said. On Friday, the bank’s shares gained 6.98 percent to N6.9 per share on the Nigerian Stock Exchange. “I think we would also see a divergence from historical trends where access and UBA used to trade at similar earnings multiples. We might see Access now be-

ing priced at a higher premium to UBA.” He said. Access Bank and Diamond Bank completed their merger on April 1 2019. In the six months to June 30, Access Bank boosted its gross earnings and profitability supported by improvements in net interest margin. Gross earnings rose 26.6 percent to N320 billion from N252.8 billion noted a year ago. On the back of betterment in earnings cash and balance to banks, loans and advances to customers, and investment securities, interest income grew 46.2 percent to N272.9 billion. Net interest income rose 81.89 percent to N155.15 billion following a 16.14 percent rise in the bank’s interest expense. Meanwhile, net interest margin improved to 7.4 percent from 6.2 percent in 2018 full-year, analysts at CardinalStone, a Lagos-based Investment house, estimate. Access net interest income after im-

pairments charges rose 92.76 percent as loan loss expenses fell 33.52 percent in the period. The lender’s Fees and commission income jumped 38.21 percent to N41.86 billion while Fees and commission expenses saw a significant increase. Notwithstanding net fees and commission income rose 24.82 percent to N37.53 billion. A closer look at the segment’s breakdown show increase across the board including commission on virtual products, channels and other e-business income and retail account charges which grew significantly. Only commission on foreign currency denominated transactions declined in the period. Access Bank saw a big decline in its net gains from investment securities to N4.15 billion, while it pared net foreign exchange loss.

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L-R: Thomas Mwanza, Cluster procurement director, West Africa Unilever Nigeria PLC; Steen Hadsbjerg, vice president, head of Sub-Sahara Africa Region, Arla Global Dairy Products Limited, and Olusegun Falade, general manager, Gail, Agro Allied Division Flour Mills of Nigeria PLC, at the Sterling Bank agriculture summit Africa in Abuja.

L-R- Lion Linda Eboreime, wife of the newly presented District governor; Lion Bernard Eboreime, District governor 404B1 Nigeria; Lion Noimot Salako-Oladele, deputy governor, Ogun State; Oghogho Makinde and Ugba Eboreime, all at the Public Presentation and Fundraising

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Marine surveyors seek policy implementation to enhance professional role Modestus Anaesoronye

uild of marine surveyors of Nigeria, the umbrella body of registered marine surveyors, cargo superintendents and maritime consultants may soon be seeking appropriate policy direction to promote professionalism among its members. The body, which believes that it has not gotten enough government recognition and support to benefit from the country’s National Content Development, which targets to promote local capacity had said that the country is losing so much to capital flight for not using its services. Monday Ogadina, leadership of the association had argued during its part interaction with journalist that despite the availability of professional marine surveyors in Nigeria, most of the businesses emanating from the local

market still go offshore. “We have not been impacted by the National Content Act because Nigerian’s were yet to be given the opportunity to do most of the jobs, the leadership said a while ago. Though he could not give specific figures to describe the losses due to lack of data, he however pointed that a

lot could be done by local players to create value in the economy. “There is need for a policy statement that empowers the surveyors to do their job unhampered. That will create job for Nigerians, Ogadina further informed. Ogadina who spoke alongside the other execu-

tive members had noted that the efforts of the Guild now is to harness its membership across the country to be able to regulate and foster cooperation for the benefits of all stakeholders. “We are mobilising our membership across the country because we must pursue a common goal and address our challenges, he said. Guild of Marine Surveyors was established on 25th November 2004 and was registered with the corporate Affairs Commission on 21st March 2006. With over 50 registered members, the number one objective is to promote professionalism and advancement of knowledge in the field of marine surveying which shall include services provided to marine and transport organisations, the production of guidance reports for all bodies connected with maritime operations including insurance companies.

African Trade Insurance Agency strengthening investment capacity into Africa Modestus Anaesoronye

he Tokyo International Conference of Africa’s Development (TICAD7) has come and gone, with the event grown into one of the largest Africa-focused international events, providing platform for billions worth partnerships and transactions to be sealed. Among these newly formed agreements, the African Trade Insurance Agency (ATI) and Nippon Export and Investment Insurance (NEXI), Japan’s export credit agency, also announced the

launch of a Japan Desk, which will be housed by ATI in Nairobi. The two institutions expressed commitment to strengthening risk mitigation cover to entice more Japanese companies and investors to enter the African market. The Japan Desk will facilitate this process. ATI also penned agreements in the form of MoUs with three of Japan’s leading banks – Sumitomo Mitsui Banking Corporation (SMBC) and Mizuho Bank. Mitsubishi UFJ Financial Group (MUFG) having signed an earlier MoU with ATI. The agreements sig-

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nal to the world that Japan views Africa as a strategic investment destination, which will also provide an opportunity for Japanese companies and investors to more effectively capitalize on the current opportunities in the fastest growing continent in the world. In the last three years, ATI has provided insurance to protect some of Japan’s largest lenders against the risk of sovereign default on transactions that have collectively brought close to $1Bn to the continent. Some of this financing has helped countries to reprofile shortterm, and often pricey local

currency debt, into longerterm and more affordable structures. The financing has also supported a wide range of priority sectors and, in the case of two ground-breaking capital markets transactions arranged by Japan’s largest bank, ATI-backed financing has facilitated the crowdingin of a new class of institutional investors to the continent. With a strong pipeline of transactions valued at over $1 Bn along with these strengthened partnerships, ATI expects to support many more Japanese exporters and banks in deals across Africa in the coming years.

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ON THE MONEY Tips to manage personal debts successfully

ebt is a common issue almost everyone grapples with in personal finance. At some point we have acquired debts that need to be managed before it gets out of control. Simply put, debt management is a delicate endeavor because it involves making smart plans that helps you gradually decrease and eliminate debt successfully. On this edition of On The Money, we will be explaining four simple steps you can take to help manage your personal debts. 1. Know how much you owe: Start by creating a list of what you actually owe, this helps you to easily identify your debt without missing out on anything. It also helps you reduce the possibility of missing payments and can help determine which debt to pay first. This list will also serve as a constant reminder. 2. Review your budget: To manage debts, you also need to have a proper understanding of budgeting and the role it plays in successful debt management. Bad debt arises as a result of improper balancing of your income and expenses. Reviewing your budget helps you assess your financial situation, allowing you plan what to spend your money on. If your expenses exceed your income you might need to create a new budget. By doing this, you can plan how to pay off debt faster. 3. Make early payments: Late payments are a sign of inadequate debt management. Pay on time unless you acquire new debts. If

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you are forgetful, keep a reminder to inform you before the due date or employ the use of an auto payment methodto avoid any delays. 4. Avoid more debts: While managing debts, it is important that you avoid acquiring more debts. Remember that you need to cut back on your expenses and stick to your budget. Although there might be unexpected emergencies, it is necessary to have an emergency fund or an insurance plan in place that can be used to address such issues instead of getting another

loan. Debt management can be daunting but with the right financial advice, you can be on your way to being debt free. For more financial education, you can call Old Mutual on 01-2719393 to arrange a free financial education session for your team, or on a one-on-one basis. Our financial advisers can help you with the right kind of financial and insurance advice. For more information, visit your nearest Old Mutual branch or go to www.oldmutual.com.ng. We look forward to helping you with your money matters

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Coronation Research releases outlook for insurance sector …from the Lagoon to the Blue Ocean Modestus Anaesoronye, Bala Augie, Endurance Okeafor

igeria’s insurance industry has not shared in the growth experienced by other Nigerian financial services, notably banks, pension funds and mutual funds. In fact, it has hardly grown in real terms over 10 years. This is according to a report from one of the leading research houses in Nigeria – Coronation Research (a part of Coronation Merchant Bank). Without scale the industry suffers from poor returns on equity. Yet its smallness is also its opportunity. If it were to grow to the level reached by countries with similar GDP per capita, it might grow by a factor of 10 times in real terms in eight-to-10 years. The technological infrastructure and data necessary for expansion are largely available. Recently, the National Insurance Commission (NAICOM) announced the introduction of new capital requirements, due in June 2020 for the sector. We believe these will reduce the current 59 companies to around 25. There are close parallels with the banking reform of 2004. The banking industry grew rapidly after that, so the question is how the insurance industry can grow after 2020. In the meantime, there will be capital raising and M&A. According to Guy, Czartoryski, head, Coronation Research, “to position the sector for radical growth, one must consider the lessons learned in Asian markets, and also in West Africa which shows how insurance can be rolled out to tens of millions of customers. Cooperation between regulators is critical, as are distribution partnerships

Tope Smart, chairman Nigerian Insurance Association

with banks and telecom companies. Fresh capital is necessary for development, but a fresh strategic approach is required to reach the industry’s potential. Nigeria’s insurance sector presents perhaps the most remarkable investment case of any industry in Nigeria. At one level the business case is very simple. Insurance penetration, at 0.31 percent, is extremely low, even compared with countries with similar GDP per capita, for example India with insurance penetration at 3.69 percent. Experience in other countries shows that, in the right conditions, insurance can be rolled out to India’s level in eight to 10 years. So Nigeria

could go from 0.31 percent penetration to 3.69 percent penetration in 10 years”. He further stated that, “Nigeria has achieved great things in financial services. Pension Fund penetration is an example, with the total assets under management (AUM) of its pension funds growing, in real terms, at 9.8 percent between 2008-2018 and taking the proportion of the population covered up to 4.3 percent and rising. However, the insurance industry has lagged its other financial services. Conditions have not been helpful for growth. Experience from other markets, particularly in Asia, suggest three remedies. First, government and regulators – not only insurance regulators but bank and telecom regulators, too – need to cooperate: there are gains for all. Second, the roll-out of micro-insurance with the development aim of financial inclusion is key to familiarizing and educating the market. Third, technology plays a key role in partnerships and distribution NAICOM’s current reform of the insurance industry shares essential features with the 2004 reform of the banking industry under Charles Soludo, then governor of the Central Bank of Nigeria (CBN). Just as NAICOM appears to seek consolidation and an overall reduction in the number of players through stringent capital requirements, so too did the CBN in 2004. The result of 2004’s banking reform was to reduce the number of banks from 89 to 25. As already stated in the report from Coronation Research, 2020 could see the number of insurance companies fall from 59 to around 25. If some insurance companies are actually eliminated rather than consolidated by this process, then the survivors will enjoy market share gains. The banking sector enjoyed a boom after 2004, so the question is how the

insurance industry will grow after 2020. It is however important to note that economic conditions between 2005-08 were different from today, with rising oil prices bringing in a very high level of foreign direct investment from which banks benefited, sometimes directly. In conclusion, as with banks after 2004, there exists the opportunity for a re-capitalised insurance industry to make enormous gains from 2020 onwards, not only in terms of expanded underwriting capacity but also (as was the case with banks after 2004) by attracting millions of new accounts. As contained in the report, Nigeria’s insurance penetration, at 0.31 percent, is less than one tenth of that of India (with similar GDP per capita) which suggests significant un-tapped potential. The business opportunity exists because of Nigeria’s very low bases in insurance penetration and insurance density. Coronation Merchant Bank was established to fill the gap in a long-underserved market segment, seeking to address the need for long term capital across key sectors of the economy. The Group offers investment and corporate banking, private banking/wealth management and global markets/treasury services to its diverse clients. Driven by its vision of becoming Africa’s premier investment Bank,the Bank has been the recipient of numerous International and National awards for product innovation and sound corporate governance practices. Some of the international awards it received in 2018 include Best Investment Bank in Nigeria by World Finance, Fastest Growing Investment Bank by Global Banking & Finance Review, Best Investment Bank by Global Business Outlook and Best Investment Bank in Nigeria by BAFI Awards.

Meet Chioma Ejikeme, the new PTAD executive secretary in 1964. She attended Queens School, Enugu and the University of Nigeria, Nsukka where she obtained a Bachelor

Modestus Anaesoronye

he Pension Transitional Arrangements Directorate (PTAD) has unveiled its new Executive Secretary Chioma Ejikeme recently appointed by President Muhammadu Buhari to take over the affairs of the agency.Ejikeme’s appointment followed the appointment of the former Executive Secretly, Barrister Sharon Ikeazor as Minister of State, Environment by the President. A trained medical doctor, Ejikeme is a two- time Commissioner for Health in Anambra state. She was a member of the 2019 Presidential Campaign Council for the South East. She is expected to continue the reforms starred by Ikeazor. According to her profile released by PTAD, she was born on the 31st Of August 1958 to the family of the Late Ukachi Ikemba, an educationist and political secretary to the Premier of the Defunct Eastern Nigeria, M I Okpara. Ejikeme started her Primary School education at the All Saints School, Enugu

Chioma N. Ejikeme

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of Medicine Bachelor of Surgery (MB.BS) degree in 1982. She holds a Masters in Public Administration (MPA) from the University of Lagos 2002. Over her 36-year career, Ejikeme has been a Medical Practitioner an Administrator and an Entrepreneur. Her career started as a House Officer at the Lagos University Teaching Hospital, Idi-Araba in 1983. She served the mandatory National Youth Service with the Ministry of Defence (Nigerian Airforce Medical Services Onikan Lagos) and was retained after NYSC where she rose from Senior Medical Officer II to Principal Medical Officer II (GL 15) until the year 2004. As a Medical officer in the Nigerian Air Force Medical Services for close to 20years, she was part of a team that, coordinated, improved and facilitated Health care delivery services within the Nigerian Airforce Medical space. In 1997 Ejikeme took a leave of Absence from the Ministry of Defence to take up appointment as Commissioner for Health in Anambra State. Ejikeme was part of the team that handed over to the current Politi-

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cal dispensation in 1999. As Commissioner, she led the Ministry in policy formulation and implementation while also coordinating healthrelated programs within the State, between the State and other states in the Federation and the state and the Federal Ministry of Health. She also formulated, coordinated, supervised and evaluated donor agency sponsored health programs for implementation throughout the state. These agencies include UNICEF, UNFPA and the WHO. Some of her achievements as Commissioner for Health Anambra State include the establishment of a Central Drug Revolving Fund for the State Ministry of Health, the establishment of a Traditional Medicine Board in the State which was the first to be established in the history of Anambra State. She also re-organised the existing revenue collection procedure to ensure an effective and affordable health care delivery system. She embarked on the infrastructural rehabilitation of State-owned hospitals with refurbishment of wards, provision of bore holes etc.

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Access Bank Rateswatch Market Analysis and Outlook: September 6 - September 13, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

1.94

Q2 2019 — lower by 0.38% compared to 2.01% in Q1 2019

Broad Money Supply (N’ trillion)

35.68

Increased by 1.88% in July’ 2019 from N35.02 trillion in Jun’ 2019

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

24.27 2.00

Decreased by 1.93% in July’ 2019 from N24.75 trillion in Jun’ 2019 Decreased by 0.55% in July’ 2019 from N2.01 trillion in Jun’ 2019

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

11.08

Decreased to 11.08% in July 2019 from 11.22% in June 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)

43.14 62.98 1.786

Global Economy

In the UK, inflation rate increased to 2.1% yearon-year in July 2019 from 2.0% in the previous month according to the Office of the National Statistics. This was spurred by the price increases seen in recreation & culture and restaurants & hotels. This is above the Bank of England 2% target. The annual core inflation rate, which excludes prices of energy, food, alcohol and tobacco, advanced to 1.9% in July, the highest in six months. In a separate development, the Indian economy expanded by 5% year-on-year in the second quarter of 2019, slowing from a 5.8% advancement in the prior period. It was the weakest growth rate since the first quarter of 2013, amid a slowdown in manufacturing and construction sectors according to data from the Ministry of Statistics. Elsewhere in Japan, unemployment rate fell to 2.2% in July 2019, the lowest rate in 27 years. According to the Statistics body in Japan, the jobs-to-applications ratio declined to 1.59, the lowest since March 2018 and also below consensus of 1.61. The number of unemployed fell 70,000 from a month earlier to 1.54 million in July, while employment grew by 150,000 to 67.16 million. Unemployment rate during this period last year was reported at 2.5%.

September 5, 2019 figure — a decrease of 0.49% from September start September 5, 2019 figure— an increase of 2.89% from the previous wk July 2019 figure — a decrease of 1.21% from June 2019 figure

Domestic Economy

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

6/09/19

30/08/19

NSE ASI Market Cap(N’tr)

27,146.57 13.21

27,525.81 13.39

Volume (bn)

0.31

0.12

Value (N’bn)

6.44

1.82

MONEY MARKET NIBOR Tenor

Friday Rate (%)

Change(%)

Indicators

6/09/19

1-week Change

YTD Change

(%) Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) 149.44 Agriculture Cocoa ($/MT) 254.41 Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Change Gold ($/t oz.) Silver ($/t oz.) (Basis Point) Copper ($/lb.) (1.38) (1.38)

(%)

62.98 2.41

2.89 6.17

(2.30) (21.14)

2,235.00 95.65 59.00 10.94 463.75

1.64 0.05 0.08 (2.23) (0.59)

15.44 (26.54) (23.87) (28.64) 6.98

1,506.63 18.15 262.75

(1.23) (1.20) 2.06

14.35 5.58 (19.84)

6/09/19

30/08/19

OBB

3.2100

9.2900

(608)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

3.8600 4.3500 13.7818

10.5000 9.2500 13.9985

(664) (490) (22)

Tenor

90 Days

13.9813

12.9832

100

1 Mnth 3 Mnths

12.77 13.28

13.03 11.42

(26) 185

Friday

1 Month

(N/$)

Rate (N/$)

6 Mnths 9 Mnths 12 Mnths

14.06 15.06 15.32

13.95 14.74 14.98

11 32 34

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

6/09/19

30/08/19

6/08/19

Official (N) Inter-Bank (N)

306.90 362.08

307.00 362.93

306.90 362.21

BDC (N) Parallel (N)

0.00 360.00

Friday 6/09/19

30/08/19

Indicators

Friday

AVERAGE YIELDS (%)

Friday (%)

Change (Basis Point)

6/09/19

30/08/19

3-Year 5-Year

0.00 14.46

0.00 14.37

0 9

7-Year 10-Year 20-Year

13.85 14.25 14.40

13.85 14.16 14.23

0 8 18

30-Year

14.56

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.

(Basis Point)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Friday

(%)

Friday

Change

(%)

BOND MARKET Tenor

Friday

(%)

Change

(%)

(Basis Point)

6/09/19

30/08/19

Index

2,958.12

2,989.74

(1.06)

Mkt Cap Gross (N'tr) Mkt Cap Net (N'tr)

8.98 5.71

9.05 5.73

(0.80) (0.31)

YTD return (%) YTD return (%)(US $)

20.42 -35.36

21.71 -34.13

(1.29) (1.23)

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

Rate(%)

91 Day 182 Day

24,372.79 38,751.85

11.1 11.58

28-Aug-2019 28-Aug-2019

364 Day

145,475.02

12.89

28-Aug-2019

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

Date

The Nigerian economy advanced at a slower pace in Q2 2019 by 1.94% year-on-year (y-o-y) when compared to Q1 2019 (2.10%), according to the Nigeria Bureau of Statistics (NBS). This indicated a decline of 0.16% over the previous quarter. The oil sector posted a real growth rate of 5.15% (year-on-year) in Q2 2019, representing 9.10% points increase relative to the growth rate recorded in the corresponding quarter of 2018. It also indicated an increase of 6.61% points when compared to Q1 2019(revised). The non-oil sector grew by 1.64% in real terms during the reference quarter. This was 0.40% lower than recorded in the same quarter of 2018, and -0.83% lower than the first quarter of 2019. During the quarter, the sector was driven mainly by information and communication, mining and quarrying, agriculture, transportation and storage, as well as other services. In a separate development, data from the Nigeria Bureau of Statistics (NBS) revealed that total value of capital importation into Nigeria stood at $5.8 billion in the Q2 2019. This represents a decrease of 31.41% compared to Q1 2019 and 5.56% increase compared to the Q2 2018. The largest amount of capital importation by type was received through Portfolio investment, which accounted for 73.76% ($4.3bn) of total capital importation, followed by Other Investment, which accounted for 22.41% ($1.3bn) and Foreign Direct Investment (FDI), which accounted for 3.83% ($222.89m) in Q2 2019. Capital importation by banking dominated in Q2 2019 reaching $1.89bn of the total capital importation in Q2 2019. The United Kingdom emerged as the top source of capital investment in Nigeria in Q2 2019 with $3.13bn. This accounted for 53.85% of the total capital inflow in Q2 2019. Lagos state emerged as the top destination of capital investment in Nigeria in Q2 2019 with $4.13bn and accounted for 71.09% of the total capital inflow in Q2 2019. Stock Market

The Nigeria Stock Exchange suffered another week of loss on the back of selling pressure and seeming profit-taking. Foreign investors confidence was also shaken by the call to nationalize South African companies due to the xenophobia attacks happening in South Africa. Accordingly, the All Share Index (ASI) declined 1.38% to 27,146.57 points from 27,525.81 points the preceding week. Market capitalization also fell by N180 billion to N13.21 trillion from N13.39 trillion the prior week. This week, we envisage that the market will remain

bearish amidst profit-taking and investors reshuffling their portfolios in anticipation of interim earnings reports of dividend-paying companies. Money Market

The direction of money market rates trended downwards last week due to sustained liquidity seen in the market and net Open Market Operation (OMO) of about N414 billion. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates declined to 3.21% and 3.86% from 9.29% and 10.50% respectively the previous week. Call rates also dipped to 4.35% from 9.25% the prior week. Longer-tenured interbank rates, such as the 30-day Nigerian Interbank Offered rate (NIBOR) declined to 13.78% from 14% the previous week. This week, rates are expected to remain in single digits barring further OMO auctions by the central bank. Foreign Exchange Market

The local unit saw an appreciation against the dollar across most major market segments for the week ended September 6th, 2019. The official window saw a slight appreciation as it ended N306.90/$, a 10 kobo gain from the prior week. Likewise, at the NAFEX window, the local unit saw a slight appreciation of 85 kobo to close at N362.08/$, while the parallel market remained unchanged at N360/$. The appreciation recorded in the NAFEX and official market segments may be attributed to the apex bank's regular interventions. This week, we envisage the stability in the market would continue due to consistent FX liquidity injections by the CBN. Bond Market

The bond market was bearish this week driven by sell off as investors' appetite for bond remained low. Yields on the five-, tenand twenty- year debt papers closed higher at 14.46%, 14.25% and 14.40% from 14.37%, 14.16% and 14.23% respectively the previous week. The Access Bank Bond index decreased by 31.62 points or 1.01% to finish at 2,958.12 points from 2,989.74 points the previous week. This week, we expect a slightly more active market in the coming week given the incoming maturities. Commodities

Oil prices rose marginally supported by betterthan-expected Chinese economic data and news that the People's Bank of China (PBoC) would soon introduce more bank reserve requirement (RRR) cuts to help stave off the ongoing economic headwinds. Nigeria's crude oil benchmark, Bonny light, edged up by 2.89% to $62.98 per barrel compared to $61.21 the prior week. Precious metals went in the opposite direction as they declined from preceding week high as risk sentiment improved after stronger-than-expected US economic data and hopes of a thaw in the USChina trade war. Gold dipped by 1.23%, settling at $1,506.63 per ounce, while silver settled at $18.15 per ounce, 1.2% lower than the prior week. This week, US-China trade talks may soon take a turn for the better after the Chinese Commerce Minister said that China will strive to achieve real progress with the US during high level meetings in October, thereby leading to a boost in oil prices. Precious metal prices are expected to decline as hopes of a resolution in the US-China trade war supports riskier assets. MONTHLY MACRO ECONOMIC FORECASTS Variables

Sept’19

Oct’19

363

362

363

Inflation Rate (%)

11.2

11.5

Crude Oil Price (US$/Barrel)

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

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Nov’19

Exchange Rate (Interbank) (N/$)

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Monday 09 September 2019

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cityfile Group wants Obaseki to domesticate disability law Idris Umar Momoh, Benin

Residents watch an articulated vehicle laden with crushed rock, which crashes an access bridge and falls into the river at Elebele community in Ogbia Local Government Area of Bayelsa. NAN

Lagos to employ 15,000 new teachers JOSHUA BASSEY

agos government is working on plans to engage 15,000 new teachers as part of efforts to strengthen i t s e d u c a t i o n s e c t o r, the governor, Babajide Sanw-Olu has said. The employment of new teachers will be followed by rehabilitation and upgrade of facilities as well as the introduction of smar t devices to enhance learning in public schools in the state. One of the major drawbacks in the Lagos education sector is that public schools are overc row d e d d u e t o h i g h population of pupils and students.

A teacher in one of the public schools in O j o, to l d Bu si n e ssDay that he handles a class with 120 students, which he described as abnormal. G ov e r n o r Bab aj i d e Sanwo-Olu, who addressed a capacity audience in Ikeja, Friday, to mark his administration’s 100 days in office, said that arrangements are also being concluded to commence the Federal Government’s school feeding programme in Lagos. When started, the feeding, he said, will not be limited to pupils in primary 1-3 as it is the case in other states, but also extended to primary 4-5. The government, Sa n w o - O l u a d d e d , i s also to establish a La-

gos metropolitan fibre optics station to boost the provision of internet facilities in the state just as he reaffirmed the resolve to ensure that the L ekki-Ikoyi toll plaza goes cashless in a matter of weeks. “The Lekki-Ikoyi toll bridge would become cashless in the next couple of weeks to ease traffic on that corridor and have as less human contact as possible. The governor also promised to tackle the challenge of energy in t h e s t a t e i n o rd e r t o actualise his vision of making Lagos a 21st century economy that works. “In this regard, w e are holding talks with D I S C O s i n t h e s t a t e, with a view to provid-

ing 20,000 metres for the use of Lagosians. We also plan to replicate the Lateef Kayode Ja ka n d e Ga rd e n s i n S u r u l e re, S a n g o t e d o, Ajara-Badagry and Epe in order to make our people home owners.” Gb e nga O m o t o s o, the commissioner for information and strategy, lauded the achievements recorded by the administration within 100 days in office. “In the last 100 days, Governor Babajide Sanwo-Olu has commissioned various projects for the well-being of Lagosians such as the Maternal and Child Care Centre (MCC) in Eti-Osa and the launch of the Lagos Blue Box programme among others,” said Omotosho.

Police arrest NGO operator, others over child trafficking

he police in P l a t e a u h av e arrested one Mildred Bako, the director of Voice for the Girl Child Foundation, a nongovernmental organisation, and four others over alleged criminal conspiracy and child trafficking. Isaac Akinmoyede, the Commissioner of Police (CP) in Plateau paraded the five suspects at the weekend in Jos, the state capital. According to Akin-

moyede, the arrest of the suspects followed a report by one Chidi Daniel, from Jenta Mangoro in Jos North local government area, to the police on August 23. The police chief said Daniel, the father of the child, raised the alarm when his wife, Rose Adams, returned home without their one month old baby. The CP explained that investigation revealed that the child was sold to one Chriswww.businessday.ng

tiana Ochuba, 32, of Bright Way area of Rukuba road community. “On August 23, one Chidi Daniel reported to us that on July 31, his wife Rose Adams, 25, left his house for Dadin Kowa in Jos S o u t h l o c a l g ov e r n ment with his two kids. “That she later returned home without their one-month old baby, and when he enquired, she told him she gave it to a woman working with Voice for the Child Foundation.

“The Juvenile Welfare Centre ( JWC) of the command upon investigation discovered that the baby was sold to one Christiana Ochuba. “Meticulous investigation by police also led to the arrest of R o s e, m o t h e r o f t h e child, Mildred, Ochuba, and two other accomplices,” he said. The commissioner said the suspects, all female, would soon be charged to court after investigations.

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do State Chapter of the National Council for Physically Challenged has appealed to Governor Godwin Obaseki to domesticate the disability bill in Edo in order to promote equal opportunity of human rights for persons living with disabilities. The council also appealed for the promotion of persons with disabilities on the state public service whose promotion had been long overdue and recognition of athletes who won medals in the last National Sports Festival in Abuja. The coordinator of the council, Gerry-Boi Omokhodion, made the appeal during a solidarity rally across major streets in Be-

nin just as he applauded the Obaseki-led administration for identifying with persons living with disabilities in the state. Omokhodion said that since the emergence of Obaseki, the employment of persons with disabilities has continued to grow in geometrical progression when compared to previous administrations. He maintained that Obaseki has been able to reposition the state in different facets with limited resources. “About 20 persons with disabilities were given employment during the last civil service recruitment in the state.” “Presently, about 25 persons with disabilities have been shortlisted for employment into the state sports commission,” he added.

Community urges urgent repair of Bayelsa collapsed bridge

eaders of Elebele community in Ogbia local government area of Bayelsa, have called for the speedy repair of Elebele bridge, which collapsed last week. The bridge which connects the state capital, Yenagoa, to Ogbia, Nembe and Brass collapsed on Thursday when a truck laden with crushed granite was crossing to a construction site. The development left scores of vehicles on both sides of the bridge stranded, cutting off the community from the rest of the state. “This bridge is important to us because this is the

only road to and out of our community; it leads to the oilfields across Ogbia land,” said John Jacobs, one of the community leaders. He explained that members of the community relied on the bridge to convey their agricultural produce to the state capital as well as other economic activities. “We appeal to the state and Federal Government and to Shell to swing to action immediately because we have no alternative.” Jacobs said. The bridge, it was gathered, was constructed in 1986 by Shell Petroleum Development Company to gain access to its oilfields in the area.

60-year man charged with receiving stolen cows

60-year man, A k a n d e Ga n i y u has been arraigned by the police in Iyaganku Magistrate Court, Ibadan, Oyo State, for allegedly receiving five stolen cows, worth N1.3 million. Ganiyu is facing a onecount charge of theft. The prosecution counsel, Olalekan Adegbite, told the court on Friday that the defendant received the stolen cows valued at N1.3million at Akinyele area, Ibadan. Adegbite alleged that Ganiyu received the stolen cows from one Ibrahim Adamu knowing same to have @Businessdayng

been stolen from the owner, Magaji Hamisu, who reported the matter at Akinyele police station, Ibadan, on August 9. He said the offence contravened the provisions of Section 427 of the Criminal Code Cap 38, Vol.II, Laws of Oyo State 2000. The defendant pleaded not guilty to the charge against him. Magistrate O.A. Enilolobo admitted the defendant to bail in the sum of N50, 000 with one surety in like sum and adjourned the matter to September 30, for mention.

Monday 09 September 2019

BUSINESS DAY

START-UP DIGEST

In association with

Margaret Akande: Revolutionising Nigeria’s skin care business ODINAKA ANUDU

kin care and beauty business is a gold mine. Though its global market is estimated at over $445 billion, the local industry is only scratching the surface. It is a much fledgling industry in Nigeria, but many entrepreneurs are beginning to push for a cut in the market. Margaret Kehinde Akande, the young chief executive of Awele Bath and Body Works, is one of them. She started this business five years ago and has since moved from making natural skin care products at home to having a mini factory in Lagos. “We specialise in natural skin care products from locally sourced ingredients,” she tells Start-Up Digest. “We have an array of products such as bathing soaps, body creams and lotion. We have body oil, soap and cream for the children as well,” she discloses. Her black soap and lotions are highly coveted in the market, not only because of their quality but as a result of affordability. She understands that Nigerian consumers are increasingly becoming price sensitive as the economy weakens. “The products that had been around before we en-

tered into the market were very expensive,” she says. “My intention was to make skin care products effective and affordable. We put measures in place to make sure that the running cost was low so that people could afford our products. Our soaps today are just N1,500, unlike many 400 or 500 grams that go for N4,000 or N5,000. We sell for N1,500 to adults and N1,000 to children, and they have high quality,” she discloses. One of the things Akande achieved was to cut

production costs by buying raw materials directly from manufacturers. “When I started, I did not know how to bring down costs,” she admits. “I sourced for the ingredients through third parties. But what I have done differently is to look for avenues to get to the local people that make them so that I buy directly from them. This has drastically reduced our cost of production,” she notes. The entrepreneur makes her natural skin care products from shea butter, coco-

nut and almond oil, among others. In the last five years, a lot has changed in her business. When Akande started, she had just N50,000. But this amount has increased many times. She would then go to the market to get raw materials, do production and packaging herself. However, things have changed as she now has two staff members. She began by processing shea butter and coconut oil. But along the line, customers started making demands for soaps. “That was what prompted me into research. I needed to know how to make black soap in a paste form, such that people could use their hands to scoop and bath with it. From what I made from the business, I started re-investing it,” she says. Patronage too has improved. “We cover beyond Lagos State now. We have customers in Ibadan and Edo State,” she says. But the entrepreneur is not satisfied with that, as she looks forward to having a standard factory where she can roll out more products. “With the present business plan I have now, I am looking at getting N10 million,” she says.

“With the money , I will be able to start a standard factory, with up-to-date equipment for the production of soaps and lotions. We need vans for logistics. We need money for buying standard equipment that will be able to make volume production. The mixer I use at the moment is a 200-litre capacity, but I am looking at getting one that will make 1,000 litres at once. The filling machine that we use in making the bottled lotion is a manual one. I am looking forward to getting automatic ones that can speed up the production process,” she demands. With power outages crippling production, the entrepreneur wants to acquire a bigger generator that can power bigger machines. She looks forward to getting grants to expand her business. As a 21st century entrepreneur, she is gaining traction on the social media, using it to reach potential remote customers. “When I started, I was doing one-on-one. I would drop my kids to schools and would move round. I later discovered that I could use the power of the social media to reach more people. That has been the game changer for me in terms of reaching customers. I

use Facebook, Instagram platforms to reach customers. We get referrals from people using our products. So the awareness is better than before,” she admits. She is reaching new partners to ensure that her products are in every nook and cranny of the country, including at retail shops around the country. She is a mentee of the Lagos Chamber of Commerce and Industry (LCCI) Mentoring Programme and admits that it has changed her way of thinking. She is also open to potential investors. “There is potential in the business. The natural skin care business is worth billions of dollars. So, it is an avenue for investors to make money. The return on investment is over 50 percent. So, if we can get the right investment, we will go places,” she notes. Her piece of advice to younger entrepreneurs is to not give up. “Once you have a clear understanding of what you have for yourself, irrespective of the challenges or environment, stick to it. Over time, you will make headway. When I started, I did not know I would get to this present level. I was not sure, but I knew the future was bright. So they should just keep working hard.”

Fojet International holds Mastering Elumelu eyes Japan’s partnership Talent Conference for entrepreneurs to empower more entrepreneurs JOSEPHINE OKOJIE

ojet International is organising the third edition of its Mastering Talent Conference for entrepreneurs in the entertainment industry. “The production of good music would lead to more business opportunities for the Nigerian music industry and the harnessing of the musical talents for financial rewards is a challenge that needs to be addressed,” said Adedotun Ademiloye David, CEO of Fojet International, while quoting from an interview he had with Femi Kuti – Nigeria’s music legend. Adedotun said that his establishment has been collaborating with major

players in the music scene across the continent to facilitate the restructuring of high potential African music artists and the musical content creators. The talent programme with the theme ‘Harnessing Talent for Financial Rewards’ will have three panel discussions comprising ‘how to build a brand in the creative industry’, ‘leveraging technology to enhance revenue in the talent business’ and ‘multiple right recording contract’. Edi Lawani, veteran and music business expert; promoter and special event consultant, Akiin Shuga, CEO, Shuga Entertainment, and Tunde Balogun, CEO, Saxtee Series Investment Ltd, among www.businessday.ng

others, will be the panellists. There will also be exclusive performance, mentoring opportunities, workshop and networking as well as free N3,000 ebook on the practical guide to understanding and succeeding in the talent business for entrepreneurs in attendance. Interested entrepreneurs can register to attend by visiting www.fojetgroup.com. The talent programme is scheduled to take place on the 16th of September, 2019 at Muson Centre, Lagos. Key stakeholders in the music industry, tech professionals, entertainment lawyers, talent managers and others are expected to be in attendance.

ODINAKA ANUDU

ony O. Elumelu, founder of Tony Elumelu Foundation, has challenged Japanese government to invest 5 percent of its $50billion commitment to Africa in empowering entrepreneurs. Speaking at the 7th Tokyo International Conference on African Development (TICAD) in Yokohama, Japan, Elumelu said such an investment would create visible on Africa’s entrepreneurship landscape. “At TICAD 2016 in Kenya, Japan pledged $30billion for Africa. This year, you have generously increased this to $50 billion. If we invested just 5 percent in Africa’s new generation of entrepreneurs, following my Foundation’s

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robust, proven model of getting capital directly to those best placed to catalyse growth and create real impact, we could touch 500,000 lives across the 54 African countries, broadening markets, facilitating job creation, improving income per capita, and laying the key foundation for political and economic stability,” he said. He urged Japan to learn from the example of the Tony Elumelu Foundation which empowers African entrepreneurs, thereby accelerating the development of Africa. Five years since starting, Tony Elumelu Foundation has assisted over 7,500 African entrepreneurs across ever y African countr y, with seed capital, capacity building, mentorship and networking opportunities through its $100 million @Businessdayng

Entrepreneurship Programme. “Africa is one of the world’s viable destinations for investment. Our huge population, of nearly 1.3 billion people, creates one of the most attractive markets anywhere in the world. The world is paying close attention to Africa, but is Japan at the centre of this conversation or is it on the sidelines?” he asked. Cyril Ramaphosa, president of South Africa and co-Chair, TIC AD, sup ported Elumelu’s position. “If you want really good returns, as Mr. Tony Elumelu said, come to Africa. Africa presents risk-adjusted returns and is a market in which investments are flowing at a hundred billion dollars - that is the new profile of Africa that is being presented to the world.”

Monday 09 September 2019

BUSINESS DAY

START-UP DIGEST

Ahmadu: Solving farmer-herder problem with technology ODINAKA ANUDU

t a point when Niger ians are merely discussing the farmer-herder problem, Ibrahim Maigari Ahmadu, an IT expert and co-founder/chief executive of Livestock247.com, is coming up with innovations targeted at solving it. His Livestock247.com is the country’s first livestock online marketing and listing platform. A lawyer by training, Ahmadu has been in the livestock industry for seven years, revolutionising a sub-sector viewed primarily through cultural and ethnic lenses. Through his platform, livestock sellers meet buyers. The herders make money from huge sales while buyers get fit-for-slaughter cattle. He is solving Nigeria’s biggest challenge: farmer-herder crisis. His strategy is simple: He tells herders to stay where they are, while he provides pasture, water, funding and market for them. With this strategy, he reduces nomadic movement of cows through farms, which often results in conflicts, blood and tears. The entrepreneur tells Start-Up Digest that his firm’s big vision is to mitigate spread of animal-to-human disease transmission in Africa. He explains that one big challenge facing Nigeria’s cattle production is lack of

functional animal identification system. “If there is a break-out of mouth cow disease, how do you trace it?” he asks. “It means you may not know what you are eating. That is why global brands like McDonalds are not in Nigeria,” he says. His firm creates a platform whereby livestock producers, consumers, financial service providers and insurance firms come together with a view to mitigating the spread of diseases and putting a structure to a sector that has been under the control of middle-men for years. “We are investing heavily in production,” he says, adding that Livestock247.com is trying to solve a very serious problem—cattle rustling. “We partnered with MTN Nigeria to develop the cattle tracking system. We developed this system ourselves. During that time, we developed relationships with ru-

ral farmers. Before we even launched our products, we had to go round the country and familiarise with rural farmers. And they are not as uncivilised as many people think they are. They are literate in their own way,” he explains. Ahmadu says the cattle business is a multibillion enterprise and is not about culture or ethnicity. “The cow does not understand Igbo, Hausa, Yoruba or Efik. Most livestock producers are looking for market. They want to get away from the shackles of middle-men; they want good margins,” he states. There is a popular livestock market in Jigawa State called Maigatari Market, which is busiest on Thursdays. Traders and buyers come from Mauritania, Congo Brazzaville, several parts of Central Africa and other countries to buy or sell cows. The entrepreneur says he is now trying to re-orient livestock producers there to

ensure their market runs 24/7. “When you go there on Friday, the place is quiet. And I ask them, ‘Why don’t you have a market on 247 basis?” “We are bringing the financial service providers to this market because it is a business that is credit based. Maigatari Market turns almost over $3 million a week. They do over N500 million, but 80 percent of this is cash. We partnered with Sterling Bank to have what we call Experience Centres and we are bringing financial services to the cattle market. That is financial inclusion. We are bringing together the banks and the under-banked through our system. So, we are helping them to sell their cattle and now we are telling them they don’t need to come with cash. Have an account with this bank and you don’t have to come with cash to the cattle market because it breeds rural banditry and kidnapping,” he states. He says that 95 percent of the 20 million cattle in Nigeria are owned by the pastoralist communities. He believes that traceability has been a landmark innovation in the livestock business. “What you are getting for nothing, you get a fit-forslaughter that is traceable and you are getting value for money,” he says. “The traceability is working at the moment. There is a microchip that we implant on the animals. It is not harmful

Dewdrops Cakes empowers 2,000 start-ups with innovative baking skills JOSEPHINE OKOJIE

ewdrops Cakes, a leading bakery business in Lagos, has empowered over 2,000 startups with innovative baking skills to enable them scale their businesses. The training, which took place recently at Landmark Event Centre, had in attendance actors across the Nigerian baking value chain, cake lovers within and outside the country who exhibited and showcased their products. The event with the theme ‘Dewdrops Uncut Learning 2’ had prominent bakers and chefs from within and outside the country such as Tareela Okene, Christopher Okpoko, Kate Ojiugo Onkwena and Tuba Geckil trained the start-ups on various innovative arts of cake making. “We want to empower the Nigerian baker. To give them a voice by encouraging and training them on new baking skills to help them scale their businesses,” said Ezinne Okonkwo, CEO, Dewdrops Cakes the

Olusegun Fafore, executive assistant - new media & public relations ,Lagos State Governor; Buddy Valastro, America-based cake artist ‘Cake boss’; Shuli Adebolu, commissioner for Tourism, Arts and Culture and Ezinne Okonkwo,CEO, Dewdrops Cakes Ltd during the Dewsdrops Learning Uncut empowerment program for start-ups in Lagos recently.

host of the event. Okonkwo advised the young bakers to ensure they work towards realising their dreams and ensure quality and standards in their cakes, saying with that, clients will trust their brands. She said that the cakebaking industry is now getting recognition from the government owing to the jobs the sector is creating. She called on the government to bridge the huge www.businessday.ng

infrastructural gaps in the countr y to ensure that small businesses survive and scale. Nigeria’s baking industry has been experiencing a tremendous increase in demand owing to the rise of its middle class who regularly celebrate event happenings in their lives. Terry Adido, a cake instructor from Canada, who took the start-ups through a cake demo session, said that

cake making is a lucrative business for those that are doing it differently. He advised the participants to carve a niche for themselves in cake-making by specialising in an aspect of the business. “Each cake artist needs to discover the aspect of cake they can specialise in and not just making all cakes,” he said. A participant, Bunmi Alabi, founder, Irresistible Cakes, said that the empowerment programme surpassed her expectation. “Seeing top bakers in the industry put us through various cake recipe demonstration is amazing, and I have learnt a lot in the process,” Alabi said. “It is worth my every penny I paid for attending and I will not miss the next edition for anything,” she added. The event was supported by Access Bank Plc and the Lagos State Government. Speaking on behalf of the bank, a staff said “for us in Access bank it is about creativity and innovation and that is why we are fully supporting the DewDrops Uncut Learning 2.”

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on the animals and is based on World Organisation for Animal Health (OIE) specifications. The body is like the World Health Organisation (WHO) of the animal space. There is also the International Standards Organisation. We design our products in line with OIE. Fortunately, Nigeria and other 180 of countries are all signatories to OIE,” he discloses. Forty-two percent of all the livestock in West Africa are in Nigeria but the country can’t export one kilogram of beef because of poor animal identification system, he said. “Botswana, Namibia and South Africa export beef. Nigeria has over 20 million cattle but can’t export any beef,” he says He points out that his firm’s new Livestock Fattening Project will bring bite to the industry, as he has an agreement with financial partners who are investing almost N500 million in the project. “What they are trying to do is to show to the government that the market-driven approach is the solution,” he says. “The farmer-herder crisis happens every year. During the dry season –from November to February— herders start moving southwards because rains stop early in the north. So, they start looking South-West and converge at the Middle-belt. They also congregate around the Ikom Belt. By March/ April when the rain starts again, they go

back. As they go back, people are already in the farm. That is why you have farmer-herder crisis. When you sit down with them, you see it is a competition of resources. The pastoralist is looking for pasture and water. The farmer, on the other hand, has every right to go to the farm. What we are telling them is, look, you say government is not investing in livestock development. There is no pasture and grazing land, so stay where you are. We will give you money for feeds and also give you the bulls to fatten. We will give you money for drugs and vaccines. We will give you a veterinary doctor to supervise you. We will give you the market. Over 1,000 companies have applied to participate in the programme. Our plan is to do 24,000 cattle in 2019 to 2020. We are starting with Osun, Taraba, Kaduna, Katsina, Kano, Abuja. We have escalated it to reach Lagos and the South-East,” he explains. He adds that one other thing his firm is trying to do is to de-ethnicise livestock production the way poultry business has gone mainstream. He explains that livestock business is no longer a cultural thing. “We are a platform. We bring buyers and sellers together. People that want to buy, sell, transport livestock come to our platform. Insurance companies and investors come to our platform and they pay some fees.”

MSMEs, FG urged to address gaps in economy IFEOMA OKEKE

ntrepreneurs have urged players in the micro, small and medium enterprises (MSMEs) as well as the Federal Government to pay more attention to the sector as part of measures to address gaps in the nation’s economy. The stakeholders, who gathered at the 2019 edition of Glocalisation and Branding Summit, stressed the need to positively impact lives of Nigerians with the MSMEs sector. Among them are: Tola Johnson, special adviser to the vice president on MSMEs; Tara Fela-Durotoye, chief executive officer, House of Tara; Kemi Areola, CEO, Vivacity PR and convener of the programme; Debola Williams, CEO of RED Media, and Yomi Sax, a leading Nigerian saxophonist. Areola said the event gathered no fewer than 1000 forward-thinking individuals, empowering them with innovative, problem- solving skills, business opportunities and mentorship programmes. She said it provided an avenue for attendees to interact, network, share business ideas and passions as well as leverage on the services of government agencies through MSME @Businessdayng

Clinics initiative. Private companies in attendance included: Bank of Industry, SMEDAN, Corporate Affairs Commission, Nexim Bank, Bank of Agriculture, Keystone Bank, Access Bank and MTN. She stressed the need to bridge the gap between SMEs and government plans for the sector, urging players in the sector to ensure that they utilise several opportunities provided by government agencies to support and contribute to the growth and success of all Nigerian MSMEs. Dayo Adeneye, who has been in business for a number of decades, spoke about his journey from his living room to the grammy’s and the transition to politics and philanthropy. He said, “Nigeria belongs to you and me. if we do not fix it by ourselves, who will fix for us?” Johnson said the Federal Governments’ MSME clinics initiative would create an enabling environment for small businesses to prosper towards creating jobs, wealth and eradicating poverty in this country. He stressed that government would intensify its intervention in small businesses through access to finance.

Monday 09 September 2019

BUSINESS DAY

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Monday 09 September 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Yes, freemium businesses need salespeople ANDRIS A. ZOLTNERS, PK SINHA AND SALLY E. LORIMER

ompanies such as Dropbox, LinkedIn and Slack Technologies offer a free basic version of their product and count on customers to pay for upgrades to premium versions. Freemium business models have grown rapidly in popularity with tech companies. The no-sales force model worked well while these companies sought out individual users and small business customers with relatively simple needs. But when the core of the paying market shift-

ed to larger enterprise customers, inside and field salespeople began to make sense for two reasons. Customer busi-

ness needs, products and buying processes became more complex. And the lifetime value of such customers justified

the investment. In complex buying situations, customers want information that can’t be found through a search

engine or on a company website. — Enterprise needs vary by industry and customer. — Simple freemium digital offerings naturally become more complex as companies shift their focus toward larger enterprise customers. — Enterprise customers often make technology investment decisions through the collaboration of multiple decision-makers. These individuals have different perspectives. With freemium, enterprise customers may learn about a product through word-of-mouth or through a referral. They may initiate a trial using self-service digital

channels. But eventually, the complexity of business needs, products/ solutions and buying processes will compel enterprise customers to seek human help — from salespeople. The story does not end after the initial purchase. As customers embed freemium products into their organizations, their needs will continue to evolve.

• Andris A. Zoltners is a professor emeritus at Northwestern University. PK Sinha is a founder and co-chairman of ZS Associates. Sally E. Lorimer is a marketing and sales consultant and a business writer, based in Michigan.

How to make your sales forecasts more accurate LOU SHIPLEY

onsistently accurate sales forecasts are like gold. They deliver the revenue predictability that is essential for companies to accelerate their growth and success. Unfortunately, consistently accurate sales forecasts are rare. That’s because many companies fail to align their sales and marketing departments, and that alignment is a prerequisite for forecast accuracy. It’s easy for marketing and sales teams to wind up at odds. There’s often competitive friction between the heads of the two departments — both of whom usually report to the CEO. Sales will grumble that marketing isn’t generating enough leads to make the number. And marketing will scoff that sales isn’t following up

on the leads that marketing delivers. What is needed is a better equation for how to create the right forecast. This equation starts with a

well-crafted definition of a lead or prospect that shows interest in a product or service. That is followed by an understanding of the rough number of stages the pros-

pect passes through (including interest, evaluation and budgeting) on the way to a purchase. Companies can achieve sales-marketing alignment

and avoid end-of-quarter angst by agreeing on a single version of the truth. A prerequisite is a very clear definition — by both sales and marketing — of what constitutes a lead that a salesperson will be able to close in the month, quarter or year. Teams have to take the time to analyze the characteristics of the leads that resulted in closing a sale, and come up with a set of clearly defined and agreed-upon criteria that had to be met for a lead to attain the designation of “sales-qualified.” This makes time allocation more efficient and resource utilization much more targeted. The single-version-ofthe-truth process makes it clear that marketing’s compensation has to be based primarily on the department’s ability to generate sales-qualified leads. Re-

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lentlessly focusing on SQLs streamlines and sharpens marketing decision-making. After a few quarters using this method, forecasting can improve markedly. This makes the role of CEO far easier. The predictive benefits of understanding the sales math equation helps clarify progress early in the quarter. The heads of sales and marketing can work collaboratively toward a defined set of clear, mutually agreed-upon company goals. As accuracy is gained, more time can be spent on other board-level topics — strategy, competition, culture — that might otherwise be missed during quarters where the sales forecast was not met.

• Lou Shipley is a lecturer in technology sales at Harvard Business School and the MIT Sloan School of Management.

Monday 09 September 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

In association with

Why CEOs surround M&A announcements with unrelated good news

ergers and acquisitions are among the most consequential strategic decisions managers make. But markets often respond negatively to acquisition announcements, which means investors are skeptical about the transactions, their terms or managerial motivations. Prior research suggests such skepticism may be wellfounded: In quarters following acquisitions, CEOs in the U.S. are 28% more likely to exercise options and 23.5% more likely to sell stock than they are in quarters not following acquisitions. This behavior implies that CEOs have low confidence in the value creation of their deals, and that the motivation for them may stem more from private interests or external pressures than attempts to enhance shareholder wealth. We wanted to ascertain CEO confidence in an acquisition’s value earlier — when the firm

munications as part of the firm’s overall strategy. In turn, media relations professionals may want to weigh the risk of being “caught” managing impressions. For boards and compensation committees, our findings suggest that CEOs are closely attuned to the personal financial risk associated with their compensation, and that they actively work to protect it. Does impression offsetting also signal low confidence in other types of announcements, such as alliances, new products or earnings forecasts? Our ongoing work is looking for answers.

announces it. In our study, we explored whether “impression offsetting” is an indicator of low CEO confidence (measured by options exercises after acquisitions). To examine this question, we collected data on acquisitions S&P 500 firms announced between

1995 and 2009. Our findings showed that a CEO whose firm issued more unrelated positive news releases around the time of an acquisition exercised 6.7% more options (on average, $220,000) in the next quarter than a CEO whose firm did not. This shows

that more impression offsetting may signal that CEOs have low confidence in the deal. Our findings have important implications for investors, media relations professionals and boards designing executive compensation packages. Investors may be wise to view com-

• Daniel L. Gamache is an assistant professor at the University of Georgia. Gerry McNamara is a professor at Michigan State University. Scott D. Graffin is a professor at the University of Georgia. Jason T. Kiley is an assistant professor at Oklahoma State University. Jerayr Haleblian is a professor at the University of California-Riverside. Cynthia E. Devers is a professor at Texas A&M University.

Is the business roundtable statement just empty rhetoric? don’t prioritize long emergencies like climate change). WHAT WOULD IT REALLY MEAN FOR THESE COMPANIES TO FOLLOW THESE PRINCIPLES? This new discussion of purpose is good, and it mirrors what some big investors are saying. But we need a much bigger pivot to circular, renewableenergy-based business models that value the long-term, protect natural capital and invest in human development and equality. That level of change is currently light-years beyond the BRT statement.

ANDREW WINSTON

he Business Roundtable (BRT) recently declared that the purpose of a corporation is not just to serve shareholders (its official position since 1997) but “to create value for all our stakeholders.” Shareholder primacy has been the core operating principle of public companies since economist Milton Friedman famously declared “the social responsibility of business is to increase its profits.” To understand why the BRT statement matters, three points and a question are worth bearing in mind. SHAREHOLDER PRIMACY CAN’T SOLVE OUR CURRENT PROBLEMS. First, social norms are changing and expectations from employees, customers and even investors are rising fast. Second, there’s a growing realization that a focus on one key stakeholder or metric is as flawed as using your cholesterol level as the only measure of your health. Third, investors are increasingly pressing companies to focus on their purpose and how they contrib-

ute to society. But fourth, and perhaps most important, the world faces enormous, thorny challenges that business is feeling: climate change, growing inequality (and awareness that these CEOs make hundreds of times more than their employees), water and resource scarcity and more. IT HAS ALWAYS HAD SKEPTICS.

In 1943 Johnson & Johnson published “Our Credo,” laying out its prime responsibilities to the world at large. Robert Wood Johnson describes his company’s responsibilities in this order: patients/doctors/nurses, customers, business partners, employees, communities, the environment and natural resources, and then, after all that, “stockholders should realize

a fair return.” Thinking about stakeholders is an old idea, more in line with why most companies were founded. IT MAY NOT BE THE REAL PROBLEM. Basically, if you manage for longterm value, of course you need to account for customers, employees, communities and more. When we define value as this quarter’s profits, we don’t invest (and we certainly

Brought to you courtesy of First Bank Nigeria

• Andrew Winston is the author, most recently, of “The Big Pivot.”

Monday 09 September 2019

BUSINESS DAY

INTERVIEW

Auto sector can generate 5m jobs for Nigerians – Stallion CEO

Nigeria’s automotive industry is grappling with a lot of problems. These ranges from the refusal of presidential assent to the NAIDP bill passed into law by the National Assembly to the decimination of the middle class and inability of the low income earners to buy used or brand new vehicles and most, if not all the assembly plants are on idle mode. In this interview with ANANT BADJATYA, Group CEO of Stallion Motors, he lamented on the narratives that has bedevilled the country’s automotive industry, but remains very optimistic of a brighter future. He told MIKE OCHONMA, BusinessDay’s motoring editor that Nigeria’s auto industry can generate five million jobs and even contribute significantly to the country’s GDP if adequate measures are taken to develop it. Excerpt:

ou have worked in different parts of the world before coming to this country. How would you describe Nigeria’s automotive industry Nigeria is a country of 200 million people and is the largest economy of Africa recorded about 10,000 new cars sold in 2018. So, I begin to wonder if we really have an auto industry.To put that in perspective; just consider a similar GDP per capita country like India which sold close to two million new cars in 2018. A lot needs to be done to develop this sector which can and has proven to be a very viable way of employment creation across the world both in developing and developed countries. The country does not have the auto policy implemented yet which creates an environment of uncertainty for OEMs and investors. Do you think car assembly plants really exist in Nigeria Only a handful of them. Current market dynamics makes it very difficult for smaller players to really operate an assembly plant in the real sense of it as the policy and the volumes simply will not justify the investment. Our own Stallion assembly plant has a capacity to assemble 200,000 units but we hardly do more than 5000 units. As I said, the country sold 10,000 new cars in 2018, while 300,000 used/tokumbo cars were sold in the same period in 2018. President Muhammadu Buhari recently declined assent to the National Automotive Industry Development Plan (NAIDP) Bill after four years of legislative fireworks before the 8th National Assembly passed the Bill in 2017. What is your reaction to this Stakeholders so much hoped for the policy to be effected because of the huge investments that have made. Auto companies have invested over millions of dollars in hopes of tapping the potential that Nigeria. It was a bit of a let-down. We need this Auto policy to kickstart this industry in Nigeria before it is too late. I am a firm believer in diversification of the economy. Nigeria is doing well in terms of turning the focus on agriculture and manufacturing but I must say that the automotive sector also is a very viable sector which needs to be looked into with as much interest. This sector can generate employment to about five million people and help develop the skill sets of young and ambitious Nigerians. It can absorb so many of the country’s

Anant Badjatya

engineers and diploma holders and provide them satisfying carrier opportunities. A well developed auto sector will have a domino effect on all related and dependent industries. As a representative of some leading brands in Nigeria, what do you think will be their reaction, especially those that have invested in auto plants in anticipation that the bill will eventually be passed It is sadly becoming to appear obvious that the major OEMs are almost giving up on Nigeria. Five years ago, the country was the new bride because of its massive population of about 200 million people, and also being the largest economy on the continent. Now, the story is different because things are not at all on what they had planned and promised for. Year on year TIV is declining. Last year, about 10,000 units of new vehicles were sold in Nigeria, while Ghana, a country of population less than 30 million sold 8,000 units. Our avoidable and inexplicable inaction is someone else’s gain. Some auto companies like Toyota, Nissan and several others are already taking advantage of Ghana’s new auto policy and have committed their investments to build auto www.businessday.ng

plants that are financially viable. The new policy in Ghana gives zero tariff on completely knocked downs (CKDs) and semi knocked downs (SKDs) making it more profitable for international brands to set up auto plant in Ghana. What this means is that in the next five years or more when the AfCTA agreement which Nigeria is signatory to become effective, Ghana will be shipping cars to Nigeria as its viable and attractive for the auto giants. So for the OEMs, Ghana with the new policy presents a better opportunity than Nigeria which is still uncertain about the direction for its auto industry. This is your first time in Nigeria, can you give us your overview of the Nigerian auto industry vis-à-vis other countries where you have worked This is my first time in Nigeria. I have worked in the US, the UK, UAE, Europe and several other countries, but Nigeria presents a unique experience for me. Auto sector has great potential but decisive action needed to be taken to develop the sector. If India can generate 32 million jobs in the auto industry with a population of over 1 billion people, there is no reason why Nigeria with the right policies in place, cannot

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generate 5 million jobs from auto and ancillary businesses within the next 10-15 years. The industry can play pivotal role in the drive for diversification as is being pushed by the government. To diversify the economy from oil to agriculture is very good, I think all the right steps have been taken and I only hope we also choose auto as a preferred industry to boost the economy. Auto can catapult the economy to a much faster growth and provide satisfying employment opportunities for the teeming young energetic and savvy Nigerians. Stakeholders often times blame the grey market and used cars import as a threat to new sales in the country.What is your take on this Why should Nigerians buy a used car in the first place? I had just arrived in Nigeria and vividly remember Rwandan President Paul Kagame’s speech at the launch of Volkswagen mobility in Kigali sometime in June last year when he spoke about the menace and dangers posed by second hand vehicles in Africa. He stated that “Africa does not deserve to be a dumping ground for second hand car or second hand anything’’. Africans deserve better, Nigeria should also imbibe a culture similar to this. Only the best will do for us. Countries that are similar to Nigeria with respect to its growing population and economy have a better ratio of people going for new cars. The government has to do something to promote new cars by putting the right policy in place for the automotive sector for it to thrive locally. Government, banks and private sector will have to work hand in hand for the success of the auto industry. I don’t think it can happen in one day, but it has to start from somewhere. Implementation of Auto Policy is the right start. What do you think Nigeria is not doing right when compared

“

with the South African auto industry and other developing countries. I believe, Nigeria is one of the most endowed country in the world, no other country is this blessed except may be Brazil. Nigeria has oil & gas, fertile land, a favourable demography with 200 million people and median age close to 20. The 7th largest oil producer and a significant producer of cocoa, sesame, cashew, cassava and yet the country is struggling with poverty and unemployment. We need to look at the auto industry as a viable job creator. It employs or has the potential to employ hundreds of thousands of people who are attached to auto servicing, spare parts, accessories, financing, leasing etc. The Government will do well to look at industries other than agriculture to generate skill-based employability for its growing youth. The inequity between the new cars to old tokumbo cars is only increasing with the ambiguity on the auto policy. Let’s us talk about your plans for the Stallion automobile group Stallion is Nigeria’s foremost auto company with over eight brands and an assembly plant with an annual capacity of 200,000 units. Stallion Group will not relent in making sure Nigerians have the best of brands backed with an efficient and affordable after sales service across the country. With the right support from the government and policy makers, Stallion plans to set up an auto park in Nigeria which will attract the best auto ancillary and spares parts companies to set up shops in the country and produce locally for auto industry. This will significantly bring down the cost of final product and will in the process bring in lot of foreign direct investment (FDI) and generate lots of skilled jobs in the country.

Nigeria is the 7th largest oil producer, harvests cocoa, sesame, cashew, cassava and yet the country is struggling with poverty and unemployment @Businessdayng

“

Monday 09 September 2019

BUSINESS DAY

INTERVIEW

‘Regulatory collaboration is critical to unlocking insurance industry potential’ Guy Czartoryski is the Head of Research at Coronation Merchant Bank Ltd. In this interview with BusinessDay’s Endurance Okafor he shares insights on the challenges stalling Nigeria’s insurance industry and the catalysts needed to spur growth. Excerpts:

ow do you define the current state of the Nigerian insurance industry? As at today, it’s undercapitalised, it’s very fragmented, and it’s not growing.

According to data by the National Bureau of Statistics (NBS), the insurance industry reported 4.48 percent growth in Q2 2019; the highest in a year. What do you think drove the expansion? So what is happening in the insurance sector as a whole is that in the last 10 years, in real terms, you have had no growth; that is from 2008 to 2018. That is real data that is similar to NBS data because their data is inflation-adjusted. So what you saw in the insurance sector is a very sharp decline at the time the economy was in recession in 2016. But what you could do is that you can take the data from 2016 and compare it to that of 2019 and you will say oh, the sector is growing. But actually, it is actually going back to what it was in 2015 before the recession. The National Insurance Commission (NAICOM) plans to include the informal-sector operators that are not yet included in the insurance scheme through the use of micro products. What’s your take on that? If you go into the formal sector, you are selling policies to companies, which traditionally has been way easier than selling it to individuals and the problem with selling to companies is that it is too easy; you get the numbers too easily. So, if you look at the group life policies between 2008 and 2015, they grew fantastically but that is mainly group life but at the same time, the premiums on group life have been declining. In other words, that big surge in group life premium was actually at lower premium rates. So you take much more risk for less money. So, that is why the profitability of life began to get worse; because they were not charging enough with respect to risks. The regulator had to come in in early 2018 and said we are going to have to raise the minimum amount that you charge for group life insurance, otherwise you guys are going to have a burst. So when it comes to selling group life products to individuals

Guy Czartoryski

your prices are a lot better than selling group life or group insurance to companies because what is going to happen is that when you go to offices you will hear something like oh, another insurance company was here earlier, they charged much lower; you have to cut your price because you are coming to a group. Groups have more bargaining power than individuals, so if you

“

can distribute to individuals you have a lot better chance of pricing in your favour than distributing at the group level. So with microinsurance it is kind of interesting because you can go direct to the consumer. What are the opportunities for the industry post recapitalisation? So if capital in the industry

The big problem has been too many insurance companies and it is difficult to create trust when you have so many insurance companies and it is really difficult to have a common standard among the many companies www.businessday.ng

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now is N300 billion and you raise that to N400 billion, you have just diluted your shareholders’ return. so you have to use that money to really expand and from the work we have done we have seen that the profit comes with scale. So you have to scale up. Also, if you raise capital, you would want a return on capital; you don’t do it just to comply. So there has to be a push back; you have to figure out how to make more money out of the capital. So obviously there is going to be some market share gain and some will go out of the business but that will be quite small. For the opportunities, I think some will create a viable bank insurance models that actually work, which is a huge opportunity, and if you are distributing through a large bank, then you can do phenomenally well. So if you can get your bank to partner and sell, whether they can sell or not is a big question. Then you can do exceptionally well, and I see that technology will play an A-part in that. The other thing would be: can you create a happier regulatory environment than the one you have now? So can you then have more cooperation, broader bank cooperation and can you involve telcos? So from our findings at Coronation Research, if there is a happier regulatory environment which will involve Telco regulator- NCC, NAICOM and the CBN, then I think things will take off. And I think you do need that regulatory environment. If you think about it, let’s say you don’t have a successful or happy resolution of the regulatory issues between the three main regulators, then you will be left with bank insurance as a way of doing it. The truth is about six or seven big banks and you would have to partner with the biggest bank. Now FBN is already taken because First Bank is already taken with FBN Life and so you will go to the next bank. But hold on, Zenith is already taken by Prudential, then you will go to the next bank. If you only have bank insurance as the only medium to enhance your distribution, you will only have certain number of banks left. Nigeria has one of the lowest insurance penetration ratios compared to its peers. What @Businessdayng

do you think has been the challenge in including more Nigerians into the scheme? I think the real problem is too many insurance companies, and the fact that someone will say I insure with a certain insurance company, you probably have never heard of. And then they can later say, ‘this particular insurer isn’t good and so I don’t like insurance’. But that could have been a really small insurer. So, the big problem has been too many insurance companies and it is difficult to create trust when you have so many insurance companies and it is really difficult to have a common standard among the many companies. In the future when they say we are going to have around 25 players and you are going to have six or seven big foreigners and six or seven Nigerians, then you are looking at around 14 to 15 major insurance companies. That will be much easier to say ok, these are our standards; these are underwriting standards, these are payment standards because you can then compare it. It is impossible to compare service standards among 59 companies. Agusto & Co projected that Nigeria’s insurance industry will expand at a slow pace of 10% in 2019 compared to 12% in 2018. What is your short-term projection for the industry? What is happening this year is the focus on 2020. There will be continued growth this year but it will be partly form the rebound. If you are running an insurance company now, the real focus is how do I get everything in order for 2020? How am I going to be one of the survivours? And that is what they are thinking about, because the next 10 years could be very exciting, and so if you are saying later that we actually gave up in 2019, then it’s going to be a pity. So going into the future, post recapitalisation, I think what will happen is that you will be able to create common standards for the industry. It will become easier for customers to compare between the companies and I think there will be better dialogue with the regulator, because I think the regulator now is probably as concerned with the very weak insurance companies as it is with the overall shape of the industry. This is why I think it is a fantastic thing they are doing in the industry.

Monday 09 September 2019

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 06 September 2019

Top Gainers/Losers as at Friday 06 September 2019 LOSERS

GAINERS

Closing

Change

NESTLE

N1250

N1205

-45

0.65

DANGCEM

N157.7

N155.7

-2

N6.05

0.55

GLAXOSMITH

N7.9

N7.15

-0.75

VOLUME (Numbers)

N6.45

N6.9

0.45

ETI

N7.7

N7.15

-0.55

VALUE (N billion)

N5.8

N6.2

0.4

N15.05

N14.5

-0.55

Opening

Closing

Change

DANGFLOUR

N20

N21

ZENITHBANK

N17.35

N18

UACN

N5.5

ACCESS CUSTODIAN

Company

ASI (Points)

Opening

Company

DEALS (Numbers)

MARKET CAP (N Trn)

27,146.57 3,192.00 311,260,175.00 6.435

Global market indicators FTSE 100 Index 7,282.34GBP +11.17+0.15%

Deutsche Boerse AG German Stock Index DAX 12,191.73EUR +64.95+0.54%

S&P 500 Index 2,979.43USD +3.43+0.12%

Nikkei 225 21,199.57JPY +113.63+0.54%

Generic 1st ‘DM’ Future 26,808.00USD +107.00+0.40%

Shanghai Stock Exchange Composite Index 2,999.60CNY +13.74+0.46%

13.206

Stocks’ new lows offer re-entry opportunity for bargain hunters Stories by Iheanyi Nwachukwu

igerian stock market’s recent decline has further created an opportunity for bargain hunters to reposition in most of the value counters. The value of listed stocks on the Nigerian Stock Exchange (NSE) decreased by approximately N185billion in the trading week ended September 6, 2019. Considering the review week’s loss, most value stocks listed on the Bourse now trade at their record lows, making them attractive to value investors for reconsideration. Despite the current bearish trend in the market, FSDH Research analysts still see opportunities in the equity market. They see prospects in stocks that have history of good performance and good dividend payment. While noting that the short-to-medium term outlook of these stocks is good, FSDH Research urged investors should to position in them as “their share prices have recently dropped significantly”. Amid negative market breadth and waning activity the NSE All Share Index (ASI) extended its bearish

trend to the last trading session of the week. This led to a negative week-on-week (WoW) performance of -1.38percent and year-todate (YtD) negative return of -13.63percent. “Valuations and technical analysis show that price levels remain attractive for medium and long term investors”, said Vetiva research analysts in their September 5 note. The analysts noted that with profit-taking activities dragging the market in the past three sessions, as well as the weak sentiment which dominated trading in the review week, “investors appear less optimistic on the performance of the Bourse.” “Therefore we foresee further negative trading at the start of next week, barring any market catalyst to spur positive activity,” they added in their September 6 note. The value of listed stocks decreased to N13.206trillion from a preceding week high of N13.391trillion while the All Share Index closed lower at 27,146.57 points against 27,525.81 points as at August 30. Lagos-based Afrinvest Research analysts had in their September 2 note said they expect the Index to continue to wander within the negative territory.

“But why are we pessimistic? All indicators strongly suggest there are no possible triggers to herald a rebound in the near term”, the analysts said. Twenty-seven (27) equities appreciated in price during the review week, higher than 25 equities in the preceding week. Thirtyfour (34) equities depreciated in price, lower than 35 equities in the preceding week, while 105 equities remained unchanged, lower than 106 equities recorded in the preceding week. The market recorded a total turnover of 1.101 billion shares worth N17.082 billion in 15,431 deals in contrast to a total of 713.141 million shares valued at N13.295 billion that exchanged hands the preceding week in 16,237 deals. The Financial Services industry (measured by volume) led the activity chart with 752.440 million shares valued at N9.900 billion traded in 8,519 deals; thus contributing 68.34percent and 57.96percent to the total equity turnover volume and value respectively. The Conglomerates industry followed with 93.204 million shares worth N239.250 million in 883 deals; and Construction/ Real Estate Industry with a turnover of 65.808 million shares worth N66.730 million in 100 deals.

L-R: Chidi Ajaere, chief executive officer, God is Good Motors; Tara Fela-Durotoye, CEO, Tara House of Fashion; Dan Agbor, senior partner, Udo-Udoma & Bello Osagie; Kayode Falowo, president, Nigerian-British Chambers of Commerce; Atedo Peterside, founder & chairman ANAP Business Jets; Bisi Adeyemi, managing director, DCSL Corporate Services Limited, and Bimbo Olashore, chairman, Olashore International School, during Nigerian British Chambers of Commerce Breakfast Meeting on Succession Planning in Lagos

Access Bank’s first post-merger H1 PBT hits N74.1bn …Declares 25kobo interim dividend

ccess Bank Plc’s audited half-year (H1) results released to the Nigerian Stock Exchange (NSE) on Thursday September 5 showed the Group recorded gross earnings of N324.4 billion, up 28percent from N253billion in the corresponding period of 2018. The growth in gross earnings was driven by 46percent increase in interest income on the back of continued growth in the Bank’s core business and 22percent non-interest income underlined by strong recoveries. The Bank delivered a Profit before Tax (PBT) of N74.1 billion, a 62percent increase from N45.8 billion recorded during the same period in 2018. Profit after Tax (PAT) grew by a similar margin from N39.6 billion in 2018 to N63.01 billion in H1 2019. Similarly, the Bank posted 34percent growth in Operating Income to N202.3 billion from N151.4 billion in 2018.

Total Asset was up 31percent at N6.48 trillion as at June 2019 in comparison to N4.95 trillion in December 2018. Access Bank’s Capital Adequacy Ratio (CAR) remained solid at 20.8percent, well above the regulatory minimum. Commenting on the result, Group Managing Director/ CEO, Herbert Wigwe said, “Access Bank’s performance in the first half of the year reflects a sustainable business model coupled with effective execution as we make solid gains towards the achievement of our strategic goals” Following the release of the half year results, the Bank also declared an interim dividend of 25kobo to its shareholders. “Our focus on retail gained momentum during the period, as continued investments in our channels platform resulted in a 29percent contribution to gross fee and commission income, up 92percent from the corresponding period in 2018. “The strong retail contribution demonstrates the ef-

fectiveness of our continued drive around low-cost deposits, on the back of an innovative digital platform. Asset quality improved as guided, to 6.4percent on the bank of a robust risk management approach. This is expected to trend into the future as we strive to hit and surpass the standard we had built in the industry prior to the merger. Similarly, liquidity ratio improved year on year to 49.7percent, reflecting deliberate steps to optimise our balance sheet in order to ensure the group’s liquidity position remains robust.” Wigwe added. “Going into the second half of the year, our focus is on consolidating momentum and driving access to financial inclusion through our various agency initiatives. Additionally, we will remain disciplined in our efforts to deliver enhanced shareholder value, as we continue to realise the synergies from our newly expanded franchise” he noted.

NASD OTC: Unlisted stocks’ value down by N2.47bn

T L – R: Taiwo Owokalade, vice president, Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN); Oscar N. Onyema, OON, The Nigerian Stock Exchange (NSE); Bode Ayeku, president/chairman of Council, ICSAN; Hakeem Ogunniran, past president, ICSAN; Nosike Agokei, past president, ICSAN; Abiola Laseinde, council member, ICSAN and Jude Chiemeka, divisional head, Trading Business, NSE during a courtesy visit to the Exchange to discuss on collaborative opportunities with the NSE in Lagos. www.businessday.ng

he value of unlisted equities trading on NASD OTC Plc declined by N2.47billion in the trading week ended September 6, 2019. The OTC market’s summary for the review week shows its capitalisation decreased to N515.11billion from preceding week’s high of N517.58billion.

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This represents a decline of 0.48percent in Capitalisation. Also the NASD Security Index (NSI) for the week ended September 6 recorded a decrease from 720.42 points to 716.98 points. The volume of stocks traded year-to-date (YtD) on this Over- The-Counter market for unlisted stocks stood at 2.58billion. Also, the number @Businessdayng

of trades YtD stood at 2,148; while the value traded YtD was N8.11 billion. Friesland Campina Wamco Nigeria Plc recorded the highest weekly decline, from N138.22 to N140.75, down by 1.80percent. In terms of value and volume of stocks traded, Friesland Campina Wamco Nigeria Plc also occupied the topmost position.

Monday 09 September 2019

BUSINESS DAY

MARKETS INTELLIGENCE

Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Snap Shot of Banks’ Half Year Loans and advances BALA AUGIE

otal loans and advances extended by Nigeria’s largest banks hit N14.97 trillion in the second quarter, a 10 percent increase from N13.61 trillion recorded the previous year as the Central Bank of Nigeria (CBN) has put in measures to ensure that lenders start to lend to the real sector of the economy. The chart below shows the fastest expansion in loans was in 2016, when loans and advances were up 39.05 percent to N14.62 trillion, a !!period before banks started leveraging on the high yield environment. In 2017 financial year, loans were up by 1.75 percent to N14.51 trillion, when banks made money from short term government securities. In order to make banks lend to the real sector of the economy, the central bank has said that all Deposit Money Banks are to maintain a minimum Loan to Deposit ratio (LDR) of 60.0 percent by September 2019, which will be subject to

quarterly review. Banks are to assign a weight of 150 percent to loans to SMEs, retail, mortgage and consumer lending, when computing the LDRs, in a bid to encourage lending to these sectors. The CBN will provide a framework for the classification of businesses that fall in the category of these sectors. The industry average LDR of banks dropped to 61.15 percent in June 2019 from 82.25 percent the previous year. In our LDR computation, we considered the loans and deposits at the bank level for the Nigerian operations, excluding the impact of the 150% SME/retail weighting on the LDR. Further analysis of the financial statements of companies show Fidelity Bank is aggressive about lending at its LDR of 105.18 percenthigher than the 60 percent threshold- increased from 98.17 percent. Access Bank, Guaranty Trust Bank (GTBank), Stanbic IBTC Holdings, United Bank for Africa (UBA), Union Bank of Nigeria (UBA), and Wema Bank, had LDR of 57.53 percent, 50.0 percent, 57.25 percent, 48.25 percent, 52.50 percent, and

relative to traditional higher quality corporate loans,” said analysts at Chapel Hill Denham Limited. “Thus, we could see higher cost of risk and NPL ratios on the back of the new measures amid tighter risk framework by the banks. Considering the CBN’s intended quarterly review of these measures, we expect stronger pressure on banks if the LDR is raised to 80 percent upwards subsequently,” they summed.

… SISB, Rencap and CSL maintains top broker positions

he lack of appetite for Nigerian equities pushed half a trillion-naira worth of investible funds away from the Nigerian market in one year. The value of trades completed from the beginning of the year to August, on the Nigerian Stock Exchange, declined by N560.10 billion from its position as at August 2018. Analysis of Member Performance on the Nigerian Stock Exchange puts the total value of trades completed by stockbrokers since the beginning of the year at N1.32

1.94%

$13.8 billion

Value of trades on NSE declines by N560bn in one year trillion. This pales in comparison to 2018’s YTD performance as at August which stood at N1.88 trillion. The 29.81 percent decline reiterates the fears of both foreign and local investors in allocating resources to the local bourse. The rally at the beginning of the 2018 calendar year was an attractive incentive for investors who looked to ride the wave of returns. However, on election fears and political instability, the market turned bearish and investors pulled money out of the Nigerian market. Year-to-date the market is down 13.63 percent and investors don’t seem to be looking at the local

SHORT TAKES Nigeria’s economy grew more slowly in the second quarter of 2019 than it did in the first quarter. The Gross Domestic Product growth rate fell to 1.94 per cent in Q2-19 from 2.10 per cent in Q1-19. Aggregate GDP stood at N34.94 trillion in nominal terms in Q2-19, an increase of 13.83 per cent over the performance in the second quarter of 2018 and 9.8 per cent over the preceding quarter.

20.92 percent lower than the 60 percent threshold. Analysts say the new rules will increase Banks loan book but it could result in rising Non Performing Loans (NPLs) because lenders will forced to extend credit to risky sectors. “We expect these measures to negatively impact banks’ asset quality as loans to the target sectors will likely be of lower asset quality

IFEANYI JOHN

P.E

bourse for cherry picking even with the declining interest environment in developed economies. The top three brokers in terms of value remained the same for the period in view. Stanbic IBTC Stockbrokers maintained the top spot as the broker with the highest value of trades with N252.30 billion representing 19.13 percent of market value. Rencap Securities Limited followed suit as it did in 2018 with N160.09 billion representing 12.14 percent and CSL Stockbrokers Limited completed the top three list from last year with N89.97 billion worth of trades representing 6.82 percent of total value.

FG Hermes Nig Limited (N86.76 billion), Apt Securities and Funds (N72.57 billion), Tellimer Capital Limited (N70.41 billion), Coronation Securities Limited (N56.50 billion), Chapel Hill Denham Securities Ltd (N55.38 billion), FBN Quest Securities Limited (N44.59 billion) and Cardinalstone Securities Limited (N40.76 billion) complete the list of stockbrokers by value of trades completed. On the stockbroking volumes end, Qualinvest Capital Limited led the top brokers with 10.71 million trades followed by SISB (10.38 million) and Greenwich Trust Limited (7.15 million).

Emerging markets (EMs) assets suffered their worst outflows in 34 months over the re-escalation of trade dispute between US and China combined with heightened fears of global economic slowdown. Investors pulled out $13.8 billion from EM securities in August compared with $24.3 billion that made way to the said markets in the preceding month. August flows are the lowest since November 2016.

N1 trillion The Central Bank of Nigeria plans to sell N1trillion worth of Treasury bills in the fourth quarter of the year across three instruments. The CBN, in its issue programme for the fourth programme released on Wednesday, said it would offer 91-day bills worth N90.62bn; 182-day bills worth N90.18bn and 364-day bills worth N821.84bn from September to December.

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 September 2019

BUSINESS DAY

MARKETS INTELLIGENCE

Insurers need additional capital of N291bn to cover shortfalls Ifeanyi John

ased on estimates by Chapel Hill Denham Limited, existing companies with capital shortfalls will require additional capital of over N291 billion ($810 million), to meet regulator’s new minimum capital requirements. The investment house used the latest financial statement of 41 out of 51 insurance and reinsurance companies, to calculate the shortfall. A shortfall is the difference between the new minimum capital and insurer’s total capital, which comprise of shareholders’ fund, share capital and qualifying capital. Analysts at Chapel Hill Denham however note that using the shareholders’ funds, the short fall is lower at N209 billion ($577 million), which is similar to its estimate of over N210 billion in capital injection if all insurers were to fall under tier 1 in the cancelled tier based approach. They add that the shortfall is N247 billion, using only share capital and premium. The report shows that total

industry short falls for composite business stood at N150.66 billion using the qualifying capital approach, N108.15 billion under the shareholders’ fund, and N118.15 billion, using the share capital. For General Insurance, short fall is N95.48 billion using the qualifying capital approach, N68.19 billion using the shareholders funds’ fund, approach, and N89.31 billion, using the share capital approach. According to the report, Life Insurance business has a capital short fall of N39.16 billion using the qualifying capital approach, N30.65 billion under the shareholders’ funds approach, and N28.92 billion under the share capital approach. According to the National In-

surance Commission (NAICOM), qualifying capital is the sum of share capital, share premium and retained earnings, while the share capital is the amount contributed by the owners of the business. In the according parlance, the shareholders’ funds is the sum of the share capital, share premium, retained earnings and other reserves. Analysts at Chapel Hill noted that some of the well capitalized insurers have the capacity to acquire smaller players with short falls of N3 billion and they added that insurers that are unable to raise capital could opt for recapitalization. “We believe it will be difficult

NSE ASI historical returns in September dampens monthly outlook Ifeanyi john

he return expectation of the Nigerian Stock Exchange for the month of September is gloomy as history foretells a high percent of negative monthon-month returns in the first ember month of the year. BusinessDay analysis of the Nigerian Stock Exchange All Share index historical data show that in the last two decades, August and September recorded the highest number of negative month-on-month declines. In 20 years, the month-on-month returns in September had closed positive a total number of 6 times making it the second worst performing month for the Nigerian stock index. August was the only month with a higher number of negative returns than September, recording 15 years of negative monthly returns in 20 years.

On the flip side, the Santa rally in December proved to be consistent across time as there is an 80 percent chance that the monthly return of the All Share Index in December is positive. May was the second-best performing month in 2 decades as the month posted positive returns 15 out 20 times. In a note to Clients, Lagos-based research firm, EUA Intelligence advised “investors to take advantage of dip in stock prices in the next month or two to properly position for the Santa rally. There is also a historical price high in the month of May typically based on the “Sell in May and go away” investment strategy.” Sell in May and go away is an investment strategy for stocks based on a theory that the period from November to April inclusive has significantly stronger stock market growth on average than the other months. Obinna Uzoma, Chief Economist at EUA Intelligence explained that

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“there is a likelihood that a market rally might start in December. The Santa rally has been consistent over the years and upbeat expectation of full year earnings result of banks, for one, will lead to equity positions in the big banks. “ “The Sell in May and go away investment strategy also suggests that inflow from active portfolio managers will increase in November to properly position for capital gains and dividend pay-outs in 2020.” Uzoma added. Since the beginning of the year, February (+3.81%) and May (+6.55%) have been the only months to have recorded positive monthly returns. January (-2.78%), March (-2.14%), April (-6.06%), June (-3.55%), July (-7.50%) and August (-0.69%) have all ended in negative territory. Yearto-Date, the Nigerian Stock Exchange All Share Index has dropped over 4,283.93 index points representing a 13.62 percent decline since January.

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for listed insurers with a shortfall of above N5 billion to raise additional capital from the current weak capital market,” said analysts at Chapel Hill Denham Ltd. A further breakdown by the investment house reveals companies that meet the minimum capital requirement by the National Insurance Commission (NAICOM). According to the report, in the Composite Business, only Leadway Assurance met the requirement with a surplus, but it recorded a deficit using the share capital approach. For life business, First Bank Nigeria (FBN) Insurance, Prudential Zenith Life Assurance, and Custodian Life Assurance, met the

requirements with surpluses. On the other hand, only FBN Insurance crossed the line, as it recorded a surplus of N2.72 billion, using the qualifying capital approach. Drilling down the report shows that for General Insurance business, Zenith General Insurance, Custodian and Allied, Wapic General Insurance, NEM, and Linkage meet the requirement. But using the qualifying capital approach shrank the list as only Zenith General Insurance, Custodian and Allied, and Wapic General crossed the line. It is interesting to note that only Wapic General meets the requirement using the share capital approach. NAICOM, worried about the weak financial position of most insurers, increased the capital bases of companies so as to enable them take on more risk and contribute more to the economy. In the new capital base, life insurance companies will now have a minim paid-up capital of N8bn from its previous N2bn, General Insurance companies will now have to recapitalize to N10bn from N3bn, while Composite Insurance companies will now need N18bn to underwrite businesses from the previous N5bn minimum capital.

WeWork considers pricing IPO as low as $20bn New estimate is less than half of office rental group’s last funding round James Fontanella-Khan and Andrew Edgecliffe-Johnson in New York, and Judith Evans and Owen Walker in London, FT

eWork expects to be valued at about $20bn in its forthcoming IPO, less than half the $47bn figure reached in its last round of funding from Japan’s SoftBank, according to people briefed on the listing process. The sharp fall comes after prospective investors raised doubts about the ability of the lossmaking shared office provider to become profitable anytime soon, according to the people briefed on the IPO. Wall Street has also voiced concern about several breaches of corporate governance norms. “WeWork is finally coming to terms with reality,” said one person working with the company. “It’s just not worth $50bn or $60bn, as they would like to be valued.” The lower valuation would be a big blow to SoftBank, the world’s largest technology investor and WeWork’s biggest backer, which invested money at a $47bn valuation at the start of this year. WeWork is expected to begin a roadshow as soon as next week ahead of the IPO, which would rank as one of the year’s biggest. The company hopes to raise more than $3bn in the offering, plus a further $6bn through a loan, $2bn of which is contingent @Businessdayng

on the IPO. Two sources briefed on the IPO plans said WeWork was looking at an IPO valuation of about $20bn. However, a person close to the company said it still hoped the valuation could finish in the $25bn to $30bn range. The banks working on WeWork’s IPO, which include JPMorgan Chase and Goldman Sachs, are concerned about overvaluing the office rental company when it lists, as was the case for Uber, which has traded down heavily since its flotation earlier this year. The lower valuation will leave cofounder and chief executive Adam Neumann stretching to reach targets attached to part of his incentive package, which includes several tranches of profit interests that would vest if the company attained market capitalisations above $50bn, $72bn or $90bn. Analysts have noted the gulf between WeWork’s valuation and that of its largest rival, London-listed IWG, which has a market capitalisation of £3.7bn despite having more sites than WeWork and a similar number of workstations globally. WeWork earlier this week made two concessions to public market investors worried about corporate governance. It added a woman — the academic and former Uber executive Frances Frei — to what was originally an all-male board, and it reversed a highly criticised $5.9m payment it had made to Mr Neumann’s investment vehicle for the rights to use the trademarked word “we”.

Monday 09 September 2019

BUSINESS DAY

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Monday 09 September 2019

BUSINESS DAY

news Sanwo-Olu and the Greater Lagos... Continued from page 2

rice mill is being built in Imota – a 22-hectare facility, which has the capacity to cater for 25 percent of our national rice needs. Some 120 patrol vehicles and 35 motorbikes have been given to security agents to enhance their operations, aiding their patrol system and boosting their response time in case of an emergency. The battle for a cleaner and healthier environment is on. The heaps of refuse that turned the highways into a vast eyesore have largely disappeared. Millions of bags that will help residents in sorting their wastes have been distributed, even as there are plans to expand the Olusosun dumpsite to 42 acres for more waste and a faster trucks turnaround time. Many roads have been rehabilitated. Workers are back on the Lagos-Badagry Expressway, the Pen Cinema Bridge and Isawo Road in Ikorodu. What lies ahead of the Sanwo-Olu administration? Exciting times are on the way. There are efforts to improve transportation by harmonising all the areas of the sector for better performance. Water transportation will be enhanced with ferry services getting a facelift. The rail lines under construction are, once again, receiving attention. More teachers are to be recruited to boost primary and secondary education, even as technical education will be strengthened to equip our youths for the fast-evolving technological age that has caught up with us all. Tourism, with its huge potentialities, will come alive to boost internal revenue and showcase our essence to the world. Security will go beyond the routine as technology will be deployed in the fight against crime. Laws will be enforced for a total reorientation of the people. How will the Greater Lagos dream be achieved? Leadership, in Sanwo-Olu’s view, remains a key factor. Besides, team work is also important. To drive home

his point, the governor at the retreat aforementioned, used a sports imagery. He is reputed to be a soccer enthusiast; an Arsenal fan. Sanwo-Olu spoke of being relevant, drawing his example from Jamaican sprinter Merlene Ottey, who remains so relevant even at 59. There must also be resilience, an attribute that has seen tennis star Djokovis staying on top for so long. For appropriate resourcing, the governor chose Man City, the Premier League team, which would not take on a player unless there is need for him. Besides, the team enjoys good funding and would not tolerate a bad manager. Many were fired until the team stabilized. Barca, the Spanish League frontliners, Sanwo-Olu believes, symbolises value for money, with good returns for investors. A team living in the past? That is Arsenal – in the governor’s view. Its fans see Arsenal as prudent; it would not shell out cash on new players like the others and it is a good example of how to be solvent. Trophies, it seems, are not the team’s priority but stability. Today’s achievement is good, but not enough to make room for complacency as there are always more hurdles to scale. ‘Many have spoken about Team Sanwo-Olu - a mixture of professionals and politicians, including women who are knowledgeable about their areas. For the governor, the 100 days ceremonies are no mere revelries on what has been done. No. They are like a springboard to propel the administration into the future – a future in which the Greater Lagos dream will become a reality. The challenges are huge, no doubt, but Sanwo-Olu sees it all as a marathon and not a 100 metres dash for which he and his Deputy Dr. Kadiri Obafemi Hamzat are prepared. Gbenga Omotoso is the Hon. Commissioner for Information & Strategy Lagos State

Big banks feel pain as investors shrug off earnings... Continued from page 1

continue to under-perform the broad market. Banks in Africa’s largest ec onomy are still able to remain profitable amid a tough and unpredictable environment, with the top five firms raking in N339.50 billion in quarterly earnings for the first time. However, the analysis, based on the half year results of lenders show that there could have been slow growth at the bottom line, save for the strong contribution of Access Bank, a company that merged

its operations with Diamond Bank. A five year trend analysis of the five largest banks – Zenith Bank, FirstBank Holdings, Guaranty Trust Bank, United Bank for Africa (UBA), and Access Bank- showed that cumulative after tax profits increased by 15.13 percent to N339.50 billion in the second quarter of 2019, compared with N294.25 billion in 2018, N270.28 billion in 2017, N203.86 billion in 2016, and N200.53 billion in 2015. Meanwhile Zenith Bank stock has returned -21.91 perwww.businessday.ng

R-L: Oluremi Hamzat, wife of the deputy governor, Lagos State; Ibijoke Sanwo-Olu, wife of Lagos State governor; Governor Babajide Sanwo-Olu; Mudashiru Obasa, speaker, Lagos State House of Assembly, and Kaoli Olusanya, representative of the APC Lagos chairman, during a ceremony to mark the 100 days in office of the Sanwo-Olu administration at De Blue Roof LTV, Agidingbi, Ikeja on Friday

Curious case of Nigeria’s rising debt but falling... Continued from page 1

The most recent data showed that the FG’s debt stock rose by N514 billion in the first quarter, which is in line with the 2019 full year projection. Economists suggest countries should borrow money to invest in infrastructure and other economy-stimulating activities that results in a multiplier effect. In Nigeria’s case, most of the N10 trillion borrowed in the last four years has been used to pay salaries and run an overbloated civil service. “Rising debt has failed to impact economic growth because the government is borrowing to fund recurrent expenditure while low revenues mean there isn’t much left to invest in capital projects when public salaries have been paid,” said Taiwo Oyedele, a partner and head of tax at Price Waterhouse Coopers (PWC). “The way out is through reforms that create an enabling environment for the private sector to invest in the economy and stimulate growth,” Oyedele added. Recurrent expenditure has snatched over 70 percent of the Federal government’s total spending for four years now.

Same as was the case even with the previous administration. Nigeria should be channelling more cash into infrastructure and human capital, according to the World Bank, which says the economy is negatively affected by a yawning infrastructure deficit and deteriorating human capital. Most will agree. The country has an infrastructure deficit that requires $100 billion annually for the next 30 years, according to the African Development Bank. The country’s education and health systems are collapsing. One of every five outof-school children in the world are in Nigeria, according to the United Nations International Children’s Emergency Fund (UNICEF). To highlight the state of Nigerian health care relative to peer countries, the average Nigerian’s life expectancy of 54 years is dwarfed by South Africa and Ghana’s 63 years each. The average Kenyan (67 years) is also expected to live longer than the average Nigerian by a gap of 13 years, while the average Egyptian is expected to live for 71 years, World Bank data shows. Health and education have accounted for less than 10 percent of the government budget in the last decade. “Time is fast running out for the government to wake up

and smell the coffee,” a senior banker told BusinessDay in condition of anonymity, as he isn’t authorized to speak on behalf of his company. “The danger in borrowing to fund unproductive needs is that it eats into public revenues that could have been better utilized and is a heavy burden for the future,” the person said. While previous administrations lacked the political will to spend more on these critical areas, the current government not only lacks the political will, it also lacks the revenues. Oil revenues have slumped with the global price of oil. From as high as $110 in 2014, oil is closer to $60 currently, nearly half of 2014’s price. That has capped government spending and led it to borrow. The worry now is that most of that debt, in their huge sums, may not have been channelled rightly, as exposed by the trend in GDP growth. Instead it is being gulped by recurrent expenditure and more recently, debt servicing. The government’s debt to revenue ratio topped 60 percent last year, the highest in eight years, but the finance minister, Zainab Ahmed, said Nigeria has a revenue problem, not a debt problem. Critics argue that the country has both problems. A revenue to GDP ratio of 6

cent year to date, FirstBank Holdings -45.28 percent, Guaranty Trust Bank -24.09 percent, UBA -20.78 percent and Access Bank +1.47 percent. The benchmark stock market NSE all share index returned -13.63 percent for the period, while the banking index has returned -19.33 percent. In 2017, banks capitalized on a high yield environment as they parked funds in risk free government securities, a strategy that added impetus to net interest margin. That year, government embarked on aggressive sale of treasury bills with a view to curbing inflation and funding a budget

deficit. Yields on Treasury Bills hovered between 18 percent and 22 percent. However, banks are feeling the pains of a drop in yields since the start of 2018, signalling the end of free money and a harsh regulatory environment casting a pall on investors view on future earnings. Today, yields are between 13.12 percent and 14.12 percent. “The current results may not be an apples to apples comparison of the results because the Access Bank of last year is different from this year,” said Ayodele Akinwunmi, analyst at FSDH Merchant Bank Limited. “The outlook for next year

may not be as good as this year as we have seen we have seen that interest rates have gone down. Also, we can also see where the external reserve is. The economic fundamentals aren’t encouraging” said Akinwumi. The Nigerian economy has been growing sluggishly since the country exited a recession, as inflationary pressure, devaluation of the currency, and hike in the price of fuel continues to squeeze consumers. High overhead costs, decrepit infrastructure, and cost of doing business makes it difficult for companies to honour obligations to banks. The country’s gross do-

by the 2019 budget debt predication, the figure will rise some N500 billion every quarter this year to reach N26 trillion by year end.

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percent ranks Nigeria as one of the lowest continentally and globally. Analysts say Nigeria can tap private capital to address most of its problems. With the right amount of capital flow into critical infrastructure, the government can free up its scarce revenues for social investments. The government would also need to plug revenue holes by ending the N1 trillion it pays to subsidize petrol. The numbers show that the petrol subsidy isn’t as beneficial to the poor, most of whom do not own cars or petrol-powered generators. Eliminating the subsidy and liberalizing the downstream petroleum sector will encourage private investment and boost economic growth. The telecommunication sector is a shining example of what liberalization can do for the economy. The sector was the best performer in Q2 with growth of 11 percent. It contributed 63 percent to total GDP growth. Another weak link between government spending and impact showed up in the Q2 Agriculture GDP. Agriculture grew by 1.8 percent for the period compared with 3.2 period recorded in Q1. However the sector’s performance should be significantly better given the several government interventions channelled towards agriculture.

mestic product expanded 1.94 percent in the three months through June from a year earlier, according to a recent data from National Bureau of Statistics (NBS). That compares with a revised expansion of 2.1 percent year on year and 2.38 percent in the first quarter (Q1) and the fourth quarter (Q4) of 2018. Analysts say the decision of the central bank mandating banks to increase their loans to deposit ratio to 60 percent in order to spur lending to the real sector of the economy could balloon banks’ nonperforming Loans (NPLs).

•Continues online at www.businessday.ng

Monday 09 September 2019

BUSINESS DAY

abujacitybusiness Comprehensive coverage of Nation’s capital

FCTA partners Water Resources Ministry to end open defecation in FCT by 2025 James Kwen, Abuja

he Federal Capital Territory Administration (FCTA) ha indicated interest to partner effectively with the Federal Ministry of Water Resources to end open defecation in the nation’s capital by 2025. Muhammad Bello, FCT Minister gave this indication when he received a delegation from the Ministry of Water Resources led by its Minister, Sulaiman

Adamu on an advocacy visit to end open defecation in the country. The Minister who assured his Water Resources counterpart that FCTA will give all the necessary support to ensure that the goal of completely eradicating open defecation in the country is achieved, said already FCTA was partnering with the private sector for solar powered public toilets in the FCT. Bello said he has directed the Minister of State

of the FCT, Ramatu TijjaniAliyu to coordinate activities for the success of the project in the FCT and ensure that FCT becomes a model worthy of emulation. Bello informed that the FCTA has six major water tanks under construction to aid in the distribution of water to newly opened districts in the territory, explaining that water was not a problem in the FCT as the Lower Usuma Dam was providing adequate water

to service the Capital city. Earlier, the Minister of Water Resources said that the visit was to kickstart the “Clean Nigeria: Use the Toilet” campaign aimed at making Nigeria opendefecation-free by 2025. He stressed the need to mobilize for an increase in sanitation budget line to ensure that the Water SushoSanitation and Hygiene (WASH) Action Plan of the Federal Government, to improve the sector, was achieved.

L-R: Oluwakayode Amund, vice chancellor, Elizade University; James Momoh, chairman, Nigerian Electricity Regulatory Commission (NERC); Funke Osibodu, managing director/CEO, BEDC Electricity Plc; Basil Ganagana, commissioner for energy, Delta State, and Victor osibodu, chairman, BEDC Board of Directors, at the graduation ceremony… Friday.

Institutionalization of rewards system in treasury promotes accountability, productivity in governance -AGF Cynthia Egboboh, Abuja

he Accountant-General of the Federation (AGF), Ahmed Idris on said institutionalization of the rewards and recognition system in the treasury remains a critical tool in ensuring accountability and productivity of officers in governance. Idris in a statement signed by Henshaw Ogubike, Deputy Director of Press, OAGF, stressed that reward inspires and encourage members of staff to exhibit high sense of

discipline and conduct. He said “I believe that the institutionalization of the Rewards and Recognition system in the Treasury will establish a well-motivated, disciplined, skilled and accountable officers leading to improved staff morale, efficient service delivery, improved productivity and ultimately good governance”. Idris who honoured the staff of the OAGF who has demonstrated strong commitment and dedication to their duties and responsibilities, urged all staff of the

Treasury to take full leverage of the novel opportunity geared towards attainment of visions and missions of the Treasury House and entrench the goals of good governance of his administration. Zainab Ahmed, Minister of Finance, represented by Permanent Secretary, of the Ministry, Mohammed IsaDutse said the award was the best incentive and motivational tools of appreciation of staff that have distinguished themselves in the discharge of their duties. Nnenna Akajemeli, the

National Coordinator of SERVICOM, stated that the Service Charter is a strategic document that communicates promises and commitments of services provided by an organization to its customers. The Nodal Officer of SERVICOM in the Office of the OAGF, Irene Ijoma reiterated that the implementation of the reward and recognition system in the Treasury House is expected to improve productivity as well as attract, nurture, develop and retain the best staff in the Treasury House.

NES decries non inclusion of economists in governance Godsgift Onyedinefu, Abuja

he Nigerian Economic Society (NES) has frowned at the non inclusion of economists in the president Muhammadu Buhari administration saying Nigeria cannot attain the economic development and growth it seeks without the active contribution of Nigerian ecomists. The NES president, Tamunopriye Agiobenebo

said Nigeria is driving an economy that doesn’t have economists in the economic management team or appointed in key agencies and ministries which according to him has been the case for many years. The president, represented by Sarah Anyamu, said, “ how do you move the country forward in terms of economic growth, this does not argur well for the country. We need to have an economist in the team to di-

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rect the affairs of the country in terms of economic growth and development. A ministry like planning is supposed to have an economist as the Minister.” Agiobenebo lamented that Nigeria is experiencing a high and disturbingly rising incidence of poverty which averaged about 77.6 per cent between 2010 and 2017, adding that burgeoning rate of unemployment all largely serve to corroborate the argument of an existence

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of a huge and significant disconnect between growth rate of GDP per capita and the quality of life indicators. He announced that NES is set to hold its 60th Annual Conference with the theme “Economic Policies And The Quality Of Life In Africa” from16th through 18th September with the broad objective of the to shed some new insights into the use of Quality of Life as indicators of socio-economic development. @Businessdayng

We will develop a blueprint to make Nasarawa more economically viable - Ajayi Kenyisola Ajayi, a Professor and Senior Advocate of Nigeria (SAN) is the Chairman of a 13-man Investment and Economic Advisory Council recently constituted by Governor Abdullahi Sule of Nasarawa State. In this interview with Solomon Attah, Ajayi said the Council will come up with a blueprint that will better the lives of the people and make the state more economic viable. Excerpts:

ust recently, you have been inaugurated as Chairman Nasarawa state Economy Advisory Council. How do you feel being the Chairman and what do you intend to deliver? I think it is a great privilege to be nominated by the Governor to chair Nasarawa economy council. It is a privilege because, as you can hear from my name I am not even from Nasarawa State, I was not born in Nasarawa State. And I am from far away Ogun state, I work in Lagos and Abuja. For the Governor to single me out and other members of the committee to foster the economy development of the state is a great privilege. As I mentioned earlier on, it shows that the Governor is one of those people that really live by the pledge, the national pledge of one country of diverse people. It is one nation that we all seek our common prosperity, peace and security. And we should be able to contribute our quota to any part of the federation to make sure we move forward. What the council wants to achieve is to let the world know that there is a place called Nasarawa. A state that is indeed one of the rich states in the country in terms of natural endowment. It gets the best cooking coal in the country, large deposit of barite which is highly needed minerals in the oil industry, they have salt, zinc, gold, limestone and so on and so forth. It has 2.7 million hectares of land. 1million hectares of the land is arable and is ready to be exploited. This tells that you this is a state of great potentials in terms of feeding the nation and in terms of export and in terms of natural resources, one of the greatest falls in the world is described as Victoria Falls. But the falls they have in Nasarawa State is even more spectacular and more beautiful than that of Victoria Falls, where no many Nigerians know this. You mentioned in your statement that you have not been here before in terms of situating your plans in consonant to the Nasarawa communities. How does that pose a challenge to you and other members of the Council? The challenge is what we put back to the Governor. Which is everything that does

and everything that we do must impact the people. Everything must be about the people. If we do anything that does not touch the lives of the people of Nasarawa State, it is totally meaningless. Take for instance, in terms of agriculture, grand vision is to go into commercial agriculture. But more importantly we should look at the rural farmers, the small scale farmers to see how we can improve their yield. What they are doing today, they get ten times what they have been getting. In mining there is a lot of artisanal mining. How can we organize all these people that are in these economic activities, but how can we work with them in a manner that will increase their own efficiency, increases employment, make the state more economic viable and make the people healthier, more prosperous and enjoy peaceful life. You quite made mention of exploitation of natural resources...? Well we must not forget that all the lands in the state belongs to the state government. The mineral below the land belongs to the government so there is no one that has a mining base that can escape dealing with the government. There are many ways in which government can begin to also get benefit from this natural resource. After all those that come to explore the resource will use the road constructed by the government, use electricity in the state, use water, and also buy food which is being produced in the state. So, there is relationship between these activities and the internally generated revenue. The state government will hope to use these resources to make the state a better business destination. And therefore, they will make proper regulations, not regulations that will tax people. The main focus of the government is how to ensure the life of the people of the state will be better. So the people in mining are creating job opportunities for the people, are they making life better for the people? What are they contributing to the state in terms of their social responsibility? These are some of the things that we hope to work with the government to achieve in the area of abundant natural resources in the state to benefit the state.

Monday 09 September 2019

BUSINESS DAY

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Monday 09 September 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper HENRY FOY IN MOSCOW

ussia goes to the polls on Sunday for local elections across the country that have been transformed from lowkey ballots into a lightning rod for rising public anger at president Vladimir Putin’s government. A flatlining economy, falling real incomes and rising taxes have dragged Mr Putin’s ratings down, while a move to prevent opposition politicians from appearing on the ballot in Moscow sparked the largest anti-government protests in the capital for seven years. The protests and the police crackdown in response have made the previously little watched local election a rallying point for disaffected citizens. They have also shone a spotlight on the Putin government’s waning popularity and the easing of its grip on Russia’s political landscape as voters grow restless in the president’s 20th year in power. While the Kremlin will be watching turnout and results in Moscow, some regional gubernatorial candidates backed by Mr Putin’s ruling United Russia party are also at risk of voter backlash. Fewer than half of Russians approve of the government’s work, according to recent polls, and the election results are likely to be viewed as an indicator of public attitudes towards the regime ahead of parliamentary elections in 2021 and increased chatter about the future of the presidency after 2024, when the constitution is set to stop

Russians vote in local elections amid anger at Kremlin Poll seen as lightning rod for rising discontent with Vladimir Putin’s government

Jeremy Corbyn held a conference call of opposition leaders to discuss a united response against Boris Johnson’s second bid to hold an early election © AFP

Mr Putin running again. “I urge you to come to polling stations in Moscow and vote according to the Smart Voting strategy for the strongest candidate who can defeat United Russia in each constituency,” said Lyubov Sobol,

US banks set to lower forecasts as falling interest rates bite Executives likely to reveal impact of inverted yield curve on profitability LAURA NOONAN AND ROBERT ARMSTRONG

xecutives from some of America’s biggest banks will this week tell investors how badly their businesses are being hurt by falling interest rates and an inverted yield curve, setting the scene for a raft of cuts to profit forecasts. Wall Street’s big six — JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, Citigroup and Morgan Stanley — last gave guidance to investors at their secondquarter earnings in July, when most envisaged short-term interest rate cuts, like the one made by the Federal Reserve in July on the back of a slowing economy. Since then, further deceleration and fears over President Donald Trump’s trade wars have triggered widespread anticipation of more aggressive cuts, forcing down the rate on longer-term debt. The 10-year yield on US government debt fell more than 50 basis points and 10-year debt briefly commanded a lower interest rate than two-year borrowings in August — an inverted yield curve that signals an economy in distress.

Wells Fargo analyst Mike Mayo said the deterioration in the 10year rate — which implies a greater likelihood of recession and therefore a greater likelihood of Fed rate cuts — was far sharper than banks envisaged in July, when many pared back their earnings outlooks. Industry leaders including JPMorgan chief executive Jamie Dimon, Wells Fargo finance chief John Shrewsberry, Morgan Stanley finance chief Jon Pruzan and Bank of America president Tom Montag will give updates on their outlooks at the Barclays Global Financial Services Conference in New York from Monday to Wednesday. “The guidance is going to be downward, especially when it comes to the interest rate environment,” said Jeff Harte, an analyst at Sandler O’Neill, who nonetheless thinks the news won’t be as bad as investors fear. Patrick Kaser, a portfolio manager at Brandywine Investment Management, said a “number of banks, particularly regional banks, will need to cut their outlooks (further)”. “There is no way to avoid cuts, for traditional spread lenders dependent on interest income.” www.businessday.ng

a 31-year-old lawyer who was one of the faces of the Moscow protests, which have run for weeks and attracted up to 60,000 people. Under bright sunshine and blue skies, voters were trickling into a primary school in central Moscow

hosting a polling centre, while state-run media showed footage of large queues at other ballot sites. By noon, turnout in Moscow was at 5.6 per cent, just ahead of where it was at the same time during the last local election in 2014, when 22 per

cent of people voted in total. Ms Sobol, a lawyer for the anticorruption group run by leading opposition figure Alexei Navalny, went on hunger strike after being prevented from running in the Moscow city council ballot. Officials said that she and other opposition figures who wanted to run did not collect enough signatures to be included as candidates, and that some of the signatures could not be verified. None of the Kremlin-backed candidates in Moscow are officially running under the banner of United Russia, in a sign of how unpopular Mr Putin’s party has become in the capital. “This year has turned out to be even trickier for the Kremlin than last year,” wrote Andrey Pertsev in an analysis for the Carnegie Moscow Center, a political thinktank. In 2018, Kremlin-backed candidates lost in three elections for regional governors. This time round, Mr Pertsev wrote, “the Kremlin is also trying to reduce the chance of a second round of voting by making sure only the most unimpressive rivals are allowed to stand”.

China exports decline as US trade dispute takes toll

Analysts expected ‘front-loading’ ahead of new sanctions would lead to increase DON WEINLAND IN BEIJING

xports from China fell in August as an intensifying trade dispute with the US took a heavier than expected toll on the country’s manufacturing sector and a forecast temporary increase in orders failed to materialise. China’s exports decreased 1 per cent last month compared with a year earlier, according to the customs administration, despite the majority of economists polled by Reuters forecasting an increase. The decline compares with a 3.3 per cent rise in exports year on year in July. Goldman Sachs had forecast that there would be a 2 per cent increase in exports in August because it expected buyers of Chinese goods to “front-load” orders before a new round of US tariffs kicked in on September 1. The decline in exports was accompanied by a 5.6 per cent drop in imports in August, unchanged from July. For more than a year, Beijing

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and Washington have stepped up levies on goods worth hundreds of billions of dollars, hitting a range of goods from medical devices and aircraft components to agricultural products. Both economies have suffered as a result and the dispute is adding to headwinds that have led to slowing growth in China. The latest round of US tariffs, which took effect last Sunday, were aimed at so-called final goods, such as shoes and clothing manufactured in China, and were expected to hit not only Chinese producers but also US consumers that rely on cheap goods from the world’s secondlargest economy. China responded to the US measures, triggering additional tariffs on US goods including crude oil, although the outlook improved later last week when both countries agreed to restart trade talks — a breakthrough after weeks without positive news on the matter. The export figures for August also showed that China’s trade surplus, a measure of how much its exports exceed its imports by value, fell to $34.8bn, far below analysts’ expec@Businessdayng

tations. The country’s surplus was $45bn in July. China’s leaders have demonstrated over the past week that they plan to combat slowing economic growth by pushing banks to lend more to companies, in the hope that a boost to available credit will translate into stronger growth in gross domestic product by the end of the year. China’s central bank said on Friday that it would cut the amount of reserves it required banks to hold, increasing their ability to lend by Rmb900bn ($126.4bn). The move comes after several similar cuts in recent years, which fuelled hopes that greater lending capacity at banks would translate into stronger economic growth. The move represented a rapid increase in stimulus measures, signalling that Beijing is growing increasingly concerned over the impact of the trade war. “We think the tone change . . . reflects rising downward pressure on the economy, which in part was indicated by weaker July activity data and August PMI amid higher US tariffs,” Barclays analysts said on Friday.

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EU talks over Brexit stall as Westminster descends into chaos British tactics surprise Brussels and leave Johnson’s deal pledge on shaky ground JIM BRUNSDEN, SAM FLEMING AND MEHREEN KHAN IN BRUSSELS

t only took two weeks, and several dispiriting negotiating rounds in Brussels, for the EU’s cautious optimism about Boris Johnson’s Brexit intentions to evaporate. The G7 Biarritz summit and Mr Johnson’s visits to Paris and Berlin had raised hopes that the British prime minister was prepared to engage in substantive negotiations, offering the kinds of detailed plans that could form a starting point for talks. But by Friday EU diplomats were complaining that UK negotiator David Frost has done quite the opposite in discussions with the European Commission in Brussels: instead of putting new plans on the table, Britain has used its face time with the EU team to take existing offers away. In negotiating rounds on Wednesday and Friday, Mr Frost reiterated Britain’s determination to scrap plans for the Irish backstop, which aims to prevent a hard border in Ireland, while offering nothing to replace it. He then pushed to unwind commitments given by Theresa May on co-operation with the EU after Brexit. One EU official said that Biarritz, where Mr Johnson held talks with EU Council president Donald Tusk and emphasised his desire for a deal, had already been oversold as a turning point. “It was all about the atmospherics rather than substance”. Nonetheless, the subsequent UK requests have taken the EU aback. They include scrapping “level playing field” provisions intended to make sure that, under a future trade deal, Britain does not undercut EU labour and environmental standards, or increase public subsidies, in order to gain a competitive edge. The UK has also suggested it would like to de-emphasise the importance of working together on security and defence issues compared with the language in Mrs May’s deal. While all those changes concern the EU and UK’s planned future relationship, rather than the text of its exit treaty, they have raised alarm bells in capitals about what kind of partnership Britain wants, with eastern European nations queasy about the idea of a reduced UK commitment to joint security. Brussels is also warning that the moves effectively limit the political space for negotiation. Diplomats note that a weaker commitment to a level playing field means the EU will be less ambitious in the market access it can offer Britain after Brexit, which makes the need for a comprehensive solution to the Irish border, like the backstop,

all the more important. Trying to sell EU members a free trade deal with Britain containing zero tariffs and zero quotas without the level playing field provisions will simply not fly, some officials say. The lack of UK proposals to replace the backstop also limits the scope for talks. According to a leaked diplomatic note seen by the FT, Mr Frost’s meetings at European Commission headquarters on Friday centred, at his request, on how to prevent the need for food safety checks at the Irish border. It is a key issue for the all-Ireland economy, and one where Mr Johnson has hinted that he may be willing to stay in line with EU rules, but Brussels is warning that it is not a subject that can be treated in isolation. The commission briefed national governments on Friday that it had “reluctantly accepted to discuss sanitary and phytosanitary (SPS) controls”, referring to the rules which govern food safety and animal and plant produce. The commission argues it is difficult to discuss this issue distinctly from a discussion on customs, considering that the two issues were “interlinked”, according to the note. Brussels is also dubious about the depth of the UK’s commitment to preventing SPS controls, given that any solution would require precise legal alignment, enshrined in detailed text and overseen by the European Court of Justice: precisely the kinds of commitments Brexiters would balk at. The upshot, EU officials say, is that despite British claims to have intensified talks, the negotiations still lack any momentum. The diplomatic note says “nothing new emerged” in a phone call on Thursday between UK Brexit minister Stephen Barclay and EU chief negotiator Michel Barnier. Mr Barclay insisted “that the backstop will never be accepted by the House of Commons in its current form and that we must be pragmatic.” Discussions will resume next week with a full agenda including customs issues, the movement of goods, food and plant controls, and the future EU-UK relationship, but with little idea where much of it is heading. “We will keep listening,” said one EU official. With talks moving slowly, Westminster in turmoil, and the UK’s October 31 exit date fast approaching, thoughts in Brussels are increasingly turning to whether Britain will take the prospect of a no-deal Brexit firmly off the table. The EU’s attention is gripped by the efforts of UK opposition parties to make sure it is. “The million dollar question is when the election will be,” one official said. www.businessday.ng

Prince Abdulaziz bin Salman will take over as Saudi Arabia’s energy minister © AFP

King Salman appoints son as Saudi energy minister

Prince Abdulaziz replaces Khalid al-Falih in shake-up of key economic department AHMED AL OMRAN IN RIYADH AND DAVID SHEPPARD AND ANDREW ENGLAND IN LONDON

audi Arabia has removed energy minister Khalid al-Falih, one of the most powerful figures in the global oil industry, in a dramatic shake-up at the heart of the kingdom’s government. The move, announced on Sunday, will see King Salman’s son, Prince Abdulaziz bin Salman, take over as energy minister, breaking the longtime convention in which members of the ruling family are not appointed to a position that has repercussions domestically and internationally. Prince Abdulaziz is a veteran of the energy ministry, which he joined in the 1980s. But analysts said the reshuffle would send shockwaves through the global energy industry at a time when Saudi Arabia — the de facto leader of Opec — and its oilproducing allies have struggled to raise crude prices. Olivier Jakob at PetroMatrix, a consultancy, said the move brought “a new level of uncertain-

ty to the market” as it suggested the outcome of the current oil policy had in some way not been “satisfactory” for the royal family. “Some people will say this is a normal situation, but if you look at where prices are, Saudi Arabia is not satisfied with $60-a-barrel oil,” he added. The dismissal of Mr Falih — who has been the international face of the kingdom’s oil policy since his appointment as energy minister in 2016 — caps 10 days of changes to senior positions in the kingdom’s energy sector. Last week, Mr Falih was replaced as chair of Saudi Aramco just as efforts are stepped up to prepare the state oil company for an initial public offering. The government also separated the ministry of industry and mineral resources from the energy portfolio, removing Mr Falih’s oversight of industrial policy. The veteran oil man’s dismissal is indicative of Crown Prince Mohammed bin Salman’s ruthless style of rule as he spearheads a highly ambitious economic reform programme. The energy minister’s job has been viewed as one of the most

secure government positions and above internal politics, reflecting the kingdom’s position as the world’s top oil exporter and swing producer. Mr Falih’s predecessor, Ali al-Naimi, held the post for 21 years. But in the three years since Prince Mohammed was appointed crown prince, he has upended convention in the absolute monarchy in his aggressive drive to shape the conservative nation in his vision. People close to the government say no senior official is guaranteed job security in the new environment: Prince Mohammed has changed his labour minister three times as unemployment has soared above 12 per cent and one of the architects of his “Vision 2030” plan, Adel Fakeih, was detained in the extraordinary corruption drive that led to more than 300 businessmen, princes and former state employees detained at the RitzCarlton hotel in Riyadh in 2017. While Prince Mohammed’s reform programme is ultimately designed to wean Saudi Arabia’s economy off its addiction to oil, in the short term he needs a higher oil price to finance his plans.

Finland to push EU budget rule of law clampdown Move likely to stoke tensions with countries including Hungary and Poland MICHAEL PEEL IN BRUSSELS, VALERIE HOPKINS IN BUDAPEST AND JAMES SHOTTER IN WARSAW

inland will use its EU presidency to push for the adoption of contentious Brussels plans to cut budget payments to states that breach the rule of law, setting up a potential showdown with several central and eastern European states. Tytti Tuppurainen, the country’s EU affairs minister, said protecting common bloc values was of “paramount importance” as

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“more or less totalitarian regimes” have risen around the world. Helsinki’s intent to make the rule of law the priority of its sixmonth rotating presidency is likely to further stoke tensions with countries including Hungary and Poland, which are already targets of EU disciplinary processes for alleged violations of bloc rules and values. Ms Tuppurainen insisted Helsinki did not want to “name and shame and [be] pointing fingers” at particular capitals, despite what she acknowledged were vocal @Businessdayng

criticisms of the European Commission’s budget proposals from some quarters. “It’s not about taking money away from certain countries,” she told the Financial Times. “It’s a preventive measure and it’s meant to apply to all of the member states.” Asked about criticism of the proposals from Warsaw and Budapest, she replied: “It’s interesting that they interpret it that way. It’s meant to be an instrument with which we safeguard our common budget.”

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Tuesday 03 September 2019

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news

Sujimoto bags two outstanding awards in 30 days

ithin the last 30 days, Sujimoto Construction has won two outstanding awards, making the saying, “Seeth thou a man diligent in his business, he shall stand before kings, he shall not stand before mean men,” a reality. Numbers they say don’t lie! Report cards don’t deceive, rather, they are key indicators of a strong performance; reminding us of what we have done right, where we are now, and how we can do better. Nigeria Institutes of Architecture, the referees of the in-

dustry, awarded Nigeria’s leading highly rated construction company, Sujimoto Construction, as the 2019 Bold Initiative in Property Development award for outpacing its peers and developing world-class, high quality luxury real estate development. Speaking on the awards, Sijibomi Ogundele, managing director/CEO, reiterated how the lessons he learnt in his childhood were instrumental to his success. According to Ogundele, “Five years ago, when we started, some said our dreams were too big, our ambitions too

grand; but we refused to think small and act local, we chose to think big and act global. By embracing the spirit of possibility, we created our own destiny. We understand that there is no nobility in poverty and to win in today’s economy, one needs an uncommon balance of integrity, creativity and quality. “Our sold-out project, the GiulianoBySujimoto, was erected on these tenets. We defied the norm in real estate industry and constructed super terraces with private elevators wrapped in Spanish travertine stones. With our current project, the LucreziaBySujimoto Develop-

ment, we are suspending villas in the sky and will be the first to adopt the Glass Reinforced Concrete (GRC) for our façade.” In recognition of the pioneering status of Sujimoto Construction Company in developing and delivering highly sophisticated residential facilities to the Nigerian market and for the adoption of globally approved standards in housing development, the award was meant to distinguish the company and to serve as an impetus for future achievements, according to the organisers. To emerge as the winner, Sujimoto Construction was

screened alongside other eminent and well-respected companies by a jury of recognised foreign and local researchers. Recall that Sujimoto was recently awarded as the Luxury Developer of the Year 2019 at the Nigerian Business Leadership Awards, a globally acknowledged award that is annually hosted by BusinessDay Newspaper, Africa’s leading business publication. Ogundele noted in his remarks that the same approach of excellence and attention to detail that went into the Giuliano development earned the company this particular award,

VDT Communications opens experience centre to deepen market penetration SEYI JOHN SALAU

n a strategic move to deepen market penetration and improve customer service, VDT Communications Limited, a 4G Lte broadband internet communications provider, recently opened its flagship Customer Experience Centre for its 4G Lte Advanced internet service along Awolowo Road in Ikoyi, Lagos. The centre comprises customer service desk, customer waiting area, experience console, technical help desk, with a 24/7 call centre attached. The centre is to give its customers hands-on experience of 4G Lte Advanced products and services. “By the opening of the experience centre, VDT Communications has taken its customer service a notch higher; offering a platform to showcase its customers-centric disposition and friendly attitude aimed at always adding value and keeping the customers delighted,” said Abiodun Omoniyi, MD/CEO of VDT Communications Limited, stating, “This is just one of such experience centre to be opened in strategic areas in Lagos and other parts of Nigeria as our 4G Lte Advanced internet coverage expands.” According to Omoniyi, the VDT experience centre promises to offer a holistic and total premium experience for pre, during and aftersales services to customers. “The experience centre is an off-shoot of the culture of quality customer service of which the VDT Communications brand is synonymous with. VDT Communications is ISO 9001: 2015 certified. It is also the first ISO 20000:2011 certified telecom company in west and central Africa for excellent IT service management,” Omoniyi stated. www.businessday.ng

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saying “that is what we intend to deploy in our new project – The LucreziaBySujimoto.” According to Ogundele, “this would never have happened without the Sujimoto Team, a brilliant crew that understands that to be needed, you have to be loaded. Dayo, an incredible and talented 21-year-old engineer; Vinay, an expatriate that has taken the business like his grandfather’s; the commitment and optimism of Architect Isiak; the unending devotion dedication of Engineer Lamid and Emmanuel; our amiable French project manager, Djalil; the tenacity of Princess.

Monday 09 September 2019

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news

How Saudi shows urgency with Aramco while Nigeria wastes time DIPO OLADEHINDE

audi Arabia, which has 20 times foreign currency reserves of Nigeria, is remarkably showing more urgency in tackling the negative economic fallout from tumbling oil prices by embarking on structural reforms, even as Nigeria dithers. Initial preparations for an IPO, long touted as the world’s biggest, were handled by Saudi Aramco but ground to a halt last year amid concerns about legal risks and doubts over whether it would achieve the $2 trillion valuation sought by the Crown Prince. Preparations for the IPO of Saudi Arabian Oil Co., known as Saudi Aramco, are being revived as government officials hope to capitalise on the positive international reaction to the state-owned company’s debut bond sale in April, which raised $12 billion, people close to the talks said. Saudi officials also believe

hammadu Buhari administration announced in far away Abu Dhabi, United Arab Emirate (UAE), that Nigeria had plans to sell key oil assets to the public. Then minister of state petroleum resources Ibe Kachikwu said the action would be the country’s first IPO of assets owned by its national oil company, scheduled for a major reforms and was expected to happen in 2018. Nine months after the deadline the plan still looks more like dream and not close to being a certainty, as NNPC still struggles with rot, lost investment, corruption and controversies. Despite the demand side management moves by the CBN, Nigeria’s foreign exchange reserves still plummeted by 5 percent year-on-year to $43.5 billion as at September 2, 2019, from $45.6 billion a year ago. Saudi-Arabia by comparison has $512.5 billion of foreign currency reserves. The plunge in oil prices, from $110 a barrel in 2014 to less than

US court discharges NNPC from $2.7bn ESSO E&P enforcement deal HARRISON EDEH, Abuja

Analysis pressure on the country following the murder of dissident journalist Jamal Khashoggi in the Saudi consulate in Istanbul is easing, according to people familiar with the matter. Also, Saudi Aramco announced Energy minister Khalid-Al Falih had been succeeded as chairman of the state-owned oil company by Yasir Al Rumayyan, head of Saudi Arabia’s Public Investment Fund, the huge sovereign wealth fund central to Bin Salman’s Vision 2030 to diversify Saudi Arabia’s economy. Leadership changes at Aramco were a “necessary step” towards the IPO, said Olivier Jakob, managing director at consultant Petromatrix told Bloomberg. Al-Falih had “never been enthusiastic about an IPO for Aramco,” a senior Organisation of the Petroleum Exporting Countries (OPEC) source said. Yet, as Prince Mohammed seeks to give the IPO new momentum, Rumayyan faces an uncertain backdrop for oil demand, fragile stock markets and deepening worries that Saudi Aramco will be used as a cash cow by the government. The planned IPO date has been pushed back from an initial plan to launch in 2018, as Saudi Arabia has been waiting for optimum conditions to list amid an uncertain oil price environment. It is now mooted for 2020 or 2021. The Saudi’s who like Nigeria, rely on oil sales to fund more than 70 percent of government spending, have cut fuel subsidies, moved quickly to woo investors to play a bigger role in the economy and introduce sales taxes on consumer goods. Nigeria’s plans to reform its corrupt national oil company, the Nigerian National Petroleum Corporation (NNPC) through a new oil bill are however stuck between the executive and legislature. In 2016, the President Mu-

Makinde Timothy, winner of the saloon car star prize, 32 year old, (m); Tunde Mabogunje, regional sales director, Lagos/Ogun, Dangote Cement (2nd r); Kayode Akin-Bamidele, head, route to market, Dangote Cement (2nd l); Desmond Aregbesola, deputy regional sales director, Lagos/Ogun (l), and Fasuhanmi Omotayo, coordinator, National Lottery Regulatory Commission (r), during the presentation to the winners.

$60 today, has pushed most oil producers to enact reforms to help cushion the shock. In Nigeria however government’s unorthodox policies such as cutting interest rates amid creeping inflation, maintaining subsidies and pegging the naira, despite the collapse in oil prices which threaten to increase economic distortions. Nigerian unemployment jumped rate of 23.1 percent means 20.9 million people are out of job. The economy expanded by just 1.94 percent in the second quarter of 2019, less than the population growth rate and implying negative per capita income expansion, even as inflation remains high at 11.08 percent. The decision might be tough, but for Nigeria, a listed NNPC will not only drive huge capital accumulation in Nigeria it also means Nigeria is going for market forces to determine oil production, retail price for products and proper deregulation of the oil sector. Auditing and preparing NNPC books for IPO also implies revealing the total and current disclosure of reserves capacity, total revenue, profitability, taxes, and other key metrics which are needed in modelling the profitability of NNPC Plc and potential dividend it could pay to investors. Listed NNPC will lift out a Nigeria’s oil sector largely in recession and also uplift Nigeria’s oil and gas reserves which have remained stagnant or dwindling, while oil production is on a decline. Listed NNPC means huge gas reserves estimated at 182 trillion cubic feet (TCF) could help feed power generation for energy-starved Nigeria, largely remain undeveloped 20 plus years after being discovered due to NNPCs inability to either fund the CapEx needed to develop the fields or let go of the fields for private oil firms to develop.

he United States Southern District Court of New York has delivered a significant judgment in favour of the Nigerian National Petroleum Corporation (NNPC) against ESSO Exploration and Production Nigeria Limited and Shell Nigerian Exploration and Production Company Limited (Collectively, “ESSO”). The court hearing was held on February 1, 2019, in a protracted litigation arising from the disputes between NNPC and ESSO regarding the implementation of the Production Sharing Contract dated May 21, 1993, covering OPL 209/ OML 133. ESSO referred its claims to arbitration in Nigeria and obtained an Arbitral Award of $1.799 billion on October 24, 2011, with annual interest running at LIBOR plus 4%.

NNPC promptly challenged the Award at the Federal High Court, Abuja, which in May 2012, ordered the set aside of the Arbitral Award. Notwithstanding the decision of the Nigerian Court, ESSO applied to the United States District Court, Southern District of New York for the recognition and enforcement of the Arbitral Award. NNPC challenged ESSO’s Application on ground that there was no Award, which the US Court could enforce as a competent court in Nigeria had since set aside the Award. NNPC also contended that there was no legal basis for the US Court to exercise jurisdiction over it as it had no presence in the United States, owned no property and does not conduct its businesses therein. ESSO contended that NNPC is the alter ego of the Federal Government of Nigeria, owned assets in the USA

including bank accounts and also conducts businesses in the USA. Esso obtained the leave of Court to conduct Jurisdictional Discovery to ascertain if the US Court can assert personal jurisdiction over NNPC. At the close of the Discovery Procedure, the Court ordered NNPC and ESSO to appear for oral hearing, which was held before Honourable Judge W. H. Pauley on February 1, 2019, for parties to canvass their respective positions. On September 4, 2019, the US Court delivered its Judgment by which it upheld the Corporation’s Application to Dismiss ESSO’s Enforcement Application on ground that a competent Nigerian Court had set aside the underlying Award and directed the Clerk of the Court to terminate and discontinue all motions and processes filed by ESSO in this matter.

By this development, Ndu Ughammadu ,the corporation’s spokespersonnoted informed on Sunday in a statement that NNPC has successfully secured the dismissal of ESSO’s application to secure recognition and enforcement of its Arbitral Award valued in excess of $2,699,405,616 plus interest. The effect is that ESSO, who had sought the Order of the US Court to enforce the said Award, has lost the right. While ESSO is at liberty to appeal this decision, NNPC is optimistic that its case on appeal is very strong. This is a significant decision in the history of this case as the US Court has not only discharged NNPC from any indebtedness to ESSO but also set the stage for NNPC’s pursuit of the challenge of three other outstanding Enforcement Applications filed in the US Court by other PSC Contractors.

Dangote Cement empowers many families through goodies promo

hairman of Dangote Cement plc, Aliko Dangote, says the ongoing Bag of Goodies National Consumer Promo was fashioned after the business model of the panAfrican conglomerate, which is to economically empower the people and thereby spreading prosperity to the largest number of people. He states that in all, not less than 20 million consumers will win one prize or the other and that translates to about 25 percent of Nigeria’s population, and at the end of the promo, the company would have succeeded in spreading prosperity and many families would have had a new means of livelihood through the prizes being won. The business mogul stated these in Abeokuta while presenting various prizes won by some 31 consumers of Dangote Cement in Ogun State, who car, refrigerators, Televi-

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sion sets and tricycle. Dangote who spoke through Dangote Cement regional sales director, Tunde Mabogunje said the promo was borne out of the company desire to economically empower all its customers along the value chain and that the current promo was targeted at empowering its consumers. “Because it is meant to empower them that is why we carefully choose the prizes. We have cars, tricycles, motorcycles, refrigerators and television sets, all these have economic value,” Mabogunje said. The sales director explained that the company also has put in place other empowerment schemes for its distributors, retailers and other customers. In his own remark, head, Dangote Cement Route to Market, Kayode Akin-Bamidele said about 20 cars had been won so far remaining 23 with many tricycles, motorcycles,

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Television sets and refrigerators to go before the promo ends at the end of September. He thanked the consumers for their patronage of Dangote Cement saying the promo was the biggest ever in the country by any company and that such humongous promo value could only be done by Dangote Cement. Apart from winning prizes when buying Dangote Cement, Akin-Bamidele said the consumer would also be buying the best quality cement at the most affordable prices while urging the consumers to spread the news to others. According to him, all the promo runs by Dangote Cement is meant to give back to the loyal customers and would continue to do so because “without you there can’t be us.” National Lottery Regulatory Commission (NLRC) whose coordinator witnessed the Abeokuta ceremony com@Businessdayng

mended the transparent process of rewarding the winners describing the promo as unprecedented. Coordinator of the NLRC, Fasuhanmi Omotayo said his commission has so far been impressed with the promo and lauded the management of Dangote Cement for the gesture of rewarding its cement consumers in such a manner. He said the transparent nature of the promo was commendable because what you see on the card is what you win and that the promo by all measures has been successful. The star prizewinner, Makinde Timothy, a builder, was close to tears when the key of the car was handed to him as he was overwhelmed by emotion. With his voice shaking, Timothy said the prize of a car was to good to be believed and that the presentation was like a dream to him.

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FG pledges government’s support for flourmills HARRISON EDEH, Abuja

L-R: Gbenga Adebayo, chairman, ALTON; Olayinka David-West, academic director, Lagos Business School; Patrick Akinwuntan, managing director, Ecobank Nigeria; Gbenga Adefaye, editor-in-chief, Vanguard Newspapers, and Ayokunle Adaralegbe, chief risk officer, CSCS, during the Vanguard conference on mobile money market and fintech with the Theme: Leveraging Fintech Innovation for Unlocking Growth and Competitiveness in Nigeria’s Mobile Money Market and Payment Ecosystem in Lagos.

NCAA commends five airlines on consistent payment of 5% TSC/CSC remittance IFEOMA OKEKE

ive domestic airlines, Air Peace Airline, Overland Airways, Medview Airline, Aero Contractors and Allied Air Limited have received commendation from the Nigerian Civil Aviation Authority (NCAA) for their consistency in the remittance of 5 percent Ticket Sales Charges/Cargo Sales Charges (TSC/CSC). The NCAA in a statement signed by Sam Adurogboye, general manager, public relations, said other key considerations for recognition were timely remittance of CSC; beneficial working relationship, especially the Aviation Revenue Automation Project (ARAP)/Direct Debit

Mandate, and contribution to effective, efficient, safe and secure operations. The payment is in compliance with the Nigeria Civil Aviation Act 2006 (as amended). While appreciating the operators for their efforts despite daunting challenges in the business environment, Usman expressed optimism that the operators will continue to honour their financial obligations and carry out seamless airline operations. Similarly, he congratulated Allied Air Limited on her success in the International Air Transport Association (IATA) Operational Safety Audit (IOSA) on the airline’s operation recently. The Airlines were presented their commendation letters during a consultative meeting

between the NCAA and the airline operators under the aegis of Airline Operators of Nigeria (AON). At the meeting attended by about 33 schedule and nonschedule commercial airlines, the chief executives of these airlines took turns to enumerate some grey areas affecting their operational efficiency. The operators expressed hope that the regulatory authority will intervene in the aforementioned areas of concern. It was unanimously agreed that this consultative meeting should occur much more frequently. Muhtar Usman, directorgeneral, NCAA, accepted the request of the airlines for an extension of 90 days to enable operators not yet in compliance

with the Aviation Revenue Automation Project (ARAP)/Direct Debit mandate to key into it. However, the AON members decided to form a committee that will interface with relevant officials of NCAA to ameliorate some contentious area of the automation within the 90 days.

inister of Industry, Trade and Investment, Richard Adeniyi Adebayo, says the Federal Government will give management of the Flour Mills of Nigeria plc all necessary supports in its ongoing industrial expansion and other businesses. The minister made the promise on Fr iday during a meeting with John Coumantaros, managing director of the company, in Abuja. Adebayo said the Federal G overnment would encourage private investors and business owners by creating enabling environment for projects capable of creating jobs for Nigerians. He said the current government had renewed its resolve to fully diversify the economy to non-oil income generation through the private players like the Flour Mills plc. To achieve this, he said government would continue to invest huge capital

Dangote, Lumumba, Magu to discuss Nigeria’s growth, sustainable development at ICAN confab KELECHI EWUZIE

resident of Dangote Group, Aliko Dangote, Patrick Lumumba, Kenyan’s Anti-Corruption boss, and Ibrahim Magu, acting chairman, Economic and Financial Crimes Commission (EFCC), among others will discuss the way for Nigeria’s sustainable growth and development at the 49th Annual Accountants’ Conference of the Institute of Chartered Accountants of Nigeria (ICAN). The theme of the conference, scheduled for Monday, September 9 to Friday, September 13, 2019 in Abuja, is ‘Building Nigeria for Sustainable Growth and Development.’ Bunmi Owolabi, senior manager, corporate communications/marketing of ICAN, in a statement made available to BusinessDay, said the theme was specifically carved to evolve ways to strengthen institutional framework to support government’s anticorruption drive and to chart a new strategy to overcome security and infrastructural challenges in Nigeria.

The lead paper of the conference entitled “Strengthening Institutional Framework to Support Anti-Corruption Drive” to be delivered by Patrick Lumumba will provide an insight into some of the key global trends and reforms aimed at enhancing transparency and accountability in state and economic institutions, Owolabi said. According to Owolabi, “Disruptive Innovations: Challenges and Opportunities in The Accounting Profession” which is the second paper hopes to dissect innovative technologies such as robotics, artificial intelligence, cloud computing, machine learning, block chain, data analytics, as the greatest disruptor of the accounting profession in this age. “The paper will consider the challenges disruptive innovations may bring to the profession and the opportunities therein for accountants. It will also consider the readiness of the accounting profession for digital disruption and how the profession aims to develop future accountants as www.businessday.ng

new technologies significantly changes the role of professionals in this regards.” In the statement, she observed that the Federal Inland Revenue Service (FIRS) recently issued letters of substitution to commercial banks in Nigeria, appointing them as tax collecting agents for certain listed customers maintaining accounts with such banks. This, she said, form the basis for the third paper entitled “The FIRS Power of Substitution: Critical Review and Matters Arising” and will review the legality or otherwise of the substitution powers of the FIRS to appoint banks as collecting agents and whether the FIRS has the power to instruct banks to freeze the account of tax defaulters. “A paper will also be presented on “Public Accountability: A Driver of Transparent Leadership and Governance”. The paper will discuss issues bothering on accountability and proffer suggestions for improved public accountability to stimulate transparent leadership and governance in Nigeria,” she said. https://www.facebook.com/businessdayng

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into infrastructure development to create enabling environment for both foreign and local investors. He called on other largescale firms and MSMEs to emulate what the company was doing in the area of agro-business to help government achieve its dream of industrialisation and food security. Coumantaros in his earlier remarks told the minister that his company needed government support in its businesses covering production of grains, fat and oil, sweeteners, starches, and proteins. He noted that the firm had various services and products to offer to Nigeria, given its large population, saying Flour Mills currently employed no fewer than 12,000 Nigerians in its factories across nine states of the federation. He promised that his firm would further help grow Nigeria’s economy, particularly through agriculture by creating a value chain of products, industry and consumers.

Monday 09 September 2019

BUSINESS DAY

news

Sahara Group takes ‘Africa Energy Access’ narrative to WEC segun adams

lobal conversations and collaborations geared towards promoting access to safe, clean and affordable energy need to consider the “unique situation in Africa,” Wale Ajiabade, executive director, Sahara Group, said ahead of the 24th World Energy Congress in Abu Dhabi. Themed “Energy for Prosperity,” the Congress kicks off on September 9, 2019, offering participants a platform to “explore new energy futures, critical innovation areas, and new strategies.” Ajibade said the achievement of Sustainable Development Goal 7, which targets “access to energy for all” would be accelerated if all stakeholders are committed to adopting tailored solutions for Africa. “The global push to expand access to energy through renewables and responsible mining of hydrocarbons is commendable.

However, the situation in Africa is dire. Africa has the least electricity access rate in the world with over 640 million Africans having no access to energy. I believe Africa is central to the achievement of access to energy for all and I will be making a strong case for an African Energy Access Agenda at the Congress while we continue to shore up the progress being recorded across other parts of the globe,” he said. Ajibade said the Congress, a foremost global gathering of stakeholders in the sector, presented a unique platform for “an honest appraisal of the future of oil and how the sector needs to respond to ensure sustained growth in a manner that is consistent with the preservation of the environment.” He said Sahara Group remained committed to enhancing access to clean energy through its interventions and operations in Africa, Asia, Europe and the Middle East. “Sahara Group is currently working with the United Nations

Development Programme to promote access to sustainable energy in Africa and we hope to make the partnership a template that can be replicated throughout the continent. This will be facilitated by promoting dialogue among key stakeholders while also implementing practical country-level projects. I will be sharing some insights on how we can expand such collaborations in Africa in my engagements with other delegates,” he stated. With over 150 countries represented, the World Energy Congress is widely considered the world’s largest and most influential energy event covering all aspects of the energy agenda. Running since 1924, the triennial World Energy Congress enables dialogue amongst Ministers, CEOs, policy-makers and industry practitioners on critical developments in the energy sector. The Congress offers a unique opportunity for participants to better understand energy issues and solutions from a global perspective.

Ezekwesili, others bag Weizsäcker fellowship in Germany Seyi John Salau

Nigerian, Obiageli Ezekwesili, has been awarded a Richard von Weizsäcker Fellowship at the Robert Bosch Academy in Berlin from September 2019 to February 2020. Others that bagged the fellowship are an international mediator from South Africa, Brian Currin; former Irish ambassador, David Donoghue, and former Mayor of the city of Wroclaw, Rafał Dutkiewicz. Among others are a professor of science and engineering at the Harvard Kennedy School, Sheila Jasanoff; Furosemide Manji; and Natalie Nougayrède. Since its foundation in 2014, more than 65 decisionmakers and experts from around the world have spent a residency at the Academy. While announcing Ezekwesili’s award of the fellowship, the Academy said, “She will design a pathway

for Nigeria out of its stagnant politics” after the programme. Ezekesili, an economic policy expert and Senior Adviser at the Africa Economic Development Policy Initiative, will spend a Richard von Weizsäcker Fellowship at the Robert Bosch Academy in Berlin from September 2019 to February 2020. She is a co-founder of the global anti-corruption group, Transparency International, and formerly a Vice President of World Bank’s Africa programme. She was a former cabinet minister of Solid Minerals and later of Education in Nigeria. The academy, in a statement, said the fellowship was offered to her and others for being “decision-makers, opinion leaders, and experts who are solution-oriented on global affairs.” It also read, “The Richard von Weizsäcker Fellowship was established in honour of the former President of Germany. “The fellowship offers a

residency of several months in Berlin to outstanding personalities from around the world. Residencies at the Robert Bosch Academy provide fellows with the intellectual and physical space to pursue individual research and outreach activities on topics beyond their normal professional commitments. “During her fellowship, Obiageli Ezekwesili, a technocrat who recently ventured into politics and ran for the office of President of Nigeria in the 2019 election, will investigate the nexus between politics and the unsatisfying results of economic management and nation-building process of Nigeria and more broadly, Africa. “Drawing immensely from her experiences in the 2019 election and her years as an economic reform expert, she plans to propose as well as execute a rescue plan to structurally change politics and political outcomes in her country, Nigeria and Africa widely.

AIB commence investigation into Max Air incident … as NAMA debunks statement by Max Air on ‘epileptic’ ILS IFEOMA OKEKE

ccident Investigation Bureau (AIB) has commenced investigation into the Max Air incident that occurred at the runway of the Minna International Airport, Niger State, on Saturday. The B747-400 flight with 560 pilgrims, which was designated for this year’s Hajj, from Jeddah with registration number 5N-DBK suffered serious turbulence at the final approach on the runway shortly after landing. The AIB in a statement by Tunji Oketunbi, the spokesman, said the accident investigative body was notified of the incident by Max Air Limited of serious incident involving its B747-400, which he said occurred during the final approach on Runway 23 at Minna Airport. Oketunbi stated that from information provided, the aircraft on landing ‘scraped the runway while the number one engine of the four engine airplane brushed runway surface and no injury reported’. He disclosed that AIB’s team of safety investigators had commenced investigations, calling for help. “We want the public to know that we would be amenable to receiving any video clip, relevant evidence or information any members of the public may have of the serious incident that can

assist us with this investigation,” he said. However, Max Air has reacte d to the incident involving its aircraft 5NDBK flying from Jeddah to Minna, saying the aircraft did not crash nor skid off the runway as reported in various media. In a statement issued by the airline and signed by Ibrahim Dilli, director, Flight Operations, the aircraft engine slightly brushed the runway due to complex landing manoeuvres accessioned by strong downdraft and an epileptic Instrument Landing System (ILS) at the airport. “The Instrument Landing System at the airport was epileptic with unstable signals. Our pilots executed an approach using their wealth of experience and knowledge on the terrain and environment to a safe landing and stopped on the runway, during which one of the engines slightly brushed the runway due to complex landing manoeuvres occasioned by the strong downdraft. “Aircraft did not crash nor skid off the runway. Aircraft was taxied safely to the airport terminal and passengers disembarked without problems. All passengers and crew are safe and sound. “All required reports of the minor incident have been filed. Officials of the Nigeria Civil Aviation Authority (NCAA) and the Ac-

NIGCOMSAT pushes for improved access, affordable satellite connectivity for Nigerians KELECHI EWUZIE

igerian Communications Satellite Limited (NIGCOMSAT) says it is committed to improve the coverage area and cost of satellite Internet in Nigeria through an eco-system of Virtual Internet Service Providers (VISPs). The company says by operating the digital Business Support System (BSS) PortaBilling as provided by PortaOne, it will deliver services to key markets such as government, defense, maritime and other enterprises. Abimbola Alale, CEO of NIGCOMSAT, says such low entry barrier enables nearly

any local company such as system integrator, utility or even a supermarket chain to become an ISP. Alale states that it will have major effects in several key markets, in particular for Small Office or Home Office (SOHO), adding that these customers will benefit from better satellite connectivity. Alale observes that the deployment of a robust and flexible solution such as PortaBilling will address the common challenges that Internet Service Providers in Nigeria face at the moment. According to Alale, “It will also aid profitability, market readiness and a need for technology, which evolves with www.businessday.ng

the market because PortaOne offers a license, unlimited in terms of number of subscribers or resellers. This helps to maintain a low and predictable TCO (Total Cost of Ownership).” Alale lauds PortaOne team agile development work done on the project to integrate with other elements of the solution such as online payment through REMITA. Andriy Zhylenko, CEO, PortaOne, a Canada-based software developer, says flexible convergent digital BSS is a crucial tool, which will enable NIGCOMSAT to succeed via monetisation of an innovative service and better customer experience. https://www.facebook.com/businessdayng

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cident Investigation Bureau (AIB) have inspected both the aircraft and runway and are satisfied.” Meanwhile, the Nigerian Airspace Management Agency (NAMA) has debunked statements attributed to Max Air that the incident at the Minna Airport was as a result an epileptic ILS, reinstating that nothing could be furthest from the truth as its ILS is working optimally. The statement made available and signed by Khalid Emele, the general manager, public affairs, NAMA, stated that the ILS was successfully calibrated early this year (2019) and there had been no report of non-alignment by the equipment from pilots since then. The airspace manager also stated that other operators that had used the facility after the incident did not complained about the ILS malfunctioning. The statement read,” The attention of the NAMA has been drawn to a press release issued by Max Air on the incident involving its aircraft, a Boeing 747-400 with registration No. 5N-DBK at Minna Airport on Saturday, the 7th of September, 2019. “In the said release, the airline’s director of operations, Ibrahim Dilli, attributed the unfortunate incident among other things, to the ILS at the airport which he said was “epileptic with unreliable signals.”

Monday 09 September 2019

BUSINESS DAY

news Northern Nigeria Flour Mills increases revenue to N4.1bn Adeola Ajakaiye, Kano

orthern Nigeria Flour Mills plc, one of the biggest food processing companies based in Kano State, is on a steady recovery as it grows its general revenue profile in the 2018/2019 financial year to N4.1 billion, as against N2.9 billion recorded in the previous year. Within the same period, the managementofthecompanysaid it was able to significantly boost its operating profit to N528 million, compared with N348 million recorded in the year before. Despite what most analysts believed was an impressive performance, the company however said it recorded a loss of N24 million at the end of March this year, as against N65 million recorded in 2018. This fact was contained in a statement of the chairman of the company, Aminu Alhassan Dantata, made available to BusinessDay during the annual general meeting (AGM) held in the commercial city of Kano, last week.

Speaking with BusinessDay on the sidelines of the AGM, John G. Coumantaros, deputychairman of the company, who presided over the meeting, said the company would soon move out of the storms of loss and return to profitability. Coumantaros gave an insight into the chairman’s statement, and said the recovery drive of the company was predicated on the resumption of milling of it premium ‘Maikwabo’ flour the company suspended some years ago, as well as the re-introduction of the Semovita brand. Also, he stated that the company had also invented new products such as the Dawavita, launched in the Nigerian market in the month of April, which is already gaining huge acceptance, adding that the launch of product was now meeting the expectations of farmers supplying gains. “The Dawavita product’s range was launched in April 2019 as we began to gradually ramp up on volumes, given the company’s commitment to meeting the expectations of farmers supplying grains.

“It is encouraging to note that overall, our strategies are beginning to bear the desired results with the gradual growth in the maize and sorghum products’ range realisation of local sourcing of related rawmaterial for the Dawavita/Masaflour and Dawavita/Sorghum flour brand,” he explained. CommentingonNigeria’seconomic environment last year, the chairman of the company noted that the economy experienced some level of stability and a modest improvement judging by the micro-economic indices. He said however the year was characterised by weak consumer demand and a fall in purchasing power resulting in lower industrial capacity utilisation and a worsening of the unemployment rate, which remained high at about 24 percent. “It is noteworthy that the gradual downward trend of inflation was sustained, as the headline inflation dropped in the year from 15.37% in December, 2017 to 11.44% by December, 2018, according to the National Bureau of Statistics (NBS).

Models on alternative Africa infrastructure funding methods discussed at WEF on Africa MIKE OCHONMA

lternative methods to infrastructure funding formed part of the discussions by delegates at the ongoing World Economic Forum on Africa taking place in South Africa. Infrastructure development is key to the growth of African economies that want to make the most of their opportunities and streamline cross-border trade, delegates at the World Economic Forum (WEF) for Africa conference heard. There are new laws being implemented in jurisdictions across Africa to facilitate the sourcing of alternative infrastructure funding, which is needed to kick-start sorely needed infrastructure projects. Currently taking place in Cape Town, the conference’s theme focuses on shaping inclusive growth and shared futures in the Fourth Industrial Revolution (4IR).

According to a statement issued by law firm Baker McKenzie on Wednesday, China has played a key role in providing alternative sources of financing to African countries that have not been able to access funding in more traditional ways. While the benefits are said to be numerous, the law firm pointed out that African countries were also concerned about their growing dependence on China. To put it into perspective, the statement refers to research published by Baker McKenzie and IJGlobal in 2018, that showed that the value of loans from Chinese financing of energy and infrastructure projects in Africa had almost trebled between 2016 and 2017, from $3 billion to $8.8 billion. “As China’s Belt and Road Initiative (BRI), a multibillion-dollar plan to link Asia, Europe and Africa, is actively being implemented, we expect this amount will increase even further,” Baker McKenzie banking and finance

head Wildu du Plessis said. “A key attraction of the BRI for both African governments and project sponsors is that it assists the speed of project implementation,” Wang said, noting that project stakeholders had previously advised that the whole process was a lot quicker than other options. However, Du Plessis said there was also a rising concern among African sovereigns who were worried about the long-term effects of their dependence on China, even though China has reiterated that it wants to be considered a responsible investor in Africa. While it remains to be seen whether this concern has an impact on Chinese involvement in the funding of infrastructure projects in future years, Du Plessis explained that African countries had also begun building capacity to correct the imbalance between borrowers and lenders in the negotiation phase so that more balanced agreements could be reached.

Nasarawa to access CBN’s N1.5bn credit facilities Solomon Attah, Lafia

asarawa State Governor Abdullahi Sule says his government has finalised plans to access N1.5 billion credit facilities from the Central Bank of Nigeria (CBN) that will enable youths set up small-scale agricultural and trading enterprises in the state. Governor Sule, who stated this at the occasion to mark his 100 days in office, said his government had so far made “deliberate efforts towards the empowerment of our youths and women in line with our policies and programmes

geared towards wealth creation, employment generation and poverty alleviation. “Government has also concluded arrangements in collaboration with the CBN to access credit facilities in the sum N1.5 billion to enable our youth set-up small-scale agricultural and trading enterprises.” He said “the process has commenced with the distribution of application forms to cooperative groups across the state.” The governor, who acknowledged agriculture as the main pre-occupation of the people, said his administration “intends to harness www.businessday.ng

for increased food production, security and value chain addition. “Accordingly, we have identified crops of comparative advantage to the State and are making arrangements to boost the production and processing of such crops. “I believe that this will open new vistas of employment and economic prosperity for our farmers in particular and the state at large.” The governor revealed that his government has procured and distributed thirty-three thousand (33,000) metric tons of fertilizer to our farmers, aimed at boosting agricultural production in the State. https://www.facebook.com/businessdayng

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Monday 09 September 2019

BUSINESS DAY

news

Delta to spend over N19bn on federal roads Francis Sadhere, Warri

elta State government says it is going to spend more than N19 billion to fix the failed portion of the 47.8km Section A of the Warri-SapeleBenin road and other federal roads in the state. The state commissioner for works, James Augoye, and his information counterpart, Charles Aniagwu, stated this on Wednesday at Okuvo, Okpe Local Government Area of the state while conducting journalists round the failed sections on the road. The works commissioner noted that although the road was a federal road, Deltans and other Nigerians depend on it for a living. He said Governor Ifeanyi Okowa was disturbed by the sufferings of the people who ply the road, and decried the loss of man hour and productive time on the road. “This Warri Sapele Benin road is a Federal Highway and as a state we actually did palliatives works on some portions of the road before now, and the parts we intervened on are still very solid till today. What we are doing here is to look at the possibility of the state government intervening. “The work here is not just

maintenance or rehabilitation, it requires total reconstruction because the mud here is very clayed and it needs to be excavated to the soil base and refilled with sharp sand to make it solid. So, there is much work to be done here. “Governor Ifeanyi Okowa has directed that we visit the site and see the possible way of intervention by the state government to free the masses from the sufferings on the road,” he said. On his part, the commissioner for information said the state government was intervening because Deltans and Nigerians use the road irrespective of where they were from, and because of what they were going through on account of the deplorable condition of the road. “As you can see it is taking us several billions to ensure that these roads are put to motorable condition. It is costing the state government several billions to carry out these interventions. Of course, you know there are a lot of needs and other challenges that are within the direct responsibility of the state government that requires attention but here we are investing huge sums of money to address these federal roads because we believe that leaving it unattended will lead to untold hardship for our people.

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Wike insists on turning ‘Port Harcourt Pleasure Park’ to world tourist centre Ignatius Chukwu

overnor Nyesom Wike of Rivers State may have commissioned a huge park of attraction in Port Harcourt near the Air Force Base, but has continued to invest in it, pledging to take it to worldclass standards and global fame. Already, huge number of children and adults storm the park every day and weekends looking exceptional. Addressing journalists on Friday after inspecting the Port Harcourt Pleasure Park Cinema completed by his administration, Governor Wike said key facilities were being developed to improve the quality of experience at the Park. He described the new cinema constructed within the Park as a five-star facility that raises the standard of entertainment available to people in the Niger Delta. “We have just completed a five-star cinema within the Port Harcourt Pleasure Park. This cinema is about the best in the country. “It will offer first-class entertainment to the people

of the region and beyond. Instead of going to Dubai for relaxation and tourism, you come over to Port Harcourt to enjoy the pleasure of this Park,” he said. According to the governor, the Rivers State government will continue to develop new facilities that will complement existing structures within the Port Harcourt Pleasure Park. The governor said the new cinema would be thrown open to the Public after the Commissioning programme on September 11, 2019. He said his administration was determined to ensure that the beauty of Port Harcourt is restored and Port Harcourt made a major tourism destination in the country. He expressed happiness that sanity is returning to the streets of Port Harcourt, with the Task Force on Street Trading, Illegal markets and motor Parks doing a splendid job. He also inspected ongoing projects in GRA and other parts of Port Harcourt and Obio/Akpor Local Government Areas. The administration will roll out several projects to mark the first one hundred days of his second term, he said.

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NCDC confirms yellow fever outbreak in Bauchi with 6 deaths Godsgift Onyedinefu, Abuja

he Nigerian Centre for Disease Control (NCDC) on Friday confirmed the outbreak of yellow fever disease in Bauchi State. No fewer than six people have so far been killed with four cases recorded, the centre said. The Borno State Epidemiology Team had on August 3, reported deaths among students of Waka College of Education in Biu LGA of Borno State who visited the Yankari Game Resort in Bauchi State on August 2019. The centre in a statement said three of the confirmed cases were residents of Alkaleri Local Government Area and the fourth case was a tourist who visited the Yankari Games Reserve in the same LGA. “Of the 95 students that visited the resort, eight of them developed symptoms and six had died as at the time of the report. The others are in a stable condition. Samples from these cases are being tested”, Chikwe Ihekweazu, director-general, NCDC, said. Ihekweazu said the NCDC was first notified on August 29, when it received the report of a confirmed case of Yellow Fever in Kano State from a

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laboratory in its Yellow Fever laboratory network. He explained that subsequent investigations led by the Kano State Epidemiology Team confirmed case of yellow fever was from a patient who visited the Yankari Game Reserve in Bauchi, in August 2019, with his father who unfortunately died with similar symptoms before a sample could be collected and tested. He said the intensification of surveillance activities led to the identification of three more confirmed cases who were all resident in Alkaleri LGA of Bauchi State. “Altogether, we can confirm four cases of yellow fever in people that either live or have visited Bauchi in the last one month,” he said. Ihekweazu however informed that the NCDC had deployed a rapid response team to support Bauchi State to carry out further in-depth investigations, including case finding, risk communications, and support the management of cases while samples of the other suspected cases from Bauchi and Borno states were currently being transported to the NCDC National Reference Laboratory in Abuja for further testing.

Monday 09 September 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Education planning: From birth to graduation MONEY MATTERS

Nimi Akinkugbe

e all want to give our children the best start in life. A solid foundation through education is one of the greatest gifts that you can give a child, yet funding education ranks as one of the largest expenses you will ever face; it must therefore be carefully planned for. The key to successful educational planning is to start early, contribute regularly, and invest wisely. Here are some issues to consider: The earlier you start the better. Time is a fundamental factor in successful investing. Paying school fees on an ad-hoc basis without advance planning will cause huge financial strain unless you have significant income and savings. How much time do you need to prepare for this expense? If you start early, you have the time to save and invest without much pressure. Ideally one should start planning for a child’s education as soon as you plan to have a baby. Acting on such a long-term goal early, might seem absurd but with the rising costs of education, the sooner your start, the better. With a head start, even small sums set aside on a regular basis enjoy the power of compounding and can grow into a significant educational fund over time. For many parents that haven’t planned ahead, reading this may be somewhat disheartening. Even if your children are older, the key is to be deliberate about saving aggressively to ease the burden. How much can you afford to save? Consider the assets you hold, your debt situation and what you can realistically save given your other commitments. Look at your family’s unique financial circumstances and determine what makes sense for you, what you can afford and can stay committed to over the long term. Automating your savings via a direct debit is a great to make steady, regular progress towards your goals. What are your options? Don’t feel pressured into embarking on an educational journey that you cannot afford; societal pressures can sometimes make us make absurd financial decisions. Remember that the most expensive school isn’t necessarily the best one for your child, and the best school for your child need not be that expensive. The most suitable choice largely depends on your own unique family circumstances and goals. From your child’s earliest years, start to identify their skills and talents in a particular area; technology, music, drama, sports or they may be

exceptionally gifted academically. If your child has a unique talent, it is worth selecting a school where it can be nurtured. Children thrive when they participate in activities where they have a strong natural ability. Many leading educational institutions offer scholarships and grants for outstanding abilities. These, however, do come with some strings attached, such as maintaining a certain standard of performance or being tied to a particular field of study. Scholarships seldom cover all costs, so you must still come up with the difference. Be mindful of not pushing too hard to extract performance levels that might just be beyond your litle genius’s ability. Such pressure can lead to high levels of stress, anxiety, and depression. In planning for your child’s education, estimate what the total cost is likely to be. It is better to over-estimate than to risk having a shortfall that could affect your plans. Major expenses include tuition fees, accommodation, textbooks, laptop, sporting equipment, uniforms, transportation, extra-curricular activities, private tutors and personal expenses. Annual increases in education costs range between 10% and 15% each year. Bear in mind that this could be significantly higher. In any case, this means that a child born today will face a tuition bill several times more than what the average student pays today. On the internet, there are numerous savings calculators that can build various scenarios. Factor in historical trends and crunch the numbers; what happens when you earn a higher interest rates on your deposit, if you miss a month’s payment, are able to make an extra payment. A financial calculator helps you determine how much to

put into the education fund each month in order to meet a particular goal. If it is your intention for your children to be educated abroad, the exchange rate is crucial. Massive devaluations of the naira against major currencies completely overturned many educational plans. Seek professional advice regarding offshore investment opportunities that can generate income to help offset expenses abroad. The stock market is generally regarded as a strong option for long term investing; stocks have historically outperformed other investments over the long term; in the short term they can be volatile. If your plan is to put money away for your child for about ten years or more, then it is well worth considering investing directly in a professionally managed portfolio of blue chip stocks or an equity mutual fund which offers diversification and liquidity. Your fund choice will typically depend on factors such as child’s age, your risk tolerance, time frame, and ultimate financial goal. As your child approaches college age, say two to three years before, preservation of capital should take precedence over the rate of return. If you leave the money in stocks till the last minute, you may be forced to sell at a loss. Begin to shift your money into more conservative investments such as treasury bills and other money market accounts to reduce exposure to market volatility. Real estate is an outstanding asset class that can support education funding; you can sell property, earn rental income to pay school fees, or borrow against a property. You may be eligible to borrow a percentage of your home equity; this is the difference between the market value of your property and the outstanding mortgage loan. Be

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From your child’s earliest years, start to identify their skills and talents in a particular area; technology, music, drama, sports or they may be exceptionally gifted academically

cautious about going into debt to fund your child’s education; interest expenses significantly increase the education costs, and if you default, you could lose the property. Unsecured loans are available for relatively high-income earners but at double digit interest rates; avoid borrowing to pay school fees without the capacity to service the loan comfortably, or it can turn into an unending cycle of debt. Have you considered an educational savings plan? Leading insurance companies in Nigeria offer Educational Savings Plans that lighten the burden considerably and help parents avoid the sudden huge expenses that come from inadequate planning. For a relatively small premium, with an Education Protection Plan, you can secure your child’s education even if the worst happens. An Educational Trust is a trust established with the sole purpose of providing funding for education. At the appropriate time withdrawals can be made from the Trust to fund the education of beneficiaries. Some private schools permit parents to pay school fees in advance, say annually or longer, for a discount. This can be attractive particularly in environments where inflation is very high as it helps you lock in today’s costs without having to worry about rising costs in the future. Consider this carefully however, as by tying down your funds you forfeit the opportunity to invest the funds yourself. As you prepare financially for your children’s education, remember that while you want your child to succeed in life, you cannot afford to neglect or jeopardise your own financial security. Try to find a happy medium between selecting a school that you can afford and one that offers a sound education. Maintaining your own long-term financial security is key to your children’s stability as well as yours.

Follow Nimi Akinkugbe on: Twitter and Instagram: @ MMWithNimi, Facebook: ‘Money Matters With Nimi’ Send an email to info@ moneymatterswithnimi.com Or visit her Website www. moneymatterswithimi.com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi.com Twitter: @MMWITHNIMI Instagram: @MMWITHNIMI Facebook: MoneyMatterswithNimi www.businessday.ng

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Monday 26 August 2019

BUSINESS DAY

news

Nigerian banks recall Eurobonds as dollar-lending opportunity thins OLUWASEGUN OLAKOYENIKAN

igerian banks were at a crossroads of incurring more costs on their outstanding Eurobonds or exercise the call option on their dollar-denominated liabilities following tumbling lending opportunities in the foreign currency, as Nigeria’s economy continued to struggle since oil crashed some four years ago. The latter seems to be a more favourable choice as three banks -Access Bank, First Bank of Nigeria Limited and Ecobank Nigeria - have so far this year redeemed as much as $1.1 billion worth of outstanding Eurobond notes issued in 2014 before maturity, while out of the three remaining banks’ dollar notes, Zenith Bank planned to re-call its outstanding 2022-dollar notes worth $500 million. This would bring the total value of early redemptions in 2019 to $1.6 billion, reflecting weakened demand for dollar

loans from Nigerian corporates. “When banks are recalling or redeeming their Eurobonds, it is a signal that there aren’t many dollar lending opportunities in the economy,” Wale Okunrinboye, head of investment research at Pension Fund, Sigma Pensions, had told BusinessDay. The Nigerian economy grew less than 3 percent in the last four years with a slower growth pace of 1.94 percent in the second quarter of the year compared with a revised growth of 2.10 percent recorded in the previous quarter. Dollar lending opportunities, which predominantly abound in the country’s oil and gas sector, have also come under pressure, no thanks to the lower crude oil prices in the international market. For instance, foreign currency loans by Zenith Bank to the oil and gas sector, which stood at $1.82 billion in the first half of 2017, fell to $1.82 billion in the same period of 2018. In the first six months of this year, the dollar-denominated

loan disbursed by the bank to the sector further dropped to $1.01 billion. Prior to the 2014 crash in crude oil prices, some international oil companies (IOCs) such as Shell, Total, Chevron, and Eni divested their stakes in some onshore and shallow water assets in the country, this among other deals required dollar funding from the Nigerian banks. However, “such transactions have reduced now locally,” said Omotola Abimbola, macro and fixed-income analyst at Lagos-based Chapel Hill Denham. “There is no point holding on to dollar liabilities as a bank if you don’t have any major use for it.” Since the private sector players are not demanding for the foreign currency related loans because the macro conditions still look quite fragile, the banks felt this is the best time to make a call on those Eurobonds and focus more on naira-denominated loans, according to Gbolahan Ologunro, research analyst at CSL Stockbrokers Limited.

Delta received highest allocation in H1 2019, with N3.84trn FAAC disbursement HARRISON EDEH, Abuja

bout N3.84 trillion was shared by Federal, States, Local Governments and others between January and June this year, with Delta State receiving the highest allocation within same period. During the same period, nine states representing 25 percent of all the states of the Federation had net disbursements higher than the first half (H1) of 2018. The information and data are contained in the latest edition of NEITI Quarterly Review, which examined ‘‘FAAC Disbursements to the Federal, States and Local governments for the first half of 2019.” A breakdown of the FAAC disbursement shows the Federal Government received N1.599 trillion; the 36 states got N1.335 trillion while the 774 local governments shared N792 billion during the period under review.

From the NEITI publication, the disbursements of N3.84 trillion by FAAC in H1 of this year were slightly lower than the N3.94 trillion disbursed by FAAC during the same period in 2018, but higher than the N2.78 trillion disbursed in the H1 of 2017. In addition, the total FAAC disbursements in second quarter of 2019 were the lowest since the fourth quarter of 2017, “The quarterly FAAC disbursements from Q1 2013 to Q2 2019 reveals that the total disbursement of N1.913 trillion in the second quarter of 2019 was the lowest since the fourth quarter of 2017 when N1.700 trillion was disbursed. The figure shows that three quarters of 2018 had total disbursements above N2 trillion.” The NEITI Quarterly Review, which combins new data for the 2019 second quarter with previously examined data for the 2019 first quarter, shows that increase in revenues witnessed in the H1 of 2018 and 2017 were not sustained in 2019, as revenues in H1

of this year were slightly lower. For instance, the N3.84 trillion shared in the first half of this year was 2.6% lower than the N3.946 trillion disbursed in the first half of last year and 37.8% higher than the N2.8 trillion disbursed in the first half of 2017. The analysis, Orji Ogbonnaya Orji informed in a statement on Sunday was conducted using data obtained from the National Bureau of Statistics, Office of the Accountant General of the Federation and FAAC showed that, “in the first half of 2019, total disbursements to FG were N1.599 trillion. This amounted to 41.61% of the total amount disbursed over this period. This amount was lower than the N1.652trillion disbursed in the first half of 2018 but higher than the N1.098 trillion disbursed in the first half of 2017. Thus, disbursements to FG in the first half of 2019 were 3.22% lower than disbursements in the first half of 2018 but 45.56% higher than disbursements in the first half of 2017”.

ENGIE’s acquisition of Mobisol presents leverage to speed up Nigeria’s rural electrification STEPHEN ONYEKWELU

NGIE, a decentralised energy company’s acquisition of Mobisol, a pioneer of off-grid solar solutions, presents partnership opportunity for Nigeria’s Rural Electrification Agency (REA) that seeks to drive rural electrification through off-grid decentralised solutions but lacks adequate funds. About 80 million Nigerians living in 8,000 villages across the country lack access to electricity, the World Bank says. The company already has significant activities in off-grid electrification in Africa. With its subsidiary Fenix Interna-

tional, it provides access to energy and financial services via its solar home systems to over 500,000 customers, improving the quality of life for over 2.5 million people in Uganda, Zambia, Nigeria, Benin, Cote d’Ivoire and Mozambique. “Access to finance and funding for projects remains a challenge for off-grid private sector developers around the world. In most cases, the projects have a viability gap that requires support from financial institutions, government agencies, state governments and donor agencies,” Damilola Ogunbiyi, managing director, REA, said in an interview last year. www.businessday.ng

“We are addressing the challenge through a number of interventions, the Rural Electrification fund, Nigerian Electrification Project with the World Bank and also working with the African Development Bank (AfDB).” Universal electrification is the 7th of the United Nations Sustainable Development Goals (SDG) that the global community has committed to achieving by 2030. Currently more than 600 million people have no access to electricity in Africa and by 2030 the continent is expected to be home to 80 percent of the world’s off-grid population, according to the International Energy Agency. https://www.facebook.com/businessdayng

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Monday 09 September 2019

BUSINESS DAY

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Monday 09 September 2019

BUSINESS DAY

news

$9.6bn award: FG warned not to toy with idea of seizing Bonga oil field

NDIC rallies foreign insurers to de-risk digital, cryptocurrency deposit system

... as it can be suicidal

... secures working partnership with South Korea, Taiwan

Olusola Bello

ederal Government has been advised not to toy with the idea of seizing Bonga Deep Water Oil Field in which a British company, Shell, has substantial interest as well as others and Irish businesses as that would amount to suicide. Oil and gas industry stakeholders also say they are weary if such proposal is not already having negative impact on the signing of the final investment decision on Bonga South West project, expected to engender tremendous impact on the economy when it kicks off. This is because activities on the project may be put on hold, as its promoters may want to wait and see how the whole case with Process & Industrial Developments Limited (P&ID) is resolved. Other projects that may attract investment inflow are feared may also be affected by controversies that have trailed the award of $9.6 billion to P&ID by a British commercial

court. Godwin Izomor, managing director of MV Vowgas Limited, says seizing the assets of companies, as retaliation to the judgment is not the solution to the problem on ground. He says the situation has not necessitated seizing assets of other companies but rather the government should find an amicable way of resolving the problem. He advises that the Federal Government should engage all interested parties so that the matter can be resolved. The problem, he explains, has nothing to do with Bonga projects and Bonga should not be dragged into it. On his part, Diran Fawibe, chairman/CEO of International Energy Services, says seizing the assets of companies in retaliation to the judgment will be counterproductive, adding that there are two approaches to the issue. One of the approaches is looking at the history of the transactions, especially the comment made by T.Y Dan-

juma who said the whole idea was his and that he paid $40 million for the preliminary jobs of the contract. He describes the whole as fraud that not be allowed to repeat itself. According to Fawibe, the government should appeal the case to stall the seizure of her assets and later on file a suit. The second approach is that the government should negotiate with P&ID, but not from the position of weakness. As the $9.6 billion arbitration award and the UK court enforcement judgment against Nigeria in favour of an Irish firm, P&ID, continue to generate controversy, the Presidency hawks are said to have urged the Federal Government to take stern actions to protect the country’s assets threatened by the hefty award. According to Presidency sources, the actions being proposed include the seizure of Bonga Deep Water Oil Field in which a British company, Shell, has substantial interest as well as other British and Irish businesses.

Showdown looms as Shiites defy police, plan nationwide procession on Tuesday Innocent Odoh, Abuja

espite the ban on protests and processions imposed on members of the Islamic Movement in Nigeria (IMN), otherwise known as Shiites, the sect has vowed that no force in Nigeria will stop them from carrying out their Ashura procession nationwide on Tuesday, stressing that it is their religious rights as enshrine in the Federal Constitution. Spokesman of the group, Ibrahim Musa, told BusinessDay on Sunday that “Ashura is a religious duty; nobody will ask us to stop it just like that.” The Ashura procession is embarked upon by the Shiites worldwide in memory of the death of Husayn Ibn Ali in the battle of Karbala in Iraq. He is believed to be the third Shia Imam. Husayn was the grandson of Prophet Muham-

mad and son of Ali ibn Abi Talib, believed to be the first Shia Imam. According to the Shia history, Husayn was killed in the Battle of Karbala on October 10, 680, when his army engaged the army of the Second Umayyad caliph Yazid 1 in a fierce battle. He is considered a hero and a martyr in Shia Islam and highly revered. Because of the significance of this event the Shiite members insist that despite the order by the police authorities banning such processions, they will stage the procession in Abuja and all over the federation even if they are shot by the police. Musa also told BusinessDay that they are willing to be martyred like their revered imam Husayn and dared the police to prepare more bullets. “We are commemorating the death of our imam who was martyred. So, if somebody

RAZAQ AYINLA

ith the increasing rate of cyber crime and other related financial crimes traceable to online transactions and cryptocurrency operations all over the world, the Nigeria Deposit Insurance Corporation (NDIC) is taking proactive steps to forestall possible eventualities that may arise as a result of unwholesome financial practices trending across the globe. This has prompted the NDIC Board to rally fellow deposit insurance corporations, which are members of 91 world deposit insurers that constitute Basel, Switzerland-based International Association of Deposit Insurers (IADI), in order to facilitate robust implementation of deposit insurance system that de-risks digital and cryptocurrency operations in various countries of the world. Consequently, the Board of the NDIC undertook tours to two foreign deposit insurers - the Central Deposit Insurance Corporation, Taiwan and the Korea Deposit Insurance Corporation (KDIC), where

exchange programmes on deposit insurance systems were discussed (among others) and memoranda of understanding (MoU) signed to cement working relations. Speaking with some journalists recently, Ronke Sokefun, chairman of the Board of the NDIC, said the tours to the Taiwan and Korean deposit insurance corporations were to effectively and quickly tame the rising nature of cyber crime digital operations might have increased across the world. Sokefun, who led the delegation from the NDIC that included Umaru Ibrahim, the managing director and other members of the Board as well as management staff, noted that deposit insurers all over the world must work together in order to jointly curtail emerging challenges arising from the increasing globalisation and complexity of large financial transactions in different regulatory jurisdictions across the world. She said, “We have an umbrella body - International Association of Deposit Insurers (IADI), which yearly AGM provides opportunities for all the regions to compare notes.

is trying to martyr us that is his problem. So, we are going out on Tuesday for our normal Ashura procession. Our procession is a peaceful one and it has been ending peacefully only that now the police want to disrupt it. But if they disrupt it they are the ones causing the chaos not we,” he said. When reminded that the procession could put their members in harm’s way, the IMN spokesman said “whenever we are observing our processions we don’t carry arms, we don’t burn shops, we just go out chanting our slogan, which is a constitutional right. We have the right to observe our procession peacefully. So if somebody says we are not going to observe the procession, that is his problem, he is the one causing chaos and confusion and killing people. Up to date nobody has said that the IMN has killed one single person.”

We’re implementing reforms to revitalise NHIS – minister Godsgift Onyedinefu, Abuja

inister of health, Osagie Ehinare, says the National Health Insurance Scheme (NHIS) is currently undergoing reforms to revitalise and reposition the scheme to effectively deliver universal and satisfactory health care to all. Ehinare said issues to be addressed during the reforms include but not limited to delayed payments by Health Management Organisations (HMOs), tales of services that were dissatisfactory as well as discourteous handling by hospital staff and the pressing

need for tariff review. The minister, who said this at a strategic stakeholders forum for healthcare providers (HCPs) last week, said, “These reforms give me confidence that ultimately NHIS will receive not just a facelift, but a total revitalisation.” He recalled that the NHIS had been of particular concern in recent times, following some protracted crisis with significant impact on its leadership and operations. He assured that some of the concerns of the providers have also come to the attention of the government, including but certainly not limited to delayed payments www.businessday.ng

by HMOs and the pressing need for tariff review. “Of particular concern here are the Health Care Providers accredited under the Scheme, who are invariably very critical stakeholders of NHIS. This is particularly so, when you consider that the providers are the ones among the stakeholders with the most frequent and intimate enrolee encounter,” he said. He said the import is that most impressions of the enrolee about NHIS are formed from their experiences at the service point, giving the providers the privilege to influence largely the image of the scheme. https://www.facebook.com/businessdayng

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“It was at one of such meetings that we developed a relationship and commenced discussions on possible collaboration with S. Korea and Taiwan which culminated in the execution of Memoranda of Understanding (MOU) with the KDIC and CDIC. “Deposits have gone beyond cash and money instruments as we now discuss cryptocurrencies which has also resulted in a rise in cyber crime. Collaborations of this nature are geared towards combating such crime through the use of technology and staff exchange.” While revealing that the MoU signed with both the Korea Deposit Insurance Corporation (KDIC) and Taiwan Central Deposit Insurance Corporation (CDIC) would offer platforms for effective multilateral working relationship among the world insurers under International Association of Deposit Insurers (IADI), Sokefun added that there would be periodic exchange of staff among participants as part of efforts to promote best practices for effective deposit insurance system globally.

Monday 09 September 2019

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 06 September 2019

Top Gainers/Losers as at Friday 06 September 2019 LOSERS

GAINERS

Closing

Change

NESTLE

N1250

N1205

-45

0.65

DANGCEM

N157.7

N155.7

-2

N6.05

0.55

GLAXOSMITH

N7.9

N7.15

-0.75

VOLUME (Numbers)

N6.45

N6.9

0.45

ETI

N7.7

N7.15

-0.55

VALUE (N billion)

N5.8

N6.2

0.4

N15.05

N14.5

-0.55

Opening

Closing

Change

DANGFLOUR

N20

N21

ZENITHBANK

N17.35

N18

UACN

N5.5

ACCESS CUSTODIAN

Company

ASI (Points)

Opening

Company

DEALS (Numbers)

MARKET CAP (N Trn)

27,146.57 3,192.00 311,260,175.00 6.435

Global market indicators FTSE 100 Index 7,282.34GBP +11.17+0.15%

Deutsche Boerse AG German Stock Index DAX 12,191.73EUR +64.95+0.54%

S&P 500 Index 2,979.43USD +3.43+0.12%

Nikkei 225 21,199.57JPY +113.63+0.54%

Generic 1st ‘DM’ Future 26,808.00USD +107.00+0.40%

Shanghai Stock Exchange Composite Index 2,999.60CNY +13.74+0.46%

13.206

Stocks’ new lows offer re-entry opportunity for bargain hunters Stories by Iheanyi Nwachukwu

Access Bank’s first post-merger H1 PBT hits N74.1bn …Declares 25kobo interim dividend

NASD OTC: Unlisted stocks’ value down by N2.47bn

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Tuesday 03 September 2019

BUSINESS DAY

news

Border closure: FG living in denial of corruption in Customs Service CALEB OJEWALE

he foreign rice found in Nigerian markets are not brought in through underground tunnels synonymous with drug cartels in Latin America as they desperately work to distribute their illegal merchandise. In Nigeria, every single bag of foreign rice (or at least 97 percent) that is found in the market was smuggled into the country, many of this with the active connivance of Customs officers who according to reliable sources do this in exchange for financial rewards, in short, bribes. Customs officers imposed a “unilateral levy” of N1000 for every bag of rice being smuggled across the Seme border area, at least as witnessed two years ago, in an undercover trip across the border by a BusinessDay reporter. It was witnessed firsthand the reckless abandon with which smuggling was done, right under the watch of Customs officers paid with taxpayers funds to secure the same borders. For some years now, rice importation through the land borders has been banned in Nigeria but still permitted through the seaports at a rather high 70 percent tariff that is meant to discourage importation. However, ‘foreign rice’, as it is called has continued to flood markets across the country, as local capacity is yet to catch up with demand. Rather than address the operational inefficiencies and monumental corruption tendencies of the Nigerian Customs Service, the Federal Government decided to shut some of the country’s southern borders in what was described as an effort to curb smuggling. “The government is in denial, everybody on the streets knows that the Customs (service) is synonymous with corruption,” said Emmanuel Ijewere, vice president, Nigeria Agribusiness Group (NABG) in a phone interview with this reporter. According to him, “We do know that the smuggling along the borders take place with a cabal, and there is allegation that it is the Customs that makes it happen. If there was genuine effort to clean up the customs, this shutting of the borders would not have been necessary.” Thailand rice exports to Benin republic in 2014 was 1,112,602 metric tonnes, declining sharply to 805,765 metric tonnes in 2015 when Nigeria stiffened rice importation in favour of local production. However, a year later in 2016 Thai rice exports to Benin picked up again, recording 1,421,050 metric tonnes, and further increased in 2017 to 1,814,014 metric tonnes. Last year, Thai rice exports to Benin was 1,697,930 metric tonnes. As at July this year (2019), Thai rice exports to Benin stood at 943,162 metric tonnes, a slight increase from 932,890 metric tonnes within the same period in 2018.

The same patterns were recorded by Cameroon, another neighbouring country sharing borders with Nigeria. In 2014, Thai rice exports to Cameroon was 517,526 metric tonnes, and just as seen in Benin, equally dipped in 2015 when Nigeria stiffened rice importation, recording 449,297 metric tonnes. The country’s exports from Thailand also picked up by 2016 with 502,254 metric tonnes of rice, increasing the volume to 749,000 metric tonnes in 2017, but a sharp decline to 415,341 metric tonnes in 2018. However, 2019 exports to Cameroon were already showing signs of performing better than 2018, with 290,679 MT of rice already exported there from Thailand, against 221,171 MT in 2018. Nigeria on the other hand recorded 6,537 MT of Thai rice exports in 2018, a staggering drop from 1,239,810 MT in 2014, 644,131 MT in 2015, 58,260 MT in 2016, and 23,192 MT in 2017. As rice exports to Nigeria decline, those of the neighbouring countries have steadily increased, even though there is little evidence to suggest they are able to consume the volume of rice they are importing. Pleading anonymity, a top official, in one of the biggest agricultural conglomerates in Nigeria, had in a document shared with BusinessDay, stated: Rice consumption in Nigeria is almost entirely of parboiled rice. In West Africa only Nigeria consumes parboiled rice. Other West African countries including all the neighbouring countries to Nigeria (Niger, Benin, Cameroon, Chad) are not consumers of parboiled rice. In Africa South Africa is the only other major country that consumes parboiled rice. The shipments of parboiled rice from India and Thailand into Lome, Cotonou and Douala ports is a very fair estimate of smuggled rice into Nigeria as none of these countries have internal consumption of parboiled rice. All the imports of parboiled rice into these countries finally find their way into Nigeria, this official asserted. As also observed, the volume of rice exported to Nigeria’s neighbouring countries, and in turn smuggled to local markets here, cannot all be brought in bits, many of these would have to be loaded into big trucks or barges. These require proper roads and hence can be intercepted easily, if some Customs officers were not complicit in those operations. “Let the customs do its job and not just paying lip service,” said Rotimi Fashola, general manager, Elephant Group Plc a company with investments in local rice production, but hesitant to indict the Customs service directly for being complicit in rice smuggling. Fashola, reiterating the existing ban on rice importation through the borders, said “if indeed the Customs service polices the land borders as it should, no rice would come in.”

L-R: Guy Czartoryski, head, research, Coronation Merchant Bank; Meksley Nwagboh, head, corporate communications, and Abiodun Sanusi, director, investment banking, during a press conference to announce the launch of the report on the insurance sector in Lagos, at the weekend. Pic Olawale Amoo

Merger deals still not insight 9 months to insurance recapitalisation deadline Modestus Anaesoronye

ine months into the insurance industry recapitalisation deadline, no merger deal is in sight yet, even as opportunities to raise fresh funds from the capital market look dim. Underwriting companies have till June 30, 2020, to meet the new minimum capital requirement set for them by the National Insurance Commission or lose their operating licence. Analysts have expected that given the low liquidity in the capital market that could have been easier source of fresh funding for insurers, alternative would have been to consummate merger deals. But with this not coming in sight till now, fears are that a lot of the underwriting

companies whose dividend payment record has not been attractive or many others with clear operational challenges may be running into troubled waters in the months ahead. Nigerian insurance regulator, the National Insurance Commission (NAICOM) had in a circular issued on Monday, May 20, 2019, announced increase in the paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion, and Reinsurance companies from N10 billion to N20 billion. According to the Commission, the minimum paid-up share capital requirement shall take effect from the commencement date of this circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies shall be

required to fully comply not later than June 30, 2020. Tunji Oluyemi, managing director/CEO, Tespauruth Consulting Limited (TCL), said with the insurance industry returns on investment being as it were today, I think the industry as a whole would encounter difficulty in attracting fresh local capital. “Local alternative asset classes offer returns significantly superior to what may be obtained in the insurance industry,” Oluyemi said. According to Oluyemi, the reality is that more than 85 percent of insurance companies’ stocks on the NSE are priced below 50 kobo, and “effectively, these are penny stocks, and may look attractive in particular to the discerning foreign investor with patient capital.” He however said we expect most of the activity to be in the realm of mergers and acquisi-

tions (M&A), stating that his company TCL was already discussing with some individual players in match-making exercises. “We will assist in a range of interlocking activities, details of which we may not go into here. We expect to record significant success in our efforts in this area,” he said. Pius Apere, managing director/CEO, Achor Actuarial Services Limited, sympathetic with some insurers that may have difficulty meeting the new minimum capital requirement, urged NAICOM not to throw them away. He stated that rather than consider liquidation, the Commission should transit any company that failed the recapitalisation test to micro insurance providers, stating that they would have value to add to that scheme having already acquired a lot of capacity.

Back-to-School campaign: NUJ, Edo SUBEB partner to check truancy among students

IMF removes age limit for position of managing director

do State chapter of the Nigerian Union of Journalists (NUJ) says it will collaborate with the State Universal Basic Education Board (SUBEB) to ensure pupils and students attend classes during school hours. Chairman of the Union, Roland Osakwe, says the partnership will ensure that no child hawks and engages in farm work during school hours in the state. Osakwe states this during the Back-to-School Rally organised by SUBEB across major streets and markets in Benin City, the Edo State capital. He notes that the state government has invested a lot in revamping the basic education sector, stressing that pupils and students need to be in their classes to benefit from the initiatives of the state government which have improved learning and teaching outcomes in schools in the state. He commends the Back-toSchool Rally while describing

Onyinye Nwachukwu, Abuja

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education as a light which every child should have access to. In her remarks, executive chairman, SUBEB, Joan Osa Oviawe, said the Back-toSchool Rally was organised to inform parents and guardians to allow their wards resume school on September 9 for the 2019/2020 academic session. The chairman, who was represented by a member of the board, Elizabeth Ighodalo, says academic activities would commence on Monday which is the first day of resumption unlike in previous times when teaching didn’t start on the first day of resumption. “We are beginning a new session and we are assuring our parents that academic activities will commence on September 9, and they should not allow their wards to hawk during school hours,” she adds. She noted that members of the School-Based Management Committee are replicating the back-to-school rally across the 18 local government areas of the state.

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nternational Monetary Fund (IMF) has announced that age limit will no longer matter for the position of its managing director. Since 1951, the IMF’s ByLaws had prohibited the appointment of a candidate aged 65 or over as Managing Director, and had also prohibited the Managing Director from serving past his/her 70th birthday. The approval by the Board of Governors is an endorsement of an earlier proposal by the Executive Board to remove the age limit for whoever heads the institution going forward. “The amendment to the By-Laws adopted by the Board of Governors, which is effective immediately, brings the Managing Director’s terms of appointment into line with those of members of the IMF Executive Board, which the Managing Director chairs, and those of the @Businessdayng

President of the World Bank Group, who are not subject to an age limit,” the IMF noted in a mailed note. The IMF Executive Board is currently engaged in the selection of a successor to outgoing Managing Director Christine Lagarde, who will step down on September 12. Nominations to the position closed on September 6, 2019, and the selection process is intended to be completed by October 4. The approval of the proposal required a simple majority of the votes cast, with a minimum participation requirement of a majority of Governors holding two-thirds of the total voting power. Voting ran from August 21 to September 4. The Board of Governors, which represents the 189 member countries according to their voting shares, is the highest decision-making body of the IMF and consists of one governor and one alternate governor appointed by each member country.

Monday 09 September 2019

BUSINESS DAY

BD Money

Monday 09 September 2019

BUSINESS DAY

Equity

cover

PERSONAL FINANCE

Commodities

These bank stocks hold upside potentials for investors amid market rout

This is what investment assets have yielded year-long

Managing joint account as couples: Pros & Cons

Why you should bet on Nigeriaâ&#x20AC;&#x2122;s $2.4b Okro market

Nigerian Stocks (-13.63%) Suppose at the start of 2019 you bought created an equity portfolio worth N1 million which replicates the main equity gauge of the Nigeria Stock Exchange (NSE); having all the listed stocks in the same weighting as the All Share Index, by how much would your investment have grown?

The notion of a joint account is that of an account held by more than one person with each individual having the right to deposit and withdraw funds with the consent of the other signatory.

Seafood Okro or fishermen soup is probably the next big cuisine that Nigerians are increasingly craving on the dinning list of hotels. Accompanied by fresh sea fishes, crabs, crayfish and other complementary ingredients...

The Nigerian equity market continues to print lacklustre performance on account of weak investor confidence over limited growth prospects of the broader economy combined with softer crude oil prices and fears of global recession.

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Monday 09 September 2019

BUSINESS DAY

BD Weekly Tenders Wrap-up Tenders Wrap-up

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; Israel Odubola; Olufikayo Owoeye; David Ibidapo; Graphics: Fifen - Famous www.businessday.ng

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Monday 09 September 2019

BUSINESS DAY

Equity

These bank stocks hold upside potentials for investors amid market rout ISRAEL ODUBOLA

he Nigerian equity market continues to print lacklustre performance on account of weak investor confidence over limited growth prospects of the broader economy combined with softer crude oil prices and fears of global recession. Despite the rout on the Nigerian Exchange which has seen sizeable number of stocks trade at fresh lows, albeit some stocks still offer significant upside potentials. Restricting the coverage to the banking industry, some stocks in this sector have attractive valuation and hold opportunity for long-term growth which will be of immense benefits to future-minded investors. Though trading at huge discount, it’s a smart move for investors with a long-term investment horizon to take position in the following stocks given their good earnings performance, remarkable asset quality, sound dividend payment track record, attractive yield and bright short to mediumterm outlook. Zenith Bank Nigeria’s second most-valuable lender is trading at a price-to-book ratio of 0.68, implying that investors are paying 68 kobo for each naira in net assets. With return on equity at about 14 percent mid-year 2019, the lender is efficient in using equity to fund operations and grow business. Zenith Bank is one of the country’s most profitable and efficient lenders with consistent records of dividend payment and asset quality. The bank declared 9 percent profit growth mid-year 2019, despite lower interest income, thanks to stronger non-interest income precisely electronic banking. The bank concentrates more on low cost deposits from retail customers to minimise cost of funds in a bid to keep interest margin at an attractive level bolster profit performance. The bank’s bad loan ratio notched slightly higher to 5.3 percent half-year 2019 from 4.9 percent in similar period of 2018, owing to drop in credit The lender says it is making efforts to

widen presence in Nigeria’s retail banking space by creating new retail loan products in a bid to meet the CBN’s loan issuance. Analysts at FSDH estimates that Zenith Bank might need to provide additional

“

Though trading at huge discount, it’s a smart move for investors with a long-term investment horizon to take position in the following stocks given their good earnings performance, remarkable asset quality, sound dividend payment track record, attractive yield and bright short to medium-term outlook

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N484 billion loan to satisfy CBN’s directive effective September 30. Its shares gained 3.75 percent to N18 Friday, and have shed about 22 percent since January. Fidelity Bank The bank is trading at price-to-book ratio of 0.22, implying that the stock is currently undervalued. Fidelity Bank generated N6 profit on each naira of owners’ fund mid-year 2019, similar with the previous comparable period, indicating that the lender is efficient in utilizing shareholder investment to expand operations. Going by current fundamentals and growth prospects, the bank is on course to deliver attractive return to investors in the near to medium term, analyst say. The bank’s earnings quality is attractive as the lender runs sustainable business model which ensures that bulk of earnings comes from core business activities. The lender’s asset quality of 5.2 percent is slightly below the Central Bank of Nigeria’s (CBN) 5 percent regulatory threshold, and this will most likely be sustained going forward as the bank has said it is going to be less aggressive to create new loans in coming quarters. The bank did not declare interim dividend for the half-year period of 2019, but

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has one of the highest dividend yields (of 7.10%) in the industry. Its shares advanced 0.65 percent to N1.55 Friday, and have shed by 26 percent since January, underperforming the benchmark index that returned 13 percent loss. Guaranty Trust Bank Nigeria’s most valuable lender continues to stand tall in the banking industry. The bank is trading at a price-to-book value of 1.31 times, implying that investors are bullish on its growth prospects going forward. This lender has the highest return on equity in the industry, generating as much as N16 for each naira of shareholders’ funds. The big bank is heavily investing in technology and deploys this service to retain existing customers and attract new ones. This paid off for the bank as non-interest income surged 16 percent in the first six months of 2019. The bank has good asset quality and liquidity position. At its recent conference call with investors, the bank has disclosed plans to explore inorganic growth strategies including potential acquisitions in East Africa to expand operations. Its shares depreciated 1.32 percent to N26.15 Friday, but has plunged 24 percent since the start of the year.

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Monday 09 September 2019

BUSINESS DAY

Cover Story This is what investment assets have yielded year-long

BUSINESS DAY

Managing joint account as couples: Pros & Cons DAVID IBIDAPO

is down -3.29 percent as of August 16, the latest information available on Securities and Exchange Commission (SEC) website. Equity based funds are down 26.96 percent, Money market funds are down 10.01 percent, Fixed Income funds are down 7.12 percent, Real Estate funds have pared 8.74 percent, Mixed fund have dipped 1.24 percent, and Ethical funds are down 10.58 percent. On the other hand, Bonds funds are up 23.67 percent. Exchange Traded Funds (+6.30%) An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. Similar to mutual fund, ETF is a hybrid investment vehicle with features of an index fund and a mutual fund. According to latest information form SEC ETFs have gained 6.30 percent year-long. Specialist Funds (+1.13%) A Specialist Fund is a fund designed for highly specialised investment entities that wish to target institutional, professional, professionally www.businessday.ng

advised and knowledgeable investors. Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF) is the only mentioned Specialist Fund in SEC’s report. The fund has gained 1.13 percent so far in 2019 according to the SEC data for six months to week ended august 16. Gold (+18.1%) Jitters on the back of rising global uncertainties have sent investors packing from risky assets into safe havens like gold, stoking price of the yellow metal to the highest levels in more than 5 years. Gold has gained 18.1 percent trading at 1,514.67 USD in the spot market as at 18:00 GMT+1 Friday. Goldman Sachs and Citigroup, US-based Investment Banks, say there is a possibility for the precious metal reaching $1,600 with the latter estimating the advancement within 6 months, at least. Bank of America Merrill Lynch, on the other hand, expects bullion price to near $2,000

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Personal Finance lennials compared to the time of the X generation. Ajayi Funmilayo, a 27-year-old career wife strongly against the operation of a he notion of a joint account joint account said “my husband’s money is that of an account held by belongs to the both of us but my money more than one person with belongs to me, besides he is the head of each individual having the the house, his money should be used to right to deposit and withdraw run the affairs of the home.” funds with the consent of the other sigSurvey and interrogations by Businatory. nessDay reveal the major Pros and Cons Biblically, the fusion of a man and of couples operating a joint account woman makes them one, hence it is as well as the most advisable form for expected that they should do everything couples to operate a joint account. together with finances or better put fiCons of operating a joint account nancial planning not excluded. • Less financial independence: this is Therefore, couples operating a joint largely feared among couples especially account would mean them sharing fi- the ladies who believe they will not be nancial responsibilities in running the opportune to spend as much as they wish home, running a joint savings account, to if they operate a joint account. etc and these can be achieved when • Slow decision making: in case of an they commit all or part of their monthly emergency where one of the signatories salary and other incoming funds into a wants to make use of funds for something single account. either personal or for the home, if the An account manager of a tier 2 bank other person is against the idea reachwho pleaded anonymity said the opera- ing a final conclusion will require a lot tion of joint accounts between couples of back and forth between the couple. have reduced greatly especially among • Possible problems in case of a the generation Y also known as the mil- breakup: with the high rate of divorce

SEGUN ADAMS Nigerian Stocks (-13.63%) uppose at the start of 2019 you bought created an equity portfolio worth N1 million which replicates the main equity gauge of the Nigeria Stock Exchange (NSE); having all the listed stocks in the same weighting as the All Share Index, by how much would your investment have grown? Not at all! You would have a capital loss of N119,950.72 as at Friday and considering inflation at currently around 11.08 percent the performance is not so good. On the upside, some stocks would have paid you dividend by that time; in fact a big lender should have your week with an interim dividend credit alert. It should be noted that while the stock market has been bearish, a number of stocks hold opportunities for savvy investors. There are a number of stocks that have gained more than 20 percent so far in the year underscoring the importance of the stocks you pick and their relative weighting in your portfolio. Also the price of some fundamentally sound stocks have never been cheaper and provide opportunities for investors. Oil (+14.59%) It started as a sleek year for oil which gained up to 39 percent by April but everything got slippery as a mix of supply and demand factors including the Trade war between US and China weighed on Brent performance. Brent, the benchmark crude, so far in the year has gained 14.59 percent to around $61.65 on the ICE Futures Europe around 18:19 GMT+1 Friday. There are trading platforms in Nigeria to bet on or against this liquid gold. Mutual Fund (-3.29%) A mutual fund is a professionally managed investment vehicle that pools money from many investors to purchase securities. The fund can be invested in securities in an asset class or an array of instruments in a way meets investors’ goal to grow or preserve wealth. There are different kind of funds and different fund managers in Nigeria. On the average across all fund types mutual fund

Monday 09 September 2019

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With the high rate of divorce and separation, there is the probability that 5 out of every 10 couples will opt for a divorce or separation at a point in their lives

within two years, beating the all-time high of $1,921.17 established in 2011. Bitcoin(+192.87%) Bitcoin opened for the year around 3,715.56 USD per unit of the cryptocurrency but has surged some 192.87 percent to 10,729.81 USD per unit as of 18:00 GMT+1 Friday. The coin has gained the most among asset classes reaching as high as USD 12,500 near mid-June. Currency (USD +0.7%) If you did not bet on the dollar against the naira at the start of the year you haven’t missed much. The naira has gained on the green back by 0.70 percent given its current price of N360.06/$ as at GMT+13:53 on Friday, according to data from Bloomberg. This is not saying that hedging against exchange rate movement is a bad idea. Earlier this month dollar was priced at N365.52/$, the highest year-long. www.businessday.ng

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and separation, there is the probability that 5 out of every 10 couples will opt for a divorce or separation at a point in their lives. In case of a breakup, reaching a consensus in splitting the account may cause disputes especially if expenses cannot be accounted for. • Higher risk of bankruptcy amid prevailing cyber fraud: A report by the Nigerian Communications Commission (NCC), says Nigeria ranks third in global internet crimes loosing N127 billion in 2015 to cybercrimes. With the increasing rate of cyber fraud, couples operating joint accounts stands the risk of bankruptcy should the be victims of the crime. Pros of operating a joint account • Curbs unnecessary spending: operating joint accounts reduces the chance of frivolous spending habits, inhibiting wasteful and unnecessary expenses since both partners have to give consent to all expenditures in the home. Furthermore, this will improve the saving culture of the couple. • Encouraging financial planning: contributing income in carrying out projects or running the affairs of the home will require a plan and a budget which will give room for judicious spending. •Transparency: operating joint account will ensure accountability and transparency between the couple as each of them are aware of the other’s spending. Managing a couple’s joint account • Before making a decision regarding finances, the couple should explore different options, discuss extensively and settle on what works best for them. • The couple can run a joint account and as well operate private accounts. This can be achieved if an agreed fraction of each person’s income is contributed into a single account which is used to run the home while the remainder is kept for personal use. • Operating a joint account should be for a particular purpose either for special projects or paying bills, a move supported by both signatories. • The funds for a joint account can be used for investments which will guarantee returns. These returns can be ploughed back into the joint account to grow it. • Financial experts advise that managing joint accounts without hassles requires communication between the couple about their financial status and expenses.

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Monday 09 September 2019

BUSINESS DAY

Commodities

Why you should bet on Nigeria’s $2.4b Okro market Temitayo Ayetoto

eafood Okro or fishermen soup is probably the next big cuisine that Nigerians are increasingly craving on the dinning list of hotels. Accompanied by fresh sea fishes, crabs, crayfish and other complementary ingredients, the soup is just one of the many ways Nigerians utilise Okro, contributing to a $2.38 billion market. The commodities which is practically a staple food across the east, south, southwest and northern areas of the country not only has a nationwide market for its production, there are also expatriate communities to be served locally through hotels with international franchise, supermarkets or open market. Opposite the Indian Language School in Ilupeju, a part of Lagos dominated by Indians, a grocery store thrives in the sale various kinds of vegetables including Okro. Going into Okro production might not be a mishit for a commodity investor looking and the success rate could even be

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As an investor, who do you want to produce for? When do you want to produce? Can you find a sustainable market? What volume does your market require from you? Is it weekly, bi-weekly or monthly?

higher than envisaged should a producer target specific markets for supply and produces in accordance with the recommended specifications, says Detoun AbbiOlaniyan, chief executive officer, Madville Consulting Ltd., an agriculture consultancy firm. Out of a total global production estimated at 8.9 million tonnes (10.68bn), Nigeria’s output make up 22.5 percent valued at $2.38 billion. Globally, Nigeria is the second largest producer after India’s out of 5.51 million tonnes. Other contenders are Sudan, Mali, Pakistan and Ivory Coast. With a potential output estimated at approximately five million tonnes, Nigewww.businessday.ng

ria can shore up production by upgrading the system of production from subsistence farming as widely being practiced to large commercial scale farming, a Financial Derivatives Company (FDC) commodity report for September suggests. This presents an opportunity for okro producers to bridge that gap. “As an investor, who do you want to produce for? When do you want to produce? Can you find a sustainable market? What volume does your market require from you? Is it weekly, bi-weekly or monthly?” asks Abbi-Olaniyan. Apart from the primary market for okro, there is also the secondary market which is

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the processed okra. The commodity can be dried milled into powder or into plate and be applied to form a cooking constituent. Besides that, okra seeds can serve as a source of non-caffeinated coffee when it is dried and milled. It is nutritional and good as medicine. Giving growing nuggets, Madville Consulting Ltd. advised that producers target months like December, January, February and March have an all-year growth plan anchored by irrigation by irrigation systems. These are seasons when okra get very expensive and might in fact be scarce because many farmers struggle to grow out of the rainy season on lack of irrigation system. For instance, Thistleberry Natural Farms grow the local variety and Lady’s Finger, another variety, to serve both Nigerian community and expatriate communities including Indians, Lebanese, Europeans or Americans eating okra. A 2010 study of the profitability of okra in a local government in Ebonyi state showed that the average revenue from okra production in the area is N 61,507.89 per hectare while the total cost is N25, 726.18 per hectare, which gives rise to N 35,781.71 profit per hectare. This indicates that the enterprise is profitable and can serve as an additional source of revenue for households in the area. It also shows that there is a high demand for okra since it is the major component of most soup in the area.

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Monday 09 September 2019

BUSINESS DAY

Data

Federal government Eurobond Yields on Eurobonds fell slightly week on week by 0.41 percent point from an average of 6.659 percent when the market closed last week to 6.25 percent following as interest in Nigeriaâ&#x20AC;&#x2122;s Sovereign Eurobonds was muted.

Corporate Eurobond Yields on corporate Eurobonds fell 0.31 percent points across all tickers week-on-week with average yield dip slightly from 5.79 percent last week to 5.48 percent. www.businessday.ng

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Monday 09 September 2019

BUSINESS DAY

Personal Finance Banks offer exciting ‘back to school’ products as classes resume OLUFIKAYO OWOEYE

chools across the country would be resuming a new academic session this month. For parents, it is time to think about payment of school fees, purchase of new school uniform, shoes or sandals, bags, and books. While parents want the best for their children, having quality education can also come with a hefty price tag. Interestingly, some financial institutions also have launched some educational products aimed at easing the burden usually experienced by parents at the beginning of a new academic session. First Bank’s educational products and solutions for school owners and parents include the FirstEdu loan, which is targeted at private nursery, secondary and Alevels schools. The product offers an opportunity for private schools to access flexible funding to meet urgent cash flow needs, replace old furniture and equipment, as well as refurbish dilapidated buildings and classroom blocks. Customer can access up to

N10m with no tangible collateral required apart from the domiciliation of school account with the bank. Others include operational vehicle loan, term loans for constructing new sites and extension of existing sites, personal loan against salary, First naira credit card which lets par-

ents spread out costs for easy payments, which enhances parents’ capacity to pay their children’s school fees. GTBank Guaranty Trust Bank has smart kids save (SKS) account available in two categories: SKS (0 – 12 years), SKS Teen (13 to under 18

Week Ahead (Monday, September 9 – Friday, September 13, 2019) Week Ahead Week Ahead (Monday, 8th April – Friday, 12th April, 2019) Commodity

Oil: Brent crude has been trading below the Federal Government’s $60 per barrel benchmark for about one month on account of escalation of United States and China trade war and uncertainty over the impact of North American hurricane drone. Going forward, we expect the commodity to sell between $58 and $61 per barrel. Risks to oil prices include on-going trade tension and Hurricane Dorian. Fixed Income The local bond market traded on a relatively quiet note, with few demand interests witnessed around the mid-end of the curve. Yields however ticked marginally higher by cumulative one percent basis points, as traders maintained bearish bets following weaker than expected second quarter GDP figures. Going forward, analysts expect interests in local debt market to remain muted, due to expectations of higher yields in the Treasury bill market. Currency We expect the naira to trade between N361/$ - 362/$ at the parallel market. Currently, the exchange rate at the Investors & Exporters Foreign Exchange (IEFX) window as Central Bank of Nigeria continues to sustain liquidity into the currency market. Data Release The Nigerian Bureau of Statistics will on Tuesday, September 10, release rail transportation data for first and second quarter of 2019. Event The Nigerian Stock Exchange Market Data workshop is an annual event aimed at increasing awareness on the critical role of Market Data as a fundamental input for creating wealth and bridging the information gap between the Exchange and market participants. The 2019 Market Data Workshop themed, “Partnerships, Products and the Customer”, will hold at Harbour Point, Victoria Island, Lagos.

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years). Minimum opening/account balance of N1, 000, with a competitive interest rates at 4.05percent It also allows lodgements of cheques, drafts, and dividends into the account, subject to a maximum of N100,000 per instrument and many more benefits. The bank also has a school fees

advance that allows competitive credit to help parents pay for their children up to three times in a year. Stanbic IBTC has a school fees loan open to customers of the bank. The loan can also be used to pay for other expenses, such as buying a laptop or materials needed to complete school projects. Flexible repayment terms over four months (if the school fees are payable each term) or 12 months (if school fees are payable yearly), Flexible interest rates and can be can be renewed every year if you have a satisfactory repayment and current account record. Access Bank has a facility upgrade support scheme credit program (“FUSS”) that provides short and medium-term financing to private primary schools for the purpose of, bridging short-term funding gaps, infrastructure development, and asset acquisition. It also has a Salary Advance that gives access to 50percent of your net monthly salary for a maximum period of 3 months, and Payday Advance which gives quick access to cash up to 90percent of net monthly salary to be repaid within 31 days or next payday

Chart of the week

Non-oil sectors drag Nigeria’s economy in Q2

For the third consecutive quarter, Nigeria’s economy slowed on the back of growth decline in the country’s non-oil sector, while oil output rose by most since the third quarter of 2018. A 1.64 percent growth of non-oil sector in the second quarter would be the first time the oil sector outpaced the non-oil counterpart. Between the second quarter of 2017 and 2018, oil grew at a faster rate until a sub-zero growth in Q2 last year. The non-oil sector grew 0.83 percent points slower than in the first quarter of 2019 while it declined -0.40 percent points year-on-year. Consequently, the contribution of non-oil to the broader economy output dropped to 91.18 percent from last year’s 91.45 percent while it improved from 90.78 percent recorded in the first quarter of 2019.

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Company IN FOCUS

BUSINESS DAY Monday 09 September 2019 www.businessday.ng

UACN 2.0: The unbundling of Nigeria’s oldest conglomerate OLUWASEGUN OLAKOYENIKAN

hen the name “UAC of Nigeria Plc (UACN)” is mentioned, what easily comes to mind is the company’s portfolio of well-known brands such as Gala Sausage Roll, a pastry snack which gained wide acceptance of road travellers in Nigeria; Mr Bigg’s, one of Nigeria’s leading Quick Service Restaurants (QSR) brands; Supreme Ice Cream; among others. From food and beverage to paint, logistics and real estate sectors of the economy, Nigeria’s oldest and one of the largest diversified conglomerates UACN, which was formerly a part of Unilever Plc., has played an active role in Nigeria’s economic landscape since 1879 and maintained a track record of consistency over the years. UACN is a listed conglomerate on the Nigerian Stock Exchange (NSE) and parent of a number of companies including UAC Property Development Company PLC (UPDC), the first company in the real estate sector to be listed on the NSE; and UAC Foods Limited, manufacturers of Gala Sausage Roll, Supreme Ice Cream and Swan Natural Spring Water. The company’s other business portfolio includes MDS Logistics Limited, a foremost integrated logistics company with investments in pharmaceutical distribution hubs in key locations across the country; UAC Restaurants Limited with its chain of Mr. Bigg’s and Debonairs Pizza outlets. In addition to these are Grand Cereals Limited, manufacturers of Vital Poultry and Fish Feeds, Binggo Dog Food, Grand Maize Flour, Grand Cornflakes and Grand Soya Oil; Chemical and Allied Products Plc, leading its industry segment with Dulux Paint; and UNICO CPFA Limited, a Closed Pension Fund Administrator. While UPDC engaged in a broad range of activities including property development for sale and lease, facilities management, and hospitality for corporations and high net worth individuals, its recent expansion coincided with Nigeria’s economic recession in 2016. The real estate sector was particularly affected with significant declines in asset values and rental rates. Although Nigeria emerged from the recession in the second quarter of 2017, the real estate sector continued to shrink, further contracting by 3.84 percent in the second quarter of 2019. The resultant effect of this is declining investment values, reduced demand for assets, and high vacancy rates. Little wonder revenue from real estate continued to underperform in 2018, contributing just 2.7 percent to the group’s revenue compared with 3.8 percent recorded in 2017. Real estate revenue also nosedived by 43 percent to N2.2 billion in 2018, from N3.9 billion

in 2017. “On the back of lower housing inventory sales and collections amid challenging market conditions, we estimate that average occupancy rate has fallen to 45-47 percent, from 55-60 percent pre2014 oil price slump,” analysts at CSL Stockbrokers Ltd stated in a note to clients. In addition to that, UPDC recorded an impairment loss of N8.91 billion, making UACN record a negative EBITDA margin, an assessment of a firm’s operating profitability as a percentage of its total revenue, of 3.9 percent in full-year 2018 and an after-tax loss of N9.58 billion from a profit of N962 million a year earlier. With UACN’s loss of N15 billion in 2018, worse than a loss of N2.9 billion recorded in the previous year, it became apparent that the UPDC business segment was no longer profitable for the parent company. Analysts had expressed concerns over the effect of UACN’s conglomerate model and the need to get out of its non-profitable lines. In March, the company appointed a seasoned professional with 17 years’ experience gained from diverse functional roles, covering finance, strategy, risk management, and corporate finance, Ibikunle Oriola, as its new group finance director, while Folasope Aiyesimoju resumed as managing director/CEO later in the month. Restructuring and Recapitalization of UPDC While shareholders, investors and analysts were keenly waiting for UACN’s next course of action to

Present state

forestall the unimpressive performance, the board and management of UACN last week announced plans to restructure and recapitalize UPDC, a move the company said is subject to the approval of the shareholders of both firms, the NSE, and the Securities and Exchange Commission (SEC). For UPDC, the challenges are endless ranging from revenue shortfalls to a continuous increase in the debt burden. Besides these, it drowned in a pool of losses since 2016. The underperformance weighed on the company’s equity value and caused its shareholders’ funds to come under within the last five years, falling steadily to N16.7 billion as at the first half of 2019. This also restricted the company’s ability to pay dividends. Worried by all these ill-fated

events and in a bid to reposition UPDC, the management of UACN said it aims to reduce finance costs and achieve a sustainable capital structure for UPDC, through the introduction of equity capital to refinance outstanding debt obligations and reduce the uncertainties associated with frequent debt roll-overs. The recapitalization of UPDC would involve an equity capital raise of N15.96 billion by way of a rights issue to repay the company’s short-term debt obligations which stood at N22.84 billion at the end of June 2019 and strengthen its balance sheet. A rights issue is a form of raising capital where cash-strapped companies grant existing shareholders right to buy new shares often at a discount – lower price – to the current market price. The right does

not translate to obligation, implying shareholders are not bound to buy the new shares. Post the rights issue, UPDC’s only interest-bearing debt will be its long-term bond with a total outstanding balance of N4.3 billion. The reduction of UPDC’s outstanding debt through the injection of N15.96 billion from the rights offering is expected to help the firm attain sustainability and ensure its debt is serviceable from recurring cash flows. After the recapitalization of UPDC, the company will also unbundle its majority interest of 61.5 percent in the UPDC Real Estate Investment Trust (UPDC REIT) to UPDC shareholders through the allocation of REIT units directly to UPDC shareholders in proportion to their post rights issue holdings in UPDC. This will be in addition to their shares in UPDC. Unlike UPDC which was enmeshed in losses since 2016, UPDC REIT is profitable and has a track record of consistent dividend payments. Subsequently, UACN will unbundle its 64.16 percent shareholding interest in UPDC on successful capital raise and transfer on a pro-rata basis – a Latin term used for describing allocation based on each person’s share of the whole – to all its shareholders, who will hold such UPDC shares in addition to their existing shares in UACN. Hence, the unbundling of these companies will break the connecting chains and create three separate entities post transaction such that UACN will no longer hold any equity stake in UPDC, implying UPDC will cease to be a subsidiary of UACN and be consolidated in UACN’s financial statements. Also, UPDC will no longer own any units in the UPDC REIT, indicating the firm will cease to be an associate company of UPDC. As a result, UPDC will now operate as a standalone legal entity, free to source appropriately structured capital. After the recapitalization and restructuring, each UACN shareholder will hold shares in three separate entities – UACN, UPDC and the UPDC REIT benefitting from the prospects of each. “Efforts are under way to strengthen UPDC’s board of directors and management team to ensure that the recapitalized and restructured UPDC retains its leadership position in the Nigerian Real Estate Sector,” both firms said in a statement. “Operations, contracts and legal obligations of both UAC and UPDC will continue as normal and in line with the existing Memorandum of Articles and Association of the respective companies.” Going forward, the management of UACN will now focus more on the rest of the company’s subsidiaries which include UAC Foods Limited, Grand Cereals and Oil Mills, Livestock Feeds Plc, MDS Logistics, Chemical and Allied Products Plc, Portland Paints Plc, amongst others.

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