BusinessDay 10 Jun 2019

After 20 years of democracy, muzzling the press is a return to dictatorship

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he indefinite suspension of the licenses of the African Independent Television (AIT) and Ray Power by the National Broadcasting Commission (NBC), a

first in 20 years, is condemnable.

It is just one of many attempts by the government to muzzle free press and all opposition voices. Nothing justified the decision to shut down media

FRONT PAGE EDITORIAL houses for political reasons and as the Nigerian Guild of Editors avers, it is “a case of executive

news you can trust I **monDAY 10 june 2019 I vol. 15, no 328 I N300

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highhandedness and it paints our dear country in the darkest tar of dictatorship.”

Some things just do not change in Nigeria. We recall that in 1984, at the height of the

economic malaise, scarcity of essential commodities and hunger pervading the country, the military regime of General Buhari rolled out a series of decrees and Continues on page 12

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L-R: Adeoye Adefulu, chairman, conference planning committee; Seni Adio, chairman, Nigerian Bar Association Section on Business Law (NBA-SBL); Ozofu Ogemudia, deputy chairman, conference planning committee/chairman programmes sub-committee, and Justina Lewa, council member/company secretary and chief legal counsel, Sterling Bank plc, at the press conference of 13th Annual Business Law Conference in Lagos at the weekend. Pic by David Apara

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Nigeria’s biggest export goes unnoticed as oil steals shine of emigrants LOLADE AKINMURELE he rise of emigrants as Nigeria’s single largest export and the subsequent dethronement of crude oil is hardly a subject of economic discourse in Nigeria, and that is a risk to effective policymaking and could cause poverty levels to worsen.

For decades, crude oil reigned supreme as Nigeria’s largest export, bringing in billions of dollars year after year to dwarf other main sources of dollars from foreign portfolio and diContinues on page 46

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APAPA GRIDLOCK

48 Governor Babajide Sanwo-Olu’s promise: “I will rid Apapa of gridlock in the first 60 days of my government.”

Inside Economics, Economist, Financial Times and Nigeria

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news Sahel Capital announces investment in Ladgroup Limited

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ahel Capital, fund managers for the Fund for Agricultural Finance in Nigeria (“FAFIN”), has announced that definitive agreements have been executed for an investment in Ladgroup Limited (“Ladgroup”), an indigenous agricultural company that engages in the processing and export of shea butter.

Ladgroup commenced operations in 1972 with the exportation of shea nuts, cocoa, ginger, coffee and gum arabic, and became the largest exporter of shea nuts and cocoa. The company is currently focused on the value addition of shea nuts through

processing into shea butter for export on an industrial scale through its factory located at Ikenne-Remo, Ogun State.

Ladgroup has built strong relationships with leading global shea stakeholders with an interest in West Africa, and has executed off-taker agreements with some of these stakeholders. With the investment, Sahel Capital will leverage on its wealth of experience and relationships in the West African corporate and agribusiness community to support Ladgroup’s growth and position the company as a market leader in the West Afri-

DIPO OLADEHINDE & OLUWASEGUN OLAKOYENIKAN

the activities of the new banks was because their licenses were rushed as Governor Godwin Emefiele was not expected to come back for second term as CBN governor. “Now he is here for another five years, they can now take their time with other statutory regulations,” another source said.

Economic analysts and market watchers said the decision by President Muhammadu Buhari to renew the appointment of Godwin Emefiele as Governor of the Central Bank of Nigeria will augur well for the economy most especially the banking sector.

Also, the lack of ministerial appointment by President Buhari is another stumbling block because no one wants to commit until they know who will be in key positions like Minister of Finance, Minister of Power, Housing and Works and other important ministerial positions.

“Promises have been made regarding transactions. More certainty is needed around Ministerial appointment and the regulatory environment,” the sources further disclosed.

BusinessDay learnt that it takes a while for banks to open operations and there are other key regulatory inspections that are still needed before the banks canlegallycommenceoperation.

“Offices have been established and preliminary recruiting is ongoing, but no bank wants to open quietly. So we are not seeing any signage just yet,” sources said.

One of the new banks, “Globus” is said to be spearheaded by Elias Igbinakenzua, a former Executive Director at a Tier One bank is yet to open for business or begin business activities.

“The Bank (Globus), have an office at Sanusi Fafunwa, Victoria Island. Nobody knows what is going on as the whole environment is quiet,” one of the sources said.

L-R: Nnamdi Okonkwo, MD/CEO, Fidelity Bank plc; Vice President Yemi Osinbajo, and Nkechi Obi, executive vice chairman/CEO, Techno Oil Limited, at the formal commissioning of the Techno Oil LPG Cylinder Manufacturing Plant in Lagos.

Continues on page 46

Five banks newly licensed by Price-sensitive consumers shift spending to CBN face fresh challenges unlisted brand names – Coronation research

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hallenges ranging from talent recruitment, extra liquidity, lack of appointment Federal Ministers and regulatory uncertainties are impeding the five new banks licensed by the Central Bank of Nigeria (CBN) from beginning operations, according to banking sources familiar with the matter, who spoke to BusinessDay. BusinessDay learnt these reasons are not only obstructing the banks from commencing activities but they are also hindering the five banks from starting transacting activities with the general public.

Recall that BusinessDay reported on April 29 that the CBN had issued licenses to the five new banks, a move which generated much optimisms in a sector which had being in dire needs of new investments which could serve the country’s over 50 million unbanked and under-banked people.

According to sources, the five newly licensed banks are having serious problem recruiting talents from the Senior Banking Officer (SBO) level to Deputy Managers as most senior bankers are skeptical of moving to a relatively new bank, don’t want to be in banking anymore, or are leaving the country for Canada.

Data from National Bureau of Statistics (NBS) revealed the number of executive and senior staff in the Nigerian banking sector dropped for the second consecutive quarter to 193 and 18,018 in the first three months of this year from 201 and 18,119 recorded in the last quarter of 2018, respectively.

Sources say talents are leaving to well established banks and not new ones as the body of CEOs recently complained about harassment of bankers.

“Bankers are also weary of changing banks,” one of the sources said.

The third issues impeding

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

David Ibidapo

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ith an expanding urban population and increasing participation in the cash economy of Nigeria, one would expect rising sales of food and home & personal care (HPC) companies, however this has not been the case as consumers opt for prices commensurate with declining earnings, Coronation Merchant bank research has shown.

The report by Coronation Merchant Bank revealed that in inflation-adjusted term, however with the exception of Nestle, there has not been much growth in sales of food and HPC companies. Hence, against expectation the study revealed a fall in inflation-adjusted sales.

This is largely due to upward

MARKETS pressure on consumer price index(CPI)whichhasresultedto fallingearningsofmiddleincome earners in real terms coupled with downward pressure on private sector wages generally.

According to the research report, “We do not deny that Nigeria’s population is growing.

As important, urbanisation has swelled the cities creating consumer concentration,” Coronation Merchant Bank stated, “the masses are not getting richer and unemployment has risen.

There is a mass market but, critically, its price points have shifted downwards.”

As a result, falling earnings of consumers have seen a shift in purchase from the large listed players like Unilever, Flour Mills, and PZ Cussons, towards a number of low-cost, low-price

point competitors and entrants.

Verifying this claim, the report noted that one of the unlisted group of companies reported nominal sales growth of 30 percent in 2018, far higher thananyofthelistedcompanies.

“It is only logical to conclude that established market shares of the principal listed companies are being eroded,” the report stated.

Taking listed companies into perspective, Nestle Nigeria stood as the only listed company with worthwhile inflationadjusted growth, hence outperforming other listed companies in the industry.

Result revealed that Nestle recorded an inflation-adjusted sales compound annual growth rate (CAGR) of 6.3 percent over the period, starting with calendar Q1 2011. Whereas taking four CAGR series (one each quarter) beginning

in 2011, their average inflationadjusted CAGR through to 2018 was 3.5 percent.

The inflation adjusted sales of Flourmill on the other hand was regarded as flatto-negative. FMN experienced inflation-adjusted sales CAGR of -0.6 percent during the same period, starting with calendar Q1 2011.

OthersincludeUnileverwith an inflation adjusted CAGR of -1.1 percent and PZ with a negative CAGR of 7.8 percent during the period respectively.

This scenario hence paints a “more people, not more money” picture. According to the report, the middle class individualswhoareperceivedtobuy relatively expensive branded products from the listed companies seem to be affected also.

•Continues online at www.businessday.ng

Economics, Economist, Financial Times and Nigeria Garba Shehu

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ne would imagine that business papers like economic success stories; apparently not. Instead, they feast and thrive on negatives.

Financial Times, for instance, is worried about a government policy that is enabling boom in rice production in Nigeria.

And the Economist is panicky about toothpick manufacturers springing up following tariffs that protect local manufacturers to get off the ground and compete globally.

Both papers only see negatives. Specifically, Economist dwells on out-of-date statistics. Deliberately it turns away from the positives as it will complicate already tailored narratives. Some foreign correspondents keep the storyline simple: Africa is home for all bad things: poverty,

disease and crime. And unremitting bleakness lives on the continent, and success is the aberration.

Since only negative reports on Africa make it to the international media, a backward picture of a nation is painted succinctly and efforts at growth in different ramifications, both investment and diplomacy are ignored. From the content of these stories, readers must be baffled that Nigerians know toothpicks, let alone be able to manufacture them.

The fact remains that with squeeze in media budgets there are not enough knowledgeable foreign correspondents based on the continent to report accurate news and uphold journalistic standards.

And the parachuting style clearly defies ethics and quality. To cut cost, many media houses rely on the expedience of technology. The highly

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revered and sacrosanct factchecking skill of journalism slips as a result. Anyone with a laptop is trusted as credible source. Cogent arguments no longer have a place, instead we have jumbled and emotive criticisms.

For instance, the Financial Times declares proudly that President Buhari failed to spur rice growing, whilst stating that production was at record levels up 60 per cent in 2018 from what we had in 2013.

The Economist talks about overdependence on oil, yet criticises policies such as subsidies or financial incentives that allow local businesses to compete and diversify the economy. It frowns at power shortfalls, but turns around to attack Alhaji Aliko Dangote – the man building the world’s largest oil refinery and improving power infrastructure in Nigeria. @Businessdayng

Fundamentally, the foreign correspondents fail to appreciate context – understandably if they have to cover a large “patch’’ with shoestring budgets, but neverthe-less it is impermissible as facts must remain sacred.

The Economist states that the economy was “sputtering’’ when President Buhari’s first term began in 2015, and still concluded he made a “bad situation worse”. “Sputtering’’ sounds euphemistic. The reality is that the economy was on its knees. The overdependence on oil, paired with impending global commodity crash, made the entry into recession at the beginning of the term inevitable. Now, however, the first quarter growth of 2019 has been the strongest.

The International Mon-

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NEWS

CBN to issue N809.4bn Treasury Bills in Q3 HOPE MOSES-ASHIKE

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entral Bank of Nigeria (CBN) will in the third quarter (Q3) 2019 issue a total of N809.4 billion worth of Treasury Bills (TBs) for various tenors, while the same amount will mature in the same period.

A breakdown of the Nigerian TBs issue programme for the Q3 2019 released on Friday by the CBN shows that a total of N90.6 billion for 91-day tenor, N188.03 billion for 182day, and N530.7 billion will hit the financial market in Q3.

Similarly, the Nigerian TBs worth of N80.6 billion, N154.03 billion and N574.7 billion will mature in the same period.

The CBN sells TBs twice a month to help the Federal Government raise money to fund its budget deficit.

Nigeria’s money market will be awash with liquidity this month of June, as a total inflow of about N1.36 trillion is expected to hit the market.

The expected inflows will

come from the various maturing government securities and Federal Accounts Allocation Committee (FAAC) in June 2019.

However, a total outflow of approximately N753 billion is estimated from the various sources, leading to a net inflow of about N607 billion.

“The market is expected to be liquid in the month of June 2019; this may necessitate the issuance of Open Market Operation (OMO) to mop-up the liquidity in the system,” Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited, said.

In 2018, the total value of NTBs issued and allotted was N3.34 trillion apiece, indicating a decline of N1.15 trillion or 25.65 percent below the level in 2017.

The decrease was attributable largely to lower NTBs issued coupled with the redemption of TBs worth N78.05 billion in December 2018, as the government indicated its preference for

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cheaper and longer tenored foreign debt.

Total public subscription stood at N6.71 trillion, compared to N7.17 trillion in 2017. The lower level of public subscription was traceable to the high patronage at OMO auctions.

The structure of allotment of the instrument indicated that banks (including foreign investors) took up N1.76 trillion or 52.76 percent, mandate and internal funds N1.51 trillion or 45.12 percent and merchant banks N70.73 billion or 2.12 percent. There was no CBN take-up in the period under review.

The stop rates, in 2018, ranged from 10.00 to 12.55 percent for the 91-day, 10.30 to 13.93 percent for the 182day and 10.70 to 14.45 percent for the 364-day tenors. The range of stop rates in 2017 was between 12.95 and 14.00 percent for the 91-day, 15.00 and 17.50 percent for the 182-day and 15.57 and 18.98 percent for the 364-day tenors.

Apapa: Presidency, NPA, NSC move to reduce demurrage charges on containers …Tin-can trailer park ready in 2 wks as Lilypond to begin 24-hour operations JOSHUA BASSEY & AMAKA ANAGOR-EWUZIE

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s part of measures to ameliorate the challenges faced by shippers doing business in Apapa and Tin-can Island ports, the Presidency, in partnership with Nigerian Shippers Council (NSC) and Nigerian Ports Authority (NPA), is working to reduce the cost of doing business at the ports by elongating demurrage and rent-free days for importers and exporters.

With the elongation of the free days, the amount payable to shipping companies and terminal operators as demurrage and rent charges for not returning empty containers and taking delivery of laden containers as and when due, would automatically reduce.

This is one of the strategies being considered by the Presidential Task Team to address Apapa traffic congestion through the reduction of the number of trucks moving on Apapa roads as importers and their agents were discovered to always be under pressure to beat deadline of returning empty containers.

Hassan Bello, Executive Secretary, NSC, who addressed journalists, Friday, as the presidential task team rounded off

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its two-week task of clearing roads/bridges around Apapa of encumbrances occasioned by the activities truckers, said, this among measures being adopted, would go a long way in tackling the menace in Apapa.

According to Bello, already, the shipping companies have extended the demurrage free days from five to 10 days, adding however, that stakeholders expect that this will be extended to 12 free days out of 90 days.

“The terminal operator has also extended the rent-free days from three to eight days. We need the truckers to be disciplined by following the procedure.”

On infrastructure, he said that “the roads are being constructed and the trailer parks are going to be available to handle traffic overflow,” while the manual call-up system will be perfected within one week and the electronic call-up ready by end of August.

“This will ensure that trucks are called only when they are needed without every of them rushing to Apapa at the same time,” he said.

Bello added that the shippers’ council has identified about 54 private parks that would be put to use and would complement the one being completed by the

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Federal Government overlooking the Tincan Island Port.

He said the simplification of processes and procedure would help in easing the traffic congestion and operations at ports, but emphasised the need for cooperation and synergy among the parties involved for the problem to be solved.

Also speaking, Kayode Opeyefa, vice chairman of the presidential task team, said government understood the role of the ports and was working towards ameliorating the situation.

“A lot of factories are based in Apapa and if the cost of doing business is high, it affects pricing, but it is about to come down, it will translate to cost reduction.

Opeifa said the task team has been able to within two weeks of consistent efforts, move trailers and trucks from Funsho Williams Avenue, Eko Bridge and Ikorodu Road, as well as Ijora-Olopa to Marine Beach.

“In these areas, we have achieved 100 percent compliance of what we are expected to do in terms truck removal from the bridge, extortion reduction, deploying an effective traffic management plan and direction while the deployment of call up system is predicated upon the availability of truck terminals.

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Memo:

May 29th 2019 and June 12th 2019: Forging ahead regardless of turbulence (II)

Bashorun J.K Randle Your Excellency,

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our address to the nation on June 12, 2019 has to be a cracker. We are compelled to acknowledge that June 12, 1993 was a watershed in our nation’s history. We now have an opportunity to reconcile our past with the present and ignite hope for the future. In doing so, we are obliged to recognise the fault lines and fissures that threatened the corporate existence of our nation.

We were on the brink of disaster and right on the edge of the precipice that threw up a cataclysmic chasm that would have buried the glorious event which against all odds was a peaceful and credible election and signalled to the rest of the world that as a nation, we could transcend ethnic loyalties, religious affinity and gender bias.

Of course, June 12 1993 will remain evergreen in our nation’s psyche and memory on account of the outstanding doggedness of late Bashorun M.K.O Abiola who paid the supreme sacrifice.

His patriotism was exceptional and his generosity knew no bounds. He was

large-hearted and he touched so many lives. He was indeed a man of the people.

From a humble background armed with education and determination to succeed, he climbed the ladder of success as a Chartered Accountant and very enterprising businessman. He had the audacity to abandon his comfort zone to venture into politics. It is not sufficient to declare that the rest is history.

On the contrary, we must seize this opportunity to acknowledge that June 12 and the heroic sacrifices that followed were not entirely and exclusively about the late Bashorun M.K.O Abiola.

Apart from the late Mrs. Kudirat Abiola, the other chieftains of the National Democratic Coalition (NADECO), whether dead or alive, deserve our eternal gratitude for their principled defence of the will of the people and the sanctity of the ballot box.

The best tribute we can pay to the memory of Bashorun M.K.O Abiola and the other fallen heroes is to commit our resources and energy to building a better Nigeria for all Nigerians regardless of their ethnicity, religion or gender.

Over the next four years, we must pursue with uncompromising vigour and relentless dedication the demolition of all obstacles to our nation’s progress in terms of peace, prosperity and harmony.

We are not in any way hostile to independent and credible measurement of our nation’s Human Development Index; Infant Mortality; Maternal Mortality; Life Expectancy; Literacy; Gross Domestic Product (GDP); Rate of Inflation etc.

In short order, we shall restore security in all the nooks and crannies of

our nation. At the international level our voice will continue to reflect our deep concern for the legitimate aspirations of our brethren in the diaspora and beyond.

However, a great deal of work requires our attention here and now. We are eager to attract foreign investment in addition to cultivating a conducive environment for local entrepreneurs.

We intend to invest massively in Agriculture and Industry while recognising the provision of power and electricity as a critical factor. The provision of water is also a matter of priority.

All over the country, the landscape has been bastardised with abandoned projects which have become eyesores.

This is a matter which calls for our urgent attention.

As we commence the journey of the next four years, we can only do justice to the memory of Bashorun M.K.O Abiola by institutionalising democracy at every level – from Local Government to State Government and ultimately at the Federal level with our focus on leaving behind an enduring and robust legacy which would earn us the gratitude of future generations. We cannot afford to disappoint them or begrudge them the opportunity to not only excel but surpass our own achievements. However, we have a duty to remind them that prosperity is the reward for hard work and even more hard work.

On their behalf and for their sake, we subscribe to the template that the sky cannot be the limit. We commend to them the vignette by William Faulkner: “You cannot swim for new horizons until you have the courage to lose sight

‘

As we commence the journey of the next four years, we can only do justice to the memory of Bashorun M.K.O Abiola by institutionalising democracy at every level

of the shore.”

June 12 is our signpost for reconciliation and resolution of grievances anchored on justice and fairness. In our fifty-ninth year as an Independent nation, maturity demands that we resolve our differences while capitalising on our diversity. Diversity is our strength and we must catalyse it to diversify our economy beyond oil revenue which we know too well will not last forever. In the meantime, we must face the burden of the pollution and devastation of our environment. In addition, we now have to contend with issues about which we were only vaguely aware of on June 12 1993.

They are now monsters which have manifested as kidnapping, cultism, ritual murders, armed robbery, drug trafficking, opioids, “419”/internet fraud; human trafficking.

The last election and the campaigns that preceded them provided us with an opportunity to feel the pulse of the nation. We were left in no doubt about the palpable anger, hunger and frustration all over our beloved country.

We now have a fresh mandate to draw strength from our resilience and face the fresh challenges on the horizon – ranging from climate change to plastic contamination/suffocation of our environment and soil erosion as well as desert encroachment.

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

Unlock FinTech with amicability: The future of investors … (I)

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rade is the greatest tête-à-tête of the moment.

Approximately, 40 African countries have duty-free access to the U.S. market. What about local Nigerian products and services?

The economics of buying/selling jargon on tariffs, bilateral agreements, quotas and bans are being ping-ponged from one medium to another. Leaders are debating the best agreements for our future of business. Nations &presidents argue over US-UK, UK-China, China-Africa agreements. What does it mean for us today?

GrowthView asks: How can a Nigerian entrepreneur, a corporate or a mother of a family unlock revenue opportunities at an early-stage, despite these uncertainties?

For corporates, the relevant COO & CFO question is, can we truly anticipate the cost of import/export or distribution, as well as integrate this in the financial model with varying scenarios, based on the trade acts/agreements?

For SMEs (small-to-medium enterprises) the question is, can a small-scale trader in Nigeria maximise its return, yield of crop or sell price to the local buyer despite these “trade agreement” talks? The short-answer is “yes.”

Corporates can beautifully influence However, legislation is forever adapting.

Perhaps, a good way forward is for us, people and businesses, to take direct-trade opportunities in our hands. GrowthView builds on our publication (see April 2019) “Do we trust tech?”; which is on the role of tech conglomerates and how they can build trust, in order to contribute to inclusiveness and prosperity. Today is smaller-scale.

We look at the positive foundations of trade and its agreements. How can these freely interpretable “trade-agreement talks” open fresh business opportunities in and out of subSaharan Africa? As an individual or as an SME, we can have (1) the access, (2) the funds (3)

the value-driven approach that was missing in the “game of monopoly” (see Dec 2018 article).

Stage 1 - define the purpose of a trade agreement The fruit of the negotiations between nation leaders, WTO, Forbes100 company influencers and local ethnic tribe leaders are the bi-lateral agreements, acts and compacts that are signed in place to enable the business environment.

The landscape is complex and players numerous. History has proven this complexity, this is why the United Nations (UN) created the International Trade Organisation (ITO) in 1948 to overcome ongoing trade handicaps.

We wonder, how did the Egyptians manage to make trade amicable and profitable? Ancient Egypt has lessons for Africa and the world. Going back to the basics is key.

The Nigerian economy signed the African Growth and Opportunity Act (AGOA), which as we know, liberalised trade with the U.S. until 2025. It gives access to goods and services in and out of America for these 40 African countries.

It came as Nigeria also joined the World Trade Organisation (WTO) in 1995. So, what can we do to anticipate, before the act expires?

As a family in rural-Nigeria, what do I care about these acts, right-now? Well there is great outlook for entrepreneurs and families. The future looks positive!

Christina Wehbe, partner at UrbanEmerge, said: “Focus on the cloth used to weave the shirt, rather than the buttons that will fix the shirt in place! The same applies to trade.”

Being courteous in trade, is to be open to exchanges and provide “free-market” opportunities to nations or companies outside of your country.

An agreement is when 2, 3 (+) countries agree to the same terms. Sounds tricky, right?

Well it is. This is where technology can help us by-pass some of these messy talks. The Egypwww.businessday.ng

tians may have had flaws in their trades, but we can learn from their successes. Be friendly!

Amicability is derived from “friendly”. This cordial entente is underpinned by the value of goodwill, which is a value that all communities around the world have. It is a value of our way of life. Whether we exploit it properly is a different story.

Stage 2 - drive growth from within and attract direct investment Share your vision with people, this is what is missing in our business today and yet so present in African culture. FinTech Investors buy a story. Investors want a story that sells. For a business to sell, you need a person behind that has almost “never-heard before” story. » Your story | triggers a connection with investors » Product story | brings out customer emotions » Future story | improves our lives as a society We all want to relate. Long-term financiers want to dive deep into the story. CEOs and entrepreneurs often overlook the inherit behavioural and “buy-in” patterns we have. Can you make your business a story to share?

Stage 3 - amicability and access helps Social lending, FinTech and peer-to-peer financing are all examples of trusted individual transactions - enabled by the right technology.

Do you have the social tools you need to build it?

Investors and consumers buy what is closest to them: we are biased by proximity and accessibility. Do they speak my local language?

Is the service in a country I know? Can I access the operations freely? Proximity can also be an emotion. Having this trusted connection where you have the platform to share your story.

Foreign policy strategies is about “winning hearts and minds”. This idea applies still today for business and investments.

Founded by Plato inancient Greece, this philosophy still applies today in 2019forAngel, VC

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GrowthView

Christina Wehbe Direct Trade | Sustainability | United Nations SDG #8

or seed investors. What captures our heart and mind? What we see, what we can touch, what we hear is what we believe is true. Therefore, proximity and triggering all four human senses are stories financiers or shareholders remember.

As an example, when a hurricane or natural disaster happens close to home, aid and local communities help or fund it passionately. It is close to their “heart” and touches their “mind.”

Keeping sustainability on the agenda of all corporates, is a fortunate gift we each have in our hands. The senses that are triggered is key.

Technology offers that accessibility and proximity that a local African business may have overlooked previously. Trigger the emotional connection with people, be transparent and tap into the access to greater networks.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Wehbe is passionate about helping others and fighting poverty & injustice. She is the founder of GrowthView. She writes from Zurich, Switzerland.christina.wehbe@gmail. com Cell: +41 79 950 4760 https://www.urbanemerge.com/people https://www.qeh.ox.ac.uk/alumni/christina-wehbe

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What do company results say about state of Nigerian Economy?

Patrick Atuanya

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he Nigerian Stock Exchange (NSE) 30 index is the big bad kahuna among domestic equity market indices, comprising the 30 biggest and most liquid stocks in a market with close to 170 stocks and Exchange Traded Funds (ETFs) listed.

Market capitalisation (the value of a company that is traded on the stock market, which is calculated by multiplying the total number of shares by the present share price), for NSE-30 firms was equivalent to N9.825 trillion as at Friday June 07, 2019, compared to N13.4 trillion for the entire market.

This means that NSE-30 firms now make up 73 percent of the market, down from as high as 95 percent before the MTN Nigeria listing. MTN Nigeria is yet to be added to the index.

A deeper look at the numbers show that all is not well with stocks that make up the index, which again could give a clue as to the state of the economy.

Market cap for the NSE-30 index comes in at about 7.5 percent of nominal GDP of N129 trillion (IMF estimates), at the end of 2018.

Combined net profits for the 30 firms in the first quarter (Q1) of 2019, came in at N361.14 billion (**), up some 4 percent from the N346.9 billion (**) recorded in Q1, 2018.

At first glance this looks decent, considering that the economy overall managed only 2.01 percent growth in Q1, 2019.

However when you back out the impact of Access Bank, which had a stellar quarter (after tax profits of N41.1 billion, up 86% year on year), following its merger with Diamond Bank, the picture becomes a little bit less cheery.

Ex- Access Bank, cumulative Q1, 2019

profits for the NSE-30 firms was down when compared to 2018, at N320 billion versus N325 billion in Q1, 2018.

Two firms made losses for the period (Dangote Flour Mills and Total), while a total of 12 firms had lower profits compared to the 2018 period.

These are Dangote Flour Mills, Dangote Cement, Unilever, Presco, PZ, Stanbic IBTC, Total, Transcorp, NASCON, Nigerian Breweries, Okomu Oil and Mobil Nigeria.

Industries these firms operate in range from, Consumer goods, industrial goods, Banking, downstream oil and gas, hospitality, Food and Beverage, and Agriculture.

These make up a broad spectrum of the Nigerian economy and if these firms are struggling it is a confirmation of the

numbers coming from the National Bureau of Statistics (NBS) about the poor state of the wider economy.

When the performance of each NSE30 member stock is looked at, one can see that investors have already priced in the poor performance and possibly written off their ability to turn things around this year, considering the lack of policy direction coming from Abuja.

Only 3 out of the 30 stocks have had positive returns in 2019 (year to date), with the rest mired in red.

These are Dangote Flour Mills (+139.42%), Sterling Bank (+28%) and Union Bank (+25%).

The direction of stock prices (whether rising or falling) is important because stocks are largely priced based on the expectations that prospective inves-

‘

A deeper look at the numbers show that all is not well with stocks that make up the index, which again could give a clue as to the state of the economy

tors have for the future earnings of the company.

Falling stocks prices therefore means investors are not confident of higher overall growth in the economy which will boost revenues and eventually profits of firms.

Lower stock prices also often affects the ability of firms to raise equity capital through initial public offerings IPOs or rights issues.

Often, long periods of sell-off in stocks could result in lower valuations and discourage prospective capital raising.

That the Nigerian economy is barely growing is probably not lost on investors.

Growth is forecast by the International Monetary Fund (IMF) to rise marginally to 2.1 percent in 2019 from 1.9 percent in 2018.

It is highly unlikely that firms can grow revenues by upper single digits or double digits from such low levels of expansion.

Looking at the numbers a lot of consumer goods firms have been particularly hit hard as disposable incomes remain largely stagnant.

Consumers are also bargain hunting which may be hurting the more established firms.

A recent report by coronation Merchant Bank suggests that upper middleclass earnings are falling in real terms in Nigeria and that there is downward pressure on private sector wages generally.

As such pricing has become the key battle ground and the energy and momentum in the food and Home /Personal Care industry appears to have shifted away from the large listed players (cue your Unilever’s, PZ, Nestles and Flour Mills) towards a number of low-cost, low-price point competitors and entrants Dangote Flour, Dangote Sugar, PZ, NASCON, Nigerian Breweries, and Flour Mills all saw a drop in revenues in 2018, compared to 2017.

The Federal Government needs to unveil an economic blueprint for growth as soon as possible, to reduce unemployment which recently hit 23 percent as well as poverty, and return confidence and animal spirits to the Nigerian economy.

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

Source: Company Financials

The Nigerian code of corporate governance 2018 Principle 6: non-executive directors

T

he Nigerian Code of Corporate Governance, 2018 outlines 28 principles intended to foster an improved corporate governance regime in Nigeria.

Principle Six of the Code deals with NonExecutive Directors: “Non-Executive Directors bring to bear their knowledge, expertise and independent judgment on issues of strategy and performance on the Board.”

A Non-Executive Director (NED) is described as a member of a board of directors of a company or organisation, who is not a member of the executive management team. Typically, a NED is not engaged in the day-to-day management of the organization and is appointed from outside the Company.

In practice, NEDs are chosen based on their extensive experience, knowledge and personal qualities. In addition, they may have key contacts and networks that support company performance. It is imperative that prior to accepting an appointment as a Non-Executive Director, prospective appointees should ensure they have a comprehensive knowledge and understanding of the company, the sector in which it operates and have undertaken their

own due diligence. A Non-Executive Director should satisfy himself/herself that the values of the entity align with his/her personal values and should be mindful of the reputation they have built and nourished over the years.

A Non-Executive Director should be well acquainted with the legal responsibilities of being a company director and the consequences of infractions. These could be as far reaching as personal liability for which the NED could go to jail or be banned from holding the office of a Director. Many companies would typically organise induction programmes for newly appointed directors to bring them up-to-speed with the Company’s business activities, operations and organizational structure as well as the expectations of their role and the duties and responsibilities of Directors.

In selecting Non-Executive Directors, the Board should be guided by a clearly articulated selection process that incorporates a diversity policy which will ensure that the Board is composed of Directors that bring different skills set, experience and background as well as age, ethnic, gender and geographical diversity. The selection process which should be transparent and reasonably free of external influence, www.businessday.ng

should be handled by a Board Committee – typically the Nominations (or Governance Committee). The Committee will articulate the selection criteria and periodically evaluate the composition of the Board to identify resource and competency gaps that will guide the appointment of new Directors.

Whilst the Board is collectively responsible for providing entrepreneurial and strategic leadership to the company, Non-Executive Directors are expected to constructively challenge and scrutinise the performance of Management in meeting agreed goals and objectives. Non-Executive Directors are not expected to be financial experts. It is however imperative that they are able to understand and interpret financial statements, identify trends in financial reporting and ask the right questions. To ensure they are able to contribute robustly to Board deliberations, its is imperative that they receive relevant information in a timely fashion. Non-Executive Directors should in this regard not be at the mercy of Management – i.e. not leave the reporting format and content to the discretion of Management. The Board is at liberty to set the reporting framework – the frequency, format and content

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Bisi Adeyemi of Management reporting.

As an external director, a Non-Executive Director may have a clearer and more robust overview of external factors that could impact the company’s performance than the Executive Directors. It is also useful if the Non-Executive Director sits on other Boards as such Directors bring significant relevant experience on board.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. For more articles, kindly download the DCSL Knowledge Hub via this link https://www.dcsl.com.ng/index/pages/page/dkhub

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EDITORIAL Publisher/CEO

Frank Aigbogun editor Patrick Atuanya DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Chuks Oluigbo EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua ASSIST. SUBSCRIPTIONS MANAGER Florence Kadiri

After 20 years of democracy, muzzling the press is a return to dictatorship Continued from front page

laws to curtail the freedom of expression of Nigerians. The infamous decree 4 prohibited journalists from reporting anything that could embarrass the regime, even if it was true.

It did not take long before two journalists fell afoul of the law and were consequently locked up.

In 2015, then candidate Buhari promised to operate differently saying he was now a converted democrat.

But since coming to power in 2015, his government has become desperate to curtail free speech and trying in various guises to resurrect the infamous decree 4.

It began early in the life of the administration with the anti-social media bill sponsored by Senator Bala Ibn Na’Allah (APC Kebbi South), which seeks to “to criminalise anyone disseminating via text message, Twitter, WhatsApp, or any other form of social

media an “abusive statement” intending to “set the public against any person and group of persons, an institution of government or such other bodies established by law”.

When that bid failed, another phony bill seeking to regulate Non-Governmental Organisations (NGOs) came up. The bill, sponsored by Umar Buba Jibril, (APC Kogi West), sought for the establishment of yet another federal agency to supervise, coordinate and monitor NGOs with sweeping powers to regulate their conduct and grant a license for operation renewable every two years. Without such license, no NGO can operate and the agency could refuse renewal for no reason. What is more, only the license of the agency (not registration with the Corporate Affairs Commission) confers legal personality and perpetual succession on NGOs. When these efforts failed, the government, in 2017, started railing against what they call

‘hate speech’, with the Vice President, Yemi Osinjabo, likening it to terrorism and vowing the government will no longer tolerate it.

Although Mr Osinbajo never defined what exactly he or the government meant by hate speech, the army provided a precise definition when it announced through its Director of Defence Information, Major General John Enenche, that it was creating “strategic media centres to monitor social media in order to sieve and react to all anti-government, anti-military, and anti-security propaganda”.

With this, the government could conveniently lump any statement or criticism by group or persons which caused it consternation, into its amorphous definition of hate speech and promptly clamp down on such groups or persons.

Nigerians must not allow the government to turn the country into a police state. The last four years have been fraught with many battles against the

government to protect citizens’ rights to free speech and association. We also saw how the government and state governors surreptitiously used the police and DSS to clamp down on opposition members and their critics under many pretexts.

If there is one thing history has taught us in Nigeria, it is that we must never allow the government to draw the borders of free speech. Knowing the lessons of history, it will not be long before the government begins to clamp down on free press, legitimate free speech and any iota of criticism.

We strongly condemn the actions of the NBC and its highly politicised leadership. Although the courts have ordered the reopening of the closed stations, we call on Nigerians, civil society and human rights groups to intensify campaigns in opposition to the obnoxious attempt to turn Nigeria into a police state. As the saying goes, vigilance is the price of liberty.

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Bashir Ibrahim Hassan

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COMMENT

Emefiele: A central bank governor in the politician’s image global Perspectives

OLU FASAN

P

resident Muhammadu Buhari got his undeserved, unmerited second term. In tow, Godwin Emefiele, central bank governor, got his too! Both failed woefully in the management of the economy in their first terms and would not have qualified for a second term in meritocratic climes. But Nigerians rewarded Buhari’s poor first-term performance with a re-election; in turn, Buhari rewarded Emefiele’s first-term underachievement by reappointing him for another term of five years.

Of course, Buhari reappointed Emefiele because he pursued, almost without reservation, the president’s statist and illiberal economic agenda, including: propping up favoured sectors, notably agriculture and manufacturing, with billions of naira; protecting these sectors from international competition through high tariffs, exchange control and outright import bans; feeding Buhari’s deficit-financing by extending massive overdrafts to his government; and, of course, like Buhari, not wanting to “kill the naira”; so, instead of liberalising the foreign exchange market and allow the naira to adjust to its true market-determined level, he is operating different foreign exchange windows that foster different exchange rates, which distort the economy and discourage foreign investors.

Surely, if the consensus is, as it is, that President Buhari failed economically in his first term – and the evidence of appalling performances across all economic indicators proves this – then Emefiele cannot insulate himself from that failure because he was the enthusiastic driver of all the policies behind it. Indeed, he has led the central bank like the omniscient head of Gosplan, the state committee that ran the Soviet Union’s planned economy.

To be sure, Emefiele is the most powerful central bank governor in Nigeria’s recent

history. Over the past four years, he has been the central bank governor, the de facto finance minister and the de facto coordinating minister of the economy, all rolled into one! When President Buhari did not have a finance minister and an economic team in the first six months of his administration, Emefiele effectively combined the roles of central bank governor, finance minister and head of the economic team. He travelled with Buhari around the world, acting as Nigeria’s finance minister and the president’s chief economic adviser.

At a time of deep economic/financial crisis, no serious country puts the running of its economy solely in the hands of a central bank governor. The US didn’t do so during the 2008 global financial crisis; in fact, President Obama’s first act, as a newly sworn-in president in January 2009, was to push the appointment of Tim Geithner as Treasury Secretary through Senate confirmation. But with the central bank taking directives from the presidency – the common phrase was “Presidency directs central bank to …” – Emefiele gained the confidence of the president. Indeed, Buhari would have further delayed the appointment of a finance minister, but for widespread criticism that the delay was spooking the markets.

Of course, when Buhari eventually appointed a finance minister, she, Kemi Adeosun, was so lightweight, with no international standing or even gravitas within the cabinet, that Emefiele effectively doubled as central bank governor and de facto finance minister throughout her tenure. Truth is, where a finance minister is strong and capable, the central bank governor would focus on his core roles of ensuring price stability and regulating the banking/financial sector, as Emefiele’s predecessors, Professor Charles Soludo and Sanusi Lamido Sanusi did, and, indeed, as Emefiele himself did in his first year as central bank governor when Dr Ngozi Okonjo-Iweala was the finance minister.

However, under the Buhari administration, Emefiele has switched the central bank into extremely dirigiste, statist and mercantilist modes, pushing Nigeria into a closed economy through hugely illiberal macro- and micro-economic policies.

But here is an interesting question: Would Emefiele have pursued the same policies he spearheaded under the Buhari administration if he was still CBN governor

under President Goodluck Jonathan, with Dr Okonjo-Iweala as minister of finance and coordinating minister of the economy?

The question is pertinent because Dr Okonjo-Iweala believes that the Buhari administration worsened Nigeria’s economic situation. In her book, “Fighting Corruption is Dangerous”, Okonjo-Iweala said that, despite the collapse in world oil prices and the steep economic decline, the Jonathan government took measures that “kept the economy in positive growth territory in 2014 and the first quarter of 2015, when we left office”. Then, she added: “In contrast, as oil prices continued their downward trend in 2015 and 2016, economic policy responses were inadequate or outright wrong; a disjointed monetary and exchange rate policy damaged investor confidence, led to capital flight, and ultimately led to economic recession for the first time in two decades”.

Clearly, Emefiele did not recommend the “outright wrong” and “disjointed” policies he later pursued under Buhari’s government to the Jonathan administration in his first year as CBN governor. So, given the same circumstances, why would a central bank governor behave differently under two different presidents?

Well, political economists would explain such behaviour as a public choice problem. For instance, the objective of economic policy is to maximise social welfare, and the consensus among welfare economists is that the general good is best promoted through competitive markets and integration into the world economy through open trade policy. But, according to the public choice theory, a central bank governor serving under a statist president may, for self-preservation, pursue policies aimed at pleasing the president but which lead to what the economist John Williamson called “social ill fare”!

Yet, a truly technocratic central bank governor, while being politically aware, must know how to say “no” to a president. For instance, Urjit Patel resigned as governor of the Reserve Bank of India in December last year reportedly because of Prime Minister Narendra Modi’s attempts to undermine the bank’s independence.

Also, recently, two of President Trump’s proposed candidates for a Federal Reserve’s governor were forced to withdraw after criticism that “they would not be independent enough from Trump”.

But, in Nigeria, every critical state insti-

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...under the Buhari administration, Emefiele has switched the central bank into extremely dirigiste, statist and mercantilist modes, pushing Nigeria into a closed economy through hugely illiberal macroand microeconomic policies

tution is politicised – the military, EFCC, the CBN etc – and most so-called technocrats are politicians in disguise. Emefiele is one of them. Take one example. During the presidential election, the PDP’s presidential candidate, Atiku Abubakar, criticised the CBN’s foreign exchange policy and said that, if elected, he would not renew Emefiele’s appointment. What did Emefiele do?

Well, he fired back, telling Atiku in a statement: “Don’t drag Nigeria back to SAP era”.

Surely, a technocratic and apolitical central bank governor shouldn’t interfere in partisan politics in that way. In 2016, during the US presidential election campaign, Donald Trump said that, if elected, he would not renew the appointment of Janet Yellen as chair of the Federal Reserve.

Professor Yellen didn’t issue a statement criticising Trump’s economic policy. But Emefiele couldn’t resist joining the political fray.

Furthermore, by criticising the liberal ethos of the structural adjustment programme, Emefiele was taking an ideological stance in support of Buhari’s statist ideology. But Nigeria’s economy was better off under SAP than under Buhari’s socialist military regime and under his current statist administration. Emefiele should read a speech by one of his predecessors, Charles Soludo, entitled “Avoiding the mistakes of old Buharinomics”.

Professor Soludo argued that, since SAP, “there is a broad consensus on continuing progress towards a competitive market economy framework”. That consensus broadly continued during the PDP’s 16year rule, particularly under Presidents Obasanjo and Jonathan. But with his socialist policies, Buhari, aided by Emefiele, has shattered the consensus.

But if the current statist, anti-business, anti-free trade and open market policies continue, with Nigeria isolating itself from the global economy and refusing to join AfCFTA, this country’s economy would be deeply uncompetitive, inefficient and unattractive to foreign investors, with wide-ranging adverse consequences.

Emefiele should reflect on this, being his and Buhari’s legacy, as he develops his next five-year agenda!

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

Why you shouldn’t give your governors a free pass

M

y column last week was about the first four years of the Buhari regime and how not so great it was. We often focus our policy critiquing on the presidency but in truth they are not wholly responsible for everything. The governors as a group are probably almost as important as the president. Although, to be fair, there are many important policy levers which they have no control over. Take monetary policy for example. Monetary policy is mostly beyond their control and a difficult monetary policy environment is likely to render any policy pushed by governors in their states toothless. The same is true for trade policy. That being said, the governors are not completely powerless.

For starters, most states are relatively large and could be considered “countries” in their own rights. Last month the National Bureau of Statistics released the second set of estimates for state GDP, and many states are comparable to other African countries. Zamfara state, which is one of the smallest states in Nigeria in terms of economic activity, is larger than Guinea Bissau and the Gambia, and almost as large as Liberia. Kano, Ondo, and Anambra are all individually larger than Niger republic. Akwa-Ibom and Rivers are both individually larger than

Mozambique. And although the GDP for Lagos state was not officially released, back of the envelope calculations put it larger than Ghana and Cameroon. So, the governors are essentially equivalent to presidents in other African countries.

Monetary and trade policy are out of their control but that is the same with most European Union member states and their presidents don’t get a free pass.

Then there is the matter of tax revenue. Again, we always focus on the presidency and the federal government’s budget but we forget that states, and local governments who are unfortunately mostly still puppets of the state governors, collect just as much tax revenue as the federal government.

According to the revenue allocation formula, states and local governments get over 47 percent of federally collected revenues. So for every N100 the federal government collects, the states and local governments collect almost N90. This is even before you talk about internally generated revenue. Whichever way you cut it, the states and the local governments have almost as much financial power as the federal government. At least if you exclude debt financing.

The impact of governance at the state level is also apparent in some economic www.businessday.ng

‘

But perhaps the most important area where governors can make a real difference is in their joint lobbying efforts to influence policy

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outcomes. Unemployment varies greatly across states and although some factors behind that variation are exogenous to current state government polices, some are not. Some states, like Lagos and Kebbi, who have taken job creation much more seriously have shown better performance than others. The same is true for educational outcomes where states like Anambra, Adamawa, and Taraba, who have taken education seriously, have been able to perform above the average. Whichever way you cut it, states who have been focused on specific issues have demonstrated that improvements are possible irrespective of what the federal government does.

Of course there are serious structural issues which limit the potential for state governors. The elephant in the room is the exclusive list which places limits on states ability to invest in railroads, ports, some roads, and other key infrastructure. However, as has been pointed out by others, airports are also on the exclusive list but governors never seem to find it difficult to get around the exclusive list for that.

But perhaps the most important area where governors can make a real difference is in their joint lobbying efforts to influence policy. The governors’ forum has real potential to influence the presi@Businessdayng

ECONOMIST

NONSO OBIKILI dency in cases where monetary or trade policy is suboptimal. As we saw in the past, with the removal of fuel subsidies under president Jonathan, if the governors are united behind a policy they can get the presidency to act. Of course, President Buhari and President Jonathan are completely different in their capacity to be influenced but still.

The morale of this short story is to shine your eyes and watch your governors. Don’t only look at president Buhari but look at your governors as well. What are their policies? What do their budgets look like? Are they governing or are they lounging in Abuja and Dubai? Don’t give your governors a free pass. They can make a difference.

Dr. Nonso Obikili is Chief Economist at Business Day.

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Monday 10 June 2019

BUSINESS DAY

In Association With

Weapons of mass disruption

Too many challengers The internet’s next act

America is deploying a new economic arsenal to assert its power That is counterproductive and dangerous

They will change it, and it will change them

W

HEN D ONAL D TRUMP arrived in the Oval Office he promised to restore America’s might. His method has turned out to be a wholesale weaponisation of economic tools. The world can now see the awesome force that a superpower can project when it is unconstrained by rules or allies. On May 30th the president threatened crippling tariffs on Mexico after a row over migration.

Markets reeled, and a Mexican delegation rushed to Washington to sue for peace. A day later preferential trading rules for India were cancelled. Its usually macho government did not put up a fight and promised to preserve “strong ties”. China faces a ratcheting up of tariffs soon, and its tech giant, Huawei, has been severed from its American suppliers. The country’s autocratic leaders are enraged, but on June 2nd they insisted they still seek “dialogue and consultation”.

A tighter embargo on Iran, imposed over European objections, is strangling its economy.

President Trump must view this scene with satisfaction. Nobody takes America for granted any more. Enemies and friends know that it is prepared to unleash an economic arsenal to protect its national interest. America is deploying new tactics—pokerstyle brinkmanship—and new weapons that exploit its role as the nerve centre of the global economy to block the free flow of goods, data, ideas and money across borders. This pumped-up vision of a 21st-century superpower may be seductive for some.

But it could spark a crisis, and it is eroding America’s most valuable asset—its legitimacy.

You might think that America’s clout comes from its 11 aircraftcarriers, 6,500 nuclear warheads or its anchor role in the IMF. But it is also the central node in the network that underpins globalisation. This mesh of firms, ideas and standards reflects and magnifies American prowess.

Though it includes goods traded

through supply chains, it is mainly intangible. America controls or hosts over 50% of the world’s cross-border bandwidth, venture capital, phone-operating systems, top universities and fundmanagement assets. Some 88% of currency trades use greenbacks.

Across the planet it is normal to use a Visa card, invoice exports in dollars, sleep beside a device with a Qualcomm chip, watch Netflix and work for a firm that BlackRock invests in.

Foreigners accept all this because, on balance, it makes them better off. They may not set the rules of the game, but they get access to American markets and fair treatment alongside American firms. Globalisation and technology have made the network more powerful although America’s share of world GDP has fallen, from 38% in 1969 to 24% now.

China cannot yet compete, even though its economy is approaching America’s in size.

Despite this, Mr Trump and his advisers are convinced that the world order is rigged against America, pointing to its rust-belt and its trade deficit. And rather than mimic the relatively restrained tactics of the last trade conflict, with Japan in the 1980s, they have redefined how economic nationalism works.

First, instead of using tariffs as a tool to extract specific economic concessions, they are being continuously deployed to create a climate of instability with

The second half of humanity is joining the internet

America’s trading partners. The objective of the new Mexican tariffs—fewer migrants crossing the Rio Grande—has nothing to do with trade. And they breach the spirit of USMCA, a free-trade deal signed by the White House only six months ago, which will replace NAFTA (Congress has yet to ratify it). Alongside these big fights is a constant barrage of petty activity. Officials have skirmished over foreign washing machines and Canadian softwood lumber imports.

Second, the scope of activity has been extended beyond physical goods by weaponising America’s network. Outright enemies such as Iran and Venezuela face tighter sanctions—last year 1,500 people, firms and vessels were added to the list, a record figure.

The rest of the world faces a new regime for tech and finance. An executive order prohibits transactions in semiconductors and software made by foreign adversaries, and a law passed last year known as FIRRMA polices foreign investment into Silicon Valley. If a firm is blacklisted, banks usually refuse to deal with it, cutting it off from the dollar payments system. That is crippling—as two firms, ZTE and Rusal, discovered, briefly, last year.

Such tools used to be reserved for times of war: the legal techniques used for surveillance of the payments system were developed to hunt al-Qaeda. Now a “national emergency” has been declared in tech. Officials have discretion to

define what is a threat. Though they often clobber specific firms, such as Huawei, others are running scared (see article). If you run a global company, are you sure your Chinese clients are not about to be blacklisted?

The damage to America’s economy so far has been deceptively small. Tariffs cause agony in export hubs such as northern Mexico, but even if Mr Trump imposes all his threatened tariffs, the tax on imports would be worth only about 1% of America’s GDP. His poll ratings at home have held up, even as they have slumped abroad. His officials believe the experiment in weaponising America’s economic network has only just begun.

In fact, the bill is mounting.

America could have built a global coalition to press China to reform its economy, but it has now squandered precious goodwill. Allies looking for new trade deals with America, including post-Brexit Britain, will worry that a presidential tweet could scupper it after it has been signed. Retaliation in kind has begun. China has begun its own blacklist of foreign firms. And the risk of a clumsy mistake that triggers a financial panic is high.

Imagine if America banned the $1trn of Chinese shares trading in New York, or cut off foreign banks.

In the long run the Americanled network is under threat. There are hints of mutiny—of America’s 35 European and Asian military allies, only three have so far agreed to ban Huawei. Efforts to build a rival global infrastructure will accelerate. China is creating its own courts to adjudicate commercial disputes with foreigners (see Chaguan). Europe is experimenting with building a new payments system to get round the Iran sanctions, which could in time be used elsewhere. China, and eventually India, will be keen to end their dependence on semiconductors from Silicon Valley. Mr Trump is right that America’s network gives it vast power. It will take decades, and cost a fortune, to replace it.

But if you abuse it, ultimately you will lose it.

I

N 2007 MORE humans lived in cities than outside them for the first time. It was a transition 5,000 years in the making. The internet has been quicker to reach the halfway mark. Over 50% of the planet’s population is now online, a mere quarter of a century after the web first took off among tech-savvy types in the West. The second half of the internet revolution has begun. As our briefing describes, it is changing how society works—and also creating a new business puzzle.

Most new users are in the emerging world; some 726m people came online in the past three years alone.

China is still growing fast. But much of the rise is coming from poorer places, notably India and Africa.

Having seen what fake news and

trolling has done to public discourse in rich countries, many observers worry about politics being debased, from the polarisation of India’s electorate to the persecution of Myanmar’s Rohingya minority.

On the positive side, charities and aid workers talk endlessly and earnestly about how smartphones will allow farmers to check crop prices, let villagers sign up for online education and help doctors boost vaccination rates.

Less well appreciated is that the main attractions of being online are the same for the second half as they were for the first. Socialising and play, not work and self-improvement, are the draw. Porn is popular.

Messaging apps help friends stay in touch, and let migrant workers say goodnight to their children back home. People entertain their friends—and strangers—on social media with goofy home-made videos on YouTube or TikTok, an app focused on short, humorous clips.

Cheap data plans and thumb drives bring pirated films to millions who may never have been to a cinema.

Dating apps are more popular than farming advice; video games are more popular than either. Such Continues on page 15

Monday 10 June 2019

BUSINESS DAY

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In Association With

Fewer friends, more problems

King Abdullah of Jordan fears that old allies are ditching him

And it is not just America

W

E ARE ALL King Abdullah.” So said the official campaign to celebrate the 20th anniversary of the king’s accession to the throne in Jordan. But the turnout on February 7th suggested that few agreed with the sentiment.

Even trays heaped with mansaf, lamb stewed in yogurt, could not rouse large crowds. Two months later the World Economic Forum on the Middle East and North Africa, held on the Dead Sea in Jordan, also failed to attract the desired audience of global bigwigs. At home and abroad, says a former official, “the king is losing his prestige.”

Other Middle Eastern countries have oil. Jordan has location. It sits at a strategic crossroads, so the West and regional powers have long valued its stability. During the cold war Jordan served as a reliable and moderate Western ally when other Arab states turned to the Soviet Union. It acted as a conduit to next-door Israel, with which it has a peace treaty, when others shunned the Jewish state.

America used Jordanian territory to launch special forces into Iraq and as a base from which to co-ordinate rebels in Syria’s civil war.

Today, though, Jordan doesn’t seem so essential. Many Arab states now deal directly with Israel. Some of them are upset with King Adbullah (pictured) for not toeing the line on regional matters. He has maintained relations with Qatar, which has been ostracised by other Gulf states, and backed away from the war in Yemen led by Saudi Arabia and the United Arab Emirates (UAE).

He is seen as soft on the Muslim Brotherhood, an Islamist group that operates in Jordan but is banned elsewhere. The king has even shaken hands with Hassan Rouhani, the president of Iran, which is hated by big Arab powers.

As it pulls troops out of the region, America is also losing interest in Jordan. King Abdullah moans that the administration of Donald Trump is ignoring him as it draws up a peace plan for Israel and the Palestinians.

The king fears that he will be pushed to provide a permanent home for millions of Palestin-

ians, who are the majority in Jordan, making it the de facto Palestinian state. The king also worries that the plan will ignore his historical claim to custodianship of Jerusalem’s holy places or give countries that support Mr Trump, such as Saudi Arabia, a role in the city.

America, Saudi Arabia and the UAE can put pressure on Jordan by withholding aid.

America gives it over $1bn each year, around 2.5% of GDP. The Gulf states injected billions more into Jordan during and after the Arab spring. But Saudi Arabia did not renew its aid package in 2017, a move that Jordanian officials viewed as punishment for their nonconformist policies. Months later King Abdullah said he faced economic pressure to tone down his opposition to Mr Trump’s recognition of Jerusalem as Israel’s capital. As Jordan faced an economic crisis last year, the Gulf states (including Saudi Arabia) promised $2.5bn, mainly in the form of loans.

Only a fraction of the cash has been transferred so far.

King Abdullah needs the help. Millions of Palestinian,

Iraqi and Syrian refugees have sought shelter in Jordan, a burden it cannot afford, says the king. Public debt equals 95% of annual GDP. The government has cut subsidies and raised taxes, pushing prices higher.

Over a million of Jordan’s 10m people are poor. Youth unemployment stands at 41%. Such is the demand for jobs that when the American embassy in Jordan advertised for a secretary, radio stations ran the news on their bulletins. “The malls, markets and restaurants are empty,” says Samer Tawil, a former economy minister.

The people used to blame greedy ministers and corrupt officials for their misery—and looked to the king for remedies.

Now when they protest, as they often do, they call out King Abdullah by name. “Prices are rocketing and Abdullah is playing poker,” runs one of their chants. “Jordan can’t handle the cost of its royal family,” says a sheikh from the Beni Hassan, the kingdom’s largest tribe. A widely-shared letter from a former minister, Amjad al-Majali, demanded the king “hunt the corrupt circle that is

close to you”.

Anger is fiercest among the indigenous Bedouin, who dominate the security and intelligence services. Retired officers sign open letters stating that they no longer consider Abdullah and his Palestinian wife, Rania, their monarchs.

Some threaten to take up arms.

Amid reports of coup plots, the king removed his interior minister and intelligence chief.

Their replacements immediately arrested tribal leaders— further inflaming tempers.

Some Bedouin sheikhs look to Prince Hamzah, the king’s half-brother, who was removed as heir apparent in 2004 to make way for the king’s son.

Prince Hamzah’s rich Arabic lilt (acquired during a youth living with tribesmen) appeals to the Bedouin and contrasts with the king, who grew up speaking English. After years out of public view the prince is back in the media. “Only the intelligence services would authorise that,” says a politician. Calls for choosing a government by elections, not by royal decree, are growing too. Better to share power, perhaps, than risk losing it all.

The second half of humanity...

Continued from page 14

boons are unlikely to make their way into many UN development reports. But they are a boost to the stock of human happiness.

For businesses, the second half of the internet offers a vast pool of customers. It also brings a headache—most of these new users are too poor to spend very much. Tens of billions of dollars in venture-capital money have flowed into internet startups in emerging markets, excluding China. The Silicon Valley giants have built up big user bases—over 1.5bn Facebook users are in developing countries.

YouTube, a video site owned by Google, is increasingly dominated by non-Western users. Last year Walmart spent $16bn buying Flipkart, an Indian e-commerce giant.

Jumia, an e-commerce firm with 4m customers in Nigeria and 13 other African countries, floated in New York in April.

Despite these firms’ punchy valuations, they are still looking for sustainable business models. Reliance Jio, an Indian firm, has sunk $37bn into building a high-speed mobile network and acquiring a big base of mostly poor users. Each Facebook user in Asia generates only $11 of advertising revenue a year, compared with $112 for a North American one. The combined revenue of all the internet firms in emerging markets (excluding China) is perhaps $100bn a year. That is about the same size as Comcast, America’s 31st-biggest listed firm by sales.

Nonetheless, the impact of these firms on business will get bigger in two ways. First, they will grow fast—although whether fast enough to justify their valuations remains to be seen. To maximise their chances, many are offering not just a single service (such as search or video), as Western firms tended to in their early years, but a bundle of services in one app instead, in the hope of making more money per user. This approach was pioneered in China

by Alibaba and Tencent. Go-Jek in Indonesia offers ride-hailing, payments, drug prescriptions and massages. Facebook is pushing a digital payments system in India through its chat service, WhatsApp (see article).

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Monday 10 June 2019

BUSINESS DAY

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The fault in our stars

When is Eid al-Fitr?

The answer may depend on pollution and politics

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S THE SUN slipped into the Mediterranean on June 3rd, imams in Gaza took to their minarets to announce the end of Ramadan.

Observers in Saudi Arabia had spotted the hilal, the waxing crescent moon that marks a new Islamic month. Muslims could celebrate the Eid al-Fitr holiday—at least for a few minutes. Word soon came from Jerusalem: Palestine’s grand mufti could not find the moon. Eid was postponed.

“Do not fast until you see the crescent, and do not break your fast until you see it,” said the Prophet Muhammad. Early Muslims were keen astronomers, in part because faith demanded it.

Scholars like Ibn Yunus of Egypt corrected Ptolemy’s mistakes.

The first modern observatory was built in Baghdad. Their work shaped our understanding of the cosmos. The moon’s phases are now a matter of predictable calculation.

But Islam still relies on hu-

man eyes to spot the hilal. This is hardly a science. Even if it hangs overhead, that sliver of luminous lunar rock can be obscured by clouds or smog. Eid is thus rarely observed at the same time across the Middle East.

Arch-rivals Saudi Arabia and

Iran often choose different dates, which are adopted by allies and co-religionists.

This year was unusually absurd. War-torn Syria and Yemen had two Eids, one for government-controlled lands, the other for rebel-held pockets. Watchers

in Libya could not find the moon on June 3rd but adopted the Saudi date anyway. Wags wondered if some countries were making political statements. For the first time in recent memory, Jordan and Palestine broke with Saudi Arabia. Both are unhappy with

the kingdom over its support for Donald Trump and his Middle East peace plan.

Along with Eid greetings, Arabs swapped Eid jokes. One widely shared video from a Kuwaiti YouTube channel showed Sunni and Shia clerics playing tug-of-war with the lunar crescent. But the confusion is a real annoyance. Muslims in the West groan about having to ask their bosses for a day off—without knowing in advance which day it will be.

Other calendars that fix their months by the moon use mathematical formulas: Rosh Hashanah or the Chinese new year are predicted scientifically. Some Muslim jurists say their faith permits the same. Enthusiasts have designed websites and apps that show when and where the crescent will be visible. Their work suggests that the hilal should not have appeared in the eastern hemisphere until June 4th. No one tell the Saudis—or Mali, which somehow spotted it on the 2nd.

Foreign-investment disputes

Why the European Union should not ditch bilateral investment treaties With populists corrupting courts, foreign investors need safeguards

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FTER THE fall of the Berlin Wall and before central and eastern European countries began joining the European Union in 2004, officials in Brussels strongly encouraged bilateral investment treaties (BITs) between the bloc’s members and their neighbours to the east. BITs are inter-governmental agreements that govern disputes between foreign investors and host states.

Their purpose is to protect investors against discrimination and expropriation (disputes between companies are handled separately). The European Commission hoped they would stimulate investment in the region to the benefit of both investors and newly liberated former Sovietbloc countries. They did. Thanks in part to these treaties, inflows of capital soared. Germany, in particular, became a big investor in Hungary and the Czech Republic. BITs have become a common way to seek redress in bust-ups originating in the region, with 145 cases filed since 1989.

Over time, however, the Eurocrats have grown cooler towards BITs, primarily because they are unhappy with where they are resolved. Arbitration is conducted by the International Centre for the Settlement of Investment Disputes

(ICSID), a World Bank body based in Washington. The European Commission argues that this is the wrong forum for all-European investment disputes. It prefers local courts to rule on them, with the European Court of Justice (ECJ) as the last resort. Its stance received a boost in March 2018 when the ECJ decided against Achmea, an insurer that had sued Slovakia for breach of the Dutch-Slovak BIT after a change in Slovak law prohibited the distribution of profits derived from private health insurance. A German court had referred the case to the ECJ, arguing that the arbitration clause in the treaty was incompatible with EU law. In the wake of the Achmea ruling the

commission proclaimed that all of the more than 190 intra-EU BITs must end by December this year.

The desire to resolve disputes at home rather than in an obscure court across the Atlantic would be understandable if courts across the EU could be trusted. But they can’t. In parts of central Europe the domestic judicial system is neither fair nor equitable, because it is increasingly under the influence of politicians. In Poland the governing Law and Justice party has subjugated courts by stacking the Constitutional Tribunal with its cronies and by letting parliament, rather than other judges, choose members of the National Council of the Judiciary,

the body that handles judicial appointments. In Hungary the prime minister, Viktor Orban, has amended the constitution to cow the country’s judges. Last week he shelved plans to create a parallel judicial system, which would have handled cases brought against state bodies, only because he worried it would lead to his party’s expulsion from the EU parliament’s European People’s Party (it is already suspended). And the Czech prime minister, Andrej Babis, recently replaced the justice minister with a loyal foot soldier who he hopes will prevent or delay his indictment for the misuse of EU funds.

In light of the politicisation of the judiciary in much of central Europe, the thought of BITs being dismantled at the end of the year fills many investors with dread.

If the treaties disappear, so will much of the investment from western neighbours on which the region still heavily relies. Not surprisingly, Germany, France and Austria—all countries whose firms have big investments in central Europe—are opposed to the abolition of intra-EU BITs, whereas Poland, the Czech Republic and Hungary are all for it.

One solution would be the establishment of an EU body, mod-

elled on the ICSID, to specialise in investment disputes. But this would take years to set up. In the meantime, the EU should stick with BITs. If it does not, investors will either steer clear of countries with unreliable judicial systems or structure their deals from countries outside the bloc that have bilateral treaties with those within it. Either way, Europe would lose.

Monday 10 June 2019

BUSINESS DAY

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Monday 10 June 2019

BUSINESS DAY

real sector watch

Firms shut down on Wempco’s lack of capacity to produce cold rolled steel ODINAKA ANUDU

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number of ma nu f a c turing companies have shut down because they cannot have access to annealed cold rolled—their major raw material— from Western Metal Products Company Limited (WEMPCO) Group, the only company authorised to produce the input.

Right from the government of Goodluck Jonathan, Wempco has been the only company allowed to produce annealed coldrolled steel and supply to other downstream firms which use it to make aluminium products and wheel barrows. But for a long time, the company has been unable to produce the steel and is even accused of importing the product.

The implication is that manufacturers using the input cannot import it because they are not allowed to, and cannot get it from Wempco which is currently battling survival.

Already, Grif, maker of aluminium drums, has exited Nigeria for this reason.

The cold-rolled steel is one of the items on the Central Bank of Nigeria’s

list of 41 items banned from accessing foreign exchange since 2016.

Also, Federated Steel from China, maker of iron rods, has exited Nigeria and sold its assets to MNIL Limited.

Another iron rod maker, Universal Steel, has shut down.

BusinessDay gathered from reliable sources in the steel sector that Industrial And Farm Equipment Company, a maker of wheel barrow, has exited.

A big aluminium maker Wahum is on the verge of shut-down as it can’t produce because it is unable to get cold-rolled steel.

“This is not how to run an economy,” an affected steel sector player, said.

“It is counter-productive and helps nobody,” the steel sector player said.

Nigeria had 21 enamel makers in 1980s but only about five companies are barely existing. Other companies playing in industries under steel are also struggling for survival. First Aluminium is in dire straits as the company continues to be hobbled by cheap aluminium products.

Qualitec Industries, a major maker of roofing sheets, is nearing shutdown, having downsized workforce by over 50 per-

cent in the last four years.

“We are really struggling.

In the metals industry, the majority of the companies are dead,” Kufile said.

Nigeria exited recession in 2017, which claimed at least 50 manufacturers, mainly SMEs, according to the Manufacturers Association of Nigeria (MAN).

Much of the problem was caused by poor access to dollars to import inputs.

Many companies in Nigeria cannot compete with cheap Chinese steel. There is also low patronage by construction players and

government contractors.

Nigeria’s business environment is generally tough, ranking 146 out of 190 countries in the 2019 World Bank Doing Business Index. The country is full of opportunities, with demography of 201 million people, half of who are under 18 years.

But issues like multiple taxation, hurdles by government agencies and poor infrastructure hurt investors.

In July 2018, the dominant player in the diaper industry, Procter &Gamble, shut down its $300 million Agbara plant owing to issues

relating to inability to meet expected targets due to multiple taxation and harsh treatment in the hands of Nigeria Customs Service, which regularly acts as a revenue earner rather than a business facilitator.

The Lagos-based Kimberly Clark, which produces Huggies, is exiting Nigeria.

“There are many substandard diapers flooding the Nigerian market. They pack them in white bails, sell them to Nigerian merchants at ridiculously low prices and bring them into this market. What we need

L-R: Michael Pompeo, U.S. secretary of state; Pauline Krikke, mayor of the Hague; and Mark Rutte, prime minister of the Netherlands during the opening session of the 2019 Global Entrepreneurship Summit at the Hague, the Netherlands last week.

is to stop this kind of products from coming into this market because they cause rashes and infections and they are not of good quality,” Paul Odunaiya, managing director, Wemy Industries, told BusinessDay in an interview.

Pharmaceutical companies are also in the shutdown party. Evans Medicals is shut down. Pharmaceuticals are struggling with importation of excepients and other inputs as Nigeria does not have a strong petrochemical industry that should produce them.

Energy constitutes 40 percent of manufacturers’ expenditure. Gas is dollarised, say manufacturers.

“We need a new energy policy. We need to review our energy policy,” Muda Yusuf, director-general of Lagos Chamber of Commerce, said recently in an interview.

In a recent CEO Confidence Index (MCCI) for Q1 2019 coducted by MAN, 92 percent of them said multiple taxes were the biggest issues, while 63 percent voted that banks were reluctant to lend to them.

However, analysts say apart from challenges in the economy, poor business practices also contribute to closure of firms.

Becoming manufacturer of the future ODINAKA ANUDU, Hague

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anufacturing is changing across the world. It is no longer just about making beer, plastics or shoes.

Manufacturing across the world is now smart, meaning that industries are increasingly becoming automated and technologydriven. This is the meaning and the basis of Industry 4.0.

South Korea has developed ‘Strategy 3.0’ for the purpose of creating 10,000 smart factories by 2020 to facilitate convergence between software and hardware technologies, according to a report at Swedish Production Symposium in 2018. The country has raised about $972 million

already for this purpose.

For South Korea, the smart firm— which is factory of the future— incorporates “a manufacturing system which all business processes of planning, design, production, distribution and sales are automated, connected and integrated by various information and communication technologies. It can produce personalised products by customers with satisfactory time, cost and quality”.

World leading home appliance company Whirlpool recently decided to eliminate wastes its factories sent to landfills by 2020.

To achieve this goal, it used an analytics platform across all of its facilities to reveal the amounts of waste generated. www.businessday.ng

In the 2018 China Smart Manufactur ing Rep or t, Deloitte, a multinational professional ser vices network, said China’s industrial enterprises have e n ha n c e d t h e i r d i g i t a l capabilities, laying the foundation for the analysis, prediction and selfadaption of future manufacturing systems.

The report says that in financial terms, smart manufacturing has substantially improved China’s contribution to enterprises’ profits “In traditional application, China has become the largest buyer of industrial robotics, with strong growth in demand,” the report further says.

It adds that building a digitalised factory is regarded as a top priority

for smart manufacturing deployment as enterprises focus on connecting data flows from production to execution, leaving great space to improve product and value chain data flow.

This is obviously why Chinese products are cheap and competitive.

At the Global Entrepreneurship Summit held in the Hague, the Netherlands, experts said manufacturers in developing countries, especially Nigeria, must brace up for change.

Tequila Harris, an associate professor in Georgia W. Woodruff School of Mechanical Engineering, said industries must not be stuck in their old ways of doing things as doing that was too risky and would put them out of business.

“You need to keep learn-

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ing and innovating to stay afloat. If you are stuck in the old ways, you will be left behind,” she said.

Nigerian manufacturers battle with poor infrastructure, multiple taxation, inadequate skills, bad policies and high energy cost.

In spite of this, Harris recommended a shift in thinking in the Nigerian manufacturing space, advising them to retrain themselves and their staff in the face of unavoidable globalisation.

Rob Gossens, chief executive of Fieldlab Technologies Added, a smart factory, said though cost would always be important, manufacturers must pay more attention to speed and efficiency.

“For me, digitisation is about speed and efficiency. @Businessdayng

The tools are getting better and it is important to keep learning and educating yourself,” he said.

“Feike Sijbesma, chief executive of the Netherlands-based DSM, which plays in health, nutrition and materials industries, said manufacturers must begin to understand the changing dynamics in the world.

“For instance, there is a lot of improvement to be done in our food,” he said.

“Our food contains too much sugar, salt, fat and not enough nutrition. I do not think this is what we call innovation,” he said.

“Africa must not copy everything from the West but must look for something that works locally and is sustainable,” he further said.

Monday 10 June 2019

BUSINESS DAY

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real sector watch Nigerian companies must organise themselves to leverage opportunities in U.S. market — Omdal Brent Omdal is the commercial counsellor at the United States Embassy/United States Mission to Nigeria. He runs an office of 12 professionals, providing services to U.S. businesses entering the Nigerian marketplace. In this interview with ODINAKA ANUDU, Industry Editor, he talks up opportunities in the U.S. market and why Nigeria companies must organise themselves better to take advantage of them.

You recently had a maiden U.S. fair where Nigerian and American businesses interfaced. Tell us about it. t was a great fair. We had 33 companies present at the fair. It was a three-day event.

The first two days included exhibitions and were open to the public, which meant that any Nigerian business interested in learning about the 33 companies could come and meet them face to face. Each of the companies had specific objectives. Some of them were looking to sell more of their products; others were interested in finding joint venture partners or agents or customers. On the second day, each company had the opportunity to present its business case, its value proposition to a group of individual Nigerian companies in that specific sector. Then on the third day, we came to have very individualised and specific meetings so that the American companies could start to talk partnerships with individual Nigerian companies. We had been interfacing with these Nigerian companies for a couple of months. So, we got to know who they were and what they wanted, and then went out in the marketplace to see what companies fit the bill.

We were fortunate enough to have Nigeria’s minister of industry, trade and investment, Okechukwu Enalamah, come and speak to us. We had one of Nigeria’s top economists, Bismark Rewane, give us his view on where the economy is headed. We also had the head of the Nigerian Investment Promotion Commission, Yewande Sadiku, talk to us about the business case for Nigeria and why it is the destination in Africa.

The American companies found that to be very informative and useful. The second part of the event is that we explored some topics that Nigerian and American companies both face, particularly when they enter partnerships. We had a series of workshops with discussion groups that explored key topics. The first was, what does US government have on offer to help promote bilateral

I

trade? So, we heard from our colleagues from different agencies within the United States government, including the Overseas Private Investment Corporation (OPIC), U.S. Export-Import Bank, U.S. Trade and Development Agency, my office— US Commercial Service—so that Nigeria businesses could understand some of the grant programmes available and some of the investments available through OPIC. Other discussions we had revolved around the supply chain and logistics in Nigeria.

Another area dealt with the roles of regulatory agencies in Nigeria like SON, NCC and NERC. We found out all these to be useful.

Were there commitments and deals?

We had about 7,000 people attend the fair over a two-day period. That tells me there is interest in doing business with U.S. companies. There are some pent-up demands.

Some of our Fast-Moving Consumer Goods (FMCGs) in Nigeria were selling some of their products, but it really takes a little bit of time for deals to germinate. We will be tracking it within the next four to six months. It is something we measure ourselves by as an organisation. We call it a bottom-line. Sometimes it takes six months to happen. Whenever we do things like this, we want deals to happen. Let’s talk in another four months or so and I will highlight some of the things that have happened.

In your opinion, how can Nigerian and American businesses do more deals?

American companies are conservative from the investment point of view, but more aggressive from trading and selling point of view. We view doing business as a journey.

We have some well-known investors here in Nigeria, including Chevron, General Electric and several oil and gas providers. We have some investors in FMCGs like Kellogg’s, Budweiser, Kimberly Clark, Procter & Gamble and others. Those companies do not start on investment front.

They first need to prove the market. Is there demand? www.businessday.ng

wildly in Nigeria. We manufacture a lot of chocolates and some shea butter is used in the process. Any agricultural product can sell in the United States.

The U.S. has an insatiable appetite for agricultural products. America is a bread basket but there are things we do not grow there. Another one is cocoa. Cane sugar is something that can be exported to the US.

Brent Omdal

Can I sell my products? Can I sell in quantity that it makes sense for me to start manufacturing locally?

American West African Agro is a great example. This is a company that came to sell irrigation equipment but decided that what Nigeria needed was some farming solution. Jerry Cunningham ( the founder) has hired about 100 employees. He has sold a lot of American equipment that way, but more importantly, he has come with a solution for the Nigerian marketplace. That really is what it takes.

We have a record of investments of American companies in Nigeria. Any track of Nigerian businesses in the US? One of our responsibilities in the Commercial Office is to help U.S. companies succeed in this marketplace. But we are also looking to attract Nigerian investments back to the US so that they can build wealth on both sides of the water.

We have seen that kind of activity in the oil and gas sector. Nigeria has a wellorganised local content. A lot of service providers do not usually have the equipment or technology. So they come to us to help them get some specialised equipment or technology. Some of those specialised oil and gas companies set up companies in the U.S. in the procurement and relationship point of

view. Every year, for the past four to five years, we have had the ‘Select U.S. Convention’ which takes place in Washington D.C. My team member is leading a delegation of 15 Nigerians to look at investment opportunities in the U.S. Last year, we had e-commerce companies who wanted to set up offices in the U.S. so that they could procure American products to sell on e-commerce exchanges in the U.S. We had a furniture manufacturer going to the US to transfer some technology here.

Again, one of my favourites from two years ago is a Nigerian company exporting agricultural products like dried hibiscus from Nigeria to the U.S. The company wanted to move up the value chain here but they didn’t know how to do it. Now, they are making an investment in the U.S. They will do manufacturing of the tea in the U.S. and will sell it here. To me, that is an example of how trade and investment create a cycle for creating wealth for both of our countries.

What specific sectors should Nigerian businesses invest in the United States?

It is not really my portfolio to help Nigerian businesses invest in the U.S. There are many agencies that can help Nigerian businesses to set up in the United States. But for specific sectors, there is demand in the cooking industry. Sesame seeds, Gum Arabic and shea butter grow

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Why are Nigerian exporters not taking full advantage of the African Growth and Opportunity Act (AGOA)?

I think there is a bit of misunderstanding of what AGOA is. It is an act of US Congress.

What it does by US law is to create zero duty access for products coming out of Africa into the United States.

There are some minimum standards that countries have to adhere to and it mostly revolves around human rights, but Nigeria is certainly complaint. But that’s just how it is. Zero duty access does not mean you have to just start exporting. You have to organise yourself. If you are exporting an agricultural product, you will still be subjected to all of the Food and Drug Administration (FDA) regulations. You have to comply with sanitary and phytosanitary regulations.

Through the US Agency for International Development, we do have some small resources available to help companies locally to develop their expertise and take advantage of AGOA. It is the Nigerian industry that needs to organise itself.

Unfortunately, it is the crude oil that has benefitted from it most, but that is not the intent of it. The intent of it is to create the pathway for a country like Nigeria to move up the value chain. I served in Vietnam from 2007 to 2010 and prior to me getting there, the U.S-Vietnamese bilateral agreement looked very much like AGOA but was specific. Vietnam did a very good job by attracting investments from Taiwan in the textile sector and they developed their textile sector as well so as to take advantage of exporting to the U.S. They developed their furni@Businessdayng

ture sector and even started importing some hard wood from the U.S, especially from the North-West, turning it into furniture and sending it to the United States to sell in big outlets in the U.S. They created wealth and employment.

So, the question for Nigeria is, what are the products that are going to do that? I can think of some. Talk about the shoes. There is a history of making shoes here. The sky is really the limit.

What are some of the complaints of American companies in Nigeria?

The challenges are not just faced by American companies but companies that do business in an open and transparent way. We have macro economic constraints, but companies want to move capital freely back and forth.

There should be no reason why some Nigerian fintech companies register themselves in the city of Delaware to enable them access funds easily. One of the biggest challenges American companies and other companies face is the difficulty in getting the products in and out of ports. In some cases, it is just the process not being clear.

In other cases, it is just congestion. Oracle highlighted working with Customs to implement blockchain technology to make the whole Customs process transparent. It has increased revenue. We believe the revenue should retain with the Nigerian government. Again, when citizens pay taxes they hold governments to account.

What do you tell American companies wishing to invest in Nigeria?

The best way to succeed in Nigeria is through partnerships. Nigerians love to partner. American companies have been able to find good partners. My office set up a programme called ‘Networking with the USA’ whereby we go out and get Nigerian companies so as to find the best partners for American companies. We sit down with the companies, view the business, talk to their bankers, look at their finances and learn a little about their reputation.

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BUSINESS DAY

COMPANIES & MARKETS

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Kaspersky lab unveils new brand name, visual identity

COMPANY NEWS ANALYSIS INSIGHT

Pg. 22

CONSUMER GOODS

These four consumer goods firms elevate return on shareholders’ funds to 8.3% ISRAEL ODUBOLA

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our consumer goods firms demonstrated improved efficiency in utilising funds sourced through equity as the return delivered on those funds appreciated in three months to March 2019.

The return on shareholders’ funds of two food and beverage giants, Cadbury and Nestle Nigeria, and two sugar producers, Dangote Sugar and Mcnichols, average 8.3 percent in the first quarter of the current year, 2.6 percentage points higher than 5.7 percent recorded in the previous comparable period.

The return on equity metric appraises a company’s level of efficiency at generating profit from its shareholders’ investment, and shows how much profit each naira of ordinary shareholders’ equity generates. A higher ROE figure depicts good management ability to generate income from the equity available to it.

Given the first quarter ROE figures, the four players in the consumer goods space generated N8 per each unit of owners’ funds, a quarter more than N6 realized a year earlier.

Nestle outshined peers with a ROE figure of 20.4 percent in the

first three months of 2019, implying that the company realized N20 from every naira of owners’ funds, 25 percent higher than N16 generated in three months to 2018.

The Lagos-based food and beverage giant grew net earnings nearly by half to N12.9 billion in the first quarter, faster than shareholders’ fund which climbed 18 percent higher to N62.9 billion.

Nigeria’s largest sugar producer, Dangote Sugar grew return on owners’ funds to 7 percent, 2 percentage points higher than N5 realized in the period.

The sugar maker was able to deliver better return as its net income surged 33 percent to N7 billion in 2019’s first quarter, and total equity dipped marginally by 1.35 percent from N107 billion twelve months earlier to N105

billion.

Cadbury delivered N4 on each naira of stockholders’ equity in the review quarter, 23 times higher than 17 kobo realized in the same period of the previous year.

The food products maker’s spike in ROE was triggered by massive acceleration in profit from N22 million to N507 million, dwarfing the four percent growth in shareholders’ equity to N13 billion.

Mcnichols elevated returns on shareholders’ investment by 2.4 percent in the review quarter, an uptick from 1.8 percent recorded in the previous comparable period.

The sugar maker was able to deliver higher returns as its 40 percent spike in bottom-line to N8.1 million, outstripped four percent rise in stockholders;’ equity.

The cumulative net income of the four players climbed to N20.4 billion in first quarter this year, indicating a 146 percent surge over N13.9 billion in the previous corresponding period.

Meanwhile, the combined stockholders’ equity of the said firms climbed five percent higher from N173.9 billion to N182.4 billion.

Consumers goods firm are facing hard times as stifled consumers’ disposable income, decrepit infrastructure, tough business environment, sluggish economic growth, shift from consumers’ tastes to cheaper brands and intense competition continues to haunt their top and bottom-lines.

The food, beverage and tobacco sector, a synopsis of performance of economic activities in the consumers goods sector, slowed for three straight quarters to 1.76 percent in the first three months of 2019, a reflection of woes bedevilling players in the industry.

ENERGY

Schneider Electric addresses business efficiency, power challenges through new products FRANK UZUEGBUNAM

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chneider Electric has launched a new range of products for its Nigerian market to address power-related challenges and the need for premium protection and innovative offers from highend users to low-income earners.

The newly launched products include a range of affordable UPS from APC

by Schneider Electric, with the brand’s guaranteed quality. Earlier versions have been proven by users to be durable with a long shelf life.

“The Easy UPS have the Schneider Electric guarantee of quality and it is very affordable as it includes only the features that the customer requires. The decision is yours to fit it into your home, or your small business requiring a steady supply of a reliable

UPS which you can count on,” Oluwaseun Oloyede, APC by Schneider Electric Channel Sales Manager said.

Other newly introduced products include wiring devices like the Schneider Electric Unica and Lisse Deco ranges. While Unica offers a range of premium, wireless-enabled switches and sockets fitted for the luxury market and hotels, Lisse Deco presents affordable and contemporary fittings equipped with USB ports, phone holders and other convenient accessories to fit today’s lifestyle.

Also launched was the Homaya Solar Hybrid System, providing access to Energy at an affordable price with less dependency on the grid supply.

“It is a smart, portable and affordable solution that fits into every home to provide peace of mind during power outages. The inverter has in-built artificial intelligence to prioritize

solar energy over the grid supply, thereby saving energy,” Ifeanyi Odoh, Head of Offer Marketing, Schneider

Electric said.

“These set of products are game changers in the power sector. They are smart

and tailored to the needs of the market, and we believe that they will have a strong impact in Nigeria,”

Christophe Begat, Managing Director of Schneider Electric, Anglophone West Africa added.

L-R: Jeff Tang, marketing manager, Tecno West Africa; Kwawou Veronica, student of First Africa Church Mission School 1/one of the winners of Give the Nigerian Child a Future; Omodojo Adejoke, head of section, social mobilization, Ifako/Ijaye Local Government Education Authority, and Jesse Oguntimehin, PR manager, Tecno Nigeria, at the Tecno Foundation presentation on scholarship award for primary school student in Lagos, yesterday. Pic by Olawale Amoo

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: David Ogar

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Monday 10 June 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

TECHNOLOGY

Kaspersky lab unveils new brand name, visual identity JONATHAN ADEROJU

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lobal cybersecurity company, Kaspersky Lab becomes Kaspersky, with a mission focused on “Building a safer world.”

For more than two decades, Kaspersky Lab has been offering the best security solutions to customers in pursuit of its mission to save the world.

As the world has become more digitised and globalised, the company has moved beyond the antivirus laboratory to become a technology leader with an advanced and comprehensive portfolio of security solutions and services, in-

cluding innovative products and technologies, cloud services and world-leading threat intelligence.

The rebranding reflects that transformation. The company name becomes simply ‘Kaspersky’, and the new mission is ‘building a safer world’, emphasises our commitment to a trusted and transparent future where everyone has the endless opportunities technology brings, because we protect it.

The new branding reflects the evolution of the business focus from “cybersecurity” towards the wider concept of “cyber-immunity”.

We live in a world where technology connects us across platforms and bor-

ders like never before. We are at a cross section where humans and technology are collaborating to improve our lives.

Cybersecurity in today’s world is consequently about more than just protecting devices, but developing an ecosystem where everything connected is protected.

Kaspersky’s rebranding marks the company’s commitment to this evolution, and to leading the development of higher industry standards for the future.

It also marks the company’s support for the creation of connected systems that are secure by design and no longer where security is only an optional add-on layer at the end.

L-R: Olaoluwa Babalola, brand manager, Heineken; Sarah Agha, portfolio manager, premium brands, NB Plc; MI Abaga, music artiste/executive, and Sandra Amachree, brand PR and sponsorships manager, NB plc, at the UCL Final viewing experience at the all new Heineken House in Lagos.

COMPANY RELEASE

DBN to empower MSMEs with N100bn in 2019

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s players in the Micro Small and Medium Enterprises (MSME) segment of the economy continue to face stiff financial huddles to scale and keep their businesses afloat, the Development Bank of Nigeria (DBN) has said it will empower MSMEs with the sum of N100 billion before the end of 2019.

Joseph Nnanna, the chief economist of the DBN disclosed this at the 5th edition of the Refined Economic Development (RED) quarterly lecture recently held at the University of Abuja.

“This year alone, the DBN plans to disburse N100 billion to MSME and we are quite on track as it is already. We are very confident that we will achieve that this year and beyond,” he said.

According to Nnanna, the DBN offers partial risk sharing, that is credit guarantees with prospective financial institutions granting credit to MSME operators

to aid in reducing the risk associated with the MSME segment of the economy.

Speaking on “Contemporary Strategies for Financial Inclusion and Prosperity in Nigeria,” Nnanna reiterated that MSME are the backbone of any economy, considering the fact that the segment makes up over 90 per cent of all firms and accounts for an average of 60 to 70 per cent of total employment and roughly 50 per cent of Gross Domestic Product (GDP) of Nigeria.

Limited access to finance for the MSME segment severely constrained opportunities for economic diversification in Nigeria, which results into a ‘crowding out effect’ due to government borrowing “As a result, over a period of one year, we witnessed an increase in treasury bill rates peaking at 18 per cent in 2017. At the same time banks facing a challenging external environment worked to reduce

risks, crowding out liquidity to real sector including MSMEs. “Presently, treasury bill rates have declined to 12.7 per cent.

However, yields on government bonds are around 14.5 per cent making it still very attractive to lend to the government. Typically, Nigerian banks observe a value chain business model that deals with already established firms with a track record of success.

“Consequently, banks tend to ignore MSMEs because of poor or no credit history, insufficient collateral to name a few reasons. To that effect, Nigerian banks resort back to what they understand to be a sale investment choice which is competing for larger firms and accepting lower margins only to exploit the higher yields earned from credit and perhaps other fees earned through product offerings as part of the loan agreements,” Nnanna said.

L-R: Oluwatoyin Akomolafe, national president, Nigerian-American Chamber of Commerce; Marie Macfoy, state manager, Globacom, SME, and Adekunle Adeleke, head, oil and gas, Glo Business Solutions, at the recent Glosponsored 3rd African Food and Products Exhibition in Lagos.

COMPANY RELEASE

Armese pledges lifeline for MAPs grappling with local content requirement

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ndigenous meter asset provider, Armese Power Solutions, has pledged its capacity to help meter companies newly engaged by the 11 distribution companies (DisCos) meet local content requirements for meter rollout in line with the Federal Government’s MAP regulation.

The regulation specifies a mandatory local content threshold, which requires MAPs to source a minimum of 30 percent of contracted metering volumes from local manufacturers. However, some MAPs engaged by the DisCos for meter supply are reportedly unable to fulfil this mandate following a dearth of reputable indigenous meter manufacturers to partner with in Nigeria.

Imran Aslam Khokar, CEO, Armese Power Solutions, who was in Lagos recently to sign a Metering Service Agreement (MSA) with Eko Electricity Distribution Company (EKEDC), however assured that Armese was equal to the task of helping MAPs plug this gap leveraging the expertise of its Akwa

Ibom-based meter manufacturing facility, reputedly the largest in subSaharan Africa.

He said: “Our manufacturing subsidiary operating as Metering Solutions Manufacturing Services Limited (MSMSL) has the installed capacity to produce 3 million meters yearly on a three-shift pattern.

It is staffed by a team of seasoned professionals, on a ratio of 99 percent local to 1 percent foreign, who bring a pedigree of unequalled competence to the table in the manufacture of world-class meter assets. Our product line includes single-phase and three-phase prepaid meters in various configurations and mountings as well as tamper-proof polycarbonate (PCB) meter box enclosures.”

Khokhar disclosed that the 20,580sqm manufacturing facility, launched by Vice President Yemi Osinbajo and other top government functionaries in September, 2017 had so far supplied over 200,000 meters to the Port Harcourt Electricity Distribution Company (PHED), among others, and was

set to produce a minimum of 175,000 meters catering to domestic and international requirements in the short run.

“Most recently, Armese also leveraged the quality of products manufactured by our subsidiary MSMSL to supply high-volume meter assets to the Liberia Electricity Company (LEC) for an ambitious electrification project funded by the United States of America through the Millennium Challenge Corporation. In effect, we are poised to help make the MAP scheme a success in Nigeria through the edge we have recorded in local content and encourage newly engaged MAPs experiencing this challenge to partner with us,” he added.

Armese recently scaled a competitive bid process to emerge one of the frontline MAPs engaged

by PHED to roll out meter assets within its franchise area for a renewable 10-year timeframe. PHED reportedly supplies power to over 14 million people cutting across Rivers, Bayelsa, Cross River, and Akwa Ibom.

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L-R: Iyke Ejimofor, executive secretary, Nigeria-South Africa Chamber of Commerce; Ohis Ehimiaghe, director, Nigeria South Africa Chamber of Commerce; Ubong King, Nigeria-South Africa Chamber of Commerce; Olawale Ogunsola, deputy manager, Gas Division, Department of Petroleum Resources; Toyin Cameron, public affairs manager, SASOL; Bobby Moroe, South Africa high commissioner to Nigeria, and Oscar Mdluli, country manager, SASOL, at the Chamber’s breakfast forum.

L-R: Rasheedah Aliyu Liman, HOD, department of theatre arts, Ahmadu Bello University, Zaria; Pamela Emodi, manager, education portfolio, MTN Foundation, presenting the first position prize to representative of Vital Years Secondary School, Zaria, winner of the MTN Theatre for Schools regional competition in Drama Village, ABU, Zaria.

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Monday 10 June 2019

BUSINESS DAY

23

COMPANIES&MARKETS INTERVIEW

Government needs to bring Onne Port at par with Lagos to attract more cargoes – Mirza

Aamir Mirza is the managing director of the West Africa Container Terminal (WACT), Onne Port in Rivers State.

In this interview on the sideline of the commissioning of newly acquired multi-million-dollar equipment to boost operation at the terminal, he shares his views with select journalists on what the Federal Government can do to attract more cargoes to the eastern ports. Mirza, who has over 21 years’ experience in port and shipping business, also speaks on efforts by WACT to attract more cargo to Onne Port through the deployment of modern cargo handling equipment, among other issues. AMAKA ANAGOREWUZIE captured his thoughts. Excerpts: A lot has been said about developing the ports outside Lagos. What is your approach to this? think a lot of work needs to be done in this area. Having worked for shipping line and from there to terminal operation, I can give you a fair assessment of some of the challenges the shipping lines face.

The issue of piracy is number one.

Vessels and their crew do not feel secure when they are coming through the eastern part of Nigeria.

The other challenge is the navigation restrictions. The navigational facilities and pilotage services in Lagos are far better than those outside Lagos, particularly Onne.

So, that is another area that needs to be addressed. More so, we do not have night navigation in this part of the country. Those are the few things that require focus from government institutions.

The first fundamental step the government needs to take is to bring Onne Port to be at par with Lagos. We should have minimum 12 meters draught to boost business activities here. Once those bottlenecks are removed, it will attract more cargoes here and bring the cost of cargo down.

already arrived and there are more on the way.

We have been tirelessly working on developing Eastern Nigerian freight and container market, in line with our obligations under the Concession Agreement. To effectively handle increased volumes at our terminal, we had placed order for two Mobile Harbor Cranes (MHCs) costing approximately $10 million.

The ordered cranes are Liebherr LHM 550 type capable of handling one of the largest container vessels calling West African Ports.

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have made Onne Port more attractive. So, what we have been doing is to invest in equipment and people.

Even the equipment commissioning we had recently is just one step in that direction. We added two more trucks to the initial four trucks we had about a month and a half back and one reach stacker.

More reach stackers and trucks are still coming in. So, there is a lot that is in the pipeline. We are conscious of our role and are taking concrete steps to improve the level of service and develop the capability for the terminal to handle the cargo that is coming in.

Talking about your operations here, what challenges are you facing?

One of the few challenges is that because we do not have night navigation, we cannot sail a vessel if she completes operations during the night. The vessel must stay until sunrise before she can leave the berth and go out. That is one challenge.

The other challenge is road connectivity. The road between Port Harcourt and Onne is deteriorating.

The rainy season has just started and if there is heavy rain, we will have serious challenge on that road. So, infrastructure is one area where a lot more still needs to be done. If traders cannot easily bring in and www.businessday.ng

take out their cargo, they will prefer to move cargo from here.

How much have you invested so far in the provision of equipment and development of facilities at WACT? It will be very difficult for me to give an accurate number but very recently – between August last year and now - we have committed $2.5 million to acquire new trucks and other cargo- handling equipment.

This was in addition to the investments we have made in developing the terminal between 2006 and now.

Some of the new equipment have

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Addressing the issue of security for the shipping lines, dredging of channels, and investment in infrastructure including road construction will attract bigger ships to our ports

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WACT is one the terminals that are beginning to compete with ports in Lagos. What measures have you put in place to make your terminal more attractive to customers?

One of the challenges in our industry is to forecast volume growth and to adequately prepare to handle it.

Every year, we try to get a feel of the market through our customers by asking them how much cargo growth they expect, to know if it is going to be more than last year, what is the increase we are looking at?

So, the challenge is to estimate growth and then plan for resources to handle that increase. What has really happened in the last two years is that, in this part of the country, cargo growth has been far higher than Lagos. People perceive the services and connectivity of Onne to be better for the Eastern Nigerian markets and the Middle Belt ; hence we see more cargo coming to us.

Another reason could also be the congestion in Lagos and delays in taking import deliveries that

Aamir Mirza

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Are there policies of government you would like to be reviewed to enhance your operations?

I think there are challenges being faced today by the ports in the East, some of which I mentioned earlier.

Shipping lines face risk of piracy, lack of night navigation and depth in channels, among others. If we can have these issues addressed, it will surely encourage more business and shipping lines will bring in more cargo here. So, the policy framework is already there, but it perhaps requires more efforts in making sure that these obstacles are removed.

With the increase in volume of trade, ports in the region are expanding to receive larger ships of 18,000 TEUs capacity. What do you think Nigeria can do to attain this hub status?

I think infrastructure is the key. If you take for example Apapa and TinCan Island Ports, they were planned for over 20, 30 years ago. The supporting infrastructure has not grown but the volume of cargoes in those ports has grown tremendously.

Access to the port must also b ce invested in. All the hinterland connectivity, the road infrastructure that connects to the port has to be upgraded along with upgrading of the terminal and huge volumes of cargo coming in.

For example, we are investing money at our terminal because we are trying to bring in more cargo here. But if the connectivity from the port to the hinterland is not reliable and if government is not going to invest on fixing the road, then, the investment here in the terminal will only go so far.

So, for me, addressing the issue of security for the shipping lines, dredging of channels, and infra@Businessdayng

structure including investment in road construction will attract bigger ships to come to our ports.

Are you saying we should consider dredging the ports channel to allow for bigger ships or develop new deep seaports?

When I came to Lagos, the Lagos port draught was 12 meters. Today, it is almost 14 meters. Then, I handled the WAFMAX vessel that came to Lagos, which is one of the biggest vessels to call Lagos. So, the thing is, it is possible. For eastern ports, in my opinion, the first fundamental step the government needs to make is to bring the port in Onne at par with Lagos. So, we should have minimum 12 meters draught to encourage business growth.

It has been said that Nigerian ports are the most expensive to do business in. What do you think should be done to address this?

The cost of doing business covers a lot of elements in it. The cost starts from when somebody books the cargo. For example, if you have a vehicle and you want to get that vehicle insured, it would also depend on your age and where the vehicle is going to be used. If a vessel is going to the east, the premium charge by the vessel owner from the importer goes higher because of the piracy risk.

So, we need to focus on removing those risks and bottlenecks in the supply chain. That is where the focus needs to be. Clearance process itself is another element.

We must address the security risk, make the port accessible, and remove the bottlenecks of infrastructure including the roads.

If for example, the Onne-Port Harcourt road is not looking well, it is going to create a bottleneck because agents would not be able to take cargo in and out in time.

So, that should be the focus. Once those bottlenecks are removed, it will help in bringing overall cost of doing business down for all stakeholders. This is what is happening everywhere around the world.

Apart from our safety functions, we have security guards deployed 24/7. We have presence of the army and mobile policemen. So, it is a combination of these security measures that enable us to ensure cargo in our custody remains secure.

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Monday 10 June 2019

BUSINESS DAY

Monday 10 June 2019

BUSINESS DAY

INSIGHT

25

5 issues to contemplate in Nigeria’s Social and Economic Development Andrew Nevin, Chief Economist at PWC outlines the five critical economic issues to ponder if Nigeria is to ignite its economy and put it on a sustainable growth path.

Power of the Diaspora – the only thing holding the economy up (1) • The official inflow of migrant remittances into Nigeria in 2018 is estimated at USD22Bn (source). The estimate for 2019 is about USD25Bn • To put this in context, this is about 7% of Nigeria’s GDP. • The transfer from NNPC to the Government was a little less than the USD11Bn in 2018.

• This means that the Diaspora is providing more than double the FX to Nigeria than our oil provides to all levels of governments.

• In fact, this understates the amount, because the $25Bn is the official remittance flow. The AfDB has a rough estimate that unofficial flows (like the Aboki system) are about 50% of official remittances.

• If this applied to Nigeria, it would mean that remittances would be close to USD40Bn and more than 3 times the USD the government receives from oil • In terms of annual emigration, the total number of Nigerian emigrants grew from 448,500 in 1990 to 1.3 million in 2017 … and the total size of the Diaspora is 15m according to FG • It is also worth noting that the fantastic Nigerian Diaspora is doing incredibly well … Nigerian Americans already earn more than the average American, an incredible accomplishment for such a new immigrant group • So what does all this mean? Simply that our biggest export is not oil it is people.

• Let me repeat this .. Nigeria is not an oil economy and our biggest export is not oil … Our biggest export is Nigerians.

• What it also means is that the only thing holding up the economy is the Diaspora; if we didn’t have this massive flow of remittances, I am pretty sure the economy would collapse • What is confusing to me is why this is not discussed more … official figures keep repeating that oil is our biggest export when it is not true. We have a flow of almost $40Bn that is not discussed much … very difficult for me to understand how someone can claim to be analyzing the Nigerian economy when they don’t look at the biggest item • We of course can question whether this is helping us overall from an economic view as we lose people, but obviously people with skills are saying their skills cannot be monetized here … but we cannot deny is that the only thing holding up economy in the incredible Nigerian Diaspora • This structure also creates 2 parallel FX universe - one where the FX starts with the government, and one where the FX starts with millions of individuals … this is of course why we don’t pay

title is uncertain, so cannot be converted to their most valuable social and economic use, and cannot be used as collateral, so prevent investment in other businesses.

• Dead Capital holds back every sector – for example, a woman cannot easily sell a plot of land, then go and liver with her sister and use the proceeds for a new business.

• But it holds back the real estate sector the most, which is an enormous problem for Nigeria • PwC believes the Real Estate sector is most important because we all need somewhere to live and somewhere to work; because we have 17m housing deficit and because real estate creates immense employment benefits, from the construction material, through to the construction which requires masons, plumbers, electricians, carpenters, and labourers, through to demand for home items as people furnish their homes • To put this another way, even if all other sectors are firing, if real estate is not working, then we cannot grow the economy at the required 6-8% … nothing else can compensate • So it is vital that we unlock our immense dead capital the real estate sector so we can create domestic capital – relying less on foreigners

much attention. The Diaspora flow goes directly into the hands of millions of Nigerians family who use it for healthcare, education, housing, and even feeding • One unmistakable conclusion from this is that Nigeria needs a powerful Diaspora strategy, one that maximizes the benefit Nigeria receives from the remarkable Diaspora. Why are we not paying more attention to our biggest resource Mobilizing our dead capital from within Nigeria (2) • We continue to get poorer and poorer as our growth is lower than population growth; with population growth of 2.7% per annum, even if we grow GDP at 2.5% at 2019, we are getting poorer and poorer • And even if grew at 3.5 per year, it would take about 100 years to double GDP per capita • IMF recently warned us we could face up to 8 years of getting poorer and poorer – 2015-2022 - unless we do something • Obviously, to grow GDP 6-8% per

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We continue to get poorer and poorer as our growth is lower than population growth; with population growth of 2.7% per annum, even if we grow GDP at 2.5% at 2019, we are getting poorer and poorer

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annum - required for reducing poverty and unemployment - demands investment; in fact, about 26-28% of GDP needs to be invested per year to grow 6-6%, meaning we need total investment of about N35TrN40Tr a year.

• We currently do not have enough domestic savings for this – we only have about half the investment required • This means we need foreign investment – both FDI and FPI – as PwC has disussed extensively over the past few years • However, taking foreign capital is not ideal … so we need to think about if we have more capital here than we think • And I think we do … that is, have more domestic capital than we think • I want to highlight the immense domestic source of capital we have that remains untapped.

• PwC estimates that Nigeria has about N170 trillion in dead capital, predominantly in real estate. This means if we could unlock N10Tr a year of this and invest , it would make an enormous contribution to • What is dead capital? These are assets that cannot be easily transferred, where

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Our incredible shrinking public sector (3) • In 2000-2002, the public sector expenditure averaged about 25% of GDP; so material and enough to make a difference both in terms of fiscal stimulus as well as delivery of critical services • However, over the last 2 decades, the public sector has been slowly shrinking; total expenditure of all three levels of government in 2017 was only about N13.2 trillion, at 12% of GDP. That year, we spent about N1.5Tr on interest and NASS costs alone added another N125Bn, meaning that real spending that affects Nigerian people directly was closer to 10% of GDP. • This might sound significant, but in fact, when we express this in per capita terms (including the interest and NASS) it is about N70k per capita • Let me repeat this … the government at all levels spends just N70k per capita for public education (primary, secondary, and tertiary) at all levels, healthcare, infrastructure investments, the military and security with all our challenges, running the embassies, etc. I am pretty sure that everyone in this room spends N70k on a single night out in Lagos quite frequently.

• This is much, much smaller than virtually any other country, including comparable nations like Ghana and South Africa • In a very real sense, we have almost no public sector that impacts people’s lives in a significant way • I think one reason we don’t talk about this enough is that the shrinking of the public sector has been a drip, drip process over 2 decades. So we have a mental model of the

public sector being muscular and having resources, but it is simply not true • It also underscores what PwC has said for some time – we need a much bigger private sector (10-15 times bigger than today in 15-20 years) and that we can’t rely on fiscal stimulus to government programs or to fund things like infrastructure … the only thing the government can do is create an enabling environment.

• The fact that our public sector should be a real worry for us … So what are the implications of having such a small public sector?

The Informal Sector and the SelfOrganizing Nation (4) • With such a small public sector, it is a fair question to ask why is Nigeria not a failed state?

• Because in fact, despite this incredibly small public sector, we are not a failed state … even though we have immense challenges, millions of Nigerians go about their business every day and in many areas we are in fact making progress • The reason we are not a failed state, in my view, is the incredible self-organizing capabilities of Nigerians. In the absence of the State providing essentials, people at an individual and collective level simply organize themselves.

• Examples abound - markets, private schools, innovative ways to produce electricity at small scale - particularly solar, the Igbo apprenticeship system that is receiving global attention • One of the most impressive to me are the incredible professional organizations in Nigeria – groups like ICAN, CIBN, IoD – that do incredible things for the country in raising standards.

These groups are totally self-organized, they make sure their members pay their dues, they deliver value, and they govern themselves • Of course, most of large companies also self-organize, in the sense they backward and forward integrate so they can deliver in a difficult environment where they cannot rely on the public sector providing what is provided in other jurisdictions.

• So in a real sense, Nigerians are organizing themselves in the absence of a State • This presents a real challenge for the government ... there are certainly benefits to have a more organized public sector, and to bring more people into formal structures; but people can’t be forced into formal structures. The formal structure has to be better than informal or self-organized structure.

• To give a simple example; I earn Naira. When I need GBP, I use the informal Aboki system. I have no idea www.businessday.ng

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We are confronted with this every day in our discussions with people from abroad.

People have beliefs about Nigeria that are not accurate – beliefs about crime, beliefs about the sophistication of Nigerians, beliefs about corruption, beliefs about the security situation whether it is legal or not. But what I do know it is faster, cheaper and seems to me more secure than the formal system.

• I would not change to the formal system through the bank unless the formal system was better than the Aboki system • Similarly, Nigerians are not going to migrate to formal systems unless the formal system is better than the informal system.

• The public sector certainly needs to raise more money to create better formal structures; but very difficult to raise more tax revenue when the economy is not growing and people are getting poorer and poorer • So I think we all need to have a good think about the self-organizing and informal structures Nigerians have created, and where and how they can be transitioned to more formal structures with a stronger public sector.

• But what we cannot do – in my view – is try to force the informal and self-organized structures to come into formal and public sectors systems unless the formal systems are better for the people involved.

Nigeria’s brand (5) • To close with the 5th issue, I want us to reflect on an challenge that is causing immense harm to Nigeria – our poor brand value • We are all aware of this, as we are confronted with this every day in our discussions with people from abroad.

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People have beliefs about Nigeria that are not accurate – beliefs about crime, beliefs about the sophistication of Nigerians, beliefs about corruption, beliefs about the security situation.

• Our poor brand is a major reason why Ghana got more FDI in 2018 than us, despite an economy that is perhaps 1/7 our size!!

• The 2019 edition of U.S. News and World Report’s Best Countries rankings ranks Nigeria in the 74th position out of 80. The rankings are based on evaluation - entrepreneurship, adventure, citizenship, cultural influence, heritage, movers, openness for business, power (as in how powerful in the world) and quality of life.

• 74th out of 80 …

• I do not know how to address the brand issue ... but I do know that prominent Nigerians like everyone in this room all have a role to play • And we need to put the issue on the national agenda … because even if we improve the country, then we will not reap full results unless we can also get the brand to capture the improvements, as well as capturing what is remarkable about Nigeria – our energy, our entrepreneurship, our connectedness, and our fantastic culture as expressed through art, music, and Nollywood Thank you for taking the time out of this incredible event to listen for a few minutes. I hope that raising these 5 issues gives a little bit different perspective on our challenges.

Everyone in this room is a leader in Nigeria. Nigeria will only reach its potential if leaders are they change they want to see …

Dr Nevin who is Chief economist at PWC, received a PhD from Harvard and a Masters from Oxford University. He delivered this paper at a birthday dinner for Pascal Dozie.

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26

Monday 10 June 2019

BUSINESS DAY

cityfile Seven IPOB members arraigned in Delta IDRIS UMAR Momoh

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L-R: Tayo Abosede, coordinator, highway sanitation (East), Lagos Waste Management Authority (LAWMA); Adewunmi Adetona, assistant director, cleaner Lagos initiative, LAWMA; Doyinsola Ogunye, founder, Kids Beach Garden; Ekuma Eze, public affairs and communications director, Nigerian Bottling Company (NBC) Limited, and Ifeoma Okoye, public affairs manager (Lagos/West), Nigerian Bottling Company (NBC) Limited, at the Clean-Up exercise organised by NBC to mark the 2019 World Environment Day in Lagos.

even members of the Indigenous People of Biafra (IPOB) have been arraigned before an Asaba Magistrate Court, in Delta State, for allegedly disturbing the peace in Best Lodge Brothel The suspects, Chinenye Ndunu, 25; Chidi Agbuma, 29; Uche Obra, 29; Sopuru Enenyo, 22; Anayo Andrew, 25 ; Williams Ikpati 19 and Ezechukwu Ekemezie, 40, are charged with belonging to secret society and breach of peace.

The prosecution counsel, Rapheal Eze, told the court on Friday that the defendants committee the offence on May 27 at Tipper Junction

Group wants govt partnership to meet vulnerable children’s needs

Demolition: Court orders Nasarawa E to pay radio station N67m

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high court in Lafia has ordered the Nasarawa State G overnment to pay the management of Breeze 99:9 FM, Lafia, N67.3 million for illegal demolition of the station.

Delivering judgment, Justice Rose Soji, held that the demolition of the station on May 20, 2017 was

illegal.

The judge also held that from the evidence before the court, the demolition was in violation of the relevant laws of the state which stipulated that the government was supposed to give a 21-days notice.

She said the Nasarawa State Urban Development Board (NUDB) notified the management of the

station that the Certificate of Occupancy was for residential on May 11, 2017.

“So, from the date the notice was served and when the station was demolished, is just nine days as against the the relevant laws of the state.

“Because of not adhering to the stipulated laws, the demolition is thereby declared illegal and the government should pay

N17. 3 as special damages and N50 million as general damages,” the judge added.

Justice Soji also ordered the state government to offer public apology to the management of the station for the illegal act.

The urban development board had on May 20, 2017 demolished the station over alleged violation of land approval rules.

FCT tops road crashes in March, says FRSC INNOCENT Odoh he Federal Road Safety Corps (FRSC) says the Federal Capital Territory (FCT) recorded the highest number of road crashes in March, with 118 crashes involving 733 persons with 29 fatalities and 295 injuries.

Boboye Oyeyemi, corps marshal, said this in the FRSC’s road traffic crash report released by the corps for the month of March.

According to the report, 922 road traffic crashes were reported across the 36 states and the FCT in March.

“However, 6, 558 persons were involved in the road traffic crashes, out of which 420 died and 3,122 others survived with varying degrees of injuries. This sta-

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tistical analysis indicates an increase by six per cent and 29 per cent in fatalities and crash cases when compared to February,” he said.

Oyeyemi listed other states with relatively high crash records to include Kaduna, with 76 crashes; Nasarawa, 58 crashes and Ogun with 57 crashes.

According to the report, Lagos and Niger recorded 45 crashes each.

The corps marshal said based on analysis of fatalities, Kaduna ranked top with 44 fatalities followed

by Bauchi with 40, Niger and FCT followed with 31 and 29 fatalities respectively.

“Oyo had 26 fatalities, while Ogun and Zamfara recorded 24 fatalities each.”

He added that in terms of location, Lagos-Ibadan road www.businessday.ng

recorded58crashesresultingto 21 deaths and 122 injuries, followed by Kaduna-Abuja with 49 crashes while Abuja-Lokoja road recorded 48 crashes.

“Nyanya-AyA recorded 16 crashes while Abuja-Keffi road recorded 12 crashes,’’ he said.

Accordingtothecorpsmarshal, speed violation accounts for the highest road traffic crash causative factor responsible for 470 road traffic crashes representing 49.5 per cent.

“Furthermore, comparative analysis of March 2019 crash statistics with that of the corresponding month in 2018 revealed eight per cent decrease in deaths and nine per cent decrease in the number of people injured’’.

Oyeyemi called on media organisations to assist the corps in sensitising the motoring public to the risk of

speeding, necessity of installing speed limiting device and obeying traffic rules.

He appealed to the Federal Government for long-term investments in the corps to reduce traffic crashes and fatalities.

He said that to enhance the war against road crashes and fatalities, sustainable road safety management must be planned.

“This requires long-term investment and appropriate capacity building for effective service delivery,’’ the corps marshal said.

He stressed that international organisations, donors, as well as public and private sectors must work together towards the realisation of the set goals in line with United Nations Decade of Action for Road Safety (2011-2020).

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Asaba Eze alleged that the defendants who introduced themselves as members of the IPOB, scaled the fence of the brothel, and caused tension in the neighbourhood.

He said that the offence was punishable under sections 516(a), 64 and Section 249(d) of the Criminal Law of Delta State, 2006.

The magistrate, Edith Anumodu, admitted the defendants to bail in the sum of N50,000 each with two sureties in like sum.

Anumodu ordered that the sureties should reside within the court’s jurisdiction, who must be relatives of the defendants. She adjourned the case until June 14.

ze Ajoku, president, Coalition of Orphanages and Children’s Home, a nongovernmental organisation, has urged the Federal Government to partner with the foundation to ensure needs of orphans are met.

Ajoku made the call in Abuja, saying the organisation played a supervisory role of supporting, monitoring and regulating the operation of its members.

According to him, the group also ensures that the protection, care, training and empowerment of vulnerable children are sustained.

Ajoku, who stated that

the core mandate of the group was to enforce the Childs Rights Act with government agencies, adoptees and operators of homes, urged government to support its cause.

He noted that child protection was imperative in achieving the Sustainable Development Goals as government intervention would help in ensuring that education and empowerment of vulnerable children were instituted.

Ajoku maintained that paying attention to the plight of vulnerable children would help curb child abuse, rape and maltreatment by adoptive parents.

Court acquits wife charged with murder of husband

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n FCT High Court, Maitama has discharged and acquitted a housewife, Amina Dauda, accused of killing her husband, Mohammed Matazu, a former reporter with the Federal Radio Corporation of Nigeria (FRCN), in Kaduna State.

Dauda, 28, was arraigned before Justice Hussein BabaYusuf, on May 22, 2013, on a one count of culpable homicide which violated Section 221 punishable with death.

The prosecutor alleged that Dauda, sprayed Matazu with petrol in their residence at Gwarinpa, Abuja,and set him ablaze.

Delivering judgment, Baba-Yusuf, held that the police did not carry out their investigations very well.

“They did not show true professionalismintheconduct of their investigation, all they did was take the defendant’s @Businessdayng

statementandvisittothescene and did not gather any other evidence. Though, there is evidence of death before the court but all the five witnesses called by the police are not eye witnesses to the incident.

Baba-Yusuf held that in a case of culpable homicide, the prosecution must prove that there was a death of human; that it was caused by a human being with the intention of killing.

The judge noted that the burden of proof was on the prosecution to discharge, adding that the defendant had no burden to prove until when the prosecution discharged its burdenthatshecouldbecalled upon to give explanation.

He stated that going by the three extra-judicial statements made by the defendant, tendered and admitted as exhibits by the court, Dauda did not admit the offence she was charged with.

Monday 10 June 2019

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Live @ The Exchanges Nigerian bourse ends first week of June in red Stories by Iheanyi Nwachukwu

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tock investors at the Nigerian Bourse lost approximately N283billion in the three-day trading week ended Friday June 7, 2019.

In the absence of a catalyst to drive the market into the green, the Nigerian bourse ended the review first week of June in the red.

The value of listed stocks on the Nigerian Stock Exchange (NSE) closed at N13.402trillion as at Friday June 7, down from a high of N13.685

trillion as at May 31.

Many analysts had anticipated a bearish performance in the week in the absence of any major market catalyst.

Vetiva research analysts in their June 7 equity note said they foresee another negative session to kick off the new week, however, “we do not rule out the possibility of investors taking position on beaten down stocks across the board as current levels present an attractive entry point”.

The year-to-date (ytd) returns of listed equities on the Lagos Bourse furthered into the negative territory by -3.18percent.

Also, the NSE All Share

Index (ASI) decreased to 30,432.13 points, from preceding week high of 31,069.37 points, implying a decrease of 2.05percent in the review week.

The Nigerian equities market had resumed the new month on a quiet note which prompted FBNQuest analysts in their June 3 note to expect the market to trade sideways post the holidays.

There were no trading on Tuesday, June 4 and Wednesday, June 5, as public holidays to mark the Muslim Eid-Fitri Celebration. The market traded for only three days –Monday, June 3; Thursday, June 6; and Friday June 7.

Oando’s two accused non-Executive Directors resign

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wo non-executive directors of Oando Plc have resigned from the Board of the company. They are Sena Anthony and Oghogho Akpata.

Already, Oando Plc in a letter dated June 6 and signed by Ayotola Jagun, its Company Secretary, notified the Nigerian Stock Exchange (NSE) and its valued shareholders of the directors’ resignation which took effect from June 3, 2019.

The two were among the eight (8) directors that the Securities and Exchange Commission (SEC) asked to refund money in view of the alleged gravity of the corporate governance lapses and internal control failures said to have been observed in the company. SEC asked Oghogho Akpata to refund N28.97million while Sena Anthony was asked to refund N11.25million.

“Sena Anthony and Oghogho Akpata were active members of the Board and its subcommittees. The Board and Management of Oando Plc appreciate their valuable contributions to the growth of the Company,” Oando said in a statement at the NSE. As at 1:14 pm on Friday June 7, 2019, the share price of Oando Plc on the Nigerian Stock Exchange was up by 5kobo or 1.25percent, from N4 to N4.05. The Federal High Court sitting in Lagos had last Monday June 3 restrained the Securities and Exchange Commission (SEC) from removing Wale Tinubu and Omamofe Boyo as Group Chief Executive Officer (GCEO) and Deputy Group Chief Executive Officer (DGCEO) of Oando Plc, respec-

tively. The Court also stopped the Mutiu Olaniyi Adio Sunmonu-led Interim Management Team. The Federal High Court of Lagos under presiding Judge C M A Olatoregun granted Oando Plc Group

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United Capital valuation sees MTNN at N171.7 per share

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nited Capital Plc research analysts said that their blended valuation model sees MTN Nigeria Communications Plc (MTNN) at N171.7 per share, “indicating that MTNN is underpriced at current price with a 25.7percent upside potential”.

As at Friday June 7, 2019, the share price of the Telco dropped to N136.5, down by 45kobo or 0.33percent against the preceding day level of N136.95.

The analysts noted this in their June 6 daily insight titled “Is MTNN currently underpriced or overpriced?”

Recently, MTN Nigeria Plc (MTNN) published its full year 2018 financial report, indicating that revenue grew by 17.1percent yearon-year (y/y) to N1trillion while profit after tax (PAT) surged 79.7percent

y/y to N145.7billion.

In the analysts’ view, the impressive full year scorecard of MTNN spurred buying interest in the stock.

“Also, the Telco paid N50billion and N111.6billion as dividends in 2017 and 2018, translating to a Dividend per Share (DPS) of N2.5 and N5.5 at a payout ratio of circa 70percent over the period”, United Capital noted.

In the first-quarter (Q1) of 2019, MTNN reported a Revenue growth 13.2 percent year-on-year (y/y) to N282.1billion. “If annualised, this translates to N1.13trillion by full year 2019. As such, earnings per share (EPS) and Book Value Per Share (BVPS) numbers both seem likely to settle at circa N9.5/share”, the analysts noted.

Furthermore, they are of the view that at a dividend payout of

Chief Executive, Adewale Tinubu, and Deputy Group Chief Executive, Omamofe Boyo, an injunction pending the hearing and determination of the applicant’s motion for interlocutory injunction.

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@Businessdayng

80percent (compared to 70percent average in 2017 and 2018), “we estimate Dividend Per Share (DPS) at circa N7.6 which implies a dividend yield of 5.7percent.

Again, return on equity (ROE) was 87.7percent in 2018, which is consistent with expected ROE of +90percent for 2019”.

In terms of valuation, “we look at the Enterprise Value (EV) to earnings before interest, tax, depreciation and amortization (EBITDA) (EV/EBITDA) multiple for MTNN, this came to 6.3x, below 6.9x average for peers across the Middle East and African Markets. The implied fair price using EV/EBITDA model came to N145.”

The analysts believe that by Price to Earnings multiples (P/E), MTNN has a PE of 13.9x compared to 20.4x for peers, implying a fair price of N194.5/share.

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Monday 10 June 2019

BUSINESS DAY

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Monday 10 June 2019

BUSINESS DAY

Start-Up Digest

29

In association with

From zero to hero: Omonike Fowowe’s rise to stardom ODINAKA ANUDU

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monike Fowowe is the founder of EMR Group, a conglomerate of six companies across several industries including real estate/ construction, jewellery, facility management, interior décor, talent and booking agency, as well as brand management. It is sometimes hard to believe that Fowowe, who turned 28 last month, started this conglomerate before the age of 25. Her entrepreneurial story must be documented for young Nigerians wishing to remain relevant in a fast-paced world.

Originally from Osun State, Fowowe is an alumni of Airforce Primary School, Christ Redeemers’ Secondary School and Redeemers University where she completed primary, secondary and tertiary education respectively.

The entrepreneur was motivated to set up EMR Group because she always wanted to live up to potential.

“I do not like to see underutilisation of resources, whether human or material,” she tells Start-Up Digest.

“I saw that there was so much more that needed to be done. In my young eyes, there were so many opportunities that needed someone to fill and I thought, who else would do it if I chose not to,” she says.

Fowowe was a very ambitious person right from primary school and she never envisaged working for anyone while in secondary school. For her, the National Youth Service Corps (NYSC) was also a huge drag and she founded EMR Group as soon as she concluded the service.

“Of course, it is good for many that they work first before starting a business, but that is why we are all different,” she says.

“I was convinced that if I put all my energy into building my own business, I would make a success of it. And that is the journey I am on, right now,” she says.

Like every business, EMR Group has had its fair share of good and bad days.

But overall, it has recorded more successes than failures.

“It has been net-positive so far,” Fowowe says. “And that is the part that excites me about the possibilities of the future,” she adds.

She says it has been a learning experience all the way. For her, entrepreneurship is more useful in how it develops the personalities of entrepreneurs than how much income it is able to generate.

Which of the segments of EMR Group is most profitable? Fowowe responds that it is difficult to rate any as more lucrative than the other because each business has its own peculiarities. “In real estate or construction, for example, it would appear than one is making a lot of money, but at the same time, expenditure is very high,” she says.

“Marketing is very brain tasking and time consuming. Interior décor has its own upsides and challenges. Today, you are chasing carpenter, tomorrow, painter, next week it could be the tiler. So every single business we have is lucrative for us,” she explains.

She believes that the Nigerian market is one in which entrepreneurs cannot just do one thing.

She points out that EMR Group needed

Omonike Fowowe

to create multiple streams of income, especially after the economy crashed in early 2016.

So far, she has built a formidable brand in the properties industry in Lekki Phase 1 Lagos, Nigeria, providing a solution in that space.

It is interesting to note that the entrepreneur started with no money. “I remember asking my friend to lend me money to pay for my Corporate Affairs Commission registration after I was cheated by a another friend who had a registered company. As of 2011, people weren’t comfortable paying for services to individuals. It must be through a company. So, I sat down one Sunday in the church and the pastor’s message seemed like it was just for me. I literally cried my eyes out listening to him speak. At the end of the service, I got up and decided to register EMR Limited,” she says.

Today, her bulk of investments is in real estate construction and refurbishing for rental.

Currently, she has the highest number of living and commercial spaces in Lekki Phase 1.

She is also in the jewellery industry, investing huge amount of money in her Emah Luxury. “We have had to consider new markets and see how much we can apply to take advantage of existing opportunities in them,” she says.

Fowowe tells Start-Up Digest that eight years down the line, she is humbled each time she requests her group’s bank statement.

Currently, she has a young team of 40 full-time employees. In most of the industries Fowowe has worked, she has had to www.businessday.ng

deal mostly with men.

“So in managing them, I have learnt to treat them like an extension of our family,” she says.

“So I try to show genuine concern in matters that I can (because, most times, men do not talk about their problems) and ensure that there is clarity in terms of each person’s deliverables so we can all smile at the end of the day,” she notes.

Fowowe has a superb personality. She is patient, business-like, disciplined but fun-loving and easy going. She loves to have a good laugh but also knows when to be very serious.

The entrepreneur also believes in continuous personal development.

Her expansion plans are clear. “As we find new opportunities in new markets, we would explore our capacity to expand,” she states.

Her group has an ongoing partnership with Force Management which is going on well and is considering creating another full-service business in that sector.

The innovative entrepreneur also plans to deepen her imprint in some of the industries she plays by driving further geographical spread.

“We want to see EMRSpaces—our real estate rental business— in other major cities across the world, including New York, Accra, Dubai and London,” she says, underlining her ambition.

“Also for a business like Emah Luxury, our real gold jewellery company, I am looking to partner with international gold jewellery companies to make our own customised bespoke pieces for our clients,” she discloses.

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She is launching a new brand— TheosLuxury— a low-cost housing construction company that creates budget-friendly homes furnished with class and luxury. She is excited at the prospects and believes the possibilities are endless.

She has not got loans from commercial banks and is debt-free.

She says that many entrepreneurs did not think much about getting external funding when she started.

“Now it is more common to hear of SMEs getting loans or raising funds from other sources, but I did not get to build the consciousness of bank loans. So right now, we are debt free and we are very happy about it,” she responds, when asked about her relationship with the banks.

For her, the biggest challenge she faces is human resource quality.

“I wish I could scream it in capital letters.

In Nigeria, I find that I am not alone. It is very difficult to find people that can do what they have promised to do and deliver to the quality you want,” she says, re-echoing the sentiments of other entrepreneurs.

Her leadership skills and maturity are visible in the way she handles her employees.

“As an entrepreneur, it is my job to get the best from people. So I have learnt how to do exactly this. I find that clarity of objectives is very important. Let us both know what is expected of us before we start so as to avoid any conflict,” she explains.

She says that one key way of resolving the skills challenge is to look at education system as a whole to ensure that quality skills and character are inculcated into the average Nigerian student.

Her mother who she describes as her ‘strength and energy’ is her mentor. She also admires Oprah Winfrey, whom she describes as ‘a total woman’. But more importantly, he team members are her biggest mentors.

“I get mentored by my bricklayers, painters, plumbers on site and marketing consultants,” she says.

She advises chief executives to learn from experts working with them so as to build their own expertise.

“These people teach me every day. They mentor me somewhat in their various fields and I am very grateful to them,” she explains.

What pieces of advice would she give her younger self?

The entrepreneur would tell her younger self that the game is first won at the level of character. ”You must first be dependable, accountable and reliable. Do what you can to build trust and create a reputation of integrity,” she says.

“Only then would you really begin to do business. Until this character is built up, people would keep losing the things they have because the market always looks for these qualities and rewards them,” she admonishes.

She further counsels that consistency pays, urging younger people not to stop doing what they are doing.

“If it gets difficult, it is just a knowledge gap and that is an invitation to learn more. Nothing is strange about that. Entrepreneurship is a learning affair,” she concludes.

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Monday 10 June 2019

BUSINESS DAY

Start-Up Digest

Entrepreneurship in the eyes of the world ODINAKA ANUDU

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he world sees entrepreneurship as an integral part of humanity. Writers and opinion leaders view entrepreneurship differently, but one major area of convergence is that it cannot be divorced from innovation and creativity.

For Joseph Schumpeter, an Austrian economist, entrepreneurs create, get things done, and exercise their energy and ingenuity.

At the pre- Global Entrepreneurship Summit reporting tour organised by the Washington D.C.-based Foreign Press Center in the United States of America’s capital and Chicago, entrepreneurs and innovation teachers gave their views on how businesses could scale up.

John Dearie, founder and president of Center for American Entrepreneurship, entrepreneurship meant to undertake, launch and begin. He explained that the major problem was the scale of decline of entrepreneurship across the world, especially in the U.S. where formation of new businesses was down 100,000 annually.

He said entrepreneurs now complained about slow commercialisation of innovation, inadequate skills, non-competitive immigration policies, over-regulation and poor access to capital. He pointed out that the world’s entrepreneurship ecosystem might not make much progress if new businesses were stifled from accessing growth capital.

For Dee Claxton, director, Washington DC Women’s Busi-

Jonathan Ortmans

ness Center, one major thing the world must do would be to free cheap capital for innovators and entrepreneurs.

“One of the most common challenges we hear from our clients is access to capital,” she said.

Mathew Moog, chief executive of PowerReviews, a leading provider of customer review technology to more than 1,000 brands and retailers in the United States of America, said entrepreneurship

was about resilience in the face of challenges.

He said business owners often made the mistake of concentrating on raising money and spending it, rather than getting customers and retaining them He frowned at entrepreneurs setting up companies with the intention of selling them after few years, stressing that it was a bad business model.

“Build a business to make mon-

Gbemi Faminu

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ayo Setro, founder of the Setro Group and advocate of business success, said that the micro, small and medium scale enterprises (MSMEs) can thrive and be successful with the right amount of visibility.

Speaking at the 2019 edition of Africa Fashion and Food Expo (AFFE) organised by the Setro Group, Dayo Setro, convener of the programme, said that there are good businesses run by qualified people which lack basic strategies to survive.

He explained that the programme was a platform to impact MSME in Nigeria and Africa.

“Our vision is to train a minimum of 1,000 youths every quarter for free. Presently we have Sterling Bank as a partner.”

He stated that through webinars and digital platforms, over 22 thousand people were trained on fashion, adding that training the youths and helping business owners involve mentoring, teaching

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other guy,” he said.

“But entrepreneurs must now be creative, open minded, global, connected, generous, curious, fun, social and disciplined.”

Ortamns said entrepreneurs, especially in developing countries like Nigeria, must be the actual leaders.

He said access to capital was not the biggest problem facing entrepreneurs.

“Every politician says ‘access to capital’ because it is popular and easy to understand.

“But from the beginning of startups, what they want to do is to test the market,” he advised.

At the GES proper held in the Hague, the Netherlands, entrepreneurs and global leaders continued to explain why innovation must take pre-eminence in new businesses.

Tequila Harris, an associate professor in Georgia W. Woodruff School of Mechanical Engineering, said entrepreneurs must not be stuck in their old ways of doing things as doing that would be costly.

“You need to keep learning and innovating to stay afloat. If you are stuck in the old ways, you will be left behind,” she said.

Sigrid Kaag, Dutch minister for foreign trade and development cooperation, said technology was always a game changer.

“Dare to dare, including failure.

Claim your space and go for it,” Kaag said.

Elaine Chao, U.S secretary of transportation, highlighted that stronger innovation often contributed to job growth, national security, economic prosperity and increasing standard of living for all.

UNICORN set to drive technological advancement across Africa

MSMEs need visibility to foster growth and many more activities.

Speaking on the business environment, Setro alluded that although the business environment was constraining the progress of enterprises and needs to improve.

“Visibility is the greatest challenge for MSME businesses in Africa. This platform will serve as an opportunity to market themselves online as businesses are more active digitally.”

“This is partly why various business owners in the micro, small and medium scale space have been gathered to help them improve their business, encourage networking and basically help the businesses thrive.”

The 2019 event— the maiden edition of the expo— held recently in Lagos with the theme, ‘Expanding your brand beyond Africa’ had experienced business owners present, who advised the participants on steps to making businesses thrive.

Joke Setro, co-convener of the event, announced the launch of ZetraHub in a bid to further boost visibility for the business owners.

It is a free e-commerce platform

ey, not to sell it,” he said.

Jonathan Ortmans President, Global Entrepreneurship Network (GEN), a platform of programmes and initiatives to help new firms start and scale within one global entrepreneurial ecosystem, explained the changing dynamics of entrepreneurship across the world.

Ortmans, whose GEN operates in170 countries to help entrepreneurs unleash their ideas and turn them into promising new ventures, said there was a need to create more new businesses.

“The question is, how do we get more people to try to figure out how to test new ideas?” he asked.

He said there was a new normal of digital disruption, pointing to Uber and Airbnb as tips of the iceberg for disruption of business models of traditional industries.

“City and state policy makers around the world are caught off guard in understanding the regulatory quandaries and policy implications of dramatic innovation,” he said.

He highlighted that there was also an intensive global demand for new economic growth and job creation.

He, however, said there were more opportunities for entrepreneurs across the world now as startup costs became less and customers more open to new solutions.

“You no longer need to cozy up to media because social media is free,” he said.

“Again, the whole world is now your market and networks are free, meaning you no longer need marketing firms,” he added.

“When we started our company in 1980s, we never cared about the

which helps business owners to grow broad clientele.

She said directing startups to establish thriving and sustainable businesses that would satisfy them and impact the economy is a way of helping the government boost the economy.

Chibuzor Awe, head of the MSME desk, Sterling Bank, advised the participants to take steps in sustaining and expanding their business while leveraging various platforms to help survive in whatever circumstance the environment provides.

Chuks Ogbekile, MD Colorvine Services, said it is important to create a brand that knows and addresses people/customer’s needs and work on making that brand the best at finding solutions, adding that other people see businesses as a brand. He stressed the need to carry out business with transparency, accuracy and accountability.

Belema Osagie, a customer service consultant, advised the entrepreneurs to treat their customers right and remain polite in order to encourage referrals and continued patronage of clients.

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Gbemi Faminu

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an-African investment company Unicorn is set to drive technological advancement across Africa through the Africa Tech Money in partnership with the University of Lagos and other companies such as Venture capital, Bluechip Technologies and other portfolio companies.

Olatorera Abiola, chief programme and business development officer of Unicorn, while addressing members of the press stated that the event was set to bring together tech companies, financial companies, investors, government regulators, and non-governmental organisations to help establish startups with brainstorming ideas guided by innovation and technology.

“In today’s world, the new opportunity for wealth is through technology and for new entrepreneurs, that is an avenue to solve Africa’s problem and enable us move to prosperity.

Speaking on decisions that influenced the programme, Abiola said Unilag was chosen due to its strategic location as well as symbolic representation of the vision of Unicorn as a solution finder and trailblazer.

The Africa Tech Money event is set to hold on June 10th and 11th at the @Businessdayng

University of Lagos and will involve over 3,000 participants, lots of portfolio companies as well as prospective clients and investors.

Folashade Ogunshade , Unilag deputy vice chancellor, said the program is a platform to encourage African startups as it will to provide solutions to Africa’s problem. She added that youths and students need to take control of their future in order to avoid the continued search for unavailable jobs.

The competition will engage 50 participants chosen on the viability of solutions provided to solve major problems in Africa. The 1st prize is an all-expense paid trip to Cape Town, South Africa, to attend the Unicorn Innovation Summit, while the 2nd prize is a consultancy opportunity for portfolio companies. The 3rd prize gets an automatic access into the programme, while another 250 participants will receive access to professional services as well as mentorship for a six-month period.

Abiola of Unicorn said that the programme has been running for three years behind the scenes but is set to move into limelight as an annual event with plans to take it round the African continent, adding that it is set to establish its campus in Johannesburg later in the year.

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CONSUMER REPORT Executive Summary

Power to the price point GUY CZARTORYSKI Growth Trends any years ago a number of international funds bought significant positions in listed food and HPC companies in Nigeria. Their aim was to profit from the rise of the Nigerian consumer, the biggest single sub-set of the African consumer.

By and large, the funds lost money and are much smaller now than they were seven or eight years ago. The listed food and HPC companies featured in this report, with the possible exception of Nestle Nigeria (Nestle), did not grow at the rates once forecast.

One early confusion was to equate nominal growth rates with US dollar growth rates. The key to sorting out this confusion is to adjust reported sales for inflation. Over the long term the Naira/US dollar exchange rate tends to adjust for inflation dierentials, so an inflation-adjusted sales record gives a reasonable

M

reflection of equivalent US dollar sales. In inflation-adjusted terms, again with the exception of Nestle, there has not been much growth.

In fact, most companies have seen inflation-adjusted sales fall.

Where the middle class went The above conclusion would have seemed illogical, if not impossible, eight years ago. The African middle class was rising, particularly in populous Nigeria, and would supply the consumption for these companies to take off.

We do not deny that Nigeria’s population is growing. As important, urbanisation has swelled the cities creating consumer concentration.

But, as we will show, the masses are not getting richer and unemployment has risen. There is a mass market but, critically, its price points have shifted downwards.

What do Nigerian consumers buy, and where? To answer this question we conducted primary research. Mr. and Mrs. Ajayi are a young couple earning

Inflation adjusted quarterly sales, rebased 2011=100

salaries which we frequently see advertised in Lagos. They spend 40% of their disposable income on transport and 10% on rent.

This leaves less than N30,000 (US$83) per month for groceries.

They eat well but are picky when they shop. They do not visit supermarkets but buy exclusively from market vendors. What they bring home (via our oce) includes just a few products from the listed companies featured in this report.

Competition price points and market share What we found in the Ajayis’ shopping basket surprised us. Most of the branded goods (only 30% of their shopping basket by value are branded goods) are made by unlisted Nigerian manufacturers whose products are highly competitive on quality and price. Some of these goods are made by long-established companies like Boulos, Olam and Tolaram, none of them listed in Nigeria. But some of

in calendar Q1 2011, and the average CAGR (using the average of all quarters) would have been 2.2%, 2011-17, a much better result which is comparable with Nestle.

When we translate FMN’s nominal sales into US dollars, we also find a flat-to-negative trend over the period 2011-18. Beginning in calendar Q1 2011 the CAGR 201118 is negative 1.9% and using the average of all calendar quarters in 2011, the average CAGR 2011-18 is negative 2.0%.

Unilever Nigeria, 2011-18 Unilever Nigeria (Unilever) is an integrated food and home and personal care (HPC) manufacturer in Nigeria with sales split approximately 48%/52% between food and HPC. Its leading food brands include Knorr seasoning cubes and its HPC brands include Pears soap, Vaseline and one of the biggest toothpaste brands Close Up, as well as Pepsodent toothpaste.

Unilever’s inflation-adjusted sales have undergone a negative CAGR of 1.1% over the period 2011-18, starting with calendar Q1 2011. Again, we need to caution that CAGRs are strongly influenced by their starting points, and so we also calculate the average of the four quarters (in 2011) through to their respective quarters in 2018. This method yields an average negative CAGR of 3.4%.

Translating Unilever’s sales into US dollars, we find a similar pattern.

The US$ sales CAGR (using all four quarters) 2011-18 is negative 4.4%.

However, the early period, 2011-14,

was one of growing sales in US dollar terms. Later growth went into reverse, no doubt influenced first by the oil price shock of Q1 2015 and the recession that followed in 2016. A rights issue took place in 2017 to de-lever the balance sheet. A sudden spurt of growth took place in Q3 2017, but overall sales performance in 2017 and 2018 was poor.

The obvious question to ask about Unilever’s data is whether its food or its HPC business has brought it long-term negative inflation-adjusted sales development, or both. Figuring out the answer is made a little dicult by the fact that we do not have quarterly sales data for the period 2011-18 broken down into the two business streams.

Unilever Nigeria, segment trends 2008-18 and 2014-18 However, we do have annual sales data by business stream for the period 2008-18 which can be adjusted for inflation. This data shows that the food business contracted by a 10year inflation-adjusted CAGR of 1.0% while the HPC business contracted by a 10-year inflation-adjusted negative CAGR of 3.0%We also have quarterly sales data for both segments from 2014 onwards, definitely not a very long sample period but useful for corroborating, or adjusting, the impression generated by the longer annual data series. When inflation-adjusted, this shows that the HPC businesses grew slightly (when using the average CAGRs from all four quarters of the first and last years in the study), while the food business got slightly smaller. The four-year inflationadjusted CAGR for the HPC business was 1.4% while for the food business it was negative 0.6%.

This recent (2014-18) pattern fits in with what we have seen elsewhere, namely that the recent years have been kinder to consumer-facing industrial companies than the earlier years (2011-14).

However, as we shall see later, 2018 was a tough year when taken in isolation, and the first calendar quarter of 2019, for Nestle and Unilever was

the goods are made by companies founded in Nigeria within the last 20 years, like Limex and Daraju.

Add to the above list products in their shopping basket made by another unlisted company, Royal Salt, and there is a lot of competition for the established listed companies. The Ajayis did bring back some products from Nestle Nigeria, Flour Mills of Nigeria, Unilever Nigeria and PZ Cussons Nigeria, but not many.

The energy and momentum in the food and HPC industry appears to have shifted away from the large listed players towards a number of low-cost, low-price point competitors and entrants.

One of these unlisted groups reported nominal sales growth of 30% in 2018 – far higher than any of the listed companies featured here – and guides to 16% growth for 2019. It is only logical to conclude that established market shares of the principal listed companies are being eroded.

Long-term sales trends Nestle Nigeria, 2011-18 estle Nigeria (Nestle) is an integrated food producer with products at many dierent price points.

Products include the Maggi range of seasoning cubes, dairy products, beverages, chocolates, cereals, coee, baby food and water. The food segment (which includes culinary, chocolate, confectionary and baby food) contributes 63% of revenues, while sales from the beverage segment, featuring Milo chocolate, Nido milk and Nescafe, account for the rest.

Nestle has achieved an inflationadjusted sales compound annual growth rate (CAGR) of 6.3% over the period, starting with calendar Q1 2011. CAGRs are strongly influenced by their starting points, but if we take the four CAGR series (one each quarter) beginning in 2011, their average inflation-adjusted CAGR through to 2018 was 3.5%. This makes it not only the best-performing listed company in this report, but arguably the only listed company with worthwhile inflation-adjusted growth.

When we translate Nestle’s nominal sales into US dollars, we find much the same pattern. (In many ways, and as we argue in Coronation Research: Naira Exchange Rate Outlook, 5 November 2018, long-term NGN/US$ inflation dierentials and long-term NGN/US$ exchange rates amount to much the same thing.)

The US$ sales CAGR (using all four quarters) 2011-18 is 2.4%.

In common with its peers, Nestle has been through many shocks during the studied period. Taking the period as a whole, Nigeria has shifted from being a highgrowth, consumption-led market benefitting from high oil prices (above US$100.00/bbl 2011-14) to a low-growth economy with oil prices generally under US$75.00/ bbl. What is striking about this pattern is that the CAGRs get better towards the end of the period. In other words, Nestle is growing better in an environment of low economic growth and low oil prices than it did during the boom years of GDP

N

Flour Mills of Nigeria, 2011-18 Flour Mills of Nigeria (FMN) is a producer of flour and several integrated lines of food. Its food business accounts for approximately 80% of the company’s revenues and includes the following food brands: Golden Penny Pasta, Golden Penny Instant Noodles, Golden Penny Semovita and Golden Penny and Goldenvita.

Historically FMN was principally a flour milling company but in the early part of this decade expanded into several business streams simultaneously. FMN today has four operating segments: flour milling; agro-allied; logistics & support services; sugar value chain.

F M N ha s e x p e r i e n c e d a n inflation-adjusted sales CAGR of negative 0.6% over the period 201118, starting with calendar Q1 2011.

When we take the four CAGR series (one each quarter) beginning in calendar 2011, their average inflationadjusted CAGR (using the average of all quarters) through to 2018 was negative 1.0%. To the nearest approximation, therefore, it makes sense to talk of FMN’s inflationadjusted sales as being essentially flat, or flat-to-negative, 2011-18.

However, it is important when considering CAGRs to think about what one year’s data can mean because, in this case, the influence of 2018 is very strong. If we had done the same exercise last year, and taken the data set for 2011-17, the inflation-adjusted sales CAGR would have been 4.2%, beginning

Source: Company, Coronation Research. *Quarterly sales adjusted for PZ Cussons’ May year-end and advanced by one month to fit quarter, e.g. reported Q3 2012, ending 29 Feb 2012, is presented as calendar Q1 2012 here. **At the interbank FX rate quoted on Bloomberg. www.businessday.ng

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no better.

PZ Cussons Nigeria, 2011-18 PZ Cussons Nigeria (PZ Cussons) is a manufacturer of home and personal care (HPC) products and seller of electrical products under the Haier Thermocool brand. Sales of HPC represent approximately 73% of sales (at calendar 2018) while electrical products account for the balance of 27%.

PZ Cussons’ HPC’s brands include Imperial Leather soap, Carex hand wash, Joy soap and Venus shampoo, among many others. Under the Haier Thermocool brand it sells air conditioning units, refrigerators and freezers, among other products.

PZ Cussons’ inflation-adjusted sales have undergone a negative CAGR of 7.8% over the period 201118, starting with calendar Q1 2011.

When we take the four CAGR series beginning in calendar 2011, their average inflation-adjusted CAGR through to 2018 was negative 9.8%.

Again, we need to caution that CAGRs are strongly influenced by their starting points. But, taking a look at PZ Cussons’ inflation-adjusted sales data, there has been a significant decline in the inflation-adjusted revenues of the business over time.

Translating PZ Cussons’ sales into US dollars, we find a similar pattern.

Beginning in calendar Q1 2011, the CAGR 2011-18 is negative 9.0% and using the average of all the calendar quarters in 2011, the average CAGR 2011-18 is negative 10.8%.

The reason behind this steep decline in sales may be attributed to the poor performance in the home and personal care (HPC) business over time. This has also been highlighted in the case of Unilever Nigeria’s HPC business that had negative inflationadjusted sales data over 2011-18 (using annual data).

Guy Czartoryski, head of research. gczartoryski@coronationmb.com

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Nigerians engaged to imbibe insurance culture Stories by Modestus Anaesoronye

I

t has become imperative for Nigerians to imbibe insurance as a lifestyle and not as a regulatory necessity, Ebelechukwu Nwachukwu, vice chairman, Sub-Committee on Publicity and Communications, Insurers Committee has said.

Nwachukwu who spoke with journalists in Lagos said this narrative necessitated the rebranding of the country’s insurance industry.

She stated that the Insurer’s Committee, comprising of CEOs of all insurance companies in the country engaged Alder Consulting, Nigeria’s leading creative intelligence firm began a brand marketing programme in 2018 to rebrand the industry and make it better understood by Nigerians.

She disclosed that the

initiative was born out of the need to redefine the narrative about insurance and to educate Nigerians on its importance.

She said: “The campaign was also designed to change the perception of the sector and increase the market penetration of insurance in Nigeria, considering that less than 1 per cent of the Nigerian adult population was insured. About 80 per cent of those insured are 35 and above. Millennials below 35 years who form over 70 per cent of Nigeria’s population, or about 138.6 million, form a large part of the uninsured.”

“In line with the foregoing, the project was designed to showcase the advancements made in the insurance sector and to encourage more Nigerians to take up insurance. It would also highlight real customer testimonials of insurance. At the end of the day, insurance would be positioned as desirable and not

just a regulatory necessity.”

Leke Alder, managing partner, Alder Consulting, on his part explained that the

campaign will span an initial period of 3 years, in 3 months respectively.

He added that instead of

pushing a message of fear and tragedy, the campaign focuses on the fulfillment of hopes and dreams, when insurance serves as a safety net in life. Hence, the phrase “Live with Freedom” was adopted as the theme for the campaign.

“Insurance users can live life to the fullest because they are confident that no matter what happens, they are insured. To ensure that the campaign was continuous and sustainable, a dedicated website (www.insuranceandyou.ng) was developed.

Social media pages - @insuranceandyou (Facebook, Instagram, and Twitter) - were also set-up to ensure that the campaign drilled down to the retail market space.

“According to a poll of 1,500 individuals in Lagos, Abuja, Enugu, Port Harcourt, Kaduna, Asaba and Ibadan conducted by Brand Sampling International, “since the beginning of the pro-

ject, 66 percent of those who have heard the campaign are changing their perception of insurance”.

He further said that during the first phase, key milestones included using a new narrative to begin repositioning insurance; educating Nigerians on the importance of insurance; communicating innovative advancements in the insurance industry; showcasing testimonials from satisfied customers; and highlighting compulsory insurance categories required by the Federal Government.

“Materials were deployed across print, radio and social media. A brand activation event also held at the Ikeja City Mall in Lagos. 1,415 radio jingles were aired and 28 radio interviews were conducted. 121 videos, graphics and blog posts were posted across digital media platforms reaching a combined 8.8 million people”, he noted.

ON THE MONEY:

Four important money lessons to teach your children

C

hildren are great learners at their early stages as they tend to pick up traits from almost everyone around them. While, they are taught the basics of mathematics, science, language and art in school, money is one topic many children are not taught practically. This is ironic considering the importance of money in our world.

In the light of this glaring misstep, it is advisable for adults to start showing children positive financial examples and habits that can be imbibed before they start off in life. To help with this, we have put together a list of financial lessons to teach your

children, so as to build a great foundation for solid financial literacy.

1. Money is earned: Children tend to be showered with monetary gifts; for birthdays, festivities and random gifts from adult relatives and visitors. As a parent, it is important to let your children know that money will not always be handed to them for doing nothing. Instead, teach them the concept of working for money. An easy way is to teach them a skill which could fetch them money, e.g. typing, beading, knitting and help them set up a small “business” where they can earn money for providing their services to neighbours or even school

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mates. This is an important lesson that will not only help them learn the value of every naira, but can also help them build work ethics.

2.

Money should be saved: Now that your children have earned their first hundreds of Naira, it is important for them to learn about saving and investment. Have your children reserve a percentage of their earnings to help them learn delayed gratification for the future. This future need not be far off, it could be for Christmas, summer vacation or a new school term.

Let them save for things they want in the nearest future, be it a book, toy or new shoes.

You could also add a little

interest to their savings as a reward for their patience and persistence.

3. Money is budgeted for: As you allow your kids to spend money earned, it is also important for them to build their budgeting skills early on in life. Before allowing your children to spend, have them draw up a list of their wants.

For example, your child may have 5,000 naira to spend and they want a toy, a book, a new game and a visit to the cinema all totaling 7,000 naira.

By having them draw up a budget, you can guide them on how to make spending choices based on what they consider to be an important need and the needs that can

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be set aside for a later date.

4. Money is for helping others: From an early age, children naturally exhibit empathy, they are ready to share things they love; toys and food with complete strangers. As a parent, you can help your child build this natural trait into generosity and charity. Speak to your children about the less fortunate and tell them the importance of giving to those who are in need. Once or twice a year, you can talk to your children about different charitable causes and have them donate a percentage of their earning, no matter how little to one that appeals to them.

Although it may take years

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for your children to learn these valuable lessons, by teaching them now, you are taking the right steps to build them into financially responsible adults who will make the right financial decisions for their future. For more financial education as this, you can call Old Mutual on 01-2719393 to arrange a free financial education session for your team, or on a one-onone 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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Disparity between Banks, insurers validate NAICOM’s call for recapitalization Stories by

BALA AUGIE

T

he incongruence between banks and insurers in terms of assets, profit, and liquidity validates the decision of the National Insurance Commission (NAICOM) to jerk up the capital bases of insurers so that they can compete on global competitive arena.

For instance 16 largest insurance companies that have released 2018 audited financial statement recorded combined net profit of N24.12 billion; this amount is 8 times less than the N193.44 billion of net income Tier 1 lender, Zenith Bank.

Similarly, the total shareholders fund of these insurers in the period under review stood at N206.07 billion, which is lower equity of Zenith Bank’s total equity of N815.71 billion.

The widening gap between these financial institutions shows there are too many weak insurance companies in Nigeria, and a radical reform is needed to transform the industry.

According to NAICOM, there are 51 insurance companies in Nigeria, less than 20 have strong financial

strength.

In other climes, insurers are so liquid that they buy banks, build skyscrapers to generate rental income, and deliver higher returns to shareholders.

During the financial crisis of 2008, Life insurers in the United States, weakened by losses on their immense investment portfolios, were manoeuvring to get a slice of government bailout funds by buying up tiny banks.

China announced earlier in the year that insurance companies are allowed to

invest in perpetual bonds and Tier 2 capital bonds issued by certain banks as government seeks to bolster banking industry capital.

The reverse is the case in Nigeria where insurance sector is still one of the most underdeveloped compared to peers in most African countries.

Nigeria, with a population of 180 million people, has a penetration rate of 0.3 percent.

That compares with South Africa (14.7 percent), Kenya (2.8 percent), Angola

(0.8%) and Egypt (0.6%).

Similarly, the sector’s insurance density (a measure of industry gross premium per capita) is still one of the lowest when compared to peers – South Africa ($762.5), Egypt ($22.8), Kenya ($40.5) Angola ($30.5) and Nigeria ($6.2).

Because insurers are not liquid enough to invest in investment securities like bonds and fixed income to bolster earnings, the reward they give to owners are abysmally poor, while most of them do not even have the

capital or cash flow to pay dividend.

For instance, 13 insurers paid a combined N12.35 billion to shareholders in 2018, this compares with the N78.50 billion Zenith put on the plate of owners.

The average industry dividend per share of is N0.06, this compares to Zenith Bank’s N2.70.

The stock markets, the symbol of capitalism rewards that serve public interest, and, on the other hand, punishes those that fail to meet public interest.

Shares of insurers are moribundly stuck at less than N0.50, and the N20.50 billion of AXA Mansard Insurance is less than the N50.12 billion market value of Tier 2 lender, Over a decade ago, banks were in the same position as insurers as they were too many of them who had weak capital, but the radical reforms of former central bank governor, Chwukuma Soludo, transformed the industry after he introduced the N25 billion minimum recapitalization.

By the end of the exercise, the entire system had been consolidated into 25 banks, and the licenses of 14 insolvent banks were revoked in January 2006.

Analysts fret NAICOM may not be as relentless as the central bank in executing a recapitalization exercise.

The regulator has announced a new Minimum Paid-up Share Capital Policy for insurance and reinsurance companies in Nigeria.

The revised paid-up capital requires life Insurance business operators to raise its capital from N2 billion to N8 billion; General business from N3 billion to N10 billion, while that of Composite business has been jerked up from N5 billion to N18 billion.

Custodian Investment displaces Leadway Assurance to become insurer with largest profit in 2018

A

cursory look at the financial statement of the largest insurance companies in Nigeria shows Custodian Investment Plc’s net income of N7.11 billion as at December 2018 is the largest in the entire industry.

This is followed by Leadway Assurance Limited with N6.02 billion in the period under review while FirstBank Assurance Limited ranked third with N5.94 billion in net income; AIICO Insurance was fourth with N3.15 billion in net income in the period under review.

Fifth on the list is Zenith Insurance with N2.80 billion while AXA Mansard was fifth with N2.42 billion in net in-

come; NEM Insurance came sixth with N2.03 billion.

Slow growth in premium income, a weak investment returns, rising claims, underwriting, and management expense have eaten deep into profit while margins are moribund.

The combined profit after tax of sixteen largest insurers fell by 26.52 percent to N24.03 billion in December 2018 from N32.71 billion the previous year.

A breakdown of the figure shows Leadway Assurance’s net income dipped by 56.45 percent to N6.02 billion from N13.83 billion as at December 2017.

The largest insurer by asset, and equity saw net profit margin reduce to 8.41 perwww.businessday.ng

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cent in the period under review from 19.81 percent the previous year.

Experts are of the view that the new rules by regulator will help shore up the capital bases of companies; the rules will also enable firms take on more risk since there will be an improvement in liquidity position.

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.

34

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MONDAYMORNING

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Managing the hopes of seriously Ill patients BRAD STUART

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linicians often withhold information about disease progression and prognosis for fear of destroying their patients’ hopes. Hope is not a monolithic entity that lives or dies with the prospects for cure or recovery, but rather a process that unfolds as illness progresses, whether or not treatment is successful.

Managing hope is different from managing treatment.

Patients and families facing the end of life are emotionally vulnerable. It’s more compassionate — and more effective — to be unconditionally present and to help patients’ hopes evolve in a gentle and compassionate way. Managing

hope requires some important qualities in clinicians — qualities that aren’t usually emphasized in traditional medical training.

Some principles and practices include:

RELIEVING PAIN AND OTHER SYMPTOMS. Unrelieved pain triggers hopelessness, whereas controlling pain allows intrinsic hope to emerge. Hospice and palliative care provid-

ers are trained to do this.

ASKING EMPATHIC QUESTIONS. When the news is that illness is incurable, certain questions can assist patients on the journey from focused to

intrinsic hope questions like “What do you hope to gain from treatment?” and “What do you hope we can help you with?”

HELPING THE BODY BE THE TEACHER. Downturns and new symptoms are distressing, but they often contain useful information that clinicians can use to help patients through denial.

LEANING ON THE DOOR. If the message the clinician is trying to deliver triggers denial, trying to break the door down can be counterproductive. Instead, knocking gently and, when the door opens a crack, continuing the conversation at the patient’s own pace, perhaps over several encounters, builds trust.

LEARNING TO SEE IN THE DARK. Compassion means standing unflinchingly

with patients, letting them know that the clinician can tolerate the very situation they find intolerable — so perhaps, over time, they can too. This kind of silent courage is contagious.

SEEING THROUGH TO THE OTHER SIDE OF DESPAIR. Depression is a clinical syndrome that should be detected and treated, but despair is different.

Despair may be seen as the ultimate form of letting go, a necessary step in healing when a cure is impossible and a rehearsal for the ultimate release that will happen at the time of death.

(Brad Stuart is a general internist who created the conceptual model for the first advanced-illnessmanagement program in the United States.)

Making health care affordable for low-wage workers JEFF LEVIN-SCHERZ AND STEVE NYCE

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mployer-sponsored health insurance historically offered access to affordable health care to many Americans of every social and economic class. But low-wage workers face particular challenges in the current approach to health care financing. Given that health care costs are unlikely to fall in the foreseeable future, what can employers do for their low-wage workers in the meantime?

OFFER HIGHER SUBSIDIES. Employers with high margins or large cadres of high-wage workers can afford to offer higher subsidies to low-wage workers.

OFFER A CHOICE. Low wage workers benefit from having a choice of health

plans that include lower deductibles and lower variability in potential outof-pocket liability.

HELP THEM MAXIMIZE POTENTIAL OUTSIDE SUBSIDIES. Many companies eliminated coverage for part-time employees in 2014 and 2015, when

the Affordable Care Act offered subsidized plans on the individual market.

Part-time coverage usually came with high employee-paid premiums, and the majority of part-time employees were able to purchase a better health insurance plan for a lower premium on the exchange

markets.

OFFER PLANS WITH LOW OUT-OF-POCKET COSTS. Modern highly tailored narrow network plans can offer more generous benefits made possible because of lower provider prices or lower provider-induced overutilization. This also

makes such plans more attractive to low-wage workers and to those with significant illnesses.

REVIEW INCENTIVES AND SUBSIDIES. Lowwage workers are often more likely to forgo “wellness incentives,” which in many instances will raise their health insurance premium costs. Therefore, employers should design wellness incentives to be simple and straightforward so that they are less likely to penalize lowwage workers.

OFFER PLANS WITH ROBUST NAVIGATION SERVICES. The U.S. health care system is difficult to navigate, and low-wage workers, especially those for whom English is not the first language, can benefit from assistance in obtaining timely and appropriate high-value

(C) (2017) Harvard Business Review. Distributed by New York Times Syndicate

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Expertise It’s in our DNA

In an ever changing economy, with 125 years of serving YOU, we remain strong, trustworthy, dependable, safe and consistent.

You can be confident that we will continue to deliver innovative banking products and services which seamlessly and conveniently suit your lifestyle needs.

Visit www.firstbanknigeria.com to learn more about us.

health care.

CONTINUE TO PUSH. Employers should continue to pressure health plans and providers for lower prices, because high prices are the primary cause of excessive U.S. health care costs.

The specific actions we recommend can help assure that health care coverage meets the needs of low-wage workers and bolsters employers’ and other payers’ diligent efforts to control health care costs overall.

(Jeff Levin-Scherz is a senior director and co-leader of the North American Health Management practice at Willis Towers Watson. Steve Nyce is a senior economist and the director of the Research and Innovation Center at Willis Towers Watson.)

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To improve your company’s health care, get the CEO involved ROBERT S. GALVIN

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s the debate heats up again about whether government should take over the funding and management of health care, it is worth trying to figure out the enduring enigma of why employers have been unable to manage health care costs. CEOs need to take control, be bold and get big.

TAKE CONTROL. Despite their rhetoric, business leaders have not treated health care costs as a core business issue.

Human resources professionals rely on insurance brokers to provide expertise; brokers are rarely equipped to help employers develop effective health care strategies. Companies where CEOs take control manage spending effectively, commit to learning about where their costs are going and engage top consultants with deep backgrounds to educate them.

BE BOLD AND COMMUNICATE. Given employees’ dislike

of restrictions on the doctors they can see, most companies have concluded that it is not worth alienating labor to control health care costs. Instead, they have relied on shifting cost increases to employees in the form of higher premiums, deductibles and copays. This approach, however, is reaching its

endgame; high out-of-pocket expenses are alienating the scarce workers companies are trying to recruit and retain.

Companies that explain to workers why they are imposing restrictions on the providers that they can see, making them pay a higher premium to have more choices or steering them

to centers of excellence have been able to make these changes without employee friction.

There is no evidence that employees don’t take or leave jobs they enjoy because of health care benefits.

GET BIG. Health care, like politics, is local. A large global employee base does not equate

to volume and leverage in individual communities. Employers have relied historically on health insurers to be their volume aggregator, but insurers have been reluctant to shift volume to the best doctors for fear of alienating other providers. And despite multiple efforts over many decades, employers have had limited success on their own in aggregating volume to purchase the best health care.

The fundamental dynamic of Medicare and Medicaid underpayments to hospitals and doctors will continue to force these providers to shift costs to employers. Employers can’t do anything about that. But they can steer their employees to the providers that produce better outcomes at the lowest possible cost.

(Robert S. Galvin is the CEO of Equity Healthcare.)

Save or invest? How companies should navigate recessions and CSR. Therefore, our results imply that innovation capability and stakeholder relationships were seen as instrumental in sustaining firms’ competitiveness during the Great Recession.

IOANNIS IOANNOU AND CAROLINE FLAMMER

T

he financial crisis and economic meltdown of 2007-2009 was disruptive for firms across industries, markets and geographies. An economic meltdown of this magnitude fundamentally affects all aspects of firms’ business environment, unsettles their relationships with customers, employees, suppliers and local communities, and generates a major shift in the competitive landscape.

Indeed, one of the major challenges of an economic meltdown for strategic management is that it exacerbates resource constraints. As a result, companies might need to make fewer investments and divest from at least some of their previous ones to ensure survival in the short run. Doing so is a balancing act, though, as divesting from too many resources — or picking the wrong ones — could jeopardize a firm’s ability to thrive in the long

Finally, we examine whether companies that sustained their investments in R&D and CSR perform better in the years following the economic meltdown.

We find that indeed they do.

run.

We know little about how exactly firms adjust their resource base as they navigate through the shifting landscape and new economic realities. To understand this phenomenon and its implications for companies, we set out to investigate how companies adjusted their strategic investments — i.e., their workforce, capital expenditures (CAPEX), R&D and

corporate social responsibility investments. More specifically, we asked: How did companies adjust their resource base during the Great Recession of 20072009? Did they try to “save their way” or “invest their way” out of the crisis?

Using data for publicly traded U.S. companies, we find that overall these firms significantly reduced their workforce and CAPEX dur-

ing the Great Recession.

Yet — remarkably — they maintained the same level of R&D and CSR. These findings suggest that companies, on average, responded to the crisis by following a two-pronged approach of simultaneously “saving their way out of the crisis” by reducing their workforce and CAPEX, and “investing their way out of the crisis” by sustaining their investments in R&D

Brought to you courtesy of First Bank Nigeria

(Ioannis Ioannou is an associate professor at London Business School. Caroline Flammer is an associate professor at the Boston University Questrom School of Business.)

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Monday 10 June 2019

BUSINESS DAY

INTERVIEW

Capital Market Development should be a UCHE UWALEKE is a renowned Professor of Capital market and the President of the Association of Capital Market Academics of Nigeria. In this interview with Businessday’s JOHN OSADOLOR and IHEANYI NWACHUKWU, in Abuja, he speaks about topical issues and recent developments pertaining to the Nigerian capital market concluding that ‘capital market development should be a key policy issue going forward to foster savings and investments for inclusive growth‘. Excerpts.

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et us start by getting your thoughts on the concern often expressed by market operators about overregulation in the capital market. Is the Nigerian capital market over-regulated?

Permit me to begin by emphasizing that market regulation is crucial in any financial system. Financial markets, including the capital market, principally engage in mobilizing funds from surplus units and channeling them to deficit units. Therefore, the activities of buyers and sellers in any financial market, in which products are largely intangible, are enabled by effective regulation without which the confidence to consummate deals will be lacking. Having said that, it is important to recognize that whether a market is over or under-regulated is relative not least because the extent of regulation is often dictated by prevailing circumstances. Recall that the global financial crisis, which negatively impacted stock markets, was blamed, in part, to absence of strong regulation and so market regulators in many Jurisdictions had no better choice than to up the ante with respect to supervision of capital markets.

Back home, I wouldn’t say the capital market is overregulated. The regulation carried by the Securities and Exchange Commission, which is the apex body, is complemented by that put in place by SelfRegulatory Organizations notable among which is the Nigerian Stock Exchange. The zero-tolerance posture adopted by these regulators with respect to infractions should not be misconstrued as over regulation. It is in the overall interest of the market since the primary aim is investors’ protection.

Speaking about zero-tolerance for market infractions, some people allege that different forms of fraudulent activities still go on in the stock market. How true is this claim?

What is true is that in every system with clear rules and regulations, you will still find players whose preoccupation is how to subvert the rules and beat the system. So, there is bound to be complaint here and there and this happens even in more developed capital markets. To give an example, I visited the South Korea Stock Exchange a few weeks ago and the same concerns were also raised especially with respect to the derivatives segment which is prone to sharp practices.

It may interest you to note that the Korean authorities are deploying strong regulations and technology to address that.

Expectedly, the Nigerian capital market, just like in many other jurisdictions, has had its fair share of cases of market infractions but what is important is that the regulators are rising to the occasion. You will agree with me that this trend is dropping by the day on account of the proactive measures put in place by the regulators such as the Direct Cash Settlement scheme which ensures that investors receive their money directly whenever securities are sold, the e-dividend policy designed to minimize cases of un-

So, going from one Exchange platform a few years ago to six today is something to write home about.

However, unlike in South Africa, the Nigerian stock market still grapples with challenges of low capitalization and over concentration with many systematically important entities not listed on the Stock Exchange. Except for MTN that got admitted to the market recently, major telecom companies and multinationals are not listed on the Exchange.

Be that as it may, the economic potentials of Nigeria favour a vibrant stock market capable of becoming number one in Africa.

What also is your assessment of Nigeria’s Debt Capital Market?

The big players in the country’s debt capital market are the federal and sub national governments because when you look at the composition of outstanding bonds, the private bond market is very small. What is obvious is that the bond market is not a significant long-term financing source for companies due in part to the crowding out effect from government borrowings. However, I should point out that this tendency of the debt market being skewed in favour of government securities is not peculiar to Nigeria. It has come to become one feature of many frontier and emerging economies including South Africa where the equities market capitalization is many times the size of the bond market.

claimed dividend and the recapitalization of market operators which has gone a long way to minimize incidence of sharp practices in the capital market. Undoubtedly, these measures have sent the right signals to the investing public with regard to enforcement and market discipline.

In your view, what are the consequences of capital market regulators playing catch-up in a developing market?

The consequences are usually grave not just for the market but for the entire economy. If there is any lesson learnt from the last global financial crisis, it is that market regulators cannot afford to trail behind the actors and playing catch-up in the process. In most parts of the world, the capital market is regarded as the barometer for the economy, and truly so given its role in capital formation. So, market regulators need to stay on top of the game. They are expected to be proactive and not reactive in order to ensure a fair and transparent system. This approach underpins the guiding principles of the IOSCO as well as that of the WASRA that is the West African Securities Regulatory As-

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sociation, to which Nigeria belongs. I have no doubt in my mind that the capital market regulators in Nigeria are up to the task.

What is your assessment of the Nigerian stock market currently compared to its peers in the African continent?

In Africa, the Nigerian stock market is second only to that of South Africa and is clearly the biggest in the West African sub region. Against all odds, some appreciable progress has been made in the last few years especially in the area of new asset classes and market infrastructure. Besides the traditional equities and bonds, Exchange Traded Funds are now traded on the Nigerian Stock Exchange. As a matter of fact, the NSE prides itself as the leading ETF market in the West African region in terms of number of listing, turnover value and capitalization. Besides the NSE, that is talking about the capital market in general, other exchanges are also now in place namely the NASD OTC, FMDQ, Nigeria Commodities Exchange, AFEX Nigeria Plc and the newly licensed Lagos Commodities and Futures Exchange.

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What is your take on the newly listed MTN Nigerian Communication Plc (MTNN)?

Are you comfortable with the stock’s current valuation?

The valuation of the stock of MTN Nigeria, following listing on the NSE, is one which should arouse the interest of any capital market Scholar. For this reason, I had asked my post graduate students to do a paper on it by way of an assignment and some of them have turned in something framed around the popular Herd behaviour theory in Behavioural Finance. Abstracting from it is what I call the ‘FOMO’ (Fear Of Missing Out) syndrome which largely accounts for the jump to N99 from the N90 listing price on the first trading day and by about 20 per cent the following day being Friday.

So, it should be expected considering the level of excitement that heralded the listing of the company on the NSE. Don’t forget that MTN Nigeria, a part of the MTN Group, is Africa’s leading cellular telecom company and so for many, the listing provides an opportunity to participate in the fortunes of the company which is why I would have preferred the IPO route from the onset, as they did in Ghana sometime last year, as opposed to listing by introduction which does not guarantee fairly large number of buyers and sellers to facilitate true price discovery even with the 20% free float requirement of the NSE aimed at forestalling the possibility of stock price manipulation which is made possible when securities are concentrated in the hands of a few investors. That said, the development is welcome as the listing of over 20 billion units of its ordinary shares has helped to enhance overall market capitalization.

What then is your outlook for MTN in terms of capital appreciation considering the challenges and potentials around it?

Speaking to the future valuation of MTN in the context of the challenges and the potentials of the company, I think the outlook is bright on bal-

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Key Policy Issue in Nigeria – Uwaleke ance. Let me begin with the potentials. ‘Investor FOMO’ which I referred to earlier will continue to drive MTN’s valuation at least in the near term.

The company fundamentals equally support this optimism. MTN remains the market leader in Nigeria and revenues have grown steadily over the years. For example, the latest financial results of the company for the year ended December 2018 show increases in both revenue and Profit after tax with the latter jumping from N81 billion to N145 billion. This explains why even at current share price of about N136, not a few think that it is undervalued. The stock is already up by about 50% outperforming the NSE All Share Index which is still in the negative territory year to date.

The major challenge I see is the operating environment in Nigeria. It goes without saying that macroeconomic performance affects stock prices. Let me return to the MTN Ghana example. When in May this year, the MTN’s share price declined to 69 pesewas by about 12 per cent since listing on the Ghana Stock Exchange, the company put the blame on the general performance of the economy especially the depreciation of the cedi which affected the performance of investments in Ghana. But for MTN Nigeria, the effect may be benign following improvements in the macro economy. Another challenge i see is the outcome of the outstanding cases the company still has in the courts which could be one of the reasons the company is delaying its IPO. The IPO will be a test of investors’ tolerance for MTN’s legal controversies.

With MTN listing by a way of introduction, a temporary relief came to the market. Airtel Africa has shown interest in listing on the NSE. Do you see more listings this year?

It is my expectation that the MTN Nigeria listing will encourage other telecom and multinational companies to list their shares on The Exchange, thereby helping to dilute the current market over concentration which I mentioned earlier. It will also assist in deepening the market as well as enhancing its contribution to the nation’s economy as more Nigerians are given the opportunity to participate in the fortunes of these companies.

Besides, it will create a positive signaling effect especially to both foreign and local investors who are bound to view the development as a sign that the investment climate in Nigeria is improving. It is against this backdrop that I welcome the reported discussion between Airtel Nigeria, the Nigerian Communications Commission and the Nigerian Stock Exchange with respect to the listing of Airtel Nigeria on the Nigerian Stock Exchange.

Speaking generally, how do we get more companies to list on NSE? By continuously making companies see the benefits derivable from listing and making listing requirements generally friendly especially with respect to small companies. A great deal of public enlightenment is required here as many small businesses are either not aware of the existence of the Alternative Securities Market platform or do not see why they should list on the NSE. The government has a huge role to play as fiscal policies can be used to lead more issuers to the market. For example, the government can grant tax incentives to companies that are willing to list on the stock exchange as well as reward already listed firms through patronage and preferential business access. It bears noting that listing promotes transparency and mandates full disclosure which helps in objective compilation of data. This explains why the bulk of the revenue from Companies Income Tax come from listed companies according to data from the Federal Inland Revenue

products other than exchange-traded ones, such as forwards and swaps. The economic benefits of derivatives include risk reduction, liquidity enhancement of the underlying asset, lowering of transactions costs, enhancing of the price discovery process and facilitation of portfolio management as introduction of more products lead to investment diversification and promotion of financial markets.

Now away from the classroom, you will agree with me that the high volatility in our stock market is a major disincentive for institutional investors, such as pension funds and mutual funds that are less active in the equities market with asset allocation concentrated in Treasury bills generally considered less volatile. A case that comes readily to mind is the 18 per cent plunge in equities market performance in 2018 in contrast to the over 42 per cent gain in 2017. It suffices to say that empirical studies have shown, as the case of Korea has confirmed, that a welldeveloped derivatives market is crucial to tackling market volatility and deepening the capital market.

Service. So it is equally in the interest of the government if many companies get listed on the stock exchange.

How can we make the NASD OTC market for unlisted securities more vibrant?

It still boils down to my earlier recommendations with respect to listing requirements, public enlightenment and use of incentives.

As you well know, the NASD Plc is an OTC Platform that facilitates secondary market trading of securities of public limited liability companies in Nigeria. Activities here in terms of volume and value of trade, although on the increase, are far from desired levels. In 2018 for instance, if my memory is right, total value of transactions increased to about N30 billion from a low base of about N4 billion the previous year. Having said that, the challenge is not just with the NASD but also with the other market infrastructure including the commodities exchanges. In the commodities exchange eco sub-system, it is only the AFEX, a privately owned commodities exchange that has witnessed some traction. The Nigeria Commodities Exchange that was set up by the government some years ago is yet to commence full operations.

Considering the current negative returns, how optimistic are you on stock market rebound in the near term?

Quite optimistic I must tell you. As I speak to you, the negative year-to-date return is gradually petering out on the back of the current tempo in market activities. The new listings in the market notably MTN and Skyway Aviation Handling Company Plc as well as the merger between Access Bank and Diamond Bank have given some fillip to the market and I see more listings underway in no distant time.

So, I am positive about a stock market rebound sooner than later. This outlook is against the backdrop of reduced political risk following the successful conclusion of the general elections, the moderation in inflationary pressure and the current stability in the foreign exchange market helped by favourable crude oil price and steady accretion www.businessday.ng

to external reserves. Also, the reappointment of the CBN Governor who has indicated preference for pro-growth monetary policies is positive for the stock market. This is because a low interest rate environment will ensure that part the associated liquidity increase will flow into the equities market.

On the global scene, the Nigerian Stock market stands to benefit from the trend of declining long term yields in the United States of America in the wake of the Federal Reserve’s shift to a more dovish stance due to the likelihood that capital flows may be redirected to frontier and emerging markets including Nigeria. I wish to point out however that the downside risks remain the present uncertainties surrounding the global economy notably the US-China frosty trade relations and the fog around Brexit.

Talking about the CBN’s supportive role, do you think the CBN’s plan to restrict banks from investing in fixed income securities will negatively impact the market?

On the contrary, it is going to have a positive impact on the stock market. So, I think it is a very good move by the CBN and I commend the MPC for taking this initiative. You and I know that the unfettered access by Deposit Money Banks to government securities has been crowding out private sector lending and once this can be checked through an effective mechanism, the chances of redirecting bank’s lending focus to the private sector become higher. This will rub off positively on the stock market and help spur the much needed growth in the economy.

What is your view on the planned introduction of Derivative instruments in the market by the Securities and Exchange Commission (SEC)?

Let me simply say it is an idea whose time has come. Theory teaches us that a derivative is a contract that derives its value from the performance of an underlying asset, such as equities, bonds, currency and commodities.

Exchange-traded derivatives are derivatives with standardised contracts and include futures and options, while OTC derivatives are

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Finally, what can you suggest to stakeholders to make the Nigerian capital market the most sought after in Africa?

Capital market stakeholders include the regulators, investors, operators, government, analysts as well as Journalists like you. Let me start with your constituency which is the media. I expect that you give a lot of visibility to positive news emanating from the capital market and the economy in general. I hope you know that the market is highly sensitive to information. Bad news is like an ill wind that buffets the market.

Market operators should play by the rules and be guided by their professional ethics. For better service delivery and given the dynamic nature of the market enabled by technology, they should always seek to improve their knowledge of the workings of the market. For regulators, the importance of continuously riding up the learning curve cannot be over emphasized. A well regulated market engenders confidence in investors.

It goes without saying that the Nigerian capital market suffers from the absence of a strong retail investor base. Much as foreign investors are welcome, expanding the pool of retail investors would help to de-risk the market. This will require a great deal of education efforts including developing financial markets courses in secondary and tertiary educational institutions. With enhanced investor education, the level of participation in the Federal Government of Nigeria Savings Bond that accommodates low income earners will certainly be higher. As I pointed out earlier, there are compelling arguments why government intervention could spur capital market development. In addition to the use of fiscal incentives to spur listing, government’s privatization programmes can be routed through the Stock Exchange. By so doing, the country’s capital market will be in a stronger position to mobilize funds not only for corporate organizations but equally for the government for long term investments.

The result will be improvement in infrastructure and enhanced job opportunities. That said, for the Nigerian capital market to be the most sought after in Africa, capital market development should be a key policy issue going forward to foster savings and investments for inclusive growth.

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Monday 10 June 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

The important information missing in your trust document The Solid Wealth Messenger

Grace Agada

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f you’re not sure what a trust document is, they are those documents that help owners of properties and investments, successfully transfer their wealth to a third party beneficiary.

A trust is, however, more than just a tool for gathering all your assets together, avoiding probate, paying school fees, protecting inheritance for your children and taking care of yourself and your spouse. Rather, it is a small part of an entire wealth preservation system. Unfortunately, most traditional trust experts do not know about this wealth preservation system. They follow ancient methods that are based on generic tools, predesigned templates and confusing language you can barely understand. The majority of trust document contains a bare minimum of what a trust should contain to be effective in the real world. If your trust document confuses you by any means, it is time to get a second opinion review and restructure your Trust.

A well-structured Trust is not a tool or template-based document; it is a dynamic document that is built upon what I call a solid wealth bridge. A solid wealth bridge is a concept that allows you preserve wealth for many generations. And if you want a strong type of bridge, your wealth has to be built on a three pillar suspension structure.

Bridges have been known since ancient times to connect people, locations, and ease travel across otherwise difficult or insurmountable obstacles. The process of transferring holistic wealth on a multi-gen-

erational basis is very similar to the process of building a suspension bridge.

When a suspension bridge is to be built, a visionary gathers a team of professionals with which he shares his ideas. With the help of these professionals, he sets a clear vision for the bridge. He makes a projection as to how long he wants the bridge to last and based on this projection, he makes a design, calculates the expected weight to go on the bridge, selects his raw materials and chooses a timeline for the completion of the bridge. To support this bridge and carry its weight, the bridge has to be suspended on certain strategically positioned pillars. These pillars are the very things that will ensure that the bridge survives through tension, stress, wear and tear.

Your family wealth bridge is no different from a suspension bridge.

But unlike the planning and preparation that goes into the construction of a suspension bridge, most family wealth bridges were created without any serious thought, planning or thinking. The important questions like “How long will these bridges last?” “What should be the design of this bridge?” “What is the projected load on this bridge and what are the external factors that can stress wear or damage this bridge?” are left unanswered.

Families that plan to preserve wealth long term must follow the solid wealth bridge system. The solid wealth bridge system is the only way families can preserve wealth across multiple generations regardless of who sits at the helm of leadership. The Solid Wealth Bridge is divided into four separate and distinct stages.

The First Stage is the Wealth Bridge Design: This is where we define the structure, objectives, vision and goals necessary to build a multi-generation wealth bridge.

The amount of time we take into consideration when designing your wealth bridge affects the overall bridge’s quality, strength and durability. The farther we pro-

Objectives • Solid wealth • Groomed Heirs • Undying legacy and Name • Rich relationships • Personal development • Healthcare Planning • Giving. www.businessday.ng

ject into the future, the better we build a resistant bridge that will stand future wear and tear. Three pillars make up the design stage.

They include the wealth creator design pillar, the wealth transfer vehicle pillar, and the heir design pillar.

The goal of the wealth creator design pillar is to help the wealth creator create a unified vision, mission and purpose for the family wealth, prepare the next generation of successors and create the structures and systems that will make wealth preservation possible for at least 10 generations. This is also the pillar that will answer the important questions like what am I trying to accomplish? What is my vision? What is the plan? What load does this bridge need to support? What is the environment that I need to create? What obstacles or hindrances stand in the way?

Etc. The wealth creator design pillar must be designed in such a way that it can function optimally regardless of whether the wealth creator is alive or not. If the wealth creator design pillar collapses after the death of the wealth creator, this can be the end of wealth.

The wealth transfer vehicle pillar: This is where the Trust comes under. The goal of the wealth transfer vehicle pillar is to explore all the options we have to safely and effectively transfer the different financial and nonfinancial wealth from one generation to the other. For a successful multi-generational wealth transfer to happen, a myriad of transfer vehicles must be combined.

The heir design pillar: The goal of the heir design pillar is to help the heirs create independent wealth through the discovery of themselves and their potentials and to use these potentials to increase the family’s wealth reputation, steward existing wealth well

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and prepare the next generation of successors and leaders.

The Second Stage of the wealth bridge is the Design Alignment Stage: The goal of the design alignment stage is to create, integrate and connect the three design pillars together. This is also where important questions like “What is this wealth bridge for?” “How far can this wealth bridge go?”, “How do the individual pillars affect each other”, “How do we maintain the load on this bridge?” etc. will be answered.

The Third Stage of the Wealth Bridge is the Building Stage: Just like the traditional suspension bridge, we need to build the wealth bridge. The building process starts from the wealth creator’s design pillar then to the wealth transfer vehicle pillar and then to the heir design pillar. Each pillar is first constructed independently before it is connected and aligned with the other pillars. The goal of the Building stage is to build the most solid and secure Wealth Bridge that will stand the test of time.

The Fourth Stage of the Wealth Bridge is the Bridge Preservation Stage. For the wealth bridge to be preserved and for it to maintain its integrity, it has to be regularly maintained. A regular maintenance plan has to be established, written down and taught across every generation to ensure that the wealth bridge integrity never dies.

There are about 12 elements that should be in your family Trust document. If you need a copy of these 12 Elements send “Trust Element Checklist” to 08101860042.

‘

For the wealth bridge to be preserved and for it to maintain its integrity, it has to be regularly maintained.

A regular maintenance plan has to be established, written down and taught across every generation to ensure that the wealth bridge integrity never dies

Grace Agada is a Senior Wealth Advisor and Author with extensive experience in wealth creation, wealth preservation and wealth transfer.

Email: info@createsolidwealth.com Tel: 08101860042 @Businessdayng

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BUSINESS DAY

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Monday 10 June 2019

BUSINESS DAY

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

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Spot light on Oando’s directors’ salaries and emoluments times total net income in 2016, which was 5.20 times net income in 2017.

The Securities and Exchange Commission (SEC), gave a directive for the resignation of the affected board members of an energy company, Oando Plc, and also barred the Group Chief Executive Officer of the company, Wale Tinubu, and his deputy, from being directors of the companies for five years.

This is after the capital market regulator concluded investigation into the activities of the company, regarding alleged infractions and other market violations.

However, the Federal High Court has restrained the Securities and Exchange Commission from removing Wale Tinibu and Omamofe Boyo as Oando Plc’s Group Chief Executive Officer and Deputy Group Chief Executive Officer, respectively.

The court also restrained SEC, its servants or agents from taking any step concerning the commission’s letter dated May 31 in which it barred Tinubu and Boyo from being directors of a public company for five years.

It also restrained the commission from imposing a fine of N91.13 million on Tinubu.

BALA AUGIE

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alaries and emoluments of directors of O a n d o Ni g e r i a P l c increased in 2018 as the oil and gas giant continues to record double digit growth in earnings.

For instance, directors’ total package was N1.31 billion in December 2014, but the company recorded a loss of N183.25 billion, when a sharp drop in crude oil price of mid 2014 deal a blow on cash flow.

Similarly in 2015, directors received N1.78 billion in salaries and emolument, whilst the company recorded a loss of N48.15 billion.

In 2016, director’s pay of N1.93 billion in December 2016 was 55.13 percent of N3.49 billion profit, but it would have recorded a loss after tax save for profit on discontinued operations of activities (N29.30 billion).

Experts say should stewards of a company in dire financial stress be paying themselves in millions of Naira?

A cursory look at the financial statement of Oando shows total operating expenses was 31.01

Stanbic, RenCap, CSL, top brokers since January Ifeanyi John

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he dominance of the biggest stockbrokers continued into the month of May as Stanbic IBTC Stockbrokers Limited, Rencap Securities Limited and CSL Stockbrokers Limited maintained their positions as the top three stockbrokers by value since the beginning of the year.

These three giants and 7 others accounted for stocks worth N537.966 billion in the first five months of the year according to data from the broker performance report by the Nigerian Stock Exchange (NSE).

Stanbic IBTC Stockbrokers Limited recorded transactions

worth N134.999 billion, representing 17.21 per cent of the total value of the transactions for the period.

RenCap Securities followed with transactions worth N95.54 billion, representing 12.18 per cent of the total value of transactions, while CSL Stockbrokers pulled transaction worth N59.08 billion. The three brokerage firms controlled half of the total value of transactions made in the first five months of the year and maintained dominance over their peers.

In terms of the volume of shares traded, Greenwich Trust ranked as the first with 6.95 billion shares sold, representing a 9.83 per cent of the total volume of shares sold during the period.

Stanbic IBTC Stockbrokers followed with volume of 6.77 billion shares, while CardinalStone Se-

curities handled volume of 4.19 billion shares.

Obinna Uzoma told BusinessDay that “stockbrokers should see more trades happening in H2 as investors positive outlook for the stock market in second half of the year should take these numbers higher. Analysts emphasize that the worst is over H1 amid political uncertainties which clouded investors’ sentiment as elections took place” The stock market is down by 2.87 percent since the beginning of the year and investor appetite for debt securities outweigh the thirst for equities.

“Following the value-investing strategy, the key to approaching equities in H2 is to pick companies at depressed prices. Investors can start cherry picking companies

that are in good shape with sound fundamentals, whose share prices are trading at a discount to intrinsic value due to the bearishness of the first half of the year. Also considered are in the investors’ stock picks are equities with history of dividend payment.” Uzoma added.

The NSE report showed that Coronation Securities sold stocks valued at N52.84 billion, while EFCP Limited’s transaction valued at N52.7 billion in five months.

Chapel Hill Denham Securities, EFG Hermes, FBN Quest Securities, CardinalStone Securities and Meristem Stockbrokers in that order pulled transactions valued at N34.78 billion, N33.96 billion, N30.44 billion, N28.56 billion and N15.06 billion completing the top ten brokerage firms by value since January.

P.E

SHORT TAKES $205 million The Central Bank of Nigeria injected $205 million into the inter-bank foreign exchange market on May 28, 2019. Dealers in the wholesale segment of the market received $100 million, Small & Medium Enterprises Segment got $55million and $50million was allocated to customers requiring forex for invisibles.

$14.6 billion Equity outflows from Emerging Markets hit $14.6 billion in May 2019, the worst since the June 2013 Taper Tantrum.

Debt inflows in May stood at $9 billion; bring capital flows to negative $5.7 billion.

Debt inflows to EM Asia, Latin America and Europe stood at $4.9bn, $2.1bn and $1.2 respectively.

2.1%

The World Bank on June 4, 2019 revised Nigeria’s growth of real Gross Domestic Product (GDP) to 2.1 percent in 2019 from its earlier projection of 2.2% in January. The Washington-based bank said growth in Nigeria will edge up to 2.2% in 2020 but foreign exchange restrictions, disruption in oil production and lack of reforms are constraints to stronger growth.

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 Email the BMI team patrick.atuanya@businessdayonline.com www.businessday.ng

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MARKETS INTELLIGENCE Gold prices hit 14-month high as rate cut bets jump

FMDQ records N79.6trn turnover in 4 months … on track to outperform last year’s FY turnover Ifeanyi John

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he first four months of the year have been a delight for Financial Markets Dealers Quotations Over-theCounter (FMDQ OTC) Securities exchange as they recorded total turnover of N79.6 trillion. The company is on track to outperform the FY turnover of 2018 of N182.86 trillion if they can maintain the pace of their transactions.

Last year, the market turnover of the exchange hit an all-time high of N182.86tn from the N142.03tn recorded in 2017, as aggregate transactions in the fixed income and currency market increased by 28.75 per cent. History seems to be on track to repeat itself as yearon-year market turnover is up by a whopping 40 percent. Turnover in the first four months of 2018 was N54.86 trillion as against N79.6 trillion turnover reported from January to April 2019.

According to the FMDQ OTC Market Turnover Report, trading activities in FX (Spot FX and FX

Derivatives) contributed the largest to overall turnover, accounting for 37.99 percent of the market.

T.bills transactions accounted for 37.60 percent, whilst Repurchase Agreements (Repos)/Buy-Backs product categories accounted for 18.85 percent, and Bonds, Unsecured Placements & Takings and

Wall Street, gold big winners as global markets bet on rate cuts FT

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pledge from the Federal Reserve that it stands ready to sustain US economic growth worked wonders for many asset classes in recent sessions, with Wall Street faring best overall and looking to rack up its largest weekly gain since late last year.

Expectations that interest rates globally will remain low, or be cut further, were reinforced this week in the wake of comments from Fed chairman Jay Powell, signals from the European Central Bank it was a long way from tightening monetary policy, and interest rate cuts from the central banks of Australia and India.

That all helped prop up bonds, but sovereign paper — particularly Treasuries — were already backing up from a strong performance in the previous week. Within this area of the market, high-yield corporate bonds comfortably outperformed Treasuries.

The S&P 500 and the Dow Jones Industrial Average were both up more than 4 per cent for the week during mid-morning trade on Friday, setting them up for their largest weekly advances since the final week of November.

The Nasdaq Composite, eyeing a 3.8 per cent rise over the past five sessions, was on track for its biggest weekly advance since late December. The S&P 500 and Nasdaq were both set to register their first weekly gains in five weeks, while the blue-chip Dow was set to end a six-week losing streak that was its longest since 2011.

Gains for US stocks, which would stand to benefit the most from a Fed rate cut, rallied harder than European and Asian stocks this week.

Gold was also a big winner, with demand for haven assets putting the precious metal on track for its largest weekly gain since April 2016.

At the other end of the scale was oil. Concerns a global trade war could curtail demand and data showing rising inventories of crude knocked oil prices this week, with the US marker, West Texas Intermediate, closing in a bear market on Wednesday, with a decline of more than 22 per cent from a recent April high.

Brent crude, the global oil benchmark, was set to chalk up its first three-week losing streak since the end of December.

The US dollar index was facing its largest weekly drop since midFebruary last year.

Money Market Derivatives representing 5.06 percent, 0.48 percent and 0.01 percent respectively, of overall market turnover.

The FMDQ OTC Market Turnover Report shows the turnover on all products traded on the FMDQ secondary market – Foreign Exchange (FX), Treasury Bills (T-

bills), Bonds (FGN Bonds, other Bonds (Agency, Sub-national, Corporate & Supranational) & Eurobonds)) Commercial Papers and Money Market (Repos/BuyBacks and Unsecured Placements/ Takings). These figures exclude primary market auctions in T-bills and Bonds.

In the last five years of operation, the FMDQ has seen a consistent increase in its market turnover, except in 2016 when the turnover dropped from N137.43tn in 2015 to N113.66tn. The annualized 2019 performance will see turnover leapfrog by 31 percent to N238.8 trillion for the forecasted turnover in 2019.

The top ten (10) Dealing Member (Banks) accounted for 77.25 percent (₦61.50trn) of the overall turnover in the market, with the top three (3) accounting for 43.09 percent (₦34.31trn) of this subsection of the market.

Stanbic IBTC Bank PLC, United Bank for Africa PLC and Access Bank PLC remained leaders in the value traded for the overall overthe-counter (OTC) market, ranking 1st, 2nd and 3rd respectively.

Energy trader Gunvor bounces back from first annual loss Neil Hume, FT

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unvor, the energy trader controlled by billionaire Torbjorn Törnqvist, has bounced back from a difficult 2018 with one of its most profitable quarters on record, according to its new chief financial officer.

“We took advantage of better market conditions but that was only possible because we were able to perform more efficiently and effectively,” said Muriel Schwab.

“A lot of actions we took last year have paid off. We really bounced back with a very strong first quarter . . . and a very solid second quarter.”

Hit by a string of exceptional charges Gunvor slumped to its first ever annual loss in 2018.

Losses ballooned to $330m after the company wrote off several investments, including an oil project in the Caspian Sea, and took provisions to cover the costs of litigation and fuel tanker that was seized by authorities in China.

Gunvor is one of the world’s top five independent oil traders, handling 2.7m barrels of oil per day.

It responded to that poor performance by slashing costs, hiring new traders and investing in technology.

Gunvor, which is 75 per cent owned

by Mr Törnqvist, also overhauled its management structure, including its executive committee.

Ms Schwab, a former Rabobank executive, was named CFO in Octo-

ber and a new role of chief operating officer was created.

Ms Schwab said a main driver of Gunvor’s improved performance was market volatility.

“That created opportunities for us,” she said. “All geographies — our US operations, our Asia operation and the Geneva office — they all contributed to the profitability of the group.”

Vitol, the world’s biggest independent oil trader, and Mercuria, a Swiss rival, have also enjoyed a strong start to the year as the oil market recovered from a violent sell-off at the end of last year.

Ms Schwab confirmed Gunvor was seeking a buyer for a 26 per cent stake in the UST Luga oil products terminal in Russia. “We are in discussions,” said Ms Schwab. “There is an appetite for that asset.”

Gunvor was once the dominant oil trader in Russia but sold most of its assets in the country after Gennady Timchenko — who co-founded Gunvor in 2000 with Mr Törnqvist — was placed on a US sanctions list in 2014. Mr Timchenko is no longer a shareholder in the company.

“We are no longer the number one player in Russia . . . so that asset is not that relevant for us,” said Mr Schwab, adding that Gunvor was also looking for a partner to invest in its Ingolstadt refinery in Germany “It is going to be a matter of whether we find the right partner and if the price is right.

Pan Kwan Yuk

G

old prices hit their highest levels in 14 months on Friday as traders aggressively ramped up bets that global central banks will cut rates this year to counter slowing growth.

The price of gold jumped 1 per cent to $1,348.31 per troy ounce in morning trade in New York, its highest level since April 2018.

The move takes the yellow metal’s weekly gain to over 3 per cent, putting it on track for its best week in over three years.

Gold, considered a safe haven asset, is benefiting from growing fears that the multi-front trade battle that Washington is waging against China and Mexico will harm the global economy.

The asset, which offers no yield, got an extra boost on Friday after data showed that US jobs growth stalled in May. The weak hiring, which was foreshadowed by a disappointing reading on private sector employment from payroll processor ADP earlier this week, added to the gloom over the outlook for the world’s most important economy.

It also prompted the markets to up bets the Fed may have to deliver three quarter-point interest rate cuts to support an economy already on edge.

Woodford in scramble to raise cash after devastating week

S

tockpicker denies fire sale as disposals put share prices under pressure Neil Woodford’s wounded fund management empire has sold or transferred close to £600m of stock since the suspension of its flagship £3.7bn fund on Monday, as the one-time star UK stockpicker scrambles to raise cash.

Signs that Mr Woodford is unwinding his long-held stock positions will heighten fears of a fire sale of assets in the funds, which have already weighed on share prices of companies across the portfolio as scrutiny intensifies of his firm’s recent conduct.

Mr Woodford, however, hit back at suggestions he was liquidating his portfolio. “This is categorically not a fire sale,” said a Woodford spokesman. “Neil has sold £95m of stocks this week as he continues to reposition the £3.7bn Woodford Equity Income Fund portfolio.”

This week’s stock market trades reflect close to £100m of equity sales by Mr Woodford’s funds, which need to raise liquidity to meet a potentially devastating call for cash when they reopen for trading.

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45

news Nigeria replaces Indonesia as top global piracy hotspot Modestus Anaesoronye

… accounts for 48 incidents or almost one in four of all reported cases

igeria has replaced Indonesia as top global hotspot for piracy, accounting for 48 incidents or almost one in four of all reported cases globally in 2018, according to Allianz Global Corporate & Specialty SE’s (AGCS) Safety & Shipping Review 2019 released weekend.

Theannualstudy,whichanalyses reported shipping losses of over 100 gross tons (GT), reveals that increased activity in the Gulf

ofGuinea(morethan70incidents overall) is responsible for Nigeria replacing Indonesia as the top global hotspot for piracy, where it has been reported that many crew members are kidnapped and taken into Nigeria where they are held for ransom.

Accordingtothereport,pirates inNigeriahavealsodemonstrated their capabilities further out at sea by hijacking a tanker around 100 nautical miles off Point Noire, Congo in October 2018, with safety of crew still a major cause

N

of concern.

“The hijacking and boarding of vessels is still tied to inequality and the economic situation in parts of Africa and Asia, which together account for more than three in four cases globally,” the report said.

In 2018, 46 total losses of vessels were reported around the shipping world, down from 9,812 months earlier, driven by a significant decline in activity in the global loss hotspot, South East Asia, and weather-related losses

(10) halving after quieter hurricane and typhoon seasons.

The number of piracy incidentsaroundtheworldincreased by 12 percent year-on-year to 201 in 2018. Given 2017’s total of 180 incidents was the lowest total for 22years,the2018piracycountstill representsan18percentdecrease in incidents from five years ago (2014:245).

While this plummet in total losses is encouraging, the number of reported shipping incidents overall (2,698 in 2018)

shows little decline – less than 1 percent year-on-year. Machinery damage is the major cause, accounting for more than a third of the 26,000+ incidents over the past decade – twice as many as the next highest cause, collision.

Machinery damage is one of the most expensive causes of marine insurance claims, accounting for $1 billion+ in five years.

“Today’s record low total loss activity is certainly influenced by fortunate circumstances in 2018, but it also underlines the culmination of the long-term improvement of safety in the global

Ogun Teaching Hospital unfit for treatment, training of medical students - Abiodun RAZAQ AYINLA, Abeokuta

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oingbythedecrepitclinicaland medical facilities dotting all the surgicaltheatres,clinicalwards and medical laboratories at Olabisi OnabanjoUniversityTeachingHospital (OOUTH) located in Sagamu, Ogun State,GovernorDapoAbiodunsaysthe state-owned teaching hospital is not fit for out-patients’ treatment.

Governor Abiodun, who made a working visit to the Teaching Hospital named after the first democratically elected governor of the state - Olabisi Onabanjo, also noted that the hospital was unsuitable for the training and internshipofmedicalstudents,especially medical doctors that were trainees of the hospital.

Speaking with a team of journalists that accompanied him on the inspection of the clinical and medical facilities at the teaching hospital on Sunday, Governor Abiodun expressed worries over the deplorable condition of the hospital, which he said used to be one of the best, but now substandard.

The governor observed that many of the clinical and medical equipment

were either obsolete or not functional, and the hospital’s morgue was overstretched and overtaken by offensive odour permeating the hospital’s environment, owing to dearth of maintenance and non-availability of needed and functional equipment.

When the governor was asked about what informed the inspection of state-owned teaching hospital, he explainedthatthevisitwasinformedby earliermeetingwithhealthworkersand management of the teaching hospital, sayinghehadfollowedupreporthegot about the position of the hospital being the only teaching hospital in the state.

He said, “This visit was informed by my meeting with the Heads of the Health Institutions, Hospital Managements. It is the only teaching hospital in the state, and with the report I got, which is disheartening. It is worse than deplorable.

“I am putting up a team, after a final report from the Medical Director.

Idonotseehowthisplacecanproduce good doctors; we shall go back to the drawing board. The place is substandard. This hospital is in depressing state. We shall look into facilities and personnel.”

Risk Control partners YABATECH on security training

H

aving lofty ambitions, maintaining hopeful aspirations and going about one’s business without let or hindrance are expectations common to most in any environment. However, for the actualisation of any of this, security is key.

In order not to live in fear and in constant terror, we need a security system that is not only based on physical security but also on the capacity of security managers who are adequately equipped with vast and appropriate knowledge of the modern art and science of intelligence, data and security management.

Now, think about Nigeria having securitymanagementpersonnelskilled in the areas of: Money Laundering and Transnational Crime, Security Survey and Risk Assessment, Forensic and Investigation Management, Electronic and Cyber Security, Occupational HealthandSafety,BusinessContinuity Planning, Guard Management, StrategicSecurityManagement,Architectural and Floor Plan Reading, and Effective Office Skills. That will be great! Isn’t it?

It is no longer far-fetched because oneofthecountry’sforemostpolytechnics, Yaba College of Technology (Yabatech), has partnered Nigeria’s most trusted security solutions company, Risk Control Services, to design and implement an industry leading Security Management Certification Programme. This programme is targeted at individuals who want to be modern security managers and best suited for those in active security employment or those who are planning to enter the security industry from the manage-

rial level.

This training collaboration will ensurethattheknowledgegapisfinally bridged in attaining the global security standard we profoundly crave.

AccordingtoUduakInyang-Udoh, director, Yabatech Consult Limited, “In this era, there is a lot of insecurity. Risk Control Academy in conjunction with Yabatech Consult looked into how security can be improved, to look for a way of adding values to security operation in Nigeria.”

Commenting further on the partnership, he said, “The objective is to improve the level of security, training quality and the development of the security personnel in the industry.”

In same vein, Femi Ajayi, the CEO of Risk Control, explained, “It is obvious there is a capacity gap within the security industry, so this partnership is a very positive collaboration between two institutions that have recognised this gap and have decided to do somethingaboutit.Weobviouslyneedtogive securitypersonnelinNigeriathekindof appropriate skills needed now and in the future to be able to secure the valuable assets of businesses, government and even individuals.

“In recognising this gap, we have put together a program that identifies the core skills every security person in the managerial position must have; skills like money laundering, trans-national crime, electronic and cyber security, security planning, even reading blueprint and floor plan’’ We know that security is everybody’s business and cannot be left to only the government.” www.businessday.ng

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@Businessdayng

shipping industry,” says Baptiste Ossena,globalproductleader,Hull & Marine Liabilities, AGCS. He says, “Improved ship design,technology,tighterregulation and more robust safety management systems on vessels have also helped to prevent breakdowns and accidents from turning into major losses. However, the lack of anoverallfallinshippingincidents, heightened political risks to vessel security, complying with 2020 emissions rules and the growing number of fires on board bring challenges.”

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news Nigeria’s biggest export goes...

Continued from page 1

rect investment to diaspora remittances.

It therefore made sense for policy makers and other stakeholders to examine the Nigerian economy through the lens of crude oil.

However, despite diaspora remittances surpassing oil receipts every year since 2015 to become the largest source of dollar inflows to Nigeria, oil remains in the spotlight in place of Abuja’s newly crowned biggest export- emigrants.

According to data provided by the Central Bank, diaspora remittances- cash sent back home by Nigerian emigrantsfirst outpaced oil revenue in 2015, as the $21.2 billion sent home officially by Nigerians abroad surpassed the $19.6 billion oil export proceeds for those twelve months.

In the years through a recession-tainted 2016 and 2017 as well as last year, the trend continued.

In 2016 and 2017, Nigerians abroad sent home $19.7 billion and $22 billion respectively, which was higher than the $10.4 billion and $13.4 billion garnered from oil exports in the same period.

The CBN’s annual economic reports show that in 2018 the total revenue from oil was $18 billion, while Nigerian emigrants sent home some &25.1 billion, the highest in four years according to data collated by BusinessDay. While oil revenue has tanked some 57 percent from the $42.7 billion recorded in 2014 when oil prices were as high as $100 per barrel, diaspora remittances grew 20.6 percent from $20.8 billion in 2014.

The surge in diaspora re-

mittances is not only down to the increasing number of Nigerian emigrants, who according to official numbers have more than quadrupled under four years to 15 million, but is also because the Nigerian Diaspora is doing incredibly well.

Nigerian Americans already earn more than the average American, something international observers deem an incredible accomplishment for such a new immigrant group.

The cash these mostly bright Nigerian emigrants send back home could even be closer to $40 billion per annum when unofficial channels are brought to bear, according to estimates by the Tunis-based African Development Bank, headed by another bright Nigerian, Akinwunmi Adeshina.

That amount ($40bn) is nearly twice the official number in 2018 and more than three times the dollars the government has received from oil each year since 2015.

The figure is also about 10 percent of Gross Domestic Product (GDP), underlying the impact of diaspora inflows on the economy. But that impact is rarely discussed.

Diaspora remittances has gone so unnoticed that it is rarely mentioned in debates about how to boost the Nigerian economy and isn’t even worthy of a footnote in key policy documents from the annual budget to the Economic Recovery and Growth Plan.

Yet, economists say if Nigeria didn’t have this massive flow of remittances, the economy would probably collapse.

Diaspora inflows have largely mirrored the state of the economy. When remittances fell to under $20 billion for the only time in 5 years, the economy

slumped into recession.

Official flows had dipped due to the capital controls put in place by the CBN to manage a dollar shortage that arose from the slump in oil prices. The CBN’s dollar management meant that it would maintain a hard artificial peg that was around 30 percent weaker than the black market rate. It also meant the recipients of Diaspora remittances that came into the country through official channels were shortchanged as local banks only gave the naira equivalent of the dollars at a rate much weaker than was obtainable on the streets.

In order to get more naira for the dollars they were sending home, Nigerians in the Disapora started finding ways to route their cash home through unofficial channels, this causing a slump in official flows.

One International Money Transfer Operator (MTO) executive who is not authorised to speak publicly told BusinessDay that unofficial diaspora remittances were rife at the time and that record sums were transacted. He said unofficial volumes are still currently higher than what the official records show as some Nigerians remain desperate to avoid any unpalatable experience where they are forced to give up their dollars at uncompetitive rates.

“They still feel the sour taste of the capital controls in 2016 and fear the CBN could return to the practice in future without notice,” the person said on condition of anonymity.

Official remittances picked up a year later, after the CBN shelved crushing capital controls. The economy responded by exiting recession.

This is not to say the slump in oil prices and oil production didn’t play a big role in the

economic dip, but to underscore the growing influence of diaspora inflows on the Nigerian economy.

“The only thing holding up the economy is the Diaspora; if we didn’t have this massive flow of remittances, I am pretty sure the economy would collapse,” said Andrew Nevin, the chief economist at consulting firm, Price Waterhouse Coopers (PwC).

According to Nevin, it is confusing that the massive flow of remittances and the fact that oil is no longer the country’s biggest export is not discussed often.

“What is confusing to me is why this is not discussed more, official figures keep repeating that oil is our biggest export when it is not true.

“We have a flow of almost $40 billion that is not discussed much, very difficult for me to understand how someone can claim to be analyzing the Nigerian economy when they don’t look at the biggest item,” Nevin said at a news conference in Glasgow.

“We of course can question whether this is helping us overall from an economic view as we lose people, but obviously people with skills are saying their skills cannot be monetized here,” Nevin added.

The massive diaspora inflows into Nigeria creates two parallel FX universes- one where the FX starts with the government, and another where the FX starts with millions of individuals, which Nevin said could be the reason why not much attention is paid to diaspora remittances.

The Diaspora flow goes directly into the hands of millions of Nigerians family who use it for healthcare, education, housing, and even feeding.

“One unmistakable con-

clusion from this is that Nigeria needs a powerful Diaspora strategy, one that maximizes the benefit Nigeria receives from the remarkable Diaspora,” Nevin concluded.

A strong diaspora strategy would boost the economy, create jobs and reduce poverty.

India’s strong diaspora strategy was useful in reducing poverty and passing the unenviable crown of the world’s poverty capital to Nigeria.

Nigeria is the sixth largest recipient of diaspora remittances in the world. Every country on the top 10 list boast a strong diaspora strategy.

Even Smaller African countries from Ghana to Kenya that received less than $3 billion in remittances last year, slightly over 10 percent of what Nigeria got in the same year, have diaspora strategies.

It remains to be seen if Nigeria will harness the potential of its diaspora base with remittances to Africa tipped to double in five years, as mobile money increasingly becomes an attractive channel to send remittances, due to its low cost, convenience and privacy.

Remittances to low- and middle-income countries reached a record high in 2018, according to the World Bank’s latest Migration and Development Brief.

The Bank estimates that officially recorded annual remittance flows to low- and middle-income countries reached $529 billion in 2018, an increase of 9.6 percent over the previous record high of $483 billion in 2017.

Global remittances, which include flows to high-income countries, reached $689 billion in 2018, up from $633 billion in 2017.

Regionally, growth in remittanceinflowsrangedfromalmost

Sahel Capital announces investment...

Continued from page 2

can shea industry. The investment will further strengthen Ladgroup’s capacity to bridge the processing gap of shea nuts in Nigeria, tap into the increasing global demand for shea butter, and venture into downstream industries such as refined cooking oil and other shea butter derivatives over the next few years.

“We are pleased to have reached agreement with FAFIN and to have them partner with us as shareholders in Ladgroup,” said B. A. Onafowokan, chairman and founder, Ladgroup Limited.

“Our long-term focus is to be the leading shea processing company in West Africa, and we are confident that the financing and operational support from Sahel Capital, as well as its technical assistance facility, will greatly improve our future prospects.”

Commenting on the investment, Olumide Lawson, partner at Sahel Capital, said, “We are thrilled to partner with Ladgroup, and are excited by the growth opportunities within the global shea sector. We expect this investment to create jobs across the shea

value chain in Nigeria, and to especially boost incomes of women who are the primary individuals active within the sector.”

The Board of Directors is being reconstituted with the investment in Ladgroup. Olumide Lawson and Remi Bodunrin of Sahel Capital, along with a number of experienced independent directors, will join pre-existing Board members such as Kunle Onafowokan (current managing director) on the reconstituted Board.

Sahel Capital is a food and agribusiness focused private equity firm that aims to transform the agriculture sector in Nigeria. It is the fund manager of the Fund for Agricultural Finance in Nigeria, which has US$66 million in investable capital. FAFIN’s investors include the African Development Bank, CDC Group, Dutch Good Growth Fund, KfW Development Bank, Nigerian Sovereign Investment Authority, and Nigerian government via the Federal Ministry of Agriculture and Rural Development (“FMARD”) and the Federal Ministry of Finance. www.businessday.ng

7 percent in East Asia and the Pacific to 12 percent in South Asia.

The overall increase was driven by a stronger economy and employment situation in the United States and a rebound in outward flows from some Gulf Cooperation Council (GCC) countries and the Russian Federation.

Excluding China, remittances to low- and middleincome countries ($462 billion) were significantly larger than foreign direct investment flows in 2018 ($344 billion).

Among countries, the top remittance recipients were India with $79 billion, followed by China ($67 billion), Mexico ($36 billion), the Philippines ($34 billion), and Egypt ($29 billion).

In 2019, remittance flows to low- and middle-income countries are expected to reach $550 billion, to become their largest source of external financing.

The global average cost of sending $200 remained high, at around 7 percent in the first quarter of 2019, according to the World Bank’s Remittance Prices Worldwide database.

Reducing remittance costs to 3 percent by 2030 is a global target under Sustainable Development Goal (SDG) 10.7.

Remittance costs across many African corridors and small islands in the Pacific remain above 10 percent.

Banks were the most expensive remittance channels, charging an average fee of 11 percent in the first quarter of 2019. Post offices were the next most expensive, at over 7 percent. Remittance fees tend to include a premium where national post offices have an exclusive partnership with a money transfer operator. This premium was on average 1.5 percent worldwide and as high as 4 percent in some countries in the last quarter of 2018.

L-R: Bassey Duke, deputy director, other financial institutions supervision department (OFIDs), Central Bank of Nigeria, CBN; Eme Essien, country director, International Finance Corporation, IFC; Joshua Etopidiok, director, special insured institutions department, Nigeria Deposit Insurance Corporation, NDIC; Tokunbo Martins, director, other financial institutions supervision department, OFIDs, Central Bank of Nigeria, CBN; and Rogers Nwoke, national president, National Association of Microfinance Banks, NamB and Hasal MFB MD at the 5th symposium of the Nigeria Microfinance Platform in Ibadan, Oyo state.

Economics, Economist, Financial Times...

Continued from page 2

etary Fund (IMF) recently said analysts and onlookers must recognise “how deep the shock” was to the economy.

As a famous American business magnate observed: “Only when the tide goes out do you discover who’s been swimming naked.” Indeed, Nigeria had been awash in oil dollars

(over $100 a barrel), yet previous governments failed to add muscle to the economy.

Since the recession struck (crude oil went below $40 per barrel), the government has takenmeasurestoredressweaknesses in our economy. The IMF goes on to praise the strong diversification in the economy and welcome the focus on pub-

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lic investment. For instance, the government has spent record figures on infrastructure in the past two years and capital expenditure is now around 30 per cent of the budget, rather than inadequate 10 per cent in 2015.

There has also been a drive to self-sufficiency where possible. It makes no sense for Nigeria to import rice, yet foreign shipments were dumped to maintain dependency. Farmers needed help: strategic tar@Businessdayng

iffs were applied to allow for initial competition, whilst the Central Bank of Nigeria financial initiatives allowed growers to access capital for fertilizer and equipment. Over the past three years, production has risen year-on-year. Nigeria, as of 2018, is Africa’s largest producer of rice. Self-sufficiency has almost been attained.

•Continues online at www.businessday.ng

Monday 10 June 2019

BUSINESS DAY

47

Access Bank Rateswatch Market Analysis and Outlook: June 07– June 14, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.01

Q1 2019 — lower by 0.38% compared to 2.39% in Q4 2018

Broad Money Supply (M2) (N’ trillion)

35.17

Increased by 3.95% in Apr’ 2019 from N33.83 trillion in Mar’ 2019

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

24.90 21.59

Increased by 3.76% in Apr’ 2019 from N23.99 trillion in Mar’ 2019 Increased by 0.25% in Apr’ 2019 from N21.53 trillion in Mar’ 2019

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

11.37

Increased to 11.37% in April 2019 from 11.25% in March 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)

45.14 62.36 1.82

June 3, 2019 figure — an increase of 0.78% from May start June 6, 2019 figure— a decrease of 4.47% from the previous week April 2019 figure — a increase of 5.27% from March 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr)

Friday

Friday

Change(%)

7/06/19

31/05/19

30,432.13 13.40

31,069.37 13.68

(2.05) (2.06)

Volume (bn)

0.31

0.20

53.78

Value (N’bn)

3.90

2.60

49.92

MONEY MARKET NIBOR Tenor

Friday Rate (%)

Friday Rate (%)

Change (Basis Point)

Indicators

7/06/19

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture Cocoa ($/MT) Coffee ($/lb.)

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Gold ($/t oz.)

Silver ($/t oz.)

Copper ($/lb.)

1-week Change

YTD Change

(%)

(%)

62.36 2.33

(4.47) (8.98)

(3.26) (23.76)

2,428.00 100.45 66.50 12.44 503.75

(0.04) (0.94) (3.57) 6.42 (0.69)

25.41 (22.85) (14.19) (18.85) 16.21

1,336.19 14.94 262.40

3.18 2.96 (0.64)

1.41 (13.09) (19.95)

7/06/19

31/05/19

OBB

10.8600

4.1400

672

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

11.4300 9.3750 12.0536

4.9300 4.7857 10.8143

650 459 124

Tenor

90 Days

13.5177

11.9616

156

1 Mnth 3 Mnths

11.21 12.68

9.61 10.59

160 209

Friday

1 Month

(N/$)

Rate (N/$)

6 Mnths 9 Mnths 12 Mnths

12.98 13.47 14.05

12.11 13.06 13.20

86 41 84

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

7/06/19

31/05/19

Friday

Friday

Change

(%)

(%)

(Basis Point)

7/06/19

7/05/19

Official (N) Inter-Bank (N)

306.95 0.00

306.95 360.47

307.00 360.99

BDC (N) Parallel (N)

0.00 361.00

0.00 361.00

0.00 361.00

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Friday

Friday

(%)

BOND MARKET AVERAGE YIELDS Tenor

31/05/19

Friday (%) 7/06/19

Friday (%)

Change (Basis Point)

31/05/19

3-Year 5-Year

0.00 14.59

0.00 14.12

0 47

7-Year 10-Year 20-Year

14.53 14.54 14.57

14.27 14.35 14.36

26 19 22

30-Year

14.69

14.69

0

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.

Change

(%)

(Basis Point)

7/06/19

31/05/19

Index

2,884.31

2,895.70

(0.39)

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

8.83 5.47

8.71 5.40

1.33 1.22

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

17.42 -38.39

17.88 -37.93

(0.46) (0.46)

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

91 Day 182 Day

24,372.79 23,157.66

364 Day

19,842.35

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

Rate(%)

Date

10

11.95

30-May-2019 30-May-2019

12.2

30-May-2019

Global Economy In the US, trade deficit narrowed down to $50.8 billion in the month of April, lower than the revised amount of $51.9 billion in the preceding month. According to the US Census Bureau, politically sensitive goods caused trade deficit with China to rise by 29.7% to $26.9 billion. Exports from the US dropped by $4.6 billion in the reference month to $206.8 billion. A drop in the sale of capital goods caused goods exports to fall by $4.4 billion to $136.9 billion. This decline was as a result of the grounding of Boeing civilian aircrafts after the recent deadly crashes. Imports to the US also plunged by $5.7billion to $257.6 billion as goods import slumped on lower purchases of capital goods such as civilian aircraft engines.

Trade deficit also widened with the European Union (EU), Japan and Canada, while it shrank with Mexico. In East Asia, the unemployment rate in Japan inched lower to 2.4% in the month of April from 2.5% in the previous month. The number of unemployed persons declined by sixty thousand in the preceding month to 1.68 million in the reference month, according to Statistics Japan. In South America, Brazil recorded a trade surplus of $6.42 billion in May 2019 from $6.07 billion a year ago. Imports jumped 12.9% year-on-year and exports rose 10.7%. The Ministry of Development, Industry and Foreign Trade (MDIC) revealed that the climb in exports was majorly supported by higher sales of manufactured goods. And higher imports were driven by increased purchases of intermediate and capital goods. Exports rose to the US, EU and ASEAN countries but fell to China and Argentina. Imports went up from China, the US, ASEAN countries and Argentina but declined from the EU. The economy recorded a trade surplus of $22.81 billion between January and May 2019.

Domestic Economy The Foreign Trade report for Q1 2019 as released by the National Bureau of Statistics (NBS) revealed that total trade grew by 2.5% quarter-on-quarter to N8.24 trillion, even as trade balance remained positive at N831.6 billion. This growth was supported by both a rise in imports and exports. The value of total imports rose 3.39% to N3.70 trillion in the reference quarter. And the value of total exports in Q1 2019 increased by 1.78% quarter-on-quarter to N4.54 trillion. Exports trade was dominated by crude oil exports which contributed 74.45% to the value of total exports. The value of crude oil exports, noncrude oil exports and non-oil exports at the end of the quarter was N3.38 trillion, N1.16 trillion and N604.44 billion. The top five export trading partners who constitute about 50% of total exports were India (16.43%), Spain (10.74%), Netherlands (8.94%), South Africa (7.18%) and France (6.67%). And the top five import trading partners who constitute about 60% of total imports were China (26.4%), Swaziland (14.3%), US (8.8%), India (6.6%) and Netherlands (4.1%). Some of the agricultural exports that were majorly traded are Sesamum seeds, good fermented Nigerian cocoa beans, superior quality raw cocoa beans, cashew nuts, frozen shrimps and prawn. In other news, a total volume of 557.08 million transactions valued at N34.02 trillion were recorded in Q1 2019, according to the Selected Banking Sector report on the National Bureau of Statistics (NBS) website.

Credit to the private sector stood at N15.21 trillion as at Q1 2019, higher than N15.13 trillion in the previous quarter. The highest credit allocation in the period under review was to Oil & Gas (N3.49 trillion) and the Manufacturing sectors (N2.23 trillion). NIBSS Instant Payment (NIP) transactions dominated the volume of transactions recorded. The

volume of NIP transaction was valued at N24.17 trillion. .

Stock Market The All Share Index (ASI) pushed lower in the week ended June 7th, 2019 as investors took profit from the rally of the previous week. The index dropped by 2.05% to settle at 30,432.13 index points from 31,069.37 index points the previous week. Similarly, market capitalization lost 2.06% to close at N13.40 trillion from N13.68 trillion last week. The oil & gas and consumer goods sectors contributed to the decline in the ASI. Year-to-date, the ASI has declined by 2.05%. This week, we expect profit taking to continue.

Money Market Rates at the money market inched upwards last week due to retail Secondary Market Intervention Sales (SMIS) and OMO auction.

Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates closed higher at 10.86% and 11.43% from 4.14% and 4.93% respectively the previous week. Likewise, the 30- and 90-day NIBOR closed at 12.05% and 13.52% from 10.81% and 11.96% respectively the previous week.

This week, we expect rates to remain at prevailing levels due to limited activity.

Foreign Exchange Market The local currency recorded relative stability against the dollar across all market segments in the week ended June 7th, 2019. At the NAFEX window the local currency witnessed a marginal appreciation of 3 kobo to close at N360.44/$. Meanwhile, the official window ended at N306.95/$, same as the previous week. And the parallel market also remained unchanged at N361/$. This week, we expect that stability in rates will prevail.

Bond Market Average bond yields ticked higher across all segments in the week ended June 7th, 2019 as the bears dominated with sell-offs. Yields on the five-, seven-, ten- and twenty-year debt instruments closed higher at 14.59%, 14.53%, 14.54% and 14.57% from 14.12%, 14.27%, 14.35% and 14.36% respectively.

The Access Bank Bond index dipped by 11.39 points to close at 2,884.31 points from 2,895.70 points the previous week. This week, we do not anticipate any deviation in yields from the previous week.

Commodities Oil prices remained pressured in the week ended June 6th, 2019 due to the ongoing global trade disputes. Bonny Light, Nigeria's benchmark reference crude declined by 4.47% or $2.92 to settle at $62.36 per barrel.

Consequently, the OPEC benchmark crude, shed $6.22, or 9.27% to $60.88 per barrel.

Precious metals prices shot up last week on trade worries and a possible US rate cut. Gold prices edged higher by $41.17 or 3.18% to $1,336.19 an ounce and silver prices climbed by 43 cents or 2.96% to $14.94 an ounce. This week, oil prices may be bolstered by signs that OPEC and other oil producers would extend their output reduction deal. For precious metals, the bullish trend may be sustained due to the possibility of a shift in the Federal Open Market Committee policy.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Jun’19

Exchange Rate (Interbank) (N/$)

Jul’19

361

362

362

Inflation Rate (%)

11.30

11.23

11.21

Crude Oil Price (US$/Barrel)

65

67

67

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

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Aug’19

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Monday 10 June 2019

BUSINESS DAY

NEWS MTN launches 21 Days of Y’ello Care 2019 with focus on mental health

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TN Nigeria recently launched the 2019 e dition of its corporate social responsibility (CSR) initiative tagged, 21 Day s O f Y ’e l l o Ca re ca m paign, a volunteerism initiative that allows MTN staff members across the country volunteer for various goodwill projects.

The theme for this year’s edition of 21 Days of Y’ello Care is “Creating a Brighter Fu tu re,” a l l ow i ng t h e t e l ecom company to focus on its effort towards ensuring a better quality of life for Nigerians in the next 21 days. The initiative that was launched in 2007 to give back to host communities is an annual campaign by MTN. Ferdi Moolman, CEO of MTN Nigeria, says this year’s Y’ello national project focus is on mental health awareness as the company tries to bring attention to issues around mental health in Ni-

geria. “This year we will be focusing on issues affecting the youth, especially in the areas of education and ITC. “Last year, 1,649 of us, put in over 2,500 volunteer hours to show how much we care across the country. This year, we are aiming to get more staff on the streets to do more in the communities where we work, live and play.”

According to Ferdi, activities lined up for the 2019 edition of 21Days of Y’ello Care include ITC training sessions, set-up of e-libraries in secondary schools, hackathon competition and a career fair.

B etw e en 1 to 21June, thousands of MTN staff across Nigeria will be committing their time to touch the lives of people in various markets and communities.

There will be a national priority project : Rhesus disease awareness; a career fair and youth empowerment campaign.

L-R: Joshua Onifade, head, midstream and gas assets, oil and gas, Sterling Bank plc; Kunle Ogunde, head of membership committee, Lagos Chamber of Commerce and Industry (LCCI); Babatunde Ruwase, president, LCCI, presenting a gift to Abubakar Suleiman, MD/CEO, Sterling Bank, and Mojisola Bakare, chairperson, financial services group, LCCI, during a courtesy visit of Financial Services Group of LCCI to MD, Sterling Bank, at the bank’s head office in Lagos.

NNPC records N174.62bn petroleum products’ sales in March HARRISON EDEH, Abuja

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igerian National Petroleum Corporation ( N N P C ) re c o rd e d N174.62 billion sales of white products in March 2019, the corporation’s Monthly Financial and Operations Report (MFOR) for March 2019 has noted.

NNPC group general manager, group public affairs division, Ndu Ughamadu, disclosed that the March sales figure were higher than the N168.65 billion recorded in February 2019.

The corporation explained in a statement on Sunday that the total revenue generated from the sale of white products from the period March 2018 to March 2019 stood at N2,780.79 billion, with petrol contributing about 91.09 percent or N2,533 billion.

In terms of volume of the total sales by the NNPC Sub-

sidiary, the Petroleum Products Marketing Company (PPMC), in March 2019, the report said a total supply and distribution of 1.36 billion litres of white products were made, compared with 1.33 billion litres of February 2019.

A further products breakdown indicated that the March volume comprised 1.29 billion litres of petrol, 0.023 billion litres of Dual Purpose Kerosene (DPK), and 0.047 billion litres for the diesel component.

Total sale of white products distributed for the period, March 2018 to March 2019, stood at 21.99 billion litres, with petrol accounting for 20.63 billion litres or 93.8 percent. The report stated that 6.4 billion litres of special products were sold during the period.

Within the period, 111 pipeline points were vandalised, indicating a 19 percent drop

from the 137 points recorded in February 2019. Ibadan –Ilorin and Benin – Ore axis accounted for 46 percent of total pulverised points, while breaks in other locations made up the balance.

In the Gas sector, the report disclosed that gas production increased by 15.4 percent at 263.48 billion cubic feet compared to the output in proceeding period of February 2019. This translated to an average daily production of 8,499.58 million standard cubic feet of gas per day (mmscfd).

Out of the volume of gas supplied in March 2019, 155.01bcf of gas was commercialised, consisting of 40.35bcf, and 111.66bcf for the domestic and export markets, respectively.

The report indicated that 58.81 percent of the average daily gas produced was commercialised, while the balance of 41.19 was re-injected, used as upstream fuel gas or flared.

TechMoney Africa Summit begins in Lagos today SEGUN ADAMS

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echMoney Africa Summit Lagos, which is expected to bring together the entire tech ecosystem with investment and capital to solve Africa’s biggest challenges, will begin in Lagos, Nigeria’s commercial capital, today.

“This business match-making event will bring together leading minds in technology, innovation and finance across Africa to achieve the following: Understand how technology can change lives; Support tech talent and start-ups to secure investment and get bankable; Inspire, educate and connect tech leaders in major public and private organisations on the latest innovation and disruption to support citizen and customer service delivery,” said a statement from the organisers.

The two-day event, scheduled to take place at Jelili Omotola

Multipurpose Hall, University of Lagos, is expected to bring together all the change agents in the space to drive significant development, create a powerful platform to enable investment into the right areas using the right processes into the right products, signpost correct decisionmaking, and build an enabling ecosystem for technology and innovation in Africa.

Vice President Yemi Osinbajo; Clen Cook, executive, RIIS, South Africa; Akintoye Akindele, partner, Synergy Capital Managers; Ponmile Osibo, chief investor relations officer, Unicorn, and Heiner Fees, founder and managing director, Tiveni, are some of the invited speakers at the summit.

Others include Ibrahim Dikko, principal owner, Hiltel Communications/resident operating partner, Unicorn; Mark Cameron, White Summers, Silicon Valley; Maya Horgan Famadu, partner, Ingressive Capital; Obinna

Ekezie, CEO, Wakanow; Bola Onadele. Koko, managing director, FMDQ, among many others.

The summit, the organisers said, will ensure that technology, innovation and strategy leaders across major organisations and enterprises in Africa engage with the next generation of disruptive and exponential technology and opportunity, so that they can continue to drive value for internal and external stakeholders by being at the heart of the technology and innovation that is changing the world and providing real opportunity to change lives for the better.

The event, they said, will be a carefully curated explosion of interactions, learnings, meetings, dealmaking, pitching, benchmarking, and showcases and will feature exhibition, pitch stages, one-to-one meeting, Hackathon, enterprise innovation stream, start-up bootcamp, angel investor training, among others.

SEC says Oando was given fair hearing Iheanyi Nwachukwu

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ecurities and Exchange Commission (SEC) says Oando plc was given sufficient opportunity of being heard before they were penalised.

According to a statement from the SEC, Oando officials were given various opportunities to defend themselves during the investigation by SEC and during the forensic Audit.

“The attention of the SEC has been drawn to various reports questioning the regulatory authority of the SEC, and insinuating lack of due process in the investigations of Oando plc.

“To put the records straight, the SEC hereby states that fair hearing is a paramount and fundamental principle, which the Commission as a law abiding agency adheres to in all its investigative processes. www.businessday.ng

“In the course of the investigations, communications e.g. letters and phone calls were exchanged and meetings held between the Commission and Oando plc, requesting for its comments and explanations on issues relating to the investigations. The findings of the Commission were communicated to the Group Chief Executive Officer of Oando plc by a letter dated July 10, 2017.”

The Commission said it subsequently engaged Deloitte & Touche to conduct a Forensic Audit of the activities of Oando plc.

SEC said in the course of conducting the forensic audit, Deloitte & Touche held regular sessions with members of the Board and senior management of Oando plc, and afforded them the opportunity to provide explanations on issues relating to the audit.

“The Commission confirms

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that Oando plc was given sufficient opportunity of being heard and accorded several opportunities to rebut the issues revealed by the investigation.

The responses given by Oando plc, were however considered unsatisfactory; prompting, the decision by the Commission to penalize the company and some of the individuals related to it for violations of securities laws.

“The actions of the Commission were properly effected pursuant to the provisions of the Investments & Securities Act (ISA) 2007 and the SEC Rules and Regulations made pursuant to the ISA 2007” the SEC said.

The Commission said these facts have been properly articulated in the court process it filed at the Federal High Court in response to the suit instituted by the Group Chief Executive Officer and Deputy Group Chief Executive officer of Oando plc.

“As the Apex Regulator of @Businessdayng

the Nigerian capital market, the Commission has a mandate to protect investors.

“The Commission’s recent action on Oando Plc aligns with the above cardinal mandate, as the directive for the removal of persons from the board of Oando Plc and the appointment of an interim management team to temporarily steer the affairs of the company is to protect investors and preserve stakeholder value.

“Failure or refusal of the Commission to act in the face of the serious issues thrown up by the investigations or to reverse its directives, would undermine the Federal Government’s agenda to build strong institutions and promote the transparency and integrity of the Nigerian capital market, especially given that, these are preconditions for attracting foreign investors to the Nigerian capital market,” the SEC said.

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Rising debt levels, structural lapses dampen emerging markets’ investment prospects Israel Odubola

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resently, emerging markets (EMs) are facing hard times as the region recorded massive capital outflows worth $5.7 billion in May. Worst still, investment growth in the region according to the David Malpass-led World Bank is expected to trend downwards in near term.

The EMs attracted investments worth $9.7 trillion in 2018, a third of the region’s GDP. However, the Washington-based Bank cited escalating debt levels which raise concerns for fiscal sustainability, fragile global growth on the heels of renewed trade war, and structural lapses as threats to investment prospects of EMs. “The rising trade tensions have impacted negatively on sentiments towards risky assets like equities.

Investors are pulling funds out of risk assets to riskless assets, causing more woes for the emerging markets” said Yinka Ademuwagun, research analyst at United Capital plc.

The continual deceleration in investment growth in EMs mirrors slowing private and public investments, with China accounting for large chunk of the slowdown.

How ever, investment growth to EMs picked up between 2017 and 2018 supported by expanded global manufacturing and trade activities and increases in oil and metal prices. Investment growth in commodityimporting and exporting nations within EMs climbed to 5.5 percent and 3.2 percent, respectively in 2018.

Investment growth in the region is projected to slow to 3.9 percent in 2019, from 4.2 percent in 2018, but expected to rebound in 2020 and 2021, to be triggered by faster growth in commodity exporters and easier financing conditions by major central banks.

The renewed trade tantrum between the world’s two biggest economies, and slowdown in several advanced economies and growing public debt, constitute downside risk to global growth, as the Bank revised the current year’s growth

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forecast to 2.6 percent.

Rising debt level is envisioned to subdue investment growth particularly if global financing conditions tightens, with many emerging market economies experiencing worsening debt dynamics and limited space, and debt servicing accounting for a rising share in their revenue.

The Bank noted that easing in global financing conditions as a result of dovish policy stance and U.S Federal Reserves and European Central Bank might help boost investment for a while, and stressed the need for EMs to channel funds to high quality investment projects to accelerate growth, and ensure debt financing does not compound the existing debt burden.

As the U.S Federal Open Monetary Committee will meet next week, analysts expect the Fed to maintain a dovish stance, to foster growth.

“Global central bankers are turning dovish and this due to the fact there is need to spur growth in the world economy. So, rate outlook

appears dovish in the near term, a tailwind for emerging markets,” Ademuwagun positioned.

The bank cited key structural constraints such as poor financial sector development, government ineffectiveness, poor business environment, infrastructural decay and political instability that could stall investment, which emerging economies must strive to address.

The weak investment prospects in EMs begs the question whether economies in the region can even achieve the Sustainable Development Goals (SGDs) by 2030, the target date for their achievement.

Low and middle-income countries (LICs) will require an average investment worth $2.5 trillion (N765trn) a year to achieve the infrastructure-related SDGs as regard electricity, transport, water, environmental protection and sanitation, according to International Monetary Fund (IMF), which represents 4 percent of EMs’ 2030 GDP and over 15 percent of LICs 2030’s GDP.

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Smuggling, dumping, challenges to economic policies – CBN

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overnor of Central Bank of Nigeria (CBN), Godwin Emefiele, says the bank, with some stakeholders, have identified smuggling and dumping as major challenges sabotaging the Nigerian economic policies.

The governor said this on the sideline of a consultative roundtable titled, “Going for Growth” with some economic stakeholders in Lagos.

The News Agency of Nigeria reports that the essence of the roundtable was to encourage participants to highlight important building blocks that will lead to greater economic growth in the country.

It also involves the CBN governor listening to their ideas and views on how productivity and investments by companies operating in Nigeria can be improved.

Others include how to reduce the nation’s dependence on imported goods and increase exports of non-oil goods and services.

Emefiele said, “We have identified smugglers and people dumping goods as those who sabotage those policies and we decided that we will deal with them. The strategy that we came up with is that we will not bother ourselves with them.

“There is an agency of gov-

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ernment that is responsible for border control and if these people pass through the border control we would use the instrumentality of being the regulator of the banking system to make sure that we get the banks to provide all details about them.

“We investigate their accounts and if they are found in economic sabotage, boarding, smuggling and dumping in Nigeria, we would not only block their accounts, we would close their accounts in all the Nigerian banks simultaneously.”

He also said the CBN asked commercial banks to close those companies’ accounts and those of the top members of such entities.

The bank chief said CBN in due course would come up with the names of those that had been identified.

“We want to be sure that we come up with something that is credible and cannot be denied.

At this stage we have already blocked the accounts of some in the textile and rice and palm oil company.

“We are investigating those accounts and as information becomes clearer, we can clearly say that they committed the offence.

We would then go to the next level which is to forbid any Nigerian bank from maintaining accounts for these people,” he said.

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BUSINESS DAY

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news

Anchoria Asset holds signing ceremony Lawyers to boycott court for 3 days over filling fees in Anambra for Anchoria Mutual Funds Emmanuel Ndukuba, Awka … as strike renders COOUTH patients stranded, hospital deserted

OLUWASEGUN OLAKOYENIKAN

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nchoria Asset Management Limited recently held a signing ceremony to approve and authorise the offer for subscription of its Mutual Funds - Anchoria Money Market Fund, Anchoria Fixed Income Fund and Anchoria Equity Fund.

This is an exciting milestone for Anchoria Asset Management Limited, its employees, shareholders and investors who have been supportive in achieving the goal.

The Anchoria Fixed Income Fund is a collective investment scheme that enables individual and corporate investors invest in a diversified portfolio of bonds

and other fixed income securities.

Anchoria Money Market Fund invests in a wide range of very liquid short-term money market instruments.

The Market Fund is an openended fund that seeks to achieve long-term capital appreciation of its assets, through investment in a portfolio of equity securities quoted on the Nigerian Stock Exchange (NSE).

The launch of these mutual funds will provide an avenue to diversify the bouquet of product offerings that Anchoria Asset Management Limited provides to its customers in line with its vision to become their wealth creation partner.

Salpha Energy solves energy crisis in Northern Nigeria’s IDP camps SEGUN ADAMS

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alpha Energy is supporting the Federal Government and UNHCRs mission to improve energy access in IDP Camp settings. For this purpose, Salpha Energy has announced a successful partnership with the Global Initiative for Food Security and Ecosystem Preservation, which delivered clean energy to 3,000 households living without electricity, through the provision of 400 Solar Home Systems.

Now in its tenth year, the humanitarian crisis in Borno, Adamawa and Yobe states in Nigeria’s northeast continues to uproot the lives of tens of thousands of children, women and men. As of 2019, 1.8 million Nigerians have fled from their homes and are internally displaced, the majority in Borno State – the epicentre of the crisis. 80 percent of internally displaced people are women and children, and one in four are under the age of five.

According to the Food and Agriculture Organisation, refugees often face limited access to fuel and energy, resulting in a wide range of environmental, health, gender, livelihood, disasters and

natural resources conflict.

The United Nations General Assembly continually highlights the central role renewable energy can play in solving the refugee energy crisis, as SDG7, sustainable energy for all, means energy for the poorest.

Bakassi IDP camp is the second largest camp of internally displaced persons in Africa after the Dalori camp, and houses more than 39,000 people. Up till this point, the camp had been without any form of electricity and heavily relied on those that could afford petrol generators to charge their phones or perform any activities requiring electric power.

The first phase of the solar project was executed in February 2019, which powered 1,000 families, the second phase completed May 2019 also powered an additional 2,000 families.

Salpha Energy, through its Light For All Nigerians Initiative (LIFAN), trained and equipped women in the IDP camps on how to install and maintain the Solar Home Systems. Salpha Energy believes that the project will ameliorate the power challenges the IDPS faced in the past while also creating direct jobs.

Nigerian Gas Company records annual N12bn profit HARRISON EDEH, ABUJA

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igerian Gas Marketing Company (NGMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), has announced a profit after tax of N12,476,685,000.00 for the year ended December 31, 2018.

This was disclosed at the company’s annual general meeting on Friday in Abuja.

Group general manager, group public affairs division of NNPC, Ndu Ughamadu, quoted the corporation’s group managing director, Maikanti Baru, who is also the chairman of the NGMC Board of Directors, as saying that the company’s performance was impressive considering the challenges it faced in its operations, notably pipeline vandalism.

The GMD, who was represented by the chief operating officer, Gas and Power, Seidu Mohammed, said the company would do everything to sustain

the performance, adding, “We have to expand our portfolio, we are going into the West African market to position ourselves as the best marketer of gas in the sub region.”

He stated that NGMC had already signed contracts with some companies in the Republic of Benin.

On his part, managing director of NGMC, Mohammad Barau, attributed the company’s performance to the support given to it by the NNPC management, which helped to resolve some of its challenges and motivated the company to embark on an aggressive drive for customers, resulting in increased earnings.

The company’s total revenue for the year 2018 was N243.630 billion compared with N275.162 billion for 2017. The decline in revenue was attributed to the move by the electric power generating companies to purchase gas directly from gas producers since June 2018. www.businessday.ng

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awyers in Anambra State have threatened to boycott all courts from June 10 to June 12 over hike on filling fees in the state.

A statement signed by Paschal Ugwuanyi, chairman, Nigeria Bar Association (NBA) in the state, notes that committee of chairmen and secretaries reached the resolution recently at Nnewi.

They state that the state government has refused to take any actions against the hike on filing fees in the courts after their complaints.

“All lawyers shall boycott all courts in the state commencing from Monday, 10th day of June, 2019 to12th day of June, 2019.

The said boycott shall act as a call on Anambra State government to come to the cries of the masses and take necessary actions in the overall interest of the masses.

“But failing which, further drastic measures shall be taken against the government of Anambra State,” they add.

They also call on the branch chairmen of all branches of NBA in the state to ensure that all lawyers comply with these resolutions.

Meanwhile, the Chukwuemeka Odumegwu Ojukwu University Teaching Hospital (COOUTH), Awka, patients are suffering untold hardship over more than three weeks indefinite strike embarked upon by doctors of the hospital.

Members of Association of Resident Doctors (ARD) of the hospital embarked on an indefinite strike on May 13 over what they called poor working conditions, while Medical and Dental Consultants Association of Nigeria (MDCAN) commenced a seven-day warning strike on June 3 over the same demands.

MDCAN says it would embark on indefinite strike action by the third week of June if Anambra government failed to address their grievances, which bothered on general welfare and proper equipment for the

hospital.

When BusinessDay visited the hospital on Friday, most patients in the wards had deserted the hospital, while those still there were those yet to pay their bills but without hope of medical attention.

The affected wards are Male and Female Surgical Wards, Male and Female Medical Wards, Children’s Ward, Gynaecology, Antenatal and Babycare Wards.

Emergency medical services were going on at the General Outpatients Department (GOPD), Specialist Out Patients (SOP), and Accident and Emergency and Children Emergency Response Units.

Ngozi Okeke, a patient in the female surgical ward, who said she had spent over a year there, said she had been advised to leave COOUTH for another hospital where she could get medical attention.

Okeke said she was brought in from Lagos last year after a container fell on her and had

neither stood nor walked since the accident.

She said she could not leave the hospital as it would aggravate her condition and called on the state government and the striking doctors to find a lasting solution to the face-off to enable them attend to patients.

“I have been lying faced down for more than a year, doctors have been working on my wound which is gradually healing but the surgery has not been done.

“For about two weeks, no doctor has attended to me because they said they are on strike. They have said I should go to another hospital but that is not possible, I cannot move from here because I am in pain.

“Even if we pay the bill, I cannot go from here because of the severity of my condition, so I am calling on Anambra government to give these doctors what they want so that they can attend to us, moving out is not the option,” she said.

L-R: Chinedu Obidiegwu, marketing and community lead, Luno Nigeria; Morenike Da-Silva, MD, Cordros Asset Management Limited; Uchechi Nwaukwa, CTO, Signal Alliance; Nana Annah, CEO, Nester Global Solution Service, and Frank Eleanya, Pic by David Apara senior tech analyst, BusinessDay, at the BusinessDay Millennial Hangout Tech edition.

Edo residents hail Obaseki for reclaiming erosion-plagued roads, streets ... urge him not to be distracted by antics of greedy politicians

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ollowing the completion of construction work on some roads and streets in Ekehuan axis of Benin City, residents in the area have expressed appreciation to Governor Godwin Obaseki for acting promptly in rescuing their hitherto erosion-prone neighbourhood.

In a letter signed by the coordinator of a coalition of residents in the area, Goodluck Okhuaherobo and nine other elders residing in the communities, residents of Aerodrome Close, Goodwill and Iriajen Streets, lauded the governor for the urban renewal effort in Oredo Local Government of the state.

“On behalf of the good people of Oredo Local Government Area of the state, especially Aerodrome Close, Goodwill

and Iriajen Street, we wish to express our sincere gratitude to the governor for considering our constituency among those in need of urgent road repair, reconstruction and refurbishment; which many in your exalted position would have overlooked in the general scale of things, considering the pressure on the state’s budget,” Okhuaherobo said.

He hailed the state government for taking particular interest in their area and for ensuring that the roads were well paved, saving them from erosion and making the streets conducive for pedestrians and motorists.

According to Okhuaherobo, “We never conceived the thought that in our time, Iriajen Street would be turned

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into something that could verily be compared to streets in the developed world; thus, the residents of Iriajen Street, Aerodrome Close and Goodwill are still reeling in excitement as their once erosion-plagued roads are now conducive for both motorists and pedestrians.

“The good people of Edo State under your leadership in the past three years have had the pleasure of enjoying massive infrastructural development, quality education under conducive environment, rapid eradication of unemployment, reconstruction of roads in every nook and cranny of streets which have earned you the title ‘Wake and See Governor.’ You have printed your name in the sands of time and will not be so @Businessdayng

easily forgotten.”

They urged the governor not to allow a handful of greedy politicians who want the governor to share money meant for the people to them and distract the state government from working for the ordinary Edo people.

“In appreciation, we humbly urge that you don’t bend to the pressure from the few disgruntled elements that are only serving their selfish interests and only wish to take the state backward. The enormous goodwill you have built over the years by choosing to serve the overall interest of the people is invaluable. You have paved the way for generations to come showing the possibility of being in power yet incorruptible by same,” they added.

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Monday 10 June 2019

BUSINESS DAY

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Monday 10 June 2019

BUSINESS DAY

FEATURE

Launch of informal tax drive in Rivers:

What business operators want, what RIRS may offer IGNATIUS CHUKWU

F

or years, Rivers State has proposed to launch deep into the informal sector for taxes but many reasons held the drive back, until now.

Instead, all forms of touts and primary agencies have feasted on that sector, collecting all forms of levies. For instance, a seller on a mere table at the popular Oil Mill Market near Eleme Junction pays minimum of N3,500 per market appearance which is every Wednesday, which is N182,000 per year, yet she sees herself as a poor women who should not be taxed.

This money does not get anywhere near the coffers of the government but is paid to a long chain of touts for the youth body, the ward councilor, the local government, the head of touts, the head of everything evil. This is almost the case in every market and group.

Those in formal trading especially the main markets and stalls bond into groups and pay collectively. The leaders take a chunk and remit what they could to the state government. This is mostly union levies and a little to spare to formal levies.

When there is a push from the Rivers State Government through any agency especially the Rivers State Internal Revenue Service (RIRS), the union leaders take some money out of the collection to ‘sort’ and protect the members. Gradually, this payment turned into protection levy and middle men emerged to intercede for business operators. The middle men became powerful over the years due to huge sums in their hands and large followers who craved for protection. Next, the middle men acquired political power by promising chunks of votes to politicians and parties.

Now, to break this, something needed to give, and a tax master that fears no force must come to the scene.

Could this be the moment, could Adoage Norteh, the RIRS Executive Chairman since 2017 be the man?

The RIRS late in 2018 hinted that it is ready to launch the informal tax drive. By May, they unveiled the project to newsmen and said it would be unveiled soon after. Now, Norteh kept the drive in the cooler but launched a stakeholders meeting series in the state capital. He met with lawyers, and then brought other professional bodies such as accountants, surveyors, builders, etc together. He followed up with trade union and artisans. The discussion or dialogue varied in tone according to the groups.

At a point, it sounded like a quarrel or threat sessions when it was the turn of the artisans. Yet, important points were taken away by both the RIRS and the groups, showing the beauty of dialogue and consultation. The biggest outcome was the decision by the RIRS boss to create a committee comprising leaders from groups to review each complain and suggestion and arrive at workable steps.

Adoage made it clear that what is uppermost is to collect taxes with

Nyesom Wike, governor, Rivers State

least rancour and injustice, but pay, you must.

What taxpayers want Give us collaboration Give us chance to meet with you and tell you many hidden things. The mistake governments make is that they roll out policies without getting input from down-line and those at the heat of operation and activity at the grassroots.

Allow us to meet with you and work out how this can go and you will see that if all traders pay even N2000 each, you will almost meet up with Lagos State in IGR. Sunny Dede of Pillars of Association said their challenge is lack of data capturing in the state. “It’s impossible for the RIRS to get to all traders in the state. So, we believe that collaboration remains the way out. Without a database, can you do it?”

The NASSI group said the same thing. “We support tax. We mobilize all traders under us. But, businesses are folding up here and there because of bad economy. We need proper meeting where we will tell you things.

After that, everything will be easy. There are many disagreements in unions so leadership crisis is an issue. Please help look into this”.

FIRS/CITN: “We are interested in how the informal sector in the state can be captured into a data base. There is need to collaborate with the Ministry of Transport and FIRS to pursue this project. Try and do adverts on how the persons coming to collect taxes in the informal sector would look to avoid fakes.”

Offer: This overwhelming demand was approved and a committee is to be set up to bring together most groups to make formal suggestions and dialogue on them.

Give us list of what to pay The majority demanded for a list of approved taxes so they can know what to pay and what is not approved. They said this has been a thorn in the flesh www.businessday.ng

Adoage Norteh

and cause of conflicts every day and every where.

Every group asked for this without exception and newsmen also asked for this during interview with Norteh.

Offer: Norteh vehemently said the taxpayers should go to each tax collecting agency and collect authentic list. Or, they should demand the source from those who served the demand notice and use this document to go for clarification. The taxpayers did not seem satisfied with the answer. They told newsmen later that they expected the RIRS as the tax body to use their professional knowledge to compile the list for all agencies and give to the traders union leaders.

Harmosed Taxes Most of them also demanded for harmonised taxes such that taxpayers will know what is due the local councils and what is for state governments and federal agencies. They also want to know the amounts and want something paid to one agency not to be demanded again by another tier of government.

More on this is that they want one agency, probably the RIRS to collect everything state government tax and not different agencies raiding the shops for many levies with strange names. Some wondered what is meant by effluent discharge levy different from sanitation levy and why there should be fire service levy when the fire service in the state has never stopped even stove fire.

Charles Obi of electrical dealers group opened up on this; “The government taxes our members at source, why do you want to tax us again? Besides, we may be registered businesses but we operate in the informal sector, why do you want to subject us to formal sector tax codes?”

Medical doctors: “We need to know the government agency that ought to collect rates for sign posts, fire service levies, effluent discharge levies; Are they from your office? How do you https://www.facebook.com/businessdayng

calculate income tax when the director is on PAYEE?” Offer: Norteh said government has tried to work on this and that the first step is to educe friction and also to make payment with ease.

Fair tax Many of those who spoke for their groups pleaded that the amounts be fair because of the economic hardship. They argued that all fingers are not equal and that many traders and business owners have closed down or about to close. They said government sometimes asks them to pay N1.3m without justification and wondered if some of them have seen a million naira in their lives.

Egberi Odiri Mackson: chairman, Table Water Producers Association, said; “We have waited for this opportunity for along time. We need to know what to be paid and what not to pay. We cant understand how anybody would levy a water business N1.3m in different subheads for a year. How many of us have seen N1m in this business? It is unreasonable. Let the levies and amounts be made public so nobody will come from behind to slam amounts on anybody. Let us know what each category will pay. Publish it in newspapers. Some taxes seem to be double what the Joint Tax Board (JTB) approved. It may take an Army to successfully collect the money oh.”

Offer: Norteh said he has documents of what was being paid in the past and that he would work with the committee to ensure that no tax is paid twice.

Give us humane treatment Some groups said people coming for taxes use much for and even impound their vehicles on the road in the name of MOT/RIRS. He said the police will not help and that one must part with N35,000 to secure his car back. Odiri Mackson again said: “We have suffered in the hands of people parading as MOT. When we confronted @Businessdayng

them and went the Ministry of Transport, they changed to MOT/RIRS. We tried also to clarify with the RIRS but it has not been possible. We found that they may be fake. What we wanted to know is who gave them the vests written RIRS? When we went to the police, they said we should settle with them.

Offer: The RIRS boss made it clear that humane treatment is the hallmark of the over all tax policy in the present administration in the state. He said the consultations and cashless system plus tax education with elimination of touting were all aimed at elimination brutality in tax collection. He however said this can only be achieved by the full collaboration of the traders and tax payers especially by refusing to pay touts and cash.

Give us tax education Some said they are always in the dark about taxes and only wake up to see all manner of persons with ID Cards and vests demanding for tax. They said in ignorance, the traders begin to haggle for price and end up sorting instead of paying. Now, please give us enough tax education.

Hear Charles Obi (Electrical Dealers Association) again: “Tax education is very poor in the state. They do not bother to let us have enough understanding, yet they want us to pay easily when we do not know what we are paying for.”

Offer: Norteh said this has been ongoing in the present era. He said they should listen to 13 radio stations in the state that dish out tax education plus the stakeholders meetings going on.

Government must show what it does with our tax Some spoke in parables but the bottom-line is that they are not getting much from government. They live in private houses, send their kids to private schools, worship in private churches, employ private guards, drive in private cars, power their homes with private supply. They want government to provide these things first before thinking of collecting taxes from the common man.

Quantity Surveyors: “Feedback is important so you can know why people do not want to pay taxes. People feel bad and you need to know. There is no development to encourage tax payers enough. Lagos is far ahead and you can see the development”.

Offer: Norteh listed many things being done in Rivers State at the moment including roads, schools, etc, and gave Trans-Amadi as a sterling example, The traders agreed TransAmadi is wonderful now. He however said the law did not say if government did not do things to your satisfaction, you should not pay tax because you travel on good road before you get to bad one.

Give more time The RIRS boss revealed that the drive would start this June. Most of them said it was too sudden and wanted more time. One particular person said enumeration was important because without data, tax is difficult.

Offer: The RIRS boss said June is certain but that consultation and meetings will still go on.

Monday 10 June 2019

BUSINESS DAY

57

FEATURE IGNATIUS CHUKWU

T

he much-expected NLNG Train-7 in Bonny Island in Rivers State is getting to reality with capacity to almost double the existing capacity. Also, for the first time, a road is about to enter into Bonny Island; a N120Bn joint project between the NLNG and the Federal Government on equal equity basis. Based on this, Bonny is expected to need bigger projects.

For this, business owners may be called upon to embark on bigger tasks such as road construction, hotels, vehicle and traffic management tasks, tourism development projects, and various industrial projects that may need to open at sea shores to serve a new population that may emerge.

While many be contented with the comforts of today, the king and custodian of assets and customs of the island and some few others were not. Thus, the young and dynamic Amanyanabo of Grand Bonny, Edward Asimini William Dappa Peple 111, who is Perekule X1, was said to have pondered over the future and fate of Bonny in the event of certain actualization of the two upcoming realities.

He was said to have realised that if not properly handled, the business explosion would lead to capital flight with capacity residing in the hands of others while the negative effects may remain with the Bonny people.

He was said to have looked for solution and remembered that the Island once had a city chamber of commerce called the Bonny Chamber of Commerce, Industry, Mines and Agriculture (BOCCIMA), founded in 1993, which had died a sudden death. With his versatile knowledge, he felt that it was such a chamber that could harness human capital and material resources needed to capture and harvest the exponential businesses and the expected opportunities and benefits.

The outcome of the king’s thoughtfulness was said to have led to the revival of the BOCCIMA in April 2018. Later, he was said to have beckoned on one of the multinational oil corporations, Mobil Producing Nigeria Unlimited (Mobil), to help out in the urgent task of grooming the new BOCCIMA into an effective and proactive business coalition. The idea to transform the city chamber through ICT and launch it on the path of digital proficiency was thus born.

Mobil went to work, brought in Michharry & Company who now brought in Wright Portfolio Consult Limited.

The team developed a transformation scheme hinged on digitalization process and ICT training and facility upgrade. The scheme began through a one week training programme in Bonny that began on April 22, 2019, with the enthusiastic support of the high and mighty in Bonny and eager participation of the members of BOCCIMA, attracting the likes of Ndi Okereke-Onyuike of the Nigerian Stock Exchange fame.

Top brand builders around Nigeria such as Constance Nwokejiobi, Chuks Aguocha, Vincent Nwani, and Williams Odah, were hunted down to cross the ocean and come to Bonny.

To flag off the one week effort, the king was fully represented to show the level of seriousness attached to the programme by the entire island. His Majesty’s representative, the Se-Alabo (Amb) Dagogo S.C Wilcox, who is the chairman, Bonny Chiefs Council, gave full credit for hatch-

Bonny prepares for business explosion, re-floats Bonny Chamber of Commerce to rally investors

Bonny Chmaber of Commerce reborn

ing the idea to the highest citizen in Bonny, the Amanyanabo.

He said: “BOCCIMA has done very well by organizing this scheme in time to take advantage of the coming massive projects coming to Bonny. In order to be fully prepared to take advantage of this, we must be ICT-compliant and prepared because that is the global trend.

We believe this programme will give the BOCCIMA the required impetus to play the critical role of preparing Bonny Kingdom in the business direction.”

Speaking further, Wilcox assured that the Amanyanabo-in-Council would be prepared to give the BOCCIMA any support it would to discharge this responsibility to the kingdom and the nation. “Together, we can accomplish great things through this ICT training; things far greater than what we have so far said.. You the trainees and participants will be the final source of those ideas and will be the driving force behind the actions.”

Welcoming the participants, Godwin Ikwue, the Group Director, Wright Portfolio Consult Ltd, said the project was to train members of BOCCIMA & local businessmen on leveraging ICT to optimize business opportunities and serve as an awakening call to new approaches that can be adopted to develop the existing business opportunities in Bonny.

He said: “Study after study shows that programmes directed at capacity development of decision-makers in the business world to reach their full potential, transforms not only their lives but also the lives of those around them, leading to stronger families, stronger communities and stronger nations.

This programme is part of our support for national content strategy to promote advocacy, enhance supplier diversity and economic empowerment for businesses owned by both men and women.”

The training progressed smoothly, attracting more Bonny dignitaries until the final day. The president of BOCCIMA, Lawrence F Jumbo, an education investor and manufacturer, speaking at the closing ceremony, said what was happening too good to look like a lie. “The reactivation of BOCCIMA looks too good but it is not an April The Fool type of story. We are committed to the mandate of the King.”

He went on: “We promise to keep this successful. His Dubai dream will sure come to pass for Bonny Island.

The five days training is something else. The first time, the BOCCIMA experiment died because people expected contracts from NLNG and the oil companies just for being members of BOCCIMA, and when this did not happen that way, they were discouraged and stopped paying dues. The chamber died. This time, we have been shown how to be independent and self-reliant financially. We plan to make businesses bigger. We urge business gurus to join now when its not too late. We are poised to succeed. Bonny has young and up-coming persons who must be encouraged to become successful business people.”

Reflecting on what was taught, the president told BusinessDay thus: “We have been taught on how to approach NGOs and other funders. They have told us about women’s wing of the chambers. Many of our women are

L-R: Ndi Okereke Onyuike, and Chapp Jumbo BJ www.businessday.ng

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Constance Nwokejiobi, chief facilitator

resourceful and they need help. We will seek support for our women. We will carry out advocacy projects especially environmental issues in Bonny. Governments are neglecting Bonny. We do not have strong transport system to Bonny and this is retarding progress. If you are coming to Bonny, the sea can be violent, pirates are waiting for you.

So, government must create a solution.

We will advocate for solution”.

On the key matter at hand, the president touched the critical issue of how Bonny should prepare for the coming of Tran-7 and a road to Bonny. “It is a challenge. The road is going to cause change, good and bad. We are talking of how to secure the island. Security will be first challenge. The other is we are talking on how to collaborate and make the island a tourist destination.

It is going to be a collaborative effort between the BOCCIMA, king’s palace, multinational companies, etc.

“For instance, we have been preaching against open defecation. There must be efforts to build public toilets to replace the idea of defecating in the sea.

We must build tourist spots and create a calendar villager by village.

“Thekingisalsodiscussingtheideaof a museum. Bonny used to be a slave exportcentreandthere is need to gatherthe relics. Bonny used to be a powerful city that controlled many areas and served as headquarters. The cannons used for wars are still there. We want to harness them and label them. We have had famous kings such as King Adama Pepple 1 like other places such as London where MargaretThatcherwhichhasastatuethat is energized. These things would boost the tourism industry in Bonny.

Government has neglected us. If @Businessdayng

your boat capsizes at sea here, you are on your own. There are no coast guards.

So, we create coast guards to save lives at sea and they would be extended to the road and guard the entry so that bad eggs to not flood to Bonny.”

He said he had been his members to work hard because nobody would give anybodyanythingfree.“Maintainquality and credibility. If they give you a job and mobilization, do the work first. Do not go and marry first and buy bigger cars at the detriment of the business that gave you the money. Deliver the job to satisfaction first. Time has gone when people do business from their pockets. Build up a track record that cam stand out for you.”

An official of Mobil from the Public Affairs department in Bonny, Bara Kabaka Brown (PhD), said at the closing ceremony that the company was grateful to the king for finding Mobil capable of reviving BOCCIMA and said Mobil jumped at the offer. “ Chambers of Commerce brings development, which is for sure. These are activities aimed at preparing for the Bodo-Bonny Road that would soon create the first-ever road access to Bonny island. Another is the NLNG Train-7. So, Wright Portfolio Consult Limited, a worthy and world class consulting firm, was mandated to midwife it. Do not be afraid because they will continue to manage the process for some time to come. The engagement starts immediately. Mobil is happy and committed to this project.”

Top business persons and pillars in Bonny such as IT Williams, Chapp Jumbo Biokpo, and more, provided a lot of steam to kick-start the scheme.

Many of them pledged to help in membership drive as suggested by OkerekeOnyuike. The facilitators provided huge insight into how good city chambers operate and sustainability lines.

Constance Nwokejiobi, Country Executive Director, Wright Portfolio Consult Limited, who was being eyed at her back to take over the task of grooming BOCCIMA to maturity as its first Director-General, exclusively told BusinessDay that Wright Portfolio won because of its experience and pedigree in working passionately huge national and international exposure and experience in transforming organizations.

She said capacity development is critical in human development. “As BOCCIMA wants to repackage and revive, if there is no business plan and human capital development component, it won’t work. So, Mobil Producing Nigeria Unlimited is supporting this big leap for this transformation. I believe their support is not over. The good news is that the training had a mix comprising the pioneer members of old BOCCIMA and the new ones of 2018 and this would bring a blend of energy and maturity, contact and drive”.

She said those trained would have to retrain new members. She said the signs of success are all over the place; “Yes, the signs are visible. There are stakeholders in this kingdom supporting this project. The Bonny kingdom hierarchy’s (they respect hierarchy a lot here) endorsement of this project is important.”

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Monday 10 June 2019

BUSINESS DAY

Feature

Dangote Refinery: Raising the bar in host community development SEGUN ADAMS

A

s part of industrial reforms, the Federal Government recently initiated the Petroleum Host and Impacted Communities Development Bill 2018 (tagged the “Bill” or “Host Community Bill”) with regard to the Nigerian petroleum industry.

The objective of the Bill is to provide direct social and economic benefits from petroleum operations to host and impacted communities. The Bill seeks to enhance peaceful and harmonious coexistence between companies on one hand and host and impacted communities on the other.

To ensure that host communities benefit from the Dangote Refinery and Petrochemical investment, the company has identified 10 host communities and five neighbouring communities in its areas of operation in IbejuLekki. The main host communities are Idasho, Ilekuru, Okeyanta, Magbo-Segun, Okesegun, Itoke, Idotun, Alasia, Okunraiye and Lekki towns, while neighbouring communities are Imobido, Tiye, Mosa, Ilege and Olomowewe.

In this regard, the company unveiled a Corporate Social Responsibility development plan, which is centred around the wellbeing of the people, especially its host communities in Ibeju-Lekki.

In Ibeju-Lekki, the company has executed several projects that are helping to enhance the lives of the people. It has provided boreholes for all the communities, classrooms for the local schools and also awarded scholarships to 51 secondary school students.

The Dangote Petroleum Refinery & Petrochemicals, National Directorate of Employment (NDE) and Nigerian Content Development and Management Board (NCDMB) recently kicked off a vocational training programme of the youth in Ibeju-Lekki, a project designed to equip young men and women with trade skills.

This programme is another level of the Dangote Refinery’s intervention as it was targeted at providing vocational skills to the teeming youth population in its host communities. Youths are veritable assets in any society and the quality of the youths determines the outlook of tomorrow’s society. Therefore, an investment in developing vocational skills among youths is expected to yield the desired results.

To bridge the gap in Nigeria’s education sector and allow it contribute effectively to economic development, Dangote Refinery and Petrochemicals has taken up a proactive measure by embarking on an integrated tripartite approach to boost quality of education in the public schools around its host communities. This approach includes a scholarship programme for students, a Train-The-Trainers Capacity Building Initiative for teachers and school infrastructure projects to improve school infrastructure.

Dangote Oil Refinery and Petrochemicals, in collaboration with NurtureHouse Limited, a company founded to strengthen quality education through enhanced teaching and learning and capacity development of teachers, organised a capacity building programme for secondary school teachers and principals

L-R: D.V.G. Edwin, group executive director, capital projects, Dangote Group; HRM Rilwan Akiolu, Oba of Lagos, and HRM Kamarudeen Isola Animasahun, Oloja of Epe, at the flag-off of a Vocational Training Scheme organised by Dangote Oil Refinery and Petrochemicals for youths across host communities in Ibeju-Lekki, Lagos, recently.

in Ibeju-Lekki area of Lagos recently.

The training sessions were delivered using practical, hands-on approach to learning.

The sessions provided participants with opportunities to collaborate as well as practice knowledge and skills acquired. At the end of each session, the participants were guided on reflective practices and action planning to encourage implementation of skills acquired when they return to their schools.

Teachers were exposed to 21st Century

We believe in wealth creation in our host communities. As our petroleum refining and fertiliser complex comes on stream, it is expected that there will be a population boom in the surrounding communities, which requires the skills and services of the trainees www.businessday.ng

best practices in “Cognitive Development and Impact on Learning” as well as “Effective Pedagogical Skills”. Personal action plans produced at the end of the two-day Professional Development Programme are expected to motivate the teachers to implement their plans.

Speaking on Dangote Refinery’s transformation agenda for the host communities, Dangote Group’s executive director, Capital Projects, Devakumar Edwin, stated: “We believe in wealth creation in our host communities. As our petroleum refining and fertiliser complex comes on stream, it is expected that there will be a population boom in the surrounding communities, which requires the skills and services of the trainees. The 12thcentury philosopher, Maimonides, said the ‘most meritorious of all is to anticipate charity by preventing poverty, by teaching him a trade, or by putting him in the way of business, so that he may earn an honest livelihood and not be forced to the dreadful alternative of holding up his hand for charity’. This is our philosophy.”

Edwin expressed the company’s commitment to the execution of more community development projects, particularly those that would improve the host communities.

Speaking on the mega project, Edwin said the company is building a 650,000 barrelsper-day refinery, which will become the world largest single train refinery on completion.

“Dangote Petroleum Refinery is expected to produce 65.4 million litres of petrol (PMS), diesel (AGO), aviation jet fuel (ATF) and kerosene (DPK) daily when it becomes operational. This high volume of PMS output from the Dangote Refinery will transform Nigeria from a petrol import-dependent country to an exporter of refined petroleum products,” Edwin said.

“The refinery is being designed to accommodate multiple grades of domestic and

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foreign crude (including shale oil) and process these into high-quality gasoline, diesel, kerosene, and aviation fuels that meet Euro V emissions specifications, plus polypropylene. It will include a crude distillation unit, single-train residual fluid catalytic cracking unit, diesel hydro-treating unit, continuous catalyst regeneration unit, alkylation unit, and a polypropylene unit. The project will provide thousands of direct and indirect jobs and add value to Nigeria’s economic development.

It will lead to significant skills transfer and technology acquisition opportunities in the country,” he added.

Speaking on Dangote Refinery’s community development initiative, Imobido Community head, Chief Jegede Lateef, commended the company for siting its refinery and petrochemical plant in the community.

“We appreciate Dangote Industries for its decision to establish a refinery and petrochemical plants in our communities and we believe that the company’s investment will contribute to the development of the community. Dangote is welcome to do his business in our communities and we are fully ready to cooperate with him,” he said.

He urged the company to ensure that the various investments translate to infrastructural development and employment opportunities for members of the host communities.

Also, the head of Tiye Community, Chief Adewale Salami, commended DORC for the various completed and ongoing projects, and promised that the community would always provide an enabling environment for the investment to thrive.

He said the company has done well in enhancing the welfare of host communities and urged it not to relent in its efforts to ensure that jobs are provided for qualified graduates who are indigenes of the Lekki Free Trade Zone.

@Businessdayng

Monday 10 June 2019

FT

BUSINESS DAY

59

FINANCIAL TIMES

World Business Newspaper

Lucy Hornby

C

hina will establish a mechanism for export control of sensitive technology, raising the spectre of tit-for-tat retaliation amid a souring trade dispute with the United States.

The announcement comes as both sides expand their dispute beyond simple tariffs, after the most recent round of trade negotiations ended without a deal in May. Since then, the Trump administration has blacklisted Chinese telecommunications equipment maker Huawei, while China has threatened to punish foreign companies that cut off ties with Huawei by listing them as “unreliable”.

The export control mechanism — which appears to be based on a draft law first proposed by the Ministry of Commerce two years ago — would “prevent and resolve national security risks”, Xinhua said. Details would be released soon, it added.

The new Chinese regulations could prove similar to US export controls on strategic technologies.

Those controls, covering military equipment, some encryption technologies, and some dual-use products, have long irked China.

China to roll out export controls on sensitive technology Mechanism to ‘prevent and resolve national security risks’ follows failure of US trade talks Chinese negotiators have often claimed that their trade surplus could be trimmed if the US would relax controls on high-tech goods.

While covering nuclear and military materials, the draft Chinese law also included latitude for retaliation if China is subject to discriminatory export control measures by any other country, according to a 2018 report by consultancy PwC. “This is a major step to improve [China’s system] and also a move to counter the US crackdown,” tweeted Hu Xijin, editor-in-chief of the Global Times, a nationalist tabloid that is sometimes used to float ideas that are not yet official policy. “Once taking effect, some technology exports to the US will be subject to the control.”

The mechanism will be developed by the National Development and Reform Commission under the guidelines of China’s national security law, passed in 2015, Xinhua said. It didn’t mention the draft law released by MofCom in 2017, which was based on US regulations that limit export of military and strategic technology.

“China . . . appears to be imple-

Active asset managers have one of their best runs since crisis as ‘quant’ funds suffer

T

raditional stockpicking fund managers have enjoyed an unusually good stretch in recent weeks even as machinedriven “quant” funds have fizzled, nurturing hopes that rockier markets may help human investors launch a comeback.

Over half of all US mutual funds that invest in big American companies managed to beat the broader stock market in May for the second month in a row, according to Bank of America. This indicates that many managed to navigate the recent trade warrelated turbulence.

So far this year 47 per cent are outperforming the broad Russell 1000 index. Although this still means that over half of US “largecap” equity mutual funds are trailing the market, if sustained this would be one of the best beat rates in the post-crisis era. Moreover, 54 per cent are beating the blue-chip S&P 500 index.

Traditional, active asset managers have long argued that they would prove their worth in less buoyant markets. Although the long-term evidence that stockpickers outperform in downturns is patchy, their recent run will be encouraging to investment groups that have battled torrential outflows year after year since the crisis.

Active equity funds have shed another $169bn already this year,

taking the cumulative outflows over the past decade to $1.31tn, according to EPFR, a mutual fund data provider. In contrast, passive equity funds have attracted over $24bn this year, and $1.9tn over the past decade.

“If active management is ever going to come back, it has to show it can do better in a downturn than the machines can,” said Michael Hartnett, a senior Bank of America strategist.

Algorithmic, “quantitative” funds continued to underperform in May, with just 34 per cent beating their benchmarks due to heavy exposure to underperforming factors like “value” stocks, according to Bank of America.

However, these are mostly “long-only”, relatively simple quant funds that typically only mine one or several well-known signals, such as the long-term tendency for cheap stocks or those with strong balance sheets to perform well.

Many quant hedge funds have bounced back this year, especially systematic trend-surfers.

Systematica’s flagship $2.7bn BlueTrend fund lost over 10 per cent last year but is up more than 8 per cent already this year. Similarly, Aspect Capital’s $3.6bn Diversified fund has returned over 10 per cent in 2019, after shedding 14.6 per cent in 2018. The strongest comeback has come from Cantab’s Aristarchus fund, which has flipped last year’s 23 per cent loss into a 20.5 per cent return already in 2019. www.businessday.ng

menting a longer-term strategy that recognises its competitive advantage in manufacturing, while building towards competing for control over the real value in the modern supply chain — intellectual property,” Jeanine Daou, a tax specialist at PwC Middle East,

concluded in the PwC report.

China has said it would retaliate against foreign companies that arbitrarily refuse to do business with Huawei, putting multinationals in the middle of a tug of war over which country dominates the next generation of technology.

Last month, the NDRC implied it would block exports of rare earths, a material with many strategic applications including smartphones, lasers, instrument panels, wind turbines and MRI machines and more than 90 per cent of hybrid and electric cars.

Renault tells Nissan it will block governance overhaul

Humans beat machines in rocky month for equities Robin Wigglesworth

A broad range of Chinese macroeconomic vulnerabilities are seen as susceptible to an intensification of US economic pressure on China

Jean-Dominique Senard’s move threatens to further inflame relations between alliance partners Leo Lewis and David Keohane

R

enault has told Nissan it will block the Japanese company’s plan to overhaul its troubled corporate governance, further inflaming the fraught relationship between the two alliance partners.

The decision — revealed in a letter from Jean-Dominique Senard, Renault’s chairman, to Hiroto Saikawa, chief executive of Nissan, on Saturday — marks an abrupt reversal of policy, and threatens to destroy months of work by Nissan.

Mr Senard’s letter was sent just two weeks before Nissan’s annual meeting, where the company had hoped to vote through a long-overdue transition from having statutory auditors to a governance system of three committees covering nominations, remuneration and audit.

According to people familiar with the letter — which has not been made public — Mr Senard wrote that, as a 43 per cent shareholder in Nissan, Renault had decided to abstain from the vote, thereby denying the proposal the two-thirds majority it needs to pass.

People close to the Japanese carmaker condemned the move as “outrageous and irresponsible”.

The three committee plan, for which Mr Senard had personally voted several times in his role as a Nissan board director, arose from months of self-examination

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following the arrest last November of Carlos Ghosn, previously chairman and chief executive of both companies.

During his tenure, Mr Ghosn had been attempting to make the automaker alliance “irreversible”, angering many within Nissan who also feared the influence of the French state within the group. Relations between the two companies have long been fraught, but have come under intense pressure since Mr Ghosn’s departure.

Mr Senard had looked to restart merger talks with Nissan shortly after taking over as head of Renault in an effort to stabilise the relationship. But, after being rebuffed once more, he turned instead to Fiat Chrysler. Nissan was only informed of the talks with FCA at the last minute, further undermining trust between the two sides.

FCA pulled its merger proposal after the French state, which owns 15 per cent of Renault, demanded more time to ensure Nissan supported a tie-up.

French government officials say their decision to delay was spurred in part by Nissan’s board representatives at Renault indicating they would abstain rather than vote in favour of the deal. And while finance minister Bruno Le Maire has publicly backed Mr Senard, some French officials have said privately that he assured them Nissan backed the deal, accusing the 66 year old Renault boss of be@Businessdayng

ing naive.

People close to Nissan have speculated that Mr Senard’s intervention may represent an attempt to gain leverage over its alliance partner — either in expectation that FCA may come back to the negotiating table, or because Mr Senard wants to revive merger talks with Nissan.

After Mr Ghosn’s arrest, Nissan assembled a special panel to analyse governance failings and propose improvements. Its main recommendation was the immediate introduction of the threecommittee system. The full Nissan board, which included Mr Senard, gave the idea its unanimous approval on May 15.

In Saturday’s letter, said people familiar with its contents, Mr Senard justified the abrupt U-turn by arguing that the three committee system might somehow be used to reduce the influence of Renault as Nissan’s largest shareholder.

People familiar with Mr Senard’s thinking stressed that the letter was “a step but only a step” in the lead up to Nissan’s AGM, and that Renault’s position could change.

Those same people said that Renault was seeking to ensure its rights as a shareholder were maintained, adding that the French carmaker had concerns around the future composition of the committees and about how the powers of the board would be transferred to those committees.

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BUSINESS DAY

FT

NATIONAL NEWS

Khartoum on tenterhooks after week of brutal violence

Sudanese fear what might happen next after hopes of a peaceful transition are crushed Tom Wilson

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he Sudanese capital Khartoum was frozen by fear on Sunday after a week of violence shattered protesters’ hopes for a peaceful, democratic revolution.

As if the city had been conquered by an occupying force, the centre was deserted but for the dreaded Rapid Support Forces stationed on every corner. Armed with rocket propelled grenades and high calibre machine guns mounted on military vehicles, the young soldiers kept watch on Sunday as other security officials, opposition groups said, continued to make arrests in the city’s suburbs.

The crackdown by the armed forces has upended negotiations between Sudan’s civilian opposition and the military leaders who seized power from Omar al-Bashir in April, leaving Sudanese in fear of what could happen next.

One scenario is a debilitating stalemate if the military leaders refuse to cede power and the civilian opposition sustains its resistance.

International mediation efforts began on Friday, led by Abiy Ahmed, Ethiopian prime minister, but the military council immediately rejected the opposition’s conditions for new dialogue.

Another possibility, experts warned, was a potentially more dangerous conflict if elements of

Sudan’s sprawling armed forces, such as the RSF, began competing for power.

Such a struggle would lead to violence “far worse” than that witnessed on Monday night when the RSF raided the main opposition demonstration in the centre of Khartoum, leaving more than 120 people dead, said Hussien Karshoum, a former peace negotiator for the Sudanese government.

Since April protesters had occupied a network of streets in the city beginning in front of the ministry of defence. At its height, the sit-in had taken 30-40 minutes to walk through, a labyrinth of tents and temporary shelters housing activists, political groups and professional associations all pushing for democracy in Sudan for the first time in a generation.

By Saturday the protest had been reduced to rubble. Along the main boulevard piles of ash settled where shelters had once stood, diggers shifted debris and heavily armed military trucks patrolled. Colourful murals painted by the protesters were all that remained, a reminder of the democratic hopes the sit-in had once protected.

As RSF soldiers policed the city some opposition leaders on Sunday told the Financial Times they could not meet in person, reluctant to leave their homes or reveal their location for fear of being detained.

UK’s CDC to invest $300m in Africa’s power networks Group addresses infrastructure shortage that leaves 600m people without electricity Tom Wilson

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he UK government’s overseas investment arm, CDC Group, said it would invest more than $300m in a new business to develop electricity networks in Africa, which it calls one of the biggest impediments to economic development in the world’s poorest continent.

The company, to be known as Gridworks, will be launched this week, CDC chief executive Nick O’Donohoe said. It will make investments in power transmission and distribution infrastructure, as well as off-grid electricity systems.

Mr O’Donohoe said that, despite decades of investment in generating capacity in many African countries, at least 600m people are without access to electricity because of a a lack of networks to transmit and distribute power. Gridworks will help bridge that gap, he added.

The announcement comes as the UK seeks to strengthen its trading relationships with Africa. CDC last year pledged to invest up to $3.5bn in the continent over the next four years.

Founded by the UK government in 1948, CDC has a mandate to make a financial return on investments that reduce poverty by supporting economic growth and creating jobs. The investment group’s sole shareholder is the Department for International Development.

Gridworks’ chief Simon Hodson called the new venture a “natural evolution” of CDC’s previous investments in energy.

CDC helped establish Uganda’s national electricity utility, Umeme,

in 2005 and holds a 70 per cent stake in Globeleq, a leading African power producer with generating facilities in Tanzania, Kenya, Cote d’Ivoire and South Africa.

The group also has holdings in Eneo, the national power utility in Cameroon, and a hydro project in Democratic Republic of Congo. Both will now be managed by Gridworks, Mr Hodson said.

With net assets under management of $5.1bn, CDC last year promised to take on riskier investments after a period of particularly high returns. Between 2012 and 2016 CDC made average returns of 10.3 per cent, against a target of 3.5 per cent, according to a review by the National Audit Office.

Gridworks expects to make at least $300m of investments in the next five years and CDC could provide further capital if the right opportunities arise, Mr O’Donohoe said.

While some African governments have welcomed private investment in power generation projects since the 1990s, transmission and distribution infrastructure has traditionally remained in the hands of the state.

That is beginning to change, according to Mr Hodson.

“We’re at a tipping point and in 10 years from now I really think you’ll see private sector flows into transmission projects evolving,” Mr Hodson said.

The project has the backing of the UK government. “Gridworks is a fantastic initiative using British expertise and finance to connect millions of people across Africa to electricity,” said Harriett Baldwin, minister for Africa. www.businessday.ng

Digital giants face tax setback after G20 agreement Ministers pledge new rules by 2020 that will ensnare groups like Facebook and Google Robin Harding

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igital companies such as Facebook and Google will soon have to pay taxes regardless of their physical presence or measured profits in a country after G20 finance ministers agreed to accelerate a radical shake-up of cross-border corporate tax.

In a communiqué issued after their meeting in Fukuoka, Japan, finance ministers from the world’s largest economies said they aimed to agree on new rules “by 2020”.

But there are still big differences to resolve, with the US, home to most of the world’s digital giants, opposed to rules that treat digital companies differently to others.

The proposals will lead to higher tax bills for some of the world’s most valuable companies and transform the basic tenets of international tax for a world where economic value comes from flows of ideas and data rather than physical goods.

“We have a new economic model based on digital activities and based on the sale and exchange and use of massive data,” said Bruno Le Maire, the French finance minister. “For the time being there is no fair taxation of this new economic model.”

Digital companies provide their services across borders and can often choose to book sales in a lowtax jurisdiction. Countries may have no way to tax profits from internet advertising, for example, even if the adverts are bought by their citizens and shown to their citizens.

The UK and France are both bringing in digital services taxes based on the local sales of search engines and digital marketplaces.

Because they target sales and not profits, however, there is a risk of double taxation.

“The US has significant concerns with the two current taxes that are being proposed by France and the UK,” said Steven Mnuchin, the US Treasury secretary. He said the European taxes had “created an urgency for us to deal with this issue”.

Mr Le Maire and Philip Hammond, the UK chancellor, both vowed to scrap their digital taxes as soon as there was an agreed G20 approach.

The G20 is looking at various ways to tax digital companies.

One idea is to calculate the “nonroutine” profits made by a digital company. Another approach is to use existing calculations of profits and then reallocate part of them to

different countries. A third possibility is to specify a “baseline profit” for marketing and distribution in any given country.

The new system will also need a set of rules to decide when a digital company is actually involved in a national economy — for example, generating content from a community of users who live there — rather than simply selling a product across borders.

“Global tax rules should still aim to tax businesses based on where they create value, not just on where they make sales,” said Mr Hammond. “We need to ensure the reformed international tax system continues to reward countries for creating attractive business environments.”

Despite disputes over the form and scope of the new tax rules, the G20 ministers signalled there was no alternative to a reform. “It sounds like we have a strong consensus,” said Mr Mnuchin. “So now we need to just take the consensus . . . [and] turn this into an agreement.”

Following their discussion on the global economy, the G20 ministers declared that “trade and geopolitical tensions have intensified”, while growth is low and “risks remain tilted to the downside”.

Oil majors gear up for wave of climate change liability lawsuits Local US authorities seek compensation for costs ranging from sea wall upgrades to retrofitting storm drains Leslie Hook

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ossil fuel companies are already grappling with the risks posed by climate change, from the physical threats of extreme weather to the challenge of switching to cleaner energy. Now they have a new item rising up their list of worries: liability lawsuits.

Over the past two years, a growing number of legal cases in the US — brought by cities, counties, and the State of Rhode Island — are seeking damages from energy companies for a litany of climate-related problems.

Baltimore wants compensation for the cost of retrofitting storm drains to prepare for worsening storms. In San Francisco, the city says it will cost $5bn to upgrade the city’s sea wall to prepare for higher sea levels. Meanwhile, Rhode Island expects coastal properties worth $3.6bn to be under threat by the end of the century.

Taken together, these lawsuits amount to a legal onslaught that climate activists hope will have a profound financial impact on oil and gas producers, by imposing huge

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penalties. The example they draw on is the years of litigation against tobacco companies that culminated in a settlement guaranteeing $206bn in payments to 46 US states over the first 25 years.

Sheldon Whitehouse, a democratic Senator from Rhode Island known for his climate activism, said the threat of litigation is a major worry for oil companies at the moment. “They are frightened at the prospect of liability at what they have done, and they are scared of courts.”

He said the comparison with the tobacco lawsuits is apt. “If you . . . pop out the word tobacco, and put in the word fossil fuels; pop out the word health, and put in environmental harms. The complaint writes itself,” he said.

One crucial difference, however, is that the climate cases are not yet on the scale of the tobacco litigation — none of the lawsuits have succeeded yet, and several have been thrown out.

At present there are more than a dozen climate liability cases under way in the US: 10 brought by counties, four brought by major cities (New York City, San Francisco, Oak@Businessdayng

land, Baltimore) and one by a state (Rhode Island). The next cities to file climate-related lawsuits are likely be Honolulu, and Washington, DC, which has already put out a call for lawyers.

However the energy companies, and the lobby groups that represent them, are sceptical that these cases have merit.

“There has been a long history of this litigation that has not been successful, and for good reason,” said Phil Goldberg, special counsel at the National Association of Manufacturers, a lobby group in DC whose members include fossil fuel companies.

“The fundamental flaw with these lawsuits is that the companies didn’t do anything wrong . . . they are selling a useful product,” Mr Goldberg added. “The whole thing is just a red herring.”

But he stops short of dismissing the lawsuits altogether. “Anytime you are sued, you take it seriously,” he said. The growing number of cases has prompted the association to set up a new wing — the Manufacturers’ Accountability Project — to address them.

Monday 10 June 2019

BUSINESS DAY

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FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Hargreaves Lansdown apologises to customers locked in Woodford fund Woodford Equity Income Fund was on investment platform’s favourite funds list Kate Beioley

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argreaves Lansdown chief executive Chris Hill has apologised to tens of thousands of customers affected by the suspension of Neil Woodford’s £3.7bn equity income fund, which the company continued to support until the fund was frozen to investor withdrawals.

In a statement, Mr Hill said he wanted to “apologise personally to all clients who have been affected by the recent problems with the Woodford Equity Income Fund”.

“We all share their disappointment and frustration. Our priority right now is to support our clients and keep them informed,” he said.

It is Mr Hill’s first public statement since Mr Woodford trapped investors in his fund on June 3, triggering a sharp decline in Hargreaves’ share price because of the close links between the two.

Hargreaves, the FTSE 100 platform used by 1.1m retail investors, has been criticised for its support of the Woodford Equity Income fund, which is one of its revered Wealth 50 list of favourite funds, despite recent poor performance.

On Sunday, Mr Hill said the company would conduct a review into its controversial decision to readmit Mr Woodford’s fund into the Wealth 50 earlier this year and said the company would “learn from it”. Hargreaves readmitted Mr Woodford’s fund into its list of favourites in January after Mr Woodford agreed to cut fund fees by 0.10 per cent.

The company has previous-

ly said that customers benefit from the discounts, and claims it weighs up a wide range of performance data and other metrics when considering which funds to add.

Mr Hill said: “We are confident in the robustness of how we analyse, research and compile our favourite fund list with a focus on ensuring best value for customers. Nonetheless, we are reviewing this specific situation to ensure we learn from it and address it for the benefit of our customers going forward.

“Our aim remains to provide the best possible service and choices to allow people to manage their investments simply and effectively. The shortcomings of one fund should not detract from the benefits of favourite fund lists like the Wealth 50.”

The suspension of Woodford Equity Income has put a spotlight on best-buy lists promoted by large platforms such as Hargreaves Lansdown, and the way in which they communicate with customers about the investments they offer.

Last week, Mike Barrett, consulting director at the Lang Cat, said platforms should be “required to take more responsibility for the behaviours they are encouraging” and said better regulation of “best in class” lists was needed.

At the end of March, Hargreaves customers accounted for about a fifth of Mr Woodford’s total assets under management.

The company’s shares are down 14 per cent since the market opened on Monday.

City watchdog head says fund rules may need to change Financial Conduct Authority weighs intervention in wake of Woodford fund meltdown Caroline Binham and Siobhan

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he head of the UK’s financial watchdog has said the rules around investment funds may need to change in the wake of the meltdown of Neil Woodford’s flagship fund, which suspended investor withdrawals last week.

Banning daily withdrawals from funds holding hard-to-trade assets, and forcing funds to keep to assets in jurisdictions chosen by investors are among the areas where the Financial Conduct Authority is weighing intervention, the watchdog’s chief executive, Andrew Bailey, has warned.

In his most detailed comments to date since Mr Woodford’s fund froze redemptions after its poor performance led many investors to ask for their money back, Mr Bailey said that the FCA will take into account “lessons” from the Woodford episode as the regulator finalises new rules for open-ended funds investing in illiquid assets such as property.

But wider changes that would affect investment funds such as Mr

Woodford’s would have to be done at an EU level, under rules known as UCITS, Mr Bailey cautioned.

“The Woodford fund points to a potential problem with the limits on illiquid assets: the purpose of these limits is to ensure that the fund remains liquid. Simply listing an unquoted company overseas does not in itself make the stock liquid. I am a strong supporter of internationally open markets. But investors have a right to choose the jurisdiction in which they invest and for it to be maintained,” Mr Bailey writes in the Financial Times.

“It is not sensible to provide for daily dealing and redemption in open-ended funds that hold a large exposure to illiquid assets, including those that while listed are not regularly traded.”

His comments suggest regulatory discomfort with a manoeuvre Mr Woodford deployed to avoid breaching UCITS rules that cap at 10 per cent the amount of unlisted stock a fund can hold. Mr Woodford listed assets in which he had sizeable stakes on the Guernsey stock exchange but they rarely traded. www.businessday.ng

Neil Woodford has been forced to gate his dwindling Equity Income fund © Shaun Curry

United Tech deal with Raytheon to create aerospace powerhouse

Concerns about scale of merged entity behind critical supply of military equipment

James Fontanella-Khan, Sylvia Pfeifer and Patti Waldmeir

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nited Technologies and Raytheon were on Sunday putting the finishing touches to an all-share merger that will create a new aerospace and defence giant and challenge the industry’s longheld pecking order.

Under the terms of the deal, which is expected to be announced on Monday, UTC will merge its aerospace business with Raytheon to form a $116bn powerhouse.

It would be a critical supplier of military equipment and rank as the second-largest defence contractor by revenue, after Lockheed Martin but ahead of Boeing.

The deal is expected to be structured as a merger of equals and would not affect UTC’s previously announced plan to spin off its Otis elevator and Carrier building-systems businesses into separate units.

Under the merger plan, UTC chairman and chief executive Greg Hayes is expected to lead the company with Raytheon head Tom Kennedy serving as chairman, said a person briefed on the matter.

If agreed, a deal will provide Raytheon and UTC with scale and diversification across defence and commercial aerospace and could help the combined group weather any slowdowns. Analysts have warned that, after an unprec-

edented boom in commercial aviation over the past decade, weaker growth could slow production.

Patriot-missile maker Raytheon, which has suffered a 10 per cent fall in its share price over the past year, has a market value of $52bn and net debt of about $4bn. Shares in UTC have risen 3.4 per cent in past year, giving it a market value of $114bn including the units of its business that will not be part of the tie-up with Raytheon. By contrast, it has net debt of $44bn. T A deal will combine Raytheon’s operations in missile defence and precision weapons with those of UTC’s Collins Aerospace, a maker of cockpit avionics and the Pratt & Whitney (P&W) aero-engines division. P&W has long been the lead engine supplier to the Pentagon — it powers the F-35 fighter jet among other military aircraft — and also makes the first-of-a-kind geared turbofan jet engine that powers the Airbus A320neo. Together, the companies employ about 180,000 people globally.

The Pentagon has previously indicated it would not look kindly on mergers between its five “prime” defence contractors but given the lack of overlap the deal may not face much regulatory opposition.

Analysts, however, greeted the potential merger with caution, noting that UTC only last November closed its $30bn acquisition of avionics specialist Rockwell Collins, a

deal that was already driven with the aim of gaining greater leverage against aircraft manufacturers which have tried to push down costs among suppliers.

“This creates the broadest aerospace and defence supplier possible.

There’s no overlap and it gives them enormous critical mass but . . . was additional critical mass really needed after the Rockwell Collins deal?” said Richard Aboulafia, analyst at the Teal Group.

“It gives them counter cyclicality, it gets them broader defence exposure, but I’m a little concerned about how you execute on this merger.

United Technologies already had a lot of work to do before this. They haven’t even divested the elevators and air conditioners yet and even absorbing all their different aerospace assets was a work in progress, and now this,” he added.

For Boeing, which has been focused on resolving the crisis surrounding the 737 Max after two deadly crashes of the aircraft model, the deal comes at a tricky time.

“One of Boeing’s key objectives is to press suppliers on cost so creating a monster supplier in both civil and military presents challenges for Boeing,” said Mr Aboulafia.

Nick Cunningham, analyst at Agency Partners, described it as “an odd combination in some ways” but said the rationale would likely be “risk diversification as well as overall scale”.

Swedish buyout group talks to investors about IPO Javier Espinoza

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ne of the largest buyout groups in Europe, EQT, is talking for the first time to investors for a potential initial public offering in a rare move in private equity.

It is the first big, well-known buyout company to go public in a long while as the Swedish company with €40bn of assets under management “leans towards a listing” and reviews options for growth, say people with knowledge of the situation.

A listing would take place in Stockholm and would be formally

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announced by the end of September with the view to list either November or December this year, these people said.

Other people involved in the process warned the timing could slip and the transaction was not guaranteed.

A move towards a listing comes after EQT appointed banks last year to explore options for growth for the 25-year-old company.

EQT’s chief executive Christian Sinding refused to confirm a potential listing, saying a sale of a strategic stake is still on the table and no formal decision has @Businessdayng

been taken. “[Talking to potential investors] is a part of evaluating whether we are going to go public or do it in the private market,” he said.

EQT has been talking to investors such as Dyal Capital, Goldman Sachs’ Petershill unit and others about a possible sale of a strategic stake, according to other people familiar with the matter.

However, Mr Sinding said if a listing were to take place it would come at the right time ahead of a looming bear market next year. He said an IPO would give EQT “more power and more confidence” in the event of a freezing of debt markets.

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ANALYSIS FT Saudi business feels ‘pain’ of the crown prince’s reforms Mohammed bin Salman’s plan was predicated on co-opting the private sector, but the project has made life difficult Andrew England and Ahmed Al Omran

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mong a network of alleyways and cobbled streets in Jeddah’s old town more than 20 stores are firmly shuttered, “for rent” signs plastered on large wooden doors. Traders in adjacent shops, selling everything from abayas to mattresses, Chinese watches, perfumes and spices, lament plummeting sales, the exodus of more than 1.7m foreigners and rising costs driven by government policies.

Across town, a Saudi lawyer echoes the pessimistic tones — their office has been involved in the closure of more than 50 businesses over the past 18 months. “It’s mainly cash, it’s not the viability of the business, it’s [a shortage of revenue],” says the lawyer, who like

These conflicting moods lie at the heart of one of Prince Mohammed’s biggest tests: can the de facto leader of the kingdom secure the buy-in of a bruised private sector to help reboot the economy and generate the jobs needed to reduce rampant youth unemployment?

From the outset, the 33-year-old’s plans emphasised the role of the private sector: Vision 2030’s targets included raising its contribution to gross domestic product from 40 per cent to 65 per cent. The government also set the goal of creating 450,000 non-government jobs by 2020, with the aim of reducing Saudi unemployment, currently 12.5 per cent, to 9 per cent next year.

“None of this works without the private sector,” says one western executive.

It is Saudi companies that have

Several companies in which Neil Woodford invests have also been targeted by hedge funds (FT montage, Richard Cannon)

many people interviewed asks not to be named for fear of falling foul of the regime. “[Closures have] gone up over the past year.”

Yet in a sand-blown industrial park on the other side of the Saudi Arabian city — where camel and sheep markets meet modern manufacturing — Sami al-Safran, chief executive of Mepco, one of the region’s biggest paper producers, is unwaveringly upbeat.

Like many Saudi companies, it has endured five years of lacklustre growth and government austerity measures. Mepco and its recycling subsidiary have laid off scores of staff to “mitigate the effect of the expatriate levies” and adjust to the shifting environment. But Mr Safran is looking at expanding its capacity as he weighs the impact of Crown Prince Mohammed bin Salman’s reforms that include the goal of increasing waste recycling, which should benefit the company.

“I see no direction but upwards,” he says. “There will be issues along the way, but this is the new reality. Change is coming and you have to be a part of it, it’s not an option any more.”

Such competing narratives have become normal in a nation experiencing dramatic change — steamrollered through — since Prince Mohammed launched his “Vision 2030” modernisation plan. Three years on, the country is still in flux and while some Saudis speak with hope and optimism, others whisper anxiously about their concerns — heightened by the grisly killing of Saudi writer Jamal Khashoggi last October.

borne the brunt of Prince Mohammed’s sweeping changes. Massive cuts in energy subsidies, as well as the introduction of VAT, have hit household spending. After the 2014 oil price slump, tens of billions of dollars of government contracts went unpaid. Large increases in tariffs on foreign workers — who filled about 90 per cent of private sector jobs — and their dependants sent costs soaring and profits plunging, triggering an expatriate exodus. The fall in consumer demand has led to deflation.

“There are about 7,000 industrial firms in Saudi Arabia and many of them are losing money or barely making money,” says a foreign executive. Some are still reeling from Prince Mohammed’s ostensible anticorruption drive, which saw more than 300 princes, businessmen and former state employees incarcerated at the Ritz-Carlton hotel in Riyadh in late 2017.

The result is that many in the private sector sat on their cash or looked offshore. Meanwhile, the newly empowered Public Investment Fund went in search of foreign deals and partners, while announcing projects, worth hundreds of billions of dollars at home, and the establishment of new companies.

It seemed that Prince Mohammed was bent on developing a new private sector using state tools, notably the PIF, and riding roughshod over traditional companies he viewed with disdain for having got rich on the back of state contracts and cheap foreign labour, people familiar with the royal court say. www.businessday.ng

A shipping container in paradise On Cosmoledo — a remote, uninhabited coral atoll in the Seychelles — a pioneering eco-camp is welcoming well-heeled castaways Teresa Levonian Cole

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o put the remoteness of Cosmoledo into perspective, consider our journey to reach it. After a 10-hour flight from London to Mahé, the largest island of the Seychelles and jumping off point for almost all its resorts, we still had more than 1,000km to go. An overnight stay, then two further domestic flights — southwest, to the islands of Alphonse then Astove — then a two-hour boat journey, racing over waters of transparent blue, turquoise and jade before, finally, the white and green of Cosmoledo began to coalesce on the horizon. In today’s small, connected world, you don’t often get a sense of distance such as this.

Cosmoledo Eco Camp, which opened late last year, is a new venture from Blue Safari Seychelles, a company known for its fly-fishing trips to Alphonse and Astove.

Guests there stay in lavish lodges or villas, but the new, ultra-remote operation offers accommodation in what the company website calls “Eco Pods” and which are, unmistakably, shipping containers.

There are eight of them in all, each sleeping two and costing $1,900 per night ($1,400 for single travellers), not including travel. They are, in fairness, no ordinary containers — cleverly designed with wood flooring, framed maps, good lighting, excellent bathrooms, aircon and comfortable twin beds. A wall of retractable glass opens on to wooden decking and the beach, alive with horned ghost crabs. Crucially, they can be removed without leaving a trace on the pristine environment.

I could just make out the roof of my pod, glinting in the sun, as we approached by boat. We were met by a welcoming committee who offered drinks and led us to a giant African safari tent decorated with sofas, tree-trunk side-tables, and fabulous fishy driftwood sculptures. This, for the next few days, would serve as sitting room, bar and dining room.

Cosmoledo is a raised coral atoll, one of the largest in the Seychelles, with some 20 islands, islets and cays (some of which you can walk between at low tide) encircling a lagoon eight metres deep and about 16km wide. The camp is on Wizard Island, named not after any local Merlin but, more prosaically, after a ship of Captain Fairfax Moresby, who explored the area in 1822. It is, nevertheless, an enchanted isle: a place so inaccessible, it is rarely disturbed by visiting vessels. Its reefs teem with

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kaleidoscopic corals and tropical fish, its deep waters are a stage for balletic dolphins, its land a haven for thousands of nesting boobies, frigates, terns, noddies and tropic birds.

A longtime devotee of deepsea fishing, I was introduced, on the lagoon’s extensive sand flats, to saltwater fly fishing — starting, you could say, at the very top of the game. A morning hurtled past with my South African guide, Dean Scott, who shared the secrets of casting. We stood, alone, kneedeep in translucent, consomméwarm waters, the sun beating down, grateful for the whisper of a breeze.

I learnt to scout for sting rays just beneath the sand, and to scan for fish following in their wake. I caught a beautiful bluefin trevally, which fought valiantly before allowing himself to be photographed in my arms (everything caught here is released, with the exception of the fish caught for food out beyond the reef). And although the “big five” of this sport — milkfish, bonefish, permit, triggerfish and giant trevally — remained elusive that day, I became a convert to this wonderfully contemplative pursuit.

The afternoon’s deep-sea fishing, yielding wahoo, yellowfin tuna, rainbow runner and barracuda, felt frenetic in comparison. They reappeared a few hours later for dinner — sashimi’d, grilled, pan-fried, and served with mountains of colourfully exotic salads, to be followed by “reconstructed lemon meringue semi-freddo”. Camp cooks Robert and Robynne Colepeper could give the best Parisian chefs a run for their money.

Blue Safari is not the first to set up camp here. Fishermen and whalers stopped by in the 19th century, and there were later, small-scale settlements designed to exploit the mangrove bark, the guano, the fish and the turtles.

But by 1992, the atoll had been abandoned.

Today’s visitors live in bathing suits by day and shorts by night, with sand underfoot at all times.

Therein lies the joy: existing within a flawless environment, surrounded by a healthy ocean that ensures spectacular dives. You quickly adapt to the rhythm of nature. Exhausted by sun, fresh air and the unwonted lack of stress, it’s early to bed, and up with the larks — or, in this case, the sooty terns, that seem to burn the candle at both ends.

I rose at 4.30 one morning to go in search of nesting turtles, hawksbills on one side of the island, green turtles on the other. The moon was still bright, the only sounds those of the dawn chorus and the waves @Businessdayng

lapping against the shore. As the sun rose, the sky assumed psychedelic hues — swirls of yellows, pinks, oranges, lilacs, reds. I felt like an interloper at some mystical rite of spring.

There is, of course, something perverse about the concept of remote “eco luxury”. Apart from subsistence fishing, and fruit and vegetables — 60 per cent of which are supplied by the organic garden on Alphonse — most food (and wine) comes from South Africa, transported via Mahé along with guests, on planes and boat. Larger freight, including the Eco Pods and all fuel, is delivered by barge, twice a year. The carbon footprint of such logistics, as well as the long-haul flights to get here, is significant.

“We don’t get involved anywhere unless we feel we can contribute something positive,” says Keith Rose-Innes, the managing director and co-owner of Blue Safari. “Cosmoledo is one of the last uninhabited atolls that need protection and we provide that protection, maintenance and conservation. It’s about sustainability. To our minds, we offset the carbon footprint by monitoring the area, and creating a year-round preserve.”

The “protection” he refers to is from illegal fishing and poaching of turtles, which had been rife. The camp is open only from November to April; for the rest of the year the Islands Conservation Society is offered accommodation to monitor and carry out research on bird and marine life. The fishing is limited to just 10 rods at any time while only sustainable, fast-maturing deepwater fish are served in camp.

Guests also pay a $25 daily “conservation levy” for environmental programmes.

Adrian Skerrett, founding chairman of ICS, takes a realistic view, praising Blue Safari for developing a sustainable business model. “We live in a world where money matters,” he says. “It’s no use screaming that we must save wildernesses such as Cosmoledo, unless it makes financial sense”.

The strict environmental stewardship is evident as soon as you don a snorkel or scuba tank and drop beneath the waves. I will not soon forget swimming below a giant barracuda or gliding beside a graceful hawksbill turtle. For some divers, the prize is the chance to explore parts of the reef that have never seen humans before. Guests can even snorkel alongside sailfish, something the camp owners claim is unique here, thanks to an elaborate system of teasing them up from the depths with hookless lures.

BD Money

Monday 10 June 2019

BUSINESS DAY

investing

FIXED INCOME

Cover Story

EQUITY

Why reinvesting your dividend pays-off in the long run

N1.36trn inflow to hit money market in June

These are the happiest, worst states to live in Nigeria

It’s almost half-year, these 10 NSE stocks have gained the most in 2019

Nigeria’s money market will be awash with liquidity this month of June as a total inflow of about N1.36 trillion is expected to hit the market.

Happiness is free, but economists believe it comes with the availability of jobs to earn a living and price stability which allows goods and services remain affordable.

As a shareholder, when you own a stock that pays dividend, you have two alternatives, either to take the cash or reinvest it to buy additional shares of that stock.

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Investing in stocks can be a rollercoaster experience. Hope, euphoria, dismay, pessimism are feelings Nigerian stock investors can relate with as the value of their portfolio has risen and fallen with ...

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Monday 10 June 2019

BUSINESS DAY

Investing

Why reinvesting your dividend pays-off in the long run Israel Odubola

A

s a shareholder, when you own a stock that pays dividend, you have two alternatives, either to take the cash or reinvest it to buy additional shares of that stock.

Having the cash on hand is not a bad idea. However, reinvesting it serves you better in the long-run.

Public-listed companies reward owners with dividends for their investment.

Dividend is the distribution of reward from a portion of a company’s earnings to shareholders, and is one way investors earn a return from investing in stock.

Reinvesting your dividends mean you are buying additional shares of the company’s stock with your cash dividend, a strategy helps grow your investment income overtime.

By purchasing new shares of a stock with cash dividends, you can grow your investment at a much quicker rate than if you pocket your dividend and depend wholly on capital gain to generate wealth.

While investing in dividend-bearing securities is a good way to earn steady returns, reinvesting it pays-off than taking the cash, particularly for long-term investors The following stocks show how your investment appreciates by reinvesting in stocks with sound dividend track record.

Nigeria’s top lender by assets has been consistent in delivering dividends to shareholders. The tier-1 bank paid N1.77 per share on March 23 2017, and traded last at N13.80 the same day.

Thus, an investor with 500, 000 units is entitled to a cash dividend worth N885, 000. Reinvesting this sum, gives him an additional 64, 130 units, bringing his total holdings to 564, 130 units.

With 564, 130 units, he is entitled to N1, 382, 118.5 cash dividend given that the lender paid N2.45 on each shares on April 13, 2018.

Reinvesting this would elevate his stake by 52, 955 units to 617, 085 units as the stock traded last at N26.10 that day.

The shareholders of Zenith Bank approved N2.50 dividend at the bank’s 2018 Annual General Meeting (AGM)

held March 18, 2019.

This implies that if our hypothetical investor, with 617, 085 units of Zenith’s shares will be paid N1, 542, 712.50, and using this sum to purchase additional shares elevate his holdings by 70, 443 units to 687, 528 units as the shares traded last at N21.90 that day.

Within three years, his holdings surged 38.5 percent to 687, 528 units from 500, 000 units.

“

Nigeria’s most-capitalized firm, Dangote Cement, has been consistent in delivering returns to shareholders.

Interestingly, dividend declared by the cement maker has trended upwards for four straight years to 2018.

With 500, 000 units in Dangote Cement, you are entitled to N4 million cash dividend as the company paid N8 on each unit held on April 21, 2016, and reinvesting this sum increases his holdings

With 500, 000 units in Dangote Cement, you are entitled to N4 million cash dividend as the company paid N8 on each unit held on April 21, 2016, and reinvesting this sum increases his holdings

by N24, 845 units given that the company traded last at N161 at day

by N24, 845 units given that the company traded last at N161 at day.

The cement maker paid N8.5 on each share on May 26, 2017, and this investor with N524, 845 units will get cash dividends worth N4, 461,183 and using this money to buy additional shares will elevate his stake by 26, 745 units to 551, 590 units as the stock traded N166.80 that day.

Holding 551, 590 units entitle this investor to N5, 791, 695 cash dividends, reinvesting this sum get him 25, 149 more units, to bring his total holdings to N576, 739 units.

Now imagine what his investment will look like when the cement maker will pay N16.50 on each share at its 2018’s AGM coming up June 17, 2019.

It is noteworthy that this strategy works in a company’s stock that delivers dividends consistently to shareholders.

This underscores the importance of assessing the profit-generating capacity of a company before reinvesting dividends as a company with losses cannot pay dividend.

However, these stocks are only used to explain the benefits related to reinvesting dividend, and not by any means a form of recommendation.

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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Fixed Income N1.36trn inflow to hit money market in June HOPE MOSES-ASHIKE

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igeria’s money market will be awash with liquidity this month of June as a total inflow of about N1.36 trillion is expected to hit the market.

The expected inflows will come from the various maturing government securities and Federal Accounts Allocation Committee (FAAC) in June 2019.

However, a total outflow of approximately N753 billion is estimated from the various sources, leading to a net inflow of about N607 billion.

“The market is expected to be liquid in the month of June 2019; this may necessitate the issuance of Open Market Operation (OMO) to mop-up the liquidity in the system”, said Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited.

On Thursday, the Central Bank of Nigeria (CBN) mopped up a total of N170 billion from the banking system through its OMO instrument.

The results of the OMO auction show that the short and medium term instruments were undersubscribed while the long term tenor was oversubscribed.

A breakdown of the OMO auction result revealed that N20 billion was offered for 98 days to mature on September 12, 2019. The offer recorded total (under) subscription of N0.071 billion at 11.4 percent stop rates.

The N30 billion offered for 175 day tenor recorded a total of N2.13 billion subscription and sales at a bid range and stop rate of 11.63 percent. The offer will mature on November 28, 2019 was undersubscribed.

For the long term instrument, the CBN offered a total of N120 billion for 364 day tenor, which was oversubscribed by N155.78 billion at the stop rate of 12.48 percent. The offer which matures in June 4, 2020 was earlier bid at a bid range of between 12.42 and 12.50 percent.

Ayodeji Ebo, managing director, Afrinvest Securities Limited told Busi-

nessDay that under subscription of the short and medium term tenor instrument was as a result of the attractiveness of rates in the secondary market.

He explained that the long term instrument was more attractive than the last primary market auction. The analysts at Afrinvest had earlier advice investors to take position in the expected OMO offering and stay alert for attractive medium to long-term bills available in the secondary market.

Overnight interbank rate which is the rate at which banks borrow and lend short-term money to each other, on Thursday dropped to 9.21 percent from 10.21 percent on Monday June 3, 2019. Similarly, the Open Buy Back (OBB) closed at 8.29 percent, representing 1.00 percentage point compared to 9.29 percent it stood on Monday.

FSDH advice investors to continue to invest in fixed income securities with good credit rating, and that companies should consider interest www.businessday.ng

‘

A slowdown in the global economy may reduce demand for crude oil and lower the crude oil price.

These developments may have negative effects on Nigeria’s fiscal position, according to FSDH rate swap to manage the risks on their loans.

Nigeria’s external reserves continued its upward trend in May 2019, rising to hit US$45.12 billion as at the end of May. According to the CBN, the external reserves position is enough to cover over 13 months of imports.

There was a further drop in capi-

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tal importation via the Investors’ and Exporters’ Foreign Exchange Window (I&E window) in May 2019 following the steep decrease in April 2019.

The total capital importation through the Investors and I&E window in May 2019 stood at US$2.10 billion, the lowest figure recorded since October 2018.

The crude oil price rallied further to hit a high of US$77.06/b in May 2019.

Sanctions on Iran and Venezuela and the production cut by the Organization of the Petroleum Exporting Countries (OPEC) continue to drive the crude oil price.

However, there are growing concerns about the negative impact of the U.S and China trade disputes on global economy and demand for crude oil.

A slowdown in the global economy may reduce demand for crude oil and lower the crude oil price. These developments may have negative effects on Nigeria’s fiscal position, according to FSDH.

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Monday 10 June 2019

BUSINESS DAY

Cover Story These are the happiest, worst states to live in Nigeria SEGUN ADAMS & ISRAEL ODUBOLA

H

appiness is free, but economists believe it comes with the availability of jobs to earn a living and price stability which allows goods and services remain affordable.

The misery index is an economic measure invented by economist Art Okun in the 1960s to measure how content people are with their lives.

The logic is that “misery tends to flow from high inflation, steep borrowing costs and unemployment,” Steve Hankes, a Professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute notes in his report: Hanke’s Annual Misery Index 2018.

In this write-up, BusinessDay provides a simple misery index (based on the summation of inflation in April 2019 and latest data on unemployment) to rank Nigerian States and show where happiness is (or really isn’t) -based on computations.

Five happiest states Osun (20.94) Osun is Nigeria’s happiest (or least miserable) place on account of its latest unemployment and latest inflation figures.

Osun is an inland state in south-western Nigeria. Its capital is Osogbo. The state is the cradle of Yoruba civilization and home to several of Nigeria’s most famous landmarks.

According to the National Bureau of Statistics, Osun State currently has the least unemployment rate (10.07 percent), bringing its misery index to 20.94.

However, the state has internally generated revenue per capita of N1, 378 per person according to BudgIT, and the National Human Development Report put its HDI at 0.512, 13th of 36 states.

Oyo (21.58) Oyo is Nigeria’s 14th-largest state by land area. It is an inland state in southwestern part of the country, with its capital at Ibadan, which is the biggest city in West Africa.

The state ranks as Nigeria’s secondhappiest place on the account of its low unemployment rate (10.14%), the secondleast in the country. Inflation rate in Oyo in April stood at 11.24%, to bring its misery index to 21.58.

The state however, has a HDI figure of 0.440, to take the 22nd spot in human de-

velopment ranking.

Katsina (25.49) Katsina is Nigeria’s fourth most populous state, and home to President Muhammadu Buhari.

The North-western state ranks third in misery ranking given its low inflation and unemployment figures at 11.16% and 14.33% respectively, totalling its misery score to 25.49.

The state debt has been growing at annual rate of 527.13% according to BudgIT’s State of States 2018 report.

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Lagos (26.35) Lagos is Nigeria’s economic and commercial capital, and the fifth biggest economy in Africa.

The city of excellence is the fourth most happiest place in Nigeria to live in on the back of its relatively low unemployment rate of 14.55% even though its inflation figure in April, which stood at 11.8% outstrips the country’s average headline inflation of 11.31%.

The state has the highest IGR in Nigeria accounting for 33 percent of total IGR of

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36 states plus Federal Capital Territory in 2018. The National Bureau of Statistics put Lagos IGR at N382 billion.

Ogun (26.97) Ogun State, the industrial headquarters of Nigeria, is home to major factories including Dangote Cement in Ibese, Lafarge Cement Factory in Ewekoro and Coleman Cables in Sagamu among others.

The Gateway state is the fifth-most happiest place in Nigeria given its misery score of 26.97. Inflation rate is relatively low in the state at 10.87%, below the country’s 11.31%, with unemployment rate at

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16.40%.

Ogun has a HDI score of 0.549, the 7th in Nigeria. The state generated N84 billion in 2018, indicating 7 percent share in total IGR across the federation.

Worst five Akwa Ibom (49.14) Akwa Ibom is located in the coastal southern part of Nigeria. It has an airport and two seaports on the Atlantic Ocean.

The state has the highest misery score of 49.14 as it has the highest unemployment rate figure in Nigeria at 37.72%, and an inflation rate of 11.42%.

Akwa Ibom, which is the largest oil-producing state in Nigeria, churning 5, 004 litre per day, according to BudgIT, had a low of IGR-GDP of 10% in 2017. Latest IGR figure for 2018 is N24 billion.

Rivers (47.31) Rivers State is located in south-southern region of Nigeria, and is the country’s sixth most-populous state, home to refineries and major oil companies.

The state is the second-most miserable in Nigeria with a discomfort score of 47.31 on the heels of high unemployment rate of 36.38% despite having a relatively low inflation figure of 10.72%.

Rivers’ HDI is 0.542, the 8th in the country.

The state is the third-largest recipient of Federal Account Allocation Committee (FAAC) disbursement in Nigeria at N119 billion in 2018.

Kano (44.10) Kano is the commercial nerve centre of Northern Nigeria, and is the second largest city in Nigeria. The North-western state is the third most miserable in the country with a discomfort or misery score of 44.10 It has a high unemployment rate of 31.25%, tangibly above the country’s 23.1% figure, and a high inflation figure of 12.13%.

Bayelsa (42.88) Bayelsa is located in southern Nigeria in the core Niger Delta region between Delta State and Rivers State. The state boasts of one of the largest crude oil and natural deposits in Nigeria. It ranks the fourth most discomfort place in Nigeria with a misery score of 42.88 on the heels of high unemployment figure of 32.56% despite having the one of the least inflation rates in Nigeria.

Borno (42.21) The war-torn North-eastern state is Nigeria’s second largest state by land area. The state is the homeland of the Kanuri people in Nigeria.

Given its misery score of 42.21, the state ranks the fifth most discomfort place in Nigeria. Unemployment stands tall at 31.39% in 2018, and inflation relatively low at 10.82%.

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Equity investors’ value up 45% in 5 years but here’s why you should be worried David Ibidapo

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gainst the need to preserve and grow income through investment in the Nigerian equity market, the upward pressure witnessed on Nigeria’s inflation rate has weighed on the real worth of investors despite rise in nominal investors’ worth in the last five years, BusinessDay calculations have shown.

Investors’ responses and reactions to evolutions around the micro/macro economy space, industry and companies listed on the Nigeria equity market translated into a 45 percent growth in the total market value of investments.

In the last 5 years, total market value of investments on the equity market rose

by N4.03 trillion from N9.3 trillion in Dec 2015 to N13.4 trillion as at the close of trading on Friday.

Taking into consideration the effect of inflation, BusinessDay analyst divided the total market value for the periods by the CPI for the same period and multiplying all by 100.

While we may see the need to celebrate growth in the wealth of investors on the exchange, analysis revealed that investors’ real worth as at the end of trading in April 2019 dipped 26 percent from N5.2 trillion to N3.8 trillion from 2015-2019. This is despite nominal value rising 17 percent to N10.9 trillion as at April 2019 during the www.businessday.ng

period under review.

Result revealed that the real worth of investors on the NSE averaged in the last 5 years N4.57 trillion. The years 2016 and 2018 saw real worth of investors on the equity market decline due to the peculiarities of those years.

Investors’ real worth continued to fall as the nation’s CPI, a measure of inflation rate, sustained an upward trend over the

“

Analysts however reiterate the need for market moving reforms across the economy on the commencement of the Buhari-led administration

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years on a monthly basis.

The month of April 2019 saw investors’ real worth plunge to its lowest level after a whooping N7.09 trillion in value of their investment was eroded due to rising CPI which stood at 283.5 as collated from CPI figures published by the National Bureau of Statistics (NBS).

In the last 5 years, rising consumer price index has eroded investors’ worth to the tone of N31.27 trillion.

According to the NBS report, Nigeria’s inflation rate seized its decline trend in April after inflation rate rose by 0.12 percent point to 11.37 percent against 11.25 percent in March 2019.

Meanwhile the Nigeria All share index (ASI) which measures the performance of the stock market continued its bearish trend driven by investors’ negative sentiments, after excitement over the listing of MTN shares by introduction had fizzled out, hence eroding market value.

With rising CPI, inflation rate and declining ASI, the real worth of investors in the Nigerian equity market is further threatened going forward.

Analysts however reiterate the need for market moving reforms across the economy on the commencement of the Buhari-led administration. This in their view should boost market performance and return value for investors.

Nigeria currently underperforms inflation target benchmark of 9 percent set by the monetary authority, CBN.

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Monday 10 June 2019

BUSINESS DAY

Equity

It’s almost half-year, these 10 NSE stocks have gained the most in 2019 SEGUN ADAMS

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nvesting in stocks can be a rollercoaster experience. Hope, euphoria, dismay, pessimism are feelings Nigerian stock investors can relate with as the value of their portfolio has risen and fallen with the latest economic data, company financial reports, and other determining factors of company performance.

With the much-awaited rally still eluding investors- despite moments of brilliance in the bearish market-it might be a good time to look at the performance of your portfolio and what stocks have impressed year long.

The information provided here is in no way a recommendation to buy, hold or sell.

C&I Leasing Plc (292.7%)* C&I leasing has surged an 292.7 percent so far in the year- thanks to a share reconstruction exercise which was com-

pleted earlier in January 2019.

The company’s management late 2018 initiated the process to consolidate four ordinary shares of 50 kobo each into one ordinary share of 50 kobo each to give C&I more room to raise equity in the future. However, the exercise affected the liquidity of C&I leasing stocks.

Dangote Flour Mills Plc (139.42%) Dangote Flours has gained 139.42 percent from year’s start where it opened at N6.85 per share. The consumer goods firm also has a 1- year return of 54.72 percent based on Friday’s closing price of N16.40 per share.

Late April, Olam offered N130 billion to acquire Dangote Flour Mills, Nigeria’s third-largest miller by market capacity.

Thomas Wyatt Nig. Plc (56.52%) Thomas Wyatt has a year to date return 56.52 percent based on its closing price of 36 kobo on Friday. The penny stock remained flat in the day’s trading.

Shares of Thomas Wyatt are currently 10 percent shy of its 52-week high of 40

“

With the muchawaited rally still eluding investorsdespite moments of brilliance in the bearish market-it might be a good time to look at the performance of your portfolio and what stocks have impressed year long

kobo established on the 22nd of May 2019.

Thomas Wyatt Nigeria PLC manufactures stationery products including calendars, brochures, cards, deposit slips, certificates, envelopes and the likes. The stock also has a 1-year return of 5.88 percent.

MTN Nigeria Plc (51.67%) The listing by introduction of MTNN mid-May rocked the stock market and brought excitement to investors-although the mobile-phone shares eluded many. MTN has gained 51.67 percent since it opened at N90 per share.

MTNN shed -0.33% to close at N 136.50 per share on Friday.

Red Star Express Plc (30.95%) Red Star Express is a courier and package delivery company listed on the Nigerian stock Exchange. Shares of the logistics company have risen30.95 percent in the year, after opening at N 4.2 per share for the year.

Red Star has a year high of N5.50 and a year low of N4.20. The stock traded flat on Friday to close at N 5.50 per share.

Sterling Bank Plc (28.95%) Sterling Bank, mid-tier lender, has www.businessday.ng

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gained 28.95 percent so far in 2019. The commercial bank’s shares gained 2.08 percent on Friday to close at N2.45 per share and bring its 1-year return to 87.20 percent.

Livestock Feeds Plc (28.57%) After opening for the year at 49 kobo, this penny stock has gained 28.57 percent in the run up to July 7 2019.

Livestock Feeds currently trades at 63 kobo, after remaining flat in Friday’s trading session. Its 1-year return is a -27.59 percent return, however.

Livestock Feeds Plc manufactures and markets animal feed products. The Company’s products include poultry, pig, and cattle rations, meat cubes, and pallets.

Caverton Offshore Support Group Plc (25.00%) Caverton , a player in the marine and aviation logistics sectors of the Nigerian oil and gas industry, has gained 25 percent so far in 2019.

Shares of the company fell 6.61 percent on Friday to close at N2.40 per share, same day. Caverton has a year’s return of 13.97 percent.

Union Bank Nigeria Plc (25.00%) Union Bank, a mid-tier commercial bank in Nigeria, opened for the year at N5.6o per share but has rallied 25 percent to N7 per share based on Friday’s closing price. Union Bank remained flat in the day’s trading.

The commercial banking stock has a 1-year return of 25 percent and 7 percent short of its 52-week high of N7.5, information from Bloomberg show.

Japaul Oil And Maritime Services Plc (19.05%) Japaul Oil & Maritime Services has gained 19.05 percent this year. It opened at 21 kobo for 2019.

The company’s shares fell 3.85 percent on Friday to close at 25 kobo per share, with its 1-year return at 13.79 percent.

Japaul Oil & Maritime Services Plc provides marine offshore construction, marine equipment leasing, and oilfield marine support services.

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Data

Federal government eurobon Yields on Eurobonds fell week on week by c.256bps from an average of 7.21 percent when the market closed last week to 7.03 percent as selling interest on sovereign Eurobonds continued from previous week.

Corporate eurobond Yields on corporate Eurobonds rose c.1956bps across all tickers from last week with average yield rising from 6.23 percent last week to 7.45 percent.

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Monday 10 June 2019

BUSINESS DAY

Investing What US Fed rates cut means for your investment in Nigeria OLUWASEGUN OLAKOYENIKAN

I

t is becoming clearer more than ever before that the United States Federal Reserve would most likely cut it monetary policy rate soon as concerns mount over a negative impact of the ongoing trade war on its economy.

Being the world’s largest economy, it is evident that this development would impact both equity and fixed income investments in emerging markets across the globe including Nigeria.

Although the apex bank chairman, Jerome Powell, did not explicitly say the bank will cut interest rate, but as a result of worsening trade tensions between U.S and China, the two world’s largest economies, Powell said the bank is “closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion.”

No doubt, an interest rate cut in the U.S would help salvage its economy and could trigger some investors, who had left markets in emerging and frontier economies for the developed nation’s markets make, a U-turn in search for higher returns on their investments.

Furthermore, the U.S interest rate cut would make carry trade more attractive for foreign investors. The implication of this is that investors can borrow at lower rates in the developed

nation and invest in the emerging markets owing to high yields in their fixed income instruments.

Consequently, there may be increased capital inflows into the Nigerian economy by

Week Ahead Week Ahead(Monday, 10th June – Friday, 14th June, 2019) Week Ahead (Monday, 8th April – Friday, 12th April, 2019) Commodity

Cocoa: Cocoa prices averaged $2,323/mt in the first half of May, 2.84% lower than $2, 391/mt in the corresponding period of April due to lower global demand. Cocoa prices will most likely maintain downward trend and trade within the band of $2,200 -$2,400/mt in near term as Ghana’s cocoa output will likely increase further elevating global supply.

Fixed Income A 364-day Treasury Bill offered for N125 billion by the Central Bank of Nigeria at a stop rate of 11.5% will mature Thursday, June 13.

A 2-year Federal Government Bond with description “13.189 FGNSR 14-Jun-2019” worth N270 million issued with 13.189% coupon, will mature Friday, June14.

Data Release The National Bureau of Statistics to release May 2019 Inflation Report this week. A snapshot of April’s report showed that the consumer price index (CPI) accelerated by 11.37% year-on-year, 0.12 percentage points lower than 11.25% recorded in March. On month-on-month basis, headline index increased by 0.94% in April, which is 0.15% higher than 0.79% recorded in March.

Event BusinessDay 2019 Real Estate Roundtable and Exhibition themed “Scaling up responsible land governance to ease affordable housing delivery” will hold Thursday, June 13 at The Dome, Central Business District, Abuja.

Currency The naira depreciated 0.05% to N360.75/$ on the Investors and Exporters window at Friday’s trading. Friday’s turnover stood at US$330.61 million. Going forward, we expect naira to remain stable across all windows given Nigerian Apex Bank’s regular injection of liquidity in the market. www.businessday.ng

offshore investors to take advantage of investment opportunity therein, a move that could put further moderation in the country’s yields and bolster the Nigerian Stock Exchange (NSE) which slumped 3.18 percent below its level at

the beginning of this year.

However, certain concerns might likely militate against these prospects if not curtailed going forward. Among these concerns are crude oil prices which entered a bear market last week having shed 3.4 percent to close at $51.68 a barrel.

A bear market refers to a situation where prices are constantly falling, reaching more than 20 percent lower from their recent highs, creating a risky investment climate and undermining investor confidence.

Since Nigerian government still depends largely on crude oil earnings for its revenue, investors would likely price in the gloomy crude oil outlook in the short term, thereby waning their sentiment for Nigeria’s securities.

Similarly, the recently downgraded 2019 global growth forecast from 2.9 percent to 2.6 percent on the back of elevated risks caused by trade tensions may not fully support reversal of capital flows back to the emerging markets until an improvement appears in the offing.

In this case, the much-anticipated inflows of investment into equities, which are perceived as risky securities, as well as fixed-income assets, may not be impacted as expected.

While a possibility of US Fed over rate cut may create some impetus for existing but depressed investments in Nigeria, the feasibility of that still hinges strongly on the downside risks on the global economy.

Chart of the week Trade war bites hard on emerging markets as Portfolio inflows plunged 115 percent in May

Capital flows to Emerging Market (EMs) in May 2019 shed a whopping 115 percent on renewed trade tensions between the world’s two biggest economies, United States and China.

According to the Washington-based International Institute of Finance (IIF), EMs suffered a capital outflow of $5.7 billion in the fifth month of the year, compared with inflows worth $32.6 billion and $38 billion in March and April respectively.

Equity outflows reached $14.6 billion in May, sparked by mounting US-China trade spat, making the month the worst for EM equity flows since the June 2013 Taper Tantrum, which saw equity outflows escalate to $22 billion.

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71

Company IN FOCUS

BUSINESS DAY Monday 10 June 2019 www.businessday.ng

Oando plc: Sailing through turbulent storms OLUWASEGUN OLAKOYENIKAN & DAVID IBIDAPO

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ando plc is one of Africa’s largest integrated energy solution providers, operating both in the upstream and downstream sub-sectors of the oil & gas

industry.

Oando was listed on the Nigerian Stock Exchange (NSE) in 1992 and on the Johannesburg Stock Exchange (JSE) in 2005, making it the first African company to have a dual listing, otherwise known as cross border listing.

Oando’s Management Team The Board of directors of Oando is made up of ten (10) individuals from diverse academic and professional backgrounds.

They include HRM Oba M.A Gbadebo as the Chairman; Adewale Tinubu, Group CEO; Omamofe Boyo, Deputy Group CEO; Femi Adeyemo, Group Executive Director (ED); and Muntari Mohammad Zubairu, as Group ED. Other members of the board are Dr. Tanimu Yakubu, an independent non-executive director; Alphonsus Ikeme Osakwe, independent non-executive director; Mobolaji Osunsanya, director; Ademola Akinrele, non-executive director; and Alhaji Bukar Aji, a non-executive director.

This came after the resignation of two of the company’s non-executive directors – Chief Sena Anthony and Mr. Oghogho Akpata – last week from Oando’s Board as disclosed by the energy firm in a notice filed at the NSE on Friday.

A battle with the capital market regulator The lingering travail of Oando Plc with the Securities and Exchange Commission (SEC) commenced in July 2017 when Ansbury Incorporated and Alhaji Dahiru Mangal filed separate petitions to the apex regulatory commission of Nigeria’s capital market over alleged gross abuse of corporate governance and financial mismanagement.

Ansbury Investment Incorporated, which is owned by Nigerian-Italian businessman Gabriele Volpi, holds a 40 percent equity stake in Ocean and Oil Development Partners (OODP) Nigeria Limited. OODP Nigeria Limited has 57.37 percent equity in Oando, making it the majority shareholding company of dual-listed oil firm, according to Oando’s 2018 audited financial statements.

Ansbury owns its holdings in Oando through Ocean and Oil Development Partners, a company incorporated in the British Virgin Islands (BVI) holding 99% stake in OODP Nigeria Limited. OODP BVI is a joint venture between Ansbury and Whitmore Asset Management Limited, owned by Adewale Tinubu and Omamofe Boyo.

Similarly, Alhaji Mangal owns 15.92% of Oando Plc as of December 31, 2018 through his company, Mangal Group.

Preliminary findings by SEC from a review of the petitions, which it revealed in its first general notice to the public, indicate the petitioners claimed there was a breach of the provisions of the Investments & Securities Act 2007, breach of the SEC Code of Corporate Governance for Public Companies, suspected insider dealings, related party transactions not conducted at arm’s length and discrepancies in the shareholding structure of Oando Plc, amongst others.

Despite all these allegations, Oando assured its shareholders and members of the public of its continued co-operation with the SEC in the discharge of its duties as the capital market regulator, promising to avail the commission with all documents requested, clarification and appropriate

rebuttals to the issues raised.

On August 23, 2017, SEC requested Oando to postpone its 40th Annual General Meeting (AGM) to enable the company look into the issues, particularly from Volpi.

But after the oil firm filed a report, which it claimed addressed all the issues raised by the SEC, the commission permitted Oando to go ahead with the AGM as scheduled.

Meanwhile, owing to SEC’s findings and in its quest to regulate the market and protect the investing public, the commission, on October 18, 2017, directed NSE to place trading in the share of Oando on full suspension and technical suspension 48 hours thereafter. While investors could not trade the shares of the company while on full suspension, trading was allowed when Oando was technically suspended, but such transactions did not result in any share price movement.

The directive, according to the apex regulator, was to enable it conduct a forensic audit into the affairs of Oando Plc. It further announced that the forensic exercise would be conducted by a consortium of experts made up of auditors, lawyers, stockbrokers and registrars to ensure independence and transparency.

However, Oando claimed the actions taken by the commission over the matter were illegal, invalid and calculated to prejudice the company’s business.

After six months from when Oando was suspended from the local bourse, SEC directed NSE to lift the technical suspension and allow market determination of the share price, even while the independent forensic audit by Deloitte was ongoing.

After Deloitte & Touche conducted a forensic audit of the activities of Oando Plc, SEC notified the general public of the conclusion of the investigations of oil company.

According to the commission, the findings from the report revealed serious infractions such as false disclosures, market abuses, misstatements in financial statements, internal control failures, and cor-

porate governance lapses stemming from poor board oversight, irregular approval of directors’ remuneration, unjustified disbursements to directors and management of the company, related party transactions not conducted at arm’s length, amongst others.

Consequently, as a measure to address these violations discovered by SEC, the regulator directed the resignation of the affected Board members of Oando Plc, convening of an Extra-Ordinary General Meeting on or before July 1, 2019, appointment of new directors, payment of monetary penalties by the company and affected individuals and directors, refund of improperly disbursed remuneration by the affected Board members to the company, and bar of Tinubu and Boyo from being directors of public companies for a period of five (5) years.

In addition to that, the commission informed the public of the constitution of an Interim Management Team to carry out its directives on the company. The team, according to SEC, would be headed by Mutiu Olaniyi Adio Sunmonu.

In its reaction, Oando Plc said the alleged infractions and penalties are unsubstantiated, ultra vires, invalid and maintained they were calculated to prejudice its business. It added that it was not be given the opportunity to see, review and respond to the forensic audit report which made the company unable to ascertain the findings made in relation to the alleged infractions and defend itself accordingly before the commission.

Owing to this, Tinubu and Boyo approached a Federal High Court in Lagos on Monday, July 3 to obtain an injunction restraining SEC from executing the sanctions.

Investors remain bullish on Oando’s stock Investors holding the shares of Oando received media reports on the petitions filed by Ansbury Incorporated and Alhaji

Dahiru Mangal with mixed reactions when news on the petitions filtered out on July 14, 2017.

While the development left a sour taste in the mouth of equity investors on the NSE, those trading the company’s shares on the JSE were upbeat on the stock, it most likely took a while for shareholders trading at the exchange to absorb the news.

After the close of business at the two Africa’s largest exchanges on July 14, 2017, Oando’s stock, which opened at N8.35, plunged 9.58 percent to close at N7.55.

The bearish performance extended into the second trading day by 9.54 percent to settle at N6.83.

The case was somewhat different on the JSE as the shares rose 4.17 percent to 25 rand. However, the company traded unchanged for 8 straight sessions thereafter.

An analysis of Oando’s share performance since the controversy commenced shows the energy firm lost more than half of its market value on the NSE, having closed at N4 on Friday. The loss is lower on the JSE as the stock only shed 37.5 percent to close at 15 rand last week.

Profits grow, margins shrink In the last five 4 years, Oando plc has recorded steady growth in its bottom line, driven by steady revenue growth within the same period.

The company in the last 5 years recorded growth in its profit after tax (PAT) at an annual average of 69 percent, this came on the back of improvement in crude oil prices after price shock witnessed in 2014 and 2015.

Oando recorded a loss of N145.6 billion in 2014. The firm extended its loss position to 2015 at N49.68 billion, an improvement by 66 percent from the previous year.

Mirroring trend in crude oil prices in the global market, Oando plc exited its loss zone in 2016 by recording a profit after tax of N3.9 billion, a 108 percent improvement from previous year. In 2017, PAT surged 405 percent to N19.77 billion and ultimately hit a 5 year high of N28.79 billion in 2018. However, in 2018, profit growth slowed to 46 percent.

To this end, Oando maintained a profit margin of 4 percent in 2018 after margin improved to 4 percent in 2017 against 1 percent in 2016.

A look into company’s gross profit and operating margin revealed a decline in both margins in 2018. Gross profit margin declined to 14 percent in 2018 against 18 percent in 2017. Meanwhile operating margin declined steeply to 6 percent from 11 percent during period under review.

Remarkably, Shareholder’s equity stood at N277 billion in 2018 as against N43.6 billion in 2014. But growth in the company’s total equity maintained a downward trend since 2017.

Oando keen on remaining profitable April 2019, Adewale Tinubu, group CEO told Reuters in an exclusive interview of the company’s plans to raise fresh capital over the next two years and repay debt used to acquire Conoco Phillips’ Nigerian assets.

It bought Conoco Phillips’ Nigerian assets for $1.5 billion in 2013, but high financing costs coupled with lower oil prices hit profit, leaving it unable to repay its debt.

Being a company largely built on debt and leverage, Tinubu said Oando has paid over 77 percent of the acquisition debt and plans to pay-off the rest in 12 months, which would allow it to resume dividend payments. He said Oando would be left with total debt of $300 million.

Oando’s growth plan is to continue to pursue acquisitions as multinational oil companies’ sell assets; Tinubu during interview with Reuters said.

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