BusinessDay 13 Aug 2018 by BusinessDay

businessday market monitor Commodities

NSE

Bitcoin

Brent Oil

Biggest Gainer

$72.81

MOBIL N176.00

Cocoa

Biggest Loser

DANGCEM 3.53pc N214.00 35,446.47

US $2,118.00

-6.14pc

₦2,309,680.86

FMDQ Close

Everdon Bureau De Change +0.50pc

news you can trust I **MONDAY 13 AUGUST 2018 I vol. 15, no 116 I N300

Buy

Sell

$-N 357.00 360.00 £-N 467.00 475.00 €-N 408.00 416.00

Foreign Exchange

Market Spot ($/N) 3M 0.20 I&E FX Window 362.00 CBN Official Rate 306.00 11.54

0.13 12.99

0.24

10 Y 0.15

20 Y 0.00

13.99

14.47

14.17

Equities down 21% from January peak

igerian stocks are almost unrecognisable from their world-beating rally less than eight months ago. Rising political tensions leading to 2019’s presidential elections and a broader emerging-market sell off took a further toll on stocks Friday, with the index falling 2 percent to 35,446 points, bringing the decline since its 2018 high on January 19 to 21 percent, ef-

0.00 362.68

0.00 363.58

Kachikwu’s marginal field bid seen unlikely as politics clouds outlook DIPO OLADEHINDE

ore than 11 years after the last oil licensing rounds was held in Africa biggest oil producing country, investors’ and industry players hopes of having a marginal field bid rounds scheduled for 2018 may have being dashed as politics and regulatory challenges continues to obstruct growth in the sector. There was a glimmer of hope and anxiety last year, when the Min-

MARKETS

What we have learnt from bank earnings so far

Inside

Government policy will not encourage monopoly, Osinbajo says at LADOL P. 8

0.00 362.23

Continues on page 42

Alstom of France to P. 2 run Lagos Blue Line rail system in 2022

NGUS OCT. NGUS JAN. NGUS JUL. 30, 2019 24, 2019 31, 2018

Nigeria goes from best to worst as stocks enter bear market LOLADE AKINMURELE & OLUWATOSIN DOKUNMU

Currency Futures ($/N)

fgn bonds

Treasury Bills

L-R: Aboubacar Kagbe Touré, chairman, UBA Guinea; Uche Ike, executive director, UBA plc; Amie Sow, regional CEO, UBA West Africa; Tony Elumelu, chairman, UBA; Alpha Condé, president, Republic of Guinea; Lounceny Nabé, Central Bank governor, Republic of Guinea, and Ejiofor Ndubuisi, managing director, UBA Guinea, during UBA’s visit to the President of Guinea.

APC wins by-elections in three states, as R-APC alleges of plans to impeach Saraki on Tuesday James Kwen & Innocent Odoh, Abuja

n what could be a boost to the claim by the All Progressives Congress (APC) that it is still the preferred party for

Nigerians, the party has won by-elections conducted in three different states on Saturday. The by-elections were conducted by the Independent National Electoral Commission (INEC) to

fill vacant seats in the National Assembly due to the death the occupants of the seat.

INEC on Sunday morning de-

Continues on page 42

BALA AUGIE

t’s a mix of good and bad for the seven Banks that have released second quarter (Q2), 2018 results so far. A record drop in impairment on financial assets on the back of gradual improvement in the economy and gains on foreign exchange transactions boosted bank profit, while low interest rates environment undermined interest income. With Access Bank, United

Continues on page 42

2 BUSINESS DAY NEWS Notore chemical losses swell to N3.9bn

C002D5556

Monday 13 August 2018

…as admin expenses, finance costs weigh on results

EMEKA UCHEAGA & MICHEAL ANI

he financial performance of Notore Chemical appears to be deteriorating as company financial results for the nine months ended in June 2018 shows dwindling revenue and deeper losses. The company reported a drop in revenue to N20.53 billion in June this year. Loss after tax increased by 5.4 percent to N3.9 billion in June 2018 which contributed to a 7.7 percent drop in total equity from N50.6 billion to N46.7 billion during the same period. Along with a drop in revenue, cost of sales also declined by around 33.3 percent from N18.6 billion in June 2017 to N12.4 billion June this year. The decline in cost of sales was largely attributable to the 16 percent drop in Staff cost which fell by around N300 million and a huge deduction of N3.9 billion from cost of sales for exceptional items. According to Notore, the exceptional item is in respect of Export Expansion Grant confirmed receivable from the Federal Government of Nigeria on the cumulative export sales made by the Company over the years 2011 -2016. These claims have been verified by the Federal Government and are awaiting settlement via Promissory Notes under the government Promissory Note Payment Programme. Although gross profit expanded this year to N8.1 billion from N7.1 billion last year, operating profit still declined this year to N3.75 billion from N4.06 billion last year. The drop in operating profit was caused by a significant jump of 28 percent in administrative expenses from N3.2

billion to N4.1 billion. The fertilizer company which is operationally profitable still reported deeper losses in its bottom line this year due to the high finance costs. Net finance cost was as high as N7.69 billion in June 2018, leading to a loss before tax of N3.93 billion for Notore Chemical. The company has failed to report a profit before tax since 2013 when it earned N1.69 billion as profit before tax in the 9 months financial statement for 2013. The company is currently immersed in debt with short and long term borrowings rising to the tune of N75.6 billion this year, up from N72.9 billion in June 2017. Both its current and non-current borrowings are financed with only bank borrowings which explain the high finance cost of the company. Short term borrowings account for N53.9 billion out of the N75.6 billion debt load. By refinancing these debts at lower yields through commercial papers, the company may be able to reduce the finance cost it is currently carrying on its books. The company will also need to restructure its short term debt to long term debt to reduce the current liquidity issues in its balance sheet. The company reported negative working capital of –N55.3 billion in June 2018, up from –N51.77 billion at this time last year. But non-current assets exceeded the non-current liabilities by around N102 billion. If the company were to convert a significant chunk of its borrowings to long term debt, it will immediately become liquid and while still remaining solvent.

Bureaucracy, poor budget implementation to dampen growth Hope Moses-Ashike

igeria’s growth outlook is seen lower in coming quarters due to government bureaucracy in procurement and implementation of capital component of the 2018 Appropriation Act. For close to two months after the 2018 budget was signed into law, the capital component is yet to be implemented. Kemi Adeosun, minister of finance has said the ministry will soon begin disbursement of funds for 2018 budget implementation. But analysts are calling for a sense of urgency in 2018 budget implementation, sounding warning on the impact of the delay on the economy. “Government’s contracting and procurement processes are extremely bureaucratic and cumbersome, which often take months to complete,” Taiwo Oyedele, head, tax and regulatory services, PWC, said. Responding to BusinessDay questions, Oyedele said, “I imagine some of the processes for awarding the capital projects only started after the budget was approved hence the delay in implementation. Given the dire need for infrastructure in the country, there should be a sense of urgency to implement capital projects without compromising due process otherwise the lost time would mean lost growth opportunity.” President Muhammadu Buhari, in June signed into law the 2018 budget where the Federal Govern-

ment plans to spend N9.1 trillion for the fiscal year. “The issue of delay in budget implementation especially as it relates to the capital component of the budget will continue to remain a challenge in the country’s government budgeting process until the procurement law is amended to remove the encumbrances which delay the implementation of capital projects,” Uche Uwaleke, professor/ head, banking and finance, department, Nasarawa State University Keffi, said in an emailed response. Uwaleke said while the problem is not usually associated with recurrent spending as government appears to prioritize the payment of salaries and overheads, avoidable delays in capital projects implementation especially in the area of critical infrastructure such as power and roads retard economic growth. Commercial banks risk loan defaults from Contractors who borrow from banks to execute projects in anticipation of refunds that are delayed. The way forward requires amendment of the procurement Act, timely passage of the Appropriation Bill and timely release of funds. A recent analysis by BudgIT shows that approximately 6, 529 new projects valued at N579.08bn was inserted into the 2018 budget by the National Assembly. Out of the 6529 new projects entered into the budget, 90.6 percent or 5918 items have a unit value below N200m. Continues on wwwbusinessday online.com

L-R: Victor Okoronkwo, senior vice president, Aiteo Eastern Exploration and Production Company; Darcy Spady, global president, Society of Petroleum Engineers; Chike Onyejekwe, group managing director, Aiteo Group, and Chikezie Nwosu, chairman, Society of Petroleum Engineers, Nigeria, during the Society of Petroleum Engineers visit to the Aiteo Group head office in Lagos.

Morocco now major aircraft spare parts hub as Nigeria lags IFEOMA OKEKE

igeria, the largest population in Africa with geographic location at the very centre of the continent is still lagging behind in becoming a hub for supplying aircraft parts as Morocco steps into the big shoes and begins sales of aircraft spare parts to African countries. Morocco with a population of 35million people is becoming an aviation industrial zone where 100 Boeing suppliers and contractors now operate from. However, Nigeria has failed to live up to its expectations. BusinessDay’s checks show that Morocco signed an agreement with Boeing to build a new hub for the US aerospace giant that has begun to create thousands of skilled jobs. “This is a very important strategic project as we move into a new aeronautical era in Morocco,” Moulay Hafi Elalamy, Industry Minister said. Morocco which was badly affected by the financial crisis in Europe, its top trade partner, has struggled to contain a ballooning public deficit

as the authorities have strenuously promoted the country as a bridge between Africa and the West, in a bid to encourage foreign investment and trade. “The Moroccan aeronautical industry has seen important growth in recent years. The Boeing industrial zone could create up to 8,700 jobs,” said Elalamy. Last year, Nigeria announced plans to partner manufacturing organisations within and outside the country to establish aircraft assembly plant, however, this never materialised till date. John Ojikutu, secretary general of the Aviation Round Table, ART and chief executive officer of Centurion Security & Safety Consults said Nigeria does not have technology within the country to back up the plans of government to set up assemble plants. “We should also look at the local content in terms of material or man power. Whatever thing we really want to do we must create an environment where people coming to invest from outside the country will trust us. The infrastructure is not there, government policies cannot be relied on,” Ojikutu said.

“We have problems with people we gave licence to establish refineries over 16 years and we are not getting anything from it. Government should be careful with their policies so that it attract foreign investors,” he added. IsaacBalami,President,NationalAssociation ofAircraftPilotsandEngineers (NAAPE)monthsbacktoldBusinessDay that Nigeria can start by fabricating locally and expanding gradually. He mentioned that the advantage of this will be that most of the man power will be done here but will need to bring in experts from abroad. Balami noted that Nigeria should address the issue of customs duty waiver, as incentives to attract technical partners. Tokunbo Fagbemi, the Executive Director, SpringFountain Infrastructure Limited said for investment opportunities to thrive in Nigeria, government will need to provide exemption from certain charges such as customs duties and grant pioneer status, to create a one stop shop for the processing and issuance of all necessary permits and licenses. Continues on wwwbusinessday online.com

Alstom of France to run Lagos Blue Line rail system in 2022 JOSHUA BASSEY

agos State Government and Alstom SA of France have sealed a deal towards the commencement of passengers’ operation of Lagos Rail Mass Transit (LRMT) Blue Line system in 2022, confirming BusinessDay’s story. BusinessDay had exclusively reported on Friday that the state government was signing an agreement with a foreign firm to co-fund the completion of the first phase of the Blue Line rail system and flag off commercial operations in 2022 The agreement with the French firm followed what Abiodun Dabiri, the managing director of Lagos Metropolitan Area Transport Authority (LAMATA), described as a comprehensive review of the rail project. The blue line rail project ought to have commenced passenger operation in 2012 but had been hindered by what Dabiri called “unforeseen third party issues and other challenges.” “The Marina to Mile 2 section

of the project would be ready for passenger operation by 2022,” said Dabiri. The state government had engaged consultants to carry out a technical review and due diligence on the implementation of the project, which substantially had focused on civil works, and they reported back to government that operation of the first phase may only commence in 2022. The project was initiated by Babatunde Fashola, former governor of Lagos State, in 2009, and projected to be delivered in 2012. “Following the report of the consultants engaged by the government, Alstom SA France, experienced international railway systems aggregator and rolling stocks manufacturer, with over 100 years of railway experience covering 60 countries, was engaged to review the report of the consultant. Alstom SA agreed with the submission of the consultant that the first phase of the rail project could only become operational in 2022 based on proposed funding pattern,” said Dabiri, who signed the

agreement on behalf of Lagos after Governor Akinwunmi Ambode’s approval. He said that a consortium of experts engaged by the state government to undertake a technical due diligence on the LRMT Blue Line project (Mile 2 – Marina) developed a roadmap which was accepted by the state government to bring the railway project to passenger operations. The consortium, according to Dabiri, in its final report outlined their findings and proposed a road map to complete the civil infrastructure works and the Operation & Maintenance (O&M) infrastructure that will be needed for the commencement of passenger operation. He stated that based on the final report submitted, “the consortium of Alstom Transport SA France has been engaged for the procurement, engineering, construction, installation of operation & Maintenance (O&M) moveable infrastructure and commissioning of railway systems towards the commencement of passenger operations for LRMT Blue Line project from Marina to Mile 2.” Continues on wwwbusinessday online.com

Monday 13 August 2018

BUSINESS DAY

C002D5556

Monday 13 August 2018

NEWS Government boosts investor’s confidence Deliotte exposes young talent to corporate environment as it removes VAT on LPG

OLUSOLA BELLO

ore investors in Nigeria would now have opportunity to invest in Liquefied Petroleum Gas (LPG) as controversies surrounding the issue of Value Added Tax (VAT) placed on LPG locally produced fromtheNigeriaLiquefiedNatural Gascompany(NLNG)againstimported LPG has been resolved, as theFederalGovernmentremoved the tariff. The VAT imposed on LPG from Nigeria LNG has made the product more costly than those imported from country like Equatorial Guinea. With this effort by the government at enhancing the domestic penetration of the product is now boosted, more consumers may embrace the product. Billy Okoye, executive director, commercial, Petroleum Products Marketing Company (PPMC), who disclosed this to BusinessDay at the sideline during the annual general meeting of the Nigerian Association of LPG marketers in Lagos, said the Nigerian National Petroleum Corporation (NNPC) and the Federal Inland Revenue Service (FIRS) were already aware. He said: “The issue of VAT on LPG from Nigeria LNG has been dealt with. I don’t want to pre-empt the government but I can assure you that the VAT on the product from NLNG is gone and the government would soon make a pronouncement on the

issue soon.” He said his organisation had alwaysbeenattheforefrontofseeing to increase in the supply and stabilise price of the commodity in the country. President of the association has earlier said his group is making every effort to see that every household embrace the product. The Nigerian Association of Liquefied Petroleum Gas Marketers(NALPGAM)hasbeenfighting for the Federal Government to removetheVATonlocallyproduced LPG, cooking gas. Nosa Ogieva-Okunbor, president of the association, while distributing about 500 cylinders free of charge to some consumers in Lagos, said it was imperative to develop effective policies to encourage investors to come into the LPG sector to deepen market penetration, boost the country’s economy and protect the environment. He commended the governmentforsettingupacommitteeto look at the issue of VAT on locally producedLPG,whichhesaidhad made the product out of the reach of consumers. According to Ogieva-Okunbor, the price of 20 metric tons (about 35,000 litres) of the LPG, which was N4 million, has been increased to N4.6 million He said the removal of VAT on the gas supplied to marketers by the NLNG would attract more investors and reduce importation of gas into the country, which is VAT free.

MICHEAL ANI

s part of its corporate social responsibility (CSR), Nigeria’s oldest indigenous accounting firm, Deliotte, weekend concluded its Young Impact Makers (YIM) aimed at tapping into younger talents by exposing them to the corporate world. The programme is targeted at exposing the young to Deloitte’s business and culture, core values and learning interventions, including hands-on blended learning activities, mentoring sessions, on-the-job business management skills training, and social activities to enhance their personal development. According to Anthony Olukoju, chief operating officer for Deliotte, the programme is part of the firm’s CSR in building up the future of millennial in the society. “The YIM programme is another way we are making impact in our society, by giving promising students early exposure and mentorship. We as a firm, our goal is to make impact on our people, our client and our society. It is Deloitte’s way of shaping the future. “Looking at what is happening in our society today, we in Deliotte felt there is a need to reach out to the younger generation and that was why we came up with the programme to bring them together, expose

them to the corporate world, network them with their peers and use the opportunity to promote co-habitation among youths in the country.” The 2018 YIM programme featured best five students each, selected from different regions across the country (Ondo, Anambra, Lagos, Abuja and Kaduna), who were giving a two-week training on Tax, Audit, Consulting, Finance, Information Technology, Financial and risk advisory services. Olukoju noted that the firm would track the performance of the students until they were out from the university, and would be giving an opportunity to start a career in the firm if they come out outstanding. “What we are doing is to impact our society and also see how we can support the younger generation who we see as the leaders of tomorrow.” The firm makes entire funding of the programme and have no plans making money from it but giving back to the society as we want to help the society to train these leaders of tomorrow, help them to appreciate what it takes to be a thorough breed professional, he said. YIM is an intensive programme for high school/college students, designed to expose them. The knowledge and skills gained from the immersion help to propel the students to take the lead in their chosen future careers.

FDC sees inflation moderating to 11% in July CYNTHIA IKWUETOGHU & OGHOGHO EDOSOMWAN

report by FDC estimates that inflation will continue its moderating trend in July, declining by 23 basis points (bps) from 11.23 percent recorded in June 2018 to 11 percent, denoting the 18th consecutive monthly fall to a 29-month low as a result of base year effects. The macroeconomic conditions in 2017 are extensively different from the current state of 2018. Some of the major differences are the availability of foreign exchange and destocking of inventories. “The waning of these base year effects, meaning that the conditions of the two years are becoming similar, is a reason for the projections that inflation will soon begin to increase again. The food and core sub-indices are expected to move in tandem with inflation,” the FDC states in the report. The month-on-month (MoM) inflation, which is more reflective of seasonalities, is expected to decline by 23bps to 2.04 percent in July. This is largely due to the reduction in the prices of some of the commodities in the food basket like yam, cassava (garri) and tomato, as the harvest season has begun. A higher level of volatility has been seen from the trend MoM, peaking mainly during the planting season. According to the FDC, “During the month of July, there were some noticeable price moderating factors, which include relative

improvement in power supply from 3,588MWh/h in June to 3,619MWh/h, decline in the average wholesale diesel prices from N217per litre in June to N207per litre in July.” Also, “reduction in naira liquidity as a result of the delay in Federation Account Allocation Committee (FAAC) disbursement and the CBN’s mopping up exercise, marginal appreciation in the parallel market exchange rate from N362 per dollar at the end of June to N360per dollar.” However, some frightening factors remained the fact that Apapa gridlock could increase inventory carrying costs and demurrage. The sustained moderation in the country’s inflation brings it close to the continent’s average of 10%. Of all the sub-Sahara Africa (SSA) countries, Kenya, Uganda and Zambia have released their inflation numbers for the month of July and recorded an increase by 1.6 percent to 4.35 percent, by 40.9 percent to 3.1 percent, and by 5.4 percent to 7.8 percent, respectively. In June, South Africa and Ghana’s inflation rates trended upwards while Nigeria and Angola (the oil producing states) slowed. All the SSA countries, with the exception of Angola and Kenya, left their monetary policy stance unchanged. The Central Bank of Nigeria has indicated that it could increase interest rates (MPR) in response to higher inflation ahead of the general elections in 2019.

Monday 13 August 2018

BUSINESS DAY

C002D5556

Monday 13 August 2018T

Monday 13 August 2018

C002D5556

BUSINESS DAY

8 BUSINESS DAY NEWS

C002D5556

Monday 13 August 2018

Government policy will not encourage monopoly, Osinbajo says at LADOL ... enlists private sector support KELECHI EWUZIE

cting President Yemi Osinbajo says Federal Government policy will never encourage the practice of monopoly, rather it will open up the business space to drive competition as it push the ease of doing policy in Nigeria. Osinbajo said discouraging monopolistic practice was an important part of encouraging investment, adding that with the right business environment, there would be competition. According to Osinbajo, monopoly can restrict the growth

NSE commends Africa Prudential as it records 48% earnings growth CYNTHIA IKWUETOGHU

fricaPrudentialplc,ashare registration and investor services firm, has been commended by the leadership of the Nigerian Stock Exchange (NSE) for championing laudable initiatives that have contributed significantly in developing the Nigerian Capital Market. While speaking with delegates during the closing gong ceremony held in honour of Africa Prudential on Friday, representing the CEO of the Exchange, Oscar Onyema, chief risk officer, Tunji Kazeem, lauded the company for ground-breaking initiatives over the past years. “The Exchange and Africa Prudential plc have had several years of cordial relationship. We are sure the wisdom and leadership of the company will present further opportunities to collaborate on Capital Market development and other mutually beneficial areas such as sustainability,” he said. The company had earlier announced its unaudited financial statements for the period ended June 30, 2018, showing an impressive turnover growth of 48 percent from N1.47 billion in 2017 to N2.17 billion, and delivering earnings per share of 49 kobo. Profit before tax grew by 20 percent from N0.95 billion in the corresponding period of 2017 to N1.14 billion, while profit after tax grew by 14 percent year-on-year to N0.98 billion. Total assets grew by 13 percent to N24.88 billion, compared with N21.93 billion as of the period ended December 31, 2017. Driven by the need to diversify its business portfolio to achieve long-term sustainability and viability, the company decided to initiate a change of name from Africa Prudential Registrars to Africa Prudential, which it completed in Q1 2018. In line with this business diversification drive, the new Africa Prudential has so far evolved 4 business lines and continues to leverage technology to develop and enhance its revenue. The company sets the pace in its industry, bringing technology into the standard share registration model, revolutionizing primary processes, and driving advocacy for regulatory initiatives within the evolving sector, with intentions to deploy its business solutions to Africa in the nearest future.

of any economy as the struggle between regulators and the monopolist impede both local and foreign investments. Osinbajo, speaking after inspecting facilities at the Lagos Deep Offshore Logistics (LADOL) and the Egina Floating Production Storage and Offloading (FPSO) platform valued at $3.8 billion in Lagos, Friday, observed that developed economies all over the world were private sector driven. He stressed that developed economies of the world were private sector driven and insisted that private sector must recognise that the development of various sectors would remain

critical to sustainable economic growth. “There is no way that government revenue can possibly satisfy the demand or push for economic growth,” he said. It makes sense for companies to invest in Nigeria, he said, stressing that the Federal Government is investing in infrastructure despite earning 60 percent less revenue than the Goodluck Jonathan-led government. “We are investing five times more than the previous government just by stopping checkmating ground corruption,” he said. “This country can only work, if we are able to deal with corruption. Everything we need to grow

the country in here. If people put their personal and financial interests before National interest, we cannot achieve the desired growth that Nigeria deserves,” he said. Appraising the local content achievements of the Egina project executed by LADOL, Total and Samsung Heavy Industry, he said this had proved clearly the clamour for utilisation of local skills. He further said the Buhariled administration had sign two executive orders to state that wherever local content was required, it was used, especially with respect to local skills and capacity.

Ladi Jadesimi, chairman of LADOL, in his address, said the mission and vision of Ladol remain unchanged - to create jobs and make Nigeria an African Hub for fabrication, engineering among other oil and gas services. Jadesimi noted that the Egina FPSO was certainly a big milestone that had taken Ladol a huge step forward on her journey towards achieving her vision and mission. According Jadesimi, “The project is on course to create directly or indirectly new job and attract millions of dollars of addition investment across the country.”

Report indicates that the through LADOL/SHI FPSO project, the industry has been boosted with 5,000 direct jobs and over 50,000 indirect employments by leveraging on the Local Content Act 2010. “This success is only possible largely due to the enabling environment, a level playing field ushered in by this administration of President Muhammadu Buhari and the leadership of managing director of NPA,” he said. On her part, Hadiza Bala Usman, managing director, NPA, said NPA/Ladol partnership had seen 100 percent private indigenous investment in the port industry.

Monday 13 August 2018

BUSINESS DAY

C002D5556

COMMENT

Monday 13 August 2018

comment is free

Send 800word comments to comment@businessdayonline.com

90 [ninety] candles for Dr. J.K. Randle BASHORUN J.K RANDLE Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

• Continued from last week

resident Buhari has continued the very corrupt practice of budget padding and budgeting for things the government knows are not needed. He has not made a single institutional reform to address corruption in Nigeria. His anti-corruption War involves arresting, and harassing suspected corrupt politicians and setting them free, if they agree to return part of the loot or failing to pursue their prosecution, if they join his political party. The result is that Nigeria remains a fantastically corrupt country, where graft, embezzlement, over invoicing, extortions by police and bribery are endemic. 20. The evidence would suggest that President Buhari is abusing his power to advance the sectarian interest of the north and the Fulani race, by aiding the violent ethnic cleansing of mainly Christian Nigerian villages by Fulani terrorists and spending Nigeria’s resources to develop Fulani nations like Niger at the expense of other parts of Nigeria. Recently, he excluded Igbo land from a West-East Rail line, while approving extension of the railway line from Nigeria to Niger. 21. At the moment, Fulanis from

all over Africa are coming to Nigeria to occupy villages cleansed of the indigenous population, who are now internally displaced people. In any other civilised country, the behaviour, attitude and response of President Buhari to Fulani terrorism in Nigeria would be considered absurd, unacceptable and unconscionable. 22. In Nigeria, under Buhari, the army has stood by, while Fulani terrorists committed crimes against humanity and the police has sought to find justification for the terror, like the one offered by the president, during his recent meeting with the Archbishop of Canterbury. When the security agencies have intervened, it is to protect the terrorists by preventing reprisal attacks. 23. The most intriguing part of the Nigerian government response to Fulani herdsmen terrorism is that the police have also stepped up disarming the population at risk, instead of disarming the terrorists. Both the army and police are headed by Muslims from northern Nigeria. 24. I write to you, The Rt. Honourable Theresa May, MP Prime Minister because you occupy a most powerful and important position in Britain and have the ear of the president of Nigeria and therefore, in a position to help find a solution to the Nigerian conundrum before it is too late. Moreover, Nigeria is a creation of the British Empire; therefore, Britain has at least a moral responsibility to those who are paying the blood price of her imperial past. . 25. I appeal to you because I am aware of the nature and potential of this calculated and premeditated injustice by Buhari’s administration

I’m up and against the supposed owners of this nation who want this nation to continue to be the plantation of their political bracket. They have far reaching powers, influence and control than you can ever imagine to sow the seeds of intractable conflict in Nigeria. 26. I hope that, The Rt. Honourable Theresa May, MP Prime Minister of Great Britain and Northern Ireland, will spare a thought for the long suffering Nigerians by lending her support to the call to President Buhari to end the ethnic cleansing of Nigerian villages by his kinsmen, who appear emboldened by his election as president of Nigeria. In addition, I urge the Prime Minister to impress on President MuhammaduBuhari the need to implement policies that will bring cattle rearing amongst Fulanis’ to modern age and standard. 27. I further plead that the First Lord of her majesty’s Treasury will impress on the president of Nigeria the wisdom of listening to the demand to restructure Nigeria to create a true federation with significant devolution of powers to the regions in order to turn Nigerian into a liberal democracy under the rule of law. 28. I believe that Nigeria is a ticking

time bomb, but there is still time to diffuse it. I plead with you, Madam Prime Minister to use your great, esteemed and privileged position to speak truth to power to avoid the implosion of Nigeria. Thank you for doing all in your power, to help the voiceless and helpless victims of this evolving pogrom in Nigeria. I am copying this letter to Her majesty the Queen and head of Commonwealth of Nations. Yours sincerely. Dr. Eke Eke We had hoped to avoid the prying eyes of the police and other security agencies but to our surprise General Muhammadu Buhari GCFR was able to track us down. He insisted on delivering his special “Not Guilty” plea and exculpation: “I’m not interested in amassing wealth, I’ve never been and that is why I don’t own oil wells and foreign accounts etc. This is the very reason that I’m not in collusion with anyone to share or embezzle the wealth of this nation. As a retired Head of State, my pension, savings, farms and other entitlements are sufficient to cater for my family. Remember, I don’t have seven wives and eighty children. My only reason to take up leadership of this nation is to do the most I can, to do the things that others couldn’t sum up the will to do and without same this nation will continue to pour our honey into a basket and always be left with nothing. I may not be the best, I have my shortfalls but my intentions are always sincere and noble. I’m up and against the supposed owners of this nation who want this nation to continue to be the plantation of their political bracket. They

have far reaching powers, influence and control than you can ever imagine. There’s nothing that they cannot do when they reach a decision and the best part is the fact that you will see their smiling faces but unknown to you that their hands are at work against the wellbeing of the nation. You may think that I am the devil but the devil is right there in your midst and shaking hands with you, they can arm-twist anyone and have their way. We wanted to save in the time of abundance but they will not let us. We wanted to repair our refineries for sixteen years but they will not let us. We wanted to enforce beautiful policies to secure this nation’s economy but still they will not let us. Today, we are saving irrespective of what they say or do. We are making our refineries work and diversifying our economy irrespective of what they say or do. We are enforcing policies that keep the hands of monkeys out of our general pot irrespective of what they say or do. The job is not perfect neither is it complete, but we are definitely on it and we will not give up. Nigeria cannot survive with the conscienceless and overbearing influence of these supposed owners of Nigeria, who surreptitiously command every facet of our nation’s socioeconomic and political life. Join me in the rescue of this nation or join anyone who you believe without a doubt that same can stop the owners of Nigeria from destroying this nation. Make no mistakes about this, 2019 is between Nigeria and the supposed owners of Nigeria. The choice is yours.

Send reactions to: comment@businessdayonline.com

The $1 trillion SME

OLAYINKA DADA Olayinka Dada is a Development Consultant, supporting SMEs through Advisory &Training on Access to Finance & Markets. He can be reached on Yinka. dada04@gmail.com

mall &Medium Enterprise in Nigerian is defined as any business concern with less than N100m turnover per annum and has less than 300 employees. The IFC stated that 96% of Nigerian businesses are in this category, compared to US, which has 53% and Europe’s 65%. SMEs in Nigeria contribute 1% of the GDP compared with 40% in Asian countries and 50% in US and Europe. In comparing Nigeria with other emerging markets, Nigeria has shown lesser effort in developing SMEs in areas of access to finance, providing basic technological infrastructure, ensuring adequate

legal &regulatory framework, and building capacity of prospecting and existing small business owners. Recently, Apple Inc. became a USD $1 trillion company by market capitalization, a company that was started in a garage by just 2 people, an SME you would say! When they started the company in that garage, I am sure they had their doubts, just like any SME start-up. For Steve Jobs, the goal of the company was not only to create great products, but to build a company that will influence the world for generations to come, and he surely did. Building a company that will outlast the founders takes tenacity and foresight. Apple succeeded in building itself into a global iconic brand through the understanding of customer’s preferences and continuous innovation. The company started with creating Phone Prank tools for people that want to cut cost on high fees on long distance calls. They later expanded into computer with Apple II. With the world paying attention to the company, Steve Jobs decided to create structure around the business by recruiting John Sculley from Pepsi as CEO. Steve and John Sculley worked together for 2 years before the relationship went sour. Jobs was asked to resign from the company he founded. The next 15 years saw the

fortunes of the company going down, even with the entrance of another CEO, Gil Amelio. At this time, their products were uninspiring. Then the company made a move and bought Steve’s new company, NeXT, the company he started when he left Apple, an enterprise computer company. The second coming of Steve to Apple, after his company, NeXT, was acquired, made way for him to become the CEO of Apple again. This era witnessed the launch of innovative products, preceded by excellent presentations by Steve himself at product launches. These launchings were always a delight to watch. Steve led the company into music, multimedia, retail, tablets industries, being major players in each, with skilled workforce, long range planning and innovative strategies. Apple has not been without its own share of business failures with falling stock prices and forty days away from bankruptcy at some point. It just shows that business challenges are imminent, but can be overcome through strategic thinking. At this point, you will agree with me that Apple Inc. was once an SME that became a $1 trillion company through doggedness, hard work and grit by its founders. Back home to Nigeria; there are surely many lessons to learn from the $1 trillion SME. The first is the creation of a lasting vision for your business. Small businesses

must be sincere and clear about their reason for being in business. People start businesses for different reasons, but like Apple, money was not the sole objective. Apple founders wanted to build a company that will be around for many generations to come and we can see this is coming to reality. Secondly, entrepreneurs need to understand the place of structure as the business is growing. There should be a threshold where you transition from a “one man” business to a “small corporate”. At this point, the founder might get someone to run it, if he/she is not skilled in running such organized entities. For most SMEs in Nigeria, this is the stage at which their business endeavour begins to fail, because founders don’t want to give up ownership. With increase in revenue and other indicators business cannot be run as it used to be at this growth stage. Asides building structures, a growing SME needs to be serious about its current and future markets. Though market research should have been conducted before the business begins, there is need to continually follow developments in the markets because market dynamics change at the speed of light. Apple was able to survive due to its proper understanding of changes in its market. Though the company had challenges at some point on its products, they were able

to swim to shore! On branding, Apple from inception has focused on good aesthetics, ease of product use and an excellent understanding of customer experience. This is what makes Apple an iconic brand, and a company to beat in the market. Nigerian SMEs are plagued with so many issues, namely, access to cheap capital and investors, unavailability of basic infrastructures like road and electricity, multiple taxation and limited knowledge and capacity building initiatives. Existing and aspiring entrepreneurs will have to continue to push and work against these odds. Of recent, development banks like Nexim, Bank of Industries (BOI), Bank of Agriculture and even the CBN, begun the disbursement of some intervention funds though the demand for collateral by these banks remains a major issue. In conclusion, the challenges experienced by SMEs in Nigeria and Africa should not be a deterrent is producing $1 trillion company from the shores of Nigeria and the continent, because these challenges can be an opportunity for social entrepreneurs within and outside the shores of Nigeria to come up with solutions and resolve these issues, that’s what entrepreneurship is all about.

Send reactions to: comment@businessdayonline.com

Monday 13 August 2018

C002D5556

COMMENT

BUSINESS DAY

comment is free

Send 800word comments to comment@businessdayonline.com

An insight into the profile of the Nigerian voter

ANTHONY OSAE-BROWN Osae-Brown is the editor of BusinessDay @osaeB

oliticians are preparing to do battle in 2019 just as they did in 2015. The timeline on the Independent National Electoral Commission (INEC) website shows that the election is just 186 days away. As defections and counter defections create uncertainty over the potential outcome of the 2019 elections, it would be interesting to look back on how Nigerians voted in 2019 especially in the allimportant presidential elections. In the 2019 elections, the total number of valid votes actually stood at 28.6 million. President Muhammadu Buhari, who emerged winner in that election got 15.4 million votes, representing 53.8 percent of total votes cast. Then incumbent President Goodluck Jonathan got 12.9 million votes, representing 45 percent of total votes cast. Buhari and Jonathan therefore got 98.8 percent of the total votes cast on the 2015 presidential elections. All other opposition candidates got less than two percent of

GILBERT ALASA Alasa lives from Lagos

oyalty programs have become a regular staple in the retention strategies of most Nigerian businesses - whether big or small. Yet, the bulk of customers, especially those of a service business, want much more than the momentary appeal of coupon codes and loyalty points. In a world where consumers are bombarded with a flurry of product options at neckbreaking speed, brand loyalty can seem like a camel passing through the eye of a needle. But businesses that differentiate themselves from the competition often stand a better chance of rewriting the rules of the game, eventually grabbing a substantial share of the market. So, apart from offering generic incentives as a way to shore up loyalty, businesses could raise the stakes a few notches higher by offering a critical and sustainable solution to the customer at no extra cost. Today, for instance, discerning businesses are fast hop-

the votes. This may explain why there are so many presidential candidates jostling to get the PDP ticket for the 2019 elections since it represents the best alternative vehicle to the Presidency besides that of the ruling APC. It cannot be ruled out that the different alliances taking shape could upset the control of the two parties over public offices. But if the voting pattern in recent governorship elections is anything to go by, the best path way to public officer still remains the platform either the PDP or the APC. However, a key part of the 2015 elections was the use of card readers which provided some significant insights into the profile of the average Nigerian voter that was difficult to get in previous elections. It should be noted that of the 28.6 million valid votes cast in the 2015 elections, only 23 million voters got accredited with the card reader. Even of this number, only 10.3 million voters were fully accredited. Being fully accredited means that a voters’ card matched with their fingerprints. The card reader could not recognise the fingerprints of 13.4 million voters even though their cards were read by the card reader. The data from the 23 million voters who had some form of accreditation with the card reader provides some interesting insights into the profile of the Nigerian voter. Fishermen and farmers account for the largest chunk of Nigeria’s voting population by occupation. They make up an average of 21 percent of all those who voted in the 2015 presidential elections. They are followed close-

Cumulatively, 63 percent voters are below the age 40 years. This means that the oldest of the people in this age group that voted in the 2015 presidential elections were just eight years when Buhari was military president in 1983. Their knowledge of the Buhari military presidency was therefore largely based on hearsay from their parents and guardians who had a first-hand experience of the Buhari years ly by students who made up the next largest voting bloc accounting for 20 percent of voters in the 2015 elections and then housewives with 18 percent of votes. Cumulatively, the three groups accounted for 59 percent of total votes in the 2015 presidential elections. This basically means that any presidential candidate who really wants to win an election in the country must have the backing of these groups or forget about Aso Rock. Interestingly, except for the student group, these are also the set of people that are least likely to spend time on the internet or have access to newspapers. They are also likely to be the least educated. This

means a presidential candidate cannot rely on the conventional communication means to reach them. The next group with the biggest voting block is the business community which accounted for 13 percent of votes in the 2015 elections. Those who claimed trading as their occupation made up just nine percent of total voters while civil servants, who incidentally consume the largest chunk of the country’s expenditure, made up just seven percent of voters. Artisans made up only four percent while public servants, another group that eats up good chunk of the country’s annual expenditure made up just two percent of voters. ‘Others’ that is unclassified by profession made up six percent of total voters in 2015. An analysis of the age profile of Nigerian voters also provides some interesting revelations. Nigerian voters are predominantly young. The data shows that 21 percent of voters are in the age bracket of 1825 while another 18 percent are in the age bracket of 26-31. This shows that 39 percent of voters in the 2015 presidential elections were below 31 years of age. However, the biggest votes are concentrated in the 32-40 age group where 24 percent of voters fall into. Cumulatively, 63 percent voters are below the age 40 years. This means that the oldest of the people in this age group that voted in the 2015 presidential elections were just eight years when Buhari was military president in 1983. Their knowledge of the Buhari military presidency was therefore largely based on hearsay from

their parents and guardians who had a first-hand experience of the Buhari years. Now that these groups of voters have experienced a Buhari Presidency first hand, it would be interesting to see if they would vote in 2019 the same way that they voted in 2015. Voters are who above 56 years, made up just 13 percent of those that voted in 2019. There is no analysis of how each of this age groups voted in the 2015 elections so it would be difficult to use it forecast how changes in their voting pattern could affect the 2019 presidential elections. A gender analysis of the voters in the 2015 presidential elections show that approximately 56 percent of voters were male while the balance of 44 percent were females. The highest concentration of female voters is found in the three northern states of Kaduna, Kano and Katsina. Each of these states has slightly over 600,000 female voters. Jigawa and Lagos also come a close second with each of the states having slightly over 500,000 female voters. Osun, Ekiti and Anambra are the only states that had more female voters than male voters in the 2015 presidential elections. Kano had the highest number of male voters followed by Lagos. As the race for the 2019 Presidency builds up, presidential hopefuls will have to craft their strategy around how to reach these various group of voters and convince them to vote for them. A one fits all campaign strategy will definitely not work.

Send reactions to: comment@businessdayonline.com

Is free Wi-Fi the new competitive advantage? ping on the free Wi-Fi train, a model that has already influenced about 49% of business and leisure travelers to choose one hotel over another. This shift in brand preference is not peculiar to the hospitality industry alone. In 2015, a joint survey by AirTightNetworks and IHL Group showed that 27.5% of retailers saw a significant spike in repeat purchases and rising loyalty levels due to the deployment of free, in-store Wi-Fi service. Nigeria, despite ranking number one in internet affordability in the 2018 Inclusive Internet Index by The Economic Intelligence Unit (EIU), broadband access remains a luxury for many people and businesses who rely on broadband connectivity to meet both personal and business obligations. Why you should offer free Wi-Fi to customers For businesses in the service segments, especially restaurants, lounges, bars and merchant locations, moving a customer from a fickle fan to a die-hard follower can seem daunting, considering the plenitude of options and competitive offerings that are

always available to the customer. But a clearly articulated retention strategy that zooms the lenses on meeting the consumer’s intrinsic needs can be a game changer. For most consumers, particularly Generation X and Millennials, the availability of a Free Wi-Fi service at a favorite hangout location remains the perfect icing on the cake - one which not only guarantees a sense of satisfaction, but one likely to prompt several comebacks. Executed correctly, as seen in the hundreds of businesses that have embraced free Wi-Fi offering, this incentive remains a sure-fire way to grow footfalls, exceed customers’ expectations and improve retention. Against the age-long notion of what influences buying behavior, customer experience is racing fast to outpace price as the single most essential differentiator in the marketing mix. According to a 2017 study by Gartner Inc, a world’s leading research and advisory firm and member of the S&P 500, customer experience is the new battleground where a brand either fortifies its competitive advantage to stay relevant or become weakened by the realities of the external environment, including changing

customer expectations. In 2014, research by one of the world’s largest Wi-Fi service platforms, Devicescape, showed that 62% of customer-facing businesses recorded a significant growth in foot traffic and higher customer spending, following their introduction of a complimentary Wi-Fi service to the customers. “The survey results show how important the provision of customer-facing Wi-Fi has become for retail businesses. The availability of Wi-Fi is no longer an innovation limited to the large retail chains—small businesses are now offering the same services in their establishments, for both employees and customers. In the near future, small businesses will consider Wi-Fi as fundamental to their success as electricity or running water,” iGR founder and President Iain Gillott said in his reaction to the study. The red Cheetah advantage In March this year, lovers of fast and reliable internet services woke up to the launch of Red Cheetah Free Wi-Fi in Lagos, a digital lifestyle offering from the stable of SWIFT Networks Limit-

ed. The service, which is currently available at over 400 top locations, including Barcelos, Hard Rock Cafe, Tastee Fried Chicken, Sweet sensation, SLOT, 3CHub, amongst others, aims to reach an initial 10,000 locations across Lagos in the short term. Supported by advertising revenue from leading partners and global brands, many Nigerian businesses have found the platform an indispensable tool for attracting new customers and retaining existing ones. The Managing Director and Chief Executive Officer of SWIFT Networks Limited, Mr. Charles Anudu, urged Nigerian businesses to maximize the Free Wi-Fi service as a valuable incentive to drive customer retention and improve the bottom-line. “As a critical enabler of economic growth and access to opportunities, we believe that brands that embrace Red Cheetah will take the early lead in distinguishing themselves and ultimately be the biggest winners in the race for the heart and loyalty of the millennial customer,” he stated.

Send reactions to: comment@businessdayonline.com

BUSINESS DAY

C002D5556

Editorial PUBLISHER/CEO

Frank Aigbogun EDITOR Anthony Osae-Brown DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya

EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure ADVERT MANAGER Adeola Ajewole MANAGER, SYSTEMS & CONTROL Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu HEAD, HUMAN RESOURCES Adeola Obisesan

EDITORIAL ADVISORY BOARD Dick Kramer - Chairman Imo Itsueli Mohammed Hayatudeen Albert Alos Funke Osibodu Afolabi Oladele Dayo Lawuyi Vincent Maduka Maneesh Garg Keith Richards Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Sim Shagaya Mezuo Nwuneli Emeka Emuwa Charles Anudu Tunji Adegbesan Eyo Ekpo

Monday 13 August 2018

Global recognition and the example of the Lagos Business School

midst concerns about quality and access in Nigeria’s educational system, the continued global recognition of the Lagos Business School serves as a source of upliftment and confirmation of the possibilities in our land. Kudos to the Lagos Business School for the many laurels it has earned, including emerging this July 2018 as the only school in Africa to be listed among the top 50 business schools in the world in The Economist magazine’s 2018 EMBA ranking. The Economist ranked the LBS Executive MBA programme as the 48th best in the world out of 65 schools featured in the annual ranking of the world best providers of the Executive MBA programme. The ranking relied on two broad measures of personal development/educational experience and career development. The analysts judged the quality of the EMBA participants, work experience,the number of industry sectors represented, career progression, and faculty. LBS MBA graduates ranked third globally in the percentage increase in earnings post-graduation. For twelve years, LBS has featured in the Financial Times ranking of MBA- awarding institutions. FT ranks it

third best provider of open enrolment executive education in Africa and second for custom education. LBS is also the first and only school in Africa featured in the CEO magazine’s Global MBA rankings. That list recognises the full-time MBA and the Executive MBA programmes of the school as Tier-One. It ranks LBS 70th out of 270 schools and programmes from around the world. The Association to Advance Collegiate Schools of Business (AACSB) and the Association of MBAs (AMBA) accredit the Lagos Business School. LBS is a member of the Association of African Business Schools (AABS), the Global Business School Network (GBSN), and the Principles for Responsible Management Education (PRME). It also has collaborations and exchanges with many schools including IESE Business School – Spain, IESEG School of Management – France, IPADE Business School, Mexico, Nanyang Business School, Singapore, Strathmore Business School – Kenya, the University of Cape Town Graduate School of Business and the University of Stellenbosch Business School, both in South Africa. The trajectory and successes of this institution exemplify best practice in education management, entrepreneurship and sustainable development. Since 1991, LBS has defined high

level management education in Nigeria. It filled a gap. Hitherto companies sent personnel to institutions abroad for short courses or “in-service” training at great cost. It was not a sustainable practice for training large numbers as the economy expanded. It started small, teaching short courses and expanding. The school played a significant role in the restoration of standards from the general decline in the locust years of the military. It provided formal general management training in line with the needs of industry. LBS set out “to develop competent and socially responsible managers to lead sustainable development in Nigeria and Africa at large”. Its growing alumni body agree that it has met this self-assigned goal. The Lagos Business School has lived up to what it teaches. It is a successful entrepreneurial venture, growing its sinews over the last 27 years and establishing best practices in content and delivery of its courses. LBS has deep relationships with the Nigerian business community, developing manpower, carrying out research, consulting and writing case studies of Nigerian businesses that rank with the best in the world. Its fundraising successes are a template for funding higher education. Through adroit project management featuring adherence to plans, transpar-

ency in handling donations, delivering on budgetand timelines, it earned the confidence of donors.Donors eagerly embrace funding of the projects of the school. The School continues to benchmark against the best in the world. The result is its increasing global rating and acceptability. The success of Lagos Business School birthed the Pan Atlantic University that has now added undergraduate courses to its initial postgraduate focus. It also gave rise to the Enterprise Development Centre with a focus on human capacity development with MSMES. There is a high equity to the LBS brand. Its emphasis on business ethics has been a strong identifier that further stands it out. We commend the management and staff of the Lagos Business School on their recent global recognitions. We urge a deepening of their focus on training socially responsible and competent managers that would make a difference in navigating Nigerian businesses through the twin challenges of changing technology and the demand for growing higher capacity for innovation, research and development of competitive capacity in Nigeria. We urge the growing number of public and private sector institutions to emulate the LBS model and its successful practices in various areas.

ENQUIRIES NEWS ROOM 08023165438 Lagos 08169609331 08033160837 Abuja

}

ADVERTISING 01-2799110 08034743892 SUBSCRIPTIONS 01-2799101 07032496069 07054563299 www.businessdayonline.com The Brook, 6 Point Road, GRA, Apapa, Lagos, Nigeria. 01-2799100 LEGAL ADVISERS The Law Union

MISSION STATEMENT To be a diversified provider of superior business, financial and management intelligence across platforms accessible to our customers anywhere in the world.

OUR CORE VALUES

BusinessDay avidly thrives on the mainstay of our core values of being The Fourth Estate, Credible, Independent, Entrepreneurial and Purpose-Driven. • The Fourth Estate: We take pride in being guarantors of liberal economic thought • Credible: We believe in the principle of being objective, fair and fact-based • Independent: Our quest for liberal economic thought means that we are independent of private and public interests. • Entrepreneurial: We constantly search for new opportunities, maintaining the highest ethical standards in all we do • Purpose-Driven: We are committed to assembling a team of highly talented and motivated people that share our vision, while treating them with respect and fairness. www.businessdayonline.com

Monday 13 August 2018

BUSINESS DAY

C002D5556

Monday 13 August 2018 In Association With

The pain of no deal

A windy start

Duque takes charge American sanctions bring more agony to Iran’s dysfunctional economy Iván in Colombia But no one has a plan for what comes next

The new president will be buffeted from

T TOOK two years to negotiate a nuclear deal with Iran—and a few strokes of a pen to undo it. On August 6th President Donald Trump signed an executive order restoring sanctions aimed at Iran’s car industry, its trade in gold and its access to dollars, among other things. It makes good on the president’s promise to withdraw from the deal, signed in 2015, which gave Iran sanctions relief in exchange for limits on its nuclear programme. The sanctions will hurt. Whether they will accomplish anything else is up for debate. Contrary to his campaign promise, Mr Trump cannot unilaterally “tear up” the deal. It has five other signatories: Britain, France, Germany, Russia and China. All say it is working, an assessment backed by the International Atomic Energy Agency, which certifies Iran’s compliance. In an effort to preserve the agreement, the European Union has instructed EU firms not to comply with the sanctions and allowed them to sue in court to recover damages resulting from America’s action. But few think the so-called “blocking” measure will work. Firms are taking seriously Mr Trump’s threat that anyone doing business with Iran will not be allowed to do business with America. Total, a French energy giant, is almost certainly quitting a $2bn deal to develop Iran’s massive South Pars gasfield. Airbus may halt the planned delivery of 100 passenger jets. American firms, such as Boeing, which lost a $20bn contract, are already out of the door. For months the looming sanctions and expected capital flight have

exacerbated a currency crisis in Iran. Last summer a dollar fetched about 38,000 rials on the black market (the official rate has long been out of touch with reality). Since then the rial has lost more than 60% of its value. On July 30th it bottomed out at 119,000 rials to the dollar, a record low. Prices of some staple foods have increased by up to half. Eager for a scapegoat, the president, Hassan Rouhani, sacked the central-bank governor and his deputy who oversaw foreign exchange. Ahmed Araghchi, the deputy, who served for barely a year, is the deputy foreign minister’s nephew. His bumbling tenure was one example of the nepotism that plagues Iran, which ranks near the bottom of Transparency International’s corruption index. Mr Rouhani has tried to make a show of arresting corrupt businessmen and politicians. Dozens of bankers have been jailed for dodgy loans. Persian empires But Iran’s problems run much

deeper than a few dirty officials. Large chunks of the economy are dominated by bloated quasi-state enterprises. Take Astan Quds Razavi, a charitable trust, or bonyad, in the northeastern city of Mashhad. It was founded in the 16th century to maintain the shrine of a revered imam. Today it has more earthly concerns: mines, an oil company, even an insurance firm. By its own estimate, it controls 41% of the land in Mashhad. The bonyads sit on vast wealth, all of it tax-exempt. A single Tehran-based trust is thought to control some $13bn in assets, twice as much as the Vatican’s bank. Every branch of the state has its own economic empire. Beneath Tehran, workers are digging the seventh line of the city’s metro. The lead contractor, Sepasad, is under American sanctions. The US Treasury says it is run by Iran’s Revolutionary Guards Corps (IRGC). It awarded much of the tunnelling to the Hara Company, also allegedly run by the Guards. If these firms need construction materials, they can turn to other IRGC-linked companies that make cement and steel. The state and the bonyads also control 40% of Iran’s private banks, many of them undercapitalised. Mr Rouhani oversold the benefits of the nuclear deal, promising a flood of new investment. Even before Mr Trump took office, foreign firms were skittish about doing business in Iran. It is hard to compete with vertically integrated empires run by clerics or the IRGC. Iranians were already frustrated with the stagnant economy. Now it will get worse—especially in November, when America reimposes sanctions on Iran’s oil industry. Mr

Trump’s predecessor, Barack Obama, did the same, in partnership with allies, and the volume of Iran’s oil exports fell by 58% between 2011 and 2014. Mr Trump says he wants a better deal, one that limits Iran’s ballisticmissile programme and does not expire in a decade. It is hard to see how he will achieve that. Far from working with allies, he scorns them. He has a fanciful goal of bringing Iran’s oil exports, currently 2.5m barrels per day, down to zero. But India is looking for alternative payment methods to keep at least some of its 768,000 barrels per day from Iran flowing. Turkey says it will not comply with the sanctions. And China, which buys a quarter of Iran’s crude, is happy to play spoiler. CNPC, a Chinese state-run energy behemoth, has reportedly offered to pick up Total’s share in the South Pars field. The president has offered to meet Iran’s leaders, perhaps hoping for a reprise of his summit with North Korea’s dictator, Kim Jong Un. Iran is cool to the idea. So the administration has fixed its hopes on the protests roiling the country. Small groups come out almost every day to complain about the economy. “We would like to see a change in the regime’s behaviour, and I think the Iranian people are looking for the same thing,” says an American official. On this, the White House and the IRGC are in rare agreement. The commander of the Guards calls the protests “more serious than threats from abroad”. But, though they are persistent, the protests are also small and leaderless. Iran has no coherent opposition to challenge the regime. At the beginning of the summer, residents of Khorramshahr province found themselves without water. The government arrested protesters, and then dispatched the Guards to install a 90km water pipeline. It was a telling sign. Mr Rouhani had hoped to weaken the IRGC’s grip on both politics and business. He failed. His relatively moderate government will now have to work with the archconservatives. This will not make Iran more amenable to Western interests, nor more responsive to its own people. Mr Trump may get a change in the regime’s behaviour—but not the one he says he wants.

GUST of wind struck the Plaza Bolívar in Bogotá while Iván Duque was sworn in as Colombia’s president on August 7th. During his inauguration speech, delivered on a massive stage thronged with Latin American presidents and other dignitaries, a man struggled to shield him from a light rain with an umbrella. Seeking to banish the bitterness of a polarised election campaign, Mr Duque promised to “govern Colombia with a spirit of construction, never destruction”. That was not the tone used by Ernesto Macías, the president of congress, who introduced Mr

Duque and administered the oath. Mr Macías, a member of Mr Duque’s Democratic Centre party, attacked the former president, Juan Manuel Santos, and vowed to modify the agreement that in 2016 ended a 52-year war with the FARC guerrilla group. The contrast illustrates the main political difficulty that the new president will face: keeping the support of his party, which is militantly opposed to the peace accord, while courting other forces to enact his legislative priorities, including reform of the pension system, making courts more efficient and cutting taxes. The key to controlling Democratic Centre is co-operation with Álvaro Uribe, a former president who has been Mr Duque’s political patron. The new president has appointed favourites of Mr Uribe to lead the ministries of defence, interior and finance. In July Mr Uribe resigned from his seat in the senate after the supreme court called him to testify about allegations that he had bribed witnesses to retract their claim that he is linked to the AUC, a paramilitary group that Continues on page 15

Monday 13 August 2018

C002D5556

BUSINESS DAY

In Association With

Iván Duque takes charge in...

Stuck in the past

Overhaul tax for the 21st century

Continued from page 14

Today’s tax systems are unforgivably cack-handed

F YOU are a high earner in a rich country and you lack a good accountant, you probably spend about half the year working for the state. If you are an average earner, not even an accountant can spare you taxes on your payroll and spending. Most of the fuss about taxation is over how much the government takes and how often it is wasted. Too little is about how taxes are raised. Today’s tax systems are not only marred by the bewildering complexity and loopholes that have always afflicted taxation; they are also outdated. That makes them less efficient, more unfair and more likely to conflict with a government’s priorities. The world needs to remake tax systems so that they are fit for the 21st century. Let me tell you how it will be Jean-Baptiste Colbert, the finance minister of Louis XIV of France, famously compared the art of raising tax to “plucking the goose so as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”. Tax systems vary from one economy to another—Europe imposes value-added taxes, America does not. Yet in most countries three flaws show how the art of plucking has failed. One is missed opportunities. Expensive housing, often the result of a shortage of land, has yielded windfall gains to homeowners in big, global cities. House prices there are 34% higher, on average, than five years ago, freezing young people out of home ownership (see article). Windfall gains should be an obvious source of revenue, yet property taxes have stayed roughly constant at 6% of government revenues in rich countries, the same as before the boom. Another flaw is that tax sometimes works against other priori-

ties. Policymakers in the rich world worry about growing inequality, which is at its highest level in half a century. In the OECD, a group of mostly developed countries, the richest 10% of the population earn, on average, nine times more than the poorest 10%. Yet over this period, most economies (though not America’s) have shifted the composition of labour taxation slightly toward regressive payroll and social-security levies and away from progressive income taxes. Tax systems have also failed to adapt to technological change. The rising importance of intellectual property means that it is almost impossible to pin down where a multinational really makes money. Tech giants like Apple and Amazon stash their intangible capital in havens such as Ireland, and pay too little tax elsewhere. This month it emerged that Amazon’s British subsidiary paid £1.7m ($2.2m) in tax last year, on profits of £72m and revenues of £11.4bn. By one recent

estimate, close to 40% of multinational profits are shifted to low-tax countries each year. The “solutions” to such problems often only exacerbate the daunting complexity of today’s tax code—and, if lobbies have their way, add extra loopholes too. The European Union wants to determine when firms have a “virtual nexus” in a state, and will then allocate profits across countries using a complicated formula. America’s supposedly simplifying recent tax reform included stunningly complex new rules for multinationals. International efforts to co-operate to prevent profit-shifting have made progress. But they are hamstrung by disagreements over how to treat technology firms and competition for investment in a world where capital crosses borders. Fundamental tax reform can boost growth and make societies fairer—whatever the share of GDP a government takes in tax. Fortunately, the principles according to which rich countries can design a good system are clear: taxes should target rents, preserve incentives and be hard to avoid. All countries should tax both property and inheritance more. These taxes are unpopular but mostly efficient. In a world where property ownership brings windfalls that persist across generations, such taxes are desirable. A conservative first step would be to roll back recent cuts to inheritance tax. A more radical approach would be to introduce a land-value tax, the most efficient of all property taxes and one with a long liberal heritage (see Briefing). Economists are sceptical of taxing other forms of capital, for the good reason that it discourages investment. But capital’s share of rich-world GDP has risen by four percentage points since 1975, transferring nearly $2trn of annual global income out of paycheques and into investors’

pockets. Given that competition is declining in many markets, this suggests that businesses are increasingly able to extract rents from the economy. Taxes on capital can target those rents without disturbing incentives so long as they include carve-outs for investment. To stop companies shifting profits, governments should switch their focus from firms to investors. Profits ultimately flow to shareholders as dividends and buy-backs. But few people are likely to emigrate to avoid taxes on their investment income— Apple can move its intellectual property to Ireland, but it cannot put its shareholders there. Corporate tax should be a backstop, to ensure that investors who do not pay taxes themselves, such as foreigners and universities, still make some contribution. Full investment expensing should be standard; deductions for debt interest, which incentivise risky leverage for no good reason, should be scrapped. As the labour market continues to polarise between high earners and everyone else, income taxes should be low or negative for the lowest earners. That means getting rid of regressive payroll taxes which, in North America, could be replaced with underused taxes on consumption. Though these are also regressive, they are much more efficient. One for you, nineteen for me Adam Smith said that taxes should be efficient, certain, convenient and fair. Against that standard, today’s tax policies are unforgivably cack-handed. Politicians rarely consider the purpose and scope of taxation. When they do change tax codes, they clumsily bolt on new levies and snap off old ones, all in a rush for good headlines. Rewriting the codes means winning over sceptical voters and defying rapacious special interests. It is hard work. But the prize is well worth the fight.

disarmed during his presidency. Mr Uribe denies the allegations. He suspended his resignation after his lawyers asked that three supreme-court justices, whom they consider biased, stand aside from the case. But as long as the ex-president’s future is cloudy, Mr Duque’s relations with his party will be unsettled. On matters of war and peace, Mr Duque has signalled that he is prepared to soften the tough line that Mr Uribe favours, but only a bit. In his speech Mr Duque said his government would consider continuing peace talks with the ELN, a guerrilla group that is still fighting, only if it declared a unilateral ceasefire. The ELN is sure to reject this, but Mr Duque’s demand looks like a retreat from his earlier position that the group would have to gather in designated zones before talks could begin. Days after his election on June 17th, congressmen from Democratic Centre called for a referendum on transitional justice, the controversial part of the peace deal under which former guerrillas are to confess their crimes in return for light sentences. The incoming vicepresident, Marta Lucía Ramírez, made clear that the government did not support the plan. On coca, an illegal crop exploited by the ELN and other armed groups, Mr Duque must consider the views of the United States as well as of Mr Uribe. Nikki Haley, the American ambassador to the UN, who attended the inauguration, said President Donald Trump wants Colombia to reduce the area on which coca is grown, which reached a recent high of 209,000 hectares last year. “We have faith in the fact that [Mr Duque is] going to deliver,” she said. The government will step up forced eradication of coca, including by sending drones to spray crops. That is bound to provoke conflict with farmers; last year they paralysed large parts of the country in protests against eradication. A clash over coca would intensify the polarisation Mr Duque is eager to lessen.

BUSINESS DAY

Monday 13 August 2018

C002D5556

In Association With

The president calls it quits

Joseph Kabila says he will not run again in Congo But will he really give up power?

HE Democratic Republic of Congo has never had a peaceful transition of power. Mobutu Sese Seko, the president from 1965 to 1997, fled his jungle palace shortly before it was ransacked by looting soldiers; his successor, Laurent Kabila, was shot by one of his bodyguards. So the country has been on edge as an election, scheduled for December 23rd, draws closer. It is already grappling with an outbreak of Ebola and armed conflicts in ten of its provinces. The big question was whether Joseph Kabila, the unpopular president (pictured), would run again. Mr Kabila inherited the job from his father, Laurent, in 2001. He is accused of corruption, incompetence and human-rights abuses. The constitution required him to step down when his second term ended in 2016, but he stayed on, citing a clause that allowed him to remain president until a new one was elected. He then repeatedly delayed elections and cracked down hard on those who protested. As other candidates registered their names ahead of the August

8th deadline, Mr Kabila waited until the last moment to announce that he would not run again. Instead the coalition that includes his party, the People’s Party for Reconstruction and Democracy (PPRD), will put forward Emmanuel Ramazani Shadary, who is

the PPRD’s permanent secretary. Many see the 57-year-old former interior minister as a potential puppet of Mr Kabila. Mr Shadary’s strongest rival is likely to be Jean-Pierre Bemba, a former vice-president and, before that, a rebel leader. Mr Bemba’s

conviction for war crimes was overturned on June 8th after he had served ten years in prison in The Hague. He had previously been held responsible for an epidemic of murder, rape and pillage committed by fighters under his command. Tens of thousands of

people lined the street from the airport to celebrate Mr Bemba’s return to Congo on August 1st. Mr Kabila was less enthused. Fearing unrest, the police blocked the road to Mr Bemba’s house in Kinshasa, which is close to the president’s residence. Then they dispersed Mr Bemba’s supporters using tear gas and rubber bullets. One man was killed when a police car ran over his head. Mr Bemba narrowly lost to Mr Kabila in an election in 2006. His supporters celebrate the fact that his parents are Congolese, while claiming that Mr Kabila’s mother was Rwandan, which he denies. “Congolais, 100%”, they say. Even while in prison he met with opposition leaders and stayed abreast of Mr Kabila’s actions. “He never lost his self-assurance,” says one visitor. “He used to treat his jailers as if they were his personal bodyguards.” Some liken Mr Bemba, absurdly, to Nelson Mandela: released from prison to save his flailing country from misrule. His opponents want to bar him from running based on a second conviction, which was not overturned, of witness tampering.

Open Future

What an amazing 18th-century feminist would champion today Mary Wollstonecraft would advocate for social equality, universal education and yes, feminism, says Hannah Dawson of King’s College London

he newly minted free and equal men who strode out of the pages of Locke’s Second Treatise of Government into the burgeoning public sphere, and out to the colonies, did so on the backs of the poor, the non-European and women. That women were omitted from “mankind” came as a shock to Mary Wollstonecraft. She had watched the French Revolution with joy, raged at Edmund Burke’s criticism of it, and gamely joined English radicals such as Thomas Paine in their rebuttals of Burke, writing her own Vindication of the Rights of Men (1790). As it became clear, however, that liberté and égalité were tied inextricably to fraternité, she took up her pen again, this time to write the masterpiece A Vindication of the Rights of Woman (1792). Liberalism has since claimed Wollstonecraft for itself. She now appears in its pantheon, credited with extending the rights of man to all human beings, “regardless of the distinction of sex,” as she wrote in Vindication. Why should women, she asked, “be excluded, without having a voice, from a participation of the natural rights of mankind”? While this certainly sounds liberal, it is questionable whether she fits the term. Liberals classically define freedom as non-interference,

so that you are considered free if you are unconstrained by physical impediments, such as chains, or by coercion, such as a gun to your head. If you are dependent for all your liberal rights on the goodwill of your master, then you are a slave Wollstonecraft, on the other hand, goes further, defining freedom as non-dependence, advocating a theory that has since been identified by Quentin Skinner and Philip Pettit as republican. According to this theory, even if you are free in the liberal sense, that is, you can move about and live without restriction, if you do so at the discretion of someone else, then you are not really free. If you are dependent for all your liberal rights on the goodwill of your master, then

you are a slave. Although some liberals respond that their view of freedom encompasses the republican view, it is important to pick out the difference between the particular horror of living under arbitrary power, and the particular horror of being incarcerated. Wherever Wollstonecraft sits precisely in relation to liberalism, however, it is unarguable that she launched the most extraordinary manifesto for freedom. It would have led her to champion three causes today. The first would be opposition to arbitrary power, and as a consequence, a commitment to social equality. If freedom means being governed by your own will, then in

political terms, parliament, the representative body of the people, must be sovereign. To be ruled according to the wishes of the executive turns us all into slaves. The same goes for the home, which ought not to be a place of tyranny. For Wollstonecraft, dependency is awful not just because it makes you a slave but because it turns you into a slavish person. You bow and scrape and flatter, diminishing yourself and becoming unable to speak truth to power. Wollstonecraft’s approach to liberty requires equality—in a move that runs contrary to much liberal thinking. Hierarchies per se—of class, race and gender—breed dependency and corrupt all parties. Society needs levelling out, if we are to be rid of monsters. As Wollstonecraft says, “power … is ever true to its vital principle, for in every shape it would reign without control or inquiry. Its throne is built across a dark abyss, which no eye must dare to explore. Wollstonecraft’s second cause would be feminism. She believed that gender is in many ways a construct of power. There are no essential differences between men and women that explain or justify the arrangement of the world. With regard to their minds, men and women have equal capacities. One consequence of the dominant sta-

tus of men is that it makes women obsessed with “the art of pleasing” them. If you are told that what is valuable about you is your appearance, then you come to believe it, and it twists your life. “Taught from their infancy”, says Wollstonecraft, “that beauty is women’s sceptre, the mind shapes itself to the body, and, roaming round its gilt cage, only seeks to adorn its prison.”

Monday 13 August 2018

BUSINESS DAY

Monday 13 August 2018

CityFile

Groups partner on ‘Feed Inmates’ campaign JOHN SALAU

y Neighbour’s Kitchen and Kokun Foundation, a nongovernmental organisation, in what aims at giving back to the society by way of Corporate Social Responsibility (CSR), are pulling resources together to reach out to prison inmates in the ‘Feed the Inmates’ Campaign. The campaign which commenced on Friday is to bringing succour to prisoners in various prisons across Nigeria. My Neighbour’s Kitchen app, currently generating traffic online, is an application designed to basically connect food vendors to clients, thereby creating additional income for both cooks and food lovers. The app is currently available for download on app stores. Adetayo Gisanrin, manager, My Neighbour’s Kitchen said the collaboration was to enable both companies take

up the plight of prisoners, who are alleged to be badly fed. “We are championing this cause through our app, myneighbourskitchen in partnership with Kokun foundation and other volunteers in various communities to reach prison inmates,” said Gisanrin. Leading the volunteering effort will be Girl Hub Africa, another non-governmental organisation dedicated to exposing Nigerian youth, particularly females to the culture of volunteerism. According to Gisanrin, Girl Hub Africa aims to raise the bar in volunteering culture in Africa, thereby creating employment opportunities for young females. The volunteers and humanitarian workers, led by Laura Ikeji Kanu and her husband Ogbonna Kanu visited Nigerian Prison Service at the Kirikiri maximum prison and Ikoyi prison to feed the inmates, donating relief materials and food items to the inmates.

Two bag six months for stealing TV, computers

Sokoto Chief Magistrate Court has sentenced Ibrahim Abdullahi and Anas Ashafa to six months imprisonment for stealing a television and two computer processing units. Abdullahi 20, and Ashafa 19, both residents of Sokoto had pleaded guilty to a two-count charge of conspiracy and theft levelled against them. The chief magistrate, Nu r ra d e e n B e l l o, s e n tenced the accused persons without an option of fine.

The prosecutor, Monday Kennedy, had told the court that the accused persons conspired and criminally entered the house of one Usman Audu of Mabera area, Sokoto, and stole a television set and two computer processing units. He said that the case was reported on August 8 at Ugwuan Rogo police station by the complainant. Kennedy said the stolen items were recovered during police investigation and the offence contravened Sections 97 and 288 of the Penal Code. NAN

Members of Behind Bars, Human Right Defenders, demanding justice for the family of late Nonso Onyeme who was allegedly shot by Policeman on patrol along Agulu-Awka Road, near Awka in Anambra. NAN

Herders/farmers’ clash: Cattle breeders seek peace in Nasarawa

asarawa State chapter of Miyetti Allah Cattle Breeders Association of Nigeria (MACBAN), is sensitising members on the need to embrace peace with farmers, its chairman, Hassan Husaini, has disclosed. Husaini said on Friday in Lafia that they were organising a workshop to educate cattle breeders on advantages of peaceful co-existence.

Ambode tasks workers on innovative public service JOSHUA BASSEY

ov e r n o r A k i n wunmi Ambode of Lagos has harpe d on the need for civil servants to embrace new innovations in the discharge of services to the public, saying it is the new direction of governance. Ambode represented by Akintola Oke, the commissioner for establishments, training and pensions, at a training session for some workers of the state, said his administration was already examine practices a n d a re a s t hat re q u i re overhaul and remodeling to better achieve the goal of optimal services to the people. According to him, the objective is put the civil service on a pedestal to meet global and reason-

able expectations of the citizens. “The key expectations from a 21st century Lagos State public service are the ability to transplant private sector-tested management theories into the public ser vice, realistic and practically-grounded polic y formulation and execution, the deepening of technical knowledge and utilisation of modern tools. “ The appreciation of the need to focus on details and importantly, the prioritisation of productivity on individual levels in terms of time utilisation and work modalities becomes imperative,” Ambode said. “The essence of the training is to fill the gap between the actual and the expected. When you want the best of your staff, you have to continuously

move them from the current state to a higher level of production,” said Ambode. He noted that the training had been packaged to empower the participants towards building accountability, encourage diversity of ideas and promote continuous improvement. Mike Ikupolati, a professor and facilitator at the training, emphasised the need for the participants not only to practicalise what they learned but to break complex situations into units so as to make it more relevant to the people they serve. Ikup olati note d that human capacity development was a path to achieving a political goal and commended the state government for organising such training which is the key to optimal performance.

…to undertake sensitisation campaign “I recently attended a workshop on conflict resolution skills organised by the Federal and Nasarawa State governments; my intention is to use the workshop to step-down what we were taught,” Husaini said. He added that officials of the association from the 13 local government areas of the state would participate in the workshop being planned in Lafia. Husaini blamed the rising insincer-

ity in the country on bad leadership at all levels, saying that the situation was worsened by the insincerity among religious and traditional leaders as well as government officials. “If all leaders in the country are sincere in their approach to issues, there will be peace and harmony,” he said. He said that MACBAN would soon embark on

a sensitisation tour of its communities to educate members on the dangers of taking laws into their hands. Husaini commended the Nasarawa State government for stepping up efforts to unite the people and promote mutual trust across tribal, religious and political lines, and advised MACBAN members with grievances to use civilised means to seek redress.

Enugu: Police bust ATM fraud syndicate, recover 30 ATM cards UDOKA AGWU

olice command in Enugu State has arrested a threeman Automated Te l l e r Ma c h i n e ( AT M ) fraud syndicate operating within Enugu city. Ebere Amaraizu, the command’s spokesman, said the police operatives recovered 30 ATM cards belonging to different individuals from the syndicate. The syndicate, according to Amaraizu, was smashed by the command’s anti-cultism squad who acted on a well-coordinated intelligence infor mation. He said the syndicate specialised in swindling their victims o f ha rd - e a r n e d m o n e y

from their bank accounts through their ATM cards transactions. They do this smartly under the pretext of offering assistance to customers, but exchange their nonworkable ATM cards to the genuine customers’ own. “They will pick the real ATM cards and also spy on the pin code of the genuine customers’ cards. They use this trick to wreck havoc on the affected victims and thereby withdrawing all the customers’ deposit in a matter of some hours,’’ he said. He gave the suspects’ names as Chinweuba Ogodo, a tricycle operator in Enugu, but an indigene of Ezza in Ebonyi; Okechukwu Nwoke, a bus driver from Ahiazu Mbaise, Imo;

and Sopuruchi Emmanuel from Alayi Bende, Abia; all resident in Enugu. Amaraizu said that Ogodo regretted his involvement in the crime and blamed it on lack of knowledge. Ogodo confessed that as a commercial tricycle rider, he was always contracted by Nwoke and Emmanuel to convey them to banks with crowded ATM customers where they hanged around to discover their preys. The police spokesman said that a full scale investigation into the incident had begun, and advised members of the public to be vigilant, security conscious and wary of those that would try to offer them help at any ATM machine.

Monday 19 August 2018

C002D5556

BUSINESS DAY

This is M NEY A daily guide to your Personal Finance

• Savings • Travel • Debt & Borrowing • Utilities • Managing your Tax

Help! I need a job!

housands of young Nigerians are unemployed. After the grandeur of the graduation ceremonies, the bachelors and masters degrees, and then NYSC have not translated as expected, to employment for scores of young people. It could be a while before you secure a job. Until it comes, how will you survive? No money is coming in, but there are still bills to be paid. Here are some unemployment survival tips that you may find useful: Do you have any savings? How much do you spend every month on necessities? Divide that total into several months of “income,” that is the amount you need to live on each month. Of course you don’t know for how long you will be without a job so create income for about a year. Create a Budget When you have a reliable source of income, it is easy to ignore where all your money goes; another paycheck will be in soon. Knowing what your money is being spent on is a first step to cutting back on non-essentials without a drastic loss to your quality of life. Review your Debt Just because you aren’t earning doesn’t mean you should ignore your obligations. Prioritize what needs to be paid first. Try

to pay a little something on each bill. Don’t avoid creditors; it’s the worst thing to do. Approach them and tell them of your challenges; they may be prepared to reschedule payments or even write some of it off if you are lucky. Network, Network, Network! “Your network is your networth”. This is not the time to withdraw from your circles. Your network, including your immediate family, relatives, friends, colleagues, former clients, and business contacts, matter now more than

ever. Everyone needs to know that you are on the job market. If you don’t have a profile on LinkedIn, create one and start networking on this powerful platform. Don’t cut off. Continue to socialize. Too much time alone can be isolating and lead to depression. Look for cheaper ways to socialise. Develop Yourself Are there some important skills that you need in order to improve your prospects? Do you have the skills to get to where you want to be? Now, don’t rush off to do the first Masters or PHD program that you get admission for; I mean practical skills that all companies need such as IT or digital marketing skills. Consider doing it now and you will be better equipped with a skill set for your next job. Volunteer Volunteering can have a positive impact in your job search. It may not always lead to paid work, but it certainly does come with benefits. Volunteering will give you a sense of fulfillment. It will also enhance your personal skill set, introduce new knowledge and keep you in contact with people. Perfect your CV There is nothing more exasperating for a prospective employer than to have the misfortune of

reading a CV full of grammatical and typographical errors. Prepare your CV and proofread it very carefully; there are many good online samples and tips to guide you. Do not pretend to be what you are not; you will be caught out. Your online presence matters; potential employees will look you up; it is so easy to jeopardise your prospects with inappropriate language, messaging or imagery. Be Prepared If you are one of the tiny percentage of those that get to secure an interview, you owe it to yourself to be prepared. If you don’t know anything about the company you are interviewing with, it could be embarrassing. Do your research. What value can you add? Look for problems to solve. Prepare questions that you wish to ask. There are literally thousands of people looking for work. What makes you unique? Be Flexible Don’t be too fixated on getting your dream job. Be prepared to accept a role that may not necessarily meet your expectations when you consider your qualifications, expertise, or your experience; this will tide you over while you continue the search. Part time, temporary, or contract work, are ways of getting you employed.

Some employers are looking for someone to work for just a few weeks or months; others may have part-time opportunities; such offers may eventually turn to actual long-term contracts or indeed full time employment. You may also offer any special skills on a consultancy basis, whilst you scout for a more permanent role. Earning as much as you can now will help get you through this period with fewer financial scars. You will also be gaining new skills and experience and preventing gaps in your CV which employers tend to frown at. But don’t neglect the job search or preparation for some challenging interviews. Health is Wealth Stressful life events can overwhelm a person’s ability to cope; this can lead to depression. Particularly if you are stressed or anxious, your health can be badly affected; a healthy diet and exercise is important for a sound mind and body. Use this time to put a proper regimen in place. It will put you in a much better frame of mind. What Can you Do to Earn Extra Income? This is the time to search inwards at your skills, talents, those things that you do effortlessly but have never leveraged on or thought of monetizing. Can you teach, can you bake, sew, take photographs, put your car on the road, rent out a room if you have space? Do you find it easy to fix things? Are you a social media expert? Everyone needs someone with tech skills. Many people are trying to bring a small business idea to life; can you assist with writing business plans? What solutions can you provide? People pay for solutions. Save Unemployment is one scenario that makes the need for emergency savings, glaring. If you have no savings, make this a priority once you’re back on your feet, immediately start preparing for the next possible emergency. Try to save up three to six

months’ worth of expenses in an emergency fund. Even if it takes you more than six months to find another job, you can often stretch that savings and a part-time job to a year or more. As soon as you can, start saving money again for the next emergency. Remain Positive  Yes, you have already sent your CV to over 100 companies and interviewed with 22. Many will not even acknowledge your CV; it’s nothing personal. They’ve simply had so many to go through. Dust off the disappointment as quickly as you can and stay focused on the next opportunity. If you are down and dejected, it shows; employers are attracted to up-beat, enthusiastic, positive people. Unemployment is one of life’s most challenging events, but it can also come with opportunities if you remain calm, proactive, focused and prepared to seize opportunities. This may just be the impetus you need to follow your passion; that dream and bring it to life. Who knows? You may soon be walking through the door of your own business and creating jobs.

Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

BUSINESS DAY

Monday 13 August 2018

BUSINESS DAY

C002D5556

CEO INTERVIEW

Monday 13 August 2018

C002D5556

BUSINESS DAY

Paul Onwuanibe CEO, Landmark Group

Interview with Private Sector Leaders

‘We are here creating a commercial and lifestyle ecosystem where everyone is related to everything’ The growth of cities with the attendant crime wave, insecurity, traffic and other inconveniences is, increasingly, encouraging developments where people can live, work and play, thus shielding them from exposure to issues outside. The Landmark Village, being developed and promoted by the Landmark Group, is one such development. In this interview, Paul Onwuanibe, the Group’s CEO, offers insights into the making of this one-stop-shop destination where the leisure, business, entertainment and hospitality communities can meet and interact. He also speaks on Nigeria’s real estate and mortgage markets, and the challenges of investing in a business environment where financing and the regulatory system are not supportive. He speaks with CHUKA UROKO, Property Editor. Excerpts

andmark Village is an ambitious project that has become a phenomenon within its neighbourhood. Briefly let us into what the project is all about The Landmark Village development is a one-stop-shop business, leisure and lifestyle destination on approximately 1mile of beachfront. We believe Landmark is the premier live, work and play waterfront destination on the West African coastline. I wouldn’t suggest our project is a luxury development but more specifically, a one-stop-shop market where the leisure, business, entertainment and hospitality communities meet and interact within one ecosystem. When you come here, you don’t need to leave for anything as you can visit the Hard Rock, Spur or Shiro restaurants eat and drink whilst on break from your conference at the Event centre; you can lounge on the beach or swim on our roof top infinity pool; you can work out in the gym or play squash; you can watch a movie in the new Filmhouse cinema or adults and kids can enjoy themselves at the family entertainment centre. There are options to play football, basketball, volley ball or simply stroll along the new beach broad walk. The new retail boulevard, the first of its kind in the region, offers various shopping alternatives. If you don’t want to go home, you can spoil yourself in the ultra-elegant Landmark Hotel. All these we offer together with Class A office space and the new upcoming Landmark Waterview apartments in this five-acre secure development. The real estate market is having challenges and yet you are going ahead with development. What is giving you the confidence in both the sector and the wider economy? Real estate development is not a spot trade. It is a long-term game and when you develop property one has to look at cycles rather than a moment in time. In planning any real estate development, you need to think in seven to 10-year cycles. Usually, when the demand side is strong, that is when the supply side is weak and vice versa. When you plan, you cannot assume that both the demand and supply side will fall into the same cycle. When conceiving an idea to develop a project, it probably takes over a year to go to the drawing board. From the drawing board to the regulatory environment will take another year or two. By the time you go into the supply chain and to build, it could take another two or more years, making it four to five years down the line. By the time you deliver the project, five

or six years are likely to have gone by. If you conceived the idea during boom years, you might be in a recession when you deliver and vice versa. So, if you are planning real estate, you need to do so across both cycles—the boom and the recession and it is not common in any environment that you have both the boom and recession happening the same time. If you look at the real estate market fundamentals, especially in Lagos, and specifically in this Victoria Island/Lekki axis, you see a growing mixed-use community. Down this stretch you have the beach front which runs across the Lekki corridor. Within half a mile from here, we can boast of the headquarters of four different banks; several event centres, three international hotel chains, Exxon Mobil, Total and Halliburton HQ’s; The Palm Shopping Centre, The British International School and a sprawling area of high value real estate. All these “anchors” drive people to the area and create a large potential market that needs to be serviced within the axis. We have an electronic counter that counts the number of people that come in and go out of this place. Currently, we entertain between 35,000 and 50,000 visitors a week in Landmark Village. We expect that this will grow to between 200,000 to 300,00 a week over the next six to nine months once our retail boulevard and leisure complex is complete. The mixed-use offering is the first fundamental that drives people to come here. The second fundamental is location attraction. Because we already have drivers that bring people here like the event centre, restaurants and the beaches, people will always come due to ease of access and locality. The third fundamental is the macro issue. The Lagos state economy is growing. More and more people and businesses are coming in. The state is the preferred destination in Nigeria and probably in West African Coast. This is driven by strong demographic trends. Lagos has a large number of people who are very aspirational. The housing market in Nigeria is a contradiction. The top end is heavy with few buyers, while the bottom is virtually empty with high demand, meaning there are opportunities there; yet investors avoid that end. Why? You are absolutely right. Unfortunately, this bucks the supply/ demand argument and goes straight to the core of how social (or low cost) housing is enabled. The problem in developing in that segment of the market is it comes at a huge cost without comparative revenues. Land in metropolitan Lagos is expensive,

whether you are developing high end or low-end property. The enabling system is still too weak to support mass housing. The cost of getting your building consents, registering your title, paying the land use charge, taxes and occupation certificates are expensive and are the same whether you are developing low or high cost housing. Again, when you are buying the building materials, if you want to use brick, for instance, it does not cost less if you are developing low cost or high cost housing. The material remains the same irrespective of the use you want to put it to and so does the cost. The difference between high end and low-end housing is just the location and the finishing. That is where the property is situated and the quality of what you want to put in the house. But to build at the low end, unless it is subsidized by the government either by cheap land or grants, would represent a huge challenge and would be difficult. All over the world, solving the accommodation problem of people at the low end always comes with government support by giving land through legislation or planning laws to promote it, or government support-

ing developers financially. Here, in the Landmark Village, we have paid over N400 million in charges and fees to various government agencies for documentation, approvals and consents, on less than 5 hectares of land over the last few years. The application of some of these fees, in other regions of the world, is to provide infrastructure or to improve the environment of the community in which you operate, or they are converted into housing units so that if a developer builds 100 units, for example, a certain percentage of those units are offered to lower income families backed by government grants. So, there are different ways a local, state or regional government can engineer equitable spread of housing, but here in Nigeria, we grapple with basic “bread and butter” issues and not yet sophisticated enough to deliver plans that will benefit both the demand and supply side. Housing deficit in Nigeria remains a recurring decimal. People blame it on the absence of a functional mortgage system. What is your view, especially with your experience from outside this country? There are two major issues with

the housing deficit in the country. The first is lack of a functional mortgage system as you have rightly pointed out. The second one is the absence of a social security system in the country. There is an absence of a system that is dedicated to funding housing for low income families. Ultimately, a mortgage system is only as good as employment rate in the country. Even if you have a viable system and the unemployment rate is very high, it does not solve any problem. This is because people have to be gainfully and sustainably employed to qualify for mortgage. Good employment with regular income is a basic requirement for mortgage. The local, State and Federal Governments need to come up with a comprehensive policy that recognises the average family household income and designs a mortgage product as well as a grant aided system that meets the real challenges in society. A boost will increase developer activity, increase supply, thereby increasing employment and reducing cost of ownership or use. That is true. But beyond that, what exactly is wrong with the mortgage system in this country? There are some basic problems with the mortgage system in Nigeria. One is accessibility and the second one is clarity. Talking about accessibility, you find that

when you approach a mortgage bank for loan, they will ask you for things that you cannot provide. So, the mortgage is simply not accessible for those that actually need it. In terms of clarity, there is no unified system. There is nowhere the government has published a mortgage rate which the mortgage banks have to use or a mortgage standard or process which the banks have to fit into. It is obvious that there is no clarity in the mortgage system here and if there is any such thing, it is not yet publicised and so people don’t know and, if people don’t know, it means such a process does not exist. The third problem with this system is the interest rate. This is a problem because you cannot take a long-term mortgage loan with double interest rate on low income. It is simply not viable. An example is that if you borrow money at a 20 percent rate, it means that every four years, you owe twice as much and that is how bad it is. So, if you are building a house with such a loan and you are building at a slow pace the amount you will owe at the end will outstrip the growth of your salary. Evidently, there is something fundamentally wrong with the system. But what needs to be done? There should be legislation towards this process, but this depends on how you apply the legislation. In some countries, what happens is that a body is set up that manages mortgage subsidies. It delivers this either through banks or by itself. So, the legislation around mortgage has to be fine-tuned, implemented and advertised so that people can access it. The mortgage industry has to improve, and developers have to be encouraged to build mortgage-viable and ready properties; mortgage interest rates have to be reduced to single digit and made available; the whole process of securing mortgage has to be made clearer and more transparent, and the mortgage has to be available on the “retail high street” such that every time you go out looking for it, you see it. Let us return you to the Landmark Village.What are the things that make it unique? The Landmark Village is West Africa’s first one-stop-shop business, leisure and lifestyle waterfront destination. The whole concept is to create a node for domestic, regional and international businesses and people. This is one place where you can live, work and play in one secure environment. The mega city throws up challenges of traffic, parking, safety, crime, insecurity and various inconveniencies. The Landmark Village is the creation of a real estate destination with one economic ecosystem to mitigate these issues. Major cities like New York have the Rockefeller Centre, London has Canary Wharf, and Johannesburg has Melrose Arch, to name a few. This is the Lagosians answer to convenience, simplicity and efficiency in one place. You can eat at the Shiro Restaurant, drink at the Hardrock

Cafe, grab a pizza at Pizza Hut or a burger at Spur. You can also watch a 4D movie at Filmhouse, attend a conference at the event centre, play squash, volley ball or five aside football, work out at the gym, conduct business meetings at the commercial tower, wind down in the hotel or simply relax on the beach or in the gardens. The offerings include a retail high street, a family entertainment centre, a beachfront leisure park, a luxury hotel, grade A offices and an elegant functional apartment block under construction. The major reason behind the development of Landmark Village is the creation of a business and leisure ecosystem that is affordable, convenient and efficient. Everything is related to anything. The more this ecosystem is used, the more convenient it becomes as the system begins to understand the customer preferences, predicts your needs and delivers value through its lifestyle loyalty system. The cornerstone of the live, work and play philosophy is the delivery of value for money in a safe and convenient manner. We have brought in a number of third parties to make the ecosystem more convenient and practical, offering real value to consumers. We are working with an international payment platform to create forum to service the loyalty discount structure for all users. We also work with infrastructure, medical, leisure, hospitality and travel service providers. This means that you cannot only work and play, but also meet your lifestyle needs within this one stop shop destination. Amid challenging environment, Apapa as a commercial hub is worth N20 billion a day. Landmark Village is also a commercial hub. What monetary value could you attach to the village? It is hard to place a value on the revenues made by all the independent commercial businesses operating out of the Landmark ecosystem. But I would assume, at its peak in a few years’ time, would be more than a fraction of the Apapa’s daily revenue. Once the developments are complete and fully occupied, the rental revenue available to service our debt should be in excess of N10 billion a year. The commercial activity created here will continue to grow and money will continue to move around within the ecosystem. It is my hope that by the time we hit 500,000 footfall a week when all phases of the development are complete, the revenue moving within the ecosystem from all businesses will average over N1 billion a day. But to get there, we have to develop and grow

and there are aspects of this growth that are outside our control such as good road and drainage network; security also has to improve along with the beautification of the environment. Orderliness in the environment and traffic/parking restrictions will need to be managed. As an entity we rely on many arms of the local and State Government to improve our locality to compliment the worldclass services we seek to develop. In return we offer immeasurable benefits of employment, tax receipts, improvements in the environment, the creation of a lifestyle hub and the delivery of facilities to foster the attractiveness of Lagos as the number one city in Africa. Landmark Village occupies a large expanse of land that could have accommodated other people. For enjoying this area alone, how do you give back to the community? First and foremost, we have provided a lot of employment, direct and indirect, consistently for people in this community in the last 10 years. The supply chain is local. About 95 percent of our employees are Nigerians; 80 percent of our team are Lagosians and 50 percent of these are from this local community. Over the years we have always paid all taxes required at both Federal and State levels. We have spent over N400 million on local, state and federal government permits within this time. A lot of the proceeds of this would have gone back into the system. We are an active member of the local community, apart from subscribing to the local supply chain, we have created thousands of indirect employment opportunities by virtue of the intense construction activities in the last five years. We actively care about our local environment. We clean the main road virtually single handily, we provided the street lights in this area; we beautify the street, we provide security patrols, we spent a small fortune tackling the Atlantic Ocean invasion of the 1 mile stretch of land, prior to the construction of the Lagos Wall; we maintain and clean the resultant beach, we built a public green park at the beginning of Water Corporation road and spent a small fortune ensuring the road and area remains tidy, clean, safe and habitable. 10 years ago, we restored the Water Corporation road and beautified the same. It is very hard to put a naira value on the things we have done for the local community, but I can proudly say that over 10% of our maintenance budget is consumed by the things we do to improve the community and environment outside the four walls

of our 5-hectare site. What are your challenges operating in this economy comparing it with other economies where you have footprints? For everybody who runs a business in Nigeria, the challenges are similar. What differs is the size of the challenge and what resources and personnel you have to tackle them. The biggest challenge I see in the country is people. Getting the right set of people to work with is a big challenge. You need people who are well trained, well-educated with high moral and ethical standards. It is very difficult to get people in this class. If you get the right people, you do extremely well, and if you get the wrong people, you do badly. We at Landmark have been very fortunate to have gotten the right set of people to drive our ambition and execute our dreams. Training, nurturing, rewarding and motivating them remains a fine balancing act in a very competitive market place. The second challenge is the access to long-term sustainable finance. I believe the system is unkind to both

big and small businesses. To grow from a small business to a large one is very difficult if you don’t have family and friends who can help. Real estate requires huge amounts of capital. To achieve both the affordable and available Finance is a cornerstone of success (if put to good use). A third challenge is what I will call the scourge of an emerging economy. A place where you have huge regulatory limits, very little enabling, yet major unplanned expenses on basic infrastructure expected from the municipal, state or federal authorities. Contrary to what obtains in mature economies, here you have to buy your own electricity generator, sewage plant, water treatment, provide your own security and improve the local environment around your business, by putting in place local infrastructure such as roads, beautification, drainage, etc. None of these costs directly brings income and as such creates a major challenge to ensure your product is affordable. These things are often a distraction too as it shifts your focus from your core business.

BUSINESS DAY

C002D5556

COMPANIES & MARKETS

Credit Bureaus urge financial institutions to embrace ‘credit scores’ in granting loans

Pg. 25

C o m pa n y n e w s a n a ly s i s a n d i n s i g h t

Cornerstone earnings rebounds as net income rises 134 percent Sobechukwu Eze

nderwriting firm, Cornerstone Insurance in its first half of 2018 reported a net income growth of 134 percent against the same period in 2017 In the report made available to the Nigerian Stock Exchange, the company’s net income increased from negative earnings of N953 million H1of 2017 to a positive earnings of N322 million during the review period. This surge in earnings could be as a result of the increase in Gross premium written which increase by 27 percent from N5.5 billion in H1 2017 to N7.1 billion H1 2018 and the reduction of claims this year H1. On further analysis showed that the insurance company had an increase in written premium, which was as a result of some additional income from annuity, which brought in N163 million to the company . “A reflection of the significant focus placed on it by the company this year” as told to businessday analyst by mail from Cordelia Ekeocha, the company’s head of Marketing and corporate Communica-

tions. Also, the company’s Nonlife Insurance and life premium in H1 2018 both had a 25 percent increase when compared to same period last year. The company’s financials showed that although, the company’s insurance claims went up, the claims which it recovered from its reinsurance companies was enough to cover for it, making the company’s underwriting results (which

reveals the efficiency of an insurer underwriting activities) go up by 766 percent, it rose from N81 million in H1 2017 to N698 million in H1 2018. “The increase was occasioned by recoveries from reinsurance which was based on businesses ceded to the reinsurance companies that now has claims. The company will continue to review her reinsurance

estlé Nigeria Plc, despite the challenges in the 2017 financial year was able to surmount economic headwinds that led to declined growth and exit of many manufacturing companies from the industrial sector and the country. The company’s latest financial report reflects that the Company recorded growth of 34 percent for the year ended December 31, 2017. The Food & Beverage manufacturer continues to withstand the challenging business environment brought on by weak consumer spending, rising input costs and currency depreciation. The Company experienced year on year sales growth of 20 percent in 2016 when the country entered into its first recession in 25 years. Furthermore, Nestlé’s turnover in 2017 exceeded the GDP growth of 11 percent recorded by its Industry in the period under review.

placements in her portfolio to ensure optimization for sustainability of the line”. Speaking about the performance of the company and the outlook for the year Ekeocha said that “the trajectory growth in the company’s profit is occasioned largely by the focus on profitable business across the retail and corporate segments which led to underwriting profit.

L-R: Joe Mazeli, national head of sales, Spectranet 4GLTE; Abideen Onifade, representing Consumer Protection Council (CPC), and Mike Ogor, head of marketing, Spectranet 4GLTE, during a live draw to pick the final set of winners of Spectranet World Cup Promo in Lagos.

Nestlé Nigeria surmounts economic headwinds with revenue growth Five-year average sales growth for Nestlé of 16 percent was also above the GDP growth in the Food, Beverage and Tobacco sector for 2017. It is safe to suggest that Nestlé was positioned to withstand the macro-economic shocks brought about by the recession. Nestlé Nigeria has developed three commitments encapsulated in the Company’s core purpose of ‘enhancing quality of life and contributing to a healthier future.’ The first commitment is helping Nigerian families lead healthier lives, working alongside stakeholders and partners to improve livelihoods, and providing access to clean drinking water in the communities in which it operates. These commitments are in line with the company’s belief that it will be successful in the long term by creating value, both for shareholders and for society, a business principle called Creating Shared Value

(CSV). At Nestlé, Creating Shared Value (CSV) brings business and society together by generating sustainable economic value in a way that also produces value for society. The company works towards its commitments by aiming to provide quality and nutritious meals that are accessible to all “purse sizes.” Today, over 80 percent of the total volume of products the company manufactures and markets in Nigeria is fortified with micronutrients to help address malnutrition. Going into the current year, Nestlé has continued to focus on demand creation activities for its existing products while enhancing its portfolio. In February 2018, the Company launched Nestlé Golden Morn Puffs – a multi-grain cereal made from maize, millet, oats and soya. Golden Morn Puffs is fortified with GRAINSMART, a unique combination of vitamins and iron.

Monday 13 August 2018

Linkage Assurance gets NAICOM approval to underwrite agric insurance Modestus Anaesoronye

nderwriting firm, Linkage Assurance Plc has secured the approval of the National Insurance Commission (NAICOM) to underwrite agric insurance in the Nigerian insurance industry. The ‘no objection’ nod will enable Linkage support the farmers and service providers in the agricultural value chain for greater sustainability and economic growth. Among the products approved include Linkage Assurance Crop Insurance Solutions; Linkage Assurance Farm All Risk lnsurance; Linkage Assurance Farm Motor lnsurance; and Linkage Assurance Livestock lnsurance solutions. Linkage Assurance Management in a statement made available to journalist said the Nigeria’s agribusiness sector needs insurance to remain sustainable and achieve long term growth expectation. Linkage said stakeholders in the agricultural value chain needs to embrace insurance by reducing retained risk and transferring the burden to insurers for effective risk management. With this approval, Linkage Assurance Plc is now well positioned to broaden its product offerings to consumers, which is in line with the federal government objective to deepen insurance penetration in Nigeria.

Linkage Assurance by this development is strategically accelerating its business objective of building a dominant company in the Nigerian insurance industry. Linkage Assurance Crop Insurance Solutions provides cover against unavoidable loss of crops or resulting directly from the insured perils, example flood, drought, excessive rains, hailstorm, diseases and pest, with covers including Weather lndex Crop Insurance; Area Yield - lndex Crop lnsurance and Multi-peril crop insurance. The Linkage Assurance Farm All Risk lnsurance is designed to cover the farm buildings/ contents, farm products and machineries against theft and fire. It also provides cover on general accident for farm staff and farmer’s legal liability. While, Linkage Assurance Farm Motor lnsurance protects the insured for loss of or damage to vehicles used in the farm or agricultural business, damage to Third Party property including bodily injury and death to third parties caused by accident. Linkage Assurance Livestock lnsurance solutions is specially designed to cover the farmer’s stock with one simple policy, which can provide immediate protection against death due to accident; death due to illness or disease; loss of use due to accident; and loss of use due to illness.

Simplified crypto access spikes Luno’s customer base FRANK ELEANYA

uno, a global cryptocurrency service provider with very strong presence in Nigeria has welcomed its two millionth customers in the month of August. The company which made the announcement on Thursday, August 9, said the achievement was a result of its simplified approach to virtual currency transactions. The approach aligns with its mission to demystify cryptocurrencies by educating customers on the risks and benefits associated with the technology. “Reaching the two million customers is a significant achievement for us,” Marcus Swanepoel, co-founder and CEO of Luno said in a statement BusinessDay received. “We strongly believe that by making Bitcoin more accessible through education and by offering a userfriendly, safe platform more and more people across the globe can benefit from a better financial system.” With a team of 250+ spread across three main hubs: Singa-

pore, Cape Town and London, Luno now empowers over two million customers in more than 40 countries worldwide. Luno has a very strong presence in Nigeria where it provides customers with services in Bitcoin and Ethereum. Customers in Nigeria can buy and sell cryptocurrencies using the local currency. In the last month alone, more than $302 billion worth of cryptocurrency trades have been completed globally, demonstrating the soaring appetite for the cryptocurrency industry across the world. Bitcoin, the first and most popular cryptocurrency, now exceeds the $125

billion total market cap. “This milestone demonstrates the growing adoption of cryptocurrencies across the globe and reinforces our aim of reimaging a financial system where money is cheaper, faster and safer with open and equal access for everyone,” Swanepoel said. Luno currently offers three core products including Luno Wallet – a consumer payments, cryptocurrency conversion and storage service; Luno Exchange – professional cryptocurrency trading platform; and Luno Enterprise – merchant integration, open API’s, institutional investors.

Monday 13 August 2018

BUSINESS

DAY

COMPANIES & MARKETS Credit Bureaus urge financial institutions to embrace ‘credit scores’ in granting loans MICHEAL ANI

n other to lend efficiently to Micro, Small and Medium Scale Enterprises (MSME), the Credit Bureau Association of Nigeria (CBAN), has urged financial institutions to embrace the use of credit

scores, as this helps in measuring the credit worthiness of a customer in a precise and scientific way. A credit score according to CBAN is a three-digit number that represents the level of risk that is inherent in a particular loan customer, and thus, helps a creditor or lender gauges its risk level if they are being ap-

proved for a loan or granted credit. The lower the credit scores of the customer, the higher the risk. Tunde Popoola, chairman, CBAN who spoke at the 5th National Credit Reporting Conference of the association held in Lagos said the score will enable financial institutions in delivering faster, more

consistent, unbiased and more accurate approach to retail lending. According to him, the credit score is used for individuals alone, not corporate and summarises the total exposure of the customer with different lenders unlike the firms internal scoring system that measures the customers exposure to that particular institution alone. He noted also, that for the country to bridge the financial gap for more than 74 per cent of Small and Medium Enterprises (SMEs), a single unique identifier must be upheld. “The country has multiple forms of government issued identifiers for individuals including National ID, BVN, Driver’s License, Voters Card and international passport. In most countries with successful Credit Bureau infrastructure, there is always one single means of identification. Hence, Nigeria also needs to embrace a unique identifier,” “The current situation

makes data matching very tedious, cumbersome and expensive for the bureaus. This is because a bureau relies on identification of data subjects to be able to match and merge data and develop innovative products for the market,” “We therefore urge the government to speedily implement a unique identifier for every Nigerian,” Nigeria has moved from 37th position in 2017 to 6th in 2018, a feat he said was possible thanks to the Federal Government’s initiatives aimed at fostering the ease of doing business “However, the credit bureau coverage remains low in Nigeria at eight per cent compared with 64 per cent in South Africa, 25 per cent in Egypt, and 17 per cent in Ghana, thus call for the need to change the narrative of credit concentration and increase access to credit,” Also, the Director, Banking Supervision Department,

Central Bank of Nigeria (CBN), Ahmed Abdulahi, said both the financial and non-financial sectors have a crucial role to play to attain more financial inclusion in the country. He noted that Nigeria’s credit bureau industry has been promoting the use of credit information to make financial decisions, to enable businesses achieve their financial goals thus promoting financial inclusion in the country. He added that access to credit is crucial to economic growth and has continued to be the catalyst for driving private sector development. Minister of State for Industry, Trade and Investment, Hajiya Aisha Abubakar, added that credit information would enable Nigerian businesses particularly SMEs to thrive to create jobs. “It would also impact positively on the Nigerian citizenry by way of identity, where Nigerians can access all financial services in the country.”

BUSINESS DAY

C002D5556

Monday 13 August 2018

COMPANIES & MARKETS Custodian meets special risks requirements

he recently announced risk based capital requirements prescribed by the National Insurance Commission (NAICOM) for the insurance industry is viewed broadly as a welcome development. Speaking during an interview with journalists in Lagos recently Wole Oshin, group managing director/CEO of Custodian Investment Plc stated that Custodian views the development as “a catalyst that will propel the group to strengthen its balance sheet and risk management tools’ “We anticipated this day would come and are prepared to remain a leading player, able to provide the requisite cover and protection to a broad spectrum of the market while remaining professionally in tune with global best practices in risk-based underwriting and investment,” Oshin said. He said the customers and the general insuring public would be the greatest beneficiaries of this development, as they would be better protected and can rest assured that their insurer is able to provide them

with timely and adequate succour whenever any insured risk crystalizes. Oshin, who confirmed that Custodian would continue to retain its leading role in the top tier of the industry, added that the insurance business is quite significant in the group’s business portfolio and as such they monitor events in the sector closely. He further said the group’s shareholders funds and assets under management (AUM) is in excess of N35 billion and N300 billion respectively, and the group ranks high amongst companies on the Nigerian Stock Exchange’s Other Financial Services Sector. According to him, it as a step in the right direction and can be said to be consistent with global best practice. He stated further that the entire insuring landscape would be the better for it as the big corporations would have greater confidence in the industry players’ capacity to honour obligations whenever the need arises. He confirmed that Custodian has more than adequate solvency capital to underwrite

special risks such as Aviation and Oil & gas risks even with the new requirements. Oshin also commended the regulator for its commitment towards strengthening the industry and bringing it to global standards. “With such actions, the country’s Insurance industry is the better for it as it will ultimately rank favorably amongst top markets in developing economies,” he said. According to Oshin, as companies brace up for the new system, there is a need to determine early where an operator would want to play in the three-tier system; adding that the beauty of the system is that it is not stagnant as it allows for mobility within the tiers depending on capital adequacy and appetite. He stated further that the new initiative would ensure that all companies participate and no one is left out as organizations have the leeway to take decisions on where to play based on available capital and allowable risk threshold within the legal and regulatory framework of the insurance industry.

Pension funds to help speed infrastructural development Abimbola Hassan

he much needed boost to reduce the c ou nt r y ’s a l a r m ing infrastructural shortage could be the new multifund structure recently launched by the National Pension Commission. As the commission sets to place efficient enabling environment for the pension managers to utilise their pension funds, infrastructural development will get a boost, analysts have said. According to International Monetary Fund(IMF), the value of Nigeria infrastructural stock is 20-25 percent of GDP, quite low when compared to the average of 70 percent of advanced economies. Projections have seen Nigeria population to increase to 397 million by 2050 which would further hamper the infrastructural requirements needed by Nigerians. Nigeria infrastructural stock being inadequate requires huge capital investment to fuel infrastructural vehicles in improving the socio-economic conditions within the country. This begs the need for private investment into the infrastructural

capacity of the country. Pension funds are not a form of private investment but funds contributed by individuals towards their retirement. The total pension fund under management by pension fund managers was recently disclosed to be in excess of N8.14 trillion according to breakdown by the pension fund commission. This figure represents 89.4 percent of the country’s budget in which about 22 percent of the total figure is been sourced via debt. A look at the new multifund structure, which breaks down the modalities for the investment of pension fund, comprising of Fund 1, Fund 2, Fund 3 and Fund 4 varies according to their overall risk exposure to variable income instrument. Fund 1 is allowed a maximum exposure of 75 percent of portfolio value to variable income instruments, Fund 2 can only be exposed to such instruments to the maximum of 55 percent while Fund 3 and Fund 4 will be allowed a maximum exposure of 20 percent and 10 percent respectively. In like manner, there are stipulations for minimum exposure as well. These are 20 percent for Fund 1, 10 percent for Fund 2 and

Business Event

L-R: Stephen Hamafyelto, president, Nigerian Universities Games Association (NUGA); Ibrahim Njodi, vice chancellor, University of Maiduguri, and Sola Solomon, director of sports and chairman sports council, University of Agriculture, Markudi, during a courtesy visit to the vice chancellor, University of Maiduguri, by the University of Agriculture, Markudi Tillers before their Higher Institutions Football League Game with the University of Maiduguri Dessert Warriors, Sponsored by Stanbic IBTC in Maiduguri

L-R: Abass Sanni, head of vaccines, GSK Pharmaceuticals Nigeria; Abosede Wellington, deputy director disease control (Hepatitis control programme officer) Lagos State Ministry Of Health; Laja Odunuga, medical director, and Mayowa Oyeyipo, group product manager vaccines, both of GSK Pharmaceuticals Nigeria, during the commemoration of World Hepatitis Day recently.

5 percent and 0 percent for Funds 3 and 4. This therefore makes it possible for pension fund managers to utilise Fund 1 and Fund 2 as individuals within this category tend to have a higher risk appetite when compared to other category utilizing this funds while ensuring due diligence at the same time. According to Ehimeme Ohioma, head, Investment Supervision Department at PenCom , during his presentation on ‘Pension funds for Economic Development, He said, “It must be commercially viable and self-financing – generate cash flows to repay itself overtime; and bid/concession processes must be open and transparent.” He further stated that, investment in infrastructure instrument would be beneficial to Nigeria which will reflects on its citizens as adequate infrastructure development would improve and promote the standard, create and sustain employment, promote entrepreneurship, enhance returns on pension fund investments as well as increase the pool of pension savings for economic development.

L-R: Uzoma Nwagba COO Government Enterprise & Empowerment Program from the office of the Vice President, Toyin Adeniji Executive Director Bank of Industry, Bisi Oduwole Soap Seller Beneficiary, Tijani Lawan Meat seller Beneficiary, during the inauguration of ‘Trader Moni,’ an initiative of the federal government for Micro Small Medium Enterprise, at Ojuwoye Market, Mushin , Lagos. Pic by Pius Okeosisi

L-R: Ifeoma Okoye, public affairs manager, Lagos & West, Nigerian Bottling Company Limited(NBC); Bode Ayeku, chairman, Regulatory & Compliance Technical Committee, Nigeria Employers’ Consultative Association (NECA), and Abiodun Peters, Senior Legal Counsel, Nigerian Bottling Company Limited(NBC), during the 61st NECA Annual General Meeting held in Lagos recently.

REAL SECTOR WATCH C002D5556

Monday 13 August 2018

BUSINESS DAY

Our locally assembled trucks can compete internationally—AG Leventis Stories by ODINAKA ANUDU

G Leventis Nig er ia says its locally assembled trucks can compete anywhere in the world as they are durable and economical. Speaking exclusively with BusinessDay in Lagos during the visit of Leventis’ Volkswagen (VW) partners last Thursday, Sunday Asade, chief operating officer, AG Leventis, said the company enjoys a healthy partnership with VW in Brazil, which is why all the products of VW in Nigeria are assembled by Leventis. Asade said the assembly plant (in Moniya) is owned and operated by Leventis, though its specification was put together by VW. “VW products are rugged and they are meant for Nigerian roads. When you look at the current infrastructure we have in the country, you will appreciate that these are trucks that can work for long hours, and they are better in terms of economic

L-R: Felipe Pires, business consultant, Volkswagen Truck & Bus; Charles Awani, head, Volkswagen; Michail Economakis, vice president, AG Leventis Plc; Pius Okonkwo, assistant general manager of Oritsetimeyin Logistics Limited; Ayo Akinyemi, transport manager, Oritsetimeyin; Giannonsaa Nikolaos, general manager, Leventis Motors; Sunday Asade, chief operating officer, AG Leventis, and Marcos Forgini, vice president, international markets, Volkswagen, at the visit of Volkswagen to Leventis in Lagos on August 9

efficiency,” he said. He said the products are cost-effective when the total cost is factored in. “In terms of infrastructure, what you have here is what you can find all over the world. That shows that whatever we assemble here is durable. If you have any issues, you have the technical partners who will come down from Brazil.

Our people are well trained by the same VW. We offer regular training in terms of after-sales. You can be sure in terms of maintenance, which is why I said that the total cost is much better than buying a cheap product without support,” he explained. “You can buy a cheap truck and the cost of maintenance will be high. VW’s

total cost of ownership is far, far better in terms of spare parts availability, and support from VW from Brazil. “Now that we have the assembly plant, people who are assembling the vehicles are trained by our partners from VW Brazil. The technical capability they have is very high. The cost of maintenance is very low because the vehicles are assembled

here,” he stated. He pointed out that the major thing for trucks is after-sales support, which Leventis offers. He added that absence of after-sales service is a major reason for incessant breakdown of vehicles along the roads. On second-hand vehicles, he said they are cheap in the short-term but expensive in the long-run. Nigeria has an auto policy, which is targeted at developing the local vehicle industry. About 54 licenses have been so far issued by the National Automotive Design and Development Council (NADDC) for local assembly of vehicles, with the firms having a installed capacity of 410,000. The policy has attracted a lot of criticisms, but Asade said it would eventually help to create a lot of jobs and grow the economy. “When we have this auto policy, it makes foreign companies bring in their businesses here. You can see the VWU Brazil coming here. When you have this, you improve the economy, compared with when you

are bringing in new trucks,” he added. Pius Okonkwo, assistant general manager of Oritsetimeyin Logistics Limited, one of the regular buyers of VW vehicles from Leventis, said his firm has confidence in VW trucks, having been using them for six years. “We have been using the trucks since 2012. To be very factual, the trucks have been wonderful and are specifically built for Nigerian roads,” Okonkwo said. He said his firm, which does haulage for multinationals, enjoys VW products because they are cost-effective and rugged. Similarly, Ayo Akinyemi, transport manager, Oritsetimeyin, pointed out that his firm keeps returning for VW products because of durability. “The trucks have been serving us well. The servicing part is very economical and easy and the trucks are specifically for Nigerian roads. We have been using other products, but theirs are stronger and cheaper to maintain.”

Lagos State urges companies to emulate Fidson’s investment model …commends firm on Astymin Brilliance Reward

he Lagos State government has urged companies in Nigeria’s economic capital to emulate the investment model of Fidson Healthcare Plc, which focuses on children’s education and health. Speaking at the 9th edition of Astymin Brilliance Reward, a children’s academic reward programme, in Lagos, Idiat Oluranti Adebule, deputy governor of Lagos State, who was represented by Folashade Lediju, director, Administration and Human Resource, Lagos State Ministry of Education, said more companies should step in to improve the education of Nigeria’s future leaders, which was the fastest way to take the country to another level. “Education is one sector that you can never do enough. You just have to keep improving. So, we are charging other corporate bodies to stand up their responsibility and partner with state government and national government to sustain the good

standards that we already have,” Lediju said. Lediju said Fidson’s consistency in supporting children’s educational development in the past nine years was commendable, adding that what the drug makers had done amounted to investing in the future of the future leaders. “It is good to know that this beautiful programme has been on for the past nine years. We want to encourage Fidson to continue to soar higher and higher. May the Lord continue to empower and enable them. We must also commend their focus on primary education, which is indeed the foundation for educational development. We all know that once the foundation is solid, definitely, success is assured,” she said. Lediju also noted that Astymin as a food supplement was important for growing children, stressing that once children were healthy, they would be able to channel

their energy into developing themselves. She noted that good nutrition was key for the development of Nigerian children. “We cannot leave out nutrition in anything we do. If you are well fed, you are

bound to be health. We all know that health is wealth,” she added. Also speaking at the event, Hakeem Olushola Olalekan, director of co-curricular department of State Universal Basic Education

Board (SUBEB), expressed gratitude to Astymin for the reward programme. The Astymin Brilliance Reward, which berthed in 2010, is the brand’s biggest and most prestigious event. The programme is aimed at

L-R: Yetunde Adesola, school programmes coordinator, Fidson Healthcare Plc; Hakeem Olusola Olalekan, director of co-curricular department of Lagos State Universal Basic Education Board (SUBEB); Friday Enaholo, marketing manager, Fidson Healthcare Plc; Folashade Leidju, director of administration and human resources, Lagos State Ministry of Education, and Olugbenga Olayemi, divisional manager, Lagos and West, Fidson Healthcare Plc, at the 2018 Astymin Brilliance Reward event in Lagos on August 4

developing mental and academic performance, while rewarding hard work and academic excellence amongst primar y school pupils, through special acknowledgment and provision of educational materials. The 2018 edition witnessed the convergence of the very best graduating pupils from about 210 private and public schools across the south-west and South-eastern regions, as well as parents, teachers and stakeholders in the Nigerian educational system. The Astymin brand recognised and rewarded the kids with certificates of excellence and valuable prizes. Astymin brand also supports other school programs in primary schools. Every month, there is an ‘Astymin Genius of the Month’ essay competition, in which students in primary schools in Lagos state write an essay on a topic. Astymin then rewards the child with the best written essay.

BUSINESS DAY

C002D5556

Monday 13 August 2018

REAL SECTOR WATCH ‘Future of Nigerian dairy industry lies on smallholder farmers’ Ben Langat is the managing director of FrieslandCampina WAMCO Nigeria PLC. In this interview with ODINAKA ANUDU, he speaks on a number of issues relating to Nigeria’s dairy industry. Read on.

What is the dairy model that will work best for Nigeria? here are different levels of how dairy farming or cattle-rearing is done globally. It starts with the smallest and very traditional one by pastoralists who graze their cows on any space or land that is available, migrating from place to place in search of pasture and water. In Africa, the Masai and the Fulani are mostly pastoralists. Their cows produce very little milk because they rear them as part of their socio-cultural practices, and for meat and milk. Smallholder dairy farmers form the second level. They are usually a family with some acres of land and they can keep cows within that location and are able to feed them with pasture generated within that land or its surrounding. The cows are confined and easier to control and manage diseases as well as collect their milk. The third level is commercial farming, which is now hugely industrialised. In countries like Saudi Arabia, you would find a farm with thousands of cows in air-conditioned dairies, fully mechanised using robots. Ranching is the fourth level, which is typically driven by the size of land available and typically focused on beef rearing. Ranches are large farms that are well secluded for thousands of cows to move in there. So, smallholder farms have been the most success-

ful dairy model so far and that is the model we are focusing on for FrieslandCampina WAMCO Dairy Development Programme (DDP). Every household that has some land can build a business on it with five to 10 crossbred cows. It makes it easier for us to collect milk. If you go to countries like Kenya, Zimbabwe, South Africa and Uganda, smallholder farmers are thriving. So, in Oyo, our DDP is progressing from pastoralists to smallholder farms. With cross-bred cows, you can get up to 10 to 15 litres of milk per cow instead of just one or two litres. This is where we believe the future of local dairy industry liessmallholder farmers. What level of success has your DDP achieved? We have made very good progress with the DDP. We started with a milk collection centre in 2011. Now we have five milk collection centres and a bulking centre, which is where we pool all the milk into a truck and move it to the factory. The main challenge is low productivity per cow. When cows roam for long distance to gather pasture and drink water, it impacts productivity, which currently stands at one litre per cow average. To raise that to commercial quantities, we should be aiming for, say, ten litres per cow. Iseyinland in Oyo State, where we currently operate the DDP with growing success, is not too far from our

Government. Government would also do well to improve infrastructure, especially by providing good roads, water and power. You can’t do anything with cows without a good supply of clean water. So far, we have sunk 45 solarpowered boreholes, which provide water not only for the cows but also for all the five communities where we are already succeeding with the DDP – Fashola, Maya, Saki, Iseyin and Alaga.

is the only multinational involved in dairy development in Nigeria and we do this in partnership with the federal government. We have had Audu Ogbeh, minister for Agriculture and Rural Development, honour our invitations and sometimes set out with our team as early as 6am in the morning from Ibadan to Fashola community in Oyo because he wanted to see farmers milking their cows. That tells you there is a huge support and commitment from the Federal government. For similar reasons, we commend also Oyo State

How exactly have you handled technology transfer as part of your on-going DDP? We have a programme called Fa r m e r 2 Fa r m e r, w h e re farmers from The Netherlands visit Nigeria, spend time with farmers in Oyo State, interact with them to share global best practices with our local farmers. We organised Nigeria’s first ever Dairy Farmer’s Day late last year. Leading to the event, two Dutch farmers spent about two weeks in the DDP communities, training local farmers on best dairy farming practices. This has yielded a lot of benefits and will be continued. Farmer2Farmer language is well understood irrespective of where they are in the world. They got very practical, demonstrated what nutritious pasture is and what it isn’t, what is hygienic for cows and what isn’t. Some of our smallholder farmers now have farms bearing similarities to what you will see in a commercial farm in The

respectively. The country’s textiles industry is estimated at $108 billion, contributing five per cent to Gross Domestic Product (GDP) and 14 per cent to overall Index of Industrial Production (IIP). The industry attracted Foreign Direct Investment (FDI) valued at $2.41 billion between April 2000 and December 2016, creating 100 million direct and indirect jobs with over 350 textile mills working. Like Nigeria, India has an arid land that grows cotton used by textile firms. However, unlike Nigeria whose tanneries in Kano and Kaduna are comatose owing to poor cotton seedlings and demise of textile mills, India has explored the opportunity to produce enough cotton to service textile mills and export 1,307.11 million kgs

in 2015/16. Incidentally, Nigeria has a N100 billion Cotton, Textile and Garment Fund set up to spur the growth of the industry. Over sixty percent of this fund has been disbursed, according to the Bank of Industry (BoI), in whose custody the fund is domiciled. However, despite the disbursement, there has been little improvement because textile makers, since the inception of the fund, made it clear that their major problem was not funding but smuggling and unbridled importation. An industry like textile needed to be protected in the past in Nigeria, but successive governments evolved unclear and uncertain import policies that killed the industry. In the face of Nigeria’s quest

Ben Langat

factory in Lagos, so we move milk daily. Other challenges include feed and poor infrastructure, among others. Secondly, there is a good concentration of farmers that have lived there for many years who have traditional knowledge of herding. There is still a lot of work to be done. To scale up milk volume per cow, you need the right kind of breeds. Are you satisfied with the level of support you are getting from government on the DDP? FrieslandCampina WAMCO

Netherlands with improved hygiene and proper keeping of farm records. What is your biggest challenge in Nigeria as a manufacturer? The consumer’s disposable income is reduced and a lot of pressure is on the consumer wallet. In the past, we would experience very strong demand during seasons like Ramadan and Christmas, and manufacturers often were struggling to supply. Now we see these seasons offtake are slower. Outside of such seasons, sales move very slowly because consumers still contend with economic pressures. Consumers buy smaller, some shift to affordable offerings. The biggest thing for me would be to see the economy remain predictable and on a sustainable growth track. Beyond Oyo, are there plans to take this to other parts of the country? There are huge infrastructural limitations to contend with, which only government can take care of. But we are ready to expand the DDP to other regions systematically because it is very expensive. When our current pilot becomes even more successful and profitable, it will become easier to replicate. They are so many opportunities. Example is the school feeding programme initiated by government, which we are actively involved in. The possibilities are endless.

The many woes of Nigeria’s textile industry ODINAKA ANUDU

n Apr il 2016, A isha Abubakar, Minister of State for Industry, Trade and Investment, took a tour of few surviving textile mills in Lagos State. Abubakar visited Spintex Mills Nigeria Limited, Lucky Fibres Plc, and Nichemtex Plc, all in Ikorodu, Lagos State. Abubakar’s mission was to ascertain the state of the industry, hear directly from key players on the challenges facing the industry and then proffer enduring solutions. The key players narrated all their woes to the minister. They complained about smuggling, high energy costs, import policy flip-flops and poor patronage by the public and the private sectors.

Twenty-eight months after the visit, these problems facing the industry are still there. A research conducted by The Economist in 2015 notes that illegally imported Chinesemade fabrics imitating Nigeria’s signature prints flood Nigeria with some Customs officials turning a blind eye to them. The report says that dilapidated textile factories in the country’s northern city of Kaduna are what remain of the industry, which in its heyday employed 350,000 people. According to the World Bank, textiles smuggled into Nigeria through Benin Republic each year are worth $2.2bn, as against local Nigerian production estimated at US$40m annually. In the early and mid-1980s, Nigeria had over 180 textile

mills employing more than one million people. There were United Nigerian Textile Limited (UNTL), Aswani Textile, Afprint, Asaba Textile Mills, and Edo Textile Mills, among others, but there are fewer than three full-fledged textile mills today. Even the firms earlier visited by the minister are basically rug producers and cotton processors/ exporters, which today are classified as textile firms. Nigeria’s lack of will to tackle smuggling head-on has been its biggest woe. India, which began its industrial journey almost the same time as Nigeria, is today world’s largest exporter of textile products after China, with 13 percent global market share, dwarfing Germany and Italy who now come third and fourth

for economic diversification and recovery, industry watchers want the government to take proactive action. Some investors visited a textile firm in Kaduna four years ago, but they are yet to return since then. How many government agencies, departments and ministries are taking patronage of local firms seriously? “What we need is the enabling environment. We cannot compete with the level of smuggling and counterfeiting going on now. We used to have about 127 textile firms in Nigeria but that has come down to two or three now,” Grace Adereti, president of the Nigerian Textile Manufacturers Association (NTMA), said in Lagos, at a Made-in-Nigeria stakeholders’ meeting last year.

Monday 13 August 2018

Stocks

Currencies

C002D5556

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

BUSINESS DAY

Watchlist

economy

Snap shot of Nigerian cement makers’ half-year results Stories by BALA AUGIE

hile a gradual e c o nomic recovery and proposed infrastructures spend by government are expected to drive revenue of cement markers, it is paramount to let shareholders and investors know the current financial position of these firms. It has been disappointing earnings season for most companies in Africa’s largest economy as low interest environment, weak consumer discretionary spend, and delay in the passage of the budget deal a bow on earnings. For instance, the cumulative net income of three major producers of the building material- Dangote Cement Plc, Lafarge Africa Plc, and Cement Company of Nor thern Niger ia (CCNN) Plc- that have released half-year results dipped by 14.20 percent to N111.86 billion, from N130.47 billion the previous year. The drop at the bottom

line (Profit) was due to sharp decline in Lafarge Africa’s loss after of N6.10 billion profit in the period under review. While Dangote Cement and CCNN were able to translate sales to higher profit as evidenced by improved margins, Lafarge Africa has been grappling with deteriorating margins. Dangote Cement’s cost of sales ratio improved to 40.95 percent in June 2018 from 43.05 percent, which means the firm was able spend less on input cost to produce each unit of product. Similarly, CCNN’s cost of sales ratio improved to 54.77 percent in the

period under review as against 64.42 percent as at June 2017. However, Lafarge Africa is spending more to product each unit of product as cost of sales ratio increased to 76 percent in the period under review from 71.12 percent the previous year. The switch in energy mix is responsible for improved cost efficiency as CCNN and Dangote now use coal- a cheap source of energy- to power plants at the factory. While Lafarge Africa’s alarming leverage is gradually eroding profitability, CCNN and Dangote Cement have been able to curtail debt as evidenced

in a low debt to equity ratio. Lafarge Africa has a debt to equity ratio of 152.25 percent in the period under review, this compares with CNN’s and Danogte Cement’s ratio of 110.10 percent and 0.43 percent respectively. Cement makers have embarked on aggressive expansion plans with view to increasing to their share of the market and taking advantage of the huge infrastructure deficit. Dangote, controlled by Africa’s richest man, Aliko Dangote, said last month it’s looking to raise $500 million from a Eurobond sale and will also issue 300 billion naira in

local-currency bonds to refinance debt and boost expansion. Meanwhile, Lafarge Africa, the Lagos-listed unit of Switzerland-based LafargeHolcim Ltd., is seeking to raise about 100 billion naira through equity or debt on top of a rights issue of about 130 billion naira late last year. BUA Group, the parent company of CCNN launched the $350 million Plant at Kalambaina, Sokoto State. The 1.5 million metric tonnes per annum cement plant built by BUA Group would provide at least 2,000 direct and 10,000 indirect jobs in the country.

Notore’s disappointing results validates SELL verdict last week

otore Chemical Industries Plc’s disappointing results in the period under review validates our verdict last week that we would not be buyers of the company’s stock. For instance, the consolidated financial statement of the company for the period ended June 2018 showed the newly listed firm recorded a loss after tax of N3.39 billion from a correspond-

ing loss position of N3.71 billion the previous year. The loss is attributed to weak sales, rising interest expense and spiralling depreciation as the Agro Allied operates in a highly competitive environment. Notore has negative retained earnings of N23.82 billion in the period under review, which means it has been recording more, loses than profit through its existence.

The company is struggling with deteriorating working capital as evidenced in a negative working capital of N55.33 billion, which means it ability to meet future short term obligation to supplier is in jeopardy. Notore has a high debt to equity ratio of 162.73 percent in the period under review. This could expose the Agro Allied firm to financial risk. The poor financial

performance of Notore Chemicals in the last five years can be traced to macro, industrial and company specific challenges. The agricultural industry as a whole has been declining as a percentage of GDP in the past decade, thus putting pressure on companies operating in this sector. In 2007, agriculture contributed more than 30 percent to GDP but this year contribution of

P.E

SHORT TAKES 56.8 The Purchasing Managers Index (PMI) of the manufacturing sector slowly expanded to 56.8 index points in the month of July with 13 out of 14 sub-sectors reporting growth. A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally contracting.

0.50 Overnight inter-bank rate rose by 0.50 percent to 4.25 percent on Thursday, from 3.75 percent after the Central Bank of Nigeria (CBN) auctioned the Nigerian Treasury Bills worth N215.5 billion on Wednesday August 1. The CBN auctioned OMO on Thursday last week where it sold an additional N348.6 billion leaving liquidity level at negative N 75.9 billion as at close of market on Friday.

N5bn A rights issue and public offer for N5bn is FMDQs current plan to boost its

operations and the agriculture to GDP was shareholders who were only 20 percent. at Annual General Fertilizer prices have been declining since Meeting approved the last year as the prices plan alongside a new name. of Urea, NPK 15 15 15 and NPK 20 10 10 are all down in excess of 10 The approved name percent. change simply involves Although fertilizer removing the Overprices are declining, The-Counter (OTC) Notore reported that tag which may have fertilizer consumption constrained its reach in the country is also on as Nigeria’s foremost debt capital, currencies and derivatives securiContinues on page 30 ties exchange.

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

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

BUSINESS DAY

C002D5556

Monday 13 August 2018

Markets Intelligence Economy

These insurers qualify to operate in NAICOM’s Tier 1 category BALA AUGIE

hirteen insurance companies are qualified to operate in the Tier 1 category as their capital bases exceed the regulatory limits set by the National Insurance Commission of Nigeria (NAICOM). Experts are of the view that the introduction of the new rules will enable firms take on more risk and reposition them to compete at the global competitive arena. It will be recalled that the commission also introduced a 3-tier based recapitalisation for the insurance industry. That means composite insurance companies that are now interested to play in the Tier 1 category are expected to increase their capitalisation from N5 billion to N15 billion, while those interested in the same tier but operating life business are required to recapitalize from N2 billion to N6 billion. Non-life insurers planning to play in this tier are expected to improve capitalisation from N3 billion to N9 billion. According to an August 8 report released by investment house Chapel Hill Denham, titled “Risk-based Capital: Mergers and Acquisition inevitable” thirteen insurance companies qualify to operate in all the Composite, Life, and Non-Life Insurance business under the Tier 1 category. The investment used the latest financial statement of firms- half year 2018to extract their shareholders’ fund. According to the report, Leadyway Assurance Company Limited, with a shareholders’ fund of N55.30 billion and solvency margin of 369 percent and AXA Mansard Insurance Plc with shareholders’ fund of N17.51 billion and solvency ratio of 117 percent, can operate in the Tier I composite insurance segment. Firms that qualify to operate in the Tier 1 non-life insurance business are Zenith Insurance Limited with shareholders’ fund of N23.47 billion and solvency margin of 261 percent, Leadway Assurance with shareholders’ fund of N22.58 billion solvency ratio (251); Linkage Assurance Plc with shareholders fund of N20.44 billion, solvency margin (227 percent); Custodian and Allied Plc with share-

holders’ fund of N17.46 billion, solvency margin (194 pecent); Wapic Insurance Plc with shareholders’ fund of N15.24 billion, solvency margin (169 percent). Others that can participate in the segment are: Nicon Insurance Limited with a shareholders’ fund of N14.59 billion, solvency margin (162 percent), AXA Mansard with shareholders’ fund of N14.20 billion solvency ratio (158 percent), Veritas Kapital Assurance Plc with shareholders’ fund of N10.90 billion, solvency margin (121 percent); NEM Insurance Plc with shareholders’ fund of N10.73 billion, solvency margin

119 (percent); and Universal Insurance Plc with shareholders’ fund of N10.41 billion and solvency margin of (116 percent). Three firms qualify to operate in the Tier 1 Life Insurance business: Leadway with shareholders’ fund of N24.47 billion and solvency margin of 408 percent; FBN Insurance Limited with shareholders’ fund of N10.57 billion, solvency margin of (176 percent); Aiico Life Insurance Plc with shareholders’ fund of N7.34 billion, solvency margin (122 percent), and Mutual Benefit Life Assurance Limited with shareholders’

fund of N7.01 billion and solvency margin (117 percent). Leadway Assurance, the largest insurer by premium, asset, and total equity qualifies to operate in Composite, Non-Life, and Life Insurance business. Analysts at Chapel Hill Denham are of the view that the new solvency capital base is positive and they expect it to enhance specialization. The new solvency requirement has elements of intervention levels and actions by NAICOM, according to the report. “There are four broad indicators for capital top up requirements for insurers. Going forward, insurers with solvency less than or equal to 130 percent will be regarded by NAICO M as well run all financial and on financial indicators within acceptable range, said analysts at Chapel hill in the report. Insurers that have their solvency margin below 130 percent but greater than or equal to 120 will be required to come up with business strategy to sustain the solvency level, five years cash flow projection and other plans drive by management and NAICOM. “Insurers with solvency below 120 percent, but greater than 100 percent will be regarded as having acceptable status, but with deteriorating indicators and will be required to inject additional capital to enhance capital base,” the analysts summed. That means firms like NEM Insurance and Universal Assurance will have to shore up their capital if they are to sustain the Tier 1 status. Mohammed Kari, commissioner for insurance NAICOM said that the recapitalization is desirable as interest rates and inflation rates have gone up while insurers have been on the same capital base for 10 years. Analysts are of the view that the latest rules could spur mergers and acquisition in the industry as the country continues to lag South Africa and Kenya in terms of insurance penetration and contribution to the economy. For instance, Insurance industry premium income of N370 billion is less than one percent of GDP size of 114.90 trillion economy while industry penetration is 0.32 percent for a population of 200 million.

Notore’s disappointing results validates SELL verdict... Continued from page 29 the decline. Fertilizer production in Notore is also down in the last five years. Ammonia produced fell from 260,001mt in 2012 to 203,223mt in 2017. Urea produced fell from 369,838mt in 2012 to 315,298mt in 2017. Lower production level translated to lower sales volume. Production level dropped as a result of non-availability of gas for 98 days in 2013 and 137 days in 2014 which temporarily shut down operations in the fertilizer plant. As a result, company earnings were volatile between 2012 and 2013.

Monday 13 August 2018

C002D5556

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: August 10 - August 17, 2018

KEY MACROECONOMIC INDICATORS Indicators

Current Figures

Comments

GDP Growth (%)

1.95

Q1 2018 — lower by 0.16% compared to 2.11% in Q4 2017

Broad Money Supply (M2) (N’ trillion)

25.17

Increased by 2.64% in May 2018 from N24.52 trillion in Apr’ 2018

Credit to Private Sector (N’ trillion)

22.21

Decreased by 0.21% in May 2018 from N22.25 trillion in Apr’ 2018

Currency in Circulation (N’ trillion)

1.93

Decreased by 1.36% in May 2018 from N1.96 trillion in Apr’ 2018

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

11.23

Declined to 11.23% in June’ 2018 from 11.61% in May’ 2018

Monetary Policy Rate (%)

Raised to 14% in July ’2016 from 12%

Interest Rate (Asymmetrical Corridor)

14 (+2/-5)

Lending rate changed to 16% & Deposit rate 9%

External Reserves (US$ million)

46.76

August 8, 2018 figure — a decrease of 0.66% from August start

Oil Price (US$/Barrel)

72.35

August 10, 2018 figure— no change from the prior week

Oil Production mbpd (OPEC)

1.66

June 2018 figure — an increase of 1.84% from May 2018 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI

Friday

10/08/18

3/08/18

35,446.47

Market Cap(N’tr) Volume (bn) Value (N’bn)

12.94 0.19 2.03

Change(%)

36,499.67

(2.89)

13.32 0.27 4.26

(2.86) (27.56) (52.23)

MONEY MARKET NIBOR Tenor

Indicators

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

(%)

72.35 2.95

0.00 4.24

12.24 (3.47)

2130.00 106.85 87.59 10.68 586.50

(0.28) (0.42) (1.51) (0.74) 0.04

10.02 (17.93) 13.02 (30.33) 35.29

1210.88 15.37 274.60

(0.07) (0.32) (0.74)

(8.10) (10.59) (16.23)

Friday Rate

Change

(%)

(Basis Point)

10/08/18

3/08/18

8.42

4.33

409

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

9.25 8.40 11.11 12.40

5.33 4.55 11.82 12.43

392 385 (71) (3)

Tenor

Friday

1 Month

(N/$)

Rate (N/$)

OBB O/N CALL 30 Days 90 Days

FOREIGN EXCHANGE MARKET Market

10/08/18

3/08/18

10/07/18

Official (N) Inter-Bank (N)

306.00 352.28

305.95 350.63

305.75 346.58

BDC (N) Parallel (N)

360.50 360.00

360.00 360.00

361.00 361.00

Friday

Change

(%)

(Basis Point)

10/08/18

3/08/18

3-Year 5-Year

0.00 13.96

0.00 13.58

0 38

7-Year 10-Year 20-Year

14.10 14.01 14.33

13.96 13.81 14.19

14 20 14

(Basis Point)

3/08/18 10.76 11.11

(88) 18

6 Mnths 9 Mnths 12 Mnths

12.79 12.71 12.69

12.40 12.76 13.01

40 (5) (32)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Friday

Change

(%)

(Basis Point)

10/08/18

3/08/18

2,665.95

2677.20

(0.42)

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

8.57 5.51 8.53

8.61 5.56 8.99

(0.41) (0.90) (0.46)

YTD return (%)(US $)

-47.82

-46.32

(1.50)

Index

TREASURY BILLS (MATURITIES) Amount (N' million)

Rate (%)

91 Day 182 Day

9,541.92 69,565.35

10 10.4

1-Aug-2018 1-Aug-2018

364 Day

136,522.57

11.3

1-Aug-2018

Disclaimer

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

Change

(%)

9.89 11.30

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

Friday

(%) 10/08/18

AVERAGE YIELDS Friday

Friday

1 Mnth 3 Mnths

BOND MARKET Tenor

10/08/18

Date

Global In the US, job growth slowed in July as employment in the transportation and utilities sectors fell. Nonfarm payrolls increased by 157,000 jobs in July from an upwardly revised 248,000 jobs in June, the Labour Department reported. Key sectors that saw big gains in new hires were professional and business services, manufacturing and health care and social assistance. Despite the weaker-than-expected job growth, the unemployment rate edged down to 3.9% in July from 4% in June. In a separate development, in Japan, a subcommittee of the government's Central Minimum Wage Council Japan has recommended that the national average minimum hourly wage should be lifted to JPY 874 (USD 7.89), a record increase of JPY 26 (0.23) or approximately 3%. Individual regions will adjust their own minimum wages based on the benchmark, with the changes to take effect in October. The increase will be the third straight year that Japan has raised the minimum wage and it comes as the country is in the midst of a severe labour shortage. Japan has also announced to bring in more foreign workers to help tackle its labour shortage. Elsewhere, the Indian Goods and Services Tax (GST) Council gave its approval to slash tax rates on over 100 items that were in the highest 28% tax bracket under the Goods and Services Tax. GST rates on articles including consumer durables like smaller television sets, refrigerators, washing machines, paints and varnishes, lithium ion batteries, and more were brought down to 18% from 28%. The tax council also rationalised rates on several other items. Domestic Data from the Central bank of Nigeria (CBN) shows foreign exchange reserves have slid below $47 billion, losing $360 million in the first eight days of the month. The country’s reserves which stood at $47.12 billion as of July the 31st, fell to $46.7 billion - the lowest level in nearly four th months - on August 8 . The depletion in the nation’s external purse may not be unconnected to the weekly intervention of the CBN into the foreign exchange market to ensure the stability of the Naira, and the recent drop in crude price in the global market from over $80 per barrel in May to around $72.03 per barrel as of August 10, 2018. Reserves have also come under pressure from increased demand for the greenback by Foreign Portfolio Investments (FPIs) exiting naira assets. In a separate development, the Vice President, has announced a new initiative by the federal government to provide five percent credit facility ranging from N2 million to N10 million to Micro, Small and Medium Enterprises (MSMEs) in the country without collateral. In addition, he stated that the government is also exploring an initiative to allow a special window of 90 days for MSMEs, who have not registered their businesses to do so at a highly subsidized price under the aegis of the Corporate Affairs Commission (CAC). The vice president also disclosed the federal government’s plan to launch Shared Facilities for MSMEs Initiative, in partnership with the Bank of Industry (BoI), Federal Inland Revenue Service (FIRS), Nigerian Export-Import Bank (NEXIM), Nigeria Export Promotion Council (NEPC) and the private sector. The initiative will provide MSMEs with access to fully equipped cluster-style facilities, for which they can pay an affordable fee to operate out of. These facilities would have been pre-certified by the relevant agencies like National Agency for Food and Drug Administration and Control (NAFDAC), Standards Organisation of Nigeria (SON), Industrial Training Fund (ITF), NEPC, thereby removing layers of bureaucracy that in the past held back many aspiring entrepreneurs. Stock Market The bearish sentiment in the Nigerian bourse continued as the All Share Index dipped 2.89% to

berth at 35,446.47 points. Similarly, market capitalization shed N380 billion to close at N12.9412 trillion. The sustained losing streak in the bourse was against the backdrop of continued selling pressure in bellwether equities as well as depreciation in share prices of bluechip counters across the banking, consumer and industrial goods sectors. This week, we expect sentiments in the Nigerian equities market to turn bullish buoyed by an influx of impressive earnings releases especially in the banking sector. Money Market Cost of borrowing at the money market ticked up slightly across most placement tenors amid tightened market liquidity conditions following OMO auction by the CBN and retail SMIS auction. The Open Buy Back (OBB) rate rose to 8.42% from 4.33% the prior week. Similarly, overnight rate rose to 9.25% from 5.33% the week before. Longer-tenured interbank rates, such as the 30day, 90-day and 180-day NIBOR further edged up to 8.40%, 11.11% and 12.40% respectively from 4.55%, 11.83 and 12.43% the previous week. This week, rates are expected to tick higher as additional liquidity leaves the system on account of an expected wholesale FX auction. Foreign Exchange Market The naira traded within a tight band in all markets last week. At the interbank window, it appreciated by N1.65 to close at N352.28/$ from N350.63/$ last week. The local unit traded flat against the dollar at N360/$ at the parallel market, while it weakened by 0.02% in the official market to N306/$ from N305.95/$ the previous week. The relative stability seen across all market segments came on the back of periodic Wholesale and Retail Secondary Market Intervention Sales (SMIS) interventions by the apex bank. This week, we expect the naira to continue trading within current rates in all markets as the CBN continues to supply FX. Bond Market Bond yields inched higher across most maturities owing to weak demand for longer-dated instruments from both local and foreign investors. Specifically, yields on the 5-, 10- and 20-year bonds finished at 13.96%, 14.01%, and 14.33% respectively from 13.58%, 13.81% and 14.19% in that order the previous week. The Access Bank bond index fell by 11.25 points to close at 2,665.95 points from 2,677.20 in the prior week. This week, the bond space may see similar sentiments should weak demand persist at the long end of the curve. Commodities Oil prices edged higher last week as on worries that renewed U.S. sanctions against Iran will tighten supplies. Consequently, the Organization of the Petroleum Exporting Countries (OPEC) crude basket price increased by 0.42% to $72.03 a barrel. Conversely, precious metals prices traded lower as a Federal Reserve policymaker reiterated the need for rate hikes and a stronger dollar weakened demand. Gold slipped 0.80 cents, or 0.07%, to $1,210.88 an ounce, while silver fell 0.3% to $15.37 an ounce. This week, we see oil prices rising in the face of geopolitical tensions and recent sanctions imposed on Russia by the US. Precious metals are likely to draw support from global political tensions and turbulence in currency markets.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Aug’18

Sept’18

Oct’18

Exchange Rate (Official) (N/$)

346.90

347.02

348

Inflation Rate (%)

9.34

9.00

Crude Oil Price (US$/Barrel)

76.75

76.00

77.00

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

BUSINESS DAY

Monday 13 August 2018

FEATURE

The Real Inside Story of the MACRON X SHRINE Event by TRACE SAM ONYEMELUKWE

ou must have seen the pictures: ‘A Celebration of African Culture’, as it was officially named, took place over a few hours on the evening of July 3rd, but it was the biggest story of French President Emmanuel Macron’s visit to Nigeria. Over 28 million people saw the social media posts, more than 1,700 press articles from around the world and TV segments were produced, reaching another 120 million people. And all for good reason! A Celebration of African Culture was made possible by Ecobank and conceived and produced by TRACE Events and it was a historic moment: the first time that a sitting President visited The Shrine of the self proclaimed “Black President”, Fela! For many, The Shrine is a mysterious place. A bit dangerous, a bit scary, far away from the glamorous clubs and swanky hotels of the Island, most in attendance on the night said they had never been to The Shrine before. The event helped cement a new perception and continued the momentum that has been turning Femi and Yeni Kuti into a celebrated legacy versus the son and daughter of the notorious Fela. But for President Macron, he accepted TRACE’s invitation because it was a place where he partied as a young

President Emmanuel Macron and Sam Onyemelukwe

man during an internship in Nigeria (“What happens at the Shrine stays at the Shrine!”, he said), and where he learned about Africa. On May 29th, just 5 weeks before the event, the scope of these challenges started to dawn on me when Steve Ayorinde, Commissioner of Tourism and Culture for Lagos State casually said to me, “It’s unprecedented for the leader of a superpower to come on a State visit, then leave the seat of Government and come to a city and spend time with a Governor, even of a City like Lagos.”

But Emmanuel Macron wanted to meet and interact with Nigerian artists and creators, and that’s what we had to deliver. A lot of thought went into the program to come up with the right line-up, the one that would present the right mix of music, dance, art, fashion, and Nollywood. Countless hours were spent in meetings with the different stakeholders: the Elysee (France’s equivalent to Aso Rock or the American White House), Ecobank, Femi Kuti and the Shrine’s management, the technical teams, the artists… A lot of interests to consider!

And so many questions: what measures do we put in place to guarantee the safety of the 800 VIP and VVIP guests, 250 journalists, but also the President of France and the Governor of Lagos? How do we handle the hawkers outside the venue who almost consider the Shrine their home? Should we renovate the toilets? (take a look at them on your next visit!) In the end it was true teamwork: Lagos State repaved the roads outside the Shrine and blocked traffic to make way for the Presidential delegation and performed a bomb sweep, the Elysee security team secured the President’s and Governor’s spaces within an already crowded VIP with Senators, Governors, Ministers, Celebrities and The Kuti Family. The event was a real leveller, all the guests, even the VIPs arrived early and waited patiently because they wanted to party with The President! Then, one major issue came up, The President’s team said that we should plan in case President Macron needs to leave after one hour… “What if Donald Trump calls with a world emergency?” I can’t lie: my team and I really felt the heat in these last couple of hours before the event. We were exhausted from weeks of non-stop work and hadn’t slept the night before. The event was massively oversubscribed: we had planned for 800, but 1,200 people showed up. The Shrine rapidly got hot, sticky, and very crowded. We ran out

of chairs. And once Emmanuel Macron and Governor Ambode arrived and were greeted by Femi Kuti, Ecobank CEO, Charles Kie, and TRACE co-founder and Executive Chairman, Olivier Laouchez, the show was ON! The rest you know: Yemi Alade and Charlotte Dipanda showed everybody what Afrobeats is about, Ara Thunder made Macron play the talking drum, Kareem Waris, the 11 year-old artist moved the President and the world with his genius skills. Kunle Afolayan and some of Nollywood’s biggest stars gathered around the French leader for an iconic selfie. And the Oga of the house, Femi Kuti grabbed the president’s hand and dragged him on stage, where he was joined by African greats Youssou N’dour and Angelique Kidjo for a beautiful finale and of course The President stayed throughout. For me and my team, it was mostly a blur, but a brilliant blur, and according to all of the positive feedback we received from our friends and guests, and from the President himself, it was a night to remember. Lagos and The Shrine - thank you for welcoming President Macron with us. Sam Onyemelukwe is a media and entertainment industry expert and is Managing Director of Trace EMC, the Trace licensee that manages Trace TV in Anglophone Africa.

BUSINESS DAY

Monday 13 August 2018

Start-Up Digest

In association with

Chinedu Azih: Succeeding where peers fear to tread JOSEPHINE OKOJIE

lobally, private security business is considered the preserve of ex-service men, but Chinedu Otakpor-Azih, cofounder of Kazih Kits Limited, is not deterred from an industry dominated by the male gender. Chinedu saw a gap in the Nigerian security market and made up her mind to fill it despite not having sufficient experience in the field then. She was inspired to establish Kazih Kits Limited, cofounded with her husband in 2014, by the uniformed men and women who taught her during her secondary education. “I caught the security bug in my secondary school sojourn at the Command Secondary School in Ibadan. I spent my formative years schooling and living in the midst of these veterans and their families,” Chinedu says. “It is quite an honour and camaraderie among the uniformed men and women who defended Nigeria. They inspired me; I was hooked even though I did not realise it then. “Looking back now, I realise I had ventured into security services as an alternative to enlisting in any of the Nigerian armed forces. Maybe my son will wear an Air Force uniform and pilot a fighter jet someday,” she recounts. Chinedu picked up a job with a security firm immediately after her tertiary education to gain experience on security and also took up courses both online and off line to learn more on the subject. The master’s degree holder tells Start-Up-Digest that her passion and that of her cofounder is to provide uniforms, kits and other accessories for security personnel

Chinedu Otakpor-Azih,

while also equipping them with the necessary required skills. Her initial start-up capital was money from her personal savings while working. Chinedu says Kazih Kits Limited has grown tremendously as the business now does its supplies of security kits and other accessories

nationwide as well as trainings. “Our business has grown tremendously. We presently supply our products nationwide,” she says. She tells Start-Up-Digest that her raw materials for the kits and accessories are sourced both locally and imported. “It is a mix of locally produced and imported

items, but our long-term plan is to manufacture those imported items locally and, perhaps, grow our business into the West Africa market,” she says. Currently, Kazih Kits has 10 employees permanently and employs on part-time basis when the need arises.

Speaking on the country’s currently insecurity issues, Chinedu says that high rate of insecurity is as a result of the huge illiteracy and high unemployment rate in the country. She notes that if the government can address these two social malaises, insecurity will become a thing of the past in the country. She urges the government to drive entrepreneurship amongst youths to help reduce the country’s high unemployment rate. Speaking on the challenges limiting her business, the University of Lagos graduate says that huge infrastructural gaps across the country have remained a major threat to her business. She states that the business spent so much on transportation of its kits to clients across the country owing to the poor road network across Nigeria, which has continued to increase cost of production. She pleads with the Federal Government to address the issue of poor road infrastructure by rehabilitating most of the bad roads in the country while also calling for the improvement in power supply and lower interest rate for small businesses. Answering questions on some of her business expansion plans, the entrepreneur says that the goal of the firm is to be the go-to for security kits in Nigeria and Africa at large. Similarly, she states that the business plans to establish a garment and shoe factory in the long run to manufacture most of its accessories locally. Asked what her advice to other young entrepreneurs is, Chinedu says, “Running a successful business venture requires a lot of work, and, some days, it can be frustrating. Just remember why you started, be persistent, pray and the success will naturally follow.”

Turn your ideas into business, PorkMoney urges youths JOSEPHINE OKOJIE

orkMoney, a leading pig farming enterprise in West Africa, has trained over 50 youths on ways of turning their ideas into business. The master class training took place last Friday and had in attendance over 50 youths with entrepreneurial ideas. “Every business idea starts by identifying a problem and then providing a solution to the problem that people are willing to pay for. Anything outside this is not a business,” Afua Osei, co-founder of She leads Africa, said. “You need to learn and target who your intended customers are and where they are located in the society for you to effectively strategise your distribution to market your products,” Osei added. She urged the youth to leverage

data to grow and scale up their businesses once they have commenced operation. “You need to keep tracking your sales as well as analytics to

identify who is buying your products or services,” she said. She noted that most start-ups fail owing to their inability to conduct adequate research about

Linda Obi, chief operating officer, PorkMoney (L) and Afua Osei, co-founder of She leads Africa (R)

their customers while spending money on things that do not really matter. “Start-ups should only invest in things that have impact on generating more money for the business,” she said. Similarly, she encouraged them to be open to feedbacks by listening and taking the most important points from it and doing something about it. Also speaking to the youths during the training, Linda Obi, chief operating officer of PorkMoney, talked about agribusiness and how the youth can leverage opportunity in that space to grow their finances. “You have an idea and you are not yet ready to start the business. You can invest the little money you have in ventures that can give you good returns until you are ready to kick-start,” Obi said. She urged them to leverage such opportunities provided by

PorkMoney to grow their business by investing and getting good returns on it. Obi stated that PorkMoney gives between 20 and 35 percent returns on investment depending on the amount invested by the partners.

Start-Up Digest Team ODINAKA ANUDU Editor

odinaka.anudu@businessdayonline.com 08067478413

Reporters Josephine Okojie Angel James Joel Samson Graphics

BUSINESS DAY

C002D5556

Monday 13 August 2018

Start-Up Digest

‘Start-ups need grants, cheap loans to unleash potential’ Gift Oranyelu is the CEO of Giftedartistry, a make-up studio based in Lagos. Gift is a graduate of Sociology from Houdegbe North American University, Benin Republic, Cotonou. In this interview with BUNMI BAILEY, the young entrepreneur shares how a clear-cut vision is driving her business. Introduce yourself, your business and tell us when you started. I am a professional make-up artist. We help clients look better while attending weddings or other special events. We give beauty makeovers to people who want to upgrade their everyday images.

Government should help in providing sufficient electricity for businesses to thrive. This can help in reducing cost of getting petrol. Another point is that government should help in creating funds for start-ups or existing entrepreneurs who want to expand. Although I have heard of them doing such, the procedure is a long and can make one frustrated. They should try to release grants or loans to individual who have a reasonable business plan.

What prompted you to pursue a career in this industry? I am a fan of the arts. I have always had this talent for drawing/painting and I actually wanted a skill for myself, but I knew that being an artist was too complex. Then I thought of being a make-up artist, so I enrolled and started attending make-up classes. Like other enterprises, make-up businesses fail within two to five years of inception. Why is this so and what do you think can be done to reduce this? First of all, being an entrepreneur is all about risk-taking. Those who cannot take risks go under. There is going to be a lot of losses, wasted time and other things, but if you cannot overcome them, you may fail. Also, saving is very important in entrepreneurship. Lack of savings culture is bad. Every entrepreneur needs a backup and saving is one of the most reliable back-ups. However, lack of vision can bring about failure. An entrepreneur must have a vision for his/her business, because it is only vision that can keep you

What has helped you to sustain your business since you started? It has been God. Starting up the business has not been very easy, especially when there is no back-up. There were ups and down; there were challenges and some people were not ready to pay for my services. But when you have that zeal, passion and are prayerful, things will definitely go well. Gift Oranyelu

moving forward. What was your initial start-up capital? I started with about N100, 000 Every business has its challenges, what are the challenges that you are currently facing? I wouldn’t say I am not facing any

Airtel reaffirms commitment to young entrepreneurs, SMEs …backs ‘25 Under 25 Entrepreneurs’ award” IFEOMA OKEKE

eading telecommunications services provider, Airtel Nigeria, has restated its commitment to the growth and development of Small and Medium Scale Enterprises (SMEs) in Nigeria with the view of deepening the economy. Speaking on its partnership with SME 100 Nigeria’s 25 Under 25 Entrepreneurs Awards, Airtel said that there is a growing recognition of the vital role that SMEs play in economic development, especially youth-run enterprises and it has become very important for all stakeholders to encourage and support youth entrepreneurs that are creating value. “Over half of Nigeria’s population today are below age 30 and it is imperative to set the youth on the right track, acknowledging their skills, recognising creativity, hard work, courage, resilience and supporting their ideas in order to build a viable economy,” the telco noted. The third edition of the Airtelsponsored SME 100 Nigeria’s 25

Under 25 Entrepreneurs Awards held on Saturday, August 4 2018 at Terra Kulture, Victoria Island, Lagos. Out of over 4,500 applicants across several sectors, the jury of the awards’ platform selected 25 entrepreneurs that have successfully made socio-economic impact since the establishment of their business. The award categories spanned across different industries from information technology (IT), media and communications, energy, education, health care, e-commerce, fin-tech, arts and craft, agriculture, fashion, hospitality, manufacturing, sports, and music, among others. According to Charles Odii, executive director, SME 100 Nigeria, “This award is beyond recognising innovative young entrepreneurs, it is a call to join a group of top-notch entrepreneurs, mentors and industrialists across a wide range of industry in the SME 100 community”. The 25 Under 25 Entrepreneurs Awards is an annual award by SME 100 to recognise, celebrate and encourage some of Nigeria’s most innovative entrepreneurs under the age of 25 across various categories.

challenge, because every entrepreneur has a challenge. One of my biggest challenges is electricity. My business requires electricity to run. When I am not getting enough electricity, it’s a challenge. When I am spending most of my profit on petrol for my generator, it’s a challenge. Also, as an entrepreneur, I

save, which serves as my backup, but then, it is not enough. I need more capital to keep my business running. I still need to buy more equipment to produce more quality products. Lack of adequate capital is a challenge. How can government improve start-ups in Nigeria?

What would you tell young people like yourself who would want to go into your type of business? There are five things I would tell them. Dreams are nothing without action. Dream it, then do it. Smile more, and worry less. Positivity is infectious and happiness is a choice. Do not worry about getting knocked down, instead, focus on getting back up as quickly as possible and never stop learning.

LSETF renews commitment to free vocational training programme ODINAKA ANUDU

he changing nature of work in the 21st century is one of the most important concerns of the day, especially with the rising cost of living and population in a rapidly urbanising megacity like Lagos.

In this vein, the Lagos State Employment Trust Fund (LSETF) in collaboration with the United Nations Development Programme (UNDP), introduced the Employability Support Project to improve the pool of skilled and employable manpower in Lagos and alleviate the acute shortage of employable

L-R: Salako Olamide Ibrahim, Graduate, Lagos State Employability Support Project (LSESP); Shola Giwa, chairman, House Committee on Wealth Creation; Oluranti Adebule, deputy governor, Lagos State; Ifueko Omoigui Okauru, chairman, Lagos State Employment Trust Fund (LSETF), and Akintunde Oyebode, executive secretary, LSETF, during the graduation ceremony of 540 trainees of the LSESP in Lagos recently

labour in the construction, manufacturing, healthcare, hospitality, entertainment and garment-making sectors. The free vocational training provides free four to eight-week vocational training to Lagos residents who are either unemployed or underemployed and also works towards placing successful trainees in jobs after training. Already, a good number of trainees have been placed in jobs and large organisations have indicated interest in hiring trained and certified candidates from the programme. Since August 8, representatives of LSETF have been going on a tour of radio stations and communities to educate them about the importance of vocational skills in giving young and vulnerable youths a fighting chance as well as to inform employers about the benefits of recruiting their workforce from the Project’s database of trained and certified workers. This will end on August 19. The team holds community engagement activities at the Isheri Olowora, Ojodu Berger, AgricIkorodu and Lagos Island between the 10th to 19th of August, 2018

BUSINESS DAY

Monday 13 August 2018

Start-Up Digest How Adeshina re-invents online marketing JOSEPHINE OKOJIE

d e s h i na Ad ewumi is the chief operating officer of P rov i l l e. n e t , Africa’s online service marketplace that provides a platform for professionals and their prospective businesses and individuals. Adeshina was inspired to set up Proville.net out of his desire to bridge the gap between professionals and their customers through digital platforms. The Proville.net dream is to drive excellent service delivery while helping to create jobs for the Nigerian youths across Africa, Adesina says. He says Proville.net, a platform under Proville Business Solutions Limited, was duly registered in 2016 though commenced business operations in 2017. The accountant-turnedCOO of one of the fastest growing online service marketplaces, tells Start-UpDigest that the business has tremendous opportunity for growth within the short time of its operation, but

adds that there are still more milestones to cover. “Proville as a brand has shown remarkable achievements so far. We have released our platform—Proville.net—and the turnout has really been remarkable. The truth is that every milestone covered gives room for new milestones. We are still at 1.0 and aspire to grow upwards, as growth never stops,” Adeshina says. Proville.net has a good, strong and sustainable business model, which has kept us in business despite challenges in the country. “Our platform allows subscribers the option to escrow your payment. By escrow, I mean we hold the funds in trust until the customer is satisfied with the job done and authorises for funds to be released. We also allow for direct payment, which is very rare in the industry,” the young COO says. “We are the first online service market place to launch out, with web and mobile (IOS and Android) on their respective stores, concurrently giving our users opportunity to work and collaborate on-the-go.

Adeshina Adewumi

“We also provide realtime ratings and portfolios of our professionals and their prospects (businesses and individuals), so that they can have an index to base their choice of professionals when searching for professionals or prospects on our platform,” he ex-

NACCIMA, MAN call for rate cut to steer 37m SMEs ODINAKA ANUDU

igerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Manufacturers Association of Nigeria (MAN) are asking the government to cut interest rate in a way that small businesses can access funding. They say micro, small and medium enterprises (MSMEs) create the most jobs and therefore should be supported with singledigit funds to enable them do more. “ Fi ve p e rc e nt i ntere s t rat e w ou l d f u r t h e r stimulate the productive sectors of the economy, create jobs and provide new opportunities for the micro, small and medium enterprises (MSME) operators,” said Iyalode Alaba Lawson, president of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) . According to the most recent Enterprise Baseline Survey conducted by

the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), there are 37 million MSMEs in the country, contributing almost 50 per cent to the country’s Gross Domestic Product (GDP) and over 60 million jobs for Nigerians. The CBN said in 2016 that banks’ lending to this category of business was less than four percent. The OPS says Nigeria needs to cut the Monetary Policy Rate, which is the benchmark interest rate, down from 14 percent. Frank Jacobs, president, Manufacturers Association of Nigeria (MAN), said what Nigeria needs now to recover fully is a single-digit rate of five percent. “What we need is an interest rate of five percent. We believe that this is what can stimulate SMEs and manufacturing,” Jacobs said recently in Lagos. Interest rates have continued to head north as the CBN retains the MPR at 14 percent. The average borrowing rate by real s e ctor players in 2017 was 22.8

p ercent, repres enting 0.4 percentage point increase from 22.4 percent recorded in 2016, according to MAN. Tony Elumelu, founder of Tony Elumelu Foundation, recently said that every $1 spent on SMEs generates $5. “It is important to fasttrack the recapitalisation of the Bank of Industry (BoI) to enable it to meet up with huge credit demands of the industrial sector,” Jacobs said. “It is critical to intensify the implementation of the Moveable Collateral Registry and Credit Reporting system which were recently passed into law,” he added. According to him, government now needs to open up access to various development funds created by the Central Bank of Nigeria (CBN) such as the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the N300 billion Real Sector Support Facility (RSSF) by relaxing stringent conditions denying SMEs and manufacturers access to these funding windows.

plains. Speaking on the business expansion plan, Adeshina says, “Our next phase would be to invest heavily in our professionals through our incubator hub.” “We also understand that one of the challenges professionals experience is

having a space to work from. So, we will be opening up our space for co-working arrangement to our registered professionals with good access to internet facilities and well-fitted office equipment to facilitate remote working and access to the global work opportunities,” he further says. Answering questions on the challenges facing the business, Adeshina says that poor infrastructure has remained the biggest issue confronting businesses generally in Nigeria. For us at Proville, piloting using clean energy is part of our strategic plan, he ads. “Our business model needs you to be online and active 24/7 in order to get projects done within agreed time frame, but with incessant disruption of power supply, we have to generate our own power— and this has continued to impact operational costs,” he admits. He identifies multiple taxation as another challenge confronting the business. Adeshina urges various tax agencies in Nigeria to work and streamline the country’s tax system while

providing incentives for start-ups and other small and medium scale enterprises (SMEs) operating in the country to increase their survival rate. He commends the federal government for its VAIDS initiative, but stressed the need for more collaboration between businesses and tax agencies for increased rate compliance. “Effective collaborations with the government at various levels can produce amazing results. Our business model is also in line with the current administration roadmap around the ease of doing business and reducing unemployment concerns in Nigeria.” On his advice to other entrepreneurs and startups, Adeshina says, “Commitment is the first word: You have to be committed to your drive. People would only celebrate what you celebrate. Consistency is second: Never give up on your way up. Capacity is the third C: Build capacity and skills and opportunity would find you out. Any idea or start-up would shine with this 3Cs. It’s just a matter of time.”

BoI to drive import substitution with leather financing scheme …product targets over 150,000 SMEs in Aba ODINAKA ANUDU

o improve capacity of operators in the leather products manufacturing sector and intensify import substitution, especially those in Aba cluster, the Bank of Industry (BoI) has unveiled the Aba Finished Leather Goods Cluster Financing programme targeted at over 150,000 artisans in the cluster. According to the bank, the financing programme, which will see beneficiaries accessing up to N300,000 for the procurement of materials for expansion and to improve production, is expected to further boost import substitution. Speaking at the unveiling of the financing initiative in Aba, yesterday, Okechukwu Enelamah, minister of industry, trade and investment, said the launch of Aba finished goods cluster financing programme has essentially addressed some of the challenges of MSME financing. Enelamah, who was represented by Edet Akpan, ministry’s permanent secretary,

said the Aba leather cluster has been in existence for many years with trade passed on from one generation to the other and can be considered to be one of the oldest and most successful trade clusters in the history of this great country. “The cluster of over 30,000 artisans is structured along four specialised production groups for shoe making, belt making, trunk box and bag making. The annual production capacity of shoes alone is estimated at about six million with the products sold in local as well as neighbouring West African market. Machines have also been acquired to enhance capacity both in quality and quantity,”he added. He therefore urged beneficiaries of the financing scheme to ensure that loans are repaid to drive sustainability of the financing programme. Olukayode Pitan, managing director of BoI,noted that the financing programme was designed to provide a tailored bundle of financial and nonfinancial services including capacity building to qualified members of the Leather Products Manufacturing Associa-

tion of Abia State (LEPMAAS). He explained that finished leather products to which LEPMAAS is a significant contributor, accounts for over 80 per cent of the textile apparel and footwear component of the manufacturing sector while informal computations put yearly revenue from the cluster at over N10 billion despite the competing volumes of similar goods being imported. “By providing low interest, non-collaterised loans, the bank has provided flexibility for qualified members of LEPMAAS recommended by their line and zonal chairmen to access up to N300,000 towards the procurement of materials to expand and improve their production activities. “The programme is being implemented alongside Ford Foundation and Fidelity Bank Plc. The Foundation will be providing a grant that specifically focuses on strengthening the capacities of the leaders and beneficiaries even as monitoring structures to ensure loan repayments are instituted. Fidelity Bank will provide account management services to the loan beneficiaries.

BUSINESS DAY Harvard Business Review

C002D5556

MondayMorning

Monday 13 August 2018

In association with

3 Questions about artificial intelligence that nontechnical employees should be able to answer Emma Martinho-Truswell

rtificial intelligence can make your organization more efficient, if employees know what it is capable of doing, and what it should never do. A fast-growing area of artificial intelligence is machine learning, in which a computer program improves its answers to a question by creating and iterating algorithms based on data. It is often regarded as the kind of technology that only the most clever and most mathematicallyminded people can understand and work with. But it is a technological

tool like any other: It can be understood on various levels, and can still

be used by those whose understanding is incomplete.

There are three important questions that any member of your team

should be able to answer: HOW DOES IT WORK? Team members who aren’t responsible for building an AI system should nonetheless know how it processes information and answers questions. It’s particularly important for people to understand the differences between how they learn and how a machine “learns.” WHAT IS IT GOOD AT? Learning what machine learning is good at quickly helps someone to see what machine learning is not good at. Problems that are novel, or which lack meaningful data to explain them, remain squarely in the realm of human specialties. Help your employ-

ees to understand this difference. WHAT SHOULD IT NEVER DO? Just because machine learning can solve a problem does not mean it should do so. There may be some problems that your organization should never ask an AI application to solve. The organizations that will do best in the age of artificial intelligence will be good at finding opportunities for AI to help employees do their dayto-day jobs better, and will be able to implement those ideas quickly.

(Emma MartinhoTruswell is the co-founder and chief operating officer of Oxford Insights.)

How to be a smart consumer of social science research Eva Vivalt

cademic studies in the social sciences often find very different results. For one, chance errors could affect a study’s results. Researchers may also consciously or subconsciously bias their results. All these sources of variability have led to fears of a “replication crisis” in psychology and other social sciences relevant to business. Given this variability, how should we consume evidence? The immediate answer is to not rely too much on any one study. Whenever possible, look for metaanalyses or systematic

reviews that synthesize results from many studies, as they can provide more-credible evidence and sometimes suggest reasons results differ. When considering how much weight to give a study and its results, pay attention to its

sample size. Studies are particularly likely to fail to replicate if they were based on a small sample. Smaller studies also often target the exact sample that would yield the biggest effects. More generally, it can be helpful to think about what

things might be different if the intervention were scaled up. For example, small interventions are unlikely to affect the broader market, but if scaled up, competitors or regulators might change their behavior in response.

Similarly, consider peculiarities of the sample, context and implementation. How did the researchers come to study the people, firms or products they did? If the study was evaluating an intervention, how that intervention was implemented is very important. You may also have more confidence in the results of a study if there is some clear, causal mechanism that explains the findings and is constant across settings. Finally, if it sounds too good to be true, it probably is. This might sound like a cliché, but it’s based on a principle from Bayesian statistics:

We have you covered through CBN’s special intervention for speciﬁed retail invisible transactions.

Are you travelling abroad for vacation

Visit any of our designated branches nationwide for your following invisible trade transactions: School Fees Pilgrimage & Other Travel Allowances (PTA and BTA) Medical Allowances

or studying abroad?

We are here to serve you. *Terms and conditions apply

www.ﬁrstbanknigeria.com

FirstBankofNigeria

@FirstBankngr

Firstbankngr

FirstBankofNigeriaLtd

@ﬁrstbanknigeria

+FirstBankNigeria

Stranger claims should require stronger evidence in order to change one’s beliefs, or “priors.” What if there haven’t been many studies? If that’s the case, you may wish to consider other sources of evidence, such as advice or predictions from others. Overall, trust a mix of your experience and the evidence, but be careful not to be overconfident in your assessments. Most people could benefit by weighing the evidence more, even when results vary.

(Eva Vivalt is a research fellow and lecturer at the Australian National University.)

Monday 13 August 2018

C002D5556

BUSINESS DAY

Politics & Policy

BUSINESS DAY

C002D5556

Monday 13 August 2018

APC plans to distort constitution to impeach Saraki on Tuesday - R-APC …Demands sack of IGP …Urges Saraki to declare Akpabio’s seat vacant INNOCENT ODOH, Abuja

he National Working Committee (NWC) of the Reformed All Progressives Congress (RAPC), has raised the alarm that the ruling All Progressives Congress (APC) led by Adams Oshiomhole has perfected plans to distort the Nigerian Constitution to illegally impeach the President of the Senate, Bukola Saraki, when the lawmakers reconvene on Tuesday, August 14. A statement entitled ‘They Are At It Again’ issued on Sunday by the National Publicity Secretary of the R-APC, Kassim Afegbua, said that the APC leadership is hell-bent on giving nebulous interpretation to the provision of the 1999 constitution (as amended) by using the numbers of Senators present to provoke an impeachment. “To this end, they have called on all APC Senators to make it a point of duty to participate at the plenary on Tuesday to pass a vote of “no confidence” in the Senate President. This will be followed by orchestrated rancourous plenary session from where impeachment motion would be raised and their illegality perpetrated. “There have been two meetings of the leaders and the Senators in the last 48 hours to perfect this approach. The security agencies have also been briefed according

Saraki

to information reaching us. The APC factional chairman has been boasting and insisting that the Senate President would be impeached by whatever means because he no longer deserves to wear the ‘crown’. “It is possible that the leadership of the factional APC now sees the National Assembly as a palace, where crowns and beads are the instruments of authority. Needless to remind them that the National Assembly is an arm of government represented by elected persons who are vested with the responsibility of making laws for the good governance of the country. It is neither a kingdom of princes and princesses, nor is it a sanctuary for traditional doctrinaire where crowns and beads are used to impose monar-

chical authority,” the statement said. The R-APC also condemned the blatant use of cash-for-votes which it said the APC has introduced into Nigeria’s electoral process, adding that the just concluded by-elections in Katsina, Bauchi and Kogi states are testimonies to this fact. It said that this is a sad commentary for a government that preaches anticorruption as its cardinal philosophy of governance, stressing that the desperation to win at all cost and the killings associated with the elections are bad signals towards 2019 general election. The R-APC therefore, called on the Acting President, Yemi Osinbajo, to sack the current InspectorGeneral of Police, who it alleged has shown a manifest incompetence in

the discharge of his responsibilities. “For example, how can an interim report of the Police on the Lawal Daura saga litter the pages of social media platforms when the investigation remains yet inconclusive? How can the Police exonerate itself from the act when it was reported that a Deputy Inspector General of Police, DIG Habila was seen in a meeting with Senators at the Aso Drive private office of the factional chairman of APC, Adams Oshiomhole? What was he doing there as early as 10a.m on that fateful morning of Tuesday, 7th August, 2018?” The R-APC queried. The breakaway faction of the APC in the statement called for an independent Judicial Investigation Panel made of eminent jurists to investigate the immediate and remote causes of the failed political coup d’etat that clearly undermined the Legislature as an arm of government, and also the invasion of the private residences of Judges, siege on the residences of the Senate President and his Deputy. “Getting the Police to do the job is to exonerate the Police, bearing in mind their earlier siege on the residences of the Senate President and Deputy Senate President barely a week earlier. “We have continuously insisted that this APC-led government under President Buhari have ‘outsourced governance’ to the cabals. We are however relieved that God

has commenced the ‘Greatest Revelations’ of all anti-democratic elements in this government, that made thousands of our members to break away. The NASS could upon resumption, also institute a high-powered Investigative Panel to unravel the several invasions that have become the operative themes in our fledgling democracy,” it said. It condemned the high-handedness against its members who have defected to the political parties of their choice, citing the deputy speaker of the Kaduna State House of Assembly as the latest victim of executive lawlessness in the past couple of days because he defected from the APC. The R-APC also condemned the wanton killings in Kogi state during the just concluded by-election pointing out that under the APC, the Muhammadu Buhariled APC Federal Government, human lives have become cheap and of no value. “The political tension in the country is avoidable if only the APC-led government and the party chieftains could refrain from making reckless militarised utterances to heat up the system instead of facing the huge task of providing leadership for the country. The level of extreme poverty and increasing rate of unemployment across the country are realities that should worry any serious-minded government that has the interest of the people at heart.

APC number swells in House of Reps as Isah wins Kogi by-election

2019: Group wants Ambode returned unopposed

PDP, SDP, ADC call for cancellation

JOSHUA BASSEY

JAMES KWEN, Abuja AND VICTORIA NNAKAIKE, Lokoja

he dwindling number of the All Progressives Congress (APC) members in the House of Representatives appreciated as the party’s candidate, Haruna Isah, won the Saturday Lokoja/Kogi Federal Constituency by-election. Returning Officer for the election, Rotimi Ajayi, who announced the results on Sunday in Lokoja, said Haruna Isah of the APC polled 26,860 votes to defeat Bashir Abubakar of the People’s Democratic Party (PDP) who polled 14, 845 votes. Ajayi also announced that Ahmed Imam of the Social Democratic Party (SDP) scored 2,916 votes while the candidates of the Accord Party and Alternative Democratic Congress (ADC) scored 149 votes and 2,984 votes, respectively. “The Labour Party scored 90 votes ; Democratic Alternative scored 159 votes; while Megga Party of Nigeria scored 50 votes. “19,960 votes from 17 polling units were cancelled due to violence

and other malpractices, 15 of the affected polling units were in Lokoja Local Government Area, two were from Kogi Local Government Area”, Ajayi stated. In a further breakdown of the election results, the Returning Officer said 51,669 voters were accredited for the election but 50,036 voted. The by-election was conducted by the Independent National Electoral Commission (INEC) to fill the vacancy created by the death of the former occupant of the seat, Umar Jibrin, also of the APC in March. Following allegations of malpractices in the just concluded House of Representatives by-election Saturday in Kogi State, the People’s Democratic Party (PDP), Social Democratic Party (SDP) and ADC have jointly called on the Ag. President Prof. Yemi Osinbajo, all authorities concerned especially the Independent National Electoral Commission (INEC), the Nigeria Police, DSS, Civil Defence and other security agencies as well as civil society groups, local and international observers to cancel the election. A statement jointly signed by

the three parties’ publicity secretataries- Bode Ogunmola, PDP; Ade Ismail, ADC, and Ochedi Udale Shaibu, SDP, stated that Saturday was indeed a black day in Kogi as they witnessed a broad day rape on democracy, human rights violation and neglect of rule of law through a destruction of electoral materials, physical assaults on innocent electorate, snatching of ballot boxes as well as destruction of private and public properties all under the watchful eyes of the security agencies, especially the Nigeria Police who they said we’re obvious conspirators in the “unholy alliances”. “It’s now an obvious fact considering what is presently happening in Kogi State as regards the by-election that democracy is dead in the state and it will be wrong of us if we did not bring it to the notice of the general public particularly the Ag. President Prof. Yemi Osinbajo and all authorities concerned, especially INEC, The Nigeria Police, DSS, Civil Defence and other security agencies as well as civil society groups, local and international observers,” it said.

political group, known as Yepe Support Group for Ambode, has pleaded with Lagos electorate and political parties to adopt Governor Akinwunmi Ambode and return him unopposed in the 2019 governorship election. The group, which is an independent campaign arm of the Itesiwaju Ipinle Eko Foundation, made the appeal at a rally in Lagos, on Sunday, attended by massive crowd at the Ejigbo mini stadium. Speaking at the rally, Abdul-Hakeem Abdullateef, the convener and commissioner for home affairs, Lagos State, also urged the electorate to register and obtain their Permanent Voters’ Cards (PVCs). According to Abdullateef, “Lagosians must prove that we are ready to develop a common attitude toward the forthcoming gubernatorial election.” “We have a governor who follows the tenets of good governance, rule of law, constitutional democracy, and all- inclusive governance. We are not ready to change a winning team. We must

be united regardless of our political parties and ideological differences by coming together to allow Akinwunmi Ambode complete the infrastructural renewal which are visible in all sectors across the five divisions of Lagos State,” he said. The convener noted that it was politically and economically expedient for political parties and groups to queue behind Ambode, as this would encourage future governors to do well, knowing fully well that Lagosians will always put their political differences aside as a mark of support for a hardworking governor. “Also, if you look at the budget of INEC for the election, one way Lagosians can assist in reducing the huge amount to be spent on the forthcoming election is by not contesting against Governor Akinwunmi Ambode in the election. It will also remove the distractions associated with campaigns as the governor will be able to concentrate in ensuring timely completion of all ongoing projects,” he further said. The commissioner said Lagosians were unanimous that Ambode has done well in many areas including restructuring of the civil service which has saved the state billions of naira.

Monday 12 August 2018

C002D5556

BUSINESS DAY

40 BUSINESS DAY NEWS

C002D5556

Monday 13 August 2018

materials prices drop in H1 2018 Nigeria negotiates $1.1bn agric package with Brazil Time to build as input materials such that, depending Jideofor advises that, given ONYINYE NWACHUKWU, ABUJA

igeria’s Federal Government is currently in bilateral negotiations with the Brazilian government for a $1.1 billion agriculture package intended to lift the country’s present subsistence farming and create needed jobs. The package, proposed by Nigeria’s ministry of agriculture on behalf of the Federal Government, is for Brazil to bring in agricultural machinery and equipment which will be assembled in the country. The South American country known largely for tropical agriculture will also bring in inputs, including fertilizer, seeds, pesticides etc; as well as services like training, project management amongst others to help agricultural output in the Africa’s largest nation. As contained in the project document prepared by the ministry and seen by BusinessDay, the project will be financed by the Brazilian EximBank (BNDES). The term of financing will be 13 years including two years of grace period and 10 years for repayment. It was also gathered that the agreement is expected to be signed before the last quarter of the year. Ricardo Guerra de Araujo, the new Brazilian Ambassador for Nigeria confirmed to BusinessDay that talks had advanced on the project and that what is going on presently is basically discussions on the terms

of the agreement. “The package that we are negotiating with the Nigeria side is of $1.1 billion that will be entirely financed by the Brazilian government with credit guarantees by the Brazilian insurance companies. The Islamic Development Bank will also support this financing structure,” Araujo told BusinessDay in an exclusive interview. BusinessDay leant that the whole project cost will be divided in three tranches, the first one of $380 million, the second one of $310million and the third $310 million for machinery. But when inputs and services are added, it will amount to the first tranche of $420m; the second tranche, $343m; and the third tranche $343, totalling $1.1 billion for the entire project cost. According to the proposal, the Central Bank of Nigeria (CBN) will make available to the local banks concessional resources to cover the working capital needs of the services centers for the first two years to ensure sustainability of the project and also aid financial inclusion. “The idea is to get machineries of course, and provide fertilizer, the seeds, pesticides, training for project managers,” the Ambassador explained. “What we wanted to do in Nigeria is not just export machines but to help Nigeria develop the whole value chain from the export of the machines to the training, to the

maintenance of these machines. “The idea really is not just to export these agricultural equipment but to assemble these machines here in Nigeria,” the Ambassador who resumed in the Nigerian embassy in June explained. Confirming that a big Brazilian manufacturer has already located a place in Bauchi state to site the assembly factory, he added, “ The assembly plant will build this CKD Completely Knocked Down, so they will not arrive the Nigeria market already ready to be used. “It is the Nigerian workers especially young people who will assemble the parts and then sell the final product in the Nigeria domestic market.” Brazil is globally important for both food security and environmental sustainability. It is one of the three largest producers and exporters of sugar, coffee, orange juice, soybean, beef, tobacco, ethanol, and broiler chicken in the world. The country is notable for tropical agriculture and science-based development of successful tropical agriculture. Both countries are enthusiastic that the project would create a technological leap for the Nigerian agriculture sector resulting in increased productivity and quality of agricultural products, particularly as the two countries share almost similar agricultural experiences as well as soil structure, climate and so on.

CBN boosts agric, raw material sectors with $327m, CYN69m HOPE MOSES-ASHIKE

entral Bank of Nigeria (CBN) on Friday enhanced liquidity in the foreign exchange market to the tune of $327 million and CYN69 million to meet the needs of agricultural and raw material sectors of the economy. The dollar injection was made into the interbank retail Secondary Market Intervention Sales, while the Chinese Yuan sale was in the spot and short-tenored forwards. Isaac Okorafor, acting director, corporate communications at the CBN, said the exercise, in tune with the CBN guidelines, was for the payment of Renminbi denominated Letters of Credit for agriculture as well as raw materials. Okorafor said the sales in the Chinese Yuan were through a combination of spot and short-tenored forwards, arising from bids received

from authorised dealers. While noting that availability of Renminbi was sure to ease pressure on the Nigerian foreign exchange market, he attributed the relative stability in the foreign exchange market to the intervention of the CBN as well as the sustained increase in crude oil prices in the international market. He further assured that the CBN would remain committed to ensuring that all the sectors continue to enjoy access to the needed foreign exchange by Nigerians. Meanwhile, $1 exchanged for N360 at the Bureau de Change (BDC) segment of the foreign exchange market, while CNY 1 exchanged for N53.35. The CBN recently signed a bilateral currency swap agreement with the People’s Bank of China (PBoC) worth about $2.4 billion. FSDH Research review in the last five years shows that Nigeria’s imports from China are higher than

the exports to China, leading to a negative trade balance. China has been one of Nigeria’s largest import partners over the last five years, with imports from China accounting for an average of 20.95 percent of total imports between 2013 and 2017. Nigeria’s exports to China averaged just 1.50 percent of total exports over the same period. According to the research firm, the fact that it removes some trade barriers between the two countries may increase Nigeria’s imports from China. This development, without a corresponding increase in Nigeria’s exports to China, will further increase Nigeria’s trade deficit with China. Nigeria needs to develop competitive advantage in the production of certain exportable goods that China currently imports in order for Nigeria to get the full benefit from this currency swap deal.

Experts propose 10-year recapitalisation roadmap for insurance industry MODESTUS ANAESORONYE

n expert has proposed a 10-year recapitalisation roadmap for the insurance industry that will enable life insurance companies raise their capital to N20 billion; general operators N30 billion, and composite firms N50 billion. Adebayo Adeleke, managing director, Lancelot Ventures Limited, who is also a shareholder in many insurance firms, stated this at the third National Conference of the National Association of Insurance and Pension Correspondents (NAIPCO) in Lagos. He said 3-tier recapitalisation roadmap should be clearly thought out and spanned for a 10-year period. According to Adeleke, the first phase of recapitalisation should be within a period of 18 months and Life Underwriters should raise their capital from N2 billion to N4 billion; General Business Operators, move

from N3 billion to N5 billion. Continuing, he said in the second phase, which should be three years after the first exercise, Life operators should move their capital to N8 billion; Non-life, N10 billion, and Composite, N18 billion. He maintained that in the third phase, which should be five years after the second recapitalisation exercise, Life Underwriters should beef-up their capital to N20 billion, General Business underwriters, N30 billion and Composite firms, N50 billion. He called on the National Insurance Commission (NAICOM) to evolve templates and incentives for mergers and acquisitions to enable strong firms absolve weak ones, as against waiting for firms to be bankrupt, and then take over the management. In a similar vein, Bala Zakariya’u, past president, Chartered Insurance Institute of Nigeria (CIIN), charged regulators in the financial

services industry to create the enabling environment for mega companies to be established through mergers and acquisitions, saying, “Such mega financial institutions are to be tasked with higher capital and solvency, sophisticated information technology infrastructure, best in class human resources and strong brand presence.” Zakariya’u further said the mega institutions should also have better all-round capacities and connections as well as cognate strategies to deepen market penetration and enhance finance inclusion. While fears may be expressed that creating mega institutions may lead to the emergence of ‘companies that may be too big to fail,’ which, is every regulator’s nightmare,’ he believes ‘this ought to be a preferred nightmare than what we currently have by default: companies that are too small to succeed.’

CHUKA UROKO

he significant drop in the prices of major building materials in the first half of 2018 is good reason for builders who had abandoned their projects at the peak of economic recession to return to site, a new report on the real estate market performance notes. Major fallouts of the 15-month economic recession in Nigeria were the hyperinflation that peaked at 18.9 percent, described as the worst in 25 years, and the weakened naira, which, at a time, exchanged N420 to the dollar. The twin evils of high inflation and exchange rates escalated commodity prices, including those of building materials, over 60 percent of which is imported, leading to meteoric and unsustainable rise in construction cost and stalling of many building projects. But since the exit from in Q2 2017, inflation rate has eased, month-on-month, to 11.13 percent in May this year while exchange rate has stabilised at N360 to a dollar at the official window. These have impacted positively on the price of building

on the brand, the price of cement, a major building component, has dropped to between N2,550 and N2,600 in H1,2018, down from between N2,700 and N2,900 in corresponding period in 2017, representing about 8 percent drop in price. Michael Jideofor, a building technologist, explains that, because of this development, where a builder would have spent close to N300,000 to buy 100 bags of cement in H1,2017, he would now spend about N260,000, gaining close to N40,000, which is enough for him to buy a tipper load of gravel. But while the price of sandcrete (9inch) block has dropped to 210 in H1 2018 and to N170 at the moment, down from N220 in H1 2017, the price of aluminium roofing sheets (0.55mm) has gone up 7 percent to N2,700 in H1 2018, up from N2,500 in H1,2017. The price of cables (6mm/ coil) has also come down to N35,000 in H1 2018, down from N38,000 in H1 2017, representing -9 percent drop. Similarly, the price of paving stone 60mm (local), which is very much in vogue for builders, has dropped from N2,100 in H1 2017 to N1,800, representing -17 percent drop in price.

the fluctuation in exchange rate and likely instability in the money market that may be triggered by election spending, this is the time to revisit all abandoned projects and even to start new ones. In the last six months, the Nigerian economy as a whole has experienced significant improvements. Though this can hardly be said of the real estate sector, which has recorded negative growth since Q4 2016, there has been a market shift as seen in increased enquiries for houses. In the light of this, the new report which was compiled by Northcourt Real Estate notes that the various sub-sectors (residential, retail, office, hospitality and industrial) experienced stabilisation of rents, revival of some suspended projects and the commencement of new ones, in stark contrast to H1 2017. “Prices of building materials have also dipped or remained constant when compared year-on-year. This is expected and understandable, seeing that foreign exchange rates have stayed fairly stable for about 12 months now and is also readily available,” Ayo Ibaru, director, Real Estate at the company, notes.

41 NEWS

Monday 13 August 2018

BUSINESS DAY

At least, 3m new jobs needed annually Almak Media appoints Aliu Akoshile as CEO to reduce Nigeria’s unemployment rate A … need for more service sectors - Pwc JONATHAN ADEROJU

egardless of the strong economic growth, which averaged 6.5 percent between 2000 and 2017, high unemployment remains a critical challenge facing the Nigerian economy. The rate of high unemployment in Nigeria can be attributed to the slow pace of job creation, which has been considerably weaker than labour force growth. Between 2010 and 2017, average job growth was 1.6 percent, weaker than labour force growth of 3.9 percent. According to PricewaterHouseCoopers (Pwc) research to reduce the unemployment rate in Nigeria, it has been estimated that employment growth of at least 4 to 5 percent is required, and that would translate to at least 3 million new jobs annually. The informal economy, which is usually linked with weak productivity growth, is large in Nigeria and accounted for an estimated 41.4 percent of GDP and 68.0 percent of jobs created between 2013 and 2016. Providing jobs capable of boosting incomes and reducing poverty requires creating more high productivity jobs within the formal sector. Nigeria needs to focus on the service sector to help reduce the unemployment rate. Services sector jobs require a wide range

of skills from artisans in traditional services, to ICT experts in modern services. But without higher productivity in both segments, the potential of services to drive employment will be unrealised; therefore enhancing productivity in services requires a significant investment in human capital development. Similarly, the services sector can be harnessed to diversify exports this is particularly important because services is less reliant on physical infrastructure. Despite this, boosting services exports would still require significant improvements to telecoms and power infrastructure. According to the National Bureau of Statistics (NBS) data, put Nigeria’s unemployment rate at 18.8 percent as of Q3’17. Two years prior, this rate was 9.9 percent. Similarly, the underemployment rate reached the highest on record at 21.2 percent, from 17.4 percent over the same period. Nigeria’s population is projected to rise to 410 million by 2050, and with this population the country will rank as the third largest populated country globally. As such, implementing policies that will deliver inclusive growth and engender a productive labour force is vital. Recall that the Nigerian economy expanded rapidly between 2000 and 2014, recording an

average annual growth of 7.6 percent y/y. Over the same period, employment growth was 1.2 percent, markedly below the labour force growth of 2.9 percent. As a result, the unemployment rate, which also reflected underemployment at the time, increased from 13.1 percent in 2000 to 24.3 percent in 2014. The 2016 economic recession saw job creation decline to 422,000, the weakest in four years. The implication was an increase in the informal sector share of new jobs created to 73.7 percent. The Pwc research also reveals factors that can help in reducing unemployment in Nigeria through services-led growth. The need to look into human capital development is highly need as the services sector relies on high skilled workers to drive high productivity sectors, which include ICT, medical services and other professional services. To develop adequate human capital, there needs to be a ramp up in investment in education, through increased funding for schools, and public research and technological institutes. However, given the poor state of public finances, where spending on education was allotted only 7 percent of the Federal sixth budget in 2018, unlocking investment in education would require increased participation from the private sector.

lmak Media Limited, an integrated marketing communication firm, has announced the appointment of Aliu Akoshile as CEO. The appointment, which took effect from August 1, 2018, is to position the media specialist company for strategic growth and realisation of its mission to offer innovative marketing communication solutions that create and transform brands. Akoshile started his journalism career with Sunday Times in 1986, and in over three decades he has traversed the gamut of integrated media communications as a reporter, associate editor, editor-in-chief, PR and communications head of a commercial bank, and media executive in charge of business development and brand strategy. He was until now the Associ-

ate Director, Business of Media Trust Limited, publishers of Daily Trust newspapers, where he served for nearly 11 years and led teams that successfully executed customer-centric products development, brand innovations, creative marketing, special sales, commercial printing, events planning and activation, and international stakeholders’ relationships. Akoshile holds a B.Sc. degree in Mass Communication from University of Lagos and M.Sc. degree in International Relations and Strategic Studies from the University of Jos. He has attended leadership training on strategic management at the University of Oxford, UK; Howard University School of Business, Washington DC; and the Lagos Business School/Pan African University.

A consummate professional, Akoshile is a member of the Nigerian Institute of Management; Nigerian Institute of Public Relations, and a registered practitioner of advertising certified by the Advertising Practitioners Council of Nigeria.

UAC Foods appoints Oladele Ajayi as MD

ladele Ajayi has been appointed as the new managing director of UAC Foods Limited, a joint venture company between UACN and Tiger Brands Limited of South Africa. Ajayi holds a PhD in Mechanical and Process Engineering from the University of Strathclyde, United Kingdom, and is also an alumnus of the Advance Management Programme of Harvard Business School. In 1989, he joined Nigerian Breweries as an assistant brewer and following several roles in technical, marketing and sales, both in Nigeria

and overseas, was appointed sales director of Nigerian Breweries. Thereafter, he was appointed managing director of Heineken, Hungary, and later managing director, Central and East Africa sub-regions for Heineken International. Oladele has also served in many non-executive roles such as chairman of Sierra Leone Brewer y Limited, chairman of Brasserries et Limonaderies du Rwanda, external director of Guinness Ghana Breweries Limited, and director of Brasserrie de Bourbon, St Dennis, La Reunion.

Prior to his appointment, he was the special adviser to the Federal Minister of Industry, Trade and Investment and non-executive director of GZ Industries.

Air passenger demand accelerates in June IFEOMA OKEKE

L-R: Leke Aider, principal, Aider Consulting; Oby Ezekwesili, senior economic advisor, Africa Economic Development Policy Initiative, and Wole Oshin, group managing director, Custodian Investment plc, at the Custodian Mentors conference in Lagos.

New meter box to address shortfall in accessibility KELECHI EWUZIE

cting President Yemi Osinbajo, as part of the Federal Government drive to boost private sector participation, inaugurated a world-class meter and other plastics manufacturing factory constructed with the aim of addressing the shortfall in meter accessibility by end users in Nigeria. Osinbajo, speaking when he paid a visit to Mojec International Limited, Nigeria’s smart meters manufacturing company in Lagos on Friday, to commission the project, said the facility was a big achievement and milestone that would not only boost local capacity but also create thousands of jobs. While expressing optimism

on the determination of government to achieve its target in the area of power generation, the acting President noted that the facility was a huge step forward for the development of the power sector, noting that it would help significantly in addressing the 6 million energy meter deficit. Osinbajo, who was encouraged by the company’s 100 percent local capacity, promised that government would continue to provide the enabling environment for local manufacturers to thrive, noting that works were in progress to introduce cheap financing model that would enable them produce meters that meet demand. Chantelle Abdul, managing director, Mojec International Limited, commended the acting President for his commitment

to promoting local content, and expressed the company’s desire to work closely with the Federal Government to find lasting solutions to the problem of steady power supply in Nigeria. She stated that the current facilities of factory on ground were capable of producing meters from start to finish, saying, “This factory has provided enough proof that local companies can produce meters that can meet global standard, which could consequently help in reversing government policy on local meter manufacturing. “Here in Mojec, it is very obvious. Practically, every one you see from the factory down to the reception, they are all Nigerians. It shows that we are at the forefront of innovation, manufacturing and human capital develop-

ment.” She appealed to the Federal Government to assist local manufacturers by formulating policies that would encourage cheap financing, which could go a long way to make meter accessible to the people. “From our MAP policy, 70% of meters are expected to be delivered through importation while 30% is local production. If we have a market of about 6 million metering gap, this means only 2 million meters are allowed to be provided locally and that can easily be done by Mojec alone,” she said. The acting President further observed that it was very obvious that Nigerian talent and creativity had proved they could compete with the best anywhere in the world.

nternational Air Transport Association (IATA) announced global passenger traffic results for June showing that demand (measured in total revenue passenger kilometres or RPKs) rose by 7.8 percent compared with June 2017. This was up from 6 percent year-over-year growth recorded in both May and April. June capacity (available seat kilometres or ASKs) increased by 6.5 percent, and load factor rose 1 percentage point to 82.8 percent. The first six months of 2018 produced demand growth of 7 percent, a strong performance, but down from 8.3 percent growth recorded in the first half of 2017. “The first half of 2018 concluded with another month of above-trend demand growth, which is a good indicator for the peak summer travel season in the northern hemisphere. But the looming prospect of a global trade war is casting a long shadow. “Additionally, rising cost inputs—fuel prices have soared by approximately 60% over the past year—are reducing the stimulus of lower fares,” Alexandre de Juniac, IATA’s director-general/ CEO, said. June international passenger demand rose 7.7% compared to June 2017. All regions recorded growth, led by airlines in the Middle East and Africa. Capacity climbed 5.9%, and load factor increased 1.4 percentage points to 81.9%. African airlines’ traffic soared 10.9% in June, up substantially from just 2.1% growth in May, although this partly also reflect

volatility in the monthly data. Capacity rose 5.5%, and load factor jumped 3.3 percentage points to 68.0%. Higher oil and commodity prices are buoying the economies in a number of countries, including Nigeria. Asia-Pacific airlines’ June traffic rose 9.5% compared to the year-ago period, up from 7.7% growth recorded in May year-over-year. Capacity rose 7.4% and load factor edged up 1.5 percentage points to 80.6%. Demand is being stimulated by robust regional economic growth and increased city-pair options for travellers. Middle Eastern carriers posted an 11.0% demand increase in June compared to the same month last year. This was a sharp turnaround from the flat traffic growth in May, which was partly attributable to the timing of Ramadan between the two years. European carriers saw traffic rise 6.1% in June compared to June 2017, down slightly from a 6.3% year-over-year increase recorded in May. Capacity climbed 4.8% and load factor rose 1.1% percentage points to 86.8%, highest among the regions. Growth is supported by a relatively healthy economic backdrop. However, the possibility of air traffic control strikes could affect growth over the coming months. Demand for domestic travel climbed 7.9% in June compared to June 2017, up somewhat from the 6.7% annual growth seen in May. June capacity increased 7.5%, and load factor edged up 0.3 percentage point to 84.5%. Led once again by double-digit gains in India and China, all markets reported demand increases, but with wide variation.

42 BUSINESS DAY NEWS

C002D5556

Nigeria goes from best to worst as stocks enter ... Continued from page 1

fectively tossing the market into bear territory. A market is said to be in bear territory when it is down 20 percent from its last peak. The Nigerian market has sold off despite the rally in oil prices (Brent crude is up 9 percent to $73 per barrel year to date as at Friday) which historically has a positive correlation with equities.

The Johannesburg Stock Exchange (JSE) is the only other African market to have slipped into bear territory this year after shedding 24 percent from a February peak. Investors have also sidestepped the cheap valuation of Nigerian stocks which currently trade at 10 times earnings compared to the MSCI frontier market average of 14.05 percent, South Africa’s 17.68 percent, Kenya’s 14.39 percent and Egypt’s 16.08 percent. A drastic slump in foreign buying amid boiling political tensions is at the heart of the stock sell-off and is likely to continue until after elections in 2019, according to Wale Okunrinboye, head of research at Sigma Pensions. “It’s about timing,” Okunrinboye said when asked if the current cheap stock valuations serve up the best opportunity for value investors with a medium to long term horizon to buy. “There’s higher gain in buying

most of your holdings when the market is at the bottom, however it is best to start gradually accumulating now,” Okunrinboye said. Nigerian stocks have gone from best performing in January to the bottom of the pack, closing at a negative year to date return of 7.3 percent Friday. That makes them the worst performing among African peers. South African and Egyptian stocks settled at a year to date return of -2 percent and -0.9 percent respectively at close of trading Friday, while Kenyan stocks closed at 0.9 percent. Dangote Cement Plc, Africa’s biggest producer of the building material, dragged down Nigerian stocks the most on Friday, declining 6.1 percent to N214, bringing its losses this year to 7 percent. That is despite the fact that the company posted another quarter of impressive top line performance in the second quarter. Relative to the second quarter of 2017, the company grew its top line by 17.5 percent to N240.3 billion after total revenue benefitted from a 12.5 percent boost year on year in volumes growth to 6.2 metric tonnes, accompanied by favourable pricing. “Despite improving macroeconomic fundamentals and better earnings outlook for listed companies, valuations of counters on the exchange has continued to decline as investors shun emerging and frontier markets particularly Nigeria on the back of heightened political risks,” analysts at Lagos-

based Cardinal Stone Partners said in a note to clients. “However, we think currently attractive valuations provide strategic investors good entry points to cherry pick fundamentally sound stocks in anticipation of the recovery when political tensions abate.” The year 2019 looks set to be one of the most tightly contested general elections since the return to democratic governance, as the opposing People’s Democratic Party (PDP) seeks to return to power after defeat in the last general elections against the All Progressive Congress (APC), snapped a 16-year rule. This has taken a new twist following the recent coalition by the PDP and 38 other political parties to field a single candidate to pose a formidable challenge to the incumbent. More than fifty lawmakers and two state governors have quit the APC in the past week, with the vast majority switching allegiances to the PDP. Both parties have struggled with internal divisions but the mass defections seems to be breathing new life into PDP which ruled since the end of military rule in 1999, prior to President Muhammadu Buhari’s election in 2015. The economy has been at the fore front of the political spat. Investors say the economy isn’t doing so badly but a feisty political turmoil has forced them to underweight Nigeria tipped to post a 2 percent growth in Gross Domestic Product by the International Monetary Fund in 2018. Continues on wwwbusinessday online.com

Monday 13 August 2018

What we have learnt from bank earnings ... Continued from page 1

Bank for Africa (UBA), Fidelity Bank, Stanbic IBTC Holdings set to report earnings this week, here is the trend so far. Interest Income Interest income is declining on lower assets yield,” said Gloria Fadipe, head of research at CSL Stock Brokers. “Most haven’t grow n loan books but they said they expect an uptick in loan book of between 2 to 5 percent in the second half,” said Fadipe. Banks no longer enjoy free money as a drop in Treasury bill yields deal a blow on interest income, meaning they may be forced to start lending, cut costs, improve on foreign exchange trading to underpin future profit. For instance, the cumulative interest income of seven lenders that have released half- year results fell by 2.87 percent to N880.02 billion from N906.07 billion the previous period. The banks are: Zenith Bank Nigeria Plc, Guaranty Trust Bank Plc, First Bank Holdings Plc, First City Monument Bank (FCMB) Plc, Union Bank Nigeria Plc, Sterling Bank Plc, and Diamond Bank Plc. Zenith Bank’s interest income was down 12.86 percent to N228.67 billion in the period under review. A breakdown of the figure shows interest income on loans and advances reduced by 18.0 percent to N146.58 billion while interest income on treasury bills fell by 13.32 percent in the period under review. GTBank’s interest income was down 2.40 percent to N161.88

billion as at June 2018, as against N165.88 billion the previous year; caused by a 6.68 percent decline in interest income on loans and advances to customers. FBNH’s interest income declined by 3.0 percent to N225.40 billion in June 2018 from N232.37 billion the previous year. The drop was stoked by a 4.89 percent and 2.39 percent reduction in interest on loans and advances to customers and interest on investment to N135.37 billion and N81.59 billion the previous year. Credit Quality An improvement in impairment loss on financial assets on the back of gradual economic recovery and net gains on foreign exchange trading were a major driver of profit as there was increase in non-interest income. The combined impairment charge on credit loss of the seven lenders declined by 58.31 percent to N86.75 billion, which helped lift profit by 11.34 percent to N236.68 billion in June 2018 from N212.56 billion the previous year. Zenith Bank’s net income was up 8.52 percent to N81.73 billion in the period under review, thanks to a 77.07 percent reduction in loss expense to N9.72 billion in the period under review. GTBank’s net income was up 14.22 percent to N95.58 billion in June 2018 from N83.67 billion the previous year; thanks to a 162.43 percent surge in foreign exchange trading gains to N9.50 billion and a 20.70 percent increase in foreign exchange revaluations gains. Continues on wwwbusinessday online.com

Kachikwu’s marginal field bids seen unlikely... Continued from page 1

ister of State for Petroleum, Ibe kachikwu announced that the Federal government was ready to conduct marginal fields bid rounds in 2018 adding that the regulators were only waiting for necessary government approvals before commencing the exercise. Eight months down the line, with politics currently dominating the scene in Nigeria, investors and oil experts are sceptical that the marginal fields’ rounds will ever see the light of day in 2018. R-L: Obong Idiong, managing director/CEO, Africa Prudential plc, sounding the gong to close trading on the Luqman Agboola head of infraNigerian Stock Exchange (NSE); Tunji Kazeem, chief risk officer, Nigerian Stock Exchange; Eniola Fadayomi, structure at Sofidam Capital Limited chairman, Africa Prudential plc; Peter Elumelu, non-executive director, Africa Prudential plc, and Peter Ashade, does not expect any successful bid non-executive director, Africa Prudential, at the closing gong ceremony in honour of the company at the Nigerian happening in Nigeria over the next Stock Exchange on Friday. five years as the country needs to members. clear a backlog of issues that have Business Day gathered that out dogged the sector in the past. of the 855,092 registered voters, “When you look at the market the Continued from page 1 hereby declared the winner and is 308,500 were accredited at the 1825 feeling is that the money is not there returned elected”. voting points and 1,577 polling so who will bid for those fields?” clared the APC’s candidate, Ahmad Speaking on the outcome of Babba-Kaita as winner of the Saturday the election, Mustapha Inuwa, units and 128 wards in the district Agboola asked. Marginal Field refers to an oil field that may not produce by-election for Katsina North District. Secretary to the Katsina State while 294,050 voted in the poll. Also INEC on Sunday evening enough net income to make it worth Ahmad who is a member of Government said the result was the House of Representatives a clear indication that the APC announced APC’s candidate, Ha- developing at a given time. However; should technical or scored 224,607 votes to defeat would be victorious in the 2019 runa Isah as the winner of the Saturday Lokoja/Kogi Federal Con- economic conditions change, such his elder brother and close rival, general elections. stituency by-election in Kogi state. a field may become commercial Kabir Babba-Kaita of the Peoples Inuwa commended the people Returning Officer for the elec- field. Ayodele Oni, energy partner Democratic Party, PDP, who got of Katsina North Senatorial District tion, Rotimi Ajayi who announced at Bloomfield Law Practice said the 59,724 votes. for coming out to vote for the APC the results on Sunday in Lokoja said government loses a huge amount of The election was conducted candidate in the by-election. Isah of the APC polled 26,860 votes revenue by not conducting oil field to fill the vacant seat for Katsina He said the voter turnout was North Senatorial District follow- encouraging, considering the to defeat Bashir Abubakar of the bid rounds. “Nigeria has lost more from noning the death of Senator Mustapha number of the accredited voters Peoples Democratic Party (PDP) producing marginal field licenses Bukar, in April. Katsina North is and the 294,050 people who cast who polled 14, 845 votes. Ajayi also announced that which it has estimated could cumuthe senatorial district of President their votes and described the keenAhmed Imam of the Social Dem- latively produce an average of 90,000 Muhammadu Buhari. ly contested election as peaceful. ocratic Party (SDP) scored 2,916 bpd of crude,” Oni, energy partner at Professor Hudu Abdullahi, The Katsina State Chief Scribe INEC Returning Officer who an- noted that the result was a clear evi- votes while the candidates of Bloomfield Law Practice said. Oni noted that some of the facnounced results of the bye - elec- dence that APC was in full control t h e A c c o rd Pa r t y a n d A l t e rtion said, “that Ahmad Babba- of the state, adding that, govern- n a t i v e D e m o c ra t i c C o n g re s s tors responsible for non-producing Kaita of APC having satisfied the ment appreciated the resilience ( A D C ) s c o re d 1 4 9 v o t e s a n d marginal fields range from inappropriate due diligence to technical or requirement of the law and scored and understanding exhibited by 2,984 votes, respectively. the highest number of votes is the electorate especially the party Continues on wwwbusinessday online.com financial challenges.

APC wins by-elections in three states, as R-APC...

Oni emphasised that a key indicator of having a bid round in 2018 would be the issuance of the bid round guidelines by the Department of Petroleum Resources (DPR), without which the likelihood of a bid round would only be speculative and unlikely. “As things stand, the earliest period will be 2019 in my view,” Oni said. However, Abayomi Fawehinmi an energy analyst in a Lagos based oil firm still expects the marginal fields bid rounds to happen in 2018 irrespective of the country’s political environment. “DPR are those in charge of marginal fields bid rounds and they are largely remote from politics,” Fawehinmi told Businessday. When BusinessDay contacted DPR, its head of public affairs Paul Osu said the scheduling of marginal bid rounds is not within the purview of the Department of Petroleum Resources as regulators. “It is the responsibility of the Federal Government of Nigeria which is represented by the office of the Honourable Minister of Petroleum Resources,” Osu told BusinessDay. Several attempts by BusinessDay through emails and phone calls to get the Ministry of Petroleum resources to comment on the marginal bid rounds proved abortive. Now, more than three years into the administration of President Muhammadu Buhari who is also minister of petroleum resources, it remains uncertain when there will be a major licensing round or at least a marginal fields bid round in the industry, which is in desperate need of investments to snap out of doldrums. Continues on wwwbusinessday online.com

Monday 13 August 2018

C002D5556

BUSINESS DAY

AbujaCityBusiness Comprehensive coverage of Nation’s capital

FG condemns hackers of FRSC portals OYIN AMINU, Abuja

ederal Government has called on the 36 State Governments to set up model driving schools in their states as an antidote to curbing cases of quackery in the driving school operation in the collective efforts to restore sanity to the nation’s roads. Boss Mustapha, Secretary to the Government of the Federation (SGF) who gave the charge while declaring open the National Workshop for Driving School Operators in Nigeria held in Abuja, frowned at the ugly practices whereby some operators of driving schools would hack into FRSC’s portal with a view to accessing the certificates and sabotaging the licensing system of the country. Mustapha who was represented by Olusegun Adekunle, Permanent Secretary, General Services Office of the SGF, expressed dismay at the level of avoidable crashes caused by poorly trained drivers and enjoined stakeholders to join hands to sanitise the operation of driving schools in the country. He directed that henceforth, the Commission must ensure that it is only those that have been properly trained and appropriately certified that are allowed to drive on

the nation’s roads. Mustapha mandated the FRSC Management to collaborate with relevant stakeholders to evolve measures that could address the malpractices, saying it they were capable of undermining the integrity of the licensing system. While commending FRSC for being proactive in matters of road safety, the SGF directed that all necessary measures be taken to ensure that the nation’s road is ridoff crashes caused by poorly trained and unlicensed drivers. He urged all drivers including the private vehicles operators to install speed limiters in their vehicles as a means of addressing speed induced crashes. On his part, Boboye Oyeyemi, FRSC Corps Marshal explained that the policy of Driving School Standardisation Programme evolved as part of Management’s resolve to address issues of standardisation in the operation of driving schools in the country. He noted that in the efforts to achieve the goals, state committee on driving schools was set up to deal with issues of monitoring and recommendation of the driving schools for accreditation to ensure that the highest standard is observed by all operators licensed to operate.

Kano State, farmers partner on repayment of agric loan ADEOLA AJAKAIYE, Kano

usuf Gawuna, Kano State Commissioner for Agriculture and Natural Resources, says the administration of Governor Abdullahi Umar Ganduje in the state is implementing an initiative aimed at encouraging farmers in the state to promptly repay loans they obtained for agricultural activities. Gawuna disclosed that the initiative was fashioned out to correct the wrong notion which most farmers in the state have about obtaining agriculture loans which they see as their own share of national cake. He noted that the initiative which is being implemented in partnership with the leadership of the State chapter

of All Farmers Association of Nigeria (AFAN) is helping to increase the rate of loan repayment from the 4% it was before the advent of the Ganduje administration. The disclosure of the about the initiative is coming on the heels of an announcement made by the State Government that the sum of N132 million is to be released to the AFAN in the state for the implementation of a new Tractors Acquisition Scheme. According to the commissioner, his ministry was forced to introduce the loan repayment arrangement as way of encouraging the farmers to move away from the prevailing entrenched culture of not repaying agriculture loans obtained from government financial institutions.

L-R: Senator Kabiru Marafa; Senate Leader, Senator Ahmad Lawan chatting with Senator Godswill Akpabio at a political function in Akwa-Ibom.

Indian firm partners Kano farmers on mechanized farming ADEOLA AJAKAIYE, Kano

ahindra, the w orld number one tractor manufacturing company, says it is participating in a tripartite partnership with Kano farmers and the State Government, in the implementation of a tractor acquisition project geared at mechanizing farming activities in the state. Accordingly, the company hinted that it was participating in the tractor acquisi-

tion partnership programme under an ‘end to end solution business concept’ it fashioned out as a way of supporting the development of Nigeria` agriculture sector across the value –chain. Manoj Ramakrishnan, head of operations, Springfield Agro Limited, the company representing the tractor manufacturing entity in Nigeria, made this disclosure, at the official launching of the tractor acquisition partnership which took place at the Kano Office of All Farmers Association of Nigeria, on Wednesday.

Manoj said that his company, is committed to working with Nigeria in developing agriculture beyond just supplying tractors, as it has enough capacity to participate across the value –chain. He stated that the end to end solution business concept which company have in mind for Nigeria also entails: Land Clearing, Land preparations, Supply of Improved Seeds, Fertilizers, Agro-Inputs, Post –Harvest Mechanization, and Post –Harvest Procurements. “We glad to be part of this tripartite partnership programme involving the Kano

Farmers, and the State Government. Today event is a follow-up to the earlier visit which the company organised for a delegation of the Kano State Government led by the Deputy-Governor, which visited our manufacturing plant in Bombay, India. “As part of our commitment to this partnership, we have build-up a stock of over 100 Tractors in our Warehouse in Kano which we are ready to supply on demand by end users. We also want to make it known that out Mahindra has the capacity to deliver 5000 tractors in a Year”.

Dogara, others support Public Administrators’ establishment bill KEHINDE AKINTOLA, Abuja

peaker of the House of Representatives, Yakubu Dogara and other professional bodies who converged at the public hearing on the bill which seeks to establish the Chartered Institute of Public Administrators of Nigeria (CIPAN), expressed overwhelming support for the passage of the legislation. In his keynote address, Dogara harped on the need for a resilient workforce that

will help Nigeria in tackling post-recession socio-economic and technological challenges, required for development in a digital age. The Speaker who applauded the objectives of the proposed Institute, expressed optimism that the professional body will play cardinal roles in Nigeria’s developmental efforts, by deepening human capital and ethical reorientation of those in administrative positions. “In 2017, Nigeria was ranked 114 out of 130 econo-

mies in the Global Human Capital Index by the World Economic Forum. “This shows that Nigeria, which recently moved out of recession, still has a lot of work to do to meet the kind of resilient workforce needed for modern development,” the Speaker stated. According to him, the “myriads of socio-economic and technological challenges facing the nation,” requires concerted efforts by public administrators to improve service delivery and give direction to nation

building. In his remarks, Jones Onyereri, Chairman of the House Committee on Banking and Currency, said the Chartered Institute of Public Administrators of Nigeria (CIPAN) bill was an attempt to provide legal framework for skilled and career administrators. He added that its conception was guided by the need to ensure ethical guidelines and monitoring of disciplined human capital “critical to national development.”

ery plays on Mr. President Change Agenda, he has directed that all officers should undergo relevant trainings with a view to sharpening their capacity for effective and efficient service delivery to residents of the territory. “It is a basic fact that the success of this Administration’s Change Agenda is anchored on effective and efficient service delivery as

enunciated in the SERVICOM Charter. “The Federal Capital Territory Administration acknowledges this incontrovertible fact and that thus resolved that all cadres in the services of the FCTA will receive the required training and exposure to equip them for enhanced performance”, the Permanent Secretary stated.

FCTA trains directors on improved service delivery JAMES KWEN, Abuja

s part of efforts to enhance the capacity of its management staff for effective and efficient service delivery to residents of the Territory, the Federal Capital Territory FCT SERVICOM organized a oneday intensive sensitization workshop on service delivery and operational improvement

across the territory. This is in line with the vision of the Capital Territory Administration, FCTA to be among one of the best 20 world Class Capital Cities in the provision of standard infrastructure, quality social service delivery, among others. Speaking during the workshop, Chinyeaka Ohaa, FCT Permanent Secretary, expressed optimism that the

workshop would further strengthen the capacity of the participants for enhanced productivity using the SERVICOM platform. Ohaa said the workshop is hinged on the commitment of the FCT Administration to build a World Class Capital City with standard infrastructure and quality service delivery comparable to the best in the world.

He said: “the importance of this workshop is underscored by the fact that the Federal Capital Territory Administration is entrusted with the mission-critical task of building a World Class City with standard infrastructure and quality social service delivery”. He disclosed that in view of the critical role, effective and efficient service deliv-

Monday 13 August 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 13 August 2018T

Monday 13 August 2018

C002D5556

BUSINESS DAY

FINANCIAL TIMES Bruised absolute return funds are dumped by investors

Pakistan dynasties unite against triumphant Imran Khan

Page A5

Page A4

World Business Newspaper

Erdogan lashes out at foreign ‘operation’ to fell Turkish economy No indication Turkish president will meet calls for emergency plan to prop up lira Laura Pitel, Robin Wigglesworth & Roger Blitz

ecep Tayyip Erdogan accused other countries on Sunday of mounting an “operation” to bring down the Turkish economy, but gave no indication he would meet investors’ demands for an emergency plan to prop up the plunging lira. Despite the danger of a deepening financial crisis, the Turkish president struck a defiant tone. He insisted Turkey would not back down after a bruising week that saw the nation’s currency lose a fifth of its value against the dollar on the back of an escalating dispute with US president Donald Trump and concerns about the management of the Turkish economy. “What is the cause of this storm?” he asked a gathering of ruling party officials in the Black Sea city of Trabzon. “There is no economic reason . . . It’s an operation against Turkey.” The plunging lira has piled stress on Turkish companies that are saddled with unhedged foreign currency debt and raised fears that the country will struggle to meet its large external financing needs. The impact of Turkey’s crisis on the banking system, both domestically and across Europe, is one of the main investor concerns, with analysts worrying that the start of the trading week would see stocks joining the lira under renewed pressure. “They need to recognise that there is a problem,” said Tim Ash, an analyst at BlueBay Asset Management. “Then they need a plan.” Mr Ash called for a large emergency interest rate hike, a detailed fiscal programme, the creation of a “bad bank” to handle nonperforming loans and a resolution of the dispute with the US. He added: “This all needs to happen in the next 24 to 48 hours . . . With no acceptance of the problem, no programme, no international backstop where’s it going to go?” Speaking hours before markets reopened, Mr Erdogan said that the pressure on the lira, which has lost 41 per cent of its value against the dollar this year, was a plot against Turkey

and warned: “We have seen your game and we are throwing down the gauntlet . . . We will not surrender.” The Turkish president underlined his hostility to high interest rates, claiming that they make “the rich richer and the poor poorer.” The refusal of Turkey’s central bank to hike rates despite soaring inflation and a plunging currency is widely viewed among investors as the result of political pressure from Mr Erdogan, and has stoked concern that the Turkish economy is heading for a hard landing. For the third day running, Mr Erdogan urged Turks to take dollars, euros and gold kept under their pillows and convert it to lira to prop up the ailing currency, which on Friday fell as much as 17 per cent, a day when Mr Trump said the US would double tariffs on imports Turkish aluminium and steel. The US move was the latest salvo in an escalating dispute over the detention of Andrew Brunson, an evangelical pastor whose fate has become the lightening rod for a host of disputes between the two Nato allies. Mr Erdogan said on Sunday that the US had set a deadline of 6pm on Wednesday for the release of Mr Brunson, who was moved to house arrest at the end of last month after almost two years behind bars on espionage and terrorism charges. The ultimatum has not been confirmed by Washington. The Turkish president appeared relaxed as he spoke at several events, reciting poetry and joking as he addressed ruling party officials and a crowd of supporters at an open-air rally. Analysts warned, however, that Turkey would face a spiralling financial crisis when the markets reopened. Piotr Matys, emerging markets analyst at Rabobank, said a continued slide in the lira, coupled with shrinking confidence among Turkish households and corporates, could see a run on the country’s banks in the coming days. He argued that without a synchronised effort from Turkey it would be “difficult to expect a respite for the battered lira and local assets”.

Private equity spending pace slows to 10-year low Buyout groups accessed just 1% of capital in last quarter of 2017 Javier Espinoza

uyout groups are spending money at their slowest pace since the financial crash a decade ago, despite having raised record amounts of cash, new data show.

Private equity firms have gone from using more than 5 per cent of their capital, quarter on quarter, at the height of the boom years in 2006, to utilising about 1 per cent in the last three months of 2017, an analysis of figures Continues on page A4

Trump’s tariffs prove tougher obstacle than China expected

Beijing leaders weigh likely effects of retaliation on domestic economy Tom Mitchell

s China’s top leaders huddled on their annual summer retreat on August 3, US President Donald Trump loomed large over their deliberations. Just two days earlier, Trump administration officials had said they were considering taxing Chinese exports worth $200bn at 25 per cent — compared to a previously announced tariff of 10 per cent. The world’s two largest economies had formally started trade hostilities in July, when they slapped punitive duties on $34bn of each other’s exports. Chinese officials hoped their unwanted trade war with the US would pause there, at least for the summer. “Everyone has been surprised by Trump,” said one Chinese economist who is close to Beijing policymakers. “Most Chinese of-

ficials assumed that Trump was just trying to push the boundary but would eventually back off.” Mr Trump has instead pressed ahead with his efforts to turn up the heat on Chinese President Xi Jinping. Next week, the US will impose already announced tariffs on another $16bn in Chinese exports, which will be matched by Beijing. In the face of this unprecedented economic and geopolitical challenge, Mr Xi’s administration has sought to stabilise China’s domestic economy, currency and stock markets, while also appealing to people’s patriotism. In its most recent meeting on July 31, the Chinese Communist party’s politburo — comprising its 25 most senior officials — called for “stable employment, stable finance, stable foreign trade, stable foreign investment, stable investment and stable expectation”. Days later at Beidaihe, a seaside

resort near the Chinese capital, politburo member Chen Xi urged a group of the country’s leading scientists to “keep a patriotic heart” and help China “independently control core technologies”. During the two months before the Politburo’s appeal for economic stability, the renminbi had fallen more than 6 per cent against the dollar to a low of 6.85 — a huge move for the carefully controlled currency. Since the Politburo’s statement, the renminbi has traded sideways. The country’s stock markets, which Mr Trump gleefully noted on August 4 had dropped more than 20 per cent this year, gained ground last week. China’s central bank also guided interbank lending rates to their lowest levels since the country’s stock markets crashed three years ago. In addition, it reimposed rules that make it more expensive to bet against the renminbi.

Shell hails bounceback towards deepwater drilling Head of exploration says break-even prices are now $30 a barrel Anjli Raval

oyal Dutch Shell is doubling down on drilling for oil far beneath the oceans, as the energy group eyes a cash bonanza from traditional deepwater projects despite a growing focus on new US shale investments. Andy Brown, Shell’s head of exploration and production, said the industry was seeing a “bounceback” towards deepwater after a dramatic fall in investment during the market downturn. “The most excitement at the moment is from the deepwater,” Mr Brown told the Financial Times, saying projects in Brazil, the Gulf of Mexico and West of Shetland in the North Sea were among the most attractive.

His comments come even as Shell and its peers have diverted more funds into short-cycle output, such as investments in US shale fields, aiming to yield production faster and more cheaply than socalled conventional output. Mr Brown said that while the energy industry liked the flexibility that US shale offered, sentiment had “flipped” back in favour of deepwater — defined as a depth greater than 300m. The economics of some projects, which once required high crude prices to be profitable, had seen a “transformation”, with cash generation far surpassing that of US shale. “Deepwater can compete if not demonstrate higher returns because of fundamental cost reduction,” he said. “Break-even prices in deep-

water — we are now talking $30 per barrel.” Shell seeks to generate $6bn to $7bn annual organic free cash flow by 2020 in its upstream business — an important metric for assessing the company’s ability to finance generous dividends. “It’s great to have both in the portfolio and we are growing our shales business . . . but in terms of sheer cash flow delivery our deepwater has significantly more cash flow potential,” said Mr Brown. Shell secured nine of the 19 Gulf of Mexico oil and gas blocks awarded in a Mexican auction, shortly after it won blocks in Brazil’s Atlantic waters. Both countries have attracted its rivals, with BP also looking to Mauritania and Senegal while ExxonMobil has made a big bet on Guyana.

BUSINESS DAY

C002D5556

NATIONAL NEWS

FT Private equity spending pace slows to 10-year...

Adapting to the world of the 100-year lifespan

Continued from page A3 from 1,000 institutional Investors reveals. The pace of spending has been measured as a proportion of the capital raised, researchers said. This shows private equity managers are being cautious despite mega deals, including Blackstone buying a unit of Thomson Reuters in a $20bn agreement and Carlyle buying a chunk of Akzo Nobel for €10.1bn. A plethora of funds are currently raising record cash piles, despite the slower spending trend. Carlyle, the US buyout group, recently raised the largest North American fund at $18.5bn; EQT, a Nordic private equity group, is seeking to raise Europe’s biggest infrastructure fund; and CVC, a European buyout group, is aiming to raise its largest fund in Asia. Analysts warn the pace of spending spells trouble because if managers struggle to deploy cash, they will have to return more to investors, leading to disappointing returns. They also risk coming under growing pressure to deploy funds in deals for the sake of it, increasing their risk and the potential for poor returns. “Private equity is booming and the challenge now is to spend the money wisely,” said Thibaut de Laval, chief strategy officer at software provider Efront, which analysed the data from 4,000 funds. “Despite having so much cash, [buyout groups] are not in an irrational buying spree,” he said. Rising competition was also to blame for slow spending, he added. “Corporations are fighting to buy portfolio companies at the same time as private equity firms but conglomerates tend to be willing to spend because they expect synergies. “Corporations also have lower performance expectations and can afford to pay more and they don’t need to justify fees like private equity groups.” He also said bridge financing, which allows funds to secure cheap loans to fund deals before asking investors to write cheques, may be skewing the numbers. But even taking this into account the figures would still point to the slowest pace of investing in at least a decade. The figures also showed that distributions, or the cash being handed back to investors, are near an all-time high, reaching close to 3.5 per cent in the last quarter of 2017, a level last seen in 2006. The rise in net distributions is likely to lead investors to increase their allocations into new funds as they seek yield, the analysis showed. Although the data are anonymised, Efront’s clients include some of the largest investors in private equity such as Calpers in the US and Adia in the Middle East.

Monday 13 August 2018

Increasing longevity offers not just challenges but opportunities

Pakistan dynasties unite against triumphant Imran Khan Sharif and Bhutto families form unlikely alliance against cricketer-turned-PM Farhan Bokhari & Kiran Stacey

he two dynasties that have battled for control of Pakistan for generations will join forces on Monday, promising to stage “noisy protests” inside parliament against the results of last month’s elections as new members take their oaths. The Pakistan Muslim League-Nawaz, which is controlled by the Sharif family, and the Pakistan Peoples party, run by the Bhuttos, have formed an unlikely alliance against Imran Khan, the former cricketer whose party won most seats last month. Analysts say that if the two parties manage to maintain their unity, they could present a significant obstacle for Mr Khan, who is due to take his oath as prime minister in the coming days. One senior PML-N politician said: “Inside the house we are going to keep up the clamour that the elections were clearly rigged.” A leader of the PPP added that the two parties would combine forces inside parliament over the next few years “on important political and legislative issues”.

Mr Khan has spent the past few weeks composing a governing coalition, after his Pakistan Tehreek-e-Insaf party won 116 of the 272 contested parliamentary seats. His negotiations have taken place, however, against a backdrop of protests by the opposition parties, which claim the PTI was helped by interference from the country’s powerful security services — something denied by both the PTI and the army. The controversy has formed an unexpected bond between the PPP and the PML-N, whose ruling families have been in charge of Pakistan for about half of the past 50 years, and which jointly won 107 seats at the election. The PPP is run by Asif Ali Zardari and Bilawal Bhutto Zardari, the husband and son respectively of the late former prime minister Benazir Bhutto. The head of the PML-N is Shehbaz Sharif, whose brother Nawaz Sharif was ousted as prime minister on corruption charges last year and is now serving a 10-year jail sentence. Together with a group of smaller parties they announced they have formed a “grand opposition alliance”, which has plans to nominate alternative

candidates for prime minister and speaker of the parliament. Analysts say they do not expect the opposition parties to be able to form a government, not least because they fear a backlash from voters, among whom Mr Khan remains popular. Ali Sarwar Naqvi, a political commentator, said: “Ever since the elections, opposition parties have been unable to show strength on the streets. Imran Khan is new and untested and therefore there is a lot of enthusiasm over his arrival.” But many believe the alliance could make its presence felt in parliament over the next few years, especially as Mr Khan’s first job will be to repair the country’s balance sheet, possibly by enacting unpopular spending cuts or tax rises. Asad Umar, Mr Khan’s proposed finance minister, has said the country has just weeks to secure extra financing to meet its external debt requirements. Ghazi Salahuddin, a political commentator for The News newspaper, said: “As time goes by and the new government faces difficult choices, the opposition will gain strength — especially if Imran Khan himself becomes unpopular.”

US judge allows Crystallex to seize Venezuela’s Citgo Decision over US-based oil refiner is another financial blow to cash-strapped nation Gideon Long

enezuela’s efforts to stay afloat financially have suffered another blow after a judge in the US gave a Canadian mining company permission to seize the shares of the Venezuelan holding company that owns Citgo, a US oil refiner. The judge on Thursday ruled that Canada’s Crystallex has the right to claim the shares of PDV Holding Inc to compensate it for around $1.4bn it is owed by the Venezuelan state. The case dates back to 2011 when Venezuela nationalised Las Cristinas, a gold reserve owned by Crystallex. The Canadian company took Venezuela to the World Bank’s international arbi-

tration tribunal ICSID and won, but Venezuela refused to pay up. Crystallex therefore went after Citgo as compensation, arguing that PDV Holding Inc, which is owned by Venezuela’s stateowned oil company PDVSA, is essentially an “alter ego” of the Venezuelan state. The case is one of many arbitration cases involving Venezuela and foreign companies. Earlier this year US oil company ConocoPhillips tried to seize PDVSA assets in the Caribbean, including products stored at its Isla refinery on the island of Curaçao. Citgo is the jewel in the crown of PDVSA’s foreign holdings. The Houston-based company not only operates gas stations but has three refineries in the US with a capacity to refine 750,000 barrels of crude a day.

It also produces lubricants which are vital for Venezuela’s refining of its heavy crude. Ángel Alvarado, a Venezuelan opposition member of Congress and an economist, said Thursday’s decision was an even bigger blow to PDVSA that the ConocoPhillips move “because it will seriously affect the import of diluents from the US, one of the raw materials for the extraction of heavy and extra-heavy crude.” In his brief ruling, Judge Leonard Stark of the Delaware District court did not give his reasoning. His full decision is under seal. “Crystallex and PDVSA shall meet and confer and, no later than August 16, 2018, submit a joint status report providing their position(s) as to how this case should now proceed,” he said.

n his essay “De Senectute”, Cicero says there are four reasons why people write off old age: it stops you from working, it makes your body weak, it denies you pleasure and every day is one step closer to death. Then he dismantles each argument. “The old retain their wits quite well,” he notes, “so long as they exercise them.” When a child born in the west today has a better than 50-50 chance of living beyond 105, we should keep Cicero’s words in mind. Ageing populations create immense challenges. Governments must ensure pensions, health and social care can be funded for increasing numbers of elderly, while the ratio of workingage people to the retired in rich countries is projected to halve by 2050, from four to one to two to one. Yet increasing longevity is too often seen as a curse that will create huge populations of senior citizens suffering from dementia or disease. It is time to view it also as something that opens up opportunities for individuals, society, and the worlds of business, education and culture. It is set to change how citizens live, in potentially exciting ways — provided we prepare for it, individually and collectively. As the Financial Times reported this week, Japan is now providing a model. With the world’s highest life expectancy and, at more than 67,000, the highest ratio of centenarians per capita, that is perhaps no surprise. But Japan is the only large country to have formally adopted the idea of century-long living as a national project. It was galvanised in part by the 2016 book The 100-Year Life, by two London Business School academics. Lynda Gratton and Andrew Scott noted that, while longevity will create more infirm citizens, many will stay healthy much longer — happy to work well into their 70s or 80s. That will need big changes in the world of work, but should also be plugged into public financing models. Lives, the authors suggested, will no longer consist of the three stages of education, work and retirement. Children born today may delay settling into jobs and have an “explorer” phase from 18 to 30, then change tack several times in what could be 50 year-plus careers. They will need further education or retraining at different stages. As Japan has endorsed that vision as an all-embracing policy priority, prime minister Shinzo Abe’s cabinet office assembled ministers, academics, and business and union leaders into a Council for Designing the 100-Year-Life Society. Its recommendations included big increases in care workers’ pay, and sharply expanding “recurrent” education, to facilitate higher employment among the elderly. Business has taken up the challenge. Nursery school operators have expanded into care homes. Entrepreneurs are opening gyms for senior citizens. Robotics makers are creating devices to help the elderly work longer.

Monday 13 August 2018

C002D5556

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Bruised absolute return funds are dumped by investors Sentiment sours on a hedge fund type strategy once heralded as the future of active asset management Owen Walker

nvestors have pulled billions of euros from Europe’s biggest absolute return funds this year as sentiment has turned against a strategy once heralded as the future of active asset management. The controversial move by GAM, the Swiss asset manager, to prevent clients withdrawing money from its absolute return bond funds this month has raised further questions of an investment proposition that was designed to limit risk for investors. “Many of these funds are simply a marketing gimmick to enable inherently low return funds to be sold with inherently high fees,” said Alan Miller, chief investment officer of SCM Direct, an investment manager, and a campaigner for transparent charging. “We were astonished how many UK pension funds had been taken in by the marketing department promises of low volatility without mention of the accompanied low returns. However, it is in the retail space that we are the most flabbergasted.” Absolute return funds were developed over the past decade and designed to replicate hedge fund strategies in order to provide steady returns for risk averse investors. But their high fees and, in many cases, disappointing performance have prompted investors to flee. Three of Europe’s five biggest absolute return funds suffered outflows of more than €1bn in the first half of the year, with several large products losing more than a

tenth of their assets. Standard Life Aberdeen, the €678bn Scottish asset manager, last week said its flagship fund, Global Absolute Return Strategies (Gars) had suffered €5.9bn of outflows this year. That represented close to 12 per cent of the fund’s total assets under management. Gars was once Europe’s biggest fund, but its performance has been hit in recent years. It is down 3.7 per cent this year, according to Morningstar, compared to a 3.6 per cent rise in the MSCI World Index of large and mid-cap companies globally. Gars returned just 2 per cent last year when the MSCI World Index jumped 22.4 per cent. Several other European absolute return funds also suffered retail outflows this year, according to Morningstar. The €10.4bn Real Return fund from Newton, a BNY Mellon boutique, suffered redemptions totalling just over 10 per cent of its assets from individual investors. DWS, formerly Deutsche Asset Management, saw its €6.3bn Concept Kaldemorgen fund lose 14.5 per cent to retail outflows. UK manager Aviva Investors’ €2.5bn Multi Strategy Target Income fund bled more than 13 per cent in the first half of the year from the same client group. On August 2, GAM said it had raised so-called “redemption gates” on its ARBF strategies, preventing investors withdrawing their money. This was in response to redemption requests from investors holding more than 10 per cent of the assets in the funds. They were reacting to the news that GAM suspended Tim Haywood, a high profile fund manager, who oversaw the strategies.

Soaring US profit margins pose challenge for investors After strong second-quarter results, questions surround whether a peak has been reached Nicole Bullock

rofit margins at US companies have jumped to their highest level in at least a decade, raising questions about whether the most recent quarterly results are a peak. With 90 per cent of companies in the S&P 500 having reported their results for the second quarter, net profit margins hit 11.8 per cent, the highest level since financial information provider FactSet began recording the data in 2008. Companies have been shaving costs for years, while more recently they have enjoyed the benefits of the corporate tax cut agreed in December. Revenues in the second quarter also grew by almost 10 per cent year on year, the biggest rise since 2011. Steve Chiavarone, a portfolio manager at Federated Investors, said technological advances meant margins could go higher still.

“All other things being equal . . . we should be at a cyclical peak,” he said. “But it is perfectly reasonable to say, ‘Is there a certain amount of technological innovation that is fundamentally making companies margins higher? Are we able to produce goods and services more efficiently?’ We think that is what is emerging.” Other investors argue that rising input costs, driven by trade tariffs or from commodity and currency moves as well as pressure from wage growth, mean margins are close to topping out. The US dollar was up 4.6 per cent in the year to date against a basket of other currencies. Oil prices were up 8.9 per cent in the same period. “It is very likely we are close to peak margins,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. One possibility is that profit margins may diverge between sectors.

GAM’s move to prevent clients withdrawing money from its absolute returns has raised further questions over the strategy © Tolga Akmen/FT

Private equity spending pace slows to 10-year low Buyout groups accessed just 1% of capital in last quarter of 2017 Javier Espinoza

uyout groups are spending money at their slowest pace since the financial crash a decade ago, despite having raised record amounts of cash, new data show. Private equity firms have gone from using more than 5 per cent of their capital, quarter on quarter, at the height of the boom years in 2006, to utilising about 1 per cent in the last three months of 2017, an analysis of figures from 1,000 institutional Investors reveals. The pace of spending has been measured as a proportion of the capital raised, researchers said. This shows private equity managers are being cautious despite mega deals, including Blackstone buying a unit of Thomson Reuters in a $20bn agreement and Carlyle buying a chunk of Akzo Nobel for €10.1bn. A plethora of funds are currently raising record cash piles, despite the slower spending trend.

Carlyle, the US buyout group, recently raised the largest North American fund at $18.5bn; EQT, a Nordic private equity group, is seeking to raise Europe’s biggest infrastructure fund; and CVC, a European buyout group, is aiming to raise its largest fund in Asia. Analysts warn the pace of spending spells trouble because if managers struggle to deploy cash, they will have to return more to investors, leading to disappointing returns. They also risk coming under growing pressure to deploy funds in deals for the sake of it, increasing their risk and the potential for poor returns. “Private equity is booming and the challenge now is to spend the money wisely,” said Thibaut de Laval, chief strategy officer at software provider Efront, which analysed the data from 4,000 funds. “Despite having so much cash, [buyout groups] are not in an irrational buying spree,” he said.

Rising competition was also to blame for slow spending, he added. “Corporations are fighting to buy portfolio companies at the same time as private equity firms but conglomerates tend to be willing to spend because they expect synergies. “Corporations also have lower performance expectations and can afford to pay more and they don’t need to justify fees like private equity groups.” He also said bridge financing, which allows funds to secure cheap loans to fund deals before asking investors to write cheques, may be skewing the numbers. But even taking this into account the figures would still point to the slowest pace of investing in at least a decade. The figures also showed that distributions, or the cash being handed back to investors, are near an all-time high, reaching close to 3.5 per cent in the last quarter of 2017, a level last seen in 2006.

EU prepares crackdown on ‘citizenships for sale’ Concern about Maltese passports for Russians ahead of push against money-laundering Mehreen Khan

russels is preparing to crack down on EU governments, including Malta and Cyprus, that award citizenships to rich people from outside the bloc, as concerns mount about so-called dirty money from Russia. Vera Jourova, the EU’s commissioner for justice, told the Financial Times that “citizenship for sale” schemes in eight member states will come under tougher scrutiny from Brussels as part of a wider drive against money laundering and corruption. She also alluded to worries about the origins of the wealth of Russian applicants for Maltese citizenship. “In cases of any doubt, a person should not have the privilege of citizenship,” Ms Jourova told the Financial Times. “We have no power to ban such a practice but we have an obligation to put high requirements on the member states to be careful.

They are granting citizenship for the whole of Europe.” The EU states with “citizenship by investment” schemes include not only Malta and Cyprus, but also Austria, Greece, Hungary, Latvia, Lithuania and Portugal. Such schemes can require applicants to make substantial investments in property or bonds. In return they allow the new passport holders to work and live in any EU country and to travel freely inside the Schengen area. EU member states are free to set their own criteria for citizenship. But the commission will publish a report in the autumn that is likely to fault government schemes for not carrying out enough due diligence on applicants and the sources of their wealth. The report is part of the more general drive against money laundering, in conjunction with the European Central Bank and the European Banking Authority, which

is intended to strengthen provisions against illicit cash. High-profile money laundering scandals involving banks in Malta and Latvia have made citizenship schemes more contentious by drawing attention to the lack of controls on Russian funds entering EU countries. Ms Jourova said she was especially alarmed by Malta’s scheme, in which an individual can gain citizenship in return for a €650,000 contribution to the country’s development fund and the purchase or lease of property, as well as investments of at least €150,000 in stocks and bonds. Family members can be added for an additional fee of €25,000 to €50,000 per person. “It is a big concern when a Russian citizen who has worked his whole life in middle or senior management — where salaries aren’t very high — suddenly has the money to buy citizenship in Malta,” the commissioner said.

BUSINESS DAY

C002D5556

Monday 13 August 2018

ANALYSIS

Can Mongolian copper power the green revolution? To meet demand miners will have to operate in countries difficult to navigate

fter a four-minute descent in a dark, two-storey lift, the latest shift of workers arrives at Mongolia’s largest ever construction project — a huge underground copper mine called Oyu Tolgoi 1.3km below the Gobi desert. Along one of the tunnels, a minibus makes its way slowly to a huge cavern. This, a young Australian engineer explains, will house one of the mine’s biggest pieces of equipment — a 300 tonne crushing machine, which will pulverise copper bearing rocks blasted from an ore body the size of central Manhattan. Capable of processing 4,000 tonnes of copper-bearing rock per hour, the machine is a key part of a near $7bn expansion project that will see Oyu Tolgoi emerge as the world’s third largest source of copper by 2027, producing more than 500,000 tonnes a year. Once finished Oyu Tolgoi will help supply a metal that will be in ever-greater demand as the green energy revolution takes hold. It will also become a mainstay of the Mongolian economy, which has veered between boom and bust since the end of the Soviet satellite regime in the early 1990s. The development of Oyu Tolgoi,

“Renewable energy is going to be the single largest driver of copper demand growth in the decades to come, owing to the need to connect significant numbers of small-scale electricity generation units to the grids,” he says. A wind turbine capable of generating a megawatt of power — enough to supply 500 homes — requires more than three tonnes of copper, according to Rio. The problem for Rio and its peers is that most of the easily accessible copper in attractive jurisdictions such as Chile has already been tapped. What is left is either lower grade or requires more technically challenging extraction in parts of the world where corruption is rife or the politics are difficult to navigate. As a result, the pipeline of copper projects has all but dried up and there are fears the world could be heading for a supply crunch if new mines are not brought online soon. Rio estimates that eight new mines the size of Oyu Tolgoi will be needed within a decade to fill an anticipated 5m tonne-a-yearcopper supply gap. Ownership and exploitation of mineral resources by foreign corporations is a sensitive political issue in many developing countries. But it is particularly acute in Mongolia because of its importance to its $11bn economy; the underground mine could contribute 30 per cent of the country’s

controlled and operated by AngloAustralian group Rio Tinto, provides a unique insight into the modern mining industry and its quest to find the raw materials that will make the shift to renewable energy possible. Having tapped most of the world’s copper that is easy to mine, companies like Rio Tinto are now being forced to take on complex projects in countries like Mongolia where foreign ownership and exploitation of natural resources are highly sensitive issues. “There are a lot of expectations round this project,” says Dorjdari Namkhaijantsan, a former adviser to the Mongolia government and now country manager for the Natural Resources Governance Institute. “Trying to manage them is a nightmare. “Mongolian politics are also turbulent, governments change quite often . . . and obviously Oyu Tolgoi is a very easy subject to try and win votes from people,” he adds. Mongolia has had seven prime ministers since 2007. As the world moves to cleaner sources of energy, a trend known as decarbonisation, copper will become an increasingly important commodity. While electric vehicles dominate most conversations about demand for metals and mineral resources, renewable energy is more relevant for copper, according to Colin Hamilton, head of commodities research at BMO Capital Markets in London.

gross domestic product by the time it reaches peak production in 2027. Last year, Ulan Bator, which has struggled to keep its finances in check, received its sixth bailout loan from the IMF since 1990 and in return accepted a set of budget reforms and austerity measures. While growth has picked up thanks to higher commodity prices and Chinese demand for coal, the government is still badly in need of cash to fund its spending commitments. “It’s in everyone’s interest to unlock the value of this absolutely world-class deposit that will be producing copper and gold for the next 100 years,” Rio chief executive JeanSébastien Jacques said last month. Getting to the current state at Oyu Tolgoi has not been easy. It took six years of tough negotiations before Rio and Mongolia signed in 2009 their first investment agreement, which defined the state’s participation in the first stage of the project — a $6.5bn open pit that has been in production since 2013 — and set out tax and royalty rates. Rio then stopped work on the underground project in 2013 following a series of disagreements with the government over costs, taxes and control of strategic assets. Digging resumed in 2016 after the two sides signed a development and financing plan. This saw Rio raise a total of $4.4bn from a group of international lenders and export-import banks in Australia, Canada and the US.

Neil Hume

Zimbabwe’s post-election crackdown scuppers investment hopes As fears rise over the country’s stability, promises to fix a broken economy come to nought Joseph Cotterill

mmerson Mnangagwa hoped that the days after winning Zimbabwe’s first election without Robert Mugabe would be full of promises of investment and IMF loans to fix a broken economy. But a ferocious crackdown in the wake of last month’s disputed poll has shattered those illusions. Ever since soldiers fired at demonstrators claiming the July 30 poll was rigged, Mr Mnangagwa has moved further away from reopening Zimbabwe to the world than at any time since he replaced Mr Mugabe, who was overthrown in a coup last year. Last week, western embassies condemned the “violence, attacks and acts of intimidation targeted at opposition leaders”, which claimed six lives. Not even Tendai Biti, a senior figure in the opposition Movement for Democratic Change and technocrat former finance minister in a unity government, was safe. He fled to Zambia last week in fear of his life before being deported to face what Human Rights Watch called “trumped-up”charges. The US, the most important constituency for Zimbabwe to access the IMF, has been the loudest critic. The crackdown has exposed the fundamental flaw in any plan by Mr Mnangagwa’s ruling Zanu-PF to reopen the country to investors. The economy badly needs foreign cash — literally, given the desperate shortage of US dollars, the currency in most use, which has crippled banks. Yet with Zanu-PF returning to form with violent repression of dissent, international investors are spooked. Speculation that the hardline generals who installed Mr Mnangagwa are driving the crackdown and weakening the president’s authority have heightened anxiety. “No one will want to put his money in where there is no security,” said Wilfred Sithole, a UKeducated engineer. Unable to find work, Mr Sithole ekes out a living as a street vendor in Harare, the

capital. The informal economy is believed to support more than half the population, and highlights Zimbabwe’s collapse under Mr Mugabe. During the election Mr Mnangagwa boasted of securing $15bn in investments for an economy $17bn in size, which attracted less than $300m last year. After taking power, he removed the biggest barriers to investment. Foreign mining investors mostly no longer have to hand over half of their equity to locals. Even a Rwanda-style one-stop shop to cut red tape for investors has been in the offing. But it has come to nought as fears rise over basic stability, especially the seemingly out of control security forces. Multinational companies that planned fact-finding trips after the election are postponing them. “A recovery was never going to be quick, but we now have more doubts about when it might start and how many potential investors are still interested,” John Robertson, a Zimbabwean economist, said. Much hangs on whether an IMF loan is approved despite the crackdown. Zimbabwe’s cash crisis, by far Mr Mnangagwa’s most immediate priority, will be made much tougher without cheap western money. Economists and bankers estimate that the central bank’s exhausted reserves will need a $2bn infusion just to begin tackling the problem. They say that a loan could be arranged by Afreximbank, a Cairo-based lender that underwrote issuance of the so-called “bond notes” that have been a stopgap surrogate for the real dollars. The loan could then be syndicated to other banks. But at the same time, and as a precondition for IMF help, Zimbabwe would need a bridge loan to pay off $2bn in arrears to lenders that it defaulted on — mostly the World Bank and the African Development Bank. Both loans for easing cash shortages and arrears would be short-term, expensive, and likely to be unattractive for commercial banks without IMF money on the

way to backstop them. Only an IMF structural reform programme can tackle the root cause of the dollar shortage: state overspending. Public wage bills larger than government revenue are paid for by runaway printing of electronic dollars, such as a central bank overdraft of more than $1bn. But even IMF reforms may struggle against the scale of the patronage system that has kept Zanu-PF in power through economic collapse. Despite a fiscal deficit already more than 13 per cent of gross domestic product, the party bribed civil servants before the election with pay rises. The post-election crackdown has exposed another deep structural problem — the power of the army, which has its own economic interests to defend. “Even before the election, the army was set to continue playing a prominent role in the economy,” said Michael Gibb, a researcher at Global Witness, the NGO that has exposed secretive military investments in the country’s diamond fields. There has been little accountability for alleged illicit trading worth billions of dollars. The future of the army’s involvement in diamond mining could be an “interesting test case” for how far Mr Mnangagwa’s reforms will go, which “should command the attention of the international community and donors,” Mr Gibb said. Whatever foreign investors do, many in Zimbabwe’s millionsstrong and well-educated diaspora are already resigned to living in exile. Some had made plans to rebuild businesses at home after Mr Mugabe’s fall and awaited a signal from the elections. “Now it seems like there will be another generation of Western Union babies and parents,” said one member of the diaspora, using a term for families torn apart by their children working abroad to send back cash. “We are going to suffer. We’re already in poverty,” said Clever Kamwana, a 29 year-old who sells phones on Harare’s streets. “It’s going from bad to worse.”

Monday 13 August 2018

C002D5556

BUSINESS DAY

Live @ the Stock exchange Prices for Securities Traded as of Friday 10 August 2018

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 289,279.72 10.00 - 65 1,234,460 323,184.53 9.45 0.53 113 52,101,065 UNITED BANK FOR AFRICA PLC ZENITH INTERNATIONAL BANK PLC 740,957.25 23.60 0.21 289 11,826,639 467 65,162,164 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 344,594.81 9.60 1.05 201 6,477,486 201 6,477,486 668 71,639,650 BUILDING MATERIALS DANGOTE CEMENT PLC 3,646,668.58 214.00 -6.14 28 47,197 242,855.99 28.00 -6.35 33 180,572 LAFARGE AFRICA PLC. 61 227,769 61 227,769 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY LTD 382,488.96 650.00 - 7 4,099 7 4,099 7 4,099 736 71,871,518 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 5 55,710 OKOMU OIL PALM PLC. 69,730.82 73.10 - 18 57,468 60,000.00 60.00 - 13 28,267 PRESCO PLC 36 141,445 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 511.20 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 2,070.00 0.69 - 10 73,931 10 73,931 46 215,376 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 1,164.81 0.44 - 6 4,083 JOHN HOLT PLC. 225.71 0.58 - 7 96,710 2,111.93 3.25 - 1 10 S C O A NIG. PLC. TRANSNATIONAL CORPORATION OF NIGERIA PLC 47,151.67 1.16 0.86 187 18,516,519 37,456.86 13.00 - 40 419,464 U A C N PLC. 241 19,036,786 241 19,036,786 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 33,000.00 25.00 - 7 22,885 ROADS NIG PLC. 165.00 6.60 - 0 0 7 22,885 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT CO. LIMITED 4,677.11 1.80 - 9 23,545 9 23,545 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,900.00 95.00 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 11,300.89 45.20 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 24,014.43 9.00 - 0 0 0 0 16 46,430 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 1 8,000 1 8,000 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 14,954.34 1.91 - 11 213,287 242.22 0.89 - 0 0 GOLDEN GUINEA BREW. PLC. GUINNESS NIG PLC 205,895.98 94.00 - 30 122,970 INTERNATIONAL BREWERIES PLC. 275,067.58 32.00 3.23 16 5,502,137 NIGERIAN BREW. PLC. 823,680.91 103.00 -0.97 136 564,148 193 6,402,542 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 41,000.00 8.20 -1.20 48 820,224 DANGOTE SUGAR REFINERY PLC 186,000.00 15.50 -3.12 73 2,950,868 FLOUR MILLS NIG. PLC. 100,869.34 24.60 -3.53 51 1,135,445 HONEYWELL FLOUR MILL PLC 13,402.03 1.69 -0.59 28 1,629,474 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 1,283.04 7.20 - 0 0 NASCON ALLIED INDUSTRIES PLC 52,856.30 19.95 -0.25 24 416,390 UNION DICON SALT PLC. 3,676.41 13.45 - 1 6 225 6,952,407 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 18,782.02 10.00 - 34 226,429 NESTLE NIGERIA PLC. 1,236,543.75 1,560.00 -3.49 31 238,279 65 464,708 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 3,377.28 3.24 - 33 684,589 33 684,589 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 55,785.20 14.05 - 29 63,221 UNILEVER NIGERIA PLC. 301,612.78 52.50 0.10 35 537,507 64 600,728 581 15,112,974 BANKING DIAMOND BANK PLC 27,560.86 1.19 1.71 40 3,011,236 386,258.05 21.05 -4.97 39 632,771 ECOBANK TRANSNATIONAL INCORPORATED FIDELITY BANK PLC 52,444.38 1.81 -0.55 114 6,792,633 GUARANTY TRUST BANK PLC. 1,147,815.99 39.00 -0.51 119 3,839,935 JAIZ BANK PLC 17,383.91 0.59 - 15 968,747 SKYE BANK PLC 8,189.38 0.59 3.51 30 1,601,267 STERLING BANK PLC. 39,442.87 1.37 -8.05 75 4,127,733 UNION BANK NIG.PLC. 170,356.40 5.85 - 30 118,883 UNITY BANK PLC 10,286.62 0.88 -6.38 6 5,170,988 26,230.64 0.68 -2.86 28 1,101,541 WEMA BANK PLC. 496 27,365,734 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE COMPANY PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 4,920.45 0.71 1.43 15 721,220 AXAMANSARD INSURANCE PLC 24,990.00 2.38 - 1 100 CONSOLIDATED HALLMARK INSURANCE PLC 2,240.00 0.32 - 4 36,150 CONTINENTAL REINSURANCE PLC 17,529.94 1.69 - 1 9,425 CORNERSTONE INSURANCE COMPANY PLC. 3,682.38 0.25 -7.41 19 4,254,221 GOLDLINK INSURANCE PLC 2,411.47 0.53 - 0 0 GREAT NIGERIAN INSURANCE PLC 1,913.74 0.50 - 0 0 GUINEA INSURANCE PLC. 2,149.00 0.35 - 0 0 INTERNATIONAL ENERGY INSURANCE COMPANY PLC 539.32 0.42 - 1 10,000 LASACO ASSURANCE PLC. 2,416.73 0.33 -8.33 21 5,168,833 LAW UNION AND ROCK INS. PLC. 3,866.70 0.90 - 1 1,000 LINKAGE ASSURANCE PLC 5,760.00 0.72 - 6 281,941 MUTUAL BENEFITS ASSURANCE PLC. 2,640.00 0.33 10.00 14 759,936 N.E.M INSURANCE CO (NIG) PLC. 15,577.48 2.95 - 7 100,046 NIGER INSURANCE CO. PLC. 3,018.40 0.39 - 42 2,368,455 PRESTIGE ASSURANCE CO. PLC. 2,175.92 0.57 - 3 4,452 REGENCY ALLIANCE INSURANCE COMPANY PLC 1,600.50 0.24 -4.00 22 3,041,250 SOVEREIGN TRUST INSURANCE PLC 2,001.80 0.24 -7.69 10 2,405,851 STANDARD ALLIANCE INSURANCE PLC. 5,422.63 0.42 - 0 0 STANDARD TRUST ASSURANCE PLC 4,483.72 0.48 - 0 0 3,080.00 0.22 -8.33 11 1,089,847 SUNU ASSURANCES NIGERIA PLC. UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 1 10,000 UNIVERSAL INSURANCE COMPANY PLC 7,040.00 0.44 - 0 0 VERITAS KAPITAL ASSURANCE PLC 3,744.00 0.27 - 6 502,066 WAPIC INSURANCE PLC 5,353.10 0.40 - 28 280,409 213 21,045,202 MICRO-FINANCE BANKS FORTIS MICROFINANCE BANK PLC 11,799.67 2.58 - 0 0 NPF MICROFINANCE BANK PLC 3,704.35 1.62 - 3 190,000

Company 3 190,000 MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 4,914.00 1.17 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 5,922.05 1.42 - 0 0 INFINITY TRUST MORTGAGE BANK PLC RESORT SAVINGS & LOANS PLC 5,664.87 0.50 - 0 0 2,949.22 3.02 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 0 0 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 8,100.00 4.05 - 42 344,453 CUSTODIAN INVESTMENT PLC 30,173.96 5.13 -2.29 13 332,789 660.00 0.44 - 0 0 DEAP CAPITAL MANAGEMENT & TRUST PLC FCMB GROUP PLC. 37,823.18 1.91 -4.02 56 1,285,815 NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 1,389.25 0.27 - 3 64,000 ROYAL EXCHANGE PLC. STANBIC IBTC HOLDINGS PLC 499,109.83 49.35 -1.30 11 1,425,527 18,480.00 3.08 0.98 42 443,172 UNITED CAPITAL PLC ValuAlliance Value Fund 3,312.39 103.20 - 0 0 167 3,895,756 879 52,496,692 HEALTHCARE PROVIDERS EKOCORP PLC. 1,680.29 3.37 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 1,172.54 0.33 - 12 588,000 12 588,000 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 544.04 0.55 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 9,225.00 6.15 - 1 500 18,296.91 15.30 -10.00 14 100,753 GLAXO SMITHKLINE CONSUMER NIG. PLC. MAY & BAKER NIGERIA PLC. 2,254.00 2.30 - 13 237,183 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 1,381.21 0.80 - 4 38,125 556.71 3.62 - 0 0 NIGERIA-GERMAN CHEMICALS PLC. PHARMA-DEKO PLC. 411.96 1.90 - 0 0 32 376,561 44 964,561 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 710.40 0.20 -9.09 37 14,729,850 37 14,729,850 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 680.40 6.30 - 0 0 TRIPPLE GEE AND COMPANY PLC. 435.56 0.88 - 2 451 2 451 PROCESSING SYSTEMS CHAMS PLC 1,737.54 0.37 - 0 0 E-TRANZACT INTERNATIONAL PLC 16,590.00 3.95 - 3 766 3 766 42 14,731,067 BUILDING MATERIALS BERGER PAINTS PLC 2,318.59 8.00 - 4 53,949 CAP PLC 19,845.00 28.35 - 11 27,289 38,831.34 30.90 - 5 2,450 CEMENT CO. OF NORTH.NIG. PLC FIRST ALUMINIUM NIGERIA PLC 844.14 0.40 - 1 100 361.24 0.68 - 0 0 MEYER PLC. PAINTS AND COATINGS MANUFACTURES PLC 467.82 0.59 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,785.18 2.25 - 0 0 1,279.20 10.40 - 0 0 PREMIER PAINTS PLC. 21 83,788 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 3,522.64 4.00 - 29 215,893 29 215,893 PACKAGING/CONTAINERS BETA GLASS PLC. 38,997.82 78.00 - 2 220 GREIF NIGERIA PLC 388.02 9.10 - 0 0 2 220 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 19 12,983 19 12,983 71 312,884 CHEMICALS B.O.C. GASES PLC. 1,752.39 4.21 - 4 6,356 4 6,356 METALS ALUMINIUM EXTRUSION IND. PLC. 1,825.63 8.30 - 1 100 1 100 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 57.20 0.26 - 1 1,000 1 1,000 6 7,456 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,816.18 0.29 7.41 23 2,050,279 23 2,050,279 INTEGRATED OIL AND GAS SERVICES OANDO PLC 68,994.34 5.55 1.83 61 12,148,962 61 12,148,962 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 63,464.77 176.00 3.53 21 47,642 CONOIL PLC 16,863.04 24.30 - 13 6,518 ETERNA PLC. 8,542.15 6.55 7.38 21 313,955 FORTE OIL PLC. 30,022.19 23.05 0.22 80 760,077 MRS OIL NIGERIA PLC. 8,701.65 28.55 - 2 590 TOTAL NIGERIA PLC. 62,811.54 185.00 -2.63 12 12,844 149 1,141,626 233 15,340,867 ADVERTISING AFROMEDIA PLC 2,219.52 0.50 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 18,818.75 1.93 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 541.12 0.46 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 3,360.13 5.70 - 6 82,081 TRANS-NATIONWIDE EXPRESS PLC. 365.70 0.78 - 3 25,400 9 107,481 HOSPITALITY TANTALIZERS PLC 674.44 0.21 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,801.22 3.10 - 1 500 IKEJA HOTEL PLC 5,799.84 2.79 - 8 21,722 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 0 0 51,302.73 6.75 - 2 230 TRANSCORP HOTELS PLC 11 22,452 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 5,280.00 0.44 - 2 10,000 2 10,000 PRINTING/PUBLISHING ACADEMY PRESS PLC. 302.40 0.50 - 0 0 LEARN AFRICA PLC 979.74 1.27 - 5 65,681

BUSINESS DAY

C002D5556

Monday 13 August 2018T

BUSINESS DAY

C002D5556

NEWS YOU CAN TRUST I MONDAY 13 AUGUST 2018

Insight

ÂżYHthings

Sarakiâ&#x20AC;&#x2122;s toxic influence on Nigerian politics GLOBAL PERSPECTIVES

OLU FASAN 'U )DVDQ D /RQGRQ EDVHG ODZ\HU DQG SROLWLFDO HFRQRPLVW LV D 9LVLWLQJ )HOORZ DW WKH /RQGRQ 6FKRRO RI (FRQRPLFV H PDLO R IDVDQ#OVH DF XN WZLWWHU DFFRXQW #ROXBIDVDQ

newspaper asked me in 2016 how I thought the standoff between Senator Bukola Saraki and the All Progressives Congress (APC) would end. I replied that both were playing â&#x20AC;&#x153;cat and mouseâ&#x20AC;? game but that â&#x20AC;&#x153;Saraki will, in the end, return to the People Democratic Party (PDP)â&#x20AC;?. His defection to the PDP two weeks ago, therefore, came as no surprise. Although he said it was â&#x20AC;&#x153;not a decision that I have made lightlyâ&#x20AC;?, in truth, it was three years in the making. In every practical sense, Saraki left the APC three years ago, when, in 2015, he put his personal ambitions above party discipline and set himself up against his supposed party and the government that it leads by forming an independent powerbase in the Senate! But, even worse, these past three years have been characterised by Sarakiâ&#x20AC;&#x2122;s desecration of the office of Senate President, which he captured through political chicanery, and by his arrogant and self-interested ego fights that have undermined effective governance, the culmination of which is his refusal to resign as Senate President following his defection to the PDP even though he secured the position in the first place in the name of APC. His refusal to resign is a recipe for legislative anarchy and unstable government. Saraki is, indeed, a toxic influence on Nigerian politics! To be clear, this is not a piece in defence of the APC or the Buhari government. Regular readers of this column know my views about both, and there will be plenty of opportunities ahead of next yearâ&#x20AC;&#x2122;s elections to discuss the APC and the shambolic government it leads. But my interests here are principled and institutional, focusing on party discipline, the sanctity of state institutions and political culture. And on each of these, Saraki, in my view, represents a phenomenon that canâ&#x20AC;&#x2122;t serve Nigeria well, and thus must be rejected. Letâ&#x20AC;&#x2122;s start with party discipline. It is the ability of a party to control its members in the legislature and get them to support the party line. This is important for all

systems of government that allow parties to hold political power. When a party forms a government with a majority in the legislature, it is entitled to expect its legislators to support its policies. This does not detract from the separation of power and checks and balances. The separation of power is about legislative scrutiny and executive constraints, that is, holding the executive to account and reining in its excesses. But that does not allow legislators to put their self-interest and personal ambitions above the cohesion of their party and its government and undermine party discipline. But that was what Saraki did when he defied the APC on its choice for the Senate President, and captured the position for himself in a treacherous, cloak-and-dagger way. Unable to secure the support of his partyâ&#x20AC;&#x2122;s senators, he colluded with the PDP senators and the Clerk of the Senate to hold an election while virtually all APC senators, including his main rivals for the position, had allegedly been tricked away from the chamber. He won â&#x20AC;&#x153;unopposedâ&#x20AC;? with the votes of PDP senators and just 8 out of the 60 APC senators. As part of the shenanigan, the position of the deputy Senate President, which rightly belonged to the APC went to the PDP. The Clerk described Sarakiâ&#x20AC;&#x2122;s â&#x20AC;&#x153;electionâ&#x20AC;? as â&#x20AC;&#x153;divineâ&#x20AC;?. Saraki himself attributed it to â&#x20AC;&#x153;fate and destinyâ&#x20AC;?, an attempt to use God to justify an act

of political brigandage and impunity. Truth is, no serious party anywhere in the world would condone such a brazen antiparty activity. In the US, whose system of government Nigeria follows, merely voting for an opposition candidate against party line would attract a serious punishment. For instance, in 2000, one Democratic Congressman voted for a Republican; he was stripped of his seniority and lost all his Committee

6DUDNL LV D SROLWLFLDQ GULYHQ E\ D PHJDOR-Â PDQLDFDO DPELWLRQ ERUQH RXW RI D JLOGHG EDFNJURXQG XQEULGOHG VHOI FRQÂżGHQFH DQG D IHURFLRXV VHQVH RI HQWLWOHPHQW +LV SROLWLFDO OLIH KDV EHHQ GHÂżQHG E\ SULYLOHJH ULGLQJ RQ WKH FRDWWDLO RI D IDPRXV IDWKHU posts. In the UK, an MP that rebels against his party, other than in matters of conscience on which the party allows a free vote, but in a three-line whip would face serious consequences, which include at the very least not rising to a ministerial level. Breaches of party discipline undermine democracy and good governance, and I canâ&#x20AC;&#x2122;t think of any serious democracy where Sarakiâ&#x20AC;&#x2122;s behaviour, driven by personal ambitions, would be tolerated. He would have been expelled from any party in Europe or the US. Of course, Saraki is not the first Nigerian legislator to breach party discipline; Aminu Tambuwal and Yakubu Dogara defied their parties in becoming Speaker of the House of Representatives in 2011 and 2015 respectively. What makes Sarakiâ&#x20AC;&#x2122;s case particularly reprehensible were the mystery, intrigue and seeming espionage that characterised the process of his â&#x20AC;&#x153;electionâ&#x20AC;?, which threatened to undermine the integrity of the Senate. Which brings me to the sanctity of state institutions. Letâ&#x20AC;&#x2122;s face it, the integrity of the Senate has been re-

peatedly undermined under Sarakiâ&#x20AC;&#x2122;s presidency. No previous Senate President was so beleaguered, with such serious character issues as Saraki. He, indeed, scored many â&#x20AC;&#x153;firstsâ&#x20AC;?! He was the first Senate President in Nigeria to have an arrest warrant issued against him, and actually put in a dock, on an 18-count charge of false declaration of assets and corruption; the first Senate President to be named in relation to undisclosed assets

in safe havens; and the first Senate President to be linked to an armed robbery case. Of course, to be clear, Saraki has not been found guilty of any criminality. In fact, the Supreme Court recently found no evidence against him on the assets declaration case, and hardly any Nigerian truly believes that he sent people to rob a bank, although any relationship with the suspects, even as his political thugs, would be damaging. Now, my point is that all these allegations, proven or not, politicallymotivated or not, have done enormous damage to the Office of the Senate President, and that, to preserve the integrity of that institution, Saraki should long have resigned. That precisely is what would have happened in more civilised societies. For instance, a deputy Speaker of the House of Commons was accused of a sexual offence. He resigned while an investigation was launched even though he was later cleared of the allegation. In 2016, the then Speaker of the US House of Representatives, Joe Boehner, resigned his position not because of any allegation but because he felt his leadership had become divisive. This is what he said: â&#x20AC;&#x153;When you are the Speaker of the House, your Number 1 responsibility is to the institutionâ&#x20AC;?, adding that he acted to â&#x20AC;&#x153;protect the institution of Congressâ&#x20AC;?. Sadly, Saraki has done nothing to protect the institution of the Senate or that of the office of Senate President that he occupies. But why? The truth is that Saraki is a politician driven by a megalomaniacal ambition, borne out of a gilded background, unbridled selfconfidence and a ferocious sense of entitlement. His political life has been defined by privilege, riding on the coattail of a famous father. He joined daddyâ&#x20AC;&#x2122;s business immediately after leaving university. Ten years later, President Obasanjo made him an adviser on daddyâ&#x20AC;&#x2122;s recognition. Three years later, he became governor in daddyâ&#x20AC;&#x2122;s fiefdom, Kwara state, on daddyâ&#x20AC;&#x2122;s say-so. After 8 years in office, he became a senator just for the asking. His ambition was to become Senate President and use it as a launch pad to run for President of the country.

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

for your new week

Fascinating business facts

50%

afaricom, Kenyaâ&#x20AC;&#x2122;s biggest telecoms operator, has no plans to reduce its call rates after rival Airtel cut its prices as it wants to avoid a price war, its chief executive officer said on Friday. On Thursday, the Kenyan division of Bharti Airtel cut its call rates to all other networks to $0.02 a minute. The company said the new tariff amounted to a 50 percent reduction in prices. Safaricom charges 4 shillings a minute. â&#x20AC;&#x153;We are seeing a new price war coming,â&#x20AC;? Chief Executive Bob Collymore told reporters. â&#x20AC;&#x153;We are not going to move our prices. If we lose market share as a result of that then that is fine. We have to maintain a sustainable business.â&#x20AC;?

6-Âweek low

outh Africaâ&#x20AC;&#x2122;s rand slipped to six-week lows early on Friday and government bonds weakened sharply, as slides in the Russian rouble and Turkish lira combined with escalating global trade tensions to knock sentiment towards emerging market assets. At 0637 GMT, the rand traded at 13.8125 per dollar, 0.86 percent weaker than its close on Thursday.The currency had earlier in the session lost nearly 2 percent to 13.9500, it weakest since June 28, according to Thomson Reuters data.

0.4%

he UK economy expanded by 0.4 per cent in the second quarter of the year, bouncing back after a difficult start to 2018, according to figures published by the Office for National Statistics on Friday.However, rising global trade tensions may have damped growth, as the production of cars, electronics and metal all fell during the three-month period. The data confirmed analystsâ&#x20AC;&#x2122; expectations that the British economy would grow by 0.4 per cent compared with the previous quarter, faster than the 0.3 per cent rate achieved in the Eurozone during the same period. Britainâ&#x20AC;&#x2122;s economy grew by 0.2 per cent in the first quarter.

$160bn

hen Samsung decided to try its luck at biopharmaceuticals in 2010, its operations consisted of a 12-person team working out of the basement of a hospital laboratory.The business is today one of the most promising for South Koreaâ&#x20AC;&#x2122;s largest company, employing almost 3,000 people and serving as an important reminder that the hulking conglomerate retains the flexibility to shift direction when necessary. It is a heartening tale for Samsung, but one that urgently needs replicating. Faced with growing competition from low-cost Chinese rivals, Samsung needs to find growth areas â&#x20AC;&#x201D; a reality executives were all too cognisant of on Wednesday when they announced a $160bn investment plan.

90m

ike Ashley, the billionaire founder of Sports Direct, has raised his bet on the struggling UK high street after agreeing to buy the business and assets of department store chain House of Fraser out of administration for ÂŁ90m in cash. The acquisition consists of â&#x20AC;&#x153;all of the UK stores of House of Fraser, the House of Fraser brand and all of the stock in the businessâ&#x20AC;?, the group said in a brief statement. The deal comes just weeks after Mr Ashley had to write off ÂŁ85m on Sports Directâ&#x20AC;&#x2122;s 29.9 per cent investment in Debenhams, a rival department store chain.

Published Â by Â BusinessDAY Â Media Â Ltd., Â The Â Brook, Â 6 Â Point Â Road, Â GRA, Â Apapa, Â Lagos. Â Â Ghana OIĂ&#x20AC;FH Business Â Day Â Ghana Â Ltd;Íž Â ABC Â Junction, Â near Â Guinness Â Ghana Â Limited, Â Achimota Â â&#x20AC;&#x201C; Â Accra, Â Ghana. Â Tel: Â +233243226596: Â email: Â PDLO#EXVLQHVVGD\RQOLQH FRP Â Â Advert Â Hotline: Â 08034743892. Â Subscriptions Â Â 01-Â2950687, Â 07045792677. Â Newsroom: Â 08169609331 (GLWRU $QWKRQ\ 2VDH %URZQ. Â Â All Â correspondence Â to Â BusinessDAY Â Media Â Ltd., Â Box Â 1002, Â Festac Â Lagos. Â ,661